Term
|
Definition
Def=money charged for product or service
-most important of 4Ps
-should sell value, not price
-only of the 4Ps to create revenue
-most flexible, but biggest problem
-value only est. at point of exchange
-not LT retainer
--service and assortment do
--price and place are main drivers of switching behavior
-small changes in price have large affects on profits |
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Term
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Definition
1. Competitors
2. Economy
3. Channel Choice/Market Research
4. Influences (Culture, Location, Elasticity)
5. Alternative Products/Substitutes |
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Term
| Pricing Strategies (Ch. 7) |
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Definition
1. Customer Value-Based Strategies-sets price based on buyer's perception of value
2. Cost-Based Pricing-setting price based of cost of producing, moving, selling, and risk
3. Competition-Based Pricing-set prices based on competition's strategies |
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Term
| Price Considerations (Ch. 7) |
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Definition
Customer perceptions=price ceiling (no demand above this point)
Product cost=price floor (no profits below this point) |
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Term
| Types of Value-Based Pricing (Ch. 7) |
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Definition
-Good-Value pricing: right combo of quality and good service at a fair price (ie=less exp. versions of brands, redesigned brands for more quality)
--EDLP (everyday low price):constant low price w/o discounts (Wal-Mart)
--High-low: higher prices w/frequent discounts (Kohl's)
-Value-adding Pricing: attach value-added features/services to differentiate w/ higher prices (focus is value, not price) |
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Term
| Types of Cost-Based Pricing (Ch. 7) |
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Definition
-Cost-Plus Pricing/Markup: popular due to certain of cost over demand, and min. price competition
-Break-even/Target return: you set a target profit amount based on volume and then set your price to reflect that amount (Higher price=lower break even point) |
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Term
| Competition-Based Pricing (Ch. 7) |
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Definition
-involves setting prices based on competitor’s strategies, costs, prices, and market offerings
-regardless of price, give customers superior value |
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Term
| Value-Based Pricing vs. Cost-Based Pricing (Ch. 7) |
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Definition
VBP: 1.Assess customer value perceptions, 2.set target price, 3. determine costs, 4.design product
CBP: 1.Create product, 2.determine costs, 3.set price, 4. sell product |
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Term
| New Product Pricing (Ch. 7) |
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Definition
Skimming: go for high prices, then slowly decrease down (Apple iPhone)
-fewer sales, but more profits
-good for inelastic demand/market
-best for intro/growth product cycle stages
-conditions: 1)quaity/image supports price, 2)price benefit>cost of small vol., 3)no/few comp
Penetration-setting low price to attract large volumes
-large # of sales w/large market share
-good in elastic demand/market
-best of mature and declining product cycle
-conditions: 1)market highly price sensitive, 2)prod./dist. costs fall with vol. inc., 3)keep out comp. and maintain low cost |
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Term
| Product Mix Pricing (Ch. 7) |
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Definition
-Product Line pricing: management must decide on the price steps to set between various products in a line.
•price jumps based on features
•consider competition
•review product costs
-Optional-product pricing: offering to sell optional or accessory products along with their main product
•Start with one model and add options
-Captive-product pricing: companies that make products that must be used along with a main product
--make profit/margins on second products
--service charge fixed fees and usage rate
-By-product pricing: pricing low-value by-products to get rid of them
-Product bundle pricing: sellers often combine several of their products and offer the bundle at a reduced price.
•Selling two or more products for a single price |
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Term
| Price Adjustments (Ch. 7) |
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Definition
a)Discounts
-price reduction
-quantity
-funct./trade=for trade-channel partners
-seasonal
b) Allowances-paid by manf. to feature products
-trade-in=turning in old stuff for new
-promotional=reward dealers for advert/sales support programs
c)Segmented pricing: a company sells a product or service at two or more prices, even though the difference in prices is not based on differences in cost
•Customer segment pricing: charging higher for adults and lower for kids
•Product form pricing (Price optimization): diff. product versions sold at different prices
•Location based pricing: charging a different price in different locations (in-state versus out of state tuition)
•Time based pricing: vary prices by day, month, or season
d)Psychological pricing: sellers consider to psychology of prices and not simply the economics. People perceive higher priced items as having higher quality
--reference prices=prices which buyers compare with (mental benchmark)
---affected by product location in store, pricing at low levels to make all products seem lower in price
e)Promotional pricing=temp. price dec. in ST to inc. sales -loss leaders: set stuff in back of store very lowband buy other products (very effective)
-special event pricing
-rebates
-low int. financing
-warranties/free maintaince
-creates "deal prone"
f)Geographical pricing
• FOB-Origin pricing: this practice means that the goods are placed free on board, but customers responsible from then on
•Uniform-delivered pricing: here the company charges the same price plus freight to all customers
•Zone pricing: the company sets up multiple zones, people within the zone pay the same amount for shipping (further away= >shipping costs)
•Basing point pricing: the seller selects a given city as a basing point and charges all customers the freight cost from that city to the customer location
•Freight-absorption pricing: the seller eats the freight cost to gain bus. (good for market penetration, holding market)
g)Dynamic pricing=cont. adjust prices to meet demand/needs of customers
h)International=adjust prices to reflect local market conditions and cost considerations |
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Term
| Elastic/Inelastic and Price (Ch. 7) |
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Definition
*See "Class10Pricing1" PPT*
Best for Elastic: mid price
Best for Inelastic: high price
Formula: E = (Sales t – Salest-1)/Salest-1
____________________________________
(Pricet-Pricet-1/Pricet-1)
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Term
|
Definition
Fixed Costs
-Rent
-Plant and Equipment
-Corporate Payroll
Variable Costs (changes w/prod. levels)
-Payroll
-Materials
-Marketing Costs
-Variable Payroll costs are the driver of movement of production to developing countries.
-Costs plus profit requirements establish the floor for pricing.
-Target costing focuses on establishing the price then driving cost to achieve desired levels of profit. |
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Term
| Pricing Based on Costs Formulas (Pg. 317-322) |
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Definition
Unit Cost=VC+(FC/Unit Sales)
-make sure to not take into account irrelevant and sunk costs
-unit cost=break-even price
Mark-up price=unit cost/(1-desired return on sales)
ROI price=unit cost+(ROI*investment/unit sales)
-dec. unit sales=inc. unit costs(FC spread over fewer units), dec. ROI%
-this is interally focused, ignores demand, comp., resellers |
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Term
| Pricing Based on External Factors Formulas (Pg. 317-322) |
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Definition
Dollar markup= selling price-cost
markup% on cost= dollar markup/cost
markup% on price= dollar markup/price |
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Term
| Break-even and Margin Analysis (pg. 317-322) |
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Definition
BE Vol.= FC/[price-Unit VC]-->UC/CM
-UC/CM=amount each unit covers FC
-CM= price-VC/price or total sales-total VC/total sales
BE sales= BEvol*price or FC/CM |
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Term
| Breakeven for Profit Goals (Pg. 317-322) |
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Definition
Unit Vol=FC+proft goals/price-VC
Sales=FC+proft goal/CM |
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Term
| Brands Built in Years, Managed over Quarters (Reading 5) |
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Definition
-private brands growing at 13%, consumers 50% more price sensitive
-firms should look for LT health, not ST performance
-because of focusing on price, not quality, promotions make brands less differentiated
-Why firms focus on ST, not LT:
1) abundant ST data
-follow high profits w/ discounts, erodes margins in LT
2)Difficult to measure LT marketing
-ads, productions introductions, inc. distribution lead to inc. sales and rev. doubles over 2 yrs after 1yr ads, even when ad isn't aired anymore
-discounts delete LT brand performance
--shoppers wait til next promotion
3)Wall Street pressures
-base performance on quarters, thus managers think ST
Solutions:
-make dashboard that follows changes in baseline sales and responses to reg. price and price promotions
--prevents looking at ST data
--managers look at LT
--allows to inform marketing decisions
---shows when you can afford product price premium |
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Term
| Free Customer Worth It? (Reading 6) |
|
Definition
-makes up rev. of 60/100 largest companies
-Find this CLV helps determine:
1)optimal way to grow
2)find the real value of enterprise
3)best org. design
Direct networks= buyer attract buyers, seller attract sellers
-pos.=video game systems
-neg.=malls and employment sites
Indirect=how buyers attract more sellers, vice versa
-pos=advertiser attracted to large # viewers/readers
-neg=inc. ads on programs/papers
-penetration pricing, in this case, was best to get ppl in then raise prices due to high indirect effects (more buyers affecting sellers)
Benefits
1) strengthened marketing operations to buyers
2)Able to cater to buyers better
3)Able to see trend between buyers/sellers with company's market value
Bad Solutions for Companies:
1)evenly disperse profits among free and paying
-ignores the group sizes/influence
2)Assign profits as ratio between buyers and sellers
-miscalculate value of groups/ignores network effects
-best approach=looks at paying customers
--may ignore networks too |
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Term
| Elasticity Formula (Ch. 7) |
|
Definition
[(SALESy-SALESx)/salesX]/[(PRICEy-PRICEx)/PRICEx]
or
% change in Q/% change in P
->1=elastic
-<1=inelastic |
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Term
| Promotion Mix/marketing communications mix (Ch. 8) |
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Definition
| Def.= consists of the specific blend of advertising, public relations, personal selling, sales promotion, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships |
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Term
| Promotion Mix Tools (Ch. 8) |
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Definition
-Advertising: any paid form of non-personal presentation
--good nature: reach masses over geo. dispersed @ low cost, repeatable, expressive, adds legitimacy
--bad nature: impersonal, one-way comm., large budgets needed
Personal Selling: Personal presentation by the firm’s sales force, used in exp/rishky good and markets w/few&large sellers
-good nature: best at building preference/action, personal interaction, CR build
-bad nature: most exp. (4x ads), LT commitment
Sales Promotion: short-term incentives to encourage the purchase or sale of a product or service
--good nature: attract attention, boost ST sales
--bad nature: not for LT CRM or brand preference creation
PR: Building good relations with the company’s various publics
--good nature: is received as news rather than an ad
--bad nature: afterthought
Direct Marketing: Direct connections with carefully targeted individual consumers (mailing, newspaper)
--nature: less public,immediate, customized, interactive |
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Term
| Integrated Marketing Comm. (IMC) [Ch. 8] |
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Definition
Def=the company carefully integrates its many communications channels to deliver a clear, consistent, and compelling message about the organization of its brand
-Pillars:
--advert, personal selling, PR, sales promo
-Changing landscape
--consumers are changing where get info
--less broadcasting, more narrowcasting
--using new media channels/adapting message to media, avoiding "chaos scenario" |
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Term
| Promotions Mix Strategies (Ch. 8) |
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Definition
Push: BtoB approach, sells to retailer then to consumers
-uses more personal selling, then sales promotion, advertising, PR
Pull: BtoC approach, direct to buyers then buyers demand product
-uses more advertising, then sales promo, personal selling, PR |
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Term
| Advertising Decisions/Process (ch. 8) |
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Definition
1) Advertising Objectives
2)Advertising Budget
3)Advertising Strategy
4)Advertising Evaluation |
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Term
| Advertising Objectives (Ch. 8) |
|
Definition
Def=is a specific communication task with a specific target audience during a specific period of time
-Informative advertising: used heavily when introducing a product category
-Persuasive advertising: goal is to build selective demand when cometition inc.
--Comparative advertising (attack advertising): a company directly or indirectly compares its brand with one ore more brands
-Reminder advertising: important for mature products, helps maintain customer relationships |
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Term
| Advertising Budget (Ch. 8) |
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Definition
-affordable method: set the promotion budget at what they think the company can afford (last in importance)
-percentage of sales method: setting their promotion budget at a certain percentage of their current or forecasted sales (hard for LT use, may confuse cause-effect)
-competitive parity method: setting their promotion budgets to match competitors’ outlays
-objective-and-task method: the company sets its promotion budget based on what it wants to accomplish with promotion (pro=lays out plan, con=most difficult to use) |
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Term
| Advertising Strategy Steps (Ch. 8) |
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Definition
1)Create message
-must merge advert. and entertain (Madison and Vine concept)
--a big way it to integrate brands in the entertainment industry (product placement)
A)Message strategy
-creative concept/big idea for message
--meaningful (show benefits), believeable, distinctive (better than others)
2)Select Media (should engage buyers)
A.Deciding on reach, frequency, and impact
--Reach: Percentage of people exposed to the ad
--Frequency: Number of times a person is exposed to the advertisement
--Impressions: the number of people who act on it B.
---Reach=Impressions X Frequency
*Mediums -pg. 369 (know which is best for what audience) |
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Term
| Types of advertising campaigns that build brand and drive sales (Ch. 8) |
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Definition
1. Word Hook: The word hook is a repeatable catch phrase from ad to ad (Can you hear me now?)
2. Character Hook: A character hook uses a hero, villain, or victim to embody a key attribute of a brand (Ronald Mcdonald)
3. Repeatable Theme: is a situation that plays out again and again calling out the need for a company's product. (Got Milk?)
4. Consistent Brand layout: A consistent layout uses a unique, design look and repeats these elements at each touchpoint (Apple ipod silhouettes) |
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Term
|
Definition
-Press relations or press agency: creating or placing newsworthy information in the news media to attract attention to a person, product or service
-Product publicity
--Unpaid Communication about a PRODUCT appearing in the mass media
--It can build interest in a product.
--It can create awareness about an event related to a product.
-Public affairs: building and maintain national or local community relations
-Lobbying
-Investor relations: maintaining relationships with shareholders and others in the financial community
-Development: public relations with donors or member of non profit organizations to gain financial or volunteer support |
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Term
| Social Media Strategies (Reading 7) |
|
Definition
All are temporal and bus. will move from one to the other that measure customer's influence
1) Predictive Practitioner
-confines usage to specific area
-works for bus. seeking to avoid uncertainty w/ measureable results
-good if bus. wants to be more social, has clear objectives
2)Creative Experimenter
-comp. embraces uncertainty using small scale tests to improve functions/practices
-learn by listening to customers/employees using platforms (Facebook) and internal tests
-best for company with small budget
3) Social Media Champion
-used to engage customers
-large initiatives designed for predictable results
-depends on close collaboration across multi-functions/external parties
-good for large scale strategy w/ sig. results and enlist enthusiasts
-to move to transformer: need company wide changes in leadership, incentives, bus. processes
4)Social Media Transformer
-used for internal communications and for partner communications
-enables large scale interactions with stakeholders to use the unexpected to improve bus.
-largest impact on an enterprise
-sees social tech as key enabler, not answer |
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Term
| Upstream vs. Downstream Partners (Ch. 9) |
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Definition
Upstream=firms producing RM (supply chain)
Downstream=dist. channels selling to customers (demand chain) |
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Term
| Internal Use of Social Media (Reading 7) |
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Definition
-Accountability:Employees should take responsibility for their postings, clearly indicating when opinions are their own and not the firm’s.
-Accuracy and transparency:Posts must be factual, with the poster’s identity disclosed.
-Lawfulness: Employees must be aware of and respect the legal and professional framework that governs firm behavior. |
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Term
| Value Delivery Network (VDN) (Ch. 9) |
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Definition
| is made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system |
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Term
| Direct vs. Indirect Marketing Channels (Ch. 9) |
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Definition
-Direct marketing channel: has no intermediary levels, the company sells directly to consumers
•Manufacturer can serve customer better
•Lower prices than possible by using a retailer
•Control of pricing service and delivery
-Indirect marketing channels:containing one or more intermediaries
--Channel conflict
•Horizontal conflict: occurs among firms at the same level of the channel
•Vertical conflict: conflicts between different levels of the same channel |
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Term
| Producer and Marketing Channel Relationship (Ch. 9) |
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Definition
| Producers make narrow assortments at high volumes, marketing channels buy large volume from many producers and and break-up into large variety @ small volume, then customers buy |
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Term
| Vertical Marketing Systems (VMS) (Ch. 9) |
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Definition
-Conventional distribution channel: consists of one or more independent producers, wholesalers, and retailers. Each acts independently to increase their own profits, even at expense of the entire channel
--no role assignment or conflict resolution
-VMS: dist. channel structure united and works together
-Types:
1)Corp. VMS=integrates successive stages of production and distribution under single ownership
2)Contractual VMS: consists of independent firms at different levels of production and distribution who join together through contacts to obtain more economies or sales impact
---Franchise organization:
A)manf.-sponcered retialer=Honda
B)manf.-sponcered wholeseller=Coke bottlers
C)service-firm-sponcered retailer=Burger King
3)Admin. VMS=leadership is assumed not through common ownership or contractual ties, but through the size and power of one or a few dominant channel members |
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Term
| Horizontal Marketing Systems (HMS) (Ch. 9) |
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Definition
in which two or more companies at one level join together to follow a new marketing opportunity.
-Example, McDonalds in Wal-Mart stores |
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Term
| Disintermediation (Ch. 9) |
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Definition
| occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones. |
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Term
| Marketing Intermediaries (Ch. 9) |
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Definition
-Intensive distribution: a strategy in which they stock their products in as many outlets as possible. (commidity products)
-Exclusive distribution: the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. (luxury brands)
-Selective distribution: the use of both intensive and exclusive. |
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Term
| Retail convergence (Ch. 10) |
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Definition
| such convergence means greater competition for retailers and greater difficulty in differentiating offerings. |
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Term
| Retailer Service Amount (Ch. 10) |
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Definition
-Self-service=Wal-Mart
-Limited Service=more sales ass. with more goods (greater operating costs=greater prices)/ie=JCP
-Full-service=high end specialty stores (high costs/prices) |
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Term
| Types of Retailers (Ch. 10) |
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Definition
•Specialty stores: carry narrow product lines with deep assortments within those product lines (Tiffany's)
•Department stores: carry a wide variety of product lines (Macy's)
•Supermarkets: the most frequently shopped type of retail store w/low cost/margin (Kroger)
•Convenience stores: small stores that carry a limited line of high-turnover convenience goods (7-Eleven)
•Superstore: much larger than regular supermarkets and offer a large assortment of routinely purchased food products, nonfood items, and services (Meijer, SuperTarget)
--Category killers: superstores that are actually giant specialty stores (PetSmart)
•Service retailers: include hotels and motels, banks, airlines
•Discount store: sells standardized merchandise at lower prices by accepting lower margins and selling higher volume (Wal-Mart)
•Off-price retailers: buy at less-than-regular wholesale prices and charge consumers less than retail
--Independent off-price retailer: are either independently owned and run or are divisions of larger retail corporations (TJ Max)
--Factory outlets: manufacturer-owned and operated stores by firms such as j.crew, Levi Strauss, and others (Levi, GAP)
--Warehouse clubs: operate in huge, drafty, warehouse-like facilities, and offer few frills. (Sam’s club) |
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Term
| Major Retailer Organizations (Ch. 10) |
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Definition
•Chain stores: two or more outlets that are commonly owned and controlled. Advantages include being able to buy in larger bulk quantities to gain promotional economies (CVS)
•Voluntary chain: a whole-seller sponsored group of independent retailers that engages in group buying and common merchandising (IGA)
•Retailer cooperative: group of independent retailers that band together to set up jointly owned, central wholesale operation and conduct joint merchandising and promotional efforts (ACE Hardware)
•Franchise: normally based on some unique product or service, on a method of doing business, or on the trade name, goodwill, or patent that the franchiser has developed (McDonalds) |
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Term
|
Definition
*biggest trend is retail convergence
-needs for greater efficiency
-retailers look like wholesalers, vice versa
-domestic growth is slow, going international |
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Term
| Types of Wholesalers (Broker vs. Agent) (Ch. 10) |
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Definition
•Merchant wholesalers: largest single group of wholesalers, accounting for roughly 50 percent of all wholesaling, Take title to goods
--Full-service: provides full set of services
--Limited-service: offer fewer services to their suppliers and customers
•Broker: brings buyers and sellers together and assists in negotiation.
•Agent: represents buyers or sellers on a more permanent basis
-Brokers and agents never take title to goods |
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Term
| Major Int. Marketing Decisions (Ch. 11) |
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Definition
1) Look at global marketing enviroment
2)Decide whether to go global
3)Decide which market to enter
4)Decide how to enter
5)Decide global marketing program
6)Decide on global marketing organization |
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Term
| Types of Economies (Ch. 11) |
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Definition
•Subsistence economies: vast majority of people engage in simple agriculture. They consume most of their output, and barter the rest, little opportunity.
•Raw material exporting economies: these economies are rich in one or more natural resources but poor in other ways. Good for large equipment and luxury goods
•Emerging economies: fast growth in manufacturing results in rapid overall economic growth. (BRIC Countries). Growing middle classes, the need for everything but textiles.
•Industrial economies: major exporters of manufactured goods, services, and investment funds. Large middle class, very rich |
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Term
| Things that Affect Trade (Ch. 11) |
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Definition
1)Tariffs
2)quotas-limits amount of imported product
3)exchange controls=limit currency exchange
4)nontariff barriers=protectionalism, bias |
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Term
| How to Enter Market (Ch. 11) |
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Definition
* Rsik/potential escalates as you move down
Export
-Indirect=Agent (less invest./risk)
-Direct=little more risk/potential
Joint Venture
-Licensing=most adopted by manf. (lose control and possible profits)
-Contract Manufacturing=hire domestic manf. (no control but start faster w/ less risk)
-Joint Ownership=partner may disagree on policies
-Management Contracting=mgmt know-how exported (early profits but must wait
Direct Investment
-Assembly Facility
-Manufacturing
-Sales offices
--Pros=lower costs, full control, pos. relations/image
--Cons=gov. changes, falling market |
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Term
| Steps of Global Marketing Organizations |
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Definition
Usual Way:
1. Create export department
2. Create International divisions: consists of marketing, manufacturing, research, finance, planning, and personal specialists.
3. Global organization: think of themselves as global marketers. The top corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows, and logistic systems.
New Ways:
1)geo. org=responsible for sales in region
2) world product groups=respon. for sales of specific product
3)int. subsidiaries=each responsible for own sales
4)global org.=thinks as global marketer |
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Term
|
Definition
*Cultural differences present the biggest challenge to success in international marketing
-Language
-Sizes
-Taste Preferences
-Communication tools
-Mores and traditions.
-Political Environment |
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Term
| Adjust Mix Internationally (Ch. 11) |
|
Definition
Promotion
-Market specific
-Be careful of unintended meaning (Gerber)
Price
-Based on the market not costs
-Brand perception may be very different by market. (A&F and Levis)
-Exchange Rate Issues and offsets
Place
-Go where the consumers shop for your product
-Be wary of copying existing practice as it may not accomplish the desired goal. |
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Term
| Global Comm./Product Strategies (Ch. 11) |
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Definition
•Straight product extension: marketing a product in a foreign market without any change (Same product, same promotion)
•Product adaptation: changing the product to meet local conditions or wants (adapted product, same promotion)
•Product invention: consists of creating something new for a specific country market (new everything)
•Communication adaptation: fully adapting advertising messages to local markets (Same Product, different promotion)
*Dual adaption: adapted product, different promotion |
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Term
| Dimensions of Global Brands (Reading 8) |
|
Definition
1) Quality Signals
-ppl think highly of brands, willing to pay premium
-don't care about origin of product, only quality
2)Global Myth
-makes ppl feel connected/brands=symbol of cultural ideals (local brands=what we are, global brands=what we want to be)
3)Social Responsibility
-ppl expect companies to tackle issue related to product/industry (very important in developing countries, not so in developed countries)
4) American Influence
-little effect on buying decisions |
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Term
| Global Consumer Segments (Reading 8) |
|
Definition
-Global Citizens=55%, rely success as signal of quality (see how countries rank on this measure=pg. 502)
-Global Dreamers=23%, buy into brand's myth about being global and not as concerned for social responsibility, simply buy product
-Antiglobals=13%, don't like/trust American values or behaviors
-Global Agnostics=8%, judge global brands like local brands |
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Term
| Managing Brands (Reading 8) |
|
Definition
*Never forget brand's national heritage
-Think globalness: thinks brands as symbols, monitor perception in unstable global culture
-Manage dark side: smooth over bad perceptions/reputation
-Treat antiglobals as customers: earn their trust, treat as unhappy customers
-Turn social responsibility into entrepreneurship: must prove actions are for ppl's welfare, not self-interest |
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Term
| Distribution/Channel Metrics |
|
Definition
*Simply memorize formulas, no need to do math
Numeric Dist. (%)= # outlets carrying brand/ total # outlets available
All Commodity Volume (ACV)= Total $ Sales of stores carrying brand/ Total $ Sales of outlets available
Product Category Volume= Total Category $ Sales of stores carrying our brand/ Total $ category Sales of outlets available |
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|
Term
| Price Reductions Formulas (Pg. 331) |
|
Definition
current total contribution= CM X Sales
New CM x new sales level= org. total contribution |
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