MKTG 301 Midterm 1

Marketing

A set of strategies and activities by which companies engage and acquire customers, build strong customer relationships, and create superior customer value to capture value from customers in return

Market offerings

Some combination of products, services, solutions, experiences, offered to market to satisfy a want/need

Marketing myopia

Paying more attention to products than customer wants/needs

Products are only tools to solve customer problems!

Markets

Actual and potential buyers

2 things you need to develop a marketing strat

Who to serve (segmentation)

What you’re serving (value proposition, benefits, promises, taglines)

5 marketing orientations (concepts)

1. Production concept: customers favor products that are available and affordable

2. Product: customers favor products that are quality, innovative

3. Selling: customers won’t buy product without promo effort

4. Marketing: to win, companies need to know customer needs better than customers, and deliver better than competitors

5. Societal marketing: companies should deliver value in a way that improves customer and society well being

4 Ps

Product, place (physical and digital), price, promotion

Customer relationship management

overall process of building and maintaining profitable customer relationships by delivering value

Customer perceived value

Difference between benefits derived by offering and costs of obtaining and using it, relative to competitors

customer engagement marketing

fostering direct contact with customer to make community

SNS, collabs with customers (submit your own oreo flavor)

Share of customer

Share of customer purchasing in product categories

Banks want share of wallet, restaurants share of stomach, etc.

Customer equity

Total combined customer lifetime value of all of a company’s current and potential customers—-measure of future value of customer base

Cadillac looked great on the sheets, but customers were old and on last cars so plummeted over time

Customer relationship grid

1. Butterflies (high profit, low loyalty): enjoy for a short time

2. True friends (high profit, high loyalty): strong fit between needs and company offerings. Good to nurture

3. Barnacles (low profit, high loyalty): problematic—sell them more, increase fees, or decrease service. Best buy customers who return a lot

4. Strangers

Strategic planning

Developing and maintaining a profitable strategic fit between organization goals/capabilities and changing market opportunities

Mission statement

Organization’s goal/purpose and what it wants to accomplish in larger environment

Market, not product oriented! Sephora helps people unlock their potential

Business portfolio

Collection of businesses and products that make up a company

BCG’s approach for a growth share matrix

1. Stars (high market growth, high market share) need investment to continue financing rapid growth. Will eventually slow into cash cows

2. Question marks (high market growth, low market share) require more money to build share, but can be turned into stars

3. Cash cows (low market growth, high market share) provide money for bills, more investments, cash reserves, etc. Successful and established

4. Dogs (low market growth, low market share) Opportunity cost. May generate enough money to maintain, but not much. Customers may be mad if discontinued for nostalgia sake

Product/market expansion grid

1. Market penetration (existing products, existing markets) new stores, ads

2. Market development (existing products, new markets) new demographics

3. Product development (new products, existing markets) new products

4. Diversification (new products, new markets)

Marketing ROI

Net return of marketing investment / costs of investment

Market segmentation

Dividing markets into groups with different behaviors and characteristics

Positioning

Arranging for the product to occupy clear, distinct, good place relative to competitors in the mind of target customer

Diffferentiation

Creating superior customer value relative to competition

What are the 4As?

Acceptability: extent to which product exceeds expectations

Affordability

Accessibility

Awarness

SWOT Analysis

Strengths: internal capabilities

Weaknesses: internal limitations

Opportunities: favorable factors/trends in the environment

Threats: unfavorable external factors

What’s the Big Picture framework? There are 3 initial steps that branch into 2 other steps. Those steps combine into 4 steps, and we end on 2 separate steps again

Corporate objective, marketing objective, source of volume

Positioning strategy, target segment

Price, promo, product, place

Execute, evaluate

What are the components of the corporate objective?

Mission/vision

SMART goal: specific, measurable, achievable, relevant, time bound

Entity/level (corporation, business unit, product line)

5 Cs

Customer

Company, competitors, collaborators

Context

Microenvironment

Actors close to corporation

Suppliers, competitors, publics, customers

Macroenvironment

Larger societal forces that affect microenvironment

Demographic, economic, natural, technological ,political, social, cultural

What did we learn in Bud Light vs. Modelo?

Bud Light alienated their core customer base, which lost them a lot of support. However, they still don’t really stand for anything. Bro-y suburban ads…but what’s the core emotional part?

Modelo, on the other hand, has worked to use their fighting spirit tagline and campaigns to continue to have heart with their original Mexican customer base.

Customer funnel (7 steps)

Awareness

Familiarity

Consideration

Trial

Purchase

Repeat purchase

Evangelize

What are the components of the Marketing Objective?

How many customers do we need to retain/acquire to achieve our corporate objective?

Aquisition and retention

Acquisition overview

• Essential for all organizations, but particularly start-ups

• PR, viral marketing, new product launches, trail promotions

• Bundling: multiple products in one cheaper package

• Measure through awareness (ask ppl what their top soda brands are, do they list yours?)

What makes acquisition difficult?

• Price of overcoming inertia (switching costs)

• Lock in: companies make switching harder

Retention overview

• Less expensive than acquisition

• Loyalty leads to evangelism

• Customer relationship management!

• Loyalty programs, customer service, line extensions

• Measurements: repeat purchases, net promoter score, customer lifetime value

Customer lifetime value formula

(M * (r / 1+i-r)) - AC

M = margin = profits = revenues-expenses

r = retention rate

i = discount rate

AC = acquisition cost

DO SOME EXAMPLES!

Components of source of volume?

Steal share and stimulate demand

What should I decide to do—-steal share or stimulate demand?

If you’re category leader, pursue demand

Always emphasize category benefit you dominate

Don’t give competitors additional exposure! (Samsung ad)

If you’re not category leader, and not planning on building a new segment, then steal share

Stimulating demand

Growing the pie

More users (Zara home, kid’s collections)

More use (baking soda for deodorizers, borax and slime, Youtube TV)

More often (Hungry? grab a snickers, SNS)

Stealing share

Bigger slice of the pie

1. Identify brand to steal from

2. What variable will you steal from? What is your benefit?

3. Communicate your strength relative to competition

Components of positioning strategy and target segementation

Four key segmentation variables

How to decide which to target

Positioning (plotting, 5 box/mad libs, laddering)

Four key segmentation variables

1. Demographic: traits you can physically observe and measure

   1. Info is readily available, but competitors get same

   2. Not predictor of behavior

2. Behavioral: specific actions of customers

   1. Potentially difficult to collect and analyze

3. Attitudinal: thought, feelings, beliefs, values

   1. Attitudes don’t always drive real behavior

   2. Can provide basis for deep emotional connection and sustainable advantage

   3. Difficult to measure and act on

   4. Can change over time

4. Aspirational: attitudes about the future

   1. Fancy Feast, Old Spice (imagine your man)

5 important traits of segments

1. Identifiable/measurable

2. Accessible

3. Substantial (large enough)

4. Differentiable: respond differently to marketing mix elements

5. Actionable: resources/ability to execute

Targeting strategies

Mass market

• Amazon

Differentiated target strategies: segmenting and then serving multiple segments

• Mariott serves low and high income customers with different hotels

Concentrated targeting strategy: niche

• Nut free production facilities for foods

One to one: complete different product for each customer, NOT just customization

• Custom tailored outfit made just for you, your materials, etc.

How to choose target market?

Opportunity for profit (segment size, growth rate, revenue potential, cost effective to reach/serve)

Industry attractiveness (Porter’s 5 forces:competitor intensity, threat of entrants, threat of substitution, supplier/buyer power)

Company fit: with objectives, competencies, resources

Profitability formula

(Segment size x Segment adoption percentage x Purchase behavior x Profit margin percentage) - Fixed costs

Purchase behavior = purchase size * number of occaisons

Profit margin percentage = (selling price - variable costs) / selling price

What’s bridging the gap?

Innovators, early adopters, GAP, early majority, late majority, laggards

Innovators not always the same as late majority (Tesla)

Laddering

Functional benefits to emotional benefits

Plotting

Main variable: cost of entry for category

Dynamic variable: benefit we choose to compete on

Mad Libs

To target customer, brand is the one competitive frame of reference that brand promise. That’s because only brand has reasons to believe so that target customer can end reward/benefit.

5 step process

Currently do (1)

^

Current belief (2)

v

Consumer proposition

v

Desired benefit

v

Desired do

What is the foundation of the 4Ps?

Branding

Brand

Meaning you stand for in the mind of your audience. It’s a promise and fulfillment of that promise

Fosters loyalty, elevates pricing power, north star/decision aid, differentiator

Name, motto, soundmark, packaging, characters

Brand positioning

Company’s view of how its target customer should think about the brand

Walmart = low prices, Nike = athletic performance

Brand equity

Monetary value of brand. What value is added because of the brand? Do customers like brand more than generic?

Equity is poer! Measure of ability to capture preference and loyalty

Uncommon denominator framework

Cust desire + Company strengths = uncommon denominator

Cust desire + Competitor strengths = cede to competition

Everything = common denominator, everyone has it, everyone wants it. Lemonade should be sweet and delicious

3 types of brand strategy

1. Single brand/umbrella brand/branded house: use same brand across a variety of diverse offerings

   1. Nestle has Nescafe, Nesquick, Nespresso. Apple has iPad, iWatch, etc.

   2. Leverages existing brand equity, can strengthen brand visibility across product categories and segments

   3. Difficult to establish meaningful brand image across a broad set of categories/segments, spillover

2. Multibrand/house of brands

   1. Yum! brands owns Taco Bell and KFC

   2. Unique brand identity can targe diverse categories and limit possibility of spillover

   3. Substantial financial, management, time

   4. NOT the same as line extensions

3. Co-branding

   1. Sub brand: combines umbrella or parent brand with secondary brand (Jeep Wrangler)

   2. Brand endorsement (Apple Watch x Nike)

   3. Brand halo: collaborating with a good other brand makes u look good too

   4. Ingredient brand: component to other brands (Android, Dolby)

Line extensions

Vertical: hard to do upwards, downwards can tarnish brand image

Horizontal: extends into new product category (Yamaha instruments and audio equipment) can dilute brand. Cust decide where you go, not you

Name vs. House brands

Private labels! Kirkland Signature, Trader Joe’s

What does MIE stand for

Marketing information ecosystem

Market research, internal database, competetive marketing intelligence

Internal database

Collection of info from data services within company network

Can be in not ideal format for marketing, but accessed more quickly and cheaply

Competetive marketing intelligence

Monitoring and analysis of competition

Consulting firms can specialize

Two ways—companies should also see if their info is unprotected and conduct intelligence investigations of self

Market research steps

1. Gather objectives

   1. Research types

2. Develop research plan

   1. Primary and secondary data

   2. Research approaches

   3. Sampling plans

3. Implementing research

4. Interpreting findings

Primary vs. secondary data

Primary is collected for task at hand, secondary is from elsewhere

Research approches

Observational, ethnographic: observed behaviors

• not all things can be observed

• Febreeze

Surveys and questionaires

• questions can be worded to affect answers

• flexible and can obtain many kinds of info

• double barrelled

Interviews

Focus groups

• Groupthink, demand offset (act in ways they think they should)

• Small sample sizes

Experimental research, customer insight communities, digital sensors ,online targeting

What is difficult to assess?

Willingness to pay

Conjoint analysis forces choice using a range of attributes

Honesty policies

Anonyminity

Projection (do you do drugs)

4 types of research

1. Exporatory: gathers preliminary info that will help further define research problems and suggest hypothesis (qualitative)

2. Descriptive: market and consumer characteristics, such as market potnetial for product, or demographics of consumer who buys (quantitative)

3. Casual: test hypothesis about cause and effect relationships