b Rockstar has a price premium relative to Monster c Red Bull engaged in price

B rockstar has a price premium relative to monster c

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b. Rockstar has a price premium relative to Monster. c. Red Bull engaged in price discounting relative to both Monster and Rockstar from 2009 to 2010. d. Rockstar sold more product than Monster in 2010. e. In terms of dollar market share, Red Bull has a lower share than the “Other Brands” category. Answer: a Page(s): 353 LO: 1 AACSB: Analytic QD: Hard Rationale: Red Bull’s price premiums of 15.2% and 12.1% in 2010 and 2009 respectively clearly exceeded Monster’s -5.3% of in 2010 and -5.6% in 2009. Figure 14-A 14-190 USING MARKETING DASHBOARDS APPLICATION - 62 -
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Frito-Lay is considering whether to buy the Cracker Jack brand of caramel popcorn from Borden, Inc. Frito-Lay research shows that Cracker Jack has a strong brand equity. But Cracker Jack’s dollar sales market share and pound (a surrogate for unit) volume market share have declined recently and trailed the Crunch ‘n Munch brand as shown in the Figure 14-A marketing dashboard above. Borden’s management used an above-market, premium pricing strategy for Cracker Jack. As a Frito-Lay marketer studying Cracker Jack, calculate Cracker Jack’s price premium. What position in Figure 14-A above represents the price premium of Cracker Jack? a. “A” b. “B” c. “C” d. “D” e. “E” Answer: e Page(s): 353 LO: 1 AACSB: Analytic QD: Hard Rationale: A price premium is the percentage by which the actual price charged for a specific brand exceeds or falls short of a benchmark established for a similar product or basket of products. The price premium calculations for the following brands are: Price Premiun (%) = Dollar Sales Market Share for a Brand Unit Volume Market Share for a Brand – 1 Crunch ‘n Munch price premium = [(32% ÷ 32%) – 1] = 0%, which is displayed at position “D.” Cracker Jack price premium = [(26% ÷ 19%) – 1] = 36.8%, which is displayed at position “E.” Fiddle Faddle price premium = [(7% ÷ 8%) – 1] = -12.5%, which is displayed at position “B.” Private Brands price premium = [(4% ÷ 8%) – 1] = -50.0%, which is displayed at position “A.” S, S, R brands price premium = [(31% ÷ 33%) – 1] = -6.1%, which is displayed at position “C.” Positions “A,” “B,” and “C” fall short of the benchmark established by Crunch ‘n Munch (“D”) while Cracker Jack (“E”) shows a price premium relative to Crunch ‘n Munch. 14-191 LOSS-LEADER PRICING KNOWLEDGE Loss-leader pricing refers to a. a pricing method where the price the seller charges is below the actual cost to make the product. b. setting a low initial price and gradually but consistently increasing that price so as not to antagonize the consumer. c. deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention in hopes that they will buy other products as well. d. a method of pricing based on a product’s tradition, standardized channel of distribution, or other competitive factors. e. pricing a product between 8 and 10 percent lower than nationally branded competitive products.
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