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Chapter 15

COMMERCE 1BA3 Chapter 15: Chapter 15 Business Environment Notes

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Rita Cossa

Chapter 15 Business Environment Notes • Value: Good quality at a fair price • There are many factors on a customer determining the value of a product • Total product offer or Value Package: consists of everything that customers evaluate when deciding whether to buy something • Product Line: a group of products that are physically similar or are intended for a similar market. • Product Mix: The combination of product lines offered by an organization. Services also offer combinations • Product differentiation: the creation of real or perceived product differences. (Ex. Although water bottle companies offer very similar products, the companies will try to edge out the opponent by pricing, promotion or creating a brand loyalty. • Packaging must have seven functions (obvious) • Bundling: combines goods and/or services for a single price (ex. Cell phone plan) • Brand: a name, symbol, or design (or combination thereof) that identifies the goods or services of one seller or group of sellers, and distinguishes them from the goods and services of competitors • Brand Equity: the value of the brand name and associated symbols. Usually the company will not understand its worth till it sells to another company • Brand loyalty: the degree to which customers are satisfied, enjoy the brand, and are committed to further purchases • Brand manager: has direct responsibility for one brand or product line. This individual also manages all the elements of the marketing mix—product, price, place, and promotion—throughout the life cycle of each product and service. Thus, you might think of the brand manager as the president of a one-product firm. • Product life cycle has four stages: Introduction, Growth, Maturity and Decline • Some companies attempt to change the image of their brand every few years to avoid the full decline • When pricing a product, the following are taken into consideration: 1. Achieving a target return on investment or profit 2. Building traffic (Ex. Supermarkets offering certain products at a lower price to bring people into the store) 3. Achieving greater market sphere (Ex. Low finance rates) 4. Creating an image (Ex. Pricing certain items high like a Rolex gives them an image of exclusivity and status) 5. Furthering Social objectives (ex. The government often subsidizes products that are necessities so that people can afford them with little money) • Cost Based pricing: elaborate cost accounting systems to measure production costs (including materials, labour, and overhead), add in a margin of profit, and come up with a price • Demand based pricing: designing a product so it not only satisfies customers but also meets profit margins we’ve set • Competition-based pricing: A strategy based on what all the other competitors are doing • Price leadership: the strategy by which one or more dominant firms set pricing practices that all competitors in an industry then follow • Break -even analysis: the process used to determine profitability at various levels of sales • Total fixed costs: all expenses that remain the same no matter how many products are made or sold • Variable costs: Costs that change depending on the level of production • A skimming price strategy: A strategy in which a new product is priced high to make optimum profit while there's little competition. • Penetration pricing: A strategy in which the product is priced low to attract many customers and discourage competitors. • Everyday low pricing (EDLP): sets prices lower than competitors and does not usually have special sales • High-low pricing strategy: Set prices that are higher than EDLP stores, but have many special sales where the prices are lower than competitors. • Psychological pricing: Pricing goods and services at price points which make them look cheaper than they are • Marketing Intermediaries: organizations that assist in moving goods and services from producers to businesses (B2B) and from businesses to consumers (B2C) • Channel of distribution: consists of a whole set of marketing intermediaries (such as agents, brokers, wholesalers, and retailers) that join together to transport and store goods in their path (or channel) from producers to consumers. • Agents/brokers: marketing intermediaries who bring buyers and sellers togethe
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