MGTA02H3 Study Guide - Ecash, Private Placement, Financial Industry Regulatory Authority

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7 Apr 2013

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MGTA04 Chapters 6-10 from Business 2nd Ed. Vol. 2
Chapter 6: Developing and Promoting Goods and Services
Promoting Products and Services
Promotion: any technique for selling a product.
Communication mix: total message about a product sent to the consumer.
Sales promotions add value beyond obvious benefits in the product.
The purpose of these promotions is to:
o Make consumers aware of the product;
o Make them knowledgeable of the product;
o Persuade them to like the product; and
o Persuade them to purchase the product.
o Ultimate objective: increase sales.
Uses of promotion:
o Communicating information through different mediums about the product or related things such as
new developments and new availabilities.
o Product Positioning: establishing an easily identifiable image or the product in consumer’s minds.
Appeals to a specific segment of the market.
o Adding value.
o Controlling Sales Volume: seasonal sales patterns can be smoothed through year-wide promotion
(Eg: Hallmark card sales).
Promotional strategies developed to meet these objectives:
o Push strategy: company pushes the product to wholesalers and retailers, who then persuade
consumers to buy.
o Pull strategy: appeals directly to customers. Customers then influence the retails and wholesalers
to offer the product, product is pulled to the market.
Promotional Mix: choosing the best combination of advertising. The target audience influences what the
promotional mix will be, it is matched to the 5 steps in the buyer decision process:
o Buyers recognize the need to purchase; buyers learn about available products; compare competing
products; choose and purchase; and evaluate the product after purchase.
Advertising Promotions
Advertising: paid, non-personal communication, sponsor informs audience about product.
Information advertising: appropriate to introduction stage of product life cycle, makes consumers aware of
the product.
Persuasive advertising: appropriate to growth stage of product life cycle, influences customers to buy the
firm`s product.
Comparative advertising: appropriate to the maturity stage, influences customers to switch from a
competitor to their product.
Reminder advertising: appropriate to late maturity stage of the product life cycle, keeps product`s name in
the minds of customers.
Advertising Media: specific communication vehicles to carry a firm`s message such as TV and radio. Form
the `media mix` (combination of media through which a firm advertises). Each has pros and cons (10 items):
o Newspapers: short life, poor production quality, not targeted, reach a large audience.
o Television: appeals to all viewer`s senses, brief (poor for informing customers), many commercials
compete for viewer`s attention.
o Direct mail: printed ads mailed to consumer`s homes or places of businesses, can be targeted and
allows for large amounts of information to be conveyed. `Fax attacks`: sending advertising
message via fax for better chance of impact.
o Radio: programmed locally so consumer`s can be targeted, short, used as background music so
people rarely pay attention.
o Magazines: high level of targeting, space for detail, tend to be passed from person-to-person.
o Outdoor advertising: billboards, signs, high repeat exposure, little control over who sees the ads.
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MGTA04 Chapters 6-10 from Business 2nd Ed. Vol. 2
o Word of Mouth: opinions about the value of products passed informally through social interaction.
Free, but firm cannot choose what is said.
o The Internet: ecommerce (buying and selling through electronic technology) and internet
marketing (advertising to consumers over the internet).
The internet offers buyers: convenience, privacy (no face-to-face pressure), selection
(limitless variety of products), useful information, and control (consumer can customize
products through web applications).
The internet offers sellers: reach (global accessibility), direct distribution (eliminating
intermediates), reduced expenses (no operating of `brick and mortar` physical stores),
relationship building (customers interact with websites), flexibility (quickly change terms of
sale), and feedback (measuring page conversions and effectiveness).
Problems: profitability problems, information overload, and limited markets restricted to
highly educated people who typically use the internet.
Spyware problem, security is a top concern among consumers.
o Virtual advertising: digitally superimposed ads on live or taped television programming. For
example, an image of coke superimposed on the field during a football game. Consumers pay more
o Other Advertising Channels: telephone calls, Yellow Pages, door-to-door, etc.
Types of Advertising (8 types)
Brand advertising: promotes a specific brand of products by reinforcing the brand`s identity.
Product advertising: promotes general type of product (Eg: dairy farmers of Ontario advertising milk).
Advocacy advertising: promotes a candidate`s position (usually politics).
Institutional Advertising: advertising a firm`s long-term image, not a specific product.
Retail advertising: retailers reaching end-users of consumer products (general public).
Co-operative advertising: manufacturer teams up with retailer or wholesaler to reach customers.
Trade advertising: advertising by manufactures to reach potential wholesalers and retailers.
Industrial advertising: advertising by manufacturers to reach other manufactures which buy raw materials.
Preparing the Campaign with and Advertising Agency
Advertising campaigns: the arrangement of ads, as a whole, in media to reach a target audience.
Six steps: 1) identify target audience; 2) establish budget; 3) define objectives of the message; 4) creating
the messages; 5) selecting the appropriate media; and 6) evaluating ad effectiveness.
Advertising agencies: firms that specialize in creating and placing advertisements.
Personal Selling
Personal selling: using a salesperson to communicate one-on-one with potential customers.
Most expensive form, but most personal form. Telemarketing is less expensive and cuts the cost of personal
Sales force management: setting sales goals at high management levels which translate into practical
periodic goals for salespeople, implementing strategies to meet those goals.
Personal selling situations:
o Retail selling: selling product for buyer`s personal use (buyer comes to salesperson).
o Industrial selling: selling to other businesses (salesperson comes to buyer).
Personal selling Tasks (3 basic tasks):
o Order processing: personal sales, receiving and follow-through of an order by a salesperson.
o Creative selling: techniques designed to persuade a potential customer to buy using benefits that
are not obvious in the product. Crucial for high-priced products.
o Missionary selling: indirect promotion of a product by offering technical assistance or promoting a
relationship or image. For example, drug companies inform doctor`s of new drugs they can
Personal selling process (6 steps):
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MGTA04 Chapters 6-10 from Business 2nd Ed. Vol. 2
o 1) Prospecting: determining potential customers, Qualifying: determine if they have the authority
and money to make a purchase.
o 2) Approaching: few minutes, the first impression of the seller in very important.
o 3) Presenting and Demonstrating: links benefits to prospect`s needs and helps them visualize using
the product.
o 4) Handling Objections: often customers object to the price, salesperson must be practiced in
differing or fixing objections. They tell the salesperson what the customer thinks is important and
how to sell to them.
o 5) Closing: asking customer to buy the product, most infective when indirect. Eg: “Are you free
Tuesday for delivery?” Places burden of rejecting the sale on the prospect, and they find it hard to
say no.
o 6) Following up: good impression to be made in terms of delivery time and product support,
determines repeat orders.
Sales Promotion
Short-term promotional activities designed to stimulate consumer buying or co-operation from other
members of the trade (distributors, for example).
5 Major Types:
o Coupons: entitles barer to certain savings, incentive to buyer.
o POP (Point-of-purchase) displays: a special product display in a retail store that gets prominent
attention, encourages buying.
o Premiums: some items are offered for free or at a bargain price to induce buyer purchasing.
Usually given as a reward for the buyer’s first purchase. May not always work, may buy just to get
premiums and then not buy again.
o Trade shows: members of an industry gather and rent booths to display their products.
o Contests and sweepstakes can add incentives to salespeople to increase sales.
Publicity and Public Relations
Publicity: information about a company made available to consumers through news media, not controlled
by the company, but it is free.
Public relations: public-service announcements made by the company to enhance the company’s image.
Chapter 7
Pricing: deciding how much to sell products for
Pricing objectives: goals that producers strive to reach in pricing
o To sell the number of units that generates that highest total profits
o Ebusiness: comparison shopping and direct link between buyers and sellers influence pricing
Market Share objectives: set prices low in order to increase customer base
o Market share: percent of total sales in a market made b the company.
Loss containment/survival strategy: Eg: cutting prices on obsolete products to recover an investment
Price-setting tools
Cost-oriented pricing:
o Markup is the difference between manufacturing price and selling price that takes into account
additional costs
o Markup percentage = Markup/Sales Price (as a percent of revenue)
Break-even analysis
o Considers variable costs (costs that change with number of units sold) and fixed costs (unaffected
by number of units sold) to perform a break-even analysis (determining the number of units that
are required to sell in order to cover costs).
o Break-even point (in units) = Total fixed costs/(Price-Variable cost) [know how to do this for the
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