L6 Marketing Mix

Question 1

Product manager:

2 features

Answer 1

L.L.

• the Product Manager follows 1 product throughout all development phases, from idea generation & screening through branding, test marketing, lifecycle mgmt to product line & mix decisions
• the Product Manager is a lynchpin interacting w all functions & roles inside & outside the Co

Question 2

products vs services

+ 6 peculiarities of services

Answer 2

• material goods or (repeated) interactions
• today the distinction is blurring due to servitization
• it is more difficult to market services due to peculiarities of services, where the human factor is important
• iiv plc*
  
  • intangibility
  • inseparability of production & consumption
  • variability
  • perishability
  • lack of ownership
  • customer integration

Question 3

3 types / levels of product

w 1+5+5 attributes

Answer 3

**C.Ac.A.

Core product**
: Company’s products or services which are most directly related to their core competencies.

• core benefit

Actual product: Is the physical or tangible product which a consumer buys to get a core benefit that this product is offering.

• features
• design
• quality level
• packaging
• brand name

Augmented product: Both the primary physical attributes and the non-physical attributes that are added to increase the product’s value.

• warranty
• delivery
• credit
• installation
• after-sales service

Question 4

products & services: 5 combinations

Answer 4

1. product
2. service
3. bundle => price < sum of prices
4. hybrid => integrated product & service
5. solution => price > sum of prices, with performance-based elements

Question 5

why are brands important?

5 reasons + 1 trend + 1 point of attention

Answer 5

Hi, Qen!
they

• make hiring easier
• lead to more innovations
• are quality surrogate (heuristic giving security)
• increase shopping efficiency
• draw customers’ attention to new products of same brand

+ product differentiation is becoming more difficult and therefore the brand is becoming more important

+ cross-culture translation of brands is tricky

Question 6

Major branding decisions (5):

Answer 6

• no brand => generic products
• manufacturer’s brand
• private brand (dealer brand)
• -> dealers now growing in strength vs manufacturers
• licensed brand
• co-branding

Question 7

product branding (when launching new product):

2 dims
+ logic of the 4 quadrants

Answer 7

product lines:

brands: existing new

existing line extension brand extension

new multibranding dev. f new brands & lines

LOGIC:

exploitation of existing VS diversification through innovation

Question 8

6 manifestations of branding strategies

Answer 8

• individual brand
• brand family
• branded house
• house of brands
• brand transfer
• co-branding

Question 9

Pricing - 7 forms of payment

Answer 9

• money now, of course!
• dancwf*
• data
• attention
• network value
• co-production (what the customers do themselves)
• word of mouth
• future transaction revenues

Question 10

Approaches for pricing

Answer 10

from naive to smart:

1. cost-based –> does not consider market (customer value, competitors) at all!
2. value-based –> starts from customer value, seeing what customers are willing to pay for, and sets that as target price (in case, cutting costs to make that possible)
3. behavioral pricing –> consider & exploit the consumer’s irrationalities

Question 11

Behavioral pricing

• basis
• eminent example
  
  • w 4 reasons
  • where stronger?

Answer 11

• basis: Prospect Theory (Kahneman, Tversky
• eg flat-rate bias: most ppl prefer a flat rate even when it actually is not convenient for them; reasons:
• cito*
  
  • convenience effect <– nice to not pay each time
  • insurance effect <– risk avoidance
  • taxi-meter effect <– it hurts to pay each time
  • overestimation effect <– we overestimate usage
• • stronger for hedonic VS utilitarian products/services

Question 12

3 pricing strategies

Answer 12

• skimming pricing
  = start high & go down, to segment; eg new iPhones
  (don’t exaggerate or it is not accepted)
  (typical of quality leader)
• penetration pricing (opposite of skimming)
  = start low & go high after conquering market share
• price discrimination

Question 13

price discrimination:

3 degrees

Answer 13

from precise to rough:

1. degree
   individual… eg AZ tried w individual prices
   but not accepted by consumers well!
2. degree
   customers decide to which segment they belong, e.g. 1st/2nd class train tickets
3. degree
   customers are assigned to segments based on observable characteristics, eg Legi price at bar

Question 14

2 keys to modern communication in promotion

Answer 14

1. initial campaign to stimulate conversation
2. integrate interactive feedback from consumers
   eg Old Spice

Question 15

Product:

general def.

+ 3 related concepts

Answer 15

• Product:
  Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations and ideas.
• Core product:
  Company’s products or services which are most directly related to their core competencies.
• Actual product:
  Is the physical or tangible product which a consumer buys to get a core benefit that this product is offering.
• Augmented product:
  Both the primary physical attributes and the non-physical attributes that are added to increase the product’s value.

Question 16

brand strength def=

+ 2 aka’s

Answer 16

„The set of emotional, cognitive and behavioral processes on part of a brand’s customers relative to its competitors that permit the holder of the brand to acquire and bind attractive customers more effectively than without branding the respective product“

aka customer-based brand equity

aka the indirect effects of brand on CLV

Question 17

major branding decisions, incl. brand positioning

in 5 stages (2+4+4+2+1)

Answer 17

• 1. To brand or not to brand
  
  1. Brand
  2. No Brand
• 2. Brand Sponsor
  
  1. Manufacturer’s brand
  2. Private brand–> retailers
     (winning battle of the brands vs. manufacturers)
  3. Licensed brand
  4. Co-branding aka brand partnership
     (for synergies)
• 3. Brand Development Strategy
  
  1. New brand
  2. Line extension
  3. Brand extension
  4. Multi-brands
• 4. Brand Name
  
  1. Selection then
  2. Protection
• 5. Brand Standard
  
  1. Guidelines for all Marketing-Mix activities

=> steps 2-5 are brand positioning!

Question 18

value of a non-paying customer:

6 types

Answer 18

CAD fwn

• coproduction
• attention
• data
• future transactions
• word of mouth
• network value

Question 19

Promotion mix or Marketing communications mix:

def= + 5 components

Answer 19

“The specific blend of advertising, public relations, personal selling, sales promotion, and direct marketing tools that the company uses to persuasively communicate customer value, build customer relationships and form brand image.”

The five major promotion tools
s(p).a.p(s).p.d.:

• Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service.
• Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
• Personal selling: Personal presentation by the firm’s sales force for the purpose of 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 heading off unfavorable rumors, stories, and events.
• Direct marketing: Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.

Question 20

brand success or brand equity:

3(x3) components

Answer 20

• brand strength
  
  • potential-related factors:
    rai recognition, attitudes, image
  • market-related factors:
    lo.pp.s. loyalty, price premium, share
• economic factors:
  sales, profits, value

Question 21

Product in its 3 components

Answer 21

caa

• Core product (What am I?)
• actual product (physical product)
• augmented product (add- ons, guarantees, services)

Question 22

Market offerings: 5 types

Answer 22

Market offerings:

• (tangible) goods
• services
• bundles
• hybrids
• solutions

Question 23

Brand def=

Answer 23

Brand: an identifying symbol, word, or mark that distinguishes a product or company from its competitors

Question 24

new product development in 8=3+3+2 phases:

Answer 24

New product development:

• idGe.screening.conTe.buAna.proDe.marTe.comm…*
• 3 idea-related:*

1. idea generation
2. screening
3. concept testing
   * 3 startup-related:*
4. business analysis
5. product development
6. market testing
   * 2 normal biz-related:*
7. commercialization
8. new product

Question 25

price def=

Answer 25

The price is the amount of money charged for a product or the sum of the values that consumers exchange for the benefit of having and consuming/using a product.

Question 26

Pricing approaches taxonomy:

3=3+1+1

Answer 26

Cost-based pricing

• Long-term perspective = absorption costing
• FC + VC + markup*
• Short-term perspective = direct costing
• variable costs*
• Break-even analysis or ~ target profit pricing

Value-based pricing

based on demand curve

Competition-based pricing

based on competitors

Question 27

behavioral pricing:

1 theory, 2 effects w their consequences
+ underlying explanation

+ 2 applications

Answer 27

Prospect Theory (Kahneman, Tversky (1979))

2 effects:

• Certainty Effect:
  ​People underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty =>
  
  • Risk aversion in choices with sure gains
  • Risk seeking in choices with sure losses
• Isolation Effect: people discard components that are shared by all prospects under consideration =>
  
  • inconsistent decisions depending on choice presentation

+ ppl’s utility function is normally concave for gains (implying risk aversion), commonly convex for losses (risk seeking)
and generally steeper for losses than for gains (loss aversion)

2 applications:

• framing sways decisions, by making ppl perceive gain or loss
• bundle pricing produces more consumer satisfaction as compared to (transparent) communication of each item’s price discount

Question 28

pricing strategies: 5 main ones, w goals or subtypes

Answer 28

• Skimming pricing (high price when product is introduced): goals
  
  • Benefit from high short-term profits (due to the newness of the product)
  • Benefit from effective market segmentation
  • Quality leader strategy
• penetration pricing (low price when product is introduced): goals
  
  • establishing a strong market position in a very short time
  • profiting from volume-based cost advantages
  • Often connected with accessories sales
  • Cost leadership strategy
• price discrimination (different prices for different consumers)
  
  • 1st degree: individual prices
  • 2nd degree: self-selection
  • 3rd degree: based on socio-demographic proxies
• price bundling (pure bundling vs. mixed bundling)
  
  • Pure Bundling:
    consumer can only buy the entire bundle or nothing
  • Mixed Bundling:
    consumers are offered a choice between purchasing the entire bundle or purchasing separate parts of the bundle
• harvest pricing: milking a declining market

Question 29

Online marketing instruments: (3+1)+3+1

Answer 29

Online marketing instruments:

3+1 social:

1. viral marketing =
   Strategy that motivates customers to pass along a marketing message to friends or colleagues in order to generate “word of mouth” - through games, images, e-books…
2. blog marketing =
   Internet marketing via web blogs
3. ​social media marketing =
   uses the interactivity of the internet in order to create and facilitate firm- to-user and user-to-user communication
   
   • Firm initiated (firm’s own platform)
   • User initiated (user community/ fan community/ hate community)
4. affiliate marketing =

An arrangement where one web site refers customers to another for a fee or percentage of any subsequent sales; 2 types:

• In house offers a one-to many relationship with marketers having full control over the affiliate network, and the affiliate has only one single partner
• In brokered affiliate marketing an independent third party acts between the affiliate and the marketer’s website

3 search engine-related:

1. Search Engine Marketing (SEM):
   – Paid advertisement in the form of search engine results at e.g. Google, MSN, Yahoo
2. Search Engine Optimization (SEO):
   – A process that enables a site to appear at the top of search engine’s listing in order to generate traffic
3. Digital Asset Optimization (DAO):
   – Promotion of digital assets like videos, pictures, documents presentations by way of digital

• 1 direct:*
  4. e-mail (direct) marketing =

Promotion of a product or service by sending e-mails to target customers; to:

* Improve customer loyalty
* Acquisition of new customers
* Affiliate Marketing
* Couponing

Question 30

evaluating success of promotions on the internet - 5 metrics:

Answer 30

1. Page impression (PI)

occurs when one person views one web page.

2. Click-through (CT)

Occurs each time a user clicks on an advertising and is directed to a web page with further information.

3. Click-through rate (CTR)

CTR = CT / PI

Expresses the percentage of total ad impressions; refers to the proportion of users viewing ads and click on them.

4. Conversion rate (CR)

CR = Number of new customers /

Number of new visitors

Measures the quality of traffic. Traffic quality depends on whether visitors are within the target group and their propensity to buy.

5. Cost per Acquisition (CPA)

CPA= CostPerClick / CR

CPA is important for controlling, calculating and defining companies allowable cost per each acquisition.

Question 31

goods taxonomy: 2=5+7

Answer 31

Consumer Goods:

1. Used for personal consumption
2. Convenience
3. Shopping
4. Specialty
5. Unsought

Industrial Goods:

1. Used for further processing or business us
2. Raw materials (e.g. petroleum, wheat, cotton, …)
3. Components and partially processed materials
   ​(e.g. CPUs, screens, engines, …)
4. Capital goods (buildings, fixed equipment)
5. Ancillary equipment (portable factory
6. equipment, tools, office equipment)
7. Supplies (e.g. office supplies)

Question 32

service

def

Answer 32

Any activity or benefit that one party can offer to another that is essentially intangible and results in no ownership of anything.

• Its production may or may not be tied to a physical product.

Question 33

brand

def

+ 3 goals

+ 2 key elements

+ 1 background reason for current importance

Answer 33

Brand: An identifying symbol, word, or mark that distinguishes a product or company from its competitors

• attract a set of customers who are rather loyal
• anchor to hold existing customers
• legal protection for unique product features that otherwise might be copied by competitors

+ colors & sounds are key elements

+ important because differentiating by physical features is difficult today

Question 34

brand strategy Individual Brand

4 examples + 5 pros + 4 cons

Answer 34

e.g. Ariel, Oil of Olaz, Pampers and Bounty from Procter & Gamble

5 pros:

1. Clear profile for a product is possible
2. Concentration on a selected target group
3. Choice between specific positionings available
4. Good illustration of the innovative character of the new product is possible
5. Prevention of a badwill- transfer effect on other products when new one is a failure

4 cons:

1. Product has to bear all expenditures (brand budget) by itself
2. Sustainable market volume required
3. Risk of not reaching the break-even-point because of shorter product life-cycles
4. Due to structural changes of the market chances of survival of product-specific brands is at risk

Question 35

brand strategy Family Brand

3 examples, 3 pros, 3 cons

Answer 35

e.g. Nivea, Tesa, Ricola

3 pros:

1. Several products bear the necessary brand budget
2. New products participate in the goodwill of the family brand
3. Every new „philosophy- compatible“ product strengthens the brand image

3 cons:

1. „Brand core“ limits possibilities for innovation
2. Risk of brand-overexpansion and -dilution
3. When developing profiles for the individual products the basic-positioning has to be kept in mind

Question 36

brand strategy Branded house

3 examples, 4 pros, 4 cons

Answer 36

e.g. Siemens, Sony, Apple

4 pros

1. All products bear the necessary brand budget together
2. Relative easy market introduction of new products
3. Each new product can enjoy the Goodwill of the umbrella brand
4. Short product live cycle of several products don’t endanger the joint profitability of the brand

4 cons

1. Clear profile of the total program under one brand is difficult to achieve
2. Concentrating on several target groups is not possible
3. General, unspecific positioning
4. In case of failure of one product, badwill transfer effects

Question 37

brand strategy House of brands

1=3 examples, 5 pros, 4 cons

Answer 37

e.g. Marlboro, Philip Morris and Chesterfield from
Philip Morris

5 pros

1. Brand switching customers stay with the company
2. Market exhaustion and marketing synergy potentials
3. High entry barriers for competitors
4. Reduction of market risk and higher action flexibility
5. Broad market coverage according to differentiated positioning

4 cons

1. High costs since an own brand has to be built for several product (parallel market cultivation)
2. Cannibalisation effects because of opposite market share substitution
3. Danger of over-segmentation
4. Suboptimal utilisation of personal and financial resources

Question 38

brand strategy brand transfer

3 examples, 2 pros, 2 cons

Answer 38

e.g. Camel travels, Camel clothes, Swatch, Benetton

2 pros

1. Many products bear the brand budget together
2. Reduction of a risk of the new product being a flop due to the usage of an established brand

2 cons

1. Negative attitude change by customer towards the brand if the transfer product don‘t fulfil minimum quality standards
2. Bearing capacity of the brand can be strained

Question 39

brand strategy co-branding

1 example, 3 pros, 3 cons

Answer 39

e.g. Nivea & Gillette - Additional revenue potential

3 pros

1. Cultivation of markets which are to far away for a brand transfer
2. Cost advantages and reduction of necessary investments
3. Transfer of positive attributes

3 cons

1. Rejection due to dissonances resulting from lacking fit
2. Brand erosion
3. Negative spill-over-effects due to affaires and image problems of partner brand

Question 40

Brand Name and Label:

5 demands

Answer 40

d.e.s. tra.pro.

• should be distinctive
• should be easy to pronounce, recognize, remember
• should suggest something about the product’s benefits
• should translate easily into foreign languages
• should be capable of registration and protection

Question 41

product dev.: 3 sources of new ideas

Answer 41

e.c.o.

1. external sources like customers, distributors, suppliers
2. product innovation mgmt consultants
3. organization: motivated employees, patent scanning…

Question 42

innovation types across 2 dimensions

Answer 42

increased customer fulfillment

tech. novelty low high

low incr. innov. mkt breakthru

new car selfie stick

high tech breakthru rad. innov.

segway internet

Question 43

Cost-Based Pricing – 3 Limitations and 2 advantages

Answer 43

Limitations of Cost-Based Pricing

• No consideration of demand response on price
• No consideration of competitors price activities
• Risk of pricing oneself “out of the market“ !

Main advantages of Cost-based pricing

• Relatively easy to use!
• (Traditional way how people are trained to set prices)

Question 44

Value-Based Pricing: 3 pros & 2 cons

Answer 44

pros
• Consistent with Marketing Philosophy
• worth the effort

• Optimal pricing: integrative approach covering customer value, cost, and competition aspects

cons

• needs underlying demand function measurement model,
• needs a competition simulation algorithm

Question 45

Competition-Based Pricing - 1 pro & 3 cons

Answer 45

pro

• Prices and Pricing behavior of the competitors in the market are considered

cons

• Too narrowly focused on the competition aspect.
• Company costs and the price-demand relation don’t play a major role in the price setting.
• Price war and prisoners‘ dilemmas.

Question 46

flat rate bias: def, 4 causing effects + 1 manipulatable factor
&

BR height: def + calc

Answer 46

• def= Customers often pay more with flat-rates for the same amount of consumption than with pay-per-use
• 4 causing effects
  TICO
  
  • T**axi-meter effect​ =**
    enjoy usage without thinking about cost
  • Insurance effect =
    no risk of unexpected high cost
  • Convenience effect =
    no concerns with pay-per-use calculations
  • Overestimation effect =
    no benefit
  • + 1 manipulatable factor:
    perception of hedonic consumption (–>TIO)
• FRB height is defined as the CHF difference from the flat rate tariff to the next smaller tariff
• *+ = max( 0 , cost_diff )**

Question 47

6 important pricing decisions

Answer 47

• Generic new product pricing
  skimming strategy and penetration strategy
• Pricing the product portfolio
  individual products in context of a product portfolio
• Price changes of products
  permanent or temporary price changes
• Price differentiation
  identical/different products to different segments at different prices
• Design/structure of discount and bonus systems
  reduction of regular prices in general or for loyal customers
• Enforcement of prices
  enforcement of company-internal or external pricing

Question 48

Promotion mix or Marketing communications mix:

def

+ 5 main channels

Answer 48

The specific blend of advertising, public relations, personal selling, sales promotion, and direct marketing tools that the company uses to persuasively communicate customer value, build customer relationships and form brand image.

• *The five major promotion tools
• draps - from less to more personal:***
• Advertising: Any 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.
• Public Relations: Building good relations with the company’s various publics by obtaining favorable publicity, building up a good “corporate image”, and handling or heading off unfavorable rumors, stories, and events.
• Direct marketing: Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.
• Personal selling: Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships.

Question 49

Media evaluation:

5 metrics

Answer 49

1. Circulation = Number of printed copies of an issue
2. Number of issues sold (= total number of sold copies –number of complimentary issues and returns)
3. Gross reach = Number of contacts that can be reached with the medium (often indicated in GPRs)
4. Gross rating points (GRPs) = Reach (% of the target group exposed to the medium) * Frequency (# of times a person of the target group is exposed to the medium)
5. Cost per thousand (CPM; cost per mille) =
   1000 * costs for using the medium /
   # of contacts with each use of the medium (reach)

Question 50

SEM in 6 features

Answer 50

1. SEM does not appear in organic search results (SEO)
2. SEM are labeled as advertisements
3. Advertisers place text ads for specific keywords with relevance for their business
4. Advertisers are bidding on keywords (auction) and pay per click (performance based)
5. Search engines use different algorithms for placing organic and paid search results on certain positions
6. New Google search algorithm „Venice“ prioritizes local websites

Question 51

SEO: ranking factors: 2=6+7

Answer 51

1. page ranking factors
   
   • link popularity
   • URL length/depth
   • content actuality
   • text style
   • web design
   • spam techniques
2. query ranking factors
   
   • keyword prominence
   • keyword frequency
   • keyword density
   • query intent
   • contextual relevancy
   • term rarity
   • term proximity

Question 52

characteristics of the internet as a medium:

3+5 pros

5 cons

Answer 52

PROs

• on the internet, consumer response can be measured, rather than assumed
• Metrics on the Internet are based on interactivity and are therefore better proxies for advertising success than offline marketing metrics
• Online marketing metrics exceed offline marketing metrics in:
• A.P.A.RT.*
  • Accountability
  • Predictability
  • Accuracy
  • Real-Time
  • enabling path to conversion analysis
• *​CONs
• 3 practical:***
• Most companies have trouble in tracing the sources of consumers actions
• They do have data, but they do not make sense or are not able to analyze them
• Cookie-based tracking encompasses disadvantages (e.g.: expiry after 30 days and cookie cleaning tools)

2 ethical:

• Irritation, unfairness, deception, and fraud
• Invasion of privacy:

Question 53

display advertising & retargeting

Answer 53

• Display Advertising: Customer-specific advertising embedded in websites visited (e.g.: Banner advertising).
• based on cookie-stored navigation history, show some customer specific advertising to the customer (retargeting).

Question 54

AboveTheLine VS BelowTheLine advertising

Answer 54

Above the line (ATL) = Marketing via the mass media.

• Newspaper
• Magazine
• Cinema
• TV
• Radio
• Billboards

Below the line (BTL) = Marketing via methods other than mass media.

• Promotion event
• POS display
• Direct marketing
• Email promotion
• Text message promotion
• Sponsorship
• Trade show
• Exhibition
• Catalogue

Question 55

Multichannel consumer &

Multichannel mgmt

Answer 55

Multichannel Consumer = Consumers are utilizing multiple channels

Multichannel mgmt = today’s firms are using 4 channels each, on avg; internet enables cheap direct marketing!