Marketing Final Celly

Service

intangible offering involving a deed or performance

Hierarchy of Value

fundamental shift in how we experience the world from primarily function to primarily emotional (product-based economy) (example we pay more for Starbucks coffee than regular)

Service Marketing is…

intangible, inseparable, heterogenous, and perishable

The 7ps

product, price, promotion, place, presentation, personnel, processes

Knowledge Gap

understanding customers’ expectations (to reduce the gap…)

Standards Gap

difference between the firm’s perceptions of customer perceptions and the service standards it sets

Delivery Gap

gap between the delivery and service quality

Communication Gap

gap between the actual service provided and the service the firm promises/communicates

What is the Main Gap?

The service gaps model: difference between the customer expectations and the actual service delivered

Voice of Customer (VOC)

program that collects customer input and integrates them into managerial decisions

Zone of Tolerance

the area between customer’s expectations regarding their desired service and the minimum level of acceptable service

Service Recovery Paradox

When a company messes up but does so much to redeem itself that the customer is more loyal to the brand than they would’ve been if they never had a problem

Pricing

customers decide it (incentive to purchase = perceived value - price) (firm’s incentive to sell = COGS - price)

5cs of Pricing

company objectives, customers, costs, competition, and channel members

Profit Oriented

maximize the money made

Sales Oriented

focused on increasing sales, premium pricing could be pursued, more concerned with overall market share

Customer Oriented

pricing strategy based on how the firm can add value to its products and services to match prices to customer expectations (a lot of different prices)

Competitor Oriented

price similar to competitors

Status Quo Pricing

only change the prices to meet the competitors’

Monopoly

one firm controls the market

Monopolistic Competition

many firms selling differentiated products at different prices

Oligopolistic Competition

a handful of firms control the market

Pure Competition

many firms sell commodities for the same prices

Price Elasticity of Demand

% change in quantity demanded / % change in price

Elastic Demand

price sensitive (ex. slippers)

Inelastic Demand

price insensitive (necessities) (gas)

Income Effect

as people’s income increases their spending behavior changes

Cross-Price Elasticity

% change in the quantity of product A demanded compared to product B

Substitution Effect

customer’s ability to substitute other products for it

Complementary Goods

goods that go well with each other (pb and jelly)

Razor Blade Strategy

they give away the razor body for really cheap then make you pay a lot for the razor blades (complimentary good)

Break-Even Point

total revenue = cogs so that they are coming off even

Every Day Low Pricing (EDLP)

creates value for the consumers in different ways, it reduces the search costs

High/Low Pricing

provides the thrill of the chase for a low price

Internal Reference Price

what you think you spend on it last time

External Reference Price

what is the actual price you spent on it last time on the shelf

Penetration Pricing

set the initial price low for the introduction of the product or service

Price Skimming

set a higher initial price for the segments of consumers who are willing to pay premium price to have the innovation first

Anchoring and Adjustment

make up a number and anker them in then they will adjust away from it (like the coach bag)

Lewin’s Equation

behavior is a function of people and their environment, b = f(pe)

Priming

things that you have seen (stimuli) earlier in the decisions making process that influence your decisions later (banner ads)

Prospect Theory

You feel losses and gains differently (loss more than gain) loss aversion

Attraction Effect

inferior product (a decoy) increases the change the change they will buy the other product

Extremeness Aversion

customers don’t pick the cheapest or priciest option they will choose the moderate one because it is in between quality and value

Bundling

selling multiple products or services together to increase the perceived value (5 dollar meal deal)

Unbundling

Separating goods and services so customers can have more flexibility (airlines charging tickets and luggage separately)

Charm Price

ending prices in 99 cents because it round (you think its cheaper than it is_ or using a random number so it seems more fair (John Deere)

Legal and Ethical Aspects of Pricing

deceptive/illegal advertising, predatory pricing (charging a little less than competitors ex. DG) price discrimination (legal, special deals for certain groups but others get mad a lot), price fixing (colluding with other companies)

Merchandise is Produced and Distributed

in the right quantities, right locations, at the right times

Supply Chain

network of suppliers that works to deliver products to consumers

Wholesalers

firms that buy products from manufacturers and resell them to retailers (retailers cn act as wholesalers too)

Distribution Center

facility for the receipt, storage, and redistribution of products

Fulfillment Center

used to ship directly to individual consumers (Amazon)

QR (quick response) / JIT (just in time)

less merch on a frequent basis (no holding costs) (think about Toyota’s production system)

Kaizen

Japanese philosophy of continuous movement (flow state) (cars are on a convey belt) (how can we constantly be improving better) (troubleshooting)

Direct Channel

manufacturer to customer (becoming more popular because we want relationships with customers)

Indirect Channel

one intermediary (manufacturer to retailer to customer) or two intermediaries (manufacturer to wholesaler to retailer to consumer)

Franchising

contractual agreement between a franchisor and a franchisee to operate a retail outlet using a name and format developed and supported by the franchisor

Vertical Channel Conflict

a type of channel conflict in which members of the same marketing channel disagree (Walmart is mad at Heinz)

Horizontal Channel Conflict

members at the same level of a marketing channel disagree (target and Walmart)

Channel Power

one firm has means or ability to dictate the actions of another member at a different level of distribution (reward, coercive, referent, expertise, information, legitimate)

Reverse Merchandise Flow

total returns (has been 743 billion) growing becaue online sales are growing

Customer Lifetime Value

total profit a customer brings to the company during all of their purchases (lifetime revenue - lifetime costs)

Lifetime Revenue

revenue per sale * number of transactions

Lifetime Costs

Cost of acquisition + (cost to serve * number of transactions)

Margin

% of the selling price that you can take home from the profit (price - cost) / price

Mark Up

how much will you increase the cost of the product when you sell it to make a profit (will always be more than the margin) (gross profit = price - cost) ((price - cost) / cost

Romelle Morris

Uiowa grad who is a global marketing strategist for Estee Lauder

Retailing

adds value to products and services sold to consumer for their personal or family use (provides an assortment of p/s, breaking bulk, holding inventory, providing services)

Innovators Dilemma

there is some new technology that comes out, and people have to decide if it is worth it to make it and sell it, will the new idea be worth our time and will it work out (sell)

Vertical Integration

business strategy where a company controls multiple stages of a supply chain including production, marketing, and distribution (streamline operations) ex. Tesla

Intensive Distribution

uses all available outlets (ex. beer, gum)

Selective Distribution

limited number of outlets to sell products, choosing the ones best fit to sell your product (Seiko)

Exclusive Distribution

only one wholesaler, retailer, or distributor in a specific geographical area (they have complete control)

Scrambled Merchandising

a retailer broadens their assortment to include items that are out of their general focus or are usually sold in a different format

Goods/Service Continuum

products can be a mix of goods and services and the line between them is blurry

Omnichannel

order online and pick up in store, buy online and return in store, buy in store and have it delivered at home (deeper and broader selection, more personalized, larger market presence and good brand image, reduction of channel migration, retailers can adjust prices (target))

Long Tail of Retailing

some books are super popular, and some are not so stores like Barns and Noble can only afford to have the popular ones, places like Amazon found a way to sell all books so that they could have more variety (must figure out what you are selling and to whom

Showrooming

people go to the store to see the product but then purchase it online (beds or like best buy electronics)

Integrated Marketing Communications (IMC)

consumer, communication channels, and results of communication

The Communication Process

Sender (adjusts messages according to the medium and receiver’s traits (they encode the message)), transmitter, channel, receiver (decode differently), feedback, noise (interference or disruption)

AIDA Model

Awareness (senders must gain attention of the consumer), Interest (feelings and emotions, customer must want to further investigate), Desire ( I like it and now want it ), Action (goal)

Advertsing

most visible IMC strategy, placements of announcements, persuasive messsages

Public Relations

free media attention (ex. dance marathon)

Sales Promotion

aimed at end consumers or channel members, give people an incentive (maybe rebated)

Rebates

50% of rebates are not cash returned or used (same with gift cards)

Direct Marketing

communicating directly with target customers, email and mobile marketing (this is growing), must be able to target the right customers

Domino’s Points for Pies

introduced a rewards system so customers could get points on any pizza, by downloading the app users could scan any pizza and earn points towards a free Domino’s product, this promotion attracted many people to Dominos and got them to download the app

Burger King Geofencing

location based marketing to effect targeted consumers near local McDonalds locations, consumers in these locations would receive a special discount voucher designed to convince them to change their plans and drive to burger king instead, this gave incentive for consumers to download their app as well

Geofencing

setting an intangible barrier between other competitors and your brand

Offline and interactive IMC strategy

personal selling, sales promotions (contests), direct marketing (telemarketing)

Online and Interactive IMC Strategy

direct marketing (mobile marketing), online marketing (blogs/social media)

Offline and Passive IMC Strategy

advertising, sales promotions (coupons), public relations, direct marketing

Online and Passive IMC Strategy

direct marketing (email marketing)

Online Marketing

direct mobile marketing (blogs/social media), practice promoting products services, or brands using the internet and digital technologies

Competitve Parity

communication budget is set so the firm’s share of communication expenses = its share of the market (doesn’t allow firms to exploit unique opportunities or problems)

Percentage of Sales

communication budget is a fixed percentage of forecasted sales (assumes the same % used in the past and doesn’t consider new plans)

Available Budget

marketers forecast their sales and expenses without communication during the budgeting, forecast sales - expenses + desired profit is reserved for the budget (money available after operating costs and profits have been budgeted) (assuming communication expenses do not stimulate sales and profit)

Objective and Task Budgeting

say an objective then elaborate on what needs to be done to reach the goal (harder from a manager standpoint)

Rule of Thumb Budgeting

competitive parity, percentage of sales, and available budget