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Marketing Review.pdf

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Carleton University
BUSI 2208
Irfan Butt

Marketing Notes 1/22/11 2:14 PM Chapter One:  Green marketing – marketing efforts to produce, promote, and reclaim environmentally sensitive products.  The American Marketing Association, is the professional body representing marketers in Canada, The United States, and other countries around the world.  Marketing – an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. In order to create Value Marketing seeks: • To discover the needs and wants of prospective customers • To satisfy them Four requirements for Marketing to Occur • Two or more parties with unsatisfied needs • A desire and ability on their part to be satisfied • A way for the parties to communicate • Something to exchange  Market – people with the desire and ability to buy a specific product  Social marketing – marketing designed to influence the behavior of individuals in which the benefits of the behavior accrue to those individuals or to the society in general and no to the market.  Ultimate consumers – people who use the gods and services purchased for a household.  Organizational buyers – those manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale. Those who benefit are: • Consumers who buy • Organizations that sell • Society as a whole Environmental Forces which affect Marketing: • Social • Economic • Technological • Competitive • Regulatory  Need – occurs when a person feel physiological deprived of basic necessities, such as food, clothing, and shelter.  Want – a felt need that is shaped by a person’s knowledge, culture, and personality.  Target Market – one or more specific groups of potential customers toward which an organization directs its marketing program. The Four Ps: • Price – what is exchanged for the product. • Product – a good, service, or idea to satisfy the consumer’s needs. • Promotion – a means of communication between the seller and buyer. • Place – a means of getting the product into the consumer’s hand.  Marketing Mix – the marketing manager’s controllable factors; the marketing actions of product, price, promotion and place that he or she can take to create, communicate, and deliver value.  Environmental Forces – the uncontrollable factors involving social, economic, technological, competitive, and regulatory forces.  Marketing program – a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers. Evolution of Marketing:  Production era – goods were good so there was no standard for goods. Products sold themselves. Early on until the 1920s.  Sales era – competition grew. 1920s – 1960s.  Marketing concept era – marketing became motivating force among firms. 1960s – 1990s.  Marketing orientation era – focus on marketing needs and wants, customer value, and customer satisfaction. 1990s – 2020s.  Customer experience management era – the customer is the focus and interaction between consumer and organization has grown. 2000s – 2010s.  Marketing concept – the idea that an organization should strive to satisfy the needs of consumer, while also trying to achieve the organization’s goals.  Marketing orientation – focusing efforts on continuously collecting information about customers’ needs and competitors’ capabilities. Sharing this information throughout the organization, and using the information to create value, ensure customer satisfaction, and develop customer relationship.  Customer value – the unique combination of benefits received by the customer that include quality, price, convenience, on-time delivery, and both before-sale and after-sale service.  Customer satisfaction – the match between customer expectations of the product and the product’s actual performance.  Customer relationship management (CRM) – the process of building and developing long-term relationship with customers by delivering customer value and satisfaction.  Customer lifetime value (CLV) – the profit generated by the customer’s purchase of an organization’s product or service over the customer’s lifetime.  eCRM – a Web-Centric, personalized approach to managing long-term customer relationships electronically.  Interactive marketing – involves two-way buyer-seller electronic communication in which the buyer can control the kind and amount of information received from the seller.  Customer experience management (CEM) – managing the customers’ interactions with the organization at all levels and at all touch points so that the customer has a positive impression of the organization, is satisfied with the experience, and will remain loyal to the organization.  Ethics – the moral principles and values that govern the actions and decisions of an individual.  Social responsibility – individuals and organizations are part of a larger society and are accountable to that society for their actions.  Societal marketing concept – the view that an organizations should discover and satisfy the needs of its consumers in a way that also provides for society’s well being.  Macro-marketing – the aggregate flow of a nation’s goods and service to benefit society.  Micro-marketing – how an individual organization directs its marketing activities and allocates its resources to benefit its customers. Chapter Two:  Profit – the reward to a business firm for the risk it undertakes in offering a product for sale; the money left over after a firm’s total expenses are subtracted from its total revenue. Kinds of Organization • Business firms • Nonprofit organizations  Business firm – a privately owned organization that serves its customer in order to earn a profit.  Nonprofit Organization – a nongovernmental organization that serves its customers but does not have profit as an organization goal. Levels in Organization • Corporate level • Business unit level • Functional level  Corporate level – level at which top management directs overall strategy for the entire organization.  Business unit – an organization that markets a set of related products to a clearly defined group of customers.  Business unit level – level at which business unit managers set the direction for their product and markets.  Functional level – level at which groups of specialists actually create value for the organization. Functional Strategy • Information system • Finance • Research and development • Marketing • Manufacturing • Human resources  Cross-functional teams – a small number of people form different departments in an organization who are mutually accountable to a common set of performance goals.  Mission – a statement of the organization’s scope that often identifies its customers, markets, products, technology, and values.  Stakeholders – individuals or groups, either within or outside an organization, that relate to it in what it does and how well it performs.  Organizational culture – a set of values, ideas, and attitudes that is learned and shared among the members of an organization.  Goals or Objectives – convert the mission into targeted levels of performance to be achieved.  Market share – the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself. Goals • Profit – maximize long-run profit • Sales revenue – increase sale levels • Market share – increase its market share, even if it costs some profit. • Unit sales – increase number of units it sells • Quality – target high quality or service in its industry • Customer satisfaction – vital to survival or organization • Employee welfare – provide good employment opportunities and working conditions. • Social responsibility – balance conflicting goals of consumers, employees, and shareholders to promote the overall welfare of all these groups, even at the expense of profits.  Customers – strategic direction is set by knowing in complete detail who an organization’s customers and prospective customers are and the type of products and services (value) they are seeking.  Competencies – an organization’s special capabilities, including skills, technologies, and resources, that distinguish it from other organizations.  Competitive advantages – a unique strength relative to competitors, often based on quality, time, cost, innovation, customer intimacy, or customer experience management.  Quality – those features and characteristics of a product that influences its ability to satisfy customer needs.  Benchmarking – discovering how others do something better than your own firm so that you can imitate or leapfrog competition.  Competitors – fierce competitive and globalized economy.  Business portfolio analysis – uses quantified performance measures and growth targets to analyze a firm’s business units as though they were a collection of separate investments. Growth-share matrix reveals four types of Strategic Business Units (SBU) • Cash cows • Stars • Question marks • Dogs  Cash cows – low-growth, high share businesses that require less investment to maintain market share.  Stars – high-growth, high-share businesses that require heavy investment to finance their rapid growth. When their growth slows they are likely to become cash cows.  Question Marks – low-share businesses in high-growth markets that require major investment to hold shares, and even more investments to increase it.  Dogs – low-growth, low-share businesses. They may generate enough cash to maintain themselves but do not hold promise to become real winners for the organization.  Market penetration – a marketing strategy of increasing sales of present product in existing markets.  Market development – a marketing strategy of selling existing products to new markets.  Product development – a marketing strategy of selling new products to existing markets.  Diversification – a marketing strategy of developing new products and selling them in new markets.  Related diversification – occurs when new products and new markets have something in common with the firm’s existing operations.  Unrelated diversification – the new products and new markets have nothing in common with existing operations.  Strategic marketing process – process whereby an organization allocates it s marketing mix resources to reach its target market.  Marketing plan – a road map for the marketing activities of an organization for a specified future period of time, such as one year or five years. The Planning Phase • Situation analysis (SWOT) • Market-product focus and goal setting • Marketing Program  Situational analysis – taking stock of where the firm or product have been recently, where it is now, and where it is headed in terms of the organization’s plans and the external factors and trends affecting it.  SWOT analysis – an acronym describing an organization’s appraisal of its internal strengths and weakness and its external opportunities and threats. Situational Analysis (SWOT) • Identify industry trends • Analyze competitors • Assess own company • Research customers Market-product focus and goal setting • Set market and product goals • Select target markets • Find points of difference • Position the product Marketing Product • Develop the program’s marketing mix • Develop the budget, by estimating revenues expenses, and profits.  Market segmentation – aggregating prospective buyers into groups, or segments, that have common needs, and will respond similarly to a marketing action.  Points of difference – characteristics of a product that make it superior to competitive substitutes. The Implementation Phase • Obtaining resources • Designing the marketing organization • Developing schedules • Actually executing the marketing program designed  Marketing strategy – the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it.  Marketing tactics – detailed day-to-day operational decisions essential to the overall success of marketing strategies. The Control Phase • To compare the results of the marketing program with the goals in the written plans to identify deviations • To act on these deviations, correct or exploit them. Appendix Notes:  Marketing map – a road map for the marketing activities of an organization for a specified future period of time. Target audience and purpose • Who the audience is • What its purpose is  Business map – a road map for the entire organization for a specified future period of time, such as one year or five years. Interpreting the Marketing Plan • Substantive notes are shaded blue and elaborate on the significance of an element in the marketing plan and are keyed to chapter references in the text. • Writing, style, forma, and layout notes are shaded in yellow and explaining the editorial or visual rationale for the element. Chapter Three:  Environmental scanning – the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends. Social Forces • Demographics • Culture  Social forces – forces of the environment that include the demographic characteristics of the population and its values.  Demographics – the study of the characteristics of a human population. These characteristics include population size, growth rate, gender, martial status, ethnicity, income, and so forth.  Baby boomers – the generation of those born between 1946 and 1964.  Generation X – the population of these born between 1965 and 1976.  Generation Y – those born between 1977 and 1994.  Blended family – family formed by the merging into a single family of two previously separated units.  Census Metropolitan Areas (CMAs) – geographic labour markets having a population of 100,000 persons or more.  Ethnic marketing – combinations of the marketing mix that reflect the unique attitudes, race or ancestry, communication preferences, and lifestyles of ethnic Canadians.  Culture – the set of values, ideas, and attitudes that are learned and shared among the members of a group.  Value consciousness – the concern for obtaining the best quality, features, and performance of a product or service for a given price. Economic Forces • Macroeconomic Conditions • Consumer Income  Economy – pertains to the income, expenditures, and resources that affect the cost of running a business and household.  Gross income – the total amount of money made in one year by a person, household, or family unit.  Disposable income – the money a consumer has left after paying taxes to use for such necessities as food, shelter, clothing, and transportation.  Discretionary income – the money that remains after paying for taxes and necessities. Used for luxury items. Technological Forces • Technology’s Impact on Marketers • Technology’s Impact on Customers  Technology – invitations or innovations from applied science or engineering research.  Intranet – an internet/web-based network used within the boundaries of an organization.  Extranet – an internet-based technology that permits communication between a company and its suppliers, distributors, and other partners.  Marketspace – an information and communication-based electronic exchange environment.  E-Business – all electronic-based company activities, both within and outside the company.  E-commerce – specific buying and selling processes on the internet.  E-marketing – also called online marketing, the marketing component of e-commerce. E-marketing: • B2B – Business-to-business marketing • B2C – business to consumer  Blog – a personal web site or web page that contains the online personal journal of an individual.  CGC – Consumer generated content, also called user-created media  C2C – Consumer to consumer marketing, allowing consumers to buy and sell products and service among themselves.  C2B – Customer to business marketing, where proactive customers initiate communication and interact with companies online, providing suggestions on feedback on their experience. Competitive Forces • Alternative forms of competition • Components of competition • Small business as competition • Pure-play online competitors.  Competition – alternative firms that could provide a product to satisfy a specific market’s needs.  Pure competition – every company has similar products.  Monopolistic competition – the many sellers compete with their products on a substitutable basis.  Oligopoly – a common industry structure, occurs when a few companies control the majority of industry sales.  Monopoly – occurs when the one firm sells the product or service. Components of Competition • Entry • Power of buyers and suppliers • Existing competitors and substitutes  Barriers to entry – business practices or conditions that make it difficult for new firms to enter a market. Regulatory forces • Protecting competition and consumers • Self-Regulation • Consumerism  Regulation – restrictions that provincial and federal laws place on businesses with regard to the conduct of its activities.  Competition act – the key legislation designed to protect competition and consumers in Canada.  Self-regulation – an alternative to government control where an industry attempts to police itself.  Consumerism – a grassroots movement started in the 1960s to increase the influence, power, and rights of consumers in dealing with institutions. Acts to protect privacy • The privacy Act (PA) • Personal information protection and electronic documents act (PIPEDA). Chapter Nine: Segment buyers into groups that: • Have common needs • Will respond similarly to a marketing action  Marketing segments – the relatively homogenous groups of prospective buyers that result from the market segmentation process.  Product differentiation – strategy that involves a firm using different marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different from and better than competing production.  Market-product grid – a framework to relate the market segments of potential buyers to products offered or potential marketing actions by the firm. Use of Market Segmentation • One product and multiple market segments • Multiple products and multiple market segments • “Segments of one” or mass customization  Segmenting its markets when it expects that it will increase its sales, profit, and return on investment.  BTO – Build to order, manufacturing a product only when there is an order from a customer.  Ultra-Customization – allows you to hand-pick your entertainment packages, personalize your next action, design your own clothes etc. Steps in Segmenting • Group potential buyers into segments • Group products to be sold into categories • Develop a market-product grid and estimate size of markets • Select target markets • The marketing actions to reach target markets Forming the segments • Potential for increased profit • Similarity of needs of potential buyers within a segment • Differences of needs of buyers among segments • Potential of a marketing action to reach a segment • Simplicity and cost of assigning potential buyers to segments Ways to segment consumer markets • Geographic segmentation • Demographic segmentation • Psychographic segmentation • Behavioral segmentation  Usage rate – quantity consumed or patronage, store visits, during a specific period; varies significantly among different consumer groups.  80/20 rule – a concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers. Way to segment organizational markets • geographic segmentation • demographic segmentation • behavioral segmentation Criteria to choosing the target segments • market size • expected growth • competitive position • cost of reaching the segment • compatibility with the organization’s objective and resources  Product positioning – the place an offering occupies in consumers mind on important attributes relative to competitive products.  Product repositioning – changing the place an offering occupies in a consumer’s mind relative to competitive products. Two approaches to product positioning • Head-to-head positioning – competing directly with competitors on similar product attributes in the same target market. • Differentiation positioning – seeking a less competitive, smaller market niche in which to locate a brand, usually stressing the unique aspects of the product.  Perceptual map – a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands relative to its own and then take marketing actions.  Market potential – the maximum total sales of a product by all firms to a segment during a specified time period under specified environmental conditions and marketing efforts of the firm.  Sales forecast – the total sales of a product that a firm expects to sell during a specified time period under specified environmental conditions and its own marketing efforts.  Direct forecast – estimating the value to be forecast without any intervening steps.  Lost-horse forecast – making a forecast using the last known value and modifying it according to positive or negative factors expected in the future.  Survey of buyers intentions forecast – asking prospective customers if the yare likely to buy the product during some future time period.  Salesforce survey forecast – asking the firm’s salespeople to estimate sales during a coming period.  Trend extrapolation – extending a pattern observed in past data into the future.  Linear trend extrapolation – the pattern is described with a straight line. Chapter Eleven:  Product life cycle – the stages of a new product goes through in the marketplace: introduction, growth, maturity, and decline.  Selective demand – demand for a specific brand.  Trial – the initial purchase of a product by a consumer  Growth stage – characterized by rapid increases in sales  Maturity stage – characterized by a slowing of total industry sales or product class revenue.  Decline stage – occurs when sales and profits begins to drop.  Deletion – dropping a product from a company’s product line.  Harvesting – occurs when a company retains the product but reduces marketing support costs. Aspects of Product Life Cycle • Their length • The shape of their curve • How they vary with different levels of the product • The rate at which consumers adopt products  Product class – the entire product category or industry  Product form – variations of a product within the product class  Product manager – manages the marketing efforts for a close-knit family of products or brands.  Product modification – altering a product’s characteristics, such as its quality, performance, appearance, features, or packages to try to increase and extend the product’s sales.  Market modification – strategy in which a company tries to find new customers, increase product’s use among existing customers, or create new-use situations.  Product repositioning – changing the place a product occupies in a consumer’s mind relative to competing products.  Trading up – adding value to a product through additional features or higher quality materials.  Trading down – reducing the number of features, quality or price.  Downsizing – reducing the content of packages without changing package size and marinating or increase the package price.  Branding – activity in which an organization uses a name, phrase, design, or symbols, or combination of these to identify its products and distinguish them from those of competitors.  Brand name – any word, device, or combination of these used to distinguish a seller’s goods or services.  Trade name – a commercial, legal name under which a company does business.  Trademark – identifies that a firm has legally registered its brand name or trade name so that the firm has its exclusive use.  Product counterfeiting – involves low-cost copies of popular brands not manufactured by the original producer has been a growing problem.  Brand personality – a set of human characteristics associated with a brand name.  Brand equity – the added value that a given brand name gives to a product beyond the functional benefits provided. Creating brand equity • Develop positive brand awareness • Establish a brand’s meaning • Elicit the proper consumer responses • Create consumer brand resonance evident in an intense, active loyalty relationship between consumer and the brand.  Brand licensing – a contractual agreement whereby a company allows another firm to use its brand name, patent, trade secret, or other property for a royalty or free.  Multi-product branding – use by a company of one name for all its products in a product class. Also known as family branding or corporate branding. Branding Strategy • Multi-product branding strategy • Multi-branding strategy • Private branding strategy • Mixed branding strategy  Co-branding – the pairing of two or more recognized brands on a single product or service.  Multi-branding – a manufacturer’s branding strategy giving each product a distinct name.  Private branding – when a company manufactures products but sells them under the brand name of a wholesaler or retailer. Also called private labeling or reseller branding)  Cohort brand management – the bundling of one company’s multiple brands into a single marketing effort aimed at a common consumer group.  Mixed Branding – a firm markets products under its own name and that of a reseller because the segment attracted by the reseller is different from its own market.  Packaging – any container in which a product is offered for sale and on which label information is communicated.  Label – an integral part of the package that typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients.  Warranty – a statement indicating the liability of the manufacturer for product deficiencies. Chapter Five:  Consumer behavior – the actions that a person takes in purchasing and using products and services, including the mental and social processes that precede and follow these actions.  Purchase decision process – the stages a buyer passes through in making choices about which products and services to buy. Purchase Decision Process • Problem recognition – perceiving a difference between a person’s ideal and actual situation that is big enough to trigger a decision. • Information Search – begin to search for information • Alternative evaluation – clarifies the problem for the consumer • Purchase decision • Post purchase behavior External Information • Personal sources • Public sources • Marketed dominated sources Alternative Evaluations • Yielding brand names • Suggesting criteria to use to judge the various brands • Developing consumer value perception  Evaluative criteria – factors that represent both the objective attributes of a brand, you use to compare different products and brands.  Consideration set – the group of brands that a consumer would consider acceptable from among all the brands of which he or she is aware.  Cognitive dissonance – feeling of post purchase psychological tension or anxiety.  Involvement – the personal, social, and economic significance of the purchase to the consumer. High-involvement purchase: • Item is expensive • Can have serious personal consequences • Could reflect on one’s social image.  Situational influences – have an impact on your purchase decision process, the purchase task, social surroundings, physical surroundings, temporal effects, and antecedent states.  Motivation – the energizing force that causes behavior that satisfies a need.  Physiological needs – basic to survival and must be satisfied first.  Safety needs – self-preservation and physical well being.  Social needs – concerned with love and friendship.  Personal needs – represented by the need for achievement, status, prestige, and self-respect.  Self-actualization – involve personal fulfillment, such as completing your degree.  Personality – a person’s consistent behaviors or responses to recurring situations.  National character – a distinct set of personality characteristics common among people of a country or society.  Self-concept – the way people see themselves and the way they believe others see them.  Actual self – refers to how people actually see themselves.  Ideal self – describes how people would like to see themselves.  Perception – the process by which an individual selects, organizes, and interprets information to create a meaningful picture of the world.  Selective perception – the brain organizes and interpret information through a filtering process. Four States of Perception: • Selective exposure • Selective attention • Selective comprehension • Selective retention  Selective attention – consumer will pay attention only to messages that are consistent with their attitudes and beliefs and will ignore those that are consistent.  Selective comprehension – involve interpreting information so that it is consistent with one’s attitude and beliefs.  Selective retention – consumers don’t remember all they see.  Subliminal perception – means that you see or hear messages without being aware of them.  Perceived risk – the anxiety felt because the consumer cannot anticipate the outcomes of a purchase but believes that there are may be negative consequences.  Learning – those behaviors that result from repeated experience, and thinking.  Behavioral learning – the process of developing automatic responses to a situation built up through repeated exposure to it. Four Behavioral Variables: • Drive – need that moves an individual to action • Cue – a stimulus or symbol perceived by consumers • Response – the action taken by a consumer to satisfy the drive • Reinforcement – the reward  Stimulus generalization – occurs when a response elicited by one stimulus is generalized to another stimulus.  Stimulus discrimination – refers to a person’s ability to perceive differences in stimuli.  Cognitive learning – making connection between two or more ideas, or simply observing the outcomes of other’s behaviors and adjusting your own accordingly.  Brand loyalty – a favorable attitude toward and consistent purchase of a single brand over time.  Values – personally or socially preferable modes of conduct or states of existence that are enduring.  Beliefs – a consumer’s subjective perception of how well a product or brand performs on different attributes.  Attitude – a learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way. Attitude Change • Changing beliefs about the extent to which a brand has certain attributes. • Changing the perceived importance of attributes • Adding new attributes to the product  Lifestyle – a mode of living that is identified of how people spend their time and resources, what they consider important in their environment, and what they think of themselves and the world around them.  Psychographics – analysis of consumer lifestyles.  Opinion leaders – those knowledgeable about users of particular products and services, and so their opinions influence other’s choice.  Word of mouth – the influencing of people during conversations.  Buzz marketing – popularity created by consumer word of mouth.  Viral marketing – the online version of word of mouth, involving the use of messages “infectious” enough that consumers wish to pass them along to others through online communication.  Reference groups – people to whom an individual looks as basis for self- appraisal or as a source of personal standards.  Membership group – one to which a person actually belongs, including fraternity, sororities, social clubs, and family.  Aspiration group – one that a person wishes to be a member of or wishes to be identified with, such as a professional society.  Dissociative group – one that a person wishes to maintain a distance from because of differences in values of behaviors. Family influences on consumer behavior: • Consumer socialization • Family life cycle • Family decision making  Consumer socialization – the process by which people acquire the skills, knowledge, and attitudes necessary to function as consumers.  Family life cycle – the distinct phase that a family progresses through from formation to retirement, each phase bringing with it identifiable purchasing behavior. Family-Decision making styles • Spouse-dominant o One makes the decisions. • Joint decision making o Made by both husband and wife Roles of individual family members • Information gatherer • Influencer • Decision maker • Purchaser • User  Social class – the relatively permanent, homogenous division in a society into which people sharing similar values, lifestyles, interests, and behavior can be grouped.  Subcultures – subgroups within the larger, or national, culture with unique values, ideas, and attitudes. Chapter Twelve:  Services – intangible activities, benefits, or satisfactions that an organization provides to consumers in exchange for money or something else of value.  Four Is of services – four unique elements to services: intangibility, inconsistency, inseparability, and inventory.  Idle product capacity – when the service provider is available but there is no demand.  Service continuum – a range from the tangible to the intangible or goods- dominant to service-dominant offerings available in the marketplace.  Customer contact audit – a flowchart of the points of interaction between consumer and service provider.  Gap analysis – an evaluation tool that compares expectations about a service offering to the actual experience a consumer has with the service. Dimensions of service quality • Tangibles – appearances of physical facilities • Reliability – ability to perform the promised service • Responsiveness – willingness to help customers • Assurance – personnel who listen to customers and answer questions • Empathy – knowing the customer and understanding their needs  Eight Ps of service marketing – product, price, place, and promotion, as well as people, physical evidence, process, and productivity that constitute the services marketing mix.  Internal marketing – the notion that in order for a service organization to serve its customers well, it must care for and treat its employees like valued customers.  Capacity management – making service capacity as productive as possible without compromising service quality.  Off-peaking pricing – charging different prices during different times of the days or days of the week to reflect variations in demand for the service. Chapter Fourteen:  Marketing Channel – individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.  Producers recognize that intermediaries make selling goods and services more efficient because they minimize the number of sales contacts necessary to reach a target market.  Intermediary – any intermediary between manufacturer and end-user markets.  Agent or Broker – any intermediary with legal authority to act on behalf of the manufacturer.  Wholesaler – an intermediary who sells to other intermediaries, usually to retailers; usually applies to consumer markets.  Retailer – an intermediary who sells to consumers.  Distributor – an imprecise term, usually used to describe intermediaries who perform a variety of distribution functions, including selling, maintaining inventories, extending credit, and so on; a more common term in business markets but may also be used to refer to wholesalers.  Dealer – an even more imprecise term that can mean the same as distributor, retailer, wholesaler, and so forth. Types of Function: • Transactional function • Logistical function • Facilitating function  All three groups of functions must be performed in a marketing channel.  Direct channel – a marketing channel where a producer and ultimate consumer deal directly with each other.  Indirect channel – a marketing channel where intermediaries are inserted between the producer and consumers and perform numerous channel functions.  Business distributor – performs a variety of marketing channel functions, including selling, stocking, delivering a full product assortment, and financing for business goods and services.  Electronic marketing channels – employ the internet to make a goods and services available for consumption or used by consumers or business buyers.  Direct marketing channels – allow consumers to buy products by interacting with various advertising media without a face-to-face meeting with a salesperson.  Multi-channel distribution – an arrangement whereby a firm reaches buyers by employing two or more different types of marketing channels.  Strategic channel alliances – a practice whereby one firm’s marketing channel is used to sell another firm’s products.  Merchant wholesalers – independently owned firms that take title to the merchandise they handle. • General merchandise • Specialty merchandise  General merchandise (full-line service) – carry a broad assortment of merchandise and perform all channel functions.  Specialty merchandise (limited-line service) – offer a relatively narrow range of products but have an extensive assortment within the product lines carried. Four Major types of specialty merchandise (limited service): • Rack jobbers • Cash-and-carry wholesalers • Drop shippers • Truck jobbers  Manufacturer’s agents – work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory; also called manufacturer’s representatives.  Selling agents – represent a single producer and are responsible for the entire marketing function of that producer.  Brokers – independent firms or individuals whose principal function is to bring buyers and sellers together to make sales.  Food brokers differ from conventional brokers because they act on behalf of producers on a permanent basis and receive a commission for their service.  Manufacturer’s branch office – carries a producers inventory and performs the functions of a full-service wholesaler.  Manufacturer’s sales office – does not carry inventory, typically performs only a sales function, and serves as an alternative to agents and brokers.  Vertical marketing system (VMS) – professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact.  Corporate vertical marketing system – the combination of successive stages of production and distribution under a single ownership.  Forward integration – when a producer owns the intermediary at the next level down in the channel, an example is oil companies which own gas stations.  Backward integration – when a retailer might own a manufacturing operation, an example is Tim Hortons which operates its own roasting facilities.  Contractual vertical marketing system – independent production and distribution firms integrate their efforts on a contractual basis to obtain greater and functional economies and marketing impact than they coul achieve alone. Contractual systems: • Wholesaler-sponsored voluntary chains – a wholesaler develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandising programs, and inventory management efforts. • Retailer-sponsored cooperatives – small, independent retailers for man organization that operates a wholesale facility cooperatively. • Franchising – contractual arrangement between a parent company and an individual or firm that allows the franchise to operate a certain type of business under an established name and according to specific rules. Four types of Franchise arrangements • Manufacturer sponsored retail franchise system (Auto Industry) • Manufacturer sponsored wholesale systems (Soft-drink companies) • Service-sponsored retail franchise system (Mcdonalds) • Service sponsored franchise system (Tax services)  Administered vertical marketing system – achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership. Factors affecting channel choice and management • Environment factors • Consumer factors • Product factors • Company factors  A firm’s financial, human, or technological capabilities affect channel choice. Channel Design Consideration • Target market coverage • Satisfying buyer requirements • Profit
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