Test 3 Flashcards
Price
the money or other considerations (including other products or services) exchanged for the ownership or use of a product or service
Barter
the practice of exchanging products and services for other products and services rather than for money
Value
ratio of perceived benefits to price
Value pricing
the practice of simultaneously increasing product benefits while maintaining or decreasing price
downsizing
decreasing contents but still remains at the same; price conscious
profit equation
profit = total revenue - total cost
profit equation
(price x quantity sold) - (fixed cost+ variable cost)
demand-oriented pricing approaches
methods to setting price that focus on demand
Five types of demand oriented pricing approaches
Skimming: high initial price
Penetration: low initial price
Prestige: high price quality or status-conscious consumers will be attracted to the product and buy it
Odd-even: setting prices a few dollars or cents under an even number
Bundle: marketing two or more products for a single package price
Cost-oriented pricing approaches
methods for setting price that stresses cost
Two types of cost-oriented
standard markup: adding a fixed percentage to the cost of all items in a specific product class
cost-plus: calculating the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price
Profit-oriented pricing approaches
methods for setting price that balance revenue and cost
three types of profit-oriented
target profit: setting prices to achieve a specified annual dollar amount of profit
target return-on-sales: setting prices to achieve a profit that is a specified
target return-on-investment: setting prices to achieve an annual target return on investment (ROI)
competition oriented pricing approaches
methods for setting price that focus on competition
three types of competition oriented pricing approaches
customary: setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors
above, at ,or below-market: setting a market price for a product or product class using the average market price as the benchmark
loss-leader: selling a product below its customary price, not to increase sales, but to attract customers’ attention to it in hopes that they will buy other products with large markups as well
demand curve
a graph that relates the quantity sold and price, showing the maximum number of units that will be sold at a given price
price elasticity of demand
the percentage change in quantity demanded relative to a percentage change in price
elastic demand
a 1% price decrease generates more than 1% increase in quantity sold - increasing total revenue
inelastic demand
a 1% price decrease generates less than 1% increase in quantity sold - decreasing total revenue
freebie
:)
total revenue
the total money received from the sale of a product - the product of price and quantity
fixed cost
the sum expenses that do not change with the quantity sold
variable cost
the sum of the expenses that vary directly with the quality of a product that is produced and sold
unit variable cost
variable cost expressed on a per unit basis UVC = VC/Q
total cost
total expense incurred to produce and market a product
break-even analysis
a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output
break-even point
the quantity at which total revenue equals total cost - profit is zero
pricing objective
the role of price in an organization’s marketing and strategic plans
pricing constraint
a factor that limits the range of prices a firm may set
the five legal and ethical constraints
price fixing: a conspiracy among firms to set prices for a product
price discrimination: the practice of charging different prices to different. buyers for goods of like grade and quality
deceptive pricing: price deals that mislead consumers
bait and switch: when a firm offers a very low price on a product (the bait) to attract customers to a store and then tricks the customer into purchasing a higher-priced (the switch)
predatory pricing: charging a very low price for a product with the intent of driving competitors out of business
fixed price policy
one price for all buyers
dynamic pricing policy
different prices depending on buyers and situations
quantity discounts
reduction in unit price to encourage customers to buy larger quantities of a product
seasonal discounts
price reduction to encourage buyers to stock inventory earlier than their normal demand would require
trade(functional) discounts
reduction off list price offered to resellers based on their level in the channel and the marketing activities they are expected to perform
cash discounts
reduction for paying cash - typically a percentage off the list price to encourage buyers to pay their bills
trade-in allowances
price reduction given when a used product is part of the payment on a new product
promotional allowances
reductions from list price for buyers in return for undertaking specific advertising or selling actives to promote a product
marketing channel
network of individuals and firms that make a producer’s product available to end users
intermediary
an individual or firm that assist manufactures in distributing products to end users by helping promote, sell, and distribute its products
wholesaler
an intermediary who sells to other intermediaries, usually retailers
retailer
an intermediary who sells to consumers
agent or broker
an intermediary with the legal authority to act on behalf of the manufacturer - their role is to bring buyers and sellers together
transactional functions
buying: purchasing products for resale or as an agent for supply of a product
selling: contacting potential customers, promoting products, and seeking orders
risk taking: assuming business risks in the ownership of inventory that can become obsolete or deteriorate
four logistical functions
assorting: creating product assortments from multiple sources to serve customers
storing: assembling and protecting products at a convenient location to offer better customer service
sorting: purchasing in large quantities and breaking into smaller amounts desired by customers
transporting: moving product to customers
three facilitating functions
financing: extending credit to customers
grading: inspect or testing products and assigning them quality grades
marketing, information, and research: providing information to customers and suppliers, including competitive conditions and trends
direct channel
producer to consumer
indirect channel
include intermediaries between the producer and consumer
dual distribution
strategy of using two or more channels to reach different buyers of the same product
strategic channel alliance
partnership between two firms where one sells its products through the other firm’s marketing channel
Direct-to-consumer marketing channel
marketing channel that allows consumers to buy products through print or electronic media without a face-to-face meeting with a salesperson
Multichannel marketing
strategy of combining mutually reinforcing communication and delivery channels to attract, retain, and build relationships, with consumers who shop traditional and online channels
vertical marketing system
professionally managed, centrally coordinated marketing channel designed to achieve channel economics and maximize marketing impact
corporate vertical marketing system
marketing channel formed by combining successive stages of production and distribution under a single ownership
forward integration
companies looking to gain greater control over the resale of their products
backward integration
companies trying to gain greater control over supply sources pursue backward integration
administered vertical marketing system
marketing channel where coordination is achieved at successive stages of production and distribution by the size and influence of one channel member rather than through ownership or a contractual relationship
profitability
(revenue minus cost) driven by the margins earned for each channel members
channel conflict
conflict that arises when one channel member believes another channel member is engaged in behavior that prevents it from achieve its goals
vertical conflict
conflict between different levels in a channel
sources of vertical conflict
disintermediation: strategy of bypassing another member of a distribution channel to sell products directly to a downstream channel member
Disagreements over distribution of profit margins among channel members
Inadequate attention paid to products
horizontal conflict
conflict between intermediaries at the same level in a marketing channel
sources of horizontal conflict
dual distribution: strategy of using two or more channels to reach different buyers of the same product
Increased distribution intensity can result in increased competition for existing intermediaries
Forms of influence
Economic: ability a firm to reward other members given its strong financial position or customer franchise
Expertise: a channel member’s skill or knowledge that benefits other channel members
Identification: value of association with a strong brand or exclusive retailer
Legitimate: contractual right of one channel member to direct the behavior of other members
logistics
the activities required to move product inputs and finished products through the supply chain
logistics management
the practice of organizing the cost-effect flow of raw materials, in-process, inventory, finished goods, and related information from point of origin to point of consumption to meet customer requirements
supply chain
network of individuals and firms that create and deliver a product to end users includes the suppler network and marketing channel
supplier network
network of individuals and firms that make raw materials, parts, and components from suppliers available to a manufacturer
marketing channel
network of individuals and firms that make a producer’s product available to end users.
supply chain management
the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering products that provide value to consumers
bullwhip effect
the tendency for buyers at different levels of the supply chain to exaggerate the need to increase or decrease inventory in response to variation or lack of predictability in customer demand
vendor-manage inventory (VMI)
an inventory management system whereby the suppliers determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items
reverse logistics
the process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption for repair, manufacturing, redistribution, or disposal
response supply chain
designed to provide the ability to quickly adapt to shifts in the market
- ship products faster
- network of decentralized warehouse reducing order cycle time
- increase inventory to reduce stock outs
efficient supply chain
designed to deliver products at the lowest possible cost
- ship products inexpensive, slower
- limits its warehouse to a single warehouse increasing orders cycle time
- low levels of inventory even if stock outs occur
channel of communication
medium used to transmit the message from the sender to the receiver - professional selling, advertising, public relations, sales promotions, or direct marketing
field of experience
frame of reference including attitudes, values, and beliefs, that influence the way a source encodes a message or the way a receiver decodes a message
noise
extraneous factors that can work against effective communication by distorting a message or the feedback received during the communication process
promotional mix
the combination of communication tools to (1) inform prospective buyers about the benefits of the product, (2) persuade them to try it, and (3) remind them later about the benefits they enjoyed by using the product
integrated marketing communications (IMC)
the concept of designing marketing communications programs that coordinate all promotional activities to provide a consistent message across all audiences
advertising
any paid form of nonpersonal communication by an identified sponsor about an organization or product
personal selling
the two-way flow of communication between a buyer and seller, often in a face-to-face encounter, designed to influence the purchase decision of a person or group
public relations
a form of communication management that seeks to influence the feelings, opinion, or beliefs held by customers, prospective customers, stockholders, suppliers, employees, and other publics about a company and its products or services
sales promotion
a short-term inducement of value offered to arouse interest in buying a product or service
publicity
a non personal, indirectly paid presentation of an organization, product, or service
direct marketing
a promotional alternative that uses direct communication with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet
push strategy
directing the promotional mix to channel members to gain their cooperation in ordering and stocking the product
pull strategy
directing the promotional mix at ultimate consumers to encourage them to ask the retailer for a product
combination strategy
directing the promotional mix to channel members and consumers to create upstream and downstream demand simulation
target audience
the group of prospective buyers toward which a promotion program will be directed
hierarchy of effects
the sequence of states a prospective buyer goes through from initial awareness of a product to eventual action including awareness, interset, evaluation, trail and adoption of the product
name the hierarchy of effects
Awareness: ability to recognize and remember a product or brand name
Interest: desire to learn about a product or brand
Evaluation: appraisal of a product or brand on important attributes
Trail: the first use of a product or brand
Adoption: repeated purchase and use of a product or brand
percentage of sales budgeting
Spending is set as a percentage of past or anticipated sales.
competitive parity budgeting
Spending is set to match competitors absolute spending or spending relative to market share.
all-you-can-afford budgeting
Spending on promotion occurs only after all other expenses are covered.
objective and task budgeting
Budget is determined by setting promotion objectives, outlining the tasks needed to accomplish those objectives, and then determining the cost of performing those tasks.
copy
written or verbal message
lead generation
the result of a direct marketing offer designed to generate interest in a product and request additional information
freebie #2
:))
product advertisement
advertisement that focuses on selling a product
institutional advertisement
advertisement designed to build goodwill or a positive image for an organization rather than to promote a specific product
Consumer-oriented sales promotions (or consumer promotions)
sales tools used to support a company’s advertising and personal selling directed to ultimate consumers
premium
item – other than the product being marketed – offered for free or at significant savings with the purchase of the product being marketed
Encourage return purchases and increased product use
trade-oriented sales promotions
sales tools used to support a company’s advertising and personal selling directed to wholesalers, retailers, or distributors
cooperative advertising
advertising program where a manufacturer pays a percentage of a retailer’s local media expense for advertising a manufacturer’s products
Advocacy
loyal consumers recommending brands to others
