Business Explain: August 2018

Archive for August 2018

What are the main reasons that companies pay attention to pricing?

• Due to the revenue equation, Revenue = Price × Quantity Sold. There are 2 ways for a firm to grow revenue: increase price or increase the volume of product sold.

• Pricing is the easiest of all marketing variables to change.

• Firms take considerable pains to discover and anticipate the pricing strategies and tactics of other firms.

• Pricing receives a great deal of attention because it is one of the few ways to differentiate a product in commoditized and mature markets.

What is transfer pricing?

Transfer pricing occurs when one unit in an organization sells products to another unit. Transfer prices are used when individual entities of a larger multi-entity firm are treated and measured as separately run entities.

What do we mean by prestige pricing?

This strategy sets prices at the top end of all competing products in a category. This is done to promote an image of exclusivity and superior quality. This is a viable approach in situations where it is hard to objectively judge the true value of a product.

What do we mean by repositioning strategy?

This strategy involves targeting existing products at new markets or segments. This process can involve real or perceived changes to a product. These typically includes changes to the marketing mix, such as product, place, price and promotion. Repositioning is done to keep up with consumer wants and needs.

What is the connection of social responsibility and marketing performance?

• This causes employees to become more motivated to serve customers, more committed to the firm, more committed to standards of high quality, and more satisfied with their jobs.

• This causes customers to become more loyal to the firm and increase their purchases from the firm.

• This leads to increased trust among the firm's stakeholders. The most important contributing factor to gaining trust is the perception that the firm and its employees will not sacrifice their standards of integrity.

Why is the connection of marketing ethics and leadership so important?

An ethical climate calls for organizational members to incorporate the interests of all stakeholders, including customers, in their decisions and actions.

In an ethical environment, a strong leader is needed to maintain the policies and standards of ethical leadership.

When such a leader in top management is found and displays these traits, the employees are more likely to follow the example of the leader, which leads to a more friendly and self-aware working environment in the firm.

What are some of the key considerations in developing a code of conduct?

1. Examine high-risk areas and issues.

2. State values and conduct necessary to comply with laws and regulations. Values are an important buffer in preventing serious misconduct.

3. Identify values that specifically address current ethical issues.

4. Consider values that link the organization to a stakeholder orientation. Attempt to find overlaps among organizational and stakeholder values.

5. Make the code of conduct understandable by providing examples that reflect values.

6. Communicate the code frequently and in language that employees can understand.

7. Revise the code every year with input from a variety of internal and external stakeholders.

What is the role of a code of conduct for a company?

1. Trustworthiness
2. Respect
3. Responsibility
4. Fairness
5. Caring
6. Citizenship

Is not truly effective until it has the full support of top management. It helps employees and managers deal with ethical dilemmas by prescribing or limiting specific activities.

Deceptive practices in marketing are ?

Price fixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules.

1. agreements between competitors (horizontal conduct)

2. monopolization (single firm conduct)

What is the role of the top management in creating an ethical environment in a company?

1. Create a common goal or vision for the company.

2. Obtain buy-in, or support, from significant partners.

3. Motivate others to be ethical.

4. Use the resources that are available to them.

5. Enjoy their jobs and approach them with an almost contagious tenacity, passion and commitment.

What do we mean by "enlightened self-interest"?

A philosophy in ethics which states that persons who act to further the interests of others (or the interests of the group or groups to which they belong), ultimately serve their own self-interest.

It has often been simply expressed by the belief that an individual, group, or even a commercial entity will "do well by doing good.

What is the relationship of marketing ethics and strategy?

1. Marketing Ethics includes the principles and standards that guide the behavior of individuals and groups in making marketing decisions.

2. Marketing Strategy must consider stakeholders—including managers, employees, customers, government regulators, suppliers, shareholders, the community, and special-interest groups—all of whom contribute to accepted standards and society's expectations.

Product-Related Ethical Issues:

1) The firm fails to disclose risks associated with a product or information related the function, value, or use of a product.

2) Issues can arise in product design as pressures build to substitute inferior materials or product components to reduce cost.

3) Counterfeit products

Pricing-Related Ethical Issues:

The company seeks to earn high profits at the expense of its customers.

Price Discrimination - Firms charge different prices to different customers.

Price Fixing - Firms collaborate to set prices.

Predatory Pricing - Firm charge very low prices for a product with the intent of driving competition out of business or out of a specific market.

Superficial Discounting - Firm advertises a sale price as a reduction below the normal price when it's not the case

Promotion-Related Ethical Issues:

Firms use ambiguous statements, in which claims are so weak that the viewer, reader, or listener must infer the advertiser's intended message.

Bribery - An incentive is offered in exchange for an illicit advantage.

Supply Chain-Related Ethical Issues:

Managing supply chain ethics is important because many stakeholders hold the firm responsible for all ethical conduct related to product availability. This requires the company to exercise oversight over all of the suppliers used in producing a product.

What is Sustainability ?

Assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles - all while maintaining the natural environment.

This approach has led to many firms to engage in green marketing, a strategic process involving stakeholder assessment to creating meaningful long-term relationships with customers, while maintaining, supporting, and enhancing the natural environment.

Stages of Product Life Cycle:

1. Development Stage: A time of no sales revenue, negative cash flow, and high risk.

2. Introduction Stage: A time of rising customer awareness, extensive marketing expenditures, and rapidly increasing sales revenue.

3. Growth Stage: A time of rapidly increasing sales revenue, rising profits, market expansion, and increasing numbers of competitors.

4. Maturity Stage: A time of sales and profit plateaus, a shift from customer acquisition to customer retention, and strategies aimed at holding or stealing market share.

5. Decline Stage: A time of persistent sales and profit decreases, attempts to postpone the decline, or strategies aimed at harvesting or divesting the product

What do we mean by repositioning?

When a company changes a brand's status in the marketplace. This typically includes changes to the marketing mix, such as product, place, price and promotion. Repositioning is done to keep up with consumer wants and needs.

What do we mean by market positioning?

The process of establishing the image or identity of a brand or product so that consumers perceive it in a certain way.

What is branding strategy?

Selection the right combination of name, symbol, term, or design that identifies a specific product or firm.

Brand Recognition is the extent to which a consumer can correctly identify a particular product or service just by viewing the product or service's logo, tag line, packaging or advertising campaign.

Brand Loyalty: A positive attitude toward a brand that causes customers to have a consistent preference for that brand only.

Brand Preference is when consumers choose a specific company's product or service when you have other, equally priced and available options.

Brand Equity: Marketing and financial value associated with a brand's position in the market place. Value of a brand to the firm

Brand Insistence is when a customer is completely loyal to a particular brand for a type of product.

Will accept no substitute brand.

What are some of the advantages and disadvantages of loyalty programs?

Rewards loyal customers who engage in repeat purchases. These programs are popular due to their potential to dramatically increase profits over the long term.

Firm has no idea where the loyal behavior comes from, Cancelling the programs results in lost sales.

What are some of the advantages and disadvantages of samples?

Samples stimulate trial of a product, increase volume in the early stages of the product's cycle, & encourage customers to search for a product.

Not enough samples or never enough interest generated by samples.

What are some of the advantages and disadvantages of rebates?

Like coupons except they require more efforts on the consumer's part to obtain the price reduction.

Firms prefer rebates because the firms control the time period of any rebate, firms can collect important consumer info to build customer databases.

What are some of the advantages and disadvantages of coupons?

Reduce the price of a product & encourage customers to try new or established brands.

Customers are now using mobile coupons instead of newspaper coupons.

What do we mean by recruiting and training salespeople?

Recruiting the types of salespeople should be closely tied to the personal selling and IMC strategies. Potential salespeople come from sources within the firm, other firms, employment agencies, educational institutions, and ad responses placed in newspapers, magazines or the internet.

What do we mean by determining sales force size?

Is a function of many variables including the types of salespeople used, specific sales objectives, and the importance of personal selling within the overall IMC programs.

What do we mean by developing sales force objectives?

Involves desired sales dollars, sales volume, or market share.

These sales objectives can be translated into guidelines for recruiting new salespeople as well as setting quotas for individual salespeople.

What do we mean by sales management?

The development of sales force objectives, determining the size of the sales force, recruiting and training salespeople, and the controlling and evaluating the sales force.

What are the different types of publicity that a company may use?

1. News Releases
2. Feature Articles
3. White Papers
4. Press Conferences
5. Event Sponsorship
6. Employee Relations

What are some of the marketing functions performed by distributors?

Sorting
breaking bulk
maintaining inventories
maintaining convenient locations
provide services

What are some situations that decrease price sensitivity?

• When substitute products are not available.
• When customers perceive products as being necessities.
• When the prices of complementary products go down.
• When customers believe that the product is just worth the price.
• When customers are in certain situations associated with time pressures or purchase risk.
• When products are highly differentiated from the competition.

What do we mean by inelastic demand?

A situation in which the demand for a product does not increase or decrease correspondingly with a fall or rise in its price.

Few choices or few options are available. Lack of substitutes.

What do we mean by price elasticity?

Refers to customers' responsiveness or sensitivity to changes in price.

Circumstances may cause someone to look elsewhere for the same product.

What is the relationship between price and revenue?

Revenue = price x quantity sold

This is based on two general pricing myths:

1. When business is good, a price cut will capture greater market share.
2. When business is bad, a price cut will stimulate sales.
This also means that firms should not always cut prices, but should instead find ways to build value into the product and justify the current, or a higher, price.

Sellers have increased power when?

Certain products are in short supply or in high demand.

Buyers also have power when the ?

Economy is weak and few customers are unwilling to part with their money. During a seller's market, prices will go up and terms and services become unfavorable.

Buyers have increased power over sellers when ?

There are many sellers in the market or when there are many substitutes for the product.

Buyers also have power when the economy is weak and few customers are unwilling to part with their money. During a seller's market, prices will go up and terms and services become unfavorable.

Why is pricing so important to companies?

1. Due to the revenue equation, Revenue = Price × Quantity Sold. There are 2 ways for a firm to grow revenue: increase price or increase the volume of product sold.

2. Pricing is the easiest of all marketing variables to change.

3. Firms take considerable pains to discover and anticipate the pricing strategies and tactics of other firms.

4. Pricing receives a great deal of attention because it is one of the few ways to differentiate a product in commoditized and mature markets.

What do we mean by Product Line Extensions?

These products supplement an existing product line with new styles, models, features, or flavors.

What do we mean by New Product Lines?

Products represent new offerings by the firm, but the firm introduces them into established markets.

New products lines are not as risk as true innovation, and they allowed the firm to diversify into closely related products categories.

Simultaneous Production and Consumption meaning what?

Customers or their possessions must be present during service delivery; Services are often difficult to distribute.

Intangibility meaning what?

It is difficult for customers to evaluate quality, especially before purchase and consumption; Customers cannot take possession of a service.

What is a product?

Something that buyers can acquire via exchange to satisfy a want or a need.

Consumer Product: Is any tangible product for sale that is used by a person or household for non-business purposes.

Business Product: Are goods that are sold to other businesses, used for resale and used to produce other goods.

Convenience Product: Maximize availability and ease of purchase. Inexpensive, routinely purchased products. Little time and effort to acquire.

Shopping Product: Products that consumers will spend time and effort to obtain. Consumers shop different options to compare prices, features, and service. Focus on differentiation through imagine and symbolic attributes.

Unsought Product: Products that consumers are unaware of or a product that consumers do not consider purchasing until a need arises.

Specialty Product: Unique, one-of-a-kind products that consumers will spend considerable time, effort, and money to acquire.