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Test 3 Study Guide Chapter 10 1. Systematic Nature of Research 2. Primary vs.

Secondary Data Advantages And Disadvantages of Each a. Secondary data- are pieces of information that have been collected prior to the start of the focal research project. Secondary data include both external and internal data sources. i. Advantages: 1. Saves time in collecting data because they are readily available 2. Free or inexpensive (except for syndicated data) ii. Disadvantages: 1. May not be precisely relevant to information needs 2. Info may not be timely 3. Sources may not be original, and therefore usefulness is an issue 4. Methodologies for collecting data may not be appropriate 5. Data sources may be biased iii. External Secondary Data 1. Syndicated data- Data available for a fee from commercial research firms such as Information Resources Inc. (IRI), National Purchase Diary Panel, and ACNielsen. 2. Panel research- information collected from a group of consumers, organized into panels, over time a. Panel research focuses on the total weekly consumption by a particular person or household. 3. Scanner research- A type of syndicated external secondary data used in quantitative research that is obtained from scanner readings of UPC codes at check-out counters. a. Scanner research typically focuses on weekly consumption of a particular product at a given unit of analysis (e.g., individual store, chain, region) iv. Internal Secondary Data 1. Data Warehouse- Large computer files that store millions and even billions of pieces of individual data. 2. Data Mining- The use of a variety of statistical analysis tools to uncover previously unknown patterns in the data stored in databases or relationships among variables. b. Primary data- are those data collected to address specific research needs. Some common primary data collection methods include focus groups, in-depth interviews, and surveys. i. Advantages: 1. Specific to the immediate data needs and topic at hand 2. Offers behavioral insight generally not available from secondary research ii. Disadvantages: 1. Costly 2. Time consuming 3. Requires more sophisticated training and experience to design study and collect data iii. Two Methods in Collecting Primary Data 1. Qualitative Research- Informal research methods, including observation, following social media sites, in-depth interviews, focus groups, and projective techniques. a. Exploratory b. Observations- entails examining purchase and consumption behaviors through personal or video camera scrutiny c. Social Media- used to create sentiment mining i. Data gathered by evaluating customer comments posted through social media sites such as Facebook and Twitter. d. In-depth interview- trained researchers ask questions, listen to and record the answers, and then pose additional questions to clarify or expand on a particular issue. e. Focus Group Interviews- a small group of persons (usually 8 to 12) come together for an intensive discussion about a particular topic. Using an unstructured method of inquiry, a

trained moderator guides the conversation, according to a predetermined, general outline of topics of interest. 2. Quantitative Research- Structured responses that can be statistically tested to confirm insights and hypotheses generated via qualitative research or secondary data. a. Conclusive b. Survey- a systematic means of collecting information from people using a questionnaire i. Questionnaire- a form that features a set of questions designed to gather information from respondents and thereby accomplish the researchers' objectives. 1. Unstructured questions- are open ended and allow respondents to answer in their own words. 2. Structured questions- thus are closed-ended questions for which a discrete set of response alternatives, or specific answers, is provided for respondents to evaluate c. Panel and Scanner research can be either secondary or primary d. Experimental research (an experiment) - is a type of quantitative research that systematically manipulates one or more variables to determine which variables have a causal effect on other variables. 3. Errors In International Research a. They select domestic company that have no international experience b. Try to rigidly standardized methods across countries c. Interviewing in English around the world d. Implementing inappropriate sampling techniques e. Failing to communicate effectively with local research companies f. Lack of consideration with language g. Misinterpreting data across countries h. Failing to understand preferences of foreign researchers Chapter 11 1. Types of Products a. Specialty- those for which customers express such a strong preference that they will expend considerable effort to search for the best suppliers b. Shopping- products or services for which consumers will spend a fair amount of time comparing alternatives, such as furniture, apparel, fragrances, appliances, and travel alternatives c. Convenience- products or services for which the consumer is not willing to spend any effort to evaluate prior to purchase d. Unsought- products consumers either do not normally think of buying or do not know about at all i. Because of their very nature, these products require lots of marketing effort and various forms of promotion 2. Product Mix and Product Lines a. Product Mix- the complete set of all products and services offered by a firm b. Product Lines- groups of associated items that consumers tend to use together or think of as part of a group of similar products or services c. Breadth- for a product mix represents a count of the number of product lines offered by firm d. Depth- equals the number of products within a product line e. Too much breadth in the product mix becomes costly to maintain, and too many brands may weaken the firm's reputation 3. Branding Key Features a. Branding- anything done to a product to distinguish it from competitors b. Brand Elements i. Brand Name- Spoken component of branding ii. URLs- location of pages on the Internet, which often substitutes for the firms name...Amazon, Yahoo!

iii. Logos and Symbols- logos are visual branding elements tht stand for corporate names or trademarks...symbols are logos without words iv. Characters- brand symbols that could be human, animal, or animated v. Slogans- short phrases used to describe the brand or persuade consumers about some characteristics of the brand vi. Jingles/Sounds- audio messages about the brand that are composed of words or distinctive music c. Value of Branding for the Customer i. Facilitate purchasing ii. Establish loyalty iii. Protect from competition iv. Reduce marketing costs v. Are assets... can be legally protected vi. Impact market value 4. Brand Equity- the set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or service. a. Four Aspects of a Brand to Determine Equity i. Brand Awareness- measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion about it 1. Marketers create brand awareness through repeated exposures of the various brand elements (brand name, logo, symbol, character, packaging, or slogan) in the firm's communications to consumers through advertising, publicity, or other methods ii. Perceived Value- of a brand is the relationship between a product's or service's benefits and its cost iii. Brand Loyalty- occurs when a consumer buys the same brands product repeatedly over time rather than buy from multiple suppliers within the same category 1. Rewards and customer relationship management (CRM) 2. Consumers are often less sensitive to price 3. Marketing costs are much lower 4. Firm insulated from the competition iv. Brand associations- reflect the mental links that consumers make between a brand and its key product attributes, such as a logo, slogan, or famous personality. These brand associations often result from a firm's advertising and promotional efforts. 5. Brand Ownership a. Manufacturer Brands/National Brands- owned and managed by the manufacturer i. manufacturer develops the merchandise, produces it to ensure consistent quality, and invests in a marketing program to establish an appealing brand image ii. By owning their brands, manufacturers retain more control over their marketing strategy, are able to choose the appropriate market segments and positioning for the brand, and can build the brand and thereby create their own brand equity. b. Retailer/Store Brands/Private-Label Brands- products developed by retailers i. In some cases, retailers manufacture their own products, whereas in other cases they develop the design and specifications for their retailer/store brands and then contract with manufacturers to produce those products. ii. Some national brand manufacturers work with retailers to develop a special version of its standard merchandise offering to be sold exclusively by the retailer iii. Premium- designed to go head to head with primary brands of competitors iv. Generic- unbranded, cheap, usually in commodities and pharmaceuticals v. Copycat- store has its own brand but looks just like national brand in packaging and product...placed next to national brand, so customers will compare store and national brand. vi. Exclusive Co-branded- big name designer products are only available thru specific stores...cant buy them anywhere else 6. Brand Naming Strategies

a. When all products are sold under one family brand, the individual brands benefit from the overall brand awareness associated with the family name b. A firm can use individual brand names for each of its products. 7. Brand Extensions- brand extension refers to the use of the same brand name in a different product line. a. It is an increase in the product mix's breadth b. Line extension- is the use of the same brand name within the same product line, and represents an increase in a product line's depth. c. the firm can spend less in developing consumer brand awareness and brand associations for the new product d. If either the original brand or the brand extension has strong consumer acceptance, that perception will carry over to the other product. e. when brand extensions are used for complementary products, a synergy exists between the two products that can increase overall sales f. Brand Dilution-occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold i. Marketers should evaluate the fit between the product class of the core brand and that of the extension. If the fit between the product categories is high, consumers will consider the extension credible, and the brand association will be stronger for the extension ii. Firms should evaluate consumer perceptions of the attributes of the core brand and seek out similar attributes for the extension because brand-specific associations are very important for extensions iii. Firms should refrain from extending the brand name to too many products and product categories to avoid diluting the brand and damaging brand equity. iv. Firms should consider whether the brand extension will be distanced from the core brand, especially if the firm wants to use some but not all of the existing brand associations 8. Co-Branding- the practice of marketing two or more brands together, on the same package, promotion, or store. a. Co-branding can enhance consumers' perceptions of product quality by signaling unobservable product quality through links between the firm's brand and a well-known quality brand b. creates risks, especially when the customers of each of the brands turn out to be vastly different c. May also fail when there are disputes or conflicts of interest between the co-brands. 9. Brand Licensing- is a contractual arrangement between firms, whereby one firm allows another to use its brand name, logo, symbols, and/or characters in exchange for a negotiated fee a. Licensing is an effective form of attracting visibility for the brand and thereby building brand equity while also generating additional revenue. b. For the licensor, the major risk is the dilution of its brand equity through overexposure of the brand, especially if the brand name and characters are used inappropriately. 10. Repositioning- refers to a strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences a. Firms often need to spend tremendous amounts of money to make tangible changes to the product and packages, as well as intangible changes to the brand's image through various forms of promotion. b. These costs may not be recovered if the repositioned brand and messages are not credible to the consumer or if the firm has mistaken a fad for a long-term market trend. 11. Packaging And Labeling a. Primary Package- consumer uses, such as the toothpaste tube, from which he or she typically seeks convenience in terms of storage, use, and consumption b. Secondary Package- wrapper or exterior carton that contains the primary package and provides the UPC label used by retail scanners; can contain additional product info that may not be available on the primary package c. Subtle way of repositioning the product, make the product more ecological, promotional tool, helps with attraction, display purposes, shipping purpose, suppliers save costs d. Labels- provide info the consumer needs for his or her purchase decision and consumption of the product...important element of branding and can be used for promotion

i. Communication tool ii. The information required on them must comply with general and industry-specific laws and regulations, including the constituents or ingredients contained in the product, where the product was made, directions for use, and/or safety precautions. Chapter 12 1. 5 Types Of New Products (High Risk to Low Risk) a. Pioneer/ new to the world- New product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market; also called breakthroughs (Ex: Kleenex, Band-Aid, Q-tips) i. Pioneers have the advantage of being first movers; as the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead b. New Category Entry- somebodys already making it but first for the company c. Editions to Product Line- Ex: cherry coke d. Product Improvement- same but justifiably different e. Product Repositioning- same product but whole new use...doesnt need to much money 2. Benefits Of New Products a. Changing Customer Needs b. Market Saturation- longer a product is in the marketplace, market will become saturated...without new products the value of the firm will decline...can offer opportunities for a company that is willing to adopt a new process or mentality c. Managing Risk Through Diversity d. Fashion Cycles e. Improving Business Relationships 3. Diffusion Of Innovation- the process by which the use of an innovation spreads throughout a market group, over time and across various categories of adopters a. Innovators- those buyers who want to be the first to have the new product or service. i. Enjoys taking risks and are highly knowledgeable...keeps themselves well informed about the product category ii. Helps new products gain market acceptance b. Early Adopters- The second group of consumers in the diffusion of innovation model, after innovators,to use a product or service innovation; generally don't like to take as much risk as innovators but instead wait and purchase the product after careful review. i. only after reading the innovators' complaints and praises do they decide whether the new technology is worth the cost ii. tend to enjoy novelty and often are regarded as the opinion leaders for particular product categories iii. Spreads the word. 1. As a result, early adopters are crucial for bringing the other three buyer categories to the market. 2. If the early adopter group is relatively small, the number of people who ultimately adopt the innovation likely will also be small c. Early Majority- represents approximately 34 percent of the population; members don't like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them i. if the group never becomes large enough, the product typically fails ii. When early majority customers enter the market, the number of competitors in the marketplace usually also has reached its peak, so these buyers have many different price and quality choices d. Late Majority- The last group of buyers to enter a new product market; when they do, the product has achieved its full market potential. i. When they come into the market, sales tend to level off or may be in decline





e. Laggards- consumers who like to avoid change and rely on traditional products until they are no longer available 5 Factors Influencing The Rate Of Adoption a. Relative Advantage- If a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick b. Compatibility- A diffusion process may be faster or slower, depending on various consumer features, including international cultural consistent it is with lifestyle if not the slower to adopt c. Observability- When products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process. d. Complexity and Trialability- Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try. Sources For New Product Ideas a. Internal Research and Development- costs are high but revenue from the new product should cover generally are considered continuous investments, so firms may lose money on a few new products. In the long run though, these firms are betting that a few extremely successful new products, often known as blockbusters, can generate enough revenues and profits to cover the losses from other introductions that might not fare so well. b. Research and Development Consortia- groups of other firms and institutions, possibly including government and educational institutions, to explore new ideas or obtain solutions for developing new products. Here, the R&D investments come from the group as a whole, and the participating firms and institutions share the results. c. Licensing- For many other scientific and technological products, firms buy the rights to use the technology or ideas from other research-intensive firms through a licensing agreement. This approach saves the high costs of in-house R&D, but it means that the firm is banking on a solution that already exists but has not been marketed. d. Brainstorming- Firms often engage in brainstorming sessions during which a group works together to generate ideas. One of the key characteristics of a brainstorming session is that no idea can be immediately accepted or the end members vote and the idea with highest goes to the next step e. Outsourcing- gets help from other firms that help generate new product ideas f. Competitors Products- A new product entry by a competitor may trigger a market opportunity for a firm, which can use reverse engineering to understand the competitor's product and then bring an improved version to market. i. Reverse engineering involves taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitor's patents, if any exist ii. This copycat approach to new product development is widespread and practiced by even the most research-intensive firms. 1. Copycat consumer goods show up in apparel, grocery and drugstore products, as well as in technologically more complex products like automobiles and computers, g. Customer Input- joint effort between the selling firm and the customer...listening to customers i. Because customers for B2B products are relatively few, firms can follow their use of products closely and solicit suggestions and ideas to improve those products either by using a formal approach, such as focus groups, interviews, or surveys, or through more informal discussions. Concept Testing- the process in which a concept statement is presented to potential buyers or users to obtain their reaction...reactions determine whether or not it goes forward...triggers the marketing research process a. the expected frequency of purchase, how much customers would buy, whether they would buy it for themselves or as a gift, when they would buy, and whether the price information (if provided) indicates a good value Product Development/Design- process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a products form and features or a services features

a. Prototype- first physical form or service description of a new product, still in rough form, that has the same properties as a new product but is produced through different manufacturing processed b. Alpha Testing- firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended...occurs in R&D department c. Beta Testing- uses potential consumers, who examine the prototype in a real use setting to determine its functionality, performance, potential problems 8. Market Testing- test the market to make sure the product will sell in that market a. Premarket Tests- Conducted before a product or service is brought to market to determine how many customers will try and then continue to use it. i. Customers exposed, customers surveyed, firm makes decision b. Test Marketing- Introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch. i. Uses all the elements of the marketing mix: It includes promotions like advertising and coupons, just as if the products were being introduced nationally, and the product appears in targeted retail outlets, with appropriate pricing. ii. Test marketing costs more and takes longer than premarket tests, which may provide an advantage to competitors that could get a similar or better product to market first without test marketing. 9. Product Life Cycle- Defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offer marketers a starting point for their strategy planning. a. Introduction- Stage of the product life cycle when innovators start buying the product. i. Initial losses due to high startup costs, low levels of sales revenue, if successful may see profits at the end of this stage, low competition b. Growth- Stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category. i. More competition and versions of product, rapid growth of sales, market becomes more segmented, consumer preferences vary causing potential for new markets or uses for product, profits rise, some firms fall out at this stage, early majority c. Maturity- Stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them. i. Late majority adopts product, intense competition, marketing costs increase, price falls so intense competition on price, market is saturated, profits starts to decrease d. Decline- Stage of the product life cycle when sales decline and the product eventually exits the market. i. Laggards adopt, could be due to seasonal or economical change, 3 Options: maintain production and advertisement, harvest product (continue producing but do not invest in it, let is sell itself without promotions), or get rid of it divest and start another product Chapter 13 1. Service-Product Continuum

2. US Dependence On Service, Economic Importance Of Service (4 Areas) a. Generally less expensive for firms to manufacture their products in less developed countries (outsourcing) b. People place a high value on convenience and leisure c. People are demanding more specialized services such as personal trainers, plumbers, lawyers, etc d. Aging population require more services 3. Differences Between Services And Goods a. Intangible- they cannot be touched, tasted, or seen like a pure product can b. Inseparable- it is produced and consumed at the same time...service and consumption are inseparable c. Heterogeneous- variability in the services quality

d. Perishable- cannot be stored for use in the future Chapter 14 1. Price- the overall sacrifice a consumer is willing to make to acquire a specific product a. Includes monetary and nonmonetary components b. Quality of product c. Does not create any costs so very important out of 4 Ps 2. Price And Value a. Relationship b/w benefits and costs 3. 5 Cs Of Pricing a. Company Objectives i. Profit Orientation- implemented by focusing on target profit pricing, maximizing profits, or target return pricing ii. Sales Orientation- increasing sales will help the firm more than increasing profits...setting prices low to gain more sales 1. A firm may set low prices to discourage new firms from entering the market, encourage current firms to leave the market, and/or take market share away from competitorsall to gain overall market share 2. Premium Pricing- firm deliberately prices a product above the prices set for competing products to capture those who always shop for the best or for whom price dont matter. iii. Competitor Orientation- the firm should measure itself primarily against its competition 1. Competitive parity- set prices that are similar to those of their major competitors 2. Status Quo Pricing- changes prices only to meet those of the competition iv. Customer Orientation- firm sets its pricing strategy based on how it can add value to its products/ services. 1. Targets a market segment of consumers who highly value a particular product benefit and set prices relatively high ( premium pricing) b. Customers i. Demand Curve- shows how many units of a product consumers will demand during a specific period of time at different prices 1. downward sloping curve happens when demand increases as price decreases 2. Not all follow downward sloping curve a. Prestige products- consumers purchase for their status rather than functionality...demand increases as price increases to a point but after that point demand decreases as price increases ii. Price Elasticity of Demand- measures how changes in a price affect the quantity of the product demanded...ration of the percentage change in quantity demanded to the percentage change in price 1. Elastic- relatively small changes in price will generate fairly large changes in the quantity demanded, so if a firm is trying to increase its sales, it can do so by lowering prices a. > 1 b. If a product is expensive, high priced, or has a substitute, then it likely has elastic demand 2. Inelastic- relatively small changes in price will not generate large changes in the quantity demanded. a. < 1 b. If a product is a necessity to life, has a low price, or its a habitual product, then it has inelastic demand. iii. Factors Influencing Price Elasticity of Demand 1. Income Effect- the change in the quantity of a product demanded by consumers due to a change in their income 2. Substitution Effect- the consumers ability to substitute other products for the focal brand a. Greater the availability of a substitute product, the higher the price elasticity of demand for any given product will be b. Substitute Product- changes in demand negatively related

3. Cross- Price Elasticity- percentage change in the quantity of Product A demanded compared with percentage change in price in Product B a. Complementary Products- products whose demands are positively related, such that they rise and fall together c. Costs i. Fixed Costs- costs that remain constant regardless of any changes in the volume of production ii. Variable Costs- costs, primarily labor and materials, that vary with production volume iii. Total Costs- sum of variable and fixed costs iv. Break-even Analysis- examine the relationship among cost, price, revenue, and profit over different levels of production and sales 1. Break-even Point- number of units sold generates just enough revenue to equal the total costs a. Profits are zero d. Competition i. Less Price Competition 1. Monopoly- one firm controls market 2. Monopolistic- many firms selling differentiated products at different prices ii. More Price Competition 1. Oligopoly- a handful of firms control the market 2. Pure Competition- many firms selling commodities for the same prices e. Channel Members i. Manufacturers, wholesalers, retailers can have different perspectives when it comes to pricing ii. Manufacturers must protect against gray market transactions 1. Gray Market- employs irregular but not necessarily illegal methods; it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer 2. To discourage gray market transactions, manufacturers will not honor warranties if the product was purchased from an unauthorized dealer 4. Keystoning- A pricing method of marking merchandise for resell to an amount that is double the wholesale price. Chapter 15 1. Methods that Help Develop Pricing Strategies a. Cost-Based- determines the final price to charge by starting with the cost. Relevant costs (e.g., fixed, variable, overhead) and a profit are added. Then this total amount is divided by the total demand to arrive at a cost-plus price. i. Does not recognize the role that consumers or competitors prices play in the marketplace ii. All cost should be calculated on a per unit basis iii. Assumes that these costs will not vary much for different levels of production iv. Set on basis of estimates b. Competitor-Based- pricing below, at, or above competitors offerings i. Set prices to reflect the way they want consumers to interpret their own prices, relative to competitors offerings c. Value-Based focuses on the overall value of the product offering as perceived by consumers, who determine value by comparing the benefits they expect the product to deliver with the sacrifice they will need to make to acquire product i. Improvement Value Method ii. Cost of Ownership Method 2. Pricing Strategies a. Everyday Low Pricing (EDLP)- used to emphasize the continuity of their retail prices at a level somewhere b/w the regular, nonsale price and the deep- discount sale prices their competitors may offer i. Reduces consumers search costs, EDLP adds value b/c time is saved from not looking for low prices

b. High/Low Pricing- relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases i. Provides the thrill of the chase for the lowest price ii. Attracts those who are not price sensitive and willing to pay the high price and more pricesensitive customers who wait for the low sale price iii. get them while they last atmosphere iv. Reference Prices- price against which buyers compare the actual selling price of the product an that facilitates their evaluation process 3. New Product Pricing Strategies a. Market Penetration- set the initial price low for the introduction of the new product or service i. Objective is to build sales, market share, and profits quickly ii. Experience curve affect- drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in prices iii. Firm must be able to keep up with demand iv. Low prices does not signal high quality v. Firms should avoid a penetration pricing strategy if some segments of the market are willing to pay more for the product b. Price Skimming- selling a new product at a high price that innovators and early adopters are willing to pay in order to obtain it; then, when sales begin to slow down, lowers prices to capture the next most price sensitive segment i. Product must be perceived breaking new ground in some way ii. Signals high quality iii. Helps earn some of high R&D costs iv. Tests consumers price sensitivity v. Competitors cannot be able to enter the market easily or price competition will lower prices vi. High unit costs, having to lower the price as demands wanes, margins suffer, customers who purchase earlier will be irritated when prices fall 4. Pricing Tactics Aimed at Consumers a. Markdowns- reductions retailers take on the initial selling price of the product or service i. Gets rid of slow moving merchandise, sell seasonal items after season, and match competitors prices on specific merchandise ii. Can increase traffic into the store b. Quantity Discounts for Consumers i. Size discount-The most common implementation of a quantity discount at the consumer level; the larger the quantity bought, the less the cost per unit (e.g., per ounce). c. Seasonal Discounts- Pricing tactic of offering an additional reduction as an incentive to retailers to order merchandise in advance of the normal buying season. d. Coupons- Provides a stated discount to consumers on the final selling price of a specific item; the retailer handles the discount. e. Rebates- A consumer discount in which a portion of the purchase price is returned to the buyer in cash; the manufacturer, not the retailer, issues the refund. f. Leasing- A written agreement under which the owner of an item or property allows its use for a specified period of time in exchange for a fee. g. Price Bundling- Consumer pricing tactic of selling more than one product for a single, lower price than what the items would cost sold separately; can be used to sell slow-moving items, to encourage customers to stock up so they won't purchase competing brands, to encourage trial of a new product, or to provide an incentive to purchase a less desirable product or service to obtain a more desirable one in the same bundle. h. Leader Pricing- Consumer pricing tactic that attempts to build store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the store's cost.

i. Price Lining- Consumer market pricing tactic of establishing a price floor and a price ceiling for an entire line of similar products and then setting a few other price points in between to represent distinct difference in quality 5. Business Pricing Tactics and Discounts a. Seasonal Discounts- an additional reduction offered as an incentive to retailers to order merchandise in advance of the normal buying season b. Cash Discounts- offering a reduction in the invoice cost if the buyer pays the invoice prior to the end of the discount period c. Allowances i. Advertising Allowance- tactic of offering a price reduction to channel members if they agree to feature the manufacturers product in their advertising and promotional efforts ii. Slotting Allowance- Fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products. d. Quantity Discounts- provides a reduced price according to the amount purchased i. Cumulative quantity discount- Pricing tactic that offers a discount based on the amount purchased over a specified period and usually involves several transactions; encourages resellers to maintain their current supplier because the cost to switch must include the loss of the discount ii. Noncumulative quantity discount- Pricing tactic that offers a discount based on only the amount purchased in a single order; provides the buyer with an incentive to purchase more merchandise immediately. e. Uniform Delivered versus Zone Pricingi. Uniform delivered pricing- The shipper charges one rate, no matter where the buyer is located. ii. Zone Pricing- The shipper sets different prices depending on a geographical division of the delivery areas. 6. Legal Aspects and Ethics of Pricing a. Deceptive or Illegal Price Advertising i. puffery is typical, but if very specific claims and you dont go with it than there will be consequences ii. Loss Leader Pricing- Loss leader pricing takes the tactic of leader pricing one step further by lowering the price below the store's cost. 1. buy one get one free iii. Bait and Switch- A deceptive practice of luring customers into the store with a very low advertised price on an item (the bait), only to aggressively pressure them into purchasing a higher-priced model (the switch) by disparaging the low-priced item, comparing it unfavorably with the higher-priced model, or professing an inadequate supply of the lower-priced item. b. Predatory Pricing- A firm's practice of setting a very low price for one or more of its products with the intent to drive its competition out of business; illegal under both the Sherman Antitrust Act and the Federal Trade Commission Act. c. Price Discrimination- The practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of price discrimination are illegal. d. Price Fixing- The practice of colluding with other firms to control prices. i. Horizontal Price Fixing- Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers. ii. Vertical Price Fixing- Occurs when parties at different levels of the same marketing channel (e.g., manufacturers and retailers) collude to control the prices passed on to consumers.