Marketing 6020 - Exam 2

Textbook: • Chapter 6 - Products & Services • Chapter 7 - Brands • Chapter 8 - New Products & Innovation • Chapter 9 - Pricing • Chapter 10 - Place (Distribution) • Chapter 11 - Advertising & Marketing Communications • Chapter 12 - IMC • Chapter 14 - Customer Relationship Management Harvard Business Reading: • Mountain Man Brewing Company: Bringing the Brand to Light • Customer Lifetime Value (Customer Profitability & Lifetime Value)

Stages of the Stage-Gate Process

0. Discovery
1. Scoping
2. Build Business Case
3. Development
4. Testing & Validation
5. Launch

Commercialization

the actual start of full operations or production, marketing, and selling.

Cost-Based Pricing

Designed to cover both fixed and variable cost

Buyers are less price sensitive when a product is...

• unique
• high in quality
• a necessity
• Low in cost relative to the consumer's income
• When customers are brand loyal

Requirements of Market Skimming

• Product quality and image must support high initial price
• Product should not be so easy to copy that competitors can easily undercut high price with comparable products

Advantages of Market Skimming

• Gain insight into what consumers are willing to pay
• Maximizes possible revenue/ROI from a new product
• High initial price may communicate prestige (brand image)

Goal of Vertical Marketing Systems

increase efficiency and align incentives so that there is less channel conflict

Perishability

Services cannot be stored for later sale or use.

Services are simultaneously produced and consumed; thus,
• Services cannot be stored
•Services cannot be separated from the provider

What are the 3 types of Product Lines?

1. Mix (or Assortment)
2. Breadth (or width)
3. Line Depth

What meaning do brands convey?

• Attributes (of the product)
• Benefits (to the consumer)
• Value of the brand/firm (deeper enduring commitments
• Personality (associated with the brand and potentially with its consumers)

Relevance

Actual and perceived importance of the brand to its target customers

Umbrella Approach

Attach the same brand name to all products

Pros of House-of-Brands Approach

• Any problems with one brand should not influence the other brands
• Brand images do not need to be consistent, which allows for targeting multiple segments
• Requires more advertising expense

Brand Benefits to Sellers

• Serve as a basis of competitive differentiation
• Help foster customer relationships & loyalty à repeat purchases
• Can allow premium prices
• Can pursue multiple market segments via (different) brands

Which is the most dynamic of the marketing mix variables?

Price

Harder to change the product, produce an ad, shift the placement.

Marketing Strategy

Target certain customers, position (in their minds)

3 major pricing strategies

1. Customer Value-Based Pricing
2. Cost-Based Pricing
3. Competitor Based Pricing

Everyday Low Pricing

constant everyday low price with few / no temporary price discounts

Wholesaler

A business engaged primarily in selling goods and services to those buying for resale (like retailers) or business use.

Benefits of Franchising

• Franchisor receives capital, scales of economy, committed people, less risk, can focus on core functions

• Franchisee: well-known brand and some market awareness, supplier relationships, templates for training, central support

What makes up the Marketing Strategy?

Segmenting
Targeting
Positioning

What makes up the Marketing Mix (or the 4Ps)?

Product
Price
Promotion
Place

Product

Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.

What are considered "Products"?

Tangible goods or services + organizations, events, persons, places, and ideas (or some combination of these)

Kotler's Five Product Levels

1. Core Benefit
2,. Generic Product
3. Expected Product
4. Augmented Product
5. Potential Product

Services

An activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything.

The 4 Characteristics of the Servicing Market

1. Intangibility
2. Variability
3. Inseparability
4. Perishability

Intangibility

Services cannot be seen, tasted, heard, or smelled before purchase.

Extent to which you have something concrete

Variability

Quality of service depends on who provides them and when, where, and how.

Inseparability

Services cannot be separated from their providers

Product Design: Kano Model Attributes

• L = Linear Satisfiers (the more the merrier)
• N = Neutral/Indifferent (no big deal)
• M = Must Haves (I won't buy without it)
• D = Delighters (what an unexpected treat)

Packaging

Container or wrapper for product

Labeling

What goes ON the package

Product Support

Augment the actual products (Ex: Post-purchase support)

What do Product Support Services do?

Augment the actual products

Product Lines

A small group of products that are closely related because they function in a similar manner, are sold to the same customer groups, and/or are marketed through the same types of channels

Product Mix Breadth (or Width)

Variety and number of product lines offered; how many product lines a company has

Product Mix (or Assortment)

A company's complete set of all products and/or services

Product Line Depth

Number of items/products in a given product line

Why and when to expand Product Mix?

1. Add a business whose profit stream will probably correlate negatively with those of existing businesses as it reduces the overall risk of the business

2. Leverage a key asset that underlies the current product offerings

3. Add a complementary product to work toward being a total solution provider (want a bigger "share of wallet" or "share of mouth")

Line filling

adding more items within the present price range

Line stretching

adding products that are higher or lower priced than the existing line

Goods and services differ in terms of:

1. Intangibility
2. Search, experience, credence
3. Perishability
4. Variability

What is an example of a pure good in relation to tangibility/intangibility?

Paper & Phone

What is an example of a pure service in relation to tangibility/intangibility?

Massage & Babysitting

Experience marketing

Consumers are buying the experience

What is an example of a hybrid good/service in relation to tangibility/intangibility?

Restaurant & Beauty Salon

3 Types of Qualities:

1. Search Qualities
2. Experience Qualities
3. Credence Qualities

Search Qualities

May be evaluated prior to purchase

Experience Qualities

Need trial/consumption before evaluation

Credence Qualities

Difficult to judge even post-consumption

Which two qualities are goods dominated by?

Search & Experience

Which two qualities are services dominated by?

Credence & Experience

Brand

the name, term, sign, design, or a combination of these, that identifies the maker or seller of a product or service

Brand Association

anything (mental links) that is deep seated in customer's mind about the brand

How can marketers build brand association?

The use of symbols, packaging & logos, ads, endorsements, retail channels, etc.

Brand Personalities

The capture of specific information about the brand and holistic perceptions about the brand.

What do personalities capture?

1. Specific information about the brand
2. Holistic perceptions about the brand

How do brands reinforce their position/personality?

Organizations need to create a core brand message that communicates the essence of the brand and defines its brand premise

What types of brands do consumers choose?

Those that match our actual or ideal self-conception

Brands help customers express what?

Their ideal selves

How can brands become the focal point of bonding?

Through brand communities

Brand Equity (Brand Value)

The differential effect that knowing the brand name has on customer response to the product or on its marketing.

What does Brand Equity (Brand Value) affect?

Customer Lifetime Value - increases both retention rate and profit margin.

Ways to measure brand equity

1. Determining the price premium of the brand
2. Comparing branded and unbranded favorability

Interbrand

assess value of a firm, subtract physical and financial assets

Factors that determine brand equity/value

1. differentiation
2. relevance
3. knowledge
4. esteem
5. emotional connection

Differentiation

How clearly different is this company from competitors?

Knowledge

How much do consumers know about the product / service

Esteem

How much do people respect / admire the brand?

Emotional Connection

How emotionally tied are customers to the brand?

Types of Product Brand Strategies for Manufacturers

1. National Brand
2. Private Brand/Store Brand
3. Licensing
4. Co-Branding

National/Manufacturer Brand

Putting your own name / brand on a product

Private Brand / Store Brand

Sell to resellers who put their brand name on the product

Licensing

• Pay to put someone else's brand on your product
• Letting someone else's brand do the work for you

Co-Branding

• Put both your brand and someone else's brand on your product

Pros of using the Umbrella Approach

• Builds stronger brand associations
• Subsequent product introductions are easier for the customer to understand and accept
• Higher initial awareness levels
• Most appropriate for companies with strong brand equity

House-of-Brands Approach

Introducing a new brand name for every product line

Brand Benefits to Consumers

• Can Simplify Shopping (e.g., less perceived risk)
• Surrogate for Quality Information / Predicable Quality
• Satisfy Status Needs (brands serve as status symbols)

What are the risks for NPD (new product development)?

1. Demand-Side Risk - NPD failure rates of at least 40%
2. Supply-Side Risk - High cost of entire NPD process

Why bother launching risky new products?

• New products are risky, but they are the key to sustaining long term firm success.
• New products account for 33% of company sales on average.

What does the Product Life Cycle apply to?

• Product Class
• Product Form
• Brand

Stages of the product Life Cycle

introduction, growth, maturity, decline

Stage-Gate NPD Process

a conceptual and operational model for moving new product projects from idea to launch.

What is the trigger for the Stage-Gate process?

A new product idea when technological possibilities are matched with market needs and expected market demand.

Stage-Gate Process

Conceptual and operational model for moving new product projects from idea to launch. Offers a blueprint for managing the product innovation process to improve effectiveness and efficiency

Stage 0: Discovery

• Great ideas, discover and uncover opportunities.
• Communicate with customers, suppliers, etc. to generate ideas in this stage
• Overall trend is bringing more people into the process
• Crowdsourcing

Stage 1: Scoping

• A quick, preliminary investigation of the project - largely secondary research
• Evaluate the product strengths and weaknesses, value proposition, and feasibility
• Evaluate the market potential and relative level of threat from competitors

Stage 2: Build Business Case

• A more detailed investigation involving primary research, both market and technical
• Product definition and analysis
• building the business case
• Building the project Plan
• Feasibility Review

Stage 3: Development

• The detailed design and development of the new product and the design of the operations or production process
• The product's marketing plan is often also developed at this stage

Stage 4: Testing & Validation

• Test or trials in the marketplace or lab to verify and validate the proposed new product and its marketing and production/operations
• Includes field testing, market testing, simulated test marketing

Stage 5: Launch

• Commercialization, the full start of operations or production, marketing, and selling
• Finalize a marketing strategy to generate customer demand for the new product
• Train sales and support personnel
• Set price

What is the goal of Stage-Gate Process (as you go thorough the stages)?

• Drive uncertainties down at each successive stage
• As the stakes increase, the uncertainties of the project must decrease

Gates of the Stage-Gate Process

1. Idea Screen
2. 2nd Screen
3. Go to dev?
4. Go to test?
5. Go to launch?

Discovery

Generate ideas & Discover and uncover opportunities

Scoping

Evaluate the product & Evaluate the market potential

Build Business Case

A more detailed investigation involving primary research, both market & technical

Development

The detailed design and development of the new product, and the design of the operations or production process

Testing & Validation

Tests or trials in the marketplace or lab to verify and validate the proposed new product and its marketing and production/operations

Examples of tests used in the Testing & Validation Stage

Field Testing, Market Testing, Simulated Test Marketing