Marketing and Finance - Flashcards

Q: Marketing Plan

The marketing plan is a key component of a firm\'s overall business strategy The marketing plan outlines its marketing strategy, including information about: Target market Sales and revenue goals The marketing budget Timing for implementing elements of the marketing mix.

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What is Marketing

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A set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing begins with discovering unmet customer needs and continues with researching the potential market Producing a good or service capable of satisfying the targeted customers; and promoting, pricing, and distributing that good or service. Marketing is more than just selling. It is research, production, promotion, pricing, and distribution.

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Exchange process

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- activity in which two or more parties give something of value to each other to satisfy perceived needs.

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Utility

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: the ability of a good or service to satisfy a wants and needs of customers

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Create form

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utility by converting raw materials and other inputs into finished goods and services

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Create time

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utility by making a good or service available when customers want to purchase it

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Create place

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Create place utility by making a product available in a location convenient for customers

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Create ownership

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Create ownership utility through an orderly transfer of goods and services from the seller to the buyer

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Marketing Concept

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- company-wide consumer orientation to promote long-run success. Firm starts with analysis of customers' needs and works backward to offer products that fulfill them. Firm Explained by shift from sellers' market in which goods and services are relatively scarce to buyers' market in which they are relatively plentiful.

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Cause for non traditional marketing

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- promotes awareness or raises money for a cause or issue

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Marketing Plan

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The marketing plan is a key component of a firm's overall business strategy The marketing plan outlines its marketing strategy, including information about: Target market Sales and revenue goals The marketing budget Timing for implementing elements of the marketing mix.

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Target Marketing

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group of people toward whom an organization markets its goods, services, or ideas with a strategy designed to satisfy their specific needs and preferences

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Types of Markets

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Consumer (B2C) product: good or service that is purchased by end users Business (B2B) product: good or service purchased to be used, either directly or indirectly, in the production of other goods for resale

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Product Strategy

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the nature of the product and its package design, brand names, trademarks, and product image.

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Distribution strategy

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customers receive their purchases in the proper quantities at the right times and locations.

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Promotional strategy

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blends advertising, personal selling, sales promotion, and public relations to achieve its goals of informing, persuading, and influencing purchase decisions

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Pricing Strategy

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is setting profitable and justifiable prices for the firm's product offerings, sometimes subject to government scrutiny.

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Standardization

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offering the same marketing mix in every market.

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Adaption

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- developing a unique marketing mix to fit each market's local competitive conditions, consumer preferences, and government regulations.

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Mass customization

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- allows a firm to mass produce goods and services while adding unique features to individual or small groups of orders.

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Marketing Research

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- the process of collecting and evaluating information to support marketing decision making. AC Nielson- Consumer Research

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Secondary Data

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Previously published data from trade associations, advertising agencies, marketing research firms, and other sources.

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Primary Data

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Data collected through observation, surveys, and other forms of observational study.

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Data Mining

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- computer searches of customer data to detect patterns and relationships

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Business intelligence

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activities and technologies for gathering, storing, and analyzing data to make better competitive decisions

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Market segmentation

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- the process of dividing a total market into several relatively homogeneous groups to reach desirable target markets.

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Geographic Segmentation

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Divides market into homogeneous groups on the basis of their locations

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Demographic Segmentation

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Divides market on the basis of various demographic or socioeconomic characteristics: gender, income, age, occupation, household size, stage in the family life cycle, education, and ethnic group

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Psychographic Segmentation

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Divides consumer market into groups with similar psychological characteristics, values, and lifestyles. (VALS) AIO statements—people's verbal descriptions of various attitudes, interests, and opinions

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Product-Related Segmentation

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Divides market based on buyer's relationship to the good or service. based on benefits sought by buyers, usage rates, and loyalty levels

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Geographic

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- many B2B target geographically concentrated industries such as aircraft or automobiles. Demographic, or customer-based, segmentation- a good or service intended for a specific organizational market (i.e. healthcare).

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customer-based, segmentation

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- a good or service intended for a specific organizational market (i.e. healthcare). End-use segmentation - focuses on the precise way a B2B purchaser will use a product.

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End-use segmentation

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focuses on the precise way a B2B purchaser will use a product.

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Consumer Behavior

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- actions of ultimate consumers directly involved in obtaining, consuming, and disposing of products and the decision processes that precede and follow these actions

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Personal Factors

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Personal factors: needs and motives, perceptions, attitudes, self-concept

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Interpersonal factors

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cultural, social, and family influences

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External Factors

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Economic Events

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Business buying behavior

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often includes a variety of influences from multiple decision makers

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Relationship Marketings

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goes beyond the effort of simply making a sale Developing and maintaining long-term, cost-effective exchange relationships with partners Consumers enter into relationships only if there is some benefit to them. Relationship marketing seeks to achieve customer satisfaction

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Benefits of Relationship Marketing

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Lower costs and higher profits for the business

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80/20 principle

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frequent customers have a higher lifetime value, so businesses allocate resources accordingly

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Frequency marketing

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reward purchasers with cash, rebates, and other premiums. See Walgreen's Balance Rewards Loyalty program.

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Affinity programs

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solicit involvement based on common interest

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Comarketing:

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businesses jointly market each others' products

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Co-branding

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firms link their names in a single product

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Product

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a bundle of physical, service, and symbolic characteristics designed to satisfy consumer wants

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Convenience products-

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items the consumer seeks to purchase frequently, immediately, and with little effort

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Shopping Products

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- typically purchased only after the buyer has compared competing products in competing stores

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Specialty Items

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items a purchaser is willing to make a special effort to obtain

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Accessory equipment-

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includes less expensive and shorter-lived capital items than installations and involves fewer decision makers

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Component parts and materials-

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become part of a final product

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Raw materials-

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farm and natural products used in producing other final products

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Supplies

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expense items used in a firm's daily operations that do not become part of the final product

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Marketing Strategy Implications

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In B2B there is a greater emphasis on personal selling for installations and many component parts and a concentration on quality and customer service. Producers of installations and component parts may involve customers in new-product development. Advertising is more commonly used to sell supplies and accessory equipment. Producers of supplies and accessory equipment place a greater emphasis on competitive pricing strategies.

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Product line

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- a group of related products marked by physical similarities or intended for a similar market

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Product Mix

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assortment of product lines and individual goods and services a firm offers to consumers and business users

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Product cycle

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four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses

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Intro Stage

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firm promotes demand for its new offering; informs the market about it; gives free samples to entice consumers to make a trial purchase; and explains its features, uses, and benefits.

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Growth Stage

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sales climb quickly as new customers join early users who are repurchasing the item. company begins to earn profits on the new product

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Maturity stage-

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industry sales eventually reach a saturation level at which further expansion is difficult.

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Decline Stage

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sales fall and profits decline.

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Marketer's Goal

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Increasing customers' frequency of use Adding new users Finding new uses for product Changing package sizes, labels, and product designs

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Product Development Stages

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Stage 1: Generating ideas for new offerings Stage 2: Screening Stage 3: Concept development and business analysis phase Stage 4: Product development Stage 5: Test marketing Stage 6: Commercialization

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Manufacturer's brand-

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brand offered and promoted by a manufacturer. Examples: Tide, Cheerios, Windex, Fossil, and Nike.

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Private or store brand-

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brand that is not linked to the manufacturer but instead carries a wholesaler's or retailer's label. Examples: Sears' DieHard batteries and Walmart's Ol'Roy dog food.

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Family branding strategy-

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a single brand name used for several related products. Examples: KitchenAid, Johnson ; Johnson, Hewlett-Packard, and Arm ; Hammer.

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Individual branding strategy-

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giving each product within a line a different name. Examples: Procter ; Gamble products Tide, Cheer, and Dash

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Brand Recognition

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consumer is aware of the brand but does not have a preference for it over other brands

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Brand preference-

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consumer chooses one firm's brand over a competitor's

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Brand insistence-

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consumer will seek out preferred brand and accept no substitute for it (the ultimate degree of brand loyalty)

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Brand Equity

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added value that a respected and successful name gives to a product

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Brand awareness-

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product is the first one that comes to mind when a product category is mentioned

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Distribution channel

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path through which products—and legal ownership of them—flow from producer to consumers or business users

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Physical distribution

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: actual movement of products from producer to consumers or business users

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Direct Distribution

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Direct contact between producer and customer. Most common in B2B markets. Often found in the marketing of relatively expensive, complex products that may require demonstrations. Internet is helping companies distribute directly to consumer market.

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Distribution Channels Using Marketing Intermediaries

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Producers distribute products through wholesalers and retailers. Inexpensive products sold to thousands of consumers in widely scattered locations. Lowers costs of goods to consumers by creating market utility

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Wholesaler

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distribution channel member that sells primarily to retailers, other wholesalers, or business users

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Manufacturer

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Manufacturer-Owned Wholesaling Intermediaries Owned by the manufacturer of the goods or products to control distribution or customer service Sales branch that stocks products and fills orders from inventories Sales office that takes orders but does not stock the product

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Retailer

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channel member that sells goods and services to individuals for their own use rather than for resale Final link of the distribution channel Two types: Store Nonstore

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Nonstore Retailing

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Direct response retailing Internet Retailing Automatic merchandising Direct selling

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Distribution Channel Decisions and Logistics

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What specific channel will it use? What will be the level of distribution intensity? Selecting Distribution Channels Complex, expensive, custom-made, or perishable products move through shorter distribution channels involving few—or no—intermediaries. Standardized products or items with low unit values usually pass through relatively long distribution channels. Start-up companies often use direct channels because they can't persuade intermediaries to carry their products, or because they want to extend their sales reach.

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Intensive distribution

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firm's products in nearly every available outlet; requires cooperation of many intermediaries

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Selective Distribution

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Selective Distribution - manufacturer selects limited number of retailers to distribute its product lines

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Exclusive distribution -

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Exclusive distribution - limits market coverage in a specific geographic region

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Supply Chain

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- complete sequence of suppliers that contribute to creating a good or service and delivering it to business users and final consumers

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Logistics

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Logistics - process of coordinating the flow of goods, services, and information among members of the supply chain

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Physical Distribution

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- the activities aimed at efficiently moving finished goods from the production line to the consumer or business buyer

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Promotion

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Promotion is the function of informing, persuading, and influencing a purchase decision.

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Primary Demand

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Some promotional strategies try to develop primary demand, or consumer desire for a general product category.

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Selective Demand

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Most promotions stimulate selective demand, or a desire for a specific brand

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Integrated marketing communications (IMC)

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is the coordination of all promotional activities—media advertising, direct mail, personal selling, sales promotion, and public relations—to produce a unified, customer-focused message. Must take a broad view and plan for all form of customer contact. Create unified personality and message for the good, service, or brand. Elements include personal selling, advertising, sales promotion, publicity, and public relations

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Promotional mix-

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combination of personal and nonpersonal selling components designed to meet the needs of their firm's target customers and effectively and efficiently communicate its message to them.

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Personal Selling

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the most basic form of promotion: a direct person-to-person promotional presentation to a potential buyer

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Nonpersonal selling-

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advertising, sales promotion, direct marketing, and public relations

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Product placement-

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marketers pay placement fees to have their products showcased in various media, ranging from newspapers and magazines to television and movies.

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Guerilla marketing-

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innovative, low-cost marketing efforts designed to get consumers' attention in unusual ways

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Advertising-

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Advertising- paid nonpersonal communication usually targeted at large numbers of potential buyers. Advertising expenditures are great- carmakers spend $20 billion per year. Consumers are bombarded with many messages. Firms need to be more and more creative and efficient at getting consumers' attention.

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Product advertising-

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Product advertising- messages designed to sell a particular good or service

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Institutional advertising-

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Institutional advertising- messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities

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Cause advertising

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Cause advertising- institutional messaging that promotes a specific viewpoint on a public issue as a way to influence public opinion and the legislative process

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Informative advertising

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- used to build initial demand for a product in the introductory phase

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Persuasive advertising

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- attempts to improve the competitive status of a product, institution, or concept, usually in the growth and maturity stages

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Comparative advertising

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Comparative advertising- compares products directly with their competitors either by name or by inference

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Reminder-oriented advertising

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Reminder-oriented advertising - appears in the late maturity or decline stages to maintain awareness of the importance and usefulness of a product

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Sales promotion

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consists of forms of promotion such as coupons, product samples, and rebates that support advertising and personal selling.

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Trade Promotion

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is sales promotion geared to marketing intermediaries rather than to consumers

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Encourage Retailers

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To stock new products To continue carrying existing ones To promote both new and existing products effectively to consumers

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Sales Tasks

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Order Processing Creative Selling Missionary Selling Telemarketing

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Follow up

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An important part of building a long-lasting relationship. May determine whether the customer will make another purchase.

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Public relations

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- a public organization's communications and relationships with its various audiences. Is an efficient, indirect communications channel for promoting products. It can publicize products and help create and maintain a positive image of the company.

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Publicity-

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nonpersonal stimulation of demand for a good, service, place, idea, event, person, or organization by unpaid placement of information in print or broadcast media. Good publicity can promote a firm's positive image. Negative publicity can cause problems.

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Pushing Strategy

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Pushing Strategy relies on personal selling to market an item to wholesalers and retailers

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Pulling Strategy

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Pulling Strategy promotes a product by generating consumer demand for it through advertising and sales promotion Most marketing situations require combinations of push and pull strategies Cooperative advertising - allowance provided by marketers in which they share the cost of local advertising of their firm's product or product line with channel partners.

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Breakeven analysis-

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pricing technique used to determine the minimum sales volume a product must generate at a certain price level to cover all costs. Slide 32

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Finance

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planning, obtaining, and managing the company's funds in order to accomplish its objectives

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finance organization

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To maximize revenues and profits, organizations are measuring and reducing costs - a function managed by the finance organization

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An organization's financial objectives include

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Meeting expenses Investing in assets that increase value Increasing value/cash flow to shareholders

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Risk-Return Tradeoff

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The process of maximizing the wealth of the firm's shareholders by striking the optimal balance between risk and return. Relying too heavily on borrowed funds may increase returns to shareholders The more money a firm borrows, the greater the risks to shareholders. Failure to invest surplus funds in an income-earning asset reduces the potential of a return

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Opearting Planning

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short term 2-3yrs

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Strategic

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plans have a much longer time horizon up to five or ten years.

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Financial Plan

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What funds will the firm require during the planning period? When will it need additional funds? Where will it obtain the necessary funds? What to do with excess Funds Financial plans are based on the forecasts of costs and expected sales activities for a given period.

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Debt Capital

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funds obtained through borrowing

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Equity Capital

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investment in the firm in exchange for ownership.

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Capital structure

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- the mix of a firm's debt and equity capital

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Principle of Leverage:

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increasing the rate of return on funds invested by borrowing funds. A company's earnings must be greater than its interest payments. Figure 17.2 shows earnings for two identical firms who choose to raise funds by leverage and equity.

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Dividends

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Dividends are periodic cash payments to shareholders Companies are under no legal obligation to pay dividends to shareholders Earnings that are paid in dividends are not reinvested in the firm and don't contribute additional equity capital. Highest dividend yielding stocks

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Trade Credit

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- extended by suppliers when a firm receives goods or services, agreeing to pay for them at a later date

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Short-Term Loans

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line of credit and revolving credit agreement

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Commercial Paper

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- large, financially strong corporations sell a short-term, unsecured IOU in multiples up to $1 million to investors

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Equity Financing

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selling stock in the firm or reinvesting company profits Public Sale of Stocks and Bonds Private Placements Venture Capitalists Private Equity Funds Hedge Funds

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Acquisition

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one firm buys the assets and assumes the obligations of another firm. Leveraged Buyouts Divestiture Sells off/Spin-off

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Real Estate Example

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Find a vacant lot for $50,000 Real Estate agent thinks there is a shortage of office buildings in one year Building will be worth $420,000 in a year The cost of building the building will be $320,000 Is this a good investment? I.E. investng $370,000 and get $420,000 in one year

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