Marketing Chapter 7
diffusion of innovations
- The manner by which a new product spreads through a market is basically a group phenomenon. - New products can be placed on a continuum from no change to radical change, depending on the market's perception.
characteristics of opinion leaders
-- Greater long-term involvement with the product category than the non-opinion leaders in the group. This is called enduring involvement. -- They tend to be only opinion leaders for specific products or activity clusters. --- Seldom differ demographically from the people they influence. --- They have higher levels of exposure to relevant media. --- Because of the WOM factor, they tend to be very satisfied customers with the product category.
characteristics of market mavens
-- They provide significant amounts of information to others across a wide array of products. -- They provide info on quality, sales, price, product availability, store personnel characteristics, and other features of relevance to the consumer. -- Like opinion leaders, they do not differ demographically from those to whom they provide the information. -- Extensive users of media and are usually more extroverted and conscientious than other. More likely to be female.
brand identity
---Those "brand elements," or trademarkable devices that serve to identify and differentiate the brand (Trademark - the exclusive right to use a brand or part of a brand (e.g., brand name, mark, shapes, colors, slogan, sounds); based on use (3 years) vs. registration) ---Includes brand name, mark/symbol, character, slogan, jingle, product design, packaging. should be MEMORABLE, likable, consistent w meaning
service
--The result of applying human or mechanical efforts to people or objects. --involve a deed, performance or effort that cannot be physically possessed.
Advantages of Private Brands
-Earn higher profits on own brand -Less pressure to mark down price -Ties customer to wholesaler or retailer -Wholesalers and retailers have no control over the --------intensity of distribution of manufacturers' brands. -Only marked down a little from manufacturer's brand.
adjustments to product lines, items, mixes
........leads to product modification, product repositioning, and product line extension/contraction
upper middle class
12.5% : premium price, status = professional, grounds
middle class
36% : premium price, achievement, sharing themes; middle class backgrounds
working class
38% : popular price, sports themes, working-class backgrounds
product life cycle
A biological metaphor that traces the stages of a product's acceptance, from its introduction (birth) to its decline (death).
Private Brand
A brand name owned by a wholesaler or a retailer. Also known as private label or store brand.
product line
A group of closely-related product items.
speciality product
A particular item for which consumers search extensively and are reluctant to accept substitutes
consumer product
A product bought to satisfy an individual's personal needs or wants.
new product
A product new to the world, the market, the producer, the seller, or some combination of these
shopping product
A product that requires comparison shopping, because it is usually more expensive and found in fewer stores
unsought product
A product unknown to the potential buyer or a known product that the buyer does not actively seek
business product
A product used to manufacture other goods or services, to facilitate an organization's operations, or to resell to other consumers. B to B: business for another business.
convenience product
A relatively inexpensive item that merits little shopping effort
information processing
A series of activities by which stimuli are perceived, transformed into information, and stored. exposure: does not have to be "seen" attention: when the add is seen interpretation: the meaning associated
product item
A specific version of a product that can be designated as a distinct offering among an organization's products; receives its own UPC code
simultaneous product development
A team-oriented approach to new-product development where all functional areas participate in all stages of the development process. allows firms to shorten the development process and reduce costs.
concept test
A test to evaluate a new-product idea, usually before any prototype has been created. Considered fairly good predictors of success for line extensions and for products that do not require major changes in consumer behavior.
product line extension
Adding additional products to an existing product line in order to compete more broadly in the industry.
campbell's example
All of Campbell's products constitute its product mix. Each product in the product mix may require a separate marketing strategy. In some cases, product lines and mixes share some marketing strategy components. Consider Nike's theme, "Just Do It."
product mix
All products that an organization sells. Rarely does a company sell a single product. Instead, it sells a variety of things that may be categorized into product lines and product mixes.
attitude
An enduring organization of motivational, emotional, perceptual, and cognitive processes with respect to some aspect of our environment. .. the way one thinks, feel, and acts toward some aspect of his or her environment.
brand hierarchy
An important product decision involves determining whether different offerings in a company's product line should be positioned as individual brands or share the same brand name. Brand hierarchy (or architecture) reflects the relationship among different brands in a company's portfolio
motive
An unobservable inner force that stimulates and compels a behavioral response and provides specific direction to that response.
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. includes: "Tangibles" like physical unit, package, warranty "Intangibles" like brand, image, and overall value
benefits of greater depth
Attracts buyers with different preferences Increases sales/profits by further market segmentation Capitalizes on economies of scale
measuring brand power
Brand awareness Type of brand associations Strength of brand associations Price willing to pay for branded vs. identical unbranded product
financial based approach
Brand equity = NPVFutureCashFlows* Brand contribution factor * Risk factor
market based approach
Brand equity = RevenuesBrand - RevenuesGeneric - Branding costs
brand elements
Brand name: Kellogg Frosted Flakes Brand marks (logo, etc.) Character Tony is 6 feet 6 inches tall with a muscular build and walks on two legs. He's a strong, self-assured friend who offers encouragement to kids and grown-ups alike Slogan: They're Gr-r-reat!® Packaging Endorsements Sponsorships
brand meaning
Brand-related perceptions and beliefs held by consumers (i.e., consumers' understanding of the brand's value proposition). Creates value by ... Signaling product quality Providing emotional, social, and self-expressive benefits
cost based approach
Calculating the costs involved if the brand needed to be created from scratch at the time of valuation (e.g., marketing research, advertising, legal)
brand meaning
Creates value for the customer, the company, and collaborators
development
Creation of prototype Marketing strategy Packaging, branding, labeling Promotion, price, and distribution strategy Manufacturing feasibility Final government approvals if needed
probability of experiencing dissonance
Degree of commitment or irrevocability Importance of the decision Difficulty in choosing Individual's tendency to experience anxiety
commonalities
Demographics Extracurricular Activities Media Usage Marketing Strategy
benefits of product mix width
Diversifies risk Capitalizes on established reputations
laggards
Dogmatic and oriented toward past Locally oriented and engage in limited social interaction Adopts innovations with reluctance.
Universal Product Code
Each and every product produced gets its own UPC. A 12-digit "universal" number imprinted on a product A scanner automatically reads the UPC, looks up the price, and prints the description and price on the receipt
interdependent self-concepts
Emphasizes family, cultural, professional, and social relationships. Obedient, sociocentric, holistic, connected, and relation oriented Define themselves in terms of social roles, family relationships, and commonalities with other members of their group
independent self-concepts
Emphasizes personal goals, characteristics, acheivements, and desires Individualistic, egocentric, autonomous, self-reliant, and self contained. Define themselves in what they have done, what they have, and their personal characteristics.
benefits of cobranding
Enhancement of prestige or value of a product and increased market presence in markets with little or no market share.
product failure
Failure can be a matter of degree. Absolute failure occurs when a company cannot recover its development, marketing, and production costs. A relative product failure occurs when the product returns a profit but fails to achieve sales, profit, or market share goals.
laggards
Final 16% of consumers
innovators
First 2.5% of consumers
Advantages of Manufacturers' Brands
Heavy consumer ads by manufacturers Attract new customers Enhance dealer's prestige Rapid delivery, carry less inventory
brand functions
Identify a company and/or offering Meaningfully differentiate it from the competition
growth stage
In the growth stage, sales grow at an increasing rate, many competitors enter the market, and larger companies may acquire small pioneering firms. Profits rise rapidly, peak, and begin declining as competition increases. Aggressive brand advertising and communication of the differences between brands is the preferred promotion strategy. Adequate distribution is a major key to establish a strong market position and product success.
first mover advantage
Increased sales through longer sales life Increased margins Increased product loyalty More resale opportunities Greater market responsiveness A sustained leadership position
brand hierarchy core approaches
Individual branding - using different brand names for different products Family branding (a.k.a. umbrella branding) - marketing several different products under the same brand name
brand decison
Individual brand—different brands for different products Family brand—common names for different products or a combination of individual branding and family branding.
market mavens
Individuals who have information about many kinds of products, places to shop, and other aspects of markets. They take being an opinion leader to the next extreme.
how services differ from goods
Intangibility: Services cannot be touched, seen, tasted, heard, or felt in the same way as goods. Services cannot be stored and are easy to duplicate. Tangible cues are often used to communicate a service's quality and nature. Facilities are a critical tangible part of a service experience. Produced and Consumed Simultaneously: Goods are produced, sold, and then consumed. In contrast, services are often sold, produced, and consumed at the same time. Consumers are involved in the production of the services that they buy. The quality of services depends on the quality of employees. Heterogeneity: Services are less standardized and uniform than goods—a characteristic known as heterogeneity. Because services are labor-intensive, consistency and quality control can be hard to achieve. Standardization and training help increase consistency and reliability. Perishability: Services cannot be stored, warehoused, or inventoried. If not used, the revenue is lost. One of the most important challenges in many service industries, such as hotels and airlines, is finding ways to synchronize supply and demand. Deep discounts and off-peak pricing strategies encourage demand during nonpeak times.
functions of attitude
Knowledge - your way of organizing beliefs, ex. colas Value-expressive - allows you to express yourself in what every way you deem fit, ex. Green Peace Utilitarian - favorability towards rewards and negativity to non-rewards Ego-defensive - defense of self-image, ex. Dandruff shampoo
why new products succeed
Match between product and market needs Different from substitute products Benefit to large number of people
early adopters
Next 13.5% of consumers
early majority
Next 34% of consumers
late majority
Next 34% of consumers
why new products fail
No discernible benefits Overestimation of market size Incorrect positioning Priced too high or too low Inadequate distribution Poor promotion Inferior product Poor match between features and customer desires
late majority
Older with less social status and less mobility Skeptical about innovations Adopts out of social pressure, decreased previous product availability, or positive evaluation of innovation
decision process
Problem recognition, information search, alternative evaluation + selection, outlet selection and purchase, postpurchase processes
types of product modifications
QUALITY modification: change in a product's dependability or durability. FUNCTIONAL modification: change in a product's versatility, effectiveness, convenience, or safety. STYLE modification: an aesthetic product change (like color) rather than a quality or functional change. Planned obsolescence is a style modification change to make old products "obsolete" to the consumer.
search qualities
Qualities that are identifiable through inspection before purchase; associated with the least amount of uncertainty (like size)
experience qualities
Qualities that are revealed only through consumption; associated with greater uncertainty like TASTE or RELIABILITY
credence qualities
Qualities that consumers may have difficulty assessing even after consumption; associated with the most uncertainty
benefits of product line contraction
Resource concentration on the most important products. * No waste of resources on poorly performing products. * Greater likelihood of the success of new product items due to more financial and human resources to manage them.
brand identity
Signals value to the customer, the company, and collaborators
product line overextension
Some products have low sales or unduly cannibalize sales of other items Resources are disproportionately allocated to slow-moving products Items have become obsolete because of new product entries
early majority
Somewhat older, less educated, less socially mobile Cautious about innovations Adopts sooner than most of their social group, but after innovation is proven successful Socially active but seldom leaders Relies heavily on interpersonal sources of information
new product strategy
Specifies the roles that new products must play in the organization's overall plan Describes the characteristics of products the organization wants to offer and the markets it wants to serve
brand hierarchy
Subbrands often used to avoid brand dilution while capitalizing on the brand name: Courtyard by Marriott (Marquis) / Gillette Good News razors (Sensor) / Mercedes C class (S).
early adopters
Successful, well educated, and younger than peers Tend to be opinion leaders in local reference groups Will to take risk, but concerned with failure of innovation Use commercial media, professional, and interpersonal information sources Provides information to others
Manufacturer's Brand
The brand name of manufacturer.
idea screening
The first filter in the product development process, which eliminates ideas that are inconsistent with the organization's new product strategy or are inappropriate for some other reason.
introductory stage
The introductory stage represents the full-scale launch of a new product. During the introductory stage, sales normally increase slowly. Marketing costs are high due to higher dealer margins required to obtain adequate distribution and the cost of consumer incentives to try a product. Production costs are high. Advertising expenses are high because consumers must be educated about the product's benefits. Promotion strategy focuses on developing product awareness and informing consumers about the product's potential benefits. Intensive personal selling is often required. Promotion of convenience products may require heavy consumer sampling and couponing. Shopping and specialty products demand educational advertising and personal selling to the final consumer.
market testing
The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.
maturity stage
The maturity stage begins when sales increase at a decreasing rate, and the market approaches saturation. This is normally the longest stage of the PLC. Annual models may appear during the maturity stage for shopping and specialty products. Product lines are lengthened to appeal to additional market segments. Service and repair help manufacturers distinguish their products from others. Heavy promotion is required to maintain market share. For example, consider the competitive "wars" between Coke and Pepsi, Budweiser and Miller, and McDonalds against Burger King and Wendy's. As prices and profits continue to fall, marginal competitors drop out of the market. Niche marketers that target narrow, well-defined segments of a market emerge.
product line depth
The number of product items in a product line.
product mix width
The number of product lines an organization offers.
planned obsolescence
The practice of modifying products so those that have already been sold become obsolete before they actually need replacement.
learning
The process by which memory and behavior are changed as a result of conscious and non-conscious information processing.
brainstorming
The process of getting a group to think of unlimited ways to vary a product or solve a problem. Ideas are not criticized or scrutinized at this stage The goal is quantity, not quality
decline stage
The rate of decline depends on how rapidly consumer tastes change or substitute products are adopted. Many convenience products and fad items lose their market overnight. A strategy for declining products includes elimination of nonessential marketing expenses, and the eventual product withdrawal as sales decline. Management expert Peter Drucker says that all companies should practice organized abandonment, which entails reviewing every product every 2-3 years and asking the question, "If we didn't do this already, would we launch it now?" If the answer is no, begin the abandonment process.
self-concept
The totality of the individual's thoughts and feelings having reference to him-or herself as an object. actual: how I/others actually see me ideal: How I would like/ would like others to see me
opinion leaders
They are individuals who actively filter, interpret, or provide product and brand information that is relevant to their family, friends, and colleagues.
innovators
Younger, educated, socially mobile, venturesome risk takers Cosmopolitan view toward innovations Capacity to adopt an unsuccessful product Extensive use of commercial media, sales personnel and professional sources
collins' theory
__________ ___________ is about long-term emotional energy that builds up and is sustained across an individual's entire interaction ritual chain.
packaging
___________________ serves not only the practical function of containing and protecting products as they travel through the distribution channel, but it is also a container for promoting the product and making it safer and easier to use.
postpurchase dissonance
a consumer reaction after making a difficult decision that involves doubt and anxiety
social class system
a hierarchical division of a society into relatively distant and homogenous groups with respect to attitudes, values and lifestyles
efficient sales and distribution
a product line enables a full range of choices to customers, and as a result, better distribution and retail coverage.
subculture
a segment of a larger culture whose members share distinguishing patterns of behavior. - these patterns are based on the social history of the group as well as on its current situation. - They are also influenced by the larger culture in which they exist.
high involvement learning
a situation in which the consumer is motivated to process or learn the material. Ex. Reading a computer magazine before buying a computer.
low involvement learning
a situation where the consumer has little or no motivation to process or learn the material. Ex. Seeing an ad for polydent. Can include classical conditioning.
component
affective, cognitive, behavioral
component manifestation
affective-- emotions or feelings about specific attributes or overall objects cognitive: beliefs about overall or specific object behavioral: intentions with respect to specific attributes or overall objects
equivalent quality
all products in a line are perceived as having similar quality.
innovation
an idea, practice, or product perceived to be new by the relevant individual or group.
problem recognized
between desired and actual states
Ingredients of Collins' ritual
co-presenece of bodies, barriers to outsides, mutual focus of attention, and shamed mood
reference groups
co-workers at weekend job, hometown friends, friends from apartment complex, classmates, family, teammates
aspects of culture
comprehensive (containing all), acquired (inherited), boundaries (no detailed prescriptions but guidelines instead), seldom aware (seems natural)
functions of packaging
contain and protect, promote, facilitate storage use and convenience, facilitate recycling
brands
create value that goes beyond the functional aspects of the product. Includes: "Tangibles" like brand name, logo, characters "Intangibles" like brand image, personality, meaning
selection process
criteria evaluation / importance / alternatives, apple decision rules, select alternative
external influences
culture, subculture, demographic, social status, reference group, family, marketing activities
idea generation
customers, employees, distributing, retailers, competitors, R + D, consultants
microsociological
defines society in terms of a series of face - to face interactions (chains)
nature of discrepancy
difference between consumer's desired and perceived conditions
advertising economies
economies of scale in advertising (more impact for equivalent spending).
types of subcultures
ethnic, religious affiliation, regional differentiation, activity/brand consumption
high involvement purchase
extended decision making.... problem recognition: generic, information search: internal + external, alternative evaluation: many attributes, complex decision rules, many alternatives, PURCHASE + dissonance, complex evaluation
external search
external information relevant to solving the problem
Outcomes of collins' ritual
group solidarity (belonging), enhanced emotional energy, symbols marked as sacred objectivity, standards of morality regarding searched objects
introductory stage
high failure rates, little competition, frequent product modification, limited distribution, high marketing and production costs, negative profits with slow sales increases, promotion focuses on awareness and information
product life cycle
highest point is right before you get to maturity stage/major competition
ingredient branding
identifies the brand of a part that makes up the product. Examples: Intel in Dell computers, Coach interiors in Lincoln automobiles.
growth stage
increasing rate of sales, entrance of competitors, marketing consolidation, initial healthy profits, aggressive advertising of the differences between brands
conceptualization
interaction ritual theory
brand power
is a measure of the value of the brand to customers (current and potential)
brand equity
is a measure of the value of the brand to the company
affective cultural factors
language, demographics, values, nonverbal communications... all leads into consumer behavior and marketing strategy
medium involvement purchase
limited decision making.... problem recognition: generic, information search: internal + limited external, alternative evaluation: few attributes, simple decision rules, few alternatives, PURCHASE + no dissonance, limited evaluation
Interaction Ritual Theory
link to consumer subcultures etc.
successful new product firms
listening to customers, producing the best product, VISION OF FUTURE MARKET, getting every aspect right, STRONG LEADERSHIP, commitment to new product development, project-based team approach, WILLINGNESS TO FAIL OCCASIONALLY
decline stage
long-run drop in sales, large inventories of unsold items, elimination of all nonessential marketing expenses, "organized abandonment"
business analysis
looks at demand, cost, sales, profitability. asks, * What is the likely demand for the product? * What impact would the new product have on total sales, profits, market share, and return on investment? * How would the introduction of a new product affect existing products? * Would the new product cannibalize existing products? * Would current customers benefit from the product? * Would the product enhance the image of the company's overall product mix?
consuming and consumer behavior
most of us spend more time buying + consuming than we do working or sleeping. We consume products such as fuel, services such as monster.com, and entertainment like concerts. - marketers spend billions attempting to influence our purchasing decisions and millions studying our behavior - but in turn, we can study their practices as well, speculating on their objectives, target audiences, and underlying behavior assumptions
new product development process
new product strategy, idea generation, idea screening, business analysis, development, market testing, commercialization, new product
categories of new products
new-to-the-world, new product lines, product line additions, improvements or revisions, repositioned products, lower-priced products
low involvement purchase
nominal decision making... problem recognition: selective, information search: limited internal, PURCHASE + with no post-purchase dissonance
socioeconomic factors
occupation, education, ownership, income, heritiage
cooperative branding
occurs when two brands receive equal treatment. Examples: Promotional contest sponsored by Ramada Inns, American Express, and Continental Airlines.
lifestyle
outward expression of self concept. 5 types... Excitement-seeking competitives (16%): Like risk, some danger, and lots of competition. Participate in team and individual sports. 2. Getaway actives (33%): Like to opportunity to be alone or experience nature like camping, fishing, and birdwatching. 3. Fitness driven (10%): Engage strictly for fitness benefits like walking, bicycling, and jogging. 4. Health-conscious sociables (33%): Relatively inactive despite health concerns. Enjoy sightseeing, pleasure drives, and zoos. 5. Unstressed and Unmotivated (8%): Not interested in outdoor activities except for the family to be together.
package uniformity
packages may have a common look but maintain individual identities.
new product strategy
part of the organization's overall marketing strategy. It sharpens the focus and provides general guidelines for generating, screening, and evaluating new product ideas. It links the new-development process with the objectives of the marketing department, the business unit, and the corporation. All objectives must be consistent with one another.
sanctions
penalties for violating norms
internal influences
perception, learning, memory, motives, personality, emotions, attitudes
labeling
persuasive: Focuses on promotional theme Consumer information is secondary informational: Helps make proper selections Lowers cognitive dissonance Includes use/care
cobranding
placing two or more brand names on a product or its package.
unique behaviors
preferences, purchases, consumption, communication
commercialization
production, inventory buildup, distribution shipments, sales training, trade announcements, customer advertising
postpurchase consumer behavior
purchase (sometimes dissonage or nonuse), usage (sometimes leads to disposal), evaluation (sometimes complaints), satisfaction.. leads to loyal customers who repeat purchases and either increase or discontinue use
standardized components
reductions in manufacturing and inventory costs.
complementary branding
refers to products advertised or marketed together to suggest usage.
internal search
relevant information from long-term memory
maturity stage
sales increase at a slower rate, saturated markets, annual models appear, lengthened product lines, service and repair assume important roles, heavy promotions to consumers and dealers, marginal competitors drop out, niche marketers emerge
maslow's hierarchy
self-actualization (set goals), esteem(rising to potential), belongingness (find your groups), safety, physiological
expectancy disconfirmation theory
some level of problem recognition in the difference between desired and actual state
initiator
stimuli: products, situations, retail outlets, sales personnel, advertisements, other attitude objects
influencers of household purchase and consumption
structure of household unit, state of the household life cycle, household decision process
current situation
temporary factors affecting consumer
actual state
the condition the consumer perceives himself to be in at this point in time
diffusion process
the manner in which innovations spread throughout a market. Follows a pattern of : - a period of relatively slow growth - followed by a period of rapid growth - followed by a final period of slower growth
consumer behavior
the study of - individuals, groups or organizations and the processes they use to -select, source, use, and dispose of- products, services, experiences, or ideas to satisfy needs AND the impacts that these processes have on the consumer and society
culture
the values, beliefs, preferences and tastes handed down from one germination tot the next
desired consumer lifestyle
the way the customer would like to live and feel
ongoing search
to acquire information for possible later use and because the process itself is pleasurable
social standing
upper middle working lower class
referent group influence
visible usage, high relevance of product to group, low individual purchase confidence, strong individual commitment to group, non-necessary item
expectation dissonance
when actual and satisfaction are not equal
ratchet effect
when something exceeds are expectations so we have higher ones next time and eventually can't be satisfied
actual state
where a consumer actually is
learning
where culture, subculture, social class, family, friends, institutions, experiences, mass media, etc teach us our values, attitudes, tastes, preferences, skills, feelings, meanings, and behaviors, which then affect our purchase and use of products
