Marketing ch 12, 14, 17

profit =

(contribution per unit x quantity) - fixed costs OR (price x quantity) - [fixed costs + (variable costs x quantity)}

what are the five reasons firms innovate?

1. changing customer needs 2. market saturation 3. managing risk through diversity 4. fashion cycles 5. improving business relationships

What are the five critical components of pricing?

1. company objectives 2. customers 3. costs 4. competition 5. channel members

Integrated marketing communications is the concept of designing marketing communications programs that coordinate all promotional activities - advertising, personal selling, sales promotion, public relations, and direct marketing - to provide

A consistent message across all audiences

suggests that Awareness leads to Interest, which leads to Desire, which leads to Action

AIDA model

The process of conveying a message to others that requires six elements: a source, a message, a channel of communication, and the process of encoding and decoding

Communication

Sally wants to start a lemonade stand. She has calculated at what point her revenue will cover her stands costs. Based on this calculation, she has decided she needs to sell 75 glasses of lemonade at $6 per glass. Which important element is sally not accounting for in her analysis?

Consumer demand

The percentage change in quantity demanded of product A compared to the percentage change in price of product B

Cross-price elasticity

If the price for a product increases, the demand for the complementary product will

Decrease

_____ is the process by which the adoption of an innovation spreads

Diffusion

Like personal selling, __________ has the advantage of being customized to match the needs of specific target markets. Messages can be developed and adapted quickly to facilitate one-to-one relationships with customers.

Direct marketing

The increased use of customer databases has enabled marketers to identify and track consumers over time and across purchase situations, and has contributed to the rapid growth in

Direct marketing

New-to-the-world products, where the product category itself is new, are also called:

Discontinuous innovations

Tammy is assessing the effect of her firms marketing communications. She should remember that the ultimate goal is to

Drive the receiver to action

When the Williams-Sonoma lowered the price of its bread maker from $479 to $267, their total revenue increased. This is an example of _______

Elastic demand

What is an inherent weakness of personal selling?

Extremely high expenses per exposure

Sales data, complaints, compliments, and redemption rates for coupons and rebates are types of ________________ marketers use to assess the effectiveness of their IMC efforts.

Feedback

Wanda asked her firm's advertising agency to estimate how often consumers saw her firm's IMC message and what percentage of the target audience was exposed to the message. Wanda is asking for

Frequency and reach data

The sender of an integrated marketing communication

Has little control over what meaning any individual receiver will take from the message

Dan is especially price sensitive. He has been known to line up on "Black Friday" (the day after Thanksgiving) at 4 a.m. in order to be among the first to buy sale items. Dan would likely respond to a __________ pricing strategy.

High/low

If demand for a product is __________ consumers will not change their purchasing habits greatly when the price of that product changes

Inelastic

When price decreases and total revenue falls, demand is

Inelastic

Kyle, who is an expert in electronic products, purchased a 3D tv right after they were available in the marketplace. He paid over $7,000 for it. Kyle would be considered which category of product adopters?

Innovator

Buyers who want to be the first on the block to have the new product or service. They enjoy taking risks and are regarded as highly knowledgable.

Innovators

Provides firms with the best means to reach the target audience with the desired message, and it enhances the value story by offering a clear and consistent message.

Integrated Marketing communications (IMC)

encompasses a variety of communication disciplines - advertising, personal selling, sales promotion, public relations, direct marketing, and online marketing including social media - in combination to provide clarity consistency, and maximum communicative impact.

Integrated marketing communications (IMC)

In the _____ stage of the product life cycle, the primary objective is to generate consumer awareness and motivate consumers to try the product

Introduction

This stage is characterized by initial losses to the firm due to high start-up costs and low levels of sales revenue as the product begins to take off

Introduction

One of the difficulties in measuring the effectiveness of IMC efforts is the __________ where consumers do not act immediately after receiving a marketing communication

Lagged effect

Nancy only breaks down and buys a new product after most of her friends and family have adopted it. Her reference group heavily influences her buying decision. Nancy is best described as _____

Late majority

Ryan is a sales rep for an established paper supply company. Business is good, but he is concerned that the company has spent little on new product development and has not created a new product in over five years. Without new products, Ryan can market his current products only to his current customers or

Market the same products to similar customers

Doritos is most likely in which stage of its product life cycle?

Maturity

Marginal competitors will start dropping out of the market during the _______ stage of the product life cycle.

Maturity

The _____ stage of the product life cycle normally has the longest stage.

Maturity

If a firm in a purely competitive market can differentiate its product or service, it becomes part of a(n) _______ market.

Monopolistic competition

What is the most common reason new products fail?

No discernible benefits

Refers to any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the mwdium

Noise

Budgeting method whereby the company determines its promotion objectives, outlines the tasks to accomplish these objectives, and determines the promotion cost of performing these tasks

Objective and task

The best approach to promotion budgeting is

Objective and task budgeting method

If a telecommunications company drastically cuts the price for cellular phone service in order to eliminate local competitors, the company could be charged with

Predatory pricing

total revenue =

Price x Quantity

Decoding is usually done by the

Receiver

Brian is trying to sell a new line of ultrasound imaging equipment. Unlike existing technology, these machines are compact, creating the potential for general practice physicians to have and use them in their offices. These new products diffused rapidly because of their _____

Relative advantage

Health clubs often use a low, introductory offer price to get people to join their club. These low prices represent a ______________ pricing strategy.

Sales orientation

Many restaurants offer daily specials, appetizers, entrees, and desserts not listed in their standard menu. These specials primarily provide the new product benefit of _____

Satisfying the changing needs of current and new customers

If a firm is engaged in monopolistic competition, it should....

Seek a way to differentiate itself

There are many options available to consumers when it comes to breakfast cereals. So, if Kellogg's significantly increases the price of Rice Krispies, consumers are more apt to buy alternate cereals instead. This illustrates what concept?

The substitution effect

Zappos.com, an online shoe store, offers an easy, no-hassle return procedure. This relates to the _______ of its products.

Trialability

Gross Rating Points (GRPs)

a reference number used by advertisers that is obtained by multiplying reach (expressed as a percentage of the total market) by frequency

entails the placement of announcements and persuasive messages purchased by retailers and other organizations that seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas.

advertising

extremely effective for creating awareness of a product or service and generating interest.

advertising

When consumers indicate they know the brand when the name is presented to them

aided recall

the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended

alpha testing

uses potential consumers who examine product prototype in a real-life setting to determine its functionality, performance, potential problems, and other issues

beta testing

refers to a potential customer's ability to recognize or recall that the brand name is a particular type of retailer or product/service.

brand awareness

target profit =

break even point = (fixed costs + target profit)/contributions per unit

The medium—print, broadcast, the Internet—that carries the message.

communication channel

describes how speed of diffusion process may depend on various consumer features, including international cultural differences

compatibility

a strategy where firms measure themselves primarily against their competition.

competition orientation

products will diffuse more quickly if they are less complex and easy to try

complexity and trialablity

products whose demand curves are positively related, such that they rise or fall together; a percentage increase in demand for one results in a percentage increase in demand for the other

complimentary products

the process in which a concept statement is presented to potential buyers or users to obtain their reactions

concept testing

pricing strategy based on how a firm can add value to its products or services.

customer orientation

Firms in this stage either position themselves for a niche segment or else completely exit the market.

decline

refers to the process by which the receiver interprets the sender's message

decoding

shows how many units of a product or service consumers will demand during a specific period at different prices

demand curve

the process by which the use of an innovation - whether a product, a service, or a process, spreads throughout a market group, over time, and across various categories of adopters

diffusion of innovation

Marketing that communicates directly with target customers to generate a response or transaction

direct marketing

The IMC channel that has received the greatest increase in aggregate spending recently is....

direct marketing

this group wait's and purchases a product after careful review. Enjoy novelty and are regarded as the opinion leaders for particular product categories

early adopters

Few new products or services can be profitable until this large group buys them

early majority

This group tends to wait until the bugs are worked out of a particular product or service. By this time, competition has reached its peak, so this group has many price and quality choices

early majortity

converting the sender's ideas into a message, which could be verbal, visual, or both.

encoding

strategy in which a retailer offers its customers consistently low prices on every product, without running sales or price promotions

everyday low pricing (EDLP)

why do companies create new products to manage risk?

firms with multiple products can better withstand external shocks

break even point =

fixed cost / (unit price - unit variable cost)

How often the audience is exposed to a communication within a specified period of time

frequency

The goal of any marketing communication is to

get the right message to the right audience through the right media.

Firms attempt to reach new consumers during this stage

growth

The goal of this stage is to ride the rising sales trend a firmly establish the firm's brand.

growth

this stage is marked by rapid growth and increases in both competitors and number of available product versions. Profits also rise during this time

growth

relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases

high/low pricing

refers to the change in the quantity of a product demanded by consumers due to a change in their income

income effect

Once the consumer is aware that the company or product exists, communication must work to....

increase the consumer's interest level.

the process of charging different prices for goods or services based on the type of customer; time of the day, week, or even season; and level of demand.

individualized pricing (dynamic pricing)

what are the four stages of the product life cycle?

introduction, growth, maturity, and decline

the market for a product or service is price insensitive, or inelastic, when....

its price elasticity is greater than -1

This group likes to avoid change and rely on traditional products until those products are no longer available and they are forced to change.

laggards

When this group enters a new product market, the product has achieved its full market potential. By this time, sales have leveled off or are in decline

late majority

Firms enter into new markets/market segments and develop new products during this stage

maturity

marketing costs increase during this stage as firms defend their market share against competitors

maturity

this stage is characterized by adoption by the late majority and intense competition for market share among firms

maturity

strategy where firm is able to identify the price at which its profits are maximized.

maximizing profits

when many firms are competing for customers in a given market, but their products are differentiated

monopolistic competition

one firm provides the product or service in a particular industry, results in less price competition

monopoly

After the firm has piqued the interest of its target market, the goal of subsequent IMC messages should....

move the consumer from "I like it" to "I want it" (Desire)

without _______ __________ or __________ in a saturated market, the value of the firm will ultimately decline

new products or services

diffusion process in enhanced when benefits or uses are easily communicated to others.

observability

only a few firms dominate, typically change prices in reaction to competition to avoid upsetting stable competitive environment

oligopolistic competition

where firms set the initial price low for the introduction of the new product or service. This discourages competitors from entering the market

penetration pricing

The two-way flow of communication between a buyer and seller, often in a face-to-face encounter, designed to influence a person's or group's purchase decision is referred to as

personal selling

new-to-the-world products that create new markets

pioneers or breakthroughs

conducted before a product or service is brought to market to determine how many customers will try and then continue to use it

premarket tests

Measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price.

price elasticity of demand

relies on innovators and early adopters being willing to pay a higher price to obtain the new product or service

price skimming

firms implement a _____ _________ strategy by focusing on target profit pricing, maximizing profits, or target return pricing

profit orientation

large number of sellers offer standardized products or commodities that consumers perceive as substitutable

pure competition

The percentage of the target population exposed to a specific marketing communication at least once

reach

the person who reads, hears, or sees and processes the information contained in the message and/or advertisement.

receiver

describes how diffusion will be relatively quick if the product or service is perceived to be better than substitutes.

relative advantage

Taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitors patents

reverse engineering

use prior sales and communication activities to determine the present communication budget.

rule-of-thumb methods

when a firm is more concerned about their overall market share than about dollar sales

sales orientation

Special incentives or excitement-building programs that encourage the purchase of a product or service, such as coupons, rebates, contests, free samples, and point-of-purchase displays

sales promotions

contribution per unit =

selling price per unit - variable cost per unit

the message originates from the ___________, who must be clearly identified to the intended audience.

sender

refers to consumers' ability to substitute other products for the focal brand

substitution effect

where firms use price to stimulate a certain level of sales at a certain profit per unit. Used when a particular profit goal is the overriding concern.

target profit pricing

strategy where firms employ pricing strategies designed to produce a specific return on their investment, usually expressed as a percentage of sales

target return pricing

introduces the offering to a limited geographical area prior to a national launch. method of determining success potential of a new product

test marketing

What are the three elements in any IMC strategy?

the consumer, the channels through which the message is communicated, and the evaluation of the results of the communication

allows the receiver to communicate with the sender and thereby informs the sender whether the message was received and decoded properly

the feedback loop

The right communication channel to use in IMC is

the one that will connect to the desired recipients.

the market for a product or service is price sensitive, or elastic, when...

the price elasticity is less than -1

the ultimate goal of any form of marketing communications is....

to drive the receiver to Action

occurs when consumers mention a specific brand name first when they are asked about a product or service

top-of-mind awareness

total costs =

total fixed costs + total variable costs

the marketing department or external agency receives the information from the sender and transforms it for use in its role as the ....

transmitter

total variable costs =

variable cost per unit x quantity

costs, primarily labor and materials, that vary with production volume.

variable costs