MKT 3

What is price competition and what is required for price competition to be a successful strategy?

Price competition - Emphasizing price as an issue and matching or beating competitor's prices. For this to be successful, you need to be the low-cost seller of the product and be able to change prices rapidly and aggressively.

What is the difference between a normal demand curve (raising prices leads to lower quantities sold) and the demand curve for a prestige product (raising prices could lead to higher or lower quantities sold)?

In a normal demand curve, higher prices lead to less products sold because less people can afford it or are willing to pay the higher price. With a demand curve for prestige products, low prices may indicate that it is not as prestige as people think and may be considered a cheap quality, and high prices may be TOO high for people to afford or be willing to pay.

What is price elasticity of demand (sometimes just called "elasticity") and what does it mean to marketers?

Price elasticity of demand is a measure of the sensitivity of demand to changes in price. It can tell marketers how their demand will be affected by a change in price (which is the easiest to change of the product mix)

What is the practical result of elastic versus inelastic demand when price changes?

With elastic demand, a slight decrease in price results in a relatively large increase in demand and with inelastic this is the opposite.

What is markup as a pricing strategy? As discussed in class: why do grocery stores carry products with a negative markup (mean that they lose money on the sale)?

Markup - the difference between the cost of a good and its selling price. Grocery stores carry products with a negative markup because it's typically a brand customers will come to the store for, and then they are inside to buy other products.

What are price-skimming, penetration pricing, and differential pricing and in which circumstances are each more likely to be effective?

a. Price Skimming - set a relatively high price at first and then lower it over time. Most popular with electronics, good for inelastic demand, encourages competition.

b. Penetration Pricing - set a relatively low price to drive market share/value perceptions. Designed for high market share, good for elastic products, discourages competition

c. Differential Pricing - charging different prices to different buyers for the same quality and quantity of product. To work, the market must consist of multiple segments with different price sensitivities.

What is bundle pricing?

Bundle Pricing - packaging together two or more complementary products and selling them for a single price. The single price is generally less than the sum of the prices of the individual products.

When it comes to psychological pricing, what are the various forms of odd-even pricing and why do they seem to work?

Odd-Even Pricing - ending prices in odd or non-round numbers. .95 indicates normal selling price, .50 indicates sale. Numbers like $4.99 may be seen as $4 and the more specific the price the more consumers believe it's the lowest price possible.

What are distribution, supply chain, and procedure and how do they impact marketers?

a. Distribution - the decisions and activities that make products available to consumers when and where they want to purchase them. This impacts how marketers can get their products to their target audience.

b. Supply Chain - all the organizations and activities involved with the flow and transformation of products form raw materials through to the end customer. Affects how businesses produce products to sell to their target audience.

c. Procurement - Processes to obtain resources to create value through sourcing, purchasing, and recycling including materials and information. Gives marketers a chance to obtain resources from companies that provide them with the best benefits (lower prices, fast accessibility, etc.).

What is a marketing "channel"?

Marketing Channel - a group of individuals and organizations that direct the flow of products from producers to customers within the supply chain.

What are the different strategies of intensive, selective, and exclusive distribution and what are the circumstances in which each is most appropriate?

a. Intensive - using all available outlets to distribute a product. Appropriate for products that have a high replacement rate, require almost no service, or are bought based on price cues. Must be available at a store nearby and be obtained with minimal search time.

b. Selective - using only some available outlets in an area to distribute a product. Appropriate for shopping products. Desirable when a special effort, such as customer service from a channel member, is important to customers.

c. Exclusive - using a single outlet in a fairly large geographic area to distribute a product. Suitable for products purchased infrequently, consumed over a long period of time, or that require a high level of customer service or information. Used for expensive, high-quality products with high profit margins and is not appropriate for convenience products and many shopping products.

What is logistics and what does it involve?

Logistics is responsible for roles such as: moving goods from suppliers to buyers, moving finished goods to the customer, moving work-in-process materials within a firm, returning or recycling goods, and storing items along the way in supply chains. It involves order processing, inventory management, materials handling, warehousing, and transportation.

What is inventory management and what is the role of "safety stock"?

Inventory management - developing and maintaining adequate assortments of products to meet customers' needs. Safety stock's role is to provide a safety net of inventory to prevent a firm from experiencing a stockout.

What are the costs of carrying too much inventory?

Costs of carrying too much inventory include damage, theft/pilferage, obsolescence, excess capital invested, and freight and storage.

What are stockouts and what do stockout costs include?

Stockouts - shortage of products. Stockout costs include lost sales, future deals, and image and reputation.

What is a reorder point and what does it depend on (order lead times, usage rates, and the level of safety stock you choose)?

a. Reorder Point - the inventory level that signals the need to place a new order.

b. Order Lead Times - the average time lapse between placing the order and receiving it.

c. Usage Rates - the rate at which a product's inventory is used or sold during a specific time period.

d. Safety Stock - the amount of extra inventory a firm keeps to guard against stockouts resulting from above-average usage rates and/or longer-thanexpected lead times.

What is the difference between a private and a public warehouse?

Private warehouses are company-operated facilities for storing and shipping their own products whereas public warehouses are storage space and related logistics facilities that can be leased by companies.

What is a distribution center and what types of purposes does it commonly serve for marketers?

Distribution Center - large, centralized warehouses that focus on moving rather than storing goods.

What are the five major modes of transportation and how do they compare in terms of speed, cost, and flexibility?

Railroads, trucks, waterways, airways, and pipelines. Airways are the fastest mode while pipelines are the slowest. Airways are the most expensive right above trucks, while waterways are the cheapest right below pipelines. Trucks are the most flexible while pipelines are the most automated.

What are the primary sources of value that retailers can offer?

Retailers: add value for customers by providing services and assisting in making product selections; can enhance customers' perception of the value of products by making buyers' shopping experiences easier or more convenient; can facilitate comparison shopping which allows customers to evaluate different options; have sales personnel who know how products can satisfy customer needs or solve problems; can add significant value to the supply chain; play a major role in creating time, place, possession, and (sometimes) utility; and perform marketing functions that benefit ultimate consumers.

For "brick-and-mortar" retailers, what are the primary considerations for locating stores?

Primary considerations for locating stores are position of the firm's target market within the trading area, kinds of products being sold, availability of public transportation, customer characteristics, and placement of competitors' stores.

What is category management in retailing?

Category Management - a retail strategy of managing groups of similar, often substitutable, products produced by different manufacturers. Important for developing a collaborative supply chain.

What is franchising as a business model? What are the different roles and obligations of franchisors and franchisees?

a. Franchising - an arrangement in which a supplier (franchisor) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration.

b. The franchisor may receiver a percentage of total sales in exchange for furnishing equipment, buildings, management know-how, and marketing assistance to the franchisee.

c. The franchisee supplies labor and capital, operates the franchised business, and agrees to abide by the provisions of the franchise agreement.

What are the primary advantages and disadvantages of the franchise model for franchisors and franchisees?

a. Franchisors advantages - gains fast and selective product distribution without incurring the high cost of constructing and operating its own outlets, the franchisee is likely to be very highly motivated to succeed, and success of the franchise means higher income for the franchisor.

b. Franchisor disadvantages - gives up a certain amount of control when entering into a franchise agreement with an entrepreneur, individual establishments may not be operated exactly according to the franchisor's standards.

c. Franchisee advantages - able to start a business with limited capital and benefits from the business experience of others, lower failure rates than independent retail establishments and are often more successful because they can build on the established reputation of the national brand, can obtain guidance and advice from the franchisor at little to no cost if there are problems, and received materials for local advertising and can benefit from national promotional campaigns sponsored by the franchisor.

d. Franchisee disadvantages - franchisor can dictate many business aspects, franchisee must pay to use franchisor's name, products, and assistance, onetime franchise fee and continuing royalty and advertising fees (often collected as a percentage of sales), must often work very hard with long hours and days, franchise agreements are not uniform.

What are off-price retailers and how can they charge less while still making a profit?

Off-price Retailers - stores that buy manufacturers' seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts. They can charge less and still make a profit because they are buying their products at such a low price.

What are wholesalers and what are their common functions?

a. Wholesalers - an individual or organization that sells products that are bought for resale, for making other products, or for general business operations.

b. They are primarily responsible for physical distribution of products from manufacturers to retailers. They may also: establish information systems to help producers and retailers manage the supply chain; use information technology and the internet to share info among intermediaries, employees, customers, suppliers, and facilitating agencies; and make databases and marketing information systems available to their supply chain partners to facilitate order processing, shipping, and product development and to share information about changing market conditions and customer desires.

What is a full-service wholesaler and what are the common types (general-merchandise, rack jobbers)?

a. Full-service Wholesalers - a merchant wholesalers that performs the widest range of wholesaling functions.

b. General-merchandise - have a wide product mix but limited depth within product lines

c. Limited-line wholesalers - carry only a few product lines but many products within those lines

d. Specialty-line wholesalers - carry only a single product line or a few items within a product line

e. Rack jobbers - full-service, specialty-line wholesalers that own and maintain display racks in stores

What is a limited-service wholesaler and what are the common types (drop shipper, truck jobber)?

a. Limited-service wholesalers - a merchant wholesaler that provides some services and special in a few functions

b. Cash-and-carry wholesalers - limited-service wholesalers whose customers pay cash and furnish transportation

c. Truck wholesalers (jobbers) - limited-service wholesalers that transport products directly to customers for inspection and selection

d. Drop shippers (desk jobbers) - limited-service wholesalers that take title to goods and negotiate sales but never actually take possession of products

e. Mail-order wholesalers - limited-service wholesalers that sell products through catalogs

What are agents and brokers? What makes them different than wholesalers (do they ever take ownership of products)?

a. Agents - represent either buyers or sellers on a permanent basis

b. Brokers - bring buyers and sellers together temporarily

c. Different from wholesalers because they never take title to products like wholesalers do.

What is integrated marketing communication and why is it important for marketers?

IMC - a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time". It's important because having an awareness of IMC allows companies to create multi-pronged marketing campaigns that target wider audiences.

What are the definitions and concepts related to: source, receiver or audience, coded and decoded messages, channel, noise, feedback, and channel capacity?

a. Source -a person, group, or organization with a meaning it tries to share with a receiver/audience.

b. Receiver/Audience - the individual, group, or organization that decodes a coded message.

c. Coded/Decoded Messages - a coded message is the message from the source to the communications channel, a decoded message is the message given from the communication channel to the receiver. the process of coding messages involves converting your message into a series of signs or symbols. The source must consider certain characteristics of the receiver and needs to use signs or symbols that the receiver uses and understands. It also involves the decoding process which is where signs or symbols are converted into concepts and ideas.

d. Channel - the way in which a message is given to the receiver (commercial, ad, radio, etc.)

e. Noise - Anything that reduces a communication's clarity and accuracy

f. Feedback - the receiver's response to a decoded message. Can be verbal and nonverbal. Feedback can occur through talking, teaching, smiling, nodding, eye movements, and other body movements and postures.

g. Channel Capacity - the limit on the volume of information a communication channel can handle.

What are the major marketing objectives of promotion?

The major objectives of promotion are to inform the market, increase demand, and differentiate a product.

What are the four parts of the promotion mix (advertising, public relations, sales promotion, personal selling)? What are the advantages and disadvantages of each?

a. Advertising - a paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media. Advantages: extremely cost-efficient when it reaches a vast number of people at a low cost per person and visibility gained can enhance an organization's image. Disadvantages: absolute dollar outlay can be high, rarely provides rapid feedback, often difficult to measure effect on sales, and less persuasive than personal selling.

b. Personal Selling - a paid personal communication that seeks to inform customers and persuade them to purchase products in an exchange situation. Advantages: involves more specific communication than advertising, has greater impact on customers, and provides immediate feedback. Disadvantages: expense (hiring, training, commissions) and availability of talent.

c. Public Relations - a broad set of communication efforts used to create and maintain favorable relationships between an organization and its stakeholders. Should be viewed as an ongoing program rather than a set of tools.

d. Sales Promotion - an activity or material that acts as a direct inducement, offering added value or incentive for the product to resellers, salespeople, or customers. Fast growing area. Advantages: improves effectiveness of other promotion-mix ingredients. Disadvantages: expense.

What is the difference between "push" and "pull" strategies and when is each best used?

Push strategies try to "push" products onto consumers which things like brand reps and displays. Pull strategies try to "pull" the consumer into the product by using things like coupons and contests/prizes.

What is word-of-mouth marketing and which types of products is it most important for?

Word-of-Mouth Marketing - personal, informal exchanges of communication that customers share with one another about products, brands, and companies. Most effective for new-to-market and more expensive products.

What is product placement and what are its advantages and disadvantages for marketers?

Product placement - the paid inclusion of branded products or brand identifiers through audio and/or visual means, within mass media programming. Advantages: reaches target audience in subtle way, used to increase sales, increase brand awareness, and draw in customers. Disadvantages: expensive, difficult to monitor efficiency, often associated with actors.

What is a target audience and how does it relate to segmentation?

Target Audience - the group of people whom advertisements are aimed. Advertisers research and analyze advertising targets to establish an information base to establish segmentation for a campaign.

What is the difference between sales-based and communication-based objectives in advertising (and which advertising is generally most effective in achieving)?

Sales-based objectives focus on increasing sales or market share while communication-based objectives focus on increasing product/brand awareness, consumers' knowledge and attitudes, and awareness of good consumer behavior.

What are the top three methods of setting advertising budgets (objective-and-task, percentage of sales, and competition-matching) and which is the most common?

a. Objective-and-Task - budgeting for an advertising campaign by first determining its objectives and then calculating the cost of all the tasks needed to attain them.

b. Percentage of Sales - multiplying the firm's past and expected sales by a standard percentage (often an industry average). This is the most common method.

c. Competition-Matching - trying to match competitors' advertising outlays (often with the goal of preserving market share)

What are the major advantages and disadvantages of advertising media (TV, radio, newspapers, magazines, direct mail, digital media, outdoor)?

a. Newspapers advantages - reach large audience, purchased to be read, geographic flexibility, short lead time, frequent publication, favorable for cooperative advertising, and merchandising services. Newspaper disadvantages - not selective for socioeconomic groups or target market, short life, limited reproduction capabilities, large advertising volume limits exposure to any one advertisement.

b. Magazines advantages - demographic selectivity, good reproduction, long life, prestige, geographic selectivity when regional issues are available, read in leisurely manner. Magazine disadvantages - high costs, 30- to 90-day average lead time, high level of competition, limited reach, communication less frequently.

c. Direct mail advantages - little wasted circulation, highly selective, circulation controlled by advertiser, few distractions, personal, stimulates actions, use of novelty, relatively easy to measure performance, hidden from competitors. Direct mail disadvantages - very expensive, lacks editorial content to attract readers, often thrown away unread as junk mail, criticized as invasion of privacy, consumer must choose to read the ad.

d. Radio advantages - reaches 95% of consumers, highly mobile and flexible, very low relative costs, ad can be changed quickly, high level of geographic and demographic selectivity, encourages use of imagination. Radio disadvantages - lacks visual imagery, short life of message, listeners' attention limited because of other activities, market fragmentation, difficult buying procedures, limited media and audience research.

e. TV advantages - reaches large audiences, high frequency available, dual impact of audio and video, highly visible, high prestige, geographic and demographic selectivity, difficult to ignore, on-demand capabilities. TV disadvantages - very expensive, highly perishable message, size of audience not guaranteed, amount of prime time limited, lack of selectivity in target market.

f. Digital media advantages - immediate response, potential to reach a precisely targeted audience, ability to track customers and build databases, highly interactive medium, real-time analytics. Digital media disadvantages - costs of precise targeting are high, inappropriate ad placement, effects difficult to measure, concerns about security and privacy.

g. Outdoor advantages - allows for frequent repetition, low cost, message can be places close to point of sale, geographic selectivity, operable 24 hours a day, high creativity and effectiveness. Outdoor disadvantages - message must be short and simple, no demographic selectivity, seldom attracts readers' full attention, criticized as traffic hazard and blight on countryside, much waster coverage, limited capabilities.

What are the three types of media scheduling patterns (continuous, flighting, pulsing) and what type of products are each best suited for?

a. Continuous - advertising runs at a constant level with little variation throughout the campaign period. For products and services consumed on a consistent basis throughout the year (ex. toothpaste).

b. Flighting - advertisements run for set periods of time, alternating with periods in which no ads run. For products with distinct seasonal patterns (ex. chocolate Easter eggs).

c. Pulsing - during the entire campaign, a portion of advertising runs continuously, and during specific time periods additional advertising is used to intensify the level of communication with the target audience. For products consumer year round but with some seasonality (ex. swimwear).

What are reach, frequency, and gross rating points when it comes to measuring the impact of an advertising campaign?

a. Reach - how many people or what percentage of the target audience were exposed to our ads?

b. Frequency - How many times, on average, were they exposed to our ads?

c. Gross Rating Points - what is the total communication impact of the campaign, across media channels or over a particular channel?

What are the different roles of pre-tests and post-tests in creating and evaluating ad campaigns?

A pre-test is an evaluation of advertisements performed before a campaign begins while a post-test is an evaluation of advertising effectiveness after the campaign.

What are the differences among recognition tests, unaided recall tests, and aided recall tests?

a. Recognition Test - a posttest in which respondents are shown the actual ad and are asked if they remember seeing or hearing it

b. Unaided Recall Test - a posttest in which respondents are asked to identify advertisements they have seen recently but are not given any recall clues

c. Aided recall test - a posttest that asks respondents to identify recent ads and provides clues to jog their memories

What are ad agencies? How do they work with companies and how do they get paid?

Ad agencies help organizations develop their advertising campaign. They handle copywriting, artwork, technical production, and formulation of the media plan. They are typically paid as a percentage (commission) of the money spent on media (standard 15% but is declining), sometimes agencies are paid fees for services such as research, consulting, etc.

What are the differences between advertising and public relations? How can they work together?

Public relations is defined as communication efforts used to create and maintain favorable relations between an organization and it stakeholders whereas advertising communicates to a target audience with the intent to inform, persuade, or to remind. They can work together to create one consistent message for the target audience.

Who are the "stakeholders" on PR? How do they compare to the target audience for ad campaigns?

Stakeholders can be employees in the company, the management/shareholders of the company, the community members, consumers, the target audience, and anyone else who has some sort of stake in the company. The target audience for an ad campaign are generally consumers while stakeholders include other groups of people.

What are the advantages and limitations of externally focused PR and publicity in the promotional mix?

a. Advantages of publicity-based PR tools - credibility, news value, significant word-of-mouth communications, a perception of media endorsement, and low cost compared to advertising.

b. Limitations of publicity-based PR tools - media personnel must judge company messages to be newsworthy if the messages are to be published or broadcast at all, and there is no control over the content of the timing of the communication.

What are advantages and disadvantages of personal selling as part of the promotional mix?

a. Advantages: gives marketers the greatest freedom to adjust a message to satisfy customers' information needs, is the most precise of all promotional methods which enables marketers to focus on the most promising sales prospects, and is the most effective way to form relationships with the customers.

b. Disadvantages: is generally the most expensive element in the promotion mix, and it's difficult to recruit, train, and retain an excellent sales team

What is changing (trends) in the world of personal selling?

Increased professionalism, driven by data and buyer insights, AI and predictive analytics, more focus on alignment between sales and marketing.

What are common sources of prospects, and what is a "qualifying" prospect?

a. Common sources include company sales records, trade shows, databases, public records, responses to ads, seminars and meetings, referrals, etc.

b. A qualifying prospect is someone who resembles the seller's ideal customer profile.

What are the typical criteria for qualifying prospects and turning them into leads?

To determine if prospects turn into leads sellers may ask: Does the prospect represent a good fit in our target market? Has the prospect indicated interest? And do they have the ability and authority to buy?

What are the different roles of "inside sales" and "outside sales" on a sales team?

Inside sales take orders, follow up on deliveries, and provide technical information. Outside sales are more consultative and are built on developing long-term relationships.

What are the roles of sales enablement, customer success teams, and account management?

a. Sales Enablement- provides salespeople with what they need to engage their target buyers including content that sales will provide to the buyer and the best practices, research, and tolls that sales will consume internally.

b. Customer Success Teams - makes sure that a product helps customers achieve whatever goals they have

c. Account Management - part of the sales effort, usually is responsible for customer retention, upsells, and cross-sales. First contact from customer who have a specific question or problem.

What is team selling and why is it increasingly important?

Team Selling- the use of a team of experts from all functional areas of a firm, led by a salesperson, to conduct the personal selling process. More important today because of team buying (more people involved in the prospect's buying process), long time periods involved, and products and solutions are increasingly complex.

What is sales promotion? What is it designed to accomplish and why has it gained importance?

Sales Promotion - an activity and/or material intended to induce resellers or salespeople to sell a product, typically in the short term. Designed to stimulate resellers' demand and effectiveness, increasing consumer demand, or both. Gained importance due to the expense of advertising.

Why is couponing the most common consumer sales-promotion technique, and what are the trends in coupon redemption rates?

Typical redemption rates of printed coupons range from 0.5%-2%. Average coupon redemption rates from email coupons via desktop channels are at 2.7%. Coupons via smartphone apps have rates between 8%-16%. Retailers who offer both email and SMS coupons see rates of 15%-25%. Couponing is the most common technique because it stimulates interest and encourages consumers to purchase products.

What is premium money ("spiff")? What scenarios is it most effective?

Premium Money - extra compensation to salespeople for pushing a line of goods. Is appropriate when personal selling is an important part of the marketing effort.

What are the general advantages and disadvantages of sales contests and buy-back allowances?

Sales contest advantages -can achieve participation at all distribution levels. Sales contest disadvantages - positive effects may be temporary, prizes usually expensive.

b. Buy-back allowances advantages - foster cooperation during an initial sales promotion effort, stimulate repurchase afterward. Buy-back allowance disadvantages - expense.

What are premiums and when are they most effective?

Premiums - items offered free or at a minimal cost as a bonus for purchasing a product. Most effective when a brand has high equity and there is a good fit between the product and the premium.

What are advantages of (free) sampling? Why is it the most expensive sales-promotion method?

It is the most expensive because production and distribution entail high costs. Advantages include an increase in sales, potential new loyal customers.

What are refund and rebates and loyalty ad frequent-user programs? What are their uses?

a. Money refunds - sales-promotion techniques that offer consumers a specified amount of money when they mail in a proof of purchase, usually for multiple product purchases. Used primarily to promote trial use of a product.

b. Rebates - sale-promotion techniques in which a consumer receives a specified amount of money for making a single product purchase. Used to reinforce brand loyalty and to encourage product purchase.

c. Loyalty Ad Frequent-user Programs - provides rewards for customers for spending money at a certain business seen as rewarding customers for their "loyalty" to the business. Used to track customer purchases, generates data to contribute information about consumers.

What is co-operative ("co-op") advertising and how does it work for both manufacturers and retailers?

Cooperative Advertising - an arrangement in which a manufacturer agrees to pay a certain amount of a retailer's media costs for advertising the manufacturer's products. Retailer must show proof that advertisements did appear before the manufacturer pays the agreed-upon portion of the advertising costs.

What are the keys to effective sales contests (from in-class video)?

Focus on key activities, keep the contest short, talk about the concert.