Marketing Test 2
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How does New Balance shoes track their product requirements for their stores and what advantages does it provide.
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Why are international prices hard to determine and what are the factors that go into setting them?
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57. Why must the Price Demand curve be studied before any strategy or decisions are made on price?
Demand Curve- A curve that shows the number of units the market will buy in a given period of time at different prices that might be charged. Need to understand the demand curve in order to make good pricing decisions. Con Agra example for frozen 1 dollar dinners.
82. Gavina Coffee uses 11 different types of channels to help them grow. What are the variety that they use in the 20 states they sell their products?
Price of the commodity of coffee has gone up a lot. They have had competition with large companies and could not compete with them straight up, so they had to initiate channels. They use Retail Brand- anything that is sold through a customer to the end retailer- Kroger, Safeway. Wholesaler- sell to companies who buy in large quantities- Costco. Private Labels- Mcdonalds- created a new blend specifically for Mcdonalds , small bakerys
98. Logistics Information Management is critical to making a large enterprise run efficiently. What is ERP - Enterprise Resource Planning and how does it help a company replenish their products?
Process by which a company manages and integrates the important parts of its business. • Integrates planning, purchasing, inventory, sales, marketing, finance and HR
74. Psychological pricing is used when a store practices "even / odd pricing". What do they do?
• 99 cents makes the price seem lower, or discounted • Even number is a "premium" product's price • Plays to psychological conceptions of price by sending subliminal messages to consumers
101. Bill Rossiter in his talk to the class gave create to the "Geek Squad" in the survival of Best Buy. What did they do for the company
• Addressed an issue that exists among older consumers of technology. Provided a service that takes care of setup and explains to consumers how to use the product. This saves people time and frustration and as such it has made Best Buy a ton of money
44. Describe the current strategies of Amazon and Walmart in their current Price War for Online Supremacy? What approach and competitive strategy are each one using?
• Amazon and Walmart are in a fight to control online, low-price retailing. The primary basis for competition between the two is price. Walmart has an advantage insofar as it has always been predicated upon low prices and can use physical locations to augment the online process, with in-store pick up. WalMart uses EDLP, everyday low prices • On the other hand amazon is not saddled by many of the costs that are associated with operating brick and mortar. Additionally, as the company has a long history of online, they know how to deliver goods efficiently and beat Walmart on most nonprice buying factors: speed of deliver, assortment of product offerings, services, etc.
96. What is Third-Party logistics (3PL) and why have these companies mushroomed over the past 20 years?
• An independent logistics provider that performs any or all of the functions required to get a client's product to market. Ex: FedEx Logistics, UPS Business Solutions • Big companies often hate the grunt work that goes into logistics. • Companies use these for a number of reasons: o getting product to market is primary focus, and these providers can deal with logistics more efficiently at lower cost o Outsourcing logistics frees a company to focus more intensely on core business o Integrated logistics companies understand increasingly complex logistics environments
Apple Computer gets a strong premium price for their product and rarely discounts. Their competitors like Xiaomi have created a cheaper alternative for their phone. How should Apple counter this type of competition?
• Apple is the market leader in quality and branding, consumers want their products. Premium priced and worth it. • Keep doing what they are doing. If Apple were to churn out a lower quality, less expensive product for China, it would hurt brand image, which is what makes Apple so successful
Give some examples of "channel conflict" and how do "power" relationships play in channel management. What is "horizontal" conflict and "vertical" conflict?
• Channel power: degree to which any member of a marketing channel can exercise influence over the other members of a channel, conflict occurs when channel members become upset by the relationships with other parts of the channel • Horizontal Conflict: occurs among firms at the same level of the channel; EX: Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside of their assigned territories • Vertical Conflict: conflict between different levels of the same channel; EX: McDonald's increased its emphasis on aggressive discounting, which hurts the margins of franchises
90. Why is a company constantly re-evaluating their channel strategy? Economics, Control and Adaptability all play a role.
• Company must regularly check channel members performance against standards such as sales quotas, average inventory levels, customer delivery time, treatment of damaged and lost goods, cooperation in company promotion, and services to the customer. • Good intermediaries should be rewarded and bad ones assisted or, as a last resort, replaced
52. Why is "Competition-based pricing" often preferred by the sales function? What are the pros and cons?
• Competition-based pricing: involves setting prices based on competitors' strategies, costs, prices and market offerings. Goal is to set prices according to the relative value created versus competitors • The sales function prefers this method of pricing because it allows them to talk about why their product adds more value than does that of the competitor • The pros are that price is indicative of the relative value of the product compared to competitors • Cons: price must be appropriately set so that the customer can make an accurate purchase decision
81. What is Vertical Integration of your channels, "Corporate VMS"? Describe the issues of Direct versus Indirect channel management.
• Consists of producers, wholesalers, and retailers acting as a unified system. One channel member owns the other, has contracts with them, or wields so much power that they must all cooperate • Corporate VMS: integrates successive stages of production and distribution under single ownership. EX: Kroger owns and operates manufacturing plants, which gives it factory-to-store channel control over 40 percent of private-label items found on shelves • Direct--ownership of channels, or contractual, almost complete control... • Indirect--less hands on, etc.
71. Pharma pricing model is often criticized. What are the two sides of the argument for why Pharma prices are set the way they are? What is Predatory Pricing? Price fixing?
• Consumers argue that pharma companies have a monopoly and are raising prices on products that the consumer cannot live without; no choice but to buy it • Pharma companies argue that the price increases are necessary for the research and development of future drugs, thus the high prices are an investment in saving lives • Price fixing: legislation states that sellers must set prices without talking to competitors--collusion • Predatory pricing: selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.
Why is the choice of marketing channels critical in maintaining your brand image / essence?
• It is important that the channels that a company selected remain in line with the brand image/essence of the brand. If these channels are unable to uphold standard of quality or whatever the contributes to the overarching brand image this can hurt the brand
50. How does one practice Cost-Based Pricing and what is the advantage and disadvantage of this method? What is Cost-Plus method of pricing?
• Cost-based pricing: involves setting prices based on the costs of producing, distributing and selling the product plus a fair rate of return for the company's effort and risk • Results in lower prices and, thereby, margins but higher greater sales and profits • Cost-plus method of pricing: adding a standard markup to the cost of the product--ex: construction companies submit job bids by estimating total project costs and adding a standard markup for profit
48. Customer Value-based pricing is best determined in what way?
• Customer Value-Based Pricing: uses buyers' perceptions of value as the key to pricing • Company first assesses customer needs and value perceptions → sets target price based on customer perceptions of value → design product based on targeted value and price
56. Who within an organization should set price? Product Developers, Finance, Sale, Marketing?
• Depends on the organization's size; small companies often have prices set by top management; large companies often have prices set by divisional or product managers; in industrial markets salespeople often negotiate prices within a certain range; in certain industries, airline, companies have pricing departments • Ideally, all of these departments would coordinate in determining the price
83. "Disintermediation" is the constant concern of players in the marketing channel? When does it occur and give some examples of how companies fight it.
• Disintermediation: the cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries • Occurs when product or service producers cut out intermediaries and go straight to final buyers. EX: itunes and other streaming services have put traditional music stores out of business • Channel innovators who find new ways to add value in the channel can displace traditional resellers and reap the rewards; innovation is a cause and a solution • Example: Netflix innovated by switching from DVD-by-mail to video streaming, preventing itself from going out of business in the way it put BlockBuster into ruin • to remain competitive, producers must develop new channel opportunities
Why is your channel strategy so important in developing an International marketing program?
• Distribution channels vary from country to country and international marketers face a wide range of challenges. Local conditions can greatly influence how a company distributes products in global markets.
65. What is "Dynamic pricing" and how does Amazon implement it?
• Dynamic pricing: adjusting prices continually to meet the characteristics and needs of individual customers and situations • Amazon's automated dynamic pricing system changes the price on as many as 80 million items on its site throughout a given day, based on a host of marketplace factors.
73. How are "shipping costs" used in geographic pricing as a tactic to pass along price discounts or increases? Example might be FOB-origin pricing, Uniform-delivered pricing, zone pricing, basing-point pricing or freight-absorption pricing.
• Firms uses these shipping methods to pass along the cost of freight to consumers • FOB-origin pricing: goods are placed free on board a carrier; title and responsibility passes to customer who pays freight from factory to destination. • Uniform-delivered pricing: opposite of FOB, company charges the same price plus freight to all customers, regardless of location. Freight charge is set at average cost, some pay more some pay less than what it should cost. • Zone pricing: Company sets up zones and people pay an additional charge depending on how far away the zone is from origin • basing-point pricing: seller selects a give city as a basing point and charges customers all the freight costs form the city to destination Freight absorption pricing- Freight-absorption pricing- the seller covers all of the shipping costs in order to get business
79. How does a franchise represent a marketing channel for a company and what is good and bad about it as a way of doing business? What is the difference between manufactured- sponsored retailer, wholesalers and service-firm-sponsored retailers
• Franchise organization: a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process • A franchise carries the brand name and makes sales for the company. This can be good in that the company does not have to deal with the day-to-day details of operating stores, however, if the franchise is bad, it can hurt overall brand image. • Three types of franchises: o manufacturer-sponsored retailer franchise system: Ford and its network of independent franchised dealers o manufacturer-sponsored wholesaler franchise system: Coca Cola licenses bottlers (wholesalers) in various world markets that buy Coca Cola syrups and then bottle and sell the finished product to retailers locally o Service-firm-sponsored retailer franchise system: Burger King and its franchisee-operated restaurants around the world.
49. The airline industry pricing practices and the Spirit Airline strategy has many aggressive features in it? Describe Spirit's practices and different approaches that are used, like ala carte or auctions?
• Good-value pricing: offering the right combination of quality and good service at a fair price • "Bare Fare" pricing--customers get less but don't pay for what they don't get; getting less but paying much less for it. • Buying a ticket gets you only a seat; must pay for many amenities that have become standard on other airlines--beverages, seat assignment, checking bags, etc. • Gives customers complete control over what they want to purchase; you get what you pay for
75. When a company adopts "High/ Low" pricing (JC Penney) and battles against EDLP pricing (Walmart) how do they compete?
• High/Low pricing: putting the high "original price" next to the low actual price makes it seem like you are getting a valuable discount. They make it seem like they are offering low prices on higher quality goods, compared to EDLP where the company is offering low prices on low quality goods
Describe the difference between an exclusive, selective or intensive distributor.
• Inclusive distribution--stocking the product in as many outlets as possible...wants to get maximum brand exposure...ie kraft • Exclusive distribution-- giving a limited number of dealers the exclusive right to distribute the company's products in their territories (luxury brands) • Selective distribution--the use of more than one but fewer than all the intermediaries that are willing to carry the company's products...STIHL only gives their products to unique dealer in which they can get greater profits than just going to Lowes and Home Depot
47. JC Penney made a major mistake in changing their price philosophy. What did they do?
• JC Penney had initially used a system of coupons, which was something that their target market really liked. The company couldn't compete with WalMart on price and with higher end stores on quality. By trying to change to a value pricing strategy, the company alienated their target market.
72. Lululemon Stores takes prestige pricing to the limits. What do they do to get value and such high price products?
• Lifestyle brand, selling a lifestyle. Target affluent people, who are willing to pay for the perceived value that comes from the products and the status they give them.
77. Laws prohibit "retail price maintenance" - where a manufacturer requires a dealer price a product at a certain level, creating MSRP. What is MSRP and what is Price Discrimination with channels?
• MSRP: Manufacturer's Suggested Retail Price; illegal for seller to require a specified price by retailers but they can suggest a price • Price Discrimination: practice of charging customers different prices for the same product or services. seller charges buyer the maximum price that they are willing to pay. Can also discriminated by giving different quality goods to different retailers.
62. Printer Manufacturers, Amazon Kindle and shaving companies often use "captive" pricing to make profits. How does it work?
• Make it so that products require additional recurring purchases, which is where you get the money. Ex: cheap printers, razors that require ink and blades or JUUL • Fixed fee plus variable usage rate
61. An aggressive approach to eliminate competition is "Market-penetration pricing". What is the goal and objective of this strategy?
• Market-penetration pricing: setting a low price for a new product in order to attract a large number of buyers and a large market share; high sales volume results in falling costs, allowing companies to cut prices even further • Conditions: market must be highly price sensitive so that low prices produce more market growth; production and distribution costs must decrease as sales volume increases; low price must help keep out the competition
60. New Product Pricing is very tricky. When a company practices "market - skimming" what are they doing?
• Market-skimming: Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high prices; the company makes fewer but more profitable sales. EX: apple with new models that start high but come down in price
78. What is a Marketing Channel? Give some examples of types of channels used by markets.
• Marketing Channel: set of independent organizations that help make a product or service available for use or consumption by the consumer or business user. • Examples: Manufacturer→ Distributor → Retailer → Consumer • Add value by: o Information o Promotion o Contact o Matching o Negotiation
84. Netflix is seen as a disruptor because they have not been afraid of "disintermediating" many companies business models and roles in the marketing chain. They believe in "disintermediating" themselves. What does that mean?
• Netflix is not afraid of making changes to their business model that make their old model obsolete. The company caused the disintermediation of Blockbuster by pioneering dvd's by mail and then avoided disintermediation by switching to video streaming. The company innovates in a way that disintermediates itself.
How is your Brand affected - If you are using a "prestige product" strategy? If you are use "comparison" pricing strategy? If you use a "technical or innovation selling" strategy?
• Prestige product strategy--product is high quality, brand is a luxury • Comparison pricing strategy -- Directly compare their prices with that of a competitor, forms an association between the companies in the mind of consumers. • Technical or innovation selling -- Makes your brand seem innovative or highly technologically advanced
70. What are the different considerations when one changes, increase or decreases prices from the customer? From the competition? What is the purpose of the "low-price fighter brand"? How are "store brands" used to serve this function?
• Price cuts: express capacity, falling demand in face of price competition • Price increases: Inflation, rising costs, over-demand • Must consider price elasticity of demand • Balance between reducing price and improving quality/value of offering • low-price fighter brand: adding a lower-price item to the line or creating a separate lower-price brand--necessary if the particular market segment being lost is price sensitive and will not respond to arguments of higher quality • Store brands: Give customers who just want the essentials for a low price an option, also are almost all margin for the store
45. How is a "Price" created for each product and how is it validated by the marketplace?
• Price--amount of money charged for a product or service; the sum of all the values that customers give up to gain the benefits of having or using a product or service. • Customer perceptions of the product's value set the ceiling for its price; product costs set the floor for a product's price. In setting the a price between these two extremes, the company must consider several external and internal factors, such as competitors strategies and prices, the overall strategy and marketing mix and the nature of the market and demand • Once it is set, the market validates the price in through purchases
63. When would you use "Price-Bundling" prices and what are the good and bad points?
• Price-bundling: combining several products and offering the bundle at a reduced price. EX: Microsoft office • Pro: can promote the sales of products that consumers might not otherwise buy • Con: combined price must be low enough to get them to buy the bundle, cutting into the bottom line
46. Price is one of the biggest headaches for Executive management but also the biggest opportunity to improve profitability. Why do executives not want to deal with it?
• Pricing is very volatile; prices have a direct impact on the firm's bottom line--small changes in price can have a large impact on overall profitability
A "Promotional Price" is set but there are often restrictions on them... what are they?
• Promotional Pricing: companies will temporarily price their products below list price and sometimes even below cost to create buying excitement and urgency. • Restrictions: special events, limited time offers, flash sales; add services: low interest financing, longer warranties, free maintenance,
99. How does "RFID" technology make an integrated logistics management supply system simpler and inventory management more accurate?
• Radio frequency identification uses electromagnetic fields to automatically identify and track tags attached to objects • Allows companies to manage inventory with high accuracy and efficiency
67. A Manufacturer likes setting a "Reference price" as a psychological marker. How do they use it?
• Reference Prices: prices that buyers carry in their minds and refer to when looking at a given product; might be formed by noting current prices, remembering past prices, or assessing the buying situation • They uses this reference price as a basis of comparison with their products. For example, retailers put out an expensive box of cereal that they don't really intend to sell to make the overpriced store brand box appear more affordable
53. How did the Ritchie Brothers establish price for their used Machinery and what did they do to increase that price? What is the advantage for the Seller when they use "auction-pricing"
• Ritchie Brothers create competition in order to raise the price of their machinery in an auction. To increase that price they company fixes up all the machinery and gathers all the top potential buyers in one spot • If the auction is set up in the correct way, the potential buyers will drive the price up higher than if they had been negotiating with the seller independently. Once the buyer sees the product, they will often pay more in the spur of the moment than they originally had intended to
Segmented pricing" is used to pass along lower prices by segment, geography, demographic, age group or sex. Is this fair and why do they do it?
• Segmented Pricing: company sells product or service at two or more prices, even though the differences in prices are not based on differences in costs • I think this is fair so long as the differences in price are not based on demographic, age group or sex. It is fine to differentiate different products that seek to appeal to these different groups but if the product is exactly the same, it should be the same price
76. How does a consumer use "Showrooming" to get the best price? Why do retailers hate the practice?
• Showrooming: practice of consumer checking out merchandise in-store and then buying online. retailers will make the sale on the product but get no actual money • Webrooming: practice of checking out merchandise online and then buying it in traditional stores
95. Describe how good Supply chain management systems work to deliver marketing value for the consumer?
• Supply Chain Management: managing upstream and downstream value-added flows of materials, final goods and related information among suppliers, the company, resellers and final consumers IF this is managed correctly it will allow the company to provide higher quality goods and services for a lower cost to its consumers
51. What are Target-Profit Pricing and Break-Even Analysis and how are they used to determine price?
• Target profit pricing (or variation target return pricing): firm sets a price at which it will break even and make the the target return on the costs of making and marketing the product • Break-even analysis: select the price where total revenue equals total costs; break-even volume=fixed cost / (price-variable cost)
How does Amazon and P&G work together in their Vendor-flex program.
• The two companies have partnered to make the fulfillment and shipping of P&G products purchased on Amazon more efficient. P&G's warehouse has a fenced in area ran by Amazon; the products are placed in the area, and Amazon handles packaging, labeling and shipping to customers. • Reduces storage costs for Amazon, P&G saves on the cost of transporting goods to Amazon
Apple Pay is a potential disintermediator? How are they offering change?
• They are offering an alternative to physical credit cards, ease of payment, and security. This is a threat to companies like Visa, Mastercard, etc.
86. What is a "customer value delivery network" and how do marketing channels play a key role in satisfying consumer needs?
• Value delivery network: is made up of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system. • Channels are used as a means of delivering the value to the customer, each member and level adds value for the customer
55. Trader Joe's has a new Pricing Mix and marketing strategy that changes the nature of pricing decisions. How do they price? Good-Value pricing or value-added pricing?
• Value-added pricing: rather than cutting prices, they add quality, services and value-added features to differentiate offers and thus support higher prices • Good-Value Pricing: offering the right combination of quality and good service at a fair price • Trader Joe's uses good value pricing, offering the right quality offerings a a value price. The company cuts operational costs and uses a store brand for most products which increases margins which can in turn be turned into price cuts
58. Taco Bell uses price as a weapon to compete. What is their method and how does target marketing contribute to their strategy of what to charge?
• Value-based pricing; price competition. The company has figured out what value their target market wants for what price and recreates their menu to satisfy this desire. Realized that their target market wanted a meal for very inexpensive→ made value menu
How does the selling models of Volvo and Tesla threaten the existing car industry marketing channel strategy? What is the advantage and the disadvantage?
• Volvo and Tesla have began selling cars online, which threatens the current system wherein dealers are responsible for the selling of cars. • Advantages: this boosts the company's profit margins as they cut out the middleman and keep the profits for themself. • Disadvantage: run the risk of alienating independent dealer network. Consumers also might not be accepting of online sale of cars, as they may only feel comfortable buying a care they can take for a test drive, etc--consumers sometimes fear change
54. Why is the shopper at the Whole Foods store willing to use a different type of pricing philosophy at that store and what is their main criteria for shopping there?
• Whole Foods is an experience of sorts, the company attracts consumers who live the Whole Foods way of life. Willing to pay more for organic food, product differentiation. Whole Foods uses prestige pricing
