Quiz Review 2: Chapters 7 to 11

MKT304 Dr. Franck Vigneron 7-1

STP

Segmentation & Targeting & Positioning 7-2

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

Requirements for Effective Segmentation

Measurable Accessible Substantial Differential Actionable 7-5

•

Size, purchasing power, profiles of segments can be measured.

•

Segments can be effectively reached and served.

•

Segments are large or profitable enough to serve.

•

Segments must respond differently to different marketing mix elements & programs.

•

Effective programs can be designed to attract and serve the segments.

Step 2.

Market Targeting

Evaluating Market Segments

7-6

•

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

A Undifferentiated Marketing Company Marketing Mix Market 7-7 B Concentrated Marketing Company Marketing Mix C Differentiated Marketing Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3

Marketing strategies

Target 1 Target 2 Target 3 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.

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

7-9

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 2. Develop Profiles of Resulting Segments 1. Identify Bases for Segmenting the Market Positioning Market Targeting Market Market Segmentation 7-10

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 7-11

The Total Product Concept

Image of retail store Service after sale Color Attachments Image of the brand Warranty Packaging Instructions 7-12 The Product

Product Strategies

Levels of Product: think on 3 levels

7-13

Delivery & Credit Actual Product Brand Name Quality Level Augmented Product Installation Packaging Core Benefit or Service Features Design After Sale Service Warranty Core Product

7-14

Product Classifications Consumer Products

Convenience Products

    Buy frequently & immediately Low priced Mass advertising Many purchase locations i.e Candy, newspapers, soap

Specialty Products

    Special purchase efforts High price Unique characteristics Brand identification  Few purchase locations i.e Lamborghini, Rolex

Shopping Products

    Buy less frequently Higher price Fewer purchase locations Comparison shop, time/effort i.e Clothing, cars, appliances

Unsought Products

   New innovations Products consumers don’t want to think about these products Require much advertising & personal selling i.e Life insurance, blood donation

Product Mix Decisions

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

7-15

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

Depth (assortment variables within a line)

Passenger Commercial Farm related Cars Passenger Sports Vans Passenger Commercial Station wagons

Width (# of product lines)

Leisure-Recreation

Product Strategies

Product Line Decisions

Product Line Length Number of Items in the Product Line

Stretching

Lengthen beyond current range Downward

Filling

Lengthen within current range Two-Way Upward

7-17

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

Brand Equity = Mostly means the image of a brand

7-19 Recall versus Recognition BRAND AWARENESS = Brand Meanings BRAND ASSOCIATIONS Expected Performance BRAND QUALITY Price Sensitivity & Purchase rate BRAND LOYALTY

•

Anchor to Which Other Associations Can Be Attached

•

Familiarity Liking

•

Signal of Commitment

•

Brand to Be Considered

•

Help Process & Retrieve Information

•

Differentiate/ Position

•

Reason-to-Buy

•

Create Positive Attitudes/ Feelings

•

Potential for Extensions

•

Reason-to-Buy

•

Differentiation/ Position

•

Price

•

Channel Member Interest

•

Extensions

•

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 Distributor’s or Private Brands Name is owned and advertised by the manufacturer Name is owned and advertised by intermediary Generic Products “No-Name” product in plain package with stark lettering Black & Decker tools Whirpool Appliances Craftsman Tools VONS products Dog Food

Product Strategies

Strategic Choices of Brand Name

Three brand name choices : A.

family branding

- less expensive - less effective Philips B.

C.

individual branding

OMO POWER

combinations

- more expensive VW Beetle - can be very effective 7-21

Strong Brands = Strength + Stature

• Strength – Differentiation – Relevance • Stature – Esteem – Knowledge

7-22

7-23

Dimensions of Brand Personality

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 Down-to earth Honest Wholesome Cheerful Excitement Competenc e Daring Spirited Imaginative Up-to-date Reliable Intelligent Successful Sophisticatio n Upper class Charming Ruggedness Outdoorsy Tough

Four Brand Strategies

Product Category Existing New Existing Line Extension Dannon Yogurt Flavors Brand Extension Barbie Electronics

7-24

New 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?

Newness to the Firm High New product lines/ established markets

20%

Improvements to existing products

26%

New to the world products

10%

Additions to existing product lines

26%

Low Cost reductions

11%

Low Repositionings Newness to the Market

7%

High 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 7-26

time

+

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

GROWTH Maximize share, grow market MATURITY Maximize profit, Defend Mkt Share DECLINE Reduce/ Delete, milk the brand INTRODUCTION awareness and trial

Launch

Product Strategies

Takeoff Rapid growth Shakeout Maturity Decline

Time

Speeding Up Development

Sequential Simultaneous (Team-Based)

7-29 Step 1 Step 2 Step 3 Step 4 Step 3 Step 4

Major Stages in New-Product Development

7-30 Concept Development and Testing Marketing Strategy Idea Screening Idea Generation Business Analysis Product Development Test Marketing Commercialization

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.

7-31

Internal Factors Affecting Pricing Decisions: Marketing Objectives

7-32 Marketing Objectives Survival

Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business.

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.

Types of Cost Factors that Affect Pricing Decisions

Fixed Costs

(Overhead) Costs that don’t vary with sales or production levels.

Executive Salaries, Rent

Variable Costs

Costs that do vary directly with the level of production.

Raw materials

7-33 Total Costs

Sum of the Fixed and Variable Costs for a Given Level of Production

Costs Considerations

Cost Per Unit at Different Levels of Production Per Period

The Experience Curve

1 2 SRAC (short-run average cost curve) 3 4 LRAC 7-34 Quantity Produced per Day

Price Elasticity of Demand

7-35 A. Inelastic Demand Demand Hardly Changes With a Small Change in Price

.

P 2 P 1 Q 2 Q 1 Quantity Demanded per Period

B. Elastic Demand Demand Changes Greatly With a Small Change in Price.

P’ 2 P’ 1 Q 2 Quantity Demanded per Period Q 1

Major Considerations in Setting

7-36

Competitors prices Other internal and External factors Consumer Perceptions Of value

Low price

No possible profit at this price

High price

No possible demand at this price

Cost-Based Pricing

Certainty About Costs Pricing is Simplified Price Competition Is Minimized Much Fairer to Buyers & Sellers Ethical onal ected Cost-Plus Adds a Standard Attitudes Product.

Situati Cost of the Simplest Pricing Method Ignores Current Demand & Competition

7-37

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 expected costs and profits, they do not take the price-demand relationship into account.

to cover

•

c). When using this method, the company must also consider the impact of price on the sales volume at each possible price.

needed to realize target profits and the likelihood that the needed volume will be achieved 7-38

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

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

7-41

New Product Pricing Strategies

7-42 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.

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.

7-45

Product Mix- Pricing Strategies

7-46

•

By-Product

–

Pricing low-value by products 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.

Discount and Allowance Pricing

7-47 Adjusting Basic Price to Reward Customers For Certain Responses Cash Discount Quantity Discount Functional Discount Seasonal Discount Trade-In Allowance Promotional Allowance

Segmented Pricing

Selling Products At Different Prices Even Though There is No Difference in Cost Customer - Segment Product - Form Location Pricing Time Pricing

7-48

7-49

Promotional Pricing

Loss Leaders Special-Event Pricing Cash Rebates Temporarily Pricing Products Below List Price to Increase Short-Term Sales Through: Low-Interest Financing Longer Warranties Free Merchandise Discounts