Prelim 2 Flashcards
Psychographic segmentation divides buyers into different segments based on __________.
lifestyle and personality
What are examples of behavioral segmentation?
Occasions (fall), Benefits Sought, user status (nonusers, ex-users, potential users, first-time users, and regular users), loyalty
Which base of segmentation divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product?
behavioral
What are the 5 dimensions of effective segmentation requirements?
1) measurable
2) accessible
3) substantial
4) differentible
5) actionable
What are the 3 aspects of evaluating market segments?
- segment size and growth
- segment structural attractiveness (i.e. less attractive if strong competitors, substitute products, easy for new entrants, high relative power of buyers compared to sellers, and powerful suppliers that can control prices)
- company objectives and resources
What are the 3 aspects of evaluating market segments?
- segment size and growth
- segment structural attractiveness (i.e. less attractive if strong competitors, substitute products, easy for new entrants, high relative power of buyers compared to sellers, and powerful suppliers that can control prices)
- company objectives and resources
What are the 3 targeting strategies?
undifferentiated (mass) marketing, Differentiated (segmented) marketing, and Concentrated (niche) marketing
Define market demand (market size)
total volume that would be bought by a defined consumer group in a defined geographic area in a defined time period in a defined marketing environment under a defined level and mix of industry marketing effort
What is TAM?
Total Adjustable/Available Market
What is primary vs selective demand?
- primary ≈ target market size (i.e. students who can afford C2C bus and schedule lines up)
- selective ≈ served market size (i.e. students who actually use C2C bus and not a competitor)
What is the Chain-Ratio Method?
used to estimate market segment size; multiplying a base number by a
chain of related percentages i.e. 100 students, .4 available, .2 qualified market, .1 target market, .05 served market; to estimate the # of buyers
What is the Market Buildup Method?
• identifying all the potential buyers
and estimating their potential
purchases to estimate the total revenue
What is a marketer-defined position?
Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers.
What is a customer-derived position?
Product position is the way that the
product is defined by consumers on
important attributes.
What are the 4 steps to choosing a positioning strategy?
- identifying possible competitive advantages (low cost, differentiation, focus)
• differentiation by: product & service, branding, channels, price, etc. - choosing the right competitive advantages (how many, i.e. Target high quality & low prices vs Walmart low prices, which?)
• important, distinctive, superior, communicable, preemptive (competitors cannot easily copy the difference), affordable, profitable - selecting an overall positioning strategy and developing a positioning statement
- communicating and delivering the chosen position to the market
Should you pick a position without competing brands in the perceptual map?
no, it’s dangerous; not all positions are profitable (value propositions)
What are the 3 levels of a product?
Core product, Actual product, and Augmented product
What is a core product?
the benefit of the product that makes it
valuable to you; real needs & wants; iPhone: being able to communicate with family and friends
What is an actual product?
the tangible, physical product; features, designs, quality, etc; iPhone: the phone
What is an augmented product?
Augmented product is the nonphysical
part of the product, consisting of added values; warranty, customer service, etc; iPhone: genius bar
What are the consumer product categories?
Convenience: buy frequently without much buying effort, cheap; i.e. toothpaste
Shopping: less frequently purchased, customer compares carefully like furniture, cars, clothing; higher price; a lot of effort during decision
Specialty: Even higher price, market size is smaller; i.e. Rolex
Unsought: insurance, blood donation; aggressive advertising
What is the product mix? What are its 4 features?
• Product mix consists of all the product lines and items that a particular
seller offers for sale.
• width: the number of different product lines
• lengths: the number of items within each product line
• depth: the number of versions offered of each product
• consistency: how closely the various product lines are in end use, production
requirements, or distribution channels
What is a product line?
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 i.e. Gain and Tide
What are the 2 types of product line development?
• Product line filling involves adding
more items within the present
range (market penetration) wider
• Product line stretching occurs when a
company lengthens its product line beyond its current range − downward, upward, or both ways (market
development, same product in diff market)
What are the 2 product quality dimensions
Quality Dimensions
• level: performance quality
• consistency: conformance quality
What are the characteristics of a service? i.e. airplane
• Intangibility: services cannot be seen,
tasted, felt, heard, or smelled before
they are purchased.
• Inseparability: services cannot be
separated from their provider i.e. overbooking is a tool to deal w/this
• Variability: service quality depends
on who provides the services as well
as when, where, and how the
services are provided.
• Perishability: services cannot be stored
for later sale or use
Describe the service triangle
Internal: from company to staff
Interactive: marketing from staff to customers
External: from company to users/customers
Under the SERVQUAL Model, what are the 5 dimensions of service?
reliability (if they keep their promise), responsiveness, empathy, assurance (ability to provide information decision, correct knowledges, do you think your server really cares about you), tangibility (physical environment)
What are the five dimensions of the customer experience?
sense, feel, think, act, and relate
What are the 3 levels of branding strategies?
• corporate branding: promoting products with a well-established corporate entity’s brand name • family branding: selling many related products under a single brand name • individual branding: products are given brand names that are newly created and not connected to the names of existing brands in the company
What are the 4 types of brand sponsorship?
• national brands
• store brands
• licensing vs. franchising
--licensing is authorizing using names
or symbols, names of well-known
celebrities, or characters from
popular movies and books
--franchising is licensing the whole
business model and brand
• co-brandingWhat four choices does a copany have when it comes to brand development?
- line extension
- brand extension
- multibrands
- new brands
Describe the 2 x 2 matrix of brand development
brand name x product category
existing & existing- line extension
existing & new- brand extension
new & existing- multibrands
new & new- new brands
What is line extension?
• Extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category. • A line extension works best when it takes sales away from competing brands, not when it “cannibalizes” the company’s other items.
What is brand extension?
• Extends a current brand name to
new or modified products in a
new category i.e. Apple: first product was Mac, extended to phones, tablets, watch
• Potential Risks: confuse the image of the main brand (BMW clothing), inappropriate to a particular new product (Disney healthcare)
What ae multibrands?
• Market many different brands in a given product category i.e. parent company Mars has twix, pedigree, orbit • Offer a way to establish different features that appeal to different customer segments and capture larger market share.
What are new brands?
• Create a new brand name when it enters a new product category, because the power of its existing brand name is waning thus a new brand name is needed i.e. Toyota --> Lexus • Offering too many new brands cab results in a company spreading its resources too thin.
What is the new product development process? (8 steps)
1) idea generation
2) idea screening
3) concept development and testing
4) market strategy development
5) business analysis
6) product developent
7) test marketing
8) commercialization
Describe idea generation
• Systematically searching for new product ideas • internal sources refer to the company’s own formal research and development, management and staff, and intrapreneurial programs; • external sources refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms.
Describe idea screening
• Identifying good ideas and drop poor ideas • R-W-W screening framework Is it Real? Can we Win? Is it Worth doing?
Describe concept development and testing
• Developing attractive ideas into product concepts and testing new product concepts with groups of target consumers • product idea is an idea for a possible product that the company can see itself offering to the market; • product concept is a detailed version of the idea stated in meaningful consumer terms.
Describe Marketing Strategy Development
• Designing an initial marketing strategy for a new product based on the product concept • Marketing strategy statement consists of • target market description • value proposition planned • sales, share, and marketing mix
Describe Business Analysis
• Reviewing the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives: • sales history of similar products • conduct market surveys • assess the range of risk • estimate expected costs and profits • analyze financial attractiveness
Describe Product Development
• Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering: • calls for a huge jump in investment • undergo rigorous tests • often involve actual customers
Describe Test Marketing
• Testing the product and its proposed marketing program in realistic market settings • It is possible but sometimes risky to shorten or skip test marketing to take advantage of fast-changing market developments.
Describe Commercialization
Introducing a new product into the market • When to launch? • Where to launch? • Planned market rollout?
How can you be successful in new product development? (3)
customer-centered, team-based (marketing, R&D, manufacturing), and systematic (don’t skip steps)
What are the stages of the Product Life Cycle?
- product development
- introduction (still losing $)
- growth (after market accepts product, sales grow)
- maturity
- decline
Compare stages of Product Life Cycle to BCG matrix
Introduction is question mark, growth is star, maturity is cash cow, decline is like dog
What are the 3 major pricing strategies?
- Customer value-based pricing: customer value perception
- Cost-based pricing: product cost
- Competition-based pricing: competitors’ strategies and prices
Describe Customer Value-Based Pricing
• uses the buyers’ perceptions of value rather than the seller’s cost • customer driven • to match perceived value • Value does not merely mean low price, but well-satisfying customers’ needs and wants
Describe Cost-Based Pricing
• sets prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. • product driven • to ensure the business profit
What is good-value pricing?
• Offers just the right combination of quality and good service at a fair price. Cheaper than expected. • Targets on the mass market, by: • introducing less-expensive versions • introducing new lower-price lines • redesigning products to offer ---------better quality at the same price ---------the same quality for less • offering less value at very low prices
What are 2 the good-value pricing tactics?
Everyday low pricing (EDLP) & High-low pricing
What is everyday low pricing?
involves charging a constant
everyday low price with few or no
temporary price discounts
What is High-low pricing?
involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items
What is value-added pricing?
Value-added: give more value to customer and you charge them more in return, more for more position strategy
Describe 3 cost estimations
• Fixed costs do not vary with production or sales level. Ex: constructions, machines, rents, interest, executive labors
• Variable costs vary directly with the level of production. Ex: raw materials, packaging, production labors
• Total costs are the sum of the fixed and variable costs for any given
level of production; • marginal cost: the change in total cost that comes from producing one additional item; •economies of scale: reduced costs per unit that arise from increased total output of a product;
• experience curve: drop in the average cost with accumulated production experience
What is markup/cost-plus pricing?
• adds a standard markup to the cost of the product. calculate the total & unit cost, decide reasonable markups • Sellers are certain a/b costs and avoids price competitions, but will ignore the market demand and competitor prices.
What is break-even/target return pricing?
sets price to break even on costs or to make a target return; if the demand line is on the left side of break-even point, you’re gonna lose money, HAS to be on right side of break-even point
What are internal pricing factors?
• Cost, strategy & mix, objectives
• Price is only one element of the
company’s broader marketing strategy. Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program.
• Pricing Objectives, including building profitable customer relationships (customer retention), preventing competitions, maintaining resellers relationships, avoiding gov’t intervention (dumping pricing)
Who normally uses competition-based pricing?
usually market foreigners and challengers use this, market leaders do not use it
What are external factos affecting pricing?
customers (value perception) & market (structures/competitors [perfect competition, monopolistic competition, oligopolistic competition, pure monopoly] competitors’ strategies, price-demand aka elasticity)
What is market-skimming pricing?
• sets high initial prices to “skim” revenue layers from the market; mostly in technological markets; market with inelastic demand; well differentiated product; profitable: cost < revenue • When companies decrease the price, they should consider early purchasers’ feeling carefully.
What is market-penetration pricing?
sets a low price for a new product in order to attract a large number of buyers and a large market share; market with elastic demand (sensitive to lower price); high sales volume–> falling costs; no harm to the brand position
What is product-mix pricing?
• The firm looks for a set of prices that maximizes its profits on the total product mix. • Various products have related demands and costs, and face different degrees of competition.
What is Product Line Pricing?
• decides prices for entire product lines rather than single products • Determine the price steps to set between various products in a line, based on customer evaluations of the different features. • Spotify: free vs. premium, how do you value the differences?
What are the 5 product mix pricing strategies?
product line, optional product, captive product, by-product, bundle
What is Optional-Product Pricing?
• divides the total price into prices for optional or accessory products and the price for the main product Ex: hotel rooms, PC… • But which items to include in the base price and which to offer as options? - the baseline reflects positioning - options consider customer needs - options introduce extra values
What is Captive-Product Pricing?
• also called two-part pricing, sets prices of products that must be used along with a main product Ex: Kindle, Nintendo Switch…
• The price is broken into a fixed fee plus a variable usage rate.
- the fixed fee is usually low
- the variable usage rate is usually high
What is By-Product Pricing?
• sets the price for the main product after deducting byproducts profits
–offsets the costs of disposing byproducts and makes the price of the main product more competitive
What is Bundle Pricing?
• combines several products at a
reduced price; promote the sales of products consumers may not otherwise buy i.e. McDonalds family bundle
Companies usually adjust their
basic prices to account for various
______ _____ and _____ _____
customer differences; changing
situations
What is segmented pricing?
involves selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.
• customer-segment, product-form,
location-based, & time-based
• international pricing
How can segmented pricing be effective?
it must be segmentable, have differences in demand, be profitable & legal
What are the 5 strategies for geographical price adjustment?
- FOB-origin: ship-deliver (goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.)
- uniform-delivered: average (opposite of FOB; company charges the same price plus freight to all customers, regardless of their location)
- zone: multiple averages (company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.)
- basing-point: base-deliver (seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.)
- freight-absorption: no freight charge (seller absorbs all or part of the freight charges in order to get the desired business.)
What are reasons for initiating a price change?
- price cuts occur due to excess capacity, increased market share
- price increases occur due to cost inflation, increased demand, lack of supply
What are Buyers’ reaction to price changes?
- when price drops new models will be available, current models are not selling well, quality issues
- when price increases the product is “hot”, the company is greedy
What does Price fixing legislation do?
requires sellers to set prices without talking to competitors.
What does Predatory pricing legislation
do?
it prohibits selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business.
What does Unfair price discrimination legislation do?
it ensures that the seller offer the same
price terms to customers at a given
level of trade.
When is price discrimination allowed?
if sellers
• can prove that costs differ when selling
to different retailers;
• manufactures different qualities of the
same product for different retailers.
What does Retail price maintenance legislation do?
it requires a dealer to charge a specific retail price for its product.
When does Deceptive pricing occur?
when a seller states prices or price savings that mislead consumers or are not actually available to consumers.
• artificial regular price (then marking it down arbitrarily)
• scanner fraud (over-charging)
How do channel members add value?
create efficiency • less total transactions • specific skills provide economies • transform the assortment of products into assortments wanted by consumers • bridge major time, place, and possession gaps that separate goods and services from users
What are Conventional Distribution Systems?
consist of independent producers,
wholesalers, and retailers.
• each separate business seeks to maximize its own profits;
• no member has the power to control over other members.
• producers set prices independently;
they negotiate on distribution markups and commissions.
What are Vertical Marketing Systems (VMS)?
• consist of producers, wholesalers, and retailers acting as a unified system with a dominant member • Major types of VMS, by different means for setting up leaderships corporate – ownership contractual – contracts administered – size & power
What are Horizontal Marketing Systems?
channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.
• competitors corporation
• the same level co-branding
i.e. FedEx, ups, postal service
What is disintermediation?
Disintermediation makes channel more efficient, cuts intermediaries
What are Multichannel distribution systems?
systems in which a single firm sets up two or more marketing channels to reach one or more customer segments.
What are the types of intermediaries?
• refers to channel members that are available to carry out the channel work. • Three strategies to determine the number of channel members to use at each level. • intensive distribution • exclusive distribution • selective distribution
Intensive is selling product in as many stores as possible, exclusive is in one stores (probably your own), selective picks certain amount of retailers
