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This 20 page Class Notes was uploaded by an elite notetaker on Thursday August 27, 2015. The Class Notes belongs to MKT 201 at University of Miami taught by Claudia Townsend in Summer 2015. Since its upload, it has received 93 views. For similar materials see Foundations of Marketing in Marketing at University of Miami.
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Exam 2 Chapter 71011121314 Chapter 07 Global Marketing I GROWTH OF THE GLOBAL ECONOMY GLOBALIZATION OF MARKETING AND PRODUCTION Globalization refers to the processes by which goods services capital people information and ideas ow across national borders The globalization of production also known as offshoring refers to manufacturer s procurement of goods and services from around the globe to take advantage of national differences in the cost and quality of various factors of production The General Agreement on Tariffs and Trade GATT facilitates and oversees the growth of global markets their purpose is to lower trade barriers such as high tariffs on imported goods and restrictions on the number and types of imported products that inhibited the free ow of goods across borders The World Trade Organization WTO replaces the GATT but differs in that the WTO is an established institution based in Geneva instead of simply an agreement The International Monetary Fund IMF was conceived in 1944 to promote international monetary cooperation and facilitate the expansion and growth of international trade Helping the IMF is the World Bank Group which is dedicated to fighting poverty and improving the living standards of people in the developing world II ASSESSING GLOBAL MARKETS Economic Analysis Using Metrics They must look at 3 major economic factors 1 Evaluating the General Economic Environment One metrics is the relative level of imports and exports The USA suffers a trade deficit which mean that the country imports more goods than it exports this means that there is greater competition It is better to have a trade surplus which is when exports are greater than imports as it creates for opportunity for local products The most standard metric of output is Gross Domestic Product GDP is defined as the market value of the goods and services produced in a year The Gross National Income GNI consists of the GDP plus the net income earned from investments abroad The Purchasing Power Parity PPP is a theory that starts that if the exchange rates of two countries are in equilibrium a product purchased a product purchased in one will cost the same in the other if expressed in the same currency The Human Development Index HDI is it made of three indicators life expectancy at birth educational attainment and the average income 2 Evaluating Market Size and Population Growth Rate Global population has been growing dramatically since the turn of the twentieth 3 Evaluating Real Income Exam 2 Chapter 71011121314 Firms can make adjustments to an existing product or change the price to meet the unique needs of a particular country market Analyzing Infrastructure and Technological Capabilities Infrastructure is defined as the basic facilities services and installations need for a community or society to function such as transportation and communications systems water and power lines and public intuitions like schools post offices and prisons Three important factors 1 Transportation 2 Distribution Channels 3 Communication 4 Commerce Analyzing Government Actions 1 Tariffs A tariff also called a duty is a tax levied on a good imported into a country They are intended to make imported goods more expensive and this less competitive with domestic product Dumping occurs when a foreign producer sells it s offering in a foreign market at a price less than its production costs to gain market share 2 Quotas A quota designates the maximum quantity of a product that may be brought into a country during a specific time period 3 Boycott A boycott pertains to a group s refusal to deal commercially with some organizations protest against its policies 4 Exchange Control Exchange control refers to the regulation of a country s currency exchange rate and that is the measure of how much one currency is worth in relation to another 5 Trade Agreements They must consider the trade agreements to which a particular country is a signatory or the trading bloc to which it belongs A trade agreement is an intergovernmental agreement designed to manage and promote trade activities for a specific region trading bloc consists of those countries that have signed the particular trade agreement European Union There are 27 member countries of the EU NAFTA United States Canada and Mexico CAFTA United States Costa Rica Dominican Republic El Salvador Guatemala Honduras and Nicaragua Mercosur Argentina Brazil Paraguay Uruguay and Venezuela ASEAN Brunei Darussalam Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand and Vietnam Analyzing Sociocultural Factors Exam 2 Chapter 71011121314 There are two levels of culture Visible Artifacts such as behavior symbols physical settings Easy to recognize Underlining values such as thoughts beliefs and assumptions Hofsede believes cultures differ on five dimensions a Power Distance Willingness to accept social inequality as natural b Uncertaintv Avoidance The extent to which the society relies on orderliness structure to address situations that arise in daily life c Individualism Perceived obligation to and dependence on groups d Masculinity The extent to which dominant values are male oriented e Time Orientation Short term versus long term orientation III CHOOSING A GLOBAL ENTRY STRATEGY Exporting Exporting means producing goods in one country and selling them in another Requires the least financial risk but also allows for only limited return to the exporting firm Franchising Franchising is a contractual agreement between a firm the franchisor and another firm or individual the franchisee A franchise contract allows the franchise to operate a business using the name and business format developed and supported by the franchisor Strategic Alliance Strategic alliances refer to collaborative relationships between independent firms though the partnering firms do not create an equity partnership that is they do not invest in one another Joint Venture A Joint Venture forms when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership control and profits are shared Direct Investment Direct Investment requires a firm to maintain 100 percent ownership of its plants operation facilities and offices in a foreign country often through the formation of wholly owned subsidiaries IV CHOOSING A GLOBAL MARKETING STRATEGY Target Market Segmentation Targeting and Positioning A product service or even a retailer often must be positioned differently in different markets The Global Marketing Mix 1 Global Product or Service Strategies Exam 2 Chapter 71011121314 Sell the same product or service in both the home country market and the host country Sell a product or service similar to that sold in the home country but include minor adaptions Sell totally new products or services 2 Global Pricing Strategies Determining the selling price in the global market place is an extremely difficult task Competitive factors in uence global pricing in the same way they do home country pricing but because a firms products or services may not have the same positioning in the global marketplace as they do in their home country market prices must be adjusted to re ect the local pricing structure 3 Global Distribution Strategies Global distribution networks form compleX value chains that involve middlemen eXporters importers and different transportation system 4 Global Communication Strategies The major challenge in developing a global communication strategy is identifying the elements that need to be adapted to be effective in the global market place Chapter 10 Product Branding and Packaging Decisions V COMPLEXITY OF PRODUCTS AND TYPES OF PRODUCTS A Complexity of Products At the center is the core customer value which defines the basic problem solving benefits that consumers are seeking The associated services also referred to as the augmented product include the nonphysical aspects of the product such as the product warranties financing product support and after sale service The core customer value is usually converted into an actual product that includes brand name packaging and designfeatures B Types of Products Consumer products are products and services used by people for their personal used i Specialty products services are products or services toward which customers show such as a strong preference that they will eXpend considerable effort to search for the best suppliers ii Shopping productsservices are products or services for which consumers will spend a fair amount of time comparing alternatives such as furniture appareletc iii Convenience productsservices are those products or services for which the consumer is not willing to spend any effort to evaluate prior to purchase Exam 2 Chapter 71011121314 iv Unsought productsservices are products consumers either do not normally think of buying or do not know about VI PRODUCT MIX AND PRODUCT LINE DECISIONS The complete set of all products offered by a firm is called its product miX consists of various product lines which are groups of associated items that consumers then to use together or think of as part of a group of similar products A Change Product MiX Breadth Breadth represents a count of the number of product lines offered by the firm 1 Increase Breadth Firms often add new product lines to capture new or evolving markets and increases sales 2 Decrease Breadth Sometimes it is necessary to delete the entire product lines to address changing market conditions or meet internal strategic priorities B Change Product Mix Depth Depth equals the number of products within a product line 1 Increase Depth Firms might add items to address changing consumer preferences or preempt competitors while boosting sales 2 Decrease Depth It is also necessary to delete products within a product line to realign the firm s resources C Product Line Decisions for Services Many of the strategies used to make product line decision for physical products can also be applied to services VII BRANDING A company lives or dies based on brand awareness Consumers cannot buy products that they that they know eXist Brand Name URL s Logo s amp Symbols Characters Slogans and Sounds is what makes a brand A Value of Branding for the Customer and the Marketer 1 Brands Facilitate Purchasing Consumers often easily recognize brands and because they signify a certain quality level and contain familiar attributes brands help consumers make quick decisions especially about their purchases 2 Brands Establish Lovaltv Over time and with continued use consumers learn to trust certain brands 3 Brands Protect from Competition and Price Competition Strong brands are somewhat protected from competition from other firms and price competition because some brands are more established than the other Exam 2 Chapter 71011121314 4 Brands Reduce Marketing Costs Firms with well known brands can spend relatively less on marketing them firms with little known brands because the brand sells itself 5 Brands Are Assets For firms brands are also assets that can be legally protected through trademarks and copyrights and this constitute a unique form of ownership 6 Brands Impact Market Value Having well known brands can have a direct impact on the company s bottom line B Brand Equity The value of the brand translates into brand equity or the set of assets and liabilities linked to a brand that add to or subtract form the value provided by the product or service A licensed brand is one for which there is a contractual arrangement between firms whereby one firm allows another to used its brand in exchange for a negotiated fee 1 Brand Awareness measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion about that brand 2 Perceived Value the relationship between a product or service s benefits and its cost 3 Brand Associations re ect the mental links that consumers make between a brand and its key product attributes such as logo slogan or famous personality 4 Brand Lovaltv occurs when a consumer buys the same brand s product or service repeatedly over time rather than buy from multiple suppliers within the same category VIII BRANDING STRATEGIES A Brand Ownership 1 Manufacturer Brands also known as national brands are owned and managed by the manufactures 2 Private Label Brands also called store brands house brands or own brands are products developed by retailers Premium brands offer the consumer a private label that is comparable to or even superior to a manufacturer s brand quality sometimes with modest price savings Generic brands target price sensitive segment by offering a no frills product at a discount price Copycat brands imitate the manufacturer s brand in appearance and packaging generally are perceived as lower quality and are offered at lower prices Exam 2 Chapter 71011121314 3 Exclusive Co brands is a brand that is developed by a national brand manufacturer often in conjunction with a retailer and is sold exclusively by the retailers B Naming Brands and Product Lines 1 Corporate or Family Brands A firm can use its own corporate name to brand its entire product lines and products 2 Corporate and Product Line Brands 3 Individual Brands a firm can use individual brand names for each of its products 4 Choosing a Name C Brand Extension A brand extension refers to the use of the same brand name in a different product line A line extension is the use of the same brand name within the same product line and represents an increase in a products line depth D Brand Dilution Brand dilution occurs when the brand extension adversely affect consumer perceptions about the attributes the core brand is believed to hold E Cobranding Co branding is the practice of marketing two or more brands together on the same package promotion or store F Brand Licensing Brand licensing is a contractual arrangement between firms whereby one firm allows another to use its brand in exchange for a negotiated fee G Brand Repositioning Brand repositioning or rebranding refers to a strategy in which marketers change a brands focus to target new markets or realign the brand s core emphasis with changing market preferences IX PACKAGING The primary package is the one the consumer uses such as the toothpaste tube The secondary package is the wrapper or exterior carton that contains the primary package A Product Labeling Labels on products and packages provide information the consumer needs for his or her purchase decision and consumption of the product Exam 2 Chapter 71011121314 Chapter 11 Developing New Products X WHY DO FIRMS CREATE NEW PRODUCTS Innovation refers to the process by which ideas get transformed into new offerings including products services processes and branding concepts that will help firms grow Changing Customer Needs when they add products services and processes to their offerings firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers or simply by keeping customers from getting bored with the current product or service offering Market Saturation The longer a product eXists in the marketplace the more likely it is that the market will become saturated Managing Risk through Diversity Through innovation firms often create a broader portfolio of products which help them diversify their risk and enhance firm value better than a single product can Fashion Cycles In industries that rely on fashion trends and experience short product like cycles most sales come from new products Improved Business Relationships New products do not always target end consumers sometimes they function to improve relationships with suppliers XI DIFFUSION OF INNOVATION Diffusion of innovation is the process by which the use if an innovation spreads throughout a market group over time and across various categories of adopters A pioneer or breakthroughs are new products that establish a completely new market or radically change both the rules of competition and consumer preferences in a market They have the advantage of being first movers as they are the first to create the market and become recognizable and get a larger market share Innovators Are those buyers who want to be the first on the block to have the new product or service Early Adopters They don t like to 353 M W1m take as much risk as innovators do T a 3 w 95 g 3 ng 5mm 3 but instead wait and purchase the product after careful review 5 g 5 Early Majority Represent E E 391 Equot approximately 34 of the in population it is crucial because few pmwmg 39 n new products and services can be E i profitable until this large group buys E gs D them jiiiU 39E u3939 E 39 E Laj idw Exam 2 Chapter 71011121314 Late Majority the last group of buyers to enter a new product market Laggards These consumers like to avoid change and rely on traditional product until they are not longer available Using the Diffusion of Innovation Theory 1 Relative Advantage IF a product or service is perceived to be better than substitutes then diffusion will be relatively quick 2 Compatibility A diffusion process may be faster or slower depending on various consumer features including international cultural differences 3 Observability When products are easily observed their benefits or uses are easily communicated to others which enhances the diffusion process 4 Complexity and Trialability Products that are relatively less compleX are also relatively easy to try XII HOW FIRMS DEVELOP NEW PRODUCTS A Idea Generation 1 Internal Research and Development Many firms have their own RampD departments in which scientist s work to solve compleX problems and develop new ideas 2 RampD consortia They are joining consortia or groups of other firms and institutions possibly including government and educational institutions to eXplore new ideas or obtain solutions for developing new products 3 Licensing New scientific and technological products firms buy the rights to use the technology or ideas from other research intensive firms through a licensing agreement 4 Brainstorming Firms often engage in brainstorming sessions during which a group works together to generate ideas 5 Outsourcing Companies have trouble moving through these steps alone which prompts them to turn to outside firms 6 Competitors Products A new product entry by a competitor may trigger a market opportunity for a firm which can use reverse engineering to understand the competitor s product and then bring an improved version to the market 7 Customer input Listening to the customer in both B2B and B2C markets is essential for successful idea generation Exam 2 Chapter 71011121314 B Concept Testing Concept testing refers to the process in which a concept statement is presented to potential buyers or users to obtain their reactions C Product Development Product development or product design entails a process of balancing various engineering manufacturing marketing and economic consideration to develop a products form and features or a service s features A prototype is the first physical form or service description of a new product Alpha testing is when the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended Beta testing uses potential consumers who examine the product prototype to determine its performance and potential problems specific to its use D Market Testing 1 Premarket Tests Firms conduct premarket tests before they actually bring a product or service to market to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers 2 Test Marketing A method of determining the success of potential of a new product test marketing introduces the offering to a limited geographical area prior to the national lauch E Product Launch 1 Promotion Trade promotions which are promotions to wholesalers or retailers to get them to purchase the new products often combine introductory price promotions special events and personal selling Introductory price promotions are limited duration lower than normal prices designed to provide retailers with an incentive to try the products 2 Place The manufacturer coordinates the deliver and storage of the new products with its retailers to ensure that they are available for sale when the customer wants them at the stores the customer is eXpecting to find them and in sufficient quantities to meet demand 3 Price Manufacturers must decide at what price they would like products to sell to consumers on the basis of factors Manufacturers suggested retail price MSRP is a specific price suggested by retailers 4 Timing The timing of the launch may be important depending on the product F Evaluation of Results After the product has been launched marketers must undertake a critical post launch review to determine whether the product and its launch were a success or failure and what additional resources or change to the marketing miX are needed if any 10 Exam 2 Chapter 71011121314 XIII THE PRODUCT LIFE CYCLE The product life cycle defines the stages the products move through as they enter get established in and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning A Introduction Stage The introduction stage for a new innovative product or service usually starts with a single firm and innovators are the ones to try the new offering B Growth Stage The growth state of the product life cycle is market by a growing number of product adopters rapid growth in industry sales and increases in both the number of competitors and the number of available product versions C Maturity Stage The maturity stage of the product life cycle is characterized by the adoption of the product by the late majority and intense competition for market share among firms 1 Entry into New Markets or Market Segments because the market is saturated at this point firms may attempt to enter new geographical markets including international markets that may be less saturated 2 Development of New Products despite market saturation firms continually introduce new products with improved features or find new uses for eXisting products because they need constant innovation and product proliferation to defend market share from intense competition 3 Pmdme ames I truerj Maturity saline D Decline Stage Firms with products in the decline stage either position themselves for a niche segment of diehard consumers or those with special needs or completely eXit the market Peak Peak to declining Sales Low Rising Profits Typical consumers Negative or Low Rapidly Rising Innovators Early Adopters and Late majority early majority High number of competitors and competitive products One or few Few but increasing Competitors 11 namm Decli Decli Lagg Low com1 prod1 Exam 2 Chapter 71011121314 E The Shape of the Product Life Cycle Curve The product life cycle curve is assumed to be hell shaped with regard to sales and profit However each product or service category has its own individual shape F Strategies Based on Product Life Cycle Some Caveats The most challenging part of the product life cycle is that not all managers know what shape the curve will take Chapter 12 Services The Intangible Product XIV SERVICES MARKETING DIFFERS FROM PRODUCT MARKETING A Intangible The most fundamental difference between a product and a service is that services are intangible they cannot be touched taste or even seen like a pure product can B Inseparable Production and Consumption Unlike a pair of jeans that may have been made six months prior to the purchase halfway around the world services are produced and consumed at the same time that is the service and its consumption are inseparable C Variable The more humans are needed to provide a service the more likely there is to be variability in the services quality D Perishable Services are perishable in that they cannot be stored for use in the future XV PROVIDING GREAT SERVICE THE GAPS MODEL A The Knowledge Gap Understanding Customer Expectations The knowledgeable gap re ects the difference between customer s expectations and the firm s perception of those customers expectations 1 Evaluating Service Quality Using Well Established Marketing Metrics To meet or exceed customer s expectations marketers must determine what those expectations are B The Standards Gap Setting Service Standards The standard s gap pertains to the difference between the firm s perception of the customer s expectations and the service standards it sets 12 Exam 2 Chapter 71011121314 1 Achieving Service Goals through Training To consistently deliver service that meets customer s expectations firms must set specific measurable goal 2 Commitment to Service Quality Service providers take their cues from managements If managers show a good example then the other employees will follow and do the same C The Delivery Gap Delivering Service Quality The delivery gap is the difference between the firm s service standards and the actual service it provides to customers 1 Empowering Service Providers In this context empowerment means allowing employees to make decisions about how service gets provided to customers 2 Providing Support and Incentives A service provider s job can often be difficult especially when customers are unpleasant or less than reasonable they use both emotional stand behind their decisions and instrumental equipment to deliver service properly support 3 Use of Technology Technology has become an increasingly important facilitator of the delivery of services D The Communications Gap Communicating the Service Promise The communication gap refers to the difference between the actual services provided to customers and the service that the firm s promotion program promises XVI SERVICE RECOVERY A Listening to the Customer Firms often don t find out about service failures until the customers complain B Finding a Fair Solution 1 Distributive Fairness pertains to a customer s perception of the benefits he or she received compared with the costs 2 Procedural Fairness refers to the perceived fairness of the process used to resolve them C Resolving Problems Quickly The longer it takes to resolve a service failure the more irritated the customer will become and the more people he or she is likely to tell about the problem Chapter 13 13 Exam 2 Chapter 71011121314 Pricing Concepts for Establishing Value XVII THE FIVE Cs OF PRICING A Company Objectives 1 Profit Orientation Profit Orientation is when a firm specifically by focusing on target profit pricing maximizing profits or target return pricing They use target profit pricing when they have a particular profit goal as there overriding concern The maximizing profits strategy relies primarily on economic theory 2 Sales Orientation Firms using a Sales Orientation to set prices believe that increasing sales will help the firm more than will increasing profits Premium pricing means the firms deliberately prices a product above the prices set for competing products to capture those customers who always shop for the best or for whom price does no matter what 3 Competitor Orientation When a firm takes a competitor orientation they strategize according to the premise that they should measure themselves primarily against their competition Competitive parity is when they set prices that are similar to those of their competitors Status quo pricing means changing prices only to meet those of the competition 4 Customer Orientation A customer orientation explicitly invokes the concept of value They will make sure to focus on customer satisfaction and price the product accordingly B Customers 1 Demand Curves and Pricing A demand curve shows how many units of a product or service consumers will demand during a specific period of time at different prices 2 Price Elasticity of Demand Price elasticity of demand measures how changes in a price affect the quantity of the product demanded Change in quantity demanded Price elasticity of demand Change in price Old Demand New Demand Change in quantity Old Demand Old price New Price 14 Exam 2 Chapter 71011121314 Change in price Old Price When a product is price sensitive it means it is elastic 1 or less this is when there is a change in price there will be a change in demand When a product is price insensitive it means it is inelastic 1 or greater this is when there is a change in price there will be no change in demand 3 Factors In uencing Price Elasticity of Demand Income Effect refers to the change in the quantity of a product demanded by consumers due to a change in their income Substitution Effect refers to consumer s ability to substitute other products for the focal brand Cross Price Elasticity the percentage change in the quantity of Product A demanded compared with the percentage change in price in Product B Complementary products are products whose demands are positively related such that they rise or fall together Substitute products changes in their demand are negatively related this means that a percentage increase in the quantity demanded for Product A results in a percentage decrease in the quantity demanded for Product B C Costs 1 Variable Costs are those costs primarily labor and materials that vary with production volume It is a cost that varies on the output of the firm 2 Fixed Costs are the costs that remain essentially at the same level regardless of any changes in the volume of production 3 Total Cost is simply the sum of the variable and fixed costs E D Break Even Analysis and Decision Making A useful technique that enables managers to examine the re ationships among cost price revenue and profit over different levels of production and sales is called break even analysis The break even point is the point at which the number Of units sold generates just enough revenue to equal total cost P BreakEv n F d t Total Variable Cost Variable cost per unit X Quantity L El Fi t Total Cost Fixed Cost Total Variable Cost a Vari ibl Eu 5 FihZE39IEI E i39li Total Revenue Price X Quantity Contribution per unit Price Variable Cost Fixed Costs 15 utpui Exam 2 Chapter 71011121314 BreakEven Point Contribution per Unit Fixed Costs BreakEven Point for specific target Contribution per Unit E Competition Monopoly One firm controls the market Oligopoly A handful of firm s control of the market Monopolistic Competition Many firms selling differentiated products at different prices Pure Competition Many firms selling commodities for the same prices F Channel Members XVIII MACRO INFLUENCES ON PRICING A The Internet The shit among consumers to acquiring more and more products services and information online has made them more price sensitive and opened new categories of products to those who could not access them previously B Economic Factors Disposable income and status consciousness have merged and impacted pricing decisions Cross Shopping is the pattern of buying both premium and low prices merchandise or patronizing both expensive status oriented retailers and price oriented retailers Chapter 14 Strategic Pricing Methods XIX CONSIDERATIONS FOR SETTING PRICE STRATEGIES 16 Exam 2 Chapter 71011121314 A Cost Based Methods Cost based pricing methods determine the final price to charge by starting with the cost Relevant costs and a profit are added and this total amount is divided by the total demand to arrive at a cost plus price B Competition B ased Methods Competitor based pricing method means they may set their prices to re ect the way they want consumers to interpret their own prices relative to the competitors offerings C Value Based Methods Value based pricing methods include approaches to setting prices that focus on the overall value of the product offering as perceived by the consumer 1 Improvement Value Method represents an estimate of how much more consumers are willing to pay for a product relative to other comparable products 2 Cost of Ownership Method consumers may be willing to pay more for a particular product because over its entire lifetime it will eventually cost less to own than a cheaper alternative XX PRICING STRATEGIES A Everyday Low Pricing EDLP With an everyday low pricing EDLP strategy companies stress the continuity of their retail prices at a level somewhere between the regular non sale price and the deep discount sale prices their competitors may offer 1 Odd Pricing is when the price ends in odd numbers B HigMow Pricing HigMow Pricing relies on the promotion of sales during which prices are temporarily reduced to encourage purchases 1 Reference Pricing the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process C EDLP and Highlow Strategies are In uenced by Price Quality Relationships Whether consumers prefer sellers offering EDLP or a highlow price strategy depends on how those consumers evaluate prices and quality Price lining is when marketers establish a price oor and a price celling for an entire line of similar products and then set a few other price points in between to represent distinct differences in quality XXI NEW PRODUCT PRICING A Market Penetration Pricing 17 Exam 2 Chapter 71011121314 Market Penetration Pricing is when they set the initial price low for the introduction of the new product or service in order to attract more consumers B Price Skimming Price Skimming is when products have a high price to attract early adopters and put a premium price to have the innovation first XXII PRICING TACTICS Pricing Tactics offer short term methods to focus on select components of the five C s A Pricing Tactics Aimed at Consumers 1 2 Markdowns are the reductions retailers take on the initial selling price of the product or service Quantity Discounts for Consumers the most common implementation of a quantity discount at the consumer level is the size discount Seasonal Discounts are prices reductions offered on products and services to stimulate demand during off peak seasons Coupons offer a discount on the price of specific items when they re purchased Rebates provide another form of discounts for consumers off the final selling price Leasing consumers pay a fee to purchase the right to use a product for a specific amount of time Price Bundling practice of selling more than one product for a single lower price Leader Pricing is a tactic that attempts to build store traffic by aggressively pricing and advertising a regularly purchased item often priced at or just above the store s cost B Business to Business Pricing Tactics and Discounts Seasonal Discounts a seasonal discount is an additional reduction offered as on incentive to retailers to order merchandise in advance of the normal buying season Cash Discounts a cash discount reduces the invoice cost if the buyer pays the invoice prior to the end of the discount period Allowances advertising allowance offers a price reduction to channel members if they agree to feature the manufacturers product in their advertising and promotional efforts Slotting allowances are fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products Ouantitv Discounts a quantity discount provides a reduced price according to the amount purchased A cumulative quantity discount uses the amount 18 Exam 2 Chapter 71011121314 purchased over a specified time period and usually involved several transactions A noncumulative quantity discount is based only on the amount purchased in a single order 5 Uniform Delivered versus Zone Pricing a uniform delivered pricing the shipper charges on rate no matter where the buyer is located which makes things very simple for both the seller and buyer Zone Pricing sets different prices depending on a geographical division of the delivery areas XXIII LEGAL AND ETHICAL ASPECTS OF PRICING A Deceptive or Illegal Price Advertising 1 Deceptive Reference Prices creates reference points for the buyer against which to compare the selling price 2 Loss Leader Pricing is when stores price products lower than the price bought to attract more customers 3 Bait and Switch is when the store lures customers in with a very low price on an item only to aggressively pressure these customers into purchasing a higher priced model B Predatory Pricing Predatory Pricing is when a firm sets a very low price for one or more of its products with the intent to drive competition out of business C Price Discrimination Price Discrimination is when firms sell the same product to different resellers at different prices D Price Fixing Price Fixing is the practice of colluding with other firms to control prices Horizontal price fixing occurs when competitors that produce and sell competing products or services collude or work together to control prices effectively taking price out of the decision process for consumers Vertical price fixing occurs when parties at different levels of the same marketing channel agree to control the prices passed on to consumers 19 Exam 2 Chapter 71011121314 20
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