Drop in unit cost as accumulated vol sold increases

drop in unit cost as accumulated vol sold increases; as sales grow, costs drop allowing further
price reduction
o Penetration pricing: low initial price to lure away from competitors, discourages competitors bc low profit margin
 Price skimming: sell new prod/svc @ high price that innovators/early adopters willing to pay
 Loss leader pricing: lower price below store’s cost (BOGO)
 Bait & switch: lure in w/ low price ad prod then aggressively pressure to purchase higher priced model
 Price discrimination: sell same prod to diff re-sellers or ultimate consumer at diff prices; not all forms illegal (Clayton &
Robinson-Patman Acts)
 Price fixing: collude w/ other firms to control prices (Sherman Antitrust Act)
o Horizontal: competitors take price out of consumer decision process
o Vertical: parties at diff levels of same marketing channel collude
 MSRP: price manufacturers suggest retailers use to sell their merchandise
 Contribution per unit: price – var cost per unit
Chapter 15: Supply Chain & Channel Mgmt.
 Marketing channel/supply chain mgmt.: set of approaches/techniques firms employ to efficiently/effectively integrate
suppliers/manufacturers/warehouses/transporters/stores
 Wholesalers: buy prods from manufacturers & sell to retailers
 Distribution center: facility for receipt/storage/distribution of goods to comp stores/customers
 Direct channel: manufacturer  customer
 Indirect channel: 1+ intermediaries
 Vertical channel conflict: members of same channel disagree
 Horizontal channel conflict: disagreement among 2 @ same level (competitors)

 Independent/conventional channel: indep members try to satisfy own objectives & max profits, @ expense of other members
 Vertical marketing sys: members act as unified sys
o Administered: dominant member controls channel relationship
 Power: 1 firm can control actions of another member @ diff level
 Reward power: offer rewards to gain power
 Coercive power: threatening/punishing
 Referent power: 1 wants to be associated w/ another, mkt share %
 Expertise power: has expertise another needs/wants
 Info power: 1 provides/withholds info from another
 Legit power: get another to behave in certain way
o Contractual: indep firms @ diff levels join together by contracts to obtain econs of scale & reduce conflict
 Franchising: franchisor allows franchisee to operate bus using name/format developed/supported by franchisor
o Corporate: parent comp has total control & dictates channel priorities/objectives
 Strategic/partnering relationship: members maintain long term, invest in mutually beneficial opportunities; requires mutual
trust/open comm/common goals/credible commitments
 UPC: black & white bar code (manufacturer, description, special packaging info, & special promos)
 ASN: e-doc supplier sends retailer in advance of shipment to tell retailer what to expect in shipment
 EDI: electronic data interchange; computer to computer exchange of bus docs from retailer to vendor & back
o Cycle time: