Marketing 302

Services traditionally viewed as having four distinctive features

• intangibility

• heterogeneity

• inseparability

• perishability

intangibility

you can’t see it, (Maids leave little chocolates or towel folding to show they were there), (insurance commercials show what could happen)

heterogeneity

variation (services are not the same) (people are different, customers are different) (differences between physicians with in a given hospital or different as their shift goes on) (Umps, the team winning will get more facorable calls so it ends quicker)

inseparability

produced and consumed at the same time (haircut, therapy, comedian) (if you had a bad experience, people won’t come back)

perishability

can’t be stored for later

problem when deman t fluctuates

Restaurant has 20 tables and is open for 5 hours

• 10 parties come to the restaurant each hours

• 50 parties come to the retaurant at 5pm, empty otherwise

• Service providers generally want to smooth demand

  • shifting demand to other periods (reservations, special deals)

  • increasing acceptable waiting time

Combat wait time

Put baggage caresoul far away so the wait is included in the walk and they aren’t waiting for too long

Door close button, push button to walk across the street

Disney overestimate the wait time so people are happy when they get there qucker

Websites having a bar showing where the process is

Effective standardization via uniforms

Blue man group
Uniforms

• some are some aren’t

• uniforms ties the employees to the brand, so you don’t want them to do bad

• uniforms increase perceived corp, responsibility for service quality

Shock

People said the would pay to not be shicked again

But when left aline with nothing to do, they were willing to do it

Services have tangible results

your hair looks different after a haircut

your body works better after surgery

sometimes customers are involve in the production of goods and sometimes they aren’t

Shoes, computers, build a bear

Snow plow, dry cleaners

TF: Services are more perishable than goods

true

Customer satisfaciton

high satisfaction can help your brand become customers first choice within the category

TF: Customers just need to be happy enough

True

Example of customer service

Zappos 10 hour long service call, ad with customer not wanting the product yet

Counter: places are designed to be mean to you

Managing satisfaction involves

Managing expectations, so that people are pleasantly surprised

Satisfaction =

Performance-Expectations

Attempts to manage expectations

Home depot, changed their slogan because people were expecting them to actually help them build stuff

Dominos, their under 30 min caused car crashes

Overpromising

Can cause anger, keep easy promises to keep people happy
Never make a promise you can’t keep

Bold promises are okay when

Are dangerous when

the consuption/service experience is ambiguous (this class will change your life")

Consumption/service experience is easy to evaluate (We will deliver this pizza in under 30 min)

Mange memories

Memories can be influenced by advertising viewed post experience

• amusement park commercials will show the rides, not the lines

• Picture of student studying (in reality you did not look like this)

The availability heuristic

We tend to treat the ease with which we can recall examples of an event as indicative of the frequency of that event

• people asked whether there are more English words with k as the first letter or k as the third letter

• how often does ___ occur, if you can come up with easy examples it’s likely to happen

• helps explain why it seems like we always get stuck in the slow line

Traditional assumption

Consistent performance throughout a service encounter is optimal

• at an amusement park, the first ride is as important to the customer’s evaluation as the last ride

TF: Certain moments of service.experience are especially likely to influence memories

True

Who reports more pain?
Participant 1 Rates pain as 5 at minute 1, 10 at minute 2
Participant 2 Rates pain as 10 at minute 1, 5 at minute 2

Participant 1

Child birth: after months it was less thant after a few days

Managing customer dissatisfaction

Want to retain mildly dissatisfied customers

Service recovery paradox

There are situations in which post-recovery satisfaction is greater than satisfaction prior to the service failure

Expectations following service failure tend to be pretty low

From this pov, mild service failures can actually be opportunities to increase satisfaction

Promotion (marketing communication)

Means by which firms attempt to inform, persuade, and remind customers

• represent the voice of the company and its brands

• it is here that we convert customer propositions into taglines, slogans, ads, etc

Who articulate the customer proposition?

• manufactors work with ad agency’s account and strategy teams to develop a creative brief

  • a document that includes background info on the brand, category, targeted segment, budget, goals

• Ad agency’s creative team interprets creative brief, proposes a campaign, and develops mockups

• ad agency’s production team turns the mockups into an advertisement

Different level of ad agencies

Some large manufacturers will use an in house ad agency model Icoke, amazon, nike, apple)

• benefits of speed, cost, consistency, control

Larger or more complex campaigns (commercials, complex social media campaigns) will often involve a separate production house

• production house: firm specializing in film and tv production

Common misconception of commercials, advertising, marking communication

Misconception: Commercials=Advertising=Mkt communication

Reality:

Advertising examples

print, web, broadcast ads

product placement

billboards

point of purchase displays

marketing communications mix

Customer/price promotions examples

coupons

rebates

games

gifts

samples

Marketing communications mix
events, sponsorships, experiences

games at football/basketball with companies

olympics, redbull

Marketing communication mix

direct and interactive marketing

Catelogs, check off what you wnat and send a check

Email marketing

cost per response

total cost/(percent response * number sent out)

Marketing communication mix

sales presenation, trade shows

auto shows, resturant trade show

b2b don’t want to do a commercial where most people that see aren’t in that category

Common marketing communications objectives

achieve basic awareness: do you recognize a brand

achieve top of mind awareness: assume you know the product, remind you during the context buwiser, watching a game you want a bud

achieve an information goal: want customers to know certain facts about your product, nutrients, how to cook turkey

achieve an image goal: the image they represent is aspirational, want to look like that, perfume

achieve a behavior goal: buy now

Measuring recognition vs recall

recognition: which of the following headache medications have you heard of? ()on head () head on ()forehead on

Recall: name the first five headache medications that you can think of: ()()()()()

Marketers’ interest in memory

Many ads not intended to encourage immediate purchase

many customer decisions are purely memory-based (picking a restaurant for dinner)

How much advertising is required?

need 20 exposures at least in the past

Two modern sales response models

concave downward response curve

s shaped response funtion

TF: with repetition, consumers can come to believe the claim that is being made

True

The sleeper effect

memory for content > memory for context

if you see something multiple times you will remember the content but not the context

spread of disinformation can occur even when the initial message is from a low-credibility source

• message might not be immediately persuasive

• but that can change with time

Bad way to debunk

repeat false statements

repeat true statements to make people remember

Mere exposure effect

participants are shown shapes

then are shown two shapes one of which was a previous shape

which have you seen before? half say the one they saw

which do you like better? most say the one they saw

reason why you want to show your product more and more even if you think they aren’t paying attention

Explains product placements (even if you don’t know the product, customers getting used to see it will make them like it better)

• iPhone doesn’t allows villains to hold them

• peloton didn’t control the context in satc when big died on it and it made people nervous

another example: if you see your face in candidates you will like that candidate better

Turning to new ad media

glass (put money in a glass and people couldn’t work it)

put trucks with ads infront of trump tower to get on the news

Native ad

try to blend in

when ads resemble editorial content, an advertiser risks implying the information comes from a non biased source, which is does not

don’t want customers to be mislead

now needs to disclose it’s an ad

Influencer marketing

risk: fire festival, lied about what it would be, influencers were sued for instagram posts, not disclosed as ad

social media platforms have built in sponsored content to tag, even if it’s not money and just gifts, it still needs to be discloused

TF: Paid media is the only way to reach customers

False

paid media

• advertising you purchase

• billboards, search ads, commerci

pay something to get your media out there

owned media

content you create on platforms you control

website, social media email campaigns

Earned media

publicity gained form others talking about you

word of mouth reviews, social media content, media/news coverage

ex: death of duo, got lots of views, people and other companies were jumping on the trend, everything is free for duolingo

why is earned media coverage so valuable

free (but need to do some thing people will talk about)

long lasting: unline paid media, not limited by campaign budget/duration

• the pepsi tast challenge is 50 years, old but still talked about and knockoff brands do it too

build trust (info can come from unbiased, high quality sources)

Doesn’t activate persuasion knowledge (if consumers know they’re being advertised to, they will be more critical/skeptical of the marketing message

Benefits of unused coupons

coupons are like a reminder, and they spend more

even though only like 1% actually uses the coupon, or they forget it at home, or it’s expired

Evaluation of bundles

They are more likely to average than add

like adding a free gift, people said hamburger was more calories than hamburger and apple

Which of the following is true?

The mere exposure effect helps explain why product placements are effective

How are national brand manufacturers responding to death of brand management

value pricing

really new new products

mega brands and fighting brands vs private labels

building brand equity

Steps in advertising

set objectives

select tasks

set budget

develop message

test

evaluate response

set objectives

awareness, interest, desire, action

select tasks

increase awareness, attract switchers, increase repeat, post purchase behavior

set budget

percentage of sales (we give 10% of sales into advertising)

competitive parity (looking at what the competition does)

state of the art practice (use data to know how your ad will effect sales)

develop message

what is the copy or text of the message

message objectives, strategy, format, creativity, copy

top of mind and awareness questions

top of mind

• when I ask you to think about executive mbs programs, which is the first executive MBA program that comes to mind?

  • harvard, wharton, kellogg, michigan, stanford

Awareness

• what executive mba programs have you heard or seen promoted in the last year

  • harvard, wharton, kellogg, michigan, stanford

• In what media do you recall hearing or seeing the promotion?

  • radio, tv, news print, magazine

test

copy testing

market testing

IRI data at right from 300+ tests in which test group sees twice as many ads as the control group

Evaluate response

compare levels of hierarchy of effects response variables before and after an ad compaign (with respect to original goals)

• exposure (estimation of audience size) GRP: what percetage of the target market do you reach and how many times do they see the ad

• awareness (immediate recall or recognition levels)

• acceptance (comprehension, attitude, preference) positive or negativeRe

• retention (post-hoc recall or recognition)

• intentions and behaviors (purchase liklihood, trial, satisfaction, repeat)

What about the sales effects of advertising?

• that’s important too but challenging

  • tough to separate out the effects of the rest of the marketing mix, competitors

  • measuring performance on hierarchy of effects response variables can help tease out what’s due to our advertising efforts and what’s due to other factors

Media planning

after deciding how to convey the client’s cusumer value proposition, the advertiser works with media buyers and the client to develop a media plan for the campaign

• involves selecting desired reach, frequency

• choosing among media types (TV, online, radio)

• choosing a specific vehicle within a media type

  • primetime show vs superbowl

Reach and frequency

The percent of a revelant population exposed to a particular media campaign at least once during a specified time period

Frequency: the average number of exposures among those reached by the ad campaign

Does exposed = actually watching the ad?

• no, exposed just means having an opportunity to see the advertisement

• usually anywhere between 50% and 95% of people watching a program will actually see ads run during that program

Gross rating points

Commonly used to gauge the strength of an advertising campaign

• generally considered to be the common currency of media planning

• can be used across a number of platforms (TV, radio, newspapers, magazines)

total number of exposures = R x F

different ways to get teh same GRP

• 20% reach x frequency of 1 = 20 GRPs

• 10% reach x frequency of 2 = 20 GRPs

Reach vs Frequency

one circle equals people exposed to a particular ad

Max # of exposures that someone receives in the Low Reach, High Frequency world?

Min # of exposures?

Max # of exposures that someone receives in the High Reach, Low Frequency world?

5 max

0 (outside of the circle)

2 max

0 min

there are 2 shows on which we would like to advertise

• 15% of households watch NCIS

• 10% of households watch This Is Us

• 5% of households watch both

We want to run 2 spots on NCIS and 3 spots on This is Us

GRPs = total number of exposures = (10% x 2) + (5% x [2+3]) + (5% x 3) = 60

What is the reach of this campaign?

What percent of the population watches modern family?

What percent of the population sees the ad at least 6 times?

30% +20% + 5% + 25% + 20% = 100%

100%

50%

General recommendations of reach vs frequency

reach: generally, most important when launching a new product or when going after a poorly defined target market

frequency: generally, most important when there are strong competitors, a complex story to tell, or high consumer resistance

Are super bowl ads effective?

The ads are linked to an increase in sales when your close competitors are not advertising

• much less effective if a category competitor is also advertising

• coke vs pepsi

• if you both advertise no one wins

some common arguments in favor of billboard advertising

high reach

high frequency

• everyday on the way to and from work

you can’t skip or avoid a billboard

some people actually love them

Why put ads during football

something people want to watch live

usually at home focused on the screen

another example election

Upfronts in may

Networks get together and pitch their shows and the demographics they reach trying to sell the advertisers on commercial time

• advertisers commit billions of dollars in ad purchases

• have the option to pull portion of their committed purchases

• 75-90% of advertising inventory is committed in may

• networks guarantee ads will reach a certain audience size

• bring out celebrities

• consider the ads before or after you, could make you look bad or people change the channel

How is viewership measured?

peoplemeters: attached to their tv and can see what is being view as well as check ins

Out of home viewing presents a challenge

device wouldpick up those audio codes that humans can’t here

portable people meters people can wear

People avoid ads

zapping: change channels

multi tasking: diverting attention to people, other media

physical zapping: leave room (4x common as zapping)

zipping: fast forward through recorded programs

Factors that increase zapping

actors older than 40

depict scenes of frustration

convey negative messages

annoying stimuli (bad dancing, voice, made-up words)

How do commercials influence enjoyment of the show?

people go to great lengths to avoid commercials, particularly bad ones

some recent work suggests that brief commercials might not be so bad

Media buying online

Cost per million

• banner ads, social media, video

• 1-15 dallors

cost per click

• search

• 1-5 dallors

• depends on industry, keywords advertised

• mesothelioma often most expensive, cancer that lawyers want their case

Most online ads are sold by auction

entire process completes in under 200 milliseconds

Participants in programmic ad buying

user/consumer: wants content, willing to tolerate ads

publisher: website or app with content, eans money by showing ads alongside content

ad exchange: marketplace where sellers (platform) list inventory and buyers (advertisers) make bids

Advertiser: wants to reach consumers, bid on impressions in real time through DSP

Demand side platform: software systme helping advertisers implement their bidding preferences, who to target, when and how often to target, how much to bid

Online advertising is quite accessible

target based on location, interests, language

split tests to identify the most receptive audience

Which of the following is true according to our reading advertising analytics 2.o?

More than one above

Surplus

We can think of producer surplus as price minus unit variable cost (like materials)

• increase the price or decrease the variable cost

consumer surplus can be thought of as the difference between perceived value (or the maximum willigness to pay) and actual price paid

we’ll be motivated to increase producer surplus

Option for increasing producer surplus

Lower variable cost (change packaging)

be careful to not reduce quality or perceived quality which can lower willingness to pay and the price you can change

Hold overall package price constant, but shink total quality (chips, babybell)

Increase the price (but explain)

Faireness

Fairness concerns act as a constraint on profit seeking, but consumers feel firms are entitle to a fair profit, which they begrudgingly accept

unfair to exploit shifts in demand by raising prices (unacceptable morally and sometimes legally)

uping prices of shovel after a snowstorm\

hand sanatizer during pandemic

Uniform pricing in retail chains

grocery, drug, and mass merch chains charge nearly uniform prices across stores

movie tickets are all the same no matter the movie

imagine there are 5 consumers

abe is willing to pay up to $10
bob is willing to pay up to $9

carl is willing to pay up to $8

dan is willing to pay up to $7

ernie is willing to pay up to $6

if price = $10, total surplus is?

If price = $6, total surplus is?

If price = max wtp, total surplus?

10-5 = 5

(6-5)x5 =5

(10-5) + (9-5) + (8-5) + (7-5) + (6-5) = 15

price discrimination

selling a product/service at two or more prices that do not completely reflect a difference in cost

1st degree: seller charges each buyer their maximum willingness to pay (theoretical ideal for sellers)

2nd degree: seller charges less to buyers who buy in bulk

3rd degree: seller charges different amounts to different classes of buyers (often based on willingness or ability to pay)

• pink tax, “different products”

• gringo tax: cheaper in spanish

Old age discounts

they elderly pay less, but it is better to get that smaller amount from them than zero

it looks like you’re being nice, not that you want as much money as possible

Direct vs indirect price discrimination

Direct: offering different prices to different classes of buyers (3rd degree)

Indirect: offer a menu of prices or options to all customers and let customers elf-slect (2nd degree)

Many pricing schemes driven by indirect price discrimination (coupons, pricing fluctuations, versioning/premium products)

Requirements for a firm to price discriminate

Some level of market/scale economies/monopoly power

• competitors don’t undercut prices

Must be able to identify and segment buyers with different demand elasticities

• adults vs students

• impatient vs patient

Must be able to maintain seperation of buyers to avoid arbitrage

• adults can’t buy student tickets

• airline passengers can’t trade tickets

Estimating demand curves

quantitative analysis of past prices, quantity sold

surveys: how likely would you by at x, y, z

price experiments in the field

• every 10th customer gets 5% off coupon

price elasticity of demand

ex: price increases from $10 to $12

quantity decreases from 200 units to 180 unite

% change in quantity demanded/ % change in price

((180-200)/200)/(($12-$10)/$10)= -.50

How does price level affect price elasticity?

Price elasticity of demand generally becomes more elastic as price increases because it’s ratio of percentage changes

<1 it’s inelastic (less sensitive to price)

>1 elastic (more sensitive to price)

perfectly elastic = infinity

very price sensitive

perfectly inelastic = 0