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COMPLETE Marketing Study guide [4.0ed this final]

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SMG MK 323
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CH 15: Supply Chain Management -Place (Supply Chain Management): refers to a set of approaches firms employ to integrate their suppliers, manufacturers, warehouses, stores and transportation intermediaries into a seamless operation in which merchandise is produced and distributed in the right quantities, to the right locations at the right time. -Wholesalers: firms that buy products from manufacturers and resell to retailers Supply Chain Management = Marketing Channels + Logistics -Marketing Channel: set of institutions that transfer the ownership of and move goods from the point of production to the point of consumption; supply chain -Logistics Management: planning, implementing and control the efficient flow of raw materials, in- process inv, and finished goods from origin to the point of consumption. -part of supply chain responsible for movement and control -supply chain management also considers relationships between members to provide optimal value to customers -each step in supply chain should add value -supply chain management streamlines distribution -traditional distribution was long and susceptible to missed deliveries -this led to firms stock piling inventory, which increased costs -supply chain management affects marketing -distribution center: facility for receipt, storage, and redistribution of goods to company stores or customers Making Information Flow -Flow 1 (Customer to Store): sales associate scans UPC code and customer receives receipt -Flow 2 (Store to Buyer): point-of-sale terminal records the purchase information and electronically sends it to the buyer at corporate office -Flow 3 (Buyer to Manufacturer): purchase info from each store (ex. Collective Bestbuys) is aggregated by retailer which creates an order for new merchandise and sends it to Sony -Flow 4 (Store to Manufacturer): in some situations, sales transaction data are sent directly from store to manufacturer, and manufacturer decides when to ship more merchandise to distribution centers -Flow 5 (Store to Distribution Center): stores also coordinate with Best Buy Distribution centers to coordinate deliveries and check inventory status -Flow 6 (Manufacturer to Distribution Center and Buyer): manufacturers send advanced shipping notice to distribution centers -advanced shipping notice: electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect -Data Warehouse: database of purchase info collected at point of sale -Electronic Data Exchange: computer-to-computer exchange of business documents between retailer to vendor -reduces cycle time (time between decision to place order and receipt of merchandise) -improves overall quality of communications through better record-keeping -computer-readable format that can be easily analyzed Vender Managed Inventory: approach for improving supply chain efficiency in which manufacturer is responsible for maintaining the retailer’s inventory levels in each of its stores -cosignment: manufacturer owns merchandise until it is sold by the retailer, at which time the retailer pays for the merchandise -provides incentive for manufacturers to choose inventory levels that will minimize inventory and generate sales Collaborative Planning, Forecasting, and Replenishment: sharing of forecast and related business info and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment Push Strategy: merchandise is allocated to stores on the basis of forecasted demand Pull Strategy: orders for merchandise are generated at the store level on the basis of sales data captured by POS -less likely to be over/under stocked b/c store orders as demanded -increases inventory turnover -requires more costly information system The Distribution Center -Advantages of using a Distribution center: -more accurate sales forecasts are possible when retailers combine info for many stores serviced by one center -enable retailer to carry less merchandise in the individual stores (carry less backup stock) -easier to avoid running out of stock or having too much stock b/c merchandise is ordered from distribution center as needed -retail store space is more expensive than distribution center space (also better equipped at preparing sale) -NOTE: if retailer only has a few outlets or if outlets are close, cost of distribution center is NOT worthwhile -Management of Inbound Transportation -dispatcher: person who coordinates deliveries to the distribution center -Receiving and Checking Using UPC and RFID -receiving: process of recording the receipt of merchandise as it arrives at distribution center -checking: process of going through the goods upon receipt to make sure there are no discrepancies -main value of RFID is that it eliminates the need to handle items individually -Storing vs. Cross-Docking -cross-docked: prepackaged by vendor for a specific store (indicated by UPC label) vs. regular storing which is simply transported within distribution center -preferable for perishable, popular fads, fashion apparel -Floor Ready Merchandise: merchandise ready to be placed on the selling floor -ticketing and marking: affixing price and identification labels to the merchandise -more efficient to ticket/mark at distribution center -Preparing to Ship Merchandise to Store -pick ticket: document or display on screen in a forklift truck indicating how much of each item to get from storage areas Inventory Management through Just-In-Time Systems -lower inventory systems but actually increases product availability -decreases holding costs -reduced lead time by eliminating paper transactions by mail and overnight deliveries -HIGHER transportation costs Managing the Supply Chain -channel conflict: supply chain members are not in agreement about their goals/roles/rewards -conventional supply chain (independent): each attempt satisfy their own objectives, often at the others’ expense -no control over other members -vertical marketing system: members act as a unified system -more formal the vertical system, the less conflict -administered vertical marketing system: no common ownership and no contractual relationships; the dominant channel member controls the channel relationship -contractual vertical marketing system: independent firms join together through contracts to obtain economies of scale and coordination -franchising: contractual agreement that allows the franchisee to operate a retail outlet using a name/format created by the franchisor -corporate vertical marketing system: portion of supply chain that firm owns and controls -NOTE: supply chains with independent entities have more pronounced channel conflict -strategic (partner) relationship: supply chain members are committed to maintaining the relationship over the l long term -mutual trust -open communication -common goals -credible commitments CH 16: Retailing and Multichannel Marketing -Retailing: the set of business activities that add value to products and services sold to consumers for their personal or family use -shift of power from manufacturers  retailers (retailers dictate what should be made, how it should be configured, when it should be deliver, and what it should cost) -multichannel strategy: sell in more than one channel Choosing Retail Partners -Need to consider: -Channel Structure -level of difficulty a manufacturer has in getting retailers to purchase its products is determined by the degree to which the channel is vertically integrated, the degree to which the manufacturer has a strong brand or is otherwise desirable in the market, and the relative power of the manufacturer and retailer -Customer Expectations -Channel Member Characteristics -the larger/more sophisticated the channel member, the less likely that it will use supply chain intermediaries -gain more control, become more efficient, and save money -Distribution Intensity: the number of channel members to use at each level of the marketing channel -intensive distribution: designed to get products into as many outlets as possible -exclusive distribution: grant exclusive geographic territories to one or very few retail customers so no other customers in the territory can sell a particular brand (only most appropriate retailers represent their products) -selective distribution: uses a few selected customers in a territory -like exclusive distribution, helps a seller maintain a particular image and control Types of Retailers: 1. Food Retailers -conventional supermarket: self-service food store offering groceries, meat, and produce with limited sales of nonfood items (~30,000 stocking units) -emphasize fresh perishables -target health-conscious/ethnic consumers -provide better in-store experience -offer more private-label brands -limited assortment supermarkets (extreme value food retailers): designed to maximize efficiency and reduce costs (~2,000 stocking units) -supercenters: large stores that combine a supermarket with a full-line discount store ex. Wal-Mart -150,000 to 220,000 sq. feet -warehouse clubs: offer a limited and irregular assortment of food and general merchandise with little service at low prices for ultimate consumers and small businesses ex. BJ’s -100,000 to 150,000 sq. feet -convenience stores: provide a limited variety and assortment of merchandise at a convenient location -2,000 to 3,000 sq. feet 2. General Merchandise Retailers -department stores: retailers that carry a broad variety and deep assortment, offer customer services, and organize their stores into distinct departments for displaying merchandise -soft goods: apparel and bedding -hard goods: appliances, furniture and consumer electronics -3 tiers -attempting to increase amount of exclusive and private-label merchandise -strengthening customer loyalty programs -expanding their online presence -full line discount stores: retailers that offer a broad variety of merchandise, limited service, and low prices -offer both private and manufacturer brands (but less fashionable) -ex. Wal-Mart, Target (fashionable) -specialty stores: concentrate on a limited number of complementary merchandise categories and provide a high level of service in relatively small stores -drugstores: specialty stores that concentrate on pharmaceuticals/health/personal grooming -category specialists (big box retailers/category killers): discount stores that offer a narrow but deep assortment of merchandise ex. Staples -by offering a complete assortment in a category at somewhat lower prices, category specialists can “kill” their competition -home improvement center: category specialist offering equipment and material used by do-it- yourselfers and contractors to make home improvements -extreme value retailers: small, full-line discount stores that offer a limited merchandise assortment at very low prices ex. Dollar stores -off price retailers (close-out retailers): offer an inconsistent assortment of brand name merchandise at low prices ex. Marshalls, TJ Max -irregulars: merchandise that has minor mistakes in construction -outlet store: off-price retailers owned by manufacturers/department stores/specialty stores -those owned by manufacturers are also known as factory outlets Facilitating Retail Strategy Using the Four P’s -Product -to reduce handling/transportation costs, manufacturers often ship cases of products (retailers break the cases b/c consumers typically don’t want bulk items) -Price -Promotion -cooperative advertising: paying all or a portion of the advertising’s production and media costs -share of wallet: % of the customer’s purchases made from that particular retailer -Place Exploring Multiple Channel Options -Store Channel -browsing -touching/feeling products -personal service -cash/credit payment -entertainment and social experience -immediate gratification -risk reduction -Catalog Channel -convenience -information -safety (vs. security in malls/shopping centers) -Internet Channel -broader selection -more information to evaluate merchandise -virtual communities: networks of people who seek info, products, and services and communicate with one another about specific issues -social shoppers: people who participate in these networks and seek info/enhanced emotional connection with other participants during the shopping experience -personalization (MOST SIGNIFICANT BENEFIT) -personalized customer service -personalized benefit -using a cookie (computer program that provides identifying info installed on harddrive) firms can cater their offerings to individual -Selling Merchandise with “touch-and-feel” attributes -brand trust -technology ex. 3D views -increased conversion rates (% of consumers who buy the product after viewing it) -virtual models -gifts -when info from store vs. online doesn’t make a difference (ex. Buying perfume ) it saves customers time by purchasing online -services -risk of credit card transactions -risk of privacy violations -expand market presence -increases Share of Wallet -gains insight into customers shopping behavior Disintermediation: occurs when a manufacturer sells directly to consumers, bypassing retailers -retailers are more efficient in dealing with customers directly -retailers also offer a broader array of products/services to serve solve customer problems Multichannel Retailers: retailers that use combination of stores, catalogs, and the Internet to sell merchandise -Overcoming the Limitations of an Existing Format -limitations of physical retailers is size of their storeby blending stores with internet kiosks, retailers can dramatically expand the assortment offered to their customers -availability and knowledge of sales associates can vary considerablykiosks designed to be used by sales associated -catalog companies use real-time information to inform about stock availability and price reductions CH 13 Pricing Concepts for Establishing Value -price: the overall sacrifice (including nonmonetary) a consumer is willing to make to acquire a specific product/service The Five C’s of Pricing 1. Company Objectives -profit orientation: specifically focus on target profit pricing, maximizing profits, and target return pricing -use target profit pricing when firm has a particular profit goal as primary concern -maximizing profits strategy is based on mathematical models (think sm222) need to know ALL variables to be 100% accurate -sales orientation: firm believes price that increase sales is more beneficial to them than increasing profits -NOTE: premium pricing: firm deliberately prices a product above its competitors to capture those customers who always shop for the best or for whom price does not matter -does not explicitly invoke concept of value (but is implied) -competitor orientation: firms should measure themselves primarily against their competition -competitive parity: set prices that are similar to those of their major competitors -status quo pricing: changes prices only to meet those of the competition -value is implicitly considered -customer orientation: explicitly invokes the concept of value -“no haggle” price structure makes purchase process easier for customer 2. Customers -demand curve: shows how many units of a product that consumers will demand during a specific period in time given different prices -prestige products: consumers purchase for their status rather than functionality -exception to downward sloping demand curve -price elasticity of demand: measures how changes in a price affect the quantity of the product demanded = % change in quantity demand / % change in price PRICE SENSITIVE = < -1 PRICE INSENSITIVE = > -1 -NOTE: necessary products (ex. Milk) are less sensitive to price changes -customers are generally more sensitive to price INCREASES than to price decreases (easier to lose customers with price increase than to gain customers with price decrease) -income effect: change in quantity of product demanded by consumers due to change in their income -substitution effect: consumers ability to substitute other products for the focal brand (greater the availability of substitute products, the higher the price of elasticity of demand) -cross price elasticity: % change in quantity of Product A, given% change in price of Product B (complimentary products) 3. Costs -in general, prices should NOT be based on cost (does not relate value to consumer) -total cost: VC +Fixed Costs -breakeven point (units) = FC / contribution margin 4. Competition -oligopolistic competition: only a few firms dominate -price war: occurs when 2 or more firms compete primarily by lowering their prices -monopolistic competition: occurs when there are many firms competing for customers in a given market but their products are differentiated -pure competition: different companies that consumers perceive as substitutable sell commodity products -fair trade: socially responsible movement that ensures producers receive fair prices -used to distinguish products 5. Channel Members -gray market: employs irregular but no necessarily illegal methods; it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer -cheap price can tarnish manufacturers reputation Macro Influence on Pricing -internet has made consumers more price sensitive and open to new categories of products -increase in consumers’ disposable income/status consciousness -consumers attempting to shop cheap -cross shopping: buying both premium and low-priced merchandise CH 14 Strategic Pricing Methods Pricing Strategies -each product/service requires its own specific pricing strategy b/c no two are ever exactly the same in terms of of the marketing mix -Cost-Based Method: determine the final price to charge by starting with the cost -Competitor Based Method: set prices to reflect the way they want consumers to interpret their own prices relative to the competitor’s offerings -Value Based Method: include approaches to setting prices that focus on the overall value of the product offering as perceived by the consumer -improvement value method: estimate of how much more (or less) consumers are willing to pay for a product relative to other comparable products -cost of ownership method: consumers may be willing to pay more for a particular product b/c over its lifetime it will eventually cost less to own than a cheaper alternative Psychological Factors Affecting Value-Based Pricing Strategies -reference price: price against which buyers compare the actual selling price of a product and that facilitates their evaluation process -external reference point: seller often shows higher price to which the consumer can compare -internal reference point: accessing price info stored in their memory -NOTE: external points influence internal onesinternal reference points shift toward higher values Everyday Low Pricing vs. High/Low Pricing -everyday low pricing (EDLP): companies stress the continuity of their retail prices at a level somewhere between the regularly (non-sale) price and the deep-discount sales prices their competitors may offer -adds value in that customers do not need to shop around -high/low strategy: relies on the promotion of sales, during which prices are temporari
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