Understanding Product, Price, and Distribution Policies

Product Policy

Product is everything that is offered in a market to satisfy a need, benefiting the company. A product has three levels: commodities, the actual product, and augmented product attributes.

Product-Related Attributes

These include quality and design.

The Brand

A combination of images, words, and graphics intended to identify a product. There are family and individual brands, trademarks of the manufacturer or distributor.

The Package

Wrapping dedicated to keeping the commodity safe and also serves to make the product more attractive to the consumer.

The Label

A tool providing product information.

Price Policy

The price is the number of monetary units that must be paid to acquire a unit of the product. Formulas for pricing include:

• Prices based on cost
• Prices based on competition
• Prices based on supply and demand
• Prices based on laws

Pricing Policy Examples

• Low prices (e.g., Dacia)
• High prices (e.g., BMW, Ferrari)
• Average prices (e.g., Renault)
• Psychological prices (e.g., $0.99, $4.99, $9.99)
• Prices depending on the product life cycle

Point of Sale Policy (Distribution)

Distribution

Includes all decisions and activities made by the company to bring the product to the consumer.

The Distribution Channel

The path that the product follows from manufacture to the final consumer. According to the number of intermediaries, channels can be:

Direct Sales

No intermediary.

Indirect Channels

In which intermediaries are involved. These channels can be classified into short (with only 1 intermediary) and long channels (with 2 or more intermediaries).

Intermediaries

Firms whose business is to get products from their place of manufacture to the end consumer. Types of intermediaries:

Wholesale

Companies that buy from manufacturers and sell to other intermediaries.

Retail

Companies that buy from manufacturers and sell to final consumers.

Wholesale Dealers

Companies that sell to both other businesses and final consumers.

Representatives

Charging a fee, involved by bringing together buyers and sellers.

Functions performed by intermediaries: storage, financing, product transportation, post-sales servicing, conveniently provide higher quality products.