Unit 3: Pricing and distribution decisions

Objectives: survival, profit maximisation, market-share leadership, quality leadership and return on investment.

Price changes

• Initiating price cuts: excess capacity, falling market share, cost leadership; risk of price wars and low-quality image.
• Initiating price increases: cost inflation, excess demand; use escalator clauses, unbundling, reduce discounts.
• Responding to competitors' price changes: maintain price, raise perceived value, reduce price, raise price and launch a fighter brand.

• Supply chain: the network from raw materials to the final customer — upstream (suppliers) and downstream (distribution).
• Decisions: order processing, warehousing (number and location), inventory, transportation mode (rail, road, air, water, pipeline), logistics information systems; integrated logistics management and third-party logistics.

Intensity of distribution: intensive (soft drinks — everywhere), selective (electronics — chosen dealers) and exclusive (luxury brands — one dealer per area). Channel management includes selecting, motivating, evaluating members and managing channel conflict.

Retailing is selling goods and services directly to final consumers. Formats: department stores, supermarkets, hypermarkets, convenience stores, speciality stores, discount stores, and non-store retailing (e-commerce, direct selling, vending). Physical distribution (logistics) moves goods from the producer to the customer: order processing, warehousing, inventory management and transportation. The goal is the right product, in the right place, at the right time, at the lowest cost.

• Wholesaling: selling to retailers and business buyers; merchant wholesalers, brokers and agents, manufacturers' sales branches; functions — buying and assortment, bulk breaking, warehousing, transport, financing, risk bearing, market information.

Integrated marketing communications (IMC) coordinates all promotional tools so that they deliver a clear, consistent and compelling message about the company and its brands.

Personal selling is direct, face-to-face (or virtual) communication by a salesperson to persuade a prospect to buy.

The sales force finds customers, communicates value, sells, services accounts, gathers market information and builds relationships. Sales force strategy decides structure — territorial (by area), product (by product line), customer/market (by customer type) or a combination.

Financial rewards: salary, commission, bonus, profit sharing and fringe benefits. Non-financial rewards: recognition, awards, promotion, training, contests and job enrichment.