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203 Cards in this Set
- Front
- Back
A Product Defined
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-A good, a service, or an idea received in an exchange.
-It can be tangible (a good) or intangible (a service or an idea) or a combination of both. -It can include functional, social, and psychological utilities or benefits. |
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Why Buyers Purchase a Product
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-To get the benefits and satisfaction that they think the product will provide
-Symbols and cues provided by marketing help consumers make judgments about products. |
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Consumer Products
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Products purchased to satisfy personal and family needs
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Business Products
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Products bought to use in an organization’s operations, to resell, or to make other products (raw materials and components)
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Convenience Products [definition]
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Relatively inexpensive, frequently purchased items buyers exert minimal purchasing effort
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Convenience Products
[Characteristics] |
-Marketed through many retail outlets
-Relatively low per-unit gross margins -Little promotional effort at the retail level -Packaging is important marketing mix element |
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Shopping Products
[definition] |
Items buyers are willing to expend considerable effort in planning and making purchases
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Shopping Products
[Characteristics] |
-Expected to last a long time; less frequently purchased
-Do not have brand loyalty appeal -Require fewer retail outlets -Inventory turnover is lower -higher gross margins -More amenable to personal selling -Supported (servicing and promoting the product) by both the producer and channel members |
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Specialty Products
[definition] |
Items with unique characteristics buyers are willing to expend considerable effort to obtain
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Specialty Products
[Characteristics] |
- preselected by the consumer
- no close substitutes or alternatives - available in limited # of retail outlets - purchased infrequently - significant and expensive investment - high gross margins, low inventory turnover |
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Unsought Product
[definition] |
purchased to solve a sudden problem, products of which the customers are unaware, and products that people do not necessarily think about buying
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Unsought Products
[Characteristics] |
-Speed and problem resolution of the utmost importance
-Price and other features not considered -No consideration of substitutes or alternatives -Purchased infrequently |
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Installations
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Facilities and nonportable major equipment [Office buildings, factories and warehouses, production lines, very large machines]
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Accessory Equipment
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Equipment used in production or office activities [File cabinets, small motors, calculators, and tools]
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Raw Materials
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Basic natural materials that become part of a physical product such as ores, water, lumber, grains, and eggs
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Component Parts
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Items that become part of the physical product:
-Finished items ready for assembly -Items needing little processing before assembly -Computer chips, engine blocks, girders, and paints |
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Process Materials
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not readily identifiable materials when used directly in production of other products such as screws, knobs, and handles
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MRO Supplies
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Maintenance, repair, and operating items that facilitate production and do not become part of the finished product such as cleaners, rubber bands, and staples
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Business Services
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The intangible products that many organizations use in their operations such as cleaning, legal, consulting, and repair service.
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Product Item
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A specific version of a product
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Product Line
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A group of closely related product items viewed as a unit because of marketing, technical, or end-use considerations
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Product Mix
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The total group of products that an organization makes available to customers
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Width of Product Mix
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The number of product lines a company offers
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Depth of Product Mix
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The average number of different products in each product line
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Product Life Cycle
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The progression of a product through four stages: introduction, growth, maturity, and decline.
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Introduction Stage
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The initial stage of a product’s life cycle—its first appearance in the marketplace—when sales start at zero and profits are negative
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Growth Stage
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when sales rise rapidly and profits reach a peak and then start to decline:
-More competitors enter the market -Product pricing is aggressive -Brand loyalty becomes important -Gaps in market coverage are filled -Promotion expenditures moderate -Production efficiencies lower costs |
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Maturity Stage
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when the sales curve peaks and starts to decline and profits continue to fall:
-Intense competition -Emphasis on improvements and differences in competitors’ products -Weaker competitors lose interest and exit the market -Advertising and dealer-oriented promotions predominate -Distribution sometimes expands to the global market |
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Strategic objectives for maturity stage
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-Generate cash flow
-Maintain market share -Increase share of customer |
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Decline Stage
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when sales fall rapidly:
-Pruning items from product line -Cutting promotion expenditures -Eliminating marginal distributors -Planning to phase out product |
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Production Adoption Process
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stages buyers go through in accepting a product:
- Awareness - Interest - Evaluation - Trial - Adoption |
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Categories of Product Adopters
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-Innovators
-Early adopters -Early majority -Late majority -Laggards |
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Innovators
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First adopters of new products
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Early adopters
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Careful choosers of new products
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Early majority
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Those adopting new products just before the average person
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Late majority
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Skeptics who adopt new products when they feel it is necessary
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Laggards
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The last adopters, who distrust new products
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Brand
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-An identifying name, term, design, or symbol
-One item, family of items, or all items of a seller |
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Brand Name
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-The part of a brand that can be spoken
-Words, letters, numbers |
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Brand Mark
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-The part of a brand not made up of words
-Symbols or designs |
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Trademark
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A legal designation of exclusive use of a brand
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Trade Name
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Full legal name of an organization
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Value of Branding To Buyers
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-Helps speed consumer purchases by identifying specific preferred products
-Provides a form of self-expression and status -Evaluates product quality to reduce the risk of purchase |
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Value of Branding To Sellers
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-Identifies and differentiates a firm’s products from competing products
-Helps in the introduction of new products -Facilitates the promotion of all same-brand products -Fosters the development of brand loyalty |
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Brand Equity
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The marketing and financial value associated with a brand’s strength in a market
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Brand Loyalty
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A customer’s favorable attitude toward a specific brand
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Brand Recognition
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A customer’s awareness that a brand exists and is an alternative purchase
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Brand Preference
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The degree of brand loyalty in which a customer prefers one brand over competitive offerings
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Brand Insistence
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The degree of brand loyalty in which a customer strongly prefers a specific brand and will accept no substitute
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Manufacturer Brands
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Brands initiated by producers
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Private Distributor Brands
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Brands initiated and owned by resellers
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Generic Brands
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Brands indicating only the product category
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Selecting a Brand Name
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-easy to say, spell, and recall.
-indicate major benefits. -suggest major uses and special characteristics. -distinctive, set apart from competing brands. -compatible with all products in line. -designed for use and recognition in all types of media. |
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Protecting a Brand
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-Surnames and descriptive, geographic, or functional names are difficult to protect.
-Registration with the U.S. Patent and Trademark Office protects a brand for ten years with indefinite renewals. |
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Degree of Brand Protection Through Registration [from MOST to LEAST]
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-Fanciful
-Arbitrary -Suggestive -Descriptive -Generic |
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Individual Branding
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- naming each product differently
-avoids stigmatizing all products due to a failed product |
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Family Branding
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-Branding all of a firm’s products with same name
-Promotion of one item also promotes all other products |
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Brand Extensions
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-Using an existing brand name on a new product in a different category.
-Provides support for new products through established brand name and image. |
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Co-Branding
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-Using two or more brands on one product to capitalize on the brand equity (customer confidence and trust) of multiple brands
-Brands involved must represent a complementary fit in the minds of consumers. |
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Brand Licensing
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agreement whereby a company permits another organization to use its brand on other products for a licensing fee
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Brand Licensing PROS & CONS
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Advantages
-Low-cost and/or free publicity -Revenues from royalty fees Disadvantages -Lack of manufacturing control -Creating too many unrelated products |
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Packaging
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development of a container and a graphic design for a product
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Packaging Functions
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-Protect product from damage
-Offer convenience to consumers -Prevent waste and make storage easier -Promote product by communicating features, uses, benefits, and image |
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Cost of Packaging Consideration
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Limited consumer willingness to pay for better packaging
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Family Packaging Consideration
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Similar packaging for all of a firm’s products or packaging that has one common design element
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Promotional Role of Packaging
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-Verbal and nonverbal symbols
-Size, shape, texture, color, and graphics |
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Reseller Needs of Packaging
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Transportation, storage, and handling
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Packaging and Marketing Strategy
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-Altering the Package
-Secondary-Use Packaging -Category-Consistent Packaging |
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Altering the Package Strategy
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-To update style and to meet increased competition
-To highlight new features -To take advantage of new packaging materials -To make the product safer or easier to use -To reduce packaging costs |
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Secondary-Use Packaging Strategy
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-Reusable packaging adds customer value
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-Category-Consistent Packaging
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-Packaging reflects customer expectations for the expected appearance of products in a category
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Innovative Packaging Strategy
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Unique features or ways of packaging that make a product more distinct from its competitors
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Multiple Packaging Strategy
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Bundling multiple units of a product together to encourage usage and to increase demand
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Handling-Improved Packaging Strategy
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Packaging that has been changed to facilitate product handling in the distribution channel
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Labeling
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Providing identifying, promotional, legal, or other information on package labels
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Purposes of Labels
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-Help identify the product
-Support promotional efforts for the product -Provide legally required labeling information -Provide information on product origin |
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Line Extension
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-Development of a product that is closely related to existing products in the line but meets different customer needs
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Line Extension Advantages
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-Is a less expensive, low risk alternative
-May focus on the same or a new segment -Can be used to counter competing products |
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Product Modifications
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A change in one or more characteristics of the product and the elimination of the original product from the product line
-Product must be modifiable. -Customer must be able to perceive modification has been made. -Modified product more closely satisfies customers’ needs. |
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Quality Modifications
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Changes in material or production processes related to a product’s dependability and durability
-Reducing quality to offer a lower price to customers -Increasing quality to gain a competitive advantage |
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Functional Modifications
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Changes affecting a product’s versatility, effectiveness, convenience, or safety; usually requiring redesign of the product
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Aesthetic Modifications
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Changes to the sensory appeal of a product such as altering taste, texture, sound, smell, or appearance
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Developing New Products Benefits & Risks
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Benefits
-Enhances product mix Risks -Expensive to develop -Creates risk of market failure -Loss of market share without new products |
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Idea Generation
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Seeking product ideas to achieve objectives
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Idea Generation Internal sources
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SOURCES: marketing managers, researchers, sales personnel, and engineers
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Idea Generation External sources
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SOURCES: customers, competitors, advertising agencies, consultants, and new-product alliances
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Developing New Products
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-Idea generation
-Screening -Concept testing -Business analysis -Product Development -Test marketing -Commercialization |
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Screening
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Choosing the most promising ideas for further review:
-Concerns about cannibalization of existing products -Company capabilities to produce and market the product -Nature and wants of buyers |
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Concept Testing
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Seeking potential buyers’ responses to a product idea:
-Low cost determination of initial reaction to product idea -Identification of important product attributes and benefits |
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Business Analysis
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Assessing the potential of a product idea for the firm’s sales, costs, and profits:
-Does product fit in with existing product mix? -Is demand strong enough to enter the market? -How will introducing the product change the market? -Is the firm capable of developing the product? -What are the costs for developing and marketing? |
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Product Development
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Determining if producing a product is feasible and cost effective:
-Construction of a prototype, or working model -Testing of the prototype’s overall functionality -Determining the level of product quality -Branding, packaging, labeling, pricing, and promotion decisions |
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Test Marketing
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Introducing product on a limited basis to measure the extent potential customers will actually buy:
-Sample launch of entire marketing mix -Lessens risk of larger market failure -Expensive; simulated test marketing is an alternative |
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Commercialization
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Deciding on full-scale manufacturing and marketing plans and preparing budgets:
-Modifications indicated by test marketing are incorporated into production design. -Marketing, distribution, and servicing plans are finalized. -Product roll-out occurs in stages to lessen risks of introducing new product. |
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Product Differentiation
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Creating and designing products so that customers perceive them as different from competing products:
-Perceived differences in product quality, product design and features, and product support services -Branding—crucial way to differentiate a product |
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Product Quality
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-Overall characteristics of a product that allow it to perform as expected in satisfying customer needs
-Level of quality is relative amount of quality a product possesses. -Consistency of quality is degree a product has the same level of quality over time. |
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Product design
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-How a product is conceived, planned, and produced
-Good design provides a strong competitive advantage. -Customers typically desire products with good designs and that function well. -include specific design characteristics that allow a product to perform certain tasks. |
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Styling
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physical appearance of a product
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Customer services
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-Human or mechanical efforts or activities that add value to a product
-Delivery and installation, financing, customer training, warranties and guarantees, repairs, online product information -Competitive advantage when all other product features are equally matched by competitors |
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Product Positioning
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-Creating and maintaining a certain concept of product in customers’ minds
-Product’s position results from customers’ perceptions of product’s attributes relative to those of competing products. -Marketers emphasize characteristics most desired by target market (or segment) in advertising. |
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Perceptual Mapping
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Bases for positioning
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Perceptual maps
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show marketers how closely products are conceptually positioned by consumers to “ideal points,” to their own products, and to competitors’ products.
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Repositioning a Product
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- Adjusting a product’s present position can strengthen/increase its market share and profitability.
- Accomplished by changing product’s features, price, distribution, or image. - Adding new products to the line may necessitate in older products. |
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Product Deletion
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process of eliminating a product from the product mix
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Reasons to remove a product
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-Slow sales create higher unit-production costs, inventory costs, and distribution costs.
-To prevent negative feelings from affecting company’s other products. |
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Service
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-An intangible product involving a deed, performance, or effort that cannot be physically possessed
-Application of human and/or mechanical efforts directed at people or objects |
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Intangibility
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actions that have no permanent physical qualities as opposed to goods which can be touched and possessed over time.
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Inseparability of Production and Consumption
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cannot be separated from its consumption by the customer. Produced, sold, and consumed all at the same time.
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Perishability
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cannot be produced ahead of time and stored until needed.
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Heterogeneity
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Variation in the quality of services delivered by individuals and organizations
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Client-Based Relationships
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Interactions that result in satisfied customers who use a service repeatedly over time
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Customer Contact
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level of interaction between the service provider and the customer necessary to deliver the service
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High-contact services
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require the customer to be present during the production of the service and require well-trained and motivated service personnel.
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Low-contact services
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do not require the customer’s continuous presence while the service is carried out.
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Package or bundle of services
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-core services that are expected basic service experience.
-supplementary services that differentiate service bundle from those of other competitors. |
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Development of Services
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-Marketers can customize services to match specific customer needs; can also offer standardized packages
-Marketers employ promises and tangible cues to help assure customers about quality of service -Customer contact and other customers can affect service experience |
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Pricing of Services
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-Performance of specific tasks
-Amount of time to complete the service -Variable pricing based on the level of demand; high price at peak demand, lower prices when demand slackens -Bundling of services requires decisions on unit, combination, or separate pricing -Pricing as an indicator of quality is used when consumers have no other cues to indicate quality. |
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Distribution of Services
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-Customers come to a service facility.
-Services are brought to the consumer. -Services are provided at “arm’s length”, with no face-to-face customer contact. -Marketing channels are short and direct, no or few intermediaries. -Inseparability of service requires focus on service demand/supply management -Accessibility to services increased by substituting automated equipment for contact personnel. |
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Promotion of Services
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-Providing tangible (symbolic) cues/images
-Promoting price, guarantees, availability, personnel -Using concrete, specific language in advertising -Using personal selling and word-of-mouth advertising -Offering services on a trial basis |
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Product manager
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person responsible for a product, a product line, or several distinct products that make up a group
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Brand manager
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person responsible for a single brand
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Market manager
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person responsible for managing marketing activities that serve a particular group of customers
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Venture team
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cross-functional group that creates entirely new products that may be aimed at new markets
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Price
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value exchanged for products in a marketing exchange
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Barter
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trading of products; the oldest form of exchange
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Nature of Price
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- most readily changeable characteristic (under favorable circumstances) of a product.
-key element in the marketing mix; relates directly to generation of revenues and quantities sold. -key component of the profit equation, having strong effect on profitability. -symbolic value to customers—prestige pricing. |
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PROFIT =
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= TOTAL REVENUE - TOTAL COSTS
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PROFITS =
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=(PRICE X QUANTITY SOLD) - TOTAL COSTS
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Price Competition
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-Emphasizing price and matching or beating competitors’ prices
-effective strategy in markets with standardized products -Lowest-cost competitor (seller) will be most profitable. -Allows marketers to respond quickly to competitors -Price wars can weaken competing organizations. |
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Nonprice Competition
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-Emphasizing factors other than price to distinguish from competing brands
-Advantage in increasing brand’s unit sales without changing price. -effective when features are difficult to imitate by competitors and customers perceive their value -Builds customer loyalty by focusing on nonprice features |
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Demand Curve
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-A graph of the quantity of products expected to be sold at various prices
-Decreases in price create increases in quantities demanded. -Increased demand means larger quantities sold at the same price. -Prestige items sell best in higher price ranges. |
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Demand Fluctuations
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-Changes in buyers’ needs
-Variations in the effectiveness of the marketing mix -The presence of substitutes -Dynamic environmental/market factors |
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Assessing Price Elasticity of Demand
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measure of the sensitivity of demand to changes in price—the greater the change in demand for a specific change in price, the more elastic demand is
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PRICE ELASTICITY OF DEMAND =
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% CHANGE IN QUANTITY DEMANDED / % CHANGE IN PRICE
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Marginal Analysis
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Examines what happens to a firm’s costs and revenues when product changes by one unit
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Marginal Revenue
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-change in total revenue resulting from sale of an additional unit of product
-Profit maximized where marginal costs (MC) are equal to marginal revenue (MR). |
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Fixed Costs
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costs that do not vary with changes in the units produced or sold
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Average Fixed Cost
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the fixed cost per unit produced
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Variable Costs
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costs that vary directly with changes in the number of units produced or sold
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Average Variable Costs
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variable cost per unit produced
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Total Cost
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sum of average fixed cost and average variable cost times the quantity produced
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Average Total Cost
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sum of the average fixed cost and the average variable cost
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Marginal Cost (MC)
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extra cost incurred by producing one more unit of a product
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Breakeven Point
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-point at which costs of producing a product equal revenue made from selling the product
-point after which profitability begins |
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BREAKEVEN POINT =
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= FIXED COSTS / PER-UNIT CONTRIBUTION TO FIXED COSTS
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BREAKEVEN POINT =
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= TOTAL FIXED COSTS / UNIT PRICE - UNIT VARIABLE COSTS
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Organizational and Marketing Pricing Objectives
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-should be set that are consistent with organization’s goals and mission.
-must be compatible with marketing objectives |
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Types of Pricing Objectives
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-Setting prices low to increase market share
-Using temporary price reductions to gain market share -Lowering prices to raise cash quickly |
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Factors Affecting Pricing Decisions
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-Costs
-Price/quality image of the product or brand -Selective or intensive product distribution -Product pricing used as a promotional tool |
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Channel Member Expectations
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-To make a profit at least equivalent to potential profit from handling a competitor’s brand
-To earn a profit commiserate with effort and resources channel member expends on the product -To receive discounts for volume purchases and prompt payment -To be supported by producer with training, advertising, sales promotion, and return policies |
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Internal reference price
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price developed in the buyer’s mind through experience with the product
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External reference price
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comparison price provided by others
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Buyers’ Responses to Price
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-Value consciousness
Concern about price and quality -Price consciousness Striving to pay low prices -Prestige sensitivity Being drawn to products that signify prominence and status |
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Quantity Discounts
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Deductions from list price for purchasing large quantities
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Trade (Functional) Discounts
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reduction off the list price given by a producer to an intermediary for performing for performing certain functions
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Cumulative Discounts
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Quantity discounts aggregated over a stated period
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Noncumulative Discounts
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One-time reductions in price based on specific factors
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Cash Discount
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price reduction given to buyers for prompt payment or cash payment
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Seasonal Discount
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price reduction given to buyers for purchasing goods or services out of season
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Allowance
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concession in price to achieve a desired goal
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Geographic Pricing
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Reductions for transportation costs and other costs related to the physical distance between buyer and seller
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Transfer Pricing
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The price of products that one organizational unit charges when selling to another unit in the same organization
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Actual full cost
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All fixed and variable costs divided by the number of units produced
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Standard full cost
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Pricing based on what it would cost to produce the goods at full plant capacity.
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Cost plus investment
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Full cost plus internal cost of assets used in production
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Market-based pricing
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Market price less marketing and selling costs
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Pricing Objectives
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-Goals that describe what a firm wants to achieve through pricing.
-Form basis for decisions about other stages of pricing. -Must be consistent with overall marketing objectives. -Can support attainment of multiple short-term and long-term goals. |
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Stages for Establishing Prices
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1. Development of Pricing objectives
2. Assessment of target market's evaluation of price 3. evaluation of competitors'prices 4. selection of basis for pricing 5. selection of pricing strategy 6. determination of a specific price |
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Importance of Price
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-Type of product
-Type of target market -The purchase situation |
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Value Focus
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-Combination of price and quality attributes
-Helps customers differentiate a product from competing brands -Guides marketers in evaluation of importance of price to consumer |
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Importance of Knowing Competitors’ Prices
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-Helps determine how important price will be to customers
-Helps marketers in setting competitive prices for their products |
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Comparative shoppers
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Persons who systematically collect data on competitors’ prices
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Dimensions of Pricing
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Cost, demand, and competition
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Bases for Pricing
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-Type of product
-Market structure of the industry -Brand’s market share relative to competing brands -Customer characteristics |
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Cost-Based Pricing
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Adding a dollar amount or percentage to the cost of the product
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Cost-Plus Pricing
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Adding a specified dollar amount or percentage to the seller’s cost
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Markup Pricing
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Adding to the cost of the product a predetermined percentage of that cost
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Demand-Based Pricing
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-Customers pay a higher price when demand is strong and and lower price when demand is weak.
-Effectiveness depends on marketer’s ability to estimate demand accurately. |
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Competition-Based Pricing
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-Pricing influenced primarily by competitors’ prices
-Importance increases when competing products are relatively homogeneous -May necessitate frequent price adjustments |
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Differential Pricing
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Charging different prices to different buyers for the same quality and quantity of product
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Price Skimming
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Charging the highest possible price that buyers who desire the product will pay
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Penetration Pricing
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Setting prices below those of competing brands to penetrate a market and gain a significant market share quickly
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Product-Line Pricing
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Establishing and adjusting prices of multiple products within a product line
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Captive Pricing
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pricing basic product in poroduct line low while pricing rel
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Premium Pricing
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pricing highest-quality or most versatile products higher than other models in product line
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Bait Pricing
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pricing product in product line low with intention of selling higher-priced item in the line
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Price Lining
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setting limited number of prices for selected groups or lines of merchandise
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Psychological Pricing
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Pricing that attempts to influence a customer’s perception of price to make a product’s price more attractive
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Reference Pricing
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pricing at moderate level and positioning next to a more more expensive model or brand
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Bundle Pricing
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packaging together two or more complementary products and selling for a single price
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Multiple-Unit Pricing
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packaging together two or more products and selling for a single price
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Everyday low prices [EDLP]
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setting low price for products on a consistent basis
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Odd-Even Pricing
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ending price with certain numbers to influence perceptions of price or product
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Customary Pricing
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pricing on the basis of tradition
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Prestige Pricing
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setting prices artificially high to convey prestige or quality image
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Professional Pricing
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Fees set by people with great skill or experience in a particular field
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Price leaders
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Products priced below the usual markup, near cost, or below cost
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Special-event Pricing
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Advertised sales or price cutting linked to a holiday, season, or event
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Comparison discounting
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Setting a price at a specific level and comparing it with a higher price
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Determination of a Specific Price
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-After determining a pricing strategy that yields a certain price, the price may need refinement to ensure consistency with pricing practices in the market and industry.
-The way pricing is used in the marketing mix will affect the final price. -Pricing is a flexible and convenient way to adjust the marketing mix. |
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Negotiated Pricing
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Establishing a final price through bargaining
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Secondary-Market Pricing
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setting one price for primary market and different price for another market
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Periodic Discounting
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temporary reduction of prices on patterned or systematic basis
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Random Discounting
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temporary reduction of prices on an unsystematic basis
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