Marketing Unit 4

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print to the 1960's, American business culture believed in the legal concept....

"let the buyer beware"

Which of the following is not an advantage of expanding the product line?

Guaranteed market share

the Lanham Act (1946) provided for the registration of a company's trademarks

Historically, the first user had the exclusive right to use the particular word, name or symbol in its business consumers benefit from trademarks because they allow them to correctly identify products they want to purchase

Which set of goods most closely relates to the phrase "payment after/during consumption?"

Houses and automobiles

What kind of pricing strategy is used to drive out competitors from a market by undercutting them?

Predatory

The mechanism by which a firm captures value is

Price

What is it called when a seller sells identical goods to different consumers at different prices?

Price discrimination

What is it called when competitors collude to raise prices?

Price fixing

This pricing strategy gets at the real value of the product to consumers

Price gauging

What is the percentage change in quantity demanded that occurs in response to percentage change in price at a given point?

Price sensitivity analysis

Sale signs are an example of...

Pricing cues

economic theory - topics to consider

companies care about costs break even analysis consumers price elasticity of depend

we want consumers to ...

consume products they have already purchased

be heard

consumer should have access to public policy makers to make complaints about offerings

tying

consumers required to buy something they do not want as a condition of buying something they dot want illegal in the US

price too high and ...

consumers won't buy

ethics codes typically address

contributions to government officials and political parties relations with customers and suppliers conflicts of interest accurate record keeping

the sunk cost effect

cost drives consumption - we use products we already paid for to avoid feeling that we wasted money consumption is driven by the perceived costs and not to be what was actually paid

how do companies set prices?

cost plus price gauging see what competitors are doing consider legal environment

factors in the economics of pricing in regard to the company

costs breakevent

disadvantages of penetration

created long term price expectations, may upset consumers who eventually pay higher price

consumers rely on ...

cues that indicate whether the price is a good deal or not

breakeven analysis

determine how many units must be sold at a given price to cover fixed costs how many units will give us 0 profit

variable/marginal costs

directly related to quantity

Because of trust issues and the overuse of permission marketing, many consumers create ....

dump accounts

the Clayton act (1914)

forbids certain actions that are likely to lessen competition, although no actual harm has yet occurred

mixed gains

integration is preferred (cancel small losses with large gains)

multiple losses

integration of losses preferred

price gauging

see what consumers are willing to pay . it gets at the real value of the product to consumers but they don't like it

mixed losses

segration (every cloud has a silver lining)

alternative to government regulation

self-regulation

see what competitors are doing

usually this is a bad idea b/c it assumes your products, customers and costs are similar

price fixing

viewed as per se illegal

The left-digit effect is best show in which price?

4.99

Which of the following is not an example of a bundle?

Bananas and strawberries

calculating elasticity

%change in quantity / % change in price

recent changes in trademark regulations and rulings

- US Supreme Court held that company may obtain trademarks for colors associated with their products - Consumers associate a particular color with a specific brand over time

regulation exists to protect

- companies to ensure competition and fair business practices - consumers to protect against unfair trade practices and ensure safety

the FTC Act has the power to

- issue, cease or desist orders - can order a company to stop practices it considers unfair - order corrective advertising, which means that it can require a company to spend money on advertising to correct previously misleading ads

3 problems with self regulation

- non-compliance members - enforcement - may violate the robinson-patman act is self regulation attempts are too strong

standards often ...

- reflect laws and regulations - affect social and economic behavior - can create ethical dilemmas

business culture affects ethical conduct in 2 ways

1. in the exchange relationship between sellers and buyers 2. in the competitive behavior among sellers

there are at least 4 possible reasons the stat of perceived business ethical conduct is at its present level

1. increased pressure on business people to make dicisions in a society characterized by diverse value systems 2. growing tendency for business decisions to be judged publicly by groups with different values/interests 3. the publics' expectations of ethical business behavior has increased 4. ethical business conduct may have declined

mental accounting properties (3)

1. the assignment of activities to specific accounts 2. the frequency with which accounts are evaluated affects our decisions 3. gifts are different from products we purchase

Both company and consumer protection

1. trademarks are intended to protect both firm selling trademarked product and consumer buying it 2. the Lanham Act (1946) provided for the registration of a company's trademarks 3. in 2003, the US agreed to participate in the Madrid Protocol 4. recent changes 5. the federal dilution act (1995) 6. the Gramm-Leach Bliley Act of 1999

research on catalog pricing shows sale signs can increase demand by more than ________% even without carrying the prices

50%

_____% of US companies have an ethics code _____% of large companies have a corporate ethics officer

86 25

What is a loss leader?

A product sold at a loss to attract customers to another item

Signpost items depend on...

A well-known benchmark price of that good

Which relationship describes buyers' behavior

As price decreases, quantity demanded increases

Which of the following describes businesses' behavior?

As price decreases, quantity demanded increases and as price increases, quantity demanded decreases.

Why do managers prefer for their consumers to use the good they purchase rather than not use it and just purchase it?

Because consumption will lead to renewals and more publicity

One property of mental accounting has to do with the frequency of which specific accounts are evaluated. Which phrase best reflects this property?

Behavior is altered by our current position and not our overall lifetime position

Best known self regulatory group

Better Business Bureau (BBB)

When companies offer several products for sales as one combined product the pricing strategy is called

Bundling

According to mental accounting, most people will buy something they need with (a) __________ and something they want for fun with (a) __________.

Cash; gift card

As price gets __________ elasticity gets __________.

Cheaper; smaller

When pricing a product line, one product can be more expensive than another when they are

Complements

What is an additional advantage to consumption according to class material?

Consumption helps establish high switching costs

Adding a mark-up on your own cost is called

Cost plus

How do cash transactions differ from credit transactions?

Credit card transactions mask the price more than cash transactions

When there is a price decreases and the demand is inelastic, total revenue will

Decrease

father of mental accounting

Dick Thaler

the __________ requires a company to follow its police or face severe penalties, even if the company is not required by the Gramm-Leach Bliley Act to have a privacy policy

FTC

Overstock.com was found guilty of doing what?

Falsely advertising list prices

Which pricing strategy involves giving basic products for free but charging a premium for advanced features?

Freemium

When companies price their products, sunk costs should be

Ignored

Paying for utilities, such as the lights in a factory, is considered a

Incremental fixed cost

If the price of a good increases and there is a small change in demand for that good, it can be said that the demand is

Inelastic

Fill in the blanks: In mixed gains __________ is preferred, while __________ is preferred for mixed losses.

Integration; segregation

Why do most people prefer to use mental accounting even though it results in them paying more in some situations?

It makes them feel more financially safe

What is a disadvantage of using sale signs?

It may hurt the reputation of the seller if the good isn't truly discounted

in 1962, _______ outlined a consumer bill of rights that codified the ethics of exchange between buyers and sellers which were the right to 1. 2. 3. 4.

JFK Safety be informed choose be heard

Which scenario best describes the concept of "multiple gains"?

Kids are happier when they open more presents compared with one box that holds all of the presents inside of it

How did Michelob, a pricy beer brand, use mental accounting to target consumers?

Michelob figured that consumers tend to drink pricier beer on the weekend, so they marketed their beer to be associated with weekends

What is one method used by retailers to obscure the reference price of a good?

Monthly payments

Demand is __________ elastic if there are __________ close substitutes.

More; many

If a product is advertised as getting the first 3 months of membership for $7/month and just $15 after that, this would be an example of

Penetration

When a new product is introduced at a low price to secure market acceptance the price is called

Penetration

One systematic error in transaction utility is derived from...

People comparing options to past purchases rather than possible purchase

Which of the following is not a way to beat online price discrimination

Purchase right away

Companies are not allowed to discriminate based on

Race

According to the Wall Street Journal, McCormick was accused of doing what?

Reducing the goods in each package subtly without changing the packaging or price

Briefly define mental accounting.

Refers to the act of allocating funds into different accounts that have a unique purpose

A consumer's income, needs, and the availability of substitutes play a role in determining their

Reservation price

Which of the following is not true regarding price discrimination?

Revenues of each segment must exceed costs

When the price varies according to the quantity sold it is called

Second degree price discrimination

Which one of the following is an example of a signpost item?

Selling convenience item for a loss to attract business into other parts of the store

What is one method used by retailers to obscure the reference price of a good?

Selling the good in an unusual size

the ___________ was punitive towards monopolies, whereas the __________ was preventive

Sherman antitrust act Clayton act

Low price advantages due to price wars are often

Short lived

Price wars

Should be avoided

If demand is elastic and price goes up, a large proportion of customers will purchase

Substitutes

If the price level for a good is set above the market price, then there is a

Surplus

SPAM

Term for unwanted commercial email similar to junk mail

In an example from the slides, two couples were reimbursed $400 for salmon that the airline had lost in transportation. How come they spent $325 on dinner with that money when they had never dined out for nearly that much?

The couples viewed the $400 as part of their entertainment and food account

Referring to class material, a study was done to test the effects of a placebo pain killer pill (no direct health benefits) at different prices. Which sentence summarizes the study?

The group that paid less for the pill had less people say the pill reduced pain that the group that paid more for the pill.

Why do most consumers rely on pricing cues?

They don't know the true value of the item

Why does Amazon sell the Kindle at a loss?

They make the money up in paid content sold through the Kindle

What is the strategy where consumers are required to buy something they don't want as a condition of buying something they do want?

Tying

Which category of costs is directly related to the quantity produced?

Variable costs

In first degree price discrimination the seller is concerned with the __________ of each consumer

Willingness to pay

consumerism

a grassroots movement started in the 1960s (increase the influence, power, and rights of consumer's in dealing with institutions)

Exclusive territorial distributorships

a manufacturer grants a distribute the sole rights to sell a product in a specific geographic area

Do not call registry

a nationwide list of consumers' telephone numbers who don't want unsolicited telemarketing calls

digital millennium copyright act (1998)

act designed to prevent copyrighted material from being pirated online. while prominent cases involve downloading music, your marketing info is also included

cost plus

add a mark on your own cost not desirable when consumer valuation is really high or when demand is unknown

why should we avoid price wars

advantages fade quickly price expectations distorted long term customers become less benefit sensitive

slack fill example

air in a potato chip bag

sunk costs

already incurred, cannot be recovered, always IGNORE them

signpost items

although consumers often do not know exact prices, they have benchmarks consumer suse signpost items' prices to form overall impression of store's prices

predatory

an aggressive pricing technique (undercutting) intended to drive out competitors from a market illegal in US

price wars should be ...

avoided

people are more likely to consume a product when they are...

aware of its costs

before companies can display the BBB accredited business logo on their websites, they must

be members of their local BBB Have been in business for at least 1 year agree to participate in the BBB's advertising self-regulation program abide by the BBB code of business practices resolve consumer disputes over goods/services promoted or advertised on their website

2. the frequency with which accounts are evaluated affects our decisions

behavior is altered by current position and not lifetime position

ethical exchanges between buyer and seller should result in ...

both parties being better off after transactions

________________ comprise the effective rules of the game, the boundaries between competitive and unethical behavior and the codes of conduct in business dealings

business cultures

quantity discounts

buyers can be charged different prices for a product, provided there are difference in manufacturing or delivery costs

__________ highlights perceived costs __________ masked perceived cost

cash credit

consumer protection

child protection act (1966) nutritional labeling and education act (1990) consumer product safety act (1972)

______________ is a formal statement fo ethical principles and rules of conduct

code of ethics

if demand is elastic and .. price increases, then total revenue ... price decreases, then total revenue ...

decreases increases

2 kinds of unethical competitive behavior are most common

economic espionage giving/receiving bribes/kickbacks

3. gifts are different from products we purchase

economics theory of gift giving - maximize utility of the recipient given the budget.

large change -->

elastic

factors in the economics of pricing in regard to the consumer

elasticity reservation discrimination

Dump accounts

email addresses they use whenever they need to register for something online only used for this purpose so all spam goes to one account

consumer product safety act

established the consumer a product safety commission. monitors product safety and establishes uniform product safety standards

___________ are based on the personal moral philosophy of the decision market

ethical choices

Laws/regulations relating to distribution

exclusive dealing requirement contracts exclusive territorial distributorships tying arrangements

Which is not an example of how retailers can increase sales?

expensive signpost items

segregate mixes losses

explains the use of rebate segregate savings and payment

major federal levitation has been passed to encourage _______________ because it permits the consumer to determine which competitor will succeed or fail

fair competition

how is price determined ?

fairness is main factor depend on cost to the seller

advantages of penetration

fast product adoption sets barriers of entry for competitors

pricing right is the ...

fastest, most effective and most important way for companies to gain profit

price matching

firm can meet competitors price in good faith

advantages of skimming

firms recover research and development costs before competitors enter market firms capture all consumer surplus

companies care about costs

fixed costs variable/marginal costs opportunity costs sunk costs

the Sherman antitrust act (1890)

forbids contracts, combinations, or conspiracies in restraint of trade forbids actual monopolies or attempts to monopolize any part of trade/commerce

choose

freedom of choice in the form of practices by firms that do not limit the availability of new products to consumers

A company can lose its trademark if it comes ...

generic if it has primarily become a common descriptive word for the product it can be used by anyone aspirin and escalator have lost their trademark protection

bribes and kickbacks are often disguised as

gifts, consultant fees and favors

copyright law

gives author of literary, drama, music, or art work from the exclusive right to print, perform or otherwise copy that work. copyright is secured automatically when work is created

patent law

gives inventory right to exclude others from making, using, or selling products that infringe on patented invention

the price paid for the product compared to some reference price: we are _________________ if we think we got a good deal

happier (higher utility)

consumption establishes ...

higher switching costs

consumers

how the QD will change if we raise/lower the price (what is their price sensitivity level) what is the maximum price consumers are willing to pay for our product?

reservation prices depend on ...

income, needs, substitutes

methods of raising prices without generating excessive negative truncations utility

increase perceived regency price obscure reference price

if demand is inelastic and .. price increases, then total revenue ... price decreases, then total revenue ...

increases decreases

fixed costs

incremental - utilities non-incremental - rent

bribes and kickbacks are more common in

industries experiencing intense competition countries in earlier stages of economic development B2B and government marketing than consumer marketing

small change -->

inelastic

freemium

involves offering basic products/services free but charging premium for advanced features or functionality

Exclusive dealing

is an arrangement a manufacturer makes with a reseller to handle only its products of one manufacturer and not those of competitors is illegal under Clayton act when it substantially lessens competition

economic espionage

is the clandestine collection of trade secretes or proprietary information about a company's competitors illegal and unethical and carries serious criminal penalties

the ______________________ is a major reason for the violation of ethics codes

lack of specificity

a person's moral philosophy is ...

learned through the process of socialization with friends/family/formal education

price discrimination is ... requirements

legal must be legal multiple segments inability to resell better if revenues of segments are greater than costs no resentment from differential pricing

implication - make a popular signpost item your ...

loss leader

the Robinson-Patman Act (1936)

makes it unlawful to discriminate in prices charged to different purchasers of same product where the effect may substantially lessen competition of help create a monopoly

be informed

marketers have obligation to give consumers complete and accurate information about their offerings

promotional allowances

maybe be given to buyers on an equal basis proportionate to the volume purchased

what is price?

mechanism by which firms capture value from consumer side, price can be more than money

the system that households use to evaluate regulate and process their home budget - violates the fundability of money (end of losing money)

mental accounting

ethics

moral principles and values that govern actions and decisions of an individual or group

____________ can be different in different cultures

moral standards

how does the BBB encourage companies to follow its standards for commerce

moral suasion

the BBB use ___________________ to get remembers to comply with its standards

moral suasion

Tying arrangements

occurs when a seller is required to purchase one product to also buy another item in the line

bundling

offering several products for sale as one combined product a "deal"

1. the assignment of activities to specific accounts

often both the sources and the uses of the funds are labeled expenditures are groups into categories spending is constrained by implicit budgets

price discounting

only certain forms are allowed - quantity discounts - promotional allowances - price matching

whether we go or not go depends on ______

pain of payment if payment was done a long time ago, we don't feel the pain anymore

company protection

patent law copyright law digital millennium copyright act

timing is usually set to increase demand payment options

payment last consumption payment in advance payment after/during consumption

when identical goods.services are sold by the same provider at different prices

price discrimination

price elasticity of demand

price elasticity of demand is measure as the %change in QD that occurs in response to a %change in price at a given price point

how price changes affect the total revenue depends on the ...

price elasticity of the demand

2nd degree price discrimination

price varies according to quantity sold

factors in the economics of pricing in regard to the competitor

price wars

the best run companies go to almost any lengths to avoid ...

price wars

_________ is the only way to capture consumer value and to make money for the company

pricing

product line pricing

profit maximization from product line vs a particular product cannibalization

the federal dilution act (1995)

prohibits the use of a trademark on a non-competiting product

telephone consumer protection act (1991)

provides requirements for telemarketing promotions

deceptive mail prevention and enforcement act (1999)

provides specifications for direct mail sweepstakes requires that the "no purchase is necessary to enter" statement be displayed in the mailing, rules, entry form

price discrimination is illegal if its done on the basis of...

race, religion, nationality, or gender or if it is in violate of antitrust or price fixing laws

______________ can trigger suicidal price wars

reducing prices

__________ consists of restrictions that state and federal law place on businesses with regard to the conduct of its activities

regulation

Requirement contracts

requires a buyer to purchase all or part of its needs for a product from one seller for a period of time legality depends on a court's interpretation of their impact on distribution

The Gramm leach Biliey Act of 1999

requires financial institutions to provide written notice of their privacy policies the law was broadened in 2003 to apply to a wider array of companies and consumer information

CAN SPAM Act (2004)

restricts collection fo personal information and unsolicited email promotions on the internet. prohibits the use of email, faxes, and other technology to randomly push a message to a potential consumer.

what rights are included in the consumer bill of rights

rights to safety, to be informed, to choose and to be heard

sales signs

sale signs signal to customers that the item is a bargain no cost for the retailer, usually no commitment to a particular level of price be careful not to upset customers

pricing cues

sales signs signpost items keep it simple, no comma, period, dollar signs, cents decoy - anchoring, attraction effect call is small "a small $1 fee"

sugging

sell or attempt to sell a product under the guise of conducting market research. misrepresenting or lying about the source of the info in an effort to gain an unfair advantage term was primarily applied to a practice in which a salesperson would pretend to be doing market research by interviewing a consumer, and then turn the consumer's answers into reasons to buy more recently, some companies have hired young, good looking outgoing men and women to hang out in bars and surreptitiously promote a particular brand of alcohol or cigs legal but not fair

consumption is vital to businesses that

sell subscriptions and memberships

obscure reference price

sell the product in an unusual size, change the size, or slack fill

1st degree (perfect) price discrimination

sell to each consumer at different price. usually we sell just below reservation price

3rd degree (indirect)

sell to each segment at different price

integrate losses

sellers have an advantage in selling something if its costs can be added on to another larger purchase

multiple gaines

serration of gains is preferred

penetration

set initial price relatively low (lower then eventual market price) to secure market acceptance

culture

set of values, idea, attitudes that are learned and shared among the members of a group

corporate culture

set of values, ideas, and attitudes that is eland and shared among members of an organization dress, sayings, manner of work is apparent in formal codes of ethics and ethical actions of top management/co-workers

skimming

set price of product relatively high at first, then lower price over time

special pricing methods

skimming penetration predatory bait and hook freemium product line pricing bundling tying

disadvantages of skimming

slows down product adoption may upset customers

___________ affect ethical and legal relationships among individuals, groups, business and institutions and organizations

social values

culture serves as a ...

socializing force that determines what is considered to be morally right and just

laws

society's values and standards that are enforceable in the courts

privacy policies

statements regarding how a company will use and protect a consumers' private data

increase perceived regency price

suggested retail price, increase perceived costs

_________ seems to be a good term to apply to fake reviews

sugging

Permission marketing

term created to suggest that marketers should always ask for permission to sell or ot offer buyers marketing messages - the idea was that when permission is granted, the buyer is willing to listen

the ____________ closely monitors promotion and advertising to identify deceptive or misleading advertising and unfair business practices

the FTC Act (1914)

A treaty that protects US trademark rights globally

the Madrid Protocol

safety example

the US consumer product safety common checks the safety of 15,000 consumer products

bait and hook

the basic product (hook) is offered cheaply or free, the complementary product or refill (bait) is sold expensively. the basic product cannot be used without the complementary product

laws/regulations relating to online and offline promotion

the federal trade commission act (1914) deceptive mail prevention and enforcement act (1999) telephone consumer protection act (1991) controlling the assault of non-solicited pornography and marketing act (2004) do not call registry

reservation price

the maximum price a consumer is willing to pay for a good/service

workers sometimes violate ethics codes because of how they perceive the behavior of ...

top management/co-workers

how much are you willing to pay and how will it make you feel

transaction utility

economic espionage examples

trespassing, theft, fraud, misrepresentation, wiretapping, teaching trash, violation or written and implicit employment agreements with non-compete clauses

starting int the mid 2000s (recession)m there has been a public outcry about the ...

unethical practices of business people.

the federal trade commission monitors

unfair business practices

BBB

voluntary alliance of companies whose goal is to help maintain fair business practices has no legal power

opportunity cots

what else can we do with these resources

self-regulation

when an industry attempts to police itself

kickback

when money is paid after exchange occurs

bribe

when money is paid before an exchange occurs

segregate gains

when selling a product with more than one dimension, it is desirable to have consumers evaluate each dimension separately

employees who report unethical or illegal actions of their employers

whistleblowers

price too low and ...

you leave money on the table


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