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40 Cards in this Set

  • Front
  • Back
a good/service/idea w/ bundle of tangible or intangible attributes that satisfies the consumer and is exchanged for money.
Product Line
a group of closely related products that satisfy a class of needs, are used together, sold to same customer group, distributed through same outlets, or are within a given price range.  firms use same marketing strategy
-Product Item – specific item within product line
Product Mix
different product lines offered by any company
Tangibility - Part 2
Nondurable Goods
- consumed in one or few uses (food/fuel)

Durable Goods
– multiple uses over time (appliances/stereo)

- activities performed for benefit of consumer
Classification of Consumer Goods
Convenience goods
– frequently bought, minimum effort

Shopping Goods
– user compares criteria among alternatives (price, qual, style)

Specialty Goods
– user makes special effort to seek out and buy (rolex)

Unsought goods
– goods consumers don’t know about, or don’t originally need
Classification of Business Goods
Production Goods
– items used in manufacturing process (raw mat)

Support goods
– items that assist in the production of other goods
– buildings and fixed equipment

-Accessory Equipment
– tools


-Industrial Services – maintenance
New Product
Newness compared with existing products
– functionally different than others

Newness in legal terms –
FTC = “new” during first 6 months of distribution

Newness from the company
– product line extension (cherry coke)

Newness from Consumer
-continuous innovation, no new behavior (technology upgrades)

- continuous innovation, minor changes (fold down seats)
-Discontinuous innovation
– new pattern to be learned
Marketing Reasons for New-Product Failures
-insignificant point of difference
– not different from current products

-incomplete market and product definitions before product development

-too little market attractiveness
-poor execution of marketing mix: name, package, price, promotion, distribution

-poor product quality or sensitivity to customer needs
New-Product Process
New-Project strategy development –
defines new product in terms of corporate objectives (identify trends, SWOT)

Idea Generation –
developing concepts for potential new-products

Screening and Evaluation – internal and external evaluations of ideas

Business Analysis – specifying product features and marketing strategy, financial projections

Development – build the prototype

Market Testing
– exposing products to customers in realistic buying conditions
-Test Marketing – limited time/area of sale buy?
-Simulated Test Markets “laboratory” STM– simulated test market

– position and offer product in the marketplace
Product Life Cycle
Sales / profit, driven byConsumer Demand, Competition

Development – negative profit, no sales

Introduction – small sales increase, advertising, production,

Growth – rising to max sales, max profit peaks before max sales b/c competition

Maturity – slowing sales, small competitors leave mkt (try to hold mkt share)

Decline – profits drop b/c environmental changes
-deletion – total dropping of a product/line
-harvesting – firm retains product but cuts advertising
Product Class
entire product category or industry
Product Form
variations within class
Product Modification
altering product characteristics (quality, performance, appearance)  increase sales
Market Modification
firm’s strategy to find new customers or increase product’s use
Creating Brand Equity
1. develop positive brand awareness (overall/within class)
2. establish brands meaning (functional and image-wise)
3. elicit proper consumer responses to identity (quality, credibility, superiority)
4. create link between firm and customer repeat, loyal buyers
Picking a Good Brand Name – the name should
1. suggest product benefits
2. be memorable, distinctive, and positive
3. fit company/product image
4. no legal restrictions
5. be simple/emotional
Types of Consumers –
based on behavior risk, knowledge, experience

Early Adopters
Early Maturity
Late maturity
differentiate products (brand name, logos, symbols, trademarks, taglines)
What makes a good brandname?
- easy to spell/read/ pronounce
- meaning
- originality
Services – four I’s
- Intangibility – no physical component
- Inconsistency – not standardized/different
- Inseparability – serviceservice provider (package deal)
- Inventory – idle production capacity – service available but no demand
Customer contract audit
evaluation of entire service provided, from contact to completion.
Off-Peak Pricing
changing prices during different times in weeks/months/years
= Perceived Benefit / price
Total Rev – Total Cost
(P x Q) – TC
Steps In Setting Prices
1. Identify pricing objectives and constraints
- Objectives – Profit, market share, and survival
- Constraints – demand for product/class/brand/newness, costs, and competition
2. Estimate Demand and Revenue
- Demand estimation
-Consumer taste
-Price and availability of similar products
- Sales Revenue estimation
-Total Revenue = TR = P x Q
-Average Revenue = P = TR/Q
-Marginal Revenue = ΔTR/ΔQ
- Price Elasticity estimation - % change in Qd relative to % change in P
-E = %ΔQd / %ΔP
-Elastic – 1% decrease in P more than 1% increase in Qd
-Inelastic – 1% decrease in P < 1% increase in Qd
3. Determine Cost, Volume, and profit relationships
- Cost Estimation
- Total Cost
- Fixed Cost – all expenses that don’t change with ΔQ
- Variable Cost – costs directly from producing item P goes up w/ Q
- Unit variable Cost – cost per unit = UVC = VC/Q
- marginal Cost – change in TC from producing 1 more unit: ΔTC/ΔQ
- Marginal analysis – continuous comparing of incremental changes in TC against TR
- Break-even analysis – relationship between TR and TC Δ profitability?
-BEquantity = FC / (P – UVC)
- Profit = (P x Q) – [FC + (UVC x Q)]
4. Set an approximate price level
- Demand-oriented approach
- Skimming: high initial price (sell to consumers w/ most desire)
- Penetration: low initial price strait to mass market
- Prestige: high price high quality
- Price lining: changing prices with qual CLK 500 to CLK 55
- Odd-even – take off cents $0.99
- Target – estimate ultimate consumer price (rebates and markups through
all channels)
- Bundle – two or more products in single package
- Yield management – different prices to max. rev at given capacity/time
- Cost-oriented approach
- Standard markup – + fixed percentage to a class of products
- Cost-plus – adding rate to estimated Unit cost
- Experience curve – unit cost decreases 10%-30% for every time
production/Sales doubles
- Profit-oriented approach
- Target Profit – set $ amount to reach for fiscal year
- Target return on sales – set prices to reach given return % of sales
= Target Profit / TR
- target return on investment – sets prices to meet above %
- Competition-oriented approach
- customary – level pricing over wide range of styles
- Above, at, below Market – based on competition
- Loss leader – set prices w/ very low profit margin most sales
5. Set list or quoted price
- One/Flexible price – standard price over variety of styles or
Dynamic - different P for different customers
- Company, Customer, Competitive effects
- Product Line pricing – 1) lowest price 2) highest price 3) intermediary
- Price War – cutting prices w/ competition
- Incremental costs and revenue – based on Marginal rev/cost/ Ed
6. Make special adjustments to list or quoted prices
- Discounts
- Quantity
- Cumulative – earn “points” for discount
- Noncumulative - based on size of individual order
- Seasonal – try to liquidate old inventory
- Trade (functional) – reward to wholesalers/retailers for future marketing
- where they are in the channel
- what marketing functions they will perform in the future
- Cash – benefit for paying quickly: 2/10 net 30 2% discount if paid
within 10 days, otherwise due in 30
- Allowances
- Trade-in
- Promotional – “everyday low pricing”
- Geographical adjustments
- FOB origin pricing – ownership transfer
- Delivered Pricing
Marketing Channel
individuals a firm uses to produce/sell products
- Middleman – any intermediary between manufacturer and end user
- Agent/Broker – intermediary w/ authority to act for manufactuerer
- Wholesaler – sells to other intermediaries (retailers)  consumer market
- Retailer – sells directly to consumers
- Distributor – intermediary w/ financial responsibility (sell/hold inventory/extend credit)
- Dealer – all of the above
Functions of Intermediaries
- Transactional – buying/selling risk of pre-sale inventory
- Logistical – gathering/storing/dispensing products
- Facilitating – making goods/services more attractive to consumer
- Sales Revenue estimation
Total Revenue = TR = P x Q
-Average Revenue = P = TR/Q
-Marginal Revenue = ΔTR/ΔQ
Price Elasticity estimation
-Elastic – 1% decrease in P more than 1% increase in Qd. Greater than 1

-Inelastic – 1% decrease in P < 1% increase in Qd
Determine Cost
Cost Estimation
- Total Cost

- Fixed Cost – all expenses that don’t change with ΔQ

- Variable Cost – costs directly from producing item

 P goes up w/ Q
Unit variable Cost
marginal Cost
Marginal analysis
Break-even analysis
- Unit variable Cost – cost per unit = UVC = VC/Q

marginal Cost – change in TC from producing 1 more unit: ΔTC/ΔQ

Marginal analysis – continuous comparing of incremental changes in TC against TR

Break-even analysis – relationship between TR and TC Δ profitability?
-BE quantity = FC / (P – UVC)
Profit Second
(P x Q) – [FC + (UVC x Q)]
Services Continuum
Pure Goods Pure Service
Classifying Services
oDelivery by People vs. Machines
(Automated) – Ex) ATM, Car Wash

Profit vs. Non-Profit vs. Government
o GAP Analysis-
Measuring the quality of the interaction between the buyer and the seller. The difference between expected satisfaction levels vs. the actual level of satisfaction.
PRICE LEVEL - Based on demand
- Based on demand
- Skimming Strategy – Taking a little off the top. Going to charge highest price for small group of consumers. The drop price and sell to another small group of consumers and so on. Max TR by Consumer. Getting consumers to pay their highest price.
- Penetration Strategy – Lower price to get a larger group of consumers who fit into their demand that are willing and able to buy.
- Prestige Pricing – Price level that starts high and stays high.
Price Level - Based On Cost
- Mark up % - selling price or cost of good sold.
- Cost- Plus $
Price Level - Based On Profit
- R.O.I  10% (Return on investment
Why would a company choice less profits for more revenue.
- Stock Price
- Market Share
- Invest it to support other products.
- Indirect Benefits.
Annual Turnover Rate
Annual Cogs/ Average Inv. Level
Degree of Distribution Density
• Intensive Dist
-a lot of # of outlets / convenience goods
• Selective Dist
- Fewer outlets/shopping goods
• Exclusive Dist
- Few outlets/specialty goods
Sales Forecasting
Internal Sources/Opinions
Sales data – historical
Sales force – future sales
Management –

-industry experts/ analysts