1. Marketing
Concern the philosophy we should analyze the needs of our
Customers and then make decisions to satisfy those needs better
than our competitors.
Adam Smith – 1776 Wealth of Nations
We went a lot far since that time ……
2. Abstract
Those notes just attempts to set a frame-work to
give direction to our manegers.
To better understand the marketing concept and
capitalize our half century in business, it is whort
to analize its evolution during different historical
time frames.
One of the four major elements of the
Marketing Mix is Price.
Pricing is an important strategic issue beeing
related to product’ positioning, product’
features, channel decision, promotion and, not
least, company finance.
The aim is to light out themes and questions
finalized to became institutional INMAN’
corporate practice.
3. The Production Concept prevailed in an early stage of the Company.
We were focused on the capacity to produce efficiently at low cost and for this
reason itself create the demand for the products.
The key questions where:
- Can we produce the product ?
- Can we produce enough of it ?
It worked fairly well because the goods produced were those of basic necessity
and there was a high level of unfulfilled demand.
Virtually everything that could be produced was sold easily by sales team whose
job was simply to execute transaction at a price determined by the cost of
production.
Production Concept
4. In a second stage, Mass Production had become a commonplace, Competition
had increased, and there was little unfulfilled demand.
Company evolved to a Sales Concept under which, not only would produce the
products but also would try to convince Customer to buy them through
advertising and personal selling. The key questions were :
- Can we sell The Product ?
- Can we charge enough for it ?
The goal simply was to beat the competition to the sale with little regard to
Customer Satisfaction.
Marketing was a function performed after the product was developed and
produced and confused with hard selling. We still abuse of the word
"Marketing“ when we really mean Sales.
Sales Concept
5. In a third stage the variety of product increased and selling no longer can be
relied upon to generate sales.
With increased discretionary income, customer could afford to be selective and
buy those product that precisely meet their changing needs, and this needs
were, and are not immediately obvious.
The key questions became :
- What do Customer Want ?
- Can we develop it While they still want it ?
- How we can keep our Customer Satisfy ?
Marketing Concept
6. In response to the discerning Customers, firm begun to adopt a more evolut
Marketing Concept,
Which involves :
- Focusing on customer need before developing the product.
- Aligning all functions of the company to focus on those needs.
- Realizing a profit by successfully satisfy Customer needs over the long-term.
Marketing Concept
7. When companies first begun to adopt the concept they typically set up separate
marketing departments with the objective to satisfy Customer needs; often they
were just sales departments with expanded responsibilities.
More and more the most advanced firms have structured themselves into
marketing organization having a company-wide Costumer focus.
Since the entire organization exist to satisfy Customer needs, nobody can
neglect a Customer issue by declaring “ It's a Marketing Problem " - everybody
must be concerned with Customer Satisfaction.
The Marketing Concept relies upon marketing research to define market
segments, their size and their needs.
To satisfy those needs, the Marketing Team makes decisions about the
controllable parameters of what’s called ‘’Marketing Mix’’.
Marketing Concept
8. Activities : I. Develop Marketing Analysis
II. Set Marketing Mix
III. Estimate Demand
IV. Calculate Costs
V. Enviromental Factors
VI. Set Pricing Objectives
Pricing Strategy
9. I. Market Analysis i. Sectorzation
ii. Segmentation
iii. Targetting
iv. Positioning
Pricing Strategy
10. II. Marketing Mix
Define :
i. Product
ii. Place of distribution
iii. Price
- Price Strategy
- Price Demand
Picing Strategy - Marketing Mix -
11. Pricing Strategy - Marketing Mix -
i. Product
Associated Decisions :
• Brand Name
• Functionality
• Styling
• Quality
• Packaging
• Repair & Support
• Warranty
• Accesories &
Service
12. Pricing Strategy - Marketing Mix -
ii. Place of
Distribution
Associated Decisions :
• Market Coverage
Target
Inclusive – Selective –
Exclusive
• Distribution
Channel
• Specific Channel
Members
• Warehousing
• Repair & Support
• Localisation of non
strategic Product’
process stages
• Order pocessing
• Transportation
14. Pricing Strategy - Marketing Mix -
iii. Price :
- Demand
Esimate Demand
Try to understand how
demand varies on Price
variation
Valuate and Estimate :
• Demand Curve * see theory
• Price Elasticy of Demand * see theory
• The Experience Curve * see theory
• Product ife Cycle Curve * see Theory
15. IV. Calculate Costs Before launching a product, there likely is at
least a basic understand of the costs involved,
othewise there might be no profit to be made.
The Unit costs of the product set the lower limit
to be charged, and determine the profit margin
at higher prices.
The total unit costs of producing a product is
composed of the Variable cost of producing any
additional unit and Fixed costs regardless the
quantity produced.
The Pricing Policy has to consider both types of
Costs.
Pricing Strategy
16. Pricing Strategy
V. Enviromental
Factors
To be considered :
• Implication of our prycing on
competitors’ pricing decisions.
Too low = Price War
Too hight = Attract more Competitors
• Legal Implication
* It is not our main issue but to be considered in iternational
trade :
- A company is not free to price its ‘’Product’’ at any level it choses
as offering different price to different costumer may violate
internatinal fiscal laws, ‘’Tranfer Price’’.
- Pricing too low may be cosidered a predatory pricing or
‘’dumping’’ in the case of international trade.
- Collusion with Competitor s to fix prices at an agreed level is illegal
in many Countries
17. Picing Strategy
VI. Pricing Objectives
Settings :
• Current Profit Maximization
Maximize current profit, taking into account just revenue and
costs may result in lower long-term profits.
• Current Revenue Maximization
Maximize current revenue with no regard to profit margin
has a sense to maximise long-term profit by increasing
Market Shares and Lowerig Costs
• Maximize Quantity
Maximize the units sold or the number of Customer served
has a sense in order to decrease long-terms costs as
predicted by the Experience Curve
• Maximise Profit Margin
Attempts to maximize the unit profit margin, recognizing that
quantities will be low .
18. Picing Strategy
VI. Pricing
Objectives
Settings :
• Quality Leadership
Use Price to signal high Quality in an attempt to position the
Product/Brand as Quality Leader
• Partial Cost Recovery
An organization that has other revenue sources may seek only
partial cost recovery
• Survival
In situation of Market Decline and Overcapacity, a temporary
goal may be to select a price that will cover costs and permit
the company to remain in the market
• Status Quo
The company may seek price stabilization in order to avoid
price wars and maintain a moderate but stable level of profit
19. VI.a PricingMethod • Cost Plus
Set the price at the production costs plus a certain profit
margin.
• Target Return
Set a price to achieve a target return-on-investment.
• Value Based
Base the price on the effective value to the Customer
relative to alternative products.
• Psichological
Base the price on factor such as signals of product quality,
popular price points, and what Customer perceives to be
fair.
DeterminePricing
20. VI.a Pricing Discount • Quantity
Discounts is to be defined for Customers who purchase
large quantities on scale economy base.
• Quantity Over-Time
Discounts may be offered to Customers who purchase large
quantities over time but cannot, or do not wish, to place
large individual Orders. A Control must be performed
regularly overtime on quantity/discount alignment.
• Open Orders
Discounts can be analized and approved by upper sales dpt
level.
• Trade Discount
A functional discount offered to distribution channel
members for performing they roles.
• Casch & Ealy Paiments
Extended to Customer who pay their bill before a certain
term. Could be extended to Customers who demonstrate
a substantial respect of payment terms on a rating base
assigned by Account dpt.
DeterminePricing
21. Using the informations
on the above steps we
have the opportunity to
design
Determine Pricing
Corporate
PricingModels
to better meet the
needs either of the
Company, of its Market
and of the Istitutions
that rule it.
• Chose Method of Pricing
• Develop Structure of Pricing
• Determine Discounts of Pricing
Set
Price Iists