MARK 301: Midterm

What are the 4 p’s?

Product

Promotion

Price

Place

What is a need?

Needs occur when a person feels deprived of basic necessities.

Physical – I’m hungry Social – I’m lonely Individual – I feel good about myself

What are wants?

Wants are needs shaped by culture and individual personality u Jeans vs. a sari u Gelato vs. ice cream u Espresso vs. green tea

When do needs and wants become demands?

When they are backed by money

Segmentation

Segmentation divides the market into groups of customers with varying needs and wants

Targeting

Targeting selects the right segment to nurture

Outperformed

If performance is higher than satisfaction is high you outperformed

Expectation < Performance

Underperform

If performance is lower than expectations, satisfaction is low you underperformed

expectation > performance

Production philosphy

Mass production

dont care about consumers

more rare now

identical products

Product philosophy

All about innovation and adding more details

regardless if you want them

sales philosphy

Salesmen - very expensive but far more persuasive

Marketing philosphy

Up to this point customer not in equation. Company start to talk to customers

Societal marketing philosophy

where we are now. Doing things good for society

Marketing environmetn

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

Macroenvironment

Broad forces in the environment that affect ALL companies

Opportunities/Threats

Mircoenvironment

Actors close to the company that affect its ability to serve its customers

UNIQUE to the company

Strengths/Weaknesses

A system of actors in the environment

Value delivery network: marketers can’t do it alone

Microenvironment: Company

Company’s internal environment

• Areas inside a company

  • Departments?

  • Creators of the products in the “kitchens” and sales ambassadors

• Affects marketing’s planning strategies

  • Company culture, adherence to mission statement

  • All departments must “think consumer” and work together to provide superior customer value and satisfaction

Microenviroment: suppliers

Provide resources needed to produce goods and services

Microenvironemtn: Intermediaries

Help the company to promote, sell and distribute its goods to final buyers

• Resellers

• Physical distribution firms

• Marketing services agencies

• Financial intermediaries

Microenvironment: Customers

Three types of customers: final, business, and government

Lush example - Lush customers?

Final consumers - targets young women (18-45) in urban areas interested in skin care and who care about social responsibility

Microenvironment: Competition

• Identify competitors

• Assess competitors’

  • Objectives and strategies

  • Strengths and weaknesses

  • Reaction patterns

• Select which competitors to:

  • Attack

  • Avoid

• Know your competitive advantage (distinctive competency)

Identify competitors: Can define at many levels. ie

• similar products and services at similar prices

  • LUSH vs The Body Shop

• same product class - industry view

  • LUSH vs Bath and Body Works

• same need (want) satisfied - market view

  • LUSH vs Beauty retailers

Microenvironment: Public/Community

Any group of people that has an actual or potential interest in, or impact on, an organization’s ability to achieve its objectives

Financial - banks, shareholders

Media - news organizations

Gov’t - Municipal, provincal and federal

Citizen - Enivornmental or other groups

Local - neighbourhood residents, community organizations

General - general public whether customers or not

Internal - workers, volunteers, board

Demographic Environment

Demographics: study of human population in terms of

Size Location Density Age Gender Race Occupation

Geographic shifts u Rural to urban u Between provinces u

Generational differences

Aging

Economic Environment: Income trends

Discretionary income- what’s left after necessities

Macroeconomic Trends

Inflation, interest rates, unemployment

Business cycle (growth, recession)

Index of consumer sentiment

International trade: Economics in other countries, Exchange rates

Natural Environment

Physical environment (weather and natural disasters) and natural resources

Firms’ consumption of resources affects their (and our) health and future: Shortages, Energy costs / alternative sources, Pollution-Emissions / Packaging, Government Intervention- Clean Air Act / Acid Rain, Pay Now… or Pay Later

Changes to product offerings, markets

Technological Environment

Application of knowledge in science, inventions and innovations to marketing, which can lead to New products

New market opportunities

New processes

• Antibiotics, cars, TV, credit cards, laptops, Internet…

Every new tech hurts an old one - don’t get left behind

Political legal environment

Political environment:

• Nationalism

• Free trade

• Consumerism

• Environmentalism.

Legal environment

• CRTC, Industry Canada, Competition Bureau

• Consumer protection/privacy

• Provincial and local regulations/laws (cigarettes)

Cutural Environment

Institutions and other factors that impact society’s basic values, perceptions, preferences and behaviours

While core values are highly persistent and resistant to change, secondary beliefs and values evolve View of

• yourself e.g., independent vs. interdependent, self-expression

• others e.g., how much time is spent with others and how the time is used

• organizations e.g., confidence and loyalty in business

• society e.g., national pride (I am Canadian)

• nature e.g., natural and organic products

• Universe (religion) e.g., attendance at church, temples, synagogues

Types of buyers

3 types of customers:

final buyers/consumers

Business buyers who buy for the use of the company

Gov’t buyers who buy on behalf of public services.

Consumer behviour

The buying behaviour of final consumers—individuals and households who buy goods and services for personal consumption.

We need to be able to understand consumer behaviour before we can (hope to) influence it

Purchase decision making process

1. Need recognition

2. Information search

3. Evaluation of alternatives

4. Purchase decision

5. Post-purchase evaluation

Stage 1: Need recognition

Individual becomes aware of a difference between a desired state and an actual condition. u Triggers

• Consumer level

• Marketer level

Reference group change

Inventory - run out of a product etc.

Variety seeking/boredom

dissatisfied

Family life cycle

Needs change as life changes

Independent/bachelor → Young marrieds/partners → Full nest; Babies through adolescents → Empty nest; Children move out, Retirement → Sole survivor

How do marketers influence need recognition

Educate

Exaggerate problem

Remind

Stage 2: Information search

Sources of information

personal - family, friends, neighbours (powerful source to evaulate products)

Experiential - handling and using the product (powerful source to evaluate products)

Comercial - advertising, sales people (Firm controlled: informative but less influential)

Public - Gov’t agencies, consumer groups (independent: informative, influential)

Consideration set

The products or brands that consumers evaluate when purchasing

How do you get into the consideration set?

Exposure, attention and learning

Stage 3: Evaluation of alternatives

How do consumers choose from within the consideration set?

Choice and ranking depend on

• The consumer

• The product or type of purchase

Stage 4: Purchase decision

Which one do you pick?

• The highest ranked one!

When does your purchase intention NOT turn into your actual purchase decision?

• Not easy to justify and get others’ approval }

• An unexpected situational event occurs

  • Price hikes

  • Negative WOM (word of mouth)

  • Out of stock

Stage 5: Postpurchase behaviour

Consumer satisfaction is a function of expectations and perceived performance

• Performance < Expectations → Dissatisfaction

• Performance = Expectations → Satisfaction

• Performance > Expectations → Delight

Satisfaction will determine postpurchase behaviour

• Complaining, WOM, repeat purchasing

High involvement purchases

Cognitive dissonance: Buyer discomfort caused by post-purchase conflict

• Lots of choice

• When consumer receives information which contradicts existing beliefs

• Did I make the right purchase?

Situational influences

• Purchase task

• Social surroundings

• Physical surroundings

• Temporal effects

• Antecedent states

Psychological Influence

• Motivation

• Attention/Exposure

• Perception

• Learning

• Attitudes

A need that is sufficiently pressing to direct the person to seek its satisfaction

This tells us WHY customers buy what they do

Maslow’s Hierarchy

Maslow Heirarchy

Attention vs Exposure

How many ads do you see in a day? exposure

How many ads do you remember seeing? attention

Exposure

Contact with a stimulus

How do marketers gain exposure?

• Advertisements, point of purchase displays, shelf space, product placements, buzz marketing

Why do marketers care about exposure without attention?

• Exposure leads to familiarity and recognition

The more often we see something, the more we like it

• Mere exposure

Attention

Attention: devoting cognitive resources to a stimulus

Attention is

1. Selective - decide what to focus on

2. Dividable - divided, multi task

3. Limited- we can only do so much at once

Getting attention: novelty, humor/thinking, zeigarnik effect,

Psychological influences: Perception

Perception: the process by which people select, organize, and interpret information to form a meaningful picture of the world

Perception is constructive

• people interpret stimuli on the fly

Interpretation of a stimulus is affected by…

• Hard-wired features of brain

• Context (what else is in the environment)

• Individual differences (culture, experiences)

• Expectations (people see what they expect to see)

Influencing Perception: expectations

Branding

• McDonalds, Beer

Aspects of the product itself

• Labelling

• Colour

Aspects of the product

• Labelling/language use

  • Cigarettes: light, smooth, filtered

  • Beef: 95% lean versus 5% fat

  • Vitaminwater: “restore,” immune functioning

• Product & package colours

  • 7UP: green v. yellow

  • Pudding: chocolate v. vanilla

Learning

Changes in an individual's behaviour arising from experience

• Learn from observation, experience or thinking

Learning in marketing

• How to satisfy needs in particular ways

• What brands represent

• What products and services are available

• How to use products and services.

Not all learning is “knowledge-based”

• Behavioural learning

Pavlov’s classical conditioning

• Associating or transferring responses from one stimulus to another after repeated pairing

• How do we use this in marketing?

Psycological influences: values, beliefs, attitudes

Values

• deeply held beliefs

  • resistant to external influences, but may change over time

Belief

• a descriptive thought about an object

  • based on personal experience, advertising, and word of mouth

  • does not necessarily involve liking or disliking

Attitude

• a consistent evaluation of a target object

  • has action implications

  • shaped by beliefs and values

Socio-cultural: culture

Culture- Set of basic values, perceptions, wants and behaviours learned from family and important institutions. Core values that remain stable or change slowly

Socio-cultural: subculture

Subculture - A group of people with shared value systems based on common life experiences and situations

• Basis for subculture -- ethnicity, religion, age, lifestyle, geography…

Culture Matters

Similarities

• Across cultures, there are some universal emotions and values

Differences

• Language

• Tradition, norms, taboos

Culture differences = mistakes

Packaging and Product

Product names

• The Matador

• Bensi

Slogans

• Turn it Loose

• Every Car Has a High Quality Body

• Finger Lickin Good

• Nothing sucks like an Electrolux

• Got Milk?

Socio-cultural: groups

We are often impacted by the views, opinions, or behaviors of others (personal, groups, families)

Properties of groups

• Norms: Values, attitudes, and behaviours that the group deems appropriate for members

• Status: Relative position within a group

• Roles: Behaviour the group expects of individuals who hold specific positions within the group

Reference groups

A group that you do not belong to that serves as a point of comparison in forming attitudes and making choices.

Socio-cultural - personal influence

Opinion leadership

Word-of-Mouth

• Consumer generated: Stories about consumption experiences, voluntarily shared between consumers

One of the most powerful influences on consumer behaviour… why?

Organtional buyers vs final consumers

Similarities

Differences

• Market structure & Demand

  • Fewer but larger buyers, geographically concentrated

  • Derived demand, based on purchases by consumers

• Nature of the buying unit

  • More people are involved and influenced by the decisions

  • Multiple rational decision-makers

• The decision process

  • More complex, formalized, dependent

  • More involvement, higher risk

Implications for marketing

Few Buyers/Sellers

• Direct selling is important

• Physical distribution is very important

Rational buyers

• Advertising and other promotions are technical

Price is often negotiated, together with other attributes and service

Market segementation

Dividing the total market into smaller, distinct, relatively homogeneous groups who respond similarly to marketing strategies

• No single marketing mix can satisfy everyone

• Use separate marketing mixes for different segments

Embracing diversity = maximizing happiness (segmentation)

UNdifferentiated (mass) marketing

Focus is on common needs of consumers

Differentiated (segmented) marketing

Firm targets several segments, designs separate offers for each

Concentrated (niche) marketing

Firm acquires a large share of one segment

Micro (individualized) marketing

Customizing offer to the tastes of specific individuals or locations

Segmentation variables

demographic

geogrpahic

psychographic

behavioural/product usage

Demographic segmentation

Dividing consumer groups according to PERSONAL CHARACTERISTICS such as

gender, age, family size, family life cycle, income, occupation, education, religion, race, and gerneation

geographic segmentation

Dividing market into groups based on LOCATION or ENVIRONMENT

• Country, region, province, city, neighbourhood, density

• Climate

psychographic segmentation

Shared attitudes and behaviours, personality, lifestyles, hobbies, interests

Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities

behavioural segmentation

Dividing a consumer population into homogeneous groups based on their knowledge, attitude, use, or respond to a PRODUCT

• Purchase occasion

• Benefits people seek when they buy

• User status

• Usage rates

• Loyalty

The segmentation process

after you segment the market

1. develop a profile for each segment

2. Evaluate each segment

   size and growth rate

   attractiveness

   company objectives and resources

3. select specific market segments = target markets

Differentiation and positioning

After segmenting the market and picking a target…

1. Decide what differentiates you from competition and makes you unique

2. Choose one or some of these differences to focus on

Options for differentiation

Versus competitors

• Away from or against

Product differentiation

• Attributes

  • Safety, performance, innovation

• Product class

  • Margarine vs. butter

  • Frozen pizza vs. Delissio/delivery

• Usage occasion

  • Morning or evening use

• Product users

  • Baby shampoo

Branding/benefits offered

• Associate different brands with different benefits

  • Gain vs. Tide

Can also differentiate on:

• Services

• Channels

• People

Differentiation: competition

Relate to existing mental structures in the consumer’s mind

• Position the product against something consumers already know – but away from the leader, to differentiate

  • 7 Up – the Uncola u Avis – we are No. 2… we try harder

  • Tylenol – for the millions who can’t have Aspirin

  • Jamaica – the Hawaii of the Caribbean

Differentiation: product attributes

Price

quality

Differentiation: benefits

Procter and Gamble

• Tide – Tide’s in, dirt’s out (all purpose dirt remover)

• Cheer – outstanding cleaning and “colour protection”

• Gain – “clean, fresh smelling clothes”

• Ivory Snow – the mild, gentle soap for baby diapers and clothes

• Era Max – has “built-in stain removers”

Differentiation and positioning

After segmenting the market and picking a target…

1. Decide what differentiates you from competition and makes you unique

2. Choose one or some of these differences to focus on

3. Decide how to position your product

• POSITIONING: The way the product is defined by consumers on important attributes; the place the product occupies in consumers’ minds relative to competing products

Perceptual map (positioning map)

Graph showing consumers’ current perceptions of competing products

• Objective: to understand how your product is positioned vs. competing products in the minds of consumers

Perceptual maps are comprised of

Two axes that list product attributes

Your products and competitors’ products are graphed in relation to these attributes, along with consumers’ ideal products

Perpetual map: attributes

Use focus groups and managers’ judgments to determine attributes

Put most important dimension to consumers on Xaxis and second most important on Y-axis.

Plot consumers’ preferences and perceptions

What do perceptual maps tell us

1. What consumers’ current reality is

2. Who is your competition

3. What segments are being served

4. If you modified a product (or its perception) who you would take share from

5. If you developed a new product, what segment to target and what consumers do not want

Positioning strategies and perceptual maps

You can use perceptual maps to

• Move a brand closer to ideal point of a target segment

• Introduce a new brand near the target segment’s ideal point

• Shift ideal point by introducing new attributes or by changing the importance of other attributes

• Reposition: change the place an offering occupies in a consumer’s mind relative to competitive offerings

Repositioning

Change the position of product in consumers’ minds relative to the positions of competing products

Positioning

The way the product is defined by consumers on important attributes; the place the product occupies in consumers’ minds relative to competing products

What axis is the most important attribute

X axis

Product

Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need

What are the product levels

core customer value - core benefit: need satisfied

Actual product - features, design, quality

Augmented product - additional things that add value ie warranty, delivery and credit, product support

Feature

What a product is

Benefits

What a product does

Characteristics of a service

Intangible - cannot be seen, tasted, felt or smelled before purchasing

Inseparable - consumed when it is provided and cannot be separated from the provider

Variable - quality depends on who provides

Perishable - Cannot be store or resold

Convenience product

Frequent and/or immediate purchases

Types of convenience products

Impulse - purchases spur of the moment

Staples - Consumers constantly replenish to maintain inventory

emergency - bought in response to unexpected needs

Shopping products

More involved decision-making, more expensive, less frequently purchased

Homogeneous

similar quality, but differ in other respects - features, etc. Once features chosen, compare on price.

Heterogenous

need to meet certain consumer criteria – size, colour, design

Specialty products

Unique characteristics that buyer values

Buyer makes a special effort to obtain

Unsought goods

Goods and services marketed to consumers who may not yet recognize need (new) or do not wish to recognize need (regular)

Product attributes

Quality: product’s ability to perform its functions

Features: differentiate your product

Design: form and function

Packagining

Packages

• Protect against damage, spoilage

• Lower distribution costs

• Assist in marketing the product

Packaging can enhance quality

• Easier to use

• Re-usable

• Safety

Labelling

Identifies product

Describes product

Promotes product

Labelling requirements - Consumer Packaging and Labelling Act

• Unit pricing

• Open dating

• Nutrition Facts