ADMN 201 — Ch13: Pricing, Promoting, and Distributing Products
Chapter 13 is the second marketing chapter. It takes the 4 Ps from Ch12 and digs deep into three of them: Price, Promotion, and Place (distribution).
mindmap root((Ch13<br/>Pricing · Promotion<br/>Distribution)) LO1 - Pricing Objectives + Tools Price = Only P that generates revenue Profit Maximizing - Price × Volume Market Share - Accept losses for dominance E-Business - No intermediaries + comparison Cost-Oriented - Cost + Profit Markup % = Markup ÷ Sales Price Breakeven Analysis LO2 - Pricing Strategies + Tactics New Products Skimming - No competition Penetration - Competition exists Existing Products Above At Below Market Dynamic Pricing Fixed Amazon Auctions eBay Reverse Auctions Priceline Tactics Price Lining Psychological Pricing Discounts LO3 - Promotional Mix 5 Tools Objectives by Buyer Stage Push vs Pull IMS Consistency LO4 - Advertising Paid + Identified Sponsor 7 Media Types by Spending Media Mix Second Screen LO5 - Personal Selling + Promotions Educate Demonstrate Close Reassure Coupons Premiums POP Trade Shows Publicity vs PR - Credibility vs Control LO6 - Distribution Channels 4 Channel Types Agents vs Brokers Intensive Selective Exclusive Channel Conflict LO7 - Intermediaries Wholesalers - B2B Bulk Breaking 8 Retailer Types Nonstore Retailing E-Intermediaries LO8 - Physical Distribution Warehousing Owned vs Independent 6 Transport Modes JIT Walmart Model
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LO1 — Pricing Objectives and Price-Setting Tools
Price is the only one of the 4 Ps that generates revenue. The other three generate costs.
Pricing Objectives
| Objective | Goal | Example |
|---|---|---|
| Profit-Maximizing | Find the price × volume combination that generates the highest total profit — not the highest price per unit | Widgets at 10,000 vs. 6,000 — lower price wins |
| Market Share (Market Penetration) | Accept minimal profit or even losses to establish dominance long-term | Doritos, iTunes — build habit first, profit later |
| E-Business | Two structural forces push prices down: (1) direct producer-to-consumer links cut intermediary costs; (2) easy comparison shopping compels competitive pricing | Amazon vs. brick-and-mortar |
Revenue = Selling Price × Units Sold
Profit-maximizing ≠ charging the highest price. If the price is too high, units sold drops so much that total revenue falls.
Target Return: Managers weigh revenue against costs (materials, labour, marketing) to set a price that covers costs and achieves a specific target return for owners.
Price-Setting Tools
1. Cost-Oriented Pricing Build the price from the bottom up:
Selling Price = Seller’s Costs + Profit
The added amount is the Markup — the dollar amount added to cover overhead and generate profit.
Markup % = Markup ÷ Sales Price ← note: based on sales price, not cost (common exam error)
Worked Example:
- Store buys t-shirt for 7 markup
- Selling Price = 7 = $15
- Markup % = 15 = 46.7%
2. Breakeven Analysis Calculates the sales volume required before the company starts making profit.
Breakeven Point = exact units where Total Revenue = Total Costs (zero profit, zero loss). Every unit after this point is profit.
To find it, you must distinguish:
- Fixed Costs — constant regardless of units produced (rent, insurance)
- Variable Costs — change with quantity produced (materials, labour)
You cannot calculate a breakeven point without separating fixed and variable costs.
LO2 — Pricing Strategies and Tactics
Strategy = high-level philosophy. Tactic = specific execution technique.
New Product Strategies
| Strategy | When to Use | Logic |
|---|---|---|
| Price Skimming | No current competition | High initial price recovers R&D costs before rivals arrive; signals quality |
| Penetration Pricing | Competitors exist or will arrive quickly | Low price captures market share and blocks rivals; stimulates trial |
Risk of Skimming: If barriers to entry are low, a high price is an invitation for competitors to rush in with a cheaper version. Skimming only works if you can block or outpace competition (like early Apple iPods).
Reverse Auction nuance (Priceline): The airline fills an empty seat at a privately negotiated price without lowering its public fare — protecting brand image while clearing inventory.
Existing Product Strategies
- Above Market → prestige signal; relies on the consumer assumption that higher price = higher quality (e.g., Patek Philippe)
- At Market → competitive parity
- Below Market → value positioning (e.g., budget car rentals)
Dynamic Pricing (E-Business)
- Fixed Pricing (Amazon) — one price for all buyers
- Dynamic Pricing (eBay) — price determined by real-time auction
- Reverse Auctions (Priceline) — buyer sets the price they will pay; seller accepts or rejects
Pricing Tactics
| Tactic | Description |
|---|---|
| Price Lining | Set limited price tiers (e.g., 399/$499) to reduce decision fatigue and signal clear quality levels |
| Psychological Pricing | Odd-even pricing (10.00) exploits non-rational perception — customers cognitively “round down” |
| Discounts | Short-term price reductions to incentivize immediate purchase |
LO3 — Promotional Mix: Objectives and Selection
Promotion = the communication component of the marketing mix. Not just advertising — the full toolkit for informing and persuading at every stage of the buyer journey.
Promotional Objectives Mapped to Buyer Stages
| Buyer Stage | Promotional Objective | Best Tools |
|---|---|---|
| Awareness (“We exist”) | Reach many people quickly | Advertising, Publicity |
| Education (“What is it?“) | Teach features and value | Advertising, Personal Selling |
| Comparison (“Why you?“) | Demonstrate quality vs. competitors | Personal Selling |
| Purchase (“Buy now”) | Provide the final incentive | Sales Promotions (coupons, discounts) |
| Post-Purchase (“No regrets”) | Remind; reduce buyer’s remorse | Advertising, Personal Selling |
The 5 Promotional Tools
| Tool | Description |
|---|---|
| Advertising | Paid, non-personal, identified sponsor — mass media (TV, online, outdoor) |
| Personal Selling | One-to-one salesperson communication; adaptive and customizable |
| Sales Promotions | Short-term incentives to stimulate immediate buying |
| Direct Marketing | Non-personal direct contact via email, internet, catalogues |
| Public Relations & Publicity | Goodwill building and media coverage |
Target audience = the #1 factor in selecting the right mix.
IMS — Integrated Marketing Strategy
All promotional tools must be consistent with each other and with the product’s 4 Ps. If the promotion doesn’t match the price and distribution, it undermines every dollar spent.
Example: Advertising an exclusive $10,000 watch via a discount coupon mailer destroys the product’s luxury positioning. The watch should be promoted in high-income lifestyle magazines and sold only through exclusive retailers.
Social Media Warning (Course Notes): Social media is often used ineffectively. It must be part of the IMS and support other marketing activities — not exist for its own sake.
Push vs. Pull
graph LR A[Company] -->|Push: Personal Selling| B[Wholesaler/Retailer] B -->|Retailer persuades| C[Consumer] A -->|Pull: Advertising| C C -->|Consumer demands| B
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- Push — company pushes product through intermediaries; they persuade consumers
- Pull — company advertises directly to consumers; consumers demand it from retailers
LO4 — Advertising and Media
Advertising = Paid + Non-Personal + Identified Sponsor
All three must be present:
- Not paid → it’s Publicity
- No identified sponsor → it’s Propaganda
7 Media Types (Ranked by Spending)
| Medium | Spending | Key Strength | Key Weakness |
|---|---|---|---|
| Online | $5.9B (#1) | Targeted + measurable (clicks, conversions) | Easy to ignore; can feel annoying |
| TV | $2.05B (#2) | Mass reach; sight + sound + motion | Most expensive; ads increasingly skipped (DVR, streaming) |
| Mobile | Rising | Personalized; highly accessible | Small screen; no standardization across devices |
| Radio | $890.9M | Cheap; audience segmentation by station | Message disappears instantly; easy to tune out |
| Newspapers | $726.7M | Educated/wealthy readers; ads changeable daily | Quickly discarded; poor image quality; declining circulation |
| Outdoor | $368.5M | Inexpensive; high repeat exposure (daily commuters) | Very limited information; no audience control |
| Magazines | $221M | Reread and shared; easy to segment by topic | Long lead times required; limited placement control |
Media Mix: No single medium is perfect. Companies combine media to offset weaknesses with strengths.
The Second Screen Phenomenon
TV audiences now use phones and tablets while watching. Advertisers have adapted by creating TV campaigns that drive simultaneous social media engagement.
Example: Pepsi’s Super Bowl halftime sponsorship encouraged users to unlock virtual stickers, reaching 36 million people online during the broadcast — TV used to fuel digital, not as a passive standalone.
Influencer Marketing
A sub-sector of online advertising where companies pay social media influencers to endorse products.
Legal requirement: Influencers must disclose the paid relationship (e.g.,
#ad). Failure to disclose is deceptive, and courts now hold influencers to the same professional standards as traditional advertisers.
LO5 — Personal Selling, Sales Promotions, and Publicity/PR
Personal Selling — Tasks Mapped to the Buyer Journey
Personal selling is one-to-one, interactive, and adaptive — unlike mass advertising.
| Task | Buyer Stage | What the Salesperson Does |
|---|---|---|
| Educate | Information Search | Explain product features, benefits, and availability |
| Demonstrate & Compare | Evaluation | Show quality and performance vs. competitors; handle objections as requests for more information, not “no” |
| Close | Purchase Decision | Bring product to convenient location; provide final incentive |
| Reassure | Post-Purchase | Remind customer they made a wise decision; reduce buyer’s remorse |
B2B Lead Gen Funnel: Direct marketing generates leads (finds suspects); personal selling steps in to close (converts prospects). This efficiency funnel prevents wasting high-cost salesperson time on cold outreach.
Sales Promotions — Short-Term Incentives
| Type | Definition | Example |
|---|---|---|
| Coupon | Certificate entitling bearer to price savings on regular price | 20% off your next purchase |
| Premium | Free or bargain-priced item given with a purchase | Buy cologne, get a free travel bag |
| POP Display | In-store display at point of purchase to trigger impulse buying | Candy rack at checkout |
| Trade Show | Industry event; B2B product demonstrations to professional buyers | Tech Expo, manufacturing trade shows |
Warning: Overusing sales promotions hurts long-term brand equity. Luxury brands like Louis Vuitton never run sales to protect their pricing power and brand image.
Publicity vs. Public Relations
| Publicity | Public Relations | |
|---|---|---|
| Cost | Free (no direct cost) | Managed company cost |
| Control | None — media writes it independently | Company-influenced messaging |
| Credibility | Higher (third-party, no obvious bias) | Lower (audience knows company influenced it) |
| Scope | The result — a specific news story or review | The strategy — proactive goodwill building and reactive crisis management |
Uber Case Study: News outlets reported on Uber’s CEO verbally abusing a driver — negative publicity with no cost to Uber but high brand damage. Uber’s response (leadership changes, public apologies, policy announcements) was Public Relations — managing an unfavourable event to rebuild goodwill.
LO6 — Distribution Mix and Channels
Distribution Mix = the combination of channels a firm uses to get products to end users.
Why Intermediaries Exist
Intermediaries specialize in distribution and are often more efficient than manufacturers doing it alone. They provide:
- Place utility — products available where customers want them
- Time utility — products available when customers want them
- Possession utility — products in a form customers can actually use/own
“Chili” Analogy: Without a supermarket, making chili means separate trips to a tomato farm, a beef ranch, and a bean farm. The supermarket (intermediary) aggregates everything in one place — dramatically reducing transaction costs for the consumer.
Efficiency paradox: Adding intermediaries can lower the final price. They buy in massive quantities (economies of scale) and reduce transport costs far below what a single manufacturer could achieve.
4 Channel Types
graph TD A[Producer] -->|Direct| B[Consumer] A -->|Retail| C[Retailer] --> B A -->|Wholesale| D[Wholesaler] --> C --> B A -->|Agent/Broker| E[Agent or Broker] --> F[Customer]
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| Channel | Path | Best For |
|---|---|---|
| Direct | Producer → Consumer | Software downloads, farm stands |
| Retail | Producer → Retailer → Consumer | Most consumer goods |
| Wholesale | Producer → Wholesaler → Retailer → Consumer | When too many small retailers exist to contact individually |
| Agent/Broker | Producer → Agent/Broker → Customer | Travel, real estate, financial products |
Agents vs. Brokers
| Sales Agent | Broker | |
|---|---|---|
| Relationship | Long-term | Temporary / one transaction |
| Role | Represents a few producers on an ongoing basis | Matches buyers and sellers as needed; may not know parties in advance |
| Example | UNIGLOBE travel agency (permanent airline/hotel representation) | Real estate broker, stock broker |
Distribution Strategies
| Strategy | Coverage | Best For |
|---|---|---|
| Intensive | Nearly every possible outlet | Convenience goods (candy, magazines, gum) |
| Selective | Limited qualified outlets | Products needing advice or service (Black+Decker tools) |
| Exclusive | One outlet per geographic area | Luxury goods (Maserati, Rolex) — maintains prestige and controls service experience |
Channel Conflict
Channel Conflict = when members of a distribution channel disagree over the roles they should play or the rewards they should receive. Example: a manufacturer selling directly online while also using retailers — retailers may feel bypassed.
LO7 — Intermediaries: Wholesalers, Retailers, and E-Intermediaries
Wholesalers
Sell to other businesses (B2B) for resale — do not sell to final consumers.
Wholesaler functions:
- Bulk Breaking — buy massive quantities from manufacturers; sell smaller quantities to retailers
- Storage — hold inventory so retailers don’t have to
- Logistics — handle transport to widely dispersed retailers
Example: A convenience store cannot buy one box of candy bars from a factory. A wholesaler supplies hundreds of convenience stores from bulk factory purchases.
8 Brick-and-Mortar Retailer Types
| Type | Description | Canadian Example |
|---|---|---|
| Department Store | Wide range of products organized into specialized departments | The Bay |
| Supermarket | Large food-focused store; low prices, self-service | Loblaws, Sobeys |
| Specialty Store | Small; deep selection in one product category; knowledgeable staff | Aldo, Sunglass Hut |
| Category Killer | Giant specialty store; dominates an entire product category; pushes out smaller competitors | Best Buy, Staples |
| Discount Store | Wide variety; minimal service; low prices | Walmart |
| Wholesale Club | Brand-name merchandise at bulk discounts; annual membership fee | Costco |
| Factory Outlet | Manufacturer-owned; sells last season’s or factory-second merchandise | Nike Outlet |
| Convenience Store | Accessible location; extended hours; speedy service | Couche-Tard, Circle K |
Costco hybrid nuance: Costco is called a “Wholesale Club” but sells to end consumers — technically a retailer. However, when small businesses buy bulk flour from Costco, it acts as a wholesaler. It is a hybrid depending on who is buying.
Nonstore (Direct-Response) Retailing
| Type | Description | Example |
|---|---|---|
| Catalogue Marketing | Customers order from mailed catalogues | Sears catalogue (historical) |
| Telemarketing | Telephone-based direct selling | Inbound toll-free lines |
| Direct Selling | Oldest form; face-to-face, door-to-door, or home parties | Avon Products (world’s largest direct seller) |
| Video/TV | Customers shop from specialty TV channels | QVC, Home Shopping Network |
Direct Selling ≠ Direct Marketing: Direct Selling is face-to-face (Avon). Direct Marketing is non-personal via media (email, catalogues).
E-Intermediaries
Two functions:
- Collect information — aggregate data about sellers to present to consumers (price comparison sites)
- Deliver products — assist in delivering digital or physical internet purchases
Amazon acts as both: an online retailer (when it sells directly) and an e-intermediary (when it connects buyers to third-party sellers). Its personalized recommendation algorithm also functions as direct marketing.
LO8 — Physical Distribution
Physical Distribution = the activities needed to move products efficiently from manufacturer to consumer.
Two components: Warehousing (storing) + Transportation (moving).
Goal: make goods available when and where customers want them, while keeping costs low.
Warehousing
| Type | When to Use | Example |
|---|---|---|
| Owned Warehouse | Consistent, high-volume storage needs | Large manufacturers with steady production |
| Independent (Rented) | Flexible or seasonal demand spikes | The Brick rents space during peak furniture seasons |
6 Transportation Modes
| Mode | Speed | Cost | Best For |
|---|---|---|---|
| Trucks | Medium | Medium | Short/medium haul; flexible delivery |
| Rail | Medium | Low-Medium | Heavy, bulk goods over land |
| Air | Fastest | Most expensive | High-value, time-sensitive goods |
| Water | Slowest | Cheapest | Massive international bulk cargo |
| Pipeline | Continuous | Low | Liquids and gases (oil, natural gas) |
| Digital | Instant | Near-zero marginal cost | Software, media, information |
Just-In-Time (JIT)
JIT = demand-triggered restocking that eliminates the need for massive inventory stockpiles.
Walmart/P&G Model: When a barcode is scanned at a Walmart checkout, a digital signal goes directly to P&G. New stock ships exactly when needed. This bypasses traditional warehousing and maximizes efficiency — low cost and high availability simultaneously.
Innovation Example: Maersk Line developed oxygenated tanks for ships that keep seafood alive without pumps — distribution innovation that created an entirely new live seafood export market to Europe.
Key Exam Summary
| LO | Core Formula / Rule |
|---|---|
| LO1 | Price is the only P that generates revenue |
| LO1 | Revenue = Selling Price × Units Sold |
| LO1 | Markup % = Markup ÷ Sales Price (based on sales price, not cost) |
| LO2 | Skimming = no competition; Penetration = competition exists |
| LO2 | Above Market = prestige/quality signal |
| LO3 | Target audience = #1 factor in promotional mix selection |
| LO3 | Push = sell to intermediaries; Pull = sell to consumers |
| LO3 | Social media must be part of IMS, not standalone |
| LO4 | Advertising = Paid + Identified Sponsor (not paid = publicity; no sponsor = propaganda) |
| LO4 | Online is #1 medium by spending ($5.9B) |
| LO5 | Coupon = price savings certificate; Premium = free/extra item with purchase |
| LO5 | Publicity = free, uncontrolled, high credibility; PR = company-managed, proactive + reactive |
| LO5 | B2B funnel: Direct Marketing generates leads → Personal Selling closes |
| LO6 | Intensive = everywhere; Selective = limited qualified; Exclusive = one per area |
| LO6 | Agents = long-term; Brokers = temporary matchmakers |
| LO7 | Wholesalers → B2B resale; Retailers → B2C final consumer |
| LO7 | Category Killer = giant specialty store that dominates one category (Best Buy) |
| LO8 | JIT = demand-triggered restocking; Walmart/P&G model |
Related Pages
PricingStrategies, PricingTactics, PromotionalMix, AdvertisingMedia, DistributionChannels, PhysicalDistribution, ADMN201-Ch12