Marketing Test 11-13
3 different objectives relate to a firm's profit.
- managing long run profits - maximizing curent profit objective - Target Return Objective
Setting a final price Steps:
- select an approximate price level - Set the list or quoted price - Make special adjustments to the list or quoted price
Balancing Logistics Cost Factors with Customer Service Factors. Customer Service 4 factors
-time -convenience - communication - dependability
Aligning a Supply Chain with Marketing Strategy steps
-understanding the customer - understanding the supply chain - harmonizing the supply chain with market strategy
4 pricing practices that have received special scrutiny:
1.) PRICE FIXING 2.) PRICE DISCRIMINATION 3.) DECEPTIVE PRICING 4.) PREDATORY PRICING
price fixing
A conspiracy among firms to set prices for a product is termed price fixing. Price fixing is illegal under the Sherman Act. When two or more competitors collude to explicitly or implicitly set prices, this practice is called horizontal price fixing. For example, six foreign vitamin companies recently pled guilty to price fixing in the human and animal vitamin industry and paid the largest fine in U.S. history: $335 million.19 Vertical price fixing involves controlling agreements between independent buyers and sellers (a manufacturer and a retailer) whereby sellers are required to not sell products below a minimum retail price.
Franchising
A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor.
Social Responsibility
A firm may forgo higher profit on sales and follow a pricing objective that recognizes its obligations to customers and society in general. For example, Gerber supplies a specially formulated product free of charge to children who cannot tolerate foods containing cow's milk.
Intermediaries: Dealer
A more imprecise term than distributor that can mean the same as distributor, retailer, wholesaler, and so forth.
Setting a final price step 3: Make Special Adjustments to the List or Quoted Price- Allowances: Trade in allowance
A new-car dealer can offer a substantial reduction in the list price of that new Toyota Camry by offering you a trade-in allowance of $2,500 for your Chevrolet. A trade-in allowance is a price reduction given when a used product is part of the payment on a new product. Trade-ins are an effective way to lower the price a buyer has to pay without formally reducing the list price.
Setting a final price Step 2: One price policy
A one-price policy, also called fixed pricing, is setting one price for all buyers of a product or service. Ex: CarMax uses this approach in its stores and features a "no haggle, one price" price for cars. Some retailers have married this policy with a below-market approach. Dollar Value Stores and 99¢ Only Stores sell everything in their stores for $1 or less. Family Dollar Stores sell everything for $2.
Factors Affecting Channel Choice and Management: Buyer Requirements: 4 aspects
A second consideration in channel choice is gaining access to channels and intermediaries that satisfy at least some of the interests buyers might want fulfilled when they purchase a firm's products or services. 1.) information 2.) convenience 3.) variety 4.) pre-or post-sale services
Factors Affecting Channel Choice and Management: Target Market Coverage: 3 types of distribution
Achieving the best coverage of the target market requires attention to the density—that is, the number of stores in a geographical area—and type of intermediaries to be used at the retail level of distribution. Three degrees of distribution density exist: intensive, exclusive, and selective. Intensive distribution Exclusive distribution Selective distribution
Setting a final price step 3: Make Special Adjustments to the List or Quoted Price- Allowances: Definition and types
Allowances—like discounts—are reductions from list or quoted prices to buyers for performing some activity. Trade in allowance and Promotional allowance
Intermediaries: Distributor
An imprecise term, used to describe intermediaries who perform a variety of distribution functions, including selling, maintaining inventories, extending credit, and so on; a more common term in business markets but may also be used to refer to wholesalers.
Intermediaries: Middleman
An intermediary between the manufacturer and end-user markets.
Intermediaries: Wholesaler
An intermediary who sells to other intermediaries, usually to retailer, term usually applies to consumer markets.
Cost of producing and marketing the product
Another profit consideration for marketers is to ensure that firms in their channels of distribution make an adequate profit. Without profits for channel members, a marketer is cut off from its customers. Ex: Of the $200 a customer spends for a pair of designer denim jeans, 50 percent of each dollar spent by a customer goes to a specialty retailer to cover its costs and profit. The other 50 percent goes to the marketer (34 percent) and manufacturers and suppliers (16 percent).
Intermediaries: Agent/Broker
Any intermediary with legal authority to act on behalf of the manufacturer.
Setting a final price: Step 1:
Before setting a final price, the marketing manager must understand the market environment, the features and customer benefits of the particular product, and the goals of the firm. A balance must be struck between factors that might drive a price higher (such as a profit-oriented approach) and other forces (such as increased competition from substitutes) that may drive a price down. Marketing managers consider pricing objectives and constraints first, then choose among the general pricing approaches—demand-, cost-, profit-, or competition-oriented—to arrive at an approximate price level. This price is then analyzed in terms of cost, volume, and profit relationships. Break-even analyses may be run at this point, and finally, if this approximate price level "works," it is time to take the next step: setting a specific list or quoted price.
Important Functions performed by Intermediaries: 3 basic functions:transactional function
Buying: Purchasing products for resale or as an agent for supply of a product Selling: Contacting potential customers, promoting products, and seeking orders Risk Taking: Assuming business risks in the ownership of inventory that can become obsolete or deteriorate
Balancing Logistics Cost Factors with Customer Service Factors. Customer service: Communication
Communication is a two-way link between the buyer and supplier that helps in monitoring service and anticipating future needs. Status reports on orders are a typical example of communication between the buyer and seller.
pricing constraints
Consumer demand for the product clearly affects the price that can be charged. Other constraints on price vary from factors within the organization to competitive factors outside the organization.
Factors Affecting Channel Choice and Management: Buyer Requirements:convenience
Convenience has multiple meanings for buyers, such as proximity or driving time to a retail outlet. For example, 7-Eleven stores, with more than 50,000 outlets worldwide, many of which are open 24 hours a day, satisfy this interest for buyers. Candy and snack-food firms benefit by gaining display space in these stores. For other consumers, convenience means a minimum of time and hassle. Jiffy Lube, which promises to change engine oil and filters quickly, appeals to this aspect of convenience. For those who shop on the Internet, convenience means that websites must be easy to locate and navigate, and image downloads must be fast. A commonly held view among website developers is the "eight second rule": Consumers will abandon their efforts to enter or navigate a website if download time exceeds eight seconds.
Balancing Logistics Cost Factors with Customer Service Factors Customer service: dependability
Dependability is the consistency of replenishment. This is important to all firms in a supply chain—and to consumers. How often do you return to a store if it fails to have in stock the item you want to purchase? Dependability can be broken into three elements: consistent lead time, safe delivery, and complete delivery. Consistent service allows planning (such as appropriate inventory levels), whereas inconsistencies create surprises. Intermediaries may be willing to accept longer lead times if they know about them in advance and can thus make plans.
Setting a final price step 3; Make Special Adjustments to the List or Quoted Price- Discounts.... definition and 4 different kinds
Discounts are reductions from list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller. Four kinds of discounts are especially important in marketing strategy: (1) quantity, (2) seasonal, (3) trade (functional), and (4) cash.
Factors Affecting Channel Choice and Management: Target Market Coverage: exclusive distribution
Exclusive distribution is the extreme opposite of intensive distribution because only one retailer in a specific geographical area carries the firm's products. Exclusive distribution is typically chosen for specialty products or services, such as some women's fragrances and men's and women's apparel and accessories. Gucci, one of the world's leading luxury products companies, uses exclusive distribution in the marketing of its Yves Saint Laurent, Sergio Rossi, Boucheron, Opium, and Gucci brands.
Balancing Logistics Cost Factors with Customer Service Factors. Logistics cost factors
Expenses associated with transportation, materials handling and warehousing, inventory, stockouts, order processing, and return products handling. Changes in one of these WILL impact the others. For example, if a firm attempts to reduce its transportation costs by shipping in larger quantities, it will increase its inventory levels. While larger inventory levels will increase inventory costs, they should also reduce stockouts. It is important, therefore, to study the impact on all of the logistics decision areas when considering a change. -Materials handling and warehousing costs -Inventory costs Stockout costs -Order processing costs -Return products handling costs -Transportation costs
Important Functions performed by Intermediaries: 3 basic functions: facilitating function
Financing: extending credit to customers. Grading: Inspecting, testing, or judging products and assigning them quality grades. Marketing information and research: Providing information to customers and suppliers, including completive conditions and trends.
backward integration
For example, Kroger supermarkets operate manufacturing facilities that produce everything from aspirin to cottage cheese for sale under the Kroger label. Tiffany & Co., the exclusive jewelry retailer, manufactures about half of the fine jewelry items for sale through its more than 250 specialty stores and boutiques worldwide.
sales
Given that a firm's profit is high enough for it to remain in business, an objective may be to increase sales revenue, which can lead to increases in market share and profit.
Aligning a Supply Chain with Marketing Strategy step 3
Harmonize the supply chain with the marketing strategy. Finally, a company needs to ensure that what the supply chain is capable of doing well is consistent with the targeted customer's needs and its marketing strategy. If a mismatch exists between what the supply chain does particularly well and a company's marketing strategy, the company will need to either redesign the supply chain to support the marketing strategy or change the marketing strategy.
marketing channels for consumer products and services; 4 basic functions:
Help create value for consumers through the four utilities: Time, Place, Form, Possession
Balancing Logistics Cost Factors with Customer Service Factors. customer service: time
In a supply chain setting, time refers to order cycle or replenishment time for an item, which means the time between the ordering of an item and when it is received and ready for use or sale. The various elements that make up the typical order cycle include recognition of the need to order, order transmittal, order processing, documentation, and transportation. A current emphasis in supply chain management is to reduce order cycle time so that the inventory levels of customers may be minimized. Another emphasis is to make the process of reordering and receiving products as simple as possible, often through inventory systems called quick response and efficient consumer response delivery systems. For example, at Saks Fifth Avenue, point-of-sale scanner technology records each day's sales. When stock falls below a minimum level, a replenishment order is automatically produced. Vendors such as Donna Karan (DKNY) receive the order, which is processed and delivered within 48 hours.
Survival
In some instances, profits, sales, and market share are less important objectives of the firm than mere survival. For example, RadioShack, an electronics retailer, faced survival problems because it couldn't compete with the prices promoted by other retailers. The company enacted a price-matching program and advertised large discounts on its merchandise to raise cash and hopefully stave off bankruptcy. These efforts failed and RadioShack declared bankruptcy in 2015.
Factors Affecting Channel Choice and Management: Buyer Requirements: Information
Information is an important requirement when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling. Apple has opened more than 460 retail outlets staffed with highly trained personnel to communicate how its products can better satisfy each customer's needs.
Factors Affecting Channel Choice and Management: Target Market Coverage: intensive distribution
Intensive distribution means that a firm tries to place its products and services in as many outlets as possible. Intensive distribution is usually chosen for convenience products or services such as candy, fast food, newspapers, and soft drinks. For example, Coca-Cola's retail distribution objective is to place its products "within an arm's reach of desire." Cash, yes cash, is distributed intensively by Visa. It operates more than 1.4 million automated teller machines in more than 200 countries.
Break even chart
It shows that total revenue (line DE) and total cost (line AC) intersect and are equal at a quantity of 400 pictures sold, which is the break-even point (F) at which profit is exactly $0.
Setting a final price step 3; Make Special Adjustments to the List or Quoted Price-
Make Special Adjustments to the List or Quoted Price- When you pay $1.00 for a bag of M&Ms in a vending machine or receive a quoted price of $50,000 from a contractor to renovate a kitchen, the pricing sequence ends with the last step just described: setting the list or quoted price. But when you are a manufacturer of M&M candies and sell your product to dozens or hundreds of wholesalers and retailers in your channel of distribution, you may need to make a variety of special adjustments to the list or quoted price. Wholesalers also must adjust the list or quoted prices they set for retailers. Two adjustments to the list or quoted price are (1) discounts and (2) allowances.
Demand for the product class
Product, and Brand- The number of potential buyers for a product class (cars), product (sports cars), and brand (Bugatti Chiron) clearly affects the price a seller can charge. Generally, the greater the demand for a product, or brand, the higher the price that can be set. For example, the New York Mets set different ticket prices for their games based on the appeal of their opponent—prices are higher when they play the New York Yankees and lower when they play the Pittsburgh Pirates.
Setting a final price step 3: Make Special Adjustments to the List or Quoted Price- Allowances: Pro motional Allowances
Sellers in the channel of distribution can qualify for promotional allowances for undertaking certain advertising or selling activities to promote a product. Various types of allowances include an actual cash payment or an extra amount of "free goods" (as with a free case of pizzas to a retailer for every dozen cases purchased). Frequently, a portion of these savings is passed on to the consumer by retailers.Some companies, such as Procter & Gamble, have chosen to reduce promotional allowances for retailers by using everyday low pricing.Everyday low pricing (EDLP) is the practice of replacing promotional allowances with lower manufacturer list prices. EDLP promises to reduce the average price to consumers while minimizing promotional allowances that cost
Setting a final Price- Step 2
Set the List or Quoted Price- A customer must decide between the one-price and dynamic price policy.
Legal and Ethical Considerations
Setting a final price is clearly a complex process. The task is further complicated by legal and ethical issues. Four pricing practices that have received special scrutiny are described below:
variable costs
Sum of expenses that vary directly with the quantity produced and sold.
Balancing Logistics Cost Factors with Customer Service Factors. Customer Service
The ability of logistics managment to satisfy users in terms of time, dependability, communication, and convenience. Four factors:
corporate vertical marketing system
The combination of successive stages of production and distribution under a single ownership is a corporate vertical marketing system. For example, a producer might own the intermediary at the next level down in the channel. This practice, called forward integration, is exemplified by Ralph Lauren, which manufactures clothing and also owns apparel shops. Other examples of forward integration include Goodyear, Apple, and Sherwin-Williams
Balancing Logistics Cost Factors with Customer Service Factors. customer service: Convenience
The concept of convenience for a supply chain manager means that there should be a minimum of effort on the part of the buyer in doing business with the seller. Is it easy for the customer to order? Are the products available from many outlets? Will the seller arrange all necessary details, such as transportation? This customer service factor has promoted the use of vendor-managed inventory (VMI), whereby the supplierdetermines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items.
stockout costs
The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.
transportation costs
The expenses involved in moving products or assets to a different place, which are often passed on to consumers.
Important Functions performed by Intermediaries: 3 basic functions
The importance of intermediaries is made even clearer when we consider the functions they perform and the value they create for buyers. Make the flow of products from producers to ultimate consumers by performing these three basic functions: Transactional Function- Logistical Function Facilitating Function
Newness of the Product
The newer a product and the earlier it is in its life cycle, the higher is the price that can usually be charged. Ex: Are you willing to spend $40,000 for an LG 98-inch 3D OLED HD Smart TV? The high initial price is possible because of patents and limited competition early in its product life cycle. By the time you read this, the price probably will be much lower.
Balancing Logistics Cost Factors with Customer Service Factors. definition
The objective of logistics management in a supply chain is to minimize total logistics costs while delivering the appropriate level of customer service. - logistics cost factors - customer service
Consumer Tastes
The popularity of a good or service has a strong effect on the demand for it. Because consumer tastes can change quickly, up-to-date marketing research is essential to estimate demand. For example, if research by nutritionists concludes that some pizzas are healthier (because they are now gluten-free or vegetarian), demand for them will probably increase.
Factors Affecting Channel Choice and Management: Profability
The third consideration in choosing a channel is profitability, which is determined by the margins earned (revenue minus cost) for each channel member and for the channel as a whole. Channel cost is the critical dimension of profitability. These costs include distribution, advertising, and selling expenses associated with different types of marketing channels. The extent to which channel members share these costs determines the margins received by each member and by the channel as a whole.
Aligning a Supply Chain with Marketing Strategy
There are a variety of supply chain configurations, each of which is designed to perform different tasks well. Marketers today recognize that the choice of a supply chain follows from a clearly defined marketing strategy and involves three steps
Setting a final price step 3; Make Special Adjustments to the List or Quoted Price- seasonal Discounts
To encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use seasonal discounts.A firm such as Toro that manufactures lawn mowers and snow throwers offers seasonal discounts to encourage wholesalers and retailers to stock up on lawn mowers in January and February and snow throwers in July and August—five or six months before the seasonal demand by ultimate consumers.
Setting a final price step 3; Make Special Adjustments to the List or Quoted Price- Quantity Discounts
To encourage customers to buy larger quantities of a product, firms at all levels in the channel of distribution offer quantity discounts, which are reductions in unit costs for a larger order. For example, an instant photocopying service might set a price of 10 cents a copy for 1 to 24 copies, 9 cents a copy for 25 to 99 copies, and 8 cents a copy for 100 copies or more.
Setting a final price step 3; Make Special Adjustments to the List or Quoted Price- Cash Discounts
To encourage retailers to pay their bills quickly, manufacturers offer them cash discounts. Cash discounts are typically expressed as a percentage off the list price.
Setting a final price step 3; Make Special Adjustments to the List or Quoted Price- Trade (functional) Discounts
To reward wholesalers and retailers for marketing functions they will perform in the future, a manufacturer often gives trade, or functional, discounts. These reductions off the list or base price are offered to resellers in the channel of distribution on the basis of (1) where they are in the channel and (2) the marketing activities they are expected to perform in the future.
Aligning a Supply Chain with Marketing Strategy step 2
Understand the supply chain. Second, a company must understand what a supply chain is designed to do well. Supply chains range from those that emphasize being responsive to customer requirements and demand to those that emphasize efficiency with a goal of supplying products at the lowest possible delivered cost.
competitors pricing
When Apple introduced its iPad, it was not only unique and in the introductory stage of its product life cycle but also the first commercially successful tablet device sold. As a result, Apple had great latitude in setting a price. Now, with a wide range of competition in tablets from Samsung's Galaxy Note, Lenovo's Think Pad, and others, Apple's pricing latitude is less broad.
demand curve
a curve that shows the relationship between the price of a product and the quantity of the product demanded
Setting a final price Step 2: Dynamic price policy
a dynamic price policy, or flexible-price policy, involves setting different prices for products and services depending on individual buyers and purchase situations in light of demand, cost, and competitive factors. Dell Inc. uses dynamic pricing as it continually adjusts prices in response to changes in its own costs, competitive pressures, and demand from its various personal computer segments (home, small business, corporate, etc.). "Our flexibility allows us to be [priced] different even within a day," says a Dell spokesperson.20 Dynamic pricing is not without its critics because of its discriminatory potential. One frequent criticism of dynamic pricing lies in the realm of "surge" pricing, which occurs when a company raises the price of its products or services if there is a spike in demand. Read the Making Responsible Decisions box to learn about the ethics and economics of surge pricing used by Uber and Lyft and decide where you stand on the practice.
target return objective
a specific level of profit as an objective, usually determined by its board of directors
administered vertical marketing systems
achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership. Ex: Procter & Gamble, given its broad product assortment ranging from disposable diapers to detergents, is able to obtain cooperation from supermarkets in displaying, promoting, and pricing its products.
dual distribution
an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. For example, GE sells its large appliances directly to home and apartment builders but uses retail stores, including Lowe's home centers, to sell to consumers. In some instances, firms pair multiple channels with a multibrand strategy.
manufacturer sponsored retail franchise systems
are prominent in the automobile industry, where a manufacturer such as Ford licenses dealers to sell its cars subject to various sales and service conditions.
order purchasing cost
are the expenses incurred to create and process an order to a supplier.
Important Functions performed by Intermediaries: 3 basic functions: logistical function
assorting: creating product assortments from several sources to serve customers storing: assembling and protecting products at a convenient location to offer better customer service sorting: purchasing in large quantities and breaking into smaller amounts desired by customers transporting: physically moving a product to customers
managing for long-run profits
companies give up immediate profit by developing quality products to penetrate competitive markets over the long term. Products are priced relatively low compared to their cost to develop, but the firm expects to make greater profits later because of its high market share.
marketing channel
consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users
First, logistics deals with
decisions needed to move a product from the source of raw materials to consumption—that is, the flow of the product. Second, those decisions have to be cost effective. Third, while it is important to drive down logistics costs, there is a limit: A firm needs to drive down logistics costs as long as it can deliver expected customer service, which means satisfying customer requirements. The role of management is to see that customer needs are satisfied in the most cost-effective manner. When properly done, the results can be spectacular.
price discrimination
division of customers into groups based on how much they will pay for a good
Manufacturer-sponsored wholesale franchise systems
exist in the soft-drink industry. For example, Pepsi-Cola licenses wholesalers (bottlers) that purchase concentrate from Pepsi-Cola and then carbonate, bottle, promote, and distribute its products to retailers and restaurants.
Service-sponsored franchise systems
exist when franchisors license individuals or firms to dispense a service under a trade name and according to specific guidelines
Inventory Costs
expenses associated with materials and direct labor for production until the product is sold
marketing channels for consumer products and services:Time Utility
having a product available at a certain time of year or a convenient time of day
marketing channels for consumer products and services: place utility
having a product where customers can buy it
a supply chain
includes the various firms involved in performing the activities required to create and deliver a product or service to consumers or industrial users.
Under a contractual vertical marketing system
independent production and distribution firms integrate their efforts on a contractual basis to obtain greater functional economies and marketing impact than they could achieve alone. Contractual systems are the most popular among the three types of vertical marketing systems.
Indirect Channels
intermediaries are inserted between the producer and consumers and perform numerous channel functions
Intermediaries:retailer
intermediary who sells to customers
Pricing Objectives
involve specifying the role of price in an organization's marketing and strategic plans. To the extent possible, these pricing objectives are carried to lower levels in the organization, such as in setting objectives for marketing managers responsible for an individual brand. H. J. Heinz, for example, has specific pricing objectives for its Heinz Ketchup brand that vary by country.
Adding a wholesaler
is most common for low-cost, low-unit value items that are frequently purchased by consumers, such as candy, confectionary items, and magazines. For example, Mars sells case quantities of its line of candies to wholesalers, who then break down (sort) the cases so that individual retailers can order in boxes or much smaller quantitie
supply chain management
is the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering products and services that provide value to consumers
price
is the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service
fixed costs
is the sum of expenses that are stable and do not change with the quantity produced and sold.
Factors Affecting Channel Choice and Management: Target Market Coverage: selective distribution
lies between these two extremes and means that a firm selects a few retailers in a specific geographical area to carry its products. Selective distribution weds some of the market coverage benefits of intensive distribution to the control over resale evident with exclusive distribution. For example, Dell Inc. chose selective distribution when it decided to sell its products through U.S. retailers along with its direct channel.
List of intermediaries:
middleman agent/broker wholesaler retailer distributor dealer
deceptive pricing
price deals that mislead consumers. Deceptive pricing is outlawed by the Federal Trade Commission. Bait and switch is an example of deceptive pricing. This occurs when a firm offers a very low price on a product (the bait) to attract customers to a store. Once in the store, the customer is persuaded to purchase a higher-priced item (the switch) using a variety of tricks, including (1) degrading the promoted item and (2) not having the promised item in stock or refusing to take orders for it.
vertical marketing system
professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact.
Factors Affecting Channel Choice and Management: Buyer Requirements: Pre- or Post-Sale Services
provided by intermediaries are an important buying requirement for products such as large household appliances that require delivery, installation, and credit. Therefore, Whirlpool seeks dealers that provide such services.
Factors Affecting Channel Choice and Management: Buyer Requirements: variety
reflects buyers' interest in having numerous competing and complementary items from which to choose. Variety is evident in the breadth and depth of products and brands carried by intermediaries, which enhances their attraction to buyers. Thus, manufacturers of pet food and supplies seek distribution through pet superstores such as Petco and PetSmart, which offer a wide array of pet products and services
maximizing current profit objective
such as for a quarter or year, is common in many firms because the targets can be set and performance measured quickly. American firms are sometimes criticized for this short-run orientation.
Factors Affecting Channel Choice and Management:
target market coverage, buyer requirements, profitability
multichannel marketing (omnichannel marketing)
the blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online. Multichannel marketing seeks to integrate a firm's electronic marketing and delivery channels. At Eddie Bauer, for example, every effort is made to make the apparel shopping and purchase experience for its customers the same across its retail store, catalog, and website channels. According to an Eddie Bauer marketing manager, "We don't distinguish between channels because it's all Eddie Bauer to our customers.
marketing channels for consumer products and services: possession utility
the exchange of a product for some monetary value ex: have airplane tickets delivered by a travel agency.
materials handling and warehousing costs
the movement, protection, storage and control of materials and products throughout manufacturing, warehousing, distribution, consumption and disposal.
Predatory Pricing
the practice of charging a very low price for a product with the intent of driving competitors out of business. Once competitors have been driven out, the firm raises its prices. Proving the presence of this practice has been difficult and expensive because it must be shown that the predator explicitly attempted to destroy a competitor and the predatory price was below the defendant's average cost.
logistics management
the practice of organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements
direct channel
the producer and the ultimate consumers deal directly with each other. Ex Many insurance companies sell their services using a direct channel and branch sales offices. The Schwan's Food Company of Marshall, Minnesota, the largest direct-to-home provider of frozen foods in the United States, uses route sales representatives who sell from refrigerated trucks. Because there are no intermediaries with a direct channel, the producer performs all channel functions.
Unit Volume
the quantity produced or sold, as a pricing objective. These firms often sell multiple products at very different prices and need to match the unit volume demanded by customers with price and production capacity. Using unit volume as an objective can be counterproductive if a volume objective is achieved, say, by drastic price cutting that drives down profit.
market share
the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself. Companies often pursue a market share objective when industry sales are relatively flat or declining. For example, Boeing has often cut its prices drastically to try to maintain its 60 percent share of the commercial airline market to compete with Airbus. As a result, it encountered losses. Although increased market share is a primary goal of some firms, others see it as a means to other ends: increasing sales and profits.
Total Cost
the sum of fixed and variable costs
Total revenue
the total amount of money a firm receives by selling goods or services
marketing channels for consumer products and services: Form Utility
the value producers add to materials in the creation of finished goods and services
Logistics
those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost
Aligning a Supply Chain with Marketing Strategy step 1
understand the customer: a company must identify the needs of the customer segment being served. These needs, such as a desire for a low price or convenience of purchase, help a company define the relative importance of efficiency and responsiveness in meeting customer requirements.
Service-sponsored retail franchise systems
used by firms that have designed a unique approach for performing a service and wish to profit by selling the franchise to others
strategic channel alliances
whereby one firm's marketing channel is used to sell another firm's products. Strategic alliances are popular in global marketing, where the creation of marketing channel relationships is expensive and time-consuming. For example, General Mills and Nestlé have an extensive alliance that spans about 140 international markets from Mexico to China.