Marketing Exam 3

Internal Idea Generation

New product ideas some from research and development, entrepreneurial programs (employees)

External Idea Generation

Ideas come externally from distributors, suppliers, competitors, customers

Crowdsourcing

Inviting broad communities of people into the new product innovation process (customers, employees, researchers, etc.)

Idea Screening

Screening new product ideas to spot good ones and drop poor ones as soon as possible

Product Concept & Testing

A detailed version of the new product is stated in meaningful consumer terms. The product is tested with a group of market consumers to find out if the concepts have a strong consumer appeal

Marketing Strategy and 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

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

Test Marketing

The stage of new product concept into a physical product to ensure that the product idea can be turned into a workable market offering

Commercialization

The introduction of a product to the market

New-Product Development Process

1. Idea Generation
2. Idea Screening
3. Concept
4. Marketing Strategy
5. Business Analysis
6. Product Development
7. Test Marketing
8. Commercialization

Customer-centered new product development

Focuses on finding new ways to solve customer problems and create more customer-satisfying experiences
- Begins and ends with solving a customer's problems

Team-based new product development

Is a development approach where company departments work closely together in cross-functional teams, overlapping in the product development process to save time and increase the effectiveness

Product Life-Cycle stages

1. Product Development
- Sales are zero, and investment costs mount
2. Introduction
- New product is first distributed and made available for purchase
3. Growth
- Product sales start growing quickly
4. Maturity
- A product's sales growth slows or levels off
5. Decline
- Product sales fade away

Style

A basic and distinctive mode of expression (realist, abstract)
- Fluctuating trends that go up and down over time

Fashion

A currently accepted or popular style in a given field
- Arc shaped trend (parabola)

Fad

A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity
- Mountain shaped trend (peak)

Customer-value-based pricing (customer driven)

Setting prices based on buyers' perceptions of value rather than on the sellers' cost, is the key to pricing. Price is considered before the marketing program is set.
- Customers set price ceilings

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
- Assess customer needs and value perceptions, set target price

Good-value pricing

Offers the right combination of quality and good service at a fair price
- Introducing less-expensive versions of established name-brand products
- Redesign and improve quality for the same price
- Everyday low pricing

High-low pricing

Involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

Value-added pricing

Attaches value-added features and services to differentiate offers, support higher prices, and build pricing power

Break-even pricing (target return pricing)

Setting a price to break even on the costs of making and marketing a product or setting a price to make a target return
- Anything after the breakeven point in the profit margin

Target Costing

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

Dan Ariely

The fallacy of supply and demand
- Consumers purchase items based on value, quality, or availability - often on all three. Something other than supply and demand
- The Tahitian Black Pearl

Imprinting

A consumer's first experience with a given price

Anchor

The reference point a customer uses to compare current and future offerings
- Price relative to the extremes of the product

Arbitrary Coherence

Although initial prices are arbitrary, once those prices are established in our minds they will shape not only present prices but also future prices

Learning Curve

Overtime costs will lower because a company learns how to do things more efficiently and cost effectively

Experience Curves

Constraints on manufacturing, materials, human labor. Looks at different costs when the constraints are at different levels

Market-Skimming Pricing

Setting a high price for a new product to "skim" maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

Market Penetration Pricing

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

Product Line Pricing

Setting prices across an entire product line, based on cost differences between the products customer evaluations or different features, and competitor's prices

Optimal-Product Pricing

Pricing optional or accessory products sold with the main product
- Car with special features (heated seats)

Captive-product pricing

Pricing products that must be used with the main product
- Main product is often priced low and the supplies is marked up

By-product pricing

Pricing low-value by-products to get rid of or make more money on them
- Setting a price to help offset the cost of disposing them and help make the main product's price more competitive
- Grease powered Oscar Meyer car

Product Bundle Pricing

Pricing bundles of products sold together
- Several products are offered in a bundle at a discounted price

Discount

A straight reduction in price on purchases during a stated period of time or of larger quantitie

Allowances

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

Segmented

Selling a product or service at two or more prices, where the difference in prices is based on a difference in costs
- Customer based: Could be discounted for age or military
- Product Form: First class or economy on a plane ride
- Location-based: Out-of-state tuition
- Time-based: Seasonal discounts

Psychological Pricing

Considers psychology of prices and not simply the economics; the price is used to say something about the product
- Reference prices: 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 country or world

Dynamic and Online Pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations

Price Fixing

Sellers must set price without talking to competitors

Predatory Pricing

Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business

Robinson-Parman Act

Prevents unfair price discrimination by ensuring that the seller offers the same price terms to customers at a given level of trade
- If the seller can prove that costs differ when selling to different retailers
- If the seller manufactures different qualities of the same product for different retailers

Retail Price Maintenance

Is when a manufacturer requires a dealer to charge a specific retail price for its products

Deceptive Pricing

Occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers

Scanner Fraud

Failure of the seller to enter current or sale prices into the computer system

Price Confusion

Results when firms employ pricing methods that make it difficult for consumers to understand what price they are really paying

Upstream Partners

Include raw materials suppliers, components, parts, information, finances, and expertise to create a product or service (push method)

Downstream Partners

Include the marketing channels or distribution channels that look toward the customer (pull method)

Intermediaries

Offer producers greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operations, intermediaries usually offer the firm more than it can achieve on its own

Disintermediation

Gets rid of the middleman
- Netflix switched from delivering DVDs to being an online streaming service

Reintermediation

Supplier gets rid of the middleman but then brings them back
- Apple devices were sold in retail stores then exclusively apple stores then back to retail

Direct Marketing Channel

A marketing channel that has no intermediary levels

Indirect Marketing Channel

Channel containing one or more intermediary levels

How channel members add value

- Information
- Promotion
- Contact
- Matching
- Negotiation
- Channel level

Exclusive Distribution

This is when the seller allows only certain outlets to carry its products

Exclusive Dealing

Is when the seller requires that the sellers not handle the competitor's products

Exclusive Territorial Agreements

Are where producer or seller limit territory

Tying Agreements

Are agreements where the dealer must take most or all of the line

Retailing

All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use

Retailer

A business whose sales come primarily from retailing

Specialty Store

A retail store that carries a narrow product line with a deep assortment within that line
- REI, Sunglass Hut, Sephora

Department Store

A retail sore that carries a wide variety of product lines, each operated as a separate department managed by specialist buyers or merchandisers
- Macy's, Sears

Supermarket

A large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of grocery and household products
- Kroger, Publix, Safeway

Convenience Store

A relatively small store located near residential areas, open 24/7 and carrying a limited line of high-turnover convenience products at slightly higher prices
- 7-Eleven, Sheetz

Superstore

A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, nonfood items, and services
- Walmart Supercenter, SuperTarget

Category Killer

A giant specialty store that carries a very deep assortment of a particular line
- Home Depot, Petco

Discount Store

A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume
- Walmart, Target, Kohl's

Off-price retailer

A retailer that buys at less-than-regular wholesale prices and sells at less than retail

Independent off-price retailer

An off-price retailer that is independently owned and operated or a division of a larger retail corporation
- TJ Maxx, Marshalls, and HomeGoods (TJX Companies)

Factory Outlet

An off-price retailing operation that is owned and operated by a manufacturer and normally carries the manufacturer's surplus, discounted, or irregular goods

Warehouse Club

An off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and other goods at deep discounts to members who pay annual membership fees

Corporate Chain

Two or more outlets that are commonly owned and controlled

Franchise

A contractual association between a manufacturer, wholesaler, or service organization (franchisor) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system

Wheel-of-retail concept

States that many new types of retailing forms begin as low-margin, low price, low-status operations, and challenge established retailers. As they succeed they upgrade their facilities and offer more services, increasing their costs and forcing them to increase prices, eventually becoming the retailers they replaced

Showrooming

The shopping practice of coming into retail store showrooms to check out merchandise and price but instead buying from an online-only rival, sometimes while in the store

Wholesaling

All the activities involved in selling goods and services to those buying for resale or business use

Merchant Wholesaler

An independently owned wholesale business that takes title to the merchandise it handles

Brokers

A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation

Agent

A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions and does not take title to goods

The promotion mix

The specific blend of promotional tools that the company uses to persuasively communicate customer value and build customer relationships
- Advertising, Sales Promotion, Personal Selling, Public Relations, Direct and Digital Marketing

Advertising

An paid form of non personal presentation and promotion of ideas, goods, or services by an identified sponsor

Sales Promotion

Short-term incentives to encourage the purchase or sale of a product or service (sampling, coupons, financing)

Personal Selling

Personal presentation by the firm's sales force for the purpose of engaging customers, making sales, and building customer relationships

Public Relations

Building good relations with the company's various publics by obtaining favorable publicity, building up a good corporate image, and handling or head off unfavorable rumors, stories, and events

Direct and Digital Marketing

Engaging directly with carefully targeted individual consumers and customer communities to both obtain an immediate response and build lasting customer relationships

AIDA Model

Attention -> Interest -> Desire -> Action

Buyer-readiness stages

The stages consumers normally pass through on their way to making a purchase
- Awareness
- Knowledge
- Liking
- Preference
- Conviction
- Purchase

Personal Communication Channels

Channels through which two or more people communicate directly with each other, including face-to-face, on the phone, via mail or email, or through the internet

Word-of-mouth influence

The impact of the personal words and recommendations of trusted friends, family, associates, and other consumers on buying behavior

Opinion leaders

Are people within a reference group who, because of their special skills, knowledge, personality, or other characteristics; exerts social influence on others

Buzz marketing

Cultivating opinion leaders and getting them to spread information about a product or a service to others in their communities

Non-personal communication channels

Media that carry messages without personal contact or feedback, including major media, atmospheres, and events

Affordable Method

Setting the promotional budget at the level management thinks the company can afford
- Spend as much as you are able to on advertising

Percentage-of-sales method

Setting the promotion budget at a certain percentage of current forecasted sales or as a percentage of the unit sales price

Competitive-parity method

Setting the promotion budget to match competitor's outlays
- could start a back and forth war on spending