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marketing final 380
final
238
Marketing
Undergraduate 3
03/17/2011
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Term
Political-Legal environment
 Definition
component of the marketing environment consisting of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights.
Term
Exclusive dealing regiment
 Definition
exclusive dealing arrangement between companies
Term
o Tying agreement
 Definition
– the sale of one product is tied to the sale of another agreement
 Ex: I will sell you televisions only if you buy some DVD players as well
Term
 Robertson packman act 1936 (regulates competition)
 Definition
Prohibits price discrimination in sales to wholesalers, retailers, or other producers
• prohibits selling at unreasonably low prices to eliminate competition
Term
o Federal trade commission act 1914 (maintains a competitive environment)
 Definition
 Prohibits unfair methods of competition
 Establishes the federal trade commission (FTC)
• An administrative agency that investigates business practices and enforces the FTC act.
Term
• North American free trade agreement 1993 - NAFTA(regulates competition)
 Definition
o International trade agreement between Canada, Mexico and the US
o Designed to facilitate trade by removing tariffs and other trade barriers among the 3 nations.
Term
o Scanning
 Definition
The process of collecting information about the external marketing environment to identify and interpret potential trends
 Marketers analyze the information and decide whether these trends represent opportunities or threats to the company.
 It is a component of environmental management
Term
o Monitor
 Definition
The process of looking at the information without interpreting the data
Term
mgmt
 Definition
attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-cultural environments.
 Ex:When managers lobby legislators or contribute to the campaigns of politicians in order to get some law passed in their favor in return.
Term
• The competitive environment
 Definition
interactive process that occurs in the marketplace among marketers of directly competitive products, marketers of products that can be substituted for one another, and marketers competing for the consumer’s purchasing power.
o As organizations vie to satisfy customers, the interactive exchange creates the competitive environment.
Term
o Monopoly
 Definition
sole supplier of a good or service in the marketplace
 These are few organizations
 Ex: natural gas, electricity, water, etc.
 Deregulation movement – movement to end monopolies
Term
o Oligopoly
 Definition
– when only a few companies control the market

 This is achieved by having high-startup costs which form a barrier of entry to keep newcomers from entering the market
 Ex: airplane manufacturers (Airbus and boeing)
Term
o Perfect competition
 Definition
when many companies compete to offer similar products.
 The most direct form of competition
 Ex: phone companies (T-Mobile, AT&T, sprint, Verizon)
Term
o Oligopolistic Competition
 Definition
when many companies provide substitutable goods
 This is an indirect form of competition.
 Ex: fast food joints (tacos, hamburgers, hot dogs)
 A change in price will affect demand for a substitutable good.
Term
o Competition for purchasing power
 Definition
 No matter what type of competition it is, consumers will only spend so much money, and companies are trying to be the ones that get the money from the consumers.
Term
o Competition for purchasing power
 Definition
 No matter what type of competition it is, consumers will only spend so much money, and companies are trying to be the ones that get the money from the consumers.
Term
• Cannibalization
 Definition
when you have 2 products and instead of one product competing with the competition, it accidently competes with your other product.
Term
• Internet Global Reach
 Definition
when you are going outside your market area and reaching the international market using internet
Term
o Statistics about internet pop usage:
 Definition
 218 million US citizens (75%) access the Internet
 Worldwide is 1.5 billion
 Asia leads in the # of users and the growth of internet use
Term
o Japan has faster internet in the world (8 to 30 times faster than US)
o In US, Internet users use the internet for communication, information and purchases
 Most people would rather give up TV than Internet.
o In china, users log on to visit social network sites, play online games and visit virtual words.
 Absence of online shopping because of government control.
 Definition
Term
• E business
 Definition
Conducting online transactions with customers by collecting and analyzing business information, carrying out the exchanges, and maintaining online relationships with customers.
Term
• E marketing
 Definition
Strategic process of creating, distributing, promoting, and pricing goods and services to a target market over the Internet or through digital tools (like smart phones) o E marketing is the means by which E business is achieved, it is an integral component of E business
Term
o E-marketing as a remarkable array of capabililities
 Definition
Term
Global reach
 Definition
The ability to reach anyone connected to the Internet anywhere in the world
Term
Personalization
 Definition
Creating products to meet customer specifications
Term
Interactive Marketing
 Definition
Buyer-seller communications in which the customer controls the amount and type of information received from a marketer through such channels as the Internet and interactive kiosks
Term
Right-time marketing
 Definition
The ability to provide a product at the same exact time needed
Term
Integrated marketing
 Definition
Coordination of all promotional activities to produce a unified, customer-focused promotional message
Term
• B2B e-marketing
 Definition
use of the internet for business transactions between organizations.
o 93% of e-business activity consists of B2B transactions
o B2B e-marketing generates sales revenue, slashes order processing expense and provides detailed product descriptions whenever needed.
Term
o Electronic exchanges
 Definition
created by entrepreneurs to bring buyer and sellers together in one electronic marketplace and cater to a specific industry’s needs.
 These were created in the early stages of B2B transactions.
 They are like a bulletin board where organizations post what they want to buy and sell
 Out of 15,000 that were launched in the few first years, less than 20% remain today (they merged or disappeared)
• This is because suppliers didn’t want to lower their prices every time there was a new exchange and they had to compete for the lowest bid in order to sell their product.
• Also, because buyers didn’t mind paying a little more to stick with the same buyer and cultivate a long-term relationship with them.
Term
o Open exchange
 Definition
and area where people can openly buy, sell and exchange products and services.
 Electronic exchange is the most common type
Term
• B2C e-marketing
 Definition
Selling directly to consumers over the internet.
o This doesn’t apply only to products but services as well.
Term
o Electronic storefront
 Definition
company web site that sells products to consumers
 When major retailers have an electronic store that describes and sells their products. The site can also include features like a store locator, opportunity to sign up for sales or promotions and a feedback link.
 When visitors buy an item from an electronic storefront, these items are placed in a file called an electronic shopping cart and when they want to complete their transaction, the items in the electronic shopping cart are displayed along with the total so the customer can review the order before finalizing his purchase.
Term
o Benefits of B2C marketing:
 Definition
 Competitive pricing
 Access and convenience
 Personalized service
Term
• Challenges in E-business and e-marketing
 Definition
Term
o Safety of online payment
 Definition
The safety of sending your credit card information over the internet.
 Internet browsers contain sophisticated encryption systems and SSLs to protect sensitive information from being obtained by unauthorized people and provide authentication.
Term
• Encryption
 Definition
– the process of encoding data for security purposes. When such a system is active, users see a special icon that indicates that they are on a protected web-site
Term
• Secure Sockets Layer (SSL)
 Definition
– encrypts and deciphers information from the 2 computers communicating to provide a secure connection and ensure the users say they are who they say they are.
Term
o Privacy issues
 Definition
consumers worry that information about them will become available to others without their permission.
 This is one of the top concerns of Internet users.
 To combat this, e-marketing sites involving personal information require:
Term
Passwords
 Definition
a form of authentication used to determine if the person using the site actually is the one authorized to access the account.
Term
• E-signatures
 Definition
an individual obtains a form of electronic identification and installs it on the web browser, then the web browser can verify their identity when they try to purchase something.
Term
• TRUSTe
 Definition
internet web sites display the TRUSTe logo to indicate the promise to disclose how they collect data and what they do with the information.
Term
 Other methods to combat privacy are:
 Definition
Term
• Do Not Ask List
 Definition
a list that would allow consumers to request online sellers to not track their online habits.
Term
• Firewalls
 Definition
an electronic barrier between a company’s internal network and the Internet that limits access in and out of the network
o Companies use this to keep unauthorized users out of their network.
Term
o Frauds and scams
 Definition
saying false information in order to gain something (usually important information (ex: SSN, credit card #, etc.) about a person.
Term
 Phishing
 Definition
High-tech scam that uses authentic-looking e-mail or pop-up messages to get unsuspecting victims to reveal personal information.
• This is a growing type of internet fraud
• The message usually asks the reader to update or validate information, and saying that there will be a consequence if they don’t.
Term
 Vishing
 Definition
this is the voice equivalent of phishing
• An e-mail of VoIP phone call requests the user to make a phone call to a voice response system that asks for the caller’s credit card #.
Term
 Payment fraud
 Definition
When orders are placed online and paid using a credit card, and the retailer ships the merchandise. Then the cardholder asks the credit card issuer for a chargeback claiming that they never made the order and that the charge is fraudulent. This way, the retailer incurs the costs and the cardholder gets a free product.
Term
o Site design and customer service
 Definition
websites are not always designed in the best way to sell things to the customer or to help them find information about their products or provide support for people that purchased them
Term
o Channel conflicts and copyright disputes
 Definition
– because of the amount of information on the internet that is available to undercut partners, producers must decide whether these relationships with their retailers are more important than the potential of selling directly on the web and making a bigger profit.
Term
 Channel conflicts
 Definition
conflicts between producers, wholesalers and retailers
Term
• Online forums
 Definition
internet discussion group that can operate as electronic bulletin boards, libraries for storing information, or even a type of classified ad directory
o Firms often use forums to ask questions or receive information from other forum members
Term
• Electronic bulletin boards
 Definition
specialized online services that center on a specific topic or area of interest.
o They are like a place where you post announcements.
Term
• Promotion on the web
 Definition
When companies not only rely on their web sites not attract buyers but expand their reach by placing ads on sites their prospective consumers are likely to visit.
Term
o Banner ads
 Definition
Typically small, strip messages placed in high-visibility areas of frequently visited websites.  the most common form of Internet advising
Term
o Pop-up ads
 Definition
separate windows that pop up with an advertising message
 Not very effective because there are a lot of scams from pop-ups so people hate them and block them.
Term
• Search marketing
 Definition
paying search engines, such as Google, a fee to make sure the company’s listing appears toward the top of the search results (or in the sponsored links on the side of the page).
o A type of web promotion
o Most firms make sure they are listed with the major search engines like Google.
o Many experts consider search marketing the most cost-effective form of web-based advertising.
o Statistics show that 90% of people that search for something click only on the first 3 links
Term
• Assessing Website effectiveness
 Definition
based on 5 major categories:
o Profitability
o Website traffic counts
o Conversion Rates
o Research studies
click through rates
Term
o Click-Through rates
 Definition
percentage of people presented with a banner ad who click on it.
 Is a lot lower today than when it first started, it is therefore less reliable to try to make sales
Term
• Web-to-store shoppers
 Definition
A group that favors the Internet primarily as a research tool and time-saving device for retail purchases made in stores.
o They are a significant customer niche.
Term
- Marketing Intermediary
 Definition
most channel options involve at least one marketing intermediary
- Also called middleman
- Definition: an organization that operates between producers and consumers or businesses users
Term
- Wholesaler
 Definition
intermediary that takes title to the goods it handles and then distributes these goods to retailers or consumers
- The internet enables business
Term
Direct Selling:
 Definition
- The simplest and shortest marking channel is a direct channel
Term
- Direct channel
 Definition
: carries good from a producer to the business purchaser
Term
- Direct Selling
 Definition
marketing strategy in which a producer establishes direct sales contact with its products final users
- This is an important option for goods requiring extensive in persuading customers to buy
- Important in business to business selling and consumer-goods markets
Term
- Internet is a direct selling channel
 Definition
o Ex: consumers who want to sport designer bags but cant pay the whole price can rent them for $10 a month from a website
Term
- Direct mail:
 Definition
o Can encourage a potential customer to contact an intermediary such as a retailer
Term
Channels using marketing intermediaries:
 Definition
- Producers to wholesaler to retailer to consumer:
- Producer to Wholesaler to Business User
- Producer to Agent to Wholesaler to Retailer to Consumer
- Producer to Agent to Wholesaler to Business User
- Producer to Agent to Business User
- Dual Distribution:
- Reverse channels:
Term
- Producers to wholesaler to retailer to consumer:
 Definition
o Carries goods between thousands of small products with limited lines and local retailers
Term
- Producer to Wholesaler to Business User
 Definition
o Similar characteristics in the organizational market often attract marketing intermediaries to operate between producers and business purchasers
Term
- Producer to Agent to Wholesaler to Retailer to Consumer
 Definition
o In small companies the agent performs the basic function of bring buyer and seller together
o The agent never takes title of any goods
Term
- Producer to Agent to Wholesaler to Business User
 Definition
o Brokers also never take title in goods
Term
o Manufacturers representative:
 Definition
 Provides an independent sales force to contact wholesale buyers
Term
- Producer to Agent to Business User
 Definition
o For products sold in small units, only merchant wholesalers can economically cover the markets
o A merchant wholesaler is an independently owned wholesaler that takes title to the goods
o The agent becomes the producers sales force but bulk shipments of the product reduce the intermediary’s inventory management function
Term
- Dual Distribution
 Definition
o Refers to the movement of products through more than one chanel to reach the firms target market.
 Ex: Nordstroms has a three-pronged distribution system, selling through stores, catalogs, and the Internet.
o Marketrs adapt this strategy to either maximize their firms coverage in the market place or to increase the cost effectiveness of the firms marketing effort
Term
- Reverse channels
 Definition
o Marketers should not ignore reverse channels: designed to return goods to their producers
o Some reverse channels move through the facilities of traditional marketing intermediares
o Reverse channels also handle product recalls and repairs
Term
- Channel Strategy Decisions:
 Definition
o Selection of a marketing channel
 Market Factors
 Product Factors
 Organizational and Competitive factors:
Term
o Selection of a marketing channel
 Definition
Factors that affect the selection of a marketing channel
Term
 Market Factors
 Definition
Channel structure that reflects a products intended markets for either consumers or business users
 Most conusmers make their purchases from retailers
 Not only is the channel conserned with market needs but also with its geographic location and its average order size
Term
 Product Factors
 Definition
 Product Factors
Term
 Organizational and Competitive factors:
 Definition
• Companies with strong financial, mgmt., and marketing resources feel less need for intermediaries
• A large financially stong manufacturr can hire its own sals forc, warehouse its own goods, and extend credit to retailers or consumers.
• A small firm with fewer resourcs may do btter with th aid of intermediaries
• A firm with a broad product line can usually market its products directly to retailers or business users because its own sales force can offer a variety of products
• High sales volumes spread selling cost over a large number of item generating adequate returns from direct sales
Term
- Distribution Intensity
 Definition
refers to the number of intermediaries through which a manufacturer distibutes its goods through a particular market
o optimal distribution intensity should insure adwuate market coverage for a product
o in general distribution intensity varies along a continuum with thr general categories
Term
 intensive distribution:
 Definition
• a strategy that sks to distribute a product through all availavble channels in a trade area
o Ex: you can pick up a Campbell soup anywhere because they market it in most trade areas
Term
 selective distribution
 Definition
firm chooses only a limited number of retailers in its market area to handle its line
• Ex: Gucci
• by limiting the number of retailers marketers can reduce total marketing costs while establishing strong working relationships within the channel
• often they agree to cooperative advertising
o in which manufacturer pays a percentage of the retailers advertising expendentures and the retailer displays the firms product
Term
 exclusive distribution
 Definition
• when a producer grants exclusive rights to the wholesaler or retailer to sell its products in a specific geographic region
o EX: there is only one ford dealership in a city of 40000 people
Term
- Channel MGMT and Leadership
 Definition
o Manufacturers must focus on channel mgmt. by developing and maintaining relationships with intermediaries in their marketing channels
Term
o Channel captain:
 Definition
the dominant member of a marketing channel
Term
• Transaction based marketing:
 Definition
buyer and seller exchanges characterized by limited communications and little or no ongoing relationship between the parties.
o Short-term, one time excanges
Term
• Relationship based:
 Definition
development, growth and maintenance of long term cost effective relationships with customers, suppliers, emps, etc. martkers can gain a clearler understanding of the customers needs over time. Increases sales and decreases mktg costs. Discovered that it is less expensive to retain satisfied customers then to attract newones or repair damaged ones. Smaller profit margin because purchases are inexpensive but higher turnover because ppl buy it more often. Profit marginXTurnover=higher profit. In transaction margin is 25% but turnover is only 1. In relationship, turnover is 104
Term
Elements of relationship mktg:
 Definition
1. Gather info about their customers. Use database tech to identify current and potentails customer demographic, purch and lifestyle characterisitics.
2. Use data to modify mktg mix to deliever differentiated messages and customize mktg programs to indidual consumers.
3. Moniter interactions with customers. Access customers level of satisfaction. Seek how to add value to the buyer seller transaction so that the relationship will continue.
4. CRM software, they use knowledge of customer preerences to orient every part of the org includeing internal and external partners.
Term
Internal mktg:
 Definition
Term
• External customers
 Definition
ppl or orgs that buyt or use firms goods.
Term
• Internal customer
 Definition
employee or depts within the org. the employe processing the order is the internal customer to the salesperson who sold the order.
Term
• Internal mktg
 Definition
managerial actions that enable all members of an org to understand, accept and fulfill their respective roels in implementing a mktg strategy. Increases emps knowledge and involvement across depts.
Term
o Employee satisfaction
 Definition
: eliminate bad word of mouth to their friends and fam
Term
The Realtionship Mktg Continum:
 Definition
Term
Primary bond
 Definition
Level 1 Level 2 Level 3
Financial Social Strucutrual
Term
Degree of customization
 Definition
level 1 level 2 level 3
Low Med Med to high
Term
Potential for sustained competitive advantage
 Definition
level 1 level 2 level 3
Low Med High
Term
• First Level
 Definition
: Focus on Price to get customer to enter. Not customized to buyer so can be easily copied by competitors and therefore don’t make a long lasting relationship
Term
• Second Level
 Definition
Social Interactions. A store manager might talk to customer about local events, the service dept may call a customer to see whether or not the customer is satisfied or has questions, an investment firm might send holiday cards to its customers. Firms try reaching through facebook.
Term
• Third Level
 Definition
Interdependent Partnership. Ensure buyer and seller are true business partners. Make them feel like they are benefiting
Term
Enhancing customer satisfaction
 Definition
1. Understand customer needs: avoid unfavorable customer service gaps
2. Meet those needs:
3. Get feedback:
Term
3. Get feedback
 Definition
toll free phone number, web sites, interactive methods for collecting feedback. , hire mystery shoppers. Unhappy customers talk about their buying experience more than happy customers so cost of dissatisfaction is high. Proactive methods include visiting, mailing or calling clients to find their level of satisfaction.
Term
Building buyer seller relationships
 Definition
Term
• How mrkters keep customers:
 Definition
o Customer churn
o Frequency mktg
o Affinity mktg:
o Database mktg
Term
o Customer churn
 Definition
customer turnover is expensive, it is expensive to find new customers.
Term
o Frequency mktg
 Definition
frequent buyer mktg programs that reward customers with cash, rebates, merch or other premiums eg frequent flyer miles
Term
o Affinity mktg
 Definition
mktg efforts sponsored by an org that solicits responses form individuals who share common interests and activities. Eg Bank of America offer as an Extra Points card that gives pro football fans rewards linked to gifts, films and events. Eg the NY public TV station offers members who contribute more than $40 a yr a card that give them discs at restrains, museums, theaters, hotels, etc
Term
o Database mktg
 Definition
use of IT to analyze data about customers and their transactions. Co’s can track buying patterns, develop customer relationship profiles, customize offerings and sales promotions and even personalize customer service to suit needs of targeted mkrts. Eg google tracks users history and tailors the results of their searches.
Term
data base marketing helps cos
 Definition
 Identify their most profitable customers
 Calculate the lifetime value of each customers business
 Create a meaningful dialog that builds brand lotalty
 Improve customer retention and referral rts
 Reduces mktg promotion costs
 Boosts sales per customer
 Expands loyalty programs
 New techs such as RFID Radio frequency Identification allow retailer to identify shiping pallets. Future will allow tagging of individual store items, allowing retailers to gather info about purchaser as well as managing in and determined theft
 Interactive tv
 ASPs Application Service Providers: assist mrkters to provide softare to capture, manipulate and analyze masses of consumer data.
Term
CRM Customer Relationship Mgmt
 Definition
combo of strategies and tools that drives relationship programs, reorienting the entire org to a concentrated focus on satisfying customers.
Term
• Benis
 Definition
create partnerships with customers aligning cos mission and goals. Reduces costs by empowering customers to find the info they need to manage their own orders. Improve customer service by centralizing data. Reduce response time thus increase customer satisfaction. Improve customer retention and loyalty. Can provide a complete pic of customer. Results are measureable.
Term
Buyer Seller Relationships in B2B mrtks
 Definition
lower prices for supplies, quicker deliver, improved quality and reliability, customized product features, more favorable financing terms
Term
• Partnership
 Definition
affiliation of 2 or more cos that help ea other achieve common goals. Common goals include protecting their positions in existing mrkts, gain acess to new domestic or international mrkts, or quickly enter new mrkts, expansion of a product line, sharing resources, reducing costs, warding off threats of competition, raising or creating barriers to entry and learning new skills.
Term
o Buyer partnership
 Definition
a firm purchases goods or services form one or more providers. Apple buys chips from Intel and the 2 cos are working together to share innovations.
Term
o Seller partnership
 Definition
set up long term exchange of foods in return for cash or other consideration. Sellers also prefer long term relationships and want prompt pmts.
Term
o Internal
 Definition
partnerships between internal dept. if purch dept selects vendor that fails to deliver on time, production dept cant get parts and fails to ship to customers.
Term
o Lateral
 Definition
: include strategic alliances with other cos or with not for profit org and research alliances between for profit orgs and universities. The relationship focuses on external entities such as customers of the partner firm and involves no direct buyer seller interactions
Term
• Cobranding
 Definition
joins 2 brand names to sell a product. Eg Eddie Bauer on a car
Term
• Comktg
 Definition
2 firms jointly mrkt each other product. Eg an add with 2 brands, a store with dunkin donuts, 31 flavors and a sandwich place.
Term
Improving buyer seller relationships in b2b mkrts
 Definition
• National acct selling
• B2b Databases
• EDI
Term
• National acct selling
 Definition
manufacturer use this acct to serve their largest most profitable customers eg locate a large number of supplier offices near a Walmart.
Term
• B2b Databases
 Definition
use info from sales reports, scanners
Term
• EDI
 Definition
comp to comp exchanges or of invoices, orders and other business docs. Allows firms to reduce costs and increase efficiency and competitiveness. Retailers often require vendors to use EDI as a quick response mechanizing tool for just in time inventory
Term
VMI Vendor managed inventory:
 Definition
inv mgmt. sys in which the seller based on an existing agreement with the buyer determines how much of a product is needed
Term
• CPFaR Collaborative planning, forecasting and replenishment
 Definition
modified WMI, a planning and forecasting technique involving collaboration efforts of both the purch and vendor.
Term
• Managing the supply chain
 Definition
the entire sequence of suppliers that contribute creation and delivery of a product. Effective supply chain mgmt.: increases innovation, decreases costs, improves conflicts within the chain, improve communication
Term
• B2B Alliances
 Definition
: Strategic Alliance: the ultimate expression of relationship mktg are partnerships formed to create a competitive advantage. These formal long term arrangements improve each partners supply chain relationship and enhance operating and flex.
o Alliance partners can establish a new business unit in which ea takes ownership position.
o Less formal that doesn’t involve ownership for ex a joining new product design team.
Term
Lifetime value of a customer
 Definition
revs and intangible benis such as referrals and customer feedback a customer brings to the seller over an ave lifetime, less the amt the cos must spend to acquire, mrkt to and service the customer.
Term
- Channel MGMT and Leadership
 Definition
o Manufacturers must focus on channel mgmt. by developing and maintaining relationships with intermediaries in their marketing channels
Term
o Channel captain
 Definition
the dominant member of a marketing channel
 EX: in the grocery store, food producers are considered channel captain
Term
- Channel Conflict
 Definition
marketing channels work smoothly only when members cooperate in well-organized efforts to achieve maximum operating efficiencies
Term
o Horizontal conflict:
 Definition
Disagreements among channel members at the same level
 Ex: two or more wholesalers or retailers such as two competing discount stores
 Cause problems between different types of marketing intermediaries that handle similar products.
Term
o Vertical Conflict
 Definition
may result in frequent and severe conflict
 Ex: retailers develop private brands to compete with producers brands
 Producers may annoy wholesalers and retailers when they attempt to bypass these intermediaries and sell directly to consumers
Term
- Vertical Marketing Systems
 Definition
o Planned channel system designed to improve distribution efficiency and cost-effectiveness by integrating various functions throughout the distribution chain
Term
o Corporate marketing system
 Definition
when a single ownership of intermediaris within a corporate VMS or the exercising of power within an administered system
Term
o Administered marketing system
 Definition
achieves channel coordination when a dominate channel member exercises its power
Term
- Contractual Marketing system
 Definition
o Coordinates distribution through formal agreemnts among channel member
Term
o Wholesaler sponsored-voluntary chains:
 Definition
 When an independent wholesalers adopts a formal agreement with its retailers to use a common name and standardized facilities and to purchase the wholesalers goods
 Often helps smaller retailers compete with rebel chains and strengthens the wholesalers position as well
Term
o Retail cooperative
 Definition
 A group of retailers establishes a shared wholesaling operation to help them comptete with chains
 The retailers purchase ownership shares in the wholesaling operation and agree to buy a minimum percentage of their inventories from their operation
Term
o Franchise
 Definition
 A wholesaler or dealer agrees to meet the operating requirements of the maufacturer
Term
- Logistics and supply chain mgmt.:
 Definition
o Effective logistics requires proper supply chain mgmt., control of the activities of purchasing, processing, and delivery through which raw matrials are transformerd into products and made available to final consumers
Term
o Supply chain (value chain):
 Definition
 Complete sequence of suppliers and activitis that contribute to the creation and delivry of goods and services
o Customer satisfaction results directly from the perceived value of a purchase to its buyer
Term
o Upstream mgmt
 Definition
involves managing raw materials, inbound logistics, and warehouse and storage facilities
Term
o Downstream management
 Definition
:involves managing finished product storage, outbound logistics, marketing and sales, and customer service
Term
- Problem of sub optimization:
 Definition
o Results when the managers of individual physical distribution functions attempt to minimize costs, but the impact of one task leads to less than optimal results on the others.
 EX: a hockey team composed of all star players – when each logistics activity is judged by its own accomplishments instead of the way it contributes to the overall goal of the team
o Any reduction in logistical costs should support progress toward the goal of maintaining customer-service standards
Term
- Customer service standards
 Definition
o States the goals and define acceptable performance for the quality of service a firm expects to deliver to its customers
 Ex: some stores offer same day delivery
o Designers of a physical distribution system begin by establishing acceptable levels of customer service
o The designers then assemble physical distribution components in a way that will achieve lowest possible costs. Cost break downs are…
 Transportation
 Warehousing
 Inventory control
 Customer service/order processing
 Admistrative costs
Term
- Classes of Carriers
 Definition
o Common carriers
o Contract Carriers:
o Private Carriers
Term
Common carriers
 Definition
considered the backbone of the transportation industry
 Move freight through all modes of transportation
• Ex: Fedex
Term
o Contract Carriers
 Definition
are for-hire transporters that do not offer their services to the general public.
 They establish contrancts with individual customers and operate xclusiviely for particular industries
Term
o Private Carriers
 Definition
do not offer services for hire
 Provide transportation services solely for internally generated freight
 They observe no rate or service regulations
Term
- Major Transportation modes:
o Five
 Definition
 Railroads
 Motor Carriers
 Water Carriers
 Pipelines
 Air Freight
Term
 Railroads
 Definition
control the largest share of the freight business as measured by ton-miles.
• Transports lumber, iron, steel, coal, etc
Term
 Motor Carriers
 Definition
although it costs more, trucks can reach places that railroads cant
• Advantage: relatively fast shipping and consistent service for both large and small shipments
• Transports clothing, furniture, fixtures, lumber, etc.
Term
 Water Carriers:
 Definition
transport fuel, oil, coal, chemicals, etc
Term
 Pipelines:
 Definition
transports oil, diesel fuel, jet fuel, natural gas, etc..
Term
 Air Freight
 Definition
transports flowers, medical tsting kits, and gourment food products, etc
Term
 Air Freight
 Definition
transports flowers, medical tsting kits, and gourment food products, etc
Term
- Merchandising Strategy:
 Definition
o Guides decisions regarding the items which the retailer will offer
o A retailer must decide on general merchandising categories, product lines, specific items within lines, and the depth and width of its assortments
Term
o To develop a successful merchandise mix a retailer must weigh serveral priorities
 Definition
 Consider the preferences and needs of it previously defined target market
 Keeping the competitive environment in mind
 Consider profitability of each line and product category
Term
- Category Management
 Definition
o A category manager oversees an entire product line for both benders and retailers and is responsible for the profitability of the product group
o Seeks to improve the retailers product category performance through more coordinated buying, merchandising, and pricing
o Does not focus on the performance of individual brands
Term
- Battle for shelf space
 Definition
o Large scale retailers are increasingly taking the role of channel captain within many distribution networks.
o The result is a shift in power from the manufacturers of top selling brands to the retailer who makes them available to customers
Term
- Stock Keeping Unit
 Definition
o Identifies the varying items within a product line
o Retailers refer to a specific product offering as a stock keeping unit
EX: cosmetic company breaks their products into product lines
o results in a fierce battle over space on store shelves
o manufacturers who are not able to comply with the increasing demand for shelf space find their companies not surviving in this market place
Term
o Slotting allowance
 Definition
a nonrefundable fee grocery retailers receive from manufacturers to secure shelf space for new products
Term
- Customer service strategys
 Definition
o The basic objective of all customer service focuses on attracting and retaining target customers thus increasing sales and markets
 EX: clean restrooms and lounges enhance shoppers comfort
o Can help support efforts in building demand for a line of merchandise
Term
- Pricing Strategy
 Definition
o Prices reflect a retailers marketing objectives and policy
o Play a major role in consumer perceptions of a retailer
Term
- Mark up
 Definition
o The amount the retailer adds to a products cost to set the final selling price
o The amount of the mark up typically results from two marketing decisions
 services performed by the retailer – stores that offer more services can charge larger mark ups to cover their costs
 inventory turnover rate – stores with a higher turnover rate can cover their costs and earn a profit while charging a smaller mark up
Term
- Mark down:
 Definition
o Guides decisions regarding the items which the retailer will offer
o A retailer must decide on general merchandising categories, product lines, specific items within lines, and the depth and width of its assortments
Term
o To develop a successful merchandise mix a retailer must weigh serveral priorities
 Definition
o The amount by which the retailer reduces the originally selling price of a product
 To attract buyers when the product is not popular
Term
- Category Management
 Definition
o A category manager oversees an entire product line for both benders and retailers and is responsible for the profitability of the product group
o Seeks to improve the retailers product category performance through more coordinated buying, merchandising, and pricing
o Does not focus on the performance of individual brands
Term
- Store Atmospherics:
 Definition
o Combination of physical characteristics and amenities that contribute to a stores image
 Ex: rainforest café and there unique eye catching interior
Term
- Stock Keeping Unit
 Definition
Term
o Interior atmospheric elements:
 Definition
 Store layout
 Merchandise presentation
 Lighting
 Colors
 Sounds
 Scents
 Cleanliness
Term
- Types of Retailers:
 Definition
o Forms of ownership
o Shopping effort expended by customers
o Service provided to customers
o Product line
o Location of retail transactions
Term
- Independent retailers:
 Definition
o Retailing structure supports a large number of small, medium and large stores
Ex: best Western
Term
- Classification by shopping effort:
 Definition
o Convienence retailers:
o Specialty Retailers
Term
o Convienence retailers
 Definition
: focus their marketing appeals on accessible locations, extended store hours, rapid check out service, good parking
Term
o Specialty Retailers
 Definition
combine carefully defined product lines, services, and reputations
Attemps to get customers to spend effort shopping there
Term
- Classification by service provided
 Definition
o Three retail types: self service, self selction, and full service
 Ex: ampm, safeway, bridal store, respectively
Term
- Classification by product lines:
 Definition
o Groups retailers by product lines produces three major categories
 Specialty stores:
 Limited line:
 General merchandise retailers:
Term
 Specialty stores:
 Definition
• Handle only part of a single product line but have considerable depth or variety
o EX: bakeries
Term
 Limited line:
 Definition
• Large assortments of products within one product line or a few related lines in a limited line store
o Ex: ikea
Term
• Category Killer
 Definition
o Offers huge selections and low prices in single product lines
 EX: best buy, barnes and noble
 General merchandise retailers:
Term
 General merchandise retailers:
 Definition
• Carrying a wide variety of product lines stocked in some depth distinguishing themselves from limited line
o EX: wall mart
Term
- Scrammble merchandising
 Definition
o Practice of combining dissimilar product lines to boost sales volume
Term
- Manufactured owned facilities:
 Definition
manufacturers have more control over how their products are distributd
Term
o Sales branch
 Definition
carries inventory and processes orders for customers from available stock – function as a storage unit
Term
o Sales office
 Definition
serves as regional office for a manufacturers sales personell
Term
o Trade fair:
 Definition
ate
Term
o Merchandise mart
 Definition
: provides space for personal show rooms and exhibit
Term
- Merchant wholesaler
 Definition
o Takes titles to the goods it handles
o Industrial distributors: sell machinery and equipment
Term
o Rackjobber
 Definition
full function merchant wholesaler that markets specialized lines of merchandise to retailers
 Supplies racks at corner store
Term
o Truck wholesaler (jobber
 Definition
): markets perishable food items – bread, tobacco
Term
o Drop shipper
 Definition
accepts orders from customers, forwards them to producers which ship the products directly to consumers
Term
o Mail to order wholesaler
 Definition
catalogs, make a purchase by mail
Term
- Agents and Brokers
 Definition
o They are independent wholesaler intermediaries.
o They never take the title of the goods
o Mainly work together to bring buyer and seller together
 1. Commission merchant
 2. Auction houses
 3. Brokers
4. Selling agents
 5. Manufacturer reps
Term
- commission merchant
 Definition
o mostly in the market for agricultural products
o they act as the producers agents and receive fees
o broker: either represents the buyer or seller but never both
Term
- Selling agent:
 Definition
o Exerts full authority over pricing decisions and promotional outlays
Term
- Manufacturer representatives
 Definition
o Hiring a sales rep and they can work for different firms as long as they are not competing products
Term
- Direct Marketing
 Definition
o Broad concept that includes direct mail, direct selling, direct response retailing, telemarketing and internet retailing
Term
o Direct response retailing:
 Definition
Ex: infomercial
Term
- Automatic merchandising
 Definition
o Vending machine
Term
profitability objectives
 Definition
prices rise to the point where MR=MC for profit maximization
and short or long run objectives of achieving a specific return on sales or investment
Term
volume objectives
 Definition
the goal of maximizing sales
also can be a market share objective
Term
PIM studies profile impact of market strategies
 Definition
research that discovered a strong relationship between a firms market share and product quality and its ROI
Term
value pricing
 Definition
a pricing strategy emphasizing benifits derived from a product in comparison to the price and quality levels of competing offerings
Term
pricing objectives of non profit
 Definition
profit maximization, cost recovery, market, incentives, market suppression(ex sin tax to discourage smokers)
Term
prestige objectives
 Definition
develops and maintains an image of quality and exclusiveness that appeals to status conscious consumers
Term
customary prices
 Definition
traditional prices that customers expect to pay for certain goods or services
Term
elasticity
 Definition
responsiveness of purchasers n supplyers to change in price
Term
price determination
 Definition
cost plus(uses a base cost figure per unit and ads a mark up to cover un assigned costs and provide profit), full cost( allocates all variable and fixed costs to the good, the rest is added for profit margin), break even analysis(determening the number of goods or services that must be sold in order to recover total costs)
Term
modified break even concept
 Definition
pricing technique used to evaluate consumer demand by comparing the number of products that must be sold at a veriety of prices to cover total cost with estimates of expected sales at the various prices
Term
yield mgmt
 Definition
allows marketers to vary prices based on such factors as demand,even thought the cost of providing those goods or services remain the same
Term
global issues in price determination
 Definition
if the price varies by the number of units being produced then you will not have uniform pricing, you will have domestic pricing. Uk Tesco towns(store taking over uk)
Term
Service people have 7 P’s:
 Definition
price Value: Product positioning: Promote the product List Price Non cumulative quantity discount: Cumulative discount: Seasonal discount:
Allowances Wholesalers are resellers
Term
price
 Definition
Ex: coffee mug = $15, suppose you would like to price it at $20, in order for you to do that, you need to convince consumers that its worth $20
Term
Value:
 Definition
the benefits you get from what you pay
Term
Product positioning
 Definition
position your product in the consumers mind as a higher quality product compared to the competitions product
§ Mercedes has been able to position its brand name in the mind set of the consumer
Term
Promote the product
 Definition
Term
List Price
 Definition
price which is listed on the product that you want to sell
§ Ex: you want to buy snow skis which cost $300, 2% discount so now the price is $294
Term
Cash discount
 Definition
reduction in price for a prompt payment of bills
Term
Non cumulative quantity discount
 Definition
ex: from 1 to 5 skis – no discount, 6-10 skis 2% discount, 11-15 skis 4%, etc.
Term
Cumulative discount
 Definition
March 2001 they can get 32 skis they have to wait until the end of the year if they want to get a discount. 60 pairs during the year at a 7% discount, the price will be $16740
Term
Seasonal discount:
 Definition
Term
Allowances
 Definition
pecified deduction from list price, including a trade in or promotional allowance.
· Ex: allowance of $50
Term
Wholesalers are resellers:
 Definition
they get another type of discount Trade discount Pm List price is illegal for manufacturers SLP
Term
Trade discount:
 Definition
a discount that we give over the price that we sell.
· Ex: lets say that the price of skis are now $100, trade discount 15% for wholesaler
Term
Pm
 Definition
p sub m is manufacturing price
Term
List price is illegal for manufacturers:
 Definition
because manufacturers cannot list the price
Term
SLP
 Definition
suggested list price
Term
skimming pricing strategy
 Definition
selling at a high price relative to competitive offerings
Term
penetration pricing strategy
 Definition
involves the use of relatively low enter price compared with competitive offerings based on the theory that this initial low price will help secure market acceptance
Term
everyday low pricing
 Definition
continuous low prices ex wall mart
Term
list price
 Definition
established price normally quoted to potential buyers
Term
quantity discounts
 Definition
buying in bulk
Term
FOB pricing
 Definition
free on board means I sell it at the first place that I give it to you
prices include no shipping charges
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