Marketing Products and Pricing Class 4 Flashcards
Cost of goods?
The expense of obtaining Materials for making products
Price?
That which is given up in an exchange to acquire a good or service
Profit Maximization
Setting prices so that total revenue is as large as possible relative to total cost
Revenue = ___ * ____ ____
Price x Units Sold
When supply shifts left, market price ____ and quantity ____.
increases, decreases
Service:
The service element can be particularly influential for ‘commodity’ products. (5th element of 4 marketing of Ps)
Commodity products
Similar to each other without meaningful differentiation.
____ is Everything consumers evaluate when deciding whether to buy something. Includes intangibles
The Total Product Offering
Product lines
A group of physically similar products intended for a similar market.
Example of product lines?
Coca-Cola and how they own different types of products, each with their line.
EX: bottled water –> Dasani or Sports drinks –> PowerAde.
Product Mix
Combination of all product lines offered by a manufacturer or service provider
Product Differentiation
Creation of actual or perceived product differences. Companies use Pricing, advertising, and packaging to create differentiation.
Positioning
Brand meaning perceived by the target market in terms of:
other competing products
perceived product characteristics
Product Branding
Grouping two or more products and pricing them as a unit.
EX:
Virgin Airlines –> limo service, in-flight massage with tickets.
Finacial Institutions –> advice + purchases
What is Break-Even Analysis?
Breakeven Point is the point at which cost (or expenses) and income are equal No net loss or No net gain
How is Break-Even Analysis used?
The process is used to determine profitability at various levels of sales.
What is Total Fixed Costs?
All costs that remain the same no matter how much is produced or sold
What is Variable Cost?
Costs that change according to the level of production.
What is the formula for Break-Even Analysis?
BE = FIXED COST / Price - Variable Cost per unit (contribution margin per unit).
Solve:
Fixed Cost = $100,000
Variable Cost = $8 per hat
Price = $15
Contribution Margin = $15 - $8
Contribution Margin = $7
(hint: use BE)
BE = 100,000 / (15-8)
Be= 14,286
Shortcomings of Break-Even?
-In complex, multiproduct organizations, it can be difficult to determine exact fixed and variable costs.
-Assumes all products sold at the same price
-No specified time frame
-It does not consider the net present value of money
