Marketing 2nd Exam

Contribution margin

(unit selling price - unit variable costs) / unit selling price

Points-of-parity (POPs)

- Attribute/benefit associations that are not necessarily unique to the brand but may be shared with other brands - Forms include category, correlational, and competitive

Points-of-difference (PODs)

- Attributes/benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand - Need to be desirable, deliverable, and differentiating

Positioning

- Designing a company's offering and image to occupy a distinctive place in the minds of the target market - Communicating the value proposition

Market Leader Strategies

- Expand total market demand - Protecting market share - Increasing market share

Consumer-adoption process

1. Awareness—The consumer becomes aware of the innovation but lacks information about it. 2. Interest—The consumer is stimulated to seek information about the innovation. 3. Evaluation—The consumer considers whether to try the innovation. 4. Trial—The consumer tries the innovation to improve his or her estimate of its value. 5. Adoption—The consumer decides to make full and regular use of the innovation.

Market-Follower Strategies

1. Cloner—The cloner emulates the leader's products, name, and packaging with slight variations. 2. Imitator—The imitator copies some things from the leader but differentiates on packaging, advertising, pricing, or location. The leader doesn't mind as long as the imitator doesn't attack aggressively. 3. Adapter—The adapter takes the leader's products and adapts or improves them. The adapter may choose to sell to different markets, but often it grows into a future challenger, as many Japanese firms have done after improving products developed elsewhere.

Product Lifecycle

1. Introduction—A period of slow sales growth as the product is introduced in the market. Profits are nonexistent because of the heavy expenses of product introduction. 2. Growth—A period of rapid market acceptance and substantial profit improvement. 3. Maturity—A slowdown in sales growth because the product has achieved acceptance by most potential consumers. Profits stabilize or decline because of increased competition. 4. Decline—Sales show a downward drift and profits erode.

Product Hierarchy

1. Need family—The core need that underlies the existence of a product family. Example: security. 2. Product family—All the product classes that can satisfy a core need with reasonable effectiveness. Example: savings and income. 3. Product class—A group of products within the product family recognized as having a certain functional coherence, also known as a product category. Example: financial instruments. 4. Product line—A group of products within a product class that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels, or fall within given price ranges. A product line may consist of different brands, a single family brand, or an individual brand that has been line extended. Example: life insurance. 5. Product type—A group of items within a product line that share one of several possible forms of the product. Example: term life insurance. 6. Item (also called stock-keeping unit or product variant)—A distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute. Example: Prudential renewable term life insurance.

Monitoring Competition

1. Share of market—The competitor's share of the target market. 2. Share of mind—The percentage of customers who named the competitor in responding to the statement "Name the first company that comes to mind in this industry." 3. Share of heart—The percentage of customers who named the competitor in responding to the statement "Name the company from which you would prefer to buy the product."

Consumer Reference Pricing

All types of reference prices are possible (see Table 16.1), and sellers often attempt to manipulate them. For example, a seller can situate its product among expensive competitors to imply that it belongs in the same class. Department stores will display women's apparel in separate departments differentiated by price; dresses in the more expensive department are assumed to be of better quality. Marketers also encourage reference-price thinking by stating a high manufacturer's suggested price, indicating that the price was much higher originally, or by pointing to a competitor's high price.

Growth Strategies

Building market share Developing committed customers & stakeholders Building a powerful brand Innovating new goods, services, and experiences International expansion Acquisitions, mergers, and alliances Building an outstanding reputation for social responsibility Partnering with government and NGOs

New-product options

Buy other companies Buy patents from other companies Buy a license or franchise from another company Improve existing products New-to-the-world items

Cost-based and value-based pricing

Cost-based Pricing - Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk Value-based Pricing - Setting prices based on buyers' perceptions of value rather than on seller's costs

Marketing in a slow growth economy

Explore upside of increasing investment Get closer to customers Review budget allocations Put forth compelling value proposition Fine-tune brand and product offerings - Consider removing high-end products from line

Market-Nicher Strategies

Firms with low shares of the total market can become highly profitable through smart niching

Differentiation

Form Features Performance quality Conformance quality Durability Reliability Repairability Style Customization

Warranties

Formal statements of expected product performance by the manufacturer

New-product failure

Fragmented markets Social, economic, and government constraints Development costs Capital shortages Shorter development time Poor launch timing Shorter PLCs Lack of organizational support

Adapting price

Geographic pricing Price discounts and allowances Loss-leader pricing Special event pricing Special customer pricing Cash rebates Low-interest financing Longer payment terms Warranties/service contracts

Labeling

Identifies, grades, describes, and promotes the product

Final price factors

Impact of other marketing activities Company pricing policies Gain-and-risk-sharing pricing Impact of price on other parties New Product Pricing -Market penetration -Market skimming

Segmentation

Market segmentation divides a market into well-defined slices. A market segment consists of a group of customers who share a similar set of needs and wants. The marketer's task is to identify the appropriate number and nature of market segments and decide which one(s) to target. The major segmentation variables—geographic, demographic, psychographic, and behavioral segmentation

Legal and Ethical Segmentation Issues

Marketers must avoid consumer backlash - Labeling consumers - Vulnerable groups - Disadvantaged groups - Potentially harmful products

Segmentation Criteria

Measurable (size, purchasing power, characteristics of the segments can be measured) Substantial (segments are large and profitable enough to serve) Accessible (can be effectively reached and served) Differentiable (conceptually distinguishable) Actionable (effective programs can be formulated for attracting and serving the segments)

Services Differentiation

Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair Returns

Revenue equation

Price drives the total revenue equation Profit = total revenue - total costs - Total revenue = unit price * quantity sold) - Total costs = (fixed costs + (unit variable costs * quantity sold)) Says don't need to memorize???

Rate-of-return pricing

Price is based on specified rate of ROI: ROI = profit / investment

Newer trends in pricing

Pricing in a digital world: - Quick, free, convenient price comparisons - Negotiate prices online or even in person - Get products free (easier access to trial) - Monitor customer behavior (and tailor offers) - Give customers access to special prices

Guarantees

Promise of general or complete satisfaction

Steps in setting pricing policy

Select the Pricing Objective (profit, market share, cost-leader, market skimming, survival, etc.) Determine Demand (price sensitivity, demand curves, elasticity) Estimate Costs (fixed vs. variable expenses, total costs of all functions) Analyze Competitors' Costs, Prices, and Offers Select a Pricing Method Select the Final Price

Characteristics of Services

Service: Any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything Intangibility Perishability Variability Inseparability

Spectrum of Segmentation

Spectrum goes from mass market to the left to customization on the right. More mass market items are full market coverage and multiple segments. More customization items are single segments and individuals as segments

Porter's 5 Forces

Threat of rivalry Threat of new entrants Threat of substitutes Threat of buyer bargaining power Threat of supplier bargaining power

Co-Branding

Two or more well-known brands are combined into a joint product or marketed together in some fashion - Same-company - Joint-venture - Multiple-sponsor - Retail

Mark-up pricing

Unit Selling Mark-up Price = Total Unit Cost / (1 - Desired Market - up)

Packaging

Used as Marketing Tool -Self-service -Consumer affluence -Company and brand image -Innovation opportunity Packaging Objectives - Identify the brand - Convey descriptive and persuasive information - Facilitate product transportation and protection - Assist at-home storage - Aid product consumption

Product Mix Terminology

Width, Length, Depth, Consistency The width of a product mix refers to how many different product lines the company carries. The length of a product mix refers to the total number of items in the mix. The depth of a product mix refers to how many variants are offered of each product in the line. The consistency of the product mix describes how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

Break-even analysis

identifies the unit or dollar sales volume at which an organization neither makes a profit nor incurs a loss total revenue = total variable costs + total fixed costs Unit Break-even volume = total fixed costs / (unit selling price - unit variable costs)

Market-Challenger Strategies

market challenger can attack: - market leader - underfunded firms its own size - small local and regional firms - status quo

New-product development

the phases by which firms develop new products, including idea generation, product concept development and screening, marketing strategy development, business analysis, technical development, test marketing, and commercialization