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MARKETING EDUCATION TERMS REVIEW

ADVERTISING

Advertising is any message paid for by an identified sponsor and appearing in the media; a form of promotion.

In order to be considered advertising, the message must be paid for.

In order to be considered advertising, the sales message must be non-personal. If the message is delivered on a person-to-person basis, it becomes personal selling.

In order to be considered advertising, the sponsor must be identified. If the sponsor is not identified, the message is a form of propaganda.

Types of Advertising

Promotional advertising attempts to motivate people to purchase products or services or ideas.

Institutional advertising attempts to create a favorable image of the company that is doing the advertising.

Retail advertising attempts to motivate people to shop at a particular store. Retail advertisers usually use newspapers and/or local radio and TV. They usually do not use advertising agencies because they charge commissions and because the store is usually working under such strict deadlines and doesn't have time to work through agencies.

Cooperative advertising is where a manufacturer of a brand name product joins with a retailer in advertising. The brand name products are featured in the ad, and the name of the retailer selling the product appears in a prominent spot. The manufacturer often provides retailers with complete advertising material for cooperative advertising. Retailers merely add the store's name and address and purchase space for the ad in a local newspaper. Then they share the cost of the ad.

Wholesale advertising is where wholesalers or manufacturers place ads in magazines that circulate among retailers. They advertise also in trade magazines. Wholesalers will place ads in these magazines to tell retailers why they should stock their brands.

ADVERTISING AGENCY

An advertising agency is a business that specializes in creating, planning, and placing ads for other businesses and organizations. The companies using advertising agencies are referred to as clients.

An advertising agency helps the client decide what the advertising of a business should say or show; creates, writes, and designs ads and commercials; purchases the art and type; helps produce radio and TV ads; orders ad space and time; sends out the advertising and checks to make sure it ran; checks the bills for accuracy and then pays them; and, through research, investigates the effectiveness of advertising being used.

Most of the income an ad agency makes comes from commissions. For example, if you use an ad agency for ad placement services, the ad may cost you $100. This price usually includes a fee or commission for the agency, so the newspaper with which the ad was placed may charge only $85; therefore, the agency's fee is $15.

ADVERTISING MEDIA

The main advertising media include newspaper, radio, television, outdoor, direct mail, magazine and specialty advertising. Advertising media are the vehicles or channels used by advertisers to communicate a message to potential customers.

The media a company uses depends upon many factors such as the target market, the type of message, and the objectives of advertising. For example, if a producer of hair conditioner wants to attract young females, the company may select popular young women's magazines (such as Glamour). If the product is a tennis racket, the advertiser may use a TV tennis match, a sports magazine, or the sports section of the newspaper. So, the media selected depends on many different factors.

Advertising Media Types

Direct mail advertising is advertising sent to prospective buyers through the mail.

Outdoor advertising includes signs and posters, painted bulletins, billboards, and other rented spaces along city streets, highways, etc.

Transit advertising is advertising used in buses, cabs, and subways; and in airline, bus and railroad terminals.

Specialty advertising is advertising which provides a useful product with an advertising message on it. Pens and pencils, calendars, balloons, key rings, and chains with companies' names on them are examples of specialty advertising.

Television advertising is advertising broadcast on TV. Spots are usually 15, 30, or 60 seconds in length.

Radio advertising is advertising broadcast on the radio. Spots are usually 15, 30, or 60 seconds in length.

Magazine advertising is advertising printed in magazines. Magazine ads can be printed either in black and white or in color.

Newspaper advertising is advertising printed in the newspaper. Newspaper ads are printed most frequently in black and white but may be printed in color. They are sold by the line.

AIDCA FORMULA

When we purchase products, our minds go through a process called the AIDCA formula in such a way that a purchase will be made. The AIDCA formula is listed below:

Attention: Attract the customer's attention to a product or service through a good approach, advertising or using visual merchandising.

Interest: Interest your customer by showing product features. When advertising, start talking about your product's benefits.

Desire: Show the potential customer how this product will fill his/her needs and wants.

Conviction: Convince the customer (if this is honest) how this product or service will enhance his/her lifestyle and that now is the time to purchase.

Action: Ask the customer for the sale. If we are not selling directly, ask the customer to take the action by providing a coupon, asking the customer to visit his/her local retailer, etc.

Since consumer behavior is complex, it is important to be aware of different ways the consumer responds, his motivation for purchasing, and what makes the consumer satisfied. Using the AIDCA formula, you can help the consumer and the business.

ASSETS

Assets are anything of monetary value a company owns. This includes cash, accounts receivable, merchandise inventory, equipment, fixtures, supplies, land, and buildings.

All the things a business owns are assets.

If a business owes for something, it is a liability.

The worth of a business is called equity or capital.

Fixed assets are assets that are a fairly permanent part of a business and are expected to last a long time such as buildings, land, and major equipment. The money used to purchase fixed assets is called long-term capital.

Current assets are assets that are easily liquidated, such as cash and accounts receivable.

AUTOMATION

The increased use of machines to get things done is known as automation. Mass production is possible through the use of machines, giving products more uniformity and making them more affordable.

BETTER BUSINESS BUREAU

The primary purpose of the Better Business Bureau is to promote truth in advertising. The BBB is not a government agency and has no enforcement power, but it helps consumers by making them aware of businesses that have not used fair business practices. They will often contact a business and try to persuade that business to correct poor practices.

A service the BBB performs is publicizing information about unfair business practices and what to watch out for as consumers. Sometimes, the BBB will cite specific companies publicly for "ripping people off." As a result, the BBB is considered a powerful tool of persuasion, trying to make sure companies use no false advertising.

BUYING (as a marketing function)

Companies often hire people to decide what, when, and how much merchandise to purchase, what price to pay, where the merchandise should come from and, sometimes, what price is fair for the consumer.

Buyers are responsible for developing written plans of merchandise stock and orders called merchandise plans. They will also develop sales budgets, which lay out how much money they have to spend in a certain time frame.

Buying is a tough job -- you must know your customers' likes and dislikes, market trends, how fast merchandise moves, etc. Food buyers must also know how much to buy so food does not spoil before it is sold to the ultimate consumer.

Small stores will generally not have buyers; in these cases, the manager, assistant manager, etc. do the buying, because the store cannot really afford to pay a person to perform only this job function.

CONSUMER BUYING MOTIVES

Buying motives are the needs, desires, and impulses that drive a consumer to purchase a particular good from a particular business. Why do customers purchase what they do? Why do they buy where they do?

Whatever motivates them to do what they do when it comes to purchasing things is called buying motives.

You need to understand the buying motives of your customers. For example, do you see why it would be your goal to have a discount store located on a corner where lots of people go by every day? And do you see why your Lexus Automobile Dealership might be located some distance from the central shopping district?

Emotional buying motives involve an individual's desire for pride, status, romance, or adventure.

Rational buying motives involve careful, formal reasoning on the part of the buyer.

Patronage buying motives make someone want to shop at one store rather than another even though they offer the same goods.

Impulse buying motives involve buying something without planning for it. Candy at the check- out stand of a grocery store is a good example.

CAPITAL

Capital consists of equipment and other facilities needed to produce goods and services. In business, capital is often thought of as money that is needed to run a business.

Money needed to start a business and keep it going is capital. Working capital is money needed to continue a business. Initial capital is the money needed to start it.

CAPITALISM

Capitalism is an economic system in which most of the economic resources are owned by individuals rather than by the government. This system is also known as the free enterprise system.

CATALOGUE (as a form of selling)

A catalog may be defined as a list of items with prices and descriptions of specifications. The primary purpose of the catalog is to get the customer to buy the products listed. The customer may mail an order in, telephone an order in, or go in person to the catalog store to place an order.

Most manufacturers and wholesalers also publish catalogs, which describe their merchandise. The catalogs are distributed to retailers who make use of them when ordering merchandise for resale.

CHAINSTORE

Chainstores are a group of stores, usually of the same type, that are owned and managed centrally. They could also represent a group of retailers who voluntarily band together to compete against the other chains. This is called a voluntary chain.

CHANNELS OF DISTRIBUTION

The route along which goods flow is called a marketing channel or channel of distribution.

Any person who assists in moving the goods from the producer to the consumer is known as a middleman. The wholesaler is a middleman who buys from producers or other wholesale dealers and resells to retailers or the institutional users such as hospitals and schools. The retailer is a middleman who performs the last step in the marketing process by selling the goods to the consumer.

When a manufacturer skips all middlemen, including retailers, and uses its own salespeople (or sends catalogs directly to the consumer) this is known as direct selling. When the consumer buys directly from the manufacturer, this is known as direct buying.

CHARTER (for incorporation)

A Corporation is created by law for the purpose of conducting business. In most cases, corporations are formed by securing a charter from the province in which the corporation is to operate in. The charter states the purpose for which the corporation is being formed, gives rules for voting for directors, lists names of principal owners, tells how much stock the corporation can issue, and indicates what the life of the corporation will be.

One advantage of buying stock is limited liability, meaning you can lose no more than the amount you have invested in the stock. Creditors of the corporation cannot claim any of your personal property. The extent of your risk is limited to the amount of your investment. This encourages investment in corporations.

Charters usually are written to last a long time. Popular terms expressed in many corporation charters are "99 years" and "perpetual life." This gives the corporation stability and makes it easier for it to borrow money.

COMMON CARRIERS

Common carriers are primarily trucking operations, which will haul goods or personal property for the general public. Therefore, if the company has negotiated a special agreement with certain customers and limits its services to these persons, or if it is owned and operated by business firms and individuals who confine their transporting of goods to their own products, they would not be a common carrier.

COMPETITION

Competition is the struggle of contest between two or more businesses for the same market.

Competition offers the consumer many advantages. It gives the consumer a choice. It forces business to offer better products, better service, and wider selections at lower prices.

Non-price competition dominates, however. In fact, about 10 percent of the cost of goods and services produced in the United States are spent for non-price competition. For example, they compete on the basis of services offered prestige, etc.

The key is differentiation. The marketer attempts to get you to differentiate his product from others. Bayer Aspirin sells, by far, more aspirin than anyone does. But, aspirin is aspirin is aspirin! Somehow, they have gotten us to imagine a difference. Bayer has advertised quality and has made us believe it!

CONSIGNMENT

Consignment is when the merchant does not pay for the merchandise he has on sale until he sells it. If you take possession of goods and store them until they are sold, you don't have to pay for them until you sell them if you have them on consignment.

CONSUMER

An ultimate consumer is anyone who buys goods and services intended to satisfy his/her individual, personal needs and wants.

Industrial consumers will purchase and use goods or services for their businesses. They don't change the goods, resell them, or reprocess them. The goods are used to provide goods or services to their customers. When Pizza Hut buys chairs for their dining area, or a government office buys paper clips, they are in the role of the industrial consumer.

CONVENIENCE GOODS

Convenience goods are goods which the customer buys frequently and without much attempt to shop around. For example, when you buy a Coke, a loaf of bread, frozen food, or a newspaper, you are purchasing convenience goods. Beckers and 711 specialize in convenience goods.

Because of the nature of convenience goods, they are often sold in vending machines.

COOPERATIVE (as a form of ownership)

The cooperative is another form of business organization. Under this organizational plan, the business is owned and controlled by its customers.

Like a corporation, a cooperative is financed through sale of stock; however, each stockholder, called a patron, has only one vote no matter how much stock he owns.

The management is appointed by patrons. The cooperative is a legal entity and has limited liability. As a rule, many people are involved in a cooperative, credit is usually obtained more easily and more capital is involved than with a partnership or sole proprietorship. However, a cooperative usually has less capital and credit than a corporation.

COPYWRITER

The copywriter has the responsibility for writing copy for the various advertisements that the firm runs.

The artist has the responsibility for laying out the advertisement and creating the illustrations, which will

be included with the ad.

Good copywriters must be masters of expression and have an unusually good understanding of psychology. They must be able to write advertising copy that will create the desired impression of a product in the consumer's mind. To do so, they must have a thorough knowledge of the appeal for a product and of the market for a particular product.

CORPORATE IMAGE

Some years ago companies tried to create a favorable image by telling their potential consumers how great their firms were. Customers often found such promotion techniques offensive. Today, businesses go for the "you" approach. The self-interest of the consumer is considered above all. The company is presented in terms of what it can do for the potential customer and for the total public good. Corporate image refers to how customers feel about doing business with a particular firm.

CORPORATION (see Charter)

A corporation is created by law for the purpose of conducting business. The corporation sells stock, and each share of stock is a share in the business. If the business makes a profit, it may pay part of this profit to its owners in the form of a dividend. The dividend is distributed by paying out a certain amount for each share of stock owned. Thus, each stockholder receives payment according to the number of shares he owns. Limited liability means that the owner of stock has no liability beyond the amount he paid for the stock. Stockholders have the right to vote for directors of the corporation. Directors do not have to declare dividends but, since they are elected, they usually do.

CREDIT

Credit is the ability to obtain goods and services or money in exchange for a promise to pay later. The "Three C's of Credit" refer to the three characteristics creditors look at when making a decision whether to lend or not to lend, and these are listed on the next page.

Character What kind of person are we dealing with? Does s/he have an education? Does s/he already have a good work history? Is s/he healthy? Does s/he tend to hold a job?

Capacity What potential does s/he have to make money? Does s/he have an education? Does s/he already have a good work history? Is s/he healthy? Does s/he tend to hold a job?

Capital What does s/he own already that could be used for collateral? What does s/he have that could be retrieved in a lawsuit? What does s/he have in the bank?

CUSTOMER TRAFFIC

The retailer cannot produce sales without adequate customer traffic. Customer traffic is the number of people who go into a store during any given time. Methods used to increase customer traffic include the use of personal services (such as beauty shops, lounge areas, etc.) frequent sales, trading stamps, giveaways, contests, games, etc.

DECENTRALIZATION

Decentralization is the trend away from downtown shopping and downtown businesses.

DEMAND

The amount of a product that customers are willing to purchase at different prices is called demand.

If demand increases while supply is steady, prices rise.

If demand decreases while supply is steady, prices go down.

If demand stays the same while supply increases, prices go down.

If demand stays the same while supply decreases, prices rise.

DEPARTMENT STORE

A department store is a retail establishment that employs 25 or more people and sells clothing for men, women, and children; furniture and appliances; and household items and dry goods. Many department stores, of course, sell other items as well.

Department stores are organized into individual departments according to the type of merchandise or services sold.

A department store is essentially a collection of several single-line stores under one roof and management. They are responsible for about 10 percent of total retail sales volume in the nation but are surpassed by grocery and food stores, which account for nearly 25 percent of all retail sales.

DISCOUNT STORE

A retail store that makes a policy of selling merchandise at reduced prices is known as a discount store.

Often, discount stores have increased customer services and improved their decor by acquiring expensive buildings in high rent areas. In order to continue to offer low-priced goods, many discount stores are now marketing private labels. An example is K-Mart, which is selling more and more goods that carry only the K-Mart label.

DISPLAY

Display means showing merchandise in such a manner that it attracts the attention of the potential buyer of that merchandise. The display must be put together in such a way that it attracts attention, creates interest, and encourages desire by the customer to buy.

It has the same role as advertising, except that advertising is carried to the people while the people must come to a display.

Window displays should attempt to attract attention and create enough interest to get people to enter the store. If it portraying high fashion, it would feature only one or two items. If it is portraying an inexpensive image, it should have many items and signs proclaiming low-priced merchandise available in the store, along with price tags for encouragement.

Open displays are located in the store where merchandise is out in the open and customers can handle and examine it. This is the most common type of display in use in retailing today. Items displayed at eye-level will outsell those that are displayed above or below eye-level. This is so important that manufacturers will pay the retailer for a preferred shelf location. Also, the more rows of shelf space that are devoted to a particular article, the higher sales will be of that article.

Closed displays are displays inside showcases. The purpose of closed displays is to protect the merchandise. Closed displays are used for items that are easily stolen, broken, or soiled.

Dump displays are displays where merchandise has been dumped on a table or in a bin. Often this merchandise will outsell a formal display, because people are sometimes hesitant to mess up a perfectly formed, symmetrical display. It also gives the impression, accurate or not, that the items are on sale.

DROP SHIPPER

A drop shipper is a wholesaler with a limited function. The drop shipper takes orders from retailers and arranges for delivery of goods directly from a producer. Often the drop shipper operates with little more than an office, a note pad, and a telephone. Because s/he does not maintain a warehouse, break bulk, or offer a delivery service, s/he sells at lower prices than service wholesalers. The drop shipper assumes ownership of the goods before reselling them, but does not physically handle the goods.

The advantage of a drop shipper to retailers is that s/he reduces freight costs to a minimum. Shipments can be sent directly from producer to consumer. Drop shippers deal almost exclusively with bulky items, such as coal, lumber, and building materials. These are items that do not require bulk-breaking and which customers are willing to accept in railroad carloads or truckloads.

DURABLE GOODS

Durable goods are those goods, which last a long time. Appliances, furniture, and automobiles are all examples of durable goods.

ECONOMICS

Economics is the study of how people make and spend their incomes. It is also the study of how, with limited resources, we produce and make available products and services to help satisfy as many of our unlimited needs and wants as possible.

ECONOMIC SYSTEMS (types of)

An economic system is a plan that a nation has for making decisions on what to produce, how to produce, and how to distribute goods and services.

There are three main economic systems in existence today: Capitalism, Socialism, and Communism. The main differences among these systems are in whom owns the economic resources and who makes the decision about production.

Under Capitalism, mainly individuals rather than the government own economic resources. It involves the right to own property, the right to be involved in private enterprise, the right to choose what you buy, and the right to choose what you do for a living.

Under Socialism, the government may own and operate such basic enterprises as steel mills, railroads and airlines, power plants, radio and TV stations, and banks; however, the extent of government control and ownership is decided by the people. If they want more or less government control, they can vote for it.

Under Communism, the government has tight control over the economic resources. Farms, mines, factories, stores, newspapers, hospitals, railroads, and telephone services are all owned and run by the government. The government decides what goods and services are produced and it decides how they are to be produced. Prices and supplies of products such as clothing, TV sets, watches, and cars are set by the government. Most people do not have the freedom to decide how far they will go in school or what jobs they will have. The government mostly fixes Job opportunities and wages.

EMBEZZLEMENT

When an employee steals money or shares of stock from the company for which s/he works, s/he has committed the crime of embezzlement.

Specifically, pilferage is often the word used for theft of merchandise by an employee.

ENTREPRENEUR

An entrepreneur is an individual who is in business for him/herself, such as a sole proprietor or a single person who owns a franchise.

FAD

A short-lived fashion is a fad.

A fashion is defined as a style accepted by the majority of consumers at any given time.

F.O.B.

FOB means "free on board." FOB point determines 1) the point from which the buyer pays the transportation charges, and 2) when legal ownership of goods, called the title, passes to the buyer.

The most common FOBs are: FOB shipping point, FOB city of destination, and FOB store.

FRANCHISE (as a form of ownership)

A franchise is where a supplier, or franchiser, who has developed a pattern for a particular type of business gives a retailer, or franchisee, the right to conduct such a business and sell certain goods and services under the company name in a specified location.

The franchiser is usually paid in one of the following ways:

1. a straight fee for the use of the company's/individual's name

2. a percentage of sales

3. a percentage of profit from the sale of equipment, supplies

or finished products/services

The advantages of owning a franchise over an independent retailer are as follows: initial investment is usually less, lower operating costs, established reputation, management assistance to overcome the inexperience of a new store owner, reasonable margin of profit and motivation.

The disadvantages of owning a franchise over an independent retailer are as follows:

franchise fee may be high, much standardization (so a franchise may have less independence), difficult and expensive to cancel a franchise agreement.

FREE ENTERPRISE

The free enterprise system, also known as capitalism, is an economic system where individuals rather than the government own most of the economic resources. Freedom of ownership, profit, and risk are all characteristics of the free enterprise system.

GROSS DOMESTIC PRODUCT (GDP)

Gross Domestic Product, or GDP, is the sum total of the dollar value of production of goods and services in a nation for a specified period of time, usually a year. It is a measure of the dollar value of production.

GOODS

Consumer goods are those we use for personal use.

Industrial or Business goods are used to make products or provide services.

Impulse goods are products/services that are purchased without much, if any, thought. Impulse goods may be luxuries, convenience goods, repeat goods, or low-priced goods that are purchased on impulse. For example, if you are standing at the checkout stand and see a candy bar and purchase it, even though you had not intended to, you are buying an impulse good.

Shopping goods are goods/services, which a customer is willing to shop around for, and compare different stores, brands, services, features, quality, or prices. You usually think more about purchasing before you buy this type of good. For example, if you were going to buy a dress, a suit, or a stereo, you would usually check around until you found the one that was right for you.

Specialty goods are goods with unique characteristics for which the customer is willing to make a special effort to buy. Gourmet foods, photographic equipment, stereo equipment, and high fashion clothing are all examples of specialty goods. With specialty goods, you are usually concerned about brand names.

GOOD WILL

Anything that is done for the primary purpose of creating good feelings between buyer and seller is termed good will. A store sponsors a Fun Run to help an organization and to show the public how the company cares about the community. This results in a feeling of good will toward the company.

INITIATIVE

When a person sees a job to be done and has the determination to go ahead and do it, that person possesses initiative. Many times initiative is a trait recognized by corporate leaders and personnel directors as a prime requirement in the selection of persons for supervisory and management training.

For example, after learning about your business and your job, you find additional jobs to be done, learn how to handle emergency situations, and handle new duties without the assistance of others and without being asked.

Initiative is different from industriousness, which means a steady, earnest effort. Initiative is different from enthusiasm, which means eager and intense interest.

Initiative is different from tact, which is the ability to say and do the right thing at the right time. Asking your mom or dad for money for a new car the same night you wrecked yours would not be tactful.

INNOVATION

The development of new ideas or anything that hasn't been thought of or made before is innovation. A person who comes up with these new ideas is innovative, or is an innovator. Computers would be considered an innovation in the way we keep records.

JOBBER

A jobber is a person who purchases goods from manufacturers in large quantities and sells them to retail dealers in small quantities. Snap-On Tools is an example; a middleman of this type delivers the goods to the retailer in his/her own truck.

LABOR UNION

A union is a group of workers who have banded together for a common purpose. The principal reasons for which a union is organized are to improve working conditions and to get better salaries and fringe benefits. Some of the benefits unions have obtained for their members include holiday pay, retirement pay, and health services.

A union acts as a bargaining representative for a group of workers. It negotiates with the employer concerning terms and working conditions of employees. Many times, this is why people join unions; they have a better bargaining position when the union represents many people like themselves. UAW (United AutoWorkers) is an example of a union.

LIABILITY

A liability is a term used for any amounts owed by the company. Accounts payable, notes payable, and loans payable are common liabilities.

Unlimited liability means that a person in a business venture could lose everything that a person owns. When a person is in business for him/herself and not incorporated, s/he could lose his/her house, car, etc., if someone sued the company.

Limited liability, then, is when a person is responsible only for the amount of his/her investment. For example, if an individual purchases GM stock, s/he is part owner; but, if something happened to GM, s/he would lose only the investment amount.

LIMITED PARTNERSHIP

A limited partnership is one whose liability extends no further than the amount of his/her investment. This limited liability must be stated in the partnership agreement.

LOBBYIST

A person who fights for the type of legislation, which will help your type of business or fights against the type of legislation, which would hurt you, is a lobbyist.

LOSS LEADER

A leader is something that draws customers into a store. A loss leader is something you sell at below your own cost. Leader items should attract a store's target market so that the customers who come in because of the leader item will buy other things.

MANUFACTURER'S AGENT

An independent representative who handles part of the output of one or more manufacturers within a sales territory is known as a manufacturer's agent. S/he has little freedom in adjusting prices or in making promises on behalf of the manufacturer. The manufacturer's agent handles goods such as non-fashion clothing, furniture, housewares, and home furnishings.

MARKET

A market is any place where goods or services are bought and/or sold.

The target market is the ultimate consumer, specifically targeted by the producer or retailer, to whom a particular product or service will be sold. For example, Rolls Royce targets people with high incomes for its automobiles. Josten's targets high school seniors for its class rings.

MARKETING

Marketing is simply the process of buying or selling. It is all of the activities that direct the flow of goods and services from the producer to consumer. Marketing brings consumers and producers together.

Value is added to products through marketing. The creation of utility adds value to products and services. The four types of utility are: form, place, time, and possession.

The value-added concept means that value is added to the product through marketing. Consider the Minnesota resident who wants strawberries in midwinter. Strawberries growing in Florida are of no value to the potential customer unless they can be transported to Minnesota. This action increases place utility. It also increases value because the Minnesota resident can now purchase the strawberries.

Is this increased value worth the increased cost of transporting the strawberries? If not, then the arrangement would not continue. If enough strawberries are bought at the increased price then, obviously, enough added value was there to make it worthwhile.

Consumer-oriented marketing means that, as a marketing person, you must try to determine society's needs and then provide the goods and services to satisfy those needs. An error in judgment can affect your business and our society.

If your firm makes a product that is not needed or wanted, you have wasted valuable resources. If you correctly interpret the needs and wants of consumers, you will be able to improve their standard of living. What consumers want and need determines what business provides. That is why marketing is consumer-oriented.

The Marketing Concept means that, in marketing, we attempt to emphasize the needs of the buyer. A business that applies the marketing concept centers all company planning and activity on consumer needs. Instead of trying to sell to everybody, the firm selects the most likely customer for its products.

MARKETING MIX

When the four Ps of marketing -- product, price, promotion and place -- and use them in a good combination to best run your business, you are using the marketing mix.

MARKETING RESEARCH

Marketing research is the gathering, recording and analysis of data about problems relating to the transfer and sale of goods and services from producer to consumer.

Marketing research is conducted to minimize loss and risk. Nine out of 10 new products put out on the market each year fail to receive customer acceptance. The marketing manager must be concerned with thorough and complete knowledge of the product, the market and marketing policies if he is to compete successfully. Therefore, there is an ever-increasing importance being attached to marketing research.

Primary sources of information, or primary data, refer to information collected directly from the original source rather than data already collected by someone else. The principal sources of primary data are salespeople, potential customers, dealers and competitors that sell the product. In addition, your company's own records can be a source of primary data.

There are three types of formal research that can be done to obtain primary data. These methods are listed below.

The Observation Method avoids face-to-face interviews, and relies solely on watching rather than asking questions. A business firm that is considering changing locations might count the number of cars and pedestrians which pass a potential location.

The Survey Method includes telephone, mail and personal interview surveys. The telephone survey is sometimes difficult to implement because several companies have tried to sell products over the telephone while claiming that they are taking a "survey". In addition, not everyone owns a telephone. The mail survey can be quite costly if the response back is small. Also, results can be skewed using the mail survey; many times, the only people who will answer a mail survey are those who respond positively to its contents. The personal interview survey can be quite effective if a skilled interviewer is asking the questions. Here, also, there is a possibility of receiving skewed information if the interviewer does not remain objective.

The Experimental Method combines the techniques used in both the observation method and the survey method. One of the ways to use this method is to use test marketing, where a new product is marketed to a selected area. Another example of the experimental method would be to send out two different types of coded coupons, and then keeping track of which coupons received the greatest response to see which type of promotion was most effective.

Secondary data refers to information that has already been collected by another person for another reason. Examples of secondary data are library books, trade publications, trade associations, etc.

MARKET SEGMENTATION

Market segmentation is the process of appealing to separate market groups. For example, there is no such thing as the automobile market. Instead there are different segments for new and used cars, for economy sub-compacts and luxury sedans, for sports cars and vans. Income, geographic location, education, jobs, age, and sex and other characteristics can segment markets.

MARK-UP

Markup is the different between the cost and the original retail price for which the item is sold.

Markup percentage = Markup in Dollars Markup percentage = Markup in Dollars

on retail Retail Price on cost Cost Price

MARKDOWN

A markdown is a reduction in the normal retail price, and is figured as a percentage of the retail price. Therefore, if an item that normally sells for $5.00 is marked down to $4.00 the markdown percentage is figured as follows:

Markdown Dollar ($) Amount = Markdown OR $1.00 = 20%

Retail Price Percentage $5.00

There are three types of price reductions: a sale, which is an offer of goods at a lower price than the retailer normally charges; a clearance, which is a sale that a retailer uses to remove leftover items from the selling floor; and a special purchase, which refers to merchandise that the retailer was able to acquire at a low cost, thereby passing the savings on to the customer.

MASS SELLING

Mass selling, or mass merchandising, is selling a high volume of goods to many people. Mass selling is dependent upon mass communication, and this is the role played by advertising in the marketing system. Discount stores are an example of mass selling.

MIDDLEMAN

Middlemen are business organizations such as wholesalers and retailers who perform buying and selling services which aid the flow of goods from the producer to the consumer. A complicated channel of distribution would be one which uses three or more middlemen, such as the following: Manufacturer -------- Agent ------- Wholesaler ------- Retailer ------- Customer

MONOPOLY

A monopoly is control by one company of the supply of one kind of economic good for which there is no adequate substitute. There are some legal monopolies, such as utility companies.

OPERATIONS

The operations of a business deal with the activities necessary to run a business, other than buying, selling or control. Examples include personnel, security, budgeting, buying supplies, etc.

OPERATING EXPENSES

All the costs of doing business other than the actual cost of the merchandise are called operating expenses.

Examples are salaries, rent, credit losses, advertising, buying expenses, depreciation of equipment, insurance, taxes on inventory, maintenance, etc.

PARTNERSHIP

When two or more people combine to own a business jointly, the venture is known as a partnership.

Partners each have unlimited liability. When a partner withdraws, a new organization must be established if the business is to continue. Advantages of partnerships include the varying abilities of partners, resources of several persons and relative ease in starting and dissolving the partnership. The disadvantages include unlimited liability, limited capital and limited life of the business.

PILFERAGE

Pilferage is theft of merchandise by an employee.

PLANNED OBSOLESCENCE

Planned obsolescence is the intentional design of products to make them seem out of date after a period of time.

PROFIT

Profit is the amount of income left after business expenses and the cost of production is subtracted from sales. In other words, total revenue minus total expenses leaves profit.

The primary goal of any business is to make a profit.

PROMOTION

Promotion is informing customers of your offerings and persuading these customers to buy the goods or services, which you have for sale. The purpose is the eventual sale of goods or services.

Effective promotion informs customers about products and services, is persuasive, reminds people of products or services, and uses the promotional mix; that is, a combination of personal selling, advertising, display, public relations and sales promotion.

Promotion is important because it informs. Imagine the confusion you would experience if you went to buy an automobile and no form of promotion existed: no ads informing you of the merits of the various brands of autos, no salesperson to tell you the advantages of his particular brand, and no means to compare similar products! The result would be fewer autos sold and a higher price for the one you decide to purchase.

Some sales promotions include premiums, a product offered free or at a reduced price to encourage a customer to buy the promoted product, like a towel in a box of detergent; contests, like a sweepstakes; and coupons. Other types of promotions include special sales, clearance sales, leaders, and special events.

PUBLIC RELATIONS

Public relations is that portion of promotion which is concerned with the public image of the business. The primary function of public relations is to determine and evaluate the public's attitude toward the company and to adopt a program, which will develop favorable public attitudes.

PUBLIC UTILITY

A public utility is a business that supplies a service or product at prices usually determined by government regulation rather than by competition.

A public utility regularly supplies a service or a product that is vital to the public welfare. Examples are telephone companies, railroads and companies that provide water and electricity. Government limits competition between public utilities. One electric company can give a city better service than could several companies. Government gives special privileges to private utilities. A city will give a utility the right to supply certain services and keeps out all competing companies.

PUBLICITY

Publicity is any unpaid, nonpersonal mention of a firm, product or person in any of the mass media. Publicity is valuable because it is a noncommercial type of communication. Customers know that an advertisement is space or time that has been purchased by the retailer. They know that ads are an attempt to sell. Unconsciously, customers tend to think that a news write-up of an event held by a store is less biased than an ad about the same event.

A good publicity program can be expensive! Determining which events and happenings to publicize, setting up these events, and then putting the information in a form that the media is most likely to be interested in takes skill, time and money. Retailers, however, know the results are worth the cost, because their customers feel that information about a retailer or a store in the news is there because the media think that something about the retailer is of interest.

RACK JOBBER

The rack jobber supplies certain goods, sets up the racks and keeps them filled. They specialize in coming to the store and supplying goods sold in self-service fixtures. They actually do the stock work, such as moving older stock to the front of the shelf (also known as stock rotation), building displays and replenishing inventory from his/her truck. In effect, the rack jobber is a "warehouse on wheels".

RAW MATERIALS

Raw materials come directly from nature. Industries, which furnish raw materials, are called primary industries since they engage in the first step of the production process.

RETAILING

Retailing includes all the activities involved in the sale of goods or services to the final consumer for personal use. Retailing is the final link between the consumer, or user of goods, and those who produce those goods and services.

Types of Retail Stores

General merchandise stores offer a wide variety of goods for sale.

Department stores employ at least 25 people; have sales of apparel and soft goods combined amounting to 20 percent or more of total sales; and sell items of furniture, home furnishings, appliances, radios, TVs, general apparel, and household linens and dried goods.

Branch stores are smaller stores of a main store, and is also organized by department.

Twig stores are relatively small and carry only one line of merchandise. They are usually owned by a department store.

Junior department stores carry a fairly wide variety of merchandise and have a departmentalized organization, but are not quite broad enough to be considered full department stores.

Variety stores are retail firms that handle a varied assortment of goods in a relatively low price range.

General stores supply groceries, hardware, and some other inexpensive items such as grooming aids to consumers in rural communities.

Limited-line stores, also known as specialty stores, sell only one classification of merchandise.

Supermarkets are self-service food stores with at least four basic departments: grocery, meat, produce, and dairy.

SCRAMBLED MERCHANDISING

Scrambled merchandising refers to the addition of profitable new merchandise line and services traditionally handled by other types of retailers and not basic to the main line of business.

SELLING

Personal selling is personal, persuasive communication that helps the customer buy those products or services, which will fulfill their wants, needs and/or desires. Effective selling concentrates on customer benefits. Effective selling satisfies wants.

A retail salesperson sells goods to the final consumer. An in-store salesperson sells inside the store. A route salesperson follows a particular route and sells such things as bread, milk, etc. A specialty salesperson might sell something like magazines door to door. S/he would also be a direct salesperson.

Some common selling terms are listed and defined below:

The pre-approach is everything you do before seeing the customer.

The approach is going up to the customer and saying something that will initiate the sale. There are many different types of sales approaches. The greeting approach, the merchandise approach and the service approach are all examples.

After the approach, the conversation you first have with the customer will deal with determining needs. The best way to determine needs is to ask the customer questions. This will help you find out what the problem, is that needs to be solved.

The act of presenting merchandise and attempting to motivate a customer to buy is the presentation. It involves choosing the right merchandise to present, using showmanship to demonstrate the merchandise, involving the customer in the presentation and emphasizing customer benefits when presenting product/service features.

Showing the product in use and getting the customer to think of him/herself as the owner occurs during the product demonstration.

Answering, or overcoming objections helps the customer by solving customer problems or helping the customer overcome his/her reasons for hesitating on the buying decision.

Asking for the sale and verifying agreement to buy is known as closing the sale.

The follow up is checking on the customer later to see that the purchase is satisfactory and that all agreements have been followed through.

DECA-Ontario wishes to thank Mr. Ed Bufford for his work on this document.

DECA-Ontario

Occupational Terminology List

Occupational Area: Advertising and Visual Merchandising Services

• Agate Line/Pica • Illustrations

• Arbitron/Nielson • Leader

• Bleed • Logotype (Logo)

• Blue Line • Media

• Camera Ready • Paste-up

• Column Inch • Ratings

• Copy • Reach and Frequency

• Cost Per Thousand • R.O.P./R.O.S./Daypart

• Demographic Information • Rough Layout

• F.T.C. • Storyboard

• Graphics • Tabloid

• Headline • Target Market

• Typeset

DECA-Ontario

Occupational Terminology List

Occupational Area: Apparel and Accessories

• Accessories • Junior Sizes

• Basic Stocks • Mannequin

• Boys' Sizes • Misses Sizes

• Classic • Naturals

• Fashion Consultant • Permanent Press

• Fashion Cycle • Petite Sizes

• Fashion Designer • Ramie

• Fashion Trends • Shaker Knit

• Flame Retardant • Silhouette

• Full Figure • Stone Washed

• Girls' Sizes • Synthetics

• Haute Couture • Toddler Sizes

• Infant Sizes • Visual Merchandise

• Jacquard

DECA-Ontario

Occupational Terminology List

Occupational Area: Entrepreneurship

• Balance Sheet • Invoice

• Business Plan • Leasing

• Capitalization • Leverage

• Cash Budget • Licensing Requirements

• Employee Benefits • Limited Partnership

• Entrepreneur • Mark-up

• Equity • Organizational Chart

• Franchising • Perpetual Inventory

• F.O.B. • Physical Inventory

• Gross Margin • Purchase Orders

• Income Statement • Sales Volume

• Insurance • SBA

• Investment • Stock Turnover

• Venture Capital

DECA-Ontario

Occupational Terminology List

Occupational Area: Food Marketing

• Air Curtain • Multiple Pricing

• Back Order • Nonfoods

• Bulk Produce • OSHA

• "Cents-off" • Out-of-Stock

• Code Dating • Over-Ring

• Couponing • Pallet

• Dry Groceries • Perishables

• Facings • Produce

• F.D.A. • Scanners

• Food Broker • Shelf Extender

• Food Stamps • Shelf Talker

• Front End • Shrinkage

• Grades • Stock Rotation

• H.B.A. • Turnover

  or

H.A.B.A. • Unit Pricing

• Island Display • U.P.C.

DECA-Ontario

Occupational Terminology List

Occupational Area: Finance and Credit

• Accounts Payable • Delinquent

• Accounts Receivable • Depreciation

• Amortize • Equity Capital

• APR (Annual Percentage Rate) • FDIC

• Assets • Federal Trade Commission

• Bond • Liabilities

• Capital • Mortgage

• Capital Expenditure • Mutual Fund

• Cash Reserve • Operating Expenses

• Collateral • Owners Equity Percentage

• Collection Agencies • Profit

• Contract • Return on Assets

• Credit • Return on Investment

• Credit Application • Stock

DECA-Ontario

Occupational Terminology List

Occupational Areas: General Marketing & Retail Merchandising

• C.O.D. • Packing Lists

• Controller • Purchase Orders

• Display Windows (Types) • Register Terminals

• Fashion • Reserve Stock

• Federal Trade Commission • Sales Volume

• F.O.B. • Self-service

• Gross Margin • Service Approach

• Inventory (Types) • Stock

• Invoice • Stock Turnover

• Mark-up • Suggestion Selling

• Media (Types Available) • Visual Merchandising

• Merchandise Approach

DECA-Ontario

Occupational Terminology List

Occupational Area: Hospitality and Tourism Marketing

• Adjoining Rooms • European Plan (EP)

• AH & MA • Fare

• American Plan (AP) • Folio

• Arrival Time • Front Office

• Average Daily Rate (ADR) • General Manager (GM)

• Back of the House • Guarantee

• Bell Person • Guest

• Block • Hospitality Suite

• Booking • Incidental

• Check-In • Inclusive

• Check-Out • Itinerary

• Commercial (Corporate) Rate • Modified American Plan (MAP)

• Commission • Occupancy

• Comp Room • Package

• Concierge • Passport

• Connecting Rooms • Property

• Confirmation • Rack Rate

• Continental Breakfast • Reservation

• Continental Plan • Room Nights

• Contract • Single

• Day Rate • Skip

• Double • Tour

• Double-Double • Tourism

• Double Occupancy Rate • Travel Agent

• Double Room Rate • Upgrade

DECA-Ontario

Occupational Terminology List

Occupational Area: Restaurant Management

• A la Carte • Holding Times

• Appetizer • Labor Control

• Brunch • Maitre d'

• Carafes • Market Share

• Catering • OSHA

• Completed Waste • Portioning

• Condiments • POS Systems

• Couponing • Quick Service

• Customer Experience • Raw Waste

• Drive Through • Sanitation

• English Service • Set-up

• FIFO • Shelf Life

• Flatware • Stock Rotation

• Food Handlers Card • Suggestion Selling

• Full Service • Tableware

• Garnish • Take-out

• Gratuity • Yields

DECA-Ontario

Occupational Terminology List

Occupational Area: Vehicles and Petroleum Marketing

• Air Filter • Gasoline Additives

• Antifreeze • Premium Gasoline

• A.P.I. Engine Service Rating • Regular Gasoline

• Battery Charger • Unleaded Gasoline

• Belted Radial Tire • Graphite Motor Oil

• Chassis Lubrication • Hydrometer

• Crankcase • Jumper Cables

• Dealer Cooperative Advertising • Octane Rating

• Diesel Fuel • Self-service Station

• Dipstick • Vapor Lock

• Electrolyte • Wheel-balancing Machine

• Full-service Station • Work Order

• Viscosity

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