Marketing Quiz #3

Product Item

A specific version of a product that a company offers, with a unique ID or characteristic. The smallest individual unit in the product hierarchy.

Product Line

A group of related products offered by a company that function similarly or are sold to the same customer group. Related and share a brand or function.

Product Mix

The complete set of all product lines and items that a company sells. The entire collection of products a company offers.

Product Class

a broader category of products that are similar in function and satisfy the same basic need, regardless of brand. This is an industry-wide category, not brand specific.

Define Product

A good, service, or idea with attributes that satisfy consumers’ needs and is received in exchange for money or something of value. 

Tangible

Physical items that have a material form (smartphones, clothing, a car)

Intangible

Non-physical offerings that provide a benefit or experience (Haircuts, streaming subscriptions, insurance)

Durable

Used repeatedly over time (Furniture, laptops, cars)

Non-durable

Consumed in a short period of time (Food, paper products, beverages)

Convenience Products

Frequently purchased (Place - widespread, many outlets)

Shopping products

Comapares criteria (Purchase behavior of consumer - infrequent purchases, needs much comparison shopping time)

Speciality Product

Special effort to search/buy (Promotion - uniqueness of brand and status stressed)

Unsought Products

Items consumer does not know about (Promotion - awareness is essential)

Product Line Extension

 Adding new variations to an existing product line under the same brand (Coke brand introducing new flavors like cherry or vanilla Coke versions)

Brand Extension

Using a current brand name to enter a completely different product class (Apple, which is known for iPhones launching headphones (AirPods) or smartwatches)

Reasons Consumers Resist a New Product

Usage Barriers - product not compatible with habits

Value Barriers - no incentive to change

Risk Barriers - physical, economic, social

Psychological Barriers - cultural differences or image

Competitive Advantages/Benefits of Packaging & Labeling

Communicates benefits - information for consumer

Functional benefits - storage, convenience, or protection 

Perceptual benefits - distinguishes brand in customer’s eyes

Four I’s of Service

Intangibility - can’t be touched or seen before purchase

Inseparability - delivered and consumed simultaneously

Inconsistency - quality can vary based on the person delivering the service

Inventory - can’t be stored for future use

3 Unique P’s of Service

People - everyone involved in delivering the service, including employees and sometimes other customers (Example: a friendly and helpful server at a restaurant)

Physical Environment - the tangible elements that help customer evaluate a service since it cannot be touched (Example: Cleanliness of a hotel or restaurant)

Process - the procedures, steps, and flow of activities used to deliver the service (Example: the speed and efficiency of checkout at a store)

Idle Production Capacity

Occurs when the service provider is avaliable but there is no demand for the service (Example: A hotel has many empty rooms during the off-season, even though they are fully available for booking

Supplementary Services

Additional services that support or enhance the core product or main service

Price Equation (Final Price)

Final Price = List Price - (Incentives + Allowances) + Extra Fees

Calculate Profit

Profit = (Unit Price x Quantity sold) - (Fixed cost + Variable Cost)

Total Cost

The total expense incurred

Fixed Cost

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. (Rent on the building, insurance)

Variable Cost

The sum of the expenses of the firm that vary directly with the quantity of a product that is produced or sold (labor, materials, shipping)

Break-even quantity

BEPQuantity = Fixed Cost /Unit Price - Unit Variable Cost = FC/P - UVC

Elastic

If a small price change causes a big change in demand (luxury items like high-end handbags or sports cars)

Inelastic

If a big price change causes little or no change in demand (Gasoline, prescribed medication)

Pricing Approaches and Policies

Demand-oriented - skimming, penetration, price lining (Concert tickets priced higher for popular artist because fans are willing to pay more)

Cost-oriented - standard markup, cost-plus, experience curve (furniture manufacturer sells a chair for $50 production cost + $15 markup = $65 selling price)

Profit-oriented - target profit, target return on sales, target return on investment (a company sets a price to ensure a 20% return on investment for a new product line)

Competition-oriented - customary, above, at, or below market, loss leader (airlines match competitors’ ticket prices for the same route) 

Price Fixing

Competing companies agree to set prices at a certain level instead of letting the market determine them

Price Discrimination

Different Prices to different customers

Deceptive Pricing

False discounts or hidden fees

Predatory Pricing

Setting prices very low to drive competitors out of business, then raising prices once competition is gone