(3.4) Selected marketing mix strategies Flashcards
Define perceived quality
Customers’ perceptions of the overall quality or superiority of a product or service compared with alternatives and with respect to the intended purpose
What are the dimensions of perceived quality?
Primary ingredients, supplementary features, product reliability, durability, serviceability, style and design
What is the relation between objective and perceived quality?
- Objective changes do not result in quick changes in perceived
- Effects are larger and quicker for a decrease than for an increase in quality
- Brand reputation speeds up perceived quality rewards and slows down perceived quality punishments
- Critics: quality is never objective
Why is the post purchase a second moment of truth?
Actual product experience conveys the most favorable associations –> after marketing becomes more important
- Word of mouth
- Defection
- Repeat purchase
- Cross buying
What are known tools for quality perceptiongs and strong ties with customers?
- User manuals
- Customer service programs
- Loyalty programs
Explain why user manuals are good for perceived quality
It describes basicly what the product can do, and how consumers can realize it at the fullest
» today; augment offline manuals with online and multimedia formats and extensions
Explain why customer service programs are good for perceived quality
= call centers, online chat bots, brand communities
> Connecting, valuable feedback, cross-selling, up-selling, increased profitability
Bad customer service is the worst negative publicity»_space; think of firestorms!
Explain why loyalty programs are good for perceived quality
= increasing the yield of “best” customers through a long term, interactive, value-added relation
> Idea = reward for buying a lot
(+) Integration into e-commerce transactions, increase of retention, creating switching costs, reduction of price competition, access to valuable consumer data
(-) High cost, competition by me-too programs, self-selection effects because members would maybe be loyal anyway
Why is pricing important?
For profit, pricing is a profit driver
5% increase in pricing can reach until 50% improvement in profit
What are the 5 fundamental price positions?
1) Ultra low price
2) Low price
3) Medium price
4) Premium price
5) Luxury
Explain the ultra low price concept
Radical simplification - bare minimum is included, so far only successful in emerging markets
» Nano car
Explain the low price concept
Focus on sufficient functional for low price, minimal distribution costs, abandonment of most services, communication puts price central
» IKEA, Ryanair
Explain the medium price concept
Performance and price at market average, usage of product and price differentiation, limited price promotions, usage of various distribution channels, communcation focusses more on product performance
» Siemens, Bosch, ZARA
Explain the premium price concept
High functional performance! But also emotional, symbolic and ethical appeal, high relative price signals lasting value and continuity, selective distribution, communication focusses on the emotional part
» Mercedes, Lavazza
Explain the luxury concept
High dept of value creation, manual work, long brand history, price is status symbol, limited editions, exclusive distribution and communication, personalization,value-added services, perfection!
» Rolls Royce
What are 3 famous price-related strategies?
- Value pricing
- Everyday low pricing
- Razor-and-blades pricing strategies
Explain the value pricing strategy
= company sets its product or service prices primarily based on the perceived value to the customer rather than on the cost of the product or historical prices
> value for C: product quality / product price
> value for F: product price / product costs
» method only works when value C is positive and larger than value F because the firm has to earn a decent profit
» necessary parallels: communicating value, price segmentation
Explain everyday low pricing
Normal price discounts have negative effects: high sales needed to compensate profit loss & discount price could be new reference price
> Everyday low princing prevent those negative price spirals – consistent low prices are valuable in competition, reduces manufactureing and inventory costs
> More steady revenue stream, avoid an inconsistent supply chain
Explain the razor-and-blades pricing strategy
Selling the core, durable product component at a very low price, selling the additional, nondurable product components at a rather high price
= locked-in situation, high swithcing cost»_space; brand loyalty but also customer frustration
Give examples of direct sales channels
- Stores
- Pop ups
- Store-in-store
- Online store
Give examples of indirect sales channels
- Pull and push strategies
- Retail segmentation
- Cooperative advertising
What is the objective of a distribution strategy?
Optimize customer experience across all channels and performance over all channels
When are direct channels more beneficial?
- Product = customized and complex
- Demand = concentrated on small number of customers
- Monetary value of product is large
- Establishing close relations is warranted
- If sales activities should be monitored strongly
- Extra costs are blocked
Why are direct sales channels interrupted?
Internet has forced brand to re-evaluate the channels in terms of transaction costs
Evaluate company owned stores and pop up stores
(+) control over selling, showing dept of product range, experience boosts brand equity
(-) lacking skills, resources and contacts to operate as retailer, potential conflict with channel partners
Evaluate stores-in-stores
(+) appeasing retailers, retain control over product presentation, quick distribution growth, upgrading the image for established retailers
(-) smaller assortment than in company-owned store
Evaluate online stores
(+) shopping where and when customers want, allowing cross-channel synergies, data about consumers
(-) returns: decrease margins and ecological problem
What are pull and push strategies?
- Pull = marketing efforts to consumers who demand that retailers stock the brands product
- Push = providing direct incentives for retailers to stock and sell products to end consumers
» Optimal = blending pull and push
Explain retail segmentation
Retailers are also customers: segmentation or individual treatment is needed
> Different product mixes
> Special delivery systems
> Customized promotions
> Own branded versions of products
Explain cooperative advertising
= manufacturer pays for a portion of the advertising that a retailer runs to promote the manufacturer’s product
» share is mostly 50/50
» rationale? concentrating some communication on local level where relevance and selling impact is the greatest
What does empirics say about distribution?
That the branding power of distribution shouldn’t be underestimated!
Explain the problem of the large box of marketing communication options
It is highly complicated in terms of integration and in terms of deciding about communication budget allocation
What is the biggest difference between EU and US in terms of advertising spending?
Covid: devline in advertising spending in Europe, not in the US
What are the different kinds of online communication?
- Paid = social media, emails, influencers, ..
- Owned = website, owned sociale media, mobile apps
- Earned = reviews, public relations, media coverage
What is the aim of the most digital communication activities?
Increasing brand engagement > cognitive, emotional and behavioral investment in brand interaction
What do sales elasticities learn us?
Price remains very important.
In terms of communication: personal selling and word of mouth (even online) are very important.
Explain the information processing model
Change consumer behavior is very difficult
Funnel: Exposure > Attention > Comprehension > Yielding > Intentions > Behavior
Conversion rate to get down = 1.56%
What are criteria for integrated marketing communication programs?
- Coverage = proportion of audience reached, how much overlap in existing options
- Contribution = inherent ability to create desired consumer response
- Commonality = extent to which common info conveyed by different comm options shares meaning acrosss comm options
- Compelemtarity = extent to which different associations and linkages are emphasized across communication options»_space; interaction effects
- Conformability = extent that a mark comm option is robust and effective for different groups of consumers
- Cost = efficiency and effeciveness
How is dynamic, optimal communication budget allocation across products and countries discussed in empirics?
Optimal allocation is often more relevant than an optimal overall budget.
Empirical context: pharmaceutical marketing
> Physician oriented: detailing, ads, others
> Patient oriented: direct to consumer, below the line activities, ..
We make this a maximization problem!
Creates an optimal allocation weight & another heuristic sollution SEE SLIDES
