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Exam 3 Notes

by: Chelsea Gavranich

Exam 3 Notes MKTG 360

Chelsea Gavranich
GPA 3.1
Principles of Marketing
Dr. David Knuff

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Principles of Marketing
Dr. David Knuff
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This 11 page Reader was uploaded by Chelsea Gavranich on Wednesday February 4, 2015. The Reader belongs to MKTG 360 at Washington State University taught by Dr. David Knuff in Spring2014. Since its upload, it has received 148 views. For similar materials see Principles of Marketing in Marketing at Washington State University.

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Date Created: 02/04/15
3 1 1 April 9th I Exam 3 Supply Chain Management 0 The supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumer or business customer 0 Supply chain management is the management of ows among the firms in a supply chain to maximize total profitability Supply Chain Vs Distribution Channel 0 Supply chain has a broader focus 0 Distribution channel is the process of getting finished goods to the consumer 0 Functions served by Distribution Channels 0 Time place ownership utilities Transportation and storage functions Facilitating functions credit to buyers Repair and maintenance functions Risktaking Communications and transaction functions Efficiency creation OOOOOO Distribution 0 Breaking bulk channel members purchase large quantities from manufacturers and sell smaller quantities to many different customers 0 Creating assortments channel members provide a variety of products on one location I Reduces transactions 0 Types of distribution Channels 0 Consumer channels I I Direct if you buy on line from apple and they ship it to you directly that is a direct channel I Indirect manufacturerwholesalerretailerconsumer any one who gets inbetween 0 Internet as a channel of distribution I Disintermediation eliminating layers of channels of distribution removal of any layer ie if apple decides to not allow anyone sell their products I Receive products online 0 Communication of the supply chain via the internet knowledge management 0 A Few final issues 0 Selecting channel partners select the right people 0 Managing the channel of distribution I In every channel of distribution someone has power I Channel leader is the dominant firm that controls the channel I Channel leaders have some form of power relative to other members 0 Economic power control resources 0 Legitimate power legal authority to call shots 0 Reward or coercive power power to reward channel intermediaries Wholesaling I Wholesaling encompasses the buying andor handling of goods and services and their subsequent resale to organizational buyers 0 Organizational Buyers any purchasing agent in the marketplace I What do wholesalers do 0 Some of the functions of wholesaling I Enable manufacturers and service providers to distribute locally without making customer contacts I Provide a greater assortment of items so customers can make fewer transactions I Purchase large quantities reducing total physical distribution costs I Process returns and make adjustments for defective products 0 Manufacturer provider wholesaling 1 ManufacturerService Provider Wholesaling Manufacturer Owned Intermediaries manufacturer does all the wholesaling functions a Manufacturerowned Intermediaries have operations limited to 1 manufacturer b They own it they maintain it they get all the profit have all control 2 Merchant Wholesaling Largest percentage take title and possession of products for further resale e g Sysco a Resells to someone b They buy it own it then sell it 3 Agents and Brokers smallest percentage perform various wholesaling tasks but do not take title of the products a Never take title FOB origin vs FOB delivers Channel Strategy Steps in determining channel objectives and tactics 1 Develop Distribution Objectives a Support of marketing goals eg increase sales 2 Evaluate Internal and External Environmental In uences a What is best situation for distribution channel 3 Choose a distribution strategy a Conventional vertical and horizontal 4 Development distribution tactics a Necessary steps to implement strategy Distribution Retailing 0 Retailing is the final stop on the distribution path 0 Who are retailers O Manufactures importers and wholesalers all can serve as retailers if they sell directly to the end users 0 TEST QUESTION What is the final stop in the distribution path Its not the consumer it s the retailer Retailing 0 Why is retailing an important end to the distribution channel 0 Need to hit target segment 0 Retailers add value with image inventory service quality location and pricing policies 0 Things for retailers to consider 0 Must know your target market determines what products you will carry 0 This is referred to as the Merchandise Mix strategic decision on what products to carry 0 This mix is often referred to in terms of merchandise breadth and merchandise Lem 0 Merchandise Breadth the number of different product lines available assortments 0 Merchandise Depth the variety of choices available for each specific product line specialty stores 0 Scrambled merchandising merchandising strategy to carry multiple types of products that are not directly related e g Walgreens gas station 0 Know different classification of retailers on page 490 0 Wheel of retailing concept out with the old in with the new 0 Over time companies come and go 0 Over time number 1 is not going to stay number 1 forever 0 E g WalMart is now but before Target was number 325 retail convergence many of the same products available at different locations could threaten your revenues keeps pricing down Retailing 0 creating store image through environment 0 retail environments in store and online 0 In store environments 0 ecological design atmospherics modify environment to change behavior 0 ecological design items to consider 0 layout 0 lighting 0 color 0 music 0 positive cues increase purchase behaviorHollister s perfume the opposite holds true Environmental PsychologyNUGGET majority of research follows an sor paradigm trying to determine what environmental factors in uence behavior 0 stimulusgt organism gt response 0 the stimulus anything in the environment 0 most any aspect of customer and employee environment 0 the organism o affect gt emotional reaction 0 arousal gt physiological feeling state 0 the response 0 approach behaviors 0 desire to stay explore wor o avoidance behaviors 0 desire not to stay 0 various points should be noted about actually in uencing the environment 0 cues can interact to in uence behavior 0 alterations to the environment can be expensive 0 like any stimulus environmental cues can get old 0 bad cues can increase avoidance behaviors o congruity between stimulus and environment 0 if it s not congruent we walk away and are confused o spangenberg sprott Tracy and grohmann local clothing store in Pullman wa 2 shopper gender X2 scent gender 0 congruent scents lead to increases intentions to revisit more money spent 0 Retailing 0 online environments 0 electronic retailing 0 allure of electronic retailing search for product info in hyperspace retailers can update priceproduct info continuously order 24 hoursday timesaver for many customers I if someone s engaged on the ELM more likely to buy in person I Barriers to success 0 customer must still wait days to receive products by mail 0 people need touch and feel info before buying 0 security concerns Vending machines as retailers I Red box coca cola Multilevel marketing or network marketing What is price I price is value customers give up exchange to obtain desired product I payment may be in form of 0 money time vote favors anything that has value 0 value benefits sacrifice Importance of pricing decisions I good pricing decisions are critical to firm s success in marketplace 0 only source of profit for most organizations is price charged for products 0 most consumers rank reasonable price as most important consideration in purchase 0 businesses price may be second only to quality in buying decisions 0 price as a quality measure 0 marketers have tendency to lower price instead of sell value 0 today pricing is more dynamic how do we determine price I some ways to look at pricing 0 based on demand or what consumers are willing to pay value pricing 0 look at costs of manufacturing 0 our marketing objectives will most likely indicate what price we should use 0 pricing can uctuate based on your marketing strategies elasticity of demand change in quantity demanded over change in price I if Egt demand is elastic d changes with price I if Elt demand is inelastic no change in d I if E demand is unitary 327 I What is price 0 Price value customers give up exchange to obtain desired product 0 Payment may be in form of I Money I Service or goods bartering I Favors I Votes anything else that has value to other party Importance of Pricing Decisions 0 Good pricing decisions are critical to firm s success in marketplace I Only source of profit for most organizations is price charged for products I Most consumers rank reasonable price as most important consideration in purchase I Businesses price may be second only to quality in buying decisions I Price as a quality measure I Marketers have tendency to lower price instead of sell value How do we determine price 0 Some ways to look at pricing I Based on demand or what consumers are willing to pay value pricing I Look at costs of manufacturing I Out marketing objectives will most likely indicate what price we should use Things to consider when setting price I Demand I Elasticity of demanddeals with market reaction to change in price change in quantity demanded change in price If E gt 1 Demand is elastic D changes w Price If E lt 1 Demand is inelastic no change in D If E 1 Demand is Unitary Elastic What does Elasticity mean 0 How does elasticity relate to revenues I Elastic inverse relationship 0 If you lower price total rev increases 0 If you raise the price total rev goes down I Inelastic goes in the same direction 0 If you lower price rev decreases 0 If you raise price rev increases Why elasticity of demand Who cares 0 Deals with price changes 0 Elasticity likely to be different across market segments Shifts in demand curves 0 Nonprice factors that in uence shifts in demand curves Demand Backward Pricing Target Costing 0 Price is set by first determining what consumers are willing to pay or what competitors are charging then determining whether you can profitably make the product at that price 0 Cost of MFG Price Setting Strategies 0 CostBased Strategies Advantages simple relatively risk free Disadvantages Misses many factors competition demand etc difficult to est costs Cost Plus Pricing most common approach 0 Marketer figures all costs for the product and then adds desired profit per unity 0 Straight markup pricing is the most frequently used price is calculated by adding a predetermined percentage to the cost 0 Ex will be on test e g cost of product35 desired markup50 35 times 5175 35 5250 is the new selling price 0 Cost Based Pricing 0 Break even analysis How may units of this product must I sell at this price to break even cover all costs All costs are covered but there isn t a penny BEtotal fixed costunit priceunit variable costs BE Example fixed cost150000 unit selling price1 unit variable cost25 150000125200000 units in dollars multiply by sale price 200000 times 1200000 know for test 0 Fixed and Variable Costs Fixed costs costs that do not vary regardless of units produced Variable costs per unit cost of production that will uctuate with number of units produced 0 Things that may cause adjustments in pricing Quantity discounts Seasonal discounts products that don t have consistent demand buy out of season Cash discounts 210 net 30 2 discount if paid in 10 days otherwise due in 30 days Functional discount a discount offered to a middleman for performing a channel function 0 Psychological Pricing 0 Some different pricing methods 0 O O O OddEven 499 19 999 0 Prestige products will not use odd pricing Price Lining 25 50 75 and no prices in between 0 Groups of prices within your product to lessen consumer choices consumers pick the middle price I What if we want people to pay 75 0 Price lining pricing I Latitudes of acceptance and rejectionhelps establish prices Latitude of Latitude of Latitude of rejection Acceptance rejection Low price Acceptable High Price Price I Latitudes can be moved 0 When sales people show a product they show you the most expensive in order to set your reference price 0 Reference price price in consumer mind on who much a particular product should cost various information causes this 0 Pricing Strategies Based on Competition 0 Firms may price products 0 At same or similar level as competition 0 Below competition 0 Above competition 0 A Price leadership strategy follows industry leader by setting same or similar prices 0 Pricing Strategies Based on Customers Needs 0 Strategies focus on keeping customers for long term 0 May use costofownership strategy I Price consumers pay for product plus cost of maintain amp using product less its resale or salvage value 0 May use value pricing or every day low pricing strategy I Firms sets prices that provide ultimate value or pricebenefit ratio to consumers I Want to maintain valueadded so you can raise price and not lose customers pricing power differentiate 0 Trial Pricing 0 Pricing new product low for limited period of time in order to lower risk for customer 0 In trial pricing I Win customer acceptance first by offering low price then I Makes profits later as buyers concerted to regular price customers I EX HBO or Showtime 0 Trial price 5 regular price 2095 0 Is it a new product I Price skimming set a high price initially no competition I Skimming is effective when demand is inelastic 0 Consumers are willing to pay higher price I Penetration Pricing se ta low price initially competition in the market place I Penetration is effective when demand is elastic 0 Many consumers are pricesensitive O A low price may discourage competitors from entering market 0 Pricing tactics for individual products I Two part pricingtow separate types of payments required to purchase product e g golf membership I Payment pricing seeks to make consumers think price is doable eg three payments of 3999 each monthly lease payments on cars 41 0 Pricing Tactics for individual products 0 TwoPart pricing I Two separate types of payment 0 Pricing tactics for Multiple products 0 Price Bundling I Selling 2 or more goodsservices as single packages for 1 price bundle and save cable company COMCAST O Captive Pricing I Pricing tactic firm uses when it has 2 products that work only when used together printers I printer free and the ink cartridges are expensive 0 EX Gillett I Sells one at very low price razor amp make profit on second high margin item blades 0 Legal amp Ethical Considerations in pricing 0 Deceptive Pricing Practices BaitandSwitch ILLEGAL bc ie if the product isn t available but if there is one available it is legal 0 Unfair Sales Acts Loss Leader Pricing 0 Price Fixing Horizontal amp Vertical Price Fixing I Horizontal get together with competition and agree to sell at a set price I Vertical the manufacturer tells the retailer you have to sell at this pr1ce 0 Price Discrimination RobinsonPatman Act everyone has to be given the same price 0 Promotional pricing 0 Cash rebate 0 Mail in Rebate I SHORTENING THE TIME FRAME of mail in rebates Increase or decrease Answer increase 0 Low financing 0 Could lead to price wars 0 Too many promo pricing could hurt brand decreases the value of that brand 0 Tiddy bear 0 Kush 0 Promotion amp its Goal 0 InformslRemindsIPersuadesElBuilds Relationships etc Coordination of Marketing Communication Efforts to in uence Attitudes or Behaviors IMC integrative marketed communications 0 Elements of Promotion Mix 0 O O 0 Advertising nonpersonal communication from identified Sponsor Using Mass Media Personal Selling direct interaction between company representative amp customer Sales Promotion Shortterm incentives to encourage sales during specific time period Publicity amp public relations portrays organization amp its products positively by in uencing perceptions of public I Communication Model 0 O O O O Source Message Encoding Medium Transmission I Noise or interference Receiver Decoding Most important part Feedback I Decoding by Receiver 0 O Decoding is process of assigning meaning to message by receiver Most likely to occur when I Message source is someone receiver likes I Message is creatively executed I Receiver normally pays attention to medium I Message is personally relevant I Guerilla marketing unique and creative way 0 Message Objectives 0 Objectives I Attention I Interest I Desire I Action 0 Meeting Objectives I Types of appeals I Rational Appeals use of facts to appeal Left Brain 0 Emotional Appeals Make you feel something Right brain processing I Structure of Appeal 0 Onesided or Twosided argument 0 One tell all the positives about product 0 Two tell you both positive and negative 0 Drawing Conclusions I show you exactly what is going to happen if you use my product


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