Marketing & Social Media
FHNW- BITMr. Flad
FHNW- BITMr. Flad
In contrast to web 1.0, the core principles of web 2.0 are based on… (mark all correct answers)
- Artificial intelligence and analytics
- Client-server networks
- Neural networks and machine learning
- The creation and sharing of content by peers
- The externalization of content
In contrast to web 1.0, the core principles of web 2.0 are based on… (mark all correct answers)
- Artificial intelligence and analytics (false)
- Client-server networks (false)
- Neural networks and machine learning (false)
- The creation and sharing of content by peers
- The externalization of content (false)
Media richness (MR): mark all correct answers
- MR is the amount of information a medium can transmit at a given time
- Media with higher richness reduce uncertainty and ambiguity in communication
- The richest way of communication is face-to-face
- A phone conference is a richer medium than a virtual world
- Wikipedia is a richer medium than YouTube
Media richness (MR): mark all correct answers
- MR is the amount of information a medium can transmit at a given time
- Media with higher richness reduce uncertainty and ambiguity in communication
- The richest way of communication is face-to-face
- A phone conference is a richer medium than a virtual world (false)
- Wikipedia is a richer medium than YouTube (false)
Social presence and self-disclosure /self-presentation Mark the best answers
- Synchronous communication has a higher social presence than asynchronous forms
- Social presence is influenced by the capacity of a medium to provide intimacy and closeness
- Levels of self-disclosure are higher in Wikipedia than in LinkedIn
- A medium with high self-disclosure helps fostering employee engagement.
Social presence and self-disclosure /self-presentation Mark the best ansers
- Synchronous communication has a higher social presence than asynchronous forms
- Social presence is influenced by the capacity of a medium to provide intimacy and closeness
- Levels of self-disclosure are higher in Wikipedia than in LinkedIn (false)
- A medium with high self-disclosure helps to foster employee engagement.
What does the newsfeed algorithm of facebook do?
The newsfeed algorithm goes over the steps of a user and tries to classify it into different categories to provide strong KPIs to make prediction or improve the reach.
Interest in user - how often user interact with the sender/clicks on recent posts
+
Post - how interesting was this to other users/friends? (comments, likes, clicks)
+
Creator - how interesting is content form this creator in general?
+
Type - image? Video? Link? Plain text?
+
Timing- is the content new?
Why is the newsfeed algorithm useful for facebook? What was the initial urge to create this algorithm?
Content on facebook has been increasing. The algorithm filters corporate pages
Why? the value of a FB fan?
2/3 of fans are likely to share good brand experiences and share promotions and discounts with their Facebook friends. 2/3 of fans are likely to share a bad brand experience.
What type of advertising does facebook have? What are the benefits?
- News Feed
- Mimics regular postings
- Large image/video + text
- Right column Ad
- Not as effective as news feed ad
- Not available for mobile advertising
What is the benefit of stating the location in a targeted post on facebook?
You also have another layer of location targeting, allowing to be even more specific:
- Everyone in this location (the default targeting option)
- The last updated location of an actual Facebook user
- People who live in this location
- Location is set by the location on a user’s Facebook profile and confirmed by their IP address.
- People recently in this location
- Tracked by mobile device usage in the geographic area you intend to target.
- People traveling to this location
- Users who had this geographic area as a recent location that’s at least 100 miles away from their home location
What to do and what do avoid when using social media campaigns??
Do:
- Do not delete messages/ comments
- Apologise in an authentic manner
- Take critique seriously
- Engage the most prominent/ vocal critics
- Remain calm , every storm moves on
- React to date
Don't:
- Do not listen (united airlines)
- Do not react (dell)
- Work with unauthentic messages (NYPD)
- Use wrong medium (NYPD)
- E.g. musicians produce youtube song about company fail. 18'500'000 vies withing 4 days stock price decreased by 10 % since the company did not react in time to this video.
- Think about what could go wrong with a campaign before you launch it.
- E.g NYPD launched a campaign and expected happy pictures with the police with "do you have a photo w/ a member of the NYPD? Tweet us & tag it . Result was a flood of pictures with officers mistreating people, and cynical comments. 70000 people tweeted aout police brutality and comments postet at a rate of 10'000 an hour. Bad response. Image was more damaged thatn ever.
What is there to understand about the social media usage and users contes?
- Demographic: : Twitter users young/urban; no "social obedience" ▪
- Medium: no control "Tweets are like roaches". Most content is negative, funny or sarcastic.
- Brand: already negative sentiment => avoid a hashtag campaign.
- Alternatives
- Feel-good user generated photos through a contest on Facebook, Instagram and Pinterest
- Use Twitter:
- Upcoming events with positive/ neutral PR surrounding; for monitoring not for campaigning
- Nevertheless: More people are following @NYPDNews
How is social media used in global corporate?
Two-thirds of companies said they are either currently using social media channels or have social media plans in the works
But:
- Focus: social media as a one-way promotional channel,
- Lack of use media to analyse conversations and turn it into insights
- 75% did not know where their most valuable customers task about them
- 31% do not measure effectiveness of social media
- 7% of participating companies integrate social media into their marketing
What are social media approaches and principles of engagement?
Social media: approaches and principles of successful engagement (synthesis)
- Take social media seriously, feel the “pulse” (Dell)
- Know your audience and your media (NYPD)
- Align social media with corporate “reality” / with reality of products and services
- Interact with other influential individuals/ brands to maximise your reach
- Consider the timing of your engagement
- Dialogue and not content is king
- Let others talk for you (customers, employees, partners etc):
- Don`t sell – give (entertainment, information, education,…)
- 80/20 rule of thumb (non-promotional vs. promotional content)
Successful approaches
- Constantly monitor the social media environment. In case of "turbulences" react immediately, honestly, and sensitively
When do you tweet?
Most brands tweet during the work week. Peak is on Thursdays and in general between 9AM to 6PM. But peak times vary with industry, location, and audience demographics.
The most retweets happen on Sundays. And in general more at night (EST)
What are non-promotional dialogues?
Non-promotional dialogues:
- Get personal (occasionally) Dell
- Incorporate users or employees as your brand messengers
- Link social media messages to real world / events (Oreo, Obermutten)
- Transmit corporate and consumer values (Dove, Apple, Under Armour)
- Do the unexpected (outrageous /funny / provocative (Abarth, Blendtec, Burger King)
How can you transmit corporate and consumer values platforms without apparent self-serving purposes?
- Unilever’s Dove Campaign for Real Beauty’’
- Bring together like-minded people who wish to enhance girls’ and women’s self-esteem by helping to establish realistic standards of beauty
- Mix of media/activities: advertisements, video, workshops, sleepover events and the publication of a book, the production of a play and a digital platform, viral videos.
Automotive – practice case
Assignment: Your task is to develop an outline for a marketing campaign in which you try to engage the target populations as much as possible. You can use social media, viral marketing approaches, on site events/activities etc. In planning the campaign, you develop a first outline which describes the key elements of the campaign including channels, events etc.
Case: Company background You work as a marketer in a large and globally operating automotive manufacturer with European roots. The company has a global market share with a focus on US, Europe and Asian markets. You and your team are in charge of the US market. Your particular task is to develop a sketch for a campaign for a new electric car to be launched in the US market. The is priced between 25’000-35’000 USD. The image that you and your team want to bestow to the new care is a small, stylish/hip, and environmentally friendly city car for urban populations. One of the main customer segments for this market are millennials, who are relatively young and culturally diverse.
Contact influencers personality to promote the car & start a social media (twitter, Instagram(fb)) marketing campaign
Maybe guarantee something to be done for the environment when you buy the car. Like planting a tree
Influencer. Ping them, make a proposal, define expectations, name a price and make a contract. They need to interact with the product.
What do you need to Track & monitor in social media?
- Awareness
- Brand awareness e.g. followers
- Engagement
- Brand engagement (e.g. twitter analytics - comments)
- Website traffic from social media (google analytics)
- Word of mouth
What do swiss companies monitor on social media?
- Likes, follower 71%
- Visitors 68%
- Number of social media reports 59%
- Dialogue 16%
- Requests, rutnover 17%
- Image 14%
- Topic leadership 13%
- Satisfaction, recommendations 11%
How do you implement a systematic approach to social media?
Digital acceleration team (DAT)
3 core disciplines:
- Listening
- Engaging
- Inspiring & Transforming
Listening and engaging: focus on trouble spotting:
- Taping on online conversation and interactions as and when they happen.
- Trouble spotting: high number of comments,”
- Marking negative issues: «If there is a negative issue emerging, it turns red.”
- Alters to trigger engagement, i.e., a real-time online response from a team member.“
DAT team: combining social media with corporate training
- Digital leadership training
- 12 members per class train for 8 months
- Three different areas:
- Community management for top global brands.
- Small internal projects, where we would make our capacity for business units and functions, e.g. mobile solutions in emerging markets
- Intense training and through leadership
What are key questions and key content of Social Media?
- Foundations /characteristics of social media and social networks, nodes etc.)
- What makes networks and social media powerful?
- Networks in organisations
- Social media and underlying concepts/classifications)
- Social media goal setting/ approaches / building blocks
- Audience, channels and successful customer engagement principles
- Frequent mistakes - and approaches and principles of successful engagement
- Social media tracking / monitoring
How would you define marketing?
"Marketing is the performance of business activities that direct the flow of goods and services from producers to consumers."
"Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return"
"Marketing is the process of planning and execution the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives."
What are the goals of marketing?
"marketing is to find out what people like and do more of it. Marketing is to find out what people don't like and do less of it."
Why do we need marketing?
The Consumer needs something and the suppliers provides goods and services- so marketing gives the information of the supplier to the consumer and the consumer gives money to the supplier.
Old times the consumers needs were only provided by one supplier. It was a simple decision making. The supplier market decided (shortage society) Today it is different, consumer demand marked (affluent society) consumers have multiple suppliers to choose from and make a complex decision about goods and services and where to buy it.
What is the principal of reward? Which rewards exist for the market partners?
Consumer: convenience fllfilled, happy, phychological relieve, accessability
Supplier: Revenue provitability, new customer, loyalty, dominance in area
What is the principal of capacity? Which resources do the market partners need?
Consumers: space, capital, human resource
Supplier: human resource, capital, suppliers, good decision making, smart invesments
What was the marketing evolution from the 1950ies to 2000s?
1950 Production orientation (sellers market) produce as much as you can
1960 Sales orientation (increasing competition, saturation) sell as much as you can
1970 Marketing orientation (buyers market) produce what you can sell
1980 Competitive orientation. How do we differentiate ourselves from competition?
1990 Environmental orientation , how do we recognize relevant trends and react effectively?
2000 Network orientation, how do we interact in networks and with customers and other market partners?
What are factors impacting marketing?
- Customer collaboarion and influence
- Growth of channel and device choices
- Social media
- Roi accountability
- Decreasing brand loyalty
- Data explosion
- Shifting consumer demographics
- Regulatory considerations
- Growth market oppotunities
- Financial constraints
- Corporate transparency
- Privacy considerations
- Global outsourcing
Sorte the factors that impact marketing by impact.
- Privacy considerations
- Shifting consumer demographics
- Social media
- Roi accountability
- Corporate transparency
- Global outsourcing
- Customer collaboarion and influence
- Regulatory considerations
- Data explosion
- Growth of channel and device choices
- Decreasing brand loyalty
- Growth market oppotunities
- Financial constraints
- 67% Customer collaboarion and influence
- 61% Growth of channel and device choices
- 57% Social media
- 45% ROI accountability
- 42% Decreasing brand loyalty
- 39% Data explosion
- 37% Shifting consumer demographics
- 33% Regulatory considerations
- 31% Growth market oppotunities
- 30% Financial constraints
- 21% Corporate transparency
- 10% Privacy considerations
- 9% Global outsourcing
Identifiy unerlying needs of tesla in the upside down maslow pyramid.
Self actualization, esteem, social, safety, transportation
What is market oriented management
It takes customer orientation plus competitor orientation and equals the building up, extensions and conservation of competitive advantages of a corporation. Marketing is market-oriented and market-driven business management and decision making.
Draft a marketplace and customer needs and the role of marketing
What is marketing as a dual management concept ?
Compare the old view of organizations to the new way of organisations
What is a seamless hospitality organization drawing?
What is maslow's hierarchy of needs?
Define: Need, Want and Demand
Need- a state of feld deprivation of some basic satisfaction e.g. food, clothing ,safety, belonging. Needs Are states of feld deprivation
want- desire for specific satisfiers of these needs. E.g.g burger, mercedes benz, and LV Bag etc. different for different socio-cultural structures. Wants Are the form human needs take as they are shaped by culture and individual personality.
demand- wants backed by ability and willingness to buy. E.g. * of people who want a Merc and can buy it. Demands Are human wants that are backed by buying power
What are Market offerings and marketing myopia?
Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want.
Marketing myopia is focusing only on existing wants and losing sight of unerlying consumer needs.
What does marketing actions try to create?
Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing actions try to create, maintain, and grow desirable exchange relationships.
What is a market?
A market is set of actual and potential buyers. Consumers market when they: - search for products.
- interact with companies to obtain information
Make purchases
What questions do you need to ask when designing a customer value -driven marketing strategy?
Marketing management is the art and science of choosing target markets and builing profitable realtionships with them.
- what customers will we serve (target market)?
How can we best serve these customers (value proposition)?
A brand's value proposition is the set of benefits or values it promises to deliver to customers to satisfy theri needs.
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What are elements of the contemporary integrated marketing mix?
What are the five dimensions of service quality?
- Reliability
- Providing service as promised
- Dependability in handling customers' service problems
- Performing service right the first time
- Providing services at the promised time
- Maintaining error-free records
- Empathy
- Giving customers individual attention
- Employees who deal with customers in a caring fashion
- Having the customer's best interest at heart
- Employees who understand the needs of their customers
- Convenient business hours.
- Responsiveness
- Keeping customer informed as to when services will be performed
- Prompt service to customers
- Willingness to help customers
- Readiness to respond to customers' request
- Tangibles
- Modern equipment
- Visually appealing facilities
- Employees who have a neat, professional appearance
- Visually appealing materials associated with the service
- Assurance
- Employees who instil confidence in customers
- Making customers feel safe in their transactions
- Employees who have the knowledge to answer customer question
What are the different Marketing Tools of the Marketing Mix and to which policy to they belong to?
- Supply policy
- Product policy
- Service/ product variety
- Quality
- Design
- Features
- Brand name
- Packaging
- Sizes
- Services
- Warranties
- returns
- Price policy
- List price
- Discounts
- Allowances
- Payment period
- Credit terms
- Product policy
- Sales policy
- Communication policy
- Sales promotion
- Advertising
- Sales force
- Public relations
- Direct marketing
- Online and social media marketing
- Distribution policy
- Distribution channels
- Coverage
- Assortments
- Locations
- Inventory
- logistics
- Communication policy
In what added value does the marketing mix resolve in for the customer?
What is the tricky thing about setting a high price for a product?
Prices are often set to satisfy demand or to reflect a premium that consumers are willing to pay for a product or service. We buy a bottle of mineral water for CHF 5, sports shoes for CHF 160 or a concert ticket for CHF 60. Some people think this is not fair pricing.
Take a position: Prices should reflect the value that consumers are willing to pay versus prices should primarily just reflect the cost involved in making a product or service.
What is special about the price as a marketing instrument?
Price is the only marketing instrument with a direct impact on the profit not on the costs.
Synonyms for price: rent, tuition, fee, fare, rate, toll, premium, honorarium….
Which factor influence earnings?
Earnings = (Price * Sales) - Costs
Price is not yet optimized
Sales there are not that much possibilities left due to saturation and market share
Costs are more or less optimized. There are variable and fixed costs
What changes happened in price management during the last decade?
- Sales and price pressure have further increased.
- Transparency and comparability of prices have further increased.
- Successful "Price warriors" have established themselves (Aldi, Dell, Sixt, Fielmann, Ryanair etc.).
- Sales Discounts, special sales, coupons etc. became „a drug“.
- Consumer acceptance for prices decrease: Smart Shopper, Cherry Picker, Discount buyers.
- Highest/premium prices are spend on convenience (comfort), experiences, speed, innovation and quality: Gas station shops, overnight-delivery, cinema/theatre, fun cars, pharmaceuticals.
Give an example what happens when you increase price, var.costs, sales vol or fix costs by 10% and what impact it has on earnings
go with the current
Price = 100
Var. Costs 60
Sales vol. 1 Mio.
Fix costs 30 Mio.
Why is the price of a product important?
- Price is a profit driver
- Direct impact on profit
- Direct impact on sales volume -> indirect influence on fixed costs
- Price is the strongest profit diver
- Assuming a typical cost structure of big businesses - a 1% increase of price may result in a 12 % increase of profit
- Price is a strong marketing instrument
- Price elasticity is ten times higher than advertising elasticity
- Immediate reaction of consumers and competitors on price changes
Price is the only element of the marketing mix that produces revenues!
What is value based pricing? Describe it and compare it to cost-based pricing in a sketch
Setting a price based on the buyers’ perceptions of product values rather than on the cost. Underlying principle is to offer the right combination of quality and good service at a fair price.
Name some of the most common pricing mistakes
- Determine costs and take traditional industry margins
- Failure to revise price to capitalize on market changes
- Setting price independently of the rest of the marketing mix
- Failure to vary price by product item, market segment, distribution channels, and purchase occasion
What is the 4 C model and what does it influence?
Are there other aspects influencing the price of a product?
The 4 C model influences the price of a product
- Capacity
- Costs
- Customer Perceived Value
- Competition
Other aspect is going to answer three questions to define the selling price
- Define perceived value
- Compare value with the value of your competition
- Are you able to produce for this costs with the available capacity?
- = selling price
What are the considerations in setting a price?
What is the key idea of pricing?
Price has a larger impact on profits than any other lever. Price changes affect margins, unit volumes, costs, and customer perceptions. In setting prices, the firm should consider perceived customer value, costs, competition, and strategic objectives. Excessive focus on a single element leads to suboptimal pricing decisions.
When selecting a price objective, what is your goal?
- Product-quality leadership
- Maximize long- or short-run profit
- Increase sales volume (quantity)
- Increase market share
- Maintain price leadership
- Discourage new entrants into the industry
- Match competitors' prices
- Enhance the image of the firm, brand, or product
- Discourage competitors from cutting prices
What are the three things to keep an eye on regarding the price when determining demand?
- Price sensitivity
- Estimating demand curves
- Price elasticity of demand
Compare inelastic to elastic demand
- Inelastic demand
- Decreased price sensitivity
- Small volume change by changing prices
- Set favourably higher prices
- Elastic demand
- Increased price sensitivity
- Great volume change by changing prices
- Set favourably lower prices
Give a graphic example of the price elasticity of demand (PED) for
- Bananas
- Salt
- Market for cigarettes
- Cigarettes of a specific brand
- Special cardiac medication
- City travel tours
What are the objectives and methods of customer value-based pricing?
Objective
Based on buyers' perceptions of value.
Determination of demand function
( price elasticity of demand)
Methods
- Real market data
- Data from pilot markets
- Pricing experiments
- Auctions
- Customer surveys
- Expert consultation
What are the objectives and methods of cost-based pricing?
Based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
Methods:
- Break-even pricing: Setting price to break even on the costs of making and marketing a product, or setting price to make a target return
- Markup pricing: Adding a standard markup to the cost of the product
Describe the different pricing strategies
Pricing strategies:
- Static pricing: setting the optimal price at a given point in time
- Customer-value-based pricing
- Cost-based pricing
- Competition-based pricing
- Dynamic pricing: changing prices as the product passes through its life cycle
- Capacity-based pricing
- Price skimming
- Penetration pricing
- (freemium)
- Price differentiation: accounting for differences in consumer segments and situations
- Discount pricing
- Segmented pricing
- Psychological pricing
Compare the static and dynamic view of price determination in a sketch
High price: ( no possible demand at this price)
Ceiling price: customers' assessment of unique product features.
Orienting point: competitors' priices and prices of cubstitutes
Costs
Floor price
Low price (no possible profit at this price)
Compare the pricing strategies for new innovative products in a graph of profit and time
What is market skimming?
- High price, Low volumes
- Skim the profit from the market
- Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out)
- Innovative products = high customer value
- Market size somehow limited
- Examples include: Playstation, jewellery, digital technology, new movies, etc
What is penetration pricing?
- Price set to ‘penetrate the market’
- ‘Low’ price to secure high volumes
- Seeking cost advantages
- Typical in mass market products – chocolate bar no 230, detergent with aloa, household goods, etc.
- Suitable for products with long anticipated life cycles
- May be useful if launching into a new market
Compare price skimming versus penetration pricing
Price skimming:
- To benefit from high short-term and monopoly profits due to the newness of the product
- Profit realization in early stages of the product life cycle
- Fast payback of high expenditures for research and development
- To "skim off" customers that are willing to pay more to have the product sooner
- Prices can be lowered later when demand from the early adopters falls
- Thus acquiring maximum profit from each customer segment
- Prestige and quality indication of high prices
Penetration pricing
- the setting of low prices in order to achieve large sales volumes and a large, if not dominant market share
- possible where demand for the product is believed to be highly elastic, i.e. demand is price-sensitive
- also used to promote sales of complimentary and captive products that are sold at higher mark-ups
- to profit from economies of scale and experience and therefore lower costs per unit
- lower introductory prices reduce the risk of a flop § low prices act as a barrier to entry and discourage the entry of competitors
What is freemium?
Feemium (Free + Premium)
Freemium companies typically see the share of paid subsriptions (and therefore cash flow) rise and fall and then rise again in a predictable way over time. Those that don't account for this phenomenon risk failure. Early adopters are willing to pay for the premium offering.
Late adopters are more price-sensitive and see less value in upgrading
New features are introduced, driving new conversions
Give and explanation and examples for the different price differentiations
- Discount pricing
- Reducing prices to reward customer responses such as paying early or promoting the product
- Cash, quantity, and seasonal discounts
- Segmented/ differentiated pricing
- Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs
- Customer segmented pricing, product form pricing, time-based pricing
- Psychological pricing
- Considers the psychology of prices and not simply the economics. Price is used to say something about the product.
- Reference prices: prices that buyers carry in their minds and refer to when looking at a given product
What is the idea behind a price waterfall?
- The firm needs good systems to track elements in the pricing toolkit
- The pricing toolkit produces the pocket price via the price waterfall
- Pricing toolkit elements are differentially important to customers.
What are some of the price-adaptation discount strategies?
Countertrade
- Barter
- Compensation deal
- Buyback arrangement
Discounts/ Allowances
- Cash discount
- Quantity discount
- Functional discount
- Seasonal discount
- Loyalty discounts
- Allowance (products, services, values)
- Negative rebates, add-on fees, penalties
- Bundling ( buger + drinks = menue) and unbundling
- Ankering e.g. image
What are the dimensions of price differentiation?
Price differentiation is the goal
Methods are:
- Customer-segment pricing
- Students
- Senior
- Product-form pricing
- Packages
- Bottles
- Tetra-pack
- Image pricing
- White labels
- Brands
- Channel pricing
- Restaurants
- Vending machine
- Pharmacy
- Location pricing
- Locations
- Seat prices
- Time pricing
- Season
- Day/hour
- Weekends
- Time of booking (Yield)
Price discrimination leads to a better extraction of the willingness-to-pay
How is profit increased by price differentiation and discrimination?
What is a Yield management system?
Yield management systems (time based differentiation)
- Optimization of revenue
- Differentiation by market segment/ customer category
- Exhaustion of consumer surplus
- Differentiation by time of consumption
- Regular capacity utilization
- Differentiation by time of booking
- Reaching a booking target
- Differentiation by market segment/ customer category
In general, what is important to know for the pricing policy in the marketing mix?
- The three major pricing strategies are customer value-based pricing, cost-based pricing, and competition-based pricing.
- Customer perceptions of the product’s value set the ceiling for prices. Company and product costs set the floor for prices. Consumers will base their judgements of a product’s value on the prices that competitors charge for similar products. Thus, in setting prices, companies need to consider all three factors, customer perceived value, costs, and competitors’ pricing strategies.
- Pricing strategies usually change as a product passes through its life cycle. In pricing innovative new products, a company can use market-skimming pricing by initially setting high prices to “skim” the maximum amount of revenue from various segments of the market. Or it can use marketpenetrating pricing by setting a low initial price to penetrate the market and win a large market share.
- Companies apply a variety of price differentiation and adjustment strategies to account for differences in consumer segments and situations. One is discount pricing, whereby the company establishes cash, quantity or seasonal discounts. A second is segmented pricing, where the company sells a product at two or more prices to accommodate different customers, product forms or times. Sometimes, companies use psychological pricing to better communicate a product’s intended position.
What are the advantages of Direct distribution and what are the advantages of indirect distribution?
Direct distribution:
- Complete control consumer process
- Control consumer experience
- Brand image
- Direct interactions and relationship builting with consumers.
- Eliminates intermediaries
- Reducing fees( commision, broker, allowance, advertisiong and promotion)
Downside of direct distribution:
- Great control = great responsibility and risk
- Bears 100% of financial risks
- High startup costs
Indirect distribution:
- Gain access to increased consumer base without the callenge of getting customers through the door
- More time to focus on product and customer base
- More time to increase range to target consumer.
- Low startup cost
Downside:
- Costs to third-party logistics
- Commissions, broker fees and allowances
- Coonstraint on company's freedom to set prices.
Why is marketing channel strategy growing in importance?
Reasons:
- Growing power of retailers in marketing channels
- Search for sustainable competitive avantage
- The need to reduce distribution costs
Why are retailers in marketing channels growing power?
Retailers…
- Are growing larger
- Enjoy substantial channel power
- Act as buying agents for customers rather than selling agents for suppliers
- Often operate on lowe price / low margin model
- Operate in saturated markets and fight for market share
- Power or dominant retailers ae therefore the "gatekeepers" into the consumer marketplace. Thus, effective channel strategy for dealing with power retailers is crucial
Why is the search for sutainable competitive advantage is becoming more difficutl to attain?
A sustainable competitive advantage is becoming more difficult to attain through:
- Product strategy - rapid technology transfer enables competitors to quickly produce similar products
- Pricing strategy - glocal economy allows competitors to find low-cost production to match prices
- Promotion strategy - high cost, clutter, and short life promotional campaigns limit competitive advantage.
Competitive advantage based on superior marketing channel strategy is more difficult for competitors to copy because:
- Channel strategy is long term
- Requires a channel structure
- Depends on relationships and people
- Requires effective inter-organizational management.
Why does the reduction of distribution cost play a big role in the growing importance of marketing channels?
Distribution costs often accoutn for a significant percentage of the final price of products. Sometimes distribution costs ae higher than the manufacturing cost or the costs of raw materials and component parts.
e.g.
