• Pricing: deciding how much to sell products for
• Pricing objectives: goals that producers strive to reach in pricing
o To sell the number of unites that generates the highest total profits
o E-Business: comparison shopping and direct link between buyers and
sellers influence pricing
• Market Share objectives: set prices low in order to increase customer base
o Market share: percent of total sales in a market made by the company.
• Loss containment/survival strategy (e.g. cutting prices on obsolete products
to recover an investment).
• Cost-orienting pricing:
o Markup is the difference between manufacturing price and selling price
that takes into account additional costs.
o Markup percentage = Markup/Sales Price (as a percent of revenue)
• Break-even analysis
o Consider variable costs (costs that change with number of units sold)
and fixed costs (unaffected by number of units sold) to perform a
break-even analysis (determining the number of unites that are
required to sell in order to cover costs).
o Break-even point (in units) = Total fixed costs/ (Price-Variable cost)
[know how to do this for the exam]
• Price leadership: dominant firm in the industry that establishes prices and
other companies follow
• Price-skimming strategy: to price as high as possible to maximize profit per
unit (only works if the product is market as truly unique).
• Penetration-pricing strategy: price a new product very low to move units and
build customer loyalty.
• Setting price points for items in categories, limiting the number of price
points adds simplicity
• Psychological pricing: setting prices to take advantage of consumer
perceptions of certain types of prices
o Odd-even psychological pricing (e.g. $99.99, not even a dollar amount,
perceived lower than $100)
• Discounting: price reductions on set prices to persuade consumer to buy
o Cash discounts, seasonal discounts, trade discounts (in return for being
a distributor), quantity discount (in return for buying in bulk)
• International pricing: pricing a product lower in a foreign market than in a
home market is called ‘dumping’ (it is illegal). It involves taking a loss to drive
competitors out of business.
• The distribution mix is just as important as the marketing mix discussed
• Intermediaries/middlemen: help distribute a producer’s goods
‘ o Wholesalers: sell products to other businesses who then sell to
o Retailers: sell directly to consumers
• Non-direct distribution (using intermediaries) adds to the cost, but also adds
value by doing their specific jobs more efficiently than the producer can.
• 8 Primary Distribution Channels:
o Direct channel: no intermediaries
o Retail distribution of consumer products
o Wholesale distribution (wholesaler between producer and retailer)
o Distribution through sales agents and brokers: independent business
person receives commissions for distributing merchandise
o Distribution by agents to consumers and business: Agents are the only
intermediary, sell directly to consumers or to businesses that consume
the product (e.g. travel agents).
• Distribution of business products used in manufacturing follow the following 3
o Direct distribution of business products: manufacturers maintains a
o Wholesale distribution of industrial products: manufacturers produce in
large quantity and buyers purchase in small quantities, requires
wholesalers to break orders into smaller units
o Wholesale distribution to businesses retailers (e.g. stores such as
Staples, warehouse like retailers come after wholesalers in the
• Distribution strategies:
o Intensive distributions: product is distributed through every possible
outlet using as many channels as possible
Works for low-involvement products such as candy where
nothing but a visual presence is needed to sell the product
o Exclusive distribution: only one retailer or wholesaler in a geographic
area sells the product, good for high-cost product that maintain an
o Selective distribution: mi