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by: Dixie Olson

Marketing Mktg 360

Dixie Olson
GPA 3.7

Jeffrey Joireman

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About this Document

Jeffrey Joireman
Class Notes
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This 13 page Class Notes was uploaded by Dixie Olson on Thursday September 17, 2015. The Class Notes belongs to Mktg 360 at Washington State University taught by Jeffrey Joireman in Fall. Since its upload, it has received 41 views. For similar materials see /class/205951/mktg-360-washington-state-university in Marketing at Washington State University.


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Date Created: 09/17/15
I Overall Any book material from chapters on services pricing placement distribution and promotion is potential for questions although the exam will mainly focus on the textbook material that was discussed in the lectures After you commit the terms their meanings and applications to memory then create scenarios and examples where each term is used Try to solve the problems these chapters present The following study guide is not a list of what will be on the exam rather it is a document that you can use to help you cover many of the most important parts of the chapters ll Services a What are services and service acts Services are acts efforts or performances exchanged from service producer to consumer After the service is consumed you typically don39t leave with a physical asset Services are performance acts provided by people machines or web servers Services are intangible and provide real but intangible benefits Ex peace of mind healthy feeling being informed etc However service providers use products and products can be bundled with services How do services differ from products There are 4 ways services differ from products KL lntangibility Both physically you can t feel taste hear touch or see and mentally hard to gain a clear mental picture 2lnsegarability The product and consumption of services are inseparable EGlt a meal at a restaurant Products are often mass produced in a factory long before they are sold 3Perishabilig Services can39t be stored for future usage EG an empty hotel room won t make any money llVariability of Service Quality Generally not reliablerepeatable You can t mass produce services so quality varies Higher variance in service quality is due to variability in inputs people inter and imra and outputs Why is it more difficult to market services than products Hint search experience and credence attributes It is much more difficult to market and provide services and ensure they are high quality as compared to products but services are money makers Unlike products you can handle services have fewer quotSearch QualitiesquotI AKA attributes that you can evaluate before purchasing them like price and time length See quotCquot b Describe the attributes that define services perishability inseperability etc How does Marketing communications overcome each ofthese To overcome lntangibility use of service scape atmospherics bank vaults lawyers sign great employee uniforms logo etc lnseparabiitv To improve quality and reduce costs try to automate service using a website or self service technology like website atm or phone app Perishahility Run specials and loyalty programs to increase sales during lull times and offseasonsperform capacity planning and capacity management Variabilityn A service act is a repeatable scripted performance Use TQM aka total quality management is a methodology to study processes and encourage 39 Use critical incidents to record consumer complaints and view these as indicants of Murphy s Law Fix the things that can go wrong Use computerized disintermediation automate service as much as possible using computer scripts and workflows variance in service quality C 9 e How do consumers judge service quality Hint Servicescape etc Services are judged on Experience Qualities attributes that you can evaluate only a er consuming the service Credence Qualities These can be hard to evaluate even after purchase taxes legal etc ALSO SERVQUAL 1 Reliabilig most important Dependable accurate consistent repeatable service 2 Responsiveness Ability to provide fast custom service 3 Assurance Knowledgeable and courteous employees who earn our trust 4 Tangibles atmospherics Physical facilities tools equipment used to provide service 5Empathy Caring individualized attention to the customer Describe the gap model of service quality what are the gaps the critical incidents technique to improving service quality and the dimensions of SE RVQUAL Gap Analysis Approach A measurement approach that gauges the difference between a customer expeditions of service quality and what actually occurs By identifying gaps the service provider can close them and increase service quality and in theory increase profitability There are 5 Service gaps Gap 1 Poor understanding of customer preferenceThe di erence between the quality of service that customers want and what the managers think they want CLOSING THE GAP Better understand customer needs and quality expectations Gap 2 Poor management standards They aren t driving the quality that customers t an CLOSING THE GAP Better understand what customers are complaining about create standards that match their expectations Gap 3 Current performance is substandard The difference between the specification and the actual service CLOSING THE GAP Better articulate quality specs to employees Train and cross train employees and provide better tools to improve delivered 005 Also measure performance to the Go standards using Key Performance Indicators Gap 4 Unrealistic promises Difference between what the customers have been promised and the actual service quality standards CLOSING THE GAP Menage customer expectations Don t communicate exaggerated 005 levels to consumers rather communicate only realistic service expectation It s better to undersell and outperform Gap 5 Unrealistic consumer expectations Difference between Quos level customers irrationally expect is and the actual service level quality that is being delivered CLOSING THE GAP clearly state Qos standards and that you met them Some customers are never happy so stick with your service strategy and keep your target market satisfied Understand the core vs supplementary service Core Service Basic benefit customer is seeking watching a baseball game or transportation Supplementam augmented service Addon services that support or enhance core service parking food delivery and helpful staff When the core service becomes a commodity the supplementary service can create the differential benefit EX a glass of wine and a shoulder rub at a hair salon f Four categories of service processes people possessions mental stimulus information 1 Customers bodies hairstyling transportation health clubs Consumers are buying a physical experience 2 Customers Minds quot spouts J 39 Consumers are buying a mental experience 3 Customers physical gossessions car repair dry cleaning lawn care 4 Customers intangible assets Banking financial consulting these are intangible services provided to consumers intangible assets g Describe the four P s and disintermediation as they relate to services how your service is marketed Mission statement SWOT Develop concrete marketing objectives Develop marketing strategies to implement the objectives such as identifying new target market refine promotional efforts THEN 1 Product Define differentiate and promote the core and supplementary service Brand itdifferentiate it amp tangibilize it both physically and in the minds of consumers 2Pricing Strategies Revenue oriented MAX PROFITS r 39 39 quot MATCH UFFL Patronage oriented MAX CUSTOMERS 3Plaidistribution Provide convenience easy access location 4Promotion Use tangible cues personal references strong organization image post purchase communication etc h How does a company overcome a service s high level of experience and credence attributes Tangible clues of professionalism Ill Pricing Decisions A Develop Pricing Objectives Step 1 describe each of the following 1 SalesMarketing Objectives EX pricing products low to maximize unit sales perhaps to maximize usage of manufacturing facilities dur to beliefs of competitive advantage of the manufacturing ops or supply chain 2 Profit Objectives Price product to reach target profits for product or product line 3 Competitive Effect Reduce price to max sales for a short time season or to fight off a new competitor MSFT 4 Customer Satisfaction Set Price points for different products in the product line so that it s easy for customers to choose 5 Image Enhancement Set pricing to reflectsignal presage B Estimate Demand Step 2 1 Demand be able to estimate demand based on total market and expected market share in aggregate the quantity of a product that customers are going to buy Pricing is usually based on covering costs of estimated demand and providing a profit HOW TO ESTIMATE By estimating the number of potential buyers for a product then multiplying this number by the average units amount of each buyer s purchase based in part on market research NOW they can predict their company s market share 1 3 etc EXAMPLE 3000 families in Colfax 4 people per each are estimated to eat Mexican restaurant meals 12 times per year 36k meals or 100k entrees If the restaurant expects 20 of this action then they will be serving 20000 entries per year quot1650 per month or quot420 max per week Demand Curves be able to explain and calculate the price elasticity of demand and read the demand curves Law of Demand As price goes up quantity 39demanded39 purchased goes down Elastic Demand Price change causes great change in demand lnelastic Demand Price change causes little change in demand Wrapup Estimating Demand Estimate total market demand for targeted product category by year and month Next guestimateSWAG your firm s market share of this action be conservative Caculate the if of units the estimated demand this estimated market share translates to your unit demand ldentify substitute productsI competing product linesI amp cross market effectors of reducedincreased demand then watch for changes in these 8 other forces that move the demand curve Factor in price elastivicity the discounting you plan to use Arrive at demand estimate Normal Product be able to discuss the law of demand and how firm s leverage this Normal Product Demand increase and price decreases Prestige Products be able to discuss the applicability of the law of demand Prestige Product Demand increases as price decreases quot portion is elastic quotIquot portion is in elastic C Determine Costs Step 3 1 Variable Costs define why do these change Variable costs cost of production that is tied to and vary depending on the number of units produces AVC Change as the number of units produced changes Change occurs due to price discounts and economies of scale Fixed Costs and average fixed costs define How are these spread Fixed Costs costs of production that don t change with number of units produced Ex Rent cost of owningmaintaining a factory equipment fixed salaries of firm executives AFC Fixed cost per unit total fixed costs divided by number of units produced This decreases as the number of units produced increases fixed costs get spread over a larger production run 3 Total Costs define TFCVariable costs for a set number of units produced Product prices must cover these at each level of demand 4 What is breakeven analysis breakeven point and contribution per unit The ll of units a firm must produce and sell at a given price to any covers all its costs The point at which a firm doesn t lose any money but doesn t yet make any profit If you can calculate demandhow many will you sell and you can calculate the cost of production then you better match them at a given price to breakeven Breakeven point the point at which your sales cover costs and new sales contribute to profit Each firm needs to identify their breakeven point for weekly monthly or quarterly sales Breakeven is based on sales prices that marketing managers set Providing discounts necessitates recalculation Contribution per unit amount per unit that can be applied to profits and fixed expenses the difference between the price the firm charges for a product and the variable costs The pricing of the product must cover the total costs at the estimated level of sales AKA projected demand What does each unit contribute to Marginal Cost the increase in total costs from producing one addition unit of a product Marginal Rev The increase in total revenue from selling one additional unit of a product may decrease with each additional unit sold due to volume discounting Profit is maximized where marginal cost is exactly to marginal revenue Producing more costs too much Marginal Rev can decrease as sales increases like discounts require selling additional product or costs of production become prohibitive Why is breakeven analysis so popular The S of units a firm must product and sell at a given price to cover all its costs The point at which a firm doesn t lose any money but doesn t yet make any profit yet 5 Be able to describe the theory behind marginal analysis If AVC and MC rise as production quantities increase then there is a point where increased production costs make it less profitable to sell more at the chosen price Marginal analysis tells you at what level it becomes unprofitable to sell more D Evaluate Pricing Environment Step 4 what environmental factors affect price Examples Broad economic trends consumer trends social trends and intense competition Economy when the economy is growing inflation occurs and prices rise When times are tougher prices stagnate or contract to keep sales stable and consumers may be less likely to buy luxury items Competitors can also start price wars and dumping in an attempt to kill of competition Oligopolies can work together to maintain a status quo pricing so that all participants prosper E Choosing Pricing Strategy Step 5 1 Cost Plus Pricing what is this and when should a firm use it Costplus pricing total all products costs and add markup very simple and common to implement 2 Demand Based Pricing what is this and when should a firm use it Demand based pricing basing prices on an estimate of the quantity that can be sold at different prices Two types 3 Target Costing define and give examples Types of demandbased pricing where firms identify product category price minds customers are willing to pay Identify quality and functionality customers need Identify these factors before designing product then match product to expectations Yield Management Pricing what is this Yield Management Pricing a type of demandbased pricing where firms charge different prices to different customers to manage capacity ex airlines 5 Value Pricing Value pricing or everyday low pricing EDLP pricing strategy in which a firm sets prices and do not discount afterwards 6 New Product Pricing whywhen use each Skimming Penetration Trial Skimming Charge a very high premium price during introductory stage works if innovation products which have no substitute Penetration charging a very low price to encourage more customers to purchase also keeps competitors out of the market Trail Charging an introductory discounted price for a limited period of time F Develop Pricing Tactics Step 6 1 Pricing for Individual Products Twopart pricing two separate types of payments to purchase the product or service ex country club cellphone Payment Pricing Breaking total price into smaller amounts payable over time 2 Pricing for Multiple Products Price bundling packaging selling two or more goods or services as a single package for one price cable companies Captive Pricing pricing two products that work only when used together iPod I39l39unes Gillette razors hp printers and ink G Psychological Issues in Pricing 1 Internal Reference Price what are these and how are they set Definition An expected fair price amp price range for the product category acts as an anchor Prices out of this norm are questioned Assimilation effect consumers naively reason that similarly priced products are of equivalent quality Contrast Effect consumers reason that a markedly different product is superior or inferior 2 Price Quality Inferences what is this and why do we do this PriceQuality Inferences consumers typically assume the highpriced product is of higher quality 3 Price Lining why use this Defin39 39on items in a product line sell at different price points Consumers are accustomed to paying a certain price vendors can change quality and customers may not notice H Legal and Ethical Issues 1 What is bait and switch An illegal marketing practice in which an advertising price special is used as bait to get customers into the store with the intention of switching them to a higher priced item 2 What are loss leaders how are they different than predatory pricing Loss Leader the pricing policy of setting prices very low or even below cost to attract customers into a storeimpossible to enforce online hard to enforce because it is close to the legal price tactic of trading up Predatory pricing is illegal pricing strategy in which a company sets a very low praise for the purpose of driving competitors out of business then later when they have a monopoly they turn around and increases prices international dumping Direct ma 1 i l P Billboards I 1Mi IV P quot 39Stratezv and 39 39 Marketing f 39 39 A Describe the parts of the communication model Source Message 7 Medium 2 Receiver 7 39 39 gyi jgg l encodingpp 5 i 33 er 5 decodinggt Mum l l Television 7 Radio Feedback 1 Purchase data Encoding Process of translating an idea into a form of communication that will convey the desired meaning Source Organization of individual sending the message could be a credible spokesperson actual customer testimonials or trade character Message the actual communication in physical form going from sender to receiver The actual communication in physical form going from sender to receiver Medium communication vehicle used to reach members of a target audience Ex website blog sales rep TV etc others Race er the individual or organization that intercepts and interprets the message if they are paying attenti n Decoding Process whereby a receiver assigns meaning to a message wide variance here as we are all different and some people receive the msg in a foreign language and translate Noise anything that interferes with effective communication ex popup ads online static on the radio competitors ads Feedback Receivei s reactions to the message You don t have to talk back to the TV anymore B Four Elements of Promotion Mix when should a firm use each in what mix What are the advantages and disadvantages of each table 121 Definition Communication techniques the marketer controls and mixes together 1 Mass appeals Advertismg TV sales promotion coupons Public relations uniforms and direct marketing mailers HEMENT 2 Personal Appeals Personal selling ms PROS Advertising Non personal comm From an Identified sponsor using mass media The marketer has control over what the message will say when it will appear and who is most likely to see it Often expensive to produce and distribute May have low credibility andor be ignored by audience Sales Promotion contests designed to build interest or encourage product purchase during a specified period If demand is price elastic coupons can immediately trigger increased sales Provides incentives to retailers to support one s products Builds excitement for retailers and consumers Encourages immediate purchase and trial of new products Priceoriented promotions cater to pricesensitive Shortterm emphasis on immediate sales rather than a focus on building brand loyalty The number of competing promotions may make it hard to break through the promotional clutter Public Relations Comm activities that createmaintain a positive image of a firm and its prod ucts PR works with media outlets Relatively low cost High credibility Lack of control over the message that is eventually transmitted and no guarantee that the message will ever reach the target Hard to track the resultof publicity efforts Personal Selling direct interation between a company rep and a customer Direct contact with the customer gives the sales person the opportunity to be flexible and modify the sales message to coincide with the customer39s needs The salesperson can get High cost per contact with cust Difficult to ensure consistency of message which it is delivered by many different company representatives The credibility of sales people often depends on the quality of immediate feedback from their Company39s image which the customer has created by other promo strategies C Integrated Marketing Communication what is this 1 What is its goals BUILD A RELATIONSHIP WITH THE CUSTOMER 2 Integrated Marketing Communication Theory describe the process that marketers use to plan develop execute and evaluate coordinated measureable persuasive brand communication programs over time to targeted audiences Needs to be consistent and choreographed amp synchronlzed 3 Control Continuum what is this Vendor with HIGH control over message that is communicated there is low variance in message Vendor with LOW control over message that is communicated and will have high variance High l Advertising 3 iii bifect marketian l Ll L gem quot3997 L Figure 123 Control Continuum The messages that consumers receive about companies and products differ in the amount oi control the marketer has over the message delivered to the consumer D New Marketing techniques what are these What are the pros and cons Any ethical issues Why is Buzz Marketing so important now Viral Marketing Creating Eurer online content that consumers want to pass onto their friends email vmail blog fb An online campaign Guerilla Marketing Creating quirky quotinthe worldquot content that is used to surprise and ambush consumers Consumer s buzzup the promo by snapping uploading and forwarding pics Positive WOM It is an unconventional marketing promotion intended to get maximum results from minimal resources Buzz Marketing signing up for Cool people mavens to tell others what cool stuff they found This is a coordinated posrtive WOM campaign STEPS GO AS FOLLOW 1 Choose a narrowly defined target audience 2 Find mavens Target selected message boards online forums chat sites and news groups for promotional messages and offers 3 Offer an incentive to targeted audience member to pass along information with 39 s ssages coupons and offers New product new offer new hundle new features 4 Doing something noteworthy or different that generates conversations among the target audience C C 3 3 r 3 3 v Buu All of the above techniques generate buzzipeopla talking E Integrated Marketing Communication 1 Characteristics of IMC and why is IMC important I Creates a single unified voice or theme music for firm or product line for each target market I Begins with the customer and the gathered market research about them not with the prod uct I Seeks to develop relationships with customers through onetoone marketing using database marketing Relies on twoway communication feedback from consumer Generates a continuous stream of communication using database marketing emails direct mailers catalogues I Measures results based on actual feedback So responders get more mail 2 What is database marketing Definition creation of ongoing relationship constant spam with a set of customers who have identifiable interest in a product Customers39 responses are stored in the database and become part of ongoing comm Process The customer gets different massemail offers depending on their responses site visits andor purchases or inactivity Is Interactive Stimuates cross selling Iocates new customers yieds traceable responses buids relationships is measurable Used to calculate LVC lifetime value of customer 2 Developing the IMC plan Steps A B Identify Target Audience Establish Communication Objectives Create consumer awareness I saw It Inform the target market create knowledgeO of the derived benefits Kt position the product yak I know about that Build consumer desire and positive attitudes in the target market I want that Encourage purchase and traile promotions I tried it I liked it Build loyalty repeat usage expand product line I m hooked Marketing Budget techniques be able to describe these Determine total promotion Sbudget TopDown budgeting techniq ues Percentageof sales approach 5 of revenue goes back into promotions Or Competativeoarity spend like competitors Bottomup budgeting technique ObjectiveTask Methodjust figure out the needed promo campaign and execute it Don t base 53 spend based on a of previous year s sales Sales don t drive promotionspromotions drive sales Push Strategy Move products through the channel by convincing retailers to offer them works during introductory phase when customers are trailing the product use sales promotions give retailers trade discounts and incentives so they purchase your product and sell it in their stores pay slotting fees Theom if consumers see it they will want it Pull Strategy move products through the channel by first building desire among consumers using advertising Consumers will then buy and convince retailers to respond to demand D Design Promotion Mix mix of what What mix of buzz marketing guorilla mktg print ads competitions facebook content discounts sponsorship etc are you going to deploy E Evaluate Effectiveness of Communication how is this accomplished Are communication objectives adequately translated into marketing communication that is reaching the right target market Was there a bump in sales An analysis of the marketing metrics and key performance indicators KlP s for the promotion will give an indication of the success of the marketing campaign or status of the product line V Distribution A What are the Primary and support Activities within the Value Chain How does the supply chain concept differ from a value chain Support Activities lProcurementl Marketing and sales Primary Activities It s different because it doesn39t go in a circle B Describe each of the following and identify how they are similar and different supply chain distribution channel logistics management distribution centers vs warehouses What does each do I Supply Chain All of the activities of different firm need to turn raw materials into a good or service and put it in the hands of the consumer The goal is to rapidly respond to changes Distribution Center Are a subset of the supply chain getting finished goods to market Logistics management optimizes distribution channel activities deals with the operational day to day implementation process and efforts to move goods through the supply chain choice of location of distribution centers smaller warehouses truck vs rail routes etc 0 Compare Insourcing vs Outsourcing 0 Insourcing rms can contract with specialists such as IZ UPS company s suppiv chain DEX that handles all or part of e D Different types of channel intermediaries Definition Firms of individuals such as wholesalers agents brokers and retailers help quickly move the product from the producer to the consumer or business user Functions provide logistics andor physical distribution of many different products Facilitate the flow of information from supplier to consumer and vice versa Also deals with international trade issues Transport and store goods in a warehouse then fill retailer shelves F What factors is driving disintermediation within distribution channels commerce has created radical changes in distribution strategies helped consumers get access to less expensive channels a Disintermediation Eliminating traditional Interi nediarles Can reduce price for smaller less bulky items Knowledge management sharing knowledge with other supply Chain G Understand and describe each type of Independent Intermediaries and the Manufacturer owned Intermediaries What does each do When should you use each Merchant wholesalers Independent firms not manufacturer owned work with many manufacturers Buy goods from manuf and sell to retailers and other b2b customers typically in one region Cashandcarry wholesalers take title buy then break containers have a ware house don t deliverlike costco Truck jobbers take title buy and deliver perishables like bread run their routes weekly handle ordering and delivery to smaller retailers Dreyers Drop Shippers take orders from retailers combine them into bigger orders to reap price breaks place orders to mfr s contract out delivery take title sweat out delivery then take 810 cut and never touch the product Rack Johbers own the product display racks work with specialty products like cosmetics and magazines Mailorder wholesalers service remote business consumers using print and web catalogs Merchandise agents and brokers similar to merchant wholesalers but they never take title typically do not hold inventory are independent service providers that facilitate sales of different mfr s products maybe on a smaller scale Typically have specialized knowledge in an industry Typically operate in one region Manufacturers39 agentsreps independent sales people that control sales in territories for one or a few mfr svisit retailers take orders schedule shipments work with retailers Selling agents do not take title facilitate importexport industry specific similar to mfr rep no services just sales Commission merchantsTake goods on consignment but no title try to sell it Merchandise brokers intermediaries that bring buyers and sellers together Manufacture owned intermediaries ex an outlet store Sales Branches A division of mfr carry inventory provide sales and service support in region Sales Offices Similar to agents but are employee sof mfr DO NOT CARRY INVENTORY but provide selling functions Manufacturers Showrooms permanent product displays for customers to visit Demo products take orders schedule shipments NO INVENTORY EX Kiosks


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