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Principles of Marketing Notes Week 11

by: Kelsey Bixler

Principles of Marketing Notes Week 11 MKTG 3310 - 001

Marketplace > Auburn University > Marketing > MKTG 3310 - 001 > Principles of Marketing Notes Week 11
Kelsey Bixler
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About this Document

Notes for Principles of Marketing week 11 (March 28-31).
Principles of Marketing
Jeremy Scott Wolter
Class Notes
Principles, Marketing, Wolter, auburn
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This 3 page Class Notes was uploaded by Kelsey Bixler on Sunday April 3, 2016. The Class Notes belongs to MKTG 3310 - 001 at Auburn University taught by Jeremy Scott Wolter in Fall 2015. Since its upload, it has received 70 views. For similar materials see Principles of Marketing in Marketing at Auburn University.

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Date Created: 04/03/16
Principles of Marketing Week 11 March 29, 2016  Appendix 1, 1.1 to 1.11  Appendix 2- 1.2 to 1.5  Price Elasticity= % change in quantity demand/ % change in price- If the price of a product changes from $5.00 to $7.50 and, as a result,  demand falls from 500,000 units to 300,000 units, what is this product’s price  elasticity?  (300­ 500)/500 (­200)/500 ­.4 ­40% Price % chg­ ($7.5­ $5)/$5 (2.5/ 5 .5 50% elasticity= ­40%/ 50%= ­.8  Total cost= total variable costs + total fixed costs  Unit cost= unit variable cost=total fixed cost/unit sales  Unit cost= (total variable cost/ unit sales) = total fixed cost/unit sales  Unit contribution margin= price­ unit variable cost/ price   If the price of a product is $14.00 and the unit variable cost is $10.00, what is the unit contribution margin? UMC (14­10)/14 4/14 .286 answer =29%  Dollar mark up= selling­ cost  Markup % of cost= dollar markup/ cost  Markup % of price= dollar markup/ price  Supposed a company purchases clothing for $15 and sells it for$75. What  is the markup percentage of cost and price?  Supposed a company purchases sausage for $2 and sells it for $6.What  is the markup percentage of cost and price? % of markup %= 66.7%  Markup price= unit cost/ (1­desired return on sales)  Supposed a company wants to earn a 40% markup on sales for  product that costs $75. What is the necessary markup price? Markup price  =75 /1­.40 markup price= 75/ .6 markup price  Answer= $125   Supposed a company wants to earn a 10% markup on sales for a product  that costs $225. What is the necessary markup price? Answer= $250  Supposed a company wants to earn a 20% markup on sales for a product  when total fixed costs are $5,000, total variable costs are $20,000, and the  company produces 2,000 units during this timeframe. What is the  necessary markup price? Answer $15.63  MARKUP CHAIN: DEMAND­BASED PRICING  Markup chain price =  Retail price − retailer margin − wholesaler margin  Retailer margin = Retailer price x retailer margin percentage  Wholesaler margin = Wholesaler price ∗ wholesaler margin percentage  Manufacturer price = Wholesaler price − wholesaler margin  Wholesaler price = Retailer price − retailer margin  Suppose retailers for a certain product typically expect a 20% markup and  wholesalers typically expect a 30% markup and a manufacturer expects a product to sell well at $250. What price can the manufacturer sell to the wholesaler to achieve  the $250 retail price? Answer= whole sale price (200) –60 Manufacture price= $140  Suppose retailers for a certain product typically expect a 10% markup and  wholesalers typically expect a 25% markup and a manufacturer expects a product to sell well at $250. What price can the manufacturer sell to the wholesaler to achieve  the $250 retail price? Answer= $168.75 March 31, 2016  Analysis to determine the unit volume and dollar sales needed to be profitable  given a particular price and cost structure Break­even point = Fixed cost / (Price – Unit variable cost)  BEP is the quantity at which total revenue = total cost  Total revenue = Total cost(Price * Quantity) = Total cost  (Price * Quantity) =   Fixed cost + (UVC * Quantity)  (Price * Quantity) –   (UVC * Quantity)   = Fixed cost  Quantity *   (Price – UVC) = Fixed cost  Quantity = Fixed cost /   (Price – UVC) What are we trying to figure out? What number of units do we need to sell in  order to break even.   What is the breakeven point for a product that has $3,000 in fixed costs, $2 in unit variable cost, and is priced at  $4?  $1, 500 What is the breakeven point for a product that has $10,000 in fixed costs, $175 in unit variable cost, and is priced at $200? Answer= 400   Let’s say we get more equipment­ this will change the break even point  Example­ from slides­ increase BEP by 3,000 units – in this case the new  production method has a potential for more profit­ but at more of a risk  Profit difference­ figure out revenue (price x quantity)­ cost (fixed x variable x  quantity) for original and new product method.   Total rev­ total cost= 50,000­42,500= 7500  New­ 50,000­40,000= 10,000 so more profit potential  Psychological Process Reference prices› Buyers prices carry in their minds and refer to when they look  at a given price.  Processing Fluency› The ease in which consumers process information.  Priming› When a stimulus object influences reactions to a post­stimulus object­  Differently social identities in different situations can be affected by products.   Odd vs Even numbers in pricing­ ex­ Bat Man products­ $24.96 etc­ when we  look at prices we are generally lazy­ we process the number to the left and ignore  the rest­ 24.99 looks $1 cheaper than 25  Decoys­Ted talks­when given options­ if you give people a slightly less attractive  version of an option­ the originally option looks significantly better. 3 options­  option1, option 2, more expressive/worse version of option 2 (decoy)­ now the  less expensive version of option 2 looks significantly better.  Price sizes­ the size creates a different magnitude of the cost­ the Bigger the price  the more it seems to cost. People react to smaller prices more favorably    Price placement­ placing the price higher up on the page­ we view it as higher in  price­ we as humans naturally associate up as more. Higher magnitude. We  associate smaller with left­ best placement of price is bottom left  Preciseness­ we associate preciseness with smaller numbers­ things sell better  when prices are taken all the way to the decimal.   Kong dog toy experiment­ If people are exposed to a large number­ they react   better to numbers that are smaller­ we start overestimating   Shoes­ bottom left, small font, being number at the top of the page  Tiffany diamond ring­ very small print because its $12,000­ irrational decision  For test you’ll be given an example­ point out the strategy that is being used.   Pain of payment­ it is painful to give money­ try to distance yourself from money­ ex­ removing $ signs from receipts. 


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