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Marketing
Chapter 13
| Question | Answer |
|---|---|
| Price | The money or other consideration (including other products and services) exchanged for the ownership or use of a product or service |
| Barter | The practice of exchanging products and services for other products or services rather than for money |
| Value= | the ratio of perceived benefits to price: Value = Perceived benefits/Price |
| Value-pricing | The practice of simultaneously increasing product and service benefits while maintaining or decreasing price. |
| Profit equation | Profit = Total Revenue - Total Cost |
| Total Revenue | Unit Price x Quantity Sold |
| Total Cost | Fixed Cost + Variable Cost |
| Six Steps In Price Setting | 1) Identify price objectives/constraints 2) Est. demand and revenue 3) Determine cost/volume/profit relations 4) Select approx price level 5) Set list/quoted price 6) Make adjustments to list/quote price |
| Pricing Objecives | Specifying role of price in an organization's marketing and strategic plan |
| Three Objectives Relate to Firm's Profit | 1) Managing for Long-Run Profit 2) Maximizing Current Profit 3) Target Return |
| Market Share | The ratio of the firm's sales revenues or unit sales to those of the industry (competitors plus the firm itself) |
| Unit Volume | The quantity produced or sold as a pricing objective |
| Pricing Objectives (6) | 1) Profit 2) Sales 3) Market Share 4) Unit Volume 5) Survival 6) Social Respnsibility |
| Pricing constraints | Factors that limit the range of prices a firm may set |
| Pricing Constraints (6) | 1) Demand for Product/Product Class/Brand 2) Cost of Producing/Marketing Product 3) Newness of the Product: Cycle Stage 4) Single Product vs. Product Line 5) Cost of Changing Prices & Time Period They Apply 6) Type of Competitive Market |
| Pure competition | Many sellers who follow the market price for identical, commodity poducts |
| Monopolistic Competition | Many sellers who compete on nonprice factors |
| Oligopoly | Few sellers who are sensitive to each other's prices |
| Pure Monopoly | One seller who sets the price for a unique product |
| Demand Curve | A graph relating the quantity sold and price, which shows the maximum number of units that will be sold at a given price |
| Three factors of demand | 1) Consumer Tastes 2) Price/Availability of substitutes 3) Consumer Income |
| Three revenue concepts | 1) Total Revenue 2) Average Revenue 3) Marginal Revenue |
| Total Revenue= | Total money received from the sale of a product; TR = Unit Price (P) x Quantity sold (Q) |
| Average Revenue= | Average amount of $ received for selling one unit of product; AR = TR/Q |
| Marginal Revenue (MR) | Change in total revenue that results from producing and marketing one additional unit of a product; MR = (Change TR)/(1 Increase in Q) |
| Price elasticity of demand | Percent change in quantity demanded relative to a percentage change in price; (% change in QD)/(% change in price) |
| Elastic demand exists when... | a 1 % decrease in price produces more than a 1 % increase in quantity demanded = increaseing sales revenue |
| Inelastic demand exists when... | 1 % decrease in price produces less than a 1 % increase in quantity demanded = decreasing sales revenue |
| Unitary demand exists when... | the % change in price is identical to the % change in quantity demanded so that sales revenue remains the same |
| The more substitutes for the product... | the more price elastic |
| Products/services considered necessities are... | price inelastic |
| Items requiring large cash outlay compared with a person's disposable income are... | price elastic |
| Five Cost Concepts | 1) Total Cost 2) Fixed Cost 3) Variable Cost 4) Unit Variable Cost 5) Marginal Cost |
| Total Cost | Total expense incurred by a firm in producing and marketing a product. Sum of fixed cost and variable cost |
| Fixed Cost | Sum of the expenses of the firm that are stable and do not change with quantity of a product that is produced and sold |
| Variable Cost | Sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold. TC = FC + |
| Unit Variable Cost | UVC = Variable Cost / Quantity |
| Marginal Cost | MC = (Change in Total Cost)/(1 Unit Increase in Quantity) |
| Marginal Analysis | A continuing, concise trade-off of incremental costs against incremental revenues |
| Break-even analysis | A technique that analyzes te relationship between total revenue and total cost to determine profitability at levels of output |
| Break-even Point | Quantity at which total revenue and total cost are equal. BEP=(Fixed Cost)/(Unit Price - Unit Variable Cost) |
| Break-even Chart | Shows a graphic presentation of the break-even analysis |
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