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Ch. 7, 9, 10, 14, 17, 18

business and organizational customers

any buyers who buy for resale or to produce other goods and services. Types include: 1) Producers of goods and services, 2) Intermediaries, 3) Government units, 4) Nonprofit organizations

purchasing specifications

a written (or electronic) description of what the firm wants to buy

ISO 9000

is a way for a supplier to document its quality procedures according to internationally recognized standards

purchasing managers

buying specialists for their employers; they usually specialize by product area and are real experts

multiple buying influence

means that several people - perhaps even top management - play a part in making a purchase decision. Possible buying influences include: 1) Users, 2) Influencers, 3) Buyers, 4) Deciders, 5) Gatekeepers

buying center

all the people who participate in or influence a purchase

vendor analysis

a formal rating of suppliers on all relevant performance


a request to buy something

new-task buying

occurs when a customer organization has a new need and wants a great deal of information. Can involve setting product specifications, evaluating sources of supply, and establishing an order routine that can be followed in the future if results are satisfactory. Multiple buying influence is typical in new-task buying.

straight rebuy

a routine repurchase that may have been made many times before.

modified rebuy

the in-between process where some review of the buying situation is done - though not as much as in new-task buying.

competitive bid

the terms of sale offered by the supplier in response to the purchase specifications posted by a buyer

just-in-time delivery

reliably getting products there just before the customer needs them.

negotiated contract buying

agreeing to contracts that allow for changes in the purchase arrangements


contract with an outside firm to produce goods or services rather than to produce them internally

North American Industry Classification (NAICS) codes

groups of firms in similar lines of business. Ex: The number of establishments, sales volumes, and number of employees - broken down by geographic areas - are given for each NAICS code.

open to buy

the buyers have budgeted funds that can be spent during the current period

resident buyers

independent buying agents who work in central markets (NYC, Paris, Rome, Hong Kong, Chicago, LA) for several retailer or wholesaler customers based in outlying areas or other countries.

Foreign Corrupt Practices Act

passed by US Congress in 1977; prohibits US firms from paying bribes to foreign officials


the need-satisfying offering of a firm


a product's ability to satisfy a customer's needs or requirements

product assortment

the set of all product lines and individual products that a firm sells

product line

a set of individual products that are closely related

individual product

a particular product within a product line


the use of a name, term, symbol, or design - or a combination of these - to identify a product

brand name

a word letter, or group of words or letters. ex: America Online (AOL), WD-40, 3M Post-its, etc...


includes only those words, symbols, or marks that are legally registered for use by a single company

service mark

the same as a trademark, except that it refers to a service offering

brand familiarity

how well customers recognize and accept a company's brand. 5 levels: 1-rejection, 2-non-recognition, 3-recognition, 4-preference, 5-insistence

brand rejection

means that potential customers won't buy a brand unless its image is changed

brand nonrecognition

final consumers dont recognize a brand at all - even though intermediaries may use the brand name for identification and inventory control

brand recognition

customers remember the brand

brand preference

that target customers usually choose the brand over other brands, perhaps because of habit or favorable past experience

brand insistence

customers insist on a firm's branded product and are willing to search for it

brand equity

the value of a brand's overall strength in the market

The Lanham Act (of 19946)

spells out what kinds of marks (including brand names) can be protected and the exact method of protecting them; applies to goods shipped in instate or foreign commerce

family brand

the same brand for several products - or individual brands for each product. EX: Keebler snack food products and Sears Kenmore appliances

licensed brand

a well-known brand that sellers pay a fee to use. EX: Sunkist brand name has been licensed to many companies for use on more than 400 products in 30 countries

individual brands

separate brand names for each product. EX: when General Mills introduced a line of organic cereals, it used the Cascadian Farm name and the Big G logo was not on the box. That was so consumers who try to avoid additives might not trust a big corporate brand.

generic products, generic "brands"

products that have no brand at all other than identification of their contents and the manufacturer or intermediary

manufacturer brands

brands created by producers; sometimes called "national brands" because the brand is promoted all across the country or in large regions. EX: Colgate, MasterCard, & McDonald's

dealer brands or private brands or private label

brands created by intermediaries. EX: Craftsman and Kenmore (Sears), Up & Up (Target)

battle of the brands

the competition between dealer brands and manufacturer brands is just a question of whose brands will be more popular and who will be in control.


involves promoting, protecting, and enhancing the product

universal product code (UPC)

identifies each product with marks readable by electronic scanners matching the product with its price.

Federal Fair Packaging and Labeling Act (of 1966)

requires that consumer goods be clearly labeled in easy-to-understand terms to give consumers more information; calls on industry to try to reduce the confusing number of package sizes and make labels more useful

Nutrition Labeling and Education Act of 1990

requires food manufacturers to use a uniform format that allows consumers to compare the nutritional value of different products.


explains what the seller promises about its product

Magnuson-Moss Act (of 1975)

says that producers must provide a clearl written warranty if they choose to offer any warranty. It does not have to be strong. Federal Trade Commissions says that it must be clear and definite and not deceptive or unfair. A warranty also must be available for inspection before the purchase.

consumer products

products meant for the final consumer

business products

products meant for use in producing other products

4 groups of consumer product classes

1) convenience, 2) shopping, 3) specialty, 4) unsought

convenience products

products a consumer needs but isn't willing to spend much time or effort shopping for; bought often; require little service or selling; inexpensive; may even be bought out of habit; may be a staple/impulse/emergency product


products that are bought often, routinely, and without much thought; ex: breakfast cereal, canned soup, and other packaged foods

impulse products

products that are bought quickly - as unplanned purchases - because of a strongly felt need; ex: sale items

emergency products

products that are purchased immediately when the need is great; consumer doesn't have much time to shop around; EX: Ambulance service, raincoat, or ice cubes

shopping products

products that a customer feels are worth the time and effort to compare with competing products; can be homogeneous or heterogenous

homogeneous shopping products

shopping products the customer sees as basically the same and wants at the lowest price; some consumers feel that certain sizes and types of computers, TV sets, washing machines, and cars may be very similar, so they shop for the best price.

heterogeneous shopping products

shopping products the customer sees as different and wants to inspect for quality and suitability. Furniture, clothing, and membership in a spa are something a consumer would expect help from a knowledgeable salesperson; quality and style matter more than price.

specialty products

consumer products that the customer really wants and makes a special effort to find; willing to search for it

unsought products

products that potential customers don't yet want or know they can buy, so they don't search for them at all. Consumers probably won't even see these products unless promotion can show their value

new unsought products

products offering really new ideas that potential customers don't know about yet

regularly unsought products

products - like gravestones, life insurance, and encyclopedias - that stay unsought but not unbought forever. May be a need, but potential customers aren't motivated to satisfy it. For this, personal selling is VERY important.

derived demand

the demand for business products derives from the demand for final consumer products. EX: car manufacturers buy about 1/5 of all steel products, but if demand for cars drops, they'll buy less steel, then even the steel supplier with the best marketing mix is likely to lose sales

expense item

a product whose total cost is treated as a business expense in the year it's purchased

capital item

a long-lasting product that can be used and depreciated for many years; often very expensive, but due to tax purposes the cost is spread over a number of years


important capital items; ex: buildings, land rights, and major equipment


short-lived capital items - tools and equipment used in production or office activities; more standardized than installations and usually needed by more customers - like Canon's small copy machines, Rockwell's portable drills, and Steelcase's filing cabinets.

raw materials

unprocessed expense items - such as logs, iron ore, and wheat - that are moved to the next production process with little handling; raw materials become part of a physical good and are expense items. 2 types: farm products & natural products

farm products

grown by farmers - ex: oranges, sugar cane, and cattle

natural products

products that occur in nature - ex: timber, iron ore, oil, and coal


processed expense items that become part of a finished product


expense items that do not become part of a finished product; THREE types = 1) maintenance, 2) repair, 3) operating supplies (AKA: MRO supplies)

professional services

specialized services that support a fir's operations; usually expensive

product life cycle

describes the stages a really new product idea goes through from beginning to end. FOUR major stages: 1) market introduction, 2) market growth, 3) market maturity, 4) sales decline

1) market introduction stage

sales are low as a new idea is first introduced to a market

2) market growth stage

industry sales grow fast - but industry profits rise and then start falling

3) market maturity stage

occurs when industry sales level off and competition gets tougher.

4) sales decline stage

new products replace the old


the currently accepted popular style; some sales of products are influenced by fashion; tend to have short life cycle


an idea that is fashionable only to certain groups who are enthusiastic about it; but these groups are so fickle that a fad is even more short lived than a regular fashion.

new product

one that is new in any way for the company concerned

Federal Trade Commission (FTC)

The federal government agency that policies antimonopoly laws; to be called new, the FTC says a product must be entirely new or changed in a "functionally significant or substantial respect"

New-Product Development Process

1) Idea generation
2) Screening
3) Idea evaluation
4) Development
5) Commercialization

Consumer Product Safety Act (of 1972)

set up the Consumer Product Safety Commission to encourage safety in product design and better quality control

product liability

the legal obligation of sellers to pay damages to individuals who are injured by defective or unsafe products; liability settlements may exceed not only a company's insurance coverage, but its total assets!

concept testing

getting reactions from customers about how well a new-product idea fits their needs; uses market research - ranging from informal focus groups to formal surveys of potential customers

product managers or brand managers

manage specific products - often taking over the jobs formerly handled by an advertising manager; major responsibility = Promotion.

total quality management (TQM)

the philosophy that everyone in the organization is concerned about quality, throughout all of the firms activities, to better serve customer needs

continuous improvement

a commitment to constantly make things better one step at a time

Pareto chart

a graph that shows the number of times a problem cause occurs, with problem causes ordered from most frequent to least frequent

fishbone diagram

a visual aid that helps organize cause-and-effect relationships for "things gone wrong"


giving employees the authority to correct a problem without first checking with management


communicating information between the seller and potential buyer or others in the channel to influence attitudes and behavior; involves telling target customers that the right Product is available at the right Place at the right Price

personal selling

involves direct spoken communication between sellers and potential customers; salespeople get immediate feedback; can be very expensive

mass selling

communicating with large numbers of potential customers at the same time; less flexible than personal selling, but when the target market is large and scattered, mass selling can be less expensive


any paid form of non-personal presentation of ideas, goods, or services by an identified sponsor; vs. publicity which is "free"


any unpaid form of non-personal presentation of ideas, goods, or services

sales promotion

refers to promotion activities - other than advertising, publicity, and personal selling - that stimulate interest, trial, or purchase by final customers or others in the channel

sales managers

concerned with managing personal selling; often responsible for building good distribution channels and implementing place policies

advertising managers

manage their company's mass-selling effort - in tv, newspapers, magazines, and other media; job = choosing the right media and developing the ads

public relations

communications with non-customers, including labor, public interest groups, stockholders, and the government

sales promotion managers

manage their company's sales promotion effort; has independent status and reports directly to the marketing manager

integrated marketing communications

the intentional coordination of every communication from a firm to a target customer to convey a consistent and complete message

AIDA model

action-oriented model consisting of FOUR promotion jobs:
1) to get Attention
2) to hold Interest
3) to arouse Desire
4) to obtain Action

The Traditional Communication Process

Source --> Encoding --> Message channel --> Decoding --> Receiver --> Feedback --> back to Source (in the middle of all this is "Noise"

communication process

a source trying to reach a receiver with a message


the sender of a message


a potential customer


any distraction that reduces the effectiveness of the communication process


the source deciding what it wants to say and translating it into words or symbols that will have the same meaning to the receiver


the receiver translating the message

message channel

the carrier of the message; a source can use many message channels to deliver a message


means using normal promotion effort - personal selling, advertising, and sales promotion - to help sell the whole marketing mix to possible channel members


means getting customers to ask intermediaries for the product

adoption curve

shows when different groups accept ideas


the first to adopt; eager to try a new idea and willing to take risks

early adopters

are well respected by their peers and often are opinion leaders; tend to be younger, more mobile, and more creative than later adopters but have fewer contacts outside their own social group or community than innovators

early majority

avoid risk and wait to consider a new idea after many early adopters have tried and liked it

late majority

cautious about new ideas


prefer to do things the way they've ben done in the past and are very suspicious of new ideas

primary demand

demand for the general product idea - not just for the company's own brand

selective brand

demand for a company's own brand

task method

basing the budget on the job to be done; helps set priorities so that the money you spend produces specific results


the amount of money that is charged for "something" of value

target return objective

sets a specific level of profit as an objective

profit maximization objective

seeks to get as much profit as possible

sales-oriented objective

seeks some level of unit sales, dollar sales, or share of market - without referring to profit

status quo objectives

don't-rock-the-pricing-boat objectives; this form of thinking may happen when managers want to stabilize prices, meet competition, or even avoid competition

nonprice competition

aggressive action on one or more of the Ps other than Price

administered prices

consciously set prices

one-price policy

means offering the same price to all customers who purchase products under essentially the same conditions and in the same quantities

flexible-price policy

offering the same product and quantities to different customers at different prices

skimming price policy

tries to sell the top (skim the cream) of a market - the top of the demand curve - at a high price before aiming at more price-sensitive customers; skimming may maximize profits in the market introduction stage for an innovation

penetration pricing policy

tries to sell the whole market at one low price; this might by wise when the elite market is small

introductory price dealing

temporary price cuts - to speed new products into a market and get customers to try them; however don't confuse temporary price cuts with low penetration prices.

basic list prices

the prices final customers or users are normally asked to pay for products


reductions from list price given by a seller to buyers who either give up some marketing function or provide the function themselves

quantity discounts

discounts offered to encourage customers to buy in larger amounts

cumulative quantity discounts

apply to purchases over a given period - such as a year - and the discount usually increases as the amount purchased increases; encourage repeat buying by reducing the customer's cost for additional purchases

noncumulative quantity discounts

apply only to individual orders; encourage larger orders but do not tie a buyer to the seller after that one purchase

seasonal discounts

discounts offered to encourage buyers to buy earlier than present demand requires


payment for the face value of the invoice is due immediately; these terms are sometimes changed to net 10 or net 30, which means payment is due within 10 or 30 days of the date on the invoice

cash discounts

reductions in price to encourage buyers to pay their bills quickly; the terms for a cash discount usually modify the net terms

2/10, net 30

means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days. Otherwise, the full face value is due within 30 days.

trade (functional) discount

a list price reduction given to channel members for the job they are going to do

sale price

a temporary discount from the list price; encourage immediate buying

everyday low pricing

setting a low list price rather than relying on frequent sales, discounts, or allowances. Some supermarkets use this approach


given to final consumers, customers, or channel members for doing something or accepting less of something

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