MGT 103 Final Exam Study Material - UCSD (Ehrich)

Profit Equation

Profit = Total Revenue - Total Costs

or

Profit = (Price X Quantity Sold) - Total Costs

Price

the assignment of value, or the amount the consumer must exchange to receive the offering

Relationship between price and demand

inverse relationship

How would you get an increase in demand without changing price?

Scarcity

Elasticity

a change in price results in great change in quantity demanded

Inelasticity

a change in price results in little to no change in quantity demanded

Fixed Costs

don't change with number of units produced

Variable Costs

production costs that are tied ti the number of units produced

Breakeven Point

costs of producing a product equal the revenue made from selling the product

Types of Variable Costs

raw materials, credit card fees, sales commissions

Types of Fixed Costs

rent, insurance, salary, loan repayment

What is more favorable to investors?

A higher proportion of variable costs to fixed costs

Breakeven Point (Quantity) Equation

Fixed Costs/Contribution Unit Margin

Contribution Margin

the difference between the total revenue and total variable costs

Contribution Unit Margin Equation

Price - Variable Costs

How do you calculate a breakeven price?

Add the amount of profit you want to make to the fixed costs of the equation

1. Type of product

2. Type of target market

3. Purchase situation

KNOW YOUR AUDIENCE!

What does the importance of price depend on?

Cost Based Pricing

calculate price based on company's costs

Competitive Based Pricing

benchmarking on competitor's prices

Demand Based Pricing

setting a price based on what consumers are willing to pay

Captive Pricing

Add ons in games (battle pass in Fortnite, gems in episode)

Predatory Pricing

drive competitors out of the market

Dynamic Pricing

prices that are changed to match competitive prices, and customer demand

Skimming Pricing

charge high initial price and bring it down over time

Penetration Pricing

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

Trial Pricing

pricing a new product low for a limited period of time in order to lower the risk for a customer

Loss-Leader Pricing

choose 1 item to take a loss on to bring in customer

Buyers' Expectations

going to be similar to what you bought before

Odd-Even Pricing

$29.99 vs $30

Bait and Switch Pricing

advertising a low price then switching it

Price Lining

different versions and attributes

Anchor and Adjustment

have an "anchor" in their mind and they "have'" to adjust downwards

Endowment Effect

people are more likely to retain an object they own than acquire that same object when they do not own it

Product, Price, Place, Promotion

The 4 P's

Customer solution, Customer cost, Convenience, Communication

The 4 C's

Economic Forces, Political Forces, Regulatory Forces, Technological Forces, Socio-cultural Forces, Competitive Forces

Six factors that affect the marketing mix

Value Equation

value = customer benefits - customer costs

1. Signal to the consumer the goal they can expect to achieve by using your brand

2. Leverage your points of parity

3. Make your points of difference compelling

What can you do to differentiate your brand?

What is the key final piece to marketing?

distribution

Distribution Channel

manufacturing, distributor, retailer, consumer

Direct Distribution

manufacturer to consumer

Indirect Distribution

involves one or more intermediaries

Why are intermediaries used?

Producers make narrow assortment of products in large quantities, while consumers want broad assortments of products in small quantities

1. Easy to get the product

2. In good condition

3. Convenient for the customer to buy it

4. Setting is consistent with the brand image

Product Value Chain

Full Vertical Integration

a firm controls multiple aspects from supply chain and production to the customer-facing portion of the business

Forward Vertical Integration

manufactures gaining ownership or control over the intermediary at the next level down

Backwards Vertical Integration

retailers might own the manufacturing operation

Determines a product's market presence and buyer's accessibility to the product, entails long-term commitments

Significance of Marketing Channels

intensive distribution

Placing the products in as many stores as possible

exclusive distribution

placing the product in very few outlets

selective distribution

somewhere between intensive and exclusive

Importance of retailing

critical link between the producers and the ultimate customers

Self Service

customers perform many functions during the purchase process

Limited Service

Customers are responsible for most but salespeople are available

Full Service

specialty stores and department stores

Retail atmospherics

exterior and interior atmospherics

1. Group potential buyer into segments

2. Group products sold into categories

3. Develop a market-product guide and estimate size of markets

4. Select target markets

5. Take marketing actions to reach target markets

5 key steps in segmenting and targeting a market

1. Demographic

2. Geographic

3. Psychographic

4. Behavioristic

Segmentation Variables

Psychographic Segmentation

Sociological, lifestyle group, materialism

Behavioral Segmentation

How consumers act towards a product, usage occasions, use status, 80/20 (80% of your sales comes from 20% of your customers)

1. Segmentation

2. Targeting

3. Positioning

Target Market Process

Positioning

designing the company's offer and image so that it occupies a distinct and values place in the target customer's mind

Brand Position

The image that a brand has in the mind of the customer

Points of Parity

attributes that inform the consumer that you are capable of providing something that might work

Points of Difference

What makes your brand unique

Intangibility

services cannot be seen, tasted, felt, heard, or smelled before purchase

Inseparability

the inability of the production and consumption of a service to be separated; consumers must be present during the production

Inconsistency

state of being self-contradictory; lack of uniformity or steadiness

No inventory

Unused service capacity from one time period cannot be stored for future use

Search Attributes

Customers can readily evaluate prior to purchase

Experience Attributes

can only be evaluated after purchase, or once customer has experienced

Credence

Can never be fully evaluated even after purchase

Durable goods

manufactured items that have a life span longer than three years

Value Proposition

Benefits the customer will receive when buying the product

Product Item

A specific product with a unique brand, size, or price

Product Line

A group of products or services that satisfy a class of needs

Product Mix

Consists of all product lines offered by an organization

Continuous innovation

Requires no new learning by customers

Dynamically continuous innovation

Disrupts consumer's normal routine but does not require totally new learning

Discontinuous Innovation

Requires new learning and consumption patterns by consumers

1. Introduction Stage

2. Growth Stage

3. Maturity Stage

4. Decline Stage

Product Life Cycle

Growth Stage of PLC

The product is accepted and sales rapidly increase

Maturity Stage of PLC

Sales peak

Decline Stage of PLC

Sales decrease as customer needs change

Relative Advantage

The degree to which a consumer perceives that a new product provides superior benefits

Compatibility

Consistent with customers values

Complexity

Difficulty to use or understand

Trialability

The ease of sampling a new product and its benefits

Observability

The degree to which others can witness the new product and benefits

Brand Equity

A brand's financial value to its organization

Brand Storytelling

Marketers seek to engage consumer with compelling stories about brands

Sub-branding

Creating a secondary brand within a main brand that can help differentiate a product line

Individual Branding (multibranding)

Separate brands for each product or product line; allows company to serve multiple segments without diluting the image of brands

Umbrella or Family Branding (multiproduct branding)

A single brand for (nearly) all of a company's products

Product Repositioning

Change essential aspect of product to increase relevance

Brand Extensions

Using established brand in a different context

Multichannel Promotional Strategies

Combine traditional mass media with online buzz building activities

Advertising

Personal selling

Public relations

Sales promotion

Direct marketing

5 Primary Elements of the Promotional Mix

One to many model

One to one model

Many to many model

3 Models of Marketing Communication

Pull Promotion Strategy

producers direct their marketing activities toward the final consumer to encourage them to ask retailers (channel members) for the product.