MRKT Session 3
price elasticity of demand formula
% change in quantity demanded / % change in price
customer characteristics, product attributes, type of organization, competition, marketing environmental forces, and characteristics of intermediaries
, channel selection decisions are usually affected significantly by one or more of the following factors (figure 14.5)
8 factors that affect pricing decisions
1. Organizational and Marketing Objectives 2. Costs 3. Other Marketing Mix Variables 4. Channel Member Expectations 5. Customer's Interpretation and Response 6. Reference Prices 7. Competition 8. Legal and Regulatory Issues
convenience, shopping, specialty, and unsought
4 types of consumer products
target public
A collective of individuals who have an interest in or concern about an organization, a product, or a social cause
external reference price
A comparison price provided by others
electronic data interchange
A computerized means of integrating order processing with production, inventory, accounting, and transportation
demand curve
A graph of the quantity of products a firm expects to sell at various prices if other factors remain constant
marketing channel (also called a channel of distribution or distribution channel)
A group of individuals and organizations that direct the flow of products from producers to customers within the supply chain
long term economic growth
A major catalyst in the growth of consumer services has been
vertical marketing system
A marketing channel managed by a single channel member to achieve efficient, low-cost distribution aimed at satisfying target market customers
price elasticity of demand
A measure of the sensitivity of demand to changes in price
home sourcing
A practice whereby customer-contact jobs are outsourced into workers' homes
internal price reference
A price developed in the buyer's mind through experience with the product
exclusive dealing
A situation in which a manufacturer forbids an intermediary from carrying products of competing manufacturers
supply chain
All the organizations and activities involved with the flow and transformation of products from raw materials through to the end customer
price fixing
An agreement among competing firms to raise, lower, or maintain prices for mutual benefit
tying agreement
An agreement in which a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well
strategic marketing alliance
An agreement whereby the products of one organization are distributed through the marketing channels of another
industrial distributer
An independent business organization that takes title to industrial products and carries inventories
just in time approach (lean distribution)
An inventory management approach in which supplies arrive just when needed for production or resale
experience qualities (what services possess, restaurants and vacations)
Attributes that can be assessed only during purchase and consumption of a service (taste, satisfaction, pleasure)
credence qualities (surgical operations, automobile repairs, and legal representation)
Attributes that customers may be unable to evaluate even after purchasing and consuming a service
horizontal channel integration
Combining organizations at the same level of operation under one management; ex- combining multiple dry cleaning firms
vertical channel integration
Combining two or more stages of the marketing channel under one management
private warehouses
Company-operated facilities for storing and shipping their own products; when its warehousing needs in a given geographic market are substantial and stable enough to warrant a long-term commitment to a fixed facility.
value conscious
Concerned about price and quality of a product
recycling
Converting waste into reusable material, reprocessing, reclaiming, or reusing supplies and final products
opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
fixed costs
Costs that do not vary with changes in the number of units produced or sold (a paint manufacturer's cost of renting a factory does not change because production increases from one to two shifts a day or because twice as much paint is sold)
variable costs
Costs that vary directly with changes in the number of units produced or sold (The wages for a second shift and the cost of twice as much paint are extra costs incurred when production is doubled)
desired and acceptable
Customers usually have two levels of service expectations: _______ and _______.
service quality (note- 70%of people will spend 17% more on products that have good customer service)
Customers' perceptions of how well a service meets or exceeds their expectations
digital distribution
Delivering content through the internet to a computer or other device
inventory management
Developing and maintaining adequate assortments of products to meet customers' needs
nonprice competition
Emphasizing factors other than price to distinguish a product from competing brands
price competition
Emphasizing price as an issue and matching or beating competitors' prices
price discrimination
Employing price differentials that injure competition by giving one or more buyers a competitive advantage
Third-party logistics (3PL) firm
Firms that have special expertise in core logistics activities such as warehousing, transportation, inventory management, and information technology and can often perform these activities more efficiently
megacarriers
Freight transportation firms that provide several modes of shipment
70%
In most developed countries, including Germany, Japan, Australia, and Canada, services account for about what percept of GDP
client based relationships
Interactions that result in satisfied customers who use a service repeatedly over time
price war
Involves two or more companies engaging in intense price competition, often in an effort to boost market share
distribution center
Large, centralized warehouses that focus on moving rather than storing goods
operations management
Managing activities from production to final delivery through system-wide coordination (most public and visible part of the supply chain)
logistics management
Managing the efficient and effective flow of materials, products, and information from the point of origin to consumption
nonprofit marketing
Marketing activities conducted to achieve some goal other than ordinary business goals such as profit, market share, or return on investment
marketing intermediates
Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products
freight forwarders
Organizations that consolidate shipments from several firms into efficient lot sizes
materials handling
Physical handling of tangible goods, supplies, and resources
procurement (supply management)
Processes to obtain resources to create value through sourcing, purchasing, and recycling, including materials and information
social marketing
Social marketing promotes social causes, such as AIDS research or recycling
peak demand
Some services are time sensitive, meaning that a significant number of customers desire the service around the same time. This point in time is called
public warehouses
Storage space and related logistics facilities that can be leased by companies; are especially useful to firms that have seasonal production or demand, low-volume storage needs, and inventories that must be maintained in many locations
price conscious
Striving to pay low prices
search qualities (all goods posses this)
Tangible attributes that can be judged before the purchase of a product (color, style, size, or fit)
channel power
The ability of one channel member to influence another member's goal achievement`
purchasing
The act of negotiating and executing transactions to buy and sell goods, materials, and services
zone of tolerance
The area between customers' expectations regarding their desired service and the minimum level of acceptable service—that is, the difference between what the customer really wants and what he or she will accept before going elsewhere.
marginal revenue
The change in total revenue resulting from the sale of an additional unit of a product
intangibility
The characteristic that a service is not physical and cannot be perceived by the senses
supply chain management
The coordination of all the activities involved with the flow and transformation of supplies, products, and information throughout the supply chain to the ultimate consumer
distribution
The decisions and activities that make products available to customers when and where they want to purchase them
warehousing
The design and operation of facilities for storing and moving goods
channel captain (channel leader)
The dominant leader of a marketing channel or a supply channel; Walmart is retail industry
marginal coat
The extra cost incurred by producing one more unit of a product
perishability (empty seats on an airline cannot be saved and sold later)
The inability of unused service capacity to be stored for future use
customer contact
The level of interaction between provider and customer needed to deliver the service
transportation
The movement of products from where they are made to intermediaries and end users (the most expensive logistics function)
breakeven point
The point at which the costs of producing a product equal the revenue made from selling the product
off peak pricing
The practice of reducing prices of services used during slow periods in order to boost demand
sourcing
The process of determining what materials a firm needs, where those materials come from, and how they impact marketing integrity
inseparability (airline flight)
The quality of being produced and consumed at the same time
order processing
The receipt and transmission of sales order information to the successful delivery of a product or service
total cost
The sum of average fixed and average variable costs times the quantity produced
average total cost
The sum of the average fixed cost and the average variable cost
multichannel distribution
The use of a variety of marketing channels to ensure maximum distribution
deceptive pricing
The use of false or misleading statements or practices to persuade buyers that a product is a better deal than it really is
price
The value paid for a product in a marketing exchange
fixed and variable
Two types of monetary pricing exist
exclusive distribution
Using a single outlet in a fairly large geographic area to distribute a product; This method is suitable for products purchased infrequently, consumed over a long period of time, or that require a high level of customer service or information. It is also used for expensive, high-quality products with high profit margins, such as Porsche, BMW, and other luxury automobiles
intensive distribution
Using all available outlets to distribute a product; appropriate for products that have a high replacement rate, require almost no service, and are often bought based on price cues; Most convenience products like bread, chewing gum, soft drinks, and newspapers are marketed through this
selective distribution
Using only some available outlets in an area to distribute a product; appropriate for shopping products, which include durable goods like televisions or computers
time, place, possession, and form
What are 4 types of utility?
order entry, order handling, and order delivery
What are the 3 main tasks for order processing?
Radio Frequency Identification (RFID)
a wireless system composed Using tags and readers that use radio waves to identify and track tagged materials (tags at zara)
intangible (something that cannot be physically possessed
all products whether physical or services are to some extent what
manufacturers agent
an independent businessperson who sells complementary products of several producers in assigned territories and is compensated through commissions
yes - (think of a theater the play is a service that is a product)
can services be products
administered vertical marketing system
channel members are independent, but informal coordination achieves a high level of interorganizational management
corporate vertical marketing system
combines all stages of the marketing channel, from producers to consumers, under a single owner; ex- zara
13.4a in book
dimensions of service quality
client publics (student body of a college)
direct consumers of a product of a nonprofit organization
prestige sensitive
drawn to products that signify prominence and status
health care, real estate, and legal services
examples of high contact services
tax preparation, auto repair, travel reservations, and dry cleaning
examples of low contact services
restaurant or hotel
examples of places with intangible and tangible aspects
wholesalers and retailers
firms that are downstream in the supply chain; firms are responsible for delivery of the product and after-market services to the ultimate customers
supplies
firms that are upstream in in the supply chain; firms provide direct or indirect input to make the product
product, distribution, promotion, and price
four major marketing mix variables
general publics (alumni, parents of students at a college)
indirect consumers of a product of a nonprofit organization
6 basic characteristics of services
intangibility, inseparability of production and consumption, perishability, heterogeneity, client-based relationships, customer contact
figure 14.6 in book (intensive, selective, and exclusive distribution)
intensity of market coverage table
safety stock
is the amount of extra inventory a firm keeps to guard against stockouts resulting from above-average usage rates and/or longer-than-expected lead times
containerization
is the consolidation of many items into a single, large container that is sealed at its point of origin and opened at its destination
usage rate
is the rate at which a product's inventory is used or sold during a specific time period
table 14.1 in book
key tasks in supply chain management
table 14.2 in book
marketing channel activities performed by intermediaries
unit loading
one or more boxes are placed on a pallet or skid. These units can then be loaded efficiently by mechanical means, such as forklifts, trucks, or conveyer systems
figure 14.4
page shows typical marketing channels for business products
figure 14.3
page shows typical marketing channels for consumer products
total revenue - total cost (Price x quantity sold) - total cost
profit formulas
tangible (rare, even a good like sugar must be marketed and priced)
pure goods are what
intangible (education or healthcare)
pure services are what
order lead time
refers to the average time lapse between placing the order and receiving it
reorder point= (order lead time x usage rate) + safety stock
reorder point formula
heterogeneity
services delivered to people that vary in quality
stockouts
shortages of products that can result in loss of customers
supplementary service
supports the core service and is used to differentiate the service bundle from those of competitors
customer relationship management
systems exploit the information in supply chain partners' information systems and make it available for easy reference
figure 14.7 in book
table showing Proportional Cost of Each Logistics Function as a Percentage of Total Distribution Costs
core service
the basic service experience or commodity that a customer expects to receive
outsourcing
the contracting of physical distribution tasks to third parties
average fixed cost
the fixed cost per unit produced and is calculated by dividing fixed costs by the number of units produced
reorder point
the inventory level that signals the need to place a new order
contractual vertical marketing system
the most popular type of vertical marketing system. Channel members are linked by legal agreements spelling out each member's rights and obligations. Franchise organizations, such as McDonald's and KFC
intensity of market coverage
the number and kinds of outlets in which a product will be sold
analysis of customer expectations, service quality specifications, employee performance, and management of service expectations (see Figure 13.2).
the service company must consider the four factors that affect service quality:
cycle time
the time needed to complete a process
barter
the trading of products, is the oldest form of exchange
nonprofit-organization marketing
the use of marketing concepts and techniques by organizations whose goals do not include making profits
average variable cost
the variable cost per unit produced, is calculated by dividing the variable costs by the number of units produced
when to order and how much to order
to achieve the objective of inventory management, marketers focus on two major issues
intermodal transportation
two or more transportation modes used in combination
time utility
utility that having products available when the customer wants them (Netflix)
form utility
utility that is created by assembling, preparing, or otherwise refining the product to suit individual customer needs
place utility
utility that is making products available in locations where customers wish to purchase them (Zappos)
possession utility
utility that means that the customer has access to the product to use or to store for future use (lease that is handed down through generations)
the increasingly complex, specialized, and competitive business environment.
what can the growth in business services be attributed to
US
what nation is know as the worlds first service industry
desired level of expectations
what the customer really wants
acceptable level of expectations
what the customer views as adequate
marginal revenue = marginal coat
when is profit highest
customer
who is the ultimate consumer
