Marketing 310 – Exam 3

Market Share
Company sales divided by Market sales
Value-Based Pricing
Setting the price of a product based on buyer’s perceptions of value rather than on the seller’s cost.
The marketer CANNOT design a product and marketing program and then set the price.
Good-Value Pricing
Offering just the right combination of quality and good service at a fair price
Ex – Dollar General
Value-Added Pricing
Attaching value-added features and services to differentiate a company’s offers and charging higher prices
Ex – AMC Theaters improving their theaters by adding new luxury seats and dine / wine services so they can charge higher prices
Cost-Based Pricing
Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk.
Fixed Costs (Overhead)
Costs that do not change with production or sales level
Variable Costs
Costs that vary directly with the level of production
Total Costs
The sum of fixed and variable costs for any given level of production
Cost-Plus Pricing
Adding a standard markup to the cost of a product
Aka – Markup Pricing
Break-Even Pricing
Setting price to break even on the costs of making and marketing a product or setting price to make a target return
Competition-Based Pricing
Setting prices based on competitors strategies, prices, costs, and market offerings
Price Elasticity
A measure of the sensitivity of demand to changes in price
Target Costing
Pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
Reverses usual process of designing first and then setting a price last
Captive-Product Pricing
Type of product mix pricing strategy that requires setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console
Pricing products that must be used with the main product.
Optional-Product Pricing
Type of product mix pricing strategy that requires the pricing of optional or accessory products along with the main product
Product Line Pricing
Type of product mix pricing strategy that requires setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.
Setting prices across an entire product line
Ex – Toyota, Lexus
By-Product Pricing
Type of product mix pricing strategy that requires setting a price for by-products in order to make the main product’s price more competitive
Bundle Pricing
Type of product mix pricing strategy that requires combining several products and offering the bundle at a reduced price
Market-Skimming Pricing
Type of new product pricing strategy that requires setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price
The company makes fewer but more profitable sales
Market-Penetration Pricing
Type of new product pricing strategy that requires setting a low price for a new product in order to attract a large number of buyers and a large market share
Discount and Allowance Pricing
Type of price adjustment strategy that involves reducing prices to reward customer responses such as volume purchases, paying early, or promoting the product.
Seasonal Discount
A straight reduction in price on purchases during a stated period of time or of larger quantities.
Allowance
Promotional money paid by manufacturers to retailers in return for an agreement to feature their products in some way
Segmented Pricing
Type of price adjustment strategy that involves adjusting prices to allow for differences in customers, products, or locations
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.
Promotional Pricing
Type of price adjustment strategy that involves temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales
Dynamic Pricing
Type of price adjustment strategy that involves adjusting prices continually to meet the characteristics and needs of individual customers and situations
Ex – Supply and Demand
Net Marketing Contribution
Net Sales – Cost of Goods Sold – Marketing Expense
Marketing Return on Sales (ROS)
Net Marketing Contribution / Net Revenue
Marketing Return On Investment (ROI)
Net Marketing Contribution / Marketing Expenses
Gross Margin
Revenue – Cost of Goods Sold
Gross Margin Percentage Calculation
Gross Margin / Revenue
Marketing Channel
A set of interdependent organizations (intermediaries) that help make a product or service available for use or consumption by the consumer or business user.
Ex – Apple selling their music via the Internet on iTunes
Rental Car services like Enterprise having offices by the airport
Channel Level
A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer.
Direct Marketing Channel
A marketing channel that has no intermediary levels
Ex – Producer –> Consumer
Indirect Marketing Channel
A marketing channel containing one or more intermediary levels
Ex – Producer –> Wholesaler –> Retailer –> Consumer
Vertical Marketing System (VMS)
A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.
Ex – Producer, wholesaler, retailer –> Consumer
Horizontal Marketing System (HMS)
A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity
Ex- Fox and Disney ABC joining together to own and market Hulu
Value Delivery Network
The network made up of the company, suppliers, distributors, and ultimately consumers who “partner” with each other to improve the performance of the entire system in delivery customer value
Marketing Logistics (Physical Distribution)
Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit
Supply Chain Management
Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.
Upstream Supply Chain Partners
Firms that supply the raw materials, components, parts, and other elements required to create a good
Downstream Supply Chain Partners
Marketing channel partners that link the firm to the customers
Promotion Mix (Marketing Communication Mix)
The specific blend of promotion tools that the company uses to engage customers, persuasively communicate customer value, and build customer relationships
Advertising
Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
Personal Selling
Personal customer interactions by the firm’s sales force for the purpose of engaging customers, making sales, and building customer relationships.
Public Relations (PR)
Building good relationships with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, or events
Direct Marketing
Engaging directly with carefully targeted individual consumers and customer communities to both obtain an immediate response and build long lasting customer relationships
Content Marketing
Creating, inspiring, and sharing brand messages and conversations with and among consumers across a fluid mix of paid, owned, earned, and shared channels (advertising)
Engages customers, builds relationships with them, and moves them to action.
Integrated Marketing Communications
Carefully integrating and coordinating the company’s many communications channels to deliver a clear, consistent, and compelling message about the organization and its brands.
Push Strategy
A promotion strategy that calls for using the sales force and trade promotion to push the product through channels.
The producer promotes the product to channel members who in turn promote it to final customers.
Pull Strategy
A promotion strategy that calls for spending a lot on consumer advertising and promotion to induce final consumers to buy the product, creating a demand vacuum that “pulls” the product through the channel
Reach
A measure of the percentage of people in the target market who are exposed to an ad campaign during a given period of time.
Frequency
A measure of how many times the average person in the target market is exposed to a message.
Gross Rating Points
Reach x Frequency
Steps to Creating an Advertising Program
1. Setting your advertising objectives
2. Setting your advertising budget
3. Developing your advertising strategy
4. Evaluating advertising effectiveness
Advertising Objective
A specific communication task to be accomplished with a specific target audience during a specific period of time.
To help engage customers and build customer relationships by communicating customer value.
To inform, persuade, and remind.
Percentage-of-Sales Method
Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price
Advertising Strategy
The strategy by which the company accomplishes its advertising objectives.
It consists of two major elements: creating advertising messages and selecting advertising media
Creative Concept
The compelling “big idea” that will bring an advertising message strategy to life in a distinctive and memorable way.
Advertising Media
The ways through which advertising messages are delivered to their intended audience.
TV – Pro and Con
Pro – good mass-marketing coverage; low cost per exposure; combines sight, sound, and motion; appealing to the senses

Con – High absolute costs; high clutter; fleeting exposure; less audience selectivity

Magazine – Pro and Con
Pro – high geographic and demographic selectivity; credibility and prestige; high-quality reproduction; long life and good pass-along readership

Con – Long ad purchase lead time; high cost; no guarantee of promotion

Radio – Pro and Con
Pro – good local acceptance; high geographic and demographic selectivity; low cost

Con – Audio only; fleeting exposure; low attention (the half heard medium); fragmented audiences

Outdoor – Pro and Con
Pro – Flexibility; high repeat exposure; low cost; low message competition; good positional selectivity

Con – Little audience selectivity; creative limitations

Sales Force Compensation
Needed to attract good salespeople; Motivates salespeople and directs their activities
What are the 4 elements that make up Compensation?
1. A fixed amount – salary, gives stable income
2. A variable amount – commissions or bonuses based on sales performance
3. Expenses – repays for job-related expenditures
4. Fringe Benefits – vacations, sick leave, pensions
Sales Person
An individual who represents a company to customers by performing one or more of the following activities: prospecting, communicating, selling, servicing, information gathering, and relationship building

Can either be an ORDER TAKER (store or department clerk) or an ORDER GETTER (demands creative selling and relationship building)

Sales Force Management
Analyzing, planning, implementing , and controlling sales force activities
Territorial Sales Force Structure
A sales force organization that assigns each salesperson to an exclusive geographic territory in which that salesperson sells the company’s full line
Product Sales Force Structure
A sales force organization in which salespeople specialize in selling only a portion of the company’s products or lines
Customer Sales Force Structure
A sales force organization in which salespeople specialize in selling only to certain customers or industries
Team Selling
Using teams of people from sales, marketing, engineering, finance, technical support, and even upper management to service large, complex accounts
Sales Quota
A standard that states the amount a salesperson should sell and how sales should be divided among the company’s product
Social Selling
Using online, mobile, and social media to engage customers, build stronger relationships, and improve sales performance
Salespeople Process
Designing sales force strategy and structure –> Recruiting and selecting salespeople –> training salespeople –> compensating salespeople –> supervising salespeople –> evaluating salespeople
Selling Process
The steps that salespeople follow when selling, which includes prospecting and qualifying, preapproach, approach, presentation and demonstration, heading objectives, closing, and follow-up
Prospecting
The sales step in which a salesperson or company identifies qualified potential customers
Preapproach
The sales step in which a salesperson learns as much possible about a prospective customer before making a sales call
Approach
The sales step in which a salesperson meets the customer for the first time
Presentation
The sales step in which a salesperson tells the “value story” to the buyer, showing how the company’s offer solves the customer’s problems
Heading Objectives
The sales step in which a salesperson seeks out, clarifies, and overcomes any customer objections to buying
Closing
The sales step in which a salesperson asks the customer for an order
Follow-Up
The sales step in which a salesperson follows up after the sale to ensure customer satisfaction and repeat business
Sales Promotions
Short-term incentives to encourage the purchase or sale of a product or a service
Business Promotions
Sales promotion tools used to generate business leads, stimulate purchases, reward customers, and motivate salespeople
Trade Promotions
Sales promotion tools used to persuade resellers to carry a brand, give it shelf space, promote it in advertising, and PUSH it to customers.
Consumer Promotions
Sales promotion tools used to boost short-term customer buying and engagement or enhance long-term customer relationships. PULL the customers
Good Salesperson Qualities
Well-educated and well-trained professionals who add value for customers and maintain long-term customer relationships.
Listen to their customers, assess customer needs, and organize the company’s efforts to solve customer problems
Mass Marketing
Targeting broad markets with standardized messages and offers and distributing them through intermediaries
Digital and Social Media Marketing
Using digital marketing tools such as Web sites, social media, mobile apps and ads, online video, email, and blogs to engage consumers everywhere, anytime via their digital devices
Online Marketing
Marketing via the Internet using company web sites, online advertisements and promotions, email, online video, and blogs
Social Media
Independent and commercial online social networks where people congregate to socialize and share messages, opinions, pictures, videos, and other content
Mobile Marketing
Marketing messages, promotions, and other marketing content delivered to on-the-go consumers, through mobile phones, smartphones, tablets, and other mobile devices
Direct-Mail Marketing
Marketing that occurs by sending an offer, announcement, reminder, or other item directly to a person at particular address
Catalog Marketing
Direct marketing through print, video, or digital catalogs that are mailed to select customers, made available in stores, or presented online
Telemarketing
Using the telephone to sell directly to customers
Direct-Response Television (DRTV) Marketing
Direct marketing via television, including direct-response television advertising (or informercials) and interactive television (iTV) advertising
Viral Marketing
The digital version of word-to-mouth marketing: videos, ads, and other marketing content that is so infectious that customers will seek it out or pass it along to friends
Online Advertising
Advertising that appears while consumers are browsing online, including display ads and search related ads
Loss Leader
A pricing strategy where a product is sold at a price below it’s market cost to stimulate other sales of more profitable goods or services.
Wholesaling
All the activities involved in selling goods and services to those buying for resale or business use
Broker
A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation
Agent
A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to the goods
Standardized Global Marketing
A global marketing strategy that basically uses the same marketing strategy and mix in all of the company’s international markets
Adapted Global Marketing
A global marketing approach that adjusts to the marketing strategy and mix elements to each international target market, which creates more costs but hopefully produces a larger market share and return
Global Firms
A firm that, by operating in more than one country, gains R&D, production, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors
What are the 3 ways to enter a foreign market?
1. Exporting
2. Joint Venturing
3. Direct Investment
Exporting
Entering foreign markets by selling goods produced in the company’s home country and sending them to the foreign country, often with little modification
Joint Venturing
Entering foreign markets by joining with foreign companies to produce or market products or services
Licensing
Type of joint venturing that involves entering foreign markets through developing an agreement with a licensee in that foreign market
Contract Manufacturing
A joint venture in which a company contracts with manufacturers in a foreign market to produce its product or provide its service
Management Contracting
A joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products
Joint Ownership
A joint (cooperative) venture in which a company creates a local business with investors in a foreign market who share ownership and control
Direct Investment
Entering a foreign market by developing foreign-based assembly or manufacturing facilities
What is the biggest grocery store in the US?
The Kroger Co
What is the biggest industry in the US?
1. Insurance and finance
2. Health Care
3. Manufacturers