# Place Development, Pricing and Promotion

## Place Development

Key Issues
- product classes suggest place pbjectives
- place decisions have long-run effects
- place systems may be complex

Why choose direct channels
- greater control
- lower cost
- internet makes direct distribution easier
- direct contact with customers
- suitable intermadiaries not available

Direct channels are common with business customers and services

Indirect channels are best when they like department or retail stores: convenience and channels
- important to look for quantity or assortment changes


**channels specialists adjust deiscrepancies in quantity or assortment with regrouping activities**
1. accumulating- collecting products from many small producers
2. bulk-breaking- dividing larger quantities into smaller quantities
3. assorting- assembling a variety of products that are likely to appeal to customer wants
4. sorting- seperating products into grades/qualities to appeal to diffrent target segments


**Intensive**- sell it where they buy it- appropriate for convenience products
**selective**- sell it where sells best- shopping products- reduce costs & obtain better partners
**exclusive**- one intermediary specialty products (Viking oven, Ferrari, selective beer)


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## PHYSICAL DISTRIBUTION AND CUSTOMER SERVICE


physical distribution- transport, sorring and product handling should all be one system for a given service level

What service level to offer?

Need to find service level that costs just enough to satisfy the customer. too high service level costs too much- not needed


Transporting must fit the marketers goal of the product

Must look at the overall system

storing goods
- needed when production doesn't match production
- keeps prices steady
- economies of sclae
- builds channel flexibility

**RETAILER AND WHOLESALER CONSIDERATIONS**


Retailer's Strategy
1. product selection- assortment, brand & quality
2. place decisions- location of stores, online, location
3. promotion- displays, demos, product information
4. prices- special doscounts
5. emotional needs- social image, status, feeling of fitting in
6. shopping atmophere- comfort, safety, sounds, smells


Retailing is still in the growth stage
1. brick & mortar stores add online capabilities
2. new meaning of convenience
3. online costs for retailers & customers
4. showrooming- go to B&M store and still buy online for lower price
5. big data- online retailers have better insight on consumers



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## PRICING OBJECTIVES AND POLICIES

price is what the consumer must give up to gain good orservice

Marketing Managers develop objectives and policies
- price flexibility
- price levels over product cycle
- discounts and allowances - to whom and when
- transportation costs- who pays and how

Pricing objectives:
* Profit oriented
* target return- satisfactory profits (public company)
* maximize profits (recoop costs)
* Sales oriented
* dollar or unit sales growth
* growth in market share
* ease of measurement
* sales growth does not always translate to higher revenue
* Status quo oriented (don't rock pricing boat)
* nonprice competition (image or quality)
* meeting competition (market for product is not growing)

Pricing Policies:
- one-price policy
- same for everyone
- frequently purchased items
- low-cost & convenient
- maintain goodwill
- Flexible price policy
- different customers, different prices
- databases make it easier
- sales people adjust prices
- too much cutting hurts profits
- having databases helps with pricing adjustment
- salespeople can also adjust pricing
- may prompt resentment by customers

- skimming should not be used for prescription drugs
- new price, nre features attracts new target market
- penetration has low enough cost to discourage competition

Discount policies: reduction from list price
Start at list price, reduction given to buyer for specific actions or manage inventory
- quantity- helps push for product
- seasonal- buy sooner, stabilize demand
- cash- reduction in the net, pay quickly (2/10, net 30)
- trade- services given
- sale- immediate buying, can condition to show for sales and erode brand loyalty

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## Price Setting


### Cost-Oriented price setting

**markup pricing**- necessary for all to make a profit
- high markup don't always translate to big profits, they can reduce demand, seller will lose $$
- low markup will speed turnover

producer typically start markup, but can be other players int he chain


in the above example:
62k/40k units = 1.55$ per units cost
Profit needs to be 18k ($.45) per unit
Cost must be $2 to make 18K profit

**easy to lose money if demand is not accurate, because of overhead expense**

Marketing Manager must consider various costs
- fixed cost- remains constant
- variable- change with level of output
- total cost- fixed + variable
- average unit cost - total labor and materials/# of units
- average fixed cost - fixed cost/units
- average variable cost - variable cost/units


Marginal analysis helps find the right price that helps maximize the profit. If --> then thinking

Profit will be maximized when marginal revenue is equal to marginal cost**
- Maximum profit is achieved when the Marginal Profit, the profit from selling one additional or one less item, is zero. Profit is determined by the revenue minus the cost, and thus to maximize profit, the marginal revenue is equal to the marginal cost.

### Demand Oriented cost setting

Demand Estimation
- substitute wants of meeting a need?
- easy to compare prices?
- who pays the bill?
- total expenditure?
- is end benefit significant?
- how great are switching costs? important for business customers

Bid pricing- offering specific for every job
- cost estimation is the biggest issue, must respond fast
- ethical issues - overestimation
- consider demand- must consider overhead
- negotiate pricing- multiple rounds of negotation

## Promotion

### Promotion Methods
- personal selling- obtains quick feedback
- mass selling- using when target market is large and disbursed
- ads- paid format of non-personal presentation
- publicity- unpaid form of non-personal presentation
- sales promotion- stimulate interest

which method to use depends on promotion objectives:
- infroming- create awareness, new
- persuading- convince market, reinforce
- reminding- if customers have positive attitude already


AIDA- Attention, Interest, Desire, Action



**Combination of push and pull is the best method**

### Promotion Planning
Promotions must be aimed at different adoption groups
- innovators- first to buy, don't mind risk
- early adopters- opinion leaders, most contact with sales people
- early majority- avoid risk, deliberate decision makers
- late majority- cautious, older and set in their ways
- laggers- hang on to tradition and less educated

### Promotion Budget

Percent of sales- past or anticipated, doesn't consider situation variables
Task Method- marketing concept and is customer oriented

## Personal Selling and Customer Service

### Importance of Personal Selling

Personal selling is important:
- helping to buy is smart selling
- salesperson represent whole company
- sales force provide market information
- salespeople can be strategy planners

supporting sales people:
- missionary sales- increase sales, training for new salespeople
- tech specialist- engineering or science background
- customer service reps- problems after sale

### Personal selling Tasks
Organize so all task performed well
- different markets, different tasks- account size
- major accounts sales force
- telemarkeritng
- sales territory
- size of salesforce based on workload
- team selling- work on same account

### Strategy Decisions
Tasks ususally handled by sales, can now be handled by IT and ecommerce

### Personal Selling Process

## Advertising, Publicity and Sales Promotion

### Ad Spending
Retailers play significant role in Ads
Advertising Objective should be specific
- position brands- product benefits
- introduce new products
- obtain outlets-where to buy?
- ongoing contact
- support sales force- reference ads
- get immediate action- timed deals
- maintain relationships


### Ad Strategy Decision

Product- sell a product. designed to know & like product
- pioneering- primary demand for category, early
- competitive- develop selective demand for specific brand
- reminder- keeps company's name before public
Institutional- promotes company's reputation, image or ideas. Creates goodwill and improves reputation with groups

Best way to deliver message depends on:
- promotion objectives
- target market characteristics
- funds available
- nature of the media- match market with media

### Channel Analysis

Digital marketing
- capture data, geotargetting
- SEO- organic and paid search
- display advertising- accross websites and social media sites. Can be re-targeted
- social media and influencer marketing
- mobile device
- video content consumption
- email- cost per reach is very low

Ad effectiveness:
- consider the total mix- can't fail for selling bad product
- research and test improve odds- mix and match
- research past to learn from into future

### Publicity and Communication Tactics

works alongside other advertising tools


### Sales Promotion Decisions

seeks immediate response


1. issued coupons to clear inventory. customers stock pile so sales go down later
2. limited promotion
3. free samples pull new product- best tactic!!

Problems:
- erode brand loyalty- customers catch best sales
- need for alternatives- every day low price
- hard to manager- can't transfer lessons learned from one promotion to next
- lessons learned- strategic tool