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Lecture 8

MKT 100 Lecture 8: Week 9 Audio

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Ryerson University
MKT 100
Yanina Chevtchouk

Pricing Strategies • Value for money • Setting price for what to charge based on consumer preferences, company cost, type of competition, goal of channel members • Profit Goal o Maximize profit  brand new product with not much competition o Flat Screen Tv first came out, cost 1000 of dollars, more people enter market, price went down o Type of strategy  Skimming: setting a high intial price for a product to allow recovery for research and development ▪ Apple uses skimming ▪ Skiming strategy suitable when, new product distinctive features strongly desired by consumers, product is in early stages of life cycle, lower prices are not likely to produce greater total revenue because lack of awareness of product, features are more important then benefits, product has a patent for its technology protected by cometptiors entring market quickly • Market Share Goal o Price tend to be lower, objective is to increase sale volume, achieve rapid growth and discourage competition, we see this in season sales for cars and retailers, if company has a high market share in a specific market, then can leaverage their suppliers and vendors for better deals, achieve cost efficiencies which can be passed onto consumers o Type of Strategy  Penetration: relative low price establish for new product, aim generate sales based on price benig removed as a barrier to trial, gaining large market share through low price discourages competition from entering market. o Effective when: a large mass market already exist (pop, paper towel, tooth paste), product is in latter stage of life cycle demand is related to price, economy of scales result cost deficiencies, product category is already experiencing price competition or will occur after a new product is introduced • Status Quo Goal o Ompanies don’t want to competit in price as follow th leader: if one brand produces its price, competitive brands follow. When competitive situation is an oligopoly like oil and gas industry, price war occurs where one lowers the price and the rest is required to follow. Price matching : best buy and walamart will meet price of its compettiors, the responsibility is on the customer to find the lower price. o Pricing startey  Meet the competition: brands are competitng against future, benefits and image not price o When channel members have differen goals, it can be confusing for retailer. Manufacturer might want to present quality image with a high price, retailer may wanna drive traffic and mark down high price. o Internet has an impact on traditional pricing startgey. Consumer has access ot much more information and many more competitive products. Prices can easily be checked over internet. E commerce can now be ordered anywhere electronically. Pricing Tactics • Marketers use various tactics to increase the perceptions of their product or service being valuable o When selling B2B: product market use ▪ Seasonable discounts – these are reductions offered as financial incentives to stock product in advance of season using this tactic , manufacturer can reduce the amount of inventory it has to stock prior to peak season demand. ▪ Cash discount- reduction on invoice the buyer pays promptly, get
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