3.3 pt2

Question 1

Distinguish difference between predatory and psychological pricing

Answer 1

predatory - a dominant business incurs a loss with the intention of removing a rival business e.g setting price from 60p to 10p Psychological pricing - deceiving people into believing that a product is way cheaper than it actually is e.g 99p instead of £1

Question 2

Cost plus pricing

Answer 2

calculating the full cost of a product plus a % mark up - tc + profit margin to set a price of a good

Question 3

Calculation for mark up

Answer 3

labourers job cost £4000 he wants a mark up of 25% - 25% of £4000 = £1000

Question 4

contribution pricing

Answer 4

setting a price which covers minimal cost and therfore make a contribution to fixed costs - usually used to increase capacity

Question 5

price discrimination

Answer 5

charging different prices to different segments of the market, based on customer willingness to pay

Question 6

2 methods of new product pricing

Answer 6

Skimming - setting high price to maximise profit penetration - introducing a new product at a lower price compared to competitors

Question 7

prestige pricing

Answer 7

High price to enhance or reinforce a products quality

Question 8

3 purposes of promotion other than increasing sales an attracting new customers?

Answer 8

-encourage customer loyalty -create awareness -encourage brand switching

Question 9

Personal selling

Answer 9

promotion on a person to person basis e.g telephone, meetings, knocking on doors - high customer attention dis adv -labour intensive

Question 10

Sales promotion

Answer 10

tactical point of sale material designed to stimulate purchases e.g 50% off

Question 11

Merchandising

Answer 11

process of maximising the effectiveness of retail distribution

Question 12

Sponsorship

Answer 12

takes place when a payment for an event, person, organisations is given in return for some consideration of benefit

Question 13

direct marketing

Answer 13

promotional material directed through mail, email or telephone to a household or businesses

Question 14

viral marketing

Answer 14

consumer being encouraged to share a companys good or service via the internet

Question 15

branding

Answer 15

The process involved in creating a unique name and image for a product in the consumers’ mind

Question 16

2 factors which determine the mix of promotional activities used

Answer 16

Stage in product life cycle - advertising may be important for the early stages of a product competition - what are competitors doing? what promotional methods re traditionally effective in this market

Question 17

What are 3 meanings of place

Answer 17

-where a product is sold -How a product is sold -how the product gets from the producer to the consumer

Question 18

What is channel distribution

Answer 18

A distribution channel moves a product from production to consumption

Question 19

what is intermediary in the channel of distribution and explains the roles of the 3 different types

Answer 19

and intermediary is each party in the distribution channel. the 3 types are the 1)whole salers (break bulk) 2) distributors - sell on products and serve as local sale points (b2b) 3)agent - specialist type of distributor (doesn’t hold stock)

Question 20

Explain with examples what is meant by an integrated market?

Answer 20

integrated marketing mix - each one of the 7Ps is contributing, consistently for the success of the business. e.g high quality clothes such as Gucci would not sell in a shop like top man as it doesn’t aim for the right customer

Question 21

calculate profit?

Answer 21

TR - TC

Question 22

Where can you find break even on a graph?

Answer 22

when total revenue line and total cost line intersect

Question 23

Break even formulae

Answer 23

Question 24

margin of safety formulae

Answer 24

Question 25

total contribution formulae?

Answer 25

total sales - total variable costs