Marketing 3000 Exam 3

Front 1

Pricing methods

Back 1

1. Cost/ demand pricing (break even analysis)
2. Going rate (competitive pricing)
3. Perceived value pricing

Front 2

Going rate pricing

Back 2

-Pricing according to what competition is doing

-Commodities use this (oil companies, fruits and veggies)

Front 3

Perceived value pricing

Back 3

-Basing price on perceived value to customer

-Often used in conjunction with heavy promotion

Front 4

Profit equation

Back 4

Profit = total revenue - total cost

Total revenue = Unit price x quantity sold

Total cost = fixed cost + variable cost

Front 5

Fixed costs

Back 5

Overhead

Costs that don't vary with sales or production levels

executive salaries
rent

Front 6

Variable costs

Back 6

Costs that do vary directly with the level of production

Raw materials

Front 7

Total costs

Back 7

Sum of the fixed and variable costs for a given level of production

Front 8

Break even point

Back 8

that quantity of output at which total revenue equals total cost, assuming a certain selling price

Break even point in units

Front 9

Break even point formula

Back 9

Total fixed costs / (price - unit variable cost)

Front 10

List the six steps to setting pricing policy

Back 10

1. Selecting the pricing objective
2. Determining the demand
3. Estimating costs
4. Analyzing competitors' costs, prices and offers
5. Selecting a pricing method
6. Selecting final price

Front 11

Objectives of pricing existing and new products

Back 11

1. Segmentation and positioning
- consistency with target markets and competitive position
2. Signal of product quality
3. Sales and profit goals
4. Market share goals
- Economic/ industry conditions
- Survival or domination goals
5. Social responsibility
- predatory pricing, drug companies gouging brings regulatory heat

Front 12

New products - Penetration pricing

Back 12

- Set price low to gain immediate sales/ market share, scare off competitive entry
- Negative sales impact - slow recovery of investment profits

Example - New airline route fares, internet browsers, MICROSOFT

Front 13

New products - Price skimming

Back 13

- Set price high to achieve quick/ large profits

Example - Intel's new processors always priced high. Gillette razors, Apple

Front 14

Existing products characteristics- Perishability

Back 14

- Foods - produce, bread, bakery items
- Services -airline flights, concerts and sports events
- Short times demand - Christmas cards/ wrapping paper
- Need flexible pricing strategy

Front 15

Existing products characteristics- Distinctiveness

Back 15

-Higher price for high quality products
-Depends on product class (gasoline vs. watches)
-Depends on consumer perception (perrier vs. arrowhead)

Front 16

Existing products characteristics- Nature of competition

Back 16

- In general... greater the competition = lower the price

- Product life cycle - generally price decreases as product moves from growth -> maturity -> Decline

Front 17

Promotional pricing methods

Back 17

1. Loss-leader pricing - Safeway - offer lower priced items to get people into the store
2. Special events pricing
3. Cash rebates
4. Low interest financing
5. Longer payment terms
6. Warranties and service contracts
7. Psychological discounting

Front 18

Discriminatory pricing

Back 18

Legal as long as it doesn't substantially hinder competition

-Victoria's Secret charges more in CA than in MO

-Movie theaters charge different rates for students/ senior citizens

Front 19

What must be true for discriminatory pricing to work?

Back 19

1. Market must be segmentable and segments must have different intensities of demand
2. Members in low-priced segment must not be able to sell product to high priced segment
3. Cost of servicing different segments must not excceed profit generated by discrimination
4. Must not breed resentment or ill will
5. Must be legal

Front 20

List the intermediary functions of distribution (benefits)

Back 20

1. Trancactional
- Buying and selling, Risk taking

2. Logistical
- Concentration, storing, sorting, physical distribution

3. Facilitating
- Financing, grading

4. Informing
- Marketing research: to companies
- Providing information: to consumers

Front 21

Distribution strategy - coverage or channel width

Back 21

The number of distributors offering product/ service

Front 22

Distribution strategy - channel depth

Back 22

The levels of warehouse/ distributors/ brokers between producer and consumer

Front 23

Three coverage strategies

Back 23

1. Intensive
2. Selective
3. Exclusive

Front 24

Intensive distribution

Back 24

1. Provide offering in as many outlets as possible - maximize exposure
2. Coverage/ sales effort trade off - maximum coverage and no sales effort at point of purchase
-usually lower priced items
-sales depend on consumers seeing product and easy buying opportunity

Front 25

Selective distribution

Back 25

1. Provide offering in selective outlets
- restrict distribution in area to intermediaries based on performance capability

2. Coverage/ sales effort tradeoff
-Middle ground - medium coverage and sales effort

example - compaq computers at fry's and computerland, but not sears
2.

Front 26

Exclusive distribution

Back 26

1. Using only one outlet in a geographic area
- maximize "push" of a distributor

2. Coverage/ sales effort tradeoff
- Maximum sales effort at point of purchase - minimum coverage

-Exclusive distributor may only carry one product line

Front 27

Define retailing

Back 27

The sale, and all activities directly related to the sale of goods and services to ultimate consumers for personal, non business data.

Front 28

Define retailer

Back 28

A firm primarily engaged in retailing

Front 29

List some activities that retailers perform

Back 29

Anticipating customers' wants, developing market information and financing

Front 30

How many retail stores are there in the US?

Is retailing easy to get in and out of?

Back 30

2.7 million

YES!

Front 31

Largest retailers in the world

Back 31

1. Wal mart
2. Carofor
3. Home depot
4. Metro I.G.
5. Tesco
6. Kroger

Front 32

Small retailers typically succeed by:

Back 32

1. Serving customers who seek benefits that small companies can provide better than large stores (service)

2. Forming or joining a contractual vertical marketing system

Front 33

The ten largest retailers in the U.S. account for what percentage of total retail trade in the U.S.?

Back 33

13%

Front 34

Corporate chain

Back 34

Centrally owned and managed stores that carry similar products

Front 35

Independent

Back 35

Single unaffiliated store

Front 36

Contractual vertical marketing system

Back 36

- contract specifies how members will operate

Front 37

Retailer cooperative

Back 37

Small retailers establish and operate a wholesale warehouse

Front 38

Voluntary chain

Back 38

wholesalers contract with interested retailers to provide services to them

Front 39

Franchising

Back 39

Franchisor provides trademark and assistance in return to payments from franchises

Front 40

Factory outlet

Back 40

A store owned by a manufacturer that sells clearance items, regular merchandise and sometimes even otherwise unavailable items

Front 41

factory outlets seem to be losing their edge because:

Back 41

1. Malls, starving for customers, are narrowing the price gap
2. Explosive growth is raising fears of market saturation
3. Factory outlet centers are being forced to upgrade to draw shoppers

Front 42

Factory outlet centers are fighting back by adding:

Back 42

- New brand name tenants
- Different product categories
- New conveniences

Front 43

Nonstore retailing

Back 43

retailing activities that take place away from a retail store

Front 44

Direct selling

Back 44

Personal contact between a salesperson and a consumer away from a retail store

Front 45

Door to door

Back 45

Type of direct selling which involves canvassing or occurs after other initial contact

Front 46

Party plan

Back 46

type of direct selling where a host invites people to "party" with a sales rep.

Mary flippin Kay

Front 47

Telemarketing

Back 47

Salesperson initiates contract with a shopper and also closes sale over telephone

Front 48

Automatic vending

Back 48

Sale of products through a machine with no personal contact between buyer and seller

Front 49

Direct marketing

Back 49

use of advertising to contact customers who, in turn, purchase products without visiting a retail store.

-Direct mail
-Catalog retailing
-Televised shopping
-Online retailing

Front 50

Integrated marketing communications

Back 50

The concept of designing marketing activities - advertising, personal selling, sales promotion, and public relations - to provide a consistent message across all audiences is referred to as integrated marketing communications (IMC).

Front 51

List the four elements of promotion

Back 51

1. Advertising
2. Personal selling
3. Public relations
4. Sales promotion

Front 52

Advertising

Back 52

Paid form of nonpersonal communication

Front 53

Personal selling

Back 53

Two way, personal communication

face to face

Front 54

Public relations

Back 54

Communications management that seeks to influence stakeholders

Publicity, lobbying, etc

Front 55

Sales promotion

Back 55

Short term inducement of value to arouse interest

coupons, samples, contests, etc

Front 56

Promotional mix

Back 56

combination of one or more promotional elements

Goal is to have all elements work together (IMC)

Front 57

Factors affecting promotional mix decision

Back 57

largest audience, stage of product life cycle, product characteristics, buyer decision stage, distribution channel strategy

Front 58

Target audience

Back 58

Stakeholders other than consumers

-Public relations

Front 59

Channel members

Back 59

Personal sales (main promo tool)

Front 60

Consumers

Back 60

Advertising (particularly when there is large number who are geographically depressed

Front 61

List the stages of product life cycle

Back 61

Introduction
Growth
Maturity
Decline

Front 62

Introduction stage of product life cycle

Back 62

- Publicity to potential customers
- Advertising to stimulate primary demand
- Personal selling to channel members

Front 63

Growth stage of product life cycle

Back 63

- Advertising to differentiate brand

-Personal selling to channel members

Front 64

Maturity stage of product life cycle

Back 64

- Reminder advertising
- Sales promotion -some effort made here to discourage switching

Front 65

Decline stage of product life cycle

Back 65

- Not much money is usually spent on promotion

- Limited sales promotion

Front 66

Complexity

Back 66

- Technical sophistication of product (information required to understand it)

Front 67

Purchase risk

Back 67

-Financial, social, physical

Front 68

The higher the complexity and risk:

Back 68

- The greater the need for personal selling as opposed to advertising

Front 69

List the stages of a buying decision

Back 69

1. Prepurchase - advertising to inform, sales promotion to induce trial

2. Purchase - Personal selling to close sale, sales promotion

3. Post purchase - Personal selling and advertising to reduce anxiety

Front 70

Push strategy

Back 70

-Personal selling (to inform/ gain support)

- Sales promotion (contests to motivate, discount, allowances to support channel effort)

Front 71

Pull strategy

Back 71

- Advertising

Nicoderm - "ask your doctor"
Intel inside

Front 72

Message problems

Back 72

Selective attention
Selective distortion
Selective retention

Front 73

AIDA

Back 73

Attention
Interest
Desire
Action

Front 74

AIDA - Attention

Back 74

Get the attention of the target market.

- Break through clutter by
-reaching and focusing on target market

- Involves right choice of media and message

- Distinctive and relevant message

Front 75

AIDA - Interest

Back 75

Generate interest in what you're selling

-Focus on benefits, not features

Talk directly to needs of target market
- Gatorade "Thirst quenching need"

Front 76

AIDA - Desire

Back 76

Build desire by:
Using emotion - show benefits and uses of product/ service

Using logic - Humor - miller light ads build desire to have fun

Front 77

AIDA - action

Back 77

Get target market to act
- direct action - buy the product, try product, send for free information kit
- indirect action - encode a thought or image - remember name of product, have positive image, associate product with benefit

- Always call for action
- ask for sale

Front 78

Alternative vehicles

Back 78

Trend is away from traditional promotion

-need for more efficient/ effective tools

Front 79

List the main limitations with promotional tools

Back 79

Clutter
Low credibility and sophisticated/ jaded consumers

Front 80

Product placement

Back 80

Paid integration of product communication into medias

-Fastest growing promotional expenditure - grew 30% to $3.5bil in 05

- Growing the fastest on:
Reality tv and niche learning channels

Front 81

Product placement and celebs

Back 81

- Wearing Armani on Oscar night

- Gift bags

Front 82

Product placement - Movies

Back 82

- Product placement gone wild

"Herbie Fully Loaded" was said to have a commercial in every frame

Front 83

Drop ins

Back 83

growing use in both radio and tv advertising.

"Hot pitch of the day brought to you by hardees hot n spicy sammy"