BUSML 3250 Final Exam

What is a price?

price is the sum of all the values that customers give up to gain the benefits of having or using a product or service.

Value-based pricing

uses buyers' perceptions of value as the key to pricing. Price is considered along with all other marketing mix variables before the marketing program is set.

Good value pricing - offering the right combination of quality and good service at a fair price.

Value Added Pricing - Rather than cutting prices to match competitors, they add quality, services, and value-added features to differentiate their offers and thus support their higher prices

Cost-based pricing

involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for the company's effort and risk.

Cost plus pricing - adding a standard markup to the cost of the product. Construction companies, for example, submit job bids by estimating the total project cost and adding a standard markup for profit.

Break even pricing - The firm sets a price at which it will break even or make the target return on the costs of making and marketing a product.

Competition-based pricing

involves setting prices based on competitors' strategies, costs, prices, and market offerings.

Demand curves

shows the number of units the market will buy in a given time period at different prices that might be charged

Price elasticity of demand

how responsive demand will be to a change in price. If demand hardly changes with a small change in price, we say demand is inelastic. If demand changes greatly, we say the demand is elastic.

Pricing new products: Market-skimming pricing vs. Market-penetration pricing

Skimming - With each new generation of Apple iPhone, iPad, or Mac computer, new models start at a high price then work their way down as newer models are introduced

Penetration - Companies set a low initial price to penetrate the market quickly and deeply—to attract a large number of buyers quickly and win a large market share. The high sales volume results in falling costs, allowing companies to cut their prices even further

Product mix pricing strategies

product line pricing - setting prices across an entire product line
optional product pricing - Pricing optional or accessory products sold with the main product
captive product pricing - Pricing products that must be used with the main product
by-product pricing - Pricing low-value by-products to get rid of or make money on them
product bundle pricing - Pricing bundles of products sold together

For example, Quicken offers an entire line of financial management software, including Starter, Deluxe, Premier, Home & Business, and Rental Property Manager versions priced at $29.99, $64.99, $94.99, $104.99, and $154.99, respectively

Reference prices

aspect of psychological pricing. prices that buyers carry in their minds and refer to when looking at a given product

Price image

When designing price strategies price image must be considered as to how it influences shopping behaviour.
Similar to brand image however it is uni-dimensional as opposed to multidimensional as price is main focus.
Price image \= a function of two types of factors: retail based factors which retailers can directly influence, and consumer based factors which are personal and can't be influenced by retailers directly

Everyday low pricing vs. high-low pricing

Create value in different ways
EDLP saves search costs of finding lowest overall prices
High/low provides the thrill of the chase for the lowest price

Odd-even pricing

Ending the price with certain numbers (odd numbers just under even numbers) to influence buyers' perceptions of the price or product

Price-quality relationship

The perception of price as an indicator of product quality (e.g., the higher the price, the higher the perceived quality of the product.)

Loss leader pricing

the pricing policy of setting prices very low or even below cost to attract customers into a store

Legal and ethical aspects of pricing

price-fixing states that sellers must set prices without talking to competitors.

predatory pricing—selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.

How do channel members add value?

by bridging the major time, place, and possession gaps that separate goods and services from those who use them. information, promotion, contact, matching, negotiation, physical distribution, financing, risk taking

Direct marketing channels

has no intermediary levels—the company sells directly to consumers. Omaha steaks sells directly to consumer

Indirect marketing channels

containing one or more intermediaries.
Producer -\> retailer -\> consumer.
Producer -\> retailer -\> wholesaler -\> consumer.

Channel design decisions

1) Analyzes customer needs
2) setting channel objectives
3) identifying major channel alternatives
4) evaluate

Channel conflict

channel members often disagree on who should do what and for what rewards. Such disagreements over goals, roles, and rewards generate conflict

Horizontal conflict occurs among firms at the same level of the channel.

Vertical conflict, conflict between different levels of the same channel, is even more common. For example, McDonald's has recently faced growing conflict with its corps of 3,100 independent franchisees

Types of distribution: intensive

a strategy in which they stock their products in as many outlets as possible. These products must be available where and when consumers want them

Types of distribution: selective

the use of more than one but fewer than all of the intermediaries who are willing to carry a company's products. Most consumer electronics, furniture, and home appliance brands are distributed in this manner

Types of distribution: exclusive

in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Exclusive distribution is often found in the distribution of luxury brands

Logistics

involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. In short, it involves getting the right product to the right customer in the right place at the right time profitably.

What is retailing?

includes all the activities involved in selling products or services directly to final consumers for their personal, nonbusiness use.

STP in a retail setting

Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets

Retail atmospherics

Retailers want to create a unique store experience, one that suits the target market and moves customers to buy

What is wholesaling?

all the activities involved in selling goods and services to those buying for resale or business use

Functions of wholesalers

Selling and promoting. Wholesalers' sales forces help manufacturers reach many small customers at a low cost. The wholesaler has more contacts and is often more trusted by the buyer than the distant manufacturer.

Buying and assortment building. Wholesalers can select items and build assortments needed by their customers, thereby saving much work.

Bulk breaking. Wholesalers save their customers money by buying in carload lots and breaking bulk (breaking large lots into small quantities).

Warehousing. Wholesalers hold inventories, thereby reducing the inventory costs and risks of suppliers and customers.

Transportation. Wholesalers can provide quicker delivery to buyers because they are closer to buyers than are producers.

Financing. Wholesalers finance their customers by giving credit, and they finance their suppliers by ordering early and paying bills on time.

Risk bearing. Wholesalers absorb risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence.

Market information. Wholesalers give information to suppliers and customers about competitors, new products, and price developments.

Management services and advice. Wholesalers often help retailers train their salesclerks, improve store layouts and displays, and set up accounting and inventory control systems.

What is promotion?

consists of the specific blend of advertising, public relations, personal selling, sales promotion, and direct marketing tools that the company uses to engage consumers, persuasively communicate customer value, and build customer relationships

IMC (Integrated Marketing Communications)

carefully integrating and coordinating the company's many communications channels to deliver a clear, consistent, and compelling message about the organization and its products

Purpose: 1.) consumers are changing. In this digital, wireless age, consumers are better informed and more communications empowered. Rather than relying on marketer-supplied information, they can use the internet, social media, and other technologies to find information on their own. 2.) marketing strategies are changing. As mass markets have fragmented, marketers are shifting away from mass marketing. 3.) sweeping advances in digital technology are causing remarkable changes in the ways companies and customers communicate with each othe\`

The communication process model

Sender. The party sending the message to another party—here, McDonald's.

Encoding. The process of putting thought into symbolic form—for example, McDonald's ad agency assembles words, sounds, and illustrations into a TV advertisement that will convey the intended message.

Message. The set of symbols that the sender transmits—the actual McDonald's ad.

Media. The communication channels through which the message moves from the sender to the receiver—in this case, television and the specific television programs that McDonald's selects.

Decoding. The process by which the receiver assigns meaning to the symbols encoded by the sender—a consumer watches the McDonald's commercial and interprets the words and images it contains.

Receiver. The party receiving the message sent by another party—the customer who watches the McDonald's ad.

Response. The reactions of the receiver after being exposed to the message—any of hundreds of possible responses, such as the consumer likes McDonald's better, is more likely to eat at McDonald's next time, hums the "i'm lovin' it" jingle, or does nothing.

Feedback. The part of the receiver's response communicated back to the sender—McDonald's research shows that consumers are either struck by and remember the ad or they email or call McDonald's, praising or criticizing the ad or its products.

Noise. The unplanned static or distortion during the communication process, which results in the receiver getting a different message than the one the sender sent—the consumer is distracted while watching the commercial and misses its key points.

Key considerations in designing a marketing communications message

-identify the target audience
-determine the communication objectives
-design a message
-choose the media through which to send the message
-select the message source
-collect feedback.

What is advertising?

Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

Key advertising objectives: inform

is used heavily when introducing a new product category. In this case, the objective is to build primary demand. Thus, early producers of big-screen HDTVs first had to inform consumers of the image quality and size benefits of the new product.

Key advertising objectives: persuade

becomes more important as competition increases. Here, the company's objective is to build selective demand. For example, once HDTVs became established, Samsung began trying to persuade consumers that its brand offered the best quality for their money.

Key advertising objectives: remind

Maintaining customer relationships.
Reminding consumers where to buy the product
Reminding consumers that the product may be needed in the near future
Keeping the brand in a customer's mind during off-seasons

Setting advertising budget and strategy

Budget: A brand's advertising budget often depends on its stage in the product life cycle. For example, new products typically need relatively large advertising budgets to build awareness and to gain consumer trial. In contrast, mature brands usually require lower budgets as a ratio to sales. Also, brands in a market with many competitors and high advertising clutter must be advertised more heavily to be noticed above the noise in the marketplace. Undifferentiated brands—those that closely resemble other brands in their product class (soft drinks, laundry detergents)—may require heavy advertising to set them apart. When the product differs greatly from those of competitors, advertising can be used to point out the differences to consumers.

Strategy: consists of two major elements: creating advertising messages and selecting advertising media.

Types of advertising appeals: rational

concerned with an appealing price point and with highlighting the benefits of owning the product

Types of advertising appeals: emotional

pulls on the customers' heartstrings to get them to purchase a product or service because of its high quality, its use as a status symbol or its connection to the individual's deep-seated interests.

Types of advertising appeals: moral

directed to a consumers sense of what is right and proper. Often used to exhort people to support social and ethical issues

What is public relations and what are the major PR tools?

Press relations or press agency. Creating and placing newsworthy information in the news media to attract attention to a person, product, or service.

Product and brand publicity. Publicizing specific products and brands.

Public affairs. Building and maintaining national or local community relationships.

Lobbying. Building and maintaining relationships with legislators and government officials to influence legislation and regulation.

Investor relations. Maintaining relationships with shareholders and others in the financial community.

Development. Working with donors or members of nonprofit organizations to gain financial or volunteer support.

What is personal selling?

Personal presentation by the firm's sales force for the purpose of engaging customers, making sales, and building customer relationships

What is sales management?

analyzing, planning, implementing, and controlling sales force activities. It includes designing sales force strategy and structure as well as recruiting, selecting, training, compensating, supervising, and evaluating the firm's salespeople

How can sales forces be organized?

A company can divide sales responsibilities along any of several lines. The structure decision is simple if the company sells only one product line to one industry with customers in many locations. In that case the company would use a territorial sales force structure. However, if the company sells many products to many types of customers, it might need a product sales force structure, a customer sales force structure, or a combination of the two.

What are the key considerations when hiring, training, and supervising salespeople?

Hiring: a company should analyze the sales job itself and the characteristics of its most successful salespeople to identify the traits needed by a successful salesperson in its industry. Then it must recruit the right salespeople
Training: Therefore, an effective training program teaches them about the company's objectives, organization, products, and the strategies of major competitors.
Supervising:Companies vary in how closely they supervise their salespeople. Many help salespeople identify target customers and set call objectives. Some may also specify how much time the sales force should spend prospecting for new accounts and set other time management priorities. One tool is the weekly, monthly, or annual call plan that shows which customers and prospects to call on and which activities to carry out. Another tool is time-and-duty analysis. In addition to time spent selling, the salesperson spends time traveling, waiting, taking breaks, and doing administrative chores.

Know the steps in the personal selling process

Prospecting - identifying qualified potential customers.
Pre-approach - Before calling on a prospect, the salesperson should learn as much as possible about the organization (what it needs, who is involved in the buying) and its buyers (their characteristics and buying styles).
Approach - the salesperson should know how to meet and greet the buyer and get the relationship off to a good start.
Presentation - the salesperson tells the "value story" to the buyer, showing how the company's offer solves the customer's problems.
Handling Objections - the salesperson should use a positive approach, seek out hidden objections, ask the buyer to clarify any objections, take objections as opportunities to provide more information, and turn the objections into reasons for buying.
Closing - The sales step in which a salesperson asks the customer for an order.
Follow-Up - The sales step in which a salesperson follows up after the sale to ensure customer satisfaction and repeat business.

Sales promotions

consists of short-term incentives to encourage the purchase or sales of a product or service

What is a push vs. pull strategy and what role do the different elements of the promotion mix play in both?

Push Strategy: A push promotional strategy involves taking the product directly to the customer via whatever means, ensuring the customer is aware of your brand at the point of purchase.
Pull Strategy: is where interest for a specific product or service is created within a target audience that then demands the product from channel partners. This causes the product to be "pulled" through the manufacturer's sales channel

What are direct and digital marketing?

involve engaging directly with carefully targeted individual consumers and customer communities to both obtain an immediate response and build lasting customer relationships. Companies use direct marketing to tailor their offers and content to the needs and interests of narrowly defined segments or individual buyers

What are the benefits of direct and digital marketing to both buyers and sellers?

Companies use direct marketing to tailor their offers and content to the needs and interests of narrowly defined segments or individual buyers. In this way, they build customer engagement, brand community, and sales.

What are the forms of digital and social media marketing?

online marketing (websites, online ads and promotions, email, online videos, and blogs), social media marketing, and mobile marketing.

What are the traditional direct marketing forms?

face-to-face selling, direct-mail marketing, catalog marketing, telemarketing, direct-response television marketing, and kiosk marketing

What are the new forms of digital, social, and mobile marketing?

omni-channel retailing, websites, online advertising, emails, viral (online videos) marketing, blogs, social media, mobile phones

What policy issues exist with respect to direct and digital marketing?

COPPA - which requires online operators targeting children to post privacy policies on their sites. They must also notify parents about any information they're gathering and obtain parental consent before collecting personal information from children under age 13.
TRUSTe - audit privacy and security measures and help consumers navigate the internet safely
Digital Advertising Alliance - Among other measures, the self-regulatory principles call for online and mobile marketers to provide transparency and choice to consumers if online viewing data are collected or used for targeting interest-based advertising

Be able to identify and define paid vs. owned vs. earned media in the digital space

Paid - refers mostly to traditional advertising
Earned - cannot be bought or owned; it can only be gained organically, when content receives recognition and a following through communication channels such as social media and word of mouth.
Owned - Owned media is any web property that you can control and is unique to your brand. One of the most common examples is a website

Identifying competitors at the market vs. industry level

Market: Here they define competitors as companies that are trying to satisfy the same customer need or build relationships with the same customer group.
Industry: company must understand the competitive patterns in its industry if it hopes to be an effective player in that industry

Blue ocean strategy

Rather than competing head-to-head with established competitors, many companies seek out unoccupied positions in uncontested market spaces. They try to create products and services for which there are no direct competitors. Goal is to make competition irrelevant

Basic competitive strategies

Entrepreneurial marketing: Most companies are started by individuals who live by their wits. They visualize an opportunity, construct flexible strategies on the backs of envelopes, and knock on every door to gain attention. (Samuel Adams)

Formulated marketing: As small companies achieve success, they inevitably move toward more-formulated marketing. They develop formal marketing strategies and adhere to them closely.

Intrapreneurial marketing: Many large and mature companies get stuck in formulated marketing. They pore over the latest Nielsen numbers, scan market research reports, and try to fine-tune their competitive strategies and programs. These companies sometimes lose the marketing creativity and passion they had at the start. They now need to build more marketing initiative and "intrapreneurship"—encouraging employees to be more entrepreneurial within the larger corporation—recapturing some of the spirit and action that made them successful in the first place.

market leader

the firm with the largest market share (40%)

market challenger

runner-up firms that are fighting hard to increase their market share (30%)

market followers

other runner-up firms that want to hold their share without rocking the boat (20%)

Market nichers

firms that serve small segments not being pursued by other firms. (10%)

Porter's Five Forces

is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.

1. Competition in the industry;

2. Potential of new entrants into the industry;