BOSC1 Marketing Midterm

The Demographic Environment Changes

• Age structure

• Family structure

• Geographic shifts (migration)

• Increasing diversity (ethnic & racial)

The Economic Environment (Macro)

GDP affected by:

1. inflation (stable: 2%/year) → decreases demand

2. exchange rate → affordability of goods, unpredictability of price

3. globalization

4. unemployment

→ affect demand & supply of the hospitality industry & spending power of customers

The Technological Environment

• technological development influences products sold & the way consumers interact with them

• can threaten the company/ create new opportunities (e.g. self-service desks at CitizenM)

• personalize customer experience (e.g. Starbucks App)

political stances

• liberal (believes in preserving the freedom of individuals, e.g. Canada)

• conservative (liberal views while upholding conservative values, e.g. UK)

• democratic (vote of people, economic & social safety, high taxation, e.g. Switzerland)

• authoritarian (right to govern social & economic activities of its people, little to no social rights, e.g. Russia)

concerns for hospitality:

• stability

• human rights

Two Key Questions in Marketing

1. What consumers are we going to serve? (What is our target market?) 2. How are we going to serve them? (What is our value proposition?)

Key Marketing Objectives:

• Retain and grow existing customers

→ highest possible level of long-term satisfaction

• Attract new customers by offering superior value

In Business: Marketing is about building profitable customer relationships based on long-term value creation

The Marketing Process

1. Understand the marketplace and customer needs and wants

2. Design a customer-driven marketing strategy

3. Construct an integrated marketing program that delivers superior value

4. Build profitable relationships and create customer delight

5. Capture value from customers to create profits and customer equity

Needs pyramid (Maslow)

1. Physiological Needs (food, warmth, water, rest)

2. Safety Needs (safety & security)

3. Belongingness & Love (intimate relationships & friends)

4. Esteem Needs (prestige, feeling of accomplishment)

5. Self-actualization (achieving one's full potential, including creative activities)

→ if one is satisfied, you start searching for the next

→ if an ad portrays 4, it implies that 1-3 are already fulfilled

1. Understand the marketplace and customer needs and wants

NEEDS

= An inherent part of human nature = A sense of deprivation

e.g. "I'm hungry!"

WANTS

Need + Culture + Personality

= A solution to satisfy the need

e.g., "I feel like having sushi or pizza."

DEMAND

Wants + Purchasing Power (Resources available to satisfy the want e.g. money, time)

e.g. Student → pizza from the cafeteria

MARKET & MARKETING

= Efforts to understand customer needs, wants, and demand

→ Continuous research and analysis of information and data

e.g. How many students are on campus?

Marketing Management Orientations

= Marketing management design strategies that will engage target customers to build a profitable relationship with them

• orientation = the "philosophy" that guides these strategies

1. Production Concept

2. Product Concept

3. Selling Concept

4. Marketing Concept

5. Societal Marketing Concept

Production Concept

→ What can we make easily?

• Consumers favor products that are readily available and affordable

• Organizations should focus on improving production efficiency and distribution effectiveness

Product Concept

→ What can we make that's special?

• Consumers favor products that offer superior quality, performance, features, or innovation

• Organizations should focus on the continuous improvement of their products

The Risk: Marketing Myopia

• = becoming too focused on the product itself rather than on the benefits and experiences customers are actually seeking

• Focusing only on what current customers say they want today, instead of understanding their underlying needs and anticipating the future or unmet wants of both current and potential customers

Selling Concept

→ What can we convince people to buy?

• Consumers buy because the company actively promotes its products and pushes for sales

• The focus is on selling what the company has already produced, rather than identifying what customers actually want and developing products to meet those needs

Marketing Concept

→ What can we make that satisfies a need?

• The organization focuses on understanding the needs and wants of its target market

• It becomes profitable by meeting those needs and wants better than its competitors

• Challenge: understanding customer needs & sometimes even better than customers understand themselves

Societal Marketing Concept

→ What can we make that will make people like us?

Business decisions should take into account:

• Consumers (want satisfaction)

• Company (profit)

• Society (long-term well-being/ human welfare)

Building Customer Relationships

= Building and maintaining profitable customer relationships by delivering greater value and satisfaction than competitors

Customer loyalty and retention programs:

• Frequency-based programs: reward customers who purchase frequently/ spend more

• Membership clubs: offer exclusive benefits & build a sense of community

customer profitability analysis to:

• Identify customers who generate little or no value for the company

• Focus their efforts on the most valuable customers

Managing Customer Equity

• Strangers: - profitability, - loyalty

• Barnacles: - profitability, + loyalty

• Butterflies: + profitability, - loyalty

• True Friend: + profitability, + loyalty

The Consumer Behavior Model

1a) Marketing Stimuli

• Product

• Price

• Place (= distribution → where people can find the product (e.g. booking))

• Promotion (e.g. social media)

1b) Other Stimuli

• Economic, Technological, Political, Social & Cultural

• no influence, understand the facts

2. Buyer's black box

• Buyer's characteristics

• Buyer's decision process

3. Buyer responses

• Product choice

• Brand choice

• Seller choice

• Purchase timing

• Purchase amount

Buyer's Characteristics

1. Cultural Factors

2. Social factors

3. Personal factors

4. Psychological factors

Cultural Factors

e.g. Kit Kat

1) Culture

= the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions

2) Subculture:

= groups of people within a culture with shared value systems based on common life experiences and situations

3) Social Class

= society's relatively permanent and ordered divisions whose members share similar values, interests, and behaviors

• Measured as a combination of occupation, income, education, wealth, ...

Social factors

1. Membership group:

• has a direct influence on the consumer

Reference group:

• form a comparison in forming attitudes or behaviors

• identify & reach opinion leaders within the reference groups they target

2. Family

• Strong influence on buying behavior (also children)

• Changing roles between men and women (Heineken & cocktails, Sydney Sweeney, ban on sexist ads in CH)

3. Role:

• activities that a person is supposed to do given his/her position in a group

Status:

• esteem attributed by society to a certain role

Personal factors

1. Age and lifecycle

2. Occupation & Economic Situation = Macro-Environment

3. Lifestyle

• Activities, hobbies and opinions

• Personal values (Kahle's 'list of values', 1983)

• same social class/group: different lifestyles

• e.g. VALS model

4. Personality

• e.g. Big Five

• a brand's personality (sincerity, excitement, competency, sophistication, toughness)

Psychological factors

1. Motivation

• = psychological needs (conscious or subconscious)

• Based on needs

2. Perception

• = process by which we select, organize and interpret information and assign it meaning

• ‘selective' or 'biased' (e.g., familiarity, expertise, loyalty, stereotypes)

• perception is more important than reality

• Selective attention

• Selective distortion (change facts)

• Selective retention (hide facts)

3. Learning

• A link is created then strengthened depending on the positive/ negative effects of behavior.

• positive/ negative reinforcement (e.g. Netflix, Seatbelt)

4. Beliefs

• = what a person thinks about something based on knowledge, opinion or faith

Attitudes

• = relatively consistent evaluations and feelings that someone has towards something or an idea

The buyer's decision-making process

1. Need recognition

→ need sparked by internal/ external stimulus

2. Information search

• Own experience with product/service

• Personal sources (e.g., family, friends)

• Commercial sources (e.g., ads, sellers)

• Public sources (e.g., online reviews, articles)

3. Evaluation of alternatives

• Individual characteristics of buyer & situation

• Between intention and purchase can change: Attitudes of the buyer/ unexpected event

4. Purchase decision

5. Post-purchase behavior

• Consumers' level of satisfaction depends on the relationship between expectations and their perception of product performance

• Cognitive dissonance (=the mental discomfort you feel when your beliefs do not match your actions or when you hold two contradictory ideas at the same time)

Corporate strategic planning: 4 steps

Firm level:

1. Corporate mission (market-oriented)

2. Strategic objectives

3. Portfolio of activities (which activities to use, SBUs)

At the level of: strategic business activities, products, markets

4. Marketing Planning (use the activities)

→ The overall corporate strategy will guide the marketing strategy and how it is implemented

Corporate mission

• purpose of a firm includes what it wishes to accomplish in its business environment

• corporate mission states why the firm exists

• the best mission statements are driven by a vision (=a dream that almost seems unattainable)

Define & Create a corporate mission statement

mission answers:

• What is our primary activity?

• Who are our clients/customers?

• What do they value? (= value-proposition)

• What should our primary activity be? (becomes important once you grow)

• marketing perspective (rather than ‘product’ perspective)

• brief summary of what the firm hopes to accomplish in its given environment

• realistic, specific to the firm & geared towards creating long-term value

• market-oriented & not focused on a product or service

Company’s Objectives &Goals

• mission translated into realistic goals for each management level

• goals achieved via marketing & commercial strategies

Defining a Strategic Business Unit (SBU)

→ included in the portfolio of business activities

e.g.:

• A division of the firm(e.g., Nutrition)

• Product category within a division (e.g., Cereals)

• Just a brand/product (e.g.: KitKat)

→ independent

• the company compares itself through the SBUs rather than as a whole group

• each SBU has its own strategic plan (attractivity, competitivity, marketing plan)

• a separate entity to some extent: they have their own marketing, HR, financing,... departments

Analysis of current business activities

• to decide for which SBUs it will reduce, maintain, or increase investment

• set development strategies of activities

• BCG matrix for existing

• ANSOFF matrix to develop growth strategies for new products

BCG matrix

(you put the existing SBUs on the matrix)

1. Cash Cows

• Relative Market Share: High (Leader)

• Growth Rate: Low (Stagnation) = the best because no competition is entering the market anymore & you are the leader

• no need to invest

2. Stars

• Relative Market Share: High (Leader)

• Growth Rate: High (Growth)

3. Question Marks

• Relative Market Share: Low (Follower)

• Growth Rate: High (Growth)

4. Dogs

• Relative Market Share: Low (Follower)

• Growth Rate: Low (Stagnation)

• the losers, you are a follower in a market that is not developing anymore

The ANSOFF matrix

(to develop new activities/ SBUs)

Market Penetration (Ansoff)

= Existing Products & Existing Markets

• the least risky

• Sell more to current customers

• Sell to customers of direct competitors

• Sell to potential customers who don’t currently buy our product but who have a need we could meet

Product development (Ansoff)

= New Products & Existing Markets

• understanding the needs of existing markets

• products and services that supplement the main product with a view to improving the customer experience

• Other products to strengthen the relationship with the customer

• e.g.: Nespresso started with capsules and moved on to coffee machines

Market Development (Ansoff)

= New Markets, Existing Products

• taking existing products and finding new markets

• Opening new markets driven, in particular, by price policies (e.g.: if you are a student, you pay less; airlines: economy/ business

• New distribution channels or new marketing channels

• Launch in new geographic markets either domestically or abroad

Diversification (Ansoff)

= New Markets, New Products

• developing new products for new markets

• into similar markets

• into different markets but with current resources/capacities

• into different markets that require different and new resources and skills

• e.g.: Virgin group

Marketing’s key role in the company

Marketing = a means of communicating:

• sets the firm’s philosophy for the entire organization

→ all entities are aligned with the main objective: building long-standing relationships with consumers

1. Outside the firm:

• Value creation starts with the consumer

2. Within the firm:

• Internal marketing

→ in: HR • = "Internal Branding"

What is the marketing environment?

The marketing environment includes the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers

• Micro-environment:

→ consists of the actors close to the company that affect its ability to serve its customers: the company, suppliers, marketing intermediaries, customer markets, competitors, and publics

• Macro-environment:

→ consists of the larger societal forces that affect the microenvironment: demographic, economic, natural, technological, political, and cultural forces Individuals (people or companies) have no influence on Macroenvironment, but can somewhat influence Microenvironment

micro-environment analysis: company

• R&D (-> new products, <- marketing needs)

• Production (-> production capacity & lead times, <- quantities)

• HR (->people & organization structure, <- training & development)

• Finance (-> constraints, <- marketing forecasts & expenses)

→ Cooperate to develop, produce, sell, deliver and support the product/service

micro-environment analysis: suppliers

• Supply resources needed to create goods & services

• Partnership to create value for the consumer

• Suppliers can seriously affect marketing plans with their own strategic initiatives and stability → oversight of suppliers is crucial (e.g., LVMH supplier code of conduct)

micro-environment analysis: intermediaries

• help a company contact its customers

• Resellers (wholesalers, retailers)

• Logistics firms

• Marketing services (PR agencies, marketing research)

• Financial intermediaries (banks, insurance companies, e.g. TWINT)

micro-environment analysis: customers

• often most important part of micro-environment

• six types of markets (with Nespresso example):

1. Business to Consumer (B-to-C): Consumers

2. Business to Business (B-to-B): Offices

3. Resale market (speculation): Distributors

4. Public markets (linked to the state, e.g. school): Administrations, Universities, Hospitals

5. Domestic market (in 1 country): Swiss market

6. International markets: Over 80 countries

Influence groups

= Groups that have an interest or potential/current impact on the company’s ability to reach its goals

• Financial partners (investors, shareholders)

• Medias (TV, radios, newspapers, social media)

• The State (regulations such as the GDPR)

• Consumer protection groups

• Local NGOs, charities, non-profits, etc.

• The general public (social network groups)

• Members of the company (employees)

Competitor analysis

to succeed, a company must keep an eye on its competitive position to offer a value proposition that is better than that of its competitors

1. Define the industry & the current competition

2. Understand & Evaluate the Competition

3. Identify the competitive strategy

direct vs indirect competition

• Direct competitors:

→ includes all firms that sell a similar product or service

• Indirect competitors:

→ include companies that offer a product/service that is different but meets the same need and is considered by consumers to be a credible alternative

quantitative competition analysis

use: Measurable Numbers & Statistics, KPIs, Costs, Revenues, ROI, Market share, Quantity

ANALYSIS

Objective: Measure our performance (vs. our competitors or benchmark) in an objective manner

Performance indicators in hospitality:

• Occupancy rate

• ADR (Average daily Rate) = Average price for a hotel room

• RevPar= Revenue per Available Room

(Where available:)

• Customer satisfaction rate

• Financial results

qualitative competition analysis

use: (=Observable but unquantifiable): Words, Behaviors, Emotions, Culture, Esthetics, Quality

ANALYSIS

Objective: understand the strategies of competitors, identify similarities and differences, opportunities, and investment needs

Methods:

• Ask employees, competitors’ customers, industry experts (interviews, focus groups)

• Observe by monitoring social networks, organizing participative observations

• Experimenter: mystery shopping

choosing a competitive strategy

Porter’s Generic Strategies:

ways to create a competitive advantage:

• Cost leader

• Differentiation

e.g.:

1. Ibis

2. moxy

3. EasyJet

4. Aman

Blue Ocean vs. Red Ocean Strategy

RED

• compete in existing market space

• beat the competition

• exploit existing demand

• make the value-cost trade-off

• align the whole system of a firm's activities with its strategic choice of different or low cost

BLUE

• create uncontested market space

• make the competition irrelevant

• create & capture new demand

• break the value-cost trade-off

• align the whole system of a firm's activities in pursuit of differentiation & low cost

• e.g. Citizen M, Cirque du Soleil