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3 Learning Goals (continued) CHAPTER 11 5 What are the five basic forms of market segmentation? 6 What is a product, and how is it classified? 7 How do organizations create new products? 8 What are the stages of the product life cycle? 9 What strategies are used for pricing products? 10 What trends are occurring in products and pricing?
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CreatingProducts
and PricingStrategies to
Meet Customers’ Needs
CH
APT
ER 1
1
The Future of BusinessThe Essentials 4th EditionGitman & McDaniel
Prepared byDeborah BakerChapter 11
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
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Learning Goals
CH
APT
ER 1
1
1 What are the marketing concept and relationship building?
2 How do managers create a marketing strategy?
3 What is the marketing mix?
4 How do consumers and organizations make buying decisions?
3
Learning Goals (continued)
CH
APT
ER 1
1
5 What are the five basic forms of market segmentation?
6 What is a product, and how is it classified?
7 How do organizations create new products?
8 What are the stages of the product life cycle?
9 What strategies are used for pricing products?
10 What trends are occurring in products and pricing?
4
marketing
The process of discovering the needs and wants of potential buyers and customers and then providing goods and services that meet or exceed their expectations.
The Marketing Concept
5
exchange
The process in which two parties give something of value to each other to satisfy their respective needs.
The Marketing Concept
6
Marketing: The “Right “ Principle
Gettingthe right goods or services
tothe right people
atthe right place, time, and price
usingthe right promotion techniques
71
What are the marketing concept and relationship building?1
The Marketing Concept
81
Focusing on customer wants so the organization can distinguish its products from competitors’ offerings.
Integrating all of the organization’s activities to satisfy these wants.
Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly.
The Marketing Concept
91
The Marketing Concept
CustomerSatisfaction
The customer’s feeling that a product has met or exceeded
expectations.
CustomerValue
The ratio of benefits to the sacrifice necessary to obtain those benefits,
as determined by the customer.
RelationshipMarketing
A strategy that focuses on forging long-term partnerships with customers
by offering value and providing customer satisfaction.
10
CONCEPT check
1
Explain the marketing concept.
Explain the difference between customer value and customer satisfaction.
What is meant by relationship marketing?
112
How do managers create a marketing strategy? 2
Creating a Marketing Strategy
12
environmental scanning
The process in which a firm continually collects and evaluates information about its external environment.
The External Environment
2
13
The External Environment Social forces
Demographic forces
Economic forces
Technological forces
Political and legal forces
Competitive forces2
14
target market
The specific group of consumers toward which a firm directs its marketing efforts.
Defining the Target Market
2
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competitive advantage
A set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition; also called differential advantage.
Creating a Competitive Advantage
2
16
Creating a Competitive Advantage
Differential CompetitiveAdvantage
A firm’s ability to provide a unique product or service that offers something of value besides a lower price.
CostCompetitiveAdvantage
A firm’s ability to produce a product or service at a lower cost than its competitors.
NicheCompetitiveAdvantage
A firm’s ability to target and effectively serve a single segment of the market within a limited geographic area.
2
17
CONCEPT check
What is environmental scanning?
What is a target market, and why should a company have one?
Explain the three types of competitive advantages and provide examples of each.
2
183
What is the marketing mix?3
Developing a Marketing Mix
19
marketing mix
The blend of product offering, pricing, promotional methods, and distribution system that brings a specific group of consumers superior value.
Developing a Marketing Mix
3
20
Elements of the Marketing Mix
3
Product
Promotion
Price
Place
21
CONCEPT check
What is meant by the marketing mix?
What are the components of the marketing mix?
How can marketing techniques help not-for-profit organizations?
3
224
How do consumers and organizations make buying decisions?
4
Buyer Behavior
23
buyer behavior
The actions people take in buying and using goods and services.
Buyer Behavior
4
24
(5)Postpurchase Behavior
(4)Purchase
(3)Evaluation of Alternatives
(2)Information Search
(1)Need Recognition
Cultural, social, individual and psychological
factors affect
all steps
Consumer Decision-Making Process
4 Exhibit 11.2
25
Influences on Consumer Decision Making
4
Cultural Factors
Psychological Influences
Individual Influences
Social Factors
26
Characteristics of the Business- to-Business Market
4
27
CONCEPT check
Explain the consumer decision-making process.
How do business markets differ from consumer markets?
4
285
What are the five basic forms of market segmentation?
5
Market Segmentation
29
Volume
Benefit
Psychographic
Geographic
Demographic
Amount of use (light versus heavy)
Benefits provided by the good or service
Lifestyle, personality, interests, values, attitudes
Regional location, population density, city/county size, climate
Age, education, gender, income, race, social class, household size
Market Segmentation
5
30
Example of Age Segmentation
5 Exhibit 11.4
31
Using Marketing Research
5
Observationresearch
An investigator monitors respondents’ actions without interacting directly with respondents.
ExperimentAn investigator changes one or more variables while observing the effects of these changes on another variable.
Surveyresearch
Data is gathered fromrespondents to obtain facts, opinions, and attitudes.
32
CONCEPT check
Define market segmentation.
List and discuss the five basic forms of market segmentation.
How does market research help companies make better use of their marketing budgets?
5
336
What is a product, and how is it classified?6
What is a Product?
34
product
In marketing, any good or service, along with its perceived attributes and benefits, that creates value for the customer.
What is a Product?
6
35
Consumer Product Classifications
6
ConvenienceProduct
Relatively inexpensive items that require little shopping effort and are purchased routinely without planning.
UnsoughtProduct
Products that either are unknown to the buyer or are known but the buyer does not actively seek them.
SpecialtyProduct
Items for which consumers search long and hard and for which theyrefuse to accept substitutes.
ShoppingProduct
Items that are bought after considerable planning, including comparisons of price, suitability, and style.
36
Consumer Product Classifications
6 Exhibit 11.6
37
capital productsLarge, expensive items with a long life span that are purchased by businesses for use in making other products or providing a service.
expense itemsItems, purchased by businesses, that are smaller and less expensive than capital products and usually have a life span of less than one year.
Classifying Business Products
6
38
1. Installations
2. Accessories
3. Component parts and materials
4. Raw materials
5. Supplies
6. Services
Industrial Product Classifications
6
39
CONCEPT check
What is a product?
What are the classes of consumer goods?
Explain how business products are classified.
6
407
How do organizations create new products?7
Creating Products That Deliver Value
41
focus group
A group of 8 to 12 participants led by a moderator in an in-depth discussion on one particular topic or concept.
Focus Group
7
42
brainstorming
A method of generating ideas in which group members suggest as many possibilities as they can without criticizing or evaluating any of the suggestions.
Brainstorming
7
43
product manager
The person who develops and implements a complete strategy and marketing program for a specific product or brand.
Product Manager
7
44
CONCEPT check
How do companies organize for new-product development?
What are the steps in the new-product development process?
Explain the role of the product manager.
7
458
What are the stages of the product life cycle?8
The Product Life Cycle
46
product life cycle
The pattern of sales and profits over time for a product or product category.
Consists of:• introduction• growth• maturity• decline
The Product Life Cycle
8
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The Product Life Cycle
8
Light competition Frequent product modifications Limited distribution Heavy promotion High failure rate High production and marketing
costs Low sales volume Small or negative profits
Introduction
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The Product Life Cycle
8
Growth Sales grow at an increasing rate Healthy profits Many competitors enter market Large companies may acquire pioneering firms Promotion emphasizes aggressive brand ads
and the differences between brands Adequate distribution is a major key to success Prices normally fall at end of growth phase Priority is increasing/retaining market share and
enhancing profits
49
The Product Life Cycle
8
Maturity Sales growth—but at a decreasing rate Saturated markets Product line extensions through product variations Global introduction of products
50
The Product Life Cycle
8
Decline
Sales and profits fall Trade allowances eliminated Most advertising and sales promotions eliminated
The rate of decline is governed by:
Rate of change in consumer tastes Rate at which new products are introduced
51
CONCEPT check
What is the product life cycle?
Describe each stage of the product life cycle.
What are the marketing strategies for each stage of the product life cycle?
8
529
What strategies are used for pricing products?9
Pricing Strategies
53
Pricing Strategies
price skimmingIntroducing a product with a high initial price and lowering the price over time.
penetration pricingSelling new products at low prices in the hope of achieving a large sales volume.
9
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Pricing Strategies
leader pricingThe strategy of pricing products below the normal markup or even below cost to attract customers to a store where they would not otherwise shop.
bundlingThe strategy of grouping two or more related products together and pricing them as a single product.
9
55
Pricing Strategies
odd-even pricingThe strategy of setting a price at an odd number to connote a bargain and at an even number to suggest quality.
prestige pricingThe strategy of increasing the price of a product so that consumers will perceive it as being of higher quality, status, or value.
9
56
CONCEPT check
What is the difference between penetration pricing and price skimming?
Explain the concept of price bundling.
Describe odd-even pricing and prestige pricing.
9
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What trends are occurring in products and pricing?
10
Trends in Developing Products and Pricing
Trends in Developing Products and Pricing
Internet
One-to-One Marketing
5810
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Trends in Developing Products and Pricing
one-to-one marketing
Creating a unique marketing mix for every customer.
10
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The Impact of the Internet on Pricing Buyers can compare products and prices
Sellers can collect detailed data about customers’ buying habits
Sellers can monitor the competition’s prices
10
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Trends in Developing Products and Pricing
product line (or brand) extension
Taking a product with a well-developed brand image and using that brand name for a new product in either the same product category or a different product category.
10
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Trends in Developing Products and Pricing
private-label branding
Where a retailer, or wholesaler, has a manufacturer produce products and the retailer, or wholesaler, puts its own name on the item.
10
63
CONCEPT check
How have online price-comparison engines helped consumers shop for the best price?
Describe one-to-one marketing and the role of marketing databases.
10