MARK 3000 Test 2

sample

a court of customers who represent the customers of interest in a research study

To achieve a target profit: break-even point (units)=

(fixed costs + target profit)/ contributions per unit

4 pricing orientations/objectives

- a firm may embrace two or more noncompeting objectives - what is your company trying to accomplish? *1) profit orientation*- reach a target level (often a set percentage of what profit you want to make) - specifically focus on target profit pricing, maximizing profits, or target return pricing - firms usually implement *target profit pricing* when they have a particular profit goal as their overriding concern. too meet this objective, firms use price to stimulate a certain level of sales at a certain profit per unit - the *maximizing profits* strategy relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits, it should be able to identify the price at which its profits are maximized (problem w/ this approach is difficulty of gathering data & creating a model) - firms that are more interested in the rate at which their profits are generated relative to their investments typically turn to *target return pricing* and employ pricing strategies designed to produce a specific return on their investment, usually expressed as a percentage of sales *2) sales orientation*- max sales volume, even if it cuts into profits (all about selling a lot) - firms using this strategy to set prices believe that increasing sales will help the firm more than will increasing profits -ex: a new health club might focus on unit sales, dollar sales, or market share and therefore be willing to set a lower membership fee and accept less profit at first to focus on and generate more unit sales -ex: a jewelry store relies on its image so have higher prices to provoke sales. even though it sells fewer units, it can still generate high dollar sales levels -some firms may be more concerned about their overall market share than about dollar sales - a firm may set low prices to discourage new firms from entering the market, encourage current firms to leave the market, and/or take market share away from competitors- all to gain overall market share - ex: Apple, the songs that are the most popular cost the most, but by charging less for less popular songs, Apple aims to increase its sales per customer ($0.69, $0.99, $1.29) - *premium pricing* means the firm deliberately prices a product above the prices set for competing products to capture those customers who always shop for the best or for whom price does not matter (ex: Philadelphia Cream Cheese) *3) competitor orientation*- measure against competitors (base off their prices) - when firms take a competitor orientation, they strategize according to the premise that they should measure themselves primarily against their competition - some firms focus on *competitive parity* which means they set prices that are similar to those of their major competitors - another competitor-oriented strategy, *status quo pricing*, changes prices only to meet those of the competition (ex: when delta increases its average fares, so does American airlines) - ex: gas prices *4) customer orientation*- base price off of creating value/customer needs - when a firm sets its pricing strategy based on how it can add value to its products or services -ex: Carmax promises a no-haggle pricing structure - firms may offer very high-priced, state of the art products or services in full anticipation of limited sales. these offerings are designed to enhance the company's reputation and image and thereby increase the company's value in the minds of consumers -ex: speaker company has both low and high priced speakers to demonstrate their capabilities to customers even though most people won't buy $8,500 speakers

prestige products or services

those that consumers purchase for status rather than functionality

3) costs

to make effective pricing decisions, firms must understand their cost structures so they can determine the degree to which their products or services will be profitable at different prices - in general, prices should not be based on costs b/c consumers make purchase decisions based on their perceived value; they care little about the firm's costs to produce and sell a product or deliver a service (ex: CFA cups are so cheap to make but sell for over $1) - 2 primary cost categories: *1) variable costs* - are the costs, primarily labor and materials, that vary with production volume - as a firm produces more or less of a good or service , the total variable costs increase or decrease at the same time - on a per-unit basis (*remain the same per unit*) -ex: loaves of bread, the more you make, the more expensive - ex: the more hotel rooms booked, the more expensive to get them cleaned - variable costs tend to *change depending on the quantity produced* *2) fixed costs* - those costs that remain essentially at the same level, regardless of any changes in the volume production - unaffected by production volume - ex: rent, insurance, administrative salaries, and the depreciation of the physical plant and equipment -ex: whether you make 100 loaves or 1000000 loaves at a bakery, the rent you pay for the bakery remains the same Total Cost - the sum of variable and fixed costs

total variable cost=

total variable cost= variable cost per unit x quantity

qualtrix

type of internet survey that updates the stats as its being filled out

1) introduction stage

usually starts with a single firm, and innovators are the ones to try the new offering - low sales - negative or low profits - one or few competitors examples of new to the world products: telephone, cassette player, Facebook, blue-ray - other firms soon enter the market with similar or improved products - this stage is characterized by initial losses to the firm due to its high start-up costs and low levels of sales revenue as the product begins to take off

associated services

(also called *augmented product*) the non-physical attributes of the product including product warranties, financing, product support, and after-sale service

profit=

(contribution per unit x quantity) - fixed costs OR (price x quantity) - (fixed cost + (variable cost x quantity))

survey research technique

* the most popular type of quantitative primary collection method is a survey This is a systematic means of collecting information from people using a questionnaire - a *questionnaire* is a form that features a set of questions designed to gather information from respondents and thereby accomplish the researchers' objectives - 2 types of individual questions on questionnaires: 1) *unstructured* questions are open-ended and allow respondents to answer in their own words -ex: what are the most important characteristics for choosing a brand of shampoo? - types: a) *fill in the blank* (ex: what is the most important reason you selected UGA) b) *projective technique*= when you inadvertly make respondents compare (ex: if wendy's burger could talk to a mcdonalds burger, what would it say?) 2) *structured questions* are closed-ended questions for which a discrete set of response alternatives, or specific answers, is provided for respondents to evaluate (answer choices provided) - types: a) *Likert scale*= type of ranking- strongly disagree, disagree, uncertain, agree, strongly agree b) *semantic differential*= you pick the anchors, switch order to make sure people are paying attention (ex: circle- Excellent 5 4 3 2 1 Awful..... then circle Old 1 2 3 4 5 Fresh)

6 ways brands add value:

*1) Brands facilitate purchases* - brands signify a certain quality level and contain familiar attributes - brands help consumers make quick decisions, especially about their purchases -ex: people who know of Coke's brand may be more willing to try other Coke Products - brands enable customers to differentiate one firm or product from another (Coke vs. Pepsi) *2) Brands establish loyalty* - with continued use, consumers learn to trust certain brands ex: Amazon replaced stolen playstation free of charge so people will stay loyal to them ex: even if Pepsi has a special, you will only buy Coke *3) Brands ---protect from competition--- and price competition* - strong brands are more established in the market and have a more loyal customer base, so neither competitve pressures on price nor retail-level competition is as threatening to the firm -ex: Lacoste is perceived to be of superior quality compared to other brands and therefore can command a premium price *4) Brands are assets* - brands are assets that can be legally protected through trademarks and copyrights and thus constitute a unique form of ownership - ex: Footsyroll & Tootsie Roll- Footsyroll might dilute the brand of Tootsie Roll so there could be a lawsuit *5) Brands affect market value* - brands can impact the value of a company and its overall monetary worth *6) reduce marketing costs* - once the brand is established, costs to market the product will decrease

Pricing Strategies (3):

*1) Everyday Low Pricing (EDLP)* - when companies stress the continuity of their retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale prices their competitors may offer - reduces consumers' search costs, adds value, consumers can spend less time comparing prices -ex: Wal-Mart communicates to consumers that, for any given group of often-purchased items, its prices will tend to be lower than those of any other company in that market - if sellers want to imply EDLP, odd prices may be appropriate. however, odd prices can sometimes suggest a lower quality - *no sales by the retailer (ex: walmart doesnt ever run specials because they just always offer low prices)* *2)High/low pricing* - a strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases - a "get them while they last" atmosphere - two distinct market segments: 1) those who are not price sensitive--> willing to pay high price 2) those who are price sensitive--> wait for low sale - a *reference point*, which is the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process. the seller labels the reference point as the regular price or an original price (ex: marked down from $21.99 to $19.99). consumers perceptions of the value of the deal will likely increase *3) new product pricing strategies* - it is easier to develop pricing strategies for old products than it is for new to the world products - 2 distinct new product pricing strategies: *1) market penetration pricing*- sets the price as low as you can so you can grab as much of the market - sets the initial price low for the introduction of the new product - it is an incentive to purchase the product immediately -ex: adding a software program to a computer free of charge. this increases the likelihood that customers will pay to obtain updates of software that is already implanted into their computer - firms using this strategy expect the unit cost to drop significantly as the accumulated volume sold increases, an effect known as the *experience curve effect*... as sales continue to grow, the cost continues to drop - penetration pricing discourages competitors from entering the market because the profit margin is relatively low *2) price skimming*- starts at a high price to reach the innovators and then drops price to reach other targets when demand levels off - appeals to segments of consumers who are willing to pay the premium price to have the innovation first (innovators & early adopters) - common in technology markets - ex: fans of call of duty will wait in line for hours and pay high costs - after this high pricing market segment becomes saturated and sales begin to slow down, companies generally lower the price to capture the next most price sensitive market segment

Experts look at 4 aspects of a brand to determine its equity:

*1) brand awareness* - measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion about it - the more aware or familiar they are, the easier their decision making process is, which improves the chances of purchase - familiarity matters most for products that are bought without much thought (soap, gum) - critical for infrequently purchased items or those the consumer has never purchased before (ex: for those who have never purchased a Toyota, the simple awareness that it exists can help facilitate a purchase - sometimes certain brands gain predominance in a particular market overtime that they become synonymous with the product itself (ex: Kleenex) *2) Perceived Value* - the perceived value of a brand is the relationship between a product's or service's benefits and its costs - customers usually determine the offering's value in relationship to that of its close competitors (ex: Target and Kohl's) - if customer believe a less expensive brand is about the same quality as a premium brand, the perceived value of that cheaper choice is high - people don't just buy expensive things b/c it is expensive, they actually seek value so they buy over other brands -ex: why buy something at Neeman Marcus when you can get it at TJ Maxx? b/c there is perceived value *3) Brand associations* - reflect the mental and emotional links that consumers make between a brand and its key product attributes, such as a logo and its color, slogan, or famous personality - brand associations often result from a firm's advertising and promotional efforts - ex: Prius is known for being economical - ex: Hallmark's brand (slogan) gives a family image - ex: associating charlotte from sex in the city with a rain coat on a commercial -ex: Jeep is associated with being tough and rugged-jeep ads in the outdoors *4) Brand loyalty* - occurs when a consumer buys the same brand's product or service repeatedly over time rather than buy from multiple suppliers within the same category -ex: airlines and hotel companies reward loyal consumers with loyalty or customer relationship management (CRM) programs - the marketing costs of reaching loyal consumers are much lower because the firm does not have to spend money on advertising and promotion campaigns to attract these customers - loyal customers do not need persuasion - loyal customers' positive word of mouth reaches other potential customers and reinforces the perceived value of the product - a high level of brand loyalty protects the firm from competitors b/c these loyal customers don't switch to other brands no matter the incentives - consumers are often less sensitive to price

Step 4: analyzing data and developing customer insights

- covering data into information to explain, predict, and/or evaluate a particular situation *data* can be defined as raw numbers or other factual information that, on their own, have limited value to marketers. when the data is interpreted, they become *information*, which results from organizing, analyzing and interpreting data and putting them into a form that is useful to marketing decision makers ex: after looking at survey results, McDonalds realized they scored the same as Wendy's on cleanliness but they had lower prices & Wendy's had better taste. so McDonalds needs to improve taste while keeping prices low

1) company objectives

- develop the company's pricing objectives - the pricing of a company's products and services should support and allow the firm to reach its overall goals - do managers want it to grow by increasing profits, increasing sales, decreasing competition, or building customer satisfaction? -ex: a firm with a primary goal of very high sales growth will likely have a different pricing strategy than a firm with the goal of being a quality leader

reasons for innovation/creating new products:

*1) changing customer needs* - sometimes companies can identify problems and develop products or services that customers never knew they needed (ex: movie boxes) - we want faster, better, more efficient *2) market saturation* - when the amount of product provided has been maximized (becomes stagnant) - the longer a product exists in the marketplace, the more likely it is that the market will become saturated -without new products or services, the value of the firm will ultimately decline -ex: what if car models stayed the same - saturated markets can also offer opportunities for a company that is willing to adopt a new process or mentality -ex: General Mills' mentality of creating gluten free chex cereal and pancake mixes *3) Managing risk through diversity* - firms with multiple products can better withstand external shocks, including changes in consumer preferences or intensive competitive activity - "don't put all your eggs in one basket" -ex: Keebler lessens risk by offering many variations of cookies, not just vanilla wafers *4) fashion cycles* - in industries that rely on fashion trends and experience short product life cycles, most sales come from new products - ex: including apparel, arts, books and software markets - ex: new video games created b/c people have already beat them *5) improving business relationships* - new products do not always target end customers; sometimes they function to improve relationships with suppliers - packaging can make it easier for retailers to place on the shelves -ex: Kraft redesigning pallet to help retailers better position them on the shelves

Five C's of Pricing:

*1) company objectives* - profit orientation - sales orientation - competitor orientation - customer orientation *2) customers* - demand curves and pricing - price elasticity of demand *3) costs* - variable costs - fixed costs - total costs *4) competition* - monopoly - oligopoly - monopolistic competition - pure competition *5) channel members* - many companies use a blend of these

functions of packaging: (5)

*1) contains & protects the product* - now companies consider how easy a package is to open *2) promotes the product* *3) facilitates storage, use, and convenience* -ex: putting a tube of toothpaste in a box so it is easier to ship, display/stock - ex: coke boxes, easy to carry and stick in the fridge *4) facilitates recycling* - telling people if the bottle has been recycled and/or how to recycle it *5) provide information* - ingredients, etc.

The Product Development Process

*1) idea generation* - development of viable new product ideas *2) concept testing* - testing the new product idea among a set of potential customers *3) product development* - development of prototypes and/or the product *4) market testing* - testing the actual products in a few test markets *5) product launch* - full-scale commercialization of the product *6) evaluation of results* - analysis of the performance of the new product and making appropriate modifications

factors influencing price elasticity of demand

*1) income effect* - refers to the change in the quantity of a product demanded by consumers due to a change in their income - generally as people's income increases, their spending behavior changes: they tend to shift their demand from lower-priced products to higher-priced alternatives (ex: buying steak now instead of hamburgers or a 5 star hotel instead of a 3 star) *2) substitution effect* - refers to consumers' ability to substitute other products for the focal brand - the greater the availability of substitute products, the higher the price elasticity of demand do any given product will be (ex: there is a variety of OJ brands. if Tropicana raises prices, people might turn to minute maid) - b/c brand loyalty and the lack of what consumers judge to be adequate substitutes, the price elasticity of demand for some brands is very low (ex: Ralph Lauren sells millions of polos at $85, while shirts of equal quality but without the polo logo sell for much less) - if a brand is viewed as unique and better than substitutes, it increases brand loyalty and decreases price elasticity *3) cross-price elasticity*- complementary products - the percentage change in the *quantity* of product A demanded compared with the percentage change in *price* of product B - *complementary products* are products whose demands are positively related, such that they rise or fall together (ex: blue ray DVDs and blue ray DVD players)... *increase in A=increase in B* - *substitute products* have demands that are negatively related (ex: DVD players and blue ray DVD players)... *increase in A=decrease in B* *4) consumer tastes*

5 groups of purchasers:

*1) innovators* - those buyers who want to be the first on the block to have the new product or service - enjoy taking risks and are regarded as highly knowledgable -ex: the person who stood in line overnight to be sure to get a ticket for the very first showing of the latest superhero movie -ex: firms that invest in the latest technology - typically innovators keep themselves very well informed about the product category - innovators help the product gain market acceptance through talking about and spreading positive word of mouth - they bring in early adopters *2) early adopters* - generally don't like to take as much risk as innovators do but instead wait and purchase the product after careful review - ex: waits for the first reviews of the latest movie before purchasing a ticket -ex: they do not stand in line to wait for the first of the new Samsung TVs - most of them go ahead and purchase, though, because early adopters tend to enjoy novelty and often are regarded as the opinion leaders for particular product categories - if the early adopter group is relatively small, the amount of people who ultimately adopt the innovation will likely be small *3) early majority* - represents approx. 34% of the population - crucial group because few new products and services can be profitable until this large group buys them - its members don't like to take as much risk and therefore tend to wait until the bugs are worked out of a particular product or service -ex: this group probably rents the latest Avengers movie during the first week it comes out on video - at this point, the number of competitors in the marketplace usually has reached its peak, so these buyers have many price and quality choices *4) late majority* - the last group of buyers to enter a new product market - at this point, the product has achieved its full market potential -ex: movie watchers that wait till the movie is easily available to rent (not high demand anymore) - by this time sales tend to level off or may be in decline *5) laggards* - make up roughly 16% of the market - like to avoid change and rely on traditional products until they are no longer available -ex: when Avengers eventually shows on their regular TV networks then they might watch it

Observative research types:

*1) manual*- you going out and observing/ collecting data (ex: digging in people's trash) *2) mechanical*- using cameras, devices that can see in stores (ex: do people look at labels longer if a product says organic) *3) ethnographic*- immersing yourself within that society (ex: if someone came in and watched your morning routine)

2 types of packaging:

*1) primary package* - the one the consumer uses, such as a toothpaste tube or a glass Snapple bottle - consumers usually seek convenience in terms of storage, use and consumption *2) secondary package* - the wrapper or exterior carton that contains the primary package and provides the UPC label used by retail scanners (ex: wrapper on the glass Snapple bottle) - consumers can use the secondary package to find additional product information

factors affecting product diffusion: (4)

*1) relative Advantage* - why is new product better than what is already offered? - if a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick - ex: instead of offering just an e-reader, Apple has developed a multi-purpose tablet device called an iPad that has several relative advantages (touch screen, games, music) *2) compatibility* - how well does the product work with the user's lifestyle? - a diffusion process may be faster or slower, depending on various consumer features, including international cultural differences - ex: firefox is different in China b/c they surf the web differently there -ex: iPad's lack of adobe flash has caused issues *3) observability* - when we see others using this product - when products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process - ex: people see others using iPad, so they buy one -ex: Botox is diffused more slowly b/c it is talked about less - doesn't really work for anything that we use in the privacy of our own home (ex: face creams, books, services) *4) complexity and trialability* - how easy a product is for us to try - products that are relatively less complex are also relatively easy to try. these products will generally diffuse more quickly and lead to greater/faster adoption - ex: if you are interested in an iPad, you can easily go to an Apple store and try it out. but it is not as easy to do that for a Kindle

4 types of consumer products:

*1) specialty products/services* - those for which customers express such a strong preference that they will expend considerable effort to search for the best suppliers ex: luxury cars, legal or medical professionals or designer apparel, wedding gowns, college apparel, antiques *2) shopping products/services* - products or services for which consumers will spend a fair amount of time comparing alternatives - not as involved as specialty but you still compare alternatives ex: furniture, clothing, shoes, cellphones, fragrances, appliances and travel alternatives *3) Convenience products/services* - those products or services for which the consumer is not willing to spend any effort to evaluate prior to purchase - frequently purchased commodity items/ very little thought ex: beverages, bread, toilet paper, candy, shampoo, can goods, or soap *4) unsought products/services* - products that consumer either do not normally think of buying or do not know about at all ex: GPS systems, hand warmers, *insurance* policies, fire extinguishers, dictionary, medical supplies

1) idea generation- 7 sources of ideas

*a) internal research and development* - many firms have their own R&D departments in which scientists work to solve complex problems and develop new ideas - costs for these firms are high - R&D investments generally are considered continuous - in the long run, though, these firms are betting that a few extremely successful new products, often known as blockbusters, can generate enough revenues and profits to cover the losses - *reverse innovation*= when they turn to subsidiaries in less developed markets for new product ideas (ex: Coke turning to Shanghai to make Minute Maid) *b) R&D consortia* - when *multiple firms come together* to explore new ideas for developing projects - in this case, the R&D investments come from the group as a whole, and the participating firms and institutions share the results - in many cases, consortia groups form due to research that could run into the millions of dollars and one single company couldn't afford (pharmaceutical or high tech) - ex: US cable industry consortia that came together to find ways to conserve energy *c) licensing* - when firms buy the rights to use the technology or ideas from other research-intensive firms through a licensing agreement - saves from high costs but means that the firms is banking on a solution that already exists but has not been marketed -ex: weight loss solutions that have already been created by a company but not marketed *d) brainstorming* - when a group works together to generate ideas - no idea can be immediately accepted or rejected - only at the end of the session do members vote on the best idea(s) *e) outsourcing* - pay someone to develop for you - getting help from other companies to create ideas - ex: IDEO, a company that provides services to help clients generate not new products but new ideas *f) competitors' products* - look and see what others are doing - a new product entry by a competitor may trigger a market opportunity for a firm and allow them to then bring an improved version to market - *reverse engineering* involves taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitor's patents *g) customer input* - listening to the customer in both B2B and B2C markets is essential for successful idea generation *1) B2B* - has less customers - firms solicit suggestions and ideas to improve those products either by using a formal approach such as focus groups, interviews, or surveys, or through more informal discussions - this joint effort between the selling firm and the customer significantly increases the probability that the customer eventually will buy the new product *2) B2C* - customer input comes from a variety of sources -ex: Wal-Mart noticed lots of people by the store brand so they started making better Great Value ice cream flavors - ex: Staples observed how customers opened their mail in the kitchen when it developed the Mailmate shredder to look like a kitchen appliance - ex: creating online discussion communities about your product - a particularly successful customer input approach is to analyze *lead users*, those innovative product users who modify existing products according to their own ideas to suit their specific needs - ex: manufacturers & retailers of fashion products often spot new trends by noticing how innovative trend-setters have altered their clothing/shoes (ex: jeans became ripped or splatter painted)

5) brand licensing

*brand licensing* is a contractual arrangement between firms whereby one firm allows another to use its brand name, logo, symbols, and/or characters in exchange for a negotiated fee - common for toys, apparel, accessories, and entertainment products (video games) - the firm that provides the right to use its brand (licensor) obtains revenues through royalty payments from the firm that has obtained the right to use the brand (licensee) - for the licensor, the major risk is the dilution of its brand equity through exposure of the brand -ex: the NBA licensees products like bobblehead figures of Dallas Mavericks and San Antonio Spurs players to a manufacturer in exchange for a negotiated fee

6) brand repositioning

*brand repositioning* also known as *rebranding* refers to a strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences -ex: Proctor and Gamble used to only be white packaging (to resemble purity) but now it has branched out to use other colors -ex: Special K cereal commercials original focus used to be on losing weight and showed a girl stepping off a scale... now they have repositioned it to focus on feeling good about yourself -ex: dish soap, added a peal off at the bottom that reveals an air freshener (so it is a two in one)

4) co-branding

*co-branding* is the practice of marketing two or more brands together on the same package, promotion, or store -ex: Yum Brands frequently combines 2 or more of its restaurant chains including A&W, KFC, Long John Silvers, Pizza Hut and Taco Bell, into one store space. this co-branding strategy is designed to appeal to diverse market segments -ex: OREO- in blizzards, ice cream, pies, cakes

2) concept testing

*concepts* refer to brief written descriptions of the product, its technology, working principles, and forms; and what customer needs it would satisfy... might also include visual images *concept testing* refers to the process in which a concept statement is presented to potential buyer or users to obtain their reactions - customers reactions determine whether or not it goes forward - triggers the marketing research process - it helps firms avoid the costs of unnecessary product development - the firm likely starts with exploratory research, like in depth interviews or focus groups, to test the concept, after which it can undertake conclusive research through internet or mall-intercept survey -ex: video clips to show the way the product works 2 important questions to ask: 1) if the product or service were made available would you purchase it? 2) whether the product would satisfy a need that other products currently are not meeting - how much/often would customers buy? - would they buy for themselves or as a gift? - good price?

issues with surveys

*interviewer bias* (the interviewer shouldn't show affiliation with the company) - the presence of the interviewer may change responses (i.e. being asked if you have ever used illegal drugs or had sex) *consumer unwillingness to participate* - company must think of ways to increase participation (ex: Zaxby's and CFA put surveys on their receipts. whoever fills them out will win a free sandwich)

3) product development

*product development* or *product design* entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a service's features *1) build prototype*: a *prototype* is the first physical form or service description of a new product, still in rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes- sometimes even crafted individually - prototypes are usually tested through alpha and beta testing: *2) alpha testing*- letting people in house try the product - is when the firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended - rather then use potential customers, alpha tests occur in the firm's R&D department -ex: Ben & Jerry's alpha tests all its proposed new flavors on its own employees *3) beta testing*- allowing consumers to try the product - uses potential customers, who examine the product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use -ex: a virtual store aisle that mimics a real-life shopping experience to see if customers choose new product

Using the diffusion of innovation theory

- firms can predict which types of customers will buy their new product or service immediately after its introduction as well as later as the product is more and more accepted by the market - helps firms develop effective promotion, pricing, and other marketing strategies to push acceptance - ex: Amazon's Kindle--> gradually lowered price - different products diffuse at different rates so marketers must work to understand the diffusion curve for each new product -ex: the marketing decision for e-readers are different from the decisions for electronic books

How to extend the time your product lasts in the product life cycle:

- increase frequency of use (ex: replace baking soda every 90 days... or toothbrushes that stop working when it is time for them to be replaced) - increase number of users (expand to different target markets) - find new uses (identify new applications of the product)

creating new products

- new market offerings provide value to both firms and customers - when we say a "new product/service" we don't necessarily mean that the market offer has never existed before (ex: new versions of LEGOs) - *innovation* refers to the process by which ideas are transformed into new offerings, including products, services, processes, and branding concepts that will help firms grow - without innovation, firms would have only 2 choices: continue to market current products to current customers or take the same product to another market with similar customers

techniques of collecting primary data:

- observation - social media - in-depth interviews - focus group interviews - survey research - panel & scanner based research - experimental research

pannel and scanner-based research

- panel & scanner research can be either primary or secondary data - in this case, we consider the use of a panel to collect primary data ex: Walmart uses a 18,000-customer panel to help determine which products to carry

Emerging Technology & Ethics of using consumer information

- respect the rights of the subjects in the course of your research the bottom line: marketing research should be used only to produce unbiased, factual information ex: using mannequins with hidden cameras to monitor shoppers (unethical) ex: digital billboards embedded w/ software that can identify passersby then display ads targeted at them (*biometric data*) - consumers are more anxious than ever about preserving their right to privacy - they also demand increasing control over the info that has been collected about them - several organizations (i.e. CDT & EPIC) have emerged as watchdogs over data mining of consumer information -companies are legally required to disclose their privacy rights to customers - in the case of social media, protecting privacy is mainly up to the consumer b/c they voluntarily give info

the importance of price: - for the seller - for the consumer

- revenue - the cost of something (what we give up)

online surveys

- the response rates are relatively high - are relatively inexpensive - results are processed and received quickly - reports and summaries can be developed in real time and delivered directly to managers in simple, easy-to-digest reports

2) customers

- when firm's understand consumers' reactions to different prices -look at consumer demand - what are consumers will to pay? (ex: Tide vs. cheaper store brand) - what are consumers' ability to pay? - what is the nature of the product? (ex: ketchup and sports cars are valued differently)... necessity vs. luxury - 2 economic theories help explain how prices are related to demand: *1) demand curve* - about how consumers react to different price levels - this curve shows how many units of a product or service consumers will demand during a specific period of time at different prices - can be straight or curved, assumes everything else remains unchanged - each point on a demand curve represents the quantity demanded at a specific price - not all products or services follow the downward sloping demand curve (ex: prestige products or services) - *prestige products or services* are purchased for their status rather than their functionality. the higher the price, the greater the status (ex: Faberge egg- the higher the price, the better the status and the more it could sell) - ex: caribbean cruise is a prestige service *2) price elasticity of demand* - about how consumers respond to actual changes in price - these responses vary depending on the product or service (ex: consumers are generally less sensitive to price increases for necessary items like milk because they have to purchase the items even if the prices climb) -ex: the price of T-bone steaks rises beyond a certain point, people will buy less because they can turn to the many substitutes for this cut of meat - *price elasticity of demand* measures how changes in a price affect the quantity of the product demanded. specifically, it is the ratio of the percentage change in quantity demanded to the percentage change in price - the market for a product or service is price sensitive (or *elastic*) when the price elasticity is less than -1, that is when a 1% decrease in price produces more than a 1% increase in quantity sold (ex: whitening strips) - in an elastic case, relatively small changes in price will generate fairly large changes in the quantity demanded (ex: barely lowering price in steak will greatly increase sales) - the market for a product is generally viewed as price insensitive (or *inelastic*) when its price elasticity is greater than -1, that is, when a 1% decrease in price results in less than a 1% increase in quantity sold - if the products are inelastic, lowering prices will not appreciably increase demand (people will buy no matter what) - the price elasticity of demand usually changes at different points in the demand curve unless the curve is actually a straight line (ex: Caribbean cruise 'backwards c' graph... at the bottom it is inelastic, and the top it is elastic b/c it is not a necessity and people opt for other options

Developing a questionnaire

-questions cannot be misleading (shouldn't be open to multiple interpretations) - address only one issue at a time - vocab must be familiar and comfortable - the questions should be sequenced appropriately: general questions first, then more specific/personal questions, & demographic/difficult questions at the end (you don't want them to drop out right away) - the layout must be professional & easy to follow with appropriate instructions

packaging plays several key roles:

1) attracts consumer's attention 2) it enables products to stand out from their competitors 3) it offers a promotional tool (ex: NEW or IMPROVED) 4) it allows for the same product to appeal to different markets with different sizes (ex: Costco sells large versions of products where convenience stores sell small versions) - a change in packaging can be used to attract a new target market and/or appear more up to date to its current market - changes can also make consumers feel like they are receiving something tangible in return for paying higher prices, even when the product itself remains untouched - consumers see new packaging and tend to think that the "new" product may be worth trying -some packaging change are designed to make the product more ecological (ex: Pepsi's Eco-Fina) -many consumers experience *wrap rage*- a great frustration with packaging that makes it seemingly impossible to get at the actual products. so companies are moving away from traditional clam shells, which are the curved plastic package around many electronic goods, because they are so difficult to open -retailers' and manufacturers' priorities for secondary packaging often differ from those of its customers (ex: they want convenience so they package and ship in bulk to save money)

what not to do when designing a questionnaire

1) avoid questions the respondent *cannot easily or accurately answer* -ex: how much money did you spend on groceries last month? -ex: how many times have you eaten at CFA at Tate? 2) avoid sensitive questions unless they are absolutely necessary - ex: do you dye your hair gray? 3) avoid *double-barreled questions*, which refer to more than one issue with only one set of responses - ex: do you like to shop for clothing and food? -ex: how do you feel about being a student and living in athens? 4) avoid *leading questions*, which steer respondents to a particular response - ex: BMW is the safest car on the road, right? - ex: the HOPE scholarship is sucking up people's money, how do you feel about this scholarship? 5) avoid one-sided questions that present only one side of the issue -ex: fast food is responsible for adult obesity: agree/disagree 6) *jargon or inappropriate terminology*

6 branding strategies:

1) brand ownership 2) naming brands and product lines 3) brand and line extensions 4) co-branding 5) brand licensing 6) brand repositioning

Marketing Research Process

1) defining objectives and research needs 2) designing the research 3) data collection process 4) analyzing data and developing insights 5) action plan and implementation - researchers go back and forth from one step to another as the need arises - it is important to plan the entire project in advance... by planning the research process prior to starting the project, researchers can avoid unnecessary alterations to the research plan

what does a typical marketing research presentation include?

1) executive summary- a condensed write up or snapshot of the types of studies you ran, research, etc. 2) body- explains methods, sample population, etc. in detail 3) conclusions- drawn from the data 4) limitations- what should you have included 5) supplements- including graphs, charts, tables, figures, pictures, appendices, etc.

why do marketers find marketing research valuable?

1) it helps reduce uncertainty 2) it provides a crucial link between firms and their environments, which allows them to be *customer oriented* (they build their strategies by using customer input and continual feedback) 3) by constantly monitoring their competitors, firms can anticipate and respond quickly to competitive moves

limitations to break-even analysis:

1) it probably represents an average price that attempts to a account for variances 2) prices often get reduced as quantity increases b/c the costs decrease, so firms must perform several break-even analyses at different quantities 3) cannot indicate for sure how many units will sell at a given price

AMA's 3 Guidelines for conducting marketing research:

1) it prohibits selling or fundraising under the guise of conducting research 2) it supports maintaining research integrity by avoiding misrepresentation or the omission of pertinent research data 3) it encourages the fair treatment of clients and suppliers

to prevent negative consequences of brand extensions:

1) marketers should evaluate the fit between the product class of the core brand and that of the extension - ex: do razors and underwear go together? no 2) firms should evaluate consumer perceptions of the attributes of the core brand and seek out similar attributes for the extension b/c brand-specific associations are very important for extensions -ex: if HP printers are known to be affordable and reliable, then consumers expect other HP products to be the same 3) firms should refrain from extending the brand name to too many products and product categories to avoid diluting the brand and damaging brand equity 4) firms should consider whether the brand extension will be distanced from the core brand, especially if the firm wants to use some but not all of the existing brand associations -ex: different level Marriott hotels (Ritz)

drawbacks to the market penetration strategy:

1) the firm must have the capacity to satisfy a rapid rise in demand 2) low price does not signal high quality 3) firms should avoid a penetration pricing strategy if some segments of the market are willing to pay more for the product

factors managers consider before embarking on a marketing research project:

1) will the research be useful (will it provide insights beyond what the managers already know?) 2) is top management committed to the project and willing to abide by the results of the research? 3) should the marketing research project be small or large? (ex: the firm could already have most of the info needed, therefore they don't need to spend much more money on conducting research)

advantages & disadvantages of secondary research

ADV - saves time in collecting data b/c they are readily available - free or inexpensive (except for syndicated data) DISADV - may not be precisely relevant to information needs - info may not be timely - sources may not be original, therefore usefulness may be an issue - methodologies for collecting data may not be appropriate - data sources may be biased

advantages & disadvantages of primary research

ADV - specific to the immediate data needs and topic at hand - offers behavioral insights generally not available from secondary research DISADV - costly - time consuming - requires more sophisticated training and experience to design study and collect data

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variable costs

Those costs, primarily labor and materials, that vary with production volume

3) brand and line extensions

a *brand extension* refers to the use of the same brand name in a different line product - it is an increase in the product mix's *breadth* - ex: Colgate- toothbrush, toothpaste, Listerine a *line extension* is the use of the same brand name within the same product line and represents an increase in a product line's depth Advantages to using the same brand name for new products 1) because the brand name is already well established, the firm can spend less in developing consumer brand awareness and brand associations for the new product 2) if either the original brand or the brand extension has strong consumer acceptance, that perception will carry over to the other product -ex: users of one Neutrogena product are likely to try other Neutrogena products 3) when brand extensions are used from complementary products, a synergy exists between the two products that can increase overall sales -ex: Frito markets chips and dip so people buy them both *brand dilution* occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold

sales orientation

a company belief that increasing sales will help the firm more than increasing profits will.

customer orientation

a company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers' needs

competitor orientation

a company objective based on the premise that the firm should measure itself primarily against its competition

profit orientation

a company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing

premium pricing

a competitor based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter

status quo pricing

a competitor-oriented strategy in which a firm changes prices only to meet those of competition

brand licensing

a contractual arrangement between firms, whereby one from allows another to use its brand name, logo, symbols, or characters in exchange for a negotiated fee

bait-and-switch

a deceptive practice of luring customers into the store with a very low advertised price on an item, only to aggressively pressure them into purchasing a higher-priced model by disparaging the low-priced item, comparing it unfavorably with the higher priced model, or professing an inadequate supply of the lower priced item

family brand

a firm's own corporate name used to brand its product lines and products

predatory pricing

a firm's practice of setting a very lower price for one or more of its products with the intent to drive its competition out of business; illegal under both the Sherman Antitrust Act and the Federal Trade Commission Act

competitive parity

a firm's strategy of setting prices that are similar to those of major competitors

questionnaire

a form that features a set of questions designed to gather information from respondents and thereby accomplish the researcher' objectives; questions can be either unstructured or structured

early majority

a group of consumers in the diffusion of innovation model that represents approximately 34% of the population; members don't like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products or services can be profitable until this large group buys them

market penetration strategy

a growth strategy that employs the existing marketing mix and focuses the firm's efforts on existing customers

target return pricing

a pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales

target profit pricing

a pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit

high/low pricing

a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases

maximizing profits

a profit strategy that relies primarily on economic theory. if a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits, it should be able to identify the price at which its profits are maximized

focus group interviews

a research technique in which a small group of persons (usually 8-12) comes together for an intensive discussion about a particular topic, with the conversation guided by a trained moderator using an unstructured method of inquiry

Marketing Research

a set of techniques and principles for systematically collecting, recording, analyzing, and interpreting data that can aid decision makers involved in marketing goods, services, or ideas

everyday low pricing (EDLP)

a strategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale prices their competitors may offer

brand repositioning (rebranding)

a strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences

price skimming

a strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the net most price sensitive segment

What is the most popular method of quantitative primary collection?

a survey

survey

a systematic means of collecting information from people that generally uses a questionnaire

experimental research (experiment)

a type of conclusive and quantitative research that systematically manipulates one or more variables to determine which variables have a causal effect on another variable

scanner data

a type of syndicated external secondary data used in quantitative research that is obtained from scanner readings of UPC codes at check-out counters

break even analysis and decision making

a useful technique that enables mangers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales is called *break-even analysis* - used to set the "must have" price (or minimum quantity that can be sold - central to this analysis is the determination of the *break-even point*, or the point at which the number of units sold generates just enough revenue to equal the total costs - at this point, profits are zero - a starting point after variable and fixed costs are covered (a predictor) - can be adjusted (in most cases, adjustments are made upward of the break even point) - the amount added above break even point= profit - NOT THE SAME AS CONTRIBUTION MARGIN - profit cannot tell managers how many units a firm must produce and sell before it stops losing money and at least breaks even, which is what break even point does - the fixed curve will always appear as a horizontal line straight across the graph because fixed costs do not change over different levels of volume -the lowest point the total costs can ever reach is equal to the total fixed costs b/c the fixed costs of operating the business remain and cannot be avoided - *contribution per unit* is the price less the variable cost per unit

trade promotions

advertising to wholesalers or retailers to get them to purchase new products, often through special pricing incentives

retailer/store brands...private-label brands...store brands

all the same?

retailer/store brands

also called *private-label* brands products developed by retailers

product development

also called *product design* entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a service's features

experimental research

also called an "experiment" a type of quantitative research that systematically manipulates one or more variables to determine which variables have a causal effect on another variable ex: McDonalds puts their new item on the menu at 4 different prices in 4 different markets

Deceptive or illegal price advertising

although it is always illegal and unethical to lie in advertising, a certain amount of puffery is typically allowed - price advertisements should never deceive consumers to the point of causing harm -example of puffery: car dealer saying they have the best cars in town *1) deceptive reference prices* - if the reference price is bona fide (true), the advertisement is informative. if the reference point has been inflated or is just plain fictitious, the advertisement is deceptive and may cause harm to consumers - it is hard to determine what a "regular" price is - if a seller is going to label a price as a regular price, the Better Business Bureau suggests that at least 50% of the sales have occurred at that price *2) loss leader pricing* - selling the product at near or below cost to generate traffic - leader pricing is when you price an item at the purchase price to draw customers in, not trying to make money, just gain customers - *loss leader pricing* takes this tactic one step further by lowering the price below the store's cost, you risk taking a hit to pull customers in - ex: BOGO's that end up making profits by lying about original costs. in some states this form of pricing is illegal and considered a form of bait and switch *3) bait and switch* - uses low priced item to pull you in and then end up convincing you to buy a higher priced item (ex: saying the lower priced item sucks or is out of stock) - occurs when sellers advertise items for a very low price without the intent to really sell any - this tactic is a deceptive practice because the store lures customers in with a very low price on an item (the bait), only to aggressively pressure these customers into purchasing a higher-priced model (the switch) by disparaging the low-priced item, comparing it unfavorably with the higher-priced model, or professing an inadequate supple of the lower-priced item

alpha testing

an attempt by the firm to determine whether a product will perform according to its design and whether it satisfies the need for which it was intended; occurs in the firm's research and development (R&D) department

observation

an exploratory research method that entails examining purchase and consumption behaviors through personal or video camera scrutiny

in-depth interview

an exploratory research technique in which trained researchers ask questions, listen to and record the answers, and then pose additional questions to clarify or expand on a particular issue

product

anything that is of value to a consumer and can be offered through a voluntary marketing exchange

jingles/sounds

audio messages about the brand that are composed of words or distinctive music

characters

brand symbols that could be human, animal, or animated -ex: Pillsbury dough boy and the Keebler elves, tony the tiger, mr clean

1) brand ownership

brands can be opened by any firm in the supply chain, whether manufacturers, wholesalers, or retailers - brands can be marketed using a common/family name or as individual brands - 2 brand ownership strategies: *1) manufacturer brands (national brands)* - owned and managed by the manufacturer -ex: Nike, Coca-Cola, Kitchen-Aid and Sony - the majority of the brands marketed in the US are manufactured brands - by owning their brands, manufacturers retain more control over their marketing strategy and thereby create their own brand equity *2) retailer/store brands (private-label brands)* - are products developed by retailers *a) premium*= ex: archer farm's belongs to target, kirkland's belongs to costco *b) generic*= ex: kroger brand or publix brand *c) copycat*= copycat of herbal essence shampoo *d) exclusive co-branded*= ex: Martha Stewart for K-Mart

private-label brands

brands developed and marketed by a retailer and available only from that retailer; also called *store brands*

manufacturer brands (national brands)

brands owned and managed by the manufacturer

concepts

brief written descriptions of a product or service; its technology, working principles, and forms; and what customer needs it would satisfy

5) channel members

channel members= manufacturers, wholesalers, retailers -retailers normally set the final price to consumer - channel members must communicate their pricing goals and select channel partners that agree with them - a *gray market* employs irregular but not necessarily illegal methods; generally it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by manufacturer (ex: if a retailer has too many high definition TV's in stock, it may sell them at just above its own cost to an unauthorized discount dealer) - *mark-up*= amount added above the retailer's cost to purchase the product - includes retailer's expenses and profits - *keystoning*= when you double the purchase price and use that as your end selling price - this is a 100% mark- up

neuromarketing

claims the ability to read consumers' minds using wireless electroencephalogram (EEG) scanners that measure the involuntary brainwaves that occur when they view a product, advertisement or brand images

structured questions

closed-ended questions for which a discrete set of response alternatives, or specific answers, is provided for respondents to evaluate

price bundling

combining two or more different products in a single package -ex: BOGO's, combo meals, TV bundles

premarket test

conducted before a product or service is brought to market to determine how many customers will try and then continue to use it

two primary categories of products and services that reflect who buys them:

consumers or businesses - *consumer products* are products and services used by people for their personal use

laggards

consumers who like to avoid change and rely on traditional products until they are no loner available

contribution per unit=

contribution per unit= price- variable cost per unit

What is secondary data?

data already collected by others - might come from free or inexpensive *external sources*: i.e. government sources, census data, syndicated data (*must be purchased*), or reports published in magazines - firms can also purchase more specific or applicable secondary data from specialized research firms - secondary sources can be accessed through internal sources (including the company's sales invoices, customer lists, and other reports generated by the company itself) ex: politicians knocking on neighborhood doors most likely already know all about the people they talk to 3 types: - *inexpensive external secondary data* - *syndicated external secondary data* - *internal secondary data*

syndicated data

data available for a fee from commercial research firms such as Information Resources Inc. (IRI), National Purchase Dairy Panel, and ACNielsen

primary data

data collected to address specific research needs

sentiment mining

data gathered by evaluating customer comments posted through social media sites such as Facebook and Twitter

product life cycle

defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy plan

biometric data

digital scanning of the physiological or behavioral characteristics of individuals as a means of identification

Example question: The first year they were offered, John wanted a tablet computer, but he did not know which one to choose. He waited until there were *more choices, lower prices, and improved quality*. John is part of the ________ diffusion of innovation groups.

early majority

When demand is price ______, a change in price has a large change in demand - in the opposite direction

elastic (price sensitive)

gray market

employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer

observation technique

entails examining purchase and consumption behaviors through personal or video camera scrutiny ex: observe customers while they shop or when they go about their daily lives, during which they use a variety of products - can last for a brief period of time (i.e. watching teenagers shop) or it may take days or weeks (i.e. researchers that live with families) ex: Proctor and Gamble observed poor women washing their hair and made cheap shampoo targeted to them

contribution per unit

equals the price less the variable cost per unit. Variable used to determine the break-even point in units

Step 1: defining objectives and research needs

establish in advance what problems need to be solved *1. What information is needed to answer specific research questions?* *2. How should that information be obtained?* examples of objectives: - McDonalds wants to know more about customer experience - Mcdonalds wants to know what its customers think about Wendy's research needs: - the complexity of either McDonalds project depends on the resources already available and the amount it needs

branding

ex: Kate Spade a company lives or dies based on brand awareness - consumers cannot buy products that they don't know exist branding provides a way for a firm to differentiate its product offerings from those of its competitors -ex: both Snapple and Tropicana make and sell fruit drinks, yet consumers may choose one over the other b/c of the associations that the brands invoke

slotting allowance

fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products

Why increase depth?

firms might add items to address changing consumer preferences -ex: Bank of America added an eChecking account to appeal to online users -ex: band aid now how 40 different kinds of band aids to heal cuts (some with medicine already in them, different sizes, etc.)

Why increase breadth?

firms often add new product lines to capture new or evolving markets and increase sales ex: to increase product breadth, a firm may add a new line of jam products to compliment its bread line - ex: true religion is now a lifestyle brand, offers apparel, belts, swimwear, and fragrances - ex: Listerine, if you make good toothpaste, you might make good toothbrushes

4) decline stage

firms with products in this stage either position themselves for a niche segment of diehard consumers or those with special needs - declining sales - declining profits - low competition - the few laggards who have not yet tried the product or service enter the market at this stage -ex: records are still around for collectors that prefer them over CDs

break-even point (units)=

fixed costs/contributions per unit

product lines

groups of associated items, such as those that customers use together or think of as part of a group of similar products

beta testing

having potential consumers examine a product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use

Step 2: Designing the research

identify the type of data needed and determine the research necessary to collect it ex: if McDonalds wants to find out about their customers' experiences: - survey them - observe customers to see how they actually enter the stores, interact with employees, & consume the product - ask customers specific questions about their experience - the project's design might begin with available data

what are products?

in addition to goods, products might be: - services (non tangible- hair cuts, restaurants) - places (theme parks, Disney, Jamaica) - ideas (stop smoking, don't text and drive) - organizations (red cross) - people (Oprah, politicians) - communities (FB, neighborhood, cities, areas of town) that create value for consumers

When demand is price ______, a change in price has little change on demand

inelastic (price insensitive)

qualitative research

informal research methods, including observation, following social media sites, in-depth interviews, focus groups, and projective techniques

panel data

information collected from a group of consumers

lead users

innovative product users who modify existing products according to their own ideas to suit their specific needs

Example question: Tiffany always asks Samantha about beauty supply products. She considers her a well-informed friend who always knows the latest trends and enjoys taking risks, sometimes with obsession. For Tiffany, Samantha is a(n) ______ in the diffusion of innovation process.

innovator

test marketing

introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch

reverse engineering

involves taking apart a competitor's product, analyzing it, and creating an improved product that does not infringe on the competitors patents, if any exist

product labeling

labels on products and packages provide information the consumer needs for his or her purchase decision and consumption of the product - labels are also important elements of branding and can be used for promotion - labels must include the ingredients contained in the product, where the product was made, directions for use, and/or safety precautions -the FDA is the primary federal agency that reviews food and package labels and seniors that the claims made by the manufacturer are true

Example question: Denise and Janet attend a large university in Texas. Denise asked for Janet's email address, but Janet said she didn't have one. Janet would probably be considered a(n) _____ in the diffusion of innovation process.

laggard

data warehouses

large computer files that store millions and even billions of pieces of individual data

who is the last group of buyers to enter a new product market?

late majority

Logos and symbols

logos are visual branding elements that stand for corporate names or trademarks symbols are logos without words (Nike swoosh, Mercedes start) ex: Snicker's "hungry" in the same font

trade show

major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry

price

the overall sacrifice a consumer is willing to make- money, time, energy- to acquire a specific product or service

6) evaluation of results

marketers must understand a critical post launch review to determine whether the product and its launch were a success or failure and what additional resources changes to the marketing mix are needed, if any - many firms use panel data collected by panelists in their receipts using a home scanning device - this info is used to measure individual household first-time trials and repeat purchases -firms can measure success of a new product by 3 interrelated factors: *1) its satisfaction of technical requirements* (i.e. performance- did the product do what its supposed to do?) *2) customer acceptance* *3) its satisfaction of the firm's financial requirements* (i.e. sales and profits... pricing)

price elasticity of demand

measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price

brand awareness

measures how many consumers in a market are familiar with the brand and what it stands for; created through repeated exposures of the various brand elements (brand name, logo, symbol, character, packaging, or slogan) in the firm's communications to consumers

what is the most common form of competition?

monopolistic competition

pioneers

new product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market - also called *breakthroughs*

breadth

number of product lines offered by a firm; also known as *variety*

brand dilution

occurs when a brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold

brand loyalty

occurs when a consumer buys the same brand's product or service repeatedly over time rather than buying from multiple suppliers within the same category

horizontal price fixing

occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers

pure competition

occurs when different companies sell commodity products that consumers perceive as substitutable; price usually is set according to the laws of supply and demand

oligopolistic competition

occurs when only a few firms dominate a market

vertical price fixing

occurs when parties at different levels of the same marketing channel (e.g., manufacturers and retailers) collude to control the prices passed on to consumers

monopolistic competition

occurs when there are many firms that sell closely related but not homogeneous products; these products may be viewed as substitutes but are not perfect substitutes

price war

occurs when two or more firms compete primarily by lowering their prices

odd-even pricing

odd number prices imply a bargain (ex: gas, we see $2.99 as cheaper than $3) even number prices imply quality (ex: at high end restaurants food are priced even numbers- steak $22)

monopoly

one firm provides the product or service in a particular industry

unstructured questions

open-ended questions that allow respondents to answer in their own words

information

organized, analyzed, interpreted data that offer value to marketers

secondary data

pieces of information that have already been collected from other sources and usually are readily available

Step 5: Action and Plan implementation

prepares the results and presents them to the appropriate decision makers - a typical marketing research presentation includes an executive summary, the body of the report (including research objectives, methods used & findings), the conclusions, the limitations, appropriate tables, figures and appendixes ex: McDonalds might want to hire gourmet chefs as consultants to improve taste & then they can promote this. They also might want to look into their low pricing and see if it should be kept the same or raised to make more profits Includes: 1) executive summary 2) body 3) conclusions 4) limitations 5) supplements

price elasticity of demand=

price elasticity of demand= % change in quantity demanded/ % change in price if E is less than -1, demand is elastic (if prices go up, sales go down) if E is greater than 1, demand is inelastic

total revenue=

price x quantity

what is the most challenging of the 4 P's to manage and does not generate costs?

price, it generates revenue

Primary data collection techniques

primary data is data you collect on your own - 2 methods: 1) *qualitative research* is used to understand the phenomenon of interest through broad open-ended responses (feeling people out and talking to them) - more informal than quantitative research - generally in-depth but UNSTRUCTURED - includes: a) *observation* - ex: if there are balloons over a flatscreen TV at best buy, do people flock? - ex: observing trash b) *social media* research - monitoring blogs, creating online communities - *sentiment mining*- people put anything on social media, ex: budweiser can search every tweet that mentions it and see which are negative or positive c) *in-depth interviews* - generally unstructured - limited in number (don't want too many people, one on one most times) -time consuming & costly d) *focus groups* & projective techniques - these are beneficial because people feed off of each other - 8-12 people (more people than in-depth) - discuss one topic - facilitated by a trained moderator 2) *quantitative research* are constructed responses that can be statistically tested - large numbers of respondents - must be statistically valid (real numbers) - you are allowed to generalize - provides information needed to confirm insights and hypotheses generated via qualitative research -includes: a) *experiments* - generally *changes one of the 4 P's* - you have to change *one variable* at a time so you have control, you want to know exactly what made the difference - *Field* (experiments out in the field- ex: changing price in Publix) *vs. Lab* (experiments where you pull people in- ex: little Debby Smell lab) b) *surveys* - telephone interviews= people are more unwilling and hang up - mail surveys= cheap but get thrown away - internet surveys= free, reach more people, convenient, instant, eliminates human error (best kind) - mall intercept surveys= usually give you about a $5 incentive, somewhat skewed data b/c you're not capturing everyone - in person interviews= labor intensive, costly c) *scanner or panel data* - can be primary or secondary

first movers

product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead

consumer products

products and services used by people for their personal use

substitute products

products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A results in a percentage decrease in the quantity demanded for product B

unsought products/services

products or services consumers either do not normally think of buying or do not know about

specialty products/services

products or services toward which the customer shows a strong preference and for which he or she will expend considerable effort to search for the best suppliers

complementary products

products whose demand curves are positively related, such that they rise or fall together; a percentage increase in demand for one results in a percentage increase in demand for the other

Lanham Act

protects brand names -ex: identifying all frozen pops as popsicles, when popsicle is actually the brand name - ex: calling all slow cookers crock pots -ex: calling all hot tubs jacuzzi's -ex: styrofoam is a registered brand name, (ex: CFA cup is not styrofoam... there is no such thing as a styrofoam cup) -ex: ping pong is a brand name (ex: most people call the game of table tennis ping pong)

data

raw numbers or facts

inelastic

refers to a market for a product or service that is price insensitive; that is, relatively small changes in price will not generate large changes in the quantity demanded

elastic

refers to a market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large changes in the quantity demanded

substitution effect

refers to consumers' ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand

income effect

refers to the change in the quantity of a product demanded by consumers due to a change in their income

experience curve effect

refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price

slogans

short phrases used to describe the brand or persuade consumers about some characteristics of the brand -ex: state farm's "like a good neighbor" or dunkin donuts "America runs on Dunkin" -ex: "im loving it" "eat more chicken"

introductory price promotions

short-term price discounts designed to encourage trial

demand curve

shows how many units of a product or service consumers will demand during a specific period at different prices

primary package

the packaging the consumer uses, such as the toothpaste tube, from which he or she typically seeks convenience in terms of storage, use and consumption

cross-price elasticity

the percentage change in demand for product A that occurs in response to a percentage change in price of product B

social media technique

social media provides valuable information that aids marketing research - contributors to social media sites rarely are shy about providing their opinions about products - blogs in particular represent valuable sources of marketing research insights (marketers pay attention to online reviews about everything) -blogs can also be challenging--> ex: ConAgra tried a hidden camera experiment on bloggers and became exposed/blasted online -another creative use of social media is online communities for companies -ex: Kraft created a community when thinking about launching a South Beach Diet. they learned that it would need to educate consumers about the diet and offer products that could address cravings throughout the day, not just at mealtimes -b/c of splurge of social media, many companies have added heads of social media to their management teams - *sentiment mining* uses social media sites like FB, Twitter and online blogs to collect consumer comments about companies and their products -sentiment mining yields qualitative data that provide new insight into what consumers really think -some companies take it a step further by joining the online conversation with customers, a process called *social engagement*

inexpensive external secondary data

some sources of external secondary data are relatively low in cost or free ex: you could look at the US Bureau of the Census if you are trying to open a new location of a business, it provides zip codes about businesses by county and zip codes. the data provided might help you determine the size of your potential market - inexpensive data sources are not always adequate to meet researchers' needs b/c the data was initially acquired for some other purpose & sometimes the data is only collected at the beginning of the decade so it becomes outdated (i.e. the census) easy access doesn't always ensure that the data is trustworthy!

Why decrease breadth?

sometimes it is necessary to delete entire product lines to address changing market conditions -ex: due to competitive changes, TCBY is now focusing on yogurt... it originally branched out beyond frozen yogurt but realized it wasn't as successful

Why decrease depth?

sometimes it's necessary to delete products within a product line to realign the firm's resources - done to eliminate unprofitable or low margin items and refocus their marketing efforts on more profitable items ex: Tide deleted a cheap product b/c it worried that an inexpensive, less effective version simply undermined its brand

maturity stage

stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them

introduction stage

stage of the product life cycle when innovators start buying the product

decline

stage of the product life cycle when sales decline and the product eventually exits the market

growth stage

stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category

quantitative research

structured responses that can be statistically tested to confirm insights and hypotheses generated via qualitative research or secondary data.

syndicated external secondary data

syndicated data is available for a fee from commercial research firms - some syndicated data providers also offer information about shifting brand preferences and product usage in households, which is *gathered from scanner data and consumer panels* ex: firms like Kellogg's use scanner data to assess the success of new products such as its special K popcorn chips -*scanner data* are used in quantitative research obtained from scanner readings of UPC labels at checkout counters. this information is used to help leading consumer packaged goods firms assess what is happening in the marketplace - ex: a firm can use scanner data to determine what would happen to its sales if it reduced the price of its least popular product by 10 percent in a given month -*panel data* are information collected from a group of consumers, organized into panels, over time - data collected from panelists often include their records of what they have purchased (secondary data) as well as their responses to survey questions that the client gives to the panel firm to ask the panelists (primary data) -ex: secondary panel data thus might show that when diet pepsi is offered at a deep discount, 80 percent of usual diet coke consumers switch to pepsi -ex: primary panel data could give insights into what they think of each option -overall panel and scanner data provide info about what consumers are buying or not buying - the key difference between scanner research and panel research is how the data is aggregated - scanner data typically focuses on weekly consumption of a particular product at a given unit of analysis (ex: individual store, chain, region); panel research focuses on the total weekly consumption by a particular person or household

loss leader pricing

takes the tactic of leader pricing one step further by lowering the price below the store's cost

target return price=

target return price= (variable cost + (fixed cost/expected unit sales)) x (1 + target return % [expressed as a decimal])

break-even analysis

technique used to examine the relationships among cost, price, revenue, and profit over different levels of production and sales to determine the break-even point

actual product

the physical attributes of a product including the brand name, features/design, quality level, and packaging

break-even point

the point at which the number of units sold generates just enough revenue to equal the total costs; at this point, profits are zero

price fixing

the practice of colluding with other firms to control prices

4) market testing

test the market for the new product with a trial batch of products 2 forms of market testing: *1) premarket tests* - conducted before a firm brings a product or service to market to determine how many customers will try and then continue to use the product/service according to a small group of potential consumers -ex:Nielsen BASES- during this test, potential customers are exposed to the marketing mix variables such as the advertising, then surveyed and give a sample of the product to try. after some period of time, during which the potential customers try the product, they are surveyed about whether they would buy/use the product again. this second survey provides an estimation of the probability of a consumer's repeat purchase - sometimes firms simulate a product or service introduction (ex: fake website w/ old products and the new one- see if customers pick the new product and if advertising is effective) *2) test marketing* - introduces the offering to a limited geographical area (usually a few cities) prior to a national launch - a strong predictor of product success b/c the firm can study actual purchase behavior, which is more reliable than a simulated test - uses all the elements of the marketing mix -costs more and takes longer than premarket tests

the product life cycle

the *product life cycle* defines the stages that products move through as they enter, get established in, and ultimately leave the marketplace - stages of the life cycle often reflect marketplace trends - in their life cycles, products pass through four stages: introduction, growth, maturity and decline *1) introduction stage* - this stage is initiated when the product category first launches *2) growth stage* - the product gains acceptance, demand and sales increase, and more competitors emerge *3) maturity stage* - industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them *4) decline* - if the product is not successful, it eventually exits the market - many products, such as home appliances, stay in the maturity stage for a very long time (ex: dishwashers and washing machines) - most products follow a similar pattern of growth and decline - length of the cycle for products varies, but pattern shape of graph is similar - is descriptive, not predictive - best used for product categories, not brands (ex: washer machine, not Whirlpool)

core customer value

the basic problem solving benefits that consumers are seeking

product mix and product line decisions

the complete set of all products and services offered by a firm is called its *product mix* - the product mix is constantly changing - consumers adopt products at different speeds - products remain viable for different time periods (ex: washing machine) - *product lines* are groups of associated items that consumers tend to use together or think of as part of a group of similar products or services -ex: Kellogg's- cereal, toaster pastries and breakfast snacks, frozen items (waffles), crackers and cookies - the product mix reflects the breadth and the depth of the company's product lines - a firm's product mix *breadth* represents a count of the ---number of product lines--- offered by the firm - breadth- creating different products to add - product line *depth* is the ---number of categories within a product line--- (ex: Kellogg's cereal- Fruit Loops, Cocoa Krispies, Special K) - depth- same product, different version (ex: new scents of deodorant) - too much breadth in the product mix becomes costly to maintain and too many brands may weaken the firms reputation

product mix

the complete set of all products offered by a firm

prototype

the first physical form or service description of a new product, still in rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes, sometimes even crafted individually

late majority

the last group of buyers to enter a new product market; when they do, the product has achieved its full market potential

URLs (uniform resource locators) or domain names

the location of pages on the internet, which often substitutes for the firm's name, such as Yahoo! or Amazon - ex: yourbaldlawyers.com

brand associations

the manual links that consumers make between a brand and its key product attributes; can involve a logo, slogan, or famous personality

2) naming brands and product lines

the more the products vary in usage or performance, the more likely it is that the firm should use individual brands -ex: General Motors uses several individual brands (Cadillac, Chevy, GMC), each catering to different target markets - manufacturer/national & retail/store brands can take the form of : *1) Family Brands* aka corporate brand - when all products are sold under one family brand, the individual brands benefit from the overall brand awareness associated (recognition) with the family name -ex: Kellogg's Special K cereal, granola bars, etc. - ex: crest- toothpastes, floss, toothbrush????? -ex: Apple- laptops, iphones, ipad, ipods - ex: Kroger's family line= kroger, Publix's family line= Publix and Publix premium *2) Individual Brands* - a firm can use individual brands for each of its products (ex: Kellogg's allows other products like Famous Amos cookies & Cheez-its to keep individual identities not readily seen as being under the Kellogg's umbrella) -ex: Kroger's individual brand= private selection bread, Publix's individual brand= greenwise - ex: Coca Cola- dasani, vitamin water, minute maid??? THINK OF AS A FAMILY- all same last name INDIVIDUALS- all have different names

depth

the number of categories within a product line

churn

the number of consumers who stop using a product or service, divided by the average number of consumers of that product or service

What is price?

the overall sacrifice a consumer is willing to make to acquire a specific product or service - people may sacrifice time, travel costs, taxes, shipping costs, etc. - price allocates resources in a free market economy - ex: the cheaper item is at a further grocery store so you buy the more expensive item at the closer store- this is a sacrifice of time - price is the only element of the marketing mix that does NOT generate costs, but instead *generates revenue* - price is the most challenging of the 4 P's to manage

what is price fixing?

the practice of colluding with other firms to control prices - can be either horizontal or vertical - horizontal price fixing is illegal under the Sherman Antitrust Act, but vertical price fixing falls into a gray area -*horizontal price fixing* occurs when competitors that produce and sell competing products or services collude, or work together, to control prices, effectively taking price out of the decision process for consumers - ex: gas stations come together to all set the same higher price -*vertical price fixing* occurs when parties at different levels of the same marketing channel (i.e. manufacturers and retailers) agree to control the prices passed on to consumers (ex: Sony decides that TV's can't be sold for less than $1000) -manufacturers often encourage retailers to sell their merchandise at a specific price, known as *manufacturer's suggested retail price (MSRP)* - manufacturers enforce MSRPs by withholding benefits such as cooperative advertising, or even refusing to deliver merchandise - MSRP is based on a case-by-case basis to determine legality

co-branding

the practice of marketing two or more brands together, on the same package or promotion

price discrimination

the practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of this are illegal

reference point

the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process

manufacture's suggested retail price (MSRP)

the price that manufacturers suggest retailers use to sell their merchandise

manufacturer's suggested retail price (MSRP)

the price that manufacturers suggest retailers use to sell their merchandise

innovation

the process by which ideas are transformed into new products and services that will help firms grow

diffusion of innovation

the process by which the use of an innovation, whether a product or service, spreads throughout a market group over time and over various categories of adopters

what is diffusion of innovation?

the process by which the use of an innovation- whether a product, a service, or a process- spreads throughout a market group, over time and *across various categories of adopters* - it helps marketers understand the rate at which consumers are likely to adopt a new product or service - it gives them a means to identify potential markets even before they introduce the innovations - new-to-the-world products that create new markets, also called *pioneers* or *breakthroughs*, establish a completely new market or radically change both the rules of competition and consumer preferences in a market - ex: Apple, iPod, iPhone, iPad - pioneers have the advantage of being *first movers*; as the first to create the market or product category, they become readily recognizable to consumers and thus establish a commanding and early market share lead - ex: Chobani Greek Yogurt over other brands -not all pioneers succeed - why is the failure rate for new products so high? 1) failure to assess the market property by neglecting to do appropriate product testing, targeting the wrong segment, and/or poor positioning 2) by venturing into products or services that are inconsistent with their brand

concept testing

the process it which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reactions

perceived value

the relationship between a product's or service's benefits and its cost

early adopters

the second group of consumers in the diffusion of innovation model, after innovators, to use a product or service innovation; generally don't like to take as much risk as innovators but instead wait and purchase the product after careful review

brand equity

the set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or service

brand name

the spoken component of branding, it can describe the product or service/product characteristics and/or be composed of words invented or derived from colloquial or contemporary language ex: Comfort Inn (suggests product characteristics), Apple (no association with the product), Zillow.com (invented term) ex: Nike, Ocsar Meyer, Coca Cola

total cost

the sum of the variable and fixed costs

data mining

the use of a variety of statistical analysis tools to uncover previously unknown patterns in the data stored in databases or relationships among variables

individual brands

the use of individual brand names for each of a firm's products

brand extension

the use of the same brand name for new products being introduced to the same or new markets

line extension

the use of the same brand name within the same product line and represents an increase in a product line's depth

brand equity for the owner

the value of a brand translates into *brand equity*, or the set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or service - brands are assets that increase overall value - marketing expenditures can result in greater brand recognition, awareness, perceived value, and consumer loyalty for the brand, which all enhance the brand's overall equity

secondary package

the wrapper or exterior carton that contains the primary package and provides the UPC label used by retail scanners; can contain additional product information that may not be available on the primary package

4) competition

there are four levels of competition: *1) monopoly* - one firm controls the market - when one firm provides the product or service in a particular industry, which results in less price competition -ex: power companies - ex: ticket master wasn't allowed to buy out all ticket companies *2) oligopolistic competition* - only a few firms dominate the market - firms typically change their prices in reaction to competition -ex: the soft drink market, airline travel - sometimes reactions to prices in oligopolistic markets can result in a *price war* which occurs when two or more firms compete primarily by lowering their prices (firm A lowers its prices; firm B responds by meeting or beating firm A's new price) - in some cases, these tactics result in *predatory pricing* when a firm sets a very low price for one or more of its products with the intent to drive its competition out of business *3) monopolistic competition* - occurs when there are many firms competing for customers in a given market but their products are differentiated (ex: different types of watches/watch companies) - this is the most common form of competition *4) pure competition*- lots of firms selling commodities for the same price - when there is a large number of sellers of standardized products or commodities that consumers perceive as substitutable, such as grains, gold, meat, spices or minerals - in such markets, price usually is set according to the laws of supply and demand - ex: wheat is wheat so it does not matter to a commercial bakery whose wheat it buys - secret to price success: decommoditize (differentiate) your products (ex: most people feel that all chickens purchased in a grocery store are the same, but companies like Tyson have branded their chickens to move into a monopolistically competitive market

what is price discrimination?

there are many forms of price discrimination but only some of them are considered illegal under the Clayton Act and the Robinson-Patman Act. - when firms sell the same to different resellers (wholesalers, distributors, or retailers) at different prices, it can be considered *price discrimination* (usually larger firms receive lower prices) - legal price discrimination examples: student/senior deals on movie tickets OR eBay auctions - quantity discounts= a legitimate method of charging different prices to different customers on the basis of the quantity they purchase (stems from the assumption that it costs less to sell and service 1000 units to one customer than 100 units to 10 customers). these discounts must be available to all customers - CAN ONLY DO THIS TO END CONSUMERS, not through the channel- can't give deals to certain retailers, etc.

internal secondary data

this is customer information and purchase history - this data is stored in large computer files called *data warehouses*... data is useless until you mine it because there is so much -firms find it necessary to use data mining techniques to extract valuable information from their databases - *data mining* uses a variety of statistical analysis tools to uncover previously unknown patterns in the data stored in databases or relationships among variables -some retailers try to customize their product offering to match the needs of their customers (ex: using Kroger plus card to get info & then targeting promotions to each customer) -ex: data mining can also enable a home improvement retailer such as Lowe's to learn that 25% of the time its customers buy a garden hose, they also purchase a sprinkler, so the retailer may decide to put the garden hoses next to the sprinklers in the store -data mining also helps determine customer satisfaction - by mining customer data and information, the company also reduced its churn levels. *churn* is the number of participants who will discontinue use of a service, divided by the average number of total participants - firms can also use secondary data to assess the profitability of their customers by determining the customer lifetime value (CLV)

3) Maturity Stage

this stage is characterized by the adoption of the product by the late majority and intense competition for market share among firms - marketing costs increase - intense competition on price - eroded profit margins (profits are at peak but starting to decline) - market has become saturated (sales have peaked) 2 tactics when market has become saturated: *1) entry into new markets* - firms may attempt to enter new geographical markets, including international markets (ex: Whirlpool expanding to China and Brazil) - even in mature markets, firms may be able to find new market segments (ex: to generate sales in a mature world, Dial has developed laundry sheets that include detergent, fabric softener, and antistatic) *2) development of new products* - firms continually introduce new products with improved features or find new uses for existing products -ex: KFC developed grilled chicken product line

2) growth stage

this stage is marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions - rising sales - rapidly rising profits - few but increasing competitors - firms attempt to reach new consumers by producing different product variations - the goal of this segmentation is to firmly establish the firm's brand (ex: many food manufacturers are working hard to become the first brand that consumers think of when they consider organic products - firms that have not yet established a stronghold in the market, even in narrow segments, may decide to exist in what is referred to as an industry shakeout

Step 3: data collection process

this step always comes after the research design process 2 types of data: - *secondary data*: pieces of information that have already been collected prior to the start of the focal research project (include both external and internal data sources) - data that is already out there - *primary data*: data collected to address specific research needs (i.e. focus groups, in depth interviews, and surveys) - you are creating the data ex: McDonalds may decide to get secondary data from external providers such as National Purchase Diary Panel and ACNielsen. Based on the data, it might decide to follow up with some primary data using a survey - no company can ask every customer their opinions, so researchers must choose a group or a *sample*, and then generalize their opinions to describe all customers. they can choose the participants at random or based off of a characteristic (i.e. age) - marketing researchers use various methods of asking questions--> ex: Section A measures customer's experience in McDonalds, B measures customer's experience in Wendy's, C measures the customer's habits at McDonalds & D measures customer demographics

innovators

those buyers who want to be the first to have the new product or service

fixed costs

those costs that remain essentially at the same level, regardless of any changes in the volume of production

shopping products/services

those for which consumers will spend time comparing alternatives, such as apparel, fragrances, and appliances

convenience products/services

those for which the consumer is not willing to spend any effort to evaluate prior to purchase

predatory pricing

when a firm sets a very low price for one or more of its products with the intent to drive its competition out of business - this is illegal under both the Sherman Antitrust Act and the Federal Trade Commission Act because it constrains free trade and represents a form of unfair competition This can be difficult to prove: - one must demonstrate intent - the complainant must prove

focus group interview technique

when a small group of persons (8-12) come together for an intensive discussion about a particular topic - focus groups are unstructured, a monitor guides the conversation according to a general outline - researchers usually record the interactions so they can comb through the interviews later - focus groups gather qualitative data about initial reactions to a product ex: focus groups helped Campbell create healthier soups for women- they shared what they did and did NOT want (wanted soups that contains ingredients they would use if they made it from scratch) - focus groups aren't limited to products, services can benefit too ex: eFocus groups- online focus groups that are useful but only downside is you can't read body language

Product Complexity

when developing or changing a product, marketers start with core customer value, then make the actual product and add associated services to round out the offering *1) core customer value* (what are consumers looking for) - ex: Mars' M&Ms- are they looking for a sweet treat or an energy boost? *2) make actual product* - brand name - quality level - packaging - features/design * level of importance varies depending on the product *3) associated services* (non-physical aspects of a product) ex: for M&M's maybe a customer complaint line - financing -product warranty -product support -after sale service * vary with product

in-depth interview technique

when trained researchers ask questions , listen to and record the answers, and then pose additional questions to clarify or expand on a particular issue ex: observing teenagers shop at Abercrombie and notice they left early--> you might ask why they left so early. if they say the weren't being helped you might ask if they normally expect better assistance there -in depth interviews communicate how people really feel about a product or service at the individual level. marketers can use the results of in-depth interviews to develop surveys -in depth interviews are relatively expensive and time consuming (could cost $200 or more depending on length)

5) product launch

when you introduce the product to the entire market - requires tremendous financial resources and extensive coordination of all aspects of the marketing mix - what does a product launch involve? a) the firm confirms its target market and decides how the product will be positioned b) the firm finalizes the remaining marketing mix variables: *Promotion*- how will we promote? - the test results help the firm determine how to promote - promotion for new products is required at each link in the supply chain - *trade promotions* are promotions to the wholesalers or retailers to get them to purchase the new products, often combine introductory price promotions, special events, and personal selling - *introductory price promotions* are limited-duration, lower-than-normal prices designed to provide retailer with an incentive to try products (ex: special display in a grocery aisle, an introductory celebration, or a party in conjunction with an interesting event like the academy awards) - a *trade show* is a temporary concentration of manufacturers that provides retailers the opportunity to view what is available and new in the marketplace (ex: fashion show) - promotion can be used to generate demand - promotions are often coupled with short-term price reductions, coupons or rebates *Place*- where will we sell? - the manufacturer coordinates delivery and storage of the new products with its retailers to ensure that it is available for sale when the customer wants it, at the stores the customer is expecting to find it, and in sufficient quantities to meet demand *Price*- how will we set price? - manufacturers must decide at what price they would like products to sell to consumers - they often encourage retailers to sell at a specified price knowns as the *manufacturer's suggested retail price (MSRP)* - not all retailers abide by the MSRP, but manufacturers can withhold things against them - it is sometimes easier to start with a higher MSRP and then over time lower it - when setting MSRP, manufacturers consider the price at which the new products are sold to the retailers - the retailers not only need to make a profit on each sale, but they may also receive a *slotting allowance* from the manufacturer, which is a fee paid simply to get new products into stores or to gain more or better shelf space for their products time - the timing of the launch may be important depending on the product - ex: releasing kid's movies at summer when school is out