MKT 300 [University of Michigan - Ross] my version

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 bc consumers use reviews, social media, and expert opinion

2. LOYALTY

- ppl used to be very brand loyal and rely on past experiences, now ppl have more access to low cost information and can easily start from scratch

= LESS brand loyalty

3. POSITTIONING

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

low size of wallet (cant afford it) vs low share of wallet (market share would rather spend on other stufff)

---

experience search and credence

---

what comes first sales of profits peaking

----

what happens in all of the stages (esp declining stage and advertsiing efforts

----

heavy buyers vs light buyers

----

frontal vs flank

flank - (usually smaller companies) not naming competitor , frontal is more direct

segmentation by ___

pyschographics, demographics, ___ theres more i forget

push vs pull

pull: bringing in new customers directly to costumers

push: incentives to distrution channel- not directly to customers but pushing product where customers will see

conjoint analysis importance

you can see how much customers value something by looking at the tradeoffs (like in econ)

Fundamental Entity (FE)

The perspective from which you will create marketing strategy

- relevant when there is a PARENT BRAND with sub brands

how to work around marketing myopia?

answer the following question

1) what needs are we trying to fulfill? companies can drop limiting names (ex: apple computer becomes apple, dominos pizza becomes dominos)

2) is there something we are uniquely good at? find a core competence

3)what is our brand architecture

4)what are our goals

core competence

Firm skills that competitors cannot easily match or imitate.

- leads to sustainable compettive advantage

- can provide access to multiple markets

- 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

caveats of core competencies

1) some strategic assets are a consequence of core competencies but some are not -- for example google bought patents from IBM (this has nothing to do w core competency but were aquired externally)

2) Some companies do not have core competence but also some who do have it do not realize it and have a hard time identifying it

Brand Architecture

The relationship between different brands within a company's portfolio

(this may not be relevant to some companies that only sell 1 product or have 1 location)

umbrella brand

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

ex: crest

advantages: once consumers trust the brand it can be extended in various ways such as product line extensions (ex: more doritos variations) and category extensions (moving across categories Harley Davidson motorcycles to perfume)

disadvantages: not flexible, damage from product failures can be especially high

product line extensions

ex: doritos: cool ranch, late night, spicy

same category - different products (ex: flavors)

category extensions

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

- much risker

ex: Swiss (watch, knife, perfume)

every category extension is a brand extension

why do we see so many brand extensions?

1) consumers can alleviate boredom but still stay in the same family

2) billboard effect

3)pricing breadth

4) lower cost to extend than create a new brand

- reduced promotion, packing, research costs

5) reduced risk of product failure

billboard effect

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

makes you think of the central brand

brand dillution

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

distinct branding

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

ex: consumer packaged goods at Kraft, Unilever,

advanatages: offers flexibility, can target multiple groups of people with conflicting priorities

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)

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

who are the people that take time to write reviews

self appointed brand managers or people who love the brand

purposes of goals

1) simplify decision making

2) performance benchmark

but when goals are overly ambitious they can stimulate dishonesty

attributes of beneficial goals

prioritized

quantified

includes a temporal benchmark

realistic

internally consistent

it is important to consider the context

1) stakeholders

2) external events (PESTEL)

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

hose who make up a small portion of people, but a large portion of sales

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

RFM analysis

R and F are more important than M

RFM

RECENCEY

- how recent their pruchase was

FREQUENCY

- how often they buy it

MONETARY

- how much do they spend

types of customer relationships (aka when do u stop being a customer)

contractual -- we observe the time when people become in active or their churn rate (Netflix, gym membership, subscription based)

non-contractual -- we do not observe when they become inactive (nike shoppers, product based)

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

retention requires two components: proactive vs reactive campaigns

reactive: straightforward, 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 (failing to identify customers who intend to leave) AND false positives (offering incentives to stay to customers who never had any intention of leaving)

-- this can disrupt habits

-- some customers would have continued / renewed on autopilot

-- The offer (e.g., upgrade at a steep discount) can prompt them to review and change their consumption habits

attitude

what consumers think and feel about your brand

acquisition challenge

overcoming existing brand loyalties

loyalty

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

typical assumption about loyalty

loyal customers are more valuable with time

true assumption about loyalty

loyal customers are more price sensitive and believe they deserve lower prices, also more knowledgeable about product offering and they get angry when only new customers get the perks

benefits of loyalty

can be a barrier to entry

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

source of price premiums (additional amount a customer will pay for a loyal brand versus a no loyalty one)

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

caveat to loyalty/disadvanatges

1) loyal consumers believe they deserve lower prices (angry when new people get perks)

2) they are more knowledgeable about products so they are more price sensitive

common categorization of a customer

1) profitability 2) longevity

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 (affordability) and share of wallet - we want to go after those with a share of wallet problem aka those who are buying from competitors

customer lifetime value (CLV)

present value of all future profits generated from a particular customer

function of : margins, annual retention rate, discount rate

heterogeneity

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

cohort level survival curve

-----

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

-- win greater share of wallet by consolidating purchases

loyalty progams CANNOT:

- build emotional attachment

-- costs can be forgone due to product giveaways

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

- difficult to reduce or restructure without disappointing customers

aquisition marketing can be done with

ads that build awareness

retention marketing can be done with

ads that focus less on a product

current state research

•Huge effort toward predicting churn (which customers are at the highest risk of leaving?)

•Still working on...

-Who to target (highest risk of churning or highest sensitivity to incentives to stay?)

-When to target, and with what incentives

-How to integrate retention programs with other marketing activities

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

brands within a category have two features: POP and POD

Point of Parity

attributes or benefits that ALL brands within a category offer

necessary but not sufficient enough for success

liscence to compete in the category

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

multibrand consumers

people outside of the category

to attack competitors you can?

1) steal share (from comp)

2) stimulate demand ( the public/grow the pie)

stimulating demand

stimulate heightened usage among current customers

ways to stimulate:

1) bring people into the category (when market expands category leader usually gains the most because of name recognition)

2) stimulate heightened usage among current consumers

3) when you do this you are likley to help the WHOLE industry but leaders will come out on top

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

what happens when non-leaders promote the category

1) lead competitor takes sale

how do you grow a category where everyone is buying?

stimulate increased usage, price promotions (can encourage them to stockpile if the usage is inflexible and the product is non-perishable) focus on multi-brand customers

non leaders can steal share by

1) frontal attack -- attack the fundamental aspects of a leader and say urs is better (pepsi tastes better than coke)

2) flank attack -- attack a leaders weak spots

new companies should ___ and established companies should ___

1) focus on acquisition

2) focus on retention

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

STP

Segmentation, Targeting, Positioning

segment

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

types of marketing

Mass Marketing (offering → customer 1,2,3,4,5)

Segment based Marketing (offering A → customer 1,2,3 + offering b → customer 4,5)

One-to-one Marketing (offering A → customer 1, offering B → customer 2, offering C → customer 3, etc.)

When should we segment?

When incremental value from customizing outweighs costs of developing separate offerings for each segment

when costs of customization are high -- companies develop large segments

when they are low offerings can be tailored

Why do we segment?

Increase efficiency, want to find the balance between size and conversion

target market size and probability of conversion are inversely related

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

Issue: sometimes we fall into stereotyping

Drawbacks: only some behaviors are strongly predicted by demographics, and potentially limits growth and marketers cannot grow a demographic group

behavioral

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

- BUT purhcases dont always reflet our typical attitudes

Issue: lots of instances where our purchases do not reflect our typical attitudes (gifts, using the company credit card, on a date)

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)

People also think more green than they behave and translation of beliefs to needs are not always straightforward

difficult to collect

ex: CAMBELL:

- passionate kitchen master, uninvolved quick fixer, familiar taste pleaser, diciplined health manager

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

- airport personalities

- very difficult to collect

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

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

prizm premier

PRIZM Premier

Geoclustering technique that takes into account location, education, affluence, family cycle, urbanization, race, ethnicity, and mobility

gray powers

older couples in downtain areas, white collar, professional

one of the niche segments

pink tax

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

-- however evidence suggests that price differences mainly come from product differentiation not a "tax"

successful segmentation either based on needs or behaviors should be

Identifiable (easily identify which customers fall into which category and measure)

Substantial (large enough to be profitable)

Accessible (should be reachable)

Stable (stable for long enough period of time to be marketed to)

Differentiable (similar needs that are different from other groups' needs)

Actionable (you have to actually be able to provide your product to these people {insurance, legal, geographical barriers})

what makes an UNattractive segment

Segment already contains several strong or aggressive competitors

Entry barriers are low and exit barriers are high

Many substitutes for the product

conjoint analysis is a method of discovering attitudinal segments

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

perceptual maps

tool used to depict graphically the positioning of competing products

+ type of chart

blue ocean strategy

xyz

red ocean strategy

xyz