Marketing Final Study Guide Chapter 15 Retailing Retailing is a large portion of employment businesses and of GDP Classifications 1 Ownership independent single person or partnership chain stores operated as group by single organization franchises licensed by larger supporting organization 2 Level of Service along a continuum from full service to self service 3 Product Assortment breadth depth of assortment 4 Price discounters to specialty stores usually matches gross margin Major Types of Retailers 1 Department stores wide assortment good customer service headed by a buyer 2 Specialty stores narrow deep assortment high customer service ex Foot Locker 3 Supermarkets large self service food some non food conventional supermarkets replaced by superstores with scrambled merchandising 4 Drugstore pharmacy products over the counter medicine 5 Convenience store limited line high turnover convenience goods 6 Discount stores low prices high turnover high volume 4 types Full line limited service broader assortment of well known hard goods aka mass merchandisers large quantities high turnover ex Wal Mart Specialty single line self service high volume high turnover often termed category killers heavily dominate narrow merchandise segment ex Best Buy Staples Warehouse membership clubs limited selection in bulk ex BJ s Costco Off price 25 or below prices of traditional department stores ex Marshalls factory outlets variation owned an operated by a manufacturer ex Nordstrom Rack 7 Restaurants straddle b t retailers service industry Nonstore Retailing shopping w o visiting a store Automatic vending machines Direct retailing door to door direct marketing telemarketing direct mail catalogs electronic online or 24 hour TV networks Franchising Franchisor grants rights to others to sell its product vs Franchisee gets the rights 2 types product trade name dealer buys or sells products from particular manufacturer or wholesaler business format ongoing relationship where franchisee uses franchisor s name format or method in return for fees Retail Marketing Strategy define target market first Retailing mix 6 P s Product offering mix of products promotion advertising PR place location hours ex destination stores price presentation atmosphere personnel customer service personal selling New developments interactivity ex Build a Bear M commerce mobile purchases Chapter 20 Setting the Right Price 4 step process 1 Establishing Pricing Goals must weigh trade offs 2 Estimate demand costs profits elasticity estimate revenues etc 3 Choose a price strategy determines base price price skimming high introductory price heavy promotion then lower prices penetration pricing low price initially to reach mass market status quo identical or very close to competition 4 Fine tuning base price with tactics Legality Ethics Unfair Trade practice acts prevents selling below cost Price fixing collusion b t firms about price they will charge Price discrimination charging 1 customer higher than another Predatory pricing charging very low price to drive competition out of business Fine Tuning the base price Discounts Allowances Rebates Value Based Pricing Quantity discount price reduction for buying multiple units Cum Quant Discount applies to total purchases during specific period Noncum Quant Discount single order rather than over time period Cash discount price reduction for prompt payment on a bill Functional discount to wholesalers retailers for performing channel functions Seasonal discount price reduction for buying merchandise out of season Promotional allowance payment to dealer for promoting manufacturer s products Rebate cash refund for purchase during specific period Value based pricing level that seems to be good compared to other options Geographic pricing FOB origin buyer absorbs freight costs from shipping point Uniform delivered seller pays freight charges bills every buyer identical flat fee Zone pricing divides US into zones charges flat freight rate to each zone Freight absorption pricing seller pays all or part of actual freight charges Base point charges freight from given point regardless of where goods ship from Other pricing tactics Single price tactic offers al goods services at same price Flexible variable different customers pay different prices for same merchandise Price lining offering product line w several items at specific price points Leader product sold near or below cost in hopes customers will buy other products in store Bait pricing get customers in a store through false or misleading price adv then use high pressure selling to sell more expensive merchandise Odd even psychological odd numbered prices ex 9 99 implies discount Price bundling 2 or more products in single package Unbundling reducing bundle of services that comes w basic product Two part charges 2 separate amounts for good or service ex membership then usage fees for a racquetball court Consumer penalties violating purchase agreement becoming more prevalent Product line pricing setting prices for an entire line of products maximizes profits Joint costs shared in manufacturing marketing of several products in a line Pricing during Difficult economic times Inflation cost oriented tactics vs demand oriented tactics Cost oriented cutting products w low profit margin delayed quotation pricing firm price not set until item is finished or delivered escalator pricing final price reflects cost increases incurred from order to delivery time Demand oriented price shading use of discounts by salesmen to increase demand increasing demand through cultivating customers unique offerings changing package size heightening buyer dependence Recession value based pricing bundling unbundling lose unprofitable items Chapter 19 Pricing Concepts Pricing creates revenue and in turn profits Pricing Objectives Profit Oriented Profit maximization satisfactory profits target ROI net profit after taxes total assets Sales Oriented Market share product sales as a of total sales for industry units or revenue sales maximization ignores profits competition Status quo pricing maintains existing prices or meets competition Demand Determinant of Price Price falls demand increases opposite for prestige products price up demand up Elasticity of demand change in quantity change in price Elastic demand demand is sensitive to changes in price Inelastic demand price changes will not significantly affect demand Unitary elasticity total revenue remains equal when prices
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