MKT 451 Exam 2

Packaging

All the activities of designing and producing the container for a product Packages might have up to three layers: a primary package inside a secondary package, with one or more packaged units sent in a shipping package. An extension of the product itself

Straddle Positioning

Allow brands to expand their market coverage and potential customer base. If the POP and POD are not credible, however, the brand may not be viewed as a legitimate player in either category

The Consumer-Adoption Process

An individual's decision to become a regular user of a product Adoption is followed by the consumer-loyalty process. New-product marketers typically aim at early adopters and use the theory of innovation diffusion and consumer adoption to identify them.

Value Proposition (Examples)

Company: Hertz (car rental) Target Customers: Busy Professionals Value Proposition: Fast, convenient way to rent the right type of car at an airport

Geographic Segmentation

Geographical units Nations, states, regions, counties, cities, or neighborhoods Nielsen Claritas' PRIZM Education and affluence Family life cycle Urbanization Race and ethnicity Mobility Marketing based on neighborhoods, marketing may be different for different regions

5. Business Analysis (NPDP)

The firm evaluates the proposed product's business attractiveness Management needs to prepare sales, cost, and profit projections to determine whether they satisfy company objectives

Income (DS)

Income segmentation is a long-standing practice

Expanding Total Market Demand

New Customers More usage

Introduction Stage (Product Life-Cycle) (Marketing Strategies)

To be the first to introduce a product can be rewarding, but risky and expensive Successful imitators thrived by offering lower prices, continuously improving the product, or using brute market power to overtake the pioneer Because it takes time to roll out a new product, work out technical problems, fill dealer pipelines, and gain consumer acceptance, sales growth tends to be slow in the introduction stage. Profits are negative or low, and promotional expenditures are at their highest ratio to sales because of the need to (1) inform potential consumers, (2) induce product trial, and (3) secure distribution.

Multiple Frames of Reference

Two main options: First develop the best possible positioning for each type or class of competitors and then create one combined positioning robust enough to effectively address all Prioritize competitors and choose the most important set as the competitive frame

Optional Market Share (7.3)

When you achieve the highest profitability and have around 50% market share

Competitive Advantage

a company's ability to perform in one or more ways that competitors cannot or will not match

Means of differentiation

marketers have to match customer's desire for a benefit with their company's ability to deliver it

Brand Mantras

A 3 to 5 word articulation of the brand's heart and soul, closely related to other branding concepts like 'brand essence' and 'core brand promise'. Brand mantras must economically communicate what the brand is and what it is NOT McDonald's "Food, Folks, and Fun" Brand essense Core Brand Promise Personally meaningful and relevant

Market Segment

A group of customers who share a similar set of needs and wants Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation

Life Stage (DS)

A person's major concern (e.g., divorce)

Categories of Service Mix

A pure tangible good A tangible good with accompanying services A hybrid A major service with accompanying minor goods/services A pure service

The New Service Realities

A shifting customer relationship Customer empowerment & coproduction Satisfying employees as well as customers

Internal Branding

Activities and processes that help inform/inspire employees about brands -Holistic marketers train and encourage distributors and dealers to serve their customers well Marketers adopt an internal perspective to be sure employees and marketing partners appreciate and understand basic branding notions and how they can help—or hurt—brand equity. When employees care about and believe in the brand, they're motivated to work harder and feel greater loyalty to the firm. Some important principles for internal branding are: Choose the right moment. Turning points are ideal opportunities to capture employees' attention and imagination. Link internal and external marketing. Internal and external messages must match. Bring the brand alive for employees. Internal communications should be informative and energizing. Keep it simple. Don't overwhelm employees with too many details. Focus on the key brand pillars, ideally in the form of a brand mantra.

Demographic Segmentation

Age & life-cycle stage Life stage Gender Income Generation Ethnic Background & Culture Marketers need to understand a specific demographic so they can first identify what their life is like Marketers need to factor the norms, language nuances, buying habits, and business practices of multicultural markets into the initial formulation of their marketing strategy

How does Branding Work?

American Marketing Association A brand is "a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors" A brand is thus a product or service whose dimensions differentiate it in some way from other products or services designed to satisfy the same need. These differences may be functional, rational, or tangible—related to product performance of the brand. They may also be more symbolic, emotional, or intangible— related to what the brand represents or means in a more abstract sense.

User And Usage-Related Variables

Attitudes Occasions User Status Usage Rate Buyer Readiness Stage Loyalty Status

Points-of-parity (POPs)

Attribute/benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands Domestic Beer, you can get drunk off all of them if you try hard enough POP forms: Category Correlational Competitive

Points-of-difference (PODs)

Attributes/benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand Method Soap & other products POD criteria: Desirable to customer Deliverable by company Differentiation from competition

Stages in the Adoption Process

Awareness Interest Evaluation Trial Adoption An innovation is any good, service, or idea that someone perceives as new, no matter how long its history. Everett Rogers defines the innovation diffusion process as "the spread of a new idea from its source of invention or creation to its ultimate users or adopters." The consumer-adoption process is the mental steps through which an individual passes from first hearing about an innovation to final adoption. These five steps are: (1) awareness (consumer becomes aware of the innovation but lacks information about it), (2) interest (consumer is stimulated to seek information about the innovation), (3) evaluation (consumer considers whether to try the innovation), (4) trial (consumer tries the innovation to estimate its value), and (5) adoption (consumer decides to make full and regular use of the innovation).

Alternative Approaches to Positioning

Brand narratives and storytelling Brand story Consumer journey Visual language Narrative expression Brand role in consumer's life Cultural branding

Devising a Branding Strategy

Can develop new brand elements for new product Can apply some of existing brand elements Can use a combination of new & existing brand elements A firm's branding strategy—often called its brand architecture—reflects the number and nature of both common and distinctive brand elements. Deciding how to brand new products is especially critical. A firm has three main choices listed in this slide.

Market-Follower Strategies

Cloner Imitator Adapter

Competitive frame of reference

Defines which other brands a brand competes with and which should thus be the focus of competitive analysis Category membership and industry Shares of market, mind, and heart

Market-Challenger Strategies

Defining the strategic objective and opponent(s) A market challenger can attack: The market leader Underfunded firms its own size Small local and regional firms An industry as a whole

Design Differentiation

Design -The totality of features that affect the way a product looks, feels, and functions to a consumer As competition intensifies, design offers a potent way to differentiate and position a company's products and services.

Product Classifications

Durability Tangibility Use Marketers classify products on the basis of durability, tangibility, and use (consumer or industrial). Each type has an appropriate marketing-mix strategy.

Figure 9.2 : New-Product Development Process (NPDP)

Everything starts with an idea, then you think about that idea

Competitive Strategies for Market Leaders

Expanding total market demand Protecting market share Increasing market share

Packaging Objectives

Identify the brand Convey descriptive and persuasive information Facilitate product transportation and protection Assist at-home storage Aid at-home consumption Packaging must achieve a number of objectives: (1) identify the brand, (2) convey descriptive and persuasive information, (3) facilitate product transportation and protection, (4) assist at-home storage, and (5) aid at-home consumption.

Distinctive Characteristics of Service

Intangibility Inseparability Variability Perishability

Behavioral Segmentation

Marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product Needs based segmentation Needs and benefits Decision roles Initiator Influencer Decider Buyer User

Achieving Excellence in Services Marketing

Marketing Excellence (S13) Strategic concept Top-management commitment High standards Profit tiers Monitoring systems Satisfying customer complaints Strategic concept

Industrial-Goods Classification

Materials and Parts - farming, provides a lot of raw materials Capital Items - Supplies and Business Services Materials and parts are goods that enter the manufacturer's product completely. Raw materials can be either farm products (wheat) or natural products (iron ore). Manufactured materials and parts fall into two categories: component materials (wires) and component parts (small motors). Capital items are long-lasting goods that facilitate developing or managing the finished product, including installations (factories) and equipment (tools). Supplies and business services are short-term goods and services that facilitate developing or managing the finished product.

BrandDynamics Model (BEM) (8.2)

Meaningful, different, & salient associations Power, premium, & potential outcomes This model is based on a system of brand associations—meaningful, different, and salient—that builds customer predisposition to buy a brand. The associations have three important outcome measures: power (a prediction of brand volume share), premium (ability to command a price premium), and potential (the probability that a brand will grow value share).

Gender (Demographic Segmentation (DS))

Men and women have different attitudes and behave differently

Age and life-cycle stage (DS)

Our wants and abilities change with age

The Innovation Imperative And New Product Success

The innovation imperative Continuous innovation is a necessity New-product success Incremental innovation vs. disruptive technologies (typically cheaper, altering how we perceive products/services) Companies that fail to develop new products leave themselves vulnerable to changing customer needs and tastes, shortened product life cycles, increased domestic and foreign competition, and especially new technologies. Most established companies focus on incremental innovation, entering new markets by tweaking products for new customers, using variations on a core product to stay one step ahead of the market, and creating interim solutions for industry-wide problems. Newer companies create disruptive technologies that are cheaper and more likely to alter the competitive space.

Brand Portfolios

The set of all brands and brand lines a particular firm offers for sale in a particular category or market segment -Flankers -Cash Cows -Low-end entry level -High-end prestige The basic principle is to maximize market coverage so no potential customers are being ignored, but minimize brand overlap so brands are not competing for customer approval. Each brand should be clearly differentiated and appealing to a sizable enough marketing segment to justify its marketing and production costs. Marketers carefully monitor brand portfolios over time to identify weak brands and kill unprofitable ones. Brands can also play a number of specific roles as part of a portfolio. Flanker or fighter brands are positioned with respect to competitors' brands so that more important (and more profitable) flagship brands can retain their desired positioning. Some brands may be kept around despite dwindling sales because they manage to maintain their profitability with virtually no marketing support. Companies can effectively milk these "cash cow" brands by capitalizing on their reservoir of brand equity. The role of a relatively low-priced brand in the portfolio often may be to attract customers to the brand franchise. Retailers like to feature these "traffic builders" because they are able to trade up customers to a higher-priced brand. The role of a relatively high-priced brand often is to add prestige and credibility to the entire portfolio.

Managing Product-Support Services

Three types of customer worries: Failure frequency Downtimes Out-of-pocket costs

Services Differentiation

When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. The main service differentiators are: Ordering Ease Ordering ease describes how easy it is for the customer to place an order with the company. Delivery Delivery refers to how well the product or service is brought to the customer, including speed, accuracy, and care throughout the process. Installation Installation refers to the work done to make a product operational in its planned location. Customer Training Customer training helps the customer's employees use the vendor's equipment properly and efficiently. Customer Consulting Customer consulting includes data, information systems, and advice services the seller offers to buyers. Maintenance and Repair Maintenance and repair programs help customers keep purchased products in good working order. These services are critical in business-to-business settings.

Perceptual Mapping

visual representations of consumer perceptions and preferences, they provide quantitative pictures of market situations and the way consumers view different products, services, and brands along various dimensions By overlaying consumer preferences with brand perceptions, marketers can reveal "openings" that suggest unmet consumer needs and marketing opportunities

Brand Equity Models (BEM)

BrandAsset Valuator Brandz & BrandDynamics Brand Resonance Model Although marketers agree about basic branding principles, a number of models of brand equity offer some differing perspectives. Here we highlight three more established ones. BrandAsset Valuator. Advertising agency Young and Rubicam (Y&R)'s model of brand equity, the BrandAsset® Valuator (BAV), covers four pillars of brand equity. BrandZ and BrandDynamics™. Marketing research consultants Millward Brown and WPP have developed the BrandZ model of brand strength, at the heart of which is the BrandDynamics model. Brand Resonance Model. The brand resonance model views brand building as an ascending series of steps.

Psychographic Segmentation (Figure 6.1)

Buyers are divided into groups on the basis of psychological/personality traits, lifestyle, or values Using the science of psychology in what we do, from this we can understand the consumer in terms of what they've experience and the impact that has had on their life/personality

Decline Stage (PLC, Marketing Strategies)

Eliminating weak products Harvesting and divesting Sales decline for a number of reasons, including technological advances, shifts in consumer tastes, and increased domestic and foreign competition. All can lead to overcapacity, increased price cutting, and profit erosion. As sales and profits decline, some firms withdraw. Those remaining may reduce the number of products they offer, exiting smaller segments and weaker trade channels, cutting marketing budgets, and reducing prices further. Unless strong reasons for retention exist, carrying a weak product is often very costly. A company in an unattractive industry that possesses competitive strength should consider shrinking selectively. A strong competitor in an attractive industry should consider strengthening its investment. Companies that successfully restage or rejuvenate a mature product often do so by adding value to it. Two other options are harvesting and divesting. Harvesting calls for gradually reducing a product or business's costs while trying to maintain sales. When a company decides to divest a product with strong distribution and residual goodwill, it can probably sell it to another firm. If the company can't find any buyers, it must decide whether to liquidate the brand quickly or slowly.

Branding Decisions - Alternative Branding Strategies

Individual or separate family brand names Corporate umbrella or company brand name Sub-brand name Assuming a firm decides to brand its products or services, it must choose which brand names to use. Three general strategies are popular: Individual or separate family brand names. Companies often use different brand names for different quality lines within the same product class. Corporate umbrella or company brand name. Many firms, such as GE, use their corporate brand as an umbrella brand across their entire range of products. Sub-brand name. Sub-brands combine two or more of the corporate brand, family brand, or individual product brand names.

1. Idea Generation (NPDP)

Interacting with customers, employees, scientists Using creativity techniques Studying competitors Crowdsourcing Ideas can come from interacting with customers, employees, scientists, and other groups; from using creativity techniques; and from studying competitors. Through Internet-based crowdsourcing, paid or unpaid outsiders can offer needed expertise or a different perspective on a new-product project that might otherwise be overlooked.

Growing the Core

Make the core of the brand as distinctive as possible Drive distribution through both existing and new channels Offer the core product in new formats or versions Some of the best opportunities come from growing the core—focusing on the most successful existing products and markets. UK marketing guru David Taylor advocates three main strategies, citing these examples: 1. Make the core of the brand as distinctive as possible. Galaxy chocolate has successfully competed with Cadbury by positioning itself as "your partner in chocolate indulgence" and featuring smoother product shapes, more refined taste, and sleeker packaging. 2. Drive distribution through both existing and new channels. Costa Coffee, the number-one UK coffee shop chain, has found new distribution routes using drive-through outlets, vending machines, and in-school locations. 3. Offer the core product in new formats or versions. WD40 offers a Smart Straw version of its popular multipurpose lubricant with a built-in straw that pops up for use.

Generation (DS)

Millennials (Gen Y) Gen X Baby Boomers Silent Generation

The Product Hierarchy

Product system Product mix/assortment -Width - how many different product lines a company carries -Length - total number of lines in that mix -Depth - how many variations are offered of each product in that area -Consistency - how closely related the product lines are in the end use A product system is a group of diverse but related items that function in a compatible manner. A product mix (also called a product assortment) is the set of all products and items a particular seller offers for sale. A product mix consists of various product lines. A company's product mix has a certain width, length, depth, and consistency. The width of a product mix refers to how many different product lines the company carries. The length of a product mix refers to the total number of items in the mix. The depth of a product mix refers to how many variants are offered of each product in the line. The consistency of the product mix describes how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

The Role of Brands (for consumers)

Reduce risk Simplify decision making Take on personal meaning Become part of identity Take on human-like characteristics A brand identifies the maker of a product and allows consumers to assign responsibility for its performance to that maker or distributor. Consumers may evaluate the identical product differently depending on how it is branded. They learn about brands through past experiences with the product and its marketing, finding out which brands satisfy their needs and which do not.

Determinants of Service Quality

Reliability Responsiveness Assurance Empathy Tangibles

The Nature of Services

Service Any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything Its production may or may not be tied to a physical product. The government sector, with its courts, employment services, hospitals, loan agencies, military services, police and fire departments, postal service, regulatory agencies, and schools, is in the service business. The private nonprofit sector—museums, charities, churches, colleges, foundations, and hospitals—is in the service business. A good part of the business sector, with its airlines, banks, hotels, insurance companies, law firms, management consulting firms, medical practices, motion picture companies, plumbing repair companies, and real estate firms, is in the service business. Many workers in the manufacturing sector, such as computer operators, accountants, and legal staff, are really service providers, making up a "service factory" providing services to the "goods factory." And those in the retail sector, such as cashiers, salespeople, and customer service representatives, are also providing a service.

Inseparability

Services are typically produced and consumed simultaneously

Intangibility

Services cannot be seen, tasted, felt, heard, or smelled Physical evidence and presentation tools: Place People Equipment Communication material Symbols Price Table 10.1

Perishability

Services cannot be stored Strategies to match demand & supply On demand side: Differential pricing Nonpeak demand Complementary services Reservation services On supply side: Part-time employees Peak-time efficiency routines Increased consumer participation Shared services Facilities for future expansion

The Role of Brands (for firms)

Simplify product handling Organize inventory & accounting Offer legal protection Create brand loyalty Secure competitive advantage Brand loyalty provides predictability and security of demand for the firm, and it creates barriers to entry that make it difficult for other firms to enter the market. Loyalty also can translate into customer willingness to pay a higher price—often even 20 percent to 25 percent more than competing brands.

4. Market Strategy Development (NPDP)

1. Target market's size, structure, & behavior; the planned brand positioning; the sales, market share & profit goals sought in first few years 2. Planned price, distribution strategy, and marketing budget for the first year 3. Long-run sales & profit goals and marketing-mix strategy over time Following a successful concept test, the new-product manager will develop a preliminary three-part strategy plan for introducing the new product into the market.

Product Life-cycle (Marketing Strategies)

A company's positioning and differentiation strategy must change as its product, market, and competitors change over the PLC To say a product has a life cycle is to assert four things: (1) products have a limited life, (2) product sales pass through distinct stages, each posing different marketing challenges and opportunities, (3) profits rise and fall at different stages, and (4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each stage. Most product life cycles are portrayed as bell-shaped curves (see Figure 9.5), typically divided into four stages: introduction, growth, maturity, and decline. In introduction, sales grow slowly as the product is introduced; profits are nonexistent because of the heavy introductory expenses. Growth is a period of rapid market acceptance and substantial profit improvement. In maturity, sales growth slows because the product has achieved acceptance by most potential buyers, and profits stabilize or decline because of increased competition. In decline , sales drift downward and profits erode.

Understanding Positioning

The act of designing a company's offering and image to occupy a distinctive place in the minds of the target market Value proposition

Variability

The quality of services depends on who provides them, when and where, and to whom As such, services are highly variable

Brand Equity (8.1)

Added value endowed to products with consumers Brand equity may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability it commands.

Establishing a Brand Positioning

Announcing category benefits - to reassure consumers that a brand will deliver on the fundamental reason for using a category, marketers frequently use benefits to announce category membership Comparing to exemplars - well-known, noteworthy brands in a category can also help a brand specify its category membership (Tommy Hilfiger) Relying on product descriptor - the product descriptor that follows the brand name is often a concise means of convey ing category origin

Brand Contract

Any information-bearing experience (positive or negative) a customer or prospect has with the brand, its product category, or its market Customers come to know a brand through a range of contacts and touch points: personal observation and use, word of mouth, interactions with company personnel, online or telephone experiences, and payment transactions. Integrated marketing is about mixing and matching marketing activities to maximize their individual and collective effects. Marketers need a variety of different marketing activities that consistently reinforce the brand promise.

Product

Anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas Many people think a product is tangible, but this definition suggests otherwise.

Product (Product Characteristics and Classifications)

Anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas Many people think a product is tangible, but this definition suggests otherwise.

Measuring and Managing Brand Equity

Brand audit Brand-tracking studies Brand valuation A brand audit is a focused series of procedures to assess the health of the brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity. Brand-tracking studies use the brand audit as input to collect quantitative data from consumers over time, providing consistent, baseline information about how brands and marketing programs are performing. Tracking studies help us understand where, how much, and in what ways brand value is being created to facilitate day-to-day decision making. Marketers should distinguish brand equity from brand valuation, which is the job of estimating the total financial value of the brand.

Brand Equity Drivers

Brand element or identify choices Product & accompanying marketing Other associations Marketers build brand equity by creating the right brand knowledge structures with the right consumers. The success of this process depends on all brand-related contacts—whether marketer-initiated or not. From a marketing management perspective, however, there are three main sets of brand equity drivers: 1. The initial choices for the brand elements or identities making up the brand (brand names, URLs, logos, symbols, characters, spokespeople, slogans, jingles, packages, and signage). 2. The product and service and all accompanying marketing activities and supporting programs. 3. Other associations indirectly transferred to the brand by linking it to some other entity (a person, place, or thing).

Branding New Products (Table 8.3)

Brand extension Sub-brand Parent brand Master/family brand Line extension Category extension Brand line Brand mix Branded variants Licensed product Deciding how to brand new products is especially critical. A firm has three main choices: (1) develop new brand elements for the new product, (2) apply some existing brand elements, or (3) use a combination of new and existing brand elements (see definitions in Table 8.3).

Managing Brand Equity

Brand reinforcement -Requires the brand always be moving forward Brand revitalization -Almost any kind starts with the product Marketers can reinforce brand equity by consistently conveying the brand's meaning in terms of (1) what products it represents, what core benefits it supplies, and what needs it satisfies; and (2) how the brand makes products superior and which strong, favorable, and unique brand associations should exist in consumers' minds. The first step in revitalization is to understand what the sources of brand equity were to begin with. Are positive associations losing their strength or uniqueness? Have negative associations become linked to the brand? Then decide whether to retain the same positioning or create a new one and, if so, which new one.

The Scope of Branding

Branding The process of endowing products and services with the power of a brand It's all about creating differences between products. Marketers need to teach consumers "who" the product is—by giving it a name and other brand elements to identify it—as well as what the product does and why consumers should care. Branding creates mental structures that help consumers organize their knowledge about products and services in a way that clarifies their decision making and, in the process, provides value to the firm.

Growth Strategies

Building market share Developing committed customers and stakeholders Building a powerful brand Innovating new offerings and experiences Expanding internationally Acquisitions, mergers, and alliances Building an outstanding reputation for social responsibility Partnering with government and NGOs Phil and Milton Kotler stress the following eight growth strategies.50 Companies can grow by (1) building market share, (2) developing committed customers and stakeholders, (3) building a powerful brand, (4) innovating new offerings and experiences, (5) expanding internationally, (6) arranging acquisitions, mergers, and alliances, (7) building an outstanding reputation for social responsibility, and (8) partnering with government and nongovernmental organizations.

Ingredient Branding

Co-branding that creates brand equity for parts that are necessarily contained within other branded products For host products whose brands are not that strong, ingredient brands can provide differentiation and important signals of quality. An interesting take on ingredient branding is self-branded ingredients that companies advertise and even trademark.

3. Concept Development and Testing (NPDP)

Concept development Figure 15.3(a): product-positioning map Figure 15.3(b): brand-positioning map Concept testing Rapid prototyping and virtual reality A company can form several concepts, select the most promising, and create a product-positioning map for it. Figure 9.3(a) shows the positioning of a product concept, a low-cost instant breakfast drink, based on the two dimensions of cost and preparation time and compared with other breakfast foods. These contrasts can be useful in communicating and promoting a concept to the market. Figure 9.3 (b) is a brand-positioning map , a perceptual map showing the current positions of three existing brands of instant breakfast drinks (Brands A-C) as seen by consumers in four segments, whose preferences are clustered around the points on the map. The brand-positioning map helps the company decide how much to charge and how calorific to make its drink. As shown on this map, the new brand would be distinctive in the medium-price, medium-calorie market or in the high-price, high-calorie market. There is also a segment of consumers (4) clustered fairly near the medium-price, medium-calorie market, suggesting this may offer the greatest opportunity. Concept testing means presenting the product concept to target consumers, physically or symbolically, and getting their reactions. The more the tested concepts resemble the final product or experience, the more dependable concept testing is. In the past, creating physical prototypes was costly and time consuming, but today firms can use rapid prototyping to design products on a computer and then produce rough models to show potential consumers for their reactions. Companies are also using virtual reality to test product concepts.

Consumer-Goods Classification

Convenience - soft drinks Shopping - furniture Specialty - Cars Unsought - smoke detectors Classified on the basis of shopping habits, these include convenience goods (such as soft drinks) that are purchased frequently, immediately, and with minimal effort; shopping goods (such as furniture) that consumers compare on such bases as suitability, quality, price, and style; specialty goods (such as cars) with unique characteristics or brand identification for which enough buyers are willing to make a special purchasing effort; and unsought goods (such as smoke detectors) that the consumer does not know about or normally think of buying.

Postsale Service Strategy

Customer service departments vary Customer-service evolution

Managing Service Quality

Customer switching behavior factors: Pricing Inconvenience Core service failure Service encounter failures Response to service failure Competition Ethical problems Involuntary switching

Market-Nicher Strategies

End-user specialist Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist

BrandAsset Valuator (BEM) (8.1)

Energized differentiation Relevance Esteem Knowledge Strong new brands show higher levels of energized differentiation and energy than relevance, whereas both esteem and knowledge are lower still. Leadership brands show high levels on all pillars, with strength greater than stature. Declining brands show high knowledge, a lower level of esteem, and even lower relevance and energized differentiation.

Positioning/Branding for a small business

Find compelling product performance advantage Focus on building one or two strong brands based on one or two key associations Encourage product trial in any way possible Develop cohesive digital strategy to make the brand "bigger and better" Create buzz and a loyal brand community Employ a well-integrated set of brand elements Leverage secondary associations Creatively conduct marketing research

Product Levels: The Customer-Value Hierarchy (9.1)

Five Product levels Customer-value hierarchy From middle-out: Core benefit Basic product expected product augmented product potential product In planning its market offering, the marketer needs to address five product levels (see Figure 9.1). Each level adds more customer value, and together the five constitute a customer-value hierarchy. The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel guest is buying rest and sleep. Marketers must see themselves as benefit providers. At the second level, the marketer must turn the core benefit into a basic product . Thus, a hotel room includes a bed, bathroom, and towels. At the third level, the marketer prepares an expected product, a set of attributes and conditions buyers normally expect when they purchase this product. Hotel guests expect a clean bed, fresh towels, and so on. At the fourth level, the marketer prepares an augmented product that exceeds customer expectations. In developed countries, brand positioning and competition take place at this level. At the fifth level stands the potential product, with all the possible augmentations and transformations the product or offering might undergo in the future. Here companies search for new ways to satisfy customers and distinguish their offering.

Brand Element Choice Criteria (table 8.2)

For Building a Brand: Memorable Meaningful Likeable For Defending the Brand: Transferrable Adaptable Protectable As shown in Table 8.2, there are six criteria for choosing brand elements. The first three— memorable, meaningful, and likable—are brand building. The latter three—transferable, adaptable, and protectable—are defensive and help leverage and preserve brand equity against challenges.

Product Differentiation

Form. Many products can be differentiated in form—the size, shape, or physical structure of a product. Features. Most products can be offered with varying features that supplement their basic function. Performance Quality. Performance quality is the level at which the product's primary characteristics operate. Conformance Quality. Buyers expect a high conformance quality, the degree to which all produced units are identical and meet promised specifications. Durability. Durability, a measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for durable goods. Reliability. Buyers normally will pay a premium for more reliable products. Reliability is a measure of the probability that a product will not malfunction or fail within a specified time period. Repairability. Repairability measures the ease of fixing a product when it malfunctions or fails. Ideal repairability would exist if users could fix the product themselves with little cost in money or time. Style. Style describes the product's look and feel to the buyer and creates distinctiveness that is hard to copy. Customization. Customized products and marketing allow firms to be highly relevant and differentiating by finding out exactly what a person wants—and doesn't want—and delivering on that.

Market-Challenger Strategies, choosing an attack strategy

Frontal attack - attacker matches its opponent's product, advertising, price, and distribution Flank attack - another name for identifying shifts that cause gaps to develop in the market, then rushing to fill the gaps Encirclement attack - attempts to capture a wide slice of territory by launching a grand offensive on several fronts Bypass attack - bypassing the enemy to attack easier markets offers 3 lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies Guerilla attack - consist of small, intermittent attacks, conventional and unconvential

Brand Extensions

Introducing a host of new products under a firm's strongest brand names Improved odds of new-product success Positive feedback effects Risk of brand dilution May harm parent brand Firm forgoes creating new brand Most new products are in fact brand extensions—typically 80 percent to 90 percent in any one year. Moreover, many of the most successful new products, as rated by various sources, are brand extensions. Two main advantages of brand extensions are that they can facilitate new-product acceptance and provide positive feedback to the parent brand and company. On the downside, line extensions may cause the brand name to be less strongly identified with any one product. Brand dilution occurs when consumers no longer associate a brand with a specific or highly similar set of products and start thinking less of the brand. The worst possible scenario is for an extension not only to fail, but to harm the parent brand in the process. One easily overlooked disadvantage of brand extensions is that the firm forgoes the chance to create a new brand with its own unique image and equity.

Emotional Branding

It should contain POD and POP that appeal to both the head and the heart A person's emotional response to a brand and its marketing will depend on many factors, an increasingly important one is the brand's authenticity

Labeling, Warranties, and Guarantees

Labeling -Identifies, grades, describes, and promotes the product Warranties -Formal statements of expected product performance by the manufacturer Guarantees -Suggest product is of high quality and the company is dependable A label performs several functions. First, it identifies the product or brand—for instance, the name Sunkist stamped on oranges. It might also grade the product; canned peaches are grade-labeled A, B, and C. The label might describe the product: who made it, where and when, what it contains, how it is to be used, and how to use it safely. Finally, the label might promote the product through attractive graphics. All sellers are legally responsible for fulfilling a buyer's normal or reasonable expectations. Products under warranty can be returned to the manufacturer or designated repair center for repair, replacement, or refund. Whether expressed or implied, warranties are legally enforceable. Guarantees reduce the buyer's perceived risk. They can be especially helpful when the company or product is not well known or when the product's quality is superior to that of competitors.

Maturity Stage (PLC, Marketing Strategies)

Market Modification Product Modification Marketing Program Modification At some point, the rate of sales growth slows. Most products are in this stage of the life cycle, which normally lasts longer than the preceding ones. Three ways to change the course for a brand in the maturity stage are market, product, and marketing program modifications. A firm might try to expand the market by increasing the number of users (converting nonusers, entering new segments, or attracting rivals' customers) and increasing usage rates among users (getting current customers to use the product on more occasions, use more on each occasion, or use the product in new ways). The firm can also try to stimulate sales by improving quality, features, or style. Finally, it might try to stimulate sales by modifying non-product elements—price, distribution, and communications in particular.

8. Commercialization (NPDP)

Market timing is critical 1. First Entry 2. Parallel Entry 3. Late Entry Commercialization is the costliest stage in the process because the firm will need to contract for manufacture, or it may build or rent a full-scale manufacturing facility. If a firm learns that a competitor is readying a new product, one choice is first entry (for "first mover advantages" of locking up key distributors and customers and gaining leadership). However, this can backfire if the product has not been thoroughly debugged. A second choice is parallel entry (timing its entry to coincide with the competitor's entry to gain both products more attention). A third choice is late entry (delaying its launch until after the competitor has borne the cost of educating the market). This might reveal flaws the late entrant can avoid and also show the size of the market.

Durability and Tangibility

Nondurable Goods - Beer, you drink it, then its gone Durable Goods - coffee good Services - legal advice, financial advice, hair cut Products fall into three groups according to durability and tangibility: 1. Nondurable goods are tangible goods normally consumed in one or a few uses, such as beer and shampoo. Because these goods are purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. 2. Durable goods are tangible goods that normally survive many uses: refrigerators, machine tools, and clothing. They normally require more personal selling and service, command a higher margin, and require more seller guarantees. 3. Services are intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs.

Factors Influencing the Adoption Process

Personal influence: effect one person has on another's attitude or purchase probability As Figure 9.4 shows, innovators are the first to adopt something new. After a slow start, an increasing number of people adopt the innovation, the number reaches a peak, and then it diminishes as fewer nonadopters remain. The five adopter groups (innovators, early adopters, early majority, late majority, and laggards) differ in their value orientations and their motives for adopting or resisting the new product. Personal influence, the effect one person has on another's attitude or purchase probability, has greater significance in some situations and for some individuals than others, and it is more important in evaluation than in the other stages. It has more power over late than early adopters and in risky situations.

6. Product Development (NPDP)

Physical prototypes Customer tests: alpha & beta testing The job of translating target customer requirements into a working prototype is helped by a set of methods known as quality function deployment (QFD). The methodology takes the list of desired customer attributes (CAs) generated by market research and turns them into a list of engineering attributes (EAs) that engineers can use. The goal of the R&D department is to find a prototype that embodies the key attributes in the product-concept statement, performs safely under normal use and conditions, and can be produced within budgeted manufacturing costs. When the prototypes are ready, they must be put through rigorous functional and customer tests before they enter the marketplace. Alpha testing tests the product within the firm to see how it performs in different applications. After refining the prototype further, the company moves to beta testing with customers.

Differentiating Services

Primary and secondary service features Innovation with services

Protecting Market Share

Proactive marketing - Responsive anticipation, marketer find a stated need and fills it, to see the writing on the wall, as when IBM changed from hardware producer to a service business - Creative anticipation, to devise innovative solutions Defensive Marketing defenses - Positioning Flank Preemptive counteroffensive mobile Contraction

Product Line Analysis and Product Line Length

Product map - see which competitors products are competing against our own Line stretching Down-market stretch Up-market stretch Line filling Line modernization Line featuring Line pruning Product line managers need to know the sales and profits of each item in each line to determine which ones to build, maintain, harvest, or divest. They also need to understand each line's market profile and image.11 Marketers can use a product map to see which competitors' items are competing against their own items and to identify market segments so they can gauge how well their items are positioned to serve the needs of each segment. A company lengthens its product line in two ways: line stretching and line filling. Line stretching occurs when a company lengthens its product line beyond its current range. A firm may choose a down-market stretch—introducing a lower-priced line—to attract shoppers who want value-priced goods, battle low-end competitors, or avoid a stagnating middle market. With an up-market stretch, the firm aims to achieve more growth, realize higher margins, or simply position itself as a full-line manufacturer. Companies serving the middle market might stretch their line in both directions. With line filling , a firm lengthens its product line by adding more items within the present range. Product lines need to be modernized. In rapidly changing markets, modernization is continuous. Companies plan improvements to encourage customer migration to higher-value, higher-price items. Marketers want to time improvements so they do not appear too early (damaging sales of the current line) or too late (giving the competition time to establish a strong reputation). The firm typically selects one or a few items in the line to feature, possibly a low-priced item to attract customers or a high-end item for prestige. Multi-brand companies all over the world try to optimize their brand portfolios, ensuring that every product in a line plays a role. This often means focusing on core brand growth and concentrating resources on the biggest and most established brands.

2. Idea Screening (NPDP)

Purpose of screening is to drop poor ideas as early as possible because product-development costs rise substantially at each successive development stage The company can estimate whether the probability of success is high enough to warrant continued development Most companies require new-product ideas to be described on a standard form for a committee's review. The description states the product idea, the target market, and the competition and estimates market size, product price, development time and costs, manufacturing costs, and rate of return. Comes down to the rate of return and the time involved

Characteristics of the Innovation (Factors Influencing the Adoption Process)

Relative advantage Compatibility Complexity Divisibility Communicability Five characteristics influence an innovation's rate of adoption. The first is relative advantage, the degree to which the innovation appears superior to existing products. The second is compatibility, the degree to which the innovation matches consumers' values and experiences. The third is complexity, the degree to which the innovation is difficult to understand or use. The fourth is divisibility, the degree to which the innovation can be tried on a limited basis. The fifth is communicability, the degree to which the benefits of use are observable or describable to others. Other characteristics: Cost Risk and uncertainty Scientific credibility Social approval Organization's environment, the organization itself, and the administrators Other forces come into play in trying to get a product adopted into organizations that are mostly government-funded, such as public schools. A controversial or innovative product can be squelched by negative public opinion.

Incorporating Self-service Technologies

SSTs can: Make transactions more accurate Make transactions more convenient Make transactions faster Reduce costs

7. Market Testing (NPDP) (Table 9.3)

Sales-Wave Research Customers Simulated Test Marketing Controlled Test Marketing Test Markets Table 9.3 shows four methods of consumer-goods testing, from the least costly to the most costly. Sales-Wave Research Consumers who initially try the product at no cost are reoffered it, or a competitor's product, at slightly reduced prices. The offer may be made as many as five times (sales waves), while the company notes how many customers select it again and their reported level of satisfaction. Simulated Test Marketing Thirty to 40 qualified shoppers are asked about brand familiarity and preferences in a specific product category and attend a brief screening of both well-known and new TV or print ads. Controlled Test Marketing A research firm delivers the product to a panel of participating stores and controls shelf position, pricing, and number of facings, displays, and point-of-purchase promotions. The company can evaluate sales, the impact of local advertising and promotions, and customers' impressions of the product. Test Markets The company chooses a few representative cities, implements a full marketing communications campaign, and sells the trade on carrying the product.

Brand Resonance Pyramid (BEM) (8.3)

The brand resonance model views brand building as an ascending series of steps. Enacting these four steps means establishing a pyramid of six "brand building blocks" as illustrated in Figure 8.3. The model emphasizes the duality of brands—the rational route to brand building is on the left side of the pyramid, and the emotional route is on the right side.

Increasing Market Share

The cost of buying higher market share through acquisition may far exceed its revenue value Consider these 4 factors first: Possibility of provoking antitrust action Economic Cost Pursuing the wrong marketing activities The effect of increased market share on actual and perceived quality

Customer Based brand Equity

The differential effect brand knowledge has on consumer response to the marketing of that brand Brand promise Differences in consumer response Brand knowledge Perceptions, preferences, and behavior A brand has positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified than when it is not identified. A brand has negative customer-based brand equity if consumers react less favorably to marketing activity for the brand under the same circumstances. A brand promise is the marketer's vision of what the brand must be and do for consumers. There are three key ingredients of customer-based brand equity. First, brand equity arises from differences in consumer response. If no differences occur, the brand-name product is essentially a commodity, and competition will probably be based on price. Second, differences in response are a result of consumers' brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with the brand. Brands must create strong, favorable, and unique brand associations with customers. Third, brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the brand's marketing. Stronger brands earn greater revenue.

Product Mix Pricing

The firm searches for a set of prices that maximizes profits on the total mix Product Line Pricing Optional Feature Pricing Captive Product Pricing Two Part Pricing By-Product Pricing Product Bundling Pricing We can distinguish six situations calling for product mix pricing, as shown in Table 9.2. 1. Product line pricing. The seller introduces price steps within a product line and strives to establish perceived quality differences that justify the price differences. 2. Optional-feature pricing. The seller offers optional products, features, and services with the main product, the way automakers offer different trim levels. The challenge is which options to include in the standard price and which to offer separately. 3. Captive-product pricing. Some products require the use of ancillary or captive products. Manufacturers of razors often price them low and set high markups on razor blades, the captive product. If the captive product is priced too high, however, counterfeiting and substitutions can erode sales. 4. Two-part pricing. Many service firms charge a fixed fee plus a variable usage fee. Cell phone users often pay a monthly fee plus charges for calls that exceed their allotted minutes. The challenge is deciding how much to charge for basic service and variable usage. 5. By-product pricing. The production of certain goods (such as meats) often yields by-products that should be priced on their value. Income from the by-products will make it easier for the company to charge less for its main product if competition forces it to do so. 6. Product-bundling pricing. Pure bundling occurs when a firm offers its products only as a bundle. In mixed bundling, the seller offers goods both individually and in bundles, normally charging less for the bundle than for the items purchased separately. Savings on the price bundle must be enough to induce customers to buy it.

Customer Equity

The sum of lifetime values of all customers Is affected by customer acquisition, retention, and cross-selling We can relate brand equity to one other important marketing concept: customer equity. The aim of customer relationship management (CRM) is to produce high customer equity. Customer lifetime value is affected by revenue and by the costs of customer acquisition, retention, and cross-selling.

Leveraging Secondary Associations (8.4)

The third and final way to build brand equity is to "borrow" it by linking the brand to other information in memory that conveys meaning to consumers (see Figure 8.4). These "secondary" brand associations can link to sources such as the company itself, countries or other geographical regions, and channels of distribution as well as to other brands, characters (through licensing), spokespeople (through endorsements), sporting or cultural events (through sponsorship), or other third-party sources (through awards or reviews).

Branding Decisions - House of brands & a branded house

The use of individual or separate family brand names has been referred to as a "house of brands" strategy, whereas the use of an umbrella corporate or company brand name is a "branded house" strategy. These two strategies represent two ends of a continuum. A sub-brand strategy falls somewhere between. With a branded house strategy, it is often useful to have a well-defined flagship product. A flagship product is one that best represents or embodies the brand as a whole to consumers. It often is the first product by which the brand gained fame, a widely accepted best-seller, or a highly admired or award-winning product.

Growth Stage (PLC, Marketing Strategies)

To sustain rapid market share growth now: Improve product quality, add new features, and improve styling Add new models and flanker products to protect the main product Enter new segments Increase distribution coverage and enter new channels Shift from awareness and trial communications to preference and loyalty communications Cut price to attract price-conscious buyers By spending money on product improvement, promotion, and distribution, the firm can capture a dominant position, trading off maximum current profit for high market share and the hope of greater profits in the next stage.

Co-Branding

Two or more well-known brands are combined into a joint product or marketed together in some fashion Same-company Joint-venture Multiple-sponsor Retail Marketers often combine their products with products from other companies in various ways. In co-branding—also called dual branding or brand bundling—two or more well-known brands are combined into a joint product or marketed together in some fashion. One form of co-branding is same-company co-branding, as when General Mills advertises Trix cereal and Yoplait yogurt. Other forms are joint-venture co-branding, multiple-sponsor co-branding , and retail co-branding. For co-branding to succeed, the brands must separately have brand equity—adequate brand awareness and a sufficiently positive brand image.