1) Identify a new product (good or service) that was launched during 2015 or 2016. You may choose a successful product or one that failed dismally. One way to search is to type the phrase ?new product failures 2016? into Google?s search bar, or substitute ?successes? or the year ?2015? in place of their counterparts in the example above.
2) As you research articles related to the new product, I suggest you make use of the NoelLibrary?s Lexis-Nexus database and Google to find information.
Once you have chosen a product, look for any articles that discuss aspects related to the introductory marketing plan. These articles might describe or review the product?s benefits or features, its pricing strategy or consumer reactions to the same, the distribution strategy and of course the promotional/integrated marketing communications strategy used to launch the brand or position the product.
You may also wish to search YouTube for ads or consumer reviews, or check consumer review websites for comments about the product. If the brand is still ?alive? and in distribution, I also suggest that you review information found on the brand or parent company?s website. In your post, discuss the following:
? PART A:
Provide a descriptive overview of the product (tangible good or service) that explains
the offering (features, benefits), its (alleged) differentiation, the market being targeted
and the basic components of its marketing plan. Remember to use evidence and logical
reasoning to justify your discussion; as always, cite your sources in APA format.
The following bullet points are meant to guide your discussion. The answers to some
bulleted question may be relatively brief; just make sure you don?t neglect important
information as it relates to the various marketing plan decisions.
1-What benefits does/did the product provide? What is/was its intended use?
2- How would you classify the ?new? product according to the types of new
products shown in Exhibit 6.1?
3-With respect to the new product strategy, which of the six degrees of ?newness?
discussed on in chapter 6 seems to best describe the product? Why do you say
4- What are the key characteristics of the intended target market?
5- How is/was the product distributed or made available to consumers (e.g., what
channels were used, was dual distribution used, etc.)?
6- What type of pricing strategy from among those described in chapter 6 seems to
have been used?
7-How was the product promoted with respect to marketing communications
including social media, digital marketing, search engine marketing, advertising,
sales promotion, publicity and personal selling? (NOTE: if your choice of product
is one that would be sold via grocery stores or mass merchandisers, the
personally selling aspect was likely targeted towards the retailer, rather than
towards the consumer.)
8- What media were used to promote the product?
9- If you don?t find this information and had to guess, how would you describe the
product?s intended positioning strategy? (If you find a source documenting the
positioning strategy report use that instead.)
? PART B:
Critique the marketing plan for the new product and explain whether the product failed,
If the product failed or its fate is unknown:
1- Critique the marketing plan with an eye towards diagnosing what did or could go
wrong. You may draw upon any text topics covered to date (especially chapter
6) but also justify your analysis with additional support.
? Example of using text information: Failed service ? analyze not only the
marketing strategy decisions, but also how the service provider MET or
FAILED TO MEET the marketing challenges outlined in Exhibit 6.3.
1- How could their marketing strategy have been improved? This is your opinion,
but support it with logical reasoning or citations that help justify your thought
2-Step back a moment and reflect on what you have written. What key lessons did
this example provide that might be generalized to other new product launches?
If the product succeeded:
1- Diagnose and justify why their marketing plan strategy and tactics worked.
? Did the product meet the needs of a niche market or capitalize upon an
opportunity? How so?
? Were the appropriate media selected? Why do you say that?
? Did publicity play a role in the product?s success and if so, how?
? Was the creative campaign brilliantly executed? IF so, in what way?
? Did the branding strategy or parent company reputation assist in the
product?s success? Explain how.
Note that the questions shown above are merely examples of the types of
questions you might ask yourself during this portion of your analysis. They are
meant to help guide your thought process; if the marketing plan was successful
reasons other than those listed above, discuss those reasons. Recognize that you
may not be able to answer each of these questions or that the answers to some
questions may have no relevance to the success of the marketing strategy. If
that is the case, you would not discuss that information.
1- Offer recommendations to improve the product, distribution, pricing, or IMC
strategy if you believe they can do even better.
2- If you have no recommendations for improvement, discuss the possibility
for one or more product line extensions. Justify your thoughts.
3-Step back a moment and reflect on what you have written. What key lessons did
this example provide that might be generalized to other new product launches?
Please provide reference materials. (Minimum 4 sources)
Chapter 6: The Marketing Program
A. Beyond the Pages 6.1 discusses the marketing program at Barnes & Noble and how it compares to its chief rival, Amazon.com.
B. The marketing program refers to the strategic combination of the four basic marketing mix elements: product, price, distribution, and promotion.
C. The outcome of the marketing program is a complete ?offering? that consists of an array of physical (tangible), service (intangible), and symbolic (perceptual) attributes designed to satisfy customersâ€™ needs and wants.
D. The best marketing strategy is likely to be one that combines the product, price, distribution, and promotion elements in a way that maximizes the tangible, intangible, and perceptual attributes of the complete offering.
E. Given the state of commoditization in many markets, the core product (the element that satisfies the basic customer need) typically becomes incapable of differentiating the offering from those of the competition.
II. Product Strategy
A. Product offerings in and of themselves have little value to customers. Rather, an offering?s real value comes from its ability to deliver benefits that enhance a customerâ€™s situation or solve a customerâ€™s problems.
B. Strategic Issues in the Product Portfolio
1. Products fall into two general categories: consumer products (used for personal use and enjoyment) and business products (purchased for resale, to make other products, or for use in a firm?s operations). [Exhibit 6.1]
2. A product line consists of a group of closely related product items. A product mix or portfolio is the total group of products offered by a company. [Exhibit 6.2]
3. The number of product lines to offer (the width or variety of the product mix) is an important strategic decision.
4. The depth of each product line (the assortment) is an important marketing tool. Firms attract a wide range of customers and market segments by offering a deep assortment of products in a specific line.
5. Benefits of offering a large portfolio of products:
a) Economies of Scale?in production, bulk buying, and promotion.
b) Package Uniformity?all packages in a product line have the same look and feel.
c) Standardization?product lines can use the same component parts.
d) Sales and Distribution Efficiency?sales personnel can offer a full range of choices and options to customers.
e) Equivalent Quality Beliefs?customers expect and believe that all products in a line are equal in terms of quality and performance.
C. The Challenges of Service Products
1. Firms lying closer to the intangible end of the product spectrum face unique challenges in developing marketing strategy.
2. Services possess many unique characteristics. [Exhibit 6.3]
3. Because of the intangibility of service, it is difficult for customers to evaluate a service before they actually purchase and consume it.
4. Because most services are dependent upon people (employees, customers) for their delivery, they are susceptible to variations in quality and inconsistency.
5. Customers typically have few problems in expressing needs for tangible goods, buy they often have difficulty in expressing or explaining needs for services.
D. Developing New Products
1. The development and commercialization of new products is a vital part of a firmâ€™s efforts to sustain growth and profits.
2. Six strategic options related to the newness of products:
a) New-to-the-World Products (Discontinuous Innovations)?These products involve a pioneering effort by a firm that eventually leads to the creation of an entirely new market.
b) New Product Lines?These products represent new offerings by the firm, but the firm introduces them into established markets.
c) Product Line Extensions?These products supplement an existing product line with new styles, models, features, or flavors.
d) Improvements or Revisions of Existing Products?These products offer customers improved performance or greater perceived value.
e) Repositioning?This strategy involves targeting existing products at new markets or segments.
f) Cost Reductions?This strategy involves modifying products to offer performance similar to competing products at a lower price.
3. The key to new product success is to create a differential advantage for the new product. This advantage can be real or based entirely on image.
4. Five typical stages of the new product development process are:
a) Idea generation?New product ideas can be obtained from a number of sources, including customers, employees, basic research, competitors, and supply chain partners.
b) Screening and evaluation?New product ideas are screened for their match with the firm?s capabilities and the degree to which they meet customers? needs and wants.
c) Development?At this stage, product specifications are set, the product design is finalized, and initial production begins.
d) Test marketing?As a final test before launch, the new product is test marketed in either real or simulated situations to determine its performance relative to customer needs and competing products.
e) Commercialization?In this final stage, the product is launched with a complete marketing program designed to stimulate customer awareness and acceptance of the new product.
III. Pricing Strategy
A. There is no other component of the marketing program that firms become more infatuated with than pricing. There are at least four reasons for this attention:
1. There are only two ways for a firm to grow revenue: increase prices 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. Price is considered to be one of the few ways to differentiate a product in commoditized and mature markets.
B. Beyond the Pages 6.2 discusses how prices vary around the world.
C. Key Issues in Pricing Strategy
1. The Firmâ€™s Cost Structure
a) A firm that fails to cover both its direct costs (e.g., finished goods/components, materials, supplies, sales commission, transportation) and its indirect costs (e.g., administrative expenses, utilities, rent) will not make a profit. A popular way to associate costs and prices is through breakeven pricing:
Breakeven in Units = Total Fixed Costs
Unit Price â€“ Unit Variable Costs
b) Cost-plus pricing is another strategy that is commonly used in retailing. Here, the firm sets prices based on average unit costs and its planned markup percentage:
Selling Price = Average Unit Cost
1 â€“ Markup Percent (decimal)
c) A firmâ€™s cost structure should not be the driving force behind pricing strategy because different firms have different cost structures.
2. Perceived Value
a) Value can be defined as a customer?s subjective evaluation of benefits relative to costs to determine the worth of a firm?s product offering relative to other product offerings. A simple formula:
Perceived Value = Customer Benefits
b) Value is a key component in setting a viable pricing strategy. In fact, value is intricately tied to every element in the marketing program and is a key factor in customer satisfaction and retention.
3. The Price/Revenue Relationship
a) Virtually all firms face intense price competition from their rivals, which tends to hold prices down.
b) Although it is natural for firms to see price-cutting as a viable means of increasing sales, all price cuts affect the firmâ€™s bottom line. There are two general pricing myths:
1. Myth #1: When business is good, a price cut will capture greater market share.
2. Myth #2: When business is bad, a price cut will stimulate sales.
c) The reality is that any price cut must be offset by an increase in sales volume just to maintain the same level of revenue.
in Unit Volume = Gross Margin %
Gross Margin % ? Price Change % ? 1
d) It is often better for a firm to find ways to build value into the product and justify the current price, or even a higher price, rather than cut the price.
4. Pricing Objectives [Exhibit 6.4]
a) Pricing objectives must be realistic, measurable, and attainable.
b) Firms make money on profit margin, volume, or some combination of the two. A firmâ€™s pricing objectives will always reflect this market reality.
5. Price Elasticity
a) Price elasticity refers to customersâ€™ responsiveness or sensitivity to changes in price. A more precise definition defines elasticity as the relative impact on the demand for a product, given specific increases or decreases in the price charged for that product.
b) Firms cannot base prices solely on price elasticity calculations because they will rarely know the elasticity for any product with great precision over time.
c) Since the same product can have different elasticities in different times, places, and situations, firms often consider price elasticity in regard to differing customer behavior patterns or purchase situations.
d) Situations That Increase Price Sensitivity
1) Availability of substitute products
2) Higher total expenditure
3) Noticeable price differences
4) Easy price comparisons
e) Situations That Decrease Price Sensitivity
1) Lack of substitutes
2) Real or perceived necessities
3) Complementary products
4) Perceived product benefits
5) Situational influences
6) Product differentiation
D. Pricing Service Products
1. Service pricing is critical because it may be the only quality cue that is available in advance of the purchase experience. Services pricing becomes more important?and more difficult?when:
a) service quality is hard to detect prior to purchase
b) the costs associated with providing the service are difficult to determine
c) customers are unfamiliar with the service process
d) brand names are not well established
e) the customer can perform the service themselves
f) advertising within a service category is limited
g) the total price of the service experience is difficult to state beforehand
2. Due to limited capacity, service pricing is also a key issue with respect to balancing supply and demand during peak and off-peak demand times.
3. Many service firms use yield management to balance pricing and revenue considerations with their need to fill unfilled capacity. [Exhibit 6.5]
4. Yield management allows the service firm to simultaneously control capacity and demand in order to maximize revenue and capacity utilization.
a) The service firm controls capacity by limiting the available capacity at certain price points.
b) The service firm controls demand through price changes over time and by overbooking capacity.
5. Yield management systems are also useful in their ability to segment markets based on price elasticity. That is, yield management allows a firm to offer the same basic service to different market segments at different price points.
E. Base Pricing Strategies
1. A firmâ€™s base pricing strategy establishes the initial price and sets the range of possible price movements throughout the productâ€™s life cycle.
2. Base pricing approaches:
a) Price Skimming?occurs when a firm intentionally sets a high price relative to the competition.
b) Price Penetration?occurs when a firm sets a relatively low initial price to maximize sales, gain widespread market acceptance, and capture a large market share quickly.
c) Prestige Pricing?setting prices at the top end of all competing products in a category to promote an image of exclusivity and superior quality.
d) Value-based Pricing (EDLP)?setting reasonably low prices, but still offering high quality products and adequate customer services.
e) Competitive Matching?focuses on matching competitorsâ€™ prices and price changes.
f) Non-Price Strategies?building a marketing program around factors other than price.
F. Adjusting the Base Price
1. Adjusting base prices in consumer markets:
a) Discounting?using sales or other temporary price reductions to attract customers and create excitement.
b) Reference Pricing?comparing the actual selling price to an internal or external reference price.
c) Price Lining?occurs when a firm creates lines of products that are similar in appearance and functionality, but are offered with different features and at different price points.
d) Odd Pricing?prices are rarely set at whole, round numbers.
e) Price Bundling?bringing together two or more complementary products for a single price.
2. Adjusting base prices in business markets:
a) Trade Discounts?Manufacturers will reduce prices for certain intermediaries in the supply chain based on the functions that the intermediary performs.
b) Discounts and Allowances?Business buyers can take advantage of sales and other price breaks including discounts for cash, quantity or bulk discounts, seasonal discounts, or trade allowances for participation in advertising or sales support programs.
c) Geographic Pricing?Selling firms often quote prices in terms of reductions or increases based on transportation costs or the actual physical distance between the seller and the buyer.
d) Transfer Pricing?Transfer pricing occurs when one unit in an organization sells products to another unit.
e) Barter and Countertrade?In business exchanges across national boundaries, companies sometimes use products, rather than cash, for payments.
f) Another important pricing technique used in business markets is price discrimination, which occurs when firms charge different prices to different customers. When this situation occurs, firms set different prices based on actual cost differences in selling products to one customer relative to the costs involved in selling to other customers.
IV. Supply Chain Strategy
A. Supply chain management is essentially invisible to customers because the process occurs behind the scenes. Customers take these processes for granted and only notice interruptions of the supply chain.
B. The picture is drastically different from the firmâ€™s perspective. Supply chain concerns now rank at the top of the list for achieving a sustainable advantage and true differentiation in the marketplace.
C. Supply chain management consists of two interrelated components:
1. Marketing channels?an organized system of marketing institutions, through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user.
2. Physical distribution?coordinating the flow of information and products among members of the channel to ensure the availability of products in the right places, in the right quantities, at the right times, and in a cost- efficient manner.
D. The term supply chain expresses the connection and integration of all members of the marketing channel. Creating an extended enterprise requires investments in and commitment to three key factors: connectivity, community, and collaboration.
E. The goal of channel integration is to create a seamless network of collaborating suppliers, vendors, buyers, and customers. [Exhibit 6.6]
F. Strategic Supply Chain Issues
1. The importance of the supply chain ultimately comes down to providing time, place, and possession utility for consumer and business buyers. However, the expense of distribution requires that firms balance customersâ€™ needs with their own need to minimize costs. [Exhibit 6.7]
2. Marketing Channel Functions
a) Sorting?Manufacturers make one or a few products while customers need a wide variety and deep assortment of different products. Intermediaries overcome this discrepancy of assortment.
b) Breaking Bulk?Manufacturers produce large quantities of a product; however, customers typically want only one of a particular item. Intermediaries?particularly retailers?overcome this discrepancy of quantity.
c) Maintaining Inventories?Manufacturers cannot make products on demand, so the channel must store products for future purchase and use. Intermediaries overcome this temporal (time) discrepancy. This issue does not apply to services.
d) Maintaining Convenient Locations?Since manufacturers and customers have a geographic separation, the channel must overcome this spatial discrepancy.
e) Provide Services?Channels add value to products by offering facilitating services and standardizing the exchange process.
3. Marketing Channel Structure
a) Exclusive distribution, the most restrictive type of market coverage, occurs when a firm gives one merchant or outlet the sole right to sell a product within a defined geographic region.
b) Selective distribution, a somewhat restrictive type of market coverage, occurs when a firm gives several merchants or outlets the right to sell a product in a defined geographic region.
c) Intensive distribution, the least restrictive type of market coverage, occurs when a firm makes a product available in the maximum number of merchants or outlets in each area to gain as much exposure and as many sales opportunities as possible.
4. Power in the Supply Chain
a) True supply chain integration requires a fundamental change in how channel members work together, including moving from a â€œwin loseâ€ competitive attitude to a â€œwin winâ€ collaborative approach.
b) Each firm in a supply chain has its own mission, goals, objectives, and strategies. It is not surprising that firms often assess their own interests before considering others in the supply chain.
c) Power can be defined as the influence one channel member has over others in the supply chain.
1) Legitimate power deals with the firmâ€™s position in the supply chain?this power balance shifted to large retailers in the 1990s.
2) Reward power involves the ability to help other parties reach their goals and objectives.
3) Coercive power stems from the ability to take positive outcomes away from other channel members, or the ability to inflict punishment on other channel members.
4) Information power comes from having and sharing knowledge among members of the supply chain.
5) Referent power is based in personal relationships and the fact that one party likes another party.
d) Today, discount mass merchandise retailers?like Walmart, Costco, and Target hold the power in most consumer channels.
1) Manufacturers typically must pay hefty fees, called slotting allowances, just to get a single product placed on store shelves.
G. Trends in Supply Chain Strategy
1. Technological Improvements
a) Significant advancements in information processing and digital communication have created new methods for placing and filling orders for both business buyers and consumers.
b) E-commerce now accounts for 52 percent of transactions in manufacturing, 26 percent of transactions in wholesaling, and 5.2 percent of retail transactions.
c) Radio frequency identification (RFID) involves the use of tiny computer chips with radio transmitters that can be attached to a product or its packaging.
d) Beyond the Pages 6.3 discusses Walmart?s use of distribution technology to create supply chain advantages.
2. Outsourcing Channel Functions [Exhibit 6.8]
a) Outsourcing has traditionally been used as a way of cutting expenses associated with labor, transportation, or other overhead costs.
b) Today, the desire of many firms to focus on core competencies drives outsourcing decisions.
c) Many firms have shifted to offshoring their own activities (rather than outsourcing) to maintain some control over operations.
d) Information technology is the primary activity outsourced today.
3. The Growth of Nontraditional Channels
a) Customersâ€™ demands for lower prices and greater convenience have put pressure on all channel intermediaries to justify their existence.
b) When margins get squeezed, the channel typically evolves into a more direct form. The most obvious example of this evolution is the growth of e-commerce.
c) Other forms of nontraditional channels:
1) Catalog and direct marketing
2) Direct selling
3) Home shopping networks
5) Direct response advertising
d) Dual distribution (the use of multiple channels to offer two or more lines of the same merchandise) is a direct outgrowth of the increased use of nontraditional channels. However, it often creates conflict between the manufacturer and its supply chain members.
V. Integrated Marketing Communications
A. Integrated marketing communications (IMC) refers to the strategic, coordinated use of promotion to create one consistent message across multiple channels to ensure maximum persuasive impact on the firmâ€™s current and potential customers.
B. IMC takes a 360-degree view of the customer that considers each and every contact that a customer or potential customer may have in their relationship with the firm. [Exhibit 6.9]
C. Beyond the Pages 6.4 describes how marketers are being forced to adopt new marketing strategies as advancing technology and customer preferences are threatening to make traditional forms of promotion obsolete.
D. Strategic Issues in Integrated Marketing Communications
1. The classic model for outlining promotional goals is the AIDA model:
a) Attention?the first major goal of any promotional campaign is to attract the attention of potential customers.
b) Interest?the firm must spark interest in the product by demonstrating its features, uses, and benefits.
c) Desire?good promotion will stimulate desire by convincing potential customers of the productâ€™s superiority and its ability to satisfy needs.
d) Action?promotion must push customers toward the actual purchase.
2. The firm must also consider its promotional goals with respect to the supply chain.
a) Firms use a pull strategy when they focus their promotional efforts toward stimulating demand among final customers, who then exert pressure on the supply chain to carry the product.
b) Firms use a push strategy when they focus their promotional efforts on members of the supply chain to motivate them to spend extra time and effort on selling the product.
3. Coordinating promotional elements within the context of the entire marketing program requires a complete understanding of the role, function, and benefits of each element.
1. Advertising is paid, nonpersonal communication transmitted through mass media such as television, radio, magazines, newspapers, direct mail, outdoor displays, the Internet, and mobile devices. [Exhibit 6.10]
2. Online advertising is growing rapidly due to its ability to reach highly specialized markets at a relatively low cost. [Exhibit 6.11]
3. Though the initial expense for advertising can be quite high, it can be a cost efficient means of reaching a large number of people.
4. Setting the advertising budget too high will obviously result in overspending, waste, and lower profits. However, setting the budget too low may be even worse. Firms that do not spend enough on advertising find it very difficult to stand out in an extremely crowded market for customer attention.
5. Evaluating the effectiveness of advertising is one of the most challenging tasks facing marketers.
a) Many of the effects and outcomes of advertising take a long time to develop.
b) The effect of advertising on sales is lagged in some cases, with the effect occurring long after the campaign has ended.
6. Most marketers struggle with the fine line between what is permissible and not permissible in advertising.
F. Public Relations
1. Public relations, an element of a firm?s corporate affairs activities, tracks public attitudes, identifies issues that may elicit public concern, and develops programs to create and maintain positive relationships between a firm and its stakeholders.
2. Public relations can be used to promote the firm, its people, its ideas, and its image; and can even create an internal shared understanding among employees.
3. Public Relations Methods
a) Firms use a number of public relations methods to convey messages and to create the right attitudes, images, and opinions: news (or press) releases, feature articles, white papers, press conferences, event sponsorship, and employee relations.
b) Public relations often becomes confused with publicity. Publicity is more narrowly defined to include the firmâ€™s activities designed to gain media attention through articles, editorials, or news stories.
4. Although public relations activities are often seen as being more credible, they are often difficult for the firm to control. Another drawback involves the risk of spending a great deal of time and effort in developing public relations messages that fail to attract media attention.
G. Personal Selling and Sales Management
1. Personal selling is paid personal communication that attempts to inform customers about products and persuade them to purchase those products.
2. Compared to other types of promotion, personal selling is the most precise form of communication because it assures companies that they are in direct contact with an excellent prospect.
3. The most serious drawback of personal selling is the cost per contact.
4. Because firms depend on repeat sales and ongoing customer relationships, personal selling activities must include elements of customer service and marketing research.
5. The Sales Management Process
a) Developing Sales Force Objectives?objectives must be fully integrated with the objectives and activities of other promotional elements.
b) Determining Sales Force Size?size is a function of many variables, including the type of salespeople used, specific sales objectives, and the importance of personal selling within the IMC program.
c) Recruiting and Training Salespeople?should be a continuous activity as firms must ensure that new salespeople are consistently available to sustain the sales program.
d) Controlling and Evaluating the Sales Force?requires a comparison of sales objectives with actual sales performance. [Exhibit 6.12]
6. Many sales activities are now done through sales automation systems and CRM systems to push integrated customer, competitive, and product information to the sales force.
H. Sales Promotion
1. Sales promotion involves activities that create buyer incentives to purchase a product, or that add value for the buyer or the trade.
2. Sales promotion activities account for the bulk of promotional spending in many firms.
3. Consumer Sales Promotion
a) Coupons are used to reduce the price of a product and encourage customers to try new or established brands. [Exhibit 6.13]
b) Rebates are similar to coupons except that they require much more effort on the consumerâ€™s part to obtain the price reduction. Most firms prefer rebates to coupons.
c) Samples stimulate trial of a product, increase volume in the early stages of the productâ€™s life cycle, and encourage consumers to actively search for a product.
d) Loyalty programs reward loyal customers who engage in repeat purchases.
e) Point-of-purchase (POP) promotion includes displays, counter pieces, display racks, or self-service cartons that are designed to build traffic, advertise a product, or induce impulse purchases.
f) Premiums are items offered free or at a minimum cost as a bonus for purchasing a product.
g) Contests and sweepstakes encourage potential consumers to compete for prizes or try their luck by submitting their names in a drawing for prizes.
h) Direct mail, which includes catalog marketing and other printed material mailed to individual consumers, is a unique category because it incorporates elements of advertising, sales promotion, and distribution into a coordinated effort to induce customers to buy.
4. Business (Trade) Sales Promotion
a) Trade allowances include both merchandise and price allowances for bulk buying or for special promotional considerations.
b) Free merchandise is sometimes offered to intermediaries instead of quantity discounts.
c) Cooperative advertising is an arrangement where a manufacturer agrees to pay a certain amount of an intermediaryâ€™s media cost for advertising the manufacturerâ€™s products.
d) Training assistance and sales incentives are sometimes offered to intermediaries. Sales incentives come in two general forms: push money and sales contests.
Questions for Discussion
1. Consider the number of product choices available in the U.S. consumer market. In virtually every product category, consumers have many options to fulfill their needs. Are all of these options really necessary? Is having this many choices a good thing for consumers? Why or why not? Is it a good thing for marketers and retailers that have to support and carry all of these product choices? Why or why not?
Students should immediately see that this situation is not necessarily a good thing for marketers and retailers. It would be much easier and much less expensive to sell only a few products or choices in each category. The limited shelf space available in retail stores is also an important consideration (this is a good point to bring up slotting allowances). That said, students will have a harder time determining whether this situation is good for consumers. Obviously, more choices mean a higher standard of living. But at what cost? Encourage students to discuss how prices would change if marketers eliminated some or most of the options that they make available to consumers.
2. Pricing strategy associated with services is typically more complex than the pricing of tangible goods. As a consumer, what pricing issues do you consider when purchasing services? How difficult is it to compare prices among competing services, or to determine the complete price of the service before purchase? What could service providers do to solve these issues?
Most customers have few, if any, reference prices for what services should cost. As a result, the best way to consider prices for services is to shop around. Although this is easy in some service categories (hotels, air travel), it is extremely difficult or time consuming in others (professional services, hairstyling, dry cleaners). Many services quote prices by the hour. However, this is also problematic because many customers will compare these rates to their own hourly wages. Service firms should be as open and transparent as possible about their prices. They should also make pricing information easy to find and easy to compare to competing firms.
3. Some manufacturers and retailers advertise that customers should buy from them because they ?eliminate the middleman.? Evaluate this comment in light of the functions that must be performed in a marketing channel. Does a channel with fewer members always deliver products to customers at lower prices? Defend your position.
While some channels may physically eliminate the middleman, the functions performed by that middleman cannot be eliminated. Customers who buy from warehouse clubs, for example, break bulk and provide storage. Channels with fewer members should theoretically be able to offer lower prices. However, in many direct channels the manufacturer is prohibited from offering lower prices due to trade agreements with retail firms. In these cases, the prices are likely to be the same.
4. Review the steps in the AIDA model. In what ways has promotion affected you in various stages of this model? Does promotion affect you differently based on the type of product in question? Does the price of the product (low versus high) make a difference in how promotion can affect your choices? Explain.
Student responses will vary. Students will argue that the effectiveness of promotion designed to gain attention will vary greatly depending on the product in question. It will also vary depending on whether the customer is currently in the market for the product (the concept of selective attention is key here). The effectiveness of promotion designed to stimulate desire and action will depend on how motivated the customer is to buy. Get the students to discuss situations where only a gentle nudge is needed to get them to buy. Many students will argue that the price of the product is not that important, especially if they are truly interested in the product or if they have a need for the product.
1. You are in the process of planning a hypothetical airline flight from New York to St. Louis. Visit the websites of three different airlines and compare prices for this trip. Try travel dates that include a Saturday night layover and those that do not. Try dates less than seven days away, and compare those prices with flights that are more than twenty-one days out. How do you explain the similarities and differences you see in these prices?
The similarities and differences can be explained by (1) the competition on the route from New York to St. Louis, and (2) the yield management system being used by each airline.
2. Locate a product offered by a manufacturer using a dual distribution approach. Are there differences between the customers targeted by each channel? How do the purchase experiences differ? In the end, why would a customer buy directly from a manufacturer if the prices are higher?
A good example of this occurs when Sony sells products through its www.sonystyle.com website. Customers can buy from Sony, local stores, or online merchants. In most cases, Sony charges the manufacturer?s suggested retail price. The prices at other stores are likely to be less expensive. Sony often throws in a free product to sweeten the deal. Still, students will have a hard time developing reasons for buying direct in this case.
3. Shadow a salesperson for a day and talk about how his or her activities integrate with other promotional elements used by their firm. How does the salesperson set objectives? How is he or she made aware of the firm?s overall IMC strategy? Does the sales force participate in planning marketing or promotional activities?
This is a great exercise for any marketing student. Experiences will vary dramatically.
4. Visit the Cents Off website (www.centsoff.com) and browse the available coupons and read the FAQs. What are the benefits of the Cents Off service for advertisers and consumers? If you were a manufacturer that issues coupons, what factors would favor using the Cents Off website for distribution rather than the traditional Sunday newspaper insert?
The benefits for consumers and manufacturers are tied to efficiency. Both parties receive major benefits without wasted time and effort. Manufacturers can specifically target customers that are truly interested in their products.
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