MKT 333 Flashcards

Question

Collecting Customer Insights Marketing information system (MIS)

Answer 1

* Marketing research * Big data * Internal databases * Competitive intelligence * Social media

Answer 2

• Systematic design, collection and analysis of data relevant for a marketing decision • Exploratory research – preliminary data collection to define problem or hypotheses • Descriptive research – to describe a situation in terms of customer attitude • Causal research – to test cause and effect relationships

Answer 3

• “Formulation of a problem is more essential than its solution” • Hardest stage of marketing research • Research objectives – goals for conducting research • E.g. Gather information about general attitudes of customers towards our company • How do customers view our brand in general?

Answer 4

* A written plan of conducting marketing research * Secondary data vs. primary data * Choice of method: * Observation (Ethnographic, Netnography) * Survey (Why?) * Experiment (cause and effect) * Contacting respondents * Mail, phone, personal, online * Specify sampling plan * Sample size, probability vs. non-probability, unit

Answer 5

• Implementing the Research Plan • Actually following through with the research plan and collecting data, making changes, if necessary • Analyzing the data gathered • Charts, graphs, statistical analysis • Interpreting and reporting the findings • Making meaningful, practical recommendations for action defining the problems and setting the research objectives ----- developing research plan ------- implementing the research plan ----- interpreting and reporting the finding

Answer 6

* Customer relationship management (CRM) * Big data and marketing analytics * Cost is a big consideration, small firms * International research has additional challenges * Ethics of Research * Privacy * Misuse of research in false advertising

Answer 7

marketing, more than any other business function, deals with customers. Although we will soon explore more-detailed definitions of marketing, perhaps the simplest definition is this one: Marketing is managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction.

Answer 8

The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Marketing

Answer 9

1. Understand the marketplace and customer needs and wants 2. Design a customer-driven marketing strategy 3. Construct an integrated marketing program that delivers superior value 4. Build profitable relationships and create customer delight 5. Capture value from customers to create profits and customer equity

Answer 10

States of felt deprivation 感到被剥夺的状态 Human needs are states of felt deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression. Marketers did not create these needs; they are a basic part of the human makeup.

Answer 11

The form human needs take as they are shaped by culture and individual personality. Wants are the form human needs take as they are shaped by culture and individual personality. An American needs food but wants a Big Mac, french fries, and a soft drink. A person in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped by one’s society and are described in terms of objects that will satisfy those needs.

Answer 12

Human wants that are backed up by buying power. When backed by buying power, wants become demands . Given their wants and resources, people demand products with benefits that add up to the most value and satisfaction.

Answer 13

Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Market offerings are not limited to physical products. They also include services —activities or benefi ts offered for sale that are essentially intangible and do not result in the ownership of anything. Examples include banking, airline, hotel, retailing, and home repair services.

Answer 14

he mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products. They are so taken with their products that they focus only on existing wants and lose sight of underlying customer needs. 7 They forget that a product is only a tool to solve a consumer problem. A manufacturer of quarter-inch drill bits may think that the customer needs a drill bit. But what the customer really needs is a quarter-inch hole. These sellers will have trouble if a new product comes along that serves the customer’s need better or less expensively. The customer will have the same need but will want the new product.

Answer 15

The act of obtaining a desired object from someone by offering something in return.

Answer 16

The set of all actual and potential buyers of a product or service.

Answer 17

The art and science of choosing target markets and building profitable relationships with them

Answer 18

The idea that consumers will favor products that are available and highly affordable; therefore, the organization should focus on improving production and distribution efficiency.

Answer 19

The idea that consumers will favor products that offer the most quality, performance, and features; therefore, the organization should devote its energy to making continuous product improvements.

Answer 20

The idea that consumers will not buy enough of the firm’s products unless the firm undertakes a large-scale selling and promotion effort. The selling concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such as insurance or blood donations. push strategy

Answer 21

A philosophy in which achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customer focus and value are the paths to sales and profits. Instead of a product-centered make and sell philosophy, the marketing concept is a customer-centered sense and respond philosophy. The job is not to fi nd the right customers for your product but to fi nd the right products for your customers. pull strategy

Answer 22

The idea that a company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests. the societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare It calls for sustainable marketing , socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs.

Answer 23

The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

Answer 24

The customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers.

Answer 25

Attracting and retaining customers can be a difficult task. Customers often face a bewildering （扑朔迷离）array of products and services from which to choose. A customer buys from the firm that offers the highest customer-perceived value —the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Importantly, customers often do not judge values and costs “accurately” or “objectively.” They act on perceived value.

Answer 26

The extent to which a product’s perceived performance matches a buyer’s expectations

Answer 27

N ew technologies have profoundly changed the ways in which people relate to one another. New tools for relating include everything from e-mail, Web sites, blogs, cell phones, and video sharing to online communities and social networks, such as Facebook, YouTube, and Twitter. T

Answer 28

Marketing relationships in which customers, empowered by today’s new digital technologies, interact with companies and with each other to shape their relationships with brands.

Answer 29

Brand exchanges created by consumers themselves—both invited and uninvited—by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers.

Answer 30

Working closely with partners in other company departments and outside the company to jointly bring greater value to customers. Marketing

Answer 31

The value of the entire stream of purchases a customer makes over a lifetime of patronage.

Answer 32

The portion of the customer’s purchasing that a company gets in its product categories.

Answer 33

The total combined customer lifetime values of all of the company’s customers. page 52

Answer 34

Strangers show low potential profitability and little projected loyalty Butterflies are potentially profitable but not loyal True friends are both profitable and loyal. Barnacles are highly loyal but not very profi table.

Answer 35

A vast public web of computer networks that connects users of all types all around the world to each other and to an amazingly large information repository.

Answer 36

the process of developing and maintaining a strategic fi t between the organization’s goals and capabilities and its changing marketing opportunities

Answer 37

A statement of the organization’s purpose—what it wants to accomplish in the larger environment. Marketing

Answer 38

The collection of businesses and products that make up the company. The best business portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.

Answer 39

The process by which management evaluates the products and businesses that make up the company. The major activity in strategic planning is business portfolio analysis , whereby management evaluates the products and businesses that make up the company.

Answer 40

page 73 A portfolio-planning method that evaluates a company’s SBUs in terms of its market growth rate and relative market share. Marketing

Answer 41

1. Stars. S tars are high-growth, high-share businesses or products. They often need heavy investments to fi nance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows. 2. Cash cows. Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment. 3. Question marks. Question marks are low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out. 4. Dogs. Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash

Answer 42

A portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversifi cation.

Answer 43

Company growth by increasing sales of current products to current market segments without changing the product. For example, Under Armour offers an ever-increasing range of styles and colors in its original apparel lines. It recently boosted its promotion spending in an effort to drive home its “performance and authenticity” positioning. The company also added direct-to-consumer distribution channels, including its own retail stores, Web site, and toll-free call center. Direct-to-consumer sales grew almost 60 percent last year and now account for more than 23 percent of total revenues.

Answer 44

Company growth by identifying and developing new market segments for current company products For instance, the company recently stepped up its emphasis on women consumers and predicts that its women’s apparel business will someday be larger than its men’s apparel business. The Under Armour “Athletes Run” advertising campaign includes a 30-second “women’s only” spot. Under Armour could also pursue new geographical markets . For example, the brand has announced its intentions to expand internationally.

Answer 45

Company growth by offering modifi ed or new products to current market segments. For example, after years of pitting cotton as the enemy of its sweat-absorbing synthetic materials, Under Armour recently introduced its own cotton-based line. Recognizing that many consumers simply like the feel of cotton and wear it in casual settings, the company wants a piece of the 80 percent of the active apparel market captured by cotton products. Under Armour claims that its own blend—called Charged Cotton—dries fi ve times faster than normal cotton. “Mother nature made it,” claims one ad. “We made it better.”

Answer 46

Company growth through starting up or acquiring businesses outside the company’s current products and markets For example, it could move into nonperformance leisurewear or begin making and marketing Under Armour fi tness equipment. When diversifying, companies must be careful not to overextend their brands’ positioning.

Answer 47

The series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a fi rm’s products. page 77

Answer 48

The network made up of the company, its suppliers, its distributors, and, ultimately, its customers who partner with each other to improve the performance of the entire system page78

Answer 49

The marketing logic by which the company hopes to create customer value and achieve profi table customer relationships.

Answer 50

Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs.

Answer 51

A group of consumers who respond in a similar way to a given set of marketing efforts.

Answer 52

The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. For example, Ferrari sells only 1,500 of its very high-p erformance cars in the United States each year but at very high prices—from an eye-opening $255,000 for its Ferrari 458 Italia to an astonishing more than $2 million for its FXX super sports car, which can be driven only on race tracks (it usually sells 10 in the United States each year). Most nichers aren’t quite so exotic. White Wave, the maker of Silk Soymilk, has found its niche as the nation’s largest soy milk producer. And profi table low-cost airline Allegiant Air avoids direct competition with major airline rivals by targeting smaller, neglected markets and new fl yers. Nicher Allegiant “goes where they ain’t” (see Marketing at Work 2.2 ).

Answer 53

Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Answer 54

Actually differentiating the market offering to create superior customer value.

Answer 55

The set of tactical marketing tools— product, price, place, and promotion— that the fi rm blends to produce the response it wants in the target market.

Answer 56

Product means the goods-and-services combination the company offers to the target market. Thus, a Ford Escape consists of nuts and bolts, spark plugs, pistons, headlights, and thousands of other parts. Ford offers several Escape models and dozens of optional features. The car comes fully serviced and with a comprehensive warranty that is as much a part of the product as the tailpipe.

Answer 57

Price is the amount of money customers must pay to obtain the product. For example, Ford calculates suggested retail prices that its dealers might charge for each Escape. But Ford dealers rarely charge the full sticker price. Instead, they negotiate the price with each customer, offering discounts, trade-in allowances, and credit terms. These actions adjust prices for the current competitive and economic situations and bring them into line with the buyer’s perception of the car’s value.

Answer 58

Place includes company activities that make the product available to target consumers. Ford partners with a large body of independently owned dealerships that sell the company’s many different models. Ford selects its dealers carefully and strongly supports them. The dealers keep an inventory of Ford automobiles, demonstrate them to potential buyers, negotiate prices, close sales, and service the cars after the sale.

Answer 59

Promotion refers to activities that communicate the merits of the product and persuade target customers to buy it. Ford spends more than $1.5 billion each year on U.S. advertising to tell consumers about the company and its many products. 12 Dealership salespeople assist potential buyers and persuade them that Ford is the best car for them. Ford and its dealers offer special promotions—sales, cash rebates, and low fi nancing rates—as added purchase incentives.

Answer 60

Turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives

Answer 61

Measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved.

Answer 62

The net return from a marketing investment divided by the costs of the marketing investment.

Answer 63

The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.

Answer 64

The actors close to the company that affect its ability to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.

Answer 65

The larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces.

Answer 66

Firms that help the company to promote, sell, and distribute its goods to final buyers. They include resellers, physical distribution fi rms, marketing services agencies, and fi nancial intermediaries. Resellers are distribution channel fi rms that help the company fi nd customers or make sales to them.

Answer 67

Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives.

Answer 68

● Financial publics. This group infl uences the company’s ability to obtain funds. Banks, investment analysts, and stockholders are the major fi nancial publics. ● Media publics. T his group carries news, features, and editorial opinion. It includes newspapers, magazines, television stations, and blogs and other Internet media. ● Government publics. M anagement must take government developments into account. Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising, and other matters. ● Citizen-action publics. A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups, and others. Its public relations department can help it stay in touch with consumer and citizen groups. ● Local publics. This group includes neighborhood residents and community organizations. General public. A company needs to be concerned about the general public’s attitude toward its products and activities. The public’s image of the company affects its buying. ● Internal publics. T his group includes workers, managers, volunteers, and the board of directors. Large companies use newsletters and other means to inform and motivate their internal publics. When employees feel good about the companies they work for, this positive attitude spills over to the external publics.

Answer 69

The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.

Answer 70

The 78 million people born during the years following World War II and lasting until 1964.

Answer 71

The 49 million people born between 1965 and 1976 in the “birth dearth” following the baby boom.

Answer 72

The 83 million children of the baby boomers born between 1977 and 2000.

Answer 73

D o marketers need to create separate products and marketing programs for each generation? Some experts warn that marketers need to be careful about turning off one generation each time they craft a product or message that appeals effectively to another. Others caution that each generation spans decades of time and many socioeconomic levels. For example, marketers often split the baby boomers into three smaller groups—leadingedge boomers, core boomers, and trailing-edge boomers—each with its own beliefs and behaviors. Similarly, they split the Millennials into teens and young adults.

Answer 74

Economic factors that affect consumer purchasing power and spending patterns. Marketing

Answer 75

Natural resources that are needed as inputs by marketers or that are affected by marketing activities

Answer 76

Developing strategies and practices that create a world economy that the planet can support indefi nitely.

Answer 77

Forces that create new technologies, creating new product and market opportunities.

Answer 78

Laws, government agencies, and pressure groups that infl uence and limit various organizations and individuals in a given society. Marketing

Answer 79

Enlightened companies encourage their managers to look beyond what the regulatory system allows and simply “do the right thing.” These socially responsible fi rms actively seek out ways to protect the long-run interests of their consumers and the environment.

Answer 80

To exercise their social responsibility and build more positive images, many companies are now linking themselves to worthwhile causes. These days, every product seems to be tied to some cause. Buy a pink mixer from KitchenAid and support breast cancer research. Purchase a special edition bottle of Dawn dishwashing detergent, and P&G will donate a dollar to help rescue and rehabilitate wildlife affected by oil spills. Go to Staples’ DoSomething101 Web site or Facebook page and fi ll a virtual backpack with essential school supplies needed by school children living in poverty. Pay for these purchases with the right charge card and you can support a local cultural arts group or help fi ght heart disease.

Answer 81

Institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors

Answer 82

Fresh understandings of customers and the marketplace derived from marketing information that becomes the basis for creating customer value and relationships.

Answer 83

People and procedures dedicated to assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights.

Answer 84

Electronic collections of consumer and market information obtained from data sources within the company network.

Answer 85

The systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketing environment.

Answer 86

The systematic design, collection, analysis, and reporting of data relevant to a specifi c marketing situation facing an organization.

Answer 87

Marketing research used to gather preliminary information that will help defi ne problems and suggest hypotheses.

Answer 88

Marketing research used to better describe marketing problems, situations, or markets. such as the market potential for a product or the demographics and attitudes of consumers who buy the product.

Answer 89

Marketing research used to test hypotheses about cause-and-effect relationships. For example, would a 10 percent decrease in tuition at a private college result in an enrollment increase sufficient to offset the reduced tuition? Managers often start with exploratory research and later follow with descriptive or causal research.

Answer 90

Research objectives must be translated into specific information needs. For example, suppose that Red Bull wants to conduct research on how consumers would react to a proposed new vitamin-enhanced water drink that would be available in several flavors and sold under the Red Bull name.

Answer 91

● T he demographic, economic, and lifestyle characteristics of c urrent Red Bull customers ● T he characteristics and usage patterns of the broader population of enhanced-water users: What do they need and expect from such products, where do they buy them, when and how do they use them, and what existing brands and price points are most popular? ● R etailer reactions to the proposed new product line: Would they stock and support it? Where would they display it? ● Forecasts of sales of both the new and current Red Bull products.

Answer 92

Information that already exists somewhere, having been collected for another purpose

Answer 93

Information collected for the specific purpose at hand.

Answer 94

Gathering primary data by observing relevant people, actions, and situations. For example, Trader Joe’s might evaluate possible new store locations by checking traffic patterns, neighborhood conditions, and the locations of competing Whole Foods, Fresh Market, and other retail chains.

Answer 95

A form of observational research that involves sending trained observers to watch and interact with consumers in their “natural environments.”

Answer 96

Gathering primary data by asking people questions about their knowledge, attitudes, preferences, and buying behavior. However, survey research also presents some problems. Sometimes people are unable to answer survey questions because they cannot remember or have never thought about what they do and why they do it. People may be unwilling to respond to unknown interviewers or about things they consider private. Respondents may answer survey questions even when they do not know the answer just to appear smarter or more informed. Or they may try to help the interviewer by giving pleasing answers

Answer 97

Gathering primary data by selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking for differences in group responses. Marketing

Answer 98

Mail questionnaires can be used to collect large amounts of information at a low cost per respondent. Respondents may give more honest answers to more personal questions on a mail questionnaire than to an unknown interviewer in person or over the phone. Also, no interviewer is involved to bias respondents’ answers. However, mail questionnaires are not very fl exible; all respondents answer the same questions in a fi xed order.

Answer 99

Telephone interviewing is one of the best methods for gathering information quickly, and it provides greater fl exibility than mail questionnaires. Interviewers can explain diffi cult questions and, depending on the answers they receive, skip some questions or probe on others. Response rates tend to be higher than with mail questionnaires, and interviewers can ask to speak to respondents with the desired characteristics or even by name.

Answer 100

Personal interviewing that involves inviting six to ten people to gather for a few hours with a trained interviewer to talk about a product, service, or organization. The interviewer “focuses” the group discussion on important issues. Marketing

Answer 101

Collecting primary data online through Internet surveys, online focus groups, Web-based experiments, or tracking consumers’ online behavior.

Answer 102

Gathering a small group of people online with a trained moderator to chat about a product, service, or organization and gain qualitative insights about consumer attitudes and behavior. For example, online research fi rm Channel M2 “puts the human touch back into online research” by assembling focus group participants in people-friendly “virtual interview rooms.” At the appointed time, participants sign on via their webcam-equipped computer, view live video of other participants, and interact in real-time. Researchers can “sit in” on the focus group from anywhere, seeing and hearing every respondent. 1 5

Answer 103

A segment of the population selected for marketing research to represent the population as a whole Designing the sample requires three decisions. First, who is to be studied (what sampling unit )? Second, how many people should be included (what sample size )? Large samples give more reliable results than small samples. Finally, how should the people in the sample be chosen (what sampling procedure )?

Answer 104

The questionnaire is by far the most common instrument, whether administered in person, by phone, by e-mail, or online. Questionnaires are very fl exible—there are many ways to ask questions. Closed-end questions include all the possible answers, and subjects make choices among them. Examples include multiple-choice questions and scale questions. Open-end questions allow respondents to answer in their own words

Answer 105

Although questionnaires are the most common research instrument, researchers also use mechanical instruments to monitor consumer behavior. Nielsen Media Research attaches people meters to television sets, cable boxes, and satellite systems in selected homes to record who watches which programs. Retailers likewise use checkout scanners to record shoppers’ purchases. O ther mechanical devices measure subjects’ physical responses. For example, consider Disney Media Networks’ new consumer research lab in Austin, Texas

Answer 106

Managing detailed information about individual customers and carefully managing customer touch points to maximize customer loyalty CRM analysts develop data warehouses and use sophisticated data mining techniques to unearth the riches hidden in customer data. A data warehouse is a company-wide electronic database of fi nely detailed customer information that needs to be sifted through for gems. The purpose of a data warehouse is not only to gather information but also to pull it together into a central, accessible location. Then, once the data warehouse brings the data together, the company uses high-powered data mining techniques to sift through the mounds of data and dig out interesting fi ndings about customers.

Answer 107

The buying behavior of fi nal consumers—individuals and households that buy goods and services for personal consumption.

Answer 108

All the individuals and households that buy or acquire goods and services for personal consumption

Answer 109

The set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. arketers are always trying to spot cultural shifts so as to discover new products that might be wanted. For example, the cultural shift toward greater concern about health and fi tness has created a huge industry for health-and-fi tness services, exercise equipment and clothing, organic foods, and a variety of diets.

Answer 110

A group of people with shared value systems based on common life experiences and situations. Each culture contains smaller subcultures , or groups of people with shared value systems based on common life experiences and situations. Subcultures include nationalities, religions, racial groups, and geographic regions. Companies such as General Mills, P&G, Verizon, McDonald’s, Toyota, Walmart, and many others have developed special targeting efforts for this fast-growing consumer group. For example, General Mills targets Hispanics with its extensive Qué Rica Vida (What a Rich Life) marketing initiative, which communicates with Hispanic mothers about the benefi ts of General Mills products. The Qué Rica Vida Web site, magazine, and mobile apps offer Spanish-language recipes and a wealth of parenting, family health, lifestyle, and education information. General Mills also targets Hispanics with tailored ads for specifi c brands. For example, Hispanic advertising for Nature Valley, a popular brand with Hispanic consumers, depicts couples “savoring nature instead of conquering it.” Nature Valley sales grew 19 percent in Hispanic markets as a result of the brand’s more-targeted approach.

Answer 111

Relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors

Answer 112

Two or more people who interact to accomplish individual or mutual goals

Answer 113

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

Answer 114

A person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts social infl uence on others.

Answer 115

Online social communities—blogs, social networking Web sites, and other online communities—where people socialize or exchange information and opinions.

Answer 116

A person belongs to many groups—family, clubs, organizations, online communities. The person’s position in each group can be defi ned in terms of both role and status. A role consists of the activities people are expected to perform according to the people around them. Each role carries a status refl ecting the general esteem given to it by society.

Answer 117

People change the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle—the stages through which families might pass as they mature over time. Life-stage changes usually result from demographics and life-changing events—marriage, having children, purchasing a home, divorce, children going to college, changes in personal income, moving out of the house, and retirement. Marketers often defi ne their target markets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage.

Answer 118

A person’s pattern of living as expressed in his or her activities, interests, and opinions. It involves measuring consumers’ major AIO dimensions—activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products). Lifestyle captures something more than the person’s social class or personality. It profi les a person’s whole pattern of acting and interacting in the world. For example, Triumph doesn’t just sell motorcycles; it sells an independent, “Go your own way” lifestyle. Similarly, HarleyDavidson tells customers to “grab life by the bars.” And watchmaker Breitling doesn’t sell just sturdy, accurate time pieces. It positions the brand as “instruments for professionals,” targeting people who identify with an active, adventurous, rugged lifestyle. One Breitling ad features an airline pilot who spends his spare time setting freediving records beneath the sea. “Whether he’s deep beneath the sea or high up in the air,” says the ad, “fi rmly strapped to his wrist is the new Breitling Superocean, an extreme watch cut out for great accomplishments.”

Answer 119

Each person’s distinct personality infl uences his or her buying behavior. Personality refers to the unique psychological characteristics that distinguish a person or group. Personality is usually described in terms of traits such as self-confi dence, dominance, sociability, autonomy, defensiveness, adaptability, and aggressiveness. Personality can be useful in analyzing consumer behavior for certain product or brand choices.

Answer 120

The unique psychological characteristics that distinguish a person or group.

Answer 121

person’s buying choices are further influenced by four major psychological factors: motivation, perception, learning, and beliefs and attitudes

Answer 122

A need that is sufficiently pressing to direct the person to seek satisfaction of the need. Marketing

Answer 123

the term motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations. Consumers often don’t know or can’t describe why they act as they do.

Answer 124

The process by which people select, organize, and interpret information to form a meaningful picture of the world

Answer 125

selective attention, selective distortion, and selective retention 选择性注意，选择性失真和选择性保留 For example, people are exposed to an estimated 3,000 to 5,000 ad messages every day. It is impossible for a person to pay attention to all these stimuli. Selective attention —the tendency for people to screen out most of the information to which they are exposed—means that marketers must work especially hard to attract the consumer’s attention.

Answer 126

Changes in an individual’s behavior arising from experience. A drive is a strong internal stimulus that calls for action. A drive becomes a motive when it is directed toward a particular stimulus object . For example, a person’s drive for self-actualization might motivate him or her to look into buying a camera.

Answer 127

A descriptive thought that a person holds about something. Marketers are interested in the beliefs that people formulate about specifi c products and services because these beliefs make up product and brand images that affect buying behavior. If some of the beliefs are wrong and prevent purchase, the marketer will want to launch a campaign to correct them.

Answer 128

A person’s consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or idea

Answer 129

in the evaluation stage, the consumer ranks brands and forms purchase intentions. Generally, the consumer’s purchase decision will be to buy the most preferred brand, but two factors can come between the purchase intention and the purchase decision . The first factor is the attitudes of others

Answer 130

Buyer discomfort caused by postpurchase conflict. 采购后冲突引起的买家不适。 After the purchase, consumers are satisfi ed with the benefi ts of the chosen brand and are glad to avoid the drawbacks of the brands not bought. However, every purchase involves compromise. So consumers feel uneasy about acquiring the drawbacks of the chosen brand and about losing the benefi ts of the brands not purchased. Thus, consumers feel at least some postpurchase dissonance for every purchase

Answer 131

A good, service, or idea that is perceived by some potential customers as new.

Answer 132

The mental process through which an individual passes from first hearing about an innovation to final adoption.

Answer 133

people differ greatly in their readiness to try new products. In each product area, there are “consumption pioneers” and early adopters. Other individuals adopt new products much later.

Answer 134

Innovators are venturesome—they try new ideas at some risk. Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas early but carefully. The early majority is deliberate— although they rarely are leaders, they adopt new ideas before the average person. The late majority is skeptical—they adopt an innovation only after a majority of people have tried it. Finally, laggards are tradition bound—they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

Answer 135

The buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others.

Answer 136

he decision process by which business buyers determine which products and services their organizations need to purchase and then fi nd, evaluate, and choose among alternative suppliers and brands.

Answer 137

urther, business demand is derived demand— it ultimately derives from the demand for consumer goods. For example, W. L. Gore & Associates sells its Gore-Tex brand to manufacturers who make and sell outdoor apparel brands made from Gore-Tex fabrics. If demand for these brands increases, so does d emand for Gore-Tex fabrics. 此外，业务需求是衍生的需求，它最终源自对消费品的需求。例如，W。L. Gore＆Associates将其Gore-Tex品牌出售给制造和销售用Gore-Tex织物制成的户外服装品牌的制造商。如果对这些品牌的需求增加，那么对Gore-Tex织物的需求也会增加。

Answer 138

The business demand for products and services that ultimately derives from the demand for consumer goods

Answer 139

Systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials exists for use in making products or reselling them to others.

Answer 140

A business buying situation in which the buyer routinely reorders something without any modifications.

Answer 141

A business buying situation in which the buyer wants to modify product specifi cations, prices, terms, or suppliers.

Answer 142

A business buying situation in which the buyer purchases a product or service for the fi rst time.

Answer 143

Buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation. For example, UPS bundles a complete system of services that support Nikon’s consumer products supply chain—including logistics, transportation, freight, and customs brokerage services—into one smooth-running system.

Answer 144

All the individuals and units that play a role in the purchase decision-making process. Marketing

Answer 145

Organizational factors are also important. Each buying organization has its own objectives, strategies, structure, systems, and procedures, and the business marketer must understand these factors well. Questions such as these arise: How many people are involved in the buying decision? Who are they? What are their evaluative criteria? What are the company’s policies and limits on its buyers? he buying center usually includes many participants who influence each other, so interpersonal factors also influence the business buying process. However, it is often difficult to assess such interpersonal factors and group dynamics. Buying center participants do not wear tags that label them as key decision maker or not influential.

Answer 146

Business marketers use their sales forces or advertising to alert customers to potential problems and then show how their products provide solutions. For example, an award-winning ad from Makino Engineering Services, a leading maker of advanced machining tools, highlights a daunting customer problem: hard-to-machine parts.

Answer 147

Carefully analyzing a product’s or service’s components to determine if they can be redesigned and made more effectively and effi ciently to provide greater value. Marketing

Answer 148

Purchasing performed through electronic connections between buyers and sellers—usually online. advances in information technology have changed the face of the B-to-B marketing process. Online purchasing, often called e-procurement, has grown rapidly in recent years. Virtually unknown a decade and a half ago, online purchasing is standard procedure for most companies today. E-procurement gives buyers access to new suppliers, lowers purchasing costs, and hastens order processing and delivery. In turn, business marketers can connect with customers online to share marketing information, sell products and services, provide customer support services, and maintain ongoing customer relationships.

Answer 149

Market Penetration

Answer 150

Product Development

Answer 151

Diversification

Answer 152

Market Development

Answer 153

Diversification

Answer 154

Market Development

Answer 155

Diversification

Answer 156

Product Development

Answer 157

Diversification

Answer 158

product development

Answer 159

production concept

Answer 160

Marketing management

Answer 161

encourage competition in the market

Answer 162

to give customers the complexion they dream about by providing products suited to their needs

Answer 163

They are the wealthiest generation in U.S. history.

Answer 164

business market

Answer 165

a company's marketing decisions should focus on creating economic value in a way that also creates value for the surrounding environment

Answer 166

the suppliers who work with the company

Answer 167

The marketing concept focuses on customer needs, whereas the selling concept focuses on existing products

Answer 168

pruning product pruning. discontinuation of a product or brand in response to declining demand or insufficient financial returns. Product pruning enables the marketer to dedicate its resources to its best products or brands. 产品修剪。因需求下降或财务收益不足而停产产品或品牌。产品修剪使营销人员可以将其资源专用于其最佳产品或品牌。

Answer 169

The demand for analgesic drugs in the Terrania market is expected to remain stable.

Answer 170

low market share in a market with high growth prospects

Answer 171

value proposition

Answer 172

Demography

Answer 173

market growth rate and relative market share

Answer 174

understanding the marketplace and customer needs and wants

Answer 175

Various ethnic groups mix together but also retain their cultural differences

Answer 176

macroenvironment

Answer 177

the list of all the marketing activities in which the company invests

Answer 178

market penetration

Answer 179

Learn about consumer decision process and distinguish the stages of the process • Understand cultural, social, personal and psychological factors affecting consumer decisions • Comprehend how consumers differ in terms of innovativeness • Learn product characteristics that may influence new product adoption • Know the differences b/w consumer and business buying • Distinguish among the business buying situations

Answer 180

Need Recognition-->Information Search-->Evaluation of Alternatives -->Purchase Decision --> postpurchase behavior

Answer 181

* Culture * Learned beliefs and values * Subculture * Race, Ethnic, religious * Social Class * Occupation, education, income, wealth

Answer 182

* Groups and social networks * Word-of-mouth, opinion leaders • Online social networks * Family * Nuclear, extended

Answer 183

• Occupation • Age, lifestage • Lifestyle • Personality, self image • Matching brand image

Answer 184

• Motivation | physiological needs --> safety needs --> love/belong needs --> esteem needs --> self-actualization

Answer 185

• Perception-process of selecting, organizing and interpreting information • Learning –Changes in behavior arising from experience • Beliefs and attitudes

Answer 186

Rogers diffusion of innovation bell innovation (2.5%) --> early adopters (13.5%) --> early majority (34%) --> late majority (34%) --> laggards (16%)

Answer 187

* Much better than previous products (high relative advantage) * Fit with customers’ existing lifestyle (high compatibility) * Simple to understand and use (low complexity) * Easy to try (high divisibility) * Easy to see advantages (high communicability)

Answer 188

* Business-to-business (B-to-B, or B2B) * Fewer but larger buyers * More inelastic demand * Derived demand • Professional buyers * Complex, formalized process * Buying center

Answer 189

* Straight rebuy * Modified rebuy * New task

Answer 190

Dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.

Answer 191

The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Answer 192

Differentiating the market offering to create superior customer value.

Answer 193

Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Answer 194

Segmentation Divide the total market into smaller segments Targeting Select the segment or segments to enter Differentiation Differentiate the market offering to create superior customer value Positioning Position the market offering in the minds of target customers the four points Create value for targeted customers

Answer 195

Dividing a market into different geographical units, such as nations, states, regions, counties, cities, or even neighborhoods.

Answer 196

Geographic Nations, regions, states, counties, cities, neighborhoods, population density (urban, suburban, rural), climate Demographic Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation Psychographic Social class, lifestyle, personality Behavioral Occasions, beneﬁ ts, user status, usage rate, loyalty status

Answer 197

Dividing the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.

Answer 198

Dividing a market into different age and life-cycle groups. Life-cycle segmentation: Disney Cruise Lines targets primarily families with children, large and small. Most of its destinations and shipboard activities are designed with parents and their children in mind

Answer 199

Dividing a market into different segments based on gender. Harley-Davidson has boosted its efforts to move women from the back of the bike onto the driver’s seat

Answer 200

Dividing a market into different income segments.

Answer 201

Dividing a market into different segments based on social class, lifestyle, or personality characteristics

Answer 202

Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product.

Answer 203

Dividing the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item

Answer 204

Dividing the market into segments according to the different benefi ts that consumers seek from the product. Occasion segmentation: M&M’s Brand Chocolate Candies runs special ads and packaging for holidays and events such as Easter.

Answer 205

Markets can be segmented into nonusers, ex-users, potential users, fi rst-time users, and regular users of a product.

Answer 206

M arkets can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. For instance, a recent study showed that heavy seafood consumers in the United States are a small but hungry bunch.

Answer 207

A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Tide), stores (Target), and companies (Apple). Buyers can be divided into groups according to their degree of loyalty. C onsumer loyalty: “Mac Fanatics”—fanatically loyal Apple users—helped keep Apple aﬂ oat during the lean years, and they are now at the forefront of Apple’s burgeoning iPod, iPhone, and iTunes empire

Answer 208

Using Nielsen’s PRIZM system, marketers can paint a surprisingly precise picture of who you are, what you watch, and what you might buy. PRIZM segments carry such exotic names as “Brite Lites L’il City,” “Kids & Cul-de-Sacs,” “Gray Power,” and “Big City Blues.”

Answer 209

business marketers also use some additional variables, such as customer operating characteristics , purchasing approaches , situational factors , and personal characteristics . A lmost every company serves at least some business markets. For example, A merican Express targets businesses in three segments: merchants, corporations, and small businesses

Answer 210

Forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries. orld markets can also be segmented on the basis of economic factors . Countries might be grouped by population income levels or by their overall level of economic development.

Answer 211

● Measurable. The size, purchasing power, and profi les of the segments can be measured. ● Accessible. The market segments can be effectively reached and served. ● Substantial. The market segments are large or profi table enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars especially for people whose height is greater than seven feet. ● Differentiable. T he segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments. ● Actionable. E ffective programs can be designed for attracting and serving the segments. For example, although one small airline identifi ed seven market segments, its staff was too small to develop separate marketing programs for each segment.

Answer 212

A set of buyers sharing common needs or characteristics that the company decides to serve

Answer 213

A market-coverage strategy in which a fi rm decides to ignore market segment differences and go after the whole market with one offer.

Answer 214

A market-coverage strategy in which a fi rm decides to target several market segments and designs separate offers for each. Marketing

Answer 215

Undifferentiated (mass) marketing --> Differentiated (segmented) marketing --->Concentrated (niche) marketing ----> Micromarketing (local or individual marketing) Differentiated marketing: In addition to its broad Hallmark card line, Hallmark has introduced lines targeting a dozen or more speciﬁ c segments, including its Mahogany, Tree of Life, and Sinceramente Hallmark lines above

Answer 216

A market-coverage strategy in which a fi rm goes after a large share of one or a few segments or niches 一种市场覆盖策略，其中，公司将大量资金用于一个或几个细分市场或利基市场 For example, Whole Foods Market has about 300 stores and $9 b illion in sales, compared with goliaths such as Kroger (more than 3,600 stores and sales of $82 billion) and Walmart (close to 9,000 stores and sales of $419 billion). 16 Yet, over the past fi ve years, the smaller, more upscale retailer has grown faster and more profi tably than either of its giant rivals. Concentrated marketing: Thanks to the reach and power of the Web, online nicher Etsy—sometimes referred to as eBay’s funky little sister—is thriving. Etsy, Inc. and The Clay Collection

Answer 217

Tailoring products and marketing programs to the needs and wants of specifi c individuals and local customer segments; it includes local marketing and individual marketing . Marketing

Answer 218

Tailoring brands and promotions to the needs and wants of local customer segments—cities, neighborhoods, and even specifi c stores. Local marketing: The North Face uses “geo-fencing” to send localized text messages to consumers who get near one of its stores.

Answer 219

Tailoring products and marketing programs to the needs and preferences of individual customers Individual marketing: Companies such as CaféPress are hyper-personalizing everything from artwork, earphones, and sneakers to yoga mats, water bottles, and food

Answer 220

smart targeting helps companies become more effi cient and effective by focusing on the segments that they can satisfy best and most profi tably. Targeting also benefi ts consumers— companies serve specifi c groups of consumers with offers carefully tailored to their needs. However, target marketing sometimes generates controversy and concern. The biggest issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products Socially responsible marketing: Critics worry that marketers of everything from lingerie and cosmetics to Barbie dolls are targeting young girls with provocative products

Answer 221

The way a product is defi ned by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products. Marketing

Answer 222

In planning their differentiation and positioning strategies, marketers often prepare perceptual positioning maps that show consumer perceptions of their brands versus competing products on important buying dimensions

Answer 223

Some fi rms fi nd it easy to choose a differentiation and positioning strategy. For example, a fi rm well known for quality in certain segments will go after this position in a new segment if there are enough buyers seeking quality. But in many cases, two or more fi rms will go after the same position. Then each will have to fi nd other ways to set itself apart. Each fi rm must differentiate its offer by building a unique bundle of benefi ts that appeals to a substantial group within the segment.

Answer 224

An advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefi ts that justify higher prices. Product differentiation: Seventh Generation’s household products are greener—naturally safe and effective. The brand is “Protecting Planet Home.”

Answer 225

How Many Differences to Promote. Purex Complete 3-in-1 is positioned on multiple beneﬁ ts. The challenge is to convince customers that one brand can do it all. Which Differences to Promote ● Important. The difference delivers a highly valued benefi t to target buyers. ● Distinctive. C ompetitors do not offer the difference, or the company can offer it in a more distinctive way. ● Superior. T he difference is superior to other ways that customers might obtain the same benefi t. ● Communicable. The difference is communicable and visible to buyers. ● Preemptive. Competitors cannot easily copy the difference. ● Affordable. Buyers can afford to pay for the difference. ● Profi table. The company can introduce the difference profi tably.

Answer 226

Possible Value Propostions

Answer 227

More-for-more positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs. A more-for-more market offering not only offers higher quality, it also gives prestige to the buyer. ore-for-more positioning: Hearts On Fire diamonds have created a more-for-more niche as “The World’s Most Perfectly Cut Diamond—for those who expect more and give more in return.”

Answer 228

C ompanies can attack a competitor’s morefor-more positioning by introducing a brand offering comparable quality at a lower price. For example, Toyota introduced its Lexus line with a more-for-thesame value proposition versus Mercedes and BMW.

Answer 229

Offering the same for less can be a powerful value proposition— everyone likes a good deal. Discount stores such as Walmart and “category killers” such as Best Buy, PetSmart, David’s Bridal, and DSW Shoes use this positioning. They don’t claim to offer different or better products. Instead, they offer many of the same brands as department stores and specialty stores but at deep discounts based on superior purchasing power and lower-cost operations. Other companies develop imitative but lower-priced brands in an effort to lure customers away from the market leader. For example, The Sharper Image makes a less expensive e-reader, the Literati, to compete with the Nook and Kindle.

Answer 230

A market almost always exists for products that offer less and therefore cost less. Few people need, want, or can afford “the very best” in everything they buy. In many cases, consumers will gladly settle for less than optimal performance or give up some of the bells and whistles in exchange for a lower price. For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary extras, such as a pool, an attached restaurant, or mints on the pillow. Hotel chains such as Ramada L imited, Holiday Inn Express, and Motel 6 suspend some of these amenities and charge less accordingly.

Answer 231

O f course, the winning value proposition would be to offer more for less . Many companies claim to do this. And, in the short run, some companies can actually achieve such lofty positions. For example, when it fi rst opened for business, Home Depot had arguably the best product selection, the best service, and the lowest prices compared to local hardware stores and other home improvement chains.

Answer 232

A statement that summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference). Marketing

Answer 233

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

Answer 234

An activity, benefi t, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything. page 226

Answer 235

augment product --> actual product --> core customer value Core, actual, and augmented product: People who buy an iPad are buying much more than a tablet computer. They are buying entertainment, self-expression, productivity, and connectivity—a mobile and personal window to the world.

Answer 236

A product bought by fi nal consumers for personal consumption

Answer 237

Convenience Shopping Specialty Unsought

Answer 238

A consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort.

Answer 239

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

Answer 240

A consumer product with unique characteristics or brand identifi cation for which a signifi cant group of buyers is willing to make a special purchase effort.

Answer 241

A consumer product that the consumer either does not know about or knows about but does not normally consider buying.

Answer 242

A product bought by individuals and organizations for further processing or for use in conducting a business.

Answer 243

raw materials as well as manufactured materials and parts. Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and natural products (fi sh, lumber, crude petroleum, iron ore). Manufactured materials and parts consist of component materials (iron, yarn, cement, wires) and component parts (small motors, tires, castings). Most manufactured materials and parts are sold directly to industrial users. Price and service are the major marketing factors; branding and advertising tend to be less important.

Answer 244

Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment. Installations consist of major purchases such as buildings (factories, offi ces) and fi xed equipment (generators, drill presses, large computer systems, elevators).

Answer 245

Organization Marketing: IBM’s Smarter Planet campaign markets IBM as a company that helps improve the world’s IQ. This ad tells how IBM technologies are helping to create safer food supply chains.

Answer 246

Place marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places New York State advertises “I ❤ N Y,” and California urges you to “Find yourself here.” Tourism Ireland, the Irish tourism agency, invites travelers to “Go where Ireland takes you.” The Discover Ireland Web site offers information about the country and its attractions, a travel planner, special vacation offers, lists of tour operators, and much more information that makes it easier to say “yes” to visiting Ireland

Answer 247

Ideas can also be marketed. In one sense, all marketing is the marketing of an idea, whether it is the general idea of brushing your teeth or the specifi c idea that Crest toothpastes create “healthy, beautiful smiles for life.” Here, however, we narrow our focus to the marketing of social ideas. This area has been called social marketing , defi ned by the Social Marketing Institute (SMI) as the use of commercial marketing concepts and tools in programs designed to infl uence individuals’ behavior to improve their well-being and that of society.

Answer 248

The use of commercial marketing concepts and tools in programs designed to infl uence individuals’ behavior to improve their well-being and that of society.

Answer 249

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

Answer 250

Product attributes -->Branding -->Packaging --> Labeling --> Product support services

Answer 251

Total quality management ( TQM ) is an approach in which all of the company’s people are involved in constantly improving the quality of products, services, and business processes. For most top companies, customer-driven quality has become a way of doing business. Today, companies are taking a return on quality approach, viewing quality as an investment and holding quality efforts accountable for bottom-line results.

Answer 252

level and consistency. In developing a product, the marketer must fi rst choose a quality level that will support the product’s positioning. Here, product quality means performance quality For example, a Rolls-Royce provides higher performance quality than a Chevrolet: It has a smoother ride, provides more luxury and “creature comforts,” and lasts longer. Companies rarely try to offer the highest possible performance quality level; few customers want or can afford the high levels of quality offered in products such as a Rolls-Royce automobile, a Viking range, or a Rolex watch. Instead, companies choose a quality level that matches target market needs and the quality levels of competing products. eyond quality level, high quality also can mean high levels of quality consistency. Here, product quality means conformance quality— freedom from defects and consistency

Answer 253

A product can be offered with varying features. A stripped-down model, one without any extras, is the starting point. The company can then create higher-level models by adding more features. Features are a competitive tool for differentiating the company’s product from competitors’ products. Being the fi rst producer to introduce a valued new feature is one of the most effective ways to compete.

Answer 254

A nother way to add customer value is through distinctive product style and design. Style simply describes the appearance of a product. Styles can be eye catching or yawn producing. A sensational style may grab attention and produce pleasing aesthetics, but it does not necessarily make the product perform better. Unlike style, design is more than skin deep—it goes to the very heart of a product. Good design contributes to a product’s usefulness as well as to its looks. Product design: OXO focuses on the desired end-user experience, and then translates its pie-cutter-in-the-sky notions into eminently usable gadgets

Answer 255

A name, term, sign, symbol, or design, or a combination of these, that identifi es the products or services of one seller or group of sellers and differentiates them from those of competitors

Answer 256

The activities of designing and producing the container or wrapper for a product. Poorly designed packages can cause frustration for customers and lost sales for companies. “Wrap rage” is the frustration we all feel when trying to free a product from a nearly impenetrable package.

Answer 257

labels range from simple tags attached to products to complex graphics that are part of the packaging. The label might also describe several things about the product—who made it, where it was made, when it was made, its contents, how it is to be used, and how to use it safely. Brand labels and logos: When Gap tried to modernize its familiar old logo, customers went ballistic, highlighting the powerful connection people have to the visual representations of their beloved brands.

Answer 258

For example, upscale department store retailer Nordstrom knows that good marketing doesn’t stop with making the sale. Keeping customers happy after the sale is the key to building lasting relationships. Nordstrom’s motto: “Take care of customers, no matter what it takes,” before, during, and after the sale. Nordstrom thrives on stories about its after-sale service. It wants to “Take care of customers, no matter what it takes,” before, during, and after the sale.

Answer 259

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

Answer 260

Product line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line downward, upward, or both ways. Companies located at the upper end of the market can stretch their lines downward .

Answer 261

The set of all product lines and items that a particular seller offers for sale.

Answer 262

healthy beverages, baked snacks, and simple meals.

Answer 263

intangibility, inseparability, variability, and perishability

Answer 264

Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase Variability Quality of services depends on who provides them and when, where, and how insparability Services cannot be separated from their providers Perishability Services cannot be stored for later sale or use

Answer 265

The concept that services cannot be seen, tasted, felt, heard, or smelled before they are bought.

Answer 266

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

Answer 267

The concept that services cannot be stored for later sale or use.

Answer 268

The chain that links service firm profits with employee and customer satisfaction.

Answer 269

● Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in . . . ● Satisfi ed and productive service employees: more satisfi ed, loyal, and hardworking employees, which results in . . . ● Greater service value: more effective and effi cient customer value creation and service delivery, which results in . . . ● Satisfi ed and loyal customers: satisfi ed customers who remain loyal, make repeat purchases, and refer other customers, which results in . . . ● Healthy service profi ts and growth: superior service firm performance.

Answer 270

Orienting and motivating customercontact employees and service-support people to work as a team to provide customer satisfaction.

Answer 271

1. company 2. employees 3. customer internal market between 1 and 2 external market between 1 and 3 interative market between 2 and 3

Answer 272

Training service employees in the fine art of interacting with customers to satisfy their needs

Answer 273

n these days of intense price competition, service marketers often complain about the diffi culty of differentiating their services from those of competitors The offer can include innovative features that set one company’s offer apart from competitors’ offers. Service differentiation: Service companies can differentiate their images using unique characters or symbols, such as the Aﬂ ac duck.

Answer 274

Southwest created a high-level group—headed by Fred Taylor, “senior manager of proactive customer service communications”—that carefully coordinates responses to major ﬂ ight disruptions, turning wronged customers into even more loyal ones

Answer 275

ith their costs rising rapidly, service fi rms are under great pressure to increase service productivity. They can do so in several ways. They can train current employees better or hire new ones who will work harder or more skillfully. Or they can increase the quantity of their service by g iving up some quality. Finally, a service provider can harness the power of technology. Although we often think of technology’s power to save time and costs in manufacturing companies, it also has great—and often untapped—potential to make service workers more productive.

Answer 276

The differential effect that knowing the brand name has on customer response to the product or its marketing Consumers sometimes bond very closely with speciﬁ c brands. To this customer, this isn’t just a cup of coffee, it’s a deeply satisfying Dunkin’ Donuts brand experience.

Answer 277

Major Brand Strategy Decisions: 1. Brand positioning: Attributes Benefits Beliefs and values 2. Brand name selection: Selection Protection Brand sponsorship: Manufacturer’s brand Private brand Licensing Co-branding Brand development: Line extensions Brand extensions Multibrands New brands Brand positioning: Successful brands engage customers on a deep, emotional level. This ad suggests the deep-down connection that hardcore users have with the WD-40 brand.

Answer 278

(1) It should suggest something about the product’s benefi ts and qualities. Examples: Beautyrest, Acuvue, Lean Cuisine, Mop & Glo. (2) It should be easy to pronounce, recognize, and remember: Tide, Jelly Belly, iPod, Facebook, JetBlue. (3) The brand name should be distinctive: Panera, Flikr, Swiffer. (4) It should be extendable— A mazon.com began as an online bookseller but chose a name that would allow expansion into other categories. (5) The name should translate easily into foreign languages. Before changing its name to Exxon, Standard Oil of New Jersey rejected the name Enco, which it learned meant a stalled engine when pronounced in Japanese. (6) It should be capable of registration and legal protection. A brand name cannot be registered if it infringes on existing brand names.

Answer 279

A brand created and owned by a reseller of a product or service. N ational brands (or manufacturers’ brands) have long dominated the retail scene. In recent times, however, an increasing number of retailers and wholesalers have created their own store brands (or private brands ).

Answer 280

Most manufacturers take years and spend millions to create their own brand names. However, some companies license names or symbols previously created by other manufacturers, names of well-known celebrities, or characters from popular movies and books. For a fee, any of these can provide an instant and proven brand name.

Answer 281

Co-branding occurs when two established brand names of different companies are used on the same product. C o-branding offers many advantages. Because each brand dominates in a different category, the combined brands create broader consumer appeal and greater brand equity. Licensing: Nickelodeon has developed a stable full of hugely popular characters—such as SpongeBob SquarePants—that generate billions of dollars of retail sales each year. Licensing: Nickelodeon has developed a stable full of hugely popular characters—such as SpongeBob SquarePants—that generate billions of dollars of retail sales each year.

Answer 282

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

Answer 283

Extending an existing brand name to new forms, colors, sizes, ingredients, or fl avors of an existing product category. the Cheerios line of cereals includes Honey Nut, Frosted, Yogurt Burst, MultiGrain, Banana Nut, and several other variations.

Answer 284

1. product category 2. brand name line extension: existing 1 and 2 multibrand: existing 1 and new 2 brand extension: new 1 and existing 2 new brand: new 1 and 2

Answer 285

Extending an existing brand name to new product categories. Brand extensions: P&G has leveraged the strength of its Mr. Clean brand to launch new lines, including Mr. Clean-branded car washes.

Answer 286

ompanies often market many different brands in a given product category. For example, in the United States, PepsiCo markets at least fi ve brands of soft drinks (Pepsi, Sierra Mist, Slice, Mountain Dew, and Mug root beer), four brands of sports and energy drinks (Gatorade, No Fear, Propel, and AMP Energy), fi ve brands of bottled teas and coffees (Lipton, SoBe, Seattle’s Best, Starbucks, and Tazo), two brands of bottled waters (Aquafi na and SoBe), and two brands of fruit drinks (Tropicana and Ocean Spray). Multibranding offers a way to establish different features that appeal to different customer segments, lock up more reseller shelf space, and capture a larger market share. For example, although PepsiCo’s many brands of beverages compete with one another on supermarket shelves, the combined brands reap a much greater overall market share than any single brand ever could.

Answer 287

A company might believe that the power of its existing brand name is waning, so a new brand name is needed. Or it may create a new brand name when it enters a new product category for which none of its current brand names are appropriate. For example, Toyota created the separate Scion brand, targeted toward Millennial consumers

Answer 288

The development of original products, product improvements, product modifi cations, and new brands through the fi rm’s own product development efforts. Visiting the NewProductWorks Showcase and Learning Center is like ﬁ nding yourself in some nightmare version of a supermarket. Each product failure represents squandered dollars and hopes.

Answer 289

The systematic search for new-product ideas.

Answer 290

1. Idea generation 2. Idea screening 3. Concept development and testing 4. Marketing strategy development 5. Business analysis 6. Product development 7. Commercialization Product 8. test markeing 9. Commercialization

Answer 291

distributors and suppliers can contribute ideas Competitors are another important source. Customer-driven new-product ideas: At 3M innovation centers, customer teams meet with 3M marketing and technology experts to spark novel solutions to customer problems.

Answer 292

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

Answer 293

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

Answer 294

A detailed version of the new-product idea stated in meaningful consumer terms. This is Tesla’s initial all-electric roadster. Later, more-affordable mass-market models will travel more than 300 miles on a single charge, recharge in 45 minutes from a normal 120-volt electrical outlet, and cost about one penny per mile to power

Answer 295

Testing new-product concepts with a group of target consumers to fi nd out if the concepts have strong consumer appeal.

Answer 296

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

Answer 297

The fi rst part describes the target market; the planned value proposition; and the sales, market share, and profi t goals for the fi rst few years.

Answer 298

A review of the sales, costs, and profi t projections for a new product to fi nd out whether these factors satisfy the company’s objectives.

Answer 299

Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering. Product testing: HP signs up consumers to evaluate prototype imaging and printing products in their homes and ofﬁ ces to gain insights about their entire “out-of-box experience.”

Answer 300

The stage of new-product development in which the product and its proposed marketing program are tested in realistic market settings. Starbucks tested its VIA instant coffee extensively before launching the new-product nationally. “We knew it could undermine the company if we didn’t do it right.”

Answer 301

Introducing a new product into the market. | Marketing

Answer 302

New-product development that focuses on fi nding new ways to solve customer problems and create more customersatisfying experiences. Customer-centered new-product development: P&G’s Connect Develop crowdsourcing site urges customers to submit their own ideas for new products and services.

Answer 303

An approach to developing new products in which various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness. Marketing

Answer 304

When tough economic times hit, or when a company faces fi nancial diffi culties, management may be tempted to reduce spending on new-product development. However, such thinking is usually shortsighted. By cutting back on new products, the company may make itself less competitive during or after the downturn.

Answer 305

The course of a product’s sales and profi ts over its lifetime.

Answer 306

1. Product development begins when the company fi nds and develops a newproduct idea. During product development, sales are zero, and the company’s investment costs mount 2. Introduction is a period of slow sales growth as the product is introduced in the market. Profi ts are nonexistent in this stage because of the heavy expenses of product introduction. 3. Growth is a period of rapid market acceptance and increasing profi ts. 4. Maturity i s a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profi ts level off or decline because of increased marketing outlays to defend the product against competition. 5. Decline is the period when sales fall off and profi ts drop. Product life cycle: Some products die quickly; others stay in the mature stage for a long, long time. TABASCO ® sauce is “over 140 years old and yet still able to totally whup your butt!”

Answer 307

A basic and distinctive mode of expression.

Answer 308

A currently accepted or popular style in a given fi eld.

Answer 309

A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity. Examples of fads: The Pet Rock fad broke out one October but had sunk like a stone by the next February. Low-carb diets followed a similar pattern.

Answer 310

The PLC stage in which a new product is fi rst distributed and made available for purchase.

Answer 311

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

Answer 312

The PLC stage in which a product’s sales growth slows or levels off. For example, the Glad Products Company helps customers fi nd new uses for its Press’n Seal wrap, the handy plastic wrap that creates a Tupperware-like seal. As more and more customers contacted the company about alternative uses for the product, Glad set up a special “1000s of Uses. What’s Yours?” Web site ( www.1000uses.com ) at which customers can swap usage tips. Suggested uses for Press’n Seal range from protecting a computer keyboard from dirt and spills and keeping garden seeds fresh to use by soccer moms sitting on damp benches while watching their tykes play. “We just roll out the Glad Press’n Seal over the long benches,” says the mom who shared the tip, “and everyone’s bottom stays nice and dry.” Reinvigorating the mature brand: Kellogg kept its 55-year-old Special K brand growing by turning it into a healthful, slimming lifestyle brand.

Answer 313

The PLC stage in which a product’s sales fade away. Management may decide to maintain its brand, repositioning or reinvigorating it in hopes of moving it back into the growth stage of the product life cycle. P&G has done this with several brands, including Mr. Clean and Old Spice. Management may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force), hoping that sales hold up. If successful, harvesting will increase the company’s profi ts in the short run.

Answer 314

The Nestlé Kit Kat chocolate bar in Japan beneﬁ ts from the coincidental similarity between the bar’s name and the Japanese phrase kitto katsu , which roughly translates to “You will surely win!” The brand’s innovative “May cherries blossom” campaign has turned the Kit Kat bar and logo into national good luck charm

Answer 315

• Learn about segmentation, targeting and positioning (STP) process • Understand behavioral, geographic, demographic and psychographic segmentation • Distinguish among different criteria for effective segmentation • Understand choices in targeting • Learn about positioning, positioning maps and different value propositions

Answer 316

* Can’t be all things to all people * Dividing the market into smaller segments –Segmentation * Select the segment(s) to enter –Targeting * Make the offering different from competitors and attractive to your target –Positionin

Answer 317

* First step * Benefits sought * Usage rate * 80/20 rule * Occasions * Restaurants, meals * Holidays * Loyalty

Answer 318

• Where people live often relates to their needs • Urban vs. rural –population density • Climate • International markets

Answer 319

* Age and life-cycle stage * Gender * Income

Answer 320

* Lifestyles | * Personality

Answer 321

* Measurable * Differentiable * Substantial – big enough to serve * Accessible and Actionable

Answer 322

* Targeting continuum | * Mass (undifferentiated), differentiated, concentrated, individual

Answer 323

* Differentiated (Segmented) marketing * Concentrated (niche) marketing * Individual, one-to-one

Answer 324

* A process of influencing a brand’s image in customer’s mind * How a product is viewed by customer- product position * Products are made in factories, brands happen in minds of consumers * Image of a product relative to competition * Influences: consumer experience, company marketing mix, opinion leaders, media etc

Answer 325

in y: basic -> Fashion | in x: value -> expensive

Answer 326

* Competitive advantage * Value proposition – mix of benefits provided to consumers • Unique selling proposition * Positioning statement * Summarizes the STP process * Target, need, brand, difference

Answer 327

Learning Objectives • Learn about levels of product and product terms • Understand product classification and distinguish among four types of products • Comprehend four differences between service and product • Learn brand terminology and implications of branding

Answer 328

* What is customer really buying? | * Core customer value, actual product, augmented product

Answer 329

width of the Product Mix

Answer 330

* Convenience * Shopping * Specialty * Unsought

Answer 331

* Intangibility – cannot be sensed * Inseparability * Variability * Perishability

Answer 332

* Name, logo, symbol • Brand equity – impact on customer knowing the brand * Brand value – financial value of a brand ($148B) * Customer equity – value of customer relationships * Co-branding * Brand extension * Manufacturer brand vs. store brand

Answer 333

Learning Objectives • Understand different new product development strategies • Learn about the new product development process • Differentiate among eight different stages in the new product development process • Understand the product life cycle • Differentiate among four different stages in the product life cycle

Answer 334

• Why develop new products? • Newness bias • Strategy • Acquisitions • New product development 1. idea generation 2. idea screening 3. concept testing 4. marketing strategy 5. business analysis 6. product development 7. test marketing 8. commercialization

Answer 335

• Internal idea sources • Employees -3M, Google, Hackathons –Facebook, Twitter • External • Distributors and suppliers, competitors, customers • Crowdsourcing

Answer 336

* Idea screening - Product committee reduces number of products based on: Is there a real need for the product? Does firm have resources to make it a success? Does it fit firm strategy? * Concept developing and testing – describe the idea in consumer terms and asking a sample of potential customers for their reactions

Answer 337

Marketing Strategy Development – strategy statement including 1. target market and sales goals 2. price, distribution and promotional budget 3. long term market share, sales and profit goals • Business analysis – projection for new product costs, sales and profits to determine financial attractiveness of the potential product • Ideas with the most potential move to the next stage

Answer 338

• Developing a physical prototype of the product • Engineers get to work • Testing for safety, reliability etc

Answer 339

* Test marketing –introducing the product and marketing mix into a limited geographic area * Selecting cities that represent your target market –sampling decision * Commercialization -Rolling the product out to the whole market * Simultaneously or sequentially? * Build up production, inventories * Major promotional expenditures

Answer 340

The amount of money charged for a product or service; the sum of the values that customers exchange for the benefi ts of having or using the product or service P rice is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also one of the most fl exible marketing mix elements. Unlike product features and channel commitments, prices can be changed quickly. At the same time, pricing is the number-one problem facing many marketing executives, and many companies do not handle pricing well.

Answer 341

he price the company charges will fall somewhere between one that is too low to produce a profi t and one that is too high to produce any demand

Answer 342

Price floor: No profits below Product costs Competition and other external factors Competitors’ strategies and prices Marketing strategy, objectives, and mix Nature of the market and demand Price ceiling: No demand above Consumer perceptions of value

Answer 343

Cost-based pricing Design a good product-->Determine product costs -->Set price based on cost-->Convince buyers of product’s value Value-based pricing Assess customer needs and value perceptions-->Set target price to match customer perceived value-->Determine costs that can be incurred-->Design product to deliver desired value at target price

Answer 344

Setting price based on buyers’ perceptions of value rather than on the seller’s cost. Design Customer value-based pricing uses buyers’ perceptions of value as the key to pricing. Value-based pricing means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with all other marketing mix variables before the marketing program is set. Perceived value: A Steinway piano—any Steinway piano—costs a lot. But to those who own one, price is nothing; the Steinway experience is everything. ROBERT CAPLIN/The New York Times/Redux Pictures

Answer 345

good-value pricing and value added pricing . Good-value pricing Offering the right combination of quality and good service at a fair price. Good-value pricing: With its no-frills positioning and low prices, Snap Fitness is well-positioned to take advantage of either good or bad economic conditions. Value-added pricing Attaching value-added features and services to differentiate a company’s offers while charging higher prices. Value-based pricing doesn’t mean simply charging what customers want to pay or setting low prices to meet competition. Instead, many companies adopt value-added pricing strategies. Rather than cutting prices to match competitors, they attach value-added features and services to differentiate their offers and thus support their higher prices. Value-added pricing: Rather than cutting services to maintain lower admission prices, premium theaters such as AMC’s Cinema Suites are adding amenities and charging more. “Once people experience it, . . . they don’t want to go anywhere else.”

Answer 346

Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk. A company’s costs may be an important element in its pricing strategy. Panera Bread understands that, even in uncertain economic times, low prices often aren’t the best value. Says Panera CEO Ronald Shaich, “Give people something of value and they’ll happily pay for it.”

Answer 347

company’s costs take two forms: fixed and variable. Fixed costs (also known as overhead ) are costs that do not vary with production or sales level. For example, a company must pay each month’s bills for rent, heat, interest, and executive salaries regardless of the c ompany’s level of output. Variable costs vary directly with the level of production. Each PC produced by HP involves a cost of computer chips, wires, plastic, packaging, and other inputs. Although these costs tend to be the same for each unit produced, they are called variable costs because the total varies with the number of units produced. Total costs are the sum of the fixed and variable costs for any given level of production. Management wants to charge a price that will at least cover the total production costs at a given level of production.

Answer 348

he simplest pricing method is cost-plus pricing (or markup pricing )—adding a standard markup to the cost of the product. For example, an electronics retailer might pay a manufacturer $20 for a fl ash drive and mark it up to sell at $30, a 50 percent markup on cost. The retailer’s gross margin is $10. If the store’s operating costs amount to $8 per fl ash drive sold, the retailer’s profi t margin will be $2. The manufacturer that made the fl ash drive probably used cost-plus pricing, too. If the manufacturer’s standard cost of producing the fl ash drive was $16, it might have added a 25 percent markup, setting the price to the retailers at $20. Cost-plus pricing (markup pricing) Adding a standard markup to the cost of the product. Another cost-oriented pricing approach is break-even pricing , or a variation called target return pricing . In this method, the fi rm tries to determine the price at which it will break even or make the target return it is seeking. Target return pricing uses the concept of a break-even chart , which shows the total cost and total revenue expected at different sales volume levels. 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.

Answer 349

Competition-based pricing involves setting prices based on competitors’ strategies, costs, prices, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products. Competition-based pricing Setting prices based on competitors’ strategies, prices, costs, and market offerings.

Answer 350

Overall Marketing Strategy, Objectives, and Mix Companies often position their products on price and then tailor other marketing mix decisions to the prices they want to charge. Here, price is a crucial product-positioning factor that defi nes the product’s market, competition, and design. Target costing Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is met. ther companies deemphasize price and use other marketing mix tools to create nonprice positions Nonprice positioning: Cutting-edge consumer electronics maker Bang & Olufsen builds high value into its products and charges sky-high prices. Its 103-inch B&O HDTV goes for almost $100,000. Organizational Considerations anagement must decide who within the organization should set prices. Companies handle pricing in a variety of ways. The Market and Demand Pricing in Different Types of Markets Under pure competition , the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or fi nancial securities. No single buyer or seller has much effect on the going market price. sellers in these markets do not spend much time on marketing strategy. Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers. Under oligopolistic competition, the market consists of only a few large sellers. For example, only four companies—Verizon, AT&T, Sprint, and T-Mobile—control more than 80 percent of the U.S. wireless service provider market. Because there are few sellers, each seller is alert and responsive to competitors’ pricing strategies and marketing moves In a pure monopoly , the market is dominated by one seller. The seller may be a government monopoly (the U.S. Postal Service), a private regulated monopoly (a power company), or a private unregulated monopoly (De Beers and diamonds). Pricing is handled differently in each case.

Answer 351

ach price the company might charge will lead to a different level of demand. The relationship between the price charged and the resulting demand level is shown in the demand curve Demand curve A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged. The price-demand curve: When ConAgra raised prices on its Banquet frozen dinners, sales fell sharply. “The key component . . . is you’ve got to be at $1,” says CEO Gary Rodkin, pictured above. “Everything else pales in comparison to that.”

Answer 352

arketers also need to know price elasticity— how responsive demand will be to a change in price. If demand hardly changes with a small change in price, we say demand is inelastic . If demand changes greatly, we say the demand is elastic . Price elasticity A measure of the sensitivity of demand to changes in price. Marketing

Answer 353

conomic conditions can have a strong impact on the fi rm’s pricing strategies. Economic factors such as a boom or recession, infl ation, and interest rates affect pricing decisions because they affect consumer spending, consumer perceptions of the product’s price and value, and the company’s costs of producing and selling a product. ather than cutting prices, many companies have instead shifted their marketing focus to more affordable items in their product mixes. Pricing and the economy: Rather than just cutting prices, Home Depot shifted its marketing focus to more affordable items and projects under the tagline: “More saving. More doing.” (

Answer 354

How will resellers react to various prices? The company should set prices that give resellers a fair profi t, encourage their support, and help them to sell the product effectively. The government is another important external infl uence on pricing decisions. Finally, social concerns may need to be taken into account

Answer 355

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 profi table sales. Market-penetration pricing Setting a low price for a new product to attract a large number of buyers and a large market share. Penetration pricing: To lure famously frugal Chinese customers, IKEA slashed its prices. The strategy worked. Weekend crowds at its cavernous Beijing store are so big that employees need to use megaphones to keep them in control. 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. Marketing Product line pricing: Mr. Clean car washes offer a complete line of wash packages priced from $5 for the basic Bronze wash to $27 for the featureloaded Mr. Clean Signature Shine package. Captive product pricing Setting a price for products that must be used along with a main product, such as blades for a razor and games for a videogame console. By-product pricing Setting a price for by-products to make the main product’s price more competitive By-product pricing: “There’s green and money to be made in animal poop!” exclaims Dan Corum, the Woodland Zoo’s enthusiastic Compost and Recycling Coordinator (also known as the Prince of Poo, the Emperor of Excrement, the GM of BM, or just plain Dr. Doo). Product bundle pricing Combining several products and offering the bundle at a reduced price.

Answer 356

Pricing Situation Description Product line pricing: Setting prices across an entire product line Optional product pricing: Pricing optional or accessory products sold with the main product Captive product pricing: Pricing products that must be used with the main product By-product pricing: Pricing low-value by-products to get rid of or make money on them Product bundle pricing: Pricing bundles of products sold together

Answer 357

Discount A straight reduction in price on purchases made during a stated period of time or in larger quantities. Allowances are another type of reduction from the list price. For example, trade-in allowances are price reductions given for turning in an old item when buying a new one. Trade-in allowances are most common in the automobile industry but are also given for other durable goods. Promotional allowances are payments or price reductions that reward dealers for participating in advertising and sales support programs. Allowance A reduction from the list price for buyer actions such as trade-ins or promotional and sales support. Segmented pricing Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs. Product-form pricing: Evian water in a one-liter bottle might cost you 5 cents an ounce at your local supermarket, whereas the same water might run $2.28 an ounce when sold in ﬁ ve-ounce aerosol cans as Evian Brumisateur Mineral Water Spray moisturizer. Psychological pricing Pricing that considers the psychology of prices, not simply the economics; the price says 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. Promotional pricing: Companies offer promotional prices to create buying excitement and urgency. Geographical Pricing company also must decide how to price its products for customers located in different parts of the United States or the world. Should the company risk losing the business of more-distant customers by charging them higher prices to cover the higher shipping costs? Dynamic Pricing Throughout most of history, prices were set by negotiation between buyers and sellers. Fixed price policies—setting one price for all buyers—is a relatively modern idea that arose with the development of large-scale retailing at the end of the nineteenth century. Today, most prices are set this way. However, some companies are now reversing the fi xed pricing trend. Dynamic pricing A djusting prices continually to meet the characteristics and needs of individual customers and situations. Dynamic pricing: The Web seems to be taking us back in time to a new age of ﬂ uid pricing. At Priceline.com, you can “name your own price.” International Pricing ompanies that market their products internationally must decide what prices to charge in different countries. In some cases, a company can set a uniform worldwide price. For example, Boeing sells its jetliners at about the same price everywhere, whether the buyer is in the United States, Europe, or a third-world country. However, most companies adjust their prices to refl ect local market conditions and cost considerations. nternational pricing: To lower prices in developing countries, Unilever developed smaller, more affordable packages that put the company’s premier brands within the reach of cash-strapped customers.

Answer 358

Strategy Description Discount and allowance pricing Reducing prices to reward customer responses such as paying early or promoting the product Segmented pricing Adjusting prices to allow for differences in customers, products, or locations Psychological pricing Adjusting prices for psychological effect Promotional pricing Temporarily reducing prices to spur short-run sales Geographical pricing Adjusting prices to account for the geographic location of customers Dynamic pricing Adjusting prices continually to meet the characteristics and needs of individual customers and situations International pricing Adjusting prices for international markets

Answer 359

Initiating Price Changes Initiating Price Cuts S everal situations may lead a fi rm to consider cutting its price. One such circumstance is excess capacity. Another is falling demand in the face of strong price competition or a weakened economy. Initiating Price Increases A successful price increase can greatly improve profi ts. For example, if the company’s profi t margin is 3 percent of sales, a 1 percent price increase will boost profi ts by 33 percent if the sales volume is unaffected. Initiating price increases: When gasoline prices rise rapidly, angry consumers often accuse the major oil companies of enriching themselves by gouging customers. Buyer Reactions to Price Changes C ustomers do not always interpret price changes in a straightforward way. A price increase , which would normally lower sales, may have some positive meanings for buyers. For e xample, what would you think if Rolex raised the price of its latest watch model? On the one hand, you might think that the watch is even more exclusive or better made. On the other hand, you might think that Rolex is simply being greedy by charging what the traffi c will bear. Competitor Reactions to Price Changes A fi rm considering a price change must worry about the reactions of its competitors as well as those of its customers. Competitors are most likely to react when the number of fi rms involved is small, when the product is uniform, and when the buyers are well informed about products and prices. Responding to Price Changes H ere we reverse the question and ask how a fi rm should respond to a price change by a competitor. The fi rm needs to consider several issues: Why did the competitor change the price? Is the price change temporary or permanent? What will happen to the company’s market share and profi ts if it does not respond? Are other competitors going to respond? Fighter brands: Starbucks has positioned its Seattle’s Best Coffee unit to compete more directly with the “mass-premium” brands sold by Dunkin’ Donuts, McDonald’s, and other lower-priced competitors.

Answer 360

rice competition is a core element of our free-market economy. In setting prices, companies usually are not free to charge whatever prices they wish. Many federal, state, and even local laws govern the rules of fair play in pricing. In addition, companies must consider broader societal pricing concerns. In setting their prices, for example, pharmaceutical fi rms must balance their development costs and profi t objectives against the sometimes life-anddeath needs of drug consumers. Pricing within Channel Levels Federal legislation on price-fi xing states that sellers must set prices without talking to competitors. Otherwise, price collusion is suspected. Price-fi xing is illegal per se—that is, the government does not accept any excuses for price-fi xing. sellers are also prohibited from using predatory pricing— selling below cost with the intention of punishing a competitor or gaining higher long-run profi ts by putting competitors out of business. Predatory pricing: Some critics charge that big-box stores like Best Buy price CDs as loss leaders to drive music competitors out of business. But is it predatory pricing or just plain good marketing? Pricing across Channel Levels T he Robinson-Patman Act seeks to prevent unfair price discrimination by ensuring that sellers offer the same price terms to customers at a given level of trade. For example, every retailer is entitled to the same price terms from a given manufacturer, whether the retailer is Sears or your local bicycle shop.

Answer 361

Producing a product or service and making it available to buyers requires building relationships not only with customers but also with key suppliers and resellers in the company’s supply chain. This supply chain consists of upstream and downstream partners. Value delivery network: In making and marketing its many models, Honda manages a huge network of people within Honda plus thousands of suppliers and dealers outside the company who work together to bring value to ﬁ nal customers.

Answer 362

Few producers sell their goods directly to fi nal users. Instead, most use intermediaries to bring their products to market. They try to forge a marketing channel (or distribution channel) —a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. Value delivery network A network composed of the company, suppliers, distributors, and, ultimately, customers who partner to help the entire system deliver better customer value. Marketing Marketing channel ( or distribution channel) A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user How Channel Members Add Value Why do producers give some of the selling job to channel partners? After all, doing so means giving up some control over how and to whom they sell their products. Producers use intermediaries because they create greater effi ciency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the fi rm more than it can achieve on its own. This system requires nine different contacts.its shows the three manufacturers working through one distributor, which contacts the three customers. This system requires only six contacts. In this way, intermediaries reduce the amount of work that must be done by both producers and consumers.

Answer 363

● Information: G athering and distributing information about consumers, producers, and other actors and forces in the marketing environment needed for planning and aiding exchange. ● Promotion: Developing and spreading persuasive communications about an offer. ● Contact: Finding and communicating with prospective buyers. ● Matching: S haping offers to meet the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging. ● Negotiation: R eaching an agreement on price and other terms so that ownership or possession can be transferred. Others help to fulfi ll the completed transactions: ● Physical distribution: Transporting and storing goods. ● Financing: Acquiring and using funds to cover the costs of the channel work. ● Risk taking: Assuming the risks of carrying out the channel work.

Answer 364

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. Indirect marketing channel A marketing channel containing one or more intermediary levels.

Answer 365

``` Consumer marketing channels Channel 1 producer --> consumer channel 2 producer --> retailer --> consumer Channel 3 producer -->wholesaler --> retailer --> consumer ``` Business marketing channel Channel 1 producer --> business consumer channel 2 producer --> business distributor -->business consumer Channel 3 producer -->Manufacturer’s representatives or sales branch --> Business distributor -->business consumer

Answer 366

Channel Behavior Channel conﬂ ict Disagreements among marketing channel members on goals, roles, and rewards—who should do what and for what rewards. They often disagree on who should do what and for what rewards. Such disagreements over goals, roles, and rewards generate channel confl ict Horizontal confl ict occurs among fi rms at the same level of the channel. For instance, some Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories. Or Holiday Inn franchisees might complain about other Holiday Inn operators overcharging guests or giving poor service, hurting the overall Holiday Inn image Vertical confl ict , confl icts between different levels of the same channel, is even more common. In recent years, for example, Burger King has had a steady stream of confl icts with its franchised dealers over everything from increased ad spending and offensive ads to the prices it charges for cheeseburgers. At issue is the chain’s right to dictate policies to franchisees Conventional distribution channel A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profi ts, perhaps even at the expense of profi ts for the system as a whole. Conventional marketing channel producer -->wholesaler --> retailer --> consumer Vertical marketing system (producer wholesaler retailer) --> consumer Vertical marketing system (VMS) A channel structure in which producers, wholesalers, and retailers act as a unifi ed system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate. A conventional distribution channel consists of one or more independent producers, wholesalers, and retailers. Each is a separate business seeking to maximize its own profits, perhaps even at the expense of the system as a whole. No channel member has much control over the other members, and no formal means exists for assigning roles and resolving channel confl ict. In contrast, a vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unifi ed system. One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate. The VMS can be dominated by the producer, the wholesaler, or the retailer. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership. Contractual VMS A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts. Franchise organization A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process Franchising systems: Almost every kind of business has been franchised—from motels and fast-food restaurants to dating services and cleaning and handyman companies. 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 Systems Another channel development is the horizontal marketing system , in which two or more companies at one level join together to follow a new marketing opportunity. By working together, companies can combine their fi nancial, production, or marketing resources to accomplish more than any one company could alone. Horizontal marketing system A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity Horizontal marketing system A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity Multichannel Distribution Systems In the past, many companies used a single channel to sell to a single market or market segment. Today, with the proliferation of customer segments and channel possibilities, more and more companies have adopted multichannel distribution systems. Multichannel distribution system A distribution system in which a single fi rm sets up two or more marketing channels to reach one or more customer segments. Dealers Changing Channel Organization Changes in technology and the explosive growth of direct and online marketing are having a profound impact on the nature and design of marketing channels. One major trend is toward disintermediation —a big term with a clear message and important consequences. Disintermediation The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries. Avoiding disintermediation problems: Fender’s Web site provides detailed product information but you can’t buy any of the company’s products there. Instead, Fender refers you to its resellers’ Web sites and stores.

Answer 367

Marketing channel design Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives. Analyzing Consumer Needs Meeting customers’ channel service needs: Your local hardware store probably provides more personalized service, a more convenient location, and less shopping hassle than a huge Home Depot or Lowe’s store. But it may also charge higher prices Setting Channel Objectives The company should decide which segments to serve and the best channels to use in each case. In each segment, the company wants to minimize the total channel cost of meeting customer-service requirements. Identifying Major Alternatives Types of Intermediaries A fi rm should identify the types of channel members available to carry out its channel work. Most companies face many channel member choices. For example, until recently, Dell sold directly to fi nal consumers and business buyers only through its sophisticated phone and Internet marketing channel. Number of Marketing Intermediaries C ompanies must also determine the number of channel members to use at each level. 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 Responsibilities of Channel Members The producer and the intermediaries need to agree on the terms and responsibilities of each channel member. They should agree on price policies, conditions of sale, territory rights, and the specifi c services to be performed by each party. Exclusive distribution: STIHL sells its chain saws, blowers, hedge trimmers, and other products only through a select corps of independent hardware and lawn and garden retailers. “We count on them every day and so can you.” Selective distribution The use of more than one but fewer than all of the intermediaries who are willing to carry the company’s products. Evaluating the Major Alternatives Using economic criteria , a company compares the likely sales, costs, and profi tability of different channel alternatives. Selective distribution The use of more than one but fewer than all of the intermediaries who are willing to carry the company’s products. Designing International Distribution Channels International marketers face many additional complexities in designing their channels. Each country has its own unique distribution system that has evolved over time and changes very slowly. Sometimes local customs can greatly influence how a company distributes products in global markets.

Answer 368

once the company has reviewed its channel alternatives and determined the best channel design, it must implement and manage the chosen channel. Marketing channel management calls for selecting, managing, and motivating individual channel members and evaluating their performance over time. Marketing channel management Selecting, managing, and motivating individual channel members and evaluating their performance over time. Managing and Motivating Channel Members Caterpillar works closely with its worldwide network of independent dealers to ﬁ nd better ways to bring value to customers. When a big piece of CAT equipment breaks down, customers know they can count on Caterpillar and its outstanding dealer network for support. Evaluating Channel Members he company must regularly check channel member performance against standards such as sales quotas, average inventory levels, customer delivery time, treatment of damaged and lost goods, cooperation in company promotion and training programs, and services to the customer.

Answer 369

or the most part, companies are legally free to develop whatever channel arrangements suit them. In fact, the laws affecting channels seek to prevent the exclusionary tactics of some companies that might keep another company from using a desired channel. Most channel law deals with the mutual rights and duties of channel members once they have formed a relationship.

Answer 370

Nature and Importance of Marketing Logistics To some managers, marketing logistics means only trucks and warehouses. But modern logistics is much more than this. Marketing logistics— also called physical distribution — involves planning, implementing, and controlling the physical fl ow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profi t. Marketing logistics ( or physical distribution) Planning, implementing, and controlling the physical fl ow of materials, fi nal goods, and related information from points of origin to points of consumption to meet customer requirements at a profit. Supply chain management Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers. Marketing Logistics: As this huge stockpile of shipping containers suggests, American companies spent $1.1 trillion last year—7.7 percent of U.S. GDP— to bundle, load, unload, sort, reload, and transport goods. Figure 10.5 Supply Chain Management suppliers --> company --> outbound logistic --> customer Goals of the Logistics System ome companies state their logistics objective as providing maximum customer service at the least cost. Unfortunately, as nice as this sounds, no logistics system can both maximize customer service and minimize distribution costs. Major Logistics Functions Warehousing Distribution center A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fi ll them effi ciently, and deliver goods to customers as quickly as possible. High-tech distribution centers: Staples employs a team of super-retrievers—in day-glo orange—to keep its warehouse humming. Inventory Management Inventory management also affects customer satisfaction. Here, managers must maintain the delicate balance between carrying too little inventory and carrying too much. With too little stock, the fi rm risks not having products when customers want to buy. Transportation The choice of transportation carriers affects the pricing of products, delivery performance, and the condition of goods when they arrive—all of which will affect customer satisfaction. Integrated logistics management The logistics concept that emphasizes teamwork—both inside the company and among all the marketing channel organizations—to maximize the performance of the entire distribution system Integrated logistics management The logistics concept that emphasizes teamwork—both inside the company and among all the marketing channel organizations—to maximize the performance of the entire distribution system Third-party logistics (3PL) provider An independent logistics provider that performs any or all of the functions required to get a client’s product to market

Answer 371

Learning Objectives • Learn about segmentation, targeting and positioning (STP) process • Understand behavioral, geographic, demographic and psychographic segmentation • Distinguish among different criteria for effective segmentation • Understand choices in targeting • Learn about positioning, positioning maps and different value propositions