Week 6, marketing - price and place

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  • Created by: jf00632
  • Created on: 03-04-19 10:07
What is price?
Amount of money paid for a product
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What factors effect price decisions?
poster on document
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What are the Other Considerations Affecting Price Decisions?
Overall Marketing Strategy- Pricing decisions must be compatible with other elements of the marketing mix Luxury or value brand?
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(2)
Organisational Considerations - Who sets prices inside the organisation?
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(3)
The Market and Demand- Price elasticity of demand
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(4)
Competitors Strategies and Prices Your prices in the context of theirs Pricing affects the nature, type and intensity of competition
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(5)
External Factors Economic conditions Taxes and quotas
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What is marketing and demand?
Before setting prices, the marketer must understand the relationship between price and demand for its products.
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What is price sensitivity?
increase - Customers more price sensitive to products that cost more or bought frequently
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(2)
decrease - Customers less price sensitive to low cost items, or items bought infrequently
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How do you estimate demand?
price experiments, survey, statistical analysis, past sales, previous prices etc.
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Price Elasticity Concept (1)
• More elastic: relates to the proportion of income spent on the good - the lower the proportion of income spent, the more inelastic the good will tend to be
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Price elascity concept (2)
• The number of substitutes - the more substitutes a good has the easier it is for consumers to switch to another product if the price goes up
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Price Elasticity Concept (3)
• The strength of the brand - the stronger the brand, the more inelastic the product will be
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Price Elasticity Concept (4)
• The level of necessity or addiction - the more necessary or addictive something is, the more inelastic it will be
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Economic pricing theory demand curve
• the demand curve is the Relationship between price and quantity of demand. • The more easily a shopper can substitute one product with a rising price for another, the more the price will fall – be "elastic."
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Inelastic goods
• Inelastic goods have fewer substitutes and price change doesn't affect quantity demanded as much. Some inelastic goods include gas, electricity, water, drinks, clothing, tobacco, food, and oil. A necessity good
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Pricing Approaches (Strategies) - cost based
Cost-based pricing involves setting prices based on the costs for producing, distributing and selling the product Experience or learning curve is when average cost falls as production increases because fixed costs are spread over more units.
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Pricing Approaches (Strategies) - cost based- ad and dis
on document
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Pricing Approaches (Strategies) - customers needs
as follows
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What does value based pricing use?
• Value-based pricing uses the buyers’ perceptions of value, not the sellers cost, as the key to pricing. Price is considered before the marketing program is set.
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How is value based pricing driven?
• Value-based pricing is customer driven
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How is cost based pricing driven?
• Cost-based pricing is product driven.
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What does good value pricing offer?
• Good-value pricing offers the right combination of quality and good service at a fair price.
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What does valuue added pricing attach?
• Value-added pricing attaches value-added features and services to differentiate a company’s offers and charging higher prices.
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What does every day low pricing involve? (EDLP)
• Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts. Removes the WOW from the customer experience
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What does high low pricing involve?
• High–low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. Customers can wait for price promotion activity.
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Pricing Approaches (Strategies) - demand based
Starts with an ideal selling price and then targets costs that will ensure that the price is met e.g. Manufacturer might ask for a product at a price point of £99.
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Pricing Approaches (Strategies) - competition based
as follows
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What is target profit pricing?
Target profit pricing is the price at which the firm will break even or make the profit it’s seeking
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How are prices set in competition based?
• Setting prices based on competitors’ strategies, prices, costs and market offerings.
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How will consumers base their judgement?
• Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.
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How are B2 sales often completed?
• B2B sales often completed through competitive bids
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How do companies sometimes base their prices?
• Sometimes companies base their price on what is perceived as the “going rate” for a product or service
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Conpetion based pricing - adv and dis
see document
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Pricing Approaches (Strategies) - new product pricing startegies
as follows
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What is the market skimming process?
• Market-skimming pricing is a strategy with high initial prices to ‘skim’ revenue layers from the market.
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What must support the price?
• Product quality and image must support the price.
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How does this effect compeitors?
• Competitors should not be able to enter the market easily.
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When is product pricing startegy used?
• Few or no competitors • Innovative product • Price inelastic demand
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What is market penetration pricing?
Market-penetration pricing sets a low price for a new product to attract a large number of buyers and a large market share (gain rapid market share).
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What is price sensitive market? (market penetration pricing)
opposite relationship of production and distribution cost to sales growth and • Low prices must keep competition out of the market.
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When is it used?
• Extensive competition • Market is price sensitive
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What is the prcing tripod? Also see poster on document
• costs to the provider, competition, and value to the customer as the three legs (Figure). The costs that a firm needs to recover usually impose a minimum or floor price for a specific service offering
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How many types of Product mix pricing strategies are there and what are they?
prodict bundle pricing, by-product pricing, captive product pricing, optional product pricing and product line pricing
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What is product bundle pricing?
pricing bundles of products soild together e.g. package holidays
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What is by product pricing?
pricing low – value products to get rid of them e.g. meat for animals
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What i captive product pricing?
pricing products that must be used with the main unit e.g. razor blades or print-ing cartridges
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What is Optional product pricing?
options/accessories with their own prices e.g car stereos
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What is product line prcing?
– setting price steps between product line items e.g. different sied televisions
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Name the price adjustment strategies
promotional pricing, discount pricing, geographical pricing, dynamic pricing, segmented pricing, psychological pricing
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What is dynamic pricing?
continual adjustment of prices – e.g. dell and component supply – special offers
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What is segmented pricing?
– different segments pay different price e.g different time of travel
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Why is PLACE important?
Products need to be available in adequate quantities , in convenient locations and at times when customers want to buy
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The importance of distribution
• Distribution channels come in different forms, e.g bakery or supermarket could be a member of the distribution channel • some channels are direct such as when you buy your vegetables from a farm store that’s a direct channel relationship
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What is the process usually like?
• But often the process is more complex and you may have to use wholesalers or agents and these are known as channel intermediaries
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What is the most important thing in distribution?
• The most important thing is to ensure your stock is where your customer is
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What is a marketing channel?
a set of interdependent organisations that help to make a product or service available for use or consumption by the consumer or business user e.g. tomato ketchup
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Why are channel intermediates essential?
• Channel intermediaries are essential for the effective distribution of products to customers, they enable the physical flow of good through distribution channels
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How does the internet enable distribution?
• The internet enables the distribution of music and video through downloads or streaming
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What is multi channel?
employ more than a single distribution channel to reach the target customer and supply the market
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What is ommi channel?
delivering a consistent, integrated and uninterrupted brand experience across all channels rather than looking at the messaging in each channel.
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What is channel level?
A layer of intermediaries
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What is a direct marekting channel?
A marketing channel that has no intermediary levels
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What is an indirect marketing channel?
Channel containing one or more intermediary levels
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What is channel conflct?
Disagreement amongst marketing channel members
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What are the 2 type of channel conflict?
Horixantal (same channel level and vertical (different levels of the same channel
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What is horizantal channel conflict?
Different firms at same point of supply chain falling out Example: Car dealerships
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What is vertical channel conflict?
Adjoining firms falling out Example: Dell and Direct Marketing channel Imbalance of power between partners
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What is Disintermediation
the cutting out of marketing channel intermediaries by product or service producers, or the displacement of traditional resellers by radical new types of intermediaries (internet)
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The customers buyind directly creates the removal of who?
wholesalers, retailers and warehouses
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And what does this cause?
improved quality of Information/Communication o Databases o Narrow-casting – communications channels, number of niches to target, • Reintermediation – additions to the distribution channel
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Channel design decisions (1)
Analysing Consumer Needs (What do customers want from the channel?)- Distance to travel, in person versus online, breadth of assortment etc.
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Channel desogn decisions (2)
setting chanel objectives- Targeted levels of customer service, what segments to serve etc
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Channel design dec- (3)
Identifying major alternatives- Types and number of intermediaries Responsibilities of channel members
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Channel design dec (4)
Evaluation of alternatives against - Economic criteria, control, adaptive criteria
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