USC BUAD 307 MIDTERM- LARS PERNER

Marketing

Activity, set of institutions, and processes for creating, capturing, communicating, delivering, and exchanging value for customers, clients, partners, and society at large

The 4 P's

4 P's: Product, Price, Place, Promotion

Types of Organizations that use marketing

Businesses, Government Units, Non-Profit Organizations, Cause Related Organizations

Scope of Marketing

The "Scarf of the Tiger"

-Market research showed that customers responded more favorably when Tony the Tiger wore a scarf

- red scarf: more human

- could be numbers game, try several tools for Tony and the scarf numerically showed high favoritism

Customer Benefits and Delivering Value

Customer benefit- Is the customer benefit greater than the sacrifice (Cost)?

Yes- Potential Good Value

No- Poor Value

Imitating successful competitors is usually

NOT an effective strategy

Which is more expensive-

Selling online or selling through conventional retailers?

selling things online

Products with ____ and ___ tend to be better suited for online sale

High value to bulk ratio and High absolute (dollar) margins

Aside from a great product you need ____ and ____ to be successful

-Awareness by customers

-Access to Distribution

Value Engineering

(4 components)

Creating a product that has value in the customers point of view.

(Form, place, time and possession Utility)

Form Utility -> Giving the product in the form that the customer would want it

Place Utility -> Giving the product in the place that the customer would want it

Time Utility -> Giving the product in the time the customer would want want it

Possession Utility -> Having the right assortment

Value

-When what you get is more than what you give

-Value reflects the relationship of benefits to costs.

Value Co-Creation:

Customers act as collaborators with a manufacturer or retailer to create a product or service.

Relationship orientation:

A method of building a relationship with customers on the philosophy that buyers and sellers should develop a long term relationship.

Customer relationship management (CRM) Strategy:

A process used to build loyalty with the firm's most valued customers using strategies, programs, and systems

Guerrilla marketing

advertisement strategy designed for businesses to promote their products/ services in unconventional way with little budget to spend. involves high energy and imagination focusing on grasping the attention of the public in more personal and memorable level.

Value =

Benefits (convenience, reliability, durability, etc.) received / sacrifices (money, time, risk) made

Strategy- purpose

To achieve desired objectives (profit, market share) based on available resources and are subject to choices made

Strategy objectives

Obtain a sustainable competitive advantage over fellow competitors

Four overarching strategies to develop sustainable competitive advantages

- Consumer excellence (loyal customers and excellent customer service)

- Operational excellence (efficient operations and excellent supply chain and human resource management)

- Product excellence (Products with high perceived value in effective branding and positioning)

- location excellence

Core competencies

Things a company does extremely well, which sometimes give it an advantage over its competition

SWOT analysis

Strengths and weaknesses (internal to firm)

Opportunities and threats (external to firm)

- decide if where to consecrate resources, taking advantage of strengths and opportunities, addressing weaknesses and threats, using strengths and opportunities to compensate for weaknesses and threats

Market Balance

Different firms should attempt to offer different forms of value, appealing to different customer segments - otherwise, competition is likely to degenerate into price competition

Sustainable competitive advantage

Something the firm can persistently do better than its competitors

Market development

Market segmentation

Dividing the market into groups of customers with different wants, needs, or characteristics

Growth strategies (4)

- Market penetration (employs existing marketing mix, focuses firm's efforts on existing customers)

- Product development (offers new product or service to a firm's current target market)

- Market development (employs existing marketing offering to reach new market segments, domestic or international)

- Diversification (New product to a market segment currently not served)

Model for identifying ethical concerns

Step 1: Identify Issues

Step 2: Gather info and identify stakeholders

Step 3: Brainstorm and evaluate alternatives

Step 4: Choose a course of action

General Ethical Concerns:

Deception/manipulation, product dangers, Preying on personal Insecurities

Ethical Concerns: Deception and Manipulation

For something to be misleading or deceptive, it does not have to involve outright lies. Statements can be true and still misleading.

Ethical Concerns: Product Dangers

Products that can potentially cause consumers harm tend to be problematic. In some cases, there may be some danger in using a product that is unavoidable. In such cases, the benefits may outweigh the potential danger, but products that may cause serious injury or harm without sufficient redeeming benefit are more likely to be suspect.

Ethical Concerns: Preying on Personal Insecurities

Advertisements may cause consumers to focus on perceived personal limitations, causing the consumer to buy products that he or she may not otherwise have bought.

"Win-win" opportunities for firms and non-profit organizations

In the cases in which its profitable for companies to do good deeds, it enhances a firm's brand reputation and gain favorably public opinion for contributing to NPOs.

Industry- Charity Partnerships

potential for a triple "win-win-win" exists when a sponsor pays for all the expenses for a benefit concert tour.

-A singer donates his or performance. A non-profit organization benefits from the revenue. The

sponsor benefits both from the favorable publicity and the reality that the only place you can

buy a ticket is on its web site, thus generating traffic and interest. An aging performer whose

fans are now in their prime earning years may like to be able to fill large concert venues again

and may have a book or a role in a movie to promote.

The Market Environment

factors that, for the most

part, are beyond the control of the company (consists of the company's capabilities, competitors, and corporate partners)

Broad Implications of againg populations in the U.S., Japan, and China

-Japan: Aging population where older generations will outnumber the younger generation

-Low birth rate/ longer life expectancy= pressure on welfare programs, debts for financing, and a country with a large number of retirees needs workers, usually resolved by an influx of immigrants.

U.S.: Generations becoming more evened out; by 2065, age 65+ will consist of 20% of the population

China: Population also aging out; predicted to have more older females than males

Case of Hostess

3 factors contributing to Hostess going bankrupt:

"Tripple wammy"

-Cost of ingredients had gone up due to increase in cost of petroleum

-Consolidation in supermarket industry put downward pressure on wholesale prices

-Recession switched consumer preferences (national to store brands)

Case of Boeing

- Political changes affect opportunities to export to different countries

- Uncertainty in long-term fuel prices causes questionability of product strategy

Some planes work better under low fuel prices, some work better under high prices

- Fluctuating global economy can dramatically affect demand for new aircraft with very short notice

Considerations in determining suitability for products and services for sale online

-Value-to-bulk ratio

-Absolute (dollar) margin

-Ability of consumer to evaluate quality and fit through online description

-Convenience to the customer and willingness to pay for this convenience

-Customer sensitivity to delayed delivery

-Extent of customization needed

-Geographical dispersal of consumers

-Extent of inventory value decline over time

Two types of Online Sellers

-Manufactures: selling own product directly to customers (Dell, Geico)

-Online Retailers: from multi combining Merchandise ple Manufacturers (Amazon, Staples)

Who has higher costs, online merchants or conventional retailers?

online merchants; much of the work is done by the merchant and not the customer

Who are Intermediaries and what happens if the are eliminated?

add value through specialization of labor and consolidation of task. If they are elevated, it usually results in higher costs.

Service level strategy:

-Brick-and-mortar and online retailers offer various degrees of service. To assess cost effectiveness of each approach, the comparison should be between vendors (online and offline) with comparable levels of service.

-Walmart: low cost but limited service

-Best Buy: high levels of service (Blue Shirt employees)

-Retail online service (easier returns)

Sources of profitability for Amazon.com

-amazon= most efficient and well run major online merchant

- estimated to loose 5 to 6 billion a year

Sources of Profitability:

-electronic content (books, movies)

-website hosting (netflix)

-used merchandise shipped from seller to buyer (no labor for amazon)

-services provided to smaller online retailers (sales tax assessment)

Value to Bulk

value= market price

bulk= anything making it difficult/costly to ship (large volume, fragile)

Absolute Margin

dollar amount

ex: $5 book, sell for 10= 100% markup, 50% Gross margin((10-5)/10)= 50%, Absolute margin= $5.00

Firm level factors affecting online sales potential

-Firm reputation/credibility

-Volumes sufficient for

-Economies of scale in automation

Volume discounts on shipping

-Ability to sell multiple items together

-Synergy with traditional retail store operations ("bricks-and-clicks")

-Location for minimization of sales taxes

-Location for low labor and land costs

-Potential for repeat sales to the same customer: Increased business volume and Application of collaborative filtering

Collaborative Filtering

-"brute" computer force to identify additional items customer may want to buy

Two Levels:

-Product Level: items bought together at high rates

-Individual Level: comparison of an individual to "similar" others who have bought many of the same things.

-"Win-win" merchants have opportunity to sell more, while customer find things they otherwise wouldn't of found

Relative costs in selling online, in retail settings, and combined mode

-Selling online is typically more labor-intensive for merchant because the merchant has to perform the job, or pay others to do it, the customer otherwise would do in the retail store

online costs > retail costs > combined costs

Profitability of online firms in markets where costs of selling online are lower

Long-run behavior will lead to a competitive marketplace in which prices are low and profits are marginal

Basic Internet economics

1) online merchants tend to have HIGHER costs than conventional retailers

2) Eliminating intermediaries usually = higher costs

3) Employees of e-commerce companies and their transportation services have to be paid to do the work the customer would normally do

The case of Dell Computer

- Customizing computers for each customer probably does NOT save money.

-percent margins tend to be low due to competition but absolute margins can be significant

-cheaper to ship directly to an efficient retailer

-Dell claims to have an inventory turnover time of 48 hours, someone else—probably a supplier—has to carry the needed "buffer" inventory to accommodate fluctuations in demand.

Reality of online economics and competition

-Intense competition of market will force reduced costs—if any—to be passed on to customers

-Less competition on specialty products =greater margins

"Bricks-and-clicks" potential

-business model by which a company integrates both offline (bricks) and online (clicks) presences

-Brand equity

-Volume purchasing power

-inventory assortment warranted by combined store and online sales

Micro-payments—problems, opportunities, and applications

Online content and services could be made profitably available for a small charge, but collecting small amounts of money can be costly and inconvenient.

-Not viable for electronic content or tangible goods (shipping is too expensive for a small amount)

Web metrics

Unique visits, repeat visits, average time spent on site

Search engines and search engine optimization

Key metrics: quality and number of links to site (popularity index)

-Involves popularity, keywords, click-through rates, location, other criteria

-quality links appear to be more important than key words.

M-commerce

-model technology with internet access

-internet browsers and smart phone apps

-many countries running ahead of the U.S

Opportunities: location based services, mobile banking, mobile tickets, mobile apps, secure transactions on the go, mobile entertainment

Internet of Things

An increasing number of devices and appliances can be connected to the Internet through

-Wi-fi

-Cellular connections

-Bluetooth and other "patch-ins"

(ex: printers, lights, Amazon Alexa)

"Showrooming"

-technique that enables customers to scan a product in a store and immediately compare its price to those online in order to determine which is a better deal

Sentiment analysis

When companies use data gathered from their social media sites to collect customer comments about companies and their products

Consumer problems, recognition, and solutions

Discrepancy between ideal and actual state

-not always recognized immediately

Consumer decision stages—theory and reality

Theory: recognition--> information search-->evaluation of alternatives--> purchase--> evaluation

Reality:

-Evaluation of alternative= information search

-Post purchase Evaluation/Behaviors= information search and purchase

Approaches to alternative identification

(solution search)—internal vs. external search

Internal ( low involvement decisions): memory thinking

External (high involvement decisions): word of mouth, media, store visits, trial

Universal, retrieved, and evoked (consideration) sets

Universal: all possible outcomes

Retrieved: options that come to mind

Evoked/Consideration: Options considered by the consumer

____involvement products, aimed at affecting internal search tend to be more effective

Low

Level of involvement and decision

characteristics

o Duration of involvement

o Magnitude of involvement

o Manifestations of involvement

- Duration: temporary (high involvement on an important pending decision) vs.

enduring (lasting interest in a non-urgent decision)

-Magnitude of involvement:

Temp. involvement can be very high while it takes place.

-Manifestations of involvement:?

Compensatory vs. Non-compensatory decision

strategies

compensatory - decision based on overall value of alternatives

non-compensatory - must meet at least one important criterion

hybrid

combination of the two (one non-compensatory measure, then compensatory tradeoffs of other attributes0

Heuristics

simplified decision rules that may be used by consumers under conditions of low

involvement or lack of information (ex: picking highest price bc you automatically thinking the higher price= higher quality)

Tippability

The potential of a small factor to change a low stakes decision from one alternative to another one

Consumer information processing

-Consumers have limited capacity to process all advertisements so some stimuli has to be prioritized

-Not all given conscious attention

-use of triggers, attention, linking

Associative network of knowledge

The linking of one concept to another in a web-like format (ex: Lululemon- leggings, yoga, lemons, health, kombucha)

The Means-End chain

Chain of decision making, consumers subconsciously go through, compares attributes of product to consequences of decision to values achieved by end result

-start w attribute, end with value

Subliminal messages

Illegal, more than 2 syllables, no impact on consumers

Procedural knowledge and its implications

-knowledge: conscious/unconscious of how to do something (driving a car)

-largely unconscious

-lack of training= prevent consumers from buying certain products

-products can be optimized to reduce effort needed to gain sufficient procedural knowledge

Organizational buyers

(Types, Characteristics, Purchase types)

Types: industrial, reseller, gov, non-profit

Characteristics: greater involvement, more important decisions, Bureaucracy(more ppl involved), long-term relationships, price may not be the most important factor

Purchasing types: straight rebuy, limited and extending decision making

Types of needs

Functional: relate to performance of good

Psychological: relate to biological necessities (safety, love, esteem, self-actualization (goal))

Conversion rates

percentage of consumers who buy a product after viewing it

Attitudes and their components

attitude - a person's evaluation and behavioral tendencies toward an object or idea

- Cognitive component (belief system)

- Affective component (emotional basis)

- Behavioral component (actions we take based on what we know or believe)

Social influences on decision making

Family - families consider the needs of all family members in purchasing decisions

Reference groups - groups used as a basis for comparison regarding attitudes

Derived demand

A demand for a commodity, service, etc., that is a consequence of the demand for something else

Institutional buyers

Organizational buyers that make purchasing decisions for institutions

Buying centers

The group of people typically responsible for the buying decisions of large organizations

The 6 roles of the Buying Center

1. Initiator: person who first suggest buying the particular product or service

2. Influencer: person whose views influence others in making the final decision

3. Decider: person who ultimately determines any part of the entire buying decision

4. Buyer: person who handles paperwork of the actual purchase

5. User: person who consumes or uses the product or service

6. Gatekeeper: person who controls info or access or both to decision makers and influencers

"Business" vs. bribery

Culture and its implications

Shared beliefs, expectations, behavioral traits, and attributions of most of the members of a group

Consider big picture when determining entry strategy and marketing mix

Floating exchange rates

currencies are set on the open market based on the supply of and demand for each currency

Exchange rates and trade imbalances

help reduce trade imbalances

-fluctuating exchange rates can reduce demand for currency, increase export demands and reduce import demand

Some influences on exchange rates

trade deficit (demand for foreign currency to fund this reduces value)

interest rates (attract foreign investors)

inflation (reduces attractiveness of holding the currency)

Measurements of country wealth

nominal per capita GDP and

purchase parity adjusted per capita GDP

Assessing costs of living

labor (cost of labor = low cost of services)

environmental regulations

safety regulations

resource availability

Impact of government economic

policies on buying power of consumers

(especially tax rate effects)

Highly progressive tax rates= smaller markets for luxury products

-Leveling income= less inequality but less incentive to produce

-Consumer= less control on what that can buy

-develop long waiting lost for certain gov. services

Product standardization, adaptation, and customization:

Advantages and disadvantages of each approach

-Customization (completely new made for each country)

-Adaptation ( adjustment made to accommodate infrastructure, cultural, economic differences)

-Standardization (products sold across the world are identical)

Advantage: economies of scale, more resources (better quality), faster production

Disadvantage: unnecessary features, vulnerability to trade barriers, strong local competitors

Product standardization, adaptation, and customization:

Mandatory vs. discretionary Adaptations

Mandatory—required by laws of nature or laws of government

-Legal requirements

-Infrastructure

Discretionary—not required by natural or human laws but often not really "optional" in practice (needed to compete with brands that do offer adaptations)

-Local tastes

-Fit into cultural environment

Country of origin effects

-perception of product (quality, style)

-historical associations

-positioning strategies (emphasis/obfuscation (unclear) on origin)

Laws of interest to U.S. firms doing business abroad

-Anti-trust = illegal US firms participate in collusion and anti-competitive activities abroad.

-Foreign Corrupt Influences Act= bribery illegal abroad

-Anti-boycott laws = illegal to participate in non-government sanctioned boycotts, emphasis on Israel

-Trading w the enemy = illegal to trade with certain enemy states

-Extra-territoriality= U.S. courts often take jurisdiction over cases of violations of U.S. law that occurred entirely abroad.

Extra-territoriality

U.S. courts will often take jurisdiction over cases of violations of U.S. law that occurred entirely abroad.

Assessing global markets—components of analysis

-Economic Analysis

-Infrastructure

-Government Actions

-Sociocultural Actions

Purchasing power parity (PPP)

a theory that if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, if expressed in the same currency.