MARK 3000 Introduction to Marketing Grantham UGA Exam 2 Study Guide
MARK 3000 Introduction to Marketing Grantham UGA Exam 2 Study Guide MARK 3000
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This 23 page Study Guide was uploaded by Samantha Snyder on Monday October 3, 2016. The Study Guide belongs to MARK 3000 at University of Georgia taught by Kimberly Grantham in Fall 2015. Since its upload, it has received 5 views. For similar materials see Principles of Marketing in Marketing at University of Georgia.
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MARK 3000, Grantham Exam 3 Study Guide Chapters 14, 17, 18 and 19 “go through the book and add all bold/italicized words to your notes” Examples – Important – Stressed during lecture • “My recommendations for exam 3: go outside the examples I give you in class…we are bombarded with promotions everywhere” • “Be very comfortable with Management by the Numbers —there will be similar problems on the pricing portion of exam 3 —memorize formulas for profit -analysis and break-even (no calculators on test)” ▯▯▯▯▯ ▯▯▯▯▯ o Break Even = ▯▯▯▯▯ — ▯▯▯▯▯▯▯▯ ▯▯▯▯▯ § price—variable costs = contribution per unit ▯▯▯▯▯ ▯▯▯▯▯▯▯▯▯▯▯▯ o Profit Analysis =▯▯▯▯▯ — ▯▯▯▯▯▯▯▯ ▯▯▯▯▯ • 50 MC questions, 2pts each, equal weight on price and promotion unites • study MBTN, examples (text, class, real life), Talladega presentation, formulas, definitions not covered in class Chapter 14: Pricing Concepts for Establishing Value Key Terms Price—the overall sacrifice a consumer is willing to make —time, energy, money—to acquire a specific product or service Profit Orientation—a company objective that can be implemented by focusing on target profit, pricing, maximizing profits or target return pricing Target Profit Pricing—a pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit Maximizing Profits —a profit strategy that relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the fac tors required to explain and predict sales and profits, it should be able to identify the price at which its profits are maximized Target Return Pricing—a pricing strategy implemented by firms less concerned with the absolute level of profits and more inte rested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment usually expressed as a percentage of sales Sales Orientation—a company objective based on the belief that increasing sales will help the firm more than will increasing profits Premium Pricing—a competitor-based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price doesn’t matter Competitor Orientation —a company objective based on the premise that the firm should measure itself primarily against its competition Competitive Parity—a firm’s strategy of setting prices that are similar to those of major competitors Status Quo Pricing—a competitor-oriented strategy in which a firm changes prices only to meet those of competition 1 Customer Orientation—a company objective based on the premise that the firm should measure itself primarily according to whether it meets its customer’s needs Demand Curve—shows how many units of a product or service customers will demand during a specific period at different prices Prestige Products or Services —those that consumers purchase for status rath er than functionality Price Elasticity of Demand —measures how changes in a price affect the quantity of the product demanded, specifically, the ratio of the percentage change in quantity demanded to the percentage change in price Elastic—refers to a market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large changes in quantity demanded Inelastic—refers to a market for a product or service that is price insensitive; that is, a small change in price will not generate large changes in quantity demanded Income Effect—refers to the change in the quantity of a product demanded by consumers due to a change in their income Substitution Effect—refers to a consumer’s ability to substitute other produ cts for the focal brand, thus increasing the price elasticity of demand for the focal brand Cross-Price Elasticity—the percentage change in demand for product A that occurs in response to a percentage change in the price of product B, see complimentary products Complementary Products —products whose demand curves are positively related, such that they rise or fall together’ a percentage increase in demand for one results in a percentage increase in the demand for another Substitute Products—products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A causes a percentage decrease in the quantity demanded for product B Variable Costs— those costs (labor, materials, etc.) that vary with produc tion volume Fixed Costs—those costs that remain essentially at the same level, regardless of any changes in the volume of production Total Cost—the sum of variable and fixed costs Break-Even Analysis—technique used to examine the relationships among cost, price, revenue and profit over different levels of production and sales to determine the break-even point Break-Even Point—the point at which the number of units sold generates just enough revenue to equal the total costs; at this point, profits are zero Contribution Per Unit—equals the price less the variable cost per unit -variable used to determine the break-even point in units Monopoly—one firm provides the product or service in a particular industr y Oligopolistic Competition —occurs when a few firms dominate the market Price War—occurs when two or more firms compete primarily by lowering their prices Predatory Pricing—a firm’s practice of setting a very low price for one or more of its products with the intent to drive its competition out of business; illegal under both the Sherman Antitrust Act and the Federal Trade Commission Act Monopolistic Competition —occurs when there are many firms that sell closely related nut not homogenous products; these pr oducts may be viewed as substitutes but not perfect substitutes Pure Competition—occurs when different companies sell commodity products that consumers perceive as substitutable; price is usually set according to the laws of supply and demand Gray Market—employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer 2 Everyday Low Pricing (EDLP) —a strategy companies use to emphas ize the continuity of their retail prices at a level somewhere between the regular non -sale price and the deep-discount sale prices their competitors may offer High/Low Pricing—a pricing strategy that relies on the promotion of sales, during which prices a re temporarily reduced to encourage purchases Reference Price—the price at which buyers compare the actual selling price of the product and that facilitates their evaluation process Market Penetration Strategy —a growth strategy that employs the existing marketing mix and focuses on the firm’s efforts on existing customers Experience Curve Effect—refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow. The costs continue to drop, allowing even further reductions in price Price Skimming—a strategy of selling a new product or service at a high price that innovators and early adapters are willing to pay in order to obtain it; after the high -price market segment becomes saturated and sales begin to slow down, the firm will generally lower the price to capture (or skim) the next most price sensitive market Loss Leader Pricing—loss leader pricing takes the tactic of leader pricing one step further by lowering the price below the store’s cost Bait-and-Switch—the deceptive practice of luring customers into the store with a very low advertised price on an item (the bait) only to aggressively pressure them into purchasing a higher -priced model (the switch) by disparaging the low -priced item, comparing it unfavorably with the higher-priced model or professing an inadequate supply of the lower -priced item Price Discrimination—the practice of selling a product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, b ut not all, forms of price discrimination are illegal Price Fixing—the practice of colluding with other firms to control prices Horizontal Price Fixing —occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision for consumers Vertical Price Fixing —occurs when parties at different levels of the same marketing channel (e.g. manufacturers or retailers) collude to control the prices passed on to consumers Manufacturer’s Suggested Retail Price (MSRP) —the price that manufacturers suggest retailers use to sell their merchandise 3 Chapter 17: Integrated Marketing Communications (skip LO 17-1 Key Terms Integrated Marketing Communications (IMC)—represents the promotion dimension of the four Ps ; encompasses a variety of communication principles —general advertising, personal selling, sales promotion, public relations, direct marketing, and electronic media —in combination to provide clarity, consistency, and maximum communicative impact AIDA Model—a common model of the series of mental stages through which consumers move as a result of marketing communications; awareness leads to interests, which lead to desire, which leads to action Brand Awareness—measures how many consumers in a market are familiar with the brand and what it stands for; created through repeated exposures of the various brand elements (brand name, logo, symbol, character, packaging or slogan) in the firm’s communications to consumers Aided Recall—occurs when consumers recognize a brand name that has been presented to them Top-of-Mind Awareness—a prominent place in people’s memories that triggers a response without them having to put any thought into it Lagged Effect—a delayed response to a marketin g communication campaign Advertising—a paid form of of communication from an identifiable source, delivered through a communication channel, and designed to persuade the receiver to take some action, nor or in the future Public Relations—the organizational function that manages the firm’s communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationships with the media Sales Promotions—special incentives or excitement -building programs that encourage the purchase of a product or service Personal Selling—the two-way flow of communication between a buyer and a seller that is designed to influence the buyer’s purchase decision Direct Marketing—sales and promotional techniques that deliver promotional materials individually Mobile Marketing —marketing through wireless handheld devices Blog—a web page that contains periodic posts; corporate blogs are a new form of marketing communications Social Media—media content used for social interactions such as YouTube, Facebook and Twitter Objective-and-Task Method—an IMC budgeting method that determines the cost required to undertake specific tasks to accomplish communication objectives; pr ocess entails setting objectives, choosing media and determining costs Rule-of-Thumb Methods—budgeting methods that base the IMC budget on either the firm’s share of the market in relation to competition , a fixed percentage of forecasted sales, or what is left after other operating costs and forecasted sales have been budgeted Frequency—measure of how often the audience is exposed to a communication within a specified period of time Reach—measure of consumer’s exposure to marketing communications Gross Rating Points (GRP)—measure used for various media advertising—print, radio or television; GRP = reach X frequency Search Engine Marketing (SEM) —a type of web advertising whereby companies pay for keywords that are used to catch consumers’ attention while br owsing a search engine Impressions—the number of times an advertisement appears in front of the user ▯▯▯ ▯▯▯▯▯▯ ▯▯ ▯▯▯▯▯ ▯ ▯▯▯▯ ▯▯▯▯▯▯ ▯▯ ▯▯ ▯▯▯▯▯▯ ▯▯ Click-Through Rate (CTR)— ▯▯▯ ▯▯▯▯▯▯ ▯▯ ▯▯▯▯▯▯▯▯▯▯▯ 4 Relevance—in the context of search engine marketing (SEM), it is a metric used to determine how useful an advertisement is to the consumer Return on Investment (ROI) —the amount of profit divided by the value of the investment. In the case of (▯▯▯ ▯▯▯▯▯ ▯▯▯▯▯▯▯▯▯ ▯▯ ▯▯▯ ▯▯—▯▯▯ ▯▯ ▯▯▯▯) ▯ an advertisement, the ROI is ▯ ▯▯▯ ▯▯ ▯ ▯▯▯▯ 5 Chapter 18: Advertising, Public Relations and Sales Promotions Key Terms Advertising—a paid form of communication from an identifiable source, delivered through a communication channel, and designed to persuade the receiver to take some action, now or in the future Advertising Plan—a section of the firm’s overall marketing plan that explicitly outlines the objectives of the advertising campaign, how the campaign might accomplish those objectives, and how the firm can determine whether the campaign was successful Pull Strategy—designed to get consumers to pull the product into the supply chain by demanding it Push Strategy—designed to increase demand by motivating sellers —wholesalers, distributors, or salespeople—to highlight the product, rather than the product of competitors, and thereby push the product onto the consumers Informative Advertising—communication used to create and build brand awareness, with the ultimate goal of mobbing the consumer through the buying cycle to a purchase Persuasive Advertising —communication used to motivate customers to take action Reminder Advertising—communication used to remind consumers of a product or to prompt repurchases, especially for products tha t have gained market acceptance and are in the maturity stage of their life cycle Product-Focused Advertisements—used to inform, persuade or remind consumers about a specific product or service Institutional Advertisements—a type of advertisement that informs, persuades or reminds consumers about issues related to places, politics or an industry Ex. Got Milk? ads Public Service Advertising (PSA)— advertising that focuses on public welfare and generally is sponsored by nonprofit institutions, civic grou ps, religious organizations, trade associations, or political groups, a form of social marketing Social Marketing—the content distributed through online and mobile technologies to facilitate interpersonal interactions Unique Selling Proposition (USP) —a strategy of differentiating a product by communicating its unique attributes; often becomes the common slogan or theme in the entire advertising campaign Informational Appeals—used in a promotion to help consumers make purchase decisions by offering factual information and strong arguments built around relevant issues that encourage them to evaluate the brand favorably on the basis of the key benefits it provides Emotional Appeal—aims to satisfy consumer’s emotional desires rather than their utilitarian needs Media Planning—the process of evaluating and selecting the media mix that will deliver a clear, consistent, compelling message to the intended audience Media Mix—the combination of the media used and the frequency of advertising in each medium Media Buy—the actual purchase of airtime or print pages Mass Media—channels that are ideal for reaching large numbers of anonymous audience members; includes national newspapers, magazines, radios and television Niche Media—channels that are focused and generally us ed to reach narrow segments, often with unique demographic characteristics or interests Advertising Schedule —the specification of the timing and duration of advertising Continuous Schedule—runs steadily throughout the year and therefore is suited to produc ts and services that are consumed continually at relatively steady rates and that require a steady level of persuasive or reminder advertising 6 Fighting—an advertising schedule implemented in spurts, with periods of heavy advertising followed by periods of no advertising Pulsing—combines the continuous and fighting schedules by maintaining a base level of advertising but increasing advertising intensity during certain periods Headline—in an advertisement, large type designed to draw attention Subhead—an additional, smaller headline in an ad that provides a great deal of information through the use of short and simple words Body Copy—the main text portion of an ad Brand Elements—characteristics that identify the sponsor of the specific ad Pretesting—assessments performed before an ad campaign is implemented to ensure that the various elements are working in an integrated fashion and are doing what they are intended to do Tracking—includes monitoring key indicators, such as daily or weekly sales volume, while th e advertisement is running to shed light on any problems with the message or the medium Posttesting—the evaluation of an IMC campaign’s impact after it has been implemented Lift—additional sales caused by advert ising Puffery—the legal exaggeration of praise, stopping just short of deception, lavished on a product Public Relations (PR)—the organizational function that manages the firm’s communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationships with the media Cause-Related Marketing—commercial activity in which businesses and charities form a partnership to market an image, product or service for their mutual benefit; a ty pe of promotional campaign Event Sponsorship—popular PR tool; occurs when corporations support various activities (financially or otherwise), usually in the cultural or sports and entertainment sectors Sales Promotions—special incentives or excitement-building programs that encourage the purchase of a product or service, such as coupons, rebates, contests, free samples, and point -of-sale displays Coupons—provides a stated discount to consumers on the final selling price of a specific item; th e retailer handles the discount Deal—a type of short-term price reduction that can take several forms, such as a “featured price,” a price lower than the regular price, a “buy one, get one free” offer, or a certain percentage, “more free” offer contained in larger packaging; can involve a financing arrangement, such as reduced percentage rates or extended payment terms Premium—an item offered for free or at a bargain price to reward some type of behavior, such as buying, sampling or testing Contest—a brand-sponsored competition that requires some form of skill or effort Sweepstakes—a form of sales promotion that offers prizes based on a chance drawing of entrant’s names Sampling—offers potential customers the opportunity to try a product or service before th ey make a buying decision Loyalty Programs—specifically designed to retain customers by offering premiums or other incentives to customers who make multiple purchases over time Point-of-Purchase (POP) Display—a merchandise display located at the point of p urchase, such as the checkout counter at a grocery store Rebates—a consumer discount in which a portion of the purchase price is returned to the buyer in cash, the manufacturer, not the retailer, issues the refund Product Placement—inclusion of a product in nontraditional situations, such as in a scene in a movie or TV show Cross-Promoting—efforts of two or more firms joining together to reach a specific target market 7 Chapter 19: Personal Selling and Sales Management (skip LO 19-3) Key Terms Personal Selling—the two-way flow of communication between a buyer and a seller that is designed to influence the buyer’s purchase decision Relationship Selling—a sales philosophy and process that emphasizes a commitment to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial to both parties Leads—a list of potential customers Qualify—the process of assessing the potential of sales leads Trade Shows—major events attended by buyers who choose to be exposed to pro ducts and services offered by potential suppliers in the industry Cold Calls—a method of prospecting in which salespeople telephone or go to see potential customers without appointments Telemarketing—a method of prospecting in which salespeople telephone p otential customers Preapproach—in the personal selling process, occurs prior to meeting the customer for the first time and extends the qualification of leads procedure; in this step, the salesperson conducts additional research and develops plans for meeting with the customer Role Playing—a good technique for practicing the sales presentation prior to meeting with a customer; the salesperson acts out a simulated buying situation while a colleague or manager acts as the buyer Closing the Sale—obtaining commitment from the customer to make a purchase Sales Management—involves the planning, direction and control of personal selling activities, including recruiting, selecting, training, motivating, compensating and evaluating, as they apply to the sales force Company Sales Force—comprised of people who are employees of the selling company and are engaged in the selling process Independent Agents—salespeople who sell a manufacturer’s products on an extended contract basis but are not employees of the manufacturer , also known as manufacturer’s representatives or reps Manufacturer’s Representative —see independent agents Reps—see independent agents (skipped vocab from LO 19-3) 8 Lecture Notes: Integrated Marketing Communications (Promotion) PowerPoint • Integrated Marketing Communications o companies didn’t always work this way, and we didn’t always teach this (started about 3 years ago—very recent) o Three elements: the consumer, the channels through which the message is communicated and the evaluation of the results of the communication o “consistency in core message across EVERY contact point with consumers” o “power idea” – what the company wants us to walk away with o “experiential marketing” – adding a ‘human touch’ to marketing o Ex. The Dark Knight (examples section o Ex. Bing with Jay-Z (examples section • AIDA Model o “feel comfortable with this model—it is the backdrop of communication” o “on exam I will give you a hypothetical ad situation and I want you to be able to identify what a campaign is doing—I will be clear cut on the exam” o AIDA Model: awarenessà interestà desireà action § Interest + desire = purchasing intention o Traditional learning hierarchy: thinkà feelà do o Awareness § Awareness ads don’t have a lot of text—think early iPod ads—had black silhouette of person and white silhouette of product—no text at all § “attention grabbing” § high top-of-mind awareness means the brand is probably in the consumer’s evoked set of brands § Household brands typically stay in awareness level for reminder ads • Cottonelle Ads with Puppies • Evian Babies (examples section) https://www.youtube.com/watch?v=_PHnRIn74Ag o Interest § Content Marketing: “is this an ad, or is this an advertiser giving me information?” http://adage.com/article/ad-age-research/content-advertising/300858/ o Desire § “purchase intention” § may not be in a position to buy this product right now but increases your preference for when you are in a position to buy o Action § Coupons, contests, sweepstakes—all push customer to action § May not necessarily be a purchase 9 • Bottom left is traditional forms of promotion • Top right is goal—very innovative • Think “how do I allocate my resources” • Today, ad agencies are held more responsible—are being compensated more & more based on their performance • Advertising o Does not always have an immediate impact—multiple exposures are often necessary o It is difficult to determine which exposure led to a purchase o Examples § “the ads will watch us” – Bruised Woman billboard (examples section § “the stores are watching us” – CNN—Nordstrom watching consumers (examples section) § **facial recognition software • Public Relations (PR) o PR ≠ Publicity!! Publicity is just one of the outputs of PR o PR’s purpose is to “build a wall” around a firm § Ex. Chickfila has awesome PR, negative publicity doesn’t last long or really have an affect on the business • PR, sales promotions, personal selling, direct marketing and online marketing are all different “buckets” of communication • Sales Promotions o An incentive to make a purchase—most popular medium is a coupon o Can be directed at consumers OR retailers/wholesalers • Personal Selling o Ex. Pharmaceuticals—an industry that understands sales people provide a 2-way form of communication that creates long term relationships that are needed to move products through the channel o Ex. Industrial industry • Online Marketing o Ex. AdAge—Yes, there is a War on Advertising. Now What? http://adage.com/article/print-edition/a-war-advertising/300336/ § How much will we be able to control of what we see and don’t see in online advertising? 10 § When people began opting out of traditional forms of promotion, product integration became more prominent in TV shows and movies— what will happen with online advertising when people start opting out? o Ex. Volvo and the Super Bowl https://www.youtube.com/watch?v=xZe1rVgT0WE § “shifting social conversation to Volvo—when other car ads came up on TV, people were looking at their phones, focused on Volvo” § tweet “#volvointerception” during another car commercial for chance to win a Volvo – “ambush marketing” § 2,000 tweets/minute, 70% sales increase, trended nationally and globally during entire game • Direct Marketing o “KEY” to capitalize on the growing spending power of minorities o “one to one” format – mass customization o Ex. Selig Center: http://news.uga.edu/releases/article/multicultural-economy- report-2014/ o Ex. Columns: http://news.uga.edu/releases/article/2015-multicultural-economy- report/ • Setting and Allocating the IMC budget o “feel comfortable with how companies decide to spend IMC budgets” o Objective and Task method § Most straight forward, logical § Each part of advertising plan has a $ attached to it—add up $, get budget amount – “build up” method o Rule-of-Thumb Methods § More popular § Competitive Parity: You want to be very aware of what other companies are spending on advertising per market share point—You may not be able to compete dollar for dollar, but you can be on par with % of money spent relative to your smaller piece of the market pie § Percentage-of-sales: % of last year’s sales or % of projected sales • Logic behind it: reverse logic—the more we make, the more we’ll spend on advertising • Reverse from how we typically try to view advertising: as an investment that we expect a certain rate of return on § Available/Affordable: what is left over • Ex. Alex described Umano as “bootstrapped” • Steps in Planning and Executing an Ad Campaign • Step 1: Identify Target Audience – WHO are you speaking to? *KEY* can’t move on until this is done! • Step 2: Set Advertising Objectives – Push vs Pull strategy o Consumers: pull (advertising/sales promotions) 11 o Channel members: push (personal selling/trade promotions) • Advertising Objectives: Inform (introductory), persuade (growth), remind (mature o Doesn’t have to be either/or o What an ad should be doing is related to the product’s place in the PLC o “On the exam I’ll describe an ad and you’ll have to tell me what the objective is” o Informative—builds brand awareness, pushes consumer through buying cycle o Persuasive—result of intense competition o Reminder—remind or prompt purchases after product gains market acceptance § Ex. http://adage.com/article/cmo-strategy/michelle-obama-s-veggie- pitch-includes-celebrity-ads/297334/ • Focus of Advertisements o Institutional vs Product Focused advertisements § Ex. Institutional P&G/Dove—P&G wanted to connect products to P&G name, “image building,” goal was not to advertise the products themselves § PSA’s—Public Service Announcements—under FCC, broadcasters must devote a certain amount of free airtime to PSAs • Ex. “Cheerleader Daddy” fatherhood.gov https://www.youtube.com/watch?v=Eb2iWSae5HE • Step 3: Determining the Advertising Budget o “Be comfortable with the methods of setting the budget” o Competitive parity, percentage-of-sales, available budget— (Ch. 17, pg. 389) • Step 4: Convey the Message o Unique Selling Proposition (USP): what is the power message?? § Ex. Redbull gives you wings, Nike: just do it, TNT: we know drama o The Appeal: how do you execute it? (for examples of types of appeals, see “examp es” section) § Informational § Emotional—doesn’t scream “buy my product” 12 o Symbols: the use of symbols DOES matter! • Step 5: Evaluate and Select Media o Media mix: what mediums to use o Media buy: MOST expensive part • Mass and Niche Media o Massà Super Bowl ads o Nicheà AT&T Between Two Worlds campaign https://www.youtube.com/watch?v=i6LBJfL-_rk&feature=youtu.be • Choosing the Right Medium o “refer to this table…be comfortable with the pros and cons, uniqueness of each” o Ex: Magazines have “pass-along readership” aka when you find an article in a magazine you know a friend will like, you hold onto it and pass it along to them (CH 18, pg. 404) • Viral Marketing Campaign o Similac “Real Parents” and “Motherhood” advertisements • Determine the Advertising Schedule o Continuing—household products o Pulsing (combination of continuing and fighting, spikes in advertising)—bars and boutiques o Fighting (major fluctuations)—movie release advertisements, cold/flu season • Step 6: Create Advertisements o Type of media determines execution o Creativity important in execution § Creativity shouldn’t overshadow message o Execution style must match medium and objectives o Parts of an Ad § Headline: large type that draws attention § Subhead: provides more information § Body Copy: main text portion (builds interest) § Brand Elements: identifies the sponsor 13 o Lift: sales from advertising • Step 7: Assess Impact Using Marketing Metrics o It is extremely important to have measurements, benchmarks and goals for brand awareness o Pretesting (before)—measures brand awareness before campaign o Tracking (during)—measures key indicators o Post Testing (after)—assessment of impact of ad • Regulatory and Ethical Issues in Advertising o Know the difference between puffery and false advertising § Puffery: legal, advertising through hyperbole, doesn’t have to be proven, subjective, “world favorite” § False Advertising: illegal, factually false, used to promote a product, objective, “9 of 10 recommend” § FTC—consumer protection, truthful advertising § FCC—restricts lottery, cigarettes, obscene language § FDA—regulates packaging • Prescription drugs to be sold with a black box warning • Sales Promotions o Can be targeted at the consumer or the channel members § Ex. Trade discounts § Ex. Kohl’s, website screams “deal!!!” “savings!!!”—that image is built into the business model § Ex. Bed, Bath & Beyond • Very hard to step away from this once it is built into your business model • Types of Sales Promotion— “be familiar with each type, advantages and disadvantages of each” o Sweepstakes (chance, little involvement, aligned with buying based on price) vs contest (evaluated or judged, builds brand loyalty) o We think of product placement/integration as PR, not sales promotion 14 o Cross promoting vs cobranding § Ex. Petsmart à Iams Dog food • Evaluating Sales Promotions using Marketing Metrics o Realized margin, cost of additional inventory, potential increase in sales, long- term impact, potential loss from switches from more profitable items o Additional sales by customers—loss leaders: product priced at or below cost, “willing to take a hit on this” but these items are strategically placed at the back of the store, counting on “spillover” purchases § Loss leader pricing is considered an illegal form of bait-and-switch pricing in come states • Personal Selling Process o Most expensive form of promotion o Know the steps: Generate and qualify leads à preapproach (know the ins & outs of a contract a client may already have with someone else) à sales presentation and overcoming reservations à closing the sale à follow up (5 service quality dimensions: reliability, responsiveness, assurance, empathy, tangibles) • Issues for the Sales Force and Corporate Policy o Vice goods, vulnerable populations 15 Examples: Integrated Marketing Communications PowerPoint • The Dark Knight – 2007 https://www.youtube.com/watch?v=VpuC7HhCPWA o “one of the most successful viral marketing campaigns in my opinion” o think like the ad agency: what all went into coordinating every piece of this campaign? o “immersive marketing campaign” § 75 countries, 10 million participants o scavenger hunt for clues that led to an official dark knight trailer o “transmedia experience” o biggest opening day of all time o ALL consumer touch points were integrated • Bing | Decode Jay-Z Case Study https://www.youtube.com/watch?v= XNic4wf8AYg o “harnessed this moment in pop culture” o pages of Jay-Z’s autobiography posted in various places around the world in multiple formats – put story in context (placed where page was talking about) § Gucci made jackets, page on bottom of pool, in sub ways, etc. § “if the channel didn’t exist to communicate the page, we created it” o BING—integrated online game, clues on BING using maps to locate pages o “woven together using BING technology” o 11.7% increase in visits to BING in 30 days § 1.1 billion media impressions • “take note of level of integration…consistency” • Ads Will Watch Us https://www.youtube.com/watch?v=t0nmztds7B4 o Uses facial recognition software to determine gender and age and produce a digital ad targeted to you o Also records how long you look at the ad • Bruised Woman Billboard http://www.adweek.com/adfreak/bruised -woman-billboard-heals-faster-more-passersby-look- her-163297 o 3 stages—look, pay attention, donate o uses facial recognition software for stopping power • The Stores are Watching U s http://newday.blogs.cnn.com/2013/07/17/retail -stores-are-tracking-your-cell-phone/ o Uses Wi-Fi signals from smartphones to track your movement around the store o Heat mapping to see where people spend the most time looking at products o RetailNext— “our software is so specific it can tell exactly where you are in the store and even which direction your head is looking” § More than 5,000 stores worldwide § “Can’t identify you individually” • Different types of Appeals o Informational § Domino’s pizza is hot again http://money.cnn.com/2014/10/22/investing/dominos -pizza-hot-again-stock- record/ o Emotional 16 § Apple’s Holiday TV ad https://www.youtube.com/watch?v=nhwhnEe7CjE § P&G Raising an Olympian https://vimeo.com/46271901 • Multicultural • Not advertising any product, just P&G getting name out there § Dove Real Men + Care https://www.washingtonpost.com/video/c/video/d064bf24 -a1a0-11e4-91fc- 7dff95a14458 • Kind of weird because it blatantly says “BUY DOVE PRODUCTS!” at the end § Toyota Camry: To Be a Dad http://www.hulu.com/adzone/740582 § Toyota: My Bold Dad https://www.youtube.com/watch?v=aihYeQsoQoQ § Nissan: With Dad https://www.youtube.com/watch?v=wR5CSBIpXy0 § Humor—Lost Phone Allstate Mayhem https://www.youtube.com/watch?v=ozFy -A1uOG8 § Geico: Tarzan argues o ver directions https://www.youtube.com/watch?v= - lmw0d6S6jU § Targeted audience: moms—Clorox: Cute kids do not so cute things in the bathroom http://creativity-online.com/work/clorox -bleachable-moments-- mop/39317 § Toyota: Swagger Wagon https://www.youtube.com/watch?v=ql -N3F1FhW4 § AT&T “It’s not complicated” commercials https://www.youtube.com/watch?v=gyVrvUq5PSs § Happiness—Coca-Cola Happiness Machine https://www.youtube.com/watch?v=lqT_dPApj9U § Extra Gum: The Story of Sarah and Juan https://www.youtube.com/watch?v=XLpDiIVX0Wo § Quaker: Off you Go http://adage.com/article/cmo -strategy/oatmeal-season- quaker-emotional/300333/ § Dick’s: Gifts that Matter http://adage.com/article/cmo -strategy/dick-s- sentimental-holiday-ad/295766/ § Nostalgia—Ritz: Buttery Crackers Can make you Rich http://adage.com/article/cmo -strategy/ritz-buttery-crackers-make- rich/298012/ § Kraft: Mac & Cheese http://adage.com/article/cmo -strategy/kraft-hold/300941/ § Honey Maid: This is Wholesome https://www.youtube.com/watch?v=2xeanX6xnRU • Honey Maid responds to backlash from This is Wholesome Campaign http://www.huffingtonpost.com/2014/04/03/honey -maid-love- commercial_n_5086442.html 17 Lecture Notes: Price PowerPoint 1. Price is the overall sacrifice a consumer is willing to make to acquire a specific product or service o Price ≠ price tag!!! It includes time, energy, money, etc. o Price to seller: revenue o Price to consumer: cost of something The 5 C’s of Pricing 1. Company Objectives – not mutually exclusive – see definitions in “key terms” section o Profit Orientation— “anticipated return on investment” § Target Profit Pricing § Maximizing Profits § Target Return Pricing o Sales Orientation—overall revenue, “increasing your slice of the pie” § Premium Pricing o Competitor Orientation—aligned with the industry, airlines/pizza wars § Competitive Parity § Status Quo Pricing o Customer Orientation—customers drive value o Ex. Apple’s iPad Mini http://money.cnn.com/2012/10/23/technology/mobile/apple-ipad-mini-price/ § Great article to understand these concepts!!! You should read! 2. Customers o Demand Curves § Not all are downward sloping—prestigious products or services have upward sloping curves • Think: Starbucks § Price Equilibrium: the price at which supply and demand are equal • But how do companies get here, if how much we are willing to pay is determined by consumers? § Ex. Dan Ariely— https://www.youtube.com/watch?v=FaO3aGmuNFc • Idea used to be that consumers are very rational—evidence is now showing that is not always the case! § Ex. Panera Cares • http://business.time.com/2012/02/27/at-paneras-pay-what-you- want-cafes-customers-usually-pay-full-price/ • https://www.youtube.com/watch?v=RVSh4_in1mo • http://gothamist.com/2011/10/20/williamsburg_restaurant_start ing_pa.php o Elasticity of Demand § Elasticity: ▯▯▯▯▯▯ ▯▯ ▯▯▯▯▯▯▯▯▯ ▯▯▯▯▯▯▯▯ ▯▯ ▯▯ ▯ ▯ % ▯▯▯▯▯▯ ▯▯ ▯▯▯▯▯ ▯▯ ▯▯▯▯ ▯ • E > 1: elastic demand • E < 1: inelastic demand • E = 1: unitary demand 18 § When demand is price elastic • Price ¯, demand , revenue • Price , demand ¯, revenue ¯ o Elastic: demand & revenue move in the same direction • Think: airlines—leisure travel • Ex. JCPenney http://business.time.com/2013/05/02/jc-penney- reintroduces-fake-prices-and-lots-of-coupons-too-of-course/ o took away fake, inflated prices that made customers think they were getting a deal, and marked things at their normal price, customers hated it, quit shopping, JCPenney brought back inflated prices and insane coupons, people came back § When demand is price inelastic • Price ¯, demand —, revenue ¯ • Price , demand —, revenue o Inelastic: price & revenue move in the same direction • Think: airlines—business travel o Factors Influencing Price Elasticity § Substitution Effect—when a product can be easily substituted, people usually chose the cheaper version § Cross-Price Elasticity— “spillover” effect, think printers: an HP printer may seem reasonably priced, but the cartridges are CRAZY expensive, so it keeps people from buying a printer § Remember: it is easier to lose current customers with a price increase than it is to gain customers with a price decrease 3. Costs o Prices should NEVER be basked on costs o Variable costs—vary with production volume § Primarily labor and material § Variable costs per unit may go up or down (for all units) with significant changes in volume o Fixed costs—unaffected by production volume o Total cost—sum of variable and fixed costs o Break Even = ▯▯▯▯▯ ▯▯▯▯▯ ▯▯▯▯▯▯▯ ▯▯▯▯▯ — ▯▯▯▯▯▯▯▯ ▯▯▯▯▯ § Selling price—variable costs = contribution per unit o Profit Analysis = ▯▯▯▯▯ ▯▯▯▯▯▯▯▯▯▯▯▯ ▯▯▯▯▯▯▯ ▯▯▯▯▯ — ▯▯▯▯▯▯▯▯ ▯▯▯▯▯ 4. Competition— “1 or two questions on the exam will be hypothetical situations and I will ask you to identify the type of competition—feel comfortable with the difference in hese” Less Price Competition More Price Competition 19 Monopoly: one firm Oligopoly: a handful of Fewer controls the market firms control the market Firms Ex. the phone company Ex. Airlines, soft drink Grantham Worked for market Monopolistic Pure Competition: many Many Competition: many firms firms selling commodities Firms selling differentiated for the same prices products at different Ex. Marathon—oil/gas, prices meat, wheat • In a purely competitive market, the impulse is to price low—don’t do this! Instead, de- commoditize your product o Ex. Tyson chicken has made their chicken “better” with good branding, therefore people are willing to pay more for it 5. Channel Members o Gray Market: employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer § Ex. purchasing the “instructor version” or “international version” of a textbook rather than what is listed on the syllabus for a much cheaper price, but it does not benefit the publisher or instructor at all § Ex. Costco • Pricing Strategies o Pricing objectives based on orientation is very broad—pricing strategies are the most specific ways to handle pricing that fall under the pricing objective umbrella o Everyday Low Pricing: saves search costs of finding lowest overall prices § Ex. Walmart—savings catcher, “engrained in business model” https://savingscatcher.walmart.com/?&search_redirect=true&wl5=9011 071&adid=22222222220215806259&veh=sem&wl0=b&wmlspartner=wm tlabs&wl2=c&wl1=g&wl4=kwd-87219888029&wl3=52899942657 o High/Low Pricing: provides the thrill of the chase for the lowest price § Ex. JC Penney o Initial Strategies § Whichever of these companies start with, they will always make adjustments later § Not responsible for status quo pricing § Market Penetration Pricing: intentionally entering the market with your prices lower than the market average • Ex. car wash on ATL HWY for $4, Kate Upton’s Fabletics (set of athletic-wear for $50) § Price Skimming: entering market at a higher-than-average price because you know there are people willing and able to pay a higher price point for a new product, then dropping price later to expand reach 20 • Ex. Apple dropping iPhone price http://www.macworld.com/article/1059838/iphonepricecut.html Walmart doing phone rollback plan http://money.cnn.com/2016/04/01/technology/walmart-iphone/ LuluLemon (athletic-wear for upwards of $70 per piece) • Legal Aspects and Ethics of Pricing o Deceptive or Illegal Price Advertising § CitruSolution carpet cleaning—positions themselves to provide “honest” pricing. They do a good job, but they hype up that they price honestly because so many other companies put out coupons they won’t honor or tack on hundreds in hidden fees etc. o Predatory Pricing: setting prices far below market averages with the intention to drive out competition § EXTREMELY hard to prove the intention!!! § Ex. Pizza price wars o Price Fixing: collusion between companies to keep prices low (or high), completely illegal o Price Discrimination § Capital One—offering different people different prices on “personalize” offers before consumers even opt in and share any information…crosses a privacy and discrimination boundary § Quantity discounts must be available to all customers and not be constructed in such a way that they consistently and obviously favor one or a few buyers over others 21 Costco Craze: Inside the Warehouse Giant https://www.youtube.com/watch?v=wOwJ4PXt3GM • Take note of: o Business model, what former CEO believes is at the center, driving force behind the business model • Triggers vs treasures: triggers (everyday things like cereal, laundry detergent, etc.) get people into the store and build loyalty, treasures (TVs, diamond rings, caskets, Prada handbags) are where people really spend their money • No signs in the store—they want people to wander so they end up picking up things they don’t need • Limited choices to encourage purchases (Costco only carries about 4,000 Items)— studies show that if you give a person 13 options of jelly, there is too much room for confusion and consideration and more often than not, they’ll walk away; giving a person 6 choices results in way more purchases. Costco takes a lot of the guess work out for people • Nothing is marked up more than 15%—typical supermarket markup is around 25% • Costco already breaks even on items they sell because of membership fees x volume of members • CEO pushes some vendors too far, to the point where they say “no, we won’t sell it that cheap” • Costco goes through the gray market to get some things cheaper by circumventing the manufacturer and going through third parties o CEO defends this, saying he only things utilizing the gray market is wrong if people use it to keep prices artificially high • Supplier pressures: 28:45 o Pay special attention to how much pressure Costco puts on their suppliers o Buyers search & search for the best products, them whittle down the price— extremely competitive because Costco runs with so few products in their stores o Toys—getting into “the room” is a huge deal, manufacturers go through tons of meetings, work, revisions, to even get selected for that round, then Costco’s buyer teams whittle about 1200 toys down to 150 22 Talladega Presentation, 3/23/16 • 70% of fans are from outside Alabama, $380 million dollar economic impact on the area • Nascar o Bill France o Daytona 500—Super Bowl of Nascar o Dale Jr. has won Nascar favorite 13 yrs. in a row o Most accessible athletes o Current market focus: military, youth o Huge push in digital & social media o Sponsorship is KEY!!! #1 sport in Fortune 500 sponsorships § Dale Jr.—you’re looking at $800,000 to be on the car for one race o On Fox Sports & NBC Sports • Talladega does play-by-play updates for every race on social media, not just the races they host • $1 bill in advertising from Geico • Fan generated content: video production: 100,000 Cameras o People get married, spread ashes, etc. at Talladega • Snapchat Live Feed • Marketing web Youth (acceleration Product relevance nation) (actual racing) Digital & Social Generation Y Event Media experience Driver star power multicultural • 2016 Key Marketing Objectives o Event experience: party on the field the night before the race, idea from a driver, Clint Boyer, infield concert, 7 -8,000 people, o Youth targeting: college package gets you a $25 ticket, college camping area access and infield concert ticket o #NascarSalutes campaign—military • Media Relations o Nascar IMC § Competitions, racing ops, touring, digital and social media • Grantham’s Questions o If the average person is a 55+ yr. old man, and you’re targeting mostly youth & military, is it because you don’t need to target those 55+ year old men? § Reps said “we don’t need to advertise to them, they will come anyways. We are really focusing on targeting youth to build our future fan base” 23
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