Marketing Management Exam 2
Market leader
Has largest market share
Leads in price changes, new product introductions, distribution coverage and promotional intensity
40%
Market challenger
Market group that attacks the leader and other competitors in an aggressive bid for further market share
30%
Market follower
Market group that is willing to maintain its share and chooses not to rock the boat or attack the market leader
20%
Market nicher
Market group that serves small segments larger firms don't reach
10%
Market leader strategies
Expand the total market
Defend market share
Mobile defense
Contraction defense
Expanding total market demand strategies
New customers - new users and new uses
More usage - increase amount, level, or frequency used
Additional opportunities to use the brand
New ways to use the brand
Protecting market share strategies
Proactive marketing
Defensive marketing
Proactive marketing
Responsive marketing
Anticipative marketing
Creative marketing
Responsive marketing
Proactive marketing strategy
Finds stated need and fills it
Anticipative marketing
Proactive marketing strategy
Looks ahead to needs customers may have in the near future
Creative marketing
Proactive marketing strategy
Discovers solutions customers did not ask for but to which they enthusiastically respond
Market driving firms
Defensive marketing strategies
Position defense
Flank defense
Preemptive defense
Counteroffensive defense
Mobile defense
Contraction defense
Position defense
Defensive marketing strategy
Occupying the most desirable market space in consumer's minds, making the brand almost impregnable
Flank defense
Defensive marketing strategy
Erecting outposts to protect a weak front or support a possible counterattack
Preemptive defense
Defensive marketing strategy
Attack first in order to keep everyone off balance
Announce a stream of new products in advance
Counteroffensive defense
Defensive marketing strategy
The market leader can meet the attacker frontally and hit its flank or launch movements forcing challengers to pull back
Exercise of economic or political clout
Mobile defense
Defensive marketing strategy
The leader stretches its domain over new territories through marketing broadening and diversification
Contraction defense
Defensive marketing strategy
Market leaders give up weaker markets and reassign resources to stronger ones
Potential drawbacks of increasing market share
Antitrust action
Economic cost
Pursuing the wrong marketing-mix strategy
Effect of increased market share on actual and perceived quality
Market challenger strategic objectives
Attack the market leader
Attack firms its own size that are not doing the job and are underfinanced
Attack small local and region firms
Market challenger attack strategies
Frontal attack
Flank attack
Encirclement attack
Bypass attack
Guerrilla attacks
Frontal attack
Market challenger attack strategy
Attacker matches its opponent's product, advertising, price, and distribution
Greater resources will win
Flank attack
Market challenger attack strategy
Concentrate your strength's on the enemy's weak spots
Geographic attack
Serve uncovered market needs attack
Encirclement attack
Market challenger attack strategy
Attempts to capture a wide slice of territory by launching a grand offensive on several fronts
Challenger must command significant resources
Bypass attack
Market challenger attack strategy
Bypassing the enemy altogether to attack easier markets
Diversifying into unrelated products, new geographical regions, new technologies
Guerrilla attacks
Market challenger attack strategy
Small intermittent attacks, conventional and unconventional designed to harass the opponent and eventually secure permanent footholds
Selective price cuts, intense promotion, legal actions
Market follower strategies
Counterfeiter
Cloner
Imitator
Adapter
Counterfeiter
Market follower strategy
Duplicates leader's products and packages and sells it on the black market
Cloner
Market follower strategy
Emulates the leaders products, name, and packaging with slight variations
Imitator
Market follower strategy
Copies some things from the leader but differentiates on packaging, advertising, pricing, or location
Adapter
Market follower strategy
Takes the leaders products and adapts or improves them
Market niche stratgies
End user specialist
Vertical level secialist
Specific customer specialist
Product line specialist
Product feature specialist
Quality/Price specialist
Service specialist
Channel specialist
Product life cycle
Introduction
Growth
Maturity
Decline
Growth-slump-maturity pattern
Sales grow rapidly when the product is first introduced and fall into a petrified level sustained by late adopters buying for first time and early adopters replacing it
Small kitchen appliances
Cycle-recycle patter
Aggressively promote new product, when sales decline, another promotion push occurs
Pharmaceutical drugs
Scalloped PLC
Product life cycle
Sales pass through a succession of life cycles based on the discovery of new product characteristics, uses, or users
Nylon
Style
A basic and distinctive mode of expression
Fashion
Currently accepted or popular style in a given field
Fad
Fashions that come quickly into public view, are adopted with great zeal, peak early, and decline very fast.
Marketing strategies for INTRODUCTION stage of product life cycle
Inform potential consumers
Induce product trial
Secure distribution in retail outlets
Inventor
First to deveop patents in a new product category
Product pioneer
First to develop a working product model
Market pioneer
First to sell in the new product category
Marketing strategies for GROWTH stage of product life cycle
Improve product quality and add new features
Add new models and flanker products
Enters new market segments
Increases distribution coverage and enters new distribution channels
Shifts from awareness and trial promotion to loyalty
Lowers prices to attract the next layer of price sensitive buyers
Marketing strategies for MATURITY stage of product life cycle
Market modification
Product modification
Marketing program modification
Marketing strategies for DECLINE stage of product life cycle
Harvesting
Divesting
Harvesting
Marketing strategy for decline stage of product life cycle
Gradually reducing the product cost while trying to remain profitable
Divesting
Marketing strategy for decline stage of product life cycle
Selling the product, idea, distribution channel to another firm
Marketing strategies in an economic downturn
Explore the upside of increasing investment
Get closer to customers
Review budget allocations
Put forth the most compelling value proposition
Fine tune brand and product offerings
Five product levels - Customer value hierarchy
Core benefit
Basic product
Expected product
Augmented product
Potential product
Product
Anything that can be offered to a market to satisfy a want or need
Core benefit
The service or benefit the customer is really buying
Hotel guest buying rest and sleep
Drill buyer is purchasing holes
Basic product
A core benefit is turned into a product
Hotel room includes a bed, bathroom, towels, desk, dressers, etc
Expected prodcuct
A set of attributes and conditions the buyer normally expect when they purchase this product
Hotel guests expect clean bed, fresh towels, working lamps, etc
Augmented product
A product that exceeds customers expectations
Brand positioning and competition occur here
Potential product
Encompasses all the possible augmentations and transformations the product or offering might undergo in the future
Consumption system
The way the user performs the task of getting and using products and services
Product classificaitons
Durability and tangibility
Consumer goods
Industrial goods
Durability and tangibility products
Nondurable goods
Durable goods
Services
Nonduarable goods
Tangible goods normally consumed in one or a few uses
Beer, cheese, shampoo
Durable goods
Tangible goods that normally survive many uses
Washing machine, car, clothing
Services
Intangible, inseparable, variable and perishable products that normally require more quality control, supplier credibility, and adaptability.
Haircuts, legal advice, appliance repairs
Consumer goods classification
Convenience goods
Shopping goods
Specialty goods
Unsought goods
Convenience goods
Purchased frequently, immediately, and with minimal effort
Soft drinks, soaps, etc
Impulse goods
Emergency goods
Shopping goods
Consumers compare on bases such as suitability, quality, price, and style
Homogenous - differ by price
Heterogeneous - differ by quality
Specialty goods
Have unique characteristics or brad identifications for which enough buyers are willing to make a special purchasing effort
Cars, stereo equipment, homes
Unsought goods
Goods the consumer does not now about or normally think of buying
Smoke detectors, cemetery plots
Industrial goods
Materials and parts
Capital items
Supplies and business services
Materials and parts
Goods that enter the manufacturers product completely
Raw materials
Manufactured materials
Raw materials
Farm products - wheat, cotton, livestock, fruits
Natural products - fish, lumber, iron ore
Manufactured materials
Component materials - iron, yarn, cement
Component parts - small motors, tires, castings
Capital items
Long lasting goods that facilitate developing or managing the finished products
Installations
Equipment
Installations
Buildings, factories, heavy equipment, machines, computer systems
Equipment
Portable factory equipment and tools and office equipment
Don't become part of finished product
Supplies and business services
Short term goods and services that facilitate developing or managing the finished product
Maintenance and repair items
Operating supplies
Business advisory services
Maintenance and repair items
Paint, nails, brooms, window cleaning, copier repair
Operating supplies
Lubricants, coal, writing paper
Business advisory services
Legal, management consulting, advertising
Product differentiation
Form
Featuers
Customization
Performance quality
Conformance quality
Durability
Reliability
Repairability
Style
Services differentiation
Ordering ease
Delivery
Installation
Customer training
Customer consulting
Maintenance and repair
Returns
Design
The totality of features that affect how a product looks, feels, and functions to a consumer
The product hierarchy
Need family
Product family
Product class
Product line
Product type
Item
Need family
Product hierarchy
The core need that underlies the existence of a product family
Example - security
Product family
Product hierarchy
All the product classes that can satisfy a core need
Example - savings and income
Product class
Product hierarchy
A group of products within the product family recognized a having a certain functional coherence
Example - financial instruments
Product line
Product hierarchy
A group of products within a product class that are closely related because they perform a similar function, are sold to same customer groups, are marketed through the same channels, or fall within given price range
Example - life insurance
Product type
Product hierarchy
A group of items within a product line that share one of several possible forms of the product
Example - term life insurance
Item
Product hierarchy
A distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute.
Example - Prudential renewable term life insurance
Product system
A group of diverse but related items that function in a compatible manner
Example - iPod product selections
Product Mix
The set of all products and items a particular seller offers for sale
Width
Length
Depth
Consistency
Width
Part of product mix
How many different product lines the company carries
Length
Part of product mix
The total number of items in a mix
Depth
Part of product mix
How many variants are offered of each product in the line
Consistency
Part of product mix
How closely related the various product lines are in end use, production requirements, distribution channels, or some other ways
Product map
Shows which competitors' items are competing against company X's products
Shows possible locations for new items
Identifies market segment
Product line length decisions
Line stretching
Line filling
Line modernization, featuring, and pruning
Line stretching strategies
Down market stretch
Up market stretch
Two way stretch
Line stretching
When a company lengthens its product line beyond its current range
Down market stretch
Product line stretching strategy
Introducing lower priced line
Up market stretch
Product line stretching strategy
Introducing a premium product line in the high end market
Two way stretch
Product line stretching strategy
Introducing both lower and higher priced product lines
Line filling
Lengthening a product line by adding more items within the present range
Product mix pricing strategies
Product line pricing
Optional feature pricing
Captive product pricing
Two part pricing
By product pricing
Product bundling pricing
Product mix pricing
The firm searches fro a set of prices that maximizes profits on the total mix, not individual products
Product line pricing
Products in a line with established quality and price differences
Men's suits for $300, $600, and $900
Optional feature pricing
Companies offering optional products, features, and services with their main product
Restaurants price food low and beverages high
Captive product pricing
Products that require the use of ancillary or captive products
Low initial razor prices, high prices for replacement blade cartridges
Two part pricing
A fixed fee plus a variable usage fee
By product pricing
The selling of products that are byproducts of the original product
Meats, petroleum, etc
Product bundling pricing
Pure bundling - firm offers its products only as a bundle
Mixed bundling - firm offers products both individually and as a bundle
Co-branding
Two or more well known brands are combined into a joint product or marketed together in some fashion
Ingredient branding
Special case of co-branding
Creates brand equity for materials, components, r parts that are necessarily contained within other branded products
GORETEX water resistant fibers, Scotchgard fabrics
Packaging
All the activities of designing and producing the container for the product
Labeling
Identifies the product
Grades the product
Describes the product
Promotes the product
Warranty
Formal statements of expected product performance by the manufacturer
Service
Any act or performance one party can offer to another that is essentially intangible and does not result int he ownership of anything
Categories of service mix
Pure tangible good
Tangible good with accompanying services
Hybrid
Major service with accompanying minor goods and services
Pure service
Pure tangible good
Service mix category
Soap, toothpaste, salt
No accompanying services
Tangible good with accompanying services
Service mix category
Car, computer, cell phone
Hybrid
Service mix category
Equal parts goods and services
Restaurant meal
Major service with minor accompanying goods and and services
Service mix category
Air travel
Pure service
Service mix category
Purely intangible service
Babysitting, psychotherapy, massage
Search qualities
Goods with characteristics the buyer can evaluate before the purchase
Clothing, jewelry, furniture
Experience qualitites
Characteristics the buyer can evaluate after the purchase
Vacation, haircuts
Credence qualities
Characteristics the buyer normally finds hard to evaluate even after consumption
Auto repair, medical diagnosis
Characteristics of services
Intangibility
Inseparability
Variability
Perishability
Intangibility
Services characteristic
Services cannot be seen, tasted, felt, heard or smelled before they are bought
Position by using place, people, equipment, communication material, symbols and price
Inseparability
Services characteristic
Services are typically produced and consumed simultaneously
Not like physical goods which are manufactured, inventoried, distributed, and then consumed
Variability
Services characteristic
The quality of services depends on who provides them, when and where, and to whom, which makes them highly variable
Invest in good hiring and training procedures
Standardize the service performance process
Monitor customer satisfaction
Perishability
Services characteristic
Services cannot be stored
Demand strategies - differential pricing, nonpeak demand, complementary services, reservation systems
Supply strategies - part-time employees, peak time efficiency, increased customer participation, shared services, facilities for future expansion
Solutions to customer failures
Redesign processes and redefine customer roles to simplify service encounters
Incorporate the right technology to aid employees and customers
Create high performance customers by enhancing their role clarity, motivation, and ability
Encourage "customer citizenship" so customers help customers
Types of marketing in service industries
External marketing
Internal marketing
Interactive marketing
External service marketing
Normal work of preparing, pricing, distributing, and promoting
Internal service marketing
Training and motivating employees to serve customers wel
Interactive service marketing
Describes the employees' skill in serving the client
Best practices of top service companies
Strategic concept
Top management commitment
High standards
Profit tiers
Monitoring systems
Satisfying customer complaints
Service quality model
Highlights the main requirements for delivering high service
Identifies five gaps that cause unsuccessful delivery
Gaps that cause unsuccessful service delivery
Gap between consumer expectation and management perception
Gap between management perception and service quality specification
Gap between service quality specification and service delivery
Gap between service delivery and external communications
Gap between perceived service and expected service
Determinants of service quality
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Customer worries about product service
Failure frequency
Downtime
Out of pocket costs
Consumer psychology and pricing
Reference prices
Price quality inferences
Price endings
Reference prices
Comparing an observed price to an internal reference price consumers remember or an external frame of reference such as a posted "regular retail price"
Steps in the pricing process
Select the pricing objective
Determining demand
Estimating costs
Analyzing competitors' costs, prices, and offers
Selecting a pricing method
Selecting the final price
Pricing objectives
Survival
Maximum current profit
Maximum market share
Maximum market skimming
Product quality leadership
Survival pricing objective
Companies who are plagued with overcapacity, intense competition, changing consumer wants
Maximum current profit pricing objective
Estimate demand and costs and set the price that maximizes profit
Maximum market share pricing objective
Higher sales volume is believed to lead to lower unit costs
Market penetration pricing - set the lowest price to sell high volumes
Price sensitive market
Production and distribution costs fall with accumulated experience
Low price discourages competition
Maximum market skimming pricing objective
Prices start high and slowly drop over time
High current demands
Unit costs of producing a small volume are high enough to cancel the advantage of charging what the traffic will bear
High initial prices does not attract competitors
High price communicates the image of superior product
Product quality leadership pricing objective
Company that aims to be the product quality leader
Can charge premiums
Determining demand
Price sensitivity
Estimating demand curves
Price elasticity of demand
Methods for estimating demand curve
Surveys
Price experiments
Statistical analysis
Price elasticity of demand
How responsive or elastic demand is to a change in price
Inelastic - demand hardly changes with large change in price
Elastic - demand considerably changes with change in price
Price indifference band
A range of prices in which price changes have no effect on demand
Experience or learning curve
Decline in average cost with accumulated production experience
Target costing
The concentrated effort by designers, engineers, and purchasing agents to reduce costs
Pricing methods
Markup pricing
Target return pricing
Perceived value pricing
Value pricing
Going rate pricing
Auction type pricing
Markup pricing method
Markup price = unit cost / (1 - desired markup %)
20% markup
16 / (1 - 0.2) = 20
Target return pricing
Firm sets a price that yields its target rate of return
Target return price =
unit cost + ((desired return X invested capital) / unit sales)
Invest $1,000,000
Unit cost $16
50,000 unit sales
ROI of 20%
Find Price
= $16 + ((0.20 X $1,000,000) / 50,000) = $20
Break even volume
Total revenue curve crosses the total cost curve
Break even volume =
fixed cost / (price - variable cost)
Fixed costs - $300,000
Price = $20
Variable costs = $10
= 300,000 / (20 - 10) = 30,000
Perceived value pricing
Basing a price on the customer's perceived value
Based on buyer's image of product performance, channel deliverables, warranty quality, customer support, etc
Value pricing
Charge a fairly low price for high quality offers to win loyal customers
Everyday low pricing
Charging a constant low price with little or no price promotions or specials sales
High low pricing
Retailer charges high prices on an everyday basis but runs frequent promotions with prices temporarily lower than everyday low prices
Going rate pricing
Firm basis its prices largely on competitor's prices
Auction type pricing
English auction - one seller, many buyers increasing bids
Dutch auction - one buyer, many sellers decreasing bids
Sealed bid auctions - allow only one bid per supplier, can't know what other suppliers bid
Countertrade
Buyers that offer other items in payment
Barter
Compensation deal
Buyback arrangement
Offset
Barter
Buyer and seller directly exchange goods
No money involved
Compensation deal
Seller receives some percentage of the payment in cash, the rest in products
Buyback agreements
Seller sells plant, equipment, or technology to another country and agrees to accept the products produced with that equipment as partial payment.
Offset
The seller receives full payment in cash but agrees to spend a substantial amount of money in the location in which it was produced
Promotional pricing
Loss leader pricing
Special event pricing
Special customer pricing
Cash rebates
Low interest financing
Longer payment terms
Warranties and service contracts
Psychological discounting
Loss leader pricing
Supermarkets drop prices on well known brands to stimulate additional store traffic
Differentiated Pricing
Customer segment pricing
Product form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
Price discrimination
Selling a product or service at two or more prices that do not reflect a proportional difference in costs
First degree - separate prices to customers based on the intensity of demand
Second degree - lower prices to customers who buy in large volumes
Third degree - seller charges different amounts to different classes of buyers
Customer segment pricing
Different customer groups pay different prices for the same product
Product form pricing
Different versions of the product are priced differently but not proportionally to cost
Image pricing
Different prices based on image differenes
Perfume in different bottles
Marketing channels
Sets of interdependent organizations participating in the process of making a product or service available for use or consumption
Marketing channel system
The particular set of marketing channels a firm employs
Merchants
Wholesalers and retailers who buy, take title to, and resell merchandise
Agents
Brokers, manufacturers' representatives, sales agents who search for customers and may negotiate on the producer's behalf but do not take title of the product
Facilitators
Transportation companies, warehouses, banks, ad agencies, who assist in the distribution process but neither take title to goods nor negotiate purchases
Push strategy
Uses manufacturer's sales force, trade promotion money to induce intermediaries to carry, promote, and sell the product to end users
Low brand loyalty
Pull strategy
Manufacturer uses advertising, promotion ad other forms of communication to persuade consumers to demand the product from intermediaries, this inducing the intermediaries to order it
High brand loyalty
Hybrid marketing channels
When a single firm uses two or more marketing channels to reach customer segments
Demand chain planning
The company first thinks of the target market and then designs the supply chain backward from that point
Value network
A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings
Firm's suppliers, suppliers' suppliers, immediate customers, end users
Enterprise resource planning system
Manage cash flow, manufacturing, human resources, purchasing and other major functions within a unified framework
Zero level channel
Direct marketing channel
A manufacturer selling directly to the final customer
One level channel
A manufacturer selling to a distributor selling to the final customer
Two level channel
A manufacturer negotiating with a representative selling to a distributor selling to the final customer
A manufacturer selling to a wholesaler selling to a retailer selling to the final customer
Jobbers
Intermediaries that act as small scale whole-salers
Meat packing industry
Channel alternatives
Exclusive distribution
Selective distribution
Intensive distribution
Exclusive distribution
Severely limiting the number of intermediares
When producer wants to maintain control over service level and outputs
Selective distribution
Relies on only some of the intermediaries willing to carry a particular product
Can gain adequate market coverage
Intensive distribution
Places goods or services in as many outlets as possible
Snack foods, soft drinks, newspapers
Elements in trade relations mix
Price policy
Conditions of sale
Distributors' territorial rights
Mutual services and responsibilities
Channel power
the ability to alter channel members' behavior so they take actions they would not have taken otherwise
Types of manufacturers' channel powers
Coercive power
Reward power
Legitimate power
Expert power
Referent power
Coercive power
Manufacturer threatens to withdraw a resource or terminate a relationship
Reward power
Manufacturer offers intermediaries an extra benefit for performing specific acts or functions
Legitimate power
Manufacturer requests a behavior that is warranted under a contract
Expert power
The manufacturer has special knowledge the intermediary values
Referent power
Manufacturer is so highly respected that intermediaries are proud to be associated with it
Efficient consumer response practices
Demand side management - collaborative practices to stimulate demand
Supply side management - collaborative practices to optimize supply
Enablers and integrators - collaborative info tech and process improvement tools to support joint activities
Types of vertical marketing systems
Corporate vertical marketing system
Administered vertical marketing system
Contractual vertical marketing system
Conventional marketing channel
Consists of an independent producer, wholesaler, and retailer
Vertical marketing system
When the producer, wholesaler, and retailer act as a unified system
Corporate vertical marketing system
Combines successive stages of production and distribution under single ownership
Sears obtains goods from subsidiaries it owns
Administered vertical marketing system
Coordinates successive stages of production and distribution through the size and power of one of the members
Manufacturers of dominant brands can secure strong trade cooperation and support from resellers
Distribution programming
Building a planned, professionally managed, vertical marketing system that meets the needs of both manufacturer and distributer
Contractual vertical marketing system
Independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone
Wholesaler sponsored voluntary chains
Retailer cooperatives
Franchise orgainizations
Wholesaler sponsored voluntary chains
Wholesalers organize voluntary chains of independent retailers to help standardize their selling practices and achieve buying economies
Retailer cooperatives
Retailers take the initiate to organize a new business entity to carry on wholesaling and possibly some production
Franchise orgainizations
A franchisor might link several successive stages in the production distribution process
Horizontal marketing system
Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity
Integrated marketing channel system
Channel in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels
Channel conflict
When one channel member's actions prevent another channel from achieving its goal
Types of channel conflict
Horizontal channel conflict - between members at the same level
Vertical channel conflict - between different levels of the channel
Multichannel conflict - when manufacturer has established two or more channels that sell to the same market
Causes of channel conflict
Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries' dependence on the manufacturer
Strategies for managing channel conflict
Strategic justification
Dual compensation
Superordinate goals
Employee exchange
Joint memberships
Co-option
Diplomacy, mediation, and arbitration
Legal recourse
Strategic justification
Strategy for managing channel conflict
Explaining that channels do not compete as much as they think
Dual compensation
Strategy for managing channel conflict
Pays existing channels for sales made through new channels
Superordinate goals
Strategy for managing channel conflict
Channel members come to an agreement on the fundamental goal they are jointly seeking
Employee exchange
Strategy for managing channel conflict
Exchange persons between two or more channels
Joint memberships
Strategy for managing channel conflict
Marketers can encourage joint memberships in trade associations
Co-option
Strategy for managing channel conflict
An effort by one organization to win the support of the leaders of another by including them in advisory councils, boards of directions, etc
Diplomacy, mediation, arbitration
Strategy for managing channel conflict
Diplomacy - each side sends a person to meet and resolve conflict
Mediation - relies on a neutral third party to reconcile both parties' interests
Arbitration - two parties present their arguments to a third party who makes a decision
Legal recourse
Strategy for managing channel conflict
A channel partner may choose to file a lawsuit
Full line forcing
When producers of strong brands sell to dealers only if they will take some or all of the rest of the product line
Tying agreements - are not illegal
E-commerce
Using a website to transact or facilitate the sale of products or services online
M-commerce
Mobile phone commerce
Retailing
All the activities in selling goods or services directly to final consumers for personal, non business use
Retailer
Any business enterprise whose sales volume cones primarily from retailing
Types of retailers
Store retailers
Nonstore retailing
Corporate retailing and franchising
Store retailers
Self service
Self selection
Limited service
Full service
Self service store retailer
Cornerstone of all discount operations
Customer carries out own locate, compare, select activities
Self selection store retailer
Customers find their own goods, but they can ask for assistance
Limited service store retailer
Retailers that carry shopping goods and services
Customers need more information and assistance
Full service store retailer
Salespeople are ready to assist in every phase of the locate, compare, select process
Nonstore retailing
Direct selling
Direct marketing
Automatic vending
Buying service
Direct selling nonstore retailing
Door to door sales, at home party sales
Avon, Tupperware
Direct marketing nonstore retailing
Roots in direct mail and catalog marketing
Telemarketing - 1-800-FLOWERS
Television direct response marketing - QVC
Catalog marketing - Land's End catalogs
Electronic shopping - Amazon
Automatic vending nonstore retailing
Vending machines
Buying service nonstore retailing
Storeless retailer serving a specific clientele
Employees of large organizations who are entitled to buy from a list of retailers that have agreed to discount for members
Franchising system
Tightly knit group of enterprises who's systemic operations are planned, directed, and controlled by the franchisor
Franchisor owns trade mark and licenses it to franchisee
Franchisee pays to be a part of the system
Franchisor provides system for doing business
Marketing decisions in retailing
Target market
Product assortment
Procurement
Prices
Services
Store atmosphere
Store activities and experiences
Communications
Location
Direct product profitability
Used to measure a product's handling costs from the time it reaches the warehouse until a customer buys it in the retail store
Receiving, moving to storage, paperwork, checking, loading, etc)
Private label brand
A brand that retailers and wholesalers develop
Generics
Unbranded, plainly packaged, less expensive versions of common products such as spaghetti, paper towels, canned peaches
Standard or lower quality
Low price due to low cost labeling and packaging, minimal advertising
Slotting fee
A fee charged by retailers for accepting a new brand, to cover the cost of listing and stocking it
Wholesaling
All the activities in selling goods or services to those who buy for resale or business use
Also called distributors
Why are wholesalers used?
Selling and promoting
Buying and assortment building
Bulk breaking
Warehousing
Transportation
Financing
Risk bearing
Market information
Management services and counseling
Major wholesaler types
Merchant wholesalers
Full service wholesalers
Limited service wholesalers
Brokers and agents
Manufacturers' and retailers' branches and offices
Specialized wholesalers
Merchant wholesalers
Independently owned business that take title to the merchandise they handle
Full service wholesalers
Carry stock, maintain a sales force, offer credit, make deliveries, provide management assistance
Limited service wholesalers
Cash and carry - sell limited line of fast moving goods for cash
Truck - sell and deliver a limited line of semi-perishable goods
Drop shippers - serve bulk industries, assume title and risk
Rack jobbers - serve grocery retailers in nonfood items
Producers' cooperatives - assemble farm produce to sell to markets
Mail order - send catalogs to customers
Brokers and agents wholesalers
Facilitate buying and selling on commission
Brokers - bring buyers and sellers together and assist with negotiations
Agents - represent buyers and sellers in negotiations
Supply chain management
Starts before physical distribution
Strategically procuring the right inputs, converting the efficiently into finished products, and dispatching them to the final destinations
Market logistics
Planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer requirements at a profit
Integrated logistics systems
Materials management, material flow systems, and physical distribution aided by information technology
Lean manufacturing
Producing goods with minimal waste of time, materials, and money
Market logistics decisions
How to handle order processing
How should we locate stock or warehouse goods
How much inventory should we hold
How should we transport materials and products
Containerization
Putting the goods in boxes or trailers that are easy to transfer between two transportation methods
Marketing communications
The means by which firms attempt to inform, persuade, and remind consumers - directly or indirectly - about the products and brands they sell
Marketing communications mix
Advertising
Sales promotion
Events and experiences
Public relations and publicity
Direct marketing
Interactive marketing
Word of mouth marketing
Personal selling
Advertising
Part of the marketing communications mix
Any paid form of nonpersonal presentation and promotion of ideas, goods or services by an identified sponsor
Print media
Broadcast media - radio, television
Network media - telephone, cable, satellite
Electronic media - videotape, CD, Web page
Display media - billboards, posters
Sales promotion
Part of the marketing communications mix
A variety of short term incentives to encourage trial or purchase of a product or service
Consumer promotions - samples, coupones
Trade promotions - advertising and display allowances
Business and sales force promotions - contests for sales reps
Events and experiences
Part of the marketing communications mix
Company sponsored activities and programs designed to create brand related interactions with consumers
Public relations and publicity
Part of the marketing communications mix
Programs directed internally to employees of the company or externally to customers to promote or protect a company's image
Direct marketing
Part of the marketing communications mix
Use of mail, email, telephone, etc to communicate directly with or solicit response from customers
Interactive marketing
Part of the marketing communications mix
Online activities and programs designed to engage customers
Word of mouth marketing
Part of the marketing communications mix
People to people oral, written, or electronic communication that relate to the experiences of buying or using a product
Personal selling
Part of the marketing communications mix
Face to face interaction with prospective purchasers
Macromodel of the communications process
Sender
Receiver
Message
Media
Encoding
Decoding
Response
Feedack
Noise
Micromodels of consumer response
AIDA model
Hierarchy of effects model
Innovation adoption model
Communications model
Response hierarchy model
Buyers pass through cognitive, affective, and behavioral stages
Learn - feel - do
Do - feel - learn
Learn - do - feel
AIDA consumer response hierarchy model
Attention
Interest
Desire
Action
Hierarchy of effects consumer response hierarchy model
Awareness
Knowledge
Liking
Preference
Conviction
Purchase
Innovation adoption consumer response hierarchy model
Awareness
Interest
Evaluation
Trial
Adoption
Communications consumer response hierarchy model
Exposure
Reception
Cognitive response
Attitutde
Intention
Behavior
Developing effective communications
Identify the target audience
Determine the communications objectives
Design the communications
Select the communications channels
Establish marketing communications budget
Communications objectives
Category need
Brand awareness
Brand attitude
Brand purchase intention
Category needs
Communications objective
Establishing a product or service category as necessary to remove or satisfy a perceived discrepancy between a current motivational state ad a desired motivational state
New to the world products
Brand awareness
Communications objective
Fostering the consumer's ability to recognize or recall the brand within the category, in sufficient detail to make a purchase
Brand attitude
Communications objective
Helping consumers evaluate the brand's perceived ability to meet a currently relevant need
Brand purchase intention
Communications objective
Moving consumers to decide to purchase the brand or take purchase related action
Creative communications strategies
The way marketers translate their messages into specific communication
Informational appeal
Transformational appeal
Informational appeal
Creative communication strategy
Elaborates on product or service attributes or benefits
Problem solution ads
Product demonstration ads
Product comparison ads
Testimonials
Transformational appeal
Creative communication strategy
Elaborates on a nonproduct related benefit or image
What kind of person uses a brand
What kind of experiences results from using a brand
Positive (humor, love, pride) and negative appeals (fear, guilt, shame)
Message source attributes
Expertise
Trustworthiness
Likabilty
Expertise
Message source attribute
The specialized knowledge the communicator posses to back the claim
Trustworthiness
Message source attribute
How objective and honest the source is perceived to be
Likability
Message source attribute
Describes the source's attractiveness
Principle of congruity
Implies communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience
Personal communication channels
Let two or more persons communicate face to face or person to audience
Advocate channels - company salespeople contacting buyers
Expert channels - independent experts making statements
Social channels -neighbors, friends, family talking to target buyers
Earned media - unsolicited professional commentary
Nonpersonal communication channels
Media
Advertising
Sales promotions
Events and experiences
Public relations
Methods of establishing marketing communications budget
Affordable method
Percentage of sales method
Competitive parity method
Objective and task method
Affordable method
Method of establishing marketing communications budget
Budget set at what the company thinks it can afford
Percentage of sales method
Method of establishing marketing communications budget
Budget set at a certain percentage of current or anticipated sales or of the sale price
Competitive parity method
Method of establishing marketing communications budget
Budget set to what competitors spend
Objective and task method
Method of establishing marketing communications budget
Develop communication budgets by defining specific objectives, determining the tasks that must be performed to achieve these objectives, and estimating the costs of performing them
Establish market share goal
Determine percentage of the market that should be reached
Determine the percentage of aware prospects that should be persuaded to try the brand
Determine the number of advertising impressions per 1 percent trial rate
Determine the number of gross rating points that would have to be purchased
Determine the necessary advertising budget on the basis of the average cost of buying a gross rating point
Advertising characteristics
Pervasiveness
Amplified expressiveness
Control
Sales promotion characteristics
Ability to be attention getting
Incentive
Invitation
Public relations and publicity characteristics
High credibility
Ability to reach hard to find buyers
Dramatization
Events and experiences characteristics
Relevant
Engaging
Implicit
Direct and interactive marketing characteristics
Customized
Up to date
Interactive
Word of mouth marketing characteristics
Influential
Personal
Timely
Personal selling characteristics
Personal interaction
Cultivation
Response
Factors in setting the marketing communications mix
Type of product market
Buyer readiness stage
Product life cycle stage
Integrated marketing communications
A planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time
Advertising
Cost effective way to disseminate messages, whether to build a brand preference or to educate people
Mission
Money
Message
Media
Measurement
Advertising objective
A specific communications task and achievement level to be accomplished with a specific audience in a specific period of time
Informative advertising
Persuasive advertising
Reminder advertising
Reinforcement advertising
Informative advertising
Advertising objective
Aims to create brand awareness and knowledge of new products or new features of existing products
Persuasive advertising
Advertising objective
Aims to create liking, preference, conviction, and purchase of a product or service
Reminder advertising
Advertising objective
Aims to stimulate repeat purchase of products or services
Reinforcement advertising
Advertising objective
Aims to convince current purchasers that they made the right choice
Factors affecting advertising budget
Stage in the product life cycle
Market share and consumer base
Competition and clutter
Advertising frequency
Product substitutability
Steps for developing the advertising campaign
Message generation and evaluation
Creative development and execution
Legal and social issues
Creative brief
Elaboration of the positioning statement
Includes considerations such as key message, target audience, communications objectives, key brand benefits, supports for the brand promise and media
Creative advertising development and execution
Television ads
Print ads
Radio ads
Television ads
Reaches broad spectrum
Low cost per exposure
Ability to demonstrate product use
Brief
Clutter
High cost of production/placement
Print ads
Detailed product information
Ability to communicate user imagery
Flexibility
Ability to segment
Passive medium
Clutter
Unable to demonstrate product use
Print ad parts
Picture
Headline
Copy
Signature
Radio ads
Pervasive media
Flexibility
Targeted stations
Lack of visual images
Passive nature of audience
Media selection
Finding the most cost effective media to deliver the desired number and type of exposures to the target audience
Find level of brand awareness required for trial rate
Find how many exposures are required to reach brand awareness level
Exposures are a product of reach, frequency, and impact
Reach
The number of different persons or households exposed to a particular media at least once during a specified time period
Frequency
The number of times within the specified time period that an aver person is exposed to the message
Impact
The qualitative value of an exposure through a given medium
A food ad will have higher impact in Bon Appetit than in Fortune magazine
Total number of exposures
Also called gross rating points
E = Reach X Frequency
Weighted number of exposures
WE = Reach X Frequency X Impact
Place advertising
Out of home advertising
Billboards
Public spaces
Product placement - cabs, buses, benches, etc
Point of purchase - ads on shopping carts, aisles, shelves
Major types of media
Newspapers
Television
Direct mail
Radio
Magazines
Outdoor
Yellow pages
Newsletters
Brochures
Telephone
Internet
Macroscheduling decions
Relates to seasons and the business cycle
Microscheduling decions
Calls for allocating advertising expenditures within a short period to obtain maximum impact
Media schedule timing patterns
Continuity
Concentrated
Flighting - advertising then no advertising the advertising then no advertising
Pulsing - continuous low weight advertising with periods of heavier activity
Buyer turnover
The rate at which new buyers enter the market
Higher rate more continuous the advertising should be
Purchase frequency
The number of times the average buyer buys the product during the period
Higher the frequency the more continuous the advertising should be
Forgetting rate
The rate at which the buyer forgets the brand
The higher the rate the more continuous advertising should be
Evaluating advertising effectiveness methods
Communication effect research
Sales effect research
Communication effect research
Method to evaluate advertising effectiveness
Copy testing
Seeks to determine whether an ad is communicated effectively
Sales effect research
Method to evaluate advertising effectiveness
Historical approach - correlates past sales to past advertising expenditures
Experimental design - measure advertising's sales impact
Sales promotion
Consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade
Offers an incentive to buy
Manufacturer promotions
Rebates, gifts to motivate purchase,
Retailer promotion
Price cuts, feature advertising, coupons
Consumer sales promotion tools
Samples
Coupons
Cash rebates
Price packs (cents off deals)
Premiums/gifts
Frequency programs
Prizes/contests
Patronage awards
Free trials
Product warranties
Tie in promotions
Cross promotions
Point of purchase displays and demonstrations
Trade sales promotion tools
Price off - discount of list price
Allowance - amount offered in return for agreeing to feature products in some way
Free goods
Sales force promotion tools
Trade shows and conventions
Sales contests
Specialty advertising
Forward buying
Retailers buying a greater quantity during the deal period than they can immediately sell
Diverting
Retailers buying more cases than needed in a region where the manufacturer offers a deal and shipping the surplus to stores in other regions
Lead time
The time necessary to prepare the sales promotion program prior to launching it
Sell in time
Sales promotions
Begins with the promotional launch and ends when approximately 95 percent of the deal merchandise is in the hands of consumers
Events and experiences objectives
To identify with a particular target market or lifestyle
To increase salience of company or product name
To create or reinforce perceptions of key brand image associations
To enhance corporate image
To create experiences and evoke feelings
To express commitment to the community or social issues
To entertain key clients or reward key employees
TO permit merchandising or promotional opportunities
Public
Any group that has an actual or potential interest in or impact on a company's ability to achieve its objectives
Public relations
A variety of programs to promote or protect a company's image or individual products
Press relations
Product publicity
Corporate communications
Lobbying
Counseling
Marketing public relations
Support corporate or product promotion and image making
Serves a special constituency, the marketing department
Launching new products
Repositioning a mature product
Building interest in a product category
Influencing specific target groups
Defending products that have encountered public problems
Building the corporate image in a way that reflects favorably on its products
Decisions in marketing public relations
Establishing objectives
Choosing message ad vehicles
Implementing the plan
Evaluating the results
Tools in marketing public relations
Publications
Events
Sponsorships
News
Speeches
Public service activities
Identity media
Direct marketing
The use of consumer direct channels to reach and deliver goods and services to customers without using a marketing middleman
Direct marketing channels
Direct mail
Catalog marketing
Telemarketing
Interactive TV
Kiosks
Web sites
Mobile devices
Direct mail
Sending an offer, announcement, remind, or other item to an individual consumer
Use recency, frequency, monetary amount formula to select customers
Very targeted
Parts of direct mail campaign
Choose objectives
Select target prospects - RFM
Develop offer elements
Test elements
Execute
Measure success
Telemarketing
Type of direct marketing
The use of the telephone and call centers to attract prospects, sell to existing customers, and provide service by taking orders and answering questions
Public and ethical issues with direct marketing
Irritation
Unfairness - marketers take advantage of vulnerable or impulsive buyers
Deception and fraud
Invasion of privacy
Advantages of interactive marketing
Tailored messages possible
Easy to track responsiveness
Contextual ad placement possible
Search engine advertising possible
Contextual placement
Buying ads on sites related to the marketer's offereings
Disadvantages of interactive marketing
Consumers can screen out messages
Bogus clicks cause errors
Interactive marketing options
Web sites
Search ads
Display ads
Mobile marketing
Web sites
Interactive marketing option
Ease of use
Physical attractiveness
Search ads
Interactive marketing option
Marketers bid on search terms that serve as a proxy for the consumer's product or consumption interests
When consumer searches for a key term the marketer's advertisement displays above the results
Advertisers pay only when people click on the links
Display ads
Interactive marketing option
Banner ads
Small rectangular boxes containing text and perhaps a picture that companies pay to place on relevant web sites
Interstitials
Advertisements, often with video or animation, that pop up between changes on a web site
Earned media
All the PR benefits a firm receives without having directly paid for anything
Paid media
Press coverage of company generated advertising, publicity, or other promotional efforts that was paid for
Sources of word of mouth
Online forums
Blogs
Social networks
Buzz marketing
Marketing that generates excitement, creates publicity, and conveys new relevant brand related information through unexpected or even outrageous means
Viral marketing
Marketing that encourages consumers to pass along company developed products and services or audio, video, or written information to others online
Steps in designing a sales force
Sales force objectives
Sales force strategy
Sales force structure
Sales force size
Compensation
Types of sales representatives
Deliverer
Order taker
Missionary
Technician
Demand creator
Solution vendor
Deliverer
Type of sales representative
Major task is the delivery of a product
Order taker
Type of sales representative
An inside or outside order taker
Missionary
Type of sales representative
Salesperson not permitted to take an order but expected to build goodwill or educate potential users
Technician
Type of sales representative
A salesperson with high level of technical knowledge
Demand creator
Type of sales representative
Relies on creative methods for selling tangible and intangible products
Solution vendor
Type of sales representative
A salesperson who's expertise is solving a customer's problem
Sales force objectives and strategies
Prospecting
Targeting
Communicating
Selling
Servicing
Information gathering
Allocating
Leveraged sales force
Focuses reps on selling the company's more complex and customized products to large accounts and uses inside salespeople and web ordering for low end selling
Workload approach
Used to determine sales force size
Customers grouped into size classes
Desirable call frequencies are established
Number of accounts in each size class multiplied by frequency
Average number of calls possible per year established
Number of reps = total annual calls required / average annual calls one sales rep can make
Sales force compensation methods
Fixed amount
Variable amount
Expense allowances
Benefits
Steps in managing the sales force
Recruiting and selecting representatives
Training and supervising
Motivating
Evaluating
Steps in personal selling
Prospecting and qualifying
Preapproach - learn as much as possible
Presentation and demonstration
Overcoming objections
Closing
Followup and maintenance
Incremental innovation
Entering new markets by tweaking products for new customers, using variations on a core product to stay one step ahead of the market, and creating interim solutions for industry wide problems
Factors causing new product failure
Shortage of important ideas in certain areas
Fragmented markets
Social, economic, and governmental constraints
Cost of development
Capital shortages
Shorter required development time
Poor launch timing
Shorter product life cycles
Organizational support
New product development organizational approaches
Cross functional teams
Stage gate systems
Venture teams
Organizational approach for new product developent
Cross functional groups charged with developing a specific product or business
Skunkworks
Informal workplaces, sometimes garages, where intrepreneurial teams attempt to develop new products
Stage gate system
Organizational approach for new product development
Divides the innovation process into stages, with a gate or checkpoint at the end of each stage
Managers review criteria and make a decision at each gate
New product development decision process
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Market testing
Commercialization
Ways to generate ideas for new products
Interacting with others
Interacting with employees
Studying competitors
Adopting creativity techniques
Creativity techniques for generating new product ideas
Attribute listing
Forced relationships
Morphological analysis
Reverse assumption analysis
New contexts
Mind mapping
Attribute listing
Creativity technique for generating new product ideas
List the attributes of an object
Modify each attribute
Forced relationships
Creativity technique for generating new product ideas
List several ideas and consider each in relationship to each of the others
Morphological analysis
Creativity technique for generating new product ideas
Start with a problem (getting something from one place to another)
Think of dimensions such as the type of platform (cart, chair, sling, bed)
Think of the medium (air, water, oil, rails)
Think of the power source (compressed air, electric motor, magnetic fields)
Reverse assumption analysis
Creativity technique for generating new product ideas
List all normal assumptions about something and then reverse them
New contexts
Creativity technique for generating new product ideas
Take familiar processes and put them into a new context
Mind mapping
Creativity technique for generating new product ideas
Start with a thought, write it on paper, then think of the next thought, write it on paper, then think of the next thought, etc
Lateral marketing
Combining two product concepts or ideas to create a new offering
Gas stations + food = gas station stores
Cereal + snacking = cereal bars
Audio + portable = Sony Walkman
Drop error
when a company dismisses a good idea
Product idea
A possible product that a company might offer to the market
Product concept
An elaborated version of the idea expressed in consumer terms
Concept testing
Presenting the product concept to target consumers and getting their reactions
Communicability and believability - are the benefits clear and believable?
Need level - do you see this product as solving a need?
Gap level - do other products currently satisfy this need?
Perceived value
Purchase intention
User targets, purchase occasions, purchase frequency
Conjoint analysis
A method for deriving the utility values that consumers attach to varying levels of a products attributes
How important are each attribute of a product
Business analysis for new product development
Estimate total sales
Estimate total costs
Quality function deployment
Takes the list of desired customer attributes generated by market research and turns them into a list of engineering attributes that engineers can use
Alpha testing
Testing the product within the firm to see how it performs in different applications
Beta testing
Allowing outside consumers to test the product
Consumer goods marketing testing strategies
Sales wave research
Simulated test marketing
Controlled test marketing
Test markets
Sales wave research
Type of marketing testing strategy for consumer goods
Consumers who initially try the product at no cost are reoffered it or a competitors product at slightly reduced prices to see how often they are purchased over and over again
Simulated test marketing
Type of marketing testing strategy for consumer goods
Qualified shoppers are shown both new ad and popular brand ad and sees afterwards which shoppers purchase which brands
Controlled test marketing
Type of marketing testing strategy for consumer goods
A company with new products specifies the number of stores and geographic locations it wants to test
Research firms delivers product and controls location, shelf space
Records purchases
Test market
Type of marketing testing strategy for consumer goods
Putting the product up for sale in a full blown test market
Commercialization of a new product
When (Timing)
Where (Geographic strategy)
To whom (Target market)
How (Introductory marketing strategy)
Critical path scheduling
Used to coordinate the many tasks in launching a new product
Develops a master chart showing the simultaneous and sequential activities that must take place
Consumer adoption process
Awareness
Interest
Evaluation
Trial
Adoption
Adoption
An individual's decision to become a regular user of a product
Innovation
Any good or service or idea that someone perceives as new no matter how long its history
Adopter groups to new products
Innovators
Early adopters
Early majority
Late majority
Laggards
Relative advantage
The degree to which the innovation appears superior to existing products
Compatibility
The degree to which the innovation matches the values and experiences of the individuals
Complexity
The degree to which the innovation is difficult to understand or use
Divisibility
The degree to which the innovation can be tried on a limited basis
Communicability
The degree to which the benefits of use are observable or describable to others