Distro and Pricing Flashcards
what are distribution channels
individuals and organisations
linking raw materials
through production
to end consumer
what are intermediaries?
anyone linking the producer to the end consumer
through contract or purchase/resale
why use intermediaries?
if they... create utility facilitate exchanges reducen inefficiencies reduce costs eliminate redundancies satisfy customer needs
only if they have positive gain in cost/benefit
what are marketing channel functions?
customer interaction
meeting customer needs
inventory functions
financial functions
what happens in customer interaction (marketing channel intermediary)
most direct contract to customer
promotion and marketing
information collection
negotiation of price, quality, delivery, etc
what happens in meeting customer needs (marketing channel intermediary)
quantity desired - resellers for instance location variety services - delivery, training, repair consumer credit
what happens in inventory function (marketing channel intermediary)
steady ordering - large quantities at regular intervals
physical disto - warehousing, inventory control, transpo
risk sharing - variety of locations and conditions
what happens in financial functions (marketing channel intermediary)
financing of inventory - purchase and store offsite
cash flow - consistency of ordering
what is a channel level?
a single layer of intermediary/middleperson
performing a channel function
between producers and consumers
what are the types of channel levels?
one level (retailer) two level (wholesale, retail) three level (wholesale, jobber, retail) zero level (direct)
always a producer and consumer
what is direct marketing
direct from producer to consumer
is direct marketing communication or channel
it’s not a communication approach
it’s a channel decision
but it does impact communication, and is augmented by communication
what’s the difference between wholesalers and retailers?
wholesalers = resell to businesses (manufacturing, retailers, or business use) retailers = resell to end users
how long should channel level be?
only as long as adding players improves cost/benefit
do long channels drive up purchase price?
no
customers have a range of prices they’re willing to pay
channel length impacts profit split between players
what are the three approaches to intensity of marketing coverage?
intensive distribution - maximise availability
selective distribution - promote in select venues, but actively avoid in others (generally for more expensive goods)
exclusive distribution - select 1 single channel for distribution (often very top tier products)
why is channel management tricky?
independent entities
integrally dependent on each other for success
different missions, strategies, and objectives
mutual benefit can be tricky to find
what is power in a channel?
one member’s ability to dominate
a decision making process
what is conflict in a channel?
difference in levels of power
different ideas in the best way to be successful
what does cooperation in a channel do?
increases efficiency
and typically everyone’s financial gains
what are channel alliances?
forming official strategic partnerships
most often in cooperative product offerings (not competitive)
what is horizontal integration?
when orgs at the same level
combine or cooperate
to consolidate power
eg, farmers coop
what is vertical integration?
two or more levels
are owned/managed by the same company
eg, retailer that starts manufacturing
what are the five legal concerns for channels?
dual distribution - manufacturer owns some legal outlets, but also allows other companies to sell their product (possible conflict of interest / anti-competitive)
restricted sales territory - manufacturer restricts where a retailer can sell
tying agreements - requiring sale of product B in allowing retailer to sell product A (desired product) (can be OK, printer + ink, but also can be bad, unrelated products)
exclusive dealings - forbidding sale of competitor’s products
refusal to deal - refusing to sell to someone (acceptable, but concern if retaliation)
what is physical distribution?
act of moving/storing products
what parts of physical distribution are often outsourced?
inventory management
warehousing
transportation
what is pricing of a product?
more than dollar amount to be charged
people have ideas of reasonable price - reference price
what is total value?
perceived value
minus
perceived costs
includes
utility
psychological benefits
any other value perceived to be associated with ownership
what goes into perceived total cost?
dollar amount paid energy costs time costs psychic costs opportunity costs
what is energy cost of a product?
human physical/emotional energy actual energy (fuel)
what are time costs for a product?
time required to obtain product
eg, wait time at hospital
what are the psychic costs?
psychological costs of obtaining product
fear, discomfort, perception of “fit”, impact on image
what are the opportunity costs?
costs of giving up other options
eg, taking vacation here means not taking vacation elsewhere
what is the supply/demand theory
economic theory
as price goes up
demand goes down
(negative slope)
doesn’t always hold true (eg, limited edition)
what is price sensitivity?
relationship between price and demand
what are price sensitive customers?
have elastic demand
slightly lower price = much more demand
demand changes significantly
what are price insensitive consumers?
have inelastic demand
slightly lower price = very little demand change
demand is roughly static
why is pricing complex?
many variables
must align with company objectives and strategy
what are the main pricing considerations
costs - must cover fixed and variable costs
marketing might let us raise price
channel partners might have an opinion based on their profits and prestige
consumers might have strong existing expectations
competition influences consumer expectations
when is pricing set for others?
vested interest - insurance influencing prices of healthcare
decision maker - textbooks are chosen by prof, but bought by student
legal/regulatory - can set floors / ceilings for pricing
what are the basis’ for pricing
cost based pricing: start with costs
demand based pricing: maximise for profit/revenue
competition-based pricing: respond to competitive strategic approaches
what are two important pricing strategies
penetration pricing - low price to gain market share
skimming pricing - high price to maximise margin
