Marketing final comprehensive chapters

production oriented era

up until 1920- oldest - believed that a good product would sell itself

Henry Fors - "customers can have any color they want as long as its black"
Manufacturers were concerned with product innovation, not with satisfying the needs of individual consumers.
Retail stores just help merchandise until a consumer wanted it

not needs or wants based
the sole focus was to develop a good product

PROBLEM- competitors easily pop up

sales oriented era 2nd era- great depression, ww2

manufacturers produces more than customers wanted
overproduction was forced to become sales oriented: depending on advertising and personal selling

market oriented era 3rd after WW2

Manufacturers turned from war effort to focus on making consumer products.
suburban communities, shopping centers
US entered a buyers market - consumers became king
consumers made purchasing decisions on the basis of quality, convenience, and price
Manufacturers and retailers has to focus on CUSTOMER WANTS AND NEEDS- before they designed or sold their products
FIRMS DISCOVERED MARKETING

Value based marketing era

most successful firms today are market oriented. (transcended production or selling orientation and focus on satisfying customer wants and needs)

firms discovered that they would have to give their customers greater value than their competitors did
must create value beyond the obvious need
99% of all new products fail because they dont eve reach consumers

SWOT analysis

Assess the internal environment with regard to Strengths and Weaknesses and the external in terms of Opportunities and Threats

firms can anticipate and interpret change so they can allocate appropriate resources
Strengths- what do we have
Opportunities- what can we be? what is happening externally that can be a benefit to us?

boston consulting matrix

One of the most popular portfolio analysis methods

horizontal axes- relative market share - the percentage of a market accounted for by a specific entity and is used to establish the products strength in a particular market

vertical axes - market growth rate - the annual rate of growth of the specific market in which a product competes
measures how attractive a particular market is

stars

High market share and High market growth rate

require a heavy resource investment in such things as promotions and new production facilities to fuel rapid growth
heavy users of resources
as market growth slows, stars will migrate from heavy users of resources to heavy generators of resources and become cash cowsh
upper left quadrant
ex: apple watch

cash cows

Low market growth rate but a High market share
products already received heavy investments to develop high market share, they have excess resources that can be spun off to those products that need it.

ex: ipads

question marks (upper right)

High growth markets but low market shares
most managerially intensive products and require significant resources to maintain and potentially increase market share

managers must decide weather to infuse question marks with resources generated by cash cows to become starts, or withdraw resources and phase out the products

ex: iphones

dogs (lower right)

low growth markets and low market shares.
not destined for stardom and should be phased out unless they are needed to compliment or boost sales of another product or for competitive purposes.
ex: ipod

growth strategies

market penetration (in current markets with current products and services)

product development(in current markets with new products)

market development (new markets with current products)

diversification (new markets and new products)

market penetration

employs the existing marketing mix and focuses on the first efforts on existing customers.
achieved by attracting new customers to the firms furrent target market or encourage to buy more from the firm

requires greater marketing efforts, increased advertising and promotions, to reach more of the market

market development

employs existing market offering to reach new market segments
ex: expanding into more global markets
expanding into new market segments

product development

offers a new product or service to a firms current target market
ex: launching marvel subseries to keep people occupied between movie releases

diversification

introducing a new product or service to a market segment that is currently not served

related diversification: current target market and or marketing mix shares something in common with the new opportunity
ex: marvel making home decor

unrelated diversification: new business lacks any common elements with the present business

very risky since diversifications do not capitalize on the core strengths associated witht he market or its products
ex: if marvel ventured into child day care service industry

segments

irms cannot satisfy everyone's needs
market segments consist of groups of consumers who respond similarly to a firm's marketing efforts

geographic segmentation, demographic segmentation, psychographic segmentation, behavioral segmentation, benefit segmentation

the process of dividing the market into groups of customers with different needs wants, or characteristics - who therefore might appreciate products or services geared especially for them

geographic segmentation

Organizes customers into groups on the basis of where they live.

can be grouped by country, region., states, neighborhoods
value by region (some regions do not need surfboards)
marketsize (ikea)
customer convenience (cracker barrel)
population shifts (new orleasn)
culture

demographic segmentation

The most common type of segmentation and demographically segmented markets are easy to reach
age: viagra, botox, wholefoods, happy meal
Gender: lego friends (loews marthe stewart)
Income (marill lynch)
Education

psychographic segmentation

how consumers actually describe themselves
how people self-select based on the characteristics of how they choose to occupy thir time (behavior) and what underlying psychological reasons determine those choices.

exL person might have a strong need for belonging
what determines their choices
different reasons for buying the same product
based on consumer interests and behaviors

self values- self concept- lifestyles
self values: goals for like- overriding desires that drive how a person lives his or her life. ex: the need for self respect, self fulfillment, or a specific sense of belonging.
causes people to develop self images

self concept: the image people ideally have of themselves.

lifestyle: the ways people live. how we live our lifes to achive goals

geodemographic segmentation

geographic + demographic + lifestyle characteristics to classify consumers
ex: consumers in the same neighborhoods tend to buy the same type of cars, appliances, and apparel and shop at the same types of retailers.

useful to retailers because cutomers typically patronize stores close to neighborhoods

benefit segmentation

groups consumers on the basis of the benefits they derive from products or services

dividing the markets into segments whose needs and wants are best satisfied by the product benefits is powerful.
segmentation based on which benefit a specific group of people want

ex: in teas there is throat comfort, positive energy, stress relief, womens nursing support, detox,

behavioral segmentation

divides customers into groups on the basis of how they use the product or service

segmentation based on customer behavior

occasion segmentation: people buy a new suit for an occasion or a new dress

Loyalty segmentation: 80/20 rule - 80 percent of a given business's profit typically comes from a mere 20 percent of its clientele.

identifiable

firms must be able to identify who is within their market to be able to design products or services to meet their need
also ensure that segments are distinct from one another
too much overlap means that distinct marketing strategies arent necessary to meet segment member needs

substantial

is the size of the firm good?
if too small or buying power is insignificant, it wont generate sufficient profits or support marketing mix activities

\# of people and profitability

reachable

if the market can be reaches or accessed through persuasive communications and product distributions
the consumer must know that the product or service exists, understand what it can do for him or her, recognize how to buy it

do they know the product exists? what it can do\> recognize how to buy it?

responsive

customers in the segment must react similarly and positively to the firms offerings.

positive reaction, accept value proposition

profitable

must assess if the current and future market is profitable
!!!!analysis includes market growth, competitiveness, and market access !!

segment profitability \= (size x adoption percentage x purchase behavior x profit margin percentage) - fixed costs

undifferentiated /mass marketing

When everyone might be considered a potential user of its prodyct
focuses on the similarities in needs of the customers as opposed to the differences
the product or service is percieved to provide similar benefits to most consumers
not used much today

differentiated

several segments with slight changes in the product for each

targets several market segments with a different offering for each
ex: magazines focused on literature lovers, fashion, and techies

helps diversify the business and lowers companies overall risk - but is more costly
helps obtain bigger share of the market and increases the market for their products overall
ex: NFL partnered with telemundo to reach latino and hispanic markets

concentrated segmentation strategy

(one segment)
an organization selects a single, primary target market and focuses all of its energies on providing a product to fit that markets needs

ex: newton running concentrated on runners- but not all
it focuses only on those who prefer to land on their forefeet while running

micromarketing/ one to one

to the individual

when a firm tailors a product or service to suit individual customer wants or needs
ex: tailoring a suit to exact expectations

price elasticity of demand

Measures how changes in price affect the quantity of the product demanded - specifically, it is the ratio of the percentage change in quantity demanded to the percent change in price

percent change in quantity demanded/ percent change in price

consumer response to change in price varies based on the product or service.
consumers are generally less sensitive to price increases for necessary items such as milk because they have to purchase the items even if price climbs.

factors influencing price elasticity of demand

income effect, substitution effect, cross-price elasticity

substitution effect

consumer's ability to substitute other products for the focal brand. The greater the availability of substitutes, the higher the price elasticity of demand for a given product
ex: if tide pod price rises, people would buy other detergents
however, extremely brand loyal consumers are willing to pay a higher price up to a point

substitute products

changes in demand are negatively related
a percent increase in demand for A will decrease demand for B
ex: sprite and mountain de

elastic

price elasticity is less than -1. the market for a product or service is price sensitive
an elasticity of -5 would indicate that a 1 percent decrease in price produces a 5 percent increase in quantity sold

small change in price will generate a fairly large change in quantity demanded \-- so to increase sales the firm should lower price

cross price elasticity

the percentage change in demand for product A that occurs in response to a percentage change in price of product B

inelastic

Describes demand that is not very sensitive to a change in price

break even analysis

cannot help managers set prices, it does help them assess pricing strategies because it clarifies the condition in which different prices may make a product or service profitable

monopoly

less price competition and fewer firms
regulated and can be dismantled by government antitrust laws
one firm controls the market- provides the product/service in the industry
ex: microsoft

oligopoly

few firms dominate - a handful of firms control the market
more price competition because firms change their prices in reaction to competition to avoid upsetting an otherwise stable competitive environment
ex: airline travel, softdrink market

price war- two or more firms compete primarily by lowering their prices
\-- results in predatory pricing, when a firm sets a very low price for one of more products with intent of driving out competition. \--- illegal

monopolistic competition

many firms sell differentiated products at different prices
less price competition
product differentiation rather than strict price competition tends to appeal to consumers
most common form of competition
create unique value propositions with product differentiation
ex: the hundreds of firms making sunglasses

pure competition

a large number of sellers offer standardized products or commodities that consumers percieve as substitutable, such as grains, gold, meat, spices, or minerals
many firms more price competition

price set according to laws of supply and demand
firms must make their product distinct from others ex: Morton's solt

value based pricing methods

approaches to setting prices that focus on the overall value of the product offering as perceived by the consumer. consumers determine value by comparing the benefits they expect the product to deliver with the sacrifice they will need to make to acquire the product.

how does a manager use value-based pricing methods? \-- improvement value and the cost of ownership methods

improvement value method

managers must estimate the improvement value of a new product or services
improvement value- represents an estimate of how much more or less consumers are willing to pay for a product relative to other comparable products.
ex: a new cellphone was developed
\-- using consumer surveys- the manager could get customers to assess the new product relative to the existing cellphone an provide an estimate of how much better it is
\-- that is the improvement value

cost of ownership method

the total cost of owning the product over its useful life.
consumers may be willing to pay more for a particular product because, for its entire lifetime, it will eventually cost less to own than will a cheaper alternative
ex: an LED lightbulb costs $3 and is expected to last 6000 hrs
another costs $1 but is expected to last only 1500 hrs

everyday low pricing (EDLP)

ompany stresses the continuity of their retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale prices their competitors may offer.

By reducing consumer's search costs, EDLOP adds value \--- consumers spend less of their time comparing prices at different stores
ex: walmart- communicates to consumers that for any given group of often purchased items, its prices will tend to be lower than those of any other company in the market

high/low pricing

relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases
SALESS
appealing because it attracts 2 market segments: those who are willing to pay the "high" price (not price sensitive) and more price sensitive customers who will wait for the "low" sale price.
also create excitement and attract customers through the "get them while they last" atmosphere that occurs during a sale.

sellers usually communicate their strategy by using a
reference price, which is the price against which buyers compare the sale price to original

price skimming

for new and innovative products or services, innovators and early adopters are willing to pay a higher price to obtain the new product or service

product must be perceived as breaking new ground, offering new benefits unavailable in alternative products.
may use this to signal high quality, build production capabilities, earn back some high research and development investments, test consumer price sensitivity.
appeals to those segments of consumers who are willing to pay a premium price to have the innovation first
common in technology markets, video games
however, is this high price market segment becomes saturated and sales slow down, companies must lower price

penetration pricing

for new products, firms set the initial price low for the introduction
objective is to build sales, market share, and profits quickly and deter competition from entering the market because the profit margin is relatively low
firm must have the capacity to satisfy a rapid rise in demand
low price does not signal high quality
should avoid penetration strategy if some segments of the market are willing to pay more for the product- firm is "leaving money on the table"
low penetration price is an incentive to purchase the product immediately.
firms using this expect the unit cost to drop significantly as volume sold increases- the experience curve effect.\-- sales grow and costs drop

markdowns

the reductions retailers take on the initial selling price of the product or service.
can promote merch and increase sales
ex: sales
enables retailers to get rid of slow moving or obsolete merchandise, sell seasonal items after the season, match competitor prices on specific merch

quantity discounts for consumers

size discount- the larger the quanity (ex: cereal box) the less cost per ounce.
goal is to encourage consumers to purchase larger cuantities each time they buy.

consume more product and less likely to switch brands

seasonal discounts

price reductions offered on products and services to stimulate demand during off peak seasons.
ex: hotel room, ski lift tickets, flights

coupons

offer a discount on the price of specific items when they're purchased
can induce customers to try products for the firt time, encourage large purchases, increase usage, protect market share.

rebates

manufacturer issues the refund as a portion of the purchase price returned to the buyer in the form of cash. Promises savings at a later date.

more annoying to customers than coupons
customer muct buy the item during a specific time period, then mail in documentation, and wait weeks for a check to arrive.
good for manufacturers because 90% of consumers never bother to redeam them.

leasing/rentals

consumers pay a fee to purchase the right to use a product for the specific amount of time.
opens up new price sensitive target markets.

consumers also like this because they get tired of the product before its useful life is over.

price bundling

ex: when you sign up for internet, you also get cable tv
selling more than product for a single, lower price.
encourages customers to stock up and not purchase competing brands

leader pricing

helps build store traffic by aggressively pricing and advertising a regularly purchased item, often prices at or just above stores cost

ex: turkeys during thanksgiving

price lining

establishing a price floor and a price ceiling for an entire line of similar products and then set other price points in between to represent distinct differences in quality.
ex: selling a shirt for $118, $168, and $225 - customer would probably buy the middle one because they dont want the "low quality" but cant afford the expensive one

seasonal discounts for B2B

an additional reduction offered as an incentive for retailers to order merchandise in advance of the normal buying season.
retailers have to hold the inventory for longer

cash discounts B2B

reduces the invoice cost if the buyer pays the invoice prior to the end of the discount period.
encourages early payment- time value of money

allowances b2b

advertising allowances- offers a price reduction to channel members if they agree to feature the manufacturers product in advertising and promotional efforts
-legal as long as they are available to all customers and do not obviously show favoritism

slotting allowances - fees paid to retailers simply to allow new products into stores or to gain more or better shelf space for their products.
arguably unethical bc small competitors cannot pay for this

quantity discounts b2b

providing a reduced price according to the amount purchased
the more the buyer purchases the higher the discount and the greater the value
cumulative (over time and several transactions ) vs noncumulative (single order)

uniform delivered vs zone pricing

specific to shipping,
uniform delivered pricing - the shipper charges one rate no matter where the buyer is located
zone pricing- sets different prices based on geographic division of the delivery areas.
ex: a new york based manufacturer may divide the US into 7 zones and use different shipping rates in each zone - each customer in a zone is charged the same cost of shipping

advantageous to the sipper- reflects actual shipping prices

deceptive reference prices

if the reference price has been inflated or is just fake, it is illegal
hard to regulate, how do you determine that the reference price is fake?
at least 50% of sales had to have occured at that price

loss-leader pricing

leader pricing is a legitimate tactic that attempts to build store traffic by aggressively pricing and advertising a regularly purchased item at above or below store cost .

However, LOSS - LEADER pricing lowers the price BELOW the stores cost.
illegal in some states

bait and switch

sellers advertise items for a very low price without the intent to really sell any.
stores lure customers in with a low price on an item (bait), but say they dont have that item in stock and pressure them into purchasing a higher priced model (the switch)
difficult to enforce
have to prove the intent of the seller

predatory pricing

when a firm sets a very low price for one or more of its products with the intent to drive its competition out of business.
illegal under the antitrust act and the federal trade commision act
constraints free trade and is unfair competition
also tends to promote oligopolistic competition (few dominant firms)

difficult to prove- must prove intent

price discrimination

When firms sell the same product to different resellers (wholesalers, distributors, retailers) at different prices
usually larger firms recieve lower prices

in B2B
not always illegal - quantity discounts are a legitimate method of charging different prices to different customers on the basis of the quanitity they purchase
but must be available to all customers and not be structures in a way that they obviously favor a buyer

in B2C
federal law does not apply to sales to end consumers
ex: students and seniors recieve discounts on food
-online auctions like ebay

price fixing

colluding with other firms to control prices
horizontal price fixing is illegal

vertical price fixing falls into a gray area

direct marketing channel

there are no intermediaries between the buyer and seller
goods go from the manufacturer straight to the customer
the seller is a manufacturer typically
ex: when a carpentry business sells bookcases through its own store and online to individual consumers.
the seller can also be an individual
ex: a knitter sells blankets and scarves at craft fairs, on etsy, ebay
can also be B2B such as when Boeing sells planes to JetBlue

indirect marketing channel

one or more intermediaries work with manufacturers to provide goods and services to customers
with one intermediary : manufacturer \---\> retailer-\> customer
ex: car manufacturers often use indirect distribution, such that dealers act as retailers
two intermediariesmanufacturer--\> wholesaler --\> retailer --\> customer
wholesalers are more common when the company does not buy in sufficient quanities to make it cost effective for the manufacturer to deal directly with then. Ex: independent book sellers, wine marchants, independant drugstores.\--- also more prevalane in less developed economies in which large retailers are rare

intensive distribution

designed ot place products in as many outlets as possible.
most consumer packaged-goods such as pepsi, Kraft
want the product to be EVERYWHERE
the more exposure, the more they sell

exclusive distribution

granting exclusive geographic territories to one or very few retailers so that no other retailers in the territory can sell a particular brand
benefits manufacturers by assuring them that the most appropriate retailers represent their products
ex: coachlimits distribution to a few select high end sellers in each region
for small firms or limited supply, providing an exclusive territory helps ensure enough inventory to provide the buying public an adequate selection.a small businesse's product guarantees retailers that they will always have it on shelves (strong incentive to market those products), no competitors to cut prices to profit margins are protected.

selective distribution

between the two - relies on a few selected retail customers in a territory to sell products
helps a seller maintain a particular image and control the flow of merchandise into an area.
retailers have strong incentive to sell the products
\-- attractive to many shopping goods manufactuers (those products for which consumers are willing to spend time comparing alternatives such as apparel, TV, pots, pands, tolwers, tools, electronics

communication process

the sender (firm) _\> transmitter encodes the message and send it down the \---\> communications channel (media) and the reciever (consumer) decodes the message
feedback from the receiver is sent to the sender in a feedback look
noise from the environment is present in all stages or the process

the sender

message originates from the sender who must be clearly identified to the intended audience.ex: it must be clear that the message is sent from Pepsi

the transmitter

a creative department or advertising agency that develops marketing communications to highlight the new beverage
ex: pepsi delevoped new mobile and social media tools, website, mobile apps, flyers, in store displays, commercials
\--- marketing department or agency recieved information from sender and transforms it for use

encoding

converting the sender's ideas into a message
verbal, visual, or both
ex: depicting people drinking Pepsi and breaking into a dance
visual and auditory images
\-- most important facet is not what is sent, but how it is receivedcustomers must receive consistent, comprehensible information that makes them embrace the message and engage in activities that it recommends (such as feeling happy and purchasing Pepsi behevarges)

communication channel

the medium- print, broadcast, internet, etc thtat carries the message
the media must be able to connect the sender with the desired recipients

receiver

the person who reads, hears, or sees and processes the information contained in the message and/or advertisement

noise

any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the medium
ex: if pepsi advertises in newspapers tht the target market doesn;t read

feedback loop

allows the reciever to communicate with the sender and thereby informs the sender whther the message was recieved and decoded properly\-- ex: a customer's purchase of the item, a complaint or complement, a redemption of a coupon or rebate, a tweet about the product, etc

recievers decode messages differently

each reciever may interpret the sender's message differently, and the senders often adjust their message according to the medium used and the recievers level of knowledge about the product or service
\-- different people shown the same message will often take radically different meaning from it

senders adjust messages according to the medium and receivers traits

different media communicate in varied ways, marketers must make adjustements to message and media depending on if they want to communicate with suppliers, shareholders, customers, general public, or specific segments

setting and allocating the IMC budget

Objective and task method
Percentage of Sales
Competitive Parity
Available Budget

objective and task method

detemines the budget to undertake specific tasks to accomplish communication objectives
marketers first establish a set of communication objectives, then determine which media best reach the target market and how much it will cost to run the number and types of communications nevessary to achieve the objectives
process: set objectives, choose media, determine costs \-- must be repeated for each product and service

percentage of sales

the communication budget is a fixed percentage of forecasted sales
weakness: assumes the same percentage used in the past, or by competitors, is still appropriate for the firm. does not take into account new plans

competitive parity

the communication budget is set so that the firm's share of communication expenses equals its share of the market(match competition by proportion of market share)
cons: does not allow firms to exploit the unique opportunities or probems they confront ina market.\--- if all competitors use this method to set communication udgets, their market shares will stay the same over time

available budget

forecast sales - (expenses + desired profit)
marketers forecast their sales and expenses during the period. difference between the forecast sales and expenses plus desired profit is reserved for the communication budget. (the money available after operating costs and profits have been budgeted)
cons: assumes communication expenses do not stimulate sales and profit

measuring success using marketing metrics

each step in the IMC process can be measured to determine how effective it has been in motivating consumers to move to the next step of the buying process.
what makes it hard: creative and new forms of communication, the lagged effect (it may take several exposures before consumers are moved to buy)

frequency

how often the audience is exposed to a communication within a specific period of time
used for traditonal media

reach

for traditional media, guages the exposure to communication
describes the percentage of the target population exposed to a specific marketing communication at least once

Gross rating points (GRP)

states media objectives
reach x frequency

web tracking

measures how much time viewers spend on particular web pages, number of pages they view, and how many times users click banner ads
click through rate\-- the amount of clicks / the number of impressions

impressions

the number of times the ad appears infront of the user

click through rate

the number of times a user clicks on an online ad divided by the number of impressions

informative advertising

Used to create and build brand awareness.Push the consumer through the buying cycle to a purchase.
Inform customers about upcoming sales events or arrival of new merchandise.
retailers aim to push the consumer through the buying cycle to final purchase

persuasive advertising

pull strat when a product has gained a certain level of brand awareness, you use this to motivate consumers to take action.
occurs in growth and early maturity stages of the product life cycle where competition is most intense
attempts to accelerate market acceprtance of the product
in later stages, used to reposition by persuading customers to change their existing perceptions of the product.

reminder advertising

communication is used to remind or prompt repurchases
occurs after the products have gained market acceptance\-- mostly used in the maturity stage
reinforce previous promotion activities