marketing test 2

Product lifecycle and consumer behavior

Innovators

Early adopters

Early Majority

Late majority

Laggards

Innovators

•       Venturesome

•       Higher educated

•       Use multiple sources of information

Early adopters

•       Leaders in the social setting – Apple iPhone

•       Slightly above average education

Early majority

•       Deliberate

•       Many informal social contacts

late majority

•       Skeptical

•       Below average social status

Laggards

•       Fear of debt

•       Neighbors and friends are sources of information

Market segmentation

Involves aggregating prospective buyers into groups or segments that : •       Have common needs

•       Respond similarly to a marketing action

psychographic

•       Based on some subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers

Market segmentation

•       Involves aggregating prospective buyers into groups or segments that

•       Have common needs

•       Respond similarly to a marketing action

Pure competition

many sellers and commodity product

Monopolistic

many sellers competing on price and non-price features and advertising

Oligopoly

Few sellers and sensitive to competitive pricing

Pure monopoly

one seller sets the price for the product

Idle production capacity

occurs when a service provider is available but there is no demand

Product positioning

refers to the place the product occupies in the consumer’s mind based on key attributes related to competitive products

Perceptual mapping

A means of displaying in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how they perceive competing products or brands, as well as the firm’s own product or brand.

Perceptual mapping steps

* Identify the important attributes for a product or brand class
* Discover how target markets rate competing products or brands with respect to these attributes
* Discover where a company’s product or brand is on these attributes in the minds of potential customers
* Reposition the company’s product or brand in the minds of potential customers

Product differentiation

involves a firm using different marketing actions such as advertising and product features to help consumers perceive the product as being different  and better than competing products.

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The perceived differences may involve physical features , such as size or color, or nonphysical ones, such as image or price

Product repositioning

refers to changing the place a product occupies in a consumer’s mind retaliative to competitive products

Elements of services

Intangibility

Inconsistency

Inseparability

Inventory

Intangibility

cannot be held, seen or touched before the purchase decision

Inconsistency

developing, pricing, promoting, and delivering services is challenging because the quality is often inconsistent

Inseparability

company’s image depends on the deliverer as it is difficult to separate the deliverer from the company itself

Inventory

idle production capacity (consulting services) perishable products (produce) inventory carrying costs

Classifying Services

•       Delivery by people or equipment

•       People-based

•       Automated

Delivery by people or equipment

Operated by relatively unskilled operators

•       Motion picture theaters

•       Dry cleaners

•       Taxis (Uber and Lyft)

Operated by skilled operators

•       Electric utilities

•       Airlines

•       Computer networks

People-based

Unskilled labor

•       Security guards

•       Lawn care

•       Janitorial services

Skilled labor

•       Appliance repair

•       Plummers

•       Caterers

•       Professionals

•       Management consultants

•       Accountants

For-profit or nonprofit organizations - Nonprofits

•       United Way

•       The Salvation Army

•       Red Cross

Nonprofits use marketing to help achieve their goals

•       Government Sponsored Services

•       United States Postal Service

•       Peace Corps

Automated

ATMS

Product manager

•       Managing existing products

•       Some are responsible for developing new products

•       Develop and execute marketing plans

•       Approving advertising and packaging

•       Category development index (CDI)

•       Brand development index (BDI)

•       Category and brand development index's help identify strong and weak market segments

**market-product grid**

a frame work to relate the MARKET SEGMENTS of potential buyers to products offered or potential marketing reactions.

Intangible Items

A service, or an idea. (not material products)

20/80 Rule is a concept that suggests

80% of the sales come from 20% of the customers

Classifying products

Consumer products

Business products

Consumer products

products purchased by the __ultimate consumer__

Business products

also called B2B products or industrial products) –are products organizations buy to __assist in providing other products for resale__

Four types of consumer products

Convenience product

Shopping product

Specialty product

Unsought product

Convenience product

are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort

Shopping product

are item for which the consumer __compares__ several alternatives on criteria such as price, quality, or style

Specialty product

are items that the consumer makes a __special effort__ to search out and buy

Unsought product

are items the consumer __does not know about__ or knows about but does not initially want

Business products’s sales are often a result of

derived demand

support products of Business products

Raw materials

Assemblies

Installations

Accessory equipment

Supplies

Industrial services

Assemblies

engines, electronic components

Raw materials

lumber, pipe, wire

Marketing mix pricing

Net Profit = (unit price X quantity sold) – (fixed cost + variable cost)

Net Profit = total revenue – total cost

Net Profit = (unit price X quantity sold) – (fixed cost + variable cost)

What is a price

the money or other considerations (including other products and services sometimes called barter) exchanged for the ownership of a product or service

The 7 Ps of Services Marketing

•       People – internal marketing – customer experience management

•       Physical environment

•       Process – capacity management

•       4 p’s (product, place, promotion, price)

Assessing service quality

•       Reliability – performs as promised

•       Tangibility – Overall appearance of components involved

•       Responsiveness – Willingness to provide fast efficient service

•       Assurance – Knowledge, trust and confidence in service

•       Empathy – Caring, individualized attention

•       GAP – the difference between the actual service and the service expectations

Bundle pricing (focus)

marketing two or more products or services for a single price

Loss-leader pricing

•       Sell select products at no profit or low profit

•       Designed to increase customer traffic

•       Price image

product lifecycle

Introduction stage

Growth stage

Maturity stage

Decline stage

Introduction stage

when a product is introduced to its intended target market

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•       Sales grow slowly

•       Profit is minimal – usually the result of a large investment

•       Advertising to develop primary demand – heavy spending

•       Gaining awareness and moving to selective demand – the preference for a specific brand (HEB Superbowl ad)

•       Skimming strategy – helps the company recover the costs of development as well as capitalize on the price sensitivity of early buyers

•       Pricing very high – tend to attract competitors eager to enter the market

•       Pricing very low – to discourage competitive entry to the market and is referred to as penetration pricing

Growth stage

rapid increases in sales

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•       Stress product differentiation

•       Advertising focused on selective demand

•       New purchasers and more repeat purchasers

Product lifecycle

Maturity stage

•       Maintain brand loyalty

•       Slowing of total sales

•       Profit declines due to competition

•       Fewer new buyers and fewer repeat buyers

Decline stage

•       Sales drop

•       Price declines

•       Usually leads to product deletion – dropping a product from a company’s product line

•       Can lead to harvesting – company retains the product but reduces marketing costs

Three aspects of the product lifecycle

•       Length of the product lifecycle

•       Shape of the lifecycle curve

•       Product level – class and form

Length of the product lifecycle

•       No set time limit; however, consumer products usually have a shorter lifecycle – food

High-learning product

steady increase and slow decline

Low-learning product

steady increase very slow decline

Fashion product

demand increases and decreases several times during the product lifecycle

Fad product

rapid rise and rapid decline

Product class

entire product category or industry – candy

Product form

variation within the product class – Halloween candy

Common approaches to finding the approximate price level

Demand-oriented

Cost-Oriented

Profit-Oriented

Competition-Oriented

Demand-oriented

Weighing expected customer tastes and preferences over cost, profit, and competition

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•Skimming pricing

•Penetration-pricing

•Prestige pricing

•Price lining

•Odd-even pricing

•Target pricing

•Bundle pricing

•Yield management pricing - A complex pricing model based on supply and demand

•Conditions favoring penetration pricing

Skimming pricing

usually a new or innovative product setting the highest price that customers who really desire the product are willing to pay

Prestige pricing

Setting a high price so that quality or status-conscious consumers will be attracted to the product and buy it

Price-lining

A firm selling a number of similar products at a number of different price points.

Odd-even pricing

Setting prices either a few cents or dollars under an even number $500 - $499.99

Target pricing

Working backward from what the consumer’s expected buying price is and adjusting wholesale prices and or features to meet the target price

Yield management pricing

•A complex pricing model based on supply and demand

•Many customized options

•Level of service

•Class of service

•Used for capacity management

Cost – Oriented Approach

•Standard markup pricing - retailers

•Standard markup pricing – entertainment venues

•Cost-Plus pricing

•Experience curve pricing

•Profit-Oriented Pricing

Competition-Oriented Pricing

•Customary pricing

•Loss-leader pricing

•Company, customer and competitive effect on pricing

•Allowances

Service continuum

from service dominated to product dominated. A balanced item would be equally weighted between products and services – fast-food restaurants

Geographic segmentation

Where customers live and work (region, city, and size)

Demographic segmentation

Based on some objective physical (gender, race), measurable ( age, income) or other classification attribute (birth era, occupation) of prospective customers

Psychographic segmentation

segmentation based on some subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers

Behavioral segmentation

Based on some observable actions or attitudes by prospective customers – such as where they buy, what benefits they seek, how frequently they buy, and why they buy

Target profit pricing

the firm sets an annual target of a specific dollar volume of profit

Services

are **intangible activities** or benefits that an organization provides to satisfy consumers’ needs in exchange for money or something else of value.

Three specific segmentation strategies

* __One product and multiple market__ segments – magazines, books movies and many services
* Multiple products and multiple market segments – Ford Motor Company Each of its different lines of cars, SUV’s, trucks, crossovers, hybrids and all electric vehicles
* Segments of one or Mass customization – The next step past build to order (BTO) which involves manufacturing a product only when there is an order from a customer

Segments of one or Mass customization

The next step past build to order (BTO) which involves manufacturing a product only when there is an order from a customer

Multiple products and multiple market segments

Ford Motor Company Each of its different lines of cars, SUV’s, trucks, crossovers, hybrids and all electric vehicles

__One product and multiple market__ segments

magazines, books movies and many services

Five key steps in segmenting and targeting markets – **Link the market needs of the customers to the organization’s marketing program**

•       Group potential buyers into segments

•       Group products to be sold into categories

•       Develop a market-product grid and estimate the size of the markets

•       Select target markets – sales and margin are critical

•       Execute marketing actions to reach target markets

Simplicity and cost-effectiveness of assigning buyers to segments

A marketing manager must be able to put a market segmentation into effect. __This means identifying the characteristics of potential buyers in a market and then cost-effectively assigning them to a segment__

Potential for increased profit

The best segmentation approach is one that maximizes the opportunity for future profit and ROI (go with  the trends)

Similarity of needs of potential buyers within a segment

Customers have common needs that, in turn, lead to common marketing actions

Difference of needs of buyers among segments

the depth of differences determines the depth of segments. __Keep in mind the more segments the most cost.__

Potential of a marketing action to reach a segment

Reaching a segment requires a simple but effective marketing action. __If no such action exists, don’t segment, like tobacco was a category. Market extensions was its own category, until rolls were a whole other category.__

North American Industry Classification System (NAICS)

Measuring Organizational Markets

derived demand

a demand for a __commodity__, service, etc. which is a consequence of the demand for something else.

Primary Demand

The desire for the product class rather than for a specific brand, since there are few competitors with the same product.

selective demand

As more competitors launch their own products and the product progresses along its life cycle company attention is focused on creating selective demand, preference for a specific brand.

specialty product

are items that the consumer makes a __special effort__ to search out and buy

Shopping product

are item for which the consumer __compares__ several alternatives on criteria such as price, quality, or style

Convince product

are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort

Unsought product

are items the consumer __does not know about__ or knows about but does not initially want

Market Share

The ratio of firm’s sales revenues or unit sales to those of the industry