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129 Cards in this Set
- Front
- Back
Retailing
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Efforts aimed at selling products to final consumers for personal, non-business use
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Economic Motivators
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Convenience, Product selection, Special services, Fairness in dealings, Helpful information, Price, Social image, Atmospherics
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Classification Of Ownership in Retailing
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1. independent retailers
2. chain stores 3. franchise outlets |
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Benefits of Sole Proprietor & Gen. Partner
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1. No special fillings or rules for operating the business
2. P&L reported on owners personal income taxes 3. No registration required or fees |
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Drawbacks of Sole Proprietorship & GP
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1. No protection from liability claims
2. Personal assets at risk |
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Benefits of LLC
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1. Owners have limited personal liability for claims against
the business 2. Flexibility to apportion P&L |
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Drawbacks of LLC
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1. Distribution subject to self-employment taxes
2. VC prefer more traditional corporate structure |
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Benefits of S Corp
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1. Personal liability for claims against business is limited
2. P&L reported on owner’s personal income tax statement 3. Salaries subject to income & employment taxes |
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Drawbacks of S Corp
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1. P&L can be allocated only in proportion to each
shareholder’s ownership interest 2. Some states tax S Corp like C Corp |
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Benefits of C Corp
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1. Extensive case law support owners limited personal
liability against claims 2. Lower tax rate vs. LLC for first $50,000 - $75,000 of profits 3. Favored by venture capitalists |
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Drawbacks of C Corp
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1. Double taxation problem
2. Separate tax structure requires separate accounting 3. Admin overhead – Board of Directors, annual meeting |
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Classification of Retailers Level of Service
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1. full service
2. self-service |
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Classification of Retailers in Product Assortment
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1. breadth
2. depth |
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Classification of Retailers in Price
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1. gross margin (% of sales)
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Conventional retailer in terms of selling
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use low volume/high margin; “buy low sell high” philosophy
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Classification of Conventional Retailers
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General Stores, Limited-Line Stores, Specialty Store, Department Stores
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.General Store
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carry anything they could sell in
reasonable volume |
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Limited-Line Stores
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specialize in certain lines of
related products rather than a wide assortment |
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Specialty Stores
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small; distinct “personality”;
excellent service (Sierra Designs) |
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Department Stores
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combination of limited-line
stores and specialty stores (Nordstrom’s) |
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Goal of Mass-Merchandising
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offer low prices to get faster turnover & greater sales volume
by appealing to larger markets |
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Evolution of Mass-Merchandising
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1.Supermarket
2. Catalog Showroom Retailers 3. Discount Houses 4. Hypermarkets 5. Warehouse Clubs 6. Category Killer |
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Supermarkets
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large grocery stores; self-service
orientation; wide assortments (Safeway) |
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Catalog Showroom Retailers
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offer several lines in
display showroom; hold backup inventories (Service Merchandise) |
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Discount Houses
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offer “hard goods” (cameras, TVs,
appliances) at substantial price cuts |
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Hypermarkets
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carry food, drugs, & services that
consumers purchase routinely (Super Target) |
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Warehouse Clubs
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offer appliances, household items
& groceries; usually sold in bulk; cash-carry basis; may be a membership fee (Costco) |
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Category Killer
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offer single-line merchandise; use
self-service, discount prices, high turnover (Best Buy) |
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Clicks vs. Bricks in terms of customers
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Clicks: young, educated, upscale
Bricks: Cross Section |
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Clicks vs. Bricks in terms of Days of Week they shop
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Clicks: Weekdays
Bricks: Weekends |
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Clicks vs. Bricks in terms of customer service
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Clicks: Weak but improving
Bricks: Varies, better than online |
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Click vs. Bricks in terms of products
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Clicks: Emphasis on one-time
Bricks: Emphasis on routine |
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Click vs. Bricks in terms of examining the product
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Clicks: Loss of tactile inspection
Bricks: Ability to appraise |
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Clicks vs. Brick in terms of comparative info.
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Clicks: more extensive, sometimes poorly organized
Bricks: Often Weak, limited to packaging |
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Clicks vs. Bricks in terms of how entices the customer to buy there
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Clicks: Media experience
Bricks: Social experience |
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Clicks vs. Bricks in terms of pricing
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Clicks: Product price lower, shipping and handling can be costly
Bricks: Product prices higher, no shipping expense |
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Clicks vs. Bricks in terms of shopping hours.
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Clicks: 24/7
Bricks: time frame |
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Scrambled Merchandising
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offer any product line that can be sold profitably
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U.S. Landscape of retailers
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1,115,900 retailers
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Small retailers
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56% of the pool; annual sales less than $1
million |
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Big retailers
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11% of the pool; annual sales more than
$5 million |
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What kind of chain do small retailers do?
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Cooperative chains and Voluntary chains
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Voluntary chains
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wholesaler sponsored
(IGA) |
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Cooperative chains
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retailer sponsored
(True Value Hardware) |
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Franchiser
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originates the trade name, product, methods of operation
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Franchisee
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pays the franchiser for the right of use
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Franchise agreement
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usually lasts for 10-20 years; it is legally binding
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Typically, the franchisee pays
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1. initial, one-time franchise fee
2. pays weekly, biweekly, or monthly royalty fee (3-7% of gross revenues) 3. advertising fees (4% of gross revenues) |
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Why Franchise?
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Risk relatively little capital, Product has already been established, Technical training & assistance , Quality control standards, Substantial lower failure rate , Growing in popularity
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Factory Outlet
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an off-price retailer that is owned and operated by the manufacturer
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Direct retailing
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the selling of products by representatives who work door-to-door, office-to-office, or at home sales parties
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Direct Marketing
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techniques used to get consumers to make a purchase from their home, office, or other non-retail setting.
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Telemarketing
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is the use of the tele-phone to sell directly to consumers.
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Destination Stores
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stores that consumers plan to visit
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Business Format franchising
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is an ongoing business relationship in which a franchisee uses franchiser's name, format, or method of business in return for several type of fees.
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Retailing Mix
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product, place, promotion, price, presentation, and personnel
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Product (Retail)
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Width and depth of product assortment
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Place (Retail)
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Location and Hours
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Promotion (Retail)
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Advertising, publicity, and public relations
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Personnel (Retail)
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Customer Service and personal selling
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Presentation (Retail)
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Layout and Atmosphere
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Markup Pricing
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Resellers set prices by using a markup;
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Markup
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a dollar amount added to the cost of a product to reach the selling price
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Markup (percent) is based on...
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Selling Price
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A standard markup is acceptable when...
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(a) covers the firm’s operating expenses
(b) provides a reasonable profit |
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Stockturn rate
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the number of times the average inventory is sold in a year
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Markup: Algebraic Method
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cost + markup = selling price, percent*selling price = markup
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Markup Price: Useful Equations
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Markup % = Markup / (Cost + Markup),
Selling Price = Cost / (100% - Markup % |
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Break Even Equation
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BE = [FC/(SP – AVC)]
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Demand Pricing Strategies
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1. Value
2. Reference 3. Leader 4. Bait 5. Odd-Even 6. Prestige 7. Demand-Backward |
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Value Pricing
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Offer the highest value relative to competitors
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Reference Pricing
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Taps the price consumers expect to pay
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Leader Pricing
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Offer attractive prices to get consumers into retail stores
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Bait Pricing
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Offer a bargain, but sell under protest
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Odd-Even Pricing
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Offer prices that end in certain numbers
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Prestige Pricing
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Offer a rather high price to suggest high quality or status
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Odd-Even Pricing
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Offer prices that end in certain numbers
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Demand-Backward Pricing
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Offer an acceptable final consumer price and work backward to what
a producer can charge |
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Price =
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clear, tangible cue; higher prices set higher expectations
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Three Cs that impact price
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Company = cost focus
Customer = demand focus Competition = market focus |
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Target Return
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percentage of sales or capital investment; yardstick idea (GE)
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Satisfactory Profits
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returns that insure a firm’s survival
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Profit Maximization
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charge all that traffic will bear
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Sales Growth
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seek some level of unit sales, without referring to profit (Amazon)
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Market Share
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seek to gain a specific share (percent) of a market, benchmark idea (Coke)
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Status quo
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hold a “don’t rock the boat” mindset; goal: non price competition
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New-Product Pricing Strategies
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skim, penetrate
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Basic Properties of a great ad
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1. Strategically Sound
2. Creativity Concept 3. Execution |
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Persuasion Process
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1. Stopping Power
2. Pulling Power 3. Locking Power |
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Appeal
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efforts that make a product attractive or interesting to target
audiences |
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Types of Appeals
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1. Rational - utilitarian needs
2. Emotional - psychological needs* 3. Status - quality needs 4. Fear - social approval needs 5. Appetite - physiological needs |
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Execution
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speaks to how an appeal is presented
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Factual Message
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focus on product attributes &
benefits (Ford F-150) |
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Technical Evidence
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scientific evidence is highlighted
to support a claim (Intel) |
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Demonstration
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illustrate key product benefits by
showing uses (UPS) |
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Comparison
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direct or indirect comparison to a
competitive brand (Hertz) |
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Testimonial
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a person speaks on behalf of the product (Honda)
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Slice of Life
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portray real-life situations featuring problems to be solved (Tide Acti-Lift)
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Animation
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focus children audiences (TMNT, Hyundai –Brett Favre)
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Personality Symbol
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central character who becomes
strongly associated with the product (Geico) |
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Fantasy
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relies on imagery or illusion (Gatorade)
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Dramatization
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creates suspense in the form of a short story (Under Armour)
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Humor
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easy to remember, difficult to create (Dude, E*TRADE)
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Creative Issues
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Is the creative approach consistent with the brands marketing objectives, Is the creative approach appropriate for the target audience?, Is the approach clear,understandable, and convincing for target audiences?, Is the message sacrificed for creative execution, Is the ad truthful/tasteful
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Effective Persuasive Talk
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Effective political ads require verisimilitude, Dialogue quality elicits attitudinal and behavioral response, Delivery quality engenders emotional response
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Meaning Transfer (celebrity endorsements)
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1. celebrity derives meaning from past roles
2. meaning transfers to the endorsed product 3. consumers gain meaning via purchase |
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Source Attractiveness
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similarity, familiarity, liking
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Caveats regarding celebrity use
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Overshadow the product, Overexposure, Target audiences, Risk to marketers, Synergy: product; target; celebrity
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Lecture
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adv in which the speaker confronts the audience; direct address
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(Lecture ad) Persuasion =
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quality of argument or facts
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Lecture ads assume...
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the audience wouldn’t dare challenge an expert
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(Lecture ad) From the viewer’s stance
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the speaker is trying to impose his/her ideas on me
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Lecture ads must have
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1.Credible speakers
2.Viewer appreciation 3.Supportive illustrations |
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Speaker credibility hinges on:
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1.Expertise → a speaker’s ability; having the proper credentials
2.Trustworthiness → willingness to tell the truth without compromise |
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Advantages of Lecture ads
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1.Cost savings
2.Compact 3.Explicit |
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Disadvantages of Lecture ads
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1.Potential for counterarguments
2.Potential for source derogation |
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Drama
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adv in which characters talk to each other and ignore the audience; indirect address
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(Drama ad) Persuasion depends on
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the appearance or semblance of truth
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Dramas are driven by
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inferences
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(Drama ad) From the viewer’s stance
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the conclusions I draw are my own ideas
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Drama ads must
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1. the appearance or semblance of truth
2.Engage viewers 3.Allow viewers to sample emotional rewards associated with the brand |
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Advantages of Drama ads
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1. Miminal Counteragruements and ource derogation
2.Unleash the power of personal inference |
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Disadvantages of Drama ads
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1.Viewers may miss intended inference
2.Difficult to achieve verisimilitude 3.Works more so with TV; rarely print |
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Personal Selling
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person-to-person communication process, message flow from sender => receiver uninterrupted, dyadic communication; allows the message to be tailored
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Order Getter
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seek out potential customers
persuade them to buy |
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Order Taker
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assist customers who
have already decided to buy |
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Missionary
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work for producers, don’t take orders, build goodwill or educate buyers
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Technical Specialists
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assist salespeople and provide technical insight
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Sales Force Functions
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1. Locate new customers
2. Underscore product benefits 3. Provide strategic insight 4. Act as visible agents of the company |