6.think marketing

8/2/2019 6.Think Marketing

1/89

5/6/12

A drive through !


2/89

5/6/12


3/89

5/6/12

MarketingMix

Produ

ct

Pric

e

Place

Promotion

TargetMarket


4/89

5/6/12

Key Strategic MarketingActivities

Consumer

Analysis

Product

Planning

Pric

e

Distributi

on

Planning

Promoti

on


5/89

5/6/12

Key Strategic MarketingActivities

Consumer

Analysis

Product

Planning

Examination and evaluation of

consumer characteristics, needs, and

purchase processes

Development and maintenance of

products, product assortments,

product positions, brands, packaging,

options, and deletion of old products

Pric

e

Outlines price ranges and levels,

pricing techniques purchase terms,

price adjustments, and the use of price

as an active factor


6/89

5/6/12

Key MarketingActivities

Distributi

on

Planning

Establishment of channel

relations, physical distribution,

inventory management,

warehousing, transportation,

allocation of goods, andwholesaling

Promotion

Planning

Combination of advertising,

publicity, personal selling, and

sales promotion to drive sales

revenue


7/89

5/6/12

Product/MarketMatrix

ExistingProducts

NewProducts

ExistingMarkets

New

Markets

Market

Penetration

MarketDevelopment

Product

Development

Diversification


8/89

5/6/12


MarketPenetration

MarketDevelopment

The firm seeks to achievegrowth with existing products in

their current market segments,

aiming to increase its market

share Effective when the market is

growing or not yet saturated

The firm seeks growth by

targeting its existing products to

new market segments Effective when a local or regional

business looks to wider its

market, new market segments

are emerging due to changes in

consumer life-


9/89

5/6/12


ProductDevelopment

Diversification

The firms develops new

products targeted to its existing

market segments

Effective when the firm has a

core of strong brands

The firm seeks growth by

targeting its existing products

to new market segments Diversification is utilized so

that the firm does not become

overly dependent on one

product line


10/89

5/6/12

MarketSegmentation

The division of a market

into different homogeneous

groups of consumers

Market

Segment

Should be: measurable accessible by communication and

distribution channels different in its response to a marketing

mix durable (not changing too quickly) substantial enough to be profitable


11/89

5/6/12

Types of Market

SegmentationGeographic

Demographic

Based on regional variables such

as region, climate, population

density, and population growth

rate.

Based on variables such as age,

gender, ethnicity, education,

occupation, income, and family

status


12/89

5/6/12

Types of MarketSegmentation

Psychographi

c

Behavioral

Based on variables such as

values, attitudes, and lifestyle

Based on variables such as usage

rate and patterns, price

sensitivity, brand loyalty, and

benefits sought


13/89

5/6/12

Step in Planning A SegmentationStrategyDeterminingcharacteristics and

needs of

consumers for the

product category

of the company

Analyzingconsumer

similarities

and

differences

Developingconsumer

group

profiles

Selecting

consumersegment

(s)

Positioning

companysoffering in

relation to

competition.

Establishin

g anappropriate

marketing

plan


14/89

5/6/12

Types of marketing warfare


15/89

5/6/12

DefenseStrategy

Position Defense

Least successful of the

defense strategies

e.g. Mercedes was using aposition defense strategy

until Toyota launched afrontal attack with itsLexus.


16/89

5/6/12

Defense Strategy

Mobile Defense

By market broadening anddiversification

For marketing broadening,there is a need to

Redefine the business(principle of objective),and

Focus efforts on the

competition (the principleof mass)

e.g. Legend Holdings, thetop China PC maker Legend

has announced a joint


17/89

5/6/12

DefenseStrategy

Flanking Defense:

Secondary markets (flanks)are the weaker areas and

prone to being attacked

Pay attention to the flanks

e.g. Automobile

manufacturers coming withdifferent comparable productin the same segment ofcompetitors


18/89

5/6/12

DefenseStrategy

Contraction Defense

Withdraw from the mostvulnerable segments and

redirect resources tothose that are moredefendable

By planned contraction

or strategic withdrawal

e.g. Indias TATA Groupsold its soaps anddetergents business

units to Unilever in 1993


19/89

5/6/12

DefenseStrategy

Pre-emptive Defense

Detect potential attacksand attack the enemies

first Let it be known how it

will retaliate

Product or brandproliferation is a form ofpre-emptive defense e.g.Seiko has over 2,000models


20/89

5/6/12

DefenseStrategy

Counter-Offensive Defense

Responding to competitorshead-on attack by

identifying the attackersweakness and then launcha counter attack

e.g. Toyota launched the

Lexus to respond toMercedes attack


21/89

5/6/12

MarketChallengerStrategies

The market challengersstrategic objective is to gainmarket share and to becomethe leader eventually

How?

By attacking the marketleader

By attacking other firms ofthe same size

By attacking smaller firms


22/89

5/6/12

MarketChallengerStrategies

Types of AttackStrategies

Frontal attack

Flank attack

Encirclement attack

Bypass attack

Guerrilla attack


23/89

5/6/12

COMPETITIVE POSITION TACTICS


24/89

5/6/12

Which AttackStrategyshould a

ChallengerChoose?

Use a combination ofseveral strategies toimprove market share overtime


25/89

5/6/12

Market-FollowerStrategies

Theodore Levitt in his article,Innovative Imitationarguedthat a product imitationstrategy might be just as

profitable as a productinnovation strategy

e.g. Product innovation--Sony

Product-imitation--Panasonic


26/89

5/6/12

Market-FollowerStrategies

Each follower tries to bringdistinctive advantages toits target market--location,services, financing

Four broad follower

strategies: Counterfeiter (which is

illegal)

Cloner e.g. the IBM PC

clones Imitator e.g. car

manufacturers imitatethe style of one another

Adapter e.g. manyJapanese firms are


27/89

5/6/12

Market-NicherStrategies

Smaller firms can avoidlarger firms by targetingsmaller markets or nichesthat are of little or nointerest to the larger firms

e.g. Logitech--mice


28/89

5/6/12

Market-NicherStrategies

Nichers must createniches, expand the nichesand protect them

e.g. Nike constantly

created new niches--cycling, walking, hiking,cheerleading, etc

What is the major risk

faced by nichers? Market niche may be

attacked by larger firmsonce they notice the

niches are successful


29/89

5/6/12

Multiple Niching

Firm should `stick to itsniching but not necessarily toits niche.

Multiple niching is preferableto single niching. Bydeveloping strength in two ormore niches the companyincreases its chances forsurvival.

Challenger Superstore is a


30/89

5/6/12

Product Planning and

Development


31/89

5/6/12

Products : Types ofGoods

Types of

Goods

Convenience

Goods

Shopping

Goods

Specialty

Goods


32/89

5/6/12

ConvenienceGoods

Convenien

ce Goods

Those purchased with aminimum of effort, because the

buyer has knowledge of product

characteristics prior to shopping

The consumer does not want to

search for additional

information (because the item

has been bought before) andwill accept a substitute rather

than have to frequent more

than one store

Staplef ood are low-pricedConvenience


33/89

5/6/12

Convenienc

e Goods

Staplef ood are low priced

items that are routinely

purchased on a regular

basis, such as detergent,milk, and cereal

Impulse goods are items

that the consumer does not

plan to buy on a specific tripto a store, such as candy, a

magazine, and ice cream

Emergency goods are items

purchased out of urgent

need, such as an umbrella

during a rainstorm, a tire to

replace a flat, or aspirin for

ConvenienceGoods


34/89

5/6/12

ShoppingGoods

Shopping

Goods

Those for which consumers

lack sufficient information

about product alternatives

and their attributes, andtherefore must acquire further

knowledge in order to make a

purchase decision

Shopping


35/89

5/6/12

ShoppingGoods

Shopping

Goods

For attribute-based shopping

goods, consumers get

information about and thenevaluate product features,

warranty, performance, options,

and other factors. The goods

with the best combination of

attributes is purchased. Sony

electronics and Calvin Klein

clothes are marketed asattribute-based shopping goods

Forprice-based shopping

goods, consumers judge

product attributes to be similar

S i l


36/89

5/6/12

SpecialtyGoods

Specialty

Goods

Those to which consumers are

brand loyal.

They are fully aware of these

products and their attributes

prior to making a purchase

decision. They are willing to make a

significant purchase effort to

acquire the brand desired and

will pay a higher price than

competitive products, if

necessary.

For specialty goods, consumers


37/89

5/6/12

Services

Type of

Services

Rented- goods

Service

Owned-goods

service

Non-goods


38/89

5/6/12

Services

Rented- goods

Service

Owned-goods

service

Non-goods

Involves the leasing of a good for a

specified period of time. Examples

include car, hotel room, apartment, and

tuxedo rentals

Involves an alteration or repair of agood owned by the consumer.

Examples include repair services (such

as automobile, watch, and plumbing),

lawn care, car wash, haircut, and dry

cleaning

Provides personal service on the pan of

the seller; it does not involve a goods.

Examples include accounting, legal, and

consulting services


39/89

5/6/12

Characteristics ofServices

The intangible nature of many services makesthe consumer's choice more difficult than with

goods

The producer and his or her services are often

inseparable

The perishability of services prevents storage

and increases risks

Service quality may be variable


40/89

5/6/12 Time

Dema

n

d

Product Life Cycle

Growth

Introduction

Maturity

Decline


41/89

5/6/12

Product LifeCycleCharacteristics Introduction GrowthMarketing objective Attract innovators and

opinion leader to newproduct

Expand distribution andproduct line

Industry sales Increasing Rapidly increasing

Competition None or small Some

Industry profits Negative Increasing

Customers Early adopters Affluent mass market

Product mix One or two basic models Expanding line

Distribution Depends on product Rising number of outlets

Pricing Depends on product Greater range of prices

Promotion Informative Persuasive


42/89

5/6/12

Product LifeCycleCharacteristics Maturity DeclineMarketing objective Maintain differential

advantage as long aspossible

(a) cut back,(b) revive,(C) terminate

Industry sales Stable Decreasing

Competition Substantial Limited

Industry profits Decreasing Decreasing

Customers Mass market Laggards

Product mix Full product line Best-sellers

Distribution Greatest number ofoutlets

Decreasing number ofoutlets

Pricing Full line of prices Selected prices

Promotion Competitive Informative

Human product life cycle in


43/89

5/6/12

Human product life cycle ina bottle


44/89

5/6/12

New ProductPlanning

Idea

Generation

Product

Screening

Concept

Testing

Business

Analysis

Product

Development TestMarketing

Commercial-

ization


45/89

5/6/12

New ProductPlanning

Idea

Generation

A continuous, systematic search

for new product opportunities

It involves delineating sources of

new ideas and methods forgenerating them

Product

Screening

After the firm identifies potential

products, it must screen them

Many companies use a new-

product screening checklist for

preliminary evaluation


46/89

5/6/12

Screening ChecklistGENERAL CHARACTERISTICS OF NEW PRODUCTS

Profit potential

Existing competition

Potential competition

Size of market

Level of investment

Patentability

Level of risk

MARKETING CHARACTERISTICS OF NEW PRODUCTS

Fit with marketing capabilities

Effect on existing products (brands)

Appeal to current consumer markets

Potential length of product life cycle

Existence of differential advantage

Impact on image

Resistance to seasonal factors

PRODUCTION CHARACTERISTICS OF NEW PRODUCTS

Fit with production capabilities

Length of time to commercialization

Ease of product manufacture

Availability of labor and material resources

Ability to produce at competitive prices


47/89

5/6/12

New ProductPlanning

Concept

Testing

Business

Analysis

Concept testing presents the consumer

with a proposed product and measuresattitudes and intentions at this early

stage of development

Concept testing is a quick and

inexpensive way of measuringconsumer enthusiasm

Business analysis for the remaining

product concepts is much more detailed

than product screening Because the next step is expensive and

time-consuming product development,

critical use of business analysis is

essential to eliminate marginal items


48/89

5/6/12

Business Analysis Variables

Factors Considerations

Demand projections Price/sales relationship; short- and long-run sales potential; speed ofsales growth; rate of repurchases; channel intensity

Cost projections Total and per unit costs; use of existing facilities and resources; startupvs. continuing costs; estimates of future raw materials and other costs;econo-mies of scale; channel needs; break-even point

Competition Short-run and long-run market shares of company and competitors;strengths and weaknesses of competitors; potential competitors; likelycompetitive strategies in response to new product by firm

Required investment Product planning (engineering, patent search, product development,testing); promotion; production; distribution

Profitability Time to recoup initial costs; short- and long-run total and per-unit

profits; control over price; return on investment (ROI)


49/89

5/6/12

New ProductPlanning

Product

Developmen

t

Test

Marketing

Product developmentconverts a productidea into a physical form and identifies a

basic marketing strategy

It involves product construction,

packaging, branding, product

positioning, and attitude and usage

testing. Test marketing involves placing a product

for sale in one or more selected areas

and observing its actual performanceunder the proposed marketing plan.

The purpose is to evaluate the product

and pretest marketing efforts in a real

setting prior to a full-scale introduction


50/89

5/6/12

New ProductPlanning

Commercial-

ization

After testing is completed, the firm isready to introduce the product to its

full target market. This is

commercialization and corresponds to

the introductory stage of the product

life cycle

Commercialization involves

implementing a total marketing plan

and full production


51/89

5/6/12

Promotion Mix :

Advertising, Publicity,Personal Selling and Sales

Promotion


52/89

5/6/12

PromotionMix

Advertising

Publicity

Personal

Selling

Sales

Promotion

TargetMarket

Promotion


53/89

5/6/12

PromotionMixFactor Advertising Publicity Personal Selling Sales Promotion

AudienceMass Mass Small (one-to-one) Varies

MessageUniform Uniform Specific Varies

CostLow per viewer or reader Can be moderate costs forpress releases andpublicity materials

High per customer Moderate per customer

SponsorCompany No formal sponsor in that

media.

Company Company

FlexibilityLow Low High Moderate

Control over content andplacement

High None High High

CredibilityModerate High Moderate Moderate

Major goalTo appeal to a massaudience at a reasonablecost, and createawareness and favorableattitudes

To reach a mass audiencewith an independentlyreported message

To deal with individualconsumers, to resolvequestions, to close sales

To stimulate short-runsales, to increase impulsepurchases

ExampleTelevision ad for a Kodakvideo camera

Newspaper articlereporting on the uniquefeatures of a Kodak video

camera

Retail sales personnelexplaining how a Kodakvideo camera works

A Kodak video cameradisplayed at consumerphotography shows

Four Key Steps to


54/89

5/6/12

Four Key Steps toAdvertiseDetermine

messagecontent and

devise an ad

Specify the

location of anad (media

placement)

Outline a

promotionschedule

Choose how

many variations

of a basic

message to

utilize


55/89

5/6/12

Things to Consider inAdvertising

Waste

Reach

Wasteis the portion of anaudience that is not in a firm's

target market. Because media

appeal to mass audiences, waste

is a significant factor in

advertising.Reach refers to the number of

viewers or readers in the audience


56/89

5/6/12


Frequency

Message

permanence

Frequencyis how often amedium can be used. It is greatest

for newspapers, radio, and

television, where ads may appear

daily and advertising strategy maybe easily changed

Message permanence refers to

the number of exposures one

advertisement generates and

how long it remains with the

audience


57/89

5/6/12


Persuasiveimpact

Clutter

Persuasive impactis the ability of a

medium to stimulate consumers.Television often has the highest

persuasive impact because it is able

to combine audio, video, color,

animation, and other appeals.

Clutterinvolves the number of ads

that are contained in a single

program, issue, etc. of a medium.

Clutter is low when a limitednumber of ads is presented and

high when many ads are presented.

Publicity : Poor and Good


58/89

5/6/12

Publicity : Poor and GoodResponse

Situation Poor Response Good Response

Fire breaks out in acompany plant

Requests for information bymedia are ignored.

Company spokesperson explains the cause of thefire and company precautions to avoid it andanswers questions.

New productintroduced

Advertising is used withoutpublicity

Pre-introduction news releases, product samples,and testimonials are used.

News story aboutproduct defects

Requests for information by media areignored, blanket denials are issued,

hostility is exhibited toward reporter ofstory.

Company spokesperson states that tests are beingconducted on products, describes procedure for

handlingdefects, and answers questions.

Competitorintroduces new

product

The advertising campaign isstepped up.

Extensive news releases, statistics, andspokespeople are made available to media topresent company's competitive features.

High profits reportedProfits are rationalized and positiveeffects on the economy are cited.

Profitability is explained, data (historical and current)are provided, uses of profits are detailed: research,community development.

Overall view ofpublicity

There is an infrequent need for publicity;crisis fighting is used when bad reportsare circulated.

There is an ongoing need for publicity, strongplanning, and contingency plans for bad reports.


59/89

5/6/12

Developing a PublicityPlan

Setting

objectives

Outliningtypes of

publicity

Selecting

media

Creatingpublicity

messages

Timingpublicity

messages

Publicity


60/89

5/6/12

PublicityTypePublicity Type Example

News publicityDell describes its decision to sell PCs through stores Tier 2 cities.

Business feature articleToyota explains its goals and objectives for the 2020.

Service feature articleCREDA I offers 10 tips on how to property purchases.

Finance releaseInfosys distributes quarterly financial data about the company.

Product releaseIntel announces its new, fast-speed microprocessor

Pictorial releaseApple distributes photos showing all of its personal computer products and relatedsoftware

Background editorial releaseMc Kinsey presents a biography of its president and his rise through the company.

Emergency publicityThe Red Cross makes a request for aid to tornado victims.

Specific Personal Selling


61/89

5/6/12

Specific Personal SellingObjectivesType of Objective Illustrations

Demand-Oriented

Information To fully explain all good and service attributes

To answer any questions

To probe for any further questions

Persuasion To clearly distinguish good or service attributes from those of competitors

To maximize the number of sales as a per cent of presentations

To convert undecided consumers into buyersTo sell complementary items, e.g., film with a camera

To placate dissatisfied customers

Reminding To ensure delivery, installation, etc.

To follow up after a good or service has been purchased

To follow up when a repurchase is near

To reassure previous customers when making a new purchase

Image-Oriented

Industry and companyTo maintain a good appearance by all personnel in contact with consumers

To follow acceptable sales practices


62/89

5/6/12

Personal SellingProcess

Prospecting(blind, lead)

Approach

Customer

Wants

Sales

Presentation

Answering

Questions(questions and

objections)

Close

Follow up(satisfaction,referrals,repurchase)

Where does sales fit into


63/89

5/6/12

Where does sales fit intomarketing?

Advertising

PersonalSelling

SalesPromotio

n

PublicRelations

Place(distribution

)Price

Product/

ServicePromotio

n

Market

ing

These are

calledthe 4 Ps ofmarketing,

or themarketing

mix

This iscalled thepromotio

nalmix

Types of Sales


64/89

5/6/12

Types of SalesPromotionType Characteristics Illustration

CouponsManufacturers or retailers advertisespecial discounts for customers whoredeem coupons.

P&G mails consumers a 25-cents-offcoupon for Sure deodorant, which canbe redeemed at any supermarket.

Refund orrebate

A consumer submits proof-of-purchase(usually to the manufacturer) and receivesan extra discount.

ACER gives rebates on accessories toconsumers submitting proof of purchase.

SamplesFree merchandise or services are givenconsumers, generally for new items.

When Sunlight dishwashing liquid wasintroduced, free samples were mailed toconsumers.

Contests orsweepstakes

Consumers compete for prizes byanswering questions (contests) or fillingout forms for random drawings of prices(sweepstakes).

Publishers Clearinghouse sponsorsannual sweepstakes and awardsautomobiles, houses, and other prices.


65/89

5/6/12

Type Characteristics Illustration

Bonus ormultipacks

Consumers receive discounts forpurchasing in quantity

Consumer buys two shirts and getsthe third one for Rs 100.

Point-of-purchasedisplays

In-store displays remindcustomers andgenerate impulsepurchases.

Chewing gum sales in supermarketsare high because displays arc placedat checkout counters.

Specialevents

Manufacturers or retailerssponsor celebrityappearances,fashion shows, and otheractivities.

Virtually every major league baseballteam has an annual "Old Timers'Day," which attracts large crowds.

GiftsConsumers are given gifts formaking a purchase or opening anew account.

You buy the jwellary product and get a

silver coin free.

Types of SalesPromotion

Sales Promotion


66/89

5/6/12

Sales PromotionAdvantages

It helps attract customer traffic andmaintain brand or store loyalty

Quick results can be achieved

Some forms of sales promotion(calendars, t-shirts. Pens, etc) provide

value to the consumer and are

retained by them; and these forms

can provide a reminder function Impulse purchases can be increased

through in-store displays

Sales Promotion


67/89

5/6/12

Sales PromotionDisadvantages

The image of the firm may be lessened if

it continuously runs promotions.

Consumers may view discounts as

representing a decline in product quality

and believe the firm could not sell itsofferings without them.

When coupons, rebates, or other special

deals are used frequently, consumers

may not make purchases if the items are

sold at regular prices. Instead, they will

stock up each time there is a promotion.

Sales Promotion


68/89

5/6/12

Sales PromotionDisadvantages

Sometimes sales promotions shift thefocus away from the product onto

secondary factors. Consumers may be

attracted by calendars, coupons, or

sweepstakes instead of by product

quality, functions, and durability. In the

short run this generates consumer

enthusiasm. In the long run this mayhave adverse effects on a brand's

image and on sales, because a product-

related differential advantage has not

been developed.


69/89

5/6/12

Distribution Planning

and Pricing Strategy

Distribution


70/89

5/6/12

DistributionPlanning

Distribution planning is systematic decision

making regarding the physical movementand transfer of ownership of a product

from producer to consumer.

It includes transportation, storage, and

customer transactions.

Distribution functions are carried out

through a channel of distribution, which is

comprised of all the organizations orpeople involved in the process.

These organizations or people are known

as channel members or middlemen.

Intensity of Channel


71/89

5/6/12

yCoverageCharacteristics Exclusive

DistributionSelective Distribution Intensive

Distribution

Objectives Prestige image,channel control andloyalty, price stabilityand high profit margins

Moderate marketcoverage, solid image,some channel controland loyalty, good salesand profits

Widespread marketcoverage, channelacceptance, salesvolume and profits

Channelmembers

Few in number, well-established reputablestores

Moderate in number,well-established, betterstores

Many in number, alltypesof outlets

Customers Few in number, trendsetters, willing to travelto store, brand loyal

Moderate in number,brand conscious,somewhat willing totravel to store

Many in number,convenience-oriented

Intensity of Channel


72/89

5/6/12

Intensity of ChannelCoverageCharacteristics Exclusive Distribution Selective

DistributionIntensive

Distribution

MarketingEmphasis

Personal selling,pleasantshopping conditions,good service

Promotional mix,pleasant shoppingconditions, goodservice

Mass advertising,nearby location,items in stock

MajorDisadvantages

Limited sales potential May be difficult tocarve out a niche

Limited channelcontrol

Examples Automobiles, designerclothes, Watches andjwellary

Furniture, clothing,watches

Groceries,household products,magazines


73/89

5/6/12

Methods of ChannelCooperationFactor Manufacturer Action Channel Member Action

New-productintroduction

Thorough testing, adequate promotionalsupport

Good shelf location andspace, enthusiasm forproduct, assistance in testmarketing

Delivery Prompt filling of orders, adherence toscheduled dates

Proper time allowed fordelivery, shipmentsimmediately checked foraccuracy

Promotion Sales force training, sales forceincentives, development of nationaladvertising campaign, cooperative

programs

Attractive in-store displays,knowledgeable salespeople,participation in cooperative

programs

Product qualityProduct guarantees Proper installation andservicing of products


74/89

5/6/12

Pushing and PullingStrategy

Manufacturer

Channelmembers

Consumers

Manufacturer

Channelmembers

Consumers

Pushing Strategy Pulling Strategy

P i


75/89

5/6/12

PricePlanning

A PriceRepresents the value

of a good or service for

both the seller and the

buyer

PricePlanning

Systematic decision

making by anorganization regarding

all aspects of pricing

F t Aff ti P i i


76/89

5/6/12

Factors Affecting PricingDecisions

Consumers Competitors

ChannelMembers

Government

Cost

Total Effectson Price

Decisions


77/89

5/6/12

Consumers and PriceDecisions

Consumers

The relationship between priceand consumer purchases and

perceptions is explained by two

economic principles the law of

demand and price elasticity of

demand

The law of demand states that

consumers usually purchase

more units at a low price than at

a high price The price elasticity of demand

defines the sensitivity of buyers

to price changes in terms of the

quantities they will purchase

Consumers and Price


78/89

5/6/12

Elastic

Demand

Elastic demand occurs if relatively

small changes in price result in large

changes in quantity demanded

Numerically, price elasticity is

greater than 1

With elastic demand, total revenue

goes up when prices are decreased

and goes down when prices rise Inelastic demand takes place if price

changes have little impact on

quantity demanded

Price elasticity is less than 1

With inelastic demand, total revenue

goes up when prices are raised and

goes down when prices decline

In-elastic

Demand


d i


79/89

5/6/12

UnitaryDemand

Unitary demandexists ifchanges in price are exactly

offset by changes in

quantity demanded, so that

total sales revenue remainsconstant.

Price elasticity is 1


C i d i


80/89

5/6/12

Competitors and PriceDecisions

Competitors

Another elementcontributing to the degree

of control a firm has over

prices is the competitive

environment within which itoperates

Competitors and Price


81/89

5/6/12

Market-

controlled

price

environme

nt

Characterized by a high level of

competition, similar goods and

services, and little control over

price by individual companies

Characterized by moderate

competition, well-

differentiated goods andservices, and strong control

over price by individual firms

Company-

controlledpriced

environme

nt


C tit d P i


82/89

5/6/12

Government-

controlled

price

environme

nt

Characterized by prices setby the government. Examples

are public utilities, buses,

taxis, and state universities


Channel Members and Price


83/89

5/6/12

Decisions

Channel

Members

A wholesaler or retailer can gain

stronger control over price bystressing its importance as a

customer to the manufacturer,

refusing to carry unprofitable

product, stocking competitive items,

and developing strong dealer brands

so that consumers are loyal to the

seller and not the manufacturer

Sometimes retailers engage in

selling against the brand, whereby

they stock merchandise, place high

prices on it, and then sell other

brands for lower prices. This is often

done to increase the sales of their

Ch l M b d P i


84/89

5/6/12

Channel Members and PriceDecisions

Channel

Members

To ensure channel membercooperation with price

decisions, the manufacturer

needs to consider four factors:

channel member profit

margins, price guarantees,

special deals, and the impact of

price increases

G t d P i


85/89

5/6/12

Government and PriceDecisions

Government

Price fixingregulations

Prohibitions againstprice discrimination

among channelmembers

Unfair sales acts :predatory pricing

C t d P i


86/89

5/6/12

Cost and PriceDecisions

Cost

Cost of raw materialsand supplies

Labor cost

Advertising Cost

Distribution Cost

PricingDecision

s

Price


87/89

5/6/12

PriceStrategy

Cost-basedPrice

Strategy

Demand-based Price

Strategy

Competition-based Price

Strategy

PriceStrategy

Price


88/89

5/6/12

PriceStrategy

Cost-basedPrice

Strategy

Demand-

based PriceStrategy

With a cost-based pricestrategy, the marketer

sets prices by computing

merchandise, service, and

overhead costs, and thenadding the desired profit

to these figuresThe marketer sets prices

after researching con

sumer desires and

ascertaining the range of

prices acceptable to the

target market

Price


89/89

PriceStrategy

Competition-based

PriceStrategy

The marketer sets prices inaccordance with competitors

Prices may be below the

market, at the market, or above

the market, depending on

customer loyalty, services

provided, image, real or

perceived differences between

brands or stores, and the

competitive environment

6.think marketing

Documents