Chapter 8: Products, Services, and Brands: Building Customer Value

Key Concepts:

1. Definition of a Product:
○ Anything offered to a market for attention, acquisition, use, or consumption that
might satisfy a want or need, including physical objects, services, events,
persons, places, organizations, and ideas.
2. Three Levels of Product:
○ Core Customer Value: The fundamental benefit or service the customer is really
buying.
○ Actual Product: Includes the product's features, design, quality level, brand
name, and packaging.
○ Augmented Product: Additional services and benefits, such as warranty,
installation, and delivery.
3. Product and Service Classifications:
○ Consumer Products: Bought by final consumers for personal use and classified
as convenience products, shopping products, specialty products, and unsought
products.
○ Industrial Products: Bought for further processing or for use in conducting a
business, including materials and parts, capital items, and supplies and services.
4. Product and Service Decisions:
○ Individual Product Decisions: Attributes, branding, packaging, labeling, and
product support services.
○ Product Line Decisions: Group of products closely related.
○ Product Mix Decisions: All product lines and items that a company offers.
5. Services Marketing:
○ Characteristics of Services: Intangibility, inseparability, variability, and
perishability.
○ Service Profit Chain: Links service firm profits with employee and customer
satisfaction.
○ Marketing Strategies for Service Firms: Managing service differentiation,
service quality, and service productivity.
6. Branding Strategy:
○ Brand Equity: The differential effect that knowing the brand name has on
customer response.
○ Brand Positioning: Positioning the brand clearly in target customers’ minds.
○ Brand Name Selection: Should be distinctive, easy to pronounce, and suggest
something about the product’s qualities and benefits.
○ Brand Sponsorship: Manufacturer’s brands, private brands, licensing, and
co-branding.
○ Brand Development: Line extensions, brand extensions, multibrands, and new
brands.
Exercise Answers:

1. Define product and describe the major classifications of products and services:
○ Products are anything that can be offered to a market for attention, acquisition,
use, or consumption that might satisfy a want or need. Major classifications
include consumer products (convenience products, shopping products, specialty
products, and unsought products) and industrial products (materials and parts,
capital items, and supplies and services).
2. Describe the decisions companies make regarding their individual products and
services, product lines, and product mixes:
○ Decisions include determining product attributes, branding, packaging, labeling,
and product support services for individual products. Product line decisions
involve the number and nature of related products. Product mix decisions involve
the entire range of products offered by the company.
3. Identify the four characteristics that affect the marketing of services and the
additional marketing considerations that services require:
○ The four characteristics are intangibility, inseparability, variability, and
perishability. Additional considerations include service differentiation, service
quality, and service productivity.
4. Discuss branding strategy—the decisions companies make in building and
managing their brands:
○ Branding strategy involves brand positioning, brand name selection, brand
sponsorship, and brand development. Companies aim to create strong brand
equity, differentiate their brands, and extend or develop new brands as needed.

Chapter 10: Pricing: Understanding and Capturing Customer Value

Key Concepts:

1. Factors to Consider When Setting Prices:

○ Customer perceptions of value
○ Company costs
○ Competition
○ Other internal and external factors
2. Customer Value-Based Pricing:
○ Setting price based on buyers’ perceptions of value rather than on the seller’s
cost.
3. Cost-Based Pricing:
○ Setting prices based on the costs of producing, distributing, and selling the
product plus a fair rate of return for effort and risk.
4. Competition-Based Pricing:
○ Setting prices based on competitors’ strategies, costs, prices, and market
offerings.
5. Pricing Strategies for New Products:
○ Market-Skimming Pricing: Setting a high price to skim maximum revenues.
 ○ Market-Penetration Pricing: Setting a low price to attract a large number of
buyers and a large market share.
6. Product Mix Pricing Strategies:
○ Product Line Pricing: Setting prices across an entire product line.
○ Optional-Product Pricing: Pricing optional or accessory products sold with the
main product.
○ Captive-Product Pricing: Pricing products that must be used with the main
product.
○ By-Product Pricing: Pricing low-value by-products to get rid of them.
○ Product Bundle Pricing: Pricing bundles of products sold together.
7. Price Adjustment Strategies:
○ Discount and Allowance Pricing: Reducing prices to reward customer
responses.
○ Segmented Pricing: Adjusting prices to allow for differences in customers,
products, or locations.
○ Psychological Pricing: Adjusting prices for psychological effect.
○ Promotional Pricing: Temporarily reducing prices to spur short-run sales.
○ Geographical Pricing: Adjusting prices to account for the geographic location of
customers.
○ Dynamic Pricing: Continuously adjusting prices to meet the characteristics and
needs of individual customers and situations.
○ International Pricing: Adjusting prices for international markets.

Exercise Answers:

1. Describe the major strategies for pricing new products:

○ Major strategies include market-skimming pricing, where prices are set high to
maximize profit margins, and market-penetration pricing, where prices are set low
to attract a larger customer base and build market share.
2. Explain how companies find a set of prices that maximizes the profits from the
total product mix:
○ Companies use product mix pricing strategies such as product line pricing,
optional-product pricing, captive-product pricing, by-product pricing, and product
bundle pricing to maximize profits across their product offerings.
3. Discuss how companies adjust their prices to take into account different types of
customers and situations:
○ Companies adjust prices through strategies like discount and allowance pricing,
segmented pricing, psychological pricing, promotional pricing, geographical
pricing, dynamic pricing, and international pricing to cater to different customers
and market conditions.

Chapter 11: Marketing Channels: Delivering Customer Value

Key Concepts:
 1. Nature and Importance of Marketing Channels:
○ Marketing channels are sets of interdependent organizations that help make a
product or service available for use or consumption by the consumer or business
user.
2. Channel Behavior and Organization:
○ Channel members depend on each other and work together smoothly to create
value for consumers.
○ Channel conflict can arise when channel members disagree on roles, activities,
or rewards.
3. Channel Design Decisions:
○ Analyzing consumer needs
○ Setting channel objectives
○ Identifying major channel alternatives
○ Evaluating major channel alternatives
4. Channel Management Decisions:
○ Selecting, managing, and motivating individual channel members.
○ Evaluating channel members’ performance over time.
5. Marketing Logistics and Supply Chain Management:
○ Marketing logistics (physical distribution) involves planning, implementing, and
controlling the physical flow of goods, services, and related information.
○ Supply chain management involves managing upstream and downstream
value-added flows of materials, final goods, and related information.

Exercise Answers:

1. Explain why companies use marketing channels and discuss the functions these
channels perform:
○ Companies use marketing channels to bridge the gap between the final
consumers and the company’s products or services. Channels perform functions
like information gathering, promotion, contact, matching, negotiation, physical
distribution, financing, and risk-taking.
2. Discuss how channel members interact and how they organize to perform the
work of the channel:
○ Channel members interact through cooperation and coordination. They organize
through vertical marketing systems (VMS), horizontal marketing systems, and
multichannel distribution systems to achieve more effective performance.
3. Identify the major channel alternatives open to a company:
○ Major channel alternatives include intensive distribution, exclusive distribution,
and selective distribution, each offering different levels of market coverage and
control.
4. Explain how companies select, motivate, and evaluate channel members:
○ Companies select channel members based on criteria like reputation, financial
stability, market coverage, and growth potential. They motivate channel members
through incentives, training, and support and evaluate their performance using
sales metrics, customer feedback, and operational efficiency.
Chapter 14: Engaging Consumers and Communicating Customer Value

Key Concepts:

1. Integrated Marketing Communications (IMC):

○ IMC involves carefully integrating and coordinating the company’s many
communications channels to deliver a clear, consistent, and compelling message
about the organization and its products.
2. The Communication Process:
○ Understanding how communication works is crucial to effective marketing
communications.
3. Steps in Developing Effective Marketing Communications:
○ Identifying the Target Audience: Clearly defining the target audience.
○ Determining the Communication Objectives: Establishing what the
communicator wants to achieve.
○ Designing a Message: Crafting a message that gains attention, holds interest,
arouses desire, and obtains action.
○ Choosing Media: Selecting communication channels to deliver the message.
○ Selecting Message Source: Choosing credible and attractive message sources.
○ Collecting Feedback: Understanding the impact of the message.
4. Setting the Total Promotion Budget and Mix:
○ Affordable Method: Setting the promotion budget at an affordable level.
○ Percentage-of-Sales Method: Setting the budget at a certain percentage of
current or forecasted sales.
○ Competitive-Parity Method: Matching competitors’ outlays.
○ Objective-and-Task Method: Defining specific objectives, determining tasks to
achieve these objectives, and estimating costs.
5. The Promotion Mix:
○ Advertising: Any paid form of non-personal presentation and promotion of ideas,
goods, or services.
○ Sales Promotion: Short-term incentives to encourage the purchase or sale of a
product or service.
○ Personal Selling: Personal presentation by the firm’s sales force.
○ Public Relations: Building good relations with the company’s various publics.
○ Direct and Digital Marketing: Engaging directly with carefully targeted individual
consumers.
6. Socially Responsible Marketing Communication:
○ Ethical and legal issues in marketing communication, including advertising
standards, honesty, and transparency.

Exercise Answers:

1. Define the five promotion mix tools for communicating customer value:
○ Advertising: Paid non-personal presentation and promotion.
○ Sales Promotion: Short-term incentives.
 ○ Personal Selling: Personal interactions by the sales force.
○ Public Relations: Building good relations with various publics.
○ Direct and Digital Marketing: Direct engagement with targeted individuals.
2. Discuss the steps in developing effective marketing communications:
○ Identify the target audience, determine communication objectives, design the
message, choose media, select message source, and collect feedback to ensure
the message is effectively delivered and received.
3. Explain the methods for setting the promotion budget:
○ The affordable method, percentage-of-sales method, competitive-parity method,
and objective-and-task method provide different approaches to determining how
much to spend on promotion efforts.
4. Define the role of integrated marketing communications in the marketing process:
○ IMC ensures that all forms of communications and messages are carefully linked
together to provide a clear, consistent, and compelling message about the
company and its products.