PART I

Marketing - process of determining goods or services that there is a demand for, and then developing, pricing,
distributing, and promoting those products and services to make a profit. Bring product/service to market.

Market - customers for a product or service, or the town, region, or country where a demand for a specific product or
service exists and people who have ability to buy.

Commodities offered for sale are known as products, and can include goods, services, information, places, etc.

Loss Leader - pricing strategy which involves selling products/services at a price that will generate little or no profit
and in some cases not even cover all associated costs.Selling at below cost. The idea is to attract customers to the
business via a bargain who may then purchase other products/services. Selling other items that generate high profits
makes up for the Loss Leader pricing.

Marketing Concept management philosophy that states an organization should try to provide
products that satisfy customers' needs while achieving its own goals

6 Primary Marketing Functions:

1. Environmental Analysis (Market Research Function)- used to determine market potential for
product & identify specific target markets. Collects info about forces in marketing environment &
analyzing data to determine possibilities in market linked to environmental chances.

Environmental Scanning - Collecting information about the forces in the marketing environment. (i.e,
threats/opportunities). Data is used for Environmental Analysis. Organizations can perceive forces as
unchangeable, try to adapt to them, or try to mold forces (i.e, if law reduces product marketability, can try to
lobby for chg in legislation, etc.)

2. Consumer Analysis (Market Research Function)(same as above) both environmental &

consumer analysis involve factors which cannot be directly controlled by the organization.

Next 4 are also the variables that make up Marketing Mix: (known as 4 Ps):
3. Price establishing the value the customer receives in a sale. Critical component as customers
are concerned about the value obtained in an exchange. Sometimes lower prices are used to win
customers, and other times high prices are necessary to maintain the prestigious image of a
product.
4. Product Designing a product (i.e,, good/service/idea) that fits customers needs and making
something which has their desired characteristics
5. Promotion involves informing one or more groups of people about an organization and its
products. Activities aimed at increasing public awareness about an organization or one of its
products, keeping interest strong in an established product, educating consumers about product
features, etc.
6. Physical Distribution - making products available in the desired quantities to as many customers as
possible while keeping inventory, transportation, and storage costs as low as possible.

Marketing Mix - A marketing manager decides what type of each component to use and in what
amounts, and this "mix" reflects the strategy of an organization's marketing program.

Marketing Concept - to achieve the organization's goals, the company should try to identify
customers' wants and needs, and satisfy them. Consists "four Ps" (variables): product, price,
promotion, and physical distribution. An organization creates a marketing mix for a specific market
they are targeting--a target market.

Conjoint analysis - is used to estimate the value people place on specific attributes or features of
products and services. Products are essentially bundles of attributes such as price and color. The goal of
any conjoint survey is to assign specific values to the range of options buyers consider when making a
purchase decision.
Market Segmentation - process of dividing a total (heterogenous) market into market groups
consisting of people who have relatively similar (homogenous) product needs. Dividing a certain market
into segments, based on what people need. For example, for someone selling cars, part of the market
may want economy cars, another part might want big vans, and a third part may want a status symbol.
The company would segment that market into three segments, and develop a marketing mix for each.
The reason for segmenting a market is that an organization can better develop a marketing mix that
satisfies a small, similar group of people instead of trying to develop something that appeals to a broad,
diverse group.

A Market Segment - consists of individuals, groups, or organizations with one or more similar
characteristics that cause them to have relatively similar product needs.

A Target Market - a group of people that an organization creates a marketing mix for, which is
designed to meet their specific needs and preferences. A group of people that an organization is trying
to target with their marketing. It can be a market segment, or a mass market, and they are expected to
respond similarly to the same marketing mix. Characteristics used to identify them need to be
measurable.

Product Differentiation - the strategy where a company promotes the features of its product over the features of a
competing product in the same market. Trying to get consumers to see a product or brand as different from its
competitors, whether that difference be a tangible or intangible characteristic.

Product Positioning - decision and activities intended to create and maintain a certain impression of the company's
product relative to competitive brands in customers' minds. About consumer perceptions, not actual differences
between products, and involves shaping a certain image of a product in customer's minds.

Banner Ads on Internet website is measured through the number of click-throughs. "Click-throughs" is the number of
times visitors to a Web site click on an advertisement and go to the advertiser's Web site.

Marketing Plan - written document or blueprint governing all of a company's marketing activities, including the
implementation and control of those activities. Identifies target markets and includes environmental analysis and the
identified problems, opportunities, and threats, and specifies guidelines for developing the marketing mix. Basically, it's
a road map for implementing the organization's strategies and achieving its objectives.

To develop a Marketing Plan, an organization first needs to conduct situation analysis--identifying the opportunities
and threats posed by the marketing environment, how the company compares to the competition, etc.

Situation analysis - involves analyzing the current situation, the big picture, and developing a marketing plan which
involves objectives that are tailored to the marketing environment and considers the company's strengths and
weaknesses.

Marketing Objective - statement of what is to be accomplished through marketing activities. Goal of the firm, and can
either be quantitative, such as achieving a certain profit, or qualitative--i.e. corporate image. Should be specific and
stated in a way that its accomplishment can be measured accurately, and specify a time period for it to be done in.

Marketing Environment - made up of forces which affect a company's marketing strategy. Some of these forces are
controllable, and can be managed by the company; others are uncontrollable. Analyzed through environmental
analysis to determine the forces in the environment which affect the company and its products. Forces which impact all
the companies in an industry are known as Macroenvironmental factors, versus Microenvironmental factors, which are
unique to a specific company.

Macroenvironmental factors - forces which affect all firms in an industry, not just a specific company, and include
demographics, economic conditions, technological factors, political factors, social and cultural factors, material supply,
etc.
Microenvironmental factors - include things such as the Target Market, Suppliers, and other external forces which
are specific to each company. They are largely uncontrollable, but can sometimes be influenced to some degree, while
macroenvironmental factors are completely uncontrollable forces.

Companies have no direct control over environmental forces; they have to tailor their marketing mixes and choose
target markets in response to the environment. Companies' primary means of response to forces in the environment is
to change what they have direct control over--internal resources and what kind of decisions they make. They make up
marketing mixes and choose what markets to target based on environmental analysis and the threats and
opportunities it reveals.

Marketing strategy - encompasses selecting and analyzing a target market, as well as creating and maintaining an
appropriate marketing mix to satisfy that market. A manager develops a marketing strategy by analyzing the marketing
environment for opportunities, and using that information to select a target market and develop a marketing mix to
target that group of people. Basically, a marketing strategy articulates a plan for the best use of the organization's
resources to meet its objectives, and this plan involves a marketing mix for a target market.

Product/Market Opportunity Matrix - identifies the 4 fundamental marketing strategies available to

a company:
1. Market Penetration - involves increasing sales of existing products in its current market,
whether it be through better use of distribution, promotion, pricing, etc.. Involves current
products in a current market.
2. Market Development - involves introducing existing products into new markets. This one deals
with present products in new markets.
3. Product Development - involves developing new products and offering them to the company's
current markets. New product in one of the company's present (existing) markets.
4. Diversification - involves offering/selling new products to new markets.

Market Power - If an organization's product is of critical importance to customers, and it would be

expensive for them to switch to another company's product. Has greater influence over the
intermediaries in its distributing channel.

Boston Consulting Group Matrix - defines 4 classes a company's product can fall into, as a function
of high and low market share relative to the competition versus high and low market growth rate:
1. Star - generates large profits, but it is in a high growth market, and requires substantial
resources to maintain its growth. Has a big share of the market in a high growth market--it
generates a lot of profit, but it costs a lot to keep up with the rapidly growing market
2. Problem child (aka: question mark)- product that does not provide much profit, but
requires substantial resources as it is in a high-growth market. Has a low share of a high-
growth market--they consume resources but generate little in return.
3. Cash Cow - generates large profits, but is in a low-growth market and requires little
investment. They have a large market share in a slow-growth market, and they generate
much more than is invested in them.
4. Dog - Products with low profitability in a slow-growth market. Product that has a small share
of a slow-growth market; not much needs to be invested in them, but they often generate
little, if any profit for the company.

Differential Advantage - where customers prefer one product over another because the obvious
differences in that product encourage customer purchase. Customers recognize the unique qualities of a
product and they prefer that product over a competing product.

Product differentiation - involves knowing that there's a difference between products, not attaching
any loyalty or preference to that difference.

Marketing Myopia - short-sighted marketing strategy--instead of focusing on customer wants and

needs, which change over time, the company blindly focuses on its product. A company loses sight of
the Marketing Concept, which states that a firm should focus on fulfilling customer wants and needs as
its goal, not pumping out a product.

PART II
Measurable characteristics should be used when segmenting markets into target markets:
1. (Personal) Demographic - are identifiable characteristics of individuals and groups of people
including age, sex, ethnicity, income, education, occupation, family size, religion, social class,
etc. One of the types of characteristics used by marketers in market segmentation because they are often
closely linked to customers' product needs and purchasing behavior and because they can be readily
measured.
2. Geographic Demographics - identifiable characteristics of towns, cities, states, regions, and
countries, and include characteristics such as climate, terrain, natural resources, population
density, etc..
3. Psychographic - refers to the mental profiles of consumers; it allows the marketer to define
consumer lifestyles in measurable terms. To define consumer lifestyles, marketers examine
consumer activities, interests and opinions (AIOs). Types of characteristics used to identify
target markets, and includes things which affect consumers' patterns of living such as
personality characteristics, motives, and lifetyles. For example, certain products are made to
appeal to people with specific lifestyles.
4. Behavioral - identify target markets, and involve characteristics of behavior towards a specific
product, such as user status, user rate, brand loyalty, etc. Such as whether a group of people use
the product or not (user status) and how often they use it (user rate). Frequent flier miles
benefits used by airlines are an example of market segmentation based on behavioral variables.

Income - Consumer's ability to buy, which consists of gross, disposable and discretionary income.

Gross Income - total amount of money made in a year by an individual, household or family.

Disposable income - money a consumer has for paying for necessities such as food, shelter, clothing
and transportation. What a consumer has left after taxes.

Discretionary income - money that is left over after paying for taxes and necessities (disposable
income). Used for luxury items, such as vacations. To calculate discretionary income use the following
formula: Gross Income (Taxes + Necessities) = Discretionary income.

Heterogenous Markets - made up of individuals with diverse product needs. Heterogeneous markets exist because
not everyone wants the same type of car, furniture, clothes, etc. Broken up into multiple target markets through the
process of Market Segmentation.

Homogeneous market - is one in which the potential buyers have similar wants and needs, at least when evaluated
from the perspective of a potential product.

Marketing mix should be designed for a specific, clearly defined target market. Market Segmentation is used to define
target markets which are homogenous.

Market segmentation - divides larger markets made up of individuals with diverse needs into smaller target markets
made up of people with similar needs.

Market Targeting - Once the market segmentation process is complete, target markets for the company are chosen.
The market has been broken up into market segments, and the company now chooses which of those segments it will
target.

3 conditions for a market segment to be suitable to be chosen as a target market :

Each segment must be identifiable and divisible, it must be reachable with a particular marketing mix,
and it must have sufficient profit potential.
1. the segment must be clearly identifiable
2. must be reachable through existing channels
3. must have enough profit potential to justify developing and maintaining a marketing mix just for
that segment.

Direct marketing benefit is the ability to reach niche markets. Includes in-home retailing, telemarketing, mail-
order retailing, etc., is good for reaching niche markets because it can be much more targeted than
other forms of marketing.
Process of market segmentation begins with choosing segmentation bases, also known as
segmentation variables. Segmentation variables are chosen, and then the markets are divided along those
dimensions. Segmentation variables can be demographic or behavioral dimensions.

Single-Variable Segmentation - performing market segmentation, using one segmentation variable,

or base, is usually not very meaningful. Rarely useful, because in most cases, the resulting market
segment is too broad and is not going to be homogeneous. For example, using just one variable such as
gender, to split up the total toy market is too broad--toys that appeal to toddlers will not appeal to
teens--the market segment is still too diverse to be considered a target market.

Multi-variable segmentation - looks at relationships between more than one variable to define
market segments. Uses more than one characteristic to split up a market, which results in more tightly
defined market segments. For example, age, income, and education are often used together to choose
a target market.

Once market segments have been identified as suitable to be potential target markets, a
firm is going to choose among them by looking at several factors:
1. segment's characteristics (size and potential for growth & profit)
2. the competitors within that market segment (how many are there & how strong is the
competition)
3. how good of a match it is with the company (does it go along w/ the firms objectives, match its
strengths, etc)

Concentration Strategy (aka: Single-Segment Strategy)- firm decides to focus on only one market segment as a
target market by creating and maintaining one marketing mix. This allows the company to specialize for that one
market, and compete with larger organizations; however, its success depends on demand remaining
strong in that one market. Also, it can develop an image associated with that segment, making it
difficult to appeal to other segments when it wants to expand later. An example is the car manufacturer
Lamborghini, which focuses on the super high-end luxury sports car segment. Disadvantage - company is putting all of
its eggs in one basket, and it may become entrenched in that one market and be unable to branch out to other market
segments.

Multisegment strategy (aka: Differentiated Strategy) - company has more than one target
market and develops and maintains marketing mixes for each of them. Costs of planning, organizing,
implementing, and controlling marketing activities increase as a company tries to target more market
segments; however, there can also be more potential for profit, and more customers to appeal to.

Undifferentiated Approach (aka: Total Market Approach or Mass Marketing)- When a company
designs a single marketing mix and directs it at the entire market for a particular product. Products with
little or no variation such as sugar and salt are often marketed successfully using the undifferentiated
approach

A good understanding of the forces that shape consumer behavior is helpful in reaching profitable
market segments.

Buying Behavior - decision processes and acts of people involved in buying and using products.
A big part is the decision process used in making purchases, and consists of 5 stages:
1. recognizing a problem - what is the problem or need that needs to be satisfied?
2. searching for information
3. evaluating alternative products
4. purchasing
5. postpurchase evaluation
The first three steps of the buying decision process take place before the purchase, the fourth is
purchasing, and the fifth is postpurchase. Most of the time, people omit one or more steps--all five steps
are associated with high involvement or extensive decision-making.

There are three steps associated with low-involvement decision making--identifying a need or problem, making the
purchase, and postpurchase evaluation.
Level of involvement - primary determinant of how consumers reach purchase decisions. When
making an expensive purchase, for example, consumers typically have a high level of involvement,
and spend a lot of time and effort researching their purchase beforehand, whereas low-involvement
buyers often evaluate a product's features after purchasing it. The individuals level of involvement
affects consumer buying decisions, and refers to the importance and intensity of interest in a product in
a particular situation.

Most buying decisions, especially those involving frequently-purchased, low-priced goods, are low-
involvement decisions. Consumer may form an attitude about a product, and evaluate its features
after purchasing it, rather than before.

High level of involvement are products associated w/ personally important, relatively expensive, or have high risks
associated with making a bad decision. Associated with non-routine purchases which for one reason or
another are important enough to warrant time and energy spent making a careful purchasing decision.

Qualitative Research - any kind of research that produces findings not arrived at by means of
statistical procedures or other means of quantification. An example of qualitative research is asking a
group of people what their feelings were about a new product. The information collected from
respondents takes the form of verbal descriptions or direct observations, in contrast to quantitative
research, where the information collected is converted into numbers.

Cognitive dissonance - doubts that occur because the buyer questions whether the right decision was made in
purchasing the product. Occurs shortly after the purchase of an expensive product. The buyer continues to evaluate
alternatives after making the purchase, and remains uncertain and less than fully satisfied about his decision.

One of the major categories of influences which affect the consumer buying decision process are psychological
forces, and include perception, motives, ability and knowledge, attitudes, and personality.

5 major psychological forces which affect consumer buying decisions. These psychological
factors operate internally, but are often affected by social forces.
1. Social factors - includes family influences, reference groups, social classes, and culture. Our
roles in society, our relationships, and society and culture affect our buying decisions. For
example, upper-class Americans often prefer luxury cars such as Mercedes Benz to symbolize
their status and income
2. Information forces, which include advertisers, product rating services, etc.. Affect consumers
buying decisions by providing them with relevant views on products. Informational forces often tie in with social
and psychological forces.

Industrial Products - Products sold to organizational customers. Industrial products are sold to
business customers,
as opposed to consumer products sold to consumers. Consumer goods are usually purchased for final
consumption, whereas industrial products are purchased for resale or further production.

One of the big differences between organizational markets and consumer markets is in the demand
for products. Organizational markets are based on derived demand, where the demand for materials is
based on the anticipated demand by consumers for the finished products. This is known as derived
demand. The demand for industrial products results from the demand for consumer products. For
example, a company that produces transistor radios buys the electronic parts to build the radios to sell
to consumers. If sales for the radios drop, the manufacturer in turn cuts back on orders for parts.

Penetration Pricing - When trying to gain a large market share quickly, a marketer will set a price
below the prices of competing brands and is used when the marketer is trying to gain market share
quickly.

3 bases, or variables, which are not used for consumer markets, but used EXCLUSIVELY for
segmenting ORGANIZATIONAL markets:
1. Customer Type - include producer, reseller, government, and institutional
2. Customer Size - measures the purchasing power of buyers, whereas in consumer markets a
firm typically looks at the number of buyers, not the purchasing power of each.
 3. Buying Situation - can be one of three types:
New-task buying - an organization makes an initial purchase of an item to be used to
perform a new job or to solve a new problem. Most complex decision-making process for
the firm making the purchase. If the organizational buyer is satisfied with the product, the
supplier may be able to sell the buyer large quantities of the product for a period of
years, so new-task purchases are important to the seller.
Straight rebuy - a buyer purchases the same products routinely under the same terms of
sale. Buyer requires little information to make these purchases. It is a process used to
purchase inexpensive, low-risk products, and alternative products or suppliers are not
usually considered.
Modified rebuy - Company changes the requirements for a new-task purchase or the
requirements for a routinely purchased product are modified. For example, an
organizational buyer may decide to look for faster delivery or lower prices, and consider
alternative suppliers. The decision process associated with a Modified Rebuy purchase is
more complex than a Straight Rebuy, but less complex than a New-Task purchase.
The decision making process for the firm usually entails different levels of involvement for these three types.

The buying decision process for high-involvement consumer purchases is similar to that of new-task purchases by
organizations.

New-task purchases use a similar five-step process as high-involvement consumer purchases. Both require
much research and information gathering, and evaluating alternatives.

Low-involvement consumer purchases involve a similar buying decision process as straight rebuy purchases
made by organizations. Straight Rebuy purchases are routine purchases made by companies, just like low-
involvement purchases are routine, low-risk purchases made by consumers. They involve a similar three-step
processes.

5 different categories of people who affect the decision making process in organizational
purchases.
1. Buyers are responsible for selecting suppliers and actually negotiating the terms of purchase.
Carry out the purchasing procedures.
2. Users - ones who actually use the product being acquired.
3. Influencers - usually technical personnel, such as engineers, who help develop the
specifications and evaluate alternative products. When the products being considered involve
new, advanced technology, technical personnel are especially important influencers.
4. Gatekeepers - people such as secretaries and technical personnel who control the flow of
purchase-related information within the organization. Control the flow of information.
5. Deciders - people in an organization who make the buying decision, actually choosing the
products and vendors. Make the final purchase decision.
Buying Center - group of people within an organization who are involved in making organizational
purchase decisions, and includes five categories of people: users, influencers, buyers, deciders, and
gatekeepers. All the people who participate in or influence the buying decision-making process.

PART III

Consumer products - purchased by individuals for final consumption. Consumer goods can be
broken down further categories (involving different levels of involvement) into:
1. Convenience Goods - which are purchased routinely using low-involvement decision-making.
Products which are routine and low-risk, and entail a low level of involvement from the consumer.
2. Shopping Goods - require high-involvement decision making; buyers typically spend time to
compare stores and brands with respect to prices, product features, qualities, etc. they may be
expensive, high-risk, or personally important to the buyer.
3. Specialty product types - Characterized by strong brand loyalty; buyers know exactly what
they want and will not accept a substitute. Buyers are willing to expend considerable effort, often
as much as it takes, to find and purchase their brand. Examples of specialty products are Ferrari
cars, Picasso paintings, etc..
Industrial products (aka: business products) - purchased for resale, operational needs, or for use
in further production. Are one of the two classifications of products- the other type are consumer
products, which are purchased by consumers for final consumption.

Unsought products - category of goods for which consumers don't typically think of buying;
aggressive selling is required to obtain a sale that otherwise would not take place. Either bought in
response to an emergency or as a result of aggressive selling. There is no demand for these products.
Examples are life insurance and cemetery plots.

Industrial (business) goods can be broken down into 6 categories:

1. Raw materials - basic materials that actually become part of a physical product. Include
minerals, chemicals, materials from forests and oceans, etc. They are usually bought in large
quantities, and the buying decision process is pretty simple.
2. Component Materials (aka: Fabricated Parts) - become a part of the physical product and
are either finished items ready for assembly or products that need little processing before
assembly. Can usually be easily identified and distinguished as a part of the finished product. Examples are
spark plugs and tires on an automobile.
3. Process Materials - products used directly in the production of other products. Process
materials are different from component materials in that they form an indistinguishable part of
the finished product.
4. Major Equipment (aka: Installations) - includes large tools and machines used for production
purposes. Are very expensive, and are not purchased frequently, so the buying decision process
is very complex.
5. Accessory Equipment - used in production or office activities, and are purchased routinely. Not
as expensive as major equipment. It is standardized, and does not require as complex a buying
decision process. Examples of accessory equipment include desktop computers and calculators.
6. Consumable Supplies (aka: Operating Supplies) - do not become part of the finished
product, but facilitate production and operations. Are products such as office supplies, soap, oils
and grease, etc. They are usually cheap, purchased frequently, and the buying decision process
is very simple.

Family Life Cycle - factors such as marital status, and the presence and age of children combine to
form a variable used to segment markets. Used to segment markets, because persons in a particular life
cycle stage may have very specific needs. For example, a divorced woman with children is in a stage of
the Family Life Cycle which makes her a likely target for life insurance. Knowing where a family is in this
Cycle can help determine what their product needs are.

Services - tasks performed by one individual or firm for another. Services can be broken down into consumer services
and industrial services depending on who the customer is. Examples are financial, legal, and janitorial services.

Product line -includes a group of closely related product items that are considered a unit because of
marketing, technical, or end-use considerations. The specific product items in a product line usually
reflect the desires of different target markets or the different needs of consumers.

Product mix - consists of all the products that an organization makes available to customers.

A new product- can either be an innovative product that has never been sold by any organization, or it
can be a product that a given firm has not marketed previously. A new product can either be genuinely
new, or it can simply be a product that a certain company has never offered before; for example, IBM
making cars.

5 steps to the New-Product Development Process to include:

1. Idea Generation - where organizations seek product ideas that will help them achieve their
objectives. Can involve market research, brainstorming, and many other internal and external sources for
new product ideas.
2. Product Screening where ideas for new products go through an initial evaluation and are
subjected to consumer scrutiny. Made up of Product Screening and Concept Testing. Product
Screening involves weeding out the ideas which do not meet the company's standards.
Concept Testing takes the remaining ideas and subjects them to the scrutiny of potential
 customers. The screening stage is where most new product ideas are eliminated--it usually involves just
going through a checklist and checking the company's overall ability to produce and market the product.
3. Business Analysis - product idea is evaluated to determine its potential contribution to the
firm's sales, costs, and profits. More in-depth, and looks into the products commercial feasibility--
how strong are the competitors, what kind of demand and profit potential is there, etc.
4. Product Development - where ideas are first produced in tangible form. Idea or concept is
converted into a prototype, or working model. It is near the end of this stage that marketers
begin to make decisions regarding branding, packaging, pricing, and promotion for use in the
next stage--the test marketing phase.
5. Test Marketing and Commercialization (test marketing)where the company makes a
limited introduction of a product in geographic areas chosen to represent the intended market. It
tests actual customer reaction to the product, as well as allows the firm to experiment with
variations in advertising, price, and packaging. (commercialization) - where plans for full-scale
manufacturing and marketing are settled and implemented. Occurs if the Test Marketing stage had
the desired results. This stage corresponds to the Introductory stage of the Product Life Cycle for the product.

Sample launching - of the entire marketing mix occurs in the Test Marketing phase of the new-product
development process, and is the final step before Commercialization. (Sometimes, commercialization is
listed as a sixth step instead of being combined with test marketing.)

Price fixing - an illegal practice involving an agreement between competitors regarding price. Price
fixing is illegal, and practically any agreement regarding price between competitors is considered price
fixing. The biggest form of price fixing involves one or more competitors agreeing to set a specific price
for a certain product or service. This is different from price discrimination (exists when sales of
identical goods or services are transacted at different prices from the same provider)--many forms of
price discrimination are legal, depending on the basis for the discrimination.

Focus groups - small groups of consumers who are brought together under the direction of a moderator while
researchers record their observations, comments, and reactions. Used to collect consumer feedback on new product
development, pricing, branding and other issues. Participants are typically paid for their time.

Internet focus group -uniquely attractive when the subject is evaluating Web sites or Internet
software.
Allow for the discussion of specialized subjects as each participant has his or her computer to view
technical diagrams and descriptions. As with traditional focus groups, Internet focus groups, feature a
moderator who is in control of the session, using a predetermined set of questions.

Calculate the markup as a percentage of the cost when the product cost is $40 and the selling
price is $60. The markup would be 50%. The answer is 50%. Take the markup (60 - 40 = 20) and divide
it by the cost (20 / 40). You divide it by the cost because you are calculating markup as a percentage of
the cost. If you divide it by the selling price (20 / 60) you get 33.3%, so when the markup based on cost
is 50%, the markup based on price is 33.3%.

Product Adoption Process - steps buyers go through in accepting a product. Consists of 5 steps:
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption- When a buyer accepts a product and decides to continue using it regularly. Buyer
buys a product and decides to continue buying it; however, they still require reassurance or
confirmation on a regular basis to stick with that product.

This process is often taken into account in the commercialization phase of new product development,
where companies try to promote the product to make people aware of the product, and even offer
samples or trials to help them decide to purchase the product for the first time.

Diffusion Process - divides into 5 categories the people who decide to adopt a product based
on how soon after its initial release they purchase it. Progression through which an innovation travels
through the social system. 5 Groups of People: (in order)
 1. Innovators - first to buy a new product. Customers who are at the forefront of trends,
particularly when it comes to technical products are known as innovators. Likely to have a higher
disposable income and are often willing to pay a higher price to be first into the market. They
make up about 2.5 percent of the population.
2. Early Adopters - Young, have an above average education and comprise approximately 13.5
percent of the population.
3. Early Majority - speed of adoption increases significantly. Made up of middle class consumers.
They are more cautious in making purchases than the early adopters and they make up
approximately 34 percent of the population.
4. Late Majority - a group skeptical of new ideas. Tends to be older, more conservative and
traditional than the early majority. They also tend to be less educated and more skeptical about
new products and ideas. This group makes up about 34 percent of the population.
5. Laggards - price conscious, low-income consumers who are the last to buy a product/services.
Make up about 16 percent of the market. They tend to be older and resist change. Often this
group will only adopt a new clothing style when other groups have abandoned the style and
moved on to something else.

Whereas the diffusion process tracks an innovation as it spreads throughout a social system, the
adoption process is concerned with the individual's decision making process.

Product Positioning - refers to the decisions and activities intended to create and maintain a certain
concept of the firm's product relative to competitive brands in customers' minds. Trying to manipulate
the product's position, or image, relative to competing brands and products. The customers' concept of
a product's attributes relative to their concept of competitive brands is known as the Product Position.

Firms try to shape this perception of a product through Product Positioning. For instance, Volvo has
often emphasized its safety features, creating the image of a safer car than other manufacturers.

Product Mix Expansion - Adding new product lines or adding new products to existing product lines.
Gives the company new opportunities for growth. The opposite of this is product mix contraction,
and involves reducing the product mix in width or depth.

Depth Product Mix - measured by the number of different products offered in each product line. The
depth of a product line is the number of products in it. When a firm has a deep product mix, it is focusing on
less product lines, more products per line so that it can target numerous segments within each market.

Width Product Mix - number of product lines. When a company has a wide product mix, or many product
lines, they are employing a diversification strategy--meeting many types of customer needs. A wide product mix
indicates many product lines. The width of a product mix is the number of product lines.

Calculate the markup as a percentage of the selling price when the product costs $50 and its
selling price is $100. The markup percentage in this case would be 50%. The markup as a percentage of the
selling price would be 50%. The first step in calculating this is determining the markup. Subtract the cost from the price
to see how much more the company is charging than it cost them--the markup. Then you take this value (100 - 50 =
50) and divide it by the selling price (50 / 100 = 0.50).

Product Life Cycle - A product goes through a cycle of growth and decline, from the time it is
introduced into the marketplace until it is terminated. 4 Stages:
1. Introduction - product makes its first appearance in the marketplace. During this stage, the
profits are below zero, because the company must cover the initial costs associated with
promotion and distribution. When the product begins to turn a profit, it enters the next stage, the
Growth stage.
2. Growth - sales rise rapidly and profits reach a peak and then begin to decline. Very few
products make it past the Introduction stage, which is the commercialization of a product.
However, once it starts making a profit, it is considered the growth stage. Competition begins to
appear during the Growth stage and can determine the product's life expectancy.
3. Maturity - sales peak and begin to decline and profits continue to decline. The Maturity stage is
marked by a peaking of sales and then a decline. The difference between maturity and growth
stages is that in the growth stage, *profits* peak and begin to decline as more money is spent
due to heavier competition, while in the maturity stage, *sales* peak and begin to decline.
 4. Decline - final stage where sales fall rapidly, and the firm may plan to phase out the product.
Where sales and profits are rapidly declining. Many firms will leave the market during this stage.

Brand - a name, term, design, or symbol that identifies one seller's goods or services as distinct from
those of other sellers. Can identify one specific product or all the products belonging to a certain
organization. A brand name is the part of a brand which can be spoken, and allows expression of an
identity and a "personality" for the product.

Branding - helps buyers identify specific products that they do and do not like, and usually provides a
certainty in customers' minds that they are getting a certain level of quality.

Brand names - help buyers and sellers, but most importantly, brand names give products an identity,
and serve to differentiate competitors. Customers tend to feel more confident when buying a familiar
brand, so often marketers work to develop brand loyalty.

There are different types of brands based on who is doing the branding.
1. Manufacturer brands (aka National Brands) - initiated by producers, and allow customers to
associate the producer with its product at the point of purchase. Created by the product
manufacturers.
2. Dealer Brands (aka Private brands) - initiated and owned by resellers. Created by resellers--wholesalers
or retailers. Allow retailers or wholesalers to purchase products at a low price and sell them without disclosing
the identity of the manufacturer.
3. Family Brand Strategy - same brand is used for several of the firm's products which are of comparable type
and quality.
4. Individual Brand strategy - significant differences in product types and quality, so each
product gets its own brand.

There are two major types of branding strategies an organization can use: Family Brand and Individual Brand.
Brand Familiarity - describes how consumers react to a brand name, and includes 5 Levels:
1. Brand Insistence - strongest positive reaction. Consumer will accept no substitutes for that
brand
2. Brand Preference target customers will usually choose 1 specific brand over others.
3. Brand Recognition customers remember brand name.
4. Brand Non-Recognition consumers do not recall brand name.
5. Brand Rejection - Consumer recognizes the brand name and refuses to buy it.

Brand equity refers to the value of a well known brand. Company or product's reputation in the
marketplace. It is based on customer perceptions of quality based on experience and it translates into
brand loyalty and repeat sales.

Inelastic - If a company doubles the price of its product, and it barely affects its number of sales, then
demand for its product is said to be inelastic. When demand curve is inelastic both changes in price
and revenues move in the same direction.

Elastic - On the other hand, if there was a significant drop in sales, then demand would be elastic.
When demand is elastic, a small change in price can mean a noticeable change in sales.

Licensed Brand well established brand name that other sellers pay to use. (giving another firm the
right to a trademark/brand name in exchange for a yearly fee (royalty).

Trademark - a legal designation, such as a brand name, symbol or other device used to indicate that
the owner has exclusive use of a brand or part of a brand. Used to identify products. Registered trademarks
are legally protected.

3 benefits of product packaging:

1. Protection protects the contents
2. Promotion last chance to influence customers decision. Packaging seeks to promote the
product through convenient packaging or by communicating its features and benefits.
 3. Information - involves providing product contents, nutritional information, etc. Some
information is required by law; other information allows consumers to compare brands and
evaluate a product by its packaging.

PART IV

Distribution - activities that make products available to customers when and where they want to
purchase them. Choosing which channels of distribution to use is a major part of developing a
marketing strategy.

A Channel of Distribution (aka: Marketing Channel) - group of individuals and organizations that
direct the flow of products from producers to customers. Channels of distribution make products
available at the right time, in the right place, and in the right quantity by providing functions such as
transportation and inventory management.

3 Functions of Distribution:
1. Transportation
2. Inventory management
3. Customer service

Industry sales peak during the maturity stage of the product life cycle. During the maturity stage,
industry sales peak and begin to decrease. During the growth stage, industry profits peak. In the growth
stage, profits peak, but then as more competitors enter the market, prices go down and promotional
expenses go up--this means ultimately more sales in the maturity stage, but less profits.

Most channels of distribution involve marketing intermediaries, or middlemen, who link producers
to other middlemen or to consumers. The middlemen are known as "intermediaries." There are 2 types
of Marketing Intermediaries:
1. Merchants - businessperson who trades in commodities that were produced by others to earn
a profit
2. Functional middlemen

Services Marketing services are distinct in 4 ways from manufactured goods:

1. Intangible not experienced by buyers until services are done
2. Inseparability - services cannot be separated from person providing it
3. Perishable services cannot be inventoried, returned or resold
4. Variable not performed in same way each & every time. Raises level of perceived risk for
buyers.

Sorting activities- functions that allow the members of a distribution channel to divide roles and
separate tasks:
1. Sorting - which involves separating conglomerates of heterogeneous products into relatively
uniform, homogeneous groups based on product characteristics. After sorting the goods by
quality, color, size, etc., the next step, if necessary is Accumulation.
2. Accumulation - involves developing a reserve or inventory of products that have similar
production or demand requirements. An example might be where farmers who grow a relatively
small amount of corn transport their corn to central collection points, where the corn is
accumulated in large lots for movement into the next level of the distribution channel. The idea
is to pool relatively small individual shipments so that they can be transported more
economically.
3. Assorting - combination of products it offers to meet the preferences of consumers. The result
of the Sorting process is to develop a broad assortment to meet the diverse preferences of
consumers. Final result of the entire sorting process is a broad assortment to meet the diverse
needs of customers. Combining products into collections that buyers want to have available in
one place. Usually done at the retail level--an example being grocery stores putting competing
brands of canned foods together.

Banner Advertisement - Quite often, with the results of an Internet search, an advertisement is
presented on the page. Unique to the Internet.
Internet cookies include personalization, website activity tracking and one to one marketing. Cookies
are small text files that contain information sent by a web server to be stored on a client's computer
running a web browser. Later the cookie can be read back from that browser. With one to one
marketing, cookies are used to serve up advertising targeted to the user. Cookies are used to track
where site visitors go, what banner ads they click on and other information that allows advertisers to
customize advertising to match the profiles of potential customers.

Direct Channels - Distribution channels which involve the direct movement of goods from the
producer to consumers. Simplest of the distribution channels, but they are not necessarily the cheapest
or the most efficient method of distribution.

Indirect Channels - Distribution channels which involve independent intermediaries, or middlemen, to

move the goods from the producer to the consumer. Most organizations use Indirect Channels involving
one or more intermediaries.

Channel Length - number of levels in a distribution channel--the number of intermediaries a product

has to go through to reach the consumer.

Channel Width - number of members at each level of the distribution channel. For example, if one
level consists of wholesalers, the number of wholesalers would be the Width.

Intensity of market coverage - number and kinds of outlets in which a product is sold--in other
words, the number of intermediaries involved at the wholesale and retail levels of the distribution
channel. Intensity can range from:
1. Intensive Distribution Strategy- all outlets are used for distributing a product. Appropriate
for convenience products--consumers want maximum availability at a store located nearby with
minimum time spent looking for the product.
2. Selective Distribution Strategy only some available outlets in an area are chosen to
distribute a product; it is usually appropriate for shopping goods. Often used for products when
customer service or some other special (attention) service must be offered to the buyer.
3. Exclusive Distribution Strategy- only one or two intermediaries within each market are used.
The least intensive of the distribution strategies is exclusive distribution, which involves using
only one or two outlets in each market. Not appropriate for convenience products or most
shopping products. It is usually used for products for which there is a very limited market. An
example of a product distributed exclusively is the Bentley automobile.

There are 2 parts to a brand:

1. Brand name - part of a brand that can be spoken. Brand Name is the name of the logo.
2. Brand Mark - part, such as the design, or symbol, which cannot be spoken. For example, the
way the letters are written for a can of Sprite--the Sprite font with a lemon and a lime above it--
is the brand mark. The name Sprite itself is the brand name. The Brand Mark is the style or
design of the logo, whereas the Brand Name is the name of the logo.
Vertical Integration acquiring firms that operate at different channel levels. Can increase
operational control & stability of the channel.

Channel Integration (aka: Vertical Channel Integration) - two or more levels of a distribution
channel are combined under one management or when one channel member coordinates channel
activities for those levels. Marketing channels which incorporate vertical channel integration are called
vertical marketing systems, and can be broken down into corporate, contractual, and administered
depending on how the different levels are coordinated.

3 types of vertical marketing systems:

1. Corporate Channel of Distribution - all stages of the marketing channel, from producers to
consumers, are combined under a single ownership. An example would be a retailer purchasing
a wholesaler and production facilities.
2. Contractual Arrangement - most popular type of VMS, in which interorganizational
relationships are formalized through contracts. Involves specifying performance terms for each
intermediary in legal contracts.
3. Administered Vertical Marketing System - the distribution channel members are
independent, but channel operations are coordinated through a dominant channel member.
 Dominant member is one with significant market power such as the producer, or a large retailer.
An example is Walmart, which has a strong influence over the manufacturers in its marketing
channels.

Horizontal Integration -process of combining distribution channel members which are at the same
level under one management. Involves acquiring firms on the same level of the distribution channel, as
opposed to vertical integration, where different levels are combined under one management. An
example of horizontal integration is a grocery store owner buying several other grocery stores.

Dual Distribution (aka: Multiple Channel) - a producer distributes the same product through two or
more different channels, or sells similar products through different channels under different brand
names to reach the same target market. Can be used as a way to increase market coverage or reach new
market segments. An example could be where a firm uses retailers where they are available, and then uses a direct
channel by creating its own retail outlets where other retailers are not available.

Consumerism - movement which seeks to protect and inform consumers about products, and has resulted in safer
products, and honest packaging and advertising.
Channel Control (aka: Channel Power) - ability to influence another distribution channel member's actions. May
come through the market power the firm wields, or it could be established by the channel's decision making structure.
For example, in a Corporate channel, the company which owns all the levels of the channel has the channel power.

Channel Conflict disagreements arise between members over channel practices & policies.

A push policy of product promotion involves the producer promoting the product only to the next institution down
the marketing channel Each member of the distribution channel promotes the product to the next member down the
channel. For example, the producer promotes the product to the wholesaler, the wholesaler promotes to the retailer,
and the retailer to the customer.

A Pull policy of product promotion is where the producer promotes directly to consumers with the intention of
developing a strong consumer demand for the products. Intended to "pull" the goods down through the channel by
creating demand at the consumer level. The consumers want to get the products at retail stores, so retail stores go to
the wholesalers, who in turn go to the producers to buy the product. This is in contrast to the producer "pushing" the
product down the channel.

Total-cost approach to physical distribution - looking at the distribution system as a whole--taking into account the
costs of transportation, materials handling, order processing, and inventory management. Places the emphasis on
minimizing the total cost of the entire distribution system, as opposed to trying to lower the costs of the
individual functions. This is more effective because decreasing costs in one area of distribution often
raises them in another.

Distribution-Center Concept is an alternative to either keeping one centrally located stock of

inventory for all markets, or creating numerous dispersed inventory sites. Creating distribution centers
which are large, centralized warehouses designed to ship products to customers in regional markets
quickly. The problem with having only one centralized inventory for the entire market is potentially high
transportation costs and delivery delays, while having too many inventory sites results in complex
inventory control and increased handling costs.

PART V

Wholesaling - consists of all exchanges among organizations and individuals in a distribution channel
except for those transactions with ultimate consumers. Consists of all transactions in which the buyer
intends to use the product for resale, for making other products, or for general business operations. It
does not include transactions where the product is being sold to ultimate consumers.

Whether or not wholesalers are involved, distribution of goods requires wholesaling activities,
which typically include:
Warehousing
Transporting
Financing
Major wholesaling - activities include warehousing, transporting, and financing. Inventory control and
promotion are also often included.

Customer Service Standard different customers requiring different levels of service.

Wholesalers often play a part in the sorting process, by accumulating products and redistributing them
in smaller units.

Sorting process consists:

Sorting, Accumulating, Assorting

Intermediaries often handle some or all of the sorting process, with wholesalers typically doing the
sorting and accumulating, and retailers doing the assorting.

Out of the marketing mix, producers often choose to control product, pricing, and promotion, while shifting physical
distribution functions, such as transportation, warehousing, and financing over to wholesalers.

Suboptimization cost-reducing actions in 1 distribution function that increase overall cost of other distribution
functions.

Physical Distribution is the one of the "Four P's" which many producers don't directly control themselves.
Independent wholesalers can usually more efficiently handle distribution functions, while also acting as an extension of
the producer's sales force.

Order Processing receipt & transmission of sales order info.

Electronic Data Interchange (EDI) allows company to integrate order processing, production,
inventory, transportation into 1 system.

Materials Handling physical handling of goods in warehouse & transportation.

Unit Loading Group boxes on pallet/skid .

Containerization consolidating items in 1 container.

Warehousing designing/operating facilities for both storing & moving, dispatching goods.

Types of Warehouses:
1. Public(best suited for seasonal use) & Private Warehouses (Private Warehouses when
company stores large volumes of goods on a regular basis)
2. Distribution Centers main function is to re-distribute stock, not store it.
3. Bonded Storage

Concepts Related to Efficiency Operation & Inventory Management:

1. Order Lead Time average length of time when customer orders & receives it.
2. Reorder Point new orders need to be placed to avoid stock out.
3. Stock Out shortage of product due to too few in inventory.
4. Usage Rate rate at which inventory sold per time period.
5. Safety Stock extra inventory
6. Economic Order Quantity (EOQ) order size that minimizes total cost of ordering & carrying
inventory.
7. Just-In-Time (JIT) making products available when needed.

Transportation Modes moving goods from 1 location to another (5 modes: railroad, trucks,
waterways, airways & pipelines).

MegaCarriers freight transport companies that provide several shipment modes.

Intermodel Transportation 2 or more transportation modes used in combination.

Freight Forwarders specialized agencies that provide alternate forms of transportation coordination.
Manufacturer Wholesaling - producer does not rely on an independent firm to perform the
wholesaling functions, but does it through its own sales branches and offices. Sales branches are
manufacturer-owned middlemen, and sales offices are manufacturer-owned operations that provide
services normally associated with agents. Sales branches, which fall under Manufacturers' wholesalers,
are manufacturer-owned middlemen who sell products and often support the manufacturer's sales
force. Sales branches act as middlemen, and perform the associated wholesale functions, such as
promotion, extending credit, transporting goods, etc..

The 2 types of Manufacturer Wholesaling

1. Sales branches - manufacturer-owned middlemen who sell products & support manufacturers
sales force.
2. Sales offices - manufacturer-owned operations that provide services normally associated with
agents . Sales offices differ in that they are like manufacturer-owned agents.

Merchant Wholesalers (aka: Jobbers & Distributors) - are independently owned wholesalers that
take title to goods and assume the risks associated with ownership. Make up about two-thirds of all
wholesalers.

2 main types of merchant wholesalers

1. Full service Merchant Wholesalers - middlemen who offer the widest possible range of wholesaling
functions, and can be broken down into general merchandise, limited-line, and specialty-line
wholesalers. Divided into three categories depending on how wide of a product line they carry,
from general merchandise wholesalers with a wide product mix but limited depth, to specialty-
line wholesalers, with a narrow, but deep product mix.
2. Limited service Merchant Wholesalers - Provide only some marketing services and specialize in a few
functions. Take title to merchandise, but they provide a very limited set of wholesaling functions. For example,
many of them do not extend credit or transport goods. Include cash-and-carry wholesalers, drop shippers, and
mail-order wholesalers.

Rack Jobbers are Full-Service Merchant Wholesalers who own and maintain their own display racks in
supermarkets and drugstores. Fall under the category of "specialty-line" wholesalers. They send out
delivery persons to set up displays, keep them stocked, maintain records, etc. The retailers only have to
furnish the space.

Web site can serve a variety of marketing functions, including customer support, promotion, collection
of consumer information, and even distribution. This versatility makes it an excellent marketing tool.

Types of Limited Service Merchant Wholesalers:

1. Drop Shippers (aka: Desk Jobbers) are Limited Service Merchant Wholesalers who take title
to goods and negotiate sales, but never take actual possession of products. Forward orders to
manufacturers and then arrange for shipments of items to be delivered directly from producers
to customers.
2. Cash-and-carry Wholesalers are Limited Service who handle a limited line of products with a
high turnover rate--customers pay cash and furnish transportation. Usually sell to retailers and
industrial firms who are too small for full-service wholesalers to profitably handle.
3. Mail-order Wholesalers

Cooperative Advertising is where a manufacturer agrees to pay a certain amount of a retailer's

media costs for advertising the manufacturer's products. Occurs when the manufacturer and retailer
share advertising costs. The manufacturer helps pay for advertising by the retailer which involves the
manufacturer's products.

Advocacy Advertising - form of advertising in which an organization expresses its views on

controversial issues. Can be defined as paid corporate advertising designed to communicate the company's view on
political issues. For example, pending legislation.

3 types of Full Service Merchant Wholesalers:

1. General Merchandise Wholesalers - carry a wide product mix but offer limited depth
2. Limited-Line Wholesalers - offer a few product lines with extensive depth within each product line.
 3. Specialty-Line Wholesalers - Offer the narrowest range of products--they offer specialty products.

3 categories of wholesalers:
1. Manufacturer's Wholesalers products producer performs wholesaling function.
2. Merchant Wholesalers independent firms that take title & possession of products they sell.
3. Agents and Brokers - negotiate purchases and expedite sales but do not take title to
products. Agents are middlemen who represent buyers or sellers on a permanent basis, while
brokers are typically employed temporarily by either buyers or sellers.
Retailing- all transactions in which the buyer intends to use the product for individual or household
consumption. Selling to final consumers, in contrast to wholesaling, which involves selling to organizational
buyers, other wholesalers, and retailers.

Corporate Chains - group of stores which operate under central ownership and management to market essentially the
same product line. Consist of a group of stores owned and managed by the same firm.

Contractual Vertical Marketing System (VMS) - When retail stores organize voluntary chains or
cooperatives. Contractual VMSs can involve retail stores coordinating their activities, or various levels of
a distribution channel, such as wholesalers and retailers working together. Retail stores who use these
contractual arrangements get to enjoy some of the advantages enjoyed by corporate chains.

Independent Stores are retail stores which are not part of a corporate chain or contractual VMS.
Single retail stores which are not part of a corporate chain or a contractual VMS, which includes
voluntary chains and cooperatives.

Franchise Systems are a type of Vertical Marketing System in which a parent company grants dealers
the right to use the supplier's trademarks--usually in return for a percentage of the total sales. Involve a
franchisor, which is the supplier, granting a franchisee, or the dealer, the right to sell products in
exchange for something--often a percentage of sales. Franchisees benefit from this system because
they get to take advantage of well-known products and brand names. Examples of franchises are
McDonalds and Jiffy Lube

Direct channel of distribution gives the manufacturer the greatest degree of control over the
marketing of the product. However, it is best suited for an organization whose customers are
geographically concentrated; otherwise, it can be very inefficient.

Franchise system, the franchisor often provides franchisees with assistance in site selection,
personnel training, inventory management, and promotion strategy.

The franchisor, which is the parent company which owns the trademarks, grants the franchisee the
right to use these trademarks. The franchisee usually pay a franchise fee; in return, the franchisor
provides certain services and support.

Retail stores can be divided into 3 main categories:

1. Department stores - typically have a wide and deep selection, with moderate prices, and an
emphasis on customer service.
2. Mass merchandisers - Consists of discount stores, superstores and hypermarkets,
supermarkets, and catalog showrooms. Typically emphasize low prices and a low level of
customer service, and a wide product mix.
3. Specialty retailers - Include stores such as Foot Locker, jewelry stores, Radio Shack, etc..
Some specialty retailers offer unusual depth in one main product category, and are called single-
line retailers. Retail stores which carry a narrow product mix with deep product lines

Retailers - categorized based on the width and depth of their product mix, their pricing strategy, and
the level of customer service they provide.

Nonstore retailing - selling of goods or services outside the confines of traditional store settings, and
include telemarketing, automatic vending, mail-order retailing, in-home retailing, etc. Accounts for
approximately 20 percent of retail sales.
Telemarketing - direct selling of goods by telephone, in-home retailing is where a salesman sells
products to consumers in their homes (examples are Amway and Mary Kay cosmetics).

When choosing a retail store location, a firm takes into account location of competitors, the location of the target
market, site costs, etc. Store location is important because location dictates the geographic trading area from which a
store will draw its customers. The location needs to be profitable, which means factors such as site cost, accessibility
to potential customers, location of competitors, etc. must be taken into account.

Scrambled merchandising - When retailers add unrelated products and product lines to an existing product mix.
Normally involves adding items which sell quickly, increase profitability, and increase store traffic. An example is a
convenience store adding lawn fertilizer to its product mix.
Wheel of Retailing - theory describing the evolution and development of new types of retail stores.
New retailers often enter the marketplace with low prices, margins, and status. The successful ones tend to become
more elaborate and expensive as time passes. Eventually, they emerge at the high end of the price/cost/service
scales, and new retailers enter in at the low end, in an endless cycle. Wheel of Retailing explains how retail stores
evolve and new types of retail businesses come into being. Explains origin and evolution of new types of retail stores.
According to this Wheel, in an endless cycle, new, cheap retailers enter the market, grow into big and expensive
operations, making room for the next generation of new, cheap retailers.

PART VI

Promotion Plan requires identifying a Promotion Mix, Promotion Objectives, and a Promotion Budget.

3 Elements make up the total Promotion Plan:

1. Promotion Mix is made up of those specific ingredients a company combines to promote a
product. The ingredients a company combines to inform and persuade people to purchase its
products. Combination of one or more of four ingredients: advertising, personal selling, publicity,
and sales promotion.
2. Promotion Objectives can fall into one of three main categories. For new products, the
objective is to inform, or let intermediaries and end-users known about new products. For
products which are already established, promotion can either be used to persuade, or remind
buyers.
3 types of objectives:
1. to inform - Companies use promotion to inform customers about new products
2. to persuade - for existing products they try to persuade them to use the product
3. to remind - remind them about its availability.
3. Promotion Budget

4 Ingredients of Promotion Mix:

1. Advertising - a paid form of nonpersonal communication about a company or its products that
reaches the target audience through a mass medium. Involves using a mass medium such as
television, radio, newspapers, magazines, direct mail, etc. The cost per person reached through
advertising is low compared to personal selling, but it has less persuasive impact.
2. Personal Selling - involves informing customers and persuading them to purchase products
through personal communication. Can include telemarketing, door-to-door salesmen, etc.. The
cost per person reached through personal selling is much higher than advertising, but it often
has a greater impact and provides immediate feedback.
3. Publicity - nonpersonal communication in news story form about an organization or its
products, that is transmitted through a mass medium at no charge. Publicity is similar to
Advertising in that it is a form of nonpersonal communication through a mass medium about the
company or its products. However, unlike advertising, the company does not pay to have it
transmitted, and it cannot always be controlled; publicity can be good as well as bad. Examples
of publicity are magazine and news stories about new products or changes in an organization.
4. Sales Promotion - activity or material that offers added value, or incentive for a product.
Examples of sales promotions include coupons, bonuses, and contests used to enhance the sales
of a product. "Sales promotion" should not be confused with "promotion." Promotion includes
Sales Promotion, as well as Advertising, Personal Selling, and Publicity.

Communication, used in the context of promotion, is the transmission of information.

Communication process can be broken down into 5 steps :
 1. A Source for the Message - Process begins with a source. A source is a person, group, or
organization that has a meaning it is trying to share.
2. An Encoded Message- convert the meaning being conveyed into a series of signs that
represent ideas or concepts or symbols. Usually, an organization will encode the meaning in a
combination of words and pictures. To share meaning, the signs need to be familiar to the
audience; for example, the language should be one that the receiver understands.
3. A Medium of Transmission - to share a coded meaning with the receiver or audience, a source
must select a medium of transmission. Anything that carries the message from the source to the
receiver; i.e. a person's voice, a letter, television, radio, etc. source sends an encoded message via a
medium of transmission to a receiver.
4. A Decoded Message - Receiver then decodes the message, or converts the signs in the
encoded message into concepts and ideas.
5. The receiver decodes the message. In the context of the communication process, encoded does
not mean using some kind of secret code. Converting thoughts and ideas into symbols--for
example, writing an email in plain English to someone--is encoding. When the receiver gets the
email, and interprets it to figure out what ideas the source was trying to convey, this is called
decoding.
6. The Receiver or Audience

Noise - Anything which hinders the communication process, and results in the receiver decoding a
different message from what the source was trying to convey. Anything which interferes with or breaks down
parts of the communication process, and may result in poorly encoded/decoded messages. Noise can result from
many things--for example, the medium of transmission not fully reaching the desired audience, or the source
conveying meanings he did not intend to due to differences in cultural perceptions between the source and the
receiver.

Many industrial products--especially expensive equipment such as steam generators and aircraft--are
sold through a direct channel from the producer to the buyer. With many industrial products, a direct
channel is used--the product is sold directly to the buyers by the producers. This is good for large
machinery and expensive equipment, and buyers of complex industrial products also can receive
technical assistance from the manufacturer more easily in a direct channel.

Major techniques for establishing a Promotion Budget include:

1. Percent-of-Sales technique - determining a promotion budget involves simply allocating a
fixed percentage of the previous year's sales. More popular than the Objective and Task
approach. The downside is that sales determine how much is spent on promotion, which means
that when sales drop, the amount spent on promotion drops, which could further diminish sales.
2. Competitive Parity approach (aka: Competition Matching Approach) - involves trying to
match competitors' budgets, either in terms of absolute dollars or to allocate the same
percentage of sales for promotion as their competitors do. Not usually a good idea because a firm's
competitors probably have different promotion objectives and different resources available for promotion.
3. Objective and Task procedure - where the tasks required to achieve promotional objectives
are listed, and then the estimated costs for each of these tasks is added up to come up with the
budget. Most logical way to calculate a promotion budget; however, it is not widely used because
the costs to achieve certain objectives can be difficult to estimate. For example, determining
how much money in advertising will raise market share from 5 to 7 percent can be very difficult,
if not impossible.
4. All Available Funds technique - allocating all the money that is available after the other
elements of the marketing plan have been funded. Often used by new firms who want to spend
as much as they can afford on advertising.

These are all methods for establishing a promotion budget. These approaches can also be used
specifically for advertising, or figuring out the advertising appropriation--the total amount of money
that a marketer allocates for advertising for a specific time period.

Advertising Plan, which includes Objectives and Budget, is determined by the overall Promotion Plan.
Advertising is a part of the Promotion Mix, so the Promotion Objectives outlined in the Promotion Plan
are usually the same as the Advertising Objectives. For example, if one of the Promotion Objectives is to
increase brand awareness, advertising may be one of the tools they use to achieve that.
Web sites are capable of performing many different marketing functions. Many sites, however, simply
provide information on their products. They are performing the marketing function of promotion via
their Web site.

Intranet site (aka: internal web site) is a Web site which is designed by a company to present
information to its own employees or specific business partners--access to it is usually restricted. Usually
only accessible by the employees of the company, or in some cases, by business partners or customers
who have been specifically granted access. This is in contrast to an Internet site, which anyone can
access and view.

Promotion function of marketing servers to inform the audience of an organization's products, and
usually at the same time tries to persuade them to purchase these products.

Advertising Budget is derived from the Promotion Budget. Determined by the Promotion Budget, using the
same technique, whether it be Objective and Task, Percent of Sales, etc.

In advertising, a Media Plan specifies the exact media vehicles to be used and the dates and the times
that the advertisements will appear. Specifies which kinds of media the firm will be advertising in; i.e.
specific newspapers, magazines, direct mail, etc. It also specifies the advertising schedule.
Magazines, television stations, newspapers, and outdoor ads are all examples of media types.

Media Vehicles - the specific venues in each medium which a marketer chooses to advertise with are.

First the media planner chooses media types to advertise in. Then he chooses specific media vehicles
within each media type, for example specific newspapers or magazines. This is known as "reach." A
typical time frame is four weeks. Reach and frequency are often looked at together; frequency is the
number of times these targeted consumers were exposed to the advertisement.

When evaluating alternative media vehicles, one of the factors that media planners look at is
frequency, which refers to the average number of times targeted consumers were exposed to the
advertisement in a stated time period.

In addition to looking at Frequency and Reach, which tell how much of the target audience is exposed to the
advertisement and how many times, media planners also take into account cost. Cost-per-thousand is one way
advertising costs are evaluated and allows for comparisons across media types.

Cost per Thousand (CPM) is the cost of reaching one thousand prospects through a given media
vehicle.

Multiplying Reach times Frequency is how media planners calculate Gross Rating Points.
Gross Rating Points are calculated by multiplying Reach, which is the percentage of a target audience
exposed to an ad, times Frequency, which is the average number of times each of the people targeted
were exposed.

The "total weight" of advertising delivered during a certain time period is determined by
calculating the Gross Rating Points. The Gross Rating Points (GRP) indicates the "total weight" of
advertising delivered over a certain time period.

Marginal revenue is the change in total revenue that occurs when a firm sells an additional unit of a
product. The marginal revenue between selling 5 units at $7 each, and 6 units at $6 each is $1. The
Marginal Revenue in this case is one dollar. Selling 5 units at $7 each equals $35 in revenue. Selling 6
units at $6 each equals $36 in revenue. By selling that one additional unit, the marginal revenue
gained was $1.

Creative Platform - overall concept and theme for an advertising campaign. Themes may emphasize
performance characteristics and the brand's competitive advantages. Ads emphasizing the firm are
typically intended to improve the image of the company.
Pretests - Evaluations performed before an advertising campaign begins. One of the big types of pretests is known
as a consumer jury, which involves asking a number of actual or potential buyers of an advertised product to judge an
advertisement.

A consumer jury involves getting a group of potential customers together and asking them to judge parts of an
advertisement before the campaign begins. This is usually done to try to evaluate the effectiveness of one or more
elements of the message in the advertisement.

To measure advertising effectiveness during an advertising campaign, a marketer uses inquiries, which may be in the
form of coupons or a form request. Can be evaluated before, during, or after a campaign. The method used during a
campaign typically involves "inquiries." For example, several advertisements may have coupons attached, and the
advertisement that results in the most coupons returned would be determined to be the best.

Posttest - Evaluating advertising effectiveness after an advertising campaign. Evaluation on an advertising campaign
performed after it is over. Depending on what the objectives were, these tests can include surveys, or a measurement
of change in sales or market share, or recognition and recall tests.

Publicity is a type of promotion which can be influenced by a firm, but not controlled. Type of nonpersonal
communication in news story form, about an organization or its products that is transmitted through a mass medium at
no charge. Types of publicity include news releases, feature articles, and press conferences. Publicity can be good or
bad. Form of promotion which often has greater credibility among consumers because it appears to be more
objective--it is primarily informative, not persuasive. Publicity often has greater credibility among consumers because
as a news story it may appear more objective. However, negative publicity is just as credible, and can easily tarnish a
company's image.

Public Relations - broad set of communication activities used to create and maintain favorable relations between the
organization and the community, and enhancing the company's image. Often includes using publicity.

Personal selling involves using salesmen, and is the most precise promotion method, but also the most expensive.
Using salesmen who inform customers and persuade them to purchase products through personal communication falls
under personal selling.

There are 3 types of salesmen:

1. Order Getters are responsible for increasing the firm's sales by selling to new customers and by increasing
sales to existing customers. Responsible for securing new business for the company.
2. Order Takers- Using salesmen who inform customers and persuade them to purchase products through
personal communication falls under personal selling,
3. Support Personnel - usually are not involved solely with making sales . Provide assistance to both the order
getters and order takers. There are 2 types of support personnel.
Missionary salespersons are employed by manufacturers, and assist the producer's customers
in selling to their own customers.
Technical salespersons give technical assistance to the organization's current customers.

Sales Potential - maximum possible sales for a firm within a market in a specific time period. Certain
percentage of the Market Potential. Sales Potential is that percentage of Market Potential which a specific firm will
get in sales.

Sales Force Allocation talent & ability of salesperson to characteristics of customers within territory.

Market Potential - total amount of a product that customers will purchase within a market in a specific
time period from all firms. Sales potential is influenced by market potential, industrywide marketing
activities, and the company's marketing activities.

For many non-profit organizations, the price of a product or service is set so that the organization can
hit its break-even point. Goal is to set a price that will allow them to hit the break-even point, or the
point at which the revenue equals the costs. Some non-profit organizations do work towards a profit, but
it is for the purpose of putting that profit into offering more services or offering some other benefit for
the customers.
Selling Process is a 7 step process which many salespersons move through as they sell
products:
1. Prospecting - involves developing a list of potential customers. A salesperson seeks the names
of prospects from previous sales records, referrals, trade shows, and many other sources. The
Salesperson then qualifies these leads, or determines whether each prospect is willing and able
to buy the product.
2. Pre-Approach (aka: Preparing) - where a salesperson conducts research on a prospect--such
as determining the prospect's specific product needs, current use of brands, personal
characteristics, etc.. Where the salesperson gathers information about the prospect and analyzes
that information. The more information a salesperson has about a prospect, the better prepared
he will be to develop an effective presentation.
3. Approach (1ST meets buyer) - where a salesperson conducts research on a prospect--such as
determining the prospect's specific product needs, current use of brands, personal
characteristics, etc.. Where the salesperson gathers information about the prospect and analyzes
that information. The more information a salesperson has about a prospect, the better prepared
he will be to develop an effective presentation.
4. Presentation - salesperson works to attract and hold the prospect's attention to stimulate
interest and stir up a desire for the product. The Presentation can either be prepared, or it can
be interactive. Either way, the salesperson must listen and try to adjust the message to meet the
prospect's information needs.
5. Meeting Objections - Overcoming Objections is usually part of the presentation, but is considered an
individual step in the Selling Process. A salesperson seeks out a prospect's objections in order to address
them; a well-prepared salesperson will anticipate objections and be ready to overcome them.
6. Closing the Sale (aka: Closing) - Closing is the element in the Selling Process where the salesperson
asks the prospect to buy the product. If unsure if it's time to close the deal, a salesperson will often try a trial
close, which involves asking questions that assume the prospect will buy the product. For example, asking
about financial terms, delivery arrangements, etc., allow the prospect to indicate indirectly that he is ready to
buy the product.
7. Follow-Up - final step where the salesperson makes an effort to assure customer satisfaction after the sale.
May involve calling the customer to find out if any problems or questions have arisen regarding the product. It
can also be used to determine future product needs for that customer.

The exact activities involved in this process vary among salespersons, but some or all of these activities
take place in a successful sale.
When making a presentation to customers, salesmen usually use a combination of a canned approach and an
interactive approach.

Partnership Selling formal arrangements between buyers & sellers that create unique, customized products &
services for buyers.

Relationship Selling salespersons activities that are focused on building ties with customer.

Sales Force Structure how sellers choose to organize salesfoce (i.e.,geographic, customer, product lines,etc.)

A Canned sales presentation - basically just a memorized message which the salesperson delivers.

An interactive presentation - one in which the salesperson interacts with the prospect to determine his needs, and
then explains how the product will address those needs. Quite often, a salesperson will have a bit of both in his
presentation--a prepared, and an interactive portion.

Drawing Account Method modification of straight commission plan, sales commission. Credited to each
salespersons account.

There are 3 basic types of Salesforce Compensation plans:

1. Straight salary compensation plan - salespeople are paid a specified amount per time period. Salesperson
receives a straight salary.
2. Straight Commission Plan - a salesperson's compensation is determined solely by the amount of their sales
for a given time period. Salesperson's entire paycheck is based on how much in sales he made during a given
time period.
3. Combination Compensation plan - When choosing a compensation plan for salespeople, the main factor is
balancing the need to provide income security versus incentives. Salary provides income security, while
 Commission provides sales incentives. In a Combination compensation plan, salary is combined with a
commission to provide for some level of both needs.

Demand for industrial products is derived from the demand for consumer products. Derived demand is based on the
demand for consumer products. For example, if an organization sells tires to car manufacturers, its demand is derived
because the number of tires it sells depends on how much of a demand there are for the cars. The higher the demand
for the cars, the higher the demand for its tires.

When evaluating salespeople's performance, a lot of information can be obtained from reports, which describe each
salesperson's schedule of calls and sales results.

Sales Reports are a big part of what sales management looks at when evaluating performance. The dimensions used
to measure a salesperson's performance are based on the sales objectives. Qualitative measures can also be a factor;
i.e. through customer feedback.

Sales promotion - activities which are intended to provide short-term boosts in product sales. Examples are coupons,
contests, sweepstakes, free trial offers. They can be directed at intermediaries also, and include sales contests, trade
shows, quantity discounts, etc.. All paid marketing communications other than advertising, public relations, and
personal selling falls under Sales Promotion.

PART VII

Price Elasticity of Demand provides a measure of the sensitivity of demand to changes in price. Formally defined as
the percentage change in quantity demanded relative to a given percentage change in price. Basically, it is supposed
to tell us, for a given change in a product's price, how this will affect the demand for the product.

The Price Elasticity of Demand is calculated by dividing the percentage change in demand by the percentage
change in price.

The percentage change in demand, or the percentage change in the number of units demanded, divided by the
percentage change in the price of the product tells us the Price Elasticity of Demand.

For example, if demand for a car goes down 8 percent when a seller raises the price by 2 percent, the price elasticity
of demand is -8 / 2, which equals -4.

The Price Elasticity of Demand Coefficient is the absolute value, or non-negative value, of the Price Elasticity of
Demand formula, and is used to determine how elastic the demand is. This coefficient can range from 0 to infinity. For
example, if the price elasticity of demand is -4, then the coefficient will be 4, which indicates Elastic.

The left column shows the value of the coefficient, the right column shows what happens if you raise the price given
that coefficient. Basically, this coefficient tells you how much changing the price affects the demand for the product.
You are most likely to encounter the second and fourth values in real life.

When the value of the Price Elasticity of Demand Coefficient equals 0, the demand is said to be perfectly inelastic,
which means that demand does not decrease at all in response to price increases.

Demand is said to be elastic when a change in price causes an opposite change in total revenue--an increase in price
will decrease total revenue, and vice versa. This is known as elastic demand. Total revenue is the number of units
sold multiplied by the price. In most situations, whether elastic or inelastic, demand goes down to some extent when
price goes up--however, in elastic demand, demand drops so quickly in relation to price raises, that total revenue goes
down.

Demand is said to be inelastic if a change in price results in the same change in total revenue--raising the price
increases total revenue.

Inelastic demand - increasing the price will increase total revenue, and vice versa. The more people need a certain
product, and cannot go with substitutes, the more inelastic demand will be; i.e. demand drops slowly relative to price
increases, so total revenue increases. In a perfectly inelastic demand, demand does not go down at all despite price
increases.

Total revenue is calculated by multiplying the price by the number of units sold. For example, if it costs an
organization $5 for each unit they produce, and they sell each unit for $7, and they sell 10 units, their total revenue is
$70. Cost is not a factor in total revenue.

Elastic Demand - Demand is said to be elastic when a change in price causes an opposite change in total revenue--
an increase in price will decrease total revenue, and vice versa. Total revenue is the number of units sold multiplied by
the price. So basically, when selling a product with elastic demand, if the price goes up, demand goes down.

Sherman Act prohibits contracts, combinations, or conspiracies to restrain trade. Under this law, monopolies are
illegal.

Sherman Antitrust Act of 1890 prevents businesses from restraining trade and interstate commerce. Written in rather
vague terms, so the Clayton Act was passed in 1914 to limit specific activities that tend to reduce competition.

Clayton Act of 1914 prohibits price discrimination, tying and exclusive agreements, and the acquisition of stock in
another corporation when the result is to substantially lessen competition or create a monopoly.

Federal Trade Commission Act of 1914 created a federal agency which regulates marketing practices and prohibits
unfair methods of competition. Passed in the same year as the Clayton Act, created the Federal Trade Commission
to investigate and enforce laws such as the Sherman Antitrust Act and the Clayton Act.

Robinson-Patman Act of 1936 prohibits price discrimination among wholesalers and retailers where the effect of
such discrimination tends to reduce competition among the purchasers or gives one purchaser a competitive edge.
Significant because it directly influences pricing policies. A firm cannot provide the same products to competing buyers
at different prices unless it can be clearly justified.

In 1994 the NAFTA (North American Free Trade Agreement) treaty went into effect linking the economies of the US,
Mexico and Canada. Simplified export procedures and lowered tariffs on US goods entering Mexico. It also provided
protection for US investment in Canada and Mexico.

Tariffs refer to the taxes imposed on internationally traded commodities when they cross national boundaries. Imposed
by governments on imports, they raise the prices of imported goods and thereby restrict their sale.

Non-tariff barriers (NTBs) are restrictions placed on trade that do not involve a financial penalty.
Include import quotas, anti-dumping laws, and special health and safety requirements on imported goods.
Import quotas are quantitative restrictions on imports that may be expressed as individual units imported or
as a total value of imports.
Quotas are normally imposed on an annual basis and are often used as a means of protecting domestic
industry from lower cost imports. It is a numerical limit placed on the quantity of a particular product or class of
products.
Dumping occurs when a company sells its products on international markets at prices below cost. Used to
penetrate markets and increase market share. Once the company is established in the marketplace the price
is increased. Governments often create anti-dumping laws to protect domestic industry from cheap imports.
Anti-dumping legislation is used to protect the local industry and trade from predatory pricing practices by
foreign companies. It may also be used to limit foreign competition in a market.

Rate of diffusion - how quickly a new product is adopted by consumers. Less complex a product is, and the greater
trialability, compatibility, and observability individuals perceive in a product, the faster its rate of diffusion, or the faster it
will be adopted. Very complex products can take a long time to diffuse, and may require significant interaction with the
consumer to get them to adopt the product.

2 types of pioneer pricing strategies, or strategies for setting the base price for a new product:
1. Price Skimming strategy - charging the highest possible price that buyers who most desire the product will
pay. Can be beneficial by keeping demand consistent with a firm's production capabilities when it first releases
a product, and it can also generate initial cash flows to help offset sizable development costs. It is called price
skimming because after the initial introductory period, the firm usually lowers its price gradually.
2. Penetration Pricing strategy - setting a price below the prices of competing brands. Low introductory prices
often allow the firm to gain a large share of the market more quickly than starting out with high prices. Can
allow a firm to quickly gain a large market share and often discourages potential competitors from entering.
However, the firm has less pricing flexibility; it is easier to lower the price of a product than to raise it.

Pricing method is a mechanical procedure for setting prices on a regular basis. In Cost-Based Pricing, a dollar
amount or percentage is added to the cost of a product.

Cost-Based Pricing - does not necessarily take into account supply and demand.
2 cost-based pricing techniques:
1. Cost-Plus pricing - which involves determining prices by adding a predetermined level of profit to product
costs
2. Return-On-Investment pricing - where product prices are set to enable the firm to achieve a specified rate of
return.

Demand-Based Pricing (aka: Psychological Pricing) - pricing method where instead of basing the price of a product
on its cost, they base it on the level of demand for the product. Results in a high price when demand for the product is
strong, and a low price when demand is weak.

Competition-Based Pricing - an organization considers competitors' prices and chooses a price below, equal to, or
above the competition depending on factors such as product costs. Include Customary Pricing and Price Leadership.
Another example of competition-based pricing,or setting prices according to those charged by competitors, is Price
Leadership--one firm is the first to change prices from previous levels, and the rest of the industry follows this change.

Customary Pricing falls under Competition-Based Pricing, and involves pricing goods primarily on the basis of
tradition. Applies to goods such as candy bars.

In personal selling, instead of a One-Price policy, sellers often adopt a Flexible Pricing policy, where the seller charges
different prices to different buyers in similar circumstances.

What distinguishes a retailer from a wholesaler is that in the case of the retailer, the customer is purchasing the
product for consumption. The difference between a retailer and a wholesaler is the motive of the customer--is he
purchasing for his own use or consumption, or is he purchasing to sell, or use in a product that he will sell?

Personal selling often involves a Flexible Pricing policy, versus One-Price policy, where all buyers pay the same
price in similar situations. For example, car salesmen often negotiate on the price, and two people may buy similar
models on the same day for significantly different prices.

Unit Price is the price per unit for a product, and simplifies comparisons between brands and various package sizes.
Often on or near a product. One place unit prices are provided are at grocery stores, which often list the cost per
ounce or other unit for foods.

In the absence of other specific product information, buyers often rely on price as an indicator of quality and use this
measure when evaluating brands. Buyers will often base quality on price, especially when they have little confidence
in their ability to judge product quality and think that there are substantial differences in quality between brands.

Psychological pricing encourages purchases based on emotional rather than rational responses. Mainly used at the
retail level, and includes:
1. Odd-Even Pricing - ends prices with certain numbers to try to influence buyers' perceptions of the price of the
product--for example, charging $99.95 instead of $100. Most common is setting prices just below even dollar
values, which supposedly looks more attractive to certain customers than even dollar values. Sometimes even
prices are used for the opposite effect, to give a product an exclusive or upscale image--i.e. charging $40
instead of $39.95.
 2. Prestige Pricing - involves setting prices at an artificially high level to provide prestige or a quality image.
Used especially when buyers associate a higher price with higher quality. Jewelry, perfumes, and automobiles
are examples of items which are prestige priced.
3. Price Lining - organization sets a limited number of prices for selected groups of merchandise. Simplifies
consumers' evaluation of alternative products. For example, a retailer might have a line of various brands and
styles of similar quality men's shirts selling for $20, and another line, consisting of higher quality shirts for $28.
If the consumer shops within a certain price line, then he doesn't need to worry about price--he can base his
decision on other factors.
4. Leader Pricing - firm prices one or more products below the usual price to attract customers. Idea is that it will
lead to increased store traffic, as customers come to take advantage of the lower prices. Hopefully, this will
result in increased sales of the other regularly priced merchandise to offset the reduced priced products.

The package can be a vital part of a product, by making it more versatile, safer, or easier to use. The package for
some products can be considered part of the product.

A Markup is a predetermined percentage or dollar amount which is added to the cost of the product to derive a
product's selling price. Many retailers and wholesalers use Markup Pricing, where they simply use a standard
percentage markup to set selling prices. Markups are usually calculated as a percentage of the selling price, rather
than a percentage of the cost.

To calculate the markup, just subtract the price the retailer paid for the product from their selling price. For
example, I buy a brush for $5 and sell it in my store for $7, the markup is $2. To calculate the markup as a
percentage of selling price, I divide $2 by $7.

Markups can be calculated as a percentage of Selling Price, or as a Percentage of cost.

Markups can be calculated as a percentage of cost. To calculate the markup as a percentage of the cost, the solution
is to divide the Markup by the Cost; in the same way, to calculate markup as a percentage of the selling price, divide
the Markup by the Selling Price.

.
A Markdown - a retail price reduction, typically in response to low consumer demand. A markdown is the opposite of a
markup. It is usually expressed as a percentage of the selling price, but can also be a percentage of the cost.

Multiple Buying influence - several people share in making a purchase decision in an organization's buying center,
and most likely occurs during new-task buying. Means several people are involved in the purchase decision making
process. It is most likely when the organization is making a new-task purchase, whereas in modified rebuy and straight
rebuy situations, the buyer may be the only one involved in making the decision. The different types of people in a
buying center are users, buyers, influencers, deciders, and gatekeepers.

5 categories of discounts which sellers give to buyers:

1. Trade Discounts - reduction off the list price given by a producer to a middleman for performing certain
functions. Given to intermediaries by a producer as compensation for performing various functions, such as
selling, transporting, providing credit services, etc..
2. Quantity Discounts - deductions from list price that reflect the economies of purchasing in large quantities.
Discounts given to customers who make large orders. They usually reflect legitimate reductions in costs,
because selling fewer but larger orders reduces per-unit costs for the seller.
3. Cash Discounts - discounts are given to buyers for prompt payment. Based on cash payments or cash paid
within a stated time. For example, "2/10 net 30" is a common policy which means that a 2 percent discount will
be allowed if the account is paid within 10 days. Otherwise, the entire balance is due within 30 days without a
discount, and interest may be charged after 30 days. A common Cash Discount policy is called the "2/10
 net 30" policy, which involves giving a two percent discount if cash payment is made within Ten days. 2/10
net 30 means that a 2 percent discount will be allowed if the account is paid within 10 days. Otherwise, the
entire balance is due within 30 days and there is no discount. After 30 days, interest may be charged.
4. Seasonal Discount - price reduction to buyers who purchase goods or services out of season. Allow the seller
to maintain production during the year.
5. An allowance - reduction in price to achieve a desired goal--often to help give the buyer the ability to make
the new purchase. May be a trade-in allowance, making financing a purchase easier by allowing the buyer to
turn in a used item when purchasing a new one. Another type of allowance is the Promotional Allowance,
which is a price reduction granted to dealers for participating in programs to increase sales of a particular item.

Personal Selling - success is determined by closing a sale. Salesperson must "close" the sale, or in other words, ask
the prospect to buy the product. The salesperson could have a very effective sales presentation, but if he doesn't make
an attempt to close the sale at the end of his meeting with the prospect, he is making a critical mistake.

The Break-Even point is the point at which the costs of producing a product equal the revenue made from selling the
product. Knowing the number of units necessary to break even is important in setting the price. When sales exceed the
break-even point, each successive unit sold generates profit.

Break-Even Analysis is a pricing technique that determines the number of products that a firm must sell at a specified
price in order to generate enough revenue to cover total cost. Involves calculating break-even points for several
alternative prices. It is not used solely for calculating prices, but can be used to identify highly undesirable price
alternatives that should be avoided.

The Total Revenue is calculated by multiplying Price by Quantity Sold.

Fixed Cost is the cost that does not vary with changes in the number of units produced or sold. Costs associated with
production that do not change depending on how many units the firm produces or sells. For example, the rent for using
an office building or a factory is a fixed cost.

Variable costs vary directly with changes in the number of units produced or sold. Costs that change depending on
how many units of a product a firm produces or sells. For example, producing more units often means paying more
wages because workers are working longer hours.

Break-Even Point is calculated by dividing the Fixed Costs by the Per Unit Contribution to Fixed Costs.

Per Unit Contribution is another way of saying how much money you make from selling one unit after subtracting the
variable costs associated with producing that one unit.

If you sell a brush for $5, and the variable costs for producing that brush was $3, then your Per Unit Contribution is $2.

.
Sales analysis uses sales figures to evaluate a firm's current performance. Often performed according to product
group or specific product item, and for each sales territory, individual salesmen, etc..

2 strategies for evaluating sales performance:

1. Sales v. Goals is a form of sales analysis which determines the firm's level of success against its own
standards. Involves comparing sales results to sales goals.
2. Market Share Analysis--comparing the strength of a firm to its competitors in the market.

International Marketing (aka: Global Marketing):

 Marketing carried out by companies overseas or across national borderlines
This strategy was extension of techniques used in home country of a firm

E-commerce (aka: e-comm) - buying & selling of product/services over electronic sytems, such as
internet. Electronic commerce is a sales aspect of e-business.

E-commerce can be divided into:

E-tailing (aka: virtual storefronts) on websites with online catalogs gather in virtual mall
Gathering/use of demographic data on web
Electronic Data Interchange (EDI) business to business exchange of data

Strategic Alliance relationship between 2 or more parties to pursue agreed upon goals or meet
critical business needs while remaining independent organizations. Partners provide products,
distribution channels, expertise, etc.

Process Includes:
1. Strategic Development align alliance objectives & development of resource strategies
2. Partner Asset analyzing partners strengths/weaknesses
3. Contract Negotiation determining all parties have realistic objectives, etc.
4. Alliance Operation addressing senior mgt commitment linking budgets/resources
5. Alliance Termination winding down alliance

4 Types of Strategic Alliance:

1. Joint Venture 2 or more firms create legally independent company to share resources & have
competitive advantage.
2. Equity Strategic Alliance 2 or more firms own different percentages of company theyve
formed by combining resources to have competitive advantage.
3. Non-equity Strategic Alliance 2 or more firms develop contractual-relationship to share
unique resources to create competitive advantage.
4. Global Strategic Alliance working partnerships between companies (often more than 2)
across national boundaries & increasingly across industries (i.e., company & government).

B2B (Business to Business) commerce transactions between business (i.e., manufacturer to

wholesaler or wholesaler to retailer). Volume of B2B transactions is much higher than B2C due to many
transactions involving raw materials. Communication is among business employees.

B2C (Business to Consumer) only 1 transaction sale to consumer. Communication is w/

consumers.

Micro-Macro Dilemma what is good for some prodcuers may not be good for society as a whole.

Macro-Marketing looks at marketing function in relation to society as a whole.

Micro-marketing looks at activities of individual organizations.

Marketing Information Systems (MIS) organized way of continually gathering & analyzing data to
provide marketing managers w/ the most up-to-date- info they need to make decisions.

Decision Support Systems (DSS) computerized systems that help any decision maker, not just
marketing managers.

Time Series Analysis statistical forecasting tool

Marketing Research helpful to solve non-routine problems.

Consumer Panels groups of customers who collect data.

Sales Era emphasis on selling more parts & outselling the competition.
Production Era focused on production of products.
Marketing Company Era time when companies embraced marketing concept.
Simple Trade Era wen middlemen were introduced in the early role of marketing involving simple
distribution.
Marketing Department Era tied together various marketing efforts under 1 department.

Market-Directed Economic Systems prices vary to allocate resources and distribute income
according to consumer preferences, so price is a rough measure of the value of resources used to
produce goods & services.

Marketing (true statements): applies to both for-profit & nonprofit organizations, affects
products/services that are bought as well as product prices. Advertising & sales promotion are areas in
the marketing mix & marketing decisions would include how to sell products.

Pure Subsistence Economy family units make all the products they consume. (Marketing does not
occur in this instance, because 2 or more parties have to be willing to exchange something/for
something else.)

Planned Economy government makes all decisions about the production & distribution of products &
services.

Economies of Scale as a company produces larger quantities of an item, the cost producing each
item goes down.

Micro-Marketing looks at marketing as a set of activities.

Possession Utility concept looks at satisfying customers needs.

Form Utility something that is made out of some other material (s), usually called raw materials.
Time Utility having product ready for customer.

Magnuson Act of 1975 ensures that warranties are clear and definite not deceptive or unfair.

U.S. Common Law producers of goods must warrant their products as merchantable.

UPC Code identifies products w/ readable electronic code was developed to speed handling of fast-
selling products.

Federal Fair Packaging & Labeling Act of 1966 required goods to be clearly labeled &
understandable.

When marketers compare their product to competitors offerings, they are concerned w/ quality &
satisfaction of the total product and formulate a SWOT (strengths, weaknesses, opportunities, threats)
analysis.

Service deed performed by 1 party for another at a cost.

Supplies expense items that do not become a part of a finished product and are tangible.

3 Types of Convenience Products: Staples, Impulse &Emergency

Capital Item (necessary element in setting price) Long lasting product that can be depreciated
(examples: an installation, buildings, land rights, major equiopment in business/company. For tax
purposes, the cost is spread over a number of years.

Mass Marketing lowest level that doesnt involve any segmentation at all.

Micro-Marketing highest level where firms try to offer products/services to suit individual customers
needs.

Niche Marketing caters to segments within segments of customers.

Segment Marketing offers different products for different groups of customer (not at individual
levels).

Macro Marketing marketing at the societal level

Unitary Elasticity occurs when the total revenue stays the same when the price of a product is
changed.

Advertising Standard Commission Rate is 15%. (example: what would ad agency receive for a
magazine ad that cost $20,000? $20,000 x 15% = $3,000.)

Pleasing Products are not good for consumers in the long run, but do give immediate satisfication.
i.e, disposable diapers.

Desirable Products gives immediate satisfaction and is good for consumers in the long run.

Deficient Products do not satisfy consumers in the long run or provide immediate satisfication.

Salutary Products are good for cosnumers in the long run, but do not give consumers immediate
satisfaction.

Descriptive Buying Method form of buying a product through a written/verbal description and is
often done without inspection.
Inspection Buying inspecting (careful examination) every item before you buy it.
Sampling Buying- looking at only part of the potential purchase, making the assumption that the
whole purchase will be of the same standards.
Negotiated Contract Buying agreeing to a contract to purchase, but the contract allows for
changes in the purchasing arrangements.

Regrouping Activities adjust the quantities and assortments of products handled.

Bulk-breaking dividing larger quantities into smaller quantities

Perceptual Map 2-dimensional diagram that depicts a brands position along 2 product attributes
in relation to its competition. (Used in product positioning)

Nonbusiness Marketing marketing activities undertaken by groups without an objective of profit,

ROI (Return on Investment), or market share. (ex: beer manufacturer running ad campaign to reduce
teenage drinking).

Learning change in a persons thought processes caused by prior experience.

Cue product sign, ad, or other stimuli in the environment.

Responses efforts to satisfy a strong stimulus that encourages action.

Oligopoly competitive structure existing when a few sellers control the supply of a large proportion of
a product.

Reverse Channels used to retrieve products that consumers no longer want.

Exclusive Dealing forbids an intermediary to carry products of a competing manufacturer.

A Tying Agreement- requires a channel member to buy other products from a supplier besides the one
preferred by the channel member.

Unique Selling Proposition when a company chooses one attribute to excel at and promotes it to
create a competitive advantage.
Current Profit Maximization setting prices as low as possible

Straight Extension only strategy for marketing a product in a foreign market without any product
changes.

Selective Processes when one is exposed to stimuli:

Selective Exposure minds/eyes seek out and notice info that interests us (products begin to
interest you, example)
Selective Retention remember only what we want to remember
Selective Perception screen out or modify ideas, messages & information that conflict w/
previously learned attitudes/beliefs.

Preemptive Differeentiation choosing a product attribute or difference that competitors would not be able to
duplicate (i.e, firm is taking preemptive action against its competitors).

Pioneer Advertising done early in the products life cycle and informs potential customers of the product and its
benefits.
Institutional Advertising promotes a specific organization, not a product.
Competitive Advertising aims to develop customers preference for a specific brand.
Product Advertising aims to sell a product.
Reminder Advertising aims to keep the product name before the public later in the products life cycle.

Vendor Analysis process used to evaluate suppliers and how they are working out for the
company.
Evaluation less formal and not as detailed as vendor analysis.
Checklist may be part of a vendor analysis but more information is needed to make an
assessment of the vendor than is provided ina checklist.
Subjective interpretation may be used in analyzing the vendor, but objective
measurement is also needed.

Market Research Process

Problem definition - takes most time
Situational Analysis
Data Collection
Problem Solving
Alternative Development

Marketing Research needed to keep isolated marketing managers in touch with their
markets.