DECA Marketing Management

List some common pricing mistakes
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List some common pricing mistakes
Not revising price often enough to capitalize on market changes, setting price independently rather than as an intrinsic element of market positioning strategy, not varying price enough for different products, segments, channels, and purchase occasions.
Name 3 ways customers perceive price (consumer psychology and pricing)
1. Reference prices
2. Price quality inferences
3. Price cues
What are reference prices?
Comparing a product's price to an internal reference price they remember or an external frame of reference such as a posted.
What are price quality inferences?
Consumers use price as an indicator of quality. When alternative information about true quality is available, price becomes a less significant indicator of quality.
What are price cues?
Consumer tend to be "left to right" in processing prices. IE = $299 is in $200 range versus $300 range. Prices ending in odd numbers also may convey a discount
Name the 6 steps in setting pricing policy
1. Selecting the pricing objective
2. Determining demand
3. Estimating costs
4. Analyzing competitor costs, prices, offers
5. Selecting a pricing method
6. Selecting the final price
Name the 5 major objectives through pricing (selecting the pricing objective)
1. Survival
2. Maximum current profit
3. Maximum market share
4. Maximum market skimming
5. Product quality leadership
What is survival?
Short term objective that is appropriate for companies plagued with overcapacity, intense competition, or changing consumer wants.
What is maximum current profit?
Companies estimate the demand and costs associated with alternative prices and then choose the price that produces max current profit, cash flow or return on investment.
What is maximum market share?
Higher sales volume will lead to lower unit costs and higher long run profit. Market penetration pricing - the firm sets the lowest price, assuming the market is price sensitive.
What is market skimming pricing?Prices start high and slowly drop over time. Makes sense when enough buyers have high current demand, unit costs of producing a small volume are not high,Name 8 factors that lead to less price sensitivity1. Expenditure is small relative to buyers income 2. Other pay part of purchase price 3. Cost of switching suppliers is high 4. Buyer can't easily compare suppliers 5. Cost of not getting the expected benefits is high 6. Product is a small part of the cost to obtain an important benefit 7. Price is a proxy for the products likely quality 8. Price is within the range of buyers perceived fair or reasonableName 3 basic methods to estimate demand curve1. Surveys to explore how units sold as certain prices 2. Setting different prices in similar territories, test different prices online 3. Statistically analyze past prices, quantities sold, other factors to reveal relationshipsWhat are fixed costs?Costs that don't vary wit production or sales revenue, such as payments for rent, heat, salaries, other bills that must be paid regardless of output.What are variable costs?Vary directly with the level of production.What are total costs?Sum of fixed and variable costs at a certain level of productionWhat are average costs?Cost per unit at that level of production, it equals total cost divided by production. As production increases, average cost falls as fixed costs are spread across more units.What is activity based accounting?Tries to identify the real costs both variable and overhead associated with serving each customerWhat is the experience/learning curve?Decline in the average cost with accumulated production experience. Experience curve pricing is risky as it may give the product a cheap image and also assumes rivals are weak followersWhat is target costing?Market research establishes a new products desired functions and the price at which it will sell given appeal and competitor prices, deducting the desired profit margin from this price element - different departments have to figure our how to bring the cost down to that levelName the 3 Cs of selecting a price1. customers demand schedule 2. cost function 3. competitor pricesWhat is a low price?There is no profit at this price setting markWhat is the floor price?You cover your costs with the floor price, break evenWhat is an orienting point price?Competitors price and the price of substitutesWhat is a ceiling price?highest price customer will pay for productWhat is a high price?No possible demand at this priceName the 6 price setting markup methods1. Markup pricing 2. Target return pricing 3. Perceived value pricing 4. Value pricing 5. Going rate pricing 6. Auction type pricingWhat is standard markup pricing?Add a standard markup to the product's cost. this method only works when it brings in expected number of sales. popular because easier to estimate costs than demandWhat is target return pricing?The firm determines the price that would yield its target rate of return on investment. Much depends on price elasticity and competitors prices which are ignored in this methodWhat is the unit cost equation?unit cost = variable cost + fixed costs / unit salesWhat is the target return price equation?target return price = unit cost + desired return x invested capital / unit salesWhat is the break even volume equation?break even volume = fixed cost / price - variable costWhat is perceived value pricing?Made up of several elements: buyers image of product performance, channel deliverables, warranty quality, customer support. The key to perceived value pricing is to deliver more value than competitors and demonstrate this to buyers.What is value pricing?Method in which the firm wins loyal customers by charging a fairly low price for a high quality offering. It means re-engineering operations to become a low cost producer without sacrificing quality.What is everyday low pricing (EDLP)?Important type of value pricing take place a retailer level. Charge a constant low price with few or no price promotions and special sales.What is high low pricing?Retailer charges higher prices on an everyday basis but then runs frequent promotions in which prices are temporarily lowered below EDLP pricing.What is going rate pricing?Firm bases its price largely on competitors pricing.What is auction type pricing?English auctions, dutch auctions, sealed bid auctionsNotes on selecting the final priceFinal price must take into account: brand's quality and advertising relative to competition, consistent with company's pricing policies, buyer's may not buy due to high perceived risk, impact on other partiesWhat is geographical pricing? (adapting the price)Company decides how to price its products to different customers in different locations and countries.What is countertrade?Buyers want to offer other items in payment - barter, compensation deal, buyback arrangement (accept partial payment products manufactured), offset (gets full cash, but agrees to spend cash in area).Name 7 techniques to stimulate early purchase1. loss leader pricing - cut price on well known brand, makeup in traffic sales 2. special event pricing 3. Cash rebates 4. low interest financing 5. longer payment terms 6. warranties and service contracts 7. psychological discounting - set artificially high price and then offer savingsName 5 price discounts and allowances1. cash discount 2. quantity discount 3. functional discount - 4. seasonal discount 5. allowance - trade in or promotionalWhat is price discrimination?Occurs when a company sells a product or service at tow or more prices that do not reflect a proportional difference in cost.What is first degree price discrimination?Seller charges a separate price based on intensity of each customers demandWhat is second degree price discrimination?buyers who buy in larger volumes get lower pricesWhat is third degree price discrimination?Seller sets different price for different classes of buyers:Name 6 kinds of third degree price discrimination1. customer segment pricing 2. product form pricing 3. image pricing 4. channel pricing 5. location pricing 6. time pricingName 5 situations for price discrimination works1. market is segmentable with different levels of demand 2. lower priced segment cannot resell 3. competitors can't undersell firm in higher price segment 4. cost of segmenting doesn't exceed extra revenue derived 5. doesn't breed customer resentment 6. type of discrimination is not illegalWhat is product mix pricing?Firm searches for set of prices that maximizes profits on the total mix.Name 6 product mix pricing situations1. product line pricing - well established price points to distinguish product in line 2. optional feature 3. captive product pricing - IE = razor and blades 4. two part pricing - fixed fee plus variable usage 5. by product pricing - certain good production includes by products 6. product bundling pricingName 4 traps of price cuts1. customer assume quality is low 2. low price market share but not loyalty 3. higher priced competitors match lower prices but have longer staying power 4. price war may be triggeredWhat is cost inflation? (initiating price increases)When rising costs unmatched by productivity gains squeeze profit marginsName 4 pricing techniques with overdemand (cannot supply all customers)1. delayed quotation pricing - final price not set until finished/delivered 2. escalator clauses - pay today's price and inflation 3. unbundling - reprice one or more elements 4. reduction of discountsEnvironmental scanningprocess of continually acquiring information on events outside the organization to identify and interpret potential trendstechnological forcesResearch indicates email messages sent through wireless is double than that of 1 year ago. According to an environmental scan of the US, this growth is a change in ________ forces.Social environmental forceYou are the marketing director for a large potato chip and snack food company. You have learned that a major portion of your market has switched to healthier foods. which environmental force contributed to this change in dietary habits?demographicsterm used to describe population's characteristics, such as age, gender, ethnicity, income and occupationMembers of generation YAmericans born between 1977 and 1994 are described asAmanda gave blood to the Red Cross and she was satisfied that she had performed a good deed. Was this a marketing exchange?Yes, because the donated blood was exchanged for a feeling of satisfaction.A TV ad shows teenagers searching in the fridge for something to drink. The ad showing the teens selecting Sunny D over the other drinks appeals to the consumers'____for liquid and attempts to shape consumers' ________for the advertised product.Needs; wantsAll markets ultimately are composed ofpeopleThe four Ps are commonly known asthe marketing mix or controllable factorsWhich of the following best defines needs and wants?Needs occur for physiological deprivations and wants are determined by a person's knowledge, culture, or personality.After launching a new product, an important consideration whether it would provide a reward for the risk .... reward is known ascompany profitA statement of the organization's scope, which often identifies its customers, markets, products, technology, and values.missionRatio of sales revenue of firm to total sales revenue of all firms in the industry, is known asmarket share___is a unique strength that an organization has relative to its competitors, often based on quality, time, cost, or innovation.competitive advantageIf Ben & Jerry's sells more premium ice cream to Americans, the company would be practicing which market-product strategy?Market penetrationserve as guidelines on how to act rightly and justly when faced with moral dilemmasethicssociety's values and standards that are enforceable in the courtslawsComputer program sold to car dealers shows financing outcomes that use the lowest possible estimates of taxes and interest. The company agrees the program may mislead buyers but it is not against the law. This is an example of an act that isunethical but legalSet of values, ideas, and attitudes that are learned and shared among the members of a groupcultureWhich of the following is NOT specified in the Consumer Bill of Rights?The right to have fair pricesStages a buyer passes through in making choices about which products and services to buy is called thepurchase decision processduring the purchase decisions process, person at the __ stage will realize that the difference between what she has and what she would like to have is big enough to actually something about isproblem recongitionKeisha is in the process of buying a new car appropriate to her role as the new VP of the company. In which stage of the purchase decision process is Keisha?alternative evaluationWhich problem solving variation would normally be used to purchase such items as toothpaste, soda, or chewing gum?routine problem solvingAnxiety felt because the consumer cannot anticipate the outcomes of a purchase, but believes may be a negative consequence is calledperceived riskmanufacturers, wholesalers, retailers and government agencies that buy goods and services for their own use or resale are examples oforganizational buyersSystem providing common industry definitions for Canada, Mexico, and the US which make easier the measurement of economic activity in the NAFTA is calledNAICS: North American Industry Classification SystemDemand for industrial products and services that is driven by demand for consumer products and servicesderived demand___________ a group of persons within an organization who participate in the buying process and share common goals, risks, and knowledge important to purchase decisionsbuying centerthree types of organizational buy classesstraight rebuy new buy modified rebuyEconomic argument for protectionism is that it:protects nation's political security discourages economic dependency on foreign countries encourages the development of domestic industries preserves jobsa tax on goods or services entering a country is calledtariff_________ sets rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issue binding decisionsWorld Trade Organization_________ exists when firms originate, produce, and market their products and services worldwideglobal competitionThorough cross-cultural analysis involves an understanding of an appreciation for the __________ customs, symbols, and language of other societiesvaluesProcess of defining a marketing problem and opportunity, systematically collecting and analyzing information and recommending actions is calledmarketing researchwhich of the following is not a step in the market research process?take marketing actionswhich of the following is a typical marketing research objective?all: explore how best to increase sales revenue and product find out why new clothing is not selling well, etc.Facts and figures that have already been recorded before the project are calledsecondary dataobserving people and asking them questions are really the only two ways to obtainprimary data