Intro to Marketing Chapter 5-10

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Market segmentation
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is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs
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Segmenting Consumer Markets
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• Geographic • Demographic • Psychographic • Behavioral ALL are major segmentation
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Geographic segmentation
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divides the market into different geographical units such as nations, regions, states, counties, or cities
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Demographic segmentation (MOST POPULAR)
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divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables
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Age and life-cycle stage segmentation
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(Part of Demographic segmentation) is the process of offering different products or using different marketing approaches for different age and life-cycle groups
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Gender segmentation
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(Part of Demographic segmentation) divides the market based on sex (male or female)
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Income segmentation
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(Part of Demographic segmentation) divides the market into affluent or low-income consumers
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Psychographic segmentation
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divides buyers into different groups based on social class, lifestyle, or personality traits
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Behavioral segmentation
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divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product • Occasion • Benefits sought • User status • Usage rate • Loyalty status
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Occasion segmentation
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divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product — ex: Orange juice
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Benefit segmentation
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requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit – ex: Toothpaste
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User Status
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divides buyers into ex-users, potential users, first-time users, and regular users of a product
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Usage Rate
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divides buyers into light, medium, and heavy product users – ex: cigarette smokers
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Loyalty Status
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divides buyers into groups according to their degree of loyalty
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To be useful, a market segment must be:
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• Measurable • Accessible • Substantial • Actionable
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Measurable
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examples include the size, purchasing power, and profiles of the segments – degree to be measured.
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Accessible
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refers to the fact that the market can be effectively reached and served
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Substantial
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refers to the fact that the markets are large and profitable enough to serve
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*Actionable
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refers to the fact that effective programs can be designed for attracting and serving the segments
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Selecting Target Market Segments
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• Undifferentiated marketing • Differentiated marketing • Concentrated marketing • Micromarketing
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Undifferentiated marketing
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targets the whole market with one offer • Mass marketing • Focuses on common needs rather than what’s different
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Differentiated marketing
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targets several different market segments and designs separate offers for each • Goal is to achieve higher sales and stronger position • More expensive than undifferentiated marketing
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Concentrated marketing
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targets a small share of a large market • Limited company resources • Knowledge of the market • More effective and efficient
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Micromarketing
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is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations • Local marketing • Individual marketing
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Product position
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is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products • Perceptions • Impressions • Feelings
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Product
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is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want • Soap • Toothpaste
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Service
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is a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership • Doctor’s exam • Legal advice
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Experiences
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represent what buying the product or service will do for the customer • Disney • American Girl • Toys “R” Us
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Core benefits
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represent what the buyer is really buying – ex: Toothpaste – clean teeth
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Actual product
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represents the design, brand name, and packaging that delivers the core benefit to the customer – ex: Toothpaste — Crest
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Augmented product
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represents additional services or benefits of the actual product – ex: warranty, delivery policy
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Consumer products
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are products and services for personal consumption • Classified by how consumers buy them • Convenience product • Shopping products • Specialty products • Unsought products
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*Convenience products
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are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort • Newspapers • Candy • Fast food
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*Shopping products
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are consumer products and services that the customer compares carefully on suitability, quality, price, and style • Furniture • Cars • Appliances
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*Specialty products
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are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort • Medical services • Designer clothes • High-end electronics
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Unsought products
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are consumer products that the consumer does not know about or knows about but does not normally think of buying • Life insurance • Funeral services • Blood donations
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Product attributes
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are the benefits of the product or service • Quality • Features • Style and design
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Quality level
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is the level of quality that supports the product’s positioning Product quality includes level and consistency
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Performance quality
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is the ability of a product to perform its functions
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Product features
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are a competitive tool for differentiating a product from competitors’ products Product features are assessed based on the value to the customer versus the cost to the company
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Brand
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is the name, term, sign, or design, or a combination of these, that identifies the maker or seller of a product or service Ex: JetBlue KFC
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Packaging
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involves designing and producing the container or wrapper for a product ex: Paul Mitchell • Primary container • Secondary container • Shipping package
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Label
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identifies the product or brand, describes attributes, and provides promotion • Identifies product • Grade product (Grade A) • Describe product • Promote product with graphics
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A firm can obtain new products through:
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• Acquisition • New-product development
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Acquisition
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refers to the buying of a whole company, a patent, or a license to produce someone else’s product
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*New product development
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refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development
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*New-Product Development Process
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1. Idea generation 2. Idea screening 3. Concept development and testing 4. Marketing strategy development 5. Business analysis 6. Product development 7. Test marketing 8. Commercialization
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New idea generation
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is the systematic search for new product ideas Sources of new-product ideas • Internal • External
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Internal sources
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refer to the company’s own formal research and development, management and staff, and intrapreneurial programs
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External sources
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refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms
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Idea screening
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refers to reviewing new- product ideas in order to spot good ideas and drop poor ones as soon as possible
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Product idea
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is an idea for a possible product that the company can see itself offering to the market
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Product concept
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is a detailed version of the idea stated in meaningful consumer terms
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Concept testing
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refers to new-product concepts with groups of target consumers
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Marketing strategy
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development refers to the initial marketing strategy for introducing the product to the market
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Marketing strategy statement steps:
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Part 1: Description of the target market Product positioning, sales, market share, and profit goals Part 2: Price, distribution, and budget Part 3: Long-term sales, profit goals, and marketing mix strategy
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Business analysis
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involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives
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Product development
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involves the creation and testing of one or more physical versions by the R&D or engineering departments • Requires an increase in investment
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Test marketing
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is the stage at which the product and marketing program are introduced into more realistic marketing settings Test marketing provides the marketer with experience in testing the product and entire marketing program before full introduction
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Commercialization
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is the introduction of the new product • When to launch • Where to launch • Planned market rollout
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Product life cycle (PLC)
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is the course that a product’s sales and profits take over its lifetime • Product development • Introduction • Growth • Maturity • Decline
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Introduction stage
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is when the new product is first launched • Takes time • Slow sales growth • Little or no profit • High distribution and promotion expense
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Growth stage
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is when the new product satisfies the market • Sales increase • New competitors enter the market • Price stability or decline to increase volume • Consumer education • Profits increase • Promotion and manufacturing costs gain economies of scale • Product quality increases • New features • New market segments and distribution channels are entered
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Maturity stage
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is a long-lasting stage of a product that has gained consumer acceptance • Slowdown in sales • Many suppliers • Substitute products • Overcapacity leads to competition • Increased promotion and R&D to support sales and profits
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Decline stage
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is when sales decline or level off for an extended time, creating a weak product • Maintain the product • Harvest the product • Drop the product
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Price
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is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service. The only element in the marketing mix that produces revenue; all other elements represent costs
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Value-based pricing
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uses the buyers’ perceptions of value, not the seller’s cost, as the key to pricing. Price is considered before the marketing program is set. • Value-based pricing is customer driven • Cost-based pricing is product driven
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Cost-based pricing
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involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk adds a standard markup to the cost of the product Ex: 10% for all projects OR 25%
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Market skimming pricing
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is a strategy with high initial prices to “skim” revenue layers from the market • Product quality and image must support the price • Buyers must want the product at the price • Costs of producing the product in small volume should not cancel the advantage of higher prices • Competitors should not be able to enter the market easily
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Market penetration pricing
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sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share • Price sensitive market • Inverse relationship of production and distribution cost to sales growth • Low prices must keep competition out of the market
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Product line pricing
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takes into account the cost differences between products in the line, customer evaluation of their features, and competitors’ prices – ex: GAP Inc.
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Optional product pricing
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takes into account optional or accessory products along with the main product – ex: Buying a car
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Captive product pricing
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involves products that must be used along with the main product – ex: Gillette or Polaroid
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Discounts:
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• Quantity • Seasonal discount • Timing pricing • Promotional pricing
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Quantity Discount
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reduces prices to buyers who buy large volumes Ex: Costco
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Seasonal Discount
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reduces prices to buyers who purchase merchandise or services out of season Ex: Christmas things after holidays Swimwear after summer
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Timing Discount
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reduces prices to buyers who based on month, day, even hour. Ex: Movie theaters – matinee pricing Cell phones
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Promotional Discount
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temporarily reduces prices below list price to increase short-run sales. Ex: Airline tickets
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Salespeople
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can include an order taker such as someone standing behind the counter or an order getter whose position demands more creative selling and relationship building Salespeople can be more effective than advertising • Learn about customer problems and adjust the marketing offer and presentation accordingly to meet the special needs of each customer Salespeople are an effective link between the company and its customers to produce customer value and company profit by: • Representing the company to customers • Representing customers to the company
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Sales promotion
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is the short-term incentives to encourage the purchase or sale of a product or service • Discounts • Coupons • Displays • Demonstrations
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Major Sales Promotion Tools
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• Consumer promotion tools • Trade promotion tools
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Samples
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offer a trial amount of a product
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Coupons
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are certificates that give buyers a saving when they purchase specified products
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Cash refunds
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are similar to coupons except that the price reduction occurs after the purchase
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Contests, sweepstakes, and games
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give consumers the chance to win something, such as cash, trips, or goods, by luck or through extra effort • Contests require an entry by a consumer • Sweepstakes require consumers to submit their names for a drawing • Games present consumers with something that may or may not help them win a prize
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Trade promotion tools persuade resellers to:
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• Carry a brand • Give the brand more shelf space • Promote the brand in advertising • Push the brand to consumers
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Trade promotion tools include:
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• Discount • Allowance • Free goods • Specialty advertising
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Direct marketing
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consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships • No intermediaries • An element of the promotion mix • Fastest-growing form of marketing
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Forms of Direct Marketing
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• Personal selling direct marketing • Direct-mail direct marketing • Catalog direct marketing • Telephone marketing • Direct-response television marketing • Kiosk marketing • Digital direct marketing • Online marketing
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Direct-mail marketing
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involves an offer, announcement, reminder, or other item to a person at a particular address • Personalized • Easy-to-measure results • Costs more than mass media • Provides better results than mass media
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Catalog direct marketing
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involves printed and Web-based catalogs
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Benefits of Web-based catalogs
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• Lower cost than printed catalogs • Unlimited amount of merchandise • Real-time merchandising • Interactive content • Promotional features
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Challenges of Web-based catalogs
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• Require marketing • Difficulties in attracting new customers
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*Telephone direct marketing (telemarketing)
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involves using the telephone to sell directly to consumers and business customers • Outbound telephone marketing sells directly to consumers and businesses • Inbound telephone marketing uses toll-free numbers to receive orders from television and print ads, direct mail, and catalogs
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Direct-response television (DRTV) marketing
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involves 60- to 120-second advertisements that describe products or give customers a toll-free number or Web site to purchase and 30-minute infomercials such as home shopping channels • Less expensive than other forms of promotion • Easier to track results
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Kiosk marketing
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involves placing information and ordering machines in stores, airports, trade shows, and other locations
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Mobile phone marketing includes:
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• Ring-tone giveaways • Mobile games • Ad-supported content • Contests and sweepstakes
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Podcasts and Vodcasts
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involve the downloading of audio and video files via the Internet to a handheld device such as a PDA or iPod and listening to them at the consumer’s convenience
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Interactive TV (ITV)
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lets viewers interact with television programming and advertising using their remote controls and provides marketers with an interactive and involving means to reach targeted audiences
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Internet
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is a vast public web of computer networks that connects users of all types around the world to each other and to a large information repository
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Online Marketing Domains
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• Business to consumer (B2C) • Business to business (B2B) • Consumer to consumer (C2C) • Consumer to business (C2B)
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Business to consumer (B2C)
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involves selling goods and services online to final consumers
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Business to business (B2B)
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involves selling goods and services, providing information online to businesses, and building customer relationships
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*Consumer to consumer (C2C)
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occurs on the Web between interested parties over a wide range of products and subjects • Blogs • Offer a fresh, original, and inexpensive way to reach fragmented audiences • Difficult to control
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Consumer to business (C2B)
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involves consumers communicating with companies to send suggestions and questions via company Web sites
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Click-only marketers
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operate only online without any brick and mortar presence • E-tailers • Search engines and portals • Shopping or price comparison sites • Internet service providers (ISP) • Transaction sites • Content sites
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E-tailers
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are dot coms that sell products and services directly to final buyers via the Internet • Amazon • Expedia
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Search engines and portals
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are ports of entry to the Internet • Yahoo! • Google
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Click-and-mortar
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companies are brick-and-mortar companies with an online presence Advantages of click and mortar companies include: • Known and trusted brand names • Strong financial resources • Large customer bases • Industry knowledge • Reputation • Strong supplier relationships • More options for customers
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Corporate Web site
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is designed to build customer goodwill and to supplement other channels, rather than to sell the company’s products directly to: • Provide information • Create excitement • Build relationships
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Integrated direct marketing
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involves the use of carefully coordinated multiple-media, multiple-stage campaigns
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*Distribution channel OR Marketing channel
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is a set of independent organizations that help make a product or service available for use or consumption by the consumer or business users
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Market Intermediaries
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are people or organizations that help get products to the final consumer. They are sometimes called middle men.
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*Direct marketing channel
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has no intermediary levels; the company sells directly to consumers
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*Indirect marketing channels
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contain one or more intermediaries
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Intensive distribution
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is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible
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Exclusive distribution
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is a strategy in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories • Luxury automobiles • High-end apparel
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Selective distribution
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is a strategy when a producer uses more than one but fewer than all of the intermediaries willing to carry the producer’s products • Televisions • Appliances
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Physical Distribution (Marketing logistics)
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involves 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
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Retailing
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includes all the activities in selling products or services directly to final consumers for their personal, non-business use
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Retailers
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are businesses whose sales come primarily from retailing
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*Specialty stores
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carry narrow product lines with deep assortments within the product lines
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*Department stores
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carry a wide variety of product lines
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Convenience stores
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carry a limited line of high-turnover convenience goods
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Superstores
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offer a large assortment of routinely purchased food products, non food items, and services
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Supercenters
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have very large combination food and discount stores
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Discount stores
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sell standard merchandise at lower prices by accepting lower margins and selling higher volume
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Factory outlets
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are producer-operated stores
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Warehouse clubs
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are large warehouse-like facilities with few frills and offer ultra-low prices
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Direct Marketing
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selling your product directly to consumers.
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Direct Selling/Non-store retailing includes selling to final consumers through:
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• Direct mail • Catalogs • Telephone • Internet • TV shopping • Home and office parties • Door-to-door sales • Vending machines
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Wholesaling
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All the activities involved in selling goods and services to those buying for resale or business use. — Selling to other businesses who sell to consumers.
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The promotion mix
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is the specific blend of advertising, public relations, personal selling, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships
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Major Promotion Tools
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• Advertising • Sales promotion • Public relations • Personal selling • Direct marketing
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Advertising
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is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor • Broadcast • Print • Internet • Outdoor
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Public relations
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involves building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events • Press releases • Sponsorships • Special events • Web pages
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Personal selling
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is the personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships • Sales presentations • Trade shows • Incentive programs
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Direct marketing
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involves making direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships—by using direct mail, telephone, direct-response television, e-mail, and the Internet to communicate directly with specific consumers • Catalog • Telemarketing • Kiosks
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Integrated marketing communication
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is the integration by the company of its communication channels to deliver a clear, consistent, and compelling message about the organization and its brands Integrated marketing communication calls for recognizing all contact points (brand contact) where the customer may encounter the company and its brands
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*The Communications Process
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1. Sender 2. Encoding 3. Message 4. Media 5. Decoding 6. Receiver 7. Response 8. Feedback 9. Noise
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Sender
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is the party sending the message to another party
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Encoding
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is the process of putting thought into symbolic form
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Message
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is the set of symbols the sender transmits
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Media
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is the communications channels through which the message moves from sender to receiver
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Decoding
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is the process by which the receiver assigns meaning to the symbols
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Receiver
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is the party receiving the message sent by another party
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Response
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is the reaction of the receiver after being exposed to the message
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Feedback
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is the part of the receiver’s response communicated back to the sender
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Noise
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is the unplanned static or distortion during the communication process, which results in the receiver’s getting a different message than the one the sender sent
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Major functions in the Communication Process include:
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Encoding; Decoding; Response and Feedback
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Effective Communication steps
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1. Identify the target audience 2. Determine the communication objectives 3. Design the message 4. Choose the media 5. Select the message source 6. Collect feedback
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Message content
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is an appeal or theme that will produce the desired response • Rational appeal • Emotional appeal • Moral appeal
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Rational appeal
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relates to the audience’s self- interest – ex: Pine Sol
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Emotional appeal
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is an attempt to stir up positive or negative emotions to motivate a purchase – ex: Alarms
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Moral appeal
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is directed at the audience’s sense of right and proper – ex: AIDS
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Developing Advertising Programs
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• Setting advertising objectives • Setting the advertising budget • Developing advertising strategy • Evaluating advertising campaigns
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*Advertising Objective
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is a specific communication task to be accomplished with a specific target audience during a specific time Objectives are classified by primary purpose • Inform • Persuade • Remind
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*Informative advertising
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is used when introducing a new product category; the objective is to build primary demand
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Comparative advertising
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directly or indirectly compares the brand with one or more other brands
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*Persuasive advertising
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is important with increased competition to build selective demand
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Reminder advertising
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is important with mature products to help maintain customer relationships and keep customers thinking about the product
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Factors to consider when setting the budget
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• Product life-cycle stage • Market share
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Reach
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is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time
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Frequency
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is a measure of how many times the average person in the target market is exposed to the message
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Selecting media vehicles
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involves decisions that present the media effectively and efficiently to the target customer and must consider the message’s: • Impact • Effectiveness • Cost
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Communication effects
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indicate whether the ad and media are communicating the ad message well and can be tested before or after the ad runs
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Sales and profit effects
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compare past sales and profits with past expenditures or through experiments

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