Introduction to Marketing Final Fall 2025

University of Iowa

Additional 3 P’s

presentation, personnel, processes

Service gap between customer expectations for service quality and management perceptions of customer expectations

knowledge gap

Service gap between management perceptions of customer expectations and standards specifying service to be delivered

standards gap

service gap between standards specifying service to be delivered and actual service that is delivered

delivery gap

service gap between actual service delivered and retailer communications about service quality

communication gap

service recovery paradox

if you have a problem with a product or service, and the company recovers, you are more likely to be loyal to the company than if you had not experienced a problem

5 C’s of pricing

company objectives, customers, costs, competition, channel members

company objective: profit oriented

setting a companywide policy requiring all products to yield a certain profit margin to meed a set profit goal

company objective: sales-oriented

setting prices very low to generate higher sales and gain market share

company objective: competitor oriented

setting prices low to generate new sales and gain market share from competitors at the cost of profits

company objective: customer oriented

pricing reflects what customers are willing to pay

monopoly

less price competition, one firm controls market. ex. google

monopolistic competition

many firms sell differentiated products at different prices ex. watch brands

oligopolistic competition

handful of firms control the market

pure competition

many firms sell commodities for the same prices ex. soda

cooties heuristic

people think they can pick up good vibes, like wearing grandmas wedding ring.

income effect

people like more expensive things when they start to make more money

cross price elasticity

if a substitute goes up in price, people switch to the cheaper sub; but if complementary good rises in price so does the complement

razor and blades strategy

making one complementary item cheaper and one more expensive

dynamic pricing

constantly shifting prices like MLB tickets which pushes consumers to pay more depending on demand; stub hub is an example

penetration pricing

low initial price during the introduction of a new product/service

price skimming

higher prices to appeal to segments who are willing to pay a premium to have the item early

deceptive price advertising

bait and switch: illegal- promising to offer a lower price and then actually selling the item at a higher price

predatory pricing

ex. amazon- pricing far below other companies to drive them out of business

price discrimination

charging certain people more or less for the same good depending on their income

price fixing

managers from different companies colluding to set fixed prices for a good or service

anchoring and adjustment

the anchor is an initial price given to the consumer, which doesnt need to make logical sense and after that, consumers make their own adjustment based on the anchor set. ex salary negotiation

shrinkflation

during recessions, either prices or quantities must be adjusted and in this case, it is when quantities are decreased

priming

prior exposure to something lowers the threshold of attention so that it will be more likely to get noticed. ex buying a car and noticing it more often on the road.

prospect theory

people are risk-averse over prospects involving gains and more risk taking when it involves a loss

loss aversion

concept that losing a $100 hurts more than making $100

charm pricing

concept that anything below a rounded number feels cheaper ex. when iTunes charged 0.99 cents per song

wholesalers

intermediary that acts between manufacturers and retailers- they add value to the product.

costco is an example of a:

retailer and wholesaler

distribution centers

send goods out directly to individual retailers

fulfillment centers

ship products directly to individual consumers

quick response inventory systems/ just in time inventory

keeping less merchandise on a more frequent basis

Kaizen

is the Japanese philosophy of continuous improvement

toyota production system

was the first car company to manufacture 10 million cars. uses JIT and defect prevention to produce more and better

vertical channel conflict

members of the same channel conflicting, ex. the manufacturer disagreeing with the retailer

horizontal channel conflict

members of the same level within a marketing channel disagree

why did walmart put sears out of business

sears was in malls in cities, walmart went for small towns between 5 &10,000

leaverage buyout

when a larger company targets a smaller one and buys it. happens when future cash flows will be high, there is money in the bank, or the company is being mis managed. henry b tippie came up with this concept

the innovators dilemma

is the decision that companies weigh on whether they should keep doing what they do well or switch to a new and more risky technology

retailing

adds value to products and services sold to consumers for thier personal or family use

retailing process

choosing retailing partners —> identifying types of retailers —> developing a retail strategy —> managing an onmichannel strategy

intensive distribution

puts products in as many places as possible

selective distribution

relies on a few selected retail customers in a territory

exclusive distribution

grants exclusive geographic territories

intangible

any service involving a deed or performance that cannot by physically possessed

inseparable

production and consumption of the service usually happen at the same time- customer takes part in production

heterogeneity

quality of the service depends on the employee providing it

perishable

services cannot be stored or saved

scrambled merchandising

retailer has broad and random assortment of inventory that is outside of the usual format

omnichannel

ex- order online and pickup in store, buy online and return in store

brand equity

consumers thoughts and feelings towards a brand

the communication process

sender (firm) —> transmitter (encodes the message) —> communications (media) —> receiver (consumer)

AIDA model

awareness, interest, desire, action

aided recall

measures awareness, goal is to gain consumer attention

top of mind awareness

goal is for a brand to gain acceptance in the maturity stage ex. coke trying to maintain position of advantage in the market

lagged effect

occurs when marketing communications dont have immediate effects ex. DeBeers jewelry trying to convince consumers to spend 3 months salary on a ring

interactive advertising

personal selling, sales promotions (contests) , direct marketing (telemarketing), online marketing (social media)

passive advertising

sales promotions (coupons), PR, direct marketing (catalogs), direct marketing (email)

PR

is gaining trust as people are becoming more skeptical about marketing

competitive parity

communication budget is set so that firms share of communication expenses is that of the market share

percentage of sales

communication budget is a fixed % of forecasted sales

available budget

forecasting sales during budgeting period but expenses + profit is reserved for the communication budget

great advertising:

changes perception. like Malboro when they were only marketed to women, repositioned to include men and emphasize masculinity.

informative advertising

used to build brand awareness and push consumer through the buying cycle

peresuasive advertising

usually used during growth and maturity stages, when competition is most intense

reminder advertising

used to prompt repurchases and is used after the product has gained market acceptance in the maturity stage

institutional advertisement

promotes a company, corp, business, or their features

Rosser Reeves

was a copywriter responsible for M&M’s melts in your mouth, not your hands creating lots of unique selling propositions

informational appeal

helps consumers make buying decision based on factual information

emotional appeal

aims to satisfy consumers emotional

continuous advertising

runs steadily throughout the year

flighting

implemented in spurts- ex. seasonally

pulsing

combines continuous and flighting with a base schedule and increased during certain periods of the year

during ad creation:

type of medium determines the execution, creativity is important but should not overpower the message, and execution must match the medium

puffery

legal exaggeration of praise stopping just short of deception

high low pricing

creates the thrill of the chase for the lowest price

premium

being offered a reward for making a purchase

discount

being offered a certain amount off of regular sale price

equation for customer lifetime value

lifetime revenue - lifetime cost

lifetime revenue equation

revenue per sale * number of transactions

lifetime costs equation

cost of acquisition + (cost to serve * number of transactions)

Gross profit equation

price - cost

gross profit margin equation

(price - cost) / price

Mark up %

(price - cost) / cost

Integrated marketing campaign

campaign that spreads across various advertising channels