Intro to Marketing Exam 2 (Ch. 8-11, 13-14, 16-17)

CHAPTER 16: RETAILING AND WHOLESALING

CHAPTER 16: RETAILING AND WHOLESALING

CHAPTER 17: INTEGRATED MARKETING COMMUNICATIONS AND DIRECT MARKETING

CHAPTER 17: INTEGRATED MARKETING COMMUNICATIONS AND DIRECT MARKETING

CHAPTER 8: MARKETING RESEARCH

CHAPTER 8: MARKETING RESEARCH

CHAPTER 9: MARKET SEGMENTATION, TARGETING AND POSITIONING

CHAPTER 9: MARKET SEGMENTATION, TARGETING AND POSITIONING

Market Research Step 4: Develop Findings

*1) Analyze the Data:* How Are Sales? What Factors Contribute to Sales Trends? *2) Present the Findings* -*use of graphs* to helps marketing managers make recommendations/actions -ex: bar graph of # of pizzas per year -> annual sales per household -> average annual sales per household by household size -> average annual sales per household by age of children in household

What type of consumer product has inelastic demand?

Inelastic Demand: -*1 Percent Price Decrease* Produces *Less than 1 Percent Quantity Increase* -*insensitive to a price change* so impacts demand -*Products that are necessities* are price inelastic (ex: toothpaste)

Company, Customer and Competitive Effects on Pricing

Three key things to consider when finalizing the price: 1) Company: *intense and strategic* for a company with *many products* in many product lines. *Product line pricing* involves the *setting of prices for all items* in a product line to *cover the total cost* and produce a profit for the complete line, *not necessarily for each item.* -Ex: sell Sony Playstation at penetration pricing point, but the games (complementary products) were set high enough to make up for the difference. 2) Customer: need to be careful here, *not too set too high, but also too low* can indicate *quality issues* in the minds on consumers. 3) Competitive: need to be *mindful of competitive pricing* but watch out for a *price war* involves successive *price cutting by competitors to increase or maintain their unit sales or market share.*

What is retailing?

-consists of *all activities involved in selling, renting, and providing products and services* to ultimate consumers for *personal, family, or household use.*

Demand curve

-A demand curve is a *graph relating the quantity sold and price*, which *shows the maximum number of units that will be sold at a given price*. As *price goes down the quantity demanded increases* -But *price is not the only factor influencing demand for a product.* Demand factors determine consumers' willingness and ability to pay for products and services. *As income goes up, will spur demand* -Consumer Tastes (can be influenced by external factors like demographics, culture, technology), Price and Availability of Similar Products (if prices of other options are competitive consumers may opt for substitutes. Not just direct competitors but also indirect competitors (not just pizza, but Chinese or other takeout), Consumer Income (as *income increases, so to can demand increase* as consumers can afford to pay)

Primary Data Advantages and Disadvantages

-Advantages: 1) More *Flexible* 2) More *Specific to the Problem* -Disadvantages: 1) *Expensive* 2) *Time-Consuming* to Collect

selective demand vs. primary demand

-Selective Demand: As *more brands enter the space*, *create a preference for a specific brand* -Primary Demand: *Initially create demand for a product class* and *not a specific brand*

The five key steps in segmenting and targeting markets that link market needs to a firm's marketing program.

1) Group potential *buyers into segments* 2) Group *products to be sold in categories* 3) Develop a *market- product grid and estimate size* of markets 4) Select *Target Markets* 5) Take *marketing actions to reach target markets*

What are the 5 elements of the promotional mix? Advertising, Personal Selling, Public Relations, Sales Promotion, Direct Marketing (Define and give advantages & disadvantages of each)

1) Advertising: any *paid form of non-personal communication* about an organization, product, service, or idea *by an identified sponsor.* -Advantages: Efficient to *reach large audience*, Can be attention getting, Communicate specific features & benefits to consumers, Can *control what you say to whom and when* -Disadvantages: *Very expensive* (airtime + production costs) and lack of direct feedback (one-way communication) 2) Personal Selling: consists of the *two-way flow of communication between a buyer and seller*, often in a face-to-face encounter, designed to *influence a person's or group's purchase decision.* -Advantages: *Customizable*, immediate feedback, persuasive, good for complex info, Control to whom the presentation is made to - reducing any wasted coverage, You can *see their reaction, and adjust your message & approach* -Disadvantages: *Very expensive* (headcount & salaries) and *messaging may differ from sales rep to sales rep* => *lack of consistency* 3) Public Relations: communication management that seeks to *influence the feelings, opinions, or beliefs held by customers*, prospective customers, stockholders, suppliers, employees, and other public *about a company and its products or services.* -Publicity: a non-personal, *indirectly paid presentation* of an organization, product, or service. (Ex: news story, editorial, product announcement) -Advantages: *Credibility* in the minds of the consumer as *brand story told by someone other than the brand*, *Effective* when consumers *lack brand or product knowledge* -Disadvantages: *Hard to control the media* and the type of coverage you will get, has exploded with social media and as a medium, it can be hard to manage/control the message 4) Sales Promotion: *short-term inducement of value* offered to *arouse interest in buying a product or service.* (Ex: coupons, rebates, sweepstakes, contests) -Advantages: Effective to *drive short term interest/incentive*, Help to *increase store traffic*, generate trial purchases -Disadvantages: Easily duplicated, can lead to promotion wars, If *done too often* (coupon) customers will come to *expect it and wait for it* 5) Direct Marketing: *direct communication with consumers* to *generate a response in the form of an order, a request for further information*, or a visit to a retail outlet. (Ex: face-to-face selling, direct mail, catalogs, telephone solicitations, direct response ads on TV) -Advantages: Highly *customizable*, *builds a relationship* with the consumer, quick to get out the door, Interactive communication so good for gaining feedback -Disadvantages: *Database management* is *expensive and time-consuming, declining response*

Demand Approach Pricing Strategies

1) Skimming Pricing: *Set the price initially high*, before there are *other competitors in the space, in hopes to recoup R&D costs* -Advantages: Perceived quality, Cost recuperation, High profitability, Vertical supply chain benefits -DISADVANTAGES: Deterrence, Limitation of sales volume, Inefficient long-term strategy, Consumer loyalty 2) Penetration Pricing: *Low price* set to *discourage competitors from coming in* as they would *need to set the price equal or lower* -ADVANTAGES: Appeals to a mass market, Can lead to lower cost per unit as sales & production expands, Discourages or blocks competition, Boosts sales and provides large profit increases -DISADVANTAGES: *Selling large volumes at lower prices* due to a price set a lower rate encourages trial and repeat purchases, *Strategy to gain market share may fail* as other competitors enter 3) Prestige Pricing: involves *setting a high price* so that *quality or status-conscious consumers will be attracted to the product* and buy it 4) Price-Lining: involves setting the price of a *line of products* at a number of *different specific pricing points.*

Product Life Cycle: Introduction

1) Stimulate Trial -Gillette is masterful at this- Fusion ProGlide Launch created awareness and drive trial. With $200M in advertising to introduce Fusion, they were able to secure 60% awareness of men within 6 months and 26% tired the product- that is huge in a competitive space where men often use the same razor forever. 2) Primary Demand: *Initially create demand for a product class* and not a specific brand 3) Selective Demand: As more brands enter the space, create preferences for a specific brand 4) Skimming Strategy: *Set the price initially high, before there are other competitors in the space*, in hopes to *recoup R&D costs* 5) Penetration Pricing: *Low price set to discourage competitors from coming in* as they would *need to set the price equal or lower* -*promotion to inform and educate*

What are the 4 utilities?

1) The utility of Time: refers to *easy availability of products or services* at the *time when customers need or want* to purchase them. 2) The utility of Place: refers primarily to making goods or services *readily and conveniently available* to potential customers. 3) The utility of Form: refers to the *specific product or service that a company offers.* 4) The utility of Possession: refers to the *benefit customers derive from ownership of a company's product* once they have purchased it.

CHAPTER 10: DEVELOPING NEW PRODUCTS AND SERVICES

CHAPTER 10: DEVELOPING NEW PRODUCTS AND SERVICES

CHAPTER 11: MANAGING SUCCESSFUL PRODUCTS, SERVICES, AND BRANDS

CHAPTER 11: MANAGING SUCCESSFUL PRODUCTS, SERVICES, AND BRANDS

CHAPTER 13: BUILDING THE PRICE FOUNDATION

CHAPTER 13: BUILDING THE PRICE FOUNDATION

CHAPTER 14: ARRIVING AT A FINAL PRICE

CHAPTER 14: ARRIVING AT A FINAL PRICE

5 Step Market Research approach- list and define each step

Steps: 1) *Define the Problem* -set *research objectives*, identify *possible marketing actions* 2) *Develop the Research Plan* -specify *constraints*, identify *data needed for marketing actions*, determine *how to collect data* 3) *Collect relevant information* -obtain *secondary data, obtain primary data* 4) *Develop findings* -*analyze* the data, *present* the findings 5) *Take marketing actions* -make action *recommendations*, *implement* action recommendations, *evaluate* results

Ethnographic Research (Primary Data: Watching People, Personal)

specialized &observational data collection* in which trained observers *seek to discover *subtle behavioral and emotional reactions* as consumer *encounter and use products* in their "natural environment"

Ways to Segment Consumer Markets: geographic, demographic, psychographic

*1) Geographic:* -Based on *where people live or work* -Can be *regions, city size, density, etc.* -*88%* companies segment this way -Campbells nacho cheese too spicy in the east, not spicy enough in south/west so plants in different regions have different formulations to adjust for spice *2) Demographic:* -By *household size, gender, age, race, income, occupation, etc.* -More than 50% of US households are 1 or 2 people -So Campbell's prepackaged meals are smaller serving sizes for these households -*53%* use this way *3) Psychographic:* -Based on *lifestyle: similar lifestyles, tastes, likes, hobbies, values, personality* live near each per Neilsen -*43%* use this way *4) Behavioral:* -retail store type, direct marketing, usage rates, user status, product features, etc. -*Product features: what product features are most important and market to consumers based on that* -*Usage rate* is the *quantity consumed or patronage (store visits) during a specific period.* -The *80/20 rule* is a concept that suggests *80 percent of a firm's sales are obtained from 20 percent of its customers.* -*65%* -Example = airline frequent flyer programs- *reward those with the highest usage*

Market Research Step 5: Take Marketing Actions

*1) Make Action Recommendations:* -ad campaign targeted to children ages 6-12, monthly promo calendar with age group in mind, special event programming for this age group *2) Implement the Action Recommendations:* -advertising research for this age group, colorful ads, funny characters. *3) Evaluate the Results:* a) Evaluate the *Decision Itself: monitor the market place to determine if future action* needed b) Evaluate the *Decision Process Used: was the decision-making process flawed?* Accurate?

Market Research Step 1: Define the Problem

*1) Set the Research Objectives:* -*specific, measurable goals the decision-maker seeks to achieve in conducting MR* (ex: Lego's use of MR/crowdsourcing for new ideas like using Legos as a learning tool and Mindstorm Robotics) -*This is a critical step*- if the research objectives are *too broad you may not be able to do MR and come up with an answer* --if *too narrow the results may not answer the question properly* *2) Have a *Clear Research Purpose:* --There are 3 main types of market research: -a) *Exploratory: provide ideas about a vague problem or question.* In MS example, Lego wanted to know if kids would be overwhelmed with the 500+ pieces, so they did some exploratory research to uncover that younger kids need more basic sets that can be completed in 20 min -b) *Descriptive*: tries to *uncover the frequency with which something occurs or the relationship between 2 factors.* Try to understand the preference of the MS kits between middle and HS students -c) *Causal: the extent to which one factor changes another.* Changing the pieces can impact the Tricks the MS robot can do, and they wanted to understand acceptance by the users. *3) -Identify Possible Marketing Action:* --•You will want to *develop very specific measures of success which are criteria of standards used in evaluating proposed solutions to the problem.* Different marketing research outcomes may lead to different decisions, --Lego assumed the measure of success to the the total amount of time it took a user to complete the robots until they were doing tricks, so the measure of success here was to market the kit that can do tricks in the least amount of playing time -> get the consumer to satisfaction faster to gain acceptance of Lego MS

Goods

-*Physical objects that implies a tangible commodity* or product, which can be *delivered to the customer* -*Produced* rather than performed -Can be *inventoried*- there is *something to count* -Can be *purchased online or in store* -Two Types of Goods: (more info next slide) 1) Consumer goods 2) Capital goods

Products (Goods, services, ideas)

-*Products* = *good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs* and is received *in exchange for money or something else of value.* 1)*Tangible goods are physical products defined by the ability to be touched.* They are distinct from *intangible goods, which may have value but are not physical entities.* (ex: apps, downloadable music) 2) Goods that are *tangible play a large part in retail*, though the purchasing of *intangible goods is now widely available through the Internet.*

Profit equation: Profit = Total Revenue - Total Cost (Know the components of revenue & cost)

-*Profit = Total revenue (unit price x Quantity sold) − Total cost (fixed cost + variable costs)* -Involves many factors like *pricing, which impacts the units sold, units sold also impacts variable cost* -Setting price from a marketing point of view is important and there are 6 steps in setting price

Components of Revenue and Cost

-*Profit = Total revenue (unit price x Quantity sold) − Total cost (fixed cost + variable costs)* 1) Total Cost= -*total expense incurred* by a firm in *producing and marketing a product.* -TC = FC + VC 2) Fixed Costs= sum of the *expenses of the firm* that are *stable and do NOT change with the quantity of product that is produced & sold.* -Ex: executive salaries, rent, electricity, insurance 3) Variable Costs= sum of expenses of the firm that *vary directly with the quantity of product that is produced and sold.* -Ex: direct labor, materials, commissions tied to Q sold

Product Life Cycle: Growth Stage

-*Rapid Sales Growth* -*More Competitors* -Profits Peak -Advertising *Shifts to Selective Demand* -*Repeat* Purchasers -*New Features* Added -Broad Distribution -promotion now looks to *stress points of differences among competitors*

Secondary vs. Primary Data

-*Secondary Data*: the *facts and figures that have already been recorded prior to the project* at hand. Using *existing sources*- do this first! (*internal & external data*) -*Primary Data*: the *facts and figures that are newly collected for the project.* Conducting market research- surveys, focus groups (*observing people and asking them questions are 2 ways* of collecting primary data)

How is pricing impacted by the competitive market?

-*price is constrained by the type of market that it competes in:* 1) Pure Competition: price competition is *almost none* and the *market sets the price* (follow market price for *identical, commodity products*) 2) Monopolistic Competition: some price competition and companies compete over a range of prices (many sellers who *compete on nonprice factors*) 3) Oligopoly: some price competition and you are either a *price-leader or follower of competitors* (few sellers who are *sensitive to each other's prices*) 4) Pure Monopoly: no price competition and the sole seller sets the price (*one seller who sets the price* for a unique product)

Ideas

-A *concept, cause, issue, image or philosophy that can be marketed* -BC month Oct started by Estee Lauder with pink ribbon campaign

The Product Life Cycle- know the stages and impact of each stage on competition, product, price, place, and promotional tactics

-A product life cycle describes the *stages a new product goes through in the marketplace*: introduction, growth, maturity, and decline. (left to right) 1) Introduction- products *launched, gaining awareness, few competitors, one product*, skimming or penetration pricing, limited place, promotion to inform & educate 2) Growth- *competition increases, more variants of the product*, price is impacted (lower) as brands look to gain/steal share, more outlets for distribution, *promotion now looks to stress POD among competitors* 3) Maturity- *many competitors, full product line developed, the price looks to defend share and drive profit*, maximum # of outlets, *promotion looks to remind consumers of the brand* 4) Decline- *Harvest/Deletion, reduced competition* (left category), the product is *limited to best sellers,* *pricing is focused on maintaining profitability, fewer outlets and minimal promotion*

Secondary Data Advantages and Disadvantages

-Advantages: 1) *Time Savings*= *already collected*, and exists, *easy to access* 2) *Inexpensive* = ex. Census data is free -Disadvantages: 1) *Out of Date*= some reports only published every few years, Census every 10 years 2) *Definitions/Categories Not Right*= age groupings in data may not match what you are trying to study 3) *Not Specific Enough*= so *look to collect our own PRIMARY data*

What is the break-even point? How is it calculated (formula)?

-Break even analysis: a technique that looks at the *relationship between total revenue and total cost* to determine *profitability at different quantity levels.* -At some point, you are not making $, why- your costs exceed your sales -At some point, you are making $, why- your costs are lower than your sales -Break-even point is the point where we go from NOT making $ to making $ that is our break even where *sales = costs* -Formula: *Break-Even Point (Quantity) = Fixed Cost / (Unit Price - Unit Variable Cost*

Setting Price Step 1: Identify Pricing Constraints (pt. 2)

-But just as there are pricing objectives, there are also *constraints or factors that limit the price that a firm can set* which may range from *internal pricing considerations* to *outside competitive forces* 1) Demand for the Product Class, Product Group and Brand: (Cars, Sedan, Specific Brand) -Generally speaking- the *greater the demand, the higher the price can be set* -Sports tickets- hot ticket vs. a rival team higher price than a game against a team no one cares about 2) Newness of the Product/Stage in the Product Life Cycle: the *earlier in the product life cycle the higher the prices can be* and sometimes are -*recoup R&D and patent expenses* before *new competitors enter the space* -*Newer Products Usually Priced Higher* 3) Cost of Producing and Marketing the Product: -Profit for Channel Members: manufacturer => wholesaler => retailer =>consumer -Ensure that *all channel members can make a profit* as we consider mark up all along the way 4) Cost of *Changing Prices and the Time Period They Apply*: (ex: Catalogues printed cost to reprint, but now prices can change immediately and often due to the transparency of the internet) 5) Single Product versus a Product Line: -Example: In 2017 Apple Unveiled Three Phones at Once and Had to Consider Value and Price of All Three 6) Type of Competitive Market: *price is constrained by the type of market that it competes in:* -Pure Competition -Monopolistic Competition -Oligopoly -Pure Monopoly 7) Competitors' Prices and Consumers Awareness of Them and Ability to Easily Purchase Them: -Consumer-Driven Pricing Actions: *sees product and price in-store*, and then goes home and *purchases online cheaper* -Seller/Retailer-Driven Pricing Actions: *changing online prices to compete* (ex: airlines)

Capital goods vs. Consumer goods

-Consumer Goods: the *"final" goods purchased by consumers* -Capital Goods: those *used to produce other goods and services* (e.g. tools, *equipment, machinery*)

What are discounts? Allowances? Define & give examples

-Discounts: *quantity* (lower unit costs for higher quantity bought) (cumulative or non-cumulative), *seasonal* (buy earlier in the season snow blowers in July and stock inventory earlier than normal), *trade* (reward wholesalers & retailers for future marketing activities or promotions), Cash (2/10 net 30- 2% disc if paid in full in 10 days, otherwise due in 30 days) -Allowances: like discounts, include *trade in allowances* (like for a car) and *promotional* (for a retailer to promote a certain product)

Durable vs. non-durable goods

-Durable Goods: product that *lasts over many uses* like *appliances, cars, smartphones* -Non-Durable Goods: products *consumed in one, or a few uses*, like *food and gas*

Forms of Ownership: Independent retailer, Corporate Chain, Contractual (=franchise)

-Form of ownership distinguishes retail outlets based on whether independent retailers, corporate chains, or contractual systems own the outlet: 1) Independent retailer- *mom and pop shops* across all categories. Accounts for *most of the 7.3 million stores in the US* 2) Corporate chain- 670 Macy's across the US, and they own Bloomingdale's too. *Centralized decision making and purchasing.* (*multiple* outlets under *common ownership*) 3) Contractual systems- *independently owned stores that work together as a chain*. franchises like McDonald's with 37K locations, with 90% being franchised locations. We spoke a bit about franchising before (a subset of licensing) *an individual or firm* (franchisee) contracts with a parent company (franchisor) ) (ex: franchise) -Franchisor- helps in picking location, setting up the store or facility, advertising, training, Franchisee pays an upfront fee and an annual royalty (=% of sales)

Price as an Indicator of Value

-Form the consumers point of view, price is often an indicator of value when it comes to *relationship to perceived benefits.* -What are a consumer's perceived benefits? Can be things like *quality or durability* of a product or service. When we think about this as a ratio, *when perceived benefits increase* so *too does the consumer's value*, at a *given, fixed price* -Value involves *judgement by a consumer of the worth of a product relative to substitutes* that *satisfy the same need* -Value pricing is the practice of *simultaneously increasing product and service benefits* while *maintaining or decreasing price.* -For some products, *price is an indicator of quality*, and ultimately value to the consumer. Varies by category and in a survey of home furnishing buyers, 84% the higher the price, the higher the quality. -Price can be an *influencer to many consumers about the quality.*

Market Research Step 2: Develop the Research Plan

-In developing the research plan and determining how to collect data you must: *1) Specify your constraints*: the *restrictions you place on finding potential solutions* through your MR --In the Lego example, constraints could be that the *answer had to be uncovered in 5 weeks using 10 teams* of middle schools students looking at 2 MS kits *2) Identify the data needed for Marketing actions:* focus on *collecting the data that will help you make the best Marketing decisions* --Lego may want to know the student's math skills, time spent playing video games, etc, but that may be largely irrelevant *3) Determine how to collect your data:* how to collect the data also becomes key a) *Concepts = ideas about products* or services -Ex: to find out impressions/thoughts of a consumer about a new product concept- you may do a new product concept test (white card)= verbal description of product, not the actual product b) *Methods: approaches to collect data to solve the problem.* MS could use a combination of observation (watching behavior as kids interact) or asking questions about their opinions of MS kits

3 Market Segmentation Strategies: One product/multiple markets, Multiple products/multiple markets, Segment of One

-In the past, it was possible to have a one size fits all approach. *But this is no longer possible.* Many brands *see the need to offer different products for different markets.* There are *3 specific market segmentation strategies*: -The *key to successful product differentiation and market segmentation* strategies is *finding the balance between satisfying a customer's needs and achieving organizational synergy* (or lead to cannibalization) 1) *One product for multiple markets*: -1 product for 1 or more markets allows a company to *spare the expense of developing & producing additional variants or versions* of the product -Sporting News has 1 magazine with *1 block of content, but 15 different covers with different baseball player from each of its 15 regions*, Harry Potter publishers effectively marketed to pre-teen, etc. *2) Multiple Products and Multiple Market Segments:* -Prevalent in the *auto industry*: Different lines of cars for different target markets- SUV's, sedans, trucks, hybrids -Used to *own a variety of brands*- many different models, features, -*Expensive & costly to maintain design, product, manufacturing, servicing for so many brands* with so many variants. So *many combinations = limited volume, higher prices, lower sales and ROI for company* *3) Segments of One-"Mass Customization": -Making *products to fit the customer's exact specifications.* Tailoring products to the *unique tastes of the individual but on a large scale* -The advent of *digital-age technology enables companies to offer customized products on a previously unheard-of scale. Flexible manufacturing* makes this possible -Communicate preference to the brand, and now *companies can manufacture a customized piece a price comparable to something mass-produced*

Types of retail locations, define and provide examples

-Indirect Channels: Consists of a variety of intermediaries (wholesalers or distributors, agents, brokers & retailers or dealers) -Direct Channels: 1) Company-Owned Store: -Gain *control of selling process, build relationships with consumers*, margin protection -Not the only channel for products -% of total sales => Apple + 20% -Can function as a *test market to try new products* -Viewed as an *advertisement or tourist attraction* => *not a revenue generating location* -When retailers worry about competition, brands say the stores are "brand showcases" 2) Pop Up Stores: -Growing in popularity -*Temporary locations* for a brand, was holiday focus, not the case now (launches, PR stunts, trial of new geographic location, collaborations) 3) Shop in Shop: -*Smaller shops in larger department stores* -Leased agreements -Fully branded experience in the larger department store--> so the brand can tell their store -Helps retailers drive traffic -ex: JC Penny with Sephora, Sears with Forever 21, Macys with Sunglass Hut

Product Life Cycle: Decline Stage

-Industry/Product *Sales Drop* -*Price Drops* -Environmental Changes -Deletion: *discontinuing a product due to declining sales*- *not worth the effort or salaries* to have someone manage the product -Harvesting: *Keep selling product, but reduce marketing costs* (ex: Coca-Cola and Tab) -*promotion at a minimum* and *few outlets*

Product Life Cycle: Maturity Stage

-Industry/Product *Sales Slow* -Fewer New Buyers -*Profit Declines due to competition* -Product *Differentiation* -Fewer Competitors as *some begin to leave* -*maximum* number of *outlets* -promotion looks to *remind consumers of the brand*

Market Research Step 3: Collect Relevant Information

-Making a decision in MR sometimes *requires you to use what you know currently and make a decision, and other times it requires you to collect an enormous amount of data.* -*Data : facts and figures related to the project* that are divided into two main parts: *secondary data and primary data.*

Setting Price Step 1: Identify Pricing Objectives

-Pricing Objectives: 1) Profit: (ROI, ROA, managing for long-run profits, maximizing current profit objective, target return (profit goal) (ex: 20% profits) 2) Sales Revenue ($): driver for many companies- goal to increase sales revenue, profit and market share. Given that the company is already profitable 3. Market Share ($ or %): *Sales of the company in comparison to sales of the industry.* Pursue share if sales are flat or declining for the industry 4. Unit Volume (#): the quantity produced or sold. 5. Survival: if the firm is at risk- sales, units share may not be as important as survival. Ex: Radio Shack price matching to try to stay alive with other competitors in an effort to raise cash 6. Social Responsibility: a firm may forgo higher profits for a social cause- ex: Gerber gives some products for free for children who cannot

What is a perceptual map? What are the elements? When do you use it?

-Product *Repositioning* using perceptual maps -Elements: (using chocolate milk for adults example) -*4 quadrant map used to reposition products to make it more appealing to a specific target market* 1) *Identify Important Attributes for a Product or Brand Class* (ex: Identify *Important Attributes for Adult Drinks*) 2) Discover *how Customers Rate Competing Products or Brands on These Attributes* (ex: Discover *How Adults See Competing Drinks*) 3) Discover *Where the Company's Product or Brand Is on these Attributes in Minds of Customer* (ex: Discover *How Customers See Chocolate Milk*) 4) *Reposition* the Company's Products or Brands *in the Minds of Consumers* (ex: *Reposition Chocolate Milk to Make It More Appealing to Adults*)

Depth vs. Breadth of Product Line

-Retail outlets may vary their merchandise line, with 2 key distinctions- breadth & depth: 1) DEPTH: -means that the store *carries a large assortment* of *each product item.* -Ex: Shoe store that carries running shoes, dress shoes, children's shoes -Focus on *one product line*, but *carry almost everything you can imagine associated with that line* 2) BREADTH: -describes the *variety of different product items* a store carries. -Refers to the *differentiated items that a store carries*- books, appliances, clothing, shoes, sporting goods, auto -ex: Macys, Walmart, etc.

Levels of Service: Self, Limited, Full

-Retailers can offer a wide variety of service options. 1) Self- Customers: *themselves perform many functions during the purchase process.* A growing trend in retail as retailers want customers to be "co-creators" in their retail experience. ATM's, self service lanes, airline check in kiosks. -Ex: Redbox, Warehouse clubs like Costco, Gas stations, Supermarkets and airlines have self-service lanes/options, Bank ATM 2) Limited: ex: here are stores like Walmart, Target, for example *only have sales associates in some departments not all* and customers are *responsible for most of the shopping activities* 3) Full: department stores like Nordstrom, Saks-*better service for more distinctive higher-margin products*, *Typically offer lots of services for their customers* - alterations, returns, credit care, online 24/7 customer support, loyalty rewards

Criteria for Forming Segments

-So, *how do you look to develop your consumer segments?* 1) *Simplicity and Cost-Effectiveness*: assign to a segment- *should not be complex or costly* to do 2) *Potential for Increased Profit: maximize ROI, otherwise don't segment* 3) *Similarity of Needs of Buyers in Segment: common needs so marketing actions speak to segments* and drive to action 4) *Difference of Needs of Buyers among Segments:* if the needs are *not very different, combine into 1 segment, diff segment = diff marketing = greater cost* 5) *Potential of Marketing Action to Reach Segment*- marketing action to reach segment *should be simple, effective and cost-efficient* if it is not then don't do it

What constitutes a new product?

-The degree of *"newness"* in a new product *affects the amount of learning effort consumers exert to use the product.* -There are 3 types of innovation patterns (continuous, dynamically continuous, discontinuous) from low degrees of new consumer learning needed to high

The retail life cycle

-The retail life cycle describes the *stage of growth and decline for retail outlets.* 1) Early growth- *new retail format emerging.* Departure from the competition, *profits may be low due to start up, market share increasing* (value-retail centers, online retailers, single-brand stores) 2) Accelerated development- *market share and profit growth, competition enters* (single price stores, factory outlet stores, warehouse clubs) 3) Maturity-*battle for share* with some *competitors dropping out.* New retailers begin to *enter with newer more innovative formats.* (fast-food outlets, supermarkets, convenience stores, department stores) 4) Decline- need to *find ways of improving or innovating in-store experience*. ex: Radio Shack (catalog retailers, business-district retailers, general stores)

Fixed Price vs. Dynamic Pricing

-We have looked at many considerations, but setting the price is still the responsibility of the marketing manager. 2 options here: 1) fixed-price policy: involves *setting one price for all buyers of a product or service.* Also called a one-price policy. What *most companies use.* 2) dynamic pricing policy: involves *setting different prices for products and services in real time* in *response to supply and demand conditions.* Also called a flexible price policy. *Technology* today can help identified online shoppers who are price sensitive and *offer them discounts/reduced prices as an incentive to buy.* Typical for *ecommerce* where there is a ton of data to show optimal price points that consumers are shopping at. Ex: Amazon is routinely adjusting prices based on past purchases of online buyers and uber uses this with its surge pricing policy

movement along vs. shift of the demand curve

-When we talk about demand there are 2 key issues: movement along the demand curve vs. a shifting of the demand curve. 1) Movement Along a Demand Curve: *Strictly* looks at the *price & quantity demanded all other factors held equal* -*change in price leads to a change in quantity* (as price drops, demand increases) 2) Shift in the Demand Curve: Impact of *other factors* like advertising that spark demand -*change in the quantity* at the *same price*

What is a product-market grid?

-a *framework to relate the market segments of potential buyers to products offered or potential marketing actions*. 1) Forming a Market-Product Grid: -*Market segments (Horizontal Rows)* (ex: side, back, stomach sleepers) -*Products (Vertical Columns)* (ex: hard, medium, soft pillows) 2) Estimating Market Sizes: -*Sales of Each Product Expected to be Sold to Market Segments* (ex: side sleepers has largest market segment of 73% so having the right firmness pillow for this market is key)

What is the promotional mix?

-combination of one or more communication tools used to: (1) *inform prospective buyers* about the *benefits* of the product (2) *persuade them to try it*, and (3) *remind them later about the benefits they enjoyed* by using the product

Services

-the *intangible activities or benefits that an organization provides to satisfy consumers' needs* in exchange for money or something else of value -ex: Banking, Insurance, Education, Medical Services, Hair Cuts, Babysitting

What is market segmentation?

-involves *aggregating prospective buyers into groups, or segments* that: (1) have *common needs* (2) will *respond similarly to a marketing action.* -And because we have different market segments, *different consumers with different needs and wants, brands have to employ a strategy of product differentiation* -Product differentiation is a marketing strategy that involves a firm using *different marketing mix actions to help consumers perceive the product as being different and better* than competing products. *(ex: price, form, features, performance, quality, style, etc.)* -Segmentation is a means to an end: *marketing actions that can increase sales & profitability* -First *segmentation stresses the importance of grouping people in a market accordingly to the similarity of their needs and benefits* that they are looking for (links consumer to brand actions)

Neuromarketing (Primary Data: Watching People)

-observe the *response to unconscious stimuli* -Study of *how the brain responds to marketing stimuli, including brands* -Research indicates that *consumer buying decision is an unconscious habitual process* -Frito-Lay used EEG technology to learn that when Cheetos made the fingers of an eater turn orange a strong response was created. The consumers liked the messiness of the product perhaps because it reflected an indulgent experience and because it indicated that the product really was infused with cheese. This insight was exploited in an advertising campaign.

What is price? What is the price equation?

-the *money or other considerations exchanged* for the *ownership or use of a product* or service. -Equation: *Final Price = List Price - (Incentives + Allowances) + Extra Fees* -List Price: can be many things such as tuition or invoice price (price listed) -Incentives + Allowances: *Discounts or deductions* to the list price *decreasing the final price* (ex: cash discount, old car trade-in) -Extra Fees: *incremental charges increasing the final price* (ex: financing charges, destination charges)

Non-store retailing

-retail opportunities that occur outside the traditional retail outlet. 6 forms: 1) Automatic vending: -*machines* where customers can *service themselves.* -Be *aware of cost of machines (lease), maintenance, operating costs* 2) Direct Mail & Catalogs: "the store that comes to your door" -19 direct mail catalogs to each house each week -*Expensive to print and mail* catalogs -*Focus on proven customers* rather than prospective customers -Can *focus on niche segments* => LL Bean sends catalogs to fly-fishing enthusiasts 3) Television Home Shopping: -Watch *product demos on TV* and *order via phone or internet* -QVC, HxSN, Evine, 24/7/365, 35-65 year old women, Greater *focus on celebrity products* 4) Online Retailing: -search, evaluate and *order products online*, 24 hour accessibility, Ability to *compare across various products*, "bricks & clicks", *8.5%* of total global retail sales, $4Trillion by 2020 5) Telemarketing: Uses the *telephone to interact with and sell to customers* -Ex: insurance companies, brokerage firms, newspapers -Regulations like the Do Not Call Registry, 221 Millions #'s on the do not call list 6) Direct Selling: *Door to door*, Selling through *personal interactions* and demonstrations. -ex: Avon, Mark Kay, Amway, Pampered Chef -$184B in sales globally, 20M direct sales reps in the US -*Growing in developing markets* where there may not be infrastructure

Observational Data (Primary Data: Watching People)

-the *facts and figures obtained by watching, either mechanically or in person, how people actually behave.* Can be collected in various ways: *1) mechanical (electronic):* -Nielsen People Meter: TV watching habits (Channel, shows watched, etc.). Increasingly complicated as audience delay view, or view on multiple devices -Neilsen TV Ratings: Ratings are % points of people watching a show and can influence advertising rates as advertisers buy airtime on different shows *2) personal: watching consumers shop or use product in person (mystery shopper, observation, ethnographic research)* -ex: Ikea noticed that once baskets were full, consumers would stop shopping, so they positioned shopping carts around the store to help consumers keep shopping a) *Mystery shoppers: pay researchers to shop in-store, as an actual consumer, to get that consumer experience.* Check things like *availability, pricing, customer service* *b) Observation* *c) Ethnographic research* (2 slides later) -Can be *valuable, very costly, time-consuming* *3) neuromarketing: (3 slides later)*

Primary Data: What is it? When do you use it? Examples?

-the *facts and figures that are newly collected for the project.* -*observing people and asking them questions are 2 ways* of collecting primary data: *1) Observing People:*(mechanical, personal, neuromarketing) a) *Observational Data* b) *Personal Methods* (mystery shopper, observation, ethnographic research) c) *Neuromarketing* *2) Asking People Questions:* a) *Questionnaire* Data (facts and figures obtained by asking people about their attitudes, awareness, intentions, and behaviors.) b) *Individual Interviews* (get a lot of detail. time-consuming, one consumer at a time) c) *Focus Groups:* --6-10 people, past, present, prospective customers, discussion leader (moderator) *that ask questions, opinions of the product, experience*, competitors products and can be recorded: one-way mirror --*Open-ended so to get ideas from consumers*, but if one person is stronger than the others, they may dominate the conversation, so need a good moderator that can control the conversations --Also *look for the next big thing, or hunting for trends* d) *Idea Evaluation Methods*: Testing an idea to help a marketer make the best marketing decision. --ex: Personal Interview Surveys, Telephone Interviews, Mail Surveys, Online (E-Mail/Internet) Surveys, Mall Intercept Interview Surveys

Secondary Data: What is it? When do you use it? Examples?

-the *facts and figures that have already been recorded prior to the project at hand.* -Two types of Secondary Data: 1) *Internal: Internal records of the company* can be most easily accessible --Marketing *Input Data: Effort Expended to Make Sales* --Marketing *Outcome Data: Results of Marketing Efforts* 2) *External: published data from outside the organization* (ex: Census Bureau, U.S. 2010 Census, American Community Survey, U.S. 2017 Economic Census) -Syndicated Panel: can answer questions like how many times did a consumer buy our product in the last year. Provided on a regular basis -Nielsen TV Ratings- lifestyle information, TV viewing behavior, J.D. Power Surveys, IRI InfoScan- sales data, coupon redemption -Trade Associations, Universities, Business Periodicals

What is price elasticity of demand (define, no calculation)

-the *percentage change in quantity demanded* relative to a *percentage change in price.* 1) Elastic Demand: -*1 Percent Price Decrease* Generates *More than 1 Percent Quantity Increase in demand* -*sensitive to a price change* so impacts demand -Opportunity to increase revenue -*Products with lots of substitutes* are said to be price elastic -Large cash outlay are price elastic (cars) 2) Inelastic Demand: -*1 Percent Price Decrease* Produces *Less than 1 Percent Quantity Increase* -*insensitive to a price change* so impacts demand -*Products that are necessities* are price inelastic

What is a product' s positioning?

-the *place the product occupies in the mind of the consumer based on attributes relative to competitive products* -Two Approaches to Product Positioning: 1) *Head-to-Head Positioning:* -*Compete directly with competitors on similar attributes for same target* market -ex: Hertz, Avis, Dollar Rent a Car 2) *Differentiation Positioning*: -*Position* a brand in a *more niche market, less competitive* -ex: McDonald's McLean launch to go after niche of healthy eaters

What is market research?

-the process of *defining a marketing problem and opportunity, systematically collecting and analyzing information, and recommending actions.* -While no method is perfect, marketers conduct market research in order to *reduce their risk and improve their marketing decisions*

Types of Innovation: Continuous, Dynamically Continuous, Discontinuous

1) *Continuous:* -consumers *don't need to learn any new behaviors*, seamlessly fits into lifestyle. Colgate whitening toothpaste. Adding extra whitening feature, but overall *does not change how consumers use the product* 2) Dynamically Continuous: -only *minor changes in behaviors are required from consumers and is relatively easy to adopt.* Examples like electric toothbrush or Swiffer Wet jet, still mopping the floor but no messiness of mop and bucket so *easy change for consumer to adopt* (*advertise points of differences and benefits* to consumers) 3) Discontinuous: -consumer *must learn entirely new consumption pattern.* Wireless routers- over 30% returned at best buy as too complicated to install. Requires heavy marketing commitment and budget because *requires a ton of new education* (educate consumers through *product trial and personal selling*)

New Product Development Process- what are the 7 steps- list & define

1) *New-Product Strategy Development*: strategically *driven by the Sr. Leadership- SBU- brands.* Fluid plan for *3-5 years out.* Term: innovation pipeline -*Defines a protocol* for NPD -Disruptive new technology= new technology that disrupts your business (digital photography & cameras were disruptive to the film-based camera industry) 2) *Idea Generation*: *Generate new ideas from a variety of sources*- peers, customer feedback, suppliers, R&D, market research, competitive products, universities, smaller up and coming companies -Think about *"what if" questions to focus on creating new solutions* to consumer problems -Ideas from Family, friends; Suppliers that have new technologies, ingredients, packaging -A *solution to a problem*- consumers had a hard time opening laundry detergent boxes- revolutionized Tide Pods -*Competitive Products* -Tech from universities Inventors, small companies with a new tech 3) *Screening and Evaluation:* -*internally* does it *fit with brand strategy/requirements* •*externally*: focus groups or surveys of consumer based on *written descriptions of product* => concepts tests 4) Business Analysis: -*Fit with mission/objectives* of the organization -*Financial feasibility analysis* to see *if there is a market for it* -Marketing *synergies* with the organizations *existing products* 5) Develop product: -*prototype with testing* (lab & consumer tests) => meets safety standards 6) Marketing Testing -*Expose products to consumers* to see *if they will buy* 7) Commercialization -*Launch* new product -*Full-scale production* and *sales*

Types of Consumer Products *(classifying products)*: Convenience, Shopping, Specialty, Unsought

1) Convenience products: items that the consumer *purchases frequently, conveniently, and with a minimum of shopping effort.* (ex: toothpaste, hand soap, etc.) 2) Shopping products: items for which the consumer *compares several alternatives on criteria such as price, quality, or style.* (cameras, TVs, airline tickets, etc.) 3) Specialty products: items that a *consumer makes a special effort to search out* and buy. (ex: luxury cars, luxury watches, heart surgery, etc.) 4) Unsought products: items that the consumer either *does not know about or knows about but does not initially want.* (burial insurance, thesaurus, etc.)

What are the ways to select an appropriate price level? (Step 4 of Price Setting)

1) Demand Approach: Bases *pricing decisions based on consumers tastes and preferences* (skimming, penetrating, prestige, price lining, odd-even, target, etc.) 2) Cost Approach: With cost-oriented approaches, the marketer *looks at the cost of the product* (not the consumer demand factors) looks at *production, marketing* and a *factor added in to cover other expenses like Overhead*, and profit targets. (standard mark-up, cost-plus, experience curve) 3) Profit Approach: Profit oriented pricing approaches *look at the profit generated in either $ or in a % of sales* (target profit, target return on sales, target ROI) 4) Competition Approach: rather than looking at consumer demand/preferences, or internal costs or even profit targets, competition-based pricing *looks to see what is going on in the market place.* (customary pricing, above, at or below pricing, loss leader)

Alternative forms of product life cycles

1) High-learning product: Personal computers and convection ovens when launched. *Longer intro period because higher learning curve for consumers* 2) Low-learning product: Moves *quickly through intro stage*. Can be *copied by competitors*, so *marketing becomes very important to highlight brand points of difference* 3) Fashion Product: Could be months or years, but trends do make a comeback. Hosiery is on the decline but recently due to young royals like Kate Middleton and popularity of brands like Spanx it is having a moment again 4) Fad Product: In and out in a *matter of months*

Know the 6 steps in setting price

1) Identify Pricing Objectives/Constraints 2) Estimate Demand and Revenue 3) Determine Cost, Volume, Profit Relationships 4) Select Approximate Price Level 5) Set List or Quoted Price 6) Make Special Adjustments

How do promotional tactics change throughout the product life cycle?

1) Introduction- *increase awareness among consumers is the primary objective* in this phase. Can use all forms, but the best form depends on the brand and what you are trying to communicate to consumers. (to inform) -New launch: launch event, mail coupons, sales force gets out to retailers to carry line, sampling, demo's in store 2) Growth: *persuade consumer to try and choose your brand over other brands*. *Focus here on advertising to call out POD vs. competition* and *personal selling* can be used to solidify distribution channels with intermediaries (like distributors) and overcome objections. Looking to *gain brand preference among consumers and solidify your distribution at retail* (to persuade) 3) Maturity: *maintain existing buyers and maintain loyalty of existing customers.* Sponsor events. Direct mail to drive repeat purchases (to remind) 4) Decline: *phase out period* for product and *little $ spent on promotional mix* (to phase out)

Primary Data Question Formats (Asking People)

1) Open-Ended Questions: respondent *can express ideas, opinions, in their own words*, not led by a researcher 2) Closed-End or Fixed Alternative Questions *(multiple choice):* select from predetermined responses 3) Dichotomous Questions: *2 potential answers*, often yes/no 4) Semantic Differential Questions: *5 point scale with 2 words at either end to help judge the scaling not important to very important* (ex: category of taste of food with 5 point scale and tasty and not tasty being the two opposite spectrums) 5) Likert Scale Questions: *extent to which you agree/disagree with something* (ex: statement of adults like to take their children to restaurants with choices being strongly agree, agree, don't know, disagree, strongly disagree)