74 terms

Marketing Chapters 9 & 10

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Market segmentation
involves aggregating prospective buyers into groups that 1) have common needs and 2) will respond similarly to a marketing action
Market segments
the relatively homogeneous groups of prospective buyers that result from the market segmentation process
Product differentiation
the existence of different market segments has caused firms to use this marketing strategy; involves a firm using different marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different and better than competing products
Segmentation Strategy
identify market needs, link needs to actions, and then execute marketing program actions
Market-product grid
a framework to relate the market segments of potential buyers to products offered or potential marketing actions
Specific segmentation strategies
(a business goes to the trouble and expense of segmenting its markets when it expects that this will increase its sales, profit, and return on investment; when expenses are greater than the potentially increased sales from segmentation, a firm should not attempt to segment its market) 1) one product and multiple market segments 2) multiple products and multiple market segments and 3) segments of one, or mass customization
Mass customization
tailoring goods or services to the tastes of individual customers on a high-volume scale (the next step to BTO)
Build-to-order (BTO)
manufacturing a product only when there is an order from a customer
Organizational synergy
the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently (organization's goal to marketing success is that customers should be better off as a result of the increased synergies)
Cannibalization
(when the increased customer value involves adding new products or a new chain of stores, the product differentiation-market segmentation trade-off raises a critical issue) The new products or new chain simply stealing customers and sales from the older, existing ones
Criteria to use in forming segments
1) simplicity and cost-effectiveness of assigning potential buyers to segments 2) potential for increased profits (the best segmentation approach is the one that maximizes the opportunity for future profit and return on investment ROI; if there is potential without segment, don't do it) 3) similarity of needs of potential buyers within a segment 4) difference of needs of buyers among segments 5) potential of a marketing action to reach a segment
Four segmentation bases
1) geographic segmentation (region) 2) demographic segmentation (household size) (objective, physical, measurable) 3) psychographic segmentation (lifestyle) (subjective mental or emotional attributes like personality, aspirations, needs, and lifestyle) 4) behavioral segmentation (product features or usage rate) (based on some observable actions or attitudes by prospective customers; where what how and why)
Usage rate
the quantity consumed or patronage (store visits) during a specific period
Frequency marketing
focuses on usage rates; implementing programs to encourage customers to use the same organization repeatedly to create loyal customers
80/20 rule
a concept that suggests 80 percent of a firm's sales are obtained from 20 percent of its customers (a small fraction of customers provides a large fraction of the firm's sales)
Ways to segment organizational markets
statistical area for geographic segmentation; NAICS code and number of employees for demographic segmentation; usage rate for behavioral segmentation
Steps in segmenting and targeting markets
1) group potential buyers into segments 2) group products to be sold into categories 3) develop a market-product grid and estimate the size of markets 4) select target markets (divide the market into segments and actually pick the target markets) (market size, expected growth, competitive position, cost of reaching the segment, and compatibility with the organization's objectives and resources) 5) take marketing actions to reach target markets
Market synergies
opportunities for efficiency in terms of a market segment (individuals, students, teachers, creating, college staff) (often come at the expense of product synergies because a single customer segment will likely require a variety of products, each of which will have to be designed and manufactured -the company saves on marketing but spends more on production)
Product synergies
opportunities for efficiency in research and development and production
Product positioning
refers to the place a product occupies in consumers' minds on important attributes relative to competitive products
Product repositioning
changing the place a product occupies in a consumer's mind relative to competitive products
Head-to-head positioning
involves competing directly with competitors on similar product attribute in the same target market
Differentiation positioning
involves seeking a less-competitive, smaller market niche in which to locate a brand
Discovering the perceptions in the minds of potential customers by taking four steps
1) identify the important attributes for a product or brand class 2) discover how target customers rate competing products or brands with respect to these attributes 3) discover where the company's product or brand is on these attributes in the minds of potential customers 4) reposition the company's product or brand in the minds of potential customers
Perceptual map
a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers
Product
good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumer's needs and is received in exchange for money or something else of value
Good
has tangible attributes that consumer's vive sense can perceive (can also have intangible attributes consist of its delivery or warranties)
Nondurable good
item consumed in one or a few uses, such as food products and fuel
Durable good
one that usually lasts over many uses, such as appliances, cars, and mobile phones
Services
intangible activities that an organization provides to satisfy consumers' needs in exchange for money or something else of value
Consumer products
products purchased b the ultimate consumer
Business products
products organizations buy that assist in providing other products for resale (also called B2B products or industrial products)
Convenience products
items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort
Shopping products
items for which the consumer compares several alternatives on criteria such as price, quality, or style.
Specialty products
items that the consumer makes a special effort to search out and buy
Unsought products
items that the consumer does not know about or knows about but does not initially want
Four types of consumer products differ in terms of
1) the effort the consumer spends on the decision 3) the attributes used in making the purchase decision and 3) the frequency of purchase
Components
items that become art of the final product
Support products
items used to assist in producing other goods and services (installations, accessory equipment, supplies, industrial services)
Product item
a specific product that has a unique brand, size, or price
Product line
a group f product or service items that are closely related because they satisfy a class of needs, are used together, are sold to the same customer group, are distributed through the same outlets, or fall within a given price range
Product mix
consists of all the product lines offered by an organization
Stock keeping unit (SKU)
a unique identification number that defines an item for ordering or inventory purposes
Continuous innovation
consumers don't need to learn new behaviors
Dynamically continuous innovation
only minor changes in behavior are required
Discontinuous innovation
involves making the consumer learn entirely new consumption patterns to use the product
Lowest level of newness and innovation of product
product line extension, an incremental improvement of an existing product line the company already sells
Next level of newness and innovation of product
(1) significant jump in innovation or technology or (2) brand extension involving putting an established brand name on a new product in an unfamiliar market
Level three of newness and innovation of product
involves a radical invention, a truly revolutionary new product
Protocol
a statement that, before product development begins, identifies (1) a well-defined target market (2) specific customers' needs, wants, and preferences; and (3) what the product will be and do to satisfy customers
Critical marketing factors that often separate new-product winners and losers
insignificant point of difference, no economical access to buyers, incomplete market and product protocol before product development starts, not satisfying customer needs on critical factors, bad timing, poor product quality, too little market attractiveness, and poor execution of the marketing mix
Key organizational problems
not really listening to the voice of the consumer, pushing a poorly conceived product into the market to generate quick revenue, encountering groupthink in task force and committee meetings, not learning critical takeaway lessons from past failures, avoiding the NIH problem (not-invented-here, ideas that get rejected simply because they come from outside)
New-product process
the seven stages an organization goes through to identify business opportunities and convert them into salable products or services (1) new-product strategy development (2) idea generation (3) screening and evaluation (4) business analysis (5) development (6) market testing (7) commercialization
New-product strategy development
the stage of the new product process that defines the role for a new product in terms of the firm's overall objectives (SWOT analysis and environmental scanning to assess its strengths and weaknesses relative to the trends it identifies as opportunities or threats and this outcome will define the protocol)
Idea generation
involves developing a pool of concepts to serve as candidates for new products, building upon the previous stage's results
Open innovation
an organization finds and executes creative new-product ideas by developing strategic relationships with outside individuals and organizations (employee and co-worker suggestions, customer and supplier suggestions, research and development laboratories, competitive products, and smaller, firms, universities, and inventors)
Crowdsourcing
involves generating insights leading to actions based on massive numbers of people's ideas
Screening and evaluation
internally and externally evaluates new-product ideas to eliminate those that warrant no further effort
Concept tests
external evaluations with consumers that consist of preliminary testing of a new-product idea rather than an actual product
Business analysis
specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections; assessing the total "business "fit" of the proposed new product with the company's mission and objectives (from whether the product can be economically developed and manufactures to the marketing strategy needed to have it succeed in the marketplace)
Prototype
a full-scale operating model of the product
Development
the stage of the new-product process that turns the idea on paper into a prototype (involves not only manufacturing the product efficiently but also performing laboratory and consumer tests to ensure it meets the standards established for it in the protocol)
Market testing
involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy
Test marketing
involves offering a product for sale on a limited bases in a defined area for a specific time period (3 main kinds are standard, controlled, and simulated)
Standard test market
a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities
Controlled test market
involves contracting the entire test program to an outside services (the service pays retailers for shelf space and can therefore guarantee a specified percentage of the test product's potential distribution volume)
Simulated (or laboratory) test markets (STM)
a technique that replicates a full-scale test market to a limited degree (often done in shopping malls, where consumers are questioned to identify who uses the product class being tested)
Commercialization
the stage that positions and launches a new product in full-scale production and sales (most expensive stage)
Regional rollouts
introducing the product sequentially into geographical areas of the United States, to allow production levels and marketing activities to build up gradually to minimize the risk of new-product failure.
Slotting fee
many supermarkets require this for new products, they are payments a manufacturer makes to place a new item on a retailer's shelf
Failure fee
a penalty payment a manufacturer makes to compensate a retailer for devoting valuable shelf space to a product that failed to sell.
Time to market (TtM)
speed is often vital in introducing a new product (sooner is more profitable rather than later for high-tech products)
Parallel development
cross-functional team members who conduct the simultaneous development of both the product and the production process stay with the product from conception to production
Fast prototyping
uses a "do it, try it, fix it" approach, encouraging continuing improvement even after the initial design