mark final exam review

price

the sum of all the values that customers give up to gain the benefits of having or using a product or service.

price ceiling

Customer perceptions of the product’s value set the ceiling for its price. If customers perceive that the product’s price is greater than its value, they will not buy the product. no demand above this price.

price floor

product costs set the floor for a product’s price. If the company prices the product below its costs, no profits are below the price floor.

setting price between ceiling and floor

the company must consider competitors’ strategies and prices, the overall marketing strategy and mix, and the nature of the market and demand.

3 pricing strategies

customer value–based pricing, cost-based pricing, and competition-based pricing

customer value–based pricing

Setting price based on buyers’ perceptions of value rather than on the seller’s cost. Value-based pricing means that marketers cannot design a product and marketing program and then set the price. They must consider price along with all other marketing mix variables before they set a marketing program

value based pricing steps

1. assess customer needs and value perceptions
2. Set target price to match customer perceived value
3. Determine costs that can be incurred
4. design product to deliver desired value at target price

cost based pricing

product-driven. The company designs what it considers to be a good product, adds up the costs of making the product, and sets a price that covers costs plus a target profit. Marketing must then convince buyers that the product’s value at that price justifies its purchase. If the price turns out to be too high, the company must settle for lower markups or lower sales, both
resulting in disappointing profits.

cost based pricing steps

1. design a good product
2. determine product costs
3. set price based on cost + target profit
4. convince buyers of products value

good value pricing (type of value based pricing)

Offering just the right combination of quality and good service at a fair price. introducing less expensive versions of established brand name products or new lower-price lines (ALDI)

everyday low pricing (type of good value pricing)

charging a constant, everyday low price with few or no temporary price discounts (Walmart)

high low pricing (type of good value pricing)

charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. (departments stores like kohl's and jcpenney)

value added pricing

Rather than cutting prices to match competitors, they add quality, services, and value-added features to differentiate their offers and thus support their higher prices.

cost-plus pricing (or markup pricing)

Adding a standard markup to the cost of the product. when all firms in the industry use this pricing method, prices tend to be similar, so price competition is minimized.

Competition-based pricing

Setting prices based on competitors’ strategies, prices, costs, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.

pure competition

the market consists of many buyers and sellers trading in
a uniform commodity, such as wheat, copper, or financial securities. No single buyer or seller has much effect on the going market price. In a purely competitive market, marketing
research, product development, pricing, advertising, and sales promotion play little or no role.

monopolistic competition

the market consists of many buyers and sellers trading over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers. use marketing to set apart. less affected by pricing strategies compare to oligopolistic competition.

oligopolistic competition

the market consists of only a few large sellers. For example, only a handful of providers—Comcast, Spectrum, AT&T, and Dish Network—control a lion’s share of the cable/satellite television market. price becomes a major competitive tool

pure monopoly

market dominated by one seller. seller may be government (u.s postal service, private regulated monopoly, or private unregulated monopoly.

chap 11

new product pricing strategy: market skimming pricing

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

new product pricing strategy: market penetration pricing

Setting a initial low price for a new product to penetrate market quickly and deeply- in order to attract a large number of buyers and a large market share. Or a firm might use penetration pricing to win customers initially and then turn them into loyal long-term customers.

market penetration pricing conditions

First, the market must be highly price sensitive so that a low
price produces more market growth. Second, production and distribution costs must decrease as sales volume increases. Finally, the low price must help keep out the competition, and the penetration pricer must maintain its low-price position. Otherwise, the price advantage may be only temporary.

market skimming pricing conditions

Market skimming makes sense only under certain conditions. First, the product’s quality and image must support its higher price, and enough buyers must want the product at that price. Second, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more. Finally, competitors should not be able to enter the market easily and undercut the high price. (APPLE)

product mix pricing strategies
1. product line pricing

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices. (iPad air, pro, mini)

Optional-product pricing

pricing optional or accessory products along with the main product. (a car buyer may choose to order a remote engine start system and premium sound system. Refrigerators come with optional ice makers.)

Captive-product pricing

Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console (razor blade cartridges,
printer cartridges, single-serve coffee pods, e-books, and
video games.)
In the case of services, captive-product pricing is called two-part pricing. The price of the service is broken into a fixed fee plus a variable usage rate. Thus, at Six Flags and other amusement parks, you pay a daily ticket or season pass charge plus additional fees for food and other in-park features.

By-product pricing

Setting a price for by-products to help offset the costs of disposing of them and help make the main product’s price more competitive. (chicken feet)

Product bundle pricing

Combining several products and offering the bundle at a reduced price (fast-food restaurants bundle a burger, fries, and a soft drink at a “combo” price, Microsoft 365 bundle)

price adjustment strategies (discount pricing)

A straight reduction in price on purchases during a stated period of time or of larger quantities.
1. cash discount, a price reduction to buyers who pay their bills promptly
2. quantity discount is a price reduction to buyers who buy large volumes
3. functional discount (also called a trade discount) to trade-channel members who perform certain functions, such as selling, storing, and record keeping.
4. A seasonal discount is a price reduction to buyers who buy merchandise or services out of season

Allowance pricing

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way. (trade in allowances are price reductions given for turning in an old item when buying a new
one.)

Segmented pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. (movie tickets; senior, adult, child prices)

price cuts causes

excess capacity
falling demand due to strong competition and weak economy
increase market share

price increase causes

cost inflation
over demand
lack of supply
avoid being a price gouger: enriching company at expense of consumers

buyer reactions to price changes

price increase:
product is better made or more exclusive
company is being too greedy

price decrease:
better deal on exclusive product
quality is reduced

brands price and image linked. price change can affect customer perception of brand

competitor reaction to price change

competitor decreases price, what action should you take?
can reduce price, raise perceived value, improve quality and increase price, or launch low price "fighter brand(adding a lower price item to line)"

chapter 12

supply chain upstream partners

upstream from the company is the set of firms that supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service.

supply chain downstream partners

the marketing channels (or distribution channels) that look toward the customer. Downstream marketing channel partners, such as wholesalers and retailers, form a vital link between the firm and its customer

demand chain

suggests a sense-and-respond view of the market. Under this view, planning starts by identifying the needs of target customers, to which the company responds by organizing a chain of resources and activities with the goal of creating
customer value.

supply chain

make-and-sell view of the business. It suggests that raw materials, productive inputs, and factory capacity should serve as the starting point for market planning

Value delivery network

A network composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value.

Marketing channel (distribution channel)

A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. long term commitment to firms

channel members add value and perform key functions

help complete transaction:
1. Information. Gathering and distributing information about consumers, producers, and other actors and forces in the marketing environment needed for planning and aiding
exchange.
2. Promotion. Developing and spreading persuasive communications about an offer.
3. Contact. Finding and engaging customers and prospective buyers.
4. Matching. Shaping offers to meet the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging.
5. Negotiation. Reaching an agreement on price and other terms so that ownership or possession can be transferred.

fulfill completed transaction
6. Physical distribution. Transporting and storing goods.
7. Financing. Acquiring and using funds to cover the costs of the channel work.
8. Risk-taking. Assuming the risks of carrying out the channel work.

channel level

each layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. The number of intermediary levels indicates the length of a channel

Direct marketing channel

A marketing channel that has no intermediary levels. sell directly to consumers via online or offline

Indirect marketing channel

A marketing channel containing one or more intermediary levels.

horizontal conflict

Horizontal conflict occurs among firms at the same
level of the channel. (some Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories.)

vertical conflict

conflict between different levels of the same channel, is even more common (McDonalds and its independent franchises)

Conventional distribution channel

No leadership and power= conflict and poor performance. A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole. no channel member has control over other members and no formal means for assigning roles and resigning channel conflict.

Vertical marketing system (VMS)

A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

corporate VMS

A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. (Amazon has prime trucks, cargo plants, and amazon flex)

contractual VMS

a vertical marketing system in which independent firms at different levels of production and distribution join together
through contracts

Franchise organization (contractual VMS)

A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process.

Administered VMS

A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties. leadership is assumed not through common ownership or contractual ties but through the size and power of one or a few dominant channel members. (p&g can command cooperation from resellers, and resellers like Walmart can exert influence on manufacturers)

Horizontal marketing system

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. (target partnering with Starbucks to place in store)

Multichannel distribution system

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. (buy lawn mover directly from john deere retailer, lowe's, or online)

Marketing channel design

Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives

types of intermediaries

When the company has defined its channel objectives, it should next identify its major channel alternatives in terms of the types of intermediaries, the number of intermediaries, and the responsibilities of each channel member.

Intensive distribution

Stocking the product in as many outlets as possible. (p&g, coca-cola, and other consumer goods distribute this way; toothpaste)

Exclusive distribution

Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.

Selective distribution

the use of more than one but fewer than all of the intermediaries that are willing to carry the company’s. products. (selling law movers at independent stores instead of lowe's or home depot)

chapter 13

Retailing

All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.

Shopper marketing

focusing the entire marketing process on turning shoppers into buyers as they move along toward the point of sale, whether during in-store, online, or mobile shopping

“First Moment of Truth”

The critical three to seven seconds that a shopper considers a product on a store shelf. does not happen in stores only now
“zero moment of truth” and “micro-moments,” brief seconds of decision making when consumers turn to their online or mobile devices to search for, learn about, or buy something.

omni-channel buyers

today's consumers; who make little distinction
between in-store and online shopping and for whom the path to a retail purchase runs across multiple channels

Omni-channel retailing

Creating a seamless cross-channel buying experience that integrates in store, online, and mobile shopping

Self-service retailers

serve customers who are willing to perform their own locate-compare-select process to save time or money. Self-service is the basis of all discount operations and is typically used by retailers selling convenience goods (such as supermarkets)
and nationally branded, fast-moving shopping goods (such as Target or Kohl’s)

Limited-service retailers

such as Macy’s or JCPenney, provide more sales assistance because they carry more shopping goods about which customers need information. Their increased operating costs result in higher prices.

full-service retailers

such as high-end specialty stores (for example, Tiffany or Williams-Sonoma) and first-class department stores (such as Nordstrom or Neiman Marcus), assist customers in every phase of the shopping process. Full-service stores usually carry more specialty goods for which customers need or want assistance or advice. They provide more services, which results in much higher operating costs. These higher
costs are passed along to customers as higher prices

The new retailing model

Digital technologies have caused a massive shift in how and where people buy. Today’s retailers must adopt omnichannel retailing that integrates in-store, online, and mobile shopping

specialty store

A store that carries a narrow product line with a deep assortment, such as apparel stores, sporting-goods stores, furniture stores, florists, and bookstores. (REI, Sunglass Hut, Sephora, Williams-Sonoma)

department store

A store that carries several product lines—typically clothing, home furnishings, and household goods—with each line operated as a separate department managed by specialist buyers or merchandisers. (Macy’s, Neiman Marcus)

supermarket

A relatively large, low-cost, low-margin, high-volume, self-service operation designed to serve the consumer’s total needs for grocery and household products (Kroger, Publix, Safeway, SuperValu)

Convenience store

A relatively small store located near residential areas, open 24/7, and carrying a limited line of high-turnover convenience products at slightly higher prices. (7-Eleven, Circle K,
Speedway, Sheetz)

superstore

A very large store that meets consumers’ total needs for routinely purchased food and nonfood items. This includes supercenters, combined supermarket and discount stores, and category killers, which carry a deep assortment in a
particular category (Walmart Supercenter,
SuperTarget, Meijer (discount stores); Best Buy, Petco, Staples, Bed Bath & Beyond (category killers))

Discount store

A store that carries standard merchandise sold at lower prices with lower margins and higher volumes. (Walmart, Target, Kohl’s)

Off-price retailer

A store that sells merchandise bought at less-than-regular wholesale prices and sold at less than retail. These include factory outlets owned and operated by manufacturers; independent off-price retailers owned and run by entrepreneurs or by divisions of larger retail corporations; and warehouse (or wholesale) clubs selling a limited selection of goods at deep discounts to consumers who pay membership fees. (costco, sam's club)

corporate chain

Two or more outlets that are commonly owned and controlled. Corporate chains appear in all types of retailing but they are strongest in department stores, discount stores, food stores, drugstores, and restaurants (Macy’s (department stores),
Target (discount stores), Kroger (grocery stores), CVS (drugstores)

Voluntary chain

Wholesaler-sponsored group of independent retailers engaged in group buying and merchandising (Independent Grocers Alliance (IGA), Western Auto (auto supply), True Value (hardware)

Retailer cooperative

Group of independent retailers who jointly establish a central buying organization and conduct joint promotion efforts (Associated Grocers (groceries), Ace Hardware (hardware)

Franchise organization

Contractual association between a franchisor (a manufacturer, wholesaler, or service organization) and franchisees (independent businesspeople who buy the right to own and operate one or more units in the franchise system). (McDonald’s, Subway, Pizza Hut, Jiffy Lube, Meineke Mufflers,
7-Eleven)

retailer marketing decisions

Create value for targeted retail customers

retail strategy:
Retail segmentation and targeting
Store differentiation and positioning

retail marketing mix:
Product and service assortment
Retail prices
Promotion
Distribution (location)

Full-service wholesalers

Provide a full line of services: carrying stock, maintaining a sales force, offering credit, making deliveries,
and providing management assistance. Full-service wholesalers include wholesale merchants and
industrial distributors.

Limited-service wholesalers

Offer fewer services than full-service wholesalers.

chapter 14

Promotion mix (marketing communications mix)

The specific blend of promotion tools (advertising, sales promotion, personal selling, public relations, direct and digital marketing)that the company uses to persuasively communicate customer value and build customer relationships.

Advertising

Any paid form of nonpersonal presentation
and promotion of ideas, goods, or
services by an identified sponsor.
(broadcast, print, online, mobile, outdoor, and other forms)
low cost, mass exposure
impersonal, lacks direct persuasiveness of salespeople

Sales promotion

Short-term incentives to encourage the
purchase or sale of a product or a service
(discounts, coupons, displays, demonstrations, and
events)
boost sales
short-lived, not effective in building customer relationships and long-run brand preference

Personal selling

Personal presentation by the firm’s
sales force for the purpose of engaging
customers, making sales, and building
customer relationships
(sales presentations, trade shows, and incentive programs. )
most effective in building up buyer's preferences, convictions

Public relations (PR)

Building good relations with the company’s
various publics by obtaining favorable
publicity, building a good corporate image,
and creating favorable events, stories, and
other marketing content.
(stories, sponsorships, events, and webpages)

Direct and digital marketing

Direct and digital marketing
Engaging directly with carefully targeted
individual consumers and customer
communities to both obtain an
immediate response and build lasting
customer relationships
(direct mail, email, catalogs, online and social media, mobile marketing)

Integrated marketing communications (IMC)

Carefully integrating and coordinating
the company’s many communications
channels to deliver a clear, consistent,
and compelling message about the
organization and its products
(combining advertising, sales promotion, personal selling, public relations, direct and digital marketing to create a clear, consistent, and compelling message about the organization and its products)

Steps in Developing Effective Marketing Communication

1. Identifying the Target Audience

2. Determining the Communication Objective/desired response (five As of the customer journey: awareness (I know about the product), appeal (I like the product), ask (I want to know more about the product and be more engaged with the brand), act (I’m buying and relating to the product), and advocacy (I’m telling others about the product)

3. Designing a Message
AIDA:
1. Get Attention
2. Hold Interest
3. Arouse Desire
4. Obtain Action

Message Content
(i) “What to say”
- Rational appeal relates to the audience’s self-interest. Shows that the product will produce the desired benefits.
- Emotional appeal is an attempt to stir up positive or negative emotions to motivate a purchase.
- Moral appeal is directed to an audience’s sense of what is right and proper.

Message Structure and Format
(i) “How to say it”



4. Choosing Communication Channels and Media
personal comm channels: Channels through which two or more people communicate directly with each other, including face-to-face, on the phone, via mail or email, or even through
an internet “chat.”
Word-of-mouth influence
Buzz marketing: Cultivating opinion leaders and
getting them to spread information about a
product or a service to others in their
communities.
non personal comm channels: major media, atmospheres, and events.

5. Select Message Source and Collect Feedback:
Messages delivered by highly credible or popular sources are more persuasive (doctors, celebrities)

Push strategy

A promotion strategy that calls for using
the sales force and trade promotion to
push the product through channels.
The producer promotes the product to
channel members who in turn promote it
to final consumers.
(John Deere’s sales force works with Lowe’s, Home Depot, independent dealers, and other channel members, who in turn push John Deere products to final consumers.)

pull strategy

A promotion strategy that calls for spending a lot on consumer advertising, promotion, and other content to induce final consumers to engage with and buy the product, creating a demand vacuum that “pulls” the product through the channel.
(P&G promotes its Tide laundry products directly to consumers using TV and print ads, websites and social media, and other channels. If the pull strategy is effective, consumers will then demand the brand from retailers such as Walmart, Target, Kroger, Walgreens, or Amazon, which will in turn
demand it from P&G. Thus, under a pull strategy, consumer demand “pulls” the product)
through the channels.

advertising objective

A specific communication task to be
accomplished with a specific target
audience during a specific period of time.

Informative advertising

used when introducing a new product category to build primary demand.

Communicating customer value
Suggesting new uses for a product
Building a brand and company image
Informing the market of a price change
Telling the market about a new product
Describing available services and support
Explaining how a product works
Correcting false impressions

persuasive advertising

is important with increased competition to build selective demand.

Building brand preference
Persuading customers to purchase now
Encouraging switching to a brand
Creating customer engagement
Changing customer perceptions of product value
Building brand community