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This 24 page Class Notes was uploaded by Mrs. Marisol Schuppe on Monday September 21, 2015. The Class Notes belongs to MKT 300 at Colorado State University taught by Christopher Blocker in Fall. Since its upload, it has received 71 views. For similar materials see /class/210059/mkt-300-colorado-state-university in Marketing at Colorado State University.
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Date Created: 09/21/15
Ch1 An Ovavizw nf Markajng Wham Markeungv have valuefm customer meme partners and ninety 11 large news uf Mankenng the m lrm marketing iceba39g Canmm 2 w There are other Whatxs an Exchange what is n nnm an mmge are 1 mm be mapmne 2 Eachpany ha amethmg afvalue m a r 3 apartyx capable a cammumcanan and 121wa 2r 211 party 1me m acceptreject an a 5 apprapnatedenmble to deal thh other CustumerValue Custumer Sansfacnnn Cu amers39 Fuur Markeung Management phllusuphes mtg puma produce tngppm n more an the w zce level ads Ewenemex 2 g Apple Four 5mm 2 Bwt 39 522 Ch 2 Strategc Planning fur Campeu39u39ve Advanng Strateg e Plannmg evatwng market apparhmme M axkenng Plan Mums a 4 nun Mink1 sn Markmn nx A written document that acts as a guidebook of marketing activities for the marketing manager designing activities relating to market objectives and changing market Business Mission Statement Situation or SWOT strengths weaknesses opportunities threats Objectives must be realistic measureable time specific and compared to a benchmark Marketing Strategy ImplementationEvaluation Control Mission Statement a statement of the firm s business based on a careful analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions statement of business that says What line are they in it establishes boundaries objectives and strategies focuses on acquired marketing Marketing Myopia Defining a business in terms of goods and services rather than in terms of the benefits customers seek eg Frito Lay classified themselves as the corn chip company they would be worse o which is why they classify themselves as the snack food company T MAMNF STRENGTHS recognize competitive WEAKNESSES What they should not flus on advantage and how they can use their or what they need to improve upon strengths e g cost competitiveIkea UCOH VCIt walmarl EWth OPPORTUNITIES See opportunities either in THREATS See other businesses as prospective market gaps UMatClJ competitors UCon vert Blue Internal Purple External Competitive Advantage A set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition 1 Cost competitive low prices within the industry while maintaining satisfactory profit margins a Experience curves curves that show costs declining at a predictable rate as experience with a product increases b Ejficient Labor c No Frills e g southwest airlines creates low costs with no seat assignments or meals on the plane d Governmentsubsidiaries e Product Design e g Ikea f Reengineering in a more inexpensive fashion g Product innovations h Service deliveries eg online magazines nook 2 ProductService differentiation competitive the provision of something that is unique and valuable to buyers beyond simply ojfering a lower price than that of the competition it is better somehow Eg Niemen Marcus Burberry coach etc 3 Niche Competitive the advantage achieved when a firm seeks to target and ejfectively serve a small segment of the market a e g highend restaurants where people pay for the food and the experience or like Chef s Garden who ships RARE artisan vegetables directly to its customers 4 Sustainable competitive an advantage that cannot be copied by the competition a eg Ne ix first in the industry and never any viable competitors Strategic Alternatives Anso s OpportunityMatrix Present Product New Product PresentMarket Market Penetration Starbucks sells more Product Development Starbucks cojfee to customers who register their develops powdered instant cojfee called reloadable Starbucks cards Via New Market Market Development Starbucks opens Diversification Starbucks launches stores in Brazil and Chile HearMusic and buys Ethos Water Boston Consulting Group Model High Star fastgrowing market Problem Child shows rapid leader eg ipad protect growth but poor profit existing market and invest in margins readjust finances to product improvement either invest more and become market dominant or adjust SB U phonespalm device Low Cash Cow generates more Dog low growth potential and cash than it needs to maintain a small market share its market share low growth eventually leave the market laptops marketplace mainframe computer High Low Once deciding where an SB U falls a company must decide whether to build potential to be a star usually problem child hold usually cash cows wanting to be conserved harvest increase short term cast or divest getting rid of the SB U GE Model Market InvestGrow Attrac veness I a Business Position Target Market Strategy Begins with a market opportunity analysis which describes and estimates the size and sales potential of market segments that are of interest to the firm they ojfer products specific to a group of people with similar interests or in similar stages of li e e g new parents Evaluation and Control Evaluation gauging the extent to which the marketing objectives have been achieved during the specified time period e g unrealistic marketing objectives inappropriate marketing strategies inappropriate marketing strategies in the plan poor implementation and changes in the environment after the objective was specified and the strategy was implemented Control provides the mechanisms for evaluating marketing results in light of the plans objectives and for correcting actions that do not help the organization reach those objectives within budget guidelines evaluating and correcting marketing results in light of the plan s objectives and correcting actions that do not help the organization reach those objectives The Four Key Frameworks I Anso s OpportunityMatrix 2 The Boston Consulting Group 3 The GEModel 4 SWOT strengths weaknesses opportunities and threats Chapter 3 Ethics and Social Responsibility Corporate Social Responsibility A business s concern for society s welfare Sustainability The idea that socially responsible companies will outperform their peers by focusing on the world s social problems and viewing them as opportunities to build profits and help the world at the same time Pyramid of Social Responsibility P Wu imam EthicsMorals Ethics the moral principles or values that generally govern the conduct of an individual or a group Morals the rules people develop as a result of cultural values and norms Morality of business ethics There are three levels Preconventional the most basic level childlike calculating selfcentered and even selfish based on what will be immediately punished or rewarded 2 Conventional egocentric to meeting the expectations of society loyalty and obedience eg whether the proposed action is legal and how others will view it Postconventional represents the morality of the mature adult people are less concerned about how others might see them and more concerned about how they see and judge themselves over the long run Code of Ethics A guideline to help marketing managers and other employees make better decisions EN Chapter 4 The Marketing Environment Social Factors In uences in society and culture that change people s attitudes beliefs customs and lifestyles how they evolve and change over time T hey are dijficult to track due to sociocultural trends in the US Increasing diversity CocaCola commercial Geographic shifts massive urbanization not just US but other countries Component lifestyles people have di erent selfidentities e g accountant dad skier Educational emphasis ticket to pursue a higher income Cultural values different cultures value different traits Changing age structure about 7 generational groups because people are living so much longer Demographic Factors the study of people s vital statistics such as age race and ethnicity and location Generational Gaps which is a demographic eg tweens 812 teens 1995 generation Y1979 generation X1965 baby boomers1946 Ethnic Markets Some markets will gear their advertising towards a certain ethnic group because it meets their needs better than another ethnic group African American Hair products Economic Factors QMrkENNt Each consumer has their own purchasing power the overall economic conditions in ation recession and everyone s willingness to spend mone eg during the recession consumers consumption behavior changed Technological Forces Basicapplied research innovation inside the firm adoption of technology altering ways to interact with the market eg online job searching has changed the recruiting process Linkedin Political and Legal Forces Laws lawsuits lobbying which looks di erent for every industry Comcast has lobbied so much they practically own the market legislation and court decisions regulatory agencies THEREFORE marketers must adjust to conditions influence through contributions Competitive Factors Competitive rivalry is huge Di erent levels 1 brand pepsi vs cocacola 2 product competitors all beverages co ee tea energy drinks etc 3 generic even broader 4 total budget in store newspaper vs coke IfATampT lowers cellphones by 20 Sprint must follow in pursuit The must monitor competition through pricing intelligence gathering and understanding the market and customer needs Chapter 5 Developing a Global Vision Buyer for export An intermediary in the global market who assumes all ownership risks and sells globally for its own account Contract Manufacturing Private label manufacturing by a foreign company Countertrade A form of trade in which all or part of the payment for goods or services is in the form of other goods or services Exporting agentbroker Exporting selling domestically produced products to buyers in other countries Export broker an intermediary who plays the traditional broker s role by bringing buyer and seller together Export agent an intermediary who acts like a manufacturer s agent for the exporter the export agent lives in the foreign market Global marketing benefitsrewards Benefits reduction of poverty and increased standards of living creates jobs new customers improves competition wider product availability Rewards expands economic freedom spurs competition access to capital markets and technology BUT Job loss and outsourcing risks associated Multinational rms A company that is heavily engaged in international trade beyond exporting and importing Global market standardization Production of uniform products that can be sold the same way all over the world vanilla ice cream Culture Cultural insights on proxemics highlow context Di erences from country to country create very different norms in proxemics in low context cultures Germany North America the people are more technical and precise and reliant on contract VS in high context societies they are very relational and put trust in relationships first they rely on business cards presentation where you sit roles and lots of context Hofstede cultural dimensions Individualism what do you want to be when you grow up VS Collectivism Where are we going Masculinity assertive aggressive VS femininity egalitarianism UncertaintyAvoidance risk or not Power Distance How OK is this culture with power hierarchy eg low in Sweden bc CEO have lunch with janitors Longterm how far do they look in future VS Short term orientation e g the US runs on quarterly and Japan has I 00 year plans EconomicTechnological kENNtN P Economically it could be dijficult because the markets rely more and more on each other which could cause a world recession but it could also benefit all the countries and technologically we have come so far and the internet is making so much global communication and business possible Political Structure Some barriers such as tariffs quotas boycotts exchange controls market groupings trade agreements Major Agreements NAFTA EU etc World Trade Organization WT O a trade organization that replaced the old General Agreement on Tariffs and Trades General Agreement on T arifk and Trade GATT a trade agreement that contained loopholes enabling countries to avoid tradebarrier reduction agreements North American Free Trade Agreement NAFTA an agreement between Canada the United States and Mexico that created the world s then largest free trade zone Central America Free Trade Agreement CAFTA a trade agreement instituted in 2005 that includes Costa Rica the Dominican Republic El Salvador Guatemala Honduras Nicaragua and the US European Union A free trade zone encompassing 27European countries World Bank an international bank that ojfers lowinterest loans advice and information to developing nations Entry Strategies exporting etc Firms use many strategies with dijferent risk levels Exporting Licensing Contract manufacturingampJoint Venture Direct nvestment Low RiskLow Return High RiskHigh Return Global Marketing lVIiX How much will the business adjust the four P s product promotion place and price within each country 1 One product and one promotion message worldwide 2 Create new product for global markets 3 Keep the product basically the same but alter the promotional message 4 Slightly alter the product to meet local conditions Product Promotion Place Distribution Price One Product One Illess Channel Choice Dumping Product Invention Channel Structure Countertrade Product Adaptation Country infrastructure Exchange rates Message 39 39 Purchas power T he internet is greatly influencing the global market Chapter 6 Consumer Decision Making Attitudes and beliefs Belief An organized pattern of knowledge that an individual holds as true about his or her world Attitude a learned tendency to respond consistently toward a given object Perception The process by which people select organize and interpret stimuli into a meanin ul and coherent picture Consumer decision marking process steps Problem Recognition Information Search Evaluation ofAlternatives Purchase Postpurchase Evaluation Possessions and the extended self What you already own and how you see yourself in the extended version Cognitive dissonance When people recognize inconsistency between their values or opinions and their behavior they tend to feel an inner tension consumer reduce dissonance by justi ing their decisions seek new information to reinforce their decisions so they have peace of mind Internalextemal search Internal looking within yourself for information before making a decision External Doing outside research before purchasing a product usually ones with greater financial investment Marketing controlled noncontrolled Nonmarketing controlled information this is not promoted by marketers controlling and promoting a product but is promoted by yourself and your experience or people you know experiences or it could be a movie reviewer MAMNF M arketing controlled information biased towards a specific product bc I originates with marketers promoting that product Evoked set A group of brands that the consumer can choose between that they like and want Extensive and limited decisionmaking Purchasing products from limited decisionmaking is when consumers are familiar with the product but maybe not with brands but decide fairly quickly and do not research much externally vs extensive involve the purchasing of a high cost item that they research externally and internally Learning Creates changes in consumer behavior through experience and practice see commercial for Nyquil and buy it after because you learned about it in the commercial Maslow s hierarchy of needs 15 must hit one than two etc Physiological needs hunger thirst etc Safety Needs security protection Social needs sense of belonging love Esteem needs selfesteem recognition and status 5 lf 139 39 needs lf r selfrealization Membership group primary secondary Primary includes all groups with which people interact regularly in an informal facetoface manner such as family friends and coworkers Secondary less consistent and more formal such as a club professional group and religious group otive The driving force that causes a person to take action to satis specific needs Need recognition Occurs when consumers are faced with an imbalance between actual and desired states that rouses and activates the consumer decisionmaking process Involvement Numerous types of involvement from person to person Product are you a product enthusiast e g fashion trends Situational boss is visiting and must buy proper alcohol Shopping involvement me vs anisha Enduring more to do with brand loyalty and always looking to buy products Emotional sports fans feel connected to the team in buying products tickets etc Reference group non aspirational Aspirational reference group a group a person would like to join where they must at least conform to the norms of that group eg Nike hired LeBron James to be a spokesperson for teens Nonaspirational reference groups influence our behavior when we try to maintain distance form them I avoid all black scary clothes bc don t want to be considered gothic Opinion leader A person who influences others often first to try new products out of curiousity Selective distortion exposure retention Selective distortion occurs when consumers change or distort information that conflicts with their beliefs I make fun of mp3 s bc I want more expensive ipod Exposure 1 choose which stimuli to notice when exposed to more than 2500 advertising messages per day and take in only 20 Retention remembering only information that supports personal feelings and beliefs Selfconcept How consumers perceive themselves includes attitudes perceptions beliefs and selfevals define their identity which provides for consistent and coherent behavior Selfimage real and ideal Self image combines the ideal self image and the real self image Ideal the way an individual would like to be perceived Real how individual actually perceives himself Consumers want to protect heir self image and will buy things according to that Social class AMNF MAMNF A group of people who are considered nearly equal in status or community esteem share behavioral norms and usually in similar economic classes so spend time together Socialization process The passing down of cultural values and norms to children done by families Stimulus stimulus discrimination generalization Stimulus need recognition is triggered by stimuli internal hunger or thirst and external someone s recommendation ads etc Stimulus generalization occurs when one response is extended to a second stimulus similar to the first e g dove shampoo relies on consumers familiarity with dove soap Stimulus discrimination learning to distinguish bw similar products eg coke vs pepsi Subculture A group of people in a society who are considered nearly equal in status or community esteem who regularly socialize among themselves both formally and informally and who share behavioral norms Value An enduring belief shared by a society that a specific mode of conduct is personally or socially preferable to another mode of conduct have great ejfect on consumer behavior Want The new way that a consumer goes about addressing a need Types of decisions routine etc Routine low involvement time cost and see only one alternative e g buying milk Limited low to moderate involvement cost and time with only few alternatives Extensive Buying a car or something big takes up more time more involvement more money and more informational search externally and many alternatives Factors determining involvement Previous experience Interest Perceived risk of negative consequences higher the risk higher the consumer s involvement could be with cars medicines etc a Financial Risk b Social risk clothes c Psychological Risk yogurt vs ice cream 4 Social visibility things that make a statement about the purchaser such as car clothes but for the reason of how others view them Cultural social individual and psychological Cultural influences social class subculture culture values and socialization Social roles family influences reference groups and opinion leaders Psychological perceptions motives learning beliefs attitudes Factors determining consumerbuying products Individual factors include gender age lifecycle personality selfconcept and lifestyle Chapter 7 Business Marketing Business marketing The marketing of goods and services to individuals and organizations for purposes other than personal consumption eg the sale of a PC to your college or university Electronic commerce The use of the Internet to facilitate activities between organizations has grown substantially Disintermediation m 9N5 iw such as or distributors from a marketing channel e g Walmart uses to help lower costs and Dell who sells directly to business buyers and consuemrs Relationship marketing alliances A strategy that entails seeking and establishing ongoing partnerships with customers An alliance is a cooperative agreement between business firms GMCR and Starbucks Categories of business customers I Producers profitoriented individuals and organizations that use purchased goods and services to produce other products to incorporate into other products or to facilitate the daily operations of the organization e g construction manufacturing transportation finance real estate and food service firms 2 Resellers retail and wholesale businesses that buy finished goods and resell them at a markup grocery stores buy coke and kraft and resell at a markup to consumers 3 Governments federal state and local buying unites this could be selling to the military or air force or school districts highway departments hospitals etc 4 Institutions seek to achieve goals other than the standard business goals of profit market share and return on investment schools hospitals colleges churches labor unions frats etc Business versus consumer markets Numerous factors I Professional buyers not emotionally making decisions 2 Geographically concentrated 3 Few larger buyers 4 Multiple sales calls 5 Personal relationships 6 Demand Characteristics of Business Marketing demand There are 4 types and very di erent from consumer markets Derived demand for business products bc they buy products to be used in producing their customers products raw materials 2 Inelastic increase or decrease in price will not a ect need 3 Joint when two or more items are used together in a final product e g demand of OSX relies on demand for apple computers 4 F luctuating when consumer demand goes up and down the number of engines that Cummins needs fluctuates according to what consumers are doing and the machines are wearing out sometimes zero in one year or sometimes four in one year Buying Centers Includes all those people in an organization who become involved in the purchase decision vary from company to company Initiator suggests making purchase In uencersevaluators define specifics and provide info Gatekeepers regulate flow of information which vendors get an appointment Purchaser person who negotiates the dea Users members of business who will actually use the product Business buying behavior Five important aspects I Buying centers 2 Evaluative criteria 3 Buying situations 4 Business ethics 5 Customer service Buying situations Must decide whether to make something or buy it from another source they decide to buy there are three different types I New Buy never have bought before and so research and find out about 2 Modified rebuy wants some change from original product and concentrate on specifics of remodel 3 Straight rebuy when consumer straight knows what they need and want and buys it easily Rod with Zach Evaluative Criteria Evaluate based on three criterion I Quality technical suitability a superior tool can do a better job in the production process 2 Service buyer s needs want to be met and the sellers must know how to satis that need 3 Price lowest prices will win Type of business products Seven categories PMAENNF I Major equipment depreciated over time machines mainframe computers etc 2 Accessory equipment portable drills power tools used in production but not as expensive nor last as long as major equipment 3 Raw materials become part of finished products and buy in huge quantities 4 Component parts either finished itmes ready for assembly or products that need very little processing before becoming part of some other product eg engines for a truck 5 Processed materials sheet metal chemicals with some processing and used in products 6 Supplies consumable items that do not become part of the final product lubricants detergents paper towels etc 7 Business services expense items Chapter 8 Segmenting and Targeting Markets Market 1 people or organizations with 2 needs or wants and with 3 the ability and 4 the willingness to buy if the group lacks any of these qualities it is not a market socially constructed we decide what a market is as consumers dynamic can be completely di erent product but satis the same need transportationbike or car Market segment the actual groups a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs Market segmentation the process o dividing a market into groups with similar needs to design a marketing mix that matches those needs e g the west county segment on Claritas Segmentationltgt Human diversity gender age ethnicity income etc Conditions and criteria for good segments Substantial is it big enough enough people to market to Identifiablemeasurable can you identi it identi who people are Accessible can you reach it Responsiveness can you influence that market Stable how long will this market last is it a fad or longlasting Competitiveness how competitive is it how many companies are after the same market Growth potential going the right way market growing7 e g in Fort Collins the amount of young families is increasing so target them Aligned with strategy does it fit our firm can our products help this market Ethical is the product discriminatory or is the market Bases for segmenting and their categories Geography region market size market density climate shade areas differently based on satisfaction rates with car service Demographics age gender income race family life cycle gender is used often Dove cause families to need dijferent things at different times Psychographics personality motives lifestyle geodemographicscombines geographic demographic and lifestyle segmentations neighborhood Merrill shoes want rugged lifestyle people to purchase hiking shoes not allodia types Benefits benefits sought PowerBar has numerous products for each stage of a workoutbefore during after Usage rate former potential 1 time light or irregular medium heavy 802020 of all customers generate 80 of the demand T he business market consists of four broad segments producers resellers governments and institutions segment based on geographic location organization or industry type business size product use and buyer characteristics buying process Steps for Segmenting 1 Select a market or product category for study define who you are marketing too objective target market Choose a basis or bases for segmenting the market make market segments Select segmentation descriptors select the above segmentation category to divide your segments by e g demographics would split the segments into age income etc BUT usage is selected the company would have to determine light medium and heavy users of the product 4 Profile and analyze segments information that is used to rank market segments as far as usage and buying potential goes 5 Select target markets the natural outcome of deciding the target market 6 Design implement and maintain appropriate marketing mixes Target Market a group of people or organizations for which an organization designs implements and maintains a marketing mix intended to meet the needs of that group resulting in mutually satisfying exchanges 3 types undifferentiated concentrated and multisegment Targetingltgt archery darts selecting a dart board target to aim for NQP kENNt 090 a N or men life cycles EN MA MN Strategies for selecting target markets Undifferentiated everyone needs the product and they do not have different strategies to aim at different markets homogenous market 2 Concentrated when a company develops a niche to go ojf of e g head and shoulders is the antidandrujf shampoo 3 Multisegment have multiple products to give to multiple consumer groups e g Wal Mart has great value brands and name brands Onetoone Marketing An individualized marketing method that utilizes customer information to build longterm personalized and profitable relationships with each customer keys to continue 121 personalization time savings loyalty and technology Position Positioning Rep positioning Position the actual place in the mind the place a product brand or group of products occupies in consumers minds relative to competing ojferings Positioning the process developing a specific marketing mix to influence potential customers overall perception of a brand product line or organization in general Repositioning changing consumers perceptions of a brand in relation to competing brands redo target market maybe market it for me instead Positioningltgt mental claim staking planting flag in consumer mind possessing that space eg we re the high quality brand quot we re the cool brand quot we re the most reliable Perceptual Mapping a means of displaying or graphing in two or more dimensions the location of products brands or groups of products in customers min s Product Differentiation a positioning strategy that many firms use to distinguish their products from those of competitors e g superjam di39jferentiates itself from other jams bc it is 1 00 fruit with no sugar added and Prego s chunky sauce ST P Segmentation Targeting Positioning Chapter 9 Decision Support Systems and Marketing Research Marketing information everyday information about developments in the marketing environment that managers use to prepare and adjust marketing plans Decision support system an interactive exible computerized information system that enables managers to obtain and manipulate information as they are making decisions interactive exible discovery oriented and accessible marketing dashboards dynamically look at dashboard and see costs trends segments etc Database marketing the creation of a large computerized file of customers and potential customers profiles and purchase patterns key tool for successful onetoone marketing Marketing research 3 roles the process of planning collecting and analyzing data relevant to a marketing decision I Descriptive factual statements 2 Diagnostic explaining data 3 Predictive what Benefits sensemaking strategic planning forecasting diagnose problems decisionmaking determine feasibility Process Define Problem Plan designprimary data Speci sampling Collect data Analyze data Present report Follow up Data Types Secondary compiled both inside and outside the organization for some purpose other than the current investigation info Already out there pay marketing organizations for their researc Primary observedrecorded or collected directly from participants PONQMrkENNt Research Methods 1 Survey get large data from customers on their opinions and preferences quantitative 2 Observation exploratory research usually noticing trends and asking questions watching what people do e g mystery shoppers 3 Ethnographic the study of human behavior in its natural context involves observation of behavior and physical setting 4 Experiments a method of gathering primary data in which the researcher alters one or more variables while observing the ejfects of those alterations on another variable 5 Scanner enables marketers to monitor a market panel 39s exposure and reaction to such variables as advertising coupons store displays packaging and price looks at what segments do and what the company needs to focus on behaviorscan and infoscan Reasons to use one research method over another Exploratory when you need more info About a problem or you don t have a clue about particular area vs conclusive research designed to verify insights via objective procedures and help marketers make decisions Quantitative measure with numbers answer questions limited vs Qualitative explore ask questions questionnaire esign Competitive Intelligence an intelligence system that helps managers assess their competition and vendors in order to become more ejficient and ejfective competitors using internet salespeople experts suppliers tradeshows garbage cans Chapter 10 Product Concepts Product everything both favorable and unfavorable that a person receives in an exchange 2 types consumer and business 1 Consumer a product bought to satis an individual 39s personal wants 2 Business a product used to manufacture other goods or services to facilitate an organ ization39s operations or to resell to other customers Types of products 1 Convenience a relatively inexpensive item that merits little shopping ejfort e g aspirin coke deodorant etc 2 Shopping a product that requires comparison shopping because it is usually more expensive than a convenience product and is found in fewer stores e g homogenousfridgeampKenmore whirlpool GE vs heterogeneous quotfinding the best product or brand for me college AnishaSyracuse Alodia Wash U etc 3 Specialty a particular item for which consumers search extensively and are very reluctant to accept substitute eg RollsRoyce Bose Speakers etc 4 Unsought a product unknown to the potential buyer or a known product that the buyer does not actively seek eg insurance burial plots etc Product item line mix width depth etc Product Item a specific version of a product that can be designated as a distinct ojfering among an organization 39s products Hershey s dark chocolate kiss Line a group of closely related product items Hershey Kiss Mix all products that an organization sells Reese s kiss KitKat etc Width ofM the number of product lines an organization o ers 3 etc Depth ofMix average number of product per line milk dark white swirl butterscotch etc Adjustments to products modi cation etc Product Modi cation changing one or more of a product39s characteristics 1 Quality 2 Functional 3 Style aesthetic 4 Repositioning Old Spice has made it more sexy and comedic Planned Obsolescence the practice of modifying products so those that have already been sold become obsolete before they actually need replacement apple s ipods phones etc Product Line Extension adding additional products to an existing product line in order to compete more broadly in the industry Baked chips baked Lays Branding brand equity brand name mark etc Brand a name term symbol design or combination thereof that identifies a seller39s products and di39jj erentiates them from competitors products Brand name that part of a brand that can be spoken including letters words and numbers GMC Chevrolet Brand Mark the elements of a brand that cannot be spoken Abercrombie s moose Brand Equity the value of company and brand names e g Starbucks has high brand equity with its customers Branding strategies Manufacturer individual family PampG owns Pringles 2 Private individual family Archer Farms at Target Generic Captive Kroger s private selection aims at upscale market but is also from company Cobranding PampG developed Clorox disinfecting wipes with F ebreze Warranty Types Warranty a confirmation of the quality or performance of a good or service I Express A written guarantee 2 Implied an unwritten guarantee that the good or service is fit for the purpose for which it was sold 9 Chapter 11 Developing and Managing Products New Product categories New Product a product new to the world the market the producer the seller or some combination of these Newto theworld entirely new market cane for blind people to feel vibrations New product lines products that a firm is now producing in an est market Additions to existing product lines new products that supplement a firm s est line new Wii U console for Wii Improvements or revisions of existing products new a improved formula of Pantene conditioner Repositioned existing products targeted at new markets e g T al bots not for older women Lowerpriced products similar to competing brands at a lower price QMAEbNF NPD Process stages and which one you re in etc I Newproduct strategy brainstorm 2 Idea Generation ideation N3 000 ideas 3 Idea Screening 4 Business Analysis rigorous analytical 100 exploratory processes 5 Development processes for more narrow phase 10 welldeveloped projects 6 T estM arketing 7 Commercialization customer involvement 2 fullfledged product launches 8 New Product I successful product Diffusion of Innovation 5 I Innovators first adopters 25 2 Early adopters careful choosers NI 3 5 3 Early majority deliberate and cautious 34 4 Late majority skeptics adopt only when necessary 34 5 Laggards distrust new products NI 6 Product Characteristicsrate of adoption I Complexity the degree of dijf 39culty involved in understanding and using a new product 2 Compatibility he degree to which the new product is consistent with existing values and product knowledge past experiences and current needs 3 Relative Advantage the degree to which a product is perceived as superior to existing substitutes 4 Observability the degree to which the benefits or other results of using the product can be observed by others and communicated to target customers e g jeans are more observable than deodorant 5 T rialability he degree to which a product can be tried on a limited basis e g toothpaste is easier to try than a new car Product life cycle 1 Introductory Stage launch of new product high marketing costs and low profitability 2 Growth Stage pro ts grow at an increasing rates and competitors enter the market profits reach a peak and then start to decline 3 Maturity stage sales increase at a decreasing rate like pay raises competition can lead to price wars as prices lower 4 Decline stage a longrun drop in sales eg people abandoning landlines for cellphones Reasons products fail No discernible benefits features don t equal desires overestimate market poor positioning pricing technicaldesign problems poor timing poor promotion insujficient distribution To succeed buyers must accept awareness interest evaluation trial adoption Concept Test Used at the screening stage in the NPD process to rate concept alternatives considered good predictors of product success Chapter 12 Services and Nonpro t Organization Marketing Services four characteristics Service the result of applying human or mechanical ejforts to people or objects I Inseparability producedconsumed simultaneously going out to eat haircut 2 Intangibility not perceived by the senses sugareducation 3 Heterogeneity high variation in quality especially in peoplebased services 4 Perishability unused services cannot be inventoried and sold at a future time e g unfulfilled seats on an airplane Evaluating service quality 1 Search quality a characteristic that can be easily assessed before purchase eg color of a car 2 Experience quality a characteristic that can be assessed only after use eg quality of a meal at a restaurant 3 Credence quality a characteristic that consumers may have di iculty assessing even after purchase because they do not have the necessary knowledge or experience eg medical advice Service Quality dimensions Reliability the ability to perform the service dependably accurately and consistently Responsiveness the ability to provide prompt service ultimate would be 247 Assurance the knowledge and courtesy of employees and their ability to convey trust Empathy caring individualized attention to customers T angibles the physical evidence of the service MAMNF Gap Model of Service quality I Gap 1 the gap between what customers want and what management thinks customers want typically when the company doesn t know what customers want so they cannot satis their need 2 Gap 2 the gap between what management thinks customers want and the quality specifications that management develops to provide the service management s fault usually for instance KF C was evaluated on how much chicken they threw away at the end of the night so they gave customers bad quality chicken at the end of the night 3 Gap 3 the gap between the service quality specifications and the service that is actually provided employees may not know what is expected of them and customers expect them to know 4 Gap 4 the gap between what the company provides and what the customer is told it provides usually due to unrealistic advertising 5 Gap 5 the gap between the service that customers receive and the service they want e g patient only waits ten minutes versus expected 20 likely to rate service higher Large gaps equal bad service ratings Core and supplementary services Core Services the most basic benefit the consumer is buying overnight rental of a bedroom at a hotel people processing Supplementary services a group of services that support or enhance the core service reservations check in check out room service mealsinformation processing Promotion Strategies 4 I Stressing tangible cues A tangible cue is a concrete symbol of the service o ering eg Doubletree o ering chocolate chip cookies 2 Using personal information sources usually use celebrities to promote products or WOM communication 3 Creating a strong organizational image physical environment of the service and its employees or branding McDonald s golden arches 4 Engaging in post purchase communication followup activities to show that the consumers opinions are valued Internal Marketing Good services flow from management to customers through employees treating employees as customers and developing systems and benefits that satis their needs Nonpro t Marketing the ejfort by nonprofit organizations to bring about mutually satisfying exchanges with target markets activities conducted to achieve some goal other than ordinary business goals such as profit market share or return on investment it is not considered a traditional business greater opportunity for creativity di icult to measure performance use 0 marketing can be controversial oals I Changing values 2 Financial contribution donate service heavily influenced by volunteers 3 Shaped by nature of exchangegoals 4 Target markets Social enterprise marketing Advances a social mission with business methods and marketbased strategies by directly confronting social needs through products a blending of forprofit and nonprofit e g Newman s Ownfirst private sector company to donate all profits and royalties after taxes for educational and charitable purposes By 2008 they had donated more than 220mil To thousands of charities worldwide Relationship Marketing attracting developing and retaining customer relationships 3 levels Level 1 FINANCIAL uses pricing incentives to encourage customers to continue doing business with it eg frequent yer Level 2SOCIAL FINANCIAL seeks to build social bonds with customers Level 3 ST RUCT UAL SOCIAL FINANCIAL adds structural bonds to the formula structural bonds are developed by o ering valueadded services that are not readily available from other firms Chapter 13 amp 14 Marketing Channels and Supply chain Management Supply chainmanagement Supply chain the connected chain of all of the business entities both internal and external to the company that perform or support the logistics function Supply chain management a management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process from the source to the point of consumption resulting in enhanced customer and economic value Completely customer driven Goodyear saved 1 bil In a year after implementing SCJW Marketing Channels consumerbe Marketing channel set of interdependent organizations that ease the transfer of ownership as products move from producer to B2B user consumer Discrepancies Quantity the dijference between the amount of product produced and the amount an end user wants to buy 2 Assortment the lack of all the items a customer needs to receive full satisfaction from a product or products 3 Temporal a situation that occurs when a product is produced but a customer is not ready to buy it e g Christmas decs in April 4 Spatial the difference between the location of a producer and the location of widely scattered markets Logistics the ejficient and coste ective forward and reverse flow and storage of goods services and related information into through and out of channel member companies includes transportation and storage of assets Channel structures Consumer channels 1 Direct Producer consumer no intermediaries Sherwin Williams Polo etc 2 Retailer Producer Retail er consumer 3 Wholesaler Producer 9wholesaler retailer consumer 4 A gent broker producer agen t broker 9wholesal er retailer consumer BusinessIndustrial irect producer industrial usersgovernment buyers 2 Industrial distributors producer industrial distributors industrial users 3 Agentbroker producer agentbroker industrial users 4 A gentbroker industrial distributor producer agentbroker industrial distributors indusirial users Other Strategic channel alliances a cooperative agreement between business firms to use the other39s already established distribution channel NFL and Verizon Nontraditional Redbox in McDonalds and grocers Justintime HT a process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line reduces waste time technology and storage Con ict Bcfirms use a variety of dijferent channels to reach out to customers it generates channel conflict eg Mom n Pop s tech shop can sell AT ampT through VACs Horizontal a channel conflict that occurs among channel members on the same level Vertical a channel conflict that occurs between dijferent levels in a marketing channel most typically between the manufacturer and wholesaler or between the manufacturer and retailer Channel power the capacity of a particular marketing channel member to control or influence the behavior of other channel members Channel Control a situation that occurs when one marketing channel member intentionally ajfects another member39s behavior Channel leader captain organizes and controls marketing channel Transpottation Modes Railroads waterways pipelines trucks air transport T radeojfs Cost transit time reliability capability accessibility traceability Global logistics and supply chain management Must understand laws of other countries and use smart modes of transportation unreliable and unpredictable Factors affecting channel choice Market factors Must consider target market how they get products where they get products and geographical location Product factors are products complex and customized or expensive to transport Producer factors how is the producer controlling prices and is it a wellknown producer or small MN Levels of Distribution 1 Intensive a form of distribution aimed at having a product available in every outletwhere target customers might want to buy it 2 Selective a form of distribution achieved by screening dealers to eliminate all but a few in any single area 3 Exclusive a form of distribution that establishes one or a few dealers within a given area Chapter 15 Retailing Classifying retail operations Ownership 1 Independent local orists etc 2 Chain store Starbucks 3 Franchise subway McDonalds Level of service Gucci vs Target Product Assortmenthow many different products they offer Price low medium high Nonstore retailing shopping without visiting a store Automatic Vending the use of machines to o er goods for sale Direct retailing the selling of products by representatives who work doorto door o iceto o ice or at home sales parties DirectMarketing techniques used to get consumers to make a purchase from their home o ice or other nonretail settin Telemarketing the use of the telephone to sell directly to consumers DirectMail Catalogs andMail Order Online retailing Shopat Home networks Atmosphere the overall impression conveyed by a store39s physical layout decor and surroundings Retail Strategy Start with segmentation targeting positioning then craft a marketing mix with the 6 P s product place promotion price presentation personnel Ni EN PONQP A Scrambled merchandising Adding nontraditional product lines particularly fastmoving items sold in volume adding gum candy to home depot New Developments in retailing Mobile ecommerce interactivity BuildaBear Retail Service Quality Physical aspects reliability personal interaction problem solving policy retail service quality Destination Store a store that consumers purposely plan to visit Disney Store Marketing Math Metric measuring system that quanti es a trend dynamic or characteristic Chapter 16 Integrated Marketing Communications Promotion communication by marketers that informs persuades and reminds potential buyers of a product in order to in uence an opinion or elicit a response Promotional Strategies a plan for the optimal use of the elements of promotion advertising public relations personal selling sales promotion and social media Competitive Advantage One or more unique aspects of an organization that cause target consumers to patronize that firm rather than their competitors Overall marketing objectives Promotional Mix The advertising public relations sales promotion personal selling and social media used to promote a product use a mix of these for I a maximum results Mllk l mix several ingredientsiwhich may include advertising public IProduot 39 relations sales promotion personal selling and social mediaito OPlaue distribution reach a target market Eagg39cmquot Advertising Impersonal oneway mass communication about a product or organization that is paid for by a marketer The Megaphone pro reaches large market or small segment relatively low cost per contact millions of people Public Relations the marketing function that evaluates public attitudes identi es areas within the organization the public may be interested in and executes a program of action to earn public 39 quot an 1 quot annual reports The podium evaluates public attitude to nd gaps changes negative opinions e g Apple with the Foxcon scam some controllable such as press conferences and some not such as opinionbased criticisms a pro is that it focuses on stakeholders other than customers affects shortterm salespro ts and longterm survival a con is that it can be unfavorable and very little control Publicity public information about a company product service or issue appearing in the mass media as a news item under public relations because it is how the public view the company Sales Promotion Activities that act as direct inducement or incentive to stimulate purchase eg free samples games rebates sweepstakes contests premiums coupons NOT TO BE CONFUSED WITH PROMOTION in general The Coupon generally a shortrun tool great for generating seasonal demand and buzz but can be expensive cause supply chain disruptions This would be if the retail store but a coupon out for Levi jeans and so more people are buying Levi s but the manufacturer doesn t know that so they do not make enough to compensate for the increase in demand Personal Selling Planned presentation to one or more buyers in an attempt to in uence them to buy The handshake warm body to look you in the facegives you immediate Other advertisements feedback specific communication 39 News articles Other store displays most persuas1ve very relatlonal now pro speci c communication aimed at oneseveral1nd1v1duals greater impact Enmdihg Message 7 Decodingmg JR on customers immediate feedback BUT 1 cha ng r 999quot con very high cost maintaining a sales force and their bene ts Marketing Advertisement Media I Receiver I Customers manager 0 Sales 39 Salesperson interpretation Viewers 39 Advertising resentaticin 39 Retail store of message listeners comunlcatlon Process and 7 39 Store display 0 Local news show News media subpafts O Advertising O Coupon I Clients agency 39 Press release Volkswa en Commerc1al It starts Other Social media With the Volkswagen usmg a consumers I Market research I Sales results 39 Change in market share 0 Social media mlquot m w l1 l r the sender source tries to communicate a in ne A m and the receiveraudience w and the rm w is responsible to give their about if the coded message equaled the decoded message During the communication channel Commercial there is which could be the audience s hunger level bathroom if the commercial was too funny and they missed the message etc Corporate and noncorporate blogs AIDA Concept Amodel that outlines the process for achieving promotional goals in terms of stages of consumer involvement with the message the acronym stands for Attention Interest Desire Action Attention Advertiser gains the attention of the target market 2 Interest The attention does not equal sales The company must evoke interest within their audience their audience must want the product they are selling 3 Desire The company must any5quot Mquot quot i create the desire 39 their customers to r a 1 want the product 1 3quot 1 and differentiate maybe from other products e g is Apple s ipad n 39quotTfquot differs from IN iphone and macs 4 Action Must promote the physical action of purchasing the product Push and Pull Strategies Push strategies are more traditional they entail the producer selling to the wholesaler selling to the retailers selling to the consumers Pull strategies are the reverse of this pattern for example Intel is a computer chip company but competitors were spiking with less quality chips but way less expensive bc of it therefore Intel made a marketing campaign to consumers They skipped the chain so pulled consumers to need Intel chips which then pulled the line Integrated Marketing Communications Careful coordination of all promotional messages to assure the consistency of messages at every customer contact point it involves the tied communication bw the promotional mix advertising PR sales promotion personal selling and social media the marketing mix product place promotion and price and the target market their messages must be integrated accordingly atampt failed at the integration within the superbowl commercials promoting to businesses but still the same collect call customers and it was a bust goals include consistency synchronized with marketing mix precisely targeted promos and facilitate competitive advantage Visualization and Visual Rhetoric 3 Roles of visualization in marketing 1 Recordsynthesize info e g consumer insights market info 2 Explore information analysis e g market research and strategy development 3 Explain information rhetoric e g internal external communication branding Big Data de nition Typically involves a period of time or process data are from a variety of sources structures forms locations Visual rhetoric Persuasive use of images communication using images to create meaning or construct an argument it must be symbolic involve human intervention and be presented to an audience for the purpose of communicating with that audience Info graphic de nition Visual representations of information data or knowledge intended to present complex information quickly and clearly why we suffer from info Overload and need more of this Chapter 17 Advertising and Public Relations Types of Advertising Paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media Institutional focuses on the company as a whole e g GM after the recession or BP after oil spill it looks at corporate identity advocacy a type where the organization lets known their views on controversial topics and responds to media attacks Product about a speci c product more than the company itself for instance the three stages include pioneering when a product is new competitive in uence demand for a speci c brand leads to more emotional appeals to show subtle differences bw brands and comparative headonhead like Taco hell s breakfast vs McDonalds directly compares two or more competitors Advertising campaign a series of related advertisements focusing on a common theme slogan and set of advertising appeals Advertising appeals umerous strategies to appeal to an audience here are some o it product saves makes or protects money Health appeals to bodyconscious or health seekers Love or romance used in selling cosmetics and perfumes Fear social embarrassment old age losing health Admiration reason for use of celeb spokesperson Convenience used for fast foods and microwave foods Fun and pleasure key to advertising vacations beer parks Vanity and egotism used for expensive or conspicuous items Environmental consciousness centers around environmental protection OWSF P39 RENNH Unique selling proposal A desirable exclusive and believable advertising appeal selected as the theme for a campaign usually appeals towards the supposed target audience more speci cally Media planning The series of decisions advertisers make regarding the selecting and use of media allowing the marketer to optimally and costeffectively communicate the message to the target audience could choose either continuous older product ighted bursts and pulsing constantly light with random bursts Cooperative advertising an arrangement in which the manufacturer and the retailer split the costs of advertising the manufacturer39s brand Media Mix the combination of media to be used this includes newspapers magazines radio TV outdoor intemet alternative considerations are 1 Cost per contact amount per person Reach how many people 3 Frequency how often 4 Audience the ability of the medium to reach a precisely de ned audience 5 Selectivity who is the audience and how to we reach them Reach and Frequency Reach the number of target consumers who are exposed to a commercial at least once during a speci c period usually four weeks Frequency the number of times an individual is exposed to a given message during a specific period measures intensity of media s coverage Audience selectivity A medium39s ability to reach a precisely de ned market e g a weekly newspaper vs the magazine Brides Media Schedule designates the medium or media to be used such as magazines television or radio the specific vehicles such as People magazine the show Mad Men on television or Rush Limbaugh39s national radio program and the insertion dates of the advertising Continuous runs steady throughout the year Charmin and ivory soap 2 Flighted heavy for about a month and then light to achieve more r39each during those times e g movie showings show commercials on Thursday nights before the weekend 3 Pulsing combines the two above and always has a little but spikes at certain high selling points within the year e g Sudafed cold tablets and coppertone 4 Seasonal Christmas items or like coppertone and sell high during certain seasons Product Placement a strategy that involves getting one39s product service or name to appear in a movie television show radio program magazine newspaper video game video or audio clip book or commercial for another product on the Intemet or at special events eg a product mentioned on Oprah starts selling immensely better or even in movies and television shows to promote the product Sponsorship A PR strategy in which a company spends money to support an issue cause or event that is consistent with corporate objectives such as improving brand awareness or enhancing corporate image CauseRelated Marketing The cooperative marketing efforts between a forpro t firm and a nonprofit rm Crisis Management is the coordinated effort to handle the effects of unfavorable publicity ensuring fast and accurate communication in times of emergency Chapter 18 Sales Promotions and Personal Selling Consumer Sales Promotion Sales promotion activities targeting the ultimate consumer activity intended to induce immediate purchasein uence BEHAVIOR not attitude Coupon A written price reduction used to encourage consumers to buy a speci c product Frequent Buyer program Rewards loyal customers from making multiple purchases eg frequent yer mypanera king soopers card punch cards etc Loyalty Marketing Program to build longterm mutually bene cial relationships between a company and its key customers Negotiation the process during which both the salesperson and the prospect offer special concessions in an attempt to arrive at a sales agreement try not to use price as a negotiating factor b c if they give in to quickly it seems to lessen the value on the product pointofpurchase display a promotional display set up at the retailer s location to build traffic advertise the product or induce impulse buying Referral a recommendation from a customer or business associate about 10X more productive than cold calls Relationship Selling Salespeople emphasize an upfront investment in the time and effort needed to uncover each customer s speci c needs and wants and meet them with the product or service offering much more popular these days to really get to know the clients Sales Process 7 steps in personal selling 1 Generating leads the identification of the target market or most likely buyers through advertising trade shows social media networking cold calling etc 2 Qualifying leads when a prospect shows interest the salesperson has the option to followup on them lead qualification includes 3 things a Recognized need b Buying power authority and access to funds to make the purchase c Receptivity and accessibility be willing to see the salesperson and be accessible to the salesperson 3 Approaching the customer and probing needs must begin with learning as much about the customer as possible U pr ow 1 39 with 39 39I selling the salesperson must start by building mutual trust with the customer sell themselves before they sell the product conducts the needs assessment of the customers must know the product must know the competition etc Developing and proposing solutions develops the sales proposal and the sales presentation Handling Objections prospect never says I ll buy it right away but they normally raise questions for the seller they should not be taken personal or as an attack can use to make the sale should be prepared to point out weaknesses in the competitors products 6 Closing the Sale At the end of a presentation the salesperson asks the customer how they would like to proceed requires courage and skill negotiation plays a big part more are expanding to global markets FollowingUp must ensure delivery schedules are met goods or services are performed as promised and buyer s employees are properly trained to use the products motivate customers to come back depend on repeat sales MA gt1 Ambiverts and Sales The best kind of salespeople Sampling Used to introduce your products superior qualities compared to their brand customer tries a product or service for free works really well in grocery stores such as Sam s Club and Costco Trade Sales Promotions When companies throw in extra merchandise for free with purchase to try and get more customers it is a trade for getting the product and with something for free Chapter 19 Pricing Concepts Price that which is given up in an exchange to acquire a good or service Price plays two roles in the evaluation of product alternatives as a measure of sacri ce and as an information cue Revenue the price charged to customers multiplied by the number of units sold it is what pays for every activity of the company production nance sales distribution and so on Pro t Revenue 7 expenses what is left over from the revenue after paying for all the other things listed expenses Total l39JDCCCl costs Breakeven Analysis Break even quantity 1 3 Amethod of determining what sales volume FlYP quot ner MW quot30 avenue must be reached before total revenue 100 equals total cost ignores demand and it is hard to tell if some costs are variable or xed Pro t Total costs BEP Rtu I tm t e mon nves en Sales g measures management s overall Varlabl costs I Net pro ts after taxes F d t Rcmrnon investment 1x cos 5 Total assets 0 Output volume 100 effectiveness in generating pro ts with the available assets the higher the better off the firm is many companies use a target ROI as their main pricing goal Market Share a company39s product sales as a percentage of total sales for that industry can be expressed in revenue or units produced traditionally it was said the higher the market share the higher the ROI and the better the company does but small companies with a low market share can still be profitable and last for years Basic Perspectives on Pricing 3 orientations 1 Status Quo Pricing charging a price identical or similar to the competition s price 2 Pro t maximization setting prices so that the total revenue is as large as possible relative to total costs doesn t mean that the price is outrageous but depends on competition quality of product many rms don t have the data to really maximize products they can reduce costs or increase customer satisfaction 3 Market sharesales maximization ignores pro t competition and the marketing environment as long as sales are rising may try to generate a maximum amount of cash in the shortrun also used as a temporary basis to sell off excess inventory Markup prices The cost of buying products from the producer plus amounts for profits and for expenses not otherwise accounted for doesn t directly analyze cost of production Retail price COST 1 DesirECE rennin curt sax lies 1 30 Primary Determinants for Price 1DD i CL 1 3 Demand 3 3 7 0 At a certain price people demand a 39 product more or less depending on how much they value or need the product usually demand goes down when price goes up and vice versa Cost the cost to make the product must be lower than the selling costs if the company wants to make a profit on the product Pro tprice X volume 7 cost Most businesses try to capitalize on increasing volume and lowering costs but more and more are seeing the secret success of messing with the prices Supply and Demand Usually when one goes up the other goes down and they from a positive slope supply and a negative slope demand Elasticity of demand A product can be either elastic or inelastic this means when the price changes does the demand change Cars are very elastic and electricity and water are inelastic bc ppl will pay whatever price to have electricity and water Variable costsFixed costs Fixed costs are the costs that the business pays no matter how many products they produce e g rental costs Variable costs the costs per product produced if a company starts making less money than the xed costs they should le for bankruptcy Marginal Costs Marginal Revenue MC the cost of producing one more good MR the additional revenue by producing one more unit Chapter 20 Setting the Right Price Price Strategy The strategy 3 a business uses to determine prices of their products to sell 1 Price Skimming a rm charges a high introductory price often coupled with heavy promotion this is to recoup after high costs and few competitors they charge as high as can without freaking the market out 2 Penetration pricing a rm charges a relatively low price for a product initially as a way to reach the mass market charge low price to get many customers hooke 3 Status quo pricing charging a price identical to or very close to the competition s price Price Fixing When two companies work together group pricing personalized pricing B2B models loyalty programs product versioning a lot of this cahoots work is illegal and similar companies selling similar products cannot collaborate to charge the consumers more than necessary against Sherman antitrust laws Base price The general price the company assumes to sell their products at can be lowered through discounts rebates and value based pricing Discounts Quantity when buyers get a lower price bc they are buying multiple units of the same product Cash a discount offered in return for their prompt payment of their bill Functional when wholesalers and retailers perform a service or function for a manufacturer and get compensated Seasonal price goes down when product is out of season and will not sell any other way Promotional Allowance Payment to a dealer for promoting a manufacturer s product both pricing and promotional tool eg king soopers runs a promotional discount on general mills cereals general mills would have to pay for some of the discount percentage Rebate A cash refund given for the purchase of a product within a given time period Flexible pricing Different customers pay different prices for essentially the same merchandise bought in equal quantities lack of consistent pro t margins car dealers often follow this practice Price lining Offering a product line with several items at speci c price points e g apple store has now used price lining to price songs from 129 top hits to 69 for unpopular music Leader pricing In an attempt to attract customers they offer a product at or below cost to attract customers to the store and try to sell them other items as well e g Gap s back to school special with a coupon that offered 50 for 25 but most customers ended up spending more than 50 Oddeven pricing Consumers are more attracted to odd prices to promote a bargain and even numbered prices to promote quality eg nice watch at 500 but many things at 999 Price bundling Marketing two or more products in a single package for a special price e g Microsoft suites that offer many of their products Consumer penalty Extra fees charged to customers for violating terms in the purchase agreement Product line pricing Setting prices for an entire line of products try to achieve maximum profits for the entire line and not just one product 3 C s ofpricing 1 Customer centric price perceived value willingness to pay segmentation based 2 Competition competitive positioning look at how competitors price game theory and modeling scenario modeling Costs must understand the oor in the value equation while costs are important to understand the pro t implications avoid cost plus pricing not just increase by 10 bc costs did LN
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