Page |1 CHAPTER 10 11: PRODUCT STRATEGY 1. Complexity of products and types of products a.

Complexity of Products

Core customer value the basic problem-solving benefits that consumers are seeking convert it into an actual product Attributes are considered through the importance of these attributes varies depending on the product Associated Services (Augmented Product)

b. Types of Products - Specialty Products/ Services products or services toward which customers show a such strong preference that they will expend considerable effort to search for best suppliers (i.e. luxury car, legal or medical professionals, or designer apparel) - Shopping Products/ Services products or services for which consumers will spend a fair amount of time comparing alternatives such as furniture, apparel, fragrances, appliances, and travel alternatives. - Convenience Products/ Services - products or services for which the consumer is not willing to spend any effort to evaluate prior to purchase (i.e. commodity item such as common beverages, bread, or soap) - Unsought Products/ Services products consumers either do not normally think of buying or do not know about require lots of marketing, effort and various forms of promotion 2. Product Mix and Product Line Decisions

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Product mix the complete set of all products offered by a firm The product mix typically consists of various product lines Product mix breadth represents a count of the number of product lines offered by the firm Product line depth equals the number of products within a product lines

a. Change Product Mix Breadth - Increase Breadth add new product line to capture new or evolving markets and increase sales - Decrease Breadth delete entire product lines to address changing market conditions or meet internal strategic priorities b. Change a Product Lines Depth - Increase Depth add items to address changing consumer preference or preempt competitors while boosting sales - Decrease Depth delete products within a product line to realign the firm resources c. Product Line Decisions for Services 3. Why do Firms create new products? a. Changing Customer Needs create and deliver value more effectively by satisfying changing needs of their current and new customers or simply by keeping customers from getting bored with the current product or service offering b. Market Saturation the longer a product exists in the marketplace, the more likely it is that the market will become saturated. Without new products or services, the value of the firm will ultimately decline c. Managing Risk through Diversity create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can d. Fashion Cycles in industries that rely on fashion trends and experience short product life cycles most sales come from new products

Page |3 e. Improving Business Relationship new products sometimes function to improve relationships with suppliers 4. Diffusion of Innovation

Innovators those buyers who want to be the first on the block to have the new product or services enjoy taking risks and are regarded as highly knowledgeable - Early Adopters begins to use a product or services innovation dont like to take as much risk as innovators do but instead wait and purchase the product after careful review - Early Majority few new products and services can be profitable until this large group buys them dont like to take as much risk and therefore tend to wait until the bug are worked out of a particular product and service - Late Majority the last group of buyers to enter market the product has achieved its full market potential - Laggards like to avoid change and rely on traditional products until they are no longer available - Using the Diffusion of Innovation Theory: The speed with which products or service diffuse depends on several characteristics + Relative Advantage if a product or service is perceived to be better than substitutes + Compatibility depend on various consumer features, including international cultural differences + Observability when products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process + Complexity and Trialability products that are relatively less complex are also relatively easy to try diffuse more quickly 5. How Firms Develop New Products a. Idea Generation - Internal Research and Development have their own R&D departments, in which scientist work to solve complex problems and develop new ideas - R&D Consortia firms have been joining consortia, or groups of other firms and institutions, to explore new ideas or obtain solution for developing new products - Licensing firms buy the right to use the technology or ideas from other research intensive firms through a licensing agreement saves the high cost of in-house R&D - Brainstorming engage in brainstorming sessions during which a group works together to generate ideas -

Page |4 Outsourcing turn to outside firms like IDEO, a design firm based in Palo Alto, CA Competitors Products a new product entry by a competitor my trigger a market opportunity for a firm , which can use reverse engineering to understand the competitors product and then bring an improved version to market (Reverse engineering) - Customer Input listing to the customers in both B2B and B2C markets 6. Concept Testing - Concept testing refers to the process in which a concept statement is presented to potential buyers or users to obtain their reactions enable the developer to estimate the sales value of the product or service concept, possibly make changes to enhance its sales value, and determine whether the idea worth further development. 7. Product Development - Product development or product design entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a products form and features or a services features - Prototype the first physical form or service description of a new product, still on rough or tentative form, that has the same properties as a new product but is produced through different manufacturing processes - Alpha testing determine whether the product will perform according to its design and whether it satisfies the need for which it was intended occur in the firms R&D department - Beta testing uses potential consumers, who examine the product prototype in a real use setting to determine its functionality, performance, potential problems, and other issues specific to its use. 8. Market Testing a. Premarket Testing determine how many customers will try and then continue to use the product or service according to a small group of potential consumers b. Test Marketing determine the success potential of a new product introduces the offering to a limited geographical area (usually a few cities) prior to a national launch 9. Product Launch a. Promotion - Trade promotions which are promotions to wholesalers or retailers to get them to purchase the new products, often combine introductory price promotion, special events, and personal selling - Introductory price promotions limited duration, lower-than-normal prices designed to provide retailers with an incentive to try the products - Trade show which is a temporary concentration of manufacturers that provide retailers the opportunity to view what is available and new in the marketplace b. Price - Manufacturers suggested retail price (MSRP) - Slotting allowance c. Timing

Page |5 10. Evaluation of Results a. Satisfaction of technical requirement b. Customer acceptance c. Satisfaction of the firms financial requirements 11. Product Life Cycle

12. Branding a. Overview - A brand can use: name, logo symbols, characters, slogans, jingles and even distinctive packages. - Value of Branding for the Customer and the Marketer + Brands Facilitate Purchases help consumers make quick decisions because brands are often easily recognized by consumers and they signify a certain quality level and contain familiar attributes + Brands Establish Loyalty consumers learn to trust certain brand overtime + Brands Protect from Competition and Price Competition Strong brands are more established in the market and have a more loyal customer base + Brands Can Reduce Marketing Costs + Brands Are Assets + Brands Impact Market Value refers to the earning potential of the brand over next 12 months b. Brand Equity - Brand equity is the incremental utility or value added to a product by its brand name. - Brand Awareness measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion about that brand - Perceived Value the relationship between a product or services benefits and its cost. - Brand Association reflects the mental links that consumers make between a brand and its key product attributes, such as logo, slogan, or famous personality - Brand Loyalty occurs when a consumer buys the same brands product or service repeatedly over time rather than buy from multiple suppliers within the same categories 13. Branding Strategies a. Brand Ownership

Page |6 Manufacturer Brands also known as national brands, are owned and managed by the manufacturer Private-label Brands called store brands, house brands, or own brands, are products developed by retailers Four categories: premium, generic, copycat, and exclusive co-brands + Premium brands offer the consumer a private label that is comparable to, or even superior to, a manufacturers brand equity. Sometimes with modest price savings + Generic brands target a price-sensitive segment by offering a no-frills product at a discount price + Copycat brands imitate the manufacturers brand in appearance and packaging, generally are perceived as lower quality, and are offered at lower prices + Exclusive co-brands is developed by a national brand manufacture, often in conjunction with a retailer, and is sold exclusively by the retailer Naming brands and Product Lines Family brand use its own corporate name to brand all its product lines and products Individual brand use individual brand names for each of its products Brand and Line Extensions Brand extension refers to the use of the same brand name in a different product line increase product mixs breadth Line extension the use of the same brand name within the same product line, and represents an increase in a product lines depth (p.314) Brand Illusion occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold Co-Branding Co-branding the practice of marketing two or more brands together, in the same package, promotion, or store. Brand Licensing Brand licensing a contractual arrangement between firms, whereby one firm allows another to use its brand name, logo, symbol, and/or characters in exchange for a negotiated fee Brand Repositioning Brand repositioning rebranding refers to a strategy in which marketers change a brands focus to target new markets or realign the brands core emphasis with changing market preferences

b. c. d. e. -

f. -

14. Packaging a. Primary package the one the consumer uses, such as the toothpaste tube seek convenience in terms of storage, use, and consumption b. Secondary package the wrapper or exterior carton that contains the primary package and provides the UPC label used by retailer scanners c. Product labeling identify the product and brand, and also an important element of branding and can be used for promotion

Page |7 CHAPTER 13: PRICING CONCEPTS FOR ESTABLISHING VALUE 1. The Five Cs of Pricing a. Company Objectives

Profit Orientation focusing on target profit pricing, maximizing profits, or target return pricing + Target profit pricing when having a particular profit goal use price to stimulate a certain level of sales at a certain profit per unit + Maximizing profits relies primarily on economic theory - Sale Orientation firms believe that increasing sales will help the firm more than will increasing profits - Competitor Orientation measure themselves primarily against their competition - Customer Orientation increase value by focusing on customer satisfaction and setting prices to match consumer expectation b. Customers - Demand curves and pricing - Price elasticity of demand: + Elastic demand: price elasticity greater than one + Inelastic demand: price elasticity smaller than one + The less elastic the demand, the more it pays for the seller to raise the price + What happens when elasticity equals one? (unitary demand) + Total revenue stays the same: sellers sell fewer items but at a higher Price - Factors influencing price elasticity of demand + Income effect refers to the change in the quantity of a product demanded by consumers due to a change in their income + Substitution effect refers to consumers ability to substitute other products for focal brand the greater the availability of substitute products, the higher the price elasticity of demand for any given product will be + Cross-Price elasticity the percentage change in the quantity of product A demanded compared with the percentage change in the price in product B (Chapter 13, p.7) c. Costs Total Cost = Variable Costs + Fixed Costs d. Break-Even Analysis and Decision Making -

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e. Competition

f. Channel Members 2. Macro Influences On Pricing 1. The Internet - Increased price sensitivity - Growth of online auctions 2. Economic Factors - Local economic conditions - Increasing disposable income - Cross-shopping - Increasing status consciousness - Increasing globalization

Page |9 CHAPTER 14: STRATEGIC PRICING METHODS 1. Considerations for Setting Price Strategies a. Cost-Based methods determine the final price to charge by starting with the cost b. Competitor-Based methods set their prices to reflect the way they want consumers to interpret their own prices relative to the competitors offering c. Value-Based methods setting prices that focus on the overall value of the product offering as perceived by the consumer - Improvement Value Method represents an estimate of how much more (or less) consumers are willing to pay for a product relative to other comparable products - Cost of Ownership Method determines the total cost of owning the product over its useful life - Implementing Value-Based Pricing Method must know how consumers in different market segment will attach value to the benefits delivered by their products 2. Pricing Strategies a. Everyday Low Pricing (EDLP) stress the continuity of their retail process at a level somewhere between regular, nonsale price and the deep-discount sale prices their competitors may offer b. High/Low Pricing relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases - Reference price is the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process (Internal reference price and External reference price) - Most inexperienced consumers use price as an indicator of quality - Price becomes crucial when consumers have little knowledge about certain products/brands 3. New Product Pricing Strategies a. Market Penetration Pricing set the initial price low for the introduction of the new product or service b. Price Skimming appeals to these segments of consumers who are willing to pay the premium price to have the innovation first 4. Pricing Tactics a. Pricing Tactics Aimed at Consumers - Markdowns the reductions retailers take on the initial selling price of the product or service enable retailers to get rid of slow-moving or obsolete merchandising, sell seasonal items after the appropriate season, and match competitors prices on specific merchandise - Quantity Discounted for Consumers encourage consumers to purchase larger quantities each time they buy - Seasonal Discounts price reductions offered on products and services to stimulate demand during off-peaks seasons - Coupons offer a discount on the price of specific items when theyve purchased

P a g e | 10 Rebates provide another form of discounts for consumers off the final selling price Leasing consumers pay a fee to purchase the right to use a product for a specific amount of time Price Bundling practice of selling more than one product for a single, lower price Leader Pricing tactic that attempts to build store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the stores cost

b. Business Pricing Tactics and Discounts Seasonal Discounts additional reduction offered as an incentive to retailers to order merchandise in advance of the normal buying season - Cash Discounts reduces the invoice cost if the buyer pays the invoice prior to the end of discount period - Vendor Allowances lowers the final cost to channel members + Advertising allowance offers a price reduction to channel members if they agree to feature the manufacturers product in their advertising and promotional efforts + Slotting allowance fees paid to retailers simply to get new products into stores or to gain more or better shelf space for their products - Quantity Discounts provides a reduced price according to the amount purchased + Cumulative quantity discount uses the amount purchased over a specified time period and usually involves several transactions + Non-cumulative quantity discount based only on the amount purchased in a single order - Uniform Delivered versus Zone Pricing + Uniform delivered the shipper charges one rate, no matter where the buyer is located + Zone pricing sets different prices depending on a geographical division of the delivery areas 5. Legal and Ethical Aspects of Pricing -

CHAPTER 15: SUPPLY CHAIN AND CHANNEL MANAGEMENT 1. Supply Chain, Marketing Channels, and Logistics are related a. Marketing Channel the set of institutions that transfer the ownership of and move goods from the point of production to the point of consumption; as such, it consists of all the institutions and marketing activities in the marketing process marketing channel = supply chain b. Logistics management describes the integration of two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, in-process inventory, and finished goods from the point of origin to the point of consumption element of supply chain management that concentrated on the movement and control of physical products supply chain management as a whole also includes an awareness of the relationships among members of the supply chain or channel and the need to coordinate efforts to provide customers with the best value 2. Supply Chains add value

P a g e | 11 a. Supply Chain Management Streamlines Distribution - Reduce number of transactions - Increase value for consumers - More efficient and effective b. Supply Chain Management Affects Marketing - Fulfilling delivery promises - Meeting customer expectations - Reliant on an efficient supply chain 3. Making Information Flow - Flow 1 (Customer to Store) - Flow 2 (Store to Buyer) - Flow 3 (Buyer to Manufacturers) - Flow 4 (Store to Manufacturers) - Flow 5 (Store to Distribution Center) - Flow 6 (Manufacturer to Distribution Center and Buyer) a. Data Warehouse b. Electronic Data Interchange computer-to-computer exchange of business documents from a retailer to a vendor and back c. Vendor-Managed Inventory an approach for improving supply chain efficiency in which the manufacturer is responsible for maintaining the retailers inventory levels in each of its stores. d. Collaborative Planning, Forecasting, and Replenishment (CPFR) the sharing of forecast and related business information and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment e. Pull and Push Supply Chains - Pull Supply Chain a supply chain in which orders for merchandise are generated at the store level on the basis of sales data captured by POS terminal - Push Supply Chain merchandise is allocated to stores on the basis of forecasted demand 4. Making Merchandise Flow a. Distribution Center versus Direct Store Delivery Several advantages to using a distribution center - More accurate sale forecasts - Lower inventory investment for retailers - Easier to avoid running out of stock or having too much stock in any particular store - Cost-effective b. The Distribution Center - Management of Inbound Transportation - Receiving and Checking Using UPC and Radio Frequency Identification (RFID) Device - Storing and Cross-Docking - Getting Merchandise Floor Ready

P a g e | 12 Preparing to Ship Merchandise to Store

5. Managing the Marketing Channel and Supply Chain a. Managing the Marketing Channel and Supply Chain through Vertical Marketing Systems - Vertical Channel Conflict (Vertical Supply Chain Conflict) the supply chain members are not in agreement about their goals, roles, or rewards - Horizontal Channel Conflict (Horizontal Supply Chain Conflict) there is disagreement or discord among members at the same level of marketing channel, such as two competing retailers or two competing manufacturers CHAPTER 16: RETAILING AND MULTICHANNEL MARKETING Retailing the set of nosiness activities that add value to products and services sold to consumers for their personal or family use. 1. Choosing Retailing Partners a. Channel Structure the level of difficulty pa manufacturer experiences in getting retailers to purchase its products - Degree of vertical integration - Manufacturers brand - Power of manufacturer and retailer b. Customer Expectations c. Channel Member Characteristics d. Distribution Intensity the number of channel members to sue at each level of the marketing channel - Intensive Distribution place products in as many outlets as possible - Exclusive Distribution granting exclusive geographic territories to one or very few retail customers so no other retailers in the territory can sell a particular brand - Selective Distribution relies on a few selected retail customers in a territory to sell products 2. Identify Types of Retailers a. Food Retailers - Supermarket - Supercenter - Convenience - Warehouse Club b. General Merchandise - Full line Discount - Category Specialist - Drug - Specialty - Department - Off-price - Extreme Value

P a g e | 13 c. Services - Auto Rental - Health Spa - Vision Center - Bank Developing A Retail Strategy Using the Four Ps a. Product providing the right mix of merchandise and services b. Price helps define the value of both the merchandise and the service, and the general price range of a particular store helps define its image c. Promotion retailers use a wide variety of promotions, both within their retail environment and through mass media d. Place Convenience can often be a key ingredient to success Benefits of Stores for Consumers - Browsing - Touching and Feeling Products - Personal Service - Cash and Credit Payment Benefits of the Internet and Multichannel Retailing - Deeper and Broader Selection - Personalization - Gain Insights into Consumer Shopping Behavior - Increase Customer Satisfaction and Loyalty - Expand Market Presence Effective Multichannel Retailing - Integrated CRM centralized customer data warehouse that houses a complete history of each customers interaction with the retailer, regardless of whether the sale occurred in a store, on the Internet, or on the phone - Brand Image retailers need to provide a consistent brand image across all channels - Pricing - Supply Chain

3.

4.

5.

6.

CHAPTER 17: INTEGRATED MARKETING COMMUNICATIONS 1. Communicating With Consumer a. The Communication Process

P a g e | 14 Noise any interference that stems from competing messages, a lack of clarity in the messages, or a flaw in the medium, and it poses a problem for all communication channels - Feedback Loop allows the receiver to communicate with the sender and thereby informs the sender whether the message was received and decoded properly b. How Consumers Perceive Communication - Receivers Decode Message Differently - Senders Adjust Messages According to the Medium and Receivers Traits c. The AIDA Model -

- Awareness gain attention - Interest customer must be persuaded - Desire I like it I want it - Action searching for the product or making a purchase - The lagged effect a delayed response to a marketing communication campaign 2. Element s of An Integrated Marketing Communication Strategy

a. Advertising b. Public Relations (PR) the organizational function that manages the firms communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationship with the media c. Sales Promotions d. Personal Selling e. Direct Marketing marketing that communicates directly with target customers to generate response or transaction f. Online Marketing 3. Planning For And Measuring IMC Success a. Goal b. Setting and Allocating the IMC Budget - Objective-and task methods determines the budget required to undertake specific tasks to accomplish communication objectives

P a g e | 15 Rule-of-Thumb methods determine the present communication budget

c. Measuring Success Using Marketing Metrics - Frequency - Reach - Gross rating points (GRP = reach x frequency) - Web Tracking d. Planning, Implementing, and Evaluating IMC Programs An Illustration of Google Advertising - Search Engine Marketing: Clicks, Impressions, Click through rate, Return on investment (ROI = (Sale revenue Advertising cost)/Advertising cost)

CHAPTER 18: ADVERTISING, PUBLIC RELATIONS, AND SALE PROMOTIONS 1. Identify Target Audience 2. Set Advertising Objectives a. Pull Strategy get consumers to pull the product into the supply change by demanding it b. Push Strategy increase demand by focusing on wholesalers, retailers, or salepeople c. Inform communicate to create and build brand awareness d. Persuade used to motivate consumer to take action or to reposition an established brand in the later stage of PLC e. Remind used to remind or prompt repurchases f. Focus of Advertisements - Institutional advertisement inform, persuade, or remind consumers about issues related to places, politics, or an industry - Product-focused advertisement inform, persuade, or remind consumers about a specific product or service - Public Service Advertising (PSA) focus on public welfare 3. Determine The Advertising Budget 4. Convey The Message a. The Message b. The Appeal - Informational Appeals help consumers make purchase decisions by offering factual information that encourages consumers to evaluate the brand favorably on the basis of the key benefits it provides - Emotional Appeals satisfy consumers emotional desires rather their utilitarian needs

P a g e | 16 5. Evaluate and Select Media - Media Planning refers to the process of evaluating and selecting the media mix - Media Mix combination of the media used and the frequency of advertising in each medium - Media Buy - Mass Media reach large anonymous audience - Niche Media reach a smaller more targeted audience - Three Scheduling Methods continuity, flighting, pulsing 6. Create Advertisements 7. Assess Impact Using Marketing Metrics - Pretesting refers to assessments performed before an ad campaign is implemented to ensure that the various elements are working in an integrated fashion and doing what they are intended to do - Tracking includes monitoring key indicators, such as daily or weekly sales volume, while the advertisement is running to shed light on any problems with the message or the medium - Protesting the evaluation of the campaigns impact after it has been implemented 8. Sales Promotions: coupon, deals, premium, contests, sweepstakes, samples, samples, loyalty programs, POP displays, rebates, product placement 9. Using Sales Promotion Tools - Cross-promoting two or more firms join together to reach a specific target market 10. Evaluating Sales Promotions Using Marketing Metrics a. Realized margin b. Cost of additional inventory c. Potential increase in sales d. Long-term impact e. Potential loss from switches from more profitable items f. Additional sales by customers CHAPTER 19: PERSONAL SELLING AND SALES MANAGEMENT 1. The Scope and Nature of Personal Selling 2. The Personal Selling Process