Marketing Exam 2

Fixed Costs

Costs that do not vary with production or sales level.

Fixed costs (overhead)

Costs that do not vary with production or sales level. Company must pay each month's bill for rent, heat, electric, interest, and executive salaries no matter what the company's level of output is.

Variable costs

Costs that vary directly with the level of production.

Variable Costs

Costs that vary directly with the level of production. (Costs of goods sold)

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. Ex: Mr. Clean car washes offer a complete line of wash packages priced from $5 for the basic Bronze wash to $27 for the feature loaded Mr. Clean Signature Shrine package.

Promotional pricing

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales. To create buying excitement and urgency.

Convenience product

A consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort. laundry detergent, candy, magazines, fast food.

Unsought product

A consumer product that the consumer either does not know about or knows about but does not normally consider buying. life insurance, pre planned funeral services, blood donations.

Return on investment (ROI)

A measure of managerial effectiveness and efficiency--net profit before taxes divided by total investment.

Net marketing contribution (NMC)

A measure of marketing profitability that includes only components of profitability controlled by marketing. NMC=net sales-cost of goods sold-marketing expenses

Marketing return on investment (ROI)

A measure of the marketing productivity of a marketing investment--calculated by dividing net marketing contribution by marketing expenses.

Allowance

A reduction from the list price for buyer actions such as trade-ins or promotional and sales support. Trade-in allowances are price reductions given for turning in an old item when buying a new one. Promotional allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs.

Target Market

A set of buyers sharing common needs or characteristics that the company decides to serve. After evaluating different segments, the company must decide which and how many segments it will target.

Profit-and-loss statement

A statement that shows actual revenues less expenses and net profit for an organization, product, or brand during a specific planning period, typically a year. Access the performance.

Discount

A straight reduction in price on purchases made during a stated period of time or in larger quantities.

Dynamic pricing

Adjusting prices continually to meet the characteristics and needs of an individual customers and situations. Prevalent online when you buy something and it says at the bottom, "you just purchased a coffee maker, would you like to add some coffee?"

Product bundle pricing

Combing several products and offering the bundle at a reduced price. "combo" fries, burger, and a drink.

Income segmentation

Dividing a market into different income segments. Luxury goods vs. convenience services.

Key Performance Metrics

Gross Margin (aka Gross profit margin) Total Sales (Revenues) less COGS Net Profit aka( Net profit before income tax) Total Sales (Revenues) less ALL Expenses and COGS (except income taxes) Return on Sales (ROS) Net Marketing Contribution divided by Net Sales Return on Marketing (ROM) Net Marketing Contribution divided by Marketing $ Market Share ($): Total Firm Sales ($) 145,000,000 ------------------------------- 14.5% Total Market Sales ($)

Everyday Low Pricing (EDLP)

Involves charging a constant, everyday low price with few or no temporary price discounts. Ex: Cotsco, Walmart

Actual Product

Need to turn the core benefit into an actual product. They need to develop the product and service features, a design, a quality level, a brand name,a and packaging. iPad is an actual product. Its name, parts, styling, features, packaging have been carefully combined to deliver the core customer value of staying connected.

Reference prices

Prices that buyers carry in their minds and refer to when they look at a given product.

Psychological pricing

Pricing that considers the psychology of prices, not simply the economics; the price says something about the product. Consumers usually perceive higher priced products as having higher quality.

Price

The amount of money charged for a product or service; the sum of the values that customer exchange for the benefits of having or using the product or service.

Derived Demand

The business demand for products and services that ultimately derives from the demand for consumer goods. Example: W.L. Gore sells its Gore-Tex brand to manufactures who make and sell outdoor apparel brands made from Gore-Tex fabrics. If demand for this brand increases, Gore so does demand for Gore-Tex fabrics.

Consumer Buyer Behavior

The buying behavior of final consumers--individuals and households that buy goods and services for personal consumption. All of these final consumers combine to make up the CONSUMER MARKET.

Idea generation

The systematic search for new-product ideas. First step in the new-product development process.

Contribution margin

The unit contribution divided by the selling price. Contribution margin=price-variable cost/price

Store brand (private brand)

A brand created and owned by a reseller of a product or service. For tougher economic times.

Demand curve

A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged. The relationship between the price charged and the resulting demand level.

Product concept

A detailed version of the new-product idea stated in meaningful consumer terms. (family car perfect for running errands, or sporty appealing to young people and couples, or a green car appealing to environment)

Competitive advantage

An advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits than justify higher prices. Businesses have to live their slogan: Staples, that was easy. Differentiate the product so that it delivers the promised quality and service.

Service

Any activity, benefit, or satisfaction offered for a sale that is essentially intangible and does not result in the ownership of anything.

Positioning

Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Segmented pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. Customer-segmented pricing: Different customers pay different prices for the same product/service. ex: movie theater, adult vs. child price. Product-form pricing: different versions of the product are priced differently but not according to differences in their costs. ex: water that all comes from French alps but priced differently based on brand and packaging. location-based pricing: company charges different prices for different locations ex: everything's more expensive down the shore. Timing based pricing-firm varies its price by the season, month, day, and even the hour.

By-product pricing

Setting a price for by-products to make the main products price more competitive.

Captive product pricing

Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video game console.

Markup

The difference between a company's selling price for a product and its cost to manufacture or purchase it. Dollar markup=selling price-cost. Markup percentage on cost=dollar markup/cost. Markup percentage on selling price=dollar markup/selling price.

Net profit percentage

The percentage of each sales dollar going to profit--calculated by dividing net profits by net sales.

Marketing return on sales (ROS)

The percentage of net sales attributable to the net marketing contribution--calculated by dividing net marketing contribution by net sales.

Optional product pricing

The pricing of optional or accessory products along with a main product. Ex: car buyer may choose to order a GPS navigation with bluetooth.

Motive (drive)

A NEED that is sufficiently pressing to direct the person to seek satisfaction of the need. A need becomes a motive when it is aroused to a sufficient level of intensity.

Style

A basic and distinctive mode of expression. Styles appear in homes (colonial, ranch, transitional) clothing (formal, casual) art (realist, surrealist, abstract)

Shopping product

A consumer product that the customer in the process of selecting and purchasing, usually compares on such attributes such as sustainability, quality, price, and style. Furniture, clothing, used cars, major appliances, hotel, airline services.

Speciality 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. Specific brands of cars, designer clothes, services of a medical or legal specialist.

Fashion

A currently accepted or popular style in a given field.

New Product

A good, service, or idea that is perceived by some potential customers as new. It may have been around for a while, but our interest is in how consumers learn about products for the first time and make decisions about whether or not they want to adopt them.

Product line

A group of products that are closely related because they function n a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. Ex: Nike produces several lines of athletic shoes and apparel, and the Marriott offers several lines of hotels.

Differentiated (segmented) marketing

A market-coverage strategy in which a firm decided to target several market segments and designs separate offers for each. ex: Toyota producers several brands of cars each targeting it's own segment of cars. Ex: Hallmark cards for every holiday.

Undifferentiated (mass) marketing

A market-coverage strategy in which 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 customers rather than what is different. company designs a product and marketing program that will appeal to the largest number of buyers.

Concentrated (niche) marketing

A market-coverage strategy in which a firm goes after a large share of one or few segments or niches. Ex: Whole foods has about 300 stores and 9 billion in sales which is less than Walmart but over time it's grown faster and more profitable than its rivals. thrives by catering to its organic, natural, gourmet lovers.

Price elasticity

A measure of the sensitivity of demand to changes in price. How responsive demand will be to a change in price. If demand changes greatly, we say the demand is elastic.

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. Customers attach meanings to brands and develop brand relationships. Ex.: Coca-Cola is an American icon.

Opinion Leader

A person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts social influence on others.When these influentials talk, consumers listen. Buzz marketing is enlisting/creating opinion leaders to serve as brand ambassadors who spread the word about a company's product.

Cost-plus pricing (markup pricing)

Adding a standard markup to the cost of the product. Ex: an electronics retailer might pay a manufacturer $20 for a flash drive and mark it up to sell at $30, a 50% markup on a cost. Retailers gross margin is $10. If the store's operating costs amount to $8 per flash drive sold, the retailer's profit margin will be $2.

Buying center

All the individuals and units that play a role in the purchase decision making process. Includes actual users of the product/service, those who make the buying decision, those who influence the buying decision, those who do the actual buying, and those who control buying information.

Lifestyle

A person's pattern of living as expressed in his or her activities, interests, and opinions. People coming from the same subculture, social class, and occupation may have different lifestyles. It involves measuring consumer's activities, interests, and opinions. Ex: Triumph doesn't just sell motorcycles, sells an independent "Go your own way" lifestyle.

Cosumer product

A product bought by final consumers for personal consumption.

Industrial product

A product bought by individuals and organizations for further processing for use in conducting a business. The distinction between a consumer product and an industrial product is based on the purpose in which the product is purchased. Lawn Mower

Business analysis

A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives. If they do, the product can move to the product development stage.

Fad

A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.

Product

Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Include more than tangible objects, can include services, events, persons, places, organizations, ideas. Ex: Starbucks coffee is a product, but so is a trip to Las Vegas.

Value-added pricing

Attaching value-added features and services to differentiate a company's offers while changing higher prices. Rather than cutting services to maintain lower admission prices, premium movie theater AMC are adding amenities and charging more such as rocking chairs, foot rests, extensive menus, spacing in rows: "Once people experience it, they don't want to go anywhere else."

Cognitive dissonance

Buyer discomfort caused by postpurchase conflict. No matter what the choice they make, consumers feel at least some postpurchase cognitive dissonance for every decision. Every purchase involves compromise. Almost all major purchases result in this.

Learning

Changes in an individual's behavior arising from experience. When people act, they learn. Most human behavior is learned. If a person buys a camera from Nikon, and likes it (experience is rewarding), their response will be reinforced and next time buys new item, binoculars, will buy from Nikon.

Marketing strategy development

Designing an initial marketing strategy for a new product based on the product concept. For introducing the product to the market.

Product development

Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering.

Differentiation

Differentiating the market offering to create superior customer value. How it will create value for target customers. Psychographic (social class, life style, personality) and Behavior (Occasions, benefits, user status, usage rate, loyal status)

Age and life-cycle segmentation

Dividing a market into different age and life-cycle groups. Disney cruise ships have on board trained counselors who help younger kids with hands on activities and teen only spaces and individual time for parents.

Geographic segmentation

Dividing a market into different geographical units, such as nations, states, regions, countries, cities, neighborhoods. Many companies today are localizing their products, advertising, promotion and sale in efforts to fit the needs of individual regions, cities, and neighborhoods. Walmart is everywhere but operates Supernercado de Walmart stores in Hispanic neighborhoods which feature bilingual staff and product assortments. In places where superstores are impractical, Walmart has opened a smaller Walmart markets and Walmart Express.

Psychographic segmentation

Dividing a market into different segments based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic characteristics. Marketers segment their markets by consumer lifestyle. Ex: Anthropologie sells Bohemianchic lifestyle clothing which young women aspire to have (firefly)

Behavioral segmentation

Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product. Behavior variables are the best starting point for building market segments.

Marketing Segmentation

Dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. The company identifies different ways to segment the market and develops profiles of the resulting segments. Geographic (nations, regions, states, counties, cities, neighborhoods) and Demographic (age, life-cycle, gender, income, occupation, education, religion, ethnicity, generation) not mutually exclusive: 18 year old, female, vegetarian

Gender segmentation

Dividing market into different segments based on gender. Used in clothing, cosmetics, toiletries, magazines.

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. Help firms build product usage. Ex: most consumers drink orange juice in the morning, but orange growers have promoted drinking orange juice as a cool, healthful refresher at other times of the day. M&M runs ads throughout the year for special packaging for Christmas, Easter, Halloween, ECT.

Benefit segmentation

Dividing the market into segments according to the different benefits that consumers seek from the product. Requires finding the major benefit people look for in a product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit. Ex: what each razor is designed to work for: close shave w no hair, or fast and convenient shave, or basic shave at affordable price.

Demographic Segmentation

Dividing the market into segments based on variable such as as, life-cycle state, gender, income, occupation, education, religion, ethnicity, and generation. Demographic variables are easier to measure than most other types of variables.

Subculture

Each culture contains smaller subcultures, groups of people with shared value systems based on common life experiences and situations. Include nationalities, races, religions, geographic regions.

Line extension

Extending an existing brand name to new forms, colors, sizes, ingredients, or flavors of an existing product category. Ex: Cheerios line includes Honey Nut, Frosted, Yogurt Burst, Multigrain, Banana Nut. Coke: Diet, Cherry, Vanilla, Cherry-Vanilla, lime, ect.

Brand extension

Extending an existing brand name to new product categories. Kellog's has extended Special K cereal to full line of cereal, crackers, fruit crisps, nutrition bars, breakfast shakes. Rejects: Heinz pet food, Life Savers gum, Cheetos lip balm

Evaluation of Alternatives

How does the consumer choose among alternative brands? Alternative evaluation is how the consumer processes information to arrive at brand choices. Some cases, consumers use careful calculations and logical thinking, other cases consumers buy on impulse/intuition. Sometimes make decisions on own, use friends, online reviews, salespeople for buying advise.

Purchase Decision

In the evaluation stage, the consumer ranks brands and forms purchase intentions. The consumer's purchase decision will be to buy the most preferred brand. Two factors come between consumer's purchase intention and purchase decision: attitude of others (someone important to you thinks should buy one over another thing, you will listen) and unexpected situational factors (economy changing, close competitor drops their price, online reviews.)

Commercialization

Introducing a new product into the market.

Core Customer Value

Marketers need to identify the core customer value consumers seek from the product when developing products. Addresses the question: What is the buyer really buying?

Good-value pricing

Offering the right combination of quality and good service at a fair price. Introducing less expensive versions of established, brand-named products. McDonalds introducing the Dollar Menu, and TRESemme hair care line "A salon look and feel at a fraction of the price"

Online social networks

Online social communities where people socialize or exchange information and opinions. Ranges from blogs, social networking Web (twitter, facebook) , message boards (craigs list)and virtual worlds (second life). marketers want to promote their product and build closer customer relationships. Use the internet to interact with the consumer and become part of their conversations and lives.

Augmented Product

Product planners must build an augmented product around the core benefit and actual product by offering additional customer services and benefits. The iPad is more than a digital device, provides customers with a complete connectivity solution.

E-procurment

Purchasing performed through electronics connections between buyers and sellers--usually online. Gives buyers access to new suppliers, lowers purchasing costs, and hastens order processing and delivery. Business marketers can connect with customers online to share marketing information, sell products and services, provide customer support services, and maintain ongoing customer relationships.

Competition based pricing

Setting prices based on competitors strategies, prices, costs, and market offerings. Consumers will base their judgements of a product's value on the prices that competitors charge for similar products.

Social Class

Relatively permanent and ordered divisions in a society, whose members share similar values, interests, and behaviors. Social scientists have identified seven American social classes: Upper Class: Upper Upper, Lower Uppers. Middle: Upper Middles, Middle Class. Working Class, Lower Class: Upper Lower, Lower Lower. Show distinct product and brand preferences in areas such as clothing, home furnishings, leisure activity, and automobiles.

Market-skimming pricing (price skimming)

Seeking 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. Apple uses this to introduce the iPhone.

Market-penetration pricing

Setting a low price for a new product to attract a large number of buyers and a large market share. Ex: To lure famously frugal Chinese customers, IKEA slashed its prices, strategy worked, weekend crowds at its Beijing store are so big now that employees need to use megaphones to keep them in control.

Break-even pricing (target return pricing)

Setting price to break even on the costs of making and marketing a product, or setting price to make a target return.

Customer value based pricing

Setting prices based on buyers perceptions of value rather than on the seller's cost. Perceived value: A Steinway piano costs a lot but to those who own one, price is nothing, the Steinway experience is everything. Set the price ceiling.

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. Set the price floor. Walmart and Southwest Airlines are the low cost producers in their industry.

Local Marketing

Tailoring brands and promotions to the needs and wants of local customer segments--cities, neighborhoods, and even specific stores. Ex: NY drug store Duane Reade sells sandwiches and quick lunches to the Manhattan area, and sells an abundance of growlers and beers to Brooklyn.

Individual Marketing

Tailoring products and marketing programs to the needs and preferences of individual customers. Companies are hypercustomizing everything from artwork, earphones, sneakers, yoga mats, and food (m&ms)

Micromarketing

Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; it includes local marketing and individual marketing.

Concept testing

Testing new-product concepts with a group of target customers to find out if the concepts have strong consumer appeal.

Introduction Stage

The PLC stage in which a new product is first distributed and made available for purchase.

Decline Stage

The PLC stage in which a product's sales fade away.

Growth stage

The PLC stage in which a product's sales start climbing quickly.

Maturity Stage

The PLC stage in which a products sales growth slows or levels off. Modifying the product: Reinvigorating the mature brand Kellogg kept its 55 year old Special K brand growing by turning it into a healthful, slimming lifestyle brand.

Packaging

The activities of designing and producing the container or wrapper for a product. Needs to attract customers, communicate brand positioning, and close the sale. Method revolutionized the laundry detergent market with its new package because its tiny (no more heavy lifting) and no more jug with measuring cap, now has a nifty pump that allows accurate, one-handed pours. and package contains 50% recycled materials.

Product quality

The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. The major marketers positioning tool. "freedom from defects." Creating customer value and satisfaction. Siemens: "Quality is when our customers come back and our products don't."

Service inseparability

The concept that services are produced and consumed at the same time and cannot be separated from their providers. If a service employee provides the service, then the employee becomes a part of the service, and customers play an active role in the delivery.

Service intangibility

The concept that services cannot be seen, tasted, felt, heard, or smelled before they are bought. For example, people undergoing cosmetic surgery cannot see the result before the purchase. Airline passengers have nothing but a ticket and a promise that they and their luggage will arrive safely at the intended destination. The Mayo Clinic calls the patients at home to see how they are doing, works with whats best for patients schedule, if looking for external information, go online and hear directly from who's been to the clinic or works there. use social networking and the result is positive word-of-mouth to build the most powerful brand in health care.

Service perishability

The concept that services cannot be stored for later sale or use. Some doctors charge patients for missed appointments because the service value existed only at that point and disappeared when the patient did not show up.

Service variability

The concept that the quality of services may vary greatly depending on who provides them and when, where, and how they are provided. Marriott has reputation for providing better service than others

Postpurchase Behavior

The consumer will either be satisfied or dissatisfied with the product. Determining satisfaction relies within the relationship between the consumer's expectations and the product's perceived performance.

Product Life Cycle (PLC)

The course of a product's sales and profits over its lifetime. 1. Product development 2. Introduction 3. Growth 4. Maturity 5. Decline

Business buying process

The decision process by which business buyers determine which products and services their organizations need to purchase and then find, evaluate and choose among alternatives supplies and brands. Business to business marketers must do their best to understand business markets and business buyer behaviors. Then, like businesses that sell to final buyers, they must build profitable relationships with business customers by creating superior customer value.

New -product development

The development of original products, product improvements, product modifications, and new brands through the firm's own product development efforts. New products: original products, product improvements, product modifications, and new brands that the firm develops. Failures: Smuckers ketchup, Ben-Gay aspirin, Gerber Singles food for adults. "What were they thinking?"

Brand equity

The differential effect that knowing the brand name has on customer response to the product or its marketing. A powerful brand has a high brand equity. A measure of the brand's ability to capture consumer preferences and loyalty. Customers react more favorably to it than a generic or unbranded version of the same product. Consumers bond closely with specific brands: Dunkin Donuts, Starbucks, Nike, Disney, Cocal-Cola

Value proposition

The full positioning of a brand--the full mix of benefits on which it is positioned. It is the answer to the customers question "why should I buy your brand?" Ex: 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 the mix of benefits. more-for-more, more for the same, same for less, less for less, more for less.

Word-of-mouth influence

The impact of the personal words and recommendations of trusted friends, associates, and other consumer on buying behavior.

Perception

The process by which people select, organize, and interpret information to form a meaningful picture of the world. A motivated person is ready to act, how the person acts is influenced by his/her perception of the situation.

Market Targeting (targeting)

The process of evaluating each market segment's attractiveness and selecting one or more segments to enter

Idea Screening

The second step in the new-product development process. Screening new-product ideas to spot good ideas and drop poor ones as soon as possible.

Product mix (or product portfolio)

The set of all products lines and items that a particular seller offers for sale. Ex: Campbells Soup Company offers 3 major product lines: healthy beverages (V8 drinks), baked snacks (Goldfish) and simple meals (soup, Preggo tomato sauce, Pace salsa) Each line consists of several sub-lines. Altogether, Campbells product mix consists of hundreds of items.

Culture

The set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. The most basic cause of a person's wants and behavior. Human behavior is largely learned. Marketers try to spot cultural shifts so as to discover new products that might be wanted. ex: health and fitness fad

Test marketing

The stage of new-product development in which the product and its proposed marketing program are tested in realistic market settings. Gives the marketer experience with marketing a product before going to the great expense of full introduction.

Total costs

The sum of the fixed and variable costs for any given level of production.

Group

Two or more people who interact to accomplish individual or mutual goals. Many small groups influence a person's behavior. Groups that have direct influence and to which a person belongs are called membership groups. Reference groups serve as direct face to face or indirect points of comparison or refrence in forming a persons attitude or behavior. influenced by reference groups in which they do not belong: aspirational group is one to wish the individual wishes to belong, young bball player hopes to emulate MJ and play in the NBA.