Marketing Fundamentals, Strategy, Consumer Behavior, and Innovation

A comprehensive vocabulary deck covering marketing fundamentals, orientations, strategic planning, portfolio models, STP, consumer decision processes, product levels, and innovation models.

Marketing

A process by which companies create and deliver value for customers and build strong customer relationships to capture value from customers in return (facilitating exchange).

Four Conditions for Marketing to Occur

1. Two or more parties with unsatisfied needs; 2. Desire and ability to have those needs satisfied; 3. A way for the parties to communicate; 4. Something to exchange.

Need

A basic state of felt deprivation (e.g., physical food/clothing, social belonging, individual self-expression).

Want

The specific form that human needs take as shaped by culture and individual personality (e.g., needing food, but wanting a Big Mac).

Demand

Human wants that are backed by buying power (willingness and financial ability to purchase).

Marketing Myopia

A concept coined by Ted Levitt describing the mistake of focusing narrowly on the physical product rather than on the underlying benefits and customer needs it satisfies (e.g., railroads defining themselves as "railroad" instead of "transportation").

Production Concept

An orientation prevalent through the 1920s based on the premise that consumers favor products that are available and highly affordable, focusing heavily on improving production and distribution efficiency.

Sales Concept

An orientation prevalent from the 1920s to the 1960s based on the premise that consumers will not buy enough products unless the firm undertakes large-scale selling and promotional effort, focusing on driving sales transactions rather than building long-term relationships.

Marketing Concept

An orientation prevalent from the late 1950s to the late 1990s based on the premise that organizational success depends on determining target customer needs and wants and delivering satisfaction better than competitors, focusing on customer satisfaction and relationship building.

Customer Relationship Concept

An orientation from the late 1980s to the present focused on maximizing customer lifetime value by balancing short-term desires with long-term customer relationships, emphasizing a deep understanding of buyers and total customer experience.

Customer Lifetime Value (CLV)

The total value of the entire stream of purchases that a customer makes over a lifetime of patronage with a company.

Four Principles of Marketing Strategy

1. Customers are different (respond differently to the marketing mix); 2. Customers change (preferences and circumstances evolve); 3. Competitors change and react (competitive advantage is dynamic); 4. Organizational resources are limited (trade-offs are mandatory).

Strategic Marketing Process (Three Phases)

1. Planning Phase (Situation analysis, Goal setting/STP, Marketing mix design); 2. Implementation Phase (Resource deployment, execution, organizational structure); 3. Evaluation Phase (Measuring metrics, comparing against goals, taking corrective actions).

Three Levels of Strategy Development

1. Corporate Level: Top management directs overall organization-wide strategy; 2. Strategic Business Unit (SBU) Level: Specific division/brand managers create strategies to exploit value opportunities; 3. Functional Level: Specialists (Marketing, Finance, R&D) execute tactical plans.

SWOT Analysis

An appraisal of internal Strengths and Weaknesses alongside external Opportunities and Threats to build strategic alignment.

The 3 Cs

Strategic analysis elements consisting of Competencies (what the firm does best / core distinctive capabilities), Customers (state of relationships, satisfaction, and evolving needs), and Competitors (who rivals are and how their strengths/weaknesses shift).

Brand Competition

Firms offering products with similar features and benefits to the same customers at similar prices (e.g., Coke vs. Pepsi).

Product Competition

Firms competing in the same product class but offering different features, benefits, and price points (e.g., sports car vs. minivan).

Generic Competition

Very different products that solve the exact same underlying problem or customer need (e.g., taking an airline vs. taking Amtrak train vs. driving).

Total Budget Competition

All firms competing for the consumer's limited disposable financial resources (e.g., buying a vacation vs. buying a new home theater).

Marketing ROI (MROI)

A metric measuring the return generated from marketing expenditures, calculated as: $\text{MROI} = \frac{\text{Incremental Financial Value Gained} - \text{Cost of Marketing Investment}}{\text{Cost of Marketing Investment}}$.

Star (BCG Matrix)

A business unit in a high market growth, high relative market share environment that generates substantial cash but also requires heavy cash to support growth and capacity; the strategy is to invest to maintain or build share.

Cash Cow (BCG Matrix)

A business unit in a low market growth, high relative market share environment where dominant share produces excess cash with low investment needs; the strategy is to harvest or milk cash flow to fund stars and question marks.

Question Mark (BCG Matrix)

A business unit in a high market growth, low relative market share environment requiring large cash injections just to hold position or build share; the strategy is to invest heavily to convert it into a star, or divest.

Dog (BCG Matrix)

A business unit in a low market growth, low relative market share environment that generates little to no cash and holds subordinate market presence; the strategy is to divest, harvest, or liquidate.

Market Penetration (Ansoff Matrix)

A strategy focused on increasing sales of existing products in existing markets (e.g., aggressive advertising, loyalty programs, increasing usage rates).

Product Development (Ansoff Matrix)

A strategy focused on offering new or modified products to existing markets (e.g., Apple creating the Apple Watch for existing iPhone owners).

Market Development (Ansoff Matrix)

A strategy focused on introducing existing products into new markets (e.g., expanding geographic regions, entering global markets, targeting new demographic groups).

Diversification (Ansoff Matrix)

A strategy focused on starting up or acquiring businesses with new products in entirely new markets, representing the highest risk.

Geographic Segmentation

Dividing a market into geographical units such as nations, regions, states, cities, neighborhoods, or climate zones.

Demographic Segmentation

Dividing markets based on objective observable variables: age, gender, household income, family life cycle, education, occupation, and ethnicity.

Psychographic Segmentation

Dividing buyers based on social class, lifestyle, and personality traits, measured using AIO (Activities, Interests, Opinions).

Behavioral Segmentation

Dividing buyers based on their knowledge, attitudes, usage occasions, benefits sought, user status, usage rate, or brand loyalty.

Criteria for Effective Market Segmentation

Five necessary conditions: Measurable (size and purchasing power can be assessed), Accessible (effectively reached and served), Substantial (large/profitable enough), Differentiable (responds distinctively to different mixes), and Actionable (feasible programs can be designed).

Undifferentiated (Mass) Targeting Strategy

A targeting strategy where a firm designs a single marketing mix directed at the entire market, which works best for homogeneous markets.

Differentiated (Segmented) Targeting Strategy

A targeting strategy where a firm targets two or more segments by developing distinct marketing mixes for each; yields higher market share but increases operational costs.

Concentrated (Niche) Targeting Strategy

A targeting strategy where an organization focuses its single marketing mix on securing a large share of one or a few specialized sub-segments or niches.

Micromarketing

Tailoring products and marketing programs to the specific needs of individual buyers (one-to-one/mass customization) or local customer groups.

Perceptual Map

A two-dimensional visual grid displaying consumer perceptions of competing brands along key evaluative dimensions; used to identify brand positioning gaps and guide repositioning.

Positioning Statement (Six Keys)

1. Simple, memorable, and tailored to target market; 2. Clear differentiation from competitors; 3. Credible and deliverable; 4. Sole occupier of that unique position ("ownable"); 5. Evaluates alignment of future marketing decisions; 6. Leaves room for growth.

Problem Recognition

Stage 1 of the purchase decision process, where the consumer perceives a difference between their actual current state and their ideal desired state, triggered by internal or external stimuli.

Information Search

Stage 2 of the purchase decision process, where the consumer gathers information through Internal Search (memory/past experience) and External Search (personal sources, public reviews, marketer advertising).

Alternative Evaluation

Stage 3 of the purchase decision process, where the consumer assesses evaluative criteria across alternatives to establish value perceptions and derive the Consideration Set (acceptable brands).

Purchase Decision

Stage 4 of the purchase decision process, where the consumer decides from whom to buy and when to buy, which can still be disrupted by unexpected situational factors or peer attitudes.

Postpurchase Behavior

Stage 5 of the purchase decision process, where the consumer compares product performance against initial expectations to determine satisfaction, repeat buying intent, or cognitive dissonance.

Cognitive Dissonance

Post-purchase psychological doubt and tension regarding whether the right buying choice was made; common with high-involvement, expensive purchases.

Extended Problem Solving

A high-involvement decision process for expensive purchases with serious personal consequences and high social risk, requiring extensive information search and comprehensive alternative evaluation (e.g., purchasing a car or home).

Limited Problem Solving

A moderate-involvement decision process for everyday considerations without extensive search, typically relying on friends or simple comparisons (e.g., buying a small kitchen appliance or picking a lunch restaurant).

Routine Problem Solving

A low-involvement decision process for low-cost, habitual, frequently purchased items that skips information search and evaluation steps entirely (e.g., milk, toothpaste).

Situational Influences

Five contextual factors that influence consumer purchase behavior: Purchase Task (reason for buying), Social Surroundings (presence of others), Physical Surroundings (store decor, music, crowding), Temporal Effects (time of day, time availability), and Antecedent States (mood, cash vs. credit).

Reference Groups (Types)

Social groups affecting buying choices: Associative groups (groups to which a person currently belongs), Aspiration groups (groups an individual wishes to join), and Dissociative groups (groups an individual deliberately distances themselves from due to conflicting values).

Three Levels of a Product

The Core Product (basic problem-solving benefit sought), Actual Product (physical attributes, styling, brand name, packaging, quality level), and Augmented Product (additional customer services, warranty, delivery, post-purchase support).

Convenience Product

An item purchased frequently, immediately, with minimal shopping effort and price comparison (e.g., candy, soap, newspapers).

Shopping Product

An item bought only after comparing suitability, quality, price, and style across competing alternatives (e.g., furniture, clothing).

Specialty Product

An item with unique characteristics or high brand identification for which buyers are willing to make a special purchasing effort (e.g., luxury watches, designer gear).

Unsought Product

A product that consumers do not know about or normally do not think of purchasing until a specific need arises (e.g., life insurance, emergency towing).

Product Mix Dimensions

Width (number of different product lines carried), Length (total number of items carried across all lines), Depth (number of versions/variants offered for each product), and Consistency (how closely related lines are in end use, production, or distribution).

Line Filling vs. Line Stretching

Adds items within the present range of the product line (risking cannibalization/confusion), vs lengthens the line beyond its current range (upward to premium or downward to economy).

Feature Bloat

Adding extra features that provide no consumer value but increase product cost and complexity.

Feature Fatigue

Consumer dissatisfaction and frustration caused when excess features degrade usability ("I can't even do the one thing I bought it for").

Continuous Innovation

A new product variation that requires no consumer learning, where the marketer's primary focus is to generate awareness (e.g., new shampoo flavor/formula).

Dynamically Continuous Innovation

An innovation requiring minor behavioral adjustment, where the marketer focuses on educating consumers on new usage points and benefits (e.g., electric toothbrush).

Discontinuous Innovation

An innovation establishing entirely new consumption patterns, requiring extensive consumer education on proper use and benefits (e.g., first personal computer).

Stage-Gate Process

A structured funnel in product development where concepts must pass review gates to receive funding for the next stage, designed to eliminate failing ideas early and cheaply.

Customer-Driven vs. Market-Driving Innovation

Asks customers directly via upfront research to produce incremental improvements, vs observes unarticulated pain points without asking directly ("marketer as anthropologist") to produce breakthrough or disruptive innovations.