MKT 300 Exam 3

Goals and Tasks of Promotion

informing, reminding, persuading

Product Factors

internal, controllable

Conversion Rate

# of future purchases by new customers (post promotion) **most important

What is the selling price? Cost = $200 Markup = 50%

$400

E =

% change in Qd / % change in P

Acquisition Rate

% of purchases by non-regular buyers

Displacement Rate

% of those who would buy anyway

Redemption Rate

% responding to incentive

Media Selection Considerations

- Cost per Contact & CPM ( (advertising costs / # of ppl seeing ad) * 1000) - audience selectivity - reach and frequency

Step 5: Select a Pricing Strategy

-EDLP -Reference pricing -portfolio pricing -bundle pricing -multiple units pricing -odd even pricing -captive product pricing -single price -bait pricing -leader pricing

Marginal Analysis

-INCREASE spending if increased cost is LESS than incremental (marginal) return -DECREASE spending if cost is MORE than return -hold if at optimal point

Step 4: Select a Basis for Pricing

-cost plus pricing (markups, margin, break even point) -demand based pricing -competition based pricing -new product (penetration pricing, price skimming)

Step 1: Develop Pricing Objectives

-maximize price per product -status quo -market share

Trends in Retailing

-omnichannel -mobile wallet -in store pickup -data to predict shopping behavior -convenience -personalized in store experiences

Product Ad

-pioneering: stimulate demand (growth) -competitive: influence demand through emotional appeal (growth) -comparative: compares two or more competing brands/ attributes

Promotional Mix

1) advertising 2) personal selling 3) sales promotion 4) public relations 5) direct marketing 6) events/ experience

Sales Promotion Dilemna

1) lose market share (our firm cutbacks) 2) same market share, profits stay low (all firms maintain promotions) 3) higher profits for everyone (all firms cutback) 4) our firm gains market share (other firms cutback)

Channel Choice Factors

1) market 2) product 3) producer

Stages for Establishing Prices

1. Development of pricing objectives 2. Assessment of target market's evaluation of price 3. Evaluation of competitors' prices 4. Selection of a basis for pricing 5. Selection of a pricing strategy 6. Determination of a specific price

BEP in units SP = $30 Cost = $20 Total Fixed Costs = $20,000

20,000 / 30 - 20 = 2,000 units

What is the SP? Cost = $100 Markup = 75%

3/4 of the selling price is markup, 1/4 is cost $400

What's the markup percentage on the selling price? Selling Price = $1000 Cost = $700

30% Because the difference is $300, so 70% is cost, so 30% is markup

What is the markup? Selling Price = $100 Cost = $35

65% Difference is $65. 65/100 is 65%

What's the markup percentage on the selling price? Selling Price = $200 Cost = $50

75% Because the difference is $150 (the markup is $150). $150/$200 is 75%

Response S- Shaped Function

A: initial spending B: high effect C: high spending, little effect

AIDA Concept

Attention, Interest, Desire, Action -advertising impacts attitudes (reason) -sales promotion impacts behavior (incentive)

CRM

recency, frequency, monetary determines the best customer

BEP in dollars

BEP units * selling price

Evaluating Media

Clutter, Impact, Efficiency, Engagement

Portfolio Pricing

Different levels of price points across a product category where consumers are willing to pay more for extras

Bait Pricing

Illegal practice of advertising unrealistically low prices to bring customers into the store

Direct Marketing

NOT face to face

Bundle Pricing

Packaging together two or more complementary products and selling them at a single price

What is the markup? SP = $1800 Cost = $600

The difference is $1200. 1200/1800 = 66.7% Cost is 1/3, so markup is 2/3

Guerilla Marketing

Unconventional, innovative, and low-cost marketing techniques designed to get consumers' attention in unusual ways.

#1 Thing to Remember from MKT 300

You stay classy, Sun Devils

Public Relations

a broad set of communication efforts used to create and maintain favorable relationships between an organization and its stakeholders ex: seminars, publications s= build brand image w= firm cannot control this

Unique Selling Proposition

a desirable, exclusive, and believable ad appeal selected as a theme for a campaign

Advertising Campaign

a series of related ads focusing on a common theme, slogan, or set of appeals

Cost Plus Pricing

adding a specified dollar amount to the seller's costs

Margin

adding to the price a predetermined percent of the TOTAL PRICE

Markup

adding to the price of the product a predetermined percent of the VARIABLE COST

Market Share

adjust price levels in order to increase sales relative to competitors' sales

Attributes vs. Benefits

attribute: a characteristic of the product. benefit: what's in it for me? customers buy benefits, not attributes.

Retailing

all the activities involved in selling goods directly to the final consumer for use

Sales Promotion

an activity that acts as a direct inducement, offering added value or incentive s= quick implementation, moves seasonal items w= not good for luxuries

Arbitrary Allocation Method

budget is determined by management solely on the basis of what is felt to be necessary

Captive Product Pricing

buy the core product, and you have to buy the corresponding captive products ex: razor and blade

Price Skimming (New Product)

charging the highest price possible that buyers who desire it will pay inelastic, no substitutes Premium: high price, high quality Overcharging: high price, low quality

4 C's

customer value (80/20 Rule), cost, convenience, and communication

Single Price

customers all pay the same price ex: dollar store

Demand Based Pricing (Flexible or Variable)

customers pay a higher price when demand is strong ex: happy hour, senior discounts

External Factors of Price

demand, competition, and economy

Odd Even Pricing

ending the price with certain numbers to influence buyer perception

Institutional Ad

enhances a company's image rather than a particular product

Unitary Elastic

equal to one an increase in sales exactly offsets a decrease in prices, and revenue is unchanged

Intensive Distribution

everywhere, uses all available outlets, convenience

Lifestyle Executional Style

exclusive

Market Factors

external, uncontrollable

Direct Retailing

face to face

Push (B2B)

geared towards others in the distributions channel

Events/ Experiences

get to know the brand/ each other1

Elastic

greater than 1 consumers buy more or less of a product when the price changes

Persuading

growth and maturity

Modes of Transportation

highest -> lowest cost: air vs water time: water vs air reliability: pipe vs water

Word of Mouth

highest credibility, lowest source control

Status Quo

identify price levels similar to competitor augmented prices

Atmospherics

image, safety, temperature, parking, senses, spacing, and crowding (positive or negative)

Informing

introduction and early growth

Inelastic

less than 1 an increase or decrease in a price will not significantly affect demand

Internal Factors of Price

marketing objectives (profit, market share, quality), marketing mix strategy, costs

Selling Price =

markup + cost

What is the cost? SP = $300 Markup = 33.3%

markup is 1/3 of the SP, so cost must be 2/3 $200

Reminding

maturity

Slice of Life Executional Style

meant for everyone

Experiential Marketing

melding of brands and experiences

Pulsing Media Scheduling

never zero but random

Measuring Tv Audiences

o Program ratings ▪ % of homes in an area watching a show ▪ "Rating Point"= 1% of a TV HH ● Program Rating = [HH tuned to show/Total US HH] o Share of audience ▪ % of HUT tuned into a show ● Share of Audience = [HH tuned to show/US HH using TV]

Advertising

paid, non personal communication about an organization and its products transmitted to a target audience through mass media highest source control, lowest crediability s= repeatable, cost efficient per person w= high total cots, slow feedback

Personal Selling

paid, personal communication that attempts to inform customers and persuade them to buy products in an exchange situation middle ground of source control and credibility s= influential, immediate feedback w= time intensive, high cost per person

Puffery

people can tolerate a degree of lying

Retailing Mix

price, promotion, merchandise (product), location (place), atmosphere (physical evidence), & customer service

Penetration Pricing

prices below those of competitors to penetrate a market and gain a market share quickly Good Value: low price, high quality Economic: low price, low quality

Reference Pricing

pricing a product at a moderate level and displaying it next to a more expensive model or brand

7 P's

product, price, place, promotion, people, physical evidence, process

(Loss) Leader Pricing

products priced below the usual markup, near cost or below cost

Pull (B2C)

promoting to consumers

Trade Sales Promotion

push strategies -trade allowances -sales contests -training Most Expensive

Consumer Sales Promotion

rebates, loyalty programs, sweepstakes, premiums

Producer Factors

resources, number of product lines, desire for channel control

Service Recovery

restoring customer satisfaction to strongly dissatisfied customers

Flighted Media Scheduling

run heavily every so often

Continuous Media Scheduling

running steadily

Direct Marketing (Promotional Mix Elements)

s= consumers request these w= privacy can be invaded

Attribution Theory

satisfaction levels are measure in terms of stability, focus, and controllability

Percentage of Sales Method

set amount per unit

Competitive Parity Method

sets the promotion budget to match competitors' outlays

Selective Distribution

shopping goods

Power of We

social norms, receive and reciprocate

Exclusive Distribution

speciality goods

Price Elasticity

tells us how much the demand for a product will change in price

Branded Entertainment

the integration of brands into entertainment media

Marketing Communication Process

the way in which a sender ENCODES a marketing idea and conveys it through message and medium so receivers can DECODE and understand it, and then respond with FEEDBACK

Objective and Task Method

thought provoking

Break Even Quantity

total fixed costs / (selling price - variable cost)

Multiple Unit Pricing

two or more identical products and selling them at a single price

Stealth Marketing

undercover/ sponsorships

Scientific Executional Style

using 3rd party data

Break Even Point

where a company produces the same amount of revenues as expenses