Marketing Chapter 11, 12, 13

Line Extension
Development of a product that is closely related to existing products in the line but meets different customer needs
Product Modification
Change in one or more characteristics of a product
Quality Modifications
Changes relating to a product’s dependability and durability
Functional Modifications
Changes affecting a product’s versatility, effectiveness, convenience, or safety
Aesthetic Modifications
Changes to the sensory appeal of a product
Genuinely New Product
Product that does not exist in the marketplace
Radically New Product
Product that may exist in one company but may be a new product to another company
New-Product Development Process (IG, S, CT, BA, PD, TM, C)
Seven-phase process for introducing products (Idea Generation, Screening, Concept Testing, Business Analysis, Product Development, Test Marketing, Commercialization)
1: Idea Generation
Seeking product ideas to achieve objectives
Internal Suggestion Box
Employees may get bonuses for successful suggestions (ex: car dealerships)
2: Screening
Choosing the most promising ideas for further review (does product match organization’s objectives + resources)
3: Concept Testing
Seeking potential buyers’ responses to a product idea, small sample is presented with idea through written or oral description (generally low-cost)
4: Business Analysis
Evaluation the potential contribution of a product idea to the firm’s sales, costs, and profits (will we make profit? what will the costs be? will we need more workers? buy another facility? are additional resources necessary?)
5: Product Development
Determining if producing a product is technically feasible and cost effective (idea is converted into a tangible model), performance, safety, convenience are tested
6: Test Marketing
Introducing a product on a limited basis to measure the extent to which potential customers will actually buy it (conducted only after product has gone through development)
7: Commercialization
Deciding on full-scale manufacturing and marketing plans and preparing budgets (marketers must eventually make decisions about warranties, repairs, replacement parts)
Product Differentiation
Creating and designing products so that customers perceive them as different from competing products
Product Quality
Characteristics of a product that allow it to perform as expected in satisfying customer needs
Product Positioning
Creating and maintaining a certain concept of a product in customer’s minds (ex: slotting fees)
Product Repositioning
If product market is decreasing, a company may target the product at a different marketing mix
Phase-Out Stage
Product declines without a change in the marketing strategy (ex: Nikon cameras sold until supplies ran out)
Run-Out Stage
Exploits strengths left in product (ex: prices of older models of comps are reduced to increase sales)
Immediate Drop
Setting a date to take the product off the market
The value paid for a product in a marketing exchange
Demand Curve
A graph of the quantity of products expected to be sold at various prices if other factors remain constant
Fixed Costs
Costs that do not vary with changes in the number of units produced or sold
Variable Costs
Costs that vary with production (ex: raw materials)
Pricing Objectives (S, P, RoI, MSG, CR, SQ, PQ)
May be different or the same story (Survival, Profit, Return on Investments, Market Share Goals, Cash Recovery, Status Quo, Product Quality)
1: Survival
Companies setting prices low to attract sales (ex: deal of the day/week). May lose money on one product but customers will buy more once already inside the store
2: Profit
Companies price products with “profit maximization”
3: Return on Investments
Companies price products with ideal rate of return on cost
4: Market Share Goals
Price products to maintain/increase (dropping price) market share
5: Cash Recovery
Invest inventory, sell inventory (drop prices)
6: Status Quo
Company tries to maintain status/reputation
7: Product Quality
Companies price products either high or low (at extremes) (ex: Wal-Mart vs Coach)
Elastic Demand
Product that consumer will increase consumptions of under favourable conditions (ex: airline tickets)
Inelastic Demand
Product that, regardless of price fluctuations, will sell (ex: toilet paper)
Marginal Revenue
Change in total revenue occurring when a firm sells an additional unit of a product
Marginal Cost
Extra cost incurred by producing one more unit of a product
Break-Even Point
Point at which a company breaks even (costs of product production = revenue earned from selling product)
Internal Reference Price
A price developed in the buyer’s mind through experience with the product
External Reference Price
A comparison price provided by others
Price Discrimination
Employing price differentials that injure competition by giving one or more buyers a competitive advantage
Trade Discount
Reduction off the list price a producer gives to an intermediary for performing certain functions
Quantity Discounts
Deductions from the list price for purchasing in large quantities
Cumulative Discounts
Quantity discounts aggregated over a stated time period
Noncumulative Discounts
One-time price reductions based on the number of units purchased, the dollar value of the order, or the product mix is purchased
Cash Discount
A price discount given to buyers for prompt payment or cash payment
Seasonal Discount
A price reduction given to buyers for purchasing goods or services out of season
Concession in price to achieve a desired goal
Geographic Pricing
Reductions for transportation and other costs related to the physical distance between buyer and seller
F.O.B. Factory
Price of merchandise at the factory before shipment
F.O.B. Destination
A price indicating the producer is absorbing shipping costs
Uniform Geographic Pricing
Charging all customers the same price, regardless of geographic location
Zone Pricing
Pricing based on transportation costs within major geographic zones
Supplementary Services
Supportive one related to the core service that is used to differentiate the service bundle from that of competitors
Product Manager
Person within an organization responsible for a product, a product line, or several distinct products that make up a group
Venture Team
Cross-functional group that creates entirely new products that may be aimed at new markets
Non-Price Competition
Emphasizes factors other than price to distinguish a product from competing brands
Value-Conscious Customers
Customers concerned about value and price of a product
Sherman Anti-Trust Act
Courts and regulatory agencies determine under what circumstances channel management practices violate his underlying principle and must be restricted, prohibits contracts, combinations, or conspiracies to restrain trade, calls monopolizing or attempting to monopolize a misdemeanor offense
Robinson Patman Act
Prohibits price discrimination that lessens competition among wholesalers or retailers, prohibits producers from giving disproportionate services of facilities to large buyers
Supply Chain
Things that take place before product is produced (buying supplies, raw materials, machinery)
Operations Management
Total set of managerial activities used to transform resources into goods and services
Logistics Management
Planning, implementing, and controlling of efficient/effective flow or products from time of production to consumption
Distributing products from production to consumer
Deals with: credit options, inventory products, advertising, dispense information, shelving distribution, availability, shipping options, product assembly
Traditional Channel
Manufacturer –> Wholesale –> Retail –> Ultimate Consumer
Direct Channel
Manufacturer –> Ultimate Consumer

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