Exam 2 Flashcards
Sections 3 & 4
What is a product?
A product is a bundle of benefits
What are the product levels?
Core products, actual products, and augmented products
Core products
primary product or service that a company offers to customers
Actual products
the physical, tangible product that a customer receives,
Augmented products
a product that has been enhanced with additional features, services, or benefits beyond its basic functionality
What are the four categories of benefits?
(from top to bottom) social impact, life changing, emotional, and functional
How does the pyramid of benefits relate to Maslow’s hierarchy
Mundane benefits are located at the top and the bottom benefits are the easiest to fill. The top then becomes superior to the bottom.
What category of the pyramids must be filled first.
Functional benefits, as both start at the bottom and work upward
Ideal range of provided benefits
4-11… any more could overwhelm the consumer and cause dissatisfaction
What does bad customer service (over phones) do to the benefits?
Minimizes the benefits… outsourcing customer service could cause a decrease in quality
What is feature fatigue?
Too many features can set consumers up for dissatisfaction because they a) don’t know how to use them or b) feel bad for not being able to use all of them
What are services
intangible products that are offered to help satisfy needs or wants
Why can we think of products and services as continuum?
Continuum because most products on the market fall somewhere between a good and a service
Why is the US a service based economy?
Products can be made into services, and products that did not exist can be turned into services. Service also creates jobs, and new products are more likely to be a service than a good.
How are services different from goods?
Services are not tangible goods, but they can still provide perceived benefits. Goods have higher quality and satisfaction on average than services. Its hard to create a service that continuously operates at the same level.
How do the service characteristics affect marketing?
Intangibility: services cannot be touched, so it relies on brand image and conveying good messages about the product
Variability: Due to the human element, quality is not perfectly consistent
Inseparability: As services are often produced and consumed simultaneously, the customer interaction with the service provider is crucial
Perishability: Services cannot be stored and must be consumed as they are produced
Does employee satisfaction relate to customer satisfaction for all products? Why or why not?
In terms of companies with no contact with customers, it doesn’t matter what the employee thinks. But when companies have even minimal contact with customers, it does affect the customer experience.
5 stages of product lifecycle
In order: development, introduction, growth, maturity, decline
What are the characteristics of each stage in terms of sales, profits, competitors, and marketing?
development sinks money into the product as the company attempts to bring it to market, introduction is when the product makes it to market and continues to sink funds into it, growth shows a tremendous increase in sales and profitability begins to level off, maturity shows the plateau of popularity and perhaps a decrease in sales, decline is when the product begins to fall off and sales decline
What are the typical PLCs for styles, fashions, and fads
Styles tend to have long and stable PLCs with gradual changes. Fashions have steeper rises and falls with distinct peaks. Fads experience a very rapid rise and fall, making them the shortest PLC of the 3.
what is the diffusion of innovation
How new ideas, behaviors and products spread throughout a population
What are the adopter categories?
In order from left to right: innovators (2-3%), early adopters (15%), early majority (35%), late majority(35%), and laggards(12%)
How can we characterize the adopters by category?
Innovators
early adopters
early majority
late majority
laggards
Why do early adopters and innovators adopt early?
Bc they are young with more money and wish to have the social standing
What happens if EA&I cannot adopt early?
They take their money somewhere else
What are the roles of experts and consumers over the NPD process?
experts primarily contribute their technical knowledge to design and refine product concepts, while consumers provide crucial feedback on needs, wants, and potential market acceptance
What kind of innovation is a consumer likely to come up with?
A consumer is most likely to come up with an incremental innovation, which is a small improvement or adaptation to an existing product or service
What are consumers better at than experts?
identifying and articulating their specific needs, preferences, and pain points related to a product or service
Who makes the innovations that lead to discontinuous new products?
startups, entrepreneurs, or smaller companies outside of the established market leaders who are more willing to take risks and explore new ideas
What are the 3 reasons that people can create discontinuous products.
Address an entirely new market need or pain point that existing products don’t solve, 2. Leverage a breakthrough technology that fundamentally changes how a problem is tackled, and 3. Create a significantly different user experience by introducing a radically new concept
Given the above and in consideration of 5-hour energy, why is someone who developed a discontinuous innovation unlikely to do it again?
such innovations carry a high level of risk and uncertainty, often requiring substantial investments and significant market disruption
Why is pricing so important?
Price has the greatest potential to impact profitability
What are the influences on pricing?
Customer perception, internal costs, market characteristics (price sensitivity), and competition.
fixed costs
expenses that remain constant no matter production amount
variable costs
expenses that fluctuate based on production level
total revenue
selling price x # of units
profit
total sales less total costs
markup
it represents the amount added to cover operational expenses and generate profit
skimming
high initial price that gets gradually lowered
penetration pricing
low initial price to gain market share
EDLP
A company consistently charges low prices for products over a long period of time
high-low pricing
running frequent promotions off of a high price
loss-leader pricing
sells below market to stimulate profitable sales
What is a demand curve
Demand curves show how much of a product is demanded at different price points. Typically an inverse relationship
Elasticity
The responsiveness of demand as it relates to changes in price
Elasticity formula
% change in quantity demanded / % change in price
What does marketing do to a product’s price elasticity?
Good marketing should make prices less elastic, as they strive to create a stronger sense of value within the product, stronger differentiation and stronger brand loyalty.
What are the factors that affect price elasticity?
if there are lots of substitutes, then it becomes more elastic (you have options) if your product is a necessity, people will pay no matter what (less elastic)
What is price discrimination?
Charging different customers different prices at the same time
What is the purpose of price discrimination?
Selling to different customers at different price points based on the maximum they are willing to pay at the moment and in their position in the market
is price discrimination legal
It is generally lawful as long as the purpose is to cater to different buyers, or respond to competitor behavior
What are price fixing and bait and switch?
Fraudulent procedure where prices are advertised as super low but the seller has no intent of actually selling at that price
Who are superconsumers? Are they price sensitive or insensitive?
Subset of heavy users that are highly involved with a category or brand, and they are not price sensitive. (inelastic)
