Download MKTG 2500 Exam 3: Pricing Strategies and Concepts and more Exams Marketing in PDF only on Docsity!
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MKTG 2500 Exam 3 WMU 129 correct
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Price - ANSWER-The amount of money charged for a product or service - The sum of all the values that consumers exchange for the benefits of having or using the product or service. considerations in setting price - ANSWER-product costs (price floor: no profits below this price) competition and other external factors: (competitors strategies and prices, marketing strategy, objectives, and mix, nature of the market and demand) consumer perceptions of value (price ceiling: no demand above this price) cost-based pricing process - ANSWER-design a good product > determine product costs > set price based on cost > convince buyers of products value value-based pricing process - ANSWER-assess customer needs and value perceptions
set target price to match customer perceived value > determine costs that can be incurred > design product to deliver desired value at target price internal factors that affect price decisions - ANSWER-marketing objectives, marketing mix strategy, costs, organizational considerations Factors Affecting Price Decisions: Internal - Marketing Objectives - ANSWER-Market positioning influences strategy Other pricing objectives: survival, current profit maximization, market share leadership Not-for-profit objectives: Partial or full cost recovery, Social pricing Factors Affecting Price Decisions: Internal - Marketing Mix - ANSWER-Pricing must be carefully coordinated with the other marketing mix elements, Target costing is often used to support product positioning strategies based on price - starts with ideal selling price and then targets costs to meet that price, Price must match distribution strategy as well as media placement strategy for advertising Factors Affecting Price Decisions: Internal - Costs - ANSWER-types of costs: variable, fixed, total, How costs vary at different production levels will influence price-setting fixed costs - ANSWER-costs that do not vary with production or sales level variable costs - ANSWER-costs that vary directly with the level of production
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Factors Affecting Price Decisions: Internal - Organizational Considerations - ANSWER- Who sets the price? - Small companies: CEO or top management Large companies: Divisional or product line managers, Price negotiation is common in industrial settings, Some industries have pricing departments external factors that affect price decisions - ANSWER-nature of the market and demand, competition, other environmental factors (economy, resellers, government, social concerns) external factors - competitor costs, prices, and offers - ANSWER-Consider competitors' costs, prices, and possible reactions when developing a pricing strategy, Pricing strategy influences the nature of competition (Low-price low-margin strategies inhibit competition & high-price high-margin strategies attract competition), benchmarking costs against the competition is recommended, consider other strategies to control competitor's prices. E.g. price-matching ('we will not be undersold') external factors - other environmental elements - ANSWER-economic conditions (affect production costs & affect buyer perceptions of price and value), reseller reactions to prices must be considered, government may limit or restrict pricing options, social considerations may be taken into account Factors Affecting Price Decisions: External - Nature of Market and Demand - ANSWER- Types of markets: Pure competition, Monopolistic competition, Oligopolistic competition, Pure monopoly Consumer perceptions of price and value: How to measure?, Just noticeable difference Price-demand relationship: Demand curve, Price elasticity of demand pure competition - ANSWER-Many buyers and sellers where each has little effect on the going market price Monopolistic Competition: - ANSWER-Many buyers and sellers who trade over a range of prices Oligopolistic Competition: - ANSWER-Few sellers who are sensitive to each other's pricing/marketing strategies Pure Monopoly - ANSWER-Market consists of a single seller the market and demand - ANSWER-Costs set the lower limit of prices. The market and demand set the upper limit. price elasticity of demand - ANSWER-% change in quantity demanded / % change in price
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value - based pricing - ANSWER-Uses buyers' perceptions of value rather than seller's costs to set price, Measuring perceived value can be difficult, Consumer attitudes toward price and quality have shifted during the last decade, Introduction of less expensive versions of established brands has become common. competition-based pricing - ANSWER-Also called going-rate pricing, May price at the same level, above, or below the competition, Bidding for jobs is another variation of competition-based pricing market - skimming pricing - ANSWER-Set a high price for a new product to "skim" revenues layer by layer from the market, Company makes fewer, but more profitable sales. New Product Pricing Strategies: market - skimming pricing - ANSWER-Product's quality and image must support its higher price, Costs of smaller volume cannot be so high they cancel the advantage of charging more, Competitors should not be able to enter market easily and undercut the high price. New Product Pricing Strategies: market - penetration pricing - ANSWER-Market must be highly price sensitive so a low price produces more market growth, Production and distribution costs must fall as sales volume increases, Must keep out competition and maintain low price or effects are only temporary. Set a low initial price in order to "penetrate" the market quickly and deeply, Can attract a large number of buyers quickly and win a large market share. product mix pricing strategies - product line pricing - ANSWER-Setting price steps between product line items based on cost differences, customer perceptions, or competitor's price product mix pricing strategies - optional-product pricing - ANSWER-Pricing optional or accessory products sold with the main product product mix pricing strategies - captive-product pricing - ANSWER-Pricing products that must be used with the main product, Services: two-part pricing strategy - Fixed fee plus a variable usage rate product mix pricing strategies - by-product pricing - ANSWER-Pricing of low-value by- products to get rid of them product mix pricing strategies - product bundle pricing - ANSWER-Pricing bundles of products sold together
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Price Adjustment Strategies: Discount/Allowance - ANSWER-Strategies used by companies to adjust their basic prices to account for various customer differences and changing situations Types of discounts: Cash discount, Quantity discount, Functional (trade) discount, Seasonal discount Allowances: Trade-in allowances, Promotional allowances Price Adjustment Strategies: Psychological - ANSWER-Considers the psychology of prices and not simply the economics, Consumers usually perceive higher-priced products as having higher quality, Consumers use price less when they can judge quality of a product. The price is used to say something about the product: Reference prices, Differences as small as five cents can be important, Numeric digits may have symbolic and visual qualities that psychologically influence the buyer Price Adjustment Strategies: Promotional - ANSWER-Temporarily pricing products below list price and sometimes even below cost to create buying excitement and urgency. Examples: Special-event pricing, Cash rebates, Low-interest financing, longer warranties, free maintenance promotional pricing can have adverse effects - ANSWER-Easily copied by competitors, Creates deal-prone consumers, May erode the brand's value, Not a substitute for effective strategic planning, Frequent use leads to industry price wars which benefit only a few firms Public Policy Issues in Pricing - price-fixing - ANSWER-Competitors cannot work with each other to set prices Public Policy Issues in Pricing - predatory pricing - ANSWER-Firms may not sell below cost with the intention of punishing a competitor or gaining higher long-run profits or running a competitor out of business. Public Policy Issues in Pricing - price discrimination - ANSWER-Sellers must charge the price to all customers unless they can justify the difference in price. Public Policy Issues in Pricing - retail price maintenance - ANSWER-Manufacturers cannot force resellers to charge a specific price Public Policy Issues in Pricing - deceptive pricing - ANSWER-Cannot advertise a false sale (e.g. if you say it is a price reduction it must in fact be a price reduction) Public Policy Issues in Pricing - price confusion - ANSWER-Pricing terms must be easy to understand
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public relations tools - ANSWER-News, Speeches, Special events, Buzz marketing, Mobile marketing, Written materials, Audiovisual materials, Corporate identity materials, Public service activities, Company Web site, Event Sponsorship Elements of Marketing Communication Mix: Personal Selling - ANSWER-Personal presentation by sales force to make sales and building customer relationships, Personal selling is a paid, personal form of promotion, Involves two-way personal communication between salespeople and individual customers, Sales Force serves as critical link between company and its customers, Personal interaction allows for feedback and adjustments, Relationship-oriented, Most expensive of the promotional Elements of Marketing Communication Mix: Direct Marketing - ANSWER-Direct connections with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships Forms: Telephone marketing, direct mail, online marketing, etc., Can be used as a supplemental medium or as the only approach used by the firm, Some see this as the new marketing model of the next millennium - Especially personalized offerings (e.g. Amazon's recommendations) four characteristics of direct marketing - ANSWER-Nonpublic, Immediate, Customized, Interactive direct marketing benefits to buyers - ANSWER-Convenient, Private, Ready access to products and information, Immediate and interactive direct marketing benefits to sellers - ANSWER-Powerful tool for building customer relationships, Target small groups or individuals, Tailor offers to individual needs, Timed to reach prospects at the right moment, Gives access to buyers they could not reach through other channels, Offers a low-cost, efficient way to reach markets customer and prospects forms of direct marketing - ANSWER-telephone, direct mail, catalog, direct response TV, kiosk marketing telephone marketing - ANSWER-Used in both consumer and B2B markets, Can be outbound or inbound calls. direct mail marketing - ANSWER-Involves sending an offer, announcement, reminder, or other item to a person at a particular address, Permits high target-market selectivity, Easy to measure results. catalog marketing - ANSWER-With the Internet, more and more catalogs going electronic, Print catalogs still the primary medium, Harder to attract new customers with Internet catalogs.
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direct response TV marketing - ANSWER-Infomercials; Direct-Response Advertising: Home Shopping Channels kiosk marketing - ANSWER-Information and ordering machines generally found in stores, airports, and other locations. Elements of Marketing Communication Mix: Advertising - ANSWER-Any paid non personal presentation and promotion of ideas, goods, or services by an identified sponsor. Signage in ancient times offers evidence of early advertising, Modern ad spending tops $231 billion in U.S. annually, $500 billion worldwide, Business firms, not-for-profit firms, social agencies, and professionals such as doctors and lawyers all advertise, Can reach masses of geographically dispersed buyers, Can repeat a message many times, Is impersonal, one-way communication, Can be very costly for some media types. major marketing decisions - ANSWER-objectives setting: communication & sale objectives > budget decisions: affordable approach, percent of sales, competitive parity & objective and task > message decisions: message strategy & message execution OR media decisions: reach, frequency, impact, major media types, specific media vehicles & media timing > campaign evaluation: communication & sales impact Major Advertising Decisions: Setting Objectives - ANSWER-An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time, Must be measurable, Must be realistic and consistent with other marketing decisions, Can be both direct (e.g. specific behavioral response) or indirect (e.g. attitude change). classified by purpose in setting objectives: - ANSWER-Inform - Introduce new products Persuade - Build selective demand Compare - direct or indirect comparison with competition Remind - keeps consumers thinking about the product Major Advertising Decisions: Setting the Budget - ANSWER-Consider several factors when setting ad budgets: Stage in the PLC, Market share, Level of competition, Ad clutter, Degree of brand differentiation Budget Setting Methods: - ANSWER-Affordable: level management thinks they can afford. Percentage of Sales: percentage of current or forecasted sales or as percentage of unit sales price. Competitive-Parity: match competitors' outlays. Objective and Task: define objectives, determine tasks required to meet those objectives, estimate costs of performing those tasks.
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Major Advertising Decisions: Evaluating Ad Campaigns - ANSWER-Measuring communications effects: Copy testing, Consumer recall, Product awareness, Product knowledge, Product preference - Measuring sales effect: Past vs. current sales comparison, Experimentation Marketing Channel (Distribution Channel) - ANSWER-set of interdependent organizations involved in the process of making a product or service available for use or consumption by consumer or business users. - Channel choices affect other decisions in the marketing mix, A strong distribution system can be a competitive advantage, Channel decisions often (but do not have to) involve long-term commitments to other firms channel includes - ANSWER-all the entities involved with making and selling the product, from raw material producers, to sales people in stores. channel choices affect the 4 p's - ANSWER-product (what can you get to go into product, where can you sell it, what price can you charge for it given that goes into it and what you charge for it, and then what kind of promotions can you use). why use channels? - ANSWER-The use of intermediaries results from their greater efficiency in making goods available to target markets - Offers the firm more than it can achieve on its own through the intermediaries: Contacts, Experience, Specialization, Scale of operation Key Functions of Intermediaries - ANSWER-These functions should be assigned to the channel member who can add the most value for the cost - information, promotion, contact, matching negotiation, physical distribution, financing, and risk taking channel decisions - ANSWER-Not what do you do but who does it: The channel will be most effective when: each member is assigned tasks it can do best, all members cooperate to attain overall channel goals. number of channel levels - ANSWER-The number of intermediary levels indicates channel length: Direct Channels - no intermediaries, Indirect Channels - one or more intermediaries -- Producers lose more control and face greater complexity as more channel levels are added. More complicated the channel: - ANSWER-the harder it is to maintain control. Consumer and Business Channels - ANSWER-Channels can take on a variety of forms, each with its own unique business problems. channel 1: manufacturer > consumer channel 2: manufacturer > retailer > consumer channel 3: manufacturer > wholesaler > retailer > consumer
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channel 4: manufacturer > wholesaler > jobber > retailer > consumer Channel Behavior and Organization - ANSWER-Channels consist of both formal and informal interactions - all work towards building relationships. Important that a firm is just one part of a network --- show network structures; discuss strength of weak ties and why that's important; discuss key positions in network (bridges); discuss both business and personal networks. channel conflict - ANSWER-Occurs when channel members disagree on roles, activities, or rewards - Types of Conflict: Horizontal conflict: firms at the same channel level, Vertical conflict: firms at different channel levels Vertical Marketing System - ANSWER-Consists of producers, wholesalers, and retailers acting as a unified system - One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate. conventional marketing channel - ANSWER-manufacturer > wholesaler > retailer > consumer vertical marketing system - ANSWER-VMS as a way to gain control and avoid conflicts. Corporate --- everything owned by the same company Contractual --- example = franchise Administered --- one firm has a lot of power of the others in the channel e.g. walmart Disintermediation: - ANSWER-Product and service producers bypass intermediaries and go directly to final buyers. Logistics Management: - ANSWER-Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. Considerations: Warehousing, Inventory Management, Transportation ch 11 - ANSWER- What is Retailing? - ANSWER-Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. Types of retailers are classified based upon: - ANSWER-Amount of service they offer, Breadth and depth of product lines, Relative prices charged, How they are organized Self-Service Retailers: - ANSWER-Serve customers who are willing to perform their own "locate-compare-select" process to save money.
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Wholesaling includes - ANSWER-all activities involved in selling goods and services to those buying for resale or business use. Types of Wholesalers - ANSWER-Merchant Wholesalers: An independently owned business that takes title to the merchandise it handles. Brokers: A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation. Agents: A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods. Manufacturers' Sales Branches and Offices: Wholesaling by sellers or buyers themselves rather than through independent wholesalers Retailing Decisions: The 4Ps - ANSWER-Product: Product Assortment: what products and services to offer, Store Atmosphere: the physical feel of the store. Employees Price: Pricing policy must fit target market, positioning, product and service assortment, and competition. Promotion: Advertising, personal selling, sales, public relations etc. Place: Retailers can locate in various types of shopping centers and locations. Location is hugely important!
