...Correct The purpose of strategic pricing is to _____. Answer Selected Answer: improve profits by capturing more value rather than making more sales Correct Answer: improve profits by capturing more value rather than making more sales Question 2 5 out of 5 points Correct To create value in a product and price it profitably, financial management must choose to _____. Answer Selected Answer: incur costs to make only profitable products given their value to the targeted customer Correct Answer: incur costs to make only profitable products given their value to the targeted customer Question 3 5 out of 5 points Correct Pricing that reflects market conditions is _____. Answer Selected Answer: customer-driven pricing Correct Answer: customer-driven pricing Question 4 5 out of 5 points Correct The key actions for price setting involve _____. Answer Selected Answer: setting appropriate pricing objectives, calculating price-volume trade-offs, and assessing drivers of price sensitivity that are unrelated to value Correct Answer: setting appropriate pricing objectives, calculating price-volume trade-offs, and assessing drivers of price sensitivity that are unrelated to value Question 5 5 out of 5 points Correct _____ allows a company to vary its prices outside the scope of value and cost according to explicit or cultural rules or protocols. Answer Selected Answer: Pricing policy Correct Answer: Pricing policy Question 6 ...
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...ABSTARCT Marketing is the process of planning and executing the concepts of pricing, promotion and distribution of ideas, goods and services that satisfy individual and organizational goals (AMA). Successful marketing requires a winning strategy. Understanding marketing strategy formulation lets you properly evaluate your organization's marketing needs. You can then gear your marketing strategies to achieve maximum effectiveness. Marketing strategy formulation is the process of defining an organization's marketing goals and objectives. This allows formulators to create a guide. They examine the market and in doing so, use that information to determine what marketing approaches will be best at reaching clients and enticing them to seek out the business' services. Products and services constitute the platform for attracting customers, basically all organizations are in the business of attracting customers. Hence, the need to compete favourably. As a general rule, a good first step in a marketing strategy formulation is determining what you want to accomplish in terms of marketing. It could be as simple as letting potential customers know what you sell, and how your product can benefit them.The next step is to examine internal and external trends. These could include spreading the word about a next-generation version of one of your products (internal), and how it improves upon other products in the industry (external). After that, assign a value to the strategy's outcome...
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...------------------------------------------------- STRATEGIC PRICING PROPOSAL TO COUNTER GENERIC SILDENAFIL We, the Viagra Senior Marketing Managers, are proposing the post-patent expiration Strategic Pricing Plan to the Pfizer Executive Leadership Team for presentation at the next quarterly meeting. Viagra has been very successful since its approval in March 1998 as a first in class erectile dysfunction (ED) medication. We achieved gross revenue of $1.9 billion last year despite competition from the two other branded drugs in our market, Cialis and Levitra. As we look to the future and our patent expiration in 2020, we need to plan to face our generic competition. The goal for the Viagra post-patent expiration Strategic Pricing Plan is to maximize profit as long as possible. This report will provide an overview of our past and current state, and arrive at our proposed pricing strategy plan in which we will achieve the best outcome. ZOLOFT (ANTI-DEPRESSION DRUG) CASE EXAMPLE: PRICE ELASTICITY OF DEMAND In our efforts to predict what will happen to Viagra once our patent expires, we reviewed another Pfizer’s drug, Zoloft, as a case example. Zoloft was the leading antidepressant drug that brought in $3.3 billion in sales before its patent expired on June 30, 2006. It faced branded competition from Effexor XR from Wyeth, Paxil and Welbutrin XL from GlaxoSmithKline, and Cymbalta from Eli Lilly & Co. The demand for Zoloft was inelastic before patent expiration which...
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...A Strategic Marketing Plan is important for all companies to have. It lays out the goals, objectives, strategies and tactics to be implemented to support the companies’ goals. A formal plan will ensure all employees and ownership in the company know what to do and why. CalendarPlus.com is an online company offering customized calendars. A situation analysis where information is gathered from both external and internal sources is the background for the preparation of a strategic marketing plan. The type of information gathered includes sales data, customer data, competitive data and industry data. A SWOT, or strength, weakness, opportunities and threats, analysis will be completed and prioritized. The Strategic Marketing Plan will identify how the company will use its strengths and opportunities and work to overcome its weaknesses and threats. The strategic marketing plan will consist mainly of the goals, objectives, strategies and tactics and will thus be the plan which gives direction for the company. “Objectives must be measurable and include specific, quantifiable end results with dates assigned. Strategies identify how the company will achieve its objectives. Tactics indicate specifically what the company will do.” (Richards, L. 2011). A budget and timetable are imperative to a strategic marketing plan as it shows how and when resources are to be utilized to reach company objectives. There are several pricing strategies CalendarsPlus.com could utilize. Once market...
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...Vol. 27, No. 5, September–October 2008, pp. 811–828 issn 0732-2399 eissn 1526-548X 08 2705 0811 informs ® doi 10.1287/mksc.1080.0398 © 2008 INFORMS Supermarket Pricing Strategies Department of Economics, Duke University, Durham, North Carolina 27708, paul.ellickson@duke.edu William E. Simon School of Business Administration, University of Rochester, Rochester, New York 14627, misra@simon.rochester.edu Paul B. Ellickson Sanjog Misra M ost supermarket firms choose to position themselves by offering either everyday low prices (EDLP) across several items or offering temporary price reductions (promotions) on a limited range of items. While this choice has been addressed from a theoretical perspective in both the marketing and economic literature, relatively little is known about how these decisions are made in practice, especially within a competitive environment. This paper exploits a unique store level data set consisting of every supermarket operating in the United States in 1998. For each of these stores, we observe the pricing strategy the firm has chosen to follow, as reported by the firm itself. Using a system of simultaneous discrete choice models, we estimate each store’s choice of pricing strategy as a static discrete game of incomplete information. In contrast to the predictions of the theoretical literature, we find strong evidence that firms cluster by strategy by choosing actions that agree with those of its rivals. We also find a significant impact of...
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...Airline Ticket Pricing The basis of airlines competition for passengers and a larger share of the market are based on: i. Frequency of service and departure schedule on each route served ii. Price charged, relative to other airlines, to the extent that regulation allows for price competition iii. Quality of service and products offered ‐‐airport and in‐flight service amenities and/or restrictions on discount fare products Passengers on the other hand choose combination of prices, flight schedules and product quality that will maximize the utility of taking a flight. Therefore, it is in the interest of each passenger to have the best service for the lowest price possible on a flight that departs at the most convenient time (Peoples, 2012). Price elasticity is a measure of how responsive consumers are to price changes or consumers' price sensitivity to changes in price. From the law of Demand, we know for certain that an increase in the price of a product will always result in a decrease in the amount demanded and vice versa. That is, we know the direction of the change. Price Elasticity answers the question: When price goes up, how much does the quantity fall. Knowledge of price elasticity helps a firm to accurately forecast the impact of price changes on unit sales. Price elasticity also helps the firm determine an optimal pricing strategy to max profits. The understanding of the price elasticity of demand for a given company's services can guide the firm in...
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...Strategic Transfer Pricing Author(s): Michael Alles and Srikant Datar Source: Management Science, Vol. 44, No. 4 (Apr., 1998), pp. 451-461 Published by: INFORMS Stable URL: http://www.jstor.org/stable/2634608 . Accessed: 15/08/2011 07:30 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. INFORMS is collaborating with JSTOR to digitize, preserve and extend access to Management Science. http://www.jstor.org Strategic Transfer Pricing Michael Alles * Srikant Datar CBA 4M-202, University of Texas at Austin, Austin, Texas 78712 HarvardBusiness School,Accounting and ControlArea, Soldier'sField, Boston,Massachusetts02163 M\ost research into cost systems has focused on their motivational implications. This paper , takes a different approach, by developing a model where two oligopolistic firms strategically select their cost-based transfer prices. Duopoly models frequently assume that firms game on their choice of prices. Product prices, however, are ultimately based on the firms' transfer prices that communicate manufacturing...
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...Case 2 1. How does Hammerpress employ the concept of dynamic pricing? Hammerpress offers a set of pricing options. They are like other companies in the industry. They practice cost-based pricing, which is: design great product, add up the costs, and set a price. First, they offer an estimate price to the customer and offer a certain amount of revises. In the video though, revising a piece of work can be costly, and Hammerpress tells their consumers that it will cost them extra in order to make additional revises. The second way is when Hammerpress splits the operation costs with the company/consumer in return Hammerpress gets half the revenue per sale. If the company is not satisfied with the product, they can revise it as many times as they want. However, if additional revises become too costly then Hammerpress will tell the company that this will cost more money. 2. Discuss the three major pricing strategies in relation to Hammerpress. Which of these three do you think is the company’s core strategic strategy? A. Price based on hours of design, material and labor for production B. Split the material costs, labor, and profits in half. (50-50) C. Do it because they believe it will be profitable in the long-term, not short-term. Hammerpress is also responsible for marketing the product. I believe the company’s core strategic strategy is splitting everything 50-50 because this is both a short-term and long-term source of revenue, assuming the company continues to...
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...1. How does Hammerpress employ the concept of dynamic pricing? Hammerpress offers a set of pricing options. They are like other companies in the industry. They practice cost-based pricing, which is: design great product, add up the costs, and set a price. First, they offer an estimate price to the customer and offer a certain amount of revises. In the video though, revising a piece of work can be costly, and Hammerpress tells their consumers that it will cost them extra in order to make additional revises. The second way is when Hammerpress splits the operation costs with the company/consumer in return Hammerpress gets half the revenue per sale. If the company is not satisfied with the product, they can revise it as many times as they want. However, if additional revises become too costly then Hammerpress will tell the company that this will cost more money. 2. Discuss the three major pricing strategies in relation to Hammerpress. Which of these three do you think is the company’s core strategic strategy? A. Price based on hours of design, material and labor for production B. Split the material costs, labor, and profits in half. (50-50) C. Do it because they believe it will be profitable in the long-term, not short-term. Hammerpress is also responsible for marketing the product. I believe the company’s core strategic strategy is splitting everything 50-50 because this is both a short-term and long-term source of revenue, assuming the company continues to buy...
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...business creates value by combining inputs such as labor, materials, and capital to make products and services that consumers need and desire. And it survives and thrives by charging a price that equals or exceeds the cost of delivering the products and services that consumers value. In this course, students learn how businesses optimally create and capture value and how their abilities in doing so are impacted by various market forces and the strategic interaction among players in the industry. A good understanding of the 1 economic principles that govern the distribution of value in markets is critical to formation of a successful and sustainable business strategy. Learning Objectives: Understand and apply tools, concepts, and theories from microeconomics to perform industry and demand analyses. Apply demand and supply analyses in predicting market price and related dynamics in competitive markets. Understand the key tradeoffs between high margin and high volume of sales in pricing decisions, and choose different pricing strategies according to industry/market conditions or consumer characteristics. Predict competitors' actions and reactions using basic game theoretic methods. In the context of oligopoly market, analyze the direct...
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...variety of delicacies to choose from, the idea is to bring the best dishes from most parts worldwide. The value addition does not stop there, there is going to be adequate staff to cater for the large number of customers expected. This will help to ensure that the customers will not have to wait longer than their meal takes to prepare, hence maximum customer service is ensured. The restaurant is set to benefit the common or the average citizen, which is to mean that prices will be set in a way that they are affordable to that target group. The prices in this kind of restaurant are always medium and this restaurant is no exception. I have adopted a cost-plus pricing strategy to cater for all the dishes to be included in the menu which I found to be the best and one I will be guaranteed of profits (Smith, 2012). This pricing policy is the best because before coming up with the final price for a unit of output, it takes into account various overhead costs such as the rent, wages for the staff and the power used in the rooms. The strategy also considers the profit margins which ensures the restaurant is kept in operation (Smith, 2012). The percentage of the cost and the margins will be combined in order to give a comprehensive percentage that will be used to determine the price of every food item to be sold. This policy also is beneficial to customers because it ensures that they are not exploited and that the business remains...
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...points Customer-driven pricing may depress profits because _____. Answer Selected Answer: customers will only pay so much for a product Correct Answer: pricing for short term sales objectives often undermines perceived value by customers • Question 2 2 out of 2 points Cost-plus pricing is effectively opposite of a prudent pricing strategy because _____. Answer Selected Answer: it leads to overpricing in weak markets and underpricing in strong markets Correct Answer: it leads to overpricing in weak markets and underpricing in strong markets • Question 3 2 out of 2 points Proactive, value-based, and profit-driven principles are typically embodied by _____. Answer Selected Answer: successful pricing strategies Correct Answer: successful pricing strategies • Question 4 2 out of 2 points A problem with customer-driven pricing is _____. Answer Selected Answer: pricing is based on willingness-to-pay and the ignorance of the value of the product Correct Answer: pricing is based on willingness-to-pay and the ignorance of the value of the product • Question 5 2 out of 2 points A company that is willing to be a smaller company in order to be profitable is employing the _____ principle of strategic pricing. Answer Selected Answer: profit-driven Correct Answer: profit-driven • Question 6 0 out of 2 points Strategic pricing is proactive in _____. Answer...
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...PRICING OF INDUSTRIAL PRODUCT AND SERVICES Introduction “Price is the measure by which industrial customers judge the value of an offering and it strongly impacts brand selection among competing alternatives”. (Shipley and Jobber (2001, p. 301). Pricing is a process where a business firm sets the price at which it will sell its products and services in such a way that it can generate profit as well as satisfy the customer, and it may be a part of the business’s marketing plan. Price management is a very critical element in marketing and competitive strategy and a key determinant of performance. Among different pricing strategies, marketing managers can choose their preferred type. The overall objective of pricing is to increase sales and profits globally (Kigan, 2001).Global Pricing subject can be fully integrated and considered into the product design process (Kigan, 2001) As the ultimate aim of the industry is to earn profits so pricing of industrial products and services should be based on desire of the customer. A company set the price for the first time for the following items i.e. when a new item is manufactured or a new product comes from normally when an item is directed to a new distribution channel, or it is offered to a new geographic area. Companies need to decide the positions of their product in terms of their quality and price. Literature review Research shows marketing scholars have devoted only little effort to pricing theory and practice. This lack of...
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...TOPIC 1: MARKET STRUCTURE AND MARKET POWER 1.1. Competitors Anyone that produces a substitute for a firm’s product. - Cross price elasticity: Measures the substitution degree of a product for another. P.E.>1 – The demand is elastic, a change in price is reflected as an even major change in demand. The extent of the variation is higher as higher is the substitution degree of a product for another. We can say two firms are competing when a price increase by one firm, drives its customers to the other firm. P.E. P (find higher prices). Relevant Geographic Market Imports and Transportation costs. b. Difficulties when defining a market Product differentiation is usually due to small characteristics of the product. e.g. Diet coke belongs to cola market, light cola market and soft drinks market. The idea of competitors today is completely different from the one we had in the past. Sometimes we need to look outside the industry. e.g. go by car with 4 persons vs go alone by train. 1.3.2. Market Structure: # and characteristics of firms in a market. a. Concentration in the market Concentration Index Simple measures to define the market are really useful to take antitrust decisions. It takes into consideration, the number and size of the firms. b. Measuring Market Structure - K-firm concentration ratio Once you have defined the market and relevant players, we define their MS%. Combined share of the k largest firms in the market. Ck = i , si is the MS of firm i and Ck Є...
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...Advantages of Sony using the “Buy” (Outsource) strategy: • Allow Sony to concentrate resources on unique applications like movies, video games, and music. • The fastest growth is in low-end televisions sold in developing counties like China; whose production can be more easily outsourced than more sophisticated models. • Outsource partner may be able to manufacture products at cheaper cost. • Flexibility in choosing outsource partner who specializes in product. Sony can match suppliers who can meet market demand. Outsource partner may be an expert or have latest production and manufacturing technologies available. • Sony is losing money, and manufacturing is very capital intensive. Sony can save money and use its resources to fit their strategic organizational objectives. • Offsets: using an outsource supplier may help Sony capture orders or improve business relations with the suppliers home country. Advantages of Samsung using a Make (Produce) strategy: • Samsung leadership believes that giving up manufacturing is tantamount to abandoning your brand. • Samsung can maintain tight control over the value chain, and therefor over quality. • Samsung keeps all the profits. • Samsung has reduced design to manufacturing to distribution from 16 weeks to 4 weeks; Samsung is quicker to market. • Samsung can better protect intellectual property rights. • Samsung enjoys economies of scale by producing large quantities and also reaps the benefits from new efficiencies. Samsung is...
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