Marketing Exam 3 John Eaton Mkt 300
Marketing Exam 3 John Eaton Mkt 300 MKT 300
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This 41 page Study Guide was uploaded by Nicholas Voorhees on Monday October 3, 2016. The Study Guide belongs to MKT 300 at Arizona State University taught by John Eaton in Fall 2016. Since its upload, it has received 37 views.
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Date Created: 10/03/16
Marketing Exam 3 • What is Price? - What you pay for something or… The value that you exchange for the benefits of having or using the product or service. o Time/Psychological costs, other resources o Value = benefits – costs • Internal Factors of Price o Marketing objectives § Maximize profit § Gain market share § Infer a level of quality § Survive o Marking Mix Strategy § Price needs to be consistent with other 3P’s (needs to reflect advertising) • External Factors of Price o Demand for your product o Competition § Competitors prices § Strength of competition o Economy § Cost of components (natural resources) § Economic Conditions • Price Elasticity – tells us how much the demand for a product will change with a change in price o E = % change in quantity demanded of a good “A” / % change in price of a good “A” • Elasticity of Demand o Elastic Demand § Consumer buy more or less of a product when the price changes § Describes products that are price sensitive and have many substitutes (bottled water) § A relatively small decrease in price results in a substantial increase in quantity demanded § E is greater than 1.0 o Inelastic Demand § An increase or decrease in price will not significantly affect demand § Products less price sensitive (cigarettes, medicine, text books) have very few substitutes § A relatively large increase in price results only a small decrease in quantity demanded § E is less than 1.0 2 o Unitary Elasticity § An increase in sales exactly offsets a decrease in prices, and revenue is unchanged • Methods of Cost-based Pricing o Profit = Revenue – Costs § Revenue = Price x Units Sold § Costs = Fixed Costs + Variable Costs o Markup pricing § Keystoning (double the cost) o Break-even pricing o Profit maximization pricing 3 • Markup pricing • Break-Even Analysis – Setting price to cover fixed costs 4 • Profit Maximization – in an ideal situation, marketers will operate at the point where marginal costs (MC) equal marginal revenue. • Other Determinants of Price o Stages of the Product Life Cycle o Competition § High Prices may induce firms to enter the market § Competition can lead to price wars § Global competition may force firms to lower price o Distribution Strategy 5 § Manufactures • Offer a larger profit margin or trade allowance • Use exclusive distribution • Franchising • Avoid business with price cutting discounters • Develop brand loyalty § Wholesalers/Retailers • Sell against the brand o Stocking well-known branded items at high prices in order to sell store brands at discounted prices • Buy gray market goods o Promotion Strategy o Perceived Quality • How to Set a price on a product or service § Establish pricing goals § Estimate demand, costs, and profits § Choose a price strategy § Fine tune with pricing tactics o Results lead to the right price • New Product Pricing Strategies o Market-skimming pricing § Innovators and early adopters § High Initial price o Market-penetration pricing § Low initial price 6 § Attract large number of buyers quickly o Status Quo § Suggest similar quality and value as competition o Price Skimming § Product outperforms others § Early adopters value product § Demand in inelastic § Expected demand can’t be met § High quality is desired position o Penetration Pricing § Higher Volume reduces costs § Lowe Price deters competitors § Demand is elastic § Buyers price sensitive § Competitor imitation possible 7 • Product mix pricing Strategies o Portfolio Pricing – creates several different versions of a product at different price points o Captive-product pricing – (razor and blades mentality) § Buy primary unit and all accessories that go with t hat unit (printer and ink) o Price Bundling – Combine related goods, sell for one price (packaged deals) § Could be example of co-branding • Price adjustment strategies o Discounts, allowances, rebates § Cash – pay cash upfront § Quantity – buy in bulk § Seasonal – buy during non-peak times 8 § Promotional allowance – money to dealer for promoting products o Flexible (variable pricing) § Different segments pay different rates • Senior citizen movie rates, kids rates at a restaurant § Off-peak daily rate changes • Movies, long distance, electricity o Psychological (odd-even) pricing § The 99 principle § Reference pricing • What you expect to pay for a product in that category (SUV = ?) § Unit pricing • States price in a recognized unit of measurement o Other Pricing Tactics § Single Price tactic (everything $1) § Baiting Pricing § Two-part pricing – country club § Loss leaders (leader pricing) • Summary of pricing o How do you set your price? § Markup pricing § Break-even pricing § Maximization Pricing o How do you adjust your price? § Tactics 9 o What affects price? § Competition § Distribution § Promotion § Relationship of price to quality § Substitutes § Complements o Substitute or complement § When a decrease in price on one product results in a decrease in sales of a second product, the two products are said to be this… (substitutes) • Marketing Channels – a set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. (specialization and division of labor provides contact efficiency, cost savings and economies of scale) o Gather Information o Develop Communications o Negotiate Prices o Place Orders o Store and Transport o Provide Credit o Make Sales 10 • Cost Efficiency • Designing a marketing channel system o Analyze customer needs o Establish channel objectives o Identify major channel alternatives o Evaluate major channel alternatives • Benefits to consumers: intermediaries provide a variety in terms of o Product size (what) o Assortment of goods (what) o Location (where) o Hours of operation (when) 11 • Logistics – The process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption o Trends § Increased automation § Outsourcing of logistic functions § Electronic distribution • Physical Distribution o The process of carrying goods to customer which includes transportation and warehousing • Channel Functions Performed by intermediaries: • Channel Strategies o Levels of intermediaries o Multiple channels o Intensity of distribution o Channel choice factors 12 § Product • Complexity • Price • Standardization • Life Cycle • Delicacy § Producer • Producer resources • Number of product lines • Desire for channel control § Market • Customer profiles • Consumer or industrial customer • Size of market • Geographical location o Intensity of Distribution 13 • Ranking modes of transportation • Push Strategy o Geared towards distribution partners • Pull Strategy o Geared toward to consumers • Retailing – All the activities involved in selling goods directly to the final consumer for their use • Type of retailers 14 • Nonstore Retailing o Automatic Vending (vending machine) o Direct Retailing (girl scout cookies) o Direct Marketing (Mail/Telephone) • Retailing Strategy o Retail Atmosphere § Image § Safety § Temperature § Senses § Parking § Spacing § Crowding o Atmospherics and shopping behavior § Atmosphere • Layout, design, textures, senses 15 § Emotional response • Pleasure/displeasure/heightened senses § Behavior • Time spent in store, affiliation with people, buying actions • Integrated Marketing Communications – A method of carefully coordinating all promotional messages to assure the consistency of messages at every contact point where a company meets the consumer. o Are strategies for engaging consumers and influencing how they think, feel, and act toward a brand or market offering through the use of marketing communications o Process: • Communication Objectives o Value Persuasion o Stimulate Action o Brand Reminder o Need recognition 16 o Build awareness o Reinforce decision • Promotional Mix Elements o Sales Promotion § Market-controlled communications to stimulate immediate response by consumers o Sponsorship § Publicly associating a brand with an event or activity that the company supports financially o Personal Selling § Representatives of a company interact directly with consumers to provide information to help the consumer make a buying decision o Direct Marketing § Any communication addressed to a consumer that is designed to generate a response o Advertising § Paid, non-personal communication of a marketing message by an identified sponsor through mass media o Public Relations § Two-way communication designed to positively influence the relationship between the marketer and its publics • Control and Credibility 17 • Goals and Tasks of Promotion • Informing o Increase awareness o Explain how product works o Suggests new uses o Build Company image • Reminder o Remind customers that product may be needed o Remind customers where to buy product o Maintain customer awareness • Persuasive o Encourage brand switching o Change customers’ perceptions of product attributes o Influence immediate buying decision o Persuade customers to call 18 • Sales Promotion – is marketer-controlled communication to stimulate immediate audience response by enhancing the value of an offering for a limited time o Types § Trade (50%) • Co-Op Advertising o Allowances pay part or all of the cost for wholesalers and retailer to conduct local advertising (Kellogg advertising its cereals in local grocery store) • Sales Contests o Reward salespeople for meeting or exceeding sales goals • Training o Can also be used as a promotion tool by improving the knowledge and sales skills of members of a trade • Trade Shows o Showcases products to large groups of buyers in a central location • Trade Allowances o Reward retailers and wholesales with discounts of payments for promoting a product to consumers § Consumer (25%) • Rebates • Loyalty programs • Contests and sweepstakes 19 • Coupons • Premiums § Media Advertising (25%) • Objectives of Sales Promotion o Redemption Rate § % responding to incentive o Displacement Rate § % of those who would buy anyway o Acquisition Rate § % of purchases by non-regular buyers o Conversion Rate § Number of future purchases by new customers o Product line effects § The impact the promotions have on related products 20 • Long Term Allocations of promotions • Sales Promotion Dilemma • The AIDA Concept o Attention o Interest o Desire o Action 21 • Sales Promotion o Advertising à Reason to buy o Sales Promotions à Incentive to buy § Impact behavior not attitudes • Public Relations – is two-way communication designed to improve mutual understanding positively influence relationships between the marketer and its internal and external publics o Objectives § Gauge public opinion § Establish dialogue § Enhance company image § Build/rebuild trust § Build on marketing efforts § Crisis management o Tools § New product publicity § Product placement § Consumer education § Event sponsorship § Issue sponsorship § Internet web sites • Personal Selling o Representatives of a company interact directly with a cons umer to provide information to help the consumer make a buying decisions about product or service § Number of Sales people in US is growing (organizations understand importance of building relationships) 22 o Works Best When o Advantages § Detailed Explanation or demonstration § Variable sales message § Directed to qualified prospects § Controllable adjustable selling costs § More effective than other promotion in obtaining sale and gaining customer satisfaction o Process - This is the practice used by salespeople to identify, research, and approach potential customers to sell products and services § Prospecting and qualifying – is identifying potential customers and then determine whether the prospect has the potential to become a customer 23 § Pre-Approach or research – salesperson is seeking information on the key decision makers, company business practices, current suppliers and other information that will be helpful in the sales process (Sources include: Dun and Bradstreet, Hoovers, Lexisnexus and non - competing salespeople) § Approach – is where the salesperson contacts the prospect to schedule a sales call. This stage is not about making the sale per se as the main focus is gaining access to the prospect for a sales presentation § Sales Presentation – is where the salesperson can show the prospect the benefits of using the product or service. One key element: building a relationship, this can be accomplished by finding out information about the buyer, salesperson should ask questions about the needs or problems of the prospects company, by doing so the salesperson has opportunity to show how the product can deliver the solution § Overcome Objections – Buyers will most likely express objection as a means of not making a purchase decision. These can be based on price, quality, existing supplier, etc. A good salesperson will have already determined the best approach in overcoming the prospects objections § Close the sale – Addressing a buyer’s objections moves the sales process to the point where the sales person asks for the order. There are many methods for moving the prospect to saying yes, including giving the buyer an option. § Follow-up – after the delivery has been made the salesperson should contact the buyer to determine if the order was received as expected. This reinforces to the 24 buyer that the salesperson is truly looking to build a relationship • Relationship selling vs Traditional Selling • The Consultative Salesperson o Must know everything about § Product or service § Customer § Competition § Industry • Use Direct Marketing When… o There is a clearly defined target audience o The product purchase is time sensitive o The product is available in a particular location o The goal is to reach previous buyers to encourage repeat purchase or trail of a related product 25 o The target audience is select consumer group • Direct Marketing Options o Mail order – is the business of selling merchandise through the mail and includes booth catalogs and direct mail o Catalogs – merchants are able to showcase a large selection of merchandise and today allow customers to purchase through various means such as on the phone, mail, internet, or retail store (expensive and difficult in tracking effectiveness) o Direct Mail – pieces focus usually on single product can be in the form of a postcard, letter, Boucher, or product sample. (charities, political groups and retailers) 3 Key elements: a compelling offer, targeted mailing list and a call to action o Telemarketing – is directed marketing conducted over the phone can be very difficult given consumer’s attitudes toward this form of marketing (the do not call registry has discouraged this approach) o Direct Response – Seeks to encourage consumers to take immediate action to purchase or to gain more information. Include shopping channels such as QVC as well as infomercials o Internet – offers the medium for direct marketing as the point of message receipt (webpage or email) uses the same means to connect • Advertising – Is the paid, non-personal, communication of a marketing, message by an identified sponsor through mass media o Advertisement § Paid Message § Non-personal § Mass Media § Identified Sponsor 26 o Pros and Cons § Pros • Cost-effective • Creative • Educate • Unique selling proposition § Cons • Unnoticed • Misinterpret • Intrusive • Offend o Is advertising necessary § 2-year recession study • Firms that did not cut back sold 50 percent more than those that did cut back during the recession and sold 60 percent more in the 2 years following the recession o Advertising Highlights § Top 200 brands account for 37 percent of media spending § Advertising Industry is small only 12,000 employed in ad- agencies § Ad budgets of some exceed over 4 billion per year-over 10 million per day 27 • Message Recall and Presentation order • Media Mix – The Selection of media used for an advertising campaign as well as the budget allocated to each medium • The Average American o 3,000 hours spent consuming some type of media o 900 hours listening to music o 275 hours reading o 1,500 hours watching TV o 80 hours playing video games 28 o 200 hours on the internet • Traditional Advertising media o Television, radio, newspaper, magazines, books, direct mail, billboards, transit cards • New Advertising Media o Internet, banner ads, viral marketing, e-mail, interactive video • Media o Clutter – refers to the number of ads a marketer’s spot will have to compete with in a given media, too many ads will often mean that some advertisements get lost. This can be evidenced by the commercials during the super bowl (where only the most memorable ads have any degree of recall) and in newspaper which can have up to 60 percent of space being taken up by ads o Impact – refers to the value that a consumer will place on a specific media vehicle. Ads in some sources will garner higher levels of credibility than do others. The economist offers higher credibility than does the National Enquirer. (To take into consideration, an ad for a velvet painting of Elvis will sell much better in the national enquirer than the economist.) o Engagement – is a measure of how much attention an audience pays to a particular media o Efficiency – is the cost associated with the media in relation to its ability to reach a customer segment. The cost is evaluated based on cost per thousand (CPM) rather than the actual cost. The metric helps explain why advertisers are willing to spend $3 million for a 30 second spot in the Super Bowl (high actual cost but reaches a large number of consumers) • Media Selection Considerations o Cost Per Contact – the cost of reaching one member of the target market 29 § CMP = Cost of ad space/impressions x 1000 • Super bowl – 3 million/ 98.7 million x 1000 = 30.39 • State press – 684/13,500 x 1000 = 50.67 o Reach – the number of target consumers exposed to a commercial at least once during a time period o Frequency – the number of times an individual is exposed to a message during a time period o Audience selectivity – the ability of an advertising medium to reach a precisely defined market • Tv Audience Measures • Media Selection Process o Budget – is the total amount that will be spent on all advertising during the campaign. The budget should be of sufficient size to meet the objectives. Different objectives will require different levels of spending. Media objectives should be specific and should be based on a specific time frame. (an Objective could be: during the launch period reach 80 percent of target customers an average of five times and reach 50 percent of target customers an average of three or more times) 30 o Media Profile – Here managers are trying to determine which media vehicles target customers are consuming. To understand this, mangers can look at demographics, Geographic’s, media, consumptions habits, and lifestyles/interests. (This will Help select the best media. o Media Plan – describes how to spend the media budget to reach objectives. This plan specifies the types and amounts of media to use, the timing of media and the geographic concentration. o Buying ad space – or media buying is the negation and purchase of media. Placement is the implementation of the media plan, and trafficking is getting media copy into the hands of the specific media vehicles. o Evaluation – is monitoring the performance of the ad campaign (including an evaluation of the creative, message, and the media vehicle) to ensure that objectives are on track to being met. If something is not working, marketers can make changes. • Media scheduling methods 31 • Advertising Campaign – A series of related advertisements focusing on a common theme, slogan and set of advertising appeals • Unique selling Proposition – a desirable, exclusive, and believable advertising appeal selected as the theme for a campaign • Executing the Message – Attribute… so… Benefit… o Spokesperson/Testimonial – a person speaks on behalf of the product based on their experiences o Fantasy – showing an imaginary situation involving a consumer and the product o Humorous – Funny o Real/Animated product symbols – product features real/animated symbols to help portray an image (tony the tiger symbolizes frosted flakes. o Mood or image – The ad works to create a mood or image around the product o Demonstrations – the ad shows the product in use o Musical – uses music to create an image o Scientific – evidence and or technical information is presented to support a claim o Slice of life – the ads portray real life situations that consumer face in daily lives o Lifestyle – often will show an exaggerated product experience as to how the product will help a consumer achieve a certain lifestyle. • Major types of advertising o Institutional – Enhances a company’s image rather than promotes a particular product o Product – touts the benefits of a specific good or service 32 § Pioneering • Stimulates primary demand for new product or category • Used in PLC introductory stage § Competitive • Influences demand for brand in the growth phase of the PLC • Often uses emotional appeal § Comparative • Compares two or more competing brands product attributes • Used if growth is sluggish or if competition is strong • Adverting sales/Response Functions 33 • Marginal Analysis • 6 Budget Approaches o The Affordable Method - what we have to spare, what’s left to spend o Arbitrary allocation method – No system, seemed like a good idea at the time o Percentage of sales method – set percentage of sales or amount per unit o Competitive parity method – match competitor or industry average spending o Return on investment method – spending is treated as a capital investment o Objective and task method – estimate objectives, determine specific tasks, estimate the cost • Alternative Advertising o Billboards 34 o Aerial advertising o Mobile billboard o In-store media o Branded Entertainment (product placement) § Integration of brand or brand messages into entertainment media o Mobile Marketing o Student brand managers o Grassroots marketing o DVR o Event Creation – designing an event that features sponsorship o Guerilla Marketing o Stealth Marketing o Viral Marketing • Ethical issues in advertising o False Testimonials o Bait and switch advertising o Misleading demonstrations o Puffery 35 • Beyond the 4P’s o The 4 C’s model § Customer Vale 36 § Cost § Convenience § Communication • Customer Relationship Management – is comprised of the activities that are used to establish, develop and maintain customer sales o Touch Points in CRM System § Store visits § Conversations with salespeople § Interactions via Web § Traditional Phone conversations § Service registration warranty cards o CRM System § Encourage and track customer interaction with the company § Store and integrate customer data using IT § Understand interaction with current customer base § Foster customer-satisfying behaviors § RFM analysis o Recency-Frequency- monetary analysis § Identifies customers most likely to purchase again § Identifies and ranks best customers § Identifies most profitable customers § Lifetime value of a customer o Customer Satisfaction § Negative – dissatisfied 37 § Neutral – satisfied § Positive – delighted o Importance of customer satisfaction § For every complaint 26 customers actually have same problem § The average business does not hear from 96 percent of its unhappy customers § The average person with a problem tells 9 or 10 people 13 percent will tell more than 20 § Complainers are more like to do business with you again than non-complainers 95 percent if the complaint is resolved quickly § Customers who have them complains resolved tell an average of 5 people § Complainers are more likely to do business with you again than non-complainers 54-70 percent if the complaint is resolved at all. o Attribution theory - is all about the “Blame Game.” When something goes wrong with a product or service, how upset do you get § Stability – how often does the product/service fail? § Focus - Was this a problem that you contributed to ? § Controllability - was the service failure controllable or uncontrollable? o Service Recovery § Getting people to complain • 5-10 percent of dissatisfied customers choose to complain 38 § Effective resolution • Fair procedures • Fair outcomes • Fair interactions o Factors influencing complaint behavior § Dissatisfaction of the consumer § Attitude toward complaining § Amount of benefit to be gained § Personality attributions o Customer Retention § Acquisition of customers can cost 5 times more than retaining current customers § The average business loses 10% of its customers each year § A 5% reduction to the customer defection rate can increase profits by 25% to 85% § Improving customer retention by 2% can decrease costs by as much as 10% § The customer profit rate increases over the life of a retained customer o Marketing is all about § Segmenting, Targeting and Positioning § Branding § Creating Relationships § Solving customer problems o Final thoughts § Have a vision of what you want to do 39 § Go change the world for the better, or at least your little part of it… § Keep me updated and let me know how I can be of help! 40 41
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