MARKETING MIX AND RELATIONSHIP MARKETINGLecturer – Shahed Rahman

Part – 2

THE PRICING INGREDIENT

Price is the ultimate measure of a good’s or service’s exchange value as agreed upon by the seller and buyer

Price is important because it directly affects the channel member’s profitability

Valuation –Perceived value In marketing channel each partner provides

some added value to the offering Not all buyer are not looking for the cheapest

price – ( Resellers)

A PRICE PREMIUM

A price premium is a price level in excess of the normal market or industry value. Channel members may justify price premiums for a number of reasons including:

Building relationship – In order to develop a long term relationship with a prospective exchange partner

Preserving a Relationship – Has a long history of association with an exchange partner.

A PRICE PREMIUM

Reducing Risk factors – when the situation is risky- to secure the intangible attributes. Consumers also pay more for an established

brand name product for a reduction in their perceptions of risks.

Obtaining perceived quality- Channel members can rationalize that the price premium is related to higher quality exchange performance such as on time delivery

Possessing Limited Information- Channel members may pay a price premium because they do not have sufficient information with regard to the market pricing

PRICE ELASTICITY OF DEMAND

Percentage change in the amount of a good demanded in response to a percentage change in price.

Situational considerations effect a product’s price elasticity

Changes in price elasticity of demand can occur at any channel level

PRICING METHOD

Algorithmic Pricing Method Inside – Out Approach Price is resulting from the channel member’s

forecast of their own cost and revenue Market oriented Pricing Method

Outside – in approach Pricing cues are generated from an evaluation of

threats and opportunities Relationship Oriented Pricing

Before a price is established , internal and external cues are simultaneously evaluated in an effort to build and maintain exchange relationships.

ALGORITHMIC PRICING METHODS

Break Even Analysis Convergence between the cost

associated with making a product and the revenues realized from selling the product

Buyers do not always behave rationally in the market

Revenues also depend on demand- and very hard to estimate the demand

ALGORITHMIC PRICING METHODS

Cost- Plus Pricing A percentage or fixed

markup is added to the cost to establish a price

Ignore the effect of market factors – consumer preference , brand loyalty

Modified Break-Even Pricing Several estimations of

quantity and price Also uncertain about the

demand

MARKET ORIENTED PRICING

Competitive Pricing Market Entry Pricing

Penetration Pricing Skimming the cream pricing

RELATIONSHIP ORIENTED PRICING

Volume pricing Functional Allowances Promotional Allowance

PRICE LEGITIMACY

Exists whenever a buyer and sellers perceptions of a market offerings value meet or come together.

Consumers dont believe the list price is a real price

Customers expect higher prices to result in better service

Do not view low prices as justification for poor service

SEVERAL TECHNIQUES TO JUSTIFY THEIR PRICING LEVELS

Price Guarantees Price Posting Cost of Service Pricing

THE PROMOTIONS INGREDIENT

Promotion involves any form of purposeful communications employed by channel members with the intent of informing, reminding, persuading prospects and customers regarding some aspects of their market offerings

THE PROMOTIONS INGREDIENT

Personal Selling Interpersonal communication process by which a

seller uncovers and satisfies the needs of a buyer, to the mutual long term benefit and both parties

No Personal Selling Involves all other types of promotions-

advertising, PR and sales promotion An organization targeted toward some particular

audiences

TRADITIONAL COMMUNICATION MODELS

Feedback

SENDERMessage

RECEIVER

EncodingDecoding

RELATIONAL COMMUNICATION MODELS

Cognition Cognition

Synchronous

cognition

Noise

NoiseNoise

Noise

PROMOTIONAL OBJECTIVES

Five objectives are generally associated with relational promotions in marketing channels Stimulating Sales Differentiating Offerings Sharing Information Accentuating a Market Offering’s Value Stabilizing Seasonal Demand

PULL VS PUSH STRATEGIES Pull Strategy – persuasive

communications aimed directly at the consumer Goal to stimulate the final

users’ desire for the offering Promotional message

generally involves price incentives,

Pull strategy often used with new product introductions to entice the consumer early demand for an offering

It used to create loyalty in the face of price competition

PULL VS PUSH STRATEGIES

Push Strategy Producers > Wholesaler> Retailers > Consumers

Target their influential communications at intermediaries – pushing against the next link in the distribution chain

Push promotional strategies allow the channel participants to exercise greater control over the promotional message Allowance Advance notice Training and support

THE PLACE INGREDIENT

Place is often described as distribution All those distribution, logistics and behavioral

functions that regulate the flow of market offerings between exchange partners

The goal of place is to minimize the costs of functions while maximizing customer satisfaction and market coverage

Minimizing distribution costs can damage long time channel relationships Forcing retailers to buy in large quantities to cuts

it distribution cost

STRATEGIC FORMULATION: ROLE OF MARKETING CONCEPT

A channel members' markets A channel member’s functional area

strategies A channel member’s strategic assets or skills