Download Marketing 300 Fall 2009 Exam 3: Pricing and Advertising - Prof. Kristy Reynolds and more Study notes Marketing Management in PDF only on Docsity! Marketing 300 Fall 2009 Exam 3 Professor Kristy Reynolds Ch 11 Price and steps in setting prices Price: the assignment of value, or the amount the consumer must exchange to receive the offering Step 1: Develop Pricing Objectives • Sales or market share • Profit • Competitive effect • Customer satisfaction • Image enhancement Step 2: Estimate Demand Demand: customer’s desire for a product Step3: Determine Costs • Variable costs - expenses that change in proportion to the activity of a business • Fixed costs - business expenses that are not dependent on the activities of the business (ex,. tend to be time- related, such as salaries or rents being paid per month) • Total costs – Variable costs + Fixed Costs • Break-even analysis • Break-even point (in units) = (total fixed costs) divided by (variable cost per unit) • Break-even point (in dollars) = (total fixed costs) divided by [1 - (variable cost per unit divided by price) • BE in units • FC/VCU • $200,000/$50 = 4,000 units • (CPU = Price per unit – VCU) ($100-$50) • BE in dollars • FC/1-(VCU/Price per unit) • $200,000/1-($50/$100) • $200,000/1-.5 = $200,000/.5 = $400,000 • Or BE units * price per unit • 4,000 * $100 = $400,000 • Step4: Evaluate the Pricing Environment • The economy • The competition • Consumer trends Step5: Choose a Price Strategy • Cost • Demand • Competition • Customer needs • New product pricing Step6: Develop Price Tactics • Products • Channel members Objectives Estimating demand—all terms and concepts Costs—all terms and concepts, Break-even—be sure to know the formula Pricing environment Pricing strategies and tactics Discounting – clearance discount to sell old stock or discount for making multiple purchases Odd value pricing – selling it for $9.99 instead of $10 Loss Leader – selling a product at a low or even loss-making price,hopefully attracting customers to buy other more profitable products Skimming – selling a unique product or service for a higher price Penetration – opp. Of skimming…starting at a low price and gaining market share before competitors catch up with you New product pricing o Impact of new product on the entire product portfolio o Value Analysis (internal & external) o Competition and alternative competitive technologies o Differing value segments (price, value, and need) o Product Costs (fixed & variable) o Forecast of unit volumes, revenue, and profit Pricing and e-commerce • Dynamic pricing strategies • Online auctions • Online shopping Psychological issues and strategies Buyer’s pricing expectations Odd-even Price-lining Ch 13 Marketer of the year – Hyundai Most effective ad ever – Fed Ex “face paced world” Advertising: nonpersonal communication paid for by an identified sponsor using mass media to persuade or inform an audience Types of advertising • Product advertising • The promotion of a particular good or service that is designed to increase demand. Ex newspapers, magazines, tv commercials • Institutional advertising • Promotion that attempts to influence public perception of a company, a brand, or a product. • Retail and local • Do it yourself – contests, ex Dorito’s “crunch video” winner, user generated content • Engagement Marketing – having customers help market the brand. Ex having a contest to have customers make a commercial Types of Ads Unique selling proposition – company tells you why their product is better than another companies product Comparative ad – comparing two companies , ex Captain D’s vs Red Lobster Demonstration ad – shamwow, slapchop, infomercial type Testimonial ad – celebrities or actors telling about their experience with the product Humorous appeal – any funny or comical commercial Sex appeal Emotional appeal Fear appeal – life insurance, scare tactics to sell o Apple 1984 – started the superbowl commercial craze Advertising campaign a coordinated, comprehensive plan that carries out promotion objectives and results in a series of ads placed in media over a period of time Types of sales promotion