Principles of Marketing CH 8-11

brand equity formula

brand awareness (breadth of the market) + brand association (hopefully good experiences )= brand equity

negative brand equity

brand equity suffers when a brand receives negative press or bad reviews and consumers avoid purchasing anything related to said brand

What are 3 pricing method?

cost based, market based, and value based

What is an example of curating a product assortment/Going local?

The Market at Macy's: a smaller store, curated items, local shopping centers instead of large malls.

personal selling

frontline interaction between a company representative and a potential buyer designed to influence a purchase decision

brand management

goals = to enhance equity (growth) & protect the reputation (defensive)

brand image

how consumers actually view a brand and any associations they have with it

brand image

how consumers actually view a brand and what associations they have with it

Origins for the term brand

in the 1550s the term developed to mean "mark made by a hot iron" especially on a cask, etc. to identify the maker or quality of its contents

In recent years, experience purchases have...

increased

In recent years, online sales and mobile shopping have...

increased

What is the meaning of this statement, "If you win a customer on price, you will lose that customer on price; if you win a customer on value, you will keep that customer on value"?

providing value is of greater importance than price

the promotional mix (5)

sales promotion, public relations, personal selling, direct marketing, and advertising

persuasive communication

seeks to influence customer in purchase decision

reference pricing (anchor pricing)

using another price as a reference point to make a product's price seem more appealing

value

what a product or service is worth to a consumer, or the maximum they are willing to pay

price

what is charged or exchanged for value

communications include:

what to say, how to say it, when to say it, how often, and to whom

brand value

when a brand can be identified or is differentiated to a consumer it has value

market-based pricing

when a company looks to its competitors as the main pricing factor to determine the price of its G/S; EX: coffee shops in Conway

price skimming

when a marketer introduces a product into the market at an initial high price and then lowers it over time; EX: newest version of iPhone

original price as a reference point

when a marketer shows a product's original retail value on the tag before showing its current sale price; EX: furniture stores, car dealerships; the original prices used must be real and accurate

positive elasticity

when a price goes up instead of demand decreasing, it actually increases (Giffen Good) and customers purchase more of an item

3 Benefits of using Sales Promotion strategy

- Balances demand against inventory or capacity. - Effectiveness can be measured: linking special coupon codes to specific sales promotions. - Reduces the risk of the initial trial: free samples.

Layout Interaction Psychology Tips

- Be aware of how people move throughout a store (usually turn right). - Consider the flow of traffic for signage. - Add a decompression zone at the front of the store. - Create sufficient shopping space. - Create speed bumps for customers (like a discount rack). - Place impulse items near the checkout.

Examples of PR tools

- Drafting and distributing press releases. - Speaking at events as a company representative. - Giving back to the community. - Creating publications/newsletters.

What are some benefits of the personal selling approach?

- Each sale can be customized. - Appropriate for high priced and/or complex G/S.

3 Benefits of public relation

- Promote goodwill and build trust. - Lobby for the good of the company. - Promote positive brand image.

How is value determined?

- The money, time, or other resources it saves or creates for the customer. - The competitive advantage it creates for the customer. - The expertise with which the service is performed or product is created. - The importance of the situation for which the service is being hired. - A situation where service failure would be risky or even catastrophic.

What are some costs of the personal selling approach?

- Usually pretty high because a lot of the G/S is not sold in high volumes.

Individual Branding (House of brands strategy)

- When a company brands each product individually; - Pro: the company can market to very different market segments; - Con: building a brand for each separate product is expensive; - Example: Unilever = Axe, Dove, Suave, etc.

Umbrella branding (Family branding strategy)

- When marketers brand an entire group of products, either at the institution level or a group (family) of products level; - Pro: companies can practice economies of scale in advertising and branding (saves money); - Con: if something negative happens with one product in the brand line, then it can affect all the products; - Example: Apple = iPad, iPhone, AirPods, etc.

Sub-branding (Endorsed branding strategy)

- When the company develops a brand but also brands products or groups of products individually; - Pro: the individual products get the benefit of the positive carry-over of the institutional branding and if one product receives too much negativity, the company can divest itself of that product and remove the institutional name (or endorsement) from the product; - Example: GM = chevrolet, cadillac, GMC, buick

extremity aversion/avodance

deals with the extremity aversion theory which says people tend to avoid extreme options such a price and often choose a middle option; EX: types of oil for a car oil change

In recent years, mall shopping and sales in department stores have...

decreased

elastic

describes demand that is very sensitive to a change in price; vehicles, travel, entertainment

examples of digital marketing

direct mail, telemarketing, television, shopping channels

specialty store

feature narrow and deep product lines, narrow product areas; Books-a-Million

Examples of negative brand equity

- Sea World - Lance Armstrong

Benefit of direct marketing

ability to reach and communicate directly with customers

4 Reasons why brand value is important

1) Customers recognize the product and choose it; 2) Customers perceive less risk and choose the product; 3) Customers pay a premium price; 4) Customers share about the product through word of mouth advertising.

bundle pricing

2 for 1 deals; sell more than one good at a single packaged price that would be the price of one if bought alone

brand association map

A visual illustration that shows the different associations that a consumer has with a brand; very much like the associative memory network model

cost-based pricing

Calculating total costs per unit and then adding markups to cover overhead costs and generate profits; easy to calculate and customers believe this is a fair method but may not be the most profitable method and hard to use with services

inelastic

Describes demand that is not very sensitive to a change in price; medications, gas, food

Free Flow Layout

Example: Boutiques Pro: Fun, spontaneous, not as much inventory volume anyway. Con: May be the worst option for ensuring customer exposure to all merch.

Grid Layout

Example: Home Depot Pro: Allows for merchandise on both sides of shelves. Con: Can feel overwhelming and hard to reach top shelves.

Racetrack/Loop Layout

Example: IKEA. Pro: Efficient at getting customers exposed to all. Con: Wastes space.

Diagonal Layout

Example: Produce section at WM Pro: Employees can easily see customers and merch. Con: Not the most efficient for merch volume.

Spine Layout

Example: Walmart Pro: Shoppers can easily choose where they want to go. Con: Shoppers don't get exposed to as much merch.

Is bundle pricing the same as multiple unit pricing?

No!

product line

a group of related products marketed and sold by the same company under the same brand

trademark

a legally protected brand name, brand mark, brand logo, or a combination of these

supermarket

a medium to large grocery stores, offering a large selection of grocery items sometimes at discounted prices; Kroger

brand

a name, mark, or logo to identify and distinguish a product, organization, or company from others; connects experiences, emotions, and history associated with a product or company

dynamic pricing

a pricing strategy in which a variable rate is used for each customer, often based on the G/S's demand; EX: airline tickets

digital marketing

a promotional effort wherein the seller communicates with the potential customer using media with the goal of receiving a direct response from the customer (as opposed to selling in a retail location)

sales promotion

a short term, external promotion designed to influence immediate purchase; coupons, free samples, price promotions (bogo), frequent user (loyalty) program

A la carte pricing

a strategy in which product features can be added and purchased individually so that a consumer can essentially choose the final price of the product; EX: a rafting trip, frozen yogurt toppings

5 Ways for Brick and Mortar Stores to thrive in the changing retail environment

a) Make retail an experience - something that adds value to the in-store event vs online purchasing. b) Adding an experience - tie bonus services to shopping in the physical store vs online. c) Curate a product assortment/Going local - in-store customization is very appealing as well as ties with local vendors. d) Omni-Channel approach - when retailers make purchasing options available to customers in-store and online. e) Add augmented reality and other technology - combines both the experience/service aspects of retail and online; retailers are featuring phone apps with interactive capabilities.

2 aspects of the psychology of brand value on customer satisfaction

a) branding can help shape one's perception of future experiences with a G/S; b) brands can alter how consumers perceive product experiences (think about the fake painkillers labeled with a brand name)

market penetration pricing

company introduces a product at a low price to gain market share; EX: Stax chips vs Pringles

Big-Box store

aka a supercenter; a large retail store that is often part of a chain; in the US these tend to range from 50,000 to 200,000 square feet and carry large amounts of merchandise; Sam's, Walmart, Costco

product assortment

aka merchandise mix; the broadest level -- the composite of all the products available

product width

aka product breadth; number or variety of product lines that a store offers

Retail atmospherics

all of the details inside the retail store's physical environment that influences customer behavior; used to differentiate a store environment, to reinforce branding, increase traffic, and ultimately customer spending

dumb industry

an industry in which companies tend to fight with price; price is their main differentiator and this can lead to price wars; EX: gas stations

smart industry

an industry in which companies tend to use more complex pricing structures and use more pricing options; focus is on creating value

brand mark

both identifies its product and also differentiates it from other products on the market

loss leader pricing

list a popular item at an artificially low price to attract people to the store; the low priced item = a loss leader; EX: Black Friday sales

external communication

message sent outside the company

product depth

number of individual products in a product line; variations of products in a product line like different colors, flavors, sizes

multiple unit pricing

offering a price break for purchasing multiple units of product; EX: furniture sets

department store

offers a wide assortment of product lines (wide product breadth) and is divided up into departments of similar types of product lines; Dillard's

discount store

offers product at a discount, often because of overruns (extra inventory), factory buyouts, previous-season items, or product damage; TJ Maxx

flat rate pricing

one rate for unlimited use of a service during a specified timeframe; customers like the transparency in what they will pay; EX: unlimited meal plan at the cafeteria or Netflix streaming service

Merchant's Marks

personal marks that offered a guarantee that the goods were of a certain quality; arguably early trademarks; particularly used by producers of bells and paper (watermarks)

What 2 pricing strategies are opposites?

price skimming and market penetration pricing

value-based pricing

prices are based on the perceived value that the consumer receives from the G/S; starts with the customer; this method can be difficult to calculate and may upset customers if they don't receive the same price but this maximizes profit

prestige pricing

set high prices for products to create the perception that they are elite so that status seeking customers will buy; positive elasticity effect

random incidental reference prices

show images of high priced, unrelated products to make it appear that the product under consideration is a good deal

industry reference price

show industry or competitor prices as a reference point (a market based pricing method)

convenience store

small stores often located in or near residential areas; product lines are often limited, with the store having wide product width but not depth; Kum-n-Go

odd-even pricing (psychological pricing)

sometimes referred to as $0.99 pricing; when price is set with a few cents or a few dollars under an even number; consumers perceive the item as costing less than it actually does; EX: products sold on tv

brand equity definition

the added value delivered by the brand over the functional benefits or book value of the product, service, or company; it means if nothing else existed for the company, it would still be worth something simply because of the value of the brand equity the company had built

price elasticity

the change in demand in a market in response to a product's change in price

fixed costs

the costs associated with the operating and marketing expenses of a company

store layout

the design of a store's floor space and fixtures to facilitate the flow of traffic and shopping

brand name

the part of the brand that can be spoken

variable costs

the per unit costs associated with the product

visual merchandising

the practice in the retail industry of developing floor plans and 3 dimensional displays in order to maximize sales

Public Relations (PR)

the practice of managing the spread of info between an individual or an organization and the public; PR facilitates messaging through 3rd party sources like new articles; these 3rd parties are considered more credible than company paid advertising

What is the application if the product you are selling has inelastic demand?

the price can be increased with little effect on demand, meaning overall profits can increase

breakeven quantity

the quantity (in some unit) that the company needs to sell at a certain price in order to cover fixed costs

retail

the sale of G/S to a final consumer, as opposed to the sale of goods to another business; department stores, restaurants, gas stations, car dealership, online purchases, etc.

brand logo

the symbol for the company or brand

brand identity

the way that a company wishes to be portrayed, the ideal image and messages it wishes to communicate

Why is the identification characteristic of brand value so important?

think of the Band-Aid brand that has become the generic name for the product even though it's really just a brand; same with Kleenex

What is the main aspect of a trademark?

to prevent customer confusion and mostly to prevent companies from misrepresenting themselves by impersonating another company's brand

perceived value

total benefits - total costs