MKTG 3310 Wolter 3

A great product isn't just a collection of features. It's how it all works together."

-Tim Cook, Apple CEO and Auburn graduate

What is a product?

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

What are the products that fit under the broadened definition of product?

Convenience products; Shopping Products; Ideas; Places; People/persons; Organizations; Goods, services

What are the product levels?

Augmented product, Actual Product, and core customer vale. They must then design the actual product and find ways to augment it to create customer value and a full and satisfying brand experience.

How do consumers see products?

Consumers see products as complex bundles of benefits that satisfy their needs and desires. They don’t just focus on the physical item itself; In essence, consumers see products as more than just objects, they see them as complete experiences that fulfill both functional and emotional needs.

Where does someone start when designing a product?

When developing products, marketers must first identify the core customer value that consumers seek from the product. Then they must design the actual product and find ways to augment it to create customer value and a full and satisfying brand experience

Which level does product differentiation occur?

Over time, you tend to build from the inside out. Other companies may copy the core, but then must differentiate in the outer rings; Differentiation happens at all levels

What is product quality?

The characteristics of a product or service that bear on its ability to consistently and reliably satisfy stated or implied customer needs

Why are performance and conformance quality?

Product quality is a strong potential point of differentiation both in terms of performance (i.e., level) and conformance (i.e., stability). Conformance is the determinant of satisfaction.

Why may performance be mid but conformance be high?

Performance may be mediocre, but your conformance may be higher because you are always meeting that mediocre or "mid" level of performance and meeting the customer's expectations

Which type of quality is a determinant of satisfaction (though disconfirmation)?

Conformance is the determinant of satisfaction

What are services

"Product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in a customer's ownership of anything."

What kind of products are most prevalent in the US economy?

We are a Service Based economy; 2 multiple choice options

Why is this product the most prevalent in the US economy?

Manufacturing occurs in other countries; Automation of production of goods; Innovations

How did we determine what kind of products are most prevalent in the US economy?

We look at the percent and quantities of workers in the manufacturing industry, and notice it is low, but also declining.; We can also look at the percent of value added industries to out GDP, and that is also trending downwards

How are services different from goods?

Intangibility, Variability, Inseparability, Perishability

How do the service characteristics affect marketing?

Intangible products are harder to assess. A heterogenous product has greater employee and customer input, therefore quality becomes harder to control. An inseparable product must be produced in front of and along with customers. A perishable product cannot be produced ahead of time, so demand must be forecasted.

Does employee satisfaction relate to customer satisfaction for all products? Why or why not?

• Happy employees work better and make customers happier; - However, this only happens when products are highly separable and variable; - Does not work when you have high quality

Which customers perceive changes in employee satisfaction?

Highly inseparable or Repeat customers

What is the services marketing triangle?

Figure 8.4: At the top is the company, bottom right customers and then employees in bottom left. Intended to show how each interacts

What are the concepts captured by each side of the triangle?

Making the promise (external marketing), enabling the promise (internal marketing), fulfilling the promise (interactive marketing)

What are the four categories of benefits? (lecture and article titled "Elements of Value" on Canvas)

Social Impact, Life Changing, Emotional, and functional (from top to bottom) "…the more elements provided, the greater customers' loyalty and the higher the company's sustained revenue growth."

How does the pyramid relate to Maslow's hierarchy?

1. Fulfill lower order ideas to have the higher order ideas to have the higher order needs; 2. People will willingly give up the lower order needs to maintain the higher order needs

In general, which category must be fulfilled first?

The bottom must be fulfilled first, if you don't have any of the other categories. Once you get to the higher categories, then you become more willing to give up the bottom level categories

In general, which category is most easily copied?

functional

What is the range of provided benefits for companies with highly loyal customers?

4-11 benefits; Greater customer loyalty and satisfaction; Research suggests that just providing four benefits well can create loyal customers, and the most provided by top brands is 11 out of the 30 in the Value Pyramid

What does bad customer service (over phones) do to the benefits?

Good service can create an edge; Bad service, however, can hamper the benefits

What is feature fatigue?

"A persistent challenge with asking customers what attributes they want is that customers typically want a lot of everything, all at a low price."; - Features of a product are easily copied. When you have more features, satisfaction rates can decrease because customers don't use all the features and they feel they didn't get all of the value out of it and decreases their satisfaction; .- Need to find a balance between having enough features to be attractive, but not too much that drives satisfaction down.

"Branding demands commitment; commitment to continual re-invention; striking chords with people to stir their emotions; and commitment to imagination."

• Sir Richard Branson, CEO Virgin

"Mass advertising can help build brands, but authenticity is what makes them last. If people believe they share values with a company, they will stay loyal to the brand."

• Howard Schultz, previous CEO of Starbucks

What is a brand?

A name, term, sign, symbol, or design or combination of these that identifies the products or services of one seller or group of sellers and differentiates them from competitors.

What is branding?

is the process of endowing products with the power of a brand

Where does the idea of branding stem from and what is the point of branding (i.e., what does it do for a company)?

• Tells people that it is their brand; - Who the company is; - Create connotations of quality/benefits of the product; - Get a customer to think of certain things when they see the brand; - Don't have to repeat what the company is about because consumers know based on the brand. Simplifies communication

What is brand value?

The total financial value of a brand (Apple is #1)

What is brand equity?

The differential effect of a brand on consumer responses to marketing; - "If I put my brand on something, people react differently as compared to something else"

What are the four outcomes of brand equity?

Increases willingness to pay; Attracts new customers; Increases customer loyalty; Stabilizes cash flows

What is a private brand?

Typically a retailer's own brand that they do on own products. Usually a cheaper knockoff. (ex. Target branded bleach vs. clorox)

What does the Pepsi Taste Challenge tell us about the positive effects of the power of branding?

• Pepsi taste challenge: blind tasting scenario between drinks. When people did not know whether they were drinking Pepsi or Coke, they would often say Pepsi is better. But when they knew which drink was Pepsi and which was Coke, they would more commonly say Coke.; - Branding can rewire how people respond, showing how difficult it can be to fight against high brand equity

How do we create a powerful brand?

1. awareness; 2. brand image; NEED BOTH

What is brand awareness? Why does it matter?

The extent a market knows or recognizes a brand.; - Can create brand equity. If we recognize a thing, we are more likely to buy something. "Familiarity breeds liking"

Why did downloads of Twitter drop 30% once it rebranded to X?

• Had no brand awareness upon the change. People did not know of "X" when it was created initially; - People also began to search for Twitter, and people did not see Twitter show up and they would not download X

What is brand image? How does it work?

The collection of associations, thoughts, and feelings that are evoked when exposed to a brand. Can be both positive and negative connotations; - Can be anything you want it to be, but you have to have a common and consistent theme; - Also is not always controlled by you (Ex. Corona beer took a bad hit when coronavirus came along)

What can brand image focus on?

Can be whatever you want it to be.; "Can be your product, McDonald's fries, feelings, things you do". THERE JUST HAS TO BE CONSISTENCY, just has to come back to one larger idea

Does brand image have to only focus on the brand?

No, it just has to come back to one common theme. Find different ways to get your message across; Crossfit brand equity increased when they fought with soda companies, conveying it in a consistent manner

What is a doppelganger brand image?

"a family of disparaging images and stories about a brand that are circulated in popular culture by a loosely organized network of consumers, anti brand activists, bloggers, and opinion leaders in the news and entertainment media"

What does Barnes & Noble tell us about branding?

Sometimes good branding breaks the rules; (they experimented and allowed a Barnes and Noble to change its name and it worked); - Not using overall corporate branding, each store can do it's own branding so that they can have a small time bookstore feel.

What are brand extensions and co-branding?

Brand extensions: Extending an existing brand name to new product categories (Ex. Reese's selling peanut butter "from their candies); Co-branding:; The practice of using the established brand names… on the same product (Ex. Reese's logo and flavor on Breyer's ice cream)

What are the different types of extensions (e.g., in-category vs out-category)?

• In-category: High similarities/connections between the original product and the extension (Reese's Puffs Cereal); - Out-category: Low similarities/connections between the original product and the extension (Reese's scented markers)

What determines if a brand extension works?

The brand equity of the original brand; The connection (or fit) between the brand and the product category being extended to (ex. Reese's scented markers is dumb vs. Reese's Puffs)

What are the positive outcomes of brand extensions?

• Improves odds of new product success when things go well (Ex. Amsterdam food truck); - Positive feedback effects when things go well(increase brand equity of original brand)

What are the potential negative outcomes of brand extensions?

• Negative feedback effects when things go poorly; - Ongoing link to the extended brand if something goes poorly

What do companies do to avoid these negative outcomes?

They brand things separately (Proctor and Gamble have Crest, Scope, Oral-B) so that the individual brands are isolated when something goes poorly.

What happened to Donald Trump's brand and brand extensions after he was president? Why?

• They had varied success, likely due to his presidency; - When he became more controversial, the brand extensions began to fail; - At first, some brands were spared, then a negative feedback started and all of them suffered; - When his fortunes rose and fell(assassination attempt, felony charges), his brand extensions fluctuated wildly; Why?; He began to change some of the brand extensions (i.e. their names) because he saw his value going down, and wanted to create a disconnect between himself as president and his brands

"If things are not failing, you are not innovating enough."

• Elon Musk, CEO Tesla & SpaceX

What are the five stages of the Product Life Cycle?

• Product Development; - Product Introduction; - Product Growth; - Product Maturity; - Product Decline

What are the characteristics of each stage in terms of sales, profits, competitors, and marketing?

Development: none, negative, none, none; Introduction: low, negative, few, Create product engagement and trial; Growth: Rapidly rising sales, rising profits, growing numbers, maximize market share; Maturity: peak sales, high profits, Stable number beginning to decline, Maximize profit while defending market share; Decline: Declining, declining, declining, Reduce expenditure and milk the brand

What are the typical PLCs for styles, fashions, and fads?

Style: Basic and distinctive mode of expression.; - Has a cycle of showing several periods of renewed interest (Ex. flannels); Fashion: Currently accepted or popular style in a given field; -Tend to grow slowly, remain popular for a while, then slowly decline; Fads: temporary periods of intense sales or interest driven by short term consumer enthusiasm; -Otherwise normal lifecycle, could compromise an entire life cycle. Goes through the cycle very quickly (ex. fidget spinners)

What are the diffusion of innovation adopter categories?

• Innovators; - Early adopters; - Early mainstream; - Late Mainstream; - Lagging

What are the percentages given?

-innovators (2.5%); -early adopters (13.5%); -early majority (34%); -late majority (34%); -laggards (16%)

What are the values of each category?

• Innovators: Venturesome, take on risk; - Early adopters: Respect. Get respect from others through buying things early and can talk about it; - Early mainstream: Deliberate. Want to make sure it has value; - Late Mainstream: Skeptical. Realize they are missing out in society and buy; - Lagging: Tradition. Have their way of doing things and don't want that to change

Why do early adopters adopt early?

[No text definition provided in the original Quizlet.]

What happens to the diffusion of innovation if early adopters cannot adopt early?

The early adopters will talk about it less, "cash out," and delays the rest of the cycle. The rest of the people looking for value don't hear about it, then don't adopt, then the process is delayed or the adoption rate just drops

What is the NPD process?

New Product Development Process; - Idea generation; - Idea screening; - Concept development and testing; - Marketing strategy development; - Business analysis; - Product development; - Test marketing; - Commercialization

How important is idea generation?

Research suggest that 1 standard deviation difference in idea quality translates into a 50% change in sale; The better the idea you have, the better the market potential of your product. Must emphasize idea generation

What are the sources for ideas?

Internal sources:; - Research and Development; - Intrapreneurial programs; - Hackathons; - Recognizing "hidden" ideas; - Technology; - Unbundling; External sources:; - Suppliers/distributors; - Learning from competitors; - Learning from innovation leaders; - Learning from customers; - Crowdsourcing

What is an innovation?

A new idea or product. But the degree of innovation can be very different

What is an alpha change and gamma change?

Alpha:; - Variation on a fixed scale. Movement on a perceptual map. (Ex. smart phones getting better cameras); - Movement on something people already judge you by. More of the same, makes it better; Gamma:; - Variation that can only be measured by adding a new dimension. (Ex. Smart phones being invented or now folding); - Gamma changes result in "radically new products" which cause people to "rethink what are often considered settled questions about the environment and infrastructure"

How do these relate to radically new products?

Alpha changes are more likely to lead to not as radical products , whereas gamma changes are more likely to lead to very radical products

What kind of innovation is a consumer likely to come up with?

"Listening closely to current customers might mislead and hurt firms"; Meaning, customers will give more alpha changes. This will result in missed opportunities for the big prize, which is a gamma change

Who makes the innovations that lead to radically new products?

"Radical innovations are more likely to arise from well-funded, sophisticated research labs where many top scientists spend their days putting together the technologies of the future. Such labs are more likely to be found in dominant firms, which have the critical mass for research and often have entire divisions dedicated to pioneering research"

Are consumers good at idea screening?

"Online consumers are a better way to determine a 'good' idea than are ratings by experts… predictions with samples as small as 20 customers are reliable"

How does the NPD process play into the role of luck in life?

Radical new products tend to come from "experts" in the field who; (1) are lucky; (2) can see a gap in the market, and (; 3) can combine newly emerging and existing technologies

"If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business."

• Warren Buffett, CEO Berkshire Hathaway, Inc

Why is pricing so important?

A small percentage improvement in price can often generate a large percentage increase in profitability; Has the highest impact on profit

Pricing is a reflection of what?

A reflection of everything you do as a business; "The single most important decision in evaluating a business is pricing power" -Warren Buffett; - Paradox of pricing

What are the influences on pricing?

• Internal costs; - Market and demand (Price Sensitivity); - Competition; - Marketing Strategy; - Customer perceptions

What is the price floor and ceiling?

Floor: There are no profits below this price. Revenues are equal to your costs; Ceiling: There is no demand above this price

Know the terms fixed costs and variable costs.

Fixed: Costs that do not vary with sales or production level; Variable cost: Costs that vary directly with the level of production

What is competition-based pricing?

setting prices based on competitors' strategies, prices, costs, and market offerings

What is a demand curve?

a curve that shows the relationship between the price of a product and the quantity of the product demanded

What is price elasticity?

measures the responsiveness of demand to changes in price how much of a product people will buy based on the cost.

How is price elasticity calculated?

Calculated by (percent change in quantity/ percent change in price); § Percent change in price= (P2-P1) / (P1); § Percent change in quantity= (Q2-Q1) / (Q1)

What are the factors that affect price elasticity?

Substitutes: more substitutes = more elastic; Necessities: more necessary = less elastic; % of disposable income: higher % = more elastic

What does marketing do to a product's price elasticity?

Generally, marketing should make a products demand more price inelastic. At the very least, loyal customers should exhibit less price sensitivity

What is value-based pricing?

setting price based on buyers' perceptions of value rather than on the seller's cost

Who are superconsumers?

Defined by both economics and attitude: they are a subset of heavy users who are highly engaged with a category and brand. They are especially interested in innovative uses for a product and in new variations on it

Are they price sensitive or insensitive?

They are not particularly price sensitive: they will buy no matter what

Are there superconsumers for any product?

Yes, staplers and velveeta are a prime example

How do superconsumers relate to the demand curve?

They are inelastic and positioned to the left side of the curve, where prices are higher and they are in the small group of consumers who will still demand it

What is good-value pricing?

Offering just the right combination of quality and good service at a fair price

What is EDLP?

everyday low pricing: Charging a constant low price with few or no temporary price discounts

What is value-added pricing?

Attaching value-added features and services to differentiate a company's offers and charge higher prices (contrasts cost based pricing)

How do the two pricing strategies above relate to the demand curve?

Value Added:; When a company increases a product's value through features, service, or branding, it can justify a higher price and shift a majority of their consumers over towards the left side of the curve; Good Value:; It can shift a majority of consumers towards the right of the curve, as more people will buy at the low price and good value side

What is dynamic pricing?

Changing the price constantly to match competitors or consumer demand

What are the three classic industries that used dynamic pricing?

Airlines, rental cars, hotels

Who is using dynamic pricing today and changing prices dozens of times a day?

Amazon, best buy, delta

Is price discrimination legal?

Generally legal, though not if it runs afoul of anti-competitors laws or discriminates against protected groups

Why is Target's pricing in-store different than on the app in the parking lot?

When in the store, all prices listed in the app resemble the prices listed in the store," says a retail analyst. "Outside of the store is a different story. That is where Target must compete with other online stores and the rest of the world, and the prices there mimic those of Target.com."

Why must firms be careful when using dynamic pricing?

consumers may perceive it to be unfair

What are the four determinants of unfairness perceptions?

• Perceptions of excessive profit (in comparisons to estimated costs or reference price); - Perceived immorality (take advantage of the situation, deception); - Inability to understand the pricing strategy (not knowing why prices are changed lead people to negative conclusions); - Bad reputation (people assume bad things, and when reputation is good, people assume good reasons)