LSUS Chen- MBA 706 Module 4
answers
Cost reductions✔✔Products are modified to provide similar performance but at a
lower cost:
ex: iphone XS vs Iphone XR
Price✔✔Pricing decisions are hard to make due to the complexity of interaction
among consumers, competitors, and the distribution network: and decisions are
made quickly without testing
- usually there is a large and aggressive company who determines the prices from
the industry, and almost all other companies are obliged to follow, except a few niche
companies
Pricing strategy✔✔Price takers:
- follow the prices set by other firms
Price makers:
- Possess the market power to determine the levels and patterns of price that others
follow
Meeting or following competition:✔✔Follow competitor's prices until establishing a
good reputation
Single segment concentration✔✔- firms focus on a single segment
- very high-risk strategy, but usually works well for small companies
- this type of concentrated marketing efforts can develop a strong market position (
brand image of specialist)
Survival✔✔Prices are reduced to below cost in order to maintain a sufficient cash
flow
Return on Investment✔✔Prices are set to achieve a predetermined level of return on
investment
Market stabilization✔✔Firms set prices to minimize the possibility of market leader
retaliation and to ensure market stability
Maintenance and improvement of market position✔✔Prices are set to increase
market share and minimize the possibility of price wars
Pricing to reflect product differentiation✔✔Prices are set differently for each market
segment and to create different perceptions of their product's value
ex: car manufacturers
Market skimming✔✔Firms enter the market with a high price nd gradually lowers the
price to gain more customer's
ex: high-tech products
, Market penetration✔✔Prices are set low to generate high sales revenue and keep
competitors away
ex: Japanese car manufacturers selling low-priced but reliable cars in US during 60s-
70s
Early cash recovery✔✔Prices are set to generate a high cash flow to solve problems
of liquidity
Discouraging others from entering the market:✔✔Prices are set low as a barrier to
entry which also signals the possibility of price war
Place: Channel management - key decision areas✔✔- formulate channel strategy
- design channel structure
- select channel members
- motivate channel members
- coordinate channel strategy with the marketing mix
- evaluate channel member performance
Formulate channel strategy✔✔- objectives: how, when, and where the company
offering should be made available to the target markets
- importance of a channel strategy depends on whether:
::distribution is important to target market
::distribution can provide a differential advantage over competitors
;; Distribution may become a competitive vulnerability
;; Channel coordination may become a competitive advantage
Design Channel Structure: 3 channel options✔✔- Direct marketing
- sales force
- intermediary marketing channel
Intermediary Marketing channel✔✔- merchants
- agents
-Facilitators
ex: P&G
Channel Management Design Channel structure (3 strategies)✔✔- Intensive
distribution
- Selective distribution
- Exclusive distribution
Intensive distribution:✔✔used for products of high value, low value, mass demand
Ex: soft drinks
Selective distribution✔✔Used for consumer durables: consumers will usually
"compare shopping" ex: Home appliances
answers
Cost reductions✔✔Products are modified to provide similar performance but at a
lower cost:
ex: iphone XS vs Iphone XR
Price✔✔Pricing decisions are hard to make due to the complexity of interaction
among consumers, competitors, and the distribution network: and decisions are
made quickly without testing
- usually there is a large and aggressive company who determines the prices from
the industry, and almost all other companies are obliged to follow, except a few niche
companies
Pricing strategy✔✔Price takers:
- follow the prices set by other firms
Price makers:
- Possess the market power to determine the levels and patterns of price that others
follow
Meeting or following competition:✔✔Follow competitor's prices until establishing a
good reputation
Single segment concentration✔✔- firms focus on a single segment
- very high-risk strategy, but usually works well for small companies
- this type of concentrated marketing efforts can develop a strong market position (
brand image of specialist)
Survival✔✔Prices are reduced to below cost in order to maintain a sufficient cash
flow
Return on Investment✔✔Prices are set to achieve a predetermined level of return on
investment
Market stabilization✔✔Firms set prices to minimize the possibility of market leader
retaliation and to ensure market stability
Maintenance and improvement of market position✔✔Prices are set to increase
market share and minimize the possibility of price wars
Pricing to reflect product differentiation✔✔Prices are set differently for each market
segment and to create different perceptions of their product's value
ex: car manufacturers
Market skimming✔✔Firms enter the market with a high price nd gradually lowers the
price to gain more customer's
ex: high-tech products
, Market penetration✔✔Prices are set low to generate high sales revenue and keep
competitors away
ex: Japanese car manufacturers selling low-priced but reliable cars in US during 60s-
70s
Early cash recovery✔✔Prices are set to generate a high cash flow to solve problems
of liquidity
Discouraging others from entering the market:✔✔Prices are set low as a barrier to
entry which also signals the possibility of price war
Place: Channel management - key decision areas✔✔- formulate channel strategy
- design channel structure
- select channel members
- motivate channel members
- coordinate channel strategy with the marketing mix
- evaluate channel member performance
Formulate channel strategy✔✔- objectives: how, when, and where the company
offering should be made available to the target markets
- importance of a channel strategy depends on whether:
::distribution is important to target market
::distribution can provide a differential advantage over competitors
;; Distribution may become a competitive vulnerability
;; Channel coordination may become a competitive advantage
Design Channel Structure: 3 channel options✔✔- Direct marketing
- sales force
- intermediary marketing channel
Intermediary Marketing channel✔✔- merchants
- agents
-Facilitators
ex: P&G
Channel Management Design Channel structure (3 strategies)✔✔- Intensive
distribution
- Selective distribution
- Exclusive distribution
Intensive distribution:✔✔used for products of high value, low value, mass demand
Ex: soft drinks
Selective distribution✔✔Used for consumer durables: consumers will usually
"compare shopping" ex: Home appliances
