The discussion assignments are designed to help you apply the concepts from the chapters in each unit. You will respond individually to the following questions and to the postings of your fellow classmates.
The following case, titled, “New Product or New Product Line?” is located at the end of chapter 6 and involves the factors that go into the decision to co-promote products.
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Directions
All posts are expected to demonstrate the use of proper grammar and be free of typographical and spelling errors.
Explain the various types of offerings marketed to individual consumers.
Respond to every aspect of the discussion prompt with originality.
Demonstrate exceptional familiarity with the text and topics being covered, and utilize text/PowerPoint references.
Your initial post should consist of at least 300 words
Case Analysis and Questions
New Product or New Product Line?
Mary Albrecht looked again at the sales report, hoping something had changed, but the figures still showed flat sales. As brand manager for the Moricci line of Italian-style side dish products for Del Sol, a large food manufacturing company, she was responsible for growing sales 12 percent this year. But as the first quarter came to a close, sales had grown a paltry 1.2 percent. Something was going to have to change.
The Moricci product line began when Alberto Moricci took his grandmother’s recipes to a dehydration plant and created a line of dehydrated sauces in 1933. Original products included spaghetti sauce, alfredo, vodka sauce, marinara, and marsala. He packaged the products in foil pouches and began selling them from his apartment in New York City. In 1957, he sold the company to Standard Foods, which was later acquired by Del Sol. Along the way, dried pasta was added so that the product was a complete side dish—simply empty the packet into boiling water and a few minutes later, you had a nice pasta dish.
“I don’t really know what to do,” Mary said to her husband, Gil, that night. “I’ve tried advertising on ESPN during basketball games, we did a promotion with Ibotta, and we even hired GHL, a company that does free samples in Costco and Sam’s. None of these added to our sales.”
Gil stirred the Moricci Noodles Alfredo into the boiling water, then dumped in a plate of diced chicken he had cut from a rotisserie chicken he had picked up at the grocery store on his way home from work. “You’ve got a good product,” he said. “I like the way it tastes. Maybe it is the size of the package—maybe you need to compete against boxes of mac and cheese and go after families instead of these foil pouches.”
“You may have something there. You get the same amount of food, but there is the perception that the box is bigger so you get more,” she said. She watched him spoon out the chicken alfredo onto two dishes. “What if we boxed it, and added a can of chicken chunks? Made it the main dish? After all, Del Sol owns Puritan; we make a line of canned chicken.”
“You could do chicken or you could do shrimp,” he said. “Although chicken is better with your marsala, and you probably want beef with your spaghetti.”
“True. I don’t know; it might be easier to just bundle the products in a promotion. You know, offer a coupon if you buy them together and then do a special display that has the products next to each other.”
Discussion Questions
1. What factors would go into the decision to co-promote the products with a special display versus creating a new product?
2. If you created a new product by putting a small can of chicken into a box with the pasta, should the box carry the Moricci name? Or should it be a new product line altogether? Should the can still be labeled as Puritan?
Principles of Marketing 4.0
Jeff Tanner and Mary Anne Raymond
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PUBLISHED BY:
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NO PART OF THS WORK MAY BE USED, MODIFIED, OR REPRODUCED IN ANY FORM BY ANY MEANS EXCEPT AS EXPRESSLY PERMITTED UNDER THE LICENSING AGREEMENT.
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CHAPTER 6
Creating Offerings
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LEARNING OBJECTIVES
Distinguish between the three major components of an offering: product, price, and service.
Explain, from both a product-dominant and a service-dominant approach, the mix of components that comprise different types of offerings.
Distinguish between technology platforms and product lines.
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PRODUCT, PRICE, SERVICE
Product
Most offerings consist of a product, or a tangible good people can buy, sell, and own.
Products have features which are characteristic of the offering.
Price
Offerings have a price that is paid for the product benefits.
Total cost of ownership (TCO) is the amount paid to own, use, and dispose of a product.
Service
An action that provides a buyer with an intangible benefit.
Usually require that the consumer be physically present.
Services are perishable; can’t be stored.
Many tangible products have intangible service components attached to them.
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THE RATER MODEL
The RATER model is used to focus marketers’ attention on key dimensions of services.
Reliability: the ability to deliver a specific level of quality over a number of trials.
Assurance: the degree to which the consumer can trust the service provider to live up to promises.
Tangibles: tangible products that often signal to consumers that they have received a high-quality service, such as shampoo and the appearance of furniture during a hotel stay.
Empathy: service providers need to be able to put themselves into the shoes of customers to understand what is wanted and needed.
Responsiveness: the service provider’s ability to respond to consumers’ interests and desires.
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PRODUCT-DOMINANT MARKETING
Product dominance started with the industrial revolution.
Focus was on producing products cheaply.
Firms became product oriented, believing the best way to gain market share was with better products at lower prices.
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SERVICE-DOMINANT APPROACH TO MARKETING
Service dominance integrates the product, price, and services of an offering.
Marketers should consider what services it takes for the customer to acquire their offerings, enjoy them and dispose of them.
Critics argue that the product-dominant approach also integrated services (though not price).
For many pure products, the product-dominant approach can be helpful in bundling different augmentations for different markets.
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SERVICE-DOMINANT APPROACH TO MARKETING
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SHARING ECONOMY
Information technology allows owners of assets to increase utilization of their assets, whether for money or exchange of services.
Based on service-dominant logic
Functions:
Make it possible for anyone to share an asset
Drive costs down and availability up
Disrupt many established businesses
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PRODUCT LEVELS AND PRODUCT LINES
A product’s technology platform is the core technology on which it is built.
Some new offerings take a technology platform and re-bundle its benefits.
Technology platforms are not limited to tangible products.
Knowledge can be a type of technology platform in a pure services environment.
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PRODUCT LEVELS
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PRODUCT LINES
Line depth: the number of offerings in a product line.
Line extension: when a new but similar product is added to a line.
Line breadth: a function of how many different, or distinct product lines a company has.
Product mix: the entire assortment of products that a firm offers.
GROUP OF RELATED OFFERINGS AND IS CREATED TO MAKE MARKETING STRATEGIES EFFICIENT
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KEY TAKEAWAYS
Companies market offerings composed of a combination of tangible and intangible characteristics for certain prices.
During the Industrial Revolution, firms focused primarily on products and not so much on customers.
The service-dominant perspective to marketing integrates three different dimensions of an offering—not only the product but also its price and the services associated with it.
This perspective helps marketers think more like their customers, which helps firms add value to their offerings.
An offering is based on a technology platform, which can be used to create a product line. A product line is a group of similar offerings.
A product line can be deep (many offerings of a similar type) and/or broad (offerings that are very different from one another and cover a wide range of customers’ needs).
The entire assortment of products that a company offers is called the product mix.
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LEARNING OBJECTIVES
Define the various types of offerings marketed to individual consumers.
Explain why a single offering might be marketed differently to different types of consumers.
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FOUR GENERAL CATEGORIES OF CONSUMER OFFERINGS
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Convenience
Little effort in shopping.
Bread is an example
Shopping
Compare products and select
Consumers often care about brand names
Unsought
Products that buyers do not want to shop for until they need them
Specialty
Highly differentiated. Available through limited channels
KEY TAKEAWAYS
Convenience offerings, shopping offerings, specialty offerings, and unsought offerings are the major types of consumer offerings.
Convenience offerings often include life’s necessities (bread, milk, fuel, and so forth), for which there is little difference across brands.
Shopping goods do vary, and many consumers develop strong preferences for some brands versus others.
Specialty goods are even more exclusive.
Unsought goods are a challenge for marketers because customers do not want to have to shop for them until they need them.
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LEARNING OBJECTIVES
Define the various types of offerings marketed to businesses.
Identify some of the differences with regard to how the various types of business offerings are marketed.
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PRIMARY CATEGORIES OF B2B OFFERINGS
Capital equipment offering: is any equipment purchased and used for more than one year and depreciated over its useful life.
Raw materials offerings: are materials firms offer other firms so they can make a product or provide a service.
OEM (or original equipment manufacturer) offerings: are components, or parts, sold by one manufacturer to another that get built into a final product without further modification.
MRO (or maintenance, repair, and operations) offerings: refer to products and services used to keep a company functioning.
Facilitating offerings: include products and services that support a company’s operations but are not part of the final product it sells.
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KEY TAKEAWAYS
Business buyers purchase various types of offerings to make their own offerings.
Some of the types of products they use are raw materials, manufactured materials, and component parts and assemblies, all of which can become part of an offering.
MRO (maintenance, repair, and operations) offerings are those that keep a company’s depreciable assets in working order.
Facilitating offerings are products and services a company purchases to support its operations but are not part of the firm’s final product.
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LEARNING OBJECTIVES
Understand the branding decisions firms make when they’re developing new products.
Identify the various levels of packaging for new products.
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BRANDING
Branding: the set of activities designed to create a brand and position it in the minds of consumers.
Brand name: the spoken part of a brand’s identity.
Brand mark: the symbol associated with a brand.
Brand extension: utilizing an existing brand name or brand mark for a new product category.
Cannibalization: when a firm’s new offering eats into the sales of one of its older offerings.
A NAME, PICTURE, DESIGN, OR COMBINATION OF THOSE ITEMS, USED TO IDENTIFY A SELLER’S OFFERINGS AND DIFFERENTIATE THEM FROM COMPETITORS’ OFFERINGS.
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PACKAGING DECISIONS
Packaging has to fulfill a number of important functions, including:
Communicating the brand and its benefits.
Protecting the product from damage and contamination during shipment
Protecting the product from damage and tampering once it’s in retail outlets.
Preventing leakage of the contents.
Presenting government-required warning and information labels.
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PACKAGING
Primary packaging holds a single retail unit of a product.
Secondary packaging holds a single wholesale unit of a product.
Tertiary packaging is packaging designed specifically for shipping and efficiently handling large quantities.
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KEY TAKEAWAYS
A brand is a name, picture, design, or symbol, or combination of those items, used by a seller to identify its offerings and differentiate them from competitors’ offerings.
Branding is the set of activities designed to create a brand and position it relative to competing brands in the minds of consumers.
An important decision companies must make is under which brand a new offering will be marketed. A brand extension involves utilizing an existing brand name or brand mark for a new product or category (line) of products.
Cannibalization occurs when a company’s new offering eats into the sales of one of its older offerings. It is something to be avoided in most cases, but it can also be a sign of progress because it means a company is developing new and better products.
Packaging protects products from damage, contamination, leakage, and tampering, but it is also used to communicate the brand and its benefits, product warnings, and proper use.
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LEARNING OBJECTIVES
Understand the people involved in creating and managing offerings.
Recognize the differences in organizing product marketing for consumers versus B2B companies.
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PRODUCT MANAGEMENT POSITIONS
Brand manager: responsible for all business decisions regarding offerings within one brand.
Product manager: has business responsibility for a particular product or product line.
Category manager: responsible for business decisions within a broad grouping of offerings.
Market manager: responsible for business decisions within a market.
Vertical market managers: responsible for a particular market segment, or a vertical market.
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KEY TAKEAWAYS
Brand managers decide what products are to be marketed and how.
Other important positions include category managers, market managers, and vertical market managers.
Category managers are found in consumer markets, usually in retail.
Market managers can be found in both consumer markets and B2B markets.
However, vertical market managers are found only in B2B markets.
Some companies have market managers but no brand managers.
Instead, a vice president of marketing or other executive is responsible for the brands.
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Principles of Marketing 4.0
Jeff Tanner and Mary Anne Raymond
©FlatWorld 2018
1
PUBLISHED BY:
FLATWORLD
©2019 BY FLATWORLD. ALL RIGHTS RESERVED. YOUR USE OF THIS WORK IS SUBJECT TO THE LICENSE AGREEMENT AVAILABLE.
NO PART OF THIS WORK MAY BE USED, MODIFIED, OR REPRODUCED IN ANY FORM BY ANY MEANS EXCEPT AS EXPRESSLY PERMITTED UNDER THE LICENSING AGREEMENT.
©FlatWorld 2018
CHAPTER 5
Market Segmenting, Targeting, and Positioning
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SEGMENTATION
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Marketing segments
Dividing or segmenting people and organizations into different groups of potential buyers with similar characteristics.
Targeting segments
Selecting market segments to pursue with plans.
Positioning
Creating a preferred position of the company’s products in the minds of consumers.
LEARNING OBJECTIVES
Distinguish between targeted marketing and mass marketing and explain what led to the rise of each.
Describe how targeted marketing can benefit firms.
Explain why companies differentiate among their customers.
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TARGETED MARKETING VERSUS MASS MARKETING
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BENEFITS OF SEGMENTING AND TARGETING MARKETS
Avoid head-on competition with other firms.
Develop new offerings.
Remarket older, less-profitable products.
Identify early adopters.
Focus on most profitable customers.
Retain “at-risk” customers.
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TARGETING MARKETS
Trend is toward more precise targeting of markets.
Companies are now using the Internet (Social Media) to track people’s Web browsing patterns and segment them into target groups.
Getting a read on potential target markets doesn’t necessarily have to involve technology.
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TARGETING A FIRM’S CURRENT CUSTOMERS
Finding and attracting new customers is more difficult than retaining current customers.
In addition to studying customers’ buying patterns, firms also try to get a better understanding of their customers by:
Surveying them
Hiring marketing research firms to do so
Utilizing loyalty programs
Many firms use Facebook to develop closer relationships with their customers.
Twitter is another way companies are keeping in touch with their customers and boosting their revenues.
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TARGETING A FIRM’S CURRENT CUSTOMERS
Some customers are highly profitable, others are not and others actually end up costing money to serve.
Some firms deliberately un-target unprofitable customers.
One-to-one marketing: This is a process that outlines the steps companies take to:
Target their best customers
Form close, personal relationships with them
Give them what they want
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ONE TO ONE MARKETING STEPS
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Establish short term measures to evaluate your efforts
How will the effort be measured?
Revenues, transactions, or other measures
Identify your customers
Gather all relevant information
Establish good contact information
Differentiate among your customers
Which customers are the most valuable?
Which customers are the least valuable?
Customize your products and marketing messages to meet their needs
Interact with your customers, targeting your best ones
KEY TAKEAWAYS
Choosing select groups of people to sell to is called target marketing, or differentiated marketing.
Mass marketing, or undifferentiated marketing, involves selling the same product to everyone.
The trend today is toward more precise, targeted marketing. Finding and attracting new customers is generally far more difficult than retaining one’s current customers, which is why organizations try to interact with and form relationships with their current customers.
The goal of firms is to do as much business with their best customers as possible. Forming close, personal relationships with customers and giving them exactly what they want is a process called one-to-one marketing. It is the opposite of mass marketing.
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LEARNING OBJECTIVES
Understand and outline the ways in which markets are segmented.
Explain why marketers use some segmentation bases versus others.
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SEGMENTATION BASES
These are the criteria used to classify and divide buyers into different groups.
These help a firm in getting a fuller picture of its customers and create real value for them.
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TYPES OF SEGMENTATION BASES
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behavioral
What benefits do customers want?
demographic
Profile of customers
geographic
Where are customers located?
psychographic
How do they use the product?
Age, race, ethnic backgrounds
How can they be reached?
SEGMENTATION BY BEHAVIOR
Benefits: segmenting buyers by the benefits that they seek from the product.
Usage: segmenting buyers by the frequency that they use/buy products.
Application: segmenting buyers by the way in which they use products.
Marketing people can tailor products to buyers for optimum results if they know:
The benefits that buyers seek
How often they purchase the product
The manner in which the product is used
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SEGMENTATION BY DEMOGRAPHICS
Demographics are used to segment markets because demographic information is publicly available in databases around the world.
Includes:
Age
Income
Gender
Family life cycle
Ethnicity
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SEGMENTATION BY GEOGRAPHY
Geographic segmentation divides buyers by where they are located.
Geocoding is the process of plotting geographic marketing information on a map.
Geodemographics (or neighborhood geography) combines both demographic and geographic information for marketing purposes.
Claritas’ PRIZM NE is a good source to see how this process works:
http://www.claritas.com/MyBestSegments/Default.jsp?ID=20
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SEGMENTATION BY GEOGRAPHY
City size and population density are also used for segmentation purposes.
Population density: the number of people per square mile.
Proximity marketing: an interesting new technology firms are using to segment and target buyers geographically within a few hundred feet of their businesses using wireless technology.
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SEGMENTATION BY PSYCHOGRAPHICS
Questions include:
Why consumers behave the way they do?
What is of high priority to them?
How they rank the importance of specific buying criteria?
Psychographic information is frequently gathered via extensive surveys that ask people about their:
Activities
Interests
Opinions
Attitudes
Values
Lifestyles
One of the most well-known psychographic surveys is VALS (which originally stood for “Values, Attitudes, and Lifestyles”) and was developed by a company called SRI International in the late 1980s.
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THE VALS TYPES
Innovators: successful, sophisticated, take-charge people
Thinkers: mature, satisfied, comfortable, well educated
Achievers: goal oriented, conservative, predictable, stable
Experiencers: young, enthusiastic, seek variety and excitement
Believers: conservative, conventional, believe in established codes
Strivers: trendy, fun loving, seek approval, job vs. career
Makers: practical, self sufficient, suspicious of large institutions
Survivors: few resources, concerned with safety, low motivation
What category do you fall into? Take the survey:
http://www.sric-bi.com/vals/surveynew.shtml
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SEGMENTATION IN B2B MARKETS
There are fewer behavioral and needs-based segments in B2B markets than in business-to-consumer (B2C) markets for two reasons:
Business markets are made up of a few hundred customers whereas consumer markets can be made up of hundreds of thousands of customers.
Businesses aren’t as fickle as consumers.
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SEGMENTATION IN B2B MARKETS
The behavioral segments in B2B markets include the following:
A price-focused segment
A quality and brand-focused segment
A service-focused segment
A partnership-focused segment
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KEY TAKEAWAYS
Segmentation bases are criteria used to classify buyers. The main types of buyer characteristics used to segment consumer markets are behavioral, demographic, geographic, and psychographic.
Behavioral segmentation divides people and organization into groups according to how they behave with or toward products.
Segmenting buyers by personal characteristics such as their age, income, ethnicity, family size, and so forth is called demographic segmentation.
Geographic segmentation involves segmenting buyers based on where they live.
Psychographic segmentation seeks to differentiate buyers based on their activities, interests, opinions, attitudes, values, and lifestyles.
Oftentimes a firm uses multiple bases to get a fuller picture of its customers and create value for them. Marketing professionals develop consumer insight when they gather both quantitative and qualitative information about their customers.
Many of the same bases used to segment consumer markets are used to segment business-to-business (B2B) markets. However, there are generally fewer behavioral-based segments in B2B markets.
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LEARNING OBJECTIVES
Describe the factors that make some markets more attractive targets than others.
Describe the different market-segmenting strategies companies pursue and why.
Outline the market-segmentation strategies used in global markets.
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TARGETING CRITERIA
Can the market be profitable?
Is it a growing market?
Is there room for a new competitor?
Is the market accessible?
Are resources available to serve this market?
What is the fit with present business mission and objectives?
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CHOOSING THE NUMBER OF MARKETS TO TARGET
Henry Ford proved that mass marketing can work—at least for a while.
Mass marketing is efficient because you don’t have to tailor any part of the offering for different groups of consumers, which is more work and costs more money.
Firms that mass market are vulnerable to competition.
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MULTISEGMENT MARKETING
It can allow firms to respond to demographic changes and other trends in markets.
It can also help companies weather an economic downturn by allowing customers to trade up or down among brands and products.
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CONCENTRATED MARKETING
It involves targeting a very select group of customers.
It can be a risky strategy because companies really do have all their eggs in one basket.
Niche marketing: It involves targeting an even more select group of consumers.
Microtargeting: a new effort to isolate markets and target them.
It is also known as narrowcasting.
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TARGETING STRATEGIES USED IN GLOBAL MARKETS
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TARGETING GLOBAL MARKETS
Sell the same product across the entire world.
Tailor their offerings to some extent to meet the needs of different buyers around the world.
Acquire foreign companies or companies with large market shares.
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KEY TAKEAWAYS
A market worth targeting has the following characteristics:
It’s sizeable enough to be profitable, given your operating costs
it’s growing
it’s not already swamped by competitors, or you have found a way to stand out in the crowd
it’s accessible, or you can find a way to reach it
you have the resources to compete in it
it “fits in” with your firm’s mission and objectives.
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KEY TAKEAWAYS
Most firms tailor their offerings in one way or another to meet the needs of different segments of customers.
A multisegment marketing strategy can allow a company to respond to demographic and other changes in markets, including economic downturns.
Concentrated marketing involves targeting a very select group of customers.
Niche marketing involves targeting an even more select group of consumers.
Microtargeting, or narrowcasting, is a new, effort to “super target” consumers by gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive.
Firms that compete in the global marketplace can use any combination of these segmenting strategies or none at all. Sellers are increasingly targeting consumers in China, Russia, India, and Brazil because of their fast-growing middle classes.
Firms are creating low-cost products to capture large markets in developing countries such as these and then selling the products in developed countries. Other strategies for targeting markets abroad include acquiring foreign companies or forming partnerships with them.
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LEARNING OBJECTIVES
Explain why positioning is an important element when it comes to targeting consumers.
Describe how a product can be positioned and mapped.
Explain what repositioning is designed to do.
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POSITIONING
Companies want to have a distinctive image and offering that stands out from the competition in the minds of consumers.
Perceptual map: a two-dimensional graph that visually shows where your product stands relative to your competitors, based on criteria important to buyers.
HOW CONSUMERS PERCEIVE A PRODUCT RELATIVE TO THE COMPETITION
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A PERCEPTUAL MAP
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POSITIONING
Tagline: a catchphrase designed to sum up the essence of a product.
Repositioning: an effort to “move” a product to a different place in the minds of consumers.
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KEY TAKEAWAYS
If a product faces competition, its producer will need to think about how to “position” it in the marketplace relative to competing products.
Positioning is how consumers view a product relative to the competition.
A perceptual map is a two-dimensional graph that visually shows where a product stands, or should stand, relative to its competitors, based on criteria important to buyers.
Sometimes firms find it advantageous to reposition their products. Repositioning is an effort to “move” a product to a different place in the minds of consumers.
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