Understanding Product Levels and Marketing Strategies

Product, Services, Brands (Chapter 8) – 12 & 14

1. Provide examples of the three levels of a product for an Apple Smartwatch.
   
   

1. 1. Core customer value (Psychological need of fundamental benefit): Communication, make life easier (i.e., photos, Safari)
   2. Actual product (Brand name, features, design, quality level, packaging): Apple Watch, iPhone
   3. Augmented product (Post-sale service, product support, warranty, delivery, and credit): ?
      
      

2. Fill in the blanks for the types of consumer products.
   
   

3. What are the four ways in which services are different from products? Provide an example of each.
   1. Product: A market offering that can be offered for use or consumption that might satisfy a want or need
   2. Service: A market offering that is essentially intangible and does not result in customer ownership
      1. Intangibility, variability, inseparability, perishability (pg. 26-31)
         
         
4. List the five major product and service decisions that marketers need to make.
   
   

            Performance quality: The product’s ability to perform its functions.

            Conformance quality: The product’s ability to consistently deliver a targeted level of performance.

5. Know the types of product attributes we have discussed in class (e.g., search, experience, credence). To help you practice, classify the following product attributes:

2. 1. • Search attributes: can be evaluated prior to consumption (e.g., price, MPG, color)
      • Experience attributes: can only be evaluated after consumption (e.g., taste, comfort, entertainment)
      • Credence attributes: cannot be evaluated, even after consumption (e.g., dog food, eco-friendly)

1. • The ingredients in medicine or multivitamins (credence)
   • Television, computer, or tablet screen size (search)
   • Cologne or perfume scent (experience)

Marketing Product Features

Goal = Acquisition  emphasize search (strong visuals, highlight main attributes in ads) and experience (free samples, review vlogs, commercials with customer POV)

Goal = Retention  emphasize credence (third-party certification, transparency, word-of-mouth)

6. List at least three functions of branding that help either for consumers or firms:
   
   

Brand: Name, term, etc. or a combination of them intended to identify the goods and services of seller(s) and to differentiate them from competition.

            Consumer:

7. 1. Function #1: Brands as information/quality signals
   2. Function #2: Brands as forms of self-expression
   3. Function #3: Brands create fluency
   4. Function #4: Brands impact how we experience products

Firm:

3. 1. • Brands command price premiums
      • Brands help segment markets
      • Brands create barriers to entry
        
        

8. Why did changes to brand logos and packaging (e.g., Tropicana) fail? See below.
   
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Packaging (strong driver of consumer choice): communicates brand positioning, attracts buyers by standing out visually, packaging safety

4. 1. • 35 M in advertising and investing in change
      • 20% loss in sales in first 2 months
      • Why? Brand logos evoke strong feelings of connection to a brand
        
        

9. Describe each of the four brand development strategies. Give an example.

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10. Label the product width, product depth, and product length on the product portfolio diagram below.

Width: # of different product lines

Length: # of items within the product lines

Depth: # of versions of each product

Consistency: How closely related the product lines are

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11. What is the difference between product line filling and product line stretching?

Product Line: A group of products that are closely related

Line filling: Adding more items within the product line

Line stretching: Lengthen the product line either upward or downward, or both

Developing New Products (Chapter 9) - 15

1. Why do companies innovate? List 3-4 reasons.
   Comes from crisis, from observing usage, need to differentiate, need for optimal distinctiveness,

2. Name one internal source of innovation and two external sources of innovation.
   Internal: Research & development, employees

External: Distributors & suppliers, competitors, customers

3. What is optimal distinctiveness? How does this explain why the launch of Crystal Pepsi failed?

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4. What are each of the five product life cycle stages? Outline the direction (e.g. increasing, decreasing, stable) of sales and profits of each stage, and the typical promotion goals of each stage.
   
   

Pricing (Chapter 10 & 11)

1. What are the three primary pricing strategies?

5. 1. • Customer value-based pricing: How much will consumers value my product?

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6. 2. • Cost-based pricing: How much does it cost to manufacture my product?
      • Competition-based pricing: How much does my value compare to my competitor’s value?
        
        

2. What is the difference between fixed and variable costs? Know examples of each.

Fixed: Do not vary with production levels (e.g., rent, machinery, employee salaries, etc.)

Variable: Vary directly with the level of production (e.g., raw materials, packaging, etc.)

3. The 256 GB iPhone 15 Pro is priced at $1,099. For all the components, Apple’s costs for this device are estimated to be $523. What is Apple’s markup ($) and margin (%) on this iPhone model?

$523 * (1 + Markup) = $1,099  Markup = 110% (or $576)

Margin = Markup / $1,099 = $576 / $1099 = 52.4%

4. How do manufacturing costs vary with production levels and manufacturing experience?

Manufacturing costs first decrease with production levels due to efficiency gains then increase due to diseconomies of scale. Manufacturing costs decrease with experience as companies get better at producing the products.

5. Name two types of customer-value based pricing and provide an example for each.

Good-value: Quality and service at a fair price (e.g., Target (higher quality for the same price), Costco (same quality for a lower price)

Value-added: Add competitive features to support a higher price (e.g., Peloton bikes)

6. What does a demand curve show? What kinds of goods are elastic vs. inelastic? For what kind of price elasticity (elastic vs. inelastic) is it a better idea to decrease prices? For which types of goods is the demand curve negative (vs. positive)?

Demand curve shows the relationship between price and quantity. Goods that are more elastic include: Necessity goods; goods with few alternatives; products that have strong brand loyalty; products targeted to those with high disposable income Goods that are inelastic include: Comfort or luxury goods; goods with plenty of substitutes; products that have weak brand loyalty; products targeted to those with lower disposable income It is usually better to decrease prices when demand is elastic since there is greater demand response. For Veblen goods (i.e. high luxury or high status products), demand curve can be positive.

7. Suppose Aloha Beer is forecasting sales of 20,000 pints of beer in 2026 if they set an average price of $9. Their brewery and equipment rentals for the year is $50,000, and their ingredient and labor cost per beer is $5. Will Aloha Beer breakeven based on the $9 price point and demand forecast? How many units would Aloha Beer need to sell to break even?

Fixed cost = $50,000. Variable cost = $5. Price = $9.

Breakeven Volume = fixed cost / (price – variable cost) = 50,000 / (9 – 5) = 12,500

Yes, Aloha Beer will breakeven based on the forecasted sales. Aloha Beer needs 12,500 to breakeven if selling at a price of $9 per beer.

8. Describe and provide an example for each of the following pricing strategies:
   
   

Channel Strategy (Chapter 12) - 18

1. List 3-5 different ways that channel intermediaries add value to firms and consumers.

Information, promotion, contact, matching, negotiation, physical distribution, financing, risk-taking. Intermediaries reduce the number of transactions.

2. Why might there be conflicts among channel members? Distinguish between both vertical and horizontal types of conflict and provide an example of each.

Want higher margins and commissions, do not know much about your product, do not carry the entire product line, favor competitor’s products, do not pass through price promotions to final customers, compete for the same customers

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3. Describe what the double marginalization problem is and why it might occur. What is one possible solution to this problem?

(1) An independent retailer sets a high price to maximize its own profit | (2) the manufacturer also seeks to maximize its own profit.

Excessive margin for the entire channel can exclude consumers who would be profitable clients for an integrated channel.

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Solution: quantity discounts  more retailer buys, lower the per-unit price

4. What is the difference between a direct and an indirect distribution channel? Why would a company want to use a direct vs. indirect channel?

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Direct: Selling directly to the end consumer.

Indirect: Going through at least one intermediary channel member.

Advantages of going direct: Simpler to manage, more control over which consumers you are selling to and the prices and promotions that you are using. Disadvantages of going direct: There is potentially limited breadth of distribution when going direct to consumer.

5. What is a vertical marketing system? Provide an example of each of the following three types of vertical marketing systems.

Definition: Provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system.

6. • Corporate VMS: Warby Parker (Apple)
   • Contractual VMS: McDonald's (Subway)
   • Administered VMS: P & G (Unilever)
     
     
7. What is a horizontal marketing system? Provide an example.

Definition: A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity (e.g., Starbucks in Target).

8. What is disintermediation?

The cutting out of marketing channel intermediaries by producers or the displacement of traditional resellers by new intermediaries. Driven by the internet and technological advancements.

Retailing (Chapter 13) - 19

1. What is the difference between a multichannel and an omnichannel?
   Shopper marketing: Focusing the entire marketing process on turning shoppers into buyers as they approach the point of sale, whether during in-store, online, or mobile shopping.

Omnichannel marketing: a seamless cross-channel buying experience that integrates in-store, online, and mobile shopping. Multiple connected channels, consumer uses multiple channels for a purchase.

Multichannel: Multiple siloed channels, consumer uses only one channel for a purchase

2. What are four dimensions in which retailers can be classified?

Amount of service, product line, relative prices, and organizational form.

3. Walmart is well-known for popularizing everyday low pricing (EDLP) among retailers. Describe both EDLP and high-low pricing. Why might some retailers use EDLP? Why might others use high-low pricing? Why might some retailers decide not to compete on price?

• Everyday low pricing (EDLP) Charging consistent low prices and offering few sales or discounts • High-low pricing Charge higher prices regularly, with frequent sales and other price promotions • Why would a retailer engage in EDLP? Build trust that the retailer is always selling at a low price and good value • Why would a retailer engage in high-low pricing? In most cases, it is to increase store traffic, clear out unsold merchandise, create a low price image, or attract customers who will buy other goods at full price. • Why would a retailer not compete on price? Compete on product and service quality

4. List three economic and social consequences of the COVID-19 pandemic on the retail landscape.

• Consumers have become more frugal • Consumers have shifted more towards online shopping • Stores and restaurants have focused more on their atmospherics and store experience they provide in their physical locations

Integrated Marketing Communications (Chapter 14)

1. What are the five elements of the promotion mix?

Promotion: The activities used by firms to communicate the value of a product/service to the target market.

Elements: Advertising, public relations, promotion, personal selling, direct and digital marketing

2. List the six steps for planning effective marketing communication.

Who should we talk to (target)

What do we want to happen (objective)

What should we say (message)

Where, when, how often should we say it (media)

How much do we need to spend (budget)

Campaign evaluation (evaluation)

3. What is the difference between cognitive appeal and affective appeal in marketing communications? When does a marketer want to leverage each of these in their promotions?

Cognitive (rational) appeal: desired benefits, quality (e.g., economical, good value, high performance)

7. 1. • Used to change attitudes along the central route in advertising

Affective (emotional) appeal: positive or negative emotions, brand image (e.g., high social status, warm or sincere brand)

8. 2. • Used to change attitudes along the peripheral route in advertising.
        
        

4. Which method for setting the total promotion budget is the most effective, yet requires the most effort to calculate?

Objective-and-task method

5. What is the difference between a push and a pull promotion strategy?

Push: “Pushes” the product from the manufacturer through the marketing channels to the final consumers. Marketing activities are directed to channel members (e.g. personal selling and trade promotions), who in turn promote to final consumers. Pull: A manufacturer’s marketing activities are directed to the final consumers (e.g. advertising and consumer promotion) to stimulate demand for the product. End consumers then “pull” the product through demanding it from the channel members, e.g. retailers, who then in turn demand it from the manufacturer.

Advertising (Chapter 15) – 21

1. When and how can a marketer use advertising to inform, persuade, and remind? Fill in the following table to help you organize your thoughts.
   
   

2. What are brand integrations? List 3 types. When does brand integration backfire for brands?

Brand integrations make the brand a part of a form of entertainment or content.

Product placement: branded items as props

Product written into a script: product/brand as an integral part of the story

Native advertising: creating content that appears “native to” the platform or content website that is intended to promote the brand

Brand integrations can backfire if they are too explicit, leading to consumers disliking the brand because they are too obvious.

3. What is the difference between reach and frequency in media planning? Impact versus engagement?

Reach: % of people who are exposed to an ad Frequency: The average number of exposures to an ad Impact: The qualitative value of message exposure through a given media Engagement: How much the advertisement engages (rather than just reaches) the consumer

4. Imagine that Foodland Farms has $200,000 to spend on print media (e.g., magazines, flyers) and $100,000 to spend on digital media (e.g., websites, YouTube ads). These figures include both the budget required to launch the ads within each medium and the budget required to produce the content itself. Imagine that 500,000 unique consumers are exposed to the ads and each customer sees an average of 3 ads. What is Foodland’s advertising effectiveness, calculated in terms of advertising costs per thousand customers (or CPM)?

Total ad spend = $200,000 + $100,000 = $300,000 Ad exposures = Reach x Avg. Frequency = 500,000 x 3 = 1,500,000 CPM = (Total ad spend / ad exposures) x 1000 = ($300,000 / 1,500,000) x 1000 = $200 CPM

5. Advertising during the Super Bowl costs a company about $7M for a 30-second commercial. Based on what we have discussed in class, do you think that advertising during the Super Bowl is effective? Why or why not?

Due to the tremendous amount of exposure that an ad gets (there is very large reach as well as relatively high frequency due to pre, during, and post discussion about the ads), the Super Bowl ads are quite effective from a CPM standpoint. Additionally, the ads generate a lot of word-of-mouth and increase brand reputation. However, it is less effective compared to other advertising driving actual visits to a brand’s website. Depending on the advertising objective, it might not make sense given the high cost.

Personal Selling and Sales Promotion (Chapter 16)

1. Be able to identify the three types of sales force structures.
   Territorial (based on regional/geographic needs) Product (based on product/category specific needs) Customer (based on the needs of major customers)
2. According to self-determination theory, what are the three key sources of intrinsic motivation? For each source, provide an example of how companies can incorporate it into their organization to motivate their salespeople.
   
   
   • Source: Autonomy
     • Example: Company communicates that salespeople are instrumental
   • Source: Competence
     • Example: Performance reviews and growth/training opportunities
   • Source: Relatedness
     • Example: Team building within the salesforce team and with clients
       
       
3. What is one way that companies can try to extrinsically motivate their salespeople?
   Providing cash incentives/bonuses to reward good sales performance.
4. Name at least two advantages and two disadvantages of incorporating AI agents into personal selling and provide explanations for each.
   Advantages: Rational and logical thinking potentially reduces biases Limited negative emotions when dealing with potentially negative customers Saving costs by having fewer salesforce salaries Automation for repetitive or low-priority tasks

Disadvantages: Cost of the technology itself Limited empathy and social engagement Time to set up AI agents to cover all relevant use cases Customers may not like talking to a chatbot

5. What are the short-run and long-run objectives of sales promotions?
   Short-run: Generate excitement and stimulate demand

Long-run: Build customer relationships and increase brand image and loyalty

6. List 3-5 different types of consumer promotions.
   Coupons, samples, rebates, price packs, premiums, point-of-purchase displays, events, contests/sweepstakes/games
7. Companies have to compete with other companies for shelf space of their brands and products at major retailers, like Target. How do companies incentivize retailers to carry their products and to give optimal shelf space?

Through trade promotions, including: Discounts (straight price reductions off list price) Allowances (discount with agreement to feature a brand/product) Free goods (offer of a free bundle of goods after reaching a certain quantity purchased) Push money (cash gifts to dealers/sales forces to promote the goods)