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Pricing and Distribution of Products

This article discusses how the selling price of a product is calculated and the difference between direct and indirect channels of distribution. It also covers the factors that affect pricing, the components of effective communication, and the common types of promotion.

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Pricing and Distribution of Products

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  1. 10-3 MARKETING (part 2)Price and Distribute Products Goal 1 Discuss how the selling price of a product is calculated. Goal 2 Differentiate between a direct and an indirect channel of distribution.

  2. Price- the money a customer must pay for a product or service(6 FACTORS IN PRICING A PRODUCT) • Supply and demand • Uniqueness • Age • Season • Complexity • Convenience

  3. VALUE AND PRICE • Buyers usually want to pay the lowest price possible. • Sellers want to charge the highest price possible.

  4. PRICE A PRODUCT • Selling price – Price paid by customer • Product costs- cost of a business to make or purchase the product • Operating expenses- all of the expenses operating the business in order to sell product. • Profit- the amount of money available to the business after all costs and expenses (Revenue minus Costs)

  5. Gross Margin- the difference between the selling price and the production costs. Gross Margin = Selling price + Product costs

  6. MARK-UP VS MARK-DOWN MARK-UP • The amount added to the cost of a product to set the selling price • Markup on cost • Markup on selling price MARK-DOWN • A reduction from the original selling price • Reasons for markdowns: • Low demand, End of season, Flaws

  7. DISTRIBUTION • Distribution- How the product is delivered to the consumer. • Channels of Distribution: The route a product goes through to make its final stop at the target customer Example: Manufacturer by truck to wholesale by truck to retail to customer Channel Members- all of the businesses involved in getting the final product to the customer

  8. What is the difference between Direct & Indirect Distribution • Direct channel of distribution, products move directly from the producer to the consumer. Example: Ordering a computer online from Dell • In an indirect channel, others may participate in the movement of products from the producer to the consumer, such as transportation services and retailers. Example: Allen Outlet Mall Store Nike has products delivered by truck from warehouse in Oklahoma

  9. Wholesalers VS Retailers Wholesaler- Intermediaries between manufacturers and retailers. Items in bulk Example: Furniture Warehouses, Sam’s Club Retailer-Direct contact with the customer Example: Allen Outlet Mall Stores

  10. Distribution Channels- the more channels the higher the cost

  11. 10-4 Plan Promotion Goal 1 Justify the importance of communication in marketing. Goal 2 Identify and describe the common types of promotion.

  12. Advertising: Planned Promotion • Promotion- any form of communication to inform, persuade or remind customers about a product or service. • Effective Communication- the exchange of information so that there is common understanding by everyone. • Personal Selling- Direct, individualized promotion face-to-face with potential customer.

  13. ADVERTISING- (3 Types) Paid promotion of a product, service, or company 1) PRINT- printed form of advertising Ex: Magazine, Newspaper, Mail Flyer Cheap but effective in specific areas 2) BROADCAST- Advertising through light, sound, or motion Ex: TV or Radio Expensive but very effective 3) CYBER- Online Advertising Ex: Pop-up Ads Cost depends on the web site

  14. COMPONENTS OF EFFECTIVE COMMUNICATION

  15. Checkpoint  • How does identifying a target market improve promotion communications? • Communication can be developed and directed more specifically if a target market is identified.

  16. TYPES OF PROMOTION • Merchandising- promotional activities designed to generate sales in the retail setting. • VISUAL MECHANDISING- Signage • DISPLAY- A display of products usually placed near the front door/window

  17. Checkpoint  • Describe the advantages and disadvantages of the major types of promotion. • Personalized promotion allows the provider to meet customers and identify customer needs. • It is, however, the most expensive type of promotion. • Mass promotion reaches a larger target market and is much less expensive. • It does not, however, provide for individualized service, and sales (results) are often not immediate.

  18. ONLINE RESEARCH • Superbowl Ads- Watch and analyze superbowl Ads. www.superbowl-ads.com • In 2014 the average price per 30 second ad was around 4 million dollars each.

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