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ISU MKT 230 - Price

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MKT 230 1st Edition Lecture 22 Outline of Last Lecture I. Sales PromotionII. CouponsIII. Trade Sales PromotionOutline of Current Lecture – Chapter 20I. PriceII. DemandIII. Factors Affecting PricingIV. Price DiscriminationCurrent Lecture – Wednesday, April 22, 2015I. Pricea. The only marketing mix variable that is easy to changeb. Some companies use price as their absolute competitive choicei. Example: Wal-Mart relies on their low prices to out-do their competitionII. Demanda. Demand curve: shows the relationship between price and demand, as price goes up, demand goes down.b. Different for prestige products – people wont buy if the price is too high or too lowi. If it is above their personal price range they wont buy it because it is too expensive but if it is below their personal price range then it looks like it will lack quality because it could be seen as “too good to be true”c. Demand fluctuations i. Price elasticity of demand1. Inelastic demand – changes in price wont effect the demand of the product; people will still buy gas when it is very expensive2. Elastic demand – an increase in price will make the demand go down, demand changes a lot, applies to most goodsThese 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.d. Marginal Analysisi. Fixed costs – costs that don’t vary with the number of units sold or producedii. Variable costs – vary with change in the number of units sold or producediii. Fixed cost per unit goes down with an increase in units but variable costs per unit will change the sameIII. Factors affecting pricinga. What do we want to accomplish?b. Includes things like organizational and marketing objectives, pricing objectives and costsi. Costs are crucial when establishing pricingii. Sometimes goods are sold below the cost in order to match competition, generate cash flow, and the increase their market share. However, this cant be done for very longiii. Marketers must be certain to include all costs when calculating priceiv. Cost reduction is a major focus for marketersc. Reference pricei. Internal reference price – developed in the buyers mindii. External reference price – comparison provided by outside sourced. Competitioni. It is important to know competitors price so you can adjust accordinglye. Legal and regulatory issues – to control inflation, US federal government can enact things like price controls and price freezes (to control the rate of price increase)i. The US has many laws affecting prices, like Sherman Antitrust Act and protections against deceptive pricingIV. Price Discrimination – practice of providing price differentiations that injure competition by giving one or more buyers a competitive advantagea. Legal protection against price discriminationi. Robinson-Patman Actii. The Clayton Actb. Pricing for Business Marketsi. Price discounts fall into 5 category1. Trade2. Cash3. Allowance4. Quantity5. Seasonalii. Discounts can be significant factor in marketing


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