Marketing Chapter 6, 8, 11, 12, 15, 19
Fine-tuning Pricing Tactics
-Various discounts -geographic pricing -other pricing strategies
5 Determinants of Diffusion Rate
1. Complexity 2. Compatibility 3. Relative Advantage 4. Observability 5. Trialability
Factors Affecting the Promotional Mix
1. Nature of the Product 2. Stage in the Product Life Cycle 3. Target Market Characteristics 4. Type of Buying Decision 5. Funds Available for Promotion 6. Push/Pull Strategy
Supplementary Services
a group of services that support or enhance the core service -can create competitive advantage in many service industries (i.e. for luxury hotel: food services, reservations, parking, phone, and TV services)
Climate
commonly used for geographic segmentation because of its dramatic impact on residents' needs and purchasing behavior -snowblowers, water and snow skis, clothing, and AC/heating systems have varying appeal based on this
Value is Based on Perceived Satisfaction
consumers are interested in obtaining a "reasonable price"="perceived reasonable value" at the time of the transaction -has to do with perceived quality/performance/satisfaction o/product relative to customer expectations -concerns relationship bxn cost of buying product and benefits it provides=value i.e. is it a big bang for your buck?
Service Promotion Strategy
consumers can have more trouble evaluating service quality and marketers have more trouble promoting services bc less tangible; 4 strategies: 1. stressing tangible cues 2. using personal information sources 3. creating a strong organizational image 4. engaging in post-purchase communication
The Relationship of Price to Quality
consumers tend to rely on high price as an indicator of good quality; occurs for all products but more strongly for some than others (benefits coffee, aspirin, shampoo, clothing, furniture, whiskey, education) in absence of other info, ppl assume prices are higher bc products contain better materials, are made more carefully, or, in case of professional services, bc provider has more expertise higher prices incr. expectation and set a reference point against which ppl can evaluate their consumption experiences; a bad experience w a higher priced product/service tends to incr. level of disappointment (i.e. airline complaints)
Elasticity of Demand
consumers' responsiveness or sensitivity to changes in price
Interest
created by a good sales presentation, demonstration or advertisement; simple awareness of a product seldom leads to a sale, must create attraction/curiosity as well (i.e. Apple arranges iPad demonstrations and dev. target messages to create ____ among innovators and early adopters) Important promo tools: advertising, public relations, personal selling, social media
Competitive Advantage
one or more unique aspects of an organization that cause target consumers to patronize that firm rather than competitors -the set of unique features of a co. and its products that are perceived by the target market as significant and superior to those of the competition (i.e. high product quality, rapid delivery, low prices, excellent service, or a feature not offered by the competition)
Market
people or organizations with needs or wants and the ability and willingness to buy
Price in Promotion Strategy
price often used as promo tool to incr. consuemr interest -in many cases consumers' perceptions of a store's prices are more impactful than the actual prices themselves (i.e. Whole Foods) -amount saved often most important info. when promoting a discount
Sales-Oriented Pricing Objectives
pricing objectives based on market share as reported in dollar or unit sales -firms strive for either: 1) market share goal 2) sales maximization
Shopping Bot
program that searches the Web for the best price for a particular item that you wish to purchase; gives pricing power to customer:more informed customer can make more efficient purchasing decisions 2 types: broad-based and niche-oriented type
Price
that which is given up in an exchange to acquire a G/S -to consumer: cost of something -to seller: revenue -broad sense: allocates resources in a free market economy
Dynamic Pricing
the ability to change prices very quickly, often in real time -aids brick-and-mortar stores in competing w online alternatives bc instead of sticking w set prices to give them desired profit margins, able to tweak pricing in real time to match/approach those of their online rivals -long-range wireless transmitters connected to digital price displays allow quick and remote price updates
Reliability
the ability to perform a service dependably, accurately, and consistently -it's performing the service right the first time
Internal Marketing
treating employees as customers and developing systems and benefits that satisfy their needs -firms that keep their employees happy have a better chance of retaining customers (i.e. employee programs such as flextime, on-site day care, and concierge services)
Possession Processing
type of process that occurs when the service is directed at customers' physical possessions (i.e. lawn care, dry cleaning, veterinary services)
Mental Stimulus Processing
type of process that refers to services directed at people's minds (i.e. theater performances, education)
People Processing
type of process that takes place when the service is directed at a customer -requires customers to enter the physical location=service factory (i.e. transportation services, health care)
Information Processing
type of process which describes services that use technology or brainpower directed at a customer's assets (i.e. insurance, consulting)
Reminder Promotion
used to keep the product and brand name in the public's mind -prevails during maturity stage of PLC -assumes that target market has already been persuaded of the merits of the G/S -purpose: simply trigger a memory (i.e. appliance and car co.s advertise thruout yr to remind ppl about their brands when they are looking to purchase)
Brand Extension
a well-known and respected brand name from one product category is extended into other product categories; one way companies employ categorization to their advantage
Partially Planned Purchase
Consumers know the product category that they want to buy (shirts, pants, reading lamp, car floor mats) but wait until they get to the store or go online to choose a specific style or brand
Unplanned Purchase
Consumers purchase items on impulse (i.e. gum, candy, or magazines at convenience store checkout)
Ethnic Segmentation
In past, ethnic groups in US expected to conform to homogenized, Anglo-centric ideal -Increasing numbers of ethnic minorities w/ increased buying power has changed this -3 biggest ethnic groups in US: Latinos, Blacks, Asians -some companies make products geared toward specific ethnic groups: Dias Grandiosos from Kellogg; Fashion Fair Cosmetics for AA women
Nonprofit Organization Promotion Decisions
Many nonprofit org.s explicitly/implicitly prohibited from advertising, which limits promo options (i.e. federal agencies); others lack resources to retain ad agencies, promo consultants, or marketing staff; few resources: 1) Professional Volunteers (NPOs often seek out marketing, sales, and ad professionals to help them dev. and implement promo strategies; ad agencies may donate services in exchange for potential long-term benefits: goodwill, personal contacts, general awareness o/donor's org.) 2) Sales Promotion Activities (sales promo activities using existing services or other resources are increasingly being used by NPOs, who sometimes team up w other co.s for promo activities (i.e. Columbia Sportswear, REI, Subaru, Aramark, and SW Airlines team up w US National Park Foundation for "Find Your Park" campaign)) 3) Public Service Advertising
Marketing Communication Process
Marketers are both senders and receivers of messages, so typically 2-way process -Marketers as Senders: attempt to inform, persuade, and remind the target market to take actions compatible w the need to promote the purchase of G&S -Marketers as Receivers: listen to target market in order to dev. appropriate messages, adapt existing messages, and spot new communication opps
Information Effect of Price
We infer quality information from price; i.e. higher quality=higher price -this is why consumers don't always choose the lowest-priced product in a category, such as shoes, cars, or wine, even when products are otherwise similar -may also extend to favorable price perceptions by others bc higher prices can convey the prominence and status of the purchaser to other ppl (i.e. owning a Rolex vs. Swatch watch)
Selective Exposure
a process whereby a consumer notices certain stimuli and ignores others -cannot possibly perceive every stimulus in their environment (exposed to nearly 3000 ads a day, notice 11-20)
Selective Retention
a process whereby a consumer remembers only that information that supports his or her personal beliefs (i.e. consumers see report of suspected illegal practices by their favorite retail store, but soon forget reason store was featured on the news)
Nonmarketing-Controlled Information Source
a product information source that is not associated with advertising or promotion Includes: -personal experiences (trying or observing a new product) -personal sources (family, friends, acquaintances, and coworkers who may recommend a product or service) -public sources (Rotten Tomatoes, Consumer Reports, Yelp Reviews and other rating organizations that comment on products and services)
Marketing-Controlled Information Source
a product information source that originates with marketers advertising/promoting the product Includes: -mass media advertising (radio, newspaper, television, and magazine advertising) -sales promotion (contests, displays, premiums, and so forth) -salespeople -product labels and packaging -digital media
New Product
a product new to the world, the market, the producer, the seller or some combination of these -important to sustain growth, increase revenues and profits, and replace obsolete items -some co.s spend considerable amount of money each year in R&D (Pfizer pharmaceutical co. spends $1.2 billion for each new product released)
Personal Selling
a purchase situation involving personal, paid-for communication between two ppl in an attempt to influence each other -dyad: both buyer and seller have objectives they wish to accomplish (i.e. buyer obj.=minimize cost or assure quality product; seller obj. maximize rev. and profits) -traditional methods include a planned presentation to 1/more prospective buyers for the purpose of making a sale -face-to-face or over the phone; attempts to persuade the buyer to accept a POV
Satisfactory Profits
a reasonable level of profits -rather than maximizing profits, many firms strive for profits that are acceptable/pleasing to stockholders and management -level of profits consistent with the level of risk an organization faces (i.e. in risky industry=35%; in low-risk industry=75%)
Secondary Membership Group
a reference group with which people associate less consistently and more formally than a primary membership group, such as a club, professional group, or religious group
Primary Membership Group
a reference group with which people interact regularly in an informal, face-to-face manner, such as family, friends, members of social media, and coworkers
Family Life Cycle (FLC)
a series of stages determined by a combination of age, marital status, and the presence or absence of children -Families' needs, incomes, resources, and expenditures differ at each stage
Inelastic Demand
a situation in which an increase or a decrease in price will not significantly affect demand for the product (i.e. petroleum, salt, tap water, diamonds, peak train tickets, cigarettes, emergency medical care, insulin for diabetic ppl, goods produced by a monopoly (like a sole TV provider))
Elastic Demand
a situation in which consumer demand is sensitive to price changes i.e. certain brand of toilet paper, bread, gum, cars, refrigerators; brand name food products, consumer electronics; dining out at restaurants, luxury resort packages
Cannibalization
a situation that occurs when sales of a new product cut into sales of a firm's existing products (i.e. larger-screen iphone 6 cut into ipad sales)
Multisegment Targeting Strategy
a strategy that chooses 2 or more well-defined market segments and develops a distinct marketing mix for each
Mass Customization
a strategy that uses technology to deliver customized services on a mass basis, which results in giving each customer whatever they ask for
Concentrated Targeting Strategy
a strategy used to select one segment of a market (market niche) for targeting its marketing efforts -concentrate on understanding needs, motives, and satisfactions of single segment and on developing and maintaining a highly specialized marketing mix -some firms find that concentrating resources and meeting the needs of a narrowly defined market segment is more profitable than spreading resources over several different segments
Market Segment
a subgroup of ppl or organizations sharing one or more characteristics that cause them to have similar product needs
Simultaneous Product Development
a team-oriented approach to new product development -development process works best when all involved areas (R&D, marketing, engineering, production, and even suppliers) work together rather than sequentially -shorten dev process and reduces costs -all relevant depts. and outside suppliers participate in unison in all stages of dev process -Internet is useful tool for this
Concept Test
a test to evaluate a new-product idea, usually before any prototype has been created -used at screening stage to rate concept (or product) alternatives -researchers get consumer rxns to descriptions and visual representations of a proposed product
Personality
a way of organizing and grouping the consistencies of an individual's reactions to situations -combines psychological makeup and environmental forces -includes people's underlying dispositions, especially most dominant characteristics
Attention
advertiser must first gain the attention of the target market; a firm cannot sell something if the market does not know that the good or service exists -can attract consumer's attention by training a salesperson to use a friendly greeting and approach OR by using loud volume, bold headlines, movement, bright colors, and the like in an ad (i.e. when releasing iPad, Apple uses a number of media outlets to gain the attention of the target market) Important promo tools: advertising, public relations, social media
Interpersonal Communication
direct, face-to-face communication between two or more people -ppl see the other person's reaction and can respond almost immediately (i.e. a salesperson speaking directly w a customer)
Lifestyles
divides people into groups according to the way they spend their time, the importance of the things around them, their beliefs, and socioeconomic characteristics such as income and education (i.e. independent of big biz, "green", health conscious) basis for psychographic segmentation
Usage-rate segmentation
dividing a market by the amount of product bought or consumed; i.e. former users, potential users, 1st-time users, light/irregular users, medium users, heavy users -segmenting by this allows marketers to focus their efforts on heavy users (who often account for sizable portion of all product sales) or to develop multiple marketing mixes aimed at different segments i.e. frequency/loyalty programs aim to develop/reward heavy users
Distribution Strategy in Pricing
effective distr. strategy can overcome other minor flaws in marketing mix: -if customers perceive price to be slightly higher than normal, may buy product anyway if sold at convenient retail outlet Adequate distr. often attained by offering larger-than-usual profit margin to distributors -can give dealers a large trade allowance to offset the costs of promotion and further stimulate demand at the retail level
Zero percent financing
enables purchasers to borrow money to pay for new cars with no interest charge -to attract buyers, automobile manufacturers offer these -creates huge sales incr., but costs too (5 yr interest free car loan typically reps a loss of about $3000 for auto manufacturer)
Content Marketing
entails developing valuable content for interested audience members and then using email marketing, search engine optimization, paid search, and display advertising to pull customers to the co.'s website or social media channel so they can learn about the brand or to make a purchase -content created by brands is typically distr. thru social media--gives brand ability to become publishers -doesn't interrupt a consumer's experience w media (like TV commercials do) -instead, invites consumers to experience content on social media/web site -a.k.a. owned media
Repositioned Products
existing products targeted at new markets or market segments, or ones repositioned to change the current market's perception of the product or co., which may be done to boost declining sales; new product category i.e. Mercedes Maybach line as ultra-luxurious to appeal to most status-conscious customers
Alternatives to Test Marketing
firms looking for cheaper, faster, safer alternatives to traditional test marketing 1. scanner-based research 2. simulated (laboratory) market testing 3. Internet test marketing (fast, cost-effective)
Family Life Cycle Segmentation
frequently, consumption patterns among ppl of the same age and gender differ because they are in different stages of the family life cycle -Families' needs, incomes, resources, and expenditures differ at each stage -consumers especially receptive to marketing efforts at diff points in the life cycle
Cognitive Dissonance
inner tension that a consumer experiences after recognizing an inconsistency between behavior and values or opinions -lingering doubts about soundness of a purchasing decision -i.e. kicking yourself/buyer's remorse
Why Some Products Succeed and Others Fail
large proportion of new product introductions fail; failure rate estimates as high as 80-90% Why Products Fail: -product simply doesn't offer any discernible benefit compared to existing products -poor match bxn product features and customer desires -overestimation of market size -incorrect targeting or positioning -price too high/low -inadequate distribution -poor promotion -simply an inferior product Successful New Products: deliver a meaningful and perceivable benefit to a sizable number of people or organizations and are different in some meaningful way from their intended substitutes -most important factor: good match bxn product and market needs
Conceptual Learning
learning not acquired through direct experience but based upon reasoning (i.e. someone has told you that diet drinks w artificial sweetener leave a bad aftertaste, so you choose to not drink them without ever having tried them)
Desire
marketers arouse this by illustrating how the product's features will satisfy the consumer's needs -creates brand preference -convinces potential customers that their product is the best solution for particular need (i.e. Apple creates brand preference and convinces potential customers that they want the new iPad) Important promo tools: sales promotion, personal selling
Direct reference group
membership groups that people belong to and touch people's lives directly; can be primary or secondary
Return on Investment (ROI)
net profit after taxes divided by total assets (firm's return on total assets) -measures management's overall effectiveness in generating profits with the available assets -percentage that puts a firm's profits into perspective by showing profits relative to investment
Assurance
the knowledge and courtesy of employees and their ability to convey trust -exemplified by skilled employees who treat customers with respect and make customers feel that they can trust the firm
Test Marketing
the limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation -allows management to evaluate alternative strategies and assess how well various aspects of the marketing mix fit together -cities chosen as test sites should reflect market conditions in the new product's projected market area -look for locations where: >the demographics/purchasing habits mirror the overall market >co. has good distribution >isolated from the media
Extensive Decision Making
the most complex type of consumer decision making, used when buying an unfamiliar, expensive product or an infrequently bought item; requires use of several criteria for evaluating options and much time for seeking information (high involvement) -experience most dissonance with these purchases -i.e. university, house, car
Sender
the originator of the message in the communication process -in interpersonal convo, may be: parent, friend, salesperson -for advertisement, press release, or social media campaign: the company itself
Receiver
the person who decodes a message -in marketing=consumers -can be multiple ____s as consumers share experiences/recommendations w friends/followers online thru social media, and those new receivers can then share that info. as well-empowers receivers w widespread sharing
Tangibles
the physical evidence of a service, including the physical facilities, tools, and equipment used to provide the service, as well as the appearance of personnel
Position
the place a product, brand, or group of products occupies in consumers' minds relative to competing offerings
Predatory Pricing
the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market; once competitors have been driven out, the firm raises its prices to prove: must show that predator (destructive co.) explicitly tried to ruin a competitor and that the predatory price was below predator's AVC
Showrooming
the practice of examining merchandise in a physical retail location without purchasing it, and then shopping online for a better deal on the same item
Price Lining
the practice of offering a product line with several items at specific price points -est. series of prices for a type of merchandise=creates price line -top tier priced the highest the market will pay and subsequent tiers at lower and lower prices (how many GBs of data you get w your phone) i.e. wireless providers for cell phones purchased w 2 yr contract -reduces confusion for salesperson and consumer -buyer may be offered a wider variety of merchandise at each est. price -enable seller to reach several market segments -for buyer, just have to find a suitable product at the predetermined price ADVs -valuable tactic bc firm may be able to carry smaller total inventory than it otherwise could w/o price lines -results=fewer markdowns, simplified purchasing, lower inventory carrying charges Drawbacks, esp. if costs are continually rising; sellers can offset rising costs in 3 ways: 1. begin stocking lower-quality merchandise at each price piont 2. sellers can change the prices 3. accept lower profit margins and hold quality and prices constant=short run benefits, but long run handicaps could drive sellers out o/biz
Simulated (laboratory) Market Testing
the presentation of advertising and other promotional materials for several products, including a test product, to members of the product's target market -these ppl then taken to shop at a mock/real store, where their purchases are recorded -shopper behavior, including repeat purchasing, is monitored to assess the product's likely performance under true market conditions
Revenue
the price charged to customers multiplied by the number of units sold (PXQ)
Perception
the process by which people select, organize, and interpret stimuli into a meaningful and coherent picture -how we see the world around us; we act based on these though they may or may not reflect reality -Influenced by cues: familiarity of an object, contrast, movement, intensity and smell
Diffusion
the process by which the adoption of an innovation spreads
Communication
the process by which we exchange or share meaning through a common set of symbols -used by marketers to spread selling message to potential customers
Market Segmentation
the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups -purpose: to enable the marketer to tailor marketing mixes to meet the needs of one or more specific segments
Brainstorming
the process of getting a group to think of unlimited ways to vary a product or solve a problem -criticism avoided and objective evaluation is postponed -sheer Q of ideas is what matters -creativity=wellspring of new product ideas; stimulates creative thinking
Benefit Segmentation
the process of grouping customers into market segments according to the benefits they seek from the product -groups potential customers based on their needs or wants rather than on some other characteristic, such as age or gender (i.e. snack-food market: nutritional snackers, weight watchers, guilty snackers, party snackers, indiscriminate snackers, economical snackers)
Internal Information Search
the process of recalling past information stored in the memory; this stored information stems largely from previous experience with a product
Supply
the quantity of a product that will be offered to the market by a supplier at various prices for a specified period Direct relationship bxn this and price: -at higher prices, manufacturers earn more capital and can produce more products
Demand
the quantity of a product that will be sold in the market at various prices for a specified period Inverse relationship bxn this and price (downward-sloping ____ curve): -at higher P, consumers will want to buy fewer G/S -at lower P, consumers will want to buy more G/S (certain luxury goods i.e. Birkin Bags have positive, saw-toothed ___curve)
Service
the result of applying human or mechanical efforts to people or objects -involve a deed, a performance, or an effort that cannot be physically possessed
Growth Stage
the second stage of the product life cycle when: >sales typically grow at an increasing rate >many competitors enter the market >large companies may start to acquire small pioneering firms >and profits are healthy -profits rise rapidly, reach their peak, and begin declining as competition intensifies -switch emphasis from primary demand promotion (i.e. promoting e-readers) to aggressive brand advertising and communication of the differences bxn brands (i.e. promoting Kindle vs. Nook) -est. adequate distribution becomes major key to success -manufacturers scramble to sign up dealers and distributors and build long-term relationships OR they market direct to consumer via electronic media (i.e. products in this stage: PC tablets, Blu Ray Players)
Culture
the set of values, norms, attitudes, and other meaningful symbols that shape human behavior and the artifacts, or products, of that behavior as they are transmitted from one generation to the next -the essential character of society that distinguishes it from other cultural groups -underlying elements: values, language, myths, customs, rituals, and laws that guide the behavior of people -it is: pervasive, functional, learned, and dynamic
Business Analysis
the stage following the screening process where preliminary figures for demand, cost, sales, and profitability are calculated; costs and revenues are estimated and compared -newness of product, size of market and nature of competition all affect accuracy of revenue projections -forecast market share -analyze overall economic trends and their impact on estimated sales -understand market potential bc costs rise dramatically once enter development stage
Development
the stage in the product development process in which a prototype is developed by R&D/engineering dept. and a marketing strategy is outlined -3D printing can be used to make 3D prototypes quickly at a relatively low cost -examine feasibility of manufacturing product at an acceptable cost -can be long and very expensive stage -lab tests often conducted on prototype models; test for user safety by subjecting products to much more severe treatment than is expected by end users -use tests in homes/businesses
Routine Response Behavior
the type of decision making exhibited by consumers buying frequently purchased, low-cost goods and services (low-involvement products; i.e. milk, eggs, OJ, toilet paper) ; requires little search and decision time -buyers familiar with several different brands in product category but stick with one brand
Target Return on Investment
-most common profit objective; uses target for firm's return on total assets as main pricing goal -compare ROI w/industry average; must evaluate it in terms of competitive environment, risks in the industry, and economic conditions >generally, firms seek ROIs in 10-30% range >in some industries, such as grocery industry, under 5% ROI=common and acceptable -co. w target ROI can determine desired level of profitability; marketing manager can use this standard (such as ROI=10%) to determine if particular price and marketing mix=feasible -manager must weigh the risk of a given strategy even if the return is in the acceptable range
Traditional Personal Selling
-traditional view, obj.s of salesperson are at the expense of the buyer-->win/lose outcome -traditional methods include a planned presentation to 1/more prospective buyers for the purpose of making a sale (i.e. car salesman tries to persuade buyer that a particular model is superior to competitor in certain features, like gas milage; once buyer is somewhat convinced, try to elicit some action from buyer, such as test drive or purchase)
Two Major Price Determinants
1) demand for the G/S 2) the cost to the seller for that G/S (use cost at least as a floor which price can't drop below in long-run)
Reasons for Segmenting Markets
1. Enables marketers to identify groups of customers w similar needs and to analyze the characteristics and buying behavior of these groups 2. Provides marketers w info to help them design marketing mixes specifically matched w the characteristics and desires of one or more segments 3. Consistent w the marketing concept of satisfying customer wants and needs while meeting the organization's objectives
How to Set a Price on a Product
1. Establish pricing goals 2. Estimate demand, costs, and profits 3. Choose a price strategy to help determine a base price 4. Fine-tune the base price with pricing tactics
Three Types of Perceived Consumer Risks
1. Financial Risk=exposure to loss of wealth/purchasing power; high risk associated with high prices, which leads to high involvement; as price increases, so does level of involvement (i.e. house, car, University) 2. Social Risk=occur when consumers buy products that can effect people's opinion of them (i.e. car/clothes) 3. Psychological Risks=occur if consumers believe that making the wrong decision might cause some concern or anxiety (i.e. feel guilty for eating fatty foods)
Unique Characteristics of Services
1. Intangible 2. Inseparable 3. Heterogeneous 4. Perishable
Factors Determining the Level of Consumer Involvement
1. Previous experience: when consumers have had previous experience w good/service, the level of involvement typically decreases - after repeated product trials, consumers become familiar with product and know it will satisfy their needs, so learn to make quick choices 2. Interest: involvement is directly related to consumer interests, as in cars, music, movies, bicycling, or online games -these areas of interest vary from one individual to another 3. Social Visibility: involvement also increases as social visibility of product increases; items on social display make a statement about purchaser and carry a social risk (i.e. clothing, cars, jewelry, furniture) 4. Perceived Risk of Negative Consequences: as the perceived risk in purchasing a product increases, so does consumer involvement; 3 types of risk: financial, social and psychological
Types of High Customer Involvement
1. Product Involvement 2. Situational Involvement 3. Shopping Involvement 4. Enduring Involvement 5. Emotional Involvement
2 Types of Communication Aiding Diffusion
1. Word of Mouth Communication: 50% of all purchases influenced by WOM -among consumers and from marketers to consumers -speeds diffusion by spreading the word within and across groups, including social media and viral communication -opinion leaders discuss new products w followers/other opinion leaders -consumers trust positive word of mouth from family, friends and peers -WOM especially important w Millennials (product discussions often drive their convos) -WOM CAN BE NEGATIVE (42% of customers share service experiences on social media; half is negative) -marketers must ensure that opinion leaders have types of info desired in the media that they use -influencer employees sometimes sought after by co. to build positive buzz 2. Direct Communication from Marketer to Potential Adopters -messages directed toward early adopters should normally use diff appeals than those targeting early majority, late majority or laggards -early adopters more important than innovators from a marketing standpoint bc larger group, more socially active, and usually opinion leaders
Media Type Promotional Tactic Categories
1. paid media 2. earned media 3. owned media
Need Recognition
1st step of consumer decision-making process: result of an imbalance between actual and desired states (want-got gap= difference between what a customer has and what he'd like to have)
Information Search
2nd step of consumer decision-making process: after recognizing a need or want, consumers seek out information about the various alternatives available to satisfy it
Nonprofit Organization Product Decisions
3 product-related distinctions bxn bizes and nonprofit org.s: 1)Benefit Complexity: nonprofit org.s often market complex behaviors or ideas; benefits that a person receives are often complex, long-term, and intangible, so harder to communicate to consumers (i.e. the need to exercise or eat right or stop smoking) 2) Benefit Strength: benefit strength of many nonprofit org. offerings=weak and indirect (i.e. weak personal benefits of driving 55 mph or donating blood) 3) Involvement: many nonprofit org.s market products that elicit very low involvement (prevent forest fires) or very high involvement (stop smoking); wider range than private-sector goods so traditional promo tools may be inadequate
Evaluation of Alternatives
3rd step of consumer decision-making process: after getting info and constructing an evoked set of alternative products, the consumer is ready to make a decision. A consumer will use the information stored in memory and obtained from outside sources to develop a set of decision criteria -the environment, internal information, and external information help consumers evaluate and compare alternatives -narrow choices in evoked subset by considering relative importance to them of different product attributes and how alternatives perform in terms of significant attributes
Purchase
4th step of consumer decision-making process: ultimately the consumer must decide: 1. whether to buy 2. when to buy 3. what to buy (product type and brand) 4. where to buy (type of retailer, specific retailer, online or in store) 5. how to pay ....and then buy the product/service
Post-purchase Behavior
5th step of consumer decision-making process: when buying products, consumers expect certain outcomes from the purchase--how well these expectations are met determines whether the purchase will result in customer satisfaction and potentially customer loyalty OR cognitive dissonance
Universal Sets
All possible choices for a product category, but because it is unlikely for consumers to recall all possibilities for every purchase decision, marketers tend to focus on only a subset of choices
Buying Processes Segmentation
B2B marketers can segment customers based on how they buy: -rank key purchasing criteria: price, quality, tech support, service -purchasing strategies: satisficers and optimizers -personal characteristics of buyers themselves (demographics, decision style, risk tolerance, confidence level, job responsibilities, etc.)
Segmentation Bases (Variables)
Characteristics of individuals, groups, or organizations used to divide a total market into segments
Planned Purchase
Complex and expensive items that are typically purchased only after the consumer has collected a large amount of information (i.e. university tuition, new home, new car)
Age Segmentation
EXs: Newborns, infants, young children, tweens, Millennials, Generation X, Baby Boomers, and seniors Target parents of babies and young children w products like diapers, baby food, toys Tweens and Teens: -25.9% o/pop; $44 billion of US economy -diverse, risk averse, tech-savvy -never known world w/o internet -expect instant gratification Millennials: -25% of adult pop -idealistic, pragmatic, most technology-proficient generation ever -brand attributes important to them: trustworthiness, creativity, intelligence, authenticity, and confidence -take co.'s social responsibility into account b4 making purchase decision -to be successful w them: offer social value, align brand w higher purpose, and invite participation/co-creation Generation X: -16% o/pop -sandwich generation:stuck bxn supporting their aging parents and young children -grew up as latchkey kids: spent time alone while their (often divorced) parents worked long n2 night -best-educated generation -tend to be disloyal to brands and skeptical of big bizes -many are parents who make purchase decisions w thought for/input from fams -desire an experience, not just a product--offbeat events Baby Boomers (born 1946-1964): -24.7% o/pop -outspend avg consumers in nearly every product category, including: food, household furnishings, entertainment, personal care -living longer, more active and connected lives -spend time/money to maintain vitality as they age -spends more on dining out, housing, alcohol, and healthcare -spending on vehicles growing fastest -marketers should target based on their core values, like healthy eating/aging well Seniors (70+): -part of war/Great Depression generation -silent generation: ability to quietly persevere thru great hardships -smallest generation of last 100 yrs -taught to play by the rules; cautious -healthiest, most educated, and wealthiest group of elders ever in US -as age, modify way they live/products they purchase (handrails, easy-access bathrooms, stair lifts)
CRM as a Targeting Tool
Entails tracking interactions w customers to optimize customer satisfaction and long-term co. profits -helps customize G&S offered to customers based on data generated thru interactions bxn carefully defined customer groups and the co. -can allow marketers to target co.s w extremely relevant direct offerings/personalize the customer experience -will continue to grow bc of 4 trends: 1. Personalization 2. Time savings 3. Loyalty 4. Technology (advances in mkt research and database tech allow marketers to collect detailed info on customers; allow more cost-effective way to reach customers/enable personalized messages)
Income Segmentation
Influences consumers' wants and determines their buying power -Markets segmented by this include: housing, clothing, automobiles, food Some co.s have had success marketing to the very poor: -Coca-Cola and McDonalds internationally to dev countries -dollar stores in US (46.5 mil below poverty line) Wealthy customers looking for luxury want products w: -careful craftsmanship -timeless design -prestige -exclusivity Luxury brands like Chanel and Louis Vuitton focus on setting long-lasting standards of good taste, not mass popularity
4 Levels of Service Relationship Marketing
Level 1 Financial: the firm uses pricing incentives to encourage customers to continue doing biz w it (i.e. frequent-flyer programs) -least effective in long-term bc price-based advantage is easily imitated by other firms Level 2 Social: also uses pricing incentives but seeks to build social bonds w customers; firm stays in touch w customers, learns about their needs, and designs services to meet those needs (i.e. sending customers birthday cards) -often more effective than level 1 Level 3 Customization: encourages customer loyalty through intimate knowledge of individual customers (customer intimacy) and the development of 1-to-1 solutions to fit customers' needs Level 4 Structural: the firm again uses financial and social bonds but adds structural bonds to the formula; structural bonds are dev. by offering value-added services that are not readily available from other firms
Package Content Reduction
Manufacturers can keep the price and package size the same while reducing the amount of content, thereby increasing the price per ounce or pound
Importance of Marketing Segmentation
Marketing segmentation=powerful marketing tool for several reasons: -nearly all markets include groups of ppl or organizations w different product needs and preferences -helps marketers define customer needs and wants more precisely -Since market segments differ in size and potential, segmentation helps decision makers accurately define marketing objectives and better allocate resources -performance can be better evaluated when objectives are more precise
Nonprofit Organization Place Decisions
Nonprofits org's ability to distribute its service offerings to potential customer groups when and where they want them=key variable in determining success (i.e. large universities having one/more satellite campus locations) -extent to which a service depends on fixed facilities has important implications for distr. decisions (i.e. rail transit and lake fishing can only be delivered at specific points)
Sacrifice Effect of Price
Price=that which is given up/sacrificed to get a good or service -in US, usually money, but can be other things as well: time lost while waiting to acquire the G/S, lost dignity for those relying on charity -also trade offs/implicit costs: college student may forgo a vacation, buying luxury car or wait longer to buy 1st house in order to pay college tuition
Profit-Oriented Pricing Objectives
Pricing Objective Category that includes: 1) Profit Maximization 2) Satisfactory Profits 3) Target Return on Investment
Types of Service Processes
Process can be physical and tangible OR intangible and can process people OR objects; based on these characteristics, 4 service process categories: 1) people processing 2) possession processing 3) mental stimulus processing 4) information processing
Type of Buying Decision
Routine Buying Decision: most effective promo calls attention to the brand/reminds consumer about brand (i.e. Colgate toothpaste) -advertising and esp. sales promotion Neither Routine nor Complex Buying Decision: -advertising and PR help est. awareness for the G/S; online reviews often important Complex Buying Decision: customers more extensively involved and rely on large amounts of info. to help them reach decision -personal selling; depend on salesperson for info. needed to make decision -online resources and print ads w large amount of info.
Single-variable vs. Multi-variable Segmentation
Single-variable: Advantage: -simpler and easier to use Disadvantage: -less precise Multi-variable: Advantages: -more precise -current trend toward this Disadvantages: -harder to use -usable secondary data less likely to be available -as # of segmentation bases increases, size of individual segments decreases
Price Discrimination
Robinson-Patman Act of 1936 prohibits any firm from selling 2 or more different buyers, within a reasonably short time, commodities of like grade and quality at diff prices (or offer diff supplementary services to diff buyers) where the result would be to substantially lessen competition
Sales Maximization
Sales-oriented pricing obj. in which firm ignores profits, competition, and the marketing environment as long as sales are rising Can be used to generate max. amount of cash in the short-run if co. is strapped for funds or faces uncertain future -management's task: calculate which price-quantity relationship generates greatest cash revenue -Can only be effectively used on a temporary basis to sell off excess inventory (i.e. sell off seasonal Xmas items at 50-70% off after holiday over) -Should never be long-run obj. bc cash maximization may mean little or no profitability
Revenue-Oriented Pricing
Service pricing objective that focuses on maximizing the surplus of income over costs -same approach as many manufacturing firms -disadvantage: determining costs=difficult for many services
Target Market Characteristics
Target market characterized by widely scattered potential customers, highly informed buyers, and brand loyal repeat purchasers---->promo mix w: -more advertising and sales promo -less personal selling; though still required if buyers informed and geo. dispersed: industrial installations for ex. still must have saleppl to explain product and work out purchase agreement details If potential customers=hard to locate--->print advertising, reader invited to go online, call, or mail in reply card for more info; then can send salesppl to visit them
High Costs of Test Marketing
Test Marketing frequently takes 1 yr/longer -costs can exceed $1 mil (high financial costs) -unavoidable prob o/exposing new product and its marketing mix to competitors b4 its introduction -competitors can sabotage or jam a testing program by introducing their own sales promotion, pricing, or ad campaigns to hide/distort normal conditions that the testing firm might expect in the market -despite high costs, many firms believe better to fail in a test market than in a national introduction--high price of failure prevents intro of most new products w/o testing
Attribute Sets
Universal, Retrieval, and Evoked Sets
Profit Maximization Strategies
Ways to maximize profits: 1) expand revenue by increasing customer satisfaction 2) reduce costs by operating more efficiently 3) both Balancing act: -firms may focus too much on cost reduction at the expense of the customer, which can lead to decline in customer service and revenue -when firms rely too heavily on customer service, costs tend to rise to unacceptable levels A co. can maintain/slightly cut costs while increasing customer loyalty thru: -customer service initiatives -loyalty programs -customer relationship management programs -allocating resources to programs designed to improve efficiency and reduce costs
Consumer Decision-Making Process
a 5-step process used by consumers when buying goods or services 1. Need Recognition 2. Information Search 3. Evaluation of Alternatives 4. Purchase 5. Post-purchase behavior
Laggards
a category of adopters: -final 16% to adopt a product -dominant value: tradition -do not rely on group norms -their independence is rooted in their ties to tradition -decisions heavily influenced by the past -by the time they adopt an innovation, it has probably already been outmoded and replaced by something else -longest adoption time -lowest socioeconomic status -tend to be suspicious of new products and alienated from a rapidly advancing society (hermits) -ignored by marketers bc not motivated by ads/personal selling and virtually impossible to reach online
Experience Quality
a characteristic that can be assessed only after use (i.e. the quality of a meal at a restaurant)
Undifferentiated Targeting Strategy
a marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix; mass-market philosophy -assumes that individual customers have similar needs that can be met w a common marketing mix -sometimes used by first firm in an industry w no competitors (i.e.Ford's Model T, Coca Cola used to) -commodity products (i.e. flour and sugar) -small grocery store in small isolated town
Perceptual Mapping
a means of displaying or graphing, in 2 or more dimensions, the location of products, brands, or groups of products in customers' minds
80/20 Principle
a principle holding that 20% of all customers generate 80% of the demand
Yield Management Systems (YMS)
a technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity by discounting early purchases, limiting early sales at these discounted prices, and overbooking capacity -used in airlines and hotels: key input in airlines' YMS is historical pattern of demand for specific flight; plane seats and hotel beds=perishable-if they go empty, revenue opp lost forever, so makes sense to slash prices to move toward capacity if its possible to do so w/o reducing the prices that other customers pay
Utilitarian Value
a value derived from a product or service that helps the consumer solve problems and accomplish tasks
Norm
a value or attitude deemed acceptable by a group
Hedonic Value
a value that acts as an end in itself rather than as a means to an end
Public Service Advertising (PSA)
an announcement that promotes a program of a federal, state, or local government or of a nonprofit organization -unlike commercial advertisers, sponsor of PSA doesn't pay for the time/space; it is donated by the medium -millions of dollars o/ad space donated by ad firms each yr to help communicate important info. to the public (i.e. help educate students about dangers of misusing/abusing prescription drugs and where to seek treatment for substance abuse problems)
Consumer Penalty
an extra paid fee by the consumer for violating the terms of the purchase agreement -bizes impose these for 2 reasons: they will allegedly 1. suffer an irrevocable revenue loss and/or 2. incur significant additional transaction costs should customers be unable or unwilling to complete their purchase obligations
Opinion leader
an individual who influences the opinions of others; group leaders/trendsetters -the most influential, informed, plugged-in, and vocal members of society -teens serve as these for new tech -celebrity endorsers/social media influencers
Internet's Impact on Promotion
b4 the Internet: -marketing managers in charge of defining the essence of a brand -complete brand control -mostly 1-way communication bxn brand and consumers -content and messages focused on defining and communicating brand value -campaign focus=pure entertainment -brand created all the content for campaigns Post-internet: -consumer has much more control over communication space and brand message -perception=reality; consumers can adapt the brand message to fit their ideas -instead of repetition, social media rely on customization and adaptation of the message -information=more valuable, not strictly entertaining -consumer-generated content=consumers are able to both take existing content and modify it or to create completely new content for a brand
Optimizers
biz customers who consider numerous suppliers (both familiar and unfamiliar), solicit bids, and study all proposals carefully before selecting one -one purchasing strategy/profile
Satisficers
biz customers who place an order w the first familiar supplier to satisfy product and delivery requirements -one purchasing strategy/profile
Retrieval Sets
brands/stores/product category choices that can be readily brought forth from memory
Repositioning
changing consumers' perceptions of a brand in relation to competing brands -done in order to sustain growth in slow markets or correct positioning mistakes
Relationship Personal Selling
current notions on personal selling emphasize the relationship that dev. bxn a salesperson and a buyer; emphasizes win/win outcome and the accomplishment of mutual objectives that benefit both buyer and salesperson in the long-term -focus on building long-term, committed relationship based on trust, increased customer loyalty, and a continuation of the relationship bxn the salesperson and buyer -rather than focusing on making quick, one-time sale -initially typical in B2B selling situations, involving sale of products like heavy machinery/computer systems; now both B2B and B2C
Pay What You Want
customer pays what he wants or what he thinks something is worth; seen as risky tactic -obviously doesn't work for expensive durables like cars -worked in various degrees in digital media marketplaces, restaurants, and other service bizes -social pressures come into play in this environment bc individual doesn't want to appear poor or cheap to his peers
Persuasive Promotion
designed to stimulate a purchase or an action -typically becomes the main promo goal when product enters the growth stage of its life cycle -by this time, target market should have general product awareness and some knowledge of how product can fulfill its wants -so promo task switches from informing consumers about the product category to persuading them to buy the co.'s brand rather than that of the competitor -promo message emphasizes the product's real and perceived competitive advantages -often appeals to emotional needs, such as love, belonging, self-esteem and ego satisfaction -important when goal=inspire direct action -can also be important for very competitive mature products (i.e. household items, soft drinks): >encourages brand switching >aims to convert some buyers into loyal users
Positioning
developing a specific marketing mix to influence potential customers' overall perception of a brand, product line, or organization in general -very important for consumer goods marketing (i.e. Coca Cola: Coca Cola Zero, Diet Coke, Caffeine Free Coca Cola, Tab) -effective _____ requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the co.'s marketing efforts will have the greatest impact
Self-concept
how consumers perceive themselves in terms of attitudes, perceptions, beliefs, and self-evaluations -how people define their identity, which provides for consistent and coherent behavior -combines ideal and real self-image
Socialization Process
how cultural values and norms are passed down to children -children learn by observing their parents' consumption patterns, so they tend to shop in similar patterns
Advertising
impersonal, one-way mass communication about a product or organization that is paid for by a marketer -any form of impersonal, paid communication in which the sponsor or company is identified Traditional media: TV, radio, newspapers, magazines, pay-per-click online advertising, display advertising, direct mail, billboards, and transit advertising=most commonly used -shift towards other Internet options: websites, emails, blogs, videos, interactive games, social media; privacy concerns Primary Benefit: ability to communicate to a large # of ppl at one time: cost per contact=very low BUT total cost typically very high -able to reach the masses (i.e. national TV network), but can also be micro-targeted to small groups of potential customers (i.e. TV ads on a targeted cable network)
External Stimuli
influences from an outside source (i.e. advertising, sales promotion, social media, peers, etc.)
External Information Search
the process of seeking information in the outside environment -2 basic types of sources: 1. nonmarketing-controlled information source 2. marketing-controlled information source
Decoding
interpretation of the language and symbols sent by the source through a channel -common understanding/frame of reference between 2 communicators is required for effective communication -marketers must ensure proper match bxn message to be conveyed and target market's attitudes and ideas Even if message received, may not be properly decoded bc of: 1) selective exposure 2) distortion 3) retention -when ppl receive a message, they tend to manipulate it to reflect their own biases, needs, experiences, and knowledge, so diff in age, social, class, education, culture, and ethnicity can lead to miscommunication -ppl don't always listen or read carefully, so often misinterpret what is said or written -global marketing: worry about translation and possible miscommunication of promo message by other cultures
Message Transmission
involves the sender relaying a message through a channel to the receiver
New-to-the-World Products
known as discontinuous innovations, these products create an entirely new market; smallest category of new products i.e. Gatorade's microchip-fitted "smart cap" that will inform users how much they need to drink to stay hydrated during workouts
Unfair Trade Practice Acts
laws that prohibit wholesalers and retailers from selling below cost; wholesalers and retailers must take min. percentage markup on their combined merchandise costs and transportation cost -intent is to protect small local firms from giants like Walmart, who operate very efficiently on razor-thin profit margins
Product Modification
makes cosmetic or functional changes to existing products; type of R&D
Sales Promotion
marketing activities-other than personal selling, advertising, and public relations-that stimulate/incentivize consumer buying and dealer effectiveness -generally a short-run tool used to stimulate immediate increases in demand -can be aimed at end consumers, trade customers, or a co.'s employees (i.e. free samples, contests, premiums, trade shows, vacation giveaways, coupons AND experiential marketing=where marketers create events that enable customers to connect w brands) -often used to improve effectiveness of other ingredients in promo mix (advertising, personal selling); complements advertising by yielding faster sales responses
Price Bundling
marketing two or more products in a single package for a special price -can stimulate demand for the bundled items if the target market perceives the price as a good value i.e. Fast food McD's Happy meals=bundles; Microsoft suites of software -important for services like hotels and airlines with perishable commodities and relatively fixed costs bc variable costs tend to be low (i.e. cost of cleaning a room); to account for variability, hotel charges resort fee that covers use of gym, pool, Wifi, etc. -can be difficult for customers since they may not be able to determine how much they are really paying for each component of the bundle
Profit Maximization
means setting prices so that revenue is as large as possible relative to total costs -doesn't always signify unreasonably high prices; firm cannot charge price higher than product's perceived value -both price and profits depend on the type of competitive environment a firm faces (i.e. monopoly position or much more competitive situation) -can mean firm is trying to make as much $ as possible: impressive for stockholders but not good enuf for planning
Social Media
promotion tools used to facilitate conversations and other interactions among ppl online -empower consumers by giving them ability to speak directly to other consumers, the co., and web communities -include: blogs, microblogs (Twitter), video platforms (YouTube, Twitch, Periscope), podcasting (online audio/video broadcasts), and social networks (FB, Tumblr, Instagram, Snapchat) -streaming video=new way for marketers to manage their image, connect w consumers, and generate interest in their products -blogging led to influencer marketing=social media celebrities promote brands and products
Publicity
public information about a company, product, service, or issue appearing in the mass media as a news item -org.s generally don't pay for it and aren't identified as the source of the info., but can benefit from it tremendously -isn't totally free-costs money to: prepare news releases, stage special events, and persuade media personnel to broadcast or print publicity messages -aided by social media like Twitter
Action
purchase intent which may be motivated by special offer or strong closing sales pitch; may be the actual purchase or some other deed (i.e. donation to a cause) elicited by marketers/salesperson that satisfies desire (i.e. finally, having been attracted to new iPad and convinced that they need it, customers purchase the iPad) Important promo tools: sales promotion, personal selling
Want
recognition of an unfulfilled need and a product that will satisfy it
Personality
reflects a person's traits, attitudes, and habits -clothing=descriptor of this basis for psychographic segmentation
Profit
revenue minus expenses -to earn fair profit, must charge price that is not too high/too low; Price=the perceived value of the product to target consumers
Informative Promotion
seeks to convert an existing need into a want or to stimulate interest in a new product -generally more prevalent during early stages of product life cycle -ppl generally won't buy G/S until they know its purpose and its benefits to them -important for promoting complex and technical products (i.e. cars, computers, investment services) -important for promoting a new product or for a new brand being introduced into an old product class; can use to distinguish from competitors New products can't est. themselves against more mature products unless potential buyers are: -aware of them -value their benefits -understand their positioning in the marketplace
Demographic Segmentation
segmenting markets by age, gender, income, ethnic background, and family life cycle
Geographic Segmentation
segmenting markets by region of a country or the world, market size, market density, or climate
Psychographic Segmentation
segmenting markets on the basis of personality, motives, lifestyles, and geodemographics -often combine w other variables to provide more detailed descriptions of market segments
Geodemographic Segmentation
segmenting potential customers into neighborhood lifestyle categories; combines geographic, demographic, and lifestyle segmentations -helps marketers tailor programs to prospective buyers who live in small geographic regions, such as neighborhoods, or who have very specific lifestyle and demographic characteristics (i.e. college students) basis for psychographic segmentation
Gap 3: Performance Gap
the gap between the service quality specifications and the service that is actually provided -due to the inability of management and employees to deliver and do what should be done -management must ensure employees have the skills and proper tools to perform their jobs -other helpful techniques for closing gap=training employees so they what management expects and encouraging teamwork
Public Relations
the marketing function that evaluates public attitudes, identifies areas w/in the organization the public may be interested in, and executes a program of action to earn public understanding and acceptance -often spend large sums to build/maintain a positive public image so perceived well by target markets -helps org. communicate w its customers, suppliers, stockholders, govt. officials, employees, and the community where it operates Also used to: -educate the public about the co.'s goals and objectives -introduce new products -help support the sales effort
Core Service
the most basic benefit the consumer is buying -in many service industries, this becomes a commodity as competition increases so emphasize the supplementary services bundled with it (i.e. for luxury hotel: providing bedrooms for rent)
Market density
the number of people within a unit of land, such as a census tract -used for geographic segmentation
Keystoning
the practice of marking up prices by 100 percent, or doubling the cost
Feedback
the receiver's response to a message; may be verbal ("I agree") or nonverbal (nodding, smiling, frowning, gesturing); can occur digitally (FB like, comment on a blog post) -mass communicators often cut off from direct feedback, so must rely on market research, social media, or analysis of viewer responses for indirect feedback: helps to decide whether to continue, modify or drop a message -incr. in online advertising: more feedback w the Internet: web analytics and social media instant feedback
Connecting Promotion
uses social media to form relationships w customers/potential customers thru technological ties such as FB, Twitter, YouTube, or other social media platforms -social networks allow sharing of ideas, info. and feedback -by facilitating this exchange of information thru a transparent process, brands are increasing connecting w their customers in hopes they become brand advocates that promote the brand thru their own social networks -tools for connection: social networks, social games, social publishing tools, social commerce
Product Involvement
when a product category has high personal relevance for consumer -product enthusiasts are consumers with high involvement in a product category (i.e. fashion industry)
Bases for Segmenting Consumer Markets
1. Geographic 2. Demographic 3. Psychographic 4. Benefit 5. Usage-Rate
Innovation
a product perceived as new by a potential adopter
Determinants of Price
-Demand for G/S -Costs of producing G/S -Stages in the product life cycle -The Internet/extranets -Promotion strategy -Customer loyalty -Demands of large customers (dept. stores more demanding than ever to cover their own markdowns and heavy discounts; want suppliers to guarantee stores' profit margin and insist on cash rebates if guarantee not met) -Perceived quality
3 Categories of Service Pricing Objectives
1) Revenue-oriented pricing 2)Operations-oriented pricing 3) patronage-oriented pricing -vary in importance depending on type of service, competitors' prices, differing ability of various customer segments to pay, and the opportunity to negotiate price (customized services)
Nature of the Product
1) Biz/Consumer Product Biz products: personal selling; some advertising in trade media to locate potential customers for sales force Consumer products: advertising and social media to create brand familiarity -TV and radio ads, consumer-oriented magazines, Internet and other highly targeted media to promote, esp. nondurables -sales promotion, brand name, and packaging=twice as important -personal selling in retail for goods like cares/appliances 2) Assoc. Costs and Financial Risks -when costs/risks of buying and using a product increase, personal selling becomes more important -inexpensive items cannot support the cost of salesperson's time and effort unless potential volume is high -for considerable investments like expensive and complex machinery, cars, and new homes, salesperson must assure buyers they are spending $ wisely and not taking undue financial risk 3) Social Risk -many consumer goods are not product of great social importance bc they don't reflect social position (i.e. loaf of bread) -specialty products like jewelry and clothing involves a social risk, so depend on sales personnel for guidance in making proper choice
Internet/Social Media's Impact on Communication Process
1) consumers are now able to become senders (as opposed to only brands being senders); professional bloggers/casual recommendations on FB or Yelp 2) social media platforms that allow customers to comment publicly on marketing efforts enable marketers to personalize the feedback channel by opening the door for direct convos w customers -traditionally, feedback channel was primarily interpersonal and #s driven; marketers could see results of customer behavior but unable to explain those changes except by using their judgement
7 Characteristics of Successful Product Introductions
1. A history of listening carefully to customers 2. An obsession w producing the best product possible 3. A vision of what the market will be like in the future 4. Strong leadership 5. Commitment to new-product development 6. Project-based team approach to new-product development 7. Getting every aspect of the product development process right
Types of New Product Failure
1. Absolute Product Failure: occurs when a company cannot recoup its development, marketing and production costs; product actually loses money for the co. 2. Relative Product Failure: results when the product returns a profit but fails to achieve sales, profit, or market share goals
Promotion Tasks
1. Inform target audience 2. Persuade target audience 3. Remind target audience 4. Connect w audience(thru social media) Purpose: -modify behavior and thoughts in some way -OR reinforce existing behavior The seller hopes to project a favorable image or to motivate purchase of the co's G&S
5 Categories of Adopters
1. Innovators 2. Early Adopters 3. Early Majority 4. Late Majority 5. Laggards
Positioning Bases
1. Attribute: a product is assoc. w an attribute, product feature, or customer benefit (i.e. 7th Generation removes toxins/chemicals from its household products to make them safer) 2. Price and Quality: may stress high price as a signal of quality or emphasize low price as an indication of value (i.e. Target="upscale discounter") 3. Use or Application (i.e. Danone's Kahlua liquor; points out 228 ways to consume it) 4. Product User: focuses on a personality or type of user (Gap Inc: Gap=casual clothes to mid-road consumers at mid-level prices; Old Navy=low-priced, trendy casual wear to youth/college-aged groups; Banana Republic=luxury brand offering fashionable luxurious biz and casual wear to 25-35 yr olds) 5. Product Class: position product as being assoc. w a particular category of products (i.e. assoc. margarine brand w butter); can also disassociate products w a category 6. Competitor: positioning against competitors (Apples as cooler/more up-to-date than Windows-based smartphones) 7. Emotion: focuses on how the product makes customers feel (i.e. Nike's "Just Do It"=emotional message of achievement and courage)
Bases for Segmenting Biz Markets
1. Company Characteristics (geographic location, type of company, company size, product use) 2. Buying process
Factors that Effect Consumer Decision Journey
1. Cultural Factors -culture and values -subculture -social class 2. Social Factors -reference groups -opinion leaders -family 3. Individual Factors -Gender -Age and family life cycle stage -Personality, self-concept, and lifestyle 4. Psychological Factors -Perception -Motivation -Learning -Beliefs and attitudes
Company Characteristics Segmentation
1. Geographic Location: -some markets=regional buyers prefer to buy from local suppliers, and distant suppliers have hard time competing in terms of price and service -firms that sell to geographically concentrated industries benefit by locating close to their markets 2. Company Type: -allows B2B marketers to tailor their marketing mixes to unique needs of particular types of organizations/industries 3. Volume of purchase: heavy, moderate, light 4. Company Size, may affect: -purchasing procedures -types and Qs of products it needs -responses to different marketing mixes (i.e. Banks offer diff services/lines of credit/attention to diff size customers) 5. Product Use: -many products, esp. raw materials like steel, wood, and petroleum, have diverse applications -product use may influence: amount they buy, buying criteria, and selection of vendors
Stage in the Product Life Cycle
1. Introduction Stage: -basic goal=inform the target audience that the product is available -initial emphasis is on general product class (i.e. smartphone); gradually changes to gaining attention for a particular brand (i.e. Apple, Samsung) -both extensive advertising and PR inform target audience of product class/brand and heighten awareness levels -sales promotion encourages early trial of product -personal selling gets retailers to carry the product 2. Growth Stage: -promo strategy: emphasize product's differential adv. over the competition -promo blend may shift bc different types of potential buyers are targeted -ad and PR continue to be major elements -sales promotion reduced bc consumers need fewer incentives to purchase -persuasive promotion used to build and maintain brand loyalty -personal selling already succeeded in getting adequate product distr. 3. Maturity Stage -competition=fiercer, so persuasive and reminder advertising strongly emphasized -sales promotion comes back into focus as sellers try to increase their market share 4. Decline Stage: -all promo, esp. advertising, reduced -personal selling and sales promotion efforts may continue, particularly at retail level
Product Life Cycle Stages
1. Introductory Stage 2. Growth Stage 3. Maturity Stage 4. Decline Stage
2 Role of Price in Evaluation of Product Alternatives
1. Measure of Sacrifice 2. Information Cue *value is based on perceived satisfaction
New Product Development Process
1. New Product Strategy 2. Idea Generation 3. Idea Screening 4. Business Analysis 5. Development 6. Test Marketing 7. Commercialization
5 Service Quality Components
1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles
Steps in Segmenting a Market
1. Select a Market or Product Category for Study (may be market in which firm already competes, a new but related market, or a totally new market) 2. Choose a Basis or Bases for Segmenting the Market (requires managerial insight, creativity, and market knowledge; segmentation scheme must meet 4 segment criteria) 3. Select Segmentation Descriptors (descriptors identify the specific segmentation variables; i.e. age or income for demographic segmentation or heavy/nonusers/light users for product-use segmentation ) 4. Profile and Analyze Segments (profile includes the segment's: size, expected growth, purchase frequency, current brand usage, brand loyalty, and long-term sales and profit potential; this info can be used to rank potential market segments by profit opp., risk, consistency w organizational objectives, etc.) 5. Select Markets (natural outcome of segmentation process; directly determines marketing mix) 6. Design, Implement, and Maintain Appropriate Marketing Mixes (product, place, promotion, pricing strategies intended to bring about mutually satisfying exchange relationships w target market)
Communication Process
1. Sender 2. Encoding the Message 3. Message Channel 4. Decoding the Message 5. Receiver (provides feedback to sender) (noise can interfere w 2-4)
Segmentation Scheme Criteria
1. Substantiality: a segment must be large enough to warrant developing and maintaining a special marketing mix; many potential customers 2. Identifiability and Measurability: segments must be identifiable and their size measurable; data about the pop w/in geographic boundaries, the # of ppl in various age categories, and other social and demographic characteristics are often easy to get/fairly concrete measures of segment size 3. Accessibility: the firm must be able to reach members of targeted segments w customized marketing mixes 4. Responsiveness: markets can be segmented using any criteria that seem logical; unless one market segment responds to a marketing mix differently than other segments, that segment need not be treated separately
Target Marketing Strategies
1. Undifferentiated Targeting 2. Concentrated Targeting 3. Multisegment Targeting
3 Targeting Strategies' Advantages and Disadvantages
1. Undifferentiated Targeting Advantages: -potential savings on production when firm achieves economies of mass production -potential savings on marketing when one product to promote/single distribution channel Disadvantages: -sterile, unimaginative product offerings w little appeal to anyone -company more susceptible to competition 2. Concentrated Targeting Advantages: -concentration of resources -can better meet the needs of a narrowly defined segment -allows some small firms to compete better w larger firms -strong positioning Disadvantages: -segments too small or changing -can be disastrous if firm is not successful in narrowly defined market (all eggs in one basket) -large competitors may more effectively market to niche segment 3. Multi-segment Targeting Advantages: -greater financial success: greater sales volume, higher profits, larger market share -economies of scale in manufacturing and marketing Disadvantages: -higher costs in product design, production, promotion, inventory, marketing research, and management -cannibalization
Wants Viewed in Terms of 4 Goals
1. economizing (of frequently purchased alternatives, buys coffee brand that is on sale) 2. sustaining (buys favorite brand of alternatives that she prefers) 3. treating (buys a cup of Starbucks coffee) 4. rewarding (buys a latte at trendy new cafe) -the specific goal a consumer is trying to fulfill influences how he allocates money, time, and effort
Service Price Strategy
2 unique challenges of service pricing: 1) in order to price service, must define the unit of service consumption (based on task completion/time based; those also involving good consumption may charge for goods instead of services, i.e. restaurants charge for food/drinks not use of table and chairs) 2) for services composed of multiple elements, whether pricing should be based on a "bundle" of elements or if each element should be priced separately -bundled price=preferable when consumers dislike having to pay extra for every part of the service and simpler for firm to administer -separate pricing=preferable when customers may not want to pay for service elements they don't use
Nonprofit Organization Target Markets
3 issues related to target markets for nonprofit organizations: 1)Apathetic or Strongly Opposed Targets: unlike private sector, don't always prioritize dev marketing segments that are most likely to respond to particular offerings; must often target those who are don't want to receive their services (i.e. vaccinations, psychological counseling) 2) Pressure to Adopt Undifferentiated Segmentation Strategies: often adopt these by default bc: -they fail to recognize advantages of targeting -undifferentiated approach offers economies of scale and lower per-capita costs -they are pressured/required to serve the maximum # of ppl by targeting the avg. user 3) Complementary Positioning: main role of many nonprofit org.s is to provide services, with available resources, to those who aren't adequately served by private-sector organizations; thus, must often complement, rather than compete w, the efforts of others; positioning task: -ID underserved market segments -dev marketing programs that match their needs rather than target the niches that may be most profitable
Nonprofit Organization Pricing Decisions
5 Key characteristics distinguish pricing decisions of NPOs from those of profit sector: 1) Pricing Objectives: main pricing obj. in profit sector=revenue; NPOs must also be concerned w revenue but often seek to either partially or fully defray costs rather than to achieve a profit for distr. to stockholders; seek to redistribute income (i.e. taxes, sliding-scale fees) and allocate resources fairly among individuals or households or across geographical/political boundaries 2) Non-financial Prices: consumers often not charged a monetary price but instead must absorb non-monetary costs; the importance of those costs is illustrated by the large # of citizens who do not take advantage of so-called "free" services for the poor: in many public-assistance programs, about half the eligible ppl don't participate; non-monetary costs=time, embarrassment, effort 3) Indirect Payment: indirect payment thru taxes is common to marketers of "free" services, such as libraries, fire protection, and police protection 4) Separation Between Payers and Users: by design, services of many charitable organizations are provided for those who are relatively poor and paid for by those who are better off financially 5) Below-Cost Pricing: i.e. university tuition: virtually all colleges/universities price their services below full cost
New Product Strategy
A plan that links the new-product development process with the objectives of the marketing dept., the biz unit, and the corporation -sharpens the focus and provides general guidelines for generating, screening, and evaluating new-product ideas -specifies the roles that new products play in organization's overall plan -describes the characteristics of products the co. wants to offer and the markets it wants to serve
Motive
a driving force that causes a person to take action to satisfy specific needs
Psychological Ownership
Consumers develop this kind of relationship with a product when they are able to control it, when they invest themselves in it, or when they come to know it intimately -important to marketers because when consumers feel sense of ownership of a product, they are willing to pay more for it/more likely to tell other consumers about it
Nonprofit Organizations Objectives
Do not seek to make a profit for redistribution to owners/shareholders; often, focus=generating enough funds to cover expenses -expected to provide equitable, effective, and efficient services that respond to the wants and preferences of multiple constituencies (users, payers, donors, politicians, appointed officials, the media, the general public) -lack of financial bottom line and existence of multiple, diverse, intangible and sometimes vague or conflicting objectives makes prioritizing objectives, making decisions, and evaluating performances hard for managers
Relationship Marketing in Services
Idea=develop strong loyalty by creating satisfied customers who will buy additional services from the firm and are unlikely to switch to a competitor -also likely to generate positive WOM communication to bring in new customers -more cost effective to hang on to existing customers than to focus only on attracting new ones 1. Membership Services: services that purchasers receive on a continuing basis that naturally lends itself to relationship marketing (i.e. cable TV, banking, insurance) 2. Discrete Transactions (i.e. movie theater ticket, meal at restaurant, public transportation ticket); may be harder to build membership-type relationships but can use tools: -selling in bulk -offer special benefits to customers who register w the firm (loyalty programs)
Factors that Affect Elasticity
Income Effect= when price of good incr., Q demanded decr. bc of reduction in purchasing power resulting from price change 1) Price Relative to Purchasing Power (if a price is so low that it is an inconsequential part of an individual's budget, demand=inelastic; i.e. if price of pepper doubles, ppl won't stop buying it) 2) Rate of Inflation (the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling; high rate of inflation, demand more elastic overall) Substitution Effect=when price of good incr., Q demanded decr. bc consumers switch to substitute good w lower relative price 3) Availability of Substitutes (when many substitutes are available and consumer can easily switch from one product to another, demand=elastic; same is true in reverse: demand for kidney transplant to person w renal failure=inelastic bc no substitutes) 4) Cross-Price Elasticity (measures the responsiveness in the quantity demand of one good when a change in price takes place in another good; calculated by taking the percentage change in the quantity demanded of one good and dividing it by the percentage change in price of the other good; positive for substitutes; negative for complementary goods) Product Factors: 5) Product Durability (consumers often have option of repairing durable products like cars/washing machines rather than replacing them, thus prolonging their useful life; so w more durable products, ppl more sensitive to price increase and demand=elastic) 6) A Product's Other Uses (the greater # of different uses for a product, the more elastic demand tends to be; if product has only one use, like new medicine, Q purchased won't vary w price and will consume prescribed Q regardless; on other hand, products like steel have many applications, SO as price falls, steel becomes more economically feasible in wider variety of applications=elastic demand)
Motives
Marketers may appeal to root forces driving consumers to buy, such as: -emotional (baby products, life insurance) -rational (Subaru appeals to economy, reliability, dependability) -status-related (luxury carmakers like Mercedes or Jaguar) basis for psychographic segmentation
Gender Segmentation
Marketers o/products such as clothing, cosmetics, food, personal-care items, magazines, jewelry, and gifts commonly segment market by this Women: -make 70-80% of consumer purchases each year -experienced purchasing group -responsible for purchasing majority o/household items -increasingly part of what were considered all-male markets, such as financial markets -view money and wealth differently: don't seek to accumulate money for sake of accumulation, but for security, independence, and quality of life -tend to research investments more in-depth Men: -marketers going after less-traditional male market more (i.e. skin care products)
Service Place (Distribution) Strategy
Must focus on: -Convenience (how easily accessible/readily available services are) -Number of Outlets (intensity of distribution should meet but not exceed market's needs and preferences: too few outlets=inconvenience to customers; too many outlets=unnecessarily boosts costs; also about image bc fewer outlets may evoke exclusivity) -Direct vs Indirect Distribution (distribute services directly to end-users OR indirectly through other firms; bc o/intangibility, most have to use direct distr. (most used form=Internet); franchising; or dev. indirect channels using independent intermediaries) -Location (most clearly reveals relationship bxn target market strategy and distr. strategy) -Scheduling (more important for time-dependent service providers such as airlines, physicians, and dentists)
Price Matching
Offer guarantees ensuring customers cannot save money by shopping elsewhere; when a shopper pays more for an item that it would cost at another store, he receives a voucher for the difference -in order for voucher to have value, customer must return to that store, so can be tool for building customer loyalty Attempt to build customer loyalty by: offering discounts to regular patrons (loyalty-discount cycle=loyal customers receive deeper discounts that in turn further increase their customer loyalty, results in downward pressure on firm's long-term pricing strategy)
Market Share Pricing Goal
Sales-oriented pricing obj. used bc many companies believe maintaining/increasing market share=indicator of marketing mix effectiveness Larger market shares often=higher profits, thx to greater: -economies of scale -market power -ability to compensate top-quality management Usually, market share and ROI=strongly related HOWEVER many co.s w low market share survive/prosper To succeed w low market share, must compete: -in industry w slow growth and few product changes (i.e. industrial supplies) -OR in industry that makes frequently bought items (i.e. consumer convenience goods) ALSO, connection bxn market share and profitability=not always reliable -bc of extreme competition in some industries, many market share leaders either don't reach their target ROI or actually lose money (i.e. Proctor and Gamble switched from market share to ROI objectives after realizing profits don't automatically follow from a large market share)
Operations-Oriented Pricing
Service pricing objective that seeks to match supply and demand by varying prices (i.e. hotels: match hotel demand to # of available rooms by raising prices at peak times and decreasing them during slow times)
Patronage-Oriented Pricing
Service pricing objective that tries to maximize the number of customers using the service; thus, prices vary with different market segments' ability to pay, and methods of payment (such as credit) are offered that increase the likelihood of a purchase (i.e. senior citizen and student discounts at movie theaters and restaurants) -yield management when services=perishable and revenue opp is lost after certain date so can use price differentiation to charge diff prices for diff market segments in order to maximize revenue (don't lose sales from segments w lower WTP, but still charge higher prices to segments w higher WTP)
Pricing Objectives
Should be specific, attainable, and measurable 3 Categories: 1) Profit-Oriented 2) Sales-Oriented 3) Status Quo
Funds Available for Promotion
Small, undercapitalized manufacturer/co. -may rely on free publicity if product is unique so PR efforts -if need sales force, may use manufacturers' agents, who work on a commission basis w no advances/expense accounts -online strategies Funds available for promo mix of elements: -try to optimize return on promotion dollars -try to minimize cost per contact, or the cost of reaching one member of the target market >high for personal selling, PR, and sales promotions like sampling and demos >low for ads and social media given large # o/ppl it reaches Usually trade-off among: -funds available -# of ppl in target market -quality of communication needed -relative costs of the promo elements
Global Issues in New Product Development
Some multinational firms consider new-product dev. from a worldwide perspective due to increasing globalization of markets and competition Firm that starts w global strategy is better able to dev products that are marketable worldwide -every product developed for potential worldwide distribution -unique market requirements satisfied during dev. whenever possible Some global marketers design their products to meet regulations in their major markets and then, if necessary, meet smaller markets' requirements country by country Some products have little potential for global market penetration w/o modification -succeeding in some countries (like China) often requires companies to dev. products that meet unique needs of these pops Some co.s can't sell their products at affordable prices and still make a profit in many countries
Family Life Cycle Segments
Young Single: -few financial burdens -fashion opinion leaders -recreation oriented -buy: basic kitchen equipment, basic furniture, cars, equipment for dating game, vacations Young Married or Divorced w/o Children: -better off financially than they will be in the near future -highest purchase rate and highest avg purchase of durables -buys: cars, refrigerators, stoves, sensible and durable furniture, vacations Young Married or Divorced w/Children: -home purchasing at peak -liquid assets low -dissatisfied w financial position and amount o/$ saved -interested in new products -like advertised products -buy: washers, dryers, TVs, baby food, chest rubs, cough medicine, vitamins, dolls, wagons, sleds, skates Middle-aged Married or Divorced w or w/o Children: -financial position still better -more wives work -some children get jobs -hard to influence w advertising -high avg purchase o/durables -buy: new and tasteful furniture, auto travel, unnecessary appliances, boats, dental services, magazines Middle-aged Married or Divorced w/o Dependent Children: -home ownership@ peak -most satisfied w financial position/$ saved -interested in travel, recreation, and self-education -make gifts and contributions -not interested in new products -buy: vacations, luxuries, home improvements Older Married: -drastic cut in income -keep home -buy: medical appliances, med care, products that aid health, sleep, and digestion Older Unmarried: -drastic cut in income -special need for attention, affection, and security -buy: same medical and product needs as other older group
Price Strategy
a basic, long-term pricing framework that establishes the initial price for a product and the intended direction for price movements over the PLC -sets a competitive price in a specific market segment based on a well-defined positioning strategy
Product Life Cycle (PLC)
a biological metaphorical concept that provides a way to trace the stages of a product's acceptance, from its introduction (birth) to its decline (death) -can be used to analyze a brand, a product form, or a product category; it is usually longer for a product form than it is for any one brand
Rebate
a cash refund given for the purchase of a product during a specific period -adv: stimulates demand as temporary inducement that can be taken away w/o altering basic price structure l
Innovators
a category of adopters: -first 2.5% of ppl to adopt the product -dominant characteristic: venturesome -eager to try new ideas and products, almost as an obsession -higher incomes -more worldly and more active outside their community than noninnovators -rely less on group norms -more self-confident -well educated; more likely to get info. from scientific sources and experts
Quantity Discount
a price reduction offered to buyers buying in multiple units or above a specified dollar amount
Early Adopters (EA)
a category of adopters: -next 13.5% to adopt the product (after innovators) -dominant characteristic: a desire to earn the respect of others -adopt early in product's life cycle -more important than innovators from marketing standpoint bc larger group, more socially active, and usually opinion leadesr -rely much more on group norms and values compared to innovators -more oriented to the local community -more likely to be opinion leaders due to close affiliation w groups -they=a new product's BFF -influencers have desire to talk to others about their experiences w/G&S -w/viral, buzz, and word of mouth advertising on the rise, marketers focus on identifying group of influencers that begins the viral marketing chain -challenge to target them bc not distinguished by demographics, but behavior (of all ages, genders and income groups AND don't use media any differently than followers)
Late Majority (LM)
a category of adopters: -next 34% to adopt product (after early majority) -dominant characteristic: skepticism -adopt a new product bc most of their friends have already adopted it -rely on group norms -adoption stems from pressure to conform -older -below avg. in terms of income/education -depend mainly on word of mouth communication rather than on mass media
Early Majority (EM)
a category of adopters: -next 34% to adopt the product (after early adopters) -dominant characteristic: deliberateness -weigh pros and cons before adopting new product -collect more info. and evaluate more brands than early adopters-->extended adoption process -rely on the group for info. but unlikely to be opinion leaders themselves -they are friends and neighbors of opinion leaders -like all consumers, they trust word of mouth marketing from friends, family and peers -represent important link in process of diffusing new ideas bc positioned bxn earlier and later adopters
Earned Media
a category of promotional tactic based on a public relations or publicity model that gets customers talking about products or services -can be through traditional media coverage, WOM, or electronic WOM -often created when ppl talk or share content on social media -includes search engine optimization=where co.s embed key words into content to increase their positioning on search engine results pages
Paid Media
a category of promotional tactic based on the traditional advertising model, whereby a brand pays for media space -traditional types: TV, magazine, outdoor, radio, or newspaper advertising -also include: display advertising on website, banner ads, pay-per-click advertising on search engine or even promoted tweets on Twitter -used to get the message out to target audiences
Search Quality
a characteristic that can be easily assessed before purchase (i.e. color of a car)
Credence Quality
a characteristic that consumers may have difficulty assessing even after purchase because they do not have the necessary knowledge or experience -can't make judgement because don't know any better (i.e. medical and consulting services)
Market Share
a company's product sales as a percentage of total sales for that industry -sales can be reported in dollars/units of a product--2 measures of market share can yield diff. results (i.e. Company A: 50% unit market share, 25% revenue market share; Company B: 15% unit market share, 30% revenue market share) -usually expressed in terms of revenue
Fixed Cost
a cost that does not change as output is increased or decreased (i.e. rent, executives' salaries)
Variable Cost
a cost that varies with changes in the level of output (i.e. cost of materials)
Non-cumulative Quantity Discount
a deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period (encourages orders in large Qs)
Cumulative Quantity Discount
a deduction from list price that applies to the buyer's total purchases made during a specific period (to encourage customer loyalty)
Coupon
a discount offered via paper, a card, a printable web pg., or an electronic code US marketers issue 310 billion per year, redemption rate is less than 1% (2.75 billion redeemed)
Functional Discount (trade discount)
a discount to wholesalers and retailers compensating them for performing channel functions
Stimulus Generalization
a form of learning that occurs when one response is extended to a second stimulus similar to the first -marketers often use a successful, well-known brand name for a family of products because it gives consumers familiarity with and knowledge about each product in that family; consumers generalize all products under brand name as same/lump together
Evoked Set (Consideration Set)
a group of brands resulting from an information search from which a buyer can choose; comprises the alternative brands or stores that consumers state they would consider when making a purchase decision
Social Class
a group of people in a society who are considered nearly equal in status or community esteem, who regularly socialize among themselves both formally and informally, and who share behavioral norms -typically measured as a combination of: occupation, income, education, wealth, and other variables U.S. Social Classes: -Upper Classes: Capitalist class and Upper Middle Class -Middle Classes: Middle Class and Working Class -Lower Class: Working Poor and Underclass
Target Market
a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meed the needs of that group, resulting in mutually satisfying exchanges
Aspirational Reference Group
a group that someone would like to join; to join this group, a person must at least conform to the norms of that group (i.e. celebs like Kardashians/Insta models)
Dissociative Reference Group (Nonaspirational)
a group with which an individual does not want to associate; influence our behavior when we try to maintain distance from them (i.e. a consumer may avoid buying some types of clothing/cars, going to certain restaurants/stores, or living in certain neighborhoods to avoid being associated with a particular group)
Subculture
a homogeneous group of people who share elements of the overall culture as well as unique elements of their own group -culture can be divided into these groups on basis of demographic characteristics, geographic regions, national and ethnic background, political beliefs, and religious beliefs
Stimulus Discrimination
a learned ability to differentiate among similar products -consumers may perceive one product as more rewarding or stimulating, even if it is virtually indistinguishable from competitors -product differentiation--marketers rely on promotion to point out brand differences that consumers would otherwise not recognize
Decline Stage
a long-run drop in sales signals the beginning of this final stage of the product life cycle -rate of decline based on how rapidly consumer tastes change or substitute products are adopted -many convenience products and fad items lose their market overnight, leaving large inventories of unsold items -others die more slowly (i.e. landline telephones) -almost all sales in this stage=repeat purchases marketing strategy: -eliminate all nonessential marketing expenses -let sales decline as more and more customers stop purchasing the product -eventually product withdrawn from market (i.e. typewriters, video recorders)
Product Development
a marketing strategy that entails the creation of marketable new products; the process of converting applications for new technologies into marketable products; type of R&D
Pull Strategy
a marketing strategy that stimulates consumer demand to obtain product distribution -rather than trying to sell to the wholesaler, marketer focuses promo efforts on end consumers or opinion leaders -consumer demand pulls the product thru the channel of distribution -Includes: heavy sampling, introductory consumer advertising, cents-off campaigns, and couponing (i.e. social media and content marketing)
Push Strategy
a marketing strategy that uses aggressive personal selling and trade advertising to convince a wholesaler or retailer to carry and sell particular merchandise -wholesaler, in turn, pushes merchandise forward by persuading the retailer to handle the goods -retailer then uses advertising, displays, and other forms of promotion to convince the consumer to buy the "pushed" products (i.e. Walmart uses aggressive discounts to push products out of its stores)
Channel
a medium of communication for transmitting a message (i.e. voice, radio, newspaper, computer, smartphone, facial expressions, gestures, etc.)
Seasonal discount
a price reduction for buying merchandise out of season -shifts storage function to the purchaser -enable manufacturers to maintain a steady production schedule yr-round
Cash Discount
a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill -prompt payment saves the seller carrying charges and billing expenses and allows the seller to avoid bad debt
Maslow's Hierarchy of Needs
a method of classifying human needs and motivations into 5 categories in ascending order of importance: 1. Physiological Needs (most basic human needs; i.e. food, water, shelter) 2. Safety Needs (security, protection, freedom from pain/discomfort) 3. Social needs (love and a sense of belonging; i.e. romantic love and acceptance by peers) 4. Esteem Needs (self-respect, sense of accomplishment, prestige, fame, recognition of one's accomplishments) 5. Self-Actualization Needs (self-fulfillment, self-realization, reaching point in life where "people are what they feel they should be") -must satisfy lowest level, basic needs to move onto higher needs -as person fulfills one need, a higher-level need becomes more important
Break-Even Pricing
a method of determining what sales volume must be reached before total revenue equals total costs, i.e. before the company breaks even and zero profits are earned -typical model assumes a given fixed cost and a constant average variable cost (total cost divided by Q of output) ADV: provides quick estimate of how much the firm must sell to break even and how much profit can be earned if a higher sales volume is obtained -if operating close to break-even pt, may want to try to reduce costs/increase sales LIMITATIONS: -sometimes hard to know whether a cost is fixed or variable -Simple break-even analysis ignores demand
Gap Model
a model identifying five gaps that can cause problems in service delivery and influence customer evaluations of service quality
AIDA concept
a model that outlines the process for achieving promotional goals in terms of stages of consumer involvement with the message; stands for: -Attention -Interest -Desire -Action Model proposes that consumers respond to marketing messages in a cognitive (thinking), affective (feeling), and conative (doing) sequence
Zone Pricing
a modification of uniform delivered pricing that divides the US (or the total market) into segments or zones and charges a flat freight rate to all customers in a given zone -equalizes total costs among buyers w/in large geographic areas, but not among all of the seller's market area
Owned Media
a new category of promotional tactic based on brands becoming publishers of their own content in order to maximize the brands' value to customers as well as increase their search rank in Google -includes co.'s websites as well as its official presence on FB, Twitter, YouTube channels, blogs, and other platforms -controlled by the brand but continuously keeps the customer and his needs in mind as it creates videos, blog posts, contests, photos, and other pieces of content -a.k.a. content marketing; used to increase WOM and earned media
Promotional allowance (trade allowance)
a payment to a dealer for promoting the manufacturer's products Both -a pricing tool: like a functional discount (i.e. if retailer runs ad for a manufacturer's product, the manufacturer must pay half the cost) -AND a promotional device:
Maturity Stage
a period during which sales increase at a decreasing rate -can't add new users indefinitely, so market eventually becomes saturated -normally longest stage of PLC -for shopping/specialty products, annual models begin to appear -product lines lengthened to reach additional market segments -service and repair become more important in effort to distinguish products from others -design changes=stylistic, not functional -as prices and profits continue to fall, marginal competitors start dropping out of market -dealer margins shrink-->less shelf space, lower dealer inventories, and general reluctance to promote product >promotion to dealers intensifies to retain loyalty -heavy consumer promotion by the manufacturer is required to maintain market share -cutthroat competition/price wars -emergence of "niche marketers" that target narrow, well-defined, underserved segments of a market -almost all sales in this stage=repeat purchases (i.e. products in this stage: laptops, many major household appliances)
Value
a personal assessment of the net worth one obtains from making a purchase, or the enduring belief that a specific mode of conduct is personally or socially preferable to another mode of conduct
Connected Self-Schema
a perspective whereby a consumer sees himself or herself as an integral part of a group -more susceptible to social influences -seek approval of others through "correct" product ownership; especially with conspicuous items (i.e. clothes, jewelry, cars, mobile devices) -have a strong desire to avoid negative impressions in public settings
Separated Self-Schema
a perspective whereby a consumer sees himself or herself as distinct and separate from others -less susceptible to social influences
Promotional Strategy
a plan for the optimal use of the elements of promotion: 1. advertising 2. public relations 3. personal selling 4. sales promotion 5. social media main function: convince target customers that the G&S offered provide a competitive advantage over the competition
Product Differentiation
a positioning strategy that some firms use to distinguish their products from those of competitors; the distinctions bxn products can be either real or perceived; the marketer attempts to convince consumers that a particular brand is distinctive and they should demand it -i.e. KFC chicken's unique blend of 11 herbs/spices -many everyday products, such as bleaches, aspirin, gasoline, and soaps are differentiated by such trivial means as brand names, packaging, color, smell, or "secret" additives
Leader Pricing (loss-leader pricing)
a price tactic in which a product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store -attempts to attract customers by taking a loss on one product but hopefully making up for it/making money on sale of other products -normally used on well-known items that consumers can easily recognize as bargains
Flexible Pricing (variable pricing)
a price tactic in which different customers pay different prices for essentially the same merchandise bought in equal quantities ADVs: -allows seller to adjust for competition by meeting another seller's price; fits status-quo pricing obj. -enables the seller to close a sale w price-conscious customers DISADVs: -lack of consistent profit margins -potential ill will of high-paying purchasers -tendency for salesppl to automatically lower the price to make a sale -possibility of a price war among sellers -often found in sale of shopping goods, speciality merchandise, and most industrial goods except supplies -car dealers and many appliance retailers use it
Freight Absorption Pricing
a price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer -may use in intensively competitive areas or as a way to break into new market areas
Uniform Delivered Pricing
a price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge; aka flat rate shipping -makes total costs, including freight, equal for all purchasers of identical products -sometimes called postage stamp pricing bc person can send a letter across the street or across the country for the same price
Two-part pricing
a price tactic that charges 2 separate amounts to consume a single good or service -sometimes preferred by consumers if they are unsure about #/types of activities they might actually use at places like an amusement park -the ppl who use a service most often pay a higher total price -can incr. rev. by attracting consumers who would not pay a high fee even for unlimited use
Basing-point pricing
a price tactic that charges freight from a given basing point, regardless of the city from which the goods are shipped -basing point=location designated by the seller -waned in pop after several adverse ct. rulings -phantom freight=freight fees charged when none were actually incurred, declared illegal
Single-price tactic
a price tactic that offers all goods and services at the same price (or perhaps 2 or 3) i.e. Dollar Tree/99c stores
FOB Origin Pricing (FOB shipping pt)
a price tactic that requires the buyer to absorb the freight costs from the shipping point (FOB=free on board) -the farther buyers are from sellers, the more they pay, bc transportation costs incr. w the distance merchandise is shipped
Bait Pricing
a price tactic that tries to get consumers into a store through false or misleading price advertising and then uses high-pressure selling to persuade consumers to buy more expensive merchandise -deceptive act banned by FTC in interstate commerce; also banned by most states i.e. ad for a huge bargain on sewing machine; you get to store and salesperson says it has just been sold or shows you a piece of junk, then says he has great deal on a new model! and consumer ends up walking out with $400 machine
Odd-even pricing (psychological pricing)
a price tactic that uses odd-numbered prices to connote bargains and even-numbered prices to imply quality $19.99 vs. $20.00 makes consumer feel like they are paying a lower price for the product even-numbered prices for "prestige items" like fine perfume at $100 or fine watch at $1000; saw-toothed demand curves
Status Quo Pricing Objectives
a pricing objective that maintains existing prices or meets the competition's prices -major adv: requires little planning; passive policy -though simple to implement, can lead to pricing disaster Often, firms competing in industry w an est. price leader simply meet the competition's prices -these industries typically have fewer price wars than those w direct price competition -other cases, managers regularly shop competitors' stores to ensure that their prices=comparable Often leads to suboptimal pricing bc strategy ignores: -customers' perceived value of both firm's G/S and those offered by competitors -demand and costs
Price Skimming
a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion -for new products when product is perceived by target market as having unique adv.s -often co.s will do this and then lower prices over time=sliding down the demand curve -works best when there is strong demand for product, it is well legally protected, it represents a tech breakthru, or when it has blocked entry of competitors in some other way
Penetration Pricing
a pricing policy whereby a firm charges a relatively low price for a product when it is first rolled out as a way to reach the mass market -low price designed to capture large share of a substantial market, resulting in lower production costs -does mean lower profit per unit, so need higher volume of sales to reach break even pt; may be slower to recover dev costs -tends to be effective in a price-sensitive market -if low fixed cost structure and each sale provides large contribution to those fixed costs, this can boost sales and provide large profit incr. -can attract additional buyers to market w lower prices; incr. sales justify product expansion/new tech that lowers costs -effective when experience curve will cause costs per unit to drop significantly ADV: discourages competition DISADV: must gear up for mass production to sell large volume at a low price or face huge losses
Extranet
a private electronic network that links a company with its suppliers and customers
Learning
a process that creates changes in behavior, immediate or expected, through experience and practice -boosted by reinforcement (positive and negative) and repetition
Selective Distortion
a process whereby a consumer changes or distorts information that conflicts with his or her feelings or beliefs (i.e. college student buys Dell laptop, then finds new info about alternative Transformer laptops, so distorts info so more consistent with the prior view that Dell is just as good/better than Transformer)
Reference Group
all of the formal and informal groups in society that influence an individual's purchasing behavior -consumers may use products to identify with or become a member of a group -learn from observing how members of their groups consume and they use the same criteria to make consumer decisions
Price Fixing
an agreement between 2 or more firms on the price they will charge for a product
Nonprofit Organization
an organization that exists to achieve some goal other than the usual business goals of profit, market share, and return on investment -market intangible products -often require customer to be present during production process -services vary greatly from producer to producer or even from day to day from the same producer -account for over 20% US economic activity -federal, state, and local govt.s collect tax revenues=over 1/3 of US GDP -includes: govt. entities and private museums, theaters, schools, and churches
Stimulus
any unit of input affecting 1 or more of the 5 senses: sight, smell, taste, touch, hearing
Noise
anything that interferes with, distorts, or slows down the transmission of information -often clutters mass media channels and makes it difficult for desired receivers to detect message
Stage in PLC Price Determinant
as moves thru PLC, demand for product and competitive conditions change 1) Introductory Stage: management sets prices high bc: -hopes to recover dev. costs quickly -demand originates in core of market (customers whose needs ideally match the product's attributes) and is relatively inelastic HOWEVER if target market=highly price sensitive, better to price product at market level or lower -when co.s intro highly innovative products like consumer electronics, med devices or pharmaceuticals, must properly estimate the elasticity of demand for those products 2) Growth Stage: prices generally begin to stabilize for several reasons: -competitors have entered market, increasing available supply -product has begun to appeal to a broader market -economies of scale are lowering costs, and savings can be passed onto consumers in form of lower prices 3) Maturity Stage: further price decreases as competition increases and inefficient, high-cost firms are eliminated -distr. channels become significant cost factor bc of need to offer wide product lines for highly segmented markets, extensive service requirements, and sheer # of dealers necessary to absorb high-volume production -remaining manufacturers typically offer similar prices -price incr.s usually cost initiated, not demand initiated -price reductions in late phase don't stimulate much demand -bc demand is limited and producers have similar cost structures, remaining competitors will probs match price reductions 4) Decline Stage: may see further price decreases as few remaining competitors try to salvage last vestiges of demand -when only 1 firm left in market, prices begin to stabilize -prices may eventually rise dramatically if product services and moves into the specialty goods category (i.e. horse carriages and vinyl records)
Empathy
caring, individualized attention to customers -provided by firms whose employees recognize customers and learn their specific requirements -want to know more about customers' wants and needs and maximize employees' opportunities for providing great service
Free Shipping
charging nothing for transportation of G/S to buyer; method of lowering prices for purchasers HOWEVER, since shipping is an expense to the seller, it must be built into the cost of the product (i.e. Amazon)
Promotion
communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence an opinion or elicit a response Vital part of marketing mix: -informs consumers of a product's benefits -positions product in the marketplace
Service Customization/Standardization
customized services: -more flexible -respond to individual customers' needs -usually command a higher price standardized services: -ensure that all processes associated with the performance of a service are performed within set guidelines -ensures that the end product has consistent quality -more efficient -cost less
Family Decision Making Roles
decision-making roles among family members to vary significantly, depending on the item purchased 1. Initiators: suggest, initiate, or plant the seed for the purchase process; may be any family member (i.e. sister initiates process by asking for bicycle as birthday gift) 2. Influencers: members of the family whose opinions are valued (i.e. mom as price watchdog and brother gives opinion on certain makes of bikes) 3. Decision maker: the family member who actually makes the decision to buy or not to buy (i.e. Dad/Mom likely to choose final brand/model of bike after gathering preference info from sister and imposing criteria of their own) 4. Purchaser: the one who actually exchanges money for the product (i.e. probably Dad/Mom) 5. Consumer: the actual user (i.e. Sister)
Idea Generation
new-product ideas come from many sources: -CUSTOMERS (consistent w marketing concept; customers wants and needs=springboard for new product ideas; "customer innovation centers") -EMPLOYEES (sometimes employees know co.'s products and processes best; firms have formal/informal processes for employees to propose new product ideas; encourage by running contests, holding votes, setting up idea kiosks, allowing employees time to come up w new ideas) -DISTRIBUTORS (well-trained sales force asks distributors about needs that aren't being met; bc they are closer to end-users, often more aware of customer needs than manufacturers) -COMPETITORS (one purpose of CI and monitoring performance of competitors' products is to determine which, if any, of competitors' products should be copied) -R&D (4 ways: basic research, applied research, product development, and and product modification; source of many scientific/new-product break-thrus) -CONSULTANTS (outside consultants available to examine a biz and recommend product ideas; determine if co. has balanced portfolio of products, and if not, what new product ideas are needed to offset the imbalance) -OTHER EXPERTS ("crowdsourcing"=draws from wide range of potential sources such as industry experts, independent researchers and academics, or general public/freelance inventors)
Indirect Reference Group
nonmembership reference groups to which consumers do not belong, but still exert influence over them; types: aspirational and dissociative
Internal Stimuli
occurrences you experience such as hunger or thirst
Experiential Learning
occurs when an experience changes your behavior (i.e. if the new cold medicine does not relieve your symptoms, you may not buy that brand again)
Reception
occurs when the message is detected by the receiver and enters his or her frame of reference -high in a 2 way conversation (i.e. sales pitch to a potential client) -high when message is a recommendation from a friend -receivers may/may not detect message when it is mass communicated bc most media cluttered by noise (i.e. in newspapers and TV crowded w advertisers: noise level=high so ____level =low)
Geographic pricing
pricing tactics that moderate the impact of freight costs on distant customers includes: FOB origin pricing, uniform delivered pricing, zone pricing, freight absorption pricing, and basing-pt. pricing
Consumer Behavior
processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services; also includes factors that influence purchase decisions and product use
Service Product Strategy
product offering: -intangible -consists in large part of a process/series of processes includes decisions on: -type of process involved -core and supplementary services -standardization or customization of the service product -service mix
Enduring Involvement
represents a customer's ongoing interest in some product, such as kitchen gadgets, or activity, such as fishing -consumer is always looking for opportunities to consume the product/participate in the activity -gives personal gratification to consumers as they continue to learn about, shop for, and consumer these G&S
Emotional Involvement
represents how emotional a consumer gets during some specific consumption activity -closely related to enduring involvement bc the things consumers care about most create high emotional involvement -i.e. sports fans
Shopping Involvement
represents the personal relevance of the process of shopping to a customer -some enjoy the process of shopping even if don't plan to buy anything; see it as enjoyable social activity; may practice showrooming
Stressing Tangible Cues
service promotion strategy emphasizing tangible cues=a concrete symbol of the service offering (i.e. hotels leaving mints on pillows to make their room cleaning service more tangible)
Using Personal Information Sources
service promotion strategy utilizing: personal information sources=someone customers are familiar with (such as a celebrity) or someone they admire or can relate to personally -may seek to stimulate positive WOM communication among present/prospective customers by using real customers in their ads
Engaging in Post-Purchase Communication
service promotional strategy involving post-purchase communication=the follow-up activities that a service firm might engage in after a customer transaction -shows customers that their feedback matters (i.e. postcard surveys, telephone calls)
Creating a Strong Organizational Image
service promotional strategy where firms can create strong image by: Managing the evidence, including: -the physical environment of the service factory -the appearance of the service employees -the tangible items associated with a service (i.e. stationery, bills, biz cards) OR through branding
Internal Marketing in Service Firms
services=performances, so quality of firm's employees is an important part of building long-term relationships w customers -employees who like their jobs and are satisfied w the firm they work for are more likely to deliver superior service to customers -firms who keep employees happy have better chance at retaining customers -use internal marketing strategy; critical in service firms bc employees deliver the brand promise-their performance as a brand representative-directly to customers
Value-based Pricing
setting the price at a level that seems to the customer to be a good price compared to the prices of other options -strategy grown out of the quality movement -starts w customer, considers the competition and assoc. costs, and then determines the appropriate price -must determine value of competitive offerings to the customers, then customers determine the value of a product relative to the value of alternatives
Relative Advantage
the degree to which a product is perceived as superior to existing substitutes -the greater its perceived comparative benefits, the faster the product will diffuse (i.e. iPod vs. portable CD player)
Responsiveness
the ability to provide prompt service (i.e. calling the customer back quickly, serving lunch fast to someone who is in a hurry, or mailing a transaction slip immediately; ultimate=offering 24/7 service)
Involvement
the amount of time and effort a buyer invests in the search, evaluation, and decision processes of consumer behavior
Integrated Marketing Communications (IMC)
the careful coordination of all promotional messages for a product or service to ensure the consistency of messages at every contact point at which a co. meets the consumer -managers carefully work out roles of various promotional elements in marketing mix, coordinate timing of promotional activities, carefully monitor results of each campaign for future improvement -ideally, marketing communications from each promotional mix element are integrated so that message reaching the consumer is the same regardless of whether it is from an ad, a salesperson in the field, a FB fan page, or a coupon in the newspaper -from consumers' standpoint, a co.'s marketing communications are already integrated; they don't think think in terms of diff promo mix elements like marketers do -marketers sometimes fail to integrate communication efforts from one element to the next, most commonly rift bxn personal selling and other element of promo mix -unintegrated/disjointed/uncoordinated promo activity=wasteful and inefficient Growing in importance bc: -proliferation of 1000s of media choices=more complex task -mass market fragmented -marketers slashed ad spending in favor of promo techniques that generate immediate sales responses and those that are easily measured, like direct marketing/online advertising
Situational Involvement
the circumstances of a purchase may temporarily transform a low-involvement decision into a high-involvement one -bc consumer perceives risk in a specific situation (i.e. usually buy cheap wine, but boss coming over so high-involvement decision to buy more prestigious brand)
Promotional Mix
the combination of promotional tools-including advertising, public relations, personal selling, sales promotion, and social media-used to reach the target market and fulfill the organization's overall goals
Mass Communication
the communication of a concept or message to large audiences -a great # of marketing communication are directed to consumers as a whole, usually thru mass medium like TV or newspapers When a company advertises: -generally does not personally know the ppl w whom it is trying to communicate -often cannot respond immediately to consumers' reactions of its messages -clutter from competitors' messages/other distractions in the environment can reduce its effectiveness
Encoding
the conversion of a sender's ideas and thoughts into a message, usually in the form of words or signs -what the source says is not what matters, but what the receiver hears -one way to convey message that receiver will hear properly is to use concrete words and pictures
Markup Pricing
the cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise accounted for; the total determines the selling price -most popular method used by wholesalers and retailers -doesn't directly analyze the costs of production i.e. retailer adds a certain percentage (22%) to the cost of the merchandised received ($1.80) to arrive at the retail price ($2.20) Gross Margin: diff bxn retailer's cost and the selling price (40c) Retail Price=cost/(1-Desired return on Sales) Marketing manager must calculate adequate gross margin=amount added to cost to determine price; GM must provide adequate funds to cover selling expenses and profit
Gambled Price Discount
the customer receives a discount based upon the outcome of a probabilisitic gamble (and which is therefore uncertain) i.e. roll-the-dice discount, Sears' Super Scratch event
Commercialization
the decision to market a product; final stage of the new product development process -sets several tasks into motion: ordering production materials/equipment, starting production, building inventories, shipping product to field distribution pts, training sales force, announcing new product to the trade, and advertising to potential customers
Complexity
the degree of difficulty involved in understanding and using a new product -the more complicated/difficult the product is, the slower its diffusion
Trialability
the degree to which a product can be tried on a limited basis or sampled -the easier it is to try, the quicker its diffusion (i.e. much easier to try new breakfast cereal than a new personal computer)
Observability
the degree to which the benefits or other results of using the product can be observed by others and communicated to target customers -the greater its visibility, the quicker it diffuses (i.e. cars and fashion items more visible than personal care products)
Compatibility
the degree to which the new product is consistent w existing values and product knowledge, past experiences, and current needs -the more consistent the product is w current conditions, the faster its diffusion
Nonprofit Organization Marketing
the effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets Organizations vary in size, purpose, and environment, but most do following marketing activities: -ID target target customers (clients, patients, members, sponsors) -specify objectives explicitly/implicitly -develop, manage, and eliminate programs and services -decide on prices to charge (fees, donations, tuition, fares, fines, or rates) -schedule events or programs, and determine where they will be held/where services will be offered -communicate their availability thru brochures, signs, PSAs, or ads
Screening
the first filter in the product development process, which eliminates ideas that are inconsistent w the organization's new-product strategy or are obviously inappropriate for some other reason -new-product committee performs this review -concept tests used at this stage to rate concept (or product) alternatives
Introductory Stage
the full-scale launch of a new product into the marketplace Characterized by: -high failure rate -little competition -frequent product modification -limited distribution Marketing costs high bc: -high dealer margins necessary to get adequate distribution -incentives needed to get consumers to try new products -ad expenses high bc need to educate consumers about new product's benefits -production costs high as product and manufacturing flaws are identified and corrected and try to dev. mass production economies In this Stage: -sales increasing slowly -profits are usually negative due to R&D costs, factory tooling, and high introduction costs -length of stage varies largely depending on product characteristics (product's advantage over substitutes, educational effort required to make product known, and resources management commits to new item) >shorter length preferred to help reduce impact of negative earnings/cash flows >once product gets off ground, financial burden starts to diminish Promotion Strategy: -focuses on dev product awareness and informing consumers about product category's potential benefits -communication challenge=stimulating primary demand=demand for the product in general rather than for a specific brand -intensive personal selling often needed to gain acceptance for product among wholesalers/retailers -promoting convenience products--heavy consumer sampling and couponing -promoting shopping and speciality products--educational advertising and personal selling to final customer (i.e. products in this stage: personal computer databases,wind-powered home electric generators, 3D TVs, holographic projection)
Gap 5: Perception Gap
the gap between the service that customers receive and the service they want -can be positive or negative--depends on firm's performance relative to consumer's expectations -firms want to consistently perform at a level above and beyond what customers expect, or at least meet expectations -mismatch bxn expected service and perceived service
Gap 1: Knowledge Gap
the gap between what customers want and what management thinks customers want -results from a lack of understanding or a misinterpretation of the customers' needs, wants, or desires -this gap is likely to occur if firms do little or no customer satisfaction marketing research -to close gap, firms must stay attuned to customer wishes by researching customer needs and satisfaction
Gap 2: Standards Gap
the gap between what management thinks customers want and the quality specifications that management develops to provide the service -result of management's inability to translate customer's needs into delivery systems/service quality specifications within the firm
Gap 4: Communications Gap
the gap between what the company provides and what the customer is told it provides -miscommunication error leads to major let down when customer expectations aren't met -may include misleading/deceptive advertising promising more than the firm can deliver or doing "whatever it takes" to get the business -to close this gap, firms must create realistic customer expectations through honest, accurate communication about what the firm can provide
Base Price
the general price level at which the company expects to sell the G/S correlated w pricing strategy: -above market (price skimming) -at market (status quo pricing) -below market (penetration pricing)
Perishability
the inability of services to be stored, warehoused, or inventoried -one of most important challenges in many service industries: finding ways to synchronize supply and demand (i.e. airline and hotel industries: an empty hotel room/airplane seat produces no revenue that day, revenue=lost; BUT often forced to turn away full-price customers during peak periods)
Intangibility
the inability of services to be touched, seen, tasted, heard, or felt in the same manner that goods can be sensed -harder to evaluate service quality because fewer search qualities BUT more experience and credence qualities -harder for marketing to communicate benefits of intangible service than of tangible goods -marketers rely on tangible cues to show service's nature and quality -facilities customers visit or from where services are delivered=big tangible part of total service offering (send messages thru decor, neatness/clutter of area, and staff's manners/dress)
Inseparability
the inability of the production and consumption of a service to be separated; consumers must be present during the production and are actually involved in the production of the services they buy (i.e. haircut, surgery) -services often sold, produced and consumed at the same time -means services often can't be produced in a centralized location and consumed in decentralized locations -inseparable from the perspective of the service provider: quality of services firms deliver directly depends on the quality of the employees performing them
Limited Decision Making
the type of decision making that requires a moderate amount of time/effort for gathering information and deliberating about an unfamiliar brand in a familiar product category (moderate involvement) -consumer has previous product experience, but unfamiliar with current brands available -i.e. store is out of favorite brand of toothpaste, so evaluate several other brands and forced to choose one of them
Perceived Value
the value a consumer expects to obtain from a purchase
Heterogenity
the variability of the inputs and outputs of services, which causes services to tend to be less standardized and uniform than goods (i.e. physicians in a group practice or barbers in a barbershop differ within each group in their technical and interpersonal skills) -standardization and training help increase consistency and reliability (i.e. IT certification programs)
Real self-image
the way an individual actually perceives himself
Ideal self-image
the way an individual would like to be perceived
New Product Lines
these products, which the firm has not previously offered, allow it to enter an established market; category of new products i.e. Moleskin expanding from just black-covered journals into pens, travel bags and digital creative apps
Improvements or Revisions of Existing Products
this "new and improved" product may be significantly or only slightly changed; new product category i.e. iphone 5, iphone 5s, iphone6, etc.
Purpose of Diffusion Model
this model helps guide marketers in dev. and implementing promotion strategy -As focus of promotional campaign shifts from early adopters, to early majority, to late majority, marketers should study these target markets' different: >dominant characteristics >buying behavior >media characteristics AND revise messages media strategy to fit
Additions to Existing Product Lines
this new product category includes new products that supplement a firm's established line i.e. Taco Bell's new Quesalupa combo of quesadilla and chalupa
Lower-priced Products
this new product category refers to products that provide performance similar to competing brands at a lower price i.e. HP Laserjet Color MFP is scanner, copier, printer, and fax machine combined; lower price than conventional copiers/much lower than combined price of all 4 items
Professional Services Pricing
used by ppl w lengthy experience, training, and often certification by a licensing board (i.e. lawyers, physicians, and family counselors) -professionals sometimes charge hourly rate, but sometimes fees based on solution of a problem or performance of an act -have ethical responsibility not to overcharge -demand sometimes inelastic, so may be tempted to charge "all the traffic will bare" (i.e. heart surgery)
