Principles of Marketing: Chapter 9-12 Review

market segments
relatively homogeneous groups of prospective buyers resulting from the market segmentation process
market segmentation
aggregates potential buyers into groups with common needs who respond similarly to marketing actions
five steps for market segmentation
group potential buyers into segments, group products to be sold into categories, develop market-product grid & estimate the size of markets, select target markets, take marketing actions to reach target markets
criteria for selecting target segments
market size, expected growth, competitive position, cost of reaching segment, and compatibility with the organization’s objectives & resources
perceptual map
a means of displaying the position of products or brands in consumers’ minds
product positioning
refers to the place a product occupies in consumers’ minds on important attributes relative to competitive products
head-to-head positioning
involves competing directly with competitors on similar product attributes in the same target market
differentiation positioning
seeking a less-competitive, smaller market niche in which to locate a brand
written positioning statement
used by research & development engineers, advertising agencies, and marketing department to focus marketing strategy
four I’s of services
unique elements distinguishing services from goods; intangibility, inconsistency, inseparability, inventory
continuous innovation
consumers don’t need to learn new behaviors; gains consumer awareness & wide distribution
discontinuous innovation
involves making consumers learn entirely new consumption patterns to use a product; educates consumers through product trial & personal selling
dynamically continuous innovation
only minor changes in behavior are required; advertises points of difference & benefits to consumers
new-product development process
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 & evaluation, business analysis, development, market testing, commercialization
new-product development strategy
defines the role for a new product in terms of the firm’s overall objectives
idea generation
involves developing a pool of concepts to serve as candidates for new products, building upon the previous stage’s results
screening & evaluation
internally & externally evaluates new-product ideas to eliminate those that warrant no further effort
business analysis
specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections
development
turns the idea on paper into a prototype
market testing
involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy
commercialization
positions & launches a new product in full-scale production & sales
product life cycle
the stages a new product goes through in the market-place: introduction, growth, maturity, and decline
introduction stage
occurs when a product is introduced to its intended target market
growth stage
characterized by rapid increases in sales; competitors appear in this stage
maturity stage
characterized by a slowing of total industry sales or product class revenue; marginal competitors begin to leave the market
decline stage
occurs when sales drop
deletion
dropping a product from a company’s product line; most dramatic strategy
harvesting
occurs when a company retains a product but reduces marketing costs
diffusion of innovation
a product that diffuses through the population
adoption cycle
the rate at which consumers adopt 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
branding
an organization’s use of name, phrase, design, symbol, or combination of these to identify and distinguish its products
brand name
any word, device (design, shape, sound, color), or combination of those used to distinguish a seller’s goods or services
brand personality
a set of human characteristics associated with a brand name
brand equity
the added value a brand name gives to a product beyond the functional benefits provided
four common pricing approaches
demand-oriented, cost-oriented, profit-oriented, or competition-oriented
demand-oriented pricing approach
weigh factors underlying expected customer tastes & preferences more heavily than cost, profit, & competition
cost-oriented pricing approach
stresses the cost side of pricing, not demand side; price set by looking at production & marketing costs and adding enough to cover direct expenses, overhead, & profit
profit-oriented pricing approach
balances revenues & costs to set price
competition-oriented pricing approach
stresses what competitors or the market is doing
bundle pricing
the marketing of two or more products in a single package price; based on the idea that consumers value the package more than the individual items
cost-plus pricing
involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price
loss-leader pricing
stores deliberately sell a product below its customary price; intended to attract customers in the hopes they will buy other products as well, not to increase sales
break-even point
the quantity at which total revenue & total cost are equal; BEP = fixed cost/(unit price – unit variable cost) = FC/(P – UVC)
break-even analysis
a technique that examines the relationship between total revenue & total cost to determine profitability at different levels of output
price elasticity of demand
the percentage change in the quantity demanded relative to a percentage change in price
elastic demand
a product in which a slight decrease in price results in a relatively large increase in demand
inelastic demand
a product in which a slight increase or decrease in price will not significantly affect the demand, or units sold, for the product
bait & switch pricing
occurs when a firm offers a very low price on a product (the bait) to attract customers to a store, who are then persuaded to purchase a higher-priced item (the switch) using a variety of tricks
intangibility
services can’t be touched or seen before the purchase decision
inconsistency
services depend on the people who provide them; quality varies with each person’s capabilities and day-to-day job performance
inseparability
the consumer cannot distinguish the service provider from the service itself
inventory
inventory handling costs are subjective & related to idle production capacity
multibranding
a branding strategy that involves giving each product a distinct name
multiproduct branding
a.k.a. family branding or corporate branding; a branding strategy in which a company uses one name for all its products in a product class
private branding
a.k.a. private labeling or reseller branding; used by a company when it manufactures products but sells them under the brand name of a wholesaler or retailer
mixed branding
occurs when 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