Marketing Test 4 New Flashcards

Price

The sum of all of the values that consumers give up in order to gain the benefits of having or using the product or service

Revenue

Price X Quantity

Price Elasticity

Percentage change in quantity demanded/percentage change in price

Factors to Consider When Setting Price:

1. Marketing strategy, objectives, mix

2. Competitors’ strategies and prices

3. Customer’s perceptions of value

• What is it worth to the customer?

4. Product Costs

• Variable Cost Pricing

5. Macro Environmental factors

6. Consumer Factors

7. Product Factors

Cost

(1 - Margin) x Selling Price

Fixed Costs

Costs that stay constant across all production volumes

Break even point definition

The level of sales for a firm where all costs covered

• At any level above, the firm makes profit

• At any level below, the firm loses money

Break Even Point =

Total Fixed Costs /  Selling Price - Variable Cost

To determine the dollar sales volume needed to break even, first compute break-even in units and then use this formula:

(Selling Price)x(Break Even) 

PROFIT

Q(P-VC) - (FC)

PESTEL

Political - current political issues and public policy (see text)

Economic Conditions - big impact on pricing decisions

Social Concerns - big impact on pricing in some categories

Technological - consider adoption curve and product lifecycle

Environmental - consider competitive environment, international environment, and natural environment

Legal - Pricing decisions may be regulated

Most pricing is covered under

the Sherman Act, Clayton Act and Robinson-Patman Act

Price fixing

agreeing with your competitors as to what prices to offer

Deceptive pricing

advertising or promoting one price, but that price does not cover the entire purchase

In general, the following are illegal:

1. Price fixing - agreeing with your competitors as to what prices to offer

2. Deceptive pricing - advertising or promoting one price, but that price does not cover the entire purchase

3. Price discrimination that is injurious to competition

4. Granting non-proportionate promotional pricing

Some prices have psychological

“price ceilings”

Odd/Even pricing

even prices communicate more prestige than odd prices

If a product is perishable

Price it lower so it will move before it is no longer in demand

This includes fashion-oriented and seasonal products as well as products that will physically perish

Repurchase Cycle

• Put lower margins on products purchased frequently

• Put higher margins on products purchased less frequently to account for the lower consumption rate

Distinctiveness

The more distinctive a product is, the higher price it can command

Skimming Pricing

Is offering a high price early in the life cycle and lowering it as the product matures

When to SKIM PRICE

Products quality and image must support its higher price

Cost of low volume cannot be so high they cancel the advantage of charging more

Competitors should not be able to enter the market easily

Penetration Pricing

Is offering a low price early in the life cycle and increasing the price as consumers get used to the product

Penetration pricing used when

Used to discourage competition because prices will be lower than those the competitors can profitably offer

When market is price sensitive, costs must fall as volume increases, competition must be kept out

Logistics Management

Manufacturers effort

Focused on Efficiency, Cost Minimization

Engineering driven

Supply Chain Management

Collaborative effort led by Manufacturer

Focused on Competitive advantage

Marketing driven

Marketing logistics (physical distribution)

Planning, implementing and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit.

Goal of the logistics system

Deliver a targeted level of customer service at the least cost

Major logistics functions

Warehousing

Inventory management

Inventory

Logistics information management

Intermediaries

• Organizations that specialize in distribution (middlemen)

  • Merchant intermediaries take title to the product

  • They make money by adding a markup and reselling a product

  • Ex. Retailer, stock broker

Channel of Distribution

Sequence of marketing organizations involved in bringing a product from the producer to the consumer

Conventional Distribution Channel

• There is a trade between speed and cost.

  
  Loosely aligned

• Autonomous organizations

  • This means they are independent companies

• Carry out a trade relationship

  • The orgs will do business with one another as long as there is a mutually beneficial relationship

  • Conventional distribution channels are not governed by contracts, ownership, or formal agreement 

There is a trade between speed and cost

Minimum cost, minimum satisfaction

Maximum cost, maximum satisfaction

Channel Management Decisions

• Selecting channel members

• Managing and motivating channel members

  • Partner relationship management

• Evaluating channel members

Why are Intermediaries used?

They create greater efficiency in making goods available to target markets

Things are less expensive for consumers when there

ARE middlemen involved

Intermediaries have economies of scale and system efficiencies

They lead to LOWER costs for the final consumers

Channel length tends to increase INCREASE when:

Price is low

Product is durable

Product is simple

Firm has limited resources

Numerous small customers and producers

Capable intermediaries exist

Channel length tends to DECREASE when:

Price is high

Product is perishable

Product is complex

After-sale service is needed

Few large customers, few producers

Intermediaries are few or unavailable

Piggyback

Semi-truck trailers on railroad cars

Birdyback

Planes loaded with containers

Fishyback

Truck-beds on barges or ships

Exclusive Dealing

Supplier prohibited intermediaries handling its products from selling products of competing suppliers

• Illegal if it restricts competition

Exclusive Territory

Contractual relationship where only one intermediary in the area is allowed to sell a manufacturers product

• Justified if..

  • High investments is required of dealers

  • The image is critical for success

• Illegal if competition is restricted 

Tying Contracts

Require a channel intermediary or buyer to purchase lines of merchandise supplementary to the product the purchaser wishes to buy

• Usually illegal

Retailing

All the activities involved in selling goods or selling directly to final consumers for their personal, non-business use.

The different types of retailers can be classified based on:

1. The amount of service they offer

2. The breadth and depth of product lines

3. How they are organized

4. The relative prices charged

Types of Retailers:

1. Classification by the amount of service

2. Retail classifications by product line

3. Relative prices classification

Retailer Strategy

Segmentation and targeting

Store differentiation and positioning

Retail marketing mix

Retail marketing mix

Retailers cannot make meaningful decisions related to the retail marketing mix until they first define and profile their target market

Retail Trends and Developments

1. New retail forms, shortening retail life cycles, and retail convergence

2. Larger retailers

3. Showrooming is now a common practice in stores but buying them online

4. Growing importance of retail technology

5. Enviormentalism

Functions performed by wholesalers

• Selling and promoting

• Buying and assortment building

• Bulk-breaking

• Warehousing

• Transportation

• Financing

• Risk bearing

• Market information

• Management services and advice

Merchant Wholesaler

• Largest group of wholesalers (account for 50% of wholesaling)

• Sell primarily to retailers

• Provide a full range of services

Types of merchant wholesalers

General merchandise, Specialty wholesalers

Industrial Distributors

• Sell industrial products to manufacturers

• Carry stock

• Offer credit

• Provide delivery

• May carry a broad range of merchandise, a general line, or a specialty line

Brokers and agents

• Do not take title to goods

• Perform only a few functions

• Specialize by product line or customer type

Brokers

bring buyers and sellers together

Agents

represent buyers on a more permanent basis

Manufacturers sales branches and offices

Involves wholesaling by seller or buyers themselves rather than through independent wholesalers

Cash and carry wholesalers

• Carry a limited line of fast-moving goods

• Sell to small retailers for cash
  

Truck wholesalers

Perform primarily a selling and delivery function

Dropshippers

Do not carry inventory or handle the product

Rack jobbers

• Price the goods

• Keep goods fresh

• Set up point-of-purchase displays

• Keep inventory records

Producers’ cooperatives

• Farmer-owned members

• Assemble farm produce for sale in local markets

Wholesaler Strategy

Segmentation, targeting, differentiation, and positioning

Horizontal conflict

occurs among firms at the same level of the channel

Vertical conflict

occurs between different levels of the same channel

Conventional distribution channel

Consists of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole

Vertical marketing system (VMS)

A distribution channel structure in which producers, wholesalers, and retailers act as a unified system

• One channel owns the other, has contracts with them, or has so much power that they all cooperate

Corporate VMS

A vertical marketing system that combines successive stage of production and distribution under single ownership. Channel leadership is established via common ownership

Contractual VMS

A vertical marketing system in which independent levels of production/distribution join together through contracts to obtain more economies of scale than they could alone

Franchises

are a common form of contractual vertical marketing system

Marketing's Impact on Society

• False Wants

• Too much consumerism

• Cultural pollution

• Too few social goods 

Marketing's Impact on Other Businesses

• Big budgets disadvantage smaller competitors

• Marketing practices that create barriers to entry

• Unfair competitive marketing practices

Marketings Impacts on Individual Consumers:

• High prices 

• Deceptive practices

• High-pressure selling

• Shoddy, harmful, or unsafe products

• Planned and perceived obsolescence

• Poor service to disadvantaged consumers

Traditional buyers’ rights to include the right to…

1. Not buy a product that is offered for sale

2. Expect the product to be safe

3. Expect the product to perform as claimed

4. The right to be well informed about important aspects of the product

5. The right to be protected against questionable products and marketing practices

6. The right to influence products and marketing practices in ways that will improve “quality of life”

7. To consume in a way to preserve the world for future generations of consumers

Sellers Bill of Rights

• To introduce any product in any size and style–with proper warnings and controls, if necessary

• To charge any price for the product without any discrimination

• To spend any amount to promote the product if competing fairly

• To use any product message that is not misleading or dishonest

• To use buying incentive programs that are not unfair or misleading

Christian Ethics

1. Lead by example - whether you know it or not, people are watching you

2. There is a correlation between how you deal with ethical dilemmas and how effective you are as a leader and a witness for Christ

3. Faith is essential for holding to Biblical convictions regardless of the consequences

4. Stay involved in the disciplines of the faith…as your practice of Christianity sways, so will your morality

5. An ethical decision is not a last-minute decision

6. Your convictions will be tested when you are detached from the Christ-centered subculture

7. Friendships are a key part of shaping and maintaining Biblical convictions

• Stay accountable to Godly people

8. Ethical standards must be applied consistently to ALL areas of life

9. Organizational ethics may not align with Biblical ethics

10. At times God may ask you to “walk”

• Trust Him - it will work out

The Golden Rule

“Do unto others as you would have them do unto you”

The Utilitarian Principle

Do the greatest good for the greatest number of people

Kant’s Categorical Imperative

Act in such a way that the action taken under the circumstances could be a universal law or rule of behavior