MGMT 470: Exam III - Section 1
In ______ ______, you sell something, usually a base system, at a relatively low prices, but the expendables it uses are relatively expensive - Ex: The cost for a printer is low, but each ink cartridges are high
captive pricing
Case: Wil's Grill John learned about the "______ ______" movement - characterized by locally produced, organic foods, and sustainable practices.
clean food
(5) Contextual Factors of Pricing: When starting out, maximizing profits is better than increasing market share, as competing on price may lead to negative growth
company objectives
(5) Contextual Factors of Pricing: When comparing price, compare matches in product bundles
competition
(7) Pricing Strategies: Setting a price at the highest level the market will bear, usually because there is no competition at the time
skimming
_______ ______ ________ ___ _______: Theories based on the assumption of limited human abilities
bounded rationality models of management
(3) Examples of Intermediaries: An intermediary business that represents a manufacturer's product or service to other business-to-business intermediary firms
an agent
Case: MuMate The company hired "_____ _____" identified through Taylor's network to market MuMate to key influencers.
brand ambassadors
(7) Pricing Strategies: Setting the price for an item relatively low and then charging much higher prices for the expendables it uses
captive pricing
(5) Contextual Factors of Pricing: Everyone who handles the product expects to make something, which increases the price through price escalation
channels of distribution
(5) Contextual Factors of Pricing: 1. Your ________ ________ 2. ________ ________ 3. ________ ____ ________ 4. The ________ 5. ________ & ________ ________
company objectives, marketing strategy, channels of distribution, competition, legal & regulatory issues
(3) Things we need to make Good Decisions (according to the Bounded Rationality Model): 1. _____ _____ 2. ______ ways to _____ _____ so it is _______ 3. Methods to _____ _____
good information, efficient, condense information, understandable, compare alternatives
Case: MuMate The company relied on "______ _____" and word-of-mouth marketing.
guerilla marketing
_________ ________ Definition #1: Unusual and nearly free advertising
guerilla marketing
_________ ________ Definition #2: A relatively new concept in market bu the start-up company's best friend
guerilla marketing
_________ ________ Definition #3: The use of creative and relatively inexpensive ways to reach your customer Ex: doorknob hangers, flyers under windshield wipers, T-shirts, balloons, sidewalk messages
guerilla marketing
An ________ Product: Product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased.
inelastic
Elastic vs. Inelastic Products: Essential products with NO substitutes
inelastic products
People who get the product to the end consumer for a percentage of the profits
intermediaries
(4) Fundamentals of Pricing: 1. _______ _______ 2. _______ 3. _______ 4. _______ _______
margin pricing, elasticity, value, contextual factors
The Secret to Pricing: Understanding: - the _______ - the cost of _______ _______ - the _______ your customers are willing to pay
market, doing business, prices
______ ______ Definition 2: Knowing your costs and the markup is a fundamental pricing concept
markup pricing
________ Definition 1: The purchase of inventory only after a sale is made; very typical with Internet firms
microinventories
________ Definition 2: - A set of goods or services that consists of only one or a few items - These are the small business's answer to just-in-time inventory methods in big business
microinventories
(7) Pricing Strategies: Setting a price that ends in the number 5,7, or 9 - Ex: $99.99
odd-even pricing
Charging lower prices at certain times to encourage customers to come during slack periods
off-peak pricing
_________ ________ Definition 1: The highest price that would produce your desired level of sales in your intended market
optimum price
_________ ________ Definition 2: The price that would generate the most income possible for the product or service you are selling over the course of a year
optimum price
Combining two or more products in one unit and pricing it less than if the units were sold separately
price bundling
If dropping the price increases sales, this is _________ _________.
price elasticity
Charging an outrageously high price for something
price gouging
(7) Pricing Strategies: The practice of setting (usually) three price points: good quality, better quality, best quality
price lining
A form of communication that encourages the customer to take immediate action - Ex: coupons, sales, or contests
sales promotions
(7) Pricing Strategies: 1. _______ 2. _______ pricing 3. _______ pricing 4. _______-_______ pricing 5. _______ pricing 6. _______ pricing 7. _______ _______
skimming, prestige, premium, odd-even, partition, captive, price lining
(4) Concepts of the Law of Supply & Demand: 1. When supply is adequate, prices are _______ 2. If supply shrinks, prices go _______ 3. If demand suddenly grows, prices are likely to go _______ 4. Reasonable increases are expected, but beware of _____ ____
stable, up, up, price gouging
Case: Wil's Grill Alternatives: John could... 1. Expand his "______ ______" business OR 2. Add a ______ ______
street food, catering business
(3) Examples of Intermediaries: An intermediary business that buys (typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumers
a wholesaler
The amount an entrepreneur adds to costs to provide a profit
markup
To make elasticity work, keep in mind the _______ people see in your product.
value
(3) Examples of Intermediaries: 1. A ______ 2. A ______ 3. An ______
wholesales, retailer, agent
The _____ Goal of Pricing: To set the price as high as you think you can, using your competition and customers' responses as a check
#1
The _____ Goal of Pricing: To use pricing strategies to drive sales
#2
Case: MuMate KEY ISSUE: A venture capital firm like _____, could offer ______ quickly, but was it worth the price in terms of _____ _____ and _____ _____ _____?
DPV, capital, equity dilution, loss of control
An _________ Product: Product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased.
Elastic
__________ is where the law of supply and demand relates to business.
Elasticity
(3) Examples of Intermediaries: An intermediary business that sells to consumers or end users of a product (typically in single or small quantities)
a retailer
One implication of the assumption that people are limited in their ability to use information is that the more information available to be included into the decision process, the less efficient the process will be
bounded rationality models of management
(4) Key Factors considered when determining an Optimum Price: 1. _____ for the product or service 2. _____ delivered to the customer 3. _____ set by _____ _____ 4. Your _____ _____ & ______ ______
demand, value, prices, competing firms, business strategy & product placement
Elastic vs. Inelastic Products: Products with MANY substitutes
elastic products
From economics, the idea that the market's demand for a product or service is sensitive to changes in its price
elasticity
Case: Hebon Koroth recognized the potential for ______ to help solve some of the world's aptly named "_____ ______" - of global hunger, food security, and rural poverty.
jackfruit, wicked problems
(For big businesses) The practice of purchasing and accepting delivery or inventory only after it has been sold to the final customer
just-in-time inventory
The ___________________________: The economic theory that describes how the demand for products (or services) and the supply of them affect each other
law of supply & demand
______ ______ Definition 1: (The most widely used pricing method) A price-setting method where an amount is added to the cost of a product to set the retail price and provide a profit
markup pricing
Your fundamental goal should be setting the ________ _______.
optimum price
Case: Hebon Decision: Should Koroth ... 1. Expand his business _______ to capitalize on the growing trend in the US OR 2. Should he focus on ________ _______.
overseas, domestic growth
(7) Pricing Strategies: Setting the price for a base item and then charging extra for each additional component
partition pricing
_________ Discounting: A sale run on a schedule that is unpredictable to the customer
random
(5) Contextual Factors of Pricing: Talk to your accountant & attorney for specific rules of your product
legal & regulatory issues
(5) Contextual Factors of Pricing: Your price must be consistent with your marketing strategy
marketing strategy
_________ Discounting: Sales conducted at predictable intervals, such as before major holidays
periodic
(7) Pricing Strategies: Setting a price above that of the competition to indicate a higher quality
premium pricing
(7) Pricing Strategies: Setting a price above that of the competition to indicate your product is a status symbol
prestige pricing