Business 321 exam 2

Segmenting International Markets

-geographic location -economic factors -political and legal factors -cultural factors

for segmented pricing to be effective

-market must be segmentable -segments must show different degrees of demand -costs of segmenting cannot exceed the extra revenue -must be legal

_____________ refers to the amount of money charged for a product or service. A. Value B. Cost C. Price D. Wage E. Salary

C. Price

Variable costs _____________ as the number of units produced increases. A. decrease B. increase steadily C. fluctuate D. remain the same

C. fluctuate

Effective __________ pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value. A. competition-oriented B. cost-based C. time-based D. customer-oriented E. marketer-oriented

D. customer-oriented

what has a new product category and a new brand name?

New brands (Toyota-middle class => lexus-luxurious)

zone pricing

a company sets up 2 or more zones where customers within a given zone pay the same prices (NE vs. NW, etc.)

FOB-Origin pricing

a geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination

micromarketing: individual marketing

also known as one-to-one marketing or mass customization. involves tailor products and marketing programs to the needs and preferences of individual customers. (example: Nike iD shoes)

price

amount of money charged for a product or service or sum of all values that customers exchange for the benefits of having/using the product/service

competitive advantage

an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices

Product (definition)

anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want

value-added pricing

attaches value-added features and services to differentiate the companies offers and thus their higher prices

Levels of products and services

basic level: core customer value (what is the customer really buying? example: apple iPad. not just buying a computer, but they are buying entertainment, self-expression, productivity, and connectivity-a mobile and personal window to the world) Actual product: brand name, features, quality level, packaging, design Augmented product: delivery and credit, after-sale service, product support, warranty

what has a new product category and existing brand name?

brand extension (bic pens, bic perfume)

acquisition

buying of a whole company, a patent, or a license to produce someone else's product

Segmenting International Markets: Economic Factors example

can't sell iPhone to third world countries; consider Maslow's hierarchy of needs

design

contributes to a products usefulness as well as to its looks

price increases occur due to

cost inflation, increased demand, lack of supply

fixed (overhead) costs

costs that don't vary with production or sales level

elastic demand

demand changes greatly with a small change in price

style

describes the appearance of a product (it's prettiness, not usefulness)

marketing strategy development

designing an initial marketing strategy for a new product based on the product concept

brand equity

differential effect that knowing the brand name has on customer response to the product or its marketing. (people who like iPhone vs. Samsung)

price cuts occur due to

excess capacity, increased market share

packaging

involves the container or wrapper for product

freight-absorption pricing

seller absorbs all or part of the freight charges in order to get desired business

Positioning maps

show consumer perceptions of marketer's brands vs. competing products on important buying dimensions

Demand curve

shows number of units the market will buy in a given period at different prices (demand and price are inversely related. higher price=lower demand)

Introduction stage

slow sales growth, little or no profit, high distribution and promotion expenses, high cost per customer, customers: innovative, few competitors. marketing objective: create product engagement and trial

target costing

start with an ideal setting price based on consumer value considerations and then targets costs that will ensure that the price is met

Positioning statement

summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference) (choosing positioning is often easier than implementing the position. establishing the position or changing it can take a long time. maintaining it requires consistent performance and communication)

idea generation

systematic search for new product ideas.

inelastic demand

when demand hardly changes with a small change in price

Product life-cycle strategies

-Product development: zero sales and increasing investment costs -introduction: slow sales and non-existent profits -growth: rapid market acceptance and increasing profits -maturity: slow sales growth and profits level off or decline

Evaluating market segments

-Segment size & growth: consider size of segment. if too small, not worth targeting -segment structural attractiveness: if other market players have touched that market; maybe not worth it. -company objectives and resources

Socially responsible target marketing

-benefits customers with specific needs -concern for vulnerable segments (example: McDonald's replaced soda with milk/juice in kids meals because some people want their kids to eat healthier)

Choosing a targeting strategy depends on...

-company resources -product variability -product life-cycle stage -market variability -competitor's marketing strategies

Systematic NPD (new product development): Innovation management system

-creates an innovation-oriented company culture -yields a large number of new product ideas

successful new product development should be

-customer centered -team based -systematic

4 types of segmented pricing

-customer-segment pricing (veteran's discount) -product-form pricing (1st class/coach) -location based pricing (out of state tuition) -time-based pricing (happy hour)

price adjustment strategies

-discount and allowance pricing -segmented pricing -psychological pricing -promotional pricing -geographic pricing -dynamic pricing -international pricing

Segmenting consumer markets

-geographic segmentation -demographic segmentation -psychographic segmentation -behavioral segmentation

Choosing a differentiating and positioning strategy

-identify a set of possible competitive advantages to build a position -choosing the right competitive advantages -selecting an overall positioning strategy -communicating and delivering the chosen position to market

sources of new product ideas

-internal: refer to company's own formal research and development, management and staff, and entrepreneurial programs -external: sources outside company such as customers, competitors, distributors, suppliers, and outside design firms

When test marketing is likely to be used

-new product with large investment -uncertainty about product or marketing program

concept development and testing

-product idea: idea for a possible product that the company can see itself offering in the market -product concept: detailed version of the idea stated in meaningful consumer terms -product image: way consumers perceive and actual or potential product -concept testing: testing new product concepts with groups of target consumers

product mix pricing strategies

-product line pricing -optional product pricing -captive product pricing -by-product pricing -product bundle pricing

Different types of competitive advantages

-product: advantage through their product (example: Apple, Mercedes, Lexus) -services (Discovery card customer service) -channels (Amazon, biggest online channel) -people (Best Buy's salespeople are very knowledgeable) -image (Nike logo)

pricing in different types of markets

-pure competition -monopolistic competition -oligopolistic competition -pure monopoly

effective action responses

-reduce price to match competition -maintain price but raise the perceived value through communications -improve quality and increase price -launch a lower-price "fighting" brand

when test marketing is not likely to be used

-simple line extension -copy of competitor product -low costs -management confidence

marketing strategy statement consists of

-target market description -value proposition planned -sales, market-share, and marketing mix

NPD in turbulent times

-tempted to reduce spending -may become less competitive

organizational considerations

-who should set prices? -who can influence prices?

competitor reactions to pricing changes

-why did the competitor change the price? -is the price cut permanent or temporary? -is the company trying to grab market share? -is the company doing poorly and trying to increase sales? -is it a signal to decrease industry prices to stimulate demand?

Major stages in new product development

1. Idea generation 2. Idea screening 3. concept development and testing 4. marketing strategy development 5. business analysis 6. product development 7. test marketing 8. commercialization

Major Brand strategy decisions

1. brand positioning (attributes, benefits, beliefs and values) 2. brand name selection (selection, protection) 3. Brand sponsorship (manufacturer's brand, private brand, licensing, co-branding) 4. brand development (line extensions, brand extensions, multibrands, new brands)

Brand name selection

1. suggests benefits and qualities (snapchat, pinterest) 2. easy to pronounce, recognize, and remember (iPad, Tide) 3. Distinctive (zappos) 4. Extendable (amazon.com) 5. translatable for global economy (exxon) 6. capable of registration and legal protection

Selecting Target Market segments: market targeting strategies

1. undifferentiated (mass marketing) 2. Differentiated marketing 3. concentrated marketing 4. micromarketing 5. local marketing 6. individual marketing

Bon Vivant offers an assortment of exclusive French wines at incredibly low prices. These prices are neither limited-time offers nor special discounts, but represent the daily prices of products sold by Bon Vivant. This reflects Bon Vivant's ___________ pricing strategy. A. everyday low B. markup C. break-even D. cost-based

A. everyday low

When a company sets a high price for a new product with the intention of reducing the price in the future, it is using the ____________ pricing strategy. A. market-skimming B. cost-plus C. market-segmentation D. market-penetration

A. market-skimming

_______________ are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style. A. shopping products B. convenience products C. unsought products D. capital items E. supplies and repair services

A. shopping products

Which of the following is true of product line pricing? A. the price steps take cost differences between products in the line into account B. The pricing strategy cannot be used by companies in developed countries C. The price steps do not account for the prices of similar products from competitors

A. the price steps take cost differences between products in the line into account

_______________ calls for dividing the market into regions, states, counties, cities, or even neighborhoods. A. benefit segmentation B. Geographic segmentation C. Demographic segmentation D. Psychographic segmentation E. Occasion segmentation

B. Geographic segmentation

A detailed version of a new idea stated in meaningful customer terms is called a product A. solution B. concept C. image D. proposal E. lining

B. concept

The advertising slogan, "we bring good things to life," used by GE to market itself, is an example of ____________ marketing. A. person B. corporate image C. internal D. place E. niche

B. corporate image

Which of the following is true of market penetration pricing? A. It should be used when the product's quality and image support a high price B. it involves setting a high price for a new product to appeal to the elite in society C. It results in drawing in large numbers of buyers quickly, winning a large market share D. It is best used in conjunction with a market-skimming pricing strategy

C. It results in drawing in large numbers of buyers quickly, winning a large market share

_______________ involves dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. A. Mass Customization B. Market targeting C. Market segmentation D. Differentiation E. Positioning

C. Market segmentation

If Detroit DLX charges the same price for the delivery of its product to customers located near the Great Lakes, but a different price to customers elsewhere, the company is using ____________. A. psychological pricing B. promotional pricing C. zone pricing D. reference pricing

C. Zone pricing

______________ involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. A. value-based pricing B. competition-based pricing C. cost-based pricing D. penetration pricing E. break-even pricing

C. cost-based pricing

Joann Fabrics has created a new combo of colors and fabric types. The firm wants to know how consumers will perceive the new product. The firm is concerned with the product _____________. A. idea B. displacement C. image D. activation E. placement

C. image

Which of the following is an internal source for new product ideas? A. competitors B. company executives C. marketing research firms D. trade magazines

C. marketing research firms

Advertising campaigns involving issues ranging from healthcare, education, and environmental sustainability to human rights and personal safety can be classified under ____________ marketing. A. corporate image B. internal C. social D. place E. person

C. social

At Fantastic Flavors, a large regional chain of candy stores, employees from marketing, design, production, and finance work in cross-functional groups to save time and money in the new product development process. Fantastic Flavors uses a ___________ approach. A. customer-centered new product development B. sequential product development C. team-based new product development D. heuristic

C. team-based new product development

Segmenting Business Markets

Consumer and business marketers use many of the same variables to segment their markets. Additional variables could include: -purchasing approaches -situational factors

When marketers at Fair & Leigh Inc. selected the Millennials as an untapped group of potential customers for their new line of products, they were engaging in ____________. A. occasional segmenting B. local marketing C. market diversification D. Market targeting E. product positioning

D. Market targeting

______________ are industrial products. A. Major appliances B. Laundry detergents C. Life insurance policies D. office supplies E. legal services

D. Office supplies

Which of the following is true with regard to products? A. the quality of products is far more difficult to measure than that of services B. Products don't include experiences, organizations, persons, places, and ideas C. Products aren't meant for sale in the market D. Products include services, events, persons, places, organizations, ideas, or a mixture of these.

D. Products include services, events, persons, places, organizations, ideas, or a mixture of these.

A company marketing sports merchandise for teens targets the world's teenagers, who have similar needs and buying behavior even though they are located in different countries. Which market segmentation is evident here? A. income segmentation B. psychographic seg. C. gender seg. D. intermarket seg. E. occasion seg.

D. intermarket segmentation

Marketers who use ________________ often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals. A. demographic segmentation B. geographic seg. C. benefit seg. D. psychographic seg. E. occasion seg.

D. psychographic segmentation

Overhead (aka fixed) costs _____________ as the number of units produced increases. A. decrease B. increase steadily C. fluctuate D. remain the same

D. remain the same

Segmenting consumer markets: Geographic segmentation

Divides the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods. (most common and easiest type to use)

Which of the following price adjustment strategies involves reducing prices to reward customer responses such as volume purchases, paying early, or participating in sales-support programs? A. product bundle pricing B. captive product pricing C. product line pricing D. dynamic pricing E. discount and allowance pricing

E. discount and allowance pricing

What is included in the first part of a marketing strategy statement? A. dist. strategy B. product longevity C. long-run sales goals D. promotional mixes E. target market description

E. target market description

Nature and Characteristics of a Service (4)

Intangibility, inseparability, variability, perishability

Product and service classifications: 4 types of marketing

Organization marketing, person marketing, place marketing, social marketing

True or False: The augmented product is the actual product plus the various services and benefits offered with it, such as warranty, free delivery, installation, and maintenance.

True

product line

a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges (iPhone, iTunes)

Service (definition)

a product that consists of activities, benefits or satisfactions and that is essentially intangible and does not result in the ownership of anything

basing-point pricing

a seller selects a given city as a "basing point" and charges all customers the freight cost from that city to the customer

cost-plus pricing

adds a standard markup to the cost of the product (benefits: sellers are certain about costs, price competition is minimized, buyers feel it's fair. disadvantages: ignores demand and competitor prices)

dynamic pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations (expedia changing flight prices)

product mix

all the product lines and items that a particular seller offers for a sale. width, length, depth consistency -consistency: how closely the various product lines are in end use, production requirements, or distribution channels

Segmenting International Markets: Geographic location example

car companies modifying models for different countries. U.S.: right side drivers Europe: left side drivers and smaller cars

Segmenting International Markets: Political and legal factors example

certain ingredients are legal in the U.S. but illegal in other places

product quality

characteristics of product/service that bear on its ability to satisfy implied customer needs

everyday low pricing (EDLP)

charging a constant everyday low price with few or no temporary price discounts

high-low pricing

charging higher prices on an everyday basis, but running frequent promotions to lower prices temporarily on selected items

product bundle pricing

combines several products at a reduced price (cable bundle: cheaper to get bundle of internet, phone and cable rather than buying separately)

uniform-delivered pricing

company charges same shipping fee no matter where you're located (amazon prime free shipping)

product features

competitive tools for differentiating a product from competitors' products

psychological pricing

considers psychology of prices and not simply the economics; the price is used to say something about the product (people think expensive wine is better even though when blind folded they can't tell a difference)

Organization marketing

consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization (brochures for U of I, non-profit level)

Person marketing

consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward particular people (real estate ads)

place marketing

consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward particular places (resorts and vacations)

convenience products (consumer products)

consumer products and services that the customer usually buys frequently, immediately and with minimum comparison and buying effort. (newspapers, candy, fast food, toothpaste)

unsought products (consumer products)

consumer products that a consumer does not know about or knows about but doesn't normally think of buying (life insurance, funeral services, blood donations)

specialty products (consumer products)

consumer products with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort (medical services, designer clothes, high-end electronics)

product development

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

Segmenting consumer markets: Psychographic segmentation

divides a market into different segments based on social class, lifestyle, or personality characteristics. (example: dunkin donuts vs. starbucks. DD= cheaper, but people still get it because having a coffee makes them look more "sophisticated", starbucks= some people will spend $10 a day on starbucks anyway)

Segmenting consumer markets: Demographic segmentation

divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity and generation. (most widely used, example: marketing credit cards to younger people) -Age & life-cycle segmentation: divides a market into different age & life-cycle groups -Gender segmentation: different segments based on gender (boy=blue, girl=pink) -income segmentation: divides market into different income statements

Intermarket segmentation

forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries

Segmenting International Markets: cultural factors example

ground beef in India is allowed, but it is against their religion to eat it, so it won't be successful

product line consistency

how closely the various product lines are in end use, production requirements, or distribution channels

label

identify product/brand, describe attributes, and provide promotion

idea screening

identify the good ideas, dropping the poor ideas

commercialization

introducing new product into the market: when to launch? where to launch? planned market rollout?

crowdsourcing

inviting broad communities of people (customers, employees, independent scientists and researchers, even the public at large) into the new product innovation process

market penetration pricing

involves setting a low price for a new product in order to attract a large number of buyers and a large market share

RWW screening framework

is it REAL? can we WIN? is it WORTH it?

shopping products (consumer products)

less frequently purchase consumer products and services that the customer compares on suitability, quality, price and style (furniture, cars, appliances, shoes)

What has an existing product category and existing brand name?

line extension

decline stage

maintain the product, harvest the product, drop the product, decreasing sales, low cost/customers, decreasinf profits, customers: lagging adopters, declining competitors. marketing objective: reduce expenditure and milk the brand

price elasticity

measure of the sensitivity of demand to changes in price

Modification strategies in the maturity stage

modify the market, modify the product, modify the marketing mix

has an existing product category and new brand name

multibrands (GM, Cadillac, chevy, etc. Costly)

brand

name, term, sign, or design or a combination of these things, that identifies the maker or seller of a product/service (example: Gucci)

buyer reaction to price decrease

new models will be available, models aren't selling well, quality issues

product line width

number of different product lines the company carries

product line length

number of items in the product line

good-value pricing

offering just the right combination of quality and good service at a fair price

new product development

original products, product improvements, product modifications and new brands developed from the firm's own research and development

Maturity stage

peak/slow down in sales, many suppliers, substitute products, overcapacity leads to competition, increase in promotion and research and development to support sales and profits, customers: mainstream adopters. Marketing objective: maximize profit while defending market share

reference prices

prices that buyers carry in their minds and refer to when they look at a given product (different versions of cars with barely and differences, one's way more expensive, you get the cheaper one because you think you are getting a good deal, but really, they are manipulating you)

Individual product and service decisions

product attributes => branding => packaging => labeling => product support services

Buyer reaction to price increase

product is hot, company greed

Consumer products (4)

products and services bought by final consumers for personal consumption. (convenience, shopping, specialty, unsought)

discount and allowance pricing

reduces prices to reward customer responses such as making volume purchases, paying early, or promoting the product

Market segmentation

requires dividing a market into smaller segments with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. -segmenting consumer markets -segmenting business markets -segmenting international markets

business analysis

review of sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives

decline

sales fall off or profits drop

Growth stage

sales increase, new competitors enter market, profits increase, economies of scale, consumer education, lowering prices to attract more buyers, customers: early adopters. marketing objective: maximize market share

Segmenting consumer markets: Behavioral segmentation

segments based on consumer knowledge, attitudes, uses of a product, or responses to a product -occasions: Black Friday-people are more likely to spend -benefits sought: gym-seeking to stay in shape or lose weight -user status: current, new, or potential customer: 10% off new customer -usage rate: airline miles, more used, bigger deal -loyalty status: customer lifetime value (CLV) & customer equity used (most efficient segmentation, but very costly)

segmented pricing

selling a product/service at 2 or more prices. where the difference in prices is not based on differences in cost

Target Market

set of buyers who share common needs or characteristics that the company decides to serve

by-product pricing

sets a price for by-products in order to make the main product's price more competitive (coke recycles packaging to lower cost of raw materials)

market-skimming pricing

sets high initial prices to "skim" revenue layers from the market (product quality and image must support price. buyers must want the product at the price.)

cost-based pricing

sets prices based on the costs for producing, distributing and selling the product plus a fair rate of return for effort and risk

International pricing

sets prices in a specific country based on many factors (-economic conditions -competitive situations -laws and regulations -wholesaling and retail systems)

captive product pricing

sets prices of products that must be used along with the main product (Keurig machine and K-cups or printer and cartridge)

break-even pricing (target return pricing)

setting price to break even on costs or to make a target return

competition-based pricing

setting prices based on competitors' strategies, costs, prices, and market offerings

Micromarketing: local marketing

tailoring brands and promotions to needs and wants of local customer segments. cities, neighborhoods, stores. (examples: soda that says "welcome back vandals", Macy's in higher end area charges more than Macy's in lower end area.)

optional product pricing

takes into account optional/accessory products along with the main product (car industry)

product line pricing

takes into account the cost differences between products in the line, customer evaluations of their features, and competitors' prices. (car wash)

concentrated (niche) marketing

targets a large of a smaller market. -limited company resources -knowledge of the market -more effective and efficient (examples: company selling jeans for athletic people, Rolls Royce (small market, very rich target))

Differentiated (segmented) marketing

targets several different market segments and designs separate offers for each. -goal is to achieve higher sales and stronger position -more expensive than undifferentiated marketing (example: iPhone 7 or iPhone 7+) (commonly used)

undifferentiated (mass) marketing

targets the whole market with one offer. market costs are minimized because offering only one cost to certain target. focuses on common needs rather than what's different.

promotional pricing

temporarily pricing products below the list price and sometimes even below cost, to increase short-run sales (Black Friday)

Value proposition

the full mix of benefits upon which a brand is positioned

product line depth

the number of versions offered of each product in the line

Micromarketing (local and individual marketing)

the practice of tailoring products and marketing programs to suit every customer.

test marketing

the stage of new product development in which the product and its proposed marketing program are tested in realistic marketing settings (companies sometimes shorten or skip this step)

total costs

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

Product position

the way a product is defined by consumers on important attributes (example: IKEA positions themselves as quality, DIY, and affordable)

Industrial products

those products purchased for further processing or for use in conducting a business (3: materials and parts, capital items, supplies and services)

brand value

total financial value of a brand

geographical pricing

used for customers in different parts of the country or world

social marketing

uses commercial marketing concepts to influence individuals' behavior to improve their well-being and that of society (red cross- no financial interest, just for goodwill of society)

value-based pricing

uses the buyer's perceptions of value rather than the seller's cost -customer driven -cost-based is product driven -price is set to match perceived value

variable costs

vary directly with the level of production (raw materials, packaging)