Marketing Exam 3 TA In-Depth ReviewDay 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 Strategyo 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 receiveo Target Audience: At whom are we aiming this ad?o Audience Reaction: What response do we want from our audienceo Company Personality: What image do we want to convey in our ads- Measuring Advertisingo Reach: percentage of consumers in the target audience exposed to a particular advertisement in a stated periodo 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)• Exposureso 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 • Reinforcemento Assures current users they have made the right choiceo Ex: At&T The Right Choice• Pulsingo A combination. Runs steadily with bursts at certain timeso Ex: Doritos during the Super Bowl, IKEA during “back to school” • Flightingo Runs in spurtso Heavy/noneo Good for seasonal Products (sunscreen)• Pioneer advertisingo Primary Demando Focuses on a product category, “Got Milk?; Beef”• Advocacyo Conveys a firm’s position on a public issueo We ID; • Comparativeo A type of competitive advertisement Points out a brands advantages relative to competing brandso Compares two or more brands on one or more characteristicso Ex: Papa Johns: Better Ingredients; “The taste that beat Subway”, • Recognition/unaided recallo 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 measure)• Please choose the sponsor of this ad from the following list (aided recall) Unaided Recall Aided RecallDay 16 - Setting Prices • Reference pricingo Price stored in memory that helps evaluate the actual priceo Serves as an anchoro “Frames” the purchase priceo Displaying a moderately priced product next to an expensive oneo Similar to framingo 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 timeo Popular in electronics category (PlayStation)o Allows for sunk cost (R&D) recoveryo 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 shareo Volume over margino Discourages competition o Good for elastic products (long term focus)o Fast Food, Dry Cleaning • Neutral Pricing (New Products)o Market-driven, “status quo” strategieso Airline, gas, milk, commodities • Demand curveo For a presitigious product : looks like a vertically cut semi-circle • Substitute products• Break eveno Where the costs of producing a product equal the revenue made from selling the producto Fixed Costs / Per-unit Contribution to Fixed Costs (Price – Variable Costs) • Non-price competitiono Emphasizing factors other than price to distinguish a product from competing brands • Odd/even pricingo Ending prices in odd or non-round numbers (2.99, 4.97, 39.95)o Record keeping: .95 indicates normal, .50 indicates sale • Selling priceo Price at which a product/service is sold at • Captive pricing (Product Line) o Basic product is priced low, but ancillaries are priced higho Printers / ink , cell phones / service contract, xbox / games , razor / cartridges • Price bundlingo Offering several products for sale in one “package” Microsoft Office, Cable, Phone, High Speedo Unbundling- charging separately for previously bundled products• Loss leader (Promotional Prices)o Selling products at or below costo Stimulate sales of other, profitable productso Stimulates store traffic, promotes habitual buying Low priced, every day products Milk, eggs, soda • Price elasticityo Elastic Demand: when consumers’ buying habits are sensitive to price changes (luxury car) Demand is elastic when price is greater than one (durables: washer, dryer) 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 same demand regardless of price Water in the Saharao Calculating Elasticity: {Price EOD = % change in QD / % change in P} X (P / Q) For (P/Q), use “midpoint method” average of the two prices for P and the average of the two Qo Determinants Availability of substitutes % of income Time Brand loyalty • Price framingo Anchoring price for consumerso “MSRP”, Competitor’s Price, “You Save” • Markup vs .Margino 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 100Key Concepts for Exam 3SALES PROMOTIONTrade Allowances (pg. 586 - 587) understand the broad concept and how it works. Also, know the different types of
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