MARKETING

What are the types of B2B markets?

Manufacturers, Resellers, Institutions, Government

What is a manufacturer's role in the B2B market?

They buy raw materials and parts that allow them to manufacture their own goods

What is the role of a reseller in the B2B market?

Resellers are marketing intermediaries that resell manufactured products without significantly altering their form (ex. distributers that buy jeans and resell them to Levi)

What is the role of a government in the B2B market?

Central government tends to be one of the largest purchases of goods and services

What are the key challenges of reaching B2B clients?

Must identify the right person in the org to market the product to, Must understand the buying process of each client, Must identify factors that influence the buying process of clients

What are the differences between B2B and B2C markets

Demand for goods and services in B2B derived from B2C sales
Demand is inelastic
Number of buyers is lower and orders are larger
Products ordered are primary raw materials and semifinished goods
Role of the salesman is different as they are more important in B2B

What is the North American Industry Classification System (NAICS)?

It is a 6 digit code that segments the various industries

What are the steps in the B2B buying process?

Step 1: Need Recognition
Step 2: Product Specification
Step 3: RFP (request for proposals) Process
Step 4: Proposal Analysis and Supplier Selection
Step 5: Order Specification
Step 6: Vendor Performance Assessment using metrics

What does step 1 of the B2B buying process entail?

The buying org recognizes through internal or external sources that they have an unfilled need

What does step 2 of the B2B buying process entail?

The buying org will make a list of potential specifications that vendors might use to develop their proposals

What does step 3 of the B2B buying process entail?

The request for proposals is a process through which the buying org invites suppliers to compete on supplying a product

What does step 4 of the B2B buying process entail?

The buying org evaluates all supplier proposals

What does step 5 of the B2B buying process entail?

The firm places its order with the preferred supplier(s), then the supplier sends an acknowledge that it has received the order and will fill it by the specified date

What does the buying order include in step 5 of the B2B buying process?

Description of goods
Delivery dates
Prices
[Sometimes]; Penalty if the order isn't filled on time

What does step 6 of the B2B buying process entail?

The buying org analyze their vendor's performance so they can make decisions about their future purchases

Who makes up the buying centre?

Initiator: Person who suggests buying the product
Influencer: Person who influences other members in making the final decision
Decider: Person who ultimately determines the purchase decision
Buyer: Person who handles the paperwork of the actual purchase
User: Person who actually uses the product Gatekeeper: Person who controls the information and access to decision makers and influencers

Lets say that a medical patient needed screws in their elbow, what would the process of buying these look like in the buying center of the hospital

Initiator: Doctor that suggests the screws
Influencer: Medical Device Supplier
Decider: Hospital
Buyer: Hospital materials manager
User: Patient
Gatekeeper: Purchasing department

What are the 4 different types of buying cultures in an org?

- Autocratic buying centre: only one person makes the buying decision ultimately
- Democratic buying centre: majority rules
- Consultative buying centre: one person makes the decision but gets input from others before
- Consensus buying centre: all members must agree before something is purchased

What are the 3 different types of buying situations?

- New buy: customer purchases product for the first time, meaning it will be quite involved
- Modified rebuy: customer has purchased the product in the past but has decided t change some specifications (price, quality, etc.)
- Straight rebuy: customer makes identical purchase as previously done before

What are the core differences between services and goods?

- Intangible nature: services cannot be touched, tasted, or seen like a product can
- Inseperable production and consumption: the production and consumption of the service occur at the same time (ex. hair cut)
- Inconsistent: the more humans required to deliver the service, the more inconsistent the delivery will be
- Inventory: services cannot be stored for use in the future, they are perishable

What are some steps business can take to eliminate inconsistency in the delivery of their services?

- Training and standardization
- Replacing people with machines
- Internet enabled kiosks

What is a service gap?

results when a service fails to meet the expectations that customers have about how it should be delivered

What are the types of service gaps?

- Knowledge gap
- Standards gap
- Delivery gap
- Communication gap

Describe the knowledge gap

the knowledge gap occurs when the customer's expectations and the firms perception of those customer expectations differ

What are some metrics firms can use to evaluate service quality to close the knowledge gap?

- Reliability: ability to perform the service dependably and accurately
- Responsiveness: willingness to help customers and provide prompt service
- Assurance: knowledge of employees and ability to convey trust and confidence
- Empathy: the caring and individualized attention provided to customers
- Tangibles: the appearance of physical facilities and equipment

What is the voice-of-customer program?

process of collecting customer insights and intelligence to influence and drive business decisions

What is the zone of tolerance?

the area between customers' expectations regarding their desired service and the minimum level of acceptable service

What is a straightforward and inexpensive method of collecting customer's perceptions of service quality?

At the time of sale (ex. Tim's receipts)

What is the standards gap?

the standards gap pertains to the difference between the firm's perception of customers expectations and service standard IT sets

How can firms narrow the standards gap?

by setting appropriate service standards and measuring service performance (can also be done by promoting great service, starting at the top)

What is the delivery gap?

the delivery gap is the different between a firm's service standards and the actual service it provides to customers

How can the delivery gap be closed?

Getting employees to meet or exceed service standards, which can be done by:
- Empowering employees
- Using technology
- Providing support & incentives to deliver outstanding service

What is the communication gap?

the communication gap refers to the different between the actual service provided and the service that the firm promotes

How can the communication gap be closed?

by being more realistic in advertisments

What is service recovery?

refers to the actions taken by a firm in response to service failure

How is service recovery done?

- Listening to the customer (customers need to feel heard)
- Finding a fair solution (people who have been disappointed what to be treated fairly, fairness relates to a customer's perception of benefits received vs the costs)
- Resolving the problems quickly (longer it takes, the more irritated the customer will be and tell others)

What is the definition of pricing?

the overall sacrifice a consumer is willing to make to acquire a specific product or service (money + travel costs + time)

What is the importance of pricing?

Price is the only element of the marketing mix that generates revenue, WITHOUT THE RIGHT PRICE, no sales will occur

What are the 5C's of Pricing?

1. Company Objectives
2. Customers
3. Costs
4. Competition
5. Channel Members

What are company objectives in the 5C's?

Each firm embraces an objective that fits with where management thinks the firm needs to go to be successful

What are the different company orientations? (part of company objectives)

- Profit orientation
- Sales orientation
- Competitor orientation
- Customer orientation

What is profit orientation?

A company objective that focuses on target profit pricing, maximizing profits, or target return pricing

What is target profit pricing and why do firms use it?

Firm's use a certain price level to stimulate a level of sales at a certain profit per unit (when they have a profit goal in mind)

What is maximizing profits strategy?

relies on economic theory to capture all factors required to explain and predict sales and profits, identifies a price at which profits are maximized

What is target return pricing?

strategy designed to produce a specific return on an investment

What is sales orientation?

firms set prices to increase sales more than profits

What is competitor orientation? What is competitive parity?

- firms measure themselves primarily against their competition
- competitive parity means that firms set prices to similar to those of their major competitors

What is customer orientation?

firm attempts to increase value by focusing on customer satisfaction and setting prices to match consumer expectations

What are customers in the 5C's?

The most important "C" because it is about understanding customer's reactions to different prices

What is the coefficient of price for an elastic and inelastic price?

- Elastic prices have a price elasticity of less than 1
- In elastic prices have a price elasticity greater than 1

What are some factors that influence price elasticity?

- Income effect: income change affects product demand
- Substitution effect: how easy it is to substitute one brand for another (more substitutes = more elasticity)
- Cross price elasticity: percent change in quality of A demand when there is a price change in B
- Complementary products: products that increase and decrease in demand together
- Substitute products: products inversely related in terms of demand

What is psychological pricing?

Pricing that attempts to influence a customer's perception of price to make a product's price more attractive

What is odd-even pricing?

setting prices a few dollars or cents under an even number, to influence perception of the product

Odd numbers covey a baraign image (99.99)
Even numbers convey a quality image (200)

What is "costs" in the 5C's?

The costs of a product.

In general prices should NOT be made based on costs, because consumers make purchase decisions based on their perceived value NOT the cost

What are the different types of costs?

- Fixed costs
- Variable costs
- Total costs (VC + FC)

What is a break-even analysis?

Break-even analysis is the process used to determine profitability at various levels of sales.

The break-even point is the point where revenues from sales equal all costs.

What is "competition" in the 5C's?

The different types of market competition/structures that exists

What are the four main types of competition/market structure?

- Monopoly: one firm controls the market
- Oligopoly: several firms control the market
- Monopolistic Competition: many firms selling different products at slightly different prices
- Perfect competition: many firms selling same product for same price

What is "channel members" in the 5C's?

Channel members are manufacturers, wholesales, retailers that can have different perspectives when it comes to pricing strategies

What are grey market transactions?

When the retailer sells the product a much lower price than intended by the manufacturer

Manufacturers MUST protect against this

What are the different types of pricing methods?

- Cost-based methods: determines final price by starting with the cost (assumes cost's don't vary for different production levels)
- Competitor-based methods: company sets prices to reflect the way they want consumers to reflect them relative to competitors offerings
- Value-based methods: an approach that focuses on the overall value of the product offering

What are the two methods in value based pricing method?

- Improvement value method: how much or less a consumer is willing to pay for a product relative to other products, use this to set price
- Cost of Ownership method: determine the price of owning the product over its life, some customers are willing to pay more up front for a product that lasts longer

What is everyday low pricing (EDLP)?

When companies set prices between regular prices and deep-discount sales that their competitors offer, this provides convenience to customers and saves time

What is high/low pricing?

strategy that relies on the promotion of sales when prices are temporarily dropped to increase sales volume

What are new product pricing strategies?

- Price skimming (enter market at high price, reduce gradually, to work the product must be perceived as new and innovative)
- market penetration (enter market at low price in an attempt to gain market share, sometimes allows the experience curve affect, which is reduced costs that come from low prices and so on)

What is a reference price?

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

What is price lining and price bundling?

- Price lining: establishing a price floor and ceiling for a line of products, then setting prices in between to convey different levels of quality
- Price bundling: pricing one or more product for a single lower price (encourages sales of slow moving items and higher incentive to purchase)

What is leader pricing?

Building store traffic by advertising a very popular and well priced item, an hoping customers pick up other items while shopping

What are the types of consumer price reductions

- Markdowns: reduction in price the retailer charges (not pays) to enable them to get ride of slow moving merch
- Quantity discounts for consumers (size discount, more you buy, the cheaper it is)
- Coupons and Rebates (coupon is when retailer handles discount, and rebate is when the manufacturer does)

What are some B2B pricing tactics?

- Seasonal discounts: price reduction to buy in advance of normal buying season
- Cash discounts (reduction in price if paid quickly)
- Quantity discount (reduction in price according to amount purchased) (includes cumulative, over some time to encourage suppliers to stay AND non cumulative, which encourages large order up front)
- Uniform Delivered vs Geographic pricing (uniform delivery cost or specific delivery cost to where you are located)

What are some deceptive or illegal price advertising?

- Deceptive reference prices: inflating reference price to make yours seem better
- Loss leader pricing: tactic that lowers price so low that customers come to your store
- Bait and Switch: lure customers with really good deal and then pressure them into buying something else by comparing unfavourably with another product or only offering a little amounts of it for sale

What is predatory pricing?

the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market

What is price discrimination?

selling the same good at different prices to different buyers

What is price fixing?

the maintaining of prices at a certain level by agreement between competing sellers.

What is horizontal price fixing?

it is an agreement between competitors to fix prices

What is vertical price fixing?

an agreement between a seller and a buyer to fix the resale price at which the buyer will sell goods. (ex. between manufacturer and a retailer)

What is a distribution channel?

the route a product takes from the place it is made to the customer who is the end user

What role do distribution channels have in the supply chain?

They are a part of the overall supply chain

What is supply chain management?

Refers to a set of approaches firms employ to efficiently and effectively integrate their suppliers, manufacturers, etc. into seamless value chain

What are wholesalers?

merchandising companies that sell to retailers

What is the general theory about intermediaries in a supply chain?

The more intermediaries that are involved in the supply chain, the greater the complexity and number of transactions involved for the company to reach customers

What is logistics management (general overview)?

integration of two or more activities to plan and control the flow of goods from production to end users

What activities are included in logistics management?

- Customer service
- Demand forecasting
- Distribution communications
- Inventory control

What is the general theory regarding participants in the supply chain?

Each participate in the supply chain adds value, AND with each step the product becomes more costly BUT also more valuable to the consumer

What is the benefit of a supply with a retailer vs no retailer?

It reduces the amount of transactions involved

What factors do distribution centres add in terms of value?

- Buying
- Selling
- Facilitation of exchange

What are the categories of functions performed by intermediaries?

- Transactional Function
- Logistical Function
- Facilitating Function

What are the transactional functions performed by intermediaries?

- Buying: purchase goods for resale
- Risk taking: inventory can become outdated
- Promotion: promote products to attract customers
- Selling: Transact with potential customers

What are the logistical functions performed by intermediaries?

- Physical distribution: transport goods to point of sale
- Risk taking: maintain inventory and protect goods

What are the facilitating functions performed by intermediaries?

- Gathering information: share competitive intelligence about customers or other channel members
- Financing: extend credit and other financial services to customers

What is channel conflict?

a clash of goals and methods between distribution channel members

When is channel conflict most likely to occur?

When the channel members are independent entities

What is channel style (marketing system) is better for channel conflict, and what is it?

Vertical marketing system, which is one in which the members act as a unified system to maximize benefits and make the system more efficient

What are the 3 types of vertical marketing systems?

1. Administered vertical marketing system: no common ownership, but dominant channel member holds the balance of power (ex. Walmart on PenAgain)
2. Contractual vertical marketing system: independent firms at different levels of the supply join through contracts to obtain economies of scale (ex. franchising)
3. Corporate vertical marketing system: the parent company has complete control and can dictate the priorities and the objectives of the marketing channel as it owns multiple segments of the channel

What is a strategic relationship in a supply chain?

One in which supply chains are committed to painting the relationship in the long run and invest in mutually beneficial opportunities

What does a successful strategic relationship depend on?

- Mutual trust
- Communication
- Common goals
- Credible commitments (tangible ones)

What are the different forms of channel structure?

- Direct distribution
- Indirect distribution
- Multi-channel distribution

What is a direct distribution strategy?

- Distribution channel in which there are no intermediaries between the buyer and seller

Why do some companies choose a direct distribution strategy?

To avoid costs of retailers BUT sometimes companies are forced to do this because there is no room in the retail stores

What is indirect distribution?

- Distribution channel that involves one or more intermediaries that wok with the manufacturer (intermediaries include wholesalers, retailers, etc.)