ADMN 201 — Ch13: Pricing, Promoting, and Distributing Products
Chapter 13 is the second of the two marketing chapters. It takes the 4 Ps introduced in Ch12 and digs into three of them: Price, Promotion, and Place (distribution). It covers the full toolkit — from how firms set prices to how they communicate about their products to how they physically get those products to customers.
mindmap root((Ch13\nPricing · Promotion\nDistribution)) LO1-2 Pricing Pricing Objectives Profit Maximizing Market Share E-Business New Product Strategies Price Skimming no competition Penetration Pricing competition exists Existing Product Above At Below Market Dynamic Pricing Fixed Amazon Auctions eBay Reverse Auctions Priceline Tools and Tactics Cost-Oriented Pricing Markup Breakeven Analysis Fixed vs Variable Price Lining Psychological Pricing LO3 Promotional Mix 5 Tools Advertising Personal Selling Sales Promotions Direct Marketing PR and Publicity Push vs Pull IMS Consistency LO4 Advertising Paid plus Identified Sponsor 7 Media Types Media Mix Second Screen LO5 Personal Selling and Promotions Educate Demonstrate Close Reassure Coupons Premiums POP Trade Shows Publicity vs PR LO6 Distribution Channels 4 Channel Types Agents vs Brokers Intensive Selective Exclusive LO7 Intermediaries Wholesalers B2B 8 Retailer Types Nonstore Retailing E-Intermediaries LO8 Physical Distribution Warehousing Owned vs Independent 6 Transport Modes JIT Walmart Model
LO1 & LO2 — Pricing Objectives, Strategies, Tactics, and Tools
Pricing Objectives
- Profit-Maximizing: find the price × volume combination that generates the highest total profit — NOT the highest price per unit
Revenue = Selling Price × Units Sold
- Market Share (Penetration): accept minimal profit or even losses to dominate the market long-term (Doritos, iTunes)
- E-Business: structural forces (no intermediaries, easy comparison shopping) push prices down
Strategies for New Products
| Strategy | When to Use | Logic |
|---|---|---|
| Price Skimming | No competition | High initial price to recoup development costs before rivals arrive |
| Penetration Pricing | Competitors exist or will arrive | Low price to capture market share and block rivals |
Strategies for Existing Products
- Above Market → prestige signal (luxury goods)
- At Market → competitive parity
- Below Market → value positioning
Pricing Tools
- Cost-Oriented Pricing: Selling Price = Costs + Profit; Markup % = Markup ÷ Sales Price
- Breakeven Analysis: how many units must you sell before total revenue = total costs? Requires separating Fixed Costs (constant) from Variable Costs (scale with volume)
Pricing Tactics
- Price Lining: limited price tiers reduce consumer decision fatigue
- Psychological Pricing: odd-even ($9.99) exploits non-rational perception
- Discounts: short-term incentives to buy
Dynamic Pricing (E-Business)
- Fixed pricing (Amazon) vs. Dynamic pricing (eBay auctions)
- Reverse Auctions (Priceline): buyer sets the price — inverts traditional model
See PricingStrategies and PricingTactics.
LO3 — Promotional Mix
Promotion = communication about products, not just advertising.
The Promotional Mix is the combination of five tools:
- Advertising — paid, non-personal, identified sponsor
- Personal Selling — one-to-one salesperson
- Sales Promotions — short-term incentives (coupons, POP displays)
- Direct Marketing — non-personal direct contact (email, internet)
- Public Relations & Publicity — goodwill + media coverage
Target audience is the #1 factor in selecting the mix.
IMS (Integrated Marketing Strategy): all promotional tools must be consistent with each other and with the product’s positioning across all 4 Ps. Mixing messages undermines every dollar spent.
Push vs. Pull:
- Push: target wholesalers/retailers → they persuade consumers
- Pull: target consumers via advertising → they demand it from retailers
See PromotionalMix.
LO4 — Advertising and Media
Advertising = Paid + Identified Sponsor. Both are required — miss either one and it’s something else (publicity, propaganda).
7 Media Types (ranked by spending)
| Medium | Spending | Key Strength | Key Weakness |
|---|---|---|---|
| Online | $5.9B | Targeted + Measurable | Easy to ignore |
| TV | $2.05B | Mass reach | Most expensive; skippable |
| Mobile | Rising | Personalized | Small screen; no standardization |
| Radio | $890.9M | Cheap; segmented | Message disappears |
| Newspapers | $726.7M | Educated/wealthy readers | Declining; poor image |
| Outdoor | $368.5M | Repeat exposure | Limited info |
| Magazines | $221M | Reread + shared | Long lead times |
Second Screen: TV now drives social media engagement rather than acting as a passive standalone medium.
See AdvertisingMedia.
LO5 — Personal Selling, Sales Promotions, and Publicity/PR
Personal Selling Tasks (mapped to buyer journey)
- Educate (Info Search stage)
- Demonstrate (Evaluation stage) — handle objections as requests for more info
- Close (Purchase stage) — B2B: direct marketing generates leads; salesperson closes
- Reassure (Post-Purchase stage) — reduce buyer’s remorse
Sales Promotions (short-term)
- Coupon = price savings certificate
- Premium = free/bargain item with purchase
- POP Display = in-store impulse trigger
- Trade Show = B2B demo event
Publicity vs. PR
| Publicity | Public Relations | |
|---|---|---|
| Cost | Free | Managed cost |
| Control | None (media writes it) | Company-influenced |
| Credibility | High (third-party) | Lower |
| Scope | The result (a news story) | The strategy (building goodwill, managing crises) |
See PersonalSelling.
LO6 — Distribution Mix and Channels
The Distribution Mix = the combination of channels used to reach end users.
4 Channel Types
- Direct: Producer → Consumer
- Retail: Producer → Retailer → Consumer
- Wholesale: Producer → Wholesaler → Retailer → Consumer
- Agent/Broker: Producer → Agent or Broker → Customer
Agents = long-term relationships; Brokers = temporary matchmakers.
Distribution Strategies
| Strategy | Coverage | Best For |
|---|---|---|
| Intensive | Everywhere | Convenience goods (candy, magazines) |
| Selective | Limited qualified outlets | Products needing advice/service (tools) |
| Exclusive | One outlet per area | Luxury goods (Maserati, Rolex) |
See DistributionChannels.
LO7 — Intermediaries: Wholesalers, Retailers, and E-Intermediaries
Wholesalers sell to businesses (B2B); Retailers sell to final consumers (B2C).
8 Brick-and-Mortar Retailer Types
Department Store · Supermarket · Specialty Store · Category Killer · Discount Store · Wholesale Club · Factory Outlet · Convenience Store
Nonstore Retailing
Catalogue · Telemarketing · Direct Selling (Avon) · Video/TV (QVC)
E-Intermediaries
Two functions: collect information (aggregators) or deliver products. Amazon does both depending on context.
Intermediaries lower total costs through efficiency — the “Chili analogy”: one trip to the supermarket vs. separate visits to three farms.
See RetailersAndIntermediaries.
LO8 — Physical Distribution
Physical distribution = warehousing + transportation — the activities that move products efficiently from manufacturer to consumer.
Warehousing
- Owned: consistent high-volume needs
- Independent (rented): flexible/seasonal needs (The Brick)
6 Transportation Modes
Trucks · Rail · Air (fastest/most expensive) · Water (slowest/cheapest) · Pipelines · Digital (near-zero marginal cost)
JIT (Just-In-Time)
Demand-triggered restocking: checkout scan → inventory signal → automatic replenishment. Walmart/P&G model achieves low cost and availability simultaneously.
Innovation: Maersk Line’s oxygenated tanks opened the live seafood export market to Europe — distribution innovation creating an entirely new market.
See PhysicalDistribution.
Key Exam Summary
| LO | Core Formula / Rule |
|---|---|
| LO1 | Revenue = Selling Price × Units Sold |
| LO1 | Markup % = Markup ÷ Sales Price |
| LO2 | Skimming = no competition; Penetration = competition exists |
| LO3 | Target audience = #1 factor in promotional mix selection |
| LO3 | Push = sell to retailers; Pull = sell to consumers |
| LO4 | Advertising = Paid + Identified Sponsor |
| LO4 | Online is #1 medium by spending ($5.9B) |
| LO5 | Coupon = price savings; Premium = extra item |
| LO5 | Publicity = free, uncontrolled; PR = company-managed |
| LO6 | Intensive = everywhere; Exclusive = one per area; Selective = middle |
| LO7 | Wholesalers → B2B; Retailers → B2C |
| LO8 | JIT = demand-triggered restocking, not zero inventory |