MOS 1021 Midterm 3

What is a product?

Good or service, characterized by tangible and intangible attributes, that might satisfy a need or want

What is a good

physical/virtual item capable of being delivered to a purchaser

What is a service

actions, skills, knowledge, labour for which the customer pays

Tangible attributes

physical characteristics that are discernible by the senses (eg. colour, taste, smell)

Non-tangible Attributes

symbolic or subjective characteristics (eg. stylish, reliable, comfortable)

Good-Services Continuum:
What is a service dominated offering

What happens in the middle of the goods-services continuum?

What is a goods dominated offering

A pure service: it offers no tangible goods (Ex: consulting)

It is balanced: equally weighted between goods/services (ex: fast food restaurants)

A pure good: no associated services (Ex: soft drink)

A pure commodity good: used to make other goods (ex: wheat, iron, sugar)

What are products classified based on?

1: Effort put into purchase
2: Frequency of purchase

Types of consumer products

1: Convenience
2: Shopping
3: Specialty
4: Unsought

Describe a convenience product and how marketers market it

• Widely available and inexpensive

• Purchased frequently with minimal effort

• Eg. groceries, toiletries, cleaning products
  

  Marketers:

• Packaging (make it stand out)

• Price (Low or competitive price)

• Availability (distribution, put it in as many places as possible)

Describe a shopping product and how marketers market it

• Less widely available (ie. selection distribution) and moderately priced

• Purchased less frequently with moderate effort (comparison, research)

• Eg. clothing, furniture, appliances
  
  Marketers:

• Effective messaging (provide lots of info to allow consumer understanding)

• Product differentiation (make it unique)

• Product positioning (present product as distinct)

Describe a specialty product and how marketers market it

• Limited availability (ie. low breadth of distribution) and high price

• Purchased rarely, deliberately sought (low comparison)

• Eg. luxury and high-end items (watches, cars, handbags)
  
  Marketers:

• Targeted promotion (focus on target market)

• Focus on building brand status (reputation) rather than product promotion

Describe a unsought product and how marketers market it

• Unknown to customers or undesirable to customers

• Delay of benefits are common feature

• Eg. insurance, fire extinguishers, cryonics (freezing bodies)
  
  Marketers:

• extensive promotion (awareness, value, counter negative views)

What are the three components of the total product concept

1. Core product

2. Actual product

3. Augmented product

Core Product

• basic definition of a product

• fundamental benefits from using the product

• Ex: Bike helps with transportation, point A to B

Actual Product

• Product that is sold to customers

• Point of product differentiation

• Includes

  • Design

  • Features

  • Quality

  • Packaging

  • Labelling

Augmented Product

• non-tangible, service-related features of the product (not applicable to pure goods)

• create a better customer experience

• Ex: warranty, delivery, assembly

What are the three pricing approaches?

• Cost-based pricing

• Value-Based pricing

• Competition-Based pricing

Cost-based pricing

setting prices based on the cost of manufacturing, distributing, and promoting a product

Value-Based pricing

setting prices based on the customers' perception of the product's value

Competition-Based pricin

setting prices based on the activities of competing orgs

Name the five pricing strategies

1: Penetration Pricing (low → high)
2: Skimming (high → low)
3: Prestige Pricing
4: Odd-Even Pricing
5: Loss Leader Pricing

What is penetration pricing?

• Setting a low initial price on a product, then increasing the price over time

• Generates initial interest in new product

• Good way to attract customers from competitors

• May not retain customers

• ex: free trials or first order discounts

What is skimming?

• Set the highest initial price that consumers desiring the product are willing to pay, lower the price once demand of these consumers are satisfied

• Generates revenue early

• Creates perception of high quality

• Can encourage entry of competitors

• Ex: apple

what is prestige pricing?

• Product price is set high and remains high 

• Effective for products intended to be status symbols 

• Creates perception of high quality 

• High profits 

• Potential for limited customer base 

• Eg. luxury brands
  

  ADDITIONAL NOTE*
  Wine case study: price is capable of changing peoples' experience with a product, more expensive wine often generated higher ratings of enjoyment and pleasure

What is odd-even pricing?

• Sets prices a few dollars or cents under target price (eg. $2.99 vs $3.00 or $295 vs $300)

• Creates the illusion of a bargain

• Promotes impulsive and higher-volume purchases

• Product can be perceived as lower quality

Loss Leader Pricing

• Subset of products are priced below cost to stimulate the sales of other profitable goods 

• Can be short-term (eg. Black Friday) or long-term (eg. kids meals) 

• Attracts customers and increases sales 

• Can attract “cherry picking” buyers  (people who only get the cheap/free items)

Retailer Classification

categorizing retailers–businesses that sell products to customers–(focus on physical retailers) on the basis of ownership

Name the three retailer classifications on the basis of ownership

1: Independent Retailer
2: Corporate Chain
3: Franchise (contractual system)

What is an independent retailer?

• Owned by individual, family, partnership

• Owners responsible for decision making (ie. autonomous decision making)

• Few retail locations (typically up to 3)

• Higher prices due to lower stock

What is a corporate chain?

• Numerous outlets under common ownership (minimum 4 but typically a lot more)

• Largely centralized control (ie. corporate decision making)

• Comparable shopping experience (all similar)

• Lower prices

• Larger inventory

• Ex: walmart

What is a franchise (contractual system)?

• Agreement between an individual and a business to operate a retail location

• Individual gains access to resources

• Business profits from the retail location

• Greater independence

• Ex: Mcdonalds

What is retailing utility?

Usefulness or value provided by a retailer

What are the 4 components of retailing utility?

Place Utility
Possession Utility
Form Utility
Time Utility

Place Utility

• Making products easily accessible to potential customers 

• Includes: 

  • Wide product availability 

  • Online and in-person purchasing 

  • Convenient locations

Possession Utility

• Increasing eases of owning a product 

• Includes:

  • Numerous payment options 

  • Payment plans

Form Utility

• Degree to which product design meets customer needs 

• Includes: 

  • Customized products 

  • Product alterations 

  • Wider selection

Time Utility

• Making products available when customers need them 

• Includes: 

  • Extended hours

  • Fast delivery 

  • Seasonal items year-round

What is promotion? What does it do?

• Communication or activities intended to persuade target market of the merits of a given product

• Beneficial in generating interest, encouraging sales, improving brand image

List all discussed promotional strategies

• Sales Promotion

• Public Relations

• Experiential Marketing (aka Engagement Marketing)

• Advertising

What is sales promotion

• Provides short-term incentives to generate interest in a product 

  • Eg. coupons, contests, rebates 

• Encourages immediate purchase 

• May result in lower revenue

What is public relations

• Activities meant to build and maintain a positive image for a products, band, or organization

• Includes: press release, press conference, content on websites/social media platforms 

• Reflects a form of earned media 

  • Earned Media: unpaid content generated about a product, brand, or organization 

  • Eg. news stories, social media reviews, brand mentions 

• Messaging can be seen as more objective and trustworthy 

• Limited control of messaging  

• Eg. spotify wrapped

What is experiential marketing (aka engagement marketing)

• Create an interactive experience between customers and a product/brand

• Consumers not viewed as passive message recipients 

• Can create emotional connection to product/brand (breeds customers loyalty)

• Taxing on time and resources 

what is advertising?

• Paid form of media used to communicate to consumers about a product/brand

• Includes: billboards, print advertisements, television, commercials, radio commercials, online advertisements 

• Controlled messaging 

• Can be seen as a nuisance (negative impact on attitudes)

What are shock appeals in advertising?

• Words, image, and/or actions intended to deliberately startles and offend 

• May contain controversial, disturbing, provocative

• Intended to capture attention 

• May have a negative impact on brand image

• Study: role fo shock appeal in the promotion of health behaviours

  • Each poster in the waiting room used either shock, fear, or information appeal 

  • Write down descriptions of posters you remembered seeing (recall)

  • Identify which poster captured your attention the most (attention) 

  • Indicate which posters you saw from a list of options (recognition) 

  • Shock appeal led to greatest attention, recall, and recognition 

What are sexual appeals in advertising?

• Words, images, and/or actions intended to deliver a message designed to evoke sexual thoughts, feelings, and/or arousal in a target audience 

• May be explicit or subtle 

• May be related or unrelated to product (usually unrelated) 

• Appear to attract consumer attention 

• Appear to distract from processing of advertised message 

• Meta-analysis says that sexual appeals resulted in more negative attitudes towards the brand.

  • Sexual appeals had no significant effect on brand recognition, brand recall, and intention to purchase

What are the three main levels for product and service decisions

individual products, product lines, and product mixes

What are the 5 main focuses of individual product service decisions

product and service attributes
branding
packaging
labelling
product support services

What things does product and service attributes focus on?

Quality, Features, and Style and Design

Describe product and service attributes: quality

• Total Quality Management (TQM)

• Return-on-quality approach is popular, viewing quality as an investment

• Quality has two main dimensions: level and consistency

  • Quality level here means performance quality

  • Quality consistency or conformance quality, freedom from defects and consistency in delivering targeted performance

  • Not all brands have high quality level, but all brands should aim for good quality consistency

Total Quality Management (TQM)

an approach where all a company’s people are involved in constantly improving the quality of the business’ products, services, and processes overall

Describe product and service attributes: feature

• Features are a tool for product differentiation

• Surveying buyers could help with providing ideas on which features to add and assess customers’ values

Describe product and service attributes: style and design

• Design is a larger concept than style

• A great style could grab attention but not necessarily make the product perform better

• Design goes to the heart of the product and contributes to its effectiveness

How does branding help with product-service decisions

• Customers attach meanings and develop brand relationships, making it a valuable way to manage a product or service

  • Branding helps buyers identify products that might benefit them, they seek the same features, benefits, and quality each time they buy

  • The brand name and trademark also provide legal protection to prevent copies

How does packaging help with product-service decisions

• Designing the container or wrapper for a product

  • Traditionally it was simply to hold the product, but packaging has become an important marketing tool to attract and communicate to buyers

  • Packaging can be the best and last way to influence buyers because great packaging can be a distinctive part of a brand’s identity

  • Poorly designed packages and overpackaging both create negative opinions on a brand and possibly their product (hard to open or wasteful packaging)

How does labelling and logos help with product-service decisions

• Can range from simple tags to complex graphics 

• They perform many functions, similar to packaging

  • Labels can describe who made it, where it was made, when it was made, its contents, or how to use it

  • Could also promote the brand and engage customers

• Customers often feel a strong connection to the logos of their favourite companies

  • Changes can often be really good or really bad, so marketers must be careful

How does product support services help with product-service decisions

• Taking care of customers after a sale builds long lasting relationships

• Ex: Lexus’ ambitious customer-satisfaction promise is very successful and regularly tops industry quality and customer-satisfaction ratings globally

  • Very good warranty and support services

• Nowadays, extensive support systems are offered through phone, email, online, social media, and mobile platforms

What is brand equity

the differential effect that knowing the brand name has on customer response to the product and its marketing

• It’s a measure of the brand’s ability to capture consumer preference and loyalty

• Negative brand equity means consumers react less favourably than to an unbranded version

What four dimensions is brand strength measured by

• Differentiation

• Relevance

• Knowledge

• Esteem (how highly consumers regard the brand)

All four must be high for a strong brand

What is brand value

The total financial value of a brand

Brand strategy decisions involve

• Brand positioning

• Brand new selection

• Brand sponsorship

• Brand development

Brand positioning

• positioning based on three things

  • product attributes (weakest)

  • associated desirable benefit

  • beliefs and values (strongest, highest impact)

What is co-branding

• when two established brand names are on the same product to broaden consumer appeal and brand equity

• limitations:

  • involve complex legal contracts and licenses

  • interdependence on each other (if one brand’s reputation sinks, the other suffers too).

Promotional tools that make up the promotion mix

• Advertising

• Personal selling

• Sales promotion

• Public relations

• Direct and digital marketing

Pros and cons of advertising

• Pros

  • Can reach large masses at a low cost per exposure, quick sales or long-term image

  • Ads make product seem more legitimate due to public nature

• Cons

  • Impersonal and lack of direct persuasiveness of company salespeople

  • Can be very expensive (though some are cheaper)

Pros and cons of personal selling

• Pros

  • Most effective at certain stages of buying process, builds preferences and convictions

  • Builds customer relationships

• Cons

  • Most expensive promotional tool

  • Firms spend 3x on personal selling vs advertising

Pros and cons of sales promotion

• Pros

  • Wide variety of tools: coupons, contests, discounts, premiums, etc (all strong)

  • Invite and reward quick response, instills sense of urgency “buy now”

• Cons

  • Loss of profits

  • Effects can be short lived and ineffective

Pros and cons of public relations

• Pros

  • Very believable: news stories, features, and sponsorships make it seem more real

  • Can reach people who avoid ads and salespeople

  • Can be relatively effective and inexpensive 

• Cons

  • Underused

  • Hard to control messaging

Pros and cons of direct and digital marketing

• Pros

  • Many forms

  • More targeted, directed to specific customer or community (personalized)

  • Interactive, messages can be prepped quick by marketing team

• Cons

  • Very specific and not broad

What are the two promotion mix strategies

• push strategy

• pull strategy

Push Strategy

“pushes” product through marketing channels to consumers

• Producer directs marketing activities toward channel members to convince them to carry the product and promote it to final consumers

  • Mainly use personal selling and trade promotion

Pull Strategy

consumer demand “pulls” the product through the channels

• Producer directs marketing activities toward final consumers to induce them to buy the product

  • Ads and digital marketing

Role and Impact of Public Relations

• PR can engage consumers and make it apart of their lives and conversations

• PR can have a much stronger impact and lower cost.

Major PR Tools

• News: PR professionals find or create favourable news about the company and its products/people

• Special events: news conferences, speeches, brand tours, and sponsorships help reach and interest target publics

• Written materials (reports, brochures, articles, and company newsletters: reach and influence target markets

• Audiovisual materials (videos)

• Corporate identity materials: logos, stationery, brochures, signs, business forms and cards, buildings, uniforms, and trucks

• Public service activities: improves public goodwill through money and time contributions

What is consumer behaviour

Observable actions a person takes when purchasing (purchase activities) and using products (consumption activities)

What are purchase activities?

How consumers acquire products
Includes the purchasing decision process

What are consumption activities?

The When, where, how, and why people use products

These factors impact the product and promotion decisions made around the product, since the goal of marketers is to create products that optimally cater to customer needs

May include symbolic meaning
Eg. luxury items → not a need, want to own as a symbol of status

What is consumer buyer behaviour

the buying behaviour of final consumers-individuals and households that buy goods and services for personal consumption

What is consumer market

all the individuals and households that buy or acquire goods and services for personal consumption

What is the purchase decision process?

a series of steps that a consumer will take to make a purchasing decision

What are the steps in the purchase decision process

1: Problem Recognition
2: Information Search
3: Evaluation of Alternatives
4: Purchase Decision
5: Post-Purchase Evaluation

Purchase Decision Process Step 1: Problem Recognition

• A sufficiently large disconnect exists between actual and ideal state

• The problem/need can be triggered by internal (ex. hunger, thirst) or external stimuli (ex. seeing an ad)

• 2 ways to identify this

  • needs recognition: identify need, actual state declines, act to reach ideal state (ex: being hungry)

  • opportunity recognition: identify opportunity, ideal state moves up, act to reach ideal state (not essential but can IMPROVE life, ex: having a newer car)

Purchase Decision Process Step 2: Information Search

• Find info about what products can address the problem

• 2 Types: internal & external

  • Internal: prior knowledge (memory, past experiences, etc.)

  • External: personal sources, public sources, etc., (individual likely has no or limited prior knowledge

• Types of Sources:

  • Personal

    • most effective, legitimize or evaluate the product (family, friends, etc),

  • Commercial

    • informs the buyer

    • typically where they get the most info (ads, packaging, etc)

  • Public (social media)

  • Experiential (examining and using the product)

Purchase Decision Process Step 3: Evaluation of Alternatives

• Compare all products on attributes that deliver benefit

• Awareness set:

  • Evoked set (positive impression)

  • Inert set (no impression)

  • Inept set (negative impression)

Purchase Decision Process Step 4: Purchase Decision

• What will be purchased and from whom

• From whom to purchase: price point, return policy, convenience, familiarity of seller

• When to purchase: sales/promo, shopping experience, time pressure to buy, finances

• 2 factors can come between the purchase intention and decision:

  • Attitudes of Others

  • Unexpected Situational Factors

Purchase Decision Process Step 5: Post-Purchase Evaluation

• Compare product to expectations to assess satisfaction

• Will impact whether product will be purchased again, will other products from same brand be purchased, and whether brand/product will be recommended

What is cognitive dissonance theory?

State of simultaneously holding conflicting beliefs or taking action that conflicts with beliefs

• Results in tension/anxiety

• Outcomes: change belief, change behaviour, rationalize existence of both

• Purchase of a product contrasted against positive aspects of other products can cause this
  
  *Marketing strategies focused on differentiation can help with this anxiety

What is consumer involvement

• The interest and importance that a consumer attaches to the purchase and consumption of a product

• Impacts effort, time, and energy put into decision process

• High involvement if: expensive, bought infrequently, impact social image

What are the three problem solving variations, outline them

• Routine

  • Associated with low consumer involvement 

  • Habitual, rely on past experiences to inform product decisions 

  • Used by customers to buy low-risk products that are used regularly (eg. milk, deodorant, dish soap) 

• Limited

  • Associated with a moderate level of consumer involvement 

  • Use internal info search and rely on opinions of close personal sources 

  • Customers compare products based on quality, price, and style 

  • Eg. new sneakers, sports equipment, small household appliances 

• Extended

  • Associated with high customer involvement

  • Eg. cars, jewelry, vacation packages

What is the choice overload hypothesis (aka The Paradox of Choice)?

Extensive choice can be demotivating because choice can be cognitively taxing

What was concluded from the choice overload hypothesis

• Results don't hold up in various situations including:

  • Decision making self-efficacy (confidence in your own abilities) is high

  • Clear prior preference exists

  • One is experiencing positive affect(emotions)

• Meta-analysis tested hypothesis found little supporting evidence

What are situational influences?

Impermanent, temporary factors pertaining to considerations, time, and location that impact the purchase decision process

What are the main categories of situational influences?

physical surroundings
social surroundings
temporal effects
antecedent states (previous state)
purchase task

Physical Surroundings

• Physical characteristics of retail space 

• Atmospherics: controllable factors that set ambience 

  • Eg. deco, lighting, temperature, music being played, scents 

• Layout: design of floor space, online tracking 

• Crowding (spatial–negatively impacts experience, people–moderate amount can increase spending)

• Environment that can be perceived through the five senses

Social Surroundings

• Interactions with others 

• Social shopping vs. solitary shopping (purchases made, amount spent)

  • More likely to make purchases and spend more when social shopping 

• Role of others in our lives (shopping behaviour, impulse buys)

Temporal Effects

• Time of day (ppl are open to more variety as day progresses)

• Time of year (comfort products with less daylight)

• Amount of time available (lowest price, most recognizable)

Antecedent States

• Momentary conditions 

  • Emotional state (familiarity vs. novelty)

    • When people are sad, tend to buy familiar products 

  • Energy level (self-regulation vs. impulsive buying)

    • Fatigued/tired individuals tend to impulse buy more 

    • Rested people show greater self regulation 

  • Cash on hand

Purchase Task

• Goal of a shopping trip 

• Casual shoppers vs Those with intent to select

  • Casual shoppers interact with a greater number of products, more likely to purchase more 

• Embarrassing items = more items purchased

What is sensory marketing?

A form of marketing that engages the senses and affects consumer perception

Appeals to human senses (sight, sound, taste, touch, smell) to evoke memories and create emotional response

Marketers aim for congruence: a match between sensation and environment

What are the three factors of sensory marketing: sound

• Genre 

  • Category of music 

  • Can be used to attract and deter customers 

  • Can affect spending 

  • Studies found classical music tends to result in greater spending 

• Volume

  • Loudness of music 

  • High volume increases stress response 

  • Low volume can be unwelcoming 

• Tempo

  • Speed of beat (bpm)

  • Longer browsing at slower tempos 

  • Can help control store traffic

What are ambient scents helpful with (environment scent)?

- Attracting customers
- Increasing browsing time
- Increasing product interaction
- Increasing spending