Marketing Exam 4

What are the three approaches to selling advertising schedules: Pulse (burst) schedule

A flighting schedule is combined with a continuous schedule because of increases in demand, heavy periods of promotion, or introduction of a new product.

Demand Curve

A graph relating the quantity sold and price, which shows the maximum number of units that will be sold at a given price.

Premium

A promotional tool often used with consumers is the premium, which consists of merchandise offered free or at a significant savings over its retail price.

What are the five common approaches to posttests? Unaided Recall

A question such as, "What ads do you remember seeing yesterday?" is asked of respondents without any prompting to determine whether they saw or heard advertising messages.

What are the five common approaches to posttests? Inquiry Tests

Additional product information, product samples, or premiums are offered to an ad's readers or viewers. Ad's generating the most inquiries are presumed to be the most effective.

Know the advantages and disadvantages of the types of media: Magazines

Advantage: Can target specific audiences; high quality color; long life of ad; ads can be clipped and saved; can convey complex information Disadvantage: Long time needed to place ad; relatively high cost; competes for attention with other magazine features

Know the advantages and disadvantages of the types of media: Yellow Pages

Advantage: Excellent coverage of geographic segments; long use period; available 24 hours/365 days Disadvantage: Proliferation of competitive directories in many markets; difficult to keep up-to-date

Know the advantages and disadvantages of the types of media: Newspapers

Advantage: Excellent coverage of local markets; ads can be placed and changed quickly; ads can be saved; quick consumer response; low cost Disadvantage: Ads compete for attention with other newspaper features; short life span; poor color

Know the advantages and disadvantages of the types of media: Direct Mail

Advantage: High selectivity of audience; can contain complex information and personalized messages; high-quality graphics. Disadvantage: High cost per contact; poor image (junk mail)

Know the advantages and disadvantages of the types of media: Radio

Advantage: Low cost; can target local audiences; ads can be placed quickly; can use sound, humor, and intimacy effectively No visual element; short exposure time and perishable message; difficult to convey complex information Disadvantage:

Know the advantages and disadvantages of the types of media: Outdoor

Advantage: Low cost; local market focus; high visibility; opportunity for repeat exposures Disadvantage: Message must be short and simple; low selectivity of audience; criticized as a traffic hazard

Know the advantages and disadvantages of the types of media: Television

Advantage: Reaches extremely large audience; uses picture, print, sound, and motion for effect; can target specific audiences Disadvantage: High cost to prepare and run ads; short exposure time and perishable message; difficult to convey complex information

Know the advantages and disadvantages of the types of media: Internet

Advantage: Videos and audio capabilities; animation can capture attention; ads can be interactive and link to advertiser Disadvantage: Animation and interactivity require large files and more time to load; effectiveness is still uncertain

What are the five common approaches to posttests? Aided Recall

After being shown an ad, respondents are asked whether their previous exposure to it was through reading, viewing or listening. The starch test shown in the accompanying photo uses aided recall to determine the percentage of those who 1) remember seeing a specific magazine ad (noted), 2) who saw or read any part of the ad identifying the product or brand (seen-associated), 3) who read any part of the ad's copy (read some), and 4) who read at least half of the ad (read most). Elements of the ad are then tagged with the results.

What are the five common approaches to posttests?

Aided recall, unaided recall, attitude tests, inquiry tests, sales tests

Single Zone Pricing

All buyers pay the same delivered price for the products, regardless of their distance from the seller.

Comparative Advertising

An increasingly common form of competitive advertising, which shows one brand's strengths relative to those of competitors.

Advertising

Any paid form of non-personal communication about an organization, good, service, or idea by an identified sponsor.

Cumulative Quantity Discounts

Apply to the accumulation of purchases of a product over a given time period, typically a year.

Noncumulative Quantity Discounts

Are based on the size of an individual purchase order.

Know the types of advertisements: Pioneering institutional

Are used for announcements about what a company is, what it can do, or where it is located.

Know the types of advertisements: Institutional advertisements

Build goodwill or an image for an organization rather than promote a specific good or service. 1) advocacy, 2) pioneering institutional, 3) competitive institutional and, 4) reminder institutional.

What are the three approaches to selling advertising schedules

Continuous (steady) schedule, flighting (intermittent) schedule, pulse (burst) schedule

Loss-leader Pricing

Deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention in hopes that they will buy other products as well.

Skimming Pricing

During introduction, pricing can be either high or low. A high initial price may be used as part of a skimming strategy to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers.

Inelastic Demand

Exists when a 1% decrease in price produces less than a 1% increase in quantity demanded, thereby actually decreasing sales revenue. So a product with inelastic demand means that slight increases or decreases in price will not significantly affect the demand, or units sold, for the product.

Elastic Demand

Exists when a 1% decrease in price produces more than a 1% increase in quantity demanded, thereby actually increasing sales revenue. In other words, a product with elastic demand is one in which a slight decrease in price results in a relatively large increase in demand or units sold.

Price Constraints

Factors that limit the range of prices a firm may set.

What are the five price fixing practices that are closely scrutinized?

Five pricing practices have received the most scrutiny: 1) price fixing, 2) price discrimination, 3) deceptive pricing, 4) geographical pricing, and 5) predatory pricing.

Know the types of competitive markets including from most to least competitive

From most competitive to least competitive, these are pure competition, monopolistic competition, oligopoly, and monopoly.

What are the five common approaches to posttests? Sales Tests

Involve studies such as controlled experiments (e.g., using radio ads in one market and newspaper ads in another and comparing the results) and consumer purchase tests (measuring retail sales that result from a given advertising campaign). The most sophisticated experimental methods today allow a manufacturer, a distributor, or an advertising agency to manipulate an advertising variable (such as schedule or copy) through cable systems and observe subsequent sales effects by monitoring data collected from checkout scanners in supermarkets.

Marginal Cost (MC)

Is the change in total cost that results from producing and marketing one additional unit of a product MC = change in total cost/1 unit increase in Q.

Marginal Revenue (MR)

Is the change in total revenue that results from producing and marketing one additional unit of a product MR = change in total revenue/1 unit increase in Q.

Market Share

Is the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself.

Fixed Costs (FC)

Is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold. Examples of fixed costs are rent on the building, executive salaries, and insurance.

Variable Costs (VC)

Is the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold. For example, as the quantity sold doubles, the variable cost doubles. TC = FC + VC

Know the types of advertisements: Reminder advertisements

Is used to reinforce previous knowledge of a product. It is good for products that have achieved a well-recognized position and are in the mature phase of their product life cycle

What are the three approaches to selling advertising schedules: Flighting (intermittent) schedule

Periods of advertising are scheduled between periods of no advertising to reflect seasonal demand.

Know the two main types of advertisements

Product advertisements and Institutional advertisements

Know the profit equation

Profit = Total Revenue - Total cost

Know the types of advertisements: Competitive Institutional

Promote the advantages of one product class over another and are used in markets where different product classes compete for the same buyers.

Know the types of advertisements: Competitive advertisements

Promotes a specific brand's features and benefits. The objective of these messages is to persuade the target market to select the firm's brand rather than that of a competitor.

Quantity Discounts

Reductions in unit costs for a larger order

What are the five common approaches to posttests? Attitude Tests

Respondents are asked questions to measure changes in their attitudes after an advertising campaign, such as whether they have a more favorable attitude toward the product advertised.

Prestige Pricing

Setting a high price so that quality- or status- conscious consumers will be attracted to the product and buy it.

Know the types of advertisements: Reminder institutional

Simply bring the company's name to the attention of the target market again.

Know the types of advertisements: Advocacy Insitutional

State the position of a company on an issue (renewable energy, growth and jobs, and community development). Another form of advocacy advertisements is used when organizations make a request related to a particular action or behavior, such as a request by American Red Cross for blood donations.

Cost-plus Pricing

Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.

Know the types of advertisements: Pioneering advertisements

Tell people what a product is, what it can do, and where it can be found. The key objective of this is to inform the target market.

Posttests

Tests conducted after an advertisement has been shown to the target audience to determine whether it accomplished its intended purpose.

Pretests

Tests conducted before an advertisement is placed in any medium to determine whether it communicates the intended message or to select among alternative versions of the advertisement.

FOB Origin Pricing

The 'free on board' (FOB) price the seller quotes that includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur (seller's factory or warehouse).

Which governmental agency deals with pricing issues?

The Federal Trade Commission (FTC).

Frequency

The average number of times a person in the target audience is exposed to a message or an advertisement.

When is a penetration pricing policy most likely to be effective?

The conditions favoring penetration pricing are the reverse of those supporting skimming pricing: 1) many segments of the market are price sensitive, 2) a low initial price discourages competitors from entering the market, and 3) unit production and marketing costs fall dramatically as production volumes increase. A firm using penetration pricing may, 1) maintain the initial price for a time to gain profit from its low introductory level or 2) lower the price further, counting on the new volume to generate the necessary profit.

Bundle Pricing

The marketing of two or more products in a single package price.

Pricing

The money or other considerations exchanged for the ownership or use of a product or service.

What is the most popular loyalty program?

The most popular loyalty programs today are credit card reward program. More than 75% of all cards offer incentives for use of their card.

Rating

The percentage of households in a market that are tuned to a particular TV show or radio station.

Value Pricing

The practice of simultaneously increasing product and service benefits while maintaining or decreasing overall quality and ultimately its value to consumers.

Uniform Delivered Pricing

The price the seller quotes that includes all transportation costs.

Break-even Point (BEP)

The quantity at which total revenue and total costs are equal.

Total Costs (TC)

The total expense incurred by a firm in producing and marketing a product. Total cost is the sum of fixed cost and variable cost

Know the types of advertisements: Product advertisements

They take three forms: 1) pioneering (or informational), 2) competitive (or persuasive), and 3) reminder.

Penetration Pricing

To discourage competitive entry, a company can price low, referred to as Penetration Pricing.

Know how to calculate a trade discount and a cash discount

To encourage retailers to pay their bills quickly, manufacturers offer them cash discounts. Suppose a retailer receives a bill quoted at $1,000, 2/10 net 30. This means that the bill for the product is $1,000, but the retailer can take a 2% discount ($1,000 x 0.02 = $20) if payment is made within 10 days and send a check for $980. If the payment cannot be made within 10 days, the total amount of $1,000 is due within 30 days. It is usually understood by the buyer that an interest charge will be added after the first 30 days of free credit. Retailers provide cash discounts to consumers as well to eliminate the cost of credit granted to consumers. These discounts take the form of discount-for-cash policies.

Understand the terminology for trade 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 marketing channel on the basis of 1) where they are in the channel and 2) the marketing activities they are expected to perform in the future. Suppose a manufacturer quotes price in the following form: list price-$100 less 30/10/5. The first number in the percentage sequence always refers to the retail end of the channel. The last number always refers to the wholesaler or jobber closest to the manufacturer in the channel. The trade discounts are simply subtracted one at a time. This price quote shoes $100 is the manufacturer's suggested retail price; 30% of the suggested trail price is available to the retailer to cover costs and provide a profit of $30 ($100 x 0.30 = $30); wholesalers closest to the retailer in the channel get 10 percent of their selling price ($70 x 0.10 = $7); and the final group of wholesalers in the channel (probably jobbers) that are closest to the manufacturer get 5 percent of their selling price ($63 x 0.05 = $3.15). Thus, starting with the manufacturer's suggested retail price and subtracting the tree trade discounts shows that the manufacturer's selling price to the wholesaler or jobber closest to it is $59.85.

What are the three approaches to selling advertising schedules: Continuous (steady) schedule

When seasonal factors are unimportant, advertising is run at a continuous or steady schedule throughout the year.