Marketing 2

Product

Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need

Service

An activity, benefit, or satisfaction offered for consumption or sale that is essentially intangible and does not result in a customer’s ownership of anything

Customer Solutions

Carefully thought-out bundles of products and services that are designed to comprehensively solve customer problems

Customer Experience

Market offerings with a strong sensory or emotional component that play out for the customer over time

Consumer Products

Products bought by final consumers for personal consumption

Convenience Products

Consumer products that customers usually buy frequently with low customer involvement, and with minimal comparison and buying effort

Shopping Products

Consumer products that the customer, in the process of selecting and purchasing, usually compares on such attributes as suitability, quality, price, and style.

Specialty Products

Consumer products with unique characteristics or brand identifications for which buyers are willing to make a special purchase effort

Unsought Products

Consumer products that the consumer either does not know about or knows about but does not normally consider buying

Industrial Products

Products bought by individuals and organizations for further processing, use in conducting a business, or resale.

Social Marketing

The use of traditional marketing concepts and tools to encourage behaviors that will create individual and societal well-being

Individual Product Decisions

1. Product Attributes

2. Branding

3. Packaging

4. Labeling and Logos

5. Product Support Services

Product Quality

The characteristics of a product or service that bear on its ability to consistently and reliably satisfy stated or implied customer needs

Packaging

Designing and producing the container or wrapper for a product

Product Line

A group of products from a company that are closely related because they function in a similar manner, are sold to similar customer groups, serve similar customer needs, are marketed through the same types of outlets, or fall within given prices ranges

Product Mix

(Product Portfolio) The set of all product lines and items that a seller offers for sale

4 Service Characteristics

• Intangibility

• Variability

• Inseparability

• Perishability

Service Intangibility

Services usually cannot be seen, tasted, felt, heard, or smelled before they are bought

Service Inseparability

Services are produced and consumed at the same time and cannot be separated from their providers

Service Variability

The quality of services may vary greatly depending on who provides them and when, where and how they are provided

Service Perishability

Services cannot be stored for later sale or use

Service Profit Chain

The chain that links customer satisfaction and profits for service firms with employee satisfaction

Service Profit Chain Links

• Internal service quality, firms must create superior employee selection and training

• Satisfied and productive employees, more satisfied, loyal, and productive employees

• Greater service value, more effective and efficient customer service-value creation and engagement

• Satisfied and loyal customers, satisfied customers who remain loyal, make repeat purchases, and refer other customers

• Healthy service profits and growth, strong cash flows some of which can be reinvested in internal service quality

Brand Equity

The differential effect that knowing the brand name has on a customer’s emotion, attitudes, and behaviors related to the product or its marketing

Brand Value

The total financial value of a brand

Major Brand Strategy Decisions

• Brand Positioning

• Brand Name Selection

• Brand Sponsorship

• Brand Development

Store Brands

(Private labels) Brands created and owned by a reseller of a product or service

Co-branding

The practice of using the established brand names of two different companies on the same product

Brand Development Strategies

Brand Name * Product Category

Line Extension

B(Existing) * P(Existing)

Extending an existing brand name to new forms, colors, sizes, ingredients, or flavors of an existing product category

Brand Extension

B(Existing) * P(New)

Extending an existing brand name to new product categories

Multibrands

B(New) * P(Existing)

Companies often market many different brands in a given product category

New Brands

B(New) * P(New)

Creating a new brand to replace an existing brand that is waning

New Product Development

The development of original products, product improvements, product modifications, and new brands through the firm’s own product development efforts

Major Stages in New Product Development

1. Idea Generation

2. Idea Screening

3. Concept Development and Testing

4. Marketing Strategy Development

5. Business Analysis

6. Product Development

7. Test Marketing

8. Commercialization

Idea Generation

The systematic search for new product ideas

Crowdsourcing

Inviting broad communities of people, customers, employees, independent scientists, and even the public at large, into the new product innovation process

Idea Screening

Evaluating new product ideas to spot good ones and drop poor ones

Product Concept Development

A detailed version of the new product idea stated in terms that are meaningful to the consumer

Concept Testing

Testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal

Market Strategy Development

Designing an initial marketing strategy for a new product based on the product concept

Business Analysis

A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives

Product Development Phase

Developing the product concept into a physical product or a detailed service blueprint to ensure that the product idea can be turned into a workable market offering

Test Marketing

The stage of new product development in which the product and its proposed marketing program are tested in realistic market settings

Commercialization

Introducing a new product into the market

Customer-Centered New Product Development

New product development that focuses on finding new ways to solve customer problems and create more customer-satisfying experiences

Team-Based New Product Development

New product development in which various company departments work closely together, overlapping the steps in the product development processes to save time and increase effectiveness

Product Life Cycle (PLC)

1. Product Development

2. Introduction

3. Growth

4. Maturity

5. Decline

Style

A basic and distinctive mode of expression

Fashion

A currently accepted or popular style in a given field

Fads

A temporary period of unusually high sales or interest driven by consumer enthusiasm and immediate product or brand popularity

Introduction Stage

The PLC stage in which a new product is first distributed and made available for purchase

Growth Stage

The PLC stage in which a product’s sales start climbing quickly

Maturity Stage

The PLC stage in which a product’s sales growth slows or levels off

Decline Stage

The PLC stage in which a product’s sales fade away

Customer Value-Based Pricing

Setting price based on buyers’ perceptions of value rather than on the seller’s cost

Value-Based System

1. Design a good product

2. Determine product costs

3. Set price based on cost

4. Convince buyers of product’s value

Value-Based Pricing

1. Assess customer needs and value perceptions

2. Set target price to match customer perceived value

3. Determine costs that can be incurred

4. Design product to deliver desired value at target price

Good-Value Pricing

Offerings just the right combination of quality and good service at a fair price

Value-Added Pricing

Attaching value-added features and services to differentiate a company’s offers and charging higher prices

Cost-Based Pricing

Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

Cost-Plus Pricing

(Markup Pricing) Adding a standard markup to the cost of the product

Break-Even Pricing

(Target Return Pricing) Setting price to break even on the costs of making and marketing a product or setting price to make a target return

Competition-Based Pricing

Setting prices based on competitior’s’ strategies, prices, costs, and market offerings

Target Costing

Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is profitably met

Price Elasticity

A measure of the sensitivity of demand to changes in price

Market-Skimming Pricing

(Price Skimming) Setting a high price for a new product to skim maximum revenues layer by layer from customer segments in line with their willingness to pay

Market-Penetration Pricing

Setting a low price for a new product in order to quickly attract buyers and gain a large market share

Product Line Pricing

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices

Optional-Product Pricing

The pricing of optional or accessory products along with a main product

Captive-Product Pricing

Setting a price for products that must be used along with a main product, such as games for a video-game console

By-Product Pricing

Setting a price for by-products to help offset the costs of disposing of them and help make the main product’s price more competitive

Product Bundle Pricing

Combining several products and offering the bundle at a reduced price

Allowance

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s product in some way

Segmented Pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

Psychological Pricing

Pricing that considers the psychology behind how consumer evaluate price and value, not just the economics

Reference Price

Prices that buyers carry in their minds and refer to when they look at a given product

Promotional Pricing

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

Geographical Pricing

Setting prices for customers located in different parts of the country or world

Dynamic Pricing

Adjusting prices continually in real time to meet changing conditions and situations in the marketplace

Personalized Pricing

Adjusting prices in real time to fit individual customer needs, situations, locations, and buying behaviors

Marketing Channel

(Distribution Channel) A set of interdependent intermediary organizations that help make a product or service available for use or consumption by the consumer or business user

Marketing Channel Key Functions

• Information

• Promotion

• Contact

• Matching

• Negotiation

Channel Level

A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer

Direct Marketing Channel

A marketing channel that has no intermediary levels, with the producer selling directly to the consumer

Indirect Marketing Channel

A marketing channel containing one or more intermediary levels between the producer and the consumer

Channel Conflict

Disagreements among marketing channel members on goals, roles, and rewards, who should do what and for what rewards

Vertical Marketing System (VMS)

A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has strong contracts with them, or has so much power that they all cooperate

Corporate VMS

A vertical marketing system that combines successive stages of production and distribution under single ownership, channel leadership established through common ownership

Contractual VMS

A vertical marketing system in which independent firms at different levels of production and distribution join together through well-defined contracts

Franchise Organization

A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process by operating through licensed franchisees

Administered VMS

A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties

Horizontal Marketing System

A channel arrangement in which two or more companies at one level join together to pursue a new marketing opportunity

Omnichannel Distribution System

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments, coordinating channel strategies to maximize total profits across all the channels

Channel Disintermediation

(Channel Disruption) The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radically new types of intermediaries

Direct-To-Consumer Brands (DTC)

Brands that avoid direct competition with established traditional brands by marketing, selling and shipping to consumers primarily through online and mobile channels

Marketing Channel Design

Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, evaluating those alternatives, and choosing the best design

Intensive Distribution

Stocking the product in as many outlets as possible

Exclusive Distribution

Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories

Selective Distribution

The use of more than one but fewer than all of the intermediaries that are willing to carry the company’s products