Chapter 13: Building the price foundation
Price equation: profit = total revenue – total costs
= (unit price x quality sold) – (fixed cost +variable cost)
6 steps in setting price ( figure 13-2) fundamental revenue concepts (figure 13-6)
TR = P x Q
Average revenue= P = TR/Q
Marginal Revenue = change in TR/ 1 unit increase in Q price elasticity of demand (E)= % change in demanded / % change in price fundamental cost concepts (figure 13-9)
TC = FC + VC
U(unit)VC = VC /P
Break even point = fixed cost / unit price –unit variable cost
When total revenue and total cost are equal
Max profit - When marginal revenue and marginal cost are equal ( not making any profits)
Demand curve: graph relating the quantity sold and price, which shows the maximum number of units that will be sold at a given price
Price elasticity of demand : % change in quantity demanded relative to a % change in price
Washburn guitars wanted to shift the demand curve by creating a new line called the signature guitars
Chapter 14: arriving at the final price
6 steps in setting price ( figure 14-1) half of chapt 13
4 approaches for selecting an app price level ( fig 14-2)
5 most common deceptive price practices ( fig 14-9) ex: bait and switch, bargains conditional on other purchases
Skimming pricing: involves setting the highest initial price that customers really desiring the product are willing to pay when introducing a new product
Penetration pricing: involves setting a low initial price to appeal to the mass market
Prestige pricing: involves setting a high price so that QUALITY/status conscious consumers will be attracted to
Loss-leader pricing: involves deliberately selling a product below its customary price, not to increase sale but to attract customers
Chapter 15: Managing marketing channels and supply chains
Marketing channel intermediaries perform three functions (fig 15-2)
Transactional fn, logistical fn, facilitating fnCommon marketing channels for consumer products and services by the kind and number of intermediaries (fig 15.3)
3 types of vertical marketing systems (corporate, contractual( most popular) and administered (fig 15-6) vertical marketing systems: professionally managed and centrally coordinated marketing channels designed to achieve channel economies and max marketing impact corporate systems: forward integration and backward integration contractual systems: wholesalers-sponsored voluntary chains, retailer-sponsored cooperatives
Franchise: contract allowing operation under an established name in exchange for royalties
Logistics & Supply Chain ( Fig. 15-8)
Logistics cost vs. customer service (Fig. 15-10) logistics: consists of those activies that focus on getting the right amt of the right products to the right place at the right time at the lowest possible cost supply chain: consists of sequence of firms that perform activities required to create and deliver a product or service to ultimate consumers/ industrial users relating logistics management and supply chain management to suppliers networks and marketing channels (fig 15-8) intensive distribution: level of distribution density whereby a firm tries to place its products and services in as many outlets as possible exclusive distribution: a level of distribution density whereby only 1 retailer in a specific geographical area carries the firm’s products selective distribution: is a level of distribution density whereby a firm selects a few retailers in a specific geographical area to carry its products
8 second rule:
Chapter 16: retailing and wholesaling
4 positioning strategies for retailers: broad vs. narrow, low vs. high broad and low: walmartbroad and high: bloomingdalesnarrow and low: payless shoes narrow and high: tiffany’s breath vs. depth (fig 16-4): having a large number merchandise (walmart is breath- has a lot of products but not a lot of options) ( depth: has a more narrow range of products but a wide range of options,