MKTG 101 Review

Chapter 1 1. Marketing- process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives 2. Consumer- the ultimate user of a good or service 4. Marketing concept- a management orientation that focuses on identifying and satisfying consumer needs to ensure the organization's long-term profitability 5. Need- recognition of any difference between a consumer's actual state and some ideal or desired state 6. Want- the desire to satisfy needs in specific ways that are culturally and socially influenced 7. Benefit- the outcome sought by a customer that motivates buying behavior--that satisfies a need or want 9. Market- all of the customers and potential customers who share a common need that can be satisfied by a specific product, who have the resources to exchange for it, who are willing to make the exchange, and who have the authority to make the exchange 12. Value proposition- a marketplace offering that fairly and accurately sums up the value that will be realized if the product or service is purchased 16. Business-to-business marketing- marketing of those goods and services that business and organizational customers need to produce other goods and services, for resale or to support their operations 17. Industrial goods- goods bought by individuals or organizations for further processing or for use in doing business 20. Marketing mix- a combination of the product itself, the price of the product, the place where it is made available, and the activities tht introduce it to consumers that creates a desired response among a set of predefined consumers a. Four P's-- product, price, promotion, place 21. Promotion- the coordination of a marketer's marketing communications efforts to influence attitudes or behavior; the coordination of efforts by a marketer to inform or persuade consumers of organizations about goods, services, or ideas 22. Place- the availability of the product to the customer at the desired time and location 23. Customer relationship management (CRM)- a philosophy that sees marketing as a process of building long-term relationships with customers to keep them satisfied and to keep them coming back 24. Marketing plan- a document that describes the marketing environment, outlines the marketing objectives and strategy, and identifies who will be responsible for carrying out each part of the marketing strategy 25. Mass market- all possible customers in a market, regardless of the differences in their specific needs and wants 26. Market segment- a distinct group of customers within a larger market who are similar to one another in some way and whose needs differ from other customers in the larger market 27. Target market- the market segments on which an organization focuses its marketing plan and toward which it directs its marketing efforts 28. Market position- the way in which the target market perceives the product in comparison to competitors' brands 29. Product orientation- management philosophy that emphasizes the most efficient ways to produce and distribute products 30. Selling orientation- a managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory 31. Consumer orientation- a management philosophy that focuses on ways to satisfy customers' needs and wants 32. New Era orientation- a management philosophy in which marketing means a devotion to excellence in designing and producing products that benefit the customer plus the firm's employees, shareholders, and communities 33. Utility- the usefulness or benefit consumers receive from a product a. Form utility- benefit marketing provides by transforming raw materials into finished products b. Place utility- benefit marketing provides by making products available where customers want them c. Time utility- storing products until they are needed d. Possession utility- allowing consumer to own, use ,and enjoy the product Chapter 2 1. Business plan- a plan that includes the decisions that guide the entire organization 2. Marketing plan- a document that describes the marketing environment, outlines the marketing objectives and strategy, and identifies who will be responsible for carrying out each part of the marketing strategy 3. Strategic planning- a managerial decision process that matches an organization's resources and capabilities to its market opportunities for long-term growth and survival 4. Strategic business units (SBUs)- individual units within the firm that operates like separate businesses, with each having its own mission, business objectives, resources, managers, and competitors 5. Tactical (functional) planning- a decision process that concentrates on developing detailed plans for strategies and tactics for the short term that support an organization's long-term strategic plan 6. Operational planning- a decision process that focuses on developing detailed plans for day-today activities that carry out an organization's tactical plans 7. Cross-functional planning- an approach to tactical planning in which managers work together in developing tactical plans for each functional area in the firm so that each plan considers the objectives of the other areas 8. Mission statement- a formal statement in an organization's strategic plan that describes the overall purpose of the organization and what it intends to achieve in terms of its customers, products, and resources a. To develop strategic plans, follow three steps i. Develop a mission or vision ii. Establish long-term goals or objectives iii. Allocate resources to different SBUs to maximize growth and profits 9. Business Portfolio- the group of different products or brands owned by an organization and characterized by different income-generating and growth capabilities 10. Portfolio analysis- a management tool for evaluating a firm's business mix and assessing the potential of an organization's strategic business units 11. BCG growth- market share matrix- a portfolio analysis model developed by the Boston Consulting Group that assesses the potential of successful products to generate cash that a firm can then use to invest in new products a. STARS- SBUs with products that have dominant market share in high-growth markets, command the firm's attention and grab the lion's share of the money b. CASH COWS- dominant market share in low-growth potential market, firms usually milk cash cows of their profits to fund the growth of other products in a portfolio c. QUESTION MARKS- problem children, products with low market shares in fastgrowth markets d. DOGS- a product nobody wants, they have small share of a slow-growth market, when possible, large firms may sell off their dogs to smaller firms that may be able to nurture them 12. SWOT analysis- an analysis of an organization's Strengths and Weaknesses and the Opportunities and Threats in its external environment 15. Competitive advantage- the ability of a firm to outperform the competition, thereby providing customers with a benefit the competition can't 16. Distinctive competency- a superior capability of a firm in comparison to its direct competitors 17. Differential benefit- properties of products that set them apart from competitors' products by providing unique customer benefits 18. Growth strategies a. Market penetration- growth strategies designed to increase sales of existing products to current customers, nonusers, and users of competitive brands in served markets b. Market development- growth strategies that introduce existing products to new markets c. Product development- growth strategies that focus on selling new products in served markets d. Diversification- growth strategies that emphasize both new products and new markets 19. Situation analysis- the first part of a marketing plan that provides a thorough description of the firm's current situation including its internal and external environments 20. Marketing audit- a comprehensive review of a firm's marketing function Chapter 6 1. Consumer behavior- the process involved when individuals or groups select, purchase, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and desires a. Problem recognition- the process that occurs whenever the consumer sees a significant difference between his current state of affairs and some desired or ideal state; this recognition initiates the decision-making process b. Information search- the process whereby a consumer searches for appropriate information to make a reasonable decision c. Evaluation of alternatives i. Evaluative criteria- the dimensions used by consumers to compare competing product alternatives (power, style, safety, etc) d. Product choice i. Heuristics- a mental rule of thumb that leads to a speedy decision by simplifying the process 1. Brand loyalty- a pattern of repeat product purchases accompanied by an underlying positive attitude toward the brand, which is based on the belief that the brand makes products superior to its competition 2. Country of origin e. Postpurchase Evaluation i. Consumer satisfaction/dissatisfaction (CS/D)- the overall feelings or attitude 2. How much effort put into these decisions depends on a. Involvement- the relative importance of perceived consequences of the purchase Perceived risk- the belief that choice of a product has potentially negative consequences. 3. Internal Influences on consumer decisions a. Perception- the process by which people select, organize, and interpret information i. Exposure- i.e. billboards ii. Perceptual selection- pay attention to some stimuli but not others iii. Interpretation- associations b. Motivation- an internal state that drives us to satisfy needs by activation goal-oriented behavior i. Hierarchy of needs- categorizes motives according to five levels of importance, the more basic needs being on the bottom of the hierarchy and the higher needs at the top c. Learning- a relatively permanent change in behavior caused by info or experience i. Behavioral learning theories- focus on how consumer behavior is changed by external events or stimuli 1. Classical conditioning- pairing stimuli 2. Operant conditioning- occurs as the result of rewards or punishments 3. Stimulus generalization- behavior caused by a reaction to one stimulus occurs in the presence of other, similar stimuli ii. Cognitive learning theory- theory of learning that stresses the importance of internal mental processes and that views people as problem solvers who actively use information from the world around them to master their environment d. Attitudes- a learned predisposition to respond favorably or unfavorably to stimuli based on relatively enduring evaluations of people, objects, and issues e. Personality- the psychological characteristics that consistently influence the way a person responds to situations in his or her environment Self-concept- an individual's self-image that is composed of a mixture of beliefs, observations, and feelings about personal attributes f. Age groups i. Family life cycle- a means of characterizing consumers within a family structure based on different stages through which family members pass as they grow older g. Lifestyles- the pattern of living that determines how people choose to spend their time, money, and energy and that reflects their values, tastes, and preferences i. Psychographics- the use of psychological, sociological, and anthropological factors to construct market segments 4. Situational influences on consumer decisions a. The physical environment b. Time 5. Social influences on consumer decisions a. Culture- the values, beliefs, customs, and tastes valued by a group of people b. Subcultures- a group within a society whose members share a distinctive set of beliefs, characteristics, or common experiences c. Social class- the overall rank or social stnading of groups of people within a society according to the value assigned to such factors as family background, education, occupation, and income d. Group behavior e. Reference groups- an actual or imaginary individual or group that has a significant effect on an individual's evaluations, aspirations, or behavior i. Conformity- a chance in beliefs or actions as a reaction to group pressure ii. Sex roles- society's expectations for men and women iii. Opinion leaders- a person who is frequently able to influence others' attitudes or behaviors by virtue of his or her active interest and expertise in one or more product categories 6. Peer to Peer E-Commerce a. Consumer to consumer (C2C) e-commerce- communications and pruchases that occur among individuals without directly involving the manufacturer or retailer i. Multi-user dungeons ii. Rooms, rings, and lists iii. Boards iv. Auction sites v. Product rating sites vi. Protest sites i. Chapter 7 1. Business Markets: Buying a.nd Selling When Stakes Are High a. Business to business marketing- marketing of those goods and services that business and organizational customers need to produce other goods and services for resale or to support their operations (aka Organizational markets) 1. Characteristics that make a difference in business markets 1. Multiple buyers 2. Number of Customers 3. Size of purchases 2. Geographic concentration b. Business to business demand i. Derived demand- demand for business or organizational products derived from demand for consumer goods or services 1. Demand for education-->derived demand for textbooks-->paper->pulp-->forestry products ii. Inelastic demand- demand in which changes in price have little or no effect on the amount demanded iii. Fluctuating demand 1. Acceleration principle (multiplier effect)- a marketing phenomenon in which a small percentage change in consumer demand can create a large percentage change in business to business demand (i.e. air travel) 2. Life expectancy of products iv. Joint demand- demand for two or more goods that are used together to create a product (i.e. automobiles - tires, batteries, etc) 2. Classifying business-to-business markets- customers: a. Producers- the individuals or organizations that purchase products for use in the production of other goods and services b. Resellers- buy finished goods for the purpose of reselling, renting, or leasing to others to make a profit and to maintain their business operations c. Government marketsi. Competitive bids- business buying process in which two or more suppliers submit proposals for a proposed purchase and the firm providing the better offer gets the bid d. Not-for-profit institutionse. North American Industry Classification System (NAICS)- numerical coding system that the US, Canada, and Mexico use to classify firms into detailed categories according to their business activities 3. The Nature of Business Buying a. The Buying Situation i. Buy class- a classification to characterize the degree of time and effort required to make a decision ii. Straight rebuy- routine purchases with minimal decision making iii. Modified rebuy- a previously made purchase that involves some change and requires limited decision making New-task buy- new b2b purchase that is complex or risky, requires extensive decision making b. The professional buyer i. Centralized purchasing- single dept does all buying for all the company's facilities c. The buying center- group of people in an organization who participate in a purchasing decision i. Roles 1. Initiator- recognizes that purchase needs to be made (production employees, sales manager, anyone) 2. User- person who ultimately uses product (anyone, secretary) 3. Gatekeeper- controls flow of information to others (buyer/purchasing agent) 4. Influencer- affects decision by giving advice and sharing expertise (engineers, quality control experts, technical specialists, outside consultants) 5. Decider- makes final purchase decision (purchasing agent, managers, CEO) 6. Buyer- executes the purchase decision- (purchasing agent) The business buying decision process a. Problem recognition- purchase requisition or request made b. Information search- potential suppliers identified, product specifications developed, proposals obtained c. Evaluation of Alternatives- proposals evaluated, samples obtained and evaluated d. Product and supplier selection- purchase order issued i. Just in time (JIT)- inventory management and purchasing processes used to reduce inventory to very low levels and ensure that delieveries from suppliers arrive only when needed ii. Single sourcing- buying a particular product from only one supplier iii. Multiple sourcing- buy from several different suppliers iv. Reciprocity- trading partnership, two firms agree to buy from one another v. Outsourcing- obtain outside vendors to provide goods and ser vices that otherwise might be supplied in house vi. Revenue marketing- buyer firm attempts to identify suppliers who will produce products according to the buyer firm's specifications e. Postpurchase evaluation- users surveyed, performance documented 5. Electronic Business-to-Business Commerce- internet exchanges between two or more businesses a. Extranet- private corporate computer network that links company depts, employees, and databases to suppliers customers b. Private exchanges- systems that link an invited group of suppliers and partners over the web c. Security-- firewalls-only authorized individuals gain access, encryption- need right key iv. Chapter 8 1. Selecting and Entering a Market a. Market fragmentation- creation of many consumer groups due to a diversity of distinct needs and wants in modern society b. Target marketing stretegy- divide total market into different segments based on custermer characteristics, selecting one or more segments, and developing products to meets the needs of those specific segments c. Segmentation- dividing larger market into smaller pieces i. Segmentation variables- dimensions that divide the total market into groups d. Dimensions i. Demographics- measurable characteristics- gender, age, family structure, income, social class, race ,ethnicity, geography ii. Geodemography- combining geography with demographics iii. Psychographics- VALS- values and lifetyles- psych system that divides entire US population into 8 segments iv. Behavorial segmentation- on basis of how they act toward, feel about, or use a good or service v. 80/20 rule- 20% of purchasers account for 80% of a product's sales vi. Usage occasions- when consumers use product most 2. Targeting a. Target market- group or groups that a firm selects to turn into customers as result of segmentation and targeting b. Segment profiles- description of typical customer in segment c. Undifferentiated targeting strategy- appealing to broad spectrum of people---- economies of scale! d. Differentiated marketing- develop one + products for each of customer groups with different product needs e. Concentrated targeting- focusing efforts on offering one or more products to a single segment f. Customized marketing- an approach that tailors specific products and the messages about them to individual customers g. Mass customization- modify basic good/service to meets needs of individ 3. Positioning- develping marketing strategy aimed at influencing how a particular market segment perceives a good or service in comparison to the competition a. Steps: i. Analyze competitors' positions in marketplace ii. Offer good or service w/ competitive advantage iii. Finalize marketing mix, put it all together (4 Ps) iv. Evaluate target market's responses v. Repositioning- redoing a product's position to respond to marketplace changes b. Brand personality- distinctive image that captures a good or ser vice's character and benefits i. Perceptual map 4. Customer relationship management (CRM) a. Characteristics of CRM i. Share of customer- percentage of an individual customer's purchase of a product that is a single brand Lifetime value of customer- potential profit generated by single customer's purchase over their lifetime iii. Customer equity- financial value of customer relationships throughout lifetime of relationships iv. Greater focus on high-value customers b. STEPS in CRM marketing 1. Identify customers and get to know them in as much detail 2. Diffentiate these customers by needs and value to company 3. Interact with customers, find ways to improve cost efficiency and effectiveness of interaction 4. Customize some aspect of products or services they offer to each customer (treat each customer differently ii. Chapter 5 I. Knowledge is Power a. Marketing info system (MIS)- procedure to continuously gather, sort, analyze, store, and distribute relevant and timely marketing info to managers b. Intranet- internal corporate communication network c. Marketing intelligence- method to get information about everyday happenings in marketing environment d. Market research- process of collecting analyzing and interpreting data about customers, competitors, and business environment to improve marketing effectiveness e. Syndicated research- research that collects data on regular basis, sells them to firms f. Custom research- research conducted for single firm to provide specific info g. Databases h. Marketing decision support system (MDSS)- software that allows managers to conduct analyses and find needed info i. Data mining- sophisticated analysis techniques, takes advantage of massive amount of transaction info available Steps in marketing research process a. Define the problem b. Determine the research design i. Secondary data- collected for purpose other than purpose at hand ii. Exploratory research- to generate insights for future, more rigorous studies 1. Consumer interviews 2. Focus group 3. Projective techniques 4. Case study 5. Ethnography iii. Descriptive research iv. Causal research- cause and effect c. Choose the data collection method i. Telemarketing, face to face interviews, mail questionnaires, observation, unobtrusive measures, mechanical observation ii. Data quality 1. Validity- extent to which research actually measures what it was intended to measure 2. Reliability- free of errors 3. Representativeness- consumers in study similar to larger group d. Design the sample i. Probability sampling- each member of population has chance of being included ii. Nonprobability sampling- personal judgment is used in selecting respondents e. Collect the data i. Gathering in foreign countries 1. Back-translation ii. Singe-source data- info integrated from multiple sources f. Analyze and interpret the data g. Prepare the research report II. Chapter 14 I. Tailoring marketing communications to customers a. Promotion- coordination of a marketer's communications efforts to influence attitudes or behavior i. Informs consumers of new goods, reminds them to continue using product, persuades them to choose over competition, builds relationships b. Integrated marketing communications (IMC)- process used to plan, develop, execute, and evaluate coordinated, measurable persuasive brand communication programs over time with targeted audiences c. Communications model- process whereby meaning is transferred from a source to a receiver i. Encoding by the marketer ii. The source iii. The message iv. The medium v. Decoding by the receiver vi. Noise- anything that interferes with effective communication vii. Feedback Promotional strategy a. Promotion mix i. Advertising, sales promotions, public relations, and personal selling b. Personal appeals c. Mass appeals i. Advertising- nonpersonal communication using mass media ii. Sales promotion iii. Public relations d. Promotion plan- framework that outlines the strategies for developing, implementing, and controlling the firm's promotional activities e. Establish promotion objectives i. Create awareness ii. Inform the market iii. Create desire iv. Encourage trial v. Build loyalty f. Influences on promotion mix i. Push strategy- company is trying to convince channel members to offer them and entice their customers to select these items ii. Pull strategy- company counting on customers to learn about and express desire for its products, thus convincing retailers to respond to this demand by stocking these items iii. Actions in phases 1. Intro- build awareness, push stretegy 2. Growth- stress product benefit 3. Maturity- persuade brand switching 4. Decline- reduces spending on promotion mix, maybe revive g. Determine and allocate total promotion budget II. h. i. Top-down budgeting techniques- based on total amount for marketing communications ii. Percentage-of sales method- based on certain percentage of either last year's sales or estimates for present year's sales iii. Competitive-parity method- organization matches whatever competitors are spending iv. Bottom-up budgeting techniques- based on identifyig promotional goals and allocating enough money to accomplish them v. Objective-task method- organization first defines the specific communications goals it hopes to achieve and then tries to calculate what kind of promotional efforts it will take to meet these goals Allocate budget to specific promotion mix Designing the promotion mix i. How advertising, sales promotion, personal selling, and public relations can be used most effectively 1. AIDA model- get attention, hold interest, create desire, produce action i. III. IV. Interactive marketing- customized marketing communications elicit a measurable response from individual receivers a. Customizing the message i. De-mass marketing- slice market into smaller and smaller pieces ii. First order response- directly yields transaction, transactional data iii. Second-order response- customer feedback other than a transaction b. Database marketing- the creation of an ongoing relationship with a set of customers who have an identifiable interest in a product or service and whose responses to promotional efforts become part of future communication attempts i. Interactive ii. Builds relationships iii. Locates new customers iv. Stimulates cross-selling v. Is measurable vi. Responses trackable IMC planning model a. Start with customer database b. Develop promotion strategies c. Implement specific promotion tactics d. Evaluate IMC communications Chapter 15 I. Types of advertising a. Product advertising- focuses on specific good/service b. Institutional advertising- promotes activities, personality, or point of view of an organization or company c. Advocacy advertising- type of public service advertising provided by an organization that is seeking to influence public opinion on an issue because it has some stake in the outcome d. Public service ad (PSAs)- advertising run by the media without charge for not-for-profit organization or to champion a certain cause Advertising campaign a. Limited-service agency- provides one or more specialized services such as media buying or creative development b. Full-service agency- provides most of services for campaign, including research, creation of ad copy and art, media selection, production of final messages Developing an Advertising Campaign a. Identify target market b. Establish message and budget objectives i. Set message goals ii. Set budget c. Design the ad i. Creative strategy- process that turns a concept into an advertisement ii. Advertising appeal- central idea or theme of an advertising message 1. USP- unique selling proposition- focuses on one clear reason why a particular product is superior 2. Comparative advertising 3. Demonstration 4. Testimonial 5. Slice-of-life 6. Lifestyle 7. Fear appeals 8. Sex appeals 9. Humorous appeals 10. Slogans and jingles d. Pretesting- research that goes on in early stages, minimizes mistakes by getting consumer reactions to ad messages before they appear in media e. Copy testing- measures the effectiveness of ads by determining whether consumers are receiving, comprehending, and responding to the ad according to plan f. Media planning- developing media objectives, strategies, tactics for use g. Advertising exposure- degree to which target market will see an advertising message in a specific medium h. Impressions- # of people exposed to message placed in one or more media vehicles i. Reach- % of target market that will be exposed to media vehicle j. Frequency- # times person in the target group will be exposed to message k. Gross rating points (GRPs)- compares effectiveness of diff media vehicles' average reach times frequency II. III. l. m. Cost per thousand (CPM)- compare relative cost-effectiveness of different media vehicles that have diff exposure rates; the cost to deliver a msg to 1,000 people or homes Posttesting, unaided recall (no hints about ad), aided recall (clues to prompt answers) Chapter 16 I. Public relations- communication function that seeks to build good relationships with an organization's publics, including consumers, stockholders, and legislators a. Publicity- unpaid communication about an organization appearing in the mass media b. guerrilla marketing- ambush consumers with promotional content in places they aren’t expecting Chapter 13 I. Price planning a. Cost-plus pricing- totalling all the costs for the product and then adding an amount (profit) to arrive at selling price b. Price-floor pricing- to maintain full plant operating capacity, a portion of a firm's output may be sold at a price that covers only marginal costs of production c. Demand based pricing- selling price based on estimates of demand at diff prices d. Target costing- identify the quality and functionality needed to satisfy customers and what price they are willing to pay before the product is designed; the product is manufactured only if the firm can control costs to meet the required price e. Yield-management pricing- charging different prices to diff customers to manage capacity while maximizing revenues Pricing strategies based on the competition a. Price leadership- one firm first sets its price and other firms in industry follow with similar price Pricing strategies based on customers' needs a. Value pricing- set prices that provide ultimate value to customers b. Everyday low pricing (EDLP)- same as value pricing New-product pricing a. Skimming price- very high, premium price that firm charges for its new highly desirable product i. When successful? 1. Demand is price inelastic (high desirable, unique benefits) 2. Little chance that competition can enter market quickly b. Penetration pricing- firm introduces new product at very low price to encourage more customers to purchase it i. Discourage competitors from entering market ii. Barrier to entry if prices are so low that company will not be able to recover development and manufacturing costs c. Trial pricing- new product low for limited period of time to lower risk for customer i. To win customer acceptance first, make profits later Pricing tactics a. For individual products i. Two-part pricing - (golf clubs charge yearly/monthly fee, plus fees for each round, cell phones have set #monthly minutes, and per-minute rate for extra ii. Payment pricing- monthly leases, make ppl less sensitive to total price (sticker shock) b. For multiple products i. Price bundling- selling 2 or more goods as single package for one price ii. Captive pricing- tactic for 2 items that must be used together (razor and blade) c. Geographic pricing i. F.O.B. origin pricing- cost of transporting the product from the factory to the customer's location is responsibility of customer ii. FOB delievered pricing- cost of loading and transporting the product to the customer is included in the selling price and paid by the manufacturer iii. Zone pricing- customers in different geographic zones pay different transportation rates II. III. IV. V. VI. VII. VIII. IX. X. Uniform delivered pricing- adds a standard shipping charge to the price for all customers regardless of location v. Freight absorption pricing- seller absorbs the total cost of transportation Discounting for members of the channel a. List price- price end customer expected to pay as determined by manufacturer; also suggested retail price b. Trade of functional discounts- discounts off list price of products to members of channel of distribution that perform various marketing functions c. Quantity discounts- charging reduced prices for purchases of larger quantities of a product d. Cumulative quantity discounts- discounts based on the total quantity purchased within a specified time period e. Noncumulative quantity discounts- discounts based only on the quantity purchased within individual orders f. Cash discounts- pay producer within certain time, amount due is then cut by certain percent g. Seasonal discounts Dynamic pricing- price can be easily adjusted to meet changes in the marketplace a. Auctions b. Price discrimination (based on what they know diff customer segments are willing to pay) Psychological issues in pricing a. Buyers' pricing expectations b. Internal reference prices- set price or price range in consumers' minds that they refer to in evaluating a product's price c. Price quality inferences Psychological pricing strategies a. Odd-even pricing- $1.99, $5.98, etc., concert and movie tix- even amts b. Price lining- the practice of setting a limited number of different specific prices called price points, for items in a product line i. Stripped down model cheap, better quality priced higher Legal and ethical considerations a. Bait and switch tactic- illegal practice where an advertised price special is used as bait to get customers into store with intention of switching them to a higher-priced item b. Loss leader pricing- setting prices very low or even below cost to attract customers into store c. Unfair sales acts- state laws prohibiting suppliers from selling products below cost to protect small businesses from larger competitors d. Price fixing- two or more firms i. Horizontal price fixing- competitors who are making same product ii. Vertical- force retailers to charge certain price e. Predatory pricing- set very low price to drive competitors out of business, then when they have a monopoly, increase prices iv. NEED CHAPTER 3, 9,10, 11, 17, 18, 12 Chapter 3 – Ethics I. Social profit – benefit an organization and society receive from organization doing good stuff (community service, being ethical, promoting diversity, and being environmentally friendly) II. business ethics – rules of conduct for an organization III. codes of ethics – written standards of behavior that everyone must subscribe to IV. lack of ethics can cost firms in lawsuits; customer and employee efforts can also cost firms V. Consumerism – movement to protect consumers against harmful practices VI. Consumer Bill of Rights – right of consumers protected by federal government a. Include rights to be informed, safe, heard, and choose freely VII. Discriminatory pricing – a pricing practice where different customers are charged different process VIII. Corrective advertising - clarifies or qualifies previous deceptive claims IX. Puffery – claims of a superior product that can not be proven true or untrue X. Slotting allowance – paying a fee to retailers so that the product is on the shelves XI. Social responsibility - management practice where organizations seek to engage in practices that have a positive effect on society and promote public good XII. Environmental stewardship – to protect and enhace natural environment a. Green marketing – create a differential benefit that focuses on the environment XIII. Cause marketing - marketing to link company to a good cause XIV. Total quality management (TQM)- management philosophy that encourages employees to be a part of quality improvement and promote customer satisfaction XV. ISO – international standard organization, set ISO 9000 for quality and ISO 14000 for environment XVI. Corporate cultures can be risk-taking, Profit-centered vs people-centered XVII. Business cycle – patterns in the economy, including recession, depression, and recovery XVIII. Consumer confidence – willingness to spend as a reflection XIX. Discretionary income – money after necessities XX. Competition can be either brand (same product, different company) or product (different products to satisfy same needs) XXI. Monopolistic competition - many firms with slightly different products offer unique consumer benefits Chapter 9 I. Good – tangible product II. Core product is the benefits that the customer is buying III. MARKETING SUPPLIES BENEFITS AND NOT PRODUCTS IV. Customized benefits are “bells and whistles” V. Actual product is the physical thing VI. Augmented product is product + services and such VII. Durable goods last VIII. Nondurable goods are consumed IX. Convenience products are cheap, available, purchased frequently with minimal effort or comparison a. Classified as staples, impulse products, or emergency products X. Shopping products spend time and effort in gathering information about these and comparing alternatives before buying XI. Specialty products good or service with unique characteristics, important to buyer, and will devote a lot of time to buying XII. Unsought products are ones that the consumer has little awareness of until it is brought to their attention XIII. B2B a. Maintenance, repair, and opertating (MRO) products are consumed in a short period of time b. Specialized services are crucial to organization but not part of production c. Component parts are manufactured goods or subassemblies of finished items that are needed to complete products downstream d. Also raw materials, processed materials, and equipment needs XIV. Innovation is believed to be new and different in the eyes of consumers a. Continuous innovations are modifications of an existing product to distinguish competitors i. Knockoff – copies with slight modification another product b. Dynamic continuous innovation – change in existing product that requires moderate amounts of learning or behavior change. c. Convergence – two tech coming together to create a new system with benefits greater than each on their own d. Discontinuous innovation – totally new product that creates a makor change in how we live XV. New product development a. Idea generation first step; brainstorm products that fit needs and company’s mission b. Product development and screening (like it sounds) c. Marketing strategy development d. Business analysis – assess commercial viability of product e. Technical development – new product is refined and perfected i. Prototype – test versions f. Test marketing - small market before large g. Commercialization XVI. Adoption (beginning to buy) and diffusion (spread through population) a. Awareness  interest  evaluation  trial  adoption  confirmation b. Categories: innovators (2.5%)  early adopters (13.5%)  early majority (34%) late majority (34%)  laggards (16%) Chap 10 – Managing the product I. Product lines – a firm’s total product offering designed to satisfy a single need or desire of a customer a. Large number of offerings is a full-line and small number is a limited-line. b. Upward line is more expensive and downward line is less expensive c. filling out a product line is adding sizes or styles to previous line d. cannibalization – loss of sales of an existing brand to a new brand being introduced. e. Product mix – total set of all products that a firm offers for sale II. Quality – measured as level (relative) and consistency of quality III. Product life cycle - movement from introduction  growth  maturity (margins start to narrow as competition increases)  decline IV. Brand - a name, term, symbol or unique element that identifies a product and sets it apart from the competition a. Should be easy to remember and have a name that fits needs of market b. Brand equity – value of a brand to an organization c. Brand extensions – new product with same brand name as strong existing brand d. Family brand – or umberella brand strategy; a lot of products under one brand e. Store brands, generic brands and national brands f. Licensing – selling the name of brand for someone else to use g. Co-branding – using two brands together to make a new product i. Ingredient branding – advertising the ingredient V. Trademark – brand name, mark, or character legally registered with government VI. Universal product code (UPC)- black bars that is readable by scanners and identifies the product Vocabulary Chapter 1 Customer equity: the total combined lifetime values of all the company’s customers Customer lifetime value: the value of the entire stream of purchases that the customer would make over a lifetime of patronage Customer perceived value: the difference between total customer value and total customer cost Customer relationship management (CRM): the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Customer satisfaction: the extent to which a product’s perceived performance matches a buyer’s expectations Demands: human wants that are backed by buying power Demarketing: marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but only to reduce or shift it Exchange: the act of obtaining a desired object from someone by offering something in return Internet: a vast public web of computer networks, which connects users of all types all around the world to each other and to an amazingly large information repository Market: the set of actual and potential buyers of a product or service Marketing: the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return Marketing concept: the marketing management philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do Marketing management: the art and science of choosing target markets and building profitable relationships with them Marketing offer: some combination of products, services, information, or experiences offered to a market to satisfy a need or want Needs: states of felt deprivation Partner relationship management: working closely with partners in other company departments and outside the company to jointly bring greater value to customers Product concept: the idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements Production concept: the idea that companies will favor products that are available and highly affordable Selling concept: the idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort Share of customer: the portion of the customer’s purchasing that a company gets in its product categories Societal marketing concept: a principal of enlightened marketing that holds that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long run interests Wants: the form of human needs take as shaped by culture and individual personality Vocabulary Chapter 2 Business portfolio: the collection of businesses and products that make up the company Diversification: a strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets Downsizing: reducing the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company’s overall strategy Growth-share matrix: a portfolio-planning method that evaluates a company’s strategic business units in terms of their market growth rate and relative market share. SBUs are classified as starts, cash cows, question markets, or dogs Market development: a strategy for company growth by identifying and developing new market segments for current company products Market penetration: a strategy for company growth by increasing sales of current products to current market segments without changing the product Market positioning: arranging for a product to occupy a clear, distinctive, and desirable place relative to comparing products in the minds of target consumers Market segment: a group of consumers who respond in the a similar way to a given set of marketing efforts Market segmentation: dividing a market into distinct groups of buyers who have distinct needs, characteristics, or behavior and who might require separate products or marketing mixes Marketing audit: a comprehensive, systematic, independent, and periodic examination of a company’s environment, objectives, strategies, and activities to determine problem areas and opportunities and to recommend a plan of action to improve the company’s marketing performance Marketing control: the process of measuring and evaluation the results of marketing strategies and plans, and taking corrective action to ensure that objectives are achieved Marketing implementation: the process s that turns marketing strategies and plans into marketing actions in order to accomplish strategic marketing objectives Marketing mix: the set of controllable tactical marketing tools-product, price, place, and promotion-that the firm blends to produce the response it wants in the target market Marketing strategy: the marketing logic by which the business unit hopes to achieve its marketing objectives Mission statement: a statement of the organization’s purpose-what it wants to accomplish in the larger environment Portfolio analysis: the process by which management evaluates the products and businesses making up the company Product development: a strategy for company growth by offering modified or new precuts to current market segments Product/market expansion grid: a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification Return on marketing (marketing ROI): the net return from a marketing investment divided by the costs of the marketing investment Strategic planning: the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. It involves defining a clear company mission, setting supporting objectives, designing a sound business portfolio, and coordination function strategies Target marketing: the process of evaluating each make segment’s attractiveness and selecting one or more segments to enter Value chain: the series of departments that carry out value-creating activities to design, produce, market, deliver, and support a firm’s products Value-delivery network: the network made up of the suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system Vocabulary Chapter 3: Baby boomers: the 78 million people born during the baby boom following World War II and lasting until the early 1960’s Cultural environment: institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors. Demography: the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. Economic environment: factors that affect consumer buying power and spending patterns Engel’s laws: differences noted over a century ago by Ernst Engel in how people shift their spending across food, housing, transportation, health care, and other goods and services categories as family income rises. Generation X: the 45 million people born between 1965 and 1976 in the “birth dearth” following the baby boom. Generation Y: the 72 million children of the baby boomers, born between 1977 and 1994 Macro environment: The larger societal forces that affect the microenvironment-demographic, economic, natural, technological, political, and cultural forces. Marketing Environment: The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. Marketing Intermediaries: firms that help the company to promote, sell, and distribute its goods to final buyers; they include resellers, physical distribution firms, marketing service agencies, and financial intermediaries. Microenvironment: The actors close to the company that affect its ability to serve its customers-the company, suppliers, marketing intermediaries, customer markets, competitors, and publics. Natural environment: natural resources that are needed as inputs by marketers or that are affected by marketing activities. Political Environment: Laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society. Public: any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives Technological environment: forces that create new technologies, creating new product and market opportunities. Chapter 3: • Chapter is on how companies analyze the environments to better understand the marketplace and consumers. • • • • • • • • • • • • • • • • • • • o Companies constantly watch and manage the marketing environment in order to seek opportunities and ward off threats Environmental forces that affect the company’s ability to serve its customers The company’s microenvironment includes the company’s internal environment as it influences marketing decision making o Its several department and management levels Marketing channel firms cooperate to create customer value 5 types of customer markets o Consumer o Business o Reseller o Government o International markets Competitors vie with company to better serve customers Publics have an impact on the company’s ability to meet its objectives. 6 forces make up a company’s macro-environment: forces shape opportunities and pose threats to the company o Demographic o Economic o Natural o Technological o Political o Cultural forces Changes in demographic and economic environments affect marketing decisions Demographic environment shows a changing age structure, shifting family profiles, geographic population shifts, better educated population, and increasing diversity Economic environment is characterized by more consumer concern for value and shifting consumer spending patterns. Consumers want the right combo of quality and service for a good price Distribution of income is shifting o Rich are richer, smaller middle class, poor are still poor o Two-tiered market o Companies tailor to affluent and less affluent Major trends in the firm’s natural and technological environments 3 major trends in natural environment o Shortages of certain raw materials o Higher pollution levels o More government intervention in natural resource management Environmental concerns create marketing opportunities for companies Marketer should be aware for 4 major trends in technological environment o Rapid pace of technological change o High R&D budgets o Concentration by companies on minor product improvements o Increased government regulation Companies that fall behind technology will miss out on new product and marketing opportunities Key changes in the political and cultural environments 3 changes in political environment that affect marketing worldwide • • • • o Increasing legislation regulating business o Strong government agency enforcement o Greater emphasis on ethics and socially responsible actions How companies can react to the marketing environment Passively accept the marketing environment as an uncontrollable element to which they must adapt o Avoid threats o Take advantage of opportunities Proactive stance o Work to change the environment o Don’t just react to the environment Companies should try to be proactive Chapter 4 Vocabulary: Causal research: marketing research to test hypotheses about cause-and-effect relationships Customer relationship management: the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Descriptive research: marketing research to better describe marketing problems, situations, or markets, such as the market potential for a product or the demographics and attitudes of consumers Experimental research: the gathering of primary data by selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking for differences in group responses. Exploratory research: marketing research to gather preliminary information that will help define problems and suggest hypotheses. Focus group interviewing: personal interviewing that involves inviting 6 to 10 people to gather for a few hours with a trained interviewer to talk about a product, service, or organization. The interviewer “focuses” the group discussion on important issues. Internal databases: electronic collections of information obtained from data sources within the company Marketing information system: people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. Marketing intelligence: the systematic collection and analysis of publicly available information about competitors and developments in the marketing environment Marketing research: the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization Observational research: the gathering of primary data by observing relevant people, actions, and situations Online databases: computerized collections of information available from online commercial sources or via the Internet Online (Internet) marketing research: collecting primary data through internet surveys and online focus groups. Primary data: information collected for the specific purpose at hand Sample: a segment of the population selected for marketing research to represent the population as a whole. Secondary data: information that already exists somewhere, having been collected for another purpose. Single-source data systems: electronic monitoring systems that link consumers’ exposure to television advertising and promotion with what they buy in stores. Survey research: the gathering of primary data by asking people questions about their knowledge, attitudes, preferences, and buying behavior. Chapter 5 Vocabulary: Adoption process: the mental process though which an individual passes from first hearing about an innovation to final adoption Alternative evaluation: the stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set Attitude: a person’s consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or idea. Belief: a descriptive thought that a person holds about something Cognitive dissonance: Buyer discomfort caused by post purchase conflict Complex buying behavior: consumer buying behavior in situations characterized by high consumer involvement in a purchase and significant perceived differences among brands. Consumer buying behavior: the buying behavior of final consumers-individuals and households who buy goods and services for personal consumption Consumer market: all the individuals and households who buy or acquire goods and services for personal consumption. Culture: the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. Dissonance-reducing buying behavior: consumer buying behavior in situations characterized by high involvement but few perceived differences among brands. Group: two or more people who interact to accomplish individual or mutual goals Habitual buying behavior: consumer buying behavior in situations characterized by ow consumer involvement and few significant perceived brand differences. Information search: the stage of the buyer decision process in which the consumer is aroused to search for more information; the consumer may simply have heightened attention or may go into active information search Learning: changes in an individual’s behavior arising form experience Lifestyle: a person’s pattern of living as expressed in his or her activities, interests, and opinions. Motive (or drive): a need that is sufficiently pressing to direct the person to seek satisfaction of the need Need recognition: the first stage of the buyer decision process, in which the consumer recognizes a problem or need. New product: a good, service, or idea that is perceived by some potential customers as new. Opinion leader: person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts influence on others Perception: the process by which people select, organize, and interpret information ot form a meaningful picture of the world. Personality: the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Post-purchase behavior: the stage in the buyer decision process in which consumers take further action after purchase, based on their satisfaction or dissatisfaction. Purchase decision: the buyer’s decision about which decision to purchase. Social classes: relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors Subculture: a group of people with shared value systems based on common life experiences and situations. Variety-seeking buying behavior: consumer buying behavior in situations characterized by low consumer involvement but significant perceived brand differences. Chapter 6 Vocabulary: Business buyer behavior: the buying behavior of the organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit. Business buying process: the decision process by which business buyers determine which products and services their organizations need to purchase, and then find, evaluate, and choose among alternative suppliers and brands. Buyers: the people who make an actual purchase Buying center: all the individuals and units that participate in the business buying-decision process Deciders: people in the organization’s buying center who have formal or informal power to select or approve the final suppliers. Derived demand: business demand that ultimately comes from the demand for consumer goods. Gatekeepers: people in the organization’s buying center who control the flow of information to others. General need description: the stage in the business buying process in which the company describes the general characteristics and quantity of a needed item. Government market: governmental units-federal, state, and local- that purchase or rent goods and services for carrying out the main functions of government. Influencers: people in an organization’s buying center who affect the buying decision; they often help define specifications and also provide information for evaluating alternatives Institutional market: schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care. Modified re-buy: a business buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers. New Task: a business buying situation in which the buyer purchases a product or service for the first time. Order-routine specification: the stage in the business buying process in which the buyer writes the final order with the chosen supplier. Performance review: the stage in the business buying process in which the buyer assesses the performance of the supplier and decides to continue, modify, or drop the arrangement. Problem recognition: the first stage of the business buying process in which someone in the company recognizes a problem or need that can be met by acquiring a good or service Product specification: the stage in the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item Proposal solicitation: the stage in the business buying process in which the buyer invites qualified suppliers to submit proposals. Straight re-buy: a business buying situation in which the buyer routinely reorders something without any modifications Supplier development: systematic development of networks of supplier partners to ensure an appropriate and dependable supply of products and materials that they will use in making their own products or resell to others. Supplier search: the stage in the business buying process in which the buyer tries to find the best vendors. Supplier selection: the stage in the business buying process in which the buyer reviews proposals and selects a supplier or suppliers. Systems selling: buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation Users: members of the buying organization who will actually use the purchased product or service Value analysis: an approach to cost reduction in which components are studied carefully to determine in they can be redesigned, standardized, or made by less costly methods of production. Vocabulary Chapter 7 Age and life-cycle segmentation: dividing a market into different age and lifecycle groups Behavioral segmentation: dividing a market into groups based on consumer knowledge, attitude, use, or response to a product Benefit segmentation: dividing the market into groups according to the different benefits that the consumers seek from the product Competitive advantage: an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices Concentrated (or niche) marketing: a marketing-coverage strategy in which a firm goes after a large share of one or a few segments or niches Demographic segmentation: dividing the market into groups based on demographic variables such as age, sex, family size, family life cycle, income, occupation, education, religion, race, and nationality Differentiated (or segmented) marketing: a market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each Gender segmentation: dividing a market into different groups based on gender Geographic segmentation: dividing a market into different geographical units such as nations, states, regions, countries, cities, or neighborhoods Income segmentation: dividing a market into different income groups Individual marketing: tailoring products and marketing programs to the needs and preferences of individual customers-also labeled “markets-of-one marketing,” “customized marketing,” and “oneto-one marketing” Intermarket segmentation: forming segments of consumers who have similar needs and buying behavior even though they are located in different countries Local marketing: tailoring brands and promotions to the needs and wants of local customer groupscities, neighborhoods, and even specific stores Market positioning: arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers Market segmentation: dividing a market into distinct group of buyers who have distinct needs, characteristics, or behavior and who might require separate products or marketing mixes Micromarketing: the practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer groups-includes local marketing and individual marketing Occasion segmentation: dividing the market into groups according to occasions when buyers get the idea to buy, actually make the purchase, or use the purchased item Positioning statement: a statement that summarizes company or brand positioning – it takes this form: To (target segment and need) our (brand) is (concept) that (point-of-difference) Product position: the way the product is defined by consumers on important attributes – the place the product occupies in consumers’ minds relative to competing products Psychographic segmentation: dividing a market into different groups based on social graphs, lifestyle, or personality characteristics Target market: a set of buyers sharing common needs or characteristics that the company decides to serve Target marketing: the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter Undifferentiated (or mass) marketing: a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer Value proposition: the full positioning of a brand-the full mix of benefits upon which it is positioned Vocabulary Chapter 8 Brand: a name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors Brand equity: the positive differential effect that knowing the brand name has on customer response to the product or service Brand extension: using a successful brand name to launch a new or modified product in a new category Co-branding: the practice of using the established brand names of two different companies on the same product Consumer product: product bought by final consumer for personal consumption Convenience product: consumer product that the customer usually buys frequently, immediately, and with a minimum of comparison and buying effort Industrial product: product bought by individuals and organizations for further processing or for use in conducting a business Interactive marketing: marketing by a service firm that recognizes that perceived service quality depends heavily on the quality of buyer-seller interaction Internal marketing: marketing by a service firm to train and effectively motivate its customercontact employees and all the supporting service people to work as a team to provide customer satisfaction Line extension: using a successful brand name to introduce additional items in a given product category under the same brand name, such as new flavors, forms, colors, added ingredients, or package sizes Packaging: the activities of designing and producing the container or wrapper for product Private brand (or store brand): a brand created and owned by a reseller of a product or service Product: anything that can be offered to a market for attention, acquisition, or use, or consumption that might satisfy a want or desire Product line: a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges Product mix (or product assortment): the set of all product lies and items that a particular seller offers for sale Product quality: the ability of a product to perform its functions; it includes the product’s overall durability, reliability, precision, ease of operation and repair, and other valued attributes Service: any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of something Service inseparability: a major characteristic of services – they are produced and consumed at the same time and cannot be separated from their providers Service intangibility: a major characteristic of services – they cannot be seen, tasted, felt, heard, or smelled before they are bought Service perishability: a major characteristic of services – they cannot be stored for later sale or use Service-profit chain: the chain that links service firm profits with employee and customer satisfaction Service variability: a major characteristic of services – their quality may vary greatly, depending on who provides then and when, where, and how Shopping product: consumer good that the customer, in the process of selection and purchase, characteristically compares on such bases as suitability, quality, price, and style Social marketing: the design, implementation, and control of programs seeking to increase the acceptability of a social idea, cause, or practice among a target group Specialty product: consumer product with inquire characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort Unsought product: consumer product that the consumer either does not know about or knows about but does not normally think of buying Vocabulary Chapter 9 Business analysis: a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives Commercialization: introducing a new product into the market Concept testing: testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal Decline stage: the product life-cycle stage in which a product’s sales decline Fad: a temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity Fashion: a currently accepted or popular style in a given field Growth stage: the product life-cycle stage in which a product’s sales start climbing quickly Idea generation: the systematic search for new-product ideas Idea screening: screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible Introduction state: the product life-cycle stage in which the new product is first distributed and made available for purchase Marketing strategy development: designing an initial marketing strategy for a new product based on the product concept Maturity stage: the stage in the product life-cycle in which sales growth slows or levels off New-product development: the development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts Product concept: the idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements Product development: a strategy for company growth by offering modified or new products to current market segments Product life cycle (PLC): the course of a product’s sales and profits over its lifetime. It involves five distinct stages: product development, introduction, growth, maturity, and decline Sequential product development: a new-product development approach in which one company department works to complete its stage of the process before passing the new product along to the next department and stage Simultaneous (or team-based) product development: an approach to developing new products in which various company departments work closely together, overlapping in the steps in the product development process to save time and increase effectiveness Style: a basic and distinctive mode of expression Test marketing: the stage of new-product development in which the product and marketing program are tested in more realistic market settings Chapter 10 Vocabulary: Break-even pricing (target profit pricing): setting the price to break even on the costs of making and marketing a product; or setting price to make a target profit. Competition-based pricing: setting prices based on the prices that competitors charge for similar products Cost-plus pricing: adding a standard markup to the cost of the product Dynamic pricing: charging different prices depending on individual customers and situations. Demand curve: the curve that shows the number of units the market will buy in a given time period, at different prices that might be charged. Experience curve (learning curve): the drop in the average per-unit production cost that comes with accumulated production experience. Fixed costs: costs that do not vary with production or sales level Price: the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Price elasticity: a measure of the sensitivity of demand to changes in price Target costing: pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met. Total costs: the sum of the fixed and variable costs for any given level of production Value-based pricing: setting price based on buyers’ perceptions of value rather than on the seller’s cost. Value pricing: offering just the right combination of quality and good service at a fair price. Variable costs: costs that vary directly with the level of production Chapter 11 Vocabulary: Allowance: promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way. Basing-point pricing: a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer. By-product pricing: setting a price for by-products in order to make the main product’s price more competitive. Captive-product pricing: setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera. Discount: a straight reduction in price on purchases during a stated period of time FOB-origin pricing: a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination. Freight-absorption pricing: a geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get eh desired business. Market-penetration pricing: setting a low price for a new product in order to attract a large number of buyers and a large market share Market-skimming pricing: setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. Optional-product pricing: the pricing of optional or accessory products along with a main product Product bundle pricing: combining several products and offering the bundle at a reduced price Product line pricing: setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices. Promotional pricing: temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales. Psychological pricing: a pricing approach that considers the psychology of prices and not simple the economics; the price is used to say something about the product. Reference prices: prices that buyers carry in their minds and refer to when they look at a given product. Segmented pricing: selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. Uniform-delivered pricing: a geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location. Zone pricing: a geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price. Chapter 2 Strategic business units – units that operate like separate businesses - strategic planning can happen at this level or the overall corporate level tactical planning – done by functional area managers, evaluate environment, set objectives operational planning – supervisory managers, action plans portfolio = different products or brands owned by an organization portfolio analysis – management tool for evaluating business mix BCG growth – market share matrix – way to evaluate current and new products, doesn’t tell how to expland just whether or not to do so High Relative market share Low relative market share High market growth rate Stars – generate large Question Marks – “problem revenues children”, low market shares in fast-growth markets Low market growth rate Cash Cows – not much Dog – product nobody opportunity for new wants, sell to other firms products so competitors don’t enter market, having too many can limit growth potential SWOT analysis – analysis of organizations strengths and weaknesses Distinctive competency – superior capability of a firm in comparison to its direct competitors, what a firm does well Differential benefit- properties of products them set them apart from competitor’s products by providing unique customer benefits Product market growth matrix Product emphasis on Product emphasis on new existing products products Market emphasis on Market penetration Product development existing markets Market emphasis on new Market development Diversification markets APPENDIX B Gross sales – total of all income the firm receives Net sales revenue – gross sales minus amount for returns and customer allowances Cost of goods sold – cost of inventory or goods that firm has sold Gross margin / gross profit – amount of sales revenue that is in excess of cost of goods sold Operating expenses – expenses other than the cost of goods sold necessary for conducting business Operating income – gross margin minus operating expenses Liabilities – economic obligations Ratio of margins (gross, net, operating, returns) = that margin divided by net sales Inventory turnover rate = stockturn rate = # times inventory or stock is turned over during a time period (like a year) Inv. Turover rate = cost of goods sold / average inventory at cost Average inventory at cost = (beginning inventory + ending inventory) / 2 Return on investment = how effective firm’s management has been = net income / total investment OR = (net profit / sales) x (sales / investment) price elasticity = measure of sensitivity of customers to changes in price = percentage change in quantity / percentage change in price OR = (change in quantity/total quantity) / (change in price / total price) economic order quantity – amount a firm should order at one time - ordering larger quantities less frequently = beneficial, but holding costs high - find order processing cost (cost to place an order) - find inventory carrying cost - unites sold, ordering cost, unit cost, inventory carrying cost CHAPTER 3 Social profit – benefits from ethical practices that an organization receives New era firms – price products fairly and cut prices in times of need Puffery – claims about a product that cant be proven true Slotting allowance – fee paid by manufacturer to retailer to be put on the shelf, prevents smaller manufacturers that cannot afford the slotting allowance from getting their products into the hands of consumers Green marketing- supports environmental stewardship by creating an enviornemntally founded differntial benefit Total quality management – focus on satisfying customers through empowering employees to help improve product because they directly reach customers Discretionary income – the amount of money ppl have left after paying for necessities like housing, etc Product competition – firms offering different products compete to serve the same customer needs Brand competition – when firms offering similar goods compete on brand name Perfect competition – when only a number of small firms compete and noone gets control of marketplace CHAPTER 5 Marketing information system – firms ability to gather and analyze marketing info for managers - internal data system – records of sales - marketing intelligence system – get info about everyday happenings in marketing environment (from newspapers, etc) - futurists predict customer trends syndicated research – research by firms that collect data on a regular basis and sell the reports to multiple firms (general info) custom research- research conducted for a single firm, figure out why things are happening marketing decision support system – interactive software that allows managers to conduct analyses and find the info they need - multidimensional scaling = multidimensional perceptual map data mining – techniques to take advantage of amount of info available - customer acquisition – ask qs of customer base - customer retention - customer abandonment – figure out which customers cost more to company than benefit it - market basket analysis – promotional strategies data collection - primary (data conducted to help make a decision) - secondary (data collected for a purpose other than the one at hand projective techniques – explore underlying feelings about a product bc cant get to it through direct customer responses ethnography – detailed study of ppl in their own homes or communities descriptive research – probes the problem and bases its conclusions on large numbers of observations, quantitative terms (averages, etc) validity (does it work w outside world) v reliability (is it free of error) probability sample – everyone has an equal change of being selected - stratified sample – divide public into segments nonprobability samples – convenience, quota (same proportion of ppl as in public) back translation – translate survey into foreign language, then back into English - ensure reliability of foreign sample single source data – integrate info from multiple sources to monitor one thing (eg, scanners in grocery stores) internet – cookies, online focus groups, cheaper CHAPTER 6 Decision making - involvement – relative importance of consequences to consumer (high or low) o habitual decision making – eg can of soda o limited problem solving – consumers do work to make a decision o extended problem solving – eg new car - perceived risk of consequences, (financial, physical, social) - problem recognition, information search, evaluation of alternatives, product choice, postpurchase evaluation - heuristics used (eg price = quality, brand loyalty, country of origin) hierarchy of needs - higher level needs at top like self-actualization - ego needs - belongingness - safety - lower-level needs at bottom like physiological (sleep, food, water) behavioral learning – from external events - classical conditioning = stimulus elicits a response and eventually you remove stimulus - operant conditiong = result of rewards or punishments, (prize at the bottom of cereal) - stimulus generalization – behavior caused by a reaction to one stimulus occurs in the presence of other, similar stimuli (eg product line extensions) cognitive learning theory – importance of internal mental processes - attitude, cognition, behavior personality factors- innovativeness, self-confidence, sociability brand personalities to fulfill someone’s self-concept segmentation - psychographics – psychological, sociological, anthropological factors that construct segments - demographic characteristics like age and income tell what products ppl buy but not why - AIO – activities, interests, opinions Place-based media targets consumers in nontraditional places like airports Consumer-to-consumer-commerce – occur without involving retailer or manufacturer, find value (eg auction sites, internet) CHAPTER 7 Organizational markets = business to business markets - smaller market than large population - multiple buyers (heads of corporation) - careful weighting of alternatives - long-term relationship w a company - competitive bidding - products frequently purchased directly form producer - high risk, high cost - buyers often geographically concentrated - personal selling instead of mass advertising derived demand – businesses want products for consumer goods or services inelastic demand – changes in price have little or no effect on the amount demanded - eg w cars acceleration principle (multiplier effect) – small percentage change in consumer demand can create a large percentage change in business-to-business demand - eg when new equiptment is needed to supply everyone (eg airlines) joint demand – demand for two or more goods that are used together to create a product - when demand for one product goes down, so does demand for the other - eg cars  if tire supply goes down, cant make as many cars, so steel demand decreases too producers – person who purchases products for use in production of other goods and services north american industry classification system – numerical coding system that countries use to classify firms into detailed categories buying situation – degree of effort required - straight rebuy – business buyers make routine purchases that require minimal decision making - modified rebuy – knows purchase requirements and a few potential suppliers - new task buy – new business to business purchase that is complex or risky and that requires extension decision making centralized purchasing – from single department store, eg walmart buying center – ppl in an organization who make buying decision - initiator – recognizes need - user – member who needs it - gatekeeper – controls flow of info - influencer – affects decision by giving advice - decider – CEO, purchasing manager - buyer just in time – inventory management and purchasing processes to reduce inventory - insures that deliveries only arrive when needed multiple v single sources reciprocity – 2 firms agree to buy from eachother outsourcing – obtain goods from outside business that normally would’ve been produced by business reverse marketing – company markets to get suppliers exranet – private corporate computer networks that link company departments to suppliers, etc CHAPTER 8 Market fragmentation – create many consumer groups due to different needs Undifferented targeting strategy – appeal to broad spectrum of people Target a segment - can it be reached? Purchasing power now and in future? Is it homogenized? - Economies of scale – easier to develop only one product or advertising campaign - Concentrated targeting – focusing on one product Positioning – affects how a particular market segment perceives a good or service Demographics - age, gender family structure, income, race - Hispanics geographically concentrated, spend a lot - Asian American segment growing Geodemography – combines geography w demographics, “birds of a feather flock together” psychographics – shared attitudes, interests, opinions - VALS (values and lifestyles – separates all of us into 8 segments) Behavioral segmentation – basis of how they act toward a good or service 80/20rule – 20 percent of purchasers account for 80 percent of product’s sales usage occasions – segment based upon when consumers use products the most (eg holidays) CRM – customer communication w company - individualized, higher rate of retention - strengthens biz to biz relationships too share of customer – percentage of individual customer’s purchase of a product that is a single brand – easier and cheaper to keep existing customer than get new one customer equity – financial value of a customer relationship throughout lifetime of relationship, compare cost of getting and keeping customer in exchange for what they give you CHAPTER 9 Core product = want, all the things the product will provide Actual product = physical good Augmented product = product plus other features like warranty, delivery, etc Impulse buy - > convenience products -> low involvement Shopping product -> higher involvement Maintenance, repair, operating products – goods that a business customer consumes in a relatively short time Specialized services – services purchased from outside suppliers that are essential to the operation of an organization, eg legal services Dynamically continuous innovation – change in existing product that requires moderate amount of new learning, eg computers Convergence- coming together of diff technologies, eg internet and radio Discontinuous innovation – causes major changes in the way we live Steps in creating new product - idea generation, product development and screening, business analysis, technical development, prototypes (test versions of product), test marketing - commercialization – when a new product is launched into market adoption pyramid – confirmation (advertising) - adoption - trial (demonstrations, samples) - evaluation (provide info to customers as to how info can help them) - interest (teaser advertising) - awareness (mass advertising) categories of adopters - innovators (2.5%) - early adopters, early majority, late majority, laggards - bell curve shape what affects speed of diffusion? - relative advantage, - does product provide benefits - compatibility, - w existing cultural techniques - complexity, - trialability, - observability – how visible benefits are to user and others CHAPTER 10 Product line – total product offering designed to satisfy one need - full line (targets many customer segments) v limited-line (premium) - filling-out strategy – include new sizes, etc - downward or upward line extensions - cannibalization – loss of sales of existing brand from expanding a new item into product family product mix – complete set off all products (targeting different needs) product life cycle – how products go through four distinct stages 1) introduction a. single company w a single product b. get first time buyer to try the product c. increase sales slowly d. negative profits e. high price to recover R&D costs or low price to attract customers f. focus on informing customers 2) growth a. new competitors enter market b. encourage brand loyalty via heavy advertising c. rapid increase in sales, increase in profit d. may need to reduce price bc of competition 3) maturity a. add new features to product b. goal is to attract new users and also reminder advertising c. sales peak then level off d. profit margins narrow e. price to maintain market share 4) decline a. goal is to remain profitable, maybe phase out product b. sales decline, profits decline c. decreased pricing and marketing how to create a good brand name? - easy to say, easy to read, easy to remember, easy to spell - fit target market, products benefits, customers culture, fit legal requirements brand equity – value of brand name to an organization brand extensions – new product sold w same brand name as strong existing brand family brand – umbrella brand, a brand that a group of individual products share (eg weight watchers points on diff foods) private label brands – brands owned by retailer or distributor (eg walmart) national or manufacturer brands – brands that the manufacturer of product owns generic brands – no brand name, just product, sold cheaply ingredient branding – form of co-branding in which branded materials are used as ingredients or component parts of other branded products, (eg babyfood made w dole bananas) venture teams – groups of ppl within an organization that work together to focus exclusively on development of a new product, specialty packaging – consider functionality, aesthetics, harmfulness to environment CHAPTER 11 SWOT analysis – strengths, weaknesses, opportunities, environmental threats Ways of selling intangible products - pure selling approach – find a buyer, any buyer - product improvement approach – modify product to increase value - market fulfillment approach – scan market, develop new product o eg manufactured movie stars capacity management – organizations adjust their offerings in an attempt to match demand - eg ski slopes open their mountain to bikers in the summer disintermediation – eliminate interaction between customers and salespeople to minimize negative service encounters - eg self-serve gas stations embodying – inclusion of a service with a purchase of a physical good core service – basic benefit of having a service performed augmented services – core service plus additional services to add value - eg airline ticket comes w frequent flier miles internal marketing – aimed at employees in an effort to inform them about their firms offerings and their high quality service qualities – consumer must examine them prior to purchase experience qualities – customers can determine these during or after consumption credent qualities – characteristics that are difficult to evaluate even after they have been experienced - eg we don’t know if a doctors diagnosis is correct gap analysis – measures difference btwn customers expectation of service quality and what actually occurred - gap btwn consumer expectations and management perceptions o when firms managers don’t understand customer expectations - gap btwn management perception and quality standards set by the firm o when firm fails to establish a quality control program o need written quality goals - gap btwn established quality standards and service delivery o poor employee performance - gap btwn service quality standards and consumer expectations o when exaggerated promises made - gap btwn expected service and perceived service o customer expectations too high critical incident technique – use customer complaints to identify critical incidents How do services differ from Goods? 1) intangibility 2) perishibility (cannot be stored) 3) variability (never the same each time) 4) inserparability from producer (most produced, sold, consumed at same time) How to market it? - tangibles like employee appearance - responsiveness of staff - empathy, assurance CHAPTER 12 Opportunity cost = value of something given up to obtain something else Early in life cycle, can charge a premium price if monopolizing market Image pricing – improve product so there’s more to offer than just low price Demand curves - if price decreases, customer will buy more - premium product = exception: curve… increase in price can lead to increase in purchasing bc viewed as more valuable - when demand shifts (due to improved price, fad, etc), entire line moves bc demand greater than before shift price elasticity of demand – percentage change in unit sales that results from a percentage change in price - = (percentage change in quantity demanded) / (percentage change in price) - if greater than 1, demand is elastic (respond to price decrease by buying more or price increase by busing less) - elastic demand – changes in price have large effects on amount demanded o if product has a close substitute, consumers may move to buy substitute product - inelastic demand – changes in price have little effect on amount demanded o price and revenue in same direction o even if inelastic in short-term, can become elastic in long-term (due to competition) income effect – amount ppl buy based on their own income - inferior goods – as income increase, demand decreases (eg dried beans) cross-elasticity of demand – when product is a substitute for another product that goes up in price, the substitute will be more demanded costs - variable – costs of production (raw materials, labor, etc) that depends on number of units produced o usually, but don’t always, go down w higher levels of production - fixed – do not vary w # units produced o average fixed cost = fixed cost per unit produced - total costs = sum fixed and variable costs break-even price - break even point in units = (total fixed costs) / (unit contribution) o unit contribution = manufacturer’s selling price – variable cost profit = quantity above break even x unit contribution marginal analysis – identify price that will maximize profits - marginal cost – increase in total costs from producing one additional unit of a product o at first decreases, then increases again due to decrease and subsequent increase in costs - marginal revenue – increase in total revenue that results form producing and selling one additional unit of a product o as price drops, amount sold (demand) increases… so total revenues increases even though price decreases o amount of marginal revenue, however, (added revenue for each) decreases at each lower price level - profit maximized when marginal cost = marginal revenue price subsidies – govmt pays to protect domestic business, etc when they must price below cost to make a sale (like during recession) CHAPTER 13 Cost-plus pricing – method of setting prices in which seller totals all the costs for the product and then adds an amount to arrive at the selling price - simple (unit cost plus markup) - markup on cost = price = total cost + (total cost x markup %) o markup % = profit you want / cost of producing the # of units - markup on selling price = price = cost / (1 – markup %) price-floor pricing – a portion of firms output must be sold at price that covers only marginal costs of production - use when economy poor - risks = if word gets out, could jeopardize the price of higher levels - can sell under a different name for a lower price target costing – identify quality and functionality needed to satisfy customers and what price they are willing to pay before product is designed, only manufacture it if you can control cost to meet price - determine price, - determine retail markup, - calculate maximum price retailer will pay o selling price x (1- markup%) - profit required by firm - target cost (maximum cost of producing) o price to retailer x (1 – profit %) yield management pricing – change price according to consumer, eg hotels skimming price – charge high price for product w intention of reducing it in the future - if desireable, offers benefits, premium, recover R&D costs - for success, competition cant enter market yet - works w new, complex products - works w several customer segments bc can lower price in some segments but not others later penetration strategy – firm introduces a new product at a low price to encourage more customers to purchase it - barrier to entry for competition bc competition cant price that low trial pricing – price a new product low to lower risk for customer so they can try it\ price bundling – sell 2 or more goods for the price of one captive pricing – price one product high, one low – they must be used together for both to work (eg razors and razor blades) FOB pricing – free on board – title passes to buyer at FOB - origin – cost of transportation is customers responsibility - delivered pricing – seller pays cost of transportation - zone pricing – distant customers pay more than close ones - uniform pricing – used w internet - freight absorption pricing – seller absorbs all cost trade or functional discounts when channel members sell, store, etc - list price less 40/20 – 40 percent of list price is to cover overhead and profit requirements for retailer o 20 = discount percentage for wholesalers to cover costs cash discounts if you pay for good w/in certain number of days, but must be paid by end of a certain period (eg 2 percent [discount if you pay within] 10 days, net 30 days) price discrimination – based on zipcode internal reference price – price in customers mind of how much roughly a product should cost price lining – setting a limited number of prices for items in a product line - different ranges for each segment illegalities – bait and switch (market lower price, get them to buy higher price) - loss leader pricing (set prcies low to attract customers) - price fixing – horizontal v vertical (force retailers to charge a certain price) CHAPTER 14 Tailoring marketing to customers… promotion must: 1) inform them about goods and where to buy them 2) remind them to use product 3) persuade them to choose their product 4) build relationship w customer integrated marketing communications – customer is focus - source and receiver must have a mutual frame of reference - contact management – provide communication where and when customer will receive it - some companies too financially driven to adopt to this - requires companywide commitment to put customer first promotion mix 1) advertising a. marketer has control over message, but expensive 2) sales promotion, a. encourages trial of new products, short-term emphasis on sales rather than loyalty 3) public relations a. low cost, high credibility, lack of control over message 4) personal selling a. direct contact w customer, high cost push (sell product through channel members) v pull (build desire among consumers) introduction (build awareness), growth (stress product benefits), maturity (persuade switching), decline (you’re fucked) budgeting techniques - top down – establish overall amount of budgeting and distribute among departments o percentage of sales method – based on last years sales  can imply that sales cause promotion and not vice-versa o competitive parity method – match what competitors are spending  assumes all players will maintain market share bottom-up techniques – based on promotional goals and allocating enough money to accomplish them o based on pattern, like spending more on promotion first year o objective task method – define goals to achieve AIDA model – objectives – get attention, hold interest, create desire, produce action Viral marketing – get customers to spread the word Interactive marketing – elicit response from individual receivers Levels of response - first level – transactional data formed (records of organizations that buy product) - second level – customer feedback (like request for information) database marketing – create relationship w customers who are interested in you - interactive, builds relationships, locates new customers, stimulates cross-selling, measurable, trackable CHAPTER 15 Institutional (of company) v product advertising Advocacy advertising – seek to influence public opinion on an issue bc has stake in issue Advertising appeal – central message of ads - Unique selling proposition (USP) – reason why product is superior o simple, comparative - comparative advertising - demonstration, - testimonial (celebrity endorsers) - slice of life (dramatized) - lifestyle (product = part of scene). - Fear, sex, and humor appeals Copy testing – measure effectiveness of the ads Out of home media = billboards, etc Impressions – the number of ppl who will be exposed to a message Gross rating points – compares effectiveness of different media vehicles – average reach times frequency Cost per thousand – cost to deliver a message to 1,000 people or homes Schedules – continuous, pulsing (changes according to when product is in demand), flighting (intense bursts) CHAPTER 16 Guerilla marketing – ambush consumers w messages Merchandise allowance – reimburses retailer for instore support of product Case allowance – discount to retailer based on volume of product ordered Premium – items offered free to ppl who have purchased a product Brand placement – getting a brand into a movie or tv show Cross-promotion – two or more products or services combine forces to create interest using a single promotional tool Salesforce - effective but costly, hard to reach a large # consumers - missionary salesperson – promotes the firm and tries to stimulate demand for a product, but does not actually complete sale - team selling – sales function when handled by team (sales person, technical specialist, etc) - transactional selling – focuses only on immediate sale not on relationship - steps prospecting - identify potential customers 1) preapproach 2) approach 3) sales presentation – proof statements, canned (speech written in advance), formulated (specific to buyers needs) 4) overcome customer objections 5) close the sale – trial close = act as if purchase inevitable, standing room only close = suggest opportunity may be missed if customer hesitates, last objection close = ask if theyre ready / want to purchase 6) followup – bridge for next purchase CHAPTER 17 Channels often indirect due to channel intermediaries efficiencies - Companies can buy in bulk and sell a little at a time (breaking bulk) - Create assortments – put a variety of products in one location to buy from more than one seller at a time Wholesale intermediaries – firms that handle the flow of products from the manufacturer to the retailer or business user Independent intermediaries – not controlled by any manufacturer - merchant wholesalers – buy goods from manufacturers and sell to retailers o full-service – wide range of services to customers o limited-service – take title to merchandise to accept legal responsibility, but don’t provide delivery, etc o cash and carry – low cost merchandise, eg groceries o drop shippers – never take possession of merchandise, but take title to it o mail-order wholesalers o rack jobbers- own and maintain product displays in stores - merchandise agents or brokers – provide services in exhange for commission but don’t take title to it o manufacturing agents – sell lines of noncompeting products o selling agents – sell one product line o commission merchants – receive goods on consignment (take possession w/o taking title, can sell product for highest price they can get) o merchandise brokers – lots of small buyer and sellers, eg real estate in business to business sales, retailer called “industrial distributer” multiple distribution system – each channel level interacts w more than one type of channel - eg pharmaceutical companies – sell pills to independents and wholesalers hybrid marketing system – uses a number of different channels - eg catalogue, dealers, etc conventional marketing system – multiple-levels – channel members work independently of eachother verticle marketing system – cooperation among members of manufacturing, wholesaling, retailing levels – single channel member often controls channels to create economies of size – administered – channel members are independent but voluntarily work together – corporate – one brand owns all the other channels – contractual – cooperation enforced by contracts retailer cooperative – group of retailers that establish wholesaling option to help them compete more effectively w large chain – franchise organization – franchiser allows entrepreneur to use name and marketing plan for free, eg expansion of a restaurant to new state horizontal marketing system – two or more firms at the same channel level work together for a common purpose - eg supermarkets and banks types of distribution - intensive – through all wholesalers willing to sell it o company oriented to mass markets o many customers o competition  advertise through promotion - exclusive – one outlet only / one intermediary per region o specialized markets o low customer density o cost of serving customers high o relationship marketing - selective channel leader – firm that takes a leadership role - economic, legitimate, or coercive power - producers usually hold role - now retailers, like walmart, also hold role value chain – way of looking at supply chain that thinks of each firm’s contributions in terms of the value it provides to end product logistics functions - order processing – if item not in stock, back-order it - warehousing – store goods, private = high initial investment, but lose less inventory due to damage - materials handling - transportation – dependability, cost, speed, accessibility, traceability CHAPTER 18 Wheel of retailing hypothesis – retail firms change, starting w low price and then heightening price Retail life cycle – introduction, growth (others copy it), maturity (intense competition), decline Point-of-sale-systems – technology that collects sales on site Merchandise mix – set of all products offered by retailer - too narrow – not enough customers - too broad – no central identity scrambled merchandising – combination of merchandizing items (eg food and nonfood) types of retailers - self-service - full-service – department stores - limited-service – wal-mart (credit and return but no specific customer aid) merchandise assortment – range of products sold merchandise breadth – number of products available, narrow (convenience stores) or broad merchandise depth – number of different products available – shallow or deep party plan system – relies on ppl buying things in group spirit multilevel network – distributor recruits other ppl to become distributors, sells product to recruits, receives commission – - allows consumers to be reached (like mormons) some illegal, called pyramid scheme Marketing Math Homework Assignment Due Date: Recitation, Week of 9/19/05 Out of 5 points – each question is .5 points and they get .5 points for handing it in. Question 1: You have been hired by Handspring to help prepare for the launch of the new product – a PDA (personal digital assistant) called the Visor Ultra. Packed with more features and memory than the previous versions this is an exciting new product. Over the course of the year close to 3 million PDAs are sold in the USA. Handspring hopes that Ultra will capture 10 percent of the market next year. The Deluxe (previous model) has retailed for $250. Handspring will price Ultra 20% higher. The new device will be assembled in the US out of components, which together cost $164. In addition, Handspring uses the original Palm operating system and pays Palm a royalty of $3.30 per unit sold. The Handspring salesforce will require a 1 % commission. Handspring will distribute its new offering through Circuit City (the retailer). Circuit City demands a margin of 10% based on the retail selling price. Handspring has already incurred $2,000,000 in product development costs for the Ultra. In order to assemble the components, Handspring plans to use both an old assembly line previously used for the Deluxe and a new line that will be built specifically for the Ultra at the cost of $15,000,000. The old line, which cost $9,000,000 a year ago, today can only be used to produce the Ultra and cannot be resold. Both lines have a useful life of 3 years. In addition, the salaries of the management staff needed to supervise production are expected to be $1,000,000. An additional $300,000 will be spent on focus groups prior to product launch to determine the proper message for the advertising campaign. The campaign itself will cost $2,700,000. a) What is the contribution margin? (.5 points) b) What is the break-even sales volume? (.5 points) c) What market share is needed to break even? (.5 point) d) What will be the profit impact of attaining the goal (10 % market share)? (.5 points) e) The focus groups reveal that advertising will have little impact on the target customers. They are much more likely to rely on salesforce endorsements. Hence, instead of spending money on advertising, Handspring will increase the commission to the salespeople. How high can that commission be (stated as a dollar amount per unit) such that the break even remains the same as it was with advertising? (.5 points) Question 1: Solution a) The Deluxe at customer level costs $250 x 1.2 = $300 Circuit City’s margin is 10%. Therefore, the Circuit City’s cost is $300 – 10% x 300 = $270 The variable costs are: Components Circuit City handling fee Operating system Partner’s commission (1% of $270) TOTAL VC Unit Contribution = $270 – 170 = $100 b) Fixed Costs are: New assembly line ($15 m / 3 yrs) Management salaries Focus groups Advertising TOTAL FIXED COSTS $158 $6 $3.30 $2.70 $170 $5,000,000 $1,000,000 $ 300,000 $2,700,000 $9,000,000 Break even volume: $9,000,000 / 100 = 90,000 units c) Market share: 90,000 / 3,000,000 = 3% d) At 10% market share the sales are 3,000,000 x 10% = 300,000 The profit impact is 300,000 x 100 – 9,000,000 = $21,000,000 e) The new fixed costs are $9,000,000 - $2,700,000 = $6,300,000. 90,000 unit sales are required. Therefore, the new contribution margin is $6,300,000 / 90,000 = $70. Hence, the partner’s commission can be as high as $270 - $158 - $6 - $3.30 - $70 = $32.70 Questions 2 Compaq manufactures a wide variety of IT-related products. The PRESARIO Laptop is a doing particularly well; however, its product manager needs to decide if she should launch a new advertising campaign. The costs associated with manufacturing the laptop are: 1. The screens are purchased from a third party vendor for $275 each. The vendor also charges Compaq $100 delivery charge per box. Each box contains four screens. 2. The manufacturing plant cost Compaq $10 million to build three years ago, and is expected to last an additional 17 years and have a salvage value of zero. Compaq will never be able to sell the plant; however, they can use it to manufacture other products while it is still operational. 3. Compaq pays an annual government tax equal to 3% of the plant’s original cost 4. Total wages are $4000 per month per supervisor and $2000 per month per worker. Assume 200 working hours per month. Compaq has 100 supervisors and 500 workers. 5. Other parts of the laptop cost a total of $200. 6. Each PRESARIO requires 10 workers to work for 5 hours to assemble it. The plant builds three different models, in addition to the PRESARIO. Assume that 25% of the supervisors always work on the PRESARIO manufacturing line. Workers are assigned on different manufacturing lines as needed. The PRESARIO has a retail price of $1500 and the retailed takes 20% of that price. The distributors always make a $100. Calculate the following: (For partial credit, please show all your work) 1. The contribution margin per unit for the PRESARIO (.5 points) 2. The break even quantity and the break even market share assuming total annual sales are 100,000 units. (.5 points) 3. Assuming Compaq currently has a 30% market share. What is the PRESARIO’s profit impact. (.5 points) 4. If Compaq spends $500,000 on an advertising campaign, they estimate their sales will increase by 50% (by volume not dollar value). Should they go for it? (5. points) Question 2: Solution Fixed Costs, annual: Depreciation: 500K Tax: 300K Supervisors: 1200K Total: $2,000,000 Variable Costs, per unit: Screens: $300 Other: $200 Labor: $500 Total: $1,000 $1,500 $1,200 $1,100 $1,000 Selling Price Retail to Consumer: Selling Price Distributor to Retail: Selling Price Manufacturer to Distributor: Variable Cost for Manufacturer: 1. 2. 3. 4. Contribution Margin = 1,100 – 1,000 = $100 per unit. BE quantity = 2million / $100 = 20,000 units and % Market Share is 20K/100K=20% 30K units * 100$ per unit – 2 million dollars (fixed costs) = 1 million dollars New fixed costs = 2.5 million dollars. Total Sales = 45 K units. New Profit impact = 45K*$100 – 2.5 million dollars = 2 million dollars. Go for it! Vocabulary Chapter 12 Value delivery network: The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system. Marketing chain (distribution channel): A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. Channel Level: A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. Direct marketing channel: A marketing channel that has no intermediary levels. Indirect marketing channel: A channel containing one or more intermediary levels. Channel conflict: Disagreement among marketing channel members on goals and roles – who should do what and for what rewards. Conventional distribution channel: A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole. Vertical marketing system (VMS): A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate. Corporate VMS: A vertical marketing system that combines successive stages of production and distribution under single ownership – channel leadership is established through common ownership. Contractual VMS: A marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies of scale impact than they could achieve alone. (Franchise organization – A contractual vertical marketing system in which a channel member, called a franchiser, links several stages in the production-distribution process) Administered VMS: A vertical marketing system that coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties. Horizontal Marketing System: A channel arrangement in which two or more companies at one level oin together to follow a new marketing opportunity. Multichannel distribution system (hybrid marketing channel): A distribution system in which a single firm sets up two ore more marketing channels to reach one or more customer segments. Disintermediation: The displacement of traditional resellers from a marketing channel by radical new types of intermediaries. Intensive distribution: Stocking the product in as many outlets as possible. Exclusive distribution: Giving a limited number of dealers the exclusive right ot distribute the company’s products in their territories. Selective distribution: The use of more than one, bet fewer than all, of the intermediaries who are willing to carry the company’s products. Marketing logistics (physical distribution): The tasks involved in planning, implementing, and controlling the physical flow of materials, final goods, and related information from the points of origin to points of consumption to met customer requirements at a profit. Supply chain management: Managing upstream and down stream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers. Distribution center: A large, highly automated warehouse designed to receive goods from various plants and suppliers, take order, fill them efficiently, and deliver goods to customers as quickly as possible. Intermodal transportation: Combining two or more modes of transportation. Integrated logistics management: The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system. Third-party logistics (3PL) provider: An independent logistics provider that performs any or all of the functions required to get its client’s product to market. Vocabulary Chapter 13 Retailing: All activities involved in selling goods or services directly to final consumers. Retailer: A business whose sales come primarily from retailing. Specialty store: A retail store that carries a narrow product line with a deep assortment within that line. Department store: A retail organization that carries a wide variety of product lines – typically clothing, home furnishings, and household goods; each line is operated as a separate department managed by specialist buyers or merchandisers. Supermarket: Large, low-cost low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products. Convenience store: A small store, located near a residential area, that is open long hours 7 days a week and carries a limited line of high turnover convenience goods. Superstore: A store much larger than a regular supermarket that carries a large assortment of routinely purchased food products, nonfood items, and services. Category killer: Giant superstore that carries a very deep assortment of a particular line and is staffed by knowledgeable employees. Discount store: A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume. Off-price retailer: Retailer that buys at less than regular wholesale prices and sells at less than retail. Examples are factor outlets, independents, and warehouse clubs. Independent off-price retailer: An off-price retailer that is either owned and run by an entrepreneur or is a division or a larger retail corporation. Factor outlet: An off-price retailing operation that is owned and operated by a manufacturer and that normally carriers the manufacturer’s surplus, discontinued, or irregular goods. Warehouse club: An off-price retailer that sells a limited selection of brand name grocery items, appliance, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual membership fees. Chain stores: Two or more outlets that are own and controlled in common, have central buying and merchandising, and sell similar lines of merchandise. Franchise: A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system. Shopping center: A group of retail businesses planned, developed, owned, and managed as a unit. Wheel of retailing concept: A concept of retailing that states that new types of retailers usually being as low-margin, low-price, low-status operations but later evolve into higher-priced, higherservice operations, eventually becoming like the conventional retailers they replaced. Wholesaling: All activities involved in selling goods and services to those buying for resale or business use. Wholesaler: A firm engaged primarily in wholesaling activity. Merchant wholesaler: Independently owned business that takes title to the merchandise it handles. Broker: A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation. Agent: A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods. Manufacturers’ sales branches and offices: Wholesaling by sellers or buyers themselves rather than though independent wholesalers. Vocabulary Chapter 14 Marketing communications mix (promotion mix): The specific mix of advertising, personal selling, sales promotion, and public relations a company uses. Advertising: Any paid form of non personal presentation and promotion of ideas, good, or services by an identified sponsor. Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service. Public relations: Building good relations with the company’s various publics by obtaining favorable publicity, building up a good “corporate image” and handling or heading off unfavorable rumors, stories, and events. Personal Selling: Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships. Direct Marketing: Direct communications with carefully targeted individual consumers – the use of telephone, mail, fax, email, the internet, and other tools to communicate directly with specific consumers. Integrated marketing communications (IMC): The concept under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about he organization and its products. Buyer readiness stages: The stages a consumer normally passes through on their way to purchase, including awareness, knowledge, liking, preference, conviction, and purchase. Personal communication channels: Channels through which two or more people communicate directly with each other, including face to face, person to audience, over the telephone, or through the mail. Word of mouth influence: Personal communication about a product between target buyers and neighbors, friends, family members, and associates. Buzz marketing: Cultivating opinion leaders and getting them to speak information about a product or service to others in their communities. Nonpersonal communication channels: Media that carry messages without personal contact or feedback, including major media, atmospheres, and events. Affordable method: Setting the promotion budget at the level management thinks the company can afford. Percentage of sales method: Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price. Competitive parity method: Setting the promotion budget to match competitors’ outlays. Object and task method: Developing the promotion budget by (1) defining the specific objectives; (2) determining the tasks that must be performed to achieve these objectives; and (3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget. Push strategy: A promotion strategy that calls for using the sales force and trade promotion to push the product through channels. The producer promotes the product to wholesalers, the wholesalers promote to retailers, and the retailer s promote to customers. Pull strategy: A promotion strategy that calls for spending a lot on advertising and consumer promotion to build up consumer demand. If the strategy is successful, consumers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the producers. Vocabulary Chapter 15 Advertising: Any paid form of non personal presentation and promotion of ideas, good, or services by an identified sponsor. Advertising objective: A specific communication task to be accomplished with a specific target audience during a specific period of time. Execution Styles: The manner in which an advertising message is presented. 1. Slice of Life 2. Lifestyle 3. Fantasy 4. Mood or Image 5. Musical 6. Personality Symbol 7. Technical Expertise 8. Scientific Evidence 9. Testimonial Evidence or Endorsement Selecting Advertising Media: See following steps. 1. Deciding on reach, frequency and impact. 2. Choosing among major media types. 3. Selecting specific media vehicles. 4. Deciding on media timing. Advertising Agency: A marketing services firm that assists companies in planning, preparing, implementing, and evaluating all or portions of their advertising programs. Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service. Sample: A small amount of a product offered to customers for trial. Coupon: Certificate that gives buyers a saving when they purchase a specified product. Cash refund offer (rebate): Offer to refund part of the purchase price of a product to consumers who send a “proof of purchase” to the manufacturer. Price pack (cents off deal): Reduced price that is marked by the producer directly on the label or package. Premium: Good offered either free or at low cost as an incentive to buy a product. Advertising specialty: Useful article imprinted with an advertiser’s name, given as a gift to consumers. Patronage reward: Cash or other award for the regular use of a certain company’s products or services. Point of purchase (POP) promotion: Display and demonstration that takes place at the point of purchase or sale. Contests, sweepstakes, games: Promotional events that give consumers the change to win something – such as cash, trips, or goods – by luck or through extra effort. Discount: A straight reduction in price on purchases during a stated period of time. Allowance: Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s product in some way. Public relations: Building good relations with the company’s various publics by obtaining favorable publicity, building up a good “corporate image,” and handling or heading off unfavorable rumors, stories, and events. Vocabulary Chapter 16 Salesperson: An individual acting for a company by performing one or more of the following activities: prospecting, communicating, servicing, and information gathering. Sales force management: The analysis, planning, implementation, and control of sales force activities. It includes setting and designing sales force strategy; and recruiting, selecting, training, supervising, compensating, and evaluating the firm’s salespeople. Territorial sales force structure: A sales force organization that assigns each sales person to an exclusive geographic territory in which that sales person sells the company’s full line. Product sales force structure: A sales force organization under which sales people specialize in selling only a portion of the company’s products or lines. Customer sales force structure: A sales force organization under which sales people specialize in selling only to certain customers or industries. Outside sales force (field sales force): Outside salespeople who travel to call on customers. Inside sales force: Inside sales people who conduct business from their offices via telephone or visits from prospective buyers. Team selling: Using teams of people from sales, marketing, engineering, finance, technical support, and even upper management to service large, complex accounts. Sales quota: A standard that states that the amount a salesperson should sell and how sales should be divided among the company’s products. Selling process: The steps that the sales person follows when selling, which include prospecting and qualifying, preapproach, approach, presentation and demonstration, handling objections, closing, and follow up. Prospecting: The salesperson identifies qualified potential customers. Preapproach: The salesperson learns as much as possible about ah prospective customer before making a sales call. Approach: The salesperson meetings the customer for the first time. Presentation: The sales person tells the “product story” to the buyer, highlighting customer benefits. Handling objections: The salesperson seeks out, clarifies, and overcomes customer objections to the buying. Closing: The salesperson asks the customer for an order. Follow up: The salesperson follows up after he sale to ensure customer satisfaction and repeat business. Direct marketing: Direct communications with carefully targeted individual consumers – the use of telephone, mail, fax, email, the Internet, and other tools to communicate directly with specific consumers. Customer database: An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. Telephone marketing: Using the telephone to sell directly to customers. Direct mail marketing: Sending an offer, announcement, reminder, or other item to a personal at the particular address. Catalog marketing: Direct marketing through print, video, or electronic catalogs that are mailed to select customers, made available in stores, or presented online. Direct response television marketing: Direct marketing via television, including direct response television advertising or infomercials and home shopping channels. Integrated direct marketing: Direct marketing campaigns that use multiple vehicles and multiple stages to improve response rates and profits. Vocabulary Chapter 17 Competitive advantage: An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. Competitor analysis: The process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid. Competitive marketing strategies: Strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage. Strategic group: A group of firms in an industry following the same or a similar strategy. Benchmarking: The process of comparing the company’s products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance. Customer value analysis: Analysis conducted to determine what benefits target customers value and how the rate the relative value of various competitors’ offers. Marketing Strategy: Entrepreneurial marketing Formulated marketing Entrepreneurial marketing. Basic Competitive Strategies: Porter Framework Treacy & Wiersema Framework Overall cost leadership Operational excellence Differentiation Product Leadership Focus Customer intimacy Market leader: The firm in an industry with the largest marketing share. Market challenger: A runner-up firm that is fighting hard to increase its market share in an industry. Market follower: A runner-up firm that wants to hold its share in an industry without rocking the boat. Market nicher: A firm that services small segments that the other firms in an industry overlook or ignore. Competitor centered company: A company whose moves are mainly based on competitors’ actions and reactions. Customer centered company: A company that focuses on customer developments in designing its marketing strategies and on delivering superior value to ties target customers. Market centered company: A company that pays balanced attention to both customers and competitors in designing its marketing strategies.