Marketing Final

Definition of Marketing

(Defined by the four Ps) Marketing can be defined as creating, communicating, delivering, and exchanging offerings that have value for consumers, partners, clients, and the world at large

Common Misconceptions of Marketing

1. That it’s just advertisement

2. That it’s a scheme or plot to trick people into purchasing

Goal of Marketing

To provide and OPTIMIZE value to the consumer, company, and world at large > effective marketing satisfies WHAT the customer wants and NEEDS while also creating value for the company at large

Definition of a Market?

A set of actual or potential consumers for a certain product or service > Specifically people with the ability AND desire to buy

Empathic Design

Strategy based on fulfilling the consumers wants or needs > Marketer putting themselves in the shoes of their consumer to identify pain points, needs, or opportunities those consumers did not yet express. Made up of 3 steps:

1. Observe the customer

2. Identify pain points or desires

3. Brainstorm solutions or products

Evolution of Marketing Orientations

Separated into 4 distinct phases:

1. Product based orientation

2. Sales based orientation

3. Market based orientation

4. Value based orientation

Product Based Orientation

Earliest framework of marketing> basically the idea or orientation that the Products price and quality alone would sell the product itself

Sales Based Orientation

Orientation a little later down the line where the idea was AMOUNT> sell as much as possible to as many people as possible> quantity over quality approach

Market Orientaiton

More recent marketing orientation focused basing all firms actions on the wants and needs of the consumer

Valued Based Orientation

Most recent and current approach to marketing where the firm focused on retaining and keeping the same consumers happy and integrated with the firm over time> building CLV and value > functional integration

Strategic Analysis Framework of Marketing

Basically the 3 things a firm must analyze before taking action

the 3 Cs= consumer, company, competitors

The 3 Cs

The 3 things a firm must consider:

1. Customer= Satisfying their wants and needs and knowing their CLV

2. Company= Developing companies UVP (Unique value proposition) and resources

3. Competitor= Understanding competitive landscape and building positioning around that landscape to maintain competitive advantage > analyzing direct and indirect competitors

SWOT analysis

Part os strategic analysis part of cycle: Used to understand a firms internal and external environments in marketing

Stands for

Strengths = Internal capabilities and unique standpoints

Weaknesses= Internal flaws or limitations

Opportunities External factors allowing a firm to grow

Threats= External factors hindering a firms growth

CD-Step+PESTD frameworks

These are used to assist in external macro-level environmental scanning when trying to evaluate opportunities or threats as part of SWOT analysis CD-Step stands for:

Cultural= Values+beliefs

Demographic= Personal characteristics> diversity, gender

Social = Like culture> social trends

Technological = Innovations

Economic= Growth rates> purchasing factors

Political = laws and regulations

Marketing Plan and Execution

The road-map that specifies the course of action affecting EVERY company and ensures that companies decisions meet their values, mission, and objectives

Built into three phases:

1. Planning= Defining mission and objectives + SWOT

2. Implementation = Identify opportunities through STP and implement 4 Ps

3. Control = look at consumer data and monitor insights for continued growth

STP

Vital part of the marketing plan> part of implementation phase and also part of strategy

Stands for:

Segmentation = dividing up the market into specific groups of consumers

Targeting = picking a group to focus efforts towards

Positioning = developing and defining the product in a way that fills unique territory of the mind int hat target

4 Ps

Definition of marketing and also tactical phase to executor marketing strategy:

Product = creating value through offering

Price = capturing that value in what customer pays

Place distributing and delivering the product

Promotion = communicating value to the customer

Ansoff Matrix

4 quadrant matrix focused on growth strategy: looks at new and existing markets and products to define four strategies:

1. Marketing penetration: Lowest risk> Selling existing product in existing market (Santa coke)

2. Market Development: Selling existing product in new market (foreign entry or geographic expansion)

3. Product Development: Selling new product in existing market (cherry coke)

4. Diversification: New product in new market (Vitamin Water)

CLV

Stands for customer lifetime value and also hones in on growth strategies

CLV represents the total expected value a customer brings a firm over the entire length of their relationship:

Shows the importance of customer retention as attracting new customers costs 25x more than retaining ones

Explains the existence of CRM Customer relationship management strategies

CRM

Stands for Customer Relationship management

Which is a strategy through which to boost CLV

Examples are loyalty programs that offer incentives for loyal customers

Market segmentation

The process of dividing up a market by identifying unique groups of individuals differentiated by certain traits or buying behaviors

Market Segment

A group within a market predicted to respond the same way to a marketing action and express similar product needs

Why segment

GOAL= Find segment small enough to be able to serve effectively, but large enough to generate profit

• Helps firm define who their customers are and what they want

• Clarifies marketing objectives and improves resource allocation

Segmentation Strategies

1. Undifferentiated (mass) marketing

2. Differentiated (segmented) marketing

3. Concentrated (niche) marketing

Undifferentiated Marketing

Marketing to the entire market using the same strategy to reach the widest audience> but risks losing appeal for some

Differentiated Marekting

Creating different offerings for different target segments of the market to increase sales> but expensive ad presents challenges

Concentrated (niche) marketing

This is when you only focus on offering to one specific target segment to establish a competitive advantage amongst a minimal but VIABLE audience.

Steps to targeting process

1. Identify strategy and objectives of the firm

2. Segment the market

3. Evaluate the segments (market size and potential)

4. Select target market

5. Develop marketing actions> 4 P’s

Criteria for Desirable target

1. Size of target segment

2. Potential growth rates

3. Cost to market to them

4. Competitive placement in their minds (competitive position)

Positioning

Positioning is essentially how a brand or product fills a unique territory of their target segments mind, it’s the effort to do so.

Positioning Statement and format

A statement brands or products come up with to differentiate and define their value

Our company/product is for (target market/segment) and is unlike other brands/products within (Frame of reference) as it offers (point of difference/competitive advantage).

POD (Point of difference)

The strong favorable and unique associations an individual makes with a product or brand to be relevant and desirable as compared to other offerings

Frame of reference

The other products or options competitors have in the market

Points of Parity

Ex: All grocery stores must have fresh fruit

Points or associations that all brands (competitors alike) must share or have for the consumer to even consider them as part of that category or market

Perceptual (Positioning) maps

Visual tools that utilize x and y axis to plot where consumers visualize and perceive different products or brands on the basis of two key attributes/offerings (ex price and quality).

Repositioning

Ex: Apple Watch having to change positions itself comparing to luxury Swedish watches and luxury consumers to fitness focused individuals

This is when a brand or product changes it’s position in a consumers mind by changing consumer, frame of reference, or competitive point of difference> or often all.

Segmentation Bases

There are 4 primary segmentation bases marketers use to split market into groups:

1. Geographic

2. Demographic

3. Psychographic

4. Behavioral

Geographic segmentation base

Looking at individuals country, city, urban vs. rural = location

Demographic segmentation base

Looking at a consumers age, family size, gender, race, income= basically census kind stuff

Psychographic segmentation base

Looking at a consumers lifestyle, values, attitudes, or personality types= their persona

Behavioral segmentation base

Looking at a consumers actions and observable behavior such as prior product uses and buying behaviors

Market Share

The total percent of the total market that your brand controls
Can be calculated in units or sales

Equation for market share

Total units or sales of your company over time period/ total units or sales within whole market over time period

Step-Down Analysis

Used to estimate your market share by collecting market data about proportions to help

• Lots of multiplication

Equation or formula for step-down analysis

Series of multiplication o eventually be able to use same market share equation> multiplying national size by specific segmentation base percentages

Costs

How much money a firm/company spends on the creation of unit

• Broken into fixed and variable

Revenue

Money that comes back through sales

Profit

What comes from the difference between revenue and costs profit P

Profit margin

The profit expressed in the form of it’s percentage of the revenue

Profit margin equation

profit (revenue-costs)/ revenue

Unit analysis

Looking at the costs, revenue, and profit/profit margin in relation to a single unit

Fixed Costs

Costs to the firm that do not change varying on how many units a firm sells

Ex: CEO salary, rent for warehouse/factory, etc

Variable Costs

Also referred to as COGS, these are the costs that fluctuate depending on units sold and level of production

Ex: Raw materials, advertising budgets based on growth

Cost equation

Variable cost+fixed cost= total cost

COGS

Also know as variable costs> stands for costs of goods sold

Cost per unit equation

variable cost+ (fixed cost/units sold) or variable cost+fixed cost/units sold

Contribution margin

The amount expressed in a percentage, left when you subtract variable costs from the sale price

How much money is left to pay off the fixed costs > Used to contribute to paying off fixed costs previously invested in

Contribution margin equation

Price per unit-variable costs per unit/ Price per unit

Profit Contribution

The money left over after accounting for variable AND fixed costs> What the company/firm is actually making

Also just called profit

Profit contribution equation

Price per unit- fixed costs+variable costs

Profit margin

Profit expressed as a percentage

Profit margin equation

price per unit-fixed+variable costs/ price per unit

Markup on cost

How must a retailer marks up the cost from what they paid the wholesale to account for their own variable costs

Markup on cost equation/formula

price per unit-variable cost per unit/ variable costs per unit

Summary chain of fixed and variable costs

Price per unit-variable costs per unit= contribution margin(contribution per unit)- fixed costs per unit= profit per unit

Break Even analysis

The point at which a firms profit and costs equal each other so 0 profit is made but 0 loss is made

• Can be calculated in units or sales

Break even in units formula

Break even units= total fixed cost/ unit price-variable costs

Break even profit equation/formula

Break even profit= total fixed costs/ 1- variable costs/unit price

How to decide what approach to pick when performing a break even to calculate market share

compare market share with other companies

Price Elasticity

When the price in a product changes the demand for that product > measures how responsive a demand is to a change in price

Price Elasticity Equation

% change in demand/% change in price

Equation for finding % change in demand/price

new-old/old Ex; New price-old price/new price

|PE|<1

Price is inelastic meaning that an increase (decrease) in price yields less than proportional decrease(increase) in demand

Ex: Gas, needed items for survival, strong brands

|PE|>1

Price Elastic meaning that the increase (decrease) in price leads to a more than proportional decrease(increase) in demand

Ex: Beef, eggs, weak brands

|PE|= 1

Very rare but this is called unit elasticity and it is when increase (decrease) in price is equal to decrease(increase) in demand

Cross price elasticity

This explains when an increase (decrease)in price for one product leads to an increase (decrease) in demand for a different product

Can be caused in two categories

1. Substitute products

2. Complementary products

Cross Price Elasticity equation

% change in demand for P2/%change in price for P1

Substitute products

Showcased by positive CPE number

ex: butter and margarine or beef and pork

Complimentary Products

Showcase by negative CPE number

Ex: razor and blade or hockey stick and pucks

Price Chains

A tool for understanding how prices increase and contribution margins are split as products pass through different intermediaries

Example of price chain

Manufacturer>Distributer>Retailer>Customer

Customer Research Methodologies

1. Qualitative: In-depth interviews, focus groups (8-10 people) asked about products or ads

2. Quantitative: Survey data

3. Observation: Filed study where people are sent into stores to observe customers

4. Biometrics: Advanced observation technique Measuring eye-tracking, heart rate, Facial EMG, and skin conductance to see attention, stress, and emotions.

Biometric testing

Used to understand consumer responses to products:

Ex:

Eye-tracking= Attention measurement

Heart Rate= Stress and emotional measurement

Facial EMG= Emotional Measurement

Skin Conductance= Stress/Arousal measurement

Research Methods WHY

Marketers use research methods to understand consumer motivations> these methods are how marketers learn

Consumer Decision Making Process

5 step process all consumers go through when purchasing from a market:

1. Need-recognition

2. Information Search

3. Evaluating alternatives

4. Purchase Decision

5. Post-Purchase behavior

Need recognition phase

This is the first phase of the consumer decision making process and it can be observed as the consumer drawing a difference between their current and desired state

Information Search Process

second step in the consumer decision making process which can be understood as the consumer seeking internal and external information to aid their purchasing trajectory

Two types of information search

Internal= Scanning memories of past experiences

External= using personal, public, and marketing dominated sources to guide decision

Evaluating alternatives stage

The third stage in the consumer decision making process, this stage is where you assess different options/products based on your list of specific attributes

Purchase Decision phase

This is the fourth stage of the consumer decision process and it is where you buy the chosen product

Post-Purchase Behavior

This happens once you purchase your product and can result in either post-purchase dissonance or customer satisfaction

Forms of post purchase behavior

Consumer satisfaction= the performance of the product meets or exceeds the consumers expectations therefore they continue to buy or promote to their friends

Post-Purchase dissonance= this is when the product disappoints the customer therefore leading to feelings of tension, buyers remorse, and negative reviews and word of mouth

Consumer Involvement Levels Defention

These involvement levels dictate how much time they dedicate and what kind of information search they partake in when buying a product. Three are three recognized levels:

1. Extended problem solving (high involvement)

2. Routine problem solving (low involvement)

3. Limited problem solving

Extended Problem solving

Also know as high involvement

This is when a consumer spends a large portion of time in the information search phase, comparing brands, prices, and options (usually for high price items like a car)

Routine problem solving

also know as low involvement

This is typically used for everyday simple products and most consumers don’t consider the brands, prices, or types and just want to spend limited time searching

Limited problem solving

This is the in between, when a consumer has a moderate information search, considering a few brands and prices but nothing crazy

Motivation

Motivation is the psychological process driving goal-oriented behaviors

Marketors often use Maslow’s hierarchy of needs to explain motivations ( physiological, safety, social, personal, and self-actualization) in order to identify the unmet needs they can fulfill to motivate purchasing

Word-of-Mouth Marketing

A form of purchasing influence> this is when individuals take recommendations from trusted others like family/friends or those they admire as they are seen as reliable and influential MORE SO THAN ADS

Viral Marketing

Used to trigger word-of mouth > this is marketing that leverages social media and building a brand persona to get consumers to spread key messages themselves

Ex: Brands experiment w their voice on twitter and instagram to develop personality and intimacy

Result: Builds conformity and informational influence playing on cognitive shortcuts

Socio-Cultural Influence

This is just when purchasing decisions are driven by culture, family, and reference groups

• Conformity= people want to do as others and fit in

• Informational trust= people use others information to make decisions easier and avoid time consuming investigation