essay - AEM 240 Fall 200 Marketing Prof McLaughlin Section...

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Unformatted text preview: AEM 240 Fall 200? Marketing Prof. McLaughlin Section II Essays 20 points Complete 1 out of 2 go not do egg 1} Pricing strategies are varied and essential parts of marketing plans. a} Why are loss leaders used by retailers? (4 pts} For promotions, most retailers deliberately sell a product below its customary price (or margin] to attract traffic. In some cases, they sell It at a price less than they paid for It. The idea is NHT to increase sales of the specific advertised procduct but to attract more customers to the store in hopes that they will buy other products with larger margins to make up for what they lose on the advertised product. it!) Explain why marketers use “pricing or: the nines". {4 pts} Many marketers believe that a price that ends in “9" sounds much lower to consumers than the next higher price. So $99 seems a lot lower than $199. 9o, two reasons to use: (I) demand theory indicates that consumers will buy more when the price Is lower, so it follows that more will be sold [in theory] at $99 than $199 but [2} although the evidence is mixed, it also is believed by many that some consumers will actually buy more at $99 than they will at slightly lower prices, such as $99 or $9? 12 AEM 24D Fall 2013? Marketing Prof. McLaughlin c) Consider the marketing manager who is interested in increasing total sales revenue for hisfher product line but does not know how consumers will react if hefshe increases or decreases price to achieve the greatest sales goal. Please explain to this manager how vou would determine the possible consequences of raising or lowering prices. A graph mail:r be useful but is not required. (6 pts] The impacts of a price increase or decrease depends on the elasticity of the goodlsenrice in question. If price elasticflnelastlc, a price increase 1will lower; raise total sales revenue. If price elasticfinelastic, a price decrease will raisefiower total sales revenue. A diagram can also make the points above but is not needed for full credit. d) Determining final sales prices is a critical function of marketing managers. Suppose executives estimate that the unit variable cost for their 'v'CR is $1flt‘i. the fixed costs. including the plant and RM). are $1fl million annuallv, and the target volume for the next vear is lflflfiflfl recorders. Whatjaleipflce will be needed to achieve their target profit of $1 million? (6 pts.) Profit -_= Total Revenue — Total Cost Profit = {P s o) — [so + (uvc x on s1.ooo.ooo = (a x mastic) — [s1o.ooo,ooo + (sun It 1oo,ooo}] s1.ooo,ooo = tooo,ooo r — (s1o,ooo,ooo + $1fl.flflfl,flflfl} 1oo,ooo r = s21,ooo,ooo P = $219 13 AEM 24D Fall 200? Marketing Pref. McLaughlln 2} Distribution channel strategyr is a key component cf a sclicl marketing plan. a} Generally, the more layers in a multi—tierecl marketing channel, the higher the final cc-sts since every lntermecliary takes hlsfher share of channel profits. Then, indicate four reasens why manufacturers don't just sell directly to consumers. (5 pts} ScmyDon'tAllFinnsSali Died? * Reqtieshanlfiigmmmaly m - Eamththth b} Illustrate the retail life cycle, including firm types and all labels. {5 pts} The retail life cycle marine: um: \‘Fast-fuod W'lllfla. Z/ Calalcg retailers " Business-dismal ratallars Marked share or pram ,/ / f / General slnre Ill-1mm Declne Stages 0-1 lie- cycle [4 AEM 24D Fall 200? Marketing Prof. McLaughlin c) Provide a brief explanation of each of the following distribution concepts: (8 pts.) {1) Obligations of franchisee to franchisor In exchange for its franshisor's business pian and marketing expertise, a franchisee agrees to supervise iocai iabor and hiring, execution of the business pian, maintenance of franchisor standards and to remit a portion of the earnings. (II) Retailing mix Retaii mix inciudes activities reiated to managing the store and the merchandising in the store such as retaii pricing, store iocation, retaii communication and merchandise seiection. {III} Diverting Because of manufacturers differentiai pricing (by region or by customer), circumstances are created where by one retaiier takes advantage of an unusuaiiy iow discounted price from a manufacturer to re-seii, or divert, the product to a another retaiier such that both retaii parties are better off (higher gross profits). Aithough the extra handiing and transport costs of diverting may add to totai consumer price ie veis. {Iii} Channel blur Whereas year ago, the distinction between various retail!I formats was ciear—a pharmacy soid medications, a restaurant soid food to eat in the restaurant, a supermarket soid only food—today, the boundaries between these formats has “biurred. ” Today, supermarkets seii drug store products and take-out meais, restaurants often seii more take out meais than are eaten in the restaurant and c-stores seii from-scratch pizza. 15 ...
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