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Final notes - ADM2320 - MArketing

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University of Ottawa
James Bowen

Final notes, ADM 2320 Chapter 8: Developing new products  E.D Smith: Uses fcus groups and surveys to generate new product ideas o Generates dialogue in Jam aisles o In-store taste test provide new insights o New products used less sugar o Free samples generate LOADS of feedback Innovation and Value: Benefits of new products Benefits of new products:  New products add to the firms value  Satisfy the changing needs of consumers  Diversify the firms risk (Don’t put all your eggs in one basket) Diffusion of innovation Chart: Must address the risk perceived by consumers  Innovators – 2.5%  Early adopters – 13.5%  Early majority – 34%  Late Majority – 34%  Laggards – 16% Impact of innovation continuum: Swing around from the Walkman to the Ipod Factors affecting product diffusion:  Relative Advantage and Compatability: Transition from one to the next, new products must be WAYYY better, old and new structure not compatible with each other  Observability: the easier the benefits are to communicate, the faster the product will diffuse, if benefits are not easily attained the product will not be purchased.  Complexity and Trialability: The more complex it is, the longer it takes to diffuse, sampled products diffuse faster. New product development process: Prices at each stage increase incrementally  Idea Generation: o Internal R&D: Very reliable and expensive  high development costs  Source of technological products  Source of breakthrough products o Licensing:  Firms purchase the rights to technology or ideas from other firms  University research centers often provide such licenses  Attached to revenue streams o Brainstorming:  Groups work together to generate ideas  No idea immediately dismissed  Biggest challenge is treating all members equally o Competitors Products  Reverse engineering  Copycat products o Consumer input:  85% of new B2B products come from consumers  Lead users modify existing products to their own specifications  Ask consumers for their input  Concept testing: o Concept is a brief written description of the product o Consumers reactions determine if It goes forward or not o Triggers the marketing research process  Product development: o Prototype o Alpha testing: Within the company o Beta Testing: External to the company  Market testing: o Premarket tests  Customers exposed  Customers surveyed  Firm makes decision o Test Marketing  Mini product launch  More expensive than premarket tests  Market demand is estimate  Product launch: o Getting the product out to the consumers  Evaluation of results: o Satisfaction of financial requirements o Customer acceptance o Satisfaction of technical requirements Why do new products fail?  Target market too small  Poor design  Low quality  Incorrect positioning  Wrong price strategy  Poor marketing communication  Competition Product life cycle: (PLC)  Introduction: Innovators  Growth: Early adopter/early majority  Maturity: Late majority  Decline: Laggards To extend the PLC  Develop new uses  Modify the product  Increase frequency of use  Increase # of users  Find new users  Reposition product  Tweak Marketing strategy PLC-based strategies 1. Managers do not know exactly what the shape of each products PLC will take, so ther is no way to know precisely what stage they are in 2. Misdiagnosing what stage the product is in can lead to managers falling into a self-fulfilling prophecy Chapter 9: Product, branding, and packaging decisions Dove:  Brand extension from hand soap to multiple personal care areas  Always associated with moisture and mildness  Promise: Mildness and moisturization Change in product mix breadth:  Increase breadth: o ConAgra added extensively to its product mix through the 80’s and 90’s o Used to expand presence in an industry  Decrease breadth o ConAgra have also taken products out of its product mix in response to changing market conditions and strategy Branding: The use of Name, logos, symbols, characters slogans, and even distinctive packages to increase brand awareness. Branding provides a way for a firm to differentiate its product from its competitors and can be used to represent the name of a firm and its product mix, a product line, or a single product  Anything that appeals to the 5 sense can be called a brand o Brand name o Jingle o URLs o Logos and symbols o Characters o Slogans Value of branding for the consumer and Marketer  Reduce costs: No need to further advertise (Brand awareness)  Are assets: Will generate sales no matter what we attach the brand to  Impact market value  Facilitate purchasing  Establish loyalty  Protect from competition Branding Overview  Brand equity o Brand awareness o Perceived value: People do manage to see around labels and packaging o Brand associations o Brand loyalty:  Consumers often less price-sensitive  Marketing costs are much lower  Firm insulated from competition  Brand Ownership strategies o Manufacturer or national brand o Store or private label brand o Generic  Brand Name strategies o Family brand o Individual Choosing a brand name: Desirable Qualities:  Suggest benefits and qualities  Easy to pronounce, remember, and recognize  Capable of registration and legal protection  Easily translated (Esso is a bad example) Brand extension: The use of the same brand name for new products being introduced Benefits:  Well established name  Brand know for high quality  Lower marketing costs  Synergy among products  Boost sales of core brand Brand Dilution  Evaluate the fit between the product class of the core brand and the extension  Refrain from extending the brand name to too many products  Evaluate consumer perceptions of the attributes of the core brand and seek out extensions with similar attributes  Is the brand extension distanced enough from the core brand? Co-Branding: The practice of marketing 2 or more brands together on the same package or promotion (KFC & TacoBell) Brand licensing: An agreement between firms whereby one firm allows the other to use its slogans, brands, images, or symbols in exchange for a negotiated fee (Lacoste, Harley Davidson beef jerky – ConAgra, Canadian tire/Nascar) Packaging: Consists of the wrapper or exterior carton, information about contents, the UPC code, and contents, e.g. the toothpaste tube, which provides convenience - storage, use, and consumption  First thing you see  Conveys information  Projects quality Chapter 10: Services – The intangible Product By providing good Customer Service Firms add value to their products and services Services Marketing:  Inseparable: o Production and consumption are simultaneous o Little opportunity to test a service before use o Lower risk by offering guarantees or warrantees  Variable (Inconsistent)  Perishable (Inventory): o Services can be used up o Ex: When the bus doesn’t show up, next bus isn’t the same service o Or hotels that don’t have the room you want  Intangible: o Atmosphere is important to convey value o Requires using cues to aid customers o Images are used to convey benefit of value o Production and consumption are simultaneous The Gaps Model: Movement between what we expect and what is reality Customer expectations for quality service Knowledge Gap Management perceptions of customer expectation Standards Gap Standards specifying service to be delivered Delivery Gap:  Empowering employees  Technological advances  Support and incentives Actual service delivers Customer perceptions of service delivered Communications Gap:  Manage customer expectations  Promise only what you can deliver  Communicate service expectations  Don’t oversell  Sell only what you can deliver Retailer communications about service quality Service recovery:  Listening to customers o Customers get emotional over failure o Often just want someone to listen  Quickly resolving problems  Providing a fair solution Evaluating service quality:  Reliability: The ability to Perform a service dependably and accurately  Responsiveness: The willingness to help customers and provide prompt service  Assurance: The knowledge and courtesy by employees and their ability to convey trust and confidence (Degrees on Doctors Walls)  Empathy: The caring, individualized attention provided to customers  Tangibles: The appearance of physical facilities, equipment, personnel, and communications materials (Atmosphere at Halloween Haunt) Zone of tolerance: Tends to change with experience with competitors, how bad the service was, overpriced, poor service, etc  What is the desired and expected level of service for each dimension?  What are the consumers perceptions of how well the focal service performs and how well a competitive service performs  What is the importance of each service quality dimension? Chapter 11: Pricing concepts and Strategies for establishing value Higher priced means better quality Price can drive the marketing strategy Has a certain Perception of value attached to it Price is a signal:  Prices can be too high or too low  Too low my signal poor quality  While too high may signal low value  If we are familiar with the product then price is less of a determinant Role of price in the Marketing mix:  Price is one of the most important factors in purchase decisions  Price is the only marketing mix element that generates revenue  The right price means and increase in profit The 5 Cs of Pricing:  Customers: o Connection between price and demand o Price elasticity  Elastic: Price sensitive  Inelastic: Price insensitive  Consumers are less sensitive to prices of necessities o Factors influencing price: Financial situation, economic situation (substitution) o If the price goes up will consumers buy less or go to competitors?  Cost: o Variable costs:  Vary with production volume o Fixed costs  Unaffected by production volumes o Total cost  Sum of variable and fixed costs  Company Objectives: o Profit orientation: maximize profits, target profit pricing o Sales orientation: Are we trying to maximize sales or profits? o Competitor orientation: OR are we trying to undercut the competition?  Entrepreneurial marketing: Founder of Giant tiger decided to focus on creating value  Offer everything under one roof  Groceries, footwear, clothing, furniture, toys, etc…  Channel members  Competition: o Monopoly: One company controls the market o Oligopoly: MANY companies sharing the market o Pure competition: Few companies sharing the market  Retailers often double prices in order to take overhead costs into account and maximize profit Other influencers of Pricing:  Increasing disposable income:  Local economic conditions  Increasing globalization  Increasing Status consciousness  Cross-Shopping Pricing strategies:  Cost based methods: As production increases, costs should decrease o Cost based methods start with costs o All costs calculated on a per-unit basis o Assumes costs don’t vary for different levels of production  Competitor based Methods o Set prices to signal information of how product compares with competitors  More costly = More value  Less costly = Same value although cheaper  Value-based Methods o Most difficult to do, must understand customer perceptions o Setting prices that focus on the overall value of the product o Consumer perceptions  Ex: Booking a flight in advance ($1200) or the day before ($5000) Psychological factors Affecting Pricing Strategies:  Reference pricing: The strategy of selling a product at a price just below its main competitor  Everyday Low Pricing (EDLP): If the consumer sees the product is not on sale then they’ll wait until it gets cheaper. This way it never goes on sale  Odd Pricing: Used in order to trick customers that the product is actually cheaper than it appears ($9.99) o May be so traditional that retailers are afraid to round them o May suggest a good deal may suggest low quality o Sends different signals  Price-quality relationship: Does the price of the good reflect the quality of it? o Lacking experience, consumers use price as an indicator of quality o Products/brands that consumers have little knowledge about, price becomes crucial o Why people usually land in the middle EDLP vs. High/Low Pricing  Value created in different ways  EDLP save search costs of finding the lowest overall price  High/Low provides the thrill of the chase for the lowest price o Driven by the supply chain o Some people really enjoy finding the best deal Legal and ethical aspects of Pricing  Deceptive or illegal price advertising:  Predatory pricing: Selling products at LOW prices to force competitors out of the market  Price discrimination: exists when sales of identical goods or services are transacted at different prices from the same provider.  Price fixing: Agreement between market allies to sell goods at fixed prices and control supply and demand Chapter 12: Marketing channels – Distribution strategy The importance of distribution:  Good distribution is critical to marketing success  Royal Canadian Mint released the world’s first coloured coin Via Tim Hortons, as they could easily distribute them Distribution components: Need a chain of organizations to distribute the product  Suppliers  Supply chain  Producers  Distribution Channels  Consumers Logistics: The Physical movement of a product Functions performed by intermediaries:  Transactional function o Buying – purchase of goods for re-sale o Risk Taking – ownership of inventory that can become outdated o Promotion – Promote products to consumers o Selling – Transact with potential customers  Logistical function o Distribution - Transport goods to point of purchase o Storing - Maintain inventory and protect goods  Facilitating function o Gather information – Sharing competitive intelligence about consumers or other channel members o Financing – Extend credit and other financial services to consumers Distribution channel structure: Direct: Straight from manufacturer to consumer Indirect: Moves through an intermediary first (Wholesaler, retailer) Multichannel: Sales to multiple consumer segments as well as multiple business segments. Either direct or indirect Managing distribution Channels  Channel conflict: The customer can buy things in sooo many ways, that the retailer in the area may be greatly affected  Through Vertical integration: Henry ford owned EVERY aspect of his supply chain. Now that is too costly. How much of the supply chain do we want to own? o The independent supply chain:  Manufacturer  Wholesaler  Retailer  Consumer Franchises: An interesting play on ownership, a clever way for the organisations to buy property. They gain control and yet don’t have to pay for the distributions channel Supply chain management: Is the management of a network of businesses involved in the provision of products and services required by the end consumers in the supply chain.  Direct sales are VERY costly  Reduce the number of transactions
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