#### Transcript Slide 1

```marketing
300
discussion section
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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
• Do them!
• Any and all feedback is appreciated.
• Lecture and discussion section are separate
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marketing math
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
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Average Unit Cost of A
Cost of A
Units
Unit Cost
Total Fixed
Costs
\$200,000
20,000 units \$?
Total
Variable
Costs
\$100,000
20,000 units \$?
Total Costs
\$300,000
20,000 units \$?
Total Cost / Total Units = Average Unit Cost
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Average Unit Cost of A
Cost of A
Units
Unit Cost
Total Fixed
Costs
\$200,000
20,000 units \$10
Total
Variable
Costs
\$100,000
20,000 units \$5
Total Costs
\$300,000
20,000 units \$15
Total Cost / Total Units = Average Unit Cost
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price setting
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
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)
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break-even point
What is a break-even point?
• the sales quantity at which total costs will equal total
revenue
• no money lost or gained
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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)
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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
(\$250 – \$200)
4,000 units
fixed costs
price - cost
breakeven quantity
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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?
• Expected profit = Total Sales – Total Costs
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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 = \$1,250,000
total sales
-
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
=
Profit = \$50,000
profit
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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 = \$875,000
total sales
Total costs = fixed costs + (unit cost)*(# units)
= \$200,000 + (\$200)*(\$875,000/\$250)
= \$200,000 + (\$700,000)
= \$900,000
total costs
=
Profit = - \$25,000
profit
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
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should they produce?
• If the company sells only 3,500 units, they will lose \$25,000.
• 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
• What is a mark-up?
• A mark-up is the difference between selling price and cost
• The mark-up percentage in this class is based on sales price.
• NOTE: This may differ from what you were taught in
accounting!
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mark-up percentage
• To calculate markup, use this formula:
( Price – Cost ) / Price = Mark-up percentage
• 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
• 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
\$750,000
price - cost
price
.33333  33.33%
mark-up
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pricing from mark-up
dogsleds from Wolf Movers,
Inc. for \$300.
• You want to sell them at a
40% mark-up.
• How do you price the
dogsleds?
• Take a moment to calculate.
• (Price – Cost) / Price =
Mark-up
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mark-up percentage
•
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•
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Mark-up = (Price – Cost) / Price
.4 = (x – 300) / x
.4x = x – 300
.6x = 300
x = \$500
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2/10 Net 30
• 2% discount if you pay in 10 days
• If you pay after 10 days, you pay full price
• \$100 item:
• on day 1-10, you pay (.02 * \$100) = \$98
• on days 11-30, you pay \$100
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The Exam
 100 Questions, 2 hours
 May 14, 5:05 – 7:05pm
 For your location, see [email protected]
 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?
B. Pioneering
C. Informing
D. Publicizing
E. Lagging
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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
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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
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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:
E. None of the above
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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
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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
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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
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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
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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
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
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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
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
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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
• PRACTICE WITH QUIZ QUESTIONS ON THE BOOK WEBSITE!
– 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?
• There’s much more to it than what we learned in Marketing 300:
– channels, consumer behavior, modeling, market research…
• Marketing is one of the most multi-disciplinary fields in industry
• Combines: psychology, sociology, economics, statistics, political
science, history, design…
• Allows creativity, analytical thought, experiments, insights into
society…
• Far-reaching and sometimes unexpected applications in a lot of
different areas
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Some parting words…
• 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 the direction you want the world to take
• As managers, the decisions you make could have widereaching effects.
• You do have the power to make a difference.
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Some parting words…
• 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])
• 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
– Personal selling (sales managers)–direct spoken communication between sellers and potential customers
– Mass selling (ad managers) –communicating with large numbers of potential customers at the same time
• Advertising-any paid form of non-personal presentation of ideas, goods, or services
– Publicity (PR managers) – unpaid form of nonpersonal presentation of ideas, goods, or services
– 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
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.
– 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
Promotion depends on life cycle stage
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Chapter 13
The Type of Promotion Depends on Objectives
Promo Objectives
AIDA Model
Informing
Awareness
Interest
Attention
Interest
Evaluation
Trial
Desire
Reminding
Decision
Confirmation
Action
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Chapter 14: Personal selling
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– Order-getters: Establish new relationships/customers
– Order-taking: Routine sales to regular/established customers
– Supporting: Don’t get orders themselves
• Missionary salespeople: Develop goodwill, stimulate demand, train others
• Technical specialists: Provide technical assistance
• Customer service reps: Work with customers to resolve problems after purchase
Know how to calculate sales force!
Presentation styles:
– Prepared sales presentation: Memorized presentation that is not adapted for particular
customer
– Consultative selling approach: Really understanding the consumer needs first, then making
a presentation based on the needs
– Selling formula approach: Starts with a prepared presentation, then weaves in customer
needs
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Chapter 15: Advertising & Sales Promo
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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
• Example objectives on P. 388 #1–7
• Objectives affect the type of advertising selected – see Exhibit 15-3 on P. 388
– Product Ads: Tries to sell a product
• Pioneering: Develops primary demand for a category not brand (early in Prod Life Cycle)
• Competitive Ads: Develop selective demand for a specific brand
– Direct: Aims for immediate buying action
– Comparative: Rough type of ad making brand comparisons using the competitive brand
name specifically
• Reminder Ads: Tries to keep the brand names before the public, to reinforce promo
– Institutional Ads: Recognize the name/prestige of an org., not products
– Advertising Allowances: Price reductions to firms further down the channel to encourage them to
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Ch. 15: Advertising & Sales Promotion
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Major Media: Ad Spend, % Growth & (+/–) of each (p.392)
– Medium must support objectives (e.g. product demonstrations require visual access to the product)
– Target markets must be identified, though others may be exposed to the ad anyway
– Most ads seek a direct response and come in different types (e.g. banner ads, pop-ups, etc.)
– Ads are often placed on specific, related sites to target a certain market
Copy Thrust: the words and illustrations that communicate the message
AIDA:
– Getting Attention is an ads first job
– 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
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
– Corrective advertising is one example of how the FTC seeks to correct deceptive advertising
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Chapter 16: Pricing objectives and policies
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Pricing objectives
– Profit oriented: Objectives revolve around profit/ROI
• Target return - Desire for a specific amount of profit/level of ROI
• Profit maximization - Desire for as much profit as possible
– Sales oriented: Objectives revolve around measurements OTHER than profit (ex. market share, sales
in units, sales in dollars, etc.)
– Status quo oriented: Objectives revolve around stabilizing prices or meeting competitors
Pricing policies
– Skimming: Sell to the “top” of the market at a high price
– Penetration: Sell to the rest of the market at a lower price
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Chapter 16: Continued…
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•
Discount policies
– Quantity: Discounts related to quantity bought
• Cumulative: Discounts given to purchases made during a certain time period. The discount
increases as the order size increases
• Non-cumulative: Discounts given to larger orders, but no time period is included
– Trade (functional): Price reduction for channel members
– Allowances: Discounts to final consumers, customers, or channel members for doing something or
accepting something less
• Stocking/Slotting: Incentives to get shelf space
• Push money: Money given to salesclerks for selling high margin items
• Trade-in: Price reduction for buying new products and giving up old products
Geographic pricing policies
– Zone: All buyers in the zone pay the same freight costs
– Freight-absorption: All buyers pay the same freight costs, regardless of location
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Ch 17 – Price Setting
o Markups - % of SELLING price added to cost to get the selling price
o \$1 markup on \$3 selling price is a 33 1/3% markup)
o Markup Chain
o Producer Selling Price (Cost + Markup)
o Wholesaler Selling Price (Producer Selling Price + Markup)
o Retailer Selling Price (Wholesaler Selling Price + Markup)
o Stockturn Rate - # of times the average inventory is sold in a year
o Fixed Costs – costs fixed no matter how much is produced
o E.g. rent, depreciation, insurance
o Variable Costs – sum of expenses that are closely related to output
o E.g. Sales commission, packaging materials, outgoing freight
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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?
Micro-marketing (production-focused) often does cost too much.
- Lack of interest by consumers
- Improper blending of 4Ps
- Lack of understanding of the environment
Macro-marketing (consumer-focused) is much cheaper
- Reflects society’s interests and values
- Directly products and services from producers to consumers in a way
that matches supply and demand
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Chapter 18
Criticisms of Macro-Marketing
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
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Chapter 18
Social responsibility in Marketing
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Environment
Consumer privacy
Legal duties
Ethical standards
Being socially responsible consumers
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