Final Flashcards
Marketing
The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
4 Eras in the evolution of marketing in the US
- Production
- Sales
- Marketing Concept
- Customer Relationship
The Marketing Concept Era
Fierce competition during post war baby boom. Businesses recognized they needed to be responsive to consumers if they wanted their business. Had 3 parts:
- A customer orientation: find out what consumers want
- A service orientation: Customer satisfaction should be a total and integrated organizational effort
- A profit orientation: Focus on those goods and services that will earn the most profit
CRM
Customer Relationship Management: The process of learning as much about customers and doing everything you can to satisfy them—or even exceed their expectations—with goods and services
The Customer Relationship Era
1990s and early 2000s managers adopted CRM
The Marketing Mix
The ingredients that go into a marketing program.
- Product – designing a want-satisfying product
- Price – choose a price that gives you a good profit margin and choose a price that fits your target market
- Place – putting the product where people will buy it; includes physical distribution
- Promotion - jumpstarts consumer interest
Value
Good quality at a fair price. Benefits minus cost = benefits exceed the cost
Total Product Offer
Everything that consumers evaluate when deciding whether to buy something; AKA value package.
Product + value enhancers (see fig. 14.1)
A successful marketer must begin to think like a consumer and evaluate the total product offer as a collection of impressions created by all the factors listed in 14.1
Convenience Goods and Services
Products the consumer wants to purchase frequently and with a minimum of effort (e.g. candy, gum)
Shopping goods and services
Those products that the consumer buys only after comparing value, quality, price, and style from a variety of sellers.
Specialty goods and services
Consumer products with unique characteristics and brand identity. Because these products are perceived as having no reasonable substitute, the consumer puts forth a special effort to purchase them.
Unsought goods and services
Products that consumers are unaware of, haven’t necessarily thought of buying, or find that they need to solve an unexpected problem
Brand
A name, symbol, design (or combination thereof) that identifies the goods or services of one seller or group of sellers and distinguishes them from the goods and services of competitors.
Brand equity
The value of the brand name and associated symbols
Brand loyalty
The degree to which customers are satisfied, like the brand and are committed to further purchases
Brand Awareness
How quickly or easily a given brand name comes to mind when a product category is mentioned
Sells products without effort or expenditure
Factors affecting the perception of quality:
- Price
- Appearance
- Reputation
Product Life Cycle
A theoretical model of what happens to sales and profits for a product class over time. 4 stages:
- Introduction
- Growth - profit peaks
- Maturity - competition causes profit margins to decrease
- Decline - can raise prices because of less competition and can spend less on advertising
The Traditional Promotion Mix
The combination of promotional tools an organization uses.
- Advertising
- Personal Selling
- Public relations
- Sales promotion
Promotion
All the techniques sellers use to inform people about and motivate them to buy their products or services. Includes:
In addition to the traditional promotion mix it includes publicity, word of mouth (viral marketing) and various sales promotion efforts such as coupons, rebates, samples and cents-off deals
IMC
Integrated Marketing Communication – a technique that combines the promotional tools into one comprehensive, unified promotional strategy
in other words: using the same theme again and again across all of the promotional tools
Advertising
Paid, nonpersonal communication through various media by organizations and individuals who are in some way identified in the advertising message
Public Relations
The management function that evaluates public attitudes, changes policy and procedures in response to the publics’ requests, and executes a program of action and information to earn public understanding and acceptance
Publicity
The talking arm of PR. Any information about an individual, product, or organization that’s distributed to the public through the media and that’s not paid for or controlled by the seller
Sales promotion
The promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities
Accounting
The recording, classifying, summarizing and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions
5 key working areas in the accounting profession
- managerial accounting
- financial accounting
- auditing
- tax accounting
- governmental/non-for-profit
CPA
Certified public accountant – An accountant who passes a series of examinations established by the American Institute of Certified Public Accountants
Services can include designing and accounting system, helping select the correct software to run the system, and analyzing an organization’s financial performance
Managerial accounting
Accounting used to provide information and analyses to managers inside the organization to assist them in decision making
Auditing
The job of reviewing and evaluating the information used to prepare a company’s financial statements.
Tax accountant
An accountant trained in tax law and responsible for preparing tax return or developing tax strategies
government and not-for-profit accounting
Accounting system for organizations whose purpose is not generating revenue but serving ratepayers, taxpayers, and others according to a duly approved budget
Financial accounting
Accounting information and analyses prepared for people outside the organization
Balance sheet
Financial statement that reports a firm’s financial condition at a specific time and is composed of 3 major accounts:
- Assets
- Liabilities
- Owners’ equity
Income statement
The financial statement that shows a firm’s profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm (expenses), and the resulting net income or net loss
Statement of Cash Flows
Financial statement that reports cash receipts and disbursements related to a firm’s 3 major activities:
- Operations
- Investments
- Financing
Liquidity ratios
measure a company’s ability to turn assets into cash to pay its short-term debts (liabilities that must be repaid within one year). 2 key liquidity ratios:
- Current ratio
- acid-test or quick ratio
Investment bankers
Specialists who assist in the issue and sale of new securities
Bond
A corporate certificate indicating that a person has lent money to a firm (or a government)
2 types: debenture (unsecure) and mortgage (secure)
Usually issued in units of $1,000
Bond prices generally fluctuate inversely with current market interest rates
Advantages:
- Bondholders are creditors of the firm, not owners. Management maintains control over the firm’s operations
- Bond interest is a business expense and tax-deductible to the firm
- Bonds are a temporary source of funding, They’re eventually repaid and the debt obligation is eliminated
- Bonds can be repaid before the maturity date if they contain a call provision. They can also be converted to common stock
Disadvantages:
- Bonds increase debt and may adversely affect the market’s perception of the firm
- Paying interest on bonds is a legal obligation.
- The face value of the bond must be repaid by the maturity date. Without careful planning this obligation can cause cash flow problems
NYSE
New York Stock Exchange – founded in 1972 and was a primarily a floor-based exchange. Merged with Archipelago in 2005. Merged with Euronext in 2007 and became NYSE Euronext. Acquired by Deutsche Borse AG of Germany in 2011
NASDAQ
National Association of Securities Dealers Automated Quotations – was the world’s first electronic stock market. In 2007 the NASDAQ purchased the Swedish OMX group and is now the NASDAQ ONX Group, which is the largest US electronic stock trading market and has more trading than any E-exchange in the world
Mutual Fund
An organization that buys stocks and bonds and then sells shares in those securities to the public
they offer small investors a way to spread the risk of stock and bond ownership and have their investments managed by a financial specialist for a fee
Leverage (Debt) Ratios
measure the degree to which a firm relies on borrowed funds in its operations.
Total liabilities ÷ Owner’s equity = %
Profitable (Performance) Ratios
measure how effectively a firm’s managers are using its various resources to achieve profits. 3 of the more important ratios are earnings per share (EPS), return on sales and return on equity
EPS
Earnings per Share
Basic earnings per share = net income after taxes ÷ number of common stock shares outstanding
Return on Sales
tells whether the firm is doing as well as its competitors in generating income from sales.
ROS = net income ÷ net sales
Return on equity
ROE = net income after tax ÷ total owners’ equity
Fundamental Accounting Equation
Assets = Liabilities + owner’s equity
In accounting this equation must always be balanced
Equity
Assets minus liabilities
Current ratio
the ratio of a firm’s current assets to its current liabilities
current assets ÷ current liabilities
acid-test or quick ratio
measures the cash, marketable securities (such as stocks and bonds) and receivables of a firm, compared to its current liabilities
cash + accounts receivable + marketable securities ÷ current liabilities
Stocks
Shares of ownership in a company
2 types: common and preferred
Advantages to firms who issue stock:
- Stockholders never have to be repaid their investment
- There’s no legal obligation to pay dividends; therefore a firm can reinvest income
- Selling stock can improve the condition of a firm’s balance sheet since issuing stock creates no debt
Disadvantages:
- Stockholders have the right to vote for the board of directors so issuing new shares can alter the control of the firm
- Dividends are paid from profit after taxes and are not tax-deductible
- The need to keep stockholders happy can affect manager’s decisions
Common stock
The most basic form of ownership in a firm; in confers voting rights and the rights to share in the firm’s profits through dividends, if approved by the firm’s board of directors
Preferred stock
Stock that gives its owners preference in the dividends and an earlier claim on assets than common stockholders if the company is forced out business and its assets sold.
Normally do not get voting rights
Sinking fund
Its primary purpose is to ensure that enough money will be available to repay bondholders on the bond’s maturity date.
A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond
Callable bond
permits the issuer to pay off the principal before its maturity date (e.g. the interest rate drops so they call in the bonds and issue new ones at the lower rate)
Convertible bond
can be converted into common stock. If the value of the firm’s common stock grows quickly over time, bondholders can compare the value of continued bond interest earned with the potential profit of a specified number of shares of common stock
Risk/return trade-off
The higher the risk of a bond, the higher the interest rate an issuer must offer
Junk bonds
High risk, high interest bonds
