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Ch. 4 Product & Promotion Strategy

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Product
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a broad term that describes not only physical, tangible goods, but also products that are neither physical nor tangible like services or an idea
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Types of products
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goods, services, ideas, consumers, business
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consumer products
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products targeted to the consumer market are geared to meet consumers’ needs when they are purchasing goods or services for their own or their families’ personal use
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consumer product categories
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convenience, shopping, specialty
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business products
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business products can be categorizes as: installations, accessory equipment, raw materials, component parts, process materials, MRO supplies and business services
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Type of business product categories
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installations, accessory equipment, raw materials, component parts, process materials, MRO supplies, Business Services
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product mix
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the overall group of products that a firm offers is referred to as its product mix; combination of product items, product categories and product lines
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Developing & Managing Products
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The Product mix can be narrow or broad; product item is a product category; product line is deep or shallow
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growth strategies
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(1) add new product strategies, (2) add new product items within product lines
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Importance of new products
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companies introduce new products to: increase sales, increase market share or increase presence in the marketplace; these are continuous verses discontinuous innovations
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New product development process
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(1) idea generation, (2) screening, (3) concept testing, (4) business analysis, (5) product development, (6) test marketing, (7) commercialization
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Brand
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a name, term, design, symbol or any other feature that identifies one seller’s goods or services as distinct from those of other sellers; closely tied to promotion strategy
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Product strategy consideration
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Branding: Brand Elements, Brand Equity, Packaging, Labeling
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Brand Elements
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brand name, brand mark, manufacturer’s brand, private label brand, generic product, family brands, individual brands
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special considerations in managing services
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intangibility, inseparability, perishability, heterogeneity
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product life cycle
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products progress through a lifestyle that can be viewed in four stages: introduction, growth, maturity & decline
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product adoption
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factors that influence this are: complexity, compatibility, relative advantage, observability and trialability; products must be adopted to be prfitable
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Product adoption
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complexity, comparability, relative advantage, observability, trialability
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diffusion of innovation
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innovators, early adopters, early and late majority, laggards
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promotion
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the communications arm of marketing. It is the way that a marketing organization informs, persuades and reminds the target market about the products, company brands, company or people
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Promotional mix (tools)
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includes advertising, personal selling, sales promotion and public relations
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Push Promotional Strategy
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used to build demand in within the distribution channel. companies can also direct promotional activities to wholesalers and retailers to build demand so that the retailer will push the products to the end customer
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Pull Promotional Strategy
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companies that advertise nationally branded products directly to consumers use this method influencing them to ask for the branded product at the retailer
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Communication Process
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consist of a sender, a channel and a receiver. The sender receives a message that is encoded using signs, symbols, words, colors, etc. The receiver, in turn attempts to decode the message. Effective communication takes place when the receiver decodes the message that was intended by the sender.
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integrated marketing communication
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promotional planning, budgeting, managing and controlling
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product is a broad term used to describe only those tangible physical goods that are targeted to either consumers or businesses
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false; product is a broad term that describes, not only physical, tangible goods, but also products that are neither physical nor tangible like services. In addition to goods and services, ideas are also considered to be a product that can be marketed to specific groups or targeted customers.
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examples of consumer shopping products includes hair salons, furniture and jewelry
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true; shopping products include such products as these. For products such as these, consumers will expend some effort to compare brands and invest some time to investigate product features and price points
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copies or computer printers are examples of business services
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false; copiers and printers are examples of accessory equipment – inexpensive, non-complex equipment purchased frequently. Examples of business services include processes required for running the business that are often outsourced to other businesses, such as payroll or cleaning services
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the correct term used to describe the overall group of products that a firm offers is product category
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false; Most organizations market more than a single product. The overall groups of products that a firm offers is referred to as its product mix. A company’s product mix consists of a combination of product items, product categories and product lines
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A manufacturer’s brand is also called a national brand
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true; one branding alternative is a manufacturer’s brand (aka national brand). These brands are owned and controlled by a producer and they may/may not actually be distributed nationally. Examples of a manufacturer’s brand include Sony, Ralph Lauren and Heinz
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When Lucy went to Great Cuts, one salon in a chain, and thought the stylist gave her a poor quality cut, she made the assumption that all Great Cuts salons had poor quality service. This illustrates the problem of intangibility in services
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False; intangibility means that a service, unlike a good, cannot be held, touched, examined or taken home and put on a shelf for the customer’s future use. Inseperability implies that service marketers must manage processes to ensure that the individual service provider performs the service at the same time and in the manner that the customer expects
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In the maturity phase of the Product Life Cycle, companies often make adjustments to the product mix such as improvements and product line extensions
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true; this stage of the product life cycle is split into two parts – early and late maturity. Early in maturity, industry sales remain high but growth in industry sales slow. Industry profits have begun to decline. Companies continue to jockey for position and begin to make adjustments to the product mix – improvements, extensions and adaptations
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One reason that advertising can be ineffective is because the message sender (e.g. the marketer) can make mistakes by encoding the message with symbols that the receiver (e.g. the customer) may not understand
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true;a message is encoded using signs, symbols, words, colors, and/or music to effectively convey a message via some form of channel (TV/Radio/Internet) to a receiver, who in turn decodes the message that was intended by the sender
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publicity can correctly be called “free advertising”
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false; publicity is often misunderstood PR tool; it is frequently referred to as free advertising, which is a misnomer. First, publicity is not advertising. Second, even though publicity is not purchased, it is also not free. Businesses employ PR professionals to build positive publicity
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The idea behind integrated Marketing Communication is that people are more likely to remember a message when a single message is consistently communicated across a variety of promotional channels
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true; an increasingly competitive marketplace has convinced the marketing community of the need to plan promotional strategy using integrated marketing communications (IMC). IMC is “a planning process designed to ensure that all brand contacts received by a customer or prospect for a product or service are relevant to that person and consistent over time.
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The most important of the 4 Ps
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product; all decisions about the product underlie all other decisions that relate to how the organization’s product offering will be promoted, priced and dirstributed
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Product categories
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convenience, shopping or specialty; how the consumer views the product drives the marketing strategy
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convenience product
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relatively inexpensive product that a consumer purchases on a regular, routine basis (routine problem solving) without thought or effort – candy bars, toilet paper, soda, etc. found at gas stations/convenience stores
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shopping products
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consumers will expend effort to compare brands and investigate the features and price before purchasing (hair salon, furniture, jewelry); producers choose specific retailers to carry the product that support the brands positioning
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specialty products
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consumers expend time and effort; they want the brand due to the unique features and are not willing to substitute. Usually only one store will carry the brand (Tiffany Jewelry, Porsche Cars, Four Seasons Hotel)
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business product categories
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installations, accessory equipment, raw materials component parts, process materials, MRO (Maintenance, Repair, and operating) supplies and business services; these categories drive the marketing mix to the needs of the target market
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Installations
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major equipment or processes that are complex and expensive (telecommunications system for Toyota headquarters)
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Accessory Equipment
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less expensive, less complex equipment purchased more frequently (copiers or computer printers)
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Raw Materials
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the most basic materials used by producers (iron ore mined and used in the production of steel)
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component parts
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products purchased in finished form from other suppliers (tire or sound systems)
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process materials
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products used in production that become part of the finished product (sheet metal or plastic used in the car body)
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MRO Supplies
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products used in production that do not become part of the finished product (light bulbs in the manufacturing plant, computer paper)
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business services
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processes required in running the business that are often outsourced to other businesses (payroll, cleaning services)
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product class
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category like home appliances
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product category
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sub category of product class like kitchen products, laundry room products and whole home products
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product lines
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sub category of product category like refrigerator, dishwasher, microwaves
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product items
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the individual items sold; these are made up of the following characteristics: style, brand, and size
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narrow product mix
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when the producer has a limited number of products (Whirlpool)
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broad product mix
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when the producer has many product lines and categories (P&G)
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product line depth
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the number of closely related product variations that exist within a single product line; depth is shallow when they have few product lines
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companies introduce new products to
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increase sales, market share and/or presence in the marketplace
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continuous innovation
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the product and the way the user uses the product has not changed, but options and features have
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continuous/discontinuous innovation
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requires buyers to make changes to the way they buy and use the product
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New Product Marketing Development Process
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used when developing new products: (1) idea generation, (2) screening, (3) concept testing, (4) business analysis, (5) product development, (6) test marketing, (7) commercialization; often depicted as a funnel shape model since 9 out of 10 new product ideas fail
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AMA Brand Definition
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(a) name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers. The legal term for brand is trademark. A brand may identify one item, a family of items or all items of that seller If used for the firm as a whole, the preferred term is trade name
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What is a brand
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a promise or an organization’s comittment to its target market
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brand elements
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brand name, brand mark
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brand name
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the spoken part of the brand
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brand mark
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the symbol or design associated with the brand
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manufacturer’s brand
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national brand; owned and controlled by a producer and may not be distributed nationally (heinz, Ralph Lauren). These are found in multiple retail locations and have consistent images, positioning and price points
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private label brand
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aka private brands, store brands or distributor brands; owned or controlled by an intermediary, such as a distributor or a retailer. (Gap, Sears’ Kenmore appliances); usually less expensive but reliable vs. manufacturer’s brand
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generic product
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not branding the product; no product is truly generic as it usually has the grocery store logo and branding on it
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family brands
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not only identifies the trademark, but also the products (Whirlpool)
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individual brands
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when a company has several brands and markets them differently (Proctor & Gamble Laundry detergent has multiple brands)
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brand equity AMA
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“the value of a brand. From a consumer perspective, brand equity is based on consumer attitudes about positive brand attributes and favorable consequences of brand use” – the financial value of the brand
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brand value
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how much the brand is worth based on a combination of awareness, loyalty, quality and association
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Product Strategy
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Branding, Packaging
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packaging
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packaging is what catches the consumer’s eye; what differentiates it and influences the purchaser
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labeling
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legal requirements and promotional
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intangibility
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services; cannot be held, touched, examined or taken home and put on a shelf for the customer’s future use. An act that takes place at a certain point in time. The challenge is to make it tangible
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inseperability
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service that is both produced and consumed at the same time. Often referred to as a service encounter. ex. customer service center at a hotel
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perishability
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fleeting nature of a service; if a hotel room is not filled, the opportunity to fill doesn’t come back
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heterogeneity
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aka variability; services are difficult to standardize; snickers bar will taste the same everywhere, where as service at a hair salon could differ between locations; marketers attempt to provide standardization across locations
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Product Life Cycle
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(1) introduction, (2) Growth, (3) Maturity, (4) Decline; goal is to maintain sales and profitability for as long as possible
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(1) introductory phase
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product is introduced to the market; contains few competitors, profit is usually negative
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(2) growth
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industry grows as competitors enter the marketplace; customer demand increases
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(3) maturity
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demand is saturated and the market can no longer support new entrants; early maturity – industry sales remain high but industry growth slows, companies begin to expand, improve, adapt to stay in the game. At the mid-point sales peak and then decline; usually measured in months
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(4) Decline
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Strong companies remain in the market but must alter marketing strategies to remain profitable
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an indication that the industry is moving from growth to maturity is the point at which
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profit peaks and begins to decline
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adoption and difusion
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two concepts related to PLC
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Increase adoption rate when
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see page 57
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diffusion of innovation AMA definition
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“the process by which the use of an innovation is spread within a market group, over time and over various categories of adopters”; implies that a new product is an innovation even if the new product was an iteration
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Adoption categories
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innovators, early adopters, early majority and late majority, laggards
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innovators
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2.5% of adopters. Tend to be better educated, younger, less averse to risk. tend to influence others but should not be the main target of marketing
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early adopters
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13.5% that marketers target early; tend to be opinion leaders and can easily influence others; most product marketers aim for this marketing strategy
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early majority and late majority
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34% each for a total of 68%; both groups are critical to diffusion of innovation and influenced by the early adopters
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laggards
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16% slowest group; rarely targeted by marketers since they are difficult to influence and slow to adopt. the product has usually already reached decline at this point
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AIDA
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the process of influencing potential customers in the role of promotion
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advertising AMA
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“the placement of announcements and persuasive messages in time or space purchased in any of the mass media by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas” advertising is paid for by an identified sponsor and is usually communicated out
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personal selling AMA
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“selling that involves a F2F interaction with the customer” particularly important for B2B selling
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personal selling process
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pre-approach, approach, presentation, overcoming objections, closing the sale, and following up
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sales promotion AMA
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“the media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase customer demand, or improve product availability” usually spent on incentives like sampling, coupons, rebates – acts as a temporary incentive to buy now
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public relations AMA
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“that form of communication management that seeks to make use of publicity and other non-paid forms of promotion and information to influence the feelings, opinions, or beliefs about the company, its products or services or about the value of the product or service or the activities of the organization to buyers, prospects, or other stakeholders” PR is not free to the marketing organization; end result of good PR is positive public publicity
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All promotional tools except __________ are under the control of the marketing organization
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publicity; this is under the control of the media
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communication process
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sender, encodes, message, decodes, receiver, feedback to sender
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sender
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initiates the message to communicate
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encode
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message is transformed using signs, symbols, words, colors, and/or music to convey a message
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channel
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the way the encoded message is delivered (TV, radio, paper mailing)
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Noise
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things that make the message difficult to decode or get through a channel like static, slow internet, etc.
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decode
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effective communication takes place when the receiver decoded the message intended by the sender
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feedback
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sent back to the sender when the receiver successfully decoded the message like visiting the website or store
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integrated marketing communications AMA
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“a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time”
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promotional planning
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most effective when developed after a review of a company’s marketing plan and must share info like product, price, and where it can be purchased with the target market; also includes allocation of limited promotional dollars
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Is the product line (mix) broad or narrow on abbott.com
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broad; their product mix includes a variety of product categories that are not closely related
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Match the following business products with the standard B2B product categories: Cotton used in the production of denim
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raw materials. raw materials are the most basic materials used by producers
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Match the following business products with the standard B2B product categories: Nuts, bolts and oil that keep machinery operating
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MRO Supplies; these are products used that do not become part of the finished product
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Match the following business products with the standard B2B product categories: Computer chips for Dell Computer Co.
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Component Parts; products purchase in finished form from other suppliers
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Match the following business products with the standard B2B product categories: computerized accounting and inventory control system for a major retailer
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installations; major equipment or processes that are complex and expensive like a telecommunications system
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Match the following business products with the standard B2B product categories: thread and zipper in the production of jeans
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process materials; products used in the production that become part of the finished product
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Match the following business products with the standard B2B product categories: landscaping and consulting
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business services; required in running the business but are often outsourced
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Match the following business products with the standard B2B product categories: Lawn mowers and trimmers for a landscaping company
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accessory equipment; less expensive, less complex and is purchased more frequently
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Classify each activity according to the type of promotional tool it represents: a coupon is printed in the local newspaper offering 20% off the purchase price of a pool heater if the consumer also buys pool cleaning equipment (a) advertising, (b) personal selling, (c) sales promotion, (d) public relations
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(c) sales promotion; the media and nonmedia marketing pressure applied for a predetermined, limited period of time at a level of consumer, retailer, or wholesaler in order to stimulate trial
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Classify each activity according to the type of promotional tool it represents: direct mail letter inviting homeowners to call an 800 number for additional information (a) advertising, (b) personal selling, (c) sales promotion, (d) public relations
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(a) advertising; advertising is defined by the AMA as the “placement of announcements and persuasive messages in time and space purchased in any of the mass media by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas”
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Classify each activity according to the type of promotional tool it represents: company representatives give away drink cozies printed with the company name at a 5K benefit run (a) advertising, (b) personal selling, (c) sales promotion, (d) public relations
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(d) public relations; “that form of communication management that seeks to make use of publicity and other non-paid forms of promotion and information to influence the feelings, opinions or beliefs about the company, its products or services
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Classify each activity according to the type of promotional tool it represents: a company representative visits the consumer’s home to provide an estimate on purchasing solar panels to heat the pool (a) advertising, (b) personal selling, (c) sales promotion, (d) public relations
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(b) personal selling; “selling that involves face to face interaction with the customer”
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who is the sender? (a)the newspaper, (b) TV, (c) the internet, (d) Splash!
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Splash!; the company is sending the message, the other choices are channels for sending the message
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What is the message? (a)dolphins are mammals, (b) dolphins help clean pools, (c)Splash guarantees year-round use of your pool, (d) none of the above
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(c) Splash guarantees year-round use of your pool. Spash uses a cartoon dolphin as its company spokes character but other than that the dolphin has no relationship to the year-round use of the pool
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what channel does the sender use to transmit the message? (a) TV, (b) Radio, (c) the newspaper, (d) the internet
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(c) the newspaper; Splash runs a full page ad in the local newspaper that is published once a week. The other channels may or may not be appropriate for Splash
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What possible noise may interrupt the message? (a)static, (b) slow internet connection, (c) competing messages, (d) none of the above
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(c)competing message
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Splash is looking for feedback in terms of a purchase for the pool heating service
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true; they hoped for result in the communication process is a purchase of a product or a service. In this case, a pool heating service
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A product is: (a) a physical, tangible good like a car or a computer, (b) a service such as a pedicure or lawn maintenance, (c) an idea such as “Don’t drink and drive”, (d) all of the above
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(d) all of the above; product is a broad term that describes not only physical, tangible goods, but also products that are neither physical nor tangible such as services. In addition to goods and services, ideas are considered to be products that can be marketed to specific groups of targeted customers.
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When P&G offers retailers such as Target an advertising allowance to encourage them to include the new Febreze product in their weekly advertising inserts. P&G’s activity can best be described as (a) a pull promotional strategy, (b) personal selling, (c) a consumer promotion, (d) a push promotional strategy
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(d) a push promotional strategy; Companies use push promotional strategies that are intended to build demand within the distribution channel, while pull strategies target consumers
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Jerry usually buys charmin toilet paper. If charmin isn’t avialble he’d buy some other brand. To Jerry, charmin toilet paper is: (a) a specialty product, (b) a shopping product, (c) a convenience product, (d) an impulse item
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(c) a convenience product; this is a relatively inexpensive product that a consumer purchases on a regular, routine basis (routine problem solving), without much thought or effort. A specialty product involves time and effort as does a shopping product. D is fictious
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In the product life cycle mode, a peak in industry profits indicates (a) movement out of the introductory phase, (b)the end of the growth phase, (c) moving from early to late maturity, (d) decline
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(b) the end of the growth phase; An industry profit peak is an indicator that the growth phase is over. In the introductory phase the industry contains few competitors and sales are just beginning to take hold. Early in maturity, industry sales remain high but growth in industry sales slows. Eventually, as customer demand evolves, new products are introduced and demand for existing products slows. Decline is the phase where industry sales fall to the point where it is no longer the company’s best interest to continue to support the product
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The two lines depicted in the Product Life Cycle model represent: (a) market share and promotional expenditures, (b) industry sales and industry profit, (c) product sales and product profit, (d) marginal cost and marginal revenue
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(b) industry sales and industry profit; the two lines do represent sales and profit, but for the entire industry not for a specific product
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service organizations (e.g. Allstate Insurance) use service marks (e.g. the good hands symbol) to try to minimize (a) perishability, (b)intangibility, (c) heterogeneity, (d) inseparability
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(b) intangibility; This means that a service, unlike a good, cannot be held, touched, examined or taken home and put on a shelf for the customer’s future use. Perishability describes the fleeting nature of the service. Heterogeneity means that the services are difficult to standardize. Inseparability means that a service is produced and consumed at the same time
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The adopter category that most product marketers aim for in their marketing strategy is: (a) innovators, (b) early adopters, (c) early majority, (d) instigators
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(b) early adopters; these are the opinion leaders who easily influence others who follow their lead. Innovators are not always the best group to target for marketers since they tend to be on the outer edges of the majority and may not be influential enough to pull later adopters along with them. The early majority is easier to influence than the late majority although both groups are easily persuaded by early adopters
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The planning process that is designed to assure that all brand contacts received by a customer or prospect for a product or service are relevant to that person and consistent over time is referred to as (a) promotional strategy, (b) marketing planning, (c) integrated marketing communications, (d) target marketing
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(c) Integrated Marketing communications; this is the AMA definition of integrated marketing communications. While promotional strategy also involves making plans about marketing communications, it doesn’t address the issue of consistency over time. Marketing organizations increasingly make efforts to produce promotional campaigns that incorporate integrated marketing concepts
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When new movies are about to be released, the stars in the film go on the talk show circuit to promote the release of he film. This activity is best referred to as: (a) a waste of time, (b) advertising, (c) publicity, (d) public relations
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(d) public relations; public relations is “that form of communication management that seeks to make use of publicity and other non-paid forms of promotion and information to influence the feelings, opinions, or beliefs about the company, its products or services, or about the value of the product or service or the activities of the organization to buyers, prospects, or the stakeholders
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In the Whirlpool example, which of the following matches is NOT correct (a) product mix = all items under the heading of kitchen products, laundry room products and whole home products, (b) product line = refrigerators, (c) product category = side by side refrigerator, (d) all of the above are correct
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(c) product category = side by side refrigerator; this is not a correct definition of a product category. A product category is a general term to describe the market or industry. Kitchen products are a product category for Whirlpool