what does market segmentation mean?
aggregating buyers into groups that have common needs and will respond similarly to marketing action
what are market segments?
groups of relatively homogeneous consumers drawn from the heterogeneous marketplace.
what is product differentiation
the strategy of creating real or perceived differences between your product and the competitor’s
when do you segment markets
when there is one product with multiple market segments (like a mini fridge that appeals to multiple types of people)
when there is multiple products and multiple market segments (Like Honda with several different vehicles that appeal to many different consumers)
when you have “segments of one” AKA mass customization (personalized stuff)
what are the criteria to use in forming segments
similarity of needs of buyers in a segment
difference of needs of buyers between segments
the potential of a marketing action to reach a segment
simplicity of cost of assigning buyers to segments
The segment must be identifiable and reachable!
bases for segmentation for consumer markets
geographic
demographic (race/ethnicity, religion, income, gender, family size, etc. NEVER USED BY ITSELF!)
psychographic (personality)
behavioristic/usage (based on product usage, for existing product users)
benefit (based on benefit customers seek)
Criteria to use in picking the target segments
relevance to the product - make it make sense
fits with their image, objectives, and resources - don’t try to sell a rolex to a student
competitive position - how much room is in the market?
cost/benefit - is it worth it?
leverage to other segments - get your foot in the door with other segments. (like giving athletes branded clothes in order to reach their audience)
what is positioning
the place an offering/brand occupies in a consumer’s minds on important attributes relative to competitors
variations of products
consumer goods (business 2 consumer)
business goods ( B2B)
explain the classification of consumer goods
convenience (purchased with little effort)
shopping (compare alternatives on important attributes)
specialty ( shopping good, but also luxury item)
unsought (goods you don’t think about)
explain the classification of business goods
production goods/ components
support goods (raw materials used in the process of doing business)
installations (assembly line, equipment)
accessory equipment (office equipment, computers)
supplies ( frequently purchased items like paper)
industrial services (B2B services like cleaning)
what are the degrees of tangibility
nondurable
durable
services
why do products fail?
insignificant point of difference (not unique enough)
too little market attractiveness (test mkt is too small or too competitive)
poor execution of marketing mix
poor product quality or insensitivity to customer needs on critical factors (not what they want)
bad timing
no economical access to buyers (no distribution)
newness from a customer’s perspective
there must be unique benefits
the new product development process
new product strategy development (start defining roles of the new product within an organization)
idea generation (pool of concepts)
screening and evaluation (filter and evaluate new ideas)
business analysis (financial projections (demand, cost))
development (create prototype)
market testing (test market cities)
commercialization (full scale product launch)
What is the product life cycle + name the steps
the lifespan of a product
introduction stage (product introduced to market)
growth stage (rapid increase in sales)
maturity stage (trying to maintain share)
decline stage (sales and profit drop)
how does the marketing mix change throughout a product’s life cycle?
introduction: goal is to gain awareness and stimulate demand
growth: goal is to differentiate your brand
maturity: the goal is to maintain your share
what are some alternative product life cycles
high learning product: long introduction stage
low learning product: short introduction stage, long growth stage
fashion product: multiple growth and decline stages
fad product: fast growth stage, short maturity stage, fast decline stage
what does diffusion of innovation mean and what are the types of people within this?
how a product spreads through a population
innovators (risk takers, not trendy, not typical consumers)
early adopters (more normal, opinion leaders)
early majority (mainstream, most people)
late majority (the “wait and see”’s)
laggards (reluctant, conservative spenders, traditional)
what is brand personality
associating human characteristics with a brand
what is brand equity
commands higher prices and competitive advantages
value added to products beyond their functional benefits
name the different branding strategies
multiproduct branding: one brand name for everything in a product class. (example: olay) a segment of multiproduct branding is subbranding: second brand that goes under a family brand
multibranding: each type of product gets its own brand name (like P&G)
private branding (resller branding/private labeling): store brand
mixed branding: producer has name brand and supply store brand (like green giant and store brand are the same)
what are services
activities or benefits that an organization provides/offers to consumers
what are the four I’s of services
intangibility, inseparability, inconsistency, inventory
what is the price equation
final price = list price - incentives/allowances +extra fees
what is value
perceived benefits
price
what is value pricing
increase perceived benefits (numerator) or decrease price (denominator)
what is the profit equation
profit = total revenue (sales) - total costs (expenses)
what does it mean to move along the demand curve
price - quantity relationship
what is the demand curve
shows the relationship between price and quantity demanded under certain conditions
what are the factors of demand
consumer tastes (what the marketplace wants)
price and availability of similar products
consumer income (things feel more/less affordable)
what is a shift in the demand curve
a move back or forward in demand
what is price-elasticity of demand and explain elastic/inelastic demand
how sensitive are consumers to change in price?
elastic: change the price a little and see a big change in demand
inelastic: change the price and see small change; low sensitivity
unitary demand: theoretical where the change in price is perfectly offset by a change in demand
A large # of substitutes means more elasticity; necessities are less elastic
what are the demand oriented approaches?
Skimming pricing (high initial price that goes down)
penetration pricing (low price to capture market share)
prestige pricing (high price to denote luxury)
penetration pricing (set the price points within the product line; works well with subbranding. Example: Olay with the different types of cream)
Name and describe the different types of innovation
continuous - incremental improvements
dynamically continuous - middle of the road sort of changes
discontinuous innovation - new ideas