Marketing Concepts
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Questions and Answers

What happens to price competition when exit barriers are high for some or all category participants?

  • It is likely to be fierce (correct)
  • It is likely to be low
  • It does not exist
  • It remains unchanged

    • What is an example of a product that uses complementary pricing?

  • Razors and blades
  • Private golf clubs
  • Telephone services
  • All of the above (correct)

    • Why does Gillette price razors modestly?

  • To compete with other razor makers
  • To reduce production costs
  • To attract more customers
  • To make huge margins on blades (correct)

    • What is the result of having many substitute technologies or solutions to customer problems?

    <p>Increased price competition</p> Signup and view all the answers

    What is a characteristic of complementary pricing?

    <p>Charging separately for related products</p> Signup and view all the answers

    What type of pricing is used for services with fixed and variable components?

    <p>Complementary pricing</p> Signup and view all the answers

    What affects available pricing flexibility?

    <p>All of the above</p> Signup and view all the answers

    What is an example of a product that has a fixed monthly fee and a variable usage fee?

    <p>Private golf clubs</p> Signup and view all the answers

    What happens to prices when suppliers have high power?

    <p>They often increase</p> Signup and view all the answers

    What is the result of high supplier power on the prices of goods or services?

    <p>Higher prices for goods or services</p> Signup and view all the answers

    What affects the prices when suppliers have high power?

    <p>The prices of goods or services supplied</p> Signup and view all the answers

    What is the relationship between supplier power and prices?

    <p>Higher supplier power leads to higher prices</p> Signup and view all the answers

    What happens to unit costs when suppliers have high power?

    <p>They increase</p> Signup and view all the answers

    What is the effect of high supplier power on the producer's profit?

    <p>It decreases the profit</p> Signup and view all the answers

    What is the result of high supplier power on the prices of raw materials?

    <p>They often increase</p> Signup and view all the answers

    How does high supplier power affect the prices of goods or services?

    <p>It puts upward pressure on prices</p> Signup and view all the answers

    What is a characteristic of an industry with high competitive rivalry?

    <p>Strong price competition</p> Signup and view all the answers

    What is an example of an exit barrier?

    <p>Substantial investment in plant and equipment</p> Signup and view all the answers

    What is price bundling?

    <p>Offering a set of products at a discounted price</p> Signup and view all the answers

    What is the goal of competitive pricing?

    <p>To maintain a competitive price</p> Signup and view all the answers

    What is an example of complementary products?

    <p>Razors and blades</p> Signup and view all the answers

    What is a factor that can affect the level of exit barriers?

    <p>Substantial investment in plant and equipment</p> Signup and view all the answers

    What is the result of high rivalry in an industry?

    <p>Strong price competition</p> Signup and view all the answers

    What is a key aspect of competitive pricing?

    <p>Pricing based on competitor prices</p> Signup and view all the answers

    Study Notes

    Pricing Strategies

    • Skimming (Prestige Pricing): charges a high initial price, returning more value to the producer; attracts price-sensitive customers later
    • Penetration Pricing: opposite of skimming, aims to attract customers with a low initial price

    Buyer and Supplier Power

    • High buyer power tends to depress prices, pressuring products to deliver a good value/price ratio
    • High supplier power raises the floor beneath which prices cannot be set, increasing unit costs

    Pricing Tactics

    Product Line Pricing

    • Sets prices for a closely related set of products, often used for products used together (e.g., razors and blades)
    • Can differ in small ways, such as product features (e.g., 17-inch vs. 21-inch color TV)

    Other Pricing Tactics

    • Price Bundling: offers a set of products as a package, often priced lower than individual components
    • Complementary Pricing: used for services with fixed and variable components (e.g., private golf clubs, telephone services)
    • Competitive Pricing: sets prices based on competitors' prices, maintains a "competitive" price by mimicking a particular competitor or pricing at the category average

    Industry Conditions Affecting Price Flexibility

    • High unused capacity can lead to price wars
    • High exit barriers (e.g., substantial investment in plant and equipment) can manifest in strong price competition

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    Description

    This quiz covers marketing concepts such as pricing strategies, including penetration pricing and skimming, as well as the power of buyers and suppliers.

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