Chapter 5--Distribution and Pricing Strategy Flashcards
What is a marketing channel (distribution channel)?
All the entities needed to move a product from the producer to the consumer.
What do intermediaries do in a marketing channel? What are the two main categories of intermediaries?
Provide essential services (for a fee) that help get the product to the consumer for sell.
Wholesalers and retailers
What do Wholesaling Intermediaries do?
Sell products to businesses or other organizations to be used in the production of another product, or to be resold
How are wholesaling intermediaries classified?
1) Merchant wholesalers (acquire products, add value, resell)
2) Agents and brokers (work on fee and commission basis; may take possession, but do not take title of products)
3) Manufacturer’s sales branches and offices (same function as agents and brokers, but owned by the manufacturer)
How are retailing intermediaries classified?
Retailers only sell to consumers, not businesses.
1) General merchandise (many product lines; varying customer service)
2) Specialty retailers (fewer product lines; higher customer service)
3) Non-store retailers (direct sellers and direct marketers, vending machines)
4) Franchises
What are the different channel structures a marketer may select?
1) Direct channels–B2B type, often. Fewer intermediaries.
2) Indirect channels–large number of intermediaries; often seen in consumer market
What is Supply Chain management?
THe planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.
What is the “front end” of supply chain management? What is the “back end?”
The front end is procuring raw materials to produce the product. The back end is the marketing channel.
What are the three levels of distribution intensity?
1) Intensive distribution (for low cost, convenience items that are routinely purchased by consumers)
2) Selective distribution (for shopping products that are considered using limited problem solving)
3) Exclusive distribution (for specialty products that require extended problem solving)
What is a product’s selling price defined by?
The consumers perception of its value in the marketplace
What is customer value in pricing?
A trade off between what the customer is willing to give up to obtain the benefit he or she desires
What are the three pricing objectives marketers have when setting a price?
1) Profit maximiziation (less concerned about company growth; implies high-cost items)
2) Sales maximization (growth strategy for business by selling items below market value but higher that cost, in order to increase sales)
3) Status quo (maintain the same price as competitors to keep overall value of the product higher)
What are the factors that determine price?
Cost structure (how much it cost to make)
Demand
Competition
Marketplace dynamics (the lifecycle stage of the industry)
Objectives for marketing
Other marketing mix variables
What are common pricing strategies?
New Product Pricing (skimming, penetration, status quo)
Product Line Pricing (how pricing varies among the products of a particular product line offered by the company)
Promotional Pricing
What is the most common pricing tactic?
Price reduction, which does not always work because competitors can do this too. Coupons, discounts, allowances, rebates, and bonus packs are examples of this tactic.
What are the legal issues in pricing?
Price fixing Price discrimination (illegal to charge different customers different prices unless the cost to provide to different customers is different) Resale price maintenance (Manufacturer can suggest a retail price, but not require a product be sold at that price) Predatory pricing (cannot set prices so low that competitors are prevented from entering the market)
