Marketing Chapter 10 Summary

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Questions and Answers

What is the primary focus of Chapter 10 in the marketing course?

  • Analyzing market competition
  • Understanding consumer behavior
  • Exploring pricing strategies (correct)
  • Developing promotional campaigns

Which of the following factors is likely to influence a product's pricing?

  • Cost of production (correct)
  • Brand loyalty
  • Market diversification
  • Seasonal trends

In the context of marketing, what does a pricing strategy aim to achieve?

  • Create brand awareness
  • Maximize market share (correct)
  • Enhance product quality
  • Increase customer retention

What might be a consequence of setting a price too high for a product?

<p>Decrease in sales volume (A)</p> Signup and view all the answers

Which of the following would NOT typically impact pricing decisions?

<p>Advertising spend (B)</p> Signup and view all the answers

What is the main focus of the redesign of existing brands?

<p>Quality for a lower price (A)</p> Signup and view all the answers

How does the redesign of brands aim to impact pricing?

<p>By offering better quality at a lower price (C)</p> Signup and view all the answers

Which of the following is NOT a focus of the redesign of existing brands?

<p>Maintaining high profit margins (A)</p> Signup and view all the answers

What aspect of brand strategy is being prioritized in the redesign?

<p>Delivering high quality at a lower cost (D)</p> Signup and view all the answers

Why might companies choose to redesign their brands?

<p>To better align with consumer demand for quality at a lower price (C)</p> Signup and view all the answers

What is a key consideration in pricing according to the provided content?

<p>Buyers' perceptions of value (C)</p> Signup and view all the answers

What does everyday low pricing (EDLP) typically involve?

<p>Charging a fixed price consistently (A)</p> Signup and view all the answers

Which type of costs are defined as costs that do not change regardless of the level of goods or services produced?

<p>Fixed costs (B)</p> Signup and view all the answers

Before setting the marketing program, which factor must be considered for pricing?

<p>The price in relation to quality offered (B)</p> Signup and view all the answers

Which of the following statements about pricing strategies is correct?

<p>Value perception is crucial for effective pricing. (C)</p> Signup and view all the answers

What characteristic is associated with fixed costs?

<p>They remain constant regardless of sales volume. (D)</p> Signup and view all the answers

What pricing strategy incorporates minimal discounts on a constantly low price?

<p>Everyday Low Pricing (EDLP) (B)</p> Signup and view all the answers

Which pricing strategy charges a higher price during peak periods and lower prices during off-peak times?

<p>High-Low Pricing (B)</p> Signup and view all the answers

What is the core principle of cost-based pricing?

<p>Determining prices based solely on production costs. (B)</p> Signup and view all the answers

What are fixed costs primarily associated with?

<p>Costs that do not fluctuate with production levels. (D)</p> Signup and view all the answers

What does cost-based pricing primarily focus on?

<p>Product-driven costs (D)</p> Signup and view all the answers

Which of the following best describes the pricing strategy mentioned?

<p>Establishing prices predominantly by production costs (A)</p> Signup and view all the answers

What is a characteristic of cost-based pricing?

<p>It often includes temporary price reductions. (B)</p> Signup and view all the answers

How does cost-based pricing impact promotional strategies?

<p>It incorporates promotions to temporarily lower prices. (B)</p> Signup and view all the answers

Which of the following is NOT a focus of cost-based pricing?

<p>Customer loyalty programs (C)</p> Signup and view all the answers

What distinguishes value-added pricing from other pricing strategies?

<p>It enhances product offerings with additional features and services. (B)</p> Signup and view all the answers

Which aspect is crucial for supporting higher prices in value-added pricing?

<p>Differentiating product offerings effectively. (C)</p> Signup and view all the answers

How does value-added pricing contribute to building pricing power?

<p>By enhancing the perceived value of products. (D)</p> Signup and view all the answers

What is a potential drawback of focusing on value-added pricing?

<p>Increased complexity in pricing structures. (A)</p> Signup and view all the answers

Why is understanding variable costs important in the context of pricing strategies?

<p>They assist in maximizing profit margins. (B)</p> Signup and view all the answers

Flashcards

What is Price?

Price is the amount a customer pays for a product or service.

Marketing Chapter 10

This is a summary of marketing concepts from chapter 10.

Baims App

A mobile application providing marketing summaries.

Contact Number

A phone number for communication regarding marketing summaries and the Baims app.

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Marketing Summary

A concise outline of key marketing concepts from Chapter 10.

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Price redesign

A change in pricing strategy to offer better quality for a lower cost.

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Lower price

A pricing strategy that aims to provide products at a reduced cost.

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Quality for less

A business approach to provide high quality at a reduced cost.

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Pricing strategy

A plan on how a company determines and sets the price of its products or services.

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Better quality

The provision of goods or services that are superior in attributes and performance.

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Pricing based on value

Pricing strategies consider customer perceived value, not just seller costs, to offer better quality at a specific price.

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Everyday Low Pricing (EDLP)

A pricing strategy that keeps prices consistently low throughout the year.

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Fixed Costs

Costs that do not change regardless of production volume.

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Pricing considerations

Marketers consider aspects of pricing before designing the marketing plan

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Market-based pricing

Pricing products or services according to competition and the market trends

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Value-Added Pricing

A pricing strategy where a higher price is set to reflect the perceived value of a product or service, often including additional features or benefits.

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EDLP (Every Day Low Pricing)

A pricing strategy that involves consistently low prices with minimal or no discounts.

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Cost-Based Pricing

Setting prices based on the cost of producing a product or service, plus a markup for profit.

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High-Low Pricing

A pricing strategy that involves alternating periods of higher prices with lower prices, often using sales or promotions.

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Variable Costs

Costs that change directly with the level of production. As output increases, variable costs increase proportionally. Examples include raw materials, labor, and energy.

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Product-driven pricing

A pricing strategy where the product's characteristics and value are considered to determine its price.

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Everyday prices

Consistent prices for products that rarely change, providing stability and predictability for customers.

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Frequent promotions

Short-term price reductions offered to increase sales and attract customers, often for limited periods.

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Temporary price reductions

Short-term price cuts on specific products, often with limited quantities, to drive immediate sales.

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Study Notes

CH10 Marketing Summary

  • This summary is for CH10 marketing students in the Baims app.
  • For more summaries, visit the Baims website or contact 0503028916.

What is a Price?

  • Price is the amount of money charged for a product or service.
  • It's the sum of all values customers give up for benefits.
  • Price is the only element in the marketing mix that produces revenue. All other elements are costs.

Factors to Consider When Setting Prices

Customer Perceptions of Value

  • Customer-oriented pricing understands consumer value.
  • Setting a price that reflects that value.
  • Value-based pricing uses buyer perceptions, not seller costs, as the key to pricing.
  • Price is considered before the marketing campaign is planned.

Cost-Based Pricing

  • Based on costs of production, distribution, and sales, plus a fair return for effort and risk.
  • Adds a standard markup to the product's cost.

Good-Value Pricing

  • Combines quality, service, and fair price.
  • Existing brands are redesigned for more quality at the same price or same quality for a lower price.

Everyday Low Pricing (EDLP)

  • Involves consistently charging a low price with few/no temporary discounts.

High-Low Pricing

  • Involves charging higher everyday prices with frequent promotions to lower prices temporarily.

Types of Costs

  • Fixed costs: Costs that don't change with production or sales (rent, heat).
  • Variable costs: Costs that change with production level (raw materials, packaging, executive salaries).
  • Total costs: Sum of fixed and variable costs.
  • Average cost: Cost associated with a given output level.

Value-Added Pricing

  • Adds features and services to differentiate offerings.
  • Supports higher prices and builds pricing power.
  • Pricing power allows for higher prices without losing market share.

Other Internal and External Considerations Affecting Price Decisions

  • Overall Marketing Strategy: Target costing starts with an ideal selling price based on consumer value, then targets costs to ensure that price is met.
  • Organizational considerations: Determines who sets and influences prices.
  • Market and Demand: Understands the relationship between price and demand, pricing in different market types, analyzes the relationship, and the price elasticity of demand.
  • Competitor strategies and Prices: Compares offerings in terms of customer value, competitor strengths, pricing strategies, customer price sensitivity.
  • External factors: Economic conditions, reseller response to price, government, social concerns.

New-Product Pricing Strategies

Market-Skimming Pricing

  • High initial prices to quickly collect revenue from different market segments.
  • Product quality and image must support the price.
  • Buyers must want the product at the price.
  • Competitors should not easily enter the market.

Market-Penetration Pricing

  • Low initial price to quickly attract buyers.
  • Effective for price-sensitive markets.
  • Inverse relationship between production/distribution costs and sales growth.
  • Low prices make it challenging for competitors to enter the market.

Product Mix Pricing Strategies

Product-Line Pricing

  • Considering cost differences, customer evaluation of features, and competitors' prices within a product line.

Optional-Product Pricing

  • Adds optional or accessory products to the main product.

Captive-Product Pricing

  • Products that must be used with the main product. For services, it's two-part pricing (fixed fee + variable usage fee).

By-Product Pricing

  • Products with little or no value, resulting from the main product.

Product Bundle Pricing

  • Several products offered at a reduced price.

Geographical Pricing

  • FOB-origin (free on board): Goods delivered to carrier, ownership/responsibility to the customer.
  • Uniform-delivered: Same price plus freight to all customers, regardless of location.
  • Zone pricing: Customers in a specific zone pay a single price.
  • Basing-point pricing: Seller designates a city as a base, and charges shipping costs from that city.
  • Freight-absorption pricing: Absorption of all/part of the shipping cost to attract business in competitive markets.

Price-Adjustment Strategies

  • Discounts and allowances: Reduce prices to reward customer responses (early payment, promotion).
  • Segmented pricing: Different prices for different customer segments (customer, product form, location).
  • Psychological pricing: Prices based on perceived value, not just economic factors.
  • Promotional pricing: Temporary pricing below the list price or cost to increase demand (loss leaders, special events).
  • Dynamic pricing: Continuously adjusts prices to meet individual customer characteristics/situations.
  • International pricing: Prices in a specific country based on country-specific factors.

Initiating Pricing Changes

  • Reasons for price cuts: Excess capacity, increased market share.
  • Reasons for price increases: Cost inflation, increased demand, lack of supply.

Buyer Reactions to Pricing Changes

  • Buyer reactions to price increases: Company "greed," product is "hot," new models available.
  • Reasons for price cuts: New models to be released, Models not selling well, Quality concerns.

Competitor Reactions to Pricing Changes

  • Competitors usually react when the number of firms is small, products are uniform, and buyers are well-informed about products/prices.

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