UNIT 4: MARKETING MIX DECISION PRICING AND

DISTIBUTION:
Pricing decisions are crucial for businesses and involve various objectives, factors,
methods, and strategies. Let's explore each of these aspects:

1. Pricing Decision Objectives:

• Profit Maximization: Setting prices to maximize profit margins.

• Market Share: Achieving a larger market share by offering competitive prices.
• Revenue Growth: Setting prices to maximize total revenue.
• Survival: Pricing to cover costs and ensure business viability.
• Product Quality Perception: Establishing a premium image through higher prices.
• Customer Satisfaction: Balancing price with customer value and satisfaction.

2. Factors Affecting the Price of a Product:

• Costs: Including production, distribution, and marketing costs.

• Demand: Understanding the elasticity of demand for the product.
• Competition: Analyzing competitor pricing strategies.
• Perceived Value: How customers perceive the value of the product.
• Brand Image: The impact of the brand on pricing.
• Economic Conditions: Inflation, recession, and other economic factors.
• Legal and Ethical Considerations: Compliance with laws and ethical standards.

3. Pricing Methods:

• Cost-Plus Pricing: Adding a markup to the cost of production.

• Value-Based Pricing: Setting prices based on perceived customer value.
• Competitive Pricing: Pricing in line with competitors.
• Dynamic Pricing: Adjusting prices based on real-time demand and supply.
• Penetration Pricing: Setting low initial prices to gain market share.
• Skimming Pricing: Setting high initial prices for unique or innovative products.

4. Pricing Strategies:

• Premium Pricing: Setting a higher price to reflect higher quality.

• Discount Pricing: Offering lower prices to stimulate sales.
• Psychological Pricing: Using pricing to influence consumer perception.
• Bundle Pricing: Offering packages of products at a lower overall price.
• Geographical Pricing: Adjusting prices based on the location of the customer.
• Promotional Pricing: Offering temporary discounts or promotions.

5. Psychological Factors:

• Perceived Value: Customers often make purchasing decisions based on their perceived
value of a product.
• Price Sensitivity: Understanding how price changes affect consumer behavior.
• Reference Prices: Comparing prices to a reference point, such as the original price or
competitor prices.
• Price-Quality Perception: How customers perceive the relationship between price and
product quality.

DISTIBUTION CHANNEL:

Distribution decisions involve determining the most effective and efficient way to make
a product or service available to the end consumer. The channel of distribution, also
known as the distribution channel or marketing channel, refers to the path or route
through which goods or services move from the producer or manufacturer to the final
consumer. Here's a brief overview:

**1. Distribution Decision:

• Objective: Efficiently and effectively move products from production to the end
consumer.
• Brief Explanation: Distribution decisions involve choosing the right distribution
channels and intermediaries to ensure that products reach the target market in a timely
and cost-effective manner.

2. Channel of Distribution:

• Definition: The route or path taken by a product as it moves from the producer to the
consumer.
• Brief Explanation: Channels can be direct (manufacturer to consumer) or indirect
(involving intermediaries such as wholesalers, retailers, and agents). The choice of
channel impacts factors like cost, control, and the ability to reach specific target markets.
 3. Types of Distribution Channels:

• Direct Distribution: Products move directly from the manufacturer to the consumer
without intermediaries. This is common in online sales or when manufacturers have their
own retail outlets.
• Indirect Distribution: Involves intermediaries such as wholesalers, retailers, and agents.
• Wholesaler Distribution: Products go from the manufacturer to wholesalers,
then to retailers, and finally to consumers.
• Retailer Distribution: Products move from the manufacturer to retailers and
then to consumers.
• Agent or Broker Distribution: An agent or broker facilitates the sale between
the manufacturer and the end consumer but does not take ownership of the
product.

DELIVERING VALUE:

Delivering value is a key consideration when choosing a distribution channel, as the

selected channel should enhance the overall customer experience and satisfaction. Here
are factors affecting the choice of distribution channel with a focus on delivering value:

1. Customer Expectations:
• Factor: Meeting or exceeding customer expectations for product availability,
convenience, and service.
• Explanation: Understanding what customers expect in terms of how, when, and
where they can access the product is crucial. The distribution channel chosen
should align with these expectations.
2. Product Nature and Complexity:
• Factor: The characteristics of the product, including its complexity, perishability,
and need for demonstration or explanation.
• Explanation: Some products may require a hands-on demonstration or expert
explanation, making direct channels or channels with knowledgeable
intermediaries more suitable.
3. Convenience and Accessibility:
• Factor: The ease with which customers can access and purchase the product.
• Explanation: Convenience is a significant value driver. Online channels, local
retailers, or direct sales may be chosen based on the convenience they offer to
the target customer.
4. After-Sales Service and Support:
 • Factor: The level of after-sales service and support required for the product.
• Explanation: Products that require installation, maintenance, or troubleshooting
may benefit from channels that offer strong after-sales support, such as direct
sales or distribution through authorized service providers.
5. Geographic Reach:
• Factor: The geographic dispersion of the target market.
• Explanation: Different channels have varying capacities to reach customers in
different locations. Understanding the geographic spread of the target market
helps in choosing channels that ensure widespread availability.
6. Brand Image and Control:
• Factor: The level of control the company wants over the brand image and
customer experience.
• Explanation: Direct channels provide more control over the brand experience,
while indirect channels may involve intermediaries who can impact how the
brand is perceived.
7. Cost Considerations:
• Factor: The costs associated with different distribution channels.
• Explanation: Evaluating the costs of setting up and maintaining different
channels is essential. Balancing cost-effectiveness with the value delivered to
customers is crucial.
8. Market Segmentation:
• Factor: The segmentation of the target market based on preferences and
behaviors.
• Explanation: Different customer segments may have varying preferences for how
they want to purchase products. Tailoring distribution channels to specific
segments can enhance value delivery.
9. Technological Considerations:
• Factor: The role of technology in enabling distribution.
• Explanation: E-commerce and digital platforms can enhance the customer
experience by providing convenient, 24/7 access to products.

DISTRIBUTION STRATERGIES:
Distribution strategies involve the planning and implementation of methods to get
products from the manufacturer to the end consumer. The choice of distribution
strategy can significantly impact a company's market reach, customer satisfaction, and
overall business success. Here are some common distribution strategies:

1. Intensive Distribution:
• Description: Involves making a product available in as many outlets as possible.
 • Objective: Maximize market coverage and make the product easily accessible.
• Example: Common for convenience products like snacks or soft drinks, which are
available in a wide range of retail outlets.
2. Selective Distribution:
• Description: Involves distributing a product through a limited number of
carefully chosen outlets.
• Objective: Maintain some level of control over the product and ensure it is
available in outlets that fit the brand image.
• Example: Electronics or high-end fashion brands may choose selective
distribution to control the customer experience.
3. Exclusive Distribution:
• Description: Grants exclusive rights to a limited number of retailers to sell a
product in a specific geographic area.
• Objective: Maintain tight control over the brand image and provide a unique,
premium experience.
• Example: Luxury brands often use exclusive distribution to create an aura of
exclusivity.
4. Direct-to-Consumer (DTC) Distribution:
• Description: Involves selling products directly to consumers without
intermediaries.
• Objective: Maximize control over the customer experience and capture more of
the profit margin.
• Example: Many online businesses and manufacturers sell directly to consumers
through e-commerce platforms.
5. Franchising:
• Description: Allows independent entrepreneurs (franchisees) to operate outlets
using the parent company's business model and branding.
• Objective: Expand market presence rapidly without significant capital
investment.
• Example: Fast-food chains, hotel chains, and retail brands often use franchising.
6. Online and E-commerce Distribution:
• Description: Utilizes online platforms to sell and distribute products directly to
consumers.
• Objective: Leverage the reach of the internet to access a global market and
provide convenience to customers.
• Example: Amazon, eBay, and company-owned online stores.
7. Wholesaling and Retailing:
• Description: Involves selling products to other businesses (wholesaling) or
directly to consumers (retailing).
 • Objective: Reach a broad market by using intermediaries such as wholesalers or
retailers.
• Example: Manufacturers often use wholesalers to distribute products to retailers,
who then sell to end consumers.
8. Collaborative Distribution:
• Description: Involves collaborating with other companies to share distribution
resources.
• Objective: Reduce costs and improve efficiency through shared logistics and
transportation.
• Example: Companies in the same industry may collaborate to optimize the
distribution of products to shared markets.