Term
| What are the Four Internal Factors of Price |
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Definition
1. To maximize profit
2. To gain market share
3. To infer the level of quality
4. To Survive |
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Term
| What are the three External Factors of Price |
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Definition
1. Demand for your product
2. Competition- competitor's prices, strength of competition
3. Economy- cost of components, economic conditions |
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Term
Define Price Elasticity AND
1. Elastic
2. Inelastic |
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Definition
-tells us how much the demand for a product will change with a change in price
-(% change in quantity demanded of a good/% change in price of a good)
1. larger change in quantity demanded, very price sensitive-> consumer buy more or less of a product when the price changes-> have many substitutes
-Example- bottled water
-E is greater than 1.0
2. an increase or decrease in price will not significantly affect demand -Example- cigarettes, medicine, and textbooks
-E is less than 1.0 |
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Term
Elasticity of demand-
1.Price goes down, revenue goes up=
2.Price goes down, revenue goes down=
3.Price goes up, revenue goes up=
4.Price goes up, revenue goes down= |
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Definition
1. ELASTIC
2. INELASTIC
3. INELASTIC
4. ELASTIC |
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Term
| What is Unitary elasticity? |
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Definition
| an increase in sales exactly offsets a decrease in prices, and revenue is unchanged |
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Term
Markup Pricing FORMULAS:
1.Mark up on selling price=
2.Cost
3.Price |
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Definition
1.(selling price- cost)/(selling price)
2. (1-markup on selling price)(selling price)
3. cost/(1-markup on selling price) |
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Term
MARK UP PRICING
-Selling Price |
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Definition
Markup in dollars + Cost;
for determining markup percentage, simply calculate what percentage of the selling price is markup. If cost is $50 and selling price is $200, then markup percentage must be 75% ($150/200 is markup) – here are sample problems that will be similar to those on the exam |
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Term
MARK UP PRICING EXAMPLES:
1.What would the retailer’s selling price be, given the retailer’s cost is $200, and the retailer’s markup on selling price is 50%? |
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Definition
| 1.The answer must be $400. 50% of the selling price is markup, therefore 50% of the selling price must be cost. |
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Term
MARK UP PRICING EXAMPLES:
Given the manufacturer’s selling price is $100 and the manufacturer’s cost is $35, what would the manufacturer’s markup on selling price be? |
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Definition
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Term
| Give the formula for Break-even Pricing |
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Definition
FC/(SP-VC) -> IN UNITS -IN dollars= BEP units x SP
FC= fixed cost
SP= selling price
VC= variable cost |
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Term
BREAK EVEN EXAMPLE:
Company X sells products to retailers for $30. It costs the company $20 to make each video game. The total fixed costs for plant operation is $20,000. How many products does Company X need to sell to break even? |
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Definition
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Term
| What is Profit Maximization? |
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Definition
| -where marginal cost=marginal revenue |
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Term
| What are other Determinants of Price? |
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Definition
Competition- high prices may induce firms to enter the market
-Can lead to price wars
-Global competition may force firms to lower prices |
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Term
| what are the Distribution strategies? |
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Definition
Selling against the brand (slide 17, 6.3)- stocking well know branded items at high prices in order to sell store brands at discounted prices
-How to set a price-
-Establish pricing goals
-Estimate demand, costs, and profits
-Choose a price strategy
-Fine tune with pricing tactics |
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Term
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Definition
-Establish pricing goals
-Estimate demand, costs, and profits
-Choose a price strategy
-Fine tune with pricing tactics |
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Term
IN New Product Pricing Strategies, (1 of 3)
What is Market or Price Skimming? |
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Definition
innovators and early adopters, high intial price
-product outperforms others
-Early adopters value product
-Demand is inelastic
-Expected demand can’t be met
-High quality is desired position
-EX- When the Iphone came out, it was priced at $600
Premium- high price, high quality
Overcharging- low quality, high price |
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Term
IN New product pricing strategies, (2 of 3)
What is Market Penetration? |
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Definition
set a relative low price compared to competition
-Higher volume reduces cost -Low price deters competitors -Demand is elastic
-Buyers are price sensitive -Competitor imitation possible
Good-value- high quality, low price
Economic- low quality, low price |
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Term
IN New product pricing strategies,
What is the third element (3 of 3)? |
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Definition
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Term
| What are the three things in Product Mix Pricing Strategies? AND Define each. |
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Definition
o Portfolio Pricing- company creates several different versions of product at different
price points
-Example- Hotels have different prices for different rooms
o Captive- you buy the primary unit then you pay for the different parts that come with
that unit
-Example- you buy an XBOX then you buy the games that go with that system
o Price bundling- package deal, combine related goods, sell for one price
Example- Microsoft office or value meal at McDonalds |
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Term
| What are the 7 things In Price Adjustment Strategies? Define each. |
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Definition
o Discounts/Allowances- pay cash upfront, buy in bulk, buy during non-peak times
o Flexible/variable- different segments pay different rates Ex.- Student discount, senior
discount
o Psychological-
-99 principle- an item that is 399.99 seems cheaper than $400 dollars -Reference pricing- what would you expect to pay for a product category? -Unit pricing- states price in a recognized unit of measure
o Single price- everything is $1
o Bait- illegal, we are promoting a product at a certain price point but we aren’t selling
that product at that price
o Two-part-you pay a fixed cost and variable
-Ex- Country club- you pay a yearly fee and you pay for food at the country club
o Loss leader- imply that we are taking loss relative to the amount of product that we
would normally expect to sell this product for
-Ex.- Best Buy used this strategy, they sold CDs for cheap relative to Sam Goodie and other companies, this brought customers in and the customers would buy other products as well |
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Term
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Definition
- price sensitive, we don’t see a the difference between brands
-When a decrease in price on one product results in a decrease in sales of a second product, the products are SUBSTITUTES |
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Term
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Definition
| - products that go together, Ex.- Peanut butter and jelly |
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Term
| What is a Marketing Channels? |
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Definition
- a set of interdependent organizations that ease the transfer of ownership
as products move from producer to business user or consumer |
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Term
| What is Contact Efficiency? |
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Definition
| - you get to compare and contrast different brands at one location |
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Term
| Name the four Designing a Marketing Channel |
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Definition
1. Analyze consumer needs
2. Establish channel objectives
3. Identify major channel alternatives
4. Evaluate major channel alternatives |
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Term
| Name the four Benefits to Consumers |
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Definition
-Intermediaries provide variety in terms of: 1. Product sizes (what)
2. Assortment of goods (what)
3. Location (where)
4. Hours of operation (where) |
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Term
| What are the two Logistics and trends? |
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Definition
o Physical Distribution- process of carrying goods to customers which includes
transportation and warehousing
o Warehousing- technology is becoming important-RFID |
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Term
| What are the three Channel Functions? |
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Definition
1. Transactional functions- contracting, promotion, negotiating, risk taking
2. Logistical functions- physically distributing, storing, sorting
3. Facilitating functions- researching, financing |
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Term
Levels of Intermediaries-
1. Conventional channel |
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Definition
linear relationship between producer, wholesaler, retailer,
consumer |
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Term
Levels of Intermediaries-
2. Vertical marketing system |
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Definition
| all three entities work together to establish the best route distribution to the consumer |
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Term
Channel Strategies
What is Multiple Channels? |
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Definition
| -producer can chose who to sell to, some sell directly to the consumer, some sell directly to retailer, and some sell to the wholesaler |
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Term
Intensity of Distribution
1. Intensive-
2. Selective-
3. Exclusive- |
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Definition
1. achieve mass market selling, convenience goods, many intermediaries
2. work with selected intermediaries, shopping and some specialty goods, several
intermediaries
3. work with single intermediary, specialty goods and industrial equipment, one
intermediary |
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Term
| What are the five Modes of Transportation? |
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Definition
1. Air- highest cost, shortest lead time, best traceability
2. Water- cheapest, longest lead time
3. Rail- cheap
4. Pipeline- reliable
5. Truck- best available |
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Term
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Definition
| the advertising and promotional strategy are geared towards distribution partners to encourage them to promote your product |
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Term
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Definition
| advertising and promotional strategy geared towards your consumer-Ex- commercial on TV |
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Term
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Definition
| all activities involved in selling goods directly to the final customer for their use |
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Term
| What are the 8 Types of Retailers? |
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Definition
1. Specialty store- Sports Authority
2. Department store- Macys
3. Supermarket- Jewel
4. Convenience store- 711
5. Discount store- Wal-mart
6. Off-price retailer- TJ Max, Marshalls
7. Superstore- Best buy, Home Depot
8. Online retailer- Amazon |
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Term
| What is Automated Vending? |
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Definition
| the vending machine brings the store to you |
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Term
| What is Direct Retailing? |
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Definition
| when the salesperson comes right you or your door- Ex.- Girl scout cookies |
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Term
| what is Direct Marketing? |
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Definition
| - marketers contact you through the mail or telephone |
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Term
| What are the Retailing Strategy questions? |
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Definition
| where should we locate the store, how do we promote the store, what type of merchandise should we sell, what level of customer service, what is the pricing in our store? |
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Term
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Definition
| image, safety, temperature, senses, parking, spacing, crowding (can be positive or negative) |
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