STUDY GUIDE MARKETING 3401 EXAM 2 KARAM PRICING Strategies Market Skimming Pricing Price Skimming Setting a high price for a new product to skim max imum revenues layer by layer from the segments willing to pay the high price the company makes fewer but more profitable sales Set the price as high as possible within fairness as long as possible until the competition forces an adjustment Used when firm is first in product market R D costs are large and firm needs to recoup costs Penetration pricing Penetration pricing includes setting the price low with the goals of attracting customers and gaining market share The price will be raised later once this market share is gained Status Quo Pricing Set the price even with the competition Prestige Pricing Pricing products services extremely high to separate from competition De notes quality Tactics Single Pricing All prices are the same Ex Only a Buck Store Loss Leader product is sold at a price below its market cost to stimulate other sales of more profitable goods or services Ex Walmart put 18 cent flip flops by expensive things in store Odd pricing In this type of pricing the seller tends to fix a price whose last digits are odd num bers This is done so as to give the buyers consumers no gap for bargaining as the prices seem to be less and yet in an actual sense are too high and takes advantage of human psychology Also Even pricing Odd denotes bargain even quality Precise Round Number Pricing Very precise numbers lend credibility Bundling Two or more products together at one price Dynamic Pricing Businesses set highly flexible prices for products or services based on current market demands Business are able to stay competitive by changing prices based on algorithms that take into account competitor pricing supply and demand and other external factors Prices change constantly Professional Pricing How much should you charge for professional services Charging too low denotes poor quality of service PRODUCT LIFE CYCLE Introduction Growth The introduction stage of the product life cycle is when the marketing team emphasizes promo tion and the product s initial distribution Often the product will have little or no competitors at this point Nonetheless sales may remain low because it takes time for the market to accept the new product At this stage of the life cycle the company usually loses money on the product The market has accepted the product and sales begin to increase The company may want to make improvements to the product to stay com petitive At this point there are still relatively few competitors Maturity Decline Sales will reach their peak Other competitors en ter the market making competition in the market fierce The company that introduced the new product may begin to find it difficult to compete Sales will begin to decline as the product reaches its saturation point Most products are phased out of the market at this point due to the decrease in sales and because of competitive pres sure The market will see the product as old and no longer in demand PACKAGING Common uses of packaging include Physical protection The objects enclosed in the package may require protection from among other things mechanical shock vibration electrostatic discharge compression temperature etc Information transmission Packages and labels communicate how to use transport recycle or dispose of the package or product With pharmaceuticals food medical and chemical products some types of information are required by governments Some packages and labels also are used for track and trace purposes Marketing The packaging and labels can be used by marketers to encourage potential buyers to purchase the product Package graphic design and physical design have been important and constantly evolving phenomenon for several decades Marketing communications and graphic design are applied to the surface of the package and in many cases the point of sale display Convenience Packages can have features that add convenience in distribution handling stacking display sale opening re closing use dispensing reuse recycling and ease of dis posal Barrier protection A barrier from oxygen water vapor dust etc is often required Permeation is a critical factor in design Some packages contain desiccants or oxygen absorbency to help extend shelf life Modified atmospheres or controlled atmospheres are also maintained in some food packages Keeping the contents clean fresh sterile and safe for the intended shelf life is a primary function Security Packaging can play an important role in reducing the security risks of shipment Pack ages can be made with improved tamper resistance to deter tampering and also can have tam per evident features to help indicate tampering Packages can be engineered to help reduce the risks of package pilferage Facilitate Recycling CONSUMER DECISION MAKING PROCESS Stages a buyer passes through in making choices about which products and services to buy Problem Recognition Perceiving a Need Perceiving a difference between a person s ideal and actual situations big enough to trigger a decision Can be as simple as noticing an empty milk carton or it can be activated by marketing efforts Information Search Seeking Value The information search stage clarifies the options open to the consumer Internal Search Scanning one s memory to recall previous experiences with products or brands Often sufficient for frequently purchased products External Search When past experience or knowledge is insufficient The risk of making a wrong purchase decision is high The cost of gathering information is low The primary sources of external information are Personal sources such as friends and family 90 Public sources including various product rating organizations such as Consumer Reports Marketer dominated sources aka commercial such as advertising company websites and salespeople Alternative Evaluation Assessing Value The information search clarifies the problem for the consumer by Suggesting criteria to use for the purchase Yielding brand names that might meet the criteria Developing consumer value perception A consumer s evaluative criteria represent both the objective attributes of a brand such as lo cate speed on a portable CD player the subjective factors such as prestige These criteria establish a consumer s evoked set the group of brands that a consumer would consider acceptable from among all the brands in the product class of which he or she is aware Purchase Decision Buying