Transcript Review of Quiz 2

7-1
Quiz Review 2: Chapters 7 to 11
MKT304
Dr. Franck Vigneron
7-2
STP
Segmentation & Targeting & Positioning
1
Market Segmentation
2
Market Targeting
3
Market Positioning
Step 1. Market Segmentation
Bases for Segmenting Consumer Markets
Geographic
Nations, states,
regions or cities
Demographic
Age, gender, family size
and life cycle, or income
Psychographic
Social class, lifestyle,
or personality
Behavioral
Occasions, benefits
sought, user status,
usage rate, loyalty
7-3
7-4
Hybrid Segmentation
Psychographic + Demographic Variables
Work, hobbies social
events, vacation,
entertainment, club
membership,
community,shopping,
sports
ACTIVITIES
Family,home, job,
community,
recreation, fashion,
food media,
achievements
INTERESTS
Themselves, social
issues, politics,
business, economics,
education,products,
future, culture
OPINIONS
DEMOGRAPHICS
PSYCHOGRAPHIC PROFILES
20/80 Rule
Step 1. Market Segmentation
7-5
Requirements for Effective Segmentation
Measurable
• Size, purchasing power, profiles
of segments can be measured.
Accessible
• Segments can be effectively
reached and served.
Substantial
• Segments are large or
profitable enough to serve.
Differential
• Segments must respond
differently to different marketing
mix elements & programs.
Actionable
• Effective programs can be
designed to attract and serve
the segments.
Step 2. Market Targeting
7-6
Evaluating Market Segments
• Segment Size and Growth
– Analyze sales, growth rates and expected profitability for
various segments.
• Segment Structural Attractiveness
– Consider effects of: Competitors, Availability of Substitute
Products and, the Power of Buyers & Suppliers.
• Company Objectives and Resources
– Company skills & resources relative to the segment(s).
– Look for Competitive Advantages.
Marketing Differentiation Strategy
7-7
A Undifferentiated Marketing
Company Marketing Mix
Market
B Concentrated Marketing
Company Marketing Mix
Target 1
Target 2
Target 3
C Differentiated Marketing
Company Marketing Mix 1
Company Marketing Mix 2
Company Marketing Mix 3
arketing strategies
Target 1
Target 2
Target 3
Step 3. Positioning for Competitive
Advantage
7-8
• Product’s Position - the way the product is
defined by consumers on important
attributes - the place the product occupies
in consumers’ minds relative to competing
products.
• Marketers must:
–Plan positions to give their products the
greatest advantage in selected target markets,
–Design marketing mixes to create these
planned positions.
7-9
Creating Perceptual Maps

Goal: Obtain 2-3 key underlying dimensions
that position competing products/services

Two approaches.....
Both can be used to obtain a convergent
picture of consumer perceptions.
1) Multi-Dimensional Scaling (MDS)
2) Factor Analysis
Steps in Segmentation,
Targeting, and Positioning
6. Develop Marketing
Mix for Each Target Segment
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
3. Develop Measures
of Segment Attractiveness
7-10
Market
Positioning
Market
Targeting
2. Develop Profiles
of Resulting Segments
1. Identify Bases
for Segmenting the Market
Market Segmentation
7-11
What is a Product?
• A Product is anything that can be offered to a market for attention,
acquisition, use, or consumption and that might satisfy a want or need.
• Includes:
– Physical Objects
– Services
– Events
– Persons
– Places
– Organizations
– Ideas
– Combinations of the above
The Total Product Concept
Image of retail store
Image of the brand
Warranty
Service after sale
Color
Attachments
Packaging
Instructions
The
Product
Product Strategies
7-12
Levels of Product: think on 3 levels
Augmented Product
Installation
Packaging
Delivery
& Credit
Brand
Name
Quality
Level
Core
Benefit or
Service
Features
Design
Warranty
Actual Product
Core Product
AfterSale
Service
7-13
7-14
Product Classifications
Consumer Products
Convenience Products
 Buy frequently & immediately
 Low priced
 Mass advertising
 Many purchase locations
i.e Candy, newspapers, soap
Shopping Products
 Buy less frequently
 Higher price
 Fewer purchase locations
 Comparison shop, time/effort
i.e Clothing, cars, appliances
Specialty Products
Unsought Products
 Special purchase efforts
 New innovations
 High price
 Unique characteristics
 Brand identification
 Few purchase locations
i.e Lamborghini, Rolex
 Products consumers don’t
want to think about these products
 Require much advertising &
personal selling
i.e Life insurance, blood donation
7-15
Product Mix Decisions
Consistency
Width - number
of different
product lines
Depth - number
of versions of
each product
Length - total
number of items
in product lines
Product Mix all the product
lines & items
offered
7-16
Product-Line Width, Depth and Consistency
• Definitions:
– Width (Breadth): the number of product lines carried.
– Length; refers to the total number of items the company carries within its product
lines
– Depth: the assortment of sizes, colors, and models offered within each product line.
– Consistency: the consistent relationship between products in a product line.
Trucks
Cars
Vans
Passenger
Passenger
Passenger
Sports
Commercial
Station wagons
Leisure-Recreation
Depth
(assortment
variables within Commercial
a line)
Farm related
Width (# of product lines)
Product Strategies
7-17
Product Line Decisions
Product Line Length
Number of Items in the Product Line
Stretching
Filling
Lengthen beyond
current range
Lengthen within
current range
Downward
Two-Way
Upward
7-18
NATURE OF SERVICE
Intangibility
Inseparability
Variability
Perishability
Can’t be seen, tasted, felt, heard,
or smelled before purchase.
Can’t be separated from service
providers.
Quality depends on who provides
them and when, where and how.
Can’t be stored for later sale or
use.
What is
underlined is
very
important!
Concepts in Brand Equity
7-19
Brand Equity = Mostly means the image of a brand
Recall versus
Recognition
BRAND
AWARENESS
Expected
Performance
= Brand Meanings
BRAND
ASSOCIATIONS
BRAND QUALITY
• Anchor to Which
Other Associations
Can Be Attached
• Help Process &
Retrieve
Information
• Reason-to-Buy
• Familiarity Liking
• Differentiate/
Position
• Price
• Signal of
Commitment
• Reason-to-Buy
• Extensions
• Brand to Be
Considered
• Create Positive
Attitudes/ Feelings
• Potential for
Extensions
• Differentiation/ Position
• Channel Member Interest
Price Sensitivity &
Purchase rate
BRAND
LOYALTY
• Reduced Marketing
Costs Trade leverage
• Attracting New
Customers (create
Awareness &
Reassurance)
• Time to Respond to
Competitive Threats
7-20
Types of Brands
Manufacturer’s
Brands
Name is owned
and advertised
by the
manufacturer
Black &
Decker tools
Product Strategies
Whirpool
Appliances
Distributor’s or
Private Brands
Generic
Products
Name is owned
and advertised by
intermediary
“No-Name”
product in plain
package with
stark lettering
Craftsman
Tools
VONS
products
Dog
Food
Strategic Choices of Brand Name
Three brand name choices :
A.
family branding
- less expensive
- less effective
- Philips
B.
individual branding
- more expensive
- can be very effective
- OMO POWER
C.
combinations
VW Beetle
7-21
7-22
Strong Brands = Strength + Stature
•
Strength
– Differentiation
– Relevance
•
Stature
– Esteem
– Knowledge
Dimensions of Brand Personality
7-23
The set of human characteristics associated with a brand. It
enables a customer to express his or her own self, or ideal
self, on specific dimensions of the self through the use of the
brand
Sincerity
Excitement
Down-to
earth
Honest
Wholesome
Cheerful
Daring
Spirited
Imaginative
Up-to-date
Competenc
e
Sophisticatio
n
Ruggedness
Reliable
Intelligent
Successful
Upper class
Charming
Outdoorsy
Tough
7-24
Four Brand Strategies
Product Category
Existing
Brand Name
Existing
New
New
Line Extension
Dannon Yogurt Flavors
Brand Extension
Barbie Electronics
Multibrands
Seiko  Pulsar
New Brands
Toyota & Lexus
+ Co-Branding = brands bearing 2 or more brand names
BMW + Michelin or Intel + Compaq
What is a New Product?
High
New product lines/
established markets
New to the world
products
20%
Newness
to
the
Firm
Improvements to
existing products
26%
10%
Additions to existing
product lines
26%
Cost reductions
Repositionings
Low
11%
Low
7%
High
Newness to the Market
1982 survey conducted by Booze, Allen & Hamilton
Managing product lines and brands over time:
The Product Life Cycle (PLC)
+
Market
Introduction
Market
Growth
Market
Maturity
-
Market
Decline
+
time
7-26
7-27
Applications of the Product Life Cycle
• The PLC concept can describe a:
– Product class which has the longest life cycles (i.e. gas-powered cars),
– Product form which tend to have the standard PLC shape (i.e. minivans),
– Brand which can change quickly because of changing competitive
attaches and responses (i.e. Ford Taurus),
– Style which is a basic and distinctive mode of expression,
– Fashion which is a popular style in a given field,
– Fad which is a fashion that enters quickly, is adopted quickly and declines
fast.
7-28
Product Life-Cycle Stages and Marketing Steps
Sales
MATURITY
GROWTH
Maximize
share,
grow market
Maximize profit,
Defend Mkt
Share
DECLINE
Reduce/
Delete, milk
the brand
INTRODUCTION
awareness
and trial
Launch
Product Strategies
Takeoff
Rapid Shakeout Maturity
growth
Time
Decline
Speeding Up Development
Simultaneous (Team-Based)
Step 2
Step 3
Step 4
Step 2
Step 1
Step 1
Sequential
7-29
Step 3
Step 4
Major Stages in New-Product Development
Marketing
Strategy
Concept
Development
and Testing
Idea
Screening
Idea
Generation
7-30
Business
Analysis
Product
Development
Test
Marketing
Commercialization
7-31
Step 7. Test Marketing
3 Methods
Standard
Test Market
Controlled
Test Market
Full marketing campaign
in a small number of
representative cities.
A few stores that have
agreed to carry new
products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Internal Factors Affecting Pricing Decisions:
Marketing Objectives
Survival
Low Prices to Cover Variable Costs and
Some Fixed Costs to Stay in Business.
Marketing
Objectives
Current Profit Maximization
Choose the Price that Produces the
Maximum Current Profit, Etc.
Market Share Leadership
Low as Possible Prices to Become
the Market Share Leader.
Product Quality Leadership
High Prices to Cover Higher
Performance Quality and R & D.
7-32
7-33
Types of Cost Factors that
Affect Pricing Decisions
Fixed Costs
(Overhead)
Variable Costs
Costs that don’t
vary with sales or
production levels.
Costs that do vary
directly with the
level of production.
Executive Salaries, Rent
Raw materials
Total Costs
Sum of the Fixed and Variable Costs for a Given
Level of Production
7-34
Costs Considerations
Cost Per Unit at Different Levels of Production Per Period
The Experience Curve
1
Cost per unit
2
3
SRAC (short-run average cost curve)
4
4,000
3,000
2,000
1,000
LRAC
Quantity Produced per Day
Price Elasticity of Demand
7-35
Price
A. Inelastic Demand Demand Hardly Changes With
a Small Change in Price.
P2
P1
Price
Q2 Q1
Quantity Demanded per Period
B. Elastic Demand Demand Changes Greatly With
a Small Change in Price.
P’2
P’1
Q2
Quantity Demanded per Period
Q1
7-36
Major Considerations in Setting
Competitors prices Consumer
Other internal and Perceptions
External factors
Of value
High price
Low price
No possible
profit at this price
No possible
demand at this
price
7-37
Cost-Based Pricing
Certainty About
Costs
Price Competition
Is Minimized
Much Fairer to
Buyers & Sellers
Cost-Plus
Ethical
Pricing is an
Approach That
Adds a
Standard
Markup
to the
Attitudes
Costofof the
Others
Product.
Unexpected
Situational
Factors
Pricing is
Simplified
Simplest
Pricing
Method
Ignores
Current
Demand &
Competition
7-38
Break-Even pricing
• Break-even pricing (target profit pricing) is an approach to setting
price to break-even on the cost of making and marketing products
or to make the target (desired) profit.
• a). It uses a break-even chart that shows the total cost and total
revenue at different levels of sales volume.
• b). Although break-even analysis and target profit pricing can
help the company to determine minimum prices needed to cover
expected costs and profits, they do not take the price-demand
relationship into account.
• c). When using this method, the company must also consider the
impact of price on the sales volume needed to realize target
profits and the likelihood that the needed volume will be achieved
at each possible price.
Value-Based Pricing
• Pricing developed early as part of overall
marketing program
• Target price based on perceived value of the
extended product: offering just the right combination
of quality and good service at a fair price). In many
instances, this has resulted in the organization introducing
less expensive versions of established, brand-name
products.
• Perceived value dictates design and cost: a
redesign of existing brands in order to offer more quality
for a given price or the same quality for less has been the
result.
• A company using this approach must find out what
value the buyer assigns to different competitive offers.
7-39
Competition-Based Pricing
Setting Prices
Going-Rate
Company Sets Prices Based on What
Competitors Are Charging.
?
?
Sealed-Bid
Company Sets Prices Based on
What They Think Competitors
Will Charge.
7-40
7-41
Setting Pricing Policy
1. Selecting the pricing
objective
2. Determining demand
3. Estimating costs
4. Analyzing competitors’
costs, prices, and offers
5. Selecting a pricing
method
6. Selecting final price
Pricing Strategies
7-42
New Product Pricing Strategies
Market Skimming
 Setting a High Price for a New
Product to “Skim” Maximum
Revenues from the Target
Market.
 Results in Fewer, But More
Profitable Sales.
• Use Under These
Conditions:
– Product’s Quality and Image Must
Support Its Higher Price.
– Costs Can’t be so High that They
Cancel the Advantage of Charging
More.
– Competitors Shouldn’t be Able to
Enter Market Easily and Undercut
the High Price.
7-43
New Product Pricing Strategies
Market Penetration
 Setting a Low Price for a
New Product in Order to
“Penetrate” the Market
Quickly and Deeply.
 Attract a Large Number of
Buyers and Win a Larger
Market Share.
• Use Under These Conditions:
– Market Must be Highly Price-Sensitive so
a Low Price Produces More Market
Growth.
– Production/ Distribution Costs Must Fall
as Sales Volume Increases.
– Must Keep Out Competition & Maintain
Its Low Price Position or Benefits May
Only be Temporary.
7-44
Product Mix-Pricing Strategies:
Product Line Pricing
• Involves setting price steps between
various products in a product line
based on:
– Cost differences between products,
– Customer evaluations of different
features, and
– competitors’ prices.
7-45
Product Mix- Pricing Strategies
• Optional-Product
– Pricing optional or accessory products
sold with the main product. i.e camera
bag.
• Captive-Product
– Pricing products that must be used
with the main product. i.e. film.
7-46
Product Mix- Pricing Strategies
• By-Product
– Pricing low-value byproducts to get rid of them
and make the main
product’s price more
competitive.
– i.e. sawdust, Zoo Doo
• Product-Bundling
– Combining several
products and offering the
bundle at a reduced price.
– i.e. theater season tickets.
7-47
Discount and Allowance Pricing
Adjusting Basic Price to Reward Customers
For Certain Responses
Cash Discount
Seasonal Discount
Quantity Discount
Trade-In Allowance
Functional Discount
Promotional Allowance
7-48
Segmented Pricing
Selling Products At Different Prices Even
Though There is No Difference in Cost
Customer - Segment
Location Pricing
Product - Form
Time Pricing
7-49
Promotional Pricing
Loss Leaders
Temporarily Pricing
Products Below List
Price to Increase
Short-Term Sales
Through:
Special-Event Pricing
Cash Rebates
Low-Interest Financing
Longer Warranties
Free Merchandise
Discounts