Marketing Exam Test 3 Content

core customer value

the basic problem-solving benefits that customers are seeking

parts of an actual product

• brand name

• packaging

• features / design

• quality level

associated services (augmented product)

non-physical aspects of the product , such as product warranties, financing, product support, and after-sale service

consumer products

products and services used by people for their personal use

four types of consumer products

specialty, shopping, convenience, unsought

consumer products - speciality

• those for which customers express such a strong preference (give lots of efforts to search)

• typically high priced, and buyers do not use much time to compare against other products

• purchased less frequently

  • i.e sports car, designer clothing, exotic perfumes, luxury watches

consumer products - shopping

• products or services for which consumers will spend a fair amount of time comparing alternatives

• require personal selling and advertising and are in fewer outlets

• i.e furniture, apparel, fragrances, appliances, cell phones and travel

• consumers usually compare attributes of shopping products such as quality, price, and style

consumer products - convenience

• products or services for which the consumer is not willing to expend any effort to evaluate prior to purchase

• bought the most frequently

• bought immediately and without great comparison

• typically low-prices, not-differentiated; widely distributed

• i.e sugar, laundry detergent, pencils, paper

consumer products - unsought

• products or services that consumer either do not normally think about buying, do not know about, or would not buy under normal circumstances

• products and companies are not top of mind until needed

• i.e diamond rings, funeral services, life insurance, and fire extinguishers

product mix

complete set of all products and services offered by a firmp

product lines

groups of associated items that consumers tend to use together or think of as a part of a group of similar products

product mix breadth

count of the number of product lines offered by the firm

product line depth

equals the number of products within a product line

why would you increase product mix breadth

firms often add new product lines to capture new or evolving markets (i.e a firm adds a whole new line of yogurt)

why would you decrease product mix breadth

might be due to changing market conditions or internal strategic priorities; may be too costly to maintain; i.e a firm drops its line of protein bars and focuses on energy drinks and vitamin water

why would you increase product line depth?

increase overall sales and profits; i.e haagen-dazs brand ice cream, adding new flavors like midnight cookies and cream to appeal to its variety-seeking customers

why would you decrease product line depth

may cannibalize brands; Procter and gamble announced it would be merging, eliminating, or selling many of its brands and keeping only top-performing

product

an item or service produced and offered by the company for sale in the market

brand

an entity like the logo, symbol, or name used by the companies, to make their products identifiable among other products in the marketplace

branding

the process of creating a strong, positive perception of your company, and the products you deliver, in your customer’s mind

what makes a brand?

• brand name

• URL’s

• logos and symbols

• characters

• slogans

• jingles or sounds

value of branding for the customer and firm

• facilitate purchases

• stablish loyalty

• protect from price competition

• assets

• affect market value

importance of brand equity

consumer perception of the brand name of a product or service; we want to translate to brand love

perceived value of brand equity

relationship between a product’s benefits and its costs; perceived value is a customer’s own perception of a product merit or desirability to them, especially in comparison to a competitor’s product; perceived value is measured by the price the public is willing to pay for a good

brand equity: brand associations

the mental and emotional links that consumers make between a brand and its key attributes, such as a logo and its color, slogan, or famous personality

brand loyalty

occurs when a consumer buys the same brand’s product repeatedly over time rather than buying from multiple suppliers within the same category (an important source of value, consumers are less sensitive to price, marketing costs are lower)

brand ownership

few store brands have achieved high-quality status and are often considered inferior to manufacturer or national brands

family brands

corporate name used across brands and product lines

individual brands

products have individuals identities

brand extension

same brand name in different product line (i.e Coke branded chapstick)

line extension

same brand name with the same product line (i.e Coke, diet Coke, Coke Zero, etc)

advantages of brand extensions

spend less on brand awareness, positive consumer acceptance will spread to the new product and a synergy exists between two products

brand dilution

not all brand extensions are successful

• evaluate the fit between core brand and extension

• evaluate consumer perceptions of the attributes of the core brand and seek out extensions with similar attributes

• could cause less quality

co-branding

like a collab; marketing two or more brands together can enhance perceptions of quality through links between brands; attracting the consumers of one brand to the other brand

brand licensing

common for toys, apparel, accessories, and entertainment products such as video games (The NBA licenses products like New Orleans Pelicans hats to a manufacturer in exchange for a negotiated fee)

brand repositioning or rebranding

a strategy in which marketers change a brand’s focus to target new markets or realign the brand’s core emphasis with changing market prefernces (change a brand’s focus, improve brand’s fit with its target segment)

packaging

An important brand element that has more tangible or physical benefits than other brand elements have

primary package

one the consumer uses, such as the toothpaste tube; consumers typically seek convenience in terms of storage, use, and consumption. (individual bottles in a pack)

secondary package

is the wrapper or exterior carton that contains the primary package and provides the UPC label used by retail scanners (packs that hold water bottles)

importance of packaging

• attracts the consumer’s attention

• enables products to stand to from their competitors

• allows for the same product to appeal to different markets with different size

• sustainable packaging

packaging label requirements

label information is determined by regulations (can be federal, state, and local)

• is a communication tool

• convey specific meanings, such as “natural”, “organic”, “made in the USA”

innovation

the process by which ideas are transformed into new offerings

two options firms have without innovation

1. continue to market current products to current consumers

2. take the same product to a new market

why do companies need to innovate

• changing customer needs (healthier and greener consumers)

• market saturation (everyone that wanted the product got it, so no more growth)

• managing risk through diversity (multiple products can better withstand shocks like changes in consumer preferences)

• fashion cycles (products that rely on fashion trends ~ apparel, arts, books, video games ~ have a short life cycle (think how many version’s of minecraft ryan has)

• improving business relationships (walmart asks suppliers for info about all their products)

pioneer

• radically change competition and consumer preference by introducing new-to-the-world product

• first to create the market or product category and they become readily recognizable to consumers

diffusion of innovation

process by which the use of an innovation - whether a product, service, or process - spreads throughout a market group over time and across various categories of adopters

diffusion of innovation curve

The curve shows the number of users of an Innovative product or service spreads through the population over a period of time and generally follows a bell-shaped curve

five group of the diffusion of innovation cirve

innovators, early adopters, early majority, late majority and, laggards

diffusion of innovation curve: innovators

those who stand in line for a new product; and spread positiv word of mouth

diffusion of innovation curve: early adopters

wait for review, less risk; spread positive word of mouth

diffusion of innovation curve: early majority

vital for profits; avoids risks by waiting

diffusion of innovation curve: late majority

products reached full market potential; sales level off or start to decline

diffusion of innovation curve: laggards

they don’t like changes and avoid them

The first year they were offered, John wanted a tablet computer, but he did not know which one to choose.  He waited until there were more choices, lower prices, and improved quality. John is part of the ___________ diffusion of innovation group

early majority

Tiffany always asks Samantha about beauty supply products.  She considers her a well-informed friend who always knows the latest trends. For Tiffany, Samantha is a(n) ___________ in the diffusion of innovation curve

innovators

diffusion of innovation theory

1. firms can predict which types of customers will buy their new product immediately after its introduction, as well as later as the product gets more and more accepted by the market

2. firms can develop effective promotion, pricing, and other marketing strats to push acceptance among each customer group

factors to increase the speed of diffusion of a new product

• relative advantage

• compatibility

• observability

• complexity and trialability

four factors that impact diffusion rate

relative advantage, compatibility, observability, complexity and trial-ability

relative advantage

if a product is perceived to be better than substitutes, then the diffusion will be relatively quick

compatibility

the higher the level of compatibility, the quicker the diffusion; and the lower the compatibility, the lower the diffusion (product will diffuse more quickly if it does not require consumers to change their values, norms, lifestyles, cultures and day to day behaviors)

observability

when products are easily observed, their benefits or uses are easily connumicated to others, which enances the diffusion process

complexity and trial-ability

products that are relatively less complex are also relatively easy to try (these products will diffuse more quickly than those that are not so easy to try)

six stages of product development

1. idea generation

2. concept testing

3. product development

4. market testing

5. product launch

6. evaluation of results

product development process - idea generation

development of viable new product ideas

product development process - concept testing

testing the new product idea among a set of potential customers

product development process - product development

development of prototypes and/or the product

product development process - market testing

testing the actual product in a few test markets

product development process - product launch

full-scale commercialization of the product

product development process - evaluation of results

analysis of the performance of the new product and making appropriate modification

seven sources of ideas

1. internal R&D

2. R&D consortia

3. licensing

4. brainstorming

5. outsourcing

6. competitors’ products

7. customer input

Sources of New Product Ideas: internal R&D

larger firms maintain their own R&D dept and rely on it to generate new product that will lead the market (high product development costs and often the source of tech and breakthrough products)

Sources of New Product Ideas: R&D consortia

group of other firms and institutions (including govt and educational institutions) to explore new ideas or obtain solution for developing new products (lower costs and risks, benefit spread to all firms, i.e pharmaceutical / food research)

Sources of New Product Ideas: licensing

Firms license the use of new products, tech, and processes. Small biotech firms frequently license their inventions to larger pharmaceutical firms

Sources of New Product Ideas: brainstorming

groups work together to generate ideas, no idea is immediately accepted/dismissed, members vote on the best idea or combination of ideas

Sources of New Product Ideas: outsourcing

turn to outside firms; hiring an outside firm to generate ideas and develop new products and services; design firms help clients generate new product ideas in industries such as health care, toys, and computers

Sources of New Product Ideas: competitors’ products

reverse engineer products to be substantially different from their source product

Sources of New Product Ideas: customer input

listening is essential for successful idea generation and throughout the product development process; Another particularly successful customer input approach is to analyze lead users. If lead users customize a firm’s products, other customers might wish to do so as well (Innovative product users who modify existing products according to their own specific needs)

product development process: concept testing

the process in which the concept is presented to potential buys or users to obtain their reactions (triggers the marketing research process; customer reactions decide whether to move forward or not)

product development process: product development

develops a product prototype that is based on research findings from the previous concept testing step as well as their own knowledge about materials and technology; prototype, alpha testing, and beta testing

prototype

allows consumers to interact physically with the product (concept cars revealed at auto shows that never go into production)

alpha testing

firm attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended (typically on employees)

beta testing

uses potential consumers who examine the product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to its use

five types of market testing

best testing (for digital products), test markets (for physical products), A/B testing, focus groups, and pilot programs

beta testing (for digital products)

involves releasing a pre-launch version of the product to a select group of users. These users, often referred to as beta testers, provide feedback on the product’s functionality, usability, and performance (does it work, user experience)

test markets (for physical products)

launching the product in a limited geographic area or market segment to assess consumer reactions (By analyzing the product’s performance in the test market, companies can make adjustments to the product or marketing approach before expanding to a wider audience)

A/B Testing

commonly used for digital products, websites, and marketing campaigns. It involves testing two different versions of a product or ad campaign to see which one performs better (Often used for packaging designs, product features, or pricing strategies)

focus groups

a small, diverse group of consumers is brought together to discuss their impressions of the product. This qualitative approach provides insights into customer perceptions, preferences, and potential barriers to purchase

pilot programs

a small-scale trial run of the product in a real-world environment. For example, a company launching a new line of smart home devices might offer the product to a small group of tech-savvy users

The Product Development Process: Product Launch

• Firm confirms its target market(s), decides how the product will be positioned, finalizes the remaining marketing mix variables, and determines the marketing budget

• Timing may be critical

• Part ART and SCIENCE

product lifecycle stages

introduction, growth, maturity, decline

Product Lifecycle Stage 1 - Introduction

low sales, negative or los profits, typical consumers are innovators, and there are one or few competitors

product lifecycle - growth

rising sales, rapidly rising profits, the typical consumers are early adopters and early majority, and few but increasing competitors; tipping points where the transition between intro and growth then the product either gains market acceptance or must exit

product lifecycle - maturity

peak sales, peak to declining profits, typical consumers are late majority, and a high number of competitors and competitive products, market is quite saturated

product lifecycle - decline

declining sales, declining profits, typical consumers are laggards, low number of competitors and products

service

intangible offering that involves an effort and performance that cannot be physically possessed

Factors differentiating products from services

intangible, inseparable, heterogeneous, and perishable

intangible

• services cannot be touched, tasted, or seen

• requiring using cues to aid customers (furnishing quality, location quality)

• atmosphere is important to convey value (peaceful, luxurious)

• images are used to convey the benefit of value

inseparable

Production and consumption are simultaneous (hotel, restaurant); little opportunity for a consumer to test a service before use (can’t be returned like a haircut); lower risk by offering guarantees or warranties

heterogeneous

the more humans are needed to provide a service, the more likely there is to be a difference or variability in the service’s quality

solutions for heterogenous

technology, training, and automation