L12

Question 1

Pricing of interrelated products
Image interactions
High price: Prestige pricing
Low price: Overall low prices

Answer 1

…

Question 2

Explain product interactions through substitutes and complements?

Answer 2

SUBSTITUTES exist when a change in the sales level of one item causes the sales level of another item to change in the opposite direction. ><
Are usually alternatives to each other.

Can be:
Different brands or varieties of the same product (greek yogurt from different brands)
Different items in a product line (almond, rice, soy milk)

COMPLEMENTS exist when a change in the sales level of one item causes the sales level of another item to change in the same direction&raquo_space;

Can be:

• Items purchased or used together
• Two items together that are necessary for a functional product
• When customers find products convenient or advantageous to purchase together

Question 3

How to identify product interactions?

Answer 3

The identification task should be based on:
> An understanding of customer’s needs and behaviors
> The causal order of a customer’s activities
> The effect a product purchase has on the ability to purchase other products
> Products purchased at different times, sold through different distribution channels, or purchased by other customers

Question 4

Product interrelations through product interactions?

Answer 4

Product interactions occur when an item’s price affects the sales levels of related items by affecting its own sales.
Products sold by a company are connected based on how they are purchased and used by customers.

Sales can be affected by the presence of:
> Substitutes
> Complements

Question 5

What is product interrelations through product interactions?

Answer 5

Product interactions occur when an item’s price affects the sales levels of related items by affecting its own sales.
Products sold by a company are connected based on how they are purchased and used by customers.

Sales can be affected by the presence of:
> Substitutes
> Complements

Question 6

What is product interrelations through image interactions?

Answer 6

Image interactions occur when an item’s price affects the sales levels of other items by influencing the consumer’s perceptions of the seller’s other prices.
An item’s price can be high or low – both have an effect on image.

HIGH
An overall high-price image helps communicate high product quality and that ownership is a sign of affluence and good taste.
Known as prestige pricing, it can be weakened by even a few products or product lines that include items at low price points.

It is important to:
Use 0- ending numbers and avoid the use of cents digits
Offer customers at least one very high-priced alternative, known as a “price decoy”
Present consumers with the higher-priced items of a product line before the lower-priced items

LOW
An overall low-price image is important in marketing environments where aggressive price competition exists.
A low-price image is determined more by the number of products sold at a lower price (frequency cue) rather than the size of the differences (magnitude cue).
Items particularly powerful in influencing image are known as price exemplars.