M300 1st Edition Exam 1 Study Guide Lectures 9 14 Lecture 9 February 17 What can segmentation increase the effectiveness of Promotions Product development Pricing What are the 4 steps in market segmenting targeting 1 Define the market 2 Use criteria or variables to divide market into segments 3 Select segments to target 4 Use 4P s to position What are the criteria for success in segmentation MRRP Measurable Reachable Relevant Profitable What is the PUNGD system for segmentation Psychographics Usage Needs Geography Demographics In the PUNGD system what does Psychographics mean Divide the population into groups based on behavioral and lifestyle profiles Includes attitudes and aspirations In the PUNGD system what does Usage mean Divide the population into their purchase frequency and usage level In the PUNGD system what does Needs mean Divide a population into groups based on the product s ability to satisfy needs Example size price safety In the PUNGD system what does Geography mean Divide overall market into groups based on geography IN the PUNGD system what does Demographics mean Divide consumers into groups based on sex income age occupation race religion education etc Use the PUNGD segmentation system for marketing a baseball bat P people who watch baseball athletics U heavy baseball users boys N performance comfort preference G south warmer clients who play baseball often D men younger 12 20 Positioning creates a Competitive advantage and a perception about the product Positioning affects what consumers Think of you relative to other products How can marketers reposition existing products Give an example Move to a better location on the perceptual map Example Target had to move to a slightly higher cost more stylish market because WalMart was the cost leader Lecture 10 February 19 How should a product s price be viewed From the customer s perspective What is a customer Could be a consumer or a channel intermediary like a retailer or wholesaler What is customer value Product s benefits price What impacts price Quality Perceived Value Cost Supply Demand Competition Urgency of need To effectively set pricing what are the 4 factors one must consider 1 Customer price sensitivity Elasticity 2 Product costs 3 Value of product to the customer 4 Competition s prices What is sensitivity elasticity The degree to which pricing influences demand Helps us understand what the price should be If a product is elastic this means that It fluctuates a lot responds easily If a product is inelastic this means that It is fixed Example gas people will continue to buy if the price goes up How can you determine whether a product is inelastic elastic Elasticity change in demand change in price Elastic 1 0 Inelastic 0 Example of determining elasticity Current price is 5 current units sold is 10 Test price is 4 test units sold is 15 Elasticity change in demand change in price Change in price 1 5 Change in unit 5 10 1 5 divided by 5 10 2 5 2 5 is elastic What factors cause demand for a product to be elastic inelastic Necessity vs unnecessary Importance vs unimportance Substitutes vs no substitutes Availability vs not available Type of Demand Price Revenue Impact Unit sales Impact Elastic Increase Down Down Elastic Decrease Up Up Inelastic Increase Up Slightly Down Inelastic Decrease Down Slightly Up What is the optimal place to be with elasticity Better to have bargain price Wal Mart What is the optimal place to be with inelasticity Better to have premium price and inelasticity built through non pricing actions What is the equation to measure elasticity Q2 Q1 Q1 divided by P2 P1 P1 equals E E points of elasticity Qs unit sales at different weeks months etc Ps unit prices at different times 1s old 2s new How do you calculate what price a different geographical segment should charge P1 P2 equals E1 E2 E1 divided by E1 E2 E2 Multiply this by P1 x to get X unknown price P price E elasticity Lecture 11 February 26 What is promotional pricing The use of heavily advertised temporary price reductions Example loss leader store is willing to lose money on one product because they hope you will buy other products Black Friday Sales Why do firms offer price promotions They increase demand for the product short long term and drive traffic to store Is demand considered elastic or inelastic for a product being considered for a promotion Elastic What is EDLP Pricing and why would a firm engage in this strategy EDLP pricing is a promotion oriented everyday low pricing strategy One might engage in this strategy because of the logistics easy and its appropriate for customers When would EDLP be effective When customers are sensitive Why would a retailer like using the same price It is easier to predict how much volume they need to bring into the store What is customary pricing Tradition drives pricing as customers expect certain prices for certain products Examples USA today soft drinks 1 99 single on iTunes What is a price quality relationship There is a positive relationship between price and perceived quality in the absence of other product cues What is odd pricing The belief that certain prices carry information above beyond the price itself and that some prices are more appealing than others What is markup pricing A specified amount added to the cost of the product to yield a price Think of markup as the firm s profit What is the equation for markup P Mu C Mu on Price Mu P Mu on Cost Mu C New image is a small company that develops webpages for local firms The company wishes to have a 50 markup on the cost of its services It charges 2000 for a standard web development effort P 600 C 400 MU 200 MUp 1 3 MUc 1 2 Lecture 12 March 03 Why is brand important Brand is responsible for 18 of total purchase decision What is the difference between strong vs weak brands Stronger brands can charge 19 higher What is the definition of brand Name symbol or design used to identify the products and differentiate them from competitive offerings Brand is more than just advertising and marketing It s Nothings less than everything one thinks when they see your logo or hear your name What is a brand name The words or letters of the brands What is a brand mark Pictorial part of the brand What is a trademark Legally protected brand exclusive to the owner What is brand equity The added value to the firm the channel or the consumer with which a brand endows a product What is brand recognition Brand recognition is the knowledge of the brand How can