Untitled Flashcards Set

Unit 2:

product differentiation:

creation of a product feature or product image that differs enough from existing products to attract customers

product positioning:

distinguishing a product or a service from similar products or services being offered to the same market

process of fixing, adapting, and communicating the nature of a product

pricing:

process of determining what a company will receive in exchange for its products

factors determining the price decision:

cost of production

competitive conditions in the market

competitor’s prices

marketing objectives

whether it is a new or existing product

market based pricing:

penetration pricing:

setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales

example: verizon FIOS and optimum

market skimming:

setting a high price for a new product when a firm has a unique or highly differentiated product with low customer sensitivity to price

example: smartphones

Psychological pricing:

Setting prices that take account of the customer's perception of the value of the product

Takes advantage of the fact that consumers do not always respond rationally to stated prices

Odd-Even Pricing: psychological pricing tactic based on the premise that customers prefer prices not stated in even dollar amounts

Example: $.99 and perfume

Loss leader:

Product sold at a very low price to encourage consumers to buy other products in the market

Example: bread and milk

Price discrimination:

Occurs when a business sells the same product to different consumers at different prices

Ex. Airlines

Promotional pricing:

Special low prices to gain market share or sell of excess stock

Example: Mark down and “Buy One Get One Free”(BOGO)

Variable pricing:

Negotiate the price for the product offered for sale.

Example: Car dealer

Promotion: aspect of the marketing mix concerned with the most effective techniques for communicating information about products

Advertising: any form of paid non-personal communication used by an identified sponsor to persuade or inform potential buyers about a product

Personal Selling: person-to person sales

Sales Promotion: direct inducements such as coupons and package inserts to tempt consumers to buy products

Public Relations: communication efforts directed at building goodwill and favorable attitudes in the minds of the public toward the organization and its products

L

Personal Selling: promotional tool in which a salesperson communicates one-on-one with potential customers

Selling Skills:

Ray Kroc, founder of McDonald’s was selling milkshake machines when he was inspired to turn the McDonald brothers’ hamburger restaurant into a national operation

King C. Gillette was a traveling salesman when he invented the safety razor

The Principles of Selling:

Make a Good Personal Impression

Know Your Product or Service

Believe in Your Product or Service

Know Your Field and Your Customers

Prepare Your Sales Presentation

Think Positively

Keep Good Records

Personal Selling Steps:

Preparation

Greeting

Listening to the customer

Showing the product or service

Dealing with objections

Closing the sale

Follow-up

Asking for references

Advertising: Promotional tool consisting of paid, nonpersonal communication used by an identified sponsor to inform an audience about a product

Advertising Objectives

Informative

Used heavily when introducing a new product category

Persuasive

Becomes more important as competition increases

Reminder

Important for mature products

Informative Advertising

Communicating customer value

Building a brand and company image

Telling the market about a new product

Explaining how a product works

Persuasive Advertising

Building brand preference

Encourage switching to a brand

Creating customer engagement

Changing customer perceptions of product value

Reminder Advertising

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 customers mind during off-seasons

Branding Products

Branding: process of using symbols to communicate the qualities of a product made by a particular producer

Brand Awareness: extent to which a brand name comes to mind when a consumer considers a particular product category

Sales Promotion Tools:

Consumer:

Coupons

Contests and Sweepstakes

Refunds and Rebates

Sampling

Premiums

Tie-ins

Bonus Packs

Public Relations: Build positive public relations for your company through involvement in the local community and organizations:

Special events

Sponsorships

Networking

Public speaking

Possible Channels:

Offer as a ‘take away’ option in all their stores

Offer as a home delivery option only

Distribute via gas/fuel stations

Distribute via convenience stores

Distribute via coffee shops

Special vending machines/special kiosks

Distribution Mix (Place): combination of distribution channels by which a firm gets its products to end users

Distribution Channel:

network of interdependent companies through which a product passes from producer to end user

Intermediary:

individual or firm that helps to distribute a product

Direct Channel:

distribution channel in which a product travels from producer to consumer without intermediaries

Wholesaler:

intermediary who sells products to other businesses for resale to final consumers

Retailer:

intermediary who sells products directly to consumers

Sales Agent:

represents producers and meets needs of consumers

Broker:

matches numerous sellers and buyers as needed, often without knowing in advance who they will be

prototype: a model or pattern that serves as an example of how a product would look and operate if it were produced

financing: act of providing or raising funds (capital) for a purpose

financing a business venture through:

debt

equity

savings

obtain gifts and grants

1. debt: borrow money

disadvantages

if loan payments are not made, the lender can force the business into bankruptcy

in case of default, when the borrower fails to meet the repayment agreement, the lender can take the home and possessions of the owner(s) to settle a debt

debt payments increase a business’s fixed costs, thereby lowering profits

advantages

lender has no say in the management or direction of the business

loan payments are predictable

lenders do not share in the business’s profits

2. equity: in return for money, an investor will receive a percentage of ownership in a company

disadvantages

could lose control of the business to the equity holders

riskier for the investor

must share profits with other equity investors

advantages

if the business does not make a profit, the investor does not get paid

no required regular payments

the equity investor has an interest in seeing the business succeed and may, therefore, offer helpful advice and provide valuable contacts

start-up investment or seed capital:

the one-time expense of opening a business

crowdfunding:

connect prospective borrowers and lenders virtually and earn revenues based upon transaction fees

angel investor:

a wealthy individual who invests in businesses

venture capitalist:

investor or investment company whose specialty is financing new, high-potential entrepreneurial companies

return on equity investments by:

selling their percentage share

waiting until the company goes public(starts selling stock on the open market) and trading their ownership shares for cash by selling them

financial statement:

any of several types of reports summarizing a company’s financial status to stakeholders and to aid in managerial decision making

Income statement

Balance sheet

Cash flow statement

income statement:

records the revenue, costs and profit (or loss) of a business over a given period of time

balance sheet:

supplies detailed information about a firm’s assets, liabilities, and owners’ equity at one point in time

cash flow statement:

describes a firm’s cash receipts and cash payments

profit:

amount of money remaining after all costs are deducted from the income of a business

profit is the sign that the entrepreneur is adding value

profit results from the entrepreneur’s choices