Chapters 14-20 (Part 2) Flashcards
(20 cards)
Define and provide an example of the following four levels of competition: monopoly, oligopoly, monopolistic competition, and pure competition.
• Monopoly: one firm provides the product or service in an industry, less (or no) price competition
o Examples: Standard Oil Trust, American Telephone & Telegraph Co.
• Oligopolistic competition: a few firms dominate, prices change in reaction to competition
o Price War: When two or more firms compete by lowering prices
o Predatory Pricing: a firm sets a very low price with the intent of driving its competition out of business
o Examples: Airline industries
• Monopolistic competition: occurs when there are many firms competing for customers in a given market but their products are differentiated
o Depending on the features, style, and quality, companies compete in very different markets for the same product
o Difference between oligopoly and monopolistic competition: oligopoly (a small number of large firms), monopolistic competition (a large number of small firms)
o Examples: Nike, Oakley, Lacoste
• Pure competition: large number of sellers of standard products or commodities that consumers perceive as substitutes
o Price is set by the laws of supply and demand
o Examples include grains, gold, meat, spices, minerals
What is cross-shopping? Provide an example
• Cross-shopping: buying both premium and low-priced goods, shopping at expensive and price-oriented firms
o Example: Buying clothes from Nike or J. Crew yet buying everyday items from Walmart
List and define the five considerations for setting price strategies we discussed in class
• Cost-pricing methods: final price determined by the cost of the good or service
o Fixed cost plus variable cost plus markup
• Competitor-based pricing methods: setting prices to reflect the way they want consumers to interpret their own prices relative to the competitors’ offerings
o Setting similar price to competitor to signal similar quality
o Setting price much higher than competition to signal better quality
o Can lead to price wars
• Value-based pricing methods: setting prices that focus on the overall value of the product offerings as perceived by the consumer
• Improvement value: an estimate of how much more (or less) consumers are willing to pay for a product relative to other comparable products
o How much better is it than other products?
• Cost of ownership method: consumers may pay more for a product because the overall lifetime cost will be lower
Define and provide an example of everyday low pricing and high-low pricing.
• Everyday Low Pricing (EDLP): companies stress the continuity of their retail prices at a level somewhere between the regular, non-sale price and the deep-discount sale prices their competitors may offer
o Goal is to reduce customer search costs
• Customers assume that everything in the store is low priced
• Odd prices: prices end in odd numbers (often 9), where customers mentally truncate the actual price – $21.99 becomes $21
• What you don’t get with EDLP: sales (usually), loyalty cards, coupons
ex.) Walmart
• High/low pricing: relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases
o Strategy attracts customers who are not price sensitive (will pay full price) and customers who are (deal shoppers)
ex.) Macy’s
What is reference and anchor pricing? Provide an example.
• Reference price: the price against which customers compare the actual selling price with the new, low price (“was”…”now”)
o Sale price compared to original price
• Anchor pricing: customer accepts the first price they see for a product category, then compare all other products to that initial anchor price
What is the difference between price skimming and market penetration pricing strategies? What are benefits of each?
• Market penetration strategy: set the initial price low for the introduction of the new product or service
o Build sales, market share, and profits quickly
o As company develops the product, experience should lead to lower costs, increasing margins
o Can the firm meet the demand?
o Will the low price signify low quality?
o Can you ever raise the price?
• Price skimming: appeals to segments of customers (innovators, early adopters) who are willing to pay the premium price to have the product first
• Apple, AT&T and market penetration and price skimming:
o Apple sells iPhone to AT&T for $599 (price skimming)
o AT&T sells iPhone to customer for $199 (market penetration)
o AT&T hopes to recoup costs through long-term contracts, minutes, texting, and data plans
Define and provide an example of the following pricing tactics: markdowns, quantity discounts, seasonal discounts, coupons, rebates, and price bundles.
• Pricing tactics: offer short-term methods to focus on select components of pricing
o Pricing strategy: long-term approach to setting prices
• Markdowns: reductions taken on the initial selling price of the product or service
o Often used with high/low strategy
o Get rid of seasonal items, slow-moving or obsolete merchandise
o Also used to promote store to customers
- Quantity discounts: discounts based on purchase quantity, size discounts
- Seasonal discounts: price reductions offered on products and services to stimulate demands during off-peak seasons
• Coupons: offer a discount on the price of specific items when they are purchased
o Issued by manufacturer and retailer
o Found online, through social media, given at register, in-line display, newspapers, circulars
o Coupon promotions may “steal” sales from a future period
• Rebates: discounts off of the final price, but the manufacturer (not the retailer) issues the refund as a portion of the purchase price returned to the buyer in the form of cash
o Menards: Get this shovel free after rebate (90% of customers don’t do rebate)
• Price bundling: selling more than one product for a single, lower price
o Example: AT&T U-verse
Define and provide an example of the following deceptive pricing strategies: deceptive reference pricing, predatory pricing, bait-and-switch pricing, price discrimination, and price fixing.
• Deceptive reference pricing:
o Firms display reference prices, if honest → informative; otherwise → deceptive
o What is a “regular price”?
• Predatory pricing: when firm sets a very low price in order to drive its competitors out of business (illegal)
• Bait-and-switch: store lures customer in with a very low price on an item (the bait), only to aggressively pressure these customers into purchasing a higher priced model (the switch) by
o Disparaging the low-priced item (used car lot)
o Only having a limited number of the low-priced item
• Price discrimination: when a firm sells the same product to different resellers (wholesalers, distributors, or retailers) at different prices
o US law only protects price discrimination at the reseller level, does not apply to sales to end customers
• Price fixing: colluding with other firms to control prices
o Countries who prosecute cases of price fixing: United States, Canada, Australia, New Zealand, Japan, Korea and the European Union
Define integrated marketing communications. What are three forms of communications that must be integrated?
• Integrated marketing communications: represents promotion, encompasses a variety of communication disciplines: o Advertising o Personal selling o Sales promotion o Public relations o Direct marketing o Online marketing • The key is integration – sending a unified message using multiple communication methods
What is noise in the communication process?
• Noise: any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the medium
o Poses a problem for all communication channels
What are the four components of the AIDA model?
• Awareness: gaining attention of the consumer
o Brand awareness: recall the brand, the products/services that the brand represents, good or bad feelings about the brand
o Aided recall: consumer knows the brand when the name is presented to them
o Top-of-mind awareness: when consumers mention a specific brand name when asked about a product or service
- Interest: does the consumer care?
- Desire: moving from “I like it” to “I want it”
- Action: continue the search further (e.g., prompted from a commercial to visit a website) or purchase
Define the following communication measurements: frequency, reach, impressions, click-through-rate, and relevance. Which are used for traditional media? Which for internet media?
• Traditional media
o Frequency: how often the audience is exposed to a communication within a specified period of time
o Reach: the percentage of the target population exposed to a specific marketing communication
• Internet
o Impressions: the number of times an add appears in front of the user
o Click-through-rate: the number of times a user clicks on an ad divided by the number of impressions
o Relevance: how useful the ad message is to the consumer doing the search (e.g., Google AdWords)
Define and provide an example of push versus pull marketing.
• Pull strategy: the goal is to get consumers to pull the product into the supply chain by demanding it
o Examples: Trade show promotions, point of sale displays
• Push strategy: increase demand by focusing on wholesalers, retailers, or salespeople
o Motivate the seller to highlight the product in a crowded marketplace
o Examples: advertising and mass media promotion, WOM referrals, sales promotions and discounts
List, define, and provide an example of the three types of advertising we discussed in class
• Informative advertising: used to create and build brand awareness for a new product
o Generally occurs in the early stages of the product life cycle
• Persuasive advertising: communication used to motivate consumers to change brands and start using their product.
o Generally occurs in the later stages of the product life cycle
Ex. Droid and Apple commercials.
• Reminder advertising: communication used to remind or prompt repurchases.
o Generally occurs in the maturity stage of the life cycle
Ex. Coke, it is a well established company and they uses reminder advertising to maintain its position in the market
What is the difference between mass and niche media?
• Mass media: includes newspapers, magazines, radio, television
o Ideal for reaching large numbers of anonymous audience members
• Niche media: used to reach narrow segments, often with unique demographic characteristics or interests
o Specialty television channels (e.g., HGTV, Nickelodeon) and specialty magazines (e.g., Conde Nast, Home and Garden)
What is the difference between puffery and deceptive advertising?
- Puffery: the legal exaggeration of praise, stopping just short of deception, lavished on a product (not overt)
- Deceptive advertising: false or misleading claims; a message that omits information that is important in influencing a consumer’s buying behavior and is likely to mislead consumers acting “reasonably”
Define and provide an example of product placement and cross-promotions.
• Product placement: firms pay to have their product included in nontraditional situations
o Example: Whopper add on a windows 7 pack, Batman toy on a Golden Grahams box
• Cross-promoting: when two or more firms join together to reach a specific target market
o Examples: Advertising for Subway in an Adam Sandler movie
Define the following sales terms: leads, qualified leads, cold calls, and warm calls.
- Leads: the identification of a person or entity that has the interest and authority to purchase a product or service
- Qualified Leads: more than just contact details. It includes further information on the person or the company they represent, information that qualifies them for a certain product.
• Cold Calls: calling or visiting potential customers without appointments.
Ex. People who call your house
• Warm Calls:The solicitation of a potential customer with whom a sales representative or business has had prior contact
What is the difference between order taking and order getting?
o Order taker: process routine orders, doesn’t really sell the customer additional products or services
o Order getter: identify and engage potential customers to make the sale, sells customers additional purchases
• Order getting is much harder than order taking
What is the importance of asking questions in a sales conversation? Silence?
• Silence is often perceived as a rejection by the salesperson, use it to your advantage
o It never hurts to ask for more, the worst they can say is “no”
