MKTG - Wolter Exam 3

Yes ex: velveeta and staplers

Are there superconsumers for any product?

I hope so

Could you figure out if a product was price elastic or inelastic given a context and description?

NO

Does brand image have to only focus on the brand?

Changing the prices too much makes the company look bad because of the large amount of price variations and it is likely to lead to the perception of unfairness

Even when dynamic pricing is legal, why must firms be careful when price discriminating (especially in regards to dynamic pricing)?

o Skimming strategy: setting an initially high price and using gradual, timed price drops to make as much profit as possible over time by maximizing how much you make from each sale. § Key is to sell to as many customers as you can at a specific price, then lower the price slightly and sell to as many customers as you can at the next lower price o Penetration pricing: introducing a new product at a relatively low price with the intention of establishing a large market share before competitors can establish themselves. Good example is Netflix (started as mailing DVD service for $5.99/ month)

For new products, what are skimming and penetration pricing?

Services are intangible, perishable, inseparable, and variable § Intangible: Services cannot be seen, tasted, felt, heard, or smelled before purchase § Variability: quality of services depends on who provides them and when, where, and how § Inseparability: services cannot be separated from their providers § Perishability: services cannot be stored for later sale or use

How are services different from goods?

it must fit together and it will go down together- Trump example: Trump's brand's value started to shrink when he took office, leading all of his brand extensions to weaken as well

How can connection (i.e., fit) backfire?

It matters more if the core benefit fails than any other level - any core failure is a much bigger deal Ex: delta -core- plane crash - augmented- no tvs on plane

How do failures affect the levels?

o More likely to be problems because the brand will no longer be able to capture customers who don't necessarily love the brand, but use it because of brand awareness. § Ex: P&G and Ben and Jerrys

How do political stances affect consumers? Why is there more likely to be problems than benefits?

Odd/even pricing odd numbers vs. rounded numbers odd to make consumers feel good (rational) and even for emotional purchases Price sizes - bigger the font, the more expensive it feels Price placement - prices on the left seem smaller and on the right seems larger Priming- any number seen affects reference price Pain of payment- different currency reduces pain of payment

How do the following affect consumers' reactions to prices? o Odd-even pricing o Price sizes o Price placement o Priming / Decoys o Pain of payment

o Intangibility: Intangible products are harder to assess. Benefits of intangible products must be made tangible. Tangible products often push intangible benefits to take advantage of the lasting power of abstract concepts in memory. Also, assessing the cost of a "unit of service" is difficult. o Variability: A heterogeneous product cannot be standardized, so it is harder to take advantage of economies of scale. Also, a heterogeneous product has greater FLE and customer input and therefore quality is harder to control.] o Inseparability: An inseparable product must be produced in front of and along with customers. Quality is hard to achieve and assess for the organization. Also, the customer must be accommodated within the servicescape creating capacity issues. Mass production and economy of scale is difficult to obtain. Customers impact each other. o Perishability: A perishable product cannot be produced ahead of time, so demand must be forecast. A perishable product cannot be returned for a comparable product and therefore, additional remedies must be offered. o Ownership: Products will often be judged based on the quality of the transferred object. The object will often be considered the core product whereas everything else is periphery. When there is no ownership transfer, other things start to become more relevant such as relationships and tangible cues.

How do the service characteristics affect marketing?

reference price gives the consumer a standard of how much they should be paying ex: Smithsonian ref. price is $20

How does a reference price work with PWYW?

Very similar to Maslow's in the sense that basic needs/ basic values are at the bottom and as you approach the top it becomes more complex

How does the pyramid relate to Maslow's hierarchy?

Price elasticity of demand = % change in quantity demanded / % change in price

How is price elasticity calculated?

Unlikely to do it again because "lightning does not often strike twice"

In consideration of 5-hour energy, why is someone who developed a successful product unlikely to do it again?

Functional

In general, which category is most easily copied?

functional because it is on the bottom

In general, which category must be fulfilled first?

no- people are willing to pay different prices for the same product or service --but there are definitely "wrong" prices in that you do not want to set a price that does not make money or that is unlikely to be viewed as acceptable to customers.

Is there a correct price?

o Co- brands: allow one branded product to feature another brand as a component part or ingredient o Brand extension: placing a brand name on multiple products § Ex: Breyers Reese's ice cream and Reese's peanut butter

What are brand extensions and co-branding?

o Variable costs: change with quantity sold and are generally tied to the product sold. Ex: production cost of TV is directly related to how many are produced and sold o Fixed costs: don't change based on sales. Ex: rent, utilities, insurance, salaries

What are fixed and variables costs?

Actions or activities performed by the seller for the buyer

What are services?

-Development stage: represents the investments that are made in a product by the pioneering company prior to the launch of the first brand in the category. Note in Figure 8.9 that the red line representing category profits starts at zero and plunges rapidly as costs are incurred, but no sales exist yet to offset them. - Introduction stage: begins with the launch of the first brand to compete in the category. At this point, the pioneering brand has the often brief advantage of facing no rivals. During this stage, the pioneer wishes to encourage the trial of the new product through stimulation of primary demand, which is demand for a product category without regard to brand. - Growth stage: marks the start of very rapid sales growth in the product category. This occurs for two reasons. One, target markets become aware of the product and—assuming it's a good product—begin to buy it. Two, more and more competitors will see the success of the category pioneer and will enter the marketplace and increase category awareness and sales through their own marketing efforts. Given the presence of competing brands, companies begin to concentrate on stimulating selective demand, which is demand for a particular brand within a product category rather than the product category itself. - Maturity Stage: product category sales begin to level off. The product is no longer new and it has likely attracted most all of the new consumers it ever will. In the face of fierce competition, companies frequently implement incremental improvements to their original models. In other words, they work on continuous innovations. - Decline stage: many consumers have moved on to the new technology. Brands still competing in the category experience declining sales and profits. If the company has been well managed, it has also been investing in developing new products so that the end of one product category does not mean the end of the company. For the category in decline, companies must consider whether to divest (i.e., spin off and sell) or harvest (i.e., close and cash out the assets) the investment in their brand before profits disappear entirely.

What are the characteristics of each stage in terms of sales, profits, competitors, and marketing?

In-category (near-category): brand extensions that are in the same or very similar product categories as the original. Considered to be safe in the sense that consumers can easily connect the extension to the original product o Out-category: brand extension is in a completely different category as the original brand. Risky because as extensions get further away from the original, the connection between the extension and the original becomes weaker in consumers' minds.

What are the different types of extensions (eg, in-category vs out-category)

innovators, early adopters, early majority, late majority, laggards

What are the diffusion of innovation adopter categories?

Development, introduction, growth, maturity, decline

What are the five stages of the Product Life Cycle?

(From bottom to top): functional, emotional, life-changing, social impact

What are the four categories of benefits?

perceptions of excessive profit, perceived immorality, inability to understand pricing strategy, and reputation

What are the four determinants of unfairness perceptions?

o Unlikely to gain a real advantage for any of the competitors involved because most customers who switch only for the price do not become loyal customers. They will continue to switch back and forth following the cheapest price o In the end, you all lost money you could have made if you hadn't dropped prices in the first place. Long run, price spiral will happen and in the extreme case it will go low enough to drive some competitors out of business

What are the likely outcomes of a price war?

o Positive: improves odds of new product success. Positive feedback effects o Negative: brand dilution, negative feedback effects

What are the positive and negative outcomes of brand extensions?

Core Product (inner ring): essential motivating benefit the customer is purchasing. It's what the customer wants to get most o Actual Product (middle ring): the physical and intangible properties or characteristics the product takes on. This can include attributes such as materials, styling, and branding. It's what the customer actually gets to satisfy what they want most o Augmented Product (outer ring): these are extra attributes and features that are not part of the actual product but may be offered to make the offering more attractive, to speed purchase decisions, and to match or differentiate the actual product from competitors

What are the product levels?

Experts create discontinuous innovations, consumers are good for testing and screening and making slight modifications

What are the roles of experts and consumers over the NPD process?

o Conceptualization: idea generation, idea screening, concept development, concept screening o Planning: strategy development, marketing strategy, establishing a competitive advantage, business analytics, situation analysis, marketing plan, marketing mix o Commercialization: product development, test marketing, product launch, rollout

What are the stages of the NPD process?

fads are condensed (timing thing), fashions come back (low rise pants RIP).

What are the typical PLCs for styles, fashions, and fads?

favorable thoughts and emotions. Example: § build image on leadership: brands that claim to be the biggest selling, the highest-rated, the most popular, or some other legitimate type of leadership can add prestige to their brand image. § Build image on key benefits: a common approach to branding is to strongly associate brands with certain key benefits. § Build an image around your customers: the brand seems consistent with their own self-images. Marketers can build brands to emphasize that their brands are right for certain types of people. Ex: Jif peanut butter has for years cultivated an image as the peanut butter for "choosy mothers"

What can brand image focus on?

Diffusion of innovation: the idea that new technology and the products that utilize the technology spread through markets over time Innovators: comprise first 2-3% to adopt an innovation. Tend to be young and willing to take risks. Tend to be social, often through extensive use of social media. Early adopters: next 15%. High levels of opinion leadership, meaning that others tend to look to them for information about new products. They also tend to be relatively young and well-educated. 2 categories across the middle of the curve make up the mass market and represent about 7 in 10 people who will ever adopt an innovation. Early majority: tends to be more risk averse than early adopters and chooses to wait until the bugs are worked out of product technology. These people are often well-educated, somewhat older than early adopters and innovators, and actively look to early adopters for product information. Late majority: tends to be skeptical of change, which is likely related to somewhat lower levels of education and social standing compared to the early majority. Laggards: make up the remaining 10-15% of adopters. Tend to adopt innovations as a matter of necessity, often when the prior technology is becoming difficult to find. Tend to be older than other groups, with purchase habits often driven by a sense of tradition.

What characterizes each group?

Connection, strength of brand, and amount of successful connections

What determines if a brand extension works?

- Substitutes (more= more elastic) - Necessities (more= less elastic) - % of Disposable Income (higher $% = more elastic)

What determines price elasticity?

**Market share** and negativity bias

What determines whether a political stance is more likely to be a net positive?

It shows us that creating a powerful brand can change how consumers respond to a brand - In the coke vs Pepsi taste study: when volunteers were told what they were drinking, Coke was the undisputed king (because of the volunteers' association with the brand) o The coke slogan has been (more or less) focused around the same theme (happy, coke tastes good), whereas Levi's and Chevrolet are all over the map with their slogans

What does the Pespi Taste Challenge, Oldsmobile and Howard Johnsons, and Chevrolet, Levis, and Coca-Cola tell us about creating a powerful brand?

They are less likely to ever purchase the product

What happens if early adopters do not adopt?

People are willing to pay more for a good/ service if the product is related to a good cause o Profits increase- this makes for particularly good results

What happens when you pair CSR with PWYW?

allowing customers to pay exactly what they are willing to pay

What is Pay What You Want pricing?

the name or symbol (i.e. brand marks) that identifies a specific business' product or service

What is a brand?

amount something is demanded for any given price point

What is a demand curve?

innovation as an improvement in a product's ability to deliver its primary benefit to customers, and we can distinguish between two types of innovation: § discontinuous innovations: the large jumps in a product's benefit-delivering abilities. For example, suppose the primary benefit we sought was long-distance communication. Prior to the telegraph, communication was in the form of letters and documents delivered by hand or on horseback. § Continuous innovations: Between discontinuous innovations come smaller incremental improvements to products' benefit-delivery capabilities

What is a new product?

bundle of benefits

What is a product?

an expectation of the price of the product

What is a reference price?

the extent a market recognizes or thinks of a brand. This is important because familiarity fosters liking

What is brand awareness? Why does it matter

o Branding: the process of endowing products with the power of a brand o Brand image: the collection of associations, thoughts, and feelings that are evoked when exposed to a brand o Brand equity: the financial value of a brand o Customer-based brand equity: the differential effect of a brand on consumer responses to marketing o Brandmark - a symbol that identifies a specific product

What is branding, brand image, brand equity, and brand mark?

changing prices constantly to match competitors and/or customer demand

What is dynamic pricing?

at first people want all the features, but then it becomes overwhelming - must find a balance Ex: Canon camera features used to be incredibly overwhelming with stats, new features descriptions are more streamline

What is feature fatigue?

Formalized new product development (NPD) process. Typically an expert in a market can develop a really successful product for that market because they know a lot about that area

What is necessary to develop successful products over and over again?

charging different customers a different price for the same thing (at roughly the same time)

What is price discrimination?

responsiveness of demand to changes in price - Price elasticity measures how responsive people are to changes in price.

What is price elasticity?

so we can make pricing fully value-based

What is the purpose of price discrimination?

4-11 benefits (the more elements provided, the greater the customer's loyalty and the higher the company's sustained revenue growth)

What is the range of provided benefits for companies with highly loyal customers?

value based- setting the price based on what customers are willing to pay cost based- setting price based on costs

What is value-based and cost-based pricing?

Consumers are good for validating (i.e. testing) and evolving but not for creating discontinuous innovations (they would probably come up with a continuous innovation)

What kind of innovation is a consumer likely to come up with?

everyday low pricing (EDLP)

What type of strategy is EDLP?

o Reference prices are less accurate when the customer expects (for example) to pay $1.25 for a bottle of water, but the actual price is $3.25... customer is less likely to purchase o Based on experience

When are reference prices less accurate?

when the intent is to harm

When is dynamic pricing illegal?

branding cattle- the brand on the cattle is associated with quality of care, location, feed, etc. -affects the meaning of the brand to us

Where does the idea of branding stem from and what is the point of branding (i.e., what does it do for a company)?

hotel's rates, airlines, car rentals etc..

Where is dynamic pricing especially prevalent?

coffee, restaurant, Smithsonian, and album sale

Which industries has it been found to work?

value-based pricing because how do you determine the value of every single item in publix?

Which method is hardest?

heavy users of a specific product - not price sensitive

Who are superconsumers? Are they price sensitive or insensitive?

Innovative ideas with strong market potential tend to come from "experts" in the field who combine newly emerging existing technologies.

Who makes the innovations that lead to discontinuous new products?

They like to be the first and/or really into the brand

Why do early adopters adopt?

Takes way too much work to individually figure out the "ideal value price." It is easier to look towards the market for examples

Why do large retailers not engage in value-based pricing?

o Mostly goods example: furniture purchased cash and carry o Balanced Goods-Services example: furniture reupholstery o Mostly Services example: furniture movers

Why is it useful to think of services and goods as a continuum?

it is the reflection of everything you do as a business

Why is pricing so important?

Because the majority of what the U.S. produces is "intangible."

Why is the US a service-based economy?