Untitled Flashcards Set

Pricing Strategies

• Lecture Date: October 22, 2024

• Key Concepts: Different pricing strategies such as cost-based, value-based, penetration, and skimming.

Cost based: Focus on how businesses add a markup to production costs. 

Study Tip: This strategy involves setting prices based on the cost of production plus a markup.

Application: Companies using this strategy add a standard markup to their cost of production. For example, a manufacturer producing goods might calculate the cost of raw materials, labor, and overhead and then add a profit margin. This is a straightforward pricing method but may not always optimize profitability, especially in competitive or value-driven markets.

Value-Based Pricing: Review how businesses set prices based on perceived customer value.

Study Tip: This strategy sets prices based on the perceived value of the product to the consumer, rather than just the cost of production.

Application: Companies in luxury or high-value markets often use value-based pricing to align with customer perceptions of quality and exclusivity. A luxury car brand may set a high price for their product not because it costs more to make, but because customers perceive the brand's value as high.

Penetration Pricing: Understand the strategy of setting low prices to quickly gain market share in competitive markets.

Study Tip: Penetration pricing helps a company quickly gain market share in competitive markets by setting initial prices low to attract customers.

Application: This strategy is most effective in saturated or competitive markets where establishing a customer base is essential. For example, a new streaming service might use penetration pricing by offering low-cost subscriptions to entice users to try their service, gaining market share from established competitors.

Skimming: Focus on high initial pricing to capture early adopters before lowering prices.

Study Tip: Skimming is about setting high prices initially to capture early adopters, then lowering the price over time.

Application: This strategy is effective for tech gadgets or innovative products, where early adopters are willing to pay a premium for the latest technology. A company releasing a new smartphone might price it high initially and then lower it as competitors release similar products or as the product matures in the market.

Psychological Pricing: Explore how setting prices just below whole numbers (e.g., $9.99) makes products seem more affordable.

Study Tip: This strategy involves pricing items just below whole numbers (e.g., $9.99 instead of $10) to create a perception of affordability.

Application: Many retailers use odd-even pricing to make products appear more affordable. For instance, a clothing store might price an item at $19.99 to make it seem less expensive than $20, even though the difference is minimal.

Loss Leader Pricing: Understand how selling below cost can attract customers to purchase additional items.

Study Tip: This strategy involves selling products below cost to draw in customers, hoping they will make additional purchases.

Application: Supermarkets often use loss leader pricing by offering heavily discounted or even below-cost items (like bread or milk) to attract customers. Once in the store, customers may buy other, higher-margin products, increasing the retailer's overall profit.

Price Elasticity: Study how demand responds to price changes and the factors influencing elasticity.

Study Tip: Review how demand responds to price changes, distinguishing between elastic (sensitive to price changes) and inelastic (not sensitive) products.

Application: Products with elastic demand, like fast food or clothing, will see a large drop in sales if prices increase, while products with inelastic demand, like medicine, will have relatively stable demand even if prices rise.

Reference Pricing: Focus on how comparing current prices to past prices can enhance perceived value.

Study Tip: Retailers often compare current prices with past prices to create a sense of value.

Application: A store might display a product with its original price next to a sale price, showing a discount. This tactic, often seen during sales, helps customers feel they are getting a good deal based on the reference point of the original price.

Market-Based Pricing: Emphasize how pricing is influenced by market conditions and competitors.

Study Tip: Prices are set based on competitor prices and market conditions.

Application: In highly competitive industries, companies often use market-based pricing. For instance, airlines and hotels frequently adjust prices based on what competitors charge, ensuring their offerings remain attractive while staying in line with industry standards.

• Study Tip: Review when and why companies might choose each strategy, especially focusing on how penetration pricing aids in quickly gaining market share in competitive markets.

Startup Fundraising Stages 

• Lecture Date: October 31, 2024

• Key Concepts: Differences between pre-seed, seed, Series A, and other fundraising stages.

Pre-seed: 

Definition: The pre-seed stage is the earliest phase of funding, often referred to as the "idea" stage. At this point, the company is usually just an idea or prototype, and the team may still be in the process of validating the market need or refining their product.

Investor Expectations:

• Investors at this stage are typically looking for a passionate, dedicated founding team with a clear vision and problem to solve.

• They may not expect significant traction but are interested in the potential of the idea and the founders’ ability to execute.

• Pre-seed investors may include friends and family, angel investors, or early-stage venture capitalists.

Definition: The seed stage is typically the first formal round of venture capital financing. Companies in this stage have moved beyond the idea phase and usually have an MVP, and some early signs of product-market fit (such as initial users or customers).

Investor Expectations:

• Investors want to see early traction, such as user growth, customer feedback, or product engagement.

• They will look at the business model, scalability, and potential to capture a significant market.

• They expect the company to use the seed funds to refine the product, conduct customer acquisition, and grow its user base.

Definition: Series A is a critical funding round that typically occurs after a startup has demonstrated significant product-market fit, some level of customer traction, and early revenue. This stage helps the company scale its operations and expand to new markets.

Investor Expectations:

• Investors expect strong evidence of a scalable business model and clear signs of traction (user base, revenue, or engagement metrics).

• They will assess how efficiently the startup is growing and whether it has a clear path to profitability.

• Investors are looking for a strong leadership team that can manage the company’s next phase of growth.

Definition: These rounds come after Series A and are aimed at companies that are already growing rapidly and need more capital to expand further. By the time a company reaches Series B, it has demonstrated product-market fit, and the focus shifts to scaling operations, increasing market share, and often entering new markets or geographies.

Investor Expectations:

• Series B investors expect significant growth in users, revenue, and possibly even profits.

• By Series C, investors are looking for clear indications of market dominance, the ability to fend off competition, and the potential for long-term sustainability.

• Study Tip: Focus on investor expectations and company requirements at each stage, especially understanding the purpose of the seed round for growth and customer acquisition. (sana ai)

Seven P's of Marketing

• Lecture Date: October 17, 2024

• Key Concepts: Product, Price, Place, Promotion, People, Process, and Physical Evidence.

Product: Definition: The goods or services offered by a business to satisfy customer needs and wants. It can be a physical item, a service, or a digital product.

Key Considerations: Product design, quality, features, branding, packaging, and lifecycle management. A product needs to deliver value to the consumer and fulfill their needs.

Price: Definition: The amount of money customers must pay to acquire the product or service. Pricing strategies can vary based on factors like competition, perceived value, and cost structure.

Key Considerations: Competitive pricing, discounts, pricing models (e.g., subscription, one-time purchase), and payment options. Pricing must reflect the product’s value and appeal to the target market.

Place: Definition: The distribution channels through which the product or service reaches the customer. This encompasses the logistics and strategies used to get the product into the hands of consumers.

Key Considerations: Delivery systems (how products are delivered to customers), distribution channels (online, retail, wholesalers, or direct sales), and the logistics of getting products from the manufacturer to the end consumer.

• Study Tip for "Place": Emphasize the importance of logistics in the distribution process. This includes understanding how delivery systems work (e.g., shipping, warehouses, last-mile delivery) and selecting the right distribution channels to reach your target market. For example, online stores might require partnerships with delivery services, while physical stores might need a supply chain strategy involving wholesalers and retailers.

Promotion: Definition: The activities and communication used to inform, persuade, and remind customers about the product. It includes advertising, sales promotions, public relations, and personal selling.

Key Considerations: Promotional strategies such as social media marketing, influencer collaborations, discounts, and events. It’s about creating awareness and encouraging the purchase of the product.

People: Definition: The individuals involved in the marketing and service process, including employees, customers, and stakeholders.

Key Considerations: Customer service, employee interactions, and the role of the customer in co-creating the product experience. People play a major role in creating relationships and delivering the promise of the product or service.

Process: Definition: The procedures, mechanisms, and flow of activities that ensure the product is delivered to customers in a smooth, efficient, and consistent manner.

Key Considerations: The buying process (e.g., how easy it is for customers to purchase), service processes (how services are delivered), and operational efficiency. A smooth, well-designed process enhances customer satisfaction and loyalty.

Physical evidence: Definition: The tangible aspects that help customers evaluate the service or product, often important for service-based businesses.

Key Considerations: This can include the store layout, brochures, packaging, branding, or the look and feel of the website. Physical evidence helps reinforce the brand and assures customers of the quality of the product or service.

• Study Tip: Emphasize the logistics of "Place" in distributing products, including delivery systems and channels.

CRVA Model

• Lecture Date: September 10, 2024

• Key Concepts: Connection, Reason, Value, Ask (CRVA) for networking.

CRVA Model Breakdown:

• Connection

  • Definition: This is the initial step where you establish rapport or make contact with someone in your network. It's about creating a relationship and finding common ground.

  • Key Considerations: Building a connection may include introducing yourself, finding mutual interests, or simply starting a conversation. It’s about breaking the ice and establishing a relationship.

• Purpose in Networking: You need to make a positive impression to start building trust and openness with the person you're networking with. It’s the foundation for the rest of the interaction.

• Reason

  • Definition: This is where you clearly state your intentions for reaching out or connecting with the person. Why are you networking with them? What is the purpose of the relationship?

  • Key Considerations: Your reason might be to gain advice, collaborate on a project, explore job opportunities, or simply learn more about their expertise.

• Purpose in Networking: The Reason clarifies your intentions and sets the tone for the interaction. It helps the other person understand why you're reaching out and what you're hoping to achieve, which can lead to more productive conversations. It's important to be transparent about why you're connecting to avoid misunderstandings and ensure both parties are aligned.
  Study Tip for "Reason": Focus on being clear, concise, and genuine about why you're reaching out to someone. Whether you’re seeking advice or exploring collaboration, knowing your reason will help guide the conversation and build trust with the other person. For example, if you're looking to gain insight into their industry experience, state that directly. The clearer you are about your intent, the more likely the person will be willing to engage.

• Value

  • Definition: After explaining your reason, it's important to offer something of value to the other person. What can you contribute or bring to the relationship that benefits them as well?

  • Key Considerations: This could include offering help, sharing relevant information, or providing a different perspective that might be useful to them.

• Purpose in Networking: Offering value is key to building a mutually beneficial relationship. Networking isn’t just about taking; it’s about creating win-win situations. When you show that you're willing to give as much as you hope to gain, the relationship becomes more genuine and long-lasting.

• Ask

  • Definition: This is where you make a clear and respectful request based on your reason for reaching out. This could be asking for a meeting, advice, an introduction, or feedback.

  • Key Considerations: The ask should be specific and achievable. It should reflect the intention you outlined in the "Reason" section and be aligned with the value you've offered.

• Purpose in Networking: The Ask is the action part of the networking process. It allows you to move from building rapport and offering value to taking concrete steps that will help advance your objectives. However, it's important to make the ask clear, respectful, and not too demanding.

• Study Tip: Review the purpose of each part of the CRVA model, particularly how "Reason" clarifies your intentions in professional relationships.

Business Sales Contracts

• Lecture Date: September 2, 2024

• Key Concepts: Key clauses like non-competition and arbitration in sales contracts.

Non-Competition Clause

• Definition: A non-competition clause restricts the seller from starting or engaging in a similar business that competes with the buyer’s business for a specified period of time and within a defined geographic area, after the sale.

• Purpose: The goal is to protect the buyer by ensuring that the seller does not immediately start a competing business that could undermine the value of the business the buyer just acquired.

• Study Tip: Understand how a non-competition clause protects the buyer. By preventing the seller from competing in the same market or offering similar products/services, the buyer can safeguard their investment. Without this clause, the seller could potentially take customers, employees, or proprietary knowledge to a new competing venture, which could damage the Arbitration Clause

• Definition: An arbitration clause requires both parties to resolve any disputes that arise from the contract through arbitration rather than litigation in court.

• Purpose: The aim of this clause is to provide a quicker, more cost-effective, and confidential method for resolving disputes. Arbitration typically involves a neutral third party (an arbitrator) who makes a binding decision.

• business’s success post-sale.

• Study Tip: Understand how a non-competition clause protects a buyer by restricting the seller from competing post-sale.

CRM in Business

• Key Concepts: The role of CRM systems in managing client relationships and tracking interactions.

• Study Tip: Focus on CRM’s importance in maintaining client engagement and improving business and marketing efficiency.

Key Concepts of CRM in Business:

1. Customer Relationship Management (CRM) Systems:

   • CRM systems are tools used by businesses to manage interactions with current and potential clients. They collect and organize customer data, track communications, and help companies deliver better customer service.

2. Managing Client Relationships:

   • CRM systems help businesses track and manage all interactions with customers, providing a 360-degree view of each client. This enables businesses to understand client needs and behaviors, improving relationship-building efforts.

3. Tracking Interactions:

   • CRM systems allow businesses to record and analyze every interaction with clients, including emails, phone calls, meetings, and social media contacts. This helps ensure that businesses respond effectively and consistently.

4. Customer Segmentation:

   • CRM systems can segment clients based on different factors like purchasing behavior, demographics, or engagement history. This allows businesses to tailor their marketing and sales strategies to specific groups for better results.

5. Sales and Marketing Efficiency:

   • By tracking customer data, CRM systems help streamline sales processes, allowing businesses to automate routine tasks, identify sales opportunities, and personalize marketing efforts.

6. Customer Retention and Engagement:

   • CRM systems are integral in maintaining long-term customer relationships. They allow businesses to send personalized offers, reminders, and engagement messages, helping to keep clients loyal and engaged.

7. Data-Driven Insights:

   • CRM systems provide valuable insights and analytics based on customer data. Businesses can analyze purchasing trends, identify potential problems, and measure customer satisfaction to improve products and services.

Study Tip:

Focus on CRM’s importance in maintaining client engagement and improving business and marketing efficiency. CRM systems help businesses stay in touch with customers, providing tools for personalized communication, addressing concerns, and identifying opportunities to foster stronger relationships. By using CRM effectively, businesses can optimize their marketing strategies and improve overall efficiency in both client management and sales processes.

Augmented Reality in Marketing

• Key Concepts: AR's role in virtual business showcases.

• Study Tip: Recognize how AR enhances buyer engagement by allowing virtual interaction with business operations.

Key Concepts of Augmented Reality (AR) in Marketing:

1. Augmented Reality (AR) in Marketing:

   • AR technology overlays digital content (images, videos, sounds) onto the real world, viewed through devices like smartphones, tablets, or AR glasses. In marketing, AR enhances the consumer experience by merging the virtual and physical worlds.

2. Virtual Business Showcases:

   • AR allows businesses to create virtual experiences for consumers to interact with products or services. For example, customers can visualize how a piece of furniture will look in their living room or try on clothes virtually using AR apps.

3. Enhanced Customer Engagement:

   • By using AR, businesses can provide immersive and interactive experiences that engage customers more deeply. This leads to increased interest in products and services and helps in creating memorable brand experiences.

4. Product Visualization:

   • AR helps customers visualize products in real-world settings before making a purchase decision. For instance, makeup brands allow users to try different makeup shades virtually, while furniture stores let customers view how furniture fits into their space.

5. Interactive Advertising:

   • AR can transform traditional advertisements into interactive experiences. For example, customers can point their phones at a print ad to trigger a video or interactive content, increasing engagement and attention.

6. Increased Consumer Confidence:

   • AR provides a hands-on way for customers to experience a product virtually, which can increase confidence in their purchase decision by providing a clearer idea of the product's fit and functionality.

7. Brand Differentiation:

   • AR can help businesses stand out in a crowded market by offering unique and innovative ways to engage with customers, giving them a reason to choose one brand over others.

Study Tip:

Recognize how AR enhances buyer engagement by allowing virtual interaction with business operations. AR creates interactive, immersive experiences where customers can virtually explore products, services, or business operations, which increases engagement and helps customers make more informed, confident decisions. This technology allows businesses to connect with customers in new ways, driving interest and deeper connection to the brand.

Seven P's of Marketing - Customer Perception

• Lecture Date: October 17, 2024

• Key Concepts: How "People" in the Seven P's impacts brand perception.

• Study Tip: Study examples where customer service reinforces brand reliability and customer satisfaction.

.People (in the Seven P's):

• The "People" element refers to the individuals involved in the marketing and delivery of a product or service. This includes employees, customers, and anyone who interacts with the brand.

2. Role of People in Brand Perception:

   • Customer Service: Employees are often the first point of contact with customers, and their behavior directly influences how customers perceive a brand.

   • Brand Experience: Positive interactions with staff can create a strong, reliable brand image, while negative experiences can damage customer trust and loyalty.

   • Internal Culture: The attitudes, behaviors, and interactions of employees (internal people) shape the external customer experience and, in turn, the perception of the brand.

3. Brand Reliability:

   • A company’s people, particularly customer-facing employees, help build brand reliability by being responsive, helpful, and knowledgeable. When customers feel their needs are understood and addressed, they associate the brand with trustworthiness.

4. Customer Satisfaction:

   • People directly impact customer satisfaction. Skilled, empathetic employees who provide excellent service improve customers' experiences, leading to increased satisfaction and a stronger, positive brand perception.

5. Word-of-Mouth and Reviews:

   • Excellent customer service from people can lead to positive reviews and word-of-mouth recommendations, which directly influence other potential customers' perceptions of the brand.

6. Employee Training and Engagement:

   • Businesses that invest in employee training and ensure their staff are engaged in delivering great customer service see a direct correlation between these efforts and improved customer perception of the brand.

Study Tip:

Study examples where customer service reinforces brand reliability and customer satisfaction. Focus on how businesses with exceptional customer service, where people play a key role, build stronger relationships with customers. For instance, look at brands like Zappos or Amazon, where employees go above and beyond to create positive customer experiences, which in turn boosts brand perception and fosters loyalty. Understanding how customer service influences satisfaction and trust will help you see its importance in shaping a brand's reputation

Dynamic Pricing

• Lecture Date: October 22, 2024

• Key Concepts: Dynamic pricing in response to demand changes.

• Study Tip: Look at how companies like airlines adjust prices to optimize revenue based on real-time demand.

• Dynamic Pricing:

  • Definition: Dynamic pricing is the strategy of adjusting prices in real-time based on various factors such as demand, competition, and other market conditions. Prices are flexible and can change frequently, even multiple times a day, depending on shifts in the market environment.

• Demand-Based Pricing:

  • Dynamic pricing is heavily influenced by demand fluctuations. When demand for a product or service rises (e.g., during peak times), prices may increase. Conversely, when demand falls, prices may be lowered to attract customers.

• Supply and Demand Factors:

  • Factors influencing dynamic pricing include supply shortages, seasonal trends, time of day, or competitor pricing. These factors create an environment where prices adjust according to real-time market conditions.

• Optimization of Revenue:

  • The goal of dynamic pricing is to optimize revenue by setting prices that maximize profitability. By adjusting prices based on current demand, businesses can capture more value during high-demand periods and remain competitive when demand is low.

• Use of Algorithms and Technology:

  • Dynamic pricing relies on advanced algorithms and technology that track demand, competitor prices, and consumer behavior. These systems allow businesses to automatically adjust prices in real-time based on the data they collect.

• Examples of Dynamic Pricing:

  • Airlines: Airlines are a classic example, as they frequently adjust ticket prices based on demand, remaining seat availability, and time until departure. Prices tend to rise as the flight date approaches, especially during high-demand periods like holidays or peak travel seasons.

  • E-commerce: E-commerce platforms like Amazon adjust prices on products based on customer demand, competitor pricing, and other real-time data inputs.

Study Tip:

Look at how companies like airlines adjust prices to optimize revenue based on real-time demand. Focus on how airlines track booking trends, remaining seat availability, and timing to adjust ticket prices accordingly. For example, they may raise prices as a flight date approaches or offer discounted rates for early bookings when demand is low. This strategy helps maximize profit during high-demand periods while remaining competitive during low-demand times. Studying this can help you understand how businesses use real-time data to adjust prices dynamically and optimize revenue

AI in Hyper-Personalization

• Lecture Date: November 7, 2024

• Key Concepts: AI-driven marketing for personalization and engagement.

• Study Tip: Examine how personalized content improves engagement and conversion rates.

• AI-Driven Marketing:

  • Definition: Artificial intelligence (AI) plays a critical role in hyper-personalization by leveraging data analysis, machine learning, and automation to tailor marketing strategies to individual customer preferences, behaviors, and interactions.

• Personalization:

  • Hyper-personalization goes beyond traditional personalization by using AI to deliver content and experiences that are uniquely tailored to each user, based on real-time data and predictive analytics.

  • Examples include personalized product recommendations, individualized email marketing, and targeted ads that are specifically suited to each consumer's interests and needs.

• Data-Driven Insights:

  • AI systems analyze large amounts of customer data—such as browsing behavior, purchase history, and demographic information—to understand individual preferences and predict future behavior. This data allows brands to craft highly relevant experiences for each customer.

• Customer Engagement:

  • AI helps drive customer engagement by delivering content and offers that resonate with each customer personally. By anticipating customer needs, brands can engage customers with the right message at the right time, leading to deeper connections and more frequent interactions.

• Automation of Personalization:

  • AI enables the automation of hyper-personalized content across various touchpoints—websites, emails, social media, and more—without the need for manual intervention. This increases efficiency and ensures consistency in the customer experience.

• Improved Conversion Rates:

  • By offering customers content that directly matches their preferences, AI-powered personalization can improve conversion rates. Personalized content makes it easier for customers to find what they’re looking for, increasing the likelihood of a sale.

Study Tip:

Examine how personalized content improves engagement and conversion rates. Focus on how AI analyzes customer data to deliver relevant, individualized experiences that increase interaction with the brand and drive higher conversion rates. For example, personalized product recommendations on e-commerce sites or tailored email campaigns significantly boost customer engagement by offering content that matches their specific interests, leading to better customer retention and higher sales.

AIDA Model

• Lecture Date: October 31, 2024

• Key Concepts: The Attention, Interest, Desire, Action stages in consumer decision-making.

• Study Tip: Focus on the "Interest" stage, where unique product features attract consumer curiosity.

• AIDA Model:

  • The AIDA model represents the four key stages that consumers typically go through in the decision-making process when making a purchase. These stages are Attention, Interest, Desire, and Action.

• Attention:

  • This is the first stage, where marketers aim to capture the consumer’s attention. Techniques like bold visuals, eye-catching headlines, and engaging content are used to stand out and make the consumer aware of the product or brand.

• Interest:

  • Once attention is gained, the next step is to spark the consumer’s interest. At this stage, the goal is to keep the consumer engaged by providing more detailed information about the product or service.

  • Marketers highlight the unique features or benefits of the product to make it stand out from competitors. This is where emotional appeal and addressing the customer’s needs become important.

• Desire:

  • In the Desire stage, the consumer’s interest is transformed into a stronger emotional connection or desire for the product. The product is seen as something that will fulfill a need or solve a problem, pushing the consumer closer to a purchase.

• Action:

  • The final stage is where the consumer takes action—they make a purchase or engage with the brand. Marketers encourage this stage by using clear calls to action, limited-time offers, and easy purchasing methods.

Study Tip:

Focus on the "Interest" stage, where unique product features attract consumer curiosity. Study how marketers use specific product details, such as innovation, quality, or distinct advantages, to draw the consumer in and maintain their engagement. For example, a tech company might highlight cutting-edge features like battery life, screen resolution, or software capabilities to generate interest in a new smartphone. Understanding how this stage builds on the initial attention is key to engaging potential customers and moving them down the sales funnel.

Product Lifecycle

• Lecture Date: September 26, 2024

• Key Concepts: Introduction, growth, maturity, and decline stages.

• Study Tip: Review strategies in each lifecycle stage, especially advertising during the introduction stage.

• Product Lifecycle:

  • The Product Lifecycle (PLC) describes the stages a product goes through from its launch to its decline. It consists of four main stages: Introduction, Growth, Maturity, and Decline.

• Introduction Stage:

  • Characteristics: The product is launched into the market. Sales are typically low, and the focus is on building awareness and convincing consumers of the product's value.

  • Marketing Strategies:

    • Heavy advertising is essential in this stage to create awareness and educate consumers about the product.

    • Companies may offer promotions, trials, or discounts to encourage early adoption.

    • Focus on building brand recognition and highlighting the product’s unique features.

• Growth Stage:

  • Characteristics: Sales start to increase as the product gains traction and more customers adopt it. Competition also begins to increase as other companies notice the product’s success.

  • Marketing Strategies:

    • Focus shifts to differentiation to stand out from competitors.

    • Expanding distribution channels to reach a broader market.

    • Increasing brand loyalty through customer satisfaction and repeat purchases.

• Maturity Stage:

  • Characteristics: The product reaches its peak sales, but growth slows as the market becomes saturated. Competition is fierce, and price reductions may become necessary to maintain market share.

  • Marketing Strategies:

    • Focus on maintaining customer loyalty.

    • Product modifications (such as new features or versions) to reinvigorate interest.

    • Promotions and discounts are common to maintain a competitive edge.

• Decline Stage:

  • Characteristics: Sales decline as the product becomes outdated, and consumers may move on to newer alternatives. Companies often phase out the product or reduce costs.

  • Marketing Strategies:

    • Reduce advertising and promotional efforts.

    • May focus on niche markets or use the product in other industries if possible.

    • Harvesting or discontinuation of the product.

Study Tip:

Review strategies in each lifecycle stage, especially advertising during the introduction stage. The introduction stage is critical, and advertising plays a significant role in generating awareness. Focus on how businesses use targeted, informative advertising to introduce the product and create demand. This stage often involves educating the consumer, offering incentives, and showcasing the product's unique features to differentiate it from other products in the market. Understanding how advertising adapts through the stages will help you grasp the overall marketing strategy for a product.

Surveillance Marketing

• Lecture Date: November 5, 2024

• Key Concepts: Methods like geotagging and privacy considerations.

• Study Tip: Know how geotagging enables location-specific ad delivery and its ethical implications.

• Surveillance Marketing:

  • Definition: Surveillance marketing involves the collection and analysis of consumer data to personalize marketing efforts and target specific audiences. This can include tracking behaviors, preferences, locations, and interactions to tailor advertisements and offers.

• Methods of Surveillance Marketing:

  • Geotagging: This refers to the practice of adding geographical location data to digital content, such as photos, social media posts, or other online activities. Marketers use geotagging to send location-specific ads, promotions, or notifications to consumers in real-time.

  • Tracking Online Behavior: Marketers track consumers’ online behavior, including search history, website visits, and social media activity, to create targeted ads that align with their interests.

  • Use of Cookies and Device Tracking: Cookies and device fingerprinting are used to track a user’s online activity, allowing companies to build detailed consumer profiles and predict future buying behaviors.

• Privacy Considerations:

  • Consumer Consent: It’s important for businesses to obtain explicit consent from consumers before collecting their data. Privacy laws, such as the GDPR in Europe and CCPA in California, regulate how companies must handle consumer data.

  • Data Security: Companies must ensure that the data collected through surveillance marketing is stored securely and protected from breaches or unauthorized access.

  • Transparency and Control: Consumers should have the ability to know what data is being collected and should be able to opt-out of tracking or personalized advertising if they choose.

• Ethical Implications:

  • Privacy Invasion: Geotagging and tracking can raise concerns about privacy invasion as consumers may feel uncomfortable with businesses knowing their exact location or personal activities.

  • Data Manipulation: Over-reliance on consumer data may lead to manipulative marketing tactics, where consumers are pushed toward products or services based on excessive data analysis.

  • Transparency and Trust: Ethical surveillance marketing practices involve clear communication with consumers about data usage and offering them control over their personal information.

Study Tip:

Know how geotagging enables location-specific ad delivery and its ethical implications. Study how geotagging allows marketers to deliver ads based on a consumer’s current or past location, creating a more personalized and immediate advertising experience. However, understand the ethical challenges, such as the potential invasion of privacy and the need for transparency in how location data is used. Pay attention to the balance between creating value for customers through relevant ads and respecting their privacy rights. Understanding the implications of geotagging and other surveillance techniques will help you assess how they shape consumer relationships with brands.

Bundle Pricing

• Lecture Date: October 24, 2024

• Key Concepts: Strategies for combining products to increase cross-selling.

• Study Tip: Understand how bundling promotes less popular items through pairing with high-demand products.

• Bundle Pricing:

  • Definition: Bundle pricing is a strategy where multiple products or services are sold together as a package at a reduced price compared to buying each item individually. The goal is to encourage customers to purchase more items by offering them a perceived value.

• Cross-Selling:

  • Bundling is often used as a cross-selling technique. By combining products that complement each other, businesses can increase the likelihood that customers will buy more. For example, bundling a camera with accessories like a memory card and camera bag.

• Product Pairing:

  • High-demand products are often bundled with less popular or lower-demand items. This helps move inventory of products that might not sell as well on their own. For example, a fast-food chain might bundle a popular burger with a less popular drink or side item at a discounted price to encourage the purchase of both.

• Value Perception:

  • Consumers are drawn to bundles because they perceive a better value. The price of the bundle seems more attractive than buying each product separately, even though the business might still be profiting by promoting additional items.

• Increased Sales Volume:

  • Bundle pricing often increases the overall sales volume by encouraging customers to buy more than they initially planned. It can also help reduce excess stock by pairing slow-moving items with popular ones.

• Types of Bundle Pricing:

  • Pure Bundling: The products are only available as part of a bundle (i.e., cannot be purchased separately).

  • Mixed Bundling: The products can be purchased either separately or as part of a bundle at a discount.

Study Tip:

Understand how bundling promotes less popular items through pairing with high-demand products. Focus on how businesses use this strategy to increase sales of underperforming products. For example, a retailer might bundle a slow-selling item with a top-selling product to encourage customers to purchase both at a discounted price. By doing so, businesses can move excess inventory while offering a better value to consumers, which increases the overall profitability of the bundle. Understanding this will help you see how bundle pricing is used strategically to drive cross-sales and reduce product surplus

Engagement and Retention

• Lecture Date: October 15, 2024

• Key Concepts: Benefits of building community engagement.

• Study Tip: Relate community-building in education to corporate strategies for job satisfaction and retention.

• Engagement and Retention:

  • Engagement refers to the level of enthusiasm and commitment employees or customers have toward a brand, organization, or community. High engagement often leads to greater loyalty, productivity, and satisfaction.

  • Retention focuses on keeping employees or customers over the long term. In a business context, it refers to strategies designed to reduce turnover and foster long-term relationships with employees or clients.

• Building Community Engagement:

  • Creating a sense of community is essential for both customer and employee retention. Engaging individuals in meaningful ways, such as providing value, addressing their needs, and offering personal connections, can significantly boost loyalty.

  • Engaged communities are often more supportive, leading to positive word-of-mouth marketing, a higher level of customer satisfaction, and lower employee turnover rates.

• Benefits of Community Engagement:

  • Increased Loyalty: Strong engagement fosters a deeper emotional connection, which leads to long-term loyalty among customers or employees.

  • Higher Satisfaction: Engaged individuals—whether they are customers or employees—tend to feel more valued, contributing to higher satisfaction and commitment.

  • Brand Advocacy: Engaged customers or employees are more likely to advocate for the brand or organization, providing organic promotion and attracting new clients or recruits.

  • Improved Morale: In the workplace, creating a sense of belonging and shared purpose can boost employee morale, leading to improved job satisfaction and productivity.

• Employee Engagement and Retention:

  • Creating an engaging environment for employees involves offering meaningful work, recognition, opportunities for growth, and creating a culture that values their contributions.

  • Corporate strategies such as employee recognition programs, professional development opportunities, and promoting work-life balance contribute to a more engaged workforce, ultimately improving retention.

• Customer Engagement and Retention:

  • In the context of customers, businesses can engage through personalized experiences, customer loyalty programs, responsive customer service, and creating interactive brand experiences.

  • Retention efforts include providing consistent value, addressing feedback, and maintaining relationships post-purchase.

Study Tip:

Relate community-building in education to corporate strategies for job satisfaction and retention. Just as educational institutions build communities that keep students engaged and committed, companies can create work environments where employees feel valued and part of a team. In both cases, fostering a sense of belonging, providing opportunities for growth, and recognizing contributions can significantly enhance engagement and retention. Consider how companies, like those in tech or retail, build internal communities that enhance job satisfaction by promoting culture, recognition, and professional development—paralleling the supportive environments that educational institutions create for their students

Unboxing Experience

• Lecture Date: September 24, 2024

• Key Concepts: Impact of a memorable unboxing on brand perception.

• Study Tip: Focus on how the unboxing experience can drive social media sharing and organic promotion.

• Unboxing Experience:

  • Definition: The unboxing experience refers to the process of opening a product package and the feelings or impressions it generates. A memorable unboxing can significantly influence a customer’s perception of a brand and the product itself.

  • It's not just about the product but also about the packaging, the first physical interaction with the product, and how it makes the customer feel about their purchase.

• Impact on Brand Perception:

  • A well-designed unboxing experience can enhance brand image, making the customer feel special or valued. High-quality packaging, attention to detail, and personalized elements can elevate the perceived value of the product.

  • A memorable unboxing can differentiate a brand from its competitors, influencing customer loyalty and brand preference.

• Elements of a Memorable Unboxing:

  • Packaging Design: Innovative, attractive, and functional packaging that reflects the brand’s identity.

  • Personalization: Custom notes, branded accessories, or products that create a personal touch.

  • Surprise Elements: Unexpected gifts or messages that make the customer feel delighted or appreciated.

  • Quality Materials: Premium materials that convey a sense of luxury and care.

• Customer Satisfaction and Loyalty:

  • A positive unboxing experience can contribute to greater customer satisfaction and foster a sense of excitement or delight. This emotional connection can lead to long-term brand loyalty.

• Social Media and Word-of-Mouth:

  • Shareability: Unboxing videos and photos are a popular trend on social media platforms like YouTube, Instagram, and TikTok. Customers often share their unboxing experience if it’s engaging, visually appealing, or exciting.

  • Organic Promotion: Positive unboxing experiences are shared by customers organically, acting as social proof and free advertising for the brand. Brands can leverage these user-generated contents to build credibility and reach new audiences.

Study Tip:

Focus on how the unboxing experience can drive social media sharing and organic promotion. Pay attention to how brands that create a delightful, memorable unboxing experience encourage customers to share their moments on social media. This sharing creates organic promotion, extending the brand's reach through personal endorsements. For example, Apple’s sleek and minimalist packaging has led to numerous social media posts showcasing their unboxing, which drives brand awareness. Understand how these shared experiences contribute to the brand’s image and can influence others’ purchasing decisions.

Customer Lifetime Value (CLV)

• Lecture Date: October 1, 2024

• Key Concepts: Importance of CLV in customer acquisition and retention strategies.

• Study Tip: Understand how CLV helps companies predict future revenue and guide investment in marketing efforts to maximize long-term profitability.

• Customer Lifetime Value (CLV):

  • Definition: CLV is the total revenue a business expects to earn from a customer throughout their entire relationship with the company. It is a critical metric for understanding the long-term value of acquiring and retaining customers.

  • CLV helps businesses gauge how much they can afford to spend on customer acquisition, retention strategies, and other marketing efforts while still maintaining profitability.

• Importance of CLV in Customer Acquisition:

  • Guiding Marketing Spend: By knowing the expected value of a customer over time, businesses can determine how much to invest in acquiring new customers. If the CLV is high, businesses may be willing to spend more on customer acquisition.

  • Targeting High-Value Customers: Understanding CLV allows businesses to focus their marketing efforts on acquiring customers with the highest potential lifetime value, improving the efficiency of marketing campaigns.

• Importance of CLV in Customer Retention:

  • Long-Term Profitability: Retaining high-CLV customers is more cost-effective than constantly acquiring new ones. By focusing on retaining valuable customers, businesses can improve long-term profitability.

  • Personalized Retention Strategies: Knowing which customers contribute the most to CLV allows companies to develop targeted retention strategies, such as loyalty programs or personalized offers, to keep them engaged.

• How CLV Guides Marketing and Investment Decisions:

  • Predicting Future Revenue: CLV helps businesses forecast future cash flows based on the behavior of existing customers, which helps in making informed investment decisions.

  • Optimizing Marketing Spend: By understanding the potential return on investment (ROI) from different customer segments, businesses can allocate their marketing budgets more effectively to maximize profitability.

  • Enhancing Customer Experience: CLV highlights the importance of investing in customer service and experience initiatives, as satisfied customers with higher CLV are more likely to stay loyal and make repeat purchases.

Study Tip:Understand how CLV helps companies predict future revenue and guide investment in marketing efforts to maximize long-term profitability. Focus on how businesses use CLV to estimate the revenue a customer will bring in the future and how this information influences marketing decisions. For example, if a company knows that a customer will likely generate $1,000 in revenue over the next 5 years, they might allocate more resources to acquire and retain similar high-value customers. Additionally, CLV informs decisions about loyalty programs, customer service investments, and overall marketing strategies to improve long-term business profitability.

Service Marketing - Perishability

• Chapter: Service Marketing

• Key Concepts: Characteristics of services, including perishability, inseparability, and intangibility.

• Study Tip: Focus on perishability, meaning services cannot be stored and must be used as produced, which affects scheduling and capacity planning in service industries.

• Perishability:

  • Definition: Perishability refers to the fact that services cannot be stored, saved, or inventoried for later use. Unlike products that can be kept on shelves, services are consumed as they are produced and cannot be "stocked up" or saved for future consumption.

  • For example, a flight or hotel room that is not booked for a certain date cannot be sold or used later, leading to lost revenue for that time period.

  • This characteristic makes demand forecasting, scheduling, and capacity management critical in service industries.

• Characteristics of Services:

  • Inseparability: Services are produced and consumed simultaneously. The provider and the customer are often involved in the service delivery at the same time (e.g., a hairstylist cutting hair or a teacher conducting a class).

  • Intangibility: Services cannot be touched, seen, or physically examined before they are consumed. They are experiential, making it harder for customers to evaluate the service before purchasing it.

  • Variability: The quality of services can vary from one provider to another or from one instance to another, as services are often dependent on human interaction and environmental factors.

• Service Marketing Implications:

  • Demand Management: To deal with perishability, service providers must manage demand carefully, using techniques such as pricing strategies (e.g., discounts for off-peak times), reservation systems, and promotions to smooth demand across periods.

  • Capacity Management: Service industries must balance the supply and demand for their services. This could involve adjusting staffing levels or using technology to optimize capacity, especially during peak periods (e.g., increasing staff during holiday seasons or busy hours).

  • Revenue Management: Service providers often use dynamic pricing (e.g., higher prices for peak times and lower prices for off-peak times) to maximize revenue, ensuring they don’t waste unused capacity.

Study Tip:Focus on perishability, meaning services cannot be stored and must be used as produced, which affects scheduling and capacity planning in service industries. Pay attention to how businesses like airlines, hotels, or healthcare services manage this aspect by using techniques like reservations, flexible pricing, and efficient staff scheduling. For example, airlines may offer discounts during off-peak times to encourage bookings, while hotels may adjust their room rates based on demand. Understanding perishability helps you grasp why these industries focus so heavily on forecasting demand and optimizing capacity to avoid revenue loss

Branding Functions

• Chapter: Branding

• Key Concepts: Brand identification elements like logos, colors, and brand associations.

• Study Tip: Review how branding helps establish identity and recognition, focusing on how unique visual elements aid in brand identification.

• Brand Identification Elements:

  • Logos: Distinctive symbols or designs that represent a brand.

  • Colors: Specific color schemes that convey the brand's identity and emotional appeal.

  • Brand Associations: Perceptions or ideas customers connect with a brand, like quality or reliability.

• Branding Functions:

  • Establishes Identity: Branding helps create a unique identity that differentiates a brand from competitors.

  • Fosters Recognition: Consistent use of logos, colors, and associations aids in making a brand easily recognizable.

  • Builds Loyalty: Strong branding fosters trust and emotional connection, leading to customer loyalty.

Study Tip:

Review how branding helps establish identity and recognition, focusing on how unique visual elements aid in brand identification. Understand how elements like logos and color schemes create a memorable brand image, enhancing recognition and customer loyalty.

Physical Retail Experience

• Chapter: Retail Management

• Key Concepts: Physical stores vs. online shopping, with a focus on sensory experiences.

• Study Tip: Consider the advantages of physical retail for immediate access and sensory engagement, which online stores cannot fully replicate.

• Physical Stores vs. Online Shopping:

  • Sensory Engagement: Physical stores offer a multi-sensory experience (sight, touch, sound, smell) that online shopping cannot replicate.

  • Immediate Access: Customers can purchase and take products home immediately, which is a key advantage over online shopping, where waiting for delivery is required.

• Advantages of Physical Retail:

  • In-Store Experience: The environment and layout enhance customer experience through tactile interaction with products, personal service, and atmosphere.

  • Instant Gratification: Physical stores provide immediate product acquisition and the ability to make on-the-spot decisions.

Study Tip:Consider the advantages of physical retail for immediate access and sensory engagement, which online stores cannot fully replicate. Focus on how the sensory experiences (e.g., trying products, feeling fabrics, smelling scents) in a store influence customer satisfaction and decision-making.

Value-Based Pricing

• Chapter: Pricing Strategies

• Key Concepts: Setting prices based on perceived consumer value rather than just production costs.

• Study Tip: Review how value-based pricing considers the customer’s perception, especially in luxury or high-value product markets.

• Value-Based Pricing:

  • Definition: Setting prices based on the perceived value to the customer, rather than on the cost of production.

  • Focuses on what customers are willing to pay based on the benefits they believe they will receive.

• Pricing Strategy:

  • Customer Perception: Prices are influenced by how much value consumers place on the product or service.

  • Often used in luxury or high-value markets where exclusivity, quality, or brand image significantly impact consumer willingness to pay.

Study Tip:

Review how value-based pricing considers the customer’s perception, especially in luxury or high-value product markets. Focus on how premium pricing is justified through perceived quality, brand image, and unique features rather than just production costs.

Promotion Mix - Sales Promotions

• Chapter: Promotion Mix

• Key Concepts: Components of the promotion mix, particularly sales promotions.

• Study Tip: Differentiate between advertising and sales promotions; understand how sales promotions provide short-term incentives for immediate purchases.

• Promotion Mix:

  • The combination of different promotional tools used to achieve marketing objectives, including advertising, personal selling, public relations, and sales promotions.

• Sales Promotions:

  • Definition: Short-term incentives designed to encourage immediate purchases or actions, such as discounts, coupons, contests, or limited-time offers.

  • Used to boost sales temporarily or attract new customers.

Study Tip: Differentiate between advertising and sales promotions; advertising builds long-term brand awareness, while sales promotions offer short-term incentives to drive immediate purchases. Focus on how sales promotions create urgency and encourage customers to act quickly.

SEO - Search Engine Optimization

• Chapter: Digital Marketing

• Key Concepts: SEO’s role in increasing website traffic through organic search results.

• Study Tip: Focus on SEO’s main objective of improving website visibility and relevance through quality content, not paid ads.

• SEO (Search Engine Optimization):

  • Definition: The process of optimizing a website to increase its visibility in organic (non-paid) search engine results.

  • Goal: Improve website traffic by ranking higher on search engine results pages (SERPs) for relevant keywords.

• SEO Techniques:

  • Focus on quality content, keyword optimization, technical SEO (site structure, speed), and obtaining backlinks to improve relevance and authority.

Study Tip:

Focus on SEO’s main objective of improving website visibility and relevance through quality content, not paid ads. Understand how creating valuable, keyword-optimized content drives organic traffic and boosts a website's ranking, distinguishing SEO from paid advertising strategies.

Distribution Channels - Indirect Channels

• Chapter: Distribution Channels

• Key Concepts: Direct vs. indirect distribution channels and their advantages.

• Study Tip: Understand how indirect channels, involving intermediaries, help companies reach new markets quickly without managing the entire distribution.

• Indirect Distribution Channels:

  • Definition: Involves intermediaries (such as wholesalers, retailers, or agents) to distribute products from the manufacturer to the end consumer.

  • Advantages:

    • Allows companies to reach a wider market without managing the logistics and costs of direct distribution.

    • Reduces the need for the company to invest in physical retail locations or develop extensive customer networks.

• Direct vs. Indirect Channels:

  • Direct Channels: The manufacturer sells directly to the consumer (e.g., through their own store or website).

  • Indirect Channels: The manufacturer relies on intermediaries to reach consumers, often benefiting from their established distribution networks.

Study Tip:

Understand how indirect channels, involving intermediaries, help companies reach new markets quickly without managing the entire distribution. Focus on how intermediaries ease market expansion and reduce the complexity of distribution, especially for companies new to a particular region or market.

External Marketing Environment

• Chapter: Marketing Environment

• Key Concepts: Micro (immediate) and macro (external) environmental factors.

• Study Tip: Identify external components such as political factors and their impact on marketing strategy, differentiating them from internal factors (which you also need to know).

• Micro (Immediate) Environment:

  • Definition: Factors close to the company that directly affect its ability to serve customers, such as suppliers, competitors, customers, and intermediaries.

  • Focuses on internal business relationships and interactions within the industry.

• Macro (External) Environment:

  • Definition: Broader, external factors that influence the company’s marketing strategy, such as political, economic, social, technological, environmental, and legal (PESTEL).

  • These are outside the company’s direct control but can have significant long-term impacts.

Study Tip: Identify external components such as political factors and their impact on marketing strategy, and differentiate them from internal factors like company culture or resources. Political changes, for example, could lead to shifts in regulations or trade policies that impact how a company markets its products. Understanding both micro and macro environments helps companies adapt to both immediate and long-term challenges.

Price Skimming

• Chapter: Pricing Strategies

• Key Concepts: High initial pricing that decreases over time, targeting early adopters.

• Study Tip: Focus on industries or products that benefit from early adopters and how price skimming can maximize initial revenue in competitive markets.

• Price Skimming:

  • Definition: A pricing strategy where a company sets a high initial price for a new product, then gradually lowers it over time.

  • Target Audience: Initially targets early adopters—customers who are willing to pay a premium for new or innovative products.

• Benefits:

  • Maximizes Early Revenue: High initial prices help recoup development costs and generate maximum revenue from customers willing to pay more for exclusivity.

  • Market Segmentation: As the price decreases, it attracts more price-sensitive customers, expanding the market over time.

Study Tip:Focus on industries or products that benefit from early adopters (like tech gadgets or luxury items), and understand how price skimming maximizes initial revenue in competitive markets. Recognize how this strategy works well when a product has a unique selling point and the company can capitalize on demand from those willing to pay a premium before competitors catch up.

Market-Based Pricing

• Chapter: Pricing Strategies

• Key Concepts: Setting prices based on competitor prices and market conditions.

• Study Tip: Emphasize the role of market analysis in determining prices, especially in industries with high competition.

• Market-Based Pricing:

  • Definition: A pricing strategy where prices are set based on competitors' prices and prevailing market conditions, rather than solely on cost or value.

  • Competitive Focus: The company evaluates competitors' pricing strategies and adjusts its own prices to remain competitive while meeting market demands.

• Market Analysis:

  • Involves studying competitor prices, customer demand, and overall market trends to determine the optimal pricing.

  • Common in industries with high competition where companies need to align their pricing to attract and retain customers without sacrificing profitability.

Study Tip: Emphasize the role of market analysis in determining prices, especially in highly competitive industries. Understand how businesses use competitor pricing and market trends to set prices that attract customers while ensuring competitiveness.

Value-Based Pricing in Luxury Markets

• Chapter: Pricing Strategies

• Key Concepts: Aligning price with perceived product quality or brand prestige.

• Study Tip: Review why luxury brands often choose value-based pricing to reflect exclusivity and quality rather than production costs.

• Value-Based Pricing:

  • Definition: Pricing a product based on its perceived value to the customer, rather than the cost of production.

  • In luxury markets, this means aligning the price with the perceived quality, exclusivity, and prestige of the brand, rather than the actual cost to produce the product.

• Luxury Market Focus:

  • Luxury brands often set high prices to reinforce the perception of exclusivity and high quality.

  • Price serves as a signal of the product’s value and brand status rather than just a reflection of its production costs.

Study Tip: Review why luxury brands often choose value-based pricing to reflect exclusivity and quality rather than production costs. Understand how this strategy reinforces the brand’s image and appeals to consumers willing to pay a premium for prestige and uniqueness.

Penetration Pricing for Market Entry

• Chapter: Pricing Strategies

• Key Concepts: Using low prices initially to gain customer loyalty and build a market presence.

• Study Tip: Consider penetration pricing’s effectiveness in saturated markets where building a customer base quickly is essential.

• Penetration Pricing:

  • Definition: A strategy where a company sets a low initial price to attract customers and quickly build market share.

  • Goal: Gain customer loyalty and establish a strong market presence early on, often in competitive or saturated markets.

• Market Entry:

  • By offering lower prices, businesses can encourage trial and adoption, making it easier to compete against established players.

Study Tip: Consider penetration pricing’s effectiveness in saturated markets where building a customer base quickly is essential. Focus on how this strategy helps new companies attract customers by offering value and encouraging long-term loyalty, even if initial profits are lower.

Psychological Pricing - Odd-Even Pricing

• Chapter: Pricing Strategies

• Key Concepts: Pricing items just below whole numbers to increase perceived affordability.

• Study Tip: Learn how psychological pricing affects consumer perceptions and makes products seem more affordable than they are.

• Odd-Even Pricing:

  • Definition: A psychological pricing strategy where prices are set just below a round number (e.g., $9.99 instead of $10) to make products appear more affordable.

  • Effect: Consumers tend to perceive prices ending in .99 or .95 as significantly lower than the next whole number, even though the difference is small.

• Consumer Perception:

  • Odd-even pricing plays on psychological triggers, making items seem like a better deal, encouraging purchases.

Study Tip: Learn how psychological pricing affects consumer perceptions and makes products seem more affordable than they are. Focus on how small price adjustments, like using $9.99 instead of $10, influence buying decisions by creating the illusion of a better value.

Price Elasticity

• Chapter: Pricing Strategies

• Key Concepts: Responsiveness of demand to price changes.

• Study Tip: Distinguish between elastic and inelastic products, with examples of how demand fluctuates with price adjustments.

• Price Elasticity:

  • Definition: The degree to which the demand for a product changes in response to a price change. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

• Elastic Products:

  • Definition: Products with high price elasticity, where demand significantly changes when the price changes. Typically, these are non-essential goods or those with many substitutes (e.g., fast food, clothing).

  • Example: If the price of a specific brand of soda increases, customers might switch to a different brand, leading to a significant drop in demand.

• Inelastic Products:

  • Definition: Products with low price elasticity, where demand remains relatively unchanged even when the price changes. These are typically essential goods or those with few substitutes (e.g., medicine, gasoline).

  • Example: A price increase in life-saving medication may have little effect on demand because consumers still need it.

Study Tip:

Distinguish between elastic and inelastic products, with examples of how demand fluctuates with price adjustments. Focus on understanding how price changes affect demand in different product categories—essential products are generally inelastic, while luxury or non-essential items tend to be elastic.

Reference Pricing

• Chapter: Pricing Strategies

• Key Concepts: Comparing current prices with past prices to highlight value.

• Study Tip: Focus on how retailers use reference pricing during sales to create a sense of savings for customers.

• Reference Pricing:

  • Definition: A pricing strategy where retailers display the original price alongside a discounted price, highlighting the perceived savings and value to the customer.

  • Purpose: Encourages consumers to compare current prices with past prices, creating a sense of getting a good deal or discount.

• How It Works:

  • Retailers often show the original price and the sale price to make the discount seem more significant, influencing customers' perception of value.

Study Tip: Focus on how retailers use reference pricing during sales to create a sense of savings for customers. Understand how showing a higher "original" price alongside a lower sale price makes the product seem like a better deal, even if the actual value is similar.

Loss Leader Pricing

• Chapter: Pricing Strategies

• Key Concepts: Selling items below cost to attract customers for additional purchases.

• Study Tip: Understand how loss leaders drive traffic and potentially increase overall sales despite the initial low price.

• Loss Leader Pricing:

  • Definition: A strategy where a company sells certain products at a price below cost to attract customers into the store or onto the website.

  • Goal: The aim is to encourage customers to make additional purchases once they are engaged, compensating for the loss on the initial product through higher-margin sales.

• How It Works:

  • Loss leaders are often popular or essential items that draw customers in, who then buy other products at regular prices, increasing overall sales.

Study Tip:

Understand how loss leaders drive traffic and potentially increase overall sales despite the initial low price. Focus on how these products serve as an entry point, leading customers to make additional purchases that generate profit

Cost-Based Pricing

• Chapter: Pricing Strategies

• Key Concepts: Adding a markup to the cost of production.

• Study Tip: Review how cost-based pricing works and why it’s straightforward but may not maximize profitability in certain markets.

• Cost-Based Pricing:

  • Definition: A pricing strategy where the price of a product is determined by adding a markup to the cost of production (including materials, labor, and overhead).

  • Markup: The percentage added to the cost of production to determine the selling price.

• How It Works:

  • The price is calculated by taking the total cost of producing a product and adding a fixed profit margin to set the final price.

Study Tip: Review how cost-based pricing works and why it’s straightforward but may not maximize profitability in certain markets. Focus on how this approach may overlook factors like customer willingness to pay or market competition, which could result in missed revenue opportunities in more dynamic markets.

Extremity Aversion Theory

• Chapter: Pricing Strategies

• Key Concepts: Preference for middle-priced options.

• Study Tip: Analyze how businesses create a preferred choice by offering tiered pricing that encourages middle-tier selection.

• Extremity Aversion Theory:

  • Definition: A psychological pricing strategy where consumers tend to avoid extreme options (either very low or very high priced) and prefer middle-priced choices.

  • Preference for Moderation: Consumers are more likely to choose a middle option that appears balanced and offers the best perceived value.

• How It Works:

  • By offering tiered pricing (e.g., basic, mid-range, and premium options), businesses can guide customers toward selecting the middle-tier product, which often offers the best value in terms of features and price.

Study Tip:

Analyze how businesses create a preferred choice by offering tiered pricing that encourages middle-tier selection. Focus on how the presence of extreme price options makes the middle option seem more reasonable, prompting customers to choose it as the best compromise.

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