Marketing exam #2
Concentrated Marketing
--A firm goes after a large share of one segment or niche --Can fine-tune its products, prices, and programs to the needs of a carefully defined segment --It's a good strategy to start a business. Note to Instructor: Niching lets smaller companies focus their limited resources on serving niches that may be unimportant to or overlooked by larger competitors. Many companies start as nichers to get a foothold against larger, more-resourceful competitors and then grow into broader competitors. For example, Southwest Airlines began by serving intrastate, no-frills commuters in Texas but is now one of the nation's largest airlines. Today, the low cost of setting up shop on the Internet makes it even more profitable to serve seemingly miniscule niches. Small businesses, in particular, are realizing riches from serving small niches on the Web.
Price vs. Value
-Companies should sell value, not price -Price reductions can: >Cut profits and initiate price wars >Cheapen perceptions of brand quality
Value-Based vs. Cost-Based Pricing
Although costs are an important consideration in setting prices, cost-based pricing is often product driven. The company designs what it considers to be a good product, adds up the costs of making the product, and sets a price that covers costs plus a target profit. Value-based pricing reverses this process. The company first assesses customer needs and value perceptions. It then sets its target price based on customer perceptions of value.
Product Line
A group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges
Loyalty Status
Buyers can be divided into groups according to their degree of loyalty Netflix > video streaming Amazon > tablets Apple > smartphones Apple > tablets Facebook > social networking Google > search engine Youtube > social networking Whatsapp > instant messaging Amazon > online retailer Samsung > smartphones Zappos > online retailer iTunes > video streaming Grey Goose > vodka Kindle > e-reader
Unsought Products
Consumer products that the consumer either does not know about or knows about but does not normally consider buying >Require a lot of advertising, personal selling, and other marketing efforts >New innovations are generally unsought till advertised ex: Metlife insurance, coffin
Labeling
Labels -Identify the product -Describe the product -Promote the brand
Introduction Stage Strategies
Product: Offer a basic product Price: Use cost-plus pricing Distribution: Build selective distribution Advertising: Build product awareness among early adopters and dealers Promotion: Use heavy promotion to entice product trial
Income Segmentation
Dividing a market into different income segments Walmart, Target, Whole Foods
Behavioral Segmentation
Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product 1. Occasions 2. Benefits Sought 3. User Status 4. Usage Rate 5. Loyalty Status
Benefit Segmentation
Dividing the market according to the different benefits that consumers seek from the product Venus Embrace, Venus Breeze, Venus Divine, Simply Venus
Positioning - Example
Sportiness- BMW Safety- Volvo Comfort- Benz Design- Alfa Romeo
Product Mix
The set of all product lines and items that a particular seller offers for sale ex: p&g sells all the everyday common items ex: tide, charmin, crest, duracell batteries, pringles
Price Adjustment Strategies
look at graph
Developing New Products and Managing the Product Life-Cycle Chapter 8
Chapter 8
Brand Value
Differentiation Relevance Knowledge Esteem
Undifferentiated Marketing
--A firm decides to ignore market segment differences and go after the whole market with one offer --Focuses on what is common in the needs of consumers --Designs a product that will appeal to the largest number of buyers Classic Example: Henry Ford; People can have the Model T in any color - so long as it's black.
Competitive Advantage
An advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices
A Simple Comparison
Dunkin- Starbucks-
Chapter 7
Products, Services, and Brands Building Customer Value
Product Life Cycle
The course of a product's sales and profits over its lifetime (i.e., duration that it is produced and sold in the market)
Requirements for Effective Segmentation
To be useful, market segments must be: --Differentiable (Heterogeneous) --Measurable: size and purchasing power --Substantial: large or profitable enough --Accessible: can be reached and served --Actionable: effective programs can be developed
Break-Even Analysis
Total Cost = Fixed Cost + (Variable Cost x Sales Volume) Total Revenue = Price x Sales Volume Total Revenue = Total Cost + Target Return (margin) Break-Even Volume = Fixed Cost/(Price - Variable Cost)
Co-branding
Co-branding can take advantage of the complementary strengths of two brands. ex: nike and apple itunes
New-Product Pricing Strategies
Market-Skimming Pricing >Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price >Company makes fewer but more profitable sales Market-Penetration Pricing >Setting a low price for a new product to attract a large number of buyers and a large market share
Price Changes: Price Cuts or Increases
Reasons for price cuts -Excess capacity -Falling demand in face of strong competitive price or a weakened economy -Attempt to dominate market through lower costs Reasons for price increase -Cost inflation -Overdemand
Product Mix Decisions
Width- The number of different product lines the company carries Length- the number of items within a product depth- the number of versions offered of each product in the line consistency- how closely related various lines are in end use
Nike- what is their business?
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Top 10 Brands
Apple Google Microsoft Coco Cola Amazon Samsung Toyota Facebook Benz IBM
Customer-Driven Marketing Strategy
In concept, marketing boils down to two questions: (1) Which customers will we serve? and (2) How will we serve them? Of course, the tough part is coming up with good answers to these simple-sounding yet difficult questions. The goal is to create more value for the customers we serve than competitors do.
Product Line Decisions
Line Filling- Adding more items within the present range of the line Line stretching- Lengthening the product line beyond the current range ex: BMW Note to Instructor: Product line filling is overdone if it results in cannibalization 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. A company may stretch downward to plug a market hole that otherwise would attract a new competitor or 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 they may be attracted by a faster growth rate or higher margins at the higher end.
Brand Sponsorship
National Brands: products are marketed under the manufacturer's own name Store Brands: brands created and owned by a reseller of a p/s Licensing: for a fee, companies use names and symbols created by other companies Co-branding: occurs when two established brand names of different companies are used on the same product
Geographic Segmentation - Example
One example of localization is Walmart, which operates virtually everywhere but has developed special formats tailored to specific types of geographic locations. In strongly Hispanic neighborhoods, Walmart operates Supermercado de Walmart stores, which feature signage, product assortments, and bilingual staff that are more relevant to local Hispanic customers. In markets where full-size superstores are impractical, Walmart has opened smaller Walmart Market supermarkets and even smaller Walmart Express and Walmart on Campus stores.
Styles, Fashions, and Fads graphs with sales and time
Style- 3 Fashion - hill Fad - upside down V Note to Instructor: A fashion is a currently accepted or popular style in a given field. For example, the more formal "business attire" look of corporate dress of the 1980s and 1990s gave way to the "business casual" look of the 2000s. Fashions tend to grow slowly, remain popular for a while, and then decline slowly. Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity. A fad may be part of an otherwise normal life cycle. Or the fad may comprise a brand's or product's entire life cycle. Pet Rocks are a classic example of this.
Individual Marketing: Segment of One
--Tailoring products and marketing programs to the needs and preferences of individual customers --Mass customization or one-to-one marketing ex: same laptop, diff colors Note to Instructor: The widespread use of mass marketing has obscured the fact that for centuries consumers were served as individuals: The tailor custom-made a suit, the cobbler designed shoes for an individual, and the cabinetmaker made furniture to order. Today, new technologies are permitting many companies to return to customized marketing. More detailed databases, robotic production and flexible manufacturing, and interactive communication media such as cell phones and the Internet have combined to foster mass customization. Mass customization is the process by which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs.
Style Fashion Fad
A basic and distinctive mode of expression A currently accepted or popular style in a given field A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity
New-Product Development
The development of original products, product improvements, product modifications, and new brands through the firm's own product development efforts
Differentiated Marketing
A firm decides to target several market segments and designs separate offers for each Note to Instructor: By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segment. Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments. But differentiated marketing also increases the costs of doing business. ex: Toyota vs. Lexus
again
Cost- based: design a good product > determine product costs > set price based on cost > convince buyers of products value Value- based: assess customer needs and value perceptions > set target price to match customer's perceived value > determine costs that can be incurred > design product to deliver desired value at target price
Possible Value Propositions
Note to Instructor: The figure shows possible value propositions on which a company might position its products. In the figure, the five green cells represent winning value propositions— differentiation and positioning that gives the company a competitive advantage. The red cells, however, represent losing value propositions. The center yellow cell represents at best a marginal proposition.
Product's Life From Inception to Decline
Product development begins when the company finds and develops a new-product idea. During 1) product development, sales are zero, and the company's investment costs mount (profits are negative). 2) Introduction is a period of slow sales growth as the product is introduced in the market. Profits are non-existent in this stage because of the heavy expenses of product introduction. 3) Growth is a period of rapid market acceptance and increasing profits. 4) Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. PEAK. Profits level off or decline because of increased marketing outlays to defend the product against competition. 5) Decline is the period when sales fall off and profits drop.
Demand Curve
Shows the number of units the market will buy in a given time period, at different prices that might be charged Note to Instructor: The demand curve shows the number of units the market will buy in a given time period at different prices that might be charged. In the normal case, demand and price are inversely related—that is, the higher the price, the lower the demand. Thus, the company would sell less if it raised its price from P1 to P2 . In short, consumers with limited budgets probably will buy less of something if its price is too high.
Geographic Segmentation
--Dividing a market into different geographical units, such as nations, states, regions, counties, or cities --Companies are localizing their products, advertising, promotion, and sales efforts
Psychographic Segmentation
--Dividing a market into different segments based on social class, lifestyle, or personality --The products people buy reflect their lifestyles Prius, Tesla, ZipCar, Jeep
Choosing Competitive Advantages
Choose whether to promote a single benefit or multiple benefits Promote differences that are: > important > distinctive > superior > communicable > pre-emptive > affordable > affordable
Gender Segmentation
Dividing a market into different segments based on gender Dr. Pepper, Harley Davidson, Old Spice Note to Instructor: An underdeveloped gender segment can offer new opportunities in markets ranging from consumer electronics to motorcycles.
Customer Value-Based Pricing
-Setting price based on buyers' perceptions of value rather than on the seller's cost -Types: >Good value pricing >Value-added pricing
Value-Added Pricing
Attaching value-added features and services to differentiate a company's offers while charging higher prices. Note to Instructor: Even as recession-era consumer spending habits linger, some movie theater chains are adding amenities and charging more rather than cutting services to maintain lower admission prices. Rather than cutting prices to match competitors, they attach value-added features and services to differentiate their offers and thus support their higher prices.
Pricing: Understanding and Capturing Customer Value Chapter 9
CH 9
Price Elasticity of Demand
Measure of the sensitivity of demand to changes in price >Inelastic demand - Demand hardly changes with a small change in price >Elastic demand - Demand changes greatly with a small change in price Price Elasticity = ∆Q/ ∆P
Winning Value Propositions
More for more: Starbucks, Benz, Rolex More for the same: Lexus The same for less: DSW, Walmart Less for much less: Holiday Inn, Dollar General More for less: Home Depot
Good-Value Pricing
Offering the right combination of quality and good service at a fair price Everyday Low Pricing (EDLP) [walmart] High-Low Pricing [macys] Note to Instructor: More and more, marketers have adopted good-value pricing strategies—offering the right combination of quality and good service at a fair price. In many cases, this has involved introducing less-expensive versions of established, brand-name products. For example, fast-food restaurants such as Taco Bell and McDonald's offer value menu and dollar menu items. Armani offers the less-expensive, more-casual Armani Exchange fashion line.
Place Marketing
Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places ex: I <3 NY, what happens in vegas stays in vegan Note to Instructor: The recent recession forced many places to revamp their marketing efforts in order to attract tourists.
Decline Stage Strategies
Product: Phase out weak items Price: Cut price Distribution: Go selective—phase out unprofitable outlets Advertising: Reduce to level needed to retain hard-core loyals Promotion: Reduce to minimal level Product: Phase out weak items Price: Cut price Distribution: Go selective—phase out unprofitable outlets Advertising: Reduce to level needed to retain hard-core loyals Promotion: Reduce to minimal level Note to Instructor: Management may decide to maintain its brand, repositioning or reinvigorating it in hopes of moving it back into the growth stage of the product life cycle. Management may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force), hoping that sales hold up. If successful, harvesting will increase the company's profits in the short run. Finally, management may decide to drop the product from its line. The company can sell the product to another firm or simply liquidate it at salvage value.
Introduction Stage Characteristics
Sales: Low Costs: High cost per customer Profits: Negative or low Customers: Innovators Competitors: Few Marketing objective: Create product awareness and trial Note to Instructor: In this stage, as compared to other stages, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories. Promotion spending is relatively high to inform consumers of the new product and get them to try it. Because the market is not generally ready for product refinements at this stage, the company and its few competitors produce basic versions of the product. These firms focus their selling on those buyers who are the most ready to buy
Growth Stage Characteristics
Sales: Rapidly rising Costs: Average cost per customer Profits: Rising profits Customers: Early adopters Competitors: Growing number Marketing objective: Maximize market share
Strategic Pricing
Target costing- Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is met Note to Instructor: Target costing reverses the usual process of first designing a new product, determining its cost, and then asking, "Can we sell it for that?" Instead, it starts with an ideal selling price based on customer-value considerations and then targets costs that will ensure that the price is met.
Differentiation and Positioning
--Creating differentiated value for targeted segments --Occupying a desirable position in those segments --Product position - The way a product is defined by consumers on important attributes
Packaging
--Packaging: Designing and producing the container or wrapper for a product >Protects the product >Attracts customers and closes the sale Note to Instructor: There has been a long history of legal concerns about packaging and labels. The Federal Trade Commission Act of 1914 held that false, misleading, or deceptive labels or packages constitute unfair competition. Labels can mislead customers, fail to describe important ingredients, or fail to include needed safety warnings. As a result, several federal and state laws regulate labeling. The most prominent is the Fair Packaging and Labeling Act of 1966, which set mandatory labeling requirements, encouraged voluntary industry packaging standards, and allowed federal agencies to set packaging regulations in specific industries.
Person Marketing
--Person marketing consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people --Organizations use well-known personalities to help sell their products or causes Note to Instructor: Person advertising is used for a variety of reasons: to establish a reputation, to redeem a tarnished reputation after a scandal. ex: oprah, david beckham
Product Attributes
--Product quality: The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs (Level and Consistency) --Product features --Product style and design (different?) Note to Instructor: Developing a product or service involves defining the benefits that it will offer. These benefits are communicated and delivered by product attributes such as quality, features, and style and design. Product quality has two dimensions: level and consistency. In developing a product, the marketer must first choose a quality level that will support the product's positioning. Here, product quality means performance quality —the product's ability to perform its functions. Beyond quality level, high quality also can mean high levels of quality consistency. Here, product quality means conformance quality—freedom from defects and consistency in delivering a targeted level of performance.
Multiple Segmentation Bases
--The Nielsen PRIZM system based on demographic, behavioral, and lifestyle factors --66 demographically and behaviorally distinct segments of households
User Status and Usage Rate
--User status - Segments include nonusers, ex-users, potential users, first-time users, and regular users --Usage Rate - Markets can also be segmented into light, medium, and heavy product users
Consumer Products
-A product bought by final consumers for personal consumption -Classified by how consumers buy them 1.Convenience Products 2.Shopping Products 3.Specialty Products 4.Unsought Products
Segmenting Consumer Markets
-Geographic Segmentation -Demographic Segmentation -Psychographic Segmentation -Behavioral Segmentation
Major Brand Strategy Decisions
1. Brand positioning- attributes, benefits, benefits and values 2. brand name selection- selection, protection 3. brand sponsorship- manufacturer's brand, private brand, licensing, co-branding 4. Brand development- line extensions, brand extensions, multibrands, new brands Note to Instructor: Branding poses challenging decisions to the marketer. The major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship, and brand development.
Brand Name Selection
1. Product's benefits and qualities (Beautyrest) 2. Easy to pronounce, recognize, and remember (Tide) 3. Distinctive (Yahoo) 4. Extendable (amazon.com) 5. Easy to translate into foreign languages (puffs) 6. Capable of registration and legal protection (kleenex, band-aid, xeros, aspirin) Note to Instructor: After a decade of choosing quirky names (Yahoo!, Google) or trademark-proof made-up names (Novartis, Aventis, Accenture), today's style is to build brands around names that have real meaning. For example, names like Silk (soy milk), Method (home products), Smartwater (beverages), and Blackboard (school software) are simple and make intuitive sense. Many firms try to build a brand name that will eventually become identified with the product category. Brand names such as Kleenex, Levi's, JELL-O, BAND-AID, Scotch Tape, Formica, and Ziploc have succeeded in this way. However, their very success may threaten the company's rights to the name. Many originally protected brand names—such as cellophane, aspirin, nylon, kerosene, linoleum, yo-yo, trampoline, escalator, thermos, and shredded wheat—are now generic names that any seller can use.
Branding
>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 >Customers attach meanings to brands and develop brand relationships Note to Instructor: Consumers view a brand as an important part of a product, and branding can add value to a consumer's purchase. Customers attach meanings to brands and develop brand relationships. As a result, brands have meaning well beyond a product's physical attributes. Branding helps buyers in many ways. Brand names help consumers identify products that might benefit them. Brands also say something about product quality and consistency— buyers who always buy the same brand know that they will get the same features, benefits, and quality each time they buy. Branding also gives the seller several advantages. The seller's brand name and trademark provide legal protection for unique product features that otherwise might be copied by competitors. Branding helps the seller to segment markets. For example, rather than offering just one general product to all consumers, Toyota can offer the different Lexus, Toyota, and Scion brands, each with numerous sub-brands—such as Camry, Corolla, Prius, Matrix, Yaris, Tundra, and Land Cruiser.
Price
>Amount of money charged for a product or service >Sum of the values that customers exchange for the benefits of having or using the product or service
Brand Positioning
>Product attributes (fluid absorption) >Product benefits (dryness & skin-health) >Beliefs and values (happy babies, parent-child relationships, helping moms, total baby care)
Differentiation and Positioning again
A firm can create differentiation on: -Product: bose -Services ex: singapore airlines -Channels ex: amazon.com -People ex: disney world -Image ex: volvo logo Through product differentiation, brands can be differentiated on features, performance, or style and design. Beyond differentiating its physical product, a firm can also differentiate the services that accompany the product. Some companies gain services differentiation through speedy, convenient, or careful delivery. Firms that practice channel differentiation gain competitive advantage through the way they design their channel's coverage, expertise, and performance. Companies can also gain a strong competitive advantage through people differentiation — hiring and training better people than their competitors do. Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. A company or brand image should convey a product's distinctive benefits and positioning.
Product Support Services
An important part of the customer's overall brand experience > The nordstrom way (Customer service/return excellence)
Building Strong Brands
Brand equity: The differential effect that knowing the brand name has on customer response to the product or its marketing. picture: brand name vs. generic Note to Instructor: Brands are more than just names and symbols. They are a key element in the company's relationships with consumers. Brands represent consumers' perceptions and feelings about a product and its performance—everything that the product or the service means to consumers. In the final analysis, brands exist in the heads of consumers. As one well-respected marketer once said, "Products are created in the factory, but brands are created in the mind."
Organization Marketing
Consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization --Example: IBM's Smarter Planet campaign markets IBM as a company that helps improve the world's IQ
Store Brands (Private Labels)
Consumer frugality results in increased sales of store brands Store brands now offer much greater selection, and are rapidly achieving name-brand quality ex: Walmart's store brands account for a whopping 40 percent of its sales, and its Great Value brand is the nation's largest single food brand
Convenience Products
Consumer products that customers usually buy frequently, immediately, and with minimal comparison and buying effort >Low priced >Placed in many locations to make them readily available ex: crest, hamburger, snickers
Shopping Products
Consumer products that the customer usually compare on such attributes as suitability, quality, price, and style >Less frequently purchased >Distributed through fewer outlets >Greater sales support ex: washing machine, laptop, hilton hotel, couch
Specialty Products
Consumer products with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort >Different brands are not usually compared ex: medical school, law school, rolex, gucci, ferrari
Ch. 6
Customer-Driven Marketing Strategy Creating Value for Target Customers
Age and Life-Cycle Segmentation
Dividing a market into different age and life-cycle groups Disney cruise line vs. viking river cruises Note to Instructor: Marketers must be careful to guard against stereotypes when using age and life-cycle segmentation. Although some 80-year-olds fit the doddering stereotypes, others ski and play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families. Thus, age is often a poor predictor of a person's life cycle, health, work or family status, needs, and buying power.
Occasion Segmentation
Dividing the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item M&ms, halloween
Demographic Segmentation
Dividing the market into segments based on demographic variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation 1. age and life-cycle segmentation 2. gender segmentation 3. income segmentation
Market Targeting
Evaluating different market segments: --Segment size and growth --Company objectives and resources Target Market: A set of buyers sharing common needs or characteristics that the company decides to serve
Types of Costs
Fixed Costs (overhead)- DO NOT vary with production or sales level Variable Costs- Vary directly with the level of production Total Costs- Sum of the fixed and variable costs for any given level of production
New-Product Development cycle
Idea Generation > idea screening > concept development and testing > marketing strategy/development > business analysis > product development > test marketing > commercialization New-product development starts with idea generation—the systematic search for new product ideas. Major sources of new-product ideas include internal sources and external sources such as customers, competitors, distributors and suppliers, and others. A company typically generates hundreds—even thousands—of ideas to find a few good ones. The remaining steps reduce the number of ideas and develop only the best ones into profitable products.
Idea Marketing
Idea marketing >Social marketing: The use of commercial marketing concepts and tools in programs designed to influence individuals' behavior to improve their well-being and that of society ex: no shave november, red (aids), pink breast cancer awareness ribbon
Four Service Characteristics
Intangibility: services cannot be seen/tasted/felt/heard/ or smelled before purchase Variability- quality of services depends on who provides them and when/where/how Inseparability- services cannot be separated from their providers Perishability- services cannot be stored for later sale or use Note to Instructor: Although services are "products" in a general sense, they have special characteristics and marketing needs. The biggest differences come from the fact that services are essentially intangible and that they are created through direct interactions with customers. Think about your experiences with an airline versus Nike or Apple.
Three Types of Service Marketing
Internal Marketing (between company and employees) Interactive Marketing (between employees and customers) External Marketing (between customers and company) Note to Instructor: Service marketing requires more than just traditional external marketing using the four Ps. The figure shows that service marketing also requires internal marketing and interactive marketing.
Products, Services and Experiences
Market offerings often include both tangible goods and services Pure tangible good: Tide Middle: Olive Garden Pure service: BOA Many companies now market experiences: BMW, E-trade, apple Note to Instructor: 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 or financial services. Between these two extremes, however, many goods-and-services combinations are possible. Today, as products and services become more commoditized, many companies are moving to a new level in creating value for their customers. To differentiate their offers, beyond simply making products and delivering services, they are creating and managing customer experiences with their brands or company.
Perceptual Positioning Map
Note to Instructor: In planning their differentiation and positioning strategies, marketers often prepare perceptual positioning maps that show consumer perceptions of their brands versus competing products on important buying dimensions. The figure shows a positioning map for the U.S. large luxury sport utility vehicle (SUV) market. The position of each circle on the map indicates the brand's perceived positioning on two dimensions: price and orientation (luxury versus performance). The size of each circle indicates the brand's relative market share.
Positioning Map - Large Luxury SUV
Note to Instructor: In planning their differentiation and positioning strategies, marketers often prepare perceptual positioning maps that show consumer perceptions of their brands versus competing products on important buying dimensions. The figure shows a positioning map for the U.S. large luxury sport utility vehicle (SUV) market. The position of each circle on the map indicates the brand's perceived positioning on two dimensions: price and orientation (luxury versus performance). The size of each circle indicates the brand's relative market share.
Three Levels of Products
Note to Instructor: Product planners need to think about products and services on three levels. When designing products, marketers must first define the core, problem-solving benefits or services that consumers seek. At the second level, product planners must turn the core benefit into an actual product. They need to develop product and service features, a design, a quality level, a brand name, and packaging. Finally, product planners must build an augmented product around the core benefit and actual product by offering additional consumer services and benefits. At the most basic level, the company asks, "What is the customer really buying?" For example, people who buy a BlackBerry are buying more than a wireless communications device. They are buying freedom and on-the-go connectivity. Each additional product level helps to build this core value.
Considerations in Setting Price
Note to Instructor: The figure summarizes the major considerations in setting price. Customer perceptions of the product's value set the ceiling for prices. If customers perceive that the product's price is greater than its value, they will not buy the product. Likewise, product costs set the floor for prices. If the company prices the product below its costs, the company's profits will suffer. In setting its price between these two extremes, the company must consider several external and internal factors, including competitors' strategies and prices, the overall marketing strategy and mix, and the nature of the market and demand.
New-Product Failures
Overestimation of market size Design problems Incorrect pricing or positioning High development costs Competitor reaction Note to Instructor: New product development and innovation is very expensive and very risky. By one estimate, 67 percent of all new products introduced by established companies fail. Why do so many new products fail? There are several reasons. Although an idea may be good, the company may overestimate market size. The actual product may be poorly designed. Or it might be incorrectly positioned, launched at the wrong time, priced too high, or poorly advertised. A high-level executive might push a favorite idea despite poor marketing research findings. Sometimes the costs of product development are higher than expected, and sometimes competitors fight back harder than expected.
Product Mix Pricing Strategies
Product Line Pricing: Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices Optional product pricing: Pricing of optional or accessory products along with a main product Captive Product Pricing: Setting a price for products that must be used along with a main product Product Bundle Pricing: Combining several products and offering the bundle at a reduced price Note to Instructor: In the case of services, captive product pricing is called two-part pricing. The price of the service is broken into a fixed fee plus a variable usage rate. Thus, at Six Flags and other amusement parks, you pay a daily ticket or season pass charge plus additional fees for food and other in-park features.
Product Decisions
Product attributes > Branding > Packaging > Labeling > Product Support Services The figure shows the important decisions in the development and marketing of individual products and services. The focus of all decisions is to create core customer value.
Brand Development Strategies
Product category and brand name existing PC and existing BN: line extension. ex: tide existing PC and new BN: multibrands ex: mountain dew, pepsi, etc. new PC and existing BN: brand extension. gilette creame, razor, deodorant new PC and new BN: NEW BRAND! ex: dove, ragu, etc. Note to Instructor: Line extensions involve some risks. An overextended brand name might lose some of its specific meaning. Or heavily extended brands can cause consumer confusion or frustration. A brand extension strategy also involves some risk. The extension may confuse the image of the main brand. A major drawback of multibranding is that each brand might obtain only a small market share, and none may be very profitable segments, lock up more reseller shelf space, and capture a larger market share. As with multibranding, offering too many new brands can result in a company spreading its resources too thin.
Product vs. Service
Product: Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need Service: An activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything
Maturity Stage Strategies
Product: Diversify brand and models Price: Match or beat competitors Distribution: More intensive distribution Advertising: Stress brand differences and benefits Promotion: Increase to encourage brand switching
Growth Stage Strategies
Product: Offer product extensions, service, warranty Price: Price to penetrate the market Distribution: Build intensive distribution Advertising: Build awareness and interest in the mass market Promotion: Reduce to take advantage of heavy consumer demand
Industrial Products
Products bought by individuals and organizations for further processing or for use in conducting a business 1. materials and parts 2. capital items 3. supplies and services Note to Instructor: The distinction between a consumer product and an industrial product is based on the purpose for which the product is purchased. If a consumer buys a lawn mower for use around home, the lawn mower is a consumer product. If the same consumer buys the same lawn mower for use in a landscaping business, the lawn mower is an industrial product.
Decline Stage Characteristics
Sales: Declining sales Costs: Low cost per customer Profits: Declining profits Customers: Laggards Competition: Declining number Marketing objective: Reduce expenditures and milk the brand Note to Instructor: Carrying a weak product can be very costly to a firm, and not just in profit terms. There are many hidden costs. A weak product may take up too much of management's time. It often requires frequent price and inventory adjustments. It requires advertising and sales-force attention that might be better used to make "healthy" products more profitable. A product's failing reputation can cause customer concerns about the company and its other products. The biggest cost may well lie in the future. Keeping weak products delays the search for replacements, creates a lopsided product mix, hurts current profits, and weakens the company's foothold on the future. For these reasons, companies must identify products in the decline stage and decide whether to maintain, harvest, or drop them
Maturity Stage Characteristics
Sales: Slows or levels off (peak) Costs: Low cost per customer Profits: High profits Customers: Middle majority Competitors: Stable number beginning to decline Marketing objective: Maximize profits while defending market share Note to Instructor: This maturity stage normally lasts longer than the previous stages, and it poses strong challenges to marketing management. The slowdown in sales growth results in many producers with many products to sell. In turn, this overcapacity leads to greater competition. Competitors begin marking down prices, increasing their advertising and sales promotions, and upping their product development budgets to find better versions of the product. These steps lead to a drop in profit. Some of the weaker competitors start dropping out, and the industry eventually contains only well-established competitors. Although many products in the mature stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs.
Brand Licensing
Sellers of children's products attach an almost endless list of character names to clothing, toys, school supplies, linens, dolls, lunch boxes, cereals, and other items ex: lego harry potter, kelloggs star wars, playstation sesame street
Local Marketing
Tailoring brands and promotions to the needs and wants of local customer segments—cities, neighborhoods, and even specific stores ex: Groupon partners with retailers in each city to craft attractive offers for area customers
Micromarketing
Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments >Local Marketing >Individual Marketing
Value Proposition
The full positioning of a brand—the full mix of benefits on which it is positioned Note to Instructor: The value proposition is the answer to the customer's question "Why should I buy your brand?" Volvo's value proposition hinges on safety but also includes reliability, roominess, and styling, all for a price that is higher than average but seems fair for this mix of benefits.
Market Targeting Strategies
Using an undifferentiated marketing (or mass marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. Such a strategy focuses on what is common in the needs of consumers rather than on what is different. The company designs a product and a marketing program that will appeal to the largest number of buyers. Using a differentiated marketing (or segmented marketing ) strategy, a firm decides to target several market segments and designs separate offers for each. This figure covers a broad range of targeting strategies, from mass marketing (virtually no targeting) to individual marketing (customizing products and programs to individual customers). Graph: TARGETING BROADLY > TARGETING NARROWLY 1. undifferentiated (mass) marketing 2. differentiated (Segmented) marketing 3. concentrated (niche) marketing 4. micromarketing (local or individual marketing)
The Good, The Bad, and The Ugly
starbucks coffee maker, zippo lighter perfume virgin water cooler
