Marketing Exam 3 Review: Product, Services, Pricing, and Persuasion

Comprehensive vocabulary review flashcards covering Product, Branding, New Product Development, Services Marketing, Pricing Concepts, Legal Aspects of Pricing, and Cialdini's Principles of Persuasion.

Core Customer Value

The basic problem-solving benefits and value that consumers are seeking when purchasing a product.

Actual Product

The physical attributes and design of a product, including the brand name, quality level, packaging, and features.

Associated Services

The non-physical augmented aspects of a product, such as financing, product warranties, and customer support.

Convenience Products/Services

Consumer products or services for which the buyer is unwilling to spend any effort evaluating prior to purchase, such as bread, soap, or paper towels.

Shopping Products/Services

Products or services for which consumers spend a fair amount of time comparing alternatives on criteria such as style, price, and quality (e.g., furniture, apparel, appliances, and travel).

Specialty Products/Services

Products or services for which customers express a strong preference and are willing to expend considerable search effort to obtain the best suppliers (e.g., luxury cars, designer watches).

Unsought Products/Services

Products or services that consumers either do not normally think of buying or do not know about.

Product Mix

The complete set of all products and services offered by a firm.

Product Line

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

Product Mix Breadth

The number of distinct product lines offered by a firm; maintaining too much breadth can become costly.

Product Line Depth

The number of categories or individual items within a specific product line; excessive depth can lead to cannibalizing the firm's existing brands.

Product Proliferation

The practice of marketing many variations of the same or similar products through differing attributes, colors, sizes, or uses to capture market share, which can cause consumer confusion and increased production/inventory costs.

Branding

Endowing products and services with the power of a brand to increase awareness and differentiate offerings from competitors.

Brand Equity

The commercial value that derives from consumer perception of a brand name, comprised of brand awareness, perceived value, brand associations, and brand loyalty.

Brand Awareness

The measure of how many consumers in a market are familiar with a brand and what it represents.

Perceived Value

The relationship between a product's or service's benefits and its costs as evaluated by the consumer.

Brand Associations

The mental and emotional connections that consumers establish between a brand and its key attributes, often developed through promotional and advertising campaigns.

Brand Loyalty

A favorable attitude toward and consistent repurchase of a single brand over time, which reduces customer price sensitivity and marketing expenses.

Private-Label Brands

Brands owned, controlled, and exclusively sold by retailers (also known as store brands) that serve as alternatives to national brands.

Brand Extension

The use of an established brand name in a completely different product line.

Line Extension

The use of an existing brand name to introduce a new item within the same product line.

Brand Dilution

The weakening of brand equity that happens when an unsuccessful or mismatched brand extension impairs consumer perceptions of the core brand.

Brand Licensing

A contractual arrangement where a brand owner (licensor) grants another firm (licensee) permission to use its brand name, logos, or characters in exchange for royalty fees.

Brand Repositioning

A strategy in which marketers alter a brand's focus or identity to target new markets or adapt to changing market preferences (e.g., Weight Watchers rebranding to WW).

Innovation

The process by which ideas are transformed into new offerings, including products, services, processes, and branding concepts.

Pioneers (Breakthroughs)

New products that introduce a completely new market or fundamentally alter consumer preferences and competition, securing first-mover advantages.

First-Mover Advantage

A firm's ability to outperform competitors by being the first entity to enter a new product category.

Diffusion of Innovation Curve

The distribution showing how an innovation spreads through a market over time across adopter categories: Innovators ($2.5\%$), Early Adopters ($13.5\%$), Early Majority ($34\%$), Late Majority ($34\%$), and Laggards ($16\%$).

Innovators

Buyers who want to be the very first to purchase a new product, representing approximately $2.5\%$ of adopters; they are well-informed and comfortable taking risks.

Early Adopters

The second group in the diffusion curve, representing approximately $13.5\%$ of adopters; they take less risk than innovators and are recognized for spreading word-of-mouth about the product.

Early Majority

The crucial segment representing roughly $34\%$ of the market whose adoption is necessary for a product to achieve commercial profitability.

Late Majority

The $34\%$ of market adopters who purchase only after a product has achieved full market potential and sales have plateaued or started declining.

Laggards

Consumers making up about $16\%$ of the market who resist change, avoid adoption, and typically buy a product only when earlier versions are no longer available.

Concept Testing

The stage in which a written concept description of a potential product is presented to prospective buyers to assess their interest and purchase intentions.

Product Development Process

The six-step progression for bringing offerings to market: Idea Generation, Concept Testing, Product Development, Market Testing, Product Launch, and Evaluation of Results.

Alpha Testing

An initial internal test using company research and development personnel to determine whether an engineered prototype performs according to its design specifications.

Beta Testing

Evaluating a prototype by having prospective customers test it in a real-use setting to identify functional issues and customer concerns.

Reverse Engineering

Dismantling and analyzing a competitor's product to understand its construction and design an alternative or improved version without patent infringement.

Lead Users

Innovative consumers or commercial users who modify existing products to fit their own specific needs, serving as an important source of product ideas.

Product Life Cycle (PLC)

The stages that products move through as they enter, become established in, and ultimately exit the marketplace: introduction, growth, maturity, and decline.

Growth Stage (PLC)

The stage of the product life cycle characterized by expanding adopters, rapid industry sales and profit growth, and an increasing number of competitors and product versions.

Maturity Stage (PLC)

The stage of the product life cycle characterized by peak sales, late majority adoption, plateauing or falling profits, and fierce competition for market share.

Decline Stage (PLC)

The final stage of the product life cycle where industry sales and profits drop, few competitors remain, and only laggards enter the market.

Disruptive Innovation

A new product or service that initially performs worse than established options on conventional dimensions but shakes up the industry and makes earlier offerings obsolete.

Sustaining Innovation

An innovation that improves product performance for demanding, high-end consumers, occasionally overshooting the requirements of mainstream buyers.

Service

Any intangible offering that involves a deed, performance, or effort that cannot be physically possessed.

Intangibility (Service)

The service characteristic of not being able to be touched, tasted, or seen, necessitating the use of tangible physical cues, atmosphere, and imagery to communicate quality.

Inseparability (Service)

The characteristic whereby service production and consumption occur simultaneously, preventing customers from testing the service before purchase.

Heterogeneity (Service)

The variability in service performance caused by human delivery, managed through employee training, operational standardization, and automated technology.

Perishability (Service)

The characteristic of services meaning they cannot be stockpiled or inventoried for future consumption (e.g., unoccupied airline seats or ski slopes).

Service Gaps Model

A conceptual framework that identifies four distinct managerial breakdowns: Knowledge Gap, Standards Gap, Delivery Gap, and Communication Gap.

Knowledge Gap

The difference between customer expectations for service quality and management's understanding of those customer expectations.

Standards Gap

The difference between management's perceptions of customer expectations and the firm's established service delivery standards.

Delivery Gap

The difference between the firm's established service standards and the actual service delivered to the customer.

Communication Gap

The difference between the actual service provided to customers and the service promised through the company's promotional communications.

Voice-of-Customer (VOC) Program

A systematic research program that gathers customer feedback and integrates insights into managerial planning.

Zone of Tolerance

The area between a customer's desired level of service and the minimum threshold of acceptable service quality.

Empowerment

Authorizing frontline service personnel to make spontaneous operational decisions and resolve customer issues without obtaining managerial sign-off.

Service Recovery

The actions taken by a firm to identify, address, and resolve a service breakdown to regain dissatisfied customers.

Profit-Oriented Pricing

A pricing approach where a firm determines prices to ensure a target profit margin percentage is added to product costs (e.g., $15\%$).

Sales-Oriented Pricing

Setting prices deliberately lower than competitors to stimulate high unit volume and market share, accepting lower margins per sale.

Customer-Oriented (Premium) Pricing

Setting prices high to target consumers who place high value on quality or status, reinforcing an elite image (e.g., Apple Watch Edition).

Dynamic Pricing

Continually adjusting prices in real time to reflect changing conditions in market demand and available supply (e.g., airline ticket pricing).

Competitor-Oriented Pricing

A strategy that aligns pricing with competitor behaviors, often setting low prices to discourage potential entrants from participating in the market.

Penetration Pricing

Setting an initial disruptively low price for a new offering to build a customer base and penetrate market share before raising prices later.

Price Skimming

Introducing an innovative new product at a high price to capture surplus from early, price-insensitive buyers before progressively lowering the price to capture broader market tiers.

Five Cs of Pricing

The five critical factors that drive price-setting: Company objectives, Customers, Costs, Competition, and Channel members.

Price Elasticity of Demand

The ratio measuring consumer responsiveness to changes in price; demand is elastic when consumers are sensitive to price shifts, and inelastic when price shifts yield minimal changes in purchase volume.

Substitution Effect

A consumer's tendency to replace a brand with an alternative brand or product category when the focal item experiences a price increase.

Fixed Costs

Operational expenses that remain unchanged regardless of the volume of goods or services produced (e.g., facility rent).

Variable Costs

Expenses that fluctuate in direct proportion to the volume of output produced (e.g., raw materials, unit shipping expenses).

Break-Even Point

The specific operational quantity at which total revenue equals total costs and operating profit is exactly $\$0$.

Monopolistic Competition

A market environment where numerous firms sell differentiated products at varying price points.

Oligopolistic Competition

A market structure where only a handful of large firms dominate the market and maintain intense competitive awareness.

Markdown

A reduction applied to the original retail price of an item, commonly implemented to liquidate slow-moving inventory.

Price Bundling

Combining two or more products together for a single retail package priced lower than buying each product separately.

Price Lining

Establishing price floors, ceilings, and intermediate price levels across a product line to convey distinct tiers of quality and functionality.

Leader Pricing (Loss-Leader)

Pricing an in-demand product near or below cost to draw foot traffic into a store with the expectation that customers will buy additional high-margin items.

Slotting Allowances

Fees or price allowances paid to retail establishments to secure shelf space or gain prime product placement for new offerings.

Uniform Delivered Pricing

A B2B freight pricing tactic in which the seller bills the same transportation rate regardless of buyer geographic location.

Markup Percentage

The percentage difference between gross profit and unit cost, expressed as: $\frac{\text{Price} - \text{Cost}}{\text{Cost}}$.

Margin Percentage

The percentage difference between gross profit and selling price, expressed as: $\frac{\text{Price} - \text{Cost}}{\text{Price}}$.

Bait and Switch

An unlawful and deceptive sales tactic in which a company advertises a low-priced bargain to lure shoppers, then claims the advertised product is unavailable to promote higher-priced merchandise.

Predatory Pricing

Setting prices below cost with the specific intention of bankrupting or driving competitors out of the market; an illegal practice that is difficult to prove in legal proceedings.

Price Discrimination

Charging different prices to different buyers for the same product; permitted in consumer markets (e.g., student and senior discounts) but restricted in B2B transactions under federal law.

Horizontal Price Fixing

An illegal agreement among competing firms operating at the same distribution tier to fix common prices, prosecuted as a criminal offense under the Sherman Act.

Vertical Price Fixing

An unlawful arrangement where members along different tiers of the supply chain (such as manufacturers and retailers) conspire to control resale prices.

Gray Market Pricing

The distribution and sale of branded goods through unauthorized, non-standard channels at prices below the manufacturer's suggested retail price.

Reciprocity

The principle of persuasion stating that individuals feel a psychological obligation to return a favor, gift, or concession after receiving one first.

Commitment and Consistency

The principle of persuasion stating that individuals strive to maintain consistency with previous commitments; securing agreement to an initial small request makes a person significantly more likely to agree to a larger subsequent request.

Social Proof (Consensus)

The principle of persuasion asserting that people observe and imitate the choices of others—especially similar peers—when feeling uncertain about how to act.

Authority

The principle of persuasion asserting that individuals routinely defer to credible experts, leaders, institutional titles, and third-party endorsements.

Liking

The principle of persuasion stating that people are more readily convinced by individuals they like, find relatable, or share mutual common ground and genuine compliments with.

Scarcity

The principle of persuasion asserting that individuals place greater value on opportunities, products, or information when they perceive them to be rare, limited, or dwindling in availability.