Principles of Marketing Guided Learning Activity Kit PDF

# Principles of Marketing ## Guided Learning Activity Kit ### Prices and New Product Pricing #### Quarter 2 - Week 2 ## Review **What's your status?** - Competition between other businesses cannot be prevented. This encourages businesses to improve their products. - Manufacturers and develope...

# Principles of Marketing ## Guided Learning Activity Kit ### Prices and New Product Pricing #### Quarter 2 - Week 2 ## Review **What's your status?** - Competition between other businesses cannot be prevented. This encourages businesses to improve their products. - Manufacturers and developers spend overtime promoting their products. - Deeper studies demonstrate how to improve the product, service, and experience without compromising its quality but reducing the expenses such that lower prices can be offered to consumers. - We have also learned different business models in which the common concept is that a product should make money. - By doing so, a business can continue to operate and compensate all the expenses incurred during and after the production. - Business plans guide and help us to prepare for the establishment of a business. - Through its goals, visions, and missions, we are motivated to work at the improvement, promotion, and sale of our products. ## Discussion ### A. Origins of Pricing - Price is the money, goods, or service exchanged for the possession or use of goods or services. - It is the sum of money in exchange for a product or service. - In the past, the barter system was used on the market - substituting one product for another product by swapping. #### Various names of price are the following: | Another Name of Price | Commodity Purchased | |---|---| | Tuition | Education | | Interest | Use of money | | Taxes | Government service | | Subscription | Regular receipt of a periodical | | Royalty | Use of copyright | | Rent | Use of asset | | Fare | Taxi or bus ride | | Fee | Service of a physician | | Retainer | Lawyer's services over a period of time | | Toll | Long distance call or travel on some highways | | Salary | Services of an executive or a white-collar worker | | Wage | Services or a blue-collar worker | | Commission | Salesperson's services | | Honorarium | Guest speaker's service | | Dues | Membership in a union or club | ### Suggested Retail Price (SRP) - SRP represents the price that a consumer product is expected to be sold over the counter and in stores. - This pricing mindset still exists in wet markets (public markets) and market stalls (tiangge). - Consumers try to bargain on the price at these locations. - Consumers typically ask the vendors for a discount on any item they choose to buy. - Vendors or sellers expected the buyer to ask for a discount, and then they lay a reasonable price that they could give to the buyers. - Buyers then know that the vendors offered them a fair and reasonable price. ### Emergence of the Suggested Retail Price: - The industrial revolution led to a number of developments that became critical transformers for the marketing process. #### Two elements, in particular, have seriously altered merchandisers' approach to pricing - **Mass Production** - which directed to broader admission to economical goods that are sold in bulk, as prepared possible by factory-based processes. - **Transportation** - the development of stretched variety of mechanical transportation systems that would deliver traders with admission to a distant broader variety of goods that was ever earlier possible. ## Factors to Consider when Setting Prices: ### 1. **Internal Factors** - **Marketing Objectives** - the improved target market selection and product positioning are made simpler. The common objective includes survival, current product maximization, market share leadership, and product quality leadership. - **Marketing mix strategy** - Price decision must be coordinated with product design, distribution, and promotion in order to create a constant and effective marketing program. - **Target Costing** - pricing begins with the best-selling price, and then aims at costs that will confirm that the price is met. - **Costs** set the floor to pricing. A company cannot constantly sell below costs. - **Organizational consideration** - in small business, the top administration often sets prices; in large industries, pricing is naturally held by divisional or product line manager. ### **Types of Distribution Channels** - **Direct Selling** - is one of the oldest ways of selling products. They are typically used by manufacturers selling perishable goods, expensive goods, and whose target audience is geographically concentrated. Examples of this are jewelers, bakers. - **Indirect Channels (selling through intermediaries)** - if a producer includes a trader/midway to sell its product to the end customer, it is said to use an indirect channel. #### **Indirect channels can be classified into three types:** - **One-level Channel (Manufacturer to retailer to customer)** - retailers buy the product from the producer and then trade it to the customers. Illustration: Bakeshop that bakes pandesal to a pandesal vendor (retailer) to a household (customer). - **Two-level Channel (Manufacturer to wholesaler to retailer to customer)** - wholesalers purchase products in bulks from the producer, breaks them down into small packages and sells them to retailers who then sell it to the end customers. Illustration: San Miguel Corporation Soda Company (bottled products) to warehouse (wholesalers) to stores (retailers) to household (customers). - **Three-level Channel (Manufacturer to Agent to Wholesaler to retailer to customer)** involve an agent in addition to the wholesaler and retailer who assists in selling goods. They are assigned with the distribution of the product of a specified area or district in exchange for a certain percentage commission. #### **Dual Distribution:** - When a manufacturer uses more than one marketing channel simultaneously to reach the end user, he is said to be using the dual distribution strategy. ### 2. **External Factors** #### a. **Nature of the Market and Demand** ##### **Pricing Different Types of Markets:** - **Pure competition** - no single seller or buyer can significantly affect market prices. Price taker does not need to spend too much time on marketing strategy. - **Examples:** iron, copper (unchanging supplies) - **Monopolistic competition** - trading over a range of prices caused by differentiation. Physical product may also be diverse in quality, feature, style; or the complementary services may be diverse. Buyers realize the difference in sellers' products and are willing to pay different prices for them. - **Example:** foods - **Oligopolistic competition** - few sellers are highly sensitive to each other's pricing and marketing strategies. Products can be uniform (steel, aluminum) or non-uniform (cars, computers). It is challenging for new sellers to enter the market. Seller interfaces are game-theoretically complex. - **Pure monopoly** - one seller, who can choose the price or quantity to sell. ##### **Pricing depends on monopoly type:** - **Government monopoly** - several choices - **Example:** price lower cost for social motives, price to cover costs, price high to slow down consumption - **Private regulated monopoly** - permitted to sell at rates with "reasonable return" - **Private non-regulated monopoly** - allowed to price as they wish, but not consistently at maximum price to avoid enticing competition, infiltrate market faster, and anxiety of regulation. - **Consumer perceptions of price and value** - actual buyer-oriented pricing includes understanding how much value consumers place on the benefits they obtain from the product and setting a price that is reasonable for its value. #### **c. Competition:** - High-price, high-margin strategy attracts competition; low-priced, low-margin strategy may keep them out. - Needs to target costs against competitors so that an expert conclusion can be made. - **Example:** thorough price competition when you're not the cheapest cost producer may be damaging #### **d. Other environmental factors** - **Economy, resellers, government** – economic conditions. Government can have an effect on pricing (price control, taxes). Social issues are short-term goals that will need to be moderated by bigger societal concerns. - **Example:** prices of prime commodities (rice, sugar, fish, meat, etc). The government (BFAD, DA, DTI) decides and states the suggested retail prices (SRP) of these products. These agencies lay down a bracket price range that prohibits you to exceed or decrease within the said range. ### **Structures of Distribution Channels** - Distribution channels are also called a marketing channel providing time, place, and ownership service. - They make the product accessible when, where, and in which quantities the customer wants. - Distribution channels are a vital component in all the marketing strategies that circulate around the product. - It is often called upon as a set of symbiotic intermediaries to help create a product that is available to the demand of the customer. ### **Functions of Distribution Channel** 1. Distribution channels provide time, places, and ownership utility. 2. **Logistics and physical distribution** - marketing channels are liable for the assembly, storing, sorting, and shipping of goods from manufacturers to customers. 3. **Facilitation** - channels of distribution also offer pre-sale and post-purchase services such as financing, maintenance, information broadcasting, and channel organization. 4. **Creating efficiencies** - This is done in two ways the bulk breaking and creating assortments. 5. **Sharing Risks** - subsequently most of the channels acquired the products earlier, they also share the danger with the manufacturers and do everything to sell it. 6. **Marketing** - These are among the touch points where many marketing strategies are executed. They are in direct contact with the end customers and help manufacturers in spreading the product's message and benefits to the customers.