Exam 4

Internal Pricing Factors

Marketing objectives, marketing mix strategy, costs

External Pricing Factors

Demand, competition, economy

Price Elasticity

How much demand changes when price changes

Elastic Demand

Demand changes greatly when price changes

Inelastic Demand

Demand hardly changes when price changes

Elastic: Price Decreases

Total revenue increases

Elastic: Price Increases

Total revenue decreases

Inelastic: Price Decreases

Total revenue decreases

Inelastic: Price Increases

Total revenue increases

Pricing Objectives

Profit, status quo, market share

Basis for Pricing

Cost, demand, competition, new product

Markup Pricing

Selling price = cost + markup

Markup Percentage

Markup dollars divided by selling price

Break-Even

Point where total revenue equals total costs

Break-Even Units

Fixed costs divided by profit per unit

Flexible/Variable Pricing

Different customers may pay different prices

Price Skimming

Charge highest possible price buyers will pay

Market Penetration Pricing

Price below competitors to quickly gain market share

Premium Strategy

High quality + high price

Overcharging Strategy

Low quality + high price

Good-Value Strategy

High quality + low price

Economic Strategy

Low quality + low price

Everyday Low Pricing

Consistently low prices instead of frequent discounts

Reference Pricing

Compare a price to another reference price

Selling Against the Brand

Use a known brand as the reference comparison

Portfolio Pricing

Price products while considering the whole product portfolio

Price Bundling

Sell multiple products together for one price

Captive-Product Pricing

Price products required to use a main product

Multiple-Unit Pricing

One price for multiple units

Single-Price Strategy

All products offered at the same price

Bait Pricing

Advertise a low price to attract customers toward other purchases

Loss Leader / Leader Pricing

Sell an item very cheaply to attract customers

Substitutes

Price of A increases and sales of B increase

Complements

Price of A increases and sales of B decrease

Marketing Channel

Individuals and organizations directing products from producers to customers

Distribution

Making products available when and where customers want them

Intensive Distribution

Uses all available outlets

Selective Distribution

Uses only some available outlets

Exclusive Distribution

Uses a single outlet in a fairly large geographic area

Market Channel Factors

Customer profiles, market size/location, competition, environment

Product Channel Factors

Complexity, price, standardization, life cycle, delicacy

Producer Channel Factors

Resources, product lines, desire for channel control

Intensive Distribution Best For

Convenience products with high replacement rates

Selective Distribution Best For

Shopping products and durable goods

Exclusive Distribution Best For

Specialty products and strong channel control

Push Strategy

Promote to members of the distribution channel

Pull Strategy

Promote directly to consumers to create demand

Cheapest Transportation

Water

Most Expensive Transportation

Air

Most Accessible Transportation

Truck

Most Reliable Transportation

Pipeline

Fastest Transportation

Air

Slowest Transportation

Water

Retailing

Selling goods directly to final consumers for their use

Omni-Channel Retailing

Customers shop or purchase the same items across different channels

Direct Retailing

Door-to-door, office-to-office, home sales parties

Direct Marketing

Direct mail, catalogs/mail order, telemarketing

Retailing Mix

Customer service, merchandise, promotion, location, atmosphere, pricing

Atmospherics

Management of physical surroundings

Physical Surroundings

Image, safety, temperature, parking, spacing, crowding

Integrated Marketing Communications (IMC)

Coordinate promotional messages to create a consistent, unified message

Marketing Communication Process

Sender encodes message, receiver decodes it, then provides feedback

Source

Originator of a marketing message

Encoding

Turning an idea into a communicable message

Message

Information being communicated

Communication Channel

Medium used to transmit a message

Decoding

Receiver interprets the message

Receiver

Intended recipient of the message

Feedback

Receiver's response

Noise

Anything interfering with communication

AIDA

Attention, Interest, Desire, Action

Attention

Cognitive or thinking stage

Interest

Affective or feeling stage

Desire

Affective or feeling stage

Action

Conative or doing stage

Advertising in AIDA

Impacts attitudes and works best at beginning of process

Sales Promotion in AIDA

Impacts behavior and works best at end of process

Informing

Make consumers aware and provide information

Persuading

Influence consumers to choose the product

Reminding

Keep product or brand in consumers' minds

Advertising

Paid, nonpersonal communication through mass media

Personal Selling

Personal communication that informs and persuades customers

Sales Promotion

Short-term incentive adding value to encourage response

Public Relations

Communications used to maintain favorable stakeholder relationships

Direct Marketing

Firm personally contacts customers with marketing information

Events/Experiences

Brand-related activities and experiences involving consumers

Advertising Strengths

Cost-efficient per person, repeatable, enhances brand image

Advertising Weaknesses

High total cost, slow feedback, one-way, not flexible

Personal Selling Strengths

Influential, immediate feedback, flexible

Personal Selling Weaknesses

High cost per person, time intensive

Sales Promotion Strengths

Quick to implement, moves seasonal items, supports other promotion

Sales Promotion Weaknesses

Not good for luxury products

Public Relations Strengths

Publicity can build brand image and support other promotion

Public Relations Weaknesses

Firm cannot control what outside outlets say

Direct Marketing Strengths

Messages can be tailored to consumers

Direct Marketing Weaknesses

Consumers may feel privacy is invaded

Sales Promotion Definition

Communication stimulating immediate response by enhancing value for a limited time

Advertising vs Sales Promotion

Advertising = reason to buy; sales promotion = incentive to buy

Advertising Impacts

Attitudes

Sales Promotions Impact

Behavior