Buad479 exam 2
break-even point formula
Fixed costs / unit contribution
Roles in a Brand Portfolio
Flankers Cash Cows Low- and Entry-level High-End Prestige
In 2016, having wifi at Starbucks is an example of a(n): augmented product. generic product. expected product. potential product.
expected product.
Variable cost examples
LABOR RAW MATERIALS COMMISSIONS BONUSES DELIVERY COSTS/ SHIPPING PACKAGING
Advantages of Strong Brands:
Larger margins More inelastic consumer response Greater trade cooperation Increased marketing communications effectiveness Possible licensing opportunities Improved perceptions of product performance Greater loyalty Less vulnerability to competitive marketing actions Less vulnerability to crises
You have been asked to create a digital marketing plan to reach consumers using mobile devices. Which of the following steps will you NOT recommend to your mobile team? Set up tracking programs that use location data as well as other data commonly used to study digital marketing effectiveness. Discover keyword searches that are shorter and more precise because typing on mobile devices can be problematic. Shorten long text pieces because people are less inclined to read for long periods of time on small-screen mobile devices. Leave current web pages the same because consumers prefer to view web pages on their mobile devices that mirror those created for viewing on desktop or laptop computers.
Leave current web pages the same because consumers prefer to view web pages on their mobile devices that mirror those created for viewing on desktop or laptop computers.
Most executives agree that brand strategies must be engineered across the entire marketing mix and throughout the life cycle of a product. Which of the following is NOT a component of that marketing mix?(i) Pricing (ii) Market research (iii) Production (iv) Innovation ii and iv iii only i only ii, iii, and iv
ii, iii, and iv
Present Value (PV) formula
PV = FV/(1+i)^t-1
this isnt a question but a reminder that on the exam if he says "end of year 2" it is 2 years. But if he says beginning of year 2 then its just 1 year
remember that
Retention rate formula
RR= 1-CR
Which promotional tool(s) or tactic(s) comprise a push strategy? Coupons, contests, sweepstakes, and rebates Retailer slotting allowances (promotion fees) for carrying a new product Targeting opinion leaders and end users Advertising to draw the interest of consumers who then go to their retailers and request the advertised product
Retailer slotting allowances (promotion fees) for carrying a new product
Steps in setting the price:
Selecting the pricing objective Survival, maximum current profit, maximum market share, maximum market skimming, product-quality leadership Determining the demand Price sensitivity Estimating demand curves Price elasticity of demand Estimating costs Types of costs Accumulated production Target costing Analyze competitor costs and prices Benchmark costs against its competitors Learn price and quality of competitors offers Selecting a pricing method Markup pricing Target-return pricing Value pricing Going-rate pricing Auction-type pricing Selecting the final price Impact of other marketing activities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties
Describe consumer goods classifications and what the marketing considerations for each one are:
The consumer goods classifications are described by four different categories: convenience, shopping, specialty, and unsought. Convenience goods are frequently purchased and are able to be purchased at many locations. They are typically low in price and advertised by the producer. Not a lot of thought goes into these purchases. An example of this is toothpaste and laundry detergent. Shopping goods require more thought than convenience. They are higher in price and not sold at as many stores. The advertising is done by both the producer as well as the reseller. Some examples of this are major appliances, like washing machines, and TVs. Next is specialty, which are goods that are exclusively distributed and high in price. They are carefully promoted to their targeted consumers by both producers and resellers. These are luxury items, like Rolex watches. Unsought purchases are sort of the "other" category, which varies in distribution and price. Typically the consumer does not have much knowledge or interest in these products. Promotion is by the reseller as well as producer, and an example is life insurance or blood donations.
Which of the following choices is NOT a consideration for the depth of a product line? The trialability of the product line Potential for cannibalization Customer heterogeneity and requirements specification The effect on overall brand equity
The trialability of the product line
Major Promotion Tools
advertising, sales promotion, personal selling, public relations, direct and digital marketing
Approches to the sizing budget
Affordable Percentage of expected or previous year's sales Competitive-based benchmark - share of voice equal to product share of market Objective ad task method
IKEA has a breakeven volume of 100,000 units for a new lamp. The variable cost per unit is $75 and the revenue per unit is $99.99. The fixed costs are: $2,499,000. $2,500,000. $5,000,000. $3,333,000.
$2,499,000
The basketball season is about to start, and the owners of the Red Lions team want to advertise that fact in their home metropolitan area. They plan to run a full-page newspaper ad in Metro News. The readership of Metro News is 850,000 and the cost of the ad is $82,000. What is the cost per thousand (CPM) of this campaign? $30.00 $102.08 $96.47 $56.22
$96.47
profit margin
(per unit revenue- variable cost per unit)/ per unit revenue
Profit Impact
(unit contribution * units produced & sold) - fixed costs
The demand curve suggests that an auto manufacturer will sell 20,000 Mercedes-Benz M-Class vehicles when they are priced at $50,800, but when the price is reduced to $45,000, that quantity will increase to 27,000 units. What is the resulting elasticity? -3.07 1.24 6.73 -4.38
-3.07
year 1 survival probability
1
Stages in the Adoption Process
1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption
Expected Purchasing Life (L)
1/churn rate
Assume that the variable cost of Marie's blue cheese salad dressing is $1.00 per 12 oz. bottle, that Marie's sells it to the broker for $2.00, and that the broker sells it to the retailer for $2.99. The price at retail is $3.99. What are the margins for the manufacturer, broker and retailer? Please round to the nearest percent. 100%, 40%, and 33% 50%, 33%, and 25% 30%, 50%, and 33% 33%, 25%, and 50%
50%, 33%, and 25%
Breakeven Market Share
= (Breakeven Volume)/(Total Market Size)
inelastic demand
A situation in which an increase or a decrease in price will not significantly affect demand for the product
elastic demand
A situation in which consumer demand is sensitive to changes in price
Advantages and challenges of social media marketing:
Advantages: Targeted and personal Interactive Immediate and timely Cost effective Engagement and social sharing capabilities Challenged Still being experimented Difficult to measure results Largely user controlled
Hierarchy of Effects
Cognitive Stage Awareness and knowledge Affective Stage Liking and preference Conative Stage Conviction and purchase
Customer lifetime value equation (basic)
CLV= (M*L)-AC
CLV at end of year 3 ( 3 is just a sample year)
CLV= [ (m*s1)+(m*s2)+(m*s3)]-AC s= survival probability of years 1-3
summary of characteristics of product life cycle stages
Characteristics In the Introduction phase, sales are low, costs are high per customer, profits are negative, customers are innovators, and there are few competitors In the growth Phase, there are rapidly rising sales, costs are average, profits are rising, customers are early adopters, and there are a growing number of competitors In the maturity phase, we are at peak sales, theres a low cost per customer, profits are high, the customers are in the middle majority, and there are a stable number of competitors that are beginning to decline In the decline phase, sales are declining, there is a low cost per customer, profits are declining, customers are laggards, and there is a declining number of competitors
business use of CLV
Clearly define objectives Determine effectiveness of alternative market strategies Deploy segment services based on CLV for different segments of customers Forecasting future impact of improved customer satisfaction Allocating resources for market communication Identifying investment areas for improving customer service Designing loyalty programs Early warning systems to detect increasing defection rates Allocating and rewarding sales resources Developing effective marketing campaigns Reactivating inactive customers Allocating resources for complaint management Prevent customer defection Deploying win-back strategies Mergers and selling/buying companies The annual report
All of the following are examples of expansion of the existing product line of Coca-Cola EXCEPT: Coke Zero. Diet Coke. Caffeine Free Diet Coke. Coca-Cola Freestyle vending machine.
Coca-Cola Freestyle vending machine.
Common Pricing Mistakes:
Companies base their prices on their costs, not consumers' perceptions of value Basing prices on the "marketplace" Attempting to achieve same profit margin across different product lines Failing to segment customers Holding prices at the same level for too long Incetivizing salespeople on units sold or revenue generated, rather than profits Spending on insufficient resources managing pricing practices Failing to establish internal procedures to optimize prices Spending time serving least profitable customers
Consumer Goods Classification and Marketing Considerations:
Convenience Shopping Specialty Unsought
Research indicates that which of the following plays the greatest role in the product purchase decision process? Point-of-purchase displays Customer reviews/recommendations Banner advertising Discounts
Customer reviews/recommendations
5 Step process for identifying innovation opportunity space:
Determining the benefits that are most important consumer choice in the category FAILURE possibility: marketing research failure to pick up all the relevant attributes Or inability of participants to articulate important dimensions Estimating consumer preferences on relevant attributes to determine the importance that consumer assigns to various attributes FAILURE possibility: when respondents in the study undervalue a new dimension due to uncertainty or unfamiliarity Define the competitive landscape of products in consumers consideration set Apply results to a competitive set and compute market shares for each of the existing products and a proposed new product FAILURE POSSIBILITY: consumers comparing innovation to another; "What-if?" Apply the previous step to choose the best innovation opportunity, determine a new product's optimal position in the opportunity space, or pinpoint the most promising direction to reposition an existing product based on its profitability or market share FAILURE POSSibility: risk-averse management that is hesitant to act upon market research conclusions (more likely when new benefits are involved)
Committed Costs
FC- required to maintain the organization (rent, administration, clerical salaries)
programmed cost
FC- result of trying to increase sales (advertising, sales promotions)
What type of marketing strategy best exemplifies a straightforward mapping of a product to a customer's willingness to pay? Perceived value Segmentation by income Sustainable differentiation Good-better-best vertical differentiation
Good-better-best vertical differentiation
New-Product Development Decision Process:
Idea generation Is this idea worth considering? Idea screening Is this idea compatible with company objectives, strategies, and resources? Concept development and testing Can we find a good concept consumers say they would try Marketing Strategy Development Can we find a cost-effective, affordable marketing strategy? Business analysis Will this product meet our profit goal? Product Development Do we have a technically and commercially sound product? Market Testing Have product sales met expectations? Commercialization Are product sales meeting expectations?
The Role of Brands:
Identify the maker Simplify product handling Organize accounting Offer legal protection Signify quality Create barriers to entry Serve as a competitive advantage Secure price premium
Where on Young and Rubicam's Power Grid would a product with high brand recognition but with low differentiation and relevance likely reside? Lower left quadrant/ New or fading brand Upper right quadrant / Power brand Upper left quadrant / Aspiring brand Lower right quadrant / Eroding brand
Lower right quadrant / Eroding brand
strategies for each stage in the product life cycle
In the introduction phase, brands should offer a basic product, use cost-plus pricing, build selective distribution channels, and build product awareness amongst early adopters and dealers. They should use heavy sales promotions to entice trials upon potential consumers In the growth phase, brands should offer product extensions, services, and warranties, use a price that will penetrate the market, build intensive distribution channels, build awareness and interest in the mass market, as well as reduce sales promotions in order to take advantage of the heavy consumer demand. During the Maturity Phase, brands should diversify themselves and their models, have prices that match or beat competitors, build an even more intensive distribution channel, stress brand differences and benefits in their advertising, and finally, increase sales promotion to encourage switching consumers to their brand In the decline phase, the brand should phase out weak items, cut the price, go to selective distributors and not unprofitable outlets, reduce to the level of advertising that is only necessary to retail the hard-core loyals, and similarly, reduce the sales promotion to a minimal level.
summary of product life cycle objectives
In the introduction phase, the marketing objective is to create product awareness and trial. In the growth phase, the marketing objective is to maximize market share In the maturity phase, a company should maximize profit while defending market share In the decline phase, marketing plans should reduce expenditure and milk the brand
Which of the following choices is NOT one of the reasons cost-plus pricing is so popular? It is easy to measure or estimate. It is easy to justify to various stakeholders. It simplifies an otherwise complex pricing process. It captures the full price that customers might be willing to pay for a product.
It captures the full price that customers might be willing to pay for a product.
6 M's Model of Communication Planning
Mission Market Message Media Money Measurement First 2 are for strategic intent, second 2 are for strategic execution, last 2 are for strategic impact
Your manager has asked you to increase the effectiveness of your company's digital display advertising for the wallets that your firm sells with built-in RFID (radio-frequency identification) protection. She asks you to avoid sites that already cater to men's fashion because those sites are currently your primary website choice for advertising. She also warns you not to come up with any ideas that may irritate your customers or potential customers. What type of ads would you recommend to your boss? Pop-up ads Morphing ads Contextual ads Auto-play video ads
Morphing ads
firm's incentive to sell
Price - COGS
Van Westendorp's measuring price sensitivity approach
Price sensitivity relates not to absolute price, but rather to perceived value of the product/service Consumer price expectations are measured by asking a set of price perception questions The price at which the product/service is: So cheap that quality is questionable A bargain Seeming too expensive Too expensive to consider Responses are graphed Indifference price point (IDP): the point where inexpensive and expensive responses interact Optimal Price Point (OPP): the point where too inexpensive and too expensive responses intersect Point of Marginal Cheapness (PMC): the intersection of Expensive and too inexpensive Point of marginal expensiveness (PME): Inexpensive and too expensive intersect Range of acceptice prices (RAP) or Optimal Price Band: Range from PMC to PME
Managers are trying to decide on which variables to use in segmenting and selecting a target audience for marketing communications about 5-Hour Energy—a potent energy drink. Which of the following variables are classified INCORRECTLY as demographic or psychographic bases of market segmentation? Consumers living on the West Coast with high household incomes = demographic Long-haul truck drivers and college students = demographic Individuals with an active lifestyle = psychographic Senior citizens (65 years and older) = psychographic
Senior citizens (65 years and older) = psychographic
HubSpot CEO Brian Halligan discusses inbound marketing in Video 4: Interview with HubSpot CEO Brian Halligan about Inbound Marketing 2.0 in the Core Reading. According to Halligan, digital marketers are making bad inbound marketing choices. Which of the following choices is NOT among them? Spending more time creating content and less money on placement Not measuring effectiveness well Not realizing that the role of the sales rep has changed Dabbling in inbound marketing and not going full in
Spending more time creating content and less money on placement
The makers of Red Bull Energy Drink want to generate earned media and create associations between the brand and popular culture. Which of the following types of media vehicle may be particularly useful in this strategy? Advertising in the prime-time television show The Voice Giving away free samples of Red Bull Student brand ambassadors Sponsorship of the Cliff Diving World Series
Sponsorship of the Cliff Diving World Series
6 M's Model of Communication Planning
Strategic intent -Mission objectives of the communication? -Market To whom is the communication addressed? Strategic Execution -Message What is the story to be communicated? -Media Where and how will the story be delivered? Strategic Impact -Money How much will be spent to communicate? -Measurement How will impact be assessed?
drivers of brand knowledge
Thoughts and beliefs Feelings and images experiences
Which of the following best describes brand promise? The differentiation of a product relative to its closest competitors What a company wants a consumer to do/gain/feel by using the product The underlying value proposition conveyed and the marketing language used The set of human characteristics associated with a brand
What a company wants a consumer to do/gain/feel by using the product
sunk cost
a cost that has already been committed and cannot be recovered
Customer Lifetime Value (CLV)
approximate worth of a customer to a company in economic terms; overall profitability of an individual consumer
All of the following are typical marketing research techniques utilized in the new-product development process EXCEPT: focus groups. awareness and usage study. surveys. concept testing.
awareness and usage study.
Nestlé introduced Butterfinger Peanut Butter Cups, and sales in the peanut butter chocolate candy category increased. This is an example of: category size impact. net impact on own margins. legitimization of competitors' offerings. competitive impact.
category size impact.
alternate CLV equations
clv= (m*s)-ac clv= (m*rr^t-1)-ac clv= [m/cr] -AC clv= m*[(1-i)/ (1+i-rr)]-ac
how to calculate commissions
commission % * manufacturer's selling price, NOT retail SP!!
Norwegian Cruise Lines controls the availability of prices by offering deals to specific groups of buyers based on all of the following EXCEPT: coupon usage. location. competition. information gathered via e-commerce.
competition.
Selling price =
cost + margin
All the following indicators heighten consumer sensitivity to price EXCEPT: price is high in a relative sense. the fact that reference prices exist. price is not needed as quality cue. difficult comparability.
difficult comparability.
You've been tasked with creating native advertising for your employer. Your job will most likely entail: creating advertising that can be placed with search engine firms that will enhance your firm's chances of being chosen by consumers when they search for products or services on the web. finding publishers willing to write positive editorial articles about your firm without any type of payment. finding or creating editorial pieces that can be turned into sponsored content on web pages, blending in with the normal editorial content on the page. creating advertising that promotes the overall company image at the expense of the firm's brands.
finding or creating editorial pieces that can be turned into sponsored content on web pages, blending in with the normal editorial content on the page.
All of the following are examples of commonly used market research procedures for assessing price sensitivity EXCEPT: customer surveys. focus groups. price experimentation. analysis of historic pricing and sales data.
focus groups
All of the following are characteristics exhibited by winning products EXCEPT: benefits that are highly visible to the customer. solving a problem that the customer has with a competitive product. good product quality, according to the customer's definition of quality. features easily perceived as useful by the customer.
good product quality, according to the customer's definition of quality.
A firm might NOT want to engage in social media because(i) its product is unlikely to generate online conversation,(ii) the firm wants to act transparently,(iii) the reputational risk from hostile conversations about the product is fairly high. i and iii only i and ii only i, ii, and iii ii only
i and iii only
Corporations can benefit from personal branding through:(i) celebrity endorsements,(ii) customers who relate to the brand personality,(ii) development of employee leadership potential. i only i and iii only i and ii only ii only
i and iii only
Interbrand, BrandZ, and Brand Finance all use qualitative and quantitative measurements to calculate brand value, but BrandZ model's greatest differentiating component is its: incorporation of proprietary global market research data. use of brand loyalty in its calculations. reliance on the financial performance of the brand. use of net present value (NPV) of the trademark and associated intellectual property.
incorporation of proprietary global market research data
Merging and milking brands are examples of: liquidating brands from a product portfolio. defending a brand. increasing brand loyalty. creating brand extensions.
liquidating brands from a product portfolio
In which of the following stages of the product life cycle are promotion efforts minimal? decline maturity growth introduction
maturity
Brand Element Choice Criteria
memorable, meaningful, likable, transferable, adaptable, protectable
Marketers may choose among various approaches to attribute accurately the role of a particular digital ad in a purchase. Identify the approach that uses existing data on consumer interactions with each ad or search along the consumer's purchasing path to estimate the effect of each interaction. Model-based First interaction Linear Last interaction
model based
Gross profit
net sales - cost of goods sold
The three interrelated elements in the marketing strategy formation process include all of the following EXCEPT: outcomes analysis objectives decisions
objectives
A consumer's incentive to purchase is equal to: true economic value minus product price. product price minus cost of goods sold. perceived value (PV) minus price. true economic value (TEV) minus cost of goods sold.
perceived value (PV) minus price.
customer's incentive to purchase
perceived value - price
All of the following are price indicators of customer price sensitivity EXCEPT: performance as expected. easy comparability. high in a relative sense. the existence of reference prices.
performance as expected.
True Economic Value (TEV)
price of the next best alternative + system crash savings- added operating cost
All of the following metrics are typically included in a concept test EXCEPT: perceived likeability. likelihood to purchase the product. product price. perceived uniqueness.
product price.
One role of marketing communications in the problem recognition stage of the purchase decision-making process is to: remind consumers of existing needs. educate consumers about features and benefits. alert the company about problems in conveying a message to target consumers. resolve consumer problems with customer service outreach.
remind consumers of existing needs.
Fixed costs examples
rent utilities salaries maintenance equipment building/land insurance R&D rebates advertising/ promotional costs
Subaru car owners are renowned for their repeat buying and brand loyalty. What type of connection would Keller conclude that the customer has achieved with the brand? Enlightenment Resonance Salience Performance
resonance
Unit Contribution
revenue per unit - variable costs per unit *make sure you find the manufacturers selling price as the per unit revenue
margin formula
selling price- cost
Product indicators of sensitivity to price include all of the following EXCEPT: easy comparability. performance as expected. the ability to switch easily. low differentiation of alternatives.
the ability to switch easily
Integrated Marketing Communications
the intentional coordination of every communication from a firm to a target customer to convey a consistent and complete message
A customer is shopping for spices in a US supermarket. She pauses as she compares the Goya brand of cinnamon to the McCormick brand. She opts for the McCormick cinnamon, judging it to be of better quality. This instinctual bias is known as: the corona effect. brand resonance. the provenance paradox. brand loyalty.
the provenance paradox
If costs vary for every additional unit produced, then its a
variable cost
Market share
your units sold/ total units sold in your segment
