MAR4480 Exam 4 Flashcards - Key Concepts in Industrial Goods and Customer Behavior

Product

Anything that can be offered to a market to satisfy a want or need

Attractiveness of the market offering

- Value-based prices

- Product features and quality

-Services Mix and Quality

The Customer-Value Hierarchy

Five Product Levels (Inward to Outward)

- Core benefit

- Basic product

- Expected product

- Augmented product

- Potential product

Core Benefit

The service or benefit the customer is really buying

Basic Product

Turning the service or benefit into an actual product

Expected Product

A set of attributes and conditions buyers normally expect when they purchase the product

Augmented Product

Products that exceed the customer's expectations

Potential Product

Encompassing all the possible augmentations and transformations the product or offering might undergo in the future

Convenience

Goods that are purchased frequently and without effort

Staples

Items purchased regularly

Impulse

Purchased without much planning

Shopping

Products consumers compare using suitability, quality, price, and style

Homogenous

Similar in quality but different in price to warrant a comparison

Hetergeneous

Product features and services more important than price

Specialty

Goods with unique characteristics or brand identification which buyers are willing to make a special purchasing effort

Specialty Goods

Don't require comparisons and buyers will travel long distances to find them

Unsought

Goods consumers do not know about or normally aren't thinking about

(Require advertising and personal selling)

Industrial Goods Classification

Classified by relative cost and how they enter the production process

Capital Items

long lasting goods that facilitate developing or managing the finished product

Two types of capital items

Installations and equipment

Supplies/business services

short-term goods and services that facilitate developing or managing the finished product

Two types of supplies/business services

Maintenance/repair items & Operating supplies

Service

Any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything

Pure Tangible Good

A tangible good with no supporting service (e.g., toothbrush)

Good with accompanying services

A tangible good (i.e., car) accompanied by 1 or more service(s) (e.g., satellite radio)

Hybrid

Equal parts of the good and service (i.e., restaurant)

Service with accompany goods

A capital-intensive good with a primary item and service

Pure service

Primarily just a service (i.e., babysitting)

Intangibility

services cannot be seen, tasted, felt, heard, or smelled before purchase

Physical evidence and presentation tools

Place, people, equipment, communication material, symbols, price

Sensory

This brand makes a strong impression on my visual sense or other senses

Affective

This brand induces feelings and sentiments

Behavioral

I engage in physical actions and behaviors when I use this brand

Intellectual

I engage in a lot of thinking when I encounter this brand

Inseparability

Services are typically produced and consumed simultaneously

Variability

The quality of services depends on who provides them, when and where, and to whom

Differential pricing

Shifts demand from peak to off-peak periods (Weekend car rental discounts)

Nonpeak demand

Services that are cultivated (Taco Bell offering breakfast)

Complementary services

Provides customers alternatives to waiting customers (ATM in a bank)

Reservation systems

A way to manage the demand level (Buy a plane ticket is cheaper when purchased in advance versus the day of the flight)

Internal Marketing Excellence

Training and motivating employees to treat clients well

Interactive Marketing Excellence

Employee's skill to serve the client

External Marketing Excellence

Normal job of serving the customer

Technical Quality

was the surgery successful?

Functional Quality

Did the surgeon show concern?

Causes of customer switching behavior

- Pricing

- Inconvenience

- Core service failure

- Service encounter failures

- Response to service failure

- Competition

- Ethical problems

- Involuntary switching

Reliabilty

- Providing service as promised

- Dependability in handling customers' service problems

- Performing services right the first time

- Providing services at the promised time

- Maintaining error-free records

- Employees who have the knowledge to answer customer questions

Reponsiveness

- Keeping customer informed as to when services will be performed

- Prompt service to customers

- Willingness to help customers

- Readiness to respond to customers' requests

Assurance

- Employees who instill confidence in their customers

- Making customers feel safe in their transactions

- Employees who are consistently courteous

Empathy

- Giving customers individual attention

- Employees who deal with customers in a caring fashion

- Having the customer's best interests at heart

- Employees who understand the needs of their customers

- Convenient business hours

Tangibles

- Modern equipment

- Visually appealing facilities

- Employees who have a neat, professional appearance

- Visually appealing materials associated with the service

New-Product Options

- Buy other companies

- Buy patents from other companies

- Buy a license or franchise from another company

- New-to-the-world items

- Improve existing products

Venture Teams

cross-functional groups charged with developing a specific product or business

Skunkworks

Informal workplaces where intrapreneurial teams work to develop new products

Communities of Practice

Internal web sites used for departmental cross collaboration to share knowledge and skills

Crowdsourcing

Including outside stakeholders to develop new products

Stage gate systems

Divides the innovation process into stages with a checkpoint or gate at the end of each stage of development

New product development

In charge of overseeing new product development

Generating Ideas

- Interacting with employees

- Interacting with outsiders

- Studying competitors

- Adopting creativity techniques

Attribute Listing

List attributes of an object, then modify its features to create a new idea

Forced Relationships

Listing several ideas and consider each in relationship to each other

Morphological Analysis

Starting with a problem, then thinking of dimensions such as type of platform, the medium, and power source marketers can list combinations for new ideas

Reverse assumption analysis

List all the normal assumptions about a product then reverse them

Conjoin Analysis

Deriving the utility values that consumers attach to varying levels of a product's attributes

Alpha Testing

Tests the product within the firm to see its actual performance

Beta Testing

Testing with consumers; 3 methods

Rank-order method

Preferences are ranked

Paired-comparison method

Products are paired and evaluated to see which is favorable

Monadic-rating method

Evaluation of one brand to reduce bias

Market Testing

Testing the product in the market after satisfaction of the functional and psychological performance

First Entry

First mover advantages set the standard, locks up key distributors, customers, and gains leadership

Parallel entry

Entry coincides with their competitors to gain greater awareness

Late entry

Entry is delayed to let the leader bear the cost of educating the market and discovering product flaws that can be capitalized upon

Awareness

The consumer becomes aware of the innovation but lacks the information about it

Interest

The consumer is stimulated to seek information about the innovation

Evaluation

The consumer considers whether to try the innovation

Trial

The consumer tries the innovation to improve their estimate of value

Adoption

The consumer decides to make full and regular use of the innovation

Relative advantage

The degree to which innovation appears superior to existing products

Compatibility

The degree to which the innovation matches the values and experiences of the individuals

Complexity

The degree to which the innovation is difficult to understand or use

Divisibility

The degree to which the innovation is difficult to understand or use

Communicability

The degree to which the benefits of use are observable or describable to others

Reference Prices

Comparing an observed price to a price they remmeber for a similar good

Price-quality inferences

Consumers use price as an indicator for quality

Price Endings

The end of the price containing odd numbers (9) giving the impression it is cheaper (i.e., $299 versus $300). 0-5 can also be used and easier for consumer to process

Price Cues

Items such as sale signs utilizing odd/even prices or instilling urgency (3 Day Sale)

Possible Consumer References Prices

- "Fair Price" (what consumers feel the product should cost)

- Typical Price

Steps in Setting a Pricing Policy

1. Selecting the Pricing Objective

2. Determining Demand

3. Estimating Costs

4. Analyzing Competitors' Costs, Prices, and Offers

5. Selecting a Pricing Method

6. Selecting the Final Price

Survival

Short term pricing objective for firms plagued by overcapacity, intense competition, or changing consumer wants

Maximum current profit

setting prices to a level that will maximize profits, cash flow, and rate of return on investment

Maximum market share (Market-Penetration)

Setting prices low with the assumption that lower unit costs and higher long-run profits will gain market share.

Conditions that favor adopting this pricing strategy include: A sensitive market that is receptive to lower prices, production and distribution costs fall, and low prices discourages competition

Maximum Market Skimming (Market-Skimming Pricing)

Prices are set high and fall over time. Typical for technology firms (cell phones intro's). Conditions that are favorable for skimming include: Sufficient number of buyers have a high demand, unit costs of producing smaller volumes offset charging what the market will bear, high initial price doesn't attract competition, and high prices conveys quality.

Price Sensitivity

A demand curve that shows the market's probable purchase quantity at alternative prices.

Consumers are less price sensitive to low-cost items or one's purchased infrequently

Estimate demand curves

measuring demand curves using surveys, price experiments, and statistical analysis

Price elasticity of demand

How responsive or elastic demand is to a change in price.

Lower levels of reaction to price changes indicates inelastic and higher level indicate elastic.

Fixed Costs

Fixed costs (overhead) are costs that do not vary with production levels

Variable Costs

Vary directly related to production

Total Costs

The sum of the fixed and variable costs at any given point in production

Average Cost

The cost per unit at a level of production (TC/Production)