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In our last lecture # 16 – we covered:
32. The Marketing Mix: Product and
•
Price
Lecture 17:
33. The Marketing Mix: Promotion
34. The Marketing Mix: Distribution
Promotional Mix
Promotion LAP 1
Objectives
A. Describe the elements of the
promotional mix.
B. Explain factors affecting the selection
of a promotional mix.
Objective A
Describe the elements of the
promotional mix.
Purposes of Promotion
To tell consumers about a company’s …
Goods Services
Ideas
Images
Purposes of Promotion
To persuade consumers to buy
Promotion’s Recipe
for Success:
Mix various
communication
activities together and
serve to potential
customers until desired
outcome is achieved.
Communication Techniques
• Advertising
• Personal selling
• Publicity
• Sales promotion
Flynn
The bikes
the pros
use.
Traveler Magazine
The Top 5
Airlines!
25% Off
Coupon
The Combination, or Blend, of Marketing
Communication Channels Is Called the...
Advertising
Any paid form of nonpersonal presentation of ideas,
images, goods, or services
The most visible element of the promotional mix
• Actual cost of advertisement is
quite high.
• Since many people receive the
message, the per contact cost
is very low.
The New Barchetta
Diamonds from
Desmond’s
Jewelers are a girl’s
best friend.
Say No to Drugs.
Services
Ideas
Images
Goods
The Vet for Your
Pet
At Techco,
we’re
friendly to
our
customers
and the
environment.
Advertising
Messages can be delivered by:
•
•
•
•
•
•
•
•
Television
Radio
Newspapers
Magazines
Direct mail
Outdoor advertisements
Directories
The Internet
Personal Selling
Determines client needs/wants and responds through
planned, personalized communication that influences
purchase decisions and enhances future business
opportunities
My budget won’t
allow me to replace
them all at once,
but I want them to
be compatible.
You might want
to consider leasing
Are you planning
computers. You can
on replacing all
get free service
of your computers
and upgrade to a
at once?
newer model whenever
you want!
Selling
SellingDisadvantage
Advantages
I like the sound
We do carry a
of this stereo,
bookshelf model
but I think it’s a On a per contact basis, with similar
little large for
sound quality.
selling
is
the
most
expensive
my dorm room.
form of promotion.
• Immediate feedback
• Flexibility
Publicity
• Any nonpersonal presentation of ideas, goods, or
services that is not paid for by the company or
individual which benefits from or is harmed by it
• Many consumers pay close attention to publicity.
– Feel publicity has more credibility because it is not a
commercial message
– View publicity as news
Example: Mention of a company’s charitable activities
in print or broadcast media
Ways the Internet Can Be Used
as a Source of Publicity
“Tae-Bo has really changed my life. I’ve lost
weight, toned-up, and feel better than ever.”
-Susie Wells, CA
A company web site can be used to obtain and display
positive feedback.
Ways the Internet Can Be Used
as a Source of Publicity
OnlineNews.com
Car shopping on the web
Buying a car on the web just got
easier! Autobytel.com will help you
get the financing, pick out the model,
color and extras. Then they provide a
quote from a local dealer. All at the
touch of a keypad.
A business’s goods, services, or web site might be mentioned in an
Internet newsgroup.
Ways the Internet Can Be Used
as a Source of Publicity
LINK TO ACME.COM
A company might agree to provide a link to another business’s web
site in exchange for the same consideration.
Sales Promotion
• Promotional activities other than advertising, personal
selling, and publicity which stimulate purchases
• Sales promotion activities include:
Visual
Product
merchandising
Novelty
Fashion
Instant
Free
Trade
Contests
Coupons
Exhibits
demonstrations
samples
rebates
shows
items
shows
or displays
Importance
of the
Promotional
Mix
• Plays a key role in
obtaining and keeping
customers
• Enables businesses to
communicate effectively
with customers
• Informs consumers about
goods/services and
persuades them to buy
Objective B
Explain factors affecting the
selection of a promotional mix.
Marketers Try To Create the
Ideal Blend of Promotional
Activities for Their Businesses.
Publicity
Personal
selling
Sales
promotion
Advertising
No magic formula that
marketers use to help
design promotional mix
Must decide which methods will
best reach potential customers and
communicate desired message
Hard to determine effectiveness of the
different promotional methods
Factors Affecting the Selection of a
Promotional Mix
Must be carefully
analyzed before
marketers decide when
and where to invest
promotional funds
Product’s
Good,
Distribution
Product’s
service,
target
image,
company
channels
market
or idea
Good, Service, Image, or Idea
• Type of product
Convenience goods
Shopping goods
Specialty goods
Good, Service, Image, or Idea
Inexpensive and
self-service products
can rely on advertising
and sales promotion.
This computer is
perfect for you. It
has all the software
pre-installed and a
left-handed mouse!
10% OFF
Products
which are
on all small
high-tech,
require
appliances are
demonstration,
expensive, or require
installation should be
promoted through
personal selling.
HARRY’S
HARDWARE
Product nature
Good, Service, Image, or Idea
When you are on-the-go…
New and
Improved!
…it’s Breakfast-To-Go
Each pocket provides
you a delicious
breakfast in just
Maturity
two minutes!
Growth
Introductory
Declining
Stage of life cycle
Product’s Target Market
Geographical Location
Number of Consumers
Type of Consumer
Consumer
Market
vs.
Advertising
Few
Consumers Sales Promotion
Close
Publicity
Together
Personal Selling
Industrial
Market
Many
Consumers
Spread
Over a
Wide Area
Distribution Channel
INTERMEDIARY BLVD.
The promotional
mix selection is
affected by the
path that a
product takes.
DIRECT AVE.
Requires
personal
selling
Requires
personal
selling and advertising
Product’s Company
Businesses often rely on previous
use of promotional methods.
Less flower. More power.
Think small.
1960
1970
1980
1990
Historical Perspective
2000
Product’s Company
Example:
Wal-Mart started as one small
store in Arkansas. In Wal-Mart’s
early years, local newspaper
advertising and personal selling
were all that the small company
could afford.
Today, the Wal-Mart corporation
has increased its promotional mix
to include television, radio,
newspapers, special sales bulletins,
and a Wal-Mart web site in order
to promote its national network.
Available Funds
Product’s Company
Competition
Tony’s Pizza
Kids eat
free!
Ange’s Pizza
Free kids’
meals!
Competing businesses use similar promotional
mixes and tend to follow the leader.
Promotional Mix
Chapter 17.1
What is promotion?
• Any form of
communication a
business or organization
uses to inform,
persuade, or remind
people about its
products.
The Promotional Mix is a
combination of the different
types of promotion.
Two types of promotion
• Product Promotion
– Type of promotion that a business uses to
convince potential customers to buy products
from them and not their competitors.
• Institutional Promotion
– Type of promotion that a business uses to create
a favorable image for itself.
Four basic types of promotion….
•
•
•
•
Personal selling
Advertising
Sales promotion
Public relations
What is the largest form of promotion?
• Personal Selling!
– This type of
promotion requires
contact with
potential buyers
Advertising….
• Any paid form of nonpersonal presentation
and promotion of ideas,
goods, or services by an
identified sponsor.
Sales Promotion
• All marketing activities,
other than personal
selling, advertising, and
public relations is
called….
Public Relations
• Any activity designed to
create a favorable image
toward a business, its
products or its policies.
Publicity
• A specific kind of public
relations that involves
placing positive and
newsworthy information
about a business, its
products, or its policies in
the media is called…..
Publicity
• Advantage…
– It is free!
• Disadvantage…..
– Its contents cannot
be controlled by
the business
Principal function of publicity…
• Building an image
What do they do?
• Advertising
– Creates awareness of a business’s product
• Public Relations
– Creates a favorable image for the business itself
• Sales Promotion
– Efforts stimulate sales
• Personal Selling
– Builds on all of the other efforts by helping customers
complete the sale
Marketing Department
•
•
•
•
Establishes a promotion budget
Allocates resources
Coordinates the campaign
Determines the right promotional mix
for the company
Push Policy
• Promotion policy used
only with the next
partner in the
distribution channel.
Manufacturers
PUSH
a product to the
retailers for
sale….
Pull Policy
• Promotion policy
designed to create
consumer interest
When a
product is
consumer
driven or
PUSHED
into a
store….
Distribution
Management
Prepared by:
Ma. Anna Corina G. Kagaoan
Instructor
College of Business and Accountancy
Objectives
This chapter will enable you:
• To understand the role of distribution management in the
marketing mix;
• To understand why distribution channels are required at all;
• To study how distribution channels add value to the
marketing mix; and
• To get a brief introduction to distribution channel strategy.
Preview
• Marketing – identifying customer’s needs and satisfying
them while generating profit.
• Marketer analyzes the market, segments it, selects a
target market and positions his products to offer
differential advantage to the customers.
• Marketers satisfy the needs of the target market in a better
way (in other words they position the products to offer
differential advantage) through a proper mix of Product,
Price, Promotion and Place – called Marketing mix or
4Ps of Marketing.
Preview
• Product – A Good, Service or an Idea that is provided
to satisfy the need and all the activities required to
plan the product.
• Price – Money (or something of utility) required to
exchange the product .
• Promotion – All activities required to inform and
persuade the customers.
• Place – All activities required to make the product
available where they are needed.
Distribution Management
• Distribution management deals with the Place part of
the marketing mix.
• One major aspect of the distribution management
process is the role and relevance of distribution
channels in helping the “place” aspect of the
marketing mix, which provides place, time and
possession utility to the customer.
Distribution Management
Distribution management ensures that:
• a product is made available to a consumer at a retail shop
close to his residence, thus, providing the “place” utility;
• a product is available at the retail counter at a chosen time
of the consumer, thus, providing the “time” quality;
• a consumer can pay for a product and take it home
whereby he becomes the owner of it, thus, the
“possession” utility has also been provided for.
Major Role of an Intermediary
Place
Utility
Time
Utility
Possession
Utility
Fig. 1. Major Role of an Intermediary
Distribution Management Definition
• Management of all activities which facilitates movement and
co-ordination of supply and demand in creation of time and
place utility in goods.
• Art and science of determining requirements, acquiring them,
distributing them and finally maintaining them in an
operationally ready condition for their entire lives.
• Broad range of activities concerned with the efficient
movement of finished products from the end of the production
line to the consumer and it also includes the movement of raw
materials from the source of supply to the beginning of the
production line.
Need for
Distribution Management
A company could reach the ultimate consumer by
several routes:
• Direct from the company if it runs a house-to-house
campaign;
• Direct from the company if it has put up a stall in a
consumer product exhibition to promote its
products;
Need for
Distribution Management
• The company deliver the product in bulk to a Carrying
and Forwarding Agent (C&FA) or a distribution center,
which breaks bulk and gives it to distributors. The
distributor sells convenient lot sizes to the retailers from
where the consumer buys it; and
• The distributor could sell the product to a wholesaler
who then sells it to the retailer from where the consumer
buys it.
Need for
Distribution Management
• The channels or set of intermediaries help the process of
“exchange” of the product or service at a certain margin to
themselves.
• Intermediaries help in the smooth flow of goods and services.
• Intervention is necessary as there is a difference between the
assortment of goods and services generated by the producer
and the assortment demanded by the consumer. Consumers
usually desire only a limited quantity of a wide variety of
goods.
Need for
Distribution Management
• Distribution channels are required as the companies by
themselves cannot directly reach and sell the products to their
millions of consumers.
• Marketing channel decisions play an important role of longterm importance of ensuring the presence and success of a
company in the marketplace.
• Presence ensures that the product gets wide distribution and
it reaches out to the maximum number of customers and
prospects.
Functions of Intermediaries
• To accumulate the right kind of goods, aggregating and
sorting to meet consumer needs at the point of purchase;
• To believe in routine and simplified transactions and work
with a large number of products (at the wholesaler and
retailer level), so that distribution costs could get minimized;
• To provide information both to the sellers and the buyers to
help them manage their business better.
Functions of Intermediaries
• To buy a large variety of goods and can compare costs and
prices and make the right recommendations to their
customers;
• To be aware of the environment in which they operate and
hence isolate the companies from the direct impact of these
local conditions; and
• To reduce the number of touch points. The company will not
be able to meet the demands of thousands of its consumers
directly and hence needs intermediation.
Role of an Intermediary
Company 1
Company 2
Intermediary
Large number of Consumers
Fig. 2. Role of an Intermediary
Company 3
Are Intermediaries Necessary?
• Not always, as sometimes the commitment of the intermediary
and his need for an excellent distribution effort may not be of the
same intensity as that of the company.
• In case of technically complicated products, the company may
want to handle the distribution themselves.
• Cost is a major consideration for a company wanting to handle
the distribution function by itself.
• Distribution is a specialized function best left to experts—
wholesalers and retailers.
• Cost efficiency and effectiveness of indirect distribution is higher
than in the case of direct distribution.
A Combination Works Better
Most companies use a combination of direct and indirect
distribution. Choice of combination and contribution of each set is
determined by:
• Nature of the company and its products;
• Nature and dispersal of company customers;
• Business goals of the company;
• Market expectation of credit;
• Company’s capabilities and strength;
• Speed with which a company wants to increase its sales and
coverage of the market;
• Nature of competition and how it operates; and
• Company’s market shares. Small companies may not get the
interest of channel members.
Discrepancy and
Distribution Channels
Table 1. Role of Distribution Channels
Discrepancy Spatial
Character
Helps
reduce the
distance
between
the
producer
and the
consumer
Temporal
Break bulk Assortment Financial
support
Helps
speed up in
the
meeting
the
requiremen
t of the
consumer
Reduces the
large
quantities
into
acceptable
lot sizes for
the
consumer
Provides
variety to
the
consumer to
choose from
Helps fund
the
activities of
reaching
the product
to the
consumer
How Distribution Adds Value
• The distribution function using the network of the channel
partners add value to the selling function by providing time,
place, and possession utility to the consumer.
• For providing the possession utility, the channels simplify the
transactions by maintaining contacts with their upstream partners
(C&FA or company)—closer to the producer.
• Downstream channels involved are the distributors, wholesalers
and retailers—closer to the consumers.
• Downstream channel partners do transactions like order taking,
order communication, order processing, delivery of goods, and
collection of payments.
• Service associated with products are done by channels.
Distribution Channel Strategy
Corporate Strategy
Marketing Strategy
Distribution Strategy
Fig. 3. Evolution of a Distribution Strategy
Distribution Channel Strategy
• Corporate Strategy. Spells out the overall strategy and direction.
• Marketing Strategy. Part of the overall business plan of the
company and corporate strategy. Outlines how the overall
strategy is achieved using company products and its distribution
network.
• Distribution Strategy. Forms a critical part of the marketing
strategy which cannot be frequently changed as it requires
building a network based on sound, and long-term relationships.
Part of it involves organizing and managing the distribution
function.
Distribution Strategy Factors
• Defining customer service levels. What the customer is most
interested in and hence requires extra care in defining.
• Defining the distribution objectives to achieve these service levels.
• Outlining the steps or activities required to achieve the distribution
channel objectives.
• Deciding on the structure of the network to implement these
activities to achieve the distribution objectives.
• Clearly defines policy and procedure for the network to carry out its
daily activities to achieve the objectives.
• Stating the key performance indicators (KPIs). To check if the
strategy is working well.
• Understanding the critical success factors (CSFs) to make the
distribution strategy effective.
Customer Service Levels
• Nature of the industry in which the company is operating, its
products and services, its market share and the nature of
competition help define the level of customer service the firm can
promise its customers.
• Affordability also dictates service level.
• Companies could even think of categorizing their customer into
A, B and C (Pareto’s Law) to decide different levels of service.
• Extent of competition could also decide level of service to be
provided—number of distributors servicing the market, frequency
of visits to the customers both by the channel partners and the
company sales personnel, ready availability of stocks to service
the market, etc.
Setting Distribution Objectives
• Distribution objectives clearly spell out what is expected out
of the network in ensuring the desired level of customer
service to meet the expectations of its customers.
• Expectations could only be in terms of the time, place, and
possession utilities as well as the period of credit which the
company may be willing to offer its customers.
Set of Activities
• Defines the manner in which the company and its channel partners go
about taking into action the customer service objectives.
• Performed by the company sales personnel and channel partners.
Some steps could be:
 Periodic sales forecasts by geography.
 Arranging for dispatch of the products from the plants or C&Fas to a
point closest to the market.
 Developing beat plans for market coverage.
 Developing journey and beat plans for service engineers.
 Market visits to sell products.
 Collection of sales proceeds.
 Carrying out promotional activities.
 Calling regularly on A category customers to build long-term
relationships.
The Distribution Organization
• Determines who will do what. Helps define structure to support the
entire strategy. Decision points are:
 Extent of in-company (own sales team) and outsourcing (use of
channel partners). Inventory planning, dispatches, credit
management and collection are done by the salespeople and
logistics of the company.
 Affordability factors—own sales team functioning may mean
higher fixed costs whereas a bigger outsourced network may
mean higher variable costs if the volume goes up. Channel
partners are compensated based on percentage of sales value. It
indirectly affects the margins of the company.
The Distribution Organization
• More decision points:
 Selecting the channel partners including C&Fas and distributors,
stockists or agents. Channel that cannot easily be changed.
 Setting clear objectives for each channel partners and systems to
monitor activities and measure performance.
 Ensuring the correct and agreed level of financial investments by
channel partners in the company business—size of warehouse
distributors should have, number of vans to cover market,
number of sales and back office people he has to employ, beat
plans, and amount of credit he is expected to give in the market.
Policy and Procedure
• Company sales personnel and channel partners should understand
what is expected of them and discharge roles and responsibilities
faithfully.
• Operating manuals are very important to clearly define policy and
implementation guidelines. It is an important tool to manage the
distribution organization. It may also include:
 System for redressal of complaints from channel partners;
 System for settling disputes;
 Additional payments or incentives to channel members—difficult
territories or for covering rural areas; and
 Coverage of institutional business and service levels to be extended.
Key Performance Indicators (KPIs)
• Agreed on measurement criteria with channel partners. Some popular
KPIs include:
 Consistent achievement of targets by product groups, period, and
territories;
 Achievement of market shares;
 Achievement of profitability;
 Zero complaints from customers;
 No stock returns;
 Ability to handle emergencies and sudden spurs in demand;
 Balanced sales achievements rather than period sales skews;
 Market coverage with ready stocks;
 Excellent management of accounts receivables;
 Minimize sales losses on account of stock-outs; and
 Minimize damage to products.
Critical Success Factors (CSFs)
• Top management should be involved in formulating of strategies.
Some CSFs are:
 Clear, transparent and unambiguous policy and procedure;
 Serious commitment of the channel partners;
 Fair dealing of the company with all its partners;
 Clearly defined customer service policy;
 High levels of integrity to be demonstrated by channel members;
 Equitable distribution in case of shortage of product; and
 Compensation to channel partners on special promotional
activity should be prompt and not delayed.
Scope of Distribution Management
Channels of
Distribution
Retailing
Wholesaling and
Physical Distribution
Global Marketing, R & D
Global Marketing and R&D
 Among different countries, why and how:
– It makes sense to vary the attributes of products
– Distribution strategy may vary
– Advertising and promotion strategies may vary
– Pricing strategy may vary
 How globalization affects new-product
development
Levitt, 1983
“A powerful force drives the world
toward a converging commonality,
and that force is technology”
(Prof. Ted Levitt, HBS)
Globalization of Markets?
Levitt’s “Converging commonality” has
not happened universally
Consumer product tastes converged less
than industrial product specifications
Media, communications means have
– made consumers world-wide more aware of
their mutual preferences
– have contributed to creation of world brands
– have caused market segments to emerge
across some national markets--inter-market
segments
Market Segmentation
 The process of identifying groups of consumers
whose purchasing behavior is unique in important
ways
– Is based on demography, geography, social-cultural
factors, psychological factors
– Allows firms to adjust marketing mix to meet the needs of
separate market segments
 Marketing mix variables:
product-price-place (distribution)-promotion
Market Segmentation Across
National Markets
Standardization: companies may
– Offer same products
– Adjust balance of marketing mix to market
segments with similar needs across countries
Adaptation: companies may
– Offer different products
– Adjust balance of marketing mix to market
segments with differing needs across countries
Marketing Strategy
 Standardization (Global Integration Pressures)
– Efficiencies through integrated R&D, production,
marketing
– Control implications
 Adaptation (Local Responsiveness Pressures)
– Buyer behavior (cultural, economic influence,
brand perception--country of origin idea)
– Laws, regulations
– Local environment needs
– Responsiveness to local condition shifts
 Implications on marketing mix
International Marketing Mix: Product
Product: a bundle of attributes
–
–
Hamburger: meat type, taste, texture, size
Automobile: power, design, quality,
performance, comfort, size/capacity
Attributes need to be adapted to a greater or
lesser extent to satisfy
–
–
–
Consumer preferences/tastes due to culture
Economic development levels affect consumer
behavior
National product/technical standards state
mandated
International Marketing Mix: Place
Optimal channel a company chooses
to deliver the product
 The most locally responsive element
of marketing mix because
distribution channels vary
dramatically across countries

– Retail system: concentratedfragmented
– Channel length: long, short
– Channel exclusivity
International Marketing Mix: Promotion
How firm communicates the product
attributes / benefits to customers
Barriers to international communication
– Cultural barriers
– Source effects (country of origin effects)
– Noise levels
Standardized advertising strategy possible;
standardized advertising strategy
execution more difficult (culture, laws)
International Marketing Mix:
Promotion
Push vs pull strategies
– Push strategy: personal selling emphasis
• Industrial products; complex new products
• Short distribution channels
• Few print or electronic media
– Pull strategy: mass media advertising
emphasis
• Consumer goods
• Long distribution channels
• Marketing message may be carried via print /
electronic media
International Marketing Mix: Price
Price discrimination: demand elasticity
Strategic pricing
– Predatory (quick share-of-market focus):
• lower prices to drive competitors out, then raise prices
– Multipoint pricing:
• pricing in one market may have an impact in another
market; subsidize low pricing in one market from
profits in another
–
Experience curve:
•
use aggressive pricing to build volume and move firm
down experience curve (lower marginal costs)
 Regulatory
•
issues:
antidumping, monopoly restriction
New Product Development
New product development
High risk / high return
– Technological innovation
– Creative destruction
–
Location of R&D
–
Disperse R&D to trend/technology leading
markets
•
•
•
High investment on basic and applied research
Strong underlying demand; affluent consumers
Intense competition
New Product Development
Integrate R&D, marketing and Production
Ensure:
–
–
–

Product development driven by customer needs
New products can be manufactured
efficiently/effectively
Time to market is minimized
Plan clearly: goals, milestones, budgets
New Product Development
 Use cross-functional, multinationally diverse teams
 Span: initial concept development to market
introduction
 Team composition critical
–
Assign heavyweight project manager
•
•
–

High status in organization; high power and authority
Dedicated to fullest possible extent to project
Team should have representative from each function
Physical co-location
–
–
–
When appropriate?
Build team culture
Communication and conflict resolution processes
Strategic Analysis
Why do organizations decide to enter
international business? Passive entry:
Follow customers overseas
Respond to enquiries from overseas
Competition is in overseas markets
Seek profitable growth
Sell capacity “as is”
Strategic Analysis
 Eventually one or more of key distributors become
a candidate for acquisition (FDI)
 Foreign regional development organizations
actively recruit FDI
 Competitive pressures force examination of local
assembly or production nearer to key international
markets
 Major international customers demand local
support
Strategic Analysis
Organization acquires companies that are
complimentary to existing businesses
Continued growth requires regional
management, development, distribution,
technical and customer support
Strategic Analysis
Issues involved in conducting international
business become “significant”
Demands for organization’s resources
increases:
Management
Cash
Product adaptation or unique development
Customer support
Strategic Analysis
 Eventually, these demands force the
active planning of international business by
the organization – Active strategy
Strategic Analysis
SWOT
Strength and Weaknesses – decisions made
and controlled by management
Opportunities and Threats – business
environment – events that are likely to
occur
Marketing Mix (4 Ps)
Product
Promotion
Pricing
Place (Distribution) – the most important
for international business entry
Marketing Mix (4 Ps)
Place (Distribution) – the most important
for international business entry:
Incoterms determine where title to goods
changes
Transportation to international freight carrier,
freight, insurance, documentation, customs
clearance, local transportation, logistic
management “in the market”, currency risk
Marketing Mix (4 Ps)
Product – usually controlled by the
exporter, initially the least impacted
element of the marketing mix
However, “localization” often required:

approvals and certificates

packaging & labeling

measures, etc
Marketing Mix (4 Ps)
Promotion – success at home leads to
interest from potential importers, licensors,
joint venture partners
Local knowledge essential on initial entries:
Integrated market communication
Trade and consumer sales promotion
Sales management
Trade shows
Marketing Mix (4 Ps)
Pricing : What tasks need to be performed
to get the product from place of
manufacture to foreign customers?
The remainder of the marketing mix needs
to be determined in order to set prices
Export Pricing Policy Issues

Channel length: longer channels than domestic
markets, may drive up end user prices

Price influence: distribution partners negotiate
for the lowest possible “landed cost”

Price-setting authority: How much pricing
authority should be given to distributors or to
subsidiaries?
Dumping
 WTO: Sale of an imported product at ‘less
than fair value’ and causes ‘material injury to
a domestic industry’.
 US: An unfair trade practice that results in
injury, destruction, or the prevention of the
establishment of an American industry.
 US considers dumping when price is >5%
below home market price or,
 Price is below cost of production
Grey Marketing
Grey (or parallel marketing)
Products are imported outside of the
established distribution channel –
undercutting the authorized channel pricing
Usually results from high imported prices
THANK YOU