final marketing exam

Buyers

people in an organization's buying center who make an actual purchase

The Importance of Price to Buyers

consumers consistently rank price as one of the most important variables driving purchase decisions

Revenue

The price charged to

customers multiplied by the

number of units sold.

Profit

Revenue minus expenses.

Price

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

profit oriented

pricing strategy focused on profits

sales oriented

Companies emphasized widespread distribution and promotion in order to sell products and services

status quo pricing

a pricing objective that maintains existing prices or meets the competition's prices

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

demand curve

a graph of the relationship between the price of a good and the quantity demanded

price elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price

inelastic demand

A situation in which an increase or a decrease in price will not significantly affect demand for the product

elastic demand

A situation in which consumer demand is sensitive to changes in price

break even analysis

a method of determining what sales volume must be reached before total revenue equals total costs

fixed cost

a cost that does not change, no matter how much of a good is produced

variable cost

a cost that rises or falls depending on how much is produced

total cost

fixed costs plus variable costs

markup pricing

the cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise accounted for

list price

The retail price listed in a catalog or on an Internet site

quantity discount

a price reduction offered to buyers buying in multiple units or above a specified dollar amount

seasonal discounts

discounts offered to encourage buyers to buy earlier than present demand requires

cash discounts

reductions in price to encourage buyers to pay their bills quickly

odd-even pricing

setting prices a few dollars or cents under an even number

loss leader pricing

the pricing policy of setting prices very low or even below cost to attract customers into a store

What is Customer Value?

the relationship between benefits and the sacrifice necessary to obtain those benefits

What is Demand?

the quantity of

product that will be sold in the market at

various prices for a specified period.

determines the upper limits or

ceiling of the selling price.

unitary elasticity

a situation in which total revenue remains the same when prices change

elasticity of demand formula

percentage change in quantity demanded/percentage change in price

What are Costs?

the production and

marketing costs associated with selling

a product.

determine the lower limit or floor

of the selling price.

Break-Even Point

the point at which the costs of producing a product equal the revenue made from selling the product

Formulas for Calculating

Selling Price with Markup

When markup is stated as a percent of cost:

Selling Price = Cost + Markup% (Cost)

When markup is stated as a percent of retail:

Selling Price = Cost__

1 - Markup %

Trade discounts

A reduction from the

base or list price offered to channel

members.

Net Price

The remainder when the

amount of discount is subtracted from

the base or list price.

Pricing Terminology

-at-the-money

-in-the-money

-out-of-the-money

-deep in-the-money

-deep out-of-the-money

P&G offered a 5% reduction in the list

price of Pantene Shampoo to Walmart.

This is an example of a:

Trade Discount

Cumulative Quantity Discount

uses the amount purchased over a specified time period and usually involves several transactions

Noncumulative Quantity Discount

a deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period

Geographic Pricing

The setting of different prices depending on a geographical division of the delivery areas.

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

Price Bundling

the practice of offering two or more different products or services for sale at one price

Prestige Pricing

charging a high price to help promote a high-quality image

Deceptive Pricing

occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers

Predatory Pricing

The practice of charging very low

prices for products with the intent of

driving competitors out of business.

price fixing

An agreement between two

or more firms on the price they

will charge for a product.

Price Discrimination

Occurs when a seller knowingly charges

different prices to competitive resellers

or industrial buyers of commodities of

like grade and quality when the effect

may be to injure competition.

The Robinson-Patman Act of 1936

Prohibits any form of price discrimination that has the effect of reducing competition among wholesalers or retailers

Five Most Common Deceptive Pricing Practices

1. bait and switch

2. bargains conditional on other purchases

3. comparable value comparisons

4. comparisons with suggested prices

5. former price comparisons

bait and switch

A store advertises bargains that do not really exist to lure customers in, in hopes that they will buy more expensive merchandise.

bargains conditional on other purchases

This practice may exist when a buyer is offered "1-Cent Sales," "Buy 1, Get 1 Free," and "Get 2 for the Price of 1." Such pricing is legal only if the first items are sold at the regular price, not a price inflated for the offer. Substituting lower quality items on either the first or second purchase is also considered deceptive.

comparable value comparisons

Advertising such as "Retail Value $100.00, Our Price $85.00" is deceptive if a verified and substantial number of stores in the market area do not price the item at $100.

comparisons with suggested prices

a claim that a price is below a manufacturer's suggested or list price may be deceptive if few or no sales occur at that price in a retailer's market area

former price comparisons

When a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period. Setting a high price for the purpose of establishing a reference for a price reduction is deceptive

You just opened a specialty lemonade stand/kiosk in the local mall. You wish to identify how many cups of lemonade you must sell to cover your fixed cost and break-even. Customers are willing to pay $3 per cup. Fixed cost equal $2,000 per month for rent, insurance, advertising and loan payment. The unit variable cost is $2 per cup for labor, ingredients, and supplies. Compute total variable cost, fixed cost, total cost, total revenue, and profit at the following quantity levels (0, 1000, 2000, 3000, 4000). What is the breakeven point?

Selling price per cup: $3

Fixed costs: $2000

Variable cost per cup: $2

Quantity levels: 0, 1000, 2000, 3000, 4000

2000 units

Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand?

Initial price: $3 per box, Initial quantity: 10 boxes, New price: $3.75 per box, and New quantity: 8 boxes.

0.8

The cost to the manufacturer to produce the product is $80. It marks up the price by 40% to sell to the wholesaler. The wholesaler then marks up the price another 10% to sell to the retailer. The retailer adds a 50% mark-up to arrive at the price charged to the consumer. What is the price paid by the wholesaler, retailer, and consumer if the markup up percentages are based on cost?

Manufacturer's cost: $80, Manufacturer's markup: 40, Wholesaler's markup: 10, and Retailer's markup: 50.

wholesaler: $112

Consumer: $184

Retailer: $123.20

Compute the missing value (cost or selling price) for the following:

(a) Cost of an item is $48; markup is 40%. What is the selling price if markup is based on cost? What is the selling price if markup is based on retail?

(b) The selling price of the item is $24; markup is 300%. What is the cost of the item if markup is based on cost?

(c) The retailer's selling price of the item is $168; the desired markup is 40% on retail. What should the retailer be willing to pay the vendor?

A: Cost of item: $48

Markup: 40%

B: Selling Price: $24

Markup: 300%

C: Selling Price: $168

Markup: 40%

A: $67.20 and $80

B: $6

C: $100

An invoice for $1,230 is dated July 16 with terms, 2/10, net 30. What is the amount due if the invoice is paid on July 26?

$1230

Promotion

Communication by marketers that informs,

persuades, and reminds potential buyers

of a product in order to influence an

opinion or elicit a response.

Five Promotional Elements

1. Advertising

2. Personal Selling

3. Public Relations

4. Sales Promotion

5. Direct Marketing

Advertising

Impersonal, one-way

communication about a

product or organization that is

paid for by a marketer.

Personal Selling

Direct interaction between a

company representative and a

customer that can occur in

person, by phone, or even over

an interactive computer link.

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

Sales Promotion

Short term incentives

used to arouse interest in

buying a good or service

Direct Marketing

direct communication between a seller and an individual customer using a promotion method other than face-to-face personal selling

What are the three goals of promotion?

inform, persuade, remind

elements of the communication process

sender, encoding, message, media, decoding, receiver, response, feedback, noise

What is Integrated Marketing Communications?

Coordination of promotion and marketing efforts for maximum impact

Role of Promotion in the Marketing Mix

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

The Promotional Mix

the combination of promotional tools—including advertising, public relations, personal selling, sales promotion, and social media—used to reach the target market and fulfill the organization's overall goals

Advertising Media

the vehicles through which advertising messages are delivered to their intended audiences

Traditional Advertising Media

Television

Radio

Newspapers

Magazines

Books

Direct mail

Billboards

Transit cards

new advertising media

internet, banner ads, viral marketing, email, interactive video

Public Relations Tools

news, special events, written materials, audiovisual materials, corporate identity materials, public service activities

social media

Promotion tools used to

facilitate conversations

among people online

Hannah is responsible for developing a

plan for the optimal use of advertising,

personal selling, sales promotion, and

public relations. Hannah is developing

a(n):

promotional plan

3 multiple choice options

Sender

the originator of the message in

the communication process

- For an advertisement, press release, or social media campaign, the company or organization is the sender

Encoding

the conversion of the sender's

ideas and thoughts into a message,

usually in the form of words or signs

Channel

a medium of communication—such as a voice,

radio, or newspaper—for transmitting a message

Noise

anything that interferes with, distorts, or slows

down the transmission of information

Receiver

the person who decode the message

Decoding

interpretation of the language and symbols

sent by the source through a channel

Feedback

The receiver's response to a message

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

This promotion task is used to keep a familiar brand name in the public's mind and is prevalent during the maturity stage of the product life cycle

Reminder

In the communications process, this occurs when the receiver interprets the language and symbols used by the sender.

Decoding

This is defined as the communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence an opinion or elicit a response.

Promotion

This is defined as the originator of the message in the communication process.

sender

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

False

1 multiple choice option

What are the three basic tasks of promotion?

informing, persuading, reminding

Campbell's soup has been promoted with television commercials, radio spots, newspaper coupons, and magazine advertisements. In the communications process these media served as ______ during the communication process.

channels

Social media include all of the following EXCEPT:

a pop-up ad on the ESPN Web site

3 multiple choice options

A $1-off coupon for a bottle of dish washing liquid is a form of:

sales promotion.

Advertising

Impersonal, one-way mass

communication about a

product or organization that is

paid for by a marketer.

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 defined period of time.

Major Components of the Advertising Campaign

Review marketing plan, specify advertising objectives, develop creative plan, and develop media plan

Why is it important to review

the marketing plan before

developing the advertising

campaign?

it ensures the campaign aligns with overall marketing goals, targets the right audience, and utilizes resources effectively.

Marketing Plan

a written document that acts as a guidebook of marketing activities for the marketing manager

Specify Advertising Objectives

helps advertises w/ other choices such as selcting media/evaluating campaign.

• Awareness?

• Trial?

What are advertising

objectives and how are they

determined?

specific, measurable goals that a business aims to achieve through its advertising campaigns.