Marketing 300-Test 2

Product and Service Classifications / Consumer Products
Products and services fall into two broad classes based on the types of consumers who use them: consumer products and industrial products.
Consumer products
products bought by final consumers for personal consumption
Convenience product
consumer product that customers usually buy frequently, immediately, and with minimal comparison and buying effort. (deodorant and toothpaste)
Shopping products
consumer product that the customer, in the process of selecting and purchasing, usually compares on such attributes as suitability, quality, price, and style.
Specialty product
consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. (The company has a certain product and it’s what they do best)
Unsought product
consumer product that the consumer either does not know about or knows about but does not normally consider buying.
Production Mix
Set of all product lines and items that a particular seller offers for sale (Campbell Soup Company)
Product mix length
refers to total number of items a company carries within its product lines
Product mix depth
refers to the number of versions offered for each product in the line.
Service intangibility
services cannot be seen, tasted, felt, heard, or smelled before they are bought
Service inseparability
Services are produced and consumed at the same time and cannot be separated from their providers. (haircut)
Service variability
the quality of services may vary greatly depending on who provides them and when, where, and how they are provided
Service perishability
Services cannot be stored for later sale or use
Team-Based New Product Development
New product development in which various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness. (Team work)
What are the steps of Team-Based New Product Development?
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test marketing
Commercialization
Product concept
A detailed version of the new product idea stated in meaningful consumer terms
What are the parts of Concept Development?
1.Marketing strategy development
2.Business analysis
3.Product development
Marketing strategy development
Designing an initial marketing strategy for a new product based on the product concept.
Business analysis
Review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.
Commercialization
Introducing a new product into the market
Concept testing
Testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.
Product Life-Cycle Strategies
1. Production development
2. Introduction stage
3. Growth stage
4. Maturity stage
5. Decline stage
Product development
when a company finds and develops a new product idea. Sales are zero, and the company’s investment costs mount
Introduction stage
where a new product is first distributed and made available for purchase. Profits are non-existent because of heavy expenses of product introduction
Growth stage
Where a product’s sales climb quickly
Maturity stage
where a product’s sales growth slows or levels off. Profits level off or decline because of increased marketing outlays to defend the product against competition
Decline stage
where a product’s sales fade away
Customer Value-Based Pricing
Setting price based on buyers’ perceptions of value rather than on the seller’s cost (Pricing based on what consumer is willing to pay, not what it cost to make)
Cost-Based Pricing
Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk.
Other Internal and External Considerations Affecting Price Decisions
Internal-
company’s overall marketing strategy, objectives, and marketing mix and other organizational considerations

External-
nature of the market and demand and other environmental factors

What are New Product Pricing Strategies?
Market-skimming pricing and Market-penetration pricing
Market-skimming pricing
Setting a high price for a new product to skim maximum revenues from segments willing to pay the high price
Market-penetration pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
Captive-Product Pricing
Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video game console.
Discount pricing
A straight reduction in price on purchases during a stated period of time or in larger quantities.
Allowance pricing
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way.
Psychological Pricing
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product (Paying for the brand: Apple, Polo)
Pure competition
market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities.
Monopolistic competition
market consists of many buyers and sellers trading over a range of prices rather than a single market price.
Oligopolistic competition
market consists of only a few large sellers (AT&T, Verison, Sprint, etc.)
Self-service retailers
serve customers who are willing to perform their own locate-compare-select process to save time and money. (Basis of all discount operations and is typically used by retailers selling convenience goods) [You don’t need someone to explain what the products are]
Limited-service retailers
provide more sales assistance because the carry more shopping goods about which customers need information. Increased operating costs result in higher prices. (Sears or JCPenney)
Full-service retailers
assist customers in every phase of the shopping process, and usually carry more specialty goods for which customers need/want assistance or advice. More services result in higher operating cost, which result in higher price (Nordsrtoms, Tiffany, etc)
Specialty stores
Retail store that carries a narrow product line with a deep assortment within that line (REI and Radio Shack)
Department store
carries several product lines with each line operated as a separate department managed by specialists buyers or merchandisers (Macy’s and Sears)
Supermarket
relatively large, low-cost, low-margin, high-volume, self-service operation designed to serve the consumer’s total needs for grocery and household products (Kroger and Publix)
Convenience store
relatively small store located near residential areas, open long hours, and carrying a limited line of high-turnover convenience products at slightly higher prices (Gas stations)
Discount store
store that carries standard merchandise sold at lower prices with lower margins and higher volumes (Walmart, Target, and Kohls)
Superstore
very large store that meets consumers’ total needs for routinely purchased food and nonfood items. (Walmart Supercenter, Best Buy, Staples)
Category killer
giant specialty store that carries a very deep assortment of a particular line.
Off-price retailers
Sells merchandise bought at less-than-regular wholesale prices and sold at less than retail. Include: factory outlets, independent off-price retailers, and warehouse clubs (TJ Maxx, Costco, Sam’s Club)
What are the organizational approaches?
1. Corporate chain
2. Voluntary chain
3. Retailer cooperative
4. Franchise organization
Corporate chain
two or more outlets that are commonly owned and controlled. (Macy’s, Target, Kroger, and CVS)
Voluntary chain
Wholesaler-sponsored group of independent retailers engaged in group buying and merchandising (IGA, True Value Hardware)
Retailer cooperative
Group of independent retailers who jointly establish a central buying organization and conduct joint promotion efforts (Ace Hardware)
Franchise organization
contractual associations between a franchisor and franchisees (McDonald’s, Subway, Pizza Hut, Jiffy Lube, etc.)
Product assortment
Offer merchandise that no other competitor carries
Service mix
You provide more than just one thing. (Ex: retailers inviting customers to ask questions or consult service representative.) (Home Depot offering do-it-yourself classes)
Store atmosphere
Creating a unique store experience that suits your target market and moves your customers to buy
Price decision
1. A retailer’s price policy must fit its target market and positioning, product and service assortment, the competition, and economic factors.
2. Most retailers either seek high markups on lower volume (specialty stores) or low markups on higher volume (mass merchandisers and discount stores).