Podcast
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?
- Analyze competitors' pricing strategies
- Estimate demand based on past sales data
- Develop pricing objectives that align with firm goals (correct)
- Identify the target market for the product
Which statement accurately reflects the law of demand?
Which statement accurately reflects the law of demand?
- Price has no effect on the quantity demanded for luxury items.
- As price decreases, the quantity demanded increases. (correct)
- Higher prices lead to an increased quantity demanded for inferior goods.
- As price increases, quantity demanded remains unchanged.
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?
- Downward shift
- Horizontal shift
- Elastic shift
- Upward shift (correct)
In pricing strategy, what role do costs play?
In pricing strategy, what role do costs play?
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?
What does break-even analysis help marketers understand?
What does break-even analysis help marketers understand?
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?
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?
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?
What pricing strategy involves setting prices based on the competition?
What pricing strategy involves setting prices based on the competition?
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?
What is the purpose of yield management in pricing strategy?
What is the purpose of yield management in pricing strategy?
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?
What is a key feature of dynamic pricing strategies in electronic commerce?
What is a key feature of dynamic pricing strategies in electronic commerce?
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?
What would likely increase consumer price sensitivity in online shopping?
What would likely increase consumer price sensitivity in online shopping?
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?
What is an example of a two-part pricing strategy?
What is an example of a two-part pricing strategy?
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?
What is the primary purpose of price bundling?
What is the primary purpose of price bundling?
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?
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?
What function do intermediaries provide that aids in the communication process?
What function do intermediaries provide that aids in the communication process?
What can happen if intermediaries fail to provide unique value?
What can happen if intermediaries fail to provide unique value?
How has online distribution affected supply chain coordination?
How has online distribution affected supply chain coordination?
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?
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?
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?
Which of the following best describes 'risk taking' among retailers in distribution?
Which of the following best describes 'risk taking' among retailers in distribution?
In the context of distribution channels, what does disintermediation refer to?
In the context of distribution channels, what does disintermediation refer to?
Flashcards
Price
Price
The amount of money or other consideration that a customer is willing to pay for a product or service.
Demand Curve
Demand Curve
A visual representation of how much of a product customers want to buy at different prices.
Law of Demand
Law of Demand
The principle that as the price of a product increases, the quantity demanded decreases.
Upward Shift in Demand
Upward Shift in Demand
When a product's demand increases due to successful marketing efforts.
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Downward Shift in Demand
Downward Shift in Demand
When a product's demand decreases due to factors like negative marketing or a change in customer preferences.
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Break-even point
Break-even point
The point at which total revenue equals total costs, meaning there is neither profit nor loss.
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Markup
Markup
The amount added to the cost of a product to determine its selling price. It represents the profit margin for a channel member.
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Margin
Margin
The difference between the selling price and the cost of a product. It can be expressed as a percentage or dollar amount.
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Cost-plus pricing
Cost-plus pricing
A pricing strategy where the price is set based on the costs of production, distribution, and a desired profit margin.
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Target costing
Target costing
A pricing strategy where the price is set based on the demand for the product. It takes into account consumer willingness to pay.
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Broad economic trends
Broad economic trends
Large-scale economic factors that influence a company's pricing decisions. This may include inflation, consumer confidence, or economic growth.
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Industry structure
Industry structure
The structure of an industry, such as an oligopoly (few competitors), monopolistic competition (many competitors, differentiated products), or pure competition (many competitors, identical products).
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Transportation and Storage
Transportation and Storage
Moving goods from production to storage locations for later consumer demand.
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Facilitating Functions
Facilitating Functions
Channel members that offer credit to buyers, making purchases easier for both customers and manufacturers.
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Risk Taking
Risk Taking
The risk retailers take when purchasing products from manufacturers, as unsold goods result in financial loss.
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Communication and Transaction
Communication and Transaction
Effective communication within a channel, including promotions and other types of information exchange between members.
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Disintermediation
Disintermediation
The removal of certain layers in a distribution channel to reduce costs and enhance efficiency.
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Online Distribution
Online Distribution
The use of the internet as a distribution channel, offering new ways for channel members to coordinate supply chains.
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Copyright Infringement
Copyright Infringement
The unauthorized use of copyrighted works without permission, often related to digital downloads.
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Full-service Merchant Wholesaler
Full-service Merchant Wholesaler
A full-service wholesaler that provides a range of services like credit, delivery, and marketing.
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Limited-service Merchant Wholesaler
Limited-service Merchant Wholesaler
A wholesaler focused on a specific type of service or product, offering cash sales and limited additional services.
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Penetration Pricing
Penetration Pricing
A pricing tactic used to attract a wide range of customers by offering a lower initial price, often with the expectation of increasing the price later.
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Skimming Pricing
Skimming Pricing
A pricing tactic where the seller offers a high initial price to maximize profits from early adopters, then lowers the price gradually over time.
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Trial Pricing
Trial Pricing
A pricing tactic that offers a product at a discounted price for a limited period.
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Price Bundling
Price Bundling
A pricing method where a product is offered at a lower price in a bundle than if purchased individually.
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Captive Pricing
Captive Pricing
A pricing strategy that involves setting a high price for a primary product, then offering essential complementary products at a lower price.
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Decoy Pricing
Decoy Pricing
A pricing strategy that involves creating a decoy option that makes the desired product appear more attractive by comparison.
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Subscription Pricing
Subscription Pricing
A pricing strategy where consumers pay a recurring fee for access to a service or product.
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Two-Part Pricing
Two-Part Pricing
A pricing strategy where a seller charges a fixed fee for access to a service, then charges an additional fee for each unit consumed.
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Dynamic Pricing
Dynamic Pricing
Prices vary according to the time of day, demand level, competitor pricing, etc.
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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)
- 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
-
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
-
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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