MKM 112 Industrial/Agricultural Marketing Chapter 5 - Pricing PDF

FINALS REVIEWER-MKM 112 Industrial/Agricultural COMMON PRICING METHODS Marketing COST-PLUS PRICING: A straightforward method where a Chapter 5 _PRICE fixed percentage (markup) is added...

FINALS REVIEWER-MKM 112 Industrial/Agricultural COMMON PRICING METHODS Marketing COST-PLUS PRICING: A straightforward method where a Chapter 5 _PRICE fixed percentage (markup) is added to the cost of producing the product. PRICE VALUE-BASED PRICING: Pricing based on the perceived Price is the monetary value assigned to a product or value of the product or service to the customer rather service. than the cost of production. It reflects the interaction of supply and demand in the market. COMPETITIVE PRICING: Setting prices based on what Serves as a medium of exchange in economic competitors are charging for similar products or services. transactions. PENETRATION PRICING: Introducing a product at a low In economic theory, price, value and utility are related price to gain market share quickly, with the intention of concept. raising the price later. Utility is the satisfaction that a consumer experiences from a product or service. SKIMMING PRICING: Starting with a high price for a new or innovative product, then gradually lowering it as Value is the quantitative expression of the power a competition increases or the product matures. product has to attract other products in exchange. DYNAMIC PRICING: Prices fluctuate based on demand, Price is the amount of money which is needed to supply, or external factors, often in real-time. acquire, in exchange to some combined assortment of a product and its accompanying services. PSYCHOLOGICAL PRICING: Prices fluctuate based on ROLE OF PRICE demand, supply, or external factors, often in real-time. Importance of Price in the Economy BUNDLE PRICING: Selling multiple products together at a discounted price. 1. Guides allocation of resources. FREEMIUM PRICING: Offering a basic version of a product 2. Serves as an incentive for production and consumption. for free, with premium features available for a fee. 3. Influences consumer behavior and market demand. 4. Impacts business profitability and competitiveness. PRICE DETERMINATION Demand: Consumer willingness and ability to buy. GEOGRAPHICAL PRICING: Adjusting prices based on Supply: Availability of goods and services. geographic location due to cost differences or local demand. Cost of Production: Includes raw materials, labor, and overhead. PREMIUM PRICING: Setting a high price to reflect the product's exclusivity or luxury status. Market Structure: Competitive or monopolistic scenarios. ECONOMY PRICING: Offering basic goods or services at Government Regulations: Taxes, subsidies, and price low prices to attract cost-conscious customers. ceilings. TYPES OF PRICE FLUCTUATIONS: Seasonal Fluctuations: Prices change due to seasonal demand (e.g., holiday sales). Cyclical Fluctuations: Prices vary based on economic cycles (e.g., recession vs. boom). Random Fluctuations: Unexpected events like natural disasters or political instability. Long-term Trends: Gradual price changes influenced by inflation or technological advancements. SUMMARY: Price is central to economic and business activities. Understanding the role, determination, and fluctuations of price is vital for stakeholders. Price impacts not only markets but also consumer choices and global trade. CHAPTER 6: Operational Aspect of Pricing and Pricing Common strategies include: Strategies a. Cost-Oriented Strategies PRICING: "Pricing is a critical component of any business Cost-Plus Pricing: Ensures all costs are covered with a strategy. It not only determines revenue but also affects profit margin. consumer perception, competitive positioning, and market share." Break-Even Pricing: Focuses on setting prices to Categories of Price Mechanism Discovery cover production costs, often used during market entry. Price mechanism discovery refers to how prices are b. Competition-Oriented Strategies established in various markets. Penetration Pricing: Setting a low price to enter the It determines the equilibrium price at which goods and market and capture market share. services are exchanged. Price Skimming: Setting a high price initially to maximize There are different categories: profit from early adopters, then gradually lowering it. a. MARKET-BASED PRICE DISCOVERY c. Value-Oriented Strategies 1. Demand and Supply Forces: Prices are determined by Perceived Value Pricing: Prices are based on the value the interaction of demand and supply in the market. perceived by the customer rather than production costs. Example: Stock markets or commodities trading. Example: Premium pricing for luxury goods. 2. Auction-Based Systems: Buyers and sellers bid, and the d. Product-Line Pricing final price is set by the highest bid or lowest offer. Pricing different items in a product line to create clear Example: Real estate auctions, art sales. value differentiation. b. COST-BASED PRICE DISCOVERY Example: Basic, standard, and premium models of a product. 1. Cost-Plus Pricing: Businesses calculate the total cost of production and add a markup to determine the price. RETAILERS PRICING STRATEGY ex. Common in manufacturing industries. Retailers play a crucial role in pricing strategy as they directly interact with consumers. c. NEGOTIATED PRICING Key strategies include: 1. Custom Agreements: Prices are negotiated directly a. Competitive Pricing between buyer and seller. Everyday Low Pricing (EDLP): Offering consistently low Example: B2B sales, large contracts. prices to attract price-sensitive customers. d. ALGORITHMIC OR DYNAMIC PRICING Example: Walmart. 1. Data-Driven Adjustments: Prices are determined High-Low Pricing: Alternating between high regular dynamically using algorithms based on real-time factors prices and deep discounts during sales. like demand, competitor pricing, and inventory. Example: Macy’s. Example: Ride-sharing apps, e-commerce flash sales. b. Psychological Pricing MANUFACTURER’S PRICING STRATEGY Charm Pricing: Using prices ending in.99 or.95 to Manufacturers must balance profitability, market create a perception of a deal. penetration, and long-term brand positioning. Example: Php99.99 instead of Php 100. Anchoring: Displaying a higher "original price" next to the discounted price to emphasize savings. c. Dynamic and Personalized Pricing Dynamic Pricing: Adjusting prices based on demand, time, and competition. Example: Airline tickets or hotel booking platforms. Personalized Pricing: Tailoring prices based on customer data and purchasing behaviour. d. Promotional Pricing Loss Leaders: Selling a product at a loss to attract customers and encourage additional purchases. Example: Black Friday deals. Bundling: Offering multiple products at a single price lower than buying individually. Example: "Buy 1 Get 1 Free" or combo deals. SUMMARY: Operational aspects of pricing and pricing strategies are integral to the success of businesses. Effective pricing requires understanding market dynamics, production costs, and consumer behavior. Manufacturers and retailers must adopt strategies aligned with their objectives, whether it's market penetration, maximizing profits, or enhancing customer loyalty. Understanding and applying these principles ensures competitive positioning and sustained business growth CHAPTER 7: MARKETING CHANNELS the spatial and temporal discrepancies related to supply and demand. Marketing Channels IMPORTANCE OF MARKEING CHANNELS Marketing channel consists of the people, organizations, and activities necessary to transfer the ownership of 1. Relive from Marketing Problems: They help the goods from the point of production to the point of producer in his production function by relieving consumption. It is the way products get to the end-user, him of marketing problems. Thus, the producer the consumer. can pay his full attention towards organizing the production function only smoothly to earn a high It transfers the ownership of goods from the point of rate of return. production to the point of consumption. 2. Information to the Producer: The channels of A set of interdependent organizations that help make a distribution provide information to the producer product or service available for use or consumption by regarding the taste and needs of consumers, the consumer or business user." competition in the market, current market trend and the product conditions for the increased Marketing Channels (cont)… volume of sales because they have complete Marketing channels are the route between producers knowledge of the market. and users through which goods are distributed. 3. Storage of Finished Goods: The channels of This route is also known as Distribution Channel, distribution keep the producer free from the Channel of Distribution or Trade Channel. problems of storage of finished goods. Nature of Marketing Channels 4. Finance the Producer: Channels of distribution finance the producer as well as the consumer. 1. Pathway or Route: Distribution channel is the route through which goods and services are transmitted 5. Fixing the Price: Channels of distribution assist from the manufacturers to the consumers. the producer in fixing the price of a product. 2. Flow: In a distribution channel, the goods and services Choice of Marketing Channels flow in a sequential, smooth and unidirectional 1. Nature of the Product manner. Perishability: shelf life mabilis 3. Composition: The channel comprises of Unit Value: cost of single unit. intermediaries like agents, distributors, retailers, Newness of the product: how recently the wholesalers, etc. product is introduced in the market. 4. Function: The functions of distribution channel are 2. Nature of the Market performed by intermediaries. They assist in the Consumer Buying habits: how they make transfer of title, ownership, and possession of goods purchase. and services between manufacturers and consumers. Size of average sale: typical amount spent 5. Marketing Tool: Distribution channel acts as a per purchase. medium for screening the external aspects of the Total Sales volume: total value per item marketing organization and for bridging the physical sold in the market. and non-physical gaps which occur while transferring Concentration of purchases: is purchase goods from the manufacturers to the consumers. made by few or many? Seasonality of sales: by season. 6. Supply-Demand Linkage: It bridges the gap between the manufacturers and consumers by eliminating all  Marketing Channels for selected farm products 1. Contract buyers 2. Wholesalers 3. Commission agents 4. Wholesaler-retailers: ex. Grocery stores. 5. Assembler-wholesalers: grain assembler or organizer. 6. Butcher-retailers: specific for meat products. 7. Retailers 1. Efficient Distribution: Ensure products reach the right place at the right time. 2. Customer Convenience: Offers multiple purchasing options (e.g., online, in-store). 3. Market Expansion: Access to wider geographical areas. 4. Reduced Costs: Economies of scale in distribution. 5. Enhanced Focus: Lets producers focus on production while intermediaries handle logistics. Challenges in Marketing Channels 1. Managing logistics and costs. 2. Maintaining consistent customer experience. 3. Adapting to technological advancements. 4. Conflict between channel members (e.g., wholesalers and retailers). Examples of Marketing Channels for Selected Products 1. Consumer Electronics: Online (e.g., Shopee, Lazada Amazon) and retail (e.g., Best Buy). 2. Luxury Goods: Exclusive boutiques or flagship stores. 3. FMCG (Fast Moving Consumer Goods): Manufacturer → Wholesaler → Retailer → Consumer (e.g., supermarkets). 4. Software Products: Direct-to-consumer via digital downloads or SaaS platforms. 5. Fresh Produce: Farmer → Farmer’s market (Direct Channel).