Essential Marketing & Business Concepts Defined
Key Marketing & Business Concepts
Integrated Logistics Management
The logistics concept that emphasizes teamwork, both inside the company and among all marketing channel organizations, to maximize the performance of the entire distribution system.
Promotion Mix
The specific blend of promotion tools that a company uses to engage customers, persuasively communicate customer value, and build strong customer relationships.
Madison & Vine
A term that has come to represent the merging of advertising and entertainment in an effort to break through the clutter and create new avenues for reaching customers with more engaging messages.
Captive Product Pricing
A strategy used to maximize revenue. Sellers offer a low price for the core product, but high prices are placed on captive products. This attracts customers to the core product with a low price but allows sellers to make a profit off the captive products, which are necessary to use the product.
Public Relations
Is establishing and promoting a positive relationship with the public or a particular audience by managing the communication of information.
Wheel of Retailing
A long-term strategy in which a discount retailer gradually begins to sell higher quality goods. The wheel of retailing allows the retailer to increase its prices over time, leading to higher revenues and perhaps higher profits. The ultimate goal of a wheel of retailing is to develop a discount company into a department store or the equivalent.
Distribution Strategies
Intensive Distribution
Aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used (e.g., cigarettes, beer). Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another. This alternative involves all the possible outlets that can be used to distribute the product.
Selective Distribution
Involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g., training) on them. Selective distribution works best when consumers prefer a particular brand or price and will search out the outlets that supply. This alternative is the middle-path approach to distribution. Here, the firm selects some outlets to distribute its products. This alternative helps focus the selling effort of manufacturing firms on a few outlets rather than dissipating it over countless marginal ones.
Selective distribution can help the manufacturer gain optimum market coverage and more control but at a lesser cost than intensive distribution.
Exclusive Distribution
It is an extreme form of selective distribution in which only one wholesaler, retailer, or distributor is used in a specific geographical area. This is a common form of distribution in products and brands that seek a high prestigious image. Typical examples are designer wear, major domestic appliances, and even automobiles. By granting exclusive distribution rights, the manufacturer hopes to have control over the intermediaries’ price, promotion, credit, inventory, and service policies. The firm also hopes to get the benefit of aggressive selling by such outlets.
Pricing Strategies
Market Skimming Pricing
A pricing approach in which the producer sets a high introductory price to attract buyers with a strong desire for the product and the resources to buy it, and then gradually reduces the price to attract the next and subsequent layers of the market. Examples of market skimming pricing include innovative electronic products, such as the Apple iPhone and Sony PlayStation 3, which decrease in cost over time.
Market Penetration Pricing
Is a pricing strategy that sets a low initial price for a product. The goal is to quickly attract new customers based on the low cost. The strategy is most effective for increasing market share and sales volume while discouraging competition. Examples of market penetration pricing are television and internet providers. They often offer low introductory prices, such as free or steeply discounted premium channels, and at the end of a specified period, the price increases.
The Communication Process
- Sender: The party or person who is sending the message to the other party or person.
- Encoding: The conversion of thought into meaningful symbols.
- Message: The group of symbols transmitted by the sender.
- Media: The channel of communication through which the message is transferred from sender to receiver.
- Decoding: The conversion of symbols into meaning by the receiver.
- Receiver: The sent message received by another person or party.
- Response: The reaction shown by the receiver to the message.
- Feedback: The portion of the receiver’s response that is sent back to the sender.
- Noise: The unplanned distortion during the communication process, due to which the receiver misunderstands the original message.
An effective message is one where the encoding process aligns with the decoding of messages. The message sent should consist of words and symbols known to the receiver.