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MKT Chp 7-12.docx

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MKT 100
Laila Rohani

Chapter 7: Segmentation, Targeting, and Positioning - A successful new product introduction needs to combine an innovative product with a marketing campaign that communicates the value of that new product to the targeted segment The Segmentation-Targeting-Positioning Process Step 1: Establish overall strategy or objectives: Segmentation must then be consistent/derived from the firms mission and objectives and SWOT (strengths, weaknesses, opportunities, threats) Step 2: Segmentation bases: develop descriptions of different segments Geographic segmentation organizes customers into groups based on location; make adjustments to meet needs of smaller groups Demographic segmentation groups customers according to measured, objective characteristics such as age, gender (IMPORTANT), income, education, race, occupation, marital status, etc Psychographic segmentation delves into how consumers describe themselves using characteristics that help them choose how they occupy their time - self-values are life goals; overriding desires that drive how a person lives life, self-concept is the image people have of themselves, lifestyles refer to the way we live - VALS is a system that uses a questionnaire to classify consumers into eight segments along two dimensions; vertical shows resources and horizontal shows primary motivation Behavioural segmentation groups consumers on the basis of the benefits they derive from products or services, their user status, and their loyalty; benefit segmentation looks at the benefits customers derive Loyalty segmentation targets customers who are loyal and profitable by offering incentives Companies can use multiple segmentation methods; i.e. geodemographic segmentation; can tailor stores to the preferences of local community; useful for finding target locations Step 3: Evaluate Segment Attractiveness Identifiable – firms must determine who is within their market to be able to meet their needs Reachable – customers must know the product/service exists, understand what it can do for them, and recognize how to buy it Responsive – customers in the segment must react similarly and positively to the firms offering; if the firm cannot provide to the segment it should not target it Substantial and Profitable – firms must measure growth potential, focus on potential profitability surrounding market growth, competitiveness, and access Step 4: Select Target Market - Decision affected by the marketer’s ability to pursue an opportunity/target segment - Sometimes firms might benefit from not segmenting, concentrating on one segment, or going after multiple at once An undifferentiated segmentation strategy applies when the benefits apply to everyone - Common among smaller firms, but by making products appear special companies add value A differentiated segmentation strategy targets several market segments with a different offering for each; helps firms obtain a bigger share of the market; appealing to multiple segments lowers the company’s overall risk A concentrated or niche segmentation strategy targets a specific market Micromarketing is tailoring the good to suit an individual consumers needs; much easier for a smaller company to do this than a larger one - The degree to which firms should segment their markets depends on the balance the firm wants to achieve between the added perceived customer value that segmentation can offer vs. its cost Step 5: Identify and Develop Positioning Strategy - Positioning is the mental picture that people have about a company relative to competitors; determines customers preference for a company - If done incorrectly, brand may not succeed; effective positioning requires that marketers shape thinking and feelings and evolve these feelings as they reposition into the marketplace - Value is popular because the relationship of price to quality is important to customers; some companies charge a premium for the best value; companies may go after competitors by offering comparable products at a lower price; lets consumers know they are getting much less and also paying much less - Product attributes: Focus on the attributes most important to the target market; focus on product leadership, innovation, quality, performance, design, reliability - Benefits and symbolism: emphasizes the benefits of brand as well as the psychological meaning to consumers; reasons why some brands are bought over lesser known brands - Competition: position products or services head-to-head against competitors; often leads to price wars (good for consumers, bad for businesses) - Market leadership: as opposed to competition, brands emphasize their leadership in the market A perceptual map displays, in 2+ dimensions, the position of products or brands to consumers Ideal points are where a market segment’s ideal product would lie Perceptual map created by 5 steps: 1. Determine customers perceptions and evaluations of the product or service in relation to competitors’ 2. Identify competitors’ positions 3. Determine customer preferences 4. Select the position 5. Monitor the positioning strategy Repositioning: Sometimes firms must change their positioning to keep up with changes in the marketplace or to revive their brand; change or tinker positioning to keep up with market dynamics - Not an easy task as customers do not change perceptions easily; if not done well, companies can alienate core customers while failing to attract new ones Brand repositioning refers to a strategy in which marketers change a brand’s focus to target new markets or realign the brand’s core emphasis with changing market preferences Chapter 8: Developing New Products Why do firms create new products? - A new product doesn’t have to be completely new; redesigned or “slightly repositioned” Innovation is the process by which ideas are transformed into new products and services - Create and deliver value by satisfying changing customer needs; prevent boredom; identify problems and develop products customers don’t know they need; take a well known offering and innovate - Longer a product exists, more likely market will become saturated; customers seek variety - A broader range of products allows firms to diversify risk and enhance firm value; able to withstand external shocks such as changes in preference or intense competitors - Apparel, arts, books, and software experience a short product life cycle - New products or services called pioneers or breakthroughs establish a new market or change the old one; require a higher level of learning and offer more benefits than predecessors - First movers become recognizable and establish an early market lead - Market pioneers generally command a greater market share over a longer period; though imitators can capitalize on the weaknesses of pioneers; followers spend less marketing effort and instead focus on creating demand for their specific brand; majority of new products fail Reasons for new product failure: (1) offer consumers too few benefits comparatively (2) too complex or require learning (3) bad timing Adoption of Innovation - Diffusion of innovation is the process that innovation spreads throughout a market Innovators: Buyers who want to be first; enjoy taking risks, not price sensitive; keep themselves well informed about the product category; crucial to product success; 2.5% of market Early Adopters: wait to purchase until after careful review; regarded as opinion leaders; spread the word to other groups; 13.5% Early Majority: wait until the product or service has been perfected; profitability starts here; buyers have many price and quality choices; 34% Late majority: by now, product has reached full potential; sales may be declining; 34% Laggards: avoid change and rely on traditional products; may never adopt a product; 16% Factors Affecting Product Diffusion Relative Advantage: if perceived as better than others, diffusion will be quicker Compatibility: must be compatible with the consumer Observability: easily observed products experience their benefits and uses easily communicated Complexity and Trialability: Less complex products are easier to try; diffuse quicker How Firms Develop New Products Process can feedback loop at various stages; not always necessary to go through every stage Idea Generation: Firms that want to be pioneers rely on R&D, those that rely on follower strategy scan the market for ideas; product ideas come from internal ideas and investments; product development costs are often high; firms often buy the rights to use a technology or idea (licensing); brainstorming sessions generate ideas; reverse engineering takes part a competitor’s product and changing and improving it; customer input is crucial especially B2B; analyzing lead users, who modify existing products according to their own ideas to suit their needs is key Concept Testing: refers to the process in which a concept statement is presented to potential buyers representative of the target market or users to obtain their reactions; enable estimations of sales value, and possibly make changes, determine if worth development Product Development: entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product’s form and features; a prototype is the first physical form or service description of a new product; in alpha testing, the firm attempts to determine whether it satisfies the need for which is was intended; beta testing uses potential consumers who use the prototype in a real use setting Market Testing: Premarket tests are conducted before the product is brought to the market to determine reuse; early evaluation saves marketers if the product fails; simulated product introduction has consumers view ads of the brand and its competitors to help determine the effectiveness of the advertisement; Test marketing introduces the offering to a limited geographical area includes promotion; costs more and takes longer than premarket tests; sometimes gives competitors an advantage to launch their own products Product Launch: Most critical step and is costly; complex products require more promotion and customer education, technical support; an adequate quantity of products must be available for shipment and to keep in stock; firms need to ensure proper price, easier to start with a higher price and offer promotions and over time lower price; timing of the launch is key Evaluation of Results: Success of a new product is measured be: (1) satisfaction of technical requirements; (2) customer acceptance; (3) satisfaction of firm’s financial requirements The Product Life Cycle - Defines the stages that new products move through as they enter, get established in, and leave the marketplace; not every product follows the same life cycle shape Introduction Stage: starts with a single firm, innovators are first to try; initial losses to the firm due to high start-up costs and waiting for the product to take off Growth Stage: growing number of product adopters, rapid sales growth, increases in competitors and product versions; attempt to reach consumers through product variations to preference; profits begin to rise as sales grow Maturity stage: adoption of the product by late majority and intense competition; higher marketing costs; average price of product falls substantially; saturated market; almost all potential customers have already adopted the product; firms can enter new geographical markets that are less saturated; simple design changes open new market opportunities; introducing new products shows innovation and helps protect market share Decline stage: firms either position themselves to diehard consumers or completely exit - The PLC is assumed to be bell-shaped but each product has its own individual shape Chapter 9: Product, Branding, And Packaging Decisions Complexity of Products and Types of Products - Core customer value defines the basic problem-solving benefits that consumers are seeking - The associated services or augmented product include the nonphysical aspects of the product, such as product warranties, financing, support, and after-sale service Types of Products: consumer products are products and services used by people for their own personal use, further classified by the way they are used and purchased: Specialty products/services: customers show strong preference, considerable effort to find Shopping: consumers will spend a fair amount of time comparing alternatives Convenience: the consumer is not willing to spend effort to evaluate prior to purchase Unsought: do not normally think of buying/do not know about; require lots of marketing Product Mix and Product Line Decisions - The product mix is the complete set of all products offered by a firm; product lines are groups of associated items; product categories are an assortment of items that the customer sees as substitutes for one another; may use the same or different brands, logos; a firms product mix breadth represents the number of product lines offered by the firm; product line depth is the number of products within a product line; Stock Keeping Units (SKUs) are individual items within a product category and the smallest unit available for inventory control, with own UPC code. Increase Breadth; firms often add new product lines to capture new or evolving markets, increase sales, and compete in new venues Decrease Breadth; sometimes product lines must be deleted to address changing market conditions or meet internal strategic priorities Increase Depth; add new products to address changing consumer preferences, serve newer target segments Decrease Depth; To realign resources; not taken lightly - Changing or deleting SKUs to stimulate sales or meet consumer demand Branding - Provides a way for a firm to differentiate its product offerings from those of its competitors and can be used to represent the name of a firm and it’s product mix, line, or single item - Often easily recognized and signify quality and are familiar; consumers trust certain brands - Strong brands are somewhat protected from competition as they have a more loyal customer base, and do not feel competitive pressure - Firms with well known brands market less; brands can be legally protected through trademarks and copyrights; brands impact market value Brand Equity - The set of assets and liabilities linked to a brand that add or subtract from the value provided by the product or service; brands are assets the firm can build, manage, and harness over time to increase revenue, profitability, and overall value; result in recognition, awareness, loyalty Brand awareness: measures how many consumers in a market are familiar with the brand and what it stands for and have an opinion on it; familiarity matters most - Some brands become synonymous with the product (eg. Band Aids) Perceived Value: relationship between a product or service’s benefits and costs in relation to competitors; some customers see higher prices as higher quality Brand associations: reflect the mental links between brand and key product attributes; create differentiation between the brand and its competitors; associated with positive consumer emotions Brand Personality: refers to a set of human characteristics associated with a brand Brand Loyalty: occurs when a customer buys the same brand’s products repeatedly rather than buying from multiple suppliers; important source of value; reward loyal customers through customer relationship management (CRM) programs; marketing costs of reaching loyal customers are lower; loyalty insulates the firm from competition Branding Strategies - Manufacturer brands are owned and managed by the manufacturer, also known as national brands; spend millions of dollars to promote their brands; firms control their marketing strategy, are able to choose appropriate market segments and positioning, and can build the brand Private-label or store brands are owned and managed by retailers; firms manufacture their own brand and merchandise for other brands or retailers; common in supermarkets, discount stores, drugstores; popularity varies depending on consumer preference Specialty retailers stock only their own brands and labels Generic products: sold without brand names; popularity and acceptance recently declined Corporate/Family brand: uses firm’s name to brand all products Individual brand: use of individual names for each product Choosing brand names: (1) should be descriptive and suggestive of benefits and qualities; (2) easy to pronounce, recognize, and remember; (3) should be able to register the name as a trademark; (4) brand name should be easy to translate into other languages Brand extension: refers to the use of the same brand name for new products; common in global expansions; firm can spend less on developing brand awareness; perception carries over to new product; marketing costs are lower; synergy exists between complementary products; adopters of the new brand may try other products in the brand Brand dilution: occurs when the brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold To prevent the potentially negative consequences of brand extensions: - Marketers should carefully evaluate the fit between the product class of the core brand and that of the extension - Firms should carefully evaluate consumer perceptions of the attributes of the core brand and seek out similar attributes for the extension - Firms should refrain from extending the brand name to too many products and product categories to avoid diluting the brand and damaging brand equity - Firms should consider whether the brand extension will be distanced from the core brand, especially if the firm wants to use some but not all of the existing brand associations Cobranding is the practice of marketing two or more brands together; enhances perceptions of product quality; may fail if owners cannot resolve financial disputes Brand licensing is a contractual arrangement between firms which allows a firm to use another’s brand name, logo, symbols, for a fee; the licensor obtains revenues through royalty payments; may be upfront, lump-sum, or based on dollar value of sales; attracts visibility for the brand while generating additional revenue, though may result in the dilution of brand equity Packaging - Come in different types and offer a variety of benefits; provides the UPC label, contents, directions, product information; affect consumer emotions and drive impulse buying; “Wrap Rage”: frustration with product packaging Innovations in packaging include: stand up, reclosable zipper pouches; aluminum beverage cans; aseptic packaging; child-resistant/senior-friendly packaging; green and biodegradable Labelling - Labels provide information, can be used for promotion; must comply with general laws Chapter 10: Services: The Intangible Product - Customer service refers to human or mechanical activities that firms undertake to help satisfy their customers’ needs and wants - service oriented economies developed because: (1) it is generally less expensive for firms to manufacture products in less-developed countries; (2) household maintenance activities have become specialized;
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