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MKT 316 Consumer Survey Questions on Price Discounts

MKT 316 Consumer Survey Questions on Price Discounts. Ted Mitchell. Consumer Survey Questions. The following two questions were part of a consumer survey reported in the Journal of Marketing Please get out a sheet of paper for your answers.

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MKT 316 Consumer Survey Questions on Price Discounts

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  1. MKT 316 Consumer Survey Questions on Price Discounts Ted Mitchell

  2. Consumer Survey Questions • The following two questions were part of a consumer survey reported in the Journal of Marketing • Please get out a sheet of paper for your answers. • If you want class participation points please put you name on the sheet of paper

  3. Question #1 Which of the following deals offers the biggest discount to the customer when buying a product? Deal A: A single coupon which provides a 55% discount off the original price per item. or Deal B: Two coupons where the first provides 30% off the original price, plus a second coupon that provides an additional 30% discount. or Both: Deals A and B are of equal value.

  4. Question #2 • Which of the following deals offer the best value to the customer? • Deal A: a price discount of 40% off the original price. • or • Deal B: a three-for-two deal in which the customer buys two items at the regular price and get one free. • or • Both: Deals A and B are of equal value.

  5. MORE PARTICIPATION POINTS • GO TO THE CLASS WEB SITENew Opportunity on Page 1 • http://www.prospectlearning.com/316/ • Try 7 questions used on marketing surveys to discover how consumers calculate changes.

  6. When you graduate as a business professional you are expected to be more literate and more numerate than the consumers. • The process of becoming more numerate is • 1) being able to calculate the best deal • 2) being able to take advantage of your competitor’s deals

  7. The answer to Question #1 Which of the following deals offers the biggest discount to the customer when buying the product? Deal A: A single coupon which provides a 55% discount off the original price per item. or NOT Deal B: Two coupons where the first provides 30% off the original price, plus a second coupon that provides an additional 30% discount. or NOT Both: Deals A and B are of equal value.

  8. The answer to Question #1 Why NOT Deal B: Two coupons where the first provides 30% off the original price, plus a second coupon that provides an additional 30% discount. Assume the price is $200 per item You get 30% off for the first coupon $200(1- 0.30) = $200 x 0.7 =$140 You get 30% off the $140 for the second coupon $140 (1-0.30) = $140 x 0.7 = $98 is the price paid Amount of the discount is $200 - $98 = $102 off The percentage discount is $102/$200 = 51% 51% discount is not as good as a 55%

  9. Answer to Question #2 • Which of the following deals offer the best value to the customer? • Deal A: a price discount of 40% off the original price. • or • NOT Deal B: a three-for-two deal in which the customer buys two items at the regular price and get one free. • or • NOT Both: Deals A and B are of equal value.

  10. Answer to Question #2 • Why NOT Deal B: a three-for-two deal in which the customer buys two items at the regular price and get one free. • If you buy 3 for the regular price of $100 each you spend $300 • If you buy 2 for the regular price of $100 each you spend $200 • The discount in the deal is $300 -$200 =$100 • A percentage discount is $100/$300 = 33.33% • A 33.33% deal off is not as good as 40% off

  11. Finding competitive advantage • I f you know that customers like deals in which they get a free one if they buy 2 better than a cash discountThen give them 3 for 2 deals • If you know your customers like two coupon deals better than single coupons Then give them Two Coupons.

  12. You need to be able calculate • The equivalent better deals for the traditional deals:

  13. Competitive Advantage #1 • Your competitor is offering a 40% discount off his normal price per can of soup. What is the smallest give-away deal or quantity discount you must offer to be equal to the 40% price discount? • Buy ______ cans at the regular price and get _______ cans free

  14. Competitive Advantage #2 • Your competitor is offering a single coupon with a 40% discount off his normal price. You have a current price discount of 20% off and will offer a second coupon for an additional _______% off. How much of a percentage discount must the second discount be to give the customer a total discount of 40%?

  15. The difference between you and your customers and you and your competitors is that you will be able to calculate the equivalent deals

  16. Answer Competitive Advantage #1 • Your competitor is offering a 40% discount off his normal price per can of soup. What is the smallest give-away deal or quantity discount you must offer to be equal to the 40% price discount? • Buy 3 cans at the regular price and get 2 cans free • With a normal deal you get 100% of the quantity for 100% of the price. For the 40% price deal you would get 100% of the quantity for 60% of the price. You get 40% of the price free! • For a quantity discount you would get 40% of the quantity free for the normal price of purchasing 60% of the quantity. • If the deal was for purchasing 60 cans the customer would get 40 cans free. • Smallest deal would be buy 3 cans and get 2 cans free

  17. Answer Competitive Advantage #2 • Your competitor is offering a single coupon with a 40% discount off his normal price. You have a current price discount of 20% off and will offer a second coupon for an additional 25% off. How much of a percentage discount must the second discount be to give the customer a total discount of 40%? • Total = Discount1 + Discount2 + (Discount1 x Discount2) • -40% = -20% + D2 + (-20% x D2) • D2 + 20%D2 = 40% - 20% • D2( 1 + 0.20) = 20% • D2 = 20%/(0.80) = 25%

  18. In This class you will learn how to take competitive advantage • You will learn • Total Discount Percentage = Discount1 + Discount2 + (Discount1 x Discount2) • More Importantly You will learn that you can derive these types equations from first principles • You know that • Total Price Discount Percentage = (Final Price – Original Price)/(Original Price)

  19. Total Percentage of Price Discount = (Final Price – Original Price)/(Original Price) • First Price = P1, Second Price = P2, Third Price = P3 • First Discount, D1 = (P2 – P1)/P1 • P2 = P1 – D1(P1) • P2 = P1 (1 - D1) • You also know that Second discount, D2 = (P3 – P2)/P2 • P3 = P2 – D2(P2) • P3 = P2(1-D2) • Substitute P2 = P1(1-D1) • P3 = P1(1-D1)(1-D2) • P3/P1 = 1-D1-D2 +(-D1)(-D2) • (P3/P1) – 1 = – D1 – D2 + (D1)(D2) • (P3-P1)/P1 = –D1 –D2 + (D1)(D2) • (Final Price – Original Price)/(Original price) = –D1 –D2 + (D10(D2) • Total Price Discount = –D1 –D2 + (D1)(D2

  20. Be able to calculate better than consumers • Be able to do calculations that generate competitive advantage • Be able to derive the equation from first principles!

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