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quiz Flashcards

1
Q

Define product

A

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

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2
Q

Define service

A

Form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

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3
Q

Pure tangible good

A

no services accompany the product.

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4
Q

Levels of product

A
  1. Core Customer Value → what is the buyer really buying? Define the core, problem-solving benefits, services, or experiences that consumers seek.
  2. Actual Product → develop product and service features, a design, a quality level, a brand name, and packaging.
  3. Augmented Product → built around the core benefit and actual product by offering additional consumer services and benefits.
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5
Q

Define consumer products

A

Products and services bought by final consumers for personal consumption.

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6
Q

Types of consumer products

A
  • Convenience = usually buy frequently, immediately, and with minimal comparison and buying effort.
  • Shopping = less frequently purchased; compared carefully on suitability, quality, price, and style.
  • Speciality = unique characteristics or brand identification for which buyers are willing to make a special purchase effort.
  • Unsought = consumer either does not know about or does not normally consider buying.
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7
Q

Consumer buying behaviour (Convenience, Shopping, Specialty, Unsought)

A

Convenience → frequent purchase; little planning, little comparison or shopping effort; low customer involvement.

Shopping → less frequent purchase; much planning and shopping effort; comparison of brands on price, quality and style.

Specialty → strong brand preference and loyalty; special purchase effort; little comparison of brands; low price sensitivity.

Unsought → little product awareness or knowledge; or if aware, little or even negative interest.

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8
Q

Consumer price (Convenience, Shopping, Specialty, Unsought)

A

Convenience → low price.
Shopping → higher price.
Speciality → highest price.
Unsought → varies.

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9
Q

Consumer Distribution (Convenience, Shopping, Specialty, Unsought)

A

Convenience → widespread distribution; convenient locations.
Shopping → selective distribution in fewer outlets.
Speciality → exclusive distribution in only one or a few outlets per market area.
Unsought → varies.

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10
Q

Consumer Promotion (Convenience, Shopping, Specialty, Unsought)

A

Convenience → mass promotion by the producer .

Shopping → advertising and personal selling by both producers and resellers.

Speciality → more carefully targeted promotion by both the producer and resellers.

Unsought → aggressive advertising and personal selling by the producer and resellers.

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11
Q

Define industrial products

A

products purchased for further processing or for use in conducting a business.

  1. Materials and parts.
  2. Capital items.
  3. Supplies and services.
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12
Q

Individual Product/Service Decisions

A

Product and service attributes → defining the benefits.

Product quality → creating customer value and satisfaction.

Product features → competitive tool for differentiation.

Product style and design → distinctive; adds customer value.

Branding → identifies the maker or seller; adds value to consumer’s purchase; develops brand relationships.

Packaging → designing and producing container/wrapper; consumer recognition of brand.

Labels and logos → identifies product or brand; describe product; promote the brand.

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13
Q

Define product line

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 type of outlets, or fall within given price ranges.

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14
Q

upmarket stretch vs two-way stretch

A

Upmarket stretch → when a company wants to grow and a higher margin.
Two-way stretch → companies serving the middle market.

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15
Q

Line filling vs line stretching

A

Line filling = adding more items within the range of the line.
Reasons → reaching for extra profits, satisfying dealers, using excess capacity, being the leading full-line company, plugin holes to keep out competitors.
Overdone if it results in cannibalization (eating up sales of the company’s own existing products) and customer confusion.

Line stretching = company lengthens its product line beyond its current range.
Can stretch downward, upward or both ways.
Companies located at the upper end of the market can stretch their lines downward.
Companies stretch upward to add prestiqe to their current products or to reap higher margins.

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16
Q

Product Mix Decisions

A

Product Mix (product portfolio) = consists of all the product lines and items that a particular seller offers for sale.

4 dimensions →
Width = number of different product lines the company carries.
Length = total number of items a company carries within its product lines.
Depth = number of versions offered of each product in the line.
Consistency = how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

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17
Q

How can a company increase business?

A

Company can increase business in 4 ways → (1) add new product lines, (2) lengthen existing lines, (3) add more versions of each product, (4) pursue more product line consistency.

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18
Q

The Nature and Characteristics of a Service

A

Intangibility = services cannot be seen, tasted, felt, heard, or smelled before they are bought.

Inseparability = services cannot be separated from their providers.

Variability = quality of services depends on who provides them and when, where, and how.

Perishability = services cannot be stored for later sale or use.

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19
Q

The Service Profit Chain

A

Internal service quality = superior employee selection and training, quality work environment, strong support in dealing with customers.

Satisfied and productive service employees = satisfied, loyal, hardworking employees.

Greater service value = more effective and efficient customer value creation, engagement, and service delivery.

Satisfied and loyal customers = satisfied customers who remain loyal, make repeat purchases, and refer other customers.

Healthy service profits and growth = superior service firm performance.

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20
Q

Types of Services Marketing

A

Interactive Marketing = service quality depends heavily on the quality of the buyer-seller interaction during the service encounter.
Internal Marketing.
External Marketing.

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21
Q

4 Major Brand Strategy Decisions

A
  1. Brand positioning.
  2. Brand name selection.
  3. Brand sponsorship.
  4. Brand development.
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22
Q

Brand Positioning

A

Product attributes:
Least desirable level for brand positioning.
Competitors can easily copy attributes.
Customers are not interested in attributes → they are interested in what the attributes will do for them.

Benefits:
Talk about benefits.
Ex → FedEx (guaranteed on-time delivery), Walmart (save money).

Beliefs and Values:
Engages customers on a deep, emotional level.
Inspire loyalty beyond reason.

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23
Q

Brand Name Selection

A

Beings with careful review of the product and its benefits, target market, and proposed marketing strategies.

Desirable qualities:
- Should suggest something about the product’s benefits and qualities.
- Should be easy to pronounce, recognize, and remember.
- Should be distinctive.
- Should be extendable.
- Should translate easily into foreign languages.
- Should be capable of registration and legal protection (cannot infringe on existing brand names).

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24
Q

Brand Sponsorship

A
  1. National brand (manufacturer’s brand) = sell output under their own brand names.
  2. Private brand (store brand) = created and owned by a reseller of a product or service.
  3. Licensed brand = licensing names or symbols created by other manufacturers, names of well known celebs, characters, etc..
  4. Co-brand = two established brand names of different companies are used on the same product. Capitalize on brand equity, distribution capabilities.
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25
Q

Brand Development

A

Line extensions = company extends existing brand names to new forms, colors, sizes, ingredients, or

Brand extensions = extends a current brand name to new or modified products in a new category.

Multibrands = new brand names introduced in the same product category.

New brands = new brand name for a new product category for which none of its current brand names is appropriate.

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26
Q

Line extensions (advantages and disadvantages)

A
  • Low cost, low risk way to introduce new products.
  • Meet customer desires for variety.
  • Use excess capacity.
  • Command more shelf space from resellers.
  • Overextended brand name might cause consumer confusion or lose some of its specific meaning.
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27
Q

Brand extensions (advantages and disadvantages)

A
  • Large majority of new products are extensions of already successful brands.
  • Can create immediate new-product familiarity and acceptance at lower development costs.
  • May confuse the image of the main brand.
  • May harm consumer attitudes toward other products carrying the same brand name.
  • Good brand extension should fit the parent brand, and give the extension competitive advantage in its new category.
28
Q

Multibrands (advantages and disadvantages)

A
  • Establish different features that appeal to different customer segments.
  • Lock up more reseller shelf space.
  • Capture larger market share.
  • Each brand might only obtain a small market share, and none may be very profitable.
  • Spread resources over many brands instead of building a few brands to a highly profitable level.
29
Q

New brands (advantages and disadvantages)

A
  • Can result in a company spreading its resources too thin.
  • Concerns that there are already too many brands with too few differences between them.
30
Q

Define brand value

A

the net present value of the earnings a brand expected to generate for the future.

31
Q

Define new product development

A

the development of original products, product improvements, product modifications, and new brands through the firm’s own product development effort.

32
Q

Types of new products

A

Original products.

Product improvements.

Product modifications.

New brands developed through product development.

33
Q

Issues with New Products

A
  • Many rely on new products for the majority of their growth.
  • Innovation can be very expensive and risky.
  • New products face tough odds.
  • 60% of all new consumer packaged products introduced by established companies fail.
  • Two-thirds of new product concepts are never even launched.
  • Company may overestimate market size.
  • The product may be poorly designed.
  • The product may be incorrectly positioned, launched at the wrong time, priced too high, or poorly advertised.
  • Costs or product development are higher than expected, or competitors fight back harder than expected.
34
Q

How to create successful new products

A

Understand its consumer, market, and competitors and develop products that deliver superior value to customers.

35
Q

Steps in new product development process

A
  1. Idea generation = systematic search for new product ideas.
  2. Idea screening = screening new product ideas to spot good ones and drop poor ones as soon as possible.
  3. Concept development and testing
  4. Marketing strategy development = designing an initial marketing strategy for a new product based on the product concept.
  5. Business analysis = a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.
  6. Product development = company growth by offering modified or new products to current market segments.
  7. Test marketing = the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings.
  8. Commercialization = introducing a new product into the market.
36
Q

Product Life Cycle

A
  1. Product development stage → the company finds and develops a new product idea; sales are zero, and the company’s investment costs mount.
  2. Introduction → period of slow sales growth; profits are nonexistent because of the heavy expenses of product introduction.
  3. Growth → period of rapid market acceptance and increasing profits.
  4. Maturity → period of slowdown in sales growth because acceptance has been achieved by most potential buyers; profits level off or decline because of increased marketing outlays to defend the product against competition.
  5. Decline → period when sales fall off and profits drop.
37
Q

Problems and Confusion - PLC

A
  • Not all products follow all five stages of the PLC.
  • Trouble identifying which stage of the PLC the product is in.
  • Difficult to forecast the sales level, length of each stage, and the shape of the PLC.
  • Strategy is both a cause and result of the PLC.
  • Product class (e.g. automobile), product form (e.g. SUV), brand (Ford Escape).
  • Product class → longest life cycle; product form → standard; brand → shortest.
38
Q

The Introduction Stage

A

Sales = low.
Marketing cost = high per customer.
Profit = negative or low.
Marketing objectives = create product awareness; trials.
Product = offer a basic product.
Price = use cost-plus → selling to buyers who are most ready to buy.
Distribution = selective distribution.
Advertising = build product awareness among early adopters and dealers.
Customers = innovators.
Competitors = few.

39
Q

Skimming Strategy

A

High price, high/low promotion strategy.
Small segment size, high margin.
Need to invest margin in R&D to develop long-run sustainable competitive advantage.

Conditions:
- Product quality and image must support its high price.
- Costs of producing a small volume shouldn’t be too high → high costs will cancel the advantage of charging more.
- Competitors shouldn’t be able to undercut the price.

40
Q

Penetration Strategy

A
  • Low price, high/low promotion strategy depending on consumers’ awareness of the product.
  • Build a scale of production, manufacturing experience effects.
  • Maintaining continuous demand is the most critical factor.
41
Q

Growth Stage

A

Sales = rapidly rising sales.
Marketing cost = average cost per customer.
Profit = rising profits.
Marketing objectives = maximize market share.
Product = offer product extensions, service, and warranty.
Price = remain same or slightly reduce to penetrate the market.
Distribution = build intensive distribution.
Advertising = remain same or slightly increase to build awareness and interest in the mass market.
Customers = early adopters.
Competitors = growing number.

42
Q

Maturity Stage

A

Sales = peak sales.
Marketing cost = low cost per customer.
Profit = high → declining profits.
Marketing objectives = maximize profit while defending market share.
Product = diversify brand and models.
Price = price to match or best among competitors.
Distribution = build more intensive distribution.
Advertising = stress brand differences and benefits.
Customers = mainstream adopters.
Competitors = stable number beginning to decline.

43
Q

3 Modification Strategies

A
  1. Market modification → increase consumption by finding new users and new market segments..
  2. Product modification → changing quality, features, style, packaging or technology platforms.
  3. Marketing mix modification → improving sales by changing one or more marketing mix elements.
44
Q

Decline Stage

A

Sales = declining sales.
Marketing cost = low cost per customer.
Profit = declining profits.
Marketing objectives = reduce expenditure and milk the brand.
Product = phase out weak items.
Price = cut price.
Distribution = go selective → phase out unprofitable outlets.
Advertising = reduce to the level needed to retain hard-core loyal customers.
Customers = lagging adopters.
Competitors = declining number.

45
Q

Considerations in Setting Price

A

Customer perceptions of the product’s value set the ceiling for its price.

If the product’s price is greater than its value → they will not buy the product.

If the product is priced below its costs → the company’s profits will suffer.

Consider: competitors’ strategies and prices, the overall marketing strategy and mix, and the nature of the market and demand.

46
Q

Three Major Pricing Strategies

A
  1. Customer value-based pricing.
  2. Cost-based pricing.
  3. Competition-based pricing.
47
Q

Define customer value-based pricing

A
  • setting price based on buyers’ perceptions of value rather than on the seller’s cost.
  • Understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value.
  • Marketer cannot design a product and marketing program and then set the price.
  • Price is considered before the marketing program is set.
  1. Assess customer needs and value perceptions.
  2. Set target price to match customer-perceived value.
  3. Determine costs that can be incurred.
  4. Design product to deliver desired value at target price.
48
Q

define good value pricing

A
  • offering the right combination of quality and good service at a fair price.
  • Introducing less expensive versions of established brand name products or new lower-price lines.
  • Redesigning existing brands to offer more quality for a given price or the same quality for less.
49
Q

define value-added pricing

A

Attaching value-added features and services to differentiate a company’s offers and charging higher prices.

Add quality, services, and value-added features to differentiate their offers and thus support their higher prices.

50
Q

Define cost-based pricing

A

Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk.

Companies with lower costs can set lower prices that result in smaller margins but greater sales and profits.
Other companies intentionally pay higher costs so that they can add value and claim higher prices and margins.

  1. Design a product.
  2. Determine product costs.
  3. Set price based on costs.
  4. Convince buyers of a product’s value.
51
Q

Types of Costs

A

Fixed Costs (overhead) = costs that do not vary with production or sales level (e.g. rent, heat, interest).

Variable Costs = costs that vary directly with the level of production (e.g. packaging, materials).

Total Costs = the sum of the fixed and variable costs for any given level of production.

52
Q

Define cost-plus pricing

A

Adding a standard markup to the cost of the product.

53
Q

Define break-even pricing

A

Setting price to break even on the costs of making and marketing a product or setting price to make a target return.

54
Q

Define competition-based pricing

A

Setting prices based on competitors’ strategies, prices, costs, and market offerings.

Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.

If a company’s product or service provides greater value → they can charge a higher price.

If value is less relative to competing products → charge lower price or change customer perceptions.

55
Q

Internal vs External Factors Affecting Price Decisions

A

Internal Factors = overall marketing strategy, objectives, and marketing mix, and other organizational considerations.

External Factors = nature of the market and demand, and other environmental factors.

56
Q

Organizational Decisions (who determines price)

A

Small companies → prices set by top management rather than by the marketing or sales departments.

Large companies → pricing handled by divisional or product managers.

Industrial markets → salespeople may be allowed to negotiate with customers within certain price ranges.
Industries in which pricing is a key factor (airline, aerospace, steel, railroads, oil companies) → companies often have pricing departments to set the best prices or help others set them.

Others who have an influence on pricing → sales managers, production managers, finance managers, and accountants.

57
Q

Pure competition

A

market consists of many buyers and sellers trading in a uniform commodity; sellers do not spend much time on marketing strategy.

58
Q

Monopolistic competition

A

market consists of many buyers and sellers trading over a range of prices rather than a single market price; sellers try to develop differentiated offers for different customer segments (branding, advertising, and personal selling).

59
Q

Oligopolistic competition

A

market consists of only a few large sellers; because there are few sellers, each seller is alert and responsive to competitors’ pricing strategies and marketing moves.

60
Q

Pure monopoly

A

market is dominated by one seller; seller may be a government, private regulated monopoly, or a private unregulated monopoly; pricing is handled differently in each case.

61
Q

Price elasticity

A

how responsive demand will be to a change in price.

Inelastic → demand hardly changes with a small change in price.

Elastic → demand changes greater with a small change in price.

62
Q

Product Mix Pricing Strategies

A
  1. Product Line Pricing = setting prices across an entire product line.
    Based on cost differences between the products, customer evaluations of different features, and competitors’ prices.
  2. Optional Product Pricing = pricing optional or accessory products sold with the main product.
  3. Captive Product Pricing = pricing products that must be used with the main product.
    Producers of the main product often price them low and set high markups on the supplies.
  4. By-Product Pricing = pricing low-value by-products to get rid of or make money on them.
  5. Product Bundle Pricing = pricing bundles of products sold together.
63
Q

Market Skimming Pricing

A

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

64
Q

Market Penetration Pricing

A

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

Set low initial price to penetrate the market quickly and deeply.

High sales volume results in falling costs → allowing companies to cut their prices even further.

65
Q
A

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