MKT 3013 Exam 3 Melissa Moore Spring 2023

Price – narrow

amount of money charged for a product or service

Price – broad

the sum of all the values that customers give up in order to gain the benefits of having/using the product/service

What sets the price floor?

The product’s cost

What sets the price ceiling?

The consumer perceptions of value

Cost-plus pricing

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

Competition-based pricing

setting prices based on competitors’ strategies, costs, prices, and market offerings

Customer value-based pricing

setting price based on buyer’s perceptions of value rather than on the seller’s cost

Fixed costs

overhead costs that do not vary with production or sales level

Variable costs

costs that vary directly with the level of production

Total cost

the sum of the fixed and variable costs for any given level of production

What is a demand curve?

a curve that shows the number of units the market will buy in a given time period at different prices that may be charged

What is the difference between market-penetration and market-skimming pricing?

Market penetration pricing is setting a low price to attract a large number of buyers and a large market share while market skimming price is setting a high price to skim maximum revenues layer by layer from the segments willing to pay the high price

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

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

Product bundle pricing

combining several products and offering the bundle at a reduced price

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

Optional-product pricing

the pricing of optional or accessory products along with a main product

Seasonal discount

a price reduction to buyers who buy merchandise or services out of season

Functional discount

a price reduction to trade-channel members who perform certain functions, such as selling, storing, and record keeping

Quantity discount

a price reduction to buyers who buy in large volumes

Promotional allowances

a price reduction or discount granted by a manufacturer to a member of the marketing channel in return for some form of special promotion of a particular product.

Trade-in allowances

price reductions given for turning in an old item when buying a new one

Psychological pricing

pricing that considers the psychology of prices and not simply the economics, the price is used to say something about the product

Reference price

prices that buyers carry in their minds and refer to when they look at a given product

Segmented pricing

selling a product or service at two or more prices where the difference in prices is not based on differences in costs

Dynamic pricing

adjusting prices continually to meet changing conditions and situations of the marketplace

Pure competition

many sellers, many buyers, uniform commodity like wheat or copper (marketing research, product development, pricing, advertising, and sales promotion play no role)

Monopolistic competition

many sellers, many buyers, range of prices (use branding, advertising, and personal selling to set their offers apart)

Oligopolistic competition

few sellers, price is a major competitive tool

Pure monopoly

one seller

Is good value the same as low price?

No

Is price revenue generating and is it flexible?

Yes, price is revenue generating and flexible

Supply chain

producing a product or service and making it available to buyers, consists of upstream and downstream partners

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.

Channel of distribution

raw materials to parts supplier to manufacturers to resellers to consumers

Upstream partners

supply the raw materials, components, parts, information, finances, and expertise needed to create a product, or service

Downstream partners

serve as distribution channels that link the firm and its customers

What is an intermediary?

Independent firms which assist in the flow of goods and services from producers to consumers

Why should you use an intermediary?

Intermediaries help a company to promote, sell and distribute its products to its customers

Retailer

firms that buy products from either manufacturers or wholesalers and sell them directly to consumers

Wholesaler

firms that purchases completed products from manufacturers and then sells them to retailers

Are retailers and wholesalers intermediaries?

Yes, retailers and wholesalers are intermediaries

What functions do channel members perform?

Transaction, information, communication, matching, negotiation, physical distribution, financing, and risk taking

What is the difference between direct and indirect channels?

A direct marketing channel has no intermediary levels while an indirect marketing channel has one or more intermediary channels

Example of direct and indirect channels?

Direct: Geico and Quicken Loans, Indirect: Toothpaste, cameras, cars

What is vertical conflict?

Conflict that occurs between different levels of the same channel

How is vertical conflict different than horizontal conflict?

Horizontal conflict occurs among firms at the same level of channel

Who has the most control: direct and indirect channels?

Direct channels

Define a conventional distribution channel

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

How is a conventional distribution channel different than a vertical distribution channel?

A convention distribution channel consist of one or more independent producers, wholesalers, and retailers so each is a separate business seeking to maximize its own profits at the expense of profits for the entire system. However, in a VMS, they act as a unified system

What four things are included with channel design?

Analyzing, setting, identifying major channel alternatives, evaluating the alternatives

Define disintermediation

the cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries

Example of disintermediation?

Lyft is rapidly disintermediating conventional taxicab by offering better customer experiences at lower fares

Intensive distribution and when do you use it?

stocking the product in as many outlets as possible, used for toothpaste, candy, etc

Selective distribution and when do you use it?

giving a limited number of dealers the exclusive rights to distribute the company’s products in their territories, electronics, furniture, and home appliances

Exclusive distribution and when do you use it?

the use of more than one but fewer than all of the intermediaries that are willing to carry the company’s products, used for luxury items

Logistics

planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit

What are the key areas of logistics?

Forecasting, information systems, purchasing, production planning, order processing, inventory, warehousing, transportation planning

Inbound logistics

moving products and materials from suppliers to the factory

Outbound logistics

moving products from the factory to resellers and consumers

Reverse logistics

reusing, recycling, refurbishing, or disposing of broken, unwanted, or excess products returned by consumers or resellers

What is multimodal transportation?

Combining two or more modes of transportation, piggyback, fishyback, trainship, and airtruck

RFID

radio frequency identification, gives the physical location of a product

What is the promotion mix?

the specific blend of promotion tools that the company uses to persuasively COMMUNICATE customer value and build customer relationships

Advertising and what are the pros/cons?

any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor, pros: reaches masses and builds long-term image, cons: impersonal and lacks persuasiveness

Personal selling and what are the pros/cons?

personal customer interactions by the firm’s sales force to engage customers, make sales, and build customer relationships, pros: builds customer relationships, cons: most expensive

Public relations and what are the pros/cons?

activities designed to engage the company’s various publics and build good relations with them, pros: very believable and reaches many, cons: can dramatize a product

Sales promotion and what are the pros/cons?

short term incentives to encourage the purchase or sale of a product or service, pros: attracts attention and wide assortment of tools, cons: short-lived effects

What is Integrated Marketing Communication?

carefully integrating and coordinating the company’s many communications channels to deliver a clear, consistent, and compelling message about the organization and its products

Example of integrated marketing communication

Smart Water

Explain the new marketing communications model

1. Consumers are better informed and more communications empowered.
2. Marketing strategies are shifting away from mass marketing, more focuses programs to build relationships
3. Advances in digital technology is changing the way companies communicate with their customers

What is the difference between a push vs pull strategy?

a push strategy is 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 whereas a pull strategy is 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

Informative advertising

used heavily when introducing a new product category, objective is to build primary demand, communicating customer value, telling the market about a new product

Persuasive advertising

building brand preference, encouraging switching to a brand, more important as competition increases, objective is to build selective demand

Reminder advertising

maintaining customer relationships, reminding consumers that the product may be needed in the future, important for mature products

Example of Informative advertising

Early producers of EVs had to inform consumers on the benefits

Example of Persuasive advertising

GM is trying to persuade consumers that its Chevy Bolt offers more value for the price than Tesla or Nissan Leaf

Example of Reminder advertising

Coca-Cola and Silk soy milk

Is comparative advertising persuasive advertising (see page 389)?

Some persuasive advertising has become comparative advertising, in which a company directly or indirectly compares its brands to other brands

List the advertising budget methods

competitive parity method, objective and task method, percentage of sales method, affordable method

Affordable method

setting the promotion budget at the level management thinks the company can afford

Percentage of sales method

setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price

Competitive parity method

setting the promotion budget to match competitors’ outlays

Objective and task method

developing the promotion budget by defining specific promotion objectives, determining the tasks needed to achieve these objectives, and estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget

Which is the best advertising budget method and why?

The objective and task method, it forces management to spell out its assumptions about the relationship between dollars spent and promotion results

What are the pitfalls of the other advertising budget methods?

The affordable method ignores the effects of promotion on sales, the percentage of sales method wrongly views sales as the cause of promotion rather than the result, the competitive parity method is based on the ideas of competitors and each company differs greatly

What are the key functions of public relations?

Product publicity, public affairs, lobbying, investor relations, development

What are the key tools of public relations?

News, special events, written materials, audiovisual materials, corporate identity materials, public service activities

Define personnel selling.

personal presentation by the firm’s sales force for the purpose of engaging customers, making sales, and building customer relationships

The salesperson represents what?

A company to customers by performing prospecting and communicating, selling and servicing, gathering information and building relationships

Are salespeople boundary spanners?

Yes, salespeople are boundary spanners

What does boundary spanners mean?

They link the company with its customers and coordinate marketing and sales

List the six steps in sales force management.

Designing sales force strategy and structure, recruiting and selecting salespeople, training salespeople, compensating salespeople, supervising salespeople, evaluating salespeople

What happens in designing sales force strategy and structure?

Territorial, Product, or Customer sales force structure. Outside sales force - travel, Inside sales force - via telephone, internet, or visits, Team selling - teams from different department used to service large accounts

What happens in recruiting and selecting salespeople?

A company should analyze the sales job and the characteristics of its most successful salespeople to hire others

What happens during training salespeople?

Teach them about different types of customers, how to sell effectively, and about the company’s objectives, organization, products, and strategies of competitors

What happens during compensating salespeople?

A good compensation plan both motivates salespeople and directs their activities

What’s happening supervising salespeople?

Help salespeople work smart by doing the right things in the right ways

What is a call plan?

shows which customers and prospects to call on and which activities to carry out

List the steps in the selling process

prospecting, pre-approach, approach, presentation, handling objections, closing, and follow up