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Study Notes
Market Evolution
- Markets evolve through four stages: Emergence, Growth, Maturity, and Decline
- Each stage is characterized by distinct market dynamics and challenges
Emerging Market Strategies
- Companies may adopt Single-Niche, Multiple-Niche, or Mass-Market approaches to capitalize on opportunities
- Single-Niche: Focusing on serving a specific niche market with specialized products or services
- Multiple-Niche: Targeting multiple niche markets with different products or services tailored to each segment
- Mass-Market: Catering to a broad audience with products or services designed to appeal to a wide range of customers
Product Characteristics and Classifications
- Product Levels: Understanding the hierarchy of product benefits helps marketers create offerings that meet customer needs
- Core Benefits: Fundamental needs or problems that the product addresses for the customer
- Basic Product: Essential features and functions that directly address the core benefits
- Expected Product: Additional features and attributes that customers expect as standard
- Augmented Product: Extra features or services that exceed customer expectations
- Potential Product: Innovative or future-oriented features and capabilities that redefine the category
Product/Market Offering Hierarchy
- Hierarchy Levels: Products are classified into various levels to help marketers identify target markets and develop product lines
- Need Families: Broad categories representing fundamental consumer needs or desires
- Product Lines: Groups of related products marketed together
- Product Categories: Specific groupings within a product line
- Individual Products: Distinct items within a product category
Packaging and Labeling
- Packaging: Plays a crucial role in branding, protection, information communication, and sustainability
- Labeling: Provides essential information about products, including branding, ingredients, usage instructions, and regulatory compliance
Warranties and Guarantees
- Warranties: Assure customers of product quality and performance, providing recourse in case of defects or malfunctions
- Guarantees: Offer assurances of satisfaction or refunds if customers are not fully satisfied with their purchase
New Market Offering Options
- Make or Buy: Companies have the option to develop new market offerings internally or externally through acquisition
- Types of New Products: New products can range from entirely novel innovations to incremental improvements or extensions of existing offerings
Challenges in Developing a New Product
- Innovation Imperative: Firms must continually innovate to stay competitive
- Budgeting for New Product Development: Companies employ various approaches to budgeting, including allocating funds based on sales figures or desired outcomes
- Reasons for New Product Failure: New products may fail due to ineffective management, poor market research, design flaws, high development costs, incorrect positioning, or fierce competition
Organizing New Product Development
- 7 stages: Idea Generation, Idea Screening, Concept Development and Testing, Market Strategy Development, Business Analysis, Product Development, and Market Testing
- Crowdsourcing: Involves asking a large group of people for their input, ideas, or help with tasks
- Co-creation: Collaborative process where companies work with customers, partners, or employees to create new products or services
Consumer Adoption Process
- Sequential steps that influence consumers' adoption decisions: Awareness, Interest, Evaluation, Trial, and Adoption
- Readiness to Try New Products: Consumers exhibit varying degrees of readiness to try new products, categorized into segments such as innovators, early adopters, early majority, late majority, and laggards
Characteristics of Innovation
- Relative Advantage: How much better the new product is compared to existing options
- Compatibility: How well the new product fits with consumers' needs and habits
- Complexity: How easy it is for consumers to understand and use the new product
- Divisibility: Whether consumers can try the new product on a limited basis
- Communicability: How easily information about the new product can be shared and understood
Price-Related Definition of Value
- Value in pricing is defined as the perceived benefits a customer receives from a product or service minus the perceived price they pay
Importance of Price from a Marketing Perspective
- Price plays a critical role in shaping consumer behavior and has a significant impact on a company's profitability
- Small changes in price can lead to disproportionate effects on profits
Consumer Psychology and Pricing
- Reference prices: Internal benchmarks consumers use to evaluate whether a price is fair or a good deal
- Price endings: Influencing consumer perceptions, e.g., using 9 as the last digit (e.g., $9.99)
- Scarcity effect: Products that are scarce or perceived as difficult to obtain tend to be more desirable and valuable to consumers
Steps in Setting a Price
- ODCCMF: Selecting the price objective, determining demand elasticity, estimating costs, analyzing competitors, selecting a pricing model, and adapting the final price### Pricing Strategies
- Price Discounts and Allowances: Offering reductions in price to incentivize purchases or participation in promotions
- Promotional Pricing: Temporarily lowering prices to stimulate sales during promotions or special events
- Differentiated Pricing: Setting different prices for different customer segments, products, or channels to maximize revenue
Behavioral Decision Theory and Behavioral Economics
- Heuristics:
- Availability Heuristic: People judge the likelihood of an event based on how easily they can recall similar instances
- Representativeness Heuristic: People make judgments based on how closely something resembles a typical example or prototype
- Anchoring-and-Adjustment: People rely too much on initial information (the anchor) when making decisions and don't adjust enough when new information is presented
- Prospect Theory: Emphasizes loss aversion, leading to risk-averse behavior
Framing and Prospect Theory
- Framing: Presenting information to influence decision-making
- Attribute Framing: Highlighting different aspects of information
- Message Framing: Emphasizing potential gains or losses
- Goal Framing: Motivating people by offering rewards or penalties
Marketing Communications
- Role of Marketing Communications: Shaping consumer perceptions, driving purchase decisions, and building brand loyalty
- Marketing Communications Mix:
- Advertising: Building brand awareness and visibility through paid messages in traditional and digital media
- Sales Promotion: Encouraging immediate purchase behavior through incentives
- Public Relations: Shaping public perception and enhancing brand credibility
- Direct Marketing: Reaching consumers directly through channels like email, direct mail, or telemarketing
- Interactive Marketing: Engaging consumers through online platforms and interactive experiences
- Word-of-Mouth Marketing: Harnessing the power of recommendations and referrals
- Social Media Marketing: Utilizing social media platforms to connect with audiences and create brand awareness
Micro-Models of Communication Process
- Cognitive Stage: Consumers become aware of the message and process the information, forming perceptions and attitudes
- Affective Stage: Consumers develop emotional responses to the message, influencing their feelings and preferences
- Behavioral Stage: Consumers take action based on their cognitive and affective responses
Developing Effective Communication
- Understanding the Target Audience: Conducting research to identify demographics, psychographics, and behavior
- Defining Communication Objectives: Setting clear objectives aligned with marketing goals
- Crafting Compelling Messages: Developing message strategies that appeal to the target audience's emotions, values, and motivations
- Selecting the Right Channels: Choosing communication channels that reach the target audience effectively
- Implementing Integrated Campaigns: Integrating various communication tactics cohesively to create synergy and maximize impact
- Monitoring and Measuring Results: Tracking key performance metrics to evaluate the effectiveness of communication efforts
Managing Distribution Channels
- Role of Distribution Channel Members: Bridging the gap between producers and consumers, facilitating the movement of products and services
- Channel Levels:
- Zero-level channel: Direct selling from manufacturer to customer
- One-level channel: Involves one intermediary
- Two-level channel: Includes two intermediaries
- Three-level channel: Features three intermediaries
- Channel-Design Decisions:
- Analyzing customer needs and wants related to price, convenience, product assortment, and service level
- Understanding the five service outputs provided by channels: lot size, waiting and delivery time, spatial convenience, product variety, and service backups
Integrated Marketing Communications (IMC)
- Ensuring all communication efforts work together cohesively to deliver a consistent and unified brand message across multiple channels
- Coordinating various elements of the marketing communications mix to create synergy and amplify the impact of marketing efforts### New Product Development
- Failure to develop new products can leave companies vulnerable to changes in consumer preferences, emerging technologies, and increased competition
- Companies employ various approaches to budgeting for new product development, including allocating funds based on sales figures, competitor spending, or desired outcomes
- Reasons for new product failure include ineffective management, poor market research, design flaws, high development costs, incorrect positioning, or fierce competition
Organizing New Product Development
- The process consists of eight stages:
- Idea Generation: generating a wide range of potential ideas for new products or innovations
- Idea Screening: evaluating and screening ideas to determine which ones have the most potential for further development
- Concept Development and Testing: developing selected ideas into concrete concepts or prototypes and testing them with target customers
- Market Strategy Development: developing a comprehensive market strategy for bringing the new product to market
- Business Analysis: evaluating the financial viability and potential return on investment of the new product
- Product Development: designing, engineering, and manufacturing the product according to finalized specifications and requirements
- Market Testing: testing the product in a real-world environment to assess its performance
- Commercialization: launching the product to the target market
Crowdsourcing and Co-creation
- Crowdsourcing involves asking a large group of people for their input, ideas, or help with tasks
- Co-creation is a collaborative process where companies work with customers, partners, or employees to create new products, services, or solutions together
- Both can play significant roles at various stages of organizing new product development
Consumer Adoption Process
- The consumer adoption process describes the stages individuals go through when deciding to adopt a new product:
- Awareness: becoming aware of the existence of the new product or service
- Interest: showing interest and seeking more information about the product or service
- Evaluation: evaluating the product or service based on its features, benefits, and how it meets their needs
- Trial: trying the product or service on a small scale to experience its benefits firsthand
- Adoption: deciding to adopt the product or service on a regular basis
- Consumers exhibit varying degrees of readiness to try new products, categorized into segments such as innovators, early adopters, early majority, late majority, and laggards
Innovations and Characteristics
- Innovations possess characteristics that influence their rate of adoption among consumers:
- Relative advantage: how much better the new product is compared to existing options
- Compatibility: how well the new product fits with consumers' needs and habits
- Complexity: how easy it is for consumers to understand and use the new product
- Divisibility: whether consumers can try the new product on a limited basis
- Communicability: how easily information about the new product can be shared and understood
Pricing Strategies
- Price-related definition of value: the perceived benefits a customer receives from a product or service minus the perceived price they pay for it
- Importance of price from a marketing perspective: price plays a critical role in shaping consumer behavior and has a significant impact on a company's profitability
- Consumer psychology and pricing: consumer psychology influences how people perceive prices
- Steps in setting a price:
- Selecting the price objective based on strategic goals
- Determining demand elasticity
- Estimating costs
- Analyzing competitors' prices and offerings
- Selecting a pricing model
- Adapting the final price through strategies like geographical pricing, discounts, or differentiated pricing
Behavioral Decision Theory and Behavioral Economics
- Behavioral economics examines how psychological factors influence economic decisions
- Concepts like heuristics, availability heuristic, representativeness heuristic, anchoring-and-adjustment, and prospect theory help explain why people may make irrational choices in pricing situations
Marketing Communications
- Marketing communications play a pivotal role in shaping consumer perceptions, driving purchase decisions, and building brand loyalty
- The marketing communications mix encompasses various tools and tactics, including advertising, sales promotion, public relations, direct marketing, personal selling, interactive marketing, and social media marketing
- Micro-models of communication process focus on understanding how individuals respond to marketing messages, involving cognitive, affective, and behavioral stages
Effective Communication
- Creating effective communication involves several key steps:
- Understanding the target audience
- Defining communication objectives
- Crafting compelling messages
- Selecting the right channels
- Implementing integrated campaigns
- Monitoring and measuring results
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Description
Learn about the four stages of market evolution: Emergence, Growth, Maturity, and Decline. Understand the different strategies companies adopt in emerging markets, including Single-Niche, Multiple-Niche, and Mass-Market approaches.
