MKTG Finale

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MKTG Finale
2012-04-30 23:29:46
MKTG Finale

MKTG Finale
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  1. Price
    • The valure that customers give up or exchange to obtain a desired product
    • May be in form of money, goods, services, favors, votes or anything else that has value to other party
  2. Role of Price
    • Thereer is always a catch.
    • Can't give it away from becaues they would go bancrupt
    • Firm Revenue = Price * Units sold
    • Profit = Total Rev - Total cost
  3. Steps in Planning
    • 1) Develop pricing objective
    • 2) Estimate Demand
    • 3) Determine costs
    • 4) Evaluate Pricing Enviornment
    • 5) Choose a pricing strategy
    • 6) Develop Pricing tactis
  4. Develop Pricing objectives
    • What do we want to accomplish
    • Sales or markep share objectives: often objective is to maximaize sales or increace market dshare
    • Profic Ojectives: focus on target level of profit growth or desired net profit margin
  5. Step 2: Estimate Demand
    • Demand: How much of a prduct are customers willing to buy as it's price goes up or down
    • Law of demand: if pricees decrese, customers will buy more
  6. Prestige Products
    • As price goes down, quantity demanded also goes down becase people of prestige don't want to buy if because not good for status
    • Demand curve is curved out like a backwards C
  7. Shifts in Demand
    • Improvent in prodcut
    • New ad campaign
    • Paparrazzi and celeberty use
    • Upward shift: at any given price, demand is greatere
    • Recalls in food
    • Ranines, no golf resutes in Downward shit
  8. Estimate Demand
    • Important to predict
    • Total demand by: identify # consumers, average consumptions, predict market share of your company
  9. Price Elasticity of Demand
    • Ther percent change in unit sales that results froma percentage change in price
    • Need to know how sensitive customers aer to changes in price.
    • When changes in price have large effects on the amount demanded, demand is elastic
    • When changes in price have little or no effect on the amount demanded, demand is inelastic
  10. Factors that effect Elasticity
    • Availability of substitute goods and services
    • Purchasing power of consumer
    • Cross-elasticity: When changres in the price of one product affect the demand for another item
    • Complements: increase price one decrase demand for other
    • Products durability and other uses
  11. Step 3: Determine Costs
    • Variable Costs: per-unit costs of production that will fluctuate depending on how many units made
    • Fised costs: Do no vary with the number of units produced. Stay the same.
    • Average Fixed cost: Fixed cost per unit, the toal fixeed costs divided by number of units (more units, lower average fixed costs)
    • Total costs = variable + fixed
  12. Break-Even analysis
    • Technique marketrs use to examine the rlationship between dost and price.
    • Break-even point: point at which the company doesn't lose any money and doesnt' make any profit.
    • Total fixed costs/contribution per unit
  13. Contribution per unit
    Differnce between the price the firm charges for a product (revenue per unit) and the varible costs.
  14. Marginal Analysis
    • Provides a way for marketers to look at cost and demand at the same time and to identify the output and thei price that will generate the maximum profit.
    • Marginal cost: the increas in total cost from producing one addition unit
    • Marginal revenue: the increase in rev from selling one additonal unit
    • Profit maximized whn marginal rev = marginal cost
  15. Step 4: Enviornment
    • Depends on..
    • Economy: busines cycle, infaltion, ecomoic growth, and consumer confidence
    • In resessions consumers are more price sensitive
    • Competition: Price wars not good. Try not to compete too much becaue alows all business to reamain profitable
    • Consumer Trends: the way people think: demograhihcs
  16. Step 5: Choose a pricing strategy
    • Based on-
    • Cost
    • Demand
    • Competion
    • Consumer needs
    • New product
  17. Pricing strategy based on Cost
    • Risk free, promise price will at least coer the costs
    • The drawback of cost based strategies is that they do not consider demand, competition, or the nature of the target market
    • Cosst plus pricing: markets totlas all the costs for the product and then adds an amount to arraive at the selling price
  18. Pricing strategies baes on Demand
    • The firm bases the selling price on an estimate of volume or quantity that i can sell in different markets at different prices.
    • Target costing: firm fist determines prcie at chwich customer will be wiling and then work backwrd to desing the prudt so it can prodie and sell the pruduct at a profit
    • Yield managment pricing: charge different prices to different customers in order to manage capcity whild maximzing revenues. Goal here is to accurately predict the proportion of custmers who fall into each category and allocate the percentages of the capacity so no product goes unsold
  19. Pricing Strategies based on Competion
    • Pricing near at or above or beleow the competiion
    • Price leadersip stragegy: Big firms announce and then small get in line or drop out. common in oligopolisic industries.
  20. Pricing strageies basedon customer needs
    • Less concerend with shorterm reslus than with keeping customers for the long term.
    • Value pricing (EDLP): promises ultimate valie to consumers
    • In consumers eyes, price is jstified by what they recieve
  21. New Product Pricing
    • New products are vital to growth adn profits of firm
    • Skimming, Penetration and trial
  22. Skimming
    • Firm charges a high premimium price for its new product with the intentio ofrducin it in th future in response to market pressure.
    • Doens't lower until competition comes in
  23. Penetration Pricing
    • Opposite of skimming, Prices a new product very low to sell more in short time and gaim market share easly.
    • May act as a barrier to entry for competion if price so low
  24. Trial Pricing
    • New product carries a low price for a limited tiem to generate a high leve of customer interstr.
    • Unlike penetration pricing, it will increase the trail price after the introuctory period.
    • Idea is to win customer acceptance first then profit later
  25. Step 6: Develop Pricing Tactics
    • Once develop strategies, need to put in motion
    • Individual producs
    • Mulitple products
    • Distribution based
  26. Pricing for individual products
    • Two part pricing: require two seperate types of payment to puchare the product. item plus ship and handeling or cell phones
    • Payment pricing: makes the consumer think the price is doable by breaking up into smaller amount apyable over time
  27. Pricing for multiple products
    • Price bundling: sellijng two or more goods or serves a sa single pakacge for one price where price total often less then all individual
    • Captive pricing: it has two product that work only when used together. Sell one item at low price but other is very high
  28. Distributoin Based Pricing
    Establishes how firms handle the cost of shipping produt to customers near far and wide
  29. FOB factory origin pricing
    The cost of tarnporing the prouct formt he factory to the customer location is resopnibliyt of the custmer
  30. FOB delierve pricing
    the seller pays bothe the cost of lading the cost of transproijng to the customer
  31. Basing point pricing
    Customer pay shipping charges from set basing point location wheat the good ar actually shippec from these point or not
  32. Uniform delerved pricing
    firm adds a standdard shipping charge to the price for all customers regarless of location
  33. Frieght absorption
    • Seller absorbs the total cost of tranportation
    • More likely to use this in highly competitive markets
  34. Discounting for Channel members
    • Builds most pricing strucctures arround list prices
    • List price: the pricee the end customer is expected to pay as determend by the manufacture; also referd to as the suggested retail price
  35. Trade or functional discounts
    Discounts off list price of pruduct ot members of the channel of distribution who perfomr various marketin functions
  36. Quantity desocunts
    A pricing tactic of charign reduced prices for puchas of larger quantis of a product