Final Exam - Chapter 20 Flashcards
(48 cards)
Price
the value paid for a product in a marketing exchange
Barter
the trading of products; oldest form of exchange
Profit Equations
profit = total revenue - total costs
profit = (price X quantity sold) - total costs
Price Competition
emphasizing price as an issue and matching or beating competitors’ prices; must be the low-cost seller; one in industry (ex: Walmart)
Nonprice Competition
emphasizing factors other than price to distinguish a product from competing brands; differentiators (ex: Festival Foods)
Demand Curve
graph of price vs. quantity
Prestige Products
sell better at high prices partly because the expense makes buyers feel elite; vertical parabolic demand curve (ex: Betty Crocker Cookbooks)
Factors that Can Influence Demand
changes in buyers’ needs (family size)
variation in effectiveness of marketing mix variables (ads/promo)
presence of substitutes
dynamic environment changes such as tech. improvements
Price Elasticity of Demand
a measure of the sensitivity of demand to changes in price
Inelastic Demand
price increases, demand decreases by a small amount
ex: healthcare/electricity
Elastic Demand
price increases, demand decreases by large amount
ex: coffee drinks/fast food
Who Sets the Price?
the market!; you need to align your costs/production to live within it (cover costs and meet customer expectations)
Marginal Analysis
what happens to a firm’s costs and revenues when production (or sales volume) changes by one unit
Fixed Costs
costs that do not vary with changes in the number of units produced/sold (ex: rent)
Variable Costs
costs that vary directly with changes in the number of units produced/sold (ex: raw materials used)
Total Costs
the sum of fixed and variable costs
Marginal Cost (MC)
the extra cost incurred by producing one more unit of a product
Marginal Revenue (MR)
the change in total revenue resulting from the sale of an additional unit of product
Rules of Marginal Analysis
MR > MC = add to profit
MC > MR = subtract from profit
8 Factors that Affect Pricing Decisions
organizational and marketing objectives; pricing objectives; costs; other marketing mix variables; channel member expectations; customer interpretation and response; competition; legal and regulatory issues
FAPD Organizational and Marketing Objectives
Prices should be consistent with the organization’s goals, mission and marketing objectives (ex: Walmart and premium prices? Nope.)
FAPD Pricing Objectives
Take share of market; not likely to increase price; set price at or below products of similar quality
FAPD Costs
A marketer should analyze all costs so they can be included in the total cost associated with a product; Cost should not determine price in the long term—price is determined by the market place.
FAPD Other Marketing Mix Variables
ex: price may determine how a product is promoted
