Chapter 14 lecture notes
Chapter 14 lecture notes MBUS303
Popular in Marketing in the Global Economy
Popular in Marketing
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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