MRKTNG 3000: EXAM 2
136 Cards in this Set
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Stages in the product life cycle
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1. Intro - First product is called the "pioneer"; its promotional efforts stimulate primary demand or for the product type
2. Growth - Sales/profits start to take off. Competitors begin to ender and promotional efforts to stimulate secondary demand begin.
3. Maturity - Sales/profit gr…
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5 Adopter categories
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1. Innovators
2. Early Adopters
3. Early Majority
4. Late Majority
5. Laggards
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Innovators
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Venturesome consumers who are the first to adopt an innovation. They're likely to be younger, have higher social status and be in better financial shape. They have broad social relationships involving various groups of people. They are most associated with the introduction stage of the PL…
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Early Adopters
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These consumers purchase a new product after innovators but runner than other consumers. They tend to be socially involved within a community, but not as involved outside the community. They are highly respected in their social system and are often opinion leaders. They're most often asso…
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Early Majority
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They include more deliberate consumers who usually adopt an innovation just before the average adopter in the social system. They are often associated with the late growth and early maturity stage of the PLC.
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Late Majority
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They usually adopt an innovation to save money or in response to social pressure from their peers. They rely on members of the early and late majorities as sources of information and are associated with the late majority stage of the PLC.
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Laggards
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They are consumers who are bound by tradition and are last to adopt an innovation. They are cynical, suspicious, nostalgic, and often very frugal. They're associated with the decline stage of the PLC.
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Trading Up (upmarket)
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Adding a higher-price product to a line in order to attract a broader market. The seller intends that the new product's prestige will help the sale of its existing lower-price products.
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Trading Down (downmarket)
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Adding a lower-price product to a company's product line. The firm expects that people who cannot afford the original higher-priced product or consider it too expensive will buy the new lower-priced one.
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Price Skimming (marketing-skimming pricing)
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The firm charges the highest price possible that buyers will pay. This is consistent with financial pricing objectives, such as profit, and it requires a degree of price insensitivity on the part of the target market. This situation is often seen with new products that represent the signi…
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Price penetration (market-penetration pricing)
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A strategy pricing lower than the competition, used often when there is a marketing share objective. It is often used when the demand is elastic and there is a lot of price sensitivity.
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Price adjustments
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Adjustments made to the basic price in order to reward customers for certain responses
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Types of Price Adjustments
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Cash discount
- Quantity discount
- Seasonal discount
- Functional (trade) discount
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Types of allowances
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Trade-in: price reductions given for turning in an old item when buying a new one
- Promotional: reward dealers for participating in advertising and sales support programs
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Types of segmented or discriminatory pricing
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- Customer-segment pricing
- product form pricing
- location pricing
- time pricing
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Customer-segment pricing
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different customers pay different prices for the same product or service
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Product form pricing
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different versions of the product are priced differently but not according to their differences in costs
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Location Pricing
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a company charges different prices for different locations, even though the cost of offering each location is the same
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Time pricing
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a firm varies its prices by the season, month, day, or even hour
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Requirements for segmented pricing to be effective
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- the market must be segmentable
- the segments must show different degrees of demand
- the costs of segmenting and watching the market cannot exceed the extra revenue obtained from the price difference
- it must be legal! cannot be intended to destroy or limit competition
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Types of distribution
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Intensive
- Selective
- Exclusive
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Intensive Distribution
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This provides for the widest coverage and is intended for products that involve routine decision making. Examples: chewing gum, soft drinks, or any item in a convenience store or vending machine.
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Selective Distribution
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This is distributing a product in selected outlets within a geographic area. It provides for some coverage with some exception of sales effort. Examples: electronics, washers/dryers, computers
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Exclusive Distribution
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It is offered in only one outlet within a particular geographical area. The products normally associated are high-priced, rare, and/or specialty products. Examples: luxury vehicles
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Types of retailers
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- Mass merchandisers
- Specialty stores
- Convenience stores
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Advertising Advantages
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- It's a cost effective way for communicating, particularly with large audiences that are geographically dispersed
- It's a valuable tool for creating and maintaining brand equity
- It can be integrated with other promotional tools to help generate support from retailers and other tra…
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Advertising Disadvantages
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The cost of producing and placing ads can be very high, particularly TV commercials
- It can be difficult to determine the effectiveness of advertising
- There are credibility and image problems associated with advertising
- The vast number of ads has created clutter problems and cons…
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Sales promotion advantages
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- it can provide extra incentive to consumer or middlemen to purchase or stock and promote a brand
- It's a way of appealing to price-sensitive consumers
- Its efforts can often be more directly measured than those of advertising
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Sales promotion disadvantages
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- Many forms of don't help establish or reinforce brand image, & short-term sales gains are often achieved at the expense of long-term brand equity
- There can be problems with clutter when consumers are bombarded with too much.
- Consumers may become over-reliant on incentives, which…
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Integrated marketing communication
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A strategic business process used to plan, develop, execute, and evaluate coordinated communication with an organization's public.
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Strategic goals of marketing communication
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- Create awareness
- build positive images
- identify prospects
- build channel relationships
- retain customers
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Promotional mix
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- Advertising
- Sales promotion
- Public relations
- Direct marketing
- Personal selling
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Advertising
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a paid form of non personal communications about an organization, its products, or its activities that is transmitted through a mass medium to target audiences
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Sales promotion
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an activity or material that offers customers, sales personnel, or resellers a direct inducement for purchasing a product
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Public Relations
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a nonpersonal form of communication that seeks to influence the attitudes, feelings, and opinions of customers, non customers, stockholders, suppliers, employees, and political bodies about the organization.
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Direct Marketing
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uses direct forms of communication with customers
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Personal selling
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face-to-face communication with potential buyers to inform them about and persuade them to buy an organization's product
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Potential buyers go through a process of:
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1. Awareness of the product or service
2. Comprehension of what it can do and its important figures
3. Conviction that it has value for them
4. Ordering
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Goal of integrated marketing communication
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to develop marketing communications programs what coordinate and integrate all elements of promotion so that the organization presents a consistent message
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Ethical & legal concerns of advertising
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- using deceptive advertising
- reinforcing unfavorable ethnic/racial/sex stereotypes
- Encouraging materialism and excessive consumption
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Ethical & legal concerns of public relations
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- lack of sincerity
- using economic power to gain positive publicity
- orchestrating news events to present a false appearance of widespread support for the company position
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Ethical & legal concerns of sales promotion
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- offering misleading consumer promotions
- paying slotting allowances to gain retail shelf space
- using unauthorized mailing lists to reach customers
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Ethical & legal concerns of personal selling
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- using high-pressure selling
- Failing to disclose product limitations/safety concerns
-misrepresenting product health
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Ethical & legal concerns of direct marketing communications
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- invading privacy with telemarketing
- using consumer database information without consumers' authorization
- creating economic waste with unwanted direct mail
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Objectives of advertising
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- create awareness
- aid comprehension
- develop conviction
- encourage ordering
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Methods of determining expenditure
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- Percent of sales
- Per-Unit Expenditure
- All you can afford
- Competitive parity
- Research approach
- Task approach
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2 criteria advertising message should meet
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- it should take into account the basic principles of communication
- It should be predicated upon a good theory of consumer motivation and behavior
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3 elements of the basic communication process
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- the sender or source of communication
- the communication or message
- the receiver or audience
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Newspaper Advantages
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- flexible and timely
- intense coverage of local markets
- broad acceptance and use
- high believability of printed word
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Newspaper Disadvantages
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- Short life
- read hastily
- small "pass-along" audience
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Radio advantages
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- mass use
- audience selectivity via station format
- low cost (per unit of time)
- geographic flexibility
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Radio disadvantages
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- audio presentation only
- less attractive than TV
- chaotic buying (non-standardized rate structures)
- short life
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Outdoor advantages
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- flexible
- relative absence of competing advertisements
- repeat exposure
- Relatively inexpensive
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Outdoor disadvantages
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- creative limitations
- many distractions for viewer
- Public attack (ecological implications)
- no selectivity of audience
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Television advantages
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- comprehension of sigh, sound and motion
- appeals to senses
- mass audience coverage
- psychology of attention
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Television disadvantages
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- non selectivity of audience
- fleeting impressions
- short life
- expensive
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Magazine advantages
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- high geographic and demographic selectivity
- psychology of attention
- quality of reproduction
- pass-along readership
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Magazine disadvantages
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- high geographic and demographic selectivity
- psychology of attention
- quality of reproduction
- pass-along readership
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Magazine disadvantages
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- long closing periods
- some waste circulation
- no guarantee of position (unless premium is paid)
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Direct mail advantages
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- audience selectivity
- flexible
- no competition form competing advertisements
- personalized
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Direct mail disadvantages
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relatively high cost
- consumers often pay little attention and throw it away
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Internet advantages
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interactive
- low cost per exposure
- ads can be placed in interest sections
- timely
- high information content possible
- new favorable medium
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Internet disadvantages
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- low attention getting
- short message life
- reader selects exposure
- may be perceived as intruding
- subject to download speeds
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Media mix goals (2)
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- expose a sufficient number of targeted customers (reach) to the firm's product
- exposes them enough times (average frequency) to the product to produce a desire effect
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Push Marketing strategies
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aiming promotional efforts at distributors, retailers, and sales personnel to gain their cooperation in ordering, stocking and accelerating the sales of a product
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Pull marketing strategies
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aiming promotional efforts directly at customers to encourage them to ask the retailer for the product
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Trade promotions objectives
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- convince retailers to carry the manufacturer's products
- reduce the manufacturer's inventories and increase the distributor's or retailer's inventories
- support advertising and consumer sales promotions
- encourage retailers either to give the product more favorable help space or…
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Consumer promotions objectives
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- inducing the consumer to try the product
- rewarding the consumer for brand loyalty
- encouraging the consumer to trade up or purchase larger sizes of a product
- stimulating the consumer to make repeat purchases of the product
- reacting to competitor efforts
-reinforcing and serv…
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What sales promotion can't do
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- to generate long-term buyer commitment to a brand in many cases
- to change, except on a temporary basis, declining sales of a product
- to convince buyers to purchase an otherwise unacceptable product
- to make up for a lack of advertising or sales support for a product
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2 factors of the sales process
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- the objectives the salesperson is trying to achieve while engaged in selling activities
- the sequence of stages or steps the salesperson should following in trying to achieve the specific objectives
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Objectives of the sales force
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- information provision
- persuasion
- after-sale service
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How salespeople spend their time
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55% Selling (on-site contacts and other selling contacts)
- 45% nonselling (administrative tasks, travel time, servicing the account)
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The sales relationship-building process
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1. Prospecting
2. Planning the sales call
3. Presenting
4. Responding to objections
5. Obtaining commitment
6. Building a long-term relationship
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Sales forecasting methods
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- jury of executive opinion
- sales force composite
- customer expectations
- time-series analysis
- correlation analysis
- other quantitative techniques
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After marketing
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a concept that focuses attention on the value of current customers to the organization and on providing continuing satisfaction and reinforcement to them as well as past customers. the goal is to build lasting relationships and customers
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Correlation analysis
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a method used in sales forecasting that involves measuring the relationship between the dependent variable, sales, and one or more independent variables that can explain increases or decreases in sales volume
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Cross-functional sales team
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a team that might include people from sales, engineering, customer service and finance, depending on the needs of the customer. When the product is extremely high priced and is being sold to whole organization, cross-functional teams are often used.
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Customer organization structure
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a structure that assigns a salesperson or team to serve a single customer or type of customer that has large or significant needs
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Geographic organization structure
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structure in which individual salespeople are assigned geographic territories. The salesperson calls on all prospects in the territory and usually represents all of the company's products.
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Lead
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a prospect that may or may not have the potential to be a true prospect, a candidate, to whom a sale could be made.
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Major account organization structure
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a variation of the customer organization structure, in which a company may assign a salesperson or team to focus on major customers to foster long-term relationships
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Missionary salesperson
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used in many industries to focus solely on the promotion of existing products and introduction of new products.
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Product organization structure
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structure in which each salesperson is assigned customers and prospects for a particular product or product line. This structure is useful when the sales force must have a specific technical knowledge about the products in order to sell effectively.
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Prospecting
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The process of locating potential customers. The process usually involves random prospects lead generation which usually requires a high number of contacts to gain a sale or selected lead generation which uses exiting contacts and knowledge to generate new prospects.
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Sales forecast
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an estimate of how much of the organization's output, either in dollars or in units, can be sold during a specific period under a proposed marketing plan and under an assumed set of economic conditions. It has many important uses in sales management, marketing planning, and strategic plan…
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Strategic alliance
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also called strategic partnership, long-term, formal relationships in which both parties make significant commitments and investments in each other in order to pursue mutual goals and to improve the profitability of each other. The partners in a strategic alliance actually invest in each …
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Technical sales specialist
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often used when the product is to be used to solve technical problems of the buyer. They support the salesperson by providing training or other technical assistance to the prospect.
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Times series analysis
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a method used in forecasting sales that involves analyzing past sales data and the impact of factors that influence sales (long-term grown trends, cyclical fluctuations, seasonal variations).
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Brand equity
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the set of assets (or liabilities) linked to the brand that add (or subtract) value. The value of these assets is dependent upon the consequences or results of the market place's relationship with the brand.
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Brand-manager system
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type of product management system in which a manager focuses on a single product or a very small group of new and existing products. The brand manager is responsible for everything from marketing research and package design to advertising.
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Dual branding
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A strategy in which two or more branded products are integrated. This strategy is sometimes called joint or cobranding.
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Extended product
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The tangible product along with the whole cluster of services that accompany it; one of the three ways a product can be viewed
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Fads
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a product that experiences an intense but often very brief period of popularity. the faster it becomes popular, the faster it will become unpopular. A few fads may repeat their popularity after a long absence.
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Family branding
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Sometimes called franchise extension; and organization's attachment of the corporate name to a product to enter either a new market segment or a different product class.
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Fashions
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accepted and popular products that go through a repetitive cycle of popularity, lost popularity, and regained popularity, repeating the cycle again.
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Horizontal marketing
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market that exists for an organizational product when it is purchased by all types of firms in many different industries.
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Marketing-manager system
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type of product management system popular in organizations with a line of similar products or one dominant line. One person is responsible for overseeing the entire product line with all of the functional areas of marketing such as research, advertising, sales promotion, sales, and produc…
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Multibranding
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a strategy that assigns different brand names to each product. the organization makes a conscious decision to allow the products to succeed or fail on their own merit.
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Product adoption and diffusion
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the spread of a product through the population; encompasses five stages of adopters: innovators, early adopters, early majority, late majority, and laggards
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Product life cycle
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the concept that many products go through a cycle; that is, they are introduced, grow, mature, and decline. While the cycle varies according to industry, product, technology, and market, it is a valuable aid in developing product and marketing strategies
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Product mix depth v. width
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- depth: average number of products in each product line
- width: number of individual product lines offered by the organization
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Quality
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the degree of excellence or superiority that an organization's product or service possesses. it can encompass both the tangible and intangible aspects of the product or service.
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Value
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encompasses not only quality but also price. It is what the customer gets for what the customer gives
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Vertical market
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market for organizational products that have a limited number of buyers. it is narrow because customers are restricted to a few industries and it is deep in that a large percentage of the producers in the market use the product.
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Commercialization
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stage of the new product development process that involves the actual launch of the product and the implementation of the marketing strategy.
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Diversification
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a strategy that seeks to develop new products and cultivate new customers. it often leads the organization into new businesses, sometimes through acquisition.
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Idea generation
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stage of the new product development process which the goal is to ensure that all new product ideas considered by the organization have to opportunity to be heard and evaluated because the success of the process will depend greatly on the quality of the ideas.
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Idea screening
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evaluation of an idea based on strategic risk, market risk, and internal risk for the purpose of eliminating ideas that could not be profitably marketed and expanding viable ideas into full product concepts.
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Market development
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a strategy that seeks to find new customers for existing product. an organization pursuing this strategy seeks to establish footholds in new markets or preempt competition in emerging market segments.
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Market penetration
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a strategy that denotes a growth direction through the increase in market share of present products in present markets. an organization pursuing this strategy hopes to capitalize on existing markets and combat competitive entry or incursions.
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New product development process
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1. idea generation
2. idea screening
3. project planning
4. product development
5. test marketing
6. commercialization
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product development
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a strategy that seeks to create new products to replace existing ones. an organization pursuing this strategy hopes to capitalize on existing markets and combat competitive entry or incursions
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product development stage
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stage of the new product development in which the product idea has met all expectations and is considered a candidate for further research and testing. in the laboratory, the product is converted into a finished good and tested.
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project planning
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stage of the new product development process at which the idea is evaluated further and responsibility for the project is assigned to a project team. the idea is evaluated in terms of production, marketing, financial and competitive factors. a development budget is established and prelimi…
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Rugby or relay
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an approach to creating and managing product development teams that involves groups in different areas of the organization working simultaneously on the project
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Skunkworks
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an approach to creating and managing product development teams that involves team members working in relative privacy, away from the rest of the organization
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test marketing
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stage of the new product development process at which the product is no longer a company secret. test marketing is a controlled experiment in a limited geographical area to test the new product as well as elements of the marketing mix
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time to market
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the elapsed time between product definition and product availability. it is important because history has shown that organizations that are first in bringing their product to market often gain a competitive advantage in terms of profit and market share
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Bundle pricing
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a form of psychological pricing that involves selling several products together at a single price in order to suggest a good value
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Cost-plus pricing
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cost-oriented pricing approach that involves totaling up the costs of producing a product or completing a project and then adding on a percentage or fixed profit amount. This approach is used when costs are difficult to estimate in advance.
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Deceptive pricing
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illegal under the FTC Act, an approach that involves price deals that mislead the consumer.
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Going-rate pricing
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pricing a product at the average charged in the industry
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Markup pricing
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a cost-oriented pricing approach that involves adding a percentage to the invoice price in order to determine the final selling price
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Odd pricing
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a form of psychological pricing in which the prices are set at one or a few cents or dollars below a round number in order to create the perception that the price is set low
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Penetration pricing policy
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approach to pricing in which the seller charges a relatively low price on a new product initially in order to grow a market, gain market share and discourage competition from entering the market
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Prestige pricing
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a form of psychological pricing that involves charging a high price to create a signal that the product is exceptionally fine
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predatory pricing
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practice that involves charging a very low price for a product with the intent on diving competitors out of business - this is illegal
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price discrimination
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the practice of charging different prices to different buyers for good of like grade and quality, which is illegal if it lessens or is deemed injurious for competition.
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price elasticity
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a measure of consumers' price sensitivity which is estimated by dividing relative changes in the quantity sold by relative changes in price
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price fixing
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an unfair and illegal business practice that involves competitors in a market colluding to set the final price of a product
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Promotional allowance
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price reduction offered to channel members in exchange for performing various promotional activities such as featuring the product in store advertising or on in-store displays
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rate-of-return pricing
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cost-oriented approach to pricing that involves adding a desired rate of return on investment to total costs. generally a break even analysis is performed for expected production and sales levels and a rate of return is added on
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sealed-bid pricing
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bidding process in which each seller submits a sealed bid and attempts to price below competition in order to get the contract
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skimming price policy
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the seller charges a relatively high price on a new product initially in order to recover costs and make profits rapidly and the lowers the price at a later date to makes sales to more price-sensitive buyers
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slotting allowances
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payments to retailers to get them to stock items on their shelves
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Value pricing
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setting prices so that targeted customers will perceive products to offer greater value than competitive offerings
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Study Guide: Exam 1