(3.4) Selected marketing mix strategies

Question 1

Define perceived quality

Answer 1

Customers’ perceptions of the overall quality or superiority of a product or service compared with alternatives and with respect to the intended purpose

Question 2

What are the dimensions of perceived quality?

Answer 2

Primary ingredients, supplementary features, product reliability, durability, serviceability, style and design

Question 3

What is the relation between objective and perceived quality?

Answer 3

• 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

Question 4

Why is the post purchase a second moment of truth?

Answer 4

Actual product experience conveys the most favorable associations –> after marketing becomes more important
- Word of mouth
- Defection
- Repeat purchase
- Cross buying

Question 5

What are known tools for quality perceptiongs and strong ties with customers?

Answer 5

• User manuals
• Customer service programs
• Loyalty programs

Question 6

Explain why user manuals are good for perceived quality

Answer 6

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

Question 7

Explain why customer service programs are good for perceived quality

Answer 7

= call centers, online chat bots, brand communities
> Connecting, valuable feedback, cross-selling, up-selling, increased profitability
Bad customer service is the worst negative publicity&raquo_space; think of firestorms!

Question 8

Explain why loyalty programs are good for perceived quality

Answer 8

= 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

Question 9

Why is pricing important?

Answer 9

For profit, pricing is a profit driver
5% increase in pricing can reach until 50% improvement in profit

Question 10

What are the 5 fundamental price positions?

Answer 10

1) Ultra low price
2) Low price
3) Medium price
4) Premium price
5) Luxury

Question 11

Explain the ultra low price concept

Answer 11

Radical simplification - bare minimum is included, so far only successful in emerging markets
» Nano car

Question 12

Explain the low price concept

Answer 12

Focus on sufficient functional for low price, minimal distribution costs, abandonment of most services, communication puts price central
» IKEA, Ryanair

Question 13

Explain the medium price concept

Answer 13

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

Question 14

Explain the premium price concept

Answer 14

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

Question 15

Explain the luxury concept

Answer 15

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

Question 16

What are 3 famous price-related strategies?

Answer 16

• Value pricing
• Everyday low pricing
• Razor-and-blades pricing strategies

Question 17

Explain the value pricing strategy

Answer 17

= 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

Question 18

Explain everyday low pricing

Answer 18

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

Question 19

Explain the razor-and-blades pricing strategy

Answer 19

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&raquo_space; brand loyalty but also customer frustration

Question 20

Give examples of direct sales channels

Answer 20

• Stores
• Pop ups
• Store-in-store
• Online store

Question 21

Give examples of indirect sales channels

Answer 21

• Pull and push strategies
• Retail segmentation
• Cooperative advertising

Question 22

What is the objective of a distribution strategy?

Answer 22

Optimize customer experience across all channels and performance over all channels

Question 23

When are direct channels more beneficial?

Answer 23

• 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

Question 24

Why are direct sales channels interrupted?

Answer 24

Internet has forced brand to re-evaluate the channels in terms of transaction costs

Question 25

Evaluate company owned stores and pop up stores

Answer 25

(+) 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

Question 26

Evaluate stores-in-stores

Answer 26

(+) appeasing retailers, retain control over product presentation, quick distribution growth, upgrading the image for established retailers
(-) smaller assortment than in company-owned store

Question 27

Evaluate online stores

Answer 27

(+) shopping where and when customers want, allowing cross-channel synergies, data about consumers
(-) returns: decrease margins and ecological problem

Question 28

What are pull and push strategies?

Answer 28

• 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

Question 29

Explain retail segmentation

Answer 29

Retailers are also customers: segmentation or individual treatment is needed
> Different product mixes
> Special delivery systems
> Customized promotions
> Own branded versions of products

Question 30

Explain cooperative advertising

Answer 30

= 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

Question 31

What does empirics say about distribution?

Answer 31

That the branding power of distribution shouldn’t be underestimated!

Question 32

Explain the problem of the large box of marketing communication options

Answer 32

It is highly complicated in terms of integration and in terms of deciding about communication budget allocation

Question 33

What is the biggest difference between EU and US in terms of advertising spending?

Answer 33

Covid: devline in advertising spending in Europe, not in the US

Question 34

What are the different kinds of online communication?

Answer 34

• Paid = social media, emails, influencers, ..
• Owned = website, owned sociale media, mobile apps
• Earned = reviews, public relations, media coverage

Question 35

What is the aim of the most digital communication activities?

Answer 35

Increasing brand engagement > cognitive, emotional and behavioral investment in brand interaction

Question 36

What do sales elasticities learn us?

Answer 36

Price remains very important.
In terms of communication: personal selling and word of mouth (even online) are very important.

Question 37

Explain the information processing model

Answer 37

Change consumer behavior is very difficult
Funnel: Exposure > Attention > Comprehension > Yielding > Intentions > Behavior
Conversion rate to get down = 1.56%

Question 38

What are criteria for integrated marketing communication programs?

Answer 38

• 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&raquo_space; interaction effects
• Conformability = extent that a mark comm option is robust and effective for different groups of consumers
• Cost = efficiency and effeciveness

Question 39

How is dynamic, optimal communication budget allocation across products and countries discussed in empirics?

Answer 39

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