Marketing 2 Flashcards
Name a key element of the marketing mix
Distribution
Place
Place is concerned with distribution channels, intermediaries, the distribution mix, and the distribution strategy.
Distribution channels
Distribution channels may be consumer or industrial, and they may involve such intermediaries as agents and brokers, wholesalers, and retailers, who add value to the products they handle.
Distribution mix
The distribution mix is the combination of distribution channels
a company uses to get its products to customers.
Name the three kinds of distribution strategy
Intensive
Selective
Exclusive
Place or distribution strategy: getting the product to the customer
Distribution Strategy is about getting the right product to the right person, at the right place, at the right time.
- Where do buyers look for your product or service? - If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or online? Or direct, via a catalogue?
- How can you access the right distribution channels?
- Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or send samples to catalogue companies?
- What do your competitors do, and how can you learn from that and/or differentiate?
Channel of distribution
+ name the “intermediaries”
Channel of Distribution – the path that a product takes from the producer to the consumer
Producer > intermediary (channel of distribution) > consumer
Intermediary:
- direct, merchant wholesaler to retailer, agent, retailer, non-store retailer
> multiple channels may be used
Consumer: distribution channels for consumer goods and services
(No, 1, 2 and 3 intermediaries)
No: producer > consumer
1: producer > retailer > consumer
2: producer > wholesaler > retailer > consumer
3: producer > agent/broker > wholesaler > retailer > consumer
Business: production channels for business goods and services
(No and 1 or more intermediaries)
No: business producer > business user
1 or more: business producer > agent or wholesaler > business user
Name the 5 channels of distribution (using intermediaries) and explain them
direct to consumer (from manufacturer, no intermediary): Corporately operated stores, telemarketing, online orders, door-to-door, vending machines (by manufacturer directly)
store retailers (buy form manufacturers or wholesalers): Department stores, convenience stores, supermarkets, discount stores, specialty boutiques, big-box stores
non-store retailers (buy from manufacturers or wholesalers): Online orders, vending machines, telemarketing (done by retailers)
wholesalers (buy from manufacturers): Resell to retailers or businesses (take ownership of the product and often store it before selling it)
agents: Facilitate the transaction between manufacturers and consumers or businesses (receive a commission)
How intermediates add value
Cost items:
- Salary & benefits for employees such as sales & service.
- Marketing costs such as publicity & promotions.
- Interest charges on the cost of holding inventory.
- Charges related to space & building (insurance, heating, electricity)
- Transportation, for deliveries.
• Location: Selling Products Where People Want Them
• Time: Selling Products When People Want Them
• Information: Providing Knowledge about Products • Ownership: Helping Customers Acquire the Products
• Service: Helping customers use the products
• Form: Changing Materials into Useful Products
Intermediaries: streamlining consumer transactions
also provide expertise in customer service, value- added services and improved access for the consumer
Price
Pricing:
– Is figuring out how much to charge for a product.
– Pricing is supposed to:
• make a profit
• match or beat the competition
• attract customers
• make products affordable to certain people
• create prestige
- Determines to a large extent product demand as
it is an important consideration for consumers - Creates revenue in the marketing mix and
generates profit for sellers - Requires constant revision vs. the competition
as it is often a key factor for customers - Subject to some legal restrictions in certain
industries so it is important to be aware of these
Price setting considerations
Product costs
- price floor: no profits below this price
Competitors’ prices and other internal and external factors
- economic environment, technological or sociocultural trends, government regulations
Consumer perceptions of value
- price ceiling: no demand above this price
Cost pricing
the cost of producing or buying the product—plus making a profit—is the primary basis for setting price.
Target costing
Unlike cost pricing, target costing considers market forces. In, a company starts with the price it wants to charge, figures out the profit margin it wants,
then determines what the costs must be to produce the product to meet the desired price and profit goals
Competitive pricing
price is determined in relation to rivals, factoring in other considerations such as market dominance, number of competitors, and customer loyalty.
Factors influencing pricing
- What is the value of the product or service to the target market?
- Are there any external factors that could affect the perceived value? (Note: technological or socio-cultural trends, economic environment, government regulations)
- What is the cost of the product to you?
- How will your price compare with your competitors? What level of competition are you dealing with? (Note: oligopolies and monopolies have more control over pricing)
- Is the target market price sensitive? (Note: Will a small decrease in price increase market share significantly or will a small increase be indiscernible, and so gain you extra profit margin?)
- What is your overall strategy? (Note: profit per unit, increased market share, or a combination of both)
Price common practices: Price skimming
To recover high research and development costs on a product, a company may set a high price to make a large profit; this can work when there is little competition.
Price common practices: Penetration price
low price to attract customers and deter competition
Price common practices: Discounting
assigning regular prices to products but then resorting to frequent price-cutting strategies, such as special sales, to undercut the prices of competitors
Price common practices: Bundling
the practice of pricing two or more products together as a unit
Gross margin
Gross profit margin = Selling price - COGS
Gross profit margin % = Gross profit margin / Selling price
When retailers are used, the manufacturers’ selling price is determined by:
Suggested retail price – retailer discount (net price to retailers)
Basic pricing strategies
• Building Profitability
– Establishing a fixed profit margin
• Matching the Competition
• Creating Prestige
– Setting a higher price (price skimming)
• Boosting Volume
– Setting a low price (penetration price)
Other important factors in marketing
• Buying process
• Factors influencing buying
• Market research
• Influence of social responsibility and technology
