MARKETING METRICS QUIZ #3

What is the PURPOSE of the Price Premium (aka Relative Price) metric?

to determine competitive product pricing

What is the main application/purpose of the Product Category Volume (PCV) metric?

to determine how effective you are at reaching target market; to evaluate your brand's market share compared to competitors

What is the primary GOAL of the Sales Pipeline metric?

to improve the percentage of customers that remain in the pipeline

What is the main application/purpose of the All Commodity Volume (ACV) metric?

to provide insights on where to spend time/resources for stores in your network

What is the Simple CLV formula?

(Annual profit contribution per customer X Average # of years as customer) - initial customer acquisition cost

What are reasons to use promotional programs?

- Acquire new customers (e.g. samples) - Increase shelf space - Appeal to price-sensitive customers

Who can a company manage customers' price sensitivity?

- Difficult comparison effect - Perceived substitutes effect - Unique Value Effects (e.g. Heinz ketchup) - Price/Quality Effect (e.g. Rolex) - Expenditure Effect (less expensive than other solutions)

What are some applications to decision-making after calculating the Sales Pipeline metric?

- understand sales team effectiveness - manufacturing/inventory management - identify areas of improvement

What is the marketing funnel? (6)

1. AWARENESS (campaign, research) 2. INTEREST (emails, engagement) 3. CONSIDERATION (product info, free trials) 4. INTENT (product demos, shopping cart) 5. EVALUATION (comparison) 6. PURCHASE

What 3 pieces of information do you need to calculate the Simple CLV formula?

1. Annual profit contribution per customer 2. Average customer retention rate 3. Initial cost of customer acquisition

A pricing strategy is based on what two things?

1. Business needs (e.g. cost, margin) 2. Customer demand

What are the 5 Basic Steps in Market-Based Pricing?

1. COMPETITOR ANALYSIS RANGE: competitors' solutions to problems, their prices, and ease of substitution 2. CUSTOMER VALUE (compared to competitors) 3. COST / MINIMUM ROI: determines minimum price/margin 4. PRICE ELASTICITY, SUBSTITUTES, COMPETITORS 5. SELECT PRICE WITHIN "RELEVANT RANGE"

How do you Meet Customer's Core Needs and Requirements?

1. Evaluate how your end-users need to buy (e.g. info/services) 2. Match end-user needs to distribution strategy 3. Allow fair margin for work performed

What are the 4 stages in the Sales Pipeline?

1. INTEREST CREATION (build awareness via ads, cold/warm leads) 2. PRE-PURCHASE (identify prospects -- likely buyers) 3. PURCHASE 4. POST-PURCHASE (delivery, installation, training)

What is the PURPOSE of coupons?

1. Introduce new products 2. Trial of existing products 3. "load pantries"

What are the 3 Distribution Coverage Metrics?

1. Numeric distribution 2. All commodity volume (ACV) 3. Product category volume (PCV)

What are the 3 major considerations when pricing a product/service?

1. PRICE CEILING: customers' assessment of unique features 2. ORIENTING POINT: customers' prices 3. PRICE FLOOR: costs

SALES STRUCTURES are based on which four categories?

1. PRODUCT: for companies with multiple, varying products (e.g. Kimberly Clark) 2. MARKET: assign salespeople base on **expertise** 3. ACCOUNT: required dedicated salesperson(s) assigned to **customer** 4. GEOGRAPHY: for companies with homogeneous products --> salespeople assigned by **geography**

What is the Purchase Behavior Cycle?

1. Recognize need 2. Evaluate purchase options 3. Resolve concerns about purchase 4. Make decision 5. Make purchase 6. Evaluate purchase

What are the 3 challenges/complications of the Sales Pipeline metric?

1. Requires 'good records' of time spent by salespeople 2. Requires salespersons to share info with others 3. Requires knowledge of CLV analysis to avoid over-prospecting

Consumer Psychology and Pricing What ways do marketers use psychology to influence consumers' perception of prices?

1. Reservation/Reference Prices 2. Price-quality inferences 3. Price endings (e.g. $8.99)

What are the 3 methods for measuring Lift (%) ?

1. Sales prior to promotion 2. 52-week sales average 3. Last year seasonal average

What are the 2 types of price PROMOTION?

1. Temporary price reduction -- typically measured as % of customers accepting offer (e.g. coupon redemption) 2. Permanent features of pricing systems

When can a premium pricing strategy be used? (3)

1. Unique product 2. 1st to market 3. Strong brand

How do strong brands create financial value?

1. sell more units 2. charge higher prices 3. efficiencies via decreased media costs or product launch failures

ORGANIZATIONAL STRUCTURE: customer ADVANTAGES: DISADVANTAGES:

ADVANTAGES: customer knowledge/control DISADVANTAGES: high cost, less product knowledge/coordination

ORGANIZATIONAL STRUCTURE: geographic ADVANTAGES: DISADVANTAGES:

ADVANTAGES: low cost, no customer/geographic overlap DISADVANTAGES: limited product/customer knowledge

ORGANIZATIONAL STRUCTURE: product ADVANTAGES: DISADVANTAGES:

ADVANTAGES: product knowledge/control DISADVANTAGES: customer/geographic duplication

ORGANIZATIONAL STRUCTURE: functional ADVANTAGES: DISADVANTAGES:

ADVANTAGES: selling effectively DISADVANTAGES: coordination, customer/geographic duplication

___ captures the way a brand's price compares to prices set by its competitors, without regard to customers' reactions to those prices. What is a complication? Formula?

Average Price Charged Complication: treats all competitors (large and small) the same. Pg. 230

Why is Average Price Charged easier to calculate than Average Price Paid?

Average Price Charged only requires knowledge of prices (not sales/shares of competitors)

____ is used to calculate premium pricing when comparing your prices against multiple competitors. What are the 2 methods?

Average Price Paid 1. unit-share weighted average price (pg. 229) 2. revenue market share (%) / unit market share (%)

____ is the expected sales if promotions do not run. ____ is the 'lift' in sales resulting from promotions.

Baseline sales Incremental sales

____ is when you look at historical transactional data across multiple promotional periods and analyze all baskets that contained the item promoted and determine among all those baskets which were the common items that were not on promotion.

Basket Analysis

What is the most important purchase team member for the BUYER?

CEO

What is the Need Indicator for the following levels? CEO: CFO: VP OPERATIONS: PLANT MANAGER: MAINTENANCE MANAGER: MACHINE OPERATOR:

CEO: earnings per share (EPS) CFO: ROI, EBITDA VP OPERATIONS: COGS PLANT MANAGER: machine availability MAINTENANCE MANAGER: maintenance expense MACHINE OPERATOR: oil on floor

**B2B MARKETS** CUSTOMER: VALUE-TRANSACTIONS: PRODUCT: PRICE: SELLING PROCESS: VALUE: DECISION-MAKER: DEMAND:

CUSTOMER: few customers VALUE-TRANSACTIONS: larger-value (bigger ROI) PRODUCT: customized PRICE: negotiated SELLING PROCESS: lengthy, complex VALUE: usage determines value DECISION-MAKER: multiple decision makers DEMAND: derived demand for consumer products (e.g. eatout)

**B2C MARKETS** CUSTOMER: VALUE-TRANSACTIONS: PRODUCT: PRICE: SELLING PROCESS: VALUE: DECISION-MAKER: DEMAND:

CUSTOMER: many customers VALUE-TRANSACTIONS: smaller-value PRODUCT: mass-produced PRICE: fixed SELLING PROCESS: brief, retail-focused VALUE: multiple factors influence value DECISION-MAKER: individual decision makers DEMAND: media-stimulated demand

____ is when a promoted item increasing its own sales but, decreasing the sale of another item in the same category How do you measure it?

Cannibalization Compare promotions impact on item vs on its category

What method is often used to calculate Reservation Price? What does it MEASURE? What is its PURPOSE? What key question is it trying to answer?

Conjoint analysis TO GAIN INSIGHTS into customer perceptions regarding the value of attributes (based on the trade-offs they're willing to make) TO CREATE NEW PRODUCTS that better meet customer needs Are customers willing to pay for the attribute?

____ goods require less product customization and price/margins.

Convenience goods

___ is a pricing strategy in which businesses set flexible prices for products or services based on current market demands. Ex.: airlines, hotels When is it best used? (2)

Dynamic pricing 1. All competitors use it 2. demand fluctuates a lot + fixed supply

___ a marketer sets a relatively high initial price, then lowers the price over time. ... As the demand of the first customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment.

Economy pricing

Why is it difficult to calculate customers' Reservation Price?

Have to assign a dollar value to attributes based on customer perceptions.

Design: Channel Levels LEVEL ZERO: LEVEL ONE: LEVEL TWO: LEVEL THREE:

LEVEL ZERO: simplest; direct sale from manufacturer to consumer; no intermediary LEVEL ONE: one intermediary; manufacturer --> distributor --> customer LEVEL TWO: two intermediary; manufacturer --> wholesaler --> retailer --> customer LEVEL THREE: three intermediary; includes agent; manufacturer --> wholesaler --> retailer --> agent --> customer

PRODUCT CATEGORY VOLUME (PCV) What does it measure? What are the complications? What is the formula?

Measures percentage/dollar value of category sales made by stores which stock at least on SKU of the brand compared to all stores. May miss opportunities to expand category. = (total category sales by stores carrying brand) / (total category sales of all stores)

NUMERIC DISTRIBUTION What does it measure? What are the complications? What is the formula?

Measures the percentage of outlets that stock a brand/product (i.e. how many outlets carry your product in a given territory?) Does NOT consider outlets' size or sales levels = (# outlets carrying product) / (total # outlets in market)

CATEGORY PERFORMANCE RATIO What does it measure? What are the complications? What is the formula?

Measures the relative performance of a retailer in a given product category compared with performance in all product categories = (% PCV) / (% ACV)

____ occurs when promoting one item influences us to purchase another item.

The Halo Effect

DYNAMIC PRICING PROS: CONS:

PROS: - Profit maximization - Clear out slow-moving inventory CONS: - Customer confusion - Inventory management - Increased marketing activity - Printed price changes - Competitor monitoring

___ is designed to capture market share by entering the market with a low price relative to the competition to attract buyers.

Penetration pricing strategy

___ and ___ are typically dependent on where the product is in the product life cycle.

Penetration pricing strategy Product skimming strategy

___ is the proportion of customers who consider a product to be a good value; the selling price is BELOW their reservation price.

Percent good value

____ establishes a price higher than the competitors. Can be effectively used when product is unique, first to market, or strong brand.

Premium pricing strategy

____ is when a given % rise in P will be more than offset by a larger % fall in Q so that total revenue—falls. A given % rise in P will be more than offset by a larger % fall in Q so that total revenue—falls.

Price ELASTIC

____ is when A given % rise in P will cause a smaller % fall in Q so that total revenue—rises.

Price INELASTIC

___ is the responsiveness of demand to changes in price. formula?

Price elasticity of demand Change in qty (%) / Change in price (%)

___ is the percentage by which the price of a brand exceeds a benchmark price. Compares your brand's price to that of direct competitors. What must you establish? equation?

Price premium Must establish benchmark price Price premium (%) = (My price per unit - competitor price per unit) / competitor price per unit

B2C companies utilize a ___ salesforce.

indirect

___ is when a marketer sets a relatively high initial price, then lowers the price over time. ... As the demand of the first customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment.

Product skimming strategy

_____ occurs when consumers see a price of a commodity they regularly purchase, which has a long shelf life (i.e. detergent) go on promotion. What happens? When is it used?

Pull-forward effect --> consumer tends to buy larger volume than usual. Used to "blow out" inventory or control shelf space

___ is the maximum amount an individual is willing to pay for a product.

Reservation price

Product Life Cycle When do Sales peak? When do Profits peak?

Sales: Maturity Profits: Growth/Maturity

____ goods require less distribution intensity and/or mass communication.

Specialty goods

TRUE/FALSE: B2B typically involves more of a solution-selling type of rule. Heavily relies on salesforce. In other words, salesforce acts as a problem solver to the business.

TRUE

TRUE/FALSE: If price elasticity is estimated at -1.5, then we expect the percentage change in quantity to be approximately 1.5 times the percentage change in price.

TRUE

TRUE/FALSE: Slope is the change in quantity for a small change in price. Price elasticity is the percentage change in quantity for a small percentage change in price .

TRUE

TRUE/FALSE: In linear demand function, slope is constant but elasticity is not. Elasticity is not the same as slope.

TRUE pg. 240

What is the GOAL of Promotion?

To CHANGE BEHAVIOR of consumers in order to increase sales/profits.

What is the PURPOSE of the Sales Pipeline metric?

To forecast upcoming sales, evaluate workloads and determine where/why customers drop out of the process.

PROMOTION Total Sales = Lift (%) = Cost of Incremental Sales =

Total Sales = Baseline Sales + Incremental Sales Lift (%) = Incremental Sales / Baseline Sales Cost of Incremental Sales = Marketing Spending / Incremental Sales

____ is when A given % rise in P will be exactly offset by an equal % fall in Q so that total revenue—is unchanged.

UNITARY

ALL COMMODITY VOLUME (ACV) What does it measure? What are the complications? What is the formula?

Weighted measure of product availability/distribution based on total store sales. Does not measure how well a given store sells your product category. = (total sales of outlets carrying brand ($)) / (total sales of all outlets ($))

Can a price premium be negative?

YES (e.g. discounts)

The more complex the product is, the greater _____.

the reliance on the sales force.

Companies that are manufacturer-driven believe what? What does it say about the company?

believe their product/service is superior to competitors. says that sales force is not recognize as a necessary discipline.

How can you test a brand's strength?

blind tests

_____ handle the logistics of sales (e.g. contracts, marketing, shipping) and maintain customer relationships. On behalf of manufacturers, they take ownership of products through the distribution channel. They represent the PRODUCER in the sales process.

brokers/agents

Go-to-market strategies are dependent on what?

business model

____ lead is a lead that has not specifically expressed interest. ____ lead is a lead that is expected to be responsive.

cold warm

Project teams typically have a well-defined evaluation process, but not a well-defined ___ process.

decision-making

B2B companies utilize a ___ salesforce.

direct

_____ is a wholesaler who assumes extra responsibility. In addition to fulfilling retailer orders, they actively sell products on behalf of the producers. Unlike a wholesaler who are used on a need-by-need basis, they are more likely to have a stronger affiliation with particular companies.

distributors

If value share is ____ volume share, then there is a premium If value share is ___ volume share, then there is no premium.

greater equal to

What is the most important customer benefit offered by SELLERS?

just-in-time delivery

Brand extensions increase ___ and decrease ___.

likelihood of adopting new product launch costs

In B2C world, products are one-to-____. What does this imply?

many Selling is between you (manufacturer) and the distributor/retailer via INDIRECT sales force. **NOT between you and the customer.

If the Category Performance Ratio is greater than 1, then ....

outlets perform comparatively BETTER in selling the category in question than other categories

When do you utilize advertising/direct mail? When do you utilize salesforce?

quick boost in sales long-term relationship with customer

What is a complication with the Average Price Paid metric when calculating the premium price?

requires knowledge of competitors pricing and share

_____ are the outlets (e.g. stores, online) where consumers can purchase products.

retailers

What is the visual for "B2B Seller and Buyer(s) Need Matching" saying?

salesforce aims different messages at different audiences (e.g. talking to CEO, talk about how product will make them money, NOT product benefits/features)

The more complex the good, the ____ the Purchase Behavior Cycle takes.

slower (e.g. car)

Realistically, floor price is not equal to costs. Floor price is equal to ...

the minimum amount management expects to receive.

When is a company's sales pipeline considered effective?

when a greater number of customers are retained during each step

_____ purchase in bulk, typically, which lowers the price, from either distributors or manufacturers. This allows them to make a profit because they are able to sell to retailers in smaller packages that yield higher prices. Unlike distributors, they only deal with the storage and delivery of goods.

wholesalers

The best companies have a ____ customer relationship.

win-win relationship (i.e. both are adding value to each other)