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BAM 620: Strategic Marketing > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

Marketing Program

A

Strategic Combination of 4 Basic Mix Elements:

  1. Product
  2. Price
  3. Promotion
  4. Distribution (Place)
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2
Q

*Best Marketing Strategy

A

*Combination of product, price, distribution and promotion that maximizes

  1. tangible
  2. intangible and
  3. perceptual

attributes of the complete offering to satisfy customers’ needs and wants.

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3
Q

Product

A

Something that buyers can acquire via exchange to satisfy a need or want.

Receives the most attention in the marketing program because it fulfills needs and wants.

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4
Q

*Real Value of Offering

A
  • Ability to deliver benefits that
    1. Enhances a customer’s situation or
    3. Solves a problem.
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5
Q

Types of Consumer Products

A
  1. Convenience Products
  2. Shopping Products
  3. Specialty Products
  4. Unsought Products
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6
Q

Types of Business Products

A
  1. Raw Materials
  2. Component Parts
  3. Process Materials
  4. Maintenance, Repair, and Operating Products
  5. Accessory Equipment
  6. Installations
  7. Business Services
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7
Q

Convenience Products

A

Inexpensive, routinely purchased products

Little time and effort spent in acquiring

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8
Q

Shopping Products

A

Prices, features, services are compared

Time and effort spent to acquire.

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9
Q

Specialty Products

A

One-of-a-kind

Considerable time, effort and money to acquire.

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10
Q

Unsought Products

A

Unaware of by consumers

Do not consider buying until need arises

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11
Q

Raw Materials

A

Become part of a finished product

Purchased in large quantities

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12
Q

Component Parts

A

Finished items that become part of finished product

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13
Q

Process Material

A

Finished products that become unidentifiable upon inclusion in the product

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14
Q

Maintenance, Repair and Operating Products

A

Used in the business process but do not become part of the product

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15
Q

Accessory Equipment

A

Facilitates production but does not become part of the product

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16
Q

Installations

A

Major purchase

Customized solution includes physical nature, construction, training, financing, maintenance and repair

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17
Q

Business Services

A

Intangible support of business operations

Occur often as part of outsourcing

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18
Q

*Product Line

A

*A group of closely related product items

I.E. P&G’s Household Care Products (Tide, Bounty, Duracell)

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19
Q

Product Mix (Product Portfolio)

A

The total group of products offered by the company

I.E. P&G’s Beauty and Grooming, Health and Wellness, Baby and Family, Pet Nutrition and Care, and Household Care

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20
Q

Product Assortment (Depth)

A

Different brands or products are used to fulfill different customer needs

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21
Q

Benefits of Large Portfolio of Products

A
  1. Economies of Scale
  2. Package Uniformity
  3. Standardization
  4. Equivalent Quality Beliefs
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22
Q

Portfolio Economies of Scale

A

Single themes that cover entire product lines saves on promotion expenses

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23
Q

*Portfolio Package Uniformity

A

*Easier to coordinate promotion and distribution

Customers can more easily locate products with same packaging look and feel

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24
Q

Portfolio Standardization

A

Product lines use the same component parts to reduce costs (inventory and handling)

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25
Q

Portfolio Sales and Distribution Efficiency

A

Sales personnel can offer the full range of choices and options to customers

Channel intermediaries are more accepting

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26
Q

Portfolio Equivalent Quality Beliefs

A

Customers believe all products are of same quality and performance

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27
Q

*Challenges of Service Products

A
    1. Balancing supply with demand
      1. Time and place dependent - customers must be present
      2. Difficult to evaluate quality prior to purchase
      3. Inconsistent delivery

Cannot be stored for future use
Differ from products which are tangible

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28
Q

*Unique Characteristics of Services

A
    1. Intangibility
      1. Simultaneous Production and Consumption
      2. Perishability
      3. Heterogeneity
      4. Client-Based Relationships
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29
Q

Service Intangibility

A
  1. Customers cannot evaluate quality before purchase
  2. Communicating benefits is difficult - firm must sell a promise
  3. Prices are difficult to set and justify
  4. No transfer of possession
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30
Q

Service Simultaneous Production and Consumption

A
  1. Customers must be present during delivery
  2. Other customers can impact quality
  3. Employees are critical to delivery
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31
Q

Service Perishability

A
  1. Cannot be inventoried for later use
  2. Demand is time and place sensitive
  3. Facilities sit idle during off-peak demand
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32
Q

Service Heterogeneity

A
  1. Quality varies across people, time and place - difficult to deliver consistency
  2. Customization can dramatically impact costs
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33
Q

Service Client-Based Relationships

A
  1. Clientele must be satisfied over the long-term

2. Repeat business is critical to success

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34
Q

*Six Strategic Options for Product Newness

A
  1. New-to-the-World (Discontinuous Innovations)
  2. New Product Lines
  3. Product Line Extensions
  4. Improvements or Revisions of Existing Products
    * 5. Repositioning
  5. Cost Reductions

*Customer perception of newness is critical

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35
Q

*Product Development Process

A
  1. Idea Generation
  2. Screening and Evaluation
  3. Development
    * 4. Test Marketing
  4. Commercialization
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36
Q

Easiest Marketing Variable to Change

A

Price

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37
Q

*Key Issues in Pricing Strategy

A
  1. Firm’s Cost Structure
    * 2. Perceived Value
  2. Price/Revenue Relationship
  3. Pricing Objectives
  4. Price Elasticity
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38
Q

Breakeven Pricing

A

Breakeven Units = Total Fixed Costs / (Unit Price - Unit Variable Costs)

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39
Q

Cost-Plus Pricing

A

Selling Price = Average Unit Cost / (1 - Markup Percent)

  1. Intuitive and easy to use
  2. Difficult sometimes to determine markup price
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40
Q

*Perceived Value

A

Customer’s subjective evaluation of benefits relative to costs relative to other product offerings

*Perceived Value = Customer Benefits / Customer Costs

Costs include money, time, effort and opportunity costs

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41
Q

Myths of Price Cutting

A
  1. When business is good, price cuts capture greater market share
  2. When business is bad, price cuts stimulate sales

Can move excess inventory and generate short-term cash flow. However, the bottom line is impacted.

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42
Q

Substitutes for Price Cuts

A
  1. Find ways to build value

2. Justify current price (or higher price)

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43
Q

Pricing Objectives

A
  1. Realistic, measurable, and attainable

2. Money is made off profit margin, volume or some combination of the two

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44
Q

*Price Elasticity

A

*Customers’ sensitivity to change in price

Relative impact on the demand given specific changes in price

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45
Q

Situations for Higher Price Elasticity

A
  1. Availability of Substitute Products
  2. Higher Total Expenditure
  3. Noticeable Price Differences
  4. Easy Price Comparisons
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46
Q

Situations for Lower Price Elasticity

A
  1. Lack of Substitutes
  2. Real or Perceived Necessities
  3. Complementary Products
  4. Perceived Product Benefits
  5. Situational Influences
  6. Product Differentiation
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47
Q

Common Pricing Objectives

A
  1. Profit-Oriented
  2. Volume-Oriented
  3. Market Demand
  4. Market Share
  5. Cash Flow
  6. Competitive Matching
  7. Prestige
  8. Status Quo
48
Q

Best Approach to Ensure Low Price Elasticity

A

Product Differentiation

Based on either real or perceived differences

49
Q

Brand Loyalty

A

When customers will not make a purchase when in need and in the presence of substitutes when specific product is not available

Demand becomes inelastic

50
Q

Yield Management

A

Allows firm to

  1. Simultaneously control capacity and demand to maximize revenue and utilization
  2. Offer same basic service to different market segments at different price points

Common in services with high fixed costs and low variable costs - profits are driven by sales and utilization

51
Q

*Base Pricing Strategies

A
  1. Price Skimming
  2. Price Penetration
    * 3. Prestige Pricing
  3. Value-Based Pricing (EDLP)
    * 5. Competitive Matching
  4. Non-Price Strategies
52
Q

*Adjusting the Base Price

Consumer Markets

A
  1. Discounting
  2. Reference Pricing
  3. Price Lining
    * 4. Odd Pricing
    * 5. Price Bundling
53
Q

Adjusting the Base Price

Business Markets

A
  1. Trade Discounts
  2. Discounts and Allowances
  3. Geographic Pricing
  4. Transfer Pricing
  5. Barter and Countertrade
54
Q

Price Skimming

Base Pricing Strategies

A

Initial high sales prices then reduced

  1. Recovers high R&D costs
  2. Skims profits early
55
Q

Price Penetration

Base Pricing Strategies

A

With low initial price designed to:

  1. Maximize Sales
  2. Gain Market Acceptance
  3. Capture Large Market Share

Works best when:

  1. Customers who are price sensitive
  2. R&D and Marketing expenses are low
  3. New competitors will enter market

Firm must have cost structure and economies of scale that can sustain narrow profit margins

56
Q

Prestige Pricing

Base Pricing Strategies

A

Promotes image of exclusivity and superior quality

Used in situations where hard to judge true value

57
Q

Value-Based Pricing (EDLP)

Base Pricing Strategies

A

Reasonably low prices, with high quality products and adequate customer services

ELDP = Every Day Low Prices

58
Q

Competitive Matching

Base Pricing Strategies

A

Firm will match competitor’s price

59
Q

Non-Price Strategies

Base Pricing Strategies

A

Emphasis on quality, benefits and unique features

Best used with unique products like Disney World, Sea World, etc…

60
Q

Discounting

Pricing Technique

A

Temporary price reduction to stimulate sales or store traffic.

61
Q

Reference Pricing

Pricing Techniques

A

Comparison of actual selling price to and internal or external reference price.

Makes customer price judgement easier.

62
Q

Price Lining

Pricing Techniques

A

Some customers will buy the lowest or highest price.

Lines of products at different price points (varying features) captures full market.

63
Q

Odd Pricing

Pricing Techniques

A

Based on psychology - customers believe the seller reduced the price as much as possible

64
Q

Price Bundling

Pricing Techniques

A

Brings together two or more complementary products

Bundled price is less than if two products were sold separately

Slow moving items can be bundled with hot items

65
Q

Trade Discounts

Pricing Techniques

A

Manufacturers reduce prices for certain intermediaries in the supply chain based on their function.

I.E. wholesalers receive greater discounts than retailers

66
Q

Discounts and Allowances

Pricing Techniques

A

Business buyer discounts for cash, quantity or bulk, seasonal, or trade for advertising and support

67
Q

Geographic Pricing

Pricing Techniques

A

Cost differences due to delivery location and costs

Leads to uniform delivered pricing and zone pricing

68
Q

Transfer Pricing

Pricing Techniques

A

One unit of an organization selling to another unit of the organization

69
Q

Barter and Countertrade

Pricing Techniques

A

Barter occurs across national boundaries using products instead of cash

Countertrade occurs with agreements to buy goods and services from eachother

70
Q

2 Components of Supply Chain Management

A
  1. Marketing Channels

2. Physical Distribution

71
Q

Marketing Channels

A

An organized system where products, resources, information, funds flow from the point of production to the final user

72
Q

Physical Distribution

A

Concerned with getting the product to the right place at the right time in the right quantity in a cost effective manner

73
Q

The Linchpin of Effective Supply Chain Management

A

Integration

74
Q

Supply Chain Goal

A

Providing time, place and possession utility for consumer and business buyers.

75
Q

Functions of Channel Intermediaries

A
  1. Sorting
  2. Breaking Bulk
  3. Maintaining Inventories
  4. Maintaining Convenient Locations
  5. Provide Services
76
Q

Marketing Channel Structure

A
  1. Exclusive Distribution
  2. Selective Distribution
  3. Intensive Distribution
77
Q

5 Sources of Power in the Supply Chain

A
  1. Legitimate Power
  2. Reward Power
  3. Coercive Power
  4. Information Power
  5. Referent Power
78
Q

Most Important Source of Power In Supply Chain

A

Information Power

79
Q

Impact of Technology Improvements on Sales

eCommerce then and now in manufacturing

A

eCommerce accounted for in the manufacturing sector:

2002 - 46% of sales

80
Q

Impacts of RFID at Walmart

A

16% Reduction in Stockouts

67% Reduction in Replenishment Times

81
Q

Downsides of Outsourcing

A
  1. Lost control of data security

2. Quality delivered to customers

82
Q

Nontraditional Forms of Direct Distribution

A
  1. Catalog and Direct Marketing
  2. Direct Selling
  3. Home Shopping Network
  4. Vending
  5. Direct Response Advertising
83
Q

*Integrated Marketing Communication (IMC)

A

Strategic, coordinated use of promotion to create one consistent message across multiple channels to ensure maximum persuasive impact.

Used to convey an image of truly knowing and caring about their customers translating into long term relationships.

*Importance: long term relationships, reduces redundancies, technology allows for better targeting

84
Q

AIDA Model

A
  1. Attention
    - Attract attention of potential customers
  2. Interest
    - Spark interest by demonstrating features, uses and benefits
  3. Desire
    - Stimulate desire by convincing customers of ability to satisfy needs and superiority
  4. Action
    - Promotion must push customers to actual sale
85
Q

Pull Strategy

Promotional Goals

A

Demand must be stimulated among final customers to exert pressure on the supply chain to carry a product.

Heavy advertising, public relations, and consumer sales promotion

86
Q

Push Strategy

Promotional Goals

A

Promotion is focused on supply chain for them to sell the product

Relies on personal selling and trade sales promotions

87
Q

Advertising

A

Paid, non-personal communication transmitted through media such as television, radio, magazines, newspapers, direct mail, outdoor displays, the internet and mobile devices.

88
Q

Most Rapidly Changing Marketing Statistic/Demographic

A

Hispanics wield $1-trillion in buying power - a number expected to increase to $1.5-trillion by 2015.

Hispanics account for 11% of total buying power in US

89
Q

Average Production Cost of Advertising Spot (30-sec)

A

$400,000

90
Q

Trademark Law Revision Act

A

Marketers using comparative advertising must ensure they do not misrepresent the characteristics of competing products.

91
Q

Goal of Public Relations

A

Track public attitudes, identify issues that may elicit concern, and maintain positive relationships between a firm and its stakeholders.

92
Q

Publicity

A

Part of public relations that includes activities designed to gain media attention through articles, editorials or news stories.

93
Q

6 Public Relations and Publicity Efforts

A
  1. News Releases
  2. Feature Articles
  3. White Papers
  4. Press Conferences
  5. Event Sponsorship
  6. Employee Relations
94
Q

Major Drawback of Public Relations Activities

A

Firms have much less control over how the message is delivered.

Media personnel may insert their own opinions.

Time and effort may be spent on messages that fail to attract attention.

95
Q

Personal Selling

A

Paid personal communication that attempts to inform customers about products and persuade them to purchase those products.

96
Q

Most Serious Drawback of Personal Selling

A

Cost per Contact

97
Q

Goals of Personal Selling

A
  1. Finding Prospects
  2. Informing Prospects
  3. Persuading Prospects to Buy
  4. Keep customers satisfied
98
Q

Attributes of Salespeople

A
  1. Closer to the Customer - More Opportunities for Communication
  2. Can learn about competing products
  3. Knowledge is a strength that can be leveraged in the marketing strategy
99
Q

Strategic Implementation of Sales Management

A
  1. Developing Sales Force Objectives
  2. Determining Sales Force Size
  3. Recruiting and Training Salespeople
  4. Controlling and Evaluating the Sales Force
100
Q

Developing Sales Force Objectives

Strategic Implementation

A
  1. Should involve desired sales dollars, volume or market share
  2. Can be used for guidelines and quotas
  3. Ultimately help evaluate and control activities
101
Q

Determining Sales Force Size

Strategic Implementation

A

A balance must be found between sales expenses and revenue generation.

A sales force that is too large/small can lead to inflated expenses or lost sales.

102
Q

Recruiting and Training Salespeople

Strategic Implementation

A

New sales people must be continually available to sustain the program.

Types of people must be tied to the IMC strategy

103
Q

Controlling and Evaluating the Sales Force

Strategic Implementation

A

Used to compare sales objectives with actual sales performance

Used to determine conpensation

104
Q

Key to Using Sales Technology

A

Seamlessly integrate it with customer relationship management systems, competitive intelligence activities and internal customer databases.

105
Q

Sales Force Compensation Methods

A
  1. Straight Salary
  2. Straight Commission
  3. Combination (Salary/Commission)
106
Q

Sales Promotion

A

Usually accounts for bulk of promotional spending (up to 70%)

One universal goal: Induce Product Trial and Purchase

107
Q

8 Customer Sales Promotions

A
  1. Coupons
  2. Rebates
  3. Samples
  4. Loyalty Programs
  5. Point-of-Purchase Promotion
  6. Premiums
  7. Contests and Sweepstakes
  8. Direct Mail
108
Q

Coupons

A

Reduce the price of a product and encourage customers to try new or established products

109
Q

Rebates

A

Similar to coupons, require more effort on the customer’s part to obtain the price reduction

110
Q

Samples

A

Stimulate trial of a product to increase volume in early states of the life cycle and encourage active search for the product

111
Q

Premiums

A

Items offered for free or at a minimum costs as a bonus for purchasing another product.

112
Q

Direct Mail

A

Targets individual customers incorporating advertising, sales promotion and distribution.

Has grown tremendously due to consumer time constraints, low costs and new database management tools.

113
Q

4 Business Sales Promotions

A
  1. Trade Allowances
  2. Free Merchandise
  3. Cooperative Advertising
  4. Training Assistance and Sales Incentives
114
Q

Trade Allowances Goal

A

To induce intermediaries to perform specific actions

115
Q

Free Merchandise Goal

A

Reduce invoice costs as a way of compensating intermediaries for other activities that assist the manufacturer

116
Q

Cooperative Advertising

A

Arrangement where manufacture agrees to pay some of an intermediaries media costs

117
Q

*Pricing Strategy

A
  1. Key factor in producing revenue
  2. Easiest of all marketing variables to change
  3. Important consideration in competitive intelligence
    * 4. Is considered to be the only real means of differentiation in commoditized markets

BAM 620: Strategic Marketing (9 decks)

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