Study Questions Chapter 11 and 12 Chapter 11 Question 3: a). Explain how discounts and allowances differ from promotional pricing Price is an important determinant of consumption decisions made by consumers. Termed as rational, consumers are usually concerned about product bundles that meet their specific demands while enabling them to reap the maximum satisfaction. In order to encourage higher purchases and brand loyalty, firms use different pricing strategies as examined below: Discounts and allowances: these are reductions in the price of a commodity in the market in order to encourage increased purchases.
The reductions are common in the main price of a good in any level of the supply chain. Promotional pricing is a price reduction strategy used by firms or retailers to attract the loyalty of customers to their brand. The pricing strategy is common with firms that launch their products for the first time or would like to encourage increased purchases from loyal customers. Therefore, the differences between promotion pricing and discounts and allowances are that the two are done for different purposes (Kotler and Armstrong 333). b).
Price Comparison websites i) Given that consumers value price so much, many online websites provide the comparison of prices for different products and their substitutes. In addition to comparison, they provide the product quality and ingredients. Some examples include Pricerunner UK, kelkoo. co. uk, Amazon, Google’s product search and Ciao among others. ii). Other factors influencing consumption: Other factors other than price used to influence consumption decisions include the level of income of the consumer, the availability and price of compliments, tastes and preferences and fashion among other factors (Marcussen 68). Chapter 12 a). Multichannel distribution system used by L. L.
Bean Corporation A distribution system is vital for the success of marketing strategies of an organization. A distribution system is comprised of firms, people and institutions that are involved in the flow of products and services from the producer to the consumer. Firms use different distribution systems some of which include single channel and multichannel distribution systems. A multichannel distribution system involves the use of more than one channel to distribute the products and services of the firm (Marcussen 79). The case of L. L. Bean Corporation is similar to the case of other firms using multichannel distribution system.
L. L. Bean Corporation combines different system designs to distribute and sell its products to the consumers. The various channels used in a multichannel system by L. L. Bean organization include the use of a direct retail system that involves the selling of the product using its own stores. A direct marketing system is also used to sell the products via direct mail. Lastly, the firm utilizes a single party system that involves the selling of the products through other small retailers. This system is beneficial to the firm because it ensures that the firm reaches out to a large number of customers (Mills 109).
b). Why has Dell opted to move away from its direct sales business model and expand its sales through intermediaries? What are the potential risks and rewards associated with this change in strategy? Direct marketing is an important distribution strategy that Dell used to employ because it used to provide high revenue for the firm as well as ensuring that the company clients obtain products cheaply. Despite the high sales revenue the firm was enjoying, it lacked other service values provided by intermediaries.
The manufacture and selling process involves many things and factors that if handled by one organization may prove disadvantageous. Due to lack of service values, Dell Corporation decided to move away from direct marketing and use intermediaries. Intermediaries provide many value services to the firm. For instance, intermediaries provide value activities such as product offerings to consumers, searching of products, and comparison of prices, logistics and settlement of debts, trust and provision of legal and regulatory requirements.
Through provision of these value services, the involvement of the firm in the entire process is reduced (Groucutt Leadley and Forsyth 95). However, the prices of the products of the firm are increased. The risk is that consumer will have to pay more for the products while the revenue and income of Dell Corporation would decline. Works Cited Groucutt, Jonathan, Leadley, Peter and Forsyth, Patrick. Marketing: Essential Principles, New Realities. London: Kogan Page Publishers. Kotler, Philip and Armstrong, Gary. Principles of Marketing. 13th ed. New York: Pearson. 2010. Print.
Marcussen, Carl. The Effects of Internet Distribution of Travel and Tourism Services on the Marketing Mix: No-frills, Fair Fares and Fare Wars in the Air. Information Technology & Tourism, 2.3 (1999): 15-59. Print. Mills, Gordon. Retail Pricing Strategies and Market Power. Melbourne: Melbourne University Publishing. 2002. Print.