MKT 300 Exam 3
Goals and Tasks of Promotion
informing, reminding, persuading
Product Factors
internal, controllable
Conversion Rate
# of future purchases by new customers (post promotion) **most important
What is the selling price? Cost = $200 Markup = 50%
$400
E =
% change in Qd / % change in P
Acquisition Rate
% of purchases by non-regular buyers
Displacement Rate
% of those who would buy anyway
Redemption Rate
% responding to incentive
Media Selection Considerations
- Cost per Contact & CPM ( (advertising costs / # of ppl seeing ad) * 1000) - audience selectivity - reach and frequency
Step 5: Select a Pricing Strategy
-EDLP -Reference pricing -portfolio pricing -bundle pricing -multiple units pricing -odd even pricing -captive product pricing -single price -bait pricing -leader pricing
Marginal Analysis
-INCREASE spending if increased cost is LESS than incremental (marginal) return -DECREASE spending if cost is MORE than return -hold if at optimal point
Step 4: Select a Basis for Pricing
-cost plus pricing (markups, margin, break even point) -demand based pricing -competition based pricing -new product (penetration pricing, price skimming)
Step 1: Develop Pricing Objectives
-maximize price per product -status quo -market share
Trends in Retailing
-omnichannel -mobile wallet -in store pickup -data to predict shopping behavior -convenience -personalized in store experiences
Product Ad
-pioneering: stimulate demand (growth) -competitive: influence demand through emotional appeal (growth) -comparative: compares two or more competing brands/ attributes
Promotional Mix
1) advertising 2) personal selling 3) sales promotion 4) public relations 5) direct marketing 6) events/ experience
Sales Promotion Dilemna
1) lose market share (our firm cutbacks) 2) same market share, profits stay low (all firms maintain promotions) 3) higher profits for everyone (all firms cutback) 4) our firm gains market share (other firms cutback)
Channel Choice Factors
1) market 2) product 3) producer
Stages for Establishing Prices
1. Development of pricing objectives 2. Assessment of target market's evaluation of price 3. Evaluation of competitors' prices 4. Selection of a basis for pricing 5. Selection of a pricing strategy 6. Determination of a specific price
BEP in units SP = $30 Cost = $20 Total Fixed Costs = $20,000
20,000 / 30 - 20 = 2,000 units
What is the SP? Cost = $100 Markup = 75%
3/4 of the selling price is markup, 1/4 is cost $400
What's the markup percentage on the selling price? Selling Price = $1000 Cost = $700
30% Because the difference is $300, so 70% is cost, so 30% is markup
What is the markup? Selling Price = $100 Cost = $35
65% Difference is $65. 65/100 is 65%
What's the markup percentage on the selling price? Selling Price = $200 Cost = $50
75% Because the difference is $150 (the markup is $150). $150/$200 is 75%
Response S- Shaped Function
A: initial spending B: high effect C: high spending, little effect
AIDA Concept
Attention, Interest, Desire, Action -advertising impacts attitudes (reason) -sales promotion impacts behavior (incentive)
CRM
recency, frequency, monetary determines the best customer
BEP in dollars
BEP units * selling price
Evaluating Media
Clutter, Impact, Efficiency, Engagement
Portfolio Pricing
Different levels of price points across a product category where consumers are willing to pay more for extras
Bait Pricing
Illegal practice of advertising unrealistically low prices to bring customers into the store
Direct Marketing
NOT face to face
Bundle Pricing
Packaging together two or more complementary products and selling them at a single price
What is the markup? SP = $1800 Cost = $600
The difference is $1200. 1200/1800 = 66.7% Cost is 1/3, so markup is 2/3
Guerilla Marketing
Unconventional, innovative, and low-cost marketing techniques designed to get consumers' attention in unusual ways.
#1 Thing to Remember from MKT 300
You stay classy, Sun Devils
Public Relations
a broad set of communication efforts used to create and maintain favorable relationships between an organization and its stakeholders ex: seminars, publications s= build brand image w= firm cannot control this
Unique Selling Proposition
a desirable, exclusive, and believable ad appeal selected as a theme for a campaign
Advertising Campaign
a series of related ads focusing on a common theme, slogan, or set of appeals
Cost Plus Pricing
adding a specified dollar amount to the seller's costs
Margin
adding to the price a predetermined percent of the TOTAL PRICE
Markup
adding to the price of the product a predetermined percent of the VARIABLE COST
Market Share
adjust price levels in order to increase sales relative to competitors' sales
Attributes vs. Benefits
attribute: a characteristic of the product. benefit: what's in it for me? customers buy benefits, not attributes.
Retailing
all the activities involved in selling goods directly to the final consumer for use
Sales Promotion
an activity that acts as a direct inducement, offering added value or incentive s= quick implementation, moves seasonal items w= not good for luxuries
Arbitrary Allocation Method
budget is determined by management solely on the basis of what is felt to be necessary
Captive Product Pricing
buy the core product, and you have to buy the corresponding captive products ex: razor and blade
Price Skimming (New Product)
charging the highest price possible that buyers who desire it will pay inelastic, no substitutes Premium: high price, high quality Overcharging: high price, low quality
4 C's
customer value (80/20 Rule), cost, convenience, and communication
Single Price
customers all pay the same price ex: dollar store
Demand Based Pricing (Flexible or Variable)
customers pay a higher price when demand is strong ex: happy hour, senior discounts
External Factors of Price
demand, competition, and economy
Odd Even Pricing
ending the price with certain numbers to influence buyer perception
Institutional Ad
enhances a company's image rather than a particular product
Unitary Elastic
equal to one an increase in sales exactly offsets a decrease in prices, and revenue is unchanged
Intensive Distribution
everywhere, uses all available outlets, convenience
Lifestyle Executional Style
exclusive
Market Factors
external, uncontrollable
Direct Retailing
face to face
Push (B2B)
geared towards others in the distributions channel
Events/ Experiences
get to know the brand/ each other1
Elastic
greater than 1 consumers buy more or less of a product when the price changes
Persuading
growth and maturity
Modes of Transportation
highest -> lowest cost: air vs water time: water vs air reliability: pipe vs water
Word of Mouth
highest credibility, lowest source control
Status Quo
identify price levels similar to competitor augmented prices
Atmospherics
image, safety, temperature, parking, senses, spacing, and crowding (positive or negative)
Informing
introduction and early growth
Inelastic
less than 1 an increase or decrease in a price will not significantly affect demand
Internal Factors of Price
marketing objectives (profit, market share, quality), marketing mix strategy, costs
Selling Price =
markup + cost
What is the cost? SP = $300 Markup = 33.3%
markup is 1/3 of the SP, so cost must be 2/3 $200
Reminding
maturity
Slice of Life Executional Style
meant for everyone
Experiential Marketing
melding of brands and experiences
Pulsing Media Scheduling
never zero but random
Measuring Tv Audiences
o Program ratings ▪ % of homes in an area watching a show ▪ "Rating Point"= 1% of a TV HH ● Program Rating = [HH tuned to show/Total US HH] o Share of audience ▪ % of HUT tuned into a show ● Share of Audience = [HH tuned to show/US HH using TV]
Advertising
paid, non personal communication about an organization and its products transmitted to a target audience through mass media highest source control, lowest crediability s= repeatable, cost efficient per person w= high total cots, slow feedback
Personal Selling
paid, personal communication that attempts to inform customers and persuade them to buy products in an exchange situation middle ground of source control and credibility s= influential, immediate feedback w= time intensive, high cost per person
Puffery
people can tolerate a degree of lying
Retailing Mix
price, promotion, merchandise (product), location (place), atmosphere (physical evidence), & customer service
Penetration Pricing
prices below those of competitors to penetrate a market and gain a market share quickly Good Value: low price, high quality Economic: low price, low quality
Reference Pricing
pricing a product at a moderate level and displaying it next to a more expensive model or brand
7 P's
product, price, place, promotion, people, physical evidence, process
(Loss) Leader Pricing
products priced below the usual markup, near cost or below cost
Pull (B2C)
promoting to consumers
Trade Sales Promotion
push strategies -trade allowances -sales contests -training Most Expensive
Consumer Sales Promotion
rebates, loyalty programs, sweepstakes, premiums
Producer Factors
resources, number of product lines, desire for channel control
Service Recovery
restoring customer satisfaction to strongly dissatisfied customers
Flighted Media Scheduling
run heavily every so often
Continuous Media Scheduling
running steadily
Direct Marketing (Promotional Mix Elements)
s= consumers request these w= privacy can be invaded
Attribution Theory
satisfaction levels are measure in terms of stability, focus, and controllability
Percentage of Sales Method
set amount per unit
Competitive Parity Method
sets the promotion budget to match competitors' outlays
Selective Distribution
shopping goods
Power of We
social norms, receive and reciprocate
Exclusive Distribution
speciality goods
Price Elasticity
tells us how much the demand for a product will change in price
Branded Entertainment
the integration of brands into entertainment media
Marketing Communication Process
the way in which a sender ENCODES a marketing idea and conveys it through message and medium so receivers can DECODE and understand it, and then respond with FEEDBACK
Objective and Task Method
thought provoking
Break Even Quantity
total fixed costs / (selling price - variable cost)
Multiple Unit Pricing
two or more identical products and selling them at a single price
Stealth Marketing
undercover/ sponsorships
Scientific Executional Style
using 3rd party data
Break Even Point
where a company produces the same amount of revenues as expenses