Marketing Test #3

Fixed Costs

Costs that do not change regardless of the quantity produced.

Variable Costs

Costs that vary with changes in the level of the quantity

Skimming

Setting the highest initial price that customers desiriing the proudct are willing to pay. (Goes down over time)

Penetration

Setting a low initial price to appeal to the mass market

Prestige pricing

a strategy where high prices are used to suggest superior quality and attract consumers who associate a product with luxury and exclusivity (Battery example)

Odd-even pricing

Prices are set below a round number ($4.99 instead of $5.00)

Target pricing

starts with the price consumers are willing to pay

~ Will ensure that the price is met

~ Aggressive cost reductions to meet profit goals can limit product quality

Bundle Pricing

Bundiling items together (Wendys fofofo)

Yield Management Pricing

Charging different price to maximize revenue from a fixed, perishable inventory

~ Airlines selling cheaper tickets early, higher priced tickets closer to departure.

Standard markup

Adding a fixed percentage to the cost of all items in a specific product class

~ Supermarkets, Sugar: 10~23%

Cost-Plus

Variation of standard markup pricing

~ Calculates the selling price by adding a markup percentage to the total cost of production. 

~ Consulting compant Target cost + Profit for the compant

Target profit pricing

Setting an annual target of a specific dollar volume of profit

Target return on sales pricing

Setting a price to achieve a profit that is a specificed percentage of the sales volume

Target return on investment pricing

Setting a price to achieve an annual target return on investment

Customary Pricing

pricing strategy where the price of a good or service is determined by what customers are accustomed to paying, based on long-standing market practices and consumer perceptions of value.

Above, at, or below market pricing

setting a product's price in relation to the average price of similar products in the market.

Loss Leader Pricing

a strategy where a product is sold at a price below its cost (or below the minimum profit margin) to attract customers and encourage them to purchase additional, higher-margin items.

Break-Even Analysis

Calculates the number of units a company must sell in order to cover its fixed costs.

~ Increase price this point goes down

Profit =

Total Revenue - Total Costs = (Quantity x Price) - (Quantity Sold x Unit Variable Cost + Fixed Cost)

Break Even Point =

Fixed Cost/ Unit Price - Unit Variable Cost (Contribution Margin)

Dollar Sales Break-Even Point

Unit Price x Break Even Point

One-Price Policy

Setting one price for all buyers of a product or service

~ Museum

Flexible-Price Policy

Setting different prices for products or services depending on customer segments, demand cost and competitive factors

Customer- Segment Pricing

Museum

Location Pricing

Different seats at concert

Time Pricing

1-800 Flowers

Channel Pricing

setting different prices for the same product or service based on the distribution channel, like online vs. in-store.

Discounts

Reductions from list or quoted prices to buyers as a reward for some activity of the buyer that is favorable to the seller

~ Consumers: Quantity discounts

~ Wholesalres and Retailers: Seasonal, cash

Allowances

Ex: Trade-in old car when buying a new one and getting a price reductuon

Introduction

~ High Prices signal the products value to potential buyers

Growth

Although competition increases, a high rate of market growth generally limits price competition.

Maturity

Competition begins to put downward pressure on prices.

Decline

§Retrenching to one’s strongest product lines

§Consolidating one’s position by price-cutting

Responding to Competitors Price Cut

1. Reduce its price to match the competitors price

2. Maintain its price but raise the percieved value of its offer

3. Improve quality and increase price

4. Launch a low price “fighting brand”—adding a lower-price item to the line  or creating separate lower-price brand.

   Kimberly-Clark positioned its value priced Scott Towels as “the Bounty Killer”

Distribution Channel

A set of interdependent organizations that help make a product or service avaliable for use or consumption by the consumer or business user

Transactional Function

Buying- Purchasing products for resale as an agent for supply of a product

~ Selling

~ Risk taking

Logistical Function

Assorting

Storing- Assembeling and protecting products at a convient location to offer better customer service

Sorting- Purchasing in large quantities and breaking into smaller amounts desired by customers

Transporting

Facilitating

Financing

Grading

Marketing

Direct Channel

Company straight to consumer

Indirect Channel

When theres anyone in between the manufacturer and the consumer

Dual Distribution

A single firm sets up two or more marketing channels to

reach one or more customer segments.

Vertical conflict

Conflicts between different levels of the same channel (Manufacturer vs retailer)

~ Disagreements over how profit margins are distributed among channel members.

~ Lack of retailers’ attention on manufacturers’ products.

Disintermediation

A channel member bypasses another member and sells or buys products direct

Horizontal Conflict

conflicts among firms at the same level of the channel

~ Exclusive dealers, and Walmart/Sears

Vertical Marketing System

One channel member (Channel Captain) has much more control over the other members

Corporate Systems

Successive stages of production and distribution under single ownership

Forward integration

A producer owns the intermediary at the next level down in the channel

Backward Integration

A retailer owns a manufacturing operation

Contractual systems

~ Independent firms at different levels of production and

distribution join together through contracts to obtain

more economies or sales impact.

~ Franchising- Ford—- Dealers (retail franchise system)

~ Pepsi-Cola—→ Bottlers (Wholesale franchise system)

Administered Systems

Cooridnation is achieved by the size and influence of one channel member rather than ownership

~ P&G

~ Walmart

Horizontal Marketing Systems: Strategic Alliances

Two or more companies at one level join together to follow a new marketing opportunity

~ Companies can combine their financial, production, or marketing resources to accomplish more than any one company could alone.

~ Krispy Kreme and Mcdonalds

Retail Store Marketing Decisions

1. Target Market and Positioning

2. Product Assortment- differentiates the retailer from compeitors

3. Pricining- No price Promotion, “High-Low” pricing, Everyday low Pricing

4. Retail communication- Important in positioning a store and creating brand image

5. Place

Show rooming

A consumer goes into a store to learn about different brands and products and then searches the Internet for the same product sold at a lower price. Amazon wardrobe boxes reduced the need for this

Webrooming

A consumer searches online first and buys at the store. Same day delivery reduced this

Omnichannel

various retail channels run in collaboration and effectively and provide a seamless and synchronized customer experience.

~ a customer-centric strategy that connects all of a retailer's online and offline channels (like website, mobile app, physical store, social media) into a single, seamless shopping experience

Retail Sales Reprentatives

Order Takers: Handle customer requests and inquiries

Door-to-door sales and telemarketing

Order Getters: Persuade customers to buy their produc/service

Pharmaceutical Representatives working with healthcare Professionals

Order Creators: Persuade customers to promote their product/service

Direct Marketing

direct communication with carefully targeted individual consumers to obtain an immediate responsee.g.) direct mail or telephone marketing.

Public Relations

Special events, press conferences etc.

Publicity

Indirectly paid presentation of an organization good or service Ex: News story

Sales promotion

Coupons, samples, etc.

Advertising (Promotional Element)

Whom- Some control based on where ad is placed

What- Great control: company develops message

When- Great control: space may not be avaliable

Personal Selling (Promotional element)

Whom- Great control- depends who salesperson contacts

What- Some control- salesperson can vary presentation

When- Great control- based on salespersons timing of call

Public Relations (Promotional Element)

Whom- No contril over who sees it

What- Little control over what media transmits

When- Little control except for timing of when it occurs

Sales Promotion (Promotional Element)

Whom- Some control over where sent, used, displayed

What- Great control over type of promotion and message

When- Some control over duration

Direct Marketing (Promotional Element)

Whom- Great control with data base selection of recipents

What- great control- company develops message

When- Great control of timing

Integrated Marketing Communication (IMC)

is a strategic process of integrating many communications channels to deliver a clear, consistent, and compelling message about a company and its brands.

Push Strategy

a promotion strategy that calls for using the sales force and trade promotion. (Advertising through others to consumer)

Pull Strategy

a promotion strategy that calls for spending a great amount on advertising and consumer promotion to build up consumer demand. (Advertising straight to the consumer that will come back through other channels)

Pioneering ads (informative ads)

§Telling the market about a new product

§Explaining how the product works

§Reducing consumers’ fears

§Building a company image

Competitive ads (persuasive ads)

§Building brand preference

§Persuading customers to purchase now

§Encouraging switching to your brand

Changing product/brand perception

Reminder ads

§Maintaining the customer relationship

§Reminding of needs in the near future

§Keeping it in the customers’ mind during off-seasons

Affordanle method

setting it at the level companies think they can afford

percentage of sales method

setting it at a certain percentage of current or forecasted sales

  Brand A’s forecasted sales: $200  

  Brand B’s forecasted sales: $100

Competitive-parity-method

setting their promotion budgets to match competitors’ outlays

Objective-and-task method

setting it based on what it wants to accomplish with promotio

Wasted Coverage

If media reaches people who are not buyers or potential user, it is potentially wasted.

Reach

§The number of different people exposed to an advertisement

§Circulation, rating

Frequency

§The average number of times a person in the target audience is exposed to a message

Continous Schedule

Continuous schedule throughout the year (e.g., laundry detergent)

Flighting schedule

Intermittent schedule to reflect seasonal demand (e.g., ski, fishing rods)

Pulse schedule

Continuous Schedule + Flighting schedule

  (e.g., toys)

Cause Marketing

Marketing for a charity or a greater cause

Green Marketing

Marketing green or enviormentally friendly products (Toyota Prius)

Greenwashing

The act of misleading consumers regarding a company’s environmental practices or a product or service’s environmental benefits

Choice Board

An interactive, interent-enabled system that allows individual customers to design their own products by answering a few questions and chossing from a menu of product attributed, prices and delivery systems

Collabrative filtering

filters information by using the interactions and data collected by the system from other users. It’s based on the idea that people who agreed in their evaluation of certain items are likely to agree again in the future.

Personalization

This approach moves away from mass marketing tactics and instead focuses on creating one-on-one experiences, making customers feel seen and understood. (NikeID)

Social Media

~ Improving custiner service

~ Reach new customers

~ Provide product information and support

Unique Value Proposition (UVP) (Search engine ad)

The single thing that sets the site apart from the competition

Ethics

the moral principles and values that govern the actions and decisions for an individual or a group.