Principles of Marketing Q2 Module 9 Grade-11 PDF

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Summary

Principles of MarketingQuarter 2 – Module 9Lesson 1: Price, New ProductPricing and ApproachesLesson 2: Place and theDistribution Channels, ItsFunctions and Nature of SupplyChain ManagementSenior High SchoolWriter:####### MARK JOSEPH V. SANGIL, DBAMT-I SHS IN APALIT (Stand Alone I), Cluster VIEditors...

Description

Senior High School Principles of Marketing Quarter 2 – Module 9 Lesson 1: Price, New Product Pricing and Approaches Lesson 2: Place and the Distribution Channels, Its Functions and Nature of Supply Chain Management

Writer:

MARK JOSEPH V. SANGIL, DBA MT-I SHS IN APALIT (Stand Alone I), Cluster VI

Cluster VI Editors: JANE P. VALENCIA, Ed.D – Math/ABM Supervisor CHAIRMAN GRACELA R. LABOS – MT- I Potrero National High School, Cluster IV

What I Need to Know

This module was designed and written with you in mind. It is here to help you master the subject Principles of Marketing. The scope of this module permits it to be used in many different learning situations. The language used recognizes the diverse vocabulary level of students. The lessons are arranged to follow the standard sequence of the course. But the order in which you read them can be changed to correspond with the textbook you are now using. The module is focus on:  Identify and describe the factors to consider when setting prices and new product pricing and its general pricing approaches.  Discuss the structure of distribution channels, its functions, and the nature of supply chain management.

After going through this module, you are expected to: 1. Understand the meaning of price, pricing and pricing strategies and its importance. 2. Gain insights into the subjective nature of pricing. 3. Discuss and elaborate the definition of place/distribution channels and its functions also the different distribution strategies. 4. Explain the types of marketing channels and evaluating the prospective channel member.

What I Know

Exploring Student’s Prior Knowledge Direction: Test I. Choose the letter of the correct answer. Write the letter that corresponds to your answer on a separate sheet of paper.

1. It is the money, good or service exchanged for the ownership, or use of a good or service. a. Place b. Price c. Product d. Promotion 1

2. It may be defined as those activities involved in the determination of the price at which products that will be offered for sale considering the various objectives of the firm. a. Pricing b. Pricing Approaches c. Pricing Objectives d. Pricing Procedure 3. It is a pricing strategy that allows the seller a fixed mark-up every time the product is sold. a. Marginal pricing b. Mark-up pricing c. Promotional pricing d. Target return pricing 4. This pricing strategy involves reducing the number of price points on merchandise to as little as possible, in extreme cases to only one price point. a. Going rate pricing b. Loss leader pricing c. Prestige lining d. Price lining 5. A pricing strategy involving a temporary reduction in the selling price of a product and service in order to induce trial or to encourage repeat purchase. a. Odd Pricing b. Penetration Pricing c. Predatory Pricing d. Promotional Pricing 6. It is a pricing method premised to the theory that consumers will perceive products with odd price endings as lower in price than they actually are. a. Marginal Pricing b. Mark-up Pricing c. Psychological Pricing d. Target return Pricing 7. It is a pricing method that allows as product manufacturer to recover a certain portion of his/her investment every year. a. Marginal Pricing b. Predatory Pricing c. Prestige Pricing d. Target-return Pricing 8. A pricing strategy where the new product is priced only marginally above its unit cost. a. Loss leader b. Penetration Pricing c. Price Lining d. Price skimming 9. This is the form where the prices of the products of the firm are reduced for a limited time. a. Cash rebates b. Low-interest financing c. Sale d. Special event pricing 10. These are reductions from list prices to buyers for performing some activity. a. Allowances b. Cash discounts 2

c. Quantity discounts d. Seasonal discounts 11. It refers to pricing decisions related to products intended for customers in different locations. a. Discriminatory Pricing b. Geographical Pricing c. Price discounts and Allowances d. Promotional Pricing 12. They are reductions from the list price that are given by sellers to buyers who either give up some marketing function or provide the function themselves. a. Allowances b. Cash rebates c. Discounts d. Sale 13. Are reductions in price given to final consumers, customers or channel members for doing some tasks or accepting less service. a. Allowances b. Cash rebates c. Discounts d. Sale 14. These are reductions from the list price given by the manufacturer to reward wholesalers and retailers from marketing functions they will perform like selling, storing, and record keeping. a. Cash discounts b. Functional or trade discounts c. Quantity discounts d. Seasonal discounts 15. These are reductions in unit costs for a larger order. a. Allowances b. Cash discounts c. Quantity discounts d. Trade discounts 16. It is a type of marketing channels that are used in the distribution of consumer goods. a. Consumer channels b. Industrial channels c. Manufacturer d. Producer 17. It is a type of distribution strategies that requires the firm to sell its products through every available outlet in a market where a consumer might reasonably try to find them. a. Exclusive distribution b. Inclusive distribution c. Intensive distribution d. Selective distribution 18. It is a type of distribution strategies where it is applicable to specialty products or services like automobiles and expensive watches. a. Exclusive distribution b. Inclusive distribution c. Intensive distribution d. Selective distribution

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19. It is the network of all the individuals, organizations, resources, activities, and technology involved in the creation and sale of product. a. Place b. Retailing c. Supply Chain d. Wholesaling 20. It is defined as the sale of goods and services to the final customer for his personal consumption. a. Place b. Retailing c. Supply Chain d. Wholesaling

Lesson

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Price and Pricing Strategies

As you proceed to this module, we will discuss the definitions of price, pricing strategies, and place, distribution strategies.

Notes to the Teacher

This module is good for one week and it will discuss the about price, pricing strategies, pricing procedures and objectives, place/distribution channels, and the supply chain management.

What’s In . CROSSWORD PUZZLE Let us check if you still remember the following terms that you encountered in your previous lesson about product, service and experience. Find the given words in the Word Search by looking down the questions below the given table. Encircle the correct answer. Please read it carefully. Other words are not included in the table.

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1. Intangibility 2. Product 3. Branding 4. Convenience goods 5. Labeling 6. Specialty goods 7. Sales 8. Service 9. Experience 10. Maturity stage

11. New task 12. Shopping goods 13. Consumer goods 14. Brand 15. Perishability

What’s New

The 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 5

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 of a blue collar worker

Commission

Salesperson’s services

Honorarium Dues

Membership in a union or club

What is It The second variable in the marketing mix is the price. If it is set correctly, there is a chance that the firm’s sales and profit goals will be achieved. Making the price variable work, however, requires the marketer to acquire sufficient knowledge about the various aspects of pricing.

The Meaning of Price Price is the money, good, or service exchanged for the ownership or use of a good or service. When one hundred pesos in paid for a sack of corn, that amount is the price of the corn. When a boy is asked to carry a sack of corn from the parking area to the store and is paid a kilo of corn, the price of the service is one kilo of corn. When a bundle of sweet potato tops is exchanged for a bundle of string beans, each is the price of the other.

Pricing Defined Pricing may be defined as those activities involved in the determination of the price at which products that will be offered for sale considering the various objectives of the firm.

Pricing Objectives Before setting prices, the firm’s pricing objectives must first be determined. Pricing objectives may consist of any of the following:

1. Profit-oriented objectives 2. Sales-oriented objectives 3. Status quo-oriented objectives

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Profit-Oriented Objectives

Profit-oriented objectives call for profit generation. This may either be: 1. To achieve the target return on investment or on net sales; or 2. To maximize profit The Target Return Objective. This refers to the pricing objective requiring a certain level of profit. Most often, it is stated in terms of percentage of sales or on capital investment. An example is the 21 percent return on investment required by a company’s, or the 2 percent return on sales required by another firm. The Profit Maximization Objective. This refers to the pricing objective of seeking as much profit is possible. This may be achieved by increasing the quantity sold or increasing the profit margin. However, even if the firm succeeds in the attempt, it will not be for long because the situation will invite competition and will ultimately result to a decrease in profits in the long run.

Sales-Oriented Objectives Sales-oriented pricing objectives refers to those that will provide higher sales volume. This may be achieved through any of the following: 1. Increasing sales volume 2. Maintaining or increasing market share Increasing Sales Volume. This objective requires an increase in sales volume for a given period. For example, the company may seek to increase its sales by 20% annually. This may be adapted to achieve long-term profitability even if losses are sustained in the first few years. Maintaining or Increasing Market Share. This objective requires maintaining or increasing the company’s market share. If, for instance, the company’s market grew from 30% last year to 40% this year, this surely indicates that the company is growing.

Status Quo-Oriented Objectives Status quo pricing requires maintaining the same price for the company’s products. This happens when the firm is satisfied with its current market share and profits. Status quo pricing may be due to any of the following: 1. To stabilize prices 2. To meet competition 3. To avoid competition

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The Pricing Strategies The following are strategies that can be used in pricing a product:

1. Mark-up pricing- is a pricing strategy that allows the seller a fixed markup every time the product is sold. The biggest weakness of this pricing strategy is the inclusion of unit sales in determining the product’s markup price. In reality, total unit sales is affected by the product’s final markup price. 2. Target return pricing- is a pricing method that allows a product manufacturer to recover a certain portion of his/her investment every year. 3. Odd pricing or psychological pricing- is a pricing method premised to the theory that consumers will perceive products with odd price ending as lower in price than they actually are. An example is selling at P99.50 rather than at flat P100. There are good reasons for this method: a. At only a 50-centavo difference, P99.50 appears to be more attractive to the prospective buyer than the P100 price; and b. The salesclerk will be forced to give a 50 centavo change prompting him to enter the sales transaction in the cash register. 4. Loss leader pricing- This pricing strategy refers to the practice of setting low prices on selected products which will result in the generation of less profits, but with the objective of increasing the sales volume of other products sold by the company. 5. Price lining- a pricing strategy designed to simplify a consumer’s buying decision. This method involves reducing the number of price points on merchandise to as little as possible, in extreme cases to only one price point. For example, some stores price all the merchandise in their store at P66.00 or P88.00. 6. Prestige pricing- a pricing strategy that disregards the unit cost of a product or service. Instead, it capitalizes on the high value perception or positive brand reputation of a product or service. It charges a price much higher than its unit cost. This is a pricing strategy implemented by some fragrance and skin care products. Using prestige pricing, it would not be unusual for a fragrance brand to have a unit cost of P1,300.00 and a selling price of P3,500.00. 7. Marginal pricing- it is a pricing strategy where a business organization prices its product at a range below its unit cost but higher than its unit variable cost. This is in order to offer the lowest price in a sealed bidding or another highly competitive situations. The main objective of marginal pricing is to outmaneuver competition, expand customer base, and increase market share. 8. Predatory pricing- a pricing strategy where the firm prices its product lower than unit variable cost, initially resulting in short-term losses.

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The objective of this pricing strategy is to price a new or persistent competitor out of the market share. Predatory pricing is illegal in most countries including the Philippines (under Republic Act 8479). 9. Going rate pricing- a pricing strategy where a company prices its product at the same level as or very close to its competitor’s prices. This effectively maintains the product’s price competitiveness in its market. The danger of going rate pricing is that it may result in price wars, with each company trying to outprice another, to the detriment of all industry participants. 10. Promotional Pricing- a pricing strategy involving a temporary reduction in the selling price of a product and service in order to indicate induce trial or to encourage repeat purchase. Almost all companies, especially those involved in fast-moving consumer goods (FMCGs), implement promotional pricing at one time or another. Price reductions take the form of any of the following: a. Sale- this is the form where the prices of the products of the firm are reduced for a limited time. b. Special event pricing- Under this form, special prices in certain seasons are made to draw in more customers. c. Cash rebates- these are offered to customers to encourage them to make purchases within a specified time period. d. Low-interest financing- this involves low-interest financing to customers. e. Warranties and service contracts- these involves adding free warranty offer or service contract. When new products are introduced into the market, one of the two following pricing strategies can be used: 1. Price skimming- where the product’s selling price is way above its unit cost. This allows the company to recover its research and development costs and expenses. This is usually accompanied by intense expensive advertising and promotional campaigns. 2. Penetration pricing- a pricing strategy where the new products is priced only ma...