Marketing Final (Ch. 16-22)

Merchandising conglomerate

A corporation that combines several diversified retailing lines and forms under central ownership, with some integration of distribution and management. Federated Department Stores renamed itself after one of its best-known retailers, Macy's, but also owns other retailers such as Bloomingdale's.

Customer Electronic Mailing or E-Mail List

A customer electronic mailing or e-mail list may literally be just names and e-mail addresses.

Customer Mailing List

A customer mailing list is simply a set of names, addresses, and telephone numbers.

Major Tools in Marketing Public Relations

1. Publications 2. Events 3. Sponsorships 4. News 5. Speeches 6. Public Service Activities 7. Identify Media

Straight salary, straight commission, a combination of both

1. Straight Salary Plans: provide a secure income, encourage reps to complete nonselling activities, and reduce incentive to overstock customers. For the firm, these plans deliver administrative simplicity and lower turnover 2. Straight Commission Plans: attract higher performers, provide more motivation, require less supervision, and control selling costs. On the negative side, they emphasize getting the sale over building the relationship. 3. Combination of Both: feature the benefits of both plans while limiting their disadvantages. Plans that combine fixed and variable pay link the variable portion to a wide variety of strategic goals.

Initiating Price Cuts

- Circumstances might lead firms to cut down on prices: 1) Excess Plant Capacity: Firm needs additional business and cannot generate it through increased sales effort, product improvement or other measures 2) Domination of Market: Companies sometimes initiate price cuts in a drive to dominate the market through lower costs. Either the company starts with lower costs than its competitors, or it initiates price cuts in the hope of gaining market share and lower costs.

Eight Major Modes of Communication

- Eight major modes of communication: 1) Advertising 2) Sales promotion 3) Events and experiences 4) Public relations and publicity 5) Online and social media marketing 6) Mobile marketing 7) Direct and database marketing 8) The sales force.

Number of intermediaries

- Exclusive distribution: severely limits the number of intermediaries. - Selective distribution: relies on only some of the intermediaries willing to carry a particular product. Company doesn't need to worry about having too many outlets. It can gain adequate market coverage with more control and less cost than intensive distribution. - Intensive distribution: places the goods or services in as many outlets as possible.

Market-Logistics Decisions

- Order processing: how should we handle orders? - Warehousing: where should we locate our stock? - Inventory: how much stock should we hold? - Transportation: how should we ship goods?

Role of Technology

- Retailers use technology for business operations, to enhance the consumer shopping experience inside the store, and Internet/social media strategies - Technology is profoundly affecting the way retailers conduct virtually every facet of their business.

Channel-Intermediary Performance Evaluation

- Sales-quota attainment - Average inventory levels - Customer delivery time - Treatment of damaged and lost goods - Cooperation in promotional programs - Cooperation in training programs -Participation in and support of market research

Consumer Promotion Tools

- Samples - Coupons - Cash Refund Offers (Rebates) - Price Packs (cents off deals) - Premiums (gifts)

(Ch 19) Marketing Communications

- The means by which firms attempt to inform, persuade, and remind consumers about the products and brands they sell - In a sense, they represent the voice of the company and its brands; they are a means by which the firm can establish a dialogue and build relationships with consumers.

Perceived-value pricing

-Based on buyer's image of product, channel deliverables, warranty quality, customer support, and softer attributes (e.g., reputation) -The key to perceived-value pricing is to deliver more unique value than competitors and to demonstrate this to prospective buyers. -The company can try to determine the value of its offering in several ways: managerial judgments within the company, value of similar products, focus groups, surveys, experimentation, analysis of historical data, and conjoint analysis.

3) Both Directions (Activity of Marketing Channels)

- Information, negotiation, finance and risk taking occur in both directions.

Major channel alternatives

-Types of intermediaries -Number of intermediaries -Terms/responsibilities of channel members

Multichannel Marketing

-Using two or more marketing channels to reach customer segments in one market area. Most companies have adopted multichannel marketing -Each channel can target a different segment of buyers, or different need states for one buyer, to deliver the right products in the right places in the right way at the least cost.

Three Major Considerations in Price

1) Costs: price floor 2) Competitor's prices: orienting point 3) Customers' assessment of unique features: price ceiling

5 Service Outputs Channels Produce

1) Desired lot size—The number of units the channel permits a typical customer to purchase on one occasion. 2) Waiting and delivery time—The average time customers wait for receipt of goods. Customers increasingly prefer faster delivery channels. 3) Spatial convenience—The degree to which the marketing channel makes it easy for customers to purchase the product. 4) Product variety—The assortment provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need, though too many choices can sometimes create a negative effect. 5) Service backup—Add-on services (credit, delivery, installation, repairs) provided by the channel. The more service backup, the greater the benefit provided by the channel.

Four Physical Distribution Principles

1) Massed Reserves 2) Minimum Total Transactions 3) Proximity 4) Postponement is as an operations design principle to mitigate the negative impact of product variety on operational performance

For an ad to be judged informational

1. Present factual, relevant information about the brand . 2. Present information which is immediately and obviously important to the potential consumer. 3. Present data which the consumer accepts as being verifiable. Informational Appeal: Focuses on the consumer's practical, functional, or utilitarian need for the product or service Emphasize: - Benefits - Features - Reasons for owning

Setting the price

A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it enters bids on new contract work. The firm must decide where to position its product on quality and price. Most markets have three to five price points or tiers. Firms devise their branding strategies to help convey the price-quality tiers of their products or services to consumers.

Channel Evolution

A new firm typically starts as a local operation selling in a fairly circumscribed market, using a few existing intermediaries. Identifying the best channels might not be a problem; the problem is often to convince the available intermediaries to handle the firm's line. In short, the channel system evolves as a function of local opportunities and conditions, emerging threats and opportunities, and company resources and capabilities.

Consumer cooperative

A retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends. Local cooperative grocery stores can be found in many markets.

Voluntary chain

A wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. Independent Grocers Alliance (IGA).

Procurement

After deciding on the product-assortment strategy, the retailer must establish merchandise sources, policies, and practices.

Control and Adaptive Criteria

Agents may concentrate on the customers who buy the most, not necessarily those who buy the manufacturer's goods. They might not master the technical details of the company's product or handle its promotion materials effectively. To develop a channel, members must commit to each other for a specified period of time. Yet these commitments invariably reduce the producer's ability to respond to change and uncertainty. The producer needs channel structures and policies that provide high adaptability

(Ch 18) Retailing

All the activities in selling goods or services directly to final consumers for personal, nonbusiness use

Services

Another differentiator is unerringly reliable customer service, whether face to face, across phone lines, or via online chat.

Prices

Are a key positioning factor and must be set in relationship to the target market, product-and-service assortment mix, and competition.

Sales Agency

Are less expensive, but costs rise faster because sales agents get larger commissions.

Purchase Decision

Based on how consumers perceive prices and what they consider the current actual price to but --not the marketer's stated price

Buyer Turnover

Buyer turnover expresses the rate at which new buyers enter the market; the higher this rate, the more continuous the advertising should be.

Conventional marketing channel

Consists of an independent producer, wholesaler(s), and retailer(s). Each is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole. No channel member has complete or substantial control over other members.

M-Commerce Advertising and Promotion

Consumers often use their smart phones to find deals or capitalize on them: the redemption rate for mobile coupons (10 percent) far exceeds that of paper coupons (1 percent).

Selecting media timing and allocation for new product

Continuity means exposures appear evenly throughout a given period. Generally, advertisers use continuous advertising in expanding markets, with frequently purchased items, and in tightly defined buyer categories. Concentration calls for spending all the advertising dollars in a single period. This makes sense for products with one selling season or related holiday. Flighting calls for advertising during a period, followed by a period with no advertising, followed by a second period of advertising activity. It is useful when funding is limited, the purchase cycle is relatively infrequent, or items are seasonal. Pulsing is continuous advertising at low levels, reinforced periodically by waves of heavier activity. It draws on the strengths of continuous advertising and flights to create a compromise scheduling strategy. Those who favor pulsing believe the audience will learn the message more thoroughly and at a lower cost to the firm.

Franchise organization

Contractual association between a franchisor and franchisees, popular in a number of product and service areas. Dunkin' Donuts, Marriott, H&R Block, and The UPS Store.

Economic Criteria

Every channel member will produce a different level of sales and costs.

Warehousing

Every company must store finished goods until they are sold because production and consumption cycles rarely match. But warehousing and inventory costs are higher.

Store Atmosphere

Every store has a look and a physical layout that makes it hard or easy to move around (see "Marketing Memo: Helping Stores to Sell").

Implementing and evaluating the program for sales promotion

Implementing and evaluating the program: - Lead time: Lead time is the time necessary to prepare the program prior to launching it. - Sell-in time: begins with the promotional launch and ends when approximately 95 percent of the deal merchandise is in the hands of consumers. - Sales/scanner data - Consumer surveys - Experiments

Product life-cycle stage

In the introduction stage of the product life cycle, advertising, events and experiences, and publicity have the highest cost-effectiveness, followed by personal selling to gain distribution coverage and sales promotion and direct marketing to induce trial. In the growth stage, demand has its own momentum through word of mouth and interactive marketing. Advertising, events and experiences, and personal selling all become more important in the maturity stage. In the decline stage, sales promotion continues strong, other communication tools are reduced, and salespeople give the product only minimal attention.

Retailer cooperative

Independent retailers using a central buying organization and joint promotion efforts. Unified Grocers, ACE Hardware.

Inventory

Inventory cost increases at an accelerating rate as the customer-service level approaches 100 percent. Management needs to know how much sales and profits would increase as a result of carrying larger inventories and promising faster order fulfillment times and then make a decision.

5) Online and social media marketing

Can take many forms to interact with consumers when they are in active search mode or just browsing and surfing online for something to do. They share three characteristics: 1. Rich—Much information or entertainment can be provided—as much or as little as a consumer might want. 2. Interactive—Information can be changed or updated depending on the person's response. 3. Up to date—A message can be prepared very quickly and diffused through social media channels.

Value-Priced Competitors

Companies offering the powerful combination of low price and high quality are capturing the hearts and wallets of consumers all over the world. Ex. JetBlue, Target, Walmart

1) Reference Prices

Comparing an observed price to an internal reference price they remember.

Data Mining

Data mining: - Uses sophisticated statistical and mathematical techniques on data to extract useful information about individuals, trends, and segments

Data Warehouse

Data warehouse: - Captures, queries, and analyzes data to draw inferences about an individual customer's needs and responses

Designing the Sales Force

Designing the Sales Force: - Sales force objectives - Sales force strategy - Sales force structure - Sales force size - Sales force compensation

Establishing channel objectives and constraints

Key channel concerns: -Number of channel intermediaries -Support services required -Speed of the channel -Service capabilities and requirements -Service related costs -Channel length and desire for control

2) Price Quality Inferences

Many consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes, expensive cars, and designer clothing.

Price Elasticity of Demand

Marketers need to know how responsive, or elastic, demand is to a change in price.

Estimating Demand Curves

Most companies attempt to measure their demand curves: -Surveys: explore how many units consumers would buy at different proposed prices. -Price experiments: vary the prices of different products in a store or of the same product in similar territories to see how the change affects sales. -Statistical analysis: of past prices, quantities sold, and other factors can reveal their relationships.

Personal communications

Personal communications channels let two or more persons communicate face to face or person to audience through a phone, surface mail, or e-mail. They derive their effectiveness from individualized presentation and feedback and include direct marketing, personal selling, and word of mouth.

Place Advertising Options

Place advertising options: 1. Billboards: use colorful, digitally produced graphics, backlighting, sounds, movement, and unusual— even 3D—images 2. Public spaces: ads are appearing in such unconventional places as movie screens, airplane bodies, and fitness equipment, as well as in classrooms, sports arenas, office and hotel elevators, and other public places 3. Product placement: marketers pay $100,000 to $500,000 so their products will make cameo appearances in movies and on television. 4. Point of Purchase: (P-O-P), including ads on shopping carts, cart straps, aisles, and shelves and in-store demonstrations, live sampling, and instant coupon machines.

Six Steps in Effective Selling

Prospecting and Qualifying The first step in selling is to identify and qualify prospects. More companies are taking responsibility for finding and qualifying leads so salespeople can use their expensive time doing what they do best: selling. Preapproach The salesperson needs to learn as much as possible about the prospect company (what it needs, who takes part in the purchase decision) and its buyers (personal characteristics and buying styles). The sales rep must thoroughly understand the purchasing process in terms of who, when, where, how, and why in order to set call objectives: to qualify the prospect, gather information, or make an immediate sale. Another task is to choose the best contact approach—a personal visit, phone call, e-mail, or letter. Presentation and Demonstration The salesperson tells the product "story" to the buyer, using a features, advantages, benefits, and value (FABV) approach. The pitch to a prospective client must be highly relevant, engaging, and compelling—there is always another company waiting to take that business. Overcoming Objections Customers typically pose objections. Psychological resistance includes resistance to interference, preference for established supply sources or brands, apathy, reluctance to give up something, unpleasant associations created by the sales rep, predetermined ideas, dislike of making decisions, and a neurotic attitude toward money. Logical resistance might be objections to the price, delivery schedule, or product or company characteristics. To handle these objections, the salesperson maintains a positive approach, asks the buyer to clarify the objection, questions in such a way that the buyer answers his own objection, denies the validity of the objection, or turns it into a reason for buying. Closing Closing signs from the buyer include physical actions, statements or comments, and questions. Reps can ask for the order, recapitulate the points of agreement, offer to help write up the order, ask whether the buyer wants A or B, get the buyer to make minor choices such as color or size, or indicate what the buyer will lose by not placing the order now. The salesperson might offer specific inducements to close, such as an additional service, an extra quantity, or a token gift. Follow-up and Maintenance Follow-up and maintenance are necessary to ensure customer satisfaction and repeat business. Immediately after closing, the salesperson should cement any necessary details about delivery time, purchase terms, and other matters important to the customer. He or she should schedule a follow-up call after delivery to ensure proper installation, instruction, and servicing and to detect any problems, assure the buyer of his or her interest, and reduce any cognitive dissonance. The salesperson should develop a maintenance and growth plan for the account.

Purchase Frequency

Purchase frequency is the number of times the average buyer buys the product during the period; the higher the purchase frequency, the more continuous the advertising should be.

How companies price?

Small companies: boss price Large companies: division/product line managers Proper way: 1) Understanding of consumer pricing psychology 2) A systematic approach to setting, adapting and changing prices

Types of Retailers

Store retailers, nonstore retailers, and retail organizations

Television ads

Television ads: is generally acknowledged as the most powerful advertising medium and reaches a broad spectrum of consumers at low cost per exposure. - Vividly demonstrates product attributes - Persuasively explains consumer benefits - Portrays usage imagery/brand personality - Product/brand can be overlooked - Creates clutter - Easy to ignore or forget ads

7) Direct and database marketing

The advent of "Big Data" has given marketers the opportunity to learn even more about consumers and develop more personal and relevant marketing communications. Three noteworthy characteristics of direct and database marketing are: 1. Personal—Personal facts, opinions, and experiences can be stored in massive databases and incorporated into personal messages. 2. Proactive—A direct marketing piece can create attention, inform consumers, and include a call to action. 3. Complementary—Product information can be provided that helps other marketing communications, especially in terms of e-commerce. A good catalog might spur online shopping.

Store Activities and Experiences

The growth of e-commerce has forced traditional brick-and-mortar retailers to respond. Shoppers can actually see, touch, and test; real-life customer service; and no delivery lag time for most purchases, stores also provide a shopping experience as a strong differentiator.

Macroscheduling Decisions

The macroscheduling decision relates to seasons and the business cycle. Suppose 70 percent of a product's sales occur between June and September. The firm can vary its advertising expenditures to follow the seasonal pattern, to oppose the seasonal pattern, or to be constant throughout the year.

Yield Pricing

They offer discounted but limited early purchases, higher-priced late purchases, and the lowest rates on unsold inventory just before it expires.

Total number of exposures (E)

Total number of exposures (E): Gross Rating Points (GRP): E = R × F

Order Processing

Trying to shorten the order-to-payment cycle—that is, the time between an order's receipt, delivery, and payment.

Channels

Based on a target market analysis and other considerations retailers must decide which channels to employ to reach their customers. Increasingly, the answer is multiple channels

Four types of sales force

Four types of sales forces: 1. Strategic market sales force assigned to major accounts 2. A geographic sales force calling on customers in different territories 3. A distributor sales force calling on and coaching distributors 4. An inside sales force marketing and taking orders online and via phone

Nonpersonal Channels

Nonpersonal channels are communications directed to more than one person and include advertising, sales promotions, events and experiences, and public relations.

Microscheduling Decisions

The microscheduling decision calls for allocating advertising expenditures within a short period to obtain maximum impact. Suppose the firm decides to buy 30 radio spots in September.

The principle of congruity

The principle of congruity implies that communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience.

Horizontal marketing systems

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. Each company lacks the capital, know-how, production, or marketing resources to venture alone, or it is afraid of the risk. The companies might work together on a temporary or permanent basis or create a joint venture company.

Weighted number of exposures (WE)

Weighted number of exposures (WE) WE = R × F × I Reach is most important when launching new products, flanker brands, extensions of well-known brands, and infrequently purchased brands or when going after an undefined target market. Frequency is most important where there are strong competitors, a complex story to tell, high consumer resistance, or a frequent-purchase cycle.

Wholesalers

Wholesalers (also called distributors) differ from retailers in a number of ways: 1) Wholesalers pay less attention to promotion, atmosphere, and location because they are dealing with business customers rather than final consumers. 2) Wholesale transactions are usually larger than retail transactions, and wholesalers usually cover a larger trade area than retailers. 3) Wholesalers and retailers are subject to different legal regulations and taxes.

3) Price Endings

Price Endings Many sellers believe prices should end in an odd number. Customers perceive an item priced at $299 to be in the $200 rather than the $300 range. But if a company wants a high-price image, it should probably avoid the odd-ending tactic.

Pricing Practices (Changing Pricing Environment)

Pricing practices have changed significantly, thanks in part to a severe recession in 2008-2009. New millennial generation practices include: 1) Renting 2) Borrowing 3) Sharing are valid options to many.

Radio Ads

Radio ads: Is a pervasive medium: Ninety-three percent of all U.S. citizens age 12 and older listen daily and for about 20 hours a week on average - Occurs in the car and out of home - Main advantage is flexibility - Ads are relatively inexpensive - Can be scheduled to air quickly - Effective when run in morning - Can be extremely creative - Can tap into the listener's imagination - Legal and social issues - Advertisers must not make false claims - Must not use false demonstrations - Must not create ads with the capacity to deceive - Must avoid bait-and-switch advertising

Forgetting Rate

The forgetting rate is the rate at which the buyer forgets the brand; the higher the forgetting rate, the more continuous the advertising should be

Transformational

"A transformational advertisement is one which associates the experience of using (consuming) the advertised brand with a unique set of psychological characteristics which would not typically be associated with the brand experience to the same degree without exposure to the advertisement. Thus, advertisements in this category "transform" the experience of using the brand by endowing this use with a particular experience that is different from that of using any similar brand." In addition, it must contain the following characteristics: 1. It must make the experience of using the product richer, warmer, more exciting, and/or more enjoyable, than that obtained solely from an objective description of the advertised brand. 2. It must connect the experience of the advertisement so tightly with the experience of using the brand that consumers cannot remember the brand without recalling the experience generated by the advertisement.

Integrated marketing communications (IMC)

- "A planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time" - This planning process evaluates the strategic roles of a variety of communications disciplines and combines them seamlessly to provide clarity, consistency, and maximum impact of messages.

Sales Promotion

- A collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade - Establishing objectives: For consumers, objectives include encouraging more frequent purchases or purchase of larger-sized units among users, building trial among nonusers, and attracting switchers away from competitors' brands. If some of the brand switchers would not have otherwise tried the brand, promotion can yield long-term increases in market share.56 Ideally, consumer promotions have short-run sales impact and long-run brand equity effects. For retailers, objectives include persuading retailers to carry new items and more inventory, encouraging off-season buying, encouraging stocking of related items, offsetting competitive promotions, building brand loyalty, and gaining entry into new retail outlets. For the sales force, objectives of promotion include encouraging their support of a new product or model, encouraging more prospecting, and stimulating off-season sales.

Private Labels

- A private-label brand is a brand that retailers and wholesalers develop - Role of private labels - Private-label success factors - A one-percentage-point shift from national brands to private labels in food and beverages is estimated to add $5.5 billion in revenue for supermarket chains - Retailers also develop exclusive store brands to differentiate themselves from competitors. Many price-sensitive consumers prefer store brands in certain categories - In the battle between manufacturers' and private labels, retailers have increasing market power. Because shelf space is scarce, many supermarkets charge a slotting fee for accepting a new brand to cover the cost of listing and stocking it. Retailers are building better quality into their store brands and emphasizing attractive, innovative packaging. Supermarket retailers are adding premium store-brand items.

Mark up Pricing

- Add a standard markup to the product's cost Markup Price = Unit Cost/(1-Desired Return on Sales)

Ad creative development and execution

- Advertising medium (television, print, and radio advertising media) - The ad's impact depends not only on what it says but, often more important, on how it says it.

Optimal Ordering Quantity

- As inventory draws down, management must know at what stock level to place a new order. This stock level is called the order (or reorder) point. - The order point should balance the risks of stock-out against the costs of overstock. The other decision is how much to order. The larger the quantity ordered, the less frequently an order needs to be placed. - The company needs to balance order-processing costs and inventory-carrying costs. If setup costs are low, the manufacturer can produce the item often, and the average cost per item is stable and equal to the running costs. If setup costs are high, however, the manufacturer can reduce the average cost per unit by producing a long run and carrying more inventory.

Channel Power

- Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise 1. Coercive: A manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power. 2. Reward power: The manufacturer offers intermediaries an extra benefit for performing specific acts or functions. Reward power produces better results than coercive power, but intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur. 3. Legitimate power: The manufacturer requests a behavior that is warranted under the contract. As long as the intermediaries view the manufacturer as a legitimate leader, legitimate power works. 4. Expert power: The manufacturer has special knowledge the intermediaries value. Once the intermediaries acquire this expertise, however, expert power weakens. The manufacturer must continue to develop new expertise so intermediaries will want to continue cooperating. 5. Referent power: The manufacturer is so highly respected that intermediaries are proud to be associated with it. Companies such as IBM, Caterpillar, and Hewlett-Packard have high referent power.

Omnichannel Marketing

- Companies are seeking to achieve omnichannel marketing. Where multiple channels work seamlessly together and match each target customer's preferred ways of doing business, delivering the right product information and customer service regardless of whether customers are online, in the store, or on the phone.

Transportation

- Containerization: Containerization consists of putting the goods in boxes or trailers that are easy to transfer between two transportation modes Ex. Piggyback (use of rail and trucks/is cheaper), fishyback (water and trucks) trainship (water and rail) and airtruck (air and truck) - Private vs. contract vs. common carriers - Private: If the shipper owns its own truck or air fleet it is private carrier - Contract: Is an independent organization selling transportation services to others on a contract basis - Common carriers: Provides services between predetermined points on a scheduled basis and is available to all shippers at standard rates. -Some contract carriers are investing and innovating to create strong value propositions.

Price Cutting Traps

- Cut prices to keep customers or beat competitors encourages customers to demand price concessions and trains salespeople to offer them. A price-cutting strategy can lead to other possible traps: 1) Low-quality trap: Consumers assume quality is low. 2) Fragile-market-share trap: A low price buys market share but not market loyalty. The same customers will shift to any lower-priced firm that comes along. 3) Shallow-pockets trap. Higher-priced competitors match the lower prices but have longer staying power because of deeper cash reserves. 4) Price-war trap. Competitors respond by lowering their prices even more, triggering a price war.

The Digital Channels Revolution

- Digital revolution is profoundly transforming distribution strategies. With customers—both individuals and businesses—becoming more comfortable buying online - Want the advantages and vast selection of online but also the high personalized service * Customer support in store/online/phone *Check online for product availability at local stores *Order product online to pick up at store Return a product purchased online to a nearby store

Nonstore Retailing

- Direct marketing: has roots in direct-mail and catalog marketing. it includes telemarketing, television direct-response marketing and online shopping - Direct selling: also called multilevel selling and network marketing, is a multibillion-dollar industry, with companies selling door to door or through at-home sales parties. - Automatic vending: offers a variety of merchandise, including impulse goods such as soft drinks, coffee, candy, newspapers, magazines, and other products such as hosiery, cosmetics, hot food, and paperbacks - Buying services: storeless retailer serving a specific clientele—usually employees of large organizations—who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership.

Inelastic and Elastic Demand

- Each price will lead to a different level of demand & have different impact on a company's marketing objectives. - The normally inverse relationship between price and demand is captured in a demand curve. - The higher the price, the lower the demand. - Prestige goods: the demand curve sometimes slopes upward because some consumers see higher price as a signal of a better product. However, if the price is too high, demand may fall.

Creating experiences

- Experiential marketing - Many firms are creating their own events and experiences to create consumer and media interest and involvement.

Develop product differentiation

- Feature exclusive national brands: not available at competing retailers - Feature private-label merchandise: Feature mostly private-label merchandise. Benetton and Gap design most of the clothes carried in their stores. Many supermarket and drug chains carry private-label merchandise. - Feature distinctive-merchandise events: - Feature ever-changing merchandise - Feature the latest merchandise first - Offer merchandise-customizing services - Offer a highly targeted assortment

Four components of sales force compensation

- Four components of sales force compensation 1. Fixed amount: is common in jobs with a high ratio of nonselling to selling duties and jobs where the selling task is technically complex and requires teamwork 2. Variable amount: sales are cyclical or depend on individual initiative. 3. Expense allowances: enable sales reps to meet the costs of travel and entertaining on the company's behalf. 4. Benefits: such as paid vacations, sickness or accident benefits, pensions, and health and life insurance, provide security and job satisfaction.

Types of conflict and competition

- Horizontal channel conflict: occurs between channel members at the same level - Vertical channel conflict: occurs between different levels of the channel - Multichannel conflict: exists when the manufacturer has established two or more channels that sell to the same market. It's likely to be especially intense when the members of one channel get a lower price (based on larger-volume purchases) or work with a lower margin.

Developing Effective Communications

- Identify the target audience - Set the communications objectives: 1. Establish need for category—Establishing a product or service category as necessary for removing or satisfying a perceived discrepancy between a current motivational state and a desired motivational state. 2. Build brand awareness—Fostering the consumer's ability to recognize or recall the brand in sufficient detail to make a purchase. 3. Build brand attitude—Helping consumers evaluate the brand's perceived ability to meet a currently relevant need. 4. Influence brand purchase intention—Moving consumers to decide to purchase the brand or take purchase-related action.

Constructing a Direct-Mail Campaign

- In constructing an effective direct-mail campaign, direct marketers must choose their objectives, target markets and prospects, offer elements, means of testing the campaign, and measures of campaign success. Objectives Most direct marketers judge a campaign's success by the response rate, measured in customer orders. Direct mail can also produce prospect leads, strengthen customer relationships, inform and educate customers, remind customers of offers, and reinforce recent customer purchase decisions. Target Markets and Prospects Most direct marketers apply the RFM (recency, frequency, monetary amount) formula to select customers according to how much time has passed since their last purchase, how many times they have purchased, and how much they have spent since becoming a customer. Marketers also identify prospects on the basis of age, sex, income, education, previous mail-order purchases, and occasion. The company's best prospects are customers who have bought its products in the past. Offer Elements The offer strategy has five elements—the product, the offer, the medium, the distribution method, and the creative strategy. The direct-mail marketer also must choose five components of the mailing itself: the outside envelope, sales letter, circular, reply form, and reply envelope. A common direct marketing strategy is to follow up direct mail with an e-mail. Testing Elements One of the great advantages of direct marketing is the ability to test, under real marketplace conditions, different elements of an offer strategy, such as products, product features, copy platform, mailer type, envelope, prices, or mailing lists. Response rates typically understate a campaign's long-term impact. Measuring Campaign Success: Lifetime Value By adding up the planned campaign costs, the direct marketer can determine the needed break-even response rate. This rate must be net of returned merchandise and bad debts. A specific campaign may fail to break even in the short run but can still be profitable in the long run if we factor in customer lifetime value (see Chapter 5) by calculating the average customer longevity, average customer annual expenditure, and average gross margin, minus the average cost of customer acquisition and maintenance (discounted for the opportunity cost of money).

Communication-effect research

- In-home tests, trailer tests, theater tests, on-air tests - Most advertisers try to measure the communication effect of an ad—that is, its potential impact on awareness, knowledge, or preference. They would also like to measure its sales effect - Communication-effect research, called copy testing, seeks to determine whether an ad is communicating effectively. - Marketers should perform this test both before an ad is put into media and after it is printed or broadcast.

3) Events and Experiences

- Offer many advantages if they have: 1. Relevant—A well-chosen event or experience can be seen as highly relevant because the consumer is often personally invested in the outcome. 2. Engaging—Given their live, real-time quality, events and experiences are more actively engaging for consumers. 3. Implicit—Events are typically an indirect soft sell.

2) Backward Flow of Activity of Marketing Channels

- Ordering and payment constitute a backward flow from customers to the company

Business Database

- Past purchases - Past volumes, prices, and profits - Buyer teams' names - Contract status - Supplier's share of customer's business - Competitive suppliers - Competitive strengths and weaknesses

Major sponsorship decisions

- Making sponsorships successful requires choosing the appropriate events, designing the optimal sponsorship program, and measuring the effects of sponsorship. Choosing Events: Because of the number of sponsorship opportunities and their huge cost, many marketers are becoming more selective. The event must meet the marketing objectives and communication strategy defined for the brand. Designing Sponsorship: Programs Many marketers believe the marketing program accompanying an event sponsorship ultimately determines its success. At least two to three times the amount of the sponsorship expenditure should be spent on related marketing activities. Measuring Sponsorship: Activities It's a challenge to measure the success of events. Supply-side methods for measuring an event's success assess the media coverage, for example, the number of seconds the brand is clearly visible on a television screen or the column inches of press clippings that mention it. The demand-side method identifies the sponsorship's effect on consumers' brand knowledge. Marketers can survey spectators to measure their recall of the event and their resulting attitudes and intentions toward the sponsor.

Measuring Sponsorship Programs

- Measure outcomes, not outputs - Define/benchmark objectives on front end - Measure return for each objective - Measure behavior - Apply assumptions/ratios used by other departments - Measure results of emotional connections - Identify group norms - Include cost savings in ROI calculations - Slice the data - Capture normative data

Coordinating media and implementing IMC

- Media coordination can occur across and within media types, but marketers should combine personal and nonpersonal communications channels through multiple-vehicle, multiple-stage campaigns to achieve maximum impact and increase message reach and impact. - Integrated marketing communications can produce stronger message consistency and help build brand equity and create greater sales impact. The following "six Cs" criteria can help determine whether communications are truly integrated: 1) Coverage. Coverage is the proportion of the audience reached by each communication option employed as well as the amount of overlap among those options. 2) Contribution. Contribution is the inherent ability of a marketing communication to create the desired response and communication effects from consumers in the absence of exposure to any other communication option. 3) Commonality. Commonality is the extent to which common associations are reinforced across communication options; that is, the extent to which different communication options share the same meaning. 4) Complementarity. Communication options are often more effective when used in tandem. Complementarity relates to the extent to which different associations and linkages are emphasized across communication options. 5) Conformability. In any integrated communication program, the message will be new to some consumers and not to others. Conformability refers to the extent to which a marketing communication option works for such different groups of consumers. 6) Cost. Marketers must evaluate marketing communications on all these criteria against their cost to arrive at the most effective and most efficient communications program.

Advertising Campaign

- Message generation and evaluation - Advertisers are always seeking "the big idea" that connects with consumers rationally and emotionally, distinguishes the brand from competitors, and is broad and flexible enough to translate to different media, markets, and time periods. -Positioning of an ad: A good ad normally focuses on one or two core selling propositions. As part of refining the brand positioning, the advertiser should conduct market research to determine which appeal works best with its target audience. - Creative Brief: Then prepare a creative brief, typically one or two pages. This is an elaboration of the positioning strategy and includes considerations such as key message, target audience, communications objectives (to do, to know, to believe), key brand benefits, supports for the brand promise, and media.

Message Source

- Messages delivered by attractive or popular sources can achieve higher attention and recall - The most credible source will score high on all three dimensions—expertise, trustworthiness, and likability.

Mobile Commerce (M-Commerce) Marketing

- Mobile channels and media can keep consumers as connected and interacting with a brand as they choose - Understanding how consumers want to use their smart phones is critical to understanding the role of advertising.

Competitive retail market structure

- New retail forms and combinations: To better satisfy customers' need for convenience, a variety of new retail forms have emerged. - Growth of giant retailers: Through their superior information systems, logistical systems, and buying power, giant retailers such as Walmart are able to deliver good service and immense volumes of product to masses of consumers at appealing prices. - Growth of intertype competition: One consequence of the growth of the supercenters is that department stores can't worry just about other department stores—discount chains such as Walmart and Tesco are expanding into product areas such as clothing, health, beauty, and electrical appliances. - Emergence of fast retailing (Desigual): An important trend in fashion retailing in particular, but with broader implications, is the emergence of fast retailing. Here retailers develop completely different supply chain and distribution systems to allow them to offer consumers constantly changing product choices. - Decline of middle-market retailers: We can characterize the retail market today as hourglass or dog-bone shaped: Growth seems to be centered at the top (with luxury offerings from retailers such as Tiffany and Neiman Marcus) and at the bottom (with discount pricing from retailers such as Walmart and Dollar General). As discount retailers improve their quality and image, consumers have been willing to trade down.

Sales Rep Productivity

- Norms for prospect calls: Companies often specify how much time reps should spend prospecting for new accounts. Left to their own devices, many reps will spend most of their time with current customers, who are known quantities. Reps can depend on them for some business, whereas a prospect might never deliver any. - Using sales time efficiently: Time-and-duty analysis and hour-by-hour breakdowns of activities. Companies constantly try to improve sales force productivity. To cut costs, reduce time demands on their outside sales force, and leverage technological innovations, many have increased the size and responsibilities of their inside sales force. - Sales technology: The salesperson today has truly gone electronic (tablet, Web site, and social media). Not only is sales and inventory information transferred much more quickly, but specific computer-based decision support systems have been created for sales managers and sales representatives.

Trade Promotions Tools

- Price-off (off invoice or off list) - Allowance: An amount offered in return for the retailer's agreeing to feature the manufacturer's products in some way. An advertising allowance compensates retailers for advertising the manufacturer's product. A display allowance compensates them for carrying a special product display. - Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size. They award money to the trade: 1) to persuade the retailer or wholesaler to carry the brand 2) to persuade the retailer or wholesaler to carry more units than the normal amount 3) to induce retailers to promote the brand by featuring, display, and price reductions 4) to stimulate retailers and their sales clerks to push the product.

Salespeople complete one or more specific tasks

- Prospecting. Searching for prospects or leads - Targeting. Deciding how to allocate their time among prospects and customers - Communicating. Communicating information about the company's products and services - Selling. Approaching, presenting, answering questions, overcoming objections, and closing sales - Servicing. Providing various services to the customers—consulting on problems, rendering technical assistance, arranging financing, expediting delivery - Information gathering. Conducting market research and doing intelligence work - Allocating. Deciding which customers will get scarce products during product shortages

Levels of service for store retailers

- Self-service: Self-service is the cornerstone of all discount operations. Many customers are willing to carry out their own "locate-compare-select" process to save money. - Self-selection: Customers find their own goods, though they can ask for assistance. - Limited service: These retailers carry more shopping goods and services such as credit and merchandise-return privileges. Customers need more information and assistance. - Full service: Salespeople are ready to assist in every phase of the "locate-compare-select" process. Customers who like to be waited on prefer this type of store.

Wholesaler Functions

- Selling and promoting: Wholesalers' sales forces help manufacturers reach many small business customers at a relatively low cost. They have more contacts, and buyers often trust them more than they trust a distant manufacturer. - Buying and assortment building: Wholesalers are able to select items and build the assortments their customers need, saving them considerable work. - Bulk breaking: Wholesalers achieve savings for their customers by buying large carload lots and breaking the bulk into smaller units. - Warehousing: Wholesalers hold inventories, thereby reducing inventory costs and risks to suppliers and customers. - Transportation: Wholesalers can often provide quicker delivery to buyers because they are closer to the buyers. - Financing: Wholesalers finance customers by granting credit and finance suppliers by ordering early and paying bills on time. - Risk bearing: Wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence. - Market information: Wholesalers supply information to suppliers and customers regarding competitors' activities, new products, price developments, and so on. - Management services and counseling: Wholesalers often help retailers improve their operations by training sales clerks, helping with store layouts and displays, and setting up accounting and inventory-control systems. They may help industrial customers by offering training and technical services.

(Ch 17) Marketing Channels

- Sets of interdependent organizations participating in the process of making a product or service available for use or consumption - Intermediaries: constitute a marketing channel (also called a trade channel or distribution channel). Merchants, agents, and facilitators

The downside of database marketing

- Some situations are just not conducive to database marketing - Building and maintaining a customer database requires a large investment - Employees may resist becoming customer-oriented and using the available information - Not all customers want a relationship with the company

1) Forward Flow of Activity of Marketing Channels

- Storage, movement, title and communications constitute a forward flow of activity from the company to the customer

Marketing Channel System

- The chief roles of marketing channels is to convert potential buyers into profitable customers. - Marketing channels must not just serve markets, they must also make them. In managing its intermediaries, the firm must decide how much effort to devote to push and to pull marketing. - A push strategy uses the manufacturer's sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. In a pull strategy the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

Database marketing

- The process of building, maintaining, and using customer databases and other databases (of products, suppliers, or resellers) to contact, transact, and build customer relationships

Ideal Ad Campaign

- The right consumer is exposed to the message at the right place and time - The ad causes the consumer to pay attention - The ad reflects consumer's level of understanding of the brand - The ad positions points-of-difference and points-of-parity - The ad motivates consumers to consider purchase - The ad creates strong brand associations

Sales Impact

- The sales impact is easiest to measure in direct marketing situations and hardest in brand or corporate image-building advertising. - Companies want to know whether they are overspending or underspending on advertising. - Researchers can measure sales impact with the historical approach, which uses advanced statistical techniques to correlate past sales to past advertising expenditures. - Other researchers use experimental data to measure advertising's sales impact.

Types of sales representatives

- The term sales representative covers six positions, ranging from the least to the most creative types of selling: 1. Deliverer—A salesperson whose major task is the delivery of a product (water, fuel, oil). 2. Order taker—An inside order taker (standing behind the counter) or outside order taker (calling on the supermarket manager). 3. Missionary—A salesperson not permitted to take an order but expected rather to build goodwill or educate the actual or potential user (the medical "detailer" representing an ethical pharmaceutical house). 4. Technician—A salesperson with a high level of technical knowledge (the engineering salesperson who is primarily a consultant to client companies). 5. Demand creator—A salesperson who relies on creative methods for selling tangible products (vacuum cleaners, cleaning brushes, household products) or intangibles (insurance, advertising services, or education). 6. Solution vendor—A salesperson whose expertise is solving a customer's problem, often with a system of the company's products and services (for example, computer and communications systems).

Direct Marketing

- The use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen - Direct marketers can use a number of channels to reach individual prospects and customers: direct mail, catalog marketing, telemarketing, interactive TV, kiosks, Web sites, and mobile devices. - Direct marketing can reach prospects at the moment they want a solicitation - Direct marketing also makes the company's offer and strategy less visible to competitors. Finally, direct marketers can measure responses to their campaigns to decide which have been the most profitable. 1. Direct-mail marketing means sending an offer, announcement, reminder, or other item to an individual consumer. Using highly selective mailing lists, direct marketers send out millions of mail pieces each year—letters, fliers, foldouts, and other "salespeople with wings." 2. Catalog marketing, companies may send full-line merchandise catalogs, specialty consumer catalogs, and business catalogs, usually in print form but also as DVDs or online. 3. Telemarketing is the use of the telephone and call centers to attract prospects, sell to existing customers, and provide service by taking orders and answering questions. It helps companies increase revenue, reduce selling costs, and improve customer satisfaction. Companies use call centers for inbound telemarketing—receiving calls from customers—and outbound telemarketing—initiating calls to prospects and customers. 4. Direct marketers use all the major media. Newspapers and magazines carry ads offering books, clothing, appliances, vacations, and other goods and services that individuals can order via toll-free numbers. Radio ads present offers 24 hours a day. Some companies prepare 30- and 60-minute infomercials to combine the selling power of television commercials with the draw of information and entertainment. At-home shopping channels are dedicated to selling goods and services through a toll-free number or via the Internet for delivery within 48 hours.

Number of reasons to sponsor events

- To identify with a target market or lifestyle - To increase salience of company/product name - To create/reinforce key brand image associations - To enhance corporate image - To create experiences and evoke feelings - To express commitment to the community or on social issues - To entertain key clients or reward employees - To permit merchandising/promotional opportunities

Marketing public relations (MPR) tasks

- To support corporate or product promotion and image making. Launching new products. The amazing one-time commercial success of toys such as LeapFrog, Beanie Babies, and Silly Bandz owes a great deal to strong publicity. Repositioning mature products. In a classic PR case study, New York City had extremely bad press in the 1970s until the "I Love New York" campaign. Building corporate image Building interest in a product category. Companies and trade associations have used MPR to rebuild interest in declining commodities such as eggs, milk, beef, and potatoes and to expand consumption of such products as tea, pork, and orange juice. Influencing specific target groups. McDonald's sponsors special neighborhood events in Latino and African American communities to build goodwill. Defending products that have encountered public problems. Building the corporate image in a way that reflects favorably on its products. The late Steve Jobs's heavily anticipated Macworld keynote speeches helped to create an innovative, iconoclastic image for Apple Corporation

Geofencing

- To target customers with a mobile promotion when they are within a defined geographical space, typically near or in a store. - The fact that a company can pinpoint a customer's or employee's location with GPS technology raises privacy issues. Like so many new technologies, such location-based services have potential for good and harm and will ultimately warrant public scrutiny and regulation.

2) Sales Promotion

- Use sales promotion tools—coupons, contests, premiums, and the like—to draw a stronger and quicker buyer response, including short-run effects such as highlighting product offers and boosting sagging sales. 1. Ability to be attention-getting—They draw attention and may lead the consumer to the product. 2. Incentive—They incorporate some concession, inducement, or contribution that gives value to the consumer. 3. Invitation—They include a distinct invitation to engage in the transaction now.

Integrated Marketing Channel System

- Where the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels. - The process calls for a more comprehensive, "big picture," approach to planning marketing and promotion programs. -Requires careful coordination of the communication functions that are utilized and work together. - A total marketing communications plan must be designed to achieve the company's near and long-term strategy.

Sales Force Size

- Workload approach to sales force size 1. Group customers into size classes according to annual sales volume 2. Establish desirable call frequencies for each customer class 3. Multiply the number of accounts in each size class by the corresponding call frequency to arrive at the total workload for the country 4. Determine the average number of calls a sales representative can make per year 5. Divide the total annual calls required by the average annual calls made by a sales representative to arrive at the number of sales representatives needed NS = (NC x FC x LC) / TA

Store Retailers

1) Specialty store: Narrow product line. 2) Department store: Several product lines. 3) Supermarket: Large, low-cost, low-margin, high-volume, self-service store designed to meet total needs for food and household products. 4) Convenience store: Small store in residential area, often open 24/7, limited line of high-turnover convenience products plus takeout. 5)Drug store: Prescription and pharmacies, health and beauty aids, other personal care, small durable, miscellaneous items. 6) Discount store: Standard or specialty merchandise; low-price, low-margin, high-volume stores. 7) Extreme value or hard-discount store: A more restricted merchandise mix than discount stores but at even lower prices. 8) Off-price retailer: Leftover goods, overruns, irregular merchandise sold at less than retail. 9) Superstore: Huge selling space, routinely purchased food and household items, plus services (laundry, shoe repair, dry cleaning, check cashing). 10) Catalog showroom: Broad selection of high-markup, fast-moving, brand-name goods sold by catalog at a discount. Customers pick up merchandise at the store.

Design the Communications

-Formulating the communications to achieve the desired response requires answering three questions: what to say (message strategy), how to say it (creative strategy), and who should say it (message source). 1. Message Strategy: In selecting message strategy, management searches for appeals, themes, or ideas that will tie in to the brand positioning and help establish points-of-parity or points-of-difference. Some may relate directly to product or service performance (the quality, economy, or value of the brand); others may relate to more extrinsic considerations (the brand as being contemporary, popular, or traditional). 2.Creative Strategy Communications effectiveness depends on how well a message is expressed as well as on its content. If a communication is ineffective, it may mean the wrong message was used or the right one was poorly expressed. Creative strategies are the way marketers translate their messages into a specific communication. We can broadly classify them as either informational or transformational appeals. An informational appeal elaborates on product or service attributes or benefits. A transformational appeal elaborates on a nonproduct-related benefit or image 3. Message Source Research has shown that the source's credibility is crucial to a message's acceptance. The three most often identified sources of credibility are expertise, trustworthiness, and likability.

Objective-and-Task Method

-The objective-and-task method has the advantage of requiring management to spell out its assumptions about the relationship among dollars spent, exposure levels, trial rates, and regular usage. 1. Establish the market share goal. The company estimates 50 million potential users and sets a target of attracting 8 percent of the market—that is, 4 million users. 2. Select the percentage of the market that should be reached by advertising. The advertiser hopes to reach 80 percent of the market (40 million prospects) with its advertising message. 3. Estimate the percentage of aware prospects who should be persuaded to try the brand. The advertiser would be pleased if 25 percent of aware prospects (10 million) tried Sunburst. It estimates that 40 percent of all triers, or 4 million people, will become loyal users. This is the market share goal. 4. Calculate the number of advertising impressions per 1 percent trial rate. The advertiser estimates that 40 advertising impressions (exposures) for every 1 percent of the population will bring about a 25 percent trial rate. 5. Find the number of gross rating points to be purchased. A gross rating point is one exposure to 1 percent of the target population. Because the company wants to achieve 40 exposures to 80 percent of the population, it will want to buy 3,200 gross rating points. 6. Calculate the necessary advertising budget on the basis of the average cost of buying a gross rating point. Suppose it costs an average of $3,277 to expose 1 percent of the target population to one impression. Then 3,200 gross rating points will cost $10,486,400 (= $3,277 X 3,200) in the introductory year.

Price Discounts and Allowances

1) Discount: A price reduction to buyers who pay bills promptly. Ex. 2/10 net 30 means payment is due in 30 days & buyer can deduct 2% by paying within 10 days. 2) Quantity Discount: A price reduction to those who buy large volumes. Ex. $10 per unit for fewer than 100 units; $9 per unit for 100 or more units. 3) Functional Discount: Discount (also called trade discount ) offered by a manufacturer to trade-channel. Manufacturers must offer the same functional discounts within each channel. 4) Seasonal Discount: price reduction to those who buy merchandise or services out of season. Hotels, motels, and airlines offer seasonal discounts in slow selling periods. 5) Allowances: extra payment designed to gain reseller participation in special programs. -Trade-in allowances: are granted for turning in an old item when buying a new one. - -Promotional allowances: reward dealers for participating in advertising and sales support programs

Types of Costs and Levels of Production

1) Fixed Cost vs. Variable Costs - fixed cost: known as overhead. Costs that don't vary with production level or sales revenue. Ex. heat bills, rent, etc. - variable costs: vary with production levels. 2) Total Costs: consists of sum of the fixed and variable costs for any given level of production 3) Average Costs: the cost per unit at that level of production. It equals total costs divided by production. - Demand sets the CEILING on the price a company can charge for products. Cost sets the FLOOR

Pricing Techniques to Stimulate Early Purchase

1) Loss-leader pricing: Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. This pays if the revenue on the additional sales compensates for the lower margins on the loss-leader items. 2) Special event pricing: Sellers will establish special prices in certain seasons to draw in more customers. Every August, there are back-to-school sales. 3) Special customer pricing: Sellers will offer special prices exclusively to certain customers. 4) Cash rebates: Auto companies and other consumer-goods companies offer cash rebates to encourage purchase of the manufacturers' products within a specified time period. 5) Low-interest financing: Instead of cutting its price, the company can offer low-interest financing. 6) Longer payment terms: Sellers, especially mortgage banks and auto companies, stretch loans over longer periods and thus lower the monthly payments. 7) Warranties and service contracts: Companies can promote sales by adding a free or low-cost warranty or service contract. 8) Psychological discounting: This strategy sets an artificially high price and then offers the product at substantial savings; for example, "Was $359, now $299."

Retailers must decide on the services mix to offer customers

1) Prepurchase services: include accepting telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion shows, and trade-ins. 2) Postpurchase services: include shipping and delivery, gift wrapping, adjustments and returns, alterations and tailoring, installations, and engraving. 3)Ancillary services: general information, check cashing, parking, restaurants, repairs, interior decorating, credit, rest rooms, and baby-attendant service.

Key channel factors that influence consumers

1) Price 2) Product assortment 3) Shopping goals (economic, social and experiential)

How to reduce price sensitivity

1) Product is distinctive 2) Buyers less aware off substitutes 3) Buyers can't compare quality of substitutes easily etc. - companies prefer consumers who are less price sensitive

Customer Database

A customer database, however, contains much more information, accumulated through customer transactions, registration information, telephone queries, cookies, and every customer contact. Customer Database: - Transactions - Registration information - Telephone queries - Cookies - Every customer contact - Past purchases - Demographics - Psychographics - Mediagraphics

Five Major Objectives for Pricing

1) Surviving: As long as prices cover variable costs and some fixed costs, the company stays in business. 2) Maximum Current Profit: Many companies try to set a price that will maximize current profits. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, or rate of return on investment. 3) Maximum Market Share: Some companies want to maximize their market share. They believe a higher sales volume will lead to lower unit costs and higher long-run profit, so they set the lowest price, assuming the market is price sensitive. 4) Maximum Market Skimming: In which prices start high and slowly drop over time to maximize market skimming. Ex. Sony 5) Product-Quality Leadership: A company might aim to be the product-quality leader in the market. Many brands strive to be "affordable luxuries"—products or services characterized by high levels of perceived quality, taste, and status with a price just high enough not to be out of consumers' reach.

Pricing Methods

1) Value Pricing: companies that adopt value pricing win loyal customers by charging a fairly low price for a high-quality offering 2) EDLP: using everyday low pricing (EDLP) charges a constant low price with little or no price promotion or special sales 3) Going-rate pricing: the firm bases its price largely on competitors' prices. It is popular.

Channel Levels

1) Zero-level channel (direct): manufacturer selling directly to the final customer. ex. mail order/online order. 2) One/two/three-level channels (intermediaries): - One channel contains one selling intermediary like retailers. - Two channels contain two/wholesaler and retailer - Three channels contain three selling intermediaries 3) Reverse-flow channels: Intermediaries include manufacturers' redemption centers, community groups, trash collection specialists, recycling centers, trash recycling brokers, and central processing warehousing. - reuse products or containers (ex. refillable chemical carrying drums) - to refurbish products for resale (ex. circuit boards or computers) - to recycle products - to dispose of products and packaging

Market Logistics Planning

1)Deciding on company's value proposition 2)Selecting best channel design and network strategy 3) Developing operational excellence 4) Implementing solution

Type of Product Market

1. Consumer vs. Business Marketers - Consumer marketers tend to spend comparatively more on sales promotion and advertising - Business marketers tend to spend comparatively more on personal selling. In general, personal selling is used more with complex, expensive, and risky goods and in markets with fewer and larger sellers (hence, business markets). 2. Advertising/sales promotion vs. personal selling - Advertising combined with personal selling can increase sales over personal selling alone. - An effectively trained company sales force can make four important contributions: 1. Increase stock position—Sales reps can persuade dealers to take more stock and devote more shelf space to the company's brand. 2. Build enthusiasm—Sales reps can build dealer enthusiasm by dramatizing planned advertising and communications support for the company's brand. 3. Conduct missionary selling—Sales reps can sign up more dealers. 4. Manage key accounts—Sales reps can take responsibility for growing business with the most important accounts.

Motivating Sales Representatives

1. Intrinsic versus extrinsic rewards: - One research study found the employee reward with the highest value was pay, followed by promotion, personal growth, and sense of accomplishment. Least valued were liking and respect, security, and recognition. In other words, salespeople are highly motivated by pay and the chance to get ahead and satisfy their intrinsic needs, and they may be less motivated by compliments and security. 2. Sales Quota: - Many companies set annual sales quotas, developed from the annual marketing plan, for dollar sales, unit volume, margin, selling effort or activity, or product type. Compensation is often tied to degree of quota fulfillment. The company first prepares a sales forecast that becomes the basis for planning production, workforce size, and financial requirements. Management then establishes quotas for regions and territories, which typically add up to more than the sales forecast to encourage managers and salespeople to perform at their best. Even if they fail to make their quotas, the company nevertheless may reach its sales forecast.

Public Relations department functions

1. Press relations—Presenting news and information about the organization in the most positive light 2. Product publicity—Sponsoring efforts to publicize specific products 3. Corporate communications—Promoting understanding of the organization through internal and external communications 4. Lobbying—Dealing with legislators and government officials to promote or defeat legislation and regulation 5. Counseling—Advising management about public issues as well as company positions and image during good times and bad

Advertising Budget Specific Factors

1. Stage in the product life cycle—New products typically merit large advertising budgets to build awareness and gain consumer trial. Established brands usually are supported by lower advertising budgets, measured as a ratio to sales. 2. Market share and consumer base—High-market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. Building share by increasing market size requires larger expenditures. 3. Competition and clutter—In a market with a large number of competitors and high advertising spending, a brand must advertise more heavily to be heard. Even advertisements not directly competitive to the brand create clutter and a need for heavier advertising. 4. Advertising frequency—The number of repetitions needed to put the brand's message across to consumers has an obvious impact on the advertising budget. 5. Product substitutability—Brands in less-differentiated or commodity-like product classes (beer, soft drinks, banks, and airlines) require heavy advertising to establish a unique image.

Companies can use their databases in five ways

1. To identify prospects—Many companies generate sales leads by advertising their product or service and including a response feature, such as a link to a home page, a business reply card, or a toll-free phone number, and building a database from customer responses. The company sorts through the database to identify the best prospects, then contacts them by mail, e-mail, or phone to try to convert them into customers. 2. To decide which customers should receive a particular offer—Companies interested in selling, up-selling, and cross-selling set up criteria describing the ideal target customer for a particular offer. Then they search their customer databases for those who most closely resemble the ideal. 3. To deepen customer loyalty—Companies can build interest and enthusiasm by remembering customer preferences and sending appropriate gifts, discount coupons, and interesting reading material. 4. To reactivate customer purchases—Automatic mailing programs (automatic marketing) can send out birthday or anniversary cards, holiday shopping reminders, or off-season promotions. The database can help the company make attractive or timely offers. 5. To avoid serious customer mistakes—A major bank confessed to a number of mistakes it had made by not using its customer database well.

1) Advertising

Advertising: 1. Pervasiveness—Advertising permits the seller to repeat a message many times. It also allows the buyer to receive and compare the messages of various competitors. Large-scale advertising says something positive about the seller's size, power, and success. 2. Amplified expressiveness—Advertising provides opportunities for dramatizing the company and its brands and products through the artful use of print, sound, and color. 3. Control—The advertiser can choose the aspects of the brand and product on which to focus communications.

Communications Budget

Affordable Method Some companies set the communications budget at what they think they can afford. Percentage-of-Sales Method Some companies set communication expenditures at a specified percentage of current or anticipated sales or of the sales price. Competitive-Parity Method Some companies set their communications budgets to achieve share-of-voice parity with competitors. Objective-and-Task Method The most defensible approach, the objective-and-task method, calls upon marketers to develop communications budgets by defining specific objectives, identifying the tasks that must be performed to achieve these objectives, and estimating the costs of performing them. The sum of these costs is the proposed communications budget.

Integration of Communications Channels

Although personal communication is often more effective than mass communication, mass media might be the major means of stimulating it. Ideas often first flow from radio, television, and print to opinion leaders or consumers highly engaged with me. Mass communications affect personal attitudes and behavior through a two-step process using mass media and then from these influencers to less media-involved population groups.

(Ch 20) Advertising Goal

An advertising objective (or goal) is a specific communications task and achievement level to be accomplished with a specific audience in a specific period of time. We classify advertising objectives according to whether they aim to inform, persuade, remind, or reinforce. These goals correspond to stages in the hierarchy-of-effects model. - Informative: advertising aims to create brand awareness and knowledge of new products or new features of existing products. Consumer packaged goods companies like Colgate, General Mills, and Unilever will often focus on key product benefits. - Persuasive: advertising aims to create liking, preference, conviction, and purchase of a product or service. Some persuasive advertising is comparative advertising, which explicitly compares the attributes of two or more brands. Comparative advertising works best when it elicits cognitive and affective motivations simultaneously and when consumers are processing advertising in a detailed, analytical mode. - Reminder: advertising aims to stimulate repeat purchase of products and services. Expensive, four-color Coca-Cola ads in magazines remind people to purchase Coca-Cola. - Reinforcement: advertising aims to convince current purchasers they made the right choice. Automobile ads often depict satisfied customers enjoying special features of their new car.

Customer Database (Definition)

An organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships

Retailer/Retail Store

Any business enterprise whose sales volume comes primarily from retailing

Vertical marketing systems

By contrast, includes the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member, the channel captain, sometimes called a channel steward, owns or franchises the others or has so much power that they all cooperate. Stewards accomplish channel coordination without issuing commands or directives by persuading channel partners to act in the best interest of all.

Retailers can place their stores in the following locations

Central business districts. The oldest and most heavily trafficked city areas, often known as "downtown" • Regional shopping centers. Large suburban malls containing 40 to 200 stores, typically featuring one or two nationally known anchor stores, such as Macy's or Lord & Taylor or a combination of big-box stores such as PETCO, Payless Shoes, or Bed Bath & Beyond, and a great number of smaller stores, many under franchise operation. • Community shopping centers. Smaller malls with one anchor store and 20 to 40 smaller stores • Shopping strips. A cluster of stores, usually in one long building, serving a neighborhood's needs for groceries, hardware, laundry, shoe repair, and dry cleaning • A location within a larger store. Smaller concession spaces taken by well-known retailers like McDonald's, Starbucks, Nathan's, and Dunkin' Donuts within larger stores, airports, or schools or "store-within- a-store" specialty retailers located within a department store such as with Gucci within Neiman Marcus • Stand-alone stores. Some retailers such as Kohl's and JCPenney are avoiding malls and shopping centers in favor of freestanding storefronts so they are not connected directly to other retail stores.

Transportation

Choices affect product pricing, on-time delivery performance, and the condition of the goods when they arrive, all of which affect customer satisfaction.

Sales Promotion Developing the Incentive

Developing the program: - Incentive size: marketers must first determine its size. A certain minimum discount is necessary if the promotion is to succeed - Conditions: establish conditions for participation. Incentives might be offered to everyone or to select groups - Total sales promotion budget - Duration: marketer must decide on the duration of the promotion - Timing: marketing manager must establish the timing of promotion and, finally, the total sales promotion budget - Distribution vehicle: marketer must choose a distribution vehicle

Terms and responsibilities of channel members

Elements in the "trade relations mix": 1) Price policy- producer establishes a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient. - Discounts, allowances, etc. 2) Conditions of sale - refers to payment terms and producer guarantees - Payment terms, discounts, etc. 3) Distributors' territorial rights - define the distributors' territories and the terms under which the producer will enfranchise other distributors - Contractual rights and terms

Major decisions in marketing Public Relations

Establishing Objectives MPR can build awareness by placing stories in the media to bring attention to a product, service, person, organization, or idea. It can build credibility by communicating the message in an editorial context. It can help boost sales force and dealer enthusiasm with stories about a new product before it is launched. It can hold down promotion cost because MPR costs less than direct-mail and media advertising. A good MPR campaign can achieve multiple objectives. Choosing Messages and Vehicles The MPR practitioner will search for stories. Each event and activity is an opportunity to develop a multitude of stories directed at different audiences. Whereas PR practitioners reach their target publics through the mass media, MPR is increasingly borrowing the techniques and technology of online and direct-response marketing to reach target-audience members one on one. Implementing the Plan and Evaluating Results MPR's contribution to the bottom line is difficult to measure because MPR is used along with other promotional tools. The easiest gauge of its effectiveness is the number of exposures carried by the media. A better measure is the change in product awareness, comprehension, or attitude resulting from the MPR campaign (after accounting for the effect of other promotional tools as well as possible)

Generic

Generics are unbranded, plainly packaged, less expensive versions of common products

Direct Marketing Public and Ethical Issues

Irritation. Many people don't like hard-sell direct marketing solicitations. Firms have been popping up to help block unwanted junk mail. Unfairness. Some direct marketers take advantage of impulsive or less sophisticated buyers or prey on the vulnerable, especially the elderly. Deception and fraud. Some direct marketers design mailers and write copy intended to mislead or exaggerate product size, performance claims, or the "retail price." The Federal Trade Commission receives thousands of complaints each year about fraudulent investment scams and phony charities. Invasion of privacy. It seems that almost every time consumers order products by mail or telephone, apply for a credit card, or take out a magazine subscription, their names, addresses, and purchasing behavior may be added to several company databases. As Chapters 3 and 5 discussed, critics worry that marketers may know too much about consumers' lives and that they may use this knowledge to take unfair advantage.

Price Discrimination

Is when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs. In first-degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his or her demand. In second-degree price discrimination, the seller charges less to buyers of larger volumes. In third-degree price discrimination, the seller charges different amounts to different classes of buyers, as in the following cases • Customer-segment pricing. Different customer groups pay different prices for the same product or service. Ex. museums charge a lower admission fee to students and senior citizens. • Product-form pricing. Different versions of the product are priced differently, but not in proportion to their costs. Ex. Evian prices a 2-liter bottle of its mineral water as low as $1 but 5 ounces of the same water in a moisturizer spray for as much as $12. • Image pricing. Some companies price the same product at two different levels based on image differences. A perfume manufacturer can put a scent in one bottle, give it a name and image, and price it at $10 an ounce. The same scent in another bottle with a different name and image can sell for $30 an ounce. • Channel pricing. Coca-Cola carries a different price depending on whether the consumer purchases it from a fine restaurant, a fast-food restaurant, or a vending machine. • Location pricing. The same product is priced differently at different locations even though the cost of offering it at each location is the same. A theater varies its seat prices according to audience preferences for different locations. • Time pricing. Prices vary by season, day, or hour. Restaurants charge less to "early bird" customers, and some hotels charge less on weekends.

Managing the Sales Force

Managing the Sales Force: Recruiting and Selecting Representatives. At the heart of any successful sales force are appropriately selected representatives. Studies have not always shown a strong relationship between sales performance on one hand and background and experience variables, current status, lifestyle, attitude, personality, and skills on the other. More effective predictors of high performance in sales are composite tests and assessment centers that simulate the working environment and assess applicants in an environment similar to the one in which they would work. Training and Supervising Sales Representatives. Today's customers expect salespeople to have deep product knowledge, add ideas to improve operations, and be efficient and reliable. These demands have required companies to make a much greater investment in sales training. New reps may spend a few weeks to several months in training. The median training period is 28 weeks in industrial-products companies, 12 in service companies, and 4 in consumer-products companies. Reps paid mostly on commission generally receive less supervision. Those who are salaried and must cover definite accounts are likely to receive substantial supervision. Motivating Sales Representatives. The majority of sales representatives require encouragement and special incentives, especially those in the field who encounter daily challenges.47 Most marketers believe that the higher the salesperson's motivation, the greater the effort and the resulting performance, rewards, and satisfaction—all of which in turn further increase motivation. Evaluating Sales Representatives. We have been describing the feed-forward aspects of sales supervision—how management communicates what the sales reps should be doing and motivates them to do it. But good feed-forward requires good feedback, which means getting regular information about reps to evaluate their performance.

4) Public Relations and Publicity

Marketers tend to underuse public relations, yet a well-thought-out program coordinated with the other communications-mix elements can be extremely effective, especially if a company needs to challenge consumers' misconceptions 1. High credibility—News stories and features are more authentic and credible to readers than ads. 2. Ability to reach hard-to-find buyers—Public relations can reach prospects who prefer to avoid mass media and targeted promotions. 3. Dramatization—Public relations can tell the story behind a company, brand, or product.

Media Planners

Media planners are using more sophisticated measures of effectiveness and employing them in mathematical models to arrive at the best media mix. Many advertising agencies use software programs to select the initial media and make improvements based on subjective factors.

Media Selection

Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience.

The Role of Marketing Channels

Members of a marketing channel performs functions for the manufacturer that create/support time, place, form and possession utility - Functions: Gathering Information, stimulate purchasing, negotiate price, place orders, etc.

Major Wholesaler Types

Merchant wholesalers: Independently owned businesses that take title to the merchandise they handle. They are full-service and limited-service jobbers, distributors, and mill supply houses. Full-service wholesalers: Carry stock, maintain a sales force, offer credit, make deliveries, provide management assistance. Wholesale merchants sell primarily to retailers. Limited-service wholesalers: Cash and carry wholesalers sell a limited line of fast-moving goods to small retailers for cash. Truck wholesalers sell and deliver a limited line of semi-perishable goods to supermarkets, grocery stores, hospitals, restaurants, and hotels. Drop shippers serve bulk industries such as coal, lumber, and heavy equipment. They assume title and risk from the time an order is accepted to its delivery. Rack jobbers serve grocery retailers in nonfood items. Delivery people set up displays, price goods, and keep inventory records; they retain title to goods and bill retailers only for goods sold to the end of the year. Producers' cooperatives assemble farm produce to sell in local markets. Mail-order wholesalers send catalogs to retail, industrial, and institutional customers; orders are filled and sent by mail, rail, plane, or truck. Brokers and agents: Facilitate buying and selling, on commission of 2 percent to 6 percent of the selling price; limited functions; generally specialize by product line or customer type. Brokers bring buyers and sellers together and assist in negotiation; they are paid by the party hiring them—food brokers, real estate brokers, insurance brokers. Agents represent buyers or sellers on a more permanent basis. Most manufacturers' agents are small businesses with a few skilled salespeople: Selling agents have contractual authority to sell a manufacturer's entire output; purchasing agents make purchases for buyers and often receive, inspect, warehouse, and ship merchandise; commission merchants take physical possession of products and negotiate sales. Manufacturers' and retailers' branches and offices: Wholesaling operations conducted by sellers or buyers themselves rather than through independent wholesalers. Separate branches and offices are dedicated to sales or purchasing. Many retailers set up purchasing offices in major market centers. Specialized wholesalers: Agricultural assemblers (buy the agricultural output of many farms), petroleum bulk plants and terminals (consolidate the output of many wells), and auction companies (auction cars, equipment, etc., to dealers and other businesses).

Micromodels of Marketing Communications Models:

Micromodels of marketing communications concentrate on consumers' specific responses to communications. Four classic response hierarchy models. 1) AIDA Model: Cognitive Stage: Attention --> Affective Stage: Interest --> Desire --> Behavior Stage: Action 2) Hierarchy-of-Effects Model Cognitive Stage: Awareness --> Knowledge --> Affective Stage: Liking --> Preference --> Conviction --> Behavior Stage: Purchase 3) Innovation Adoption Model Cognitive Stage: Awareness --> Affective Stage: Interest --> Evaluation --> Behavior Stage: Trial --> Adoption 4) Communications Model Cognitive Stage: Exposure --> Reception --> Cognitive Response --> Affective Stage: Attitude --> Intention --> Behavior Stage: Behavior - All these models assume the buyer passes through cognitive, affective, and behavioral stages - This "learn-feel-do" sequence is appropriate when the audience has high involvement with a product category perceived to have high differentiation, such as an automobile or house. An alternative sequence, "do-feel-learn," is relevant when the audience has high involvement but perceives little or no differentiation within the product category, such as airline tickets. A third sequence, "learn-do-feel," is relevant when the audience has low involvement and perceives little differentiation, such as with salt or batteries.

Transformational Appeals

Negative/fear vs. Positive Appeals - Negative: Communicators use negative appeals such as fear, guilt, and shame to get people to do things (brush their teeth, have an annual health checkup) or stop doing things (smoking, abusing alcohol, overeating). Fear appeals work best when they are not too strong, when source credibility is high, and when the communication promises, in a believable and efficient way, that the product or service will relieve the fear it arouses. - Positive: Communicators also use positive emotional appeals such as humor, love, pride, and joy. Motivational or "borrowed interest" devices—such as cute babies, frisky puppies, popular music, and provocative sex appeals—are often employed to attract attention and raise involvement with an ad.

Evaluating Alternate Media (Non Traditional Media)

Nontraditional media can often reach a very precise and captive audience in a cost-effective manner, with ads anywhere consumers have a few seconds to notice them. The message must be simple and direct. Outdoor advertising, for example, is often called the "15-second sell." It's more effective at enhancing brand awareness or brand image than at creating new brand associations.

Informational Appeals

One sided vs. Two sided arguments: - One Sided: In a one-sided message, presenting the strongest argument first arouses attention and interest, important in media where the audience often does not attend to the whole message. With a captive audience, a climactic presentation might be more effective. Two Sided: Two-sided messages are more effective with more educated audiences. If the audience is initially opposed, start with the other side's argument and conclude with your strongest argument.

6) Mobile marketing

Online marketing and social media rely on mobile forms of communication and smart phones or tablets. Three distinguishing characteristics of mobile marketing are: 1. Timely—Mobile communications can be very time-sensitive and reflect when and where a consumer is. 2. Influential—Information received or obtained via a smart phone can reach and influence consumers as they are making a purchase decision. 3. Pervasive—Consumers typically carry their smart phones everywhere, so mobile communications are at their fingertips.

8) Personal selling

Personal selling is the most effective tool at later stages of the buying process, particularly in building up buyer preference, conviction, and action. It has three notable qualities: 1. Customized—The message can be designed to appeal to any individual. 2. Relationship-oriented—Personal selling relationships can range from a matter-of-fact selling relationship to a deep personal friendship. 3. Response-oriented—The buyer is often given personal choices and encouraged to directly respond.

Target Costing

Price less desired profit margin leaves the target cost the marketer must achieve

Print Ads

Print ads: The picture must draw attention. The headline must reinforce the picture and lead the person to read the copy. The copy must be engaging and the brand's name prominent. - Provide detailed product information - Flexibility in design and placement - Can be fairly passive - Newspapers popular for local ads - In steady decline - Poor reproduction quality - Short shelf life

Evaluating Channel Members

Producers must periodically evaluate intermediaries' performance against such standards as sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs.

Relationship Marketing

Relationship Marketing: - In many cases the company seeks not an immediate sale but rather a long-term supplier-customer relationship - Today's customers prefer suppliers who can sell and deliver a coordinated set of products and services to many locations, who can quickly solve problems in different locations, and who can work closely with customer teams to improve products and processes. Salespeople working with key customers must do more than email or call only when they think customers might be ready to place orders. They should get in touch at other times and make useful suggestions about the business to create value. They should monitor key accounts, know customers' problems, and be ready to serve them in a number of ways, adapting and responding to different customer needs or situations. Relationship marketing is not effective in all situations. But when it is the right strategy and is properly implemented, the organization will focus as much on managing its customers as on managing its products.

Communications

Retailers use a wide range of communication tools to generate traffic and purchases. Retailers are also using interactive and social media to pass on information and create communities around their brands.

Market Logistics

Supply chain management (SCM): Physical distribution has now been expanded into the broader concept of supply chain management (SCM). Supply chain management starts before physical distribution and includes strategically procuring the right inputs (raw materials, components, and capital equipment), converting them efficiently into finished products, and dispatching them to the final destinations. Market logistics: Plan the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer requirements at a profit Many experts call market logistics "the last frontier for cost economies," and firms are determined to wring every unnecessary cost out of the system Integrated logistics systems (ILS):The market logistics task calls for integrated logistics systems (ILS), which include materials management, material flow systems, and physical distribution, aided by information technology (IT). Lean manufacturing: originally pioneered by Japanese firms such as Toyota, to produce goods with minimal waste of time, materials, and money.

Price Sensitivity

The first step in estimating demand is to understand what affects price sensitivity. Generally speaking, customers are less price sensitive to low-cost items or items they buy infrequently. They are also less price sensitive when (1) there are few or no substitutes or competitors; (2) they do not readily notice the higher price; (3) they are slow to change their buying habits; (4) they think the higher prices are justified; and (5) price is only a small part of the total cost of obtaining, operating, and servicing the product over its lifetime.

Marketing Communications Mix

The marketing communications mix consists of eight major modes of communication: 1. Advertising—Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor via print media (newspapers and magazines), broadcast media (radio and television), network media (telephone, cable, satellite, wireless), electronic media (audiotape, videotape, videodisk, CD-ROM, Web page), and display media (billboards, signs, posters). 2. Sales promotion—A variety of short-term incentives to encourage trial or purchase of a product or service including consumer promotions (such as samples, coupons, and premiums), trade promotions (such as advertising and display allowances), and business and sales force promotions (contests for sales reps). 3. Events and experiences—Company-sponsored activities and programs designed to create daily or special brand-related interactions with consumers, including sports, arts, entertainment, and cause events as well as less formal activities. 4. Public relations and publicity—A variety of programs directed internally to employees of the company or externally to consumers, other firms, the government, and media to promote or protect a company's image or its individual product communications. 5. Online and social media marketing—Online activities and programs designed to engage customers or prospects and directly or indirectly raise awareness, improve image, or elicit sales of products and services. 6. Mobile marketing—A special form of online marketing that places communications on consumer's cell phones, smart phones, or tablets. 7. Direct and database marketing—Use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue from specific customers and prospects. 8. Personal selling—Face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders.

Product Assortment

The retailer's product assortment must match the target market's shopping expectations in breadth and depth. A restaurant can offer a narrow and shallow assortment (small lunch counters), a narrow and deep assortment (delicatessen), a broad and shallow assortment (cafeteria), or a broad and deep assortment (large restaurant).

Location

The three keys to retail success are often said to be "location, location, and location."

Corporate chain store

Two or more outlets owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise. Ex. Gap, Pottery Barn

Target Market

Until it defines and profiles the target market, the retailer cannot make consistent decisions about product assortment, store decor, advertising messages and media, price, and service levels. To better hit their targets, retailers are slicing the market into ever-finer segments and introducing new lines of stores to exploit niche markets with more relevant offerings.

Wholesaling

Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use - excludes farmers and manufacturers because they're engaged in production - excludes retailers

Channel Partnerships and Efficient Consumer Response (ECR)

manufacturers and retailers have adopted efficient consumer response (ECR) practices to organize their relationships in three areas: 1) Demand-side management: or collaborative practices to stimulate consumer demand by promoting joint marketing and sales activities 2) Supply-side management: collaborative practices to optimize supply (with a focus on joint logistics and supply chain activities) 3) enablers and integrators: collaborative information technology and process improvement tools to support joint activities that reduce operational problems, allow greater standardization, and so on.