COB 300D Marketing Final Exam (Atav)

Marketing helps create

Value

Production-Oriented Era

Turn of the 20th century

Believed a good product would sell itself

Sales-Oriented Era

1920-1950

production and distribution techniques became more sophisticated

customers consume less or manufacture items themselves.

Firms responded to their overproduction depending on heavy doses of personal selling and advertising.

Market-Oriented Era

After WWII,

Buyers market (lots of options to buy)

Value-Based Era

-Focused on giving the customer what they want, but at a better value

-You get what you pay for... but price is not the most important factor

SWOT analysis

strengths, weaknesses, opportunities, threats

portfolio analysis (BCG matrix)

stars, cash cows, question marks, dogs

Stars

high market share, high market growth

Cash Cows

high market share, low market growth

Dogs

low market share, low market growth

Question Marks

low market share, high market growth

market penetration

selling more of the same to the same types of people (lowest risk)

market development

selling the existing products to new types of consumer (medium risk)

product development

selling new products to existing customers (medium risk)

diversification

selling new products to new consumer (highest risk)

Ansoff Growth Matrix

Segmentation

divide the total market into smaller segments

geographic segmentation

Value by region, Market Size, Customer Convenience, Population Shifts

demographic segmentation

segmenting markets by age, gender, income, ethnic background, and family life cycle

psychographic segmentation

segmenting markets on the basis of personality, motives, lifestyles

geodemographic segmentation

geographic, demographic, lifestyle

Benefit Segmentation

the process of grouping customers into market segments according to the benefits they seek from the product

Behavioral Segmentation

dividing a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product

Segment Identification

Who is in the market

What are their needs

Distinct separation of segments

Segment Substantiality

segment must be large enough to warrant marketing mix

Segment Reachability

Market must be accessed through persuasive communications and product distribution

Segment Responsiveness

Customers reaction must be similar to and positive to the firm's offering

Segment Profitability

the profitability of a particular type of consumer or market segment, determined by analyzing the revenues generated through the sale of products and services to that type of consumer or segment

Segment Profitability Equation

(segment size x segment adoption percentage x purchase behavior x profit margin percentage) - fixed costs

Profit Margin Percentage

(selling price - variable costs) / selling price

Undifferentiated Targeting Strategy

aka: Mass Marketing

"focuses on the similarities in needs of the customers as opposed to the differences"

Differentiated Target Strategy

A strategy in which an organization targets two or more segments by developing a marketing mix for each segment

Concentrated Targeting Strategy

a strategy used to select one segment of a market for targeting marketing efforts

Micromarketing

- tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments

- it includes local marketing and individual marketing

Five C's of Pricing

competition

COSTS

company objectives

CUSTOMERS

channel members

Demand Curves and Pricing

how many units of a product or service consumers will demand during a specific period of time at different PRICES

price elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price

Price Elastic

Factors Influencing Price Elasticity of Demand

(1) Substitution Effect

(2) Cross-Price Elasticity

(3) Income Effect

Substitution Effect

- Consumers' ability to substitute other products for the focal brand.

- The greater the availability of substitute products, the higher the price elasticity of demand

Cross-Price Elasticity

the percentage change in the quantity of Product A demanded compared with the percentage change in price in Product B

Income Effect

the change in the quantity of a product demanded by consumers due to changes in their incomes

Break-Even Analysis and Decision Making

useful technique that enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales

Break-Even Point

Fixed costs / contribution per unit

Monopoly Competition

One producer dominating the industry, leaving no room for competitors

Oligopoly Competition

Handful of competitors selling products that can be similar or different

monopolistic competition

A market structure in which barriers to entry are low and many firms compete by selling differentiated products

Pure Competition

A market structure with many competitors selling virtually identical products. Barriers to entry are quite low.

Channel Members

Businesses or individuals who assist in moving goods and services from the producer to the consumer

What is Value-Based Pricing Methods

approaches to setting prices that focus on the overall value of the product offering as perceived by the consumer

What are Value-Based Methods

Improvement Value Method

Cost of Ownership Method

Improvement Value Method

represents an estimate of how much more (or less) consumers are willing to pay for a product relative to other comparable products

Cost of Ownership Method

consumers may be willing to pay more for a particular product because, over its entire lifetime, it will eventually cost less to own than a cheaper alternative

Pricing Strategies

a long-term approach to setting prices broadly in an integrative effort (across all the firm's products) based on the five Cs of pricing

Everyday Low Pricing (EDLP)

A strategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale prices their competitors may offer.

High/ Low Pricing

a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases

New Product Pricing Strategies

penetration pricing

price skimming

Penetration Pricing

setting a low initial price on a new product to appeal immediately to the mass market

Price Skimming

Charging the highest possible price that buyers who most desire the product will pay

Pricing Tactics

Short-term pricing responses to opportunities or threats.

Pricing Tactics Aimed at Consumers

1. Markdowns

2. Quantity Discounts for Consumers

3. Seasonal Discounts

4. Coupons

5. Rebates

6. Leasing/Rentals

7. Price Bundling

8. Leader Pricing

9. Price Lining

Markdowns

the reductions retailers take on the initial selling price of the product or service

integral component of the high/low pricing strategy

Quantity Discounts for Consumers

- The more you buy the cheaper the unit cost

- Size discount is most common form

Seasonal Discounts

price reductions offered only during certain times of the year

Coupons

offer a discount on the price of specific items when they're purchase issued by manufacturers and retailers

Rebates

refunds paid to consumers after a purchase

leasing/rentals

consumers pay a fee to purchase the right to use a product for a specific amount of time

Price Bundling

selling more than one product for a single, lower price

Leader Pricing

a price tactic in which a product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store

Pricing Lining

when marketers establish a price floor and a price ceiling for an entire line of similar products and then set a few other price points in between to represent distinct differences in quality

Legal and Ethical Aspects of Pricing

1. deceptive or illegal price advertising

2. predatory pricing

3. price discrimination

4. price fixing

Deceptive or Illegal Price Advertising

Deceptive reference prices

Loss-Leader pricing

Bait and Switch

Deceptive Reference Prices

fictitious higher "regular" prices make sale prices seem better

Loss-Leader Pricing

takes the tactic of leader pricing one step further by lowering the price below the store's cost

Bait and Switch

A store advertises bargains that do not really exist to lure customers in, in hopes that they will buy more expensive merchandise.

Predatory Pricing

selling a product below cost to drive competitors out of the market

Price Discrimination

the business practice of selling the same good at different prices to different customers

Price Fixing

an agreement between two or more firms on the price they will charge for a product

Distribution Intensity

the number of channel members to use at each level of the marketing channel; divided into 3 levels

1. Intensive

2. Exclusive

3. Selective

Intensive Distribution

stocking the product in as many outlets as possible

Exclusive Distribution

giving a limited number of dealers the exclusive right to distribute the company's products in their territories

Selective Distribution

selling through only those intermediaries who will give the product special attention

The Communication Process

the steps between a source and a receiver that result in the transfer and understanding of meaning

1. The Sender

2. The Transmitter

3. Encoding

4. The Communication Channel

5. The Receiver

6. Noise

7. Feedback Loop

The Sender

the originator of the message in the communication process

The Transmitter

An agent or intermediary with which the sender works to develop the marketing communications

Encoding

converting the sender's ideas into a message

The Communication Channel

The medium that carries the message.

The Receiver

the person who decodes a message

Noise

any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the medium; a problem for all communication channels

Feedback Loop

allows the receiver to communicate with the sender and thereby informs the sender whether the message was received and decoded properly

How Consumers Perceive Communication

-receivers decode messages differently

-senders adjust messages according to the medium and receivers' traits

Setting and Allocating the IMC Budget

1. Objective and task method

2. Percentage of Sales

3. Competitive Parity

4. Available Budget

objective and task method

Developing the promotion budget by (1) defining specific promotion objectives

(2) determining the tasks needed to achieve these objectives

(3) estimating the costs of performing these tasks.

The sum of these costs is the proposed promotion budget.

percentage of sales method

A method of advertising budget allocation based on a percentage of the previous year's sales, the anticipated sales for the next year, or a combination of the two.

competitive parity method

sets the promotion budget to match competitors' outlays

Available Budget

Marketers forecast their sales and expenses, excluding communication, during the budgeting period

Measuring Success Using Marketing Metrics

1. Frequency

2. Reach

3. Gross rating points

4. Web tracking

Gross Rating Points (GRPs)

a measure used for comparing the effectiveness of different media vehicles:

average reach x frequency

continuous advertising schedule

runs steadily throughout the year

flighting advertising schedule

implemented in spurts, with periods of heavy advertising followed by periods of no advertising