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Lecture 9

MKT 100 Lecture 9: MKT 100 Week 10 Notes

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Ryerson University
MKT 100
Hamed Mehrabi

Marketing Week 10 Lecture/Textbook Notes Recall: The Marketing Plan Price • the overall sacrifice a consumer is willing to make (money, time, energy) to acquire a specific product • can be an indicator of quality - low price equals low quality and high price equals high quality 5 C’s of Pricing • company objectives - profit orientation (maximize profits, target return pricing, target profit pricing), sales orientation (increasing value perceived by consumers to make them buy more), competitor orientation and customer orientation (based on customer expectations) • customers - most important C - the reaction of customers to different price points, prestige products/services have upward sloping curves; demand of the product changes with price; price elasticity of demand = change in quantity%/change in price%; elastic demand —> small change in price does not change the demand by more than 1% (not price sensitive); income effect —> as income increases, demand increases and price elasticity decreases; substitution effect —> more availability of substitutes increases price elasticity (unique, strong brands are not affected); cross- price elasticity = change in quantity%A/change in price%B; substitutes —> price of B goes up, quantity demanded of A goes up; complementary products —> price of B goes up, quantity demanded of A goes down • costs - variable costs vary with production volume; fixed costs are unaffected by production volume; total cost is the sum of variable and fixed costs; break-even point = fixed costs/price - variable costs/unit • competition Less Price Competition More Price Competition Monopoly Oligopoly - one firm controls the - handful of firms controls Fewer Firms market the market Monopolistic Competition Pure Competition - many firms selling - many firms selling Many firms differentiated products at commodities for the same different prices price • channels members - manufacturers, wholesalers and retailers can have different perspectives on pricing strategies Other influences in Pricing • the internet economic factors - increasing disposable income, increasing status consciousness, • cross-shopping, increasing globalization, local economic conditions Pricing Strategies • cost-based approaches - sets price of product based on how much it costs to make and deliver the product • competitor-based approaches - company considers the price of other firms as a benchmark; se
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