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Chapter 14 lecture notes

by: Aimee Castillon

Chapter 14 lecture notes MBUS303

Marketplace > George Mason University > Marketing > MBUS303 > Chapter 14 lecture notes
Aimee Castillon
GPA 3.61

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About this Document

Here are the notes for Chapter 14
Marketing in the Global Economy
Dr. Joiner
Class Notes
Marketing, businessminor
25 ?




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This 4 page Class Notes was uploaded by Aimee Castillon on Thursday May 5, 2016. The Class Notes belongs to MBUS303 at George Mason University taught by Dr. Joiner in Spring 2016. Since its upload, it has received 10 views. For similar materials see Marketing in the Global Economy in Marketing at George Mason University.


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Date Created: 05/05/16
        Organization name        Student name  Marketing  student email address  MBUS 301  •  Spring 2016    Heading: 4/12/16  Notes: Chapter 14­ Pricing  Top 5 exam questions  Pricing  people got wrong  ­ Lots of names for “price”  60. E  ­ Rent, tuition, fee, fare, rate, interest, toll, premium, honorarium, bribe,  26. D  dues, assessment, retainer, salary, commission, wage, tip…  15. A  ­ “The value exchange for a product in a marketing exchange”  49. A  ­ “The overall sacrifice a consumer is willing to make to acquire  37. D  specific product or service”    ­ Costs​ ­ expenses associated with producing, distributing, and selling a    product  Value ​ is important to pricing  Pricing strategy: Get more from the product than what to give up  strategy  ­ Role of price in marketing mix    ­ Price is usually ranked as one of most important factors in    purchasing decisions    ­ Price is the only marketing mix element that generates revenue  Price = unit revenue  ­ Price is also a signal  I.e. Taco Bell’s pricing  ­ Prices can be either too high and too low  strategy  ­ Prices set too low = may signal poor quality  ­ 3­tier value menu =  ­ Prices set too high = may signal low value   price value =  ­ 5 C’s of Pricing  competitive advantage  ­ Customer: influence of their reactions to prices  ­ “Everyday low  ­ Demand curves: ​ shows how many units of a product  prices”  consumers will demand during a specific period at different  ­ Until  prices  competition  ­ Knowing demand curve enables us to see relationship  adapted   between price and demand  ­ Increased prices  ­ Demand increases as price decreases  ­ Tried to win back  ­ Insert graph  price­sensitive  ­ Microeconomic concept  consumers with  ­ Price elasticity of demand­ measure of customers’ sensitivity  discounts and offers,  (in demand) to changes in price  but it was only  ­ Elastic (price sensitive)  short­term  ­ Inelastic (price insensitive)  ­ Big Bell Value menu  ­ E.g. consumers are less sensitive to price  Price elasticity of demand  increases for necessities  ­ Large reaction  ­ Price elasticity of demand = (% change in quantity  ­ 50% decrease  demanded) / (% change in price)  / 10% increase  ­ Substitution effect  ­ Small reaction  ­ Costs  ­ 5% decrease /  ­ Fixed cost­ ​ cost that remain essentially at the same level,  10% increase  regardless of any changes in the volume of production    ­ I.e. Executive salaries, rent, property taxes    ­ Variable cost­ ​ cost that vary with production value  Contribution margin = ​ price  ­ I.e. raw materials, packaging  ­ unit variable cost  ­ Total cost­ ​ sum of variable and fixed costs  Zipcar = short­term rentals  ­ Break even analysis and decision making  ­ Pay by the hour  ­ Goal: determine how price influences the quantity  instead of pay to rent  needed to be sold at which firm will “Break even”  car for a day  ­ Breakeven point­ ​ point (# of units) at which the costs    of producing a product equals the revenue made from    selling it    ­ Can calculate breakeven point for alternative prices    ­ Breakeven analysis components    ­ Total variable cost = unit variable cost x    quantity    ­ Total cost = fixed cost + total variable cost    ­ Total revenue = price x quantity    ­ Contribution per unit = price ­ unit variable cost    ­ Breakeven points (units) = fixed costs /    contribution per unit    ­ Competition    ­ Often overlooked by marketers    ­ Why it’s crucial for pricing activities?    ­ Channel members    ­ Manufacturers, wholesalers, and retailers often have different    perspectives on pricing strategies    ­ I.e. Moorenko ice cream    ­ Whole Foods charged customers $5.39 (pays about    $3.25)    ­ Company objectives    ­ Firms can be described as having a s ​ pecific orientation ​in the    marketplace that dominates their p ​ricing strategy:     ­ Profit­oriented                          ­     ­ Sales­oriented (I.e. Coke vs. Pepsi)                            ­     ­ Focus on increasing sales volume    ­ Does not always imply setting lowest prices    ­ More concerned with overall market share  Apple iPad  ­ Competitor­oriented  ­ Market penetration  ­ competitive parity  initially (in terms of  ­ Status quo pricing  Apple standards)  ­ NOTE: Value is (again) not part of this pricing  Apple iWatch  orientation  ­ Price skimming  initially  ­ Customer­oriented  ­ Focus on customer expectations    ­ Price set in accordance with customer  Legal and ethical aspects are  perceptions about the value of the  basically pricing practices  product/service  that’s unfair or  ­ VALUE!!!  uncompetitively  ­ Other macro influences on pricing  ­ The Internet and other technologies  ­ Scanners  ­ Mobile technology  ­ Growth of online auctions and marketplaces  ­ I.e. E­bay; Craigslist  ­ Other economic factors  ­ Pricing strategies  ­ EDLP (everyday low pricing) vs. High/low pricing (price sensitivity of  consumers)  ­ EDLP: Accounting primarily for price­sensitive consumers;  not constantly adjusting  ­ High/low pricing: Account for price­sensitive and  price­insensitive consumers; adjusting prices  ­ New product strategies:  ­ Market penetration pricing (“low” price to secure high  volumes)  ­ Price skimming (high price, low volumes­­ skim the profit from  the market)  Legal and ethical aspects of pricing  ­ Deceptive or illegal price advertising  ­ Deceptive reference prices  ­ Bait and switch (i.e. Dell sold laptops for low price)  ­ Predatory pricing  ­ Price discrimination (trade)  ­ Price fixing (collusion)  Chapter 13 article­ airlines  ­ Airline tickets from different areas  ­ Different airports located in different regional economies  ­ Business flyers that go in and out 


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