Place Development, Pricing, and Promotion Flashcards
reasons to use direct distrubution
-get better control over the whole marketing job.
- might be able to serve target customers at a lower cost.
Also, wholesalers and retailers with different objectives may not consistently meet the firm’s needs.
-The Internet makes direct distribution easier for many firms. A firm having direct contact with customers ismore aware of changes in customer attitudes.
-Making adjustments is often easier and faster because intermediaries are not involved.
- suitable intermediaries are not available or will not cooperate, so it may be a necessity. Many business products are sold direct to customer.
Place
the part of the marketing mix that deals with making goods and services available in the right quantities and locations when customers want them.
Place objectives
Channel system - direct
direct to customer
channel system - indirect
involving intermediaries.
which channel system to use?
-Direct contact with customers helps a company keep abreast of market changes. Often, this is preferred way of handling place decisions.
-better control over whole marketing job, serve target customers @ lower cost
-wholesalers and retailers maynot have the same objectives as firm
-sometimes suitable intermediaries are not available
-internet makes direct distrubution easier
-direct contact with customers
channel regrouping - accumulating
collecting products from many small producers.
channel regrouping - assorting
putting together a variety of products to give a target market what it wants in a single experience.
channel regrouping - bulk breaking
dividing larger quantities into smaller quantities.
channel regrouping - sorting
separating products into the grades and qualities desired by consumers.
Market exposure - intensive (good for what type of products?)
-sell the product anywhere they will buy it
-good for convenience products b/c people don’t want to spend a lot of effort finding them
Market exposure - selective distribution
-selling only through intermediaries that will give the product special attention
-sell it where it sells best
-usually associated with shopping products
Market exposure - exclusive distribution
-selling thru only 1 intermediary in a geographic area
-specialty products
channels of distribution
any series of firms or individuals participating in the flow of products from producer to final user or customer.
need to choose specific obejctives. need to choose type of channels like direct or inderect with intermediaries
Discrepancy of quantity
is the difference between the quantity of products that is economical for a producer to make and the quantity that consumers or users really want.
Regrouping activities
are activities that adjust discrepancies in quantity or assortment.
Multichannel distribution
occurs when a producer uses several competing channels to reach the same target market. Ethical decisions may also be relevant to deal fairly with all channel members across all channel modalities.
factors affecting physical distribution service levels
Order processing, inventory management, shipping, storage, and returns are all key factors affecting the service level.
trade offs among physical distribution costs, service level and sales
inventory, lost sales, and transportation cost influence total cost of physical distribution. while total cost decreases at first, it then increases
modes of transport
truck-extensive locations
rail
water - cheapest
air-very fast
pipeline - highly dependable
the storing function
Storing is the marketing function of holding goods so they’re available when they’re needed.
physical distribution concept
dictates that all transporting, storing and product handling activities of a business and the whole channel system should be coordinated as one system that seeks to minimize the cost of distribution for a given customer service level.
factors affecting service level
Order processing, inventory management, shipping, storage, and returns
service level total cost approach
includes evaluating each possible physical distribution system and identifying the total cost of each alternative system.
Inventory
refers to the amount of goods being stored.
-most common
types of wholesalers - service merchant wholesaler
provide all the wholesaling functions
types of wholesalers - limited function merchant wholesaler
provide only some wholesaling functions
types of wholesalers - agent wholesaler
doesn’t own the products it sells
retailer offerings
-specialty shops & dept stores
-supermarkets disc, houses, mass merch, super club stores
-cstores, vending door to door phone mail some e tail
-internet
retailers strategy plan
-product selection
-place decisions
-promotion
-price
-emotional needs
-shopping atmosphere
benefits of storing
storing can smooth out sales, increase profits and enhance customer satisfaction. Storing can also help balance supply and demand to keep prices from sudden rises or falls.
single line / limited line retail stores
are specialized by product area and offer a wide assortment in that area.
types of retail stores- specialty shops
type of conventional limited line store it is usually small and has a distinct personality or shopping environment. usually sell shopping products and focus on a narrow target market with better service, knowledgeable salespeople and a unique assortment this combination generally supports higher prices for products.
types of retail stores- department stores
larger stores that are organized into many separate departments and offer many product lines.
-combine many limited line stores and specialty shops into a single location.
types of retail stores- supermarkets
large stores specializing in groceries with self-service and wide assortments, survival is based on efficiency, meaning high volume and low costs
types of retail stores - discount houses
started by offering wide assortment of name brand goods at 20 to 30% off the list price.
types of retail stores - Mass merchandisers
large, self-service stores with many departments that emphasize soft goods and staples with low prices and lower margins to obtain faster turnover.
Mass merchandisers have also led the way in streamlining distribution with technology, they are now trying to be more convenient as well.
types of retail stores - supercenters or hypermarkets
They are very large stores that carry groceries and meet all routine needs for goods and services
types of retail stores - convenience stores
carry limited assortment of fast moving items and are located conveniently near people’s homes. Goods typically cost 10 to 20% more than at supermarkets.
types of retail stores - Automatic vending
is selling and delivering products through vending machines.
-convenient
-the business has grown
-only accounts for about 1.5% of all US retail sales.
types of retail stores - online retailers`
offer expanded assortment, reduce margins and more information to consumers.
-still in the growth stage.
-E-commerce represented 14.3% of total US retail sales in 2018.
three consumer-oriented dimensions
the width of assortment desired, the depth of assortment desired and a price service combination.
Which types of wholesalers own the products?
merchant wholesalers. agent wholesalers do not
price dimensions
-price flexibility
-price levels over product cycle
-discounts & allowances to whom and when
-transportation costs - who pays and how
types of pricing objectives
profit oriented
sales oriented
status quo oriented
pricing objectives -profit oriented (2 aspects)
pricing objectives related to profit
-target return - specific guidelines for a level of profit.
-maximize profits - the firm sets prices to realize as much profit as possible.
pricing objectives - sales oriented (2 aspects)
pricing supports the objectives to increase sales without worrying about effects on profit
-overall dollar or unit sales growth within a product or service category
-growth in market share
-difference between 2 is usually which one is easier to measure
pricing objectives - status quo oriented (2 aspects)
firms that are content with the way things are
-nonprice competition - aggressive action is taken in the other three areas of the four Ps Staying clear of price
-meeting competition - stabilizes market prices because no firm benefits from raising or lowering prices. This objective is often use when the total market for a product is not growing.
pricing policy - one-price policy
-same price for everyone
-frequently purchased items
-more convenient
-lower costs
-maintain goodwill
pricing policy - flexible price policy
-different customers, different prices
-databases can give information about customers
-sales people can adjust prices
-too much cutting can hurt profits
skimming vs penetration
skimming - tries to sell at a high price before reducing, moving down as each pricepoint is exhausted
penetration - tries to maximize volumen at a lower price. usually low enough to avoid competition
discount policies
-quantity
-seasonal
-cash
-trade
-sale
discounts
reductions from list price given to buyer, typically in exchange for specific buyer actions or to manage inventory.
discounts-quanity
encourage volume buying, pay less per unit
discounts-seasonal
-encourage buyers to buy sooner
-shift storing function down channel to stabilize demand <- what??
discounts- cash
get a discount for paying quickly
discounts-trade
if you are doing something to promote the product they give a discount
discounts-sale
reduce list prices temporarily to encourage immediate buying. They can however condition buyers and sellers to shop for sales and may erode brand loyalty.
types of price setting
-cost oriented price setting approaches
-demand-oriented price setting approaches
-other price setting issues
costs a marketing manager should consider
-total fixed cost
total variable cost
-total cost
-avg unit cost
-avg fixed unit cost
-avg variable cost
breakeven analysis
-evaluate whether a firm will be able to cover all its costs at a particular price level
shows where you break even, lose or gain on units of production vs total revenue and cost. it can evaluate the possible prices for your product
marginal analysis
looking at the different profits you can make based on different variables
profit maximization with total revenue and total cost curves
total cost increases at constant rate, revenue and profit increase,peak then decreases. when revenue is the highest above cost profit is maximized
demand estimation
-substitute - meet need other ways
-ease of comparison -
-who pays
-total expenditure
-end benefits - how significant is the benefit
-switching costs
bid pricing and negotiating pricing
-new prices for every job
-ethical issues
-consider demand
-negotiated prices
markup
a dollar amount added to the cost of products to reach the selling price.
Markup percent
the percentage of the selling price that is added to the cost to get the selling price
the stock turn rate,
which is the number of times the average inventory is sold in a year.
Average cost pricing
adding a markup to the average cost of a product.
total costs Total fixed cost
sum of those costs that are fixed expenses, regardless of how much of something is produced, things such as rent, manager salaries, and insurance can remain constant whether production goes up or down.
total costs Total variable cost
is the sum of expenses that change with the level of output.
Variable costs
include things like hourly wages, the cost of materials, packaging, shipping and sales commissions.
total cost
the sum of total fixed and total variable costs
avg cost - Average uit cost per unit
dividing total costs by the related quantity.
avg cost - Average fixed cost per unit
dividing total fixed costs by the related quantity
average variable cost per unit
is obtained by dividing total variable costs by the related quantity.
Break even point (BEP) in units
divide the total fixed costs by the contribution per unit.
-Multiplying the BEP in units times the selling price per unit yields the BEP in dollars. Each
-each price has it’s own breakeven point
-A target profit can also be included in computing the BEP, the desired profit is simply added to the total fixed costs.
what does break even analysis show?
shows the effect of cutting costs in relation to increasing profits. It is helpful but not a pricing solution. Break-even analysis is a cost oriented tool Not a demand oriented one.
total revenue
The price multiply by the quantity sold is the total revenue generated at each price quantity combination
what is marginal analysis?
Marginal analysis helps find the right price that maximizes profit. It is especially important when demand curves slow down, which they typically do.
promotion methods - personal selling
direct sopoken communication to potential customers. can be good for quick feedback
promotion methods - mass selling
communicatign with large groups of customers at the same time. useful when target market is large and geographically dispersed
advertising - paid form of non-personal presentation of ideas goods or services
publicity - any unpaid form of nonpersonal presentation of ideas goods or services
promotion methods - Sales promotion
promotional activities other than advertising that stimulate interest, trial or purchase by customers
promotion objectives
reminding
persuading
informing
What does aida stand for
Attention - promotion that first seeks to break through the clutter of information in the marketplace and get the attention of a person in the target market.
Interest - seeks to arouse curiosity and stimulate greater interest in the product.
Desire - then seeks to get an emotional response, or a buy in, whereby the customer has a strong desire for the product.
Action - promotion helps the customer take action or to buy now.
promtions objectives relate to adoption process and aida model
informing -> awareness interest -> attention interest
persuading -> evaluation trial -> desire
reminding -> decision confirmation -> action
Sales promotion for consumers
-contest
-coupons
-displays
-samples
-banners
-sponsored events
Sales promotion for wholesalers and retailers
-price deals
-allowances
-sales contests
-trade shows
-catalogs
Sales promotion for companies own sales force
-contests and bonuses
-meetings
-portfolios and displays
-sales aids
Push marketing
promote product to wholesalers, retailers and final customers
-using normal promotion efforts, personal selling, advertising, and sales promotion to help sell the whole marketing mix to possible channel members.
Pull Marketing
business customers or final consumers request the product
-means getting customers to ask for the product, it involves promotion activities directed at final consumers or business customers.
Promotion Varies over lifecycle
market introduction- “This new idea is good”
Market Growth - “Our brand is best”
Market Maturity - “Our brand is better, really”
Sales Decline - “Let’s tell those who still want our product”
Setting promotion budget
-% of sales
-task method
what is the aida model?
its a practical approach for looking at what promotion tries to accomplish.
Adoption processes can guide promotion planning
first - innovators 3-5%
second early adopters 10-15%
Third early majority 34%
Fourth Late majority 34%
fifth laggards or non-adopters 5-16%
Adoption processes can guide promotion planning - innovators
are the first to buy, and don’t mind taking some risks. Innovators search out product information and rely on impersonal and scientific sources, or other innovators, when making decisions.
Adoption processes can guide promotion planning - Early Adopters
typically well respected by their peers, and also often serve as opinion leaders for others. Of all groups, this one has the most contact with sales people. High satisfaction among early adopters can aid word of mouth information about a product, which it becomes highly credible.
Adoption processes can guide promotion planning - Early majority
. The early majority group wants to avoid risk, and waits to consider a new idea until many new early adopters have tried a product and like it.
This is a group of deliberate decision makers, they have extensive contact with sales people, mass media, and early adopter opinion leaders.
Adoption processes can guide promotion planning - late majority
cautious, often older, set in their ways. doesn’t worry about marketing resources
Adoption processes can guide promotion planning - laggards or non adopters
difficult to reach, don’t adopt a lot of new ideas
primary demand
which is the demand for the general product idea
builds selective demand
which is demand for the company’s own brand
persuasive promotion
our product is better
promotion budgeting - percentage of sales
-most common method
-% of past or antiticipated future sales
-straightforward but doesn’t consider situational variables or other market forces
promotion budgeting - task method
-sometimes called zero - based budgeting
-links budgeting to what must be done to reach the promotion and sales objectives
importance and role of personal selling
- smart selling - helping customers make good buying decisions
-salespeople represent the whole company and customers
-sales force provides market info to marketers (what people think, etc)
-salespeople can be strategy planners
supporting sales people - missionary sales people
supporting sales people who work for producers by calling on their intermediaries and customers.
-can increase sales by fostering goodwill, providing training, etc.
-often training ground for new sales people
supporting sales people - technical specialists
technical experts that can support sales people. often more concerned with technical details than sales
supporting sales people - customer service reps
work with customers to solve problems after sale
-every company needs these people
why does the right structure help assign responsibility?
different markets require different tasks with different support and different needs
combining technology with personal selling
basically a sales person is required for relationship building and e-commerce is best when there is a lot of standardized information
outline key steps in personal selling process
- set effort priorities
2.Select target customer - preplan sales call and presentations
- Make sales presentation
- close the sale (get action)
6 follow up after sales call to establish a relationship or after purchase to maintain relationship - feedback throughout
what are salespeople?
communicators who build relationships.
components of salesforce
-major accounts sales force
-telemarketing
-sales territories - geographic regio that is the responsibility of one person or team
-size and workload
-team selling - different people work together on an account
types of advertising objectives
position brands
-introduce new products
-obtain outlets
-ongoing contact
-support sales force
-get immediate action
-maintain relationships
How do objectives guide implementation of promotion?
awareness - teaser campaigns, jingles, viral advertising
interest - informative ads, celebrity ads, email ads
evaluation and trial - competitive ads, comparative ads, testimonials
decisison - point of purchase ads, price deal offers, direct action retail ads
confirmation - reminder ads, informative why ads
types of advertising- institutional advertising
tries to promote the organization’s image, reputation or ideas by developing goodwill or improving relations with various groups
types of advertising- product advertising - pioneering advertising
tries to develop primary demand for a product category rather than demand for a specific product. appropriate early on when consumers still need to understand the product category
types of advertising- product advertising - competitive advertising (and 3 types)
develop demand for a specific brand.
direct - aims for immediate buying action
indirect - points out product advantages to affect future buying decisions
comparative advertising - make specific comparisons using brand names
types of advertising- product advertising - reminder advertising
tries to keep the products name at the top of peoples minds
choosing the best medium to deliver a message
there is no best advertising medium
-promotion objectives
-target market characteristics
-funds available
-nature of the media
traditional advertising channels
television and cable - good atttention and wide reach but expensive
direct mail- selected audio and flexible, costly, junk mail, low attention
newspaper - flexible and timely, compete for attention, poor quality
radio - widest reach low cost, weak attention
types of digital marketing / advertising
-data
-organic and paid search
-display advertising
-social media and influencer marketing
-mobile
-video
-email
measuring marketing effectiveness - attribution
-consider the total mix
-research and testing may improve odds
-hindsight may lead to foresight
types of publicity and communication tactics
getting and holding attention - viral videos, press articles
developing a positioning - viral videos, games, branded services
arousing desire and obtaining action - customer review, case studies, webinars
managing ongoing customer relationships - social media, blogs, online communities / forums
How does sales promotion stimulate change?
it can increase then decrease, increase only for a period of time, or increase and stay elevated
problems inn managing sales promotion
erodes brand loyalty
need for alternatives
hard to manage
lessons learned
types of advertising- product advertising
tries to sell a product and can be targeted to channel members or final consumers. these ads are designed to get consumers to know and remember product or services
search engine marketing
organic and paid search
. Organic search, known more commonly as search engine optimization, or its acronym, SEO, is focused on optimizing web pages and information, such that it displays highly on a search engine results page.
Paid search allows marketers to bid on placement of ads within a search engine’s results page.
Sales promotion
includes activities other than advertising publicity, and personal selling, that are desired to stimulate interest, trial or purchase by final customers or others in the channel.
publicity
mass selling that avoids paying media costs
place in the f ps means the same as?
distribution
when are customers more price sensitivie?
-substitutes are available
-easy to compare prices
-large total expenditures
-how great are switching costs
-no substantial end benefit
-lower initial investment
when are customers less price sensitive
when there are high switching costs
promotion objecting - informing
creating awareness of your product
- important for new products
promotion objecting - persuading
persuading-nescessary to convince market to buy your product over other firms products
-als0 reinforce the benefits of buy a product or service
promotion objecting - reminding
more suitable if customers already know about your product and have positive attitudes
three consumer-oriented dimensions depth
-for example, tennis. a company that might sell lots of different tennis equipement
three consumer-oriented dimensions width
for example dicks. lots of different sports. with tennis there would be less options
