ba 355 quiz 2
Why did Doritos launch an anti-ad? What branding cues did the ad remove or add?
- 2019, Doritos launched an "anti-ad" campaign that relied on packaging recognition - The company believed that Gen Z didn't like being advertised to/manipulated - They're trying too hard, lots of subliminal priming to make us think of a Dorito every time we see a triangle - Trying to be on trend with not trying to being your face with logos and branding - Simple red and blue bags for nacho cheese and cool ranch flavors
**Groupthink
- Stagnation of ideas - Lower productivity - Disaster EX: Boeing Max 737 To break groupthink - Open innovation: practices that encourage the use of external and internal ideas
What information does price elasticity provide, and why might marketers find it useful?
- The more the substitutes a product or service has, the more likely it is to be price elastic - Products and services considered to be necessities are price inelastic Substitutes v Complements: - Responsiveness quantity demanded of one good when the price for another good changes.
What are the names and characteristics of common types of deceptive pricing?
1. Bait and switch - This deceptive practice exists when a firm offers a very low price on a product (the bait) to attract customers to a store. Once in the store, the customer is persuaded to purchase a higher-priced item (the switch) using a variety of tricks, including (1) downgrading the promoted item, (2) not having the item in stock, or (3) refusing to take orders for the item. 2. Bargains conditional on other purchases - This practice may exist when a buyer is offered "1-Cent Sales," "Buy 1, Get 1 Free," and "Get 2 for the Price of 1." Such pricing is legal only if the first items are sold at the regular price, not a price inflated for the offer. Substituting lower-quality items on either the first or second purchase is also considered deceptive. 3. Comparable value comparisons - Advertising such as "Retail Value $100.00, Our Price $85.00" is deceptive if a verified and substantial number of stores in the market area do not price the item at $100. 4. Comparisons with suggested prices - A claim that a price is below a manufacturer's suggested or list price may be deceptive if few or no sales occur at that price in a retailer's market area. 5. Former price comparisons - When a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period. Setting a high price for the purpose of establishing a reference for a price reduction is considered deceptive.
What specific pricing strategies are associated with each of the 5 C's?
1. Customers - Price skimming - Penetration Pricing - Prestige pricing - Price lining - Odd-Even Pricing - Target Pricing - Bundle Pricing - Yield Management Pricing 2. Cost - Standard Markup Pricing - Cost-Plus Pricing - Experience Curve Pricing 3. Competition - Customary Pricing - Above-, At-, or Below-Market Pricing - Loss-Leader Pricing 4. Channel members 5. Company objectives - Company goals can influence pricing strategy - profit orientation (revenue - expenses)
What are the 5 C's of pricing? What are the pros and cons of pricing from each orientation?
1. Customers: How do customers respond to price? Customer orientation-understanding your target market - Expectations (experience, etc) - Perceived benefits - Ability to pay Effect of price on quality/perceived benefits - i.e. Monster energy drink experiment Understanding willingness to pay Price elasticity of demand **kNOW HOW TO SET UP EQUATION - % change in quantity demanded/% change in price - elastic vs inelastic (know how to interpret numbers) Cross price elasticity- substitutes versus complements 2. Costs: What the product actually costs Overall cost = fixed cost +variable cost Fixed costs: goes into the development of the product - Unaffected by production volume - Rent, equipment (machines), salaries, marketing (R&D, advertising) Variable costs: vary indirectly with production volume - Labor, materials, etc Breakeven analysis: how many units do we need to sell at x price to cover costs of doing business - The point at which we can turn a profit - Unit variable cost (UVC)=total variable cost/quantity - BEP_quantity= fixed cost/ (unit price-unit variable cost) = FC/(P-UVC) 3. Competition: Monopoly: one firm controls the market for a unique product; sets any price (less price competition, fewer firms) Pure Competition: many firms selling commodities for the same prices; price set by market (less price competition, many firms) Oligopoly: a handful of firms control the market; price as a PoD (more price competition, fewer firms) Monopolistic Comp.: many firms selling differentiated products at different prices; price becomes a PoD (more price competition, many firms) Competition orientation pricing strategies - Basing our price on what competitors are doing - Competitive party-similar cost - At, above or below or suggest brand positioning 4. Channel Members: - Ex. manufacturers, wholesalers, retailers - Can have different perspectives on pricing strategies - Manufactures have to protect against gray market transactions 5. Company objectives: How will we make money - Subscription/membership v pay per use (one time purchase) - Service-airline flight - otp - Service-cable-subscription - Uber pay per use or Uber pass - Mission statements, can present restrictions
What are the eight marketing reasons new products might fail?
1. Insignificant point of difference: research shows that a distinctive point of difference is the single most important factor for a new product to defeat competing ones - having superior characteristics that deliver unique benefits to the user - ex: Consider General Mills's launch of Fingos, a sweetened cereal flake about the size of a corn chip, with a $34 mil- lion promotional budget. Consumers were supposed to snack on them dry, but they didn't.9 The point of difference was not important enough to get consumers to stop eat- ing competing snacks such as popcorn and potato chips. 2. Incomplete market and product protocol before product development starts: Without this protocol, firms try to design a vague product for a phantom market. Developed by Kimberly- Clark, Avert Virucidal tissues contained vitamin C deriva- tives scientifically designed to kill cold and flu germs when users sneezed, coughed, or blew their noses into them. The product failed in test marketing. People didn't believe the claims and were frightened by the "cidal" in the brand name, which they connected to words like suicidal. A big part of Avert's failure was its lack of a product protocol that clearly defined how it would satisfy consumer wants and needs. 3. Not satisfying customer needs on critical factors: factor stresses that problems on one or two critical factors can kill the product, even though general quality is high. 4. Bad timing: Rresults when a product is introduced too soon, too late, or when con- sumer tastes and preferences are shifting dramatically. Bad timing gives new-product managers nightmares. Hewlett-Packard, for example, introduced its HP Tablet a few years after Apple launched its original iPad, about the same time Apple introduced its next-generation iPad 2 that featured multiple apps. Hewlett-Packard was late and its HP Tablet was significantly behind in apps com- pared to the iPad 2. Failure to deliver a product that satis- fied consumer preferences in a timely manner caused Hewlett-Packard to abandon its HP Tablet two months after its launch. 5. No economical access to buyers: Grocery products are and example to this. Today's mega-supermarkets carry more than 60,000 different SKUs. With about 40,000 new consumer packaged goods introduced annually in the United States, the cost to gain access to retailer shelf space is huge. Because shelf space is judged in terms of sales per square foot, Thirsty Dog! (a zesty, beef-flavored, vitamin-enriched, mineral-loaded, lightly carbonated bottled water for your dog) must displace an existing product on the supermarket shelves, a difficult task with the high sales-per-square-foot demands of these stores. Thirsty Dog! and its companion product Thirsty Cat! failed to generate enough sales to meet these requirements. 6. Poor execution of the marketing mix (brand name, package, price, promotion, distribution): Somewhere in the marketing mix there can be a showstopper that kills the prod- uct. Introduced by Gunderson & Rosario, Inc., Garlic Cake was supposed to be served as an hors d'oeuvre with sweet breads, spreads, and meats, but somehow the company forgot to tell this to potential consumers. Garlic Cake died because con- sumers were left to wonder just what a Garlic Cake is and when on earth a person would want to eat it. 7. Too little market attractiveness: The ideal is a large target market with high growth and real buyer needs. But often target market is too small or competitive to warrant and the huge expenses necessary to reach it. 8. Poor product quality: This factor often results when a product is not thoroughly tested. The costs to an organization for poor quality can be staggering and include the labor, materials, and other expenses to fix the problem—not to mention the lost sales, profits, and market share that usually result. Consider self-balancing scooters, commonly referred to as "hoverboards." After gaining widespread attention with the media, as well as popularity with teens, hoverboards made by a variety of manufacturers were found to catch fire or explode. Needless to say, hoverboard sales suffered greatly as a result.
What are the seven stages of the new product development process? What are key tasks and defining characteristics associated with each stage? Be able to identify a stage from a scenario.
1. New-Product Strategy Development: the stage of the new-product development process that defines the role for a new product in terms of the firm's overall objectives. - Uses SWOT analysis and environmental scanning - Occasionally a firm's Stage 1 activities can be blindsided by a revolutionary new product or technology that completely disrupts its business, sometimes called a "disruptive innovation." - Must be on the lookout for innovative products or technology that might disrupt its plans. 2. Idea Generation: the second stage of the new-product development process, involves developing a pool of concepts to serve as candidates for new products, building upon the previous stage's results - One internal approach for getting ideas within the firm is to train employees in the art and science of asking specific, probing questions. - The goal in generating new-product ideas and strategies is to move from "what is" questions that describe the present situation to "what if" questions that focus on solutions and marketing actions. 3. Screening and Evaluation: the stage of the new-product development process that internally and externally evaluates new-product ideas to eliminate those that warrant no further effort. - Internal Approach: a firm's employees evaluate the technical feasibility of a proposed new-product idea to determine whether it meets the objectives defined in the new-product strategy development stage - External Approach: Firms that take an external approach to screening and evaluation use concept tests, external evaluations with consumers that consist of preliminary testing of a new-product idea rather than an actual finished product. Concept tests rely on written descriptions of the product but may be augmented with sketches, mockups, or promotional literature. 4. Business Analysis: specifies the features of the product or service and the marketing strategy needed to bring it to market and make financial projections. - last checkpoint before significant resources are invested to create a prototype (a full-scale operating model of the product or service). - Assesses the total "business fit" of the proposed new product with the company's mission and objectives - This process requires not only detailed sales and profit financial projections but also assessments of the marketing and product synergies related to the company's existing operations. 5. Development: the stage of the new-product development process that turns the idea on paper into a prototype - This results in a demonstrable, producible product that involves not only manufacturing the product efficiently but also performing laboratory and consumer tests to ensure the product meets the standards established for it in the protocol. 6. Market Testing: the stage of the new-product development process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy. - If the budget permits, consumer packaged goods firms often do this by test marketing, which involves offering a product for sale on a limited basis in a defined area for a specific time period. - Three types: 1. standard, 2. controlled, 3. simulated 7. Commercialization: the stage of the new- product development process that positions and launches a new product in full-scale production and sales. - Most expensive stage - Companies can face disasters at the commercialization stage, regardless of whether they are selling business products or consumer products. - Ex: Burger King's fries, Burger King discontinued its Satisfries at most of its restaurants because it couldn't communicate a meaningful point of difference to its customers and Satisfries cost more than its regular fries.
What types of pricing practices have been placed under regulatory scrutiny?
1. Price Fixing: A conspiracy among firms to set prices for a product. - Price fixing is illegal per se under the Sherman Act Horizontal price fixing: when two or more competitors explicitly or implicitly set prices. Vertical price fixing: involves controlling agreements between independent buyers and sellers (a manufacturer and a retailer) whereby sellers are required to not sell products below a minimum retail price. - declared illegal per se under the Consumer Goods Pricing Act. - "manufacturer's suggested retail price," or MSRP, is not illegal per se. 2. Price Discrimination: The practice of charging different prices to different buyers for goods of like grade and quality. - The Robinson-Patman Act prohibited price discrimination - Not all price differences are illegal; only those that substantially lessen competition or create a monopoly are deemed unlawful. Cost Justification Defense: when price differences charged to different customers do not exceed the differences in the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which such goods are sold or delivered to buyers. Meet-the- Competition Defense: when price differences are quoted to selected buyers in good faith to meet competitors' prices and are not intended to injure competition. - When price differences result from changing market conditions, avoiding obsolescence of seasonal merchandise, including perishables, or closing out sales. - Covers promotional allowances. To legally offer promotional allowances to buyers, the seller must do so on a proportionally equal basis to all buyers distributing the seller's products. 3. Deceptive Pricing: Price deals that mislead consumers fall into the category of deceptive pricing. - outlawed by the Federal Trade Commission Act. - it is essential to rely on the ethical standards of those making and publicizing pricing decisions. 4. Geographical Pricing: FOB origin pricing is legal, as are FOB freight-allowed pricing practices, providing no con- spiracy to set prices exists. - viewed as illegal under the Robinson-Patman Act and the Federal Trade Commission Act if there is clear-cut evidence of a conspiracy to set prices. 5. Predatory Pricing: the practice of charging a very low price for a product with the intent of driving competitors out of business. - once competitors are out, the firm raises its prices - illegal under the Sherman Act and the Federal Trade Commission Act. *Proving the practice of predatory pricing is difficult and ex- pensive, because it must be shown that the predator explicitly attempted to destroy a competitor and the predatory price was below the defendant's average cost.
What is a "brand?" What are different cues companies use to foster brand recognition?
A basic decision in marketing products is branding, in which an organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors. A brand name is any word, device (design, sound, shape, or color), or combination of these used to distinguish a seller's products or services. - Well-known devices used to distinguish brands apart from a name include symbols (the Nike swoosh), logos (the white apple used by Apple), and characters (Charlie the Tuna for StarKist). brand personality: a set of human characteristics associated with a brand name.
Multiproduct Branding
A branding strategy in which a company uses one name for all its products in a product class. - This approach is sometimes called family branding or corporate branding when the company's name is used.
Multibranding
A branding strategy that involves giving each product a distinct name when each brand is intended for a different market segment.
Bundling
A frequently used demand-oriented pricing practice is bundle pricing— the marketing of two or more products in a single package price. For example, Delta Air Lines offers vacation packages that include airfare, car rental, and lodging. Bundle pricing is based on the idea that consumers value the package more than the individual items. This is due to benefits received from not having to make separate purchases and en- hanced satisfaction from one item given the presence of another. This is the idea behind McDonald's Extra Value Meal and AT&T and DIRECTV's TV, phone, and Internet bundles. Moreover, bundle pricing often provides a lower total cost to buyers and lower marketing costs to sellers.
Demand Curve
A graph that relates the quantity sold and price, showing the maximum number of units that will be sold at a given price.
What is brand equity? What are the different steps needed to achieve brand equity? What are characteristics and examples of each step from class?
Brand equity: commercial value based on consumers' perceived worth of a brand - The premium people are willing to pay above the substitute (shell) - Can be positive or negative (product recalls, environmental disaster, etc) (1) Develop positive brand awareness and an association of the brand in consumers' minds with a product class or need to give the brand an identity. - Gatorade and Kleenex have achieved this in the sports drink and facial tissue product classes, respectively. - influences retrieval set (2) A marketer must establish a brand's meaning in the minds of consumers. Meaning arises from what a brand stands for and has two dimensions—a functional, performance- related dimension and an abstract, imagery-related dimension. - Nike has done this through continuous product development and improvement and its links to peak athletic performance in its marketing communications. - branding cues and information - brand offers PoDs, benefits and costs (3) Elicit the proper consumer responses to a brand's identity and meaning. Here attention is placed on how consumers think and feel about a brand. Thinking focuses on a brand's perceived quality, credibility, and superiority relative to other brands. Feeling relates to the consumer's emotional reaction to a brand. - Michelin elicits both responses for its tires. Not only is Michelin thought of as a credible and superior- quality brand, but consumers also acknowledge a warm and secure feeling of safety, comfort, and self-assurance without worry or concern about the brand. - evaluates positioning and brand image (4) Most difficult step. Create a consumer-brand connection evident in an intense, active loyalty relationship between consumers and the brand. A deep psycho- logical bond characterizes a consumer-brand connection and the personal identification customers have with the brand. - Brands that have achieved this status include Harley-Davidson and Apple. - brand loyalty and satisfaction - stickiness (something about a product or brand that makes it difficult to leave) - not brand loyalty (people who love the brand) - must have brands for which there is no acceptable substitute - Promoters-detractors = NPS (net promoter score)
CHAPTER 13/14
Building the Price Foundation/Arriving at the Final Price
**Diffusion of Innovation
Concept in which a product diffuses, or spreads, through the population. - the process by which new products are adopted (or not) by their intended audiences.
What information does a demand curve provide, and what are its properties?
Consumer Tastes: - Depend on many forces such as demographics, culture, and technology. - Because consumer tastes can change quickly, up-to-date marketing research is essential to estimate demand. EX: if research by nutritionists concludes that some pizzas are healthier (because they are now gluten-free or vegetarian), demand for them will probably increase. - include what consumers want to buy Price and Availability of Similar Products: - If the price of a competitor's pizza that is a substitute for yours falls, more people will buy it; its demand will rise and the demand for Red Baron pizza will fall. - Other low-priced dinners are also substitutes for pizza. EX: if you want something fast so you can study, you could call Domino's or a local Chinese restaurant and order a meal for home delivery. So, as the price of a substitute falls or its availability increases, the demand for your Red Baron frozen cheese pizza will fall. - include what consumers want to buy Consumer Income: - As real consumers' incomes increase (allowing for inflation), demand for a product will also increase. EX: if you get a scholarship and have extra cash for discretionary spending, you might eat more Red Baron frozen cheese pizzas and fewer peanut butter and jelly sandwiches to satisfy your appetite. - include what consumers can buy
**What are the types of innovation and newness from a consumer's perspective? What are the strategies to market each type based on their level of newness?
Continuous innovation: - New features to existing product - Improves existing version/convenience - No change in consumer habits, requires no learning - Gain consumer awareness and wide distribution - Benefits: intuitive - Goal: ... Dynamically continuous innovation: - Different product; replaces/improves existing utility - Low/moderate changes consumer habits, some learning - Advertise points of difference and benefits to consumers - Benefits: not always intuitive - Goal: ... Discontinuous innovation: - Completely new product - Does not replace anything; creates new utility - Significant change to consumer habits, high degree of learning - Educate consumers through product trial and personal selling - Benefits: not always intuitive - Goal: ... Newness is relative
Loss Leader Pricing
Deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention to it in hopes that they will buy other products with large markups as well. -EX: supermarkets often use milk as a loss leader.
CHAPTER 10
Developing New Products and Services
Dynamically Continuous Innovation
Disrupts consumer's normal routine but does not require totally new learning Only minor changes in behavior are required. Procter & Gamble's Swiffer WetJet all-in-one mopping solution is a successful dynamically continuous innovation. Its novel design eliminates mess, elbow grease, and heavy lifting of floor cleaning materials without requiring any substantial behavioral change. So the marketing strategy here is to educate prospective buyers on the product's benefits, advantages, and proper use. Procter & Gamble did this with Swiffer. The result? Over a billion dollars in annual sales.
Prestige Pricing
Involves setting a high price so that quality- or status- conscious consumers will be attracted to the product and buy it. - The demand curve for prestige pricing slopes downward and to the right between points A and B but turns back to the left between points B and C because demand is actually reduced between points B and C. From A to B, buyers see the lowering of price as a bargain and buy more; from B to C, they become dubious about the quality and prestige and buy less. A marketing manager's pricing strategy here is to stay above price P0 (the initial price). - Rolls-Royce cars, Chanel perfume, Cartier jewelry, Lalique crystal, and Swiss watches, such as Rolex, have an element of prestige pricing in them and may sell worse at lower prices than at higher ones.
What are elements of a good brand name?
It is often a difficult and expensive process to pick a good name. The name should suggest the product benefits. - Glass Plus (glass cleaner), Chevrolet Bolt and Spark (electric cars) The name should be memorable, distinctive, and positive. - In the auto industry, when a competitor has a memorable name, others quickly imitate. When Ford named a car the Mustang, the Pinto and Bronco soon followed. The name should fit the company or product image. - Eveready, Duracell, and DieHard suggest reliability and longevity—two qualities consumers want in a battery. The name should have no legal or regulatory restrictions. - The U.S. Food and Drug Administration discourages the use of the word heart in food brand names. This restriction led to changing the name of Kellogg's Heartwise cereal to Fiberwise. The name should be simple and emotional. - Examples that illustrate the former include Bold laundry detergent, Axe deodorant and body spray, and Bic pens; examples illustrating the latter include Joy and Obsession perfumes and Caress soap, shower gel, and lotion. The name should have favorable phonetic and semantic associations in other languages. - Having a nonmeaningful brand name has been considered a benefit. - The 7UP name is another matter. In Shanghai, China, the phrase means "death through drinking" in the local dialect.
CHAPTER 11
Managing Successful Products, Services, and Brands
How do semantic network models help assess branding/brand equity?
Mapping brand image through associations - Semantic network models (SNM) - Nike: Lil Nas X, Satan shoes, or child labor
What are the different branding strategies (e.g., multibranding)? What conditions favor using each strategy, and what are the pros and cons of each?
Multiproduct Branding: a company uses one name for all its products in a product class. - also called family branding or corporate branding when the company's name is used. - Microsoft, Samsung, Gerber, and Sony engage in corporate branding and Church & Dwight uses the Arm & Hammer family brand name Product Line Extensions: the practice of using a current brand name to enter a new market segment in its product class. - Campbell Soup Company employs a multiproduct branding strategy with soup line extensions. It offers regular Campbell's soup, home-cooking style, and chunky varieties and more than 100 soup flavors. Sub-branding: combines a corporate or family brand with a new brand to distinguish a part of its product line from others. - American Express has applied sub-branding with its American Express Green, Gold, Platinum, Blue, and Centurion black charge cards, with unique service offerings for each. Brand Extension: the practice of using a current brand name to enter a different product class. - Equity in the Huggies fam- ily brand name has allowed Kimberly-Clark to successfully extend its name to a full line of baby and toddler toiletries. Co-branding: the practice of pairing two or more strong brands to facilitate the marketing of a joint product or service for their mutual benefit. - Companies use component or ingredient branding (Dell computers with Intel processors, or Hershey's chocolate with Betty Crocker cupcake mix), joint venture branding (Citibank and American Airlines credit cards), and sponsorships (AT&T, Mercedes-Benz, and IBM co-sponsor the annual Masters Golf Tournament). Brand Dilution: consumers no longer associate a brand with a specific product or service or start thinking less favorably about the brand. - Marketing experts claim that too many uses for one brand name can dilute the meaning of a brand for consumers and harm its brand equity. Multibranding: gives each product a distinct name, each brand is intended for a different market segment. Procter & Gamble makes Camay soap for those concerned with soft skin and Safeguard for those who want deodorant protection. Fighting Brands: their chief purpose is to confront competitor brands. - Frito-Lay introduced Santitas brand tortilla chips to go head-to-head against re- gional tortilla chip brands that were biting into sales of its flagship Doritos and Tostitos brand tortilla chips. Private Branding: manufactures products but sells them under the brand name of a wholesaler or retailer. - also called private labeling or reseller branding - Costco, Amazon, Walmart, and Kroger are large retailers that have their own brand names. Mixed Branding: a firm markets products under its own name(s) and that of a reseller because the segment attracted to the reseller is different from its own market. - Del Monte, Whirl- pool, and Dial produce private brands of pet foods, home appliances, and soap, respectively.
In what ways can packaging bring value to products?
Packaging component refers to any container in which it is offered for sale and on which label information is conveyed. - Label is an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients. 1. Informational benefits: "Our story": building connection with consumers - inviting consumer to be part of their story Instructions: boost confidence - consumers don't like any degree of risk when making a purchase (i.e. cooking instructions) consumers' rights to be information i.e. nutrition information Communication benefits: label information it conveys to the consumer, such as directions on how, where, and when to use the product and the source and composition of the product, which is needed to satisfy legal requirements of product disclosure 2. Functional benefits: providing storage, convenience, or protection or ensuring product quality Activity yogurt separate granola: compartment // minor involvement and engagement - Suggestive serving size - Brings the consumer in with a minor role of preparing their food, a psychological concept that involves the consumer in a fun way with minimal effort EX: stackable food containers are one example of how packaging can provide functional benefits - Pringles hard cylinder that protects the chips that's also resealable (increases life of Pringles i.e. takeout containers that can be unfolded into a plate Proportionality - i.e. Tylenol packets with two pills instead of walking around with a bottle of 150 caplets Consumer protection: including the development of tamper resistant containers 3. Perceptual benefits: perception created in the consumer's mind - Package and label shape, color, and graphics - Successful marketers recognize that changes in packages and labels can update and uphold a brand's image in the customer's mind - Logos, aesthetics, etc "Natural Greek Pistachios" - Ideal of natural "Hanger teas" - we tend to make many decisions based on perceptual benefits i.e. Tiffany boxes, they're sturdy cardboard with the trademark color - for premium priced products, you need expensive packaging to create excitement and anticipation, part of branding and pricing Packaging and Labeling Challenges and Responses: - Connecting with customers - Environmental concerns - Health, safety, and security issues - Cost reduction
Know the equations for and how to interpret the results of each of the following: a) Price elasticity, break even analysis, profit analysis, total variable cost, and total cost
Price Elasticity= Percentage change in quantity demanded / Percentage change in price Breakeven Analysis= BEPquantity = Fixed cost / Unit price - Unit variable cost = FC / P - UVC Profit Analysis= Total revenue - Total cost (P x Q) - [FC + (UVC x Q)] Total Variable Cost= Unit variable cost x Quantity(Unit) sold Total Cost= Fixed cost + Variable cost
When would a price skimming strategy vs. price penetration be appropriate?
Price Skimming: Skimming pricing is an effective strategy when (1) enough prospective customers are willing to buy the product immediately at the high initial price to make these sales profitable, (2) the high initial price will not attract competitors, (3) lowering price has only a minor effect on increasing the sales volume and reducing the unit costs, and (4) customers interpret the high price as signifying high quality. - These four conditions are most likely to exist when the new product is protected by patents or copyrights or its uniqueness is understood and valued by consumers. Microsoft, for example, adopted a skimming strategy for its Xbox One X video game console since many of these conditions applied. The original Xbox One X was priced about $100 more than Sony's PlayStation 4 Pro. Price Penetration: The conditions favoring penetration pricing are the reverse of those supporting skimming pricing: (1) many segments of the market are price sensitive, (2) a low initial price discourages competitors from entering the market, and (3) unit production and marketing costs fall dramatically as production volumes increase. - A firm using penetration pricing may (1) maintain the initial price for a time to gain profit lost from its low introductory level or (2) lower the price further, counting on the new volume to generate the necessary profit. - In some situations, penetration pricing may follow skimming pricing. A company might initially price a product high to attract price-insensitive consumers and recoup initial re- search and development costs and introductory promotional expenditures. Once this is done, penetration pricing is used to appeal to a broader segment of the population and increase market share.
What are some of the impacts of Covid-19 on firms' branding strategies and actions?
Rebranding and Branding Shifts - Covid has provided an opportunity to rebrand/pivot Social justice has prompted brand name and logo changes: - Aunt Jemina -> Pearl Milling - Uncle Ben's - Washington Redskins -> Washington Commander Rebrand tradeoffs...
Discontinuous Innovation
Requires new learning and consumption patterns by consumers Involves making the consumer learn entirely new consumption patterns to use the product. Have you bought a "smart home" gadget from Amazon or Google that controls household systems like security, heating, and lighting? Congratulations if you successfully installed it yourself! Best Buy's Geek Squad and Amazon's Smart Home Services have a thriving business installing and activating these gadgets because they can be complicated to set up and operate appropriately. Marketing efforts for discontinuous innovations usually involve not only gaining initial consumer awareness but also educating consumers on both the benefits and proper use of the innovative product.
Continuous Innovation
Requires no new learning by consumers Consumers don't need to learn new behaviors. Toothpaste man- ufacturers can add new attributes or features like "whitens teeth" or "removes plaque" when they introduce a new or improved product, such as Colgate Total Advanced Gum Defense toothpaste. But the extra features in the new toothpaste do not require buyers to learn new tooth-brushing behaviors, so it is a continuous innovation. The benefit of this simple innovation is that effective marketing mainly depends on generating awareness, not re-educating customers.
Feature Fatigue
Research shows that while feature bloat can increase the capability of a new product (relative to existing products) and encourage a purchase, the actual usage experience after purchase can result in consumer dissatisfaction, or feature fatigue. Occurs because "consumers give more weight to capability and less weight to usability before use (of the product) than after use (of the product), they tend to choose overly complex products that do not maximize their satisfaction when they use them." A common result of feature fatigue is annoyance and a reduced likelihood of repurchase and consumer retention.
Case Studies
See the guiding questions I sent you by email for the cases.
Price Penetration
Setting a low initial price on a new product to appeal immediately to the mass market.
What are the three types of test markets? In what ways do they differ? What are pros and cons of each? Be able to identify a test market from a scenario.
Standard: a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities. - Test-market cities must be demographically representative of markets targeted for the new product, have cable TV systems that can deliver different ads to different homes, and have retailers with checkout counter scanners to measure sales. - A distinguishing feature of a standard test market is that the producer sells the product to distributors, wholesalers, and retailers, just as it would do for other products. - If the results don't meet expectations, a product is discontinued. If the results are favorable, a full- fledged national product introduction may be undertaken. - Regional rollout: a product is introduced sequentially into geo- graphical areas to allow production levels and marketing activities to build up gradually to support the product. Controlled: involves contracting the entire test program to an outside service. - The service pays retailers for shelf space and can therefore guarantee a specified percentage of the test product's potential distribution volume. - Its service uses demographically representative cities to track sales made to a panel of households. Simulated: To save time and money, companies often turn to this test market. - A technique that somewhat replicates a full-scale test mar- ket. STMs are often run in shopping malls, to find consumers who use the product class being tested. - Qualified participants are shown the product or the product concept and asked about usage, reasons for purchase, and important product attributes. - They then see the company's and competitors' ads for the test product. - Finally, participants are given money and allowed to choose between buying the firm's product or the products of competitors in a real or simulated store environment.
What are sources of ideas in the idea generation stage? What are the pros and cons of each source?
Suggestions from Employees and Friends: Businesses often get successful new- product ideas from employees who ask the "what if" question. - A janitor at a Frito-Lay manufacturing plant asked himself, "What if I put chili on a Cheeto?" He then tin- kered with a spicy and hot chili-powder recipe at home in his kitchen and asked senior Frito- Lay executives to taste his flavor. The result? Flamin' Hot Cheetos became one of the best-selling snack products in the company's history. As for the janitor, Richard Montanez, he became an executive vice president at the company. - Life Is Good T-shirt business started with a keg party the com- pany founders, brothers Bert and John Jacobs, had with friends. At one party the drawing of a smiling, beret-wearing stick figure with the phrase "Life is good" got the most favorable com- ments. They named the character "Jake," printed 48 T-shirts with a smiling Jake and the words "Life is good," and sold out in less than an hour at a local street fair. Customer and Supplier Suggestions: Firms ask their salespeople to talk to customers and ask their purchasing personnel to talk to suppliers to discover new-product ideas. - The focus should be on what the new product will actually do for them rather than simply what they want. - Procter & Gamble: gave a revolutionary thought to "Look outside the company for solutions to problems rather than insisting P&G knows best." - Crowdsourcing involves generating insights leading to actions based on ideas from massive numbers of people. Research and Development Laboratories: Professional R&D and innovation laboratories that are outside the walls of large corporations are also sources of open innovation and can provide new product ideas - IDEO is a world-class new-product development firm that uses "design thinking," which involves incorporating human behavior as well as building upon the ideas of others in the innovation-design process. Competitive Products: Analyzing the competition can lead to new-product ideas. - General Motors targeted Tesla Motors as a reference for its Chevrolet Bolt—a $30,000 all-electric vehicle. Smaller Firms, Universities, and Inventors: Many firms look for outside visionaries that have inventions or innovative ideas that can become products. - Small firms: Provide creative advances. - Universities: Many universities have technology transfer centers that often partner with businesses to commercialize faculty inventions. - Inventors: Develop brilliant new-product ideas.
Brand Equity
The added value a brand name gives to a product beyond the functional benefits provided. - provides a competitive advantage - consumers are often willing to pay a higher price for a product with brand equity. - represented by the premium a consumer will pay for one brand over another when the functional benefits provided are identical.
Product Life Cycle (PLC)
The concept of the product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline. - The two curves shown are the total industry sales revenue and total industry profit, represent the sum of sales revenue and profit of all firms producing the product. - Introduction stage: when a product is introduced to its intended target market. Sales grow slowly, profit is minimal. Lack of profit is often the result of large investment costs in product development. Companies spend heavily on advertising and other promotion tools to build awareness and stimulate the product trail among customers in the introduction stage. Pricing can be either high or low. - Growth stage: rapid increase in sales, competitors appear, new people trying or using the product and a growing proportion of repeat purchasers buy again, important to broaden distribution for the product. - Maturity stage: slowly of total industry sales or product class revenue. Marginal competitors begin to leave the market. Most consumers who buy the product are either repeat purchasers or have tried and abandoned it. Directed toward holding market share through further product differentiation and finding new buyers and uses. - Decline: when sales drop. Tend to consume a disproportionate share of management and financial resources relative to their future worth. A company will follow one of two strategies to handle decline: deletion or harvesting.
Profit
The money left after a for-profit organization subtracts its total expenses from its total revenues—and the reward for the risk it un- dertakes in marketing its offerings.
Price Elasticity
The percentage change in quantity demanded relative to a percentage change in price. - Because quantity demanded usually decreases as price increases, price elasticity of demand is usually a negative number. Elastic Demand: exists when a 1 percent decrease in price produces more than a 1 percent increase in quantity demanded, thereby actually increasing total revenue. - highly responsive to price change Inelastic Demand: exists when a 1 percent decrease in price produces less than a 1 percent increase in quantity demanded, thereby actually decreasing total revenue. - price insensitive, not responsive to price change
Co-Branding
The practice of pairing two or more strong brands to facilitate the marketing of a joint product or service for their mutual benefit.
Fixed Costs
The sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold. - EX: rent on the building, executive salaries, and insurance
Variable Costs
The sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold. - As the quantity sold doubles, the variable cost doubles. - EX: the direct labor and direct materials used in producing the product and the sales commissions that are tied directly to the quantity sold. - TC = FC +VC
Feature Bloat
The tendency for some product developers to add additional features or functionality to a product that are not of any benefit to most consumers and unnecessarily add to the cost of the product. Unnecessary features, functions, or PoDs
Total Cost
The total expense incurred by a firm in producing and marketing a product. Total cost is the sum of fixed cost and variable cost.
Time to Market
The total length of time it takes to bring a product from conception to market availability.
Semantic Network Models
Thought maps Mapping brand image - Associations EX: Rooster Roasting Co. (target--company, brand)--> roosters, coffee, patio-seating (primary associations); then each primary has their secondary associations Each and every consumer has their own thought map for a brand. - Can include both positive and negative things, true and untrue, not necessarily fair to use as unbiased judgment because everyone has their own preferences.
Private Branding
When it manufactures products but sells them under the brand name of a wholesaler or retailer. - Often called private labeling or reseller branding - Private branding is popular because it typically produces high profits for manufacturers and resellers.
Breakeven Analysis
a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output. - How many units do we need to sell at x price to cover costs of doing business. - The point at which we can turn a profit - Unit variable cost (UVC)=total variable cost/quantity - BEP_quantity= fixed cost/ (unit price-unit variable cost) = FC/(P-UVC)
Price Skimming
setting the highest initial price that customers who really desire the product are willing to pay. - A firm introducing a new or innovative product uses this. - These customers are not very price sensitive because they weigh the new product's price, quality, and ability to satisfy their needs against the same characteristics of substitutes. - As the demand of these customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment. Thus, skimming pricing gets its name from skimming successive layers of "cream," or customer segments, as prices are lowered in a series of steps.
