Flashcards and Answers – Marketing Midterm

- A business firm segments its markets so it can respond more effectively to the wants of groups of potential buyers and thus increase its sales and profits - Nonprofit: also segment clients they serve to satisfy client needs more effectively while achieving the organizations goals

involves aggregating prospective buyers into groups that 1. Have common needs and 2. Will respond similarly to a marketing action Aggregate consumers into groups (segments) that have similar needs and will react similarly to a marketing action. Changes: trends, new segments-- do research every year or every 18 months

are the relatively homogenous groups of prospective buyers that result from the market segmentation process, each market segment consists of people who are relatively similar to each other in terms of their consumption behavior

: a firm using different marketing mix activities like product features and advertising to help consumers perceive the product as being different and better than competing products? may involve physical features, size, color or nonphysical ones like image or price

Linking needs to actions - The process of segmenting in a market and selective specific segments as targets is the link between the various buyers needs and the organizations marketing program - Marketing segmentation leads to tangible marketing actions that can increase sales and profitability - Stresses the importance of grouping people or organizations in a market according to the similarity of their needs and the benefits they are looking for in making a purchase - Stresses such needs and benefits must be related to specific marketing actions that the organization can take, such as a new product or special promotion

a framework to relate to market segments of potential buyers to products offered or potential marketing actions

One size fits al mass markets no longer exist! Recession and size of middle-income market has shrunk? offer different products to reach 1. High-income and 2. Low-income families (P&G strategy) - A business goes to the trouble and expenses of segmenting its markets when it expects that this will increase its sales, profit, and return on investment - When expenses are greater than the potentially increased sales from segmentation a firm should not attempt to segment its market - THREE SPECIFIC SEGMENTATION STRATEGIES: 1. One product and multiple market segments, 2. Multiple products and multiple market segments, and 3. Segments of one, or mass customization

when an organization produces only a single product or service and attempts to sell it to two ore more market segments it avoids the extra costs of developing and producing additional versions of the product

multiple products aimed at multiple market segments, more expensive than producing only a single product but its very effective if it meets customers' needs better, doesn't reduce quality or increase price, and adds to sales revenues and profits—

each customer has unique needs and wants and desires special TLC means tailoring goods or services to the tastes of individual customers on a high-volume scale. Mass customization is the next step beyond build-to-order (BTO) manufacturing a product only when there is an order from a customer

- the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently - Increased customer value can be through: more products, improved quality on existing products, lower prices, easier access to products through improved distribution

when the increased customer value involves adding new products or a new chain of stores, the product differentiation-market segmentation trade-off raises a critical issue: are the new products or new chain simply stealing customers and sales from the older, existing ones - harms original product--> switching to a new product completely - marketers do not want this, want to grow the market - instead of expanding market, flipping between new product and old product-- consumers only buy new product and old product suffers

- 1. Group potential buyers into segments, 2. Group products to be sold into categories, 3. Develop a market-product Grid and estimate the size of markets, 4. Select Target markets, 5. Take marketing actions to reach target market: these steps link the market needs of customers to the organizations marketing program

- Is it possible to segment and is it worth doing- important questions - Criteria to use in forming the segments (5 essential criteria) * Simplicity and cost-effectiveness of assigning potential buyers to segments * Potential for increased profit: if opportunity or potential for future profit and return on investment (ROI) is maximized without segmentation, don't segment * Similarity of needs of potential buyers within a segment * Difference of needs of buyers among segments: if the needs of the various segments aren't very different, combine them into fewer segments because different segments usually require a different marketing action that in turn means greater costs. If increased sales don't offset extra costs, combine segments and reduce the number of marketing actions * Potential of a marketing action to reach a segment, if no action exists, don't segment.

geographic segmentation (based on where prospective customers live or work: region, city, size), demographic segmentation (based on some objective physical (gender, race) measureable (age, income) or other classification attribute (birth era, occupation, marital status, education) of prospective customers, psychographic segmentation (based on subjective mental or emotional attributes [personality], aspirations [lifestyle], or needs of prospective customers, and behavioral segmentation (based on some observable actions or attitudes by prospective customers: retail store type, direct marketing, product features, usage rate, user status, awareness/intentions)

the quantity consumed or patronage (store visits) during a specific period - Usage rate is sometimes referred to in terms of the 80/20 rule: a concept that suggests 80% of a firms sales are obtained from 20% of its customers, suggest that a small fraction of customers provides a large fraction of the firm's sales. only 20% of customers make up 80% of revenue - Frequency marketing: focuses on usage rate and give programs to encourage use and create loyal customers

a concept that suggests 80% of a firms sales are obtained from 20% of its customers, suggest that a small fraction of customers provides a large fraction of the firm's sales

Group products to be sold into categories (Step 2)

- In a complete market-product grid analysis, each cell in the grid can show the estimated market size of a given product sold to a specific market segment - Developing a market-product grid means identifying and labeling the markets (horizontal rows) and product groupings (vertical columns)

- If choose too narrow a set of segments, a firm may fail to reach the volume of sales and profits it needs - If it selects too broad a set of segments, it may spread its marketing efforts so thin that the extra expense exceeds the increased sales and profits

Two steps: 1. Divide the market into segments 2. Actually pick the target segments 5 criteria - Market size: whether its worth going after or if there is a market for the product - Expected growth: future growth: growing market--> more competition so maybe prefer niche marketing - Competitive position: is there a lot of competition in the segment now or is there likely to be in the future—less competition the more attractive a segment is - Cost of reaching the segment: a segment that is inaccessible to a firm's marketing actions should not be pursued, can a firm afford to reach the segment - Compatibility with the organization's objectives and resources Size of segment Expected growth of segment Competitive position Cost of reaching the segment Compatibility with the organization's objectives and resources

- The purpose of developing a market-product grid is to trigger marketing actions to increase sales and profits - Keep in mind what your headquarters are doing, what competitors are doing, and what might be changing in the area you are serving/targeting In most segmentation situations, a single product does not fit into an exclusive market niche, product lines and market segments overlap

Synergies—efficiencies Marketing synergies: run horizontally across the grid, each row represents an opportunity for efficiency in terms of a market segment Product synergies: running vertically down the market-product grid, each column represents an opportunity for efficiency in research and development and production

the place a product occupies in consumers' minds on important attributes relative to competitive products - based on substantive brand value: memorable and distinctive (differentiate it from competition) Differentiation is the foundatin of positioning Positioning is Perceptual What do customers think or feel? Perception is Reality! Positioning is Directed to Target Market(s) Mass marketing is ineffective! Positioning is Relative to Competition How are they alike or different from competition? What are your points of difference? can you make competitors point of difference and apply your positioning (increase demand) - comparrison to competition can show potential alternatives

changing the place a product occupies in a consumers' mind relative to competitive products - Head-to-head positioning: involves competing directly with competitors on similar product attributes in the same target market - Differentiation positioning: involves seeking a less-competitive, smaller market niche in which to locate a brand - Positioning statement—converts positioning ideas into a succinct statement. Used not only internally within the marketing department but also for others like R and D engineers or ad agencies Repositioning - Changing the place an offering occupies in a consumer's mind relative to competitive products. *Used to revive an ailing brand Original positioning may be obsolete * Fix a new market entry (positioning is unclear/confusing) * The Challenge: Changing perceptions of a brand forged over years of advertising Positioning - The place a product, group of products, and/or brand occupies in consumers' minds on important attributes relative to competitive products. Based on substantive brand value Memorable AND distinctive

Steps to discover perceptions in the minds of potential customers 1. Identify the important attributes for a product or brand class 2. Discover how target customers rate competing products or brands with respect to these attributes 3. Discover where the company's product or brand is on these attributes in the minds of potential customers 4. Reposition the company's product or brand in the minds of potential customers

a means of displaying or graphic in two dimensions the location of products or brands in the minds of consumers—enables a manager to see how consumers perceive competing products or brands as well as the firms own product or brand

- Market segmentation involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action. Organizations segment their markets when it increase their sales, profits, and ability to serve customers better 5 steps involved in segmenting and targeting markets - 1. Group potential buyers into segments, buyers within a segment should have similar characteristic to each other and respond similarly to marketing actions - 2. Put related products to be sold into meaningful groups - 3. Organizations develop a market-product grid with estimated sizes of markets in each of the market product cells of the resulting table - 4. Selecting the target market segments on which the organization should focus - 5. Involves taking marketing mix actions often in the form of a marketing program, to reach toe target market segments The bases used to segment consumer and organization business markets - Geographic, demographic, psychographic, and behavioral - Business markets use the same bases except for the psychographic ones Market-product grid - Use five key criteria to segment markets whose groupings appear in rows of the market-product grid - Groups of related products appear in the columns - After estimating the size of the market in each cell in the grid, they select the target market segments on which to focus - Then identify marketing mix actions often in the form of a marketing program to reach the target market most efficiently How marketing manager's position products in the market place - Often locate competing products on two dimensional perceptual maps to visualize the products in the minds of consumers then try to position new products or reposition existing products in this space to attain maximum sales and profits

1. identify market needs: benefits in terms of: product features, expense, quality, savings in time and convenience 2. link needs to actions: process of segmenting and targeting markets 3. execute marketing program: A marketing mix in terms of the 4 ps

Segment market: Divide larger market into groups with similar needs and who will react similarly to a marketing action. Target marketing: Evaluate segments and select one or more segments to enter. Positioning: Create a clear and distinctive place in consumers 'minds relative to competing products.

Specifically target market segments: 1 product with multiple target segments Multiple products/multiple segments Mass customization Tums: stomach indigestion AND calcium replacement Dell: mass customization, computer built for you ^^ (one product with multiple target segments)

Similarity of needs of potential buyers within a segment. Difference of needs of potential buyers among segments. (if difference is great enough, separate into different segments of potential buyers among segments) Simplicity and cost of assigning potential buyers to segments. Segment must have enough potential for increased profit and ROI. ( if unable to reach/hard to reach/ not that many in that segment, do not segment. need a segment large enough for profit returns ROI) Feasibility of reaching a chosen segment with a particular marketing action.

geography income: china/mexico has to use this because multigenerational households- cannot use age segmentation demographics benefits usage patterns psychographics/life styles:opinions, interests, and activities: lifestyle segmentation provides isight into consumers motivations, what makes up lifestlye (hallmark [emotions] commitment levels

Age Gender Family Size Race Marital Status Income Education Occupation multivariable: more than one variable used for segmentation

Country Region City Climate Population Density: olive garden: smooth marinara in the north, Chunky marinara in the south

Behavioral: Heavy/medium/light users Nonusers Brand-loyal users Switchers/Variety seekers: hard to keep, like to switch around, influenced by price, coupons, get bored Emergent Consumers: due to life cycle events, constant influx of first-time buyers (cribs, dorm stuff, class-ring, wedding industry)

A single firm can't satisfy all consumers' needs so marketers select a... Target market - a specific group of potential consumers

Define the product for consumers. Help consumers remember the product. Must communicate product attributes that are relevant to consumers and that DIFFERENTIATE it from competition. Positioning must be believable and sustainable!

Attribute: A product is associated with an attribute, product feature, or customer benefit. Price and Quality: This positioning base stresses high price as a signal of quality or emphasizes low price as an indication of value. Competition: A product is positioned directly against or away from one or more competitors. Product User: This positioning base focuses on a personality or type of user.

help consumers know what segment it belongs to

most powerful, what consumers value/need

Product life cycles are becoming shorter Technology and consumer priorities are changing rapidly. Company can gain a foothold in a new market. New products can help keep overall corporate sales up when other products or categories fail.

Convenience Goods • Shopping Goods • Specialty Goods • Unsought Goods These classifications differ in terms of : 1. Effort spent on the purchase decision 2. Frequency of purchase 3. Brand loyalty and acceptance of substitutes

Consumption Effects Define Newness LOW DEGREE OF CHANGE BEHAVIOR AND LEARNING NEEDED BY CONSUMER-->HIGH BASIS OF COMPARISON Definition Examples Marketing emphasis CONTINUOUS INNOVATION Requires no new learning by consumers Sensor and New Improved Tide Generate awareness among consumers and obtain widespread distribution DYNAMICALLY CON- TINUOUS INNOVATION Disrupts consumer's normal routine but does not require totally new learning Electric toothbrush, compact disk player, and automatic flash for cameras Advertise benefits to consumers, stressing point of differentiation and consumer advantage DISCONTINUOUS INNOVATION Establishes new consumption patterns among consumers VCR, PDA, and home computer Educate consumers through product trial & personal selling

New Product Strategy Development: Defines the role of new products in terms of the firm's overall objectives. This stage utilizes SWOT and environmental scanning to determine opportunities to exploit in the marketplace. Idea Generation: 3,000 raw ideas--> 1 usable/marketable product The development of a pool of ideas and concepts that are candidates for new products. - many ideas come from R, customers, retailers/suppliers, consultants Screening and Evaluation: The internal and external evaluation of new product ideas to eliminate those that require no further attention. - kills off bad ideas (internal and external evaluation of product ideas) Where are our target markets geographically? manufacturing costs, equipment? packaging cost? ADV/promotion money (1-5 years) market research money? market share we will have in particular markets? estimate sales--> selling price, profit margins?

Screening and Evaluation Concept Testing: In general, concept testing asks consumers these types of questions: 1. Is the idea easy to understand? 2. Do you perceive distinct benefits for this product over those products currently on the market? 3. Do you find the claims about this product believable? 4. Would you replace your current brand with this new product? Screening and Evaluation (cont.) 5. 6. 7. 8. Is the price reasonable in relation to the value? Who would buy the product? Would you buy the product? How often would you buy the product?

Business Analysis: Last opportunity to kill project before significant capital is invested. Analysis includes marketing strategy review, economic payouts, legal review. Development: does the product perform, does this product meet its concepts/ does it perform up to concepts/standards/criteria - full scale model of product, small quantity--> working on shelf stability/shelf-life, no graphics/ color on packaging * local homies test (LHT): family/friends to test product, use it for certain time period then give feed back Product prototype is developed and tests are conducted to ensure that it meets the standards set for it. manufacturing costs: loss of control/quality/ propriety: manufacturers know how to make your product, have to pay them to use their machinery

Yields a more reliable forecast of future sales than no testing. • Can pre-test alternative marketing plans. • May discover a product fault missed in the product development stage. • Discover clues to distribution problems. • Gain better insights into the behavior of different market segments. * Provides a show of possible marketing forecast Test phase: usually 4-6 small cities, cannot guarantee accuracy but more reliable than not testing--> marketing forecast

*Problem of obtaining a set of markets that is reasonably representative of the country as a whole. • Problem of translating national media plans into local equivalents. * Problem of translating national media plans into local equivalents • Problem of estimating what is going to happen next year based on this year's competitive environment. • Problem of competitive knowledge of your test. • Problem of extraneous and uncontrollable factors.

Alternatives to the traditional 12-18 month market test (1-3 million dollars): • SIMULATED TEST MARKETS ($250,000) Research firms shows a consumer sample advertising for a variety of products, including the new product being tested. The sample group is given a small amount of money and then invited into a laboratory store where they can either keep the money or use it to buy items. Based upon their purchases researchers take this data and massage it with company and historical data to obtain computer-generated sales projections. • CONTROLLED-STORE TEST MARKET (place+ price controlled) A research firm manages a panel of stores that will carry the new product for a fee. Shelf position, number of facings on the shelf, pricing and displays are controlled by the research company. Sales results are measured through scanning data at the checkout. • FOREIGN FLING (weakest) Try a new product in overseas market(s), then rollout globally. - cultural differences--> may not be successful in Us just because successful overseas

Trial: first purchase of a product High trial, high repurchase rate-GO High trial, low repurchase rate-Drop or redesign product Low trial, high repurchase rate- Increase advertising and sales promotion (means once a few tried it, loved and repurchased it) Low trial, low repurchase rate- Drop product

The stage of the New Product Process that positions and launches a new product in full- scale production and sales. Most expensive because have to build up inventory levels Issues: National or regional rollout Slotting Fees: shelf space and time limit (3-10,000$ per slot per store), keep small businesses off the shelves Failure Fees: if product doesn't sell, store took a risk and lost money so owe money to store for not having product sell (assumed risk)

little time/effort put in purchase decision process bread, milk

wil accept substitutes, other brands considered

will nnot accept substitute products or brans, higher consequences, usually more expensive. viewed as specialty= produce wider variety of goods so less likely to switch, more options with same brand/look/prestige

a consumer on their own does not go out and seek, requires a lot of information and selling - life insurance, funeral plot

creates new consumption patterns among consumers, requires huge amount of new learning

role for product, takes about 3,000 roughs to get 1 good commercial idea

- relevancy through product life cycle (skillful execution) (job and ethnic diversity, personalized barbie, couture barbies, international, sell 2 every second world-wide)

Products can come back from/ out of decline stage by repositioning or a new strategy (bayer aspirin) if none viable, drop the product describes the stages a product goes through in the market place: introduction, growth, maturity, and decline - Total industry sales revenue and total industry profit represent the sum of sales revenue and profit of all firms producing the product Introduction: overall marketing objective- promote awareness and gain product trial, very little profit made because spending money on ADV, promo, and development (generate product category demand: Primary) Growth: Goal- differentiate our brand from competition (points of difference), efforts to create long-term relationships with distributors Maturity: main goal- maintain brand loyalty and market share, prices fall, profit margin shrinks, prices continuing to fall "the shakeout": only the strong competitors survive because margins slim Decline: objective- deletion/harvesting: decrease ADV but keep the product for loyal customers, (due to technological advances, consumer taste-shifts, increased competition)

- intermediary between retailer and seller/company

- brand centered, demand for actual brand (based on attributes)

Sales volume: number of brand users X usage rate per user Expand number of brand users (fedex) - convert non-users of category -enter new market segments (not changing the product) - win competitors customers - repositioning:- Usually an attempt to bolster sales - Product repositioning: changes the place a product occupies in a consumer's mind relative to competitive products- Changing the value offered—decide to change the value it offers buyers and trade up or down -Trading Up: involves adding value to the product or line through additional features or higher quality materials -Trading Down: involves reducing the number of features, quality, or price, also exists when companies engage in downsizing—reducing the package content without changing package size and maintaining or increasing the package price a company tries to find new customers, increase a products use among existing customers, or create new use situations

(campbells) - more frequent use - more usage per occasion - new and more varied uses

- actually change the product/ parts of it/ attributes - change product characteristics to increase sales volume : involves altering one or more of a products characteristic such as quality, performance, or appearance to increase the products value to customers and increase sales - Product bundling: the sale of two or more separate products in one package - New features, packages, or scents can be used to change a products characteristics and give the sense of a revised product Strategies - product quality - feature improvement: drawback- easily duplicated, short time period before competitors catch on -style improvement

- has to remain consistent across 4 p decisions, developed through multiple campaigns over time if marketers do not establish brand personality via ADV, promo, marketing decisions/strategies, the consumer will-- dangerous! *cant have brand equity without brand awareness - perceived quality want quality to exceed perception brand loyalty: advocates, repeat purchases, WOM importance A set of human characteristics associated with a brand name. Brand Personality creates expectations about performance, benefits, and key characteristics. brands are like sponges, absorb

- logo change 6/7/12 want consistency

- more leverage with the trade (retailers) - company can more easily launch brand and line extensions: trust and brand power Company has more leverage with the trade. • Company can charge a higher price than competitors. • Company can more easily launch brand and line extensions. • Affords company some defense against price competition.

- helps build shelf space - same brand name in new market, expanding into new market segments within same product class

Bic-- pantyhose Levi's-- tailored suits Clorox-- laundry detergent

current brand name into new/different product class

Ford (brand): focus, explorer, fusion, escape (sub-brands)

Multiproduct: includes brand/product extensions- family name: promotes other products of same brand Negative: diluting- what is your expertise Advantages: Promotion of one item promotes the firm's other products. Facilitates acceptance of new products by retailer and consumer. Efficiency of advertising dollars. Disadvantages: Poor performance of one item may negatively impact others in line. Dilute image of product line. Multibranding: 1 company with many brands, individual branding Individual Branding) Advantages: Each brand is unique to each market segment. No risk that product failure will affect others in line. Disadvantages: No advertising/promotion efficiency. Scattering of resources over several brands instead of building a few brands to highly profitable levels. Private branding: sell product in name of retailer - higher profit margin, not as much ADV Mixed branding: sells under manufacturer and retailer, combination of manufacturer branding strategy and private branding strategy-- sell product to retailer for retailer price (cheaper, 2 different market segments, has own brand of another existing brand NOT a generic brand though (generic has no brand name on it) example: Crest (manufacturer brand) CVS toothpaste (private, under reseller name) toothpaste: no name brand, generic, straight up

ad agency and company work on this together - 15% of typical product cost spent on packaging Benefits - Functionality: tamper proof? sealed? Protection - Communication tool: what is inside, ouces, pack size - Perceptual: color connotations Factors considered - packaging cost per unit - image sought? - sizes, colors, shapes should be used?

- the more intermediaries between manufacturer and consumer, the less control the manufacturer has - everyone in channel gets profit so more intermediaries means less money/profit for manufacturer - channels and manufacturer= long term relationships

- gather materials, store them, and distribute them - buy and sell - can eliminate middle man but NOT their function - generally in a direct channel, manufacturer does job of middle man/intermediary: promotion, customer service, repair shop

example (outlet malls) - reach different buyers by using 2 or more different types of channels for the same basic product: growing in popularity main store: in style, current, expensive, high quality vs. (conflict because selling to different markets) outlet store: may be out of style, clothes that didn't sell at main store, overflow, less thread count/ decreased quality

Producer, wholesalers, retailers, act as a unified system, eliminates conflict/ miscommunication, time delays corporate: related to each other by ownership (control!) Contractual: related via contracts Administered: related to each other by channel leader

: a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in exchange for money or something else of value - Good: has tangible attributes that a consumers five sense can perceive but can have intangible attributes like delivery or warranties that embody more abstract concepts? durable and nondurable - Nondurable good: an item consumed in one or a few uses such as food products and fuel - Durable good: one that usually lasts over many uses such as appliances, cars, and mobile phones - Services: intangible activities or benefits that an organization provides to satisfy consumers' needs in exchange for money or something else of value - Idea: a thought that leads to a product or action such as a concept

products purchased by the ultimate consumer - Differ in terms of the effort the consumer spends on the decision, the attributes used in making the purchase decision, and the frequency of purchase - Convenience products: items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort - Shopping products: items for which the consumer compares several alternatives on criteria such as price, quality, or style - Specialty products: items that the consumer makes a special effort to search out and buy - Unsought products: items that the consumer does not know about or knows about but does not initially want

are products organizations buy that assist in providing other products for resale

a specific product that has a unique brand, size, or price

a group of product or service items that are closely related because they satisfy a class of needs, are used together, are sold to the same customer group, are distributed through the same outlets, or fall within a given price range—a broad product line enables both consumers and retailers to simplify their buying decisions, avoids the need for retailers to deal with many different suppliers

consists of all the product lines offered by an organization

- Continuous innovation: consumers don't need to learn new behaviors—no need to reeducate customers, mainly depends on generating awareness—requires no new learning by consumers, marketing strategy is to gain consumer awareness and wide distribution - Dynamically continuous innovation: only minor changes in behavior are required—strategy is to educate prospective buyers on the products benefits, advantages, and proper use—disrupts consumers normal routine but does not require totally new learning, marketing strategy should advertise points of difference and benefits to consumers - Discontinuous innovation: involves making the consumer learn entirely new consumption patterns to use the product—marketing efforts usually involve not only gaining initial consumer awareness but educating consumers on the benefits and proper use of the innovative product—requires new learning and consumption patterns by consumers, marketing strategy should educate consumers through product trail and personal selling

ideally new product or service needs a precise protocol, which is a statement that before product development begins identifies 1. A well-defined target market, 2. Specific customers' needs, wants, preferences, and 3. What the product will be and do to satisfy consumers - Most American families buy the same 150 repeatedly making it difficult to gain buyers for new products

- New product process: the seven stages an organization goes through to identify business opportunities and convert them into salable products or services (new product strategy development, idea generation, screening and evaluation, business analysis, development, market testing, and commercialization) STAGE 1 of NPP: New product strategy development - The stage of the new product process that defines the role for a new product in terms of the firms overall objectives - SWOT analysis and environmental scanning used to assess its strengths and weakness relative to the trends it identifies as opportunities or threats - The outcome defines the protocol for each new product idea and identifies the strategic role it might serve in the firms business portfolio STAGE 2 of NPP: Idea Generation - The second stage of the npp, involves developing a pool of concepts to serve as candidates for new products, building upon the previous stages results - Open innovation: a result of companies not generating enough useful new product ideas, in open innovation an organization finds and executes creative new product ideas by developing strategic relationships with outside individuals and organizations—avoids NIH barriers - Employees, managers, customers, and suppliers should be encouraged to suggest new product ideas - Firms as their salespeople to talk to customers and ask their purchasing personnel to talk to suppliers to discover new product ideas - Crowd sourcing: involves generating insights leading to actions based on massive numbers of peoples ideas, requires a precise question to focus the idea generation process - R laboratories: sources of open innovation - Competitive products: analyze the competition can lead to new-product ideas - Smaller firms, universities, and inventors: outside visionaries that have inventions or innovative ideas that can become products * Smaller nontraditional firms: provide creative advances * Universities: have technology transfer centers that can partner with business firms to commercialize faculty inventions * Inventors: lone inventors and entrepreneurs develop brilliant new product ideas STAGE 3 of NPP: Screening and Evaluation - The stage of the npp that internally and externally evaluations new product ideas to eliminate those that warrant no further effort - Internal approach: employees evaluate the technical feasibility of a proposed new product idea to determine whether it meets the objectives defined in the new product strategy development stage - Internal-Employees need to have the commitment and skills to meet customer expectations and sustain customer loyalty, important in screening a new service idea - Internal-Employees interactions with customers should be considered so new services are consistently delivered and experienced, clearly differentiated from other service offerings, and relevant and valuable to the target market - External approach: firms use concept texts: external evaluations with consumers that consist of preliminary testing of a new product idea rather than an actual product, generally more useful with minor modifications of existing products than with new, innovative products with which consumers are not familiar - Concept tests rely on written descriptions of the product by may be augmented with sketches, mockups, or promotional literature STAGE 4 of npp: Business analysis - Specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections—last step before significant resources are invested to create a prototype - Prototype: a full scale operating model of the product - Assesses the total business fit of the proposed new product with the company's mission and objectives - Requires a detailed financial projections and assessments of the marketing and product synergy related to the company's existing operations - Financial projections of expected profits require estimates of expected prices per unit, and units sold, as well as detailed estimates on the costs of R, production, and marketing - For services: businesses analysis involves using capacity management to find ways to match the availability of these service offering to when it is needed STAGE 5 of npp: Development - The stage of the new-product process that turns the idea on paper into a prototype - Results in a demonstrable, producible product that involves not only manufacturing the product efficiently/effectively but also performing laboratory and consumer tests to ensure it meets the standards established for it in the protocol - For services, improving the delivery of customer service is critical, involves analyzing the entire sequence of steps or service encounters to improve the interactions between consumers and the service provider - Safety tests STAGE 6 of npp: Market Testing - A stage of that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy - Test marketing" involves offering a product for sale on a limited bases in a defined area for a specific time period - Three main types of test markets are standard, controlled, and simulated - Standard test markets: time-consuming, expensive, can alert competitors to a firms plans - Standard Test Markets: a company develops a product then attempts to sell it through normal distribution channels in a number of test market cities. The cities selected must be demographically representative of markets targeted for the new product, have cable TV systems, and have retailers with checkout counter scanners to measure sales results * the producer sells the product to distributors, wholesalers, and retailers - Controlled test markets: involves contracting the entire test program to an outside service, the service pays retailers for shelf space and can therefore guarantee a specified percentage of the test products potential distribution volume - Simulated test markets: save time and money, a technique that replicates a full-scale test market to a limited degree, often run in shopping malls, qualified participants are shown the product or the product concept and are asked about usage, reasons for purchase, and important product attributes, finally participants are given money to decide to buy or not buy the firms or the competitors product from a real or simulated store environment after seeing the company's ads for the test product along with those of competitors - Test market failure: are intangible and customers cant see what they are buying, impractical for expensive consumer products or industrial products STAGE 7 of npp: Commercialization - The stage of the npp that positions and launches a new product in full-scale production and sales - Most expensive stage for most new products - Large companies use regional rollouts: introducing the product sequentially into geographical areas of the US to allow production levels and marketing activities to build up gradually to minimize the risk of new product failure

New grocery products pose special commercialization problems because shelf space is so limited many supermarkets require a slotting fee for new products: a payment a manufacturer makes to place a new item on a retailers shelf—EXPENSIVE! - If a new grocery product does not achieve a predetermined sales target, some retailers require a failure fee: a penalty payment a manufacturer makes to compensate a retailer for devoting valuable shelf space to a product that failed to sell (a reason why grocery stores use regional rollouts) - Speed or time to market: vital in producing a new product? parallel development and fast prototyping - Parallel development: cross functional team members who conduct the simultaneous development of both the product and the production process stay with the product from conception to production—reduces development time - Fast prototyping: do it try it fix it, encouraging continuing improvement even after the initial design (software)

The added value a given brand name gives to a product beyond the functional benefits provided. "CadburySchweppesacquiredHiresandCrush soda lines from P for $220MM. $ 20MM physical assets $200MM "brand value" Key Elements of Brand Equity: • • • Brand Awareness/Associations Perceived Quality Brand Loyalty

Line Extension - Using the same brand name to enter a new market segment within its product class. Brand Extension - Using a current brand name to enter a completely different product class. Subbranding - Combining a family brand with a new brand name. Co-Branding - Using two manufacturers' names on a product.

- Occurs when a product is introduced to its intended target market - Sales grow slowly, and profit is minimal - Lack of profit is often the result of large investment costs in product development - Marketing objective at this sage is to create consumer awareness and stimulate trial—the initial purchase of a product by a consumer - Primary demand: the desire for the product class rather than for a specific brand since there are few competitors with the same product—advertising and promotion expenditures are made to stimulate this demand - Selective demand: the preference for a specific brand—as more competitors launch their own products a company's attention is focused on creating this type of demand - Skimming strategy: a high initial price of a product during introduction to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers - Penetration: a low initial price, to discourage competitive entry, helps build unit volume but a company must closely monitor costs

- Characterized by rapid increases in sales, in this stage competitors first appear - The result of more competitors and more aggressive pricing is that profit usually peaks during the growth stage - Advertising shifts emphasis to stimulating selective demand; product benefits are compared with those of competitors' offerings for the purpose of gaining market share - Product sales grow at an increasing rate because of new people trying or using the product and a growing proportion of repeat purchasers—people who tried the product, were satisfied, and bought it again - To help differentiate a company's brand from competitors, an improved version or new features are added to the original design—product proliferation - Important to broaden distribution for the product in this stage due to the increasing presence of competitors

- Characterized by a slowing of total industry sales or product class revenue - Marginal competitors begin to leave the market - Sales increase at a decreasing rate in the maturity stage as fewer new buyers enter the market - Profit declines due to fierce price competition among many sellers, and the cost of gaining new buyers at this stage rises - Market attention is directed toward holding market share through further product differentiation ad finding new buyers - Strategy is to control overall marketing cost by improving promotional and distribution efficiency

- Occurs when sales drop - Products usually enter decline stage due to environmental changes - Tend to consume a disproportionate share of management and financial resources relative to their future worth - To handle a declining product: deletion or harvesting Deletion - Dropping the product from the company's product line, most drastic strategy - Not taken lightly because a residual core of consumers still consumer or use a product even in the decline stage Harvesting - When a company retains the product but reduces marketing costs - The product continues to be offered but people do not allocate time or advertising dollars in selling it - Purpose is to maintain the ability to meet customer requests

- Length, the shape of their sales curves, how they vary with different levels of products, and the rate at which consumers adopt products 1. Length of the Product Life Cycle - As a rule, consumer products have shorter life cycles that business products - The availability of mass communication vehicles informs consumers quickly and shortens life cycles - Technological change tends to shorten product life cycles as new-product innovation replaces existing products 2. Shape of the Product Life Cycle - Generalized life cycle - Lfe cycle sales curves for our different types of products: high-learning, low-learning, fashion, and fad products - High-learning product: one for which significant customer education is required and there is an extended introductory period - Sales for a Low-Learning product: begin immediately because little learning is required by the consumer and the benefits of purchase are readily understood—the product often can be easily imitated by competitors so the marketing strategy is to broaden distribution quickly so as competitors rapidly enter, most retail outlets already have the innovators product * important to have the manufacturing capacity to meet demand - Fashion product: is a style of the times, life cycles for fashion products frequently appear in women's and men's apparel—are introduced, decline, and then seem to return - Fad—experiences rapid sales on introduction and then an equally rapid decline, typically novelties and have short life cycles 3. The Product Level: Class and form - The product life cycle is a total industry or product class sales curve - Product Class: refers to the entire product category or industry - Product Form: pertains to variations within the product class 4. The Life Cycle and Consumers - The Shapes of the life cycle curves indicate that most sales occur after the product has been on the market for some time - The diffusion of innovation: the concept that a product diffuses, or spreads through the population - For any product to be successful it must be purchased buy innovators and early adopters - Common reasons for resisting a product in the introduction stage are: * Usage barriers: the product is not compatible with existing habits * Value barriers: the product provides no incentive to change * Risk barriers: physical, economic or social * Psychological barriers: cultural differences or image - Overcome barriers: warranties, money-back guarantees, extensive usage instructions, demonstrations, free samples to stimulate initial trial of new products - Innovators (2.5%): Venturesome, higher educated, use multiple information sources - Early adopters (13.5%) : leaders in social setting; slightly above average education - Early majority (34%): Deliberate; many informal social contacts - Late Majority (34%): skeptical, below average social status - Laggards (16%): fear of debt, neighbors and friends are information sources

- A competitor's entrenched position is adversely affecting sales and market share - To reach a new market - To catch a rising trend (health consciousness/environmental concerns)

an organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors

any word, device, (design, sound, shape, or color) or combination of these used to distinguish a seller's goods or services

a commercial, legal name under which a company does business

identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it (US Patent and Trademark Office and protected under the Lanham Act) - Consumers can benefit from branding—more efficient shoppers, can recognize and avoid products they are dissatisfied with while become more loyal to more satisfying brands

: a set of human characteristics associated with a brand name. Consumers assign personality traits to products—traditional, a romantic, rugged, sophisticated, rebellious—and choose brands that are consistent with their own or desired self-image

the added value a brand name gives to a product beyond the functional benefits provided; the premium a consumer will pay for one brand over another when the functional benefits provided are identical—two distinct advantages: 1. Brand equity provides a competitive advantage 2. Consumers are often willing to pay a higher price for a product with brand equity

- Resides in the minds of consumers and results from what they have learned, felt, seen, and heard about a brand over time - Four Steps to build brand equity 1. Develop positive brand awareness and an associate of the brand in consumers' minds with a product class or need to give the brand an identity - 2. Establish a brands meaning in the minds of consumers—meaning arises from two dimensions—a functional, performance-related dimension and an abstract, imagery-related dimension - 3. Elicit the proper consumer responses to a brand's identity and meaning - 4. To create a consumer-brand connection evident in an intense, active loyalty relationship between consumers ad the brand—deep psychological bond characterizes a consumer-rand connection and the personal identification customers have with the brand - Brand equity provides a financial advantage for the brand owner - Brands are assets - Lucrative brand licensing opportunities arise from brand equity - Brand Licensing: a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products or services offered by another company (licensee) for a royalty or fee

a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products or services offered by another company (licensee) for a royalty or fee

multiproduct branding, multibranding, private branding, or mixed branding Multiproduct branding: a company uses one name for all its products in a product class (family branding or corporate branding) hen the company's trade name is used, the company's trade name and brand name are identical. - Advantages: customers who have a good experience with the product will transfer this favorable attitude to other items in the product class with the same name - Product line extensions: the practice of using a current brand name to enter a new market segment in its product class? can result in lower advertising an d promotion costs because the same name is used on all products, thus raising the level of brand awareness. Disadvantage: sales of an extension may come at the expense of other items in the company's product line—work best when they provide incremental company revenue by taking sales away from competing brands or attracting new buyers - Subbranding: combines a corporate or family brand with a new brand to distinguish a part of its product line from others - Brand extension: the practice of using a current brand name to enter a different product class—risk: too may extensions or uses for one brand name can dilute the meaning of a brand for consumers - Co-branding: the pairing of two brand names of two manufacturers on a single product—benefits firms by allowing them to enter new product classes and capitalize on an already established brand name in that product class Multibranding Strategy: involves giving each product a distinct name. Useful when each brand is intended for a different market segment - Fighting brands: intrude new product brands to counteract competition, their chief purpose is to confront competitor brands - Advertising and promotion costs tend to be higher with multibranding—no benefit of previous impressions - Advantages" each brand is unique to each market segment and there is no risk that a product failure will affect other products in the line Private Branding: (private labeling or reseller branding), when a company manufactures products but sells them under the brand name of a wholesaler or retailer - Typically produces high profits for manufacturers and resellers Mixed Branding Strategy: a firm markets products under its own name(s) and that of a reseller because the segment attracted to the reseller is different from its own market

refers to any container in which it is offered for sale and on which label information is conveyed

an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients Creating customer value and competitive advantage through packaging and labeling - The label information on it conveyed to the consumer is needed to satisfy legal requirements of product disclosure and also provides directions on how, where, and when to use the product and the source and composition of the product (communication benefit) - Packaging serves as storage, convenience, production or product quality—convenience dimension of packaging (single-serving/ portion control package sizes) (functional benefit) - Consumer protection: creating tamper-resistant containers (functional benefit) - Consumer protection through labeling: expiration date/shelf life of product (functional benefit) - Perceptual benefits: package and label shape, color, graphics convey a brand positioning and distinguish it from other brands, build brand equity

1. The continuing need to connect with customers: packages and labels must be continually updated to connect with customers—try to create aesthetic and functional design features that attract customer attention and deliver customer value in their use 2. Environmental concerns: the amount, composition, and disposal of packaging material --- widespread worldwide concern about the growth of solid waste and the shortage of viable landfill sites 3. Health, safety, and security issues: childproofing, sealed lids on food packages 4. Cost reduction

Individuals and firms involved in the process of making a product or service available for use or consumption. ! !Performs work of moving goods from producers to consumers. Overcomes critical time, place and possession gaps that separate goods and services from those who use them. consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users—make possible the flow of products from a source to a terminus—flow of products and services from a producer through intermediaries, to a buyer

Transactional - Buying, selling, risk-taking Logistical - Gather, store, disperse products Facilitating - Market information, grading, financing some purchase items from the seller, store them and resell them. Others sell them to wholesalers then the wholesalers sell these to supermarkets and then sell them to consumers. Others such brokers or agents represent sellers but do not actually take title to products—their role is to bring a seller and buyer together - ****** Value is created by intermediaries - Middleman: any intermediary between the manufacturer and end-user markets - Agent or broker: any intermediary with legal authority to act on behalf of the manufacturer - Wholesaler: an intermediary who sells to other intermediaries usually to retailers, usually applies to consumer markets - Retailer: any intermediary who sells to consumers - Distributer: usually desires intermediaries who perform a variation of distribution functions: selling, maintaining inventories, extending credit - Dealer: a more imprecise term than distributor that can mean the same as distributor, retailer, wholesaler - Perform a transactional function: whey they buy and sell products or services—also share the risk with the producer when it stocks merchandise in anticipation of sales. If the stock is unsold for any reason the intermediary not the producer suffers the loss—buying (purchasing products for resale as an agent for supply of a product), selling (contracting potential customers, promoting products and seeking orders), risk taking (assuming business risks in the ownership of inventory that can become obsolete or deteriorate) - Logistical functions: gathering, sorting, and dispersing products—assorting (creating product assortments from several sources), storing (assembling and protecting products at a convenient location to offer better customer service, sorting (purchasing in large quantities and braking into smaller amounts desired by customers), transporting (physically moving a product to customers) - Facilitating functions" make a transaction easier for buyers—each of these should be performed in a marketing channel but not all members may participate in all three—financing (extending credit to customers), grading (inspecting, testing, or judging products and assigning them quality grades), marketing information and research (providing information to customers and suppliers, including competitive conditions and trends) - Marketing channels create value for consumers through time, place, form, and possession - Time utility: refers to having a product or services when you want it - Place utility: having a product or service available where consumers want it - Form utility: involves enhancing a product or service to make it more appealing to buyers - Possession utility: entail efforts by intermediaries to help buyers take possession of a product or service

Reach different buyers by using two or more different types of channels for the same basic product. Reduce Channel Conflict: Explain the basis or rationale for dual distribution to channel members. Guide resellers to separate end-user markets. Provide slightly different products or brands to different channels.

- Producer, wholesaler(s), retailer(s) act as a unified system. ! !Either one channel member owns the others, franchises them, or has so much power that they all cooperate. VMS came into being to control channel behavior. Economies achieved through their size, bargaining power, elimination of duplicated services. Corporate VMS: Combines successive stages of production and distribution under single ownership. Vertical Integration: Favored by companies desiring a high level of control over the channels. ! F! orward Integration: Producer owns intermediary at the next level down (closer to consumer) in the channel. Backward Integration: Producer owns intermediary at next level back (away from consumer) in the channel. Contractual VMS: Independent production and distribution firms integrate their efforts on a contractual basis to obtain greater economies and marketing impact than they could achieve alone. Franchising: A contractual agreement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchise to operate a certain type of business under an established name and according to specific rules. Administered VMS: Achieve coordination at successive stages of production and distribution through the size and influence of one channel member rather than through ownership or legal arrangement.

1. Target market coverage a. Intensive distribution b. Selective distribution c. Exclusive distribution 2. Buyer requirements a. Information b. Convenience c. Variety d. Attendant services 3. Profitability a. Total revenue b. Total costs

Intensive Distribution - Maximum brand exposure and consumer convenience. Selective Distribution - Adequate market coverage with more control and less cost than intensive distribution. Exclusive Distribution - Only one outlet in specified geographic area.

Conflict between intermediaries at the same level in a marketing channel. Sources of conflict: Manufacturer increases distribution coverage in a geographical area Dual distribution

Vertical conflict: Conflict between levels in the same marketing channel. Sources of conflict: Disintermediation - Channel member bypasses another member and sells and buys products direct Profit margin distribution among channel members Manufacturer believes that channel members are not giving their products adequate attention High level of interdependence

: employ the internet to make products and services available for consumption or use by consumers or organizational buyers (combine electronic and traditional intermediaries to create time place, form and possession utility for buyers) - Can and do perform transactional and facilitating functions at a relatively lower cost than traditional intermediaries because of efficiencies made possible by information technology - But electronic intermediaries are INCAPABLE of performing elements of the logistical function

the blending of different communication and delivery channel that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online

an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product—minimizes cannibalization of the firms family brand and differentiate channels (when firms pair multiple cannels with a multi-brand strategy) - Strategic channel alliances: one firms marketing channel is used to sell another firms' products

professionally managed and centrally coordinated marketing channels designed to achieve channel economics and maximum marketing impact (corporate, contractual, and administered)--- to improve efficiency in performing channel functions and achieve greater marketing effectiveness - Corporate vertical marketing system: the combination of successive stages of production and distribution under a single ownership—forward integration: when a producer owns the intermediary at the next level down in the channel - Backward integration: when a retailer owns a manufacturing operation (forward and backward integration seek to reduce distribution costs and gain greater control over supply sources or resale of their products) BUT both increase a company's capital investment and fixed costs - Administered vertical marketing systems: achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership

- Requires attention to the density that is the number of stores in a geographical area and type of intermediaries - three degrees of distribution: intensive, exclusive, and selective - Intensive distribution: means that a firm tries to place its products and services in as many outlets as possible. Intensive is usually chosen for convenience products - Exclusive distribution: extreme opposite of intensive distribution because only one retailer in a specified geographical area carries the firms products—usually for specialty products or services (preferred: 1. Limits head to head competition for an identical product 2. Provides a point of difference for a retailer or distributor) - Selective distribution: lies between these two extremes, means that a firm selects a few retailers in a specific geographical area to carry its products

information, convenience, variety, and pre or post sale services - Information (need well trained intermediaries when buyers have limited knowledge or desire specific data about a product or service) - Convenience (proximity, driving time) Internet convenience (website easy to navigate, and locate, image downloads must be fast) - Variety—reflects buyers interest in having numerous competing and complementary items from which they can choose—evident in the breadth and depot of products and brands carried by intermediaries - Pre/post sale services: provided by intermediaries

- Important in choosing a channel, determined by the margins earned (revenue minus cost) for each channel member and for the channel as a whole - Channel cost: distribution, advertising, selling expenses associated with different types of marketing channels

- Channel conflict: arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals (vertical and horizontal) - Vertical conflict: occurs between different levels in a marketing channel (manufacturer vs. wholesaler or retailer, or wholesaler and a retailer) three sources: when a channel member bypasses another member and sells or buys products direct: Disintermediation., second over how profit margins are distributed among channel members, third, when manufacturers believe wholesalers or retailers are not giving their products adequate attention - Horizontal conflict: occurs between intermediaries at the same level in a marketing channel (between two or more retailers, or two or more wholesalers that handle the same manufacturers brands). (First: when a manufacturer increases its distribution coverage in a geographical area, second dual distribution causes conflict when different types of retailers carry the same brands)

- Channel captain: a channel member that coordinates, directs, and supports other channel members" can be producers, wholesalers, or retailers—ability to influence the behavior of other members--- economic influence arises from the ability of a firm to reward other members given its strong financial position or customer franchise, expertise second source of influence, identification with a particular channel member , fourth influence can arise from the legitimate right of one channel member to direct the behavior of other members