Mississippi College MKT 381 Price Final Exam

price

is that which is given up in exchange to acquire a good or service.

value

consumer's perceived benefits to the price it costs.

profit oriented objective

Emphasis is on profit maximization or achieving a specific target return on investment.

volumed oriented objective

emphasis is on achieving a set market share or unit sales volume.

status quo

emphasis is on maintaining existing prices or keeping prices in line with competitors' prices.

Assume a farmer is the only one selling certified organic produce in the area. He wants to set prices so that he achieves a target return on investment of 25%. What is the pricing objective? How will this objective impact his prices?

profit oriented objective

Say another farmer has 70% of the local organic produce market in revenue. Her goal is to increase market share to 80%. What is the pricing objective? How will this objective impact prices?

volume oriented objective

Now assume another farmer is very conservative and doesn't want to start a price war with competitors. He sends an employee out to monitor prices of other farmers. What is the pricing objective? How will this impact his prices?

status quo

demand schedule

a table that shows the quantity demanded of a good or service at different price levels.

demand curve

a graph that shows the relationship between the price of a good or service and the quantity demanded within a specified time frame.

price elasticity of demand

consumers' responsiveness or sensitivity to changes in price.

elastic demand

an increase or a decrease in price will significantly affect demand.

inelastic demand

an increase or a decrease in price will not significantly affect demand.

Calculate coefficient for price elasticity of demand

1. % change in quantity/ % change in price

2. (Change in quantity / (Sum of quantities/2))

/(Change in price /(Sum of prices/2))

Elasticity (E)

If E>1, demand is elastic.

If E<1 demand is inelastic.

If E=1, demand is unitary.

How does elastic demand affect revenue?

1. If the price goes down and revenue goes up, demand is elastic.

2.If price goes up and revenue goes down, demand is elastic.

How does inelastic demand affect revenue?

1. If price goes down and revenue goes down, demand is inelastic.

2. If price goes up and revenue goes up, demand is inelastic.

fixed cost

does not change as level of output changes.

variable cost

varies with changes in level of output

total cost

the sum of fixed cost and variable costs.

break-even point

the number of units (or quantity) of product that must be sold at a given price in order to break even.

formula for break-even

break even quantity = total fixed cost/price-variable cost

break-even analysis

a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.

Be able to set up the chart for breakeven.

variable cost, fixed cost, total cost, total revenue.

markup pricing

the most popular method used by wholesalers and retailers to establish a selling price.

selling price

= cost of buying + expenses + profit

(S= C + E + P)

when markup is stated as a percentage of cost (based plainly on cost)

selling price= cost + markup %

when markup is stated as a percent of retail

selling price= cost/1-markup %

quantity discounts

discounts offered to encourage customers to buy in larger quantities or to remain loyal customers.

cumulative quantity discount

applies to the total bought over a period of time.

non-cumulative quantity discount

applies to each purchase and is intended to encourage buyers to make larger purchases.

cash discounts

reduction in list price that rewards customers for paying their bills promptly.

2/10, net 30

a trade credit often offered by suppliers to buyers. It represents an agreement that the buyer will receive a 2% discount on the net invoice amount if they pay within 10 days. Otherwise, the full invoice amount is due within 30 days.

seasonal discounts

a price reduction for buying merchandise out of season.

geographic pricing

establishes when ownership of the freight transfers from the seller to the buyer.

FOB origin

title to the goods passes to the buyer at the point of loading shipment onto the mode of transportation.

FOB destination

title to the goods passes to the buyer once the shipment is delivered to the buyer.

odd-evening pricing

price tactic that uses odd-numbered prices to connote bargains and even-number prices to imply quality.

loss leader pricing

a price tactic in which a product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store.

price bundling

marketing two or more products in a single package for a special price

prestige pricing

when a purchase involves uncertainty, consumers tend to rely on high price as an indicator of quality.

price fixing

an agreement between two or more firms on the price they will charge for a product; illegal under the Sherman Act and the Federal Trade Commision Act.

price discrimination

Robinson-Patman Act prohibits firms for charging different prices to different buyers when customers are buying the same product in terms of grade and quality

- applies to business-to-business transactions, not business to consumer

-tangible goods

predatory pricing

practive of charging a very low price for a product with the intent of driving competitors out of business; raises prices once driven out.

-illegal under the Sherman Act the Federal Trade Commission Act

-must be below cost in order to be predatory

Deceptive pricing

price that misleads consumers; outlawed by Federal Trade Commission Act

Bait and switch

when a firm offers a very low price on a product to attract customers, but once the customer is there the seller tries to switch the customer to another more high-priced product; might downgrade promoted product or say they don't have it in stock.

former price comparisons

occurs when a seller represents a price as reduced when it is not; must have been offered in good faith at a higher price for a substantial previous period; deceptive!

promotion

communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence an opinion or elicit a response

promotional mix

1. advertising

2. public relations

3. sales promotion

4. personal selling

5. social media

integrated marketing communications

designing marketing communications programs that coordinate all promotional activities to provide a consistent message across all audiences.

advertising

impersonal, one-way communication about a product or organization that is paid for by a marketer.

sales promotion

short term incentives used to arouse interest in buying a good service.

personal selling

direct interaction between a company representative and a customer than can occur in person, by phone, or even over an interactive computer link.

social media

promotion tools used to facilitate conversations among people online.

public relations

describes a variety of communication activities that seek to create and maintain a positive image of an organization and its products among various publics, including customers, government officials, and shareholders.

communication process

1. sender

2. encoding the message

3. message channel

4.decoding the message

5. receiver

(also noise and feedback channel)

sender

the originator of the message in the communication process; marketing manager, advertising manager, other consumers

encoding the message

the conversation of the sender's ideas and thoughts into a message; ex. ads, sales presentations, store display, coupon, press release social media

message channel

transmission of the message; like media, salesperson, retail store, local news show

decoding the message

receiver interpretation of message, language, and symbols sent by the source through a channel.

receiver

the person who decodes the message; ex. customers, viewers/listeners, news media, clients

noise

anything that interferes with, distorts, or slows down the transmission of information; ex. other ads, news articles, other store displays.

feedback channel

the receiver's response to a message; ex. market research, sales results, change in market share, social media.

3 primary goals of promotion

inform, persuade, remind.

informative promotion

increase awareness, explain how product works, suggest new uses, build company image.

persuasive promotion

encourage brand switching, change customers' perceptions of product attributes, influence immediate buying decision, persuade customers to call.

reminder promotion

remind customers that product may be needed, remind customers where to buy product, maintain customer awareness.

advertising campaign

a series of related advertisements focusing on a common theme, slogan, and set of advertising appeals that promotes a particular product or company for a define period of time.

major components of the advertising campaign

review the marketing plan, specify advertising objectives, develop the creative plan, and develop the media plan.

review the marketing plan

identify your target market and how your product or service can benefit it. identify how you might attract new customers. encourage your existing customers to continue purchasing your product or service.

specifying advertising objectives

identify the specific communication tasks that a campaign should accomplish for a specified target audience during a specified time period.

develop the creative plan

identifying product benefits, select the execution style, and create the ad executions.

slice of life

mini drama; with problem and product is the hero of the problem

testimonials

individuals talk about their personal experience with the product

personality/product symbol

characters/symbols/personalities in which the product is built around

imagery

don't provide a lot of detailed information, but try to associate images with product (ex. perfume commercials)

demonstration

show you how to use their product

straight sell

spokesperson speaking directly to audience; delivering the facts.

comparison

comparing our brand to another competitive brands (sometimes names competitor brands)

fear appeal

showing the negative consequences of not using the product (ex. drug commercials).

humorous

using humor to attract customers, associate good feelings with the brand.

develop the media plan

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develop the ad executions

copy, layout, storyboard, script

copy

writing the words of the ad

art (or design)

visual aspects of the ad; communicated through the layout, script, or storyboard

major advertising media

newspapers, magazines, radio, television, outdoor media, internet.

geographic selectivity

ability of medium to zero in on a specific geographic area

demographic selectively

ability of medium to zero in on a specific demographic.

target market media usage

select media that target market uses

cost

don't look at plain cost by CPM (cost per thousand)

life

how long the ad lives

nature of message

depending on nature of ad will determine what medium to use

lead time

how far in advance to get advertising contract up before publication/air date.

paid search advertising

usually refers to advertising on search engines, sometimes called PPC advertising. The advertiser pays only for each click of the advert.

organic results

not paid for

keywords

what advertisers predict consumers will type; the users search terms.

know the factors that impact the ad position of a paid search ad on the SERP.

how much bid for keyword in auction; quality of ad.

sales promotion

short term incentives used to arouse interest in buying a good or service.

consumer sales promotion

sales promotion activities targeting the ultimate consumer (pull sales).

trade sales promotion

sales promotion activities targeting a marketing channel member, such as a wholesaler or retailer (push sales).