MARK 1101 Midterm

What is Marketing?

Companies trying to create value for customers and build strong customer relationships in order to capture value from customers in return

2 Goals of Marketing

1. Attract new customers by promising superior value

2. Keep and grow current customers by delivering satisfaction

Key steps in the marketing process

1. Understand the marketplace and customer needs and wants

2. Design a customer-driven marketing strategy

3. Construct an integrated marketing program that delivers superior value

4. Build profitable relationship and create customer delight

5. Capture value from customer in return

Need

The difference between a customer's actual state and ideal or desired state

Want

A desire for a particular product to satisfy a need

Market Offering

Some combination of products, services, information, or experiences offered to a market to satisfy a need or want

Demand

When people are willing to pay for "wants"

Market

The set of actual and potential buyers of a market offering

The 4 P's of the marketing mix

product, promotion, price and place

Product

variety, quality, design, features, brand name, packaging, services

Promotion

advertising, personal selling, sales promotion, public relations

Price

list price, discounts, allowances, payment method, credit terms

Place

Channels, coverage, assortments, locations, inventory, transportation, logistics

Customer Lifetime Value (CLV)

The value of the entire stream of purchases that a single customer would make over a lifetime patronage

Customer profitability

Its analysis eliminates losing customers and selects profitable ones with whom relationships should be developed

Steps to Strategic Planning

1. Define the organization's mission

2. Set objectives

3. Establish the business portfolio

4. Develop growth strategies

Product Oriented

Defining the company in terms of its service/product offerings

Customer Equity

Total combined lifetime value of all the company's current and potential customers

Market-Oriented

Defining company in terms of satisfying the market/consumer needs

S.M.A.R.T. Objectives

Specific

Measurable

Attainable

Relevant

Time-bound

Strategic Planning

The process of developing and maintain a strategic fit between the organization's goals and objectives and its changing marketing opportunities

Business Portfolio

Collection of businesses and products that make up a company

Strategic Business Unit

A relatively autonomous division of a company that operates as an independent enterprise with responsibility for a particular range of products or activities

Mission Statement

A statement of the organization's purposes - what it wants to accomplish in the large environment --> What/Who do you want to focus on?

Portfolio Analysis

The process by which management evaluates products/businesses making up the company

--> Resources are directed toward more profitable businesses while weaker ones are phased out or sold

Marketing Myopia (AVOID)

When defining the Mission Statement too narrowly and thus missing growth opportunities

--> Importance to be customer oriented

Stars

High share, high growth

Build into cash cow via investment

Cash Cows

High share, low growth rate

Maintain or harvest for cash to finance new stars

Question Marks

Low share, high growth

Build into stars via investment or reallocate funding and let QM become dogs

Dogs

Low share, low growth

Maintain or divest

Market Penetration

Ex. Product, Ex. Market

Seek to increase sales of existing products to existing markets

--> Encourage current users to consume more (toothpaste); encourage non-users to buy

Market Development

Ex. Products, New Market

Introduce existing products to new markets

--> Advertise in a different channel/media; communicate different product benefits; expand geographically; add channels of distribution (retail, wholesale, outlet, etc)

Product Development

New Products, Ex. Market

Create growth by selling new products in existing markets

--> Offer new variations of the same product (seasonal varieties, mini oreos), planned obsolescence (iPhone generations, fashion trends, etc)

The 3 elements of a customer-driven marketing strategy

Dividing the Market (Segmentation)—groups customers by needs

Market Targeting (Targeting)—choose the segment you will serve

Market differentiation and positioning (Positioning)---arrange for the offering to apply a clear, distinctive, and desirable place relative to competing products in the minds of target customers; what superior value offered?

ROMI Calculation

(Sales-Costs)/Marketing Costs

Three Levels of Competition

Direct competitors---Brand competition

Indirect competitors—Product competition

Replacement competitors—competition for discretionary income

Customers

For whom the company aims to deliver superior value

Collaborators

Work with the company to create and deliver customer value

Competitors

Want to satisfy the same customer need

Company

Responsible for the market offering

Diversification

New Products, New Market

Emphasize both new products and new markets to achieve growth

Starting up or buying business outside the firm's current products and consumer segments

--> Acquisitions (McD buying Aroma Café, Sara Lee buying Coach Leather), Brand extension (Uber Eats)

Context

Other factors impacting the marketing environment

Microenvironment

Actors close to the company that affect its ability to serve its customer

Market Research

Systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization

Purpose: It is done so that managers can make informed decisions

Have better information that provides customers insights (quality over quantity)

Managerial Decision Problem

Focuses on symptoms, action oriented, and asks what the decision maker needs to do

5 C's Framework

Customers

Collaborators

Competitors

Company

Context

Marketing Research Problem

Focuses on causes, information oriented, asks what information is needed

Primary Data

Information cannot be acquired from existing data

Secondary Data

Information can be acquired from existing data

to learn about current and potential customers

Commercial Reports

Paid-for reports. Research firms collect large amounts of data about consumer opinions, trends, demographics, industries, etc.

Competitive Marketing Intelligence

Publicly available data found on the internet based on searches, social media, blogs, online reviews, or through resellers, sales force, etc.

Ex. Google Trends/Analytics

Internal Data

Customer databases tracking behavior on site, customer service calls, purchases, etc.

Ex. Scanner data, sales reports, inventory reports

Descriptive Research

--> Describes market characteristics and/or functions

--> Large samples, quantitative data, well structured

*How do consumers perceive our ads?

Cross-sectional

Longitudinal

Surveys

Causal Research

-> Demonstrate a change in one variable causes a predictable change in another variable

*How does advertisement relate to sales?

Laboratory Research

Field Studies

Projective Techniques

Useful for uncovering latent purchase motives

Third-person technique

Completion technique

Focus Groups

Highly interactive, unstructured yet guided, discussing broad topic before focusing on specific issues

Advantages:

Relatively fast

Easy to execute and very flexible

Relatively inexpensive

Rich information due to interaction

Disadvantages:

Not representative and hard to generalize

Difficult to analyze

Moderator plays an important role

Causal/Experimental Research

A research approach in which one (or more) variable is manipulated (X) and the effect on another variable (Y) is observed

Advantage: Determines a causal relationship

Disadvantage: Lurking variables

Market Research Survey

Advantages:

Ease

Reliability

Simplicity to administer and analyze

Large sample to capture trends (longitudinal)

Disadvantages:

Difficult to motivate respondents to respond (candidly)/submit survey

Structured data collection with fixed-response choices may result in loss of validity for e.g. beliefs or feelings

Properly wording questions is not easy

Getting the right sample (sampling)

Response bias

5 Stages of the decision-making process

1. Need recognition

2. Information search

3. Evaluation of alternatives

4. Purchase Decision

5. Post purchase Behavior

Internal Information Search

Retrieval of relevant knowledge stored in memory

External Information Search

--> Relying on outside sources

Personal sources (friends, family)

Commercial sources (ads)

Public resources (health website, FDA, etc)

Experiential sources (personal experience trying the product)

Exploratory Research

Used to discover ideas or insights and to form hypotheses

--> Generally provides qualitative data (small scale studies)

--> In-depth probing of a few consumers who fit the profile of the "typical consumer"

*Why do sales decline?

Customer Interviews

Focus Groups

Projective Techniques

Case Studies

Ethnographic/Observation

Heuristics

Mental shortcuts used to make a decision

Ex. Inferring that price = quality, brand name and country of origin = quality

Exposure

The process by which the consumer comes in physical contact with marketing elements

Attention

The process by which an individual allocates part of his or her mental activity to a stimulus

Perception

The process by which sensations are selected, organized and interpreted

Retention

Interpretations of perception is retained and stored in long-term memory

Observational Research

An unobtrusive method

Researcher simply records the consumer's behavior - often without his or her knowledge.

Mechanical observation: nonhuman device records behavior

5 Ways to increase attention

1. Personally relevant

2. Very pleasant or unpleasant

3. Surprising

4. Concrete

5. Simple

Piecemeal Data

Juxtaposition of imperatives

Ex. Brand x has more headroom than a Mercedes, more leg room than a Cadillac, and more trunk space than a BMW

Nodes

concepts/words

Links

associations between related concepts

Motivation

--> Internal state that drives us to satisfy needs. When we satisfied a need, we're no longer motivated

--> When there exists a discrepancy between current (initial) state and desired (end) state, motivation arise

Chunking

group items to be processed as a unit

Words in phone numbers

Rehearsal

repeating something over and over

Jingles/slogans

Elaboration

processing information more deeply

Add additional meaning/ Use novel or unexpected stimuli

Consideration set

Set of market offerings that consumers are taken seriously to satisfy one's needs

Classical conditioning

pairing a positive stimulus with the product or brand

Mere exposure

repeated exposure increases familiarity, fluency, and liking

Emotions

creating arousal, either positive or negative (humor, celebrities, emotional appeals, fear, guilt, etc.)

4 Types of Segmentation Strategies

1. Geographic

2. Demographic

3. Psychographic

4. Behavioral

5 Criteria for effective segmentation

1. Measurable

Can you quantify the segment?

2. Accessible

Do you have access to the market through the sales force, distributors, transportation, or warehousing?

3. Substantial

Is the segment of sufficient size to warrant attention as a segment? Is the segment declining, mature, or growing?

4. Differentiable

Are segments different in terms of their needs or their response to elements of the marketing mix?

5. Acceptable

Can you design an effective program for them?

4 Targeting strategies

1. Undifferentiated Marketing

2. Differentiated Marketing

3. Concentrated Marketing

4. Micromarketing

Differentiated Marketing

Develops products for several segments with different product needs

Communicates product benefits differently to each segment

Price and distribution channel may differ

Appropriate when consumers are choosing among well-known brands with distinctive images

Ex. Toilet paper; coke zero and diet coke

Ex. Price sensitive vs. price insensitive (Marriot Hotel brands)

Pros: higher sales than undiff. Mark., some efficiencies

Cons: Cannibalization (coke zero takes away coke buyers); costly

Comparison Omission

Doesn't specify the point of reference, leaves off comparison point

Ex. Brand x gasoline gives you greater gas mileage

Concentrated Marketing

Focusing efforts on offering one or more products to a single segment

Useful for smaller firms that do not have the resources to serve all markets

Cons: May face crushing competition, hard to diversify

Ex. Whole foods/ Tesla

Micromarketing

Tailors offerings to meet the needs of specific individuals and locations

Ex. Local Marketing, Individual Marketing. Individually designed Nike

Mass customization: a company modifies a basic good to meet individual needs

Pros: Increase satisfaction, greater loyal/retention, greater CLV, greater profitability

Cons: Difficult and expensive

Pragmatic Inferences

Literally true, figuratively false

Interpreting "may" as will

Ex. Brand x may boost your immune system (vitamins)

Value Proposition

What superior value does your offering create for the target segment

More for more? Less for same? Less for less?

Affirmation of the consequent

Associating a particular result to the use of a product to make consumer think there's a causal relationship between the two

Ex. "Women who look younger use Oil of Olay" means, "Oil of Olay makes women look younger"

Differentiation and positioning

to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Demonstrations

Ex. e.g., Campbell's soup - meat and potatoes above the broth because marbles were in the bottom of the bowl - now more tightly regulated.

Perceptual Map

Plot consumer perceptions of brands on important buying dimensions

Identifies how consumers perceive the brand

Ideal Points

Used to determine what would best satisfy customer needs

Scarcity

Scarce objects are presumed to be more valuable. As such, you may want to limit production or limit distribution to influence the perceptions of scarcity!

Limiting number of purchases

Campbell soup, limit of 5!

Social Proof

The perceived validity or correctness of an idea increases as the number of people supporting the idea increases

Salting the tip jar

Hotel towel reuse

Liking

The more people like you, the more power you have over them.

Increasing liking by:

Exposure

Physical attractiveness

Similarity

Compliments

Name familiarity

Attractive people receive lighter sentences

Pay per click

good for companies with tight budget because it leads to traffic on your website- same logic if you are a small company

Affect

emotional feeling - "I really love X"/ "This product X is disgusting"

CTR

#people who click