FDNMARK

PRICING CONCEPTS

• "price" - given up in exchange to acquire goods or services

• PRICE HAS MANY STRATEGY DIMENSIONS (KEY PRICING POLICIES)
Prices reflect many dimensions, which in turn impact customer value and buyer behavior.
▪ Price flexibility
▪ Price levels over product life cycle
▪ Transportation costs - who pays and how
▪ Discounts and allowance - to whom and when
▪ PRICE EXCHANGE

▪ PRICING OBJECTIVES
▪ Profit Oriented
- Target return: sets specific guidelines for a level of profit
- Profit maximization: the firm sets prices to seek as much profit as possible. This
objective may be used to recoup high investment costs or it may be simply a matter of
company policy.
▪ Sales Oriented
- Sales growth doesn’t necessarily mean big profits, because marketers may overlook the
costs associated with delivering those sales.
- Market share growth objectives are popular.
▪ Status Quo Oriented
- Meeting competition stabilizes market prices because no firm benefits from raising or
lowering prices.
- With nonprice competition, aggressive action is taken in the other three areas of the 4
Ps, staying clear of price as a competitive “battleground.”
▪ Most firms set specific pricing to reach objectives

▪ PRICE LEVEL POLICIES OVER THE PRODUCT LIFE CYCLE

▪ Key Considerations:
- Introductory Prices
- Product Life Cycle
- Prices above, below, relative to the market
▪ A high price may lead to higher profit from each sale, but also to fewer units sold
▪ A low price might appeal to more potential customers
▪ In administering prices over the product life cycle, we must set price level policies. We
must consider where the product life cycle is—and how fast it’s moving.
▪ We must also decide if their prices should be above, below, or somewhere in-between
relative to the market.
▪ Price policies have strategy implications that must be supported with appropriate
resources.
▪ ALTERNATIVE INTRODUCTORY PRICING (major price-level policies)
• DISCOUNT POLICIES: Reductions from list prices
▪ Quantity Discounts - encourage volume buying, the customer pays less per unit
- Cumulative Quantity: apply to all purchases in a given period, reducing cost for
additional purchase to acquire and develop loyalty
- Non-Cumulative Quantity: individual orders with discounts but do not build
relationship between buyer and seller, apply to only individual orders
▪ Seasonal Discounts - encourage buyers to buy sooner
▪ Cash Discounts - reductions in the net—the face value of the invoice due immediately—
to encourage buyers to pay quickly.
▪ Trade Discounts - reductions in list price given to channel members that perform one or
more marketing functions for the producer.
▪ Everyday Low Pricing - using low list prices rather than relying on frequent sales,
discounts, or allowances.
• 2 BASIC APPROACHES OF SETTING PRICES
▪ Cost-Oriented
- Adding percentage mark-up for each product
- Average cost pricing— adding mark-up to the average cost of a product
▪ Demand-Oriented
- Relying on customer demand and price sensitivity
- Industry price
- Additional demand-oriented approach for setting prices:
1. reference price- price that the consumers expect to pay (price comparison from
competitors)
2. leader pricing- setting very low prices to get customers e.g. Shopee
3. bait pricing- low price to attract but tries to sell more expensive products once
the customer is in the store (up- selling)
4. odd-even pricing - end in certain numbers, “seeing it as substantially lower
prices” (Php 99, Php199)
5. price lining- price levels for a product line (Php 200, 300, 400)
6. demand pricing- backward pricing
7. prestige pricing- suggest high quality or high value e.g. Huawei P30
8. full line pricing- setting prices for a whole line of products (entire product line)
e.g. all 300ml conditioner on product line priced at Php88
9. complimentary product pricing - setting one product at low price but selling for
another product at higher price e.g. FujiFilm instax sold at Php 4,000 but the
instax film sold at Php 950
10. product bundling- setting one price for a set of products
11. bid pricing- offering a specific price for each possible product rather than setting
a price that applies for all customers
12. negotiated pricing- based on bargaining between buyer and seller
• ALLOWANCE POLICIES - off list prices
Allowances are given to channel members or final consumers for doing something or accepting
less of something.
▪ Advertising - exchange something for something else: price reductions given to firms in
the channel to promote the supplier’s products locally.
▪ Stocking - also called slotting allowances, these are given to intermediaries to get
attention and shelf space for a product. Stocking allowances are used mainly in
supermarkets, where space is at a premium, forcing producers to pay for product
placement.
▪ Trade-ins - the customer receives a price reduction for used products when similar new
products are bought.
▪ Push Money - manufacturers or wholesalers give push money allowances to retailers to
be used as incentives for their salesclerks to aggressively push the targeted items.
• Coupons, deals, and rebates can segment the market
▪ Coupons - vouchers that entitle buyers to a price reduction at checkout.
- Retailers accept coupons because they tend to increase sales volume at no additional
promotion expense to the retailer, and retailers are typically paid for the trouble of
handling the coupons.
- Many firms offer discounts through coupons.
▪ Rebates - refunds given consumers after a purchase. These ensure that the final
consumer actually receives the price reduction.
• List price may depend on geographic pricing policies
Retail prices sometimes vary according to the location of the buyer relative to the seller. For
many industries, geographic pricing policies are an important component of the price variable in
the marketing mix.
▪ F.O.B
- The seller pays to have the product loaded on a transportation vehicle at which time the
title is transferred to the buyer, who pays shipping and is responsible for the product at
that point.
- F.O.B. pricing is easy for the seller but may limit the range of the market.
▪ Zone
- Zone pricing smoothens delivered prices by applying an average freight charge to all
customers in the same specified geographic area.
- This simplifies billing and helps buyers know the delivery charges in advance.
▪ Freight Absorption
- Geographical pricing strategy in which the seller absorbs all or part of the freight charges
to get the desired business. The seller might reason that if it can get more business, its
average costs will decrease and more than compensate for its extra freight cost.
▪ Uniform Delivered
- In effect, all buyers are in the same “zone,” helping to open large-area markets.
 • Pricing policies combine to impact customer value

• THE PRICE ACT

AN ACT PROVIDING PROTECTION TO CONSUMERS BY STABILIZING THE PRICES OF BASIC
NECESSITIES AND PRIME COMMODITIES AND BY PRESCRIBING MEASURES AGAINST UNDUE
PRICE INCREASES DURING EMERGENCY SITUATIONS AND LIKE OCCASIONS.

PLACE MANAGEMENT
• WHAT IS A PLACE?
This marketing mix involves Marketing or Distribution channels. It is a set of interdependent
organizations involved in the process of making a product or service available for use or
consumption by the consumer or business user
• HOW A DISTRIBUTOR REDUCES THE NUMBER OF CHANNEL TRANSACTIONS
▪ Channel Functions:
- Information: Channel members help to gather and distribute marketing research and
intelligence information about the customers and competitors to the marketer. This
information would assist the marketer in their planning of the marketing activities
- Promotion: Channel members help to develop and spread persuasive communications
about the brand
- Contact: Channel members help to find and communicate with prospective buyers of
the products
- Matching: Channel members help to shape and fit the offer to the buyer's needs like
breaking down the products into smaller quantities or re-bundling them to suit the
needs of customers
- Negotiation: Channel members help to negotiate the price that the customers could
afford with the manufacturer
- Physical Distribution: Channel members help to transport and store the products in
proper warehouse conditions like away from damaging heat
- Financing: Channel members need to acquire and find funds to cover their costs of
channel work
 - Risk Taking: Channel members need to assume the risks of carrying out the channel
work like changes in customers' preference and taste, which would result in the drop
in sales of the products
▪ Channel Levels - It is a layer of intermediaries that performs some work in bringing the
product and its ownership closer to the final buyer
▪ Channel Design: Decisions - The process to decide which type of channel/method to use
- Analyzing Consumer Needs
o Amount willing to pay
o Method of purchase - online, phone, person
o Assortment of Products/Services needed
o Are any sales and after sales services required?
o Are credit and installment agreement required?
- Setting Channel Objectives
o Type of product carried
o Company's resources - money and staff Ability of channel members to provide
services
o Competitors' offerings
o Set the targeted level of service
o Find ways to deliver
- Identifying Major Alternatives
o Types of Intermediaries
o Responsibilities of intermediaries
o Number of intermediaries
- Evaluate Major Channel Alternatives
o Each alternative should be evaluated against economic, control, and adaptive
criteria
o After evaluation, decisions may be undertaken to modify or redesign a
distribution channel
▪ Number of Intermediaries - These are types of distribution that are based on the
number of intermediaries that the business uses
- Intensive: Aimed at having a product available in every outlet where target consumers
might want to buy it
- Selective: Achieved by screening dealers to eliminate all but a few in any single area
- Exclusive: Entails establishing one or a few dealers within a given area. It is the most
restrictive form of distribution
• WHAT IS RETAILING?
It includes all the activities involved in selling products or services directly to final consumers
for their personal, non-business use. Retailers are businesses whose sales come primarily from
retailing
 ▪ Creating Unique Retail Experiences
In today’s age, emotion drives consumer behavior more than anything else. So creating a
unique experience that fosters positive feelings and connection is key to building strong
customer loyalty.
- Make it personal: Use technology to gather relevant data on all your consumers
- Keep employees happy: If you want to build a positive reputation for your brand, you
need excellent customer service.
- Engage 5 senses: Make sure that your prospects' encounter with your brand sticks in
their mind.
• MULTI-SENSORY MARKETING
It is important to not only engage all five senses of your customers, but you also have to find
the right combinations between sound, smell, and visuals that elicit a specific reaction in
them and drives them to buy more.
▪ Ideas:
- Make sure your store's layout is well-designed and the entire space looks inviting.
- Choose colors wisely and use them to tell a story.
- Make it easy for prospects to feel and touch the products that are showcased.
- Use scents that are proven to boost sales in a retail setting (like cotton or vanilla)
- Play background music that your customers love
- Create a signature sound for your brand that reflects your core values
- Use feedback from your store's visitors to refine your methods
• INBOUND METHODOLOGY

• PRESENTATION OF A RETAIL STORE

The presentation of a retail store helps determine the store’s image and positioning in consumers’
minds. The main element of presentation is atmosphere.
 ▪ Employee Type and Density
▪ Merchandise Type and Density
▪ Fixture Type and Density
▪ Stimulating the Five Senses
• TYPES OF RETAILERS
Retailers are classified based on the amount of service they offer, breadth and depth of
product lines, relative prices charged
▪ Specialty: Carry narrow product lines with deep assortments
▪ Department Stores: Carry a wide variety of product lines. Each line is operated as a
separate department managed by specialist buyers or merchandisers
▪ Supermarket: Large, low-cost, low-margin, high-volume, self-service store that carries a
wide variety of food, laundry, and household
▪ Convenience: Small stores located near residential areas that are open long hours 7 days
a week and carry a limited line of high- turnover convenience goods
▪ Superstores: Much larger than regular supermarkets and offer a large assortment of
routinely purchased food products, nonfood items, and services
▪ Discount Store: Sells standard merchandise at lower prices by accepting lower margins
and selling at higher volume
▪ Off-Price Retailer: Retailer that buys at less-than- regular wholesale prices and sells at
less than retail
- Factory Outlet: Owned and operated by a manufacturer and normally carries surplus,
discontinued, or irregular goods
- Independent: Either owned and run by entrepreneurs or is a division of a larger retail
operation
- Warehouse Club: Sells a limited selection of brand-name grocery items, appliances,
clothing, and other goods at deep discounts for members who pay annual membership
fees