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Week 7 Notes – Marketing.docx

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University of Guelph
Marketing and Consumer Studies
MCS 1000

Week 7 Notes – Marketing What is Price? - Sum of all the values that consumers exchange for the benefits of having or using the good or service. What price is and what it is not! Price vs. Cost - Marketers do not make decisions about costs, they make decisions about prices. Dynamic pricing - The practice of charging different prices depending on individual customers and situations - Internet and web-purchasing provides the technological capability - Sites like eBay even add the ability to negotiate price to dynamics pricing practices. Factors that Affect Pricing Decisions Internal Factors: - Marketing Objectives - Marketing Mix Strategy - Costs - Organizational Considerations External factors: - Nature of the market and demand - Competition - Other Environmental Factors (economy, resellers, government, social concerns. Fixed vs. Variable – Your Call - Product packaging (variable) - VP of marketing’s salary (fixed) - Cost of 3 month billboard campaign (fixed) - Annual advertising budget (fixed) - Cost of the parts that go into manufacturing the marketer’s product. (Variable) Price Elasticity A way of measuring how sensitive the market is to price changes - Inelastic: minimal change in demand as price increases - Elastic: significant drop in demand in price increases Pricing In Different Markets Pure Competition: many buyers and sellers where each has a little effect on the going market price. Monopolistic Competition: Many buyers and sellers who trade over a range of prices. Oligopolistic Competition: few sellers and sensitive to each other’s pricing/marketing strategies Pure Monopoly: Market consists of a single seller General Pricing Strategies Cost-based Approach - Cost-plus pricing - Break-even analysis - Target profit pricing Value-based Approach - Consumer perceptions of value Competition-based Approach - What competitors are charging Market skimming Pricing - High price to reap maximum profit from early adopter segments - Strategy must be supported by product quality, production costs, and competitors’ difficulty in entertainment market. Market Penetration Pricing - Low price to gain maximum market share - Market must be price sensitive, costs must fall with rising volume, and price must discourage competition. Product Mix Pricing Strategies - Product Line – pricing levels to deliver value to different segments. - Optional Products – separate options available for the main product - Product Bundles – combinations of products, for a reduced price - Captive Products – needed to make main products usable. - Byproducts – created from the manufacture of the main product Discounts and Allowances Discounts - Cash - Quantity - Seasonal Allowances - Trade-In - Promotional Pricing Selling a goo or service at two or more prices, where the differences in prices are not based on differences on costs. - Customer-segment - Product-form - Location Pricing - Time pricing Psychological Pricing - Considers the psychology of prices and not simply the economics - Consumers usually perceive higher-priced products as having higher quality - Consumers use price less when they can judge quality of a product Promotional Pricing Temporarily pricing products below list price and sometimes even below list price and sometimes even below cost to create buying excitement and urgency. INSERT DIAGRAM Geographical Pricing - FOB – origin pricing - Uniform-delivered pricing - Zone pricing - Basing-point pricing - Freight-a
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