Final Exam Study Guide (Exam 3)
Final Exam Study Guide (Exam 3) 301
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This 13 page Study Guide was uploaded by Alex on Wednesday May 4, 2016. The Study Guide belongs to 301 at University at Buffalo taught by Dr. Dick in Spring 2016. Since its upload, it has received 160 views.
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Date Created: 05/04/16
Final Exam Study Guide Channel Strategy: o Creating Time & Place Utility: Time Utility – Convenient & quick for customer to get product How many retailers the company deals with; more = better/faster Convenience how many stores there are, their location, & placement in particular stores Place Utility – where item is located Convenience – lots of retailers/locations Prestige – “something special” at a particular location o Channels of Distribution v. Physical Distribution: Logistical Functions: moving products (methods of delivery) Asserting – variety of products, what products they carry Transporting Transactional Functions: no physical movement of product Selling – manufacturer’s agent will go to retailer to try & sell a bulk of product (wholesale) Risk Taking – who takes the risk when consumer returns/does not like product – negotiation Facilitating Functions: no physical movement, but facilitates movement Financing – terms/agreements with retailers to kepp them and handle prducts Market Research – retailers convince manufacturers to use them *Breaking Bulk – Manufacturer wants to sell product wholesale/by the pallet, by the truckload, but consumer wants to buy individual units of product. Manufacturer will sell in bulk to retailer, who will break it down into individual units o 3 Options for Channel Coverage: Intensive Distribution – maximize the number of retailers to sell your product; meant for products that don’t need a lot of support Selective Distribution – a lot of retailers, but not intensive; needs some support Exclusive Distribution – specialized product; requires a lot of support; well-trained retailer in a particular location o Channel Paths: Direct: Manufacturer End User Indirect: Manufacturer Retailer End User (causes channel conflict) “Typical:” Manufacturer Wholesaler Retailer End User o Types of Channel Members (Intermediaries): Wholesalers: Merchant Wholesaler – completely independent of the manufacturer o Distributor – does everything job related o Jobber – carries inventory Agent – independent distributer who represents multiple manufacturers o Don’t handle inventory Manufacturer’s Sales: o Branch – similar to the distributor role, but the manufacturer owns it o Sales Office – plays similar role to agent, place to take order Retailers: Specialty Store – narrow selection, but deep Department Store – more selection, less depth, good service Power Retailer – Will come with notes from the video lecture Discounter – lots of categories, little depth Non-Store – catalogs/on-line stores/vending machines o Types of Channels: Contractual – Franchising (Franchisee, franchisor, licensing agreement) Administered – “handshake deal” Vertically Integrated – all channel owners owned by same entity o Channel Captain – when one entity needs another more than that other entity needs it (tradeoff) o Why use the “middle man” (intermediaries)? – transaction efficiency; ensures the deal runs smoothly Pricing Strategy: o “Administered Pricing” – the price is set in advance, there is no negotiation (not a street market – in-store price is what it is) in the consumer market Participative Pricing – when there is negotiation, like in a street market (not a consumer market) o Purpose of Price: To capture the value of a product in the consumer’s mind. o Types of Competition: Price-Based – “lazy way to compete;” there is minimal creativity, not sustainable unless you are the lowest cost or can outlast competitors, and does not build brand equity Non-Price-Based – selling quality (E.g. – Apple) o Price/Quality Relationship: Price communicates value; the higher the price, the greater the worth, the higher the quality (what population believes, but is not always the case) o Pricing Objectives: Sales (dollar value and unit volume) lower price = higher sales; give up profit Profits (maximize (through fees, like Verizon) and/or satisfice (looking for a reasonable/satisfying profit)) Market Share (lower prices to gain market share) Stability (price change over time) Social Responsibility: Quantity Surcharge – product @ fair price Hidden Fees – credit cards as an example Predatory Pricing – illegal, price product very low to drive competition out of marketplace to make yourself the only one in the market (need deep pockets) o Pricing Approaches: Cost-Based: Types: o Breakeven Analysis: Quantity = Fixed Cost ÷ (Price – Unit Variable Cost); can be adjusted to solve for price o Cost-Plus; Two Variants: Price = TC + (% of TC) Price = TC + Fixed Fee o Markup (most common): % of selling price Price = Cost of Goods ÷ ((100 – Markup %)/100) Profit-Based: Target Profit Pricing: o (Total FC + Total VC + Total Profit) ÷ Total Number of Units Target ROI Pricing: o Profit = (Total FC + Total VC + (Investment X ROI)) ÷ Standard Number of Units Problems with Cost & Profit-Based Approaches include: internal focus, ignores demand and competition, assumes all produced is sold at the same price, and doesn’t track cost/unit changes (economies of scale) Demand-Based: Skimming – use with non-price elastic customers, start with a high price because those who really want it will pay more – lower price over time. Prestige Pricing – sell at low price, raise over time; results in high market penetration, little profit, but move more product Bundle Pricing – Multiple products sold in bundles (iPhone comes with headphones & charger) “Demand-Minus” Pricing – (manufacturer to retailer to consumer) o Wholesale Price = Retail Price X ((100- Markup%) ÷ 100) Chain Markup Pricing (CMP) – same as Demand- Minus, but with more players/longer chain (manufacturer, distributor, and retailer) o CMP = Retail Price X ((100 – Retail Markup %) ÷ 100) X ((100 – Distributor Markup %) ÷ 100) Competition-Based: Customary Pricing – customary price charged, followed by other companies setting similar prices cannot meet and agree on prices Leader/Follower Pricing – similar to customary pricing Competitive Bid – seeing what other charge before setting your price Value-Based: Understanding use for product Analyze product benefits Analyze the product costs Cost/Benefit tradeoffs o Different customers place different values on different products because of the different benefits o Critical Strategic Pricing Ratio: Value = Total Perceived Benefit ÷ Price Some similar products have better benefits than others o Increase value by lowering prices (not sustainable generally) o Increase value by increasing total benefits (harder for competition to replicate) Value Use Pricing – multiple similar products, but one with better benefits in an attribute customers should be willing to pay more for the product with the better benefits (saw blade example from lecture) Parity Pricing – we divide the market equally (overall rating ÷Aprice ) =A(overall rating ÷ priBe ) B Psychology & Pricing: Reference Pricing – people are bad at guessing prices. Internal/External judgment of what a product should cost (Internal – value to customer, compared with other products; External – seller shows what price was/should be like on a “for sale” item) Compromise Effect – with a low, medium, and high price; high price is not placed for purchase, but rather to get consume to buy the middle-priced product – initial goal. Decoy Price – similar to compromise effect. It is the price you don’t expect people to pay (the higher price), but for no logical reason influences the buyers decision. o Low price = value-based purchased o Middle price = if removed becomes value v. prestige; bad deal b/c there is essentially no value o High price = prestige-based; combo of low & middle prices; gives feeling of more for your money (good deal) “Unbundling:” Similar to value in use; it is a breakdown of the product to show its many attributes and show the value of their benefits compared to the competition. – give impression of value reduction/more for money Advertising & Sales Promotion: o The Advertising Industry: cyclic almost; media, producers (clients), and ad agencies (creative ideas, strategy suggestions (select media ads run in), tries to bring buyers and sellers together (intermediary)) o Advertisement Objectives: Inform customers Persuade customer that the brand is best Sell product ASAP, in as large amounts as possible Reinforce the customers opinion/change it for the better by stating the idea and strengths of the products Remind customers what the product is good for, what situations o How it works: (4 Theories): Hierarchy of Effects: high-involvement products Cognition (A) – create awareness & knowledge if the product and its use Affect (B) – “liking preference;” what the product is about and why it’s important to you Conation (C) – going to purchase the product o Low involvement products: ACB Low Involvement – needs greater message quantity. Needing greater quality is higher involvement Pressure Response: the more Ads, the more downward pressure on the customer – more times ads are seen, more likely to buy Elaboration Likelihood Model – 2 routes of persuasion High quality persuasive arguments; ad. Conveys information to the customer (what’s important), which influences the brand perceptions/beliefs, which leads to brand attitude (how you feel about the ad.), which leads to behavior (whether purchase or not) Attitude forms towards ad., which influences attitude towards brand directly o Media Strategy – effectively delivering the advertisement to the customer (quantity v. quality) o Net Reach – “ total number of consumers in target market exposed to an ad. Campaign at least once in a given time period” o Gross Rating Points (GRP) = Reach X Frequency o Rule of Thumb – “aim for avg. frequency of 3-10 exposures” o Cost per Thousand (CPM) – total cost of insertion in particular form of media divided by the number of thousands of exposures achieved through that form of media (vehicle) – examples in packet o Media Mix – total variety of media vehicles used in an advertising campaign (TV, billboards, radio, etc.) o Types of TV Ad. Placements: TV shows create audiences for ads. Network Television – overly aired networks with affiliated networks; all over country (E.g. – ABC, CBS, CNN) Spot TV – networks willing to sell to spot tv market; pin- pointing particular regions (major cities) Cable Ad – cable network; wherever cable is Spot Cable – particular cable goes to particular regions Syndicated – independent entrepreneur buys the rights to reshow old shows (if multiple seasons) (e.g. – Seinfeld) Insert your own ads and ads of your choosing – sell ad space like making your own channel o Non-TV Advertising: Radio: problem is measuring audience size Magazines/Newspapers: problem is there are alternate, free ways to access information Outdoor: billboards Online: growth of digital market (social media) Audi Campaign example Branded Entertainment: when a company associates its name with a product/form of entertainment (E.g. – videos of events on the RedBull YouTube channel) Product Placement: place the product into the form of entertainment (E.g. – ChexMix in the soap opera show) Weird New Stuff: Placing ads. Where you normally wouldn’t; tends to be relatively intrusive (E.g. – ads. As messages on phones, axe ad. At bottom of swimming pool, etc.) o Types of Sales Promotions: Push Promotion Strategy: Manufacturer (M) Retailer (R) Consumer (C) M “pushes” product on R, who pushes it on C E.g. – Coupons, Rebates, sampling, etc. Pull Promotion Strategy: M R C (Trade) M directly aims product on consumer, which pulls them to R, which pulls them to M E.g. – dealer contests, trade allowances, trade shows Retailing: o Retail Functions: “How retailers add value…” Providing assortments; people look to buy multiple products generally when they shop (location & selection are key) Breaking Bulk – separating units of product from their initial pallets sold from wholesale in order to provide individual units to customers Holding inventory; so customers only buy individual/a few units Providing services; complement products (call center, employee service, customer service, cashier, etc.) o Common Types of General Merchandise Retailers: Discount Stores: low service & price, broad selection with no depth High breadth of selection, low value-added E.g. – Walmart, Target, Kmart Department Stores: moderate prices, more service, relatively broader and deeper selection High selection, high value-added E.g. – Macy’s, JCPenney, Sears Specialty Stores: limited line of products, higher prices & level of service, greater depth, & rely on the image of the store Low selection, low value-added E.g. – GAP, Foot Locker Power Retailers; Category Killers: low price, service varies, narrow selection with great depth Low selection, high value-added E.g. – Best Buy, Office Depot, Toys “R” Us o Retail Strategy: Positioning refer to “Common Types of General Merchandise Retailers” Location: Regional mall Strip center – roads with many small stores (e.g. – Niagara Falls Blvd.) Power Center – strip center with power retailer Central Business District – dying business environment generally (e.g. – downtown Buffalo) Stand-Alone Store – particular category products; boats, cars, furniture Lifestyle Center – places/shopping centers to enjoy life, with activities, restaurants and stores o Macro Factors: Economic Environment – income level, employment rate, size of community Demographic/Psychographic Profile Competition Business Climate – property taxes, zoning regulations, etc. o Micro Factors: Accessibility – easy to get to, easy to leave, easy to get around Visibility – from road, signage, etc. Traffic/Congestion (e.g. – parking) Rent – attractive location & cost to rent Cannibalization – removing customers from other owned stores previously existing Image/Atmospherics: Store layout Merchandise display Fixtures & signage Lighting & color Music & scents o Retail Productivity Measures: analyze departments within a store Net Sales per Square Foot = Total Sales – Returns Stockturn Rate = COGS ÷ Avg. Inventory Avg. Inventory = (Beg. Inv. + End. Inv.) ÷ 2 o Non-Store Retailing: Door-to-Door: Network marketing; try to get others involved in selling product (not directly to customers) Telemarketing: Outbound – calls made out to customers Inbound – provide phone number for customers to call Catalogs: part of retail mix TV Home Shopping: “stars”/celebrities sell products Online: rapid growth Multi-Channel Retailing – selling through multiple channels such as online & brick-and-mortar o Issues in Retail Management: Brand Management – maximize performance of brand Category Management – maximize performance of category (multiple brands – like in retail stores or multiple branded companies)
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