Marketing Management Part-4 : Business Studies Class 12
Meaning and concept of Price: Sum of values that consumers exchange for the benefit of having or using the product Price may, therefore, be defined as the amount of money paid by a buyer (or received by a seller) in consideration of the purchase of a product or a service
Normally expressed in monetary terms. Decisions include decisions wrt basic price, discounts to be offered, etc
Factors determining price determination:
(a) to maximise profits in the short term-tend to charge maximum price.
(b) Obtain a large share of the market i.e., by maximising sales it will charge lower price.
(c) The firm is operating in a competitive market it may charge a low price for it.
- Price should include all costs and also include a fair return for undertaking the marketing effort and risk.
- Includes costs of producing, distributing and selling the product.
- Costs set the floor price – the minimum level / lower limit at which the product may be sold.
- Price should recover Total costs (Fixed costs/overheads + Variable costs+ Semi-variable costs) in the long run, but in certain circumstances(introduction of a new product/entry into a new market) product price may not cover all the costs for a short while.
Utility and demand:
- Utility provided by the product and the demand for a product set the upper limit of the price that a buyer would be willing to pay for a product.
- Buyers pay to the point where the utility of the demand is more than or equal to the utility derived from it.
- Law of demand = consumers purchases more at a lesser price.
- The elasticity of demand = responsiveness of demand to changes in prices of a product. Demand = elastic if a small change in price results in a large change in quantity demanded.
- If demand is inelastic, a firm can fix higher prices.
Competition in Market:
Prices of competitors need to be considered before fixing prices.
Products regulated by government pricing regulations need to be priced as per government policies.
Read PRODUCT MIX
III. P-Place Mix/Physical Distribution Mix
A set of decisions needs to be taken to make the product available to customers for purchase and consumption.
- The marketer needs to make sure that the product is available at the right quantity, at the right time and at the right place.
- It requires the development of:
- Channels of distribution
- Physical distribution of products.
Components of physical distribution-
- Order Processing: Accurate & speedy order processing leads to profit & goodwill & vice versa.
- Transportation: Add the value of the goods by moving them to the place where they are required.
- Inventory control: Additional demand can be met in less time, the need for inventory will also below.
- Ware housing: Need arises to fill the gap between the time when the product is produced & time when it is required for consumption.
Channels of Distribution
- Includes a series of firms/ individuals/ people/institutions/merchants and functionaries who form a network that helps in the transfer of title to a product from the producer to the end consumer.
- They help to overcome time, place and possession gaps that separate the goods and services from those who need/want them from those who want them
Types of Channels:
Direct Channel — Manufacturer-Customer. Eg. mail order, internet, door to door selling.
Indirect Channel —
Usually used for specialty goods like expensive watches, appliances, Cars( Maruti Udyog) etc.
Usually used for consumer goods like soaps, salt, etc.
- Manufacturer → Agent → Wholesaler → Retailer → Customer
Done when manufacturers cannot approach wholesalers directly or when they carry a limited product line and has to cover a wide market.
Factors Determining Choice of Channels of Distribution
The choice of an appropriate channel of distribution is a very important marketing decision, which affects the performance of an organisation. Whether the firm will adopt direct marketing channels or long channels involving a no. of intermediaries is a strategic decision.
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