Principles of Marketing
Principles of Marketing MKT 3013
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This 6 page Class Notes was uploaded by Mozelle Weber II on Sunday October 25, 2015. The Class Notes belongs to MKT 3013 at University of Oklahoma taught by Suman Basuroy in Fall. Since its upload, it has received 12 views. For similar materials see /class/229231/mkt-3013-university-of-oklahoma in Marketing at University of Oklahoma.
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Date Created: 10/25/15
Chapter 10 What is a Price 7 Factors to consider when setting price 0 Customer perceptions of value 0 Company and product costs 0 Other internal amp external considerations affecting price decisions NOD bovethis Price PriceCeiling ustomerPercepIionsofValue 0mg imemal Marketing strategy objective and mix ema Cons deramns Competitors39 strategies amp prices 39i 739lv uJ us No Pro ts Below this Price Customer Perceptions of Value 7 Understanding how much value consumers place on the benefits they receive from the product amp setting a price that captures the value 0 Value7based pricing buyers perception ratherthan seller39s cost I P ice consumers perceived va 0 Good7value pricing offering just the right combination of quality amp good service at a fair price I Everyday low pricing I High7low pricing 0 Value7added pricing attaching value7added features and services to differentiate a company39s offers and charging higher prices I PricePricing power I Ability to escape price competition ampjustify higher prices amp margins wo losing market share Company amp Product Costs 7 Cost7based pricing 0 involves setting prices based on the costs for producing distributing amp selling the roduct plus a fair rate of return for its effort amp risk 7 Cost7based pricing 0 adds a standard markupto the cost ofthe product Types of Costs Fixed Costs Variable Costs Total Costs 7 7 ckaging 7 Sum of the FCVC for 7 Heat 7 Raw Materials any given level of 7 Interest production 7 Executive salaries Other Internal amp External Considerations affecting Price Decision CostPlus Pricing 0 Unit Cost Variable Cost Fixed Costs Unit Sales 0 Markup Price Unit Cost lDesired return on Sales 0 Costplus pricing adds a standard markup to the cost of the product 0 Benefits I Sellers are certain about costs I Prices are similar in industry and price competition is minimized I Consumers feel it is fair 0 Disadvantages I Ignores demand and competitor prices BreakEven Analysis ampTarget Profit Pricing o BreakEven Analysis the price at which TCTR and there is no profit 0 Target Profit Pricing firm will break even or make the profit it s seeking 0 Unit Volume Fixed Cost Profit Goal Price Variable Cost 0 Sales Unit Volume Price Market amp Demand 0 Before set prices marketer must I Understand relationship between price and demand for its products 0 Competition I Pure competition I Monopolisticcompetition I Oligopolistic competition I Pure monopoly Demand Curve 0 of units the market will buy in a given period at different prices I Demand amp price are inversely related I Higher price lower demand I Luxury goods higher pricehigher demand Price Elasticity of Demand 0 Price elasticity of demand illustrates the response of demand to a change in price I Inelastic demand demand hardly changes when there is a small change in price I Elastic demand demand changes greatly for a small change in price 0 Price elasticity of demand change in guantity demand change in price Chapter 11 New Product Pricing Strategies Market Skimming 0 Setting high price for a new product to quotskimquot revenues layer by layer from those willing to pay the high price 0 Makes fewer but more profitable shares I When to use 0 Product quality and image must support it s higher price 0 Cost of low volume can t be so high they cancel the advantage of charging more 0 Competitors should not be able to enter market easily and undercut price Market Penetration 0 Setting a low initial price in order to quotpenetratequot the market quickly and deeply 0 Can attract large of buyers quickly and win a large market share I When to use 0 Market is highly price sensitive so a low price produces more growth 0 Costs must fall as sales volume rises 0 Competition must be kept out of the market or the effects will be only temporary Segmented Pricing 0 Selling products at 2 or more prices even there is no difference in cost I Customer segment I Product Form I Location Pricing I Time Pricing Pricing Strategies 0 Product Line I Setting price steps between product line items I Offer bags from SEQ1250 o OptionalProduct I Pricing optional or accessory products sold with main product I GPS in car 0 Ca ptiveProduct I Pricing productsthat must be used with the main product I ink for the printer 0 ByProduct I Pricing lowvalue byproducts to get rid of them I Lumber mills Zoos o ProductBundle I Pricing bundles of products sold together I burgers drink and fries Prestige Pricing 0 Pricing at relatively high levels so as to convey an image of high quality or exclusivity OddEven Pricing 0 Odd pricing refers to a price ending with an odd number just under a round number 0 Even Pricing is used to convey high quality Product Line Pricing o Producing or marketing multiple products at different price points 0 Bundling is marketing 2 or more products in a single package for a special price LossLeader Pricing 0 Policy which offers products at prices below or near cost to attract consumers from competitors stores Dynamic Pricing o Adjusting prices continually to meet the characteristics and needs of individual customers and situations airlines PriceQuality Relationship 0 People generally cannot judge product quality accurately I Use cues to infer quality I Perceive higher price to be of a higher quality Legal Considerations 0 Price Fixing I Violation of Sherman AntiTrust Act I Conspiring to restrain trade 0 Price discrimination I Sellers must offer substantially goods to different parties for the same price and terms if the situations are materially the same I Only relates to interstate trade I Must be carried out in a short time I Products must be of like grade and quality Charging of different prices must result in a significant competitive injury I Violation of Robinson Patman Act Illegal for business transactions 0 Exception cost justification computer price matching and no apparent harm to completion I A seller may charge different prices allow weasel room I Predatory Pricing o Intent to destroy business Public Policy Issues in Pricing 0 Shows major public policy issues in pricing I Damaging pricing practices within a given level of the channel prefixing and predatory pricing I Across levels of the channel retail price maintenance discriminatorydeceptive pricing Chapter 12 Supply Chains amp Value Delivery Network Supply Chain Partners 0 Upstream partners include raw material suppliers components parts information finances and expertise to create a product or service 0 Downstream partners include the marketing channels or distribution channels that look toward the customer Supply Chain Views 0 Supply chain llmake and sell view includes the firm s raw materials productive inputs and factory capacity 0 Demand chain llsense and respond view suggests that planning starts with the needs of the target customer and the firm responds to these needs by organizing a chain of resources and activities with the goal of creating customer value Value Delivery Network 0 the firm s suppliers distributors and ultimately customers who partner with each other to improve the performance of the entire system The Nature amp Importance of Marketing Channels Channel members add value 0 Intermediaries offer producers greater efficiency in making goods available to target markets Through their contacts experience specialization and scale of operations intermediaries usually offer the firm more than it can achieve on its own I transform the assortment of products into assortments wanted by consumers I bridging the major time place and possession gaps that separate goods and services from those who would use them I information promotion contact matching negotiation physical distribution financing risk taking of channel members 0 Connected by types of flows I Physical flow of products I Flow of ownership I Payment flow I Information flow I Promotion flow Channel Behavior and Organization 0 Channel Behavior I Marketing channel consists of firms that have partnered for their common good with each member playing a specialized role I Channel conflict refers to disagreement over goals roles and rewards by channel members 0 Horizontal conflict subway having multiple stores near each other 0 Vertical conflict apple opens store Best BuyCircuit city refuse to carry product 0 Conventional Distributions Systems I Consist of one or more independent producers wholesalers and retailers Each seeks to maximize its own profits and there is little control over the other members and no formal means for assigning roles and resolving conflict 0 Vertical Marketing Systems VMS I provide channel leadership and consist of producers wholesalers and retailers acting as a unified system and consist of 0 Corporate marketing systems 0 integrates successive stages of production and distribution under single ownership 0 Contractual marketing systems 0 Consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone The most common form is the franchise organization 0 Franchise organization links several stages in the production distribution process I Manufacturersponsored retailer franchise system I Manufacturersponsored wholesaler franchise system I Service firmsponsored retailer franchise system 0 Administered marketing systems 0 Has a few dominant channel members without common ownership Leadership comes from size and power 0 Horizontal marketing systems I are when two or more companies at one level join together to follow a new marketing opportunity Companies combine financial production or marketing resources to accomplish more than any one company could alone
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