Competitive Effectiveness - Exam 1 - Marketing Terms

Marketing

What marketing is about

• Identifying and anticipating customer needs

• satisfying customer needs profitably

• revenue generation

Marketing

an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships on ways that benefit the organization and its stakeholders

4 P’s of Marketing

• Product

• Price

• Place

• Promotion

Product

Procedures to ensure the products are ready for selling

Price

Set it at a level comparable to competitors

Place

How and where products are distributed to sell

Promotion

Brochures, ads, and information to generate interest

Effective Marketing

• Customer Value

• Relationships

• Satisfaction

Customer Value

• Deliver products and services that perform

• Successful products and services deliver value and satisfaction to customers

  • We make buying decisions based on which product is perceived to offer the most value

  • Tangible/Intangible benefits vs. cost

Relationship Marketing

• Keep customers coming back again and again

  • Acquiring customers is 5-25x more expensive than keeping current customers

  • About 70% of growing businesses rate customers success as “very important”

  • Over 80% of companies believe retention is cheaper than acquisition

Customer Satisfaction

• The feeling that a product has met or exceeded the customer’s expectations

  • Good value

  • Provided reasonable solutions to customers’ expectations

  • Do what you say you are going to do

Customer Perceived Value

________ = Expected Benefits - Expected Costs

Perceived Benefits

• Functional benefits

• Psychological benefits

  • emotional benefits

  • self-expression benefits

  • social benefits

Perceived Costs

• Purchase price

• Additional costs

  • cost of using

  • Cost of maintaining

  • Cost of disposing

4 Factors that Contribute to Value

• Exchanging

• Communicating

• Delivering

• Creating

Evolution of Marketing

• Production Era

• Sales Era

• Marketing Era

• Relationship Era

Microenvironment

• Outside but “close”

• Suppliers, competitors, customers, stakeholders, general public, etc.

Macroenvironment

• Outside and largely uncontrollable

  • but you need to understand it

How to understand how inflation will shape consumer behavior in the Americas

Mintel Recommends:

• learn from the past

• Prepare for uncertainty

• Recognize that circumstances vary hugely

Trend

structurally important; a fundamental change; changes what people do

Fad

changes what people talk about; something that just gets media attention

Market Research

The process of planning, collecting, analyzing, and using information for marketing decision-making.

• Assess market potential/select target market

• Explore what product/service offerings customers want

• Develop new products

• Develop effective promotional strategies

• Determine price points

• Evaluate where consumers shop for/purchase products in category

• Understand personal/external factors that influence consumer decision making

• Measure existing customer satisfaction

• Monitor the external environment

Sole purpose for conducting marketing research

• To inform decisions and reduce uncertainty

  • Increase value to consumers

  • Increase value to shareholders

Research Objectives

• Gather data = gather and present information relevant to the problem

• Explain the data = Explain what the data means

• Insights and predictions = Articulate what the data predicts, and how it relates to the marketing problem

Primary data

Data you collect yourself

Secondary data

Data that has been collected previously

• internal info./databases

• gov. agency info.

• Trade/industry sources

• market research firms

• commercial publications

• news media

• Internet search engines/directories

• Industry databases (e.g., Mintel, Lexis Nexis)

Secondary Data Pros

• saves time and money

• aids in determining direction for primary data collection

• pinpoints people to approach

• serves as a basis of comparison for other data

Secondary Data Cons

• may not be exactly what researcher is looking for

• quality/accuracy issues

  • Who gathered the data?

  • What method was used?

  • When was data gathered?

  • How were classifications developed?

Demographic Environment (Demography)

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

Important demographic trends

• age structure due to falling birthrates and longer life expectancies

• changing family structure

• geographic shifts due to increased mobility and movement to “micropolitan” areas

• increased education

• increased diversity

Economic Environment

Factors that influence consumers purchase ability and buying behavior

• Recession

• Inflation

• Unemployment

• Income

Results of Economic Downturn

• Sales increases

  • outdoor furniture, grills, etc. - “staycations”

  • private label brands

  • discount retailers

  • staple products

• Higher ROI on marketing spending

  • while competitors are cutting back

    • less clutter

    • more supply of ad space

• Repositioning opportunities

Natural Environment

accounts for the physical environment and natural resources needed as inputs by marketers or those that are affected by marketing activities

• Weather

• Pollution

• Climate change

• Pandemic

Technological Environment

the application of knowledge in science, inventions, and innovations to marketing

• Device mesh and connectivity b/n sensors, cars, phones, computers, etc.

• Autonomous agents and things (robots and driverless cars)

• Artificial intelligence and machine learning

• More devices yielding more and more info.

Ways to use AI in marketing

• ad optimization

• content inspiration

• scaled A/B testing

• sentiment analysis

• campaign translation

• intelligent chatbots

Political Environment

• includes factors that provide rules and penalties for violates

  • protections for consumers and for business

• includes factors that select leadership, create laws and regulations

• laws protect businesses

• laws protect consumers

Laws Protecting Consumers

• Food and Drug Act (1906)

• Public Health cigarette Smoking Act (1971)

• Children’s Online Privacy Act (2000)

• Financial Reform Law (2010)

Laws Protecting Business

• Sherman Antitrust Act (1890)

• Federal Trade commission Act 91914)

• Wheeler Lea Act (1938)

• Digital Millennium Copyright Act (1998)

Cultural Environment

• the needs and wants of society and culture

  • Demographics

  • Psychographics (e.g., lifestyle, beliefs, values)

  • Culture (e.g., norms, values, rituals, language)

  • Attitudes (e.g., towards others, organizations, nature, etc.)

• requires monitoring shifts in consumer trends and meaning

Strengths

• things your company does well

• qualities that separate you from your competitors

• internal resources such as skilled, knowledgeable staff

• tangible assets such as intellectual property, capital, proprietary technologies, etc.

Weaknesses

• things your company lacks

• things your competitors do better than you

• resource limitations

• unclear unique selling proposition

Opportunities

• underserved markets for specific products

• few competitors in your area

• emerging need for your products or services

• press/media coverage of your company

Threats

• emerging competitors

• changing regulatory environment

• negative press/media coverage

• changing customer attitudes toward your company

Market Segmentation

Who is out there?

• Identify bases for segmenting the market

• Develop segment profiles

• Divide the market into distinct and meaningful groups (i.e., segments)

Market Targeting

Who should we pursue?

• Develop measure of segment attractiveness

• Select target segments

Market Positioning

Why should they choose us?

• Develop positioning for target segments

• Develop a marketing mix for each segment

Connecting Segmentation to Targeting and Positioning

1. Identify groups of similar customers and potential customers (segmentation)

2. Understand consumer behavior w/in segments (segmentation + targeting)

3. Prioritize the groups (targeting)

4. Respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment (positioning)

Market Segment

a group of customers who share a similar set of needs and wants, and/or responses to marketing mix elements

Bases for Segmenting

• Geographic

• Demographic

• Psychographic

• Behavioral

Geographic

• target customers based on a predefined geographic boundary

• differences in interests, values, and preferences vary dramatically throughout cities, states, regions, and countries

Demographic

• the process of dividing a market through variables such as age, gender, education level, family size, occupation, income, and more

• this is one of the most wildly used strategies amongst marketers

Psychographic

• focus on the intrinsic traits the target customer has

• values, personalities, interests, attitudes, conscious and subconscious motivators, lifestyles, and opinions

Behavioral

• break down the way customers go through their decision making and buying processes

• attitudes towards the brand, the way they use it, and their knowledge base are all behavioral examples

Business-to-Business (B2B) Segmentation

same process, different bases for segmentation

• demographics — business size, industry, etc.

• geography — region, nation, international locations

• benefits sought — service support, financial terms, etc.

• loyalty

• usage rates

• customer operating characteristics — capabilities and tech. requirements, etc.

• purchasing approaches/policies

• situational factors — order size, urgency, etc.

• personal characteristics — loyalty, risk aversion, etc.

Market Targeting

• once a firm has identified market segments, it must decide which segment(s) to target

Characteristics of good segments for targeting

• measurable

• substantial

• accessible

• differentiable

• actionable

Approaches to market targeting

• undifferentiated marketing (mass marketing)

• concentrated marketing

• differentiated marketing

Undifferentiated Marketing (Mass Marketing)

• one marketing mix for one big market

• doesn’t recognize differences b/n groups

Concentrated Marketing

• one marketing mix for one segment

Differentiated Marketing

• multiple marketing mixes for multiple segments

• at the extreme is one-to-one or micro marketing

Pros and Cons of Undifferentiated marketing (mass marketing)

• Pro = savings on production/marketing costs

• Con = more susceptible to competition (due to lack of product options

Pros and Cons of Concentrated Marketing

• Pro = concentrated resources (i.e., production, marketing) and strong position among competition

• Con = must know your customer — segments can change and without diversification → this is a big risk

Pros and Cons of Differentiated Marketing

• Pro = generally higher profits, market share

• Con = higher production/marketing costs

  • product design, production, promotion, inventory, research, management

• Risk of cannibalization from other products

Positioning

• deals with serving a specific target market by achieving a certain “position” in the consumers’ minds relative to the competition and based on important attributes

  • You design strategy to position, but ultimately positioning is in the mind of the consumer

• The goal is to get the target market to recognize a company’s distinctive offerings

Aspiration

The company’s desired brand positioning

Co-Creation

• What the consumer does

• a collaborative business strategy where a company invites customers, employees, or partners to actively participate in designing, developing, or improving products, services, and brand campaigns

Reaction

The company’s adjusted brand positioning

Value Proposition

• “Internal” statement to guide strategy

  • What is the specific value a product can provide (relative to the competition)

  • Reason why the target market should buy a product

  • Personality of the brand

Perceptual Map

• Picture showing how brands stack up on key attributes vs. their competitors

• Consumers are asked to compare brands across a number of different attributes

• Answers are used to determine most important attributes, and how close or far brands are to one another on those attributes

• Create a two (or multi-) dimensional representation of what this looks like

Value Positioning Examples

• L’Oreal cosmetics = Because you’re worth it

• Michelin tires = Because so much is riding on your tires

Benefit Positioning Examples

• Pampers Diapers = Our softest diaper ever wraps your baby in comfort and protection

• Oral-B toothbrushes = Bends and adjusts with the contours of your teeth to remove more plaque

Feature Positioning Examples

• Dove soap = Contains ¼ moisturizing cream

• Organic Valley milk = Produced by family farmers without antibiotics, synthetic hormones or pesticides

Consumer Behavior

The process individuals or groups go through to select purchase, use, and dispose of goods, services, ideas, or experience to satisfy wants and needs.

Decision Making Process

• Problem or need recognition

• Information Search

• Evaluation of alternatives

• Make purchase

• Post purchase behavior

Problem Recognition

• Occurs when consumer sees a difference b/n actual state and ideal state

• We buy products to solve perceived problems

  • Out of stock

  • Dissatisfaction

  • Life events

  • Related product needs

  • Market/marketer induced

• Motivation triggered by internal state or external cue

Information Search

• The act of identifying and evaluating options that might solve problem

• Where to search?

  • Memory/personal experience

  • Personal sources like friends, coworkers

  • Market sources like websites, ads, retailers, salespeople

  • Public sources like Consumer Reports, Kelly Blue Book

Outcomes of Information Search

• Choice alternatives are options, which are evaluated in terms of evaluative criteria

• Evaluative criteria are the dimensions consumers use to compare competing product alternatives

  • e.g., feature, style, image, price, warranty

Evaluation of Alternatives

• sometimes we know exactly what we want

• Many times we consider different options in the marketplace

  • we use evaluative criteria to choose from the options in our consideration set

Integration Processes

• Attitude formation

• 2 types of integration procedures

  • Formal integration strategies (e.g., multiattribute model)

  • Simpler procedures: heuristics

Attitude Formation

• involves determining your overall evaluation of something

  • evaluate choice alternatives in terms of choice criteria

  • comprised of thinking, feeling, and behavioral components

Search heuristics

• store selection

• sources of information

• source credibility

Evaluation heuristics

• Key criteria

• Negative criteria

• Significant differences

Choice heuristics

• For familiar, frequently purchased products:

  • works best

  • affect referral

Purchase Decision

• the outcome of the process of evaluating alternatives

  • can result in purchase — or not

  • Outcomes:

    • Product choice

    • Brand choice

    • Dealer choice

    • Purchase amount

    • Purchase timing

    • Payment method

Postpurchase Behavior

• the buying process doesn’t end w/ the purchase

• Involves learning:

  • we evaluate out decision and integrate the personal experience into future decisions

  • what you learn impacts future decisions

    • satisfaction/dissatisfaction

    • attitude

    • cognitive dissonance

Routine Purchase Decisions

• Low involvement

• Short amount of time

• Low costs

• Internal information search only

• One alternative

Limited Purchase Decisions

• low to moderate involvement

• short to moderate amount of time

• low to moderate costs

• mostly internal information search

• few alternatives

Extensive Purchase Decisions

• high involvement

• Long amount of time

• high costs

• internal and external information search

• many alternatives

Involvement

• the amount of time and effort a buyer invests in the search, evaluation, and decision processes of consumer behavior

• level of involvement determined by:

  • previous experience

  • interest

  • situation

  • risk of negative consequences

  • social visibility