BADM326 Final Exam with Complete Solutions 2024/2025, Exams of Nursing

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BADM326 Final Exam with complete

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Segmented pricing - ANSWER--pricing based on market segments -logic based on differences among buyers in terms of costs, price sensitivities, and competition -buyers and comp are not likely to be cooperative with your price segmentation efforts -some forms of price segmentation might be illegal Which segments are more price sensitive: personal vs. business travelers - ANSWER--might think personal bc they have to pay for it vs business pays for bus travel -BUT personal might be less sensitive when traveling for special events like honeymoon -personal might be less sensitive during emergencies (ex. need to get out, family sick) Which segments are more price sensitive: new to market vs experienced buyers - ANSWER--new might be more sensitive (they don't know a lot about quality but they know about price) -new might be less price sensitive when they're tourists (don't know any better, locals get discounts) -exp. might be more sensitive when buying good tech (they know a lot and what its worth; also get used to prices)

Which segments are more price sensitive: light users vs heavy users - ANSWER-- similar to new vs experienced buyers Which segments are more price sensitive: students/retired vs employed - ANSWER--students are less price sensitive for textbooks -if parents are paying for students, they are likely less price sensitive (ex. buying a car, apartments- don't have many choices if you want to be on campus) Steinway piano example: tiny but well known piano maker grew quickly after the founder's daughter came up w/idea to offer free piano lessons w/the sale of each piano. why did she do this? - ANSWER-bc --> learning to play piano got a discount bc they're more price sensitive (maybe don't know as much about quality and how much it usually costs like exp. vs new buyers) Which segments are more costly to serve: peak vs off-peak purchasers - ANSWER--ice cream may be more expensive in winter (off-peak) -BUT if companies run at capacity, peak may be more costly (have to buy more resources and labor) Which segments are more costly to serve: new customers vs. established customers - ANSWER--established may be more demanding bc they know what they want Mechanisms for price segmentation: 1) by buyer identification - ANSWER--buyers have obvious characteristics that distinguish them -ex. Mercedes offers discounts to doctors --> doctors are typically respected but not in China (shouldn't offer them a discount there) -companies shouldn't offer students a discount -sometimes veterans get discounts -senior citizens: have to show their ID to show how old they are Mechanisms for price segmentation: 2) by purchase location - ANSWER--buying online vs offline: when only available online they charge higher online, local prices may be lower bc when its online its available to everyone in the world (only locals see the local promotion though)

-McDonalds prices in diff locations -Gas stations examine location and traffic: if station is on the side of the traffic they may change pricing -Urbana charges higher tax than Champaign...more businesses are located west of Wright street Mechanisms for price segmentation: 3) by time of purchase - ANSWER-- restaurants offer lunch specials... if you're already busy at lunch don't offer lunch special! -people are less price sensitive when buying lunch fast food...lunch is a short time, people are willing to pay to save the time -in business districts they should offer dinner specials (ex. some companies will pay for your dinner if you work till 7 unpaid...incentivize you to work!) -U of I will offer incentive for professors to retire early (they're not as productive, quality of work not as good) -fashion clothing: when new clothes come out its more expensive -peak load pricing: demand varies at diff. times but product is not storable (ex. flights - can't buy too early or too late) -Coke case: change prices w/weather using temp. sensor; bad reactions from customers! Mechanisms for price segmentation: 4) by purchase quantity - ANSWER--for a party, a big group may be noisy at a restaurant so may charge more for more people -for supplies like paper or coke, one indiv. item may be more expensive than a larger quantity -more you use electricity, price is higher, why some countries offer price premium? Mechanisms for price segmentation: 5) by product design - ANSWER--involves offering different versions of the product/service -tiered offerings (ex. diff. Microsoft office packages) -razors being more expensive for women is more likely bc they offer women more services (ex. higher quality, smoother)

Mechanisms for price segmentation: 6) by tie-ins - ANSWER--an explicit or implicit requirement that buyers of an asset purchase consumables used with the asset only from the seller -ex. 1) printer and cartridges, 2) razor and blades Mechanisms for price segmentation: 7) by metering - ANSWER--rental or lease arrangements with a variable rental fee dependent on a metered usage rate -ex. electricity, mileage Discussion question: department store has prices that change depending on how long the item has been in store (starts high and moves lower) - ANSWER--people who care about staying on trend are less price sensitive and will buy the clothes immediately -later on, diff. customers have less value for the clothes and will buy it for cheaper -same w/phones --> people who buy brand new models are less price sensitive., as the phone gets older its less value to customers Discussion question: steakhouse in a shopping mall offers 20% discount to employees of other stores in the mall if they eat before 6 or after 8 - ANSWER-- people who work in the mall eat there very often (repeat customers) so possibly a quantity discount -they probably get sick of the same restaurants in the mall so their value goes down --> restaurants charge them less Discussion question: College town deli offers weekly discounted "meal tickets" that expire at the end of the week - ANSWER--students often misplace their cards --> they pay for them but end up not using a lot of the meals! Discussion question: a fast food chain charges more for a salad ordered on its own than a salad ordered w/a sandwich - ANSWER--for the same salad they segment the market -person who only gets salad has more value bc they care about being healthy -vs. person who's getting a sandwich doesn't care as much about health and doesn't have as much value in a salad bar

Discussion question: hotels lend guests an iron and ironing board for free even though they have laundry service you can pay for. the same hotels also charge a lot to supply glasses, ice, and mixers for those who wish to have alcoholic drinks in their rooms - ANSWER--people who are more likely to use the ironing board are price sensitive, they'll do everything themselves instead of laundry service like customers who are NOT price sensitive -they may charge a lot for drinks bc its likely you're in here for fun & a party and are not as price sensitive USPS Cases: 1) issued forever stamps you can keep using - ANSWER-gave incentive for people to buy stamps early and buy a lot (prepay for the service) USPS Cases: 2) shape based pricing (first time) - ANSWER--people who can't fold documents are legal/employer people who have higher value for the service and will pay more -things that have a particular shape may appeal and have more value USPS Cases: 3) Express mail- 1 lb package (3.5% increase). Parcel Post- 1 lb package (14% increase) - ANSWER--Express mail has competitors so they can't increase prices a lot -vs parcel has no competitors so they can USPS Cases: 4) Rate Adjustment does NOT mean price increase --> bank statement rate reduced much more than a wedding invitation rate - ANSWER- banks started sending out paperless statements and USPS didn't like that so they reduced price a lot Distribution channel: - ANSWER-A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user Why do we need distribution channels (intermediaries) - ANSWER--reducers producer's cost

-serve end-consumers w better consumer information and better expertise in distributing products -can be efficient to society Pricing game in distribution channel (1) -two consumer segments w/100 consumers in each and a WTP of $10 and $ -how much to charge? - ANSWER--if man. charges $8, seller may only buy 100 sold at $10: ($10-$8)x100=$200. Man profit = 100x$8= $ -if man. charges $7: ($8-$7)x200=$200 OR ($10-$7)x100=$300, STILL BUY 100! --> Man. profit = 100x$7 = $ -if man. charges $6: ($8-$6)x200= $400. Man profit= 200x$6= $1200 --> BIGGEST MAN PROFIT!!!! ANSWER: (8-t)x200 = (10-t)x x=6 Pricing game in distribution channel (2) -two consumer segments w/100 consumers in each and a WTP of $10 and $ -how much to charge? - ANSWER--if man. charges $9, seller would buy 100 and make you $900! -don't always want to sell to everyone! want to sell to whoever will get you the most money Pricing game in distribution channel (3): retailer segmented pricing aka diff. prices to diff. customers! -two consumer segments w/100 consumers in each and a WTP of $10 and $ -how much to charge? - ANSWER--manufacturer should charge $8 or $7.99 bc that's the highest they can charge w/retailer still being able to make a profit -if man. charges over $8, retailer wouldn't make money from selling at $8 to lower consumers Pricing game in distribution channel (4): retailer segmented pricing AND lower WTP -two consumer segments w/100 consumers in each and a WTP of $10 and $

-how much to charge? - ANSWER--the wholesale price should be $7 or $6. -something about big data capability helping with segmented pricing Pricing game in distribution channel (5): manufacturer targeted coupon -two consumer segments w/100 consumers in each and a WTP of $10 and $ -how much to charge? - ANSWER-manufacturer can give low-income coupon for $2 so all consumers can pay $10! Channel conflict: - ANSWER-disagreement among marketing channel members on goals and roles Horizontal conflicts: - ANSWER-conflicts among firms on the same level of distribution Vertical conflicts: - ANSWER-conflicts among firms at different levels Pull vs Push distribution strategies - ANSWER-Pull: manufacturer ^ distributor ^ retailer ^ consumer Push: manufacturer ↓ distributor ↓ retailer ↓ consumer

Channel margin analysis - ANSWER-basically don't blame the publishing company for expensive books, its probably the bookstore who is upping the price and keeping the money Distribution channel discussion: Cereal manufacturers have high margins ranging from 60-75%. But the large retail grocery stores that sell cereal make small margins. - ANSWER-consumers of cereal are more brand loyal...doesn't matter whether its Walmart/Target or whoever, it matters that its Kelloggs! Distribution channel discussion: Handleman and Lieberman are middlemen who distribute CDs/DVDs/tapes and make high margins of 60%. Distributors of other products make much lower margins however - ANSWER--the wholesalers in this example make the most -retailers don't know how well a movie is going to do -the wholesalers decide which DVDs are going on the rack! they know the market and make higher margins --> the wholesalers have a lot of power Distribution channel discussion: Automobile manufacturers used to sell through new car dealers who made high margins on new cars. Nowadays, auto dealers are promoting and advertising used cars and a new channel of national car chains has emerged. why? - ANSWER--every new car is the same regardless of where you buy it -VERSUS, every used car is different --> less competition w/other dealers! High margins! Why do firms offer multiple products? - ANSWER--diversify offerings -attract consumers so they don't go to competitors Product mix: - ANSWER-set of all products offered for sale Product mix width - ANSWER-the number of product lines carried Product mix length - ANSWER-variety of sizes, colors, and models offered within each product line

Multiple product problem considerations - ANSWER--demand interrelationships (complementary: PS4 machine & controllers; substitute relationships: brands of detergent) -cost interrelationships (compete for the same resources, economies of scale) -nature of marketing strategy (segmentation issues) Product line design: Railroad pricing in the 19th century France example - ANSWER--they make the rich sound scared of being in third class so they stay in more expensive area -if they didn't have it, the second and third class may cannibalize eachother! Damaged goods: Intel example - ANSWER--they created the SX chip by taking a DX processor and disabling a component (it was inferior, but still more expensive bc this extra work) -they did this bc if the 486SX was fully functioning, no one would buy the DX! -create a product line with different quality to avoid cannibalization -damaging a superior good can be less expensive than producing the low quality product directly Damaged goods: IBM example - ANSWER--IBM introduced a lower cost printer which was really just the nicer printer that had chips in it to slow it down Damaged goods: Sony example - ANSWER--sony added code to some discs to create less space on it -created an inferior product! Price bundling - ANSWER-marketing two or more products and/or services for a price below the sum of individual prices -ex. majors are bundles of different courses! Why use price bundling? - ANSWER--shared costs when producing/selling multiple products or services -more sales: quantity discounts -leverage of popular products -exploit consumer surplus

Value of advertising space example: Segment A (grocers and retailers) values morning edition ad space more than evening edition. Segment B (theaters and restaurants) doesn't have much difference between morning vs evening - ANSWER--segment A values morning more bc if people see their ad in the morning they can go shopping during the day. if they see it later on its too late! -segment B doesn't matter bc you're going to see movies and have dinner at night anyways so it doesn't matter when you see it Product bundling example 1: two theaters A and B that have different reservation prices for two different movies, but both value "Casablanca" higher than "Married a Monster". bundle? - ANSWER--bundling them together makes the customers more similar! -ex. w/majors, by bundling marketing classes w/others, makes customers more similar and pricing easier Product bundling example 2: two theaters A and B that have different reservation prices for two different movies, but theatre A values both movies higher than theatre B. bundle? - ANSWER--no! -since theatre A values both more, bundling doesn't make sense Product bundling example 3: Britney and National Radio Symphony have diff. WTP for different ages of people. Young people are more WTP for Britney and old are more WTP for NRS. - ANSWER--optimal price for Britney is $25 bc it can capture 3 segments -optimal price for radio symphony is 27 bc it can capture 3 segments -if they bundle both, they can charge $47--> teens will pay $47 for Britney & all 4 categories of people will buy bc its the lowest combined) what is often the most difficult parts of marketing strategy - ANSWER-legal aspects of pricing When may problems arise with... Segmented and targeted pricing - ANSWER-- customer believes they have been charged illegally higher than other customers

-when a competitor believes a rival's prices are lower in markets where they both compete than in markets where they do not -when the gov. believes that competing customers of a seller are charged different prices When may problems arise with... collusion and competitive pricing - ANSWER-- collusion inevitably leads to a monopoly outcome, typically higher prices and profits that are shared by the colluding organizations -they:

1. raise prices by restricting output or dividing market into competition-free zones
2. reduce non-colluding rivals revenues through boycotts or predatory pricing
3. impose rules of competition on the members of the cartel (ex. Got Milk campaign potentially illegal bc no indiv. farmers advertised but the big cartel did to make them all profitable)
4. Restrict hours of operations (no dentist or doctor can have offices open on the weekend) Price fixing act: - ANSWER-Sherman Antitrust Act (1980); addresses issues related to: -price fixing -exchanging price information -price signaling -also affects issues of predatory pricing Sherman Antitrust Act "Per se violations" - ANSWER-automatically violates the law and subject to criminal and civil penalties. NO REVIEW of the situation: -agreed to fix prices -restrict output -divide markets -or otherwise restrict forces of competition Sherman Antitrust Act "Rule of reason violations" - ANSWER--call for inquiry into reasons, intent, and results of defendant's actions -review the history, the reasons for actions

What does Section 1 of the Sherman Antitrust Act contain? - ANSWER--Per se violations -Rule of reason violations What does Section 2 of the Sherman Antitrust Act contain? - ANSWER-1. prohibits practice of monopolizing

2. having a monopoly is not illegal, but deliberate attempt to become one is
3. if dominant market share leads to above market average prices, some form of regulatory action may take place U.S. v. Microsoft case (1998) - ANSWER--Microsoft abused monopoly power by bundling Windows and Internet Explorer which hurts Netscape Navigator -Microsoft argued that merging Windows and IE was a result of innovation and competition, others argued it did not have to be linked -settlement: Microsoft shares its application interfaces w/third parties, no restriction on bundling practice by Microsoft Parallel Pricing - ANSWER-where firms follow price changes made by the price leader in an industry legal question: whether these price changes constitute a tacit, illegal agreement? Price signaling - ANSWER-when sellers achieve a common understanding about prices and price changes through public announcements insufficient to prove a violation, evidence of concerted pricing is needed Predatory pricing - ANSWER-the cutting of prices to unreasonably low and/or unprofitable levels so as to drive competitors from the market Guidelines for avoiding Predatory Pricing legal dispute - ANSWER-1. do not target action against a smaller competitor
4. avoid targeted, excessive promotion spending

3. do not create plans or documents that permit an inference of a targeted strategy
4. avoid price reductions below a defendable measure of variable cost What was the Clayton Act later amended as? - ANSWER-Robinson-Patman Act (1936) What is the Robinson-Patman Act? - ANSWER-prohibits illegal price discrimination What does the Robinson-Patman Act Section 2(a) show? - ANSWER--backbone of the act -prohibits sellers from charging different prices to different buyers for similar products -a manufacturer can charge different prices to different retailers only if: 1) costs serving different retailers are different, or 2) those retailers do not compete against each other Before a violation of section 2(a) of the Robinson-Patman Act can be shown, it must be shown that.... - ANSWER--the same seller, -charged diff. prices, -two two or more diff. purchasers. -for use, consumption, or resale -and they were reasonably close in time, -involving commodities of like grade, quality, and quantity When does a distributor not possess sufficient autonomy? are illegal price discriminations present? - ANSWER--when they are owned by parent corporations -no Resale price maintenance: - ANSWER-specification by the supplier of the prices below or above which channel members may not sell the supplier's products

Deceptive price promotions: - ANSWER-when offers are false or misleading, they become an unfair practice that is detrimental to both competition and consumers Discussion question: many people consider profit maximizing unethical, ex. some marketing people benefit from promoting unhealthy things (cigarettes, alcohol, vapes). Do you agree or disagree? - ANSWER-For the cigarette girl that took Prof's class, he said that maybe she could find ways to benefit the consumer (like reduce the amount of nicotine in cigarettes) so they can help but still make money Antitrust laws punish companies, not individuals. So longas you can prove that you are following company policy, you are not personally subject to prosecution for pricing decisions. True or False? - ANSWER-False! Even following company policy, you will get punished! Price discrimination is always illegal A company that makes frozen dinners is interested in continuing to purchase aluminum trays from you but claims to have received a bid from another company to supply the trays for $9.00 per thousand less. They insist that you meet that price to retain the business. The price that you have been charging this company is the same price that you charge other manufacturers of TV dinners. Since this buyer is your largest account and you do not want to lose the business, you agree to match the lower bid. Is this allowed? - ANSWER-Yes You develop a new letter-quality printer that you intend to sell for only$99, a price that includes very little profit. You plan to profit handsomely, however, from sales of ink cartridges for the printer.• You have priced the ink cartridges at $29 each although they cost you only $1.50 to make. Is this allowed? - ANSWER-Yes Which types of consumers are more used to price negotiations? - ANSWER-- Business consumers...a lot of negotiations occur in the B-to-B market -vs American indiv. consumers are used to set prices in their daily lives. negotiations only happen for big-ticket items like homes and cars Benefits of fixed prices - ANSWER--negotiations may be time consuming -negotiations can create an adversarial relationship between the buyer and seller

-negotiations can undermine the process of planning for and meeting the company's profitability goals -negotiable price policies motivate sales people to use price concessions as a tool for closing the sale rather than getting a better price using more time- consuming technique of selling product value -consumers who are good at negotiation may play one store against another Tips for successful negotiations - ANSWER--plan the negotiations in advance -know your best alternative to a negotiated agreement (BATNA) -The larger the deal, the more people are likely to be involved -the negotiating teams may wish to establish ground rules for negotiations -people consideration: different culture (ex. in US you get to know eachother first before business talk, in Japan gifts are important but may not be opened immediately) -choosing the time and place for negotiation: end of month or sales period may be good for buyers -interests of negotiating parties should never be revealed Relationship of price, perceived value, and willingness to buy (diagram) - ANSWER-actual price --> perceived quality AND perceived monetary sacrifice --> willingness to buy What is odd pricing - ANSWER-the practice of ending prices in an odd number or just under a round number (ex. 1, 3, 7, 9, OR 99, 98) Weber's Law - ANSWER-the larger the original stimulus, the larger the just noticeable difference needs to be for it to be detected (the more expensive the thing is, the bigger the price needs to increase for consumers to notice a difference) What are the rules of framing? - ANSWER--unbundle gains (lotto example so seems like you won more) -bundle losses (tax example so seems like less) -unbundle mixed losses with a silver lining (car accident example)

Context effects - ANSWER-when compared to diff. standards, it may change your view