Marketing Final Exam

Call to action (CTA)

"Call to Action" or the action you ask people to do, such as "buy now"

Cross-price elasticity

%-change in the quantity of a given offering sold caused by a %-change in the price of another offering % quantity demanded change/% change in price

Price Signaling ("Image Pricing")

(1) pricing to capitalize on price-quality inferences (aka "Prestige pricing"); (2) indirect communication (because direct price fixing is illegal) to communicate with other companies about the price strategy they plan to pursue

2 Digital Media Strategies

1. Channel strategies 2. Promotion strategies

4 main communication goals

1. Create customer awareness about offering 2. Generate interest in offering 3. Create and strengthen customer preference 4. Motivate customers to pursue an action

3 types of communication groups

1. Customer communication 2. Collaborator communication 3. Company-focused communication (internal)

What 3 groups do you have to manage incentives for?

1. Customers 2. Collaborators 3. Company (employees)

3 Illegal Pricing Strategies

1. Deceptive Pricing 2. Predatory Pricing 3. Price Fixing

5 Characteristics of Penetration Pricing

1. Demand is relatively elastic 2. The target segment is increasingly competitive 3. Cost is a function of volume and, as a result, significant cost savings are expected as cumulative volume increases 4. Being the market pioneer can lead to a SCA 5. The company has the resources to mass produce the offering

5 Characteristics of Skim Pricing

1. Demand is relatively inelastic 2. There is little or no competition for the target segment 3. Cost to produce is not a direct function of volume 4. Being a market pioneer is not likely to result in a SCA 5. Company lacks capabilities to mass-produce the offering

2 methods to manage impact of strategic offerings

1. Estimate money brought in/contributing to revenue individually 2. Assess all company offerings together as contributing to value

4 cons of price war (detrimental to profit)

1. Fixed-cost effect: Price reductions have an exponential impact on profitability 2. Competitive Reaction: Competitors can easily match prices; rarely a sustainable strategy 3. Increased Price Elasticity: May cause shift in customers' future price expectations, Reference points 4. Brand Devaluation: Emphasizing price erodes brand power

2 ways to increase revenues

1. Increase sales volume 2. Increase unit price

2 approaches of communication message appeal

1. Information-based approach 2. Affect-based approach

3 strategies to increase revenue by increasing sales volume

1. Market-growth strategy 2. Market penetration strategy 3. Steal-share strategy

4 ideal conditions for a price war taking place

1. Offering Differentiation: Low differentiation is best 2. Cost Structure: Increasing volume of outputs benefits all companies 3. Market Growth: Best when markets are stagnant so steal-share strategy is needed to grow 4. Customer Loyalty: Best when customers aren't brand loyal

2 promotion strategy components

1. SEO and search advertising cookies 2. Targeting/privacy issues

3 main uses of cookies

1. Session management: recognizing users 2. Personalization: help display targeted ads 3. Tracking

6 communication consisderations

1. Setting communications goals 2. Identify target audience 3. Developing the message 4. Select the media (outbound or inbound) 5. Creative solution 6. Evaluate communication effectiveness

2 channel strategy components

1. Understanding web metrics 2. Google Analytics

Price Fixing

A practice in which companies conspire to set prices for a given product or service

Competitive Pricing ("Competitive-parity pricing")

A pricing method that uses competitors' prices as benchmarks

Bounce Rate

A ratio of people who have bounced (left without clicking on anything) to the entire number of visitors.

Pay Per Click (PPC)

Advertisers do not pay unless someone clicks

Ansoff Matrix (flip for picture)

Ansoff Matrix

Steal-share strategy

Attract customers from your competitors

Market-growth strategy

Attract customers who are new to the category; helps increase sales volume/revenue

Advertising is like an ____ where bidding and key word selection is involved

Auction

Average session duration

Average time active on website or webpage

Best strategy to win a potential price war?

Avoid the price war

SEO (Search Engine Optimization)

Best websites, based on Google algorithm PageRank, assess quality of web pages based on which pages link together

Factors that influence PageRank (SEO Google algorithm)

Changes frequently, can include quality, keywords, # of pages that link to you, title tags and meta descriptions, and website/URL structure

Price Discrimination ("Price Segmentation")

Charging different buyers different prices for goods of equal grade and quality (e.g., tourist vs. local vs. student rates at museums)

Second Market Discounting

Company charges lower prices in more competitive markets (e.g., other countries)

How do price wars start?

Company is willing to sacrifice margins to gain sales volume Price cuts --> Price wars

Reference-price effects (Psychological Aspect)

Consumers using what they know of price as a reference point when encountering new prices

Collaborator Nonmonetary Incentive Examples

Contests, bonus merchandise, buyback guarantees, sales support and training

Third-Party Cookies

Cookies put on a webpage by those other than the website being visited, such as advertisers inserting their own cookies on a different web page

Customer Monetary Incentives Examples

Coupons, rebates, price reductions, volume discounts

Peer to peer communication

Customer to customer, word of mouth

Raising prices increases profit margins but can...

Decrease sales volume

Elastic Demand

Demand changes greatly when price changes (Ex. substitute goods available

Inelastic Demand

Demand doesn't change when price changes (Ex. strong brands, essential goods)

Main con of price war

Detrimental to profit

Product-Line Pricing

Each product's price is determined as a function of the product's place in the product line

Mobile communication

Geolocation used to predict needs

Skim Pricing

High price to "skim the cream" off the top of the market

Customer initiated communication interactions

Hybrid outbound (company to customer) or inbound (customer to company back and forth)

Market Penetration Strategy

Increases sales volume by increasing quantity purchased from existing customers

Everyday Low Pricing (EDLP)

Maintaining low prices without frequent price promotions

2 ways an offering can create value for a company?

Monetary and Strategic Value

Monetary Value

Monetary benefits of an offering, primary goal for companies

Company Monetary Incentive Example

Monetary bonuses

New vs Repeat Visitors

New = first time, Repeat = returning

Strategic Value

Nonmonetary benefits and costs that are of strategic importance to the company

Company Nonmonetary Incentives Example

Nonmonetary bonuses, recognition awards, contests

Total sessions

Number of unique visits

Artificial Time Constraint (Psychological Aspect)

One day only! Sales

Outbound communcation

One way interaction, company to customer

Search engines rank search results based on...

PageRank

Price-quantity effects (Innumeracy) (Psychological Aspect)

People are more sensitive to price changes than changes in quantity

Price-ending effects (Charm pricing, price appearance effects) (Psychological Aspect)

People categorize certain price numbers as meaning certain things Ex. Prices ending in 9 make people think "discount"; prices ending in 0 make people think "quality"

Price-tier effects (Psychological Aspect)

People think of prices in tiers. $1.99 = tier 1; $2.99 = tier 2, etc.

Conversion rate

Percentage of visitors who perform the desired action (# successes) / (# unique visitors)

One-to-one communication

Personalized, right time right place

Customer Nonmonetary Incentive Examples

Premiums, rewards, loyalty programs, contests, prizes, premiums

Deceptive Pricing

Presenting an offering's price to the buyer in a way that is deliberately misleading

High-Low Pricing

Prices fluctuate over time, typically due to a heavy reliance on sales promotions

Complementary Pricing ("Captive Pricing"/"Two-part Pricing")

Pricing a group of uniquely compatible products so that the entry product in the group is comparatively low priced, with higher prices for the other components (e.g., printers and ink)

Experience Curve Pricing

Pricing based on anticipated lower cost structure due to scale economies and experience curve effects (as you get more experience, each product costs less to produce)

Psychological Aspects of Pricing Examples

Reference-price effects, Price-quantity effects, Price-tier effects, Price-ending effects, Product-line pricing effects, and Artificial Time Constraint

Product-line pricing effects (Psychological Aspect)

Relative prices of a product line can influence demand Ex. Restaurants price wine they want to get rid of as second most expensive (not most expensive, not cheapest)

2 key profit drivers

Revenues and costs

Predatory Pricing

Selling a product below cost with the intent to put competitors out of business

Loss Leader

Setting a low price for an offering (at or below cost) to increase sales of other offerings (e.g., build store traffic, increase other sales)

Prestige Pricing

Setting price relatively high to create an exclusive image

Demand Pricing

Setting prices based on customers' WTP for the benefits of the offering

Penetration Pricing

Setting relatively low prices in an attempt to gain higher sales volume, albeit at lower margins

Collaborator Monetary Incentive Examples

Slotting, stocking, advertising, display, and market-development allowances; spiffs; volume discounts and rebates; off-invoice incentives; cash discounts; inventory financing

First-Party Cookies

Stored on a website a user has visited directly, used to optimize that website's functionality

Cost-Plus Pricing

The price is determined by adding a fixed markup to the cost of the product. Used where profit margins are stable. Does not account for demand or competitors.

Yield-Management Pricing

The price is set to maximize revenue for a fixed capacity within a given time frame (e.g., airlines & hotels)

Pricing Strategies

There are a lot, prepare yourself

We use web metrics to...

Track and understand customers' online activity

Inbound communication

Two way interaction between customer and company

You can lower these 2 types of costs to manage profit

Variable and Fixed (Ex. COGS, R&D, Marketing, Other)

What is the tradeoff managers face in decisions about optimizing price? a)raising prices increases profit margins, but raising prices (generally) decreases sales volume b)raising prices always leads to increased perceptions of quality, but can make consumers demand more of the brand c)raising prices (generally) decreases short-term sales volume but this is usually not a concern d)raising prices increases profit margins, and this will lead to employee demands for raises

a)Raising prices increases profit margins, but raising prices (generally) decreases sales volume

Consider psychological aspects of pricing. A customer uses what they know of prices in general for a product category when they encounter new prices. This is an example of... a)price-quantity effects b)reference-price effects c)price-ending effects d)product-line pricing effects e)artificial time constraints

b)reference-price effects

A company uses a _____________ strategy, by which they increase sales volume by increasing the quantity purchased from their existing customers. This is a... a)market-growth strategy b)steal-share strategy c)market penetration strategy d)price elasticity strategy e)none of the above

c)Market Penetration Strategy

A company releases an advertisement for a holiday turkey. The advertisement includes the price, the weight/size of the turkey, a joke about family dynamics during the busy holiday season, and an image demonstrating a loving family around the dinner table (implying that this purchase will bring love and family togetherness to any household). This would be an example of: a)an information-based approach to advertising b)an affect-based approach to advertising c)a combination of an information-based approach and an affect-based approach to advertising d)a company-focused communication

c)a combination of an information-based approach and an affect-based approach to advertising

Consider pricing strategies. A cruise ship has a fixed capacity of cabins onboard for a week-long cruise. The company works to set an ideal price that will maximize their revenues for this fixed capacity each week. This is an example of... a)prestige pricing / price signaling b)price fixing c)demand pricing d)complementary pricing e)yield-management pricing

e)yield-management pricing

Outbound media examples

•Advertising •Public Relations •Social media •Direct marketing •Personal selling •Event sponsorship •Product placement •Product-based communication •Product samples and free trials

Contextual Targeting

•Displaying ads based on a website's content Ex. Running shoe ads on a website with a marathon article

Information-based approach

•Factual presentation •Demonstrations •Slice-of-life stories •Testimonials

Affect-based approach

•Love •Romance •Humor Fear

Inbound media examples

•Online search •Personal interaction •Phone communication •Online interactive forums •Mail/email

Predictive Targeting

•Predicts future buying patterns based on past behaviors •Uses -Web browsing data from behavioral targeting -3rd party data -AI/machine learning

Behavioral Targeting

•Segmenting customers based on web browsing behavior •Mobile and physical store data can also be incorporated

Search Retargeting

•Serve display ads to users as they browse the web based on their keyword search behavior •Keyword based

Site Retargeting ("Retargeting")

•Show display ads to users who visited your site and then left without completing a purchase to browse elsewhere •NOT keyword based •Targeting people familiar with your brand