Principles of Marketing CLEP

based on the REA study guide for this CLEP test (and some other material gleaned from the internet for clarification)

organization

company, firm, etc.

market

all people/organizations who want or need to buy a product

marketing concept

customer-oriented business philosophy that focuses on customer satisfaction

marketing functions

1. environmental analysis

2. consumer analysis

3. product planning

4. price planning

5. promotion planning

6. physical distribution (place) planning

marketing mix

combination of product, price, promotion, and physical distribution/place (the "four Ps") which make an organization's marketing program. their combination reflects the strategy of the company

market segmentation

the process of dividing the total market into submarkets based on something the people have in common (this is done by first choosing certain variables of how to divide the market, then the segments are profiled)

market segments

a submarket/group of similar customers

target market

a particular group of potential customers the company wants to appeal to

product differentiation

when a product/brand is perceived as different from its competitors & when one company promotes their product as better than a competitor's product

product positioning

shaping the product's image in the customer's mind (position) compared to competing products. consumer perceptions are more important than the actual differences between products

marketing plan

the company's marketing strategy and the activities required to execute that strategy (identifying target markets, providing general guidelines for developing the marketing mix, etc.).

research for development focuses on how the marketing mix can most effectively be used, as well as market segmentation, product differentiation, product positioning, and target market selection

situation analysis

identifies the company's relative strengths, weaknesses, its opportunities, and threats posed by its marketing environment. this is the first part of developing a marketing plan, and help establish marketing objectives for products and markets

(examines: economic environment, technological developments, social changes, changes in buying behavior, legal and political developments, size of the existing market and the potential market, rate of market growth, buyer behavior, brand loyalty, competitive behavior, and market share trends)

marketing objectives

specifies the company's quantitative and qualitative marketing goals which contribute to the company's overall goals. (they should be specific, measurable, and specify the time that it will be executed. they will be translated into more detailed goals for marketing mix variables)

marketing environment

some factors companies can control (internal resources and decisions) but other factors companies cannot (macro- and micro- environmental factors)

macroenvironmental factors

external uncontrollable forces that affect all companies in a given industry

1. demographics or demography

2. economic conditions

3. competition

4. social and cultural factors

5. political and legal factors

6. technological factors

microenvironmental factors

external (largely uncontrollable but the company can influence them significantly) forces which impact each company uniquely

1. suppliers

2. marketing intermediaries

3. the target market

marketing strategy

defines how the marketing mix is used to satisfy the needs of the target market and achieve company goals

product/market opportunity matrix

fundamental alternative marketing strategies

1. market penetration (attempts to increase sales with the same products and same markets)

2. market development (attempts to increase sales through utilizing new markets)

3. product development (attempts to increase sales by offering new products)

4. diversification (attempts to increase sales by aiming new products at new markets)

SWOT matrix

used to asses the potential value of new opportunities

internal: strengths | weaknesses

external: opportunities | threats

-strengths: competitive advantage or competency

-weaknesses: limitations

-opportunities: favorable environmental conditions

-threats: competitive conditions/barriers that prevent

company strengths that match up well with market opportunities are most likely to be successful

Boston Consulting Group matrix

industry growth rate [side] / relative market share [top]

______high | low

high | star | problem child/?

low | cash cow | dog

(-stars generate large products, but consume substantial resources to finance their continued growth

-a problem child/question mark doesn't provide great profits, but requires high investment to maintain/increase market share

-cash cows generate large profits without requiring significant investment to maintain market share in slow-growth industries

-dogs have low profitability and little growth opportunity)

differential advantage

is a product's unique qualities which encourage customer purchase and loyalty, and provides customers with substantive reasons to prefer one product over another

marketing myopia

refers to focusing on products rather than customers. this characterizes short-sighted marketing strategies because customer preferences change over time

sustainable competitive advantage

an enduring differential advantage over competitors by offering superior value (through lower prices, or other elements of the marketing mix, such as place/"location")

strategy development

marketing research regarding ____ answers: what business should we be in? how will we compete? what are the goals for the business?

monitoring the performance

collecting information after implementing plans to measure effectiveness in sales, customer satisfaction, brand switching, etc.

marketing research process

1. define the research objective

2. determine research type

(exploratory: identify problems or hypotheses

descriptive: information about existing market conditions

casual: identify cause-and-effect relationships)

3. determine research approach

(qualitative: observation, in-depth interviews, focus groups

quantitative: experiments, questionnaires)

4. select data collection method (mail, telephone, personal interviews, etc.)

5. analyze the results

6. report the findings

research design

specifies the plan for collecting and analyzing data (including the nature of the data to be collected, the data-gathering procedures to be used, and the population to be studied)

sampling

gathering data from a selected subgroup (ideally which accurately reflects the characteristics of the designated population) of the population of interest

probability samples

randomly selected people from the designated population

non-probability samples

not everyone in the designated population has an equal chance of being selected

primary data

information collected specifically for the current research study

secondary data

information that has already been collected for reasons not directly related to the current study

(internal - information available within the company

external - made up primarily of published sources)

survey research

acquiring information by communicating directly with the people (in person, by mail, or over the phone)

focus group

in-person data collection procedure where the interviewer meets with five or ten people at the same time

observation

collecting data unobtrusively (through videotape recordings, checkout scanners, etc.), however this method cannot ascertain individual's attitudes

experimental research

compares the impact of marketing variables on people's responses in a controlled setting to identify cause-and-effect relationships, however the high cost and artificial "laboratory" settings are disadvantages

simulation

uses computer based programs (mathematical models) to assess the impact of alternative marketing strategies

marketing information system (MIS)

the people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute accurate information to the people who make marketing decisions

forecasting techniques

-qualitative: internal expert opinion, consulting panels of experts from outside the company, and Decision Trees and Scenario Building (probability models based on opinion)

-quantitative: sales predictions based on analysis and extension of historical trend data, mathematical models that incorporate multiple decision variables, multiple regression analysis, and econometric modeling

-short-term: for next month or quarter (helps promotions)

-medium-term: usually annually

-long-term: typically for next five years

characteristics of a market

must be measurable, and can be demographic or behavioral

demographics

statistics about a population

personal demographics

characteristics of people and groups (age, gender, family size, income, occupation, education, etc.)

geographic demographics

characteristics of towns, cities, states, regions, and countries (ex. country size, city or SMSA [Standard Metropolitan Statistical Area] size, population density, and climate)

behavioral dimensions

purchase occasion, user status, user rate, brand loyalty, customer attitudes toward products, and product benefits (they are influenced by social factors, psychological variables, and purchase situations)

psychographics

related to personality/factors that influence the customers' patterns of living/lifestyle (ex. activities, interests, opinions [<- AIOs/IAO interests], social class, personality, and values)

heterogeneous

diverse (describing the total potential market)

homogeneous

similar (describing a segment of the market which includes people who have dimensions in common)

market targeting

determining which segments would be the company's best targets. to do this effectively it is important to ensure that the dimensions/bases/variables used to segment the market are measurable, the segment is accessible/reachable through existing channels, and each segment is large enough to be a profitable target

single-variable segmentation & multi-variable segmentation

when buyer behavior is related to only one segmentation variable & buyer behavior that fits two or more bases

single-segment/concentration strategy & multiple segmentation strategy

focusing on one segment as a target market & having more than one target market (and using a different marketing mix for each)

differentiated marketing

having more than one target market and using a different marketing mix for each of them

undifferentiated or mass marketing

marketing to the entire market instead of choosing target segment(s)

involvement

the importance that consumers attach to buying a particular product. this is the determining factor of how customers reach the decision to buy something

high involvement decision-making

is most often associated with consumers perceiving the product to be personally important, a relatively expensive/high-priced product, the consumer lacking relevant information about the product, high risks if a bad decision is made, and the product offering potentially great benefits to the buyer

stages: need/problem recognition -> search for relevant information -> identification and evaluation of alternatives -> purchase decision -> postpurchase behavior

low involvement decision-making

often the case regarding frequently purchased, low-priced goods

stages: need/problem recognition -> purchase decision -> postpurchase behavior

four types of buying behavior

differences between brands [side] / involvement [top]

___________ high____ | ____low______

significant | __complex__ | _variety seeking_

few | _dissonance reducing | ___habitual___

limited & extensive decision-making

requires a good amount of prior thought & involves a lot of prior thought (like buying a house)

cognitive dissonance

mental anxiety such as from uncertainty about a recent purchase due to the consumer continuing to evaluate the advantages and disadvantages of alternatives after purchasing a product. the buyer remains uncertain and less than fully satisfied with the product (usually only in high involvement decisions)

organizational/industrial markets

buyers purchase for resale, operational needs, or for use in further production and derive their demand for materials from the demand they anticipate consumers to have for the finished goods

characteristics used exclusively to segment non-consumer markets

customer type (manufacturers, wholesalers, retailers, government agencies, or nonprofit institutions), customer size (based on the purchasing power of the buyer), and buying situation (new-task buying, straight rebuy, or modified rebuy)

non-consumer buying situations

-new-task buying: usually the purchase of high-cost products which the company does not have previous experience with (lots of thought goes into it)

-straight rebuy: used to purchase inexpensive, low-risk products (typically just restocking supply that has run out)

-modified rebuy: requires some information and a limited number of alternatives may be evaluated before reaching the decision (requires a medium amount of involvement)

buying center

(not a specific place or location within the company) people who affect the decision making process in organizational/company buying (large companies may establish a formal "buying committee" to evaluate purchasing policies and product modifications): buyers (who identify suppliers, arrange terms of sale, and carry out purchasing procedures), users (the people in the company who will use the product), influences (people who establish product requirements and specifications based on their technical expertise or authority in the company), gatekeepers (people in the company who control the flow of relevant purchase-related information), and deciders (the individual(s) who makes the final purchase decision)

consumer products/goods

are targeted towards individuals and households for final consumption

types of goods:

convenience - purchased frequently and with minimum effort (low involvement)

shopping - price-quality comparisons are usually made at several stores before buying (high involvement)

specialty - brand loyalty/will only buy "their brand"

unsought - there is no demand for (for various reasons)

industrial or business products/goods

are typically purchased for resale, operational needs, or use in further production

types:

-raw materials, component materials, and fabricated parts: used in producing finished goods or becomes part of them

-accessory equipment, and installations: capital goods which are used in the production process (ex. assembly line equipment, drill presses, lathes)

-operating supplies/maintenance, repair, and operating: low-cost items that aid the production process (ex. lubricating oils, pencils, janitor supplies)

services

tasks performed for another person or company (classified as consumer or industrial depending on the customers). they are products that may or may not be independent of goods. they are often intangible, usually perishable (it cannot be saved for later), and they are frequently inseparable from the individual(s) providing it (thus may require the customer to be at a particular location), as well as variable (not the same every time)

tangible product

features that can be precisely specified (ex. color, size, weight)

extended or augmented product

both the tangible and intangible elements of a product (such as brand image and accompanying service features)

product line & product mix

a group or set of closely related items & all of the product lines a company offers

new product opportunities

scale:

not innovative | imitative/"me too"/"cloned" - modifications of existing products - minor innovations - major innovations | innovative

steps:

-idea generation

-product screening

-concept testing

-business analysis

-product development

-test marketing

-commercialization

idea generation

searching for new product opportunities through labratory studies, market research, brainstorming (in a group), etc. anyone can help a company come up with new ideas (even customers)

product screening

after a company has generated several ideas for new products they sort the potential products relative to their strengths and weaknesses and test the most realistic ones

concept testing

asking potential customers for the new product to evaluate the concept to determine if the product is worth pursuing

business analysis

a detailed evaluation of the potential product's commercial feasibility (considering product costs, competitors' strengths, projected market demand, needed investment, and potential profitability)

product development

the next phase of new product planning is to create the first tangible product and initial marketing strategy for it while testing and refining continue to be done

test marketing

executing a series of experiments (in at least one isolated geographic market) to determine the acceptance of the product and the appropriateness of the proposed marketing strategy

commercialization

a new product starts being mass produced and the marketing plan for it is implemented (this is the same as the introduction stage of the product life cycle)

product adoption process & product adoption

the stages a consumer goes through to learn about new products: first aware of product, if interested they will evaluate the perceived merits of it and develop an opinion, the consumer may buy the product (initial product trail) and their initial positive impression will either be confirmed or reversed & when the buyer decides to use the product regularly

diffusion process & categories of adopters

describes the typical rate of new product adoption exhibited by consumers &

-innovators (3%, the first to buy a new product, typically younger, more affluent, and cosmopolitan than later groups of buyers)

-early adopters (13%, next to buy product, typically more locally oriented than innovators, and well respected within their communities who influence others)

-early majority (34%, typically slightly above average in social and economical standing, were influenced by advertising, salespeople, and early adopters)

-late majority (34%, more resistant to change/risk taking than previous groups, typically middle aged or older, and somewhat less well off than the socioeconomic average)

-laggards (16%, typically price conscious, low-income consumers, and by this time the product has reached the maturity stage of the product life cycle)

ideal points

the consumers' perception of the perfect combination of attributes

mix expansion & contracting

adding new product lines or increasing the depth of existing lines & reducing the product mix

wide product mix & deep product mix

using a diversification strategy by offering several different product lines & focusing on a smaller number of product lines

product life cycle (PLC)

stages (in general, this process is getting shorter):

-introduction (corresponds to the commercialization of a new product, sales increase steadily from $0 but profits remain negative, innovators are the first buyers, and there is very little direct competition)

-growth (starts when the profitability becomes positive, sales continue at an increasing rate, and new firms attracted by high-profit potential enter the market)

-maturity (initially characterized by slowing sales, then industry sales level off as the market becomes saturated, consumer demand peaks, price competition is greater than during the previous stages, and some companies may be forced out of the market as total industry profits decrease)

-decline (industry sales decline and many firms leave the market, industry profits continually decline during this stage, and most remaining firms will exit the market)

brand

a name or symbol that identifies the products of a specific company, and the "personality" of the product is created around it (ideally it enhances the image of the company and makes people more receptive to their other products)

manufacturer or national brands

created by manufacturers

dealer or private brands

created by intermediaries (ex. retailers/stores)

good brand names

suggest something about the product's benefits, are short and simple, are easy to spell, read, and pronounce, are pleasant sounding, are distinctive and memorable, work for new products that may be added to the line later, and are legally available to use

brand familiarity

levels:

-brand insistence: consumers with absolute brand loyalty

-brand preference: consumers usually buy certain brand

-brand recognition: consumers remember the brand name

-brand non-recognition: consumers don't recall the brand

-brand rejection: consumers recognize but refuse to buy

family brand

a strategy used when the same brand is applied to several products (best when the products are comparable in type and quality)

individual brands

different branding for each product when the products are significantly varied in type and quality

generic products

products without a name brand (often marketed by intermediaries at low prices for cost-conscious consumers)

licensed brand

a well-established brand name that other sellers pay to use, allowing sellers to take advantage of existing brand recognition and preferences

trademarks

brand names, marks, or characteristics used to identify products (when registered, they are legally protected exclusively for the owners to use)

product packaging

is for product protection (from damage),

promotion (an extra push to persuade the consumer),

[added value (fancy dispensers, reusable container, etc.)],

and information (labels enable consumers to compare and evaluate)

channels

physically distribute (transportation, inventory management, and customer service) products. intermediaries can do market research, promotion, and product planning to aid channel efficiency and market development

sorting process

accumulation (assembling and pooling small shipments so that they can be shipped more economically), sorting (separating goods by quality, color, or size), and assorting (acquiring a wide variety of merchandise to meet the preferences of consumers, this is usually done at the retail level)

direct & indirect channels

systems that move goods from the producer to the final customer without using independent intermediaries/"middle men" & systems that move goods with the cooperation/assistance of independent intermediaries

channel width & length

refers to the number of independent members at one level of the distribution channel & refers to the number of levels used to create a distribution channel

intensive & selective & exclusive distribution

when a firm sells from every potential outlet that will reach its target market & when a firm sells through many but not all potential wholesalers and retailers & when a firm limits the number of outlets it uses to one or two intermediaries within each market

indirect distribution channel systems

-corporate: when one firm owns all channel members or the firms at the next level in the channel

-vertical integration: acquiring firms that operate at different channel levels (possibly to establish a stable corporate channel system)

-horizontal integration: acquiring firms operating at the same channel level (to increase the purchasing company's competitive strength, market share, and power within the channel system)

contractual & administered arrangements

[both are methods used to coordinate functions of independent members within indirect channels]

specifies performance parameters for each independent channel member & coordinate channel operations through a dominant channel member (because the dominant firm has a significant amount of market power)