Marketing Midterm #1

The 5 Core Aspects of Marketing

• An exchange

• Satisfying customer needs & wants

• affects various stakeholders

• can be performed by individuals & organizations

• creates value by Product, Price, Place, Promotion decisions

Exchange

The trade of things of value between the buyer and seller so that each is better off as a result

Goods

Items that can be physically touched

Services

intangible customer benefits that are produced by people or machines

and become synonymous with the producer.

Ideas

include thoughts, opinions, and philosophies; intellectual concepts such as

these also can be marketed.

How do marketers generate ideas for new products?

By uncovering consumer needs

What are the 3 ways that marketing can be performed?

BTB, BTC, and CTC

The Marketing Mix

Product, Price, Place, Promotion

Benefit - Cost Ratio

• BCR > 1: The exchange brings more value than it costs. It is likely a smart move.

  BCR = 1: The exchange equal the costs. There is no net gain.

  BCR < 1: The costs are higher than the benefits. You should reject the

  exchange

Marketing Evolution

Production Era, Sales Era, Marketing Era, Value Era(enhanced by technology & AI)

Production Oriented Era

Took place around the 20th century, when most firms believed a good product would sell itself

Sales Oriented Era

Production and distribution techniques became more sophisticated and supply outpaced demand. Firms also found an answer to overproduction by focusing mainly on sales.

Marketing Oriented Era

The focus was on what the customer wanted, during this period firms discovered marketing communication

Value Based Era

Understanding that value drives the exchange, relational orientation key to success, IMPLEMENT customer relationship management

Market Value Creation

Compares a company's total market value against broader market benchmarks

to isolate excess management alpha

Value Marketing

Having established value as their primary goal, today’s firms are turning to various

digital, mobile, internet, robotic, AI and other technologies to augment that value.

'“Creativity has become an important delivery method for a value proposition.”

Warby Parker Insight

The central insight (customer need) of Warby Parker was recognizing that the

traditional eyewear market was an outdated monopoly with excessive markups, and

that a vertically integrated, direct-to-consumer (DTC) model could offer customers a

superior experience at a revolutionary price

Marketing Strategy

The customer - facing part of the business strategy. A set of business choices.

WHO will we serve?

WHAT value will we create for them?

HOW will the organization deliver that value better than alternatives?

HOW will the firm capture enough value to earn attractive returns?

Sustainable Competitive Advantage: The Economic Moat

A sustainable competitive advantage is a capability, asset, relationship, or position

in the marketplace that creates superior customer value and is difficult for

competitors to copy.

Customer: Does it increase willingness to buy, stay, or pay?

Operations: Can we deliver it reliably and at scale?

Finance: Does it improve margin, growth, asset productivity, or risk?

Organization: Is it embedded in people, systems, culture, or know-how?

If competitors can reproduce it quickly, it is an advantage—not yet a moat.

4 Strategies to Create Value

Customer Excellence - Relationships, service, trust, retention

Operational Excellence - Cost, speed, reliability, capability, process

Product Excellence - Performance, design, innovation, IP

Location / Access Excellence - Convenience, distribution, scarce access

The Marketing Plan: 5 Steps

1. Business Mission & Objectives

2. Situational Analysis / SWOT

3. Identify Opportunities (Segmentation, Targeting, Positioning)

4. Implement Marketing Mix (Product, Price, Place, Promotion)

5. Evaluate performance using marketing metrics

What are the 3 phases of the Marketing Plan?

Planning, Implementation, Control

Coke vs Pepsi

Coke is about refreshments, moments, memories, value

Pepsi is about affordability, convenience, food, beverages, scope

SWOT Analysis

Internal Strengths Internal Weaknesses External Opportunities External Threats

STP

Segmentation - Map distinct needs / economics

Targeting - Choose where to allocate resources

Positioning - Define the reason to choose US

BCG Matrix

Stars - High relative market share, High market growth rate

Cash Cows - High relative market share, Low market growth rate

Question Marks - Low relative market share, High market growth rate

Dogs - Low relative market share, Low market growth rate

Stars

Can the firm scale without destroying returns?

Cash Cows

How much cash can be harvested without weakening the moat?

Question Marks

Tempting because the market is attractive—but they can absorb large amounts of capital. Decision: invest to win, find a niche, partner, or exit

Dogs

Decision: fix, harvest, sell, or discontinue.

Introducing new products or services to existing markets

Why would it work?

• existing brand trust

• existing customer data & channels

• cross -selling and ecosystem economics

Why it could fail?

• R&D cost and technical risk

• cannibalization

• added operational complexity

Conscious Marketing: Embedded Responsible Strategy

A business approach that embeds purpose, ethics, and stakeholder responsibility

into how the firm creates and captures value

Why would finance, ops, and management care?

Finance - revenue, resilience, litigation/regulatory risk, capex/margins, cost of capital

Operations - sourcing, energy, waste, capacity & supply chain resilience, labor standards

Management - culture, incentive, governance/reputation, employee trust

Four management principles to ask

Purpose: What value does the firm exist to create beyond quarterly earnings?

Stakeholders: Who benefits, who bears costs, and who has power?

Leadership: Do executives make trade-offs consistent with stated values?

Culture & Systems: Do incentives, metrics, processes & operating metrics reflect values?

Corporate Social Responsibility

CSR often includes initiatives that:

• Reduce environmental harm.

• Improve labor practices.

• Support communities through philanthropy or volunteerism.

• Ensure ethical and transparent governance

CSR vs Embedded Responsible Strategy

CSR is typically separated from core business operations(add on programs) and often for compliance, reputation management, or stakeholder expectations.

Conscious Marketing is embedded into core strategy, brand identity, and culture - genuine commitment to creating shared value for customers, employees, society, and environment

CSR vs Embedded Responsible Strategy LEADERSHIP DIFFERENCE

CSR is usually led by a specific department or CSR team while conscious marketing means that leadership must model and champion conscious values across the ENTIRE organization

WHO are the CSR Stakeholders

Employees, Society, Customers, Marketplace

Responsibility to Employees:

to ensure a safe working environment free of threats to their physical safety, health, or well-

being.

• More firms today realize that happy employee families make happy and

productive employees, so they are offering new benefits and options, such

as on-site daycare or flextime arrangements.

Responsibility to Marketplace:

Responsible practices can become a source of differentiation—but they can also become an industry requirement. Once customers, regulators, investors, or channel partners change expectations, competitors may have to follow.

Responsibility to Society

Companies create positive and negative externalities that may not immediately

appear on the income statement. Pollution, community impacts, public health, data

privacy, and labor practices can eventually become taxes, regulation, litigation,

operating restrictions, or reputational costs.

Responsibility to Customers

Customers increasingly evaluate not only what a company sells, but how it behaves. Responsible practices can strengthen trust and loyalty; perceived hypocrisy can destroy them quickly

SUSTAINABILITY AS A CROSS-FUNCTIONAL OPERATING CHALLENGE

Sustainability connects product design, sourcing, manufacturing, logistics, energy, capital spending, suppliers, customer behavior, regulation and reporting. That makes it an enterprise problem: Marketing can communicate the promise, but Operations and Finance must make the promise economically and operationally credible.

3 Steps of Strategic Planning Process

Planning phase, Implementation phase, Control phase

Planning Phase

This sets a core company purpose to save our planet, leaders create strict targets for using organic and renewable materials

Implementation Phase

Material Sourcing:

They use 100% organic cotton and recycled polyester in their clothing lines.

Supply Chain Action:

They pay fair living wages and ensure safe factory conditions through programs like

Fair Trade Certified sewing.

Repair and Reuse:

They run the Worn Wear program to fix old clothes and keep gear out of landfills

Control Phase

Transparent Auditing:

They publish detailed reports on their environmental and social progress.

Footprint Tracking:

They measure ongoing greenhouse gas emissions and waste reduction numbers.

Adaptive Management:

They review performance data and change suppliers or methods when targets are

missed.

Marketing Ethics Framework

Ethics matters most when doing the “right” thing has a cost.

1. Identify

2. Gather

3. Develop

4. Choose

Marketing Ethics Framework DETAILED

1. Identify Issues

2. Gather information and identify stakeholders

3. Brainstorm and evaluate alternatives

4. Choose a course of action

Identify Issues

The company realized that the drug had severe addiction and abuse risks that drove

massive prescription rates.

Gather information and identify stakeholders

Both consumer and governmental groups became aware of the harmful effects of OxyContin. Purdue Pharma, armed with their damning internal data and the realization that their external stakeholders (consumers and government) were upset, they were prepared to make a decision.

Brainstorm and evaluate alternatives

All relevant parties should come together

to brainstorm any alternative courses of

action. The company leaders and managers

review and refine the alternatives, leading

to the final step. Purdue Pharma was a family company so

the Sackler family leaders were the

decision makers.

Choose a course of action

Weigh the alternatives and take a course of action

Chosen course represents the best solution for the stakeholders using ethical best

practices

Purdue determined that keeping it secret was the best course of action for their

business and personal profitability.

Understanding the Marketing Environment: Immediate Environment

The immediate environment are the specific, close-to-home forces that directly affect a company's daily operations, decisions, and performance. They include the firm and its:

• capabilities (what you do)

• competitors (options)

• corporate partners (how good you perform)

• physical environment (tangible assets)

Understanding the Marketing Environment: Macro Environment

cultural, demographic, social, technological, economic, and political/legal forces
Macroenvironmental factors are the broad, external, and uncontrollable forces within a society or economy that influence how a business operates, makes decisions, and performs.

Understanding the Marketing Environment: Management Task

convert external signals into decisions about customers, capacity, capital, people, pricing, sourcing, and risk.

What is Culture

We broadly define culture as the shared meanings, beliefs, morals, values, and customs of a group of people.

A cultural trend involves shifts in ideas, morals, and identity. These trends change what people find meaningful, beautiful, or right. They shape our daily habits, language, and media consumption.

Culture influences what, why, how, where, and when we buy.

Demographics

Characteristics of the human population and segments, especially those used to

identify consumer markets. Provides an easily understood snapshot of the typical consumer in a specific target market.

Target

Key Details of Target's Strategy

The Indicators: Target identifies about 25 specific products—including unscented

lotions, magnesium supplements, and extra-large cotton balls—that, when bought

together, could predict a shopper's pregnancy and estimate their due date.

The Delivery: To avoid making customers feel uncomfortable or monitored, Target

mixes the high-value baby coupons with unrelated items (like lawnmowers or wine

glasses) so the offers look random.

The Business Impact: This demographic targeting strategy helped Target

significantly grow its baby-care sales by securing brand loyalty early in a major life

transition.

Generational Cohort

Consumers in a generational cohort a group of people of the same generation—have

similar purchase behaviors because they have shared experiences and are in the same

stage of life.

4 Growth Strategies

Market Penetration, Market Development, Product Development,

Social Trends

A social trend is a sustained, observable pattern of change in the behaviors,

attitudes, values, or norms of a group or society over an extended period.

Unlike a temporary fad or a single isolated event, a trend represents a deep,

directional shift in how people live, think, and interact.

Difference between culture and social trend

Cultural trends focus on what we value and express. Social trends focus on how we act and group together. Cultural trends usually change slower because they are tied to deep-seated beliefs. Social trends can change quickly when new technology arrives

Social Trends Example

Duolingo (successful) Blackberry (not successful)

Technological Advances

• PRODUCTS — what can be offered

•PROCESSES — how work gets done

• CHANNELS — how customers buy and receive value

• COST STRUCTURE — labor vs. capital and variable vs. fixed cost

• COMPETITION — who can enter and what capabilities matter

• ORGANIZATION — skills, jobs, incentives, controls and decision rights

Economic Situation

Economic conditions change both customer behavior and company economics

Monitor:

• Inflation → purchasing power, input costs, pricing

• Interest rates → financing costs, housing/durable demand, valuation

• Foreign exchange → reported revenue, sourcing economics, competitiveness

• Tariffs → landed cost, sourcing, price, margin, inventory

Legal Environment

1906 Federal Food and Drug Act

1914 Federal Trade Commission Act

1966 Fair Packaging and Labeling Act

1972 Consumer Product Safety Act

1990 Nutrition Labeling and Education Act

2003 Do Not Spam Law

2010 Financial Reform Law

What is consumer behavior?

It consists of the actions a person takes in purchasing and using products and

services.

It includes the mental and social processes that come before and after these actions.

• Why people choose one product or brand over another

• How consumers make these choices

• How companies use this knowledge to provide value to consumers (and themselves)

Internal Influences

Perception

Learning

Memories

Personality

Emotions

Attitude

External Influences

Culture

Subculture

Social Status

Reference Groups

Family

Marketing Activities

Consumer Decision Making Process

1. Need Recognition

2. Informative Search

3. Alternative Evaluation

4. Purchase & Consumption

5. Post Purchase

Marketing Timeline Before During After

Before: Times & places that influence what, when, where, and how buying decisions are triggered

During: Purchase transactions are made & services are delivered

After: Post-purchase outcomes influence future consumer decisions and purchase behavior

The consumer decision making process is not often linear

True!

Marketer’s Objective

Need recognition - motivation

Information search - perception

evaluate alternatives - attitude formation

Need Recognition

The consumer decision process begins when consumers recognize they have an

unsatisfied need, and they would like to go from their actual, “need state” to a

different, desired state.

The greater the discrepancy between these two states, the greater the need recognition

will be.

• Functional needs pertain to the performance of a product or service.

• Psychological needs pertain to the personal gratification consumers associate with a

product and/or service.

Purpose of needs - Consumer Behavior

Functional value helps justify the purchase.

Psychological value often creates willingness to pay and margin.

Information Search

After a customer recognizes a need, he or she must search for information about the various options that exist to satisfy the needs.

Internal search: or information, the buyer examines his or her own memory and

knowledge about the product or service gathered through past experiences.

External search: he buyer seeks information outside his or her personal knowledge base to help make the buying decision.

The Locus of Control

How much control people think they

have over the outcomes of various

activities, such as purchasing a product

or service?

External Locus of Control

With an external locus of control, consumers believe that fate or other external factors control all outcomes.

Internal Locus of Control

People who have an internal locus of control believe they have some control over the outcomes of their actions, in which case they generally engage in more search activities.

5 Types of Actual or Perceived Risk

1. Performance Risk

2. Financial Risk

3. Social Risk

4. Psychological Risk

5. Physiological Risk or Safety Risk

Performance Risk

A person buys a new Apple watch to track their fitness, but after using it for a

few days, they discover that the heart rate sensor is inaccurate and the

battery dies very quickly.

Financial Risk

Someone buys an expensive Peloton bike for $5,000, but after a few weeks it

starts having serious hardware problems and eventually stops working—

while the warranty doesn’t cover repairs

Social Risk

A teenager considers wearing an unusual pair of Sneakers to school, but worries

that their friends might think they look strange or unfashionable.

Physiological Risk

A person buys a very expensive Gucci wallet on impulse, but

afterward feels guilty for spending so much money and worries they

were being irresponsible

Physiological or Safety Risk

Someone buys a Vespa Scooter, but worries that it might malfunction

while riding and cause an accident or injury

Evaluation of Alternatives: Attribute Sets

Research has shown that a consumer’s mind organizes and categorizes alternatives

to aid his or her decision process.

Universal Sets

include all possible choices for a product category. Two important sub-sets of a

universal set are: Retrieval Sets + Evoked Sets

Evoked Sets

When a consumer is given a category prompt, the alternative brands that he or she would consider when making a purchase decision.

Retrieval Sets

WITHOUT GIVING the consumer a prompt, those brands that can be readily

brought forth from memory.

Determinant Attributes

Product or service features that are important to the buyer and on which competing brands are perceived to differ.

What does winning mean?

Winning often means owning the determinant attribute—not trying to be best

on every attribute

Choice Architecture

This is how marketers influence consumer purchase choice for products that are purchased without planning. Developed using a NUDGE, or non-obvious push that alters consumer choice

Type of Nudge: Default Options

Pre-setting the desired option so people have to

opt out instead of opt in.

Example: Employees are automatically enrolled in a (401k)

Type of Nudge: Framing Effects

Presenting the same info in a more positive or appealing way. Example: Labeling food “90% fat-free” instead of “10% fat”

Type of Nudge: Social Norms

Showing what most others are doing to encourage similar behavior. Example: Hotel signs: “Most guests

reuse their towels”

Type of Nudge: Salience & Positioning

Making desired choices more visible or convenient. Example: Placing fruit at eye level and

junk food on lower shelves in a cafeteria

Type of Nudge: Commitment Devices

Getting people to make small commitments to increase follow-through. Example: Asking people to sign a pledge that they will vote

Purchase & Consumption

Marketer’s Goal: Integration

Post-Purchase

Marketer’s Goal: Learning