Marketing 181 Final
4 Types of Consumer Products
1. Convenience Products: items purchased frequently and with minimum shopping effort (ex. toothpaste) 2. Shopping Products: items for which the consumer compares several alternatives on criteria such as quality and price (ex. TVs) 3. Speciality Products: items that a consumer makes a special effort to search out and buy (ex. heart surgery) 4. Unsought product: consumer does not know about product or knows but doesn't initially want it (ex. thesaurus)
Four Aspects of Product Life Cycle
1. Length: consumer products have shorter life cycles than business products, technological forces/advances shorten product life cycles 2. Shape of Life-Cycle Curve, 4 kinds: High-learning product: Significant customer education is required and there is an extended introductory period (ex. personal computers when first invented) Low-learning product: Sales begin immediately because benefits are readily understood, distribution must be broadened so competitors can't replace primary product Fashion product: style of the times, seem to be introduced, decline, and then return Fad product: rapid sales in introduction and equally rapid decline, novelties that have short life cycle (ex. car tattoos) 3. Product Level: Class and Form: Product class - refers to the entire product category or industry (ex. prerecorded music) Product Form - pertains to variations of a product within the product class (ex. digital music) 4. Product Life Cycle and Consumer Behavior: life cycle depends on sales to consumers, product must be purchased by innovators and early adopters Reasons for not adopting product in introduction: Usage barriers: product is not compatible with existing habits Value barriers: product provides no incentive to change Risk barriers: physical, economic, or social Psychological: cultural differences or image
Steps in New Product Development Process
1. New Product Strategy Development: defines the role for a new product in terms of the firm's overall objectives, firm uses SWOT Analysis and environmental scanning 2. Idea Generation: brainstorming new products, developing pool of concepts to be candidates for new products, - Can get suggestions from employees, friends, customers, suppliers, crowdsourcing, research & development laboratories, competitive products, smaller firms, universities, and inventors 3. Screening and Evaluation: internally and externally evaluates new-product ideas to eliminate those that warrant no further effort CEM (internal): customer experience management, process of managing entire customer experience within the company Concept tests (external): external evaluations with consumers that consist of preliminary testing of a new-concept idea rather than finished product 4. Business Analysis: specifies features of product, the marketing strategy needed to bring it to market, and make financial projections 5. Development: Prototype, has to be manufactured efficiently and meet standards during laboratory and consumer tests 6. Market Testing: involves exposing actual products to prospective customers under realistic purchasing conditions to see if they will actually buy Test marketing: offering a product on sale for a limited amount of time in a defined area - 3 kinds: 1. Standard: company attempts to sell product through normal distribution channels in specific cities 2. Controlled: Contracts test program to third party that pays retailers for shelf space 3. Simulated: finds consumers who use the product class being tested, usually done in malls - asked about usage, reason for purchase, compare competitors' products, see ads for product 7. Commercialization: positions and launches a product in full-scale production and sales. most expensive stage
Ch. 10 Product
A 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
Administered Systems
Achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership (ex. Walmart obtains cooperation from manufacturers with price levels and product specifications)
Brand Equity
Added value a brand name gives to a product beyond the functional benefits provided Provides a competitive advantage Consumers are often willing to pay a higher price for a product with brand equity Creating brand equity: 1. Develop positive brand awareness 2. Establish a brand's meaning for consumers 3. Elicit the proper response to brand's meaning 4. Create intense brand loyalty with consumers
Promotional Elements
Advertising: paid form of nonpersonal communication by identified sponsor Personal selling: flow of communication between buyer and seller designed to influence a person's purchase decision Public Relations: communication management that seeks to influence customers' views of the company and its products; publicity - not paid by company, done by a newspaper Sales Promotion: Short-term inducement of value offered to arouse interesting in buying a product -coupons, rebates, samples, contests Direct Marketing: uses direct communication with consumers to generate a response in the form of an order, a request for further info, or visit to retail outlet - face to face selling, direct mail, telemarketing
Multichannel Marketing
Blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online Utilize electronic marketing and delivery channels (ex. ordering something online and picking it up in store)
Repositioning the Product
Changing one or more of the marketing mix factors of a product Needs to reposition a product: 1. Reacting a Competitor's Position: competitor's position is affecting sales and market share 2. Reaching a New Market 3. Catching a Rising Trend: changing consumer trends (ex. healthier food) 4. Changing the Value Offered: Trading Up: Adding value to the product through additional features or nicer materials Trading Down: Reducing product's number of features, quality, or price
Retailing Strategy: Store Location
Choosing a location and deciding how many stores to operate Central business district: community's downtown area Regional shopping centers: 50 to 150 stores and contain a few anchor stores which are well-known national or regional stores Community shopping center: one primary store that has 20 to 40 smaller outlets Strip mall: Clusters of stores that may have gas stations and laundry outlets Power Center: huge shopping strip with multiple anchor or national stores
Corporate System
Combination of successive stages of production and distribution under a single ownership Forward integration: producer owns intermediary at the next level down in the channel Backward Integration: Retailer owns manufacturing operation
Trade Name
Commercial, legal name under which a company does business
Step 5: Set the List or Quoted Price
Company Effects on Pricing: Decision on product price must consider other products in the product line or product mix of the company Product-Line Pricing: the setting of prices of all items in a product line, determining what will be lowest and highest Customer Effects: Paying attention to factors that satisfy customers' perceptions such as customary prices, can't have price be too low bc profit and people will think lower quality Competitive Effects: Have to anticipate price responses/retaliation from competitors Price War: Successive price cutting to maintain market shares or increase sales Balance Incremental Costs and Revenues: Hard to measure
Branding Strategies: Multiproduct
Company uses one name for all its products in a product class, can build familiarity with company brand and take away sales from competitors Product line extensions: practice of using a current brand name to enter a new market segment in its product class Subbranding: combines a corporate brand or family brand with a new brand to distinguish a part of its product line from others (ex. American Express Platinum) Brand Extension: practice of using a current brand name to enter a different product class (same brand name for all products) ex. Huggies under Kimberley-Clark is used for shampoos and diapers (risk of diluting meaning of brand)
Product Characteristics
Complexity: technical sophistication of product and knowledge required to use it Risk: financial risk, social risk, and physical risk Ancillary: Pertain to the degree of service or support required after the sale, establish seller's reputation through advertising
Classifying Products
Consumer products (B2C): Purchased by the ultimate consumer Business products (B2B): Products organizations buy that assist in providing other products for resale, result from derived demand, components or support products (ex. supplies)
Sales Promotion
Consumer-oriented: sales tools used to support a company's advertising and personal selling Coupons, Deals, Premiums, Contests, Sweepstakes, Samples, Loyalty Programs, Point of purchase displays, rebates, product placement (brand name in movie)
Step 4: Arriving at the Final Price: Competition-Oriented Pricing Approaches
Customary: Traditional and competitive factors dictate the price (ex. Swatch watches) Above, At, or Below Marketing Pricing: Marketing managers have a subjective feel for the competitors' product or market price, so they'll either go above, at, or below the prices of their competitors Loss-Leader: Retail stores will deliberately sell a product below customary price to attract attention to it (ex. grocery stores use milk as a loss leader to attract customers and then get them to buy more products)
Classifying Retail Outlets: Type of Merchandise Line
Depth of product line: store carries a large assortment of each item (ex. Payless) Breadth of product line: variety of different items a store carries (ex. Dollar Store) Scrambled merchandising: offering several unrelated product lines in a single store Hypermarket: large store that offers "everything under one roof" Intertype competition: competition between very dissimilar types of retail outlets
Wheel of Retailing
Describes how new forms of retail outlets enter the market Enter as low status, low margin stores that gradually evolve to include more features more services and higher prices
Factors Affecting Channel Choice and Management: Profitability
Determined by margins earned by each channel member and for channel as whole
The Four I's of Services: Inconsistency
Developing, pricing, promoting, and delivering a service is challenging because the quality of a service is usually inconsistent Ex. guest relations in a hotel - inconsistent since it depends on the people who performs it Orgs try to reduce inconsistency through standardization and training
Direct vs. Indirect Channel
Direct: Producers and consumers interact directly with each other (no intermediaries) Indirect: Intermediaries are between producers and consumers like wholesalers and retailers
Step 6: Make Special Adjustments to the List or Quoted Price
Discounts: Quantity: Lower unit cost for larger orders Seasonal: Manufacturers will offer lower price a few months before season to encourage buyers to stock up prematurely Trade (Functional): Discounts from manufacturers to wholesalers or retailers on the basis of where they are in the marketing channel and their future actions Cash: Manufacturers discount to retailers encouraging them to pay bill quickly Allowances: Trade-In: Price reduction given when a used product is accepted as payment for the new product Promotional: Sellers can do certain advertising to promote a product and get cash or goods Geographical Adjustments: FOB (lol) (free on board) Origin Pricing: Seller pays the cost of loading the product onto the vehicle that is used Uniform Delivered Pricing: The price the seller quotes includes all transportation costs Single-zone pricing: all buyers pay same delivered price regardless of distance Multiple-zone pricing: firm divides its selling territory into geographic areas Freight-allowed pricing: buyer can deduct freight expenses from the list price of goods Basing-point pricing: list price + freight expense is charged to buyer depending on geographic zone
Dual Distribution and Strategic Channel Alliances
Dual Distribution: firm reaches buyers by employing two or more different types of channels for the same product (ex. Hallmark cards are in Hallmark stores but also department stores) Strategic channel alliance: one firm's marketing channel is used to sell another firm's products (ex. Nestle sells General Mills usual Cheerios in other parts of world bc of global alliance)
Step 2: Estimate Demand and Revenue
Estimating Demand: The Demand Curve Demand factors: factors that determine consumers' willingness and ability to pay for products and services Price elasticity of demand: Percentage change in quantity demanded / Percentage change in price Elastic demand: Means a slight chance in price will result in a large increase of demand or units sold, the more substitutes a product has the more elastic it will be, ex. toothpaste Inelastic demand: Slight changes in price will not affect demand as much, ex. open-heart surgery
Step 1 Cont'd: Identifying Pricing Constraints
Factors that limit the range of prices a firm may set Demand for the Product Class, Product, and Brand Newness of the Product: Stage in the Product Life Cycle Cost of Producing and Marketing the Product Cost of Changing Prices and Time Period They Apply Single Product vs. a Product Line Type of Competitive Market Competitors' Products and Consumers' Awareness of Them Consumer-Driven Pricing Actions: With consumers able to compare prices on the Internet, they can make more efficient buying decisions Seller/Retailer-Driven Pricing Actions: Aggressive price changes through the Internet
Branding Strategies: Mixed
Firm markets products under its own name(s) and that of a reseller because the segment attracted to the reseller is different from its own market ex. Del Monte produces private brands of pet foods
Branding Strategies: Multibranding
Giving each product a distinct name, useful when each brand is for a different market segment ex. Marriott Hotels International offers 18 hotel and resort brands such as Courtyard vs. Marriott & Renaissance hotels Fighting brands: chief purpose is to confront competitor brands Advertising and promotion costs are higher with this strategy, won't affect product line if one product fails since diff brand name
Developing advertising program: Selecting the Right Media
Gross rating point: frequency multiplied by reach Cost per thousand: cost of reaching 1,000 individuals with the advertising message in a given medium
Integrated Marketing Communications: Specifying Promotion Objectives
Hierarchy of Effects: sequence of stages a prospective buyer goes through 1. Awareness: ability to recognize product 2. Interest: Increase in consumer's desires to learn about features of product 3. Evaluation: Consumer's appraisal of product on important attributes 4. Trial: consumer's actual first purchase and use of product or brand 5. Adoption: through a favorable experience on the first trial, consumer is repeat customer
Integrated Marketing Communications: Target Audience
Identified from primary and secondary marketing sources, the more they know about its target audience the easier it is to create a promotional mix Behavioral targeting: using big data
Trademark
Identifies that a firm has legally registers its brand name or trade name so the firm has its exclusive use and no one else can use it
Retailing Strategy: Retailing Mix and Retail Pricing
Includes activities related to managing the store and the merchandise in the store Retail Pricing: Retailers must decide on the the markup, markdown, and timing for markdowns Everyday low pricing: emphasizing consistently low prices and eliminate most markdowns Off-price retailing: involves selling brand-name merchandise at lower than regular prices (ex. Ross) This includes warehouse club, outlet store, and single-price retailers such as Dollar Tree
Classifying Retail Outlets: Form of Ownership
Independent Retailer: independent business owned by individual (owner is boss) Corporate Chain: Multiple outlets under common ownership, chains have advantages when dealing with manufacturers Contractual Systems: Independently owned stores that band together to act like a chain
Contractual System
Independent production and and distribution firms integrate their efforts on a contractual basis to achieve a better marketing impact and economic benefit than if they did it alone Wholesaler-sponsored voluntary chains: wholesaler develops contractual relationship with small, independent retailers Retailer-sponsored cooperatives: small, independent retailers forms an org that operates a wholesale facility together Franchising: arrangement between parent company and firm that allows firm to operate a certain type of business under established name and with specific rules
Marketing Channel
Individuals and firms involved in the process of making a product or service available for use or consumption by consumers
Factors Affecting Channel Choice and Management: Buyer Requirements
Information, Convenience, Variety, Pre or post sale services
The Four I's of Services: Inventory
Inventory carrying costs are more subjective and are related to idle production capacity Idle production capacity: Service provider is available but there is no demand for the service The inventory cost is the salary of the person providing the service - if doctors have no appointments, it's a high cost (and airplanes), but if the salary is commission based (hair salon) - the cost is very low
Developing advertising program: Scheduling the Advertising
Issues: Buyer turnover: how often new buyers enter the market to buy the product, more advertising required Purchase frequency: the more frequently the product is purchased, the less repetition is required Forgetting rate: speed with which buyers forget the brand if advertising is not seen Setting Schedules: 1. Continuous (steady): advertising is a continuous schedule throughout the year 2. Flighting schedule: Periods of advertising are scheduled between periods of no advertising to reflect season demand 3. Pulse schedule: flighting schedule is combined with a continuous schedule bc of factors
Electronic Marketing Channels
Make products and services available for consumption or use by consumers or org buyers Also perform transactional and facilitating functions at a lower cost than traditional intermediaries
Marketing Intermediaries
Middleman: between manufacturer and end-user markets Agent or broker: has legal authority to act on behalf of the manufacturer Wholesaler: sells to other sellers like retailers Retailer: sells to consumers Distributor: sells, maintains inventory, extending credit Dealer: can mean the same as retailer, distributor, or wholesaler
What is a new product?
Newness compared with Existing Products: if a product is functionally different from others Newness from Consumer's Perspective: Degree of learning required from the consumer Newness in Legal Terms: The term "new" is used with a product up to 6 months after it enters regular distribution Newness from Org's Perspective: 1st Level: Product line extension - least risk, improvement of existing product 2nd Level: Significant jump in innovation/technology of product or a brand extension - putting an established brand name on a new product in an unfamiliar market 3rd Level: Radical invention, revolutionary new product Newness from Consumer's Perspective: Continuous innovation - consumer's don't need to learn new behaviors (ex. toothpaste) Dynamically continuous innovation: Only minor changes in behavior are required (ex. Swiffer) Discontinuous innovation: making the consumer learn new consumption patterns to use the product (ex. wireless router)
Publicity tools
News conference, news release, public service announcements
Social Media
Online media where users submit comments, photos, and videos - often accompanied by a feedback process to identify "popular" topics
Branding
Organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from competitors
Integrated Marketing Communications: Setting the Promotion Budget
Percentage of Sales budgeting: funds are allocated to promotion as a percentage of past or anticipated sales Competitive Parity: matching the competitor's absolute level of spending or the proportion per point of market share All You Can Afford: Money is allocated to promotion only after all budget items are covered Objective and Task: Determines promotion objectives, outlines tasks it wants to accomplish, and determines promotion cost of doing them
Durable good
Personal selling
Integrated marketing communications: The Target Audience
Personal selling: done at place of purchase Direct marketing: done to encourage repeat purchases Advertising directed to business buyers: trade publications Intermediaries are usually the focus of promotional elements
Developing advertising program: Target Audience
Placement of the advertising depends on audience Scheduling as well
Assessing the Advertising Program
Post tests Aided Recall - what was consumer's previous exposure to ad Unaided Recall - "What ads do you remember seeing yesterday?" Attitude Tests - measuring respondents changes in attitude after ad Inquiry tests - giving more additional info Sales Tests - controlled experiments
Why do products succeed or fail?
Precise Protocol: statement (before product development begins) that identifies (1) a well defined target market, (2) specific customers' needs, wants, and preferences, (3) what the product will be and do to satisfy customers Marketing Reasons for New-Product Failure: 1. Insignificant point of difference: if your product difference is not good enough, won't sell 2. Incomplete market and product protocol before product development starts: vague product for phantom market 3. Not satisfying customer needs on critical factors: problems on critical factors can kill a product 4. Bad timing: too soon, too late, or consumer trends are shifting 5. No economical access to buyers: ex. cost to gain shelf space in grocery stores 6. Poor product quality: not thoroughly tested 7. Poor execution of the marketing mix: somewhere in the p's something is off and goes wrong 8. Too little market attractiveness: target market may be too small Organizational Inertia: 1. Encountering "groupthink" in task force and committee meetings: no one will speak against a new product that everyone loves 2. Avoiding the "NIH problem": not-invented-here problem, ideas from external sources getting rejected just bc they're from outside Open innovation: practices and processes that encourage the use of internal and external ideas and the collaboration of the two sources
Executing Advertising Program
Pretests: tests before advertisements are placed in any medium Portfolio: Used to test copy alternatives (with other ads) Jury: showing the ad copy to a panel of consumers and having them rate it Theater: invited to view new television shows in which test commercials are also shown Full-service agency: Provides the most complete range of services Limited-service agencies: specialize in one aspect of the advertising process such as providing creative services to develop advertising copy In-house agencies: company's own advertising staff may provide full services or limited amount
Step 1: Identify pricing objectives and constraints
Pricing objectives: Specifying the role of price in an org's marketing and strategic plans Profit: ROI, ROA, Managing for long-run profits: companies give up immediate profit by developing quality products to penetrate competitive markets over the long term Maximizing current profit objective, target return objective as a goal Sales revenue, market share, unit volume, survival, social responsibility
The Retail Life Cycle
Process of growth and decline that retail outlets experience over time Early growth: stage of emergence of retail outlet, market share grows gradually Accelerated Development: market share and profit achieve their greatest growth rates, try to achieve dominant position in market share Maturity: Some competitors drop out of market Decline: Market share and profit fall rapidly
Types of Advertisements
Product - focused on selling product: 1. Pioneering or informational (tell people what the product is, what it does, and where it can be located) 2. Competitive or persuasive (persuade target market to pick their product instead of competitors) comparative - shows one's brands strengths relative to a competitor's 3. Reminder (used to reinforce previous knowledge of product) (assure current users they made the right choice) Institutional - build goodwill of organization: 1. Advocacy: state the position of a company on an issue (Nike) 2. Pioneering institutional advertisements: "Values Matter" campaign from Whole Foods - informs customers 3. Competitive: used in markets where different product classes compete for the same buyers, promotes brand's advantages 4. Reminder: bring company's name to attention again
Product items, Product lines, Product mixes
Product Item: Specific product that has a unique brand, size, or price (ex. Ultra Downy softener in sheet and liquid form) Product Line: group of products that are closely related because they satisfy a class of needs, are used together, sold to same customer group, distributed through same outlet, or fall within a given price range (Nike has product lines of shoes and clothing) Product mix: All of the product lines offered by an organization (can have small or large product mix)
Developing advertising program: Specifying Advertising Objectives
Product category, brand, and consumer involvement in the purchase decision process may change the importance of the stages of hierarchy (Ex. using ads with humor rather than facts)
Chartering the Product Life Cycle: Introduction
Product is introduced to its intended target market: sales grow slowly and profit is minimal Primary Demand: creating desire for the product class rather than a specific brand Selective Demand: creating preference for specific brand Skimming pricing: high initial price to cover production costs Penetration pricing: low initial price to discourage competitors from entering market and help build unit volume
Price in marketing mix
Profit: Total Revenue - total cost = (Unit price * Quantity sold) - (Fixed cost + Variable cost) Six Steps in Setting Price: 1. Identify pricing objectives and constraints 2. Estimate demand and revenue 3. Determine cost, volume, and profit relationships 4. Select an approximate price level 5. Set list or quoted price 6. Make special adjustments to list or quoted price
4 markets of economies
Pure competition, monopoly, oligarchy, monopolistic competition
Channel Strategies
Push strategy: directing promotional mix to channel members to gain their cooperation in ordering and stocking the product Personal selling and sales promotions play major roles Goal is to get channel members to push it to their customers, ex. Ford providing incentives to dealers Pull Strategy: Manufacturers direct promotional mix at ultimate consumers to to encourage them to ask the retailer for a product (basically making the demand and then having retailers have to order product) (ex. Ask your doctor about ....")
Chartering the Product Life Cycle: Growth
Rapid increase in sales, competitors appear, profit peaks usually, changes in product appear such as add-ons and new features, broaden distribution
The Communication Process
Requires: a source (company or person), a message, a channel of communication (ex. salesperson), a receiver (consumers), and the processes of encoding and decoding Encoding: Process of having the sender transform an idea into a set of symbols Decoding: Process of having the receiver take a set of symbols and transform it into an idea Field of experience: both receiver and sender have to have context (similar understanding and knowledge)
Retailing Strategy: Positioning
Retail positioning matrix: positions retail outlets on the basis of breadth of product line and value added
Chartering the Product Life Cycle: Decline
Sales drop, happens because of environmental changes, companies will decide between two strategies: Deletion: Dropping product from product line Harvesting: Company retains the product but reduces marketing costs, maintains ability to meet customer requests but no money spent on advertising or selling product
Classifying Retail Outlets: Level of Service
Self-Service Limited Service (ex. Walmart, you shop yourself) Full Service (ex. Nordstrom, free tailoring, customer service line, et.c)
The Four I's of Services: Intangibility
Services are harder for people to evaluate since they can't be held, touched, or seen before the purchase decision Marketers try to make them tangible or show them the benefits ex. American Express shows tangible benefits through Membership Rewards program
Comparing Social and Traditional Media
Similarity: Ability to reach large and niche audiences - good execution is critical and audience size is not guaranteed Differences: 1. Expense and access: Traditional media like newspapers and ads are expensive to produce and are usually owned by the government or privately owned. Social media is cheap and is accessible by everyone. 2. Training and number of people involved: Producing traditional media involves specialized skills, training, and teams of people. Sending messages on social media requires limited skills. 3. Time to delivery: Time lags can be extensive when it comes to traditional media since sometimes it takes a long time to deliver the communication. 4. Permanence: Traditional media can't be altered once it is created. Ex. Magazine article can't be altered once it's in it, but social media posts can be edited and commented on 5. Credibility and social authority: New York Times has lots of credibility among newspapers. With social media, the quality of the message is what really can only establish credibility. 6. Privacy: Recipients of traditional media like TV are completely anonymous. Social media users have less privacy and anonymity. Outsides can access user names.
Step 4: Arriving at the Final Price: Demand-Oriented Pricing Approaches
Skimming Pricing: Setting the highest initial price that customers who really desire the product are willing to pay, prices are lowered in a series of steps Works when patents and copyrights protect the product or uniqueness is understood and valued by customers Penetration Pricing: Setting low initial price on a product to appeal immediately into the mass market Prestige Pricing: Involves setting a high price so that quality or status-conscious customers will be attracted to the product and buy it (duping them!) (ex. Rolex) Price Lining: Firm selling multiple products may price them at different specific pricing points like different kinds of slacks for increasing prices Odd-Even Pricing: Few dollars or cents under a whole number (the DUMBO approach) Target Pricing: Manufacturers will estimate how much product costs and then work backwards to see markups to determine what they can charge wholesalers Bundle Pricing: Marketing of two or more products in a single package price (happy meal!) Yield Management Pricing: Charging of different prices to maximize revenue for a set amount of capacity at any given time (ex. changing airplane prices during holidays)
Chartering the Product Life Cycle: Maturity
Slowing of sales, most consumers are repeat purchasers or have tried and abandoned it, profit declines bc of fierce competitors, cost of gaining new buyers rises Further product differentiation to find new buyers and uses Improve overall marketing cost through promotional and distribution efficiency (so costs don't outweigh revenue)
Step 4: Arriving at the Final Price: Cost-Oriented Pricing Approaches
Standard Markup Pricing: Adding a fixed percentage to the cost of all items in a specific product class Cost-Plus Pricing: Total unit cost + adding a specific amount Experience Curve Pricing: Unit cost declines by 10 to 30 percent each time a firm's experience producing and selling them doubles
Factors Affecting Channel Choice and Management: Target Market Coverage
Target Market Coverage: Attention to number of stores in geographical area Intensive distribution: firm tries to place its products and services in as many outlets as possible, ex. convenience products Exclusive distribution: Only one retailer in a specific geographical area carries the firm's products (ex. YSL lol) Selective distribution: Firm selects a few retailers in specific geographical area to carry products
Step 4: Arriving at the Final Price: Profit-Oriented Pricing Approaches
Target Profit Pricing: Firm that sets an annual target of a specific dollar volume of profit Target Return-on-Sales Pricing: Setting typical prices that will give them a profit that is a specified percentage of the sales volume like 1% Target Return-on-Investment: Annual ROI targets
Step 3: Determine Cost, Volume, and Profit Relationships
The Importance of Controlling Costs Break-Even Analysis (Fixed Cost / Unit price - Unit variable cost)
The Four I's of Services: Inseparability
The consumer cannot/does not separate the deliverer of the service from the service itself Ex. The university you attend may have a good quality of education but the service you get with the classes and teachers will primarily influence your view of the university Service provider and consumer co-create value together Some services are very personal such as haircuts that require you to be there, but others such as self-service technologies like ATMS are less personal
Price
The money or other considerations (including other products and services) exchanged for the ownership or use of a product or service The Price Equation: Pricing tactic that involves increasing surcharges and special fees because buyers are willing to pay extra fees rather than a higher list price
Important Functions Performed by Intermediaries
Transactional Function: buy and sell products or services Logistical Function: Preparing and getting product to buyers (assorting and storing) Facilitating Function: makes transaction easier for buyers (financing and marketing)
Value of Retailing: Utilities
Utilities: Time (product there during right season), Place, Form (production or alteration of your product), and Possession
Future Changes in Retailing: Multichannel retailing
Utilize and integrate a combination of traditional store formats and nonstore formats such as catalogs and television
Product Life Cycle Objectives
What happens, promotional objective: Introduction Stage: Informing consumers in an effort to increase their level of awareness - all the promotional mix elements are used at this time Growth Stage: Persuade the consumer to buy the product rather than substitutes, seeks to gain brand preference and solidify distribution, uses advertising and personal selling during this - tries to differentiate product from competing brand Maturity Stage: Remind buyers of the product's existence and maintain existing buyers through advertising, advertising should be used: direct marketing, promotions, and discounts Decline Stage: Period of phaseout for the product, little money is put to promotional mix
Branding Strategies: Private
When company manufacturers products but sells them under the brand name of a wholesaler or retailer. ex. Costco is a large retailer that has its own brand names Benefit: Produces high profits for manufacturers and resellers and consumers buy them
Brand Name
Word, design/shape/color, or combinations of these to distinguish a seller's products or services
