Marketing Exam 2 Review

Marketing Exam 2 Review

• STP (Chapter 9)

• Product characteristics vs. market segment

• Market segment: a group of individuals who share a common need/want or a common set of needs/wants

• Segmentations steps

• Identify a set of key needs: a key need or set of needs that helps a company to profitably distinguish between customers in different segments
• Find profiles that have correlation with these needs: an indicator that helps a company to profitably identify customers with a particular need profile

• Geographic segmentation: based on where customers live or work
• Demographic segmentation: based on some objective physical (age, gender, etc)
• Psychographic segmentation: based on personality, lifestyle, needs
• Behavioral segmentation: based on where they buy, which attributes does the customer seek, how frequently they buy, and why they buy

• Select and target a segment/s: firms usually select a target market

• Targeting is determined by: (1) size, (2) expected growth of the segment, (3) cost of reaching the segment, (4) compatibility with the organization’s objective and resources, (5) competitive position
• If a company decided to target a new segment

• The more changes required to attract a new segment, the more your existing customers may be affected
• Cannibalization: when one product steals shares from old products

• Different types of segment identifiers: geographic, demographic, psychographic, behavioral
• Which segment to target and perceptual map

• A perceptual map illustrates differences
• Create a perceptual map and place dots on the customers preference
• Check where do existing products lie in the perceptual map and look for blank space

• Opportunity space

• The Haagen Dazs example demonstrates the decision making

• Targeting strategies

• One product and one segment
• One product and multiple segments: when an organization produces only a single product and tries to sell it to two or more market segments

• Avoids extra cost of producing and developing a new product
• Ex. A magazine using different covers, but same content inside

• Multiple products and multiple segments: having different products aimed at different customers

• Ex. A car agency with different model, each aimed at a different customer

• Positioning statements and bottom-line goals

• Different goals and different segments require different positions, even with the same product
• To target segment with specific need brand/product is like frame of reference but it point of difference

• New Product Development (Chapter 10)

• Level of innovation

• Continuous innovation: consumers do not have to learn new behaviors
• Dynamically continuous innovation: only minor changes in behavior are required
• Discontinuous innovation: involves making the consumer learn entirely new consumption patterns to use the product

• Stages of NPD (New product development)

• What’s the main goal of each stage and what are the methods used for the goal?

• New product strategy development: defines the role of new products on the firm’s overall objective

• Where do we want to go?
• Where are we right now?

• Idea generation

• Companies turn to customers for ideas
• Copycat: getting ideas from competitors

• Screening and evaluation: evaluates new product ideas to eliminate those that warrant to further effort

• Concept testing is a common approach

• Business analysis: specifies the features of the particular product or service and the marketing strategy needed to bring it to the market and make financial projections

• Does the new product have business fit?

• Do we have the ability to produce it economically?
• Is the marketing strategy likely to achieve our goal?
• Will the new product be protected by patents?
• Will the new product cannibalize the existing product?
• Or will it increase revenue by reaching new segments?

• Development: turns the idea on paper into a prototype

• When, where and how much do we get the raw materials or other supplies needed for making this product?
• How will the product be manufactured

• Marketing testing

• Market testing: process where actual products are exposed to prospective consumers under realistic purchase conditions
• Standard test market: sell a new product through normal distribution channels in a 4-6 city test market for 12-18 months

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

Low trial & low repurchase rate —> drop product

• Commercialization: positions and launches a new product

• Cannibalization analysis

• Why do new products fail?

• STP

• Too small a target market
• Bad positioning

• Products

• Poor quality
• Bad timing
• Neglect consumer psychology

• Poor execution of other marketing mix

• Product Life Cycle and Branding (Chapter 11)

• Four diffusion stages, the objectives and marketing mixes at each stage

• Introduction: crucial after a new product launch

• Sales: grow slow
• Objective: gain awareness
• Pricing:

• Skimming pricing: charges a high initial price, helps recover the cost and capitalize early buyers
• Penetration pricing: charges a low initial price, helps build unit volume quickly

• Promotion:

• Educate and inform consumers
• New product trials and sampling

• Growth: builds up momentum

• Sales: rapid increase and peak in profitability
• Objective: stress differentiation
• Competition: the number of competitors increase
• Pricing: more aggressive towards the end
• Product: improved features could be added or product bundling
• Place: intensive efforts given to establish long term relationships with wholesalers and retailers

• Maturity: a product enters this stage as sales go down

• Sales: total industry sales slow down
• Objective: hold market shares with further product differentiation or expand markets
• Product: a full product line
• Price: could be lower driven by fierce competition
• Place: widely distributed through many outlets
• Promotion: reminder oriented

• Decline

• Sales:

• Decline
• Not necessarily entered due to any wrong marketing strategy, but due to technological advances and shifting consumer taste

• Object:

• Deletion: dropping the product
• Harvesting: retaining the product, but reducing marketing cost

• Different patterns of PLC

• Shapes of PLC is related with new product failure

• Modifications (market, product, repositioning) in managing PLC

• During the course of the PLC, managers sometimes needs to make major modification

• Market modification:

• Find new customer (steal share or grow market)
• More usages (grow volume)

• Product modification:

• Change product characteristics to increase sales volume
• Quality, feature improvement, product bundling

• Repositioning

• Changing the place a product occupies in a consumers’ mind relative to competition

• What is branding and brand equity

• Branding: the management of associations that consumers make with company symbols
• A brand is not a symbol, but the consistent response of customers to a symbol

• The consistent response generates your brand equity (added value beyond the functional benefits of a product)

• Brand equity creates financial values
• A strong brand generates competitive advantage
• Brand equity comes from various sources

• Branding strategy

• Multi product: use one name for all products

• Ex. Cheerios cereal
• Pros:

• Efficiency
• Facilitates acceptance of new product

• Cons:

• Poor performance on one item can have impact on another
• Dilute image of product lines
• cannibalization

• Multi branding: give each product a distinct name

• Ex. Starwood hotels and resorts that have a lot of hotels with different names
• Pros:

• Each bran is unique to each segment, no risk that product failure will affect others

• Cons:

• No advertising/promotion efficiency, scattering of resources over several brands instead of building a few brands to highly profitable

• The key to building the association of brand symbols

• Choose the segment you want to target
• Choose a unique set of symbols that will make up your brand image
• Create a desirable and competitive product/service
• Ensure that consumers consistently experience the benefits you offer
• Ensure that symbols are always associated with the experience

• Ex. Coke example and when they messed up with the appearance of their coke

• Ensure that customers make the link between the brand and the experience

• Channel (Chapter 15)

• Channel structure

• Marketing channels are not just a way to deliver products/service, they also create values themselves
• A marketing channel is part of a supply chain

• Suppliers —> producers —> consumers

• A marketing channel connects a producer and consumers
• Supply chain: the various firms involved in performing the activities required to create and deliver a product/service to consumers
• Marketing channels: individuals and firms involved in the process of making a product or service available for use or consumption by the consumer or business user

• How to determine channel structure

• Direct channel:

• producer —> consumer

• Indirect channel:

• Producer—>retailer—>consumer
• Producer—>wholesaler—>retailer—>consumer

• A firm can sometimes have multiple channels

• Ex. Nike sells online, on other stores, and their stores

• The principle of designing a channel structure is to harmonize it with marketing strategies

• Spatial: make products available 24/7
• Variety/assortment: several sources to serve consumers
• Sorting/volume: purchasing in large quantities and breaking into smaller amount desired by consumers
• Deliver/transportation: deliver products to consumers at the right time
• Customer service: provide information and support to costumers
• Risk taking: assume some risks in the ownership of inventory
• Financing: extend credit to consumers

• To choose segments give each a score of importance and compare
• Slotting fee: payment that manufactures make to place their products on a retailers’ shelves
• Failure fee: a penalty payment a manufacturer makes to compensate a retailer if the product does not meet the revenue goal
• Promotion fee: a payment that a manufacturer makes to get their products featured in retailer stores

• Vertical channel conflicts and solutions

• Between different levels (producer and retailer)
• Channel members have different, sometimes opposite, goals which lead to channel conflict
• Conflicts:

• Overpricing disagreements
• Disagreement over how profits are distributed
• Manufacturers blame retailers promote too little or too much
• One channel member bypasses another member to sell products
• Unauthorized resellers compete on a marketplace

• Solutions:

• Vertical integration
• Modify the channel design
• Incentives
• Coordination and accommodation

• Horizontal channel conflicts in multi-channel marketing

• Between same level (retailer A and retailer B)