Marketing Exam 3 Studying

Product Life Cycle

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

Introduction Stage

The introduction stage of the product life cycle occurs when a product is introduced to its intended target market. During this period sales grow slowly and profit is minimal.

Growth Stage

stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category

maturity stage

the PLC stage in which a product's sales growth slows or levels off

decline stage

stage of the product life cycle when sales decline and the product eventually exits the market

skimming strategy

high initial price to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers

Penetration pricing

setting a low initial price on a new product to appeal immediately to the mass market

Harvesting

when a company retains the product but reduces marketing costs

Deletion

dropping the product from the company's product line

Fashion product

style of the times. Introduced, decline, and then seem to return.

fad product

experiences rapid sales on introduction and then an equally rapid decline

Product class

refers to the entire product category or industry

product form

pertains to variations of a product within the product class

Product/Brand Manager

manages the marketing efforts for a close-knit family of products or brands

Product modification

involves altering one or more of a product's characteristics, such as its quality, performance, or appearance, to increase the product's value to customers and increase sales

Market Modification

strategies by which a company tries to find new customers, increase a product's use among existing customers, or create new use situations

Product bundling

the sale of two or more separate products in one package

trading up

Adding value to the product (or line) through additional features or higher-quality materials.

Trading down

reducing a product's number of features, quality, or price

Branding

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

Brand name

Any word, device (design, sound, shape, or color), or combination of these used to distinguish a seller's products or services.

Trade name

the full legal name of an organization

Trademark

A brand that has exclusive legal protection for both its brand name and its design

Brand Personality

a set of human characteristics associated with a brand name

Brand Equity

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

Brand Licensing

A contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products or services offered by another company (licensee) for a royalty or fee

Packaging

A component of a product that refers to any container in which it is offered for sale and on which label information is conveyed.

Label

An integral part of the package that typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients.

Services

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

Intangibility

the inability of services to be touched, seen, tasted, heard, or felt in the same manner that goods can be sensed

Inconsistency

developing, pricing, promoting, and delivering services is challenging because the quality of a service is often inconsistent

Inseparability

the inability of the production and consumption of a service to be separated; consumers must be present during the production

Inventory

With services , inventory carrying costs are more subjective and are related to idle production capacity.

idle production capacity

Occurs when the service provider is available but there is no demand for the service.

Inventory Carrying Costs (Going from highest to lowest cost)

Real estate agency, Hair Salon, Insurance company, dry cleaner, auto repair center, restaurant, hotel, amusement park, airline, hospital.

Service Continuum

the range of offerings companies bring to the market, from the tangible to the intangible or the product-dominant to the service-dominant

Service Continuum (Figure 12-3)

Left to right. Product dominated offerings include: salt, necktie, and dog food. Service dominated offerings include: Teaching, Nursing, the Theater.

search, experience, and credence qualities

Consumers use search, experience, and credence properties to evaluate services.

high in search qualities

Clothing, jewelry, furniture, houses, automobiles

high in experience qualities

restaurant meals, vacation, haircuts, child care

high in credence qualities

tv repair, legal services, root canal, auto repair, medical diagnosis

customer contact

A flowchart of the points of interaction or "service encounters" between consumers and a service provider.

Gap Analysis

A type of analysis that compares the differences between the consumer's expectations about and experiences with a service based on dimensions of service quality.

7 P's of Service Marketing

An expanded marketing mix concept for services that includes the four Ps (product, price, promotion, and place) as well as people, physical environment, and process.

Off-peak pricing

Charging different prices during different times of the day or during different days of the week to reflect variations in demand for the service.

internal marketing

The notion that a service organization must focus on its employees, or internal market, before successful programs can be directed at customers.

Customer Experience Management

The process of managing the entire customer experience with the company.

Capacity Management

Integrating the service component of the marketing mix with efforts to influence consumer demand.

Price

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

Barter

The practice of exchanging products and services for other products and services rather than for money.

Price Equation

Price= list price- incentives & allowances + extra fees

Value

the ratio of perceived benefits to price; or Value= Perceived benefits/Price

value pricing

The practice of simultaneously increasing product and service benefits while maintaining or decreasing price.

Profit equation

Profit = Total revenue − Total cost; or Profit = (Unit price × Quantity sold) − (Fixed cost + Variable cost).

steps 1,2,3, in price-setting process

1. Identify pricing objectives and constraints
2. Estimate demand and revenue
3.Determine cost, volume, and profit relationships

Pricing Objectives

Specifying the role of price in an organization's marketing and strategic plans.

pricing constraints

Factors that limit the range of prices a firm may set.

demand curve

A graph that relates the quantity sold and price, showing the maximum number of units that will be sold at a given price.

Demand Factors

Factors that determine consumers' willingness and ability to pay for products and services.

price elasticity of demand

The percentage change in quantity demanded relative to a percentage change in price.

Elastic demand

When a 1 percent decrease in price produces more than a 1 percent increase in quantity demanded, thereby increasing total revenue.

inelastic demand

When a 1 percent decrease in price products less than a 1 percent increase in quantity demanded, thereby actually decreasing total revenue.

Total revenue

The total money received from the sale of a product. Price x quantity sold

Total cost

The total expense incurred by a firm in producing and marketing a product. Total cost is the sum of fixed cost and variable cost.

Fixed Cost (FC)

the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold

Variable Costs

The sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold.

Unit Variable Cost (UVC)

Variable cost expressed on a per unit basis for a product.

Contribution Margin

Expressed on a per unit basis as the difference between unit selling price (P) and unit variable cost (UVC), or as a percent: UVC/P

break-even analysis

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

Break-Even Point

The quantity at which total revenue and total cost are equal.

Calculate break-even point

Fixed Costs ÷ (Price - Variable Costs) = Break even Point in Units

Skimming Pricing

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product.

Penetration Pricing

Setting a low initial price on a new product to appeal immediately to the mass market.

Prestige Pricing

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Price Lining

Setting the price of a line of products at a number of different specific pricing points.

Odd-Even Pricing

Setting prices a few dollars or cents under an even number. (14.99)

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.

Bundle Pricing

Marketing two or more products in a single package price.

Yield Management Pricing

Charging different prices to maximize revenue for a set amount of capacity at any given time.

Standard Markup Pricing

Adding a fixed percentage to the cost of all items in a specific product class.

Cost-Plus Pricing

Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.

Target Profit Pricing

Setting an annual target of a specific dollar volume of profit.

Target return-on-sales pricing

Setting a price to achieve a profit that is a specified percentage of the sales volume.

target return-on-investment pricing

Setting a price to achieve an annual target return on investment (ROI).

Customary Pricing

Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

above-, at-, or below-market pricing

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.

Loss-leader pricing

Deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention to it in hopes that they will buy other products with large markups as well.

Fixed-price policy

Setting one price for all buyers of a product or service. Also called a one-price policy.

Dynamic pricing policy

Setting different prices for products and services in real time in response to supply and demand conditions. Also called a flexible-price policy.

Product line pricing

Setting prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item.

Price War

Successive price cutting by competitors to increase or maintain their unit sales or market share.

Quantity discounts

Reductions in unit costs for a larger order.

Promotional allowances

Cash payments or an extra amount of "free goods" awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote a product.

Everyday low pricing

The practice of replacing promotional allowances with lower manufacturer list prices.

Price fixing

A conspiracy among firms to set prices for a product.

price discrimination

Charging different prices to different buyers for products of like grade and quality.

Predatory Pricing

Charging a very low price for a product with the intent of driving competitors out of business.

Marketing Channel

Consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.

Types of Marketing Channels

direct and indirect

Direct Channel

a distribution channel in which producers sell directly to consumers