EXAM 2 Marketing (class and quizzes)

Unit Margin/Contribution

(Price - Unit Variable Costs)/Price (%)

What is a brand?

*perception* that exists in the *minds* of your *constituents* about your *relevance* and *promise* of value; *sum* total of impressions formed through exposure to your *touchpoints*

Promotion Objectives

1. Cognitive create awareness provide knowledge 2. affective create favorable impression--interest attain a preferred position in customer's mind--liking 3. Behavioral stimulate action make the sale

3 components of brand positioning

1. Competitive frames of reference -Nature of competition -Target Market 2. Points of difference (PODs) -Desirable to consumer -Differentiating from competitors 3. Points of parity (POPs) -Demonstrate category credentials -Negate competitor points-of-difference

Types of Brands 1. how do they create value? 2. how do they differentiate from competitors? 3. how do they connect with customers?

1. Functional: satisfy functional needs, differentiate with superior performance or economy, connect by achieving basic goals related to physical needs like food, shelter, health, safety 2. Image: value in projecting distinct and admired image, differentiate with unique set of associations or images, connect through emotional images symbols and associations\ 3. Experiential: value in how consumers feel when interacting with brand, diff. by combining products environments and services to create temporary multi-sensory encounters with brand, connect by experiences co-created with brand and consumer at time of consumption

Target Attractive Segments

1. Market size 2. Expected Growth 3. Competitive position 4. Cost to reach objective: select segments that maximize profit!

CH 9 Brand Valuation Approaches

1. Market-based (valuation based on estimation of amount for which brand can be sold) 2. Income-based (future net revenues directly attributable to brand, discounted to present value using appropriate discount rate) 3. Formulary (based on multiple criteria such as: profitability leadership stability market internationality trend support protection

Criteria for Effective Segmentation (5)

1. Measurable: individuals can be assigned to a segment and counted 2. Accessible: reach them through company promotion/distribution channels 3. Durable: segment membership constant 4. Substantial: large enough segment to make products profitable 5. Unique Needs: homogenous within; heterogeneous across segments

Developing Brand Equity

1. brand awareness 2. brand image (impression) 3. brand loyalty (purchase only fav brand) 4. brand equity (loyalty transferred to new products)

Learning Points (3)

1. consumers need a so what? why do I need this? 2. build equity by brand positioning--build on important benefit or consumer insight 3. brand equity is differentiating feature and differentiating emotion

3 Levels of Product

1. core product--personal benefit 2. actual product--bundle of attributes 3. Augmented--complementary products

Advantages of Branding

1. helps marketers distinguish their product from others 2. consumers identify products want to buy again and avoid those they don't 3. useful for introducing new products

Product Life Cycle premises

1. limited life 2. distinct stages w/ diff. market implications 3. sales and profits vary 4. different strategies at different life cycles Introduction, Growth, maturity, decline

Why is price so important?

1. one determinant of buyer choice; especially when product differentiation is small 2. only way to compare non-comparables 3. competition based on price is common 4. If wrong price causes product to fail there may be no second chance 5. Impact on profit

Marketing on Price

1. price like thermometer--higher the better we've done in uncovering consumer needs and designing right marketing mix 2. anyone can sell at "fire sale" price; better to get premium prices for products 3. may use as indicator of product quality 4. Reference Prices external: what others are paying internal: what you think you should pay given past experience and situation 5. Subjective, perceptions; most abstract of marketing mix

Steps in setting price Inelastic vs. Elastic Price

1. select the pricing objective (survive or revenue) PxQ or PxQ - (VCXP + FC) price skimming #stairs or market penetration 2. determine demand price and demand inverse demand curve: Q bought at alternative P 3. estimate company costs 4. know competitor's prices 5. select pricing method Price elasticity of demand is % change in quantity demanded relative to % change in price--measures how sensitive consumer demand is to change in price. (steep change = elastic)

Positioning--Gap Analysis

4 square compares hospitality brands based on importance and performance of differentiating features and benefits; where are we lacking--based on importance and performance in consumer mind?

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

A

5. Why doesn'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

A

Why segmentation? (4)

Effectively reaches customer groups Allocates marketing resources Uncovers market opportunities Identifies segments that drive profitability *Understand what makes our best customers profitable, identify segments that share some of those characteristics*

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

Marketing creates value for who?

For the firm's chosen customers

Brand Matrix 1. basis for differentiation 2. marketing mix emphasis 3. consumer needs and involvement

Functional: superior performance or economy, product price and/or place, physiological and safety needs low involvement Image: desirable image, promotion, social and esteem needs, moderate-high involvement Experiential: unique engaging experience, product and place (delivery and service), self-actualization needs, moderate-high involvement

Positioning via Perceptual Maps *capsule hotels*

Hospitality Positioning: (Linear graph) high to low price basic to luxury service (see graph) *Marriott appealed to different segments of travelers with different brand personalities, price points and physical locations

New Product Development Process where does the process break down most often?

Idea Generation Idea Screening (miss boat Type I, sink ship Type II Concept Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization where does the process break down most often? concept testing

The Diffusion Process

Ignore hate group; biggest opportunity is swing group through eyes of love group; understand benefits of love group; it's those who adopt quicker than others on normal bell curve (innovators, early adoption, early majority, late majority, laggers)

The Possible Price Range

In between the customers perceived value and the cost of goods sold. We try to capture as much of the perceived value as possible. (ref prices, competitor prices, subs) capture as much perceived value as possible w/o inviting over-powering competition

CH. 10 Service problems

Intangible: tangible cues, phys environment Inseparable: people, care, quality, personal attention Variability: process, standardization, training Perishable: predict demand fluctation, balance supply and demand

Products travel through life cycles starting with introduction stage and finishing with maturity stage. In which stage of the product life cycle do marketing managers seek to maximize profit by harvesting product loyalty? Introduction Growth Maturity Decline Obsolete

Maturity

Ways to Position

Most used --> Most Useful: How you are just as good as the competition How you beat all the competition How you are loved by popular people How you fit consumers' lifestyles How you deliver what is most valued The seller must value-position the brand.

Ways to segment the Market

Most used → most useful Geographic: region, market size, market density, climate Demographic: age, gender, family size and life cycle, gen cohorts, race, occupation, income Psychographic: personality traits, values, attitudes, interests and lifestyles Behavioral: usage situations, benefits *problem trying to solve*

Five Dimensions of an Angle (more than POD)

Need to Believe (relevance) Reason to Believe (effective) Blows-Away Expectations Quantifiable Support Unique Product Claim

Considering a product's competitive angle, _______________ is about finding significant pain points that are personally relevant to the target audience while _______________ is about demonstrating problem-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

Designing Pricing Strategies Price and Perceived Value: The Economic Perspective

Objective price --perception of price including perceived benefits and perceived costs -- perceived value -- willingness to pay so they're willing to buy when perceived value >0

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

People, process, and physical environment

Product Positioning is...

The act of designing the company's offering so it occupies distinct and valued place in consumers' minds *how you make people feel* Strong positioning helps clarify the brand's essence, what the brand helps the customer achieve, and how it is unique in doing so.

Importance of Brand

The marketing battle will be a *battle of brands*, a competition for brand dominance. Businesses and investors will recognize *brands as the company's most valuable assets*...It will be more important to own markets than to own factories. The only way to own markets is to *own market-dominant brands.*

Why do marketers price below customer's perceived value? Supply equals demand above customer's perceived value. There is no possible demand for prices above customer's perceived value. Cost of goods sold exceeds demand at this point. Sellers have no incentive to sell to buyers who demand prices above customer's perceived value. External references prices are lower than internal reference prices.

There is no possible demand for prices above customer's perceived value.

. 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 This is the first time the idea is tested with potential customers Profit projections, including sales forecasts and costs, are estimated Product development begins in earnest All elements of the marketing mix are tested

This is the first time the idea is tested with potential customers other answers: Type I and Type II errors can be estimated *Idea Screening* Profit projections, including sales forecasts and costs, are estimated *Business Analysis* Product development begins in earnest *Product Development* All elements of the marketing mix are tested *Test Marketing*

Break-Even Analysis

Total Revenue = Total Cost Price x BEV = FC + UNIT VC X BEV BEV = FC/PRICE - UNIT VC or FC/UNIT CONTRIBUTION

Unit contribution is: Unit price minus unit variable cost Contribution multiplied by the total number of units sold. Unit price divided by total contribution Fixed cost divided by price minus unit variable cost The break-even volume for a specific product item

Unit price minus unit variable cost

Cinemark University Mall movie theater faces the service challenge of perishability because the company cannot save seats from Thursday evening's showings to Friday evening. What can Cinemark do to address this service challenge. Change operating hours of the theatersUse pricing to manage fluctuating demandProvides more training for frontline employeesHires "Fox" employees to handle problems quicklyChanges the physical environment of the theater to provide tangible cues

Use pricing to manage fluctuating demand textbook: Service providers try to manage perishability by managing fluctuating demand or by matching supply with changing demand.

The Golden Goose Pricing Approach

When companies know a lot about customers, but very little about competitors

Person by situation segmentation Matrix

You score where they intersect (vea la diagrama) General product benefit and personal benefit connection--touch the heart *remember person variability and situation variability*

USP Example

[Product name] competes in the [product category] and provides [biggest benefit] to [customer identity] when they are [buying situation]. [Product name] unlike [main competitors] is unique because it provides [element of differentness]. [Little Caesars Pizza] competes in the [fast food category] and provides [affordable, family loving, one-stop meals] to [busy parents] when they are [looking for a quick, filling meal that everyone enjoys]. [Little Caesars Pizza] unlike [Domino's Pizza or Pizza Hut] is unique because it provides [a pizza for $5].

Promotion

advertising sales promotion personal selling public relations direct marketing marketers seek to product consistent brand message at each customer touchpoint using multiple modes of communication that must be consistent and complimentary The great challenge for managers is to understand how best to allocate scarce marketing resources among these elements and to ensure they are working in a coordinated and consistent manner.

Promotion mix--Advertising

advertising: inform, gain liking/interest, stimulate action affective: moods, feelings, attitudes effective: successful in producing desired result

Total Contribution

amount available to cover fixed costs and profit after VC has been deducted Unit contribution x volume total revenue - total vc

What determines what consuerm is willing to apy?

buying situation or context as well as core dimensions of the product

Break through clutter with...

celebrities color and contrast humor emotion

Promotion Mix

combination of one or more of the communication tools to communicate value to consumers by informing, persuading, and/or reminding.

Pricing Methods

cost-plus pricing target return pricing skimming pricing penetration pricing (low to penetrate market) prestige pricing (high--quality) price lining odd-even pricing bundle pricing yield management (match demand and supply for set capacity) going rate pricing (follow competition) perceived value pricing

Fixed Costs Variable Costs Total Costs

don't vary with output; programmed: attempt to generate sales volume (ads, sale salary); committed are required (rent) vary with output level -COGS: or manufacturer: materials, labor -for wholesaler/retailer: merchandise -expenses: sales commissions, discounts, delivery Total Costs= Fixed + Variable Costs

Price skimming vs. Penetration

high prices at first, reduce over time capture consumer surplus quantity is low at the start not ideal for gaining market share low prices at first doesn't capture consumer surplus quantity high at start gain market share

Service Provider Matrix Quality vs. Productivity

high, high: tiger High, low: servant's heart Low, high: fox low, low: kitten

Choosing a Value Positioning Strategy Chart Product Price higher -- lower vs. customer benefits more -- fewer

higher/more: higher price for more benefits #luxury #image same/more: same price for more benefits lower/more: no way -difficult to sustain; may lose out to more focused competitors, hard b/c it costs to product lower/the same: lower price for same benefits lower/fewer: lower price for fewer benefits #storebrands #kroger same/same: "Me Too" Positioning

CH 11 CLASS price specifies...

how value can be divided between customer and firm so customer has incentive to buy and firm has incentive to...

why companies promote?

increase demand, decrease price sensitivity/make demand more inelastic *to communicate value to chosen customers* ultimate goal: influence someone to make a purchase

Better Brand-Building through Better Brand-Positioning

is brand's category membership established? is there substantial benefit to serve as point-of-difference? is the benefit important to customers?

Raison detre (reason) for using segmentation:

is to find firm's chosen customers

Product Item, line, mix

item: specific version of product line: closely related items mix: all products offer

USP: Unique Selling Proposition

make proposition to customer "buy this product and you'll get specific benefit" it must be unique somethign competition can't or doesn't offer 1. who sit he customer--identity and buying situation? 2. How does the product's biggest benefit solve a compelling pain point that the customer has? 3. Who are the main competitors and what makes this product unique--different from competitors?

Determine demand--elastic and ineleastic

price elasticity is percentage change in quantity demanded relative to a percentage change in price--measures how sensitive consumer demand is to change in price

Segmentation definition:

process of grouping customers into homogeneous sets (similar to one another in way they respond to marketing effort directed at them)

push vs. pull strategy using marketing activities

producer --> intermediaries --> end users producer --> end users --> intermediaries --> producer

Hot Means-End Chains

product feature --> general product benefit --> personal benefit --> personal value

Judging ads: good vs. bad

product is obvious, advertiser is obvious, benefit is obvious for low involvement vs. high involvement products vivid, bigger-than-life distinctive look and feel enough that reference group loves product; differentiating features tied to differentiating emotions

Performance based on two measures

recall persuasion (state key benefit)

Brands should (3)

resonate with customers differentiate from competitors motivate employees

select pricing objective

survival--price to cover variable costs maximize sales revenue/profit (sales-cost) price skimming market penetration

Four Pricing Approaches

understand customers? yes vs. no understand competitors? yes vs. no no, no cost plus no, yes competitive yes, no golden goose yes, yes value

Factors affecting price sensitivity

unique value, low substitute awareness, difficult comparison, total expenditure, end benefit, shared cost, price-quality, scarce inventory

Perceptions of Fairness... *Factors affecting price sensitivity (sensitivity goes down) need to know...(3)

vary across product categories (discretionary vs. necessity, luxury vs. utilitarian) unique value low sub awareness difficult comparison total expenditure end benefit shared cost price quality scarce in inventory company costs, competitor prices, customers

Everything is worth

what its purchaser will pay for it

Segmentation: Targeting: Positioning:

who could we exchange with? who should we exchange with? how do we position the product in the customer's mind? How do we want customers to think and feel about our brand?

How to...? (on top hat) 2. Product Positioning is...

Sell to the swing group through the eyes of the love group 2. The distinct and valued place a product offering occupies in consumers' minds

QUIZ 13 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

QUIZ 11 Break-even volume is: The point where total revenue equals total cost. The point where there are no profits. The point where there are no losses. B and C above. All of the above.

All of the above.

In his book, Brand Leadership, David Aaker notes that brands should: Resonate with customers Differentiate from competitors Motivate employees A and B are correct All of the above

All of the above

Marketing managers use elements of the promotion mix to communicate value to consumers by: Informing them about the benefits of the product Persuading them to try or continue using the product Reminding them of the product benefits A and B above All of the above

All of the above

CHAPTER 8 QUIZ 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:

A. Age and psychographics B. Family and cultural situations C. Their frequency of purchase D. The way they respond to the marketing effort directed toward them E. Geographic location D

Research on marketing services identifies five determinants of service quality--reliability, assurance, tangibles, empathy, and responsiveness. Tangibles include: Delivering and performing the service dependably and accurately Competence, courtesy, and credibility Access, communication, and understanding Appearance of physical facilities and personnel Helping customers promptly

Appearance of physical facilities and personnel the others: Delivering and performing the service dependably and accurately *reliability* Competence, courtesy, and credibility *assurance* Access, communication, and understanding *empathy* Helping customers promptly *responsiveness* order of importance to customers: reliability, responsiveness, assurance, empathy, tangibles

What is Market share??

BEV/Industry volume = Market share % (% profit)

Advertising seeks to achieve one or more objectives--cognitive, affective, and behavioral. The affective objective: Builds awareness Gains interest Gains liking Stimulates action Both B and C are correct

Both B and C are correct

QUIZ 10 Research suggests that satisfied frontline employees lead to satisfied customers. Nurses represent the frontline in health care. The working situation for nurses may affect job satisfaction. Indeed, a recent study of medicare reimbursements found much higher job dissatisfaction and burnout among nurses who were: Older than 45 years oldWorking in the public sectorCaring for patients in hospitals and nursing homesAssigned to K-12 schoolsWorking in rural areas

Caring for patients in hospitals and nursing homes

Scarce inventory

Causes price to rise due to its rarity

Behavioral FActor

Consumer willingness to buy = economic utility of transaction *perceived value - price* + fairness of transaction fairness: 1. buying situation 2. relative incentives 3. nature of product

Classifying products

Convenience Shopping (More expensive & effort) Specialty (extensive search, no sub) Unsought

2. 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? A. Accessible B. Durable C. Measureable D. Substantial E. Unique needs

D

4. 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 performance of competitive brands Psychological differences among consumers The importance of a brand's features and benefits to the buying decision The performance of external forces in the environment

D

Which pricing strategy is used when marketers set a relatively low price to capture high market share quickly, at the expense of higher profits per product? Price skimming Price penetration Promotional pricing Cost-plus pricing Competitive pricing

Price penetration

Which sales promotion method is best for products that are consumed faster when greater quantities are available? Value-added promotions Price promotions Trade promotions Coupons Interactive promotions

Price promotions

3. Estimate company costs. 4.

Pricing Knowledge requires: the company's costs competitor's prices the customers

QUIZ 9 Honda is a Japanese public multinational conglomerate corporation primarily known as a manufacturer of automobiles, aircraft, motorcycles, scooters, generators, water pumps, lawn and garden equipment, rotary tillers, outboard motors, robotics, and small engines. All of the products offered by Honda represent the company's: Product item Product mix Product life cycle Product line Augmented product

Product mix

Profit Equation

Profit = Total revenue - Total cost Profit = (Price x Quantity) - (Fixed cost + Variable cost x Quantity) Price has direct impact on profit; indirect on profit through quantity

Service providers are human and humans deliver an uncertain level of consistency. To address the service challenge of variability, marketers should: Provide training and develop skills for service providersReplace humans with machinesMinimize variability by matching supply with demandTarget low maintenance customersSeparate the customer from the service provider

Provide training and develop skills for service providers

QUIZ 12 Nestle promotes the 36-pack Kit Kat chocolate treat to the consumers with the expectation that the consumer will request the product from Costco. This is an example of: Push strategy Pull strategy Physical strategy Preventive strategy Progressive strategy

Pull strategy

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

Recall (remember the ad and the advertiser) and persuasion (remember the benefit)

Determinants of Service Quality

Reliability Responsiveness Assurance (courtesy) Empathy Tangibles