MARK 3001 Exam 3 Study Guide
MARK 3001 Exam 3 Study Guide MARK 3001
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This 50 page Study Guide was uploaded by Kyla Brinkley on Friday November 6, 2015. The Study Guide belongs to MARK 3001 at University of Georgia taught by Kimberly Grantham in Summer 2015. Since its upload, it has received 357 views. For similar materials see Principles of Marketing in Marketing at University of Georgia.
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Date Created: 11/06/15
Kyla Brinkley 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 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 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 a firm can accurately specify a mathematical model that captures all the factors required to explain & predict 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 i. Some firms may be more concerned about overall market share than dollar sales (though these are often connected) 1. Believe market share better reflects success relative to market conditions than sales alone ii. Adopting a market share objective sometimes implies low prices, but not usually 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 (des
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