M304 Final Exam

Price Elasticity of Demand

% Change in Quantity Demanded / % Change in Price

Cross-Price Elasticity

%-change in the quantity of a given offering sold caused by a %-change in the price of another offering

Price Signaling

(1) pricing to capitalize on price-quality inferences (aka "Prestige pricing"); (2) indirect communication (because direct price fixing is illegal) to communicate with other companies about the price strategy they plan to pursue •aka "Image Pricing"

People now use social media to...

- Alter their own social identities - Change the ways others perceive them through curated social media profiles - Use social media tools to expand their own social connections - Have their real identities concealed by virtual ones

Examples of Social Listening

- Analyze audience social media posts -> Create customer experience to align with their interests - Customers post negative feedback -> improve products -> create product tutorials - Customers post positive comments -> identify keyword opportunities for SEO

Different types of Cookies

- First-Party Cookies - Second-Party Cookies - Third-Party Cookies - Session Cookies (aka Non-persistent Cookies) - Persistent Cookies - Secure Cookies

Social media goals

- Increase brand awareness - Generate leads and sales - Grow your brand's audience - Provide holistic customer care - Drive traffic to your site

Strategic value

- Involves NONmonetary benefits and costs that are of strategic importance to the company - Examples: • Strengthening demand for other products in company's portfolio • Strengthening company's reputation • Providing the company with info about target customers

Method 1 to Increase Revenues: Grow the Sales Volume

- Market-growth strategy - Steal-share strategy - Market-penetration strategy

Monetary value

- Monetary benefits of the offering - Directly linked to company's desired financial performance - Typically involves factors like: • net income • profit margins • sales revenue • earnings per share • return on investment

KPIs of Interest

- Reach: # number of unique users who have seen your post since it went live - Engagement: # of [total conversions] / divided by the number of overall impressions (views) Conversions could include: likes, shares, reshares, comments, etc. - Click-through Rate (CTR): % of people who viewed a post and clicked on the call-to-action (CTA) - Cost Per Click (CPC): the amount you pay social media platforms per individual click on your sponsored posts - Cost Per Thousand Impressions (CPM): the amount you pay every time 1,000 people see your sponsored social media posts (even if they scroll past them) - Likes, Comments, Shares, Mentions - Organic and paid likes: beyond a standard Like count, these interactions are attributed to paid or organic content - Hashtag performance: What were your most-used hashtags? Which hashtags were most associated with your brand? - Sentiment: Positive and negative reactions to your content

Psychological Aspects of Pricing

- Reference-price effects: using what you know of price as a reference point when encountering new prices - Price-quantity effects: people are more sensitive to price changes than changes in quantity - Price-tier effects: people think of prices in tiers. $1.99 = tier 1; $2.99 = tier 2, etc. - Price-ending effects: prices ending in 9 make people think "discount"; prices ending in 0 make people think "quality" - Product-line pricing effects: relative prices of a product line can influence demand - Artificial constraints: One day only! Sales

Communication Considerations

- Setting communication goals - Identifying the Target Audience - Developing the message - Selecting the media (outbound, inbound) - Creative Solution - Evaluating Communication Effectiveness

Pricing as a Tool for Gaining Market Position

- Skim Pricing - Penetration Pricing

Company value

- The worth of the offering to the company - The sum of all benefits and all costs associated with offering

FLoC = Federated Learning of Cohorts

-AI system which groups people together for segmentation based on their web history and other factors -Similar to Netflix's algorithm of recommended shows

Lower Miscellaneous Other Costs

-Admin, legal, cost of capital, etc.

Lower Marketing Costs

-Cost of incentives = consumer-focused promotions such as price reductions, coupons, rebates, contests, sweepstakes, etc. -Communication costs = advertising, public relations, personal selling (sales force) -Distribution costs = margins received by distributors, cost of sales force, trade incentives, volume discounts, co-op advertising, etc. -Miscellaneous marketing costs = marketing research, overhead, etc.

Lower Cost of Goods Sold (COGS)

-Expenses directly related to the goods/services being sold -Can have variable and fixed components -Can either lower the cost of inputs (materials, labor, inbound logistics), or lower the cost of the processes (optimizing operations, using alternative tech, etc.)

Lower Research and Development (R&D) Costs

-Fixed costs necessary for designing the company's offering -New tech to shorten the product development cycle, minimizing equipment costs, reducing labor costs

Price wars are detrimental to profitability because of..

-Fixed-cost effect •Price reductions have an exponential impact on profitability -Competitive reaction •Competitors can easily match prices; rarely a sustainable strategy -Increased price elasticity •May cause shift in customers' future price expectations •Reference points -Brand devaluation •Emphasizing price erodes brand power

Bounce rate questions to ask:

-How does my website bounce rate compare to industry benchmarks? -How do my webpage bounce rates compare to each other? -How do my campaign bounce rates compare to each other? -How have my bounce rates changed over time?

Price cuts -> Price wars

-Offering differentiation •Low differentiation is best -Cost structure •Increasing volume of output benefits all companies -Market growth •Best when markets are stagnant, so a company must steal share to grow -Customer loyalty • Best when customers are not brand loyal

Penetration Pricing

-Setting relatively low prices in an attempt to gain higher sales volume, albeit at lower margins 1.Demand is relatively elastic 2.The target segment is increasingly competitive 3.Cost is a function of volume and, as a result, significant cost savings are expected as cumulative volume increases 4.Being the market pioneer can lead to a SCA 5.The company has the resources to mass produce the offering

The Body Shop & Social Listening - How do they use it?

-Turning online chatter into campaign inspiration -Monitoring and optimizing campaign / product performance -Managing corporate reputation -Spotting opportunities and trends -Understanding trends in sustainability and activism for product development

Creative solution: two key decisions

1. Message appeal 2. Execution style Balance is key! - Creativity should never be achieved at the expense of marketing content

What are cookies used for?

1.Session management - cookies help publishers' websites recognize users without asking them to authenticate. 2.Personalization - cookies help display targeted ads, set frequency capping, and help with reporting. 3.Tracking - shopping stores might suggest products similar to those the user viewed.

Social media promotion decisions

1.Which platform to use? 2.Which type of media? 3.Which KPIs?

A British hotel decides who to target with online advertising by segmenting customers based on web browsing behavior. They advertise to consumers who have been visiting websites related to British travel information, searched the weather in England, watched Paddington Bear 2 online, and booked an airplane trip on British Airways. This is an example of... a)behavioral targeting b)contextual targeting c)search retargeting d)site retargeting

A

What is the tradeoff managers face in decisions about optimizing price? a)raising prices increases profit margins, but raising prices (generally) decreases sales volume b)raising prices always leads to increased perceptions of quality, but can make consumers demand more of the brand c)raising prices (generally) decreases short-term sales volume but this is usually not a concern d)raising prices increases profit margins, and this will lead to employee demands for raises

A

Price Fixing

A practice in which companies conspire to set prices for a given product or service. This is illegal in the United States

Search Advertising Overview

Advertising is like an auction -Advertisers select search keywords -Advertisers select the bid amount for their ads -Placement on page is affected by advertiser's own bid and competitors' bids (Also affected by historic performance—more details available from Google) PPC = Pay Per Click -Pay only when someone clicks on the ad

Steal-share strategy

Attract customers from your competitors

Market-growth strategy

Attract customers who are new to the product category and are not using the company's or the competitors' offerings

Consider psychological aspects of pricing. A customer uses what they know of prices in general for a product category when they encounter new prices. This is an example of... a)price-quantity effects b)reference-price effects c)price-ending effects d)product-line pricing effects e)artificial time constraints

B

For a company interested in digital marketing promotion, their website, mobile site, and social media channels are examples of... a)earned media b)owned media c)paid media d)retargeting

B

A company releases an advertisement for a holiday turkey. The advertisement includes the price, the weight/size of the turkey, a joke about family dynamics during the busy holiday season, and an image demonstrating a loving family around the dinner table (implying that this purchase will bring love and family togetherness to any household). This would be an example of: a)an information-based approach to advertising b)an affect-based approach to advertising c)a combination of an information-based approach and an affect-based approach to advertising d)a company-focused communication

C

A company uses a _____________ strategy, by which they increase sales volume by increasing the quantity purchased from their existing customers. This is a... a)market-growth strategy b)steal-share strategy c)market penetration strategy d)price elasticity strategy e)none of the above

C

A company is using web metrics to track and understand their customers' activities on their website. The company is most concerned with understanding the proportion of website visitors who fill out a registration form on their website. This would be a measure of ... a)average session duration b)total sessions c)bounce rate d)conversion rate

D

Contextual Targeting

Displaying ads based on a website's content

Which platform to use?

Don't try to dominate them all! •X (formerly Twitter) -Great for mastering social media basics •Facebook -Algorithm change in 2022. Previously the algorithm promoted "most liked content" but now it is more sophisticated •Instagram -Centered around visual content •Threads -Connects easily through Instagram, has mobile and desktop options -100 million registrations less than a week after it was launched (July 5, 2023); the most rapidly downloaded app ever •LinkedIn -Business/networking -Great for B2B brands •Pinterest -Widely used by Gen Z and Millennials -Product marketing here relies on imagery •YouTube -Video-based -Can house your videos (even if you plan to post elsewhere) •TikTok -Hyper-personalized algorithm -Over 1 billion users

Consider pricing strategies. A cruise ship has a fixed capacity of cabins onboard for a week-long cruise. The company works to set an ideal price that will maximize their revenues for this fixed capacity each week. This is an example of... a)prestige pricing / price signaling b)price fixing c)demand pricing d)complementary pricing e)yield-management pricing

E

Social ROI Challenges

First, understand your goal. Next, choose appropriate KPIs.

SEO (Search Engine Optimization)

High quality websites get mentioned (linked) elsewhere online. Google founders developed an algorithm (PageRank) which assess quality of web pages based on which pages link to each other.

Market-penetration strategy

Increase sales volume by increasing the quantity purchased from your existing customers

Changes to communication over the past decades

Mass Media (TV / Print) - One-on-one communication; Personalized; Right place/time - Mobile Communication; geolocation used to predict needs - Peer-to-peer communication - Customer-initiated interactions; hybrid outbound / inbound

Managing incentives

Monetary: - Customer: Coupons, rebates, volume discounts, price reductions - Collaborator: Slotting, stocking, advertising, display, and market-development allowances; spiffs; volume discounts and rebates; off-invoice incentives; cash discounts; inventory financing - Company: Slotting, stocking, advertising, display, and market-development allowances; spiffs; volume discounts and rebates; off-invoice incentives; cash discounts; inventory financing Nonmonetary: - Customer: Premiums, rewards, sweepstakes, loyalty programs, prizes, contests - Collaborator: Contests, bonus merchandise, buyback guarantees, sales support and training - Company: Nonmonetary bonuses, recognition awards, contests

Second-Party Cookies

Not a thing! Second-party data is a thing, however. A company selling data it has collected

SEO: Factors that influence PageRank

PageRank's algorithm changes frequently, and is not publicly disclosed. It includes measures like: -The # of pages that link to you -The quality of pages that link to you -Keywords -Title tags and Meta descriptions -Website and URL structure Search engines rank search results based on PageRank

Which type of media?

Paid media -> advertising: paid promotion Earned media -> sharing: people love your media so they share and repost it Owned media -> web properties: tangible media

Complementary Pricing

Pricing a group of uniquely compatible products so that the entry product in the group is comparatively low priced, with higher prices for the other components (e.g., printers and ink) •aka "Captive Pricing" •aka "Two-Part Pricing"

Method 2 to Increase Revenues: Optimize Price

Raising prices increases profit margins = positive impact on profits BUT Raising prices (generally) decreases sales volume because of lower customer value associated with higher price

Behavioral Targeting (aka audience targeting)

Segmenting customers based on web browsing behavior -Mobile and physical store data can also be incorporated

Search Retargeting

Serve display ads to users as they browse the web based on their keyword search behavior

Demand Pricing

Setting prices based on customers' WTP for the benefits of the offering

KPIs (Key Performance Indicators) of Interest

What is most important to your brand? What should you keep track of on Social Media?

Price changes DO lead to big changes in consumer demand

When substitute goods/services are readily available

Competitive Pricing

a pricing method that uses competitors' prices as benchmarks ("competitive-parity pricing")

In general, the best strategy for a company to win a potential price war is to..

avoid it

Price Discrimination

charging different buyers different prices for goods of equal grade and quality (e.g., tourist vs. local vs. student rates at museums) •aka "Price Segmentation"

Second Market Discounting

company charges lower prices in more competitive markets (e.g., other countries)

Price wars rarely enable companies to achieve their strategic goals, and in most cases the only beneficiaries of a price war are the company's _________

customers

The impact of pricing on sales revenues

depends on the way customers react to changes in price

Product-Line Pricing

each product's price is determined as a function of the product's place in the product line

When developing a communication campaign, a manager's ultimate goal is to

inform target customers, collaborators, and company employees and stakeholders about the offering and the ways in which it will create market value. -Customer-focused communication -Collaborator-focused communication -Company-focused communication (internal)

Everyday Low Pricing (EDLP)

maintaining low prices without frequent price promotions

Execution Style

method used to convey a particular appeal using the means provided by the selected media format. These decisions are media-specific - Print - Radio - TV

Maximizing __________________ is the primary goal for the vast majority of companies

monetary value (profitability)

Secure Cookies

only present on a website with HTTPS protocol

Deceptive Pricing

presenting an offering's price to the buyer in a way that is deliberately misleading. This is illegal in the United States

High-Low Pricing

prices fluctuate over time, typically due to a heavy reliance on sales promotions

Experience Curve Pricing

pricing based on anticipated lower cost structure due to scale economies and experience curve effects (as you get more experience, each product costs less to produce)

Price wars often start when a company is willing to

sacrifice margins to gain sales volume

Predatory Pricing

selling below cost with the intent to put competitors out of business. This is illegal in the United States

Loss Leader

setting a low price for an offering (at or below cost) to increase sales of other offerings (e.g., build store traffic, increase other sales)

Prestige Pricing

setting price relatively high to create an exclusive image

Message appeal

the approach used to communicate the company's message. Can use a combination of the following: -Information-based approach •Factual presentation •Demonstrations •Slice-of-life stories •Testimonials -Affect-based approach •Love •Romance •Humor •Fear

Price elasticity

the degree to which a change in price leads to a change in quantity sold

Cost-Plus Pricing

the price is determined by adding a fixed markup to the cost of the product. Used where profit margins are stable. Does not account for demand or competitors

Yield-Management Pricing

the price is set to maximize revenue for a fixed capacity within a given time frame (e.g., airlines & hotels)

Social listening (social media listening)

the process of analyzing online conversations about your brand and your industry at large to find out more about your audience i.e.: actively listening to your customers at scale and conducting sentiment analysis to improve your marketing

Web Metrics

used to track and understand customers' online activities 1. Total Sessions = # of unique visits -Traffic (sessions or pageviews) -New Visitors = # of people visiting for the first time (unique visitors) -Return Visitors = # of people visiting your web page again (repeat visitors) 2. Average Session Duration = time active on your website - Could also measure time on page (*could be misleading) 3. Bounce rate = a ratio of people who have bounced (left without clicking on anything) to the entire number of visitors. 4. Conversion rate = percentage of visitors who perform the desired action, like... -Opening an email -Filling out a registration form -Signing up for a giveaway -Buying a product •Conversion rate is often = (# successes) / (# unique visitors) CTA = "Call to Action" or the action you ask people to do, such as "buy now"

Selecting the media - Outbound media (from brand to consumer)

•Advertising •Public Relations •Social media •Direct marketing •Personal selling •Event sponsorship •Product placement •Product-based communication •Product samples and free trials

Setting communication goals

•Create customer awareness about the offering •Generate interest in the company's offering •Create and strengthen customer preference (desire) for the offering by enhancing the offering's attractiveness •Motivate customers to engage with the offering and take an action such as purchasing the offering or contacting the company for information Outbound: One-way interaction Inbound: Two-way interaction

Digital Media Strategy

•Digital Media Channel Strategies -Understanding Web Metrics -Using Google Analytics •Digital Media Promotion Strategies -SEO & Search Advertising -Cookies -Targeting/privacy issues

Skim Pricing

•High price to "skim the cream" off the top of the market •Customers who seek the benefits delivered by the offering and are willing to pay a relatively high price for it 1.Demand is relatively inelastic 2.There is little or no competition for the target segment 3.Cost to produce is not a direct function of volume 4.Being a market pioneer is not likely to result in a SCA 5.Company lacks capabilities to mass-produce the offering

Session Cookies (aka Non-persistent Cookies)

•Like website memory - they only retain information about the user until they close the browser (e.g. shopping carts)

Manage Profit Growth by Lowering Costs

•Lower Cost of Goods Sold (COGS) •Lower Research and Development (R&D) Costs •Lower Marketing Costs •Lower Miscellaneous Other Costs

Manage Profit Impact of Strategic Offerings

•Not all offerings are designed to generate profits: some aim to... -Create brand awareness -Promote other offerings in the company's product line -Enhance the corporate culture -Facilitate talent recruitment and retention •Can still be an important component in creating company value

Posting on Social Media -> positive social feedback

•One reason people post is to received positive feedback, which in turn boosts their self-esteem •In general, people tend to post on social media "from some kind of emotional position that seeks a response"

Selecting the media - Inbound media (back and forth between brand and consumer)

•Online search •Personal interaction •Phone communication •Online interactive forums •Mail/email

Third-Party Cookies

•Placed by domains that a user has not visited directly •Occurs when a user visits a website with a 3rd-party cookie file (like an ad) •Used for tracking, advertisement, and retargeting

Price changes DON'T lead to big changes in consumer demand

•Products with stronger brands. Brands can charge higher prices if demand for the product is price inelastic. •Essential goods. Basic items necessary for everyday life

Social media activates our brains' reward systems

•Receiving "likes" on social media triggers dopamine receptors -aka our body's rewards system is activated •Even just SEEING a photo with many likes (compared to few) increased brain activity in areas related to social cognition, imitation, and attention

Site Retargeting (aka Retargeting)

•Show display ads to users who visited your site and then left without completing a purchase to browse elsewhere •NOT keyword based •Targeting people familiar with your brand

First-Party Cookies

•Stored on a website (domain) a user has visited directly •Used to optimize website functionality, like remembering language preferences •Essential for key website features

Predictive Targeting

•Uses -Web browsing data from behavioral targeting -3rd party data -AI/machine learning •Predicts future buying patterns based on past behaviors

Persistent Cookies

•Usually have an expiration date set by the publisher •track users' behavior on a website over an extended time

Circumventing Price Wars

•Verify the threat of a price war -Have you misunderstood? •Evaluate the likely impact of the competitor's actions -Which customers will be tempted by lower prices elsewhere? -How valuable are those customers to your company? •Develop segment-specific strategies to address the competitive threat -Stay the course -Reposition an existing offering -Add new offerings (e.g., downscale extension)