Exam 4 marketing

What are the 6 stages of establishing prices?

1) Develop pricing objectives

2)Assess target markets evaluation of price

3)Evaluate competitors prices

4)Select a basis for pricing

5)Select a pricing strategy

6)Determine a specific price

In the stages of establishing prices what does develop pricing objectives

We need profit, status quo, and market share

What is profit in develop pricing objectives

Identify and price and cost levels that allow the firm to maximize profit per product

What is status quo for developing pricing objectives

Identify price levels similar to competitor average price

What is market share in develop pricing objectives

Adjust price levels so that the firm can maintain or increase sales relative to competitors’ sales

Assessing target market. what is in importance of price?

Type of product, type of market, and purchase situation

In assessing target market. What is evaluating competitors prices?

1. Sources of competitors pricing information -Comparative shoppers

2. Importance of knowing competitors prices -Helps determine how important price will be to customers -Helps marketers in setting competitive prices for their products

3. Customer view of pricing and marketing -Pricing above competition -Pricing below competition

Adjusting your price levels so that your company can maintain or increase sales relative to competitors’ sales best describes with pricing objective?

Market share. Explanation: Increasing market share can be accomplished through being a lower-cost alternative to your competition while offering similar levels of quality. Wal-mart wins by selling in larger volume, thereby increasing its market share with lower prices.

What is price?

The amount you pay for something or the value that you exchange for the benefits of having or using the product/service

What is the price formula

Value = Benefits - Costs

What are the 3 factors that affect pricing decisions: internal

Marketing objectives. marketing mix strategy, and costs

Pricing Decisions: internal. what are marketing objectives?

-To maximize profits

-To gain market share

-To infer a level of quality

-To survive

Pricing Decisions: internal. what is the marketing mix strategy

Price needs to be consistent with other 3p’s (product, place, promotion) and aligned with overall business strategy.

Pricing Decisions: internal. what are costs?

Your costs affect your profit, so set the optimal price

Factors that affect pricing decisions: what are the 3 external factors?

1)Demand for your product

2)Competition

-Competitors prices

-Strength competition

3)Economy

-Cost of components (Natural resources)

-Economic Conditions

What is price elasticity?

It tells us how much the demand for a product will change with a change in price

What is the formula for price elasticity?

% change in quantity demanded of a good “a” /(divided by) % change in a price of good “a”

What does elastic mean?

Consumers buy more or less of a product when the price changes

What does inelastic mean?

An increase or decrease in price will not significantly affect demand

What does unitary elasticity mean?

An increase in sales exactly offsets a decrease in prices, and revenue is unchanged

Price elasticity: What is elastic demand?

-If demand greatly changes with a price change, demand is elastic

-Products that are price-sensitive and have many substitutes

Price elasticity; price, quantity and revenue chart

If demand for a good is extremely elastic, raising the price of that good typically has what effect on total revenue?

Total revenue decreases.

Selecting a basis for pricing, what are the 4 bases?

Cost, demand, competition, and new product

What is cost-plus pricing?

Adding a specified dollar amount to the seller’s costs. includes markup and margin

What is a markup?

Adding to the price of the product a predetermined percentage of the variable cost

What is margin?

Adding to the price of the product a predetermined percentage of the total price

Cost based pricing formula

Profit = Revenue - Costs

Revenue is price x units sold

Costs is FC+VC (variable + fixed costs)

Mark up pricing formula

setting price where price = markup + Cost

Markup on selling price formula

(Selling price - cost) /(divided) selling price

Cost formula

(1-markup on selling price) (selling price)

Selling price formula

Cost/(divided) (1-markup on selling price)

Markup pricing example

what is break-even point

Is where a company produces the same amount of revenues as expenses

Break-Even quantity formula

Total Fixed Costs /(divided) Selling price- variable costs

Break even pricing example

What is demand based pricing

Customers pay a higher price when demand for the product is strong and a lower price when demand is weak

-Also known as flexible or variable pricing

-Off peak cheaper prices

-Different segments pay different rates

What is competition based pricing?

Pricing influenced primarily by competitors’ prices

Method importance increases when:

-Competing products are homogeneous resulting in elastic demand

-Organization is serving markets in which price is a key consideration

What is price skimming

Charging the highest possible price that buyers who desire the product will pay

What is penetration pricing

Setting prices below those of competing brand to penetrate and gain a significant market share quickly

New product chart

Our company sells flat screen TVs to retailers for $1,000. The total fixed costs for plant operation is $60,000. It costs us $700 to make each TV. How many TVs does MKT300 industries need to sell to break even?

200

Pricing Strategy: What are everyday low prices?

Settling a low price for products on a consistent basis.

Pricing strategy: what is reference pricing?

-Pricing a product at a moderate level and positioning it next to a more expensive model or brand

-Retailers sometimes add higher priced items to extend the range of product price alternatives

-Known as selling against the brand

Pricing strategy what is portfolio pricing?

-Different levels of price points across a product category where consumers are willing to pay more for extras

Pricing strategy: What is bundle pricing?

Packaging together 2 or more complementary products and selling them for a single price

Pricing strategy: What is multiple-unit pricing

Packaging together two or more identical products and selling them for a single price

Pricing strategy: What is odd-even pricing

Ending the price with certain numbers to influence buyers’ perceptions of the price or product

Pricing Strategy: What is captive-product pricing?

-Captive products are items designed specifically for use with another product

-Many captive products are necessary to the function of the core product

Pricing strategy: What is single price?

All customers are charged the same price for all the goods and services offered for sale within that product category

Pricing strategy: What is bait pricing

Illegal practice of advertising unrealistically low prices to bring customers into the store

Pricing strategy: What is leader pricing?

Also known as loss leader pricing, products priced below the usual markup, near cost, or below cost

What is this a example of? Buying a printer for your computer and needing to buy the print cartridges for that model

This is a example of a captive pricing strategy

What is marketing channel?

A group of individuals and organizations directing the flow of products from producers to customers

What is distribution?

Activates involved in making products available to customers when and where they want to purchase them.

What is the process of designing a marketing channel system?

Analyze customer needs → Establish channel objectives → Identify major channel alternatives → Evaluate major channel alternatives

What are the 2 Issues that influence channel strategy?

Factors affecting channel choice and levels of distribution intensity

What are the 3 different factors in factors affecting channel voice?

Market factors, product factors, and producer factors

In levels of distribution intensity what are the 3 different distributions?

Intensive distribution, selective distribution, and exclusive distribution

What are the different factors of market factors?

-Customer profiles

-Consumer or industrial customer

-Size of market

-Geographic location

-Competition

-Environmental forces

What are the different factors under product factors?

-Product complexity

-Product price

-Product standardization

-Product life style

-Product delicacy

What are the different factors under producer factors?

-Producer resources

-Number of product lines

-Desire for channel control

What are the 3 terms in Intensity of Market Coverage?

Intensive distribution, selective distribution, and exclusive distribution

What is intensive distribution?

-Uses all available outlets to distribute a product

-Appropriate for convivence products with high replacement rates

-Provides availability and reduces search time

-Everywhere

What is Selective distribution?

-Uses only some available outlets to distribute a product

-Appropriate for shopping products and durable goods with low replacement rates

-Desirable when special effort such as customer service is important

-Several, not everywhere

What is exclusive distribution?

-Uses a single outlet in a fairly large geographic area to distribute a product

-Appropriate for expensive, high quality products purchased infrequently

-One

Ranking modes of transportation chart

What is the push strategy?

-Advertising and promotional strategies geared toward your distribution partners to encourage them to promote your product

-B2B

What is a Pull Strategy?

-Advertising and promotional strategies geared toward consumers to increase desire for the product

-B2C

What does Retailing mean?

-All the activities involved in selling goods directly to the final consumer for their use

-Could be nonstore retailers such as via the mail, internet, telephone

What are trends in retailing?

-Personalized in-store experiences

-Convenience/speed as technology integration continues to grow

-Privacy concerns as retailers use data to predict shopping behavior

-Mobile wallet usage

-Omni-channel retailing

What are different Direct retailer sell products?

Door to Door, Office-to-office, and home sales parties

what are the different types of direct marketing?

Direct mail, catalogs and mail order, and telemarketing

What is in the retailing mix. Hint there are 6

Pricing, customer service, merchandise, atmosphere, location, promotion

What are the factors of managing physical surroundings

-Image

-Safety

-Temperature

-Parking

-Spacing

-Crowding

What does Atmosphere mean?

Layout, design, textures, and senses

What is emotional response

Pleasure/displeasure/heightened senses

What does behavior mean?

Time spent in store, affiliation with people, buying actions

What is the promotional mix?

Advertising, personal selling, sales promotion, public relations, direct marketing, events/experiences

Integrated Marketing Communications chart

What is the marketing communication process?

The way in which a sender encodes a marketing idea and conveys it through message and medium so receivers can decoded and understand it, and then respond with feedback

How does the marketing communication process actually operate?

Source → Encoding → Message(communications channel) → decoding →receiver