Principles of Marketing final exam

Price floor

No profits below this price

Price ceiling

No demand above this price

customer value-based, cost-based, and competition-based

the three major pricing strategies include…

Customer-value based pricing

based on buyer’s perceptions of value rather than on the seller’s cost

perceptions and values

Customer-value based pricing sets its target price based on customer…

Cost-based pricing

based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

fixed costs

costs that do not vary with production of sales level

examples of fixed costs

rent, heat, and salaries

variable costs

vary directly with the level of production

fixed costs, variable costs, total costs

What are the types of costs?

Competition-based pricing

setting prices based on competitor’s strategies, costs, prices, and market offerings

Price elasticity of demand

measure of the sensitivity of demand to changes in price

inelastic demand

demand hardly changes with a small change in price

elastic demand

demand changes greatly with a small change in price

internal factors

organizational considerations, overall marketing strategy, objectives, and mix

external factors

market and demand, economy, impact on other parties in its environment

boom or recession, inflation, and interest rates

factors impacting pricing strategies…

market-skimming pricing 

setting a high price to skim maximum revenues from the segments willing to pay the high price

quality and image

Market-skimming pricing only works when the products ____________________ support the higher price and enough buyers want that product at that price

market-penetration pricing

setting a low price to attract a large number of buyers and a large market share

highly price sensitive

market-penetration pricing only works when the market is…

example of market-penetration pricing

walmart

product line pricing

setting prices across an entire product line

optional-product pricing

pricing optional or accessory products sold with the main product

captive-product pricing

pricing products that must be used with the main product

product bundle pricing

pricing bundles of products sold together

product line pricing, optional-product pricing, captive-product pricing, and product bundle pricing

the product mix pricing strategies include…

discount and allowance pricing

reducing prices to reward customer responses such as volume purchases, paying early, or promoting the product

segmented pricing

selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

psychological pricing

considers the psychology of prices and not simply the economics, such as what the price says about the product

promotional pricing

temporarily reducing prices to spur short-run sales

geographical pricing

adjusting prices to account for the geographic location of customers

dynamic pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

international pricing

adjusting prices for international markets

customer-segmented pricing, location-based pricing, and time-based pricing

forms of segmented pricing include…

examples of customer-segment pricing

student, senior, or military pricing

examples of location-based pricing

theater and stadium pricing

examples of time-based pricing

matinee and off season pricing 

reference prices

prices that buyers carry in their minds and refer to when looking at a given product

predatory pricing

selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business

example of predatory pricing

Booksellers complain the Amazon’s book pricing policies are destroying their industry

price fixing

working with competitors to set prices

illegal

price fixing is…

example of price fixing

a class action lawsuit was filed against United, Delta, Southwest, and American for conspiring to inflate air fares

Example of customer value-based pricing

a watch brand that might have only taken $200 to make, but valued at $20,000 to $50,000

example of variable costs

amount of computer chips being produced

example of market-skimming pricing

Less people are willing to pay for the dyson air wrap, but those who are will be paying a lot

Example of product line pricing

Turbo tax free, deluxe, premier

Example of optional-product pricing

cars having heated seats or automatic start

Example of captive-product pricing

Gillette sells razor handles at low prices, and charges more for the replacement blade cartridges

example of product bundle pricing

a combo meal

example of dynamic pricing

Uber

Example of psychological pricing

everything priced at 19.99 instead of 20 to give the idea of a discount

promotional pricing

If used too frequently, ______________________ can create customers who wait until brand go on sale before buying them, and, constantly reduced prices can crumble a brand’s value in the eyes of consumers

Example of frequent promotional pricing

Bed Bath and Beyond went out of business because no one went there without a coupon

retailing

all activities involved in selling goods or services directly to consumers for their personal use

shopper marketing

focusing the entire marketing process toward turning shoppers into buyers as they approach the point of sale

inside the stores

Shopper marketing is happening…

example of shopper marketing

coupons sticking out of the product

connect

Retailers ____________ brands with consumers throughout the buying process and at the point of purchase

omni-channel buyers

consumers who buy across in-store, online, and mobile

mobile-first

Consumers are increasingly _____________ shoppers

omni-channel

To be successful in today’s environment, retailers must adopt ______________ retailing that integrates in-store, online and mobile shopping

60%

Nearly __________ of shoppers research product information on their phone while shopping

restoration hardware

new stores aim to create a sense of place that is more home than store, where they want you to not only see the furniture, but also experience it

product assortment, services mix, and store atmosphere

Retailers must determine three product variables which include…

product assortments

answers the questions: what are we selling? will it be more targeted or broad?

services mix

additional services a retailer provides to support the sale and enhance customer satisfaction

store atmosphere

retailers carefully orchestrate virtually every aspect of the store experience including layout, display, music, colors, and smells

example of store atmosphere

Bloomingdales uses different essences in different departments such as coconut in the swimsuit area

target market and positioning, product and service assortment, competition, and economic factors

price policy must fit the retailers…

everyday low pricing and high-low pricing

pricing practices include…

everyday low pricing

what does EDLP stand for?

everyday low pricing

constant, everyday low prices with few sales or discount

high-low pricing

charging higher prices on an everyday basis with frequency sales and promotions to increase store traffic

place decision

locations should be accessible to the target marketing in areas that are consistent with the retailer’s positioning

example of place decision

Apple locates its stores in high-end malls and trendy shopping areas

integrated marketing communications (IMC)

carefully integrating and coordinating the company’s many communications tools to deliver a clear, consistent, and compelling message about the organization and its brands

changing consumers, changing marketing strategies, and advancements in technology

factors changing the face of today’s marketing communications include…

changing consumers

more informed and no longer have to rely on marketer supplied information, where they are easily able to connect with brands

changing marketing strategies

going from mass marketing to more narrowly defined micromarkets to be more personalized towards different people, lifestyles, locations, ect.

content marketing managers 

create, inspire, and share brand messages and conversations

set advertising objectives

The first important decision that marketing management must make when developing an advertising program is…

set the advertising budget

The second important decision that marketing management must make when developing an advertising program is…

develop advertising strategy

The third most important decision that marketing management must make when developing an advertising program is…

evaluate advertising effectiveness

The fourth most important decision that marketing management must make when developing an advertising program is…

setting advertising objectives

specific communication task to be accomplished with a specific target audience during a specific period of time

advertising objectives

_________________ answers the questions what do we want to achieve

advertising budget

________________ answers the question how much do we have to spend

advertising strategy

_______________ answers the question what do we want to say and who do we want to say it to

advertising effectiveness

_____________ answers the question how did we do

informative advertising, persuasive advertising, and reminder advertising

Potential advertising objectives include…

informative advertising 

educate consumers about a product or service

informative advertising

______________ is most common for new products

persuasive advertising

convince consumers to choose one brand over another

persuasive advertising

__________________ is more important in a highly competitive environment

reminder advertising

______________ is most important for mature products

reminder advertising

keep consumers aware and loyal to the brand

brand advertising

emotional, creates a connection, focuses on long-term brand building, and communicates personality and values

product advertising

functional, drives sales, refers to product benefits/specifics, and focuses on short-term business goals