Kyla Brinkley

What is target return pricing?

MARK 3001 Fall 2015

EXAM 3 REVIEW  

I. Chapter 14: Pricing Concepts for Establishing Value a. Knowing how consumers arrive at their perceptions of value is  critical to developing successful pricing strategies

b. Developing a good pricing strategy is huge challenge to firms c. Good pricing strategy may not remain effective tomorrow d. Price: the overall sacrifice a consumer is willing to make—

money, time, energy—to acquire a specific product or service i. Includes money that must be paid and other sacrifices like  vale of time or other monetary costs

e. Price is the only element of the marketing mix that generates  revenue instead of costs

i. Very important: if price is wrong, sales/revenue won’t  

accrue

f. Price is important factor in consumer decisions

g. Price is most challenging of 4Ps to manage

i. Least understood

What is customer orientation?

h. Price is powerful indicator of quality

i. The 5 C’s of Pricing

i. Company Objectives

1. Different firms embrace different goals, which affect  

pricing strategy

2. How does firm intend to grow?

a. Profit orientation: a company objective that  

can be implemented by focusing on target  We also discuss several other topics like What is the meaning of mercantilism?

profit pricing, maximizing profits, or target  

return pricing

i. 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

ii. Maximizing profits: a profit strategy  

that relies primarily on economic theory.  If you want to learn more check out furoxime

If a firm can accurately specify a  

mathematical model that captures all the

factors required to explain & predict  

What is pure competition?

sales & profits, it should be able to  

identify the price at which its profits are  maximized

1. Difficult

iii. Target return pricing: a pricing  

strategy implemented by firms less  

concerned with the absolute level of  

profits and more interested 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

b. Sales Orientation: a company objective  based on the believe that increasing sales will  help the firm more than will increasing profits If you want to learn more check out borderline persuasion

i. Some firms may be more concerned  about overall market share than dollar  sales (though these are often  We also discuss several other topics like How to record the crime scene?

connected)

1. Believe market share better  

reflects success relative to market  

conditions than sales alone If you want to learn more check out com 515 class notes

ii. Adopting a market share objective  sometimes implies low prices, but not  usually We also discuss several other topics like kristen kimball uconn

1. Premium brands that dominate the  market:

a. Nike, Heinz, crest

iii. 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

1. if product is perceived as high  

quality price is seen to be fair

c. Competitor Orientation: a company  

objective based on the premise that the firm  should measure itself primarily against its  competition

i. Competitive parity: a firm’s strategy of  setting prices that are similar to those of  

major competitors

ii. Status quo pricing: a competitor  

oriented strategy in which a firm  

changes prices only to meet those of

competition

d. 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

i. Firms may offer high priced state of the  art products in full anticipation of limited  

sales

1. Designed to enhance company’s  

reputation/image and increase  

value in minds of consumers

e. After company has good grasp on overall  objectives, must implement pricing strategies  that enable it to achieve objectives

3. Customers

a. When firms have developed objectives, turn to  understanding consumer’s reactions to  

different prices  

b. Customers want value

c. Demand Curves and Pricing

i. Demand curve: shows how many units  of a product or service consumers will  

demand during a specific period at  

different prices

1. Straight or curved

2. Assume firm won’t increase  

spending on advertising and the  

economy won’t change

3. As price increases, demand for  

product decreases

4. Knowing demand curve for a  

product lets firm examine different  

prices in terms of the resulting  

demand  

ii. Prestige products or services: those  that consumers purchase for status  

rather than functionality

1. Higher price=greater  

status=greater exclusivity because  

less people can afford it

2. Higher price might lead to greater  

quantity sold but only up to a  

certain point

d. Price Elasticity of Demand: measures how  changes in a price affect the quantity of the  product demanded; specifically, the ratio of  percentage change in quantity demanded to  the percentage change in price

i. Responses vary depending on product ii. Consumers are less sensitive to price  increases for necessary items like milk  because they need them

iii. However if price of a steak increases,  people will buy less because there are  substitutes

iv. Elastic: refers to a market for a product  or service that is price sensitive;  

relatively small changes in price will  

generate fairly large changes in the  

quantity demanded

1. Price elasticity is less than -1

2. Lowering prices will increase sales  but raising prices will decrease  

sales

v. Inelastic: refers to a market for a  

product or service that is price  

insensitive; relatively small changes in  price will not generate large changes in  the quantity demanded

1. Price elasticity is more than -1

2. Lowering prices or raising prices  

doesn’t significantly affect sales

vi. Consumers are usually more sensitive  to price increases than to price  

decreases

1. Easier to lose customers with  

price increase than gain new  

customers with price decrease

e. Factors Influencing Price Elasticity of Demand i. Income effect: refers to the change in  the quantity of a product demanded by  consumers do to a change in their  

income

1. If you just got paid you’re more  

likely to buy steak instead of  

hamburger or splurge on a five

star hotel

2. If you don’t have much money  

you’re going to cut back

ii. Substitution effect: refers to a  

consumer’s ability to substitute other  

products for the focal brand, thus  

increasing the price elasticity of demand  for the focal brand

1. If Tropicana raised its prices many  people would just buy Minute Maid  

instead

2. If you are brand loyal, however,  

you will stick with Tropicana  

because you are willing to pay a  

higher price because you think it  

has more value

3. Marketing is important to make  

customers brand loyal

iii. Cross-price elasticity: the percentage  change in demand for product A that  

occurs in response to a percentage  

change in price of product B

1. Depends whether products are  

complementary or substitutes

2. Complementary products:  

products whose demand curves  

are positively related, so they rise  

or fall together; a percentage  

increase in demand for one results  

in a percentage increase in  

demand for the other

a. Ex: Blu-ray discs and Blu-ray  

players

b. Pb & j

3. Substitute products: products for  

which changes in demand are  

negatively related; a percentage  

increase in the quantity demanded  

for product A results in a  

percentage decrease in the  

quantity demanded for product B

a. Ex: dvd and Blu-ray players

b. Coke and Pepsi

4. Costs

a. To make effective pricing decisions, firms  must understand their cost structures so they  can determine the degree to which their  

products or services will be profitable at  

different prices

b. Prices shouldn’t be based on costs

c. Variable Costs: those costs, primarily labor &  materials, that vary with production volume i. Each unit of a product usually has the  

same cost so marketers express  

variable costs on a per-unit basis

ii. More complex in service industry

d. Fixed Costs: those costs that remain  

essentially at the same level, regardless of  any changes in the volume of production

i. Rent, utilities, insurance, administrative  salaries

e. Total Costs: the sum of the variable and fixed  costs

5. Break-Even Analysis and Decision Making

a. 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

b. break-even point: the point at which the  number of units sold generates just enough  revenue to equal the total costs; at this points,  profits are zero

c. profit represents the difference between the  total cost and the total revenue and can  

indicate how much money the firm is making  or losing at a single period of time

i. can’t tell how many units firm must  

produce and sell before it stops losing  

money and breaks even—this is what  

break-even point does

d. The lowest point the total costs can ever  reach is equal to the total fixed costs. Beyond  that point the total cost curve increases by the  amount of variable costs for each additional  unit

6. Mark-Up and Target Return Pricing

a. In many situations, manufacturer may want to  achieve a standard mark-up

b. Ex: 10% of cost

c. See formulas below

7. Competition

a. Monopoly: one firm provides the product or  service in a particular industry

i. Results in less price competition

ii. Controls industry

iii. Can be deemed illegal and broken up by  gov

b. Oligopolistic competition: occurs when only  a few firms dominate a market

i. Sometimes reactions to prices in  

oligopoly can result in price war: occurs  

when 2 or more firms compete primarily  

by lowering their prices

ii. Can result in 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

c. Monopolistic competition: occurs when  there are many firms that sell closely related  but not homogeneous products; these  

products may be viewed as substitutes but  aren’t perfect substitutes

i. Products aren’t differentiated

ii. As more firms enter the market,  

products become more differentiated

d. Pure competition: occurs when different  companies sell commodity products that  

consumers perceive as substitutable; price  usually is set according to the laws of supply  & demand

i. Large number of sellers

ii. Key is not always low prices:  

decommoditize products

1. Ex: Tyson’s chicken marketed as  

better than regular chicken

2. Distinct for customers

8. Channel Members

a. Unless channel members (manufacturers,  wholesalers, retailers) carefully communicate  pricing goals and select channel partners that  agree with them, conflict will arise

b. 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

i. Can tarnish image of manufacturer

ii. Some manufacturers discourage this  

with disclaimers that show that product

warranty etc. are void unless product  

was purchased from authorized dealer

ii. Pricing Strategies

1. Everyday Low Pricing (EDLP): a strategy  

companies use to emphasize the continuity of their  retail prices at a level somewhere between the  regular, nonsale price and the deep-discount sale  prices their competitors may offer

a. Reduces search costs, adding value

b. Consumers spend less time comparing prices  at different stores

c. Ex: Walmart

i. For average purchase Walmart is  

cheaper

d. Use odd prices: suggesting low prices but also  can suggest low quality

2. High/Low Pricing: a pricing strategy that relies on  the promotion of sales, during which prices are  temporarily reduced to encourage purchases

a. attracts 2 market segments:

i. those who aren’t price sensitive/willing  

to pay high price

ii. those who are price sensitive/wait for  

low sale price

b. creates excitement

i. “get them while they last”

c. Reference price: the price against which  

buyers compare the actual selling price of the  

product and that facilitates their evaluation  

process

i. Labeled as regular/original price

ii. Used to compare to sale price and  

increase perception of value of the deal

3. New Product Pricing Strategies

a. Challenging

b. Approximate value to similar products:  

established

c. Market Penetration Pricing

i. Market penetration strategy: a growth  

strategy that employs the existing

marketing mix and focuses the firm’s  

efforts on existing customers

1. Incentive to purchase immediately

2. Ex: common with security software 3. Used with:

a. 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

b. Discourages competitors  

from entering market  

because their costs will be  

higher until they increase  

volume too

4. drawbacks

a. Firm must be able to satisfy  

rapid rise in demand

b. Low price doesn’t signal high  

quality

c. Firms should avoid  

penetration strategy if some  

segments of market are  

willing to pay more for  

product because then  

they’re leaving money on the  

table

d. Price Skimming: a strategy of selling a new  product or service at a high price that  innovators and early adopters are willing to  pay to obtain it; after the high-price market  segment becomes saturated and sales begin  to slow down, the firm generally lowers the  price to capture (skim) the next most price sensitive segment

i. Common in tech markets

1. People will wait for video games  

for hours: innovators

4. Legal and Ethical Aspects of Pricing a. Prices fluctuate naturally & respond to varying  market conditions

b. Deceptive or Illegal Price Advertising

i. price ads should never deceive  

consumers to the point of causing harm

ii. if claims aren’t true they are considered  deceptive

iii. E.U. stricter on puffery than U.S.

iv. Deceptive Reference Prices

1. If reference price is inflated or  

fake, ad is deceptive/can cause  

harm

2. Hard to tell if they are real or not

3. Better Business Bureau says at  

least 50% of sales must have  

occurred at that price to be a  

“regular” price

c. Loss Leader Pricing: loss leader pricing  takes the tactic of leader pricing one step  further by lowering the price below the store’s  cost

i. Ex: buy 1 get 1 free

1. Doesn’t make up enough revenue  

to cover cost

d. Bait and Switch: a deceptive practice of  luring customers into the store with a very low  advertised price on an item (bait) only to  

aggressively pressure them into purchasing a  higher-priced model (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 i. Laws are difficult to enforce because  

upselling is part of salespeople’s jobs

ii. Hard to prove deception is intent of the  seller

5. Predatory Pricing

a. Firm setting low price for products with intent  to drive competition out of business

b. Illegal under Sherman Antitrust Act & Federal  Trade Commission Act

i. Constrains free trade

ii. Unfair competition

iii. Promotes oligopoly

c. hard to prove

i. Firm intended to drive out competition?

ii. Prove firm charged prices lower than  

avg cost

d. Ex: Google’s dominance in search engine  market

6. Price Discrimination: the practice of selling the  same product to different resellers (wholesalers,  distributors, or retailers) or to the ultimate consumer  at different prices; some, but not all, forms of price  discrimination are illegal

a. Quantity discounts must be available to all  customers and not favor certain buyers over  others

b. Illegal under Clayton Act and Robinson Patman Act

7. Price Fixing: the practice of colluding with other  firms to control prices

a. Horizontal price fixing: occurs when  

competitors that produce & sell competing  products collude, or work together, to control  prices, effectively taking price out of the  

decision process for consumers

i. Illegal under Sherman Antitrust Act

ii. Reduces competition

b. Vertical price fixing: occurs when parties at  different levels of the same marketing channel  (ex: manufacturers & retailers) collude to  

control the prices passed on to consumers i. Manufacturers encourage retailers to  

sell merch at manufacturer’s  

suggested retail price (MSRP)

1. Reduce retail price competition  

among retailers

2. Stimulate retailers to provide  

complimentary services

3. Support manufacturer’s merch

4. Ability to enforce MSRP to be  

decided on case by case basis –

supreme court

For Review:

-review charts in textbook

The 5 C’s of Pricing:

1. Competition

2. Costs

3. Company objectives

4. Customers

5. Channel members

These all surround value.

Pricing Strategies:

1. Profit oriented

2. Sales oriented

3. Competitor oriented

4. Customer oriented

Equations

Price elasticity of demand = %change in quantity demanded / % change in  price

Calculating price elasticity of demand for teeth whitening kit:

%change in quantity demanded = (1,000,000—500,000) / 1,000,000  = 50%

%change in price = ($10—$15) / 10 = -50%

So…

Price elasticity of demand = 50% / -50% = -1

Break-even analysis:

Total variable cost = variable cost per unit X quantity

Total Cost = fixed cost + total variable cost

Total revenue = price X quantity

Break-even point (units) = fixed costs / contributions per unit Profit = (contribution per unit X quantity) – fixed cost

Profit = (price X quantity) – (fixed cost + (variable cost X quantity))

Break-even point (units) = (fixed costs + target profit) / contributions per  unit

Mark-Up and Target Return Pricing

Target return price = (variable cost + (fixed cost / expected unit sales)) X (1  + target return %)

Target return % is expressed as decimal

II. Chapter 17: Integral Marketing Communications

a. Integrated marketing communication: IMC: represents the  promotion dimension of the 4 P’s; encompasses a variety of  communication disciplines—general advertising, personal  selling, sales promotion, public relations, direct marketing, and  electronic media—in combination to provide clarity,  

consistency, and maximum communicative impact.

i. Strategy must have well-defined purpose/support and  

extend message delivered by other elements

ii. Product won’t have consumers unless people know about  it

iii. elements of IMC strategy:

1. consumer

2. channels

3. evaluation

b. Communicating With Consumers

i. Number of communication media has increased 1. More complex to reach target consumers

ii. The AIDA Model

1. Consumers go through several steps before taking  action

2. AIDA model (Think Feel Do Model): a common model of the series of mental stages through which  consumers move as a result of marketing  

communications:

a. Awareness

i. 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 (name, logo, symbol,  

character, packaging, slogan) in the  

firm’s communications to consumers

1. Strength of link between brand  

name and product

ii. Aided recall: occurs when consumers  

recognize a name (e.g. of a brand) that  

has been presented to them

iii. Top-of-mind awareness: a prominent  

place in people’s memories that triggers  

a response without them having to put  

any thought into it

1. Evoked set

2. Memorable names

3. Repeated exposure of name  

through ads

4. Locations

5. sponsorships

6. Memorable symbols

b. Interests

i. Increase consumer’s interest level

ii. Persuaded that product is worth  

investigating

c. Desire

i. After peaking interest

ii. Move from “I like it” to “I want it”

d. Action

i. Goal is to drive receiver to action

ii. Act on interest by searching  

for/purchasing product

iii. Lagged effect: a delayed response to a  

marketing communication campaign

1. Takes several exposures to an ad  

to be fully processed

c. Elements of an Integrated Marketing Communication  Strategy

i. Firm must deliver right message to right audience through  right media  

ii. Goal of IMC is to use different channels together so sum  exceeds total of individual channels

iii. Elements of IMC campaign can be passive or interactive  from consumer’s perspective, and online/offline

iv. 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.

1. Effective for creating awareness of a product or  

service/generating interest  

2. Mass advertising is passive and this is traditional a. Reply on certain images

v. Public Relations (PR): the organizational function that  manages the firm’s communications to achieve a variety  of objectives, including building & maintaining a positive  image, handling or heading off unfavorable stories or  events, & managing positive relationships with the media 1. Relatively passive

vi. 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-purchase displays

1. Designed for use with other ads

2. Free samples  

3. Point of purchase displays

4. Designed to build short term sales

5. CRM programs meant to build customer loyalty vii. Personal Selling: the 2 way flow of communication  between a buyer & a seller that is designed to influence  the buyer’s purchase decision

1. B2B

2. Communicating directly with potential customer is  costly but is the best/most efficient way to sell  

products

3. Sales representative add value  

viii. Direct Marketing: sales and promotional techniques that  deliver promotional materials individually

1. Communicates directly with target customers to  generate response or transaction

2. Traditional:

a. Mail, catalogues, email, mobile marketing

3. Increased use of customer databases: track  

consumers

a. Grows direct marketing

4. Mobile marketing: marketing through wireless  handheld devices like cell phones  

a. Apps

ix. Online Marketing

1. Websites

a. Build brand image

b. Educate customers about products

c. Sell merchandise  

d. Community building

e. Posting reviews

x. Blog (weblog): a web pages that contains periodic posts;  corporate blogs are a new form of marketing  

communications

1. Communicate trends

2. Announce special events

3. Create positive word of mouth

4. Connect customers

5. Develop long term relationship with company

6. Interactive

xi. Social media: media content used for social interactions  such as YouTube, Facebook, and Twitter

1. Review

2. Communicate

3. Aggregate information about products, prices, and  promotions

4. Interact/form community

5. Facilitate consumer decision process

d. Planning for and Measuring IMC Success

i. Goals

1. What outcome does firm hope to achieve?

2. Short term goals

a. Generating inquiries  

b. Increasing awareness

c. Prompting trial

3. Long term goals

a. Increasing sales, market share, & customer  

loyalty

4. Should be explicitly defined/measured

5. Part of firm’s overall promotional plan

ii. Setting & Allocating the IMC Budget

1. All the methods of setting a promotional budget  have advantages & disadvantages so no one  

method should be used in isolation

2. Objective-and-task method: an IMC budgeting  method that determines the cost required to  

undertake specific tasks to accomplish  

communication objectives; process entails setting  objectives, choosing media, and determining costs 3. Rule-of-thumb methods: budgeting methods that  base the IMC budget on either the firm’s share of  

her operating the market in relation to the  

competition, a fixed percentage of forecasted sales,  or what is left after other operating costs &  

forecasted sales have been budgeted

a. easy to implement but have limitations

b. takes rounds of negotiations to devise final  

IMC budget

iii. Measuring Success Using Marketing Metrics 1. Measure success of campaigns

2. Each step of IMC process can be measured to  determine effectiveness

3. Lagged effect influences & complicates marketers’  evaluations of a promotion’s effectiveness

4. Traditional Media

a. Measures of frequency/reach used to gauge  customers’ exposure to marketing  

communications

b. Frequency: measure of how often the  

audience is exposed to a communication  

within a specified period of time

c. Reach: measure of consumers’ exposure to  marketing communications; the percentage of  

the target population exposed to a specific  

marketing communication, such as an ad, at  

least once

d. Gross rating points (GRP): measure used  for various media advertising—print, radio, tv:  

GRP= reach x frequency

5. Web-Based Media

a. Assessing effectiveness of web-based  

communications efforts requires web tracking  

software

b. Website visitation data etc.

c. Google Analytics  

iv. Planning, Implementing, & Evaluating IMC Programs—An  Illustration of Google Advertising

1. Search engine marketing (SEM): a type of Web  advertising whereby companies pay for keywords  that are used to catch consumers’ attention while  browsing a search engine

a. Google AdWords

b. Sponsored Link section

2. Impressions: the number of times an advertisement  appears in front of the user

3. Click-through rate (CTR): the number of times a  

user clicks on an online ad divided by the number of  

impressions

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

5. Return on investment (ROI): the amount of profit  

divided by the value of the investment. In the case  

of an ad, the ROI is (sales revenue – the ad’s cost) /  

the ad’s cost

III. Chapter 18: Advertising, Public Relations, and Sales Promotions a. 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

i. Most visible form of marketing communications

ii. Must be carried by some medium: TV radio print web etc. iii. Legally, the source of the message must be known or  knowable

iv. Advertising represents a persuasive form of  

communication designed to get the consumer to take  

some action

v. Perception is selective

b. Step 1: Identify Target Audience

i. Success of advertising program depends on how well the  advertiser can identify its target audience

ii. Research

iii. Helps select media to be used

iv. Target audience may or may not be the same as current  users

c. Step 2: Set Advertising Objectives

i. Advertising plan: a section of the firm’s overall  

marketing plan that explicitly outlines the objectives of the  ad campaign, how the campaign might accomplish those  objectives, and how the firm can determine whether the  

campaign was successful

ii. Pull strategy: designed to get customers to pull the  

product into the supply chain by demanding it

iii. Push strategy: designed to increase demand by  motivating sellers—wholesalers, distributors, or  salespeople—to highlight the product, rather than the  products of competitors, and thereby push the product  onto consumers

iv. Ad campaigns aim to:

1. Inform

2. Persuade

3. Remind

v. Ads can be used to stimulate demand for a product  category, entire industry, or a specific brand, firm, or item vi. Informative Advertising: a communication used to  create and build brand awareness, with the ultimate goal  of moving the consumer through the buying cycle to a  purchase

1. Determine early stages of product life cycle

2. Tell about upcoming sales event or new merch  arrival

vii. Persuasive Advertising: communication used to  motivate consumers to take action

1. Growth, early maturity stages of product life cycle 2. Competition most intense

3. Accelerate market’s acceptance of product

4. Reposition

viii. Reminder Advertising: communication used to remind  consumers of a product or to prompt repurchases,  especially for products that have gained market  acceptance and are in the maturity stage of their life cycle

1. Triggers response without any thought needed ix. Focus of Advertisements

1. Product-focused advertisements: used to inform,  persuade, or remind consumers about a specific  product or service

a. Product focus, institutional focus, public  

service focus

2. Institutional advertisements: a type of ad that  informs, persuades, or reminds consumers about  issues related to places, politics, or an industry. a. Ex: got milk? Ads

3. public service advertising (PSA): advertising that  focuses on public welfare and generally is  

sponsored by nonprofit institutions, civic groups,  

religious organizations, trade associations, or  

political groups; a form of social marketing: the  

content distributed through online and mobile  

technologies to facilitate interpersonal interactions

a. specific amount of airtime must be devoted to  

them by Federal Communications  

Commission (FCC)

d. Step 3: Determine the Advertising Budget

i. Consider role that advertising plays in attempt to meet  objectives

ii. Advertising expenditures vary during product life cycle iii. Nature of market & the product influence the size of ad  budgets

1. Less $ spent on B2B than B2C

e. Step 4: Convey the Message

i. The Message

1. Provides target audience with reasons to respond in  the desired way

2. Unique selling proposition (value proposition): a  strategy of differentiating a product by  

communicating its unique attributes; often becomes  the common theme or slogan in the entire ad  

campaign  

a. must be unique to brand, meaningful to  

consumer

b. must be sustainable over time even with  

repetition

ii. The Appeal

1. informational appeal: used in a promotion to help  consumers make purchase decisions by offering  

factual information and strong arguments build  

around relevant issues that encourage them to  

evaluate the brand favorably on the basis of the key  benefits it provides

a. informing about its competitive advantage

b. persuade

2. emotional appeal: aims to satisfy consumers’  

emotional desires rather than their utilitarian needs a. focus on feelings about the self

b. fear

c. safety

d. humor

e. happiness

f. love/sex

g. comfort

h. nostalgia

f. Step 5: Evaluate and Select Media

i. Media planning: the process of evaluating and selecting  the media mix that will deliver a clear, consistent,  

compelling message to the intended audience

ii. Media mix: the combination of the media used and the  frequency of advertising in each medium

iii. Media buy: the actual purchase of airtime or print pages 1. Largest expense in ad budget

2. TV ads=most expensive

iv. Mass and Niche Media

1. Mass media: channels that are ideal for reaching  large numbers of anonymous audience members;  

include national newspapers, magazines, radio, and  television.

2. Niche media: channels that are focused and  

generally used to reach narrow segments, often  

with unique demographic characteristics or interests a. HGTV, Skateboarder magazine

v. Choosing the Right Medium

1. Consumers use different media for different  

purposes, to which advertisers should match their  

messages

2. Communication media various in ability to reach  desired audience

a. Fast food commercials often on radio because  

people are deciding on the way

vi. Determining the Advertising Schedule

1. Advertising schedule: specification of the timing  and duration of advertising

a. Continuous schedule: runs steadily  

throughout the year. Suited to products that  

are consumed continually at steady rates and  

require a steady level of persuasive or  

reminder advertising

b. Flighting: an ad schedule implemented in  

spurts, with periods of heavy advertising  

followed by periods of no advertising

c. Pulsing: combines the continuous and  

flighting schedules by maintaining a base level  

of advertising but increasing advertising  

intensity during certain periods

g. Step 6: Create Advertisements

i. Message and appeal are translated into worlds, pictures,  colors, music

ii. Execution style of ad usually dictates type of medium  used

1. Image: tv & magazines

2. Price: newspaper, radio

3. Appeal to specific target audience: digital

iii. Integrated marketing: maintaining consistency across  execution styles of advertising

iv. Eye catching, subject, product, features, impression,  arouse interest, headline

v. Headline: in an ad, large type designed to draw attention vi. Subhead: an additional smaller headline in an ad that  provides a great deal of information through the use of  short and simple words

vii. Body copy: main text portion of an ad

viii. Brand elements: characteristics that identify the sponsor  of a specific ad

ix. Can’t let creativity overshadow the message

h. Step 7: Assess Impact Using Marketing Metrics i. Pretesting: assessments performed before an ad  campaign is implemented to ensure that the various  elements are working in an integrated fashion and doing  what they are intended to do

ii. Tracking: includes monitoring key indicators, such as  daily or weekly sales volume, while the ad is running to

shed light on any problems with the message or the  medium

iii. Post testing: the evaluation of an IMC campaign’s  impact after it has been implemented

iv. Measuring sales impact is hard: other factors besides ads  impact consumer decisions

1. Competitors

2. Economic conditions in target market

3. Sociocultural changes

4. In-store merch availability  

5. Weather

v. Time-series analysis: sales data from past used to predict  future

vi. Lift: additional sales caused by advertising

vii. firms find creative ways to identify advertising  

effectiveness  

i. Regulatory and Ethical Issues in Advertising i. Federal Trade Commission (FTC): 1914. enforces truth in  advertising laws; defines deceptive and unfair ad  

practices

ii. Federal Communications Commission (FCC): 1934.  Restricts broadcasting material with obscene/indecent  content, promotion of lotteries, cigarettes, or that  

perpetuate a fraud

iii. Food and Drug Administration (FDA): 1930. Regulates  packaging labeling, required disclosure statements  (warning labels, dosage requirements…), defines “light” &  “organic”

iv. Puffery: the legal exaggeration of praise, stopping just  short of deception, lavished on a product

1. Ex: Charmin bears have to leave a little TP on  

behind to show that Charmin leaves less than other  brands rather than none at all, a deception  

j. Public Relations: the organizational function that manages the  firm’s communications to achieve a variety of objectives,  including building & maintaining a positive image, handling or  heading off unfavorable stories or events, and maintaining  positive relationships with the media

i. Supports other promotional efforts with free media  attention and general goodwill

ii. Designers having celebs wear their fashions on the red  carpet

iii. Importance of PR has grown as cost of other marketing  communications increased and consumers are more  skeptical about claims made in other media

1. Seen as more credible because firm doesn’t pay  print space or tv time

iv. Cause-related marketing: commercial activity in which  businesses & charities form a partnership to market an  image, product, or service for their mutual benefit; a type  of promotional campaign

v. Event sponsorship: popular PR tool; occurs when  corporations support various activities (financially or  otherwise), usually in the cultural or sports and  

entertainment sectors

vi. Firms often distribute a PR toolkit to communicate with  various audiences

1. Publications

2. Video and audio

3. Annual reports

4. Media relations

5. Electronic media

k. Sales Promotion: special incentive or excitement-building  program that encourages the purchase of a product or service,  like coupons, rebates, contests, free samples, and point-of purchase displays

i. Types of Sales Promotion

1. Coupons: provides a stated discount to consumers  on the final selling price of a specific item; the  

retailer handles the discount

a. Some companies track coupon usage

b. Found in newspapers, on products, on shelf,  

online, in mail, at register

c. Some coupons sent to consumers through  

internet or mobile have information about the  

consumer to collect data

2. Deals: 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  special financing arrangement, such as reduced  percentage interest rates or extended repayment  terms

a. Encourage consumers to try product by  reducing risk

b. Can alter perceptions of value

3. Premiums: items offered for free or at a bargain  price to reward some type of behavior, such as  buying, sampling, or testing

a. Build goodwill among consumers: perceive  high value in premiums

b. Included in packaging, places on package,  handed out in store, delivered in mail  

c. Finding a premium that is consistent with  brands message and image and desirable to  target market at reasonable cost is  

challenging

4. Contest: a brand-sponsored competition that  requires some form of skill or effort

a. Require consumer involvement: create  excitement or buzz

5. Sweepstakes: a form of sales promotion that offers  prizes based on a chance drawing of entrants’  names

a. only task is to fill out form or buy a ticket b. encourage consumers to consume more if the  form is inside the product packaging  

c. many states specify that no purchase be  required to enter into a sweepstakes

6. sampling: offers potential customers the  opportunity to try a product or service before they  make a buying decision

a. costly but effective

b. restaurants, grocery stores

7. loyalty programs: specifically designed to retain  customers by offering premiums or other incentives  to customers who make multiple purchases over  time

a. increase engagement

b. more popular, tied to long term CRM systems

c. can be expensive

8. point-of-purchase (POP) display: a merchandise  

display located at the point of purchase, such as the  

checkout counter in a grocery store

a. increase visibility

b. encourage trial

c. purchase on impulse

d. checkout screen of websites

9. 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

a. electronics

b. mail-in

c. likelihood consumer will actually apply for the  

rebate is low

d. stimulate sales but won’t have to pay the  

money offered

10. product placement: inclusion of a product in  

nontraditional situations, such as in a scene in a  

movie or TV program

a. increase visibility

b. American idol Coca-Cola

c. Hard to determine which movies will be  

successful  

ii. Using Sales Promotion Tools

1. Marketers must be careful with sales promotions

2. Consumers may stock up while items are on sale:  

short term benefit

3. Can decrease future demand

4. Cross-promoting: efforts of 2 or more firms joining  

together to reach a specific target market

5. Goal of sales promotion is to create value for  

consumers and firm

6. Can generate long and short term results

IV. Chapter 19: Personal Selling and Sales Management a. almost everyone is engaged in some form of selling

b. The Scope and Nature of Personal Selling

i. Personal selling: the 2-way flow of communication  between a buyer and a seller that is designed to influence  the buyer’s purchase decision

1. Face to face

2. Video teleconferencing

3. Phone

4. Internet

5. B2B and B2C

6. most professions rely on it to some degree

ii. Personal Selling as a Career

1. Very independent

a. Not office-bound: balance between work and  life

b. Virtual offices

c. Little day-to-day supervision

2. Variety  

a. Creativity

3. Lucrative

a. High paying for college grads

b. Perks: company car or bonuses

4. Visible to management

a. Ability to be promoted because of  

straightforward management of the work

iii. The Value Added by Personal Selling

1. Expensive for firms

a. Use internet/technology to lower costs of  

personal selling

b. Some firms have eliminated the position

c. But many see it as worth more than the cost i. Ads value: educating customers,  

providing advice, saving customer time,  

making things easier, building long term  

relationships

2. Salespeople provide Information and Advice a. Most customers find value in/are willing to pay  for the education & advice provided by  

salespeople

3. Salespeople Save Time and Simplify Buying a. Time is money

b. Salespeople straighten stock, assess  

inventory levels, write orders, stock shelves

c. Might give out free samples/give  

demonstrations

4. Salespeople Build Relationships

a. Building strong marketing channel  

relationships is critical success factor

b. 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 all parties

i. Ex: uga partnering with Nike to support  

its sports teams

c. The Personal Selling Process

i. Successful salespeople must follow several steps ii. Step 1: Generate & Qualify Leads

1. Leads: a list of potential customers

2. Qualify: the process of assessing the potential of  sales leads

3. Salespeople who have already established a  

relationship with a customer skip this step

4. Not used much in retail, more common in B2B

5. Ways to discover potential leads:

a. Talk to current customers

b. Internet research

c. Networking at events

d. Cold calls

6. Trade shows: major events attended by buyers  who choose to be exposed to products & services  

offered by potential suppliers in an industry

a. International Consumer Electronics Show  

(CES) annually in Las Vegas

7. Cold calls: a method of prospecting in which  

salespeople telephone or go see potential  

customers without appointments

8. Telemarketing: a method of prospecting in which  salespeople telephone potential customers

a. Unlike cold calls, always done over the phone

b. Sometimes done by professional  

telemarketing firms rather than firm’s  

salespeople

9. Cold calls/telemarketing are becoming less popular:  low success rate

a. Can’t establish customer’s needs beforehand b. Expensive

c. Government regulates them

i. National Do-Not-Call list (FTC)

ii. Can’t call before 8am or after 9pm or  

when consumer told them not to call

iii. Unsolicited calls, faxes, emails  

prohibited

10. after generating leads salespeople have to decide  if they should pursue them

a. Can they afford it?

b. however, in retail, bad to assume people don’t  fit the store’s image

iii. Step 2: Preapproach and the Use of CRM Systems 1. 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.

2. Basis for establishing value for customer

3. In past, customer info was included in a manual  system notebook/cards. Today, salespeople can  find the info in their firm’s CRM system

a. Data warehouse

i. Records transaction info, customer  

contact info, customer preferences,  

market segment info about customer

4. Info is used to implement programs/establish goals 5. 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

iv. Step 3: Sales Presentation and Overcoming Reservations

1. The Presentation

a. Person-to-person meeting after background  info is collected and objectives are set

b. Beginning of presentation is most important  because salesperson is establishing exactly  

where customer is in their buying process  

i. So they can assess need and customize  

presentation to match need and stage in  

decision process

c. Listening to feedback very important

i. Understand customer needs

ii. Apply knowledge to help customer solve  

problem/satisfy needs

d. Must clarify products advantages

i. Explain using statistics/predictions

2. Handling Reservations

a. Objections that buyer might have about  

product

b. Can occur in any stage of selling process but  most likely during sales presentation

c. usually related to value (price)

d. effective salespeople anticipate these  

reservations

e. key is to listen/ask questions to clarify  

reservations

i. questions are more effective than trying  

to prove customers reservations as  

wrong

ii. shows that salesperson is listening and  

avoids argument

v. Step 4: Closing the Sale

1. Closing the sale: obtaining a commitment from the  customer to make a purchase

2. Stressful

3. Without this step, salesperson leaves empty handed 4. However, losing a sale prepares salesperson for the  next successful close

5. Rarely follows up neatly

6. Must read signals: body language, listen to  

customer to achieve earlier close

vi. Step 5: Follow-Up

1. Attitude customer develops after sale is basis for  how they purchase in the future

2. Follow up=prime opportunity to solidify relationship  w/ great service

a. Reliability: salesperson delivers right product  

at right time

b. Responsiveness: salesperson/support group  

ready to deal with any issue

c. Assurance: customers assured w/ adequate  

guarantees purchase will perform as expected

d. Empathy: salesperson/support group has  

good understanding of problems faced by  

customers. Otherwise they can’t give them  

what they want

e. Tangibles: reflect physical characteristics of  

seller’s business. (Website, delivery materials  

etc.). purchase should look nice and of high  

quality even though packaging has nothing to  

do w/ it’s performance

3. Customers complain when their expectations aren’t  met

a. Salesperson must handle complaints  

effectively

b. Listen to customer, provide fair solution and  

resolve it quickly

c. Check with customer right after purchase to  

resolve complaints faster

i. Shows responsiveness, empathy

4. Post sale follow-up calls, emails, letters sustain  relationship and initiate new purchase

d. Ethical and Legal Issues in Personal Selling

i. Seller’s actions are highly visible to customers and other  stakeholders

ii. To maintain trustworthy customer relationships,  companies must respect customer privacy and  

information comfort zone (amount of info a customer  wants to give)

iii. Ethical and legal issues arise in 3 main areas:

1. The Sales Manager and the Sales Force

a. Sales manager must treat people fairly and  

equally

b. Includes hiring, promotion, supervision,  

training, assigning duties/quotas,  

compensation/incentives, firing

c. Ex: antidiscrimination laws

2. The Sales Force and Corporate Policy

a. Conflict between ethical selling and what  

company asks them to do to make a sale

b. Salespeople must live within own ethical  

comfort zone

c. Salespeople can also be held accountable for  

illegal actions sanctioned by the employer

3. The Salesperson and the Customer

a. Salespeople have duty to be ethically/legally  

correct in all dealings with customers

b. Means good business and promote long term  

relationships

c. Formal guidelines help

d. Sales managers should lead by example

For review:

The Personal Selling Process:

1. Generate and qualify leads

2. Preapproach

3. Sales presentation & overcoming reservations

4. Closing the sale

5. Follow-up

B2B buying process

1. Need recognition

2. Product specification

3. RFP process

4. Proposal analysis and supplier selection

5. Order specification

6. Performance assessment

V. Notes from Class: Supplement to PowerPoints

a. promotion

b. Remember to look for your own examples

c. Integrated marketing communications wants to ensure  consistent message across all channels/contact points i. Ex: the dark knight 2007

1. Interactive, immersive marketing campaign

2. Bat signal, joker took over websites, games/apps,  very successful

3. Experiential marketing

ii. Ex: Jay z and Bing

1. People could assemble his book digitally and find  pages around relevant locations

2. Win-win: bestseller book, increase in Bing usage iii. These two examples are totally different channels but  similar in success

1. Hype

2. Excitement around the experience

d. AIDA model

i. Associated with communications

ii. Standard model response hierarchy

iii. Steps:

1. Raise awareness of brand

2. Peak interest: distinguish from others

3. Desire: customer has intent to purchase an item  when they are in the market for it

4. Action: could be bottom-line sales, or whatever step  toward purchase the company wants

iv. Examples: awareness

1. Cottonelle puppy ad: awareness: cute

2. Evian roller babies: awareness: cute

3. Apple commercials: no copy just black silhouette  with produce emphasized in white. No copy needed  in awareness stage

v. Interest

1. Content marketing: reading content but content is  supporting a brand

2. Customers are more skeptical about ads

3. Use content to engage

4. Ongoing debate between content and advertising vi. Desire

1. Conviction

2. Intentions toward certain brands

3. my ad was an ad for 909 Broad: trying to convince  you to buy an apt (desire stage)

vii. action

1. type of action is determined by the company

2. What result does ad agency want?

3. Lagged effect

a. Takes between 3-10 exposures for audience  to retain impact

b. Depends on loyalty factor

c. Takes time

d. Campaigns repeat exposures to retain product  in evoked set

viii. Elements of an integrated marketing communication  strategy

1. Personal selling: investing in professional sales  force

2. Advertising is traditional

3. Direct marketing (ex: mobile marketing) is often  directed at younger generation

4. Interactive= 2 way communication

5. Passive= 1 way communication

ix. Advertising

1. Traditional

a. Ads watching us: collect data

i. Determine age, gender-specific ad to  

display certain ads

ii. Ex: domestic violence ad: the more it’s  

looked at, the faster a photo of a bruised  

woman heals

b. Stores watching us

i. Tracking smartphone signals to track  

shopping habits

ii. Heat maps to show when customers  

linger on products

2. Paid

x. Public relations

1. Not always paid for directly by corp

2. Publicity

3. Product placement

xi. Sales promotions

1. Call to action: ads directly connected to coupons 2. Contests, sweepstakes

3. Sales promotion trap: so many coupons that  

customers won’t buy product without them

xii. Personal selling

1. Most expensive on per contact basis

2. Expect return

xiii. Direct marketing

1. E-commerce: online

2. M-commerce: on smartphone/mobile

a. Opt-in for these

3. Expensive

4. Multicultural economy report

5. Culturally relevant connections

xiv. Setting and allocating the IMC budget

1. Rule of thumb methods are widespread: establishing  how much to spend

a. Competitive parity

i. Looking at competition to see what you  

should spend

b. Percentage-of-sales

i. Straightforward: allocate part of revenue  

towards advertising

c. Affordable budget

i. Affordable method: what is left over.  

Reality for many local firms

xv. Marketing success using marketing metrics

1. Many times, companies sacrifice reach for  

frequency and vice versa because of limited  

budgets

2. Gross rating points=reach x frequency

xvi. Search engine marketing: can get more return on a  lower investment

xvii. Steps in planning and executing an ad campaign 1. Identify target audience

a. Ex: my ad, 909 broad, has intended target  

market of college students, more specifically  

sophomores, juniors, seniors, grad students

who will be looking for cheaper off-campus  

housing

2. Pull strategy:

a. Pharmaceutical companies have access to us  now (commercials, internet ads, etc.)

b. Doctor is middleman (channel member)

c. We ask our doctors to prescribe us upon  

seeing ads for medicine

3. Push strategy:

a. Before pharmaceuticals had access, used  

sales people & doctors to channel info to us

b. Professional sales force used to inform us  

about the medicines

xviii. Informative advertising is raising awareness xix. Persuasive advertising

1. More copy, more text

2. Show how it differs from other products

3. Ex: my 909 Broad ad serves to persuade

xx. Reminder advertising

1. Mature brands

2. Keep product at top of mind (in evoked set)

xxi. Focus of advertisements

1. Institutional ads

a. Overall brand, not specific

2. Product-based ads

a. Specific product

xxii. Public service advertising (PSA)

1. Meth, smoking ads

xxiii. Step 3: determining the ad budget

1. Companies want to gain return on the huge  

investments they make

2. Article: super bowl ad costs

a. Living up to the hype

b. Must deliver

3. Article: Oscar advertisers paid record prices for 15%  drop in audience

xxiv. Step 4: convey the message

1. Distinguish brand from competition just by brand  itself

2. Dominos: made huge change to recipe, owning up  to bad pizza

xxv. The appeal

1. Emotional appeal

a. Apple holiday TV ad

i. Emotional: kid makes video of holidays  

while it looks like he was just on his  

phone all the time

ii. Cute, family, etc.

b. Raising an Olympian

i. Emotional appeal related to his mom  

supporting him

ii. Henry cejudo, gold medalist

iii. Telling his story, celebrating him

iv. P&G “sponsors of moms” series

c. Toyota: football players “choose to be dads”

d. Dove: dads super bowl men+care

i. Very obvious promotion: screams BUY  

IT

e. Nissan nascar dad, integrated brand

f. Fear: allstate mayhem are you in good hands g. Humor: Clorox: humor to reach moms

i. Kids making a mess

h. Humor: Toyota swagger wagon Toyota sienna  minivan trying to seem cool

i. Happiness: coca cola: happiness machine  

random gifts popping out of vending machine

j. Sex: super bowl

k. Love: extra gum couple commercial

l. Quaker oatmeal: how you start your morning  matters: comfort

m. Honeymaid’s this is wholesome ad

i. Neg and pos reactions to real families  

with divorce and same sex couples

ii. Honeymaid responded to anti-gay

comments and stood by its ad after the  

negative comments  

iii. Shows company values

n. Back to the future Toyota: nostalgia

o. Kraft and star wars mac and cheese: nostalgia  from past

p. My ad’s message: 909 apts are the best for  

student to live in

i. appeal: comfort, happiness

xxvi. symbols help convey messages

1. images

xxvii. step 5: evaluate and select media

1. pay attention to meaning of trending hashtags

2. are we trying to draw purpose/action

3. need media plan

4. purchase of media space is big decision

xxviii. mass and niche media

1. AT&T “between 2 worlds”

2. Bicultural Hispanics

3. Niche media reach a smaller more targeted  

audience: higher frequency

xxix. Choosing the right medium

1. Pass along: readership rate

a. Magazines last longer

2. Ex: Target: ad directed towards Spanish/Hispanic  moms—didn’t translate it

a. Chose different social outlets common for this  

group  

3. ex: in-n-out burger: word out mouth

a. consistent

b. t-shirts, bumper stickers

c. popular even on east coast without access  

xxx. viral marketing campaign

1. trending

2. sisterhood of motherhood

xxxi. determine the advertising schedule:

1.https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&v ed=0CAcQjRxqFQoTCM3vlc3J_MgCFYluJgodbWwOLw&url=http%3A%2F%2Fwww.slidesh 

are.net%2Fbrandsvietnam%2Fbrands-vietnam-media-planning-buying

training&bvm=bv.106923889,d.eWE&psig=AFQjCNGyLhVtPZg3phLArX4UxsH5r94wOw&ust 

=1446926014434541 

xxxii. Step 6: create ads

1. Barbie: unscripted video. Be who you want to be:  playing w/ Barbie let girls imagine to be anything

xxxiii. Step 7: assess impact using marketing metrics 1. Measurement

2. Ad agencies being held more responsible for results:  not straight commission

3. Results: did they deliver? How were sales affected? xxxiv. Regulatory & ethical issues in advertising

1. FTC: against misleading ads. False advertising

2. FCC: promotes so there’s no unwanted advertising.  Censoring inappropriate commercials during family  TV airtime

3. FDA: light vs. lite. Labels, etc.

4. Puffery: legal way of promoting product or service by  exaggerating based on opinion, not fact

a. Dominos isn’t puffery because they didn’t  

exaggerate: they actually changed their  

recipe: actual proof of what consumers like  

with real life focus groups

xxxv. Public relations

1. PR may not be paid for by company

2. NOT SALES PROMOTION

3. Build goodwill

4. Communicate

5. Build awareness

6. Product placement

7. Kate effect: designers of Kate Middleton’s outfits get  sold out after she wears them

8. Drake the new Kate? Monoclear jacket sold out after  hotline bling video

xxxvi. Sales promotions

1. Coupons are common

2. Discounts, coupons common for stores like Kohl’s,  JCP, bed bath & beyond

3. But are people shopping because of the brand or for  the coupons?

4. How much do we want to reply on sales  

promotions?

xxxvii. Types of sales promotions

1. Contest: some kind of evaluation involved

2. Sweepstakes: totally chance

xxxviii. Product placement

1. Just happened to “be there”

2. Coke on American Idol evolved into product  

integration: should be seamless: woven into script:  natural, realistic

3. Bud light spoof commercial product placement

4. Abercrombie & Fitch telling The Situation from  

Jersey Shore to stop wearing their clothes

xxxix. Cross promotion example: iams & PetSmart xl. Measurement is the bottom line

1. Trying to incent action

2. Measurement in different forms is key

xli. Follow up: what would you want if you were the  customer? Empathy.

e. Price

i. Company objectives are not mutually exclusive

1. Ex: apple iPad mini: profit or sales objective

2. Predicting the price/focus of the new product

3. Many companies are profit oriented and competitor  oriented, etc.

ii. Demand curves

1. Sometimes customers demand more as price  increases

2. Higher price indicates quality, increasing demand 3. Ex: Starbucks or a cruise vacation

4. At a certain price, however, demand will drop again:  customers have reached limit even for a luxury  

product

iii. What if you let customer determine price?

1. Hard to still hit price equilibrium when you allow  customers to pay what they want

2. What type of product/service here in Athens could  still hit price equilibrium if it let customers pay what  they want?

iv. Elasticity=sensitivity

v. JCP removed “fake prices”: markdowns, red tags, high low pricing but reverted back after 2 years because it  affected demand

vi. Demand is price elastic: revenue moves in same direction  as demand

vii. Demand is price inelastic: revenue moves in same  direction as price

viii. Substitution effect has nothing to do with income but more  to do with having options

ix. FORMULAS TO MEMORIZE:

1. Breakeven units = fixed costs/(price-variable cost) 2. Price-variable cost=contribution per unit

3. Profit objective= fixed costs + profit/ price-variable  cost

4. Breakeven revenue = breakeven units x sales price  per unit

x. pure completion example: market for corn: many firms  selling product

xi. oligopoly example: airlines: a few firms control the market xii. monopoly example: bell Atlantic phone company:  controlled market

xiii. monopolistic competition example: firms selling  differentiated watches at different prices

xiv. Walmart is prime example of everyday low pricing xv. New product pricing strategies

1. Market penetration pricing: gaining share:  

increasing revenue. Attract customers w/ low price  

and slowly raise it

2. Price skimming: market towards small group w/  

high prices, then dropping. Ex: video games

3. IPhone price drop: after 6 months dropped price and  

changed to penetration strategy

xvi. Legal aspects & ethics of pricing

1. Deceptive or illegal price advertising

a. Bait and switch: misleading, changing the  

price

b. Attract customers w/ low price then try to  

convince them they need to pay a higher price

c. Citrus solutions carpet cleaning

i. Advertising low prices & compare  

themselves to other companies that bait  

and switch to higher price to say they  

don’t do that

ii. Scams

2. Predatory pricing

a. Setting price low with intent of shutting your  

competition down

3. Price discrimination

a. Offering product at different prices to different  

market segments

4. Price fixing

a. The practice of colluding with other firms to  

control prices

VI. Guest Speaker Notes

a. Sam Williams

i. Consulting firm

ii. Graduate of GA Tech and Harvard business school

iii. How business leaders have helped metro cities overcome  challenges

iv. Book: The CEO as Urban Statesman

1. Stepping out of comfort zone to help city thrive

v. Dealing with public policy issues

vi. What it takes to be a great leader

vii. Pain, gain, call to action

viii. Grady hospital

1. Over 1 million patients per year

2. Was on verge of closing because of bankruptcy poor  management  

3. Belonged to Fulton/DeKalb county govs who  

appointed personnel

4. Only level 1 trauma hospital in north GA

5. Had to take it out of gov control

a. Protests

b. Racial issue: many black patients

c. Also wanted Grady to serve the poor

6. Pete Carrell

ix. Trust is key for any leader to do job

x. Columbus

1. Business and political leaders formed task force to  look at other cities

xi. Leadership in general

1. Leaders are observed at making other peoples’ lives  better

2. Can’t just declare yourself a leader

3. Must have a greater purpose & be authentic

4. Must be able to simplify complex issues

5. Drive change & meet future of opportunity

xii. His personal values

1. Civic community includes many dimensions of  business, volunteers, gov

a. Have to find way to work together

2. Trying to get GA State professors into the  

community

3. Internships as addition to learning

4. Inclusiveness, partnerships, finding common goals 5. How to govern metro cities

xiii. what sparked his interest in urban planning 1. student leader at tech heard about internship

2. demonstrated because funding wasn’t going directly  to students

3. service learning

xiv. pros of privatization of Grady and helping with Columbus 1. Grady had to overcome political/racial concern/fear 2. john turner Columbus appealed to what people  wanted

a. mobilizing people to make new river

b. thinking the way other people do

c. raised $25 million

xv. next tipping point of growth for Atlanta/Athens 1. how to recruit/retain millennials

2. Atlanta losing millennials

a. traffic

b. not liking jobs

c. quality of life

d. public education quality

3. must make sure cities attract millennials

xvi. how to convince college students we have a duty outside  the university

1. letting people observes examples of people who do 2. how do I work with the community

3. look at broader community

4. must be multidimensional: look outside your degree b. Lauventria Robinson

i. VP of multicultural marketing, Coca Cola

ii. Multicultural marketing:

1. Hispanic American growth drivers

2. African American influencers

3. Asian American future growth

iii. Bicultural Hispanic consumers will drive growth iv. Asian Americans growing faster than Hispanics v. Coke has 2 approaches: total and targeted marketing

1. Total includes all and targeted addresses more  unique groups

vi. Being hung up on ethnicity/race is less important than  culture

vii. Food & drink is important to culture

1. Matters for coke products

viii. Bicultural Hispanic: marketing to 2 cultures

ix. Country with highest per capita consumption is Mexico x. Leverage us and Mexican soccer teams

1. Ad geared toward teams/people getting along

xi. Hispanic background, American identity, country of origin are their multiple identities

xii. Less generic Hispanic marketing: more region/country specific

1. 1st filter is Mexican lens because they are biggest  consumers

xiii. Wells Fargo ad: Hispanic truck driver bringing rocks of diff  states to daughter who wants to study geology

xiv. Code-switching

1. Not just language: behavior etc.

2. “Spanish in house English in street”

3. Ad: Spanish teen’s parents exited with his first job at  McDonald’s—some Spanish some English used

4. Growing importance of bilingualism

xv. Some like Spanglish and some hate it

xvi. Spanglish is not bilingual

xvii. Message and medium of ad changes based on content 1. English/Spanish xfinity ad: to switch between tv  

programs

xviii. In celebration of Hispanic Heritage month, Coke launched  a campaign celebrating pride in one’s family name

c. Jamil Elayan

i. Director of strategic tech at cognizant corp

ii. IT service provider

iii. Former VP marketing

iv. Promotions & social media

1. Driving change

2. The mix

3. The vehicles

4. Non-traditional venues

5. What’s next?

v. Trend of social media affects almost every job function in  large and small companies

vi. What’s driving growth of social media?

1. Smartphones

2. There are more cellular accounts than people in the  US

vii. Social networking universal

viii. Promotions:

1. Communications by marketers that informs

ix. Promotional mix

1. Ad

2. Sales promotion

3. PR

x. Facebook ads

1. Newsfeed

2. Reach “right” people who are most likely to be  interested

3. Custom audiences: ads to people you already  know/existing customers

4. Context sensitive

5. Demographic profiles

6. Pay per impression

7. Pay per click

xi. Nielsen data

xii. “end to end digital customer experience”

xiii. Inexpensive to implement campaigns that tie things  together

xiv. What to put on linked in:

1. Clubs

2. Activities

3. Community service

4. Jobs look at social media

xv. Is video social?

1. YouTube

a. Red bull channel on YouTube

b. Best of red bull

c. Identify with generation of extreme sports

d. Great editing/video-professional

e. $6.5 billion revenue

f. 150 staff video editors, media group

g. Famous YouTube stars

xvi. Product reviews

1. Yelp, amazon

2. Banana slicer

3. Customers want quick response to negative reviews 4. False reviews are a problem

5. People are more likely to leave a neg review than a  pos one

6. Leveraging social networks

xvii. the danger of social networks

1. 8% of US companies have fired someone because  of what they’ve posted on social media

2. The dark side of social media

a. Growing movement to remove traces of  

perpetrator after a violent crime so they don’t

become a celebrity

b. Ethical?

xviii. Proteus digital health

1. Legal? Ethical?

xix. “the internet of things”: connecting to technology w/ body 1. Fitbit

xx. Future of social media marketing

1. Location based marketing

xxi. All aspects of company impacted by social networking xxii. We are needed for social networking

xxiii. IT industry

xxiv. Customers looking to increase customer engagement xxv. Frictionless: painless interactions

xxvi. Customize, personalize

d. Alex Torrey

i. UMANO

ii. Based in Athens

iii. Clothing company: fashion brand

iv. Umano is Italian for mankind

v. Showcases kids drawings on clothing

vi. With each sale, give backpack full of school supplies vii. Support kids’ creativity

viii. Connect consumer to artist behind artwork

ix. Believe art education is important to kids & helps them to  see

x. Special fabric used: “attainable luxury”

1. Omobono: saint of cloth making

xi. Sell clothes in Bloomingdale’s (target market)

xii. Value proposition good: can’t get fabric for cheaper xiii. Social entrepreneurship

1. Giving back

2. Self-sustained business

3. Social mission

4. Creates value

xiv. Find schools most in need

xv. Work with kids to create drawings

xvi. Support entire school not just artist

xvii. Will be on shark tank 11/20

xviii. Focused on product first to make it really good so more  people want it