Marketing Final Exam

For that stage ans introduction generally prices are

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Unformatted text preview: ife cycle, discuss pricing strategies appropriate for that stage. ANS: INTRODUCTION. Generally, prices are set high in the introduction stage to recover developmental costs. However, pricing strategies followed in this stage depend on elasticity of demand. If demand is inelastic, a high introductory price is warranted. If demand is elastic and consumers are price sensitive, the price should be set at the market level or lower. GROWTH. Price may stabilize at this level as competitors enter the marketplace. Price may fall somewhat as economies of scale allow lower costs to be passed on to the consumer in the form of lower prices. MATURITY. This stage brings on further price declines as competition increases and inefficient, high-cost firms are eliminated. Remaining competitors typically offer similar prices. Price increases are cost initiated rather than demand initiated. DECLINE. In the final stage of the product life cycle, prices may decline even further as the few remaining competitors attempt to salvage the last vestiges of demand. If only one firm is left in the market, prices will stabilize or even rise as the product becomes a specialty good. PTS: 1 REF: 313 Communication KEY: CB&E Model Pricing OBJ: 19-6 TOP: AACSB MSC: BLOOMS Synthesis 17. How does price interact with the other three Ps of the marketing mix? ANS: PRODUCT. The product life cycle stage and the perceived relationship of price to quality of the product affect its price. Some students may also mention that price levels must be set according to the cost of the product, demand for the product, and elasticity of demand for the product. PLACE/DISTRIBUTION. Adequate distribution of a new product can often be attained by offering a large profit margin to distributors. Price can be set higher than normal if the product is distributed to outlets that are convenient to the consumer. Manufacturers can also gain more control over price by using exclusive distribution, franchising, or avoiding doing business with price-cutting discounters. PROMOTION. Price is often used as a promotional tool to increase consumer interest. Special low prices are often advertised as an inducement. Discount coupons, cents-off campaigns, price rebates, and other discounts are all price-promotion marketing tools. Trade promotions also are used. PTS: 1 REF: 313-316 Communication KEY: CB&E Model Pricing OBJ: 19-6 MSC: BLOOMS Synthesis 18. What is the impact of the Internet on pricing strategies? ANS: TOP: AACSB The Internet is enabling buyers to quickly and easily compare products and prices, putting them in a better bargaining position. At the same time, the technology allows sellers to collect detailed data about customers’ buying habits, preferences, and even spending limits so that sellers can tailor their products and prices. This raises hopes of a more efficient marketplace. PTS: 1 REF: 314 Communication KEY: CB&E Model Pricing OBJ: 19-6 TOP: AACSB MSC: BLOOMS Synthesis 19. Discuss how consumers u...
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This document was uploaded on 09/29/2013.

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