Page 558 - Business Principles and Management

Chapter 20 • Nature and Scope of Marketing

The number of competing products and their prices, the demand for the prod-
uct, and whether the product will be sold for cash or credit are some of the many
other factors that influence price decisions.
When making price decisions, a company must do more than just set a price
that customers will pay for the product. It must decide what price to charge other
companies that buy and resell the product. Will the company offer coupons, dis-
counts, or other promotional bonuses to attract customers? Will it allow customers
to bargain for a lower price or trade in a used product for a new one? As you can
see, pricing is not an easy marketing decision.

DISTRIBUTION

The third element around which marketing decisions are made is distribution.
Distribution decisions relate to the economic concept of place utility, which you
studied in Chapter 3. Place utility means that the product must be in a place
where customers need or want it. Distribution (or place), therefore, is the set of
activities required to transport and store products and make them available to
customers.
Marketing managers must select businesses to handle products as they move
from the producer to the consumer. Many manufacturers prefer to use other
businesses to sell their products rather than try to reach consumers directly.
Therefore, they may sell their products to retailers or to wholesalers, which then
sell to retailers. Choosing the various routes that products will follow as they
are distributed and the businesses that will sell them to consumers are important
marketing decisions.
Planning distribution also includes the actual physical handling of the prod-
ucts and the customer service provided when orders are processed. Have you ever
opened a product you purchased, only to find it damaged or missing pieces? Have
you ordered something from a catalog or the Internet and received the wrong
merchandise or no merchandise at all? Each of these examples describes a prob-
lem with a company’s distribution system and will result in
dissatisfied customers as well as a loss of sales and profits
business note
for the company.

PROMOTION

The fourth marketing mix element for which decisions Consumers see a relationship between product
must be made is promotion. Promotion means providing benefits and the product price. This is called
information to consumers that will assist them in making value. There is a mathematical formula for this
a decision and persuade them to purchase a product or relationship: Product Benefits/Price = Value.
service. The major methods of promotion are advertising A product is seen as having greater value if
and personal selling. You will learn about other types of it offers more benefits for the same price
promotion in a later chapter. or the same benefits at a lower price. One
Promotional decisions for a digital camera might product may have more features or a better
involve selecting advertising as the main vehicle and brand image but a higher price. Another
deciding whether to advertise in magazines or by direct product may be cheaper but have fewer
mail to prospective customers. Marketing managers benefits. Marketers often try to persuade
decide when and how frequently to advertise. Then they consumers that a product has many benefits,
must decide whether to stage product demonstrations in justifying a higher price. Often those bene-
stores or at consumer electronics shows. Managers must fits are intangible, such as high social value
also decide the type of information to communicate to or status. Consumers may be willing to pay
consumers and whether to try to communicate directly a higher price to be “cool.”
with each customer or use more impersonal messages
that can reach a larger audience at a time.

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