Ch 13: The marketing mix: product, place, promotion, price – Flashcards
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product mix
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business's portfolio of product lines
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product line
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group of similar products
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consumer
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marketing purposes: person/household that buys a product for final consumption
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consumer products; categorizations
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products sold to consumers 1. convenience 2. shopping 3. speciality 4. unsought
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convenience products
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products consumers buy frequently, instinctually with min. thought (us. low price and consumed in large quantities)
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shopping products
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products consumers buy carefully and less frequently, usually cost more and are consumed less frequently (ex. furniture, clothes)
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specialty products
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products consumers buy infrequently with deliberate thought process, unique, ex. automobiles, jewelry, computers
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unsought products
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products consumers do not initially or readily recognize they need or want, only buy after being shown there is a need, ex. insurance, medical procedure, legal services
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business
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marketing purposes: organization that buys a product for resale or use in producing another product
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business products
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products sold to businesses; categories: 1. materials and parts 2. capital items 3. supplies and services
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materials and parts
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products businesses resell or use to create other products ex. clothing sold by department store
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capital items
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products businesses buy that have a life longer than one year and used in acquiring, manufacturing, selling of products and services ex. buildings, equipment, intangible assets (patents)
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supplies and services
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products businesses buy to operate the business, not classified as the other two classifications, usually have short lives, ex. office supplies, repair/maintenance, air travel
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creating customer value with product attributes
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1.features 2. quality 3. branding 4. packaging 5. labeling 6. warranties and guarantees 7. support services
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product features
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physical/mental attributes that provide customers satisfaction when they use the product
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product quality
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product's lack of defects ex. durability of clothing/furniture, response to medical treatment
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branding
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business's attempt to differentiate its product from competitors
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brand
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name, term, symbol design or combination that identifies a product/business
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trademark
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owns one when it registers its brand with the law
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brand equity
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ability of brand to create value
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generic products
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unbranded products
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packaging
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designing/producing the container in which product is sold/delivered, promotes and protects product
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labeling
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business attaching printed words or graphics to its products to educate the customer; they identify, describe, and or inform customer about content, benefits, dangers, and proper use of the product, attempt to reduce risk
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warranties
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seller's promise regarding the property's quantity and quality
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guarantee
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promise that the customer will be satisfied with the product
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support services
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at-sale or post-sale services that a seller promises the buyer (ex. training and repair), reduce buyer's risk
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place
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location and means of distributing the product
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distribution
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how and when a business delivers product to customer
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marketing channel
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aka distribution channel, composed of organizations that help business make its product available for ultimate consumption
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marketing intermediaries
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members of marketing channel
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direct marketing channel
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where business doe snot use a marketing intermediary
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indirect marketing channel
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where a business uses one or more marketing intermediaries
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wholesaler
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an organization that buys products for resale to retailers, marketing intermediary
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retailer
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organization that sells products to the ultimate consumer of the product, marketing intermediary
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retailer categorization
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specialty store department store supermarket convenience stores discout deep discount non-store
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specialty store
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carries limited product line
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department store
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several product lines
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supermarkets
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numerous lines of food and household products
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convenience store
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relatively small retailers in accessible places with limit products for everyday life
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discount stores
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price-conscious customer audience
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deep discount stores
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ex. costco - sell product lines at very low prices
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non-store retailers
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use distribution channels like vending machines, kiosks, Internet (ex. when buy an application over the Internet for Android phone, using non-store retailer)
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wholesalers categorizations
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1. merchant 2. brokers and agents
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merchant wholesaler
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buy and resell products
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brokers and agents
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facilitate buying and selling of products without taking ownership, compensated with fees/commissions
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broker
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brings buyer and seller together and help negotiate deal
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agent
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represents a buyer or seller
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why use marketing intermediaries?
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they create value by providing: efficiency convenience cost savings
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price
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value exchanged by customer and received by business
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when pricing, look at:
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1. cost business incurs from acquisition/production 2. delivery 3. sale/promotion 4. operating the business
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operating profit=
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sales - operating costs (cost of goods sold, salaries, rent, advertising, utilities)
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variable and fixed costs
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variable vary with amount sold while fixed do not
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contribution margin CM=
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money left for operating profit =P-VC price per unit of sales = p variable cost per unit of sales = vc
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break-even point BE=
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number of sales a business must achieve to generate a zero operating profit =FC/CM fc = fixed costs cm = contribution margin
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cost-volume profit analysis
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analysis of different pricing alternatives on the business's profitability
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cost-plus pricing
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when a business prices products based on costs and desired profit, designed to provide business sufficient sales revenue to 1. pay its costs 2. create a sufficient operating profit challenge: determining and allocating cost of acquiring or producing a product, delivering, selling it, and operating the business
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variable vs. fixed costs challenges
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variable easier to assign to products rather than fixed when fixed are not easy to allocate, often price product on the margin when fixed are easy, often use average cost to price product
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marginal costs
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when a business focuses only on variable costs
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pricing on the margin
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only focusing on variable costs
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marginal revenue
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price per sale
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contribution margin=
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=price per sale (marginal rev) - marginal / variable costs
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need higher or lower CM to cover unallocated fixed costs?
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when pricing on margin need higher
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total costs
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variable + fixed costs
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average cost of sale =
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total costs / number of sales =AC=TC/sales sales = number of sales TC = fixed + variable
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the wants and needs of a customer:
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customer and market that determine price of product jointly
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price elastic
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impact o price on buyer's decision to buy it or not to buy it
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price inelastic
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when prices do not matter, customers buy product regardless of price
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forces that shift the demand and supply of products
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1. cyclicality 2. seasonality 3. evolution of customer tastes, needs, options
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cyclicality
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overall state of an economy, when economy growing buy products more easily
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cyclical product
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when state of economy affects the demand for it
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non-cyclical
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when state of economy does not affect demand for it
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counter-cyclical product
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when good times hurt the demand for products (less expensive foods ex.)
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seaonsality
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time of year the product is produced and sold, affects demand price of summer clothes goes down in september
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seasonal products
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affected by seasons (ex. bathing suits, lawn mower)
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non-seasonal products
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unaffected by seasonality
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ex. of evolution of customer needs and wants
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transportation, telephones / technology
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how customers view price
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1. perceived absolute value of the product 2. perceived relative value of the product
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perceived absolute value of the product
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perception of value based on perceived benefits, compare to price
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perceived relative value of product
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compare benefits and costs of product with competing ones
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challenges of pricing a product
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1. must determine costs and required operating profit 2. must determine demand for the product an impact of price on customer's decision to buy
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marketing managers
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must determine what price to charge, when to charge, and how
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promotion
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process of communicating to customers the absolute and relative values of the product, goal is to create a successful sale
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communication process
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sender creates message, sends/encodes through medium message is affected by noise (interference with the receiver understanding clearly) message received by receiver who decodes and interprets receiver provides feedback
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promotion process
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1. target markets segment/customer 2. determine communication objective 3. design message to be communicated 4. choose a medium to communicate message 5. execute by delivering 6. collect feedback, review, adjust (1-4 are planning, 5 - marketing plans into action, 6 - comparing results)
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AIDA model
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attention, interest, desire, act - #3 of designing message
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promotional or marketing communications mix
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mix of advertising, sales promotion, personal selling, direct-marketing techniques, public relations used by business to communicate a marketing message
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advertising
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non-personal presentation of ideas about a product/line, delivered through media
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sales promotions
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techniques used to encourage customer to buy product in short-term, use sales promotions to create an immediate sale (ex. coupons, refunds rebates etc.)
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personal selling
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personal interaction intended to create a sale between a business's sales force and potential customers (ex. real estate agent)
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personal selling process
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1. prospect/qualify potential customers 2. research and understand how to approach targeted customers 3. approach targeted customers 4. present and demonstrate product 5. deal with customer concerns 6. complete / close sale 7. follow up on sale to ensure customer satisfaction
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direct marketing
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techniques used to get customers to purchase products from their home, office, or other non-retail settings (ex. mail, catalogues, etc.)
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public relations
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communicate to a business's public that the business creates value for the public as a whole, use it to create a positive image
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publicity
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information that creates an image of a business and its products (ideally positive)
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strategies for promotional efforts
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1. pull 2. push
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promotional pull strategy
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product producer uses advertising focused on the ultimate consumer, creates a demand in consumer that pulls retailers and other marketing channel members into offering product
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promotional push strategy
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producer's promotional efforts focused on retailers/other channel members, then they promote product to consumer - pushes product from producer through retailer to customer
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managing the marketing function and marketing mix is challenging all about:
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finding correct blend of 4 p's
