Final Exam Marketing

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Price

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The amount of money charged for a product or service; the sum of the values that customers exchange for the benefits of having or using the product or service.

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Customer value-based pricing

Back 2

Setting price based on buyers’ perceptions of value rather than on the seller’s cost.

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Good-value pricing

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Offering the right combination of quality and good service at a fair price.

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Value-added pricing

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Attaching value-added features and services to differentiate a company’s offers and charging higher prices.

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Cost-based pricing

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Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk.

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Fixed costs

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Costs that do not vary with production or sales level. i.e. rent, salary

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Variable costs

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Costs that vary directly with the level of production.

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Total costs

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The sum of the fixed and variable costs for any given level of production.

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Experience curve (learning curve)

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The drop in the average per-unit production cost that comes with accumulated production experience.

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Cost-plus pricing (markup pricing)

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Adding a standard markup to the cost ofthe product.

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Break-even pricing (target return pricing)

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Setting price to break even on the costs of making and marketing a product or setting price to make a target return.

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Competition-based pricing

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Setting prices based on competitors’ strategies, prices, costs, and market offerings.

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Target costing

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Pricing that starts with an ideal selling price and then targets costs that willensure that the price is met.

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Demand curve

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A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.

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Market-skimming pricing (price skimming)

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Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

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Market-penetration pricing

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Setting a low price for a new product to attract a large number of buyers and a large market share.

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Product line pricing

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Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.

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Optional product pricing

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The pricing of optional or accessory products along with a main product.

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Captive product pricing

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Setting a price for products that must be used along with a main product, such as blades for a razor and games for a videogame console.

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By-product pricing

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Setting a price for by-products to make the main product’s price morecompetitive.

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Product bundle pricing

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Combining several products and offering the bundle at a reduced price.

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Discount

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A straight reduction in price on purchases during a stated period of time or of larger quantities.

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Allowance

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Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way.

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Segmented pricing

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Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

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Psychological pricing

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Pricing that considers the psychology of prices, not simply the economics; the price says something about the product.

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Reference prices

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Prices that buyers carry in their minds and refer to when they look at a given product.

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Promotional pricing

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Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales.

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Geographical pricing

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Setting prices for customers located in different parts of the country or world.

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FOB-origin pricing

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A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

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Uniform-delivered pricing

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A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

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Zone pricing

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A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

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Basing-point pricing

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A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.

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Freight-absorption pricing

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A geographical pricing strategy in which the seller absorbs all or part of the freight charges to get the desired business.

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Dynamic pricing

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Adjusting prices continually to meet the characteristics and needs of individual customers and situations.

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Value delivery network

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A network composed of the company, suppliers, distributors, and, ultimately, customers who “partner” with each other to improve the performance of the entire system in delivering customer value.

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Marketing channel (or distribution channel)

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A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

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Channel Level

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A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer.

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Direct marketing channel

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A marketing channel that has no intermediary levels.

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Indirect marketing channel

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Channel containing one or more intermediary levels.

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Channel conflict

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Disagreement among marketing channel members on goals, roles, and rewards— who should do what and for what rewards.

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Conventional distribution channel

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A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, even at the expense of profits for the system as a whole.

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Vertical marketing system (VMS)

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A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

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Corporate VMS

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A vertical marketing system that combines successive stages of production and distribution under single ownership— channel leadership is established through common ownership.

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Contractual VMS

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A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts.

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Franchise organization

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A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process.

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Administered VMS

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A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties.

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Horizontal marketing system

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A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.

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Multichannel distribution system

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A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.

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Disintermediation

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The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries.

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Marketing channel design

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Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives.

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Intensive distribution

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Stocking the product in as many outlets as possible.

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Exclusive distribution

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Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.

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Selective distribution

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The use of more than one but fewer than all the intermediaries who are willing to carry the company’s products.

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Marketing logistics (or physical distribution)

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Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.

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Supply chain management

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Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.

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Distribution center

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A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.

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Intermodal transportation

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Combining two or more modes of transportation.

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Integrated logistics management

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The logistics concept that emphasizes teamwork—both inside the company and among all the marketing channel organizations—to maximize theperformance of the entire distribution system.

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Third-party logistics (3PL) provider

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An independent logistics provider that performs any or all of the functions required to get a client’s product to market.

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Retailing

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All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.

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Retailer

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A business whose sales come primarily from retailing.

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Shopper marketing

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Using in-store promotions and advertising to extend brand equity to “the last mile” and encourage favorable in-store purchase decisions.

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Specialty store

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A retail store that carries a narrow product line with a deep assortment within that line.

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Department store

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A retail organization that carries a wide variety of product lines—each line is operated as a separate department managed by specialist buyers or merchandisers.

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Supermarket

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A large, low-cost, low-margin, highvolume, self-service store that carries a wide variety of grocery and household products.

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Convenience store

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A small store, located near a residential area, that is open long hours seven days a week and carries a limited line of highturnover convenience goods.

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Superstore

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A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, nonfood items, and services.

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Category killer

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A giant specialty store that carries a very deep assortment of a particular line and is staffed by knowledgeable employees.

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Service retailer

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A retailer whose product line is actually a service, including hotels, airlines, banks, colleges, and many others.

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Discount store

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A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.

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Off-price retailer

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A retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs.

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Independent off-price retailer

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An off-price retailer that is either independently owned and run or is a division of a larger retail corporation.

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Factory outlet

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An off-price retailing operation that is owned and operated by a manufacturer and normally carries the manufacturer’s surplus, discontinued, or irregular goods.

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Warehouse club

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An off-price retailer that sells a limited selection of brand name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to memberswho pay annual membership fees.

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Chain stores

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Two or more outlets that are commonly owned and controlled.

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Franchise

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A contractual association between a manufacturer, wholesaler, or service organization (a franchisor) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

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Shopping center

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A group of retail businesses built on a site that is planned, developed, owned, and managed as a unit.

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Wheel-of-retailing concept

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A concept that states that new types of retailers usually begin as low-margin, lowprice, low-status operations but later evolve into higher-priced, higher-service operations, eventually becoming like the conventional retailers they replaced.

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Wholesaling

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All the activities involved in selling goods and services to those buying for resale or business use.

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Wholesaler

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A firm engaged primarily in wholesaling activities

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Merchant wholesaler

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An independently owned wholesale business that takes title to the merchandise it handles

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Broker

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A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation.

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agent

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A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods.

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Manufacturers’ sales branches and offices

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Wholesaling by sellers or buyers themselves rather than through independent wholesalers.

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Promotion mix (or marketing communications mix)

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The specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships.

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Advertising

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Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

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Sales promotion

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Short-term incentives to encourage the purchase or sale of a product or service.

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Personal selling

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Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships.

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Public relations (PR)

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Building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.

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Direct marketing

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Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.

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Integrated marketing communications (IMC)

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Carefully integrating and coordinating thecompany’s many communications channels to deliver a clear, consistent, and compelling message about the organization and its products.

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Buyer-readiness stages

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The stages consumers normally pass through on their way to a purchase, including awareness, knowledge, liking, preference, conviction, and, finally, theactual purchase.

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Personal communication channels

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Channels through which two or more people communicate directly with each other, including face to face, on the phone, via mail or e-mail, or even through an Internet “chat.”

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Word-of-mouth influence

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Personal communications about a product between target buyers and neighbors, friends, family members, and associates.

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Buzz marketing

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Cultivating opinion leaders and getting them to spread information about aproduct or service to others in their communities.

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Nonpersonal communication channels

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Media that carry messages without personal contact or feedback, including major media, atmospheres, and events.

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Affordable method

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Setting the promotion budget at the level management thinks the company can afford.

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Percentage-of-sales method

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Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price.

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Competitive-parity method

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Setting the promotion budget to match competitors’ outlays.

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Objective-and-task method

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Developing the promotion budget by (1) defining specific promotion objectives, (2) determining the tasks needed to achieve these objectives, and (3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget.

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Push strategy

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A promotion strategy that calls for using the sales force and trade promotion to push the product through channels. The producer promotes the product to channel members who in turn promote it to final consumers.

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Pull strategy

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A promotion strategy that calls for spending a lot on consumer advertisingand promotion to induce final consumers to buy the product, creating a demand vacuum that “pulls” the product through the channel.

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Advertising

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Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

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Advertising objective

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A specific communication task to be accomplished with a specific target audience during a specific period of time.

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Advertising budget

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The dollars and other resources allocated to a product or a company advertising program.

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Advertising strategy

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The strategy by which the company accomplishes its advertising objectives. It consists of two major elements: creating advertising messages and selecting advertising media.

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Madison & Vine

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A term that has come to represent the merging of advertising and entertainment in an effort to break through the clutter and create new avenues for reachingconsumers with more engaging messages.

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Creative concept

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The compelling “big idea” that will bring the advertising message strategy to life in a distinctive and memorable way.

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Execution style

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The approach, style, tone, words, and format used for executing an advertising message.

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Advertising media

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The vehicles through which advertising messages are delivered to their intended audiences.

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Return on advertising investment

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The net return on advertising investment divided by the costs of the advertising investment.

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Advertising agency

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A marketing services firm that assists companies in planning, preparing, implementing, and evaluating all or portions of their advertising programs.

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Public relations (PR)

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Building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.

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Global firm

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A firm that, by operating in more than one country, gains R&D, production,marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors.

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Economic community

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A group of nations organized to work toward common goals in the regulation of international trade.

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Exporting

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Entering a foreign market by selling goods produced in the company’s home country, often with little modification.

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Joint venturing

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Entering foreign markets by joining with foreign companies to produce or market a product or service.

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Licensing

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A method of entering a foreign market in which the company enters into an agreement with a licensee in the foreign market.

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Contract manufacturing

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A joint venture in which a company contracts with manufacturers in a foreign market to produce the product or provide its service.

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Management contracting

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A joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products.

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Joint ownership

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A joint venture in which a company joins investors in a foreign market to create a local business in which the company shares joint ownership and control.

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Direct investment

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Entering a foreign market by developing foreign-based assembly or manufacturing facilities.

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Standardized global marketing

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An international marketing strategy that basically uses the same marketing strategy and mix in all of the company’s international markets.

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Adapted global marketing

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An international marketing strategy that adjusts the marketing strategy and mix elements to each international target market, bearing more costs but hoping for a larger market share and return.

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Straight product extension

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Marketing a product in a foreign market without any change.

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Product adaptation

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Adapting a product to meet local conditions or wants in foreign markets.

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Product invention

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Creating new products or services for foreign markets.

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Communication adaptation

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A global communication strategy of fully adapting advertising messages to local markets.

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Whole-channel view

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Designing international channels that take into account the entire global supply chain and marketing channel, forging an effective global value delivery network.

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Competitive advantage

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An advantage over competitors gained by offering consumers greater value than competitors do.

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Competitor analysis

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The process of identifying key competitors; assessing their objectives, strategies, strengths and weaknesses, and reaction patterns; and selecting which competitors to attack or avoid.

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Competitive marketing strategies

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Strategies that strongly position the company against competitors and give the company the strongest possible strategic advantage.

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Strategic group

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A group of firms in an industry following the same or a similar strategy.

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Benchmarking

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The process of comparing the company’s products and processes to those of competitors or leading firms in other industries to identify best practices and find ways to improve quality and performance.

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Customer value analysis

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An analysis conducted to determine what benefits target customers value and how they rate the relative value of various competitors’ offers.

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Market leader

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The firm in an industry with the largest market share.

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Market challenger

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A runner-up firm that is fighting hard to increase its market share in an industry.

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Market follower

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A runner-up firm that wants to hold its share in an industry without rocking the boat.

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Competitor-centered company

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A company whose moves are mainly based on competitors’ actions and reactions.

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Customer-centered company

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A company that focuses on customer developments in designing its marketing strategies and delivering superior value to its target customers.

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Market-centered company

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A company that pays balanced attention to both customers and competitors in designing its marketing strategies.