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Business buyer behavior

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

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Business buying process

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the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands

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Business Market Characteristics

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Fewer and larger buyers Geographic concentration Derived demand Inelastic demand Fluctuating demand Buyer and seller dependency More decision participants More professional/knowledgeable purchasing effort

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Derived Demand

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Business demand that ultimately comes from (derives from) the demand for consumer goods.

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Inelastic demand

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the total demand for many business products is not much affected by price changes, especially in the short run

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Fluctuating demand

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The demand for many business goods and services tends to change more—and more quickly— than the demand for consumer goods and services does. Example: A small percentage increase in consumer demand can cause large increases in business demand.

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Short run

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sales go to suppliers who meet buyers' immediate product and service needs.

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Long run

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business-to-business marketers keep a customer's sales and create customer value by meeting current needs and by partnering with customers to help them solve their problems.

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Major types of buying situations

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- Straight rebuy (Buyer makes fewest decisions) - Modified rebuy - New task (Buyer makes most decisions) - Systems selling

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Straight rebuy

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A business buying situation in which the buyer routinely reorders something without any modifications. Buyer makes fewest decisions.

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Modified rebuy

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

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New task

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

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Systems selling (solutions selling)

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Buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation. Key business strategy for winning and holding accounts.

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Users

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are members of the organization who will use the product or service. In many cases, users initiate the buying proposal and help define product specifications.

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Influencers

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People in an organization's buying center who affect the buying decision; they often help define specifications and also provide information for evaluating alternatives.Technical personnel are particularly important influencers.

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Buyers

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People in an organization's buying center who make an actual purchase. Buyers may help shape product specifications, but their major role is in selecting vendors and negotiating.

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Deciders

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People in an organization's buying center who have formal or informal power to select or approve the final suppliers. (buyers are often the deciders)

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Gatekeepers

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People in an organization's buying center who control the flow of information to others.

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Buying center

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All the individuals and units that play a role in the purchase decision-making process. - actual users of the product/service - those making buying decisions - those controlling buying info - those influencing buying decisions - those doing actual buying Roles: Users, Influencers, Buyers, Deciders, Gatekeepers

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Influences on Business buyers

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Environmental Organization Interpersonal Individual

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Environmental factors

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- The economy (demand, cost of money, economic outlook - Supply conditions (buy/hold larger inventories) - Technology - Culture and Customs - Politics/Regulation - Competition

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Organizational Factors

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Each buying organization has its own objectives, strategies, structure, systems, and procedures - how many people involved in the buying decision? - who are they? - what are their evaluation criterias? - Company's policies and limits?

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Interpersonal Factors

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The buying center usually includes many participants who influence each other. - Participants may influence the buying decision because they control rewards and punishments, are well liked, have special expertise, or have a special relationship with other important participants.

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Individual Factors

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Personal motives, perceptions, and preferences - Individual factors are affected by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk. - buyers have different buying styles

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1. Problem Recognition

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The first stage of the business buying process in which someone in the company recognizes a problem or need that can be met by acquiring a good or a service.

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2. General need description

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The stage in the business buying process in which a buyer describes the general characteristics and quantity of a needed item. (In this phase, the alert business marketer can help the buyers define their needs and provide information about the value of different product characteristics.)

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3. Product specification

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The stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item. Team decides the best product characteristics and specifies them accordingly. Product value analysis: is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.

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4. Supplier Search

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The stage of the business buying process in which the buyer tries to find the best vendors.

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5. Proposal solicitation

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The stage of the business buying process in which the buyer invites qualified suppliers to submit proposals.

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6. Supplier selection

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The stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers.

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7. Order-routine specification

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The stage of the business buying process in which the buyer writes the final order with the chosen supplier(s), listing the technical specifications, quantity needed, expected time of delivery, return policies, and warranties.

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8. Performance review

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The stage of the business buying process in which the buyer assesses the performance of the supplier and decides to continue, modify, or drop the arrangement.

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Institutional Markets

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consist of schools, hospitals, nursing homes, and prisons that provide goods and services to people in their care Characteristics: - low budget - "captive" audience

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Government Markets

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Government units - consist of town/city, county, state, federal, and international governments - Tend to require suppliers to submit bids and normally award to the lowest bidder non-economic factors: - minority suppliers - depressed suppliers - small businesses - other exceptions

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E-procurement

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Purchasing through electronic connections between buyers and sellers— usually online (buying on internet) Reverse auctions - put their purchasing request online and invite suppliers to bid for the business Trading exchanges - companies work collectively to facilitate the trading process company buying sites Advantages: speeds ordering process, service/support, sales, lower cost, access to new suppliers, shares information Disadvantages: security, erode relationships

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Total Quality Management Approach (TQM)

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- Emphasizes teamwork, empowerment, statistical analysis, quality (meeting customer requirements) - Reduced number of suppliers - Supplier development

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Expanded role of procurement

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Involvement in professional services purchasing - Anecdote: RSMEC - WEC project - Withheld payment and then asked for donations!

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Request for Proposal

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solicitation made often through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals. Standard way of buying SUNY Geneseo Implications for marketing of the RFP process: - Establish favorable impressions - Get on bid list - Skills required --->Attention to detail --->Organization skills --->Coordinate activities of others in organization

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Four steps in designing a customer-driven marketing strategy

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1. Market segmentation (selecting customers) 2. Market targeting (selecting customers) 3. Differentiation (value prop) 4. Positioning (value prop)

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Market segmentation

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

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Geographic segmentation

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

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Demographic segmentation

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Dividing the market into segments based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.

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Age and life-cycle segmentation

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Dividing a market into different age and life-cycle groups.

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Gender segmentation

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Dividing a market into different segments based on gender.

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Income segmentation

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Dividing a market into different income segments.

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Behavioral segmentation

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Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product. - occasion, benefit, user status, usage rate, loyalty status

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Occasion segmentation

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

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Benefit segmentation

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Dividing the market into segments according to the different benefits that consumers seek from the product.

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Psychographic segmentation

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

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Intermarket segmentation (cross-market segmentation)

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Forming segments of consumers who have similar needs and buying behavior even though they are located in different countries.

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Geodemographic segmentation

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example of multivariable segmentation that divides groups into consumer lifestyle patterns

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Multiple segmentation

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used to identify smaller, better-defined target groups Acxiom life stages

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Requirements for effective segmentation

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- Measurable (size and purchasing power of segment) - Accessible (segment can be reached and served) - Substantial (profitability) - Differentiable (segment is distinguishable) - Actionable (effective programs can be designed for attracting and serving the segment)

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Market targeting (targeting)

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The process of evaluating each market segment's attractiveness and selecting one or more segments to enter. developing marketing programs and products tailored to each segment. Most important because you need to define and focus on a market. It makes you realize in order to be competitive, you need to select a segment.

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Target Market

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

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Targeting strategies

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1. Undifferentiated (mass) marketing 2. Differentiated (segmented) marketing 3. Concentrated (niche) marketing 4. Micromarketing (local or individual) marketing

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Choosing a Targeting Strategy

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- company resources - product variability (design) - product life-cycle stage (version launched) - market variability -competitor's marketing strategies (when competitors use differentiated marketing, undifferentiated marketing can be suicidal)

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Undifferentiated (mass) Marketing

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A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. -mass marketing -focus on what is common in needs of consumers

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Differentiated (segmented) marketing

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A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. -goal to achieve higher sales and stronger position - increases cost of doing business, extra marketing research, forecasting, sales analysis -more expensive than undifferentiated marketing

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Concentrated (niche) marketing

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A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches. -limited company resources -knowledge of market -more effective ; efficient It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably. ex. Whole Foods target the wealthy who wants to eat healthy

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Micromarketing (local or individual) marketing

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Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; It includes local marketing and individual marketing.

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Differentiation

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Differentiating the market offering to create superior customer value.

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Positioning

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

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Product's Position

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The way the product is defined by consumers on important attributes—the place the product occupies in consumers' minds relative to competing products. (how marketer wants the product to be seen) ex. Ipad as the "third device"

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Choosing a differentiation and positioning strategy

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- identifying a set of possible competitive advantages to build a position - choosing the right competitive advantages - selecting an overall positioning strategy Then must effectively communicate and deliver the chosen position to the market --> develop a positioning statement -----> public IVY -----> honors college Choosing the position is often easier than implementing the position (tweaking product) SUNY Geneseo Marketing Mix: Product - change courses to 4 credit class like private college Price Distribution Market communication

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Positioning statement

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

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Competitive Advantage

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An advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices.

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Product

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anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. - also includes services, events, persons, places, organizations, ideas, etc

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Service

answer

form of product that consists of an activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in the ownership of anything. ex. banking, hotel services, airline travel, retail, wireless communication, home repair services

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Levels of Products and Services

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- Augmented product (warranty, product support, delivery and credit, aftersale service) - Actual product (design, quality level, brand name, packaging, features) - Core customer value (most basic level)

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Consumer product

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A product bought by final consumers for personal consumption.

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Convenience product

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

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Shopping product

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

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Specialty product

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A consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. **Marketers want their products to be specialty - consumers are loyal to them**

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Unsought product

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

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Industrial product

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A product bought by individuals and organizations for further processing or for use in conducting a business. - raw material, repair/maintenance items

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Organization marketing

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consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization

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People marketing

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consists of activities under- taken to create, maintain, or change attitudes or behavior toward particular people.

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Place marketing

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involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. Cities, states, regions, and even entire nations compete to attract tourists, new residents, conventions, and company offices and factories.

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Idea marketing

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social ideas: defined by the Social Marketing Institute (SMI) as the use of commercial marketing concepts and tools in pro- grams designed to bring about social change -public health campaigns

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Product line

answer

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.

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Product mix (product portfolio

answer

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

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Product line width

answer

number of product lines

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Product line length

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number of items in all product lines

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Product line depth

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depth is the number of items in an individual product line --line stretching --line filling

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Individual product and services decisions

answer

1. product attribute 2. branding 3. packaging 4. labeling 5. product support services

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1. Product attribute

answer

- Product quality: The characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs. - 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. -quality level, performance quality -product features -product style and design

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2. Branding

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A name, term, sign, symbol, design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors. -brand equity is the differential effect that the brand name has on customer response to the product and its marketing "perhaps the most distinctive skill of professional marketers is their ability to build and manage brands."

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3. Packaging

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The activities of designing and producing the container or wrapper for a product

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4. Labeling

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identifying the product or brand, describe attributes, and provide promotion - promoting the brand, connect with customers, etc.

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Branding strategy

answer

1. brand positioning 2. brand name selection 3. brand sponsorship 4. brand development

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Internal marketing (for service firms)

answer

means that the service firm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction internal marketing must precede external marketing

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Interactive marketing (for service firms)

answer

means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter -- service differentiation -- service quality -- service productivity

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Marketing service differentiation

answer

creates a competitive advantage from the offer, delivery, and image of the service -offer can include distinctive features -delivery can include more able and reliable customer contact people, environment, or process -image can include symbols and branding

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Marketing service differentiation

answer

creates a competitive advantage from the offer, delivery, and image of the service -offer can include distinctive features -delivery can include more able and reliable customer contact people, environment, or process

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Service variability

answer

The quality of services may vary greatly depending on who provides them and when, where, and how.

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Service perishability

answer

Services cannot be stored for later sale or use.

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Marketing service quality

answer

provides competitive advantage by delivering consistently higher quality than its competitors service quality always varies depending on interactions between employees and customers

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Service variability

answer

The quality of services may vary greatly depending on who provides them and when, where, and how.

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Service perishability

answer

Services cannot be stored for later sale or use.

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Service intangibility

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Services cannot be seen, tasted, felt, heard, or smelled before they are bought. ex. cosmetic surgery

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Service variability

answer

The quality of services may vary greatly depending on who provides them and when, where, and how.

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Service perishability

answer

Services cannot be stored for later sale or use.

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Service inseparability

answer

Services are produced and consumed at the same time and cannot be separated from their providers. ex. employee provides the service

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Service variability

answer

The quality of services may vary greatly depending on who provides them and when, where, and how.

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Service perishability

answer

Services cannot be stored for later sale or use.

Chapter 6-8 Marketing – Flashcards

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