MKTG Exam 3 Review
observability
"can we see that its working" (can we see that this is a better product than others) -when products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process ex: BlendTec blender launches youtube videos showing how well their blenders blended things to show to consumers how well it works
Price Elasticity of Demand
% change in quantity demanded/ % change in price -measures how changes in price affect the quantity of the product demanded -the demand curve provides the info we need to calculate the price elasticity of demand -consumers are less sensitive to price increases in necessities (milk) -consumers are generally more sensitive to price increases than price decreases
concept testing
*concept*-> brief written description of a product or service; its technology, working principles, and forms and what customer needs it would satisfy *concept testing*-> the process in which a concept statement is presented to potential buyers or users to obtain their reactions -would you purchase this product? -would this satisfy an unmet need? -how frequently would you purchase it? -how much would you buy? -how much would you pay? -would you buy it for yourself as a present? -triggers the marketing research process
Demand Curves and Pricing
*demand curve*-> shows how many units of a product or service consumers will demand during a specific period at different prices -can be either straight or curved -knowing the demand curve for a product or service enables a firm to examine different prices in terms of the resulting demand and relative to its overall objective *prestige products or services*-> those that consumers purchase for status rather than functionality (a higher price may lead to a greater quantity sold only up to a certain point) (upward sloping curves)
Sales Orientation
-a company objective based on the belief that increasing sales will help the firm more than will increasing profits -focus on being #1 in the profit share -set prices very low to generate new sales even if the profits suffer *premium pricing*-> firm deliberately prices a product above the prices set for competing products to capture those customers who always shop for the best or for whom price does not matter
Customer Orientation
-a company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers' needs -cost is not the end all be all -can change a higher price based on how much the customer values the product
Competitor Orientation
-a company objective based on the premise that the firm should measure itself primarily against its competition -to discourage moe competitors from entering the market, set prices very low *competitive parity*-> a firm's strategy of setting prices that are similar to those of major competitors *status quo pricing*-> a competitor oriented strategy in which a firm changes prices only to meet those of competition
Profit Orientation
-a company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing (how much money can be made) -target profit pricing -maximizing profits -target return pricing
Every Day Low Pricing (EDLP)
-a strategy companies use to emphasize the continuity of their retail prices at a level somewhere btwn he regular, non sale price and the deep-discount sale prices their competitors may offer. -reduces consumers' search costs, EDLP adds value-> consumers can spend less of their valuable time comparing prices, including sale prices, at different stores. -saves search costs of finding lower overall prices -going to keep prices low all the time (Walmart- don't put products on sale because prices are always essentially on sale).
packaging
-an important brand element with more tangible or physical benefits than other brand elements -used as a marketing tool -determines success of the products -attracts the customer's attention -enables products to stand out from their competitor's -offers a promotional tool -allows for the same product to appeal to different markets with different sizes such that the convenience stores stock little packages that travelers can buy at the last minute, whereas Costco sells extra large versions of products -firms occasionally change or update their packaging as a subtle way of repositioning the product -can help suppliers save costs
service
-any intangible offering that involves a deed, performance, or effort that cannot be physically possessed *customer service*-> specifically refers to human or mechanical activities firms undertake to help satisfy their customers' needs and wants by providing good customer service, firms add value to their products or services
customer input
-as much as 85% of new B2B products come from customers -*lead users*-> innovative product users who modify existing products according to their own specific needs (watch customers use products and modify products to what customer likes) -for B2B-> firms can follow their use of products closely and solicit suggestions and ideas to improve those products by using a formal approach such as focus groups, interviews, or surveys, etc -Customer input in B2C markets comes from a variety of sources though increasingly through social media.
advantages to using the same brand name for new products
-bc the brand name is well established, the firm can spend less in developing consumer brand awareness -if either the brand or the brand extension has strong consumer acceptance, that perception will carry over to the other product -when brand extensions are used for complementary products, a synergy exists btwn the two products that can increase overall sales (when people buy Frito-Lay chips they tend to buy the dips as well)
brands are assets
-brands are legally protected (through trademarks and copyrights) and thus constitute a unique form of ownership
manufacturer brands/national brands
-brands owned and managed by the manufacturer -has the same name on it everywhere its sold (Nike) -the manufacturer develops the the merchandise, produces it to ensure consistent quality, and invests in a marketing program to establish an appealing brand image. -by owning their brands, manufacturers retain more control over their marketing strategy, are able to choose the appropriate market segments and positioning for the brand, and can build the brand and thereby create their own brand equity.
brands protect from competition and price competition
-customers are loyal to a specific brand so they won't look anywhere else -because some brands are more established in the market and have a more loyal customer base, neither competitive pressures on price nor retail level competition is as threatening to the firm
Customers
-customers want value- price is hard of the value equation
compatibility
-degree to which it fits in with the way we do things -ex: people would much rather get their nutrients from food than from pills -a diffusion process may be faster or slower depending on various consumer features, including international cultural differences
idea generation (internal R&D)
-development of viable new product -high product development costs -often the source of technological products -often the source of breakthrough products (technology, movies, pharmaceuticals) -considered continuous investments so firms may lose money on a few new products -in the long run though these firms are betting that a few extremely successful new products, often known as blockbusters can generate enough revenues and profits to cover the losses from other introductions that might not fare so well.
inseparable
-differentiates services from goods -service is produced and consumed at the same time; that is, service and consumption are inseparable -production and consumption are simultaneous -little opportunity to test a service before use -once the service has been performed it can't be returned -lower risk by offering guarantees or warranties -ex: when getting a haircut the customer is not only present but also may participate in the service process. the interaction with the service provider may have an important impact on the customer's perception of the service outcome. -if the hairstylist appears to be having fun while cutting hair, it may affect the experience positively
intangible
-differentiates services from goods -services cannot be touched, tasted, or seen like a pure product can. -requires using cues to aid customers -atmosphere is important to convey value -images are used to convey benefit of value -a service that cannot be shown directly to potential customers is difficult to promote -ex: Six Flags uses advertising to evoke images of happy families and friends enjoying roller coaster rides
perishable
-differentiates services from goods -a characteristic of a service: it cannot be stored for use in the future ex: a skit area can be open as long as there's snow even at night, but demand peaks on weekend and holidays, so skin areas often offer less expensive tickets during off peak periods to stimulate demand (same with airlines, cruise ships, movie theaters, and restaurants)
heterogeneous
-differentiates services from goods -technology, training, automation -variability in the service's quality -delivery of services is more variable than products ex: a hairstylist may give bad haircuts in the morning bc she went out the night before, yet that stylist still may offer a better service than the undertrained stylist working in the next station over -if a customer has a problem with the product, it can be replaces, redone, destroyed, however an inferior service can't be recalled- the damage has been done
Company Objectives
-each firm embraces objectives that seem to fit with where management thinks the firm needs to go to be successful, in whatever way it defines success -these specific objectives usually reflect how the firm intends to grow (increasing profits, increasing sales, decreasing competition, or building customer satisfaction)
Increase depth
-firms might add items to address changing consumer preferences or to preempt competitors while boosting sales ex: axe creating a new line of women's fragrance ex: Taco Bell's Doritos locos tacos
licensing
-firms purchase the rights to technology or ideas from other research intensive firms through a licensing agreement -university research centers also often provide such licenses -saves high costs of in-house R&D, but the firm is banking on a solution that already exists but has not been marketed
brainstorming
-groups work together to generate ideas -no idea can be immediately dismissed -only at the end of the session do the members vote on the best ideas or combinations of ideas
Growth Stage
-growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions -market becomes more segmented and consumer preferences more varied, which increases the potential for new markets or new uses of the product or service -firms attempt to reach new consumers by studying their preferences and producing different product variations (colors, styles, features) which enable them to segment the market more precisely Sales: Rising Profits: rapidly rising Typical consumers: early adopters and early majority Competitors: few but increasing
Bait and Switch
-illegal -a deceptive practice of luring customers into the store with a very low advertised price on an item (the bait), only to aggressively pressure them into purchasing a higher priced model (the switch) by disparaging the low priced item, comparing it unfavorably with the higher priced model, or professing an inadequate supply of the lower priced item
increase breadth
-increase in demand, want something new -firms often add new product lines to capture new or evolving markets and increase sales ex: adding a whole new line of yogurt
product labeling
-labels on products and packages provide info the consumer needs for his or her purchase decision and consumption of the product -they identify the product and the brand -used for promotion -the info required on them must comply with general and industry specific laws and regulations, including the constituents or ingredients contained in the product, where the product was made, directions for use, and/or safety precautions -communication tool -Federal Trade Commission Act (FTC) -Packaging and Labeling Act -Nutrition Labeling Act -FDA oversees all food safety
External Reference Pricing
-legitimate -manufacturer suggested retail price is $1.99 and says "our price is $1.59"-> therefore you feel like the store has better prices. Have a regular price or sale price (was $5, this weeks sale price is $4.25). • must be regular price for 50% of the time to be legit Deceptive External Reference Pricing -give a higher reference price (regular price $6, sale price $5).
R&D Consortia
-lower costs and risks -firms join together-investments come from the group as a whole (academia) -groups of other firms and institutions possibly including gov't and educational institutions to export new ideas or obtain solutions for developing new products. -in many cases the consortia involve pharmaceutical or high tech members whose research costs can run into the millions- too much for a single company to bear.
Loss Leader Pricing
-lowers the price *below* the store's cost "buy one get one free" sometimes the price on milk is so low, the company is losing money. (willing to lose money on you every time they sell you a gallon of milk)-> however they make money from the things they didn't put on sale
Decline stage
-maintain sales and sales support (advertising) -*harvest strategy*-> make product but not promote product (have product sell itself) -get rid of it (delete or divest of it) Sales: declining Profits: declining Typical Consumers: Laggards Competitors: low number of competitors and products
early adopters
-make up 13.5% of diffusion of innovation curve -generally don't like to take as much risk as innovators but instead wait and purchase the product after careful review -waits for the first reviews of the latest movie before purchasing a ticket, though they will likely still go a week or two after it opens -get products within the first few weeks -base decisions on early reviews -*opinion leaders*-> influential in helping to guide the opinions of later people in the markets
laggards
-make up roughly 16% of the market -like to avoid change and rely on traditional products until they are no longer available -in some cases they may never adopt a certain product or service -when the sequel to the Hunger Games eventually shows up on their regular TV networks they are likely to watch it -product is almost off the market -buy the product until its no longer available
channel members
-manufacturers, wholesalers, and retailers- have different perspectives when it comes to pricing strategies
maturity stage
-most of the products we know of -marketing costs (promotion, distribution) increase as these firms vigorously defend their market share against competitors -extend the product of the lifecycle (product improvements/find new segments/markets) -keep the product in the maturity stage -drop the price to get people to buy -fierce competition -end of early majority-> late majority -in late stages-> market becomes saturated and practically all potential customers for the product have already adopted the product -try to enter into new markets (international markets) that aren't as saturated -firms continuously introduce new products with improves features or find new uses for existing products bc they need constant innovation Sales: Peak Profits: peak to declining Typical Consumers: Late majority Competitors: high number of competitors
outsourcing
-non innovative companies hire creative and innovative companies to come up with ideas for them -ex: IDEO-> does not offer products but rather a stellar service that helps clients generate new product and service ideas in industries such as health care, toys, and computers
break even point
-point at which the number of units sold generates just enough revenue to equal the total costs -profits equal 0 Breakeven Point= Fixed Costs/Contribution Per Unit contribution per unit= sales price- variable costs per unit
leader pricing
-pricing a regularly purchased item aggressively but still above the store's cost put low price on popular product (grocery store strategy- put low price on milk, but not everything will be on sale)
depth
-product line -equals the number of products within a product line (vertical) -ex: coke adds another flavor (more variety for customers) -with more products and product lines, the firm must keep track of trends and developments in various industries which might tax its resources
branding
-provides a way for a firm to differentiate its product offerings from those of its competitors -can use brand name, URL's, logos & symbols, characters, slogans, jingles/sounds, and distinctive packages *brand*-> anything that is used to distinguish itself from its competition
Inelastic
-refers to a market for a product or service that is price insensitive, that is, relatively small changes in price will not generate large changes in the quantity demanded -PRICE INSENSITIVE -when the price elasticity is less than 1 (after taking absolute value) -if a firm must raise prices, it is helpful to do so with inelastic products or services bc in such a market, fewer customers will stop buying or reduce their purchases -lowering prices will not appreciably increase demand; customers just don't notice or care about lower price
early majority
-represents 34% of the population -crucial bc few new products and services can be profitable until this large group buys them -if the group never becomes large enough, the product or service typically fails -its members don't like to take as much risk and therefore tend to wait until the bugs are worked out of a particular product or service -*key profit group* -this group prob rents the latest Hunger hames movie during the first week it comes out on video (all the reviews are in and their costs are lower)
late majority
-represents 34% of the population -the product has achieved its full market potential -very risk adverse -wait until the price comes down -movie watchers wait until the newest movie is easy to find at Red Box or Netflix -sales tend to level off or may be in decline at this point
competitor's products
-reverse engineering (take apart product, analyze it, and create an improved product that does not infringe on the competitor's patents, if any exist) -"me too" or copycat products -ex: taking an expensive designer dress and copying the design with cheaper materials to make it less expensive
Evaluation Results
-satisfaction of technical requirements -customer acceptance -its satisfaction of the firms financial requirements, such as sales and profits -post launch review-> determine whether the product and its launch were a success or failure and what additional resources or changes to the marketing mix are needed if any.
US economic dependence on service
-service account for 76% of the US GDP 1) generally less expensive for firms to manufacture their products in less developed countries. even if the goods are finished in the US, some of their components likely were produced elsewhere. in turn, the proportion of service production to goods production in the US has steadily increased over time 2) people place a high value on convenience and leisure. ex: household maintenance activities which many people performed themselves in the past, have become more popular and quite specialized (cleaning services) 3) as the world has become more complicated, people are demanding more specialized services- everything from plumbers to personal trainers
brand equity
-set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or service -brands reputation in the marketplace (everyone knows who you are- positive or negative)
primary package
-the one the consumer uses ex: toothpaste tube -consumers typically seek convenience in terms of storage, use, and consumption
Variable Costs
-those costs, primarily labor and materials, that vary with production volume -expressed on a per unit basis -change depending on the quantity produced
Product Launch (commercialization)
-various stages of development -if the market testing returns with positive results, the firm is ready to introduce the product to the entire market -tremendous financial resources and extensive coordination of all aspects of the marketing mix -Introductory low price-> price won't last Promotion, Price, TIMING, Price
Elastic
-when the price elasticity is greater than 1 (after taking absolute value) -relatively small changes in price will generate fairly large changes in the quantity demanded -PRICE SENSITIVE raise price a little-> huge decrease in demand (luxury items)
Introduction stage
-when the product category first launches -usually starts with a single firm, and innovators are the ones to try the new offering -ex: telephone -a lot of advertising- can influence primary demand -other firms soon enter the market with similar or improved products at lower prices -characterized by initial losses to the firm due to its high start up costs and low levels of sales revenue as the product begins to take off -if the product is successful, firms may start seeing profits toward the end of this stage Sales: Low Profits: negative or low Typical Consumers: innovators Competitors: one or few
the 5 C's
1) Company Objectives 2) Customers 3) Costs 4) Competition 5) Channel Members
SKU
Stock Keeping Unit -code specific to one product
family brands
a firm's own corporate name used to brand its product lines and products -when all products are sold under one family brand, the individual brands benefit from the overall brand awareness associated with the family name -Kellogg's uses its family brand name prominently on its cereal brands (ex: Kellogg's Special K, Kellogg's Froot Loops, etc)
predatory pricing
a firm's practice of setting a very low price for one or more of its products with the intent to drive its competition out of business -illegal under both the Sherman Antitrust Act and the Federal Trade Commissions Act -constrains free trade and represents a form of unfair competition
market penetration strategies
a growth strategy that employs the existing marketing mix and focuses the firm's efforts on existing customers -set the initial price low for the introduction of the new product or service -objective is to build sales, market share, and profits quickly -come in with a low price -Customers are price sensitive (elastic demand) -Loyal customers, great market share can raise the price over time, but start low. -Discourages competition
pure competition
a large number of sellers offer standardized products or commodities that consumers perceive as substitutable, such as grains, gold, meat, spices, or minerals. -price is usually set according to the laws of supply and demand -many firms selling commodities at the same prices
High/Low Pricing
a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases -attracts two distinct market segments: 1) those who are not price sensitive and are willing to pay the "high" price 2) more price sensitive customers who wait for the "low" sale price -provides the thrill of the chase for the lowest price -(department stores-Macy's) price products high initially, attracts people willing to pay a high price. Then have periodic great sale prices -if thinking about customers- be tuned into what they're willing to pay- have a good understanding- as a manufacturer survey customers
price skimming
a strategy of selling a new product or service at a high price that *innovators* and *early adapters* are willing to pay in order to obtain it; after the high price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the next most price-sensitive segment. -come in with high introductory price Ex: Xbox, Wii, PlayStation -They raise prices because they can-> people are willing to pay the high price for something new *Riding down the demand curve*- start with high price, once they've sold to everyone insensitive to price, they drop the price a little bit to sell to customers who are a little more price sensitive, then keep dropping price to sell to more sensitive customers.
Alpha testing
an attempt by the firm to determine whether a product will perform according to its design and whether it satisfies the need for which it was intended; occurs in the firm's research and development department -first type of testing done IN THE LAB/COMPANY BY THE COMPANY
cost of ownership method
be willing to pay more for a product if its going to cost you less over the lifetime of the product (hybrid cars)
brands facilitate purchases
brands help customers make quick decisions, especially about their purchases -from promotions, past purchases, or info from friends & family, they recognize the offering before they even read any text on the label, and likely possess a perception of the brand's level of quality, how it tastes, whether it is a good value and whether they like it and want to buy it -make the same thing every time
brand establish loyalty
consumers learn to trust certain brands over time -have a preference for something that you continuously buy -they wouldn't consider switching brands and feel a strong affinity to certain brands
brand licensing
contractual arrangement btwn firms whereby one firm allows another to use its brand name, logo, symbols, and/or characters in exchange for a negotiated fee -common for toys, apparel, accessories and entertainment products such as video games -the firm that provides the right to use its brand (licensor) obtains revenues through royalty payments from the firm that has obtained the right to use the brand (licensee) ex: major league sports teams that play in the NBA, NFL, or NHL as well as various collegiate sports teams -USC gets paid by another company to put the USC logo on their brands
core customer value
defines the basic problem solving benefits that consumers are seeking "what are customers looking for"
product life cycle
defines the stages that products move through as they enter, get established in, and ultimately leave the marketplace -offers marketers a starting point for their strategy planning
Beta testing
done by potential or actual customers -having potential consumers examine a product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use
gray market
employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended to manufacturer. -going around the "authorized channel"- a manufacturer intends to sell to certain businesses (best buy), however someone buys the product from the manufacturer and sells it to the public instead of best buy- bought legally and at a great deal, not illegal, but not sent to the intended business-> if a product breaks, there's no warranty if purchased outside of the intended business, also if you're the manufacturer you want to price your product in such a way that everyone profits.
product development
entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a service's features *prototype*-> the first PHYSICAL form or service description of a new product, still in rough or tentative form, which has the same properties as a new product but is produced through different manufacturing processes-sometimes even crafted individually
addition to product lines (line extensions)
ex: coke comes up with a new flavor
product improvements
ex: new ingredients to fight stains (Tide)
improvement value
ex: new phone, customers want improved quality, better camera, better battery, etc. Therefore, charge a higher price for what customers want because you know that's what they want and they will pay more for what they want.
premarket tests
firms conduct premarket tests before they actually bring a product or service to market to determine how many customers will try and continue to use the product or service according to a small group of potential consumers. -customers exposed -customers surveyed -first make decisions -simulated setting that gives an idea how a product will do -sometimes firms simulate a product or service introduction in which case potential customers view the advertising of various currently available products or services along with advertising for the new product or service.
Decrease depth
from time to time it's necessary to delete products within a product line to realign the firms resources -firms must prune their product lines to eliminate unprofitable or low margin items and refocus their marketing efforts on their more profitable items ex: McCormick spices eliminated dozens of products each year
product lines
groups of associated items that consumers tend to use together or think of as part of a group of similar products or services -associated products grouped together in one category -BMW is grouped together as BMW's -BMW has a *long line* (link-> depth)-> a lot of different products in your product line -Rolls Royce has a *shallow line*-> no depth
relative advantage
if a product or service is perceived as better than substitutes, then the diffusion will be relatively quick -a distinct advantage over current products out there -ex: Swiffer emphasizes its mops and dusters promise to make cleaning faster, easier and more efficient- appealing to older people, children and people with one arm
Costs
in general prices should NOT be based on costs, because consumers make purchase decisions based on their perceived value; they care little about the firm's costs to produce and sell a product or deliver a service.
fashion cycles
in industries that rely on fashion trends and experience short product life cycles, most sales come from new products. -ex: a motion picture generates most of its theater, DVD and cable TV revenues within a year of its release. -ex: different fashion trends-> come up with new product to keep up
test marketing
introduces a new product or service to a limited geographic area (usually a few cities) prior to a national launch -mini product launch -more expensive than premarket tests -market demand is estimated -"final exam"-> get more reliable info -risks: exposure to competition -strong predictor of product success bc the firm can study actual purchase behavior which is more reliable than a simulated test
complexity
less likely to buy a new complex product - products that are relatively less complex are also relatively easy to try
innovators
make up 2.5% of the time diffusion of innovation curve -those buyers who want to be the firs on the block to have the new product or service -enjoy taking risks and regarded as highly knowledgeable -stand in line overnight to get a new product -smallest percentage of population -help the product gain market acceptance
brand awareness
measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion about it -the more aware or familiar they are, the easier their decision making process is, which improves the chances of purchase -familiarity matters most for products that are bought without much thought (gum) but is also critical for infrequently purchased items -certain brands gain such predominance in a particular product market over time the they become synonymous with the product itself (the brand name starts being used as the generic product category-> BandAid).
new category entry
new for a company but not new to the world
pioneers or breakthroughs
new product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market -new to the world product/ product thats never been made before -radically change competition and consumer preferences -ex: photography-> digital cameras are innovations -ex: Apple iPod-not only did it change the way people listened to music, but it also created an entirely new industry devoted to accessories such as cases, ear buds, docking stations and speakers.
improving business relationships
new products do not always target end consumers- sometimes they function to improve relationships with suppliers. -B2B products-> companies will make a new product bc businesses need it
brand loyalty
occurs when a consumer buys the same brand's product or service repeatedly over time rather than buy from the multiple suppliers within the same category -brand loyal customers are an important source of value for firms 1) consumers are often less sensitive to price (firms such as airlines, hotels, credit cards offer CRM programs such as points customers can redeem for extra discounts or free services, etc) 2) marketing costs are much lower 3) firm insulated from the competition (brand loyal customers do not switch to competitor's brands) 4) loyal customers tends to praise the virtues of their favorite products, retailers, or services to others
brand dilution
occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold -"you're only as good as your last extension" -evaluate the fit btwn the product class of the core brand and extension -evaluate consumer perceptions of the attributes of the core brand and see out extensions -ex: Cheetos lip balm was based on the idea that if you like Cheetos, you would want to wipe it all over your lips
Monopolistic Competition
occurs when there are many firms competing for customers in a given market but their products are differentiated sell at different prices -most common form of competition -when so many firms compete, product differentiation rather than strict price competition tends to appeal to consumers
Monopoly
one firm provides the product or service in a particular industry which results in less price competition -one firm controls the market -a monopoly that restricts competition by controlling an industry can be deemed illegal and broken apart by the government
Oligopolistic competition
only a few firms dominate (airlines) -firms typically change their prices in reaction to competition to avoid upsetting an otherwise stable competitive environment *price war*-> occurs when two or more firms compete primarily by lowering their prices *predatory pricing*-> when a fir sets a very low price for one or more of its products with the intent to drive its competition out of business (illegal in the US)
price
only element of the four P's that generates income
cross-price elasticity
percentage change in the quantity of Product A demanded compared with the percentage change in price in Product B. -if Product A's price increased, Product B could either increase or decrease, depending on the situation and whether the products are complementary or substitutes.
sustainable packaging
product packaging that is ecologically responsible
first movers
product pioneers that are the first to create the market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead -market pioneers can command a greater market share over a longer time period than later entrants can
consumer product
products and services used by people for their personal use -the way they are used and how they are purchased selling a consumer product-> sell to a widespread manufacturer, and make it convenient for customers to buy
retailer/store brands (private label brands)
products developed by retailers -managed and owned by the store -in some cases retailers manufacture their own products, whereas in other cases they develop the design and specifications for their retailer/store brands and then contract with manufacturers to produce those products *premium*-> brand a store creates with the intention to compete with national brands *generic*-> "lowest of the low" (ex: Publix sugar rather than Splenda) *copycat*-> store brand name, looks exactly like a national brand (store brand makes their cold medicine the same color as the national brand but prices it lower so people are more inclined to buy that) *exclusive co-branded*-> store brand works with a national brand's designer to make exclusive designs for a specific store. Store is responsible for manufacturing quality and advertising
Substitute Products
products for which changes in demand are *negatively* related; that is, a percentage increase in the quantity demanded for Product A results in a percentage decrease in the quantity demanded for product B
unsought products/services
products or services consumers wither do not normally think of buying or do not know about -require lots of marketing efforts and promotions -new to the world products -very difficult to sell
specialty products/services
products or services toward which the customer shows a strong preference and for which he or she will expend considerable effort to search for the best suppliers -have a specific brand preference, don't purchase often, put a lot of effort in to the purchase selling a specialty product-> manufacturer can sell it in one store (exclusive distribution) bc customers are willing to travel a longer way to get a specific brand/item/style
Complementary products
products whose demands are *positively* related, such that they rise or fall together -a percentage increase in the quantity demanded for Product A results in a percentage increase in the quantity demanded for Product B
Income Effect
refers to the change in the quantity demanded by the consumers due to a change in their income -generally as people's income increases, their spending behavior changes: thy tend to shift their demand from lower-priced products to higher priced alternatives.
Substitution Effect
refers to the consumers' ability to substitute other products for the focal brand. -the greater the availability of substitute products, the higher the price elasticity of demand for any given product will be. ex: if Tide raises its prices, many consumers will turn to competing brands bc they are more sensitive to price increases when they can easily find lower priced substitutes.
brand associations
reflect the mental and emotional links that consumers make between a brand and its key product attributes, such as a logo and its color, slogan, or famous personality ex: State Farm's jingle
breadth
represents a count of the number of product lines offered by the firm (horizontal) -product mix -company brings in a whole new line of product (ex: Nabisco added the new Belvita breakfast crackers (new product line)). -too much breadth becomes costly to maintain, and too many brands may weaken the firm's reputation
repositioning
same product but company finds a new use for the product
service product continuum
service dominant (pure service) -> product dominant (pure good) doctor-> hotel-> dry cleaners-> restaurant-> apparel specialty store-> grocery store -most offerings lie somewhere in the middle
Internal reference pricing
something you have in memory (have an idea of a price in mind) (not subject to deception)** *Last price paid* -> "last week when I came to store butter was $4.99, why is it $5.25 a week later" *Expected price*-> have an expectation of what you think something is going to cost *Reservation Price*-> how high you're willing to go (I would typically pay $10 for a burger but I'm willing to go up to $16) (bidding) *Expectation of Future Prices*- how good a price you're getting now depends on what you think the prices will be a week or month from now (gas prices) (after Christmas sales-> expect the price to go down after Christmas)
decrease breadth
sometimes it is necessary to delete entire product lines to address changing market conditions or meet internal strategic priorities (decrease in demand) ex: a firm drops its line of protein bars and focuses its attention on its energy drinks and vitamin water
brand repositioning
strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences -firms often need to spend tremendous amounts of money to make tangible changes to the product and packages as well as intangible changes to the brand's image through various forms of promotion -create a new perception of the brand
product mix
the complete set of all products and services offered by a firm -all of the different product lines a company sells -*wide variety* (how wide or narrow is the product mix) ex: Ralph Lauren has a wide product mix -BMW has 4 lines in their product mix
market saturation
the longer a product exists in the marketplace, the more likely it is that the market will become saturated -without new products or services the value of the firm will ultimately decline -ex: car companies sustain their growth by getting consumers excited by the new looks and new features, prompting many car buyers to exchange their old vehicle years before its functional life is over. -ex: iPhone-> Apple made the iPhone 7 to make people buy a new phone and not want to stick with their old one
associated services or augmented product
the nonphysical attributes of the product including the product warranties, financing, product support, and after-sale service
actual product
the physical attributes of a product including the brand name, features/design, quality level, and packaging
price fixing
the practice of colluding with other firms to control prices *horizontal*- illegal. occurs when competitors that produce and sell competing products or services collude or work together to control prices, effectively taking price out of the decision for consumers *vertical*- not illegal. occurs when parties at different levels of the same marketing channel (manufacturers, retailers) agree to control prices passed on to consumers. -within the channel, manufacturer selling to the wholesaler selling to the retailer. Agree you're all going to keep marking the prices up
co-branding
the practice of marketing two or more brands together, on the same package or promotion -can enhance consumer's perceptions of product quality by signaling unobservable product quality through links btwn the firm's brand and a well-known quality brand -ex: a Dell computer with Intel inside -ex: Buyer's ice-cream with Oreo's inside
price discrimination
the practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all forms of price discrimination are illegal -can do it in B2C, but not B2B (only legal for B2B based on volume) -not always legal
reference price
the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process - the seller labels the reference price as the "regular price" or "original price" -when consumers view the "sale price" and compare it with the provided reference price, their perceptions of the value of the deal will likely increase
innovation
the process by which ideas are transformed into new products and services that will help firms grow. -ideas are transformed into new offerings
diffusion of innovation
the process by which the use of an innovation, whether a product or service, spreads throughout a market group over time and over various categories of adopters -helps marketers understand the rate at which consumers are likely to adopt a new product or service -firms can predict which type of customers will buy their new product or service immediately after its introduction as well as later as the product is more accepted by the market -this way the firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each customer group.
Perceived Value
the relationship between a product's or service's benefits and its cost. -have to have a a product that is worth what we're paying -customers usually determine the offering's value in relationship to that of its close competitors -if they believe a less expensive brand is about the same quality as a premium brand, the perceived value of that cheaper choice is high
Individual Brands
the use of individual brand names for each of a firm's products -while Kellogg's makes good use of the family branding strategy, it also allows other products, such as Morningstar Farms, Famous Amos cookies, Keebler Cookies, and Cheez-Its to keep individual identities not readily seen as being under the Kellogg's umbrella
brand extension
the use of the same brand name for new products being introduced to the same or new markets -taking brand name and using your reputation to extend your brand name into a different category -increase in the product mix's breadth -ex: Crest went from making toothpaste to floss and toothbrushes
line extension
the use of the same brand name within the same product line and represents an increase in a product line's depth -ex: coke makes a new flavor
brands affect market value
the value of a company is its overall monetary worth, comprising a vast number of assets -when the brand loses value, it also threatens their assets -the value of a brand can be defined as the earning potential of that brand over the next 12 months
Fixed Costs
those costs that remain essentially at the same level, regardless of any changes in the volume of production -ex: rent, utilities, insurance, administrative salaries, depreciation *total cost*= fixed costs + variable costs
shopping products/services
those for which consumers will spend time comparing alternatives, such as apparel, fragrances, and appliances. -you're willing to shop around -ex: when people need new sneakers they often go from store to store shopping trying on shoes, comparing alternatives, and chatting with salespeople selling a shopping product-> as a manufacturer. -have salespeople know the product well in order to convince customers to buy
convenience products/services
those for which the consumer is not willing to spend any effort to evaluate prior to purchase -frequently purchased commodity items, usually bought with very little though, such as common beverages, bread, or soap (impulse chocolate buy) -"emergency products" selling a convenience product-> sell to a widespread manufacturer, make it convenient for customers to buy
managing risk through diversity
through innovation, firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can -if some products in a portfolio do poorly, others may do well. -firms with multiple products can better withstand external shocks, including changes in consumer preferences, or intensive competitive activity
triability
try before you buy (car) (product samples) -these products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try -ex: Dyson's displays in national retailers often include floor space that allows shoppers to run the machine to see how well the roller ball works or watch it pick up dirt
changing customer needs
when they add products, services and processes to their offerings, firms can create and deliver value more effectively by satisfying and changing needs of their current and new customers or by keeping customers from getting bored with the current product or service offering. i.e.: technology
secondary package
wrapper or exterior carton that contains the primary package and provides the UPC label used by retail scanners -consumers can use the secondary package to find additional product info that may not be available on the primary package -add consumer value by facilitating the convenience of carrying, using, and storing the product
