BUS-M300 Final Exam Questions And Correct
Answers
When is Price Promotion effective?
When the customer is sensitive to price.
Inelastic
% change in demand is LESS THAN % change in price.
Elastic
% change in demand is GREATER THAN % change in price.
-Price increases, revenue decreases
-Price decreases, revenue increases
Promotional Pricing
Price below list or cost for short run sales (discounts and rebates).
Everyday Low Pricing Strategy
For price sensitive.
Customary Pricing
Tradition pricing (newspapers, candy, soft drinks).
Psychological Pricing
Price is used to say something about the product, price as signal (wine).
Advantages of Competition Oriented Pricing
Easy, competitive pricing.
Disadvantages of Competition Oriented Pricing
What if a company is a poor pricer, different cost structures, customer segments.
Heterogeneous
Demand inelastic, competition pricing less important (custom jewelry).
Homogeneous
Demand elastic, competition pricing more important (milk, water).
Price Matching Guarantee
Promise to match competitors prices (walmart).
Signpost pricing
Used on frequently bought products so price knowledge
Price equation
Markup + Cost
Markup on Price equation
Markup / Price
Markup on Cost equation
Markup / Cost
Value of the product to the customer
Uses value that customers gain from using the product (seats at a concert, flying
coach).
Skimming Pricing
High price, use when little competition. (Iphone)
Penetration Pricing
Greater demand elastic, lots of competition, use low price.
Cost based
, 1. Design product.
2. Determine product costs.
3. Set price based on cost.
4. Convince buyers products value.
Value Based
1. Assess customer needs/value.
2. Set target price = Customer value
3. Determine incurred costs.
4. Design to deliver desired value at target price.
Concept of Distribution
Interdependent organizations help make a product/service available for use.
Concept of Distribution steps
1. Manufacturer
2. Wholesalers
3. Retailers
4. Consumers
Concept of Distribution Channel Level
Bring product and ownership closer to the final buyer
Transactional function of distribution channels
(Buying, selling, risk taking) -Assume business risk for supplier of goods that might go
obsolete.
-Kroger buys local farmers entire apple harvest, better able to handle risk of spoiled
product.
Logistical function of distribution channels
(Assorting, Storing, sorting, transporting) -Create similar products, store them, later sort
through to make sets demanded by customers.
-P&G move 100 cases of Downey softener to Indiana and 1200 of different Downey to
Florida.
Facilitating function of distribution channels
(Financing, grading, marketing info and research) -Enhance value of product.
-Cook medical distributes products using many channels and provides technical
assistant on how to use.
Indirection distribution channels
-Middlemen to help distribute.
-Automobile dealers, walmart.
Direct distribution channels
-Directly to customers.
-Tesla and Schwan Food only sells them straight to customer. (eg: insurance)
Multi-channel distribution channels
-Simultaneously employing multiple channels to reach customers.
-Producer, agents, wholesaler, retailer, consumer.
Factors that help a firm decide channel
-Out of stock.
-Bloated inventories.
-Inefficient channels or costly channels.
-Channel conflicts.
Answers
When is Price Promotion effective?
When the customer is sensitive to price.
Inelastic
% change in demand is LESS THAN % change in price.
Elastic
% change in demand is GREATER THAN % change in price.
-Price increases, revenue decreases
-Price decreases, revenue increases
Promotional Pricing
Price below list or cost for short run sales (discounts and rebates).
Everyday Low Pricing Strategy
For price sensitive.
Customary Pricing
Tradition pricing (newspapers, candy, soft drinks).
Psychological Pricing
Price is used to say something about the product, price as signal (wine).
Advantages of Competition Oriented Pricing
Easy, competitive pricing.
Disadvantages of Competition Oriented Pricing
What if a company is a poor pricer, different cost structures, customer segments.
Heterogeneous
Demand inelastic, competition pricing less important (custom jewelry).
Homogeneous
Demand elastic, competition pricing more important (milk, water).
Price Matching Guarantee
Promise to match competitors prices (walmart).
Signpost pricing
Used on frequently bought products so price knowledge
Price equation
Markup + Cost
Markup on Price equation
Markup / Price
Markup on Cost equation
Markup / Cost
Value of the product to the customer
Uses value that customers gain from using the product (seats at a concert, flying
coach).
Skimming Pricing
High price, use when little competition. (Iphone)
Penetration Pricing
Greater demand elastic, lots of competition, use low price.
Cost based
, 1. Design product.
2. Determine product costs.
3. Set price based on cost.
4. Convince buyers products value.
Value Based
1. Assess customer needs/value.
2. Set target price = Customer value
3. Determine incurred costs.
4. Design to deliver desired value at target price.
Concept of Distribution
Interdependent organizations help make a product/service available for use.
Concept of Distribution steps
1. Manufacturer
2. Wholesalers
3. Retailers
4. Consumers
Concept of Distribution Channel Level
Bring product and ownership closer to the final buyer
Transactional function of distribution channels
(Buying, selling, risk taking) -Assume business risk for supplier of goods that might go
obsolete.
-Kroger buys local farmers entire apple harvest, better able to handle risk of spoiled
product.
Logistical function of distribution channels
(Assorting, Storing, sorting, transporting) -Create similar products, store them, later sort
through to make sets demanded by customers.
-P&G move 100 cases of Downey softener to Indiana and 1200 of different Downey to
Florida.
Facilitating function of distribution channels
(Financing, grading, marketing info and research) -Enhance value of product.
-Cook medical distributes products using many channels and provides technical
assistant on how to use.
Indirection distribution channels
-Middlemen to help distribute.
-Automobile dealers, walmart.
Direct distribution channels
-Directly to customers.
-Tesla and Schwan Food only sells them straight to customer. (eg: insurance)
Multi-channel distribution channels
-Simultaneously employing multiple channels to reach customers.
-Producer, agents, wholesaler, retailer, consumer.
Factors that help a firm decide channel
-Out of stock.
-Bloated inventories.
-Inefficient channels or costly channels.
-Channel conflicts.
