Involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action.
Why do business firms segment their markets?
So it can respond more effectively to the wants of groups of potential buyers and thus increase it's sales and profits
relatively homogeneous groups of prospective buyers that result from the market segmentation process.
When a firm uses different marketing mix activities such as product features and advertising, to help consumers perceive the product as being different and better than competing products.
Effective market segmentation does what 2 things?
1. Forms meaningful groupings
2. Develops specific marketing mix actions.
3 steps to segmentation
1. Identify market needs
2. Link needs to actions
3. Execute marketing program actions.
3 specific segmentation strategies:
1. One product and multiple market segments
2. Multiple products and multiple segments
3. Segments of one or mass communication
Why would marketers want to produce one product and multiple market segments?
It avoids extra costs of developing and producing additional versions of the product.
An example of one product and multiple marketing segments.
Ford producing cars, SUVs, and pickup trucks
Why would marketers choose mass customization?
Internet makes it very easy and the marketers want to cater to customer needs.
What is the key to successful product differentiation and market segmentation?
To find the ideal balance between satisfying a customer's individual wants or needs and achieving organizational synergy.
The increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently.
When the increased customer value means adding more new products or a new chain of stores and these new products and stores steal sales and customers from the other products and stores.
5 step process used to segment a market and select the target segments on which it wants to focus.
1. Group potential buyers into segments
2. Group products to be sold into categories
3. Develop a market product grid and estimate market size
4. Select target markets
5. Take marketing actions to reach target markets
Criteria to use in forming segments:
1. Simplicity and cost effectiveness of assigning potential buyers to segments.
2. Potential for increased profit
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.
True or false: If the potential needs of various segments aren't very different, make more segments.
False, make less
4 general bases of segmentation:
2. Demographic-some objective physical, measurable, or other attribute.
3.Psychographic-Subjective mental or emotional attributes
suggests 80% of a firms sales are obtained from 20% of its customers which suggests a small fraction of customers provides large fraction of firms revenue.
A framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization.
What happens if a firm picks too narrow of a set of segment?
It may fail to reach the volume of sales and profits it needs.
5 Criteria to use in selecting the target segments:
1. Market Size
2. Expected growth
3, Competitive position
4. Cost of reaching that segment
5. Compatibility with the organizations objectives and resources
What is the purpose of developing a market-product grid?
To trigger marketing actions to increase sales and profits.
The place a product occupies in consumer's minds on important attributes relative to competitive products.
Changing the place a product occupies in a consumer's mind relative to competitive products.
Involves competing directly with competitors on similar product attributes in the same target market.
Head to head positioning
Involves seeking a less competitive, smaller market niche in which to locate a brand.
4 steps companies take in determining it's positioning.
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.
A means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands as well as its own product or brand.
Explain what market segmentation is and when to use it.
Market segmentation involves aggregating prospective buyers into groups that (a) have common needs and (b) will respond similarly to a marketing action. Organizations go to the expense of segmenting their markets when it increases their sales, profits, and ability to serve customers better.
Identify the five steps involved in segmenting and targeting markets.
Step 1 is to group potential buyers into segments. Buyers within a segment should have similar characteristics to each other and respond similarly to marketing actions like a new product or a lower price. Step 2 involves putting related products to be sold into meaningful groups. In step 3, organizations develop a market-product grid with estimated sizes of markets in each of the market-product cells of the resulting table. Step 4 involves selecting the target market segments on which the organization should focus. Step 5 involves taking marketing mix actions —often in the form of a marketing program—to reach the target market segments.
Recognize the bases used to segment consumer and organizational markets.
Bases used to segment consumer markets include geographic, demographic, psychographic, and behavioral ones. Organizational markets use the same bases except for psychographic ones.
Develop a market-product grid to identify a target market and recommend resulting actions
Organizations use five key criteria to segment markets, whose groupings appear in the rows of the market-product grid. Groups of related products appear in the columns. After estimating the size of market in each cell in the grid, they select the target market segments on which to focus. They then identify marketing mix actions—often in a marketing program—to reach the target market most efficiently.
Explain how marketing managers position products in the marketplace.
Marketing managers often locate competing products on two-dimensional perceptual maps to visualize the products in the minds of consumers. They then try to position new products or reposition existing products in this space to attain the maximum sales and profits.
The purpose of market segmentation is to respond more effectively to the wants of groups of potential buyers in order to
increase sales and profits
Which of the following is an example of a single product with multiple market segments?
Johnson's Baby Oil is advertised as a skin softener for babies and as a makeup remover for women.
Synergy is the increased customer value achieved through
Performing organizational functions more efficiently.
There are five steps involved in segmenting and targeting a market. What should a marketer do once he or she has grouped products to be sold into categories?
develop a market-product grid and estimate size of markets
Which of the following is a criterion used in forming market segments?
there is the potential of marketing action to reach a particular segment
People who live active outdoor lives are part of the target market for REI, a retail outdoor outfitter. This suggests that REI would most likely segment the market based on which type of consumer segmentation basis?
On a traditional market-product grid, the horizontal axis represents __________ and the vertical axis represents __________.
market segments; product groupings
Consumer markets break behavioral segmentation into variables based on product features or usage rate. Organizational markets break demographic segmentation into variables based in part on __________ and __________.
NAICS code; number of employees
Magnavox sells its target markets many different types of TVs from flat screens to a 20" combination TV/DVDs. The larger sets can be outfitted with surround sound at a higher price than the smaller sets. The smaller sets are much less expensive and allow the viewer to watch a DVD without extra equipment. Magnavox is using which type of segmentation variable in this example?
A good, service or idea, consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in the exchange for money or something else of value.
What is an intangible asset?
An asset that cannot be perceived with 5 senses and embody more abstract concepts.
What is a nondurable good?
An item consumed in one or a few uses such as food, products and fuel like gum.
Intangible activities or benefits that an organization provides to satisfy consumers' needs in exchange for money or something else of value.
A thought that leads to an action such as a concept for a new invention, or getting people out of vote.
Products that organizations buy that assist in providing other products for resale.
Business products (B2B Products or industrial products)
An example of a consumer and a business product.
Apple iMac computer because it can be for business as well as personal use.
4 Types of consumer products
1. Convenience product
2. Shopping product
3. Specialty product
4. Unsought product
Items that the consumer purchases frequently, conveniently and with a minimum of shopping effort.
Items for which the consumer compares several alternatives on criteria such as price, quality, or style.
Items that the consumer does not know about or knows about but does not initially want.
A major characteristic of business products is that their sales are often the result of ________.
Derived demand or consumer products
Stock keeping unit, which is a unique identification number that defines an item for ordering or inventory purposes
A group of 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.
Example of a product mix
Cray Inc, has a small mix of three super computer lines that that are sold mostly to governments and large businesses.
What does the Marketing Dashboard show us?
How marketers measure actual performance versus the goals set in new product planning.
True of False: New is hard to describe and difficult to define and there are several points of view for it.
Newness compared with existing products means
If a product is functionally different from existing products, it can be defined as new.
Newness in legal terms means
The FTC advises that the term new be limited to use with a product up to six months after it enters regular distribution.
Newness from the organizations perspective means
Successful organizations view newness and innovation in their products at three levels.
The three levels of how organizations view new.
1. Lowest level- Product line extension
2. Middle level- a significant jump in the innovation or technology.
3. Highest level- True innovation
Newness from the consumer's perspective means
Classifies new products according to the degree of learning required by the consumer
Three levels of consumer perspective
1. Continuous innovation
2. Dynamically continuous innovation
3. Discontinuous innovation
Disrupts consumer's normal routine but does not require totally new learning.
Dynamically continuous innovation
What is the marketing strategy for continuous innovation?
Gain consumer awareness and wide distribution
What is the marketing strategy for dynamically continuous innovation?
Advertise points of differences and benefits to consumers
What is the marketing strategy for discontinuous innovation?
Educate consumers through product trial and personal selling
A statement that, before product development begins, identifies:
1. A well-defined target market
2. Specific customer needs, wants and preferences
3. What the product will be and do
Research suggests that it takes ________ raw unwritten ideas to produce a single commercially successful new product.
8 marketing reasons for new product failures
1. Insignificant point of difference
2. Incomplete market and product protocol before product development starts.
3. Not satisfying customer needs on critical factors.
4. Bad timing
5. Too little market attractiveness
6. Poor product quality
7. Poor execution of the marketing mix: brand name, price, package, promotion, and distribution
8. No economical access to buyers
5 organizational problems in new product failure
1. Not really listening to the voice of consumer
2. Shipping stages in the new product process
3. Pushing a poorly conceived product into the market to generate quick revenue.
4. Encountering "groupthink" in a task force and committee meetings
5. Not learning critical takeaway lessons from past failures
The seven stages an organization goes through to identify business opportunities and convert them to a salable good or service.
What are the seven stages in the new product process.
1. New-product strategy development
2. Idea generation
3. Screening and evaluation
4. Business analysis
6. Market Testing
The stage of the new product process that defines the role for a new product in terms of the firm's overall objectives.
New product strategy development
The stage of the new product process that develops a pool of concepts as candidates for new products, building upon the previous stage's results.
An organization finds and executes creative new-product ideas by developing strategic relationships with outside individual organizations.
Customer and supplier suggestions focus on what the new product_________than simply______.
will do for the customer; what the customer wants
Employee and co-worker suggestions example
Employees should be encouraged to suggest new product ideas through suggestion boxes
An implied art that improves the aesthetics and usefulness of mass-produced products for users.
The stage of the new product process that internally and externally evaluates new-product ideas to eliminate those that warrant no further effort.
Screening and evaluation
The process of managing the entire customer experience within the firm.
Customer experience management
External evaluations with consumers that consist of preliminary testing of a new product idea rather than the actual product.
Specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections.
What does the business analysis stage of product development do?
It asses the total "business fit" of the proposed new product with the company's mission and objectives
Integrating the service component of the marketing mix with efforts to influence consumer demand.
Charging different prices for different times of the day or week to reflect the variations in demand for their services.
The stage of the new product process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy.
A technique that simulates a full-scale test market but in a limited fashion.
Simulated test markets
Why is test marketing so difficult?
A service is intangible and consumers can't see what they are buying and some are very expensive.
The stage of the new product process that positions and launches a new product in full scale production and sales.
Introducing the product sequentially into geographical areas of the US, to allow production levels and marketing activities to build up gradually to minimize the risk of new product failure.
A penalty payment a manufacturer makes to compensate a retailer for sales its valuable shelf space failed to make.
Why do large grocery product manufacturers use regional rollouts?
Slotting fees and failure fees are very costly.
Cross functional team members who conduct the simultaneous development of both the product and the production process.
Uses a "do it, try it, fix it" approach, encouraging continuing improvement even after the initial design.
What are many large companies doing to speed up time to market?
Building "fences" around their new product teams to keep them from getting bogged down in red tape.
For Apple, Inc., the life this organization depends on how it conceives, produces, and markets __________.
Two broad categories of products widely used in marketing based on the type of user: __________ are purchased by ultimate consumers, whereas __________ are ones that assist directly or indirectly in providing products for resale.
consumer products; business product
Consumer products are classified based on the: (1) effort the consumer spends on the decision; (2) frequency of purchase; and (3)
attributes used in making the purchase decision.
A product line is a group of products that are closely related because they __________, are used together, are sold to the same customer group, are distributed through the same type of outlets, or fall within a given price range.
satisfy a class of needs
Which of the following products at the time of their introduction was the best example of a dynamically continuous innovation?
A DVD player
Research shows that __________ is the single most important factor for a new product to defeat competitive ones—having superior characteristics that deliver unique benefits to the user.
a distinctive point of difference
There are five organizational problems that can cause new-product disasters including: (1) not really listening to the voice of the consumer; (2) skipping steps in the new-product process; (3) not learning critical takeaway lessons from past failures; (4) encountering "groupthink" in task force and committee meetings; and (5)
pushing a poorly conceived product into the market to generate quick revenue.
Recognize the various terms that pertain to products and services
A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchange for money or something else of value. A good has tangible attributes that a consumer's five senses can perceive and intangible ones such as warranties; a laptop computer is an example. Goods can also be divided into nondurable goods, which are consumed in one or a few uses, and durable goods, which usually last over many uses. Services are intangible activities or benefits that an organization provides to satisfy consumer needs in exchange for money or something else of value, such as an airline trip. An idea is a thought that leads to a product or action, such as eating healthier foods.
Identify the ways in which consumer and business products and services can be classified.
By type of user, the major distinctions are consumer products, which are products purchased by the ultimate consumer, and business products, which are products that assist in providing other products for resale. Consumer products can be broken down based on the effort involved in the purchase decision process, marketing mix attributes used in the purchase, and the frequency of purchase: (a) convenience products are items that consumers purchase frequently and with a minimum of shopping effort; (b) shopping products are items for which consumers compare several alternatives on selected criteria; (c) specialty products are items that consumers make special efforts to seek out and buy; and (d) unsought products are items that consumers do not either know about or initially want. Business products can be broken down into (a) components, which are items that become part of the final product, such as raw materials or parts, and (b) support products, which are items used to assist in producing other goods and services and include installations, accessory equipment, supplies, and industrial services. Services can be classified in terms of whether they are delivered by (a) people or equipment, (b) business firms or nonprofit organizations, or (c) government agencies. Firms can offer a range of products, which involve decisions regarding the product item, product line, and product mix.
Explain the significance of "newness" in new products and services as it relates to the degree of consumer learning involved.
From the important perspective of the consumer, "newness" is often seen as the degree of learning that a consumer must engage in to use the product. With a continuous innovation, no new behaviors must be learned. With a dynamically continuous innovation, only minor behavioral changes are needed. With a discontinuous innovation, consumers must learn entirely new consumption patterns.
Describe the factors contributing to a new product's or service's success or failure
A new product or service often fails for these marketing reasons: (a) insignificant points of difference, (b) incomplete market and product protocol before product development starts, (c) not satisfying customer needs on critical factors, (d) bad timing, (e) too little market attractiveness, (f) poor product quality, (g) poor execution of the marketing mix, and (h) no economical access to buyers.
Explain the purposes of each step of the new-product process.
The new-product process consists of seven stages a firm uses to develop a salable good or service: (a) New-product strategy development involves defining the role for the new product within the firm's overall objectives. (b) Idea generation involves developing a pool of concepts from consumers, employees, basic R&D, and competitors to serve as candidates for new products. (c) Screening and evaluation involves evaluating new product ideas to eliminate those that are not feasible from a technical or consumer perspective. (d) Business analysis involves defining the features of the new product, developing the marketing strategy and marketing program to introduce it, and making a financial forecast. (e) Development involves not only producing a prototype product but also testing it in the lab and on consumers to see that it meets the standards set for it. (f) Market testing involves exposing actual products to prospective consumers under realistic purchasing conditions to see if they will buy the product. (g) Commercialization involves positioning and launching a product in full-scale production and sales with a specific marketing program.
The desire for the product class rather than for a specific brand, since there are few competitors with the same product.
A high initial price to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers.
What are examples of products in their introductory stage?
Pocket video cameras, and electric powered automobiles
Which stage of the product life cycle is characterized by a rapid increase in sales and competitors appear.
Why do product sales increase in the growth stage?
Because of new people trying or using the product and a growing proportion of repeat purchasers.
What are some examples of products in the growth stage of life cycle?
Smart phones and digital cameras
Which stage in the products life cycle is characterized by a slowing of total industry sales or product class revenue and marginal competitors begin to leave the market?
Examples of products that are in the maturity phase of product life cycle.
Soft drinks and DVD players
Which stage are you in a products life cycle where sales drop, and consume disproportionate shares of management and financial resources relative to future worth.
Four aspects of the product lifestyle
3. How they vary with different levels of products
4. The rate at which consumers adopt products
4 shapes of curves in the product life cycle curve
1. high learning product
2. low learning product
3. fashion product
4. fad product
Product learning curve in which significant customer education is is required and there is an extended introductory period.
High learning product
Product learning curve in which sales begin immediately because little learning is required by the consumer, and the benefits of purchase are readily understood.
Low learning product
Which product life cycle curve experiences rapid sales on introduction and then an equally rapid decline.
What are some common reasons for resisting a product in the introduction stage?
Usage barriers (The product is not compatible with existing habits)
Value barriers (The product provides no incentive to change)
Risk barriers (Physical, economic, or social)
Psychological barriers (cultural differences or image)
How do companies overcome introduction stage barriers?
Offer warranties, money-back guarantees, extensive usage instructions, demonstrations downloaded from the internet.
3 ways a manager can manage a product through its life cycle:
1. Modifying the product
2. Modifying the market
3. Repositioning the product
Manages the marketing efforts for a close knit family of brands.
Product manager (sometimes called a brand manager)
Two ways product managers manage products through extensive data analysis.
1. A category development index
2. A brand development index
Involves altering a products characteristic, such as its quality, performance, or appearance.
When a company tries to find new customers, increase a products use among existing customers, or create new use situations.
3 ways of modifying the market
1. Finding new customers
2. Increasing a products use
3. Creating a new use situation
Changes the place a product occupies in a consumer's mind relative to competitive products.
Repositioning the product
4 ways to reposition a product
1. React to a competitor's position
2. Reach out to a new market
3. Catch a rising trend
4. Change the value offered
Involves adding value to the product (or line) through additional features or higher-quality.
Reducing the package content without changing the package size and maintaining or increasing the package price.
An organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors.
Identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others to use it.
Involves low-cost copies of popular brands not manufactured by the original producer.
The added value a brand name gives to a product beyond the functional benefits provided.
Two distinct advantages brand equity has.
1. Competitive advantage
2. Consumers are usually willing to pay a higher price
4 steps in creating brand equity
1. Develop positive brand awareness and as association of consumers
2. Establish a brand's meaning in the minds of consumers
3. To elicit the proper consumer responses to a brand's identity and meaning
4. Create a consumer-brand connection evident in an intense, active loyalty relationship between consumers and the brand.
A contractual agreement whereby one company allows its brand name or trademark to be used with products or services offered by another company for royalty or fee.
5 criteria are mentioned most often when selecting a good brand name:
1. The name should suggest the product benefits
2. The name should be memorable, distinctive, and positive
3. The name should fit the company or product image
4. The name should have no legal or regulatory restrictions.
5. The name should be simple and should be emotional
4 different branding strategies
1. Multiproduct branding
3. Private branding
4. Mixed branding
The practice of using a current brand name to enter a new market segment in its product class.
Product line extensions
Combines a corporate or family brand with a new brand, to distinguish a part of its product line from others.
A company uses this when it manufactures products but sells them under the brand name of a wholesaler or retailer.
Where a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from its own market.
Refers to any container in which it is offered for sale and on which label information is conveyed
An integral part of the package and typically identifies the product or brand, who made it, and where and when it was made, how it is to be used, and package contents and ingredients.
How do labels and packaging create customer value and competitive advantage?
1. Label information is needed to satisfy safety and legal requirements.
2. Packaging offers a functional role such as storage, protection, convenience, protection. etc.
3. Perceptual benefits
Packaging and labeling challenges
1. The continued need to connect with customers
2. Environmental concerns
3. Health, safety, and security issues
4. Cost reduction
Specifically states the bounds of coverage and, more important, areas of noncoverage.
Limited coverage warranty
Regarding liability claims, what is the trend now days?
Strict liability where a manufacturer is responsible for any product defect, whether it followed reasonable research standards or not.
The stage of the product life cycle when a product is first commercialized to its intended target market is called the __________ stage.
The popular "Got Milk" advertising campaign is sponsored by the National Milk Board to encourage more people to drink milk. This ad campaign stimulates __________ demand.
During the introduction stage of the product life cycle, the place element of the marketing mix is highly involved with
convincing channel intermediaries to carry the product.
3M is a master of using a(n) __________ strategy. According to a 3M manager, "We hit fast, price high, and get the heck out when the me-too products pour in."
The growth stage of the product life cycle is characterized by
rapid increases in sales and the appearance of competitors.
An extended introduction stage of the product life cycle occurs for which type of product?
Tums, which has long been used for reducing heartburn, is now being promoted as a source of calcium for the prevention of osteoporosis. Its manufacturer is primarily using which of the following market modification strategies?
creating new use situations
Which of the following statements is most accurate about product repositioning?
Product repositioning may change the value offered to consumers relative to competitive products by adding or deleting features.
Michelin has added a "run-flat" feature to its higher-priced tire lines so that they can travel up to 50 miles at 55 miles per hour after suffering total air loss. The marketing strategy Michelin used is called
A __________ identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it.
Explain the product life-cycle concept.
The product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline. Product sales growth and profitability differ at each stage, and marketing managers have marketing objectives and marketing mix strategies unique to each stage based on consumer behavior and competitive factors. In the introductory stage, the need is to establish primary demand, whereas the growth stage requires selective demand strategies. In the maturity stage, the need is to maintain market share; the decline stage necessitates a deletion or harvesting strategy. Some important aspects of product life cycles are (a) their length, (b) the shape of the sales curve, (c) how they vary by product classes and forms, and (d) the rate at which consumers adopt products.
Identify ways that marketing executives manage a product's life cycle.
Marketing executives manage a product's life cycle three ways. First, they can modify the product itself by altering its characteristics, such as product quality, performance, or appearance. Second, they can modify the market by finding new customers for the product, increasing a product's use among existing customers, or creating new use situations for the product. Finally, they can reposition the product using any one or a combination of marketing mix elements. Four factors trigger a repositioning action. They include reacting to a competitor's position, reaching a new market, catching a rising trend, and changing the value offered to consumers.
Recognize the importance of branding and alternative branding strategies.
A basic decision in marketing products is branding, in which an organization uses a name, phrase, design, symbols, or a combination of these to identify its products and distinguish them from those of its competitors. Product managers recognize that brands offer more than product identification and a means to distinguish their products from competitors. Successful and established brands take on a brand personality and acquire brand equity—the added value a given brand name gives to a product beyond the functional benefits provided—that is crafted and nurtured by marketing programs that forge strong, favorable, and unique consumer associations with a brand. A good brand name should suggest the product benefits, be memorable, fit the company or product image, be free of legal restrictions, and be simple and emotional. Companies can and do employ several different branding strategies. With multiproduct branding, a company uses one name for all its products in a product class. A multibranding strategy involves giving each product a distinct name. A company uses private branding when it manufactures products but sells them under the brand name of a wholesaler or retailer. Finally, a company can employ mixed branding, where it markets products under its own name(s) and that of a reseller.
Describe the role of packaging, labeling, and warranties in the marketing of a product.
Packaging, labeling, and warranties play numerous roles in the marketing of a product. The packaging component of a product refers to any container in which it is offered for sale and on which label information is conveyed. Manufacturers, retailers, and consumers acknowledge that packaging and labeling provide communication, functional, and perceptual benefits. Contemporary packaging and labeling challenges include (a) the continuing need to connect with customers, (b) environmental concerns, (c) health, safety, and security issues, and (d) cost reduction. Warranties indicate the liability of the manufacturer for product deficiencies and are an important element of product and brand management.