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Chapter 11

MKT 100 Chapter Notes - Chapter 11: Iphone 8, Iphone X, Monopolistic Competition


Department
Marketing
Course Code
MKT 100
Professor
Fathima Saleem
Chapter
11

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MKT 100: Introduction to Marketing
Chapter 11: Price
Price is a Signal
Prices can be both too high and too low (determining optimal price takes great amount of
research; has to be compatible with members, industry, competitors)
o Price too low may signal poor quality
o Price set too high might signal low value
Has a lot to do with consumer conception
The Role of Price in the Marketing Mix
Price is usually ranked as one of the most important factors in purchase decisions
Price is the only element in the marketing mix that generates revenue
Understanding Price
Price needs to…
o Achieve the financial goals of the company-profitability
Break-even is not the goal; want to achieve target return
o Fit the environment will customers buy at that price?
More important; understand consumer demand/demand curve
o Supports the products positioning
Price must fit in with the retail store and relatively low (ex. Walmart)
o Be consistent with other variables of the marketing mix
In general, marketing mix has to tie in together; where product is
distributed, advertised has to fit in with the price charged for product
Supply Markets and Price
Types of Supple Markets
Monopoly/No Competition
o Where there is a single supplier who has control over price, quality and supply
Usually regulated for efficiency due to basic consumer requirements
Oligopoly
o A market dominated by a few suppliers that require very large investments in
equipment or technology
Price operates in the midrange due to couple of large suppliers dominating
market
Monopolistic Competition
o Many suppliers with a variety of product, each of which has a small market share
Products that differentiate themselves, exist in competitive environment
with small shares
Perfect Competition
o When many suppliers sell essentially the same product
Several suppliers selling same exact product (gold, silver, grains, rice)
Prices extremely low cause of the selling exact same type of product; price
is cut to gain more customers
Dominated entirely with supply and demand curve
find more resources at oneclass.com
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MKT 100: Introduction to Marketing
The Laws of Market Forces
When demand increases more than supply
increases, prices rises (Housing market)
When demand increases less than supply increases,
prices fall (New technologies; iPhone 8 has not a lot of
demand as iPhone X but demand for it is still increasing)
When demand decreases less than supply decreases,
price rises (Seasonal products)
When demand decreases more than supply
decreases, prices fall (Blackberry; anything close to
leaving market)
Elasticity of Demand
Even though price went up, decrease in demand is barely
affected
Marketers paradise
As price increases to certain amount, not gonna lose large
number of consumers
Companies establish this through branding
Revenue idealistically goes up
Low price has very high quantity demand
High price reduce quantity demand
o Very responsive market
Consumers very price sensitive to changes in prices
Companies have to be very careful about upward movement
of price as it could decrease revenue
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MKT 100: Introduction to Marketing
Price Elasticity of Demand
Availability of Substitutes
o The more substitutes available, the greater the elasticity
Price goes down, consumer will run to low cost provider (more sensitive
to price consumers)
Degree of Necessity or Luxury
o Luxury products have higher elasticity than necessities
Products with high price and not essential to consumers, they have high
elasticity
Products of low luxury goods, consumers run to retail places to purchases
it, they become very responsive
o Habit forming products can become ‘necessities’
Consumers pay for it regardless of how expensive they are
Proportion of Income
o Products that represent a higher proportion of a consumer’s income will have a
greater elasticity
Demand is a lot of elastic; decrease in price makes consumer more
interested
Timing
o A one day sale will have different results than a permanent price decreases for a
longer period of time
Boxing day provides consumer a sense of urgency to buy the product
Price Points
o Decreasing from $2.00 to $1.99 will have more elasticity than from $1.98 to
$1.97
Price Sensitivity is High…
When competitors feature price in advertising
When new seller enters the market at a low price
find more resources at oneclass.com
find more resources at oneclass.com
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