MKTG 3340 FLASHCARD (VERIFIED)

Alternative Growth Strategies: Marketing Penetration - increase of sales of current products in existing markets, focus on advertising, promotion, and price reductions Alternative Growth Strategies: Market Development - sell existing products to new markets (demographic segments or geographic markets) focus on distribution Alternative Growth Strategies: Product Development - sell a new product to current markets (often brand extensions) ex: starbucks introduces new summer products or PSL in the fall Alternative Growth Strategies: Diversification - develop and/or acquire new products and sell them in new markets. HIGH RISK! Alternative Consolidation Strategies Harvesting - -gradually decreasing the share of the company's resources that support the product -product is retained as long as it is profitable -reducing spending on one product and giving it to another Alternative Consolidation Strategies Pruning - -discontinuation of a product, the organization may continue to offer products in the same category of the existing market -cutting off one or more branches of the tree Alternative Consolidation Strategies Retrenchment - -continues to offer the same product lines but eliminates its weak demographic segments or geographic markets Ex: Barney's in Dallas, going back to core values Alternative Consolidation Strategies Divestment - -selling off high risk because there is a weak "fit" between the missions and competencies of the organization and the requirements for making the product successful ex: the company you purchased is not a good fit Product life cycle objectives - -Introduction: Gain awareness and product trial -Growth: Differentiate brand from competition -Maturity: Maintain brand loyalty -Decline: Deletion, harvesting Introduction - Promotion - Stimulate Primary Demand, Pricing if often high (Skimming) or low (Penetration) Growth - Pricing begins to get aggressive towards end of stage, advertising shifts to stimulate selective demand, improved strategies are added to the original design, intensive efforts given to establish long-term relationships with wholesalers and retailers - a fight for display and shelf space Maturity - A shake-out occurs as weaker competitors drop from the market, promotional efforts are reminder oriented, goal is to hold market share with further product differentiation, finding new buyers, or new uses Decline - Decrease the amount of money put into the product, but retain it if it is profitable Demographics: - age, gender, family size, marital status, income, education Geographic: - country, region, city, climate, population density Psychographics - LIFESTYLE opinions, interests, activities Behavioral - useage (heavy, medium, light users) can be applied to frequent flyer miles, commitment (brand-loyal, switchers, emergent consumers) prestige? passenger safety? fuel economy -benefits (product/service features and attributes) direct channel - no intermediaries (farmers market, buying a laptop from dell) indirect - having intermediaries (trader joes, travelocity) dual distribution - reaching different buyers by using 2+ types fo channels for a basic product common mistakes in pricing - -price is too cost oriented -not revised enough -Price hikes only happen every few years and shocks people and pushes them away from the product if it's steep -does not take into account the rest of the marketing mix -not varied enough throughout the product line, market segments, distribution channels marketers view of pricing - -price = a revenue stream -contribution to profits -communicates brand quality and image consumers view of pricing - price= something of value given up to obtain something of equivalent or greater value determining price - marketers perspective: -demand -cost consumers perspective -value received value equation - value= perceived benefits/price value pricing - the practice of simultaneously increasing product and service benefits and maintaining or decreasing price costs - -Psychological: mental stress (buying a car or house increases mental stress because of the negotiating) -Temporal: time (post office takes too long so people start to go to the ups store instead) -Monetary: the actual price we pay benefits - -Functional: -Social: what our peers think -Personal: intrinsic benefit from owning something (buying a car that makes you feel great when you drive it, making closets plush because you enjoy seeing your clothes look nice) Steps in Setting Price: - 1. Identify pricing constraints and objectives 2. Estimate demand and revenue 3. Determine cost, volume, and profit relationships Price Ceiling: - -High price - no possible demand at this price -Unique product features -Orientation point competitors' prices and prices of substitutes -If you have unique product features, you can price higher Price Floor: - -Low price - product costs; no profit Pricing Objectives - -Profit -Sales ($ or unit volume) - rare to talk unit -Market Share - if in a mature category -Survival - don't want it to be in survival long term -Social Responsibility - pricing on drugs that help diseases that only affect ~ 200,000 people (not really that necessary) Pricing Constraints - -Demand for product class, product, and/or brand -Newness of the product - stage in product life cycle -Single product vs. product line -Cost of producing and marketing the product -Competitor's' prices Dynamic Pricing - uber surge rate, happy hour -price changes from normal to higher or lower based off the day of the week/time of day Estimating Demand: Price - -driven by a change in price -shifts in demand curve can be driven by factors other than price price elasticity - -Elastic Demand - Product is price sensitive -The % change in quantity demanded is % change in price -Inelastic Demand - Product is NOT price sensitive -The % change in quantity demanded is % change in price -Unitary Demand - Sales revenue remains the same -The % change in quantity demanded = % change in price factors affecting price sensitivity - -A buyer = less sensitive when: -product is high in quality, prestige, or exclusiveness (if Audi increases their price by $3,000 people will still buy their cars) -Substitutes are hard to find -Total expenditure of product is low vs. buyer's income -Cost of product is shared by another party (if rent is increased by $200, individually that is a lot, but with 4 roommates that is easier to come to terms with) -Product durability -Supply and demand market share - measurement of a company's sales in a market relative to its competitors: company's unit sales or sales rev./sum of unit sales or sales rev. of all firms in the market management measures - Total Revenue - total sales dollars generated = unit selling price x Q sold Unit Sales = measure of sales volume (ounces, grams, gallons, liters, etc.) costs in marketing analysis - -Variable costs - expenses that vary directly with the quantity of product produced (packaging, cost of goods sold) -Fixed costs - expenses that are stable and don't change with the quantity of product produced (rent, insurance, etc.) -Total costs = (units sold x unit variable costs) + fixed costs unit contribution - amount of money that the sale of one unit will contribute to cover fixed costs and add the profit of a company unit selling price-unit variable costs= unit contribution profit - Profit = (unit contribution x unit sales) - fixed costs Total Sales Revenue - Total Sales Revenue = unit contribution x unit sales % Profit Margin - % Profit Margin = (SP - VC) / SP VC/unit - elling price/unit x (1-Profit margin %) Break-Even - fixed Cost/(Unit Selling Price - Unit VC (unit contribution)) Target Profit BEP - (FE + Profit Target)/Unit Contribution demand oriented approaches to price level - -weight customer tastes and preferences more heavily than costs, profits, and competition cost oriented approaches to price level - stress is on recovery of costs profit oriented approaches to price level - balances both cost and revenues to set price competition oriented approaches to price level - focus is on what the "market" or competition is doing in terms of price skimming pricing strategy (demand) - setting the highest initial price that customers are willing pay. As demand is satisfied, the firm decreased the price to attract another more price sensitive segment. effective when: -enough prospective buyers willing to pay the high prices -high initial price won't attract competitors -lowering price has minor effect on increasing sales volume and reducing unit costs -customers interpret high price as signifying high quality Penetration Pricing (Demand): - Setting low initial price to appeal to mass markets -Effective when: -many segments of the market are price sensitive -a low initial price discourages competitors from entering the market -unit production and marketing costs fall dramatically as production volume in