Marketing Principles: Core Concepts, Strategy, and Environment

Marketing

The process of engaging customers and managing profitable customer relationships by creating value for customers to capture value in return

5 steps of the marketing process

1) Understand the marketplace and customer needs/wants 2) Design a customer value-driven marketing strategy 3) Construct an integrated marketing program delivering superior value 4) Engage customers, build profitable relationships, create customer delight 5) Capture value from customers to create profits and customer equity

Needs

Basic states of felt deprivation (physical, social, individual) shared by human beings

Wants

The form human needs take when shaped by culture and individual personality

Demands

Human wants that are backed by purchasing power

Market offerings

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

Exchange

The act of obtaining a desired object from someone by offering something in return

Market

The set of all actual and potential buyers of a product or service

Production concept

Consumers favor products that are available and highly affordable

Product concept

Consumers favor products offering the most quality, performance, and innovative features

Selling concept

Consumers will not buy enough unless the firm undertakes a large-scale selling and promotion effort

Marketing concept

Success depends on knowing target market needs and delivering desired satisfactions better than competitors

Societal marketing concept

Marketing decisions should consider consumer wants, company requirements, and long-term societal human welfare

Marketing mix (4 Ps)

Product, Price, Place, Promotion

Customer-perceived value

The customer's evaluation of the difference between all benefits and all costs of a marketing offer relative to competing offers

Customer satisfaction

Extent to which a product's perceived performance matches a buyer's expectations

Customer lifetime value (CLV)

The value of the entire stream of purchases a customer makes over a lifetime of patronage

Customer equity

The total combined customer lifetime values of all current and potential customers

Butterflies

Customer group: high potential profitability, short-term loyalty

True friends

Customer group: high potential profitability, long-term loyalty

Strangers

Customer group: low potential profitability, short-term loyalty

Barnacles

Customer group: low potential profitability, long-term loyalty

Strategic planning

The managerial process of developing and maintaining a strategic fit between the organization's goals, capabilities, and its changing marketing opportunities

Mission statement

A statement of the organization's purpose (what it wants to accomplish in the larger environment); should be market-oriented and customer-focused

Strategic business unit (SBU)

A key unit of the company, such as a division, product line, or single product/brand

BCG growth-share matrix

Portfolio-planning method that evaluates SBUs by market growth rate and relative market share

Stars (BCG)

High market growth, high market share

Cash cows (BCG)

Low market growth, high market share

Question marks (BCG)

High market growth, low market share

Dogs (BCG)

Low market growth, low market share

Market penetration (Ansoff)

Growth by increasing sales of existing products to existing market segments

Market development (Ansoff)

Growth by identifying and developing new market segments for existing products

Product development (Ansoff)

Growth by offering modified or new products to existing market segments

Diversification (Ansoff)

Growth through starting or acquiring businesses outside current products and markets

Value chain

The series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's products

SWOT analysis

Overall evaluation of a company's internal Strengths and Weaknesses and external Opportunities and Threats

Marketing environment

External actors and forces that affect marketing management's ability to build and maintain successful relationships with target customers

Microenvironment

Actors close to the company that affect its ability to serve customers: the company, suppliers, marketing intermediaries, competitors, publics, and customers

Macroenvironment

Larger societal forces affecting the microenvironment: demographic, economic, natural, technological, political, and cultural

Marketing intermediaries

Firms that help the company promote, sell, and distribute its goods to final buyers (resellers, physical distribution firms, marketing service agencies, financial intermediaries)

Publics

Any group that has an actual or potential interest in or impact on an organization's ability to achieve its objectives

Demography

The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics

Baby Boomers (1946-1964)

Wealthiest generation; controls 42% of spending power

Generation X (1965-1980)

Skeptical, research-oriented buyers who prize experience over acquisition

Millennials / Gen Y (1981-1997)

Tech-fluent digital adopters who value authenticity

Generation Z (1997-2016)

Digital natives who heavily influence family purchases

Natural environment

Physical environment and natural resources needed as inputs by marketers or affected by marketing activities

Proactive vs. reactive response

Reactive firms passively accept the environment and adapt to it; proactive firms take aggressive actions to shape forces in their environment

Customer insights

Fresh marketing information-based understandings of customers and the marketplace that form the basis for creating customer value

Marketing information system (MIS)

People and procedures dedicated to assessing information needs, developing needed information, and generating actionable insights

Internal databases

Collections of consumer and market information obtained from data sources within the company network

Competitive marketing intelligence

Systematic monitoring, collection, and analysis of publicly available information about consumers, competitors, and market developments

Marketing research

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

Exploratory research

Preliminary information gathered to define problems and suggest hypotheses

Descriptive research

Information gathered to describe market potential or consumer demographics and attitudes

Causal research

Information gathered to test hypotheses about cause-and-effect relationships

Secondary data

Information that already exists somewhere, having been collected for another purpose

Primary data

Information collected specifically for the current research project at hand

Ethnographic research

Observational research that sends trained observers to watch and interact with consumers in their natural environments

Customer relationship management (CRM)

Software and analysis tools that manage detailed information about individual customers and touch points to maximize customer loyalty

Marketing analytics

Tools, technologies, and processes used to analyze complex big data to extract meaningful customer patterns

Consumer market

All individuals and households that buy or acquire goods and services for personal consumption

Buyer's black box

The buyer's internal characteristics and decision process that turn environmental stimuli into buyer responses

Culture

The basic set of values, perceptions, and behaviors learned from family and other institutions

Subculture

A group of people with shared value systems based on common life experiences

Lifestyle (AIO)

A person's pattern of living as expressed in their Activities, Interests, and Opinions

Maslow's hierarchy of needs

Physiological (base), Safety, Social, Esteem, Self-actualization (top)

Consumer buyer decision process

Need recognition > Information search > Evaluation of alternatives > Purchase decision > Postpurchase behavior

Adoption process

Mental process from first hearing about an innovation to final adoption: Awareness, Interest, Evaluation, Trial, Adoption

Adopter categories

Innovators (2.5%), Early Adopters (13.5%), Early Mainstream (34%), Late Mainstream (34%), Lagging Adopters (16%)

Derived demand

Business demand that ultimately comes from the demand for consumer goods

B2B buying decision process (8 steps)

Problem recognition > General need description > Product specification > Supplier search > Proposal solicitation > Supplier selection > Order-routine specification > Performance review

Market segmentation

Dividing a market into smaller, distinct groups of buyers with different needs, characteristics, or behaviors

Geographic segmentation

Nations, regions, states, cities, population density, climate

Demographic segmentation

Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation

Psychographic segmentation

Social class, lifestyle, personality

Behavioral segmentation

Occasions, benefits sought, user status, usage rate, loyalty status

Requirements for effective segmentation

Measurable, Accessible, Substantial, Differentiable, Actionable

Target market

A set of buyers sharing common needs or characteristics that the company decides to serve

Undifferentiated (mass) marketing

Targeting the whole market with one offer

Differentiated (segmented) marketing

Targeting several market segments and designing separate offers for each

Concentrated (niche) marketing

Going after a large share of one or a few smaller segments or niches

Micromarketing

Tailoring products and programs to specific individuals and local customer locations

Product position

The way a product is defined by consumers on important attributes; the place it occupies in consumers' minds relative to competing products

Competitive advantage

An advantage over competitors gained by offering greater customer value, through lower prices or more benefits

Perceptual map

A visual map showing consumer perceptions of competing brands along key attribute dimensions

More for more

Value proposition: upscale product at a higher price

More for the same

Value proposition: high quality at lower prices

More for less

Value proposition: the best winning proposition

The same for less

Value proposition: a good deal on similar products

Less for much less

Value proposition: lower performance requirements at a lower price