TEMPLE MKTG 2101 - Test #2 Study Guide

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MKT 2101 – Test #2 Study GuideChapter 8-The product life cycleo Product DevelopmentCustomer-centered approach, not product-centeredTeam-based approach (various departments work closely together)Systematic approach, not trial-and-erroro IntroductionOffer a basic productUse cost-plus pricingBuild selective distributionBuild product awareness among early adopters and dealersUse heavy promotion to entice product trialo GrowthOffer product extensions, service, warrantyPrice to penetrate the marketBuild intensive (wide) distribution Build awareness and interest in the mass marketReduce to take advantage of heavy consumer demando MaturityDiversify brand and modelsMatch or beat competitors Widen distributionStress brand differences and benefitsIncrease to encourage brand switchingMaintain maturity stage by modifying the market, product, promotion, and priceo DeclinePhase out weak productsLower pricesPhase out unprofitable outletsReduce advertising just to level needed to retain hard-core loyalsMinimize promotionProductDevelopmentIntroduction Growth Maturity DeclineSales - Low Rapidly rising Peak DecliningCost percustomer- High Average Low LowProfits - Negative or Low Rising High DecliningCustomers - Innovators Early adopters Majority LaggardsCompetitors - Few GrowingnumberStable, beginningto declineDecliningnumberMarketingObjective- Create productawareness andtrialMaximizemarket shareMaximize profitswhile defendingmarket shareReduceexpendituresand milk thebrando An understanding of the 5 stages of the PLCo Applying the PLC- Stages of new product developmento Idea generation Systematic search for new product ideas Using internal sources (all company employees) Using external sources (customers, competitors, supplies, distributors)o Idea Screening Process used to spot good ideas and drop poor ones Evaluated using a criteria to determine if- There is a need for the product- The product offers a competitive advantage- It offers sufficient profit potential o Concept development & testing Product concept: detailed version of the new-product idea stated in meaningful consumer terms Concept development: develop alternate product concepts for testing Concept testing: testing new-product concepts with groups of target customers to find out if the concepts have strong customer appeal o Marketing strategy development Part One (short-term): describes the target market, planned value proposition, and short-term profit goals Part Two (pricing & distribution): outlines the product’s planned price, distribution, and marketing budgets Part Three (long-term): describes the planned long-run sales and profit goals, marketing mix strategyo Business analysis Review of the sales, costs, and profit projections in relation to company goals Positive results  move into product development phaseo Product development Concept/idea becomes a physical product Requires large investment Prototypes are made for testing- Must have correct physical features and convey psychological characteristicso Test marking  Product & marketing program are introduced in a more realistic market setting Only appropriate when a large investment is required, risk is high, or when management is unsure of the product or marketing program Potentially expensive and time consuming but saves company from making a major marketing mistakeo Commercialization  Must decide on timing (when to introduce the product) Must decide on where to produce the product (single location, state region, nationally…) Must develop a market rollout plan (where to begin & where to expand to)Chapter 9- Price floor (no profits below this price)o Lowest price that a government allows a good to be sold foro Examples: Minimum wage- Price ceiling (no demand above this price)o The maximum price a seller is allowed to charge for a product or service to ensure fair and reasonable business practiceso Example: rent in New York- Three main types of pricing strategies o Cost-based Setting prices based on the cost of producing, distributing, and selling product at a fair rate of return – start at price floor Cost-plus (markup) pricing- Adding a standard markup to the cost of the product Break-even pricing (target-return)- First, set price to break even on the costs of making and marketing the product (revenues = expenses) - Second, target return may be set on top of break-even priceo Customer-value Setting prices based on buyers’ perceptions of value rather than the seller’s cost - start at price ceiling  Steps:1. Customer needs & value perceptions are assessed2. Target price is based on value perception3. Vendor considers value-based pricing strategy either: Good-value pricing- Offers just the right combination of quality and good service as fair price- No add-ons Value-added pricing- Attaching value-added features and services to differentiate a company’s offersand charging higher prices- Add-ons includedo Competition-based Setting prices based on competitors’ strategies, costs, prices, and market offerings – less focus on price floor or ceiling  Assumers consumers base their judgments of a product’s value on the prices chargedby competitors for similar products Focuses on internal factors (marketing strategy, marketing mix) and external factors (the market, demand)- Types of costso Fixed costs: do not vary with production or sales levelo Variable costs: vary directly with the level of production-The four types of marketso Pure competitionVery large number of firmsSell a standardized productEntry is very easyIndividual seller has no control over product priceNo non-price competitionExample: commodities (corn, milk, copper)o Monopolistic competitionMany firmsSell a differentiated productEntry is relatively easyFirm has some control over product priceConsiderable non-price competitionExample: shoeso Oligopoly Few firmsStandardized or differentiated productEntry is difficultFirm has limited control over product price Typically some non-price competitionExample: cell phone company, movie studioso Pure Monopoly One firmUnique productEntry is blockedSingle firm has considerable control over product priceIndirect, non-price competition may or may not be foundExample: U.S. Post office- Price elasticity of demando Refers to how

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TEMPLE MKTG 2101 - Test #2 Study Guide

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