Marketing Ch 11 & 12

Describe the components of a product:
• Core customer value
• Actual product:
• Associated services(augmented product):
Core customer value
defines the basic problem solving benefits that consumers are seeking
Actual product:
the physical attributes of a product, including brand name, features, design, quality level, and packaging
Associated services(augmented product):
the non-physical attributes of the product including product warranties, financing, product support, and after-sale service
• Breadth
number of product lines offered by a firm, also known as variety
• Depth:
the number of categories within a product line
• Product line:
groups of associated items that consumers tend to use together or think of as part of a group of similar products
Identify the advantages that brands provide firms and consumers:
• Brands facilitate purchases:
• Brands establish loyalty
• Brands protect from competition and price competition
• Brands are assets
Explain the various components of brand equity
• Brand awareness
• Perceived value:
• Brand associations:
• Brand loyalty:
• Brand awareness:
measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion about it
• Perceived value:
the relationship between a products or services benefits and its costs
• Brand associations:
the mental and emotional links that consumers make between a brand and its key product attributes like logo, color, slogan etc
• Brand loyalty:
when a consumer buys the same brands product or service repeatedly over time
• Brand extension:
the use of the same brand name for new products being introduced to the same or new markets
• Line extension:
the use of the same brand name within the same product line and represents an increase in a product lines depth
• Brand dilution:
occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold
• Pluses of extension
o New revenue sources
o Reduced costs and risks for product introduction
o Satisfy consumers desire for something different, and block competition
o Move customers to higher price points
o Means for introducing technological innovations
o Helps control shelf space
o Can satisfy retailers needs for slightly different versions
o Can energize a brand
• Minuses of extension
Product is redundant within line.
Undermine brand loyalty.
Under-exploited ideas.
Poorer trade relations.
Increased admin costs.
Too many choices confuse customer
• To avoid problems with extensions firms should:
o Stay consistent with brands image
o Improve cost accounting
o Allocate resources to products that best support brands future
o Research consumer behavior
o Test your line logic
o Customize marketing mixes
o Expect and encourage product line turnover
o Ensure channel partners are satisfied
o Refrain from extending the brand name to too many products to avoid diluting brand name or damaging brand equity
o Consider whether the brand extension will be distanced from the core brand, especially if firm wants to use some but not all of the core brand attributes
• About 2.5%
• those buyers who want to be the first to have the new product or service
Early adopters:
• About 13.5%
• second group who generally don’t like to take as much risk
• wait to purchase the product after careful review
Early Majority
• About 34% of the population
• Crucial for product to be profitable
• Don’t like to take much risk so wait for all bugs to be fixed
Late majority
• About 34%
• The last group of buyers
• When they buy the product has achieved its full market potential
• Sales tend to level off or even decline by the time they enter the market
• About 16%
• Like to avoid change
• Rely on traditional products until they are no longer available
Describe the various stages involved in developing a new product or service:
• Idea Generation:
• Concept testing
• Product Development
• Market testing:
• Product launch
• Evaluation of Results
• Idea Generation:
o Internal R&D
o R&D consortia
o Licensing
o Brainstorming
o Outsourcing
o Competitors products (reverse engineering)
o Customer input
• Concept testing
Brief written descriptions of a product its technology, working principles, forms, and what customers needs it would satisfy
• Product Development
o Prototype
o Alpha testing: determine whether the product will perform according to its design and whether it satisfies the need for which it was intended
o Beta testing: uses potential customers who examine the product prototype in a real use setting to determine its functionality, problems, and issues
• Market testing:
Premarket test: before product is brought to market to determine how many customers will buy it and continue to use it
o Test marketing: introduces the offering to a limited geographic area prior to national launch
• Product launch
• trade promo to wholesale or retail
• introductory price promo
• trade show
• Slotting allowance
• Evaluation of Results
Satisfaction of technical requirements, performance
Customer acceptance
Satisfaction of firms financial requirements
Explain the product life cycle:
Introductory stage
Growth stage:
Maturity stage:
Decline stage
• Introductory stage
Stage when innovators buy product
High expense, low revenue
Cash flow challenges
Limited competition, limited consumer awareness
Growth stage:
Product gains acceptance
Demand and sales increase
More competitors emerge
Operations become efficient but cash flow remains a challenge
Prices soften
• Maturity stage:
Industry sales reach their peak
Firms try to rejuvenate their products by adding new features or repositioning
Slowing market growth
Thin margins
Strong competition
• Decline stage
Sales decline
Product eventually exits the market
Identify characteristics that distinguish services from tangible goods:
• Intangibility:
• Inseparability:
• Heterogeneity:
• Perishable:
• Intangibility:
more emphasis on experience, less emphasis on what senses detect
• Inseparability:
ongoing linkage among the service provider, the customer, and other involved customers
• Heterogeneity:
variation in consistency among service transactions
• Perishable:
unable to save and sell at a later time
Identify 4 elements of a successful CSM program:
• Offering:
• Funding mechanism:
• Employee management:
• System support
• Manufacturer’s brands (national brands):
owned and managed by the manufacturer (ex Nike)
o Manufacturers retain more control over marketing strategy
• Private label brands (retail/store brands):
developed by retailers (ex Trader joes)
o Some cases retailers manufacture their own brands
o Others develop design and contract with manufacturer
Describe why distributors would use a private label brand. What challenges face manufacturer’s brands:
–Private label brands have margins that are about 10% higher due to minimal marketing costs and contract purchases.
–Manufacturers brand have to use marketing, and it is becoming far more difficult to reach consumers.
• Primary package:
the one consumers use such as toothpaste tubes, from which he or she typically seeks convenience in terms of storage, use, and consumption
• Secondary package:
the wrapper or exterior carton that contains the primary package and provides the UPC label use by retail scanners
Recognize the different benefits packaging provides in terms of communication, perceptual, environmental, and functional benefits:
• Attracts customers attention
• Enabled products to stand out
• Offers promotional tool (NEW, IMPROVED)
• Allows same product to appeal to different markets with different sizes
• Firms can update package to reposition
• Make product more ecological (water bottles)
• Labels make it so you can highlight certain benefits (ingredients, vitamins, etc.)
• Contain and protect items
• Facilitate proper usage
• Track product codes
criteria for predicting new product success:
• Relative advantage: perceived to be better
• Compatibility
• Complexity: less complex mean easier to try
• Observability: benefits easily communicated
• Trialability