Chapter 12: The 4Ps-Market Management

Decline

Industry sales fall to the point at which it is no longer in the company's best interest to continue to support the product

Special consideration in managing services

Intangibility, inseparability, perishability, and heterogeneity

Perishability

characteristic that describes the fleeting nature of a service ex. an empty hotel room on a given night can't be saved and made available on a different night

most companies use what promotional strategy

combination of push and pull

Direct channels

commonly used in B2B markets, indicates that there are fewer middlemen between producer and end user

Pull promotional strategies

companies that advertise nationally branded products directly to consumers ex. ad for frosted flake- promotes kellogg's and getting the cereal at your next grocery store trip

Product class

company focuses on specific brand

Product lines

company offers different types of appliances ex. whirlpool, can be shallow (three different items) or vary in depth

Innovators

consists of the first 2.5% of adopters and tend to be better educated, younger and less risk averse than other categories...not always best market to target because aren't very influential

When a product's demand is characterized as elastic, it implies that:

consumers are very sensitive to price changes

Shopping products

consumers will spend some effort to compare brands and invest some time to investigate product features and price points ex. hair salons, furniture and jewelry

speciality products

where consumers spend both time and effort to purchase these products

Product life cycle (PLC)

can be viewed as four stages: introduction, growth, maturity and decline

Non-store retailers

Direct sellers ex. May Kay/ vending machines

A product with an elastic demand has customers who are not sensitive to price fluctuations.

False

Customers who are very sensitive to price fluctuations in markets have an inelastic demand.

False

Product cannibalization occurs when a business experiences an intended reduction in sales.

False

Which of the following is NOT a factor that determines price?

Fixed cost

General merchandise retailers

Macy's or JCPenny, Walmart or Target

Branding alternative also known as national brand

Manufacturer's brand- the brands are owned and controlled by a producer ex. Heinz

Which one of the following statements about pricing strategy is true?

Pricing decisions have many legal implications.

Promotional pricing

Pricing strategy closely tied to promotional strategy ex. red tag sale event

General Motors purchases sheet metal from suppliers that it uses in the production of car bodies in its factories. For GM, sheet metal would be considered

Process materials

Business services:

Processes required in running the business that are often outsourced to other businesses (payroll, cleaning services)

Pricing objectives can either be

Profit maximization (not concerned about company growth), Sales maximization (concerned with maximizing sales or market share through pricing ex. grocery stores), Status quo (company sets a price at the same level as competitors ex. soft drink industry)

New pricing strategy

Skimming is a pricing strategy that introduced a new product at a price point higher than competition, chosen by businesses that can support high price and has protection from competition ex. Apple

Which of the following is NOT typical way a wholesaling intermediary is classified?

Specialty retailer

Brands can be categorized as family brands or individual brands

Trade name that's also family brand name: Whirlpool Individual brands: Procter & Gamble's laundry detergent

Advertising is the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas

True

Inseparability means that a service is both produced and consumed at the same time.

True

New Product Development Process is a commonly known process used when companies develop new products, and includes the following steps: idea generation, screening, concept testing, business analysis, product development, test marketing, and commercialization.

True

Sales promotion is the media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand, or improve product availability.

True

Agents and brokers

Wholesalers intermediaries that provide various services but don't take title or acquire ownership of products, generally work for a fee or commission basis

Intangibility

a service, unlike a good cant be held, touched, examined or taken home and put on a shelf for the customers future use Ex. Progressive Flo spokesperson

Early adopters

accounts for 13.5% of the adopters and is often the group that marketers target in the early stages of PLC because they are opinion leaders and can easily influence

Four main promotional tools (promotional mix)

advertising, personal selling, sales promotion and public relations

executive level management is ______ involved in pricing decision, accounting, finance and production management

almost always

Generic product

alternative branding where there is NO brand name AT ALL only the product category name ex. flour or vanilla ice cream. Usually low-priced and lower-quality

Physical goods

are tangible like computers, cars, and soft drinks

Selective distribution

best employees for highly shopped brands that are considered using limited problem solving ex. Ralph Lauren

Smooth marketing channel relationships

better serve each channel member and customer

Brand can include brand elements such as

brand name (spoken part) and brand mark (symbol or design of brand)

Push promotional strategies

build demand within the distribution channel at the wholesaler or retailer level, by spending promotional dollars on sales calls to the wholesaler or retailer or by offering them quantity discounts for example

ideas to products

can be marketing to specific groups of customers "don't drink and Drive" "Say no to Drugs"

Jerry routinely buys Charmin toilet tissue when he purchases groceries. As he navigates the paper products aisle, he looks for the Charmin brand name and the cartoon bear that he remembers from Charmin's TV ads on the package. He grabs the first Charmin package he sees without giving it much thought. If he needed toilet paper and didn't see Charmin on the shelf, Jerry would likely pick another brand that he recognized. To Jerry, Charmin toilet tissue is a(n):

convenience product.

Consumer products

convenience, shopping or specialty products

Growth

customer demand increases, sometimes dramatically. customers recognize potential and enter the market in large number, customer demand is strong, industry sales grow quickly and industry profits follow

Elastic demand

customers who are highly sensitive to price fluctuations ex. liquor

Inelastic demand

customers who are less sensitive to price fluctuations in the markets ex. gasoline

A product's selling price should be set based on

customers' perceived value

Product mix

describes the overall group of products that a business offers and consists of a combination of product items, product categories and product lines. can be either narrow (five product categories) or broad (more product categories less closely related to one another)

Price reduction tactics

discounts, allowances, coupons, rebates and bonus packs

Early majority and late majority

each account for 34% of adopters for a total of 68% early majority is easy to influence compared to late majority although both are easily persuaded

Maturity

early maturity: industry sales remain high but growth in dusty sales slow. At midpoint of the maturity phase industry sales peace and begin to decline

Supply chain management

encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities, integrates supply and demand management within and across companies

product categories

ex. whirlpool produces home appliances

Communication process

explains both personal and interpersonal communication ex. illustration pg. 192

Customers demands

factor in on setting a price

Public relations (PR)

form of communication management that seeks to make use of publicity and other non-paid forms of promotion and information to influence the feeling, opinions or beliefs about the company, its products or services, or about the value of the product or service or the activities of the organization to buyers, prospects or other stakeholders

Product's selling price is an indicator of

how the customer values the product in the marketplace and the customer will be willing to pay less or equal amount of perceived value

Social network

impacts the traditional communication ways for businesses, and introduced a powerful exchange of information about products and businesses that develop between customers

Cost structure

important to understand in arriving at a selling price

types of customers who adopt a new product

innovators, early adopters, early majority and late majority and laggards

Business products:

installations, accessory equipment, raw material, component parts, process material, maintenance, repair, and operation (MR) suppose and business services

Product

is a broad term that describes physical goods, services and ideas

Brand

is a multidimensional concept that represents the totality of that which an organization delivers to its customer

Cost of production

is the basis on which selling price is set

Components parts

products purchased in finished form from other suppliers (tired, sound systems)

Customers adopt a new product when

it doesn't appear to be overly complicated to learn how to use, it is compatible with current products or usage, the relative advantage is clearly understood, the relative advantage is readily observable and it is possible to reduce customer risk through trial

Indirect channels

larger number of middlemen, more commonly seen in consumer markets

Accessory equipment

less expensive, less complies equipment purchased more frequently (copiers and computer printers)

Marketing channels (distribution channels)

made up of all entities necessary to move a product from the producer to the end user, an organized network of agencies and institutions which in combination perform all the function required to link producers with end customers to accomplish the marketing task

Installations

major equipment or processes that are complex and expensive

Price elasticity of demand

measure of the relationship between a % change in the market price of a product and a consequential % change in the quantity demanded of a product

(Channel intermediaries) Members of distribution channels

middlemen, the trade, wholesalers, distributors, jobbers, resellers and retailers

Intensive distribution:

most common for low-priced convenience products that are routinely purchased by customers, ex. soft drinks

Services

not tangible like pedicures, personal training and lawn mowing

Status quo pricing

occurs in competitive markets requiring a new product to be introduced at a price equal to other competitors in the marketplace.. only used in penetration pricing doesn't work

Cannibalization

occurs when a business experiences an unintended reduction in sales of one product due to its introduction of another similar product, an be part of growth strategy designed to circumvent a sales decrease due to captivities introductions

Penetration pricing

occurs when competition enters the marketplace with a low price point, allows businesses to quickly gain sales and market share as it enters the market

Specialty retailers

offer higher levels of service and more direct product ex. Victoria secret

integrated marketing communications (IMC)

planning process designed to assure that all brand contacts received by a customer or prospect for a product, service or organization are relevant to that person and consistent over time

Basic personal selling process:

pre-approach, approach, presentation, overcoming objections, closing the sale and following up

Product line pricing

pricing strategy for an entire product line, considering the impact of a single item's price on the pricing strategy of the entire pricing line

Another branding alternative also called private, store or distributor brands

private label brand-the brand is owned or controlled by an intermediary (distributor or retailer) ex. Abercrombie & Fitch

Marketing mix or 4Ps include:

product, promotion, price and place

Process material

products used in production that become part of finished product (sheet metal or plastic used in the car body)

MRO supplies

products used introduction that do not become part of finished product (light bulbs in the manufacturing plant)

Packing

protection of the product during shipping, handling, storage, and use but also promotion of the product, part of the decision includes abel design

Product items

providing different products with different qualities all falling under the same brand

Retailers

purchase products from wholesaling intermediaries or from producer, add value in the form of place, time and possession utility then sell products to customers for a profit ex. Best buy is an example of home electronics retailers

Pricing based of competitors pricing

reacting to competitors as a means of determine pricing strategy is short-sited

Convenience products

relatively inexpensive product that a consumer purchases on a regular routine basis without much thought or effort, consumers can may this purchase with little thought or effort

Exclusive distribution

reserved for speciality products that require extended problem solving to purchase ex. Tiffany & Co.

Sale promotion directed to consumers include activities such as

sampling, coupons, rebates, contests, sweepstakes, frequency programs and premiums, quantity discounts, promotional allowances, trade shows, point-of-purchase displays and cooperative advertising deals

Wholesalers intermediaries

sell products to businesses to be used in the production of another good or service or to be resold

personal selling

selling that involves face-to-face interaction with customer

Inseparability

service is both produced and consumed at the same time ex. if Stanley Steemer doesn't move the furniture or is late arriving the customer perceive the company as providing unsatisfactory service, but doesn't affect the view of the individual carpet cleaner

Heterogeneity

services are difficult to standardize ex.snickers bars purchased at different locations will all last the same how the services at a hair salon may be different depending on location

Value

what the customer is willing to give up to get the desired benefits ex. Calvin Klein perfume is high because they created an image to match it

Home Depot and Best Buy are generally considered to be ________ channel intermediaries.

specialty retailer

Channel structure

strategic choice by a business; a producer selects the channel distribution that helps to best accomplish its marketing objectives

Franchises

subway restaurants--each on is owned and operated by an independent retailer

Merchant wholesalers

take title or acquire ownership of a product, add value, then resell the product to another wholesaler or retailer for a profit (full service or limited-wholesalers/ general, limited-line or speciality-line wholesalers

Product Adoption

the ability for products to be easily adopted by customers. Include factors of: complexity, compatibility, relative advantage, observability and trial-ability

Promotion

the communications of marketing, the way that a business informs, persuades and reminds the target market about its product, brands, company or people

Introduction

the industry contains few competitors and sales are just beginning to take hold , revenues may be positive while profit can be negative

marketing manager has ___ autonomy with respect to pricing

the least

Sale promotion

the media and non-media marketing pressure applied for predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand or improve product availability (more promotional dollars are spent each year on sales promotion than on advertising)

Raw materials

the most basically materials used by producers (iron ore used in the product of steel)

Advertising

the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit, organizations, government agencies and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas.

Customers are more sensitive to price increase when

the price elasticity of demand coefficient has an absolute value greater than 1

Customers are less sensitive to price increase when

the price elasticity of demand coefficient has an absolute value less than 1

Diffusion of innovation

the process by which the use of an innovation is spread within a market group over time and over various categories of adopter

personal selling plays a larger role in the promotional mis when

the product is high value with a limited number of customer

Laggards

the slowest to finally adopt, 16% of adopters, rarely targeted by marketers since they are hard to influence

advertising expenditures in the U.S. has been relatively flat in recent years, although

their spending increased by 0.9 from 2012 to 2013

New product development process (funnel-shape model)

used when companies develop new products, include following steps: idea generation, screening, concept testing, business analysis, product development, test marketing and commercialization