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Questions and Answers
What is the primary characteristic of price discrimination?
What is the primary characteristic of price discrimination?
Which of the following best describes price maintenance?
Which of the following best describes price maintenance?
What is the primary objective of market-penetration pricing?
What is the primary objective of market-penetration pricing?
Which channel function involves gathering and distributing marketing research?
Which channel function involves gathering and distributing marketing research?
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What is one of the key roles of channel members in marketing?
What is one of the key roles of channel members in marketing?
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Which of the following is an example of product bundle pricing?
Which of the following is an example of product bundle pricing?
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Which of the following best defines a direct marketing channel?
Which of the following best defines a direct marketing channel?
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Which pricing strategy involves adjusting prices for psychological effect?
Which pricing strategy involves adjusting prices for psychological effect?
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What type of conflict occurs among firms at the same level of the marketing channel?
What type of conflict occurs among firms at the same level of the marketing channel?
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What is a consequence of implementing a predatory pricing strategy?
What is a consequence of implementing a predatory pricing strategy?
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Which of the following is NOT a value-added function of marketing channels?
Which of the following is NOT a value-added function of marketing channels?
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Which pricing adjustment strategy is aimed at rewarding customer behavior?
Which pricing adjustment strategy is aimed at rewarding customer behavior?
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What is a marketing channel primarily composed of?
What is a marketing channel primarily composed of?
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In product line pricing, what is the primary focus?
In product line pricing, what is the primary focus?
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What happens in dynamic pricing?
What happens in dynamic pricing?
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Which pricing strategy is likely to discourage competition?
Which pricing strategy is likely to discourage competition?
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Which characteristic is essential for a salesperson to successfully close a sale?
Which characteristic is essential for a salesperson to successfully close a sale?
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What is the primary function of an inside sales force?
What is the primary function of an inside sales force?
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What does the term 'Sales 2.0' refer to?
What does the term 'Sales 2.0' refer to?
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Which form of sales promotion is designed to encourage retailers to carry a brand?
Which form of sales promotion is designed to encourage retailers to carry a brand?
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What components make up the typical compensation structure for salespeople?
What components make up the typical compensation structure for salespeople?
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What characterizes a conventional marketing system?
What characterizes a conventional marketing system?
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Which type of vertical marketing system involves independent firms at different levels joining together through contracts?
Which type of vertical marketing system involves independent firms at different levels joining together through contracts?
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What is the main purpose of a horizontal marketing system?
What is the main purpose of a horizontal marketing system?
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What does disintermediation refer to in marketing channels?
What does disintermediation refer to in marketing channels?
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In which type of distribution strategy does a company stock products in as many outlets as possible?
In which type of distribution strategy does a company stock products in as many outlets as possible?
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Which of the following is NOT a type of vertical marketing system?
Which of the following is NOT a type of vertical marketing system?
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What is the primary goal of marketing channel design?
What is the primary goal of marketing channel design?
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In a manufacturer-sponsored wholesaler franchise, what is the primary characteristic?
In a manufacturer-sponsored wholesaler franchise, what is the primary characteristic?
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What is the primary advantage of Just in Time (JIT) logistics systems?
What is the primary advantage of Just in Time (JIT) logistics systems?
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Which mode of transportation involves using both land and water methods?
Which mode of transportation involves using both land and water methods?
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What characterizes integrated logistics management?
What characterizes integrated logistics management?
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What is the function of a third-party logistics (3PL) provider?
What is the function of a third-party logistics (3PL) provider?
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Which component of the promotion mix focuses on long-term customer relationships?
Which component of the promotion mix focuses on long-term customer relationships?
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What is the primary role of advertising in the promotion mix?
What is the primary role of advertising in the promotion mix?
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Which of the following is NOT a mode of transportation listed?
Which of the following is NOT a mode of transportation listed?
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Sales promotions are typically characterized by which feature?
Sales promotions are typically characterized by which feature?
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What aspect does sustainable marketing primarily emphasize?
What aspect does sustainable marketing primarily emphasize?
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Which of the following concepts emphasizes meeting both the current and future needs of consumers?
Which of the following concepts emphasizes meeting both the current and future needs of consumers?
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What are some public policy issues associated with direct marketing?
What are some public policy issues associated with direct marketing?
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In consumer-to-business exchanges, who typically drives the transaction terms?
In consumer-to-business exchanges, who typically drives the transaction terms?
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What is a criticism of marketing that addresses the issue of materialism?
What is a criticism of marketing that addresses the issue of materialism?
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Which principle of sustainable marketing focuses on viewing marketing activities from the consumer’s perspective?
Which principle of sustainable marketing focuses on viewing marketing activities from the consumer’s perspective?
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What is the primary goal of consumerism as a movement?
What is the primary goal of consumerism as a movement?
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Which of the following is NOT an aspect of environmental sustainability?
Which of the following is NOT an aspect of environmental sustainability?
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Study Notes
Pricing
- Price is the amount of money charged for a product or service, representing the sum of values customers exchange for benefits
- Pricing strategies include cost-based and value-based approaches
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Cost-based pricing involves pricing based on costs of producing, distributing, and selling a product, plus a fair return on investment
- Cost-plus pricing (or markup pricing) adds a standard markup to product cost
- Break-even pricing (or target return pricing) sets prices to cover costs of making and marketing a product or achieve a desired return
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Value-based pricing uses buyer's perception of value, not seller's cost, to set price
- Good-value pricing combines quality and service at a fair price (EDLP - Everyday Low Pricing and High-Low Pricing)
- Value-added pricing adds features and services to differentiate and justify a higher price
Major Pricing Strategies
- Customer perceptions of value influence price ceiling and floor; no demand above the ceiling, no profits below the floor
- Internal and external factors including market analysis, competition, and objectives shape pricing strategies
- Product costs and competitive pricing strategies are key to pricing decisions
- Customer value perception is central to Good-Value pricing (EDLP or High-Low) as well as Value-Added pricing
Types of Costs
- Fixed costs (overhead costs) do not vary with production or sales levels (e.g., rent, salaries)
- Variable costs vary directly with production levels (e.g., raw materials)
Steps for Cost-Based Pricing
- Design a good product
- Determine product costs
- Set price based on cost
- Convince buyers of product's value
Steps for Value-Based Pricing
- Assess customer needs and value perceptions
- Set target price to match perceived value
- Determine allowable costs
- Design the product to meet desired value at target price
Considerations Affecting Price Decisions
- Overall marketing objectives and mix
- Organizational considerations, including other expenses
- Economic outlook, such as recessionary pressures
- Government regulations (price controls)
- Social concerns (e.g., rising prices during emergencies)
- Market factors (e.g., competitors, supply, demand)
Price Adjustments
- Discounts and allowances: Reducing prices to reward responses (e.g., early payment, promotional offers)
- Segmented pricing: Different prices for different customer segments, products, or locations
- Psychological pricing: Using price points that appeal to customers (e.g., $9.99 instead of $10.00)
- Promotional pricing: Temporary price reductions (e.g., special offers, sales)
- Geographic pricing: Adjusting based on customer location
- Dynamic pricing: Adjusting for individual customer characteristics and situations
- International pricing: Adjusting for international market conditions
Prohibited Pricing Strategies
- Price fixing: Competitors fixing prices together
- Predatory pricing: Selling below cost to harm a competitor
Pricing Across Channel Levels
- Price discrimination: Charging different prices to different customers at the same level of trade
- Price maintenance: Requiring dealers to charge a specific retail price
- Deceptive pricing: Misleading customers with pricing
Marketing Channels
- A set of interdependent organizations that help make a product or service available for use or consumption
- Channels add value through information, promotion, contacting, matching, negotiation, physical distribution, financing, and risk-taking
- Channel members (eg. Manufacturers, Wholesalers, Retailers, Consumers)
- Value delivery network includes all the parties involved in a product's distribution process
Number of Channel Levels
- Direct (no intermediaries)
- Indirect (one or more intermediaries)
- Horizontal conflict (disagreements among firms at the same level in a channel)
- Vertical conflict (disagreements among different levels in a channel)
Types of Vertical Marketing Systems
- Corporate VMS: Integrates different stages of a product's production and distribution
- Contractual VMS: Companies use contracts to coordinate their activities
- Administered VMS: One company gains power and coordinates the channel
Disintermediation
- Removing intermediaries from a channel system
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Description
This quiz explores key pricing strategies used in business, including cost-based and value-based approaches. You will learn about concepts like cost-plus pricing, break-even pricing, and good-value pricing. Test your understanding of how customer perceptions of value influence pricing decisions.
