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Questions and Answers
What is the primary first step in price planning according to marketing strategies?
What is the primary first step in price planning according to marketing strategies?
Which statement accurately reflects the law of demand?
Which statement accurately reflects the law of demand?
What type of shift occurs when there is an increase in demand for a product?
What type of shift occurs when there is an increase in demand for a product?
In pricing strategy, what role do costs play?
In pricing strategy, what role do costs play?
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How do economists typically illustrate the effect of price on the quantity of a product demanded?
How do economists typically illustrate the effect of price on the quantity of a product demanded?
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What does break-even analysis help marketers understand?
What does break-even analysis help marketers understand?
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What is a key factor in determining the break-even point in units?
What is a key factor in determining the break-even point in units?
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What is the term for the amount added to the cost of a product to arrive at a selling price?
What is the term for the amount added to the cost of a product to arrive at a selling price?
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Which of the following is NOT an external influence firms consider for pricing decisions?
Which of the following is NOT an external influence firms consider for pricing decisions?
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What pricing strategy involves setting prices based on the competition?
What pricing strategy involves setting prices based on the competition?
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Which type of pricing refers to charging different prices depending on various conditions or characteristics?
Which type of pricing refers to charging different prices depending on various conditions or characteristics?
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What is the purpose of yield management in pricing strategy?
What is the purpose of yield management in pricing strategy?
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Which pricing tactic involves setting a high price initially and then lowering it over time?
Which pricing tactic involves setting a high price initially and then lowering it over time?
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What is a key feature of dynamic pricing strategies in electronic commerce?
What is a key feature of dynamic pricing strategies in electronic commerce?
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Which of the following is NOT a common discount tactic for channel members?
Which of the following is NOT a common discount tactic for channel members?
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What would likely increase consumer price sensitivity in online shopping?
What would likely increase consumer price sensitivity in online shopping?
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Which pricing tactic allows companies to charge different prices for the same product based on consumer segments?
Which pricing tactic allows companies to charge different prices for the same product based on consumer segments?
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What is an example of a two-part pricing strategy?
What is an example of a two-part pricing strategy?
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Which payment innovation enables consumers to buy a product immediately and pay for it later?
Which payment innovation enables consumers to buy a product immediately and pay for it later?
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What is the primary purpose of price bundling?
What is the primary purpose of price bundling?
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Which of these terms refers to a pricing strategy where products are priced higher when more options or features are added?
Which of these terms refers to a pricing strategy where products are priced higher when more options or features are added?
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What is the primary role of intermediaries in the transportation and storage process?
What is the primary role of intermediaries in the transportation and storage process?
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What function do intermediaries provide that aids in the communication process?
What function do intermediaries provide that aids in the communication process?
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What can happen if intermediaries fail to provide unique value?
What can happen if intermediaries fail to provide unique value?
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How has online distribution affected supply chain coordination?
How has online distribution affected supply chain coordination?
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What type of risk are retailers taking when they purchase a product from a manufacturer?
What type of risk are retailers taking when they purchase a product from a manufacturer?
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Which of the following is NOT a type of limited-service merchant wholesaler?
Which of the following is NOT a type of limited-service merchant wholesaler?
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What is a significant challenge of using the Internet as a distribution channel?
What is a significant challenge of using the Internet as a distribution channel?
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Which of the following best describes 'risk taking' among retailers in distribution?
Which of the following best describes 'risk taking' among retailers in distribution?
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In the context of distribution channels, what does disintermediation refer to?
In the context of distribution channels, what does disintermediation refer to?
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Study Notes
International Business Marketing MARKEC04
- Course: International Business Marketing MARKEC04
- Cluster: A-cluster (1st year, 1st semester)
- Lecture: 5 (2024-2025)
- Topic: Price and Place
Chapter 10: Price (Value Proposition)
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Learning Objectives:
- Explain pricing importance and objectives.
- Describe cost, demand, revenue and pricing environment in pricing decisions.
- Understand pricing strategies and tactics.
- Understand online pricing strategies and innovations in payment systems.
- Describe psychological, legal, and ethical aspects of pricing.
- Understand job expectations, and improving first job prospects
"Yes, But What Does It Cost?"
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Price: Assignment of value
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Payment: Anything with value (money, goods, services)
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Opportunity costs: What are lost opportunities?
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Bartering: Exchanging goods/services for each other
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Other names for price
- Fee
- Fare
- Interest
- Tuition
- Rent
Elements of Price Planning
- Step 1: Set Pricing Objectives (e.g., sales, market share, profit)
- Step 2: Estimate Demand (customer willingness to pay at different prices)
- Step 3: Determine Costs (variable and fixed)
- Step 4: Examine the Pricing Environment (economic trends, competition)
- Step 5: Choose a Pricing Strategy (cost-plus, demand-based)
- Step 6: Develop Pricing Tactics (price bundling, discounts)
Step 1: Develop Pricing Objectives
- Support overall marketing objectives
- Sales/Market Share: Increase market share
- Profit: 8% profit margin on goods sold
Costs, Demand, Revenue, and the Pricing Environment
- Marketers need quantitative and qualitative factors to set the right price
Step 2: Estimate Demand
- Demand: Customer desire for a product
- Law of Demand: As price increases, quantity demanded decreases.
- Demand Curves: Illustrate the effect of price on quantity demanded
Demand Curves for Normal and Prestige Products (graphs)
Shifts in Demand (graph)
- Upward: greater demand
- Downward: demand drops suddenly
Estimating Demand for Pizza
- Number of families: 180,000
- Average pizzas/family/year: 6
- Total annual market demand: 1,080,000
- Company's predicted market share: 3%
- Estimated annual company demand: 32,400 pizzas
- Estimated monthly company demand: 2,700 pizzas
- Estimated weekly company demand: 675 pizzas
Price Elasticity of Demand
- Percentage change in unit sales as result of price change.
- Elastic demand: Price changes significantly affect the amount demanded.
- Inelastic demand: Price changes have little effect on the amount demanded
Price Elasticity of Demand (tables and examples)
Cross-Elasticity of Demand
- Changes in other product prices affect demand
- Substitutes: Increase in one product's price increases demand for the other, (e.g., beef versus chicken)
- Complements: Increase in one product's price decreases demand for the other, (e.g., cars and gasoline)
Learning Objectives for Chapter 11 (Distribution)
- Explain what a distribution channel is, distinguish wholesaling intermediaries, and describe different distribution channels.
- List and explain distribution channel strategy planning steps.
- Discuss logistics and supply chain concepts.
- Understand proper interview preparation techniques for job applications.
Step 3: Determine Costs
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Ensure product price covers costs.
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Variable Costs: Fluctuate with production (e.g., ingredients)
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Fixed Costs: Do not vary (e.g., rental, utilities)
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Average Fixed Costs per Unit
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Total Costs: Sum of fixed and variable costs
Variable Costs and Examples (Tables)
Break-Even Analysis
- Analysis to find the required sales to cover all costs.
- Understanding the break-even point determines when profit starts.
- Selling fewer units than the break-even quantity results in losses.
- Selling more units than the break-even quantity results in profits.
- Important to understand the relationship between costs and price
Break-Even Analysis (graph)
Break-Even Calculation Formulas
Markups and Margins
- Markup: Amount added to product cost for selling price.
- Margin: Same as Markup
- Gross Margin
- Retailer Margin
- Wholesaler Margin
- MSRP (Manufacturer's Suggested Retail Price)
Markups through the Channel (Tables)
Step 4: Examine the Pricing Environment
- External factors affecting pricing:
- Broad economic trends
- Business cycle
- Economic growth
- Inflation
- Consumer confidence
The Pricing Environment: Non-Economic Influences
- Competition
- Government regulation
- Culture and demographics
- The International environment
Pricing Strategies and Tactics
- Pricing Strategies: Cost-plus, based on demand, competition, Value (EDLP), and new product pricing
- Pricing Tactics: Pricing for individual products, pricing for multiple products, distribution-based pricing, and discounting for channel members
Pricing Strategies Based on Cost
- Cost-plus pricing is a common method
Pricing Strategies Based on Demand
- Demand-based pricing: set prices based on demand volume
- Target Costing
- Yield Management
Target Costing using Jeans Example (Example)
Pricing Strategies Based on Competition and Customer Needs
- Price leadership
- Value or EDLP pricing (every-day low pricing)
- Hybrid EDLP approaches
New Product Pricing
- Tactics include skimming price, penetration price, and trial pricing
Step 6: Develop Pricing Tactics
- Implementation of pricing strategies through tactics including;
- Two-part pricing
- Payment pricing
- Subscription pricing
- Price bundling
- Captive pricing
- Decoy pricing
Develop Pricing Tactics: Discounting for Channel Members
Pricing Advantages for Online Shoppers
Pricing and Electronic Commerce
- Dynamic pricing strategies
- Online auctions
- Freemium pricing models
- Internet price discrimination
Innovations in Payment Systems
Key Types of Intermediaries
Types of Distribution Channels
Distribution Channel Functions
- Provide time, place, and possession utility
- Provide logistics and distribution
Physical Distribution
Distribution Channel Functions (continued)
Figure 11.1: Reduce Transactions via Intermediaries (Diagram)
Distribution Channel Functions (continued)
Evolution of Distribution Functions
Online Distribution
Decision 1: Conventional, Vertical, or Horizontal Marketing System
Decision 2: Intensive, Exclusive, or Selective Distribution
- Intensive
- Exclusive
- Selective
Characteristics That Favor Intense vs Exclusive Distribution (Table)
Step 4: Develop Distribution Tactics
- Selecting channel partners
- Managing the channel
Step 1: Develop Distribution Objectives
Step 2: Evaluate Internal and External Environmental Influences
Step 3: Choose a Distribution Strategy
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Description
Explore the concepts of pricing and value propositions in International Business Marketing. This quiz covers pricing strategies, the pricing environment, and psychological, legal, and ethical aspects. Prepare yourself to understand the intricacies of how pricing impacts consumer behavior and business decisions.
