MKTG 1030 WEEK 8

What are the pricing framework stages?

1. set objective

2. estimate demand

3. determine cost

4. analyze factor

5. determine strategy & policy

6. set price

7. offer & adjust

What are the price objectives?

• target ROI

• maximize profit

• maximize sale

• maximize market share

• maintain status quo

What is the target ROI price strategy?

• profit given assets tied in product

What is the maximize profit price strategy?

• increase revenue relative to cost

What is the maximize sale price strategy?

• increase revenue regardless of cost

What is the maximize market share price strategy?

• allow large sale share

What is the maintain status quo price strategy?

• meet competitor price

What are the pricing factors?

• value perception

• market size

• price elasticity

What is the price elasticity formula?

quantity demanded % change / price % change 

What is price elasticity?

• price change sensitivity affecting demand

What does it mean to be price elastic?

• sensitive to price change

  • buy more at low price

  • buy less at high price

What does it mean to be price inelastic?

• insensitive to price change

What affects pricing decisions?

• competitor price

• substitute availability

• regulation

What calls for lower price?

• low economy

• high unemployment

What affects international pricing decisions?

• currency exchange rate

What does price fixing involve?

• business charging same (high) price

How do laws protect small businesses?

prevent…

• large businesses from selling below cost

• predatory price

• bait and switch price

What does predatory pricing involve?

• set low price to drive competitor out

What does bait and switch pricing involve?

• seller baits with low price & switches to high price

What product costs affect pricing decisions?

• development

• test

• package

What costs affect pricing decisions?

• promotion

• distribution

• PLC stage

• storefront

What does BEP stand for?

BreakEven Point

What is the BEP formula?

FC / CU

What does FC stand for?

Fixed Cost

What does CU stand for?

Contribution per Unit

What is the contribution per unit formula?

MSP - VC

What does MSP stand for?

Market Selling Price

What does VC stand for?

Variable Cost (per unit)

What does the skimming price strategy do over time?

price goes down as competitor enters

What does EDLP stand for?

EveryDay Low Price

What is EDLP?

expected price through PLC

What are the price approaches?

• cost-plus

• markup

• markdown

• odd-even

• prestige

• price line

• leader

• loss leader

• sealed bid

• online auction

• forward auction

• reverse auction

• going rate

• bundle

• captive

• product mix

• 2-part

• payment

• promotion

• discrimination

What is the cost-plus pricing approach?

price = cost + fixed profit

What is the most common pricing approach?

• cost-plus

What is the markup pricing approach?

price = cost + variable profit

What is the markdown pricing approach?

• reduction amount

What is the odd-even pricing approach?

• few cents below next dollar

What is the prestige pricing approach?

• high price → high quality

What is the price lining approach?

• similar product group, different level

What is the leader pricing approach?

• low price → get people in store

What is the loss leader pricing approach?

• price below cost → get people in store

What pricing approach is illegal in many states?

• loss leader

What is the sealed bid pricing approach?

• designate in sealed bid

What is the online auction pricing approach?

• customers bid with seller until acceptable

What is the forward auction pricing approach?

• seller lists → buyers bid

What is the reverse auction pricing approach?

• buyer lists → sellers bid

What is the going rate pricing approach?

• same regardless of where / whom

What is the price bundling approach?

• sell different products together at lower price than separate sale

What is the captive pricing approach?

• no alternative → customer must buy replacement part

What is the product mix pricing approach?

• product & service going together

What is the 2-part pricing approach?

• 2 product charges

What is the payment pricing approach?

• incremental pay

What is the promotional pricing approach?

• short-term tactic getting people to purchase more

What factors should be looked at before setting prices, in addition to setting an objective?

• customer

• demand

• external environment

• other marketing mix aspects

What are the external environment factors?

• competition

• economy

• regulation

• cost

What are the other marketing mix aspects that should be looked at before setting prices?

• nature

• PLC stage

• promotion

• distribution

What is the only marketing variable generating money?

• price

What is the easiest marketing variable to change?

• price

What is the easiest marketing variable to copy?

• price

True or False: Price by itself provides a sustainable competitive advantage.

False: Price by itself doesn’t provide a sustainable competitive advantage.

What do salespeople do?

• create value

• manage relationships

• relay info

• act on customer behalf

What are salespeople's’responsibilities?

• fiduciary

• ethical

What is the bulk of salespeople’s employer value?

selling

When are salespeople the best channel to reach customers?

• adaptation

• customer education

What is a boundary spanner?

• operate outside firm / field boundary

What do firms use for customer data entry & retrieval?

CRM

What are the four basic salespeople types?

• missionary

• trade

• prospector

• account manager

What are the three salespeople types?

• order getter

• order taker

• sale support

Which of the three salespeople type do the four basic salespeople types fall under?

• order getter

What is an order getter?

• actively solicit purchase

What is an order taker?

• field request

What is a sale support?

• help sale staff

  • price

  • proposal

What is a missionary salesperson?

• one calling people making decision but not buying product

True or False: Missionary salespeople form B2C relationships.

False: Missionary salespeople form B2B relationships.

What is a trade salesperson?

• one calling retailers helping them display / advertise / sell

What is a prospector?

• salesperson finding prospect

True or False: Prospectors might be responsible for closing sales.

False: Prospectors might be responsible for closing or turning over sales.

What is an account manager?

• salesperson identifying lead & ongoing customer

What are the selling strategies?

• script-based / canned

• need satisfaction

• consultative

• strategic partner

What is the script-based / canned selling strategy?

• memorize & deliver pitch

What is the need satisfaction selling strategy?

• identify problem & need → tailor pitch

What is the consultative selling strategy?

• complex problem — special expertise → customized solution

What is the strategic-partner selling strategy?

• parties invest resources & share expertise → joint growth solutions

What does the selling strategy appropriateness depend on?

• how much buyer wants

• what info buyer needs

What are the typical sales process stages?

• (pre-)approach & plan

• need identification

• presentation

• objection handle

• close

• implementation & service

What are some pre-approach & planning resources?

• LinkedIn

• Google

• finance database

• internal data

What do salespeople try to do in the first sales process stage?

• convince buyer to explore possibility

What does SPIN stand for?

Standard questions Problem questions Implications Need-payoff

What are SPIN questions’ use?

• fully understand how problem creates need

True or False: In simple situations, salespeople use SPIN questions to identify needs.

False: In simple situations, salespeople list needs as they describe solutions.

What does the presentation stage involve?

• show offering satisfying identified need

What does FEBA stand for?

Feature Evidence Benefit Agreement

What does the objection stage involve?

find out if objection = …

• misunderstanding

• hidden need

What are the close types?

• direct request

• minor point

• summary

What is the sales cycle?

Sale < Prospect < Suspect < Lead

Why is the sales cycle a funnel?

not all people = buyer

What does BANT stand for?

Budget Authority Need Time

Who are prospects?

• one with BANT to buy if salesperson sells soon

What are the buyer & seller relationship types?

• transactional

• functional

• affiliative

• strategic

Why is critical thinking important in price & sales?

• don’t rely on assumption or one-size strategy

• analyze factors to make smart decision

  • consumer behaviour

  • market trend

  • competition

  • psychology