AFM 131 Second Midterm Material Notes

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University of Waterloo
Accounting & Financial Management
AFM 131
Darren Charters

  n CANADIAN  BUSINESS     INGRID  LIU   Material  of  the  second  midterm,  including  the  following:  Chapter  5:  Marketing  I,  Chapter  6:   Marketing  II,  Chapter  7:  Operations,  and  Chapter  8:  Finance.   University  of  Waterloo   CHAPTER  5     Marketing:  Building  Customer  and  Stakeholder  Relationships   ▯ WHAT  IS  MARKETING?     Marketing    process  of  determining  customer  needs  and  wants   -­‐>  develop  goods  and  services  that   meet/exceed  those  expectations     Marketing  Concept   1. Customer  Orientation   What  consumers  want   -­‐>  provide  to  them   2. Service  Orientation     Ensure  everyone  in  organization  has  same  objective:     customer  satisfaction   3. Profit  Organization     Focus  on  goods/services  that  will  earn  most  profit     Customer  Relationship  Management  (CRM )   Process  of  learning  as  much  as  possible  about  customers  and  doing  everything  you  can  to  satisfy  them   –  or   even  exceed  their  expectations   –  with  goods  and  services  over  time     THE  MARKETING  MIX     Much  of  what  marketing  people  do  has  been  divided  into  four  f actors:   • Product   • Price   • Place   • Promotion     DESIGNING  PRODUCT     Product     Any  physical  good,  service,  or  idea  that  satisfies  a  want  or  need   Test  Marketing  Process  of  testing  products  among  potential  users   Brand  Name   Word,  device  (design,  shape,  sound  or  colour)  o r  combination  of  these  used  to   distinguish  seller’s  goods  or  services  from  competitors     Setting  an  Appropriate  Price   Price     Money  or  other  consideration  (including  other  goods/services)  exchanged  for       ownership  or  use  of  good/service     Developing  Effective  Promotional  Strategy   Promotion   All  techniques  sellers  use  to  motivate  customers  to  buy  their  products     PROVIDING  MARKETERS  WITH  INFORMATION     Marketing  Research     Analysis  of  markets  to  determine  opportunities  and  challenges,  and  to  find  the  information  nee ded  to  make   good  decisions     THE  MARKETING  RESEARCH  PROCESS     Four  key  steps:   1. Define  question  and  determine  present  situation   2. Collect  data   3. Analyze  research  data   4. Choose  best  solution  and  implement     Secondary  Data   Information  that  has  already  been  compiled  by  others  and  published  in  journals  and  books  or  made  available   online     Primary  Data   Data  that  you  gather  yourself  ((not  from  secondary  sources  such  as  books  and  magazines)     • Primary  research  technique  is   observation   • Personal  interviews  are  face-­‐to-­‐face  opportunity  to  ask  consumers  prepared  questions     Focus  Group   Small  group  of  people  who  meet  under  direction  of  a  discussion  leader  to  communicate  their  opinions  about  an   organization,  its  products,  or  other  issues     THE  MARKETING  ENVIRONMENT     Environmental  Scanning   Process  of  identifying  factors  that  can  affect  marketing  success     Global  Factors   • Growth  of  Internet   • Communicate  easily     Technological  Factors   • Involve  Internet  and  growth  of  consumer  databases   • Companies  able  to  develop  products/services  that  closely  matc h  needs  of  consumers     Sociocultural  Factors   • Number  of  social  trends  to  monitor   • Ex.  population  growth  and  changing  demographics     Competitive  Factors   • Dynamic  competitive  environment   Economic  Factors   • Adapt  by  offering  products  that  were  less  expensive  and  tai lored  to  consumer’s  modest   incomes     TWO  DIFFERENT  MARKETS   Consumer  and  Business-­‐to-­‐Business  (B2B)     Consumer  Market   All  individuals  or  households  that  want  goods  and  services  for  personal  consumption  or  use     Business-­‐to-­‐Business  Market  (B2B)   All  individuals  and  organizations  that  want  goods  and  services  to  use  in  producing  other  goods  and  services  or   to  sell,  rent,  or  supply  goods  to  others     THE  CONSUMER  MARKET     Market  Segmentation   Process  of  dividing  total  market  into  groups  whose  members  have  similar  chara cteristics     Target  Marketing   Marketing  directed  toward  those  groups  (market  segments)  an  organization  decides  it  can  serve  profitably     Geographic  Segmentation   Dividing  market  by  geographic  area     Demographic  Segmentation   Dividing  market  by  age,  income  and  e ducational  level     Psychographic  Segmentation   Dividing  the  market  according  to  personality  or  lifestyle  (activities,  interests,  and  opinions)     Behavioural  Segmentation   Dividing  market  based  on  behaviour  with  or  towards  a  product       REACHING  SMALLER  MARKET  SE GMENTS     Niche  Marketing   Process  of  finding  small  but  profitable  market  segments  and  designing  or  finding  products  for  them     One-­‐to-­‐One  (Individual)  Marketing   Develop  a  unique  mix  of  goods  and  services  for  each  individual  customer     MOVING  TOWARD  RELATIONSHI P  MARKETING     Mass  Marketing   Developing  products  and  promotions  to  please  large  groups  of  people     Relationship  Marketing   Marketing  strategy  with  goal  of  keeping  individual  customers  over  time  by  offering  them  products  that  exactly   meet  their  requirements     THE  CONSUMER  DECISION  MAKING  PROCESS     i. Problem  recognition   ii. Information  search   iii. Alternative  evaluation   iv. Purchase  decision/no  purchase   v. Postpurchase  evaluation  (cognitive  dissonance)     Other  factors:     • Learning   changes  in  individual’s  behaviour  resulting  from  exper ience   • Reference  Group   group  that  individual  uses  as  reference  point   • Culture  Set  of  values,  beliefs,  rules  and  institutions  held  by  people   • Subculture   set  of  values,  attitudes  and  ways  of  doing  things   • Cognitive  Dissonance   psychological  conflict  that  can  occu r  after  purchase     THE  BUSINESS-­‐TO-­‐BUSINESS  MARKET     Several  factors  that  make  B2B  marketing  different:   • Number  of  customers  in  B2B  market  is  relatively  few   • Size  of  business  customers  relatively  large   • B2B  markets  tend  to  be  geographically  concentrated   • Business  buyers  generally  thought  to  be  more  rational  (as  opposed  to  emotional)  than  ultimate   consumers  in  their  selection  of  goods/services   • B2B  sales  tend  to  be  direct   • There  is  much  more  emphasis  on  personal  selling  in  B2B  markets  than  consumer  markets       CHAPTER  15     Managing  the  Marketing  Mix:  Product,  Price,  Place  and  Promotion   PRODUCT  DEVELOPMENT  AND  TOTAL  PRODUCT  OFFER     Value   Good  quality  at  a  fair  price   When  consumers  calculate  value  of  product,  they  look  at  benefits  then  subtract  cost  to  see  if  benefits  ex ceed   the  costs     Total  Product  Offer   Everything  that  consumers  evaluate  when  deciding  whether  to  buy  something  (also  called   value  package)     Product  Line   A  group  of  products  that  are  physically  similar  or  are  intended  for  similar  market     Product  Mix   The  combination  of  product  lines  offered  by  manufacturer     Product  Differentiation   The  creation  of  real  or  perceived  product  differences     BRANDING  AND  BRAND  EQUITY     Trademark   A  brand  that  has  been  given  exclusive  legal  protection  for  both  the  brand  name  and  pictori al  design     Brand  Equity   Combination  of  factors   –  such  as  awareness,  loyalty,  perceived  quality,  images  and  emotions   –  that  people   associate  with  a  given  brand  name     Brand  Loyalty   The  degree  to  which  customers  are  satisfied,  enjoy  the  brand,  and  are  committ ed  to  further  purchase     Brand  Awareness   How  quickly  or  easily  a  given  brand  name  comes  to  mind  when  a  product  category  is  mentioned     Brand  Manager   A  manager  who  has  direct  responsibility  for  one  brand  or  one  product  line;  called  a  product  manager  in  some   firms     COMPETITIVE  PRICING     Pricing  objectives:   • Achieving  target  return  on  investment  or  profit   • Building  traffic   • Achieving  greater  market  share   • Creating  an  image   • Furthering  social  objectives     Major  approaches  to  pricing:   • Cost-­‐based  pricing   • Demand-­‐based  pricing   o Target  costing:  designing  a  product  so  that  it  satisfies  customers  and  meets  profit  margins   desired  by  firm   • Competition-­‐based  pricing   o Competition-­‐based  pricing:  pricing  strategy  based  on  what  all  the  other  competitors  are  doing       BREAK-­‐EVEN  ANALYSIS     Break-­‐even  analysis   The  process  used  to  determine  profitability  at  various  levels  of  sales     Total  Fixed  Costs   All  expenses  that  remain  the  same  no  matter  how  many  products  are  made  or  sold     Variable  Costs   Costs  that  change  according  to  the  level  of  producti on     PRICING  STRATEGIES  FOR  NEW  PRODUCTS     Skimming  Price  Strategy   A  strategy  in  which  a  new  product  is  priced  high  to  make  optimum  profit  while  there’s  little  competition     Penetration  Price  Strategy   A  strategy  in  which  the  product  is  priced  low  to  attract  m any  customers  and  discourage  competitors     OTHER  PRICING  STRATEGIES     Everyday  Low  Pricing  (EDLP)   Setting  prices  lower  than  competitors  and  then  not  having  any  special  sales     High-­‐Low  Pricing  Strategy   Set  prices  that  are  higher  than  EDLP  stores,  but  have  may  special  sales  where  the  prices  are  lower  than   competitors     Bundling   Grouping  two  or  more  products  together  and  pricing  them  as  a  unit     Psychological  Pricing   Pricing  goods  and  services  at  price  points  that  make  the  product  appear  less  expensive  than  it  is           THE  IMPORTANCE  OF  CHANNELS  OF  DISTRIBUTION     Marketing  Intermediaries   Organizations  that  assist  in  moving  goods  and  services  from  producers  to  business  and  consumer  users     Channel  of  Distribution   A  set  of  marketing  intermediaries,  such  as  agents,  broker s,  wholesalers,  and  retailers,  that  join  together  to   transport  and  store  goods  in  their  path  (or  channel)  from  producers  to  consumers     Agents/Brokers   Marketing  intermediaries  that  bring  buyers  and  sellers  together  and  assist  in  negotiating  an  exchange  but   don’t   take  title  to  the  goods     Wholesaler   A  marketing  intermediary  that  sells  to  other  organizations     Retailer   An  organization  that  sells  to  ultimate  consumers       RETAIL  DISTRIBUTION  STRATEGY     Intensive  Distribution:  distribution  that  puts  products  into  as  many  retail  outlets  as  possible     Selective  Distribution:  distribution  that  sends  products  to  only  a  preferred  group  of  retailers  in  an  area     Exclusive  Distribution:  distribution  that  sends  products  to  only  one  retail  outlet  in  a  given  geographic  area       NON-­‐STORE  RETAILING     Electronic  Retailing   Selling  goods  and  services  to  ultimate  customers  over  the  internet     Telemarketing   The  sale  of  goods  and  services  by  telephone     Direct  Selling   Selling  to  consumers  in  their  homes  or  where  they  work     Direct  Marketing   Any  activity  that  directly  links  manufacturers  or  intermediaries  with  the  ultimate  consumer               PROMOTION  AND  THE  PROMOTION  MIX     Promotion  Mix   Combination  of  promotional  tools  an  organization  uses     Integrated  Marketing  Communication  (IMC)   A  technique  that  combines  all  promotional  tools  into  one  comprehensive  and  unified  promotional  strategy     Advertising   Paid,  non-­‐personal  communication  through  various  media  by  organizations  and  individuals  who  are  in  some   way  i
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