Chapter 11

PRICING STRATEGIES : ADDITIONAL CONSIDERATIONS

New-Product Pricing Strategy

1. Market-skimming pricing (price skimming) setting a high price for a new product to skim
maximum revenues layer by layer from the segments willing to pay the high price; the
company makes fewer but more profitable sales.
2. Market-penetration pricing setting a low price for a new product in order to attract a large
number of buyers and a large market share.

Product Mix Pricing Strategy

1. Product Line PricingSetting the price steps between various products in a product line based
on cost differences between the products, customer avaluations of different features, and
competitors' prices.
2. optimal-product pricing the pricing of optional or accessory products along with a main
product.
3. Captive-Product Pricing Setting a price for products that must be used along with a main
product, such as blades for a razor and games for a video-game console.
4. By-Product Pricing Setting a price for by-products in order to make the main product's price
more competitive.
5. Product Bundle Pricing Combining several products and offering the bundle at a reduced
price.

Price Adjustment Strategies

Discount a straight reduction in price on purchase during a stated period of time or in larger
quantities. Allowence promotional money paid by manufactures to retailer in return for an
agreement to feature the manufacture's products in some way.
1. Segmented Pricing
Selling a product or service at two or more prices, where the difference in prices is not based
on difference in cost.
2. Psychological Pricing
Pricing that considers the psychology of prices and not simply the economics; the price is used
to say something about the product. Reference price price that buyers carry in their minds
and refer to when they look at a given product.

3. Promotional Pricing
Temporarily pricing products below the list price, and sometimes even below cost, to increase
short-run sales.
4. Geographical Pricing
Getting price for customer located in different parts of the country or world. FOB-origin
pricing a geographical pricing strategy in which goods are placed free on board carrier; the
customer pays the freight from the factory to the destination. Uniform-deliverd pricing a
geographical pricing strategy in which the company charge the same price plus freight to all
customer, regardless of their location. Zone pricing a geographical pricing strategy in which
the company sets up two or more zones. all customer within a zone pay the same total price;
the more distance the zone, the higher the price. Basing-point pricing a geographical pricing
strategy in which the seller designates some city as a basing point and charges all customers
the freight cost from that city to the customer. Freight-absorption pricing a geographical
pricing strategy in which the seller absorbs all or part of the freight charges in order to get the
desired business.
5. Dynamic Pricing
Adjusting prices continually to meet the characteristics and needs of individual customer and
situation.

Price Changes
When a firm considers initiating a price change, it must consider customers and competitors
reaction. There are different implication to initiating price cuts and initiating price increases. Buyer
reactions to price changes are influnced by the meaning customers see in the price change.
Competitors reactions flow from a set reaction policy or fresh analysis of each situation.
There are also many factors consider in responding to a competitors price changes. The
company that faces a price change initiated by a competitor must try to understand the competitors
intent as well as likely duration and impact of the change. If a swift reaction is desirable, the firm
should preplan its reactions to different possible price action by competitors. When facing a
competitors price change, the company might sit tight, reduce its own price, raise perceived quality,
improve quality and raise price, or launch a fighter brand.
Many federal, state, and even local laws govern the rules of fair pricing. Also, company must
consider broader societal pricing concern. The major public policy issues in pricing include potentially
damaging pricing practice within a given level of the channel, such as price-fixing and predatory
pricing. Treating customer fairly is an important part of building strong and lasting customer
relationships.

Chapter 12
MARKETING CHANNELS : DELIVERING CUSTOMER VALUE

Supply Chains and the Value Delivery Network

Producing a product or service and making it available to buyers requires building
relationships not only in customers but also with key suppliers and resellers in the companys supply
chain. Value delivery network is a network composed of the company, suppliers, distributors, and
ultimately, customers who partner with each other to improve the performance on the entire system
in delivering the customer value.

The Nature and Importance of Marketing Channels

Marketing channel ( or distribution channel) is a set of interdependent organizations that
help make a product or service available for use or consumption by the consumer or business user. A
companys channel decisions directly affect every other marketing decision. Pricing depends on
whether the company works with national discount chains, user-high quality specially stores, or sells
directly to consumers online.

How Channel Members Add Value?

In making products and services available to consumers, channel members add value by
bridging the major time, place, and possession gaps that separate goods and services from those
who use them. Members of the marketing channel perform many key function. Some help to
complete transactions :

Information: Gathering and distributing information about consumers, producers, and other
actors and forces in the marketing environment needed to planning and aiding exchange.
Promotion: Developing and spreading persuasive communications about an offer.
Contact: Finding and communicating with prospective buyers.
Matching: Shapping offers to meet the buyers needs, including activities such as
manufacturing, grading, assembling, and packaging.
Negotiation: Reaching and agreement on price and other terms so that ownership or
possession can be transferred.

Others help to fulfill the completed transaction :

Physical distribution: Transporting and storing goods.

Financing: Acquiring and using funds to cover the costs of the channel work.
Risk Taking: Assuming the risks of carrying out the channel work.

Number of Channel Levels

Channel level a layer of intermediaries that performs some works in bringing the product and
its ownership closer to the final buyer. Direct marketing channel a marketing channel that has no
intermediary levels. Indirect marketing channel a marketing channel containing one or more
intermediary levels.

Channel Behavior and Organization

Channel Behavior
Channel conflict disagreements among marketing channel member on goals, roles, and
reward-who should do what and for what rewards.

Vertical Marketing System

Conventional distribution channel a channel consisting of one or more independent
producers, wholesalers and retailers, each a seperate business seeking to maximize its own profit,
perhaps even at the expense of profits for the system as a whole. Vertical marketing system (VMS) a
channel structure in which producers, wholessalers, and retailers act as a unified system.

Multichannel Distribution System

Multichannel distribution system is A distribution system in which a single firms set up two or
more marketing channels to reach one or more customer segments. Multichannel distribution
system offer many adventages to companies facing large and complex markets.

Channel Design Decision

Marketing channel design is Designing effective marketing channels by analyzing customer
needs, setting channel objectives, identifying major channel alternatives, and evaluating those
alternatives.

Channel Management Decision

Once the company has reviewed its channel alternatives and determined the best channel
design, it must implement and manage the chosen channel. Marketing channel management calls
for Selecting, managing, and motivating individual channel members and evaluating their
performance over time.

Marketing Logistic and Supply Chain Management

Marketing Logistic is an area of potentially high cost savings and improved customer
satisfaction. The major logistic functions are warehousing, inventory management, transportation,
and logistic information management.

Chapter 13
RETAILING AND WHOLESALING

Retailing
Retailing includes all the activities involved in selling goods or service directly to final
consumers for their personal, nonbusiness use. Retailers play an important role in connecting brands
to consumers in the final phases of buying process. Shopper marketing involves focusing the entire
marketing process on turning shoppers into buyers at the point of sale, whether its in store, online,
or mobile shopping.
Retail stores come in all shapes and sizes, and new retail types keep emerging. Store retailers
can be classified by the amount of service they provide (self-service, limited service), product line
sold (specialty stores, department stores, supermarkets, convenience stores, superstores, and service
businesses), and relative prices (discount stores and off-price retailers). Today, many retailers are
banding together in corporate and contractual retail organizations ( corporate chains, voluntary
chains, retailer cooperatives, and franchise organizations).

Retailer Marketing Decisions

Retailers are always searching for new marketing strategies to attract and hold customers.
They face major marketing decisions about segmentation and targeting, store differentiation and
positioning, and retail marketing mix.
Retailers must first segment and define their target markets and then decide how they will
differentiate and position themselves in these markets. Those that try to offer something for
everyone end up satisfying no market well. By contrast, successful retailers define their target
markets well and position themselves strongly.
Guided by strong targeting and positioning, retailers must decide on a retailmarketing mixproduct and services assortment, price, promotion, and place. A retailers price policy must fit its
target market and positioning, product and services assortment, and competition. Retailers use any
or all if the five promotion tools-advertising, personal selling, sales promotion, PR, and direct
marketing-to reach consumers. Finally, its very important that retailers select locations that are
acces market in areas that are consistent with the retailers positioning.

Retailing Trends and Developments

Retailers operate in a harsh and fast-changing environment, which offers threats as well as
opportunities. Following years of goods economic times for retailers, the Great recession turned
many retailers fortunes from boom to bust. New retail forms continue to emerge. At the same time,
however, different types of retailers are increasingly serving similar customers with the same
products and prices ( retail convergence), making differentiation more difficult. Other trends in
retailing include the rise of megaretailers, the rapid growth of direct and online retailing, and the
global expansion of major retailers.

Wholesaling
Wholesaling includes all the activities involved in selling goods or services to those who are
buying for the purpose to resale or business use. Wholesalers fall into three groups. First, Merchant
wholesalers take the possession of the goods. They include full-service wholesalers ( wholesale
merchants and industrial distributors) and limited-service wholesalers (cash-and-carry wholesalers,
truck wholesalers, drop shippers, rack jobbers, producers cooperatives, and mail-order wholesalers).
Second, brokers and agents do not take possession of the goods but are paid a commission for aiding
companies in buying and selling. Finally, manufacturers sales branches and offices are wholesaling
operations conducted by non-wholesalers to bypass the wholesalers.
Like retailers, wholesalers must target carefully and position themselves strongly. And, like
retailers, wholesalers must decide on product and service assortments, prices, promotion, and place.
Progressive wholesalers constantly watch for better ways to meet the changing needs of their
suppliers and target customers. They recognize that, in the long run, their only reason for existence
comes for adding value, which occurs by increasing the efficiency and effectiveness of the entire
marketing channel. As with other types of marketers, the goal is to build value-adding customer
relationship.

Chapter 14
COMMUNICATING CUSTOMER VALUE: INTEGRATED MARKETING COMMUNICATIONS
STRATEGY

The Promotion Mix

A companys total promotion mix-also called its marketing communications mix-consist of the
spesific blend of :
1) Advertising any paid form of nonpersonal presentation and promotion of ideas, goods, or
services by an identified sponsor.
2) Sales Promotion short-term incentives to encourage the purchase or sale of a product or
service.
3) Personal Selling personal presentation by the firms sales force for the purpose of making
sales and building customer relationships.
4) Public Relations building good relations with the companys various publics by obtaining
favorable publicity, building up a good corporate image, and handling or head ing off
unfavorable rumors, stories, and events.
5) Direct Marketing direct connections with carefully targeted individual consumers to both
obtain an immediate response and cultivate lasting customers relationships.

Integrated Marketing Communications

The explosive developments in communications technology and changes marketer and
customer communication strategies have had a dramatic impact on marketing communications.
Advertisers are now adding a broad selection of more-specialized and highly targeted mediaincluding digital and online media-to reach smaller customer segments with more-personalized,
interactive messages. As they adopt richer but more fragmented media and promotion mixed to
reach their diverse markets, they risk creating a communications hodgepodge for consumers. To
prevent this, companies are adopting the concept of integrated marketing communications(IMC).
Guided by an overall IMC strategy, the company works out the roles that the various promotional
tools will play and the extent to which each will be used. It carefully coordinates the promotional
activities and the timing of when major campaigns take place.

Outline the Communication Process and The Steps in Developing Effective Marketing
Communications
The communication process involves nine elements:

Two major parties :

1) Sender the party sending the message to another party.
2) Receiver the party receiving the message sent by another party.

Two communication tools:

3) Message the set of symbols that the sender transmits.
4) Media the communication channel through which the message moves from the
sender to the receiver.
Four communication functions:
5) Decoding the process by which the receiver assigns meaning to the symbols encoded
by the sender
6) Encoding the process of putting thought into symbolic form.
7) Response the reactions of the receiver after being exposed to the message.
8) Feedback the part of the receivers response communicated back to the sender.
9) Noise the unplanned static or distortion during the communication process, which
results in the receiver getting a different message than the one the sender sent.

Methods for Setting The Promotion Budget and Factors That Affect The Design Of
The Promotion Mix
The company must determine how to spend the promotion. The most popular approaches are
to spend what the company can afford, use a percentage of sales, base promotion on competitors
spending, or base it on analysis and costing of the communication objectives and tasks.
The company has to divide the promotion budget among the major tools to create the
promotion mix. Companies can pursue a push or a pull promotional strategy- or a combination of the
two. To best specific blend of promotion tools depends on the type of product/market, the buyers
readliness stage, and the PLC stage. People at all levels of the organization must be aware of the
many legal and ethical issues surrounding marketing communications. Companies must work hard
and proactively at communicating openly, honestly, and agreeably with their customers and resellers.

Chapter 15
ADVERTISING AND PUBLIC RELATIONS

Advertising
Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or
services by an identified sponsor. Advertising-the used of paid media by a seller to inform, persuade,
and remind buyers about its product or its organization-is an important promotion tool for
communicating the value that marketers create for their customers. Advertising takes many forms
and has many uses. Althought advertising is employed mostly by business firms, a wide range of notfor-profit organizations, professionals, and social agencies also employ advertising to promote their
causes to various target publics.
PR-gaining favorable publicity and and creating favorable company image- is the least used of
the major promotion tools, although it has great potential for building consumer awareness and
preference.

The Major Decision Involved in Developing Advertising Program

Advertising decision making decisions about the advertising objectives, budget, message, and
media, and finally culminates with an evaluation of the results. Advertiser should set clear target,
task, and timing objectives, whether the aim is to inform, persuade, or remind buyers.
Advertising strategy consist of two major elements : Creating advertising messages and
selecting advertising media. The message decision calls for planning a message strategy and
executing it effectively. Good messages are especially important in todays costly and cluttured
advertising environment. Just to gain and hold attaention, todays message must be better planned,
more imaginative, more entertaining, more rewarding to consumers. In fact, many many marketers
are now subscribing to a new merging of advertising and entertainment, dubbed Madison & Vine.
The media decision involves defining reach, frequency, and impact goals; choosing major media
types; selecting media vehicles; and choosing media timing. Message and media decisions must be
closely coordinated for maximum campaign effectiveness.
Finally, evaluation calls for evaluating the communication and sales effects of advertising
before, during, and after ads are placed. Advertising accountability has become a hot issue for most
companies.

Define the Role of PR in the Promotion Mix

PR-gaining favorable publicity and creating a favorable company image-is the least used of the
major promotion tools, although it has great potential for building consumer awareness and
preference. PR is used to promote products, people, places, ideas, activities, organizations, and even
nations. Companies use PR to build good relationships with consumers, investors, the media, and
their communities. PR can have a strong impact on public awareness at a much lower cost than
advertising can, and PR results can sometimes be spectacular.

Although PR still captures only a small portion of the overall marketing budgets of most firms,
it is playing an increasingly important brand-building role. In the digital age, the lines between
advertising and PR are becoming more and more blurred.

How Companies use PR to communicate with their?

Companies use PR to communicate with their publics by setting PR objectives, choosing PR
messages and vehicles, implementing the PR plan, and evaluating PR results. To accomplish these
goals, PR professionals use several tools, such as news, speeches, and special events. They also
prepare written, audiovisual, and corporate identity materials and contribute money and time to
public service activities. The web has also become an increasingly important PR channel, as web sites,
blogs, and social networks are providing interesting new ways to reach more people.