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Market

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the set of actual and potential buyers of a product or service. Share a particular want or need that can be satisfied through an exchange relationship.

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Market Segmentation

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

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Major segmentation variables

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Geographic Segmentation, Demographic Segementation, Psychographic Segmentation, Behavioral Segmentation, Occasion Segmentation, Benefit Segmentation

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Geographic Segmentation

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calls for dividing the market into different geographical units, such as nations regions states counties cities and even neighborhoods Company decides to operate in one or few geographical areas or to operate in all areas but pay attention to geographical differences in needs and wants.

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Demographic Segmentation

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dividing a market into segments based on demographic variables such as age, life cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.

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Psychographic Segmentation

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dividing a market into segments based on interests, attitudes, and opinions (IAO) Segment their markets using variables such as social class consumer lifestyles and consumer personality. Products people buy reflect their lifestyle, so marketers segment markets by consumer lifestyle and base strategies on lifestyle appeal.

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Behavioral Segmentation

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dividing a market into segments based on their knowledge, attitudes, uses or responses about a product.

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Occasion Segmentation

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buyers can be grouped according to occasions when they get the idea to buy, actually make their purchases, or use the purchased items.

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Benefit Segmentation

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requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

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User Status

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markets are segmented into nonusers, ex-users, potential users, first time users, and regular users of the product. Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users.

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Usage Rate

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markets segmented into light, medium and heavy users.

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Loyalty Status

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markets can be segmented by customer loyalty, either loyal to brand, loyal to store, or loyal to company.

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Multiple Segmentation Bases

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segmentation bases help companies to: identify smaller, better-defined target groups, identify and understand key customer segments, reach customers more efficiently by tailoring market offering and messaged to customers' specific needs. Help marketers segment people and locations into marketable groups of like-minded consumers.

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Segmenting Business Markets

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consumer and business markets use many of the same variables for segmentation. Other segmentation variables used by business marketers: operating characteristics, purchasing approaches, situational factors, and personal characteristics.

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Segmenting International Markets

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variables include: geographic location, economic factors, political and legal factors, and cultural factors.

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Intermarket (crossmarket) segmentation

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grouping consumers with similar needs and buying behaviors irrespective of their location.

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DMAs (Designated Marketing Areas)

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companies use multivariable segmentation systems that merge geographic, demographic, lifestyle, and behavioral data to help companies segment their markets down to zip codes, neighborhoods, and even households. Ex. Nielsen Company uses PRIZM system that classifies every American household based on a host of demographic, behavioral and lifestyle factors. Classifies 66 demographic and behaviorally distinct segments, organized into 14 different social groups. Segments people and locations into marketable groups of like-minded consumers, where each segment has its own pattern of likes, dislikes, lifestyles and purchase behaviors.

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Requirements for effective segmentation

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Measuring, Accessible, Substantial, Differentiable, Actionable

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Measuring

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size and profiles can be measured.

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Accessible

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segment can be effectively reached

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Substantial

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large, profitable enough to serve

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Differentiable

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distinguishable segments respond differently

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Actionable

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programs can be developed into reach segments.

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Market Targeting

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consists of evaluating each market segment's attractiveness and selecting one or more market segments to enter.

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Target Market

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

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Targeting Strategies

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Undifferentiated (mass), Differentiated/segmented, Concentrated (niche), Micromarketing (local or individual marketing)

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Undifferentiated (mass) marketing

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less expensive, potentially ineffective, targeting broadly focuses on needs that are common instead of needs that are different.

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Differentiated/segmented

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more effective/relevant, more expensive, focuses on several markets with a separate offering for each.

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Concentrated (niche) marketing

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less expensive, higher risk, focuses on going after a large share of one or few smaller segments (niches).

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Micromarketing (local or individual marketing)

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most relevant, most expensive, targeting narrowly, focuses on tailoring products and marketing programs to individual customers.

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Behavioral targeting in digital marketing

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Contextual, Retargeting, Interest-based Marketing

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Contextual

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targeting based on content of a specific webpage: keyword, category, and keyword/category combo.

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Retargeting

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targeting based on pervious interactions with specific cookies: site-based, ad-based, and email-based.

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Interest-based marketing

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targeting based on pervious browsing activity

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Market-Targeting Strategy

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Companies need to consider factors when choosing targeting strategy these include: company resources- ex. If firm's resources are limited, concentration makes most sense. Degree of product variability- undifferentiated marketing is more suited for uniform products, ex. Grapefruit or steel. Products that vary in design are more suited to differentiation or concentration. Product's life-cycle stage- if firm introduces new product, may be practical to launch one version only, as undifferentiated or concentrated marketing make most sense, in mature stage of product life cycle, differentiated strategy makes more sense. Market Variability- ex. if most buyers have same tastes, buy same amounts and react same way to marketing efforts undifferentiated marketing is appropriate. Competitors' marketing strategies- when competitors use different or concentrated marketing strategies undifferentiated strategies can hurt the firm. Vice versa, if competitors are undifferentiated using differentiated or concentrated can work to firms advantage.

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Differential and Positioning Strategies

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identifying a set of differentiating competitive advantages, choosing the right competitive advantages, and selecting an overall positioning strategy.

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Differentiation

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involves actually differentiating the firm's market offering to create superior customer value.

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Perceptual Positioning Maps

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Location of each circle shows where consumers position a brand on two dimensions: price and value. The size of circle indicates the brand's relative market share in the segment.

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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. Firms can differentiate in terms of product, services, channels, people, or image.

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USP (Unique Selling Proposition)

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How many differences to promote? Marketers think that companies should aggressively promote only one benefit to the target market. Advertising Executive Rosser Reeves said a company should develop a USP for one brand and stick with it. Each brand should pick an attribute and tout itself as number one on that attribute. Other marketers think companies should position themselves on more than one differentiator. Necessary is two or more firms claim they are the best on the same attribute.

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Types of differentiation worth promoting

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Important, Distinctive, Superior, Communicable, Pre-emptive, Affordable, Profitable

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Important

answer

difference delivers a highly valued benefit to target buyers.

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Distinctive

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competitors do not offer the difference, or the company can offer it in a more distinctive way.

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Superior

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difference is superior to other ways that customers might obtain the same benefit.

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Communicable

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difference is communicable and visible to buyers.

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Pre-emptive

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competitors cannot easily copy the difference.

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Affordable

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buyers can afford to pay for difference

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Profitable

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company can introduce the difference profitability.

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Positioning

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

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Product Position

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the way a product is defined by consumers on important attributes, the place the product occupies in consumers' minds relative to competing products.

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Value Proposition

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full mix of benefits on which a brand is differentiated and positioned.

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5 Winning Value Propositions

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More for More, More for the Same, More for Less, Same for Less, Less for Much Less

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More for More Positioning

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involves providing the most upscale product or service and charging a higher price to cover the higher costs. Offers higher quality and gives prestige to buyer, symbolizes status and a loftier lifestyle. More benefits vs. competitors (most upscale). Priced higher vs. competitors (covers higher costs).

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More for More the Same Positioning

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companies attack competitors more for more strategy by introducing a brand that offers comparable quality products at lower prices.

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More for Less Positioning

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Best winning value proposition. Many companies claim to do this. In short run companies can achieve this, but in long run companies find it difficult to sustain best-of-both positioning. More benefits vs. competitors, Lower price vs. competitors.

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Same for Less Positioning

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powerful value proposition, same benefits as competitors, lower price than competitors. Good deal, used by discount stores that offer deep discounts based on superior purchasing power and lower-cost operations.

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Less for Much Less Positioning

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products that offer less, but also cost less. Involves meeting customer's lower performance or quality requirements at a much lower price. Less benefits then competitors, lower price then competitors.

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Positioning Statement

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summarizes company or brand positioning. Form: To (target segment and need) our (brand) is (concept) that (point of difference). If company decides to build a position, it must deliver that position first. Company must design the marketing mix (product, price, place, and promotion) and they must support the positioning strategy. Firm must take care to maintain the position obtained through consistent performance and communication. Products position should be monitored and adapted over time to match changes in consumer needs and competitors' strategies.

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Marketing Mix decisions

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Product, place, promotion, and price

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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. Not just tangible items can include services, events, persons, places, organizations, and ideas, or mix of these.

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Experiences

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new level of creating value for customers, used to differentiate their offers, beyond just making products or delivering services, therefore they create and manage customer experiences.

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3 Levels of Product

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Core value, actual, and augmented

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Level 1: Core Customer Value

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addresses question: "What is the buyer really buying?" When designing products marketers must first define the core, problem solving benefits or services that customers seek.

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Level 2: Actual Product

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products planners must turn core benefit into an actual product. "What are the physical attributes of the product itself?" Product planners need to develop product and service features, design, quality level, brand name, and packaging.

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Level 3: Augmented Product

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build an augmented product around the core benefit and actual product by offering additional customer services and benefits. Ex. after-sale service, delivery, warranty, and credit. "What are the additional customer services and benefits?"

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Types of Consumer Products & Characteristics

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Convenience, shopping, specialty, unsought

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Convenience

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products that customers make frequent purchases; little planning, little comparison or shopping effort, low customer involvement; low price; widespread distribution and convenient locations; mass promotion by the producer; Ex. toothpastes, magazines, and laundry detergent.

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Shopping

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less frequent purchases; much planning and shopping effort; comparisons of brands on price, quality, and style; higher price; selective distribution in fewer outlets; advertising and personnel selling by both the producer and the resellers. Ex. major appliances tvs, furniture, clothing.

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Specialty

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strong brand preference and loyalty; special purchase effort; little comparisons of brands; low price sensitivity; High price; exclusive distribution in only one or a few outlets per market area; more carefully targeted promotion by both the producer and resellers. Ex. luxury goods, Rolex.

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Unsought

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little product awareness or knowledge (or, if aware, little or even negative interest); Price varies; Distribution varies; Aggressive advertising and personal selling by the producer and resellers; Ex. life insurance.

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Product Lines

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

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Lengthening

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two ways to lengthen a product line:

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Line Stretching

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to lengthen a product line by making new products for upper or lower class users.

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Line Filling

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to lengthen a product line by adding more items within product range to get more profits, fill missing items, use excess capacity, keep out competitors.

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Product Mix/Product Portfolio

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

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Width

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number of different product lines the company carries

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Length

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total number of items a company carries within its product lines

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Depth

answer

number of versions offered for each product in the line.

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Consistency

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relativity of the various product lines in end use, production requirements, distribution channels, or some other aspect.

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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.

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Intangibility

answer

Services cannot be seen, tasted, felt, heard, or smelled before the purchase.

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Inseparability

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Services cannot be separated from their providers.

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Variability

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Quality of services depends on who provides them and when, where, and how.

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Perishability

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services cannot be stored for later sale or use.

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Types of Services Marketing

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External marketing, Internal marketing, Interactive marketing

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External Marketing

answer

Company to customers (usual marketing)

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Internal marketing

answer

means the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction.

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Interactive Marketing

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means service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. Depends on both the service deliverer and quality of service.

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Brand

answer

name, term, sign, symbol, or design, or combination of these, that identifies maker or seller of product or service.

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Brand Equity

answer

the differential effect that knowing the brand name has on customer response to the product of its marketing. Measure of brand's ability to capture consumer preference and loyalty. Positive Brand Equity- consumers respond more favorably to the brand vs. unbranded version of the same product. Negative Brand Equity- consumers react less favorably to the brand vs. an unbranded version.

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Brand Positioning

answer

marketers should establish a mission and vision for the brand when positioning it.

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Brand Naming, Best Practices

answer

good name can greatly add to a products success. Desirable qualities for brand name should include: based on the product's benefits and qualities, easy to pronounce, recognize, and remember, be distinctive and extendable, translate easily into foreign languages, be capable of registration and legal protection.

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Sponsorship Options

answer

National brand, Store Brand/private brand, licensed brands, cobrands

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National Brands

answer

marketed under the manufacturer's own name.

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Store Brands

answer

created and owned by a reseller of a product or service.

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Licensing

answer

use names and symbols created by other companies or well-known movie characters or celebrities for a fee.

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Co-Branding

answer

use the established brand names of two different companies on the same product. Ex. Pillsbury and cinnabon joined forces to create Pillsbury cinnabon cinnamon rolls.

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Brand Development Matrix

answer

line extension, brand extension, multibrands, new brands

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Line Extensions

answer

occurs when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category. Existing name, existing category.

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Brand Extension

answer

extends a current brand name to new or modified products in a new category. New category, existing name.

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Multibrands

answer

companies market different brands in a different product category. New name, existing product. Ex. Aquafina and Aquafina Sparkling.

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New Brands

answer

company believes power of existing brand is waning, so new brand name needed or may create new brand name when it enters new product category. New Name, New category.

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New Products

answer

developed through an organizations own R&D efforts. Can be original products, product improvements, product modifications, and new brands that the firm develops. Can drive companies growth, but can also be risky and expensive.

question

Creating successful new products requires...?

answer

understanding consumers, markets, and competitors; developing products that deliver superior value to customers.

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Idea Generation

answer

the systematic search for new product ideas. Can use internal idea sources which company finds new ideas through formal R&D. Intrapreneurial programs, internal social networks. Can also obtain good new product ideas from external sources such as suppliers, distributors, customers, competitors, other industries, and crowdsourcing.

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Idea Screening

answer

spot good ideas and drop bad ones as soon as possible. Ways of screening new ideas: Proposals reviewed by "New Product Committee"; R-W-W framework- Real- Is there real customer need and desire for the product? ; Win- Can we win? Does the product offer real sustainable advantage? ; Worth doing- does the product fit the company's overall growth strategy.

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Concept Testing

answer

develops and tests a detailed version of the idea stated in meaningful customer terms. Product Concept Development- develops alternative product concepts; find out how attractive each concept is to customers; choose the best one. Product Concept testing- test a group of target consumers to find out the degree of consumer appeal toward the concepts; present concepts to consumers symbolically or physically or with a word or picture description; Ask customers their reactions to concepts.

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Marketing Strategy Development

answer

initial marketing strategy for introducing a new product to the market. The market strategy statement should include; Target Market- describes target market, planned value proposition, and the sales, market-share, and profit goals for first few years. 4P's- outlines the planned product, price, place (distribution), and promotions budget for the first year. Strategic objectives- describes planned long-run sales, profit goals, and marketing mix strategy.

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Business Analysis

answer

review of the sales, costs, and profit projections for a new product. Find out whether projections satisfy company's objectives.

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Product Development

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develops the product concept into physical product. Ensure the product idea can be turned into a workable market offering; prototype version for the testing stage.

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Test Marketing

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product and proposed marketing campaign are introduced into realistic marketing settings. Gives marketer an experience w/ marketing a product before the introduction, tests the product and its marketing program, many uses test markets; minimize costs, minimize time needed.

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Commercialization

answer

introducing the new product into the market. Decisions; Timing of introduction- internal and external factors. Where to introduce- single location, nationally or internationally?

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Crowdsourcing

answer

throws innovation doors wide open, inviting broad communities of people—customers, employees, independent scientists, and researchers, and even the public at large—into the new product innovation process.

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Customer-Centered

answer

focuses on new ways to solve customer problems and create more customer-satisfying experiences. Discovered through customer research, involve customers in the process.

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Team-Based

answer

company departments work closely together in cross-functional teams, overlapping steps in production development process to save time and increase effectiveness.

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Systematic

answer

organized ways to collect, review, evaluate, and manage new product ideas; not random or haphazard.

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Product Life Cycle

answer

the course that a product's sales and profits take over its lifetime.

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Stages

answer

Product development, Introduction, growth, maturity, decline

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Product Development

answer

begins when company finds and develops a new product idea. During product development, sales are zero, and company's investment costs mount.

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Introduction

answer

period of slow sales growth as the product is introduced into the market. Profits are non-existent or low bc of heavy expenses of product introduction.

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Growth

answer

if the new product satisfies the market it enters this stage, which sales will start climbing quickly. Early adopters continue to buy along with later buyers will start following their lead. New competitors will enter market, introduce new product features, and expand market. Sales jump to build reseller inventories. Prices remain same or decrease slightly. Companies keep promotion spending at same or slightly higher level. Profits increase as promotion costs get spread out over a large volume and as unit man. Costs decrease. Firm improves product quality and adds new features and models. Enters new market segments and distribution channels. Firm faces trade-off between high market share and high current profit.

question

Maturity

answer

Product's sales growth slow down. Lasts longer than previous stages and poses strong challenge to marketing management. Overcapacity leads to more competition. Drop in profit. Increased marketing costs to defend against competitors.

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Decline

answer

Sales drop off and profits drop.

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Product Development is like the BCG Matrix _________

answer

Question Mark

question

Introduction is like the BCG Matrix _________

answer

Question mark

question

Growth is like the BCG Matrix _________

answer

Star

question

Maturity is like the BCG Matrix _________

answer

Cash Cow

question

Decline is like the BCG Matrix _________

answer

Dog

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Styles

answer

a basic, distinctive mode of expression

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Fashion

answer

currently accepted or popular in a given field

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Fad

answer

temporary period of unusually high sales driven by immediate popularity.

question

Price

answer

amount of money charged for a product or service; determines a firm's market share and profitability; produces revenue

question

Considerations in Setting Price

answer

Product costs: price floor- no profits below this price. Consumer perceptions of value: price ceiling- no demand above this price. Competitors' strategies and prices, marketing strategy, objectives, and mix, and nature of the market and demand.

question

Pricing Strategies

answer

Customer Value Based, Cost-based, Competition Based

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Customer Value-Based Pricing

answer

based on buyers' perceptions of value rather than on the seller's costs. Price is considered before the marketing is set. 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.

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Good-Value Pricing

answer

offering the right combination of quality and good service at a fair price.

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Value-Added Pricing

answer

attaches value-added features and services to differentiate their offers and support higher prices.

question

Cost-Based Pricing

answer

based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk. Design a good product. -determine product costs -set price based on cost -convince buyers of product's value.

question

Cost-plus (markup) pricing

answer

adds a standard markup to the total cost of the product. Simple method; competitive prices similar; but ignores customer demand.

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Break-even (target return) Pricing

answer

setting the price to break-even on the total costs of making and marketing a product, or setting prices to make a target return. Helps determine minimum prices, but ignores customer value and demand

question

Competition-Based Pricing

answer

setting prices based on competitors' strategies, costs, prices and market offerings. Must compare customer value of market offerings vs. competitors. Must compare pricing strategies vs. competitors

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Types of Costs

answer

Fixed Costs (overhead), Variable costs, Total costs

question

Fixed Costs (overhead)

answer

don't vary with production or sales levels

question

Variable Costs

answer

vary directly with the level of production

question

Total Costs

answer

sum of variable and fixed costs for any given level or production

question

Internal Factors

answer

overall marketing strategy, objectives, and mix; some products may be positioned on price. Organizational considerations-Who sets price?

question

External Factors

answer

nature of the market and demand, economy, parties in the external environment (resellers, government, and social concerns)

question

Demand Curve

answer

used to show the number of units the market will buy in a given time period, at different prices that might be charged.

question

Price elasticity

answer

measures the sensitivity of demand to changes in price.

question

Inelastic Demand

answer

demand hardly changes with a small change in price.

question

Elastic Demand

answer

demand changes greatly with a small change in price.

question

Types of Markets

answer

Pure Competition, Monopolistic Competition, Oligopolistic Competition, Pure Monopoly

question

Pure Competition

answer

many buyers and sellers trading at the same price (commodity), no marketing strategy needed.

question

Monopolistic Competition

answer

many buyers and sellers trading over a range of prices, marketing strategies used to differentiate competitive offers.

question

Oligopolistic Competition

answer

market consists of a few large sellers; each seller is alert and responsive to competitors' pricing and marketing strategies.

question

Pure Monopoly

answer

market dominated by one seller, pricing and marketing handled case by case.

question

Pricing for New Products

answer

Market-skimming Pricing & Market penetration Pricing

question

Market-skimming Pricing

answer

setting a high price to skim maximum revenues layer by layer from the segments willing to pay the high price. Company makes fewer but more profitable sales.

question

Market Penetration Pricing

answer

setting a low price to attract a large number of buyers and a large market share.

question

Product Mix Pricing Strategies

answer

Product Line Pricing, Optional Product Pricing, Captive Product Pricing, By-product Pricing, Product Bundle Pricing

question

Product Line Pricing

answer

setting prices across an entire product line

question

Optional Product Pricing

answer

pricing optional or accessory products sold with the main product

question

Captive Product Pricing

answer

pricing products that must be used with the main product

question

By-product Pricing

answer

pricing low-value by-products to get rid of or make money on them.

question

Product Bundle Pricing

answer

pricing bundles of products sold together.

question

Discount/Allowance Pricing

answer

reducing prices to reward customer responses such as paying early or promoting the product.

question

Segmented Pricing

answer

adjusting prices to allow for differences in customers, products, or locations.

question

Psychological Pricing

answer

adjusting prices for psychological effect.

question

Promotional Pricing

answer

temporarily reducing prices to spur short-run sales.

question

Geographical Pricing

answer

adjusting prices to account for the geographic location of customers

question

Dynamic Pricing

answer

adjusting process continually to meet the characteristics and needs of individual customers and situations. Prevalent on the Internet.

question

International Pricing

answer

adjusting prices for international markets.

question

Buyer's Perspective

answer

price increase: product is more exclusive or better made; company is being greedy. Price cut: brand wants to get better deal on exclusive product, product's quality has been reduced, and company's image has tarnished.

question

Competitor's Perspective

answer

Price cut: company is trying to grab a larger market share, company is doing poorly and trying to boost its sales, company wants the whole industry to cut prices to increase total demand.

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