MKT 300 1nd Edition Lecture 23 Outline of Last Lecture XL. Chapter 15 TermsXLI. Chapter 15 Concepts to ApplyOutline of Current Lecture XLII. Chapter 16 Terms (part 1)XLIII. Chapter 16 Concepts to Apply (part 1)Current LectureXLII. Chapter 16 Terms (part 1)- Price: the amount of money that is charged for “something” of value- Target Return Objective: sets a specific level of profit as an objective. i.e.: percentage of sales or of capital investment. - Profit Maximization Objective: Seeks to get as much profit as possible- Sales-oriented Objective: seeks some level of unit sales, dollar sales, or share of marketing – without referring to profit.- Status Quo Objectives: “don’t-rock-the-pricing-boat” objectives. I.e.: want to stabilize prices, or meet competition, or even avoid competition. - Nonprice Competition: aggressive action on one or more of the Ps other than Price- Skimming Price Policy: tries to sell the top (skim the cream) of a market – the top of the demand curve – at a high price before aiming at more price-sensitive customers. May maximize profits in the market introduction stage for an innovation, especially if there are few substitutes or if some customers are not price sensitive. Also useful when you don’t know much about shape of demand curve. Prices step down throughout product cycle, and series of changes in marketing strategies happen w/ that stepping down of price. i.e.: cell-phones- Penetration Pricing Policy: tries to sell the whole market at one low price. Wise when theelite market – those willing to pay a high price – is small. When demand curve is fairly elastic. Wise if firm expects strong competition. Good to get a head start. i.e.: Sony’s Blu-ray (v. Toshiba HD-DVD)- Basic List Prices: prices final customers or users are normally asked to pay for productsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Discounts: reductions from list price given by a seller to buyers who either give up some marketing function or provide the function themselves- Quantity Discounts: discounts offered to encourage customers to buy in larger amounts- Cumulative Quantity Discounts: apply to purchases over a given period – such as a year –and the discount usually increases as the amount purchased increases. Encourage repeat buying by reducing the customer’s cost for additional purchases. A way to develop loyalty and ongoing relationships with customers. Good for business customers who don’t want to run up their inventory costs.- Noncumulative Quantity Discounts: apply only to individual orders- Seasonal Discounts: discounts offered to encourage buyers to buy earlier than present demand requires. Tends to shift the storing function further along the channel. Tends to even out sales over the year. i.e.: Garden Supplies on sale in the fall- Cash Discounts: reductions in price to encourage buyers to pay their bills quickly- 2/10, net 30: means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days.- Sale Price: a temporary discount from the list price. Encourage immediate buying. Customers give up the convenience of buying when they want to buy and instead buy when the seller wants to sellXLIII. Chapter 16 Concepts to Apply (part 1)1. What is a good pricing strategy designed to do?a. Achieve your goal. (goal should be specific)2. How do cost oriented and demand oriented pricing strategies differ? Why do you need both?a. Demand-Oriented Pricing:i. Balance: what will the customer pay (what do they value?) What do we want them to do?1. Methods: Value-in-Use, Auctions, Sequential Reductions, Reference, Leader & Bait, Psychological, Odd-Even, Pricing Lining, Demand-Backward, Prestigeb. Cost-Oriented Pricing:i. Cost Based- what it costs you to make and deliver to the customer + margin3. When would you use a profit oriented strategy vs. a sales oriented vs. a status quo strategy?a. Use a profit strategy: target return, maximize profitsb. Sales oriented: dollar or unit sales growth, growth in market sharec. Status quo oriented: meeting competition, nonprice competition4. Provide an example of skimming and of penetration pricing. When are these strategies typically used?a. Skimming: cell phones first very expensive, then get very cheap as they are grown in the market. Used to maximize profits in the introduction stage of an innovation product. Also useful when you don’t know the shape of the demand curve.b. Penetration: Sony’s Blu-Ray sold at cheap price initially to compete with Toshiba HD-DVD and get people into Blu-ray right way. Wise when the elite market is small. Also wise if you expect strong competition5. What are discounts and allowances designed to accomplish? Give an example of how each would work.a. Designed to get people to buy more of the product.b. Discount is reduction from list price given by a seller to a buyer who either gives up some marketing function or provides function himself. c. Allowances: also given to buyer who expects something less or who does something