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M370 Lecture Notes - Final Exam Portion

by: Elizabeth Frabotta

M370 Lecture Notes - Final Exam Portion BUS-BE 375

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Organized Marketing - M370 notes from the first class after Midterms to the final class before Finals.
Kitzmiller G
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This 38 page Bundle was uploaded by Elizabeth Frabotta on Wednesday November 11, 2015. The Bundle belongs to BUS-BE 375 at Indiana University taught by Kitzmiller G in Fall 2015. Since its upload, it has received 61 views. For similar materials see BUS-BE: I-CORE in Business at Indiana University.


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Date Created: 11/11/15
M370 Lectures Part 2 10/12/2015 ▯ Price ▯ 3 Major Pricing Strategies ▯ Price Elasticity of Demand ▯ Pricing Formulas ▯ ▯ Ex. True Religion jeans – send all of us to buy them, what would make price vary?  Sell Below Cost  holding inventory costs money (>sale), sunk cost and need to recover something, **Opportunity Cost** o Opportunity cost – only have so much retail space, place products you can make a lot of margin on ▯ Everything is ALMOST Negotiable ▯ ▯ Pricing ▯ Price>Elasticity & Demand>New Product Pricing>Product Mix Pricing ▯ ▯ - Gas prices are relatively inelastic ▯ - Demand Changes and Behavior Changes  somewhat elastic ▯ - Inelastic: people grumble, but they still fill their tank, demand doesn’t change much by price changes ▯ *Consumers are not always rational, certainly not about price ▯ ▯ *Price is established when currency for exchange changes hands* (p.297) ▯ ▯ (Seller=>)If Price= or < Perceived Value; and Price > Price Floor….Exchange could happen (<=Buyer) ▯ ▯ Harvard Business Review: any time perception of benefits is greater than perception of price, we gain market share ▯ ▯ Major Pricing Strategies ▯ What’s cost, what do consumers think, what’s demand, what’s competition  Customer Value Based Pricing  Cost Based Pricing  Competition Based Pricing ▯ - Price is not based on cost ▯ ▯ Price Elasticity  % change Quantity/% Change in Price  If <1, Inelastic  If >1, Elastic  Perfectly Elastic Demand Curve  Horizontal Line  Perfectly Inelastic  Vertical Line (little substitute)  For relatively elastic, small change in price = large change in Q  Relatively inelastic (ex. Gas)  Perfectly inelastic (monopolistic prices, company can’t raise price that much because they are regulated) ▯ Using Elasticity to Set Prices  Lost Opportunity o High price, elastic  Gold Rush o High price, inelastic  Alignment o Medium price, elastic  The One that Got Away o Medium price, inelastic  Price is King o Low price, elastic  Don’t go here o Low price, inelastic ▯ P. 260-265 in text ▯ Factors that Affect Pricing  Industry  Economy  Demand  Elasticity  Influencers: Gov’t, Social ▯ Ex Q: Cost of 690, want 30% margin, what is selling price?  986 ▯ (What’s our margin as a % of our selling price?) ▯ 690/(1-.30)  ▯ Second q: Unit cost of 200, achieve margin of 20% based on cost  what is selling price? 240  200+(200*.20)=240**only applies when we have markup as a percentage of the cost ▯ ▯ Pricing Fundamentals ▯ Proposed Selling Price (Retail) ▯ Product Cost ▯ Difference between Retail and Product Cost is Margin or Mark-Up ▯ Ex. Proposed Selling=$100 ▯ Product Cost=$55 ▯ Margin=100-55=45 ▯ ▯ Cost Based Markup=.82 (Markup$/Cost)  45/55 ▯ Retail Based Markup (Mur)= 45% (Markup$/Retail)  45/100 ▯ Markup Dollars= Margin+Product Cost ▯ ▯ Formulas  Price=Markup+Cost  Markup=Price-Cost  Cost=Price-Markup  Markup % of price= Markup/Price  Markup % of cost= Markup/Cost ▯ **IF we are given markup as % of cost, we can find price  Price=Cost + (cost*markup%) o Price=Cost*(Markup%+1) ▯ **IF given markup as % of selling price  Price=(Cost/1-Markup%)  ▯  =200*1.2=240  240*1.2=$288 ▯ ▯ Cost-Plus Pricing  P=2000  C=1333.333  MU=666.67  MUp=.3335  MUc=.5  ***TRY TO SOLVE FOR WEDNESDAY  wishes to have 50% markup  charges 2000 for a thing (price), find 5 unknowns ▯ ▯ MUp=MU$/Price$ ▯ MUc=MU$/Cost$ ▯ Price$=MU$+Cost$ ▯ C$=Price$-MU$ ▯ ▯ Day 2 ▯ Power of Price ▯ Very powerful influencer on consumer behavior ▯ Flexible ▯ Easy to change ▯ Easy to communicate differences relative to competitors ▯ - pricing is a key element of the total marketing mix used to quickly adjust consumer perception of a market offering ▯ - several different broad strategies marketers can consider when pricing ▯ - price should be set by assessing consumer perceived value not cost ▯ - elasticity of an offering can guide strategy ▯ ▯ ex. M Corp sells to Distributor 1 who sells to Retailer. Costs M Corp 500 to make 50 units. M Corp receives 20% margin on price. Distributor 1 receives 20% margin on Price. Retailers receives 10% markup on cost. What does retailer charge? ▯ ▯ 10/(1-.2)= 12.5 selling price for M Corp ▯ 12.5/(1-.2)=15.625 ▯ (15.625)*.10+15.625=17.1875 ▯ ▯ Why is iPhone 6 expensive? Why is iPhone 5 cheaper?  Costs a lot to develop  Many people will pay a lot  There are different segments at different price levels  Apple uses SKIMMING Pricing ▯ ▯ Price Skimming  Charging a high premium price at start & drop later  Product benefits that customers want at any cost  Little chance that competitors can enter market quickly  Several customer segments with different levels of price sensitivity ▯ Will skimming work for a candy bar?  Not if we want to directly compete with Snickers  Dove did this  Originally in specialty shops  Eventually lowered prices, but never came down to level of snickers bc want to be seen as the lexus or audi of candy bars  Can work for candy bar ▯ Penetration Pricing  A new product is introduced at lower price  Low price encourages demand and sales in early stages of product life cycle  Discourages competitors from entering the market  Pioneering brand ▯ Product Mix Pricing  Product line  Optional product  Captive product  Product bundling ▯ Managing Product Lines  Most firms have multiple products in given category  Requires strategic thinking about relationship of products  Price is key factor in conveying different brands to consumer ▯ Product Line Pricing  Price jumps based on features  Consider competition  Requires review of product costs  ▯ The goal of pricing is to optimize the individual markup for each product in the line  True or False??  The goal is to optimize profits on the product line, not the individual products  Pricing must have consistency across the line to avoid negative consumer sentiment ▯ Optional Product Pricing  Start with one model and add options o Leather seats, upgraded audio, custom wheels to cars ▯ ▯ Throughoustly study price, chapter 7 ▯ Review marketing by the numbers pp.355-360 ▯ Read readings 5,6,7 ▯ Homework to be posted ▯ Study help session Friday AM ▯ Price=cost+(costxmarkup) ▯ Price=cost/(1-markup) ▯ ▯ Elasticity of Demand ▯ Demand < 1  inelastic ▯ Demand > 1  elastic ▯ ▯ **Sample Questions** ▯ This photo of different iPads at differing prices shows…  Product Line Pricing  Not different models over time, not price skimming ▯ Retailer Q buys product Q from Distributor paying $3 each, with 20% MUp. Genco (maker/marketer) has cost of $1.50 per unit and a margin on prie of 25%. What is MU % cost for distributor? ▯ 3+(1*.2)=6.6 (6.6-3.0=3.6 MU) ▯ 3.375 ▯ 3/.8=3.75 ▯ **markup% price  price=c/(1-MU%p) ▯ 1.5/(.75)= $2 Genco ▯ Distributor’s P=$3 ▯ ▯ 3-2/2=.5  Genco Distributor Retailer ▯ P $2 3 3.75 ▯ M $0.50 1 .75 ▯ C $1.5 $2 3 ▯ M%p .25 .333 .2 ▯ M%c .333 0.5 .25 ▯ ▯ ▯ Price=1.5/(1-.25)  $2 ▯ 2-1.5=0.50 markup ▯ 0.50/1.5=.3333 ▯ Price Genco= Cost Distributor Price Distributor = Cost Retailer Price=3/(1-.2)=3.75 ▯ ▯ ▯ ▯ Price Bundling  Ex. Computer  monitor, mouse, keyboard, processor  Selling two or more products for a single price  Ex. Value meal at fast food restaurants ▯ Product Option Pricing  Adding additional features etc ▯ Product Line Pricing  Cars ▯ ▯ Psychological Pricing  Quality is associated with price  High price creates a quality signal ▯ Internal Reference Price  You likely know the current price of gasoline  You may not know the price of an oven  Internal, reference prices help us know when we’re getting a bargain ▯ ▯ Price Adjustments  Why do we change price? o Competition o Liquidity (can quickly sell more) o End of season (bring in new stuff, opportunity cost) o Broken assortments (missing pieces) o Change in macro-economic conditions  How do we change price? o Discounts o Allowances o Segment Based Pricing o Promotional Pricing o Dynamic Pricing ▯ Geographic Pricing  Pricing based on location o Apple prices their phones by region o Target takes markdowns based on performance of product by geographic cluster ▯ Dynamic Pricing  Adjust Price to Demand o Stocks o Airlines o Hotels o Football tickets ▯ Price Adjustments  Consumers determine price in their own way ▯ ▯ Ex. Q: Season tickets for a sporting event are considered which strategy?  Price Bundling ▯ Which of the following is an example of captive product pricing?  C. Razors and blades  Given options on an airplane, Optional Pricing ▯ Research on wine reveals higher prices are associated w/ better taste by consumers. This is an example of what type of pricing effect? ▯ ▯ Marketing by the Numbers ▯ ROI price=Unit Cost + [(ROI x Investment)/(Unit Sales)] ▯ Unit Cost= Variable Cost + (Fixed Costs/Unit Sales) ▯ BreakEvenUnits=BEPunits=FC/(P-VC) ▯ BEP$=BEPuxP ▯ Breakeven with profit goal  ▯ Volumeunits=(FC+profit goal)/(p-vc) ▯ Sales=VolumeuxP ▯ ▯ Practice Problems ▯ 1. Unit cost 200, sells for 450, what is BEP units for 200,000 Fixed costs? ▯ BEPu=FC/(p-vc) ▯ 200,000/450-200 ▯ =200,000/250=800 units ▯ ▯ 2. A manufac unit cost 200 sells for 450, 200,000 fixed, what is BEP $ ▯ BEPu=800x450=$360,000 ▯ ▯ 3. Unit cost 500 sells for 800, what is BEP+Profit goal UNIT VOLUME if fixed = 1,200,000 firm wants 1,000,000 profit goal ▯ 1200000+1000000/ 800-500 ▯ 2200000/300=7,333.333 desks ▯ ***in reality it is 7,334 desks ▯ ▯ ▯ READINGS ▯ 5: “If Brands are Built Over Years..”  shows how some brands are managed for promotions while a long- term view allows a better pricing strategy  What is scanner data? o By quarters, we look at scanner data, we put it on sale  more revenue, manage it for the short term o If that’s all you look at (short term), you’re not managing the brand equity  What is main point of the article?  What should companies DO as a result? o Long Term Data = Long View o We can look at what sales could be over long term by forming baseline, this would’ve been our baseline sales if we hadn’t put it on sale o Focus on Brand Equity ▯ 6: “How to Stop Customers from Fixating on Price”  Commoditization!  Four Strategies o 1. Use Price Structure to Clarify Advantage o 2.Willfully overprice to generate curiosity  price premium of 50-80% o 3. Partition prices to highlight overlooked benefits  tires as example, more mileage for each different tire   I’ll always find it on sale, it’ll always be cheap buyer mindset need to get them focused on brand not low price ▯ 7: “What is a Free Customer Worth?”  use free products almost daily o ex. Google, spotify, instagram, youtube, facebook  what is their business model? o Sell the use of accessing you to others  Free customers: customers who pay little or nothing and are subsidized by another set of customers are essential to a vast array of businesses including shopping malls, real estate, info tech providers, auction houses, online media  According to estimate, this business model accounts for revenues of 60 of worlds 100 largest corporations  Who are MAJOR retailers at College Mall? o Target, Dicks, Seats, Macys, Bed Bath and Beyond o Pay less per square ft bc they bring people onto mall property  Knowing lifetime value of free customers is crucial to determining o Optimal way to grow  How much should a company spend at various points in time to acquire and retain free or heaily subsidized customers? o Real value of enterprise  How much should investors pay for all or part of business with such customers? o Best organizational design  How should business and its incentive  If you answer these questions wrong, your company may go out of business ▯ ▯ HW: ▯ Study ch7 ▯ Marketing by numbers ▯ Readings ▯ Read chapter 8 ▯ Homework due FIRDAY ▯ Promotion – communication ▯ Integrated Marketing Communication (IMC) – consumer has 1 positioning ▯ Promotion Push vs. Pull strategy  Push promotions for short term to consumer thru store  Brand messages to consumers for any store, pull ▯ Promotion Objectives (I,R,P,BR) 1. Inform 2. Persuade 3. Remind 4. Build Relationships (not in text) ▯ Ad. Strategy (1. Message, 2. Media are major components) – what are consumers going to see or hear, where are they going to see or hear message, long term document which extends and elaborates a brand’s marketing strategy into the area of ads ▯ Promotion Budget Methods ▯ ▯ Today ▯ 4 types of Ad Campaigns (not in text) 1. Word hook o Repeatable catch phrase from ad to ad o Ex. “Can you hear me now?” – Verizon o Ex. 15 minutes will save you 15 or more on your car insurance 2. Character hook o Uses a hero, villain, or victim to embody a key attribute of brand o Ex. Ronald McDonald o 96% of school children in US can identify Ronald o ex. Geico has word hook & character (15% and gecko) 3. Repeatable Theme o A situation that plays out again and again calling out the need for a company’s product o Ex. Got Milk ads and Peppermint Patty ads o Consumers know punch line that is coming o They love to see the set-up played out in different situations & it is satisfying to be in on the joke o Ex. Allstate character “Mayhem” creates situations from which people need to be assisted  Appears over and over again in a similar theme in various commercials  Word hook, character hook, theme (phrase mayhem is everywhere)  not a design element 4. Consistent Layout o A consistent layout uses a unique, design look and repeats these elements at each touch point o Allows customers to easily identify your company in a blink o The more distinct these elements are from your competitors, the easier it is to stand out from the clutter o Ipod commercials o Ex. iPod ads w/ silhouetted dancers w/ bright backgrounds  Ex question: Word hook, character hook, repeatable theme, but no consistent layout for Allstate Mayhem commercials  Use combination of 4 things or one of them for most successful campaign  If you don’t use one of four, you aren’t getting a good return on investment for marketing spending ▯ Ex question. Energizer brand used a bunny in ads. Which major strategy is this?  ▯ ▯ Effective Communications  Message Strategy: general message communicated to customers, first step in creating effective advertising messages o Tend to be plain, stirahgtforward outlines of benefits and positioning points that advertiser wants to stress  Creative Concept – second step, big idea that will bring message strategy to life in a distinctive and memorable way o Simple message idas become great ad concepts, hoping one will turn out to be big idea o May emerge as visualization, phrase, or combo of two o Guides choice of specific appeals to be used in campaign o Advertising appeals should 1. Be meaningful 2. Be believable 3. Be distinctive  Message Execution: third step, best approach, style, tone, words, and format to be processed in various execution styles o Slice of Life o Lifestyle o Fantasy o Mood ir image o Musical o Personality Symbol o Technical expertise o Scientific evidence o Testimonial evidence or endorsement  Geico – great story of truly effective mass market advertising  Geico effectively did not exist in consumer minds years ago  Sub of BH but probably not ▯ ▯ ▯ Media & Metrics  Book covers Traditional Media o TV o Newspapers o Magazines o Radio o Out of Home (Outdoor)  Digital (not in textbook) o Video o News o Music o Information o Out of Home (Outdoor) ▯ Metrics  Reach o Percentage of people in target exposed to ad  Frequency o Number of times a person in target is exposed to advertisement  R*F= Gross Rating Points  CPM= Cost Per Thousand o Ex. Target paid $100 to reach 1000 households, what is their CPM in households?  100  1000 households were reached, how many thousand households were reached? 1. Then 1*100=100  Ex. 30% of all college students exposed to ad, on average they see it 3 times  30*3= 90% gross rating point  ***multiply percent NUMBER, 30, not .30  What is our cost for reaching 1000 people? $5 per 1000 people  Communication Goals o Reach/Frequency + Awareness  75% of target audience will see ad at least x times of the next 6 weeks  campaign will generate a 5% lift in sales one week after initiation and create sustained lift of 3%  Brand Awareness will increase by X percent after campaign o Customer Lifecycle approach: Data base driven, easier to measure  Cost to Acquire  Estimate CLV  ▯ PR ▯ Personal Selling ▯ Sales Promotion ▯ Reading… “Human Experience” (Reading 8)  Main Point: Interaction, Experience, not Interruption  o Four spheres:  Public sphere  Where we move from one place or activity to another, both online and off  Advertising engages consumers during moments of downtime when they’re moving between one activity and the next  Social sphere  Where we interact with and relate to one another  Turn social interactions themselves into carriers of ad messaging  Must appear in right place at right time with right message  Must be relevant in context, align w/ social goals, address  Tribal sphere  Its just us and our circle  Can use or help create consumers’ identification w/ groups  Advertising that leverages tribal affiliation must suit character and values of those involved; address desires for identity, self-expression, and membership; provide a social signal or status marker; and empower the individual  Ex. Watches, certain people align w/ certain wearable products  Psychological sphere  It’s just use and who we are as a person  Speaks to that emotion  Domain of language, cognition, and emotion  Ads optimized to insert words, phrases, or emotions into psychological processes where they serve as shorthand for complex concepts, inspiration action or triggering positive feelings  Such ads provide new ways to articulate idas, engender habit formation,  Ex. Nike – Just Do It ▯ Public Relations  General PR o Public Affairs o Lobbying o Investor Relations o Development  Product Publicity o Media Relations  Ex. Harry Potter and Deathly Hallows  Scholastic Books  #1 Search term on Youtube and Google ▯ ▯ Personal Selling  IMC: Personal Selling (p.329)  One to One  Relationship Selling vs. Transactional Selling  Transactional o Focus is on each sale o Provides information o Sell today  Relationship o Focuses on the customer o Listens to needs o Each customer matters o Confirm product fit and adjust ▯ Sales Promotion – are going to get the sale today, incentivize, short term  Coupons  Rebates  Price Discounts  Display ▯ ▯ Homework  Study Chapter 8: in particular 5 types of promotion and how to use each, table 8.1  Study Reading 8  You may skim Chapter 9 for next week ▯ ▯ *must carefully coordinate all of these customer touch points to ensure clear brand message ▯ ▯ Five Types of Promotion – Promotion Mix/Marketing Communication Mix  Used to persuasively communicate customer value and build customer relationships ▯ 1. Advertising: any paid form of nonpersonal presentation & promotion of ideas, goods, or services by identified sponsor ▯ 2. Sales Promotion: short-term incentives to encourage purchase or sale of a product or save  coupons, discounts, contests, short-lived effects ▯ 3. Personal selling: personal presentation by firm’s sales force for the purpose of making sales and building customer relationships ▯ 4. Public Relations: building good relations with company’s various publics by obtaining favorable publicity, building a good corporate image, and handling or heading off unfavorable rumors ▯ 5. Direct Marketing: direct connections w/ carefully targeted individual consumers to both obtain an immediate response and cultivate lasting relationships ▯ ▯ ▯ ▯ 10/28/15 ▯ Impressions to conversion ▯ Types of Social Media & Outcomes ▯ Basis or Foundation ▯ Management of Social Media ▯  Marketing today is about all the different touchpoints  Considering the Digital side along with Traditional side and how they interact  As a marketer, we need to get to a purchase or an action point ▯ ▯ Digital  TV  YouTube  Spotify  Facebook  Instagram  Email  Twitter  Google ads  Snapchat  Outdoor o Impressions Clickthru/Shop  Conversion to Purchase o CRM: Loyalty rewards + Email o Should try to figure out which media drove purchase  Then segment by media type ▯ Segmentation through CRM ▯ (Email, Gender, Segment) > Impressions > Conversion >CRM Captura  Email o Loyalty program  Male  Price  image  Female  Price  Image  Email Impressions  Conversion  CRM Captura ▯ What has been a foundation for digital interface?  E-mail ▯ Understanding the Major Options  Social Media for the Enterprise o Facebook has most active users o 1.49 billion monthly active users o 1.31 billion mobile monthly active users o 1/5 people on earth is on facebook o 83.1% of daily active users are outside the US and Canada  What is primary use and benefit of Facebook? o Customized ads  Youtube o Over a billion users—almost a third of all people online o 80% outside of the US o advantage: unlike TV, you drive it/are in control of what you watch, watch anywhere any time,  Instagram o 400 million monthly active users (number 3, fb, youtube, instagram) o 70% outside US o 30% of all U.S. social media users o per follower engagement rate for top brands is 58 times higher than on Facebook and 120 times higher than on Twitter o very visual, easy medium  Twitter o 316 million monthly active users o 77% outside US ▯ Social Media in the Life of the Business  Old spice commercial o Creating awareness, hoping they’re building relationships o Managed over quarters to build brand equity  That was funny, interest, etc.  If awareness doesn’t translate to conversion or brand equity no sale  Advertising today is content creation  sfdfd ▯ HOMEWORK: Read Chapter 9 ▯ ▯ Indirect Channel = there’s a store, sometimes we have to use ways to get into that store ▯ ▯ Marketing Channel vs. Value Delivery Network ▯ Intermediaries ▯ Intensive vs. Exclusive Distribution ▯ ▯ Hootsuite helps brands manage social media ▯ ▯ What is a Distribution Channel?  A set of interdependent organizations that help make a product or service available for user or consumption by the consumer or business user  Includes: o Wholesalers o Brokers or Agents o Retailers o Etc.  Conventional Distribution Channel o Producer  Builds product from raw material o Wholesaler  Splits bulk quantities into manageable lot sizes o Retailer  Presents goods to the end consumer in brick and mortar environment o Consumer o Each entity is financially independent and may work for a number of different channel partners  Modern: Value Delivery Network - Improving performance of entire system (deliver better value)  Traditional: Supply chain>Firm>Marketing Channel ▯ ▯ Value Delivery Networks  VDN: Supplier > Supplier > Retailer > Consumer o Take on only tasks which give you competitive advantage. Stronger partners influence the whole channel. o Consumer: Has multiple points of contact for acquiring the offer o Ex. Wal-Mart buys from Hasbro, consumer buys from Wal-Mart o Now the biggest seller of toys and has a big influence on Hasbro o Shift that has happened over last 20 years ▯ ▯ Direct and Indirect Distribution  Direct: Manufacturer to Customer (ex. Dell)  Indirect: Manufacturer to Retailer to Customer (ex. Heinz ketchup to Target to customer)  Why would we ever have 3 or 4 levels in a channel? o (ex. Manufacturer > Wholesaler > Distributor > Retailer > Customer) o creates efficiency o have greater contacts/expertise to handle it  Multi-Channel Distribution o Ex. Selling Fossil watches  Fossil outlet stores  Macy’s  Fossil retail store at mall  Fossil online ▯ Intermediaries  Marketer > Wholesaler > Retailer > Consumer o Wholesaler and retailer are intermediaries between Heinz and you ▯ Disintermediation  The removal of a business from the value chain/network  Blockbuster wasn’t quick enough to see what was coming, Netflix came in w/ dvd and streaming, redbox fills spontaneous need for dvds ▯ Re-intermediation  First travel agents  New intermediaries to reduce complexity  The re-introduction of an intermediary ▯ ▯ Intensive v. Exclusive v. Selective Distribution  Intensive Distribution: multi-channel on steroids, everywhere ex. Coke  Exclusive Distribution: can only buy it at certain places (ex. If you wanted to buy a Rolex watch, where are you likely to buy it?), only certain outlets, luxury products, high information needs  Selective Distribution: Best fit based on product (ex. Whirlpool kitchen appliance) ▯ ▯ Supply Chain Mgmt vs. Logistics  Logistics flows out of operation  Supply Chain flows into operation ▯ Physical Distribution vs. Title Flow  PD: moving actual product/ shipping  TF: Exchanging ownership/ “selling”  ▯ Selling to consumers  Retail ▯ ▯ Week 12: ▯ Retail ▯ Types of Retailers ▯ Trends in Retail ▯ Wholesalers and Brokers* ▯ Difference between Wholesale and Broker*  Wholesaler buys and sells, Broker passes along the title  don’t own it, facilitate the sale and make a commission, stockbrokers make commission and helps people buy stock, people don’t buy a bunch of stock & sell it  wholesaler does  5 to 7 exam questions on this stuff especially wholesalers vs brokers ▯ ▯ Exam Prep:  Start w/ Slides  what we covered in class is more likely to be on the exam (align text with slides)  Readings: main point  execution & example  Question on “what is a free customer worth?” from readings  Course study guide in text  Quantitative: pricing and breakeven problems* ▯ Exam Details  50 MC questions  32% Pricing or pricing strategy  32% IMC  22% Channels Retail  14% International (kind of common sense q’s, about 7 qs)  6 q’s from readings (especially how Global Brands Compete, Pricing, etc)  6 q’s require a calculator Homework – designed to be practice for exam, due 11/13 at 11:55* Survey for Extra Credit: Oncourse Today:  Why change marketing by country?  How to enter international markets  Global Marketing Programs o About 7 questions on the exam ▯ ▯ Global Marketing: step by step map  Global Marketing Environment o Go global or not  Which markets to enter  How to Enter Markets  Global Marketing Program o Global marketing organization ▯ ▯ Global Marketing Environment provides challenges based on  Economic Differences  Political Differences  Cultural Differences ▯ To Enter a Foreign Market:  Market Entry Strategy ▯ Global Marketing Strategy focuses on:  Standardized Marketing  Adapted Marketing  Global Brands compete on specific dimensions and attract consumers differently in foreign markets than at home ▯ ▯ Why do we have to change marketing when we go from one country to another?  3 Reasons: o Economy o Political & Legal differences o Cultural differences ▯  Culture is the most basic cause of a person’s wants and behavior o Learned from family, church, school, peers, etc o Most basic reason marketing factors must change by country o Cultural influences consumer behavior o Reflects basic values, perceptions, wants, and behaviors ▯ Textbook  P. 495-498  Global firm: 190 countries  International firm: do business between different companies  P 498-502 : Economic, Political, Cultural  P. 505-508 How to Enter Market o Export o Joint o Direct  P. 509-515: Global Marketing Program o Standardized o Adapted o Marketing Mix ▯ How Do We Enter Markets?  Which method of international market entry carries the least risk? o Answer depends on type of risk considered o There is risk on both sides (Capital Investment and Marketing Control)  Export o Entering foreign markets by selling goods produced in the company’s home country often with little modification o “Make it here, sell it there”  Direct Investment o Entering a foreign market by developing foreign-based assembly, or manufacturing facilities o “Buy or Build” facilities, manufacturing, sales offices  Joint Strategies (joint venturing) o Entering foreign markets by joining with foreign companies to produce or market a product or service o Licensing o Contract manufacturing o Joint ownership o Management contracts ▯ Example:  Export Joint Strategies Direct Investment  Indiana expansion Four Seasons Hotel – Singapore | Subaru add 1200 jobs in o Financial Capital Risk increases as you move from Export to Joint to Direct Investment ------- o Loss of Marketing Control Risk decreases as you move from Export to Joint to Direct --------- o Amt of Commitment, risk, control, and profit -- across  Risk to Exporting o Lose control of equity of brand name ▯ ▯ Q: Which method of international market entry carries the least risk for Capital Investment?  Export  From capital investment standpoint, we don’t need to spend anything for Export ▯ ▯ Standardized vs. Adapted Strategies  The two strategies bound a continuum that ranges from a completely standardized marketing approach to entering new markets to one that completely customizes the entry.  ----------------------------------------------------- Standardized Adapted or Customized ▯  Standardized Global Marketing o An international marketing strategy that basically uses the same marketing strategy and mix in all of the company’s international markets  Adapted Global Marketing o An international marketing strategy approach that adjusts marketing strategy and mix elements to each international target market, which creates more costs but hopefully produces a larger market share and return ▯ ▯ Same Product Product Adaptation Same Promotion | Straight Extension Product Adaptation | - Heineken - Nokia | - Starbucks - BP | Different Promotion | Promotion Adaptation Dual Adaptation | - Drakkar Noir - Some soft drinks | - Some clothing ▯ ▯ Global Marketing Adaptation  Product o Changing tastes, needs  Promotion o Communication adaptation  Price o Based on the market not costs o Brand perception may be very different by market o Exchange rate issues and offsets  Place o Go where the consumers shop for your product o Must meet local challenges ▯ Q: Same Product, Same Promotion?  Straight Extension Strategy ▯ Q: Same Product, Different Promotion?  Promotion Adaptation Strategy Q: Different Promotion, Adapted Product?  Dual Adaptation Strategy ▯ Q: Same Promotion, Adapted Product?  Product Adaptation Strategy ▯ Q: Coke has dozens of different formulas for their soft drink globally because…**  Culture causes different expectations ▯ ▯ REMEMBER:  HOMEWORK 4  ONE MORE READING ▯ Monday after Thanksgiving – case begins ▯ Case kickoff online ▯ Tuesday, Wednesday, Thursday, Friday – ask questions in advance electronically ▯ For an hour every day, each subject will be online in Adobe Connect to answer questions. ▯ 4 hoursa day x 4 days = 16 hours of answering q’s


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