Transcript Slide 1
marketing 300
discussion section
pass back papers
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agenda
Evaluations
Marketing Math
Skimming and Penetration Pricing
Pass back homework and projects
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evaluations
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Do them!
Any and all feedback is appreciated.
Lecture and discussion section are separate
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marketing math
Please, please, please practice these problems before coming to the exam!
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workforce calculation
Assume that Cantco salespeople spend 4 hours per day on sales calls and the average call is two hours. A sales person works 50 weeks per year, 5 days per week. Assume 500 “A” accts. that require 40 calls/year, and 3000 “B” accts that need 10 calls per year. How many people do you need?
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workforce calculation
Assume that salespeople spend 4 hours per day on sales calls and the average call is two hours. A sales person works 50 weeks per year, 5 days per week. Assume 500 “A” accts. that require 40 calls/year each, and 3000 “B” accts that need 10 calls/year each. How many people do you need?
(500 * 40) + (3000 * 10) = 50,000 Calls that need to be made in a year = # of accounts * calls needed for those accounts (4 hours/2 hours) * 5 * 50 = 500 # of calls a salesperson can make per year = calls per day * days per week * weeks per year 100 total calls needed / # each person can make = # people you need http://mywebspace.wisc.edu/rkamath
Average Unit Cost of A
Total Fixed Costs Total Variable Costs Total Costs Cost of A $200,000 $100,000 $300,000 Units Unit Cost 20,000 units $?
20,000 units $?
20,000 units $?
Total Cost / Total Units = Average Unit Cost http://mywebspace.wisc.edu/rkamath
Average Unit Cost of A
Total Fixed Costs Total Variable Costs Total Costs Cost of A $200,000 $100,000 $300,000 Units Unit Cost 20,000 units $10 20,000 units $5 20,000 units $15 Total Cost / Total Units = Average Unit Cost http://mywebspace.wisc.edu/rkamath
price setting
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Now you know cost; what do you need to set price?
Demand or an assumption about demand Estimates about the quantity to be produced Target return expected
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problems with ACP
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Why is setting price based on average-cost pricing potentially problematic? Misjudging production capabilities means cost goes up Misjudging demand means pricing won’t justify costs Costs change based on quantity (economies of scale) http://mywebspace.wisc.edu/rkamath
break-even point What is a break-even point?
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the sales quantity at which total costs will equal total revenue
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no money lost or gained http://mywebspace.wisc.edu/rkamath
break-even point To calculate break-even point, use this formula: BEP = Fixed costs / Unit Fixed Cost Contribution
or
BEP = Fixed costs / (Price – Cost)
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break-even point
Real Phlorida Orange Juice’s fixed costs for the year are estimated at $200,000. Its premium orange juice food product sells for $250. The variable cost per unit is $200. Sales for the coming year are expected to reach $1,250,000. What is the break-even point?
BP = Fixed Costs / (Price – Cost) http://mywebspace.wisc.edu/rkamath
break-even point
Real Phlorida Orange Juice’s fixed costs for the year are estimated at $200,000. Its product sells for $250. The variable cost per unit is $200. Sales for the coming year are expected to reach $1,250,000. What is the break-even point?
BP = Fixed Costs / (Price – Cost) $200,000 fixed costs ($250 – $200) price - cost 4,000 units breakeven quantity http://mywebspace.wisc.edu/rkamath
expected profit
Real Phlorida Orange Juice’s fixed costs for the year are estimated at $200,000. Its product sells for $250. The variable cost per unit is $200. Sales for the coming year are expected to reach $1,250,000. What is the expected profit?
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Expected profit = Total Sales – Total Costs http://mywebspace.wisc.edu/rkamath
expected profit (con’t)
Real Phlorida Orange Juice’s fixed costs for the year are estimated at $200,000. Its product sells for $250. The variable cost per unit is $200. Sales for the coming year are expected to reach $1,250,000. Expected profit?
Profit = Total Sales – Total Costs total sales Total sales = $1,250,000
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Total costs = fixed costs + (unit cost)*(units sold) Total costs = $200,000 + ($200)*($1,250,000/250) Total costs = $200,000+ ($200)*(5000) Total costs = $1,200,000
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profit Profit = $50,000 http://mywebspace.wisc.edu/rkamath total costs
expected profit #2
Real Phlorida Orange Juice’s fixed costs for the year are estimated at $200,000. Price is $250, unit variable cost is $200. If sales are forecast at $875,000, what is profit?
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should they produce?
Real Phlorida Orange Juice’s fixed costs for the year are estimated at $200,000. If sales are forecast at only $875,000 what is their profit?
total sales Total sales = $875,000
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Total costs = fixed costs + (unit cost)*(# units) = $200,000 + ($200)*($875,000/$250) = $200,000 + ($700,000) = $900,000
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Profit = - $25,000 profit total costs Loss of $25,000 for the year. Should they shut down operations for the year?
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decisions, decisions…
Option A -$25,000 Option B -$200,000 http://mywebspace.wisc.edu/rkamath
should they produce?
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If the company sells only 3,500 units, they will lose $25,000.
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If the company doesn’t produce (sells 0 units), they will lose $200,000 of fixed expenses!
Better to lose less than to lose more!
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mark-ups
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What is a mark-up?
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A mark-up is the difference between selling price and cost
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The mark-up percentage in this class is based on sales price.
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NOTE: This may differ from what you were taught in accounting!
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mark-up percentage
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To calculate markup, use this formula: ( Price – Cost ) / Price = Mark-up percentage
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Use simple algebra to fill in what you have and solve for what you need.
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what’s that formula?
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mark-up percentage
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You’re a realtor selling a 10,000 sq. ft. igloo in an exclusive gated community Cost
$500,000 Price
$750,000 What is the mark-up percentage?
Take a moment to calculate.
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mark-up percentage
Cost = $500,000, Price = $750,000 Price – Cost / Price = Mark-up $750,000 - $500,000 = $250,000 price - cost $750,000 price .33333
33.33% mark-up http://mywebspace.wisc.edu/rkamath
pricing from mark-up
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Your company buys dogsleds from Wolf Movers, Inc. for $300.
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You want to sell them at a 40% mark-up.
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How do you price the dogsleds?
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Take a moment to calculate.
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(Price – Cost) / Price = Mark-up http://mywebspace.wisc.edu/rkamath
mark-up percentage
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Mark-up = (Price – Cost) / Price .4 = (x – 300) / x .4x = x – 300 .6x = 300 x = $500 http://mywebspace.wisc.edu/rkamath
2/10 Net 30
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2% discount if you pay in 10 days If you pay after 10 days, you pay full price
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$100 item: on day 1-10, you pay (.02 * $100) = $98 on days 11-30, you pay $100 http://mywebspace.wisc.edu/rkamath
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The Exam
100 Questions, 2 hours
May 14, 5:05 – 7:05pm
For your location, see Learn@UW
What’s on the exam
Most of exam is not cumulative
Questions on targeting, segmenting, positions, life cycles are fair game – know this stuff!
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exam review
A company trying to sell toothpaste will probably focus on which promotion objective? A. Persuading B. Pioneering C. Informing D. Publicizing E. Lagging http://mywebspace.wisc.edu/rkamath
exam review
If a company is trying to get stores to sell something by bribing their manager with stocking fees, they are using a(n) A. Direct response promotion B. Push strategy C. Pull strategy D. Integrated marketing communication method E. Illegal promotion technique http://mywebspace.wisc.edu/rkamath
exam review
A guy who is hired by a producer to find out what retailers are doing, and to help them sell product is called a A. Missionary sales reps E. Manufacturers' agents B. "a Joe Salesman" representative C. Order takers D. Order getters http://mywebspace.wisc.edu/rkamath
exam review
TrashCo just invented a revolutionary new device that automatically collects and burns the leaves in your yard. TrashCo wants to put out an ad explaining to potential customers what the product is and why they might want it. The campaign should focus on: A. Competitive advertising B. Pioneering advertising C. Institutional advertising D. Reminder advertising E. None of the above http://mywebspace.wisc.edu/rkamath
exam review
If producer CrudCo does "cooperative advertising" with their retailer FailCo, this means that: A. They design the ads together B. They both pay for national ads C. They both pay for local ads D. They agree not to smear each others' name in their ads E. FailCo does some advertising and CrudCo handles the rest of the promotion blend http://mywebspace.wisc.edu/rkamath
exam review
A company has just developed a great new disposable cigarette lighter that tells hilarious jokes. They want to temporarily cut prices to get this on the market really fast and into peoples' hands ASAP. They should use: A. A penetration pricing policy B. A one-price policy C. A skimming pricing policy D. A flexible-price policy E. Introductory price dealing http://mywebspace.wisc.edu/rkamath
exam review
If a powerful bicycle store wants to sell bikes at $100 (instead of the usual $500) so that they can put the competing bike store out of business, they may be prohibited by the: A. Magnuson-Moss Act B. Robinson-Patman Act C. Wheeler-Lea Act D. FTC Act E. Sherman Act http://mywebspace.wisc.edu/rkamath
exam review
Which of the following is an example of odd-even pricing? A. $8.73 B. $3.90 C. $95.98 D. $99.95 E. $100.00 http://mywebspace.wisc.edu/rkamath
exam review
A producer in Podunk uses "zone pricing." The company is selling malt syrup for $1200/lb in the Western Zone--which includes Bumblefusk and Suck City. The freight cost from its plant to Bumblefusk is $150/lb. and from its plant to Suck City is $200/lb. In this situation: A. One lb. of syrup will costs a Bumblefusk buyer the same amount as a Suck City buyer B. People in either city would pay $1200 for one lb of syrup C. One lb of syrup delivered to Bumblefusk would cost the buyer $1350 D. One lb of syrup delivered to Suck City would cost the buyer $1400 E. Both C and D http://mywebspace.wisc.edu/rkamath
exam review
A producer in Podunk uses "zone pricing." The company is selling malt syrup for $1200/lb in the Western Zone--which includes Bumblefusk and Suck City. The freight cost from its plant to Bumblefusk is $150/lb. and from its plant to Suck City is $200/lb. In this situation: A. One lb. of syrup will costs a Bumblefusk buyer the same amount as a Suck City buyer B. People in either city would pay $1200 for one lb of syrup C. One lb of syrup delivered to Bumblefusk would cost the buyer $1350 D. One lb of syrup delivered to Suck City would cost the buyer $1400 E. Both C and D http://mywebspace.wisc.edu/rkamath
exam review
A tractor has a production cost of $48. The manufacturer takes a 20 percent markup, the wholesaler takes a 25 percent markup, and the retailer takes a 80 percent markup. Therefore, the item has a retail selling price of $400.
TRUE or FALSE?
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exam review
Companies should ideally advertise on TV if they can afford it.
TRUE or FALSE?
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preparation
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PRACTICE WITH QUIZ QUESTIONS ON THE BOOK WEBSITE!
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www.mhhe.com/fourps There’s a bunch of stuff at the end of these slides A BIG PRACTICE EXAM IS ON MY WEBSITE!
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Considering Marketing?
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There’s much more to it than what we learned in Marketing 300:
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channels, consumer behavior, modeling, market research…
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Marketing is one of the most multi-disciplinary fields in industry (and academia)
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Combines: psychology, sociology, economics, statistics, political science, history, design…
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Allows creativity, analytical thought, experiments, insights into society…
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Far-reaching and sometimes unexpected applications in a lot of different areas http://mywebspace.wisc.edu/rkamath
Some parting words…
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Business is the biggest engine of change in the world.
Every time you buy/create something as an individual or a company, you are making a statement:
- About yourself - About your society - About the direction you want the world to take
As managers, the decisions you make could have wide reaching effects.
You do have the power to make a difference. http://mywebspace.wisc.edu/rkamath
Some parting words…
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It’s been an absolute pleasure being your TA If you ever need anything from me, or if I can help you in any way, don’t hesitate to contact me ( [email protected]
) Facebook me!
GOOD LUCK ON THE EXAM!
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Projects
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Ch 13: Integrated Mkt Communications
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Integrated marketing communications – the intentional coordination of every communication from a firm to a target customer to convey a consistent and complete message.
Promotion-communicating information between the seller and potential buyer to influence attitudes and behavior
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Personal selling (sales managers)–direct spoken communication between sellers and potential customers
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Mass selling (ad managers) –communicating with large numbers of potential customers at the same time
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Advertising-any paid form of non-personal presentation of ideas, goods, or services
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Publicity (PR managers) – unpaid form of nonpersonal presentation of ideas, goods, or services
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Sales promotion (sales promotion managers)– promotional activities other than advertising, publicity, and personal selling that stimulate interest, trial, or purchase by final customers or others in the channel Traditional Communication Process: Source
Encoding
Message Channel
Decoding
Receiver *noise* throughout! Consumer Initiated Communication Process Consumer
Search
Message Channel
Select Topic
Source’s Message
Consumer *noise* throughout! Direct response promotion – designed to prompt immediate feedback by specific target customers.
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Usually relies on a CRM database; More than junk mail: can be TV, telephone, print, email, etc.
Pushing– using promotional effort to convince customer to purchase Pulling – customers ask for product Adoption process guides promotion planning Promotion depends on life cycle stage http://mywebspace.wisc.edu/rkamath
Chapter 13
The Type of Promotion Depends on Objectives Promo Objectives Adoption Process AIDA Model
Informing Awareness Interest Attention Interest Persuading Reminding Evaluation Trial Decision Confirmation Desire Action
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Chapter 14: Personal selling
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Three basic sales tasks:
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Order-getters: Establish new relationships/customers
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Order-taking: Routine sales to regular/established customers
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Supporting: Don’t get orders themselves
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Missionary salespeople: Develop goodwill, stimulate demand, train others
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Technical specialists: Provide technical assistance
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Customer service reps: Work with customers to resolve problems after purchase Know how to calculate sales force!
Presentation styles:
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Prepared sales presentation: Memorized presentation that is not adapted for particular customer
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Consultative selling approach: Really understanding the consumer needs first, then making a presentation based on the needs
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Selling formula approach: Starts with a prepared presentation, then weaves in customer needs http://mywebspace.wisc.edu/rkamath
Chapter 15: Advertising & Sales Promo
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Advertising is a big business with relatively few employees
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Total spend is significant and tending up, but accounts for a small percentage of corporate Sales Dollars on average Ad objectives must be specific (include a number) and part of the overall strategy
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Example objectives on P. 388 #1–7
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Objectives affect the type of advertising selected – see Exhibit 15-3 on P. 388 Types of Advertising
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Product Ads: Tries to sell a product
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Pioneering: Develops primary demand for a category not brand (early in Prod Life Cycle)
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Competitive Ads: Develop selective demand for a specific brand
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Direct: Aims for immediate buying action
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Indirect: Points out product advantages to affect future buying decisions
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Comparative: Rough type of ad making brand comparisons using the competitive brand name specifically
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Reminder Ads: Tries to keep the brand names before the public, to reinforce promo
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Institutional Ads: Recognize the name/prestige of an org., not products Coordinated Advertising
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Advertising Allowances: Price reductions to firms further down the channel to encourage them to advertise/otherwise promote products locally
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Cooperative Advertising: Middlemen and producers sharing costs of ads http://mywebspace.wisc.edu/rkamath
Ch. 15: Advertising & Sales Promotion
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Major Media: Ad Spend, % Growth & (+/–) of each (p.392)
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Medium must support objectives (e.g. product demonstrations require visual access to the product)
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Target markets must be identified, though others may be exposed to the ad anyway Advertising on the Internet
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Most ads seek a direct response and come in different types (e.g. banner ads, pop-ups, etc.)
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Ads are often placed on specific, related sites to target a certain market
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Search ads and cookies help ads target a desired market Copy Thrust: the words and illustrations that communicate the message AIDA:
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Getting Attention is an ads first job
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Holding Interest is more difficult Arousing Desire is convincing customers that a product meets their needs (very tough) Obtaining Action is the final requirement and involves actual trial/purchase Using one global message can be very difficult, even though a simpler approach Ad Manager manages company’s ad efforts WHEREAS Ad Agencies are specialists in planning and handling the mass selling details for Advertisers Majority of Ad Agencies are small (less than 10 people) but largest account for most of the billings Measuring ad effectiveness is not easy, but research and testing help The Federal Trade Commission (FTC) controls unfair advertising practices in the US
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Corrective advertising is one example of how the FTC seeks to correct deceptive advertising http://mywebspace.wisc.edu/rkamath
Chapter 16: Pricing objectives and policies
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Pricing objectives
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Profit oriented: Objectives revolve around profit/ROI
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Target return - Desire for a specific amount of profit/level of ROI
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Profit maximization - Desire for as much profit as possible
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Sales oriented: Objectives revolve around measurements OTHER than profit (ex. market share, sales in units, sales in dollars, etc.)
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Status quo oriented: Objectives revolve around stabilizing prices or meeting competitors Pricing policies
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Skimming: Sell to the “top” of the market at a high price
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Penetration: Sell to the rest of the market at a lower price http://mywebspace.wisc.edu/rkamath
Chapter 16: Continued…
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Discount policies
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Quantity: Discounts related to quantity bought
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Cumulative: Discounts given to purchases made during a certain time period. The discount increases as the order size increases
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Non-cumulative: Discounts given to larger orders, but no time period is included
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Trade (functional): Price reduction for channel members
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Allowances: Discounts to final consumers, customers, or channel members for doing something or accepting something less
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Advertising: Price reductions to encourage advertising
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Stocking/Slotting: Incentives to get shelf space
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Push money: Money given to salesclerks for selling high margin items
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Trade-in: Price reduction for buying new products and giving up old products Geographic pricing policies
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FOB (location): Seller pays loading costs, buyer pays freight costs
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FOB buyer’s/delivered: Seller pays loading and freight costs
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Zone: All buyers in the zone pay the same freight costs
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Freight-absorption: All buyers pay the same freight costs, regardless of location http://mywebspace.wisc.edu/rkamath
Ch 17 – Price Setting
o o o o o o o o o
Markups - % of SELLING price added to cost to get the selling price
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$1 markup on $3 selling price is a 33 1/3% markup) Markup Chain
o o
Producer Selling Price (Cost + Markup) Wholesaler Selling Price (Producer Selling Price + Markup)
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Retailer Selling Price (Wholesaler Selling Price + Markup) Stockturn Rate - # of times the average inventory is sold in a year Fixed Costs – costs fixed no matter how much is produced
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E.g. rent, depreciation, insurance Variable Costs – sum of expenses that are closely related to output
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E.g. Sales commission, packaging materials, outgoing freight Total Costs – total fixed costs + total variable costs Average Cost – total costs/quantity Break-even point (units) = Total fixed costs/Fixed cost contribution per unit KNOW KEY TERMS!
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Chapter 18
Evaluating Marketing a) Micro – How do customers respond, customer satisfaction rates, profit levels, failure rate, missed opportunities b) Macro – How does it affect the economy?, Does it waste resources?, Does it serve wants and needs?, Does it reflect the values of our society?
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Micro-marketing (production-focused) often does cost too much.
Lack of interest by consumers Improper blending of 4Ps Lack of understanding of the environment
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Macro-marketing (consumer-focused) is much cheaper Reflects society’s interests and values
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Directly products and services from producers to consumers in a way that matches supply and demand http://mywebspace.wisc.edu/rkamath
Chapter 18
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Criticisms of Macro-Marketing Advertising wastes resources a) But the economies of scale that it creates often offsets these resources Consumers are too easily controlled a) But consumers are not puppets b) Their needs and wants change Marketing contributes to materialism a) But does marketing create values or contribute to existing values?
b) Products do improve quality of life c) Marketing reflects society’s values Marketing does not solve social problems a) This is not the role of marketing b) However, it can help address society’s needs c) A market-directed economy makes efficient use of resources http://mywebspace.wisc.edu/rkamath
Chapter 18
Social responsibility in Marketing
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Environment Consumer privacy
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Legal duties Ethical standards
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Being socially responsible consumers http://mywebspace.wisc.edu/rkamath