Marketing Chapters 15, 17, and 21

Marketing Channel

A group of individuals and organizations that direct the flow of products from producers to customers within the supply chain

Cost Based Pricing

Adding a dollar amount or percentage to the cost of the product Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Cost Plus Pricing

Adding a specified dollar amount or per-centage to the seller's cost Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Markup Pricing

Adding to the cost of the product a predeter-mined percentage of that cost Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Advertising

Advertising is a paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media, including television, radio, the Internet, newspapers, magazines, video games, direct mail, outdoor displays, and signs on mass transit vehicles.

Advantages of Advertising

Advertising offers several benefits. It is extremely cost-efficient when it reaches a vast number of people at a low cost per person.Advertising also lets the source repeat the message several times.Furthermore, advertising a product a certain way can add to the product's value, and the visibility an organization gains from advertising can enhance its image.

Supply Chain

All the activities associated with the flow and transformation of products from raw materials through to the end customer Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Strategic Channel Alliance

An agreement whereby the products of one organization are distributed through the marketing channels of another Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Channel of distribution

Channel A depicts the direct movement of products from producer to consumers. Producers, like Dell computers, that sell products directly from their factories to end users use direct marketing channels. Channel B, which moves goods from the producer to a retailer and then to customers. Retailers like Kmart and Walmart sell clothing, stereos, and many other items purchased directly from producers. Channel C represents a long-standing distribution channel, especially for consumer prod-ucts. It takes goods from the producer to a wholesaler, then to a retailer, and finally to con-sumers. It is a practical option for producers that sell to hundreds of thousands of customers through thousands of retailers. Consider the number of retailers marketing Wrigley's chewing gum. Channel D, through which goods pass from producer to agents to wholesalers to retailers and then to consumers, is used frequently for products intended for mass distribution, such as processed foods.

Channel Cooperation

Channel cooperation is vital if each member is to gain something from other members. Cooperation enables retailers, wholesalers, suppliers, and logistics providers to speed up inventory replenishment, improve customer service, and cut the costs of bringing products to the consumer. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Differential Pricing

Charging different prices to different buyers for the same quality and quantity of product Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Objectives of Promotion

Create awareness Retain loyal customers Stimulate demand Facilitate reseller support Encourage product trial Combat competitive promotional efforts Identify prospects Reduce sales fluctuations Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Consequences of eliminating an intermediary

Critics who suggest that eliminating wholesalers would lower customer prices fail to recognize that this would not eliminate the need for the services the wholesalers provide. Although wholesalers can be eliminated, their functions cannot. Other channel members would have to perform those functions, and customers still would have to pay for them. In addition, all producers would have to deal directly with retailers or customers, meaning that every producer would have to keep voluminous records and hire enough personnel to deal with a multitude of customers.

Selective Demand

Demand for a specific brand Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Product Line Pricing

Estab-lishing and adjusting prices of multiple products within a product line Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Disadvantages of Advertising

Even though the cost per person reached may be low, the absolute dollar out-lay can be extremely high,advertising rarely provides rapid feedback. Measuring its effect on sales is often difficult, and it is ordinarily less persuasive than personal selling.

Pricing Objectives

Goals that describe what a firm wants to achieve through pricing Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Intermediaries

Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products.

Criticisms of Promotion

One common criticism of promotion is that it is deceptive and unethical.Promotion is also criticized for raising prices,Some critics of promotion claim that it manipulates consumers by persuading them to buy products they do not need, hence creating "artificial" needs.Another frequent criticism of promotion is that it leads to materialism. The purpose of promot-ing goods is to persuade people to buy them;The question is whether promo-tion helps customers enough to be worth the cost.Finally, some critics of promotion, including consumer groups and government officials, sug-gest that certain products should not be promoted at all. Primary targets are products associ-ated with violence and other possibly unhealthy activities, such as handguns, alcohol, and tobacco.

Bundle Pricing

Packaging together two or more comple-mentary products and selling them at a single price Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Demand Based Pricing

Pricing based on the level of demand for the product Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Competition Based Pricing

Pricing influenced primarily by competitors' prices Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Psychological Pricing

Pricing that attempts to influence a customer's perception of price to make a product's price more attractive Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Leader Pricing

Products priced near or even below cost. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Pull Policies

Promoting a product directly to consumers to develop strong consumer demand that pulls products through the marketing channel Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Push Policies

Promoting a product only to the next institution down the marketing channel Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

New Product Pricing

Setting the base price for a new product is a necessary part of formulating a marketing strategy. The base price is easily adjusted (in the absence of government price controls), and its estab-lishment is one of the most fundamental decisions in the marketing mix. The base price can be set high to recover development costs quickly or provide a reference point for developing dis-count prices for different market segments. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Selection of a Basis for Pricing

The fourth step involves selecting a basis for pricing: cost, demand, or competition. The selec-tion of the basis to use is affected by the type of product, the market structure of the industry, the brand's market share position relative to competing brands, and customer characteristics. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Legal Issues in channel management-dual distribution

The numerous federal, state, and local laws governing channel management are based on the general principle that the public is best served by protecting competition and free trade. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Dual Distribution

The use of two or more marketing channels to distribute the same products to the same target market Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Role of an intermediary

They also play key roles in customer relationship management, not only through their distribution activities but also by maintaining databases and information systems to help all members of the marketing channel maintain effective customer relationships. For example, eBay serves as a marketing intermediary between Internet sellers and buyers. eBay not only provides a forum for these exchanges but also helps facilitate relationships among eBay channel members and eases payment issues through its PayPal subsidiary.

Importance of Marketing channel decisions

They determine a product's market presence and buyers' accessibility to the product. Marketing channel decisions have additional strategic significance because they generally entail long-term commitments among a variety of firms. Marketing channels also serve many functions, including creating utility and facilitating exchange efficiencies.

Time, place, possession utility

Time utility is having products available when the customer wants them.Services like Movies On Demand Place utility is created by making products available in locations where customers wish to purchase them. For example, shopping malls that have an ATM machine Possession utility means that the customer has access to the product to use or to store for future use. such as a lease or rental agreement.

Intermodal transportation

Two or more transportation modes used in combination Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Promotion Mix Ingredients

When an organization combines specific methods to manage the integrated market-ing communications for a particular product, advertising, personal sell-ing, public relations, and sales promotion Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Public relations

a broad set of communication efforts used to create and maintain favorable relationships between an organization and its stakeholders. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Tensile Pricing

a broad statement about price reductions as opposed to detailing specific price discounts. Examples of tensile pricing would be statements like "20 to 50 percent off," "up to 75 percent off," and "save 10 percent or more." Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Sales Promotion

activity or material that acts as a direct inducement, offering added value or incentive for the product to resellers, salespeople, or consumers. Examples include free samples, games, rebates, sweepstakes, contests, premiums, and coupons. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Vertical Channel Integration

combines two or more stages of the channel under one manage-ment. This may occur when one member of a marketing channel purchases the operations of another member or simply performs the functions of another member, eliminating the need for that intermediary. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Role of Promotion

communication that builds and maintains favorable relationships by informing and persuading one or more audiences to view an organization positively and accept its prod-ucts. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Channel Conflict

if self-interest creates misunderstanding about role expectations, the end result is frustration and conflict for the whole channel. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Pioneer Demand

informs potential customers about the product: what it is, what it does, how it can be used, and where it can be purchased. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Cause-related Marketing

links the purchase of products to philanthropic efforts for one or more causes. By contributing to causes that its target markets support, cause-related marketing can help marketers boost sales, increase loyalty, and generate goodwill. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Defenses of Promotion

not all promotion should be condemned because a small portion is flawed. Laws, government regulation, and industry self-regulation have helped decrease deceptive promotion.Promotion is also criticized for raising prices, but in fact it often tends to lower them.Although promotion may not create needs, it does capitalize on them (which may be why some critics believe promotion creates needs). Marketers assert that values are instilled in the home and that promotion does not change people into materialistic consumers.Consumers do benefit because promo-tion informs them about product uses, features, advantages, prices, and locations where they can buy the products. Thus, consumers gain more knowledge about available products and can make more intelligent buying decisions.Those who defend such promotion assert that, as long as it is legal to sell a product, promoting that prod-uct should be allowed.

Personal Selling

paid personal communication that seeks to inform customers and per-suade them to purchase products in an exchange situation. most extensively used in the business-to-business market and also in the business to consumer mar-ket for high-end products such as homes, cars, electronics, and furniture.

Channel Power

the ability to influence another channel member's goal achievement. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Containerization

the consolidation of many items into a single, large container that is sealed at its point of origin and opened at its destination. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com

Intensity of market coverage

the number and kinds of outlets in which it will be sold. Copyright | CENGAGE Learning | Marketing, 2014 Edition | [email protected] | Printed from www.chegg.com