Principles of Marketing 4-9

Chapter 4 Marketing Environment

The external marketing environment

• Perhaps the most important decision a marketing manager must make relate to the creation of the marketing mix.

A marketing mix is the unique combination of product, place, promotion, and price strategies.

It is under the firm's control and is designed to appeal to a specific group of potential buyers, or target market.

Managers react to changes in the external environment and attempt to create a more effective marketing mix, satisfy customers, and remain competitive.

• Target market - a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

• Environmental scanning - a process in which a team of specialists continually collects and evaluates environmental information in order to identify future market opportunities and threats.

Understanding the Needs of the Firm's Most Valuable Customers

• Often 20 percent of a firm's customers produce 80 percent of the firm's revenue.

• An organization must understand what drives that loyalty and then take steps to ensure that those drivers are maintained and enhanced.

• Ex. Airlines use loyalty programs to satisfy and retain this top 20 percent of customers.

Social Factors

How Demographic Factors Impact Our Behavior

• Demography - the study of people's vital statistics, such as age, race, gender, and location.

• Demographics are significant because they are the basis for any market   

• Demographic characteristics are strongly related to consumers buying behavior in the market place.

• Demographics are always evolving.

• A major focus of companies has been members of the age groups Generations x,y,z

• Generation alpha members are born between 2010 and 2024

• Companies also target consumers by factors such as location, household life cycle, gender, and income.

The Influence of Pope Culture on Marketing

Pop culture - the products and forms of expression and identity that are frequently encountered or widely accepted, commonly liked, or approved, and characteristic of a particular society at a given time.

• Pop culture is created by the interactions between people as they engage in their day-to-day activities.

• Using pop culture in marketing can help companies to connect with their target customers.

It can enhance customers' attention to brands and advertising and help them relate to a company's brand on an emotional level, increasing their loyalty.

In effect, a brand can develop a personality and feel more approachable which can lead to increased sales.

Economic Factors

In addition to social and demographic factors, marketing managers must understand and react to the economic environment.

3 areas of greatest concern are

• Consumer's incomes - US average annual household is 80,610

• Inflation - a measure of the decrease in the value of money, expressed as percentage reduction in value since the previous year.

• Recession - a period of economic activity characterized by negative growth, which reduces demand for goods and services.

Purchasing power - a comparison of income versus the relative cost of a standard set of goods and services in different geographic areas.

• Another way to think of purchasing power is income minus the cost of living.

• In general, a cost of living index takes into account housing, food, groceries, transportation, utilities, health care, and other expenses such as clothing and services.

Purchasing power varies substantially from state to state

When income is high relative to cost of living, people have more discretionary income.

• That means they have more money to spend on nonessential items. `

Chapter 6

Importance of Understanding the Customer

• To create a proper marketing mix, marketers must understand

Preferences are always changing

The consumers make the purchasing decisions

Consumer behavior - processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services, also includes factors that influence purchase decisions and product use.

Things are based on

• Value - a personal assessment of the net worth of one obtains from making a purchase, or the enduring belief that a specific mode of conduct is personally or socially preferable to another model of product.

• Perceived value - the value a consumer expects to obtain from a purchase

• Utilitarian value - a vale derived from a product or service that helps the consumer solve problems and accomplish tasks.

• Hedonic value - the pleasure or enjoyment that a person gets from an experience, product, or activity.

• Involvement - the amount of time and effort a buyer invests in searching, evaluation, and decision process of the consumer behavior. How much people care about the product or service

Consumer decision making process - a 5 step process consumers use when buying goods or services, consumers' decisions do not always proceed in order of all the steps

Need recognition - result of an imbalance between actual desired states

• Want - recognition of an unfulfilled need and a product that will satisfy it

• Stimulus - any unit of input affecting one or more of the five senses

Information search -

• Internal -  the process of recalling information stored in the memory

• External - the process of seeking information in the outside environment

• Evoked set - consideration set - a group of brands resulting from an information search from which a buyer can choose.

• The consumer has to decide, whether to buy, when to buy, what to buy, where to buy, how to pay

• How expectations are met depends on how satisfied or dissatisfied they are

Cognitive dissonance - inner tension that a consumer experiences after recognizing an inconsistency between behavior and values or opinions

Jilting effect - anticipation of receiving a highly desirable option only to have to become inaccessible

Evaluation of alternatives

Purchase

Post purchase behavior 

10/02/2024

Chapter 8

Prospect Theory - a psychology theory that describes how people make decisions when presented with alternatives that involve risk, probability, and uncertainty.

• It holds that people make decisions based on perceived losses or gains

• Utility is defined in terms of gains and losses.

Different ways of presenting the same information often evoke different emotions

People tend to lean towards more positive emotions and what they see

Slides of Canvas with All of the Information

Market - where and who is your customer, people or organizations with needs or wants and the ability and willingness to buy.

Market segment - a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.

Market segmentation - the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.

The Importance of Market Segmentation

• Plays a key role in the marketing strategy of almost all successful organizations

1. Enables  marketers to identify groups of customers with similar needs and

to analyze the characteristics and buying behavior of these groups

1. Provides marketers with information to help them design marketing mixes

that specifically match the characteristics and desires of one or more

segments.

1.  Leads to a deeper understanding of customer lifestyles, values, jobs to be

done, need states, and buying occasions

1. Helps decision makers more accurately define marketing objectives and

better allocate resources

Criteria for Successful Segmentation

1. Substantiality: A segment must be large enough to warrant developing and maintaining a special marketing mix.

2.  Identifiability and measurability: Data about the population within geographic boundaries, the number of people in various age categories, and other social and demographic characteristics are often easy to get, and they provide fairly concrete measures of segment size.

3.  Accessibility: The firm must be able to reach members of targeted segments with customized marketing mixes.

4.  Responsiveness: Markets can be segmented using any criteria that seem logical. Unless one market segment responds to a marketing mix differently than other segments, that segment need not be treated separately.

Bases for Segmenting Consumer Markets

• Demographics segmentation - segmenting markets by age, gender, income, ethnic background, and household.

• Geographic segmentation - segmenting markets by region of a country or the world, market size, market density, or climates.

• Psychographic segmentation - segmenting markets based on personality, motives, lifestyles, and geodemographics

Psychographic variables:

− Personality – a person’s traits, attitudes, and habits

− Motives – emotions and desires that can drive purchasing decisions

− Lifestyles – the way people spend their time, the importance of the things around them, their beliefs, and socioeconomic characteristics

Select a market or product category for study

Choose a basis or bases for segmenting the market

Name segments and descriptions

10/04/2024

Segmentation - Who are your customers?

Positioning - What do you want to tell them to get their attention?

Targeting - Which media channels do you want to use?

Positioning refers to the place that a brand occupies in the minds of

customers and how it is distinguished from competitions’ offering.

•  It is not about creating something new and different, but to redefine what’s

already up there in the mind and retie the connections that already exist.

•  It Influences potential customers’ overall perception of a brand, product line, or

organization in general.

Positioning Bases

• Firms use a variety of bases for positioning, including the following:

− Attribute: A product is associated with an

attribute, product feature, or customer

benefit.

− Price and quality: This positioning base

may stress high price as a signal of quality or

emphasize low price as an indication of

value.

− Use or application: Stressing uses or

applications can be an effective means of

positioning a product with buyers.

− Product user: This positioning base focuses

on a personality or type of user.

− Product class: This associates the product

with a particular category of products.

− Competitor: Positioning against

competitors is part of any positioning

strategy.

− Emotion: Positioning using emotion focuses

on how the product makes customers feel.

 Strategies for Selecting Target Markets

 The market segmentation process is only the first step in deciding whom to

approach about buying a product.

• The next task is to choose one or more target markets.

− Target market – A group of people or organizations for which an organization

designs, implements, and maintains a marketing mix intended to meet the needs of

that group, resulting in mutually satisfying exchanges

• If a marketer wishes to appeal to more than one segment of the market, it must

develop different marketing mixes.

Undifferentiated

Advantages -

Potential savings on production/marketing costs

Disadvantages -

• Unimaginative product offerings

• Company more susceptible to competition

Concentrated

Advantages -

• Concentration of resources

• Can better meet the needs of a narrowly defined segment

• Allows some small firms to better compete with larger firms

• Strong positioning

Disadvantages -

• Segments too small or changing

• Large competitors may more effectively market to niche segment

Multi-segment

Advantages -

• Greater financial success

• Economies of scale in

production/marketing

Disadvantages -

• High costs

• Cannibalization

10/07/2024

Chapter 9

Marketing Research

Market research – The process of planning, collecting, and analyzing data relevant to a marketing decision

• Marketing research:

− Is the function that links the consumer and public to the marketer through information

− Provides decision makers with data on the effectiveness of the current marketing mix and with insights for necessary changes

− Is a main data source for management information system

The first decision for a manager is whether to conduct marketing research at all.

Research should be undertaken only when the expected value of the information is greater than the cost of obtaining it

3 Types of Data

Secondary Data- Data previously collected for any purpose other than the one at hand

Primary Data - Information that is collected for the first time, used for solving the particular problem under investigation.

Big Data- The exponential growth in the volume, variety, and velocity of information and the development of complex, new tools to analyze and create meaning. 

10/09/2024

Chapter 10

Product Concepts

• The product offering is usually the starting point in creating a marketing mix.

Product - Everything, both favorable and unfavorable, that a person receives in an exchange

• Can be a tangible good, such as a pair of shoes.

• Can be an intangible, such as a service or idea.

Types of Consumer Products

Products can be classified according to intended use

• Business product - used to manufacture other goods or services, to facilitate an organization's operations, or to resell to other customers

• Consumer product - bought to satisfy an individual's personal wants or needs.

The two types are marketed to different target markets using different distribution, promotion, and pricing strategies.

The most popular classification of consumer products are 1, convenience, 2 shopping, 3 specialty, and 4 unsought

Convivence product - a relatively inexpensive item that merits little shopping effort

• Usually bought without much planning

• Sometimes recognized by brand name

• Normally require wide distribution to sell sufficient quantities to meet profit goals.

10/11/2024

Continuation of Chapter 10

Shopping Product - a product that requires comparison shopping because it is usually more expensive than a convivence product and is found in fewer stores

• Usually purchased only after consumer compares several brands or stores on style practically, price, and lifestyle compatibility.

• 2 types of shopping products

• Homogeneous - basically similar ex washer and dryer

• Heterogeneous - essentially different ex chair

Specialty product - a particular item for which consumers search extensively and are very reluctant to accept substitutes.

• Often uses selective, statue-conscious advertising to maintain an exclusive image

• Distribution often limited to one or a very few outlets in a geographic area

• Brand names and quality of service are often very important

Unsought product - a product unknown to the potential buyer or a known product that the buyer does not actively seek

• New products fall into this category until advertising and distribution increase consumer awareness of them

• Generally sold directly through a salesperson, direct mail, or direct response advertising

10/14/2024

The rest of chapter 10

Production modification - changing one or more of a product's characteristics

• Quality modification - a change in a product's dependability or durability to lower the price or help the firm compete with rival firms.

• Functional modification - a change in a product's versatility, effectiveness, convenience, or safety.

• Style modification - a change in how the product looks

Planned obsolescence - the practice of modifying products so those that have already been sold become obsolete before they actually need replacement. Ex. Printer

Product line extension - adding additional products to an existing product line to compete more broadly in the industry

Product lines can be overextended when

• Some products in the line yield poor sales or cannibalize sales of other items in the line.

• Manufacturing or marketing resources are disproportionately allocated to slow-moving products

• Some items in the line are obsolete because of the new entries or new competitor products.

Product Items, Lines, and Mixes

Adjustments to Product Items, Lines, and Mixes

3 major benefits are likely when a firm contracts an overextended product line

• Resources become concentrated on the most important products

• Managers no longer waste resources trying to improve the sales and profits of poorly preforming products

• New -product items have a greater chance of being successful because more financial and human resources are available to manage them.

10/10/2024

Chapter 11

The Importance of New Product

New products are important to sustain growth, increase revenues and profits, and replace obsolete items.

• Some companies spend a considerable amount of money each year developing new products

• Knowing when to introduce a new product is challenging due to many unknowns.

Some companies choose to introduce a new product even when it will cannibalize sales of an existing product

Despite the amount of time and money spent on developing and testing new products, a large proportion of new product introductions fail.

The most important factor in successful new product introduction is a good match between the product and the market needs.

Many products fail to perform poorly because:

• The product was incorrectly targeted, positioned, distributed, or promoted

• They don't offer any discernible benefits as compared to existing products

• Market size was smaller than estimated

• The price was inappropriate

• The product was inferior

Categories of New Product

New Product - new to the world, the market, the producer, the seller, or some combination of these

6 categories of new products

1. New to the world product - create an entirely new market

2. New product lines - allow a firm to enter an established market

3. Additional to existing product lines - supplements to a firm's established line

New product strategy - a plan that links the new product development process with the objectives of the marketing department, business unit, and the corporation

• All 3 objectives must be consistent with one another

A new product strategy is part of an organization's overall marketing strategy.