13.2
Explain how price and marketing is effected in a monopolistic competition.
Dozens of regional, private brands of peanut butter compete with national brands like Skippy and Jif. Both price competition (regional, private brands being lower than national brands) and nonprice competition (product features and advertising) exist.
Explain how price and marketing is effected in a monopoly.
Johnson & Johnson (J&J) revolutionized the treatment of coronary heart disease by introducing the stent—a tiny mesh tube "spring" that props open clogged arteries. Initially a monopoly, J&J stuck with its early $1,595 price and achieved $1 billion in sales and 91 percent market share in two years. But its reluctance to give price reductions to hospitals for large-volume purchases turned out to be a poor strategy. When competitors like Medtronic introduced an improved stent at lower prices, J&J's market share plummeted to 8 percent two years later
Explain how price and marketing is effected in a oligopoly.
The few sellers of aluminum (Reynolds, Al.coa) or large jetliners (Boeing, Airbus) try to avoid price competition because it can lead to disastrous price wars in which they all lose money. Yet firms in such industries stay aware of a competitor's price cuts or increases and may follow suit. The products can be undifferentiated (aluminum) or differentiated (large jetliners), and informative advertising that avoids head-to-head price competition is used. In the early stages of the video game market, the Microsoft Xbox 360's oligopolistic competition with Sony and Nintendo was so severe that Microsoft lost $126 on every unit sold at its $399 introductory price
Market share is
the ratio of the firm's sales revenues or unit sales to those of the industry (competitors plus the firm itself).
A maximizing current profit objective, such as for a quarter or year, is common in many firms because
the targets can be set and performance measured quickly. American firms are sometimes criticized for this short-run orientation.
Competitor changes and price transparency through the Internet and efficient distribution make possible
(1) consumer-driven pricing actions and (2) seller/retailer-driven pricing actions.
Competitors' prices are important only if a prospective buyer both
(1) knows about those prices and (2) can act to purchase them easily.
talk about Seller/Retailer-Driven Pricing Actions
Aggressive price changes through the Internet started when airlines constantly changed ticket prices to fill the seats on their planes using their yield management systems. Today, many sellers are changing online prices even faster.
Give an example of social responsibility
For example, Gerber supplies a specially formulated product free of charge to children who cannot tolerate foods containing cow's milk.
Given an example of demand for the product class, product and brand.
For example, the New York Mets have set different ticket prices for their games based on the appeal of their opponent—prices are higher when they play the New York Yankees and lower when they play the Pittsburgh Pirates
Explain how price and marketing is effected in a pure competition.
Hundreds of local grain elevators sell corn whose price per bushel is set by the marketplace. Within strains, the corn is identical, so advertising only informs buyers that the seller's corn is available.
specifying the role of price in an organization's marketing and strategic plans.
Pricing objectives
talk about Consumer-Driven Pricing Actions.
With consumers able to compare prices on the Internet, they can make more efficient buying decisions. This occurs, say, when a consumer visits the HDTV section of a store to actually examine a TV—and then goes home and orders it online at a lower price. RedLaser, an eBay-owned smartphone app, enables consumers to scan a product's barcode on a store's shelf and then compare that price to those both online and in nearby stores
Although increased market share is a primary goal of some firms, others see it as
a means to other ends: increasing sales and profits.
Without profits for channel members, a marketer is
cut off from its customers
A target return objective occurs when a
firm sets a profit goal (such as 20 percent for pretax ROI), usually determined by its board of directors.
. One objective is managing for long-run profits, in which companies such as many Japanese car or HDTV manufacturers
give up immediate profit by developing quality products to penetrate competitive markets over the long term. Products are priced relatively low compared to their cost to develop, but the firm expects to make greater profits later because of its high market share.
The newer a product and the earlier it is in its life cycle, the ______ the price that can usually be charged.
higher
Generally, the greater the demand for a product, the
higher the price that can be set
In the late 1990s, Boeing cut prices drastically to try to maintain its 60 percent share of the commercial airline market to compete with Airbus. As a result, it encountered
huge losses
Given that a firm's profit is high enough for it to remain in business, an objective may be to
increase sales revenue, which can lead to increases in market share and profit.
The company then develops a marketing mix strategy—including setting prices—to respond to
its competitors' prices
To the extent possible, these pricing objectives are carried to ____________, such as in setting objectives for marketing managers responsible for an individual brand.
lower levels in the organization
Another profit consideration for marketers is to ensure that firms in their channels of distribution
make an adequate profit
Objectives related to dollar sales revenue or unit sales have the advantage of being translated easily into
meaningful targets for marketing managers responsible for a product line or brand..
In some instances, profits, sales, and market share are less important objectives of the firm than______.
mere survival
Today, the Internet has increased the number of "_________" exponentially for many products
present and potential competitors
The number of potential buyers for the product class (cars), product group (family sedans), and specific brand (Toyota Camry V6) clearly affects the
price a seller can charge
Likewise, whether the item is a luxury—like the Bugatti Chiron—or a necessity—like bread and a roof over your head—also affects the
price that can be charged
Factors that limit the range of prices a firm may set are referred to as
pricing constraints.
With such a variety of alternative pricing strategies available, a marketing manager must consider the
pricing objectives and constraints that will narrow the range of choices
These objectives have different implications for
pricing strategy
Because of social responsibility A firm may forgo higher profit on sales and follow a pricing objective that
recognizes its obligations to customers and society in general
However, while cutting the price on one product in a firm's line may increase its sales revenue, it may also reduce the sales revenue of related products
reduce the sales revenue of related products.
Companies often pursue a market share objective when industry sales are
relatively flat or declining
Three different objectives relate to a firm's profit, which is often measured in terms of
return on investment (ROI) or return on assets (ROA).
Sometimes—when nostalgia or fad factors come into play—prices may
rise later in the product's life cycle.
what is the difference between a single product verses a product line?
the iphone is a single product its all the same no real differences have been made. but creating the ipad mini was creating a product line in the ipad realm giving more than one type of product.
Many firms use unit volume,
the quantity produced or sold, as a pricing objective. These firms often sell multiple products at very different prices and need to match the unit volume demanded by customers with price and production capacity. Using unit volume as an objective can be counterproductive if a volume objective is achieved, say, by drastic price cutting that drives down profit.
what is an example of producing and marketing a product?
For example, of the $200 a customer spends for a pair of designer denim jeans, 50 percent of each dollar spent goes to a specialty retailer to cover its costs and profit. The other 50 percent goes to the marketer (34 percent) and manufacturers and suppliers (16 percent).10 So, the next time you buy a $200 pair of designer denim jeans, remember that $100 goes to the specialty retailer that stocked, displayed, and sold the jeans to you
Talk about how consumer-driven pricing actions and seller/retailer-driven pricing actions can be related.
For example, the day before Thanksgiving 2012, online retailer Amazon.com sold the hugely popular Dance Central 3 (DC3) Xbox video game for $49.96—the same price as Walmart and 3 cents lower than Target. Then the pricing "dance moves" began. On Thanksgiving Day, Amazon lowered the game's price to $24.99, matching Best Buy. That same day, it dropped DC3's price to $15.00 to match Walmart. Then, over the next several days, Amazon raised and lowered the price seven times. If you were lucky, you paid a price that was two-thirds lower than those who were unlucky and bought DC3 at its highest price during that week!
explain the costs of changing prices and time period they apply.
If Scandinavian Airlines asks General Electric (GE) to provide spare jet engines to power the new Boeing 737 it just bought, GE can easily set a new price for the engines to reflect its latest information since only one buyer has to be informed. But if L.L.Bean decides that sweater prices in its catalog are too low after thousands of catalogs have been mailed to customers, it has a big problem. It must consider the cost of changing prices and which prices apply to which time periods, as well as the cost of revising its price list and reprinting and mailing another edition of its catalog. However, for many of today's consumer products, prices can change from minute to minute due to the transparency of prices afforded by the Internet.
Give an example of mere survival for a company
RadioShack, an electronics retail chain, faced survival problems because it couldn't compete with the prices offered by other retailers. The company enacted price matching programs and promoted large discounts on its merchandise to raise cash and hopefully stave off bankruptcy. These efforts failed and RadioShack declared bankruptcy in 2015
Talk about legal and ethical considerations in pricing constraints.
Setting a final price is clearly a complex process. The task is further complicated by legal and ethical issues. Five pricing practices that have received special scrutiny are price fixing, price discrimination, deceptive pricing, geographical pricing, and predatory pricing, each of which is described more fully in Chapter 14.
True or False A company must know what specific prices its present and potential competitors are charging now as well as what they are likely to charge in the near future.
True
While pricing objectives frequently reflect corporate goals, pricing constraints often relate to
conditions existing in the marketplace
Pricing objectives are determined by what factors?
the financial position of the company as a whole, the success of its products, or the segments in which it is doing business.