Marketing, Real People, Real choices test 1 ch. 1

Value

The benefits a customer receives from buying a good or service.

Marketing

about:

-meeting needs

-delivering value to everyone who is affected by a transaction

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

Stakeholders

Buyers, sellers, or investors in a company, community residents, and even citizens of the nations where goods and services are made or sold-in other words, any person or organization that has a "stake" in the outcome.

Consumer

The ultimate user of a good or service.

Marketing concept

A management orientation that focuses on identifying and satisfying consumer needs to ensure the organization's long-term profitability.

Need

The recognition of any difference between a consumer's actual state and some ideal or desired state.

-physical, psychological

Want

The desire to satisfy needs in specific ways that re culturally and socially influenced.

Benefit

The outcome sought by a customer that motivates buying behavior-that satisfies a need or want.

A product delivers a benefit when it satisfies a need or a want

Demand

Customers' desires for products coupled with the resources needed to obtain them.

Market

All the customers and potential customers and potential customers who share a common need that can be satisfied by a specific product, who have the resources to exchange for it, who are willing to make the exchange, and who have the authority to make the exchange.

consumers who share a common need and have resources, willingness and authority to buy

Marketplace

Any location or medium used to conduct an exchange.

Utility

The usefulness or benefit consumers receive from a product.

Exchange

The process by which some transfer of value occurs between a buyer and a seller.

Production orientation

A management philosophy that emphasizes the most efficient ways to produce and distribute products.

Selling Orientation

a managerial view of marketing as a sales function or a way to move products out of warehoused to reduce inventory.

Consumer orientation

a management philosophy that focuses on ways to satisfy customers needs and wants.

Total Quality Management (TQM)

A management philosophy that involves all employees from the assembly line onward in continuous product quality improvement.

Instapreneur

A business person who only produces a product when it is ordered.

Triple bottom line orientation

business orientation that looks at financial profits, the community in which the organization operates, and creating sustainable business practices.

Customer relationship management (CRM)

a strategy that involves systematically tracking consumers' preferences and behaviors over time in order to tailor the value proposition as closely as possible to each individual's unique wants and needs

Social marketing concept

a management philosophy that marketers must satisfy customers needs in ways that also benefit society and also are profitable for the firm

Sustainability

A product design focus that seeks to create products that meet present consumer needs without compromising the ability of future generations to meet their needs.

Return of investment (ROI)

The direct financial impact of a firm's expenditure of a resource such as time or money.

Popular culture

the music, movies, sports, books, celebrities, and other forms of entertainment consumed by the mass market

Myths

Stories containing symbolic elements that express the shared emotions and ideals of a culture.

Product

A tangible good, service, idea, or some combination of these that satisfies consumer or business customer needs through the exchange process; a bundle of attributes including features, functions, benefits and uses.

Consumer goods

The goods individual consumes purchase for personal or family use.

Services

Intangible products that are exchanged directly between the producer and the customer.

Business-to-business marketing

the marketing of those goods and services that business and organizational customers need to produce other goods and services, for resale or support their operations

Industrial goods

goods individuals or organizations buy for further processing or for their own use when they do business

e-commerce

the buying and selling of goods and services over the internet

not-for-profit organizations

Organizations with charitable, educational, community, and other public service goals that buy goods and services to support their functions and to attract and serve their members

Target market

the market segments on which an organization focuses its marketing plan and toward which it directs its marketing efforts.

Value proposition

a marketplace offering that fairly and accurately sums up the value that will be realized if the good or service is purchased

The unique value that a product or service provides to its customers and how it is better than and different from those of competitors.

Lifetime value of a customer

how much profit companies expect to make from a particular customer, including each and every purchase he will make from them now and in the future. to calculate lifetime value, companies estimate the amount the person will spend and then subtract what it will cost the company to maintain this relationship

Distinctive competency

A superior capability of a firm in comparison to its direct competitors

Differential benefits

properties of products that set them apart from competitors' products by providing unique customer benefits

Value chain

a series of activities involved in designing, producing, marketing, delivering, and supporting any product. Each link in the chain has the potential to either add or remove value from the product the customer eventually buys.

Easier and less expensive to retain a customer, than to generate business from new customers

Lifetime value of a customer

Calculating the projected profit from a particular customer

Certain customers are better to retain

Consumer-generated value

everyday people functioning in marketing roles, such as participating in creating advertisements, providing input to new product development, or serving as wholesalers or retailers

Wisdom of crowds

under the right circumstances, groups are smarter than the smartest people in them, meaning that large numbers of consumers can predict successful products

Open source model

a practice used in the software industry in which companies share their software codes with anyone to assist in the development of a better product

Consumer addiction

a physiological and/or psychological dependency on products or services

Marketing Plan

a document that describes the marketing environment, outlines the marketing objectives and strategy, and identifies who will be responsible for carrying out each part of the marketing strategy

Mass market

all possible customers in a market, regardless of the differences in their specific needs and wants

Market Segment

a distinct group of customers within a larger market who are similar to one another in some way and whose needs differ from other customers in the larger market

Market position

the way in which the target market perceives the product in comparison to competitors brands

Marketing mix

a combination of the product itself, the price of the product, the place where it is made available, and the activities that introduce it to consumers that creates a desired response among a set of predefined consumers

4 ps

Four Ps

Product, Price, Promotion, and Place

Price

The assignment of value, or the amount the consumer must exchange to receive the offering.

strategies:determine how much a firms charges for a product. As we'll see later in the semester, setting a price is not an easy task - one must consider cost and competitive factors, the price consumers are willing to pay, and the ability of wholesalers and retailers to markup the product and earn a fair profit. Typically marketers set the price to wholesalers, or if wholesalers are not used, retailers, and suggest a retail price which may or may not be adopted at the point of sale. Sometimes the firm bases its pricing strategy solely on cost, demand, or competitive issues.

Promotion

the coordination of a marketer's marketing communications efforts to influence attitudes or behavior; the coordination of efforts by a marketer to inform or persuade consumers or organizations about goods, services, or ideas

strategy: is how marketers communicate a product's value proposition to the target market. Marketers use promotion strategies to develop the product's message and the integrated communications mix of advertising, sales promotion, publicity, direct marketing, and personal selling that will deliver the message. As previously discussed, the marketing mix strategy must be devised with the intent of achieving marketing objectives, which in turn, contribute towards the achievement of corporate or SBU objectives.

Place

The availability of the product to the customer at the desired time and location.

Distribution (place) strategies:

How, when, and where the product is available to targeted customers

FORM UTILITY

benefit provided by marketing when raw materials are transformed into finished goods; e.g., oats transformed into oatmeal; rubber into tires. (Relates to PRODUCT portion of marketing mix.)

PLACE UTILITY

benefit provided when marketing makes goods available where customers want them; e.g., many things can be purchased over the Internet. (Relates to DISTIBUTION/PLACE portion of marketing mix.)

TIME UTILITY

benefit provided by marketing when products are stored (or inventoried) until they are needed. Stores inventory products, as do wholesalers/distributors, and the manufacturers themselves. (Relates again to DISTRIBUTION/PLACE portion of marketing mix.)

POSSESSION UTILITY

benefit marketing provides by allowing the consumer to own, use, and enjoy the product. Promotional plans that offered deferred payment or even those which feature a sale may be exactly what the consumer needs to own a product. Retail stores and websites offer access to a bewildering array of products.

Calculating the lifetime value of a customer allows a firm to decide which customers are "worth keeping" vs. which should be "fired". This is done by estimating the amount a consumer will spend with the firm less the cost to maintain the relationship.

Competitive advantage provides value, so creating a competitive advantage is highly desirable. Distinctive competencies - firm capabilities that are superior to the competition - must be identified as the first step in this process. The next step requires that marketers turn this competency into a differential benefit - value that competitors do not offer. The best differential advantages provide reasons for consumers to pay a premium for the firm's product.

How companies respond to market changes

Deliver innovation

Create value

Change

-Product

-Price

-Promotion

-Place

Business to consumer (B2C)

marketing from an organization to a consumer

value

The benefit(s) a customer receives from buying a good or service

Customer perspective

Cost versus benefit

(Price) versus (utilities)

value needs to be from a customer and a seller perspective

Creating a competitive advantage

Distinctive competency

Differential benefit

Effective product benefits must be both different from the competition and things customers want.

marketing involved

analyzing and predicting needs to determine what customers want and what needs the company wants to meet (product development), as well as determining pricing, promotion and distribution strategy.

Branding

stay relevant

new-product development

Phase 1: Idea generation

Brainstorming products that provide customer benefits and which are compatible with the firm's mission

Phase 2: Product-concept development and screening

Product ideas are tested for technical and commercial success

Phase 3: Marketing strategy development

Developing a strategy to introduce the product to the marketplace

May involve green marketing

Phase 4: Business analysis

The product's commercial viability is assessed in this phase

Phase 5: Technical development

Firm engineers refine and perfect the new product

Prototypes or test versions of the proposed product are developed (in R&D department

Phase 6: Test marketing

The complete marketing plan is tested in a small geographic area similar to the larger market

Phase 7: Commercialization

The new product is launched into the market

Full-scale production, distribution, advertising, and sales promotion are begun

Adoption Pyramid

bottom:

awareness (product exists) -interest (see how product might satisfy a need, open to information) -evaluation (weigh losts and benefits) -trial (potential adopters use product)-adoption (agrees with idea)-confirmation consumers wigh in)

Innovation and Adoption factors

Relative advantage (also referred to by some authors as a "point of difference") is the degree to which a consumer perceives a new product as offering superior benefits. Relative advantage typically relates to functional benefits such as higher quality, faster speed, lower cost, greater convenience, etc. All things being equal, the greater the relative advantage, the faster the product should be adopted.

Compatibility is the extent to which the innovation is consistent with existing cultural values, customs, practices, and consumers way of "doing things." Metal roofs are commonly used in manufacturing and retailing facilities, but are not very prevalent in the consumer market, for several reasons that relate to compatibility, including aesthetics and cost/benefit ratio (metal roofs easily last 30 or more years, but consumers rarely want to pay the higher cost in light of the fact that people move around on average every 5 to 7 years). Lack of perceived compatibility will slow the rate of adoption.

Complexity refers to the degree to which consumers perceive a new product as difficult to understand and use, and as one would expect, the higher the degree of perceived complexity, the slower the rate of adoption. Well-executed marketing communications can reduce consumer perceptions of complexity.

Trialability refers to the ease of sampling a new product and its benefits. The cost to both the consumer and manufacturer influences the degree of trialability. For example, some samples are entirely free (in-store product demonstrations), yielding a high degree of trialability and speeding the rate of adoption. Some marketers make trial-size purchases available at a reduced rate, but this tactic also decreases the trialability factor because consumers must be willing to pay for the product in order to test it. Finally, some products simply aren't trialable, due to either the cost to the manufacturer or due to the nature of the product (cures for male pattern baldness don't work with a single application, but rather require longer periods of time and consecutive treatments).

Observability refers to the degree to which others can see the new product and the benefits it provides. If products are not used or consumed in situations where others can see them, they aren't observable, and that fact could slow the rate of adoption.

categories of adopters

innovators, early adopters, early majority, late majority, laggards

Strategic planning

Corporate level

Define mission

Evaluate internal and external environment

Set organizational / business unit (BU) objectives

Establish the business portfolio

BCG matrix

Develop growth strategies

BCG Matrix

analyzes business opportunities according to market growth rate and market share

the ___ is a portfolio strategy that managers use to categorize their corporations businees by growth rate and relative market share

^ market growth rate

< > relative market share

develop growth strategies

^ v market emphasis

< > product emphasis

marketing plan outline ***

Perform Situation Analysis

Set Marketing Objectives

Develop Marketing Strategies

Implement and Control the Plan

Situation Analysis

The study of the internal and external factors that affect marketing strategies.

Utilize market research data

-SWOT

Competitive intelligence

the process of gathering and analyzing data about rivals

Competition

Consumers' discretionary income

Consumer interest in the type of product

Purchase of their brand versus competition

marketing objectives

what do we need to achieve in words, numbers, strategies, measures

SMART objectives

Specific - What do you want to achieve?

Measurable - How will you know whether you meet the objective?

Achievable - Are the objectives you set attainable?

Realistic - Given your resources, can you realistically achieve the objectives?

Time - In what timeframe do you need meet the objectives?

product

design, branding, services

strategies: . Certainly a major consideration relates to the nature of the product - its key benefits and attributes. But product strategies also include considerations related to packaging (colors, sizes, materials uses, information included), branding, support services (maintenances, upgrade opportunities, FAQs on websites, etc.), and product variations (flavors, quantities, variations, e.g., Diet vs. Non-Diet).

marketing plan

marketing team!

-sales

-production

-customer service

-information tech

-forecasting/ planning

-market research

-finance

Tactical plan

or action plan!

1. Develop specific action plans to achieve objectives

2. Assign responsibility

3.Set timeline

4.Determine budget

5.Create measurements and controls

template for tactical plan Table 2.4 ***

1.Title of action plan: Relevant name

2.Purpose of action plan: what do you want to accomplish by the action plan- what objective?

3. Description of action plan: Steps involved, core of plan. What must be done.

4. Responsibility for the action plan: who is responsible for what

5. Time line for the plan: timetable of events

6. Budget: costs

7. measurement and control of the action plan: metrics, how and when they will be measured and who will measure them

Consumer decision-making process

1- problem recognition

2- information search

3- evaluation of alternatives:

4- product choice,

5- post-purchase evaluation.

Extended problem solving

a purchase decision process during which the consumer devotes considerable time and effort to analyzing alternatives; often occurs when the consumer perceives that the purchase decision entails a lot of risk

ex: car

habitual decision making

consumers generally do not seek information at all when a problem is recognized and select a product based on habit

ex- box of cereal

evaluation of alternatives

consumer will identify a small number of products in which he or she is interested (called the consideration set), then narrow these choices by comparing the pros/cons of each on the basis of evaluative criteria

Influences on decision making

Internal, Social, Situational

Internal influences

perception: selecting, organizing, interpreting information:

-exposure

-attention

-interpretation

motivation

learning: connections we form between events

attitudes

personality

age groups

lifestyle

Social influences

culture

subculture

social class

group memberships

Situational influences

physical environment

time

Classical conditioning

a person perceives two stimuli at same time and after a while, the person transfers his response from one stimulus to the other.

Operant conditioning

reward vs punishment

Attitude

lasting evaluation of people, issues or objects

Learned predispositions

Three components

Affect: feeling component, emotional response

Cognition: knowing component, belief/knowledge about product or its important characteristics

Behavior: doing component, intent to buy/use

Motivation

: internal state that drives us to satisfy needs

Maslow's Hierarchy of Needs

(level 1) Physiological Needs, (level 2) Safety and Security, (level 3) Belongingness, Ego needs, (level 4) (level 5) Self Actualization

Brand personality

Marketers create a brand personality

People buy products that are similar to their personality

strong pressure

gender roles society's expectations regarding the appropriate attitudes, behaviors, and appearance for men and women.

Social Class

overall rank of people in a society

Status symbols: visible markers that flaunt membership in higher classes

Reference group: set of people you want to please or imitate

Culture

values, beliefs, customs and tastes valued by a group of people

Subcultures

group within a society that shares a distinctive set of beliefs, characteristics, or experiences

Lifestyle trends

Consumerism: protecting consumers from harmful business practices

Environmentalism: philosophy and social movement that seeks conservation and improvement of the environment

Opinion leaders

people who influence others' attitudes or behaviors, due to the expertise they hold on a subject.

Opinion leaders have high interest in the product category, and actively stay current by keeping up with new product news, reading blogs, talking with sales reps, etc.

Opinion leaders have nothing to gain by either endorsing or slamming a given brand - they aren't paid endorsers for the product, just interested amateurs. Thus friends and acquaintances trust that their opinions to be unbiased,

They are also often innovators, meaning they are among the first to buy a new product when it first hits a product.

Now, an important thing to understand is that a true opinion leader is an expert in only one or two product categories at the most. No single person can provide informed opinions on every single product category.

market research

collecting, analyzing and interpreting data on customers, competitors, business environment