MARKETING II

Business-to-business (B2B) marketing

the process of buying and selling goods or services to be used in the production of other goods and services, for consumption by the buying organization, or for resale by wholesalers and retailers

Resellers

marketing intermediaries that resell manufactured products without significantly altering their form

Derived demand

The linkage between consumers' demand for a company's output and its purchase of necessary inputs to manufacture or assemble that particular output.

North American Industry Classification System (NAICS) codes

A classification scheme that categorizes all firms into a hierarchical set of six-digit codes.

Request for proposals (RFP)

a process through which buying organizations invite alternative suppliers to bid on supplying their required components

Buying centre

the group of people typically responsible for the buying decisions in large organizations (6 roles)

Initiator

the buying centre participant who first suggests buying the particular product or service

Influencer

The buying centre participant whose views influence other members of the buying centre in making the final decision.

Decider

The buying centre participant who ultimately determines any part of or the entire buying decision—whether to buy, what to buy, how to buy, or where to buy.

Buyer

The buying centre participant who handles the paperwork of the actual purchase.

User

The person who consumes or uses the product or service purchased by the buying centre.

Gatekeeper

The buying centre participant who controls information or access to decision makers and influencers.

Organizational culture

Reflects the set of values, traditions, and customs that guides a firm's employees' behaviour.

Autocratic buying centre

A buying centre in which one person makes the decision alone, though there may be multiple participants.

Democratic buying centre

A buying centre in which the majority rules in making decisions.

Consultative buying centre

A buying centre in which one person makes the decision, but he or she solicits input from others before doing so.

Consensus buying centre

A buying centre in which all members of the team must reach a collective agreement that they can support a particular purchase.

New buy

In a B2B setting, a purchase of a good or service for the first time; the buying decision is likely to be quite involved because the buyer or the buying organization does not have any experience with the item.

Modified rebuy

Refers to when the buyer has purchased a similar product in the past but has decided to change some specifications, such as the desired price, quality level, customer service level, and options.

Straight rebuy

Refers to when the buyer or buying organization simply buys additional units of products that had previously been purchased.

Service

Any intangible offering that cannot be physically possessed.

Customer service

Specifically refers to human or mechanical activities firms undertake to help satisfy their customers' needs and wants.

Intangible

A characteristic of a service; it cannot be touched, tasted, or seen like a pure product can.

Inseparable

A characteristic of a service: it is produced and consumed at the same time—that is, service and consumption are inseparable.

Inconsistent

A characteristic of a service: its quality may vary because it is provided by humans.

Inventory

A characteristic of a service: it is perishable and cannot be stored in inventory for future use.

Service gap

Results when a service fails to meet the expectations that customers have about how it should be delivered. (4 types)

Knowledge gap

a type of service gap; reflects the difference between customers' expectations and the firm's perception of those expectations

Standards gap

a type of service gap; pertains to the difference between the firm's perceptions of customers' expectations and the service standards it sets

Delivery gap

a type of service gap; the difference between the firm's service standards and the actual service it provides to customers

Communication gap

a type of service gap; refers to the difference between the actual service provided to customers and the service that the firm's promotion program promises

Service quality

Customers' perceptions of how well a service meets or exceeds their expectations.

Voice-of-customer (VOC) program

an ongoing marketing research system that collects customer inputs and integrates them into managerial decisions

Zone of tolerance

The area between customers' expectations regarding their desired service and the minimum level of acceptable service—that is, the difference between what the customer really wants and what he or she will accept before going elsewhere.

Empowerment

In the context of service delivery, means allowing employees to make decisions about how service is provided to customers.

Distributive Fairness

pertains to a customer's perception of the benefits he or she received compared with the costs (inconvenience or loss) that resulted from a service failure

Procedural Fairness

refers to the customer's perception of the fairness of the process used to resolve complaints about service

Profit orientation

a company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing

Maximizing profits strategy

A mathematical model that captures all the factors required to explain and predict sales and profits, which should be able to identify the price at which its profits are maximized

Target return pricing

A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales.

Sales orientation

a company objective based on the belief that increasing sales will help the firm more than will increasing profits

Competitor orientation

a company objective based on the premise that the firm should measure itself primarily against its competition

Competitive parity

a firm's strategy of setting prices that are similar to those of major competitors

Customer orientation

Pricing orientation that explicitly invokes the concept of customer value and setting prices to match consumer expectations.

Demand curve

Shows how many units of a product or service consumers will demand during a specific period at different prices.

Prestige products or services

Those that consumers purchase for status rather than functionality.

Price elasticity of demand

Measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price.

Elastic

Refers to a market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large changes in the quantity demanded

Inelastic

Refers to a market for a product or service that is price insensitive; that is, relatively small changes in price will not generate large changes in the quantity demanded.

Income effect

Refers to the change in the quantity of a product demanded by consumers because of a change in their income.

Substitution effect

Refers to consumers' ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand.

Cross-price elasticity

The percentage change in demand for Product A that occurs in response to a percentage change in price of Product B.

Complementary products

Products whose demand curves are positively related, such that they rise or fall together; a percentage increase in demand for one results in a percentage increase in demand for the other.

Substitute products

Products for which changes in demand are negatively related—that is, a percentage increase in the quantity demanded for Product A results in a percentage decrease in the quantity demanded for Product B.

Variable costs

Those costs, primarily labour and materials, that vary with production volume.

Fixed costs

Those costs that remain essentially at the same level, regardless of any changes in the volume of production.

Total cost

The sum of the variable and fixed costs.

Break-even point

The point at which the number of units sold generates just enough revenue to equal the total costs; at this point, profits are zero.

Contribution per unit

Equals the price less the variable cost per unit. Variable used to determine the break-even point in units.

Monopoly

Occurs when only one firm provides the product or service in a particular industry.

Oligopoly

Occurs when only a few firms dominate a market.

Price war

Occurs when two or more firms compete primarily by lowering their prices.

Monopolistic competition

Occurs when many firms sell closely related but not homogeneous products; these products may be viewed as substitutes but are not perfect substitutes.

Pure competition

Occurs when different companies sell commodity products that consumers perceive as substitutable; price usually is set according to the laws of supply and demand.

MSRP (manufacturer's suggested retail price)

A price set by the manufacturer, and they mandate the channel partners to sell at this price (manufacturer controls price).

Grey market

Employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer.

Cost-based pricing method

Determines the final price to charge by starting with the cost, without recognizing the role that consumers or competitors' prices play in the marketplace.

Competitor-based pricing method

An approach that attempts to reflect how the firm wants consumers to interpret its products relative to the competitors' offerings. (Can be close to competitors to signal that the product is similar, or a higher price, signalling better quality)

Value-based pricing method

Focuses on the overall value of the product offering as perceived by consumers, who determine value by comparing the benefits they expect the product to deliver with the sacrifice they will need to make to acquire the product. (Improvement Value Method or Cost of Ownership Method)

Improvement value

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

A value-based method for setting prices that determines the total cost of owning the product over its useful life.

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.

Price skimming

A new product pricing strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the next most price-sensitive segment.

Market penetration pricing

A new product pricing strategy of setting the initial price low for the introduction of the new product or service, with the objective of building sales, market share, and profits quickly.

Experience curve effect

Refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price. (Economies of scale)

Reference price

The price against which buyers compare the actual selling price of the product and that facilitates their evaluation process.

Pricing tactics

Short-term methods, in contrast to long-term pricing strategies, used to focus on company objectives, customers, costs, competition, or channel members; can be responses to competitive threats (e.g., lowering price temporarily to meet a competitor's price reduction) or broadly accepted methods of calculating a final price for the customer that is short-term in nature.

Price lining

Consumer market pricing tactic of establishing a price floor and a price ceiling for an entire line of similar products and then setting a few other price points in between to represent distinct differences in quality.

Price bundling

Consumer pricing tactic of selling more than one product for a single, lower price than the items would cost sold separately; can be used to sell slow-moving items, to encourage customers to stock up so they won't purchase competing brands, to encourage trial of a new product, or to provide an incentive to purchase a less desirable product or service to obtain a more desirable one in the same bundle.

Leader pricing

Consumer pricing tactic that attempts to build store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the store's cost.

Markdowns

Reductions retailers take on the initial selling price of the product or service.

Size discount

The most common implementation of a quantity discount at the consumer level; the larger the quantity bought, the less the cost per unit (e.g., per gram).

Coupon

Provides a stated discount to consumers on the final selling price of a specific item; the retailer handles the discount.

Rebate

A consumer discount in which a portion of the purchase price is returned to the buyer in cash; the manufacturer, not the retailer, issues the refund.

Seasonal discount

Pricing tactic of offering an additional reduction as an incentive to retailers to order merchandise in advance of the normal buying season.

Cash discount

Tactic of offering a reduction in the invoice cost if the buyer pays the invoice prior to the end of the discount period. (ex. 3/10, n/30)

Advertising allowance

Tactic of offering a price reduction to channel members if they agree to feature the manufacturer's product in their advertising and promotional efforts.

Listing allowances

Fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products.

Quantity discount

Pricing tactic of offering a reduced price according to the amount purchased; the more the buyer purchases, the higher the discount and, of course, the greater the value. (Cumulative or Noncumulative)

Cumulative quantity discount

Pricing tactic that offers a discount based on the amount purchased over a specified period and usually involves several transactions.

Noncumulative quantity discount

Pricing tactic that offers a discount based on only the amount purchased in a single order.

Uniform delivered pricing

The shipper charges one rate, no matter where the buyer is located.

Geographic pricing

The setting of different prices depending on a geographical division of the delivery areas.

Loss leader pricing

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 deceptive practice of luring customers into the store with a very low advertised price on an item (the bait), only to aggressively pressure them into purchasing a higher-priced item (the switch) by disparaging the low-priced item, comparing it unfavourably with the higher-priced model, or professing an inadequate supply of the lower-priced item.

Predatory pricing

A firm's practice of setting a very low price for one or more of its products with the intent of driving its competition out of business; illegal under the Competition Act.

Price discrimination

The practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of price discrimination are illegal.

Price fixing

The practice of colluding with other firms to control prices.

Horizontal price fixing

Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers.