Marketing ch 12, 14, 17
profit =
(contribution per unit x quantity) - fixed costs OR (price x quantity) - [fixed costs + (variable costs x quantity)}
what are the five reasons firms innovate?
1. changing customer needs 2. market saturation 3. managing risk through diversity 4. fashion cycles 5. improving business relationships
What are the five critical components of pricing?
1. company objectives 2. customers 3. costs 4. competition 5. channel members
Integrated marketing communications is the concept of designing marketing communications programs that coordinate all promotional activities - advertising, personal selling, sales promotion, public relations, and direct marketing - to provide
A consistent message across all audiences
suggests that Awareness leads to Interest, which leads to Desire, which leads to Action
AIDA model
The process of conveying a message to others that requires six elements: a source, a message, a channel of communication, and the process of encoding and decoding
Communication
Sally wants to start a lemonade stand. She has calculated at what point her revenue will cover her stands costs. Based on this calculation, she has decided she needs to sell 75 glasses of lemonade at $6 per glass. Which important element is sally not accounting for in her analysis?
Consumer demand
The percentage change in quantity demanded of product A compared to the percentage change in price of product B
Cross-price elasticity
If the price for a product increases, the demand for the complementary product will
Decrease
_____ is the process by which the adoption of an innovation spreads
Diffusion
Like personal selling, __________ has the advantage of being customized to match the needs of specific target markets. Messages can be developed and adapted quickly to facilitate one-to-one relationships with customers.
Direct marketing
The increased use of customer databases has enabled marketers to identify and track consumers over time and across purchase situations, and has contributed to the rapid growth in
Direct marketing
New-to-the-world products, where the product category itself is new, are also called:
Discontinuous innovations
Tammy is assessing the effect of her firms marketing communications. She should remember that the ultimate goal is to
Drive the receiver to action
When the Williams-Sonoma lowered the price of its bread maker from $479 to $267, their total revenue increased. This is an example of _______
Elastic demand
What is an inherent weakness of personal selling?
Extremely high expenses per exposure
Sales data, complaints, compliments, and redemption rates for coupons and rebates are types of ________________ marketers use to assess the effectiveness of their IMC efforts.
Feedback
Wanda asked her firm's advertising agency to estimate how often consumers saw her firm's IMC message and what percentage of the target audience was exposed to the message. Wanda is asking for
Frequency and reach data
The sender of an integrated marketing communication
Has little control over what meaning any individual receiver will take from the message
Dan is especially price sensitive. He has been known to line up on "Black Friday" (the day after Thanksgiving) at 4 a.m. in order to be among the first to buy sale items. Dan would likely respond to a __________ pricing strategy.
High/low
If demand for a product is __________ consumers will not change their purchasing habits greatly when the price of that product changes
Inelastic
When price decreases and total revenue falls, demand is
Inelastic
Kyle, who is an expert in electronic products, purchased a 3D tv right after they were available in the marketplace. He paid over $7,000 for it. Kyle would be considered which category of product adopters?
Innovator
Buyers who want to be the first on the block to have the new product or service. They enjoy taking risks and are regarded as highly knowledgable.
Innovators
Provides firms with the best means to reach the target audience with the desired message, and it enhances the value story by offering a clear and consistent message.
Integrated Marketing communications (IMC)
encompasses a variety of communication disciplines - advertising, personal selling, sales promotion, public relations, direct marketing, and online marketing including social media - in combination to provide clarity consistency, and maximum communicative impact.
Integrated marketing communications (IMC)
In the _____ stage of the product life cycle, the primary objective is to generate consumer awareness and motivate consumers to try the product
Introduction
This stage is characterized by initial losses to the firm due to high start-up costs and low levels of sales revenue as the product begins to take off
Introduction
One of the difficulties in measuring the effectiveness of IMC efforts is the __________ where consumers do not act immediately after receiving a marketing communication
Lagged effect
Nancy only breaks down and buys a new product after most of her friends and family have adopted it. Her reference group heavily influences her buying decision. Nancy is best described as _____
Late majority
Ryan is a sales rep for an established paper supply company. Business is good, but he is concerned that the company has spent little on new product development and has not created a new product in over five years. Without new products, Ryan can market his current products only to his current customers or
Market the same products to similar customers
Doritos is most likely in which stage of its product life cycle?
Maturity
Marginal competitors will start dropping out of the market during the _______ stage of the product life cycle.
Maturity
The _____ stage of the product life cycle normally has the longest stage.
Maturity
If a firm in a purely competitive market can differentiate its product or service, it becomes part of a(n) _______ market.
Monopolistic competition
What is the most common reason new products fail?
No discernible benefits
Refers to any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the mwdium
Noise
Budgeting method whereby the company determines its promotion objectives, outlines the tasks to accomplish these objectives, and determines the promotion cost of performing these tasks
Objective and task
The best approach to promotion budgeting is
Objective and task budgeting method
If a telecommunications company drastically cuts the price for cellular phone service in order to eliminate local competitors, the company could be charged with
Predatory pricing
total revenue =
Price x Quantity
Decoding is usually done by the
Receiver
Brian is trying to sell a new line of ultrasound imaging equipment. Unlike existing technology, these machines are compact, creating the potential for general practice physicians to have and use them in their offices. These new products diffused rapidly because of their _____
Relative advantage
Health clubs often use a low, introductory offer price to get people to join their club. These low prices represent a ______________ pricing strategy.
Sales orientation
Many restaurants offer daily specials, appetizers, entrees, and desserts not listed in their standard menu. These specials primarily provide the new product benefit of _____
Satisfying the changing needs of current and new customers
If a firm is engaged in monopolistic competition, it should....
Seek a way to differentiate itself
There are many options available to consumers when it comes to breakfast cereals. So, if Kellogg's significantly increases the price of Rice Krispies, consumers are more apt to buy alternate cereals instead. This illustrates what concept?
The substitution effect
Zappos.com, an online shoe store, offers an easy, no-hassle return procedure. This relates to the _______ of its products.
Trialability
Gross Rating Points (GRPs)
a reference number used by advertisers that is obtained by multiplying reach (expressed as a percentage of the total market) by frequency
entails the placement of announcements and persuasive messages purchased by retailers and other organizations that seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas.
advertising
extremely effective for creating awareness of a product or service and generating interest.
advertising
When consumers indicate they know the brand when the name is presented to them
aided recall
the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended
alpha testing
uses potential consumers who examine product prototype in a real-life setting to determine its functionality, performance, potential problems, and other issues
beta testing
refers to a potential customer's ability to recognize or recall that the brand name is a particular type of retailer or product/service.
brand awareness
target profit =
break even point = (fixed costs + target profit)/contributions per unit
The medium—print, broadcast, the Internet—that carries the message.
communication channel
describes how speed of diffusion process may depend on various consumer features, including international cultural differences
compatibility
a strategy where firms measure themselves primarily against their competition.
competition orientation
products will diffuse more quickly if they are less complex and easy to try
complexity and trialablity
products whose demand curves are positively related, such that they rise or fall together; a percentage increase in demand for one results in a percentage increase in demand for the other
complimentary products
the process in which a concept statement is presented to potential buyers or users to obtain their reactions
concept testing
pricing strategy based on how a firm can add value to its products or services.
customer orientation
Firms in this stage either position themselves for a niche segment or else completely exit the market.
decline
refers to the process by which the receiver interprets the sender's message
decoding
shows how many units of a product or service consumers will demand during a specific period at different prices
demand curve
the process by which the use of an innovation - whether a product, a service, or a process, spreads throughout a market group, over time, and across various categories of adopters
diffusion of innovation
Marketing that communicates directly with target customers to generate a response or transaction
direct marketing
The IMC channel that has received the greatest increase in aggregate spending recently is....
direct marketing
this group wait's and purchases a product after careful review. Enjoy novelty and are regarded as the opinion leaders for particular product categories
early adopters
Few new products or services can be profitable until this large group buys them
early majority
This group tends to wait until the bugs are worked out of a particular product or service. By this time, competition has reached its peak, so this group has many price and quality choices
early majortity
converting the sender's ideas into a message, which could be verbal, visual, or both.
encoding
strategy in which a retailer offers its customers consistently low prices on every product, without running sales or price promotions
everyday low pricing (EDLP)
why do companies create new products to manage risk?
firms with multiple products can better withstand external shocks
break even point =
fixed cost / (unit price - unit variable cost)
How often the audience is exposed to a communication within a specified period of time
frequency
The goal of any marketing communication is to
get the right message to the right audience through the right media.
Firms attempt to reach new consumers during this stage
growth
The goal of this stage is to ride the rising sales trend a firmly establish the firm's brand.
growth
this stage is marked by rapid growth and increases in both competitors and number of available product versions. Profits also rise during this time
growth
relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases
high/low pricing
refers to the change in the quantity of a product demanded by consumers due to a change in their income
income effect
Once the consumer is aware that the company or product exists, communication must work to....
increase the consumer's interest level.
the process of charging different prices for goods or services based on the type of customer; time of the day, week, or even season; and level of demand.
individualized pricing (dynamic pricing)
what are the four stages of the product life cycle?
introduction, growth, maturity, and decline
the market for a product or service is price insensitive, or inelastic, when....
its price elasticity is greater than -1
This group likes to avoid change and rely on traditional products until those products are no longer available and they are forced to change.
laggards
When this group enters a new product market, the product has achieved its full market potential. By this time, sales have leveled off or are in decline
late majority
Firms enter into new markets/market segments and develop new products during this stage
maturity
marketing costs increase during this stage as firms defend their market share against competitors
maturity
this stage is characterized by adoption by the late majority and intense competition for market share among firms
maturity
strategy where firm is able to identify the price at which its profits are maximized.
maximizing profits
when many firms are competing for customers in a given market, but their products are differentiated
monopolistic competition
one firm provides the product or service in a particular industry, results in less price competition
monopoly
After the firm has piqued the interest of its target market, the goal of subsequent IMC messages should....
move the consumer from "I like it" to "I want it" (Desire)
without _______ __________ or __________ in a saturated market, the value of the firm will ultimately decline
new products or services
diffusion process in enhanced when benefits or uses are easily communicated to others.
observability
only a few firms dominate, typically change prices in reaction to competition to avoid upsetting stable competitive environment
oligopolistic competition
where firms set the initial price low for the introduction of the new product or service. This discourages competitors from entering the market
penetration pricing
The two-way flow of communication between a buyer and seller, often in a face-to-face encounter, designed to influence a person's or group's purchase decision is referred to as
personal selling
new-to-the-world products that create new markets
pioneers or breakthroughs
conducted before a product or service is brought to market to determine how many customers will try and then continue to use it
premarket tests
Measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price.
price elasticity of demand
relies on innovators and early adopters being willing to pay a higher price to obtain the new product or service
price skimming
firms implement a _____ _________ strategy by focusing on target profit pricing, maximizing profits, or target return pricing
profit orientation
large number of sellers offer standardized products or commodities that consumers perceive as substitutable
pure competition
The percentage of the target population exposed to a specific marketing communication at least once
reach
the person who reads, hears, or sees and processes the information contained in the message and/or advertisement.
receiver
describes how diffusion will be relatively quick if the product or service is perceived to be better than substitutes.
relative advantage
Taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitors patents
reverse engineering
use prior sales and communication activities to determine the present communication budget.
rule-of-thumb methods
when a firm is more concerned about their overall market share than about dollar sales
sales orientation
Special incentives or excitement-building programs that encourage the purchase of a product or service, such as coupons, rebates, contests, free samples, and point-of-purchase displays
sales promotions
contribution per unit =
selling price per unit - variable cost per unit
the message originates from the ___________, who must be clearly identified to the intended audience.
sender
refers to consumers' ability to substitute other products for the focal brand
substitution effect
where firms use price to stimulate a certain level of sales at a certain profit per unit. Used when a particular profit goal is the overriding concern.
target profit pricing
strategy where firms employ pricing strategies designed to produce a specific return on their investment, usually expressed as a percentage of sales
target return pricing
introduces the offering to a limited geographical area prior to a national launch. method of determining success potential of a new product
test marketing
What are the three elements in any IMC strategy?
the consumer, the channels through which the message is communicated, and the evaluation of the results of the communication
allows the receiver to communicate with the sender and thereby informs the sender whether the message was received and decoded properly
the feedback loop
The right communication channel to use in IMC is
the one that will connect to the desired recipients.
the market for a product or service is price sensitive, or elastic, when...
the price elasticity is less than -1
the ultimate goal of any form of marketing communications is....
to drive the receiver to Action
occurs when consumers mention a specific brand name first when they are asked about a product or service
top-of-mind awareness
total costs =
total fixed costs + total variable costs
the marketing department or external agency receives the information from the sender and transforms it for use in its role as the ....
transmitter
total variable costs =
variable cost per unit x quantity
costs, primarily labor and materials, that vary with production volume.
variable costs