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Lecture 6

MGMA01H3 Lecture Notes - Lecture 6: Loss Leader, Minestrone, Demand Curve

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Sam J Maglio

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Different forms of market research (cont from last class)
Truck makes men seem more handsome
o Everything constant except the truck
Experiments to find causality, by holding everything constant except one thing
Price (today)
Implement arketig progra  P’s
Simple: cut prices = more sales
Complicated: Spend over $30 and get free shipping
Economist: Pay nothing if given the choice, people will actually pay some amount to what they
Economic Framework of Price
Customer Value: how uh do the thik it’s orth pereied alue
o Best case (Value pricing): perceived value > selling price > cost of production
Customer believes they get a good deal and businesses get a profit
o No one buys when price > PV > cost or price > cost > PV
Measuring customer value
o Price Elasticity: how do consumers react to the price changes
E > 1 means elastic (responsive)
E < 1 means inelastic (unresponsive
Affected by loyalty, ability to substitute the product, hard to compare
products (cheap but small vs more expensive and large, which is the
better option?), importance (loyalty), stockpile (fresh tomatoes is
inelastic, canned is elastic because she has a lot and buys a lot when on
sale and does not go bad)
o Economic value to customer: how to convince a rational person the value of a
Energy efficient lightbulbs will last much longer and save in the long run
o Survey Methods: how much is this product brand worth to customer over other
Brand vs. Generic (will pay more for the brand if all else equal)
Dollarmetric method: brand vs brand
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