Syllabus

LIQUIDITY RATIOS

The relationship of current assets to current liabilities is an important indicator of the degree to which a firm is liquid. Working capital and the components of working capital also provide measures of the liquidity of a firm. Ratios that directly measure a firm`s liquidity provide clues concerning whether or not a firm can pay its maturing obligations. The current (or working capital) ratio and the acid-Test (or quick) ratio are important ratios that are used to measure a firm`s liquidity. Continue reading “LIQUIDITY RATIOS” »

Incoming search terms:

• 5 significant liquidity ratios (1)
• bakery financial and liquidity ratios (1)
• relationship of liquidity ratio and dividend (1)

ADVERTISING AND SELLING

Advertising is addressed to the masses, while personal salesmanship is geared to specific individuals. Advertising is also designed to presell the product or service, and personal salesmanship is used to follow up with more detailed information and to close the sale. Effective advertising and personal salesmanship work together to achieve the same objective – namely, to stimulate sales. Each is important, and these two functions must operate together as a coordinated effort.

It is the salesperson`s responsibility to keep abreast of all current advertising conducted by her company. She must know the content of each ad and when it appeared. She should be able to explain to dealers the uses and advantages of advertising and show them how it can help them move the product off their shelves after she has sold it to them. The following are some common points she can mention: (1) advertising increases demand for the product or service. A dealer can sell advertised products more quickly than unadvertised ones because the consumer is presold to a certain extent and is already aware and informed about the product; (2) advertising creates faster turnover of inventories, and faster turnover means lower operating expenses and greater profits; (3) through advertising and branding, consumers can identify quality products that they wish to buy again. Such identification also helps to establish a good reputation for the dealer who handles the product; (4) advertising not only helps the customer to identify products, but also provides her with valuable information about their quality and performance.

Advertising also helps the salesperson in many ways:

It develops customer interest and helps to presell products and services.
The salesperson can use advertising to emphasize and reinforce sales points she mentions in her presentations.
Advertising reaches the masses and serves as a means for securing new leads and contacts. Thus, it often reaches some people whom the salesperson, because of distance or other circumstances, is unable to contact.
Sometimes the salesperson is unable to call on all her customers as often as she would like, and advertising helps her sell between calls.
The presentation of new ideas and information through advertising stimulates interest and increases motivation in the salesman herself.
To use company advertising effectively, the salesperson should carry copies of current advertisements to show to prospective buyers. She should also be well informed on her company`s total advertising program and be able to explain its uses and benefits to the buyer. Sometimes a buyer will ask questions on how she can tie her efforts in more effectively with the advertising campaigns, and the salesperson should be able to give the buyer appropriate suggestions. It is also the salesperson`s responsibility to get the buyer to use any direct mail, point-of-purchase, or cooperative space advertising her company provides. Finally, she should obtain the buyer`s reaction to, and suggestions concerning, her company`s advertising in order to make it more effective.

It is recognized that the salesperson`s knowledge of her company, her product, competitive products, and current advertising will vary with her experience and training. It sometimes takes months and even years to prepare for a particular sales position. Furthermore, it is a continuing process, for markets and products are constantly changing. To keep abreast of these changes is an important responsibility of the salesperson, which will greatly determine her success or failure.

Indicate whether each of the following statements is true or false by writing “T” or “F”.

The salesperson serves as a personal representative of the company and should be well informed about its history, growth, and development.
It is enough that a salesperson thoroughly understands her company and its products in order to be successful.
Once a salesperson learns all about her company`s products, she can concentrate on other problems and not study her own products any further.
Advertising is an aid to the salesperson, and she should carry copies of current advertisements to show to prospective buyers.
Answer

True. A salesperson should know all about her company, especially its pricing policies, discounts, delivery, credit, and other services.
False. Being informed about her own company and products is not enough for a salesperson. She must also be well informed about the products or services offered by competitors in order to discuss the relative advantages and disadvantages.
False. Most products are periodically changed and improved, and keeping up to date on product knowledge is a never-ending process.
True. Advertising helps the salesperson by increasing demand for products, establishing a good company image, providing consumer information, reaching people the salesperson cannot, and stimulating and motivating the salesperson herself. The salesperson should use these ads to support her presentation. The salesperson should also provide feedback from the customer to make future ads more effective.

ADVERTISING

Advertising is any form of paid non-personal communication of messages designed to promote products and services to target markets utilizing the mass media.

What are the objectives of advertising?

The objectives of advertising are to educate, convince, and remind target markets.

• Educate. Educational advertising is essential in the early stages of product or service introduction. Education advertising informs the target consumer about the advantages of a particular product or service and how it can be useful.
• Convince. In competitive markets it becomes essential to convince consumers about why one product or service is more advantageous than another in terms of features, services, price, or status.
• Remind. In mature markets it is necessary to continuously remind consumers to use a particular brand or service. It is also useful for overcoming buyer`s remorse, and consumer second thoughts about a purchase, by reminding them of the strengths of a particular product or service. Continue reading “ADVERTISING” »

Incoming search terms:

• what is advertising pre-testing (2)
• objectives of advertising to intermediaries (1)

THE PROMOTIONAL MIX

The promotional mix is the blending of five promotional areas of advertising, sales promotion, public relations, direct marketing and personal selling.

• Advertising. Advertising is any form of paid public and impersonal communication utilizing the mass media. The purpose of advertising is to emphasize the benefits and characteristics of products or services, often using special effects including graphics, color, sound, music, famous personalities, testimonials and related methods.
• Sales promotion. Sales promotions consist of various types of incentives including discounts, rebates, contests, etc., intended to induce a positive response from consumers. Although they are short-term in nature, promotions are designed to induce a rapid increase in sales. Continue reading “THE PROMOTIONAL MIX” »

DEVELOPING THE PROMOTION BUDGET

One of the most challenging marketing management functions is developing the company`s promotion budget. Promotional advertising is extremely expensive, and establishing an acceptable figure is difficult at best. While companies use many different methods, we will describe four widely used methods:

• Funds available method. This is the simplest promotion budget allocation method. The marketing manager simply establishes the budget at the amount established by the company`s management. It does not require any research and makes long-term planning impractical.
• Percentage of current sales method. This method is calculated from last year`s or the current year`s forecasted sales for various product or service categories. It can be justified in that the promotion budget will increase or decrease proportionally to sales and that it establishes linkage between the sales of a product or service category and the amount budgeted for its promotion. However, it encourages more spending during growth periods when less may be indicated, and spends less during periods of contraction when more may be appropriate. Continue reading “DEVELOPING THE PROMOTION BUDGET” »

Incoming search terms:

• content (2)
• marketing policy and estimated budget for companies (1)

MARKETING CHANNEL DESIGN DECISIONS

Marketing channel (also termed channels of distribution) design decisions are critical for successful product distribution. Marketing channels consist of intermediaries who contribute to the product distribution process according to consumer demand. They consist of merchant middlemen, agent middlemen, and facilitators. Companies rely on market intermediaries because of their effectiveness in distributing products as well as their capitalization. A company`s chosen channel members develop long-term relationships built on trust, and directly affect the marketing process including price. Marketing channels always have a producer and a final consumer.

Who are merchant middlemen?

Merchant middlemen consist of wholesalers and retailers who actually purchase the product and resell it. Wholesalers buy in large lots and sell in smaller quantities to retailers who in turn sell individual units to the consumer. Wholesalers and retailers assume the risk of ownership in return for a profit markup when selling the merchandise to others.

Who are agent middlemen?

Agent middlemen are sales intermediaries such as brokers, product representatives and sales representatives who seek others to purchase merchandise. They do not actually purchase any merchandise and are compensated on the basis of a percentage of sales and/or salary depending on whether they are independent business people or employees of companies wishing to sell products.

Who are facilitators?

Facilitators are intermediaries who directly assist in the distribution function without taking title to the goods. They consist of a range of organizations including advertising agencies, financial lending organizations, shipping companies, and storage warehouses.

What is channel length?

Channel length describes the number of intermediary levels existing between the producer and the consumer. A direct, or zero, channel is one where there is a direct relationship between the producer and the consumer (e.g., a neighborhood bakery may be considered a direct channel since the retail consumer purchases the finished baked goods directly with no intermediaries). A one-level channel has one intermediary which is usually a retailer (e.g., a regional bakery goods operation utilizes local food stores to distribute the product to the consumer). A two-level channel has two intermediaries to distribute products to the consumer (e.g., a candy manufacturer sells the product to a wholesaler who in turn sells to the retailer). A three-level channel has three intermediaries normally consisting of an agent middleman who sells to a wholesaler who then sells to a retailer.

How are channels developed?

Developing channels of distribution requires many decisions. Channel distribution needs grow and develop as companies grow and markets change. Increased channel utilization increases costs which are passed on to the consumer. The design of channel development begins by studying the buying patterns of the target customers.

What are consumer buying patterns?

Consumer buying patterns affect a channel`s characteristics and are classified in the following ways:

• Units purchased. Different customers have different purchasing needs. Commercial customers normally purchase larger lot sizes than do the household consumer. Channel modifications have to be made to meet these different needs.
• Turnaround times. Some industries, such as fast foods, use rapid turnaround times as an inherent part of the business, while other businesses may have longer turnaround times. Industries having customers needing rapid turnaround times require more direct channels of distribution than those with slower turnaround times.
• Product assortment. Industries, particularly retail, offering large product assortments have a need for deeper channels of distribution in order to provide product variety.
• Services. High levels of services, including repair, delivery, installation and others, require more intensive channel utilization.

How many intermediaries should be used in a channel?

Determining the number of intermediaries will affect the marketing of a product. Longer channels have more intermediaries and higher costs. On the other hand, intermediary expertise may be essential for successfully marketing a particular product. Thus, a manufacturer may try and limit the number of intermediaries in order to contain costs. The tradeoff in having fewer intermediaries is limited distribution.

As manufacturers continue to penetrate markets, greater distribution is desired involving more intermediaries. While this will increase distribution, it will also increase costs while sacrificing some degree of marketing control. This may result in having the product incorrectly positioned.

Finally, not all intermediaries are the same. The marketer wants only those intermediaries who most effectively work with the company to distribute the product.

How do company characteristics affect channel development?

Generally, the companies having the largest array of retail products, particularly product consumables, have the least need for intermediaries. They are well-enough positioned in the market to deal directly with retail outlets. Smaller companies with smaller product lines have a greater need for the market distribution strengths of intermediaries.

How do product characteristics affect channel development?

Products that are perishable, time sensitive (such as fashions), heavy and bulky, or are highly unique in nature (such as those requiring specialized training) generally have short channels of distribution. On the other hand, standardized products often move through several intermediaries in the distribution process.

How are channel alternatives evaluated?

There are several issues in evaluating channel alternatives. One issue is choosing the most economically effective channel alternative. Companies must evaluate channel intermediaries based on those that have the largest level of sales per unit of selling cost. Other issues concern the extent to which marketing management control will be lost by including a sales agency or other sales broker in the marketing channel. A final variable is choosing a channel intermediary that will still allow the producer to maintain maximum marketing flexibility in fast moving markets.

What are the challenges in managing market channel intermediaries?

Several issues are important in channel management.

• Choosing the most effective channel alternatives. Management must determine what the characteristics are the most effective channel intermediaries. Having done this, management must develop strategies for attracting these channel intermediaries to the marketing channel.
• Maximizing channel member effectiveness. Management must motivate channel members to create the most cost-effective market distribution system for the company.
• Evaluating the effectiveness of intermediaries. Management must develop channel member evaluation systems. While seeking the cooperation of channel members, it is still essential to determine what profit standards must be used as the basis for evaluation

Incoming search terms:

• channel design decisions in marketing (4)
• channel design decisions (3)
• marketing plans for dichotomous middleman pattern (2)
• merchant middlemen and agent middlemen (2)
• bakery channels and intermediaries (1)
• syllabus channel of distribution (1)

NEW-PRODUCT DEVELOPMENT AND MARKETING STRATEGIES

New-product development is essential for a company to remain competitive in today`s rapidly changing markets. Marketing plays an important role in new-product development. Analyses of the selected market segments and the targeted consumer groups are performed, and decisions are made regarding the development of appropriate products. Yet, the introduction of new products is extremely risky. New product failures are estimated to be 80% of all new-product launches in certain markets. There are various levels of failure. A complete product failure is a dead loss and provides no cost recovery. Partial product failures allow the recovery of some variable and fixed costs, while a comparative product failure actually provides some profit, but is relatively less profitable when compared with other products. Note: The introduction stage is characterized by slow sales growth and lack of profits because of the high expenses of promotion and distribution. Competitors are few, basic versions of the product are produced, and higher income customers are usually targeted. Prices may initially be high to permit cost recovery when unit sales are low. Continue reading “NEW-PRODUCT DEVELOPMENT AND MARKETING STRATEGIES” »

Incoming search terms:

• marketing management in new product development (1)
• product development and marketing syllabus (1)

PRODUCT LINE DECISIONS

A product line is a group of products related on the basis of similar customers, marketing methods or product characteristics. The range of product lines establishes a product mix. The two types of product lines are those having complementary and substitute products.

What are complementary products?

In a product line, complementary products are those designed to add to the original product. For example, a company producing computers would also manufacture other items such as a mouse, printers, and software.

What are substitute products?

Substitute products are those that appeal to the same basic market segment, but have different specific characteristics. For example, a soup company has a full line of soups including chicken, tomato, turkey, pea, etc. Each soup can easily be substituted for the other.

How long should a product line be?

Product line length is determined by the number of products supported in a particular product line. Companies seeking high market share and growth have longer product lines.

Profitability is also affected by product line length. A product line has too many products if adding to the line reduces profits, while it has too few if profits can be increased by adding products.

Increasing product length tends to increase associated costs including engineering, inventory, ordering and transportation costs. Companies having successful products often tend to increase product line length in order to increase profits. However, overextended product lines can cause diminishing returns.

Lines can be extended by stretching and filling.

What is product line stretching?

Product line stretching develops when a firm adds additional products to a product line. Product lines can be stretched downward, upward, or both.

What is downward product line stretching?

A company producing “high end” products, in the more expensive range of the market segment, stretches downward by offering lower priced products in the market segment. Offering lower priced products will appeal to a wider range of consumers who may upgrade upon seeing the feature differences between the low and high end products. Using the “downward stretch” can be a competitive marketing strategy to challenge competitors either at the high or low end of the market segment.

What is upward product line stretching?

A company producing “low end” products, in the least expensive range of the market segment, stretches upward by offering higher priced products in the market segment. Companies may consider the “upward stretch” for a number of reasons. They may be well entrenched at the lower end of the market segment, but desire greater unit margins by moving upward in the market (for instance, the Japanese automotive companies implemented an “upward stretch” by successfully introducing luxury cars only after becoming well established in the lower end of the market with compact cars). The company may also be interested in experiencing a faster growth rate at the upper end of the market when those conditions exist.

What is two-way market stretching?

Two-way market stretching applies to companies in the middle of a market that want to expand their product line upward and downward. The basic objective is to become competitive in markets it did not previously serve by introducing products into those respective markets.

SERVICE FIRM MARKETING STRATEGIES

As of 2005 over 70% of all U.S. employment was in the service producing sector. Additionally, services account for over 70% of the gross domestic product and will produce 90% of all new jobs in the next ten years.

What are the characteristics of the services industry?

• Intangibility. Marketing services are intangible since they cannot be seen, tasted, felt or sensed. Services are unknown until they are performed (for example, a woman seeking a new hairdo from the hairstylist does not know what it will be like until it is actually done). Because of the unknown nature of services, marketers must create an image of quality, reliability and value for the consumer.
• Immediate production and consumption. Services are consumed as fast as they are produced. A lawn service leaves a trimmed lawn as soon as it is finished. Therefore, developing a strong relationship with the consumer is critical for the marketer`s success.
• Perishability. Services cannot be saved or stored. It is difficult for service firms to provide the ideal level of service at all times. During periods of peak demand, resources may be overtaxed, while during periods of low demand, resources are underutilized. Organizations providing mass transit often find that trains or buses are overloaded taking passengers to the urban area during the morning rush while they are empty on the return ride.
• Inconsistency. There is no standard in services. The level of quality varies depending on who provides the service as well as when and where it is provided. Resume writers provide a wide variety of resumes depending on who is writing it, what their industry depth of knowledge is, how well they write and what level of interest they have in the consumer.

How is marketing performed for the service sector?

Marketing for the service sector is more complex than tangible products primarily because of the difficulty of defining quality service, and managing productivity.

• Service market differentiation. The greatest challenge for service marketers is differentiating between service providers. If consumers perceive that service providers have indistinguishable offerings, then price competition becomes the only differentiating feature. A method of differentiating services from the competition is to add innovative features. Thus, the marketer adds to the primary service package by offering a secondary service package (for instance, an automotive lubrication service provider adds a secondary service package of automotive manufacturer certification, speed of service, and a consumer comfort facility to distinguish its service from the traditional service station or automotive dealership).
• Service productivity. The service industry is experiencing a need to increase its productivity to remain competitive. However, the service industry is highly labor intensive. Increasing productivity, therefore, is extremely challenging. The following methods can be utilized in the service industry to increase productivity.

Better utilization of labor. Management can research and develop more effective service procedures. Employee skills can be upgraded through training to make their service activities more effective.

Trade off quality for quantity. In order to improve productivity, organizational procedures are developed whereby less time is spent per service unit. This may require changing the nature of the service as well as how services are delivered (e.g., using an automatic phone router which screens and routes phone calls).

Automate the provision of services. The implementation of technology often can reduce the need for labor while increasing consumer satisfaction (such as, installing a fax back system which immediately provides consumers with requested information).

Update current employees. Utilizing training and certification programs, It may be possible to upgrade lower paid employees to perform specified services performed by professional (for example, nurses are now performing many medical services previously performed by doctors).

Allow consumers to perform self-service. Increasingly consumers are substituting their own labor for procedures formerly performed by employees (as in, self-service gas stations).

How can service delivery differentiation be achieved?

Service delivery can be differentiated with the “3P`s” of service marketing: people, physical environment and process. Having better trained and more competent people can be extremely important in the service delivery process itself. Improving the physical environment of the service delivery environment is also extremely important (for example, having a clean and cheerful waiting room can be crucial in improving the overall image of an organization). Finally, improvements and innovations in the process can also make a critical difference in service market differentiation (e.g., the installation of bar code scanners in supermarket expedites the check-out process with improved accuracy while enabling management in maintain a real-time management information system).

BRAND MARKETING DECISIONS

The objective of brand marketing is to increase consumer product or service awareness in order to generate increased and predictable demand leading to consumer willingness to buy and display loyalty. Brand marketing decisions involve a wide range of issues.

What is a brand?

A brand is a name, logo, sign or shape which singularly, or in combination, allow the consumer to differentiate the product or service from others in the marketplace.

What is a brand name? Continue reading “BRAND MARKETING DECISIONS” »