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Mktg in the Global Econ

by: Ida Lockman

Mktg in the Global Econ MSOM 303

Ida Lockman
GPA 3.67

Kevin McCrohan

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Kevin McCrohan
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This 16 page Class Notes was uploaded by Ida Lockman on Monday September 28, 2015. The Class Notes belongs to MSOM 303 at George Mason University taught by Kevin McCrohan in Fall. Since its upload, it has received 27 views. For similar materials see /class/215096/msom-303-george-mason-university in Minor In Business at George Mason University.

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Date Created: 09/28/15
MSOM 303 Final Exam Review What is marketing Marketing is an organizational function amp a set of processes for creating capturing communicating amp delivering value to customers amp for managing customer relationships in ways that bene t the organization amp its stakeholders the biggest stakeholder is the customer Marketing Helps create value 39 Management amp marketing are unique to the US bc it created these 2 specific disciplines we try to sell the product rather than produce the product McCorrnack reaper example that had a vertical market system distribution can t cost too much middlemen take risks amp therefore they should get more money from 1900 to 1930 name brands began to develop amp advertising for products became a huge hit Is about satisfying customer needs amp wants Entails an exchange Requires product price place amp promotion decisions MARKETING MIX Can be performed by both individuals amp organizations Occurs in many settings Marketing Concept and Requirements Business philosophy that maintains that the key to achieving organizational goals is to determine the needs of the target market amp deliver the goods more efficiently than the competitor The marketing concept introduces the marketer at the beginning rather than at the end of the production cycle amp integrates marketing into each phase of the business Requires 39 Customer orientation the customer is at the center amp we produce what we want generally customers don t know what they want 39 Integrated company effort gt Goaldirected behavior satisfying customers to make a pro t The strategic marketing planning process steps in developing the strategic marketing plan Planning Phase gt Defining the mission and or Vision gt Situation Analysis Internal environment knowing ourselves and what our problems are Strengths include diverse business amp wellknown brand Weaknesses include overreliance on relationships seasonal uctuations amp risky foreign operations External environment Opportunities include building the current brand amp businesses both in the US amp abroad Threats include increasing competitive pressures Implementation Phase gt Identifying amp evaluating opportunities segmentation targeting amp positioning Segmentation lays out the cast of characters you are trying to sell your product to we note these specific segments Targeting is when we select a segment or segments when you select 4 or 5 segments that you really want to sell your product to Positioning is when we position our products to these 4 or 5 specific markets against competition gt Implementing the marketing mix amp resources gt We target our market amp position accordingly gt Product amp service strategy gt Place strategy distribution gt Price Strategy gt Promotion strategy communication Control Phase gt Evaluate performance The 3 phases of the marketing plan are planning implementing amp controlling A business portfolio is the collection of business and products that make up the company A portfolio analysis is a tool by which management identi es amp evaluates the various business of the company examples include the Boston Consulting Group amp the PIMS data set The product portfolio is a concept that stresses that the cash ows for the complete miX of products should be considered rather than concentration on isolated problems of the individual members of that mix The concept focuses on the interrelationships between differing types of products within the product mrx The concept identi es the need for products in various stages of the product life cycle and each business unit has its own objectives you have to have products in every stage of the product life cycle to make sure that you have products to stay in the market Stages of the Product Life Cycle Product Development Introduction Light competition growth highest per unit pro t Heavy competition growth Maturity highest pro t volume times declining pro t margins Decline Keep in mind that when you are the rst rm to create a new product you create the level of demand for that product You want to promote the brand not the product Stages of Product Diffusion Innovators coincides with introduction stage of PLC Early Adopters coincides with light competition stage of PLC Personality selfcon dence less dogmatic empathy rationality amp innerdirected Socioeconomic younger are highereducated have higher social or professional status have higher income amp have dual income Motivations achievements amp higher aspirations Positive Attitudes to change to risk to education amp to science Communication Network social participation are cosmopolitan read productspeci c magazines as well as mass media Early Majority coincides with heavy competition stage of PLC Late Majority coincides with maturity stage of PLC luggurrlx coincides with decline stage of PLC Note that the innovators amp the early adopters are the trendsetters their product reviewswordofmouth help the early amp late majority get to know the product amp purchase it they are also easy to contact Boston Consulting Group Portfolio Matrix and The Life Cycle r Lih 39 Strong competitive positions in rapidly growing industries gt Represent the future success of the firm 39 General recommendation is to 1 wk cl fund to obtain the lligllc l market wlmre while the imlusli is grim ing A competition tends h ighl 39 Are market leaders in high growth marks with high Relative Market Share Cash Cows 39 Products are in a low growth market but the firm overall has a high Relative lVIarket Share 39 Their function is to generate cash to invest in stars or question marks gt They shouldn t be subject to signi cant investment but maintain a health position for a longterm cash ow 39 Their strategic goal is to protect amp defend the market position generating cash 39 Cost controlreduction is critical for success 39 Cash cows are identi ed by mature markets in the product life cycle oligopolistic market conditions and low if any increases in annual sales Question marks 39 Are in growing industries but the rm s low Relative Market Share of the business makes expansion risky gt Risk of expansion is a function of the general strategic recommendation they either aggressively invest to grow or they leave the market 39 Maintaining the status quo is not recommended Dogs 39 Products are in low growth markets 39 The have low relative market share 39 They have a weak competitive position amp lowpro t potential gt Their strategic goal is to harvest divest or liquidate NOTE gt Information needs focus on slope of deadline Competitive intentions 39 For highly advertised products simply cutting the advertising budget can be effective for cash generation Relative market share is your market share in relation to your competitors Your market share divide by your largest competitor s market share is the equation that you use one of the most critical insights of the matrix idea that market share relative to industry competitive dynamics Industry growth rate Calculated comparison of industry growth rate amp economy as a whole High growth businesses are in industries growing faster than the economy Low growth businesses are in industries growing slower than the economy Example Ifa firm had a product in an industry w 10 growth rate per year amp economy is growing at 5 it is considered a high growth market Example Ifa firm has a product in an industry w 2 growth rate per year and the economy is growing at 5 it would be a low growth market because it is less than 5 where the economy is at An oligopoly is when the top 4 firms in the industry own 33 or more of the market share A monopoly is when 1 rm owns the entire market share Marketing Strategy Identify a market or a market segment Start broad amp then go narrow most rms sell to all of the following segments bc it prevents their business from going bad gt Consumer gt Commercial gt Reseller gt Government gt Nonpro t Design a marketing mix product place distribution price promotion communication Product Alternatives Physical product Service Packaging Style Quality Training Warranty Extent of product line Bran Volume Image 0 Distribution Alternatives Extent of market coverage gt Intensive distribution aims to provide saturation coverage of the market by using all available outlets is usually required where consumers have a range of acceptable brands to choose from for example if one brand isn t available a customer will simply choose another 39 Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products an advantage of this approach is that the producer can choose the most appropriate or best perforrning stores amp focus effort this distribution works best when consumers are prepared to shop around or when they have a preference for a particular brand or price amp will search out the store that supply 39 Exclusive distribution this is an extreme form of selective distribution in which only one wholesaler retailer or distributor is used in a speci c geographical area Direction of communication effort Channel lengt Physical distribution the physical movement of the product form the manufacturer to the consumer Pricing Alternatives Costbased pricing a pricing method in which a xed sum or a percentage of the total cost is added to the cost of the product to arrive at its selling price TOInpetitmbased pricing a pricing method in a which a seller uses prices of competing products as a benchmark instead of considering own costs or the customer deman Valuebased pricing on customer s perceived value when you price your product based on the value it creates for the customer is usually the most pro table form of pricmg Prestige pricing a marketing strategy where prices are set higher than the normal bc lower prices will hurt instead of help sales such as expensive perfumes clothing cars etc Price lining the process used by retailers of separating goods into cost categories in order to create various quality levels in the minds of consumers effective price lining will usually involve putting suf cient price gaps between categories to inform prospective buyers of quality differentials Psycholooicul pricing setting prices according the psychographics of the aimedat market segment I wglmm pricing placing the price of the product less than 3 to 5 times the production cost of the product a strategy adopted for quickly achieving a high volume of sales amp deep market penetration of a new product under this approach a product is widely promoted amp its introductory price is kept relatively low Price skimming placing the price of the product at least 3 to 5 times the production cost of the product an approach under which a producer sets a high price a new highend product its objective is to obtain maximum revenue from the market before substitute products copycat products appear Adveltising is any paid form of nonpersonal presentation amp promotion of ideas goods or services by an identi ed sponsor in mass media Personal selling is an oral presentation w one or more prospective purchasers for purposes of making a sale 0 Industrial espionage Involves illegal activities conducted for commercial purposes instead of national security purposes both by governments amp by private organizations Items stolen include Detailed customer lists Product speci cations Research amp development data Computer source codes Corporate strategy documents Pricing lists Technology amp computer systems data Penalties for illegally acquiring information range form injunction to damages to felony convictions Competitive Intelligence or Industrial Espionage In most cases all of the items listed in the items stolen list can be acquired via open source customer lists product speci cations research amp development data strategy documents pricing lists amp clients Different amp evolving legislation of computer codes amp computer systems data In many situations acquisition amp use of such data depends on situational ethics business demands amp paranoia Macroenvironmental Factors Consumers gt Politicallegal situations 39 Culture 39 Demographics 39 Socialtrends 39 Technology 39 Economic situations 0 The Consumer Decision Process 1 Need Recognition everything starts with recognizing a need for something Functional needs needs that pertain to the performance of a product or service Psychological needs needs that pertain to the personal grati cation consumers associate with a product andor service 2 Information Search Internal search for information experiential External search for information outside personal knowledge 3 Evaluation of Alternative Products 4 Purchase 5 PostPurchase 0 Different Types of Products or Services Specialty goods amp services where distribution is exclusive Convenience goods amp services Shopping goods amp services 0 Product Classi cations Consumers Convenience products 39 Requires habitual problemsolving 39 Requires low consumer search 39 Buy frequently amp immediately gt Products are lowpriced 39 Mass advertising 39 Many purchase locations for the product 39 Examples include candy and newspapers Shopping products 39 Requires limited problemsolving 39 Requires medium consumer search gt Bought less frequently 39 Products are highpriced 39 Fewer purchase locations 39 Comparison shop 39 Examples include clothing amp appliances Specialty products 39 Requires extended problemsolving 39 Requires high consumer search 39 Products are highpriced gt Products have unique characteristics 39 Brands are identi edrecognized brand identi cation 39 Few purchase locations 39 Examples include Porsches amp Rolexes Unsought Products 39 Products are new innovations 39 These are products that consumers don t want to think about 39 These are products that require much advertising amp personal selling 39 Examples include life insurance amp blood donation 0 Types of Buying Decisions L vnnmx Wu 539 5175 my occurs during a purchase decision that calls for at most a moderate amount of effort amp time Habitual decision making a purchase decision process in which consumers engage with little conscious effort Extended problem solving occurs when a buyer devotes considerable time amp effort to analyzing alternatives common when the customer perceives that the purchase decision entails a lot of risk lmpulm hm ing a buying decision made by customers on the sport when they see the merchandise Note that the rm needs to make sure that the product amp the customer are in sync they need to make sure that the level of value that people have for the product match up with the product 0 Business to Business B2B Markets Manufacturers Institutions Resellers Government 0 Organizational Marketing 0 Industrial marketing a good or service sold for other than personal consumption 0 Purposes 39 To supply manufacturers with raw materials equipment component parts supplies amp service 39 To supply nonmanufacturing entities with industrial products 39 To supply equipment for wholesalers amp retailers gt To supply goods amp services for nonprofit organizations 39 To supply goods amp services for government bodies 0 Characteristics of Organizational Markets Decisions are group decisions 39 Tend to involve 3 to 8 decision makers 39 Past amp present relationships with suppliers are important 39 Purchasing agents play a role but varies in importance by type of decision Reciprocity is present Internal segmentation by decisions type amp stage Nature of demand just bc a product has a low price doesn t mean that demand will necessarily increase for that product it depends on the customer amp what they want 0 The Nature of Industrial Demand 0 Derived Demand is present when demand is based on the demand for another product or service the demand of the consumer creates the demand for a consumer s product 0 Price inelasticity is present because buyers can pass along price increases the price of any one product is an insignificant part of the total price of the nal product increasing the price will not necessarily increase the demand for the product 0 Fluctuating is present when purchases are closely linked to the economy industrial purchasers can stock up industrial products have longer lives 0 B2B Buying Process Need recognition Product Speci cation RFP Process request for proposal RFP describes what businesses need for their products Proposal analysis amp supplier selection Order speci cation Vendorperformance assessment using metrics 0 Why International Trade Has Grown Proof of the value of comparative advantage a person has a comparative advantage at producing something if he or she can produce it at a lower cost than anyone else International Monetary Fund 1944 provides credit to nations that need credit for a certain period of time General Agreement on Trade and Tariffs 1947 a set of multilateral trade agreements aimed at the abolition of quotas and the reduction of tariff duties amount the contracting nations it tried to take away tariffs get rid of them 39 A tariff is a tax placed on an imported good it raises the price of the good 39 A quota is a restriction on the quantity of goods of a specific kind that a country permits to be imported during a speci ed time become the imposition of added duties Trading blocks a trading bloc is a set of countries which engage in intemational trade together amp are usually related through a free trade agreement or other association Technology Stability 0 Choosing a Global Entry Strategy Exporting most rms try this first bc it s less risky amp requires less control 39 Producing goods in one country amp selling them in another Franchising 39 A contractual agreement between a firm the franchisor amp another form or individual the franchisee Strategic Alliance r quot 39 t 39 quot 39 391 between 39 39 l 39 rms though the partnering rms don t create an equity partnership that is they don t invest in one another Joint Venture 39 Formed when a rm entering a new market pools its resources with those of a local rm to form a new company in which ownership control amp pro ts are shared Direct Investment 39 An exit strategy that requires a firm to maintain 100 ownership of its plants operation facilities amp of ces in a foreign country often through the formation of whollyowned subsidiaries NOTE as you go from exporting to direct investment the amount of risk and the amount of control increases 0 The International Trade System Tariff value or unit Quota xed amount Embargo restrict all or some trade v1 mi mn li allow foreign exchange for limited purposes Counter trade a trade between two countries by which good are exchanged for other goods rather than currency money onInrlfftmdu hzu39rlch Administrative amp entry procedures Standards National origin 0 Segmentation Targeting and Positioning Process Segmentation 39 Strategy or objectives gt Describe segments Targeting 39 Evaluate segment attractiveness 39 Select a target market Positioning 39 Identify and develop a positioning strategy 0 Market Segmentation 4 market segmentation strategies 0 Dividing markets into smaller segments that can be reached more efficiently amp effectively with products amp services that match their unique needs breaking down markets into different chunks l Massundifferentiated marketing same product to all consumers no segmentation example if our 2 Iiffe1 enlizled marketmg different products to one or more segments requires some segmentation examples include Marriott or the Gap 3 Concentrated segmentation strategy single target market examples are specialty tools amp IT support 4 Microsegmentation strategy productservice for individual customers examples are wealth management amp custom clothing 0 Describe potential segments 0 A segment is a bunch of descriptives on who the person is 0 Geographic demographic psychographic bene t geodemographic and loyal segments provide broad categories for possible use 0 Firms do not use old or young the Northeast or the Southwest innovators or laggards Concentrateddifferentiated segmentation rms use 0 Northeast geographic 25 to 45 years old college graduate or higher professional income greater than 100000 single female demographic Innovator psycho graphic 0 Prestige benefit 0 75 more likely to have passport amp 60 more likely to drink imported wine geodemo graphic 0 Greater than 2 prior purchases loyalty 0 Evaluate Segment Attractiveness Segments must be gt Substantial Segments are large or profitable enough to serve 39 Reachable 0 Effective programs can be designed for attracting amp serving the segments 39 Responsive 0 Segment reacts positively for rm s offerings 39 Pro table 0 Size purchasing amp pro les of segments can be measured amp pro t estimated 39 Identi able Segments are conceptually distinguishable amp respond differently to different marketing mix elements amp programs 0 Efficient Market Segmentation Segments are Are homogenous within we want all people to look similar Are heterogeneous among Are parsimoniously de ned the smallest number of variables possible Are reachable by unique media Are of a reasonable size Segment profiles are real 0 Marketing Research 0 Consists of a set of techniques amp principles for systematically collecting recording analyzing amp interpreting data that can aid decision makers involved in marketing goods services or ideas 39 Collecting 39 Recording 39 Analyzing 39 Interpreting 39 Decisionmaking The Marketing Research Process Step 1 De ning objectives 39 This is the most important step 39 What are the objective amp what are we trying to figure out 39 What information is needed to answer research questions amp how should that information be obtained Step 2 Designing the research project 39 Marketing data consists of primary data and secondary data 0 Primary data is very expensive harder to do obtain collect however it is specific to the immediate data needs amp topic at hand amp if offers behavioral insights that aren t generally available from secondary research 0 Secondary data is less expensive amp easier to obtain however it may not be relevant to information needs information may not be as timely as needed amp sources may not be original quick cheap amp easier to nd Step 3 Data collection research 0 Exploratory research servation 39 Indepth interviews 39 Projective techniques 39 Focus groups 0 Conclusive research more expensive amp takes more time 39 Experiments 39 Survey 39 Scanner 39 Panel Step 4 Analyzing data Step 5 Presenting results 0 Research Approaches Observational Research gt Gathering data by observing people actions and situations exploratory Survey Researc 39 Asking individuals about attitudes preferences or buying behaviors descriptive Experimental Researc 39 Using groups of people to determine causeandeffect relationships causal NOTE There is no intermediary between the consumer amp the reporter however it won t tell you why someone did something such as why a customer walked into a store amp the immediately walked out without buying anything gt this will tell the reporter to conduct more research 0 What is a Product 0 A product is anything that can be offered to a market for attention acquisition use or consumption amp that might satisfy a want or nee 0 It includes Physical objects Services Events Persons Places Organizations Ideas Any combination of the above 0 Brands are assets Brand equity gt Brand loyalty Brand ownership 39 Manufacturer brands or national brands 39 Privatelabel or store brands 39 Generic We like to give people more options with brands such as brandname vs generic this may also reduce production costs of the product For sellers 39 Consumers are often less sensitive to price 39 Marketing costs are much lower 39 Firm is insulated from the competition 39 Higher pro ts to sellers For buyers 39 Easy identification 39 Assurance of quality New Product Failures Studies estimate that as much a 80 to 95 of new consumer packaged products fail Only about 40 of new consumer products are on the shelves for 5 years after introduction 39 This is because of 0 Overestimation of market size 0 Product design problems 0 Product incorrectly positioned priced or advertised 0 Product may have been pushed despite poor marketing research ndings 0 Costs of product development 0 Competitive actions 0 Diffusion of Innovation we try map out what the product life cycle will look like before we introduce the product to customers we try to map out how fast consumers will accept the new product Innovators 25 Early adopters 135 Early majority 34 Late majority 34 Laggards 16 0 Factors Affecting Product Diffusion Compatibility 0 Observability Trialability 0 Relative advantage 0 New Product Development Process 6 Idea generation development of new ideas Sources of ideas come from 39 Internal research amp development Research amp development consortia 39 Licensing 39 Brainstorming 39 Competitors products 39 Customer input 7 Concept testing testing the new product idea among a set of potential customers 8 Product Development development of prototypes andor the product 9 Market testing test the actual product in a few test markets we usually want to test market products that have high repeat purchase rates Premarket tests Customers are exposed gt Customers are surveyed 39 Firm makes a decision Test marketing 39 Mini product launch amp marketing programs are tested in more realistic market settings 39 More expensive than premarket tests AND competitive secrecy is lost 39 Initial purchase rate amp repurchase rate are estimated demand is estimated NOTE The mini product launch is in a realistic setting the downside to having a test market is that you expose your plan amp product to your competitors competitors then try to recreate the product except have a lower price on in this will mess up the result of the test market for the product 10 Product launch Fullscale commercialization of the product 11 Evaluation of Results Analysis of the performance of the new product amp making appropriate modifications 0 The Product Life Cycle Introduction Stage Low sales High cost per customer Pro ts are negative or low The marketing objectives create product awareness amp trial They offer a basic product identify product weaknesses amp have high quality control The price is usually high therefore there are low sales amp the pro ts are low There are high expenses for distribution Spending is high on advertising to inform consumers of the new product 0 Growth Stage Light Competition Have rapidly rising sales Have an average cost per customer Have the highest per unit pro ts The marketing objective is to maximize market share We want to expand the product life by offering new product features amp models The price needs to remain where it is or fall slightly We need to increase the number of distribution outlets We need to advertise to create selective demand to meet the competition 0 Growth Stage Heavy Competition Have rising sales but they are slowing down Have an average cost per customer Declining per unit pro ts The marketing objective is to maximize your market share in order to remove or stop the competition We want to prune product features and mo e s We want to discount discontinued items We want to prune the number of distribution outlets For advertising we want to begin to focus on retail channels in order to meet competition amp be able to explain our price cuts 0 Maturity Stage Have declining sales sales are beginning to slow Low cost per customer but increasing We have the greatest proportion of pro ts but declining per unit pro ts Our marketing objective is to maximize pro ts while defending our market share We may want to modify the product to increase the consumer use we also may want to change the marketing mix product price distribution communication The price may decline but we want to resist this amp use nonprice competition We want to build more intensive distribution amp focus on nonprice competition We want to have heavy persuasive advertising so that we can stress brand differences amp the bene ts of having one brand over another 0 Decline Stage Increasing amp declining sales Have a low cost per customer if channels are pruned Have declining pro ts Our marketing objective is to reduce expenditures amp maintain harvest or drop he product We want to phase out our weak products We want to cut our prices Our distribution is selective we want to phase out unpro table outlets We want to reduce our advertising level to a level needed to retain hardcore loyal customers 0 The Service Product Continuum Goes from service dominant to product dominant 39 Service dominant 0 Doctors offices 0 Hotels 39 Both service amp product dominant where most offerings are 0 Dry cleaners 0 Restaurants 39 Product dominant 0 Apparel specialty stores 0 Grocery stores 0 Services Differs from Product Marketing Factors differentiating services from goods include 39 Inseparable 39 Variable gt Perishable 39 Intangible The 5 C s of Pricing these 5 things create value Customers 39 Supply amp demand notes how much will be producedpurchased at different price supply amp demand curves 39 Equilibrium is where the intersection of the curves meet between supply and demand gt Customeroriented pricing is based on market research to match prices with customer expectations 39 Variable costs vary with production value costs that do vary directly with the level of production an example is the amount of raw materials nee e gt Fixed costs overhead unaffected by production volume costs that don t vary with sales or production levels examples are executive salaries amp house rent 39 Total cost sum of xed costs and variable costs Channel members 39 Manufacturers wholesalers amp retailers can have different perspectives on pricing strategies 39 Manufacturers must protect against gray market transactions Competition 39 Pricing in different types of markets 0 Pure competition many buyers amp sellers little effect on price perfect information ease of exit and entr Monopolistic competition many buyers amp sellers trade over a range of prices seek nonprice competition 0 Oligopolistic competition few sellers top 4 firms own at least 33 of the market sensitive to competitors different pricing amp marketing strategies Plll c mnunpv rl single seller that owns 100 of the market 0 Pro t Orientation ll Icluru employ pricing strategies to produce a speci c return on investment such as 8 g I prof pricing implemented by firms when they have a particular pro t goal as their overriding concern uses price to stimulate a certain level of sales at a certain pro t per unit based on relationships among demand xed cost amp variable cost Pro t maximizing identifies the price at which pro ts are maximized by using a speci c mathematical model that captures all of the factors required to explain amp predict sales amp pro ts 0 Sales Orientation Focus on increasing sales Does not always imply setting low prices More concerned with overall market share 0 Competitor Orientation Competitive parity set prices similar to competition Status guo pricing change price only to meet competition Value is not part of this pricing strategy 0 Customer Orientation Firms focus on customer expectations by matching prices to customer expectations 0 NewProduct Pricing Strategies lVIarket Skimming setting a high price for a new product to skim maximum revenues from the target market this results in fewer but more pro table sales 39 Under these conditions 0 The product s quality and image must support its higher price 0 Costs can t be so high that they cancel the advantage of charging more 0 Competitors shouldn t be able to enter the market easily amp undercut the high price 3 to 5 times the production cost price skimming lVIarket Penetration setting a low price for a new product in oder to penetrate the market quickly amp deeply attract a large number of buyers amp win a larger market share 39 Under these conditions 0 Market must be highly pricesensitive so that a low price produces more market growth 0 Productiondistribution costs must fall as sales volume increases 0 Must keep out competition amp maintain its low price position or benefits may only be temporary 0 Enter an established market Less than 3 times the production cost penetration pricing 0 Demand Curves and Pricing Demand curves at given price levels what suppliers will supply amp what consumers will demand Knowing the demand curve enables to see the relationship between price amp demand 0 Price Elasticity of Demand 0 Elastic price sensitive usually if many substitutes exist in a market 0 Inelastic price insensitive usually if few substitutes bc the buyer only has so many to choose from then Consumers are less sensitive to price increases for necessities 0 Cost and Pricing Strategy 0 Variable cost times the number of units xed costs total cost 0 Total cost divided by the number of units production price per unit 0 If you are selling the product at more than 3 to 5 times the production price then you are participating in price skimmin 0 If you are selling the product at less than 3 times the production price then you are participating in penetration prrcmg 0 Legal Aspects and Ethics of Pricing Deceptive or illegal price advertising 39 Deceptive reference prices the pricing of goods amp services in such a way as to cause a customer to be mislead 39 Loss leader pricing a product sold at a low price at cost or below cost to stimulate other pro table sales 39 Bait and switch an illegal tactic in which a seller advertises a product with the intention of persuading customers to purchase a more expensive product Predatory pricing an anticompetitive measure employed by a dominant company to protect market share from new or existing competitors involves temporarily pricing a product low enough to end a competitive threat Price discrimination 39 Quantity discounts having discounts for buying a large amount of product 0 What is a distribution channel A 1 4 L 315126 is a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user 0 Key issues in a distribution channel are 39 They are interdependent but dependent 39 They move the product from producer to consumer They market the product for the producer 0 Why are marketing intermediaries used The use of intermediaries results from their greater ef ciency in making goods available to target markets They reduce the number of transactions necessary to clear the market They offer the rm more than it can achieve on its own through the intermediaries such as 39 Contacts 39 Experience 39 Specialization 39 Scale of operation Purpose to match supply from the producers to the demand from consumers Intermediaries can do it cheaper 0 Supply chain management Reduces the number of transactions that need to occur Can go from many manufacturers to a retail distribution center and then to many stores It increases the ef ciency of the operation 0 Distribution Intensity Selective distribution used for shopping products Interim 6 distribution used for convenience products having your products at many places Exclusive distribution used for specialty products 0 Determinants of Channel Choice Market environment 39 Potential order size larger order size more direct channel 39 Concentration of customers higher concentration more direct channel 39 Number of actual and potential customers higher concentration more direct channel Firm s Marketing Mix product price distribution communication 39 Value of item high value more direct channel 39 Perishable highly perishable more direct channel 39 Technical complexity highly technical more direct channel 39 Brand image the more prominent the brand more direct channel 39 Functional discounts the more discounts there are the less direct channel Organizational Resources 39 Funds available if a large amount of funds are available more direct channel 39 Management skills high management skills more direct channel 39 Control desires high control desires less direct channel 39 Services needed the more services needed less direct channel 0 Integrated Marketing and Channels Integrated marketing communications IIVIC represents the promotion dimension of the four P s price promotion produce place t encompasses a variety of communication disciplines 0 Advertising 0 Personal selling 0 Sales promotion 0 Public relations 0 Direct marketing 0 Electronic media 39 In combination to provide clarity consistency and maximum communicative impact Communication channel The medium print broadcast or internet that carries a message 0 Channel Behavior and Organization Supply chain con ict channel con ict results when supply chain members are not in agreement about their goals roles or rewards Supply chain members are independent entities Each channel member s role must be speci ed and con ict must be managed Who does a reseller work for 39 Manufacturer tends to think it is themselves 39 Reseller tends to think it is the consumer 0 Integrated Marketing Communication it IMC the company carefully integrates amp coordinates its many communications channels to deliver a clear consistent amp compelling message about the organization amp its products 0 Elements of Integrated Communication Strategy Electronic media Advertising 39 Most visible element of IMC 39 Extremely effective at creating awareness amp generating interest gt Tends to be used more in consumer markets Personal selling 39 Some products require the help of a salesperson 39 More expensive than other forms of promotion 39 Salespeople can add signi cant value which makes the expense worth it Sales promotion Public relations Direct marketing 0 Planning and Measuring IMC Success Understand the outcome they hope to achieve before they begin Shortterm or longterm objectives should be explicitly defined amp measured Budget should be carefully planned 0 Setting IMC Objectives IMC objective speci c communication task accomplished with a speci c target audience during a speci c period of time 39 Informative inform consumers or build primary demand example a new product happens in the introduction stage 39 Persuasive build selective demand example early competitive entrants happens in the early competition stage 39 Comparative compares one brand to another example Avis vs Hertz 39 Reminder Keeps consumers thinking about a product example Coke products happens in the maturity stage 0 Methods of Setting the IMC budget for each product amp market Affordable based on what the company can afford Percentage of sales based on a certain percentage of current forecasted sales


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