MKT 319 Exam 3

Creighton University, Professor Rose Jarmon

Pricing

the amount of something a buyer exchanges with a seller to obtain a product

What are the steps of the price setting process?

define objectives, evaluate demand, determine costs, analyze competitive price environment, choose a price, monitor and evaluate

profit maximization

setting a high price for a period of time after the launch; must have a competitive advantage for this to work

volume maximization

setting prices low to encourage greater volume of purchases; must have cost advantage over competitors to sustain

survival

temporarily lowering prices to where revenue just covers cost so firm can survive in a hard time

price sensitivity

degree to which the price of a product affecting buyers purchasing behavior

price elasticity of demand

measures price sensitivity by showing the % change in demand in response to the % change in price

elastic

a % change in the price = large change in demand

ex. clothes, handbags, cars

inelastic

a % change in the price = small change in demand

ex. gas, heat, prescriptions

fixed costs

do not vary based on # of units produced/sold

variable costs

vary based on # of units produced/sold

break even analysis

calculating the point where cost of producing equals the revenue made from selling

break even point =

fixed costs / (selling price per unit - variable cost per unit)

what is one important thing that breakeven analysis does not tell us?

does not tell us about price sensitivity

reference prices

what consumers consider reasonable and fair

unbundling

separating out pieces of products and pricing them individually

escalator clauses

contract piece that provides for price increase if certain conditions occur

shrinkflation

prices stay the same but the product gets smaller over time

what are the 6 common pricing tactics?

markup, odd/even, prestige, loss leader, seasonal discounts, price bundling

markup/cost-plus pricing

adding a % or certain amount to the cost of a product

odd/even pricing

odd is pricing a few cents below the next dollar amount; even is pricing at the dollar amount

prestige

pricing higher than your competitors to signal higher quality ex. Apple

loss leader

prices cause a financial loss but the company hopes customers stay and buy more profitable products as well

seasonal discounts

price reductions for customers purchasing out of season

price bundling

2+ products packaged together and sold at a single price

six pros of cost-plus pricing

1. fair and non discriminatory
2. can lead to powerful differentiation
3. greater customer trust
4. reduced risk of price wars
5. quality > lower cost/cheapest


1. simple to implement

3 cons of cost-plus pricing

1. discourages efficiency
2. not guaranteed to cover costs
3. ignores the customers willingness to pay and competitor prices

name your own price

consumers submit a bid at a price they are willing to pay and the site matches it

gray market

sale of branded products through legal but unauthorized distribution channels

dumping

company sells exports to another company at a lower price than in the home market

price discrimination

charging different customers different prices for the same product

price fixing

working with your competition to fix prices; always illegal

predatory pricing

setting prices low to eliminate competition and then raising them to a normal leveld

deceptive pricing

intentionally misleading with price promotions by lying about the original price

robinson-patman act

anti price discrimination act; sellers charge everyone the same price; protects competition

FTC Act

prevents unfair methods of competition

Wheeler-Lea Act

broadened FTC powers to include protecting consumers from false advertising

Sherman Antitrust Act

eliminates monopolies and guarantees competition; reduces market domination by 1 company

retailing

selling products to the ultimate consumer for personal, family, or household use

3 ways retail marketing is different

1. the average amount per transaction
2. impulse purchasing


1. physical store and online integration

assortment

selection of merchandise

breadth

number of distinct good/product lines carried

ex. target

depth

number of items within a product line

ex. petco

scrambled merchandising

selling products unrelated to the original business

ex. grocery store selling clothes

full line discount stores

ex. target, walmart, kmart

speciality discount stores

“category killers”; ex. best buy, petco

conventional super markets

ex. bakers, kroger, super saver, HEB

warehouse clubs

ex. sams, costco

drug stores

ex. walgreens, cvs

specialty stores

one line of products ex. apple, lululemon, warby parker

off price retailers

brand names for less

ex. marshalls, ross

extreme value retailer

ex. dollar tree, 5 below, big lots

department store

one store lots of different departments

ex. kohls, macys, dillards

leased department

section in a retail store rented to an outside company

ex. sephore in kohl’s

factory outlets

manufacturer owned stores in an outlet mall

ex. gap outlet, nike outlet

service retailers

ex. chipotle, hilton, amc

5 types of nonstore retailing

1. online retailing
2. catalog marketing
3. shop at home tv
4. automated vending
5. direct selling

slotting allowances

payments for a specific location in a store for a product

category management

focuses on product category performance overall

geofencing

targeting consumers with deals by sending notifications to their app when they are within a certain distance of the store

paid media

buying advertisements

owned media

brand controlled; includes a company’s website and socials

earned media

PR, unsolicited consumer brand conversations and blog posts; independent product reviews

the stages of website design

planning, design, development, testing and launch

planning stage

setting objectives, deciding the target market, choosing a domain name and hosting service

design stage

creating a wireframe (blueprints of the site)

development stage

creating a functional site (theme, content, coding)

testing and launch stage

testing the site on many browsers, optimizing for mobile use, going live

search marketing

focus on driving website traffic through us of search engines (paid and unpaid)

SEO

search engine optimization; unpaid; creating more traffic from working to be a higher ranking of the free search results

SEM

search engine marketing; paid; paying for more traffic based on search engine ads

3 strategies used in social media marketing

1. engage customers
2. call to action


1. improve brand loyalty and advocacy

content marketing

valuable content to attract and retain target marketse

expert content

uses PR to get 3rd party articles from journalists

user generated content

created by followers through reviews, posts, etc.

branded content

developed and owned by the brand

ex. white papers, blogs, research reports

social media monitoring

also called social listening; identifying and assessing what is being said about your company online; responding before complaints damage company reputation

customer service

everything a company does to satisfy needs and wants of its customers

ultimate goal of good customer service

increasing brand loyalty

common objectives of customer service

timeliness, reliability, customer communication, ease of doing business

timeliness

ability to deliver product by the time the customer expects it to arrive

reliability

customer receives products within lead time without issues

customer communication

2 way information flow between company and customer

ease of doing business

website uses, 24-7 helplines, liberal return policy

companies use social media for…

responding to comments, addressing issues/complaints, answering info requests, gathering new product ideas

fill rate

the % of orders shipped on time and complete

perfect order rate

how many orders were filled, delivered, and billed without errors

order cycle time

length of order cycle and ability of system to react to customer demands/issues

CRM

customer relationship management; getting new customers, keeping old customers, and increasing purchases

lifetime value analysis

comparing retention costs with acquisition costs; scores are used to see which customers we want to use certain tactics on

corporate social responsibility

an org’s obligation to maximize positive impact and minimize negative impact on society

dimensions of CSR

economic, legal, ethics, philanthropic

corporate volunteerism

giving employees time off in order to serve in their community; a good low cost way to perform CSR

green market

environmentally conscious customers and businesses

environmentalism

advocates preservation, restoration, improvement of environment

eco efficiency

promotes cost saving effects

ex. tide cold water washing

beyond compliance leadership

emphasizes that they are better than their competitors/doing more than required

ex. chevy trucks = most fuel efficient pickup

eco branding

pushing an image of your brand where consumers will see benefits to the environment

ex. 7th generation cleaning products

environmental cost leadership

having a much higher price to the consumer for a sustainable product

ex. scotch magic greener tape = 2.5x the price of regular tape

sustainable value innovation

creating a new market space in order to be sustainable

ex. jackson hole vertical harvest project