New product development process:
Idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, test marketing & commercialization.
Idea generation
is the systematic search for new-product ideas (Sources of new-product ideas :Internal & External)
Internal sources
refer to the company’s own formal research and development, management and staff, and intrapreneurial programs
External sources
refer to sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms
Concept testing
refers to testing new-product concepts with groups of target consumers
Product life cycle:
product development, introduction, growth, maturity and decline
1.Product development
Sales are zero and investment costs mount
Slow sales growth and profits are nonexistent
Rapid market acceptance and increasing profits.
Slowdown in sales growth and profits level off or decline
Sales fall off and profits drop
Chapter 10
is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service. It’s the only element that produces revenue.
Customer value based pricing
uses the buyers’ perceptions of value, not the sellers-cost, as the key to pricing. Price is considered before the marketing program is set.
Value-based pricing
is customer driven
Cost-based pricing
is product driven setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk 1. Design a good product 2. Determine product costs 3. set price based on cost 4. Convince buyer of products value.
Good value pricing
offers the right combination of quality and good service at a fair price
Everyday low price strategy
charging a constant everyday low price with few or no temporary price discounts
High-low pricing
charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items
Value-added pricing
attaches value-added features and services to differentiate offers, support higher prices, and build pricing power
Fixed costs are the costs that do not vary with production or sales level
rent, heat, interest, executive salaries
Variable costs are the costs that vary with the level of production
packaging, raw materials
Total costs
are the sum of the fixed and variable costs for any given level of production
Why costs diminish with production experience
Experience or learning curve is when average cost falls as production increases because fixed costs are spread over more units
Cost-plus pricing
adds a standard markup to the cost of the product a) Benefits: Sellers are certain about costs, Prices are similar in industry and price competition is minimized, Buyers feel it is fair. B) Disadvantages: Ignores demand and competitor prices
Breakeven analysis The break-even level or break-even point (BEP) represents the sales amount—in either unit or revenue terms—that is required to cover total costs (both fixed and variable). Profit at break-even is zero. Break-even is only possible if a firm’s prices are higher than its variable costs per unit.
Target profit pricing is the price at which the firm will break even or make the profit it’s seeking
Competition based pricing Setting prices based on competitors’ strategies, costs, prices, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.
Target costing starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.
Monopolies and pure competition Under pure competition, the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities. No single buyer or seller has much effect on the going market price. In a purely competitive market, marketing research, product development, pricing, advertising, and sales promotion play little or no role. Thus, sellers in these markets do not spend much time on marketing strategy. Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers.
Elastic and inelastic demand curves Inelastic demand occurs when demand hardly changes when there is a small change in price Elastic demand occurs when demand changes greatly for a small change in price
External influences on price decisions: a) nature of market and demand b) competitors costs, prices, and offers c) other environmental elements.
Chapter 11
Market skimming is a strategy with high initial prices to “skim” revenue layers from the market
Market penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share
Bundle pricing combines several products at a reduced price
Price adjustments: Discount and allowance pricing, Segmented pricing, Psychological pricing, Promotional pricing, Geographic pricing, Dynamic pricing, international pricing
Psychological pricing occurs when sellers consider the psychology of prices and not simply the economics
Promotional pricing is when prices are temporarily priced below list price or cost to increase demand (Loss leaders, Special event pricing, Cash rebates, Low-interest financing, Longer warrantees, Free maintenance)
Geographic pricing is used for customers in different parts of the country or the world
(FOB-origin pricing, Uniformed-delivered pricing, Zone pricing, Basing-point pricing, Freight-absorption pricing)
Discounts and allowances reduces prices to reward customer responses such as paying early or promoting the product
Reference prices are prices that buyers carry in their minds and refer to when looking at a given product
noting current prices, remembering past prices, assessing the buying situations
Loss leaders are products sold below cost to attract customers in the hope they will buy other items at normal markups.
Price changes: price cuts occur due to excess capacity and increased market share & price increase from cost inflation, increased demand and lack of supply.
Price fixing Sellers must set prices without talking to competitors
Predatory pricing Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business
Price discrimination: Robinson-Patman Act prevents unfair price discrimination by ensuring that the seller offers the same price terms to customers at a given level of trade
Price discrimination is allowed:
If the seller can prove that costs differ when selling to different retailersIf the seller manufactures different qualities of the same product for different retailers
Chapter 13
Retailing includes all the activities in selling products or services directly to final consumers for their personal, non-business use
Retailers are businesses whose sales come primarily from retailing
Classification of retailers:
product line & Relative pricing
1.Product Line:
Specialty stores Narrow product line with deep assortment, Department stores Wide variety of product lines, Convenience stores Limited line of high-turnover goods, Superstores Non-food goods, Category killers Deep in category with sales staff
2.Relative pricing:
Discount stores carry standard merchandise sold at lower prices with lower margins and higher volumes (Wal-Mart, target, Kohl’s)
Off-price retailers Sell merchandise bought at less that regular wholesale prices and sold at less than retail, often leftover goods, overruns, and irregulars obtained at reduced prices from manufactures or other retailers (Factory outlet, TJ Maxx, Costco, Sam’s)
Factory outlet is a manufacturer-owned store selling that firm’s stock directly to the public.
Warehouse club is a retail store, usually selling a wide variety of merchandise, in which customers are required to buy large, wholesale quantities of the store’s products, which makes these clubs attractive to both bargain hunters and small business owners. The clubs are able to keep prices low due to the no-frills format of the stores. In addition, customers may be required to pay annual membership fees in order to shop.
Corporate chains are two or more outlets that are commonly owned and controlled, Size allows them to buy in large quantities at lower prices and gain promotional economies
Voluntary chains are wholesale-sponsored groups of independent retailers that engage in-group buying and common merchandising
Retailer cooperatives is a group of independent retailers that band together to set up a joint-owned, central wholesale operation and conduct joint merchandising and promotion effort
Franchise organizations are based on some unique product or service; on a method of doing business; or on the trade name, good will, or patent that the franchisor has developed
Merchandising conglomerates A free-form corporation that combines several diversified retailing lines and forms under central ownership, along with some integration of their distribution and management functions.
Non-store retailing: is the selling of goods and services outside the confines of a retail facility. It is a generic term describing retailing taking place outside of shops and stores like mail order, television, phone & online.
Wholesaling: includes all activities involved in selling goods and services to those buying for resale or business use.
Selling and promoting: involves the wholesaler’s sales force help the manufacturer reach many smaller customers at lower cost
Buying assortment building involves the selection of items and building of assortments needed by their customers, saving the customers work
Bulk breaking involves the wholesaler buying in larger quantity and breaking into smaller lots for its customers
Warehousing involves the wholesaler holding inventory, reducing its customers’ inventory cost and risk
Transportation involves the wholesaler providing quick delivery due to its proximity to the buyer
Financing involves the wholesaler providing credit and financing suppliers by ordering earlier and paying on time
Risk bearing involves the wholesaler absorbing risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence
Market information involves the wholesaler providing information to suppliers and customers about competitors, new products, and price developments
Management services and advice involves wholesalers helping retailers train their sales clerks, improve store layouts, and set up accounting and inventory control systems
Chapter 14
The Promotion Mix is the specific blend of advertising, public relations, personal selling, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships
Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor (broadcast, print, internet, outdoor)
Sales promotion is the short-term incentive to encourage the purchase or sale of a product or service (discounts, coupons, displays, demonstrations)
Personal selling is the personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships (sales presentations, trade shows, incentive programs)
Publicity/PR Publicity is the act of attracting the media attention and gaining visibility with the public, it necessarily needs the compliment of the media it cannot be done internally ) is the process of making service known by the people or creating awareness or letting your product known or your company it is the publicist that carries out publicity while PR is the strategic management function that helps an organization communicate, establish and maintain relation with the important audiences, It can be done internally without the use of media
Direct Marketing involves making direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships—through the use of direct mail, telephone, direct-response television, e-mail, and the Internet to communicate directly with specific consumers (catalog, telemarketing, kiosks)
Why mass marketing is a thing of the past Mass marketing sold standardized mass-produced products to a similarly standardized, undifferentiated mass of consumers. Mass marketing was: “Top-down – We know what’s good for you (and profitable for us!)Company-out – We developed it; produced it. It must be good. Buy it. Product-oriented – Aren’t these terrific features! Consumer wishes not the highest priority – Remember “New Coke”?”
Integrated Marketing Communications is the integration by the company of its communication channels to deliver a clear, consistent, and compelling message about the organization and its brands
The communication process (Identify the target audience, Determine the communication objectives, Design the message, Choose the media, Select the message source) Sender, Receiver, Field of experience, Encoding, Message, Media, Decoding, Noise & Response and feedback
Steps in developing effective Marketing communication
Identify the target audience – Like all marketing programs, marketing communications should begin with a specific audience in mind. Who is the intended recipient of a company’s messages? Who marketers target will dictate what is said, how it is said, when it is said, and where it is said.
Establish goals & objectives – Effective marketing communications also begin with the end in mind. What does the company want to achieve with its communications efforts? More specifically, how does it want its target audience to respond?
Develop a compelling message – Once marketers have identified its target and objectives, they must then design a provocative message that draws attention, piques interest, and spurs action. An effective message will include what a company will say, how it will say it, how it will be formatted, and who will deliver it.
Select communications channels – Marketers can select from five communication tactics to deliver its message: Advertising, PR, direct marketing, sales promotion, and personal selling. Some of these channels are personal (i.e., email); others are not (i.e., paid media). Marketers must choose the most efficient channels of communication to deliver its message.
Determine how much to spend – Most marketing organizations do not have carte blanche when it comes to marketing spend. Given that, marketers must determine how much of its budget to allocate towards marketing communications. This decision can be based on how much it can afford, a percentage of sales, or event a competitor’s spending on communications.
Decide on a marketing communications mix – Depending on the market and target audience, some communications channels can be more effective than others. Marketers must find the most efficient combination of channels – a.k.a. the marketing communications mix – necessary to achieve its goals and objectives.
Measure and optimize – Like all marketing programs, an effective marketing communications program should be designed as a continuous improvement process. Marketers should regularly measure the effectiveness of its marketing communications mix (i.e., message recall, message frequency), and make changes as needed.
Determining the communication objectives Marketers seek a purchase response that results from a consumer decision-making process that includes the stages of buyer readiness
AIDA model: Get Attention, Hold Interest, Arouse Desire & Obtain Action.
Message content is an appeal or theme that will produce the desired response (Rational appeal, Emotional appeal, Moral appeal)
Message format color, music, time etc.
Opinion leaders are people within a reference group who, because of their special skills, knowledge, personality, or other characteristics, exerts social influence on others
Buzz marketing involves cultivating opinion leaders and getting them to spread information about a product or service to others in their communities
Spokesperson is someone who is willing to stand up and enunciate your group’s successes and achievements. (usually a well known person)
Budgeting techniques: Push strategy involves pushing the product to the consumers by inducing channel members to carry the product and promote it to final consumers.
Pull strategy is when the producer directs its marketing activities toward final consumers to induce them to buy the product and create demand from channel members.
Social responsibility in marketing communications Communicate openly and honestly with consumers and resellers, Avoid deceptive or false advertising, Avoid bait-and-switch advertising, Conform to all federal, state, and local regulations
Self-regulation adjusting, ruling, or governing itself without outside interference; operating or functioning without externally imposed controls or regulations: a self-regulating economy; the self-regulating market.
Chapter 12
Supply chains: it suggests that raw materials, productive inputs and factory capacity should serve as the starting point for market planning. Also called demand chain because it suggests a sense and response view of the market.
Supply chain partners
Upstream and downstream partners
Intermediaries: create greater efficiency in making goods available to target markets. Intermediaries usually offer the firm more than it can achieve through their contacts, experience, specialization, and scale of operation.
How channel members add value – figure 12.1: they add value by bridging the major time. Place, and possession gaps that separate goods and services from those who use them.
The role of intermediaries in: Costco is a marketing intermediary wholesaler because they purchase the items from a supplier and then sell the items in their warehouse to consumers.
Information: Gathering and distributing information about consumers, producers, and other actors and forces in the marketing environment needed for planning and aiding exchange.
Promotion: developing and spreading persuasive communications about an offer.
Negotiation: Reaching an agreement on price and other terms so that ownership or possession can be transferred.
Physical distribution: transporting and storing goods.
Risk taking: assuming the risks of carrying out the channel work.
Financing: acquiring and using funds to cover the costs of the channel work.
Direct and indirect distribution systems: Direct- a company sells directly to the customer, A marketing channel that has not intermediary levels. Indirect- Uses one or more levels of intermediaries to help bring its products to final buyers. A marketing channel containing one or more intermediary levels.
Channel conflict: Disagreements among marketing channel members on goals, roles, and rewards.
Vertical marketing systems: A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel members owns the others, has contracts with them or has so much power that they all cooperate.
Franchises: a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process.
Horizontal marketing systems: A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.
Intensive, selective, and exclusive distributions: Intensive- Stocking the product in as many outlets as possible. Exclusive- Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories. Selective- The use of more than one but fewer than all of the intermediaries who are willing to carry the company’s products.
Logistics: planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.
Just-in-time: Logistics system in which producers and retailers carry only small inventories of parts or merchandise, often enough for only a few days of operation. New stock arrives just when needed rather than being stored until bought. This system results in substantial savings in inventory carrying and handling costs.
Inventory management: Firms must balance the cost of carrying larger inventories against resulting sales and profits.

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