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Ethics Moral principles and values that govern the actions and decisions of an individual or group Laws Society's values and standards that are enforceable in the courts Consumer Bill of Rights A bill outlined by JFK that codified the ethics of exchange between buyers and sellers. Therese were the right to safety, to be informed, to choose and to be heard. Economic Espionage The clandestine collection of trade secrets and information about a company's competitors. Code of Ethics A formal statement of ethical principles and rules of conduct Whistleblowers Employees who report illegal or unethical behavior of their employers Moral Idealism A personal moral philosophy that considers certain individual rights or duties to be universal, regardless of outcome Utilitarianism Personal moral philosophy that focuses on the greatest good for the greatest number of people Social Responsibility Organizations are apart of a larger society and are accountable to that society for their actions Triple Bottom Line Recognition of the need for organizations to improve the state of people, the planet and profit simultaneously Green Marketing Marketing offers efforts to produce, promote and reclaim environmentally sensitive products, Cause Marketing The practice where charitable organizations are tied to the profit of a firm Social Audit A systematic assesment of a firm's objectives, strategies and performance in terms of social responsibility Sustainable Development Involves conducting business in a way that protects the natural environment while making economic progress Business Marketing The marketing of goods and services to companies, governments and nonprofits for use in the creation of goods and services that they produce Organizational Buyers Manufacturers, wholesalers, retailers and government agencies that purchase goods and services for their own use or for resale Derived Demand The demand for an industrial products and services is driven by, or derived from, demand for consumer products and services. Reciprocity An industrial buying practice in which two organizations agree to purchase each other's products and services Supply Partnership Exists whena buyer and its supplier adopt mutually beneficial objectives, policies and procedures for the purpose of lowering the cost and increasing the value of products delivered to the ultimate consumer Buying Center Individuals who share common goals, risks and knowledge important to a buying decision. Buy Classes Three types of buying situations: straight rebuy, new buy, modified rebuy New Buy The organization is a first time buyer of the product or service Straight Rebuy The organization reorders something that it already purchased Modified Rebuy The users, influencers or deciders in the buying center want to change the product specifications, price, delivery schedule or producer Organizational Buying Behavior The decision making process that organizations use to establish the need for products and services and to identify, evaluate and choose among alternative brands and suppliers Make-buy decision an evaluation of whether components and assemblies will be puurchased from outside suppliers or built by the company itself Value Analysis A systematic appraisal of the design, quality and performance of a product to reduce purchasing costs Bidder's List A list of firms believed to be qualified to supply a given firm. Generated from the company's purchasing databank as well as engineering inputs E-Marketplaces Online trading communitites that bring together buyers and supplier organizations Traditional Auction A seller puts an item up for sale and would be buyers are invited to bid in competition with each other Reverse Auction A buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other. Price Money or considerations exchanged for the ownership or use of a product or service Barter The practice of exchanging products and services for other products and services without using money Price Equation Final price= List price-(incentives+allowances)+extra fees Value Ratio of perceived benefit to price( Value= benefits/price) Value Pricing Practice of simultaneously increasing product and service benefits while maintaining or decreasing price Profit Equation Total Revenue (unit price x quantity sold) - (FC+VC) 1. Identify pricing objectives and constraints 2. Estimate demand and revenue 3. Determine cost, volume and profit relationships 4. Select an approximate price level 5. Set list or quoted price 6. Make special adjustments to list or price Six major steps in the process organizations go through Pricing objective Involve specifying the role of price in an organization's marketing and strategic plans Pricing Constraints Factors that limit the range of prices a firm may set Demand Curve A graph relating the quantity sold and price, which shows the maximum number of units that will be sold at a given price Demand Factors Factors that determine a consumer's willingness and ability to pay for products and services Total Revenue, (P*Q) Total money received from the sale of a product Average Revenue, (TR/Q=P) Average amount of money received for selling one unit of a product, or simply the price of that unit Marginal Revenue, (change in TR/1 unit increase in Q) The change in total revenue that results from producting and marketing one additional unit Price Elasticity of Demand The percentage change in quantity demanded relative to a percentage change in price Marginal Analysis Trade off of incremental costs against incremental revenues Break-even analysis A technique that analyzes the relationship between total revenue and total cost Break-even point The quantity at which total revenue and total cost are equal Breakeven Equation Fixed Cost/Unit Price-Unit Variable Cost Skimming Pricing Setting a high initial price so customers really desiring the product will be willing to pay Penetration Pricing Setting a low initial price on a product to appeal immedietley Prestige Pricing Involves setting a high price so that quality or status conscious customers will be attracted to the product Price Lining A line of products may price them at a number of different specific pricing points Odd-even Pricing practice of pricing items a few dollars or cents under an even number (ex. $49.95) Target Pricing Manufacturer deliberately adjusting the composition and features of a product to achieve the target price for consumers Bundle Pricing The marketing of two or more products in a single package price Yield Management Pricing The charging of different prices to maximize revenue for a set amount of capacity at any given time. Standard Markup pricing Entails adding a fixed percentage to the cost of all items in a specific product class Cost-Plus Pricing Involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price Experience Curve Pricing Based on the learning effect, holds that the unit cost of man products and services declines by 10 percent each time a firms experience at producing and selling doubles Target Profit Pricing When a firm sets an annual target of a specific dollar volume for profit Target return on sales pricing (target profit/total revenue) Set typical prices that will give them a profit that is a specified percentage Target Return on Investment Pricing Set annual return on investment targets, and prices are set to meet this target Customary PRicing Where tradition, a standardized channel of distribution and other factors dictate the price Above, at and below market pricing Where marketers have a subjective feel for the competitiors price or market price using this benchmark Loss-leader pricing Way of attracting customers in hopes they will buy other products as well. Ex. Wal mart One-price Policy The setting of one, fixed price for a product and it cannot be negotiated. Flexible Price Policy Involves setting different prices for products and services depending on individual buyers and purchase situations Product Line Pricing Setting of prices for all items in a product line Price War Involves successive price cutting by competitiors to increase or maintain their unit sales or market share Quantity Discounts Used to encourage customers to buy larger quantites of a product Promotional Allowances Allowance for undertaking certain advertising or selling activities to promote a product Everyday low pricing is the practice of replacing promotional allowances with lower mancufacturer list prices FOB origin pricing Involves the seller's naming the location of his loading as the sellers factory or warehouse Uniform Delivered Pricing The price the seller quotes includes all transportation costs. Basing Point Pricing Involves selecting one or more geographical locations from which the list price for products plus freight expenses are charged to the buyer Price Fixing Conspiracy among firms to set a price for a product Price Discrimination The practice of charging different prices to different buyers for goods of similar quality Predatory Pricing Practice of charging very low prices for the intention of driving competitors out of business Marketing Channel Consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users Industrial Distributor Performs a variety of marketing channel functions, including selling, stocking, delivering and financing Electronic Marketing Channels Employ internet to make goods and services available for consumption or use by consumers or business buyer Direct Marketing Channels Allow consumers to buy products by interaction with various advertising media without a face to face meeting with a salesperson Multichannel Marketing Blending of different communication and delivery channels that are mutually reinfocing in attracting, retaining and building relationships with customers Dual Distribution An arrangement whereby a frim reaches different buyers by employing two or more types of channels for the same basic product Strategic Channel alliances One firm's marketing channel is used to sell another firms products Merchant Wholesalers Independently owned firms that take title to the merchandise that they handle Manufacturer's agents Work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory Selling Agents Represent a single producer and are responsible for the entire marketing function of that producer Brokers Indpendent firms or individual whose principal function is to bring buyers and sellers together to make sales Vertical Marketing Systems Professionally managed and centrally coordinated marketing channels to achieve channel economies and maximum marketing impact Franchising Is a contractual agreement between a parent company and an individual firm orthat allows the franchisee to operate a certain type of business under an established name Channel Partnership Consists of agreements and procedures among channel members for ordering and phusicaly distributing a producer's products through the channel to the ultimate consumer Intensive Distribution Means that a firm tries to place its products and services in as many outlets as possible Exclusive Distribution Only one retailer in a region that carries the firm's product Selective Distribution Firm selects a few retailers in a geographic area to carry its products Channel Conflict When one channel member believes another channel member is engaged in behavior that prevents it from achieving the the firm's goals Disintermediation When a channel member bypasses another member and sells or buys products direct Channel Captain A channel member that coordinates, directs and supports other channel members Logistics Involves activities that focus on getting the right amount of the right products to the right place at the right time Logistics Management Practice of organizing the cost effective flow of raw materials in process inventory, finished goods and related information from point of origin to point of consumption Supply Chain Sequence of firms that perform activiteis required to create and deliver a product or service to ultimate consumers or industrial users Understand Consumer, Understand Supply Chain, Harmonize supply chain with marketing strategy Three Steps of marketing strategy Electronic Data Interchange Combines Computer and telecommunication technologies to exchange invoices, payments and infomration among suppliers, manufacturers and retailers Total Logistics Cost Includes expenses associated with transportation, materials handling and warehousing, inventory and stockouts. Customer Service Ability of logistics management to satisfy users in terms of time, dependability, communication and convenience Lead Time The lag from ordering an item until it is received and ready for use or sale Efficient Consumer Response Inventory mangement systems reduce retailers lead time for receiveing merchandise, reducing logistics expense Third Party Logistics Providers Firms that perform most or all of the logistics funtions that manufacturers, suppliers and distributors would normally perform for themselves Just-in-time concept Inventory supply system that operates with very low inventories and requires fast, on time delivery Vendor Managed Inventory Inventory management system whereby the supplier determines the product amount and assortment a customer needs and automatically delivers the appropriate items Reverse logistics Process of reclaiming recyclable and reusable materials, returns and reworks from the point of consumption or use for repair, remanufacturing, redistribution and disposal Promotional Mix Combination of multiple communication tools Integrated Marketing Communications A consistent message across all audiences Communication Process of conveying a message to others and it requires six elements: a source, message, channel, receiver and process of encoding and decoding Source A company or person who has information to convey Message Information sent by a source Channel of communication Means of communication such as a salesman, media or PR tools Receivers Consumers who read, hear or see the message Encoding Process of having sender transform an idea into a set of symbols Decoding Process of receiver interpreting the set of symbols Field of Experience Sender and receiver have a similar understanding and knowledge Response Impact that a message had on the receiver's knowledge Feedback Sender's interpretation of the response and indicates whether the message was decoded and understood as needed Noise Extraneous factors that can work against effective communication by distorting a message or feedback received Advertising Any paid form of nonpersonal communication about an organization, good, service, or idea by an identified sponsor Personal Selling The 2 way flow of communication between a buyer and seller designed to influence a person's purchase decision Public Relations Form of communication management that seeks to influence the feelings, opinions, or beliefs held by potential customers Publicity A nonpersonal, indirectly paid presentation of an organization, good or service Sales Promotion Short term inducment of value offered to arouse interest in buying a good or service Direct Marketing Direct communication with consumers to generate a response in the form of an order, request for further information or a visit to an outlet Push Strategy Directing the promotional mix to channel members to gain their cooperation in ordering and stocking the product Pull Strategy Directing the promotional at ultimate consumers to encourage them to ask a retailer for a product Hierarchy of effects The sequence of stages a prospective buyer goes through from initital awareness of a product to eventual action Percentage of sales budgeting Funds are allocated to promotion as a percentage of past or anticipated sales, in terms of either dollars or units sold Competitive Parity Budgeting Matching a competitors absolute level of spending or the proportion per point of market share All you can afford budgeting Money allocated to promotion only after all other budget items are covered Objective and task budgeting Where a company determines its promotion objectives, outlines the tasks to accomplish and determines the proportion of cost Direct orders Result of offers that contain all the information necessary for a prospective buyer to make a decision to purchase and complete the transaction Lead Generation The result of an offer designed to generate interest in a product or service and request for additional information Traffic Generation The outcome of an offer designed to motivate people to visit a business Advertising Any paid form of nonpersonal communivation about an organization, a good, a service or an idea by a sponosr Product Advertisment Focus on selling a good or service Pioneering, Competitive, Reminder Three forms of product advertisement Institutional Advertisment Objectve to build goodwill or an image for an organization rather than promote a good or service Reach The number of different people or households exposed to an advertisement Rating The % of households in a market that are tuned to a particular TV show or radio station Frequency When advertisers want to reach an audience more than once Gross Rating Points When reach is multiplied by frequency, an advertiser will obtain a commonly used reference number Cost per thousand Refers to cost of reaching 1,000 individuals or households with the advertising message in a given medium Infomercials Program length advertisement that take an educational approach to communication with potential customers Pretests Used to determine whether ad communicates the intended message or select alternative versions of the advertisement, conducted before ads are placed in any medium Limited Service agencies Specialize one aspect of the advertising process such as providing creative services to develop the advertising copy, buying previously unpurchased media or priving internet services In-house agencies Made up of the company's own advertising staff may provide full services or a limited range of service Product Placement Involve the use of a brand name product in a movie, tv show, video game or commercial of another product Trade-oriented sales promotions Simply trade promotions are sales tools used to support a company's advertising and personal selling directed to wholesalers, retailers or distributors Cooperative Advertising Common sales promotional activity to encourage both better quality and greater quantity in the local advertising efforts Publicity Tools Methods of obtaining nonpersonal presentation of an organization, good or service without direct cost