Marketing Final
"Forget Early Adopters: These People are Happy to Be Late"
"But I often don't feel the need for these new technologies... They require you to sort of constantly adapt to something new, and I often feel this is just unnecessary." (quote from a late adopter) late adopters tend to be skeptical of differences between advertised claims and the actual product often value products core attribute once they've done all that research, and once they are convinced about a product, they are going to stay for a long time
why is understanding price important?
1. Fundamental element of exchange in the market economy 2. Price is a driver of REVENUE, and related to your business' profit PROFIT = REVENUE - COST 3. Psychological elements of pricing -price communicates value
six major steps in the process organizations go through in setting prices
1. Identify pricing objectives and constraints. Profit •Managing for Long-Run Profits •Managing for Current Profit •target Return (ROI or Return on Investment) 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.
pricing constraints
1. demand for product class & brand (Generally, low demand means low prices. Higher demand means higher prices.) 2. newness/stage of product life style Ex: flat screen price has gone down 3. costs (production & marketing) -in the short-run, we must cover variable costs; in the long-run we hope to cover variable costs, fixed costs, and make a profit 4. competitor prices Ex: American furniture warehouse vs. Ikea 5. cost of changing prices & time period they apply 6. single product v. product line Ex: gillette razors 7. type of competitive market 8. legal and ethical concerns
choosing the promotional mix
1. target audience 2. product characteristics 3. push v pull strategy 4. stage in product lifestyle 5. stage in the buying process
"Apple is returning money to ebook buyers after losing price-fixing lawsuit
3 years in court finally ruled apple guilty of fixing ebook prices and consumers will be getting their money back (total of $400 million)
WalMart's unique pricing strategy
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How do changes in price, the product's need-satisfying ability, and internal reference price (the price that the shopper believes or expects the item should cost) may affect perception of value (or utility).
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advertising's role in stimulating primary and/or selective demand.
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common pitfalls of price increases
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how to properly raise prices to minimize customer backlash
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price transparency in raising prices
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The term branding refers to __________. a. the licensing of a name, phrase, design, symbol, or combination of these for a period of 17 years, at which time a firm may renew its intellectual property rights to them b. the value added to the product from the additional features given to a product beyond its functional attributes c. the identification of an organization's products based upon individual SKUs d. an organization's use of a name, phrase, design, symbol, or combination of these to identify its products and distinguish them from those of competitors e. the establishment of a commercial, legal name under which a company does business
d. an organization's use of a name, phrase, design, symbol, or combination of these to identify its products and distinguish them from those of competitors
aided recall
After being shown an ad, respondents are asked whether their previ-ous exposure to it was through reading, viewing, or listening. The Starch test shown in the accompanying photo uses aided recall to determine the percentage of those who (1) remember seeing a specific ad (noted), (2) saw or read any part of the ad identify-ing the product or brand (associated), (3) read any part of the ad's copy (read any), and (4) read at least half of the ad (read most). Elements of the ad are then tagged with the results, as shown in the photo.
comparative advertising
An increasingly common form of competitive advertising shows one brand's strengths relative to those of competitors
retailer
An intermediary who sells to consumers
brand equity
Associations with a brand -Provides a competitive advantage -has a financial advantage, thus has a financial value (it is an asset). -Are consumers willing to pay a premium? Ex: paying for Coca Cola instead of the store brand
acquisition utility (intermediaries)
Assorting: Creating product assortments from several sources to serve customers Storing: Assembling and protecting products at a convenient location to offer better customer service Sorting: Purchasing in large quantities and breaking into smaller amounts desired by customers Transporting: Physically moving a product to customers Financing: Extending credit to customers Grading: Inspecting, testing, or judging products and assigning them quality grades Marketing information and research: Providing information to customers and suppliers, including competitive conditions and trends
ABC Campaign
Attention Brand Communication
formula for breakeven quantity
BEP quantity= fixed cost/unit price-unit variable cost
deceptive pricing
Bait and switch, conditional on purchase of other items, comparison with suggested price
brand licensing
Brand licensing is a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products or services offered by another company (licensee) for a royalty or fee.
branding
Branding is a marketing decision by an organization to use a name, phrase, design, or symbols, or combination of these to identify its products and distinguish them from those of competitors.
Why do we Brand?
Brands help to distinguish and differentiate products. Brands help simplify the shopping experience.
transaction utility (intermediaries)
Buying: Purchasing products for resale or as an agent for supply of a product • Selling: Contacting potential customers, promoting products, and seeking orders • Risk taking: Assuming business risks in the ownership of inventory that can become obsolete or deteriorate
disintermediation
Bypassing Another Channel Member
clicker: The Virgin corporation uses short words after the Brand name "Virgin" to delineate its different product offerings. For example: Virgin Mobile, Virgin Records, Virgin Megastore. In this way, which branding strategy is being used by Virgin? A.Line Extension B.Co-Branding C.Multiproduct Branding D.Private Branding
C.Multiproduct Branding
fundamentals of estimating demand: the demand curve
Change in Quantity Demanded •Movement on the curve due to change in price Change in Demand •A new curve is created due to changes in: -Consumer Tastes -Price of Complementary or Substitute Products -Consumer Income
'public relations' and the do's and don'ts for firms attempting to handle public relations challenges.
Communication management that seeks to influence the image of an organization and its products and services. tools: news release, news conference, public service announcement Don't: United airlines PR crisis Do: Start early, avoid "no comment," be proactive (assuming no legal issues at stake - often conflict between PR and legal team) •If there is negative, get it all out there, avoid drip, drip, drip •Stay positive, avoid getting in the mud •Announce proactive measures to right any wrong -be sincere
how is marginal analysis used for profit maximization?
Companies use marginal analysis as a decision-making tool to help them maximizetheir potential profits. Marginal refers to the focus on the cost or benefit of the next unit or individual, for example, the cost to produce one more widget or the profitearned by adding one more worker.
"The downside of too many product choices on store shelves Learn how to navigate the flood of options—and save money"
Consumer Reports National Research Center confirms that option overload can be a hindrance as well as a help abundance of choice can complicate decision-making, causing shoppers to freeze or postpone a purchase out of uncertainty and frustration when faced with an array of complex options, consumers tend to throw reason out the window and pick a product based on what's easiest to evaluate, not what's most important.
"Are Electric Car Sales About To Accelerate? Why Some Forecasters Are Hopeful -- And Wrong"
Consumers are excited about electrified vehicles today, but are concerned about driving range; high costs for battery packs make the cost of offering ICE range prohibitive," automakers may find it difficult to find the capital for electric vehicle investment as they are forced to simultaneously finance conventional models, and develop new technologies such as connectivity, autonomous driving and meet tough new fuel consumption regulations
clicker: Article 'Forget early adopters' Which of the following is FALSE: A. Late adopters are skeptical of marketing and tend to point out differences between advertised claims and the actual product B.It takes a lot of time to change late adopters, but once they are convinced about a product, they are going to stay for a long time. C.By listening to late adopters of the old version of a product, developers can create a new version that is quicker to be adopted. D.All of the above are TRUE
D
inelastic demand
Demand is NOT responsive to changes in price 1 percent decrease in price produces less than a 1 percent increase in quantity demanded, thereby actually decreasing total revenue. Ex: Gas
elastic demand
Demand is responsive to changes in price 1 per-cent decrease in price produces more than a 1 percent increase in quantity demanded, thereby actually increasing total revenue.
"Dr Pepper vs Dr Pepper in court"
Dublin Dr Pepper in Dublin, Texas sold their sodas in their small town. Customers would travel there to buy them and can even order online. Now found in battle against Dr. Pepper about trademark rights Internet sales and use of cane sugar are increasing their sales across the country Dr Pepper Snapple sued Dublin Dr. Pepper, saying they are diluting the Dr. Pepper brand and stealing sales by selling outside of its approved territory Dublin sells less than 1% of Dr. Pepper's sales volume per year Dublin is selling to restaurants across the country, which Snapple Dr. Pepper said in the lawsuit Dr Pepper Snapple says it has nothing to do about sugar, its in the branding Dublin has temporarily stopped selling soda online but still takes orders from toll free line
elasticity of demand
Elasticity of demand refers to consumers' responsiveness or sensitivity to changes in price
supply and demand: what effect would fluctuations in supply and demand have on price?
Example: Valentines day roses are more money because they are in higher demand
"Keeping it under your hat"
Tesla and Apple are vertically integrated. Apple writes most of its software, designs its own chips and runs their own shops. Tesla makes 80% of their electric cars and sells them directly to customers. Vertical integration was deemed "key to success" in olden days Nowadays, vertical integration is very rare consumers want simplicity; things are done more efficiently in-house; consumers want choice and to companies want to create a relationship with customers.
"Could Graphic New Anti Smoking Ads Do More Harm?"
The TV spots show regretful ex-smokers who have lost toes or a voice-box in graphic detail; such images are sure to make a strong and lasting impression. They also raise a basic question: is scaring the crap out of someone an effective way to make him change behavior? fear appeal the scarier the message- the stronger the affect I'll keep smoking JUST TO SHOW THEM they can't tell me what to do
dual distribution
an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. For example, GE sells its large appliances directly to home and apartment builders but uses retail stores, including Lowe's home centers, to sell to consumers
distributor
an imprecise term, usually used to describe intermediaries who perform a variety of distribution functions, including selling, maintaining inventories, extending credit, and so on; a more common term in business markets but may also be used to refer to wholesalers
wholesaler
an intermediary who sells to other intermediaries, usually to retailers; term usually applies to consumer markets
middleman
any intermediary between the manufacturer and end-user markets
agent or broker
any intermediary with legal authority to act on behalf of the manufacturer
advertising
any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponsor
Vertical Integration- why is this trend growing?
arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or service, and the products combine to satisfy a common need.
2. Rather than compete with large greeting card companies for shelf space in supermarkets, several smaller card companies place their cards in (1) Staples stores where business purchasing managers can easily buy and mail cards, and in (2) Racks in carwashes where customers who are waiting for their cars can browse and purchase cards. This would be an example of which type of marketing channel strategy? a. a strategic channel alliance b. multichannel distribution c. parallel distribution d. dual distribution e.direct distribution
d. dual distribution
3. In the WSJ article, "Companies More Prone to Go 'Vertical'", which of the following was NOT rationale used for businesses to vertically integrate? a. Heightened control over raw materials b. Greater oversight offered with quality assurance c. Increased authority over distribution-based decisions d.Cost savings by lowered fixed cost investments
d.Cost savings by lowered fixed cost investments
early majority (34%)
deliberate, many informal social contacts
product life cycle
describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline
"DOJ Sues Apple, Publishers Over E-Book Price-Fixing"
e books were priced above what they should have been amazon drove e book prices down dramatically publishers would set a retail price and gave retailers no power to alter that price go to an agency model where the price is set, the retailer would get their 30% and the customer would pay a little more.
1. Jaffar Tabrizi is the owner and president of Tabrizi Oriental Rugs located in Toronto, Canada. He personally shops the world over, handpicks, and orders authentic and beautiful handmade rugs. He has them shipped to Canada, where he sells them through his brick-and-mortar stores and his www.tabrizi.com website. In terms of the marketing channel, Jaffar is acting as a(n) __________. a. consumer b. agent c. wholesaler d. brokerage firm e.middleman (*)
e.middleman
standard mark-up
entails adding a fixed percentage to the cost of all items in a specific product class. This percentage markup varies depending on the type of retail store (such as furniture, clothing, or grocery) and the product involved. High-volume products usually have smaller mark-ups than low-volume products
laggards (16%)
fear of debt, neighbors and friends are information sources
Oligopoly
few sellers who are sensitive to each other's prices extent of price competition: some; price leader or follower of competitors Example: airlines
total cost formula
fixed cost + variable cost total expense incurred by a firm in producing and marketing a product. Total cost is the sum of fixed cost and variable cost.
multibranding strategy
giving each product a distinct name. Multibranding is a useful strategy when each brand is intended for a different market segment. Example: Marriott EDITION hotels and Vacation Clubs offer luxury amenities at a premium price. Marriott and Renaissance hotels offer me-dium-to high-priced accommodations. Courtyard hotels and TownePlace Suites ap-peal to economy-minded travelers, whereas the Fairfield Inn is for those on a very low travel budget. disadvantages: Compared with the multiproduct strategy, advertising and promotion costs tend to be higher with multibranding. The company must generate awareness among consum ers and retailers for each new brand name without the benefit of any previous impres sions. Advantages: each brand is unique to each market segment and there is no risk that a product failure will affect other products in the line.
humorous appeals
imply either directly or subtly that the product is more fun or exciting than competitors' offerings
indirect channel
intermediaries are inserted between the producer and consumers and perform numerous channel functions
dynamic pricing policy
involves setting different prices for products and services in real time in response to supply and demand conditions. A dynamic pricing policy gives sellers considerable discretion in setting the final price in light of demand, cost, and competitive factors. Yield management pricing is a form of dynamic pricing because prices vary by an individual buyer's purchase situation, company cost considerations, and competitive conditions.
breakeven analysis
is a technique that analyzes the relationship between total reve-nue and total cost to determine profitability at various levels of output. the quantity at which total revenue and total cost are equal. Profit then comes from all units sold beyond the BEP.
exclusive distribution
is the extreme opposite of intensive distribution because only one retailer in a specific geographical area carries the firm's products. Exclusive distribution is typically chosen for specialty products or services, such as some wom-en's fragrances and men's and women's apparel and accessories. Retailers and industrial distributors prefer exclusive distribution for two reasons. First, it limits head-to-head competition for an identical product. Second, it provides a point of difference for a retailer or distributor
variable costs
is the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold. For example, as the quantity sold doubles, the variable cost doubles. Examples are the direct labor and direct materials used in producing the product and the sales commissions that are tied directly to the quantity sold.
benefits and drawbacks of using celebrity spokespersons for advertising
key element is likability benefits: advertisers who use a celebrity spokesperson believe that the ads are more likely to influence brand equity and sales, particularly as the popularity of social media increases. drawbacks: the spokesperson's image may change over time, becoming inconsistent with the image of the company or brand.
Dos Equis Farewell to most interesting man
largest US sales in franchise history objective: remind target market: beer drinkers/those who know about the campaign
early adopters (3.5%)
leaders in social setting, slightly above average education
selective distribution
lies between these two extremes and means that a firm selects a few retailers in a specific geographical area to carry its products. Selective distribu-tion weds some of the market coverage benefits of intensive distribution to the control over resale evident with exclusive distribution. For example, Dell Technologies chose selective distribution when it decided to sell selected products through U.S. retailers along with its direct channel. most common for todays businesses
private branding strategy?
manufactures products but sells them under the brand name of a wholesaler or retailer Example: Rayovac, Paragon Trade Brands, and ConAgra Foods are major suppliers of privatelabel alkaline batteries, diapers, and grocery products, respectively. Costco, Sears, Walmart, and Kroger are large retailers that have their own brand names advantages: high profits for manufacturers and resellers.
how can businesses utilize dynamic pricing to alter a price to better-fit individual consumers?
many marketers have the ability to customize a price for an individual on the basis of his or her purchasing patterns, product preferences, and price sensitivity, all of which are stored in company data warehouses.16 For example, online marketers, like Amazon, described in Chapter 13, routinely adjust prices in response to purchase situations and past purchase behaviors of online buyers.
monopolistic competition
many sellers compete with substitutable products within a price range extent of price competition: some; compete over range of prices Ex: north face v Patagonia
pure competition
many sellers who follow the market price for identical, commodity products extent of price competition: almost none' market sets price Ex: produce
intensive distribution
means that a firm tries to place its products and services in as many outlets as possible. Intensive distribution is usually chosen for convenience products or services such as candy, fast food, newspapers, and soft drinks. pro: control over resale
loss-leader pricing
not to increase sales but to attract customers in hopes they will buy other products as well, particularly the discretionary items with large markups. For example, supermarkets often use milk as a loss leader.
premiums
objectives: Build goodwill advantages: Consumers like free or reduced-price merchandise disadvantages: Consumers buy for premium, not product
rebates
objectives: Encourage customers to purchase; stop sales decline advantages:Effective at stimulating demand disadvantages: Easily copied; steal sales from future; reduce perceived product value
samples
objectives: Encourage new-product trial advantages: Low risk for consumer disadvantages: High cost for company
sweepstakes
objectives: Encourage present customers to buy more; minimize brand switching advantages: Get customer to use product and store more often disadvantages: Sales drop after sweepstakes
loyalty programs
objectives: Encourage repeat purchases advantages: Help create loyalty disadvantages: High cost for company
point of purchase displays
objectives: Increase product trial; provide in-store support for other promotions advantages: Provide good product visibility disadvantages: Hard to get retailer to allocate high-traffic space
deals
objectives: Increase trial; retaliate against competitor's actions advantages: Reduce consumer risk disadvantages: Consumers delay purchases; reduce perceived product value
product placements
objectives: Introduce new products; demonstrate product use advantages: Positive message in a noncommercial setting disadvantages: Little control over presentation of product
coupons
objectives: Stimulate demand advantages: Encourage retailer support disadvantages: Consumers delay
contests
objectives: increase consumer purchases; build business inventor advantages: Encourage consumer involvement with product disadvantages: Require creative or analytical thinking
vertical channel conflict
occurs between different levels of the same channel Ex: between manufacturer and and a wholesaler
horizontal channel conflict
occurs between intermediaries at the same level in a marketing channel, such as between two or more retailers (Target and Kmart) or two or more wholesalers that handle the same manufacturer's brand
product life cycle (decline)
occurs when sales drop. Usually is due to environmental changes marketing objective: harvesting deletion competition: reduced product: best sellers price: stay profitable promotion: minimal promotion place: fewer outlets Ex: written cards
channel conflict
one channel member be-lieves another channel member is engaged in behavior that prevents it from achieving its goals. Two types of conflict occur in marketing channels: vertical conflict and horizontal conflict
strategic channel alliances
one firm's marketing channel is used to sell another firm's products. Strategic alliances are popular in global marketing, where the creation of marketing channel relationships is expensive and time-consuming.
pure monopoly
one seller who sets the price for a unique product extent of price competition: none; sole seller sets price Example: google glasses
forward integration
own the next level down toward the consumer ex: patagonia opening and owning retail stores
backwards integration
owning the next level up Ex: Krogers making their own brand of Mac and cheese
product form
pertains to variations of a product within the product class
stage 4: stage in the product lifestyle
post-purchase experience: reinforce the purchase, nurture ongoing loyalty pre-purchase experience: create aware, develop consideration purchase experience: develop preference, call to action
how is price used to indicate value?
price is often used to indicate value when it is com-pared with perceived benefits, such as the quality or durability of a product or service. (Value = Perceived Benefits / Price)
cost-oriented approach (internally focused)
price setter stresses the cost side of the pricing problem, not the demand side. Price is set by looking at the production and marketing costs and then adding enough to cover direct expenses, overhead, and profit.
Pricing Objectives
pricing objectives: -sales volume $$ Ex: Target -sales volume (units) Ex: walmart market share Ex: investors survival pricing Ex: JC Penney Social responsibility Ex: Patagonia
What are the efforts to stimulate primary demand (for the product class) versus secondary demand (for a particular product form or brand)?
primary demand: advertising and promotion secondary demand: attention is focused on creating preference for specific brand
direct channel
producer and the ultimate consumers deal directly with each other. Many products and services are distributed this way. Example: Many insurance companies sell their services using a direct channel and branch sales offices.
4 most-common types of direct and indirect distribution
producer--> consumer producer--> retailer --> consumer producer--> wholesaler--> retailer-->consumer producer--> agent--> wholesaler--> retailer--> consumer
4. You're opening your own lawncare business. To get started, you'll need to purchase a $150 lawnmower and apply for a business license that costs $50. You've figured that it costs you around $8 in labor for every lawn mowed, along with the cost of lawn bags for clippings which cost $2.00 per lawn. You hope to achieve a 20% return on your sales and hope to mow around 100 lawns per year. Using the target return on sales model, what would be the price of your product? At the given quantity - what would your profits be? a. $20.00 Price; $800 Profit b. $15.00 Price; $300 Profit c. $25.00 Price; $1,300 Profit d. None of These
b. $15.00 Price; $300 Profit
1. Yankee Candles is a US-based candle manufacturer. Currently, each candle made costs the company $2 in materials like wicks, glass, and wax. To run the Yankee factory in Connecticut, the company pays around $100,000 per year in rent and utilities. Each candle sells for $4. Unfortunately, Yankee's wick supplier is threatening a price increase due to cotton price escalation. This change, all else equal, would effect would this have on Yankee's break even point? a. Breakeven point units would decrease b. Breakeven point units would increase c. Breakeven points would remain unchanged d. None of the above
b. Breakeven point units would increase
You are a Marketing Manager for Dasani bottled water, and need to find a way to raise the price of your products due to the rising cost of plastic (used for your bottle). Based on the WSJ article, "How Companies Can Get Smart About Raising Prices", which of the following are recommended approaches you could pursue? a. Reduce the size of your bottles from 20 oz. to 19 oz. to increase the profitability of each bottle. b. Come out with "Dasani Kids" - a reduced-size water bottle that's easier for kids to handle and drink, at a premium price due to its added value. c. Discontinue a 20% off sales promotion you've been running for your water at 7-11 stores. d. Raise the prices of your product from $1.99 to $2.09. e. None of the Above
b. Come out with "Dasani Kids" - a reduced-size water bottle that's easier for kids to handle and drink, at a premium price due to its added value.
2. Demand for a product is likely to be more price elastic if it a. is considered a necessity. b. has many substitutes. (*) c. has few substitutes. d. requires a small cash outlay. e. is non discretionary.
b. has many substitutes.
experience curve pricing
based on the learning effect, which holds that the unit cost of many products and services declines by 10 to 30 percent each time a firm's experience at producing and selling them doubles. This reduction is regular or predictable enough that the average cost per unit can be mathematically estimated.
pioneering institutional
brand building
if unit price goes up
break even quantity goes down
if fixed costs go up
break even quantity goes up
if unit variable costs goes up
break even quantity goes up
reminder institutional
bring the company's name to the attention of the target market again
institutional advertisements
build goodwill or an image for an organization rather than promote a specific product or service. Institutional advertising has been used by companies such as Texaco, Pfizer, and IBM to build confidence in the company name.
share of voice
calculation of any one advertiser's brand expenditures relative to the overall spending in a category
product life cycle (maturity)
characterized by a slowing of total industry sales or product class revenue. marginal competitors begin to leave market. most customers are repeat purchasers of the item marketing objective: maintain brand loyalty competition: many product: full product line price: defend market share, profit promotion: reminder oriented place (distribution): maximum outlets example: HP laptops
how does the product life cycle differ between class and form types
product class: more of a steady curve on the graph (i.e. prerecorded music) product form: shorter life cycle and skinnier curve on the graph (i.e. cassette tapes and CD's)
product life cycle (growth)
characterized by rapid increase in sales. This is when competitors appear. Profit usually peaks marketing objective: stress differentiation competition: more product: more versions price: gain market share, deal promotion: stress points of difference. advertising emphasis on stimulating selective demand place (distribution): more outlets. very important to broaden distribution Example: apple expanding to make more products
REI opt outside
closed doors on Black Friday to promote going outside remind what brand represents IMC-yes they used many different methods for getting the word out, it was very effective
how do key elements associated with a brand (i.e. color) can affect a brand's trademark?
color can affect consumer perception and therefore affect the trademark based on the perceived value
subbranding
combines a corporate or family brand with a new brand, to distinguish a part of its product line from others. Example: Consider American Express. It has applied subbranding with its American Express Green, Gold, Platinum, Blue, and Centurion black charge cards, with unique service offerings for each
3 types of benefits a products packaging can offer
communication benefits: A major benefit of packaging is the label information it conveys to the consumer, such as directions on how, where, and when to use the product and the source and composition of the product, which is needed to satisfy legal requirements of product disclosure. Ex: nutritional information on food labels functional benefits: providing storage, convenience, or protection or ensuring product quality. Ex: stackable food containers perceptual benefits: Package and label shape, color, and graphics distinguish one brand from another, convey a brand's positioning, and build brand equity.
marketing channel
consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.
Integrated Marketing Communications
coordinating the promotion mix elements and synchronizing promotion as a unified effort traditional tactics: offline digital tactics: online
Fashion Product Life Cycle
curve goes up and down in waves as trends come and go Ex: hush puppies shoes
Fad Product Life Cycle
curve is super sharp; super high to super low Example: silly bands
Clicker Question: Electric Cars Forbes article When thinking about the adoption of electrical vehicles, consumer's core needs are: a)Affordable price point b)Convenience c)Driving range d)All of the above
d) All of the above
If Haagen-Dazs were to develop a range of candy bars, it would represent an example of: a) Multiproduct branding b) Private branding c) Sub-branding d) Brand extension e) Halo branding
d) Brand extension
3. Newsweek, like many other print news organizations, experienced _____________ due to a growing trend with more consumers seeking news information through digital platforms. a. Movement along the demand curve and a decline in quantity demanded b. Movement along the demand curve and a decline in demand c. A shift to a new demand curve and a decline in quantity demanded d. A shift to a new demand curve and a decline in demand e. None of the above
d. A shift to a new demand curve and a decline in demand
product life cycle (introduction)
product is introduced to the market marketing objective: gain awareness and get initial purchase from customers competition: few product: one price: skimming or penetration (skimming to help recover the costs of development) promotion: inform, educate place (distribution): limited example: electric cars
infomerical
program-length (30-minute) advertisements that take an educational approach to com-munication with potential customers. You may remember seeing infomercials for the Magic Bullet, ThighMaster, and OxiClean products, using Ron Popeil, Suzanne Somers, and Anthony Sullivan, respectively, as the spokesperson.
competitive institutional
promotes one product class over another
Push vs. Pull Strategy
push: Directing the promotional mix to channel members to gain their cooperation in ordering and stocking the product. pull: Directing the promotional mix at ultimate consumers to encourage them to ask the retailer for a product.
product class
refers to the entire product category or industry
promotional mix
sales promo, advertising, direct marketing, personal selling, public relations
predatory pricing
selling a product below cost to drive competitors out of the market
prestige pricing
setting a high price so that quality-or status-conscious consumers will be attracted to the product and buy it.
fixed-price policy (one-price policy)
setting one price for all buyers of a product or service. For example, when you buy a Wilson Blade 98 tennis racquet from a sporting goods store, you are offered the product at a single price. You can buy it or not, but there is no variation in the price under the seller's fixed-price policy
odd-even pricing
setting prices a few dollars or cents under an even number Ex: 9.99
late majority (34%)
skeptical, below average social status
what factors affect speed of adoption?
usage barriers: the product is not compatible with existing habits Ex: electric cars value barriers: the product provides no incentive to change Ex: when a new iPhone comes out risk barriers: physical, economic, or social Ex: Tesla psychological barriers: cultural differences or image product complexity: Ex: instagram=easy to navigate trialibilaity: can we try it before? Ex: samples at Costco
reminder advertising
used to reinforce previous knowledge of a product. good for products that have achieved a well-recognized position and are in the mature phase of their product life cycle
innovators (2.5%)
venturesome, higher educated, use multiple information sources
Demand-Oriented Pricing (externally focused)
weigh factors underlying expected customer tastes and preferences more heavily than such factors as cost, profit, and competition when selecting a price level.
mixed branding strategy?
where a 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. Example: Del Monte, Whirlpool, and Dial produce private brands of pet foods, home appliances, and soap, respectively.
how does price increases affect elastic and inelastic demand differently?
with elastic demand, a slight increase in price results in a relatively large decrease in demand. So marketers may cut price to increase consumer demand, the units sold, and total revenue for a product with elastic demand, depending on what competitors' prices are. So a product with inelastic demand means that slight increases or decreases in price will not significantly affect the demand, or units sold, for the product. The concern for mar-keters is that while lowering price will increase the quantity sold, total revenue will actually fall.
demand curve
a graph of the relationship between the price of a good and the quantity demanded
2 critical elements that must be contained within most effective advertising messages.
Most advertising messages are made up of both informational and persuasive elements. These two elements are so intertwined that it is sometimes difficult to tell them apart.
dealer
a more imprecise term than distributor that can mean the same as distributor, retailer, wholesaler, and so forth
puffery
a promotional statement or claim that expresses subjective rather than objective views, which no "reasonable person" would take literally
brand personality
a set of human characteristics associated with a brand name Research shows that consumers assign personality traits to products—traditional, romantic, rugged, sophisticated, rebellious—and choose brands that are consistent with their own or desired self-image Marketers can and do imbue a brand with a personality through advertising that depicts a certain user or usage situation and conveys emotions or feelings to be associated with the brand.
Clicker Question: Too Many Choices? From the article "Too many product choices", psychologist Barry Schwartz makes the claim that: a)Option overload can be a hindrance b)There is no such thing as too many choices c)Consumers like to have an abundance of choice d)An abundance of choice can simplify decision- making as there will always be something that the consumer likes
a)Option overload can be a hindrance
3. You are the proud manufacturer of a new diet soda - SkinnySoda. The carbonated water and flavoring ingredients cost you a total of $0.50, and, because you are a premium brand, each SkinnySoda package and can cost $1.50. Your bottling factory rent is $10,000 per year. You hope to earn a profit of $100,000 per year by selling 10,000 units. Using the target profit pricing model, what price should you choose for your product? a. $13.00 b. $9.99 c. $15.00 d. $7.00 e. None of These
a. $13.00
When Fiat, an Italian-made automobile, launched its line of compact cars in the US marketplace, Fiat executives carefully analyzed the price of Mini Cooper vehicles in the US, choosing to price the Fiat at a premium over other small compact cars such as the Mini Cooper. Fiat was using which pricing approach? a. Above-market pricing b. Loss-leader pricing c. Price-penetration d. Prestige pricing e. Yield-management pricing
a. Above-market pricing
Check out this commercial for the 'got milk?' campaign. Such expenditures are often made to stimulate primary demand, or desire for the product __________, rather than for a specific brand, when there are few competitors with the same product. a. class (*) b. form c. item d. mix e. concept
a. class
bait and switch
ad that attracts consumers with a low-priced product, then tries to sell them a higher-priced product
magazines
advantages: Can target specific audiences; high-quality color; long life of ad; ads can be clipped and saved; can convey complex information disadvantages: Long time needed to place ad; relatively high cost; competes for attention with other magazine features
yellow pages
advantages: Excellent coverage of geographic segments; long use period; available 24 hours/365 days disadvantages: Proliferation of competitive directories in many markets; difficult to keep up to date
newspapers
advantages: Excellent coverage of local markets; ads can be placed and changed quickly; ads can be saved; quick consumer response; low cost disadvantages: Ads compete for attention with other newspaper features; short life span; poor color
direct mail
advantages: High selectivity of audience; can contain complex information and personalized messages; high-quality graphics disadvantages: High cost per contact; poor image (junk mail)
outdoor
advantages: Low cost; local market focus; high visibility; opportunity for repeat exposures disadvantages: Message must be short and simple; low selectivity of audience; criticized as a traffic hazard High cost per co
television
advantages: Reaches extremely large audience; uses picture, print, sound, and motion for effect; can target specific audiences disadvantages:High cost to prepare and run ads; short exposure time and perishable message; difficult to convey complex information
internet
advantages: Video and audio capabilities; animation can capture attention; ads can be interactive and link to advertiser disadvantages: Animation and interactivity require large files and more time to load; effectiveness is still uncertain
radio
advantages:Low cost; can target specific local audiences; ads can be placed quickly; can use sound, humor, and intimacy effectively disadvantages: No visual element; short exposure time and perishable message; difficult to convey complex information
Brand Name
the part of the name that is spoken, including letters, numbers and words
co-branding
the practice of pairing two or more strong brands to facilitate the marketing of a joint product or service for their mutual benefit Example: Hershey's chocolate with Betty Crocker cupcake mix)
brand extension
the practice of using a current brand name to enter a different product class Example: equity in the Huggies family brand name has allowed Kimberly-Clark to successfully extend its name to a full line of baby and toddler toiletries.
product-line pricing
the setting of prices for all items in a product line. When setting prices, the manager seeks to cover the total cost and produce a profit for the complete line, not necessarily for each item.
fixed cost
the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold. Examples of fixed costs are rent on the building, executive salaries, and insurance
brand mark
the unspoken part of the name (i.e. Nike swoosh or Apple's apple)
target return-on-sales pricing
to set typical prices that will give them a profit that is a specified percent-age, say, 1 percent, of the sales volume. =target profit/total revenue
What is the risk with excessive brand extensions, subbrands, and co-brands?
too many uses for one brand name can dilute the meaning of a brand for consumers and harm its brand equity. Brand dilution occurs when con-sumers no longer associate a brand with a specific product or service or start thinking less favorably about the brand.
profit formula
total revenue-total cost
total revenue formula
unit price x quantity sold the total money received from the sale of a product.
target profit pricing
A firm that sets an annual target of a specific dollar volume of profit
Pulse Advertising Schedule
A flighting schedule is combined with a continuous schedule because of increases in demand, heavy periods of promotion, or intro-duction of a new product.
deception
A material representation, omission or practice that is likely to mislead the reasonable consumer.
profit-oriented pricing (internally focused)
A price setter may choose to balance both revenues and costs to set price using profit-oriented approaches. These might either involve setting a target of a specific dollar volume of profit or expressing this target profit as a percentage of sales or investment.
trademark
A trademark identifies that a firm has legally registered its brand name (making it the trade name or trademark) or brand mark so the firm has its exclusive use, thereby preventing others from using it. A well-known trademark can help a company advertise its offerings to customers and develop their brand loyalty.
competitive/persuasive advertising
Advertising that promotes a specific brand's features and benefits persuade the target market to select the firm's brand rather than that of a competitor. used during the growth phase
above-, at-, or below-market pricing
For most products, it is difficult to identify a specific market price for a product or product class. Still, marketing manag-ers often have a subjective feel for the competitors' price or market price.
customary pricing
For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price,
how does brand licensing benefit both the licensed brand and the licensor?
From tapping into new audiences to earning incremental value, there are countless benefits for both licensee and licensor.
how do marketers use marginal analysis to decide whether or not to continue producing an item?
Fundamentally, as long as MR>MC I should keep selling more. When MR<MC I should stop selling it; the cost for that extra unit was higher than what I made!
IKEA bedtime ad
IKEA campaign that sent highly targeted and contextual ads to people who might have been having trouble sleeping The concept we landed on for TV took aim at the reasons people stay awake. And one of those reasons is to watch YouTube videos, so it just made sense to extend our message in a highly targeted way.
Click Streaming
In Web advertising, a click stream is the sequence of clicks or pages requested as a visitor explores a Web site. See our list of advertising terminology on the Internet.
target return-on-investment pricing
Large, publicly owned corporations and many public utilities set annual return-on-investment (ROI) targets such as an ROI of 20 percent. Target return-on-investment pricing is a method of setting prices to achieve this target.
target pricing
Manufacturers will sometimes estimate the price that the ultimate consumer would be willing to pay for a product. They then work backward through markups taken by re-tailers and wholesalers to determine what price they can charge wholesalers for the product.
horizontal price fixing
Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers.
vertical price fixing
Occurs when parties at different levels of the same marketing channel (e.g., manufacturers and retailers) collude to control the prices passed on to consumers.
price lining
Often a firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points
flighting advertising schedule
Periods of advertising are scheduled between periods of no advertising to reflect seasonal demand.
price
Price is the money or other considerations exchanged for the ownership or use of a product or service
competition oriented approach
Rather than emphasize demand, cost, or profit factors, a price setter can stress what "the market" is doing by using competition-oriented approaches.
sales tests
Sales tests involve studies such as con-trolled experiments (e.g., using radio ads in one market and newspaper ads in another and comparing the results) and consumer purchase tests (measuring retail sales that result from a given advertising campaign).
consumer insight
The capacity to gain an accurate and deep intuitive understanding of a consumer
how does elasticity of demand differ between a product category, and particular brands?
The more substitutes a product or service has, the more likely it is to be price elastic. Items that require a large cash outlay compared with a person's disposable income are price elastic. Products and services considered to be necessities are price inelastic
pioneering/informational advertising
Used in the introductory stage of the product lifestyle, PIONEERING advertisements tell people what a product is, what it can do, and where it can be found THE KEY OBJECTIVE: (such as Campbell's new slow kettle soups) is to inform the target market Have been found to be: interesting, convincing, and effective Advertising that promotes a specific brand's features and benefits is
unaided recall
The unaided recall approach involves asking respondents a ques-tion such as, "What ads do you remember seeing yesterday?" without any prompting to determine whether they saw or heard advertising messages.
unit variable cost
UVC= VC/Q
continuous advertising schedule
When seasonal factors are unimportant, advertis-ing is run at a continuous or steady schedule throughout the year.
Multiproduct Branding Strategy
a company uses one name for all its products in a product class. Advantages: -capitalizing on brand equity; consumers who have a good experience with the product will transfer this favorable attitude to other items in the product class with the same name. -makes it possible for product line extensions -lower advertising and promotion costs because the same name is used on all Disadvantage: -A risk with line extension is that sales of an extension may come at the expense of other items in the company's product line. Line extensions work best when they provide incre-mental company revenue by taking sales away from competing brands or at-tracting new buyers. Example: Toro makes: Toro snowblowers Toro lawn mowers Toro garden hoses Toro sprinkler systems
conditions that are most favorable to a penetration versus a price skimming strategy
skimming: For a new innovative product, set a high price (skimming) during introduction since innovators are price inelastic. 1) enough prospective customers are willing to buy the product immediately at the high initial price to make these sales profitable (2) the high initial price will not attract competitors, (3) lowering price has only a minor effect on increasing the sales volume and reducing the unit costs (4) customers interpret the high price as signifying high quality Later, lower price (penetration pricing) to appeal to early majority during growth. (1) many segments of the market are price sensitive, (2) a low initial price discourages competitors from entering the market, and (3) unit production and marketing costs fall dramatically as production volumes increase.
multichannel marketing
sometimes called omnichannel marketing, is the blend-ing 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. Multichannel marketing seeks to integrate a firm's electronic marketing and delivery channels.
advocacy institutional
state the position of a company on an issue
sex appeal
suggest to the audience that the product will increase the attractiveness of the user. Sex appeals can be found in almost any product category, from automobiles to toothpaste.
fear appeal
suggest to the consumer that he or she can avoid some negative experience through the purchase and use of a product or service, a change in behavior, or a reduction in the use of a product.
cost-plus pricing
summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price. Cost-plus pricing generally assumes two forms. With cost-plus percentage-of-cost pricing, a fixed percentage is added to the total unit cost.
price discrimination
the business practice of selling the same good at different prices to different customers
marginal analysis tool
the change in total cost that results from producing and marketing one additional unit of a product Marginal cost=change in total cost/1 unit increase in Q
yield management pricing
the charging of different prices to maximize revenue for a set amount of capacity at any given time Ex: airlines
first step in designing a promotional campaign
the first and most-critical step in advertising is to identify your target audience You should also consider your message content and budget when selecting a medium for advertising.
bundle pricing
the marketing of two or more products in a single package price. For exam-ple, Delta Air Lines offers vacation packages that include airfare, car rental, and lodg-ing. Bundle pricing is based on the idea that consumers value the package more than the individual items.
