FHCE 3100 Lecture 10Outline of Current Lecture II. Finishing up last lecture III. Ch.6Current Lecture 2) Pricing strategy Deals with the methods of setting profitable and justifiable prices Goal is to get to the equilibrium price  3) Distribution strategy Planning that ensures that consumers find their products in the proper quantities at the right times and places (ex. Peppermint ice cream) Modes of transportation  Warehousing Inventory control  Order processing  4) Promotional strategy Blending together the various elements of promotion to communicate most effectively with the target market  Informing, persuading, and influencing a consumer’s purchase decision  Ex) Chick fil A flew over dropping bags of plastic cows with coupons  Companies and Competition Companies respond to competition by: Reducing prices  Increasing advertising  Introducing a new or improved product  Buying out the competition Trying to inspire brand loyalty  Brand Perception and Image Brand image refers to the set of perceptions that consumers have formed about a brand  Why use celebrity spokespersons? Ex: Dart Vadar: Volkswagen, Megan Fox: Motorolla These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. To inspire brand loyalty!  Case Study Harley Davidson Building Success Understanding the consumers’ emotions and motivation Determining the factors of loyalty  Translating this information to effective advertising  Measuring success Currently 22% of all US bike sales  Demand above supply  Sales doubled in past 5 years with earnings tripled  Brand extension for Harley Davidson—Harley Davidson MasterCard, dolls that are HarleyDavidson  *brand preference—strong brand preference on mayo, soft drinks, soap—low preference oncat food, frozen food, paper towels  Brands, Counterfeiting, and Pirating Brand names can be protected by law with a trademark Counterfeiting occurs with a replica of the product  “Folex” instead of Rolex  Pirating occurs when an original idea or product is stolen and sold We pirate movies and music  Population Trends Some states are growing in population more than other states  Much of the future growth in the US will come from immigration  The average age of the population is increasing  This is b/c we aren’t making babies like they used to There is increased diversity in the population  Households are all persons who occupy a housing unit. Households go through life cycle stages Market segmentation may be based on a variety of factors, such as socio-economic index  A market segment is a portion of a larger market whose needs differ from the larger market Chapter 6 New Product Development and Product Life Cycle Strategies Definition New Product development Development or original products, product improvements, product mortifications, and new brands through the firm’s own research and development efforts Product Development and External  Bandwagon effect Consumer gets satisfaction from being like others in his/her reference group Ex) Doc Martins, Crocs, Tommy Hilfiger Veblen Effect Consumer gets satisfaction from showing others that he/she has a lot of money (even if he/she does not) also known as conspicuous consumption “Dress for the job you want not the job you have!” Snob effect Consumer gets satisfaction from having something that no one else has (at least no one else in one’s reference group) Consumer wants to be unique  *Budget constraint is huge for what boundaries it sets for your consumption New Product Development Strategy New products can be obtained via acquisition or development  New products suffer from high failure rates  *ex) cereal milk tried to be put in school district  Several reasons account for failure Brilliant ex) soap in bathrooms that is automatically foamy to save you time and water  New product development strategy exam, this list, the stages New product development process: ex) coffee sleeve for hot coffee  Stage 1: Idea Generation- Internal idea sources: research and development- External idea sources: customers, competitors, distributors, suppliers Stage 2: Idea Screening- Product development costs increase substantially in later stages- Ideas are evaluated against criteria; most are eliminated  Stage 3: Concept Development and Testing- Product concepts provide detailed versions of new product ideas- Concept tests ask target consumers to evaluate product concepts- Think…concept cars! Another example—new iPhone 6 “gumby”  Stage 4: Marketing Strategy Development- Strategy statements describe: The target market, product positioning, and sales, share, and profit goals for the first few years  Product price, distribution, and marketing budget for the first year Long-run sales and profit goals and the marketing mix strategy  Stage 5: Business Analysis - Sales, cost, and profit projections Stage 6: Product Development- Prototype development and testing  Stage 7: Test Marketing- Standard test markets- Controlled test markets- Simulated test markets Stage 8: Commercialization  *Microsoft slide on ppt---NOT ON EXAM  Product Life Cycle Strategies  The typical product life cycle (PLC) has 5 stages  Product development, introduction, growth, maturity, decline Not all products follow this cycle:- Fads- Styles- fashions Product development Begins when the company develops a new product idea Sales are zero Investment costs are high Profits are negative  *not yet targeting anyone Introduction Low sales High cost per customer TO THE FIRM Negative profits Innovators are targeted  Little competition  Growth Rapidly rising sales Average cost per customer TO THE FIRM  Rising profits  Early adopters are targeted *they are band wagoners  Growing competition  Maturity Sales peak here  Low cost per customer TO THE FIRM  High profits Middle majority are targeted Competition begins to decline  Decline Declining sales  Low cost per customer TO THE FIRM  Declining profits Laggards are targeted - Ex) maybe send them a coupon  Declining competition