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Agent or broker.
Any intermediary with legal authority to act on behalf of the manufacturer
aka marketing channel of distribution, which consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.
ie. can be compared with a pipeline through which water flows from a source to a terminus, mktg channels make possible the flow of products and services from a producer, thru intermediaries, to a buyer.
Direct marketing channel.
Direct Marketing Channels
allow consumers to buy products by interacting with various advertising media without a face-to-face meeting with a salesperson. Direct mktg chan. include mail-order selling, direct-mail sales, catalog sales, telemarketing, etc.
- Direct Channels
- Under consumer products and services: direct marketing channel represents the path from producer to ultimate consumer and enables them to deal directly with each other. ie. Schwan Foods to Consumer.
- Under business prods & serv: firms using this channel maintain their own salesforce and perform all channel functions. This channel is employed when buyers are legal and well defined, the sales effort requires extensive negotiations, and the product are of high unit value and require hands-on expertise in terms of installation or use.
- ie. IBM to Industrial user (equivalent to consumer)
All other forms are indirect channels
because intermediaries are inserted between the producer and consumer/indust user.
ie. Producer > [Agent >] [Wholesaler >] [Retailer >] Consumer
ie. Producer > [Agent >] [Industrial Distributor >] Consumer
Electronic marketing channel.
Interactive electronic tech has made this channel possible. It employs the internet to make products and services available for consumption or use by consumers or organizational buyers. A unique feature of these channels is that they combine electronic and traditional intermediaries to create time, place, form, and possession utility for buyers.
They perform like consumer product marketing channels. Elect. intermed. can and do perform transactional and facilitating functions effectively. But elect. interm. are incapable of performing elements of the logistical function, particularly for products such as books and automobiles (tangible).
an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product.
ie. GE sells its large appliances directly to home and apartment builders but uses retail stores, including Lowe's home centers, to sell to consumers.
Although not illegal, can be viewed as anti-competitive in some situations.
Strategic Channel alliance.
a recent innovation in marketing channels, whereby one firm's marketing channel is used to sell another firm's products. They are popular in global marketing because it's expensive and time-consuming.
ie. General Mills and Nestle have an extensive alliance that spans 130 int'l markets
Under corporate systems vertical marketing systems, where a producer might own the intermediary at the next level down the channel.
ie. Ralph Lauren which manufactures clothing and also owns apparel shops.
A retailer might own a manufacturing operation. ie. Kroger supermarkets operate manufacturing facilities that produce everything from aspirin to cottage cheese for sale under the Kroger label.
is a contractual arrangement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchisee to operate a certain type of business under an established name and according to specific rules.
Manufacturer-sponsored retail franchise systems (automobile industry) ie. Ford licenses dealers to sell its cars subject to various sales and service conditions.
Mnfr-sponsored wholesale fran. sys exist in the soft-drink industry, where Pepsi-Cola licenses wholesalers (bottlers) that purchase concentrate from Pepsi and then carbonate, bottle, promote, and distribute its products to retailers and restaurants.
Service-spon'd retail fran. sys. are used by firms that have designed a unique approach for performing a service and wish to profit by selling the franchise to others. ie. Holiday Inn, McDonald's
Service-spon'd fran. sys. when franchisors license individuals or firms to dispense a service under a trade name and specific guidelines. ie. H&R Block
The 3 degrees of distribution density.
Intensive distribution - means that a firm tries to place its products and services in as many outlets as possible. Usually chosen for convenience products or services such as candy, fast food, newspapers, and soft drinks.
Exclusive distrib - is the extreme opposite of int. dist. because only 1 retailer in a specified geographical area carries the firm's products. Chosen for specialty products or services, such as some women's fragrances and men's and women's apparel and accessories.
Selective dist - lies between these two extremes and means that a firm selects a few retailers in a specific geographical area to carry its products. Uses combination of market coverage benefits of int. dis. to the control over resale evident with exclus. dist. ie. Dell, Inc. chose selective dis. when it decided to sell its products via U.S. retailers along with its direct channel.
(a vertical conflict) involves channel conflict that arises when a channel member bypasses another member and sells or buys products direct.
ie. American Airlines decided to terminate its relationship with Orbitz and Expedia, and sell directly through AA Direct Connect.
Second, conflict occurs due to disagreements over how profit margins are distributed among channel members.
ie. Universal Music Group adopted a pricing policy for CDs that squeezed the profit margins for specialty music retailers
Third, situation arises when manufacturers believe wholesalers or retailers are not giving their products adequate attention.
ie. Nike stopped shipping popular sneakers such as Nike Shox NZ to Foot Locker in retaliation for the retailer's decision to give more shelf space to shoes costing under $120.
Based on Logistics
, which involves getting the right amount of the products to the right place at the right time at the lowest possible cost.
The performance of these (logistics) activities is Logistics Management
, the practice of organizing the cost-effective flow of raw mats, in-process inv, finished goods, and related info from point of origin of consumption to satisfy customer requirements.
Supply chain management.
Supply chain - refers to the various firms involved in performing the activities required to create and deliver a product or service to consumers or industrial players.
SCM is the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering products and services that provide value to consumers.
See previous chart.
An important feature of SCM is its application of sophisticated information technology that allows companies to share and operate systems for order processing, transportation scheduling, and inventory and facility management.
A responsive supply chain.
Dell marketing strategy primarily targets customers who desire having the most up-to-date computer systems customized to their needs. These cx are willing to (1) wait to have their customized comp sys delivered in a few days, rather than a generic model at retail store (2) pay a reasonable, though now the lowest, price
Dell opted for a responsive supply chain. It relies on more expensive express transportation for receipt of components from suppliers and delivery of finished products to customers. Dell achieves product variety and manufacturing efficiency by designing common platforms across several products and using common components. Also, they invested heavily in information tech to link itself with suppliers and customers.
An efficient supply chain.
Walmart's marketing strat. is to be a reliable, lower-price retailer for a wide variety of mass consumption consumer goods. The strategy favors an efficient supply chain designed to deliver products to 200 million consumers each week at the lowest possible cost.
Efficiency is achieved in a variety of ways. For instance, Walmart keeps relatively low inventory levels, and most of it is stocked in stores available for sale, not in warehouses gathering dust. The low inv arises from Walmart's use of cross-docking, a practice that involves unloading products from suppliers, sorting products for individual stores, and quickly reloading products onto its trucks for a particular store. The company also runs its own fleet of trucks.
Between Responsive or Efficient supply chain: (1) there is no one best supply chain for every company. (2) the best supply chain is the one that is consistent with the needs of the customer segment being served and complements a company's marketing strat. And finally, supply chain managers are often called upon to make trade-offs between efficiency and responsiveness on various elements of a company's supply chain.
Total logistics cost.
includes expenses associated with transportation, materials handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return products handling. Many of these costs are interrelated so that changes in one will impact the others.
ie. if a firm attempts to reduce its transportation costs by shipping in larger quantities, it will increase its inventory levels. While larger inventory levels will increase inventory costs, they should also reduce stockouts.
Integrated Marketing Communications (IMC)
Integrated marketing communications (IMC) is the concept of designing marketing communications programs that coordinate all promotional activities—advertising, personal selling, sales promotion, public relations, and direct marketing—to provide a consistent message across all audiences.
Communication Process - FIGURE 17-1
Communication is a process of conveying a message to others and it requires six elements: a source, a message, a channel of communication, a receiver, and the processes of encoding and decoding.
- a company or person who has info to convery; ie. descrip. of a new cellular telephone forms the Message
- which is conveyed by a means of a channel of communication
such as a salesperson, advertising media, or public relations tools. Consumers who read, hear, or see the message are the receivers
is the process of having the sender transform an idea into a set of symbols. Decoding
is the reverse, or the process of having the receiver take a set of symbols, the message, and transform the symbols back to an idea. Decoding performed by receivers is in accordance to their own frame of reference: their attitudes, values, and beliefs.
ie. The North Face is the source
and the advertisement is the message
, which appeared in Outside
magazine (the channel
Promotional Mix - the Five Elements of the Promotional Mix - Review Figure 17-2 and read about them to understand payments, strengths, weakness, plus read how each is executed and key differences such as between advertising and publicity.
Mass - used with groups of prospective buyers vs. Customized interaction - between a seller and prospective buyer
Advertising - Mass - (pmt) Fees paid for space or time - (strength) efficient means for reaching large numbers of people - (weakness) high abolute costs, difficult to receive good feedback
Personal Selling - Customized - (pmt) fees paid to salespeople as either salaries or commissions - (str) immediate feedback, very persuasive, can select audience, can give complex info - (weak) extremely expensive per exposure, messages may differ between salespeople
Public relations - Mass - (pmt) no direct payment to media - (str) often most credible source in the consumer's mind - (weak) difficult to get media cooperation
Sales promotion - Mass - (pmt) wide range of fees paid, depending on promotion selected - (str) effective at changing behavior in short run, very flexible - (weak) easily abused, can lead to promotion wars, easily duplicated
Direct Marketing - Customized - (pmt) cost of communication thru mail, tele, computer - (str) messages can be prepared quickly, facilitates relationship w/ cx - (weak) declining cx response, database mgmt is expensive
Advertising involves mass media (tv, radio, magazines) and is any paid form of nonpersonal communication about an organization, service, or idea by an identified sponsor. Disadvantage of Advert. is costly and hard to gauge effectiveness of message due to lack of feedback.
Publicity is a nonpersonal, indirectly paid presentation of an organiz, product, or service. It can take the form of a news story, editorial, or prod announcement. Key diff between Ad and Pub and personal selling is the "indirectly paid" dimension. W/ publicity a company does not pay for space in a mass medium (tv, radio) but attempts to get the medium to run a favorable story on the company. An advantage of pub is credibility. Disadvantage is lack of the user's control over it. ie. company invites media for press coverage of a store grand opening or new product release, but there is no guarantee that a story will result, is positive, favorable, or who will be in the audience. Blogs, social media have added uncontrollable public discussion of any company activity (think #hateChicAFil)
Promotional Objectives of each stage of the Product Life Cycle.
Example Purina dog chow
- objective: to inform
, activity: publicity, advert, salesforce calling on intermediaries, sales promo (free samples)
- obj to persuade
, activ: personal selling to intermediaries, advert to differentiate Dog Chow attributes from competitors
- obj. To remind
, activ: reminder advert, sales promo as discounts, coupons, events; limited personal selling, direct-mail reminders
- obj. To phase out
, activ: little money spent on promotion
Channel Strategies: Push strategy and Pull strategy.
- directing the promotional mix (advertising, personal selling, public relations, sales promo, direct mktg) to channel members to gain their cooperation in ordering and stocking the product.
In this approach, personal selling and sales promotions play major roles. Salespeople all on wholesalers to encourage orders and provide sales assistance. Sales promotions, such as case discount allowances (20% off the regular case price), are offered to stimulate demand.
- sometimes manufacturer face resistance from channel members who do not want to order a new product or increase inv levels of an existing brand. A manufacturer may then direct its promotional mix at ultimate consumers to encourage them to ask the retailer for a product. Seeing the demand from ultimate consumers, retailers order the product from wholesalers. (ie. pharmaceutical comps spend $4 bill on direct-to-consumer prescrip. drug ads)
Types of advertising: Product (pioneering, competitive, and reminder) and Institutional (advocacy, pioneering institutional, competitive institutional, reminder institutional).
Product Ads take 3 forms: pioneering (or informational), competitive (or persuasive) and reminder.
- used in introductory prod life cycle to tell people what a product is, what it can do, and where it can be found, goal is To Inform
- Competitive - promotes a specific brand's features and benefits, goal is To persuade.
- A form of compet. is comparative advertising which shows one brand's strengths relative to competitors (taste of 7up vs lime sodas). Using comparative requires market research to provide legal support for their claims.
- used to reinforce previous knowledge of a product. Reminder advert is good for products that have achieved a well-recognized position
are in the mature phase of their prod life cycle.
- is to build goodwill or an image for an organ rather than promote a specific good or service. ie. IBM to build confidence in the company name. This form of advert is used to support the public relations plan or counter adverse publicity (Tylenol sealed bottles after ppl got poisoned).
- state the position of a company on an issue. ie. Chevron's "We Agree" cmapaign places ads stating its position on issues such as renewable energy, growth and jobs, and community development.
Pioneering Instit. adverts
- like pioneering ads for products, used for announcements about what a company is, what it can do, or where it is located. ie. Bayer (aspirin) stating "We cure more headaches than you think" attempt to inform public of producing many products in addition to aspirin.
- Competitive Instit - adverts promote the advantagesof one product class over another and are used in markets where diff prod classes compete for the same buyers. America's milk and dairy farmers use "Got Milk?" campaign to increase demand for milk as it competes with other beverages.
- Reminder instit adverts - like product form, simply bring the company's name to the attention of the target market again. The Army branch sponsors campaign to remind potential recruits the opportunities in the Army "Be all you can be" and promote learning of life and job skills.
Types of advertising appeal.
Fear appeals - suggest he/she can avoid negative experience, a change in behavior, or reduction in the use of a product (automobile safety ads that depict accident or injury).
Sex appeals - audience will increase attractiveness of the user (wide range automobiles to toothpaste). Sexual content is most effective when there is a strong fit between the use of a sex appeal in the ad and the image and positioning of the brand (ie. Candie's clothing - think of every aisle as a runway)
Humorous appeals - impy either directly or subtly that the product is more fun or exciting than competitors' offerings (Geico caveman). Advertisers believe humor increases the effectiveness of ads, but a study has shown that the problem with humor is that it runs out quickly, losing interest of consumers. Another problem is across cultures the effectiveness may vary, esp. on global scale.
Reach, Rating, and Frequency.
Reach is the number of different people or households exposed to an advertisement. (used by newspapers)
Rating is the percentage of households in a market that are tuned to a particular TV show or radio station (equivalent to reach used by TV and radio). Advertisers try to maximize reach in their intended target market at the lowest cost.
Frequency is the average number of times a person in the target audience is exposed to a message or an advertisement. Advertisers want their message to be exposed to the intended audience more than once. Like reach, greater frequency is generally viewed as desirable. Studies show repeated exposure will result in favorable brand extensions.
Review advantages and disadvantages of Mediums – Figure 18-3 (Page 468)below:
Executing the advertising program; pretests, posttests.
Pretests are tests conducted before an advertisement is placed in any medium to determine whether it communicates the intended message or to select among alternative versions of the advertisement.
Posttests are tests conducted after an advertisement has been shown to the target audience to determine whether it accomplished its intended purpose.
Three types of Agency Services (this chart is not in the text, but is available in lecture slides).
A full-service agency is an advertising agency that provides the most complete range of services, including market research, media selection, copy development, artwork, and production.
Limited-service agencies are advertising agencies that specialize in one aspect of the advertising process, such as providing creative services to develop the advertising copy, buying previously unpurchased media space, or providing Internet services.
In-house agencies consist of the company’s own advertising staff, who may provide full services or a limited range of services.
Consumer-Oriented Sales Promotions.
Consumer-oriented sales promotion aka consumer promotions consists of sales tools used to support a company’s advertising and personal selling directed to ultimate consumers. Also called consumer promotions.
ie. Coupons, deal, rebates, contents, samples, loyalty programs
What is Personal selling what is a Sales Manager’s job? Salespeople’s role in the company.
Sales management involves planning the selling program and implementing and evaluating the personal selling effort of the firm.
Personal selling is the two-way flow of communication between a buyer and seller, often in a face-to-face encounter, designed to influence a person’s or group’s purchase decision.
Forms of Personal Selling: order taker, order getting – relationship selling, transactional selling.
Personal selling - 3 roles in marketing. (1) critical link between firm and customers, req. salespeople match company interests w/ cx needs to satisfy both parties (2) salespeople are the company in a consumer's eyes, represent what a company is or attempts to be (3) per. sell. may play a dominant role in a firm's mktg program (ie. Avon pays almost 40% of its total sales dollars for selling exp.)
Order taker salespeople - processes routine orders or reorders for products that were already sold by the company. Primary respons. is to preserve the ongoing relationship w/ existing cx and maintain sales. Two types of order takers: outside, visit cx and replenish inv stocks of resellers, such as retailers or wholesalers. Inside, also called order clerks or salesclerks, typically answer simple questions, take orders, and complete transactions.
Order getter - sells in a convertional sense and identifies prospective customers, provides cx w/ info, persuades cx's to buy, closes sales, and follows up on cx's use of a prod/service. Inside (auto sales rep), or outside (xerox sales rep). Order getter reqs. high degree of creativity and cx empathy and is typically req. for selling complex or technical products w/ many options, so considerable prod. knowledge and sales training are necessary. (ie. Met Life insurance agent must know income, stage of family's life cycle, and investment objectives)
Relationship selling is the practice of building ties to customers based on a salesperson’s attention and commitment to customer needs over time.
Transactional selling -
Leads, prospects, qualified prospects.
A lead is the name of a person who may be a possible customer.
A prospect is a customer who wants or needs the product.
A qualified prospect is an individual who wants the product, can afford to buy it, and is the decision maker.
Review the Stages of the Personal Selling Process – Figure 20-3 (Page 524) below (This chart is also one of the Marketing Model).
1. Prospecting - search for and qualification of potential customers (lead, prosp, qualified prosp)
2. Preapproach - gather info and decide how to approach the prospect
3. Approach - gain a prosp's attention, stimulate interest, and make transition to the presentation
4. Presentation - begin converting a prosp into a cx by creating a desire for the prod/serv
5. Close (most important step! makes money) - obtain a purchase commitment from the pros and create a cx (maybe sign Intent to purchase or other contract)
6. Follow-up - ensure that the cx is satisfied w/ the prod/serv
Three major presentation formats, and types of each.
1. stimulus - response format: assumes that given the approrpriate stimulus by a salesperson, the prospect will buy. (McD's upselling combo meals)
2. formula selling format: based on view that a presentation consists of info that must be provided in an accurate, thorough, and step-by-step manner to inform the prospect (canned sales presentation, telemarketing)
3. need-satisfaction format: combination of stimulus and formula w/ common characteristic: the salesperson dominates the conversation. Emphasizes probing and listening by the salesperson to identify the needs and interests of prospective buyers. Once identified, the salesrep tailors the presentation to the prospect and highlights prod. benefits that may be valued (life ins. agent)
1. acknowledge and convert the objection
2. postpone (that's a great question, let me get back to you)
3. agree and neutralize
4. accept the objection
5. denial (prospect's objection is based on misinformation, correct it and show why)
5. ignore the objection (used when it appers that the object. is a stalling mechanism or is not clearly not important to the prospect or relevant)
Sales management’s three interrelated functions.
- 1. sales plan formation
- 2. sales plan implementation
- 3. sales force evaluation
Sales Plan Formulation: output or input-related objectives, major account management.
Sales force Motivation and Compensation: what produces motivated salespeople?
Three Sales Compensation Plans.