Pricing and Place Flashcards
Price definition?
- The dollar amount the consumer pays
- Includes: Money, time, cognitive effort, behavioral effort, affective effort, commitment
What are the trade offs with “Price Elements”
- time for money
- money for time
- money for effort
- effort for money
What does price elements contribute to?
Different market segments
List concepts involving price:
- Demand
- Price elasticity and demand
- Break even point
- Reference price
- Price perception
- Price competition
What is Demand equivalent to?
Total number of potential transactions -taste or preference -availability of substitutes -income price expectations for future
Does demand change with the price?
NO, demand is unlocked by price
-This is called quantity demanded and it changes with price.
What is the correlation between Price and Demand?
Price increase, QUANTITY DEMANDED goes down, YES
Income increases, demand goes up? YES
Break Even Point
-How many units should you sell in order to cover all your fixed and variable costs, up until that point of selling
What is the Break Even Point equation?
- Contribution Margin = Price - Variable Cost
- Break-even Volume = Fixed Cost / Contribution Margin
What are issues with the Break Even Point?
- Variable cost being not constant
- fixed cost not being constant
- Quantity demanded, for the price may be lower than the break even point. Need to shift demand. Price change wont help.
Reference Price and Price Perception
Ref. Price-The aggregate consumer belief about what the price should be for a particular offering
Price Percept.-is a subjective judgement about a particular market offering (product)
What are some common pricing goals?
- Max profits per unit sold
- Max unit sales
- Market share
- Discourage competitors
- Brand image
- Traffic
- Trial purchases
List some pricing strategies:
-Cost-plus - (variable cost + allocated cost) * (1+ percentage marked up)
Price Skimming
-High to Low. Usually first to the market.
Penetration pricing
-Low price. Usually expect that costs go down over time.
Experience Curve:
-Lowering with time
Prestige Pricing
-Using pricing as information
Bait and Switch
-Low base, aggressive add-ons
Price Promotions
- Usually short term and aggressive
- —Done for: New introductions, Inventory Management, Get competitors customers to try the product.
Is it easy to change prices, but hard to change price perception?
Yes
Is product mix and pricing policies can/should synergize.
Yes
Place
AKA distribution, or how to get the products to a place where consumers can engage in the exchange.
What are the 4 Channel Utilities?
- Form Utility
- Place Utility
- Time Utility
- Possession
Form Utility
convert raw/bulk goods to a consumable product/quantity
Place Utility
Making the physical exchange possible where the consumer wants it
Time Utility
at a time when the consumer wants it
Possession
actual transfer of ownership.
Do major retail activities impact both WTD and Cost?
Yes
Retail Formats
- A retail format represents a specific configuration of the retail marketing mix which is maintained consistently over time:
- nature of merchandise
- services offering
- pricing policy
- advertising and promotion mix
- store design and display
- location.
What are the factors driving E-commerce?
- Dramatic rise in internet access
- Increase in shopping convenience
- Reduction in time to possession
- Information content at point of shopping
- Delivery economies of scale
- Psychological comfort.
Place notes:
- provides form, place, time, and possession utilities
- increase efficiency/reduces cost
- provides specific functions
- varies in formats
- e-commerce is surging WW
Product is the first among the 4Ps
True
Price is the second among the 4Ps
True
Explain the 4Ps
Product is first found then we set a Price
Means Ends Chains - Attributes - Consequences - Values
Attributes to consequences to values
Calyx and Corrolla what was the problem?
- How to grow? Tapping into demand vs. increase demand
How was the US Flower Market in Calyx and Corrolla?
Low per capita consumption
Highly Fragmented - Mom and Pop stores
Long Supply Chain or Value Chain (Grower, Distributor, Wholesaler, Retail, User) (Takes about 14 days and user has about 7 days of life for flower)
Vary upon Seasonality - Demand varies, Risk varies, Supply varies
Global Supply Network
Roles within the Value Chain?
Grower-Grows bulk quantities $5
Distributor- Aggragrete and store $7.50
Wholesaler- $15
Retailer- Arranging, displaying, inventory, and pricing $40
(risk is high on retailer which takes away from the value surplus) Pre Calyx and Corrolla Model
What is Calyx and Corrolla Model?
- CC sends catalog
- Customer sends order
- Order goes to the grower
- Grower uses Fedex
- Fedex drops off flowers
*Grower does most of the work
-Cuts out the middle man
Calyx and Corrolla does all the marketing
All growth points are not about demand
Look at entire supply chain and take note of all pain points within the supply chain and figure out solutions for each throughout the entire distribution cycle.
