Product Why introduce New Products? ↳ Consistent new product introductions are critical to a company’s long-term success ↳ Offensive ○ Achieve market share or profit goals (products under 5 years old contribute ⅓ revenue) ○ Yield stock-market gain ↳ Defensive ○ Pre-empt attack ○ Replace declining products products: firms that cannot create successful new products disappear ACCORD Model ↳ Advantage (ideal - high) ○ differences/improvements compared to existing products ↳ Compatibility (ideal - high) ○ With current behaviors/norms/beliefs/products ↳ Complexity (ideal - low) ○ In communicating benefits, and consumers ability to realize those benefits ↳ Observability (ideal - high) ○ Of the benefits and of usage ↳ Riskiness (ideal - low) ○ What if the ↳ Divisibility (ideal - high) ○ Trialability, whether you can test the products to see if you like it Reasons for New Product Failures ↳ Capacity problems ○ Inadequate tech skill or financial resources ○ Lack of manufacturing and servicing ability ○ Lack of access to supply or distribution channels ↳ Strategy problems ○ Segment synergy/compatibility ○ Poor target selection ○ Insufficient “points of difference” ○ Wrong entry timing ○ Poor marketing mix decisions New Product Development Process ↳ Idea Generation ○ Get ideas from: customers, marketing research, competitors, other markets ↳ Screening ○ Strengths and weaknesses, fit with objectives, market trends, rough ROI estimate ↳ Idea evaluation ○ Concept testing, reactions from customers, rough estimates of costs/sales/profits ↳ Development ○ R&D, develop model or service prototype, test marketing mix, revise plans as needed, ROI estimate ↳ Commercialization ○ Finalize product and marketing plan, start production and marketing, roll out in select markets, final ROI estimate This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ Market Testing ↳ Fully introducing a new product can cost hundreds of millions ↳ Marketing testing implemented in limited but carefully selected parts of the market ↳ Goals ○ Gain info and experience with the marketing mix ○ Forecast demand when applied to total market ↳ Popular methods ○ Simulated test market ■ Advantages ● Fast, cheap, flexible ■ Disadvantages ● Generalizability ○ Full-scale test market (cities where product is sold just as it would be in a national launch) ■ Advantages ● High external validity ■ Disadvantages ● Time consuming, expensive, not confidential ↳ Typical simulated test market procedure ○ Step 1: recruit qualified shoppers ○ Step 2: background questions ○ Step 3: screening of ads ○ Step 4: simulated shopping ○ Step 5: debriefing ○ Step 6: reinterview Degree of new consumer learning needed ↳ Continuous innovation: requires no new learning by consumers ↳ Dynamically continuous innovation: disrupts consumer’s normal routine but does not require totally new learning ↳ Discontinuous innovation: requires new learning and consumption patterns by consumers Product Life Cycle ↳ Introduction ○ Target segment: Innovators ↳ Growth ○ Target segment: early adopters ↳ Maturity ○ Target segment: early and late majority ↳ Decline ○ Target segment: laggards ↳ Life stage does not equal market size ↳ Small, stable markets can be mature markets Strategies for Maintenance and growth ↳ Market penetration ○ How to get people to use more of your product ○ Current markets, current product ↳ Market development ○ Repositioning product to diff consumers ○ New markets, current product ↳ Product development This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ ○ Make product serve market needs better ○ Current markets, new products ↳ Diversification ○ New market to serve, but must update product ○ New products, new markets Brands ↳ Name, term, symbol, design intended to identify the goods and services of one seller or group of and to differentiate them from those of the competition ↳ Firm perspective ○ Can be most valuable asset ○ consumer/operating advantages ○ Exclusive rights to use name on products ↳ Consumer Perspective ○ Something consumer identifies with ○ Promise from firm to customers ○ Simplifies decision making ○ Relationship ↳ Brand equity ○ Added value the brand name gives to a product beyond the functional benefits provided ○ Occurs when brand awareness is high and brand image is favorable ↳ Brand personality ○ Consumers often see brands as having personalities ○ Examples: excitement, competence, sincerity, sophistication, ruggedness Four Company STrategies ↳ Line extension ○ Same brand, new version of existing product ↳ Multibrands ○ New brand, new version of existing product ↳ Brand extension ○ New product, same brand ↳ New brands ○ New product, new brand ↳ Brand name extension: put brand name on an additional product ○ Why do it? ■ Brand loyalty ■ Costs less to introduce ■ Distributors more willing to carry ○ Risks ■ Overstretch brand name - consumers feel that brand name does not work for new product ■ Can then hurt original products by confusing customers ↳ Upward brand extension: making the brand name more luxurious ↳ Downward brand extension: making budget friendly options Place Channel ↳ Path that enables products to flow from producers to end users This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ Functions of a Channel ↳ In firm’s perspective ○ Transactional Function: buying, selling, negotiating, risk taking ○ Logistical Function: transporting, sorting, storing ○ Facilitating Function: financing, providing info, promoting, product testing ↳ In consumer’s perspective ○ Informational needs: try before you buy, advice and demos, compare diff products, customization ○ Logistical needs: convenience, variety, immediacy of availability, pre or post sale service Channel Structure ↳ Direct ○ Advantages ■ Effective distribution system ■ More control over environment ■ Closer contact with end-users ■ Greater cost-efficiency ○ Disadvantages ■ Large upfront fixed cost investment and risk ■ Takes away from a focus on core business ■ Difficult to achieve same breadth as outlets ↳ Indirect: Going through an intermediary ↳ Private labels ○ Brands owned by distributors ↳ Hybrid marketing systems ○ Multichannel distribution: different channels to reach different segments Distribution Intensity ↳ Density of coverage ↳ Intensive ○ Distribution through every reasonable outlet in the market ○ High coverage/increased access ○ Convenient for end customers ↳ Selective ○ Distribution through multiple, but not all, reasonable outlets in a market ↳ Exclusive ○ Distribution through a single wholesaling middleman and/or retailer in a market ○ High margins throughout the channel ○ Resellers compete to carry the product Channel Conflict ↳ When one channel member believes another is engaged in behavior that prevents it from achieving its goals ↳ Vertical conflict ○ Occurs between different levels in a channel ○ Producer and distributor have competing market strategy that would lead to different channel services for end users ○ Pricing ■ Want higher margins and commissions ■ What price to charge consumers ■ Do not pass through price promotions to final customers This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ ○ Information ■ Don’t spend enough resources on your product ■ Do not know much about your product ○ Logistics ■ Do not carry entire product line ■ Favor competitor’s products ■ Sell products to unauthorized dealers ↳ Horizontal conflict ○ Occurs between intermediaries at the same level in a marketing channel, ex two retailers handling same producers brand ○ Multiple distributors competing with each other for customers ○ Resolving it ■ Provide different products ■ Prodive different sizes (bulk v individual) ■ Provide different promotions ○ Powerful producers can take advantage of their distributors ○ Powerful distributors can dictate terms ↳ Push-through strategy ○ Motivate distributors to push products onto consumers ↳ Pull through strategy ○ Motivate consumers to request brand from distributors Trends in distribution ↳ Disintermediation v. brick and mortar ○ Online v storefronts ↳ Amazon effect ↳ Mobile commerce Price Different from other P’s ↳ Price is only P that brings in revenue ○ Others use cash ↳ Price is quantifiable and comparable ↳ Price is somewhat easy to change ↳ Price affects quantity sold and therefore costs Price Elasticity ↳ Marketing factors affecting ○ Availability of substitutes ○ Importance ○ Perceived uniqueness ○ Switching costs ○ Ability to stockpile Pricing Tactics ↳ Cost-based Pricing ○ Recover costs and make a profit ○ Found in supermarkets, drugstores, industrial suppliers ○ Limitations ■ Costs often not easy to determine ■ Cost-plus is product oriented This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ ↳ Value-based pricing ○ Price is supposed to capture the perceived value of the product in the minds of the customer ○ Step 1: calculate costs with existing product ○ Step 2: compute maximum price consumers would pay for new product ↳ Dynamic pricing ○ Maximize profits over time ○ Skimming pricing: recover investment, profit from loyal customers ■ Set high price and gradually lower it ○ Penetration pricing: dive into the market; gain/steal market share ■ Set a low price to start ■ Predatory pricing: pricing goods so low that suppliers cannot compete ↳ Discriminatory pricing ○ Charge consumers with high WTP more than those with a low WTP ○ Must be able to identify which segment consumers are in ○ Must prevent resale between segments ○ WTP segments ■ Demographic: senior/student discounts ■ Geographic: broceries by neighborhood, regional pricing ■ Behavioral: coupons, quantity discounts ■ Temporal: holidays ■ Channel: private label brands Ethics and Fairness in Pricing ↳ Price discrimination can achieve social purposes ○ Senior citizen discounts ○ Charge lower prices for drugs in lower-income countries ○ Scholarships Psychological aspects of pricing ↳ Price perceptions ○ Consumers don’t always perceive “objectively” or “rationally” ○ Consumers may not precisely know the values of goods ○ Price-quality hueristic: using price as a proxy for quality ○ Left digit effect: 2.99 perceived differently than 3.00 ↳ Reference prices ○ Human thinking is relative, not absolute ○ Consumers have poor recall of prices ○ Consumers often compare an observed price to a frame of reference ■ Regular retail price, what it is placed near, how other items in line are priced ○ Decoy products: the tendency to prefer X to Y can be increased by adding a third decoy product that is clearly inferior to X but not Y ↳ Mental accounting ○ Tendency for people to separate their money into separate accounts ■ Amounts within a mental account are equivalent ■ Amounts across mental accounts are not ↳ Method of payment ○ Paying is painful ○ Separate paying from consumption This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ Promotion Roles of promotion ↳ Build awareness ↳ Create associations ↳ Develop motivation to act Two main types ↳ Incentives ○ Short term solutions enhancing the value of the offering by providing additional benefits or reducing costs ↳ Communication ○ Public relations ○ Personal selling ○ Direct marketing ○ Advertising ■ Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor ○ Social media Planning effective advertising ↳ Market ○ Who should we talk to? ○ Ex: customers, influencers, channel partners ↳ Mission ○ What do we want to happen? ○ Inform ■ Tell markets about a new product ■ Describe attributes ■ Moving consumers from ignorance to awareness ○ Persuade ■ create/strengthen positive associations ■ Weaken negative associations ■ Moving consumers from awareness to intent ○ Remind ■ Remind current customers to purchase again/more ■ Keep product in consumers mind during off season ■ Moving consumers from intent to purchase/repurchase ↳ Message ○ Central theme of the advertising translates into attention-getting, distinctive, and memorable messages ○ Affective ■ Emotions ■ Influencing feelings This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ ■ Celebrity endorsements ● Can grab attention and have positive affect when celebrities are credibela nd consistent with image ● Risky because celebrity may become passe, recieve bad publicity, or not be a good fit ■ Positive or negative effect ○ Cognitive ■ Rational, informative ■ Influencing thoughts, beleifs, and intelligence ■ Use when ● Differences btween benefits offered by competing brands ● Consumer knowledge of important product attributes ● High involvement level ■ Comparative advertising ● Competitors are directly or indirectly referred to in the add ● Helps position competitively, grabs attention ● Risks - poor attitude towards ad, ad for competitor ○ Behavioral ■ Influencing how one acts on thoughts and feelings ■ Encourage enquiries ■ Induce trial, purchase and repurchase ■ Inform about purchase wherabouts ■ Encourage word of mouth ↳ Media ○ Selecting communication vehicles ○ Fit the communication objectives and message ○ Fit the target customer’s media consumption habits ○ Traditional channels ■ TV, radio, print, outdoor, direct mail ○ New Channels ■ Online, internet, social media, mobile ○ Strategy: language of the media buyer ■ Reach, rating, frequency, GRP, CPM, CPI, CPC, CPA ○ Best measure to choose best media vehicle ■ CPM in target segmetn ■ Regular CPM does not tell firm what it costs to reach consumers in the target segment ○ Scheduling ■ Continuous - constant ■ Flighting - only during specific times ■ Pulse - constant but extra push at certain times ↳ Money ○ How to Budget? ■ Affordability ■ Percentage of sales ■ Competitive benchmark This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ ■ Objective and task ● Typically most desirable ● Calls upon marketers to develop their budgets by defining specific objectives ↳ Measurement ○ Evaluating ad effectiveness ○ Hierarchy of effects model: communications must move consumer through a series of steps, ending in purchase ■ Ignorance → awareness → knowledge → liking → preference → purchase intention ■ Measure the proportion of target segment that is at each step ○ Common metrics ■ Exposure and cost: impressions, GRP, CPM ■ Reception: attention and understanding ■ Retention: persistance of the message ■ Acceptance: brand attitutdes, purchase intention ■ Sales response: control v. treatment, market response models ↳ This study source was downloaded by 100000839768760 from CourseHero.com on 01-10-2022 12:08:20 GMT -06:00 https://www.coursehero.com/file/60624411/MarketingFinalStudyGuidedocx/ Powered by TCPDF (www.tcpdf.org)
