MKT 6661 Exam 3

Consumer Marketing Channels

-Channel 1: Producer/Manufact--->Consumer -Channel 2: Producer--->Retailer--->Consumer -Channel 3: Producer--->Wholesaler--->Retailer--->Consumer

International Marketing Channels

-Channel 1: Producer/Manufact--->Consumer -Channel 2: Producer/Manufact--->Industrial Distributors---> Consumer -Channel 3: Producer/Manufact--->Manufact representative-----> Industrial Distributors---> Consumer

setting pricing policy

1. Selecting the Pricing Objective 2. Determining Demand 3. Estimating Costs 4. Analyzing Competitors' Costs, Prices, and Offers 5. Selecting a Pricing Method 6. Selecting the Final Price

contributed to the use of packaging as a marketing tool

4 factors contribute to the growing use of packaging as a marketing tool. Self-service. In an average supermarket, which may stock 15,000 items, the typical shopper passes some 300 products per minute. Given that 50 percent to 70 percent of all purchases are made in the store, effective packaging must perform many sales tasks: attract attention, describe the product's features, create consumer confidence, and make a favorable overall impression. Consumer affluence. Affluent consumers are willing to pay a little more for the convenience, appearance, dependability, and prestige of better packaging. Company and brand image. Packaging contributes to instant recognition of the company or brand. In the store, they can create a billboard effect, as Garnier Fructis does with its bright green packaging in the hair care aisle. Innovation opportunity. Unique or innovative packaging can bring big benefits to consumers and profits to producers. Companies are always looking for a way to make their products more convenient and easier to use—often charging a premium when they do so. The SC Johnson Smart Twist Cleaning System has a handheld sprayer and carousel that rotates among concentrated versions of three different cleaning products; Kleenex hand towels use a dispenser that fits upside down on a bathroom towel rack; and Kiwi Express Shine shoe polish has a dispenser and applicator to shine shoes without the need to spread newspaper, wear a glove, or use a brush.

include core functionality, features, performance quality,

9 Attributes on the basis of which to differentiate include core functionality, features, performance quality, conformance quality, durability, reliability, form, style, and customization. Design has become an increasingly important differentiator, and we discuss it separately later in the chapter. To successfully compete in the market, products must be differentiated. Well-differentiated products can create significant competitive advantages.

contractual vertical marketing system (VMS)

A contractual vertical marketing system consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone. Sometimes thought of as "value-adding partnerships," contractual vertical marketing systems come in 3 types: (1) In wholesaler-sponsored voluntary chains, wholesalers organize voluntary chains of independent retailers to help standardize their selling practices and achieve buying economies. (2) In retailer cooperatives, retailers take the initiative and organize a new business entity to carry on wholesaling and possibly some production. (3) In franchise organizations, a channel member (franchisor) might link several successive stages in the production-distribution process.

wherein rising costs unmatched by productivity gains squeeze profit margins and lead companies to

A major circumstance provoking price increases is cost inflation, wherein rising costs unmatched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases. Companies often raise their prices by more than the cost increase in anticipation of further inflation or government price controls, a practice called anticipatory pricing. Another factor leading to price increases is high demand that exceeds a company's production capabilities. When a company cannot supply all its customers, it can raise its prices, ration supplies, or both.

the number of variants offered for each product in the line

A product portfolio encompasses all products offered by a company, including various product categories and product lines. For example, the extensive iPhone product portfolio includes headphones and headsets, cables and docks, armbands, cases, power and car accessories, and speakers. NEC's (Japan) portfolio consists of communication products and computer products.

persuade consumers to demand the product from intermediaries,

A push strategy uses the manufacturer's sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. This strategy is particularly appropriate when there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood. In a pull strategy the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it. This strategy is particularly appropriate when there is high brand loyalty and high involvement in the category, when consumers are able to perceive differences between brands, and when they choose the brand before they go to the store.

elastic demand

A situation in which consumer demand is sensitive to changes in price. Flatter line

elaborates on product or service attributes or benefits

An informational appeal elaborates on product or service attributes or benefits. Examples in advertising include problem-solution ads (Aleve offers the longest-lasting relief for aches and pains); product demonstration ads (Thompson Water Seal can withstand intense rain, snow, and heat); product comparison ads (AT&T offers the largest 4G mobile network); and testimonials from unknown or celebrity endorsers (NBA player LeBron James pitching McDonald's, Nike, Samsung, Sprite, and others). Informational appeals assume strictly rational processing of the communication on the consumer's part. Logic and reason rule.

online journals or diaries designed to reach a few close friends or a mass audience

Blogs, regularly updated online journals or diaries, have become an important outlet for word of mouth. There are millions in existence, and they vary widely; some are personal for close friends and families, and others are designed to reach and influence a vast audience. One obvious appeal of blogs is that they bring together people with common interests.

expand consumption of such products as tea, pork, and orange juice

Building interest in a product category. Companies and trade associations have used publicity to rebuild interest in declining commodities such as eggs, milk, beef, and potatoes and to expand consumption of such products as tea, pork, and orange juice.

reuse products or containers, refurbish products for resale, recycling products

Channels normally describe a forward movement of products from source to user, but reverse-flow channels are also important. Reverse-flow channels perform several important functions, such as to reuse products or containers (such as refillable chemical-carrying drums), refurbish products for resale (such as circuit boards or computers), recycle products, and dispose of products and packaging. Reverse-flow intermediaries include manufacturers' redemption centers, community groups, trash-collection specialists, recycling centers, trash-recycling brokers, and central processing warehousing.

Color is a particularly important aspect of packaging

Color is a particularly important aspect of packaging and carries different meanings in different cultures and market segments. As one expert says, "Color is all-pervasive. It is language-neutral, but loaded with meaning. It's completely overt, yet each person sees color through different eyes, both literally and figuratively." Color can define a brand, from Tiffany's blue box to Cadbury's purple wrapping and UPS's brown trucks. Orange, the telecom mobile operator, uses color as both its look and its very name!

successful upscale automobile nameplate: Toyota's Lexus, Nissan's Infiniti, and Honda's Acura.

Companies may wish to enter the high end of the market to achieve more growth, realize higher margins, or simply position themselves as full-line manufacturers. They invented entirely new names because consumers might not have given the brand "permission" to stretch upward when those lines were first introduced. Moving up-market is not without risks, however. A company might lack the resources—infrastructure, know-how, and people—to develop a superior product that will fit the needs of its upscale target customers.

ways to measure communication effectiveness

Companies often examine the effectiveness of their communication campaigns to determine whether they are overspending or underspending on advertising. One way to answer this question is to work with the formulation shown in Figure12.4. A company's share of advertising expenditures produces a share of voice (proportion of company advertising of that product to all advertising of similar competitive products) that earns a share of consumers' minds and hearts and, ultimately, a share of market.

conventional marketing channel

Conventional marketing channels consist of an independent producer, wholesaler(s), and retailer(s). Each is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole. No channel member has complete or substantial control over other members. Channel coordination occurs when channel members are brought together to advance the goals of the channel instead of their own potentially incompatible

entitling the bearer to a stated saving on the purchase of a specific product

Coupons are certificates entitling the bearer to a stated saving on the purchase of a specific product. They can be mailed, enclosed in or attached to other products, inserted in magazine and newspaper ads, e-mailed, or made available online

consumer's ability to recognize or recall the brand in sufficient detail

Creating awareness provides a foundation for brand equity. Creating awareness involves fostering the consumer's ability to recognize or recall the brand in sufficient detail to make a purchase. Recognition is easier to achieve than recall—consumers who are asked to think of a brand of frozen entrées are more likely to recognize Stouffer's distinctive orange packages than to recall the brand without seeing it. Brand recall tends to be important for consumers who have received marketing communications outside the store when the company's offerings are not readily visible and available for purchase. In contrast, brand recognition tends to be important inside the store when consumers can readily see and purchase the company's offering. Creating awareness can involve highlighting awareness of the need (stimulating primary demand) or awareness of the specific offering (stimulating selective demand).

Causes of Channel Conflict

Even though each channel conflict has unique antecedents and consequences, there are 4 general factors that can contribute to the creation of a channel conflict. Some of the most common reasons for channel conflict are as follows: Goal incompatibility. Channel conflict can stem from the conflicting goals of different channel members. For example, a manufacturer may want to achieve rapid market penetration through a low-price policy. Dealers, in contrast, may prefer to work with high margins and pursue short-run profitability. Differences in strategies and tactics. Channel conflict may also occur when channel members adopt different strategies and tactics to achieve their goals. The manufacturer may be optimistic about the short-term economic outlook and want dealers to carry higher inventory, while the dealers may be pessimistic. In the beverage category, it is not uncommon for disputes to arise between manufacturers and their distributors about the optimal advertising strategy. Power imbalance. Greater retailer consolidation—the 10 largest U.S. retailers account for more than 80 percent of the average manufacturer's business—has led to increased retailer influence that often spawns channel conflict. Walmart, for example, is the principal buyer for the products of many manufacturers, including Disney, Procter & Gamble, and Revlon, and is able to command reduced prices or quantity discounts from these and other suppliers.36 Power imbalance can also be caused by distributors' reliance on the manufacturer. The fortunes of exclusive dealers, such as auto dealers, are profoundly affected by the manufacturer's product and pricing decisions. Unclear roles and rights. Territory boundaries and credit for sales often produce conflict. HP may sell laptops to large accounts through its own sales force, but its licensed dealers may also be trying to sell to large accounts.

surveying recent buyers and then calculating customer value versus company cost

Features - Most products can be offered with varying features that supplement their basic function. A company can identify and select appropriate new features by surveying recent buyers and then calculating customer value versus company cost for each potential feature. Marketers should consider how many people want each feature, how long it would take to introduce it, and whether competitors could easily copy it.4 To avoid "feature fatigue," the company must prioritize features and tell consumers how to use and benefit from them.

functions performed by channel members constitute a forward flow

Figure 15.1 Many of the channel functions involve bi-directional flows of goods and services. Some of these functions (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; others (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions.

regarding pricing in a digital world

For over 25 years, the internet has been changing the way buyers and sellers interact. The internet has enabled buyers to make instant price comparisons from thousands of vendors. Moreover, using smart mobile devices, customers can easily make price comparisons in stores before deciding whether to purchase, pressure the retailer to match or better the price, or buy elsewhere. In addition to empowering buyers, the internet also enables sellers to optimize their pricing. Thus, sellers now can monitor market demand and adjust prices accordingly.

the size, shape, or physical structure of a product

Form - Many products can be differentiated by form—the size, shape, or physical structure of a product. Consider the many possible forms of aspirin. Although essentially a commodity, aspirin can be differentiated by dosage, size, shape, color, coating, or action time.

characteristics of franchising.

Franchises are distinguished by 3 main characteristics: The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments. For example, McDonald's Corporation owns the intellectual property associated with the McDonald's brand and the logistics associated with operating its franchises. The franchisee pays for the right to be part of the system. Start-up costs include rental and lease equipment and fixtures and (usually) a regular license fee. McDonald's franchisees typically invest upward of $1.5 million in total start-up costs and fees. The franchisee then pays McDonald's a certain percentage of sales plus a monthly rent. The franchisor provides its franchisees with a system for doing business. McDonald's requires franchisees to attend "Hamburger University" in Oak Brook, Illinois, for two weeks to learn how to manage the business. Franchisees must follow certain procedures in buying materials.

provided free of charge and require no additional payment from customers,

Furthermore, whereas guarantees are always provided free of charge and require no additional payment from customers, warranties are available to extend the free warranty that comes with the product. A guarantee ensures that if a product fails to function as promised by the company or as customers expect, the company will provide some type of compensation to the purchaser.

data-driven approach with three phases: observation, ideation, and implementation.

Given the creative nature of design, it's no surprise there isn't one widely adopted approach. Some firms employ formal, structured processes. Design thinking is a very data-driven approach with three phases: observation, ideation, and implementation. Design thinking requires intensive ethnographic studies of consumers, creative brainstorming sessions, and collaborative teamwork to decide how to bring the design idea to reality.

regarding marketing communication budgeting methods

How much resources should a company allocate to marketing communications compared to alternatives such as product improvement, lower prices, or better service? There is no universal rule. How much to spend on marketing communications depends on a variety of factors. The main factors to consider when setting the communication budget follow. Stage in the product life cycle. New products typically merit large communication budgets to build awareness and encourage consumer trial. Established brands usually are supported by relatively lower communication budgets, measured as percentage of sales. Product differentiation. Offerings in less differentiated categories (beer, soft drinks, banks, and airlines) often require more advertising to establish a unique image than do offerings that provide distinct benefits. Market share. High-market-share brands usually require less advertising expenditure, measured as a percentage of sales, to maintain share. Building share by increasing market size requires larger expenditures. Message complexity. The number of repetitions needed to get the company's message across to consumers has a direct impact on the communication budget. More complex messages tend to require more repetition and, hence, a larger communication budget. Reach. A company's ability to reach consumers in an effective and cost-efficient manner. Communications to customers who are more difficult to reach tend to require a larger communication budget. Competitive communication. In markets with a large number of competitors and high communication spending, a brand must advertise more heavily to be heard. Even communications not directly competitive to the brand create clutter and a need for heavier advertising. Available resources. The communication budget is limited by the company's resources. After all, a company cannot spend something it does not have.

logos, stationery, brochures, signs, business forms and cards, buildings, uniforms

Identity media. Companies need a visual identity that the public immediately recognizes. The visual identity is carried by company logos, stationery, brochures, signs, business forms, business cards, buildings, uniforms, and dress codes.

the firm bases its price largely on competitors' prices.

In competitive pricing (or going-rate pricing), the firm bases its price largely on competitors' prices. All firms in industries that sell a commodity such as steel, paper, or fertilizer normally charge the same price. Smaller firms "follow the leader," changing their prices when the market leader's prices change, rather than when their own demand or costs change. Some may charge a small premium or discount, but they preserve the difference. Competitive pricing is quite popular. Where costs vary and/or are difficult to measure, when the demand fluctuates, or when competitive response is uncertain, firms feel competitive pricing is a good solution because they believe it reflects the industry's collective wisdom.

putting the goods in boxes or trailers that are easy to transfer

In shipping goods to its warehouses, dealers, and customers, a company can choose rail, air, truck, waterway, or pipeline. Shippers consider such criteria as speed, frequency, dependability, capability, availability, traceability, and cost. For speed, the prime contenders are air, rail, and truck. If the goal is low cost, then the choice is water or pipeline. Shippers are increasingly combining two or more transportation modes, thanks to containerization. Containerization consists of putting the goods in boxes or trailers that are easy to transfer between two transportation modes. The term piggyback describes the use of rail and trucks; fishyback, water and trucks; trainship, water and rail; and airtruck, air and trucks. Each coordinated mode offers specific advantages. For example, piggyback is cheaper than trucking alone but provides flexibility and convenience. Shippers can choose private, contract, or common carriers. If the shipper owns its own truck or air fleet, it becomes a private carrier. A contract carrier is an independent organization selling transportation services to others on a contract basis. A common carrier provides services between predetermined points on a scheduled basis and is available to all shippers at standard rates. Some contract carriers are investing and innovating to create strong value propositions.

drop the price on well-known brands to stimulate additional store traffic

Loss-leader pricing. A company can set the price of a specific product or service in a way that maximizes the profitability of its entire product line. A common product-line pricing approach is loss-leader pricing. Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. This approach pays if the revenue on the additional sales compensates for the lower margins on the loss-leader items. Manufacturers of brands that retailers use as loss leaders typically object, because this practice can dilute the brand image and bring complaints from retailers who charge the list price. Manufacturers have tried to keep intermediaries from using loss-leader pricing by lobbying for retail-price-maintenance laws, but these laws have been revoked.

reward dealers for participating in advertising and sales support programs

Manufacturers award money to distribution channel members in the form of trade incentives. Unlike consumer incentives that aim to create greater value for buyers, trade incentives aim to increase the attractiveness of the offering for the members of the distribution channel—wholesalers, retailers, and dealers. Specifically, manufacturers use a number of trade promotion tools

especially effective for ego-sensitive products.

Many consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes, expensive cars, and designer clothing.

cameo appearances in movies and on television

Marketers pay hundreds of thousands of dollars for their products to make cameo appearances in movies and on television. Sometimes such product placements are the result of a larger network advertising deal, but small product-placement shops also maintain ties with prop masters, set designers, and production executives. Some firms get product placement at no cost. Nike does not pay to be in movies but often supplies shoes, jackets, bags, and so on. Increasingly, products and brands are being woven directly into the story, as when a new iPad for the gadget-loving dad of Modern Family became the story arc of a whole episode. In some cases, however, brands pay for the rights to appear in a movie.

reasons to sponsor events

Marketers report 8 reasons to sponsor events: To identify with a particular target market or lifestyle. Old Spice sponsors college sports—including its college basketball Old Spice Classic in late November—to highlight product relevance and sample among its target audience of 16- to 24-year-old males. To increase the salience of a company or product name. Events offer sustained exposure to a brand, a necessary condition for reinforcing brand salience. Top-of-mind awareness for soccer World Cup sponsors Emirates Airlines, Hyundai, Kia, and Sony benefited from the repeated brand and ad exposure over the month-long tournament. To create or reinforce perceptions of key brand image associations. Events themselves have associations that help to create or reinforce brand associations.44 To toughen its image and appeal to the heartland, Toyota Tundra sponsors B.A.S.S. fishing tournaments and has sponsored Brooks & Dunn country music tours. To enhance corporate image. Sponsoring and organizing events can improve perceptions that the company is likable and prestigious. Although Visa views its long-standing Olympic sponsorship as a means of enhancing international brand awareness and increasing usage and volume, it also engenders patriotic goodwill and taps into the emotional Olympic spirit. McDonald's sponsors community-based programs to build goodwill, including Black & Positively Golden, which celebrates Black culture. To create experiences and evoke feelings. The feelings engendered by an exciting or rewarding event may indirectly link to the brand. Audi models featured prominently in the blockbuster film franchise Iron Man, including main character Tony Stark's personal R8 Spyder, the A8 and A3, as well as the Q5 and Q7 SUVs. To express commitment to the community or on social issues. Cause-related events sponsor nonprofit organizations and charities. Firms such as Timberland, Stonyfield Farms, Home Depot, Starbucks, American Express, and Tom's of Maine have made their support of causes an important cornerstone of their marketing programs. To entertain key clients or reward key employees. Many events include lavish hospitality tents and other special services or activities for sponsors and their guests only. These perks engender goodwill and establish valuable business contacts. From an employee perspective, events can also build participation and morale or serve as an incentive. BB&T Corp., a major banking and financial services player in the U.S. South and Southeast, used its NASCAR Busch Series sponsorship to entertain business customers and its minor league baseball sponsorship to generate excitement among employees. To permit merchandising or promotional opportunities. Many marketers tie contests or sweepstakes, in-store merchandising, direct response, or other marketing activities to an event. Ford and Coca-Cola have used their sponsorship of the popular TV show American Idol in this way.

communication at low levels periodically reinforced by waves of heavier activity

Pulsing is continuous communication at low levels, reinforced periodically by waves of heavier activity. It draws on the strengths of continuous communication and flighting to create a compromise scheduling strategy. Those who favor pulsing believe it results in the audience learning the message more thoroughly and at a lower cost to the firm

programs directed internally to employees or externally to consumers

Publicity and public relations involve a variety of programs directed internally to employees of the company or externally to consumers, other firms, the government, and media to promote or protect a company's image or its individual product communications (press kits, speeches, seminars, annual reports, charitable donations, publications, community relations, lobbying, identity media, and company magazines). Marketers tend to underuse publicity and public relations, yet a well-thought-out program coordinated with the other elements of the communication mix can be extremely effective, especially if a company needs to challenge consumers' misconceptions. The appeal of public relations and publicity is based on its high credibility: News stories and features are more authentic and credible to readers than ads.

steps are involved in generating a consumer response

Regardless of their specific sequence, 6 steps are involved in generating a consumer response. Awareness. In order to take any kind of action, customers must be aware of the existence of the company's offering. If most of the target audience is unaware of the offering, the communicator's task is to build awareness. Knowledge. The target audience might have awareness but not know much more about the offering. Liking. Members of the target audience may know the brand, but how do they feel about it? Preference. The target audience might like the product but not prefer it to other products. The communicator must then try to build consumer preference by comparing the product's quality, value, performance, and other features to those of likely competitors. Conviction. The target audience might prefer a particular product but not develop a conviction about buying it. Purchase. Finally, some members of the target audience might have conviction but not quite get around to making the purchase. The communicator must lead these consumers to take the final step, perhaps by offering the product at a low price, offering a premium, or letting them try it out.

manufacturer offers intermediaries an extra benefit for performing

Reward power. The manufacturer offers intermediaries an extra benefit for performing specific acts or functions. Reward power typically produces better results than coercive power, but intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur.

the company pays search engine firms to be featured

Search engine marketing (SEM) describes activities whereby the company pays search engine companies to be featured in the results of particular keyword searches that serve as a proxy for the consumer's product or consumption interests. When consumers search for any of these words with Google, the marketer's ad may appear above or next to the results, depending on the amount the company bids and an algorithm the search engines use to determine an ad's relevance to a particular search. For example, McDonald's might pay Google for its information to appear among the results generated when consumers search for a particular word or phrase, such as "burger," "French fries," or "fast food."

not all of the intermediaries being willing to carry a particular product

Selective distribution relies on some but not all of the intermediaries willing to carry a particular product. Unlike exclusive distribution, in which individual retailers do not directly compete with one another (for example, because they are assigned non-overlapping geographic areas), selective distribution might include retailers that compete for the same customers. STIHL is a good example of successful selective distribution.

paid form of nonpersonal presentation and promotion of ideas, goods, or services

The communication media mix identifies the different modes of communication that a company will use to inform the target audience about its offerings. The most common media formats include advertising, online and social media communication, mobile communication, direct marketing, events and experiences, word of mouth, publicity and public relations, personal selling, and packaging. The key aspects of these communication formats are summarized as follows: Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor via print media (newspapers, magazines, brochures, books, leaflets, directories), broadcast media (radio and television), network media, and display media (billboards, signs, posters, outer packaging, packaging inserts, ad reprints, and point-of-purchase displays). Advertising can build up a long-term image for a product (Coca-Cola ads) or trigger quick sales (a Macy's ad for a weekend sale). Certain forms of advertising, such as TV, can require a large budget, whereas other forms, such as targeted online ads, do not. The mere presence of mass-media advertising might have an effect on sales: Consumers might believe a heavily advertised brand must be of good quality

build a large factory, set its prices as low as possible, win a large market share

The company would build a large plant, set its price as low as possible, win a large market share, experience falling costs, and cut its price further as costs fell. The following conditions favor adopting a market-penetration pricing strategy: (1) the market is highly price sensitive, and a low price stimulates market growth; (2) production and distribution costs fall with accumulated production experience; and (3) a low price discourages actual and potential competition. Companies that choose penetration pricing want to maximize their market share. They believe a higher sales volume will lead to lower unit costs and higher long-run profit, so they set a very low price, assuming the market is price sensitive.

a simple attached tag or an elaborately designed graphic

The label can be a simple attached tag or an elaborately designed graphic that is an inherent part of the package. It might carry a great deal of information or only the brand name. Even if the seller prefers a simple label, the law may require more.

major communications functions

The macromodel of marketing communication articulates the interaction between the sender (company) and the recipient (consumer) of the communication message. Figure12.1 shows a macromodel denoting nine key factors in effective communication. Two represent the major parties—sender and receiver. Two represent the major tools—message and media. Four represent major communication functions—encoding, decoding, response, and feedback. And the last element in the system is noise, random and competing messages that may interfere with the intended communication.

comes along with accumulated production experience

The result is that average cost falls with accumulated production experience. This decline in the average cost with accumulated production experience is called the experience curve. Thus the average cost of producing the first 100,000 tablets is $100 per tablet, but when the company has produced the first 200,000 tablets, the average cost has fallen to $90. After its accumulated production experience doubles again to 400,000, the average cost is $80.

will make buyers less sensitive to increases in price

To estimate the demand for a company's offering, marketers need to know how responsive, or elastic, demand is to a change in price. Price elasticity of demand reflects the degree to which a change in price leads to a change in quantity sold. The lower the price elasticity, the less sensitive consumers are to price increases, and the more likely it is that raising the price can increase sales revenues

distribution to reach customer segments in one market area

Today's successful companies typically employ multichannel distribution, using two or more marketing channels to reach customer segments in one market area. HP uses its sales force to sell to large accounts, outbound telemarketing to sell to medium-sized accounts, direct mail with an inbound phone number to sell to small accounts, retailers to sell to still smaller accounts, and the internet to sell specialty items. Each channel can target a different segment of buyers, or different need states for one buyer, to deliver the right products in the right places in the right way at the least cost.

products feature the color green on their packaging

Transparency. In addition to attracting consumers' attention and differentiating the company's offerings from the competition, effective packaging clearly communicates the value of the offering to its target customers. Shoppers typically interact with the packaging at the time of purchase, which means that packaging must transparently communicate the offering's value proposition by touting the offering's virtues and giving shoppers a reason to purchase it. For example, many sustainable products feature the color green on their packaging to visually communicate their environmentally friendly nature.

establishing channel objectives?

Usually, planners can identify several market segments based on desired service and choose the best channels for each. Consumers may choose the channels they prefer based on price, product assortment, and convenience, as well as their own shopping goals (economic, social, or experiential). However, the same consumer may choose different channels for different reasons. Some consumers are willing to "trade up" to retailers offering higher-end goods such as TAG Heuer watches or Callaway golf clubs and "trade down" to discount retailers for private-label paper towels, detergent, or vitamins. Others may browse a catalog before visiting a store or test-drive a car at a dealership before ordering online. Channel objectives vary with product characteristics. Bulky products, such as building materials, require channels that minimize the shipping distance and the amount of handling. Nonstandard products such as custom-built machinery are sold directly by sales representatives. Products requiring installation or maintenance services, such as heating and cooling systems, are usually sold and maintained by the company or by franchised dealers. High-unit-value products such as generators and turbines are often sold through a company sales force rather than intermediaries. Marketers must adapt their channel objectives to the larger environment. When economic conditions are depressed, producers want to move goods to market using shorter channels and without services that add to the final price. Legal regulations and restrictions also affect channel design. For example, U.S. law looks unfavorably on channel arrangements that substantially lessen competition or create a monopoly. When entering new markets, firms often closely observe what other firms are doing.

What consumers feel the product should cost

When examining products, however, they often employ reference prices, comparing an observed price to an internal reference price they remember or an external frame of reference such as a posted "regular retail price." Possible reference prices include "fair price" (what consumers feel the product should cost), typical price, last price paid, upper-bound price (reservation price, or the maximum most consumers would pay), lower-bound price (lower price threshold, or the minimum most consumers would pay), competitor price, expected future price, and usual discounted price

Elements of the communication process

sender, encoding, message, media, decoding, receiver, response, feedback, noise

Steps in developing a communication program

setting the communication objectives, identifying the target audience, crafting the communication message, selecting the communication channels, developing the creative aspect of communication, and measuring communication effectiveness.