Marketing 3000 (Joel Poor) Exam 1

Marketing:

"Study of exchange"; academic def: learning about marketing from the perspectives of the business and the customer; functional def: facilitation of exchange; long def: the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy the individual and organizational objectives

Given exchange definition, what are the requirements that define the scope of marketing?

Communication

Marketing's first task

Discovering consumer needs

The marketing concept

Before you provide an offering, you have to determine where there are unmet needs. "Make what's desired".

Marketing's second task

Satisfying consumer needs with the marketing mix (4 P's).

4 P's

The marketing mix:

= set of decisions marketing managers need to make. This mix is designed for each target group

1. Product (play place at McD's)

2. Price (values meals and happy meals)

3. Promotion (ads with kids)

4. Place (put in places with lots of young parents)

Original marketing philosophy

Revolved around the product. "If we build it, they will come". Known as product-orientation philosophy.

Best for situations where demand exceeds supply.

Based on idea: product will sell itself through either a low price or high quality.

Sales orientation philosophy

Sell what is made.

Internally driven (just like the previous product-orientation philosophy).

This introduced the concept of communication, ONE-WAY communication to the customer. "Just sell the damn product"

Marketing orientation philosophy

Characterized by?

Requires information about the market (potential customers, trends, competitors) be collected prior to making decisions that involve the selling process.

Depends on two-way relationship with customer.

Characterized by: customer focus, coordinated marketing effort (all departments in the firm share in the effort to satisfy customer needs), and long-term success.

Relationship marketing concept

Why?

Emphasizes the creation and maintenance of long-term relationships with all participants (customers, suppliers, retailers) in the exchange process.

Why? The cost of attracting new customers is much greater than the cost of keeping customers.

Service after the sale must be a consideration. Customers tend to stick with products due to this when there is not a large price difference amount alternatives.

4 types of benefits you get from products

1. Functional: ceiling fan, hammer, car, pen

2. Social: social media, cell phones, bars, restaurants, dandriff shampoo, deodorant

3. Personal: mountain climbing, exercise, education (college)

4. Experiential: vacation, football games, Truman, concerts, massages, amusement parks

Soap: functional and social

4 Types of costs

1. Monetary

2. Temporal

3. Psychological

4. Behavioral

Monetary Costs

Tuition and book fees... What you pay

Temporal Costs

Time spent in class and studying.... The time you spend

Psychological costs

Stress studying for exams... The toll is takes on your mental state

Behavioral Costs

Expending energy walking to class or getting sick from lectures

Porter's Five Forces Model

Decides in which industries we want to compete.

Industry profitability depends on:

-industry competitiveness

-availability of substitute products

-potential entrants (threat of new comp)

-supplier power

-buyer power

Industry Competitiveness

Intensity of current competitors

-Low intensity=high profitability

-industry has low intensity when: few firms competing

-Ex: commercial aircraft

Availability of substitutes

-few of no subs= higher profitability

-ex of few/no subs: gasoline (electric may be the only sub)

-Ex of many subs= fresh veggies (canned, frozen, vitamins) soft drinks (Gatorade, bottled water)

Threat of Potential Entrants

High barriers to entry= high profitability

High barriers to entry exist when:

-high capital requirements

-economies of scale are present

-high product differentiation

-network externalities

Ex of network barrier: word processing software

Supplier and buyer power

Low bargaining power of suppliers/ buyers= higher profitability

-Low bargaining power when

1. High # of suppliers

2. Low info: they don't know eachother's bids

Low supplier power ex: CDs, airplanes (not many bought each year)

Low buyer power ex: medical services (we have no info about docs, hospitals, pricing, until after we leave the ER).

Sustainable Competitive Advantage

An advantage over competition that can be maintained consistently over time

Market development

Change market but not product

Product development

Change product, not market

Intensive Growth Strategies: Ansoff's Product/ Market Expansion Grid

Strategic Planning

Developing a strategy to ensure long-term survival and growth. Process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities.

1. Develop a company mission

2. Objectives and goals

3. Choose organizational strategies

4. Develop a portfolio plan

A firm's success depends on:

It's ability to adapt to the changes occurring outside the firm

Environmental analysis

Called monitoring or scanning: ongoing process of identifying external forces, analyzing them, and predicting their potential impact

Demographics

Characteristics of a population (ethnicity, income, gender)

Economic trends

Business cycles is an example: periods of prosperous growth or decline

Substitute competition

A threat that often comes under the radar of monitoring.

Often preceded by a change in consumer taste related to sociocultural trends (low carb trend)

Substitute product

One from a different product category that can be substituted or used instead of another product

Technology

Needs to be monitored and analyzed

This can also be used for developments. The discovery of trans fat started a whole trend against it.

Marketing objectives

specific, measurable, attainable

Market segmentation

Process of dividing the market up into different groups of potential customers who share a common characteristic that differentiates them from another group.

Ex: foot locket and lady foot locker

Segment must be large enough to to generate enough demand to be profitable

Positioning

A product's image in relation to competing products. Based on the differential advantage or unique selling proposition.

Ex: it could be the healthiest burger shop compared to others

Differential advantage

Something special about a product that gives it a better position

Target market

Selected group of customers (intended target of a particular marketing mix)

Product

Both physical products as well as services

Marketing research

Process of defining a marketing problem or opportunity, systematically collecting and analyzing information, and making recommendations based on that analysis.

Purpose: aid managerial decision making. It's the function that links the consumer and public to the marketer.

Research done by a 3rd party company

Marketing research includes

-syndicated research services

-marketing information systems

-marketing intelligence systems

-non-recurring research projects (primary)

Marketing information system (MkIS)

Consists of ppl, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate info to marketing decision makers.

Marketing research process

1. Define the problem and research objectives

2. Develop the research plan

3. Collect the information

4. Analyze the information

5. Present the findings

Kinds of research and what they do

1. Exploratory: sheds light on problem and suggests ideas for solution

2. Descriptive research: ascertain magnitudes

3. Causal: Test cause and effect relationships and test hypothesis about them

Secondary-Data sources

Information that has already been collected. Always use first when you can (cheaper). Use when it answers research problem.

Ex: internal sources, gov publications, periodicals and books, commercial data, on-line associations and business info

Good Marketing research

1. Is scientific, is creative, uses multiple methods, realizes the interdependence of models and data, acknowledges the cost and value of info, maintains healthy skepticism, and is ethical

Demand forecasting

Estimating sales of product during future time period

Sales forecast

-bassed on a specific marketing plan

-expressed in $ or product units

-1 yr period

Estimating future demand

-market factor analysis

-survey of buyers' intentions

-past sales analysis

-composite of sales force opinion

-expert opinion

-market test method

Market-factor analysis

Market demand method. Demand for a product is assumed to be related to the behavior of certain sales activity

Survey of buyer intentions

Market demand method. A sample of current or potential customers are asked how much of a particular product they would buy at a given price during a specified future time period.

Sales-force composite

Market demand method. A bottom-up method consisting of collecting estimates of sales for the future period from all salespeople

Executive judgement

Market demand method. Obtaining opinions regarding future sales volume from one or more executives. Situation that you can't predict.

Test marketing

Market demand method. A firm markets it's product in a limited geographic area, measures sales, and then projects the company's sales over a larger area.

Steps in Market Segmentation, Targeting, and Positioning

Market Segmentation

1. Identify segment variables and segment the market

2. Develop profiles of resulting segments

Market Targeting

3. Evaluate attractiveness of each segment

4. Select the target segment(s)

Market Positioning

5. Identify possible positioning concepts for each target segment

6. Select, develop, and communicate the chosen positioning concept

Market segmentation: why?

Bc customers have

-difference in buying habits

-differences in the way the good or service is used

-different motives for buying

Ex. Toothpastes

Marketing focuses on and serves/ exploits individual differences

When do you segment the market?

ALWAYS. Visualize prospective customers in designing a marketing mix. Concentrate resources on only one or a few market segments.

Market Segmentation Types:

1. Demographic: age, gender, ethnicity, income, education, occupation, family type, martial status

2. Geographic: nation, region, urban/rural, regional, climatic (ski shops, surf shops)

3. Psychographic: attitudes and lifestyles (mountain dew's appeal to X-treme youth)

4. Purchase behavior:

-usage

-loyalty status

-user status

5. Benefit: importance of a particular product benefit

Geodemographic segmentation

-shotguns and pick-ups

--rural blue collar workers and families

ignore

Ignore

Distinguish between 3 Purchase Behavior types

-usage: light, med, or heavy users. How much is used in a given time period. Ex. Less expensive beer is for heavy users like Frank. Expensive wine is for special occasions

-Loyalty status: brand loyal or variety seekers. Mayonnaise has high brand loyalty. Don't target brand loyal customers bc they won't switch.

-User status: users vs. nonusers, former users. Magazines target former users. Things that are subscription based. Ex. Sports teams.

Marketing guidelines !!

-buying behavior of a segment is rarely traceable to a single characteristic

-the 1st segmentation characteristic chosen should be the one that provides the clearest and most distinctive division of the market

-the marketer should be aware of the interrelations amount segmentation characteristics

Target Marketing-Approaches

1. Mass Marketing (no segments)

-one product for all customers

-doesn't exist anymore

2. Niche Marketing

-one product for one segment

3. Differentiated Marketing

-multiple products for multiple segments

-most are this type

4. Individualized (Customized) Marketing

-customizing product/service for individual

What's needed in effective segmentation

-identifiable: who's in the segment

-substantial: size matters

-reachable: ex. Hard to reach college students bc we all use different media types (radio, tv, Internet)

-responsive: customers must react positively and move towards the firms products/services.

Competitive-Based Positioning

Competitive-based focuses strategy on the competition.

-new brands have to establish their CATEGORY MEMBERSHIP

--shows consumers that they're meant to be in that category

--existing brands might have to re-establish this to show they're still one of the best

--Preferred Marketing Approach: inform consumers of a brand's membership before stating its point of difference in relation to other category members.... DONT do p.o.d. & category membership in same campaign

-only emphasize most important point of difference benefit (ex. People won't believe it's the best quality and cheapest)

-STRESS ONE BENEFIT IN PROMOTION

Goal positioning:

Match brand essence to target market goals.

Brand essence: abstracted benefits that relate to consumer goal.

Laddering up: Dover real beauty campaign. Involves repeatedly asking what the implication of an attribute or benefits is for the customer.

Laddering down: Ford F-150

When mad

Ben Frank's "I will speak ill of no man"

Lincoln's letter to General Meade: write a letter or email of men thoughts but don't send it

Primary Data Collection

Information that is collected for a current, specific purpose. Has 3 steps:

1. Exploratory research

2. Descriptive research

3. Experimental research

Exploratory research:

Focus Group Method!!!

Advantages: speedy collection of data, low cost, interaction flexibility

Disadvantages: small sample size, prone to client/researcher bias, group pressures to conform, analysis can be difficult

Exploratory research:

Depth Interveiw Method!!!

Advantages: greater depth/ insights than focus groups, no social/ group pressure

Disadvantages: high cost, analysis can be difficult

Exploratory research:

Projective Techniques Method!!!

Advantages: elicits responses subjects normally unwilling to give, increased validity of responses, ability to uncover subconscious motivations.

Disadvantages: Hight cost, interpretation bias

Descriptive or Casual research:

Mall Intercept Method!!!

Advantages: interaction flexibility, speedy collection of data, high response rates, ability to use visual stimuli

Disadvantages: moderate to high costs, potential for interviewer bias, potential for sampling bias

Descriptive or Casual research:

Telephone survey method!!

Advantages: moderate cost, speedy collection of data

Disadvantages: limited question types, perceived intrusiveness

Descriptive or Casual research:

Internet survey!!!

Advantages: inexpensive, speedy collection of data, convenience of response time-frame

Disadvantages: Lack of control over bogus responses, self-selection bias, difficult to ensure random sample

Descriptive or Casual research:

Mail survey!!

Advantages: cost effective, convenience of response time-frame, perceived anonymity of respondent is high

Disadvantages: low response rate, limited depth of response, slow collection of data

Descriptive or Casual research:

Observation Method!!!

Advantages: permits collection of actual behavior- no reporting bias, useful in collecting sensitive data

Disadvantages: expensive, behavior may not reflect underlying motivations or attitudes, often time-consuming

Sampling:

Selecting representative units (the sample) from a total population

Population: all elements, units, or individuals that are of interest to researchers for a specific study

Random sampling

Provides an equal chance for each member of the population to be selected as part of the sample

Stratified Sampling

The population is divided into groups based on a common characteristic, then a random sample is taken from each group

Area (geographic) sampling

The pop is divided into groups based on location, then a random sample is taken from that location

Convince sampling

Not good to use but is used in small firms. Choosing most available subjects in the time allowed

Points of parity

Benefits that imply category membership

-POP refers to the way in which a company's product offers similarity with its competitors within an industry.

Exemplar

Used to specify a brand's category membership: if you like honey wheat cherioes, you'll like Wheaties

Point of difference

Shows how brand dominates other members of its category

Why would multiple benefits be described in an ad?

Because one is introduced to support category membership and another is introduced to eatablish a point of difference

Normative benefits

Ones that customers says are important bc of social standards rather than bc these benefits actually influence behavior.

Ex: when nutrition, safety, and the like are normative features, they are not powerful points of difference.

Five personality dimensions that can be related to a brand:

Jennifer Aaker 1997

1. Sincerity

2. Excitement

3. Competence

4. Sophistication

5. Ruggedness

These imply its essence

Category essence

Uses insight about how a category fits with consumers' goals as a brand's point of difference.... If a consumer perceives a brand to understand their problems, that brand is the solution.

May be a viable way for a brand to compete when it does not have a product point of difference... But it's the last resort.

Why is it important to segment the market?

1. Because consumers vary in buying habits

(some people buy toothpaste for whitening others for cavity prevention)

2. Difference in the way goods or services are used ( improve life in a certain way e.g running and hiking)

3. Different motives for buying (gifts)

Segmentation Process Step 1

Identify current and potential needs/wants within a market. This involves knowledge of consumer behavior and marketing research

Segmentation Process Step 2

Identify distinguishing characteristics among segments.

Segmentation Process Step 3

Determine the potential for segments and how well they are being satisfied

When should you segment the market?

Before marketing (apriority) Class Ex: McDonalds as a good segmenter

When should you segment the market?

Always

Traditional Segmentation bases (types)

demographic, geographic, attitude and lifestyle (psychographic), purchase behavior, and benefit

Demographic

age, gender, income, education, marital status, family type (qualitative)

Geographic

nation, region, urban/rural, climatic (location)

Psychgraphic

attitudes and lifestyles

eg Mountain Dew appeal to "X-treme" youth

Purchase Behavior

usage (light, medium, heavy)

loyalty i.e brand loyalty or variety seekers

user status i.e users, non user, former users (often companies will go after former users)

Purchase Behavior in class examples

dual packs target heavy users

beer targets light (Amstel Light)

Magazines and season tickets- loyalty

Ketchup and Mayo= hi loyalty to brands