ESRM 320 Exam 2

Pricing Objectives

Achieve a target profit: e.g., 10% mark up Build store traffic: e.g., grocery stores "10 for $10" Increase market share: e.g., competitive pricing like 0% car financing Create an image: a higher price may create a status image, often used with designer clothing, jewelry, and perfume Further social objectives: lower prices so more people can afford it - the government sometimes subsidizes the price of necessities like milk and bread

Pricing Strategies

Cost-based pricing: pricing based on the costs of producing/buying, distributing, and promoting the product - plus a rate of return (profit) Demand-based / target-cost pricing: is based on demand (buyers' sensitivity of demand to changes in prices and involves designing a product that satisfies buyers and meets the company's profit goals Competition-based pricing: choosing a price based on competitor prices (above, at, or below competitors). It depends on customer loyalty, perceived product differences, and the competitive climate. Price leadership is when one dominant firms set prices and all competitors in the industry follow Breakeven analysis pricing: process of determining profitability at various levels of sales. The break even point is where sale revenues equal all costs

Anticipate Buyer Questions

-Who is your company and who are you? - What are you selling? How does it compare to alternatives? Is your price competitive? - Why do I need your product? Why do I need it now?What is your record for support and service? -Who has bought your product, and are they satisfied?

Channel of Distribution

- A channel of distribution consists of marketing intermediaries (agents, brokers, wholesalers, retailers) that join together to transport and store goods in their path (or channel) from producers (manufacturers) to consumers - Marketing intermediaries are other businesses (e.g., agents, brokers, wholesalers, retailers) that help a manufacturer; this is the B2B(business to business) market ▪B2C refers to businesses that sell products to the final consumer

Product Line

- A group of products that are physically similar or intended for a similar market - Coca-Cola product line example: -Vanilla Coke - Diet Coke - Coke Zero - Coke with Lime - Cherry Coke

What Are Negative Externalities?

- A negative externality refers to adverse side effects (i.e., costs) arising from a business transaction that impacts the environment and society Negative externalities are costs not currently captured (paid for) in the related business transaction. Said another way, the buyer only pays for the product while society pays for the negative externalities Negative externality example: greenhouse gas emissions from burning oil, gas, and coal. True cost: purchase price people pay to buy oil/gas/coal + global warming costs to society

Total Product Offer

- A product is more than the physical good or service and consists of everything consumers evaluate when deciding whether to buy - Elements in a total product offer can be tangible and intangible. Some examples include price, brand name, convenience, packaging, service, store surroundings, image created by advertising, guarantee, speed of delivery, company's reputation, buyers' past experiences

Give the Sales Presentation

- Actual presentation of your product or serviceBegins with exploring customer needs/ problems to confirm that your product is a good match. If it is, present your product - Discuss how the product might satisfy/solve their needs/problemsMatch the benefits of your product to buyer needs - A study found that successful sales calls contained three times more identified needs than failed sales calls. In addition, best salespeople believe in what they sell and focus on win-win solutions

Types of Marketing Intermediaries

- Agents and Brokers: bring buyers and sellers together and assist in negotiating an exchange. Agents and brokers do not buy or own the products (e.g., a real estate agent /broker does not buy the houses it lists for sale) - Wholesalers: sell products to other businesses and organizations for: 1)Resale(e.g., Food Service of America wholesaler sells Organic Valley dairy products to Whole Foods for resale to consumers) 2)Use by another business/organization (e.g., Disney Cruises are sold to corporations for business conventions; Merck pharmaceuticals are sold to hospitals for patient use) 3)Producing a final product (e.g., Intel sells microprocessors to Dell Computers) ◼Retailers: sell products to customers (e.g., Whole Foods sells Organic Valley dairy products to consumers)

Objections, Closing, & Follow Up

- Anticipate objections that might be raised and think about proper responses. During the presentation seek out, clarify, and overcome customer objections. Objections are gifts - After answering objections and questions, close the sale (statement or question that moves the buyer toward purchasing) - After the sale, follow up with the buyer to ensure customer satisfaction and repeat business; handling customer complaints

TV Ad of the Century

- Apple's 1984 ad announced the arrival of the Macintosh computer and was shown only once on TV. Apple's 1984 ad was voted best ad of the century -Apple's one minute long 1984 ad cost $500,000 to air during the 1984 Super Bowl. Today a Super Bowl ad costs $4 million dollars and airs for 30 seconds

Sustainability & Promotion

- Approximately 70% of our food supply is pollinated by honeybees. Many crops won't grow without honey bees (see next slide) - Honeybees have been disappearing at an alarming rate since 2005. Healthy bees began abandoning their hives en masse, never to return. Researchers call the mass disappearance Colony Collapse Disorder, and they estimate that nearly one-third of all honey bee colonies in the country have vanished - Why are the bees leaving? A combination of factors like pesticide exposure, invasive parasitic mites, an inadequate food supply, and a new virus that targets bees' immune systems, but more research is essential to determine the exact cause of the bees' distress - Although the U.S. Department of Agriculture has allotted $20 million for research, that amount pales in comparison with the potential loss of $15 billion worth of crops that bees pollinate every year

Differentiating Products

- Creating real or perceived product differences through branding, pricing, packaging, and promotion - Various bottled water companies have been successful at differentiating water -is bottled water real or perceived differentiation? - Product differentiationis done so consumers view a company's product as being different from products offered by competitors

Importance of Capturing Externalities

- Improving the measurement of harm to human health and ecosystems. Advancements are being made in measuring ecosystem services (e.g., bees pollinating food, wetlands treating wastewater, trees absorbing carbon dioxide). Because such eco- services have been received for free in the past does not mean they are valueless Evaluating cumulative and synergistic impacts. For example, climate change impacts could reduce local water availability Quantifying impacts across multiple scales. From local, to regional, to global. Climate change demonstrates the scale of impacts that our actions can produce

What is "Bottle Bill"?

- Deposit laws significantly reduce container litter - Bottle bills (container deposit legislation) requires distributors and retailers to collect a refundable deposit (e.g., 5-10 cents) on glass, aluminum, and plastic beverage containers - How it works: Oregon retail stores pay the beverage distributor a 5-cent deposit for each container of bottled water, beer, and soft drinks they purchase.Consumers pay the 5-cent container deposit to the retailer when they make a purchase. The consumer returns the container to a retail store to redeem their 5-cents.Distributors pay retail stores the 5-cent redemption for each container returned to the distributor for recycling

Distribution Channel Conflict

- Distribution channels perform best when all intermediaries cooperate to achieve shared goals that satisfy the needs of the target market consumers ◼When channel cooperation is lacking (e.g., conflicting goals, failure to perform as agreed), conflict can arise: 1)Horizontal conflict occurs among firms at the same level of the channel (e.g., conflict among several Ford dealerships in King County) 2)Vertical conflict occurs among different levels of the channel (e.g., a toy manufacturer's products arrive late at retail stores due to an inefficient wholesaler)

Deposits Not Claimed

- During a recent year totaled $104,000,000 in New York, $34,000,000 in Massachusetts, and $18,000,000 in Michigan - Deposit accounts are closed out each year, and the money is allocated to various environmental causes or the retailers who collected the deposits - E.g., in Massachusetts, 100% goes to the state's Clean Environment FundIn Michigan, 75% goes to the Cleanup and Redevelopment Trust Fund and the other 25% goes to retailers

Other Pricing Strategies

- Every day low pricing (EDLP): lower prices that competitors and not having any special sales (Wal-Mart) - High-Low Pricing: Setting prices that are higher than EDLP stores except during special sales when they are lower - Product bundling: combining several products and offering the bundle at a reduced price (e.g., printer/copier/scanner) - Psychological pricing: using price points that make the product appear less expensive than it is (e.g., 99 cents versus $1; $99,000 house price rather than $100,000)

Marketing Process

- Find opportunities - Conduct research - identify a target market - Design and test a product(good, service, idea) that satisfies consumer needs, based on research findings --- - Determine the appropriate price (consider the firm's costs, competitors' prices) - Select a distribution system (getting the product to the right place) - Develop a promotional campaign - Build a relationship with customers

Beverage Container Externalities

- Glass bottles require a large amount of energy to make (e.g., glass is heated to 1675 degrees before pouring) - Glass bottles are 100% recyclable, and disposal to landfills is a 100% resource loss - Plastic bottles also require lots of energy, require petroleum (aluminum for cans), and degrade in sunlight which causes water and soil contamination

What Is a "Product?"

- Goods (recycled paper) - Services (Mt. Rainer National Park campgrounds) - Organizations (Sierra Club) - Events (Earth Day) - Spokespeople (Smokey Bear) - Places (ski Whistler) - Ideas (prevent forest fires)

Externalities & Full Cost Accounting

- Includes all costs arising from a business transaction to all stakeholders over the entire product life cycle, including disposal (i.e., cradle to grave) Traditional price = product costs + profit Sustainable price = product costs + externalities costs + profit Not capturing the cost of externalities leads to the over use and accelerated depletion of nonrenewable natural resources. Externalities are indeed paid, sooner or later, by all citizens and not just product buyers

Integrated Marketing Communications

- Integrating and coordinating all promotion tools to deliver a comprehensive, clear, consistent, and compelling message about its products or the company to create a positive brand image or a favorable corporate image - Integrated marketing communications is important because consumers are being exposed to a greater variety of marketing communications from and about the company. Conflicting messages from difference sources can result in confused brand positions and company images

Benefits of Bottle Bills

- Keeps garbage out of landfills. Following the implementation of bottle bills in various states, container litter has been reduced by 69-84% - Creates a source of recycled materials for bottlers - Reduces production of beverage containers made out of "virgin" materials - Beverage containers comprise 40-60% of litter, so bottle bills create positive environmental externality: an incentive to clean up litter 10 U.S. States Have Bottle Bills

Other Pricing Strategies: New Products

- New product pricing: refers to pricing during the introductory phase of the product life cycle. A skimming strategy uses a high price to make optimal profits while there is little competition. That way a firm can recover research and development costs. Skimming works well when 1) a product's quality and image support a higher price and 2) competitors should not be able to enter market easily and undercut price - A penetration strategy uses a low price to attract more buyers, build market share, and discourage competitors. Penetration pricing works well when: 1) consumers are highly price sensitive and 2) a low price can help keep out competition

Why New Products Fail

- Not delivering what is promised -Poor product planning - Poor product design - Product is poorly positioned, placed, priced, or promoted - Market size is overestimated - Costs are underestimated - Competitor reactions

GRI Product Responsibility

- PR1 product health and safety impacts are assessed for improvement - PR2 non-compliance with regulations and voluntary codes concerning product health and safety impacts during their life cycle - PR3 product and service information and labeling - PR4 non-compliance with regulations and voluntary codes concerning product information and labeling - PR5 surveys measuring customer satisfaction with products n PR6 sale of banned or disputed products - PR7 number of incidents of non-compliance concerning marketing communications, including product advertising, promotion, and sponsorships - PR8 number of complaints regarding breaches of customer privacy and losses of customer data - PR9 fines for non-compliance with laws and regulations concerning the provision and use of products

Logistics

- Planning, implementing, and controlling the physical flow of material, final goods, and related information from points of origin to points of consumption ▪The three major logistic functions are: 1)Transportation (e.g., truck, rail, ship, pipeline, air, drone). If you are interested in the latest developments of Amazon's pioneering effort to deliver products using drones, then watch one or all three videos about Amazon's Prime Air drone 2. Storage/warehousing 3. tracking goods

Pre-Approach & Approach

- Pre-approach: learning about a prospect's wants and needs. People buy solutions, not products (e.g., a contractor doesn't buy a bulldozer but a way to move dirt) - Approach: making first contact and getting permission for a presentation. Goals are to: 1)create a good first impression ("you don't get a second chance to make a good first impression") 2)build rapport 3)establish credibility 4)start a relationship

Price (1 of 4 marketing Mix)

- Price is one of the four components of the marketing mix - It is important because it is the only "P" that generates sales revenue - Price affects consumer evaluations of the product itself - In the narrowest sense, price is the amount of money charged for a product. In its broadest sense, price is the sum of the values that customers exchange for the benefits of owning or using the product - Pricing decisions need to be coordinated with promotion and distribution decisions

Types of Public Relations

- Public service: building and maintaining community relations - Lobbying: relationships with legislators and government officials to influence legislation and regulation - Investor relations: relationships with shareholders and others in the financial community - Stakeholder relations: sustainability reports offer transparency and accountability

Targeting & Socially Responsibility

- Some are concerned about targeting vulnerable segments like children Note how this Barbie doll wears heavy make up, a halter top, mini skirt, and go-go boots Critics say marketers targeting girls irresponsibly bombard them with unrealistic, unattainable images that negatively impact girls' self-esteem

GoPro Video Case Study

- The GoPro is a lightweight, compact, mountable, shockproof, and waterproof to 130 feet camera/camcorder - I suggest that you pause this Panopto recorded lecture and watch this module's video case study called GoPro Ad (this is a five minute advertisement)

Product Mix

- The combination of all product lines offered by a manufacturer - Seventh Generation product mix example: - Kitchen product lines (dishwashing soap, paper towels, napkins, trash bags) - Bathroom product lines (toilet paper, tissue) - Laundry product lines (laundry detergents, softeners, stain removers) - Baby product lines (diapers, baby wipes, bath soap, skincare) - Personal care product lines (body wash, lotion)

Product Value

- The most effective way a company can compete with products offered by competitors is to offer customers the best VALUE - According to the American Marketing Association, valueis a foundation of marketing and "good quality at a fair price" - How consumers value products might depend on more than product quality and price -or Total Product Offer

Promotion

- The specific blend of promotion tools that a company uses to motivate consumers to buy their product, communicate customer value, build customer relationships, and create a positive corporate image - Companies, nonprofits, and governments use promotion -A promotion mix consists of a portfolio of tools like advertising, public relations, sales promotion, and personal selling - A specific promotion mix depends on the firm's financial resources, promotion goals, nature of the target market, and the product itself

Social Responsible Marketing Communications

- There are a legal and ethical issues surrounding marketing communications. It is illegal to use false or deceptive advertising or claims made by salespeople (e.g., saying a product cures something when it does not; a bread cannot be advertised as diet bread with fewer calories just because its slices are thinner; overstating how many miles per gallon a car uses) - Companies must avoid "bait-and-switch" advertising that attracts buyers under false pretenses - Beyond avoiding legal issues, companies can use advertising to encourage and promote socially responsible actions and programs

Collecting Data

- There are two major sources of data: secondary data and primary data - Secondary data is existing data that has previously been collected (in the form of studies, reports, and surveys conducted by someone else). To minimize costs, researchers should begin by looking at secondary data, BUT secondary data may not provide all the information that a marketer needs - Primary data is in depth information gathered by marketers, through observation, surveys (e.g., questionnaires, interview, focus groups), and experiments

More About Advertising

- Types of advertising (e.g., retail, trade/ B2B/institutional, product, advocacy, comparison) - Advertising mediums (direct mail, cable and broadcast TV, internet, outdoor, radio, social media) - Green advertisingProduct placement (firms pay to have products into TV shows and movies) - Social media and advertising effectiveness - Global advertising (problems can arise in global markets when using one ad campaign in all countries)

"Nudging" Sustainability

-If you want people to use less energy, show people how much energy they've used compared to their neighbors. One study reported that people use less electricity when they have "neighbor" information and are "nudged" to use less Another "nudging" example, one with positive social benefits is putting healthy food at the front of a school cafeteria - it results in students choosing to eat more healthy food

Marketing Research Process

1)Defining the research problem, question, or opportunity and determining the present situation 2)Collecting the research data 3)Analyzing the data 4)Choosing the best solution and implementing it

Recall the Marketing Mix's 4 P's

1)Designing products to meet consumer needs and wants 2)Setting attractive prices 3)Producing effective promotion campaigns 4)Delivering (distributing) products to appropriate places

Types of Utility

1)Form Utility: Changing raw materials into useful products. E.g., Starbucks converts coffee beans into coffee "just the way you like it." 2)Time Utility:Making products available when needed. E.g., Walgreen Pharmacies open 24 hours a day. 3)Place Utility:Placing products where people want them. E.g., Coke and Pepsi are widely available, including campus vending machines. 4)Possession Utility: Facilitating the transfer of ownership from seller to buyer, including credit, delivery, and installation. E.g., real estate agents and mortgage brokers often work together to help a person buy a home. 5)Information Utility: Opening two-way flows of information between. E.g., mapquest.com provides hotel and restaurant information when giving driving directions. 6)Service Utility: Providing service by teaching customers how to best use products. E.g., Paul Allen has invested $40 million to create SkyLight to address illegal fishing.

New Product Development Steps

1)Idea generation - It takes about seven ideas to generate one commercially successful new product - New product ideas come from research and development, employees, suppliers, and consumer suggestions 2)Product screening - Reduces the number of new product ideas being worked on at any one time to focus on the most promising - Criteria are applied to determine whether the product fits well with current products, has good profit potential, and is marketable

Research Approaches for Collecting Data

1. Observation - Watching people and situations(Exploratory) 2. Survey - Learning about people's/firm's attitudes, preferences, behaviors e.g., performance (Descriptive) 3. Experiment - Giving groups of people different "treatments" to determine cause-and-effect(Causal)

Evolution of Marketing

1. production era 2. selling era 3. marketing Concept Era 4. customer relationship Era 5. On Demand Era

On Demand Era

24/7 digital technology has increased consumer demand for more product information, and they share, compare, and rate their experiences

New Product Development Cont.

3)Product analysisMaking cost estimates and sales forecasts to get a feel for the potential profitability of a new product 4)Product development and testing - Product concept is developed into a physical prototype or sample - Concept testing takes the prototype or sample to consumers to test their reactions 5)CommercializationDeveloping advertising and sales campaigns to generate interest in the product - Promoting the product to distributors and retailers to get wide distribution

Experiment Research Example

A new sandwich is offered at one price in one city and at another price in a McDonald's restaurant in another city If the cities are similar and all marketing efforts for the sandwich are the same, then differences in sales between the two cities could be related to the price charged

Oregon Recycling History

A shortage of landfill space, in part, led to passage of Oregon's first Opportunity to Recycle Act in 1983. This act also established solid waste management policies that recognized the environmental benefits of waste prevention, reuse, and recycling. It stated that in order to conserve energy and natural resources, solid waste management should follow a hierarchy: Reduce the amount of waste generated Reuse materials for their original intended use Recycle what can't be reused Compost what can't be reused or recycled Recover energy from what cannot be reused, recycled, or composted Dispose of residual materials safely Richard Chambers, a logging equipment salesperson, collected litter throughout the Oregon and in 1968 proposed that the Oregon state government put a deposit on bottles and cans to encourage people to return them Oregon Bottle Bill of 1971 was the first bottle deposit program in US

Supply Chain

A supply chain is the sequence of linked activities performed by various businesses to move goods from the suppliers of raw materials to consumers ▪A supply chain is longer than a distribution channel because it includes suppliers to the manufacturers (e.g., farmers, miners, suppliers of parts) ▪Supply chain managementis the process of managing the movement of raw materials, parts, work in progress, finished goods, and related information throughout all the organizations in the supply chain

Product Life Cycle (PLC)

After launching a new product, marketers hope the product has a long, profitable life - The Product Life Cycle (PLC) is a theoretical model of what can happen to a product's sales and profits over time. The PLC has four stages: introduction, growth, maturity, and decline - Marketers use the PLC framework because it describes how a product's sales and profits might unfold over time AND suggests marketing mix strategies for each PLC stage

Product

Any good, service, or idea that satisfies a want or need Begins with new product development and test marketing A total product offering is developed (anything consumers evaluate when buying) Some firms create product differentiation (real or perceived product differences) Generating brand loyalty and equity is important. A brand name is aword, letter, or a group of words or letters, that differentiates one seller's goods from a competitor's

Branding

Brand: a name, symbol, or design that identifies the product and distinguishes it from competitors' products Brand loyalty: the degree to which consumers are committed to buying a specific brand Brand equity: the value of the brand name and associated symbols Brand awareness: how quickly or easily a given brand name comes to mind when when a product category is mention Brand manager: manager responsible for the brand and manages the marketing mix elements

Two Types of Markets

Business to Business (B2B) market - products are often sold and resold several times before reaching final consumers. B2B refers to companies and organizations that buy goods and services to use in producing their products to sell, rent, or supply to others (consumers, manufacturers, wholesalers, retailers, hospitals, schools, charities, and government Consumer market - products are sold to end consumers (individuals or households)

Selling Era

By the 1920s, supply exceeded demand, so the focus changed from production to persuasion to sell excess inventory

Psychographic Segmentation Example

Car-sharing service Zipcaroffers a low-cost, low-hassle, environmentally responsible alternative to owning a car - Zipcar's "Have an Impact" strategy involves: 1)Environmental Commitment.We are changing the way people think about consumption. We care deeply about our world and offer a practical example of sustainable living that decreases the adverse effects of transportation 2)Social Change.We are committed to the greater good, making positive changes in our communities and society. We inform public policy through leadership 3)Transforming Urban Life.We make life more rewarding, sustainable, and affordable

Distribution Channels Versus Supply Chains

Channel of Distribution manufacturing -> wholesalers -> retailers ->consumers ◼Consists of marketing intermediaries that transport and store goods in their path from MANUFACTURERS to consumers ◼Channels of distribution begin with the manufacturer Supply Chain suppliers plants -> manufacturing -> wholesalers -> retailers ->consumers ▪Consists of marketing intermediaries that transport and store goods in their path from SUPPLIERS to consumers ▪Supply chainsbegin with the supplier(of raw materials, inputcomponents, etc.)

Product Packaging

Companies often use packaging to change and improve their basic product, like microwave popcorn Some key functions of packaging are: - Attract buyers' attention - Protect the product and make it tamperproof - Provide information about the product - Explain product benefits - Provide warranty information and warnings - Indicates price, value, and uses

Classifying Consumer Products

Consumers goods and services can be classified in to four categories. Convenience: products purchased frequently with minimal effort (e.g., candy, milk, gasoline) Shopping: products bought only after comparing value, quality, price, and style from a variety of sellers (e.g., clothing, shoes, furniture) Specialty: products with unique characteristics and brand identity (no reasonable substitute) so consumers put forth a special effort to purchase (e.g., fine jewelry, medical services) Unsought: products consumers are not aware of or have not thought about until they need them (e.g., car towing, burial services, insurance)

Who Holds Container Deposits?

Container deposits are collected by distributors and retailers - In some states (CA/HI), a special unit of the state holds the money - In other states (CT/MA/NY/MI/MN) the state government -Finally, in other states (OR/IA/VT) the distributors/retailers hold the deposits

Public Relations

Def: Free and paid for, non-personal company-focused promotion tool Goals: Focuses on enhancing the image of the business, organization, cause, etc. (not a product) and dealing with unfavorable rumors and events Strength: May be favorable, may be free weakness: May be unfavorable, firm may have little or no control

Sales Promotion:

Def: Paid for, non-personal product promotion tool (reward programs, samples, coupons, rebates, demonstrations, contests) Goals: Aimed at stimulating product purchase now by means of short-term activities Strength: Attracts consumer attention weaknesses: Effects are short lived and not effective in building brand loyalty

Advertising:

Def: Paid for, non-personal product promotion tool using various media (print, outdoor, head) Goals: 1). INFORM existing buyers about new products and potential buyers about products 2)PERSUADE consumers to buy the product 3)REMIND existing buyers to reinforce brand loyalty strength: Reaches masses of geographically dispersed people at a low cost per exposure AND the seller can repeat the message often weakness: Standardized message

Place

Developing distribution channels, or the set of marketing intermediaries, that move products from producers to businesses to consumers Whole Foods example:"Our Suppliers: There are hundreds of businesses that we depend on to assist us in creating an outstanding retail shopping experience for our customers. We treat them with respect, fairness and integrity."

Retail Distribution Strategies

Different products call from different retail distribution strategies. ◼Intensive Distribution: Products are available in as many retail stores as possible. What type of products benefit most from intensive distribution? Why? ◼Exclusive Distribution: Products are available with only one retailer. What type of products benefit most from exclusive distribution? Why? ◼Selective Distribution: Products are available with only a preferred group of retailers. What type of products benefit most from selective distribution? Why?

Segmenting the Consumer Market

Dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviours that might require different marketing mix strategies. Segmentation methods include: - Psychographic: by values, lifestyle, and interests - Benefit: according to the different benefits that consumers seek from the product (e.g., organic,, convenience, durability, luxury, economy, safety) - Volume: by usage and loyalty (nonusers, ex-users, potential users, first-time users, loyal users) - Geographic: dividing the market bycities, counties, states, nations - Demographic: by age, income, race,gender, occupation, education, etc.

Dove: Socially Responsible Marketing Example

Dove did a global study about beauty and found that the definition of beauty was limiting and unattainable. Dove's research found that only 2% of women described themselves as beautiful, and only 11% of girls around the world feel comfortable using the word beautiful to describe their looks

Sustainability and Utility

Environmental Utility: Adding value to products by lowering their negative impact on the environment, from cradle to grave. ▪Nickels cites an article claiming that 75% of the waste in the U.S. is recyclable, but only 30% is actually recycled (citation for this is Footnote 24 at the end of the chapter). ◼What examples come to mind for you? ▪Social Responsibility Utility: Adding value to products by raising their positive impact on all stakeholders. ◼Reflecting on our three case study companies, what human rights examples come to mind for you? ◼What labor practices examples come to mind for you? ◼What product responsibility examples come to mind for you? ◼What society examples come to mind for you?1)

Market Targeting

Evaluating each segment's attractiveness and selecting one or more segments to enter or target based on: - Segment size and growth (sufficient size and good profit growth potential) - Segment structural attractiveness (easy to access buyers, few competitors, relative power of competitors) - Company objectives and resources are aligned with targeted segments so that the company can create customer value

Nonprofit Marketing

Even though marketing emphasizes a profit orientation, marketing is a critical part of almost all organizations including nonprofits, for: Fundraising (for combating world hunger) Public relations (encourage people to donate blood) Ecological practices (reduce carbon emissions, promote safe environmental practices) Changing public opinions and attitudes (political campaigns, "Friends Don't Let Friends Drive Drunk" campaign) increasing membership (state tourism, universities, religious institutions)

Consumer Adoption of Products

Everett Rogers (1962) created the Diffusion of Innovation (DOI) theory to describe stages in the consumer adoption of new products over time § There are five consumer stages: innovators, early adopters, early majority, late majority, and laggards § What type of an adopter are you? Does it depend on the type of product?

Differentiation Via Sustainability

Founded in 2001 by Tom Szaky, then a Princeton University freshman, TerraCycle recycles hard to recycle waste (drink pouches, chip bags, tooth brushes) - Over 20 million people, in 20 countries, collect waste that TerraCycle recycles for producing over 1,500 consumer products.

So Why Risk Failure?

First Mover Advantage - If a company is not the first to market the new product, but instead is second, the product's lifetime profits are 12% lower than the company first to market - If a firm is third to sell a new product, its lifetime profits are 33% lower

Product Bundling

Grouping two or more products together and pricing them as a unit, at a single price. Factors favoring product bundling include: Customer Factors. Buyers may prefer a bundled product if they save time and effort in "one-stop" shopping or if they perceive the bundle as less risky (believe that components of the bundle will work together properly) Firm Factors. The strongest case for bundling is when competitors cannot duplicate the bundle or if bundling enables the firm to realize economies of scale Product Factors. Bundling complementary products, as compared to substitute or unrelated products, is key

PLC Example: Camera

History of the camera: - A camera obscura is a box with a pinhole and lens that projects an image. Ancient Chinese and Greeks used them to project images on paper, which they then traced. - In 1544 Reiners Frisius of Leuven University in Belgium used a camera obscura to watch a solar eclipse and published his method. Frisius' article led to a wide spread adoption of the camera obscura - George Eastman pioneered photographic film, and sold his first camera, the "Kodak" camera in 1888. The Kodak was pre-loaded with film for 100 photos, and the camera needed to be sent to the Kodak factory for processing the photographs - Digital cameras do not use film, they store images and sound digitally, which are displayed immediately. The first commercial digital camera was launched by Kodak in 1991 - Today digital cameras are bundled with many devices, such your phone

Market concepts Era

In the 1950s competition intensified and businesses needed to be more responsive to consumers to get their business. The focus was the customer comes first

Customer Relationship Era

In the 1990s businesses focused on building and maintaining long-term buyer-seller relationships by learning as much as possible about customers and satisfying /exceeding expectations The focus was to build long-term customer loyalty (e.g., frequent flyer programs) because the cost of selling a product to a new customer is about six times more than selling to an existing customer

Factors Affecting Price

Internal factors: Marketing objectives Marketing mix Costs External factors: The market and demand Customers' perceptions of price and value Competitors' costs and prices

Environmental Sustainability Portfolio

Internal: Pollution prevention-Eliminating or reducing waste before it is created New Clean Technology: Developing new sets of environmental skills and capabilities External Product Stewardship: minimizing environment impact throughout the entire product life cycle Sustainability Vision: creating a strategic framework for future sustainability. EXPANDED PRODUCT LIFE CYCLE 1) Introduction 2) Growth 3) Maturity 4) Decline 5)Sustainable Product Withdrawal and Disposal, to avoid negative environmental externalities

Profits Over the Product Life Cycle

Introduction: losses may occur due to low sales and high research and development and various product introduction expenses § Growth:veryhighprofits,profitsdramatically increase due to recouping new product expense, then profits reach a maximum § Maturity:decreasingprofitsbecauseof competition § Decline:profitscontinuedecreasingandmay become losses due to low consumer demand

Competitors Over the PLC

Introduction: no competitors(due to a patent which gives the inventor the exclusive right to their invention) or very few competitors due to high barriers to entry § Growth:rapidlygrowingnumberofcompetitors § Maturity:thenumberofcompetitorsstabilizes and then begins decreasing § Decline:furtherdecreasingnumberof competitors

Sales Over the Product Life Cycle

Introduction: the product is being introduced to consumers, so sales are low § Growth:consumershavelearnedaboutandlike the product, and rapidly increasing sales § Maturity:themarketbecomessaturated.Sales mature, meaning sales increase but at a slowing rate, then sales reach a maximum, and then sales begin decreasing for the first time § Decline:changingconsumerneedsorthe product is no longer relevant or useful leads to decreasing sales

Marketing Research

Involves analyzing markets to determine opportunities and challenges, and finding the information needed to make good decisions - Research can identify: - the effectiveness of current marketing strategies - changing consumer needs - emerging market trends - attitudes held by stakeholders - the environmental and social impact of business decisions

Observation Research Example

Kraft Canada marketers observed actual family life in diverse Canadian homes.

Building Channel Cooperation

Linking marketing intermediaries to form a unified system can foster cooperation. Nickels says there are four such systems: 1)Corporate Distribution System:All intermediaries in the channel (e.g., manufacturer, wholesaler, retailer) are owned by one company. Thus the owner has control over all operations (e.g., Sherwin William Paints) 2)Contractual System:All intermediaries commit to cooperate through contractual agreements(e.g., McDonalds and Baskin-Robbins franchises; the franchisee legally agrees to the rules, regulations, and procedures of the franchisor) 3)Administered System: The manufacturer manages all the marketing functions at the retail level, due to having considerable power(e.g., Disney) 4)Supply Chain: Linked activities performed by various organizations to move products from the sources of raw materials to ultimate consumers

Effective Segmentation

Market segments must be: - Measurable (sizeand purchasing power can be measured) - Accessible (can be effectively reached) - Substantial (large and profitable) - Differentiable (respond differently to marketing mix elements) - Actionable (effective marketing mix program can be designed)

Analyzing Data and Implementing the Decision

Marketers turn data into useful information by: - Analyzing data using statistical software like SPSS and SAS - Then after the data is analyzed and interpreted, marketers plan, make recommendations for developing new products, etc., and implement changes in the marketing mix components

Marketing to Consumers

Mass Marketing: - developing products for large groups of people. The size and diversity of the consumer market forces marketers to decide which groups they want to serve Market Segmentation: - dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require different marketing strategies or mix Target Marketing - process of evaluating each market segment's attractiveness and selecting one or more segments to enter or target Positioning - using product design, features, style, quality, etc. to create a distinctive and desirable place in the minds of target consumers relative to competing products

GRI Supplier Related Indicators AmazonBuysWhole Foods

Overall, an increasing number of companies require their marketing intermediaries to provide environmental and social responsibility information. More specifically, companies are requesting GRI indicator information: ◼EN32 New suppliers screened using environmental criteria ◼EN33 Negative environmental impacts in the supply chain ◼HR10 New suppliers screened for human rights criteria ◼HR11 Negative human rights impacts in the supply chain ◼LA14 New suppliers screened for labor practices criteria ◼LA15 Negative labor practices impacts in the supply chain ◼SO9 New suppliers screened for society criteria ◼SO10 Negative impacts on society in the supply chain

Sustainability & Product Obsolescence

Planned product obsolescence refers to causing products to become break down or become obsolete prematurely - Using materials and components that will break, wear, rust, or rot sooner than they should - Holding back functional features, and introducing them later to make older models obsolete - Perceived obsolescence: continually changing consumer concepts of acceptable styles to encourage more and earlier buying - The Story of Stuff video case study provides extensive information and insights about planned product obsolescence

GRI Indicators

Product Responsibility - PR7 non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship Society - SO1 local community engagement - SO6 political contributions

Classifying Industrial Products

Products used in the production of other products, sometimes called business products or B2B products Production goods: - Raw materials (e.g., crude oil, metals, timber) - Component parts (e.g., engines, Intel microprocessors) - Production materials (e.g., nuts, bolts) Support goods: - Installations (e.g., buildings, machinery, equipment) - Accessory equipment (tools and office equipment)Office supplies - Services (e.g., maintenance and repair)

Prospect & Qualify

Prospecting: researching potential buyers and choosing those most likely to buy (cold calling, referrals) Qualifying: determining if the prospect needs the product, has the ability to pay, and is willing to listen to a sales presentation (qualifying increases the likelihood that a prospect will become a buyer)

Externalities Pricing Example

Puget Sound Energy (PSE) offers customers the option to buy electricity generated from renewable resources The program is voluntary, requires no contracts, and customers can cancel at anytime PSE's renewable energy costs as little as $4 more per month, above standard rates, to offset a portion of a household's electricity with renewable energy, and $10-12 to offset 100% of the average home's electricity cost

Advertising Examples

Remember Maslow's Hierarchy of Needs - physiological needs - safety needs - social needs - esteem needs - self actualization needs

Decline Stage

Sales: Decreasing • Profits: Further decreasing profits that may become losses • Competition: Further decreasing, few in number • Marketing objective: Reduce expenditures • Customers: Laggards • Product: Reduce product versions • Price: Consider price increase if most competitors are gone • Place: Decrease distribution, drop unprofitable outlets • Promotion: Reduce to only loyal customers

Introduction Stage

Sales: Low • Profits: Losses may occur • Competitors: None to few • Marketing objective: Create product awareness and trial • Customers: Innovators • Product: Offer a basic product • Price: Target innovators with a skimming price • Place: Use selective distribution • Promotion: Use heavy promotion to build primary demand (product awareness) and to get stores / distributors to carry the product

Maturity Stage

Sales: Mature, reach a maximum • Profits: Decreasing • Competitors: Stable number, then decreasing • Marketing objective: Maximize profits while defending market share • Customers: Early and late majority • Product: Differentiate product (more product versions) to satisfy different consumer segments • Price: Further reduce price • Place: Intensify distribution • Promotion: Emphasize brand name and benefits to encourage brand switching

Price

Selecting a price depends on: - Production and other costs - Consumer demand - Prices charged by competitors - A firm's pricing strategy (e.g., premium or discount). Walmart example: "We sell a wide assortment of products at the lowest possible prices. Save money. Live better."

Sustainability Era

Socially and environmentally responsible marketing that meets the present needs of consumers while also preserving the ability of future generations to meet their needs

Why Marketing Needs Intermediaries

Some manufacturers effectively sell directly to consumers. What examples come to mind? ▪However, most manufacturers use marketing intermediaries because they: 1)Increase exchange efficiencyby reducing the number of transactions and contacts 2)Their value exceeds their cost (related to their transporting and storing products, contributing specialized optimization knowledge, industry contacts, and technology)

New Product Development Example

Space Race" for commercial space travel and tourism Virgin Galactic: Virgin founder Richard Branson and aerospace inventor Burt Rutan's SpaceShipOne(optional SpaceShipOne video case study) Blue Origin: Amazon founder Jeff Bezos SpaceX: Tesla founder Elan Musk

survey Research Example

Sustainability performance assessment research using information and data in sustainability reports. That's YOU! The clothing industry is developing software to help measure the environmental impact of their apparel

Honey Bees & Häagen-Dazs

The "Häagen-Dazs' loves Honey Bees" integrated marketing communications campaignuses a well-coordinated blend of promotion elements to successfully deliver Häagen-Dazs' unique message

What Is Marketing?

The activity, institutions, and processes for creating, communicating, delivering, and exchanging offerings with value for customers, clients, partners, and society more simply, marketing refers to satisfying buyers wants and needs

Marketing Mix

The four P's refer are the ingredients that go into a marketing program. Companies blend each marketing mix tool into a comprehensive integrated marketing program aimed at positioning products with target customers Product Price Place (distribution) Promotion

Production Era

The philosophy was produce as much as you can because demand is unlimited. The focus was on mass production

Break-Even Analysis

The process used to determine profitability at various levels of sales. The break-even point is where revenues equals cost BEP = Total Fixed Costs / Price - Variable Costs Total Fixed Costs: All costs that remain the same no matter how much is produced or sold Variable Costs: Costs that change according to the level of production Total Costs: the sum of fixed and variable costs

Positioning

Using product design,features, style, quality, etc. to create a distinctive and desirable place in the minds of target consumers relative to competing products Seventh Generatio-a maker of cleaning supplies, differentiates itself by the offering products that are a green alternative

Intermediaries Create Utility

Utilityis the want-satisfying ability, or value, that organizations add to products by making them more useful or accessible to consumers. According to Nickels, there are six types of utility: 1)Form 2)Time 3)Place 4)Possession 5)Information 6)Service

Values and Lifestyle Framework

VALS segments adults into eight distinct types using a set of psychological traits that drive consumer behavior 1. Survivors-Value personal and financial safety and security. - Survivors tend to buy lottery tickets and gamble at casinos 2. Strivers- value having fun and prefer a job over career - Strivers then to seek stylish products and view shopping as a social activity 3. Believers- Value friends, pets, family, and tradition - Believers tend to buy moist dog food and choose familiar products 4. Makers- Value self-sufficiency and like to make, build, fix things - Makers tend to own wood stoves and woodworking tools 5. Thinkers- Value knowledge and having time for reflection - Thinkers tend to own saunas and hot tubs and belong to book clubs 6. Achievers- Value achievement, recognition, and status - Achievers tend to own indoor swimming pools and time-saving devices 7. Experiences- Value excitement, risk, and adventure - Experiencers tend to drive sports cars and own radar detectors 8. Innovators- Value variety, change, and new ideas - Innovators tend to buy new products before other consumers

Defining the Problem/Opportunity

What is the present situation in terms of customer needs and satisfaction, current markets and opportunities, the effectiveness of marketing strategies - Whatare the alternatives? - What information is needed?- - How should the information be gathered?

Word of Mouth Versus Viral

Word of Mouth: people tell others about products they have purchased Viral Marketing: paying buyers to post positive comments online in return for gifts or money

Total Product Offer Components

chart - Guarantee - quality - Reputation of producer - speed of delivery - image creating by advertising

Personal Selling

def: Paid for, face to face (interactive) productpresentation. Selling is any form of persuasive communication (e.g. job interview) Goals: Build long-term buyer-seller relationships strength: Customized, buyer/seller interactive presentations that can be adapted during the sales presentation weaknesses: Most expensive form of promotion per sales call (average of $400)

PLC Sales, Profits & Competitors

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Promotion

refers to what sellers do to inform, persuade, and remind people about their products and the company and motivate people to buy those products, or think about the company as a whole. Promotion includes: - Personal selling - Public relations - Sales promotions - Advertising - Word of mouth

Goal of Marketing

to attract new buyers through offering superior value and keeping current customers by delivering satisfaction