BA 355 Final Exam

Goods

Have tangible attributes
-nondurable goods (ex. gum)
-durable goods (ex. coffee maker)

Services

Intangible activities or benefits

Ideas

Thoughts that lead to products or action (e.g. concept for new invention or getting people out to vote)

Different types of 'newness' when considering types of new products

-Continuous (or Incremental) Innovation
-Dynamically Continuous Innovation - dramatic, but still the same business model
-Discontinuous Innovation - totally new business model

Some reasons new products have challenges finding success -

-Difficult to produce a successful new product
-Consumers tend to be "creatures of habit"

Why some new products fail (9)

6 Market Reasons and 3 Organization Reasons...

1. Insignificant Point of Difference
2. New product doesn't address a real consumer need
3. Bad Timing
4. Insufficient trade support
5. Poor Product Quality
6. Too little market attractiveness
7. Groupthink (ORGANIZATION REASON)
8. "Not Invented Here" (NIH) Syndrome (ORGANIZATION REASON)
9. Not learning from past failures (ORGANIZATION REASON)

Insignificant Point of Difference

New product has to make a difference or else it won't be appealling to consumers

Microsoft Zune had no major benefits vs iPod

New product doesn't address a real consumer need

Self explanatory

ex. no one really wants a 'chewy starburst', the harder ones are successful as is

Bad timing

Self explanatory

ex. technology not advanced enough in 1997 for Ask Jeeves search engine

Insufficient Trade Support

Product is unable to get onto shelves

ex. side hershey products are usually placed on the very top or very bottom of shelves, and thus get less view and less sales

Poor Product Quality

Self explanatory

ex. Frito Lay Wow Chips were fat-free, but had laxative effect

Too little market attractiveness

Market too small or competitive

ex. Car startups usually fail because car market is very very competitive and has strict barriers to entry (tesla rare exception)

Groupthink

Group becomes swayed to a false consensus because individuals don't think on their own or speak up

Not Invented Here (NIH) Syndrome

People don't accept an idea because it doesn't come from them or their area

Not learning from past failures

Self explanatory

7 Stage Cycle in the New Product Process (success)

1. New Product Strategy Development
2. Idea Generation
3. Screening and Evaluation
4. Business Analysis
5. Development
6. Market Testing
7. Commercialization

What are the 4 Ps again? (review)

Product
Price
Place (Distribution)
Promotion (IMC)

Step 1: New Product Strategy

New Product Strategy Development
-Environmental Scanning
-SWOT analysis
-Define the STRATEGIC role of a new product

Step 2: Idea Generation

Idea generation sources
-internal BRAINSTORMING
-discussions with TRADE CUSTOMERS and END CONSUMERS (research)
-analysis of competition
-research and development laboratories
-CROWDSOURCING

Step 3: Screening and Evaluation

Screening and Evaluation
INTERNAL APPROACH:
-Organization teams evaluate and select best ideas
EXTERNAL APPROACH: (consumers)
-Concept and Concept/Product Tests
-R&D labs create prototypes

Step 4: Business Analysis

Business Analysis
-New product fit with company's mission/objectives/strategies
-Financial Projections for new Product

Step 5: Development

Development
-Advance from initial prototype to final product
-Run additional laboratory and consumer tests

Step 6: Market Testing

Market Testing
-SIMULATED TEST MARKETS (STMs) most popular since firms generally do not want to test in-market (gives competitors chance to steal product)
-In Simulated Test Markets, consumers take products home after initially surveys, so both TRIAL AND REPEAT purchase can be evaluated

Step 7: Commercialization

Commercialization
-Bring a product into the market
-Development of packaging
-Development of pricing, distribution and integrated marketing communication strategies

Stages of the Product Life Cycle

Introduction, Growth, Maturity, Decline

How Stages of the Product Life Cycle Relate to a Firm's Marketing Objectives

Just review it (memorize if have time)

-

Introduction Stage

-Stimulate Trial
-First create PRIMARY DEMAND (for category) and then SELECTIVE DEMAND (for brand)

Growth Stage

-Rapid Sales Growth
-More Competitors
-Potential Strategies
- Achieve Broadest Possible Distribution
- Add new features to differentiate from competition

Maturity Stage

-Industry/product sales slow
-Defending market share a key objective
-Differentiation a key strategy

Decline Stage

-Industry/product sales drop
-Potential Strategies: Harvesting or Deletion (look at photo before)

Charting the Product Life Cycle - Consumer Behavior (Diffusion of Innovation)

Just review it (memorize if have time)

-

Modifying the Product

Product Modification
-Quality Improvements (ex. Better taste, longer shelf life, etc.)
-New Characteristics (ex. add DuraCeramic coating to grill)

Modifying the Market

Market Modification
-Finding New Customers (ex. Facebook for Baby Boomers)
-Increasing a product's use (ex. drinking OJ all throughout day, not just breakfast)
-Creating a new use situation (ex. Hershey Bar in a S'More)

Branding

Use of a NAME, LOGO, or combination of these to identify a product and distinguish it from those of competition, creating a UNIQUE PROMISE OF VALUE

Brand names and logos need to be TRADEMARKED

Brand Personality and Brand Equity

-Important to create BRAND PERSONALITY
-Goal is to build BRAND EQUITY
- the added value a brand name gives to a product beyond the functional benefits provided

Customer-Based Brand Equity Pyramid

-

Creating Brand Equity

-Build AUTHENTICITY
- Develop trust with consumers
- Has become increasingly important in today's world

Creating Value and Competitive Advantage

Packaging and Labeling Products
- Functional Benefits
- Needs to protect product
- Offers opportunities for displaying product
- Communication Benefits
- Brand Equity
- Key Features
- Other uses of product (ex. in recipes)

Challenges with Packaging Products

-Making Product User-Friendly
- Resealability
-Environmental Concerns
- Recyclability
-Health, Safety, and Security Issues
- Maintaining Shelf Life
- BPA - free plastic
-Cost Issues
- Can't be overly expensive

What is Price?

Price - money or other consideration (including other products and services) exchanged for ownership or use of a product or service

Nature and Importance of Price - Price as an Indicator of Value

Value - what all consumers want
Value = Perceived Benefits / Price

Profit Equations

-Profit = Total Revenue - Total Cost
-Total Revenue = Unit Price x Quantity Sold
-Total Cost = Fixed Cost + (Variable Unit Cost X Quantity Sold)
-Fixed Cost - Cost does not vary with volume (e.g. office rent)
-Variable Cost - Cost varies with volume (e.g. packaging material)

Six Steps in Setting Price:

1. Identify Pricing Objectives and Constraints
2. Estimate Demand and Revenue
3. Determine Cost, Volume, and Profit Relationships
4. Select an Appropriate Price Level
5. Set the List or Quoted Price
6. Make Special Adjustments to the List or Quoted Price

Step 1. Identify Pricing Objectives and Constraints

Pricing objectives can be based on maximizing...
-Profit
-Revenue
-Market Share
- Company Sales / Market Sales (ex. Chobani has $40M sales and the yogurt category is
$100M in sales: Chobani has $ market share of 40%)
- Unit Market Share = Firm Units / Category Units (ex. Chobani sells 200M units and the
yogurt category is 600M units in total: Chobani has unit market share of 33.3%)

Pricing Constraints

Consumer Demand for the product or service

Cost of producing and marketing the product

Types of Competitive Markets

4 types of competitive market

Pure Competition
Monopolistic Competition
Oligopoly
Pure Monopoly

Step 2. Estimate Demand and Revenue

Demand Curve - relates quantity sold to price
Price Elasticity of Demand
Price Elasticity of Demand (E) = Percentage Change in Quantity Demanded / Percentage Change in Price

KNOW WHAT ELASTIC AND INELASTIC IS

Elastic Demand

when a 1% decrease in price produces more than 1% increase in quantity demanded (or a 1% increase in price produces more than a 1% decrease in quantity demanded)

Inelastic Demand

when a 1% decrease in price produces less than a 1% increase in quantity demanded (or when a 1% increase in price produces less than a 1% decrease in quantity demanded)

Step 3. Determine Cost, Volume, and Profit Relationships

Break Even Analysis

Breakeven Point – unit quantity at which Total Revenue and Total Cost (fixed plus variable) are equal

DO PRACTICE PROBLEM IN COURSES

Step 4. Select an Appropriate Price Level

Demand Oriented Pricing Approaches:
Skimming Pricing
Penetration Pricing
Prestige Pricing

Cost Oriented Pricing Approach:
Standup Markup % pricing
Cost-Plus Pricing (Cost plus percentage of cost or cost plus fixed extra amt.)

Profit Oriented Pricing Approaches
Target Profit Pricing
Target Return-on-Sales pricing
Target Return-on-Investment Pricing

Competition Oriented Pricing Approaches
Customary Pricing
Above or Below-Market Pricing
Loss-Leader Pricing

Explain the 3 types of demand oriented pricing approaches

Skimming Pricing - setting the highest price consumers are willing to pay to maximize profit

Penetration Pricing - setting a low price to appeal to mass market and maximize volume

Prestige Pricing - setting a high price so that status-conscious consumers will buy product

Explain the 3 types of competition oriented pricing approaches

Customary Pricing - all players price about the same (ex. candy bars)

Above or Below Market Pricing - based on company estimate (ex. Apple brand above market, Suave brand below market)

Loss-Leader Pricing - Deliberately pricing a product low to attract people to store

Step 5. Set the List or Quoted Price

Choose a Price Policy
-Fixed Price policy - one price for all buyer of a product or service
-Dynamic Pricing policy - sets different prices in real time in response to demand and supply conditions

Consider Effects on Pricing
Company effects:
- Price of one product affects price of others in product line
Customer effects:
- Final check to make sure prices are acceptable to trade customers and consumers

Marginal Analysis (next flashcard)

Marginal Analysis

Balance Incremental Costs and Revenues

Expected incremental revenue from pricing and other marketing actions must more than offset incremental costs to achieve incremental profit

Step 6: Make Special Adjustments to the List or Quoted Price

What are the three special adjustments?

Three special adjustments to list or quoted price includes discounts, allowances, and geographical adjustments

Deceptive Pricing

Pricing which misleads consumers

Predatory Pricing

Practice of charging very low price with intent of driving competitors out of business

Services

Intangible activities or benefits that an organization provides to satisfy consumers’ needs

Four I's of Services

Intangibility
Inconsistency (referring to quality of service)
Inseparability (between deliverer of service and service itself)
Inventory (unused capacity a problem)

5 Dimensions of Service Quality

Seven P's of Service

Product Concept
- Segmentation
- Positioning
Pricing
- Price often perceived by consumer as indicator of quality
- Off-season pricing a common technique
Place (Distribution)
- How the consumer can book the service
Promotion (Integrated Marketing Communications)
- Includes advertising, public relations and consumer promotion
- Social media critical due to people sharing service experiences
People
- Internal Marketing - focus on employees
- Customer Experience Management (CEM) - outstanding service at each contact point with
customers
Physical Environment
-
Process - flow of activities by which service delivered
- Customer Contact Audit
- Inventory Management important

Managing Distribution Channels & Supply Chains

Common distribution channels for consumer products and services by the kind and number of intermediaries

Omnichannel Marketing

Blending of different delivery channels for consumers who shop and buy in brick and mortar outlets and online

Same chain has brick and mortar outlets and online presence

Factors Affecting Distribution Channel Choice

Coverage - Need to determine channels which will provide best coverage for target market
- Intensive distribution (many outlets)
- Exclusive distribution (one or a few outlets in a geographic area)

Types of Channel Conflict

Vertical Conflict - Conflict between Manufacturer and Retailer
Horizontal Conflict - Conflict between Retailers
Disintermediation (bypassing a channel) (ex. Hershey sells directly to 7/11 instead of going through candy/tobacco distributor)

Channel Captain

A channel member that coordinates, directs and supports other channel members
- Can be a manufacturer, wholesaler or retailer
- Channel captains decide how shelf will be organized

Logistics

refers to activities that get the right amount of the right products to the right place at the right time at the lowest possible cost

Supply Chains

refers to the firms involved in creating or delivering a product to intermediaries, consumers or industrial buyers

- firm must drive down supply chain costs but deliver outstanding customer service

Types of Merchandise Lines

Specialty Outlets have low breadth but High depth
(ex. best buy, staples, barnes and nobles)

Breadth

Number of different product lines

Depth

Number of items within each product line

Types of Merchandise Lines

General merchandize stores have high breadth but low depth
(ex. supermarket)

Retail Pricing

Retailer Markup % is the amount by which one multiplies the retailer cost to get the retailer selling price (retailer cost is $.60, Retailer Markup % is 50%, so $.60 X 1.50 = retailer selling price of $.90)
- Formula for retailer markup % is: [(retailer selling price-retailer cost)/retailer cost] X 100,
or [($.90-$.60)/$.60] X 100 = 50%

Retailer Margin is retailer selling price minus cost to the retailer ($.90 - $.60 = $.30 in above example)

Retailer Margin % is retailer margin over retailer selling price
- Formula for retailer margin % is: [(retailer selling price-retailer cost)/retailer price] X 100,
or [($.90-$.60)/$.90] X 100 = 33%

Don’t mix up Retail Markup %, Retailer Margin and Retailer Margin %!

Off-Price Retailing

Retail practice selling brand-name merchandise at lower than regular prices

Variants:
Warehouse clubs
Outlet stores
Single price/extreme value retailers

All Retailing Strategy Subtitles

Off Price Retailing
Location
Experience
Merchandising
The Future

Location

-The main rule of real estate also applies to retailing
-Best Place in a mall to locate is near an Apple Store
-Sephora planning to open stores in more than 75 cities, focusing on “local neighborhoods and community centers” (away from malls)

Retail Experience

Store’s image, atmosphere, ambience critical

Retail Merchandising

Category Management - an approach to assortment management in which a whole category is organized on shelf for optimal sales/profits

Best selling items in ideal spots to attract consumers

The Future

Retailers need to take customer service to a new level to compete with the online world

Best Buy an example of this trend
-Sales people steeped in product knowledge to help consumers
-Introduced in-home advisory service to explain how to connect all products in homes with each other
-Post Covid-19, transitioning half the square footage at some stores to online order fulfillment
-Testing digital first, smaller retail store in Monroe, North Carolina

Target Audience

-Must be aligned with target market specified in the positioning
-Need to understand the demographics, media use, and shopping behavior of the target audience
-Create a “Buyer Persona”

Selecting the Tools - IMC

Tools available are Advertising, Personal Selling, Public Relations, Consumer/Trade Promotion, and Direct Marketing

Use Traditional and/or Social Media for advertising, PR and consumer promotion

All the tools need to work together to create a consistent message

Three types of Advertisments

Pioneering (informational)

Competitive (or persuasive)

Reminder

Developing the Advertising Program

Creative Strategy
Coming up with an Advertising Campaign
Selecting the Right Media

Creative Strategy

Key Prospects

Key Benefit Promised

Support for Promise

Tone

Key Prospects

The target audience against which the brand’s advertising will be directed

Key Benefit Promised

the product benefit considered to be the most meaningful/motivating to the brand’s target audience

Support for Promise

the means by which believability/persuasion is brought to the brand’s promise

Tone

the personality which the advertising will have

Ex. of Creative Strategy (Kisses)

Key Prospects - Females between ages of 18-39

Key Benefit Promised - the simple, yet special, way to connect with others

Support for Promise - 1. Kisses are special due to their size, shape, foil and plume, and 2. The Kisses name is synonymous with affection

Tone - affectionate, charming, magical

Coming Up with an Advertising Campaign

Once you have a solid creative strategy, you then need a BIG IDEA for an advertising campaign

The idea should be translatable to a large array of advertising executions in traditional and digital media

Selecting the Right Media

Media planning goals
Evaluate traditional and digital media
Business Analytics optimization techniques on media data can lead to best media mix

Selecting the Right Media (cont.)

Reach - the number of different people or households exposed to an advertisement

Frequency - the average number of times a person in the target audience is exposed to an advertisement

Rating - the percentage of households in a market that are tuned to a particular show

Gross Rating Points (GRPs) - Reach % x Frequency
Example: 80% reach X Frequency of 3 = 240 GRPs

Cost per Thousand (CPM) - Cost of reaching 1,000 individuals or households with an ad in particular medium

Different media alternatives

TV
Radio
Magazines
Outdoor
Social Media

Social Media

The wave of the future and evolving rapidly
Will discuss in detail in upcoming class

Consumer Oriented Promotion Examples

Coupons - valuable tool for trial or repeat purchase

Samples - excellent tool when objective is trial purchase

Premiums (ex. merchandise) - merchandise may be free or reduced-price, build repeat purchase among current consumers

Contests - encourage consumers to apply skills or creative thinking to win a prize, build repeat purchase among current consumers

Sweepstakes - no skill needed (vs. contest) - just luck of the draw, build repeat purchase among current consumers

Loyalty Programs - encourage and reward repeat purchases

Product Placement - can build trial or repeat purchases

Trade Oriented Promotion

Discounts and allowances extensively used by manufacturers to gain reduced prices, displays and other types of promotions

Public Relations

A form of communications management that seeks to influence the image of an organization and its products/services without payment to media
-News releases and conferences
-Special Events
-Crisis control if there are quality or other controversial issues

How to Build Great Campaigns

A good advertisement is one which SELLS THE PRODUCT, not the advertisement

What you say is more important than how you say it (CONTENT IS KING)

Unless your campaign is built around a big idea, it will flop (no mediocrity)

Give the Facts (don't stretch the truth)

You can not bore people into buying (evoke excitement into your ads)

Make advertising CONTEMPORTARY (contemporary changes in current society)

Never write an advertisement that you wouldn’t want your own family to read
Good products can be sold by honest advertising
If you don’t think the product is good, you have no business to be advertising it
It’s all about trust

Every advertisement should communicate the BRAND IMAGE
-develops from the positioning and the creative strategy

Dont be a copy cat, do something new

How to Write Powerful Copy

The headline is the “ticket on the meat”: use it to flag down readers
-Do not say anything in it which will exclude parts of your target audience
-It should include your benefit/selling promise
-Try to incorporate news in it
-Include the brand name in the headline

Body copy should:
-Go straight to the point
-Be specific, factual and informative
-Include testimonials, if possible
-Give the reader helpful advice (e.g. recipes for a food product)
-Write in a style of everyday conversation