BUS 348: Exam 3

direct channel

- the manufacturer deals with the end consumer and performs all the channel functions -includes in person, face to face interaction between buyer and seller ( direct marketing or the manufacturer's own sales force - sakes personal, farmers markets, internet, email, craft and trade shows

intensive distribution

- the manufacturer placing the goods or services in as many outlets as possible -placed in as many outlets as possible - widely available to a very large set customers

pricing the unprice-able

- what can/can't you put a price on - how do you feel when a price is out on these things - the prices of roses on valentines day -putting a price one education

retailers

-buy in smaller quantities than manufacturers want to sell/larger than final consumer wants to buy -add value especially through convenience -serve different segments' needs

reference prices

-consumers compare an observed price to an internal reference price ( from memory) -" fair price" -typical price -last price paid -upper -bound price -lower bound price -competitor prices -expected future price -usual discounted price framing effect- pennies a day( paying only 49 cents a day)

price quality inference

-consumers tend to assume that expensive=higher quality - important when introducing a new luxury product - relates to importance of branding

promotional pricing pros

-helps stimulate first purchase -good for companies who are tying to build sales and market share ( in other words, are pursing market penetration pricing strategy)

price endings

-many sellers believe prices should end in an odd number - customers perceive an item prices at $299 rather than the $300 mark - they tend to process prices left to right rather than rounding -pricing cues such as sale signs that in 9 are more influential when consumers price knowledge is poor

psychology of pricing

-price-quality inferences -price ending -reference prices -pricing the unprice-able

exclusive distribution

-severely limiting the number of intermediaries in order to maintain control over the service level and outputs offered by resellers

maximum current share

-some companies want to maximize their market share - they estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profits, cash flow, or rate of return on investment - assume the firms known its demand and cost functions

Value of pricing

companies adopt value pricing win loyal customers by charging fairly low prices for high quality offering - it is not a matter of simply setting lower prices - it is a matter of reengineering the company's operations to become a low-cost producer without sacrificing quality to attract a large number of value-conscious customer

warranties and service contracts

companies can promote sales by adding a free or low cost warranty or service contract

maximum market skimming

companies unveiling a new technology favor setting high prices to max market skimming -is a product pricing strategy by which a firm charges the highest initial price that customers will pay. As the demand of the first customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment - in which prices start high and slowly drop over time - consumers who's buy early at the highest prices may be dissatisfied if they compare themselves with those who huy later at a lower price - this strategy makes sense under the following conditions 1. a sufficient number of buyers have a high current demand 2. the unit cost of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear 3. the high initial price does not attract more competitiors to the market 4. the high price communications the image of a superior product

fixed costs( overhead)

are costs that don't vary with productions level or sales revenue - a company must pay bills each month for rent,heat, interest, salaries regardless of output

marketing channels

are sets of interdependent organizations participating in the process of making a product or service available for use or consumption

cash rebates

auto companies and other consumer goods offer as rebates to encourage purchase of the manufacturer products within a specified time period - can help clear inventories without the stated list prices

promotional pricing cons

can erode brand's value

social marketing

marketing done by a nonprofit or government organization to further a cause, such as " say no to drugs"

image pricing

some companies price the same product at two different levels based on image difference - a perfume manufacturer can put a scent in one bottle, give it a name and image and price at an $10 an ounce - the same scent in another bottle with a different name and image can sell for $30

target-return pricing

the firm determines the price that yields its target rate on investment

high-low pricing

the retailer charges high prices on an everyday basis but run frequent promotions with prices temporarily lower than EDLP level

location pricing

the same product is priced differently at different location even though the cost of offering is at each location id the same - a theater various it seat prices according to audience preferences for different locations

markup pricing

pricing an item by adding Standard increase to the product's cost = unit cost/ (1-desired return on sales)

break-even point

'the point at which the income from sale of a product or service equals the invested costs, resulting in neither profit nor loss; the stage at which income equals expenditure.

product-quality leadership

- a company might aim to do this -many brands drive to be "affordable luxuries" - products or series that characterized by high levels of perceives quality, taste, and status with price just high enough not to be out of consumers reach

wholesalers/ distributors

- aka distributors -typically perform " warehousing" functions for manufacturers and dealers/retailers -often located near airports,docks -buy products in quantity , break it down, sell in smaller amounts ex: costco

marketing channel system

- is the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces - a set of interdependent organizations involved in the process of making a product or service available for use or consumption -help" bring the product to market"

time pricing

- prices vary by season, day, or hour

psychological discounting

this strategy set and artificially high price and then offer the product sat substantial savings ex; was 359 now 299 -discounts from normal price are a legitamate form of promotional pricing - the federal trade commission and better business bureau fight illegal discount tactics

variable cost

vary directly with the level of production - these costs tend to be constant per unit produced, but they're called variable because their total varied with the number of units produced

channel pricing

when a company carries a different price depending on whether the consumer purchases it from a fine restaurant , a fat food restaurant , or a vending machine

every day low pricing ( EDLP)

when a retailer charges a constant low prices with little or no price promotion or special sales -constant prices eliminate week-to-week price uncertainly and the high-low pricing of promotion-oriented competitors - can lead customers to perceive lower prices over time

Loss- leader pricing

-super markets and department stores often drop the price on well-known brands to stimulate additional store traffic - this pays the revenue on the additional sales compensates for the lower margin on the loss-leader items -manufacturers of loss-leader brands typically object because this price can dilute the brand image and bring complaints for retailers who charge the list price -A loss leader (also leader) is a pricing strategy where a product is sold at a price below its market cost to stimulate other sales of more profitable goods or services. With this sales promotion—marketing strategy, a "leader" is used as a related term and can mean any popular article, i.e., one sold at a normal price.

going-rate pricing

-the firms bases it price largely on competitors prices -in oligopolistic industries that sell a commodity such as steel, paper, fertilizer, all firms normally charge the same price

selective distribution

-the use of more than a few but less than all of the intermediaries who are willing to carry a particular product - a few outlets per given region ex; cars sold through traditional dealerships

yield pricing

-when they offer discounted by limited early purchases, higher priced are purchases -The process of examining and factoring in consumer behavior to achieve the maximum amount of profit from a perishable good. Consumer behavior is examined to determine the correct price level to make the item enticing to the consumer. The idea is to coordinate timing, price, and consumer buying patterns to achieve the best return. The issue with yield management is that it can often result in unfair pricing for consumers.

first movers

A company that is the first to establish itself in a given market or industry, the proverbial 'early bird,' is known as the first mover. First movers hope to gain a sustainable competitive advantage by establishing themselves before any competitors enter the market.

market penetration pricing strategy

A strategy adopted for quickly achieving a high volume of sales and deep market penetration of a new product. Under this approach, a product is widely promoted and its introductory price is kept comparatively low. This strategy is based on the assumption that (1) the product does not have an identifiable price-market segment, (2) it has elasticity of demand (buyers are price sensitive), (3) the market is large enough to sustain relatively low profit margins, and (4) the competitors too will soon lower their prices.

unit contribution or contribution margin

A unit contribution margin is the dollar amount that a product's selling price exceeds its total variable cost. In other words, the unit contribution margin is the selling price of a product minus the variable costs incurred to produce that product.

indirect channels

a chain of individuals and businesses ( intermediaries) are involved in the distribution process, each passing the product down the chain until it finally reaches the consumer --of distribution typically involves a product passing through additional steps as it moves from the manufacturing business via distributors to wholesalers and then retail stores.

customer segment pricing

different customer groups pay different prices for the same product or service ex; museums different prices for students and senior citizens

product -form pricing

different versions of the product are priced differently, but not in proportion to their cost

low interest financing

instead of cutting the its price , the company can offer low interest financing

price discrimination

occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs' - 1st degree, the seller charges a separate price to each customer depending on the intensity of his or her demand -2nd: the seller charges less to buyers at different volumes -3rd: the seller charges different amount to different classes of buyers

channel integration

refers to strategies aimed at consolidating — either physically or logically — customer information and its use to provide an all-encompassing view of the customer.

distribution

refers to the physical activities necessary to make a product or serve available to the end consumers -aka marketing channel system

special event pricing

sellers will establish special prices in certain season to drain in more customers - every august there are back to school sales

special customer pricing

sellers will offer special prices exclusively to certain customers -having " exclusive" customers have discounts when they purchase something compared to regular customers

longer payment terms

sellers, especially mortgage banks and car companies,stretch loans over longer period - the lower the monthly period - consumers often work less about the cost of period and more about whether they can afford the monthly period