Marketing: 8, 10, 11

What are consumer, convenience, and shopping products?

-Consumer product A product bought by final consumers for personal consumption. -Convenience product A consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort. Convenience products are usually low priced, and marketers place them in many locations to make them readily available when customers need or want them -Shopping product A consumer product that the customer, in the process of selecting and purchasing, usually compares on such attributes as suitability, quality, price, and style. Shopping product marketers usually distribute their products through fewer outlets but provide deeper sales support to help customers in their comparison efforts

Other forms of psychological pricing?

-Everyday low pricing vs. High/Low pricing. -Odd/Even pricing: A psychological pricing tactic in which numeric value is utilized to affect the customer's perception of product value. Odd pricing refers to a price ending in 1,3,5,7,9 just under a round number, such as $0.19, $2.47, $4.93. Odd pricing often seen as "more of a deal" Perception of $20 vs. $19.99? Even pricing refers to a price ending in a whole number or in tenths, such as $0.20, $2.50, $65.00. Even pricing often used to distinguish luxury items .99? Left digit effect, we anchor ourselves. -Ending digits: seem like we are getting a sale

How does pricing apply to segmentation?

-Factors that determine a product's best price to charge different market segments include: Perceptions of value Costs of providing the product Customers' price sensitivity (i.e., demand elasticity) **All concepts discussed today become more meaningful when applied at the segment level. Segmentation fences: Customer characteristics Purchase quantity, Product features, Negotiation Time of purchase or use Place of purchase or use

What are the three types of services marketing?

-Internal marketing Orienting and motivating customercontact employees and supporting service employees to work as a team to provide customer satisfaction. -External marketing (must be preceded by internal) -Interactive marketing Training service employees in the fine art of interacting with customers to satisfy their needs.

What is price?

-Most flexible of the 4 P's, easy to change Most easily copied of the 4 P's Key component of the profit equation -Profit = Revenue (price*quantity sold) - costs (fixed + variable) -Higher prices make consumers more likely to search for information before purchasing, listen to objective sources, and brag about their purchase afterwards! -Besides money give up:Privacy/data Time, Effort - physical or mental, Opportunity cost

Based on discussions in class, which of the following IS NOT an example of psychological pricing? everyday low pricing price-quality relationship cost-based pricing decoy pricing odd/even pricing

Cost-based pricing. Types of psychological pricing: Reference prices, Everyday low pricing, Odd prices, Price-quality relationship.

What is a product and what is a service?

-Product is anything that can be offered in a market for attention, purchase, use, or consumption that satisfies a need or want (often tangible but not always) -Service is a product that consists of activities or benefits that are essentially intangible and does not result in the ownership of anything -Intangible Services cannot be touched, seen, tasted, heard, smelled, or felt before purchase Variable Services are less standardized and uniform than goods because service quality depends on who provides the services and when, where, and how -Inseparable Goods are produced, sold, and then consumed. In contrast, services are often sold, produced, and consumed at the same time. A service is inseparable from the service provider -Perishable Services cannot be stored for later sale or use. If not used, the revenue is lost. Matching supply with demand at any given point in time

What is reference pricing?

-Reference Prices (Internal) Consumers have a set price or price range in their mind. If the actual price is way higher, consumers will feel the product is overpriced If it is way below the internal reference price, consumers may assume its quality is inferior - External. Pricing a product at a moderate level and positioning it next to a more expensive model or brand -Decoy pricing. Introduce a third option to shift attention.

What are specialty, unsought, and industrial products?

-Specialty product A consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Buyers normally do not compare specialty products. They invest only the time needed to reach dealers carrying the wanted brands. ex: Lamborghini. -Consumers insist upon a particular item and will not accept substitutes! High price Brand name tends to be very important -Unsought product A consumer product that the consumer either does not know about or knows about but does not normally consider buying. Most major new innovations are unsought until consumers become aware of them through marketing -Industrial product A product bought by individuals and organizations for further processing or for use in conducting a business. Thus, the distinction between a consumer product and an industrial product is based on the purpose for which the product is purchased

Which of the following is an example of a pure tangible good? -an online shoe retailer that provides free home delivery -a bag of potato chips -a laptop with a comprehensive warranty for three years -a credit card -an agency that offers free legal advice

A bag of potato chips. -A company's market offering often includes both tangible goods and services. At one extreme, the market offer may consist of a pure tangible good, such as soap, toothpaste, or salt; no services accompany the product. At the other extreme are pure services, for which the market offer consists primarily of a service. Examples include a doctor's exam and financial services

What is a brand and what should it be ideally?

A brand: A name, term, symbol, or any other unique element of a product that allows identification of a firm's product(s) and sets it apart from competition Encompasses experiences Functions: Reduces performance risk Social value Identification Promotional efforts Segmentation Building strong customer relationships And many more... -Brands should ideally: Be memorable Have a positive connotation Convey a certain image

Trade-in allowances are most commonly used in the ________ industry. dairy products financial services automobile real estate health care

Automobile. -Allowances are another type of reduction from the list price. For example, trade-in allowances are price reductions given for turning in an old item when buying a new one. Trade-in allowances are most common in the automobile industry, but they are also given for other durable goods. Promotional allowances are payments or price reductions that reward dealers for participating in advertising and sales-support programs.

A ________ is a name, term, sign, symbol, design, or a combination of these, that identifies the maker or seller of a product or service. package brand line extension feature value chain

Brand. A name, term, sign, symbol, or design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.

Marketing mix planning begins with ________. -building an offering that brings value to target customers -selecting the right channel for distribution of the product -calculating the total costs involved in manufacturing the product -setting a reasonable price for the product -finding a suitable promotion strategy for the product

Building an offering that brings value to target customers. -The right product to satisfy the needs of your target customer. -Products are a key element in the overall market offering. -Marketing mix planning begins with building an offering that brings value to target customers. This offering becomes the basis on which the company builds profitable customer relationships

What is cost-based pricing vs value-based pricing?

Cost-based: design a good product, determine costs, add profit, then convince customers Value-based (the ideal): We begin by thinking about how the product will benefit customers (the core product), And which benefits our consumers are capable of perceiving, We then price actual and augmented product based on those predictions -Customer-driven vs. Product-driven -Competition pricing is risky, based on competitiors, typically to gain market share.

The New Age Gallery has three admission prices for students, adults, and seniors, even though all three groups are entitled to the same services. This form of pricing is called ________ pricing. psychological captive product by-product product form customer-segment

Customer Segment. -In segmented pricing, the company sells a product or service at two or more prices, even though the difference in prices is not based on differences in costs. Segmented pricing takes several forms. Under customer-segment pricing, different customers pay different prices for the same product or service. For example, museums, movie theaters, and retail stores may charge lower prices for students and senior citizens.

Which of the following is an external determinant of price? marketing mix strategy demand for your product marketing objectives fixed costs variable costs

Demand for your product. External determinants: -Competition -Competitor's prices -Strength of competition -Economy -Cost of components (natural resources) -Economic conditions -Demand for your product

Samsung has decided to decrease prices on its low-end tablets. The company can reasonably expect ________ to increase. overhead costs additional value demand fixed costs competition

Demand. Supply and demand curve for normal goods. -Several situations may lead a firm to consider cutting its price. One such circumstance is excess capacity. Another is falling demand in the face of strong price competition or a weakened economy. In such cases, the firm may aggressively cut prices to boost sales and market share. But as the airline, fast-food, automobile, retailing, and other industries have learned in recent years, cutting prices in an industry loaded with excess capacity may lead to price wars as competitors try to hold on to market share. A company may also cut prices in a drive to dominate the market through lower costs. Either the company starts with lower costs than its competitors, or it cuts prices in the hope of gaining market share that will further cut costs through larger volume.

Bon Vivant offers an assortment of exclusive French wines at incredibly low prices. These prices are neither limited-time offers nor special discounts, but represent the daily prices of products sold by Bon Vivant. This reflects Bon Vivant's ________ pricing strategy. cost-based penetration everyday low markup break-even

Everyday low pricing. -Other retailers—such as Walmart, Costco, ALDI, and Family Dollar—practice everyday low pricing (EDLP), charging constant, everyday low prices with few sales or discounts. -An important type of good-value pricing at the retail level is called everyday low pricing (EDLP). EDLP involves charging a constant, everyday low price with few or no temporary price discounts

Which of the following is NOT TRUE about elastic demand? -includes addictive substances such as drugs and cigarettes. -products have many substitutes. -price changes cause great change in demand. -price changes affect quantities purchased. -the demand curve is relatively flat.

Includes addictive substances. Marketers also need to know price elasticity—how responsive demand will be to a change in price. If demand hardly changes with a small change in price, we say demand is inelastic. If demand changes greatly, we say the demand is elastic. -Has substitutes, flat demand curve, big price impact

What are some different branding strategies?

Individual Brands/House of Brands Each product has its own brand (P&G, Coca Cola) Family brands Market all (or a group of) products under an umbrella brand Store brands Retailers' own brand (Target, Walmart) Licensing One firms sells the right for another firm to use its brand name under specific circumstances Co-branding Two brands marketed together (often to suggest use)

If a service employee provides the service, then the employee becomes a part of the service. This is an example of service ________. variability perishability inseparability intangibility heterogeneity

Inseparability. -Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. If a service employee provides the service, then the employee becomes a part of the service. And customers don't just buy and use a service; they play an active role in its delivery. Customer coproduction makes provider-customer interaction a special feature of services marketing.

What are some internal determinants of price? External?

Internal: Marketing Objectives Maximize profit Gain market share To infer a level of quality To survive Marketing Mix Strategy Price needs to be consistent with other 3P's Company Costs: Fixed -does not change as output changes Variable -varies with level of output External: Competition Competitor's prices Strength of competition Economy Cost of components (natural resources) Economic conditions Demand for your product

When theaters vary seat prices due to audience preferences for seats in coveted rows, they use ________ pricing. product line location-based captive product customer-segment time-based

Location-based. -Using location-based pricing, a company charges different prices for different locations, even though the cost of offering each location is the same. For instance, state universities charge higher tuition for out-of-state students, and theaters vary their seat prices because of audience preferences for certain locations. -Finally, using time-based pricing, a firm varies its price by the season, the month, the day, and even the hour. For example, movie theaters charge

Whizz Corp. wishes to introduce a new hybrid car into mature markets in developed countries with the goal of gaining mass-market share quickly. Which of the following pricing strategies would help the firm meet its goal? market-segmentation pricing cost-plus pricing captive-product pricing market-penetration pricing market-skimming pricing

Market penetration pricing. -Companies set a low initial price to penetrate the market quickly and deeply—to attract a large number of buyers quickly and win a large market share. The high sales volume results in falling costs, allowing companies to cut their prices even further -Several conditions must be met for this low-price strategy to work. First, the market must be highly price sensitive so that a low price produces more market growth. Second, production and distribution costs must decrease as sales volume increases. Finally, the low price must help keep out the competition, and the penetration pricer must maintain its low-price position. Otherwise, the price advantage may be only temporary

Midnight Magic, a perfume manufacturing company, plans to release a new fragrance during the holiday season at $99 per bottle. The company intends to bring the price down to $49 within six months of its release to attract the next segment of buyers who couldn't afford the initial price. Which of the following pricing strategies is Midnight Magic using? market-skimming pricing product-line pricing competitive pricing market-penetration pricing cost-plus pricing

Market-skimming pricing. (price skimming) Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. -Market skimming makes sense only under certain conditions. First, the product's quality and image must support its higher price, and enough buyers must want the product at that price. Second, the costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more. Finally, competitors should not be able to enter the market easily and undercut the high price -With each new generation of Apple iPhone, iPad, or Mac computer, new models start at a high price then work their way down as newer models are introduced. In this way, Apple skims the maximum amount of revenue from the various segments of the market.

What are prestige, dynamic, and loss leader pricing?

Prestige pricing: Setting a high price to convey an image of high quality or exclusivity, The Porsche 911 turbo coupe has a base price of $105,000. Dynamic pricing: Adjusting prices continually to meet the characteristics and needs of individual customers and situations, San Francisco uses sensors to adjust parking meter and garage prices to match demand ($.25 to $6.00 per hour) Loss leader pricing: Setting prices near or below cost in order to attract customers to a store , A supermarket features bananas at 20 cents a pound and Pampers diapers at 50 percent off; the price is below cost, but the store expects buyers to purchase additional items selling at a profit

What is the price-quality relationship? Placebo effect?

Price-Quality Relationship: Most inexperienced consumers use price as an indicator of quality Price becomes crucial when consumers have little knowledge about certain products/brands -Placebo effect: real responses from fake treatment using substances with no medical effect Can marketing actions (e.g., pricing) lead to placebo effects? Literally "getting what you pay for"

________ involves adding more items within the present range of the product line. Product line filling Upward product line stretching Brand extension Market diversification Downward product line stretching

Product line filling. A company can expand its product line in two ways: by line filling or line stretching. **Product line filling involves adding more items within the present range of the line.** There are several reasons for product line filling: reaching for extra profits, satisfying dealers, using excess capacity, being the leading full-line company, and plugging holes to keep out competitors. However, line filling is overdone if it results in cannibalization (eating up sales of the company's own existing products) and customer confusion. The company should ensure that new items are noticeably different from existing ones. Product line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line downward, upward, or both ways. Companies located at the upper end of the market can stretch their lines downward. For example, Mercedes has stretched downward with the CLA line to draw in younger, firsttime buyers. A company may stretch downward to plug a market hole that otherwise would attract a new competitor or to respond to a competitor's attack on the upper end. Or it may add low-end products because it finds faster growth taking place in the low-end segments. Companies can also stretch their product lines upward. Sometimes, companies stretch upward to add prestige to their current products or to reap higher margins

Proton Corp. is an automobile manufacturer known for producing efficient, durable, and low-priced cars. Recently, the company launched a new range of luxury cars to broaden its market appeal and to add prestige to its existing line of cars. This is an example of ________. internal marketing product line stretching cannibalization social marketing product line filling

Product line stretching. -Product line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line downward, upward, or both ways. Companies located at the upper end of the market can stretch their lines downward. For example, Mercedes has stretched downward with the CLA line to draw in younger, firsttime buyers. A company may stretch downward to plug a market hole that otherwise would attract a new competitor or to respond to a competitor's attack on the upper end. Or it may add low-end products because it finds faster growth taking place in the low-end segments. Companies can also stretch their product lines upward

What are some functions of packaging?

Protect the product Provide specific information (label) Sometimes mandated by law Make the product more user-friendly Communicate brand personality/brand image

Which of the following is true with regard to services? -Services can be easily separated from their providers. -Services refer to purely tangible goods. -Services are more standardized and uniform than goods. -Services can be stored for later use. -Services consists of activities or benefits that do not result in the ownership of anything.

Services consists of activities or benefits that do not result in the ownership of anything. -Intangibility: services cannot be seen, tasted, felt, heard, or smelled before purchase -Inseparability Services cannot be separated from their providers -Variability Quality of services depends on who provides them and when, where, and how -Perishability Services cannot be stored for later sale or use

Erica wants to replace her old washing machine with a new one. In order to get the maximum value for her money, she plans to spend substantial time and effort in gathering information and making product comparisons before making the actual purchase. In this instance, Erica is planning to buy a(n) ________ product. shopping exclusive specialty unsought convenience

Shopping. -Shopping products are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style. When buying shopping products and services, consumers spend much time and effort in gathering information and making comparisons. Examples include furniture, clothing, major appliances, and hotel services. Shopping product marketers usually distribute their products through fewer outlets but provide deeper sales support to help customers in their comparison efforts.

What are the layers of the product concept?

The Core Product: Consists of all the benefits the product will provide for consumers Marketing is about providing benefits, not products The Actual Product: Consists of the physical good or service that supplies the desired benefit Example: A drill's core product is the ability to make a particular size hole, but the actual product is a plastic and metal apparatus with a motor Actual product also includes appearance, styling, packaging, and the brand The Augmented Product: Consists of the supporting features such as customer support, warranty, delivery, installation, and repair service after the sale Extra features of the product that might not be necessary for the product to work, but that can enhance the experience

What is brand equity? Brand extension?

the added value a brand name gives to a product beyond the functional benefits provided -brand has positive brand equity when consumers react more favorably to it than to a generic or unbranded version of the same product. It has negative brand equity if consumers react less favorably than to an unbranded version. -familiarity, image, quality -brand extension extends a current brand name to new or modified products in a new category. For example, Nest—the maker of stylish, connected, learning thermostats that can be controlled remotely from a phone—extended its line with an equally smart and stylish Nest Protect home smoke and carbon monoxide alarm

What is the service profit chain?

the chain that links service firm profits with employee and customer satisfaction -Internal service quality. Superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in . . . -Satisfied and productive service employees. More satisfied, loyal, and hardworking employees, which results in . . . -Greater service value. More effective and efficient customer value creation, engagement, and service delivery, which results in . . . -Satisfied and loyal customers. Satisfied customers who remain loyal, make repeat purchases, and refer other customers, which results in . . . -Healthy service profits and growth. Superior service firm performance.