ADM 2320 Chapter Notes - Chapter 11: Monopolistic Competition, Pricing Strategies, Price Fixing

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12 Dec 2018

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Chapter 11: pricing concepts and strategies: establishing values. The importance of pricing: a strategic opportunity to create value, coming up with the right price is never easy. It is the only element of the marketing mix that generates revenue; every other element can be perfect, but the wrong price won"t sell. The role of price in the marketing mix: price is usually ranked as one of the most important factors in purchase decisions, price is the only element in the marketing mix that generates revenue. Monopolistic competition: many firms selling differentiated products at different prices. (differentiate, refer to stp) More price competition handful of firms control the market bank. competition: many firms selling commodities for the same prices. This is common among smaller firms that lack knowledge or experience in setting prices. Non-market leader firms use it to signal they"re a similar leader: customer orientation, focus on customer expectations by matching prices to customer, customers expectations, the most important c.

Related Questions

Describe three examples of the marketing concepts, which you, as a consumer, observe in the world around you. Use the Internet as a resource and look for examples as well as information pertinent to this discussion. Be sure to supply the Internet addresses you use. Please post a response above and respond to two other people's postings.

Examples of the marketing concept are all around usâe.g., the competition in airplane fares triggered by the slow down in the economy and the increase in the price of fuel. With customer confidence in the safety and reliability of travel waning the airlines are attempting to fill their seats by luring customers with low-fare campaigns. This is an example of adapting a pricing strategy which temporarily reduces prices even at the risk of lowering profits in order to gain market share. Starbucks, the once invincible coffee vendor, is finding stiff competition in the coffee arena from McDonalds, Tim Hortonâs, and Dunkin Donuts. Each has developed robust, fancy brews to compete with Starbucks and at a lower price. With its sales spiraling downward, Starbucks put a new CEO in place to lead a turnaround charge and fend off the competition. For the first time in its history, it began media advertising in late 2007. Is advertising the right strategy to regain market share or is it a temporary fix?

What other examples can you recognize in the marketplace? BE SURE your discussion includes references to the appropriate marketing principles.

Do not use the examples above or companies, which have already been identified and critiqued by the authors of your texts. That's too dull! Look out into the world around you; discover examples there, and bring them back to the class for discussion.

Mercury, Inc., produces cell phones at its plant in Texas. Inrecent years, the companyâs market share has been eroded by stiffcompetition from overseas. Price and product quality are the twokey areas in which companies compete in this market.

A year ago, the companyâs cellphones had been ranked low in product quality in a consumer survey.Shocked by this result, Jorge Gomez, Mercuryâs president, initiateda crash effort to improve product quality. Gomez set up a taskforce to implement a formal quality improvement program. Includedon this task force were representatives from the Engineering,Marketing, Customer Service, Production, and Accountingdepartments. The broad representation was needed because Gomezbelieved that this was a companywide program and that all employeesshould share the responsibility for its success.

After the first meeting ofthe task force, Holly Elsoe, manager of the Marketing Department,asked John Tran, production manager, what he thought of theproposed program. Tran replied, âI have reservations. Quality istoo abstract to be attaching costs to it and then to be holding youand me responsible for cost improvements. I like to work with goalsthat I can see and count! Iâm nervous about having my annual bonusbased on a decrease in quality costs; there are too many variablesthat we have no control over.â

Mercuryâs quality improvementprogram has now been in operation for one year. The companyâs mostrecent quality cost report is shown below.

Mercury, Inc.
Quality Cost Report
(in thousands)
	Last Year		This Year
Preventioncosts:
Machine maintenance	$	210	$	140
Training suppliers		5		15
Quality circles		25		80

Total preventioncosts		240		235

Appraisalcosts:
Incoming inspection		30		22
Final testing		155		92

Total appraisalcosts		185		114

Internal failurecosts:
Rework		110		62
Scrap		62		50

Total internalfailure costs		172		112

External failurecosts:
Warranty repairs		62		23
Customer returns		252		85

Total externalfailure costs		314		108

Total qualitycost	$	911	$	569

Total productioncost	$	4,110	$	4,510

As they were reviewing the report,Elsoe asked Tran what he now thought of the quality improvementprogram. Tran replied. âIâm relieved that the new qualityimprovement program hasnât hurt our bonuses, but the program hasincreased the workload in the Production Department. It is truethat customer returns are way down, but the cell phones that werereturned by customers to retail outlets were rarely sent back to usfor rework.â

Required:

1.	Expand the companyâs quality cost report by showing the costs inboth years as percentages of both total production cost and totalquality cost. Round your percentage answers to 1 decimalplace (i.e 0.1234 should be entered as 12.3).

Mercury, Inc.
Quality Cost Report
(in thousands)
	Last Year					This Year
	Amount	Percentage of Total Production Cost		Percentage of Total Quality Cost		Amount	Percentage of Total Production Cost		Percentage of Total Quality Cost
Prevention costs:
Machinemaintenance	$210		%		%	$140		%		%
Trainingsuppliers	5					15
Qualitycircles	25					80
Totalprevention costs	240	0.0		0.0		235	0.0		0.0
Appraisalcosts:
Incominginspection	30					22
Finaltesting	155					92
Totalappraisal costs	185	0.0		0.0		114	0.0		0.0
Internalfailure costs:
Rework	110					62
Scrap	62					50
Totalinternal failure costs	172	0.0		0.0		112	0.0		0.0
Externalfailure costs:
Warrantyrepairs	62					23
Customerreturns	252					85
Totalexternal failure costs	314	0.0		0.0		108	0.0		0.0
Totalquality cost	$911	0.0		0.0		$569	0.0		0.0
Totalproduction cost	$4,110					$4,510

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1. Marketing traditionally has been divided into a set of fourinterrelated decisions known as the marketing mix, or four Ps,including all of the following EXCEPT:
A. product
B. place
C. performance
D. promotion
E. price

2. Marketers want their firms to develop efficient operationsbecause this kind of efficiency:
A. usually leads to lower prices or greater pricingflexibility.
B. allows the firm to offer greater value to customers.
C. makes it easier to get the products customers want to them whenthey want them.
D. can lead to more attractive margins.
E. All of these

3. The Ethical Decision-Making Framework includes all of thefollowing steps EXCEPT:
A. identify issues.
B. promote the firm's corporate social responsibilityefforts.
C. gather information and identify stakeholders.
D. brainstorm and evaluate alternatives.
E. choose a course of action.

4. The centerpiece of the Marketing Environment Analysis Frameworkis:
A. green marketing.
B. corporate partners.
C. culture.
D. competitive intelligence.
E. consumers.

5. Most "big box" retailers regularly move products from one aisleto another. They also put personal care products in the pharmacyarea, many aisles away from the grocery products. They do thisbecause consumers who spend more time walking through the store arelikely to make:
A. impulse purchases.
B. limited problem solving decisions.
C. extended problem solving decisions.
D. ritual consumption purchases.
E. affective alternative decisions.

6. Edward, the leading salesperson for Harry's Honda dealership,began hearing customers asking for hybrid automobiles several yearsago. Edward alerted Harry, and Harry pre-ordered many Honda hybridsbefore they became available. In this case, the source of needrecognition was:
A. trade show demonstrations.
B. ads in trade journals.
C. customers.
D. the Internet.
E. suppliers.

7. One of the reasons marketers use loyalty segmentation is:
A. the high cost of finding new customers.
B. government tax incentives for loyalty.
C. accounting difficulties associated with identifying newcustomers.
D. rapid population increases.
E. the failure of micromarketing as a workable strategy.

8. Matt was passionate about Abercrombie & Fitch. It was theonly place he'd buy his clothes. If anyone asked him about clothes,he would talk for what seemed like hours about why he only shoppedthere. From a strictly marketing perspective, this word of mouth ispart of:
A. social insistence.
B. brand loyalty.
C. self-actualization.
D. motivation.
E. brand extension.

9. When Procter & Gamble added teeth whitening products underthe Crest brand, the firm was engaged in:
A. corporate branding.
B. brand extension.
C. brand licensing.
D. brand association.
E. perceived value branding.

10. By the time BMW and Mercedes Benz entered the mini-SUV market,there were many competitors, sales had peaked, and profits weredeclining. These firms entered the market during the ______________stage of the product life cycle.
A. introduction
B. leveling
C. maturity
D. growth
E. decline

11. By providing good customer service, firms __________ theirproducts or services.
A. eliminate the communication gap for
B. add value to
C. reduce the zone of tolerance for
D. reduce the empowerment cost associated with
E. increase the perishability of

12. Collecting information at the point of sale is astraightforward and inexpensive way to assess service quality, butthis approach will NOT be useful if:
A. customers cannot assess service quality, as in the case of oilchange or maintenance check.
B. decision-making managers do not get the results of thefeedback.
C. the person who rendered poor service is the same personcollecting the information.
D. customers are rushed and don't take the time to assess theservice.
E. All of these.

13. Ryan gave the manager of his convenience store a set ofbinoculars so she could see the gasoline prices charged by theother convenience store at that intersection. Ryan told the managerto always match the gasoline prices of the other store. Ryan isusing a _____________________ pricing strategy.
A. maximizing profits
B. target profit
C. target return
D. status quo
E. sales

14. At the break-even point:
A. costs are zero.
B. price is maximized.
C. profits are zero.
D. fixed costs are zero.
E. contribution per unit is zero.

15. For marketers to advertise a price as their ______________, theBetter Business Bureau recommends that at least 50 percent of thesales of a product occur at that price.
A. fixed price
B. zone price
C. regular price
D. leader price
E. cost-based price

16. Brenda is working on an automated re-ordering system which willelectronically re-order inventory for her shoe store as purchasesare made. Brenda is working on a supply chain management systemthat will:
A. provide products at the right time.
B. provide products at the right locations.
C. provide the right quantities.
D. minimize system-wide costs.
E. all of these.

17. A manufacturer of high-end products might consider sellingproducts in a warehouse club if:
A. there are no high-end shopping centers within a 100-mile radiusof the warehouse club.
B. the warehouse club has a good reputation.
C. the manufacturer is trying to increase market share.
D. the manufacturer overestimated demand or has a great deal ofreturned merchandise from other retailers.
E. the warehouse club wants to upgrade its image.

18. Because of the way _______________ buy merchandise, customerscan never be confident that the same merchandise will be in stockeach time they visit the store.
A. department stores
B. off-price retailers
C. discount stores
D. downstream value stores
E. category specialist stores

19. The basic goal of integrated marketing communications isto:
A. communicate the value proposition to the target market.
B. create desire.
C. manipulate consumers.
D. outspend competitors.
E. tell the world about your company.

20. The sender of an integrated marketing communication:
A. must work with the advertising specialists to ensure allrecipients interpret the message accurately.
B. can assess the manner in which receivers interpret the messagethrough gross rating points.
C. has little control over what meaning any individual receiverwill take from the message.
D. controls the meaning all receivers take from the message.
E. generally uses a rule-of-thumb interpretation index.

21. In the AIDA model:
A. advertising leads to interest, which hopefully leads to desireand then, action.
B. awareness leads to integration, which hopefully leads to desireand then, action.
C. awareness leads to interest, which hopefully leads to desire andthen, action.
D. awareness leads to interest, which hopefully leads to desire andthen, attention.
E. awareness leads to interest, which hopefully leads todetermination and then, action.

22. When Microsoft introduces a new version of its Windowsoperating system, it typically uses selected magazine, Internet,and direct mail advertising. This combination of advertisingoutlets represents Microsoft's:
A. niche buy.
B. advertising plan.
C. media mix.
D. track testing.
E. supply chain messaging.

23. _____________ advertising has the advantages of being highlytargeted and offering opportunities for personalization.
A. Television
B. Radio
C. Direct mail
D. Outdoor
E. Newspaper

24. In the United States, the regulation of advertising involves acomplex mix of laws and informal restrictions designed to:
A. protect consumers from deceptive practices.
B. stimulate domestic demand.
C. reduce international competition.
D. promote social marketing.
E. institutionalize pull strategies.

25. _________________ is a sales philosophy and process thatemphasizes a commitment to maintaining and investing in long-term,mutually beneficial business relationships.
A. Organizational buying
B. Cold calling
C. Psychographic selling
D. Relationship selling
E. Sales management

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ADM 2320 Chapter Notes - Chapter 11: Monopolistic Competition, Pricing Strategies, Price Fixing

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