Bus 120 Midterm 2 Notes PDF

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Midterm 2 notes - all essential notes to study for the Midterm.
Harleen Kaur as Prof....

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Chapters 8,9,10,11

Chapter 8 Chapter 8: Developing and Managing Products and Services Product anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. ●

include services, events, persons, places, organizations, ideas, or mixes of these

Services a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything

A company’s market offering often includes both tangible goods and services. To differentiate their offers, beyond simply making products and delivering services, they are creating and managing customer experiences with their brands or their company. ● Starbucks thinks of itself as providing a “third place” for consumers—a place that’s neither their home nor their workplace, but is just as familiar and comfortable.

Levels of Products and Services

Product marketers need to think about the product they manage as consisting of three levels: 1. Core Product (Core Customer Value) a. The most basic level b. Addresses the question “what is the buyer really buying?” - focuses on the core problem-solving benefits or services consumers seek i. Eg, the core product of beauty products is “the feeling of being beautiful” ii. Smartphones is “constant connectivity” 2. Actual Product a. Turn the core benefit into an actual product - a physical device with parts including: i. Brand name ii. Quality level iii. Features iv. Design v. Packaging 3. Augmented Product a. The additional services and benefits that go along with it i. Eg, the actual product is an iphone, then the augmented product for that is an iphone plus insurance, a calling plan and a data plan When developing products, marketers first must identify the core customer value that consumers seek from the product. They must then design the actual product and find ways to augment it to create this customer value and the most satisfying customer experience.

Product and Service Classifications two broad classes: consumer products and industrial products. Consumer Products Products purchased by consumers for their personal use. (a non business use) Includes convenience products, shopping products, specialty products, and unsought products.

Convenience Products: ● Customers buy frequently, immediately, and with a minimum of comparison and buying

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effort. Usually low priced, and placed in many different locations ○ Laundry detergent, candy, magazines, fast food, etc

Shopping Products: ● Shoppers compare carefully on suitability, quality, price, and style ● Customers spend time gathering information and making comparisons ● Distributed in fewer outlets, with deeper sales support to help customers decide ○ Furniture, clothing, used cars, tv’s, hotel and airline services, etc Specialty Products; ● Unique characteristics or brand identification that buyers will make a special purchase effort. ● Buyers often are willing to travel great distances to buy it ● Do not need to compare to other products ○ Specific car brands, high cost photographic equipment, designer clothes, medical or legal specialists, buying a house, etc. Unsought Products: ● Products the consumer either doesn’t know about, or doesn’t think of normally buying. ● Require a lot of personal selling and aggressive advertising ○ Life insurance, preplanned funeral services, blood donations, etc

Industrial Products A product bought for further processing, or for use in conducting a business ● Materials and parts, etc

New Product Development The Technology Adoption Life Cycle

A marketing theory that proposes that when marketing a technology product, marketers must cross a chasm, or significant gap, between members of the early adopters segment and members of the early majority segment before a new product will become successful.

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Innovators ○ Pursue new technology for its own sake ● Early Adopters ○ Purchase new technology soon after it’s released, but only if they have a use or purpose for it *chasm* ● Early Majority ○ The more practical market segment ○ While they might want the new gadget, they wait until they have a need for it, or if the price becomes more affordable ● Late majority ○ Wait until the new technology has been proven and has become a standard ■ Once everyone is using it, so will they ● Laggards ○ People who are not comfortable with technology or have no interest in it

The two groups on each side of the chasm make their purchase decision about the new technology largely on the basis of benefits sought. New Product Development Strategy Development of original or “new to the world” products, improvements, modifications, or new brands ● Is expensive and risky

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80% of new products fail!

Why new products fail so often: ● No one really knows for sure ○ Often because of a lack of differentiation

The New-Product Development Process Eight major stages: 1. Idea Generation a. The systematic search for new product ideas i. Internal sources ii. External sources 1. Customers, competitors, distributors, suppliers, etc iii. Crowdsourcing 1. inviting broad communities of people such as customers, employees, independent scientists and researchers, and even the public at large into the new-product innovation process a. Eg, facebook uses TopCoder’s network of 400k engineers, software devs, designers, etc for ideas and solutions, and offers cash prizes 2. Idea Screening a. To reduce the number of ideas b. Spot good ideas, and drop poor ones asap. i. consider such things as the proposed customer value proposition, the target market, and the competition ii. make rough estimates of market size, product price, development time and costs, manufacturing costs, and rate of return 3. Concept Development and Testing a. a detailed description, drawing, or prototype of that idea that can be shown to potential customers i. Which must then be developed and tested 1. Eg, concept cars at auto shows (real cars that can be driven, but are not yet in production, and aren’t available to the public) 4. Marketing Strategy Development a. Designing an initial marketing strategy for a new product based on the product concept i. answer questions about how, when, where, and to whom the product will be introduced.

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begins with a detailed description of the target market must state sales goals, market share goals, and profit goals 1. Typically, this initial marketing strategy encompasses plans for the first year of the product.

5. Business Analysis a. a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives 6. Product Development a. develops the product concept into a physical product i. Requires large investment b. Prototypes are developed and tested rigorously to make sure it works how it’s supposed to 7. Test Marketing a. The product and marketing program are tested in realistic marketing settings i. Not necessarily needed for all

8. Commercialization a. Full scale introduction of the product into the market i. The company will then invest heavily in advertising and promotion.

The Product Life Cycle The Product Life Cycle (PLC) ● The course of a product’s sales and profits over its lifetime ○ Involves five stages: 1. Product Development

a. (refer to earlier section in chapter) b. Sales are 0, and investment costs start to mount 2. Introduction a. Starts when the new product is first launched and made available i. Bought by Innovators b. Many products fail in this stage i. Profits are non-existent because of heavy expenses of product introduction 3. Growth a. Sales start climbing quickly i. The early adopters will continue to buy, and later buyers will start following their lead b. Competitors start to release their versions of the product i. Profits increase, and promotion costs are spread over a larger volume ii. Unit manufacturing costs fall c. The strategy is to sustain the growth for as long as possible i. By adding new features or models ii. Add new market segments or distribution channels 4. Maturity a. Sales peak, and start to decline because the product has achieved acceptance by most potential buyers b. Profits are at their peak, and start to decline due to marketing efforts to beat competition i. Most products are currently in the maturity stage of the life cycle c. main marketing goal is to prevent it from declining i. Constantly trying to develop new strategies to keep their product consistently profitable 5. Decline a. Sales fall off, and profits drop i. marketers may decide to harvest the product, which means reducing various costs in hoping sales hold up, to increase profits in the short run.

The PLC concept can also be applied to styles, fashions, and fads

Style ● A basic and distinctive mode of expression ○ Styles of homes, clothing, art, etc ● Very unpredictable cycle ○ a mix of increased and decreased sales over time Fashion ● A currently accepted or popular style of design, colour, or theme ○ Clothing, cars, furniture, music, sports ■ Eg, the “punk” era in the 70s was music, clothing, and hairstyles ● tend to grow slowly, remain popular for a while, and then decline slowly. Fad ●

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new products that are extremely popular for a very short period of time, then disappear almost completely ○ Eg, fidget spinners, tamagotchi quick rise, peak, and steep decline all in a short period of time

Product and Service Decisions Marketers make decisions at 3 levels. 1. Individual Product decisions 2. Product Line decisions 3. Product Mix decisions

Individual Product and Service Decisions Four important parts: Product attributes ● Developing a product or service involves defining the benefits it will offer ○ Quality, features, style and design

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Packaging ○ Designing and producing the container/wrapper for a product ■ 20% of shoppers will buy products they had no intention of buying, all based on the packaging they see while shopping ○ Sustainable Packaging ■ meets the requirements of the product while minimizing the environmental, economic, and social impacts of the product and its package. Labelling ○ Identifies the product or brand

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Product Support Services ○ Customer support

Product Line Decisions Product Line ● a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges ○ Eg, Nike produces several lines of athletic shoes and apparel The major product line decision involves product line length ● The number of items in the product line ● Length is influenced by many different objectives ○ upselling - BMW wants to move customers up from its 3 series to 5 and 7 series models ○ Cross-selling - eg, Selling printers as well as cartridges ○ To protect against economic swings - the gap owns Gap, Old Navy, and Banana Republic, covering different price points A company can expand its product line in two ways: by line filling or line stretching. Product Line Filling ● Adding more items within the present range of the line ○ For reasons like reaching for extra profits, satisfying dealers, using excess capacity, being the leading full-line company, and plugging holes to keep out competitors ○ Can be harmful if it results in cannibalization (ruining its own product’s sales) or customer confusion ■ The company must make new items noticeably different from existing ones Product Line Stretching ● When a company lengthens its product line beyond its current range ○ Downward stretch - to plug a market hole that could attract a new competitor ○ Upward stretch - to add prestige to their current products ■ Eg, Nissan launched Infiniti, using an entirely new name rather than their own name

Product Mix Decisions An organization with several product lines has a product mix.

Product Mix ● consists of all the product lines and items that a company markets ○ Eg, campbell’s Product mix is 3 different product lines: healthy beverages, baked snacks, and simple meals ■ Each product line consists of several sub-lines ● The meals line consists of soups, sauces, pastas, etc

Services Marketing The service sector (the general name for services), is the single most important industry in Canada’s economy. ● Services account for nearly 70% of total GDP. ○ 4 million Canadinas work in the goods producing sector ○ 14 million are employed in the service sector ■ includes all government services, hospitals, the military, police and fire departments, Canada Post, schools, colleges, and universities

There are 4 characteristics of services: ● Intangibility ○ services cannot be seen, tasted, felt, heard, or smelled before they are bought ■ To reduce uncertainty, buyers look for “signals” of service quality ● Inseparability ○ services cannot be separated from their providers, whether the providers are people or machines ■ Both the provider and the customer affect the service outcome ● Variability ○ the quality of services depends on who provides them as well as when, where, and how they are provided ■ Eg, hotels being 1-5 stars ● Perishability ○ Services cannot be stored for later sale or use

Chapter 9 - Brand Strategy and Management

Brand ● Name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers. ○ Brands ultimately exist in the minds and hearts of consumers, but it is the job of brand managers to create representations of the brand ● Your brand “owns” that word in terms of brand positioning ○ Have status and value ○ Have personality ○ Involve emotions ○ Signify quality ○ Provide legal protection

Brand Personality ● the sum total of all the attributes of a brand, and the emotions it inspires in the minds of consumers ○ Eg, Apple is stylish and hip. ● Brand personality is created by marketers ● Includes: ○ Sincerity - reliable, like a friend ○ Competence - the best at a specific feature ○ Sophistication - high end (because it is expensive) ○ Excitement - cool, unique ○ Ruggedness - outdoorsy

Brand Equity ● The dollar amount attributed to the value of the brand, based on all the intangible qualities that create value. ○ Is difficult to calculate ○ One indicator is the extent to which people are willing to pay more for the brand ■ Eg, Supreme

The main branding strategy decisions are brand name selection, brand positioning, and brand sponsorship Brand Name Selection ● Easy to say, easy to read, and easy to spell! ○ Suggests something about the products

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Be easy to pronounce and remember Be distinctive Should be extendable Be pronounceable in many languages Be capable of registration and trademark protection

Brand Positioning ● Can be based on product attributes ● Better positioning strategy is to associate the brand with a particular benefit ○ Eg, FedEx (guaranteed on time delivery)

Brand Sponsorship: ●

National Brands ○ A brand created and owned by the manufacturer of the product ○ Created and owned by the producer of the product ■ Eg, Samsung Galaxy

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Private Brands ○ Owned by a marketer but manufactured by a third party ○ Owned by the reseller of a product ■ Eg, Walmart’s “Great Value” brand

Licensing ● The buying and selling of the rights to use a brand name, logo, character, icon or image. ○ Eg, action figures under license from Marvel - which allows rights to use designs of superheroes like spiderman and captain america Co-branding ● Practice of using the established brand names of two different companies on the same product. ○ Eg, when companies create co-branded credit cards (CIBC and Air Canada creating the Aeroplan Visa card) ● Advantages: ○ the combined brands create broader consumer appeal and greater brand equity. ○ Allows a company to expand its existing brand into a category it might otherwise have difficulty entering alone. Brand Development Four options for developing brands: Line Extensions ● Extends a current brand name to new forms, colours, sizes, ingredients, or flavours of an

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existing product category ○ Eg, Honey Nut Cheerios and MultiGrain Cheerios are extensions of the Cheerios product line Advantages ○ Low-cost ○ Low risk ○ Familiarity Risks ○ Over-exposure of brand name can lose specific meaning ■ Eg, Doritos having 20 different flavours, making the original flavour less appealing to buy

Brand Extensions ● Extends a current brand name to new or modified products in a new category. ○ Eg, Mr Clean brand was extended to Mr. Clean Magic Erasers, Ritz extended its brand to mini Ritz Bitz Sandwiches ● Advantages ○ Instant recognition for new products ○ Faster acceptance ● Risks ○ May confuse brand image or meaning ■ Eg, Cheetos lip balm met an early death, for obvious reasons… the extension confuses the image of the main brand. Multibrands ● Different brands in a given product category by the same producer ○ Eg, the Whirlpool Corporation markets appliances under its corporate brand, Whirlpool, but also under the brand names Maytag, KitchenAid, Jenn-Air, Amana, and Inglis - all of which the corporation manufactures ● Advantages ○ Appeal to different segments ● Risks ○ Separate brands may be weak on their own - may only obtain a small market share with each product ■ May end up spreading resources over many brands instead of building a few to a highly profitable level

New Brands ● New brand names assigned to new products in a new category ○ Eg, Toyota created the Scion brand of cars that is more appealing to Millenials ● Advantages ○ Best when new product does not fit within any existing brand names ● Risks

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New brands require significant resources to launch and maintain

Customer perceptions are what influence price

Price ● The amount of money charged for a product or a service, or the sum of all the values that customers exchange for the benefits of having or using the product or service.

Calculation of Value + utilitarian benefits (faster, safer, better) + emotional benefits (image, status, prestige) - operating costs (training, maintenance, etc.) - opportunity cost (benefits removed from the next best alternative) - switching costs ( cost to relearn - out of pocket costs and time investment required) = Value Received

The price will always be between one that is too high to produce any demand, and one that is too low to produce a profit. Price Ceiling ● No demand above this price ○ Set by customers perceptions of the product’s value Price Floor ● No profits below this price

The figure suggests three major pricing strategies: customer value-based pricing, cost-based pricing, and competition-based pricing.

Customer Value-Based Pricing

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Setting price based on buyers’ perceptions of value (rather than on the seller’s cost) ○ Price is considered along with the other marketing mix variables before the marketing program is set

2 types of customer value based pricing strategies: Good-Value Pricing Offering just the right combination of quality and good service at a fair price ● Eg, mcdonalds value menu, Armani offers less-expensive, more-casual “Armani Exchange” fashion line, etc ○ “Value” is subjective - depends on what the consumer deems “worth it” Value-Added Pricing ● Attaching value-added features and services to differentiate a company’s offers and charging higher prices ○ Eg, Cineplex adding amenities like food and alcohol service, and charging more for it Cost-Based Pricing ● Setting prices based on the costs for producing, distributing, and selling the product p...