Week 5: Chapter 7 Flashcards
what is a product/service
- something offered for sale
- can be an item or a service
- there is more to its physical shape or basic service function
what is product for marketers
- anything that can be offered to a market to satisfy a need or want
- Ex. physical goods, services, experiences, events, places (destinations), properties (residential or real estate), information (ex. vaccination information to get people vaccinated), and ideas
how are products complex
there is the core customer value, which would be different for each type of customer (its what the product does for the customer)
what is the core customer value made up of
- actual product
- associated services
what are factors apart of actual product
- brand name
- quality level
- packaging
- features/design
what are factors apart of associated services
- financing
- product warranty
- product support
what is boston’s consulting group (BCG) portfolio analysis
- market growth rate on left (low to high bottom to top)
- relative market share on bottom (high to low left to right)
- made up of stars, question marks, cash cows, and pets/dogs
where is stars located
- top left
- high market growth rate
- high relative market share
where is question marks located
- top right
- high market growth rate
- low relative market share
where is cash cows located
- bottom left
- low market growth rate
- high relative market share
where is dogs/pets located
- bottom right
- low market growth rate
- low relative market share
what do stars mean
expensive to maintain but best performing products
what do question marks mean
- theres a key decision to make: invest or not
- you can move the product into stars or into dogs based on its potential to grow
- its risky
what do cash cows mean
- products that already peaked and are now just generating revenue
- they support the stars
what do pets/dogs mean
- products that aren’t doing too much
- not performing well
- could be dropped
what is ansoff’s product market matrix
growth strategies
- new markets & existing markets (bottom top on the left)
- existing products & new products (left to right on the top)
what is the growth strategy for existing markets and existing products
- market penetration
- sales promotion
- increase in advertising
- low risk
what is the growth strategy for existing markets and new products
- product development
- differentiate from competitors
what is the growth strategy for new markets and existing products
- market development
- catering the product to new markets
- ex. what they would like (ex. in a different country)
what is the growth strategy for new markets and new products
- diversification
- high risk
what is the product life cycle
- introduction
- growth
- maturity
- decline
- sales and profit increase, sales peaking at maturity and profit peaking at growth
- but profit decreases faster than sales after growth
what is the timeline of adoption of the innovation
innovators -> early adopters -> early majority -> late majority -> laggards
- looks like a normal distribution
what is happening in the introduction stage
sales: low
profits: negative or low
typical customers: innovators
competitors: one or few
what is happening in the growth stage
sales: rising
profits: rapidly rising
typical customers: early adopters and early majority
competitors: few but increasing
what is happening in the maturity stage
sales: peak
profits: peak to declining
typical customers: late majority
competitors: high number of competitors and competitive products
what is happening in the decline stage
sales: declining
profits: declining
typical customers: laggards
competitors: low number of competitors and products
what is price
- complex issue
- requiring analytical and strategic thinking
- can be called tuition, rent, interest, a fee, dues, a fare, or a price
- generally money is exchanged (sometimes its goods or services)
what is cost-oriented pricing
- when a company sets its prices as: costs + % markup or fixed amount (cost plus)
- very common but ignores the current elasticity of demand (change in demand) when setting prices
- will probably not lead, except by chance, to maximum profits
- common in retailing situations -> used widely
how can price be a signal
- it can be too high and too low
- too low may signal poor quality
- too high may signal low value
what is the question to ask about pricing
what is the pricing goal
what is the classic economics approach to pricing
- quantity demand = f(price)
- profit = (unit price - unit cost) * quantity sold
- find price to maximize profit (where marginal cost = marginal revenue)
what are the core assumptions of the economics approach
- focus on short run profit
- focus on immediate customers
- price is independent of advertising, promotion, etc.
- demand and cost functions are known
- unit cost is constant
- firm has true control over price
- competitors are ignored, etc.
what are the different pricing strategies
- cost-oriented pricing
- competitive-oriented pricing
- demand-oriented pricing
- value based pricing
- price discrimination
why does markup pricing make sense
- if average unit costs are fairly constant for different points on the demand function
- if costs elasticity are constant over time
what is competitive-oriented pricing
- when a company bases its prices chiefly on what its competitors are charging instead of on cost or demand
- mostly characterizes markets with homogenous commodities (oil, water, etc.)
how does competitive oriented pricing create a price stagnant market
- if a firm increases prices, loses a lot of market share
- if a firm decreases prices, others quickly follow suit
- either downward spiral (price war) or stagnation
- a price war is a price no one can win (even if you win, you loose)
what is demand oriented pricing
- when a company sets its prices as a function of demand
- they charge higher prices when demand is high and lower when demand is low
- ex. seasonal revenue
what are the pros of the gabor-granger
- simple design
- one measurement per price level
- robust, proven method
what is gabor-granger method
- a form of demand pricing
- customers are asked to indicate their buying intention for a product at a number of price levels
- 1 = will never buy
- 5 = will absolutely buy
- transform the answers into probabilities: ex. 4 = 20%, 5 = 50%, anything else = 0%
- ideally the figures are calibrated on existing data
- demand curve and price elasticity is made based on the responses
- the highest point on the curve = the optimal price
what are examples of a company that has seasonal revenue
- airlines (higher demand during holidays = higher prices)
- concerts
- hotels
- ski resorts
what are the cons of the gabor-granger
- no margins of error or confidence intervals for optimal price level
- assumes data accuracy (purchase likelihood could be 30% instead of 50%)
- assumes optimal price is actually measured (what if its out of range?)
what is revenue management
the art and science of selling the right product to the right customer for the right price at the right time
what does revenue management through temporal price discrimination entail
- high fixed cost industries
- service industries (hotels and airlines)
- alternative approaches (temporal price discrimination in the airline/hotel industry)
what are the different alternative price approaches
- time of day pricing
- time when purchased
- day of the week pricing
- seasonal pricing
how do you implement revenue management
- estimate demand for each class of service
- demand arrives over time, so update demand function/remaining supply
- allocate remaining space to: maximize expected profitability & meet other criteria
- subject to situation specific constraints
what is advertising
- any form of impersonal, one way mass communication
- paid for by a marketer
what is the promotion mix
- social and mobile media
- advertising
- personal selling
- sales promotion
- public relations
- direct marketing
what is traditional advertising media
- television
- radio
- newspapers
- magazines
- billboards
- online banner advertising
- transit cards
- banner ads on social networks
- websites
- emails
- blogs
what is a benefit to advertising
ability to communicate with a large number of people at one time
what is percent of sales
many companies set their advertising expenditures at a specified % of their sales
what are the different advertising budgeting methods
- affordable
- percent of sales
- competitive parity
- objective/task method
- model based/response model
what is the affordable method
- setting advertising budget according to what companies can afford
- used by startups
- fluctuating advertising budget
- difficult to plan for long-range market development
what is the objective/task method
- defining advertising objectives as specifically as possible (to inform, persuade, or remind)
- determine tasks
- estimating the costs of those tasks
what is the competitive parity method
setting advertising budgets specifically to match competitors’ outlays
who creates consumer promotions for who
manufacturer for consumer
what is the model-based/response method
ex. advertising response model for online banner and keyword advertising offer firms
who creates trade promotions for who
manufacturer for trade (retailer)
who creates retailer promotions for who
trade (retailer) for consumer
what are examples of retailer promotions
- price cuts
- displays
- feature ads
- retailer coupons
- free goods
what are the different types of promotions
- trade promotions
- retailer promotions
- consumer promotions
what are examples of trade promotions
- case allowances
- advertising allowances
- display allowances
- contents
what are examples of consumer promotions
- coupons
- samples
- price packs
- value packs
- refunds
- contests
- tie-ins
what does the supply chain consist of
suppliers and suppliers networks (producers)
who does distribution channels involve
- wholesalers and retailers
- from producers to consumers
what is logistics management
flow of materials and information
what does logisitics management include
suppliers
inbound flow of raw materials and parts
producers
outbound flow of finished products
consumers
