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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