Intro to Marketing Exam 2 - Rutgers University

market research

process of defining a marketing problem and opportunity, systematically collecting and analyzing information, and recommending actions.

5 Step Market Research approach

Step 1: DEFINE THE PROBLEM

Step 2: DEVELOP THE RESEARCH PLAN, DETERMINE HOW TO COLLECT DATA

Step 3: COLLECT RELEVANT INFORMATION

Step 4: DEVELOP FINDINGS

Step 5: TAKE MARKETING ACTIONS

Step 1

DEFINE THE PROBLEM

Set the Research Objectives

Have a Clear Research Purpose

Types of Marketing Research:

Exploratory

Descriptive

Causal

Identify Possible Marketing Action

Measures of Success

Step 2

DEVELOP THE RESEARCH PLAN, DETERMINE HOW TO COLLECT DATA

Identify Data Needed for Marketing Actions

Identify Data Needed

Determine How to Collect Data

Concepts - Ideas about Products

Methods - Approaches to Collect Data

Constraints - the restrictions placed on potential solutions to a problem

Step 3

Relevant Information for Rational, Informed Marketing Decision

Data

facts and figures related to the project

Secondary Data

facts and figures already recorded prior to the project. Information that already exists somewhere, having been collected for another purpose.

Internal data (inputs: budgets, financial statements, and outcomes: actual sales)

External data (US Census reports)

Advantages: Time Savings, Inexpensive

Disadvantages: Out of Date, Definitions/Categories Not Right, Not Specific Enough

Primary Data

facts and figures newly collected to the project. Information collected for the specific purpose at hand.

Advantages of Primary Data: More Flexible, More Specific to the Problem

Disadvantages of Primary Data: Expensive. Time Consuming to Collect

Observational data

the facts and figures obtained by watching, either mechanically or in person, how people actually behave. Gathering primary data by observing relevant people, actions, and situations.

Personal Methods: Mystery Shopper, Observation, Ethnographic Research

Neuromarketing Methods: Technologies Used to Study the Brain

Ethnographic Research

A form of observational research that involves sending trained observers to watch and interact with consumers in their "natural environments."

Neuromarketing

Technologies Used to Study the Brain

Questionnaire data

: the facts and figures obtained by asking people about their attitudes, awareness, intentions, and behaviors.

Idea Generation Methods - Coming Up with Ideas (Individual Interviews, Depth Interviews, Focus Groups, Trend Hunting)

Idea Evaluation Methods - Testing an Idea: (Personal Interview Surveys, Telephone Interviews, Mail Surveys, Online (E-Mail/Internet) Surveys, Mall Intercept Interview Surveys)

Step 4

DEVELOP FINDINGS

Analyze the Data

How Are Sales? What Factors Contribute to Sales Trends?

Present the Findings

Step 5

TAKE MARKETING ACTIONS

Make Action Recommendations

Implement the Action Recommendations

Evaluate the Results

Evaluate the Decision Itself

Evaluate the Decision Process Used

market segmentation

aggregating prospective buyers into groups, or segments, that have common needs and will respond similarly to a marketing action

- Identify market needs (benefits in terms of product features, expense, quality, savings in time and convenience) → link needs to actions by taking steps to segment and target markets → execute marketing program actions

- Why segment markets? → One-Size-Fits-All Mass Markets No Longer Exist

- 3 segmentation strategies : One product/multiple markets, Multiple products/multiple markets, Segment of One

Product differentiation

a marketing strategy that involves a firm using different marketing mix actions to help consumers perceive the product as being different and better than competing products.

market-product grid

a framework to relate the market segments of potential buyers to products offered or potential marketing actions.

One product for multiple market

1 product for 1 or more markets allows a company to spare the expense of developing & producing additional variants or versions of the product (used by magazines, books, movies)

Multiple Products and Multiple Market Segments

Prevalent in the auto industry. Different lines of cars for different target markets- SUV's, sedans, trucks, hybrids. Used to own a variety of brands- many different models, features. Expensive & costly to maintain design, product, manufacturing, servicing for so many brands with so many variants. So many combinations = limited volume, higher prices, lower sales and ROI for company

Segments of One-"Mass Customization"

Making products to fit the customer's exact specifications. Tailoring products to the unique tastes of the individual but on a large scale. The advent of digital-age technology enables companies to offer customized products on a previously unheard-of scale. Flexible manufacturing makes this possible. Communicate preference to the brand, and now companies can manufacture a customized piece a price comparable to something mass produced

Organizational Synergy

Balance between offering consumers what they want (creating value for consumers) and achieving synergies for the organization--> ensuring that marketing & manufacturing are efficient and creating value for the organization (increase revenue & profits)

Cannibalization

As we strive to create customer value- we may add new products, new distribution channels and we need to ask - are new offerings creating new (incremental sales) or are they stealing sales from our existing/older product

five key steps in segmenting and targeting market

1. Group potential buyers into segments

2. Group products to be sold into categories

3. Develop a market-product grid and estimate the size of the markets

4. Select target markets

5. Take marketing actions to reach target markets

Criteria for Forming Segments

Simplicity and Cost-Effectiveness- assign to a segment- should not be complex or costly to do

Potential for Increased Profit- maximize ROI, otherwise don't segment

Similarity of Needs of Buyers in Segment- common needs so marketing actions speak to segments and drive to action

Difference of Needs of Buyers among Segments- if the needs are not very different, combine into 1 segment, diff segment = diff marketing = greater cost

Potential of Marketing Action to Reach Segment- marketing action to reach segment should be simple effective and cost efficient if it is not then don't do it

Geographic Segmentation

Based on where people live or work. Can be regions, cities. Ex: Campbell's nacho cheese too spicy in the east, not spicy enough in south/west so plants in different regions have different formulations to adjust for spice

Demographic Segmentation

By household size. More than 50% of US households are 1 or 2 people. Ex: So, campbells prepackaged meals are smaller serving sizes for these households. 53% of companies segment this way.

Psychographic Segmentation

Based on lifestyle - similar lifestyles, tastes, likes, hobbies live near each

Behavioral Segmentation

Product features: what product features are most important and market to consumers based on that

Usage rate: the quantity consumed or patronage (store visits) during a specific period.

80/20 rule

a concept that suggests 80 percent of a firm's sales are obtained from 20 percent of its customers. Ex: airline frequent flyer programs - reward those with the highest usage

Criteria to Use in Selecting Target Markets

Market Size- secondary research can tell you the size of a given market - large market signals opportunity

Expected Growth- even if a market is small, may be considered if it is forecasted to grow significantly in the future

Competitive Position- if little competition exists in the market- there is an opportunity to enter

Cost of Reaching the Segment- is it costly to reach a new target? Expensive media options only to reach them? Then you may not want to do it

Organizational Compatibility- does your organization have the resources to serve this target? Do you have product? Inventory? Distribution? If not, and costly to obtain- do not do it

Marketing Synergies

efficiency in terms of a market segment- streamline efforts if going after just one market life small/medium business. One message, one campaign, only need to understand needs of one consumer segment

Product Synergies

efficiency in R&D and production. Choose one product to focus on that addressed needs of all consumers

Perceptual map

a visual representation of the perceptions of customers or potential customers about specific attributes of an organization, brand, product, service, or idea. asks participants to place products relative to one another along 2 or more axis.

Product Positioning

the place the product occupies in the mind of the consumer based on attributes relative to competitive products

Head-to-Head Positioning

Compete directly with competitors on similar attributes for same target market

Differentiation Positioning

Position a brand in a more niche market ex: McDonald's McLean launch to go after niche of healthy eaters

Product Positioning Using Perceptual Maps:

Identify Important Attributes for a Product or Brand Class

Discover how Customers Rate Competing Products or Brands on These Attributes

Discover Where the Company's Product or Brand Is on these Attributes in Minds of Customer.

Reposition the Company's Products or Brands in the Minds of Consumers

Products

good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in exchange for money or something else of value.

Tangible

physical object that can be perceived by touch Ex: computers, clothing, food, cars

Intangible

does not have a physical nature, as opposed to a physical good Ex: downloadable music, apps

Consumer goods

: the "final" goods purchased by consumers, something that the end consumer will purchase.

Capital goods

those used to produce other goods and services (e.g. tools, equipment, machinery). purchased by a company to create something that will then become a consumer good.

Nondurable

products consumed in one, or a few uses, like food and gas

Durable

product that lasts over many uses like appliances, cars, smartphones

Ideas

A concept, cause, issue, image or philosophy that can be marketed. usually exclusively talk about goods and services ... political campaigns, social movements or causes

Convenience products

items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort. relatively inexpensive without a whole lot of thought. consumers are not really loyal to these products, readily available substitutes. subject to sales ... will accept any reasonable substitute. ex: pack of gum, fast food, groceries, toothpaste, soap

Shopping products

items for which the consumer compares several alternatives on criteria such as price, quality, or style. meant to last a little bit longer. more active shopping for, considering various alternatives based on price, quality. pricing may vary, different from convenience product. more of an investment. items are not as widespread and available. large number of outlets still. more research by the consumer. ex: cell phone, clothing esp something with an attribute to consider (warmth of a ski coat), camera, TV, airline ticket, compared on diff criteria

Specialty products

items that a consumer makes a special effort to search out and buy. real brand loyalty with these products. more expensive, more limited distribution. a lot more commitment goes into this, greater emotional connection, potentially have aspired to own for a while ... a lot more time, care, investment. ex: car , luxury goods

Unsought products

items that the consumer either does not know about or knows about but does not initially want. don't really think about until you need it, not actively seeking out , don;t want to even think about, not on your radar . infrequent purchase, not talking about on a regular basis. ex: life insurance or funeral services

how long can a product be considered new?

6 months. can put new on new products, but better have a plan for rebranding products after time frame passes

Continuous Innovation

consumers don't need to learn any new behaviors, seamlessly fits into lifestyle. Colgate whitening toothpaste. Adding extra whitening feature, but overall does not change how consumers use the product.

requires no new learning by consumers, but action form, function, and usability for the consumer doesn't really change

consumers don't need to 'relearn' how to use toothpaste, but need to learn how to reuse YOUR product . educate consumer about new feature of whitening , whereas competitors toothpaste doesn't have that feature.

Dynamically Continuous Innovation

only minor changes in behaviors are required from consumers and is relatively easy to adopt. Examples like electric toothbrush or Swiffer Wet jet, still mopping the floor but no messiness of mop and bucket so easy change for consumer to adopt.

have to think about how to include in routine, but doesn't change entire routine. some new learning necessary

Discontinuous Innovation

consumer must learn entirely new consumption pattern. Wireless routers- over 30% returned at best buy as too complicated to install. Requires heavy marketing commitment and budget because requires a ton of new education

different process that was available to consumers before this product. requires you to educate consumers, need to get into hands of consumers, requires a lot of personal selling

personal selling

1 to 1 selling with a consumer, onboarding, teaching what that learning pattern is gonna be

New Product Development Process - 7 steps

1. New Product Strategy Development

2. Idea Generation

3. Screening and Evaluation

4. Business Analysis

5. Development

6. Marketing Testing

7. Commercialization

1. New Product Strategy Development

NPD process is strategically driven by the Sr. Leadership- SBU- brands. Fluid plan for 3-5 years out. Term: innovation pipeline

innovation pipeline: although innovation is not a linear process, considers inputs, processes, outputs, how ideas spin in and out

2. Idea Generation

Generate new ideas from a variety of sources- peers, customer feedback, suppliers, R&D, market research, competitive products, universities, smaller up and coming companies

where can you come up w new ideas? → social trends, competitive trends ... customer feedback, suppliers will come to you with new product innovations that they are trying to pitch ... R&D partners .. evaluating and screening . internal filtering , external filtering with focus groups

3. Screening and Evaluation

Screen ideas- internally does it fit with brand strategy/requirements, externally- focus groups or surveys of consumer based on written descriptions of product

4. Business Analysis

Financial feasibility analysis to see if there is a market for it

5. Development

Develop product, prototype with testing-lab & consumer tests

6. Marketing Testing

Expose products to consumers to see if they will buy

7. Commercialization

Launch new product

The Product Life Cycle

Introduction

Growth

Maturity

Decline

Introduction Phase of The Product Life Cycle

products launched, gaining awareness, few competitors, one products, skimming or penetration pricing, limited place, promotion to inform & educate

Stimulate Trial

Primary Demand - Initially create demand for a product class and not a specific brand

Selective Demand - As more brands enter the space, create preference for a specific brand

Skimming Strategy - Set the price initially high, before there are other competitors in the space, in hopes to recoup R&D costs

Penetration Pricing - Low price set to discourage competitors from coming in as they would need to set the price equal or lower

Primary Demand

Initially create demand for a product class and not a specific brand

Selective Demand

As more brands enter the space, create preference for a specific brand

Skimming Strategy

Set the price initially high, before there are other competitors in the space, in hopes to recoup R&D costs

Penetration Pricing

Low price set to discourage competitors from coming in as they would need to set the price equal or lower

Growth Phase of The Product Life Cycle

competition increases, more variants of the product, price is impacted (lower) as brands look to gain/steal share, more outlets for distribution, promotion now looks to stress POD among competitors

Rapid Sales Growth

More Competitors

Profits Peak

Advertising Shifts to Selective Demand: As more brands enter the space, create preference for a specific brand

Repeat Purchasers

New Features Added

Broad Distribution

Maturity Phase of The Product Life Cycle

many competitors, full product line developed, price looks to defend share and drive profit, maximum # of outlets, promotion looks to remind consumers of the brand

Industry/Product Sales Slow

Fewer New Buyers

Profit Declines due to competition

Product Differentiation

Fewer Competitors as some begin to leave

Decline

reduced competition , product is limited to best sellers, pricing is focused on maintaining profitability, fewer outlets and minimal promotion. Harvest/Deletion. A product may enter the decline stage through no fault of its own, but due to environmental changes. Ex. Digital music pushed CD's into decline. Digital cameras and phones eliminated film developing shops

Industry/Product Sales Drop

Price Drops

Environmental Changes

Deletion - discontinuing a product due to declining sales- not worth the effort or salaries to have someone manage the product

Harvesting - Keep selling product, but reduce marketing costs, Coca-Cola

Deletion

discontinuing a product due to declining sales- not worth the effort or salaries to have someone manage the product

Harvesting

Keep selling product, but reduce marketing costs, Coca-Cola

Five categories and profiles of product adopters

Innovators

Early adopters

Early majority

Late majority

Laggards

Innovators

venturesome, highly educated; use multiple information sources

Early adopters

leaders in social setting, slightly above average education

Early majority

deliberate; many informal social contacts

Late majority

skeptical; below average social status

Laggards

fear of debt; neighbors and friends are information sources

Price

the money or other considerations exchanged for the ownership or use of a product or service.

Price equation

Final Price = List Price - (Incentives + Allowances) + Extra Fees

List price - ex: tuition, invoice price

Incentives + Allowances - ex: Discounts or deductions to the list price decreasing the final price

Extra Fees - Incremental charges increasing the final price

Value

the ratio of perceived benefits to price. Value involves judgement by a consumer of the worth of a product relative to substitutes that satisfy the same need

Perceived benefits

quality or durability of a product or service. when perceived benefits increase so too does the consumer's value

Value pricing

the practice of simultaneously increasing product and service benefits while maintaining or decreasing price.

Profit equation

Profit = total revenue - total cost = = (Unit price × Quantity sold) − (Fixed cost + Variable cost).

The 6 steps in setting price

1. Identify Pricing Objectives/Constraints

2. Estimate Demand and Revenue

3. Determine Cost, Volume, Profit Relationships

4. Select Approximate Price Level

5. Set List or Quoted Price

6. Make Special Adjustments

Pricing Objectives

- Specifying the role of price in the organizations marketing & strategic plans- go back to those strategic plans and goals set forth by Sr. mgmt and SBU's

Sales Revenue ($) - Pricing Objective Example Step 1

driver for many companies- goal to increase sales revenue, profit and market share. Given that the company is already profitable. $ or units are An easily understood goal for marketing manager to achieve.

Market Share ($ or %) - Pricing Objective Example Step 1

sales of the company in comparison to sales of the industry. Pursue share if sales are flat or declining for the industry

Unit Volume (#) - Pricing Objective Example Step 1

the quantity produced or sold.

Survival - Pricing Objective Example Step 1

if the firm is at risk- sales, units share may not be as important as survival. Ex: Radio Shack price matching to try to stay alive with other competitors in an effort to raise cash

Social Responsibility - Pricing Objective Example Step 1

a firm may forgo higher profits for a social cause- ex: Gerber gives some products for free for children who cannot

Demand for the Product Class, Product Group and Brand - Pricing Constraint Examples Step 1

# of potential buyers can impact the price a seller can charge - Generally speaking- the greater the demand, the higher the price can be set

Newness of the Product: Stage in the Product Life Cycle - Pricing Constraint Examples Step 1

the earlier in the product life cycle the higher the prices can be and sometimes are- recoup R&D and patent expenses before new competitors enter the space - Newer Products Usually Priced Higher

Cost of Producing and Marketing the Product - Pricing Constraint Examples Step 1

Profit for Channel Members- manufacturer, wholesaler, retailer, consumer

Ensure that all channel members can make a profit as we consider mark up all along the way

Cost of Changing Prices and the Time Period They Apply - Pricing Constraint Examples Step 1

Catalogues printed cost to reprint, but now prices can change immediately and often due to the transparency of the internet

Single Product versus a Product Line - Pricing Constraint Examples Step 1

Example: In 2017 Apple Unveiled Three Phones at Once (the 3 different colored iphone 5s) and Had to Consider Value and Price of All Three

Type of Competitive Market - Pricing Constraint Examples Step 1

price is constrained by the type of market that it competes in. Consider extent of price competition, extent of product differentiation, and extent of advertising

Pure Competition - many buyers and sellers, none being able to influence prices.

Monopolistic Competition - a type of imperfect competition such that many producers sell products that are differentiated from one another and hence are not perfect substitutes

Oligopoly - several large sellers who have some control over the prices

Pure Monopoly - single seller with considerable control over supply and prices

Competitors' Prices and Consumers Awareness of Them and Ability to Easily Purchase Them - Pricing Constraint Examples Step 1

Consumer-Driven Pricing Actions- sees product and price in store, and then goes home and purchases online cheaper

Seller/Retailer-Driven Pricing Actions- changing online prices to compete- ex: airlines

Demand Curve - Step 2. Estimate Demand and Revenue

a graph relating the quantity sold and price, which shows the maximum number of units that will be sold at a given price. But price is not the only factor influencing demand for a product.