Marketing Test 3 Study Guide

Profit

(Contributions per unit x Quantity) - Fixed Cost or Price x Quantity - (Fixed Cost + (Variable Cost x Quantity)

The Lagged Effect

-Advertising does not always have an immediate impact. -Multiple exposures after often necessary- takes at least 3 exposures for consumer to get it. -It is difficult to determine which exposure led to purchase.

Differences Between Advertising and Other Promotion

-Advertising is not free -It must be carried by some medium -Legally, the source of the message must be known or knowable -Advertising represents a persuasive form of communication, designed to persuade the reader to take action

Interest

-After awareness comes persuasion. It isn't enough to let a customer know that the product exists, consumers must be persuaded that it's a product worth investigating. -The customer must want to further investigate the product/service.

Reminder Advertising- what is it used for? when does it occur?

-Communication used to remind or prompt purchases. -Occurs after the products have gained market acceptance. -Mature brands use this. Persuasion is not high up. -Want to keep brand in evoked set so they used reminder advertising. ex. when grocery store places Kleenex on the end of an aisle- they're relying on top-of-mind awareness of the brand (which Kleenex maintains through advertising)

Informative Advertising- what does it create/build? what demand is influenced by this?

-Create and build brand awareness, with the ultimate goal of moving the consumer through the buying cycle to a purchase. -Inform customers about upcoming sales events or arrival of new merchandise. -Primary demand influenced by informative advertising.

Everyday Low Pricing vs. High/Low Pricing

-Create value in different ways -EDLP saves search costs of finding lowest overall prices -High/low provides the thrill of the chase for the lowest price

Legal Aspects and Ethics of Pricing

-Deceptive or Illegal Price Advertising (Carpet Cleaning) -Predatory Pricing -Price Discrimination: Personalization and Privacy -Price Fixing

Product Placement

-Goal is to make it "seamless in nature" -Third-Party increases credibility ex. advertisers now pay a lot of money to appear in movies ex. Pepsi and Empire: Pepsi was part of the story-line during three different episodes and also aired commercials during breaks. Was "seamless."

Headline, Subhead, Body Copy, and Brand Elements

-Headline: the large type in an ad that is designed to draw attention (usually noticed second behind visual) -Subhead: a smaller headline that provides a great deal of information through the use of short and simple words -Body Copy: the main text portion of an ad. It explains in more depth what the headline and subhead introduced, arouses desire for the product, and provides enough info to move consumer to action. -Brand Elements: characteristics that identify the sponsor of a specific ad (typically through a logo and USP)

The TRUTH Takes Hold- what do they focus on? what type of campaign do they use?

-How to get young consumers to quit smoking -Part of the tobacco settlement: "raising a generation that would be smoke free" -TRUTH uses a hard-hitting media campaign with in your face ads

Deceptive Or Illegal Price Advertising- Deceptive Reference Prices

-If the reference price has been inflated or is just plain fictitious, the advertisement is deceptive and may cause harm to consumers.

Choosing the Right Media Examples

-In-N-Out: they do little to no traditional advertising; they rely on word of mouth (social media, talking)- consistent communication -Target focused on Hispanic Segment- "Without Direct Translation": some Hispanic words don't match American #SinTradducion "There will always be a part of you that simply doesn't translate."

Your Pie Method

-Inform, Persuade, and Remind -Bottom-Up: Your Pie uses print, broadcast, and social media to inform, persuade, and remind. Use bottom-up to determine objectives then determine tasks and add up expenses for tasks.

The AdCouncil- is this institutional or product-focused?

-Institutional: building awareness about fatherhood/anti-bullying. ex. Fatherhood- "take time to be a dad today."

The Scope and Nature of Personal Selling (4)

-Internet -Telephone -Face-to-Face -Teleconference

5th C: Channel Members- why must they be careful about who they work with? what's a gray market?

-Manufacturers, wholesalers, and retailers can have different perspectives on pricing strategies -Gray Market: employs irregular but not illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer. In the long-term, this can tarnish the image of a manufacturer if a discount dealer gets the merchandise. -to fight this, manufacturers place warnings on websites, packaging, etc. that the product warranty becomes null and void unless the item is purchased from an authorized dealer.

Emotional Appeals in Advertising- Apple, P&G, and Superbowl examples

-Most Common Types: Fear/Safety, Humor, Happiness, Love/Sex, Comfort, Nostalgia ex. Apple "emotional home run"- used tech. as an appeal during holiday season. ex. P&G raising an Olympian- highlight a wrestler and his mom- mom had to sacrifice a lot. ex. 2015 Superbowl Ads- 5 or 6 focused on dad- very emotional. Toyota used older NFL players with their kids. -read the back of one of the pages of notes!! all examples of emotional appeal from ads.

Advertising- what is it effective at?

-Most visible element of IMC -Advertising: a paid form of communication from an identifiable source, delivered through a communication channel, and designed to persuade the receiver to take some action, now or in the future -extremely effective at creating awareness and generating interest. Typically doesn't require much action from consumers which is why it's passive.

Public Relations

-PR viewed as more credible source of information ex. Abercrombie wanted "The Situation" to stop wearing their clothes because it was bad PR.

Professional Selling as a Career

-People love the lifestyle -There's a lot of flexibility -There is a lot of variety in the job -Can be very lucrative -Very visible to management and good for promotions

Elasticity of Demand Equation

-Percentage Change in Quantity Demanded of Good A divided by Percentage Change in Price of Good A -If E is greater than 1, its elastic. -If E is less than 1, its inelastic. -If E is equal to 1, demand is unitary.

When demand is price elastic: what happens when price increases/decreases?

-Price Increase: Demand Decreases and Revenue Decreases -Price Decrease: Demand Increases and Revenue Increases ex. JC Penny

When demand is price inelastic: what happens when price increases/decreases?

-Price Increase: Demand has No Change and Revenue Increases -Price Decrease: Demand has No Change and Revenue Decreases

Evaluated Sales Promotion Using Marketing Metrics

-Realized Margin -Cost of Additional Inventory -Potential Increase in Sales -Long-Term Impact -Potential Loss from Switches from More Profitable Items -Additional Sales by Customers... Loss Leaders ex. Grantham had to walk to back of Sam's Club to get paper plates.

Integrated Marketing Communications- what are the three elements?

-Represents the promotion P of the four P's. The three elements of the IMC include: 1. Customers 2. Communication Channel 3. Results (evaluation)

Search Engine Marketing

-SEM: a type of web advertising whereby companies pay for key words that are used to catch consumer's attention while browsing a search engine. Clicks Impressions: the number of times the ad appears in front of the consumer Click Through Rate (CTR): the number of times the consumer clicks on the online ad divided by the number of impressions Return on investment (ROI) or ROMI (marketing): Gross Margin minus Marketing Expenditure divided by Marketing Expenditure multiplied by 100

Direct Marketing- what does it include? what is it good for/improve? READ ABOUT THIS AGAIN IN BOOK

-Sales and promotional techniques that deliver promotional materials individually; communicates directly with target customers to generate a response or transaction. -Growing element of IMC -Includes mail, catalogs, e-mail, and m-commerce (electronic commerce conducted on mobile phones) ex. sending coupons for products a customer has purchased recently. -Good for multicultural groups -Database technology improves.

The Value Added by Personal Selling

-Salespeople provide information and advice -Salespeople save time and simplify buying -Salespeople build relationships

Awareness- what approach is best? what does it involve?

-Senders must first gain the attention. -A multi-channel approach increases the likelihood the message will be received. -Involves brand awareness: a potential customer's ability to recognize or recall that the brand name is a particular type of retailer or product/service. The strength of the link between the brand name and the type of merchandise or service in the minds of the customers.

Viral Marketing Campaign

-Sisterhood of Motherhood: new moms helping each other -Hamburger Helper: rap videos went viral- really good lyrics and beats made it very popular

What's the first meaningful interaction you have with a customer from New Story?

-Thank-You emails -all personalized, from individual people so they can have someone to connect with. They want to make it personal. -should be "REMARKABLE"

Factors Influencing Price Elasticity of Demand

-The Income Effect -The Substitution Effect -Cross-Price Elasticity

Step 3: Sales Presentation and Overcoming Reservations

-The Presentation (make the pitch) -Handling Reservations (integral part is handling reservations or objections that the buyer might have about the product or service)

What is Price?

-The overall sacrifice a consumer is willing to make to acquire a specific product or service. -Vantage points could cause friction (sellers and customers may view value differently)

Personal Selling

-The two way flow of communication between a buyer and a seller that is designed to influence the buyers purchase decision. Can take place in various setting (online or offline). -Some products require the help of a salesperson. -More expensive than other forms of promotion. -Salespeople can add significant value, which makes the expense worth it.

The Importance of Price (3)

-To the Seller: Price is revenue -To the Consumer: Price is the cost of something -Price allocates resources in a free-market economy

Action

-Ultimate goal of any marketing communications is to drive the receiver to action. -Purchase is just one type of action.. what other actions can IMC ask consumers to take?

Persuasive Advertising- what demand is influenced by this? when does it generally occur? what can it be used for?

-Used to motivate consumers to take action. -Generally occurs in the growth and early maturity stages of the PLC when competition is most intense. -May be used to re-position an established brand in the later stage of the PLC. -Selective demand influenced by persuasive advertising (usually more text involved in these ads)

Online Marketing (3)

-Websites: firms have increased emphasis on communicating with customers through their websites (build brand image and educate consumers about products) -Blogs (Weblog): contains periodic posts on a common web page; corporate blogs are a new form of marketing communications. -Social Media: media content used for social interactions (YouTube, Facebook, and Twitter are three most popular) -"Volvo" Campaign

Deal

-a type of short-term price reduction that can take several forms, such as a "featured price" (price lower than regular price), a BOGO offer, or a certain percentage "more free" offer contained in larger packaging; can involve a special financing arrangement, such as reduced percentage interest rates or extended repayment terms -encourages trial because it lowers risk (cost)

Puffery

-hyperbole or legitimate exaggeration- based on opinion not fact (stopping just short of deception) -Know difference between false advertising and puffery- "9 out of 10 dentists" MUST be proven. ex. Match.com says it leads to better first dates. Better is subjective so that's puffery. If it said it lead to more second dates, that would have to be proven.

Mobile Marketing

-marketing through wireless handheld devices

Sales Promotions- who is it aimed at? is it short-term or long-term?

-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. -Can be aimed at both end user consumers or channel members -typically design these incentives to be used in conjunction with other forms of IMC -Can be used for both short-term and long-term objectives

Public Relations (PR)- why has PR become more important?

-the organizational function that manages the firm's communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationships with the media. -Product placement -"Free" media attention- still paying to be seen -Importance of PR has grown as cost of other media has increased -Consumers becoming more skeptical about marketing, PR becoming more important

Pricing Strategies

1. Everyday Low Pricing 2. High/Low Pricing 3. New Product Strategies

Steps in Planning and Executing an Ad Campaign (7)

1. Identify Target Audience 2. Set Advertising Objectives 3. Determine the Advertising Budget 4. Convey the Message 5. Evaluate and Select Media 6. Create Advertisements 7. Assess Impact

Focus of Advertisements (2)

1. Institutional Advertisements: inform, persuade, or remind about issues related to places, politics, or an industry. ex. P&G had to build up the P&G name- did more corporate advertising about their portfolio rather than just one product. 2. Product-Focused Advertisements: inform, persuade, or remind consumers about a specific product or service. -these are the focus of the ads (more specific objectives)

Advertising vs. PR?

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PR and 3rd Party Endorsement

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The AIDA Model- do consumers always feel it in this exact order?

A common model of the series of mental stages through which consumers move as a result of marketing communications (also known as the think, feel, do model): Awareness (Think)--> Interest--> Desire(Feel)--> Action (Do) -Consumers can feel this out of order for situations such as an impulse buy.

Sales Orientation- Premium Pricing

A company objective based on the belief that increasing sales will help the firm more than increasing profits. -Premium Pricing: a firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter.

Customer Orientation

A company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers needs (how it can add value to its products or services). ex. Car Max promises a "no-haggle" pricing structure.

Competitor Orientation- Competitive Parity and Status Quo Pricing

A company objective based on the premise that the firm should measure itself primarily against its competition. -Competitive Parity: A firm's strategy of setting prices that are similar to those of major competitors. -Status Quo Pricing: a firm changes prices only to meet those of competition (ex. When Delta increases prices, American Airlines and United often follow with similar increases.)

Profit Orientation

A company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing. -Target Profit Pricing: a firm has a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit. -Maximizing Profits: relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits, it should be able to identify the price at which its products are maximized (this is an extremely difficult undertaking) -Target Return Pricing: implemented by firms less concerned about the absolute level of profits and more concerned with the rate at which their profits are generated relative to their investment; designed to produce a specific return on investment, usually expressed as a percentage of sales.

Deceptive Or Illegal Price Advertising- Bait and Switch

A deceptive practice of luring customers into the store with a very low advertised price (bait), only to aggressively pressure them into purchasing a higher priced model (switch) by disparaging the lower priced item, comparing it unfavorably with the higher-priced model, or professing an inadequate supply of the lower-priced item. -the laws against this are difficult to enforce because salespeople are always trying to get someone to buy a higher priced item. Key to proving deception is on the INTENT of the SELLER.

Sweepstakes

A form of sales promotion that offers prizes based on the chance drawing of entrants names.

Role Playing

A good technique for practicing the sales presentation prior to meeting with a customer; the salesperson acts out a simulated buying situation while a colleague or manager acts as the buyer.

Rebates

A particular type of price reduction in which a portion of the purchase price is given to the buyer by the seller in the form of cash.

High/Low Pricing Strategy

A pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases. -Attracts two market segments: those that are not price sensitive and are willing to pay the "high" price and price sensitive customers who wait for the "low" price.

Loss Leaders

A product priced at or below cost and place it somewhere where it grabs attention- then put item in the back of store so you have to walk past all the other products to go get it.

The Sales Manager and the Sales Force (Ethical and Legal Issues)

A sales manager must treat people fairly and equally in everything they do. This includes hiring, promotion, supervision, training, firing, etc.

Sales People Build Relationships- Relationship Selling

A sales philosophy and process that emphasizes a commitment to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial to all parties.

Everyday Low Pricing (EDLP)

A strategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular, non-sale price and deep-discount sale prices their competitors may offer. -this reduces customer search cost which can add value ex. Walmart stresses that for any group of often-purchased items, its prices tend to be lower. This doesn't mean every item purchased will be lower, their prices just tend to be lower overall.

Lift

Additional sales caused by advertising.

Step 6: Create Advertisements

Ads In Execution Stage: 1. The type of medium determines the execution style 2. Creativity plays a major role in execution stage ex. Barbie tried to reach millennial parents 3. Creativity should not overshadow the message 4. The execution style must match the medium and objectives -If using different media channels to deliver same message, there must be consistency across execution styles-that is, integrated marketing.

Determine the Advertising Schedule (3)

Advertising Schedule: specifies the timing and duration of the advertisement Continuous: runs steadily throughout the year and therefore is suited for products and services that are consumed continually at relatively steady rates. Require steady level of persuasive/reminder ads. Pulsing: maintains a base level of advertising but increases advertising during certain periods. ex. school bars/restaurants play more ads at the beginning of each semester. Flighting: ad schedule implemented in spurts, with periods of heavy advertising followed by periods of no advertising (suntan lotion- promoted before summer heavily but not in winter). ex. Pie Day- everything was in place; huge emphasis right before Pie Day.

Awareness Metrics (2)

Aided Recall: consumers indicate they know the brand when the name is presented to them Top-Of-Mind Awareness: the highest level of awareness, occurs when consumers mention a specific brand name first when they are asked about a product or service. ex. when consumers are asked about motorcycles they respond "Harley" -High top-of-mind means the brand is in the evoked set. -You build this awareness by having memorable names, repeatedly exposing the name though advertising, locations, and sponsorship, and using memorable symbols.

Social Marketing

Application of marketing principles to a social issue to bring about attitudinal and behavioral change among the general public or specific population segment. -PSA represents a form of this

Break-Even Analysis and Decision Making

Break-Even Analysis: technique used to examine the relationship among cost, price, revenue, and profit over different levels of production and sales to determine the break-even point Break-Even Point: the point at which the number of units sold generates just enough revenue to equal the total costs; at this point, profits are zero. -The graph contains three curves: fixed cost, total cost, and total revenue. Vertical axis measures revenue or cost in dollars, and horizontal measures quantity of units sold. (READ OVER THIS IN BOOK AGAIN)

Speakers from Class: New Story

Building a new home gives you a new story. -Started after earthquake in Haiti (people living in temporary tents that were only supposed to last 6 months) -"Talent is universal, opportunity is not." -Founder tried to get involved in different organizations but there was a lot of uncertainty where his money would be going. -Wanted New Story to be different- 1. every donation goes to building new homes. 2. you get connected to family you're donating to. 3. video proof of house/family at end of donation -Lesson 1: When you see a need, meet it. You're not too young or too inexperienced. Start small and make it happen. (building creates protection, jobs, and new careers- ex. charcoal business) -Lesson 2: Always have the end user in mind, never assume you know best. (New Story has strong partnerships and guidance that help to spread the word and build homes more efficiently) -Lesson 3: Learn from people smarter than you. Never be afraid to ask for help from others. -Lesson 4: People won't remember you if you don't give them a reason to. -Lesson 5: If you measure it, it will improve. KNOW YOUR GOAL WHEN YOU START.

Cold Calls and Telemarketing

Cold Calls: A method of prospecting in which sales people telephone or go to see potential customers without appointments. Telemarketing: a method of prospecting in which salespeople telephone potential customers (similar to cold call, but it always occurs over the telephone)

Cause-Related Marketing

Commercial activity in which businesses and charities form a partnership to market an image, a product, or service for their mutual benefit; a type of promotional campaign. ex. Chili's and St. Jude's

Rule of Thumb Methods: Competitive Parity- limitations?

Communication budget is set so that the firm's share of communication expenses equals its share of the market (not matching dollar for dollar but on each market share point) -Limitations: does not allow firms to exploit the unique opportunities or problems they confront in a market. If all competitors use this method to set communication budgets, their market shares will stay approximately the same over time.

Types of Sales Promotions- Advantages and Disadvantages- which is least likely to result in customer buying because of discount? which is most widely used?

Coupons (most widely used) -adv.: stimulates demand, allows for direct tracking of sales -dis adv.: low redemption rates, high costs Deals -adv.: encourages trial, reduces consumer risk -dis adv.: may reduce perception of value Premiums ("freebies") -adv.: builds goodwill, increases perception of value -dis adv.: consumers buy for premium not product, has to be carefully managed Contests -adv.: increases consumer involvement, generates excitement -dis adv.: requires creativity, must be monitored Sweepstakes -adv.: increases involvement with the product -dis adv.: sales often decline after the sweepstakes is over Samples -adv.: encourages trial, offers direct involvement -dis adv.: high cost to firm Loyalty Programs (least likely to result in customer buying because of discount) -adv.: creates loyalty, encourages repurchase -dis adv.: high cost to firm POP Displays (paid for by brand- influences retailer and consumer) -adv.: provides high visibility, encourages brand trial -dis adv.: is difficult to get good location in the store, can be costly to firm Rebates (redemption- taking advantage of it is unlikely) -adv.: stimulates demand, increases value perception -dis adv.: easily copied by competitors, may just advance future sales Product Placement -adv.: displays products non-traditionally, demonstrates product uses -dis adv.: firm often has little control over display, product can be overshadowed

Step 2: Set Advertising Objectives- 2 ways

Determine whether you use push or pull by the answer to the question "Who is our target market?" -Push Strategy (focus on wholesalers, retailers, or salespeople) -Pull Strategy (advertising to consumers)

Choosing the Right Medium- Direct Marketing

Direct Marketing: -advantages: is highly targeted, allows for personalization -disadvantages: cost can vary depending on type of direct marketing used, traditional media, like mail, will be more expensive than newer media

Symbols Help to Convey Messages

Don't ignore the unspoken. ex. Honey Nut Cheerios got rid of mascot Buzz to highlight declining bee populations.

Experience Curve Effect

During the market penetration strategy, firms expect the unit cost to drop significantly as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price. -this discourages competitors from entering the market

Contributions Per Unit

Equals the price minus the variable cost per unit. -Break-Even Point: fixed cost divided by contributions per unit

T/F: The effectiveness of an ad campaign should only be assessed after the campaign is run.

FALSE- it should be assessed before, during, and after.

T/F: When a new product is different from what already appears in the market, creating a new price is easier, because the products value has already been established and value-based methods can be employed.

FALSE- when a new product is similar

T/F: Public Relations is used for consumers but not trade.

False- it's used for both.

Regulatory and Ethical Issues in Advertising

Federal Trade Commission (FTC): enforces federal consumer protection laws- specifically truth in advertising laws; define deceptive and unfair advertising practices -makes sure objective claims that are made are substantiated. Federal Communications Commission (FCC): regulates interstate and international communications by radio, television, wire, satellite, and cable- specifically enforces restrictions on broadcasting material that promotes lotteries (with some exceptions); cigarettes, little cigars, or smokeless tobacco products; or that perpetuates a fraud. Also enforces laws that prohibit or limit obscene, indecent, or profane language. Food and Drug Admin.: regulates food, dietary supplements, drugs, cosmetics, medical devices (including radiation emitting devices such as cell phones), biologic (biological issues), and blood products- specifically regulates package labeling and inserts, definition of terms such as "light" and "organic," and requires disclosure statements (warning labels, dosage requirements, etc.)

Step 4: Convey the Message

Firm determines: 1. key message it wants to communicate to target audience 2. what appeal would most effectively convey the message

Third C: Costs- 2 Categories

Firms need to understand their cost structure so they know how profitable they will be at different prices. Prices should not be based on costs. Variable Costs: costs, primarily labor and materials, that vary with production volume. As a firm increases or decreases its production volume, variable costs move with it. Fixed Costs: those costs that remain essentially at the same level, regardless of any changes in the volume of production. Total Cost: the sum of the variable and fixed costs

Step 5: Follow-Up- 5 Service Quality Dimensions

Five Quality Service Dimensions: 1. Reliability: must deliver the right product and service on time 2. Responsiveness: must be ready to deal with any issue, question, or problem that may arise 3. Assurance: must be assured through adequate guarantees their product will perform as expected 4. Empathy: salesperson/organization must have a good understanding of the problems facing their customers or they can't give them what they want 5. Tangibles: offer a signal that the product is of high quality. ex. should be neatly wrapped rather than in a plastic bag

Break-Even Equation

Fixed Cost divided by (Price Minus the Variable Cost Per Unit) -The price minus the variable cost per unit is the contribution margin

How do you show how many units a firm must produce and sell to achieve a target profit? PROFIT ANALYSIS FORMULA

Fixed Costs plus Target Profit divided by Contributions Per Unit -Contributions per unit is price minus variable cost per unit

Measuring Success Using Marketing Metrics (4)

Frequency: the number of times people were exposed Reach: the number in target market that were exposed to my campaign Gross Rating Points: reach x frequency -measured use for various media advertising: print, radio, or television (any comparisons require a single medium) Web-Tracking: used to assess how much time viewers spend on particular web-pages and the number of pages they view. ex. Google Analytics

Advertising Plan- what does it later serve as?

Generally objectives appear in an advertising plan, a subsection of the firm's overall marketing plan that explicitly analyzes the marketing and advertising situation, identifies the objectives of the advertising campaign, clarifies a specific strategy for accomplishing those objectives, and indicates how the firm can determine whether the campaign was successful. -later serves as a yardstick to measure success or failure

The Personal Selling Process

Generate and Qualify Leads--> Preapproach--> Sales presentation and overcoming reservations--> Closing the sale-->Follow-up

Price Elasticity of Demand (2)- when are consumers less sensitive to price increases?

How changes in price affect the quantity of the product demanded. The percentage change in quantity demanded to the percentage change in price. -Elastic (price sensitive)- relatively small changed in price will generate relatively large changes in the quantity demanded. -Inelastic (price insensitive)- generally less sensitive for necessary items like food, medicine, etc. -Consumers are less sensitive to price increases for necessities.

Sales Promotion Trap

If promotion is embedded in your company, it's hard to get away from it. ex. Kohl's website screams savings- if they took that away they would lose customers.

Selecting the Right Method of Promotion- Consumers: what's the sequence of events?

If target audience is consumer: -Consumers- use a pull approach (primarily advertising and consumer sales promotion) ex. Pharmaceutical companies add "ask your physician" at the end of commercials- they want you to pull. Manufacturer promotes to consumer-->consumer demands product from retailer-->retailer demands product from wholesaler-->wholesaler demands products from manufacturer

Relevance

In the context of SEM, it is a metric used to determine how useful an ad is to the consumer. Google provides this using a quality score, which measures how relevant a key word is to an ad's text and a user's search query.

Dynamic Pricing- what's it also known as?

Individualized Pricing: The process of charging different prices for goods and services based on the type of customer, time of the day, week, or even season, and level of demand.

Advertising Objectives (3)- which did Your Pie use?

Inform, Persuade, and Remind -Your Pie campaign accomplished all 3. -This is a broad objective.

Elements of an Integrated Marketing Communication Strategy

Interactive and Offline: personal selling, sales promotions (ex. contests), direct marketing (ex. telemarketing) Interactive and Online: direct marketing (ex. mobile marketing), online marketing (ex. blogs, social media) Passive and Offline: advertising, sales promotions (ex. coupons), public relations, direct marketing (ex. catalogs) Passive and Online: direct marketing (ex. e-mail marketing)

Choosing the Right Medium- Internet

Internet: -advantages: can be linked to detailed content, highly flexible and interactive, allows for specific targeting -disadvantages: becoming cluttered, the ad may be blocked by software on the computer

From Lesson 2 of New Story: Participatory Design

Involve people in the decision process so you know what's valuable to them.

Step 1: Generate and Qualify Leads- what are sources of leads?

Leads: a list of potential customers Qualify: the process of assessing the potential of sales leads Sources of leads: current customers, trade shows, the internet, networking events -a lot of emphasis on generating leads for some companies (others emphasize maintaining relationships)

4th C: Competition- Four Levels of Competition

Less Price Competition and Many Firms: Monopolistic Competition- occurs when there are many firms that sell closely related but not homogeneous products; these may be viewed as substitutes but are not perfect substitutes. -MOST COMMON FORM OF COMPETITION -ex. wristwatches: made for fashion, sports, functionality, etc. More Price Competition and Many Firms: Pure Competition- occurs when many firms sell COMMODITY products that consumers perceive as substitutable; price usually set according to the laws of supply and demand. -secret to success in this market is to decommoditize your product. ex. Companies like Tyson have branded their chicken and moved into monopolistic competition. Less Price Competition and Less Firms: Monopoly- one firm provides the product or service in a particular industry, which results in less price competition. (ex. Power Companies) More Price Competition and Less Firms: Oligopoly- only a few firms dominate in a market, firms change their prices in reaction to competition to avoid upsetting an otherwise stable competitive environment. ex. the soft drink market and airlines

Choosing the Right Medium- Magazines

Magazines: -advantages: very targeted, subscribers pass along to others -disadvantages: relatively inflexible, takes some time for the magazine to be available

Trade Shows

Major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry.

Rule of Thumb Methods: Available Budget- limitations?

Marketers forecast their sales and expenses, excluding communication, during the budgeting period. The different between the forecast sales and expenses plus desired profit is reserved for the communication budget. That is, the comm. budget is the money available after operating costs and profits have been budgeted. -Limitations: assumes communication expenses do not stimulate sales and profit. ex. Bootstrap: used by Umano

Inbound Marketing

Marketing activities that draw the attention of customers through blogs, Twitter, LinkedIn, and other online sources, rather than using more traditional activities that require having to go out to get customers attention, such as making a sales call.

Mass and Niche Media- what are channels for each?

Mass Media: reach large, anonymous audience -channels include outdoor/billboards, newspapers, magazines, radio, and television Niche Media: reach a smaller more targeted audience (often with unique demographics or interests) -channels include specialty television channels and specialty magazines ex. AT&T was first to communicate Bi-Cultural Hispanics. "Between Two Worlds"- embracing their old culture and being embedded in American culture. Wouldn't have been effective had they used mass media.

Step 5: Evaluate and Select Media (3)

Media Planning: the process of evaluating and selecting the media mix that will deliver a clear, consistent, and compelling message to the intended audience. Media Mix: the combination of the media used and the frequency of advertising in each medium. Media Buy: the actual purchase of airtime or print pages (usually the largest expense in the advertising budget)

Choosing the Right Medium- Newspapers

Newspapers: -advantages: flexible, timely, able to localize -disadvantages: can be expensive in some markets, advertisements have short life span

Setting and Allocating the IMC Budget- two methods

Objective and Task Method: determines the budget required to undertake specific tasks to accomplish communication objectives; process entails setting objectives, choosing media, and determining costs -process must be repeated for each product and service. Sum of all budgets becomes the firms total marketing budget. Rule-of-Thumb Method: budgeting methods that base the IMC budget on either the firm's share of the market in relation to competition, a fixed percentage of forecasted sales, or what is left after other operating costs and forecasted sales have been budgeted.

Step 4: Closing the Sale

Obtaining a commitment from the customer to make a purchase. -getting sale is important but not the "end-all" -often most stressful part of sales process -a "no" one day may be the foundation for a "yes" another day

Step 2: Preapproach- what goal does it set? what system is used?

Occurs prior to meeting the customer for the first time and extends the qualification of leads procedure; in this step, the salesperson conducts additional research and develops plans for meeting with the customer (do you homework on leads.) -Extends the Qualification Procedure -Set goals for what is to be accomplished -Use CRM system

Vertical Price Fixing

Occurs when parties at different levels of the same marketing channel agree to control the prices passed on to consumers.

Price War

Occurs when two or more firms compete primarily by lowering their prices (usually in oligopolistic competition) -These tactics can lead to predatory pricing

Premium

Offers an item for free or at bargain price to reward some type of behavior, such as buying, sampling, or testing. ex. toys inside cereal box

Choosing the Right Medium- Outdoors

Outdoors: -advantages: relatively inexpensive, offers opportunities for repeat exposure -disadvantages: it not easily targeted, has placement problems in some markets, exposure time is very short

Event Sponsorship

Popular PR tool; occurs when corporations support various activities (financially or otherwise), usually in the cultural or sports and entertainment sectors ex. Red Bull sponsors sporting events

Step 7: Assess Impact Using Marketing Metrics

Pretesting (before): assessments performed before an ad campaign is implemented to ensure that the various elements are working in an integrated fashion and doing what they are intended to do. Tracking (during): monitoring key indicators, such as daily or weekly sales volume, while the advertisement is running to shed light on any problems with the message or medium. Post-testing (after): the evaluation of the campaigns impact after it has been implemented. Testing and measurement has taken front and center stage- making sure its doing what it's supposed to do- takes place throughout.

How Demand and Supply Establish Price- Price Equilibrium

Price Equilibrium: the price at which demand and supply are equal.

Institutional Advertising: Public Service Advertising

Public Service Advertising (PSA): focuses on public welfare (betterment of society), generally sponsored by nonprofits, civic groups, religious groups, political parties, etc. -under Federal Communication Commission rules, broadcasters must devote a specific amount of free airtime to PSA's. ex. Mastercard- "some things money can't buy, for everything else there's Mastercard." Only focused on MC- not different features of it.

PR Elements and Functions

Publications (Brochures, special-purpose single issue publications such as Books) -Function: inform various constituencies about the activities of the organization and highlight specific areas of expertise Video and Audio (programs, public service announcements) -Function: highlight the organization or support cause-related marketing efforts Annual Reports -Function: give required financial performance data and inform investors and others about the unique activities of the organization. Media Relations (press kits, news releases, speeches, event sponsorships) -Function: generate news coverage of the organizations activities or products/services Electronic Media (websites, e-mail campaigns) -Function: websites can contain all the previously mentioned toolbox elements, while e-mail directs PR efforts to specific target groups

Choosing the Right Medium- Radio

Radio: -advantages: relatively inexpensive, can be selectively targeted, wide reach. -disadvantages: no video, which limits presentation, consumers give less focused attention than TV, exposure periods are short

The Substitution Effect

Refers to consumers' ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand. The greater the availability of substitutes, the higher the elasticity.

The Income Effect

Refers to the change in the quantity of a product demanded by consumers due to a change in their income. As peoples income increases, they tend to buy higher-priced alternatives. When incomes drop, they turn to less expensive products or purchase less.

Issues for the Sales Person and the Customer (Ethical and Legal Issues)

Salespeople have an obligation to be ethically and legally correct in all dealings with their customers. -have you ever felt you were being treated unethically by a sales person? -is this person giving me full-disclosure?

Reference Price

Sellers who use a high/low strategy often communicate their strategy through the creative use of reference price, or the price against which buyers compare the actual selling price of the product and that facilitate their evaluation process. -labeled as the "regular" or "original" price -this increases perceptions of the value of the deal

Planning for and Measuring IMC Success

Set Goals: -understand the outcome they hope to achieve -Short-term or long-term -Should be explicitly defined and measured.

Sales Promotions

Special incentives or excitement building programs that encourage consumers to purchase a particular product or service -Natural link between advertising and sales promotion -Can be targeted at either end user consumers or channel members. -Can be used in either push or pull strategies.

Dan Ariely- "Fallacy of Supply and Demand"

Starbucks changed the game on what we expect to pay for coffee. Coffee was originally available for $1- Starbucks changed those perceptions. -The initial decision of choosing the store turns into habit. -The demand curve shifted (changed shape)- prompted by something irrational

Deceptive Or Illegal Price Advertising- Loss Leading Pricing

Takes the tactic of leader pricing one step further and lowers the price below the stores cost. ex. BOGO

Choosing the Right Medium- Television

Television: -advantages: wide reach, incorporates sound and video -disadvantages: high cost, a lot of channel and program options, may increase awareness of competitors product

Selecting the Right Method of Promotion- Channel Members: what's the sequence of events?

The Trade: use a push approach (primarily personal selling and trade sales promotion). -Personal Selling is most expensive form in comm.- companies invest in sales force. ex. Physicians can push product on consumers- if pharmaceutical companies pay them to. Manufacturer promotes to wholesaler-->Wholesalers promotes to retailer-->Retailer promotes to consumer-->Consumer buys from retailer

Rule of Thumb Methods: Percentage of Sales- limitations?

The communication budget is a fixed percentage of forecasted sales. The logic is REVERSE LOGIC. -Limitations: assumes the same percentage used in the past, or by competitors, is still appropriate for the firm. Does not take into account new plans (e.g. to introduce a new line of products in the current year). -You only allocate x percentage- reverse logic: if you increase money spent on advertising you will later see an increase in sales.

Issues for the Sales Force and Corporate Policy (Ethical and Legal Issues)

The firm may have a policy to sell goods or services to people who cannot afford them or to people who should not have them. -sometimes salespeople face a conflict between what they believe is ethical and what their company asks them to do -selling products that aren't good for you to a vulnerable population

Desire

The goal of IMC messages is to move the consumer from "I like it" to "I want it."

The Appeal (2)

The message is executed in the form of an appeal. Companies try to draw us in through emotion. ex. Starbucks commercial- didn't even show Starbucks until the end- still built equity. Forms of Appeal: -Informational Appeal: used in promotion to help consumers make purchase decisions by offering factual information and strong arguments built around relevant issues that encourage them to evaluate the brand favorably on the basis of the key benefits it provides -Emotional Appeal: aims to satisfy consumers emotional desires rather than their utilitarian needs. Key to success is to create a bond between the consumer and the brand.

Cross-Price Elasticity- Complementary and Substitute Products

The percentage change in demand that occurs for product A in response to a percentage change in price of product B. -Complementary Products: products whose demand curves are positively related, such that they rise or fall together. -Substitute Products: products which changes in demand are negatively related

Price Fixing

The practice of colluding with other firms to control prices. Horizontal price fixing is illegal under Sherman Act, but vertical price fixing falls into a gray area.

Price Discrimination- who usually receives lower prices? what is web-lining?

The practice of selling the same product to different re-sellers (wholesalers, distributors, or retailers) or to the consumer for different prices; some, but not all, forms of price discrimination are illegal -usually larger firms receive lower prices -quantity discounts are legal (when you sell more it costs less so you charge less)- must be an option for everyone though Web-Lining: look at what we google/search which makes price points differ.

Manufacturer Suggested Retail Price (MRSP)

The price that manufacturers suggest retailers use to sell their merchandise. -Supreme Court ruled that this would be decided on a case by case basis

1st C: Company Objectives (4)

The pricing of a company's products/services should follow and support their overall goals. Profit-Oriented -target profit pricing -profit maximization -target return pricing Sales-Oriented -market share -sales maximization Competitor-Oriented -competitive parity -status quo Customer-Oriented -match price to customer expectations -prices are based on perception of value THESE ARE NOT MUTUALLY EXCLUSIVE

Personal Selling

The two-way flow of communication between a buyer or buyers and a seller, designed to influence the buyer's purchase decision.

Step 3: Determining the Advertising Budget- considerations (3)

The various budgeting methods for marketing communications also apply to budgeting for advertising. Considerations: -Firms must consider role that advertising plays in their attempt to meet their overall promotional objectives -Advertising expenditures vary over the course of the Product Life Cycle -The nature of the market and the product influence the size of the budget

Demand Curves-are they all downward sloping?

They're not all downward sloping. -Prestigious Products or Services: have upward sloping curves (demand increases as price increases and decreases as price decreases) -Consumers purchase these for status rather than functionality. The higher the price, the greater the status associated with it.

T/F: Consumers are generally more sensitive to prices increases than price decreases.

True

T/F: Proliferation of media has caused firms to shift their promotional dollars from advertising to direct marketing, website development, product placements, and other forms of promotions in search of the best way to deliver messages to their target audiences.

True

The Message - USP

Unique Selling Proposition (USP): "the power idea" or the VALUE PROPOSITION -many times captured in the form of a slogan. ex. It Gives You Wings, Just Do It, Like a Good Neighbor State Farm Is There -must not only be UNIQUE to the brand but MEANINGFUL to the consumer

Social Shopping

Using the internet to communicate about product preferences with other shoppers.

The 5 C's of Pricing

Value: 1. Company Objectives 2. Customers 3. Competition 4. Costs 5. Channel Members

How Supply and Demand Establish Price- Restaurants Letting People Decide How Much Food is Worth

What make it successful when you incorporate this element? -Suggested prices: 60% pay the actual price, and 20% actually pay more, which covers the people who don't pay. -DON'T use the word "free"

Predatory Pricing- what acts make this illegal? what market does it tend to promote? what made predatory pricing arise?

When a firm sets a very low price on one of its products with the intent to drive its competition out of business. Illegal under Sherman Antitrust Act and Federal Trade Commission Act (difficult to prove)- must prove intent and that the firm charged prices lower than its average cost -Tends to promote oligopolies. -Google dominance in search engine market made predatory pricing arise

New Product Pricing Strategies- when will price skimming work?

When a new product is innovative, two distinct new product pricing strategies are: -Market Penetration Pricing: a growth strategy that employs the existing marketing mix and focuses the firms efforts on existing customers; they set the initial price low for the intro of the product/service. Going after SHARE of market. -Price Skimming: a strategy of selling a new product or service at a high price that innovators and early adapters are willing to pay in order to obtain it; after this segment is saturated, the firm generally lowers the price to capture (or skim) the next most price-sensitive segment. -FOR THIS TO WORK: the product must be perceived as ground breaking

Plug Deluxe

When a star uses and enjoys the product in a show.

Horizontal Price Fixing

When competitors that produce and sell competing products or services collude, or work together, to control prices, effectively taking price out of the decision process for consumers. -this reduces competition and is illegal

2nd C: Customers

When firms have developed their company objectives, they turn to understanding consumers reactions to different prices. -Demand is downward sloping (it increases as price decreases)

Using Sales Promotion Tools- Cross Promoting: what is the intent?

When two or more firms join to reach a specific target market. -"tie-ins" -intent is to build equity of both brands

Step 1: Identify Target Audience- what question should you ask? what 3 things should you do?

Who is our target market? Everything else follows this question. ex. Target is trying to better connect with Hispanic consumers. Conduct Research (to identify target audience) Use the information to set the tone (for the advertising program) Select the media (they will use to deliver the message)

Your Pie during Pie Day- marketing metrics

Your Pie didn't look at margin as a way to measure success. -more interested in long-term impact (30-60-90 days)