Marketing

Aspects of the business environment and tools it uses

Microenvironment, microenvironment, PEST, SWOT, Porter’s Five Forces, The 5C’s

Why studying the business environment is important

Marketing activity does not happen in a vacuum

Helps achieve the objective and avoid costly errors

Helps minimize risks

Business Environment: Microenvironment

Actors close to the company that affect its ability to engage, within our sphere of influence

Examples of Business Environment: Microenvironment

The company (current business situation)

Suppliers (want trustworthy and stable)

Marketing (firms that promote or help in the marketing process)

Intermediaries (distribution)
Customer Markets (people who use us)
Competitors (people trying to meet our customers needs)
The Public Opinion (anyone with interest in our activities and what we are doing)

Business Environment: Macroenvironment

Larger forces, possibly uncontrollable

Examples of the Macroenvironment

Demographics (population trends, family composition, ages, diversity, education)

Economics (consumer spending, purchase power, tax, employment level, wage growth, inflation, travel costs)
Natural (physical envio, weather, gov. regulations on envio., sustainability)

Tech (investment in tech, tech changes impact your business)
Political/Social (legislation, regulation, trading envio, stability, ESG)

Cultural (societal value, beliefs, perceptions, preferences, behaviors, cultural norms, storytelling)

PEST

Politics, economic, social, technology

SWOT

strength, weakness, opportunities, threats

Porters Five Forces

Threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, competitive rivalry

Why do the five forces matter

They give criteria for setting prices, help set incentives for innovation, establish preparedness for competition, focus attention on the environment outside the firm

The 5Cs

Consumer (what do our consumers need)

Company (core competencies, strengths, weaknesses)

Customer (how supply chain organized)

Competition (how will competitors react)

Context (PEST+cultural reality)

Understanding the Business Envio Readings

Ozturk 2013

Gorti et al. 2019

Ozturk 2013

International markets are important to meet new foreign consumer needs that have different attitudes and behaviors

Different rate of washing machines or dishwashers used
White is innocence in Europe and death in Asia

Coca-cola did market research in Turkey and used local marketing strategies around ramadan that improved sales during ramadan by 15-20%

Gorti et al. 2019

Cultural awareness is important in a new global market

Ground strategies in value

Consider language, tech, religion, values, business norms (like drinking, handshakes, gender differences)

Patek Philippe

You aren’t just owning a watch but building a family legacy

Consumer Behavior Model

Environment
Buyer decision processing

Buyer responses

Consumer Behavior Model: Environment

Marketing Stimuli (price, product, place, promotion)

Other (economic, technological, social, cultural)

Consumer Behavior Model: Buyer Decision Processing

Buyer characteristics

Buyer decision process

Consumer Behavior Model: Buyer Responses

Attitudes and preferences, purchase behavior, volume/frequency/channel, brand relationships

Factors Affecting Consumer Behavior

Cultural (values, norms, beliefs, likes and disliked framed by the culture we live in)

Social (friend groups, social networks, family members (powerful), social roles, status, conform to others, join tribes

Personal (occupation, age, lifestyle, economic reality, lifestyle, personality)

Psychological (motivation, perception, learning, beliefs and attitudes)

Consumer Behavior: Psychological - Motivation

Freud argues real psychological factors shaped their behaviours

Maslows Hierarchy of Needs (physiological, safety, love, esteem, self-actualisation)

Consumer Behavior: Psychological - Perception

People select, organize, and interpret information into their understanding of the world

Selective attention: screen out most of the information we are exposed to

Selective Distortion: interpret information the way that matches our beliefs

Selective retention: retain info that confirms our beliefs

Consumer Behavior: Psychological - Learning

Permanent change in knowledge, attitudes, behaviors

Learn the value of benefits being offered

Learning could be reinforced through reward/positive outcome

Consumer Behavior: Psychological - Beliefs and Attitudes

Belief - descriptive thought that a person holds about something - adverse marketing efforts

Attitudes - consistent evaluation, feelings, tendencies

Marketing Information Ecosystem

Asses information needs

Developing needed information (internal databases, marketing intelligence through envio scanning, primary and secondary research)

Analyzing and using information

Information types and sources

internal databases, competitive market intelligence, market research

Information types and sources: internal databases

purchase frequency, custoemr profile, LTV, transaction history, demographics

Information types and sources: competitive market intelligence

systematic monitoring, collection and analysis of information, competitors, market, your own data

Information types and sources: market research

addressing specific questions the company has

Market Research Process

Define the objective

Determine the data you need

Determine the best research strategy/tool

Pilot the methodology

Deploy the research program

Review the gathered data

Data types

primary

secondary

Research Methodologies

focus group

survey

observational research

consumer panels

netnography

in depth interviews

bio sensors

experimentation

test markets

taste tests

Beyond meat: consumer behaviour

we are meat, put meat in the fridge aisle

Consumer Behavior Readings

Rodrigues et al. 2021

Bui 2005

Rodrigues et al. 2021

advertising can cause certain psychological influences that motivate consumers

Bui 2005

models and hypotheses of how inputs that influence consumers

values, beliefs, knowledge, and attitude (like about helping the envio) and demogrphaics, and intentions are diferent than actions

Consumer Behavior theory

is built on the consumer decision making model

Consumer Decision Making Model

need recognition, info search, evaluation of alternatives, purchase, post purchase evaluation

Consumer Decision Making Model: Need Recognition

Problem and need - the gap between the desired state and actual state

Consumer Decision Making Model: Info Search

what might help address the problem

Consumer Decision Making Model: Evaluation of Alternatives

Consumers call to mind a set of brands - a consideration set and then narrow it to a choice set (what they are choosing between)

Consumer Decision Making Model: Purchase

You make a purchase on the spot

Consumer Decision Making Model: Post purchase evaluation

Decide if their expectations have been met, how they feel post decision, review

Factors that affect decision making

Perceived risk, complexity of the item, consumer knowledge level, frequency of the purchase, level of info, time constraints, number of substitute, marketing activity, level of involvement

Factors that affect decision making: Level of involvement examples

High: car, house, financial prodcuts

Low: small portion of income beans, coffee

Decision making heuristics

scarcity

pricing

social proof

brand

Pricing Heuristics

More expensive = higher quality

Scarcity Heuristics

limited supply, special editions, rare items more desirable

social proof heuristics

guided by/accepting/believing the content of reviews

brand heuristics

branded goods are better than generic

The customer journey

the experience that consumers have with a brand

Customer Journey facets

awareness

consideration

conversion

retention

advocacy

Customer Journey: awareness

consumers aware of brand

how consumers are being aware of you

Customer Journey: consideration

actively research and compare options

digital assets

marketing assets

proof and differentiate from competitors

Customer Journey: conversion

purchase or complete an action desired by marketing team (like giving an email address or booking a test drive)

decision to purchase

Customer Journey: retention

focus turn on customer ownership and long term satisfaction

onboarding experience

loyalty program

Customer Journey: advocacy

encourage consumer to celebrate you

positive review

Business buying participants

Users - write their specification

Influencers - help with specs and may set quality standards

Buyers - select the supplier, negotiation and agree/set terms

Deciders - someone with the power to approve a contract

Gatekeepers - control the flow of info or access to decision makers

Consumer Decision Making Readings

Merlo et al. 2008

Suomala 2020

Merlo et al. 2008

simplify the choice process

influence choice

popular heuristic: anchoring (reference point), sentativeness (commonality between objects of similar appearance), availability (emotional impact)

risk reduction

efficient

Suomala 2020

Consumers find it difficult to make a choice

Personal goals, consumption history, contextual factors

help us understand the interactions that occur between these objects

Types of value you can create

Social (connection, community, network, effects/social capital)

Functional (what does it do)

Economic (monetary benefits - cheaper to use)

Experimental (the experience of using the product/service, retail experience)

Market Segmentation examples

Divide the market by demographics (age, income), geographic (region, rural), psychographics (attitudes, sense of self), lifestage (student, retired)

Customer Segmentation

dividing our existing customer base into clusters of shared needs/ccharacteristics

Market segmentation

dividing the entire market into closets of shared needs

Customer Segmentation examples

User status

experience level

Usage rate

needstate

value priorities

B2B

tech and segmentation

in a digital era - algorithmic segmentation that has lead to micro segments from a fragmented media landscape, AI helps

effective segmentation

Measurable (size and purchasing power) 

Accessible (can be reached and served)

Substantial (profitable)

Differentiable (respond diff to diff marketing mix)

Actionable (marketing activity, well executed, works based on orgs resources)

Four targeting strategies

Undifferentiated - mass marketing

Differentiated - segmented marketing

Concentrated/niche marketing - elite athletes, ppl over 7 ft tall

Micromarketing - highly localised or individual level marketing (more prevalent cause AI and ML)

Differentiation

Product (features, performance, design, cost, quality)

service (consistency, cost, response times)

channels (better experience through the design of channels)

people (better staff)

image (strong brand image)

Positioning

How consumers remember and describe you

Segmentation, Targeting, Positioning Reading

Rambasae 2024

Grier et al. 2010

Rambasae 2024

market position to get a competitive advantage

effective positioning to help with direct marketing strategy

help clarify the essence of the brand

Help market positioning by beating competition, filling the empty slots in the mind, consumer perception, differentiation, competitive advantage

COVID change how consumers interact

AI help with market mapping

Grier et al. 2010

Targeted marketing technique help fill common needs for consumers

Used for tobacco and public health campaigns

Soft drink companies - target ethnic groups

reaching domains like targeted marketing to the youth

Product

is a bundle of benefits that can be offered to a market

Product made up of what elements

core (benefit you’re selling —> car gives mobility)

actual (form of product/design elements)

augmented (customer care/services)

Product attributes

quality

features

style/design

branding attributes

identity

visual identity

story

packaging attributes

quality cue

value cue

awareness tool

marketing platform

experience

bases for product differentiation

Core function (unique approach to delivering a function)

Features (wanting something different based on your aspects)

Performance quality

Product quality

Form and design cues

Style

Customization

Product Portfolio Mgmt

Width: number of different product lines

Length: number of items in a line

Depth: version of each product in the line

Consistency: how closely related the products are in terms of use, production, distribution channels, marketing

Product Line

groups of products closely related because function in a similar manner are sold

Product line adjustments

line filling (add additional options)

line stretching (expand to add a new type)

Aspects of service management

intangibility

inseparability

perishability

variability

Bases of service differentiation

offering

ease of use

speed

installation, training, consulting

maintenance and repair

quality standards/guarantees

customer care

Branding

customers attach meaning to brand

Product lifecycle

Introduction (launch)

Growth (rapid market acceptance)

Maturity (a slowdown in sales)

Decline (sales begin to fall)

Why do most new projects fail

lack of internal support

risk for channel partners

poor consumer understanding

poor market understanding

ineffective marketing

competitor activity

ineffective channel operations

Rogers new product success depends on

relative advantage offered by the new innovation

compatibility with user?

complexity (is it confusing)

trialability (how easy it is to use)

observability

risk

Factors influencing pricing decision making

value proposition

competition

economy

business model

supply and demand

strategy

geography

WTP

WTP

how much they are willing to pay

Psychology of Pricing

decision heuristics (price as quality)

economic rationality and emotional rationality

nature of purchase (high vs. low involvement)

cost

pricing cues

timing of purchase

reference price

How to set a price

define pricing objective

determine demand

estimate costs

analyze competitor prices

test the price

set the price

manage the price over time

options of a pricing objective

generate profit

customer recruitment

competitive action

max profits

support brand

customer retention

Pricing methods

dynamic methods (airlines or ubers)

customized pricing (different prices based on buyer needs and characteristics)

price skimming (high prices and lower over time)

subscription (recurring revenue)

prestige pricing (communicate quality)

bait and hook pricing (printers and ink)

penetration pricing (get the market by going low)

free/freemium (a tv game)

good better best (low to unlimited volume or basic to experienced skill level)

Multifaceted pricing model example

good better best (streaming quality) and subscription and ads or no ads

Readings for Price and Product

Rao 1984

Wichmann 2020

Wichmann 2020

consider who, what, how, where

4P’s are very connected

Rao 1984

generate revenue - price is not just a financial decision it is a marketing decision

skimming price, penetration price, price elasticity is considered

price can be used as a promotional tool

How to build brand salience

marketing communications

paid channels - buy awareness

owned channels - you control the experience

earned media/coverage - amplify your content

shared media - media shared by consumers with other consumers