English L&A:

How is a company organized?

The different departments:

There are 2 groups:
 1 linked to the production: the employees that are directly in contact with the
product or service, to selling, creating, manufacturing.
 Support department: not directly linked to the product or service but help the
other department do what it is supposed to do. This department can be
outsourced, belong to experts outside of the company.
We have a basic list that should exist in a company but that is not always the case
especially in small companies:
Service departments:

 Human resources (support department): they do not participate in production

or selling but their job is essential. They are involved in recruitment in the staff
and they are involved in training and development  Once the workers have
been hired, they are in charge in training the workers. They help them be
happier in their jobs as well. If there is a conflict between the staff members,
they are the ones involve to resolute it. They are also in charge of grievance
procedures, or disciplinary matters  start when a worker is at fault and needs
to be “punished”. This is very different from redundancy procedure  a
situation in which a company is in a bad financial situation and must fire
workers. HR is also in charge of health and safety matters, by establishing
safety procedures; they conduct statistics to see if there is a normal number of
people are on “sick leave”.

 IT department (support department): when the computer system is down, we

turn to them. They maintain the company’s website. It is preferable for them to
be inside employees.

 Legal department: They provide legal advice and guidance (not present in
every company  outsourced when necessary). They help with legal conflict,
to avoid the company to get prosecuted. They may also review contracts if
needed.

 Organization and Methods (ONM): Department that is going to be involved

in trying to improve the efficiency in the organization. They act as consultants
to management; they have a global overview of the company. Because they
have a fresh outlook, they can help reorganize things and see where the
problem comes from. Either it is a separate department but nowadays, they are
integrated in another department like the IT department, but it is not a good
 idea because they are no longer outsiders. They are not involved in production
but supervise the organization. They are not here to impose their views.
Departments linked to production:

 Research and Development (R&D): They oversee developing new processes and
products. They also improve the existing ones; creation does not have to be from
scratch; in companies we can see just improvements of older products. They are
also in charge of creating prototypes and testing them, to make sure they are
reliable to sell.

 Purchasing department: Getting the raw materials for the product but also
providing paper for photocopies, electricity for the building, etc. The rely on the
purchasing mix by comparing different suppliers by evaluating the quantity, the
price, the quality, the delivery times, etc.

 Production department: They oversee planning production, schedules (who is

going to use the machines, when). They also must ensure the supply of your
customers, if the production is not planned properly, they will not have enough
products to sell. They are also in charge of the workforce; you decide what the
workers need to get better. They also manage product quality, when the product
leaves, it has been controlled for its quality. If you produce a lot, it is normal to
have a few defective products. The Production Department is also in charge of the
equipment, and machines because if it breaks down, the production stops. They are
also in charge of inventory; they make sure they always have raw materials to
produce. They decide on the factory layout, if you change slightly how the
machines or desk are located it can improve efficiency in the workplace.

 Marketing and Sales department: They are separate departments, but the tasks
are similar. They research what customers want; they analyze how the business can
satisfy the customers’ needs or wants. They transform the wants into needs so that
the customers cannot resist. They also organize sales: how they promote and
advertise the product.

 Accounting and finances department: Some parts are linked with the selling of
the product and others with the staff. They are first in charge in the record keeping
of transactions. This document is called a ledger. They oversee processing and
creating the invoices: account receivable; this money is potentially owned by the
company = accounts payable because the money potentially will not belong to the
company. The Finances department: account must pay suppliers for raw materials.
These departments also come out with financial statements  how much money is
earned, how much profit, how much loss… They come up with the bottom line
that shows us if the company is earning or losing money (positive or negative).
The come up with cash flow statements: it is a basis for budgeting and business
planning  how we spend our money. The income statement shows us how
profitable we are.
 Logistics/Packing/Shipping: They are in charge of storing things so that they can
be easily shipped later, they are in charge of informing the production department
of the lack of certain product (or on the contrary, reduce production). They oversee
packaging, some products require very specific one (temperature, fragile products).
They are also in charge of the delivery in transportation.
 Customer service department: They oversee on providing information to the
customers. They also receive all the complaints, they also investigate these
complaints, and analyze them (to avoid the same problem). If a product is broken it
might be a packaging problem? Finding new customers is important, but it’s more
important to keep the customers you already have because a customer will never
buy a bad product twice.

Different steps to product creation:

What services are involved?
Looking for new products, being innovative. For example, having greener
products. Customer relations is the key department because they are the ones
directly in contact with customers. Companies invent new products by
brainstorming, market research, individual hunches (a good once-in-a-lifetime
idea), suggestion boxes (all the workers are also consumers) it’s useful to have
everyone involved in the thinking process.

Evaluating the ideas:

 It is important to make a “short-list”, budgeting the new ideas, analyzing them
and their feasibility. If we want to product on the market, we need to collect a
lot of ideas surrounding the idea.
 The management team is going to oversee choosing the ideas they want to
invest in.
 All departments + management are involved.

Market evaluation: Is there a market? Who?

 Conducting surveys towards potential customers. Unfortunately, it is very
expensive.
 Doing market research.
 Companies also use internet’s database to answer these questions.
 Marketing department

Analysis:
 Business analysis
 Target market/profit margin; sometimes we want to complete our range of
products without making a huge profit.
 Production analysis, how efficient can we be?
 Marketing dept + Organization methods.

Prototype and marketing:

 Prototype is a concrete representation of the product. We test it to see if it does
what we want it to do.
 Blueprint design will help us build the product.
 Feedback (to create marketing messages). We use what people say to sell the
product.
  Testing. After testing we do multiple prototypes to find the perfect product.
 Adjustments: after all the feedback and prototypes we are going to be able to
make the perfect product.
 Marketing dept + Organization and Methods + R and D.

Market testing:
 Dress rehearsal = first try in real life that allows last minute adjustments.
 Last minute adjustments.
 Evaluation of sales
 Organization and Methods + Production + Marketing.

Launch:
 First production round often in a limited location because we cannot flood the
market from the beginning. Not being sure that people will buy, we make a
limited amount of the product.
 Planning for release in the market. Some companies like Apple, can launch
their product everywhere because people are expecting them, and Apple knows
that people will buy their new IPhone.
 Apple can also use the limited quantity of phones as a sales argument with
higher prices. People are ready to pay the price to get the latest IPhone. It is a
privilege to own it.
Marketing definition:
Marketing includes everything that has to do with putting the product on the market.
 Marketing is the organization of the sale of a product, for example, deciding on
its price, the areas it should be supplied to, and how it should be advertised.
 Marketing is the action or business of promoting and selling products or
services, including market research and advertising.
Marketing Mix:

The FOUR P’s (price, product, promotion, place):

1. Product:
The target market is included to be able to coordinate the product for its needs. We
will look at the different types of segmentation:

 One of the important steps in this decision making is geography: you are
going to create or sell a product to people living in an area. For example,
selling coats in a cold place, AC in a hot place, etc. This all depends on the
culture of the country you are trying to sell the product in. Asian food products
would be more likely sold in Asia than in Europe.

 Purchasing power: Marketers will concentrate on two types of income:

1. disposable income also known as disposable personal income (DPI), is the
amount of money that the household has available for spending and saving
after income taxes have been accounted for. “Ours is cheaper”.
 2. Discretionary income is the amount of an individual’s income that is left for
spending, investing, or saving after paying taxes and paying personal
necessities, such as food, shelter, and clothing. Discretionary income includes
money spent on luxury items, vacations and nonessential goods and services.
“Ours is better/fancier”.
 This difference is very important because it will allow companies to decide
how they are going to approach their customers. Being necessities or
leisure type of product.

 Demographics: based on factors like age, race, sex, type of family. Silver
economy for example is products specifically for the elderly.
 Psychographics: based on what people like, their taste, their values, their
religion, etc. If fact, sometimes a person of 60 is like a 20-year-old. So instead
of creating categories that are “obvious” they try to imagine categories that
would be more homogenous because they correspond to different factors such
as psychological, social status (not selling a luxury cars to a lower class),
interests, etc.

Designing the product:

 Costs need to be taken into consideration.

 Production costs: what raw materials do I buy, which materials do I need.

 The quantity will also determine the production costs. Energy for example,
may be very expensive.

 How long does it take to produce? Because time is money. How do we reduce
the time of production?

 The type of workers: highly skilled workers are more expensive than others.
That is why some companies decide to outsource their production even though
they cannot have a constant eye on the manufacturing.

 There are 2 types of productions:

 Labor intensive = requires a relatively high level of labor compared to a
capital investment. More of manmade product.
 Capital intensive = requires a relatively high level of labor compare to the
labor cost. You will require a lot of investments because you will need good
machinery.

 Kind of equipment: do I need to invest in more machines (more expensive), is

it necessary?

Useful vocabulary:
  Job production: it is often a one-off. This is often a product you buy only
once such as a wedding dress. You are prepared to spend a lot of money
because it is a onetime thing. You need one or few high skilled workers (higher
salary).

 Flow production or mass production: We are going to produce a huge

quantity of the same product by using machines. It limits the waste of time, but
this type of work tends to bore the workers in assembly lines (so they do not
need to be skilled = low salary).

 Batch production: Working in batches. Because you need time to wash the
machines or getting things ready. It is more efficient to make the same sweater
(same color and size) then you switch to a different color and size. A baker is
not going to make on baguette then one croissant but make his pastry in big
batches.

When designing a product, we need to know if we need to apply for a patent. It means
that the government recognizes that we are the inventor of the product, so we are granted a
document that says that other people have no right to manufacture the same invention.
In the UK, the IPO (Intellectual Property Office); in the US, the USPTO (United
States Patent and Trademark Office) are the offices that take care of patents. In Europe, we
use to have to apply for a patent in each individual country but thanks to the Patent
Cooperation Treaty (PCY) Europe has come up with the European Patent Office (EPO) that
allows your product to be protected by a patent in over 40 European countries. This has
nothing to do with the EU.
You can either keep, sell, or rent your patent. To do so you go through an assignment:
a transfer by a party of all or part of its right, title and interest in a patent or patent application.
You can also license your patent: a transfer of a bundle of rights which is less than the
entire ownership interest, rights that may be limited as to time, geographical area, or field of
use. In the UK, a licence / a license (US) but a licensee is the same in both countries.
While designing the product you need to take in account the safety of the product: we
have a legal liability  if the costumer suffers damage through the use of the product the
manufacturer can be sued in these cases:
 The product must be defective, even if the manufacturer was careful.
 The consumer must have exercised “due care”: he must have used the product
in a reasonable way. If you burn a bottle of deodorant, you can’t sue the
company for getting burned.
The company must:
 Monitor the manufacturing process (problem of outsourcing).
 Predicting failures and misuse while designing the product
 Performing thorough testing
 Checking the competence and working conditions of key staff (make sure
they are not tired for example).
 Informing the customers through instructions for use.
 Product recalls.
 A company can get a CPSC approval for their product:
 In the United States: Consumer Product Safety Commission you can ask them
for a CPC: Children’s Product Certificate.

Naming the product:

Marketers consider this as the first step of branding:

Branding: The process involved in creating a unique name and image for a product in
the consumers’ mind, mainly through advertising campaigns with a consistent theme.
Branding aims to establish a significant and differentiated presence in the market that attracts
and retains loyal customers. -Business Dictionary
To do so, here are different ways:
 Acronyms and initials: M&M.
 Amalgam, inventing a name by putting together parts of other names:
NABISCO (National Biscuit Co.).
 Alliteration and rhyme, that rings in the ears of people: YouTube, Dunkin’
Doughnuts.
 Descriptive or evocative: will refer to something or someone that reflects the
product or the brand: Nike is the goddess of victory.
 Founder’s name or nickname: Hugo Boss.
 Ingredients: Pepsi (reference to pepsin = digestive enzyme).
 Geography: eBay (East Bay), Fuji.
 Humor, the name will have personality and people will remember: Yahoo
(reference from Gulliver’s Travels), Cracker Jack, Marylin Merlot.
 Personification by using a character: M. Russel, Green Giants, Marie…
 Onomatopoeia, easy to remember: Twitter, Meow Mix.
 Clever names: Love Bites (chocolate).
 Experiential names, which is a way for the company to reduce marketing costs
by explaining what the company is about in the name: Tiny Moments for a
baby book for example.
If you create a bond you can use a trademark: a word, phrase, symbol, and/or design
that identifies and distinguishes the source of the goods of one party from those of others. For
example, the Coca Cola bottle’s shape.
When you have trademarks, you can copyright them: protect works of authorship,
such as writings, music, and works of art that have been tangibly expressed. Sometimes it is
tricky because companies who try to copy your product will be close to the original but not
close enough for it to be illegal.

Packaging and labelling:

The different goals of packaging:

 Contains and protects the product depending on how fragile it is.
  Preserves the product, so it reaches the costumer in excellent condition.
 Packaging easy to transport (square boxes, easy to stack).
 Use as a means of communication towards the customers, represents the
product.
When packaging, you should adapt it to a target consumer such as going green (avoid
plastic). Buying organic fruits and vegetables in plastic does not make sense.
On the other hand, when you buy perfume you are also buying the bottle (packaging)
to display it. So, the product is more expensive. So, you must take the costumer in account
and must balance usefulness with the other goals.
Colors:
When a brand is extremely successful in its color, it becomes part of their branding:
“Coca-Cola red” for example.
Color meaning in Western Europe:
- Black: sophistication, mystery, death
- White: hope, simplicity, cleanliness, goodness, purity
- Red: love, passion, romance, danger, energy
- Yellow: intellect, friendliness, warmth, caution, cowardice
- Blue: peace, sincerity, confidence, integrity, tranquility
- Grey: authority, maturity, security, stability
- Green: life, growth, nature, money, freshness
- Orange: innovation, creativity, thinking, ideas
- Purple: royalty, luxury, wisdom, dignity

Labelling:

- Legally there are rules of information that needs to be written on the packaging.
Sometimes, the information is not totally false but not totally true either 
Misleading information. For example: 100% natural chicken: all the ingredients
might be natural but not the actual chicken (plumping a chicken with water and
salt, both natural ingredients); this makes it heavier so more expansive.

- Serving sizes: the label concerning nutrition facts is not always accurate.
Especially concerning calories and serving sizes. Labels should be more explicit
When something says that a package is for four people but it’s actual for 2, it’s so
that the calories seem lower because you divide them by 4 and not the reality of
normal serving sizes (2, in this case).

- Package shapes and sizes: For example, a glass jar with a hollow bottom = less
product; or a chip bag halfway filled with air.

- Jumbo sizes or economy sizes: It might not be cheaper to by a bigger quantity.

There is the phenomenon of ‘shrinkflation’ or downsizing: you buy products
regularly, so you know the price. Companies take advantage of this and shrink the
products even though the products stay the same: Toblerone’s are 10% smaller
than when they first came out for example. Since 2016, the package sizes of
Doritos, Coco Pops and Maltesers have also shrunk because we remember the
price but not the quantity.
 Failures:
Some companies change their packages. But the consumer gets used to the packaging,
it becomes part of their habits. PowerPoint. Sometimes, it’s better to keep it the way it was.

2. Place:
We will talk about methods of transportation and storing goods, then making them
available for the customer = getting the right product to the right place at the right time.
Logistics: how you plan, implement, and control the physical flow of final products or
services and related information from your business, or source of supply, to the final end-user
(the consumer).
Questions to answer:
- What is the most convenient means for the customers to obtain the products or
services they want? If too difficult to obtain, it might not me that worth buying.

- What is the specific level of customer service standard required?

- What is the most cost-efficient way of providing accessibility and service? The
price that gives the best balance between usefulness and cost.

- How many customers are there, where are they located, what is their average
transaction value?

- What structures do competitors use and how efficient are they? Try to differ from
other compagnies (better service for example).

4 Types of marketing channels:

- Direct selling: The manufacturer is going to sell its products directly to the
consumer in a ‘non-retail’ environment (not in a market). The direct personal
presentation, demonstration, and sale products and services to consumers, usually
in their homes at their jobs.

- Selling through intermediaries: The manufacturer and uses intermediaries to

reach the costumer. They do not want to have to deal with promotion, so they
delegate it to specialists. (Amazon)

- Dual distribution: Most companies go through retail shops and in their own
shops.

- Reverse channels: reverse distribution  reverse marketing  collecting

damaged, outdated, or unsold good and bringing them back to the supplier or
manufacturer. Also called ‘reverse logistics’. For example, beer is sold in bottles
 and then exchange for giving back the bottles, you get x € (for example). Then, the
shop sends it back to the manufacturer so that they can reuse it.

Very often used in Business to Business transactions (B2B):

- Peddling: a peddler is a person walking around visiting villagers to sell their

goods.

- Party plan (B2C = business to customer): when a business asks a customer to

organize a party, invite their friends to sell the product at their home (Tupperware).

- One-in-one demonstrations: a salesperson comes to your house and shows all the
features of the product, it is always bought directly from a representative.

- Internet sales: For the company it’s easy and they don’t have to pay for an
intermediary.

 Multi-level marketing: a salesperson is paid for selling and at the same time for sales
made by people he/she recruits sponsors. You also receive a percentage from the sales
your friends make (the ones you hire).

 Single-level marketing: a salesperson is paid only for the sales he/she makes
him/herself.

Advantages and drawbacks of direct distribution:

- Expensive to set up, capital investment

- Shorter, cheaper to operate
- Difficult to operate on a large scale
- Better control
- Comfortable for customer (at home, trust)
- Selling trough intermediaries = indirect selling
- Dual distribution: a business format franchising. You can buy the good from the
producer or shops.
- Reverse channels: flow goes from consumer to intermediary to beneficiary 
collecting damaged, outdated, or unsold goods and bringing them back to the
supplier or manufacturer (recycling).

Advantages and drawbacks of indirect selling:

- Trust other companies to distribute your products for you

- Other companies are experts
- No start-up cost
- Easy to manage
- Less control on your products

List of different distribution channels:

- Manufacturer to costumer: Farmer to consumers, bakery to consumers
- Manufacturer to retailer to costumer: consumer good (shoes, clothes)
- Manufacturer to wholesaler (grossiste) to customer: wholesaler breaks down bulk
packages  warehouse clubs, they sale goods at reduced prices to members
(Costco)
- Manufacturer to wholesaler to retailer to customer: classical distribution channel
- Useful when necessary to be quick (fish)

Retail types by products:

- Convenience goods: widely distributed and relatively inexpensive goods which
are purchased frequently and with minimum of effort, such as gasoline,
newspapers, and most grocery items. You do not have brand loyalty to certain
items (like flour).

- Consumables: goods which are used up (not returned) after issuance from stores,
become incorporated into other goods and lose their identity or cannot be used for
their intended purpose without extinguishing or transforming their substance (food
products, hygiene products). People already know they need toilet paper but why
do they need your toilet paper?

- Fast moving consumer goods (FMCG) or consumer packaged goods (CPG).

 Shopping good: A higher-end product occasionally bought by consumers

that are usually compared for their appropriateness, quality, cost, and
features before purchase occurs. Customers tend to make more time when
purchasing a shopping good produced by a business, and they might even
travel to buy such goods. A good pair of shoes for example. It’s not
necessary for the good to be available everywhere because people are ready
to do more to access it.

 Hard goods or durable goods: Products that are not consumed or quickly
disposed of and can be used for several years. Examples include cars, TVs,
and household appliances (cf. white goods (washing machine, fridge,
etc. /brown goods (internet, tv, sound system)).

 Soft goods: (non-durable goods – less than 3 years)  textiles and goods
made from them, and other soft material including flexible plastic, fur,
leather, and vinyl. No one ever buys a pair of shoes to replace an old pair,
we all have multiple pairs of shoes.

 Specialty good: Item that is extraordinary or unique enough to motivate

people to make an unusual effort to get it. Examples are designer clothes,
exotic perfumes, limited-edition cars, stunning designs, works by famous
painters, etc.

Different types of retails companies:

 Brick and mortar: a store that is only physical, it is in a building.

 - Department stores (corners, counters, shops-in-shop).
- Discount store: you will find limited products.
- Warehouse store: Costco; you will not find everything you need but a lot of
stuff in enormous quantities.
- Variety store: The dollar store
- Demographic (high-end retailers): stores in response to the demographic (a
fancy expensive store).
- Mom-and-pop: owned and operated by an individual or a family, very limited
and the price are a bit higher but usually a very good service.
- Specialty shop (Hi lo = High Low pricing strategy, expensive but when there
are sales, the store has a great deal): a shop where you can find particular type
of product like a shoe, cloths, toy shop (Footlocker, Adidas) or they specialize
in a particular type of audience (tourist boutique).
- Hypermarket (EDLP: everyday low price): big-box store) = superstore, low
prices all the time.
- Supermarket
- Boutique = concept stores
- General store
- Convenience store (“superette”)
- Mall
- “Category killer” = specialist, it concentrates on one specific kind of product
(Toys R us, Fnac). Large variety in one domain  kills the competition.
- Temporary retail = flash retailing = pop-up store = or pop-up Shop
- Vending machines.

 Click and mortar: a store where you can shop in the building and online.

 Pure players: stores that exclusively sell their products online: Amazon.
But there are things that people will not buy on the internet, people want to
be able to see or test the product.

- Mail order
- E-tailor (drop-shipping): the company forwards your order to the real supplier,
then the supplier will in turn ship the product to your home.
- Online marketplace
- Lines are blurred:
- Check-out free shops (Amazon Go): videos: ppt. Amazon realized that they
couldn’t sell everything online (a sandwich), so they made a promo video on
creating stores.
- Covid: click-and-collect.

Pros: There is also the concept of Drop Shipping: The customer places an order on
your website, pays you and then ou take your profit by forwarding the order (Your job ends
here!). Then the drop shipper processes the order and ships the product. This allows you to
not have to have stock or inventory.
Cons: But drop shippers are not that common, not all wholesalers offer this service.
And, as the retailer you buy just one product from the drop shipper, so the price is higher than
buying a large quantity.
  Different types of goods correspond to different marketing strategies
so different selling points.
Inertia selling: It many cases it is forbidden. It means sending people products that
they did not order and demanding them for payment. If someone gives you a product or
service without requiring payment, it is legal. For example, a picture taken during a roller
coaster.
Inventory:
It is where the raw materials are stocked, the work-in-process (WIP) goods (that are
being manufactured) and completely finished goods that are considered to be the portion of a
business’s assets that are ready or will be ready for sales.
The Sales and Operations Planning (S&OP) is a process used by companies to
organize how raw materials will be processed into finished goods. The idea is to minimize the
time between the moment you buy the raw materials and the moment they bring in money as a
finished good. It concerns a vast majority of different departments of the company.
In transit inventory: product currently being transported to the wholesalers.
On-hand inventory: goods that are already available in stores but haven’t been sold
yet. The trick is to find the good amount in stock to make a profit and not loose money
(especially with perishable products).
To do so, there are different operations to organize inventory:
- POS (Point of sale data) : perpetual inventory management, using a bar code;
each time a product of sold the information goes to management and to the
manufacturer so that it can be automatically reordered so that the store never runs
out of the product. We call this a replenishment order (replenishment order
quantity).
You must consider 3 notions to manage your inventory efficiently:
 Responsiveness: Customers want to find what they are looking for, quickly.

 Process flow time/material flow time: It is the time that it takes between the
moment the raw material is transformed into the final product. In terms of
responsiveness this is very important. This needs to be considered when you
use subcontractors, because you need to take into account the delivery times of
the raw materials to your workshop (or final product to the customer).

 Throughput: The length of the final product to be sold.

There are 2 theories when it comes to inventory:
1. The Just in Time (JIT) inventory: it’s a management system in which materials
or products are produced or acquired only as demand requires. This approach to
managing inventory has become increasingly popular in the early 21 st century as
suppliers and retailers collaborate to try to control inventory costs while still
meeting customer demands.
2. The Just in Case inventory (JIC): an inventory strategy in which companies
keep large inventories on hand. This type of inventory management strategy aims
to minimize the probability that a product will sell out of stock. This strategy
allows to be less dependent of suppliers.

Transportation:

- Road transport: lorries, trucks, semi-trailer trucks, vans, pick-up trucks. This is a
transportation that is cheap and flexible, but it pollutes a lot.

- Railway transport: freight trains # passenger trains: it isn’t as flexible; it is used

for long distance deliveries.

- Water transportation: boats, ferries, barges, container carriers, container ships,

tankers. It’s mainly for bulk deliveries, longer distances but it’s very slow = no
responsiveness.

- Air transportation: freight planes. They are efficient but very expensive. If the
product is small and valuable, you should use air transportation.

- Drones: Amazon launched “Drone deliveries” but it wasn’t extremely successful.

- Containerization: It’s the idea of sending goods via containers. The manufacturer
puts everything in it, and it will stay closed until the customer receives the product
 more efficient.

- Sold in bulk, crates, cardboard boxes, packs, blister packs, sacks, canvas bags.

- Storage and distribution pallets/a forklift truck.

- To be in stock (for immediate delivery).

- To be out of stock, sold out.

3. Price:
What is a fair price?
The equation should be:
The production cost/cost price + reasonable profit/profit margin = selling price.
There are different pricing strategies depending on the marketing strategy:
  Cost-plus pricing: When a shop decides the price of a product, they add a
certain percentage to the cost of every product; there is no difference between
the different products; the profit margins are the same.

 Uniform delivery pricing = postage stamp pricing: No matter where you

are, you will pay the same price. Sending a letter to your neighbor, or at the
other end of France  same price. This allows everyone to have easy access to
services (Newspapers are the same price everywhere).

 Zone pricing: Different pricing between Metropolitan France and DOMTOM

for example.

 Price skimming: Products that evolve, iPhone 1,2,3, etc. They target a
segment of the population. Their former clients will want to stay with the
company, and the older phones will become less expensive. So, price
skimming is prices that become lower overtime.

 Penetration pricing: It’s used to penetrate a market. At first, you will lose
money. But overtime, customers will switch brand to buy your product because
it is cheaper. The idea is not to make a lot of profit in the short term. There is
also companies that let you try their product out for free for a month and hope
you forget to unsubscribe.

 Price discrimination or price differentiation: Companies that make their

prices different depending on the territory.

 Group pricing/volume discounts/ happy hours/ seasonal discounts: This

speaks for itself. For group pricing, there is the example of “student’s
discount”, attracting that category of people.

Incoterms: International Commerce Termes:

These trade terms have specific definitions that will be used to estimate prices of
delivery. Because they are international, they prevent confusion. There are several different
Incoterms:
 FOB (Free on Board): The shipping cost is paid by the purchaser. As soon as you
transfer the ownership of the goods, it starts the payment (including the shipping
process).

 CIF (Cost Insurance Freight): The ownership is transferred only when the goods
are loaded on the final means of transport and the cost of transport is included in
the price that is given.

When it comes to fixing a price of a product there are different techniques:

 Price versioning or menu pricing: it’s a technique that consists of creating

the same product with different versions and you sell those different versions at
different prices. If they are price sensitive, they can buy the basic version if not
they can buy the loaded version. The features that are added are worth more
 than the basic version that is why the price is higher. Consumers surplus: what
they are willing to pay vs. the actual price.

 Psychological pricing, price ending or charm pricing (odd prices): The idea
that certain prices have a psychological impact, all prices are preserved as
lower than they actual are. When a price is at 1.99, we tend to associate it with
1 even though it is closer to 2.

 Economy pricing: For people who are price sensitive, they have low price.
For example, generic store brands because there is no advertising than out of
the store. Unfortunately, some people will never buy the cheapest product
because they consider it to be a lower quality.

 Bundle pricing: It consists of selling a set of goods at a lower price than if

they bought the products separately. For example, a menu meal at a restaurant.
It makes customers buy more than they would without the bundle pricing. The
customer feels like they are making a good deal, but they are buying more than
they intended to.

 Price Anchoring: There are two different types: The 1st type  you need a
new fridge, a product that you need rarely so you do not really know the prices.
The first fridge that you usually see in store is going to represent the reference
price, so all the other refrigerators under that first price will be considered as “a
better value”. So, sellers with always give you an average price to serve as a
reference.
2nd type  we have price references in our minds, from products we use every
day such as a cup of coffee from a machine (coffee machine at university is
less expensive than one at a rest area).

 Yield management: This is based on changing the prices to the change of

consumer behavior to minimize costs and maximize revenue. For example, if a
plane is full you get more money because there are more costumers. So, if the
flight departure is at an inconvenient time, the company will lower its prices to
attract more people. Just like you pay more in the summer to go to the beach
than winter.

 Premium pricing: You fix a price as high as possible to attract people with
money. You use your product as a state of symbol. People will buy a product
because it is expensive, and it gives them status.

Questionable techniques:

 Price war: a competition between different companies, in turn each of them

cuts prices below the prices of their competitors. Some companies can allow
themselves to do so, they don’t need as much profit.

 Horizontal price-fixing: It means that companies that sell the same products
agree on a certain price and to not declare a price war, they also agree on terms
of sale and not giving discounts. This method is illegal because it suppresses
 any means of competition. But for the companies this means comfort because
they can keep their market share no matter what.

 Vertical price-fixing: It’s legal. This is when a manufacturer forbids retailers

from changing the price of the product. Apple does this for example. The price
is the same everywhere.

 Price gouging: This is a technique linked to “search pricing” and is illegal in

some places. It means charging a price higher than normal in times of crisis.
For example, during Katrina, water supplies were destroyed so bottled water
companies higher the prices because it was a need. Therefore, if ice cream
prices are higher during a hot summer this isn’t price gouging because ice
cream is not a necessity.

 Surge pricing: This totally illegal, it’s the idea of charging more in periods in
which the product is in high demand. You have a normal price, but you
increase when a lot of people want your product or service.

 The Office of Fair Trading (OFT) in the UK and The Federal Trade
Commission (FTC) in the US. These are two organizations that make sure that
companies respect all the pricing rules.

Vocabulary:

 Discount: an amount deducted from the usual list price.

 Allowance: A price reduction, especially one granted in exchange for used

merchandise: The dealer gave us an allowance on our old car.

 Seasonal discount

 (Clearance) sale or (on sale)

 Happy hour

 Hi-Lo pricing strategy

 EDLP (everyday low price)

4. Promotion:
Objectives:

 Building awareness: of the product, the company, the brand, and rebranding
(it might be necessary). We inform the customers about the product and/or
company.
 Creating interest: in the potential customers. We need to move the customer
along to the purchase of the product. We need to make the customer aware of
his unfulfilled want or wish so that he buys our product.

 Providing information: It might be necessary to provide information on its

features, its benefits, and its usage.

 Stimulating demand: insist on your product during certain times like if your
product is chocolate, take advantage of Easter or Christmas to sell your
product.

 Differentiating the product (benchmarking): making your product stand out

by talking about what is different about your product in comparison with your
competitors.

 Reinforcing the brand (brand switching, brand hopping, loyalty): It’s

important to keep your current customers. If your service and products are a
good quality, it should be easier. It’s better than always getting new customers
and losing the old ones. This is a must to avoid you customers to brand hop or
brand switch.

Product life cycle = 4 stages:

 Introduction: Introducing the product to the market to do so you can give

out discounts, more people will be interested, or you can give out a free
sample of the product. So, in the beginning you will lose money and it
takes time to recover your investment.

 Growth: Here you will advertise the product, convince people that they
need your product over another.

 Maturity: You will clearly communicate the competitive advantages of

your product. Your product is no longer new, so you need to sell the special
features and unicity to keep it going.

 Decline: It is rare for a product to stay on the market for a long time. Even
if the product is successful for a long time we don’t know if it will be
forever. So, a decline stage is almost always inevitable. The product may
be old fashioned, or not as needed. You can slow down the decrease in
sales by using price discounts. Coca-Cola is still in its maturity stage, for
example.
In terms of promotion there are two specific strategies:

 Pull: You convince the potential customers before they go in stores with
advertising so that people will look for your product specifically. The retailers
will put the product on their shelves (or online) because that’s what customers
want.

 Push: Instead of convincing the customers before they go shopping, we do it in

store. We “push” the product in front them by making it visible and enticing
the customer to buy it. For example, sales aisles in stores are a part of the push
strategy. Same goes for the gum sold near the cashier.

A promotional campaign has targets:

 Actual audience: the customers, the people who buy the product (old,
current, or potential customers).

 Influencers (Social Influence Marketing SIM): We are all influencers

and we all have influences (friends, family, neighbors, colleagues). People
are more likely to believe people they know. Even advertisements target
influencers and not the actual customers, for example, car advertisements.
They are one of the targets of promotional campaigns.

 Distribution channel members: They are the ones who are going to
display your products. The more visible the product is, the more people
will buy it.
  Other companies: May allow some opportunities to collaborate or joint
ventures.

 Below the line: promotional methods that are under the direct control of
the marketer. Newsletter for example, to contact your costumers directly.
You also have social media marketing in which companies regularly post
content.

 Above the line: press, radio and TV advertising that earns a commission
for the advertising agency, that contracts the advertising space and
broadcast time on behalf of a client. A team will oversee creating the
commercials for your company.

 Advertising: it is not a personal form of communication; you target a wide

part of the population by using mass media. You have control over what
you show.

 Public relations: It aims at developing positive relationships with the

public: publicity, it can be induced but not created by the company. To
have positive publicity you can organize an event for example. In public
relations you can also use influencers by having them use the product for
free and get free publicity in return.

 Sales promotions: These are tools that target each customer individually:
- Buy one, get one free
- Free samples
- Free tasting
- Loyalty schemes/cards: every ten stamps you get something free for example.

 Personal selling: It is selling one on one, it can be during a trade fair, or

people coming to your home to sell.

 Direct mail/Phone calls (cold calling): Calling people or emailing people at

random to sell your product for example.

 Sponsorship: A company sponsors, gives money to an organization, or a

sports team so that they can use your brand logo on their jerseys. It is an
association of something positive with your brand.

 Internet marketing: There are a bunch of different techniques.

- SEO (Search Engine Optimization): Making sure your website will show up on
the top searches. These are natural search results.
- SMO (Social Media Optimization): Creating posts via social media, having
people share those links, etc. The idea with these two techniques (SEO & SMO) is
to generate traffic on your website and it is free because it is done by internal
employees.

- SEA (Search Engine Advertising): You can pay Google to be in a higher slot
during a search. There is also the use of AdWords Ads, they show up during your
search, they do not necessarily correspond to our search, but they pay to advertise
here.

- Online advertising

- Email marketing: Sending emails to the clients.

- Search Engine Marketing: This is a mix between SEO and SEA.

- Affiliate Marketing: Creating a partnership with other companies: you pay a

commission for every lead or sale they make for my company. There are two types
of links: Inbound (direct links to my website, this shows trust) and outbound
links (a link from my website to a different website).

- AdSense: Allows Google to send you stuff linked to your previous searches.

- Pay per click (PPC): Every time you click on a link the company receives some
money.

- E-newsletters: Allows customers to keep in touch with the company and see that
they are active.

- Content marketing: This consists in publishing articles that are not directly
linked to the brand. The point is to have people spend more time on the website
while reading articles on different topics. And when you search a topic it might
show up on your company’s website as well. If you publish a certain number of
articles a day, your website will always end up at the top of the page.

Different parts of an advertisement:

 Headline or catchphrase: it attracts people’s attention. Sometimes it’s catchy

because it’s combined with the picture.
 Illustration/photo/picture
 Copy: a paragraph explaining or giving details about the product (it depends on
the company or product).
 Slogan
 ID of the company

AIDA principle:
 Grab their Attention
 Build their Interest
 Create the Desire
 Persuade them to take Action

Guerilla marketing:

This is a
marketing tactic in
which a company uses
surprise and/or
unconventional
interactions to promote
a product or service.
Guerilla marketing is
different from
traditional marketing in
that it often relies on
personal interaction
and has a smaller
budget, and it focuses
on smaller groups of
promoters that are
responsible for getting
the word out in a
particular location
rather than on wide-spread campaigns.

 Core product: The dominant benefit or satisfaction that a customer

expects from a good or service her or she buys. It can be different for
different people. For example, a car. A single 25-year-old will not want the
same car as a family of 5.
 Actual product: It is the physical product.
 Augmented product: Permit to differentiate from other products and
increase the price of the product.
 The three levels of a product.
Example of strategies: Nespresso

 Product concept/name
 Core/actual/augmented product: drinking good coffee in an easy way (with the
capsules).
 Pricing strategy: a premium pricing strategy (it is expensive), the color black
points to luxury, exclusiveness.
 Distribution
 Promotion
 A portmanteau word: a word combining two other words like jeggings (jeans +
leggings).
 Nestle + Espresso

Branding:

 Branding building: Enhance the value of your brand by using promotional

strategies (advertising), you need to create a unique image of the brand. The
same company may have several different brands. There are product brands,
service brands and retail brands. The first step is to define your brand, then you
need to differentiate yourself from the others (identity and personality).

 Brand identity: You will need to continuously find new strategies to maintain
your identity. This allows a strong customer loyalty. It is a brand that is
recognizable by people. The visual identity is important, we should be able to
recognize the logo  children who can’t read will recognize the “Lego” logo.

 Brand image (positive/negative): If they have a positive image you will trust
the brand more and it also has an impact on the workers, it creates a sense of
pride, it is more prestigious. Your choice of logo and slogan is very important
for your brand image. The marketing department can reinforce their image.
  Brand personality (emotions): The cumulative impression of a brand among
target audiences. Often contrasted with brand identity which is more of the
cumulative expression of a brand to target audiences.

 Brand essence: This is like a “gimmick”

- Unique: this is what makes us different from another company.
- Intangible: our product stays the same for your needs.
- Single-minded: a “healthy” or “efficient” product. An adjective that describes it.
- Experiential: listen to what the consumer has to say and modify the product if
needed.
- Meaningful: useful.
- Consistently delivered.
- Authentic: your slogan corresponds to the product, or else you will have a bad
brand image.
- Sustainable: that the product keeps for a long time.
We will find two parts in brand essence: the brand identity and the brand personality.
The concrete advantages (“50% less sugar”) of buying the brand is the most important. But
sometimes, how the brand “makes me feel” is more important, like a fancy perfume.
Other vocabulary used in branding:
 Product portfolio/Product range/ Product mix: products or services
offered by the company. This shows how companies offers other products
than their core product. They do so because the more you have products,
the more your customers buy (increases customer loyalty), or this allows
new customers to buy.
 Product line: This is a group of products that are closely related because
they function in a similar manner and are marketed in the same way 
Nike, different shoes, clothes, etc.
 Cash cows vs dogs vs stars vs problem children/question marks:
- Dog: A product that is not sold to many people on the market and the evolution is
not towards progress. It is at the end of its life cycle  No investment so still
profitable.
- Cash cow: A product which is in the maturity stage of the product life cycle, it is
very successful with a high market share and their growth rate is slowing down 
You don’t need to invest any longer because your product is already “perfect”, a
product that brings in a lot of money. This will allow you to fund your other
products.
- Stars: The sales are growing a lot, high market share but it requires a lot of
investment to maintain the growth rate and market leading position. The idea is to
push the growth and then to develop the “star product” into a “cash cow”.
- The question mark/problem children: Products that have just been introduced to
the market, so the sales are very low as well as the market share. We do not know
if the product will be successful yet. Those products become “problem children” if
they do not become anything.
 Line filling vs line stretching: Line filling means you have several products
in our line while targeting smaller segments of the population  shampoo for
different types of hair. Line stretching is on the contrary used to target
different segments of the population : you can stretch your product upwards
(premium, more expensive), or you can stretch it downwards (a discount
product, making it more accessible).
 Brand value/equity: This is the value people associate with the brand.
 Value for money: It is the value of your brand against the price being payed
by your customers. It can also be an emotional value: comfort, pleasure, etc.
You need to increase the value for money to keep customer’s loyalty.
 Umbrella branding or family branding: which is used when a company sells
many related products under the same name. It means that the brand itself will
have a lot of brand equity. The idea is that any product having the same name
as another product will have the same quality: For example, Apple has many
products, but they all carry the name Apple. So not only you will by your
phone from there but also your computer, the brand is already developed.
 Brand architecture: This is who coordinates the branding of the different
lines of products and the balance between the branding of the main and sub
products. It is useful for employees because it helps understand the different
products. It also helps management because they see what works and what
does not and what needs to be developed or abandoned.
 Product bundling: Assembling products as one package. This can
significantly increase profit because people will buy products and services.
People will end up buying more than what they initially intended. It allows
companies to “get rid of” the less popular products and have the clients
discover them and maybe buy them again.
 Co-branding (composite  brand equity or ingredient  one brand is
helping a less popular one): This is a marketing partnership between two
different independent brands. They create a product together and will bear both
 brand names. Sharing the profit but also sharing the cost of making the
product. H&M often collaborates often collaborates with social events for a
short amount a time.
 Brand recall (aided or unaided): This is very similar to brand recognition;
the brand rings a bell once you are in the aisle at the store.
 Brand recognition: Recognizing the brand without the name, the brand is so
famous that when you see the brand you know what it is. The type of logo we
associate with the brand is important.
 Brand fatigue: After a while, people might be bore with a brand or product. It
is important for brands to innovate and create new products regularly (new
packaging, new shape, new color, etc.).

Problems with 4P’s model:

 4P forget about the customer, the customer is not at the core of strategy.

To apply the 5C’s we do a SWOT analysis:

- Strengths
- Weaknesses
- Opportunities
- Threats

The five C’s of marketing:

The need of the customer is the most important. The company will then develop
their products depending on the customer’s needs.
 Cette photo par Auteur inconnu est soumise à la licence CC BY

8 P’s model:
There are 4 new Ps added to the traditional model:
 People: this means the workers; a good customer service is important.
 Productivity: Quality of delivery, is the product on time, in the right
conditions, etc.
 Process: It is how the product is delivered to the customers. This impacts the
customer’s experience.
 Physical evidence: The physical elements that you keep after the service or the
transaction like a haircut if you just went to the hairdresser or printed
documents after a trip to the bank, etc.

Maslow’s pyramid  the hierarchy of needs:

 Cette photo par Auteur inconnu est soumise à la licence CC BY-SA

Marketing techniques:

 Storytelling: You can engage with people’s emotions via a story especially if
you do not have a logical argument on why your product is better than another.
This is the story of a character; it can be the founder of the company or a
fictional character.

 Story making: It is not only telling a story, but it is also creating a story. The
brand participates in the making of someone’s personal story. For example,
Gaelle Baumann with Winamax.

 Cultural branding (videos): Your brand can become the example of a cultural
movement. This allows the company to build a positive image.

 Branded entertainment: The brand creates entertainment like Lego with the
Lego Movies.

 User generated content: Asking the customer to share with the brand their
own material. To promote the new IPhone we will ask IPhone users to provide
pictures taken with the phone to promote the camera quality, picture taken by a
non-professional.
 Value marketing: All the marketing actions that push forward the fact that the
brand is socially responsible (the environment, respects its workers, respects
women, etc.): Gillette promotes equality between men in women.

 Philanthropy: Air BNB’s motto is people + places + love = Air BNB; for
example.

 Cause marketing: A consumer buys a products and part of the consumer’s

money is a donation made to a cause. Gives the company a positive image.