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LECTURE OUTLINE AND LECTURE NOTES
CHAPTER OPENING PROFILE
SSB Technologies (Text pages 282-283)
Marco Sorani saw a need for disabled access to the Internet—many of the 54 million disabled
Americans were not able to access Web sites. He designed software that can read captions out loud so that
blind people can hear what is on the screen. It can also caption Web audio and enlarge text. When the
U.S. government issued guidelines for complying with the Rehabilitation Act of 1998, it created an expanded opportunity for Sorani’s company SBB Technologies. Sorani’s marketing strategy involves many
of the key concepts discussed in this chapter—understanding consumer behavior, target marketing, and
understanding product and price.
LECTURE OUTLINE
LECTURE NOTES
I. INTRODUCTION TO MARKETING
►
LEARNING OBJECTIVE 1
Define marketing and its eight functions. (Text
pages 284-286)
A. Marketing is more than selling or advertising.
B. MARKETING is the process of planning
and executing the conception, pricing,
promotion, and distribution of goods and
services to facilitate exchanges that satisfy
individual and organizational objectives.
II. THE EIGHT FUNCTIONS OF MARKETING
A. Eight marketing functions are involved in
finding an unmet need in the market and
then providing that product or service to
consumers.
B. Exchange
1. Buying: investing and developing or
procuring products to fill customer
needs (determined through market research).
2. Selling is involved when customers are
9.1
POWERPOINT 9-1
Chapter Title
(Refers to text page 282)
POWERPOINT 9-2
Learning Objectives
(Refers to text page 283)
POWERPOINT 9-3
The Eight Functions of
Marketing (Refers to text
pages 284-286)
TEXT FIGURE 9.1
The Eight Functions of
Marketing (Box in text on
page 285)
LECTURE OUTLINE
LECTURE NOTES
informed of a product (packaging and
advertising).
C. Physical Distribution
3. Transportation: goods must be transported from the factory to the place
where they will be sold.
4. Storage for products until ready for
customers.
D. Facilitating
5. Quality and quantity: providing the
right quantity of product of the right
quality.
6. Financial, including:
a. the methods and procedures for
payment;
b. the price that supplier and wholesalers charge;
c. the company’s pricing of their
products to consumers.
7. Risks are involved in buying, transporting, and selling products
a. Risks are involved in buying,
transporting, and selling products.
b. Potential competitors also introduce risk.
8. Marketing information:
a. Tasks needed to sell products include:
i. setting prices;
ii. determining how sales of the
product will help companies
meet their financial objectives;
iii. reviewing market research
9.2
TEXT REFERENCE
Real World Business Apps
(Box in text on page 285)
Ariel Powell is a smallbusiness owner who has just
developed a brand new product. Ariel has developed a
prototype and found a manufacturer. She now must decide what price to charge for
the product and how to market it.
BONUS CASE 9-1
SolutionPeople: SolutionPeople Have the Idea (Video Case)
This bonus case ties in with
the video available for use
with this chapter. The concepts of product development, packaging, and branding apply to services as well
as goods. (See complete case,
discussion questions, and
suggested answers on page
9.Error! Bookmark not
defined. of this manual.)
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
LECTURE NOTES
and competitor’s marketing information.
b. A marketer must be prepared to
change the message and the
product or service accordingly.
E. Marketing begins with determining who
your customers are.
III. MARKET SEGMENTATION
A. Consumer groups differ greatly in age, education level, income, and taste.
1. Marketers cannot fill the needs of everyone.
2. They must first decide which group to
serve and then develop products and
services specially tailored to their
needs (as Campbell Soup does).
3. MARKET SEGMENTATION is the
process of dividing the total market into groups whose members have similar characteristics.
4. TARGET MARKETING is choosing
the market segment for a marketer to
focus its efforts on.
B. Segmenting the Consumer Market
►
LEARNING OBJECTIVE 2
TEXT FIGURE 9.2
Some Methods Marketers
Use to Segment the Market
(Box in text on page 288)
POWERPOINT 9-4
Market Segmentation
(Refers to text pages 286290)
BONUS CASE 9-2
Whole Foods Markets Naturally
This case discusses Whole
Foods Markets, a chain of
“supernatural” stores that
combine the appeal of natural
foods and gourmet foods.
(See complete case, discussion questions, and suggested
answers on page 9.Error!
Bookmark not defined. of
this manual.)
Understand market segmentation and name the
types of segmentation. (Text pages 286-289)
1.
Methods of dividing the market:
a. GEOGRAPHIC SEGMENTATION
is dividing the market by geographic area (cities, counties,
states, regions, etc.).
b. DEMOGRAPHIC SEGMENTATION is segmenting by age, in-
CHAPTER 9: Marketing: Product and Price
CRITICAL THINKING
EXERCISE 9-1
Identifying the Target
Market
This exercise asks the student
to identify the target market
for various products and services. (See complete exercise
on page 9.Error! Bookmark
not defined. of this manual.)
9.3
LECTURE OUTLINE
2.
3.
9.4
LECTURE NOTES
come, and education level, race,
profession, or religion.
c. PSYCHOGRAPHIC SEGMENTATION is segmenting by lifestyle, values, attitudes, and interests.
d. BENEFIT SEGMENTATION is determining which benefits are preferred and using those benefits to
promote a product.
e. VOLUME (USAGE) SEGMENTATION is separating the market by
usage (volume of product used) or
how often a product is used.
The best segmentation strategy is to
use all the variables to come up with a
consumer profile that’s sizable, reachable, and profitable.
Reaching smaller market segments
a. NICHE MARKETING is the process of finding small but profitable
market segments and designing
custom-made products for them.
b. RELATIONSHIP MARKETING is
a marketing strategy with the goal
of keeping individual customers
over time by offering them new
products that exactly meet their
requirements.
c. The latest in technology enables
sellers to work with buyers to determine their individual wants and
needs and to develop goods and
services specifically designed for
those individuals.
BONUS CASE 9-3
Marketing to the Baby
Boom Generation
The baby boomer generation,
the largest population group,
is a profitable market for
targeted products and services. (See complete case,
discussion questions, and
suggested answers on page
9.Error! Bookmark not
defined. of this manual.)
BONUS CASE 9-4
Thermos: CustomerOriented Marketing
To become a world-class
competitor, Thermos completely reinvented the way it
conducted its marketing operations. (See complete case,
discussion questions, and
suggested answers on page
9.Error! Bookmark not
defined. of this manual.)
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
d.
LECTURE NOTES
The text uses two examples: service firms such as airlines, rental
car companies, and hotels; and
the Hard Rock Café.
SELF CHECK QUESTIONS (Text page 289)
1.
What are three ways in which marketers can segment
markets?
2.
Why do marketers choose to segment markets?
IV. CONSUMER BEHAVIOR
►
LEARNING OBJECTIVE 3
Explain the process consumers go through when
purchasing products and how consumer markets
differ from business-to-business markets. (Text
pages 290-294)
A. Before you can sell effectively to someone,
you must understand their motivations and
reasons for purchasing a product.
1. The consumer purchase decision process involves:
a. problem recognition;
b. information search;
c. evaluate alternatives;
d. make purchase decision;
e. postpurchase evaluation.
2. Consumer behavior researchers also
study the influences that impact consumer behavior.
a. marketing mix variables (the four
Ps)
b. psychological influences such as
perception and attitudes
c. situational influences such as the
type of purchase and physical surroundings
CHAPTER 9: Marketing: Product and Price
TEXT FIGURE 9.3
Outside Influences on the
Consumer DecisionMaking Process (Box in text
on page 291)
POWERPOINT 9-5
Consumer Behavior
(Refers to text pages 290292)
TEXT REFERENCE
Study Skills: Importance of
Good Communication
Skills
(Box in text on page 291)
An additional exercise and
discussion is available on
page 9.Error! Bookmark
not defined. in this manual.
9.5
LECTURE OUTLINE
LECTURE NOTES
d.
sociocultural influences such as
reference groups and culture
3. Consumer behavior is also influenced
by other factors:
a. Learning involves changes in an
individual’s behavior resulting
from previous experiences and information.
b. A reference group is the group
that an individual uses as a reference point for his or her beliefs,
attitudes, values, or behavior.
c. Culture is the set of values, attitudes, and ways of doing things
that are transmitted from one generation to another in a given society.
d. Subculture is the set of values, attitudes, and ways of doing things
that results from belonging to a
certain group with which one
closely identifies.
e. Cognitive dissonance is the type
of psychological conflict that can
occur after a purchase—such as
the purchaser’s doubts about
whether they got the best product
at the best price.
B. The Business-to-Business Markets
1. Marketers of goods and services to
manufacturers, institutions, commercial operations, and the government
are called B2B marketers.
2. Because business buyers have their
own decision-making process, market9.6
LECTURE LINK 9-1
Retro Merchandise Sells
Wax lips, bubble-gum cigarettes, Slinkies, and Moon
Pies. The toys and treats of
the post-World War II generation are enjoying a revival.
(See complete lecture link on
page 9.Error! Bookmark
not defined. of this manual.)
LECTURE LINK 9-2
Top Ten New Products in
History
Research and development
executives identify the top
ten new products of all time.
(See complete lecture link on
page 9.Error! Bookmark
not defined. of this manual.)
BONUS CASE 9-5
Food Marketing in the
Inner City
This case focuses on how
food marketing in the inner
city is different from that in
suburban neighborhoods.
(See complete case, discussion questions, and suggested
answers on page 9.Error!
Bookmark not defined. of
this manual.)
POWERPOINT 9-6
The Business-to-Business
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
3.
ing strategies are different.
Several factors make business-tobusiness marketing different.
a. Number: There are relatively few
customers compared to the consumer market.
b. Size: Though few in number, industrial customers are relatively
large.
c. Geographically concentrated: B2B
markets tend to be concentrated
in certain areas of the country.
d. Rational: Business buyers are
generally more rational than consumers in their purchase decisions.
e. Direct: B2B sales tend to be direct.
f. Personal selling: There is more
emphasis on personal selling than
in the consumer market.
g. Packaging tends to be more functional in B2B.
SELF CHECK QUESTIONS (Text page 294)
1.
What are the five steps in the consumer decisionmaking process?
2.
Describe a recent purchase and how you went through
this process.
3.
What are some differences between the consumer market and the B2B market?
V. THE 4Ps OF MARKETING: PRODUCT
►
LEARNING OBJECTIVE 4
Describe the various aspects that go into the
product element of marketing’s 4Ps. (Text pages
294-302)
CHAPTER 9: Marketing: Product and Price
LECTURE NOTES
Market (Refers to text pages
292-294)
LECTURE LINK 9-3
DeWalt Identifies its
Target Market
DeWalt Tools discovered
that it was targeting the
wrong market. (See complete
lecture link on page 9.Error!
Bookmark not defined. of
this manual.)
TEXT FIGURE 9.4
Comparing Business-toBusiness and Consumer
Buying Behavior (Box in
text on page 293)
CRITICAL THINKING
EXERCISE 9-2
Consumer or B2B Good?
This exercise asks students to
classify various products and
services as being a consumer
good, a B2B good, or both.
(See complete exercise on
page 9.Error! Bookmark
not defined. of this manual.)
POWERPOINT 9-7
The 4Ps of Marketing:
Product (Refers to text pages 294-296)
9.7
LECTURE OUTLINE
LECTURE NOTES
A. MARKETING MANAGEMENT is the process of overseeing all the aspects of marketing a particular product or service for
the purpose of attracting and retaining customers.
1. The 4Ps are the ingredients that go into a marketing program:
a. Product
b. Price
c. Place
d. Promotion
B. Total Product Offer
1. A customer is not only buying a product or a service, but also purchasing
everything that goes along with it.
2. TOTAL PRODUCT OFFER consists of
everything that consumers evaluate
when deciding whether to buy something.
C. Market Research
1. MARKETING RESEARCH is the
analysis of markets to determine opportunities and challenges, and to find
the information needed to make good
decisions.
a. One goal is to determine exactly
what consumers want and need,
now and in the future.
b. Marketing research is the activity
that gathers the information businesses need to compete effectively.
c. In addition to customers, marketers should pay attention to the
9.8
BONUS INTERNET
EXERCISE 9-1
Comparison Shopping
Online
This Internet exercise directs
students to BizRate.com, a
Web site that lets consumers
compare both product price
and vendor reputation. Students are asked to comparison shop for a digital camera.
(See complete exercise on
page 9.Error! Bookmark
not defined. of this manual.)
TEXT FIGURE 9.5
Potential Components of a
Total Product Offer (Box in
text on page 295)
CRITICAL THINKING
EXERCISE 9-3
Find a Need and Fill It
This exercise asks the student
to look around himself or
herself to identify a need that
is unfilled. (See complete
exercise on page 9.Error!
Bookmark not defined. of
this manual.)
POWERPOINT 9-8
Market Research (Refers to
text pages 296-298)
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
2.
views of employees, shareholders, consumer advocates, and
other stakeholders.
The marketing research process
a. Step 1. Defining the problem and
determining the present situation
b. Step 2. Collecting research data
i. PRIMARY RESEARCH is research that a marketer creates and implements, including focus groups.
ii. A FOCUS GROUP is of a
small group of people who
meet under the direction of a
discussion leader who tries to
discover their opinion about a
product.
iii. SECONDARY RESEARCH is
data already available to the
marketer, such as in government publications and journal
articles.
a. The disadvantage of secondary research is the information is not developed for one marketer’s
purpose.
b. It is, however, much more
inexpensive to conduct
and faster to gather than
primary research.
c. Step 3. Analyzing the research
data
i. The data collected must be
turned into useful information.
CHAPTER 9: Marketing: Product and Price
LECTURE NOTES
TEXT REFERENCE
Career Development:
The Importance of Positive
Attitude
(Box in text on page 295)
An additional exercise and
discussion is available in this
chapter on page 9.Error!
Bookmark not defined..
BONUS INTERNET
EXERCISE 9-2
How Do Nonprofits Market
Themselves on the Internet?
This Internet exercise asks
students to research a nonprofit organization’s Web
site to explore how the organization approaches marketing. (See complete exercise on page 9.Error!
Bookmark not defined. of
this manual.)
CRITICAL THINKING
EXERCISE 9-4
Good to the Last Drop
This exercise involves an inclass product comparison.
Can students identify the
taste of their favorite cola in
a blind taste test? (See complete exercise on page
9.Error! Bookmark not
defined. of this manual.)
9.9
LECTURE OUTLINE
LECTURE NOTES
ii.
Careful, honest interpretation
of the data can reveal specific
marketing challenges.
d. Step 4. Choosing and implementing the best solution.
3. A PRODUCT LINE is a group of products that are physically similar or intended for a similar market.
a. The costs of marketing research
can be spread over an entire
product line.
D. Product Differentiation
1. PRODUCT DIFFERENTIATION is the
creation of real or perceived product
differences.
a. Actual product differences are
sometimes quite small, so marketers must create a unique, attractive image (examples: various
brands of bottled water).
b. Customers develop strong loyalties over perceived differences.
2. Classifying consumer goods and services
a. Convenience goods and services
are products that the consumer
wants to purchase frequently and
with a minimum of effort.
i. Examples: candy, milk,
snacks, gas, and banking
ii. For these, location, brand
awareness, and image are
important for marketers.
iii. Sold in: convenience stores
9.10
POWERPOINT 9-9
Product Differentiation
(Refers to text pages 298300)
LECTURE LINK 9-4
The Mystique of Coca-Cola
A critical element in CocaCola’s success is the aura of
mystery around the product’s
formula. (See complete lecture link on page 9.Error!
Bookmark not defined. of
this manual.)
TEXT FIGURE 9.6
Various Categories of Con-
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
b.
c.
d.
(example: 7-Eleven)
iii. The Internet provides another
level of convenience.
Shopping goods and services are
those products that the consumer
buys only after comparing value,
quality, price, and style from a variety of sellers.
i. Shopping goods and services
are usually sold through
shopping centers where consumers can make comparisons.
ii. Sold in: Sears and Macy’s.
iii. Examples: shoes, appliances,
and auto repair services
Specialty goods and services are
consumer products with unique
characteristics and brand identity.
i. Because these products are
perceived as having no reasonable substitute, the consumer makes a special effort
to buy them.
ii. Examples: specialty foods,
expensive wine, and jewelry
iii. These are often marketed
through specialty magazines.
iv. Interactive web sites make
purchasing specialty goods
more convenient.
Unsought goods and services are
products that consumers are unaware of, haven’t thought of buy-
CHAPTER 9: Marketing: Product and Price
LECTURE NOTES
sumer and Industrial
Goods and Services (Box in
text on page 299)
LECTURE LINK 9-5
Brand Management Icons
The Michelin Man is 75
years old, but he’s not the
oldest brand mascot. (See
complete lecture link on page
9.Error! Bookmark not
9.11
LECTURE OUTLINE
LECTURE NOTES
ing, or find that they need to solve
an unexpected problem.
i. Examples: car towing services, burial services, dental
work
3. An INDUSTRIAL GOOD is a product
which is used to produce or as a component of, other products; sometimes
called business goods or B2B goods.
E. Packaging
1. Packaging plays an important role in
customers’ evaluation of the value
package.
2. Packaging must do the following:
a. Protect the goods inside, stand up
under handling and storage, be
tamperproof, deter theft, and be
easy to open;
b. Attract the buyer’s attention;
c. Describe the contents and give information about the contents;
d. Explain the benefits of the goods
inside;
e. Provide information on warranties,
warnings, and other matters;
f. Give some indication of price, value, and uses.
F. Branding
1. A BRAND is a name and symbol that
identify the product of one seller over
another.
2. BRAND EQUITY is a combination of
factors that people associate with a
given brand name, such as image and
9.12
defined. of this manual.)
POWERPOINT 9-10
Packaging (Refers to text
pages 300-301)
LECTURE LINK 9-6
The 100-Calorie Snack
Attack
Food companies such a Kraft
are introducing individual
100-calorie packages of popular snacks such as Cheetos
and Oreos. (See complete
lecture link on page 9.Error!
Bookmark not defined. of
this manual.)
LECTURE LINK 9-7
The New Barcodes
After years of using a 12digit UPC barcode, U.S.
companies will now be using
the same 13-digit standard
that has long been the
worldwide standard. PPT 911 below shows an example
of the new code. (See complete lecture link on page
9.Error! Bookmark not
defined. of this manual.)
POWERPOINT 9-11
Example of a UPC Barcode
(Refers to text pages 300301)
CRITICAL THINKING
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
perceived quality.
3. BRAND LOYALTY is the extent to
which a customer will choose one
product over another on a continual
basis.
G. Product Development Process
1. The new product develop process includes six steps:
a. idea generation;
b. product screening;
c. product analysis;
e. development;
f. testing;
g. commercialization.
2. Idea generation: ideas come from employees, suppliers, and others.
3. Product screening, looking at the new
ideas in terms of profit potential and
marketability.
4. Product analysis: If the costs of making the product versus the sales forecasts are attractive, the product goes
into the development and testing
stage, then is commercialized.
5. Products that don’t meet the established criteria are abandoned.
SELF CHECK QUESTIONS (Text page 302)
1.
2.
What are the 4Ps?
What are four classifications of product?
3.
Describe the difference between the two types of market research.
CHAPTER 9: Marketing: Product and Price
LECTURE NOTES
EXERCISE 9-5
Choosing a Brand Name
This gives students a chance
to create unique brand names
for several consumer products. (See complete exercise
on page 9.Error! Bookmark
not defined. of this manual.)
BONUS INTERNET
EXERCISE 9-3
Most Valuable Global
Brands
Interbrand, a research company, annually ranks the
most valuable brands in the
world. This exercise asks
students to research the current year’s ranking. (See
complete exercise on page
9.Error! Bookmark not
defined. of this manual.)
POWERPOINT 9-12
Product Development Process (Refers to text pages
301-302)
TEXT REFERENCE
Ethical Challenge: Celebrity Endorsements
(Box in text on page 302)
Many producers use brand
association to sell their products, often using celebrity
endorsements. If young people are lured into trying inappropriate things, who is
responsible?
LECTURE LINK 9-8
The DVD War
The conflict over video formats for consumer video
players is heating up. Half
the movie companies are
adopting the HD DVD format. The other half is adopt-
9.13
LECTURE OUTLINE
LECTURE NOTES
ing the incompatible Blu-Ray
format. (See complete lecture
link on page 9.Error!
Bookmark not defined. of
this manual.)
TEXT FIGURE 9.7
The New-Product Development Process (Box in text
on page 305)
VI. THE 4Ps OF MARKETING
►
LEARNING OBJECTIVE 5
Describe the different types of pricing that
should be considered in marketing products.
(Text pages 302-311
A. The firm may have several objectives in
mind when setting a pricing strategy.
1. Pricing objectives include:
a. Achieving a target return on investment or profit. Most first seek
to maximize profit.
b. Building traffic.
i. Low prices on certain products (lost-leaders) can bring
customers into your store.
ii. LOSS LEADERS: When a
store advertises certain products at or below cost to attract
people to the store.
c. Achieving greater market share.
Price can be used to capture and
hold market share.
i. Auto companies offer low finance rates, low lease rates,
or rebates.
ii. Market share can be defined
9.14
TEXT REFERENCE
Thinking Critically: Avoid
the Black Hole of Business
Start-Ups
(Box in text on page 304)
No one deliberately sets out
to fail in business, but four
out of every ten start-ups fail
in the first year, six within
the first five years. Many of
the missteps and disasters
that befall a new business are
avoidable.
POWERPOINT 9-13
The 4Ps of Marketing:
Price (Refers to text pages
302-303)
TEXT FIGURE 9.8
Sample Strategies Followed
During the Product Life
Cycle (Box in text on page
305)
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
as the proportion of sales
made by a company vs. the
total number of sales for that
particular product.
d. Creating an image. A high price
may present an image of status.
e. Furthering social objectives. A
product may be priced low so
more people can afford to buy it.
2. A company’s short-term pricing objectives may differ from its long-term objectives.
a. Pricing objectives are influenced
by product design, packaging,
branding, distribution, and promotion.
b. A product’s price and cost to produce aren’t always related.
B. Product Life Cycle
1. Most products go though four stages:
introduction, growth, maturity, and decline.
a. The PRODUCT LIFE CYCLE is a
theoretical model of what happens
to sales and profits for a product
class over time.
b. Not all products follow the life cycle, and some brands may act differently.
c. Knowing what stage in the cycle a
product is in helps marketing
managers to decide when strategic changes are needed.
2. The life cycle affects pricing, because
CHAPTER 9: Marketing: Product and Price
LECTURE NOTES
TEXT FIGURE 9.9
Sales and Profits During
the Product Life Cycle (Box
in text on page 307)
POWERPOINT 9-14
Product Life Cycle
(Refers to text pages 303-307
9.15
LECTURE OUTLINE
LECTURE NOTES
the longer a product stays in the life
cycle, the more profit will be made.
a. The higher the demand for a
product, the higher the price that
can be charged.
b. A fad product must be priced
carefully because it goes through
the life cycle quickly.
C. Cost-Based Pricing
1. Producers often use cost as a primary
basis for setting price.
2. In the long run, the market—not the
producer—determines what the price
will be.
D. Demand-Based Pricing
1. TARGET COSTING means to price
based upon demand.
2. A product is designed so it satisfies
needs and meets the profit margins
desired by the company.
3. Marketers estimate the selling price
that people are willing to pay, then
subtract the desired profit margin.
E. Competition-Based Pricing
1. Competition-based pricing is a strategy based on what other competitors
are doing; the price can be set at,
above, or below competitor’s prices.
2. PRICE LEADERSHIP is the procedure
by which one or more dominant firms
set the pricing practices that all competitors in an industry follow.
F. Break-Even Analysis
1. Break-even analysis is the process
9.16
TEXT REFERENCE
Career Spotlight:
So, You Want to Be … in
Marketing (Box in text on
page 310)
POWERPOINT 9-15
Demand-Based Pricing
(Refers to text pages 307308)
TEXT REFERENCE
Real World Business Apps
(Box in text on page 312)
Ariel has decided to set her
price high, using a skimming
strategy, to maximize profit.
She has designed an attractive package and has chosen
a target market: men and
women between 18 and 40.
CRITICAL THINKING
EXERCISE 9-6
Break-Even Analysis
This exercise guides the student through the analysis
required to determine a res-
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
2.
3.
used to determine profitability at various levels of sales.
The break-even point (BEP) is the
point where revenues from sales equal
all costs.
BEP is calculated:
Total fixed cost (FC)
.
Price of 1 unit — Variable cost of 1 unit
You don’t make a profit until you sell
more than the breakeven sales volume; beyond that you make a profit.
G. Other Pricing Strategies
1. Pricing in the introductory stage is critical.
2. One approach is to use the pricing
strategy matrix.
a. Determine if the product has high,
medium, or low value to the customer.
b. The price charged can also be
high, medium, or low.
c. The place where the two meet
shows the direction the marketer
should go.
3. Pricing strategies for specific products:
a. A SKIMMING PRICE STRATEGY
is a pricing strategy in which a
new product is priced high to
make optimum profit while there is
little competition; however, it invites competitors.
b. A PENETRATION STRATEGY is
a pricing strategy in which a product is priced low to attract more
LECTURE NOTES
taurant’s break-even point.
Use PPT 9-16 below with
this exercise. (See complete
exercise on page 9.Error!
Bookmark not defined. of
this manual.)
POWERPOINT 9-16
Breakeven Analysis
(Refers to text pages 309-311
and CTE 9-6 above)
4.
CHAPTER 9: Marketing: Product and Price
TEXT FIGURE 9.10
The Pricing Strategy Matrix (Box in text on page
309)
POWERPOINT 9-17
Other Pricing Strategies
(Refers to text pages 309311)
9.17
LECTURE OUTLINE
4.
9.18
LECTURE NOTES
customers and discourage competitors.
i. It allows a company to capture market share quickly.
ii. This strategy is effective for
small businesses.
Pricing strategies used by retailers:
a. EVERYDAY LOW PRICING
(EDLP) is a pricing strategy where
prices are set lower than other
stores and there are no special
sales (example: Wal-Mart).
b. The HIGH-LOW PRICING
STRATEGY has regular prices
that are higher than at stores using EDLP, but they have many
special sales in which the prices
are lower (example: department
stores).
c. Consumers can use the Internet
to find lower prices, making it
harder to use this strategy.
d. Some retailers chose the products
they carry based on price (example: stores that sell only products
priced at $1).
e. Retailers also use BUNDLING,
grouping two or more products together and pricing them as a unit.
f. PSYCHOLOGICAL PRICING
(ODD PRICING) is pricing goods
and services at price points that
make them appear less expensive
than they are (example: gasoline
priced at $2.99 instead of $3.00).
BONUS CASE 9-6
Everyday Low Pricing
(EDLP)
Retailers such as Wal-Mart
and Kmart have had great
success using everyday low
pricing (EDLP). (See complete case, discussion questions, and suggested answers
on page 9.Error! Bookmark
not defined. of this manual.)
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
LECTURE OUTLINE
LECTURE NOTES
H. Many factors affect price and must be considered.
SELF CHECK QUESTIONS (Text page 311)
1.
What are three objectives that might be used when setting pricing strategies?
2.
Discuss three types of pricing strategies which might be
used in marketing.
VII. SUMMARY
CHAPTER 9: Marketing: Product and Price
9.19