class 10 Flashcards
fwhat is multubranding
like line extension but with a different brand name aka house of brands
one company has many brands under it
Nestlé has a multi-brand portfolio of over 2000 brands, including Nespresso and KitKat.
Coca Cola is multi branded too
new brand but same product
what are multi branding advantages
Saturate market - fill all price and quality gaps
Occupy shelf space (leaving little room for competitors)
Cater to brand-switchers
Generate internal competition to keep brand managers on their toes
what is co branding
Using established brand names of 2 or more companies on the same product
collaborating
the practice of marketing two or more brands together ont eh same package or promotion
Cobranding enhances consumers perceptions of product quality by signallying otherwise unobservable product quality through links with other well known brands
This is designed to appeal to diverse market segments
what is price
The only element of the marketing mix that directly produces revenue
Most flexible marketing mix element
Top factor in consumer choice
money/value exchanged for ownership or use of a product
Could include non-monetary payments
Value is subjective
Price should be defined as overall sacrifice a consumer is willing to make to acquire a specific product or service
how is pricing a balancing act
could have price floor. Price floor at the bottom→ the cost of that good to your firm→ sum of fixed and variable costs. Cant set the costs below or price celling: customers valuation of the product. Related to willingness to pay (the highest a consumer would pay for a product)
So, pricing is a delicate balancing act between setting a price that covers your costs (the price floor) and setting a price that customers are willing to pay (the price ceiling).
what are the factors that affect price
Price sensitivity: how sensitive are people when it comes to pricing changes
Availability and waraness of subsititudes
Ease of comparison
Expense (relative value in bundle)
Shelf life/ ability to stockpile
Competition and competitors’ prices
Pure monopoly, oligopoly, monopolistic competition, pure competition
Stage in the PLC (early or late)
Industry practices and laws
what is price sensitivity
Similar to price elasticity a unit-free measure of price sensitivity( inelasticity: can raise prices and demand wont change)
refers to how responsive customers are to changes in the price of a product or service
how to guess price sensitivity without data
Availability and awareness of substitutes (ex: live in Mtl so we know the restaurants and options - don’t know the alternative restaurants in Paris)
Ease of comparison (people tend to be more price sensitive when they can easily make comparisons between brands → store brands are placed directly next to brand-name competitors)
Expense (relative value in bundle)
Total expenditure→ if you spend more on a product, you tend to be more price sensitive (ex: bigger families are more price sensitive for groceries)
Fraction of total costs → if item is larger % of total cost, you are more price sensitive
Shelf-life (ability to stockpile) → (ex: milk vs butter). people who are price sensitive might be more tolerant for items that last longer
what is a pure monopoly?
one company that provides access to a product so they own 100% of market share. Pretty rare, can set prices really high (ex: hydroquebec - government-owned monopoly)
less price competition
what is a oligopoly
few companies dominate (ex: Bell, Telus, rogers → very few due to barriers to entry)
firms change their prices in reaction to competition to avoid upsetting a stable competitive envriomennt
In this type of market, firms are constantly aware of what their competitors are doing. If one company changes its prices or introduces a new product, the others are likely to react. This is because they want to maintain a stable competitive environment and avoid losing customers or market share.
what is monopolistic competition
many firms that compete against each other - have similar offerings but try to emphasize their own point of difference (***most common)
Ex: with sunglasses, all focus on different qualities
Product differentiation rather than strict pricing competition tends to appeal to consumers
similar products not the exact same
what is pure competition
many firms operating but exact same product
price is set according to supply and demand
what are the 6 steps for setting prices
- identify pricing constraints and objectives
- estimate demand and revenue
- estimate cost, volume and profit relationships
- sleet an approximate price level
- set list or quoted price
- make special adjustments
what is the cost orientated approach
Look at the balance sheet and produce a standard markup
Standard markup: typical markup % for particular category, common in commodity markets
How to base costs
Determines the final price to charge by starting with the cost
They don’t recognize the role that consumers or competitors prices play in the marketplace
Its simple but requires that all costs can be identified or calculated on a per unit basis
Also assumes that these costs wont vary much for dif levels of product
Prices are usually set on the basis of estimates of average costs
what is the competitor oriented approach
Above, at or below market pricing: prices dictated by competitors
Loss leader pricing: pricing far below competition and even variable cost - get customers into the store
Firms measure themselves based on comparing themselves to their competitors
valued orientated approaches
Setting prices that focuses on the overall value of the product offering as perceived by the consumer
Consumers determine value by comparing the benefits they expect the product to deliver with the sacrifice they will need to make to acquire the prodigy
for value oriented approaches, what is skimming
price high at the beginning and lowering prices as time passes
Faster way of recouping high R&D costs
Capture price-insensitive consumers early and price-sensitive consumers later
only works if it isn’t easy for competitors to enter the market
ex: apple offers the newest iPhones at higher prices so they can capture consumers who will spend lke early adopters
why do firms use skimming
Some may start by pricing high to show high quality to the market
Others may price high at first to limit demand to give them time to build their production capacities
Some firms try to quickly earn back some of the high R&D investments they made for the new product
Some firms do it to test consumers’ price sensitivity (much harder to raise a price than to lower it)
cons of skimming
Skimming strategies also face drawback in the high unit costs associated with producing small volumes of products
Firms must consider the trade-off between earning a higher price and suffering higher production costs
Can also cause discontent for consumers who pay a higher price and then see prices drop quickly
what is penetration for value oriented aoorapches
price low at launch of product
Higher volume, less attractive for competitive entry
what is prestige for value oriented
high price to signal quality / reinforce brand positioning
Ex: white t shirt → tom ford is $440, H&M is $6.99
what is price lining for value oriented
create different products at various price levels (ex: Apple with iphone 12, 13, 14, 14 pro..line up the different prices)
what is dynamic pricing for value oriented
continuous matching between demand and supply (ex: uber surge pricing → for drivers it’s an incentive and for riders it’s a premium)
what is pay what you want for value oriented
firms don’t set a price, consumers can pay whatever they want
what are profit oriented approaches
Target profit pricing: aim for a particular total profit
Target return-on-sales pricing: aim for particular % return - absolute value of profit may not matter
Target return-on-investment pricing: aim for particular ROI - costs of product improvement (and resulting price increases)
Price ending effects/ odd even pricing→ g
go to the market and you look at the price tags and its like 2.99,3.59 (odd numbers or ends in a 9). Why? Seems like less than the one cent higher
Reference prices:
has a much stronger effect than price ending effects. (we’re typically always comparing the price of something to another)
Price quantity effects
people tend to notice more when the price changes than when the quantity changes. Price stays the same but quantity changes. ex: tobelorone
Price quality inferences
people believe that if something has a higher price then it must be better. Very prevalent in like wine or perfume
Endowment effect:
when we feel an ownership over a good so our willingness to pay increases (ex: test drives - opportunity to have the feeling of what it would be like to own the vehicle)
A good pricing scheme should consider things beyond costs:
competition, value, profit, consumer behavior
