Ch. 10 Marketing 3336

Finding new customers

- LEGO Group offered a new line of products to attract consumers outside of its traditional market. It offered a product line for young girls called "Lego Friends". Harley-Davidson has encouraged women to take up biking, thus doubling their customers.

Length of product cycle

- consumer products have a shorter life cycle than business products - the availability of mass communication vehicles informs consumers quickly and shortens life cycles - technological change shortens product life cycles as new-product innovation replaces existing products. ex: smartphones have largely replaced digital cameras in the amateur photography market

creating brand equity

- develop positive brand awareness - establish a brand's meaning - elicit the proper response - create intense brand loyalty

Reacting to a competitor's position

- one reason to reposition a product is because a competitor is adversely affecting sales and market share.

Reaching a New market

- one reason to reposition a product is because it may not work for its target market. ex: Johnson and Johnson repositioned its St. Joseph aspirin from a product for infants to an adult low-strength aspirin to reduce risk of heart problems or strokes.

Catching a rising trend

- one reason to reposition a product is because of changing consumer trends many products have been repositioned to capitalize on the healthy, diet trends.

Changing the value offered

- one reason to reposition a product is because the company wants to increase or decrease the value. trading up means adding value to the product through additional features or higher-quality materials trading down means reducing a product's # of features, quality, or price. downsizing - reducing the package content without changing package size and maintaining or increasing the package price

valuing brand equity

- provides a financial advantage for the brand owner ex: Gillette, Louis Vuitton, Nike, Gatorade, Apple

Picking a good brand name

- should suggest product benefits ex: EasyOff, Glass Plus - should be memorable, distinctive, positive ex: Mustang, Pinto, Bronco - should fit the company product or image ex: Bufferin, Excedrin - should have no legal or regulatory restrictions - should be simple and emotional - should have phonetic and semantic associations

role of a product manager

- sometimes called a brand manager, manages the efforts for a close-knit family of products or brands. - responsible for managing existing products through the stages of life cycle - some are responsible for developing new products - marketing responsibilities: developing and executing a marketing program for the product line - also engage in data analysis - managers will supplement data with 1. a category development index (CDI) and 2. brand development index (BDI): these indexes help to identify strong and weak market segments for specific consumer products and brands and provide direction for marketing efforts.

Consumer Economics of Downsizing- Get less, pay more

- starkist put 6.5 ounces of tuna into its regular-sized can and now puts it at 6.125 ounces for the same price - companies are taking advantage of consumer buying habits - while downsizing is legal, is it ethical?

skimming strategy

a high initial price may be used as part of a skimming strategy to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers. ex: According to a 3M manager, "we hit fast, price high, and get the heck out when the me-too products pour in" because high prices tend to attract other competitors to enter the market because they see the opportunity for profit.

Communication benefits

a major benefit of packaging is the label info it conveys to the customer such as directions on how, where, and when to use the produce and the source and composition of the product, which is needed to satisfy legal requirements of product disclosure

Place (Distribution)

a major factor in developing a service marketing strategy because of the inseparability of the services of the producer. as competition grows, the value of convenient distribution in services marketing.

Explain the role of packaging in terms of perception?

a package's shape, color, and graphics distinguish one brand from another, convey a brand's positioning, and build brand equity.

Deletion

a part of the decline stage - dropping the product from the company's product line - the most drastic strategy

Harvesting

a part of the decline stage - when a company retains the product but reduces marketing costs - salespeople do not allocate time in selling nor are advertising dollars spent. - the purpose is the maintain customer requests ex: Coco-cola still sells Tab (the first diet cola) to its die-hard fans because it shows the company cares.

health, safety, and security issues

a third challenge involves the growing health, safety, and security issues with packaging. most consumers believe packaging should be safe and secure regardless of the cost.

cost reduction

about 80% of packaging materials used in the world consists of paper, plastics, and glass. as the cost of materials rise, companies have to find innovative ways to cut packaging costs while delivering value to their customers.

label

an integral part of the package and typically identifies the product or brand, who made it, where and white it was made, how it is to be used, and package contents and ingredients.

brand name

any word, device, or combination of these used to distinguish a seller's products or services logo- a brand name that cannot be spoken ex: the apple icon to represent Apple

environmental concerns

because of widespread concern about the growth of waste and shortage of viable landfill sites, the amount, composition, and disposal of packaging material continue to receive much attention.

The set of human characteristics, such as physical traits associated with a brand make up the

brand personality

Product Repositioning

changes the place a product occupies in a consumer's mind relative to competitive products.

market modification

companies try to find new customers, increase a product's use among existing customers, or create new use situations.

The added value a brand name gives to a product beyond the function benefits provided is known as brand

equity

Seven P's of services marketing

expanding the four Ps framework to include people, physical environment, and process

Shape of the life-cycle curve

generalized life cycle: the normal curve that gradually goes up and goes down during the decline. high-learning product: significant customer education is required and there's an extended introductory period. ex: personal computers low-learning product: begin immediately since there's little to learn. product can be easily imitated by competitors, so the marketing strategy is to broaden distribution quickly. fashion product: a style of the times. fashion products are introduced, decline, and then seem to return. lengths can be years, months, decades. fad product: experiences rapid sales on introduction and then an equally rapid decline. these are typically novelties and have a short life cycle. ex: car tattoos, vinyl dresses

Growth stage

second stage in product life cycle - rapid increase in sales - competitors appear in this stage - advertising shifts emphasis to stimulating selective demand; product benefits are compared with those of competitors' offerings for the purpose of gaining market share. - sales increase because of new people trying/using the product along with repeating customers (people who have already bought the product) - to help differentiate brand from competitors, an improved version or new features are added to the original design - it is important to broaden distribution for the product since there's so much competition over shelf space.

brand personality

set of human characteristics associated with a brand name. research shows that consumers often assign traits to products (such as romantic, traditional, rebellious), and consumers will choose the brands that are consistent with their desired image

mixed branding strategy

when a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from its own market

Branding

when an organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors.

Factors that affect if a product is bought or not

- usage barriers (the product isn't compatible with existing habits) - value barriers (the product provides no incentive to change) - risk barriers (physical, economical, social) - psychological barriers (cultural differences, image) companies try to overcome these by providing low-cost leasing options to overcome usage, value, and risk barriers. other companies provide warranties, money-back guarantees, extensive usage info, demonstrations, free samples.

Important aspects of product life cycles

1. their length 2. the shape of their sales curves 3. the rate at which consumers adopt products

Maturity stage

3rd stage in the product life cycle - slowing of total industry sales or product class revenue. - marginal competitors begin to leave the market - sales increase at a decreasing rate since there aren't new consumers buying the product - profit declines due to fierce price competition among many sellers, and the cost of gaining new buyers at this stage rises - gaining market attention by furthering product differentiation and finding new buyers

Increasing a product's use

Campbell soup company promotes frequent usage by advertising their soup during the warm months to encourage consumers to think of soup as a cold-weather food.

What does "creating a new use situation" mean in managing a product's life cycle?

Creating a new use situation means finding new uses or applications for an existing product

Creating a new use situation

Dockers, finds new uses for an existing product by promoting their pants to be different looks for different uses: work, weekend, dress, golf.

How do service businesses use off-peak pricing?

Service businesses charge different prices during different times of the day or days of the week to reflect variations in demand for the service

multiproduct branding

a branding strategy in which a company uses one name for all its products in a product class, sometimes called family or corporate branding - makes possible product line extensions since people who enjoy one of the products will try the rest - some companies employ subbranding, which combines a corporate or family brand with a new brand to distinguish a part of the product line from others - also allows brand extension: the practice of using a current brand name to enter a different product class ex: Toro makes: Toro snowblowers, Toro lawn mowers, Toro garden hoses, Toro sprinkler systems

private branding strategy

a company uses this when it manufactures products but sells them under the brand name of a wholesaler or retailer. - is popular because it typically produces high profits for manufacturers and resellers, and consumers also buy them. - it is estimated that 1 in every 5 products purchased at supermarkets, drugstorers, and mass merchandisers bears a private brand

packaging

a component of a product that refers to any container in which it is offered for sale and on which label information is conveyed

brand licensing

a contractual agreement whereby one company allows its brand name or trademark to be used with products or services offered by another company for a royalty or fee.

The life cycle and consumers

innovators: venturesome; higher educated; use multiple info sources; products bought by innovators end up being successful (2.5%) early adopters: leaders in social setting; slightly above average education; products bough by early adopters end up being successful (13.5%) early majority: deliberate; many informal social contracts (34%) late majority: skeptical; below average social status (34%) laggards: fear of debt; neighbors and friends are info sources (16%)

capacity managment

integrating the service component of the marketing mix with efforts to influence consumer demand.

Advertising plays a major role in the __________ stage of the product life cycle, and ____________ plays a major role in maturity

introductory, product differentiation

Product modification

involves altering one or more of a product's characteristics, such as its quality, performance, or appearance to increase the product's value to customers and increase sales - product bundling: the sale of two or more separate products in one package (ex: Microsoft Office comes with word, excel, and powerpoint) - new features can be added to change a product's characteristics to give the feel of a new-product.

multibranding strategy

involves giving each product a distinct name. a useful strategy when each brand is intended for a different market segment. - companies will introduce fighting brands, their chief purpose is to confront competitor brands

Decline stage

last stage in the product life cycle - occurs when sales drop - happens because of environmental changes - companies either delete or harvest during this stage

People

many services depend on people for the creation and delivery of the customer service experience. the nature of the interaction between employees and customers strongly influences the customer's perception of the service experience.

introduction stage

occurs when a product is introduced to its intended target market. - sales grow shortly, profit is minimal - marketing objective at this stage is to create consumer awareness and stimulate "trial" (the initial purchase of a product by a consumer. - pricing can be either high or low - companies spend lots of $ on advertising (Gillette budgeted $200 million for advertising and over 60% of male shavers became aware of the new razor within months and 26% tried the product)

Packaging and labeling challenges and responses

package and label designers face four challenges: 1. the continuing need to connect with customers 2. environmental concerns 3. health, safety, and security issues 4. cost reduction

connecting with customers

packages and labels must be continually updated to connect with its customers. the challenge lies in creating the aesthetic and functional design features that attract customer attention and deliver customer value in their use. if done right, the sales of the new package can double of an old package.

Functional Benefits

packaging provides storage, convenience, or protection or ensuring product quality. ex: Pez Candys' unique packaging dispenses a "use experience" for its customers beyond the candy itself, namely, fun. This has created a 98% awareness level among teens and an 89% awareness for mothers.

Price

price pays two essential roles 1. to affect consumer perceptions 2. to be in a capacity environment price can indicate the quality of the service. off-peak pricing: consists of charging different prices during different seasons of the year and different times of the day. ex: airlines and movie theaters do this

diffusion of innovation

product diffuses, or spreads, through the population

Promotion

purpose of promotion of service is to show the benefits of using the service. it is valuable to stress availability, location, consistent quality, and efficient, courteous service.

Process

refers to the actual procedures, mechanisms, and flow of activities by which the service is created and delivered. the actual creation and delivery steps that the customer experiences provide customers with evidence on which to judge the service.

brand equity

the added value a brand name gives to a product beyond the functional benefits provided - provides competitive advantage - consumers are often willing to pay a higher price for a product with brand equity

Physical environment

the appearance of the environment in which the service is delivered and where the firm and customer interact can influence the customer's perception of the service. this is often referred to as an impression.

primary demand

the desire for the product class rather than for a specific brand, since there are few competitors with the same product

Will E-mail spell extinct for fax machines?

the phenomenal popularity of e-mail has not brought fax machines to extinction because the two don't directly compete for the same messaging applications. email is used for text messages and fax is predominately used for communicating formatted documents by business users. fax usage is expected to increase through 2015, even though unit sales of fax machines have declined on a worldwide basis.

selective demand

the preference for a specific brand

product life cycle

the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline.

Perceptual Benefits

the third component of packaging and labeling is the perception created in the consumer's mind. package and label shape, color, and graphics distinguish one brand from another, convey a brand's positioning and build brand equity. ex: Packaging has been a major element of L'eggs hosiery positioning since its launch in 1969

Product (Service)

there are two aspects of the product/service element of the mix that warrant special attention when dealing with services: exclusivity and brand name. since services cannot be patented, Domino's pizza has seen numerous competitors such as Pizza hut pop up. brand name is important when it comes to describing a service since you cannot truly describe a service

penetration pricing

to discourage competitive entry, a company can price low. this pricing strategy helps build unit volume, but a company must closely monitor costs.