Chapter 14: Pricing Concepts for Establishing Value

Objectives:

• List the four pricing orientations,
• Explain the relationship between price and quantity sold,
• Explain price elasticity,
• Describe how to calculate a product's break-even point,
• Indicate the four types of price competitive levels,
• Describe the difference between an everyday low price strategy (EDLP) and a high/low strategy,
• Explain the difference a price skimming and a market penetration pricing strategy,
• List pricing practices that have the potential to deceive customers.

I. The Five Cs of Pricing

Price: The overall sacrifice a customer is willing to make -- money, time, energy -- to acquire a specific product or service.

• Company Objectives
• Profit Orientation: A company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing.
• Target profit pricing: A pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to simulate a certain level of sales at a certain profit per unit. 
• Maximizing profits: A profit strategy that relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors to explain and predict sales and profits, it should be able to identify the price at which its profits are maximized.  
• Target return pricing: A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales. 
• Sales Orientation: A company objective based on the belief that increasing sales will help the firm more than will increasing profits.
• Premium Pricing: A competitor-based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter. 
• Competitor Orientation: A company objective based on the premise that the firm should measure itself primarily against its competition. 
• Competitive Parity: A firm's strategy of setting prices that are similar to those of major competitors. 
• Status Quo Pricing: A competitor-oriented strategy in which a firm changes prices only to meet those of competition. 
• Customer Orientation: A company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers' needs. 

• Customers
• Demand Curves and Pricing
• Demand Curve: Shows how many units of a product or service consumers will demand during a specific period at different prices. 
• Prestige Products or Services: Those that consumers purchase for status rather than functionality.
• Price Elasticity of Demand: Measures how changes in price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price. 
• PEOD = % Change Quantity Demanded / % Change in Price
• Elastic: Refers to a market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large changes in the quantity demanded. 
• Inelastic: Refers to a market for a product or service that is price insensitive; that is, relatively small changes in price will not generate large changes in the quantity demanded. 
• Factors Influencing Price Elasticity of Demand
• Income Effect: Refers to the change in the quality of the product demanded by consumers due to a change in their income. 
• Substitution Effect: Refers to the consumers' ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand. 
• Cross-Price Elasticity: The percentage change in demand for product A that occurs ion response to a percentage change in the price of product B.
• Complimentary Products: Products whose demand curves are positively related, such that they rise and fall together; a percentage increase in demand for one results in a percentage increase in demand for the other.
• Substitute Products: Products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A results in a percentage decrease in the quantity demanded of product B. 

• Costs
• Variable Costs: Those costs, primarily labor and materials, that vary with production volume. 
• TVC = Variable cost per unit X quantity produced
• Fixed Costs: Those costs that remain constant regardless of any change in volume of production.
• Total Costs: The sum of the variable costs and fixed costs. 
• TC = Variable Cost + Fixed Costs
• Total Revenue = Selling Price X quantity sold

• Break-Even Analysis and Decision Making
• Break-even Analysis: Technique used to examine the relationships among cost, price, revenue, and profit over different levels of production and sales to determine the Break-even Point.
• Break-even Point: The point at which the number of units sold generates just enough revenue to equal the total cost; at this point, profits are zero. 
• Contribution per Unit: Equals the price less the variable cost per unit. Variable used to determine the break-even point in units.
• Con/Unit = Selling Price - Variable Cost
• BEP Units = Fixed Costs / (Con/Unit)
• BEP Units = (Fixed Cost + Target Profit) / (Con/Unit)

• Mark-Up and Target Return Pricing
• TRP: (Variable Costs + (Fixed Costs / Expected Unit Sales)) X (1 + Target Return % [expressed as decimal])

• Competition
• Monopoly: One firm provides the product or service in a particular industry. 
• Oligopolistic competition: Occurs when onloy a few firms dominate a market.
• Price war: Occurs when two or more firms compete primarily by lowering price.
• Predatory pricing: A firm's prcatice of setting a very low price for one or more of its products with the intent to drive its competition out of business; illegal under both the sherman antitrust act and the federal trade commission act. 
• Monopolistic Competition: Occurs when there are many firms that sell closely related but not homogenous products; these products may be viewed as substitutes but are not perfect substitutes. 
• Pure Competition: Occurs when different companies sell commodity products that consumers perceive as substitutable; price usually is set according to the laws of supply and demand.

• Channel Members: --Manufacturers, wholesalers, and retailers -- can have a differnet perspective when it comes to pricing strategies. 
• Gray Market: Employ irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer. 

II. Pricing Strategies

• Everyday Low Pricing (EDLP): A strategy companies use to emphasise the continuity of their retail prices at a level somewhere between the regular, non-sale price and the deep-discount sale prices their competitors may offer. 
• High/Low Pricing: A pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases. 
• Reference Pricing: The price at which buyers compare the actual selling price of the product and that facilitate their evaluation process. 

III. New Product Pricing Strategies / Market Penetration Pricing

Market Penetration Strategy: A growth strategy that employ the current marketing mix and focuses the firm's efforts on existing customers. 

• Experience Curve Effect: Refers to the drop in unit cost as the accumulated volume sold increase; as sales continue to grow, the cost continue to drop, allowing even further reductions in the price.
• Price Skimming: A strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers price to capture (skim) the next most price sensitive segment. 

IV. Legal and Ethical Aspects of Pricing

• Deceptive or Illegal Price Advertising: 
• Deceptive Reference Prices
• Loss Leader Pricing
• Bait and Switch
• Predatory Pricing
• Price Discrimination
• Price Fixing

Chapter 13: Services; The Intangible Product

Objectives:

• Describe how the marketing of services differs from the marketing of products,
• Discuss the 4 gaps in the Service Gaps Model,
• Examine the 5 service quality dimensions,
• Explain the zone of tolerance,
• Identify 3 service recovery strategies.

"Services account for 76 percent of the U.S. GDP, a much higher percentage than they did 50, 20, or even 10 years ago."

Service: Any intangible offering that involves a deed, performance, or effort that cannot be physically possessed; intangible customer benefits that are produced by people or machines and cannot be separated from the producer.

Customer Service: Specifically refers to human or mechanical activities firms undertake to help satisfy their customers' needs and wants.

I. Services Marketing Differs from Product Marketing:

• Intangible: 
• Intangible: A characteristic of a service, it cannot be touched, tasted, or seen like a pure product can. 
• A service that cannot be shown directly to potential customers is more difficult to promote. Because of intangibility of services, the images that marketers use must reinforce the benefit or value that a service provides. 
• Inseparable Production and Consumption: 
• Inseparable: A characteristic of a service: it is produced and consumed at the same time; that is, service and consumption are inseparable. 
• The interaction with the service provider may have an important impact on the customers perception of the service outcome. Services cannot be tried first and come with a great deal of risk.
• Heterogeneous:
• Heterogeneity: As it refers to the differences between the marketing products and services, the delivery of services is more variable. 
• Marketers can use this variability to their advantage. 
• "An inferior service can't be recalled; by the time the firm recognizes a problem, the damage has been done."
• Perishable:
• Perishable: A characteristic of a service: it cannot be stored for use in the future.
• As long as the demand for the supply of the service match closely, there is no problem, but unfortunately, this perfect matching rarely occurs. 

II. Providing Great Service: The Gaps Model

Service Gap: Results when a service fails to meet the expectations that customers have about how it should be delivered.

• Knowledge Gap: A type of service gap; reflects the difference between customers' expectations and the firms' perception of those expectations. Firms can close this gap by determining what customers want by doing research using marketing metrics such as service quality and the zone of tolerance.
• Understanding Customer Expectations: Customers' expectations are based on their knowledge and experiences. Expectations vary according to the type of service. Peoples expectations also vary depending on the situation.
• Evaluating Service Quality using Well-Established Marketing Metrics:
• Service Quality: Customers perceptions of how well a service meets or exceeds their expectations. 
• Building Blocks of Service Quality:
• Reliability: the ability to perform the service dependably and accurately.
• Responsiveness: The willingness to help customers and provide prompt service.
• Assurance: The knowledge of and courtesy by employees and their ability to convey trust and confidence.
• Empathy: The caring, individualized attention provided to customers.
• Tangibles: The appearance of physical facilities, equipment, personnel, and communication material. 
• Voice-of-Customer (VOC) Program: An ongoing marketing research system that collects customer inputs and integrates them into managerial decisions. 
• Zone of Tolerance: The area between customers' expectation regarding their desired service and the minimum level of acceptable service -- That is, the difference between what the customer really wants and what he or she will accept before going elsewhere.

• Standards Gap:pertains to the difference between the firms' perceptions of the customers' expectations and the service standards it sets. By setting appropriate service standards, training employees to meet or exceed those standards, and measuring service performance, firms can attempt to close the gap. 
• Service Providers generally want to do a good job as long as they know what is expected of them. The employees must be thoroughly trained not only to complete their specific tasks but also how to treat guests, and managers need to set an example of high service standards, which will permeate through the entire organization. In extreme cases, such training becomes even more crucial. 

• Delivery Gap: The difference between the firm's service standards and the actual service it provides. This gap can be closed by getting employees to meet or exceed service standards when the service is being delivered by empowering service providers, providing support and incentives, and using technology where appropriate. 
• Methods to Reduce Delivery Gaps:
• Empower Employees
• Empowerment: In context of service delivery, means allowing employees to make decisions about how service is provided to customers.
• Provide Support and Incentives
• Emotional Support: Concern for others' well-being and support of their decision in a job setting.
• Instrumental Support: Providing the equipment or systems needed to perform a task in a job setting.
• Plus, the support that managers provide must be consistent and coherent throughout the organization. 
• Finally, Provide rewards to employees for their excellent service abilities. 
• Use of Technology
• Technology has become an increasingly important factor in the delivery of services. Technological advances that help close the delivery gap are expanding.
• But, they can also create problems. Some people do not support replacing human interaction with  machines or have problems using technology. 

• Communication Gap: refers to the difference between the actual service provided to customers and the service that the firm's promotion program promises. If firms are more realistic about the services they can provide and at the same time manage customer expectations effectively, they generally can close this gap. 
• The communications gap can be reduced by managing customer expectations and by promising only what you can deliver, or possibly even a little less. A relatively easy way to manage customer expectations is to coordinate how the expectation is created and the way the service is provided. 
• Service Quality and Customer Satisfaction and Loyalty: Good service leads to satisfied and loyal customers. Assuming that none of the service gaps discussed earlier occur, or are not too wide, customers should be more or less satisfied. 

III. Service Recovery

• Listening to the Customers and Involving them in the Service Recovery
• Customers can become very emotional about a service failure, whether the failure is serious, or minor. When the customer and company work together, the outcome is often better than either could achieve on their own. 
• Finding a fair Solution
• Distributive Fairness: Pertains to a customer's perception of the benefits he or she received compared with the costs (inconvenience or loss) that resulted from a service failure. 
• Procedural Fairness: Refers to the customers perception of the fairness of the process used to resolve complaints about service. 
• Resolving Problems Quickly
• The longer it takes to resolve a service failure, the more irritated the customer will become and the more people he or she is likely to tell about the problem. 

Chapter 12: Developing New Products

Objectives:

• Identify the reasons why firms create new products,
• Describe the different groups of adopters articulated by the diffusion of innovation theory,
• Describe the various stages involved in developing a new product or service,
• Explain the product life cycle. 

I. Why do Firms Create new products:

• Innovation: The process by which ideas are transformed into new products and services that will help firms grow. 

"Without innovation and its resulting new products and services, firms would have only two choices: continue to market current products to current customers or take the same product to another market with similar customers."

Changing Customer Needs: Firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers or by keeping customers from getting bored with the current product or service offering.

Market Saturation: The longer a product exists in the marketplace, the more likely it is that the market will become saturated, and without new products or services, the value of the firm will ultimately decline.

Managing Risk Through Diversity: Through innovation, firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can. Firms with multiple products can withstand external shocks, including changes in consumer preferences or intensive competitive activity.

Fashion Cycles: Industries that rely on fashion trends and experience short product life cycles - including apparel, arts, books, and software markets - most sales come from new products.

"Consumers of computer software and video games demand new offers because one they have beaten the game, they want to be challenged by another game or experience the most recent version."

Improving Business Relationships: New products do not always target end consumers; sometimes they function to improve relationships with suppliers.

II. Diffusion of Innovation:

• Diffusion of Innovation: The process by which the use of innovation, whether a product or a service, spreads throughout the market group over time and over various categories of adopters. 

The theory surrounding diffusion of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service. It also gives them means to identify potential markets for their new products or services and predict their potential sales, even before they introduce the innovations.

• Pioneers/breakthroughs: New product introductions that establish a completely new market or radically change both of the rules of competition and consumer preferences in a market.
• First Movers: Product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead.

Innovators: Those buyers who want to be the first to have the new product or service. These buyers enjoy taking risks and are considered highly knowledgeable. Innovators keep themselves very well informed about the product category. Are crucial to the success of any new product or service. 

Early Adopters: The second subgroup of consumers in the diffusion of innovation model, after innovators, to use a product or service innovation; generally don't like to take as much risk but instead wait and purchase the product after careful review. Often regarded as the opinion leaders for particular product categories.

Early Majority: A group of consumers in the diffusion of innovation model that represents approximately 34 percent of the population; members don't like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them. When early majority consumers enter the market, the number of competitors in the marketplace usually also reaches it's peak, so these buyers have many price and quality choices.

Late Majority: The last group of buyers to enter a new product or service market; when they do, the product has achieved it's full market potential.

Laggards: Consumers who like to avoid change and rely on traditional products until they are no longer available.

Using the Diffusion of Innovation Theory: Firms can predict which types of consumers will buy their product or services immediately after its introduction as well as later as the product is more and more accepted by the market. With this knowledge, the firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each customer group. However, because different products diffuse at different rates, marketers must work to understand the diffusion curve for each new product and service as well the characteristics of the target customers in each stage of diffusion.

"If the early adopter group is small, the number of people who ultimately adopt the innovation likely will also be small."

• Relative Advantage: If a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick. 
• Compatibility: A diffusion process may be faster or slower depending on various consumer features, including international cultural differences. 
• Observability: When products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process. 
• Complexity and Trialability: Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try. 

III. How Firms Develop New Products:

Idea Generation: Development of viable new product ideas. Firms that want to be pioneers rely more extensively on R&D efforts, whereas those who adopt a follower strategy are more likely to scan the market for ideas. 

• Internal Research and Development: Where scientists work to solve complex problems and develop new ideas. For firms that use R&D, the cost for product development are high and the resulting product or service is likely to be a technological or market breakthrough. 
• R&D Consortia: Groups of other firms and institutions, possibly including government and educational institutions, to explore new ideas or obtain solutions for developing new products. Here, the R&D investments come from the group as a whole. 
• Licensing: Firms buy the rights to use the technology or items  from other research-intensive firms through a licensing agreement. 
• Brainstorming: Firms often engage in brainstorming sessions during which a group works together to generate ideas; where no idea can be either rejected or accepted until the end of the session. 
• Outsourcing: What companies use when they have trouble doing any of the above mentioned techniques. 
• Competitors' products: A new product entry by a competitor may trigger a market opportunity for a firm, which can use reverse engineering to understand the competitor's product and then bring an improved version to market.
• Reverse Engineering: Involves the taking apart of a product, analyzing it, and creating an improved product that does not infringe upon the competitors patents, if any exist. 
• Consumer Input:  Listening to customers in both B2B and B2C markets is essential for successful idea generation. B2B customers are few so following their trends and needs to improve products and services is relatively easy. 
• Lead Users: Innovative product users who modify existing products according to their own ideas to suit their specific needs. 

Concept Testing:

• Concepts: Brief written description of a product or service; it's technology, working principles, and forms; and what consumer needs it would satisfy. 
• Concept Testing: The process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reaction. 

"If the concept fails to meet customers' expectations, it is doubtful it would succeed if it were to be produced and marketed."

Product Development:

• Product Development/Product Design: Entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a services features.

"Ben and Jerry's Ice Cream alpha tests all of its proposed new flavors on its own (lucky) employees at its corporate headquarters in Vermont."

• Prototype: The first physical form or service description of a new product, still in rough or tentative form, that has the same properties as the new product but is produced through different manufacturing processes, sometimes even crafted individually. 
• Alpha Testing: An attempt by the firm to determine whether a product or service will perform according to it's design and whether it satisfies the need for which it was intended; occurs in the firm's R&D department.
• Beta Testing: Having potential consumers examine a product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to it's use.

Market Testing:

• Premarket tests: Conducted before a firm brings a product or service to market to determine how many customers will try and then continue to use the product or service according to s mall group of potential consumers. 
• Test Marketing: Introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch. 

Product Launch: if the parket testing returns with positive results, the firm is ready to introduce the product to the entire market. Requires extensive financial investment and coordination of all of the marketing mix. 

• Promotion: Test results help the firm determine the appropriate integrated marketing communication strategy. Promotions of new products is required at each step of the supply chain. 
• Trade Promotions: Advertising to wholesalers or retailers to get them to purchase new products, often through special pricing incentives.
• Introductory Price Promotions: Short-Term price discounts designed to encourage trials.
• Trade Show: Major events attended by buyers who choose to be exposed to products or services offered by potential suppliers in an industry. 
• Place: The manufacturer coordinates the delivery and storage of the new products with its retailers to ensure that it is available for sale when the customer wants it, at the stores the customer is expecting it to be sold at, and in sufficient quantities to meet demand. 
• Price: Setting prices is a supply chain-wide decision. 
• Manufacturer's Suggested Retail Price: The price that manufacturers suggest retailers use to sell their merchandise. 
• Slotting Allowance: Fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products. 
• Timing: The timing of the launch may be important, depending on the product.

Evaluation of Results: After product is launched, the marketers must undertake a critical postlaunch review to determine whether the product and its launch were a success or failure and what additional resources or changes to the marketing mix are needed, if any. For products that do move through the system, firms can measure the success of a new product through three interrelated factors: 1) satisfaction of technical requirements, 2) customer acceptance, 3) its satisfaction of the firms financial requirements, such as sales and profits. 

IV. Product Life Cycle:

• Product Life Cycle: Defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning. 

Introduction Stage: Usually starts with a single firm.

• Introduction Stage: Stage of the life cycle when innovators start buying the product.

Growth Stage: Marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions.

• Growth Stage: Stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category. 

Maturity Stage: Characterized by the adoption of the product by the late majority and intense competition for market share among firms.

• Maturity Stage: Stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them. 
• Entry into new markets or market segments: Because the market is saturated at this point, firms may attempt to enter new geographical markets, including international markets, that may be less saturated. However, even in mature markets, firms may be able to find new market segments. 
• Development of new products: Despite market saturation, firms continually introduce new products with improved features or find new ones for existing products because they need constant innovation and product proliferation to defend market share from intense competition. 

Decline Stage: Firms with products in the decline stage either position themselves for a niche segment of the diehard consumers or those with special needs, or they completely exit the market.

• Decline: Stage of the product life cycle when sales decline and the product eventually exits the market. 

The Shape of the Product Life Cycle Curve: In theory, is bell shaped with regard to sales over time. However, each product or category has its own individual shape, where some move more rapidly through their product life cycle depending on the product and the market, and other variables.

Strategies based on Product Life Cycle: Some Caveats: Although the product life cycle concept provides a great starting point for marketers, it must be treated and used with care. New research, based on history of dozens of consumer products, suggests that the concept of the product life cycle is indeed valid. 

Chapter 11: Product, Branding, and Packaging Decisions

Objectives:

• Describe the components of a product,
• Identify the types of consumer products,
• Explain the difference between the product mix's breadth and a product line's depth,
• Identify the advantages that brands provide firms and consumers,
• Explain the various components of brand equity,
• Determine the various types of branding strategies used by firms,
• Distinguish between brand extension and line extension,
• Indicate advantages of a product's packaging and labeling strategy.

I. Complexity and Types of Products

Products: Anything that is of value to a customer and can be offered through a voluntary marketing exchange.

Core Customer Value: The basic problem solving benefits that consumers are seeking.

Actual Product: The physical attributes of a product including the 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. 

• Types of Products
• Consumer Products: Products and services used by consumers for their personal use. 
• Specialty Products/Services: Products and services for which a customer shows a strong preference and for which he or she will expend considerable effort to search for the best suppliers.
• Shopping Products/Services: Those for which consumers will spend time comparing alternatives, such as apparel, fragrances, and appliances.
• Convenience Products/Services: Those for which the consumer is not willing to spend any effort to evaluate prior to purchase.
• Unsought Products/Services: Products or services consumers either do not normally thinkk of buying or do not know about.

II. Product Mix and Product Line Decisions

Product Mix: The complete set of products offered by a firm.

Product Lines: Groups of associated items, such as those that consumers use together or think of as part of a group of similar products.

Breadth: Number of product lines offered by a firm; also known as variety.

Depth: The number of categories within a product line.

• Increase Depth: to address changing consumer preferences or preempt competitors while boosting sales. 
• Decrease Depth: to realign firms resources. 
• Increase Breadth: To capture new or evolving markets to increase sales. 
• Decrease Breadth: to address changing market conditions or meet internal strategic priorities. 

III. Branding

"A company lives or dies based on brand awareness. Consumers cannot buy products that they do not know exist."

• Value of Branding for the Consumer
• Brands Facilitate Purchases: usually signify quality level of product or service and therefore help consumer make quick decisions. 
• Brands Establish Loyalty: Over time and use, consumers build trust in brands quality and value added.
• Brands Protect from Competition and Price Competition: Loyalty established create a protective nature from competitors and competitors pricing levels. 
• Brands are Assets: Can be legally protected by trademarks and copyrights and thus constitute a unique form of ownership. 
• Brands Affect Market Value: Having a well know brand can have a direct effect on a firm's bottom line. 
• Brand Equity for the Owner: The set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or the service. 
• Brand Awareness: Measures how many consumers are familiar with the brand and what it stands for; created through repeated exposures of the various brand elements ( brand name, logo, symbol, character, packaging, or slogan) in the firm's communications to the consumer. 
• Perceived Value: The relationship between a product's or service's benefits and its costs. 
• Brand Associations: The mental links that consumers make between a brand and its key product attributes; can involve a logo, slogan, or famous personality.
• Brand Loyalty: Occurs when a consumer buys the same brand's product or service repeatedly over time rather than buying from multiple suppliers within the same category. 

IV. Branding Strategies

• Brand Ownership
• Manufacturer Brands: (national brands) Brands owned and managed by the manufacturer. 
• Retail/Store Brands: Also called private-label brands, are products developed by retailers.
• Naming Brands and Product Lines
• Family Brands: A firm's own corporate name used to brand it product lines and products.
• Individual Brands: The use of individual brand names for each of a firm's products.
• Brand Line Extensions
• Brand Extension: The use of the same brand name for new products being introduced to the same or new market.
• Line Extension: The use of the same brand name within the same product line and represents an increase in a product line's depth.
• Brand Dilution: Occurs when a brand extension adversely affects consumer perception about the attributes the core brand is believed to hold. 
• Co-Branding: The practice of marketing two or more brands together, on the same package or promotion.
• Brand Licensing: A contractual agreement between firms, whereby one firm allows another to use its brand name, logo, symbols, or characters in exchange for a negotiated fee. 
• Brand Repositioning: (rebranding) A strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences. 

V. Packaging

Primary Package: The packaging the consumer uses, such as the toothpaste tube, 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 used by retailer scanners; can contain additional product information that may not be available on the primary package.

• Product Labeling: Provide information the consumer needs for his or her purchase decision and consumption of the product. Many labeling requirements stem from various laws, used to protect the consumer from consuming goods against their lifestyle choices. It is a communication tool.

Chapter 10: Marketing Research

Objectives:

• Identify the five steps in the marketing research process,
• Describe the various secondary data resources,
• Describe the various primary data collection techniques,
• Summarize the difference between secondary data and primary data,
• Examine the circumstances in which collecting information on consumers is ethical.

I. The Marketing Research Process

Marketing Research: A set of techniques and principles for systematically collecting, recording, analyzing, and interpreting data that can aid decision makers involved in marketing goods, services, or ideas.

• Step 1: Defining Objectives and Research Needs
• Step 2: Designing the Research
• Step 3: Data Collection Process
• Secondary Data: Pieces of information that have already been collected from other sources and usually are readily available. Include both external and internal data sources.
• Primary Data: Data collected to address specific research needs. 
• Focus Groups
• In-Depth Interviews
• Surveys
• Sample: A group of customers that represent the customers of interest in a research study.
• Step 4: Analyzing Data and Developing Insights
• Data: Raw numbers or facts
• Information: Organized, analyzed, and interpreted data that offer value to marketers. 
• Step 5: Action Plan and Implementation
• A typical marketing research presentation includes:
• Executive Summary
• The Body of Report
• Includes research Objectives
• Methodology
• Detailed Findings
• Conclusions
• Appropriate Supplemental Tables
• Figures
• Appendixes

II. Secondary Data

• Inexpensive External Secondary Data
• US Census Data
• Google Searches
• Syndicated External Secondary Data
• Syndicated Data: Data available for a fee from a commercial research firm
• Scanner Data: A type of syndicated external secondary data used in quantitative research that is obtained from scanner readings of UPC Codes at check-out counters.
• Panel Data: Information collected from a group of consumers. 
• Internal Secondary Data
• Data Warehouses: Large computer files that store millions or billions of pieces of individual data.
• Data Mining: The use of a variety of statistical analysis tools to uncover previously unknown patterns in the data stored in databases or relationships among variables.
• Churn: The number of consumers who stop using a product or service, divided by the average number of consumers of that product or service. 

III. Primary Data Collection Techniques

Quantitative Research: Informal research methods, including observation, following social media sites, in-depth interviews, focus groups, and projective techniques.

Qualitative Research: Structured responses that can be statistically tested to confirm insights and hypotheses generated via qualitative research or secondary data.

• Observation: An exploratory research method that entails examining purchase and consumption behaviors through personal or video camera scrutiny.
• Social Media
• Sentiment mining: Data gathered by evaluating customer comments posted through social media sites such as facebook and Twitter.
• In-Depth Interviews: An exploratory research method technique in which trained researchers ask questions, listen to and record the answers, and then pose additional questions to clarify and expand on a particular issue.
• Focus Group Interviews: A research technique in which a small group of persons (usually 8-12) comes together for an intensive discussion about a particular topic with the conversation guided by a trained moderator using an unstructured method of inquiry.
• Survey Research
• Survey: A systematic means of collecting information from people that generally uses a questionnaire. 
• Questionnaire: A form that features a set of questions designed to gather information from respondents and thereby accomplish the researcher's objectives; questions can be either structured or unstructured.
• Structured Questions: Closed ended questions for which a discreet set of response alternatives, or specific answers, is provided for respondents to evaluate.
• Unstructured Questions: Open-ended questions that allow respondents to answer in their own words. 
• Developing a Questionnaire is Part Art and Part Science
• Panel and Scanner Based Research
• Experimental Research: A type of conclusive and quantitative research that systematically manipulates one or more variables to determine which variables have a causal effect on another variable. 
• Advantages and Disadvantages of Primary and Secondary Research
• Secondary Research
• Examples
• Census Data
• Sales Invoices
• Internet Information
• Books
• Journal Articles
• Syndicated Data
• Advantages
• Saves time in collecting data because they are readily available
• Free or inexpensive ( except for syndicated data)
• Disadvantages
• May not be precisely relevant to information needs.
• Information may not be timely.
• Sources may not be original, and therefore usefulness is an issue. 
• Methodologies for collecting data may not be appropriate.
• Data sources may be bias.
• Primary Research
• Examples
• Observed Consumer behavior
• Focus group interviews
• Surveys
• Experiments
• Advantages
• Specific to the immediate data needs and topic at hand.
• Offers behavioral insights generally not available from secondary research.
• Disadvantages
• Costly
• Time consuming
• Requires more sophisticated training and experience to design study and collect data.

IV. Emerging Technology and the Ethics of Using Customer Information

• Biometric data: Digital scanning of the behavioral or physiological characteristics of individuals as a means of identification.

Chapter 9: Segmentation, Targeting, and Positioning

Objectives:

• Outline Different methods for segmenting a market,
• Describe how firms determine whether a segment is attractive and worth pursuing,
• Articulate the differences among targeting strategies: undifferentiated, differentiated, concentrated, or micromarketing,
• Determine the value proposition,
• Define positioning and describe how firms do it. 

I. The Segmentation, Targeting, and Positioning Process

• Step 1: Establish Overall Strategy or Objectives
• Derived from the firm's mission or value statement as well as its current SWOT analysis. 
• Step 2: Segmentation Methods
• Geographical Segmentation: The grouping of consumers on the basis f where they live.
• Demographic Segmentation: The grouping of consumers according to easily measured, objective characteristics such as age, gender, income, and education.
• Psychographic Segmentation
• Psychographics: Delves into how consumers describe themselves; allows people to describe themselves using those characteristics to help them choose how they occupy their time (behavior) and what underlying psychological reasons determine those choices.
• Self-Values: Goals for life; not just goals one wants to accomplish in a a day; a component of psychographics that refers to overriding desires that drive how a person lives his or her life.
• Self-Concept: The image a person has of him or herself.
• Lifestyles: refers to the way a person lives his or her life to achieve their goals. 
• VALS Framework: 
• Innovators - High Resources / High Innovation
• Ideals: Thinkers
• Achievement: Achievers
• Self-Expression: Experiencers
• Ideals: Believers
• Achievement: Strivers
• Self-Expression: Makers
• Survivors - Low Resources / Low Innovation
• Benefit Segmentation: The grouping of consumers on the basis of the benefits they derive from products or services. 
• Behavioral Segmentation: Divides consumers into groups based on how they use the product or the service. Some common behavioral measures include occasion and loyalty.
• Occasion Segmentation: Type of behavioral segmentation based on when a product or service is purchased or consumed.  (Holiday products....)
• Loyalty Segmentation: Strategy of investing in loyalty incentives to retain the firm's most profitable customers.
• Using Multiple Segmentation Methods
• Geodemographic Segmentation: The grouping of consumers on the basis of a combination or geographic, demographic, and lifestyle characteristics. 
• Step 3: Evaluate Segment Attractiveness
• Identifiable: Must be identifiable
• Substantial: Must have a substantial population size.
• Reachable: Can the value be communicated and goods be distributed.
• Responsive: Will the segment react and provide feedback.
• Profitable: Will the firm gain revenue above the costs to communicate and distribute product or service.
• Step 4: Select Target Market
• Undifferentiated Targeting Strategy, or Mass Marketing: A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups.
• Differentiated Targeting Strategy: A strategy through which a firm targets several market segments with a different offering for each. 
• Concentrated: A marketing strategy of selecting a single, primary target market and focusing all energies on providing a product to fit that market's needs.
• Micromarketing or One to One: An extreme form of segmentation that tailors a product or service to suit an individual consumer's wants or needs.
• Step 5: Develop Positioning Strategy
• Value Proposition: The unique value that a product or service provides to its customers and how it is better than and different from those of competitors. 
• Positioning Methods
• Value: Reflects the relationship of benefits to costs, or what the consumer gets for what he or she gives.
• Positioning Using Perceptual Mapping
• Determine consumers' perceptions and evaluations of the product or service in relation to competitors.
• Identify the market's ideal points and size.
• Identify competitors positions
• Determine consumer preferences
• Select the position
• Monitor the positioning strategy

Chapter 8: Global Marketing

Objectives:

• Describe the components of a country market assessment,
• Understand the marketing opportunities in BRIC countries,
• Identify the various market entry strategies,
• Highlight the similarities and differences between a domestic marketing strategy and a global marketing strategy.

Globalization: Refers to the process by which goods, services, capital, people, information, and ideas flow across national borders.

I. Assessing Global Markets

• Economic Analysis using Metrics
• Evaluating the General Economic Environment
• Trade Deficit: Results when a country imports more than it exports
• Trade Surplus: Results when a country exports more than it imports
• Gross Domestic Product: The market value of the goods and services produced by a country in a year; the most widely used standardized measure of output.
• Gross National Income: Consists of GDP plus the income earned from investments abroad ( minus any payments made to non residence who contribute to the domestic economy.)
• Purchasing Power Parity: A theory that states that if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency.
• Evaluating Market Size and Population Growth
• Distribution of population is important. Are the areas with great population located in rural areas or urban areas. This defines what opportunities may be available in BRIC countries. 
• Evaluating Real Income
• Using the real income of an area or region, firms can redesign or repackage products to fit within the demographic population's real income so they can afford it. 
• Analyzing Infrastructure and Technology Capabilities
• Infrastructure: The basic facilities, services, and installations needed for a community or society to function, such as transportation and communications systems, water and power lines, and public institutions like schools, post offices, and prisons. 
• Four Key Areas of Concern:
• Transportation
• Distribution Channels
• Communications
• Commerce
• Analyzing Government Actions
• Tariffs: (Duty) A tax levied on a good imported into a country.
• Quota: Designates the maximum quantity of a product that may be brought into a country during a specified time.
• Exchange Control: Refers to the regulation of a country's currency exchange rate.
• Exchange Rate: The measure of how much one currency is worth in relation to another. 
• Trade Agreements: Intergovernmental agreements designed to manage and promote trade activities for specific regions. 
• Trade Bloc: Consists of those countries who have signed a particular trade agreement. 
• Analyzing Socio-cultural Factors:
• Power Distance: Willingness to accept social inequality as natural.
• Uncertainty Avoidance: The extent to which a country relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life.
• Individualism: Perceived obligation to and dependence on groups. 
• Masculinity: The extent to which dominant values are male oriented. 
• Time Orientation: Short versus long term orientation. Does this country make longer term or shorter term relationships?
• The Appeal of Bric Countries
• Brazil
• Russia
• India
• China

II. Choosing a Global Entry Strategy

• Export
• Franchise
• Strategic Alliance
• Joint Venture
• Direct Investment

III. Choosing a Global Marketing Strategy

• Target Market: Segmentation, Targeting, Positioning
• The Global Marketing Mix
• Global Product or Service Strategies
• Three Potential Global Product Strategies:
• Sell the same product or service in both the home country market and the host country.
• Sell a product or service similar to that sold in the home country but include minor adaptations.
• Sell totally new products or services.
• Glocalization: The process of firms standardizing their products globally, but using different promotional campaigns to sell them.
• Reverse Innovation: When companies initially develop products for niche or underdeveloped markets, and then expand them into their original or home markets.

• Global Pricing Strategies
• Global Distribution Strategies
• Global Communications Strategies

Chapter 7: Business to Business Marketing

Chapter information coming soon.

Chapter - 6: Consumer Behavior

Objectives:

• Articulate the steps of consumer buying process,
• Describe the difference between functional and psychological needs,
• Describe factors that affect information search,
• Discuss postpurchase outcomes,
• List the factors that affect the consumer decision process,
• Describe how involvement influences the consumer decision process.

"To understand consumer behavior, we must ask why people buy goods and services."

The Consumer Decision Process: The model that represents what consumers go through before, during, and after making a purchase.

• Need Recognition: The beginning of the consumer decision making process; occurs when consumers recognize they have an unsatisfied need and want to go from their actual, needy state to a different desired state.
• Functional Needs: Pertain to the performance of a product or service. 
• Psychological Needs: Pertain to the personal gratification consumers associate with a product or service. 
• Search For Information: After a consumer recognizes a need, consumer must now search for information about the various options that exist to satisfy the need.
• Internal Search for information: Occurs when the buyer examines his or her own memory and knowledge about the product or service, gathered through past experiences.
• External Search for Information: Occurs when the buyer seeks information outside his or her own personal knowledge base to help make the buying decision. 
• Factors Affecting Consumers' Search Processes: 
• The Perceived Benefits vs. Perceived Cost of Search: Is it worth the time and effort to search for information about a product or service? 
• Locus of Control:
• Internal Locus of Control: Refers to when consumers believe they have some control over the outcomes of their actions, in which case they generally engage in more search activities.
• External Locus of Control: Refers to when consumers believe that fate or other external factors control all outcomes. 
• Actual or Perceived Risk: Five types of risks associated with purchase decision which can delay the purchase.\
• Performance Risk: Involves the perceived danger inherent in a poorly performing product or service. 
• Financial Risk: Risk associated with a monetary outlay; includes the initial cost of the purchase, as well as the cost of using the item or service. 
• Social Risk: The fears that the consumes suffer when they worry others might not regard their purchases positively.
• Physiological/safety Risk:The fear of actual physical harm should a product or service not perform properly. 
• Psychological Risk: Associated with the way people will feel if the product or service does not convey the right image.
• "Recent research suggests that psychological risks might help explain why consumers enjoy supersizing their menu items. Especially when consumers feel powerless or more vulnerable, they equate larger sizes-whether in televisions, houses or menu items- with improved status."
• Evaluating Alternatives: Alternative evaluation often occurs while the consumer is engaged in the process of information search.
• Attribute Sets: How the organization occurs within a consumers mind. 
• Universal Sets: Includes all possible choices for a product-category.
• Retrieval Sets: Includes those brands or stores that the consumer can readily bring forth from memory.
• Evoked Sets: Comprises the alternative brands or stores that the consumer states he or she would consider when making a purchase decision.
• Evaluating Criteria: Consists of a set of salient, or important, attributes about a particular product.
• Determinant Attributes: Product or service features that are important to the buyer and on which competing brands or stores are perceived to differ.
• Consumer Decision Rules: The set of criteria that consumers use consciously or subconsciously to quickly and efficiently select from among several alternatives.
• Compensatory Decision Rule: At work when the consumer is evaluating alternatives and trade offs one character against another, such that good characteristics compensate for bad ones. 
• Multi-attribute Model: A compensatory model of customer decision making based on the notion that consumers see a product as a collection of attributes or characteristics. The model uses weighted average score based on the importance of various attributes and performance on those issues.
• Non Compensatory Decision Rule: At work when consumers choose a product or service on the basis of a subset of its characteristics, regardless of the values of its other attributes.
• Purchase and Consumption: After evaluating alternatives, the consumer is ready to buy.
• Conversion Rate: Percentage of consumers who buy a product after viewing it.
• Post Purchase: Marketers are particularly interested in postpurchase behavior because it involves actual rather that potential customers.
• Customer Satisfaction: Setting unrealistically high consumer expectations of the product through advertising, personal selling, or other types of promotion may lead to higher initial sales, but it will eventually result in dissatisfaction if the product fails to achieve high performance expectations.
• Marketers can take several steps to ensure postpurchase satisfaction such as: 
• Build realistic expectations, not too high and not too low. 
• Demonstrate correct product use - improper usage can cause dissatisfaction.
• Stand behind the product or service by providing money back guarantees and warranties. 
• Encourage consumer feedback, which cuts down on negative word of mouth and helps marketers adjust their offerings.
• Periodically make contact with consumers and thank them for their support. Customers appreciate human contact.
• Postpurchase Cognitive Dissonance: The psychologically uncomfortable state produced by an inconsistency between beliefs and behaviors that in turn evokes a motivation to reduce the dissonance; buyer's remorse.
• Customer Loyalty: Marketers attempt to solidify a loyal relationship with their customers. 
• \Undesirable Customer Behavior: Not always are customers satisfied with their purchases.
• Negative Word of Mouth: Occurs when consumers spread negative information about a product or service or store to others.

Factors Influencing the Consumer Decision Process:

• Psychological factors: A host of psychological factors affect the way people receive marketers' messages.
• Motive: A need or want that is strong enough to cause the person to seek satisfaction. 
• Maslow's Hierarchy of Needs: A paradigm for classifying people's motives. It argues that when lower-level, more basic needs (psychological and safety) are fulfilled, people turn to satisfying their higher-level human needs (social and personal); see psychological, safety, social, and personal needs. 
• Physiological needs: Those relating to the basic biological necessities of life, food, water, rest, shelter.
• Safety Needs: One of the needs in the PSSP hierarchy of needs; pertain to protection and physical well-being.
• Love Needs: Needs expressed through interactions with others.
• Esteem Needs: Needs that enable people to fulfil inner desires. 
• Self-actualization: When a person is completely satisfied with his or her life.
• Attitude: A person's enduring evaluation of his or her own feelings about and behavioural tendencies toward an object or idea; consists of three components: Cognitive, Affective, and Behavioural.
• Cognitive Component: A component of attitude that reflects what a person believes to be true.
• Affective Component: A component of attitude that reflects what a person feels about the issue at hand - his or her like or dislike of something.
• Behavioural Component: A component of attitude that comprises the actions a person takes with regard to the issue at hand.
• Perception: The process by which people select, organize, and interpret information to form a meaningful picture of the world.
• Learning: Refers to the change in a person's thought process or behaviour that arrises from experience and takes place throughout the consumer decision making process.
• Lifestyle: A component of psychographics; refers to the way a person lives his or her life to achieve goals.
• Social Factors: Consists of Customer's family, reference groups, and culture.
• Family:
• Reference groups: One or more persons whom an individual uses as a basis for comparison regarding beliefs, feelings, and behaviours.
• Culture: See previous chapter...
• Situational Factors: Factors affecting the consumer decision process; those that are specific to the situation that may override, or at least influence, psychological and social issues.
• Purchase situation:
• Shopping Situation:
• Store Atmosphere
• Sales People
• Crowding
• In-Store Demonstrations
• Promotions
• Packaging
• Temporal State: Current mood and how it affects your purchasing behaviors.

Involvement and Consumer Buying Decisions: Two types of buying decisions: Extended problem solving and limited problem solving.

• Involvement: Consumer's interest in a product or service.
• Extended Problem Solving: A purchase decision process during which the consumer devotes considerable time and effort to analyzing alternatives; often occurs when the consumer perceives that the purchase decision entails a higher amount of risk.
• Limited Problem Solving: Occurs during a purchase decision that calls for, at most, a moderate amount of effort and time. 
• Impulse Buying: A decision made by consumers on the spot when they see the merchandise.
• Habitual decision making: A purchase Decision process in which consumers engage with little conscious effort.