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48 Cards in this Set
- Front
- Back
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customer-value based pricing
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-pricing begins with analyzing the customers' needs and value perceptions
-the price is set to match the perceived value of the product -the company has to set a price BEFORE they design and market a product -good value doesn't always mean low price -the customers' value perception is the price ceiling |
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Steps in value based pricing
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1) company has to assess the customer's needs and value perceptions
2) company sets the target price to match the customers' perception of value 3) company determines costs that can be incurred 4) company designs product to deliver desired value at the target price |
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two types of value based pricing
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good value pricing
value added pricing |
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good value pricing
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-offers the right combination of quality and price
-less expensive versions of established brand name products (armani vs armani exchange) |
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value added pricing
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-attaching value added features and services to differentiate a company's offer while charging higher prices
-example: movie theaters adding services and amenities while charging more instead of taking away stuff so they can charge less |
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strengths of value based pricing
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-to some customers, you can't put a price on quality
-so even if the product has a high price, as long as the quality and the perceived value is also high, then customers will buy it example: steinway pianos are super expensive but for the people who own one, the price is nothing because the quality is so high |
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weaknesses of value based pricing
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- its hard to measure the value of the product
- if you charge more than what customers think the value is then your sales will suffer -but if you charge less, it will sell really well but your revenue is less |
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Cost based pricing
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-setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk
-cost based pricing is often product driven -the total costs set the price floor for the product |
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steps in cost based pricing
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1) company designs a product
2) add up the costs to make it, 3) set a price that will cover the costs and include a profit 4) marketing has to convince the buyers that the product's value at the price is justified |
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two types of cost based pricing
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cost plus pricing
break even pricing |
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cost plus pricing
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adding a standard markup to the cost of the product
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break even pricing
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setting the price to break even on the cost of making and marketing a product
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strengths of cost based pricing
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-you don't have to worry about the price until you calculate your costs
-its easy to implement -its flexible -if your costs go up, you can easily change the price |
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weaknesses of cost based pricing
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weaknesses:
-if the price is too high, the you get lower sales and profits -company has to charge at least enough to cover at least the total costs of making the product -if total costs are higher than the competitors then you have to charge more than them or earn less profit strengths?? |
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what pricing method does gatorade use?
is this the best method? why or why not? |
-Gatorade is owned by PepsiCo which uses value based pricing
-its the best method because most consumers value gatorade more than its competitor, powerade. and both product's prices are usually around the same price so if gatorade holds more value and is priced the same as its competitor then it wins -its value added pricing, since there more in it than water and also more expensive than water |
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market skimming pricing
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-setting high initial prices to skim revenues layer by layer
-example: iPhone started $400 then it started dropping prices. it skimmed the maximum amount of revenue from various market segments as it slowly dropped its prices |
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market skimming conditions
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-product's quality and image must support its high price
-enough buyers must want it at that price -production costs can't be too high that it cancels the advantage of charging more -competitors shouldn't be able to easily enter the market and charge less |
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market penetration pricing
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-setting low initial price to penetrate market deeply and quickly
-they attract a large number of users and win a large market share -high sales volume results in falling costs and cutting prices more |
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market penetration conditions
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-market must be highly price sensitive so low price produces more market growth
-production distribution costs must decrease as sales volumes increase -low price must keep out the competition |
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does gatorade used skimming or penetration?
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-penetration
-its not overly expensive, its a low price for how much product you get -they have the largest market share in sports drinks -its low price keeps out competition like powerade |
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conventional distribution channel
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consists of one or more INDEPENDENT producers, wholesalers, and retailers. they're each separate and want to maximize their own profits
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vertical marketing system
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consists of producers, wholesalers, and retailers acting in a UNIFIED system. one channel member owns the others, has contracts with them, or they all cooperate.
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three types of vertical marketing systems
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corporate vms
contractual vms administered vms |
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corporate vms
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integrates successive stages of production and distribution under single ownership
example: Krogers owns grocery product and meat plants so it has factor-to-store channel control |
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contractual vms
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independent firms at different levels of production and distribution join together through contracts
example: franchises |
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administered vms
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coordinates successive stages of production and distribution through the size and power of one of the parties
example- Kraft can command unusual cooperation from resellers regarding shelf space, promotions, and price policies example - large retailers like walmart can exert strong influence on many manufacturers that supply them |
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horizontal marketing system
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two or more companies at one level join together to follow a new marketing opportunity. they combine their financial, production, or marketing resources to accomplish more than any one company could alone
example: walmart wants to team with frito lay so they can buy chips cheaper and frito lay would also benefit since walmart has a lot of customers example: walmart joined with mcdonalds and has "express" mcD's in stores. they both benefit |
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gatorade: vertical or horizontal marketing? why?
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-gatorade uses a vertical marketing system
-PepsiCo makes the syrup for the drinks, then distributes the syrup to bottling plants, pepsi makes sure the formula and looks are good to go, then the bottled product goes to distributers then wholesales then retailers then to consumers. -pepsi has contracts with them |
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gatorades marketing channel strengths and weaknesses
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strengths:
-it doesn't have to spend as much on advertising since they sponsor sporting events -they have their own research facility to figure out how to better improve athletes' performance weakness: -its sales aren't really improving but they're still sponsoring as many events so they're losing revenue -they came out with new chews and shakes but they should just stick to drinks since thats what they're known for |
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what is a promotion mix
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its used to persuasively communicate customer value and build customer relationships
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5 elements of the promotion mix
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advertising
sales promotion personal selling public relations direct marketing |
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advertising
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-any paid form of non personal presentation and promotion of ideas, goods, services by an identified sponsor
-it reaches many people quickly but it is impersonal -broadcast, print, internet, mobile |
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sales promotion
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-short term incentives to encourage the purchase or sale of product/services
- coupons, contests, discounts - attracts the consumers attention and gives them a strong incentive to purchase - "buy it now" instead of "buy it" |
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personal selling
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-personal presentation by the firm's sales force for the purpose of making sales and building customer relationships
-interaction between 2 or more people -salespeople and customer -sales presentation, trade show, incentive programs |
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public relations
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-building good relations with the company's various publics by obtaining favorable publicity, building a good corporate image, and handling unfortunate rumors
-new stories, features, sponsorships. events -can reach people who avoid advertisements and salespeople |
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direct marketing
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-direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships
-direct mail and catalogs, online marketing, telemarketing, kiosks -less public, its immediate and customized |
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leveraged sales
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-redesigned for optimal use in multichannel selling environments
-its oriented towards: -narrow participation in the marketplace -generate emphasis on acquiring and building key account relationships -integration with other channels to increase productivity example: make large sales and make deals with large organizations to resell your products or incorporate your product into theirs |
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gatorades brand vision
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since gatorade is owned by pepsiCo, we use pepsis brand vision which is "to be the world's premier consumer's products company focused on convenient food and beverages. and in everything we do, we strive for honesty, fairness, and integrity."
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gatorades brand personality
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the key to having a successful brand personality is emotion!
whenever i think of gatorade the words hard work, dedication, determination, and winners come to mind |
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gatorades brand positioning
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its the number 1 sports drink
its a thirst quencher made specifically for athletes |
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new brand: use PR to build the brand
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-PR is press releases, press conference, magazine columns, interviews, sponsorships, events
-it is designed to build good relations with the public -it builds awareness at lower costs than advertising -it usually has more credibility than advertising |
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new brand: sustain with advertising
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-advertising is a good way to inform and persuade
-millions of dollars are spent on advertising -it can reach more people geographically -it can repeat the same message -but it is impersonal and the audience doesn't always pay attention or respond. like skipping commercials |
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homogenized
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same wants/needs/desires
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multinational corporations
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operates in different countries and adjusts it's products and practices in each one
example: respecting prayer times in certain countries and not conducting business at that time |
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global corporation
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operates in different countries but treats them all the same by selling the same thing, the same way, everywhere
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gatorade: multinational or global corp?
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pepsiCo is multinational
its better to be multinational for beverages because different countries are accustomed to different tastes. Gatorade only has 30 flavors in the US but 50 flavors internationally. it would be different with technology cis people will have the same needs. like iPhones are identical everywhere. multinational is better cus if you don't respect peoples practices then they won't want to do business with you. they will respect that you respect them and want to do business with you. |
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main globalization opportunity or challenge for gatorade?
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different countries might have different values than the US. Gatorade's wining and competitiveness position might not work as well in other countries
gatorade has 30 flavors in the US but over 50 internationally. find a different way to promote it, also different pricing |
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how to strengthen gatorade's global position?
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sponsor athletes and sports that are valued in that specific country
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