Chapter 12: The 4Ps-Market Management
Decline
Industry sales fall to the point at which it is no longer in the company's best interest to continue to support the product
Special consideration in managing services
Intangibility, inseparability, perishability, and heterogeneity
Perishability
characteristic that describes the fleeting nature of a service ex. an empty hotel room on a given night can't be saved and made available on a different night
most companies use what promotional strategy
combination of push and pull
Direct channels
commonly used in B2B markets, indicates that there are fewer middlemen between producer and end user
Pull promotional strategies
companies that advertise nationally branded products directly to consumers ex. ad for frosted flake- promotes kellogg's and getting the cereal at your next grocery store trip
Product class
company focuses on specific brand
Product lines
company offers different types of appliances ex. whirlpool, can be shallow (three different items) or vary in depth
Innovators
consists of the first 2.5% of adopters and tend to be better educated, younger and less risk averse than other categories...not always best market to target because aren't very influential
When a product's demand is characterized as elastic, it implies that:
consumers are very sensitive to price changes
Shopping products
consumers will spend some effort to compare brands and invest some time to investigate product features and price points ex. hair salons, furniture and jewelry
speciality products
where consumers spend both time and effort to purchase these products
Product life cycle (PLC)
can be viewed as four stages: introduction, growth, maturity and decline
Non-store retailers
Direct sellers ex. May Kay/ vending machines
A product with an elastic demand has customers who are not sensitive to price fluctuations.
False
Customers who are very sensitive to price fluctuations in markets have an inelastic demand.
False
Product cannibalization occurs when a business experiences an intended reduction in sales.
False
Which of the following is NOT a factor that determines price?
Fixed cost
General merchandise retailers
Macy's or JCPenny, Walmart or Target
Branding alternative also known as national brand
Manufacturer's brand- the brands are owned and controlled by a producer ex. Heinz
Which one of the following statements about pricing strategy is true?
Pricing decisions have many legal implications.
Promotional pricing
Pricing strategy closely tied to promotional strategy ex. red tag sale event
General Motors purchases sheet metal from suppliers that it uses in the production of car bodies in its factories. For GM, sheet metal would be considered
Process materials
Business services:
Processes required in running the business that are often outsourced to other businesses (payroll, cleaning services)
Pricing objectives can either be
Profit maximization (not concerned about company growth), Sales maximization (concerned with maximizing sales or market share through pricing ex. grocery stores), Status quo (company sets a price at the same level as competitors ex. soft drink industry)
New pricing strategy
Skimming is a pricing strategy that introduced a new product at a price point higher than competition, chosen by businesses that can support high price and has protection from competition ex. Apple
Which of the following is NOT typical way a wholesaling intermediary is classified?
Specialty retailer
Brands can be categorized as family brands or individual brands
Trade name that's also family brand name: Whirlpool Individual brands: Procter & Gamble's laundry detergent
Advertising is the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas
True
Inseparability means that a service is both produced and consumed at the same time.
True
New Product Development Process is a commonly known process used when companies develop new products, and includes the following steps: idea generation, screening, concept testing, business analysis, product development, test marketing, and commercialization.
True
Sales promotion is the media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand, or improve product availability.
True
Agents and brokers
Wholesalers intermediaries that provide various services but don't take title or acquire ownership of products, generally work for a fee or commission basis
Intangibility
a service, unlike a good cant be held, touched, examined or taken home and put on a shelf for the customers future use Ex. Progressive Flo spokesperson
Early adopters
accounts for 13.5% of the adopters and is often the group that marketers target in the early stages of PLC because they are opinion leaders and can easily influence
Four main promotional tools (promotional mix)
advertising, personal selling, sales promotion and public relations
executive level management is ______ involved in pricing decision, accounting, finance and production management
almost always
Generic product
alternative branding where there is NO brand name AT ALL only the product category name ex. flour or vanilla ice cream. Usually low-priced and lower-quality
Physical goods
are tangible like computers, cars, and soft drinks
Selective distribution
best employees for highly shopped brands that are considered using limited problem solving ex. Ralph Lauren
Smooth marketing channel relationships
better serve each channel member and customer
Brand can include brand elements such as
brand name (spoken part) and brand mark (symbol or design of brand)
Push promotional strategies
build demand within the distribution channel at the wholesaler or retailer level, by spending promotional dollars on sales calls to the wholesaler or retailer or by offering them quantity discounts for example
ideas to products
can be marketing to specific groups of customers "don't drink and Drive" "Say no to Drugs"
Jerry routinely buys Charmin toilet tissue when he purchases groceries. As he navigates the paper products aisle, he looks for the Charmin brand name and the cartoon bear that he remembers from Charmin's TV ads on the package. He grabs the first Charmin package he sees without giving it much thought. If he needed toilet paper and didn't see Charmin on the shelf, Jerry would likely pick another brand that he recognized. To Jerry, Charmin toilet tissue is a(n):
convenience product.
Consumer products
convenience, shopping or specialty products
Growth
customer demand increases, sometimes dramatically. customers recognize potential and enter the market in large number, customer demand is strong, industry sales grow quickly and industry profits follow
Elastic demand
customers who are highly sensitive to price fluctuations ex. liquor
Inelastic demand
customers who are less sensitive to price fluctuations in the markets ex. gasoline
A product's selling price should be set based on
customers' perceived value
Product mix
describes the overall group of products that a business offers and consists of a combination of product items, product categories and product lines. can be either narrow (five product categories) or broad (more product categories less closely related to one another)
Price reduction tactics
discounts, allowances, coupons, rebates and bonus packs
Early majority and late majority
each account for 34% of adopters for a total of 68% early majority is easy to influence compared to late majority although both are easily persuaded
Maturity
early maturity: industry sales remain high but growth in dusty sales slow. At midpoint of the maturity phase industry sales peace and begin to decline
Supply chain management
encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities, integrates supply and demand management within and across companies
product categories
ex. whirlpool produces home appliances
Communication process
explains both personal and interpersonal communication ex. illustration pg. 192
Customers demands
factor in on setting a price
Public relations (PR)
form of communication management that seeks to make use of publicity and other non-paid forms of promotion and information to influence the feeling, opinions or beliefs about the company, its products or services, or about the value of the product or service or the activities of the organization to buyers, prospects or other stakeholders
Product's selling price is an indicator of
how the customer values the product in the marketplace and the customer will be willing to pay less or equal amount of perceived value
Social network
impacts the traditional communication ways for businesses, and introduced a powerful exchange of information about products and businesses that develop between customers
Cost structure
important to understand in arriving at a selling price
types of customers who adopt a new product
innovators, early adopters, early majority and late majority and laggards
Business products:
installations, accessory equipment, raw material, component parts, process material, maintenance, repair, and operation (MR) suppose and business services
Product
is a broad term that describes physical goods, services and ideas
Brand
is a multidimensional concept that represents the totality of that which an organization delivers to its customer
Cost of production
is the basis on which selling price is set
Components parts
products purchased in finished form from other suppliers (tired, sound systems)
Customers adopt a new product when
it doesn't appear to be overly complicated to learn how to use, it is compatible with current products or usage, the relative advantage is clearly understood, the relative advantage is readily observable and it is possible to reduce customer risk through trial
Indirect channels
larger number of middlemen, more commonly seen in consumer markets
Accessory equipment
less expensive, less complies equipment purchased more frequently (copiers and computer printers)
Marketing channels (distribution channels)
made up of all entities necessary to move a product from the producer to the end user, an organized network of agencies and institutions which in combination perform all the function required to link producers with end customers to accomplish the marketing task
Installations
major equipment or processes that are complex and expensive
Price elasticity of demand
measure of the relationship between a % change in the market price of a product and a consequential % change in the quantity demanded of a product
(Channel intermediaries) Members of distribution channels
middlemen, the trade, wholesalers, distributors, jobbers, resellers and retailers
Intensive distribution:
most common for low-priced convenience products that are routinely purchased by customers, ex. soft drinks
Services
not tangible like pedicures, personal training and lawn mowing
Status quo pricing
occurs in competitive markets requiring a new product to be introduced at a price equal to other competitors in the marketplace.. only used in penetration pricing doesn't work
Cannibalization
occurs when a business experiences an unintended reduction in sales of one product due to its introduction of another similar product, an be part of growth strategy designed to circumvent a sales decrease due to captivities introductions
Penetration pricing
occurs when competition enters the marketplace with a low price point, allows businesses to quickly gain sales and market share as it enters the market
Specialty retailers
offer higher levels of service and more direct product ex. Victoria secret
integrated marketing communications (IMC)
planning process designed to assure that all brand contacts received by a customer or prospect for a product, service or organization are relevant to that person and consistent over time
Basic personal selling process:
pre-approach, approach, presentation, overcoming objections, closing the sale and following up
Product line pricing
pricing strategy for an entire product line, considering the impact of a single item's price on the pricing strategy of the entire pricing line
Another branding alternative also called private, store or distributor brands
private label brand-the brand is owned or controlled by an intermediary (distributor or retailer) ex. Abercrombie & Fitch
Marketing mix or 4Ps include:
product, promotion, price and place
Process material
products used in production that become part of finished product (sheet metal or plastic used in the car body)
MRO supplies
products used introduction that do not become part of finished product (light bulbs in the manufacturing plant)
Packing
protection of the product during shipping, handling, storage, and use but also promotion of the product, part of the decision includes abel design
Product items
providing different products with different qualities all falling under the same brand
Retailers
purchase products from wholesaling intermediaries or from producer, add value in the form of place, time and possession utility then sell products to customers for a profit ex. Best buy is an example of home electronics retailers
Pricing based of competitors pricing
reacting to competitors as a means of determine pricing strategy is short-sited
Convenience products
relatively inexpensive product that a consumer purchases on a regular routine basis without much thought or effort, consumers can may this purchase with little thought or effort
Exclusive distribution
reserved for speciality products that require extended problem solving to purchase ex. Tiffany & Co.
Sale promotion directed to consumers include activities such as
sampling, coupons, rebates, contests, sweepstakes, frequency programs and premiums, quantity discounts, promotional allowances, trade shows, point-of-purchase displays and cooperative advertising deals
Wholesalers intermediaries
sell products to businesses to be used in the production of another good or service or to be resold
personal selling
selling that involves face-to-face interaction with customer
Inseparability
service is both produced and consumed at the same time ex. if Stanley Steemer doesn't move the furniture or is late arriving the customer perceive the company as providing unsatisfactory service, but doesn't affect the view of the individual carpet cleaner
Heterogeneity
services are difficult to standardize ex.snickers bars purchased at different locations will all last the same how the services at a hair salon may be different depending on location
Value
what the customer is willing to give up to get the desired benefits ex. Calvin Klein perfume is high because they created an image to match it
Home Depot and Best Buy are generally considered to be ________ channel intermediaries.
specialty retailer
Channel structure
strategic choice by a business; a producer selects the channel distribution that helps to best accomplish its marketing objectives
Franchises
subway restaurants--each on is owned and operated by an independent retailer
Merchant wholesalers
take title or acquire ownership of a product, add value, then resell the product to another wholesaler or retailer for a profit (full service or limited-wholesalers/ general, limited-line or speciality-line wholesalers
Product Adoption
the ability for products to be easily adopted by customers. Include factors of: complexity, compatibility, relative advantage, observability and trial-ability
Promotion
the communications of marketing, the way that a business informs, persuades and reminds the target market about its product, brands, company or people
Introduction
the industry contains few competitors and sales are just beginning to take hold , revenues may be positive while profit can be negative
marketing manager has ___ autonomy with respect to pricing
the least
Sale promotion
the media and non-media marketing pressure applied for predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand or improve product availability (more promotional dollars are spent each year on sales promotion than on advertising)
Raw materials
the most basically materials used by producers (iron ore used in the product of steel)
Advertising
the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit, organizations, government agencies and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas.
Customers are more sensitive to price increase when
the price elasticity of demand coefficient has an absolute value greater than 1
Customers are less sensitive to price increase when
the price elasticity of demand coefficient has an absolute value less than 1
Diffusion of innovation
the process by which the use of an innovation is spread within a market group over time and over various categories of adopter
personal selling plays a larger role in the promotional mis when
the product is high value with a limited number of customer
Laggards
the slowest to finally adopt, 16% of adopters, rarely targeted by marketers since they are hard to influence
advertising expenditures in the U.S. has been relatively flat in recent years, although
their spending increased by 0.9 from 2012 to 2013
New product development process (funnel-shape model)
used when companies develop new products, include following steps: idea generation, screening, concept testing, business analysis, product development, test marketing and commercialization