Second half of Intro to Marketing

First Degree Price Discrimination

"Complete price discrimination"Firm segments the market at the level of the individual consumer and charges each consumer his/her reservation priceAlso known as "Perfect Price discrimination" or "Optimal Pricing"Consumer surplus = 0Close exampleNegotiation pricing—U.S. car dealers get close

Third Degree Price Discrimination

"Direct" price discriminationPre-identified customer segments are charged different prices because of different WTP within the segmentSegments such asStudent discountsSenior Citizen discounts

Second Degree Price Discrimination

"Indirect" price discrimination Companies cannot identify different WTP amongst different types of consumers, but allow consumers to select into different pricing schemesQuantity discountsCouponsEarly bird discountsSaturday night staysPrice skimming

Promotion: Ocean Spray

"More food energy than orange or tomato juice." how would you describe the benefits of ocean spray? - Falsely Implied: -More nutrients than orange or tomato juice ...but food energy technically means calories

Example of Captive-Product Pricing

- Low costs of razor - High costs of additional razor blades Free Dell Printer for everyone!

New Product Pricing: Market Skimming (High initial prices)

-- Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and lowers it over time. As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, more price-sensitive segment. -product mix pricing -entertainment/media --> new book or movie -completely new product (gaging prices) When? -steeper demand curve 00> capture high willingness to pay people -products quality and image support its higher price -competitors shouldn't be able to enter market easily and undercut the high price

- Direct vs. Indirect Distribution -

-Benefits of Direct Channels: More manufacturer control about how the product is priced/sold Closer customer contact Eliminate double margins -Benefits of Indirect Channels: More rapid penetration and broader coverage -Benefit of specialization Greater efficiency in making goods available to target markets Multichannel Distribution Systems: Address consumer heterogeneity Address product heterogeneity Reduce power of any single channel

What Makes a "Best" Brand

-Brand Valuations -Estimation of the total financial value of the brand -Brand Tracking -Monitoring the health of a brand -Brand Audits -Brand inventory -Profile of the current branding and marketing elements -Competitive Brands -Exploratory research -Research about what consumers think and feel about the brand

Consumer Information

-Consumer information about different price options reduces the ability to discriminate -The internet -Increases consumer communication -Makes coupon use less costly -Retailmenot.com -Provides knowledge of a sellers' costs -Kbb.com (Kelley blue book) How businesses respond -Adding additional features or services, bundling -Makes direct comparisons difficult -Offer discounts through different channels -Branding

Contribution Analysis

-Contribution per Unit ($) = Selling Price - Variable Cost -Contribution Margin = Contribution per Unit / Selling Price -Break Even Volume = Fixed Costs($) / Contribution per Unit ($) -Break Even Revenue = Fixed Costs ($) / Contribution Margin % -Example : Break Even on Incremental Investment -Paper Supply Company with annual sales of $10 million and a Contribution margin of 30%. Rent is $500,000 and a salesperson costs $50,000 in salary and benefits. -Break-even Revenue on new salesperson? -New Fixed Investment / Contribution Margin % = $50,000/30% = $166,667 -Related Concept -Payback Period = period of time required to recoup initial investment

Strategic Pricing Approaches

-Cost- based- Just as it sounds, cost-based pricing identifies the overall fixed, variable, and indirect costs of production and prices that product accordingly. -Profit- based- Profit maximization analysis is the process by which a firm determines the price and output level that returns the greatest profit. -Demand- based- demand-based pricing is any pricing method that uses consumer demand - based on perceived value - as the central element.

Search Engine Optimization

-Details are top secret! -How you get on the list -A web crawler finds the page -E.g., Googlebot -The page is indexed -All of the meaningful page text is stored -The query processor searches for keywords in the text, yields a list of relevant terms -Google considers over 100 factors in its page rank algorithm -Factors that help get you to the top of the organic list -Make your website relevant to consumers -Make your website easy to navigate -Use unique and accurate page titles - Make use of the description "meta-tag" -Make the URL's meaningful -Use, www.marketing370.edu/Lecture1.htm -Not, www.marketing370.edu/aocc830file015.htm

Retailers: EDLP and HiLo

-EDLP- everyday low pricing (amazon, urban outfitters) -High-Low Pricing- big sales one in a while- Abercrombie and Fitch

Costs: Definitions

-Fixed CostsCosts that don't vary with sales or production levels.Executive Salaries, Rent -Variable CostsCosts that do varydirectly with the level of production.Raw materials -Total CostsSum of the Fixed and Variable Costs for a Given Level of Production

Search Engine Marketing

-Google "Adwords" -Priced via second-price auction -Billions of auctions run every week •Varian, 2006 -Google's main source of revenue* ->$27 billion in 2010 ->$95 billion in 2017

Channel Conflicts within systems Types of conflicts: can occur in any system

-Horizontal Conflicts occur among firms at the same level of the channel, e.g., Two car dealers. → work on commission, if one has gigantic sale, creates conflict for others -Vertical Conflicts occur between different levels of the same channel, e.g., Franchisee and Franchisor.--> franchises not following all of the same rules → franchisers are mad Question: what type of horizontal and/or vertical channel conflicts may occur in one of the following industries: -Personal computer industry, apple store @ galleria vs online → horizontal channel effect -Music industry, legal agreement → agency + artist → vertical channel conflict -Clothing industry. → black friday → pricing expectations → quality issues

Basic Pricing - Very Basic

-In many small firms, prices are often set using approximate methods -Tradition -Rules of Thumb -Trial and Error -Gut Feel

Price DiscriminationIs it legal?

-In most cases -Exceptions -Civil Rights violations -Cases that restrict competition

Distribution Channel Members

-Independent organizations involved in making a product available for use or consumption -Manufacturers → intermediaries → customer -Why are intermediaries used? -Bulk Breaking: manufacturers make large quantities of product, intermediaries take the product and break it into smaller form for consumers to use -Grading: quality grade, eggs; we only see highest grade of eggs, diamonds -Assorting: produce very large quantities of one type of product, consumers want a wide variety; intermediary puts products into assortment -Selling: consumers must contact with retailers who provide consumers with goods they want to provide -Intermediaries used in marketing distribution channel

Advertising Message Strategies

-Informational -How can your product meet consumers' needs? -Highly cognitive message Pet Airways -Transformational -How can your product transform consumers lives or identity? -Emotional or experiential message Nike Apple

Wrap up:

-Intermediaries allow manufacturers and retailers to specialize -To be useful, they must add value -Some companies use multiple types of channels -"Multichannel Distribution Systems" -Different channels target different customer segments -Conflicts can occur at all different levels of the channel

Marketing Metrics Market Share

-Market Share: -Unit unit market share: unit sales (#)/total market unit sales (#) Revenue: revenue market share: sales revenue ($)/total market revenue ($) Purpose: indicator of product or brand market competitivenessComplicationsMarket definitions require assumptions

Brand Sponsorship options

-National Brand (e.g., Kellogg's) -Nationally distributed brand that carries name of distributor or producer -Private Brand (e.g., Schnuck's) -Brand that carries name of retailer -Growing in popularity -55% of consumers now identify as frequent buyers of store brands† -Up from 12% early 1990's -Wal-Mart's private brands account for 40% of sales -Licensed Brand -Pay a fee to use names or symbols (intangible asset) of other manufacturers or people -McDonalds play food -Co-brand -Nike Ipod Sport Kit

Why Intermediaries Are Used

-Offers the firm more than it can achieve on its own through intermediaries: Number of contacts Makes purchasing and transactions more efficient -Efficiency in making goods available to target markets Firm offers limited variety of goods in large quantities, consumers want great variety of goods in small quantities Allow firms to focus on their core competencies, rely on specialization of Target and Amazon to sell it Reduce financial risk and investments by relying on other channel members -Frequent purpose: match supply from producers to demand from customers -Must add value; why would they not use intermediaries? Expensive If manufacturer can fulfill function themselves, they can keep more of the margin Intermediary = middleman

Price Discrimination

-Price discrimination exists when the same product is sold for different prices, that are not attributable to differences in the cost -Conditions: -The market must be divisible into sub-markets -Demand conditions must be different in the sub-markets

Product-Mix Pricing

-Product line pricing price steps between products in same product line (entry, mid-priced, signature/flagship product, premium product) -Optional-product pricing optional products along with basic product -Product bundle pricing several products combined -Captive-product pricing products that must be used along with another product examples...

Pricing in different types of markets

-Pure competition: Many buyers and sellers trading a uniform commodity at uniform prices -No single buyer or seller has much influence on the market price -Examples: corn, salt, gold -Monopolistic Competition:Many buyers and sellers trading over a range of prices -Prices are different because sellers can differentiate -Examples: wine, pizza, detergent -Oligopolistic competition: Few sellers, all very sensitive to each others prices -Example: cell phone plans -Pure monopoly: One seller -Private example: Standard Oil, broken up 1911 -Public example: USPS

Profit-Based: Target ROI

-ROI = Return On Investment -(ROMI = Return on Marketing Investment) -Pros and Cons? Pros: easy to see where goes wrong (simple) Cons: company wants returns (don't want to set too high and lose customers), ignores demand

What is search engine optimization?

-Refers to the process of "optimizing" both the on-page and off-page ranking factors in order to achieve high search engine rankings for targeted search terms -Refers to the "industry" that has been created regarding using keyword searching as a means of increasing relevant traffic to a website

Wrap-up

-Search advertising -High on consumer value, high on profits -Advertising -Can be informational or transformational -Subject to rules and regulations

Setting the budget

-Set a maximum bid -Set a daily budget -Control timing -Start and end date -Time of day -Control location -Country, language, region, zip code, etc..

The Role of Brands

-Signify quality -create barriers to entry -secure price premium -serve as a competitive advantage

Demand- based pricing

-Skimming/ penetration -retailers: High Low/ EDLP

Brand Protection

-Trademark Purpose: signify source or serve as "badge of origin" Covers: brand, label, name, signature, word, letter, number, shape of goods, packaging, color or combination of colors, smell, sound, movement -International protection The Madrid System Agreement with 85 countries to review and allow a bundle of trademark protections in different international jurisdictions U.S., China, France, Georgia, Germany, Ghana...

Margins & Basic Marketing Arithmetic

-Unit Margin = Selling Price ($) - Total Cost per Unit ($) -Margin % = Unit Margin ($) / Selling Price ($) -Example: Price = $24; Total Cost = $18 -Margin % = ($24 - $18) / $24 = 25% -Purpose: To determine the value of incremental sales and to guide pricing and promotion decisions -Retailing often uses "Markup" -Markup % = Unit Margin / Cost per Unit -Example: Markup % = ($24-$18)/$18 = 33%

At what stage of the PLC are the following products?

-Walkman- decline -iPhones- maturity/decline -Apple Watch- growth -Plaid shirts

Services

-What products needs large support services? -What products are services? -Product vs. Services -What is different? -Capacity Management vs. Employee Management -Services difficult to evaluate without recommendations - cannot test drive a lawyer or surgeon -Product/Service Continuum Pure tangible good e.g., sugar ---> Pure service e.g., loan (but in between there is a hybrid e.g. computers and cars)

Advantages and disadvantages of each promotional tool:

-advertising: advantages: reaches many buyers, expressive, disadvantage: impersonal -personal selling: adv: high interactions, build relationships dis: costly -sales promotion: adv: direct incentive to buy, dis: short lived -public relations: adv: believable, economical . dis: not felixible, not always controllable -direct marketing: adv: immediate, customized . dis: not very effective on its own

Promotion Tools

-advertising: print, radio, tv, internet -personal selling: trade shows, sales presentation -sales promotion: discount, coupons, display -public relations: press, lobbies, events -direct marketing: internet, telemarketing, catalogues

What to do?

1) Independent Audits2) Be an ethical consumerGoodguide.comGivewell.org3) Promote morality in the workplace

5 Most Advertised Companies Globally (2016)

1.proctor and gamble 2.samsung etc How much does a super bowl advertisement cost to run? 2018: 5 million dollars

definition of Brand

A brand is the accumulation of a consumer's emotions, experiences, and beliefs about a product or a service.

Advertising

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. Perception -Commercials = Advertising = Marketing -Reality:

Purchase funnels

Awareness Interest Desire Action

Cost-Based: BREAKEVEN ANALYSIS

BREAKEVEN PRICE = (TOT.FC / # UNITS) + UNIT VC Break-Even Pricing: ExampleWhat price should Sleep Inn charge for one night? Hotel Capacity is 250 ROOMS(What if average occupancy is 80 rooms)?TWO KNOWNSTotal FC = $4000Unit VC = $8 PER ROOMTWO UNKNOWNSPrice (P)# UnitsB-E PRICE = (TOT.FC / #UNITS) + UNIT VC

Promotional Lift Free Shipping Example

Baseline = 161 OrdersPromo Avg = 248 OrdersLift = 248/161= 154%

Terms

Brand PromiseMarketer's vision of what the brand must be and do for consumersBasically, the "Brand Proposition"Badge brandsBrands that the consumer "wears" proudly

- Conventional (Independent) Distribution Systems -

Channel members are independent Members include: producers, wholesalers, and retailers; each seeking to maximize its own profits Little control over the other members No formal means for assigning roles and resolving conflicts

Distribution Economies

Contacts with no intermediaries: -4 producers x 4 buyers = 16 contacts Contacts with one intermediary: -4 producers + 4 buyers = 8 contacts -4 producers → intermediary ← 4 buyers

Search Marketing

Distribution of advertising spending in the United States from 2010 to 2019, by media Search Marketing: Search engine marketing is a form of Internet marketing that involves the promotion of websites by increasing their visibility in search engine results pages primarily through paid advertising -Digital advertising is becoming more important -You can improve your organization's search standing either in organic searches, sponsored searches, or both -Search marketing tools allow you to target local customers, run experiments on your webpages, and accurately track response rates Search Engine share 2017 Search engine Usage share Google 81% Bing 6% Baidu 8% Yahoo 4%

Benefits Filter

Does the ad communicate the brand's benefits in a compelling manner?Background Benefits 1)Energizing or exhilarating feeling from drinking mountain dew2)Thirst quench

Campaign Extension Filter

Does the ad fulfill a role in the broader campaign?Background: Do the Dew campaign - want to continue, but freshenConsistent elements of "do the dew": dew dudes, melodramatic extreme sports excursions, pop culture parodies, rock music to animate athletics, playful "do the dew" signature

Symbolism Filter

Does the proposed ad evoke brand symbolism?BackgroundHistorically Mountain Dew has symbolized masculinity based on unrestrained instincts, taking risks, and creating fun

WHAT QUALIFIES AS ETHICAL OR FAIR BEHAVIOR?

Flexible criteria: Usually, what's fair for use.g., Imagine you and a partner perform a production task for 15 minutes (stuffing envelopes)Imagine that you stuffed 45 and partner stuffed 15OR Imagine that you stuffed 15 and partner stuffed 45Now, split a $10 reward between yourself & partnerWhen you do 75% of the work, you keep 75% of the pie

Back to Prospect Theory

Framing effects & the greater impact of lossesHow can you use these in your pricing strategy?Losses are more acceptable when integrated.Gains have greater impact when segregated. AGGREGATE LOSSES Add shipping into cost of orderInclude dessert or beverage cost with mealOne price for whole set SEGREGATE GAINSItemize all the things you get in package (vacation, gift set)Unexpected extra services/gifts have a disproportional impact

Expectations of price influence WTP

How much would you be willing to pay?Grocery$5 Hotel$6.7You are on a beach and your friend goes to get beer..."How much is too much for the beer?"

Promotion Wrap-up

Integrated Marketing CommunicationConsistency in message across mediaPersonal SellingNot just a hard sell, can provide customer value

Wrap-Up

Intermediaries allow manufacturers and retailers to specialize To be useful, they must add value Some companies use multiple types of channels "Multichannel Distribution Systems" Different channels target different customer segments Conflicts can occur at all different levels of the channel

Product Integration filter

Is the product a central component of the story?

Story Filter

Is the story simple, understandable?Is it entertaining, arresting?Is it creative, original?

More Market Share

Market Share RankMarket Concentration3 or 4 Firm Concentration Ratio = sum of 3 (or 4) largest market sharesHerfindahl Index = sum of squared market shares of all playersFirm A = 70%; Firm B = 20%; Firm C = 10%Herfindahl Index = .54 = .49+.04+.01Firm A = 40%; Firm B = 30%; Firm C 30%HI = .34 =.16+.09+.09Purpose: indicator of overall market competitiveness (higher values indicate larger competitive players in the market).

WRAP-UP

Marketers often have a bad reputation in terms of ethicsPart of it may be earnedFocusing on meeting customer needs offers opportunities to provide value

Ad rank-- max bid x quality score= ad rank (gets ad)

Maximum bid quality score Ad rank (=) (QS) Advertiser 1 $4.00 1 4 Advertiser 2 $3.00 2 6 Advertiser 3 $2.00 7 14 Advertiser 4 $1.00 8 8 The price to be paid -Price1*Quality1=Bid2*Quality2 -Price1 =(Bid2*Quality2)/Quality1 Ad rank Maximum bid quality score Ad rank actual cost per click (=) (QS) Advertiser 3 $2.00 7 14 8/7= $1.14 Advertiser 4 $1.00 8 8 6/8= $0.75 Advertiser 2 $3.00 2 6 4/2= $2.00 Advertiser 1 $4.00 1 4 minimum

- Omnichannel -

Omni-channel Distribution is one-touch integration between operations and physical product flows across all channels to provide a seamless shopping experience. In other words, Omni-channel distribution is a system that enables customers to complete a purchase and receives orders from any channel they choose--whether they're shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store For example, a customer service representative interacting with a customer in a store can immediately reference the customer's previous purchases and preferences as easily as a customer service rep on the phone or a customer service webchat rep. Or the customer can use a desktop computer to check inventory by store on the company's website, buy the item later with a smartphone or tablet, and pick it up at a chosen location. Challenging to execute Integrating the customer experience across channels With online and mobile, more consumers shop across multiple channels when using a single retailer Across different retail outlets

- Supplier Network v. Marketing Channels -

Once good is in basic form, the marketing channel begins

The Effect of Innovations on PLC

PLC Stage typically sets strategic objectives & operational tactics, BUT -actions can change cycle shape, points and angles of inflections-- the lifecycle can be extended -theres a curve that usually follows a typical lifetime path, but innovations can bump up the path up

Packaging

Packaging used to contain and protect the product Packing can have additional value -Functional Value -Theft deterrent -Functional frustration (-) -Frustration-free packaging slow to take off -600 of millions of products on Amazon use it -Perceptual Value -Recognition value

Ethics: Motivated Reasoning

People are not great judges of their own ethicalityMotivated reasoningSelf-serving biasesWe can't help but be motivated by our own best interests

Personal Selling

Personal selling is the interpersonal part of the promotion mix and can include: Face-to-face communicationTelephone communicationVideo or web conferencingPros: personal, flexible, persuasiveCons: expensive, not always consistent

Price elasticity of demand- inelastic straight line (i would always buy insulin no matter the price), but saltines are elastic in price- if they become $20, people will stop paying for them

Price Elasticity = -% change in quantity demanded/% change in price Example: -A store sells 500 apples at $1 a piece -If they increase their price by $.50, the quantity sold goes down by 300 -Elasticity -0 = perfectly inelastic -0 to -1 = relatively inelastic - <-1 = relatively elastic - -∞ = perfectly elastic

Cost-Based pricing: Pros and cons

Pros: -Simple! -Sometimes consumers judge cost-based pricing as "fair" Cons: -Internal focus -Consistent with the Marketing Concept? -Ignores demand, competitive factors -Will the consumer even pay that much? Are they willing to pay more?

Quality Score

Quality Scores (in order of importance) -Ad's anticipated click-through rate (CTR) -Your URL's past CTR -Landing page quality -Relevant, original content -Easy to navigate -Quick load times (with minimal pop-ups) -Transparency about nature of business -Relevance (Google analyzes language and contents) -Geographic performance -Your targeted devices

Profit-Based: Target ROI Example

ROI = Return On Investment(ROMI = Return on Marketing Investment) TFC + TVC + (Investment x ROI)P = # UnitsExampleTFC = $1,175,000TVC = $825,000INVEST. = $2,000,000ROI = 20%# UNITS = 600

Advertising Terminology:

Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time. Frequency is a measure of how many times those in the target market who are exposed to the message encounter the message.

Pricing and Promotion

Reservation PriceAn individual's maximum willingness to pay for a productBaseline SalesBenchmark sales. Expected sales in the absence of promotional activityPromotional LiftImprovement in sales due to promotional activity

Number of Channel Levels

Schwan Food → Consumer (selling direct) General Motors → Retailer → Consumer (dealerships) Mars → Wholesaler (may produce assortment) → Retailer (assortment + seller) → Consumer Mansar Products → Agent (grading function) → Wholesaler → Retailer → Consumer Channel Organization - Multichannel Distribution Systems - AKA hybrid marketing channels A single firm sets up two or more types of marketing channels to reach one or more customer segments Maximizes number of consumers reaching Some segments want to go directly vs. indirectly Reaches all types of customers

Two paths to top search results:

Search Engine Optimization (SEO) -Improving traffic to your website via "organic" searches - unpaid - first link under ads -harvard pushing executive education (big money maker for them) → not organic Search Engine Marketing (SEM) -Increasing traffic to your website via paid placement

AKA Intertemporal Pricing

Separating the Market With Time -Initial release of a product, demand is inelastic -Book -Movie -Computer

The Product Life Cycle

Slow growth, Rapid growth, Profit peaks, Slowing down, Sales peak, Rapid declining

Reference Price

Standard of comparison against which an observed price is compared.Experience-dependentThe "fair" price to youThe price often / most often chargedThe last price you paidThe price of the brand that you usually buy Context-dependent"Regular retail price"What it is placed nearHow other items in the line are priced

The Power of Image

The Power of ImageNoah's Winery WineLabeled either from California or North Dakota (between subjects experimental design)People expected to like the California version betterPeople reported liking the California version better after drinkingPeople reported liking the accompanying cheese better, when the wine was labeled from CaliforniaIn a follow-up study, people ate more of their meal when the wine was labeled from California as opposed to NDWansink et al. 200721 The Power of ImageParticipants in an fMRI scanner tasted 5 different wines identified by price There were actually only 3 different winesWines 1 and 2 were repeated, but listed at different pricesWine 1 Time 1: $90Wine 1 Time 2: $10Participants reported liking the wine more when it was labeled as expensiveAreas of the brain associated with affect (e.g., VMPFC) showed greater activation when the wine was labeled as more expensive

Self-Tests

The Publicity Test-Would I want to see this action that I am about to take on the front page of the local paper or in a national magazine? The Moral Mentor Test-Could I share an honest and transparent account of my motives with the person I admire most? The Golden Rule Test-Would I like to be on the receiving end of this action and all its potential consequences?

Brand Equity

The added value that a brand gives its to products. -A set of brand assets and liabilities linked to a brand that add or subtract from the product value -Brand equity arises from differences in consumer response to a product when a brand is present absent -Differential response is reflected in perception, preferences, and behavior related to the marketing of the brand -Best brands

Price Discrimination: Coupons and Rebates

Those consumers who are more price elastic will tend to use the coupon/rebate more often when they purchase the product than those consumers with a less elastic demand.

Achieving Top of Mind Awareness

Top of Mind AwarenessWhen people think of your brand first in a given product categoryHighly associated with market shareBenefits When people are ready to buy, they think of you firstWhen people are in a hurry, they pick you first

Trait Warmth is Key

Trait warmth predicts judgments of social intentions.•Aaker, Vohs, & Mogilner 2010 High Warmth --> Communal --> High Charitable Credit Low Warmth--> Exchange --> Low Charitable Credit

Channel Conflicts Within Systems

Types of conflicts: can occur in any system Horizontal Conflicts: occur among firms at the same level of the channel Two car dealers, vying for clients (independent interests) Vertical Conflicts: occur between different levels of the same channel Franchisee and Franchisor - need to follow system, if it doesn't go as planned → unrest with franchise What type of horizontal and/or vertical channel conflicts may occur in one of the following industries: Personal computer industry: disagreement over price; manufacturers may not like price retailers set Music industry: legal disagreement between the agent and the artist Clothing industry: if the clothing manufacturer realizes the clothes are arriving at the store later than scheduled → conflict between manufacturer and wholesaler who is shipping to retailers Retailers has big goals when it comes to timing (Black Friday)

- Vertical Marketing Systems -

VMS: channel members act as a unified marketing distribution system A vertical marketing system (VMS) is one in which the main members of a distribution channel—producer, wholesaler, and retailer—work together as a unified group in order to meet consumer needs. In conventional marketing systems, producers, wholesalers, and retailers are separate businesses that are all trying to maximize their profits. When the effort of one channel member to maximize profits comes at the expense of other members, conflicts can arise that reduce profits for the entire channel. To address this problem, more and more companies are forming vertical marketing systems. Contractual: independent firms join together to obtain economies of scale or sales impact Small firms cooperating Corporate: channel leadership through ownership Administered: channel leadership through power of one member P&G's power over grocer retailers, Wal Mart's power over manufacturers Degree of direct control varies Greatest in corporate, least in administered Franchise v. Franchisee Franchise: owned by the firm Franchisee: owned by the individual

Study 7: The role of trait warmth

Warm Image•Friendly•Well-intentioned•Trustworthy•Warm•Good-natured •Sincere boathouse farms > pepsi

The perception of price

We (consumers) perceive prices in context. Like many consumer-relevant attributes, we often are not sure how we should feel about prices--if they are fair, what is a low/high price, etc.To help us understand, we use the context--how much the item costs overall, what other deals are around.

Self-serving biases

When asked to report the percentage of household tasks that they perform, married couples' estimates total above 100%Ross & Sicoly, 1979In simulated legal cases, defendant's and plaintiff's expected rulings are in favor of their own sides, even when incentivized to be accurateLoewenstein et al., 1993Physicians don't believe they (themselves) are influenced by financial arrangements with pharmaceuticalsDana & Loewenstein, 2003

When are consumers/managers most likely to behave unethically?

When they see themselves as "in a hole"e.g., cheating on taxes when owe money vs. when due for a refund

New Product Pricing: Penetration Pricing (Low initial prices)

When? -Attract a large number of buyers and win a larger market share. -Can use in "captive" product pricing scenarios. -Highly price-sensitive so a low price produces more market growth. Flatter demand curve. -Production/distribution costs must fall as sales volume increases. -Must uniquely maintain low price position or benefits may only be temporary due to competition.

INTEGRATED MARKETING COMMUNICATIONS (IMC)

Why communicate with consumers?With Integrated Marketing Communications (IMC), the company carefully integrates and coordinates its many communication media to deliver a clear, consistent, and compelling message about the organization and its product or service.communicate benefitsbuild brand imageconvince to purchaseeducatecommunicatepositioning

Resonance Filter

Will the ad resonate with the target customer?BackgroundWho is the target customer?Main target: 18 year old malesDew drinkers tend to live in more rural and blue collar areasSecondary target: 20-39 year old males

Corporate Culture

You can make money without doing evil - GoogleOnly display ads that are relevant, don't accept pop-up advertising, clearly identify sponsored links.Low price but not at any price - IkeaIkea suppliers must meet several criteria about working conditions and environmental responsibilityGoals: maintain zero-waste and sell environmentally friendly products - WalMartImpact: packaging, light bulbs

An Example of PLC Variations:

fads- peak fast and early, go down fast fashions- steady incline, goes down then back up again classics- steady incline until reach peak slow starters- start slow then peak

Example: Airline Fares

lDifferences in elasticities imply that some customers will pay a higher fare than others.lBusiness travelers have few choices and their demand is less elastic.lCasual travelers have choices and are more price sensitive.Example: Airline Fares10

Decision Filters

look at 2018Lecture15PromotionCSRAdvertisingCaseCanvas.ppt at the end

Why brand?

to move beyond commodities and reduce the primacy of rice in the consumer decision process

Advertising rules and regulations

•In U.S., Federal Trade Commission (FTC) regulates most advertising •False or deceptive advertising •"Bait and Switch" •Deceptive Pricing •An advertiser who claims that an item has been "Reduced to $9.99," when the former price was $10, is misleading the consumer, who will understand the claim to mean that a much greater, and not merely nominal, reduction was being offered. [Guide I] • FDA regulates food and drug categories •Disclosure of side effects in drug advertising

Advertising rules and regulations

•In U.S., Federal Trade Commission (FTC) regulates most advertising•False or deceptive advertising•"Bait and Switch"•Deceptive Pricing•An advertiser who claims that an item has been "Reduced to $9.99," when the former price was $10, is misleading the consumer, who will understand the claim to mean that a much greater, and not merely nominal, reduction was being offered. [Guide I]• FDA regulates food and drug categories•Disclosure of side effects in drug advertising