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This 12 page Study Guide was uploaded by Ashley Maggioli on Monday February 2, 2015. The Study Guide belongs to MGMT 324 at Purdue University taught by Jia Li in Fall2014. Since its upload, it has received 200 views. For similar materials see Introduction to Marketing in Music at Purdue University.
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Date Created: 02/02/15
MGMT 324 study guide Product Strategy Product anything that can be offered to a market for attention acquisition use of consumption that satis es a want or a need Includes more than physical products Product line comprises related products of various sizes types colors qualities or prices to perform similar functions It may be composed of different brands or a single brand ie iPad 2 iPad mini etc Product miX the set of all products and items a particular seller offers A product mix may consist of various product lines ie iPad iPhone iPod MacBook etc Product Mix Dimensions Width the of different product lines the company carries Length the total of items in the mix any product has a limited life cycle product life cycle PLC products require different marketing strategies in different stages of the life cycle pro ts rise and fall in different stages Introduction stage of PLC 0 Educate market stimulate demand create product awareness Growth stage of PLC Competitors come in need to differentiate products from competitors Maturity stage of PLC 0 Changing pricing is the only thing left Pro ts decline before sales decline because the company decreases the price so that increases sales Decline stage of PLC 0 Reduce expenditures and milk the brand cut price phase out weak items Characterst Introduction Growth Maturity Decline ics Sales Low Fast growth Slow growth Decline Pro t Negative Rapid rise Falling Declining margins Cash ow Negative Moderate high moderate Strategy Introduction Growth Maturity Decline Objective Aggressive Maximize Boost pro ts Milk product Entry share Focus Nonusers New Defend Cut costs segments share Customer Innovators Early Majority Laggards Targets adopters Competitor Few pre Growing Many Declining Targets empt number Differential Product Brand image Price amp Price Advantage performance service Introduction Growth Maturity Decline Product Basic Extensions Differentiati Rationalize amp on variety range enhanceme nts Price High Lower Low Stabilizing Promotion High High Falling Low Advertising Awareness Brand Loyalty Selective forms Performance Distribution Selective Intensive Intensive Rationalize Organizatio Introduction Growth Maturity Decline n Structure Team Market focus Functional Lean Focus Innovation Marketing Efficiency Cost reduction Culture Freewheelin Marketing Professional pressured g led New Product Development NPD new products account for 33 of rm growth 25 of rms revenues come from products that are less than 3 years old In introduction stage why are pro ts negative at rst No product awareness In maturity stage why does pro ts decline before sales decline Decrease the price sales increase and pro ts decrease NPD process Idea Generation Idea Screening Concept Testing Business Analysis Product Development Test marketing Commercialization Monitoring and evaluation movement through stages increased investment per stage mFP P FWF 3000 raw idea 1 commercial success Innovation Diffusion Diffusion of Innovation customers rst enter a market at different times depending on their attitude to innovation and new products and their willingness to take risks Customers can thus be classi ed as innovators early adopters and early majority late majority and laggards 25 Innovators venturesome higher educated o Internally motivated willing to provide feedback 0 love technology venturesome accept risk 135 Early Adopters respectable leaders in social setting slightly above average education 0 most important group carefully research s technology 0 not price sensitive wants customer service typically opinion leaders 34Early Majority deliberate many informal social contacts buys new technology only when bene ts have been proven ahead of most adopters but not leaders 34Late Majority skeptical below average social status conservatives price sensitive risk averse technology shy 0 like others to have tried 10Laggards Traditional fear of debts neighbors amp friends are information sources 0 least important group resists new technology amp innovation 0 will buy innovated product only if old product is no longer available suspicious of change last to adopt Pricing Understanding and Capturing Customer Value 1Price the amount of money charged for a product or service 2Price the sum of all the value that consumers exchange for the bene ts of having or using the product or service Price is the only one of the 4 P s that brings revenue General Pricing Strategy The Pricing Tripod 3 basic components that help determine price 1 Costs 2 Competition 3 Value to Customer 0 Distribution can also substantially in uence price 1st pricing strategy Cost Based Pricing Markup PricingCost Plus Pricing involved adding a standard markup to the cost of the product Pros can be effective for companies w many products It s simple Cons the strategy only looks at cost ignores competition amp market demand Assumes consumers are willing to pay whatever Markup PC1M C cost M markup P price Markup PCP 2nOI pricing strategy Competition based pricing Benchmark pricing Benchmark pricing setting the price based on what your competitors are charging 3 kinds of benchmark pricing 1 Price w competition follow the average market price 2 Price below competition constant discount to major competitors39 price a Steal customers vs poor quality signaling b Price war 3 Price above competition constant premium to major competitors price a Quality signal b Adding value to justify the price Price below competition l can lead to price war Price premium Your Pricebenchmark pricebenchmark price 3rCI Pricing Strategy Value Based Pricing Perceived Value Pricing Perceived Value Pricing Determining prices by consumer s perceived value or consumer s willingness to pay pricing begins with analyzing consumer needs and value perceptions and a suitable product and price are set to match the consumer s perceived value sequence is exact opposite to cost plus pricing write in charts here Pricebased Costing Example P C1M cost plus pricing Pricing Strategy Price Ceiling consumers willingness to pay Price Floor cost factors In between price oor amp ceiling is price range 2 speci c applications of pricing 1 product line pricing 2 price discrimination have the same basic idea consumers are heterogeneous some how low willingness to pay segment 1 0 some have high willingness to pay segment 2 0 charge segment 1 less than segment 2 1 Product Line Pricing PLP price difference is due to cost in product line pricing consumers have different willingness to pay the company can make each product to target different segment ie Dell XPS for geeks Dell Inspiron for poets Price differences are due to cost differences higher costs higher prices price difference is justi ed by costs ONLY for product line pricing basic idea behind both PLP amp PD consumers are heterogeneous the difference between PLP amp PD costs of production 2 Price Discrimination identical product different price ie movie theatre tickets 1 price for adult 1 price for students Type 1 Price Discrimination company can observe consumer type discrimination w the student ID demographic There are NO cost differences for price discrimination There exists different segments in the market willing to pay diff prices Type 2 Price Discrimination company does not know which segment a particular consumer is in until AFTER the purchase Selfselection If a higher price is associated w higher cost it is product line pricing When is price discrimination possible 1 When segment with different willingness to pay exist 2 Resale between segments is not possible 3 Company does not antagonize a segment a La amazon charges different prices to different customers 4 Customers cannot nd available substitutes the company has market power All 4 must be satis ed in order to be able to do price discrimination Consumers must be heterogeneous in order to be successful Understanding Brand Brand something that adds value to a product Brand a portfolio of qualities attached to the name 60 of shareholder s of coke is the brand mechanical de nition of brand 0 A name term sign symbol or design or a combination of them intended to identify the goods or services or one seller or group of sellers and to differentiate them from those of competitors If a brand only has a functional connection with the consumers then someone else can copyovercome the brand If a brand has an emotional attachment to consumers intangible nearly impossible to overcome Brand is also the company s promise to consistently deliver its unique brand bene t to its customers Branding amp STP Positioning is the act of clearly differentiating itself so that it occupies a differentiated and meaningful position in the target customers minds and hearts Branding is the outwards expression of the company s earlier decisions on positioning its products amp articulating its value propositions Brands can signal a certain level of quality in a product Brands can speed up decision process familiarity reduce risk Importance of Brand to consumers Identi cation of the source of the product Assignment of responsibility to product maker Risk reducer Search cost reducer Promise bond or pact with product maker Symbolic device Signal of quality FP P FP NE What are the major reasons that branding is important 1 can distinguish your product 2 can signal statusquality 3 build up brand loyalty 4 synergies in brandline extensions Umbrella branding a company attaches the same brand name to all of its products Cheaper because of advertising only advertise for one brand economies of scale House of Brands a company uses a different rand name for every major line of product it brings to the marketplace Can effectiver connect with 2 different segments with different brands Marriott house of brands Product Line Category Brand Existing New Name Existing Line Brand Extension Extension New MultiBrand New Brands 5 Multibrands If the new product fails under a different brand name there won t be a negative impact on the existing brand Advantages of multibrands A company can obtain a greater retailer space 0 By promoting similar products under different brands names a company can effectively target different segments of consumers Disadvantages of multibrands o Cannibalization can be an issue 0 No economy of scale on advertising Brand Extension 1 Complimentary of use ie coffeepot and coffee beans 2 Functional attributes 3 Emotional attributes 4 Same users Advantage of Brand Extension 0 Improve new product success odds Positive feedback effects Disadvantage of Brand Extension 0 Brand dilution occurs when consumers no longer associate a brand with a speci c product or highly similar product amp start thinking less of the brand 0 Product failure harms the parent brand image A brand should be extended only if there is a t between the core brand values and the new product ie brand positioning is relevant to the new product Marketing Communications De nition the means by which rms attempt to inform persuade and remind consumers about the products and brands they sell Includes more than just advertising and other promotions all other 3Ps Steps in developing effective marketing communications Identify target audience Determine objectives Establish budget Design communications Select communication channel Decide on media mix Manage IMC FP P FP NE objectives of communication Category need Brand awareness Brand attitude Purchase intention Stage in PLC Introduction Category need Brand awareness Brand knowledge and brand attitude GLlVth Brand attitude brand persistence Mature Topofmind awareness Brand attitude Brand loyalty Customer satisfaction Decline Purchase New target groups Design the communications Rational appeal related to the audience s selfinterest quaity associated service low price good value Emotional Appeal is an attempt to stir up positive or negative emotions ot motivate a purchase negative fear guilt positive humor drama joy excitement warmth Coke history exam Recently there has been a shift towards emotional appeals why because people tend to act on the emotions rather than rationally Types of Marketing Communication Advertising any paid form on nonpersonal communication about an organization good service or idea by an identi ed sponsor strengths can reach masses of geographically dispersed buyers can repeat a message many times weaknesses its impersonal one way communication can be very costly Personal Selling twoway ow of communication between buyer and seller designed to in uence the buyer s purchase intentions strengths personal interaction allows relationship building most effective way to in uence preferences and actions weaknesses most expensive promotion tool requires longterm commitment company that represents this caterpillar Public Relations a nonpersonal indirectly paid corporation does not pay for space in mass medium to arouse interest in buying a good or service ie news articles editorials product launch announcements strengths very believable reaches people who avoid salespeople and ads weaknesses tends to be used as an afterthought Sales Promotion a shortterm inducement of value offered to both consumers and sales channel to around interest in buying a good or service ie coupons rebates sample contests etc strengths wide assortment of tools attracts consumers attention offers strong incentives to buy invites and rewards quick consumer response weaknesses effects are short lived Direct Marketing any form of direct communication with the consumer designed to induce a response in the form of order enquiries or visit ie catalogs telephone strengths many form that share four primary characteristics nonpublic immediate customized and interactive well suited to highly targeted marketing Sales Promotion Trade Promotion Incentive to intermediaries to PUSH product ie free goods bulk discounts nance allowances etc Goals get retailers to carry items increase shelf space get retailer to advertisepromote products Sales Promotion Consumer Promotion Consumer promotions shortterm incentive aimed at consumers to get them to PULL product off the shelf ie coupons prices off free samples Goal increase market share permanently Can show segmentation Get someone to like the product w a coupon and they will buy it without one 0 Not everyone will use coupons they value their time more Usually only poor people do this Push vs Pull Marketing diagram Push or Pull Type of strategy Target Audience Purpose Push Intermediaries Stir interest and push product through channel Pull Customers Encourage products requests and purchase to 39pull product through the channel Integrated Marketing Communication IMC De nition a strategic business process used to plan develop execute and evaluate coordinated measureable persuasive marketing communication programs over time with consumers and other targeted relevant external and internal audiences The goal is to generate both shortterm nancial returns and build longterm brand and shareholder value Know coordinated for exam Major takeaway from this class 1 Focus on consumer 2 Be consistent Coordination of marketing activities to create a uni ed image of the organizationproducts
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