MKTG 490 TEST #3

Price as a critical component of value

- Customer's perception of the offering's pricing is a key determinant of perceived value. -When customers exhibit strongly held beliefs that a firm's offerings provide high value, they are much more likely to remain loyal to the firm and its brand as well as actively telling others about their favorable experiences. -Marketing managers must take pricing decisions very seriously - Cost leadership: A marketing strategy in which a firm utilizes its core cost advantages to gain an advantage over competitors due to flexibility in pricing strategies as well as its ability to translate cost savings to the bottom line. - Other competitive strategies include differentiation or focus/niche

Sensitivity Analysis

A sensitivity analysis determines how different values of an independent variable affect a particular dependent variable under a given set of assumptions. This technique is used within specific boundaries that depend on one or more input variables, such as the effect that changes in interest rates (independent variable) has on bond prices (dependent variable).

Three distinct advantages of Personal Selling

A. Immediate feedback to the customer B. Ability to tailor the message of the customer C. Enhance the personal relationship between company and customer

Types of Advertising: Institutional advertising vs. Product advertising

A. Institutional Advertising: Advertising that promotes industry, company, family of brands, or some other issues broader than a specific product. B. Product Advertising: Advertising designed to increase purchase of a specific thing.

Distribution Intensity: Intensive vs. Selective vs. Exclusive

A. Intense distribution: A distribution strategy designed to saturate every possible intermediary, especially retailers B. Selective distribution: A distribution strategy in which goods are distributed only to a limited number of intermediaries. C. Exclusive distribution: a distribution strategy built on prestige, security, and premium pricing in which a producer only distributes its products to one or very few venders.

Types of Intermediaries: What are these?

A. Middleman B. Merchant Middleman C. Agent D. Manufacture's agent E. Distributor F. Wholesaler G. Jobber H. Facilitating agent I. Retailer

Reach, Frequency & Advertising execution: What are these?

A. Reach frequency: The average number of times a person in the target market is exposed to the message. B. Advertising execution: The way the advertisement communicates the information and image.

10 different approaches for advertising execution

A. Slice of life B. Humor C. Mood/Affect D. Research based E. Demonstration F. Musical G. Endorser H. Lifestyle I. Fantasy creation J. Animation and animal

Key Activities of Personal Selling

A. communicate B. Sell C. Build customer relationships D. Information management

The Personal Selling Process

A. prospect for customers B. Open the relationship C. Qualify the prospect D. Make the sales presentation E. Handle customer objectives F. Follow up with customers

Advertising: What is it?

Advertising: the act or practice of calling public attention to one's product, service, need, especially by paid announcements in newspapers and magazines, over radio or television, on billboards.

Channel of distribution: What is it?

Channel of distribution: A system of interdependent relationships among a set of organizations that facilitates the exchange process.

Disintermediation: What is it?

Disintermediation: The shortening or collapsing of marketing channels due to the elimination of one or more intermediaries.

Organizing the Sales Force: Geographic Orientation vs. Product Orientation vs. Market Orientation

Geographic orientation: -Sales people assigned to individual geographical territories - Lowest costs - Small so traveling/costs is kept to minimum in territories - Fewer managerial levels required for coordination so sales administration and overhead expenses are lower. - Minimizes customer confusion - Does not encourage or support any division or specialization of labor (indivudals expected to be good at everything) Product orientation -Some companies have separate sales force for each product or product category. -Advantage is that sales people can become really comfortable with technical attributes, applications, and most effective selling methods associated with single product. -Creates closer relationships between sales, engineers, product development, and manufacturing -The major disadvantage is duplication of effort with sales people across different products assigned to same territory, usually leading to higher sales costs. Market Orientation -Structure organization's sales force based on customer type - Specialized sales people can gain a better understanding of certain types of customer's needs and requirements. - Sales costs are higher as a result of having multiple sales people operating in the same geographical location. (Two or more people sometimes call same customer which can be bad)

Unit Selling Mark-up price

Is the ratio between the cost of a good or service and its selling price. It is expressed as a percentage over the cost. A markup is added into the total cost incurred by the producer of a good or service in order to cover the costs of doing business and create a profit. The total cost reflects the total amount of both fixed and variable expenses to produce and distribute a product.[1]Markup can be expressed as a fixed amount or as a percentage of the total cost or selling price.[2] Retail markup is commonly calculated as the difference between wholesale price and retail price, as a percentage of wholesale.

Mark-up price

Mark-up price: The addition to the price of an offering after costs have been considered.

Pricing strategies: Penetration pricing vs. Price skimming

Penetration Pricing (Maximum market share): A pricing strategy in which a firm's objective is to gain as much market share as possible. - In markets where customers are sensitive to price and where internal efficiencies lead to cost advantages allowing for acceptable margins even with aggressive pricing, a penetration objective can create a powerful barrier to market entry for other firms, thus protecting market share. -Sometimes used new product introduction (Start low then build up) Price Skimming: A pricing strategy in which a firm enters a market at a relatively high price point, usually in an effort to create a strong price-quality relationship for the product. -Prestige for the brand or for newly introduced product to skim early sales while the product has high level of panache and exclusivity in the market. (Gradually goes down over time)

Functions of Channel Intermediaries: 1) Physical distribution (or logistics) functions, 2) Transaction and communications functions, 3) Facilitating functions

Physical distribution: The integrated process of moving input materials to the producer, in-process inventory through the firm, and finished goods out of the firm through the channel of distribution. Transaction and communications functions: A. selling B. Buying C. Marketing communications Facilitating functions: Activities that help fulfill completed transactions and also maintain the viability of the channel relationships. A. Financing B. Market research C. Risk-taking D. Other services

Price elasticity of demand (E)

Price elasticity of demand measures the responsiveness of quantity demanded for a product to a change in price. It is one of the most important concepts in business, particularly when making decisions about pricing and the rest of the marketing mix.

Legal Considerations in Pricing: Price Fixing, Price Discrimination, Deceptive Pricing, Predatory Pricing

Price fixing: When companies collude to set prices at a mutually beneficial high level. Price discrimination: When a seller offers different prices to different customers without a substantive bias, such that competition is reduced. Deceptive pricing: Knowingly stating prices in a manner that gives false impression to customers. Predatory pricing: Intentionally sell below cost to push competitor out of the market, then raise prices to new high levels.

Pricing Tactics: Product Line Pricing, Captive Pricing, Price bundling, Reference pricing, Prestige Pricing, One-Price Strategy, Variable Pricing, Odd/Even Pricing, Everyday Low Pricing (EDLP) and High/Low Pricing (2 -3 questions here)

Product Line Pricing: A practicing technique in which a firm affords the marketing manager an opportunity to develop a rational pricing approach across a complete line of related items. -Price points: Prices established to convey the differences in benefits offered as the customer moves up and down the product line. Captive pricing (Complementary pricing): A pricing tactic for gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate. - Need to buy more to make product function properly Price bundling: A pricing tactic in which customers are given the opportunity to purchase a package deal at a reduced price compared to what the individual components of the package would cost individually. -Sometimes unclear or unethical Reference pricing: A pricing strategy in which a firm gives customers comparative prices when considering a purchase of a product, so they are not viewing a price in isolation from prices of other choices. -Powerful psychological impact on customer Prestige pricing: A pricing tactic that lends prestige to a product or brand by virtue of a price relatively higher than the competition. - Plays on the mind (Higher price equals better goods) One price strategy: A pricing tactic in which the price marked on a good is what it typically sells for. -Makes things way easier Variable pricing: A pricing tactic in which customers are allowed or encouraged to haggle about prices. -Mainly used in other countries but not in US Odd pricing: A pricing tactic in which the price is not expressed in whole dollar increments. Even pricing: A pricing tactic in which the price is expressed in whole-dollar increments. -Psychological pricing: Creating a perception about price merely from the image the numbers provide to the customer. Everyday low pricing: A pricing tactic that entails relatively low, constant prices and minimal spending on promotional efforts. High/low pricing: A pricing strategy in which the retailer offers frequent discounts primarily through sales promotions, to stated regular prices.

Pricing strategies: Profit maximization and (thus) target ROI pricing, Competitor-based pricing, Stability pricing, and Value pricing

Profit Maximization and target ROI pricing -Pricing objectives frequently are designed for profit maximization which leads to a target ROI pricing strategy (Unethical) - target ROI pricing strategy: A pricing strategy in which a bottom-line profit is established first and then pricing is set to achieve that target. -Price elasticity of demand: The measure of a customer's price sensitivity, estimated by dividing relative changes in quantity sold by relative changes in price. -Hard to determine through marketing research Competitor-based pricing: A pricing strategy in which a firm decides to price at some market average price in context with prices of competitors. -Helps marketing managers decide where/how to price product in the market with respect to penetration or skimming objectives. - Price war: When a company purposely makes a pricing decision to undercut one or more competitors and gain sales and net market share. Stability pricing: A pricing strategy in which a firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers. - Many factors go into this decision Value Pricing: A pricing strategy in which a firm attempts to take into account the role of price as it reflects the bundle of benefits sought by the customer. - Effectively communicating a products differential advantages are at the heart of the of the strategy

Public Relations (PR): What is it?

Public relations: Systematic approach to influencing attitudes, opinions, and behaviors of customers and others. Publicity: An unpaid and relatively less personal form of marketing communications, usually through news stories and mentions at public events.

Sales promotion: What is it? Consumer promotion vs. Channel Member (or Business) promotion

Sales promotion: An inducement for an end-user consumer to buy a product or for a salesperson or someone else in the channel to sell it. Consumer promotion: When a firm is looking to gain product trail, spike distribution, shore up sagging quarterly sales, or rekindle in a waning brand. 1. product sampling 2. coupons 3. rebates 4. contests and sweepstakes 5. premiums 6. Multi-purchase offers 7. Point-of-purchase offers 8. Product placement 9. Loyalty programs Channel member (Business promotion): several approaches are available for use with members of firm's channel of distribution. 1. Trade show 2. Cooperate advertising and promotion 3. Allowance

Supply chain & Supply chain management: What are these?

Supply chain: A complex logistics network characterized by high levels of coordination and integration among its members Supply chain management: The process of managing the aspects of the supply chain.

Make vs. Buy Decision

The make-or-buy decision is the act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier). The buy side of the decision also is referred to as outsourcing. Make-or-buy decisions usually arise when a firm that has developed a product or part-or significantly modified a product or part-is having trouble with current suppliers or has diminishing capacity or changing demand.

Vertical Marketing Systems: What is it? 3 types?

Vertical Marketing Systems: Vertically aligned networks behaving and preforming as a unified system. A.Corporate systems (Backward and forward vertical integration) B.Contractual systems (Through contracts) C.Administrated systems (One channel member becomes channel captain)