ch 13 – marketing mix: product, price, 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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convenience products
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consumers buy frequently, instinctually, w/ minimum thought (ex - gas, fast food)
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shopping products
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buy carefully and less frequently (ex - clothes, phones)
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specialty products
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buy infrequently w/ deliberate thought process; unique products (ex- jewelry, cars)
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unsought products
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products not initially or readily recognized as needed or wanted (ex- legal services, getting a shot for college)
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business
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org 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
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materials and parts
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businesses resell or use to create other products (ex - clothes sold by store)
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capital items
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products w/ life longer than 1 yr; used in acquiring, manufacturing, selling of products and services (ex - buildings, equipment)
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supplies and services
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used to operate business; not classified as materials and parts or capital items; short lives (ex - office supplies, air travel)
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product features
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physical and 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)
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branding
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business's attempt to differentiate its product from product of competitors w/ a brand (reduces customer uncertainty)
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brand
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name, term, symbol, design, or combo that identifies a product or business
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trademark
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owned by business when it registers brand w/ 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 and producing the container in which a product is sold or delivered; promotes and protects product; can create convenience and storage
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labeling
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printed words or graphics to its products to educate the customer; reduce risk to buyer and seller
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warranties
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seller's promise regarding property's quantity and quality; expressed or implied
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guarantees
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promise to customer that they will be satisfied w/ product (not identical to warranty); customer has certain rights if not satisfied; reduces risk of buying = customer value increases
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support services
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at-sale or post-sale services that a seller promises the buyer (ex - repair for comp)
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distribution
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how and when a business delivers its product to its customer
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marketing/distribution channel
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composed of the orgs that help the business make its product available for ultimate consumption; help promote, finance, distribute product
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direct marketing channel
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where the business doesnt use a marketing intermediary (ex - sell google's service directly to advertisers)
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indirect marketing channel
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uses 1 or more intermediaries (ex - p&g sells products to wholesaler)
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marketing intermediaries
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members of marketing channel; create value by providing efficiency, convenience, and cost savings
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retailers
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businesses that sell products to the final consumer
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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 stores
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small retailers in easily accessible places; limied # of products used everyday
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discount stores
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lots of product lines of household products to price-conscious customers (ex- target)
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deep discount stores
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product lines at very low prices (ex - costco)
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non-store retailers
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limited or no physical presence (ex- vending machines, kiosks)
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wholesalers
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businesses that sell products to businesses for resale or business use; buy from producers and sell to retailers
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merchant wholesalers
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buy and resell products; take ownership of products and create value by providing warehousing, inventory, and transportation (ex - grocery store bought produce from merchant wholesaler)
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broker
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brings buyer and seller together to help negotiate deal
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agent
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represents either a buyer or seller
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variable costs
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vary directly w/ amount sold
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fixed costs
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costs that dont vary w/ amount sold
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contribution margin
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amount from the sale that is contributed to business CM = P - VC p= price per unit of sales vc = variable cost per unit of sales CM = marginal revenue - marginal/variable costs
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break-even point
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number of sales a business must achieve to generate a 0 operating profit BE = FC/CM fc= fixed costs ($) cm=contribution margin ($) -if sales are below break-even point: operating loss = CM * # of sales below break-even level - if sales are above break-even point: operating profit = CM * # of sales above break-even level
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to achieve operating profit
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-price is higher = # of products sold is lower = higher CM = lower break-even point -price is lower = # of products sold is higher = lower CM = higher break-even point
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cost-volume-profit analysis
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analysis of diff pricing alternatives on business's profitability
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cost-plus pricing
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when a business prices its products based on costs and desired profit; designed to provide the business sufficient sales revenue to 1) pay costs 2) create sufficient operating profit
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marginal costs
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variable costs; easy to allocate to products
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pricing-on-the-margin
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focuses only on variable costs; require higher CM to cover unallocated fixed costs
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marginal revenue
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price per sale
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fixed costs
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harder to allocate to products bc businesses often have multiple products that share fixed costs -when not easy to allocate to product = price on the margin -when easy = use avg cost to price product
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total costs
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variable + fixed costs -when businesses can allocated fixed costs to products, business prices on total costs of product (ideal!!!)
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average cost
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AC= TC/sales TC = total costs, sales = # of sales -businesses that allocates fixed costs --> prices on avg cost
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price elasticity
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impact of price on the buyer's decision to buy/not buy; higher price = buy less of product (ex - clothes)
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price inelasticity
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when prices dont matter and customer will buy regardless of price (ex - gas)
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3 forces that affect the changes in demand and supply of products
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cyclicality, seasonality, natural evolution of customer needs and wants
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cyclicality
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overall state of econ; econ goes through cycles; in bad econ, price is very impt factor to buy or not buy
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cyclical product
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when state of econ affects demand for product (ex - cars, house)
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non-cyclical product
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econ doesn't affect demand (ex-food, medicine)
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counter-cyclical products
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good times hurt demand for products and bad times help demand for products (ex - in bad times, ppl eat more hamburger and chicken than in good times)
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seasonality
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time of a year a product is produced and sold; affects price it affects demand (ex - school supplies)
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seasonal products
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affected by the seasons of the year (ex - swimsuits, lawn mower)
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non-seasonal product
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not affected by seasons
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natural evolution of customer needs and wants
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demand and supply evolve
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perceived absolute value of product
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create perception of product's value based on perceived benefits --> compare perceived value w/ product's price
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perceived relative value of product
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after customers perceive product has absolute value --> compare benefits and costs of product w/ benefits/costs of alt. products --> choose alt w/ best value
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bundling
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temporarily price products as a bundle to create perception of greater value (ex- make up bundles)
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promotion
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process of communicating to customers the absolute and relative values of product; informs, persuades, reminds customer of value
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communication process
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1-sender creates and sends msg 2-as msg goes through medium, its affected by noise (anything that interferes w/ understanding msg) 3-msg received --> receiver interprets it 4-receiver provides sender feedback w/ actions or no actions
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promotion process
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1-target market segment and customer 2-determine communication objective 3- design msg to be communicated 4- choose medium to communicate msg 5- execute by delivering the designed msg through the selected medium 6-collect and review feedback
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AIDA model
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msg should focus on customer attention, interest, desire, act (step 3 of promotion)
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promotional/marketing communications mix
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mix of advertising, sales promotion, personal selling, direct marketing techniques, PR used by a business to communicate a marketing msg
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advertising
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non-personal presentation of ideas about a product/line
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sales promotions
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techniques used to encourage the customer to buy the product immediately (ex-coupons, samples, displays)
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personal selling
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person interaction, intended to create a sale, btwn sales force and and potential customers 1- prospecting and qualifying potential customers 2- researching and understanding how to approach targeted customers 3- approaching targeted customers 4- approaching targeted customer and beginning buyer-seller relationship 5- presenting and demonstrating the product 6- dealing w/ customer concerns 7- completing or closing the sale 8- following up the sale to ensure customer satisfaction
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direct marketing
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used to get customers to purchase products from their home, office, or other non-retail settings (ex - direct mail, catalog, internet)
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public relations
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process of communicating to a business's public that the business creates a value for the public as a whole; positive image and publicity
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publicity
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info that creates an image of a business and its products
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promotional pull strategy
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where product producer uses a lot of advertising focused on ultimate customer; creates demand in customer that PULLS retailers into offering product
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promotional push strategy
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producer's promotional efforts are focused on retailers and other channel members --> channel members promote product to ultimate consumer; promotion pushes product from producer>retailer>consumer
