Marketing is used to identify, satisfy and keep customers. It is the process where companies create value for customers by building strong relationships with them in order to maintain profits and value. Marketing uses advertising, distribution and selling.

An established brand with a large market share is being wooed by an advertising agency. The agency suggests that the brand spends a relatively high amount of money on the campaign. Should the brand go along with the agency's suggestion?

An advertising agency is used to handle marketing and sales promotion for its clients. Agencies are hired to produce television and radio commercials in an advertising campaign. The agency should go along with the agency’s solutions as advertising greatly improves sales for a brand in its market share. As the brand is already established, the campaign will help customers to differentiate its products from those of close competitors. This reduces the rate of substitution of its products with those of competitors, thus the brand maximizes its sales and is able to maintain its premium price over the competitors leading to high profits. This campaign may lead the brand to become a leader in its market rather than just being established. The campaign will also stabilize its sales at even higher values than those of its competitors and help the brand to counter seasonal falls, and to prepare for market peaks. The advertisement may also lead to awareness of the brand’s goodwill towards the community leading to consequently high sales. As the brand has a large market share, the advertising costs will easily be recovered from the increase in sales.

What are three ways in which marketing a service differs from marketing a product?  

Basically, marketing a product requires customers’ perception of the product, price, place and promotion, which is the 4 P’s. Marketing a service adds other 3 P’s which are the people, physical evidence and process of the service offered. When one is marketing a service, one is really marketing the value and relationship. Service marketing includes an aspect not considered in product marketing, which is known as services cape. This is the inside and outside of the business general appearance as well as employees appearance. When a buyer purchases a service, the buyer is purchasing something intangible unlike a product which is tangible. This means that a product is returnable while a service can not be returned. The customers’ concept of marketing a service is based on reputation of the person offering the service; that is, how well the service provider offers the service. While marketing a product, the customers’ concept of the product is based on the quality of the product in comparison to other products. According to Watson (2012), product marketing takes benefit in packaging and other advantages like warranties. A service has the advantage of packaging or warranties, thus it is limited to a specific group of clients.

Which online service allows a customer to name his price and potentially have it met? 

The selling strategy of “name your price” allows customers to indicate prices that they are willing to pay for a specific service or goods, then the customer asks the provider or a service to agree to the price named. With the Internet, there is a variety of sites that allow buyers to own their own prices in the services like accommodations in hotels, transportation through air or rail, and even in renting cars.

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What kind of pricing strategy is the "Cornershop" engaging in? 10 points

The Cornershop is engaging in the high-low pricing strategy, which is also referred to as the promotional pricing strategy. In this method of pricing, a business regularly prices goods and services at a higher price than its competitors. This is like in the case of toothpaste, deodorant and milk. So as to promote the business, lower prices than that of competitors are offered to a key item like, for example, the case of bread in Cornershop. The lower prices item is designed so that the customer can be attracted to the business, whereby the customer is offered the low-priced item alongside the regular high priced products.

RussellSq Milk products find themselves in a very competitive industry where demand fluctuates and often leads to overcapacity. To meet the challenge, RussellSq Milk often lowers the price of its milk products below those of its competitors. What will the firm need to do as a long-term strategy? 10 points

RussellSq business will need to adopt a value-based pricing strategy as its long-term strategy. The constant lowering of prices might pose a challenge of destroying the profit margin of the business. RussellSq milk products, which are in a competitive industry, may also be involved in price wars, whereby it might end up making losses in the long run if its pricing strategy is often influenced by competitors. The business should therefore build a milk product that is uniquely superior, so that even in the fluctuating industry, the consumers will be convinced to buy the product because of its quality other than cost. The business should create goodwill for the product, whereby it takes ownership of the results of the customers like in taking responsibility that the product fulfills the results the customer wishes. This creates a product of high value in terms of quality, thus the demand for the milk product is likely to remain stable, and the business is able to sell as much as it produces.

PinkStoneEnergy is an energy drink. Overall fixed costs are eight-hundred thousand dollars, while the variable cost per can is 10 US cents. PSE has secured orders to sell 400 000 units.

If PSE adopted a 50% mark up-price strategy, how much will each can be priced at?

Fixed costs=800, 000 dollars

Variable costs=400,000×0.1=40,000 dollars

Mark up=50%

Profit=fixed costs –variable costs

Total profit=800,000-40,000=760,000

Profit per unit=760,000/400,000=1.9dollars

Total cost per unit=1.9× (50%+100%)

1.9× (150/100) =2.85 dollars per unit

A start-up is introducing a new, unique app (no near competitor). The founders think that they may price it much higher than the average prices for apps. What would be two possible effects (possibly contradictory) on the start-up's break-even point?

While introducing the new product into the market, the aim is to gain market shares. When they price the product with a higher price than the average price in the market, they might lose market share. This might lose market share, especially for the customer segment of buyers who are price sensitive. The break-even point is the point of no profit or loss after a business has been in the industry for quite some time. In the long run, they may not reach the break-even point or may take long to reach the break-even point.

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