Mktg 300 FINAL
13. What is demand elasticity? Explain and justify how you should change price in order to generate more revenue when demand is elastic/inelastic.
Elasticity of demand refers to the degree of the change in demand when there is a change in another economic factor, such as price or income. If demand for a good or service remains unchanged even when the price changes, demand is said to be inelastic ** visual on page 6 of class summation If E is greater than 1, demand is elastic. If E is less than 1, demand is inelastic. If E is equal to 1, demand is unitary.
16. Understand prospect theory
Major features of prospect theory ● Reference level dependence: An individual views consequences (monetary or other) in terms of changes from the reference level, which is usually that individual's status quo. ● Gain and loss satiation: The values of the outcomes for both positive and negative consequences of the choice have the diminishing returns characteristic. ● Loss aversion: The resulting value function is steeper for losses than for gains; losing $100 produces more pain than gaining $100 produces pleasure. --- EX: gambling with profits than with losses. The prospect theory is part of behavioral economics, suggesting investors chose perceived gains because losses cause a greater emotional impact.
15. Use one example to illustrate the prisoner's dilemma (PD). How can players avoid the PD?
Prisoner's Dilemma - a game where pursuing dominate strategies result in being non-cooperative leaves all players worse off. Cheating is each firm's dominant strategy, but the result when both "cheat" is worse for each than that of both cooperating. ---- WAYS TO GET OUT OF PRISONER'S DILEMMA: * Make credible commitment beforehand. Change payoff to a less desirable outcome E if not cooperate. * Play the game many times and establish trust. Move from one-shot game to repeated game. * A price-match guarantee also helps. Sears and Staples offer such a guarantee. ----- EX : Consider two firms, say Coca-Cola and Pepsi, selling similar products. Each must decide on a pricing strategy. They best exploit their joint market power when both charge a high price; each makes a profit of ten million dollars per month. If one sets a competitive low price, it wins a lot of customers away from the rival. Suppose its profit rises to twelve million dollars, and that of the rival falls to seven million. If both set low prices, the profit of each is nine million dollars. Here, the low-price strategy is akin to the prisoner's confession, and the high-price akin to keeping silent. Call the former cheating, and the latter cooperation. Then cheating is each firm's dominant strategy, but the result when both "cheat" is worse for each than that of both cooperating. EX : American Airlines and Air Canada keeping or cutting prices. ** see visual in summation pdf
12. Compare and contrast relationship selling and traditional personal selling.
TRADITIONAL PERSONAL SELLING : ● Sell products ● Focus on closing sales ● Limited sales planning ● Discuss product ● Assess "product-specific" needs VS RELATIONSHIP SELLING : ● Focus on customers bottom line ● Pricing/product focus ● Build problem solving environment ● Conduct discovery in scope of operations ● Team approach ● Profit impact and strategic benefit focus ● Long-term sales follow-up
1. Understand the four marketing management philosophies covered in class.
The 4 marketing management philosophies are: 1) Product Orientation 2) Sales Orientation 3) Market Orientation 4) Societal Orientation ---- 1) Product Orientation : Focused on products/technology; often driven by tehnology than specific observed customer needs. EX- Google/Intel 2) Sales Orientation : Focus on selling current products; slow adaptation to changing customer needs; emphasis on selling job. EX- car sales job/car dealers 3) Market orientation : Focus on developing customer needs. Efforts to find solutions to customer problems even if it requires new products or tech. Emphasis on differentiation from competitors. EX- Netflix/American Express 4) Social orientation : Emphasis on social responsibility even if it requires sacrifice of profits. EX- Duracell/Ben & Jerry's
_____ is any form of sponsor-identified, impersonal paid mass communication. a. Advertising b. Publicity c. Promotion d. Public relations e. Nonpaid communication
a) ADVERTISING
The Canadian lobster harvest requires special handling coupled with rapid transportation to ensure the cargo reaches destinations alive. The favored transportation mode would be: a. air b. water c. truck d. pipeline e. rail
a) AIR
A consumer who consistently and repeatedly purchases the same brand is said to have: a. brand loyalty b. product equity c. product loyalty d. product repetition e. store loyalty
a) BRAND LOYALTY
McDonald's used expertise developed in Brazil's inflationary environment to deal with the economic environment in Russia when it exhibited similar inflationary tendencies. This experience would have most strongly influenced McDonald's _____ strategy. a. Pricing b. Promotion c. Distribution d. product adaptation e. product invention
a) PRICING
_____ advertising is designed to enhance a company's image rather than promote a particular product. a. Publicity b. Institutional c. Pioneering d. Selective e. Image
b) INSTITUTIONAL
The _____ is the starting point in creating a marketing mix. a. price b. product c. distribution channel d. promotional media e. production line
b) PRODUCT
There are a number of detergents marketed under the Tide brand including detergent with and without fabric softener, with and without bleach, with various pleasing smells, and fragrance-free. The large variety of detergents marketed under the Tide brand is an example of a: a. marketing mix b. product line c. product mix d. product equity e. mix consistency
b) PRODUCT LINE
A company using market share pricing has a _____ pricing objective. a. profit-oriented b. sales-oriented c. demand-oriented d. supply-oriented e. status quo
b) SALES-ORIENTED
A penetration pricing strategy tends to be most effective: a. when demand is relatively inelastic b. under unitary conditions c. in price-sensitive markets d. when the company can only perform small production runs e. if unit costs are high
c) IN PRICE-SENSITIVE MARKETS
At Wal-Mart, Randi saw a bag of daffodil flower bulbs and a box of plant fertilizer. The items, which were sold together, retailed at $28.50, but were marked down to $19.99. The retailer sold one at the $28.50 price, and five at $19.99 each. The retailer's revenue from selling six bundles is: a. $19.99 b. $28.50 c. $99.95 d. $128.45 e. cannot be calculated with the information provided
d) $128.45 1. $28.50 + 5($19.99) = 2. $28.50 + $99.95 = 3. $128.45 REVENUE
According to the text, one way supermarkets establish long-term relationships with their customers is to: a. conduct longitudinal focus-group studies b. avoid any obviously ethnic appeal c. limit the number of nonfood items carried by the stores d. create and use loyalty marketing programs e. create customer correlation studies
d) CREATE AND USE LOYALTY MARKETING PROGRAMS
Which of the following is the LEAST likely source for new-product ideas? a. a company's distributors b. its customers c. its employees d. its financial lenders e. its competitors
d) ITS FINANCIAL LENDERS
_____ is direct communication between a sales representative and one or more prospective buyers for the purpose of making a sale. a. Trade promotion b. Sales promotion c. Public relations d. Personal selling e. Direct marketing
d) PERSONAL SELLING
_____ sales promotions are targeted toward the ultimate end-user market. a. Facilitating b. Intermediary c. Pull d. Consumer e. Trade
e) CONSUMER
Marketers use public relations to: a. earn public understanding and acceptance b. communicate with the community in which they operate c. educate the public about company goals d. introduce new products e. do all of these things
e) DO ALL OF THESE THINGS
_____ is the first filter in the new-product development process. It serves to eliminate new-product ideas that are inconsistent with the organization's new-product strategy or are obviously inappropriate for some other reason. a. Applied diffusion b. Introductory diffusion c. Business analysis d. Test marketing e. Idea screening
e) IDEA SCREENING
Small neighborhood florists, shoe stores, and ethnic food markets are most likely to be: a. supercenters b. franchise outlets c. membership clubs d. chain stores e. independent retailers
e) INDEPENDENT RETAILERS
Toothpaste is sold in grocery stores, service stations, convenience stores, drugstores, discount stores, and motel vending machines. This is an example of a(n) _____ distribution strategy. a. exclusive b. reciprocal c. selective d. horizontal e. intensive
e) INTENSIVE
_____ advertising is used to stimulate demand for a new product or product category and is heavily utilized during the introductory stage of the product life cycle.. a. Comparative b. Innovative c. Focused d. Image e. Pioneering
e) PIONEERING
11. Understand the EOQ model. Know the EOQ formula.
see visual from study guide** EOQ Model Economic Order Quantity, also known as Economic Purchase Quantity, is the order quantity that minimizes the total holding costs and ordering costs in inventory management. It is one of the oldest classical production scheduling models. Economic Order Quantity Formula EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.
2. What is a competitive advantage? What makes a competitive advantage sustainable?
● Competitive advantage is a condition or circumstance that puts a company in a favorable or superior business position. 3 types are cost, different product / service, and niche strategies. ● It is sustainable because it is long term and not easily duplicated or surpassable by competitors
6. What is individual branding? What is umbrella branding? Are there any benefits/risks with each branding strategy?
● Individual branding is using different brand names for different products. ● Pros: It reduces the influences of a corporate identity. ● Cons: It may cause the home company to become unstable. ● Umbrella: Marketing multiple products under the same brand name. ● Pros: Easier to manage ● Cons: No diversification
7. There are five categories of adopters that participate in the diffusion process. Name and briefly describe each of these five categories in the correct order from earliest adopter to last adopter.
● Innovators; First to buy product and run the risk of it not working, rather than missing the chance to try something new. ● Early adopters: Opinion leaders. Will only buy the product when it has been approved. ● Early Majority: More cautious of new products than early adopters. Will follow example of early adopters if exposed to enough info. ● Late Majority: More skeptical of new products and buy based on word of mouth. ● Laggards: reluctant to buy new products. Will buy new products when it is out of stock/discontinued.
8. List the four stages of the product life cycle. List two typical characteristics for each stage.
● Introduction: It is slow while demand is created. Can fail very early on ● Growth: see growing demand promote an increase in production and the product becoming more widely available. Competitors may enter the market with their own versions of your product - either direct copies or with some improvements. ● Maturity: The product is established and it is harder to sell this item when everyone already has it. It has reached market saturation. ● Decline: as competition continues to rise, with other companies seeking to emulate your success with additional product features or lower prices, so the life cycle will go into decline.
10. What is JIT? List three benefits associated with the use of JIT. Are there any disadvantages associated with JIT?
● JIT is a process that redefines and simplifies manufacturing by reducing inventory and delivering raw material levels just when they are needed on the production line. Inventory is waste. ● Advantages: Requires less space, reduces waste, and requires a smaller investment ● Disadvantages: Vulnerable to supply stocks and there are price shocks.
5. What is planned obsolescence? Name several product categories where this strategy is likely to be adopted
● Planned obsolescence is the practice of modifying products so those that have already been sold become obsolete before needing replacement. ● Software updates and prevention of repair
3. What is positioning? What is repositioning? Why is repositioning difficult?
● Positioning is altering the position of a brand or product in the minds of the customer relative to the offerings of the competitive product. ● Repositioning is a very subtle and difficult process as the brand needs to change the target market's understanding of the product. ● Repositioning is difficult because you must first help the customer "unlearn" the current brand positioning
14. What is price skimming? What is penetration pricing? Describe situations where price skimming/penetration pricing is likely to be successful.
● Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time. ● A firm charges a high introductory price, often coupled with heavy promotion. ● Situations include inelastic demand, unique advantages/ superior, legal protection of product, technological breakthrough, blocked entry to competitors. ---- ● Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. The lower price helps a new product or service penetrate the market and attract customers away from competitors. Market penetration pricing relies on the strategy of using low prices initially to make a wide number of customers aware of a new product. ● A firm charges a relatively low price for a product initially as a way to reach the mass market. ● EX : chocolate bars, food stuffs, household goods, etc.
4. Understand how consumers use a multi-attribute model to compare options in their consideration set.
● Steps in order: Problem recognition, info search, evaluation of alternative, purchase, and post purchase evaluation. ● Multi attribute models based on beliefs, attributes, and importance weights ● Strategies based on change of existing beliefs and add new beliefs.
9. What is a two-sided market? List several examples of two-sided markets.
● Two sided market is an economic network having two distinct user groups that provide each other with network benefits. EX: Ebay/ Craigslist / Uber
