Study Guide 3.docx - MKT 300 Exam 3 Study Guide Modules 6-7...

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MKT 300 Exam 3 Study Guide Modules 6-7 In addition to the Guest Speaker videos, I would ask you to focus on: Module 6: Internal/External Factors of Price o Internal Factors of Price (we have greater deal of control over) Marketing objectives To maximize profit To gain market share To infer/deliver a level of quality To survive An objective could be to create awareness Marketing Mix Strategy Price needs to be consistent with the other 3 P’s (Marketing variables) (needs to reflect advertising) If you are selling an item at Neiman Marcus, your prices will have to be higher. If you are selling an item at Walmart, the price would be lower. o External Factors of Price (no influence/control over) Demand for your product (try to convince people to buy but don’t force people) Competition (they are what they are so we need to respond to them) Competitor’s price Strength of competition Economy Cost of components (natural resources) Economic conditions Price Elasticity - Tells us how much the demand for a product will change with a change in price. o Elastic Consumers buy more or less of a product when the price changes If demand greatly changes with a price change, the demand is elastic. This describes products that are price-sensitive and have many substitutes. Example: Water. Will buy what’s on sale since there is not a major difference between brands. Elasticity is less than 1.0. Numerator is greater than the denominator. Change the price by a little bit than the quantity changes a lot. Raise the price and the quantity demanded goes down by a significant amount.
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If Revenue goes up and Price goes down or Revenue goes down and Price goes up then this is elastic. o Inelastic An increase or decrease in price will not significantly affect demand Refers to when we change the price we don’t see a change in quantity demanded. Examples are cigarettes, medicine, and textbooks because they have to have these products. Just because you decrease in textbooks, you wouldn’t stock up on textbooks even if the prices decreased. If demand hardly changes with a price change, the demand is inelastic. This describes products that are less price-sensitive and have very few substitutes. Elasticity is less than 1.0. The numerator is less than the denominator. Bigger change of price in the denominator and see less of a change in the quantity demanded. Price and Revenue both go up or both go down then its inelastic. o Unitary elasticity An increase in sales exactly offsets a decrease in prices, and revenue is unchanged. o Slide 8 is a good example If price decreases then revenue with decrease as well. Markup Pricing - Keystoning (Doubling the cost) - Markup on Selling Price = (Selling price – Cost) / Selling price - COST = (1-markup on selling price)(selling price) - Selling price = Cost / (1 – Markup on selling price)
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o No need to memorize formulas, as Selling Price = Markup in dollars + Cost; for determining markup
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