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TF Preparatory Guide Assessment 3 Spring 2011

TF Preparatory Guide Assessment 3 Spring 2011 - ASSESSMENT...

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Unformatted text preview: ASSESSMENT 3 TRUE/FALSE PREPARATION GUIDE REVEEW SESSéflN SUNDAY AP ‘g BA 202 fizGG~6zO®pM VOLUNTARY AT?ENDANCE F 10. 11. l2. 13. 14. 15. 16. 17. 18. . The product life cycle concept is concerned with planning for product recycling to protect the environment. The product life cycle is the four stages a new product idea goes through from beginning to end. Market introduction, market growth, market maturity, and sales decline are the four stages of the product life cycle. During the various stages of the product life cycle, the attitudes and needs of target customers do not change. Sales and profits generally decrease continually throughout the product life cycle. The market introduction stage of the product life cycle is usually marked by losses, as money is being invested in the hope of future profits. In the market growth stage of the product life cycle, firms usually earn smaller profits than they did in the market introduction stage because new competitors enter the market. During the market growth stage of the product life cycle, industry profits usually reach their peak and begin to decline. The market maturity stage of the product life cycle has very low promotion expenditures, little price competition, and rising industry profits. Industry profits usually decline steadily during the market maturity stage of the product life cycle. The market maturity stage of the product life cycle rarely lasts more than one or two months. During the sales decline stage of the product life cycle, no firm can earn a profit. Product life cycles describe industry sales and profits within a particular product-market, and not the sales and profits of individual products or brands. The product life cycle shows that sales of an individual firm's product follows a general pattern—— which is very useful for marketing strategy planning. The sales and profits of an individual brand may or may not follow the life cycle pattern of the product idea. A firm may introduce or withdraw a product during any stage of the product life cycle. It's possible for a firm with a mature product in the US. to experience new growth with the same product in international markets. To fully understand the nature of competition and the speed of the relevant product life cycle, it is important not to define a market too narrowly. Page 1 F 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. The more narrowly we define a product—market, the shorter the product life cycle because improved product ideas come along to replace the old. The length of each stage in the product life cycle is set. The product life cycle concept tells a manager how long each stage of the cycle will last. The smaller the comparative advantage of a new product over those already on the market, the faster its sales will grow. Sales growth is faster when a new product is easy to use and its advantages are easy to communicate. Sales growth is faster when the product can be used on a trial basis. Sales growth is usually faster when the product is incompatible with the past values and experience of the target market. In general, product life cycles appear to be getting longer in recent years. Having a patent on a new product provides very strong protection in slowing down competitors. Firms should try to develop marketing mixes that make the most of the market growth stage of the product life cycle--when profits are highest. The stage of the product life cycle in which competitors are most likely to introduce product improvements is the market growth stage. Fashion changes are a luxury that most people in less-developed economies can't afford. A fad cycle is shorter than a fashion cycle. The probable length of the product life cycle has little effect on strategy planning. Marketing strategy planning for a product depends on where the product is in its life cycle and how fast it is moving to the next stage. When introducing a really new product, the marketer should be concerned about building channels of distribution, but not about promotion. How quickly a new product will be accepted by customers and how quickly competitors will follow with their own version of a product are important factors when planning the best strategy for a new product. The strategies for all stages of the product life cycle should be growth strategies. If the prospects in some product-market are poor, a firm may need a "phase out" strategy. Page 2 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. To be called "new" according to the F TC, a product must be entirely new or changed in a functionally significant or substantial respect. The risks and costs of failure in new~product development are minor when one considers the likely rewards. Experts estimate that 70-80 percent of all new consumer packaged goods brands fail. In the new-product development process discussed in class, the burden is on the new-product idea to prove itself or be rejected. When planning new products, managers need not be too concerned about safe design because it is each consumer's responsibility to decide what products are safe to buy and use. If an individual is injured by a defective or unsafely designed product, the seller's legal obligation to pay damages is called product liability. Even in a full—scale market test, the firm is testing only the product, not the whole marketing mix. Test marketng can be risky because it gives information to competitors, but not testing may be even riskier. New-product development usually fits into the old routines of a firm, so it is not necessary for top management to support new-product development in any special way. Finding "competitive advantages" is important because they are needed for survival in increasingly competitive markets. Differentiation means that the marketing mix is distinct from and better than what is available from a competitor. Differentiation often requires a firm to fine-tune its marketing mix to meet the specific needs of its target market(s). Differentiation emphasizes uniqueness rather than similarity. Differentiation emphasizes similarity rather than uniqueness. Marketing opportunities involving present products and present markets are called "market penetration" opportunities. The Martinez Company has just modified and enlarged its product line to meet the changing needs of its current customers. This is an example of "market development." When Cadillac added a new sport utility vehicle to the "luxury—oriented" selection at its existing dealers, it was seeking "market development" opportunities. Page 3 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. If Burger King added tacos to the "burger-oriented" menu in its existing restaurants, it would be seeking "market development" opportunities. A firm which tries to increase sales by selling new products in new markets is purusing "market development" opportunities. Marketing opportunities that involve moving into totally different lines of business are "diversification" opportunities. Effective market segmentation is a two—step process that starts with naming broad product- markets and then goes on to segmenting these broad product—markets into more homogeneous submarkets. Market segmentation says that target marketers should develop one good marketing mix aimed at a fairly large market. Ideally, segmenters should start with the idea that each person is "one of a kind" and can be described by a special set of dimensions that may be used to aggregate similar customers together. One of the difficult things about segmenting is that not every customer will neatly fit into some market segment. A "substantial" market segment is one which is big enough to be profitable. The more heterogeneous a firm's target market becomes, the more likely the firm will see competition from an innovative segmenter. When segmenting markets, one should look at geographic location and demographic characteristics as well as customers' desire and willingness to compare and shop, but behavioral needs aren't important for this purpose. Market segmentation applies only to consumer goods and services; it cannot be applied to business products. Clustering techniques can be used in segmenting to help find similar patterns within sets of data—— to identify homogeneous groups of people. "Positioning" shows how proposed and/or present brands are located in a market-—as seen by customers. "Positioning" means using a map to show where a firm's products are distributed geographically. Place is concerned with the selection and use of marketing specialists--middlemen and facilitators-—to provide target customers with time, place, and possession utilities. Firms that use direct distribution can usually adjust their marketing mixes faster than firms that use indirect distribution. Page 4 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. Aggressive, market-oriented middlemen are almost always available and eager to handle the distribution of innovative, new products. Some firms are forced to use direct distribution when they can't find middlemen willing to carry innovative, new products. Selling direct-to-customer is more common with business products than consumer products. Direct marketing is primarily concerned with Promotion, not Place. A producer who wants to reach certain customers may have no choice about which wholesaler to use. A wholesaler might help a producer by reducing the producer's need to carry large inventory stocks. A wholesaler might help a producer by reducing the producer's need for market research. The most important reason to use indirect channels is if middlemen can help serve customers better and at lower cost. Discrepancies of quantity occur because individual producers want to produce large quantities of products while individual consumers prefer to buy products in small quantities. Discrepancies of assortment occur because individual producers tend to specialize in producing a large assortment of products while individual consumers prefer to buy a small assortment of products. Discrepancies of quantity and assortment occur because individual producers find it economical to produce and sell small quantities of a large assortment of products while individual consumers prefer to buy large quantities of a small assortment of products. "Regrouping activities" involve adjusting the quantities and/or assortrnents of products handled at each level in a channel of distribution. Accumulating involves collecting products from many small producers-~0ften as a way to get lower transportation rates. Bulk—breaking means separating products into grades and qualities desired by different target markets. Assorting activities involve putting together a variety of products to give a target market what it wants. In an indirect channel of distribution, both vertical conflict and horizontal conflict may arise. A "channel captain" is a manager who helps direct the activities of a whole channel. Page 5 F 99. F100. F101. F102. F103. F 104. F105. . Most traditional channel systems don't have a channel captain. . In administered channel systems, vertical cooperation is achieved by acquiring firms at different levels of activity. . Administered and contractual channel systems are vertical marketing systems which depend on informal agreements—-or contracts between channel members-40 cooperate. . "Ideal market exposure" should make a product widely enough available to satisfy target customers’ needs, but not exceed them. . Intensive distribution is selling a product through all responsible and suitable wholesalers or retailers who will stock and/or sell the product. . Intensive distribution is selling through only those middlemen who will give the product special attention. . Selective distribution is growing in popularity because it provides 100 percent coverage of the market. . Exclusive distribution is selling through only one middleman in each geographic area. . Exclusive distribution is more likely to involve a written agreement than is selective or intensive distribution. . Compared to intensive distribution, selective distribution gives a producer a greater opportunity for profit but usually makes it more difficult for middlemen to make a profit. . A manufacturer that uses several competing channels to reach the same target market is using "dual distribution." A manufacturer may be forced to use dual distribution because a big retail chain wants to deal directly with it instead of wholesalers. Reverse channels may provide a way to retrieve unwanted products from middlemen, business customers, or final consumers. Just-in-time delivery reduces storing and handling costs for business customers. A channel of distribution is part of a broader network of relationships called a chain of supply. A channel of distribution is part of a chain of supply. A chain of supply includes all the activities involved in procuring materials, transformng them into products, and distributing them to customers. In both a chain of supply and a channel of distribution, the primary aim should be to create maximum value for the customer. Page 6 F 106. F107. F108. F 109. F110. F111. F112. F113. F114. F115. F116. F117. F118. F119. F 120. F121. F122. Retailing includes all of the activities involved in reselling goods to final consumers, but it does not include the sale of services to final consumers since services must be produced. Social class appeal is one of the emotional needs that seems to affect a consumer's choice of a retail store. A consumer's choice of a retail store appears to be based almost entirely on economic needs. Specialty shops are limited-line stores which aim at a carefiilly defined target market with a unique product assortment, good service, and knowledgeable salespeople. Department stores are stores which usually try to serve customers seeking a variety of convenience products. Mass-merchandisers have proved to be effective competitors in taking away department store customers. Large sales volume and efficient operation are usually very important for supermarkets, since net profits usually run 1 percent of sales or less. Super warehouse stores charge higher prices than supermarkets and focus on attracting customers who want better selections of perishables like meat and produce. Mass-merchandisers emphasize "hard goods" while discount houses emphasize "soft goods." Mass-merchandisers may have reached the market maturity stage of their life cycle since industry profits are declining. "Supercenters" are very large stores that specialize in selling a big variety of infrequently purchased products that would otherwise be hard for consumers to find. A consumer who went to shop at a "supercenter" would probably expect not only to be able to buy food and health care products, but also to leave dry-cleaning or have shoes repaired. In addition to food, warehouse clubs carry homogeneous shopping goods. Convenience food stores now compete with grocery stores, gas stations, and fast—food outlets. The sale of candy from a vending machine at a bus station is not considered retailing since no store is involved. The major advantage of vending machine retailing is that the costs are low relative to the volume they sell. Electronic shopping, which puts catalogs on cable TV or Internet websites, got off to a slow start but is making headway now. Page 7 F123. F 124. F125. F126. F 127. F128. F 129. F130. F131. F132. F133. F134. F135. F136. F137. F138. The "wheel of retailing" theory says that new retailers enter the market as high—status, high— margin, high—price operators and then evolve into discount stores as competition becomes more intense. The "wheel of retailing" theory fails to explain some major retailing developments, such as vending machines and convenience food stores, which did not enter the market with a low—price emphasis. "Scrambled merchandising" refers to the practice of conventional retailers handling many products within a limited-line, even though many of these products have to be sold at a low profit. Retailers who carry any product line that will sell profitably are practicing "scrambled merchandising." Scrambled merchandising means mixing product lines for higher profits. The product life cycle concept applies to retailers as well as products. Application of the product life cycle concept to retailing suggests that all types of retailers are in early market growth due to continually increasing family income. Corporate chains are taking a smaller percentage of retail sales now that consumers are demanding lower prices. The growth of cooperative chains of retail stores is due to the desire of small retailers to achieve some of the benefits of large-scale corporate chains. "Cooperative chains" are retailer-sponsored groups formed by independent retailers to run their own buying organizations. "Voluntary chains" are retailer—sponsored groups—-and "cooperative chains" are wholesaler- sponsored groups-which work together to better compete with corporate chains. Unlike franchise operations which tend to focus on newcomers to retailing, voluntary chains tend to work with existing retailers. Agent middlemen usually have higher operating expenses (as a percentage of sales) than merchant wholesalers. Merchant wholesalers account for over 50 percent of all wholesalers. A hardware wholesaler that buys nails from a manufacturer and then sells them to retail hardware stores is a merchant wholesaler. "Merchant wholesalers"--who take title to the products they sell—~are the most common type of wholesaling establishment. Page 8 F139. F 140. F141. F142. F143. F 144. F145. F 146. F147. F148. F 149. F 150. Service wholesalers may be either general merchandise, single—line, or specialty wholesalers. General merchandise wholesalers handle a wide variety of nonperishable items-—and usually serve many different kinds of retail stores. Limited-function wholesalers provide only some of the wholesaling functions. Limited—function wholesalers provide all of the basic wholesaling functions, except that they do not take title to the products they sell. Cash-and—carry wholesalers do not deliver products or grant credit, but their costs are high relative to other types of wholesalers because of all of the other services they provide to small retailers. Drop-shippers have low operating costs because they do not actually handle the products they sell. Drop—shippers keep adequate quantities of every product they carry in their own warehouses so that they can ship them out quickly. Agent middlemen do not own the products they sell, but they usually perform even more functions than a service wholesaler. Manufacturers' agents sell related products for several competing manufacturers. Manufacturers' agents try to work for one producer at a time so they can devote all their energies to that producer's products. Manufacturers’ agents do not take title to the products they sell-~and are paid a commission on sales. The "Product" that brokers sell is information about what buyers need and what supplies are available. Page 9 1F 2T 3T 4F 5F 6T 7F 8T 9F 10T 11F 12F 13T 14F 15T 16T 17T 18T 19T 20F 21F 22F 23T 24T 25F 26F 27F 28T 29T 30T 31T 32F 33T 34F 35T 36F 37T 38T 39F 40T 41T 42F 43T 44F 4ST 46F 47T 48T 49T SOT TRUE AND FALSE PREPARATORY STUDY QUESTIONS ASSESSMENT 3 51F 52T 53F 54F 55F 56F 57T 58T 59F GOT 61T 62T 63T 64F 65F 66T 67T 68F 69T 70T 71F 72T 73T 74T 75T 76T 77T 78T 79T 80F 81F 82T 83T 84F 85T 86T 87T 88T 89F 90T 91T 92T 93F 94F 95T 96T 97F 98T 99T 100T 101 T 102 T 103 T 104 T 105 T 106 F 107 T 108 F 109 T 110 F 111 T 112 T 113 F 114 F 115 T 116 F 117 T 118 T 119 T 120 F 121 F 122 T...
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