MKT 300 [University of Michigan - Ross]

Marketing Myopia

Myopia = nearsighted

When companies are too PRODUCT ORIENTATED instead of CONSUMER ORIENTED

What business are we really in?

Quarter inch drill = quarter inch hole`

Three Long-Held Concepts Every Marketer Should Rethink

1. Brand

- b4 ppl relied on brands to ensure quality, now there are others ways to do this (internet)

= less barries for entry into the market and MORE brand volatity

2. LOYALTY

- ppl used to be very brand loayal, now ppl have more access to info

= LESS brand loyalty

3. POSITTIONING

- consumers evaluate multiple attributes = you can no longer define your brand by one feature

Fundamental Entity (FE)

The perspective from which you will create marketing strategy

- relevant when there is a PARENT BRAND with sub brands

core competence

Firm skills that competitors cannot easily match or imitate.

- leads to sustainable compettive advantage

- can be technical but often intangible components(implicit learning, organizational coordination, corporate culture)

- an iNPUT not an output

- generates strategic assets, which in turn generate benefits for consumers

umbrella brand

a family of products that all deliver the same higher-order benefit

ex: crest

distinct branding

firms offer several products with distinct meanings, brand names, and logos, targeted to different audiences

ex: consumer packaged goods

hybrid branding

A branding approach that combines two brands - the corporate brand plus separate brands - to designate differences in product or service lines.

ex: BMW (keeps mini cooper seperate from other cars to distinct it)

three types of brand extensions

1. product line extensions

2. category extentions

3 branded varients

- popular bc it can alleviate boredom

product line extentions

ex: doritos: cool ranch, late night, spicy

same catagory - different products (ex: flavors)

Product Extentions

items offered in addition to the product to make it more attractive to the target market

EX: law and order

= law and order special vitimes unit

law and order criminal intent

law and order trial by jury

category extensions

When a firm uses its brand to expand into new product categories

- much risker

ex: Swiss (watch, knife, perfume)

every catagory extension is a brand extension

billboard effect

Bran extensions, same color/scheme make an assortment look like a billboard

makes you think of the central brand

Why do we see so many brand extensions?

pricing breadth, lower cost, capitalize on placebo effects, risk minimization

- consumers can alleviate boredom, but stay in family

brand dillution

occurs when a brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold

Levitt's argument

selling focuses on sellers needs

marketing focuses on consumers needs

*selling not equal to marketing

super consumers

1. combine big spending with high engagement and deep interest in new uses for a new product (not just heavy users)

- they exist in most businesses

- they WILL buy more - they account for 3x as much growth as other consumers

80/20 Rule (Pareto Principle)

- 80% of a companies profits are derived from 20% of it's consumers

Customer Relationship Management (CRM)

a company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups

product BUILT off the customer

proactive vs reactive campaigns

reactive: a customer is going to leave and then you are REACTING to that news

proactive: preventing a customer from leaving

- can result in false negatives (failng to identify customers who intend to leave)

- false positives: offering incentives to stay to customers who never had any intention of leaving (=wasted materials + may convince them they aren't suing serve enough)

RFM

RECENCEY

- how recent their pruchase was

FREQUENCY

- how often they buy it

MONETARY

- how much do they spend

attitude

what consumers think and feel about your brand

contractual setting

we observe the time at which customers become inactive (churn)

ex: memberships

churn

the number of consumers who stop using a product or service, divided by the average number of consumers of that product or service

- EXIT

noncontractual

we do NOT observe the time at which customers become inactive

ex: people buying a brand of peanut butter

loyalty

a deeply held commitment to rebuy a product or service despite situational influences and marketing effors having the potential to cause deection

benefits of loyalty

can be a barrier to entry

intertia: allows time to respond to competitor innovation + protection against price attacks

source of price premiums

price premiums

additional amount a customer will pay for the brand in comparison with another brand offering similar benefits

see how much of a price increase a consmer will deal with before moving along and then the difference is the price premium

butterflies

hi profitable, short term customers

true friends

high profitability, long-term loyalty

strangers

lo profitability, short term customers

barnacels + what we want to target

low profitability, long term customers

look for size of wallet and share of wallet - we want to go after those with a share of wallet problem

customer lifetime value (CLV)

present value of all future profits generated from a particular customer

function of : margins, annual retention rate, discount rate

margins (m)

annual revenue-operating expenses

positive relationship with CLV

m=AR-OE

annual retention rate: (r)

percent of current customers who will still be with the firm at the end of the year

positive relationship with CLV

discount rate (d)

cost of capital that you use to discount future cashflows

typically around 10-16%

negative relationship with clv

customer lifetime value formula

$ margin x (retention rate % / 1 + discount rate % - retention rate %)

sets an upper bound when we are deciding how much to spend on a retention campaign

r is constant

heterogeneity

the variability of the inputs and outputs of services, which causes services to tend to be less standardized and uniform than goods

survivor bias

aggregate retention rate increases over time, even though the underlying retention rate for each customer has not changed

ex: views for season drop a lot after episode 1, barely drop after episode 2 - the retention rate shouldnt be different its just survivor bias

acquire new customers or retain existing customers?

try and retain customers you already have - those customers will then go on to spread positive word of mouth

Acquisition marketing objective

ex: advertising to build awareness. headon headache medicine: straightforward, almost annoying, but gets people's attention.

ex: leveraging awareness of stronger competitor: 7up "theres no cola like the Uncola"

Leveraging awareness of stronger competitor

retention marketing objective

ex: ads that focus less on the product: wassup budweiser commericial.

ex: kroger card, mcdonalds monopoly board, loyaly cardsd,

who do reward programs affect most

light buyers have the biggest increase, heavy uyers are already using a lot

loyalty programs

need to have good incentives but not TOO good

most grocery store membership cards reward card ownership, not loyalty

some companies starting to reward proitability over mere volume of purchases

creates barriers to exit (ex: airline miles that disappear if you leave)

- encourage purchases that woudlnt normally happen

loyalty progams CANNOT:

- build emotional attachment

- benefits frequent pruchases the most (is this who we want to offer discounts to?)

goal gradient hypothesis

goal pursuit intensifies the closer we get to a goal with a clearly defined end state

ex: make the bubbles on a punch card bigger at the beginning/give more points at the beginning

ex: charity donations - ppl more likely to donate when you are close to your goal

SOV

SOURCE OF VOLUME

1. SD: Stimulate Demand

2. SS: Steal Share

MO

Marketing Objective

Acq: Acquition

Ret: Retention

category

the brand with which a brand competes and which function as close substitutes

if consumers to do commonly choose between two brands, they should probs not be considered in the same category

POP

Point of Partity

attributes or benefits that ALL brands within a category offer

necessary but not sufficient enough for success

liscence to compete in the category

POD

Point of Difference

attiributes or benefits that consumers strongly associate with a brand, positively value, and believe they could not find to the same extent with a competitor

ex: in fast food service, subways POD is healthiness

good brands can have lots of pods

four types of customers

loyalists

competitor loyalits

cheaters (multibrand consumers)

people outside of the category

stimulating demand

stimulate heightened usage among current customers

when the total market expands who benefits

the category leader usually gains the most = perk of being category leader

category leader will generally be motivated to expand the category - other competitors might not want to promote as it will just give the leader more recogniitioin

prototypical

one brands name is synonymous with the category name

ex: tissue = kleenex

bandage = bandaid

price promotions

Promotions when products are offered at a discounted price

if usuage is inflexible and prodcut is non-perishable, price promotions can encourage consumers to stockpile

perishable goods are always flexible

flexible vs inflexible usage

flexible = if you have more you consume more (chocolate)

inflexible: toliet paper: you typically only consume a set amount

steal share

targeting competitors costomers

usually the strategy of choice for non category leders

ads that invoke comparision with the cateogry leader

cant create ambiguity about category membership (can create a need to reassure that the brand has the required POP)

frontal attack

-Head-on attack of fundamental aspects of leader (e.g.,

Pepsi tastes better than Coke)

- Challengers need high resources

flank attack

attack a leaders weak points, blind spots (internal)

ex: attack an area where leader is geographically weak

attack a segment that has been neglected by leader

try not to pick on a small competitor

COKE VS PEPSI

hypercompetition

Coca cola = inventor of marketing

- synonymous with happiness, santa, american values, home

Pepsi: young generation, music, modern, fun

Pepsi makes FRONTAL attack against coke: attacking the taste and everyone prefers Pepsi = coke create a NEW coke - but people were mad as coke isnt all about the taste, its about the BRAND

Coke now less focused on fighting pepsi, more focused on saving the category

why was the pepsi taste challenge not entirely accurage

1. we typically have more than one sip

2. we normally KNOW what we're consuming

do you want to have 100% market share

NO

Competition can be good

at some point when you get to 100% market share your profits go down - you want to maximize profitability not market share

getting to 100% market share requires a lot of additiioal costs - eventually the cost of adding an additional customer will outweight the value they bring you

placebo effect

expectations drive experience

perceptual map

displays, in two or more dimensions, the position of products or brands in the consumer's mind

spiderwe type

STP

Segmentation, Targeting, Positioning

Red Oceans and blue oceans

red oceans: crowded-blood bath markets

blue oceans: unknown, unconested markets

RED OCEAN TRAPS

1. focusing too closely on what existing customers want and not WHY non-onsumers arent customers

2. niche existing space does NOT equal new market space

3. technology innovation does NOT equal market strategiy / new market

4. creative descrubtion does NOT equal market creation

5. differentiation is not always the key to success

Segmentation

the process of dividing a larger market into smaller pieces based on one or more meaningfully shared characteristics

only target markets that are likely to be responsive

ATTITUDE is the golden segmentation variable

- demographics can lead to you missing things

common segment defenition

a group of customers sharing at least one characteristic that should increase their responsiveness to a marketing effort

compromise between mass marketing and one to one marketing

mass marketing = least cost

one to one marketing = most cost

mass marketing

using a single marketing strategy to reach all customers

ex" customers can choose any color of model t as long as its black"

one to one marketing exampes

amazon recommendations, nike shoe customization

when should you segment

when incremental value from customizing outweights costs of developing seperate offerings for each segment

MECE

mutually exclusive and comprehensively exhaustive - segments should be sufficienty different form one another so that they do not overlap

idenfitifed segments should include ALL consumers in a given market

variables on which consumers are commonly segemented

demographic: region, pop density, climate, gender, age, income, occupation

- demographic data is cheap and abundant, lots of sources

behavioral

- ads ofor nicorette gum in smoking lounges, wedding dress ads on the knot

- BUT purhcases dont always reflet our typical attitudes

attitudinal

- we LOVE

- thoughts, feelings, beliefs, desires, aspirations

- we can translate these to NEEDs (ex: i am a very busy person = i have a high need for convienence)

ex: CAMBELL:

- passionate kitchen master, uninvolved quick fixer, familiar taste pleaser, diciplined health manager (have legit fridges in thei office

- toothpastes (fresh breath, white teeth, low price, romanc)

- airport perspnalities

- very difficult to collect

gray powers

older couples in downtain areas, white collar, professional

one of the niche segments

generational segmentation by PNC

target those young kids with a easy to use banking product with the hope to get them to trade up over time

pink tax

the higher price paid for women's consumer items compared to similar products marketed to men

drawbacks of segmenting on demographic variables

potentially limits growth

- marketers cant grow a demographic segment but might be able to stimulate needs

social desirability bias

A tendency to give socially approved answers to questions about oneself.

conjoint analysis

determines the importance of different attributes to different segments of consumers

relative importance of product attributes is better measured when attributes are considered JOINTLY

forces consumers to make realistic tradeoffs

tells you

centrality

the first brand that comes to mind when you think about the category

distinctive ness

the degree to which the brand stands out fro others - better predictor of price

targeting

which segment do we pursue? who is in the selected segments?

vulnerable segments

Groups of consumers, for either psychological or economic reasons, are considered vulnerable (think gullible) to ad messages.

· Young children teens, elderly, economically, socially, physically, or mentally disadvantages

· Research argues that marketing any product to children under the age of 12 is inherently deceptive as they don't have the cognitive capacity to fully understand the purpose of advertising. It is argued that young children believe what they see and don't understand that advertising is persuasive and designed to convince them to do things or want things that they might not otherwise.

5 box positioning statement

Current Behavior, Current Belief, Consumer Proposition, Desired Belief, Desired Behavior

positioning

developing a specific marketing mix to influence potential customers' overall perception of a brand, product line, or organization in general

category confusion

ex: 7 up was a medicine and now a soda

need to establish a POP

positioning statement

a statement that summarizes company or brand positioning using this form: to (target segment and need) our (brand) is (concept) that (point of difference)

FUD FACTOR

Fear, Uncertainty, Doubt

often used in political advertising

curse of knowledge

Mistake of assuming that others know what you know

confirmation bias

a tendency to search for information that confirms one's preconceptions

personal selling

face to face communication meant ot increase the probability of purchase

B2C context but can also be B2B context

B2B: ex: manufacturer sales reps negotiating for shelf space at walmart

interactions between marketing and sales

marketing seen as a fuction that CREATES demand and sales seen as a function that FULFILLS demand

differences b/n sales and marketing

sales is much more tangible and can be measured sooner

sales people want lower price so they can sell sooner - neither feel like they hear each other - marketing blames sales for not selling, sales blames marketing for too grand of ideas/not appealing enough

push marketing

Use sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end users

Appropriate when there is low brand loyalty in category and brand choice is made in the store

ex: getting the product FRONT AND CENTER - displays in a store

pull marketing

- Manufacturer uses advertising and other marketing communications to motivate consumers to seek out the product

- Appropriate when there is high brand loyalty and high involvement in category, and when consumers choose brand before going to store

bringing customers IN - highly effective relies on loyalty

commercials

standard assumption

measuring intentions does not influence the respondent's likelihood of acting upon those intentions

the mere measurement effect

On average, people who are asked to state intentions to perform socially acceptable/desirable behaviors are subsequently more likely to engage in those behaviors than people who are not asked to state intentions

ex: saying something outloud translates to that behavior

BUT the person must be able to imagine the situation - it is realistic

descriptive research methods

Scientific procedures that involve systematically observing behavior in order to describe the relationship among behaviors and events.

observation, sruveys, projective techniques, brain imaging

causal research methods

experiments, statistical/econometric methods

double barreled questions

questions that attempt to get at multiple issues at once, and so tend to receive incomplete or confusing answers

AVOID

ex: are you satisfied with the cost and quality of this product?