Chapter Price & Distribution

MARKETING
MANAGEMENT
PRICE,
PLACE
PRICE
3
Price is the one element of the marketing mix that

produces revenue; the other elements produce costs.
Price is the easiest element of the marketing program
to adjust.
Price is also value positioning of its product or brand.
It can also be related to value proposition
7
The Determinants of Price

 Internal  External
 Corporate strategy
Premium, Differentiation,  Competition
Low-Cost  Price from supplier
 Resources in Corporate
 Recession
 Operation management
 Consumer characteristics
8
Low Cost Carrier-Southwest
9
10
Common Pricing Mistakes

• Failure to revise price to capitalize on market changes
• Setting price independently of the rest of the marketing mix
• Failure to vary price by product item, market segment,

distribution channels, and purchase occasion
11
A Changing Pricing Environment
Internet allows sellers to discriminate between

buyers and buyers to discriminate between sellers
well.
14
Consumer Psychology and

Pricing
Reference prices: (external & internal)
Price-quality inferences
Price endings (Rp 79999-Rp 80000)
Price cues
Setting the Price
Steps in Setting Price
Select the price objective

Determine demand
Estimate costs
Analyze competitor price mix
Select pricing method
Select final price
19
Step 1: Selecting the Pricing

Objective
• Survival
– (price covers FC & VC)
• Maximum current profit

– (ignoring marketing mix, competitors’ reaction, legal restraint)
• Maximum market share

– (low price)
• Maximum market skimming

– (high price)
• Product-quality leadership
20
Step 2: Determining Demand

• Price sensitivity Inelastic vs Elastics
– Inelastic when
• Few or none substitutes
• Do not notice the justified price
• Slow to change the habit
• Estimating demand curves (statistical analysis,

price experiment, surveys).
21
Step 3: Estimating Costs

Types of Costs
Accumulated Production
Activity-Based Cost Accounting
Target Costing
Step 4:
Analyzing Competitor’s Cost, Price,
Offers
How can a firm anticipate a competitor’s?

By doing a research of competitor’s current financial
situation, recent sales, customer loyalty and
corporate objectives.
23
Step 5: Selecting a Pricing

Method
Markup pricing (from selling price)
Target-return pricing (targeting of ROI)
Perceived-value pricing(influenced by buyer’s
image of the product, quality, company reputation)
Value pricing (low price high quality)
 EDLP
 High-low pricing high prices on everyday basis but runs
prices frequent promotion
Going-rate pricing based on competitor’s
prices
Auction-type pricing
Ascending
Descending
25
Step 6: Selecting the Final Price

Impact of other marketing activities.
Company pricing policies.
Impact of price on other parties.
26
Promotional Pricing Tactics

 Loss-leader pricing
 Special-event pricing
 Cash rebates
 Low-interest financing
 Longer payment terms
 Warranties and service contracts
 Psychological discounting
Special Event
30
Differentiated Pricing and Price

Discrimination
• Customer-segment pricing(Older is cheaper)
• Product-form pricing (Small is cheaper)
• Image pricing
• Channel pricing (Coca cola in restaurant vs fast-food

restaurant
• Location pricing
• Time pricing (early bird is cheaper)
• Yield pricing (higher price late purchase)

31
A Price Cutting Strategy Trap

Low quality trap
Buys market share not market loyalty
Price war
PLACE
33
Marketing Channels
Sets of interdependent organizations
involved in the process of making a
product or service available for use
or consumption.
The channels chosen affect other

marketing activities including 3-P and STP.
How a Distributor Reduces the 34
Number of Channel Transactions
1
2
3
4 A. Number of contacts
5 without a distributor
6 MxC=3X3=9
7
8
9
= Manufacturer = Customer
35
How a Distributor Reduces the
Number of Channel Transactions
1
B. Number of contacts
4 with a distributor
MxC=3+3=6
Store
2 5
3 6
= Manufacturer = Customer = Distributor

36
Consumer Markets
Copyright © 2012 Pearson Education 15-39

40
Conventional Vertical
marketing marketing
channel channel
Manufacturer Manufacturer
Wholesaler
Wholesaler
Retailer
Retailer
Consumer
Consumer
41
RETAILER
44
Retailing
Includes all the activities involved in
selling goods or services directly
to final consumers for personal,
nonbusiness use.
45
2000- 2010-2015
2010 2015-
1990- Family
an Apparel
Hypermar Online
1970-1980 Konsep ket Store
Convenience Consumer
1960 Store Factory Electronic
Konsep Outlet
High Class Home/Bed/
Supermarket
Department Category Bath
atau
Toko Department Killer
Tradisional Cash and Pet Supply
Store
Carry E-retailing
Sarinah Computer
Matahari,
Golden Truly, SOGO, Hypermar
Metro, ket dan Craft/Hobby
Pasaraya,
Ramayana Yaohan Carrefour
Mark & Computer
Muncul Spencer Giant
Sporting
konsep Apotik
Makro, Goro, Goods
Indrogrosir
46
Levels of Retail Service

Self-service
Limited service
Full service
47
Self-Service
Limited Service
Full Service
50
51
Nonstore Retailing
Direct selling
Direct marketing
Automatic vending
Buying service (corporate rate)
52
Direct Selling
53
Direct Marketing
Automatic Vending 54

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MARKETING

Price is the one element of the marketing mix that

The Determinants of Price

Common Pricing Mistakes

• Setting price independently of the rest of the marketing mix

• Failure to vary price by product item, market segment,

A Changing Pricing Environment

Internet allows sellers to discriminate between

Consumer Psychology and

Price endings (Rp 79999-Rp 80000)

Select the price objective

Step 1: Selecting the Pricing

• Maximum current profit

• Maximum market share

• Maximum market skimming

Step 2: Determining Demand

• Estimating demand curves (statistical analysis,

Step 3: Estimating Costs

How can a firm anticipate a competitor’s?

Step 5: Selecting a Pricing

Step 6: Selecting the Final Price

Promotional Pricing Tactics

 Longer payment terms

 Warranties and service contracts

Differentiated Pricing and Price

• Product-form pricing (Small is cheaper)

• Channel pricing (Coca cola in restaurant vs fast-food

• Time pricing (early bird is cheaper)

• Yield pricing (higher price late purchase)

A Price Cutting Strategy Trap

The channels chosen affect other

Number of Channel Transactions

= Manufacturer = Customer = Distributor

Copyright © 2012 Pearson Education 15-39

Levels of Retail Service

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