Bus 204
Chapter 7 - won’t be on the exam but we will see it later!
What is marketing research?
Marketing research is challanging
Used to obtain information to determine consumer demand
Five-step marketing research approach:
Decision: Conscious Choice among alternatives
Decision Making: Structured Approach to choosing
Used to obtain information to determine consumer demand
Five step Approach
Define the problem
Set research objectives
Identify possible marketing actions
Develop the research plan
Specify constraints
Identify data needed for marketing actions
Determine how to collect data
Collect relevant information
Obtain secondary data
Obtain primary data
Develop findings
Analyze the data
Present the findings
Take marketing actions
Make action recommendations
Implement action recommendations
Evaluate results
Specify Constraints -
Identify data needed for marketing action
Determine how to collect data
Concepts - ideas about products
Methods - Approaches to collect data
Sampling - asking a group for input
Relevant Information for rational, informed marketing decisions.
Types of data
Secondary Data
Internal data - Inside the firm
External data - Outside the firm
Primary Data
Observational data - what you see out in the real world
Questionnaire data - Idea generation methods - coming up with ideas, testing an idea
Other sources of data
Big Data - Describes large amounts of data collected from a variety of sources
Challenge is to transform data into useful information
Data Visualization - The presentation of analysis information
Intelligent Enterprise -
Data Mining
Sophisticated data mining reveals personal information
Predictive Modeling
Predictors, variables, affect the likelihood of future results
Sales Forecast
Three main sales forecasting techniques
Direct Forecast - estimates the value without any intervening stops
Lost-horse forecast - starts with the last known value and loss factors that could affect the forecast
Chapter 8 & 9:
Market Segmentation
Aggregating buyers into groups that have common needs and will respond similarly to
Identify Market Needs
Benefits in terms of
Product features
Expense
Quality
Savings in time and Convenience
Link Needs to actions
Take Steps to segment
Segment Markets when there is opportunity for increased returns
Three Segmentation Strategies
1. One product and multiple market segments
Multiple products and multiple market segments
Segments of one “mass customization”
The Segmentation Tradeoff: Synergies versus Cannibalization
Organizational Synergy - Better Functioning organization
Cannibalization - stealing sales from yourself
“Tiffany/Walmart” strategy - selling to high - end and low - end segments
Identify Product needs
Group potential buyers into segments
Group
Criteria to use in forming segments
Simplicity and cost-effectiveness
Potential for increased profit
Similarity of needs and buyers within a segment
Difference of needs of buyers among segments
Potential of a marketing action to reach a segment
Ways to segment consumer markets
Geographic Segmentation - where live or work
Demographic segmentation - objective classification
Psychographic segmentation - subjective attributes
Behavioral segmentation - observable action
Usage rate
The 80/20 rule
Customer Patronage
Has long-term financial consequences
Companies continuing relationships with customers
Customer Lifetime value
CLV = $ Margin * [Retention Rate % / (1 / Discount rate % - Retention Rate %)]
Average CLV for Wendy’s restaurants
Average CLV = $132 * [0.78 / (1+0.06 - 0.78)] = $378
Variables to use in forming segments for wendy’s:
Students:
Dorms, Sororities, and fraternities
Apartments
Day Commuters
Night Commuters
Segmenting Organization Business markets
Geographic Segmentation - Statistical area
Demographic Segmentation - By NAICS code; by number of employees
Behavioral
Criteria
Market size
Expected Growth
Competitive Position
Cost of reaching the segment
Compatibility with the organization’s objectives and resources
Market-Product synergies: A balancing act
Marketing synergies
Product synergies
Head to Head positioning
Compete on similar products
Differentiation Positioning
Seek a less competitive market
Writing a positioning statement:
Derived from company’s customer value proposition
Product Positioning
1. Identify important attributes for a product or brand class
2. Discover how customers rate competing products or brands on these attributes
Products
Goods
Non durable goods
Durable goods
Services
Ideas - thought that leads to action
Consumer Products
Convenience products
Shopping products
Speciality products
Business Products
Sales are the result of derived demand
Components - items that become part of the final product
Support Products
Installations - building and equipment
Accessory equipment - tools and office equipment
Supplies
Industrial Services
Delivery Classification
1. People or equipment
2. For profit or nonprofit organizations
3. Government agencies
For I’s of services
1. Intangibility - cannot be seen or touched pre-purchase
2. Inconsistency - depends on people delivering service
3. Inseparability - consumer links provider and service together
4. Inventory - pay provider and provide equipment
Gap analysis
Expectations versus experiences
Dimensions of service quality
Reliability
Tangibility
Responsiveness
Product Class
Or industry to which it belongs
Product Items
Stock Keeping Unit
Product Line
Closely related group of items
Product mix
All of the product lines offered by a company
Newness - What makes a product new?
Product is new if it is functionally different from existing products
Revolutionary newness can create new industries
Feature bloat
Unnecessary features or functions
Feature Fatigue
Complex products that do not maximize satisfaction
Newness - Consumer perspective
Continuous innovation - consumers do not change behavior
Dynamically continuous innovation - minor behavior changes are needed
Discontinuous innovation - consumers change significantly
Newness - Legal
“New” term is limited to 6 months
Newness - Organization perspective
Product line extension - improvement to product line
Brand extension - using brand name on a new product
Jump in innovation - radical invention
Marketing reasons for failure
Insignificant points of difference
Incomplete market and product protocol
Not satisfying customer needs on critical factors
Bad timing
Marketing reasons for new-product failures
No economical access to buyers
Poor execution of the marketing mix
Organizational Inertia
Encountering “groupthink”
Avoiding the “not invented-here” problem
Open innovation - practices that encourage the use of external and internal ideas
Tracking Performance
Marketers monitor new product performance
New product vitality index is used by 62% of companies (index between 20 and 30% is good)
Seven Stages if new-product development process
1. New-product strategy development
SWOT analysis
Environmental scanning
Protocol and strategic role defined
Disruptive innovation can occur
2. Idea Generation
Internally and externally
Employee and friend suggestions
Customer and supplier suggestions
Crowdsourcing
Research and Development Laboratories
Industrial Design (Apple)
Outside sources
3. Screening and evaluation
4. Business Analysis
Business fit of the new product
Financial projections
5. Development
Lab and consumer tests
Results in the demonstrable product
6. Market Testing
Standard market tests
Controlled Market Tests
Simulated Market Tests
7. Commercialization
Full scale production and sales
Chapter 10 -> Managing Successful Products, services, and Brands
Product Life Cycle
Introduction
Stimulate Trial
Primary Demand
Selective Demand
Skimming Strategy
Penetration Pricing
Growth
Rapid Sales growth
More competitors
Profits Peak
Advertising for selective demand
Repeat Purchases
New features
Broad Distribution
Maturity
Industry/Product sales slow
Fewer new buyers
Profit declines
Profit differentiation
Fewer Competitors
Examples: Soft Drinks, Breakfast Cereals
Decline
Industry/Product Sales Drop
Price Drops
Environmental Changes
Deletion
Harvesting
Shape of the Life-cycle curve
Generalized life cycle
High -learning product
Low learning product
Fashion product
Fad product
*There are differences between product classes and forms
Product Class
The entire product category or industry
Vinyl or CD
Product Form
Variations of a product within the product class
Consumer Population Divided into five categories
Innovators - 2.5%
Venturesome
Highly educated
Uses multiple information sources
Early Adaptors - 13.5%\
Deliberate
Many informal Social contacts
Early Majority - 34% \
Fear of debt
Neighbors and friends are information
Late Majority - 34%
Leaders in social setting
Slightly above average education
Laggards - 16%
Skeptical
Below social status
*The product life cycle and diffusion of innovation have barriers to adoption
Usage
Product/Brand Manager Responsibilities
Manage product life cycle stages
New product development
Marketing program implementation
Extensive data analysis, including
Category development index - CDI
Brand Development Index - BDI
Product Modification
Product Bundling
New Characteristics
Market Modification
Finding new customers
Increasing products use
Product repositioning
Changing place product occupies in a consumer’s mind
Change the value offered
Trading up
Trading Down
Downsizing - Reducing content in package
Reacting to competitors position
Reaching a new market
Catching a rising trend
What are the importance of:
Branding
Brand Name
Symbols, logos, and characters
Trademark
Brand Personality
Brand Equity
Provides a competitive advantage
Consumers are willing to pay a premium
Brand Purpose
Creating Brand Equity
Develop positive brand awareness
Establish a brand’s meaning for consumers
Elicit the proper response to brand’s meaning
Create intense brand loyalty with consumers
The customer-based brand equity pyramid
Customer brand connection
Consumer judgements
Consumer feelings
Brand performance
Brand imagery
Brand Awareness
Valuing Brand Equity
Provides a financial advantage
Brands can be bought and sold
+ Brand licencing
When You create a Brand Name it should
Suggest product benefits
Be memorable, distinctive, and positive
Fit the company or product image
Have no legal or regulatory restrictions
Be simple and emotional
Have favorable phonetic and semantic associations in other language
Branding Strategies
Multiproduct Branding Strategy
Product line extensions
Using brand name to enter new markets in its product class
Each product
Subranding
Combines corporate brand with a new brand
Brand extension
Use current brand name to enter different product class
Co-branding
Pairs two strong brands for mutual benefit
Multi Branding Strategy
Private Branding Strategy
Mixed Branding Strategy
The Seven P’s of Services Marketing
1. Product
2. Price
Off-Peak Pricing
3. Place (Distribution)
Promotion
Publicity - Free
Public service announcement
Public relations - paid for
5. People
Depend on people for the creation of the service
6. Physical Environment
Influences the perception of the service
7. Process
Capacity Management
Chapter 11 - Pricing products and services
Price Equation
Final Price = List Price - (Incentives + Allowances) + Extra Fees
Price is what a consumer pays
Value is what the consumer receives
Value Equation
Value = Perceived Benefits/Price
Value pricing
Price in the marketing Mix - Profit equation
Profit= Total Revenue - Total Cost (Variable and Fixed cost)
Select an Approximate Price Level
Demand Oriented Approaches
Skimming
Penetration
Prestige
Odd-even
Bundle
Cost-oriented approaches
Standard Markup
Cost-plus
Profit Oriented Approaches
Target Profit
Target Return on sales
Target Return on Investment
Competition-Oriented Approaches
Customary
Above, at, or below market
Loss leader
Demand-Oriented Pricing Approaches
1. Skimming Pricing
Standard Markup Pricing
Cost
Selling pricing
Cost Plus Pricing
Cost plus percentage of cost pricing
Cost plus fixed fee pricing
Target Profit Pricing
Target Return on sales
Target Return on investment pricing
Customary Pricing
Demand Factors
Consumer tastes
Price and availability of similar products
Consumer Income
(Demand Curve Based)
Price Elasticity of demand = Percentage change in quantity demanded/Percentage Change in price
Total Revenue = Price * Quantity
Total Cost = Total fixed cost * total variable cost - The total expense incurred by a firm in produci
Unit variable cost
Break even point - The quantity at which total revenue and total cost are equal
BEP calculations - BEP = Fixed Cost/Unit Price-Unit Variable cost
Profit
Return on investment
Return on assets
Managing for long-run profits
Maximizing current profit objective
Target return
Pricing Objectives
Sales revenue
Market share
Unit Volume
Survival
Social Responsibility
Pricing constraints
Demand for the product class, product group, and brand.
Newness of the product: stage in the product life cycle
Newer products usually priced higher
Cost of producing and marketing the product
Competitor prices
Legal and ethical considerations
Discounts
Quantity discounts
Seasonal discounts
Trade discounts
Cash discounts
Allowances
Reductions from list price to buyers for performing some activity
Trade in allowances
Promotional Allowances
Everyday Low pricing