Principles of Marketing Exam #3

Products

A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in exchange for money or something else of value.

Consumer Products

Products purchased by the ultimate consumer.

Business Products

Products organizations buy that assist in providing other products for resale. Also called B2B products or industrial products.

Services

The intangible activities or benefits that an organization provides to satisfy consumers' needs in exchange for money or something else of value.

The Four I's of Services

Intangibility, Inconsistency, Inseparability, Inventory.

Dimensions of Service Quality

Reliability, Tangibility, Responsiveness.

Convenience Products

Items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort.

Shopping Products

Items for which the consumer compares several alternatives on criteria such as price, quality, or style.

Specialty Products

Items that a consumer makes a special effort to search out and buy.

Unsought Products

Items that the consumer either does not know about or knows about but does not initially want.

Lifecycle of Products

The stages a new product goes through in the marketplace: introduction, growth, maturity, and decline.

Introduction Stage

The stage where the product is first introduced to the market.

Growth Stage

The stage characterized by rapid sales growth and more competitors.

Maturity Stage

The stage where industry/product sales slow and profit declines.

Decline Stage

The stage where industry/product sales drop and price drops.

Branding

A marketing decision in which an organization uses a name, phrase, design, or symbols to identify its products and distinguish them from competitors.

Brand Licensing

A contractual agreement whereby one company allows its brand name(s) or trademark(s) to be used by another company for a royalty or fee.

Brand Equity

The added value a brand name gives to a product beyond the functional benefits provided.

Pricing Strategies

Approaches to setting prices for products based on various factors.

Demand-oriented Approaches

Pricing strategies based on consumer demand.

Elasticity

The price elasticity of demand is the percentage change in quantity demanded relative to a percentage change in price.

Break-even Analysis

A technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.

Barriers to adoption

usage, value, risk, and psychological

Brand strategies

the unique elements of a brand that defines the products sold by the firm.

Price (P)

the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service.

Value

the ratio of perceived benefits to price.

Profit

Total Revenue — Total Cost

Skimming Pricing

involves setting the highest initial price that customers who really desire the product are willing to pay when introducing a new or innovative product (Demand-oriented approach).

Penetration Pricing

involves setting a low initial price on a new product to appeal immediately to the mass market (Demand-oriented approach).

Prestige Pricing

involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it (Demand-oriented approach).

Odd-even Pricing

involves setting prices a few dollars or cents under an even number (Demand-oriented approach).

Target Pricing

Consists of:

1. Estimating the price that ultimate consumers would be willing to pay for a product

2. Working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers, and then

3. Deliberately adjusting the composition and features of the product to achieve the target price to consumers.

(Demand-oriented approach).

Bundle Pricing

involves the marketing of two or more products in a single package price (Demand-oriented approach).

Yield Management Pricing

involves the charging of different prices to maximize revenue for a set amount of capacity at any given time (Demand-oriented approach).

Standard markup pricing

involves adding a fixed percentage to the cost of all items in a specific product class (Cost-oriented approach).

Cost-plus Pricing

involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price (Cost-oriented approach).

Target profit pricing

involves setting an annual target of a specific dollar volume of profit (Profit-oriented approach).

Target return-on-sales pricing

involves setting a price to achieve a profit that is a specified percentage of the sales volume (Profit-oriented approach).

Target return-on-investment pricing

involves setting a price to achieve an annual target return-on-investment (ROI). (Profit-oriented approach).

Customary pricing

involves setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors (Competition-oriented approach).

Above-, at, or below-market pricing

involves setting a market price for a product or product class based on a subjective feel for the competitors’ price or market price as the benchmark (Competition-oriented approach).

Loss leader pricing

involves deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention in hopes that they will buy other products with large markups as well (Competition-oriented approach).