Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s)
Reflection and Discussion Forum Week 4
Reflection and Discussion Forum Week 4Assigned Readings:Chapter 9. Pricing.Chapter 10. Channels of Distribution.Initial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.Also, provide a graduate-level response to each of the following questions:
- Lawyers are changing their pay structures. It used to be that they would bill hourly (top dollar for top lawyers, less experienced helpers had cheaper rates). Now they’re beginning to price like consultants—per project. Thus they must begin assessing the value-added to the client firm of the legal expertise and assistance. What advice would you give a law firm to proceed fairly and profitably?
- Go online and compare three franchises (e.g., franchise.org, americasbestfranchises.com, or whichfranchise.com). Choose two franchises in the same industry (e.g., fast food) and the third franchise from another industry (e.g., hair cutting). Make a table to report the fee structures (upfront, continued licensing), as well as benefits touted for franchisees of each franchise system. What would tempt you to pitch in with some friends and buy a franchise when you finish your degree?
[Your post must be substantive and demonstrate insight gained from the course material. Postings must be in the student's own words – do not provide quotes!] [Your initial post should be at least 450+ words and in APA format (including Times New Roman with font size 12 and double spaced). Post the actual body of your paper in the discussion thread then attach a Word version of the paper for APA review]
Activity 4 – Article Critique Assignment
In this assignment, you are to critically read and evaluate a scholarly article’s strengths, weaknesses, and contributions to the study field. Learning how to critique a journal article has several benefits, including preparing you for publishing in the future and keeping you current on the literature in your field of study. The practical application is developing the ability to look at research within your organization and industry with a knowledgeable, critical eye. The University of the Cumberlands (UC) Library subscribes to many journals and provides you access to appropriate collections to support this assignment. Using the UC Library, locate and review the following peer-reviewed articles: Lim, L. G., Tuli, K. R., & Grewal, R. (2020). Customer satisfaction and its impact on the future costs of selling. Journal of Marketing, 84(4), 23-44.Melumad, S., & Meyer, R. (2020). Full Disclosure: How Smartphones Enhance Consumer Self-Disclosure. Journal of Marketing, 84(3), 28-45.Wies, S., Hoffmann, A. O. I., Aspara, J., & Pennings, J. M. (2019). Can advertising investments counter the negative impact of shareholder complaints on firm value?. Journal of Marketing, 83(4), 58-80.Liu, Y., Shankar, V., & Yun, W. (2017). Crisis management strategies and the long-term effects of product recalls on firm value. Journal of Marketing, 81(5), 30-48.Bleier, A., Harmeling, C. M., & Palmatier, R. W. (2019). Creating effective online customer experiences. Journal of marketing, 83(2), 98-119. Following your review, choose one article from this list; critically evaluate the article’s strengths, weaknesses, and contribution to the study field using the outline below as a guide: Cover page
- The cover page will include:
- Articles Title and Author (s)
- Name of Journal (s)
- Date of publication
- Your name
Executive Summary
- Summarize the significant aspects of the entire article, including:
- The overall purpose and general area of study of the article.
- The specific problem being addressed in the study.
- The main findings of the article.
Literature Review
- Briefly summarize the overall themes presented in the Literature Review.
- Was the literature review applicable to the study, current and thorough?
- Were there gaps in the literature review?
Data Analysis
- Identify the methodology used: qualitative, quantitative, mixed? Was the chosen methodology appropriate for the study? Why or why not?
- Did the data analysis prove or disprove the research questions? Explain.
Results/Conclusion
- In this section, you will address the following:
- Describe the article’s relevance to the field of knowledge.
- Outline the strengths and weaknesses of the article. Be specific.
- Based on the article, what future research do you think needs to be accomplished in this area?
- What are your key points and takeaways after analyzing the article?
Proper APA in-text citation must be used. The review is to be word-processed double spaced, not less than two pages, and no more than five pages in length. Paper length does not include the cover page, abstract, or references page(s).
© 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2018 Cengage Learning.® May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9.
1
9
Pricing
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9. 2
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9.
2
Marketing Framework
3
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9.
Discussion Questions #1
What would you pay for a Pepsi? Why?
What would you pay for a Pepsi at a movie theater? Why?
4
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9.
Why Is Pricing Important?
Price obtains value back from customers
Marketers set optimal pricing
Pricing …
Matches brand positioning
Affects demand
Can be used as a segmentation tool
5
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9.
Demand Curve/Line
Demand tends to decrease as price increases
6
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9.
Simple Pricing Strategies
The Cs of marketing directly affect pricing
7
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9.
Pricing and Profitability
Profit (π) = (Price × Demand) – (Fixed costs) – (Variable costs × Demand) = (Price – Variable costs) × Demand – (Fixed costs)
Profit increases as price increases
However, demand decreases when price increases
Need to find a happy medium
8
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9.
Pricing and Elasticity
Elasticity
How much does demand (units sold) increase (or decrease) with a price change?
e.g., If decrease price, does volume increase cover lost revenue?
Inelastic: demand barely changes
Elastic: demand changes
9
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9.
Elastic vs. Inelastic Demand
Inelastic demand implies that customer will purchase even if price increases
10
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9.
Calculating Elasticity (slide 1 of 2)
=
Elasticity
The proportion change in quantity compared to the proportion change in price
If E > 1, demand is elastic
If 0 < E < 1, demand is inelastic
If E = 1, demand is unitary
11
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9.
Calculating Elasticity (slide 2 of 2)
Elastic example
= =
Inelastic ex
= =
12
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9.
Elasticity and Customer Segments
Elasticity varies with customer segments
13
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9.
Factors That Drive Demand
Demand increases if
Customers’ desire for the brand increases
Perceptions of product’s benefits and brand images increase
Competitive products are poor or priced higher
There are few good substitutes
14
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9.
Price Sensitivity
Price sensitivity is greater when
Customers
Don’t care much about the purchase
Don’t have strong preferences
Don’t have strong brand loyalty
Have limited income
The item is a luxury rather than a necessity
There are many substitutes
The purchase is large relative to income
It is easy to compare prices
15
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9.
Discussion Question #2
Do you think most customers are price- sensitive when buying a car? Why?
16
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9.
Low Prices
Two considerations:
You need to cover your costs
Compute a variety of break-evens
Number of units needed to make money
You need to determine if you want to have a constant low price strategy (Walmart) or a fluctuating one (Kohl’s)
17
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9.
Covering Costs
Firms need to cover costs
Costs set the minimum floor on pricing
Cost-plus pricing: Unit cost/1 – X%)
Where X% is the intended return
If fixed costs are high relative to variable costs, maximize volume
If variable costs are high, maximize per unit margins
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9.
Break-Even Analysis
Break-even (BE)
Number of units to sell to cover costs
Can be computed in terms of number of units sold or monetary values
BE = Fixed costs/(Price – Variable costs)
19
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9.
Break-Even for a Good
Costs for
Portfolio
Business
Break-Even
for Portfolio
Business
20
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9.
Break-Even for a Service
Costs for
Tablet Customization Service
Business
Break-Even
for Tablet Customization Service
Business
21
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9.
Break-Even, if Service Fee = $100
22
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9.
High Prices and Price Sensitivity
How much would sales drop off in the face of a price increase?
Good brands have low price sensitivity
Consider price sensitivity
% change in sales =
Use existing PS estimate OR
Develop PS estimates using scanner data, survey data, and/or conjoint analysis
23
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9.
Price Sensitivity and Scanner Data
Scanner data methods
Run experiments by manipulating prices in randomly selected stores and comparing sales to control groups
Calculate PS assuming 20% discount:
Use regression analysis on previous sales
24
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9.
Price Sensitivity and Survey Methods
Conduct a survey to assess willingness to pay (WTP)
$25.00 definitely would not buy 1 2 3 4 5 6 7 definitely would buy
$35.00 definitely would not buy 1 2 3 4 5 6 7 definitely would buy
Conduct price studies
Surveys are identical except pricing
A may have higher price than B, B than C, etc.
Each customer fills out an assigned survey
25
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9.
Price Sensitivity and Conjoint Analysis
Show product combinations with price; ask “Which do you most prefer?” “Next?”
Two segments are represented below
Left segment wants the brand and will pay more
Right segment gives up brand for lower price
26
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9.
Pricing Question
Given the figures, explain the difference between Sprint and T-Mobile.
27
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9.
Units or Revenue; Volume or Profits
Profit = Revenue – Expense and Revenue = Price × Quantity sold
To maximize profits, find a price where any further increase in price would lead to a large falloff in quantity sold
Profit maximization: marginal revenue equals marginal cost
28
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9.
Profit Maximization
Marginal revenue = Marginal cost at $1.00
29
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9.
Systematic Biases in Pricing (slide 1 of 5)
No pricing model is perfect
There are systematic biases in pricing
Price serves as a quality cue; higher price may be more appealing
However, studies show no correlation between price and quality for most product categories
Price contributes to expectations
30
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9.
Systematic Biases in Pricing (slide 2 of 5)
Consumers process absolute and relative numbers differently
Absolute: $15 off of a $199 item and $15 off of a $49 item is the same in absolute terms
Relative: $15 of $199 is 8% while $15 of $49 is 31%
Contextual frame
$499 trip = a $599 trip − $100 discount
However, the $599 trip seems like a better deal because of the higher starting price
31
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9.
Systematic Biases in Pricing (slide 3 of 5)
Price discounts are mood inductions
Temporary price discounts make customers think they are smart shoppers
Prices ending in 99
Prices like $4.99 or $49.99 tend to be more attractive than $5 or $50
People read right to left; thus, the 4 is processed first and leaves an impression
32
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9.
Systematic Biases in Pricing (slide 4 of 5)
Mental accounting
People categorize and budget purchases
People pay less attention to future
e.g., Vacation money is different than food money
Compromise effect
The inner/middle choice between two extremes is attractive
People assume that if a company charges more, it must be providing more
33
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9.
Systematic Biases in Pricing (slide 5 of 5)
Referent pricing
People compare price to some referent, either an externally available price or an internally stored price
External
“MSRP is $49.99, now available for $35.99!”
“Our price $34.99, compare at $45.00!”
Internal
Relevant memory
Inferences about store, etc.
34
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9.
Discussion Questions #3
Discuss the pricing biases at work in the following examples:
A house builder has three price points on kitchen cabinets
A price tag that reads “was $299 now only $199”
A toy package that reads, “This toy is not only fun but also educational.”
35
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9.
Price Discrimination
Price discrimination is illegal
Illegal to charge different prices to different people for the same goods or services
Segment pricing is legal
Different segments value different things
Customers might be annoyed to learn that others paid a lower price
36
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9.
Pricing Questions
What is the ideal price for the deal-prone customers?
What is the ideal price for the brand-loyal customers?
How could you appeal to both?
37
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9.
Quantity Discounts/Yield Management
Quantity discounts: the more purchased, the more saved
Yield management: using price and scheduling to manage demand
e.g., Movies during the day for less money
Need to manage perceptions of fairness
38
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9.
Pricing with a Quantity Discount
39
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9.
Two-Part Tariffs
Charge a fixed and variable usage fee
Price two parts separately
40
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9.
Concept in Action: Discussion Question
35 respondents would go once monthly to a wine bar with a $5 cover; 20 would go twice at $5; 10 would go once monthly at $15, etc. Assumes $2 variable cost
What is the most profitable price?
41
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9.
Product Life Cycle Pricing
Introduction stage
Penetration pricing: seek market share
Price low to stimulate sales, encourage trial, and trigger word-of-mouth
Skimming pricing: seek profit
Price high initially, then lower to make product more accessible
Adjust price in various stages; usually end with lower prices in decline stage
42
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9.
Price Fluctuations
Temporary cuts may be negative
Competitors can imitate; thus, impact may be negated while also squeezing margins
Price drops attract disloyal customers
Customers may stock up
May negatively affect brand image
43
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9.
Coupons
Coupons are relevant only to coupon clippers
Redemption rate is only about 1%
Effective at encouraging new customers to try new products and brand extensions
44
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9.
Game Theory
Game theory is used to estimate likely results of price cuts and competitive response
Marketers need to think about the broader market and competitive responses, not just their own decisions
Mutual cooperation can yield even better outcomes than both parties acting selfishly
45
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9.
Discussion Questions #4
Can you explain the chart in terms of competitive response?
What do you think the ultimate outcome would be in this scenario? Why?
46
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9.
Auctions
Price is negotiated by buyer and seller
Bidders compete to buy item
Sealed or open bid
Reservation price: estimate of customer’s willingness to pay
If the price is higher than reservation, don’t buy; if it is lower, then buy
English auctions: bids start low & increase
Dutch auctions: bids start high & decrease
47
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9.
Value
Value
An assessment of what the customer gets compared with what the customer gives up
It is usually not a good idea to compete on price
Find benefits your customers want and charge for them
48
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9.
Managerial Recap (slide 1 of 2)
Pricing strategies are basically low, medium, or high
Company and its costs can dictate the lower-bound price
Customers’ willingness to pay marks the upper bound
In the middle, price is tweaked up or down relative to competitors’ prices
49
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9.
Managerial Recap (slide 2 of 2)
Pricing can be used to
Shape a brand’s positioning
Attract/repel different targets
There are economic and psychological elements to pricing
50
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9.
,
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10.
1
10
Channels of Distribution
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10. 2
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10.
2
Marketing Framework
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10.
Discussion Questions #1
Apple introduced the Apple retail store in 2001 when it had less than 3% of the computer market—prior to its introduction of the iPod. Previously, Apple computers were sold through local computer retailers.
What do you think prompted the idea for Apple’s new retail strategy?
What were the risks associated with this strategy?
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10.
Place
The market realigns discrepancies between buyers and sellers
Sellers have large quantities; Buyers want a few
Breaking bulk
Making goods available in smaller batches
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10.
Distribution Channels
Distribution channel
A network of firms that are interconnected in their quest to provide sellers a means of infusing the marketplace with their goods, and buyers a means of purchasing those goods
The goal is to do this efficiently and profitably
Channel members include
Manufacturers, wholesalers, retailers, consumers, etc.
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10.
Functions of a Channel
Activities that are
Customer-oriented (e.g., ordering)
Product-oriented (e.g., storage)
Marketing-centric (e.g., promotion)
Logistics
Coordinating flow of goods, services, and information throughout channel
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10.
Channel Tension
All channel functions must be done by someone, the question is …
What is the most effective and efficient way to distribute the product?
Tension in channels can be created by each channel member
Does member provide more benefit than cost?
The make-or-buy decision
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10.
Channel Questions #1
Which of these is more efficient? Why?
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10.
Channels and Supply Chains
Supply chain
Upstream partners
Channel members
Downstream partners
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10.
Channel Questions #2
Who is in Amazon’s supply chain?
Who is in Pixar’s channel?
How is Dell’s distribution different from the others?
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10.
The What, Why, & How of Channels
The “what” of channels
Network of suppliers and providers
The “why” of channels
Effectiveness and efficiency
The “how” of channels
Designing effective and efficient channels
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10.
How to Design Channels (slide 1 of 4)
Intensive distribution: widely distributed
Drugstores, supermarkets, discount stores, convenience stores, etc.
Usually for simple, inexpensive, easily transported products
e.g., Snack food, shampoo, newspapers
Pull strategy: promote directly to end consumers to pull through channel
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10.
How to Design Channels (slide 2 of 4)
Selective distribution: limited distribution
Usually for complex and/or expensive products that require assistance
e.g., Most cars, computers, appliances
Push strategy: promote to distribution partners to push goods to consumer
Manufacturer has more control due to fewer relationships to manage
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10.
How to Design Channels (slide 3 of 4)
Exclusive distribution: extremely selective
e.g., Ferrari and Rolex
Manufacturers have the most control
May become monopolistic
© 2018 Cengage Learning.® May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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10.
How to Design Channels (slide 4 of 4)
How much distribution?
Design needs to be consistent with other marketing elements
Wide distribution
Usually goes with heavy promotion, lower prices, and average or lower-quality products
Exclusive distribution
Usually goes with less promotion, higher prices, and higher-quality products
© 2018 Cengage Learning.® May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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10.
Push vs. Pull Strategies (slide 1 of 2)
Push strategy
Incentives are offered to distribution partners to push products through the channel
Pull strategy
Incentives are offered to consumers to pull products through the channel
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10.
Push vs. Pull Strategies (slide 2 of 2)
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10.
Power and Conflict in Channels
Conflict arises in distribution channels
Some conflict can be healthy
Some conflict can end a partnership
Power
Power is usually defined by size
Power can be used to win conflict
Exerting power over distribution partners can lead to resentment and lack of cooperation
© 2018 Cengage Learning.® May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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10.
Transaction Cost Analysis (TCA)
Model that considers channel members’ production costs & governance costs
Goal is to minimize both costs
Production cost
Cost of producing/bringing product to market
Governance cost
Cost involved with relational issues incurred by coordinating enterprise and controlling one’s partners
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10.
Transaction Value Analysis
Perspective that emphasizes the benefits a company brings to its partners
Goes beyond cost reductions
Uses human relationship terms
Communication enhances trust
Trust is the willingness and ability to deliver on promises
© 2018 Cengage Learni
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