Chapter 9

1. Explain how companies find and develop new product ideas.

a. Find : Acquisition: the buying of a whole company, a patent, or a license to produce
someone else’s product.
b. Develop : New product development: original products, product improvements,
product modifications, and new brands developed from the firm’s own research and
development.

2. List and define the steps in the new product development process

1) Idea Generation : the systematic search for new product ideas.

2) Idea Screening : Identify good ideas and drop poor ideas.
3) Concept Development and Concept Testing : An attractive idea must be developed into
a product concept.
4) Marketing strategy development : is the activity of designing an initial marketing
strategy for introducing the new product to the market based on the product concept.
5) Business analysis : is a review of the sales, costs, and profit projections for a new
product to find out whether these factors satisfy the company’s objectives.
6) Product development : developing the product concept into a physical product to
ensure that the product idea can be turned into a workable market offering.
7) Test marketing : the product and its proposed marketing program are tested in realistic
market settings.
8) Commercialization ( new product launching ) : involves introducing a new product into
the market.

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3. List and explain the sources of new product ideas
a. Internal Sources: R&D, executives, employees, sales people, scientists, engineers,
and customers
b. External Sources: distributors (retailers, wholesalers), suppliers, competitors, and the
most important are the consumers
c. Crowdsourcing: inviting broad communities of people—customers, employees,
scientists and researchers, and even the public at large—into the new product
innovation process.

4. Distinguish among a product idea, a product concept, and a product image.

a. Product idea: an idea for a possible product that the company can see itself offering
to the market
b. Product concept: is a detailed version of the idea stated in a meaningful consumer
terms
c. Product image: is the way the consumer perceives an actual or potential product

5. List and define the major considerations in managing the new product development
process.
a. Customer-centered new product development: Most successful new products are
the ones that are: differentiated, solve customer problems and offer a compelling
customer value proposition
b. Team-based new product development: various company departments working
closely together (cross-functional teams), overlapping the steps in the product
development process vs. sequential order approach
c. Systematic new product development : The new product development should be
holistic and systematic. Otherwise, many good ideas will die .
Companies install an innovation management system to collect, review, evaluate
and manage good product ideas.

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6. Defined the product life cycle ( PLC ) , list and explain each stages in the PLC.
PLC : the course of a product’s sales and profits over its lifetime

a. Product development: zero sales and increasing investment costs

b. Introduction: slow sales and no profits
the stage in which a new product is first distributed and made available for purchase.
c. Growth: rapid market acceptance and increasing profits
the stage in which a product’s sales start climbing quickly.
d. Maturity: slow sales growth and profits decline
the PLC stage in which sales growth slows or levels off.
e. Decline: sales fall off and profits drop
the stage in which product’s sales fade away.

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7. List the advantages and disadvantages of PLC

Advantages : 1. Describing how products and markets work.

2. Develop marketing strategies for its different stages

Disadvantages : 1. Difficult to forecast the sales level at each PLC stage

2. Difficult to forecast the length of each stage
3. Difficult to forecast the shape of the PLC curve

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 Chapter 10

1. List and explain the 3 major pricing strategies

a. Customer value-based pricing : setting price based on buyer’s perceptions of value
rather on the seller’s cost.
b. Cost-based pricing : setting prices based on the costs of producing, distributing, and
selling the product plus fair rate of return for effort and risk.
c. Competition-based pricing : setting prices based on competitor’s strategies, prices,
costs, and market offerings.

2. Compare between the value-based pricing and cost-based pricing

3. List and explain the types of Value-based pricing

a. Good - Value Pricing: offering the right combination of quality and good services at
a fair price.
b. Added - Value Pricing: attaching value-added features and services to differentiate a
company’s offers and charging high prices (AMC theater chain)

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4. List and explain the types of cost
a. Fixed costs (overhead): costs that do not vary with production or sales level.
E.g. rent, heat, interests, salaries
b. Variable costs: costs that vary directly with the level of production.
E.g. raw material, packaging
c. Total cost: are the sum of fixed and variable costs for any given level of production.

5. List and explain the 4 types of market

a. Pure competition
▪ Market consists of many buyers and sellers, trading in a uniform commodity, such as
wheat, copper.
▪ No single buyer or seller has much affect on the market price.
▪ In this market, marketing research, product development, pricing, and promotion
play little or no role.
▪ Thus, sellers in these markets do not spend much time on marketing strategy.

b. Monopolistic competition
▪ The market consists of many buyers and sellers trading over a range of prices
▪ A range of prices occur because sellers can differentiate their offers to buyers
▪ Each firm is less affected by competitor’s pricing strategy, because there are many
competitors
▪ Sellers try to develop differentiated offers for different customer segments, and, in
addition to price, use branding, advertising and personal selling to set their offers
apart.

c. Oligopolistic competition
▪ the market consists of only a few large sellers.
E.g. only four companies control more than 90% of the U.S. wireless service provider.
▪ Because there are few sellers, each seller, is alert and responsive to competitors
pricing and marketing strategies.

d. Pure monopoly
▪ the market is dominated by one seller.
▪ The seller may be a government monopoly (U.S. postal service), a private regulated
monopoly (a power company), or a private unregulated monopoly (De Beers and
diamonds).
▪ Pricing is handled differently in each case.

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 Chapter 11

1. List and explain the additional pricing strategies.

a. New Product pricing : Pricing strategies change as the product passes through its
life cycle. The introduction stage is especially challenging.
b. Product Mix pricing : the strategy for setting a price when the product is part of a
product mix.
c. Price Adjustment tactics : Companies usually adjust their basic prices to account
for customer differences and changing situations.
d. Strategies for initiating and responding to Price Changes

2. Companies can choose between two broad strategies in the introduction stage or
compare between the market-skimming pricing and market-penetration pricing.

a. Market - Skimming Pricing ( Price Skimming ) : setting a high price for a new
product to (skim) maximum revenues layer by layer from the market; the company
makes fewer but more profitable sales.
E.g. when Apple first introduced iPhone its initial price was $600. Six months later,
Apple dropped the price to $400. Within a year, it dropped prices again to $200.

b. Market - Penetration Pricing : setting a low price for a new product in order to
attract a large number of buyers and a large market share.
E.g. Samsung used penetration pricing to quickly build demand for its mobile
devices in fast growing markets. Galaxy Pocket – Kenya, Nigeria, and Africa

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3. List and explain the five product mix pricing situations

a. Product Line Pricing is the activity of setting prices across an entire product line.
That is setting the price steps between various products in a product line based on
costs differences between the products, customer evaluation, and competitors'
prices.

b. Optional-Product Pricing is the activity of pricing optional and/or accessory

products (features) that are sold with the main product; that is, adding the price
features to the price of the main product.
E.g. a car buyer may choose to order a navigation system

c. Captive-Product Pricing is the activity of pricing products that must be used with
the main product; if not, the main product becomes useless.

d. By-Product Pricing is the activity of setting a price for by-products in order to make
the price of the main product more competitive.
E.g. Coca-Cola converts waste into food flavorings, cleaners

e. Product Bundle Pricing is the activity of combining several products in and offering
the bundle (one offer) at a reduced price.
E.g. fast-food restaurants bundle a burger, fries and a soft drink at a “combo” price

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4. List and explain the price adjustment strategies
a. Discount and Allowance Pricing:
1- Discount: a straight reduction in price on purchases during a stated period of time
2- Allowances: promotional money paid by manufacturers to retailers in return for an
agreement to feature the manufacturer’s products in some way.
b. Segmented Pricing: selling a product at two or more prices, where the difference in
prices is not based on differences on costs.
c. Psychological Pricing: pricing that considers the psychology of prices and not simply
the economies, the price is used to say something about the product.
d. Promotional Pricing: temporarily pricing products below the list price, and
sometimes below cost to increase short-run sales.
e. Geographical Pricing: setting prices for customers located in different parts of the
country or world.
f. Dynamic and internet pricing: adjusting prices continually to meet the
characteristics and needs of individual customers and situations.
g. International Pricing: Companies that market their products internationally must
decide what prices to charge in different countries

5. List and explain the types of discount

a. Cash discount: a price reduction to buyers who pay their bills promptly
b. Quantity discount: a price reduction to buyers who buy large volumes
c. Functional discount (trade discount): a discount offered to trade- channel members
who perform certain functions such as selling, storing and record keeping
d. Seasonal discount: a price reduction to buyers who buy merchandise out of season

6. List and explain the types of allowance

a. Trade-in allowances: price reductions given for turning in an old item when buying
a new one. (most common in automobile industry)
b. Promotional allowances: are payments or price reductions that reward dealers for
participating in advertising and sales-support programs.

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7. List and explain the types of segmented pricing
a. Customer-segment pricing: different customers pay different prices for the same
product. Museums charge lower prices for students.
b. Product form pricing: different versions of the product are priced differently.
Economy vs. business class
c. Location-based pricing: different prices for different locations. State universities
charge higher tuition for out-of-state students
d. Time-based pricing: a firm varies its price by the season, month, day, or even the
hour.

8. List the types of promotional pricing

a. Discounts from normal prices to increase sales and reduce inventories
b. Special-event pricing in certain seasons to draw more customers
c. Limited time offers such as flash sales, can create buying urgency
d. Cash rebates to consumers who buy the products from dealers within a specified
time (discount coupons)
e. Low-interest financing, longer warranties, or free maintenance to reduce price

9. List the disadvantages of promotional pricing

a. During holiday seasons marketers load consumers with deals, causing buyer wear-
out and pricing confusion.

b. Create (deal – prone) : customers who wait until brands go on sale before buying

them.
c. Erode a brand’s value in the eyes of customers

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10. List and explain the 5 geographical pricing strategies

1. FOB- origin pricing: a geographical pricing strategy in which goods are placed Free on
Board a carrier; at that point the title and responsibility pass to the customer who pays
the freight from the factory to the destination.
2. Uniform- delivered pricing: a geographical pricing strategy -the opposite of FOB
pricing- in which the company charges the same price plus freight to all customers,
regardless of their location.
3. Zone pricing: a geographical pricing strategy - falls between the FOB pricing and
Uniform delivered pricing - in which the company sets up two or more zones. All
companies within a zone pay the same total price; the more distant the zone the
higher the price
4. Basing- point pricing: a geographical pricing strategy in which the seller designates
some city as a basing point and charges all customers the freight cost from the city to
the customer.
5. Freight- absorption pricing: a geographical pricing strategy in which the seller absorbs
all or part of the freight charges, as an incentive to attract more business in
competitive markets (market penetration)

11. Describe the differences between dynamic and fixed pricing

a. Fixed-price policies: setting one price to all buyers with large-scale retail
b. Dynamic pricing: adjusting prices continually to meet the characteristics and needs
of individual customers and situations.

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12. Compare between the Price-Fixing and Predatory Pricing
a. Price- fixing: states that sellers must set prices without talking to competitors.
Otherwise, price collusion is suspected.
b. Predatory pricing: selling at a lower cost with the intention of punishing a
competitor or gaining a higher long-run profits by putting competitors out of
business.

13. Compare between the retail price maintenance, discriminatory pricing, and
deceptive pricing
a. Price Discrimination: ensuring that sellers offer the same price terms to customers
at a given level of trade.
b. Retail (rescale) price maintenance: when a manufacturer require dealers to charge
a specified retail price for its product.
c. Deceptive pricing: occurs when a seller states prices that mislead consumers or are
not actually available to consumers.

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 Chapter 12

1. List and explain the partners of supply chain

a. Upstream partners : are firms that supply the raw material, information, finances,
and expertise to create a product.

b. Downstream partners – (distribution channels) : such as wholesalers and retailers -

form a vital link between the firm and its customers.

2. What are the eight key functions that members of the marketing channel perform?
a. Information: gathering and distributing information about consumers and producers
in the marketing environment, needed for planning
b. Promotion: developing persuasive communications about an offer
c. Contact: finding and engaging prospective buyers
d. Matching: shaping offers to meet the buyer’s needs
e. Negotiation: reaching an agreement on price, so that ownership can be transferred
f. Physical distribution: transporting and storing goods.
g. Financing: acquiring funds to cover the costs of the channel work
h. Risk taking: assuming the risks of carrying out the channel work

3. Compare between the channel conflicts

1- Horizontal conflict: occurs among firms at the same level of the channel
e.g. Holiday Inn franchisees with other Holiday Inn operators
2- Vertical conflict: among different levels of the same channel
e.g. McDonalds has recently faced growing conflicts with its 3,000 independent
franchisees

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4. List and explain the two types of channel arrangements
a. Conventional distribution channels: a channel consisting of one or more
independent producers, wholesalers, and retailers, each a separate business seeking
to maximize its own profits.
b. Vertical Marketing System (VMS): a channel structure in which producers,
wholesalers and retailers that act as a unified system. One channel member owns the
other, has contracts with them or has so much power that they all cooperate

5. List the 3 major types of VMSs

a. Corporate VMS: A vertical marketing system that combines stages of production and
distribution under single ownership.
b. Contractual VMS: A vertical marketing system in which independent firms at different
levels of production and distribution join together through contracts.
c. Administrated VMS: a vertical marketing system that coordinates stages of production
and distribution through the size and power of one of the parties.

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 Chapter 14

1. Define the promotion mix and then list the 5 promotion mix tools for communicating
customer value and give example for each.

The promotion mix: is the specific blend of promotion tools that the company uses to
persuasively communicate customer value and build customer relationships.

1) Advertising is any paid form of nonpersonal presentation and promotion of ideas,

goods, or services by an identified sponsor.
E.g. broadcast, print, online, mobile, outdoor

2) Sales promotion is a short-term incentive to encourage the purchase or sale of a

product or service.
E.g. discounts, coupons, displays, demonstrations

3) Personal selling: personal customer interaction by the firm’s sales force for the
purpose of engaging customers, making sales, and building customer relationships.
E.g. sales presentations, trade shows, incentive programs

4) Public relations: building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image, and handling
unfavorable rumors, stories, and events.
E.g. press releases, sponsorships, events and web pages.

5) Direct and digital marketing: engaging directly with carefully targeted individual
consumers to both obtain an immediate response and build customer relationships.
E.g. direct mail, catalogs, online and social media, mobile marketing

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2. List, explain the elements in the communication process and give example for each.

1) Sender: the party sending the message to another party

E.g. MacDonald's
2) Encoding: the process of putting thought into symbolic form
E.g. Mac assembles words, sounds, and illustrations into a TV ad
3) Message: the set of symbols that the sender transmits
E.g. the actual MacDonalds ad
4) Media: the communication channels through which the message moves from the
sender to the receiver
E.g. TV, radio, social media
5) Decoding: the process by which the receiver assigns meaning to the symbols
encoded by the sender
E.g. a consumer watches the ad and interprets the content it contains
6) Receiver: the party receiving the message sent by another party
E.g. the consumer who watches the ad
7) Response: the reactions of the receiver after being exposed to the message
E.g. liking MacDonald's more, visiting again, singing their song
8) Feedback: the part of the receiver’s response going back to the sender
E.g. writing, calling, praising or criticizing
9) Noise: the unplanned static or distortion during the communication process which
results in the receiver getting a different message than the one the sender sent
E.g. the consumer is distracted while watching the commercial and misses its key
points

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3. List and explain the steps in developing effective marketing communication

4. List and explain the Buyer-Readiness Stages

1) Awareness: A marketer might use "teaser" ads to create interest and curiosity
2) Knowledge : marketers want to inform potential buyers of the product's high quality
and its many features
3) Liking: feeling favorable about the product
4) Preference: preferring the product to competing products
5) Conviction: believing that the product is the best for them
6) Purchase: to help reluctant consumers over barriers. The company can provide
promotional prices, upgrades and reviews online.

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5. Describe the 4 common methods used to set the total budget for advertising.
1) Affordable Method: setting the promotion budget at the level management thinks
the company can afford.
2) Percentage-of-Sales Method: setting the promotion budget at a certain percentage
of forecasted sales or as a percentage of the unit sales price.
3) Competitive-Parity Method: setting the promotion budget to match competitor’s
outlays.
4) Objective-and-Task Method: setting the promotion budget based on what it wants
to accomplish with promotion by: Defining promotion objectives, determine the
tasks needed to achieve these objectives and estimate the costs of performing these
tasks

6. Compare between the Push strategy and Pull strategy

a. Push strategy: promotion strategy that calls for using the sales force and trade
promotion to push the product through the channels. The producer promotes the
product to channel members who in turn promote it to final consumers.
Marketing activities: (personal selling, trade promotion)
b. Pull strategy: promotion strategy that calls for spending a lot on consumer
advertising and promotion to induce final consumers to buy the product, creating a
demand vacuum that “pulls” the product through the channel
Marketing activities: (advertising, promotion, direct and digital marketing)

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