Pricing and marketing. The pricing is a important factor in marketing both in getting the product accepted by the target market, and in generating sufficient revenue for the organisation.

1. Profitability-oriented objectives

1.  Profit maximization
2. Target return
3. Satisfactory profits

2. Volume- oriented objectives

1. Maximization of sales revenue
2. Maximization of Market share
3. Maximization of Customer volume
4. Minimization of  customer volume

3. Image-oriented objective

1. Maintaining an image

4. Stabilization objective

1. Maintaining stable prices

PRICING PROCE

        

Influences on price

One key activity of the marketing research and the audit process is to understand the key influences upon pricing.  Highlights the factors affecting the pricing decisions of the organization.

Eight stages to establishing a price...

Consumers’ perceptions:

One of the major factors that determine the pricing of a product is the perception of its target consumers of what is the reasonable amount to pay or the product. This may bear absolutely no relationship to the cost of the product or service.

For example:

    Bottled spring water (like Avian or Susunia), which simply flows from under the ground, cost more to buy than concentrated orange juice, even though juice manufacturer involves an intensive process of growing, picking, crushing and processing of fruits. The reason is simply the perception of preference of the products (i.e. ground water is perceived to be safer and more preferable for good health).Thus consumers make cost-benefit judgements about whether they are getting proper value for money from buying and consuming a product.

Factors Affecting Pricing Decision

The price at which a product is offered for sale in the market is affected by several factors both internal and external. Internal factors include interactions among the remaining three (product, distribution and promotion) marketing controllable and the cost. External factors include competitors’ price, buyer behaviour, overall economic climate, government policies, etc.Out of these, cost of production, product demand, competitors ‘prices, overall market conditions, and consumer paying capacity are some of the important factors which have a direct bearing on price setting. The pricing decision is subject to the influence of many economic and non-economic variables.

Internal factors

• Organizational set-up:  

 Generally upper and lower levels of the organizations are concerned with pricing decisions. In fact, the overall pricing strategy is framed by top management. The upper level management is responsible for classification of product ranges in terms of market segments. Lower level management takes care of actual price mechanics and individual product strategies.

• Marketing mix:

Price plays an equally important role with other elements of marketing.mix in an any marketing system. Any decision in any one of the elements has a direct be framed in the context of a total marketing strategy.

• Costs:

Generally costs form basics for pricing desisions,therefore,a proper study of both fixed and variable cost is essential for accurate pricing decision.Further,management should pay a due attention to other types of costs like incecemental costs, replacement costs, controllable costs, out-of-pocket costs and opportunity costs.

• Objectives:

Pricing objectives largely influenced the pricing decisions. Each objective must be explained clearly so that marketing manager may not feel any difficulty while achieving the same with the instrument of price.

• The image that business wants to build in the market(brandings)
• The nature and characteristics of the product(quality)
• Price elasticity of demand
• Product line and its composition
• The stage of product in the life cycle
• The extent to which the product is distant in the market

External factors

• Demand:

Pricing is directly influenced by the demand of product or service. In turn, demand is influenced by the following factors.

• Number and size of competitors
• Price of the competitor’s product
• Nature and economic capacity of customers
• Consumer preferences

The proper investigation of above-listed factors is essential in pricing decision.

• Competition:

Competition is the major force in a competitive market that affects pricing decisions of a firm. Therefore; a marketer should not only study the competitor’s current pricing strategies.

• Suppliers and buyers:

Pricing decisions are directly affected by the approach of suppliers and buyers.

For example:-If the prices of raw materials increase, the suppliers will shift the incidence of price rise to producers who, in turn pass it onto the customers. This is a serious situation which needs a detailed analysis by the marketers. Buyers also have a significant influence in the pricing decisions particularly under a market situation where the numbers of buyers is less but their share in a firm’s sales is maximum. At the same time, scarcity and value of the raw material used also calls for proper attention from the management in pricing decisions.

• Economic atmosphere:

Pricing policies have to operate under a particular economic climate. The absence of competition allows firms to bag any amount for their products in the shape of high price. However; market response may not be the same in competitive conditions. Economic conditions should never be expected to remain in a stable state for a long period. Economic phases like inflation, stagflation, or recession have their say in the pricing decisions and, there for each phase. As a consequence, marketers have to anticipate future economic changes for pricing decisions.

• Government control:

In many countries prices of private firms are largely controlled by various Government legislations and acts to control markets. The impact of Government on pricing decisions is more pronounced in such industries where Government is the largest buyer of the production.

• Legal norms

• The customers and their bargaining power
• Buyer behaviour in respect of the product

Distribution

Physical distribution (or place) is one of the four elements of the . An organization or set of organizations (go-betweens) involved in the process of making a product or service available for use or consumption by a consumer or business user. The other three parts of the  are , , and .

Distribution involves a number of activities centered around a physical flow of goods and information. At one time the term distribution applied only to the outbound side of supply chain management, but it now includes both inbound and outbound. Management of the inbound flow involves these elements:

• Material planning and control
• Purchasing
• Receiving
• Physical management of materials via warehousing and storage
• Materials handling

Distribution channels are formed to solve three critical distribution problems, functional performance, reduced complexity, and specialization.

The central focus of distribution is to increase the efficiency of time, place, and delivery utility. When demand and product availability are immediate, the producer can perform the exchange and delivery functions itself

Distribution management also can decrease overall channel complexity through sorting and assistance in reutilization.

There are a number of critical functions performed by the channel distributor. Ross describes these functions as:

1. Product acquisition. This means acquiring products in a finished or semi-finished state from either a manufacturer or through another distributor that is higher up in the supply channel. These functions can be performed by independent channel intermediaries or by the distribution facilities of manufacturing companies.
2. Product movement. This implies significant effort spent on product movement up or down the supply channel.
3. Product transaction. Distributors can be characterized as selling products in bulk quantities solely for the purpose of resale or business use. Downstream businesses will then sell these products to other distributors or retailers who will sell them directly to the end customer, or to manufacturers who will consume the material/components in their own production processes.

Distribution channels are the pathways that companies use to sell their products to end-users. B2B companies can sell through a single channel or through multiple channels that may include

• Direct/sales team
• Direct/internet
• Direct/catalog
• Wholesaler/distributor
• Value-added reseller (VAR)
• Consultant
• Dealer
• Retail

Distribution is one of the classic “4 Ps” of marketing (product, promotion, price, placement a.k.a. distribution). It’s a key element in your entire marketing strategy — it helps you expand your reach and grow revenue.

Here is one distribution example:

Distribution is all about getting your product/service to the right people at the right time with special consideration for profit and effectiveness. Successful marketing does not end when a business has developed a product/service and has found its appropriate target audience with a view to

 

I discusses the concept of supply chain management and organizational success. It links the operating side of the supply chain business with its customers and suppliers. Several notable people are presented that provides the definition of supply chain integration and its importance in discussing relationships among companies. The author cites the use of a multi-country survey instruments in identifying the integration of companies, which revealed that it is a fundamental capacity in meeting the demands of customers worldwide

Distribution - channel strategy

The following table describes the factors that influence the choice of distribution channel by a business:

Distribution Intensity

There are three broad options - intensive, selective and exclusive distribution:

Intensive distribution 

Aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used (e.g. cigarettes, beer). Intensive distribution is usually required where customers have a range of acceptable brands to chose from. In other words, if one brand is not available, a customer will simply choose another.

Selective distribution

 Involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g. training) on them. Selective distribution works best when consumers are prepared to "shop around" - in other words - they have a preference for a particular brand or price and will search out the outlets that supply.

Exclusive distribution 

It is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area.

CONCLUSION

 

The pricing is a important factor in marketing both in getting the product accepted by the target market, and in generating sufficient revenue for the organisation. This deal with the various elements that constitute the price of marketing-mix. This is the only element, which generates revenue when all the others talk about cost. Pricing is important in one more sense also. It is highly risk prone decision making area and a slightly wrong decision can hamper the revenue, growth and future of the company.

However you may like a product; you cannot buy that if the price of the product makes it unaffordable. The price at which a product is offered for sale in the market is affected by several factors both internal and external. The companies must use pricing keeping in mind the customers they target at.

REFERENCES

1. Gajendra,S.(2000).Marketing Strategies of Small Industry .25(9/6).P.98-99
2. Debraj,D and Mahua,D.(2006).Marketting Management .8(5)p.89-56
5.  .
7. Richard E. Wilson, 'A Blueprint for Designing Marketing Channels',   (www.chicagostrategy.com, 2008)
8. , "Distribution Channels: Understanding and Managing Channels to Market" (Kogan Page, 2008)
9. William D. Perreault, Jr. et al., 'Basic Marketing: A Marketing Strategy Planning Approach', (McGraw-Hill, 16th ed., 2008)