Marketing Exam 2 (CH 8 - 13)

Sociologist Everett Rogers created five categories of product adopters based on time to adopt new products and services. What name (and percent of population) did Rogers use to classify adopters who are the first to try new ideas, usually have more money and education than the general population, as well as a higher-than-average tolerance for risk? Innovators (2.5%) Early adopters (13.5%) Early majority (34%) Late majority (34%) Laggards (16%)

Innovators

Types of Product Adopters

Innovators - 2.5% that are the fist to try new ideas, more education and money than general population, higher Early Adopters - 13.5%, well educated waiting for the green light from innovators Early Majority - 34%, product must compliment their life, not redefine it, like to sample or see other use the product Late Majority - 34%, more risk averse, skeptical of new products, buy new products when they are the only alternative Laggards - 16%, resist change, buy new products when old products aren't available

4 Characteristics of Service Marketing

Intangibility Inseparability Variability Perishability

Product positioning is: A careful analysis of cross tabulations Shelf size and location in major retail chains--grocery and department stores Geographic segmentation, often within major metropolitan and suburban areas The place a product occupies in the target customers' minds What marketers do to a product

The place a product occupies in the target customers' minds

Social Media Marketing

- Reach active receivers - Those who will become influential - Those who will evangelize the brand to their friends - Message doesn't end with receiver

Hierarchal Values

1) Elicit distinctions - Rank brands from best to worst (consumed most to least) 2) Pyramiding Down - uncovers the distinctly good attributes of a product (great taste, unique taste, refreshing, not too sweet, nostalgic) 3) Laddering up - reveals the product-person emotional connection. (Tell me about the last time you used the product)

Stages of Product Development

1) Idea generation - problems that need solving 2) Idea screening - avoiding accepting bad ideas/eliminating good ideas 3) Concept testing - CRITICAL! First time the idea is consumer tested 4) Marketing Strategy - figure out target market and marketing mix 5) Business Analysis - sales forecasting, cost estimates, evaluate future potential, legal issues, 6) Product Development - create a product for the test market 7) Test Marketing - test marketing mix, substantial time to test repeat purchases, Commercialization! - 1) Product is ready, take it to market 2) Low repeat purchases, 3) Once consumers were educated, they bought the product. Education needs to be improved 4) Back to the drawing board

Steps in Price Setting

1) Select pricing objective 2) Determine Demand 3) Estimate Company Costs 4) Know competitor prices 5) Select Pricing Method

Advantages of Branding

1. Branding allows marketers to distinguish their products from all others. 2. Branding helps consumers identify products they wish to buy again and avoid those they do not. 3. Branding is useful when introducing new products.

Unique Selling Proposition

1. Each advertisement must say "Buy this product and receive this benefit" 2. The proposition must be something the competition does not or cannot offer 3. Proposition must be so strong it can move the masses

Advertising

3 objectives of advertising Cognitive - Gain attention Affective - Gain interest/dersire Behavioral - Stimulate Action Good Ads - Obvious - Product, Advertiser, Benefit

Product Line

A group of closely related products Honda cars and trucks

Branding

A perception that exists in the minds of your constituents about your relevance and promise of value—the sum total of the impressions formed through exposure to your touchpoints A brand should - Resonate with customers Differentiate from competitors Motivate Employees

Product Item

A specific version of a product Honda CR-V

Gap Analysis

Compare performance and importance of certain benefits Comparison can be made feature vs feature, brand vs brand and segment vs segment

The range of possible prices, where sellers have incentive to sell and buyers have incentive to purchase, is: The average of all reference prices, competitor prices, and substitute prices Based on marketing efforts minus reference and competitor prices Where demand equals profit Above the buyer's perceived value and bellow the seller's cost of goods sold Above the seller's cost of goods sold and below the buyer's percieved value

Above the sellers cost of goods sold and below the buyer's perceived value

Promotion Mix

Advertising - paid placement of persuasive messages to inform, gaining interest, or stimulate action Sales promotion - short term incentives to increase sales (coupons, rebates, samples) Personal Selling - 2 way communication between buyers and sellers to influence a purchase decision Public Relations - Placement of news/media attempting to manage public perception Direct Marketing - Promotion using direct communication with consumers to generate a response such as purchase, requesting info. or visiting a store/website (Telemarketing, Direct Mail)

Social media marketing may be more effective than traditional marketing communications channels because social media: Offers greater flexibility of content and duration Has credibility similar to word-of-mouth Can build awareness and interest at a much lower cost Both A and B All of the above

All of the Above

Product Mix

All products an organization sells Honda cars, trucks, motorcycles, generators, etc

Competitive Angle

An element of differentness that solves a problem and sparks a personal connection Lighter, heavier, smaller, bigger, cheaper, more expensive

Delta Airlines faces the service challenge of perishability because the airline cannot save seats from an empty afternoon flight for a full flight in the evening. To overcome this service challenge, Delta: Buys more airplanes from Boeing and Airbus Attempts to manage fluctuating demand or seeks to match supply with changing demand Provides more training for frontline employees Hires "Fox" employees to handle problems quickly Changes the physical environment of the airport gate to provide tangible cues

Attempts to manage fluctuating demands or seeks to match supply with changing demand

Swing Group

Biggest opportunity

Developing Brand Equity

Brand Awareness - Consumers know about the brand ( I know about Apple) Brand Image - Consumers have a definite impression of the brand (I like Apple) Brand Loyalty - Consumers only purchased their favored brand (I only buy the iPhone) Brand Equity - Loyalty is transferred to new products (All my electronics are Apple)

Types of Customers

Brand Loyal Deal Shoppers Price Shoppers Convenience Shoppers

Break Even Analysis

Break Even Volume = Fixed Costs / Price - Unit Variable Costs BEV = Fixed Costs / Unit Contribution

While watching Monday Night Football, Landon noticed an ad for a new brand of deodorant bodyspray. Although Landon had never heard of this particular brand, the ad made him aware of the brand and, by the end of the ad, Landon was favorably disposed to the brand. Which two objectives did this ad accomplish? Cognitive and behavioral Behavioral and affective Push and pull Cognitive and affective Preventive and preemptive

Cognitive and affective

3 Components of Branding

Competitive Frames of Reference - Nature of Competition - Target Market Points of Difference - Desirable to to consumer - Deliverable by brand - Different from competitors Points of Parity - Demonstrate category credentials - Negate competitors POD

Types of Consumer Products

Convenience - inexpensive, merits little shopping effort Shopping - More expensive than convenience, requires more effort Specialty - Extensive research required, consumer reluctant to accept substitute Unsought - Not actively sought by buyers (tombstones, caskets, burial plots)

3 levels of a Product

Core - Personal Benefit Actual Product - Bundle of attributes Augmented Product - Complementary products

Social media services created a new vocabulary such as cost-per-click (CPC), click-through-rate, and cost-per-action (CPA). Because ads must generate enough interest to get a click and clicks must generate an action leading to a sale, the critical number is: CPM--cost per thousand impressions CPC--cost per click CPA--cost per action CPGW--cost per gross weight CCC--cost, cohort, connection

Cost per Action

Pricing Methods

Cost-plus pricing -- add a specific amount to the cost Target return pricing -- profit, sales, ROI Skimming pricing -- high price to "skim" the market Penetration pricing -- low price to "penetrate" the market Prestige pricing -- high price to signal quality, status Price lining -- different prices for different products in a product line Odd-even pricing -- $19.99 Bundle pricing -- two or more products in a single package Yield management -- match demand and supply for set capacity Going rate pricing -- follow the competition Perceived value pricing -- what the customer is willing to pay

Marketing managers (on the business side) communicate advertising strategy to advertising agencies (on the creative side) using: Creative briefs Media buying Sales promotions CPM--cost-per-thousand impressions Social media

Creative briefs

Price

Customer - money paid for the product Seller - Money received for product (rent, fees, far, tuition, etc.) One determinant of Buyers choice Only way to compare non-comparable items (boat vs TV) Competition based on price is common The wrong price might cause failure of a product

Why do companies promote?

Increase demand Make Demand More Inelastic To communicate value to chosen customers

Reference price is an important concept in pricing strategy. ______________ is what everyone else is paying for the product and _______________ is what you think you should pay, given your past experience and the buying situation. Internal reference price; external reference price External reference price; internal reference price Referral reference price; accepted reference price High reference price; low reference price Personal reference price; relevant range reference price

External reference price, internal reference price

Facebook, Twitter, YouTube, product blogs, and Google AdWords all play different roles in achieving marketing objectives. For example, __________________ is better for generating awareness and __________________ is better for making direct sales. Facebook, Google AdWords Google AdWords, Twitter YouTube, Twitter Product blogs, Facebook Google AdWords, YouTube

Facebook, Google AdWords

Types of Brands

Functional - Satisfy functional needs (relieve pain, close shave) - Differentiate by offering superior performance or economy - Achieve basic goals (physical needs - food, shelter, health, safety) Image - Creates value by projecting a distinct image - Differentiate by offering unique set of associations/images - Connect through emotional images, symbols and associations Experiential - focus on how consumers feel using the products - Connect with consumers through experiences that are co-created by the brand and the consumer at the time of consumption

Ways of Segmentation

Geographic - Based on differences in geographic regions, population density, population size, and climate Demographic - Based on age, gender, income, education level, social class, family composition, religion and ethnicity Psychographic - Based on personality, motives or lifestyle Behavioral - Based on core benefits customers seek, usage situations, brand loyalty, usage rate, and price sensetivity

4 Pricing Approaches

Golden Goose - Know own costs, customer value Cost Plus - Know own costs, not much about customers or competitors Competitive - Know own costs, know about competitors, don't know about customers Value - Know a lot about customer value, competitors, and Know own costs

Perishability

Great performances can't be saved for later! Movie theaters can't save seats Solved by managing fluctuating demand or matching supply with changing demand

Why use social media?

Greater flexibility for content and duration Credibility similar to word of mouth Builds awareness about much lower cost

Deal Shoppers

High brand sensitivity, High price sensitivity Buy name brands but only on a deal Products like diapers, hand/body soap, pet food

Brand Loyal Shoppers

High brand sensitivity, low price sensitivity Buy favorite brand regardless of price Products like toothpaste, coffee and soda

Positioning

Higher price for more benefits - Luxury brands, customers are buying prestige Same price for more benefits - Car makers entering higher end car market (Toyota --> Lexus) Lower price for same benefits - Store brands (Kirkland) Much lower price for fewer benefits - Capsule hotels NOT GOOD POSITIONING - Me too - Same price for same benefits, no reason for customers to switch Lower price for more benefits - dream for customers, hard to sustain in the long run

In recent years, many marketers have asked, "How do I optimize my website to obtain a better rank with search engines?" Given the changes in search engine algorithms, like Google, the better questions is: "How do I create 'homegrown' videos to attract more attention?" "How do I optimize a 140-character message?" "How can I obtain mazimim leverage with my CPM bids?" "How can I minimize my cost-per-click spend?" "How can I optimize my brand so that it's a sought-after participant in relevant conversations?"

How can I optimize my brand so that it's a sought-after participant in relevant conversations?

Price Elasticity

How sensitive customer demand is to change in price. Elastic - Demand is sensitive to change in price Inelastic - Price can change without significant change in demand (not very sensitive)

Variability

Humans are inconsistent but service companies must be consistent This is done by training, and skills

Hate Group

Ignore

Compared to product marketing, services marketing poses unique challenges for marketing managers because unlike products, services are: Intangible, insparable, variable, and perishable Difficult to price Unique and engaging Part of the human resources function of the firm Both high and low involvement

Intangible, inseparable, variable and perishable

Product Life Cycles

Introduction Stage - Build awareness, promote/inform/encourage trial Growth Stage - Maximize market share, add features, improve quality, and markets/channels Maturity Stage - Maximize profit, modify target audience and marketing mix Decline Stage - reduce expenditures, milk the brand, maintain harvest or drop

Combine with a Catchphrase

Keeps your brand focused and focuses buyers on key benefits

Price shoppers

Low brand sensitivity, High price sensitivity Buy any brand at the best price plastic bags, frozen pizzas, and detergents

Price Penetration

Low entry price to capture market share quickly. Lower prices discourage new competitors from entering. Disadvantage is it does NOT capture consumer surplus

Traditional Marketing

Magazines/TV - One way communication - From sender to receiver - Marketer hopes the receiver will buy the product - some Word of Mouth - Communication typically ends with receiver

Push Strategy

Manufacturers push products to channel members (retailers) to get them to stock the product, who the sell to customers Personal Selling and Trade Promotions are important in this process Stimulates Immediate Market results by offering low prices, free samples or other incentives for people to take immediate action Easily Measured results compared to Pull

Targeting Criteria

Market Size - Large enough to deliver profits? Expected Growth - Is the market growing? Competitive Position - How intense is the current rivalry? Is your company's differentiated product offering value? Cost to Reach - Is the market economically accessible?

Types of Business Products

Materials and Parts - used in manufacturing, part of final product Capital Items - aid in operations Supplies and Services - Operating supplies, maintenance items, services

Segmentation Criteria

Measurable - Individuals can be assigned to a segment and counted Accessible - Individuals in the segment can be reached through the company's promotion/distribution channels Durable - Segment membership is relatively constant Substantial - Segment is large enough to make products profitable Unique Needs - Needs are homogenous within segments and heterogeneous across segments

Sharpening the Competitive Angle

Need to Believe - What pain-point does the product address that is personally relevant to the target audience? Reason to believe - How effective is the demonstration of the products problem solving benefits in capturing the target audience's imagination Dominant Situations - Which usage/buying situation does the product dominate in a way that delivers superior value? Quantifiable Support - What are the relevant facts and figures that support/enhance product claims Unique Product Claim - How is this product distinctly different, better at solving problems, and more memorable than its closest competitor

Considering a product's competitive angle, _______________ is about finding significant pain points that are personally relevant to the target audience while _______________ is about demonstrating product-solving benefits. Need to Believe, Reason to Believe Reason to Believe, Dominate Situations Dominate Situations, Quantifiable Support Quantifiable Support, Unique Product Claim Unique Product Claim, Need to Believe

Need to believe, Reason to Believe

What makes good ads?

Obvious - Product, Advertiser, Benefit Low Involvement Product - Vivid, bigger than life product images - Very distinct look and feel - It is enough the reference groups loves the product High Involvement Product - Vivid, bigger than life product images - Very distinct look and feel - Different features tied to different emotions USE CELEBRITIES, Color and Contrast, Humor, Emotion

Media Convergence

Owned - Created by Brand, Controlled messages, Websites, Direct Mailing Purchased - Created By Brand, Controlled Messages, Advertising Earned - Can be created by brand or 3rd party, Spread via social media Swagger Wagon Owned - Paid by Toyota Purchased - Ad space on Google and Youtube Earned - Spread by net users

The marketing mix for services includes the 4P's of marketing (product, price, place, and promotion), plus: Processes, physical environments, and potential customers People, perishability, and personality Political environment, physical environment, and personal environment People, process, and physical environment People, politics, and psychology

People, process and physical environment

Positioning Methods

Perceptual Mapping Gap Analysis Hierarchal Values

Which element of the marketing mix has the most profound influence on price? Product Promotion Place Presentation People

Place

Which pricing strategy is used when marketers set a relatively high price to obtain high margins at the expense of sales quantity, then lower the price over time? Price skimming Price penetration Promotional pricing Cost-plus pricing Competitive pricing

Price skimming

7 Ps of Service Marketing

Product Price Place Promotion People - Smart recruiting and thorough training are crucial. Hire people for who they are, skills can be trained but personalities last a lifetime. Process - Clearly defined and efficient, know what to do, how to do it, and know how to fix the system . Change it when needed. Frontline workers know when changes are needed. Physical Environment - Provide evidence of quality. Some accountants have 2 offices, 1 mess but productive and 1 organized for meeting clients

Birkenstock, a German footwear company, manufactures and sells a variety of sandals and shoes noted for their footbed. All of the products offered by Birkenstock represent the company's: Product item Product line Product life cycle Product mix Agumented product

Product Mix

With cost-plus pricing, the firm knows its costs, but not much about customers and competitors. So marketing managers simply add a margin to the cost of the product to determine price. The added amount is generally the margin needed to make the return demanded by upper management or investors. The trouble with cost-plus pricing is that: Competitors may copy the price Product costs are irrelevant to buyers Substitute products may have the same price Promotion stratetgies may alter the outcome The break-even volume is difficult to calculate

Product costs are irrelevant to buyers

Profit Equation

Profit = Total Revenue - Total Costs Profit = (Price x Quantity) - (Fixed Costs + Variable Costs x Quantity)

Nestle promotes Kit Kat chocolate treat to the final consumers with the expectation that the final consumers will demand the product from retail stores. Then the retail stores will request Kit Kat from Nestle. This is an example of: Push strategy Pull strategy Physical strategy Preventive strategy Progressive strategy

Pull strategy

Social Media and Marketing Strategy

Reach - build awareness, generate leads for new sales Engage - strengthen relationships with existing customers, Improve customer retention Convert - Win new customers RELEVANT CONTENT IS KEY IN ENGAGING AND CONVERTING POTENTIAL CUSTOMERS

Advertising effectiveness is measured by: The amount of humor and the level of entertainment Brand legacy Recall (remember the ad and the advertiser) and persuasion (remember the benefit) Media buying Push versus pull promotions

Recall and Persuasion

Perceived Value

Reference Prices - External (what everyone is paying for the product) Internal (what customers think they should pay given past experience) Competitors - What is the price of competitors Substitutes - What is the price of a substitute item (butter vs margarine) Marketing Efforts -How is the product perceived because of marketing? Quality, Brand, and service levels can influence perceived value

What is the key driver in engaging and converting potential customers using social media? Multiple media Relevant content Google AdWords Product blogs Short, precise messages

Relevant content

Which determinant of service quality shows the strongest influence on customers' perceptions of service quality? Reliability Assurance Tangibles Empathy Responsiveness

Reliability

5 determinants of Service Quality

Reliability - perform promised service dependably and accurately, the first time Assurance - competency, courtesy, credibility and security Tangibles - appearance of facility, equipment and employees Empathy - access, communication, and understanding. Listen to customer needs, Responsiveness - help customers promptly

Good strategy

SELL TO THE SWING GROUP THROUGH THE EYES OF THE LOVE GROUP

Intangibility

Same service may be viewed differently by different customers Can be overcome by showing evidence of quality as part of the service experience

Inseparability

Service providers behavior is what sets them apart. Cannot separate service from service provider like

Price Skimming

Set relatively high price to obtain high margins at the expense of sales quantity. As demand of group 1 is met, price is lowered to capture the next group of customers, and so on.

Perceptual Mapping

Simple method to see how customers perceive brands Relationships between brands can be seen (close brands a similar, and compete against each other) Provide insight about differentiating benefits and opportunities for new products

Landyachtz recently launched a new Slide Glove for longboarders--Ly Leather Slide Gloves. The local market segment consists of a few longboarders in Provo Canyon. Retailers in the Utah market are worried that the segment size is not large enough to make this product profitable. Which characteristic of effective segmentation is lacking? Substantial Accessible Measureable Durable Unique needs

Substantial

What is the basis for differentiation for functional brands? Superior performance or superior economy Desirable image Unique and engaging experience Social esteem High involvement

Superior performance or superior economy

Personal Relevance Bridge

The emotional connection the product makes with people who love the products

Perceptual maps show the judgments customers make regarding the performance of a brand's features and benefits. Gap analysis extends the perceptual maps method by asking customers to make judgments regarding: Cultural differences among consumers The importance of a brand's featurers and benefits to the buying decision Psychological differences among consumers The performance of competitive brands The performance of external forces in the environment

The importance of a brand's features and benefits to the buying decisions

Why dosen't "me too" positioning work as a value positioning strategy? The positioning approach does not give consumers a reason to change Competitors are just too difficult to copy Competitors may have lower cost structures Imitation is the sincerest form of flattery Customers want consistency among competitors

The positioning approach does not give consumers a reason to change

Market segmentation is the process of grouping customers into relatively homogeneous sets or segments such that customers within a segment are similar to one another in: Age and psychographics Family and cultural situations Their frequency of purchase Geographic location The way they respond to the marketing effort directed torward them

The way they respond to the marketing effort directed toward them

The most critical stage of the new product development process is the concept testing stage because: Type I and Type II errors can be estimated All elements of the marketing mix are tested Profit projections, including sales forecasts and costs, are estimated Product development begins in earnest This is the first time the idea is tested with potential customers

This is the first time the idea is tested with potential customers

Classifying Frontline Service providers

Tigers - High quality, high productivity Kittens - low quality, low productivity (stay because they listen to negative feedback) Fox - Low quality, high productivity (learn to beat the system, easiest customers) Servant's Heart - High quality, low productivity

Contribution Analysis

Total Contribution is the amount available to cover (or contribute to) fixed costs and profit AFTER variable costs have been deducted from Total Revenue Total Revenue - Variable Costs = Total Contribution (Price - Unit Variable Costs) x Volume = Total Contribution

One of the challenges for department stores like Macy's is the potential for service variability—services depend on who provides them and when and where they are provided. The marketing solutions for variability are: Training and standardized processes Demand estimation and hiring ahead of demand Physical evidence and quality Tangible cues and tangible evidence Augmented services

Training and standardized processes

Love group

Understand benefits

Unit Margin

Unit Margin = Price - Unit Variable Costs Often expressed as % Percent Margin = Price - Unit Variable Costs / Price

Which sales promotion method is best for building brand loyalty? Value-added promotions Price promotions Trade promotions Coupons Interactive promotions

Value-added promotions

Sticky Branding

You want a name that will be remembered and endure for years Invented names are good - no negative baggage Personal names - don't convey much, not very good

Convenience Shoppers

low brand sensitivity, low price sensitivity buying products without regard to brand or price Energy drinks, junk food, eggs, dairy, and over-the-counter medicines

Pull Strategy

marketing directly to the end consumer in the hopes that the end consumer will ask the retailers for a particular product Image building, and public relations are examples Builds brand preference and loyalty by play to strength product distinctions.