Marketing Exam 3 TA In Depth Review Day 14 Advertising A paid form of nonpersonal communication that is transmitted to a target audience though mass media Effective advertising can influence customers purchasing behavior throughout their lifetime Most organizations even nonprofits engage in advertising Start with a meaningful message Positioning Statement articulate how you want your target market to envision your product relative to the competition Six Point Strategy o Primary Purpose What is the primary purpose of the ad o Primary Benefit What unique benefit can we offer o Secondary Benefit What other key benefits will customers receive o Target Audience At whom are we aiming this ad o Audience Reaction What response do we want from our audience o Company Personality What image do we want to convey in our ads Measuring Advertising o Reach percentage of consumers in the target audience exposed to a particular advertisement in a stated period o Frequency the number of times these targeted consumers are exposed to the advertisement o Rating HH tuned to show Total US HH o Share HH tuned to show US HH using TV Exposures o Is it more effective to touch 100 customers once or 25 customers 4 times Exposure 1 What is it 2 What of it 3 What is its o Curiosity Recognition Decision Reinforcement o Assures current users they have made the right choice o Ex At T The Right Choice o A combination Runs steadily with bursts at certain times o Ex Doritos during the Super Bowl IKEA during back to school Pulsing Flighting o Runs in spurts o Heavy none o Good for seasonal Products sunscreen Pioneer advertising o Primary Demand o Focuses on a product category Got Milk Beef Advocacy Comparative o Conveys a firm s position on a public issue o We ID o A type of competitive advertisement Points out a brands advantages relative to competing brands o Compares two or more brands on one or more characteristics o Ex Papa Johns Better Ingredients The taste that beat Subway Recognition unaided recall o During the Posttest o Evaluation of advertising effectiveness after the campaign Recognition Recall respondents shown a portion of an ad or sometimes a memorable image and asked Do you recognize the ad recognition measure Please type in the sponsor of this ad unaided recall Please choose the sponsor of this ad from the following list measure aided recall Unaided Recall Aided Recall Day 16 Setting Prices Reference pricing o Price stored in memory that helps evaluate the actual price o Serves as an anchor o Frames the purchase price o Displaying a moderately priced product next to an expensive one o Similar to framing o Private label shelving 10 000 ring next to a 1000 ring Price Skimming New Products o Set a relatively high price at first and then lower it over time o Popular in electronics category PlayStation o Allows for sunk cost R D recovery o Good for inelastic demand o Encourages competition o Consulting Health Care Penetration pricing New Products o Set a relatively low price to drive market share value perceptions Call now for special introductory price o Designed for high market share o Volume over margin o Discourages competition o Good for elastic products long term focus o Fast Food Dry Cleaning Neutral Pricing New Products o Market driven status quo strategies o Airline gas milk commodities o For a presitigious product looks like a vertically cut semi circle o Where the costs of producing a product equal the revenue made from o Fixed Costs Per unit Contribution to Fixed Costs Price Variable Costs o Emphasizing factors other than price to distinguish a product from Demand curve Substitute products Break even selling the product Non price competition competing brands Odd even pricing o Ending prices in odd or non round numbers 2 99 4 97 39 95 o Record keeping 95 indicates normal 50 indicates sale Selling price o Price at which a product service is sold at Captive pricing Product Line o Basic product is priced low but ancillaries are priced high o Printers ink cell phones service contract xbox games razor cartridges Price bundling o Offering several products for sale in one package Microsoft Office Cable Phone High Speed o Unbundling charging separately for previously bundled products Loss leader Promotional Prices o Selling products at or below cost o Stimulate sales of other profitable products o Stimulates store traffic promotes habitual buying Low priced every day products Milk eggs soda Price elasticity o Elastic Demand when consumers buying habits are sensitive to price changes luxury car washer dryer Demand is elastic when price is greater than one durables o Inelastic Demand when consumers buying habits are not very sensitive to price changes electricity When economists refer to inelastic demand they mean a price that is less than one necessities o When price elasticity is one demand has unit elasticity o When price elasticity is zero perfectly inelastic Goods will have the o Calculating Elasticity Price EOD change in QD change in P X For P Q use midpoint method average of the two prices for P same demand regardless of price Water in the Sahara P Q and the average of the two Q o Determinants Availability of substitutes of income Time Brand loyalty Price framing o Anchoring price for consumers o MSRP Competitor s Price You Save Markup vs Margin o The difference between profit margin and markup They are two different ways of analyzing the cost and profit of a service Markup SP C C X 100 When you are deciding how much you want to make on the item and determining the price in which goods should be sold you would use markup Markup as of Cost when you divide the last step C and multiply by 100 Profit Margin SP C SP X 100 When you are looking at the success of your business afterwards and know how much money you took in you would calculate the profit margin this is gross profit margin Margin as of Selling Price when you divide the last step SP and multiply by 100 Key Concepts for Exam 3 SALES PROMOTION Trade Allowances pg 586 587 understand the broad concept and how it works Also know the different types of allowances described on 587 A price reduction offered to retailers or distributors in an effort to stimulate sales of a product trade discount Discount offered by producers or marketers to distribute channel members usually as a short term promotional incentive Objective is to effect a lower retail price to stimulate sales trade allowance Sales Promotions pg 579 581 be aware of what makes up the
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