Marketing - Exam 2

Pricing decisions can be complex due to the number of factors to consider

- Frequently, there is considerable uncertainty about the reactions to price among buyers, channel members, and competitors - Price is an important consideration in marketing planning, market analysis, and sales forecasting - Price is a major issue when assessing a brand's position relative to competing brands

Setting appropriate prices can be a difficult balance for firms

- a high price may reduce demand for the product - a low price will hurt profit margins and may instill in customers a perception that the product is of low quality

Firms must weigh many different factors when setting prices, including:

- costs - competition - consumer buying behavior and price sensitivity - manufacturing capacity - product life cycles

Marketers determine the appropriate pricing basis by analyzing the:

- type of product - market structure of the industry - brand's market share position relative to competing brands - customer characteristics

Captive Pricing

-being held captive by the initial product that you purchased, where you have to buy more products for the initial product to work (being sent a free razor with a blade in the mail, you have to go back to buy blades over and over again in order to use the product) (buying a printer but having to buy the ink cartridges over and over again) - Pricing the basic product in a product line low, while pricing related items higher - A common example of captive pricing is printer ink. The printer is priced quite low to attract sales, but the printer ink replacement cartridges are very expensive

The value of branding for sellers are:

-brands identify products, making repeat purchases easier -branding helps when introducing new products because buyers are familiar with the name -facilitates promotional efforts because the promotion of one branded product indirectly promotes all similarly branded products -fosters brand loyalty and a certain level of market share and price stability -when marketers increase their brand's value, they also raise the total value of the organization

Secondary trade area

10-15% of customers

Generic Brands

A brand indicating only the product category - usually sold at lower prices than comparable branded items and compete on the basis of price and value - typically staples that would be marked using an undifferentiated strategy because they lack special features - prevalence of generic brands has decreased over time --> quality and value of private brands has increased - examples: sugar, salt, aluminum foil

Private distributor brands

A brand initiated and owned by a reseller (wholesalers or retailers) - Also called private brands, store brands, or dealer brands - manufacturers are not identified on the products - retailers and wholesalers use private distributor brands to develop more efficient promotion, generate higher gross margins, and change store image - give retailers or wholesalers freedom to purchase products of a specified quality at the lowest cost without disclosing the identities of the manufacturers - Examples: Target's Archer Farms and Up & Up, Walmart's Great Value

Manufacturer brands

A brand initiated by producers to ensure that producers are identified with their products at the point of purchase - Example: Green Giant, Dell Computer, and Levi's Jeans - usually requires a producer to become involved in distribution, promotion, and to some extent, pricing decisions - when manufacturer markets goods under its own name

Individual Branding

A branding strategy in which each product is given a different name - advantage: if an organization introduces a product that fails in the marketplace, the negative images associated with it do not influence consumers' decisions to purchase the company's other products - may also facilitate market segmentation when a firm wishes to enter many segments of the same market (separate, unrelated names can be used, and each brand can be aimed at a specific segment) - example: Nestle has individual brands of Nescafé coffee, PowerBar nutritional food, Maggi soups, and Häagen-Dazs ice cream.

Trading Company

A company that links buyers and sellers in different countries -Acts like a wholesaler; buys products in one country at the lowest price consistent with quality and sells them to buyers in another country - is not involved in manufacturing and does not own assets related to manufacturing - takes title to products and performs all activities necessary to move the products to the targeted foreign country - reduces risk for firms that want to get involved in international marketing (provides producers with information about products that meet quality and price expectations in domestic and international markets) - For instance, the World Trade System (WTSC) offers a 24-hour-per-day online world trade system that connects 20 million companies in 245 countries, offering more than 60 million products.

Idea

A concept, philosophy, image, or issue

Brand preference

A customer prefers one brand over competitive offerings - if brand is not available, the customer will accept a substitute rather than expending the additional effort required to find and purchase the preferred brand

Brand insistence

A customer strongly prefers a specific brand and will accept no substitute - willing to spend a great deal of time and effort to acquire a certain brand - If a customer goes to a store and finds the brand unavailable, he or she will seek the brand elsewhere rather than purchase a substitute - Brand insistence also can apply to service products, such as Hilton Hotels, or sports teams, such as the Dallas Cowboys

Brand Loyalty

A customer's favorable attitude toward a specific brand - if it's sufficiently strong, customers will purchase the brand consistently when they need a product in that product category - customer satisfaction is the most common reason for loyalty to that brand - it reduces a buyer's risks and shortens the time spent deciding which product to purchase - varies by country, as different cultures may identify with a certain brand to a greater or less degree (Apple and Google who have a high degree of brand loyalty internationally) - Examples: Delta (airlines), Amazon (online retailer) Lyft (app-based ride share), Red Bull (energy drinks), Advil (pain relievers), ExxonMobil (gasoline), AT&T (wireless phone service), and Discover (credit cards).

Clayton Act

A federal law that prevents price discrimination

Franchising

A form of licensing in which a franchiser grants a franchisee the right to market its product, using its name, logo, methods of operation, advertising, products, and other elements associated with the franchiser's business, in return for a financial commitment and an agreement to conduct business in accordance with the franchiser's standards - With more than 1,400 locations, Canada-based Yogen Früz frozen yogurt is one of the top global franchises. - Many chain restaurants and other well-known businesses operate as franchises - Operating as the entity itself

Demand curve

A graph of the quantity of products expected to be sold at various prices if other factors remain constant - Case in point, prices have fallen precipitously for flat-screen television sets in recent years. This change in price is largely due to strong competition and newer technologies such as 4K and curved screens. In order to compensate, most makers of flat-screen televisions responded by continuing to lower prices. - inverse relationship between price and quantity demanded - as price falls, quantity demanded usually rises - Demand depends on other factors in the marketing mix, including product quality, promotion, and distribution.

Product Line

A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations - Example: Nike's product line --> shoes, apparel, equipment, etc. - Example: Starbucks has product lines for beverages, food, mugs, and tumblers, and coffee making equipment

Trademark

A legal designation of exclusive use of a brand

Brand

A name, term, design, symbol, or other feature that identifies one seller's product as distinct from those of other sellers - All inclusive (everything is centered around the brand) - may identify a single item, a family of items, or all items of that seller

Cash discount

A price reduction given to buyers for prompt payment or cash payment -Example: "2/10 net 30" means that a 2 percent discount will be allowed if the account is paid within 10 days. If the buyer does not make payment within the 10-day period, the entire balance is due within 30 days without a discount

Seasonal discount

A price reduction given to buyers for purchasing goods or services out of season - Thus, it is usually much cheaper to purchase and install an air-conditioning unit in the winter than it is in the summer. This is because demand for air conditioners is very low during the winter in most parts of the country, and price, therefore, is also lower than in peak-demand season.

Direct Ownership

A situation in which a company owns subsidiaries or other facilities overseas - having ownership in the country itself - country over markets - all companies have a multinational presence

Good

A tangible, physical entity

Cost-based pricing

Adding a dollar amount or percentage to the cost of the product - marking up your cost; cost-plus - marketers calculate and apply a desired level of profit to the cost of the product and apply it uniformly

Phase out

Allows a product to decline without a change in the marketing strategy -VHS players were overtaken by the DVD players; slowly phased out the VHS tapes and phased in the DVDs (phase out)

Predatory pricing

Also called undercutting, involves the intent to set a product's price so low that rival firms cannot compete and therefore withdraw from the marketplace - counterfeit products

Price fixing

An agreement among competing firms to raise, lower, or maintain prices for mutual benefit - Bumble Bee Foods pleaded guilty to conspiring to fix the price of packaged tuna products over a period of two years. The company paid a criminal fine of $25 million, changed its corporate policies, and hired a compliance officer to help it regain consumers' trust

Licensing

An alternative to direct investment that requires a licensee to pay commissions or royalties on sales or supplies used in manufacturing - face to face with foreign company to grant them a license requires more involvement - Example: Yoplait, for example, is a French yogurt that is licensed for production in the United States; the Yoplait brand tries to maintain a French image. - Another example of a brand that uses licensing agreements is Disney. When you purchase items emblazoned with Disney characters, it's most likely that the product wasn't actually manufactured by Disney. More often, Disney signs licensing agreements with certain producers to use their characters and images, which is why you find Disney characters on everything from soap to sleeping bags to T-shirts and clothing. - Will be used for brands that are highly recognizable. - Being able to use copyright brands and slap it on your products. And whoever you are getting the license from is getting compensated for you using their stuff

Service

An intangible result of the application of human and mechanical efforts to people or objects

Brand Extension

An organization uses one of its existing brands to brand a new product in a different product category - using the power of the original brand name, and putting it on a similar product - Examples: Crest toothpaste --> Crest Whitestrips; Baileys extended its well-known Baileys Irish Cream liqueur brand when it introduced Baileys Iced Coffee, single serving canned iced coffees flavored with Baileys Irish Cream, to capitalize on the growing category of iced coffee.

Trade Area

Area that surrounds the location where customers will come from a particular shopping center that is nearby - these are a lot bigger in rural area than somewhere like NYC where there is always a lot of people --> why we see a billion starbucks locations all around NYC) - based on population density - Example: Dukes Plaza (Ollies is the anchor, so there is not a lot of foot traffic in this area)

Raw Materials

Basic natural materials that become part of a physical product - Examples: Minerals, chemicals, agricultural products, materials from forests and oceans

Family Branding

Branding all of a firm's products with the same name or part of a name - means that the promotion of one item with the family brand promotes the firm's other products - can be a benefit when consumers have positive associations with brands, or drawback if consumer thinks negatively of the brand - Examples: the cereals Kellogg's Frosted Flakes, Kellogg's Rice Krispies, and Kellogg's Corn Flakes; Arm & Hammer Heavy Duty Detergent, Arm & Hammer Pure Baking Soda, and Arm & Hammer Carpet Deodorizer

Business analysis

Can we make a product and how much will it take to produce/when should we release it - what will it cost the market currently - what other substitutes are there for that product - will people want to buy it at that price - Evaluating the potential impact of a product idea on the firm's sales, costs, and profits

Price skimming

Charging the highest possible price that buyers who most desire the product will pay - price is high, skimming the top of the demand curve (going after innovators and early adopters who are willing to pay those top prices) - The seller essentially "skims the cream" off the market, which helps a firm to recover the high costs of R&D more quickly. - can generate much-needed initial cash flows to help offset development costs - protects the marketer from problems that arise when the price is set too low to cover costs - helps to keep demand consistent with the firm's production capabilities - can be dangerous because they may make the product appear more lucrative (profitable) than it actually is to potential competition - a firm risks misjudging demand and facing insufficient sales at the higher price

Inconsistency

Each service offering will be slightly different than the one before (a bit of inconsistency) -When you go to get your haircut with the same person, your haircut will be slightly different every time you go -Companies can offset inconsistency through training, procedure manuals, etc. -Example: going through chipotle, it's always a different experience

Nonprice competition

Emphasizing factors other than price to distinguish a product from competing brands -pricing where the competition is --> company can beat them on some other competitive aspect that isn't price - can help firms build customer loyalty toward their brand - A company must be able to distinguish its brand through unique product features, higher product quality, effective promotion, distinctive packaging, and/or excellent customer service - the firm must extensively promote the brand's distinguishing characteristics to establish its superiority and set it apart from competitors in the minds of buyers. - Mars, for example, not only markets Snickers and M&M's but also has an upscale candy line called Ethel's Chocolate. With the tagline "eat chocolate, not preservatives," Ethel's Chocolate competes on the basis of taste, attractive appearance, and hip packaging, and, thus, has little need to engage in price competition.

Price discrimination

Employing price differentials that injure competition by giving one or more buyers a competitive advantage - Airlines, for example, may charge different customers different prices for the same flights based on the availability of seats at the time of purchase. As a result, flyers sitting in adjacent seats may have paid vastly different fares because one passenger booked weeks ahead, whereas the other booked on the spur of the moment a few days before when only a few seats were still available.

Odd-even pricing

Ending the price with certain numbers to influence buyers' perceptions of the price or product - if you price below the next whole number that you will sell more (so rather than $20.00 --> $19.99) (only put the zeros on very expensive (status) items (expensive jewelry store)) (gas stations take odd-even pricing to an extreme) - It aligns with the belief among many retailers that consumers respond more positively to odd-number prices, such as $4.99, than to whole-dollar prices, such as $5, for items where customers are looking for value. - 9 and 5 are the most popular ending figures for odd-number prices

Accessory Equipment

Equipment that does not become part of the final and physical product but is used in production of office activities - Examples: File cabinets, fractional-horsepower motors, calculators, tools

Run-out

Exploits any strengths left in the product -stop making a line of products but continue to sell until it runs out, then replace it with a new line (new car models; still making the old car model but start selling the new one in addition)

Installations

Facilities and nonportable major equipment - Examples: Buildings, factories, warehouses, very large machines)

Innovators

First adopters of new products - Take the most risk by trying a new product that just hit the market (trade shows/publications, sales force, industry publications) - enjoy trying new products and do not mind taking a risk

Mixed branding

From manufacturer's perspective - making their own products and using other brand names as well - Michelin tires, Sears tires - Epson printers, IBM printers

Pricing objectives

Goals that describe what a firm wants to achieve through pricing; the big picture; what is our objective when figuring out pricing - important because they form the basis for decisions for other stages of the pricing process - must be stated explicitly and in measurable terms, and should include a time frame for accomplishing them - marketers must ensure that pricing objectives are consistent with the firm's marketing and overall objectives because pricing objectives influence decisions in many functional areas - a marketer can use both short- and long-term pricing objectives and can employ one or multiple pricing objectives - For instance, a firm may wish to increase market share by 18 percent over the next three years, achieve a 15 percent return on investment, and promote an image of quality in the marketplace.

Getting rid of a line or product

Ideal situation is phase out = slowly do some sort of replacement cycle

Profit

Identify price and cost levels that allow the firm to maximize profit - trying to find price levels that will maximize profits (tend to price higher)

Return on investment

Identify price levels that enable the firm to yield targeted ROI - targeted return that you want to get out of maximizing profit (trying to hit a certain number; 20%) - Pricing to attain a specified rate of return on the company's investment is a profit-related pricing objective. - usually requires some trial and error - Many pharmaceutical companies use ROI pricing objectives because of the high level of investment in research and development required.

Early Majority

Individuals who adopt a new product just prior to the average person (will adopt product when affected by promotion on a large scale) - influenced through media (late majority is more skeptical) - deliberate and cautious in trying new products

Business Services

Intangible products that many organizations use in their operations - Examples: Financial services, legal services, marketing research services, information technology services, janitorial services

Price war

Involves two or more companies engaging in intense price competition, often in an effort to boost market share - For instance, the introduction of two German low-price grocers—Aldi and Lidl—has sparked a grocery price war in U.S. markets where the new chains have opened stores. - Additionally, competition from extreme-value stores such as Dollar General along with lower prices from Amazon-owned Whole Foods have forced Walmart and traditional supermarkets to lower prices and cut into profit margins in order to remain competitive

Head-to-Head

Is best when the product's characteristics are at least equal and if the product is priced lower -may be appropriate even when the price is higher if the product's performance characteristics are superior - SodaStream, which manufactures a consumer home-carbonation product, uses a head-to-head positioning strategy against the dominant players in the soda market, Pepsi and Coca-Cola. SodaStream positions itself as a healthier, more eco-friendly brand, and portrays its top competitors as environmentally harmful due to the large amounts of plastic bottle waste that ends up in landfills.

Avoid competition (niche)

Is critical when introducing a brand into a market in which the company already has one or more brands - when product's performance characteristics do not differ significantly from competing brands - has unique characteristics that are important to some buyers - Prius, for example, does not compete directly with other hybrids. Rather, marketers position it as an eco-friendly hybrid that is also family-friendly. Auto companies are likely to focus on style, fuel efficiency, performance, terms of sale, or safety in their advertisements.

Shopping products

Items for which buyers are willing to expend considerable effort in planning and making purchases (shop by brands, going from store to store, comparing different store items to make purchase) - Examples: Appliances, bicycles, furniture, stereos, cameras, shoes

Component Parts

Items that become part of the physical product and are either finished items ready for assembly or items that need little processing before assembly - Examples: Spark plugs, brakes, tires, headlights

Specialty products

Items with unique characteristics that buyers are willing to expend considerable effort to obtain (depends on the customer if the product is a specialty product or not. If the consumer seeks out your product among all others, it is a specialty product to YOUR company. Can also be defined as making a special trip to buy a certain product from a certain store.) - Examples: Fine jewelry, limited-edition collector's items (Starbucks --> good customer relationships)

MRO Supplies

Maintenance, repair, and operating items that facilitate production and operations but do not become part of the finished product - Examples: Paper, pencils, cleaning supplies, paints

Process Materials

Materials that are used directly in the production of other products but are not readily identifiable - Examples: sandpaper to make a product, an ingredient in salad dressing)

Bundle pricing

Packaging together two or more complementary products and selling them at a single price -package together two or more products in one package and they charge you less money if you were to buy the products separately (shampoo and conditioner bundle pack) - Being able to buy the bundled combination may be of value to the customer, increasing convenience and reducing the time required to shop - Bundle pricing is common for banking and travel services, computers, and automobiles with option packages - Comcast Xfinity, for instance, offers a special rate when consumers bundle television, internet, and phone service.

Multiple-unit pricing

Packaging together two or more identical products and selling them at a single price - packaging together multiple units of the same products (multiple units batteries in a package from Costco) - such as two cans for 99 cents, rather than 50 cents per can. - Especially for frequently purchased products, this strategy can increase sales by encouraging consumers to purchase multiple units when they might otherwise have only purchased one at a time - can be used to attract new customers to its brands and to sometimes increase consumption - Discount stores and especially warehouse clubs, such as Sam's Club and Costco, are major users of multiple-unit pricing

Early Adopters

People who adopt new products early, choose new products carefully, and are viewed as "the people to check with" by later adopters/categories - Take the most risk by trying a new product that just hit the market (trade shows/publications, sales force, industry publications)

Reference pricing

Pricing a product at a moderate level and displaying it next to a more expensive model or brand in the hope that the customer will use the higher price as a reference price (i.e., a comparison price). - Because of the comparison, the customer is expected to view the moderate price more favorably than he or she would if the product were considered alone. - Reference pricing is based on the "isolation effect," meaning an alternative is less attractive when viewed by itself than when compared with other alternatives.

demand-backward pricing

Pricing a product based on what customers are willing to pay for it and then creating the offering based on that price.

Bait pricing

Pricing an item in a product line low with the intention of selling a higher-priced item in the line - not illegal; putting out some sort of promotion and tallying a really low price on a product (tactic to get you into the store and upsale you the more expensive models) (advertisement for a car (Nissan ultimate) fake pricing; product was strip down and not upgraded with features) - For example, a retailer may promote an inexpensive Chromebook in the expectation that consumers coming in to look at that product will wind up buying a more expensive one with more features than the advertised model - if customers go to the store looking for the low-priced model and find only the high-priced model in stock. If this is done intentionally, it is called bait-and-switch. Bait-and-switch occurs when retailers have no intention of selling the bait product. They use the low price merely to entice customers into the store to sell them higher-priced products. Bait-and-switch is unethical, and in some states it is even illegal.

Competition-based pricing

Pricing influenced primarily by competitors' prices - is a common method among producers of relatively homogeneous products, particularly when the target market considers price to be an important purchase consideration - a firm that uses competition-based pricing may choose to set their prices below competitors' or at the same level - Consider the advertisement for Walgreens, which has long engaged in a price war with CVS and others. As shown in the ad, Walgreens has taken some steps to differentiate itself from its rivals, such as highlighting its charitable giving, after years of competing for market share on the basis of price. - Likewise, competitors believe that Amazon's competition-based pricing model in industry after industry has been an attempt to gain monopoly control of many retail markets. Amazon uses highly sophisticated analytics to gauge consumer demand and compare its prices to competitors. To stay ahead of the competition, Amazon adjusts its prices millions of times each day, to ensure that it undercuts competitors on the most popular items

Everyday low pricing

Pricing products low on a consistent basis - strategy that Walmart took (everyday low pricing); match the lowest pricing - Everyday low pricing, though not deeply discounted, is set low enough to make customers feel confident they are receiving a good deal. - EDLP is employed by retailers such as Walmart and by manufacturers such as Procter & Gamble. Look at the advertisement for Target, which promotes that customers can "get everyday low prices on everyday essentials." The advertisement, which shows products falling into a Target basket, reminds consumers that they can get everything on their list. - A major issue with this approach is that customers can have mixed responses. In some instances, customers believe that everyday low pricing is a marketing gimmick and not truly the good deal that they proclaim

Psychological pricing

Pricing that attempts to influence a customer's perception of price to make a product's price more attractive - factors that are psychological in nature (may influence someone to buy something)

Premium Pricing

Pricing the highest-quality or most versatile products higher than other models in the product line -have a comparison of products: one that is deemed best (charged more) and another product (gasoline: premium, regular, other gas) - Other products in the line are priced to appeal to price-sensitive shoppers or to those who seek product-specific features. - Marketers that use premium pricing often realize a significant portion of their profits from the premium-priced products - For example, tax software, such as TurboTax and H&R Block, are marketed in multiple versions; the least expensive versions handle the most basic tax-preparation and forms, while more expensive versions include more tax forms, state tax forms, planning assistance, and more.

Business Products

Products bought to use in a firm's operations, to resell, or to make other products (purchased to satisfy the goals of the organization)

Consumer Products

Products purchased to satisfy personal and family needs

Unsought Products

Products purchased to solve a sudden problem, products of which customers are unaware, and products that people do not necessarily think of buying - Examples: Emergency medical services, automobile repairs, don't need car insurance until you end up buying a car

Convenience Products

Relatively inexpensive, frequently purchased items for which buyers exert minimal purchasing effort - examples: bread, soft drinks, chewing gum, gasoline, newspapers

Cash flow

Set price levels that help stabilize demand and sales (recovering cash as quickly as possible) - targeted level of cash to encourage rapid sales

Price lining

Setting a limited number of prices for selected groups or lines of merchandise - have to have a product line; lining the market at different pricing points in order to capture the entire market (similar to multibranding approach; but lining the market with different PRICE points) (manufacturer that makes ties: Italian, silk, regular, line their prices from expensive to affordable, so anyone can buy a tie) - For instance, a shop may sell men's ties only at $22 and $37. This strategy is common in clothing and accessory stores. It eliminates minor price differences from the buying decision—both for customers and for managers who buy merchandise to sell in these stores

Secondary-market pricing

Setting one price for the primary target market and a different price for another market - often the price charged in the secondary market is lower - However, when the costs of serving a secondary market are higher than normal, secondary-market customers may have to pay a higher price - give an organization an opportunity to use excess capacity and stabilize the allocation of resources - examples: a geographically-isolated domestic market, a market in a foreign country, a segment willing to purchase a product during off-peak times (such as "early-bird" diners at restaurants and off-season vacation rentals)

Prestige pricing

Setting prices at an artificially high level to convey prestige or a quality image - setting a high price so that quality or status conscious consumers will be attracted to the product and buy it - Maserati is a brand that has successfully used prestige pricing to set prices extremely high to convey an aura of ultra-luxury. - Typical product categories that are subject to prestige pricing include perfumes, liquor, jewelry, cars, and some food items

Penetration Pricing

Setting prices below those of competing brands to penetrate a market and gain a significant market share quickly - keep competition out of the market with prices so low, more quantity (higher volume); selling more at a lower price - beneficial when a marketer suspects that competitors could enter the market easily - If the low price stimulates sales, the firm may be able to order longer production runs, increasing economies of scale and resulting in decreased production costs per unit. - If penetration pricing allows the marketer to gain a large market share quickly, competitors may be discouraged from entering the market. - A disadvantage of penetration pricing is that it places a firm in a less-flexible pricing position (more difficult to raise prices significantly than it is to lower them)

Late majority

Skeptics who adopt new products when they feel it is necessary - influenced through media (late majority is more skeptical) - skeptical of new products, but eventually adopt them because of economic necessity or social pressure

Pricing strategies

Strategizing a way to look at the interaction between the market and customer and pricing

Laggards

Technology becomes so permeated in the environment that they are almost "forced" to buy it to stay in touch (don't promote to them) - the last adopters, who distrust new products - when they finally adopt the products, the products may have already been replaced by even newer products

Depth of product Mix

The average number of different products in each product line - Procter & Gamble offers a broad product mix, comprised of all the health-care, beauty-care, laundry and cleaning, food and beverage, and paper products the firm manufactures, some of which are quite deep

Awareness

The buyer becomes aware of the product - consumers possess little information and are not yet concerned about obtaining more

Evaluation

The buyer considers the product's benefits and decides whether to try it, considering its value versus the competition - individuals consider whether the product will address the criteria that are crucial to meeting their specific needs

Trial

The buyer examines, tests, or tries the product to determine if it meets his or her needs - consumers use or experience the product for the first time, possibly by purchasing a small quantity, taking advantage of free samples, or borrowing the product from someone else

Adoption

The buyer purchases the product and can be expected to use it again whenever the need for this product arises - Individuals need a product of that general type and choose to purchase new product on a trial basis - product adoption and product rejection can be temporary or permanent

Interest

The buyer seeks information and is receptive to learning about the product - consumers become motivated to learn about the product's features, uses, advantages, disadvantages, price or location

Intangibility

The characteristic that a service is not physical and cannot be perceived by the senses - companies try to take things that are intangible and make them tangible - pictures on your website --> creates a more tangible experience - it is impossible to touch the education that students derive from attending classes - the intangible benefit is becoming more knowledgeable in a chosen field of study

Product Adoption Process

The five-stage process of buyer acceptance of a product: Awareness, Interest, Evaluation, Trial, Adoption

Trade name

The full legal name of an organization - name is legally protected

Brand Equity

The marketing and financial value associated with a brand's strength in a market -brand does have value -handing down a brand name through generations - recognition of the brand - being aware of a brand leads to brand familiarity, which results in a level of comfort with the brand - loyalty of the brand - certain level of perceived quality

Width of Product Mix

The number of product lines a company offers - Deere & Co. offers multiple product lines for the agricultural industry, including tractors and loaders, farm equipment and technology, tools and used equipment, and utility vehicles.

contract manufacturing

The practice of hiring a foreign firm to produce a designated volume of the domestic firm's product or a component of it to specification; the final product carries the domestic firm's name - The Gap, for example, relies on contract manufacturing for some of its apparel; Nike uses contract manufacturers in Vietnam to produce many of its athletic shoes. - "Made in China"

Growth Stage

The product life-cycle stage when sales rise rapidly, profits reach a peak, and then they start to decline - critical to product's survival because competitive reactions to the product's success during this period will affect the product's life expectancy - marketers should analyze competing brands' product positions relative to their own and adjust the marketing mix in response to their findings - Smart speakers with voice assistants like Google Home and Amazon Echo are in the growth stage. Profits begin to decline late in the growth stage as more competitors enter the market, driving prices down and creating the need for heavy promotional expenses. - Profits begin to decline late in the growth stage as more competitors enter the market, driving prices down and creating the need for heavy promotional expenses - Aggressive pricing (including price cuts) is typical during this stage as a means of gaining market share (even if that means short-term loss of profits) - The goal of marketing strategy in growth stage is to establish and fortify the product's market position by encouraging adoption and brand loyalty

Importing

The purchase of products from a foreign source

Inseparability

The quality of being produced and consumed at the same time - can't take the service from the service provider - example: going to a hair salon, you need the hair cutter there to you a hair cut - Example: workers from chipotle have to be there in order to get food - An airline flight is produced and consumed simultaneously—that is, services are produced, sold, and consumed at the same time

Exporting

The sale of products to foreign markets

Decline Stage

The stage of a product's life cycle when sales fall rapidly - Marketer must consider eliminating items from product line that can no longer earn a profit - the marketer also may cut promotion efforts, eliminate marginal distributors, and finally, plan to phase out the product - usually a declining product has lost its distinctiveness because similar competing or superior products have been introduced - new technology or social trends, product substitutes, or environmental considerations also play a huge role in the decline stage of the product life cycle - during a product's decline, spending on promotion efforts is usually reduced considerably - As sales decline, the product becomes harder for consumers to find, but loyal buyers will week out retailers who still carry it

Maturity Stage

The stage of a product's life cycle when the sales curve peaks and starts to level off or decline, and profits continue to fall - characterized by intense competition bc many brands are now in the market (many competitors and many variations) - weaker competitors are squeezed out of the market during the maturity stage - the producers who remain in the market during this phase are likely to change their promotional and distribution efforts (advertising and dealer-oriented promotions are typical) - As maturity is reached, buyers' knowledge of the product is likely to be high (they are no longer inexperienced generalists) - Expanding globally --> Barbie doll sales decline in US, Mattel has been trying to increase interest for Barbie in China (Parents in China have a different view of toys than parents in the US have, so Mattel has to adapt Barbie to focus more on learning and intellectual pursuits - you may have to make new uses for your products in this stage to increase sales (Stonyfield who reformulated its yogurt products so that they would contain less sugar) - Ex: DVDs and DVD players; Dental hygiene products such as Colgate (there are a large number of brands)

Deceptive pricing

The use of false or misleading statements or practices to persuade buyers that a product is a better deal than it really is - As an example, TJX Companies agreed to pay $8.5 million to settle a class-action lawsuit that claimed that its Marshalls, T.J. Maxx, and HomeGoods stores used misleading price tags to deceive shoppers into believing they were getting a better bargain. The three stores had been accused of using fabricated higher-than-actual prices on its "Compare At" price tags to make shoppers think the stores' sale prices were a better deal than they really were.

Perceptual Mapping

Ultimately the position your product holds in the market is based on consumers' perceptions Company selects the attributes that are most critical in the market and for our product -Advil is competing head to head because they are sandwiched between two other competitors (nuprin, extra strength Tylenol) -st. joseph's and Norwich are more niche because they have less competitors You can reposition your brand over time to fit in with the trends Canbailisation - you eat your own (Stealing sales away from a competitor but eating away your own sales as well) -Position yourself away from other products

Immediate drop

Used when losses are too great to prolong the product's life -having an issue or problem with the product and having to pull it out from the market place. Can avoid additional lawsuits and will be expensive (but will be more expensive the longer you wait to take it of the product) (cabbage patch kids that had a robotic mouth that will chomp on anything it is given. Chewed a girls hair out. Had to pull the product out after trying to put a warning sign on the box of the doll.

Multibranding Strategy

Using multiple brands on products -Examples: Proctor and Gamble, laundry detergents (Procter and Gamble, Tide) -disadvantages: cost to promote all laundry detergents -Kellogs

Multi-Product branding strategy

Utilizing 1 brand name and putting them on all products - Example: Kellogs

Heterogeneity

Variation in quality - it is very difficult for service providers to maintain consistent quality of service delivery - usually increases as the degree of labor intensiveness increases

Product

a good, a service, or an idea received in exchange

Test marketing

a limited introduction of a product in geographic areas chosen to represent the intended market - the aim is to determine the extent to which potential customers will buy the product - companies use test marketing to lessen the risk of product failure - Fast-food chain KFC, for example, test marketed Hot Honey Chicken—crispy chicken tenders doused with honey pepper sauce—at its Bronx, New York, locations

price elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price

Joint venture

a partnership between a domestic firm and a foreign firm or government - some countries require joint ventures to gain access to their markets - are especially popular in industries that require large investments - are often a political necessity because of nationalism and government restrictions on foreign ownership - may also occur when acquisition or internal development is not feasible or when the risks and constraints leave no other alternative - Qualcomm formed a joint venture with Chinese chip maker Semiconductor Manufacturing International Corporation to produce semiconductors. It is believed that this joint venture will allow Qualcomm to gain a foothold in selling chips in the Chinese market - especially popular in industries that require large investments, such as natural resources extraction or automobile manufacturing.

Markup pricing

adding to the cost of the product a predetermined percentage of that cost Dollar of markup/dollar of selling price Dollar of markup/dollar of cost -Stay with it the entire time -Based on selling price or cost --> have to stick with it -Manufacturer markup (20-60,70%) -Wholesaler (10%-25%; lower range) -Retailer (highest range; 40%-5000%; if customers don't buy the product, the seller has to eat the cost (no matter how much it gets marked down)) -For instance, most liquor stores mark up prices by 25 to 45 percent, whereas warehouse club Costco has a lower average markup of 10 to 14 percent on beer, wine, and spirits

Survival

adjust price levels so the firm can increase sales volume to match organizational expenses - bad economic situation and you are pricing just to hang on (prices will be low, just to cover costs) - Because price is a flexible ingredient in the marketing mix, survival strategy can be useful in keeping a company afloat by increasing sales volume - achieving this objective generally involves temporarily setting prices low, at times below costs, in order to attract more sales - Most organizations will tolerate setbacks, such as short-run losses and internal upheaval, if necessary for survival.

Market share

adjust price levels so the firm can maintain or increase sales relative to competitors' sales - charge low price to obtain more customers/more share of a market. - pricing below their costs sometimes to gather market share - For instance, Gillette reduced prices on its razors in a bid to regain some market share lost to start-up razor clubs like Harry's and Dollar Shave Club. Gillette's market share fell from 70 percent to 54 percent after Dollar Shave Club entered the market with its subscription razor refill service

special-event pricing

advertised sales or price-cutting is used to increase sales volume and is linked to a holiday, a season, or other event

If a product priced at $100 per unit has an average variable cost of $60 per unit, the contribution to fixed costs is $40. If total fixed costs are $120,000, the breakeven point in units is determined as follows:

breakeven point = fixed costs / per-unit contribution to fixed costs = fixed costs / price - variable costs = 120,000 / (100-60) = 120,000 / 40 = 3000

The three major dimensions on which prices can be based

cost, demand, competition

Periodic discounting

discounting the items based on the situations based on period; usually because of seasonality - retailers discounting fall merchandise because winter stuff is coming; stuff from the summer is deeply discounted; used to clear space for new items) - From the marketer's point of view, a major problem with periodic discounting is customers can predict when the reductions will occur and may delay their purchases until they can take advantage of the lower prices - less effective online --> they can more easily comparison shop for a better deal even during non-sale times - reducing prices on a patterned/systematic basis temporarily

Price Competition

emphasizing price as an issue and matching or beating competitors' prices - Planet Fitness, for example, has experienced dramatic growth by offering $10/month gym memberships when other sport club memberships average $50 a month. Although Planet Fitness offers fewer amenities, its lower price is appealing to consumers who won't use most gym amenities.

Non-Durable Goods

goods that last a short period of time, such as food, light bulbs, and sneakers

Durable Goods

goods that last for a relatively long time, such as refrigerators, cars, and DVD players

Negotiated pricing

happens in a B2B setting, negotiating the price with seller to come to an agreement (buying a car, house, more expensive items, contracting for spots, specialty commission products)

Ceiling

how high the market can go (how much the market will be willing to play)

Status quo

identify price levels that help stabilize demand and sales - pricing objective in a very mature market - can focus on several dimensions, such as maintaining a certain market share, meeting (but not beating) competitors' prices, achieving price stability, and maintaining a favorable public image - Professionals such as accountants and attorneys often operate in such an environment.

The Four Stages of the Product Life Cycle

introduction, growth, maturity, decline - As a product moves through each cycle, the strategies relating to competition, pricing, distribution, promotion, and market information must be evaluated and possibly adjusted

Floor

is cost

Product development

making the actual product (if it's in your favor) - Determining if producing a product is technically feasible and cost-effective - To test its acceptability, the idea or concept is converted into a prototype, or working model.

Tertiary trade area

occasional customers

Random discounting

occurs at random; consumers aren't aware when it's going happen, driven by retailer; a lot of merchandise that hasn't been selling well, so they discount it to sell the rest of them - reducing prices on a nonsystematic basis temporarily - customers cannot predict when it will happen --> less likely to delay purchases - attract new customers - draw attention to a relatively new product - Many grocery store items, such as a new kind of yogurt or cereal, will use random discounting

Robinson-Patman Act

prevents unfair price discrimination by ensuring that the seller offer the same price terms to customers at a given level of trade

Demand-Based pricing

pricing based on the level of demand for the product - customers pay a higher price when demand for the product is strong and a lower price when demand is weak - seeing prices fluctuate based off demand - on and off season for hotels - The Walt Disney Company, for example, implemented demand-based pricing for Disney theme parks and resorts, offering cheaper tickets or extra perks on traditionally slow days and more expensive tickets or greater restrictions on traditionally crowded days, such as summer weekends

Zone pricing

pricing based on transportation costs within major geographic zones - prices in specific geographic areas will be higher based on where it is located (cost of having business is much higher) - mcdonald's is more expensive in new york city than harrisonburg - For instance, a Florida manufacturer's prices may be higher for buyers on the Pacific coast and in Canada than for buyers in Georgia.

Price leaders

products priced below the usual markup, near cost, or below cost - This type of pricing is used most often in supermarkets and restaurants to attract customers by offering them especially low prices on a few items, with the expectation that they will purchase other items as well

Product quality

set prices to recover research and development expenditures and establish a high-quality image - over the counter prescriptions - In the advertisement, STIHL Incorporated emphasizes the quality of its power equipment by highlighting the people who build, sell, service, and use its world class machines. The ad pictures the president of the German company describing how the firm's relationships have made the company an industry leader. This reputation for quality allows STIHL to command higher prices. The products and brands that customers perceive to be of high quality are more likely to survive in a competitive marketplace because they trust these products more, even if the prices are higher.

Customary pricing

setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors - 25 cent gumballs sold in gumball machines - less common now than in the past

New-product pricing

setting the price for new products is one of the most fundamental decisions in the marketing mix - under the question mark

Concept test

testing the idea (no physical product yet); do this with experts, customers, focus groups - Seeking a sample of potential buyers' responses to a product idea - A small sample of potential buyers is presented with a product idea through a written or oral description (and perhaps a few drawings) to determine their attitudes and initial buying intentions regarding the product - For a single product idea, an organization can test one or several concepts of the same product - a low-cost procedure that allows a company to determine customers' initial reactions to a product idea before it invests considerable resources in research and development.

Brand recognition

the degree of brand loyalty in which a customer is aware that a brand exists and views the brand as an alternative purchase if their preferred brand is unavailable - weakest form of brand loyalty

Persishability

the inability of unused service capacity to be stored for future use - goods are generally less perishable than services - empty seats on a airline flight today cannot be stored and sold to passengers at a later date - unsold basketball tickets, unscheduled dentists' appointment times, and empty hotel rooms

Introduction Stage

the initial stage of a product's life cycle; its first appearance in the marketplace, when sales start at zero and profits are negative - (1) sellers may lack resources and knowledge to launch product successfully - (2) initial product price may have to be high to recoup expensive marketing research or development costs, which can depress sales - Marketers can attract attention through such techniques as giving away free samples or through media appearances - sales may be slow at first because potential buyers must be made aware of a new product's features, uses and advantages through marketing - only 15 to 25 percent of new products succeed in the marketplace

Brand Name

the part of a brand that can be spoken, including letters, words, and numbers - essential, as it is often a product's only distinguishing characteristic without which a firm could not differentiate its products - Examples: Nike, Apple, Samsung

Brand Mark

the part of a brand that is not made up of words, such as a symbol or design - Examples: Nike Swoosh, Apple Logo

Breakeven point

the point at which the costs of producing a product equal the revenue made from selling the product

Comparison discounting

the pricing of a product at a specific level and simultaneously comparing it to a higher price - The higher price may be the product's previous price, the price of a competing brand, the product's price at another retail outlet, or a manufacturer's suggested retail price.

Co-branding

using two or more brands on one product - marketers employ this type of branding to capitalize on the brand equity of multiple brands - popular in several processed-food categories and in the credit card industry - brands used for co-branding can be owned by the same company - Example: Breyer's Oreo ice cream - Benjamin Moore partnered with the retailer, Target, to release a co-branded line of paint colors that coordinate with Target's kids' furniture and accessories collection. - Cinnabon has released co-branded items with Kellogg's (cereal) and Pillsbury (Toaster Strudel).

Private branding

usually done at retailer level (sold at one store usually) - Sears: Kenmore appliances, craftsman tools - Costco: Kirkland branded items (you can only found Kirkland items at Costco)

Primary Trade Area

vast majority from where customers will come from (80%)

Inventory

you cannot store a service - you are unable to store up a bunch of haircuts for later - airplane that takes off with half of the seats missing, you cannot inventory those seats for later

Buyers benefit from branding in the following ways:

•Brands help buyers recognize specific products that meet their criteria for quality, which reduces the time needed to identify and purchase products by facilitating identification of products that satisfy consumer needs •Without brands, product selection would be more difficult because buyers would have fewer guideposts indicating quality and product features •For many consumers, brand is a form of self-expression •A brand indicates a quality level and image to the customer and reduces a buyer's perceived risk of purchase •Customers might receive a psychological reward from purchasing and owning a brand that symbolizes status