Directions
All posts are expected to demonstrate the use of proper grammar and be free of typographical and spelling errors. Respond to every aspect of the discussion prompt with originality.
- Define marketing and outline its components
- Demonstrate exceptional familiarity with the text and topics being covered, and utilize text/PowerPoint references.
- Your initial post should consist of at least 300 words
Principles of Marketing 4.0
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Jeff Tanner and Mary Anne Raymond
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1
PUBLISHED BY:
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©2019 BY FLATWORLD. ALL RIGHTS RESERVED. YOUR USE OF THIS WORK IS SUBJECT TO THE LICENSE AGREEMENT AVAILABLE.
NO PART OF THIS WORK MAY BE USED, MODIFIED, OR REPRODUCED IN ANY FORM BY ANY MEANS EXCEPT AS EXPRESSLY PERMITTED UNDER THE LICENSING AGREEMENT.
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CHAPTER 15
Price, the Only Revenue Generator
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LEARNING OBJECTIVES
Understand the factors in the pricing framework.
Explain the different pricing objectives organizations have to choose from.
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THE PRICING FRAMEWORK
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THE PRICING FRAMEWORK
Various pricing objectives:
Targeted Return on Investment (ROI): The profit an organization hopes to make given the amount of assets, or money, it has tied up in a product.
Maximizing Profits: Set prices to increase revenues as much as possible, relative to costs.
Maximizing Sales: Pricing products to generate as much revenue as possible, regardless of what it does to a firm’s profits.
Maximizing Market Share: Set prices allows capturing a larger share of the sales.
Maintaining the Status Quo: Meet, or equal, competitors’ prices.
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KEY TAKEAWAYS
Price is the only marketing variable that generates money for a company.
All the other variables (product, communication, distribution) cost organizations money.
A product’s price is the easiest marketing variable to change and also the easiest to copy.
Before pricing a product, an organization must determine its pricing objective(s).
A company can choose from pricing objectives such as maximizing profits, maximizing sales, capturing market share, achieving a target return on investment (ROI) from a product, and maintaining the status quo in terms of the price of a product relative to competing products.
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LEARNING OBJECTIVES
Understand the factors that affect a firm’s pricing decisions.
Understand why companies must conduct research before setting prices in international markets.
Learn how to calculate the breakeven point.
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PRICING FACTORS
Customers: How will buyers respond?
Three important factors:
Will buyers perceive that the product offers value?
How many buyers are there?
How sensitive are customers to changes in price?
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PRICE ELASTICITY
Equal to percentage change in quantity demanded divided by percentage change in price.
Price elastic: Consumers are very sensitive to price changes and buy more at low prices and less at high prices.
Price inelastic: Buyers are not sensitive to price changes and demand is relatively unchanged.
REFERS TO PEOPLE’S SENSITIVITY TO PRICE CHANGES, WHICH AFFECTS THE DEMAND FOR A PRODUCT
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COMPTETITORS
A firm’s pricing decisions are affected by:
How competitors price and sell their products.
The availability of substitute products.
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THE ECONOMY AND REGULATIONS
Weak economies and high unemployment call for lower prices.
In international markets, currency exchange rates affect pricing decisions.
Pricing decisions are affected by federal and state regulations.
Robinson-Patman Act limits price discrimination.
Price fixing, or firms agreeing to charge the same (usually high) price, is illegal.
Unfair trade laws protect smaller businesses by preventing:
Larger businesses from selling products below cost
Predatory pricing, which is setting low prices to drive competitors out of business.
Bait and switch pricing, in which a seller ‘baits’ customers with low prices and then tries to switch them to higher-priced products, is illegal in many states.
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PRODUCT COSTS
The costs of the product that are taken into account when a pricing decision is made include the amount spent on:
Product development
Testing
Packaging
So do costs related to promotion and distribution.
The offering’s stage in the product life cycle can affect its price.
If a company has to open brick-and-mortar storefronts to distribute and sell the offering, this too will have to be built into the price the firm must charge for it.
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BREAKEVEN POINT
Total costs include both fixed and variable costs.
Fixed costs are costs that must be paid regardless of production or sales level.
Variable costs are costs that change with a company’s level of production and sales.
BEP = Total Fixed Costs divided by Contribution per Unit, or Total Fixed Costs divided by the difference between Unit Price and Unit Cost.
THE POINT WHERE TOTAL COSTS EQUAL TOTAL REVENUE
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KEY TAKEAWAYS
In addition to setting a pricing objective, a firm has to look at a number of factors before setting its prices. These factors include:
The customers whose needs it is designed to meet
Demand
The external environment
The competition
The economy
Government regulations
The offering’s cost
Other aspects of the marketing mix:
The nature of the offering
The stage of its product life cycle
Promotion
Distribution
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KEY TAKEAWAYS
In international markets, firms must look at environmental factors and customers’ buying behavior in each market.
For a company to be profitable, revenues must exceed total costs.
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LEARNING OBJECTIVES
Understand introductory pricing strategies.
Understand the different pricing approaches that businesses use.
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INTRODUCTORY PRICING STRATEGY
Skimming price strategy: A high initial price for a product aimed at consumers who are willing to pay a high price and buy products early.
Over time, the price of the product goes down as competitors enter the market and more consumers are willing to purchase the offering.
Penetration pricing strategy: Low initial price is set to get as much of the market as possible.
Often, many competitive products are already in the market.
Everyday low prices: The price the seller expects to charge throughout the product life cycle.
Walmart uses this theme in their advertising.
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PRICING APPROACHES
Cost-plus pricing (markup pricing): Uses the cost of the product and then adds a profit to determine a price.
The most common pricing approach
Ensures a company’s costs and profit are covered
Markup: Money added to the cost of a product to set the final price.
Markdown: The amount taken off of the price in a price reduction.
Odd-even pricing: Pricing a product a few cents below the next dollar amount or a few dollars below the next hundred- or thousand-dollar value
Prestige pricing: Utilizing a higher price to give an offering a high-quality image.
Price lining: Pricing a group of similar products at different price levels.
Demand-backward pricing: Starts with the price demanded by consumers and create offerings at that price.
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PRICING APPROACHES
Leader pricing: Pricing one or more items unusually low to get people into a store.
Loss leaders: Items priced below cost to bring people into stores – this is illegal in many states.
Sealed bid pricing: Process of offering to buy or sell products at prices designated in sealed bids.
Online auctions: Such as eBay, give customers the chance to bid and negotiate prices with sellers until an acceptable price is agreed upon.
Forward auction: Buyer lists an item to buy, sellers submit bids.
Reverse auction: States how much one is willing to pay for it.
Going rate: Pricing occurs when buyers pay the same price regardless of where or for whom they buy the product.
Price bundling: Selling different products or services together, typically at a lower price than if each product or service is sold separately
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PRICING APPROACHES
Captive pricing: Pricing products when firms know customers must buy specific replacement parts because there are no alternatives.
Product mix pricing: Deciding on how to price a firm’s products and services that go together.
Two-part pricing: A strategy in which providers have two different charges for a product.
Payment pricing: A strategy in which customers are allowed to break down product payments into smaller amounts they pay incrementally.
Promotional pricing: A short-term tactic to get people to purchase a product or more of it.
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PRICE DISCRIMINATION
In some situations (mostly retail), price discrimination is legal.
Price discrimination is used to get more people to use a product.
A company might lower its prices in order to get more customers to buy an offering when business is slow.
CHARGING DIFFERENT CUSTOMERS DIFFERENT PRICES FOR THE SAME PRODUCT
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PRICE ADJUSTMENTS
Quantity discounts: Involves giving customers discounts for larger purchases.
Pricing adjustments businesses:
FOB (free on board) origin.
FOB (free on board) destination.
CHANGING THE LISTED PRICES OF PRODUCTS
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PRICE ADJUSTMENTS
Uniform-delivered pricing: Buyers pay the same shipping charges regardless of where they are located.
Trade allowances: discounts given to channel partners.
Reciprocal agreements: Agreements in which merchants agree to promote each other to customers.
Bounce back: A promotion in which a seller gives customers discount cards or coupons.
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KEY TAKEAWAYS
Both external and internal factors affect pricing decisions. Companies use many different pricing strategies and price adjustments. However, the price must generate enough revenues to cover costs in order for the product to be profitable.
Cost-plus pricing, odd-even pricing, prestige pricing, price bundling, sealed bid pricing, going-rate pricing, and captive pricing are just a few of the strategies used.
Organizations must also decide what their policies are when it comes to making price adjustments, or changing the listed prices of their products. Some companies use price adjustments as a short-term tactic to increase sales.
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Case Analysis and Questions
How I intend to Apply What I have Learned.
For our final discussion assignment, I would like for you to select two concepts from chapters 1-8 and two concepts from chapters 9-16 that you would like to apply to your personal and/or business life and respond to the questions below.
Discussion Questions
1. Describe the four concepts (Two from chapters 1-8 and two from chapters 9-16), including page numbers and why you think they are important to marketing a product/service.
2. How do you intend to apply/implement them in your personal/business life?
Principles of Marketing 4.0
Jeff Tanner and Mary Anne Raymond
©FlatWorld 2018
1
PUBLISHED BY:
FLATWORLD
©2019 BY FLATWORLD. ALL RIGHTS RESERVED. YOUR USE OF THIS WORK IS SUBJECT TO THE LICENSE AGREEMENT AVAILABLE.
NO PART OF THIS WORK MAY BE USED, MODIFIED, OR REPRODUCED IN ANY FORM BY ANY MEANS EXCEPT AS EXPRESSLY PERMITTED UNDER THE LICENSING AGREEMENT.
©FlatWorld 2018
CHAPTER 16
The Marketing Plan
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MARKETING PLAN
The marketing plan should communicate:
Realistic expectations to top management.
Marketing-related responsibilities to those individuals who have marketing related responsibilities and how they should execute those responsibilities.
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LEARNING OBJECTIVE
Identify the people responsible for creating marketing plans in organizations.
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MARKETING PLANNING ROLES
Teams of marketing specialists are involved.
Many companies create marketing plans at the divisional level.
The chief marketing officer is responsible for preparing the plan.
Marketing professionals and other staff members work as teams to prepare the plan.
Marketing analysts are part of the CMO staff.
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KEY TAKEAWAYS
The CMO of a business unit is likely to be responsible for the creation of its marketing plan.
However, the CMO is generally assisted by marketing professionals and other staff members, who often work on marketing planning teams as needed.
Marketing analysts, however, are permanent members of the CMO’s staff.
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LEARNING OBJECTIVES
Understand the functions of the marketing plan.
Write a marketing plan.
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MARKETING PLAN CRITERIA
Identify customers’ needs.
Evaluate whether the organization can meet those needs in some way that allows for profitable exchanges with customers to occur.
Develop a mission statement, strategy, and organization centered on those needs.
Create offerings that are the result of meticulous market research.
Form operations and supply chains that advance the successful delivery of those offerings.
Pursue advertising, promotional, and public relations campaigns that lead to continued successful exchanges between the company and its customers.
Engage in meaningful communications with customers.
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MARKETING PLAN OUTLINE
The Executive Summary:
Should provide all of the information your company’s executives need to make a decision without reading the rest of the plan.
Include a brief description of the market, the product to be offered, the strategy behind the plan, and the budget.
The Business Challenge:
Brief rationale for why the company should invest.
How does marketing plan further the mission?
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THE MARKET
The market section of the plan should describe customers, competitors, other collaborative organizations, and the state of the market.
Describe who will purchase the offering and why they will.
Discuss the existing market conditions that will benefit or challenge the plan.
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CUSTOMERS
Break the market into customer segments and describe each segment completely:
Who is the targeted market?
Why will the target buy the offerings?
What is their buying process?
Which of their needs does the offering meet?
Include in the discussion the market share and sales goals for each segment.
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COMPANY ANALYSIS
SWOT: Strengths, weaknesses, opportunities and threats.
Strengths and weaknesses are internal to the company.
Opportunities and threats are external to the company.
Factors that make for a better SWOT analysis:
Honesty: A good SWOT analysis is honest.
Broad: The analysis has to capture trends.
Long term: Consider multiple time frames.
Multiple perspectives: A good SWOT should consider the perspective and involve people from all areas of the firm.
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COLLABORATORS
Actual or potential partners needed for plan success.
Organizations in the value chain, either upstream or downstream.
Partners that are necessary to co-create value.
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COMPETITORS
Marketing plans are likely to spark retaliation from one or more competitors.
Identify competitors and be honest about both their strengths and weaknesses.
Include in this section of the plan how quickly competitors will retaliate and what the nature of that retaliation will be.
Include a competitive analysis, financial statements, and all information publicly available about them.
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BUSINESS CLIMATE
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POLITICAL
ECONOMIC
SOCIAL AND CULTURAL
TECHNOLOGICAL
ENVIRONMENTAL
THE STRATEGY
Create an argument as to why others should invest in your strategy.
Include a value proposition to explain the benefits for the customer.
Include a discussion of alternative strategies that were considered and discarded.
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THE OFFERING
Include details on the offering, including:
Features
Benefits
Pricing options
Discuss different options in detail, as well as which market segments will respond to each option.
Some like to include sales goals in this section while others prefer to include goals in the budget section.
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THE COMMUNICATION PLAN
Include how the offering will be launched.
Specify how customer communications will be conducted.
What mechanisms will be used to gather feedback?
How will the offering be promoted to customers?
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DISTRIBUTION
Answer questions about how the offering will be sold:
Who will sell it?
Who will ship it?
Who pays for shipping?
How will it be shipped?
Who will service and support it with services such as:
Research
Credit
Handling
Specify what inventory will need to be maintained to meet customer expectations:
Where will those inventories be kept?
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BUDGET
Covers all of the resources.
Covers the investment required.
Marketing funds needed.
Includes inventory costs.
Costs to provide customer support services.
Forecasts the product’s sales and profits.
Projections should include timelines.
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A MARKETING PLAN TIMELINE
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CONCLUSION
Repeat the highlights.
Summarize the target market.
Describe the product.
Discuss the communication plan.
Reasons why this plan is the best choice.
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KEY TAKEAWAYS
A marketing plan’s executive summary should include a brief summary of the market, the product to be offered, the strategy behind the plan, and the budget, as well as any other important information. In this section of the plan, the planner describes the offering and a brief rationale for why the company should invest in it.
The market section of the plan should describe a firm’s customers, competitors, any other organizations with which it will collaborate, and the climate of the market.
The strategy section details the tactics the organization will use to develop, market, and sell the offering. When readers complete the strategy section, they should conclude that the proposed strategy is the best one available.
The budget section of the marketing plan covers all the resources, such as new personnel, new equipment, new locations, and so forth, needed to successfully launch the product, as well as details about the product’s costs and sales forecasts.
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LEARNING OBJECTIVES
List steps in the forecasting process.
Identify types of forecasting methods, and their advantages and disadvantages.
Discuss the methods used to improve the accuracy of forecasts.
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FORECASTING FACTORS
Accuracy is important when it comes to forecasts because:
Overestimating demand increases inventory costs.
Underestimating leads to lost sales and profits.
Forecasting is a complex process and depends on:
How much the product will cost
How competitors will react
The forecast must change as factors change.
Market potential: The expected industry-wide sales of a product in a particular category for a set time period.
Sales potential:
The maximum revenue a company expects to generate from a product.
The number of units the company expects to sell.
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FORECASTING METHODS
Judgment techniques: Include customer surveys, expert opinions and estimates by salespeople.
Sales force composite: a forecast based on sales estimates for a certain period of time gathered by the salespeople in a firm.
Executive opinion: the best guess estimate of the executives of a company.
Expert opinion: the estimate of an expert, usually one outside of the company.
Time Series Techniques: Examining sales patterns in the past to predict future sales.
Trend analysis: Estimating future sales based on data from past sales.
Correlational analysis: Estimates sales based on the trends of other variables.
Response models: Based on how customers have responded in the past to marketing strategies.
Market test: An experiment in launching a new offering in a limited market in order to gain real-world knowledge of how the market will react to the product.
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BUILDING BETTER FORECASTS
Commit to accuracy
Pick the right method(s) for your business and decision
Use multiple methods
Use many variables
Use scenario-based forecasts
Track actual results and adjust
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KEY TAKEAWAYS
A forecast is an educated guess, or estimate, of sales in the future. Accuracy is important because so many other decisions a firm must make depend on the forecasts.
When a company forecasts sales, it has to consider market potential and sales potential.
Many methods of forecasting exist, including:
Expert opinion
Channel and customer surveys
Sales force composites
Time series data
Test markets
Better forecasts can be obtained by using multiple methods, forecasting for various scenarios, and tracking actual data (including sales) and adjusting future forecasts accordingly.
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LEARNING OBJECTIVES
Apply marketing planning processes to ongoing business settings.
Identify the role of the marketing audit.
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ONGOING MARKETING PLANNING AND EVALUATION
Marketing plans are created frequently.
The key to a successful ongoing marketing strategy is twofold:
Causality: The relationship between two variables whereby one variable is a direct consequence of the other.
Control: The degree to which you can separate the effects of a variable on a consequence.
Managerial control: Ability to manipulate variables, such as how a marketing plan is implemented.
Statistical control: Mathematically removing the influence of a variable on an outcome so as to isolate the cause of a problem.
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THE MARKETING AUDIT
Used as an examination of all of the company’s marketing activities.
Fidelity: The degree to which plan is being implemented.
A SNAPSHOT OF THE STATE OF A COMPANY’S MARKETING STRATEGIES AS THEY ARE ACTUALLY IMPLEMENTED
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TOP TEN FACTORS TO ASSESS IN AN AUDIT
Key factors that impacted the business for good or for bad during the past year.
Customer satisfaction scores and the number and type of customer complaints.
The satisfaction levels of distributors, retailers, and other value chain members.
The marketing knowledge, attitudes, and satisfaction of all executives involved in the marketing function.
The extent to which the marketing program was marketed internally and “bought into” by top managers and non-marketing executives.
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TOP TEN FACTORS TO ASSESS IN AN AUDIT
Did the offering meet the customer’s needs as expected, and was the offering’s competitive advantage defensible?
The performance of the organization’s advertising, promotion, sales, marketing, and research programs with an emphasis on their return on the money invested in them.
Whether the marketing plan achieved its stated financial and non-financial goals.
Whether the individual elements’ marketing plans achieved their stated financial and non-financial goals.
The current value of the brand and customer equity for each brand in the product portfolio.
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KEY TAKEAWAYS
The key to a successful ongoing marketing strategy is twofold: understanding causality and good marketing plan execution.
Drawing the wrong conclusions about causality, or what actually causes a change in a company’s sales performance, can lead to disastrous results. That’s why companies investigate the causes by gathering market feedback and conducting market research.
Another tool that can be used to research a change in a company’s sales performance is a marketing audit.
A marketing audit is an examination or a snapshot of the state of a company’s marketing strategies as they are actually implemented.
Complete and partial audits can be done internally or by a consulting firm in order to find areas for improvement.
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