CLEP Principles of Marketing Study Notes

Penetration pricing when trying to gain a large

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Penetration Pricing - When trying to gain a large market share quickly, a marketer will set a price below the prices of competing brands and is used when the marketer is trying to gain market share quickly. 3 bases, or variables , which are not used for consumer markets, but used EXCLUSIVELY for segmenting ORGANIZATIONAL markets : 1. Customer Type - include producer, reseller, government, and institutional 2. Customer Size - measures the purchasing power of buyers, whereas in consumer markets a firm typically looks at the number of buyers, not the purchasing power of each.
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3. Buying Situation - can be one of three types: New-task buying - an organization makes an initial purchase of an item to be used to perform a new job or to solve a new problem. Most complex decision-making process for the firm making the purchase. If the organizational buyer is satisfied with the product, the supplier may be able to sell the buyer large quantities of the product for a period of years, so new-task purchases are important to the seller. Straight rebuy - a buyer purchases the same products routinely under the same terms of sale. Buyer requires little information to make these purchases. It is a process used to purchase inexpensive, low-risk products, and alternative products or suppliers are not usually considered. Modified rebuy - Company changes the requirements for a new-task purchase or the requirements for a routinely purchased product are modified. For example, an organizational buyer may decide to look for faster delivery or lower prices, and consider alternative suppliers. The decision process associated with a Modified Rebuy purchase is more complex than a Straight Rebuy, but less complex than a New-Task purchase. The decision making process for the firm usually entails different levels of involvement for these three types. The buying decision process for high-involvement consumer purchases is similar to that of new-task purchases by organizations. New-task purchases use a similar five-step process as high-involvement consumer purchases . Both require much research and information gathering, and evaluating alternatives . Low-involvement consumer purchases involve a similar buying decision process as straight rebuy purchases made by organizations. Straight Rebuy purchases are routine purchases made by companies, just like low- involvement purchases are routine, low-risk purchases made by consumers. They involve a similar three-step processes. 5 different categories of people who affect the decision making process in organizational purchases. 1. Buyers are responsible for selecting suppliers and actually negotiating the terms of purchase. Carry out the purchasing procedures . 2. Users - ones who actually use the product being acquired.
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