marketing exam 2
(trade) allowances
(trade) allowances: promotional allowances paid by manufactureers to retailers in return for an agreement to feature the manufactuer's products in some way
Initiating Price Cuts
- Excess capacity - Dominate market - Increase market share reasons for price cuts: - excess capacity - falling demand due to strong price competition or a weakened economy - attempt to dominate the market once u cut your price it can be hard to put it back up, so should be last resort
considerations affecting price decisions
-Internal Factors (Overall marketing strategy, objectives, and mix, costs and organizational considerations) -External Factors (nature of the market and demand, compeition, other enviomental factors;economy, resellers, government, social concerns)
consumer perceptions of value
-price ceiling -no demand above this price
responding to competitor price changes
-reduce price -raise perceived value -improve quality and increase price -launch low-price "fighter brand" when a compeitior cuts prices, another companys first reaction may be to drop prices as well. but that is often the wrong response. instead, the firm may want to emphasize the "value" side of the price-value equation.
Creating successful new products requires
1) Understanding consumers, markets, and competitors 2) Developing products that deliver superior value to customers
building strong brands
1. Brand positioning 2. Brand name selection 3. Brand sponsorship 4. Brand development
Three major pricing strategies
1. Customer value-based pricing 2. Cost-based pricing 3. Competition-based pricing
price reductions can
1. Cut profits and initiate price wars 2. Cheapen perceptions of brand quality
consumer perception dimensions
1. Differentiation 2. Relevance 3. Knowledge 4. Esteem
4 service characteristics
1. Intangibility 2. Inseparability 3. Variability 4. Perishability
Product Mix Pricing Strategies
1. Product line pricing 2. Optional-product pricing 3. Captive-product pricing 4. By-product pricing 5. Product bundle pricing
Pricing in Different Types of Markets
1. Pure competition 2. Monopolistic competition 3. Oligopolistic competition 4. Pure monopoly
individual product decisions
1. product attributes 2. branding 3. packaging 4. labeling 5. product support services
brand positioning
A branding strategy in which marketers create a certain image or impression of a brand as compared to those of competitors' brands. attributes, benefits, beliefs and values 1st step in building strong brands
value
A customer's subjective assessment of benefits relative to costs in determining the worth of a product companies should sell value, not price -- cutting cost in tough econimc times isnt always the answer value= benefit/ cost marketers are responsible for communicating to consumers that price is justified by the value provided
New Product Development Process
A eight-phase process for introducing products: idea generation, screening, concept testing, marketing strategy development, business analysis, product development, test-marketing, and commercialization
pure monopoly
A market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which nonprice competition may or may not be found. the only supplier of a unique product with no close substitutes ex: water department one of the pricing market types
inelastic demand
A situation in which an increase or a decrease in price will not significantly affect demand for the product demand hardly changes with price change
oligopolistic competition
Competition that occurs when only a few firms dominate a market. market consists of only a few large sellers ex: fedex one of the pricing market types
Managing service quality
Delivering consistently higher quality than the competitors marketing tasks for service companies
Analyzing the Price-Demand Relationship
Demand and price are inversely related; the higher the price, the lower the demand' Most demand curves slope downward in either a straight or a curved line. The prestige goods demand curve sometimes slopes upward
Managing service differentiation
Developing a differentiated offer, delivery, and image a marketing tasks for service companies
brand
a name, term, symbol, design, sign, or combination thereof that identifies a seller's products and differentiates them from competitors' products
pricing within channel levels
Price fixing: legislation requires Sellers must set prices without talking to competitors. Predatory pricing: legislation prohibits Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business.
Pricing across channel levels
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. (if someone is buying products) price discrimination: is allowed if the seller can prove that costs differ when selling to different retailers manufactures different qualities of the same product for different retailers
product support services
Support services can help a company differentiate itself from competitors an important part of the customer's overall brand experience firms must survey customers to assess the value of current services and obtain ideas for new ones 5th and final step in the individual product decisions
branding
The promotion of a product or service by identifying it with distinct characteristics (usually associated with public perception, quality or effectiveness) identifies the products or services of one seller and differentiates them from competitors 2nd stage in individual product decisons
Product Life Cycle (PLC)
The stages through which goods and services move from the time they are introduced on the market until they are taken off the market. production --> introduction --> growth --> maturity --> decline - all products do not follow all five stages of the PLC (may go from growth to decline, or intro to decline, etc. Some products die quickly, while others may stay in the mature stage for a long, long time) - marketers can apply the PLC as a framework for describing how products and markets work
managing service productivity
Training current employees or hiring new ones Increasing the quantity of service by giving up some quality Harnessing the power of technology marketing tasks for service companies
convience product
a consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort low priced mass advertising by the producer Low customer involvement many purchase locations; Toothpaste, laundry detergent, candy, newspapers, etc one of the consumer products
demand curve
a graph of the relationship between the price of a good and the quantity demanded shows the number of units the market will buy in a givem period at different prices demand price are inversely related higher price= lower demand
product line
a group of closely related product items that: have similaor functions and customer groups are sold through similiar outlets or fall within given prices ranges theres product line filling and product line stretching product line length is the. number of items in the product line
monopolistic competition
a market structure in which many companies sell products that are similar but not identical ex: hotel one of the pricing market types
price elasticity
a measure of the sensitivity of demand to changes in price (inelastic and elastic demand)
cost plus pricing
adding a standard markup to the cost of the product part of cost based pricing
product line filling
adding more items within the present range of the line
dynamic pricing
adjusting prices continually to meet the characteristics and needs of individual customers and situations. prevalent online where internet introduces fluid pricing (like airlines and rentals) one of the pricing adjustment strategies
product attributes
are the benefits of the product or service Quality: level and conssitency Features: differentiate the companys product from competitors products Style and design: appearance and use first step in individaul product decisions
product development process is critical to avoid...
critical to avoiding failure - overestimation of market size - design problems - incorrect pricing or positoning -high development costs -competitor reaction
product bundle pricing
combining several products and offering the bundle at a reduced price pricing bundle of products sold together one of the Product Mix Pricing Strategies
list the tqo product and service classfications
consumer products and industrial products
types of consumer products
convience, shopping, speciality and unsought products
three elements of products
core customer value: the company asks- what is the customer really buying? actual product: features, design, packaging, quality level, brand name, augmented product: offering additional customer services and benefits such as delivery and credit, after-sale service, product support, warranty
reasons for price increases
cost inflation, over-demand, value-added feature
product mix decisions
decisions managers make about which products to sell and in what quantities width- cleaning, household, lifestyle length- clorox, 409 spray depth- clorox wipes, clorox big bottle ◦ ◦ Width is the number of different product lines the company carriers ◦ Length refers to the total number of items a compmay carries within its product lines ◦ Depth refers to the number of versions offered of each product in the line. Ex: Colgate toothpaste comes in numerous varieties like, optic white, charcoal, sensitive, kids, etc.
elastic demand
demand in which changes in price have large effects on the amount demanded demand changes greatly with a small change in price
marketing strategy development
designing an initial marketing strategy for a new product based on the product concept 3 parts: 1. describes the target marekt, the planned value proposition, and the sales, market share, and profit goals for the first few years 2. outlines the planned product price, distrubution, and amrketing budget for the first year 3. describes the planned long run sales, profit goals, and marketing mix strategy 4th step in new product development process
product development
developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering 6th step in new product development process
Channel conflict
disagreements among marketing channel members on goals, roles, and rewards - who should do what and for what rewards Horizontal conflict occurs among firms at the same level of the channel Vertical conflict occurs between different levels of the same channel
pricing adjustment strategies
discounts, (trade)allowances, segmented pricing, psychological pricing, promotional pricing, and dynamic pricing
commericalization
introducing a new product into the market 8th and final step in new product development process
price
is the amount of money charged for a product or service, or the sum of all values that customers exchange for the benefits of having or using the product or service it determines a firms market share and profitability produces revenue is not the cost to create the product
brand valuation
is the estimation of the total financial value of a brand
customer equity
is the value of customer relationships that the brand creates
shopping products
items for which buyers are willing to expend considerable effort in planning and making purchases buy less frequently higher price Comparison of brands on price, quality and style fewer purchase locations; selective distribution in fewer outlets comparision shop; clothing, cars, appliances, furniture one of the consumer products
speciality products
items that the consumer makes a special effort to search out and buy special purchase efforts high price unique charasterics brand identification; more carefully targeted promotion few purchase locations Luxury good such as Lamborghini, Rolex, fine crystal
brand development
line extensions, brand extensions, multibrands, new brands 4th step in building strong brands
brand sponsorship
manufacturer's brand, private brand, licensing, co-branding national brands: marketed under the manufacturer's own name store brands/private labels: created and owned by a reseller of a product or service licensing: uses names and symbols created by other companies or well known movie characters or celebrities for a fee co-branding: use the established brand names of two different companies on the same product 3rd step in building strong brands
what are the major pricing strategies for new products?
market skimming pricing and market penetration pricing
profit margin calculation
net income/net sales margin= total revenue- COGS / total revenue
Disintermediation
occurs when a business sells directly to the customer online and cuts out the intermediary Occurs when product or service producers cut out marketing channel intermediaries or when radically new types of channel intermediaries displace traditional ones
product line stretching
occurs when a company lengthens its product line beyond its current range
list some variable costs
paper printing, social media advertising, raw materials, shipping
product
physical objects innovations/ideas
Product Costs
price floor - A legal minimum on the price at which a good can be sold no profits below this price
psychological pricing
pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product reference prices: prices that buyers carry in their minds and refer to when looking at a given product one of the pricing adjustment strategies
labeling and logos
printed info appearing on or with the package performs sevral functions: 1) identfies product or brand 2) describes several things about the product 3) promotes the product through attractive graphics 4th step in individual product decisions
unsought products
products that potential customers don't yet want or know they can buy new innovations products consumers don't want to think about require much advertising and personal selling Aggressive advertising and personal selling life insurance, blood donation
variability
quality of service depends on who provide them and when, where, and how one of the characteristics of services
discounts
reducing prices to reward customer responses such as paying early or promoting the product one of the pricing adjustment strategies
busniess analysis
review of the sales, costs, and profit projections for a new product 5th step in new product development process
List some fixed costs
salaries, rent, machine rental, mortgage, building insurance
idea screening
screening new product ideas to spot good ones and drop poor ones as soon as possible 2nd stage in new development product process
segmented pricing
segmented pricing: selling a product or service at two or more prices, where the difference in prices is not based on difference in costs. forms of segmented pricing are; customer segment pricing, product form pricing, location based pricing, time based pricing,
brand name selection
selection, protection desirable qualities for a brand name include: -should suggest the product's benefits and qualities - easy to pronounce, recognize and remember - be distinctive - be extendable - translate easily into foreign languages - capable of registration and legal protection 2nd step in building strong brands
intangibilty
services cannot be seen, tasted, felt, heard or smelled before purchase one of the service characteristics
Inseperability Services
services cannot be separated from their providers one of the service characterisitcs
perishability
services cannot be stored for later sale or use one of the characterisitcs of services
Market-skimming pricing
setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales strategy sets high initial prices to "skim" revenue layers from the market -product quality and image must support the price - buyers must want the product at the price one of the pricing strategies for a new product
market penetration pricing
setting a low price for a new product in order to attract a large number of buyers and a large market share one of the pricing stratgies for a new product
by product pricing
setting a price for by-products in order to make the main product's price more competitive one of Product Mix Pricing Strategies
captibe product pricing
setting a price for products that must be used along with a main product (razor and razor heads) one of the Product Mix Pricing Strategies
Customer value-based pricing
setting price based on buyers' perceptions of value rather than on the seller's cost price is considered before the marketing program is set types of value based priceing: - good value pricing - value added pricing -high low pricing - everday low pricing assess customer needs and value perceptions --> set target price to match customer percieved value --> determine costs that can be incurred --> design product to deliver desired value at target price one of the three major pricing strategies
break even pricing
setting price to break even on the costs of making and marketing a product, or setting price to make a target return the point where the total revenue and total cost intersect is the break even point (amount of units that must be sold to break even) part of cost based pricing
compeition-based pricing
setting prices based on competitors' strategies, prices, costs, and market offerings equal to less quality/ value decreases price better quality/value increases price one of the three major pricing strategies
brand strategy
the process where the offer is positioned in the consumer's mind to produce a perception of advantage
cost based pricing
setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk types of costs: 1) fixed costs (overhead), 2) variable costs, 3) total costs types of cost based pricing: cost plus pricing and break even pricing design a good product--> determine product costs--> set price based on costs--> convince buyers of porudtcs value one of the three major pricing strategies
product line pricing
setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices one of the Product Mix Pricing Strategies
promotional pricing
temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales forms of promotional pricing include: -discounts and special event pricing - limited time offers and cash rebates -low interest financing and long warranties one of the pricing adjustment strategies
concept development and testing
testing new product concepts with groups of target consumers to find out if the concepts have strong comsumer appeal -product idea -product concept -product image 3rd step in new product development process
packaging
the activities of designing and producing the container or wrapper for a product steps in developing a good package: 1) packaging concept 2) develop specific elements of the package 3) elements must support products position 4) marketing strategy 3rd step in individual decisions
New Product Development
the development of original products, product improvements, product modifications, and new brands through the firm's own research and product development efforts
brand equity
the differential effect that knowing the brand name has on customer response to the product or its marketing
pure competition
the market structure that exists when there are many small businesses selling one standardized product many competitiors selling virutally identical products ex: selling crops one of different pricing market types
optimal product pricing
the pricing of optional or accessory products along with a main product (by the main product apple phone then can add on accessories like airpods) one of Product Mix Pricing Strategies
test marketing
the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings gives the marketer experience with marketing a product before the introduction 7th step in the new product development process
idea generation
the systematic search for new product ideas crowdscouring: inviting broad communties of people into the new product innovation process first step in new product development process
what is both a fixed and variable expense?
utiltities can be based on usage like water (variable) or be a set costs (fixed)
service
work that is performed for someone banking, hotel, airline service, retail, home repair services
