Exam 2 BADM 3401
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This 31 page Study Guide was uploaded by Camille Duarte on Thursday October 15, 2015. The Study Guide belongs to BADM 3401 at George Washington University taught by Sung Ham in Summer 2015. Since its upload, it has received 55 views. For similar materials see Basic Marketing Management in Business Administration at George Washington University.
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Date Created: 10/15/15
Ch 7 Customer Driven Marketing Strategy 0 Select customers to serve o Segmentation Divide the total market into smaller segments 0 Targeting Select the segment or segments to enter 0 Decide on a value proposition 0 Differentiation Differentiate the market offering to create superior customer value 0 Positioning Position the market offering in the minds of target customers 0 Both used to create value for targeted customers Market Segmentation Geographic divides the market into different geographical units such as nations regions state counties or cities Ex taco at burger king 0 Demographic divides the market into groups based on variables such as age gender family size family life cycle income occupation education religion race generation and nationality Demographic Market Segmentation Age and lifecycle stage segmentation the process of offering different products or using different marketing approaches for different age and lifecycle groups Ex senior discountsspecials Gender segmentation divides the market based on sex male or female Ex dr pepper 10 commercial men unwilling to drink diet DI pepper 0 Income segmentation divides the market into af uent middle or lowincome segments Ex hotel chains Marriot RitzCarlton Segmenting Consumer Markets 0 Psychographic segmentation divides buyers into different groups based on social class lifestyle or personality traits Ex Whole Foods middle age vs Trader joes seniors Behavioral segmentation divides buyers into groups based on their knowledge attitudes uses or responses to a product 0 Occasions divided according to occasion when buyers get the idea to buy actually make their purchase or use item Ex Pumpkin spice latte 0 Bene ts sought divided according to different bene ts sought by consumers from products Ex Charmin toiler paper types 0 User status non ex potential rsttime regular Ex Night at the museum bene tted a lot of museums brought in a lot of nonusers Traffic in museums in New York went up 20 0 Usage rate Ex data plan with smart phone Loyalty Ex Harley Davidson 0 Using Multiple Segmentation Bases 0 Marketers use a combo of factors to segment consumers Ex plastic surgery income age and lifecycle psychographic gender Requirements for Effective Segmentation Measureable Size purchasing power and pro les of the segments can be measured Accessible market segments can be effectively reached and served Substantial Market segments are large or pro table enough to serve Differential segments are conceptually distinguishable and respond differently to different marketing mix elements and programs Actionable effective programs can be designed for attracting and serving the segments Market Targeting Target market set of buyers who share common needs or characteristics that the company decides to serve 0 Segment size and growth Segment size number of buyers x units x price 0 Segment structural attractiveness Factors may include strong and aggressive competitors substitute products and high power of buyers or powerful suppliers 0 Company objectives and resources Targeting Strategies Undifferentiated all buyers in one segment Differentiated different marketing mixes for speci c segments Concentrated marketing targets niche markets Feasible with limited company resources advantage due to knowledge of targeted segments and can be more effective in meeting target segment needs and ef cient high hit rate Micromarketing local marketing and individual marketing Choosing a Target Market 0 Company resources 0 Product variability o More variable the greater the concentration 0 Product lifecycle stage 0 Mature products have greater concentration 0 Market variability o More variable the greater the concentration Competitor s marketing strategies 0 More competition the greater the concentration Socially Responsible Target Marketing o Targeting bene ts customers with speci c needs Ex Cookie Monster now doesn t eat only cookies also eats vegetables and a balance diet Health concerns marketing cookies for kids 0 Concern for vulnerable segments 0 Children alcohol cigarettes internet abuses Ex Flintstones commercial ecig Positioning Product position the way the product is de ned by consumers on important attributes the place the product occupies in consumers minds relative to competing products Ex tide all purpose family detergent Uber everyone s private driven Subway eating fresh and healthy CV5 health is everything Positioning Maps show the consumer perceptions of their brands vs competing products on important buying dimensions Differentiation and Positioning Competitive advantage an advantage over competitors gained by offering consumers greater value either through lower prices or by providing more bene ts that justify higher prices Ex uber vs taxi 0 Product differentiation 0 Service differentiation 0 Channel differentiation 0 People differentiation 0 Image differentiation Choosing the Right Competitive Advantage Question How many differences to promote 0 Important the difference delivers a highly valued bene t to target buyers 0 Distinctive Competitors do not offer the difference or the company can offer it in a more distinctive way 0 Superior the difference is superior to other ways that customers might obtain the same bene t 0 Communicable the difference is communicable and visible to buyers 0 Preemptive Competitors cannot easily copy the difference 0 Affordable Buyers can afford to pay for the difference 0 Pro table The company can introduce the difference pro tably Selecting an Overall Positioning Strategy 0 Value proposition the full mix of bene ts upon which a brand is differentiated and positioned Ex Taco Bell vs Chipotle More The same Less More liter The same Benefits Less Communicating a position 0 Positioning Statement to target segment and need our brand is concept that point of difference To the lunch crowd who craves the best of the best Jimmy John s offers honest good and freaky fast gourmet sandwiches at a decent pricequot Subs so fast you ll freak The company must take strong steps to deliver and communicate the desired position to target consumers All the company s marketing mix efforts must support the positioning strategy SHORT ANSWER ON TEST Ch 8 Products Services and Experiences Product anything that can be offered in a market for attention acquisition use or consumption that might satisfy a need or want 0 Service product that consists of activities bene ts or satisfaction that is essentially intangible and does not result in the ownership of anything 0 Experiences represent what buying the product or service will do for the customer Ex japanese restaurant Makoto Lion King Broadway show 0 Core Customer Value what buyers really buy Consumer Products 0 Convenience products products and services that the customer usually buys frequently immediately and with minimum comparison and effort Ex laundry detergent candy fast food and magazines Shopping products products and services that the customer compares carefully on suitability quality price and style Ex furniture used cars appliances clothes hotel and airline services Specialty products products and services with unique characteristics or brand identi cation for which a signi cant group of buyers is willing to make a special purchase effort Ex medical or legal services designer clothes highend electronics and cars highpriced photography equipment gourmet foods Unsought products products that the customer does not know about or does not normally think of buying Ex life insurance funeral services blood donations Industrial Products Industrial products products purchased for further processing or for use in conducting a business Classi ed by the purpose Capital items industrial products that aid in the buyer s production or operations Materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users Supplies and services include operating supplies repair and maintenance items and business services Ex Grey commercialsadvertising Organizations Persons Places and Ideas Place marketing activities taken to create maintain or change attitudes and behavior of target consumers toward places Ex Spirit airlines ad with mile high in Colorado Idea or Social marketing use of commercial marketing concepts and tools in programs designed to in uence individuals behavior to improve their wellbeing and that society Ex no smoking commercials Organization marketing activities taken to create maintain or change attitudes and behavior of target consumers towards organizations Ex NFL commercial despite scandals Person marketing activities taken create maintain or change attitudes and behavior of target consumers toward people Ex Nike with Tiger when he regained his number 1 ranking Product and Service Decisions Product PrOdUCt 7 7 7 77 7 i l 7 39llil 39 1 attributes 9 Branding 9 PaCKag39l g 9 Label39w a support services Product attributes 0 Product Quality characteristics that bear on its ability to satisfy stated or implied customer needs 0 Two dimensions level performance and consistency conformance Conformance quality product s freedom from defects and consistency in delivering a targeted level of performance 0 Both are important because quality is often linked to customer value and satisfaction 0 Features a competitive tool for differentiating a product from competitors products 0 Style describes the appearance of the product 0 Design contributes to a product s usefulness as well as to its looks EX crocs Branding 0 Brand a name term sign symbol or design or a combo of these that identi es the maker or seller of a product or service 0 Brand names Help consumers identify products that might bene t them Say something about product quality and consistency Became the basis on which a whole story can be built about a product Provide legal protection for unique product features Help the seller to segment markets 0 Packaging involves designing and producing the container or wrapper for a product Ex Apple simple packaging Labels identify the product or brand describe attributes and provide promotion Ex Heinz and GW logo change 0 Product support services augment actual products Ex RitzCarlton academy for customer services Nordstrom customer service excellence Product Line Decisions 0 Product Line group of products that are closely related because they function in a similar manner are sold to the same customer groups are marketed through the same types of outlets or fall within given price ranges Ex jack Daniels 0 Product Line Length the number of items in the product line 0 Line stretching lengthens line beyond its current range Downward product line stretching is used by upper end rms to plug a market hole or respond to a competitor s attack at the lower end Ex Mercedes CLA class Upward product line stretching used by lower end rms to add prestige to their current products Ex Mercedes jack Daniels bottle variations Combination line stretching used by rms in the middle range of the market to achieve goals of upward and downward line stretching Line lling adding more items within present range of the line Ex jack Daniels Tennessee honey Product Mix Decisions Product Mix consists of all the products and items that a particular seller offers for sale 0 Product mix width the total number of items the company carries within its product lines Ex Colgate 0 Product mix length the total number of items the company carries within its product lines Ex Within oral care 0 Product mix depth the number of versions offered of each product in the line Ex Within toothpaste 0 Ex Pet food Service Marketing lntangibility Services cannot be seen tasted felt heard or smelled before purchase Variability Quality of services depends on who provides them and when where and how lnseparability Services cannot be separated from their providers Perishability Services cannot be stored for later sale or use External Marketing 4 P s is not enough for services Internal Marketing means that the service rm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction 0 Internal marketing must precede external marketing Interactive Marketing means that service quality depends heavily on the quality of the buyerseller interaction during the service encounter Ex Seinfeld Goal is to increase service differentiation and productivity Managing Service Differentiation creates a competitive advantage from the following 0 Offer can include distinctive features Ex Southwest free bags 0 Delivery can include more able and reliable customer contact people environment or process Ex Domino s pizza 0 Image can include symbols and branding Ex Geico gecko Managing service quality provides a competitive advantage by delivering consistently higher quality than its competitors 0 Dif cult because service quality always varies depending on interactions between employees and customers 0 Managing service productivity refers to the cost side of marketing strategies for service rms Ex Way that uber is able to be successful 0 Employee recruiting hiring and training strategies 0 Service quantity and quality strategies Branding strategy building strong brands Brand equity brand positioning brand name selection brand sponsorship and brand development Brand positioning Brand name selection Brand Sponsorship Brand development Attributes Selection Manufacturer s brand Line extensions l Bene ts 1 Protection Private brand Brand extensions i Beliefs and values Licensing Multibrands l Ctrbranding New brands Top Brands of 2015 10Marlboro9 McDonalds 8 Coca Cola 7 Verizon 6 ATampT 5 Visa 4 IBM 3 Microsoft 2 Google 1 Apple Brand Positioning Product attributes lowest level to position on and is the least desirable Product bene ts Mid level to position on and is more desirable than positioning on attributes 9 Products beliefs and values Highest level to position on and is the most desirable Extends beyond the tangible bene ts Ex 7 generation also product attributes shown and product bene ts Brand Sponsorship Manufacturers or national brand Ex PampG 0 Dominant in retail 0 Private brand brand created and owned by resellers Ex Costco Kirkland 0 Growing importance and strength 0 Licensed brand brand created with licensed names or symbols created by other manufacturers well known celebrities or characters from movies and books Ex Harry Potter books to movies CoBrand practice of using established brand names of two companies on the same product Ex Ugg and Chanel pearl boots Brand Development 0 Line extensions extends existing product line Ex Doritos and their different avors 0 Low risk way of introducing new products 0 Possible cannibalization risks Brand extensions extends beyond product category Ex Arm and hammer went from baking soda to toothpaste Went bad Colgate making frozen foods 0 Use brand name to generate success in new category 0 Risk of overextending or brand dilution Multibrands different brands in same product category Ex PampG has tide gain cheer etc 0 Great for targeting different segments 0 Risk of overspreading brands New brands new branding attempt Ex US Taco Company in Huntington Beach Cali came from taco bell Quantitative Segmentation and Targeting Problem Suppose that you are a manager for United Airlines and your marketing research team has identi ed the following for the DC to NY route What is the market size for each segment If you can offer a nonstop ight at one price what price would it be and which groups would be targeted Market Size WTP for NonStop Flight 200 150 200 Potential Customers 2000 30000 8000 Annual Frequency of 10 1 3 Use Segment Size 4 Mil 45 Mil 48 Mil Segment Size at 3 Mil 45 Mil 36 Mil 150 Segment Size at 4 Mil O 48 Mil 200 CH9 We would offer the ight at 150 and sell to all three segments A B C groups Two ways to obtain new products 0 Acquisition refers to the buying of a whole company a patent or a license to product someone else s product EX Google android applied semantics youtube where2 0 Tech and pharmaceutical companies frequently use acquisition 0 An advantage is that it reduces risk to purchase an already established product What products rms has Google acquired Motorola Android Applied Semantics Doubleclick bid real time for Ads Youtube where2 helped develop google maps waze nest zagat New product development refers to original products product improvements product modi cations and new brands developed from the firm s own research and development New Product Development Strategy 0 For companies key source of growth 0 For customers bring new solutions and variety to their lives 0 Innovation can be very expensive and very risky o 80 of all new products in America fail 0 Each year companies lose an estimated 260 billion on failed new products New coke replacing coca cola classic New coke did better on taste test but there was huge backlash After 90 days they went back to classic 0 Reasons for failure Overestimated market size Incorrectly designed or positioned Launched at the wrong time Poor marketing 4 P s Poor decisions by management Development costs are too high Products do not bring value to customers lncongruence between brand and extended product 0 Political intervention New Product Development Process ldea generation ldea screening 0 Concept development and testing 0 Marketing strategy development 0 Business analysis 0 Product development 0 Test marketing Commercialization ldea Generalization ldea generalization the systematic search for newproduct ideas OOOOOOOO 0 Sources of newproduct ideas 0 Internal sources refer to the company s own formal research and development management and staff and intrapreneurial programs 0 External sources refer to the sources outside the company such as customers competitors distributors suppliers and outside design rms Ex my starbucks idea Walmart duct tape in difference colors Iegos Elsa 5 frozen ice palace o Crowdsourcing invites broad communities of people customers employees independent scientists and researchers and even the public at large into the newproduct innovation process Ex Net ix algorithm Swiss army knife designs developed through this process ldea Screening 0 Identify good ideas and drop poor ideas RWW Screening Framework o Is it real 0 Can we win o Is it worth it Concept Development and Testing 0 Product concept is a detailed version of the product idea stated in meaningful consumer terms 0 Concept development 0 Initial prototype may not be marketable 0 Develop alternative concepts Ex Lamborghini Concept testing 0 Testing newproduct concepts with consumers to see if it has appeal Surveys Marketing Strategy Development 0 Marketing strategy development refers to the initial marketing strategy for introducing product to the market 0 Marketing strategy statement should include 0 Target market value proposition goals 0 Planned price distribution marketing budget for rst year 0 Planned longrun sales pro t goals and marketing mix strategy 0 Ex American girl dolls Alternative to existing dolls actual girls more realistic different race options More expensive dolls Business Analysis Involves a review of the sales costs and pro t projections to nd out whether they satisfy the company s objectives Product development Involves the creation and testing of one or more physical versions by the RampD or engineering departments Ex Volvo Requires an increase in investment 0 Shows whether the product idea can be turned into a workable product Test Marketing 0 Stage where product and marketing program are introduced into more realistic settings 0 Standard small number of representative test cities Ex Ashley Madison introduced last year in Hong Kong as a test country for China 0 Controlled tested and tracked at the consumer level 0 Simulated basically simulated shopping environments virtual or in person 0 Doritos Mountain dew When rms test the market 0 New products with large investment 0 Uncertainty about product or marketing program 0 When rms may not test market 0 Simple line extension 0 Copy of competitor product 0 Low costs 0 Management con dence Commercialization Introduction of the new product When to launch Where to launch Planned market rollout Apple speci c launching of new lPhones and products Successful New Product Development Should Be 0 Customer centered new ways to solve customer problems and create more satisfying experiences Ex Swiffer from PampG o PampG success rate is 50 compared to 1520 for the industry Teambased company departments work closely together in cross functional teams overlapping in the productdevelopment process to save time and increase effectiveness 0 Response to slow process of typical and sequential NPD approaches 0 Sequential approach brings control to risky and complex NPD projects 0 Can create organizational tension and confusion Systematic innovate development approach that collects reviews evaluates and manages newproduct ideas Ex Google 0 Yields innovation organizational culture and many new ideas NPD should continue even in turbulent times Product Life Cycle Strategies Sales and profits I 39 Pro ts 0 39 7 Tilme Product a 39 development Introduction Growth Maturity Decline Losses investment y Introduction 0 Slow sales growth with little or no pro ts 0 High distribution and promotion expense to educate and attract customer 0 Few basic models offered Ex Blackberry 0 Ex Tesla vs Apple car vs GM Growth 0 Sales and pro ts increase New competitors enter with new product features Ex Smartphones Price stability or decline to increase sales volume Continued consumer education Promotion and manufacturing costs gain economies of scale Improves product quality adds new products features and models and expands to new market segments and new distribution channels Maturity Ex Coca Cola o Slowdown in sales Many suppliers 0 Many substitute products 0 Increased promotion and RampD to support sales and pro ts 0 Successful strategies Market modifying increase consumption by nding new segments O 0000 Product modifying alter features to attract new buyers Marketing mix modifying alter marketing mix elements Decline 0 Sales drop 0 Cost reduction and pro t extraction 0 Competitors leave market 0 Strategies Maintain its brand repositioning or reinvigorating it in hopes of moving back into the growth stage Ex Lincoln cars Harvest product meaning to reduce various costs plant and equipment maintenance RampD advertising sales force to raise pro ts Ex Talbots Drop the product from its line It can sell it to another rm or simply liquidate it at salvage value Ex Hummer Additional Product and Service Considerations 0 Product Decisions and Social Responsibility 0 Public policy and regulations regarding Developing and dropping products Patents Ex Apple vs Samsung Quality safety and warranties Ex Tesla Battery battery issues at rst safety 0 International Product and Services Marketing 0 Determining what product and services to introduce in which countries Standardization vs customization Ex Oreo in China PIONEERING ADVANTAGE ARTICLE SHORT ANSWER ON TEST 0 What are the advantages of being a pioneer What are the disadvantages of being a pioneer Does a pioneering advantage exist Ch 10 Major Pricing Strategies 0 Price the amount of money charged for a product or service It is the sum of all the values that consumers give up in order to gain the bene ts of having or using a product or service 0 Price ceiling no demand above this price Maximum willingness to pay Customer perceptions of value 0 Price oor no pro ts below this price Products cost Cusmmer Other internal and external perceptions e considerations 77 product of value Marketing strategy objectives 9 costs and ile Price ceiling Nature of the market and demand Price oor No demand above Competitors strategies and prices Nlo profits below this price this price Valuebased pricing uses the buyers perceptions of value not the sellers cost as the key to pricing 0 May be dif cult to assess so marketers try to estimate the willingnesstopay WTP through marketing research 0 Valuebased pricing is customer driven Valuebased prieiiing Assess customer Set target price to Determine costs tVDSSIQn 330519011 needs and value matron customer that can be 0 IBIVBI Y eeire perceptions perceived value incurred V3 ep iallget Pricing valuebased example costs of strollers 3 different types Bugaboo Cameleon 1059 Graco Fast Action 18999 Silver Cross Balmoral Classic 399999 Price ranges vary greatly Customer Value Based Pricing Goodvalue pricing offers the right combo of quality and good service at a fair price Ex Dollar Value Menu 0 Introducing lessexpensive versions of established brands 0 Existing brands are redesigned to offer more quality for a given price or same quality for less price 0 Everyday low pricing EDLP charging constant everyday low price with few or no temporary price discounts Ex WaIMart Highlow pricing charging higher prices on everyday basis but running frequent promotions to lower prices temporarily on items Ex jCPenney o Valueadded pricing attaches valueadded features and services to differentiate offers support higher prices and build pricing power Ex Larger cars Audi 07 with care and care plus options Ex Macy s acquisition of blue mercury cosmetics will implement service in stores to emphasize a spa type of experience in Macy s stores CostBased Pricing Costlbased pricing Design a 9 Determine Set Price based Emma hitters y 7 of products good product product costs on cost wamue o Costbased pricing setting prices based on costs for producing distributing and selling that the product plus a fair rate of return for effort and risk Ex Shawshank Redemption 0 Types of costs 5 Fixed costs costs that do not vary with production or sales level Ex Rent heat interest executive salaries overhead and sunk costs 5 Variable costs the costs that vary with level of production Ex packaging materials Total costs the sum of the xed and variable costs for any given level of production 0 Total costs FC VC x Quantity 0 Unit cost VC FCUnit sales 0 Price Unit Cost x 1 Markup on Cost Major Pricing Strategies CostPlus or Markup Pricing 0 Bene ts Sellers are more certain about costs than demand which simpli es pricing When all sellers in a market use costplus pricing prices are similar and price competition is minimized Buyers and sellers feel it is fair 0 Disadvantages i Ignores consumer demand and competitor price Ex Bigmac meal Wendy s son of a baconator Chipotle steak burrito bowl Sub way turkey breast footlong Whopper Taco Bell 3 crunchy taco combo all prices increasing is a problem advocates for increasing minimum wage to 15 Will affect prices that restaurants can charge prices will rise for services BreakEven Analysis and Target Pro t Pricing o Breakeven pricing the price at which total costs are equal to total revenue and there is no pro t 0 Target return pricing the price at which the rm will make the pro t it s seeking o Breakeven target return and pro t maximization TVC VC x Q 0 Rev P x Q 0 Pro t Rev TVC FC 0 Break even FC PVC use pro t maiming cost price that yields highest pro t Competitionbased pricing 0 Setting prices based on competitor s strategies costs prices and market offerings 0 Consumers base their judgments of a product s value on the prices that competitors charge for similar products Ex gas stations computer generated algorithm based off of competitors near by real estate use prices per square foot to compare prices of different homes Marketing Strategy Objectives and Mix 0 Many rms use price to help position their product 0 Price quality Ex Hermes bag 0 Low price can be used to 0 Introduce new product Retain customers Create excitement Ex black Friday Prevent competitors from stealing customers Keep loyalty and support of resellers o Prevent government intervention 0 Target costing starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met ex car manufacturers Other Internal and External Considerations Affecting Price Decisions 0 The demand curve shows the number of units the market will buy in a given period at different prices 0 Demand and price are inversely related 0 For prestige luxury goods higher price can equal higher demand Veblen Effect 0 Why 0 Two reasons 0 Higher price may signal higher quality 0 Higher price may heighten exclusivity Price elasticity of demand change in quantity demand change In price 0000 02 Q1 0392 CJ1 Quantity demanded per periiod Quainiity demanded per period inelastic demand B Eiastic demand Note that Consumer Value WTPP and consumers will choose option that gives higher value CH 12 13 Marketing Channels Delivering Customer Value 0 Supply Chains Key suppliers and resellers Raw materials supplier producer wholesaler retailer consumer Upstream partners include raw material suppliers components parts information nances and expertise needed to create a product or service Downstream partners include the marketing channels or distribution channels that look toward the customer 0 Marketing channel set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user 0 How channel members add value 0 Information gathering and distributing marketing research and intelligence information about actors and forces in the market environment needed for planning and aiding exchange 0 Promotion developing and spreading persuasive communications about an offer 0 Contact nding and communicating with prospective buyers 0 Matching shaping and tting the offer to the buyers needs including activities such as manufacturing grading assembling packaging Negotiation reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred 0 Physical distribution transporting and storing goods 0 Financing acquiring and using funds to cover the costs of the channel work 0 Risk taking assuming the risks of carrying out the channel work 0 Number of channel levels 0 Direct channel indirect channels 0 Physical ow of products ow of ownership payment ow information ow promotion ow 0 Channel Behavior and Organization 0 Channel behavior channel members bene t collectively but individual opportunism usually arises Channel con ict refers to disagreement over goals roles and rewards by channel members 0 Horizontal con ict occurs among members at the same level of the channel Ex two subways stores too close to each other 0 Vertical con ict arises between different levels of the same channel ex Xbox one Con ict between Xbox and Amazon you can buy used products from Amazon More buying choices This upsets manufactures trying to sell on Amazon Amazon is promoting their Amazon marketplace ex HBO Now First attempt to bypass a network cable provider Multichannel Distribution Systems 0 Hybrid marketing channels when a single rm sets up two or more marketing channels to reach one or more customer segments 0 EX toys r us sold breaking bad toys had to remove them from stores these toys are being sold through different channels now 0 Advantages sales expansion market coverage new opportunities to tailor products and services to speci c needs of diverse customer segments Disadvantage harder to control con ict ExJohn Deere riding mowers started distributing through home depot and lowes this upset the original dealers of these mowers Now they offer different models to each of these distributors Shifted towards servicing the dealers can offer servicing for issues with product 0 Channel Design Decisions 0 Analyzing consumer needs 0 Distance to travel in person versus online breadth of assortment customer service 0 Setting channel objectives 0 Targeted levels of customer service what segments to serve best channels to use minimizing the cost of meeting customer service requirements 0 Identifying major channel alternatives 0 Types of intermediaries 0 Number of marketing intermediaries intensive selective exclusive distribution 0 Responsibility of channel members 0 Agree on price policies conditions of sale territorial rights and services provided by each party 0 Evaluating channel alternatives 0 Economic criteria 0 Control issues 0 Adaptive Channel management 0 Select channel members 0 Years in business pro tability array of products and t 0 Manage channel members Motivate channel members 0 Evaluate channel members 0 Sales contests reward for excellent service Pubic Policy and Distribution Decisions 0 Exclusive distribution when the seller allows only certain outlets to carry its products ex Pepsi true natural stevia is used when it was introduced it was only available at Amazon 0 Exclusive territorial agreements where producer or seller limit territory ex subways too close in location 0 Exclusive dealing when the producer requires that the sellers not handle competitor s products illegal the other two are legal ex Ben and Jerry s Pillsbury who used to own Haagen Dazs told distributors they couldn t sell Ben and Jerry s Tying agreements agreements where the dealer must take most or all of the line full line forcing ex levi strauss netscape navigator Both found guilty of pushing tying agreements and forcing people to buy all products 0 Nature and Importance of Marketing Logistics 0 Marketing logistics physical distribution involves planning implementing and controlling the physical ow of materials goods services and related information from points of origin to points of consumption to meet consumer requirements at a pro t 0 Inbound distribution moving products and materials from suppliers to factory 0 Outbound distribution moving products from the factory to resellers and consumers 0 Reverse distribution moving broken unwanted or excess products returned by consumers or resellers Supply chain management process of managing upstream and downstream valueadded ows of materials nal goods and related information among suppliers the company resellers and nal consumers Importance of logistics 0 Competitive advantage by giving customers better service at lower prices cost savings to the company and its customers product variety boom has created need for improved logistics information technology has created opportunities for distribution ef ciency used to meet a rm s environmental sustainability goals 0 Major logistics functions warehousing transportation inventory management logistic information management 0 Trucks are number 1 mode of transportation then train boat airplanes Retailing and Wholesaling Retailing Product Line 0 Specialty stores narrow product line with deep assortment Department stores wide variety of product lines with each line operated by a separate department managed by specialist buyers or merchandisers Supermarkets large lowcost lowmargin high volume selfservice store that carries a wide variety of grocery and household products Convenience store small store near residential area that is open long hours seven days a week and carries a limited line of high turnover convenience goods Superstore large assortment of routinely purchased food nonfood products and services target Category killer giant specialty store that carries a deep assortment of a particular line with highly knowledgeable staff Best buy home depot Service retailer service sold rather than a product Hotels airlines coHegesbanks Other retailing stores Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volume Walmart Offprice retailers buy at lessthanregular wholesale prices and charge customers less than retail 0 Independent offprice retailers owned and run by entrepreneurs or are divisions of larger retail corporations tj maxx 0 Factory outlets produceroperated stores which normally carries surplus discounted or irregular goods coach factory 0 Warehouse clubs large warehouse like facilities with few frills limited selection of brand name items and offer ultra low prices for members who pay annual fees Costco Franchises based on some unique product or service on a method of doing business or on the trade name good will or patent that the franchisor has developed McDonalds Retailing Trends Rise of mega retailers Growth of non brick and mortarquot stores and closure of brick and mortarquot stores Mail order tv phone and online Amazon Show rooming and distributing Importance of retail technology checkout scanners ship anywhere 0 Ex currentc vs apple pay Green retailing Global expansion Wholesaling Selling and promoting o lnvolves the wholesaler s sales force helping the manufacturer reach many smaller customers at lower cost 0 Buying assortment building 0 Involves the selection of items and building of assortments needed by their customers saving the customers work 0 Bulk breaking o Involves the wholesaler buying in larger quantity and breaking into smaller lots for its customers Warehousing o Involves the wholesaler holding inventory reducing its customers inventory cost and risk 0 Transportation 0 Involves the wholesaler providing quick delivery due to its proximity to the buyer 0 Financing 0 Involves the wholesaler providing credit and nancing suppliers by ordering earlier and paying on time 0 Risk bearing 0 Involves the wholesaler absorbing risk by taking title and bearing the cost of theft damage spoilage and obsolescence Market information o Involves the wholesaler providing information to suppliers and customers about competitors new products and price developments 0 Management services and advice 0 Involves wholesalers helping retailers train their sales clerks improve store layouts and set up accounting and inventory control systems Ex Grainger maintenance products Pharma Industry drug distribution Ch 11 New Product Pricing Strategies Marketskimming pricing a strategy with high initial prices to skim revenue layers from the market Ex Xbox1 or PS4 0 Product quality and image must support the price and buyers must want the product at the price 0 Costs of producing the product in small volume should not cancel the advantage of higher prices 0 Competitor should not be able to enter the market and undercut prices easily 0 Market penetration pricing sets low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share Ex 1986 Hyundai Excel it s affordable but you d never know it problem with quality and how long it lasts 0 Price sensitive market price elasticity is elastic o Inverse relationship of production and distribution cost to sales growth 0 Low prices must keep competition out of the market and must be able to sustain low price position Product Mix Pricing Strategies 0 Product line pricing takes into account the cost differences between products in the line customer evaluation of their features and competitors prices Ex Apple Optionalproduct pricing takes into account optional or accessory products along with the main product Ex Apple with macbooks Captiveproduct pricing involves products that must be used along with the main product Ex Printers need ink Disneyworld o Byproduct pricing setting a price for byproducts to make the main product s price more competitive Ex Zoo seII animal byproducts off to generate more revenue American Apparel seII scrap from clothes to make additional money 0 Product bundle pricing combines several products at a reduced price Ex Direct TV cable internet phone and McDonalds combo meals Price Adjustment Strategies 0 Discount and allowance pricing reduces prices to reward customer responses such as paying early or promoting the product Ex 210 n30 0 Discounts cash discount for paying promptly quantity discount for buying in large volume or functional trade discount for selling storing distribution and record keeping o Allowances tradein allowance for turning in an old item when buying a new one or promotional allowances to reward dealers for participating in advertising or sales support programs Ex trade in allowance when buying new can See with different technology and electronics phones Slotting allowance see a lot in retails Each space on the shelf at grocery store is sold to the manufacturers Premium shelves placement at eye level in grocery stores so more expensive place on shelf Segmented pricing used when a company sells product at two or more prices with no difference in cost 0 Customer segment pricing when difference customers pay different prices for same product or service Ex ladies drink free nights 0 Productform segment pricing when different versions of product are prices differently but not according to cost differences Ex tax premium software 0 Location pricing when product is priced according to geographic location of customers Ex where in a stadium you are you re gonna pay a different price for the tickets Floor seat more expensive than nosebleed o Timebased pricing when the price differs by time Ex movie theaters o How to make it successful Market must be possible to segment and segments must show different degrees of demand Costs of segmenting and reaching the market cannot exceed extra revenue obtained from the price difference Must be legal Ensure each segment feels value from segmentation Psychological pricing occurs when sellers consider psychology of prices and not the economics price says something about the product Reference pricing are prices that buyers carry in their minds and refer to when looking at a given product Ex Sushi boat for sale at 5 something must not be right with the sushi and would not buy 0 External reference price Ex gas stations pay attention to relative differences 0 Formed by noting current prices remembering past prices and or assessing the buying situation 0 Sellers can use the contrast effect to create perception of value Placing product next to higher priced items Introducing a higher priced product line as a decoy Possible to create the exact opposite contrast effect Promotional pricing prices are temporarily priced below list price or cost to increase sales 0 Loss leaders products sold below cost to attract customers in hope that they will buy other items at normal or greater than normal makeup Ex Bellagio in Vega hotels in Vegas have casinos will mark hotel prices low and customers spend all money at casinos 0 Special event pricing aims to attract customers during certain seasons or periods Ex Christmas 0 Cash rebates lowinterest nancing longer warrantee free maintenance 0 Adverse effects of promotional pricing Create deal pronequot customers Ex after Christmas sales Erode brand value in the eye s of the customers Marketers can be addicted and create price wars Geographical pricing setting prices for customers located in different parts of the country or the world Dynamic pricing when prices are adjusted continually to meet the characteristics and needs of the individual customer and situations Ex airline ticket prices 33 passengers paid 27 different fares on United ight from Chicago to LA 0 When should you buy an airline ticket On average 0 49 days in advance For Thanksgiving 0 96 days in advance Buying too early or too late can cause you to pay more on average International pricing when prices are set in a speci c country based on countryspeci c factors Ex price of Starbucks varies from China to US to India higher to lower costs 0 Economic conditions Competitive conditions Laws and regulations Infrastructure Consumer preferences Company marketing objective OOOOO Initiating Price Changes Initiating price cuts 0 Due to excess capacity 0 Due to falling demand 0 To gain market share Initiating price increases 0 Due to cost in ation 0 Due to overdemand 0 Demand exceeding supply 0 Buyer response to cuts 0 New models may be available soon 0 Models are not selling well 0 Quality issues 0 Brand image could be tarnished Buyer response to increases 0 Product is hot 0 Product is exclusive 0 Company is greedy price gouging Ex Net ix movie theatres and their popcorn Responding to Price Changes 0 Questions 0 Why did the competitor change the price o Is the price cut permanent or temporary o What is the effect on market share and pro ts 0 Will competitors respond 0 Solutions 0 Reduce price to match competition Ex Best Buy 0 Maintain price but raise the perceived value through communications 0 Improve quality and increase price 0 Launch a lowerprice ghting brand Ex Busch beer from Budweiser Public Policy and Pricing Pricing within channel levels 0 Price xing sellers must set prices without talking to competitors What happens in the price competition game if you are allowed to communicate with matched partner 0 Predatory pricing selling below cost with the intention of punishing a competitor or gaining high longterm pro ts by putting competitors out of business Ex WaIMart Pricing across channel levels 0 RobinsonPatman Act prevents unfair price discrimination by ensuring that the seller offer the same price terms to customers at a given level of trade 0 Price discrimination is allowed Seller can prove that costs differ when selling to different retailers Seller manufactures different qualities of the same product for different retailers If needed to match competition in good faith 0 Retail or resale price maintenance when a manufacturer requires a dealer to charge a speci c retail price for its products lllegal o Deceptive pricing occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers Illegal Ex Overstock Macy s Class Presentation Omnichannel Retail Business Centralized buying in NYC My Macy s localization right product right place right price 0 Understand characteristics of each market specialization in every Macy s store demographics price sensitivity life style Vendor relations lasting vendor and supplier partnerships Merchandise expertise create and bring the right seasonal trends to wow our customers Development and growth of focus on website Accelerated growth strategy omnichannel commerce Advanced ful llment and logistics network International shipping Innovation and optimization driving seamless integrated experiences Organize to align with customer expectations innovation One marketing function one merchandising function single view of inventory Omnichannel and digital strategy Customers show anywhere anyway they experience a brand not a channel within a brand Retailers leverage single view information in coordinated strategic ways Building solutions at every customer touch point to enable best customer experience Personalize digital experiences accelerate ful llment and delivery transform instore technology order in store for home delivery virtual tting rooms make it easy to redeem offers and points Invested 12 B this year in new tech 0 Offer what customers want Private brands Alfani Style amp Co chater club INC Exclusive product only retailerdept store that offers these brands Tommy Hil ger Kenneth Cole reaction Dominant market brands Ralph Lauren Calvin Klein MK estee lauder License products Sunglass hit nish line lids Best Buy Best in class portfolio with powerful assortments We own signi cant market share across all lines of business We will nurture the next wave of brands and categories that will drive our assortments forward 0 Making it relevant Product recommendations drive increased AOV s Deliver more relevant content based on geographical location Optimize by climate focus assortment on climateright freshness with enhanced capabilities to target needs correctly Offering relevant products increases orders and pro ts Strategic Evolution to support Omnichannel growth Single view of inventory omnichannel merchandising structure view customer Single View of the customer Omni Financial planning Omni buying Digital merchandising Omni merchandise planning Omni inventory management merchant forecasting Ability to leverage our inventory across channels is expected to result in more satis ed customers assortment availability faster shipping faster inventory turnincreased gross margins Get customer what they want when they want it Flexible algorithm World class ful llment centers More delivery options same day delivery buy online pick up in store Commitment to drive business results and innovation concurrently MacysLab has taken shape Develop post ideas vote discuss review panel prototyping execu on Companies don t innovate people innovate Similar to incubators in silicon valley Ex zTailor buy suit online they will come to your house to do measurements sent nal suit to you ldea came from MacysLab Ex eGifting idea came from MacysLab Offer gift to a friend we email them with product they decide if they like it or what to switch product they then send it to you Creating more ways to increase engagement is key Adding more channels macy s backstage locations outlet like a TJ Maxx mobile enhancements Making it fun and easy omnichannel wish lists group gifting merchandise congruency innovative loyalty program Driving specialty experiences expanding offerings with Blue Mercury high end cosmetic retailer that Macy s bought creating a wedding destination expanding assortment and service offerings partner with Mens Warehouse for suit rentals Evaluating international opportunities for long term growth and expansion China Tmall similar to alibaba Virtual store International is increasingly a must for best in class retailers Basic rules of retail apply Non one size ts all model exists Need to build entry with an omnichannel view Brand positioning can vary by market Localization applies product assortment and designs Ability to screen and work with partners is a critical capability Slow and steady wins the race 0 Potential in offprice business like TJ Maxx or Marshals Additional sales new customers access to Millennials ability to leverage excess inventory a testing ground for new ideas new opportunities for vendors
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