Marketing Notes BUSML3150
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Popular in Marketing
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Date Created: 02/09/15
Marketing Notes 9314 Chapter 1Overview of Marketing 0 Mango super fruit bursting with antioxidants and over 20 different vitamins and minerals source USDA wwwmangoorg Ben and Jerry s or Red Mango Unilever and NestleDreyer s undisputed leaders of frozen dessert market Unilever manufactures and distributes Breyer s Ben and Jerry s Good Humor Klondike and Popsicle NestleDreyer s responsible for HaagenDazs Skinny Cow and Edy s 25 billion frozen yogurt market Minimalism in avor choices part of Red Mango s brand image Probiotics promise to aid digestion Ben and Jerry s based in Vermont 1978 fund community oriented projects politics re ected in ice cream namesquotChubby Hubbyquot to quotHubby Hubbyquot in September 2009 What is Marketing Make a decision to part with time or money to receive service or product American Marketing Association de nes marketing as the activity set of institutions and processes for creating capturing communicating delivering and exchanging offerings that have value for customers clients partners and society at large Marketing Plan broken down into componentshow product or service will be conceived or designed how much it ll cost where and how it s promoted and how it will get to the customer Core Aspects of Marketing 0 Helps create value About satisfying customer needs and wants Entails an exchange Requires product price place and promotion decisions Performed by individuals or organizations Occurs in many settings PepsiCoke battle worldwide 0 So a Vergara Pepsi Taylor Swift songiTunes exchange hear 1 song on XM friend tweets about album Taylor Swift fan page on Facebook go to iTunes buy 1 song go back for more later and iTunes already has your information Potential customers interest AND ability to buy Everyone needs transportation not everyone can afford a Hybrid Lexus Marketing Mix 4 P39s o Promotioncommunicating value 0 Productcreating value goods services ideas bike helmet example OOOOO Marketing Notes 0 Pricecapturing value 0 Placedelivering value SO Delicious Dairy FreeCherry Amaretto Coconut based frozen desserts are extremely popular Rafael NadalNike Goods can physically touchNike PepsiCola Budweiser Kraft Cheese Tide iPod Services intangiblebuy tickets for the experience hotel insurance spa ATM eye doctor goods and service Sting concert goods and service Skiing Industry 0 Breckenridge Ski Resort Colorado45 intermediatebeginner trails One Ski Hill Placefull kitchen iPod docs laundry 0 Vaillittle piece of the Alps 4 Seasons Resortsushi and massage o Canyons Resort in UtahCongressional Action 2 mile gondola system connecting 7 Wasatch Mountain resorts Supply Chain Management 0 Set of approaches and techniques that rms employ to efficiently and effectively integrate their suppliers manufacturers etc into a seamless value chain where merchandise is produceddistributed in right quantities to right place at the right time minimizing costs and satisfy service levels DlY Frozen Yogurt average order size 14 02 average check 546 toppings strawberries and mampm s top 3 avors vanilla cake batter and blueberry tartini Calvin Klein provocative ads sells youth style and sex appeal Businesses use Facebook to get quotlikesquotony 13 of users ever write reviews on websites Marketing Performed by Individuals and Organizations oManufacturersB2BRetailerB2CConsumerC2CConsumer Got Milk David Beckham and Demi Lovato Turn of the 20th centuryproduction oriented good product will sell itself Henry Ford founder of Ford Motor Company quotCustomers can have any color they want so long as it s blackquot 20th centuryproduction 1920sales 1950marketing 1990valuebased marketing value relationship of bene ts to costwhat you get for what you give Value Cocreation customers act as collaborators to create productserviceNike custom shoes Drew Barrymore and Jeans Levi s Lee s and Wrangler sstill have comfortable prices PyjamaJeans Marketing Notes Jeans used to be badge of rebellion now symbol of power 0 4 Activities to become Value Driven 0 1 Share information about customers and competitors Ex J Crew 0 2 Strive to balance bene ts and costs Ex lKEA low price great design 0 3 Concentrate on building new relationships CRM 0 4 Take advantage of new technologies and connect with customers via social media 0 Logistician in charge of getting merchandise to store 0 Customer Relationship Management focus on identifying and building loyalty among most valued customers 0 34 of US companies use social media for marketing 0 Only 10 world uses Facebookrest don t have access to internet 0 46 hotel booking online are through Expedia Travelocity Orbitz Priceline and Kayak Restaurants are using Foursquare Gowalla chngr Loopt to connect locally with customers 0 BW3 s mobile contests 0 Importance of Marketing 0 Can be entrepreneurial o Enriches society 0 Expands global presence 0 Pervasive across channel members 0 Dutch grocery store giant is Ahold in US called Stop and Shop GIANT and Peapod Marketing helps expands firm s global presence also enhances global career opportunities for marketing professionals 0 Levi Strauss and Co uses auto inventory system to replenish stock 0 Entrepreneurs 0 Ben and Jerry s75 pro t to charity 0 Bose oAmazon o Net ix oThe Oxygen Network Oprah 0 Green Seal Stampmeets environment standards 0 PampG Green Guarantee Marketing Notes Chapter 5 Analyzing the Marketing Environment Companies The Cool Hunter and Trend Setters collect summarize and describe the latest and greatest ideas in various realms o Constantly growing interest in getting back to nature 0 The Cool hunterpromises its goal is to be authority on all things cool 0 Trend Hunters exclusively targets brands that want more information about what s happening in their environmentrelies on contributionsljlnoticed billboards have changed radicallynow they create shocking in your face versions and even spray scents Consumer is center of all marketing efforts Monitor Macroenvironment culture demographics social technology economic and politicallegal Immediate Environment company corporate partners competition 1st factor that affects consumer is the rm itself Gillette and Schick are competitors in razor marketcall each other out about false advertising Corporate Partners car manufacturers collaborate with suppliers of sheet metal tire manufacturers component part makers unions transport companies and dealerships Example Nau makes outdoor clothing from renewable resources corn and plastic bottles wool from quothappyquotsheep CDSTEP Macroenvironmental Factors 0 Culture shared meanings beliefs morals values and customs of a group of people Country Culture visible nuances artifacts behavior dress symbols physical settings ceremonies language differences colors and tastes and food preferences Example BMW mini bridged cultural gap producing ads to appeal to same target market across countrieschange the language of the ad but not picture or message Regional Culture affects the way people refer to think Example soda quotpopquot quotcokequot Dr Pepper from Texas 1885 Demographics indicate characteristics of human populations and segmentsage gender race income Get from SymphonyInformation Resources Inc Example CVS extracare card collects dataljeasily understood snapshot of consumers o Generational Cohortsgroup of people in same generation have similar purchasing behaviors Baby Boomers born after WWII 19461964 Generation X born 19651976 mom and dad Generation Y me born between 19772000 Marketing Notes Generation Z born 20012014 Generation Z quotDigital Nativesquot better appreciation for diverse cultures but confronted by terrorism facilitated by technology and environmental concerns Raised by and lots in common with X parentswatch same shows like video games Gap and J Crew Generation Y quotMillennialsquot more than 60 million in the US kids of the Baby Boomers entering workplacestrong emphasis on balancing work and life marriage is secondary quottweensquot have never lived without internet or cell phones techsavvy uniform ofjeans sneakers and t shirts Generation X 41 million Americans 1st generation of latchkey children both parents worked 50 have divorced parents led them to be quothelicopter parentsquot enjoy greater economic prosperity marry later on more cynical and demand convenience Baby Boomers 78 million Americans oldest collecting social security individualistic love leisure time take care of themselves obsessed with maintaining youth always love rock n roll heavy internet users and research before online purchasing By 3 kids can recognize an average of 100 brand logos 1998 Children s Online Privacy Protection Act Facebook has advantages with younger kids Income distribution in US is more polarized highest income is growing middlelower incomes real purchasing power declining 0 Increase in wealthy families due to Maturing of general population Increase in dualincome households Higher overall level of education Hammacher Schlemmer unusual toys like Fuel Cell Car and In atable Climbing Iceberg WalMart Toys inexpensive products Higher levels of education lead to better jobs and higher incomes Gender gender roles starting to blur rms are careful about gender neutrality Women s Marathon in San FranciscoNike provided a quotchocolate milequot pedicures Tiffany necklaces Ethnicity 80 population growth in next 20 years will come from African American Hispanic and Asians 14 minority population 0 Hispanic in uence risingmarketers take a separate approach 0 Pizza PatronDallas based adding English to originally Spanish 0 US is like a salad bowl Social Trends emphasis on thrift healthwellness green privacy and timepoor societies 0 Thrift save more spend less on luxuries Groupon and Living Socialsatisfy desire for deals Marketing Notes Extreme Couponing bottlenecks in checkout lines stock outs inventorysupply chain problems fraudulent coupons people don t have luxury of using extra rooms for hoarding goods 0 Health and Wellnesichildhood obesity has doubled and teenage obesity tripled in past 20 years Food items must have basic nutrients less than 30 total calories from fat and include no added sweeteners Burger King can no longer use SpongeBob to promote Yoga is growing in popularity additionals o Greener green marketing supplies customers with environmentally friendly merchandise nearly 12 US recycles greenwashing disingenuously marketing environmentally friendly to only gain approval Puma uses green bag instead of box for shoes quotClever Little Bagquot 0 Privacy Concerns Do Not Call Registry Hackers etc 0 Time Poor Society lack of leisure time leads to multitasking internet shopping self check out extended hours electronic kiosks o Technological Advances improve value of productsservices Net ix Pandora Amazonmake suggestions for you based on collected data Radio Frequency Identi cation Device RFIDtracks an item the moment it s manufactured through distribution to retailer and nally to customer Foursquaretips where to park what to and what not to order awards badgesearn you discounts incentives to bring friends Facebook able to quotcheck inquot too tagging 0 Economic Situation rate of in ation currency exchange rates and interest rates Global nancial markets closely connected if 1 falls everyone suffers US dollar is low compared to others currency 0 PoliticalRegulatory political parties government organizations legislation and laws Government enacted laws promoting fair trade and competition 1890 Sherman Antitrust Actprohibits monopolies Protect consumers with legislation Marketers required to abstain from falsemisleading ads 0 Manufacturers refrain from harmful materials 0Adhere to fair and reasonable business practices when communicating with customers 0 14 cable companies provide low cost internet to impoverished people 0 Seventh Generationenvironmentally friendly cleaning products Vermont 1988 free samples to active bloggers cost more relies on enzymes to clean clothes Marketing Notes Chapter 6 Consumer Behavior Companies such as American Eagle HewlettPackard and Red Bull use students to market goods to peers and classmates o Leads to wordofmouth forming habits and brand loyalty Zipcar and Ford joined together to make a Ford Focus Sedan available hourly for a fee 250 colleges use it These companies target younger buyers to shape their consumer behavior Must ask WHY people buy goods to understand consumer behavior People choose 1 over another perceiving it to be better value ratio of bene ts to cost is higher than another Ann Taylor and Macy s dress example Consumer Design Procesi steps consumers do before during and after purchase 0 Need Recognition 0 Information Search 0 Alternative Evaluation 0 Purchase 0 Post Purchase Need Recognition consumers recognized an unsatis ed needwant to move from needy to desired state 0 Greater discrepancy between 2 states the greater the need recognition Example hunger o Wants not needed but desired 0 Consumer needs classi ed as functional psychological or both 0 Functional Needs pertain to performance of product or serviceEx BMW 0 Psychological Needs pertain to personal grati cation associated with product or serviceEx shoes Louboutin or Haircuts15 or 80 0 Successful marketing key determine correct balance of functional and psychological needs best appeal to target market Ex Marriottdiscontinued paper deliverysavings avoid massive layoffs Supports core value of taking care of Marketing Notes employees Switch to Edy s from Haagen Dazs Also offers free night and discount rates Search for Information search for information about various options to satisfy need length and intensity of search based on degree of risk of purchase 0 2 Key Types of Information Search 1 Internal examine memory knowledge of product from past experience 2 External seeks information outside personal knowledge ll gaps by talking to people scour commercial media for unbiased information magazines TV radio blogs Ex out ts on Gossip Girl 0 Factors Affecting Consumer Search Processes 1 Perceived Bene tw Perceived Cost s of Search worth time and effort Ex real house vs doll house 2 The Locus of Control a Internal Locu believe they have control over outcomes of their actionsengage in search more Ex stocks b External Locus believe fateexternal factors control outcomesdoesn t matter how much information gathered Ex mutual funds 3 Actual or Perceived Ris a 5 Types of Risk can DelayDiscourage Purchasi i Performance danger in poorly performing goodservice Ex Dress shrink ii Financial monetary outlay initial cost and cost of using Ex dry clean iii Social others won t like purchase Ex more stylishexpensive iv PhysiologicalSafety what might happen if performance fails harm Ex car and McDonalds v Psychological why you feel it doesn t convey right image Evolution of Alternatives sift through choices and evaluate Ex Rule out certain storestypes of dresses Loyal people forgo alternatives 0 Attribute Sets Minds organize and categorize alternatives to help decision Universal Sets apparel include all choices in categorymarketers focus on subset Retrieval Sets Macy39s Ann Taylor Gap Banana brandsstores readily brought forth from memory Evoked Set Banana and Macy39s comprises alternative brandsstores consumer would consider Marketing Notes Evaluative Criteria salientimportant attributes about product Ex selling price t reputation quality etc Determinant Attributes features important to buyer which competitors differ Consumer Decision Rules criteria used consciouslysubconsciously to quickly choose Compensatory Decision Rule trade 1 characteristic against anothergood compensates for bad Ex higher priced cereal worth it for overall rating 0 MultiAttribute Model chart with numerical ratings Noncompensatory choose based on 1 characteristic regardless of values of other attributes EthicalSocietal Dilemma Part 142 low income women in US obese 17obesity in US youth McDonald s trying to accommodate laws and fat people Part 2 4 naturalorganic food Snapple natural has high fructose corn syrup USDA Natural Organic Program Regulations Natural still doesn t mean healthy Social and Mobile Marketing App ShopTogethercollaborate with friends on retail sites MAC website GNC Mattel and Charlotte Russe Seshcom Facebook Stuck App 0 Purchase 6x Consumption O 0000 0P0 M 0 Conversion Rate measure how we purchase intentions convert to purchases Net ixrenta Rent the Runway Warner Bros bought Flixster initiated Ultra Violet Zappos and Overstock create urgency Gilt 36 hour period tpurchase entails actual consumers Outcomes 1 Customer Satisfaction a Build realistic expectations not too high or low b Demonstrate correct use c Provide back guarantees and warranties d Encourage feedback e Make contact periodically and thank 2 Postpurchase Dissonance internal con ict from inconsistency between 2 beliefsbeliefs and behavior a Buyer s Remorse and questions purchase after making decision b Frequent with expensive items Marketing Notes c GE sends letter d Reduce dissonance by i Return item ii Focus on positive 3 Customer LoyaltyUndesirable Behavior a Negative word of mouth b Whirlpool FB page to quotkeep the badquot 0 Factors In uencing Decision Procesi 0 Marketing Mixproduct price place promotion 0 Psychological Factorsmotive attitude perception learning lifestyle 0 Social family reference group culture 0 Situationalpurchase shopping temporal state sychological Factors 0 Motive needwant strong enough to cause to seek satisfaction 0 Maslow39s Hierarchy of Needs Physiological biological necessitiesfood drink rest shelter Ex Taco Bell Milk Beautyrest Marriott Safety protectionphysical wellbeing Ex airbag alarms vitamins organic Love interactions with others Ex haircuts makeup deodorant cards Esteem satisfy inner desires Ex yoga meditation health club books Self Actualization completely satis ed with life Attitude enduring evaluation of feelings and behaviors toward objectideal learned and long lasting 0 3 Components Pirates of Caribbean example Cognitive person s belief systemwhat we believe is true Affective involves emotionshow we feellike or dislike Behavioral actions we undertake based on what we knowfeel Marketing Communication attempt to change what people believe to be truehow they feel about something Perception process where we select organize and interpret information to form meaningful pictures of the world 0 Culture tradition and upbringing determine perception Learning change in person s though processbehavior arises from experienceaffects attitudesperception 0 Lifestyle way consumers spend time and money to live 0 Social Factors 0 Family consider needs of entire family 0 Reference Group 1 or more people used as basis to compare beliefs feelings and behaviors 0 Culture shared meaningbeliefmoralvaluecustoms of group of people Marketing Notes Situational Factors speci c to situation overridein uence physiologicalsocial issues 0 Purchase Situation Walmart for self Tiffany for wedding 0 Shopping Situation Store Atmosphere music scent light colorEx Cheesecake Whole Foods and Wegman s Salespeople educate encourage Ex Jordan s Furniture Crowding long lines hard to maneuver lnStore Demonstrations tastesmell Promotions BOGO quotfree giftquot Packaging appealcatch eye 0 Temporal State state of mindmoodtime of day 0 Customers spend 310 sec standing in front of products deciding Packaging is tremendously important Pringles tubes stand out Nonni s Biscotti added window to box 0 Involvement and Consumer Buying Decisions 0 2 types buying decisions Extended problem solving Limited problem solving impulse buying amp habitual o Involvement consumer s degree of interest in productservice Elaboration Likelihood Model Message ad High Involvement Low Involvement Greater attentiondeeper processing Less attentionperipheral processing Develop strong attpurchase intentionGenerate weak att amp increase use of cues Ex scrutinize infoprocess key elements Ex brand name celeb super cial lnNOut habitual like Wendy s is for me Loyal customer Marketing Notes 91814 Chapter 7 BusinesstoBusiness Marketing Levi Jeans usually use a lot of water in nishing process now making quotwater lessquot Single pair uses almost 2 lb of cotton Partnered with other large cotton consumers IKEA Adidas and Gap and World Wildlife Federation Levi adopted Eco Indexshows clothing manufacturers environmental and human impact of products ManufacturersLevi Siemens IBM Ford 0 Sell to Wholesalers 0 Sell as Retailers Service Firms UPS Oracles Accenturemarket services to other businesses but not to you Derived Demand re ects link between consumer demand for company output and company s purchase of necessary inputs to make or assemble the outputExample Staples lntel createdproduced processor critical to speed of computers from Dell or Compaq and Sony TV and Androids Marketing Notes Siemens identi ed core sectors healthcare energy technology and software Market leadership in water treatmentEnergy saving solutions trains and buildings Volkswagenbiggest auto manufacturer in Europe ownsdistributes Audi Bentley Bugatti Lambo Seat Skoda Scania VW amp VW o lUsed to spend 70 time on transactions now VWsupplygroupcom IBM used to manufacture computers now 90 pro ts software consulting and nance Resellers wholesalers distributors and retailers TJ Maxx and Marshall sbuy directly from 10000 manufacturersonly difference is price TJX never advertises speci c brands never returns unsold clothing iPads adopted by Wells Fargo SAP MercedesBenz Pilots SiemensApple claims 80 Fortune 100 companies are usingtrying Institutions hospitals schools religious organizations Government central Gov 1 of largest purchasers of goodsservicesspends over 5 billions a year on aerospace and defense from nuts and bolts to jet ghters BZB Buying Procesi 0 Need recognitionproduct speci cationRFP ProcessProposal AnalysisSupplier SelectionOrder Speci cationsVendorPerformance Assessment 1 Need Recognition Salt Lake school district wants tablets for middle schoolers Directly interact with materiasReady to buy 1000 2 Product Speci cation Consider alternatives laptops Speci cations included screen size battery life processor speed connects to Internet and delivery date Bundle education apps preloaded all others removed each come with screen protector power cord cover stand keyboard and headphones 3 year service contract 3 RFP Process Request for Pronosals organizations must invite alternate vendors and suppliers to bid on supplying components or speci cations a Web Portal site whose purpose is to be starting point when users connect to web b Gurucom freelance professionals connect with companies needing their servicedispute resolution escrow for payments and rate freelancer quality 4 Proposal AnalysisNendor NegotiationSelection narrow choices and discuss price quality delivery and nancing 5 Order Speci cation place order with preferred supplier includes detailed description of goods prices delivery dates and penalties for noncompliance Marketing Notes 6 Vendor Performance Assessment Using Metrics Customer service issue resolution delivery quality total a Importance must add up to 1 b5 point scale on performance cMultiply both together to get overall 0 6 Roles within Buying Center 1 Initiator 1st suggest buying productservice 2 ln uencer views in uence others in making nal decision 3 Decider ultimately determines any partentire decisionwhether to buy amp whathowwhere 4 Buyer handler paperwork of actual purchase 5 User consumers uses product or service 6 Gatekeeper controls informationaccess to decision makerin uencers a Example Purchases made by hospital screws for elbows ilnitiatorDoctor Lin uencer Medical Device Supplier amp Pharmacy LDecider Hospital ivBuyer Hospital Materials Manager vUserPatient LGatekeeper lnsurance Company 0Transparency International compares corruption rates of countries and industries 0 All world s 28 largest economies engage in briberies 0 China and Russia most likely to use money and gifts to in uence decisions Organizational Culture re ects set of values traditions and customs that guide employee behavior 0 WalMart buyers not allowed accepting gifts from vendors 4 Types of Buying Center Culture 1 Autocratic multiple participants but 1 person makes decision 2 Democratic majority rules 3 Consultative 1 person makes decision solicit input before doing so 4 Consensus all team members must reach collective agreement White Paper provide valuable information a businessman can easily understand and will help company address problems with new solutions Linked In executives from all Fortune 500 have memberships o CustomersProspects o Investors o Suppliers 0 EmployeesProspects o Analysts 0 Hootsuite makes easy for companies with Twitter 0 Colleges Alabama negotiate with Nike Marketing Notes 0 New Buy purchase good or service for 1st time Decision will be quite involvedmost complex and dif cult 0 Example New Balance tting players shoes Fashion Runway Shows 0 Modi ed Rebuy purchased similar product in past decided to change speci cations like price quality level customer service level option etc Current vendors have advantage OSU ask Adidas to modify after they see Michigan s improvements 0 Straight Rebuy buy additional units previously purchased Hubspot help companies transform marketing approach lnbound marketingearn interest rather than buyunderstand Facebook Twitter Online reviews blogs and sites how people learn and shop 0 Key word Grader 0 Marketing Analytics 0 2nCI fastest growing software as a service company 0 National Institute 0 for Fitness and Sport increased 200 traf cleads 16 social media traf c increase 92314 Chapter 9 Segmentation Targeting and Positioning Victoria39s Secret o Balance discrepancies between customer needs vs wants and this is what makes them successful o MultiuseSeven Way Bio Fit and Showstopper Pink Collection o Pink cobranded logos and names of college teams NFL and MLB o Core offeringappeal to women more concerned with curves than cost Segmentation Targeting and Positioning Procesi 1 Establish Overall Strategy or Objectives Must be consistent with rm s missionobjectives along with current situationstrengths weaknesses opportunities and threats SWOT Coke objective increase sales in mature industryCoke Zero targets healthconscious men 2 Segmentation Method Develops descriptions of different segments Marketing Notes Use geographic demographics psychographic bene ts and behavioral segmentation methods Soft drink divided based on bene ts Geographic Segmentation organize based on where they live 1 Most useful for products that satisfy needs varied by region 2 KrogerSafewaygoods are similar but vary by region Demographic Segmentation groups by easily measured objective characteristics age gender income education 1 Kellogg s uses age Cocoa Krispy Fruit Loops Special K AllBranalso genderSpecial Kwomen 2 Gendervery important Men channel surfPrime Time action with attractive casts Women personally relate to plot a lGillette uses this to decide which ads and where 3 Demographics poor predictors of active wear Psychographic Segmentation how consumers describe themselves 1 Selfvalues goals for life self respect belonging 2 Selfconcept image people ideally have of themselves 3 Lifestyles way we live Example Harley Davidson 4Value and Lifestyle Survey VALSconsumers classi ed into 8 segments ldenti es target segments and underlying motivation Correlations between psychology and lifestyle choices 5 Psychographic more useful than demographic Bene t Segmentation basis of bene ts derived from productservice 1 Hollywood uses constantly and effectively Heinz used Facebook to introduce new Balsamic Vinegar Ketchup o Offered limited edition then permanent depending on demand 0 Had specials technical dif culties then gave free bottle Behavioral Segmentation how they use productservice Occasion when purchasedconsumed o Example Men s Warehouse FritoLay o Loyalty invest in retention and loyalty initiatives to return most pro table consumers 0 Example US Air Marketing Notes Using Multiple Segmentation Methods quotbirds of a feather ock together 0 Combination of geographic demographic lifestyle oSame neighborhoods typically drive similar cars same appliances apparel shop at same stores oPotential Rating Index by Zip Market PRIZM 0 Examples Bohemian Mix and Big Sky Family 0 ESRl s 3 Evaluate Segment Attractivenesi ls segment worth pursuingis it identi able substantial reachable responsive and pro table Identi able Ensure segments are distinct 1 Modern Bride distinct from GQ readers Substantial measure size of identi ed markets Reachable can t have any impact if market can t be reached through persuasive communication and product distribution Responsive Customers must react similarly and positively to offering Pro table market growth competitiveness and access Segment Pro tability segment size x segment adoption x purchase behavior x pro t margin xed costs 1 Segment Size number of people in segment 2 Segment Adoption in segment likely to adopt productservice 3 Purchase Behavior purchase x of the time customer would buy in a year 4 Pro t Margin selling pricevariable costs selling price 5 Fixed Costs advertising expenditure rent utility insurance administrative salary Pro tability of HomeownerBusiness Segment for Camillo s Lawn Service 4 Select Target Market Undifferentiated Targeting StrategyMass Marketing 1 When everyone might be a potential user Examples sugar salt gas 0 Topspin web appsencourages quotrebundlingquot o Combines free downloads with physical products FanTrail App Differentiated Targeting Strateg target several markets with different offering for each 0 Example Conde Nast 20 niche magazines Vogue GQ Bon Appetit etc Concentrated Targeting Strateg select single primary target market focus all to provide for that market s needs Marketing Notes Example Newton Runningnot even all runnersthose that land on forefront MicromarketingOnetoOne Firm tailors product to suit an individual s wantsneeds De amp Lands End Internet makes it easy Cookies site stores in visitor browserprovide unique ID of each potential customer 0 AmazonStaples 0 Mars MampMs BuildaBear 5 Develop Positioning Strateg de ne marketing mix variables so targets have clear distinctive desirable understanding of what product does compared to competition Value proposition communicates bene ts received from productprovides reasons to want itCirces for Successful Value Proposition 1 Main Components Target Market Offering NameBrand ProductService CategoryConcept Unique point of differencebene ts quotGatorade and 7 Up Examples Positioning Method value attributes symbols competition 1 2 3 4 Value relationship of price to quality Not necessarily low price ExamplesPatek Philippe watches Hermes Chanel MercedesBenz Attributes Volvosafe but wants luxury Competition Examples Goodrich Tiresquotthe other guys 7Upquotuncolaquot McDonald s sues anyone with quotMCquot Positioning Strategy Method 1 eweww Determine consumers perceptionsevaluations of good in relation to competitors Identify markets ideal points and size Identify competitors positions Determine consumer preferences Select position Monitor strategy Sketchers and Crowne Plaza shift 0 Crowne Plazaattempt to appeal to young travelers Marketing Notes 10114 Chapter 11 Product Branding and Packaging Decisions 0 Under Armor 0 Branded as toughest and most competitive available o Heart pounding images Olympic skiing champ Lindsey Vonn Prowling hunter Athletes pound competition quotprotect this housequot o Founder Kevin Plank U of Maryland football o UA developed Cold Gear to insulate o Controls 3 US Performance clothing market nearly 12 of Nike s share Expanding has faced hurdles O Marketing Notes Footbal cleats Women s apparelnow generates 25 of revenue 0 Product anything of value to consumer and can be offered through voluntary market exchange 0 Goods services places ideas organization people communities 0 Complexity of Product 0 Core Customer Value de nes basic problem solving bene ts consumers are seeking What are customers looking for Mars MampM s Snickerssweet snack or energy boost Trek bikestransportation or speedexcitement o Convert value into an actual product oAttributes brand name featuresdesign quality level packaging important but level varies on product 0 Associated ServicesAugmented Product nonphysical aspects warranties nancing support and aftersale servicevary w product 0 Types of Products consider types because affects hot to promote price and distribute o 2 Primary Categories of Buyers 1 Consumers buy for personal usefurther classi ed by how they use and how they purchase oSpecialty effort to nd best suppliers o Ex Trek bike luxury car legalmedical professional designer apparel oShopping spend fair time comparing alternatives o Ex furniture apparel fragrance appliance travel oConvenience no effort to evaluate prior to purchase o Ex common beverage bread soap oUnsought don t think of buyingdon t know about 0 Ex GPS hand warmers Medpex insurance 2 Businesses 0 Product Mix complete set of all productsservices offered oConsists of 0 Product Line groups of associated items tend to use together 0 Ex Kellogg sready to eat cereal portabletoaster cookiescrackers naturalorganicfrozen Breadth number of product lines offered by rmKellogg s has 4 0 Depth number of products within product line oToo much breadth too costly too many brandsweaken rm s reputation o Example Revlon tried new line cute into sales of other brandseliminated 0 Why do Firms Change Breadth or Depth 0 Increase Depth might add to address changing preferences or to preempt competitors while boosting sales Marketing Notes Ex banks adding new account types Ave version for girls 0 Decrease Depth necessary to delete within line to realign resources Ex PampG had Tide Basic 20 cents cheaper than Tide Deleted after less than 1 year might undermine brand 0 Decrease Breadth necessary to delete entire line to address market conditions or meet internal strategic priorities Ex drop line of bread to focus on dairy products 0 Increase Breadth capture newevolving markets and increase sales Ex adds jam to complement bread ine Unilever39s Axe already owned 75 men s fragrance market Wanted to grow brands increase depth Axe Anarchy quotUnleash the Chaosquot comic book fantasy with YouTube FB Twitter etc by Xmen creator Scott Lobde Branding love or die based on brand awareness o Ex Kate Spade 3 different owners now Liz Claiborne owns and best performing brand outpacing Juicy Couture Mexx Europe and Lucky Brand o Way to differentiate from competitors Tropicana vs Snapple Value of Branding for Customer 0 Brands Facilitate Purcha Often easily recognized contain familiar attributes signify quality level help with quick decisions Ex Coa is Cola but brands matter Pepsi vs Coke 0 Establish Loyalty Learn to trust oEx Amazon and brand extension to Kindle 0 Protect from Competition and Price Competition Strong brands protected when more established and have more loyal customer base Neither competitive pressure on price nor retaillevel competition is threatening Ex Lacoste 0 Brands are Assets Can be legally protected by trademarkscopyrights and constitute unique ownership Ex Tootsie Roll sued Footsyroll 0 Brands Impact Market Value Well known brand can have direct impact on company s bottom line Vaue of company is overall monetary worth comprise vast number of assets Coca Cola is most valuable brand in the world Brand Equity for Owner Marketing Notes o Value of brand translates into brand equity set of asset and liabilities linked to brand that add or subtract from value o Can build manage and harness brands to increase revenue pro tability and overall value o How do we know how good brand ishow much equity it has 0 4 Aspects of Brand Determine Equity 1 Brand Awareness how many consumers familiar with brand what it stands for and have opinion about it oFamiliarity matters most to things bought without much thought soapgum but critical for infrequentnever purchased before Certain brands gain such predominance they become synonymous with product itself Kleenex Clorox Band Aid Rollerblades 2 Perceived Value relationship between bene ts and cost 0 Usually determine value in relationship to competitorsTarget hired Mizrahi and Missoni to create well designed with Target prices 3 Brand Association re ect mental links made between brand and key attributes slogan logo or famous personality oEx Toyota Prius Statefarm Hallmark 4 Brand Loyalty consume buys same brandproduct repeatedly Important source of value 0 Airline hotel phone credit card retailer reward loyalty customer relationship management CRM programs 0 Costs lower don t have to spend to attract loyal ones 0 Loyal tend to praise virtues of favorites positive word of mouth 0 High loyalty insulates rm from competitionthey won t switch 0 Barbie Video Girl brings girls to Foursquare o Branding Strategies 0 Ownership Brands can be owned by any rm in supply chain 2 Basic Strategies 0 1 Manufacturer brands 2 RetailerStore brands o Brands can be marketed using commonfamily name or as individual 0 Manufacturer BrandsNational Ownedmanaged by manufacturerNike Coke Kitchen Aid and Sony Marketing Notes Develop merchandise produces to ensure quality invests in marketing program to establish appealing to brand image Majority of brands in USspend millions to promote yearly By owning retain more control over marketing able to choose appropriate segments and positioning can build and create own brand equity 0 RetailerStore BrandsPrivateLabel Developed by retailers Sometimes manufacture or develop design and speci cations for brands then contract with manufacturers to produce In past sales were limited Now size increased through growthconsolidation have scale economies to develop privatelabel merchandise and use to establish distinct identi cation Store brands 20 purchases in N America and 30 in Europe Kroger private label 27 of its sale Costco and Trade Joe s based brand ID around store brand 0 Naming BrandProduct Lines no simple way oThe more products vary more likely should use individual brands Ex GM utilizes several brands Cadillac Chevy GMCeach caters to different target markets and needs Hyundai utilizes 1 brand because usageperformance homogeneous 0 Family Brands Firms can use own corporate name to brand all lines and products 0 Ex Kellogg s cereals When all sold under 1 family name individual brands bene t from overall awareness associated with it 0 Individual Brands can used individual name for each product Kellogg s allows Cheeze It and Keebler to keep ID 0 BrandLine Extensions 0 Brand Extension refers to use of some brand name in different product lineincrease in breadth Ex Dental hygiene market full of extensionsColgate and Crest 0 Line Extension used of same brand name within same product line00gtincrease depth 0 Advantages Using Some Brand Name for New Products 1 Already well established can spend less developing brand awareness and associations for new product 2 If original or extension has strong acceptance perception will carry overNeutrogena extensions Marketing Notes 3 Brand extension for complementary products synergy exists can increase overall salesFritoLay chips and dips 0 Brand Dilution extension adversely affects perceptions about attributes core brand is believed to hold Ex Cheetos Lip Balm Lifesavers Soda Colgate Kitchen Entrees Bic Disposable Underwear oTo prevent potential negative consequences consider Evauate t between product class of core and extension Evauate perceptions of attributes of core and seek similar for extensionbrand speci cation associations important for extension Refrain from extending to too many products and categories Consider whether extension will be distanced from core especially if want to use some but not all existing associations Cobranding marketing two or more brands together on some package promotion or store o Ex Yum Brands combo Pizza HutTaco Bell Can enhance consumer s perception of quality by signaling quotunobservablequot quality through links between rm s brand to well known brand Designed to appeal to diverse segments and extend hours which restaurant attracts customers Cobranding creates risks especially when customers of each are vastly differentBurger King and Haagen Dazs Also fails when there s disputes or con icts of interest 0 Brand Licensing contractual arrangement between rms1 allows other to use brand name logo symbolscharacters for negotiated fee o Common for toys apparel accessories entertainmentvideogames o Firm that provides right to use brand licensor obtains revenues through royalty payments from licensee o Royalty payments take form of lump sum licensing fee upfront or based on dollar value of sales o Popular form is use of characters created in booksother media o Effective form of attracting visibility for brandbuild equity while generating additional revenue o Risksdilution because overexposure or if brandcharacters use inappropriately Brand RepositioningRebranding marketers change focus to target new markets or realign core emphasis with changing market preferences o Can improve t with target segment or boost vitality of old it is not without costs and risks Marketing Notes Even when they enjoy bene ts of wellknown namerep may be necessary to reposition Ex PampG Ivory soap rst in 1879 now comes in bright package inks to and builds on wellestablished position always push to appeal to young moms in addition to care 0 MM important element with more tangible bene ts than other elements o Come in different types and offer variety of bene ts to consumers manufacturers and retailers Primary 1 consumer uses toothpaste tubeconsumers seek convenience of storage use consumption Secondary wrapperexterior carton contains primary and provides UPC label used by retail scanners Can use to nd additional product information Add value by facilitating carrying using and storing Plays Key Several Roles Attracts consumer s attention Enables products to stand out Offers promotional tool new improved Allows same product to appeal to different markets with different sizes Ex convenience store size vs Costco Changeupdate to subtly reposition attract new appear up todate Brands that associated with less harmful environment impact gain advantage to induce consumers with good conscious Tropicana changed lots of backlash quotWrap ragequot frustration with packaging hard to get to product Product Labeling o Provide information consumer needs for decisionconsumption o ID and can be used for promotion o Information must comply with laws and regulations Constituents ingredients where made directions and safety precautions FDA primary agency to review labels and ensure claims are true Highlight speci c ingredients vitamins nutrient and country of origin Bottle and tap water operate with different regulations Bottle water recently experiencing at growth because economy down and environmental concerns 0 0 0 Marketing Notes 10814 Chapter 12 Developing New Products Danish LEGOS rst in US 19605 Grew to become one of top toy manufacturers in the world Pro ts declined early 20005 because video games came about developed LEGO video games and pushed websiteinteractive quotMy LEGO Networkquot chidren build own page with own LEGO stuff LEGO friendsmini dos with names backstories and adventures for girls Focused on sets tripled pro ts 3 LEGO sets se every second worldwide Newtothemarket represent less than 10 of all new product introductions Innovation process by which ideas get transformed into new offerings products services processes and branding concepts that will help rm grow Without innovation rms would only have 2 choices 0 Continue to market current products to current customers o Take same product to another market with similar customers About 3 new products actually succeed Changing Customer Needs o Sometimes companies identify problems and develop new products and services customers never knew they needed o Canadian rm Frogbox rents reusable moving boxes donates 1 sales to frog habitat restoration o Uses solar energy to power website and wastegenerated biodiesel fuel trucks o Huggies introduced quotLittle Movers SlipOn Diapersquot make life easier for scrambling parents Attempted to engage customersupload video of tricky baby moves Market Saturation o Longer products exists more likely market will become saturated o Without new things value will decline Car companies revamp models every year o Automakers relying on new engineering to meet global demand Lighter smaller fuel ef cient o General Mills looking to niche markets for future growth High want to eliminate gutennow GM over 300 Gluten Free products Managing Risk Through Diversity Marketing Notes o Through innovation rms create broader portfolio of products which help diversify risk and enhance rm value better than single product o Kellogg s Special K now has bars shakes and protein water Fahion Cycles o Industries that rely on trendsexperience short life cycles apparel arts books software most sales from new products o Madden NFL every year people quotbeatquot the game Improving Business Relationships o Kraft maker of Capri sun saw lemonade avor sold poorybecause placement of packages in pallets o Newtoworld products not adopted by everyone at some timethey diffusespread through populationl ldiffusion of innovation Diffusion of Innovation o Helps marketers understand rate customers will likely adopt new productservice o Helps identify potential markets for new stuff and predict potential sales 0 PioneersBreakthroughs new to world products that create new markets or radically change both rules of competition and consumer preferences Apple iPod is pioneer product iPhone iTunes iPod touch iPad Advantage of being rstmovers rst to create marketproduct category become readily recognizable and establish a commanding and early market share lead Command greater market share over longer period Not all pioneers succeed 95 all new consumer goods fail 5 Groups of Purchasers o 1 Innovators rst on block to have new productservice enjoy risks highly knowledgeable Subscribe to specialty magazines and talk to other experts productspeci c blogsforums seminars and special events25 total market Crucial to success help product gain acceptance 0 Ex stand in line overnight rms that invest in latest technology o 2 Early Adopters Don t like as much risk wait and purchase after careful review Enjoy noveltyregardless as opinion leaders 135spreads the word crucial to bring other groups in o 3 Early Majority 34 of population Few things pro table until this big group buys Wait until quotbugsquot are worked out Rents 1st week movie out on video Marketing Notes When they enter competitors usually peakleads to many price and quality choices o 4 Late Majority 34 last groupwhen product achieved full potential Sales tend to level off or decline o 5 Laggards 16 Avoid change rely on traditional till no longer available Watch movie when on regular TV Using Diffusion of Innovation Theory o Can develop effective promotion pricing and other strategies to push acceptance o Amazon 1st introduced Kindle 400 sold out less than 5 hours o Kindle 2 arrived within 6 months lowered price because competitors Barnes and Noble Sony and Apple o Market continued to grow 20 million buyersAmazon Kindle Fire under 200sold approximately 6 million within few months o As ereaders have grown ebook prices rise and almost as or more expensive as hardcovers Relative Advantagg if product received better than substitutes diffusion will be relatively quick o Instead of only ereader Apple developed multipurpose iPad Several relative advantages vibrant large color screen various games and apps and watch videos and listen to music Compatibility diffusion may be faster or slower depending on various consumer features including international cultural differences o Chinese version of Firefox because they search differently more mouse based controls o Contrast to Firefox iPad criticized for lack of compatibility Adobe Flash doesn t work Appe uses HTML5believe format for future Observability when easily observed bene tsuses easily communicated which enhances diffusion process o iPads very observable makes people want Botox is less easily observed diffused slowly ComplexityTrialibility less complex easier to try o Diffuse more quickly and lead to greaterfaster adoption o Apple Store easy to try iPad Kindle is more complex to try can try at Best Buy How Firms Develop New Products 0 1 Idea Generation rm can use own internal R amp D efforts collaborate with other rms license technology from research intensive rms brainstorm research competitors and conduct consumer research Marketing Notes Firms that want to be pioneers rely on RampD others adopt follower strategy and scan market for ideas 0 Internal Research and Develonment Many rms have own RampD department IBM computers Black and Decker consumer goods 3M industrial goods and Merck and P zer pharmaceuticals rely on RampD Other industries software music movies come from internal ideas and RampD nancial investments Product development costs for quot are highgood chance of technological or market breakthrough RampD investmentscontinuous may lose on a few new investment Blockbusters few extremely successful new products can generate enough revenue and pro ts to cover losses from other introductions RampD Consortia groups of other rms and institutions 0 Recent years more and more joining to explore new ideasobtain solutions for developing new products 0 Here RampD investments come from group as whole and participants share results lnvolve pharm or high tech members whose research can hit millions 100 much forjust a single company Licensing rms buy right to use technology or ideas from other rms through licensing agreement Saves costs but rm is banking on solution that already exists but hasn t been marketed Recent deals for weightloss Brainstorming group works to generate ideas 0 No idea can be immediately accepted or rejected At end members vote ideas with most votes go to next stage Outsourcing turn to outside rms like IDEO design rm lDEOoffers stellar service helps generate new ideas healthcare toys and computers Balance Body partnered to develop less intimidating more user friendly reformer for Pilates Competitor Products new product by competitor can trigger opportunity for rm can use reverse engineering taking apart a product analyzing and creating improved without infringing on company s patents to understand and make improved version Copycat approach is widespread Customer Input essential for successful idea generation Marketing Notes oB2B follow products closely focus group interview surveys oB2C comes from variety of sources onine on the street 0 Staples mailmate shredder oMicrosoft one of most innovative of all time but can t get search engine Bing to compete with Google Godiva started selling in retail stores individually wrapped to shareused online community to nd out what consumers want o 2 Concept Testing concept statement presented to potential users to obtain reaction Concepts brief written descriptions of product technology working principles and forms and what needs it would satisfy Occurs very earlyhelps rm avoid unnecessary development Most important Pertains to purchase intentions if it were made available o 3 Product Development process of balancing engineering manufacturing marketing and economic considerations to develop form and features Develop prototype rst physical form still rough or tentative and has same properties as a new product oTested through alpha and beta testing 0 Alphatesting rm attempts to determine whether product will perform according to its design and whether it satis es the need that it s intended o Occurs in RampD department Like Ben and Jerry s avortest Product Testing on Animals o While product might not be but individual ingredients might o Coalition for Consumer Info on Cosmeticscompanies apply and certi ed as quotcruelty freequot trademarked leaping bunny logo oThe Body Shopfree of animal testing 80 PampG products eliminated it o PETA publicly sites companies for inhumaneanimal testing o European Union passes ban on animal testing 0 BetaTesting use potential customers examine prototype in quotreal usequot setting determine functionality performance potential problems and other issues o 4 Market Testing test market for new product with trial batch Premarket Te conducted before actually bringing to market to determine how many will try and continue to use according to small group of potential Marketing Notes oNielsen BASES potential exposed to marketing mix variables surveyed and given sample to try After period which they used it surveyed again about whether they re usebuy again Firm generates estimate and decides to introduce abandon redesign or revise Test Marketing determines success potential introduces offering to limited geographical area prior to national launch Strong predictor of success Uses all elements of marketing mix o 5 Product Launch most critical steprequires tremendous nancial resources and extensive coordination of all aspects of marketing mix Con rm target market and decide how to position Promotion required at each link in supply chain 0 Trade Promotion to wholesalersretailers to get them to purchase combine introductory price promotions special events and personal selling 0 Introductory Price Promotion limited duration lower than normal prices to provide an incentive to try 0 Trade Show temporary concentration of manufacturers provides retailers opportunity to view what s available and new o Personal selling for BZB most efficient way to get retailers to buy o Manufacturers used promotion to generate demand with consumers Coupled with shortterm price reductions coupons or rebates Place coordinates delivery and storage with retailers to assure it s available when customers wants it where it s expected and sufficient quantities Price supply chainwide decision Manufacturer39s suggested retail price easier to start high and lower Slotting Allowance fee paid to get new products in stores or gain better shelf space Timing may be important depending on product Evaluation of Results 0 Measure Success 3 Ways interrelated 1 Satisfaction of technical requirements performance 2 Customer acceptance 3 Satisfaction of rm s nancial requirements sales and Pro ts Marketing Notes o Coca Cola Freestyle Machine Product Life Cycle Table pg 385 o 1 Introduction1st launches o 2 Growthgains acceptance demand and sales increase more competition emerges 3 Maturitysales peak rms rejuvenateadd featuresrepositionif they succeed achieve new life if not Stage 4 o 4 Decline eventually exits o Home appliances stay in maturity stage 0 101414 Chapter 13Services the Intangible Product Zappos o Valued at less than 16 billion a year after acquisition by Amazon o Has build business on superb service customer satisfaction is core value o All new employees required to work in call center creatively solve problems o Ranked 11th among country s best places to work Services any intangible offering that involves a dead performance or effort that cannot physically be possessed Customer Service human or mechanical activities rms undertake to help satisfy customers needswants Services account for 76 of US gross domestic product DependenceGrowth of ServiceOriented Economies Emerged Because o Less expensive to manufacture in less developed countries proportion of service to goods production in US has steadily increased o High value on convenience and leisure food prep lawn maintenance house cleaning pet grooming laundrydry cleaning hair care car maintenance all performed by specialists o World becoming more complicated people demanding more specialized services plumber personal trainer massage tax prep lawyer travel healthcare Marketing Notes 4 Fundamental Differences in Services marketing perspective 1 Intangible Dif cult to convey bene ts Service providers offer cues to help experience TV in waiting area drinks comfortable chairs etc Creatively employ symbolsimages to promotesell 6 Flags happy families Dr s white coat high tech equipment education names famous facultyalumni and accreditations Use promotional campaigns Carbonite 0 Simple affordable unlimited online backup o Runs invisiny and backs up automatically o Free support because quothassle freequot o System comparable to safeguards at banks credit card companies and online retailers lLseparable Production and Consumption Rare to try service before purchase Since risks are high service rms provide extended warranty100 satisfaction Heterogeneous The more humans are needed to provide services more likely heterogeneityvariability in quality Ex tech superpowers helps with Apple products Kiosks reduce variability with service Perishable Can t be stored for future use Ex Skiing airline cruise theater restaurants less expensive when there s less demand Providing Great Service The Gaps Model iv When delivery of service fails to meet expectationsservice gap The Knowledge Gap Understanding Customer Expectations Difference between customer expectations and rm s perception of customer expectation Close gap by research service quality and zone of tolerance and increase interactioncommunication between managers and employees Customers expectations are based on knowledge and experiences vary according to type of service and situation JetBlue surveys at least 35 passengers on every ight b Evaluating Service Quality iv Reliability perform dependany and accurately Responsiveness willingness to help and provide prompt service Assurance knowledge of and courtesy by employees and ability to convey trust and con dence Empathy caring individualized attention Marketing Notes v Tangibles appearance of physical facilities equipment personnel and communication materials c Broadmoor Colorado Spring i 50 consecutive years of 5 stars from Forbes Travel Guide ii Exceptional service quality begins with exceptional people iii Keep promisesalways give estimated time never guess if don t know an answer iv Empowers employeesservice recovery program v Updating renovating pool vi Personalize communicationsuse name vii HEART to take care of problems ol Voice of Customer Program coects inputs and integrates them into decisions e Zone of tolerance area between expectation regarding desired service and minimum level of acceptable service what they ll accept before going elsewhere 2 Standards Gap Setting Service Standards iDifference between firm s perceptions of customer expectations and service standards it sets LCIose gap by setting appropriate service standards training to meetexceed those and measure service performance LMore employees will buy into qualityoriented process it they re involved in setting goals ivWant to do a good job but need to be trained to know what good is 3 Delivery Gap Delivering Service Quality iDifference between firm s service standards and actual service it provides to customers LCan be closed by getting employees to meetexceed standards when being delivered by empowering service providers providing support and incentives and using technology where appropriate LWhere quotthe rubber meets the roadquot customer directly interacts with service provider ivAlways results in service failure vEmpowerment more important with individualized service Nordstromquotuse your best judgmentquot LEmotional support demonstrate concern for webeing and stand behind their decisions vii Instrumental Support systems and equipment to deliver service properly viii Support must be consistent and coherent throughout organization ixProvide rewards to employees for excellent service Travelocity recognizes great employees xTechnoogy helps reduce delivery gaps 1Kiosks and self service 4 Communications Gap Communicating Service Promisi b C d f Marketing Notes Difference between actual service provided and service rm promises Close by being more realistic about what they can provide and manage customer expectations effectiver LDissatis ed likely to tell otherword of mouth and Internet Amazon Prime build unparaeed loyalty Service Recovery iAttempt to make amends and learn United lost 10 of stock price and 180 million due to band Sons of Maxwell luggage complain not dealt with i Cocreating soutionsgood recovery Distributive Fairness customer perception of bene ts received compared with costs convenience or loss Procedural Fairnesi perceived fairness of process used to resolve complaints 11614 Chapter 16 Supply Chain and Channel Management Save a dollar by increase ef ciency overa bene ts worth more than single doar Happy customers increase sales and pro ts Software links Walmart to PampGmoment Walmart distribution runs out PampG initiates shipment to replenish Extensive information systems transmit millions of POS transactions crossdocking12 goods that arrive at distribution center ship in 24 hours to stores bar codes and ratio frequency ID tags for inventory and consolidated goba sourcing purchase directly from suppliers Keep delivery trucks fulltravel miles fallen by 100 million in past year Walmart is world s largest retailer Marketing Channel ManagementSupply Chain Management set of approaches an techniques rms employ to ef ciently and effectively integrate suppliers manufacturers warehouses stores and transportation intermediaries into seamless operationmerchandise is produced and distributed in right quantities to right locations at right time and to minimize costs while satisfying customers The Importance of Marketing ChannelSupply Chain Management Marketing Notes 0 Wholesalers rms that buy products from manufacturers and resell them to retailers who sell directly to customers 0 PenAgain Walmart gave trial but made them lower costsmoved production over seas Home Depot and Costco are retailers and wholesalers Goya Foods largest Hispanic owned company in US Annual sales 1 billion 0 SKUs reached over 1600 0 Got too complex shifted to automated ordering 0 Marketing Channels Add Value Each participant adds valuemore convenient less expensive 0 Affects Other Aspects of Marketing Every marketing decision is affected by and has an effect on marketing channels Distribution Center facility for receipt storage and redistribution of goods to company storescustomers operated by retailers manufacturers or distribution specialists Everything must be coordinated 0 Designing Marketing Channels 0 Direct Marketing Channel no intermediaries between buyer and seller Example manufacturer to customer 0 Indirect Marketing Channel 1 or more intermediaries work with manufacturers to provide to customers Wholesalers prevalent in less developed economies and large retailers are rare Example manufacturer to wholesaler to retailer to customer 0 Managing the Marketing Channel and Supply Chain 0 Parties want something from each other 0 Each member of channel has specialized role 0 Example Home Depot and Stanley Tool mutually beneficial partnership 0 Supply chain members that aren t in agreement about goals roles or rewards vertical channel con ictdiscord results 0 Horizontal Channel Con ict disagreement among members of same level of marketing channel 0 Managing Throudh Vertical Marketind Svstems Con ict more likely when channel members are independent entities IndependentConventional Marketing Channel several independent members manufacturer wholesalers retailers each attempt to satisfy own objectives and maximize its pro ts at expense of other members no control over the others Vertical Marketing System members act as uni ed system Marketing Notes 3 types 0 O O Administered Contractual Corporate The more formal less con ict Administered Vertical Marketing System no common ownershipcontractual relationships but dominant member controlsholds balance of power 0 O 0 Power 1 rm has ability to dictate actions of another member at different level Reward Power Walmart offers monetary incentive if PenAgain does what Walmart wants Coercive Power threaten to punish other member for not undertaking tasks Example delay payment for late delivery Referent Power desperately wants to be O O 0 associated Expertise Power Information Power provide or withhold important market info Legitimate Power getting member to behave certain way because contract Contractual Vertical Marketing System independent rms at different levels of channel join through contracts to obtain econ of scale and coordination and to reduce con ict 0 Franchising most commoncontractual agreement between franchisor and franchisee allows franchisee to operate retail outlet using name and format developedsupported by franchisor Franchisee pays lump sum a royalty on all sales and operated in accordance with procedures Combines entrepreneurial advantages or owning with efficiencies of vertical marketing systems function under single ownership Franchisor does advertising product development and system development Example Hampton Subway 711 ServPro Days Inn McDonalds Corporate Vertical Marketing System parent company has complete control and dictates prioritiesobjectives of channel because it owns multiple Marketing Notes segments manufacturing plants warehouse facilities retail outlets Example American Apparel 0 Managing Marketing Channels and Supply Chains ThrougL Strategic Relationships 0 StrategicPartnering Relationship members committed to maintaining relationship over longterm and investing in mutually bene cial opportunities Mutual trust open communication common goals interdependence and credible commitments Mutual Trust holds strategic relationship together less need for monitoring Open Communication key to successful relationshipsunderstand what s driving business strategies and any problems Common Goals incentive to pool strengths and abilities and exploit potential opportunities together Interdependence mutual bene ts key to develop and sustain Credible Commitments spend money to improve productsservices and on information technology to improve efficiency Apple code on conduct in question because labor conditions in China Only 2 consumers recognized labor issues as a concern Marketing Information Flow Through Marketing Channels 0 00000 Flow 1 Customer to Store Universal Product Code UPC black and white bar code 13 digits Flow 2 Store to Buyers Flow 3 Buyer to Manufacturer Flow 4 Store to Manufacturer Flow 5 Store to Distribution Center Flow 6 Manufacturer to Distribution Center and Buyer Advanced Shipping Notice ASN electronic document supplier sends to retailer in advance of a shipment to tell exactly when to expect it Neiman Marcus Expedites Shipments Through Customers O 0 Used internet based system to remain in contact with everyone who touches a shipment Shipments have low risk rating Electronic Data Interchange EDI computer to computer exchange of business documents from retailer to vendor and back 0 3 Main Bene ts Reduces cycle time time between the decision to place an order and receipt of merchandiseinventory turnover is higher Improves overall quality of communicationless errors Computer readable format easily analyzed and used for variety of tasks Marketing Notes VendorManaged Inventory VMI manufacturer responsible for maintaining retailer s inventory levels in all stores 0 Can reduce vendor and retailer costs 0 Consignment manufacturer owns merchandise until it s sold by retailer which then retailer pays for merchandiseprovides incentive for manufacturer to pick SKUs and inventory levels that will minimize inventory and generate sales Push vs Pull Marketing Channel 0 Push merchandise allocated to stores based on previous sales forecasts Once forecast is developed speci ed quantities are shipped pushed to distribution centers and stores Goal increase demand by providing incentives and focusing one s efforts on wholesalers retailers or their sales people Motivate seller to highlight product and push product to consumers 0 Pull amount of merchandise sent is determined based on sales data captured by POS terminals Customers rm product into channel by demanding it Less likelihood of being overout of stock because store orders as needed on basis of demand Increases inventory turnover and more responsive to demand changes More desirable but not most effective 0 Requires more costly and sophisticated into system Some merchandise retailers don t have exibility to adjust oEfficient for steady predictable demand milk and eggs Marketing Merchandise Flow Through Marketing Channels 0 lst decide if merchandise goes from manufacturers to retailer distribution center or directly to stores 0 Distribution Centers vs Direct Store Delivery Consider total cost associated with each and customer service criterion of having right merchandise at right store 0 Advantages of Distribution Center More accurate forecasts possible when retailers combine from many stores serviced by 1 distribution center Enable retailer to carry less merchandiselower inventory investments systemwide Easier to avoid running outhaving too much stock Retail store space more expensive and distribution centers better equipped to prep merchandise Marketing Notes 0 Direct store delivery sets merchandise to stores faster and used for perishable goods meatproduce item s image 1st to sell latest product video games Ensure product is on shelf properly displayed and fresh 0 Home Depot switched to highcapacity owthrough distribution centers Rapid Deployment Centersnet income increased signi cantly 0 The Distribution Center coordinates inbound transportation receiving checking storing crossdocking getting merchandise quot oor readyquot and coordinating outbound transportation 0 Management of Inbound Transportation Planners responsible for nancial planning and analysis of merchandise and its allocation to stores I Dispatcher coordinates deliveries to distribution center 0 Receiving and Checking Using UPC and RFID Receiving recording receipt of merchandise as it arrives Checking going through goods upon receipt make sure undamaged and merchandise ordered was what s received I Radio Frequency ID Tag tiny computer chips automatically transmit all information into about container s contents or individual products Eliminates need to handle items individually Reduce overall inventory because greater supply chain efficiency Takes 5 sec for 50 containers85 improvement 0 Storing and CrossDocking Stored transported to racks oor to ceilingthen when needed forklift driver picks up carton to conveyor routes to loading dock Cross Docked prepackaged by vendor for speci c store UPD label indicate which store Places on conveyor routes from unloading dock to loading dockpreferable for fashion apparel or perishable meanproduce 0 Getting Merchandise Floor Ready ready to be placed on selling oor oTicketing marking and putting on hangers o Ticketing and Marketing af xing price and ID labels 0 Preparing to Ship Merchandise to a Store list of items to be shipped that dayeach item pick ticket and shipping label generated 0 Pick Ticket documentdisplay screen on forklift indicating how much to get 0 Shipping Merchandise to Store 0 Increasingly complex 0 Most distribution centers run 50100 outbound trucks per day 0 Inventory Management Through lustinTime Inventory Systems Marketing Notes 0 justinTime Inventory SystemQuick Response OR deliver less merchandise on more frequent basis Reduced lead time increased product available and lower inventory investment 0 Reduced Lead Time amount of time between recognition order needs to be places and arrival of needed merchandise Easier to forecast demand 0 Increased Product Availability and Lower Inventory Investment 111214 Chapter 17 Retailing and Multichannel Marketing Retailing at end of supply chainwhere marketing meets consumer o Retailing set of business activities that add value to productsservices sold to consumers for personal or family use oLargest retailers in world dictate what should be made how to con gure when to deliver and sometimes cost 0 Multichannel Strateg sell in more than 1 channel Marketing Notes 0 Choosing Retailing Partners 0 O O O O o 0 Coach uses Macy s pull together all actions for greatest conveniencesatisfaction Look at basic channel structure where target expect to nd products channel characteristics and distribution intensity Channel Structure Customer Expectation Channel Member Characteristic Largermore sophisticated the channel member less likely to use supply chain intermediaries Distribution Intensity number of channel members to use at each level of marketing channel Intensive Distribution place products in as many outlets as possible Exclusive Distribution grant exclusive geographic territories to 1 or very few customers so no other retailers in territory can sell a particular brand Selective Distribution relies on few selected retail consumers in territory Helps seller maintain image and control ow of merchandise Identify Types of Retailer Food Retailers Conventional supermarkets account for slightly more than 12 of food sales excluding restaurants Supercenters warehouse clubs convenience stores and extreme value food retailers are fastest growing Conventional Supermarket selfservice retail food store offering groceries meat and product with limited sales of nonfood items Carry about 30000 individual items or Stock Keeping Units SKUs represent unique inventory item Differentiate offerings by 0 Emphasize fresh local perishables oTarget health conscious and ethnic customers with natural organic or culturespeci c items 0 Private label brands 0 Better in store experience 0 Now host social events to compete Limited Assortment SupermarketExtreme Value Food m 0Only stock 2000 SKUs 0 Offer 12 brands and sizes 1 being store brand Can offer 40 lower prices by trimming costs Marketing Notes Supercenter large stores combine supermarket with full line discount store 01 stop shopping Warehouse Club large retailers offer limited and irregular assortment of food and general merchandise little service and low prices to general public and small businesses Member fees usually 50 a year Convenience Store limited varietyassortment of merchandise at convenient location with speedy checkout 0 General Merchandise Retailer 0 Department Store carry broad variety and deep assortment offer customer services and organize store in distinct departments for displaying merchandise Can reserve online and pick up in store Full Line Discount Store offer broad variety limited service and low prices WalMart approximately 23 of fullline discount store retail sales in US Specialty Store concentrate on limited number of complementary merchandise categories targeted toward very speci c market segments by offering deep but narrow assortments and sales associate expertise Drugstore specialty stores concentrate on pharmaceuticals health and personal grooming Category Speciali big box retailers or category killers that offer narrow but deep assortment Predominantly self service approach Extreme Value Retailer small fullline discount stores offer limited merchandise assortment at very low prices Buy opportunistically from manufacturers with excess offer limited assortment and low rental location OffPrice Retailer offer inconsistent assortment of brand name merchandise at signi cant discount from manufacturer s suggested retail pricesell 2060 lower than this Service Retailers sell services rather than merchandise House cleaners lawn laundrydry clean bank hospital spa airlines etc 0 GameStop now has online interactioncan go anywhere oTypical video gamer is 37 year old man 0 42 gamers are women oTypical game is used for about 80 hours Duane Reade NY drugstorechanged based on complaintsprivate label sales double from 20082010 0 Developing a Retail Strategy Using 4 P5 0 Product Marketing Notes Exclusive cobrand developed by national brand vendor often in conjunction with retailer sold exclusively by retailer 0Double Bene tonly available at 1 retailer and provide name recognition similar to national brand Disadvantage Manufacturer Perspective only can be sold by 1 retailermanufacturer market is limited Disadvantage Retailer Perspective share pro ts with national brand Price helps de ne value of merchandise and service and general price range of store de nes image Must be aligned with other Ps Promotion Can mean difference between at sales and growing consumer base Technology expanding ways to promote Mobile Commerce MCommerce purchases through mobile device CoOp Advertising coordinated effort between manufacturer and retailers help guarantee customers receives cohesive message and both entities maintain image help defray costs of advertising by paying all or portion of advertising promotion and media costs Personal selling and customer service representatives part of overall promotions Share of Wallet percentage of purchases made from particular retailer Shopkick Walgreens appsfaciitates and rewards 0 Place convenience in key to success 0 Bene ts of Stores for Consumers o Browsing see what s available before nal decision 0 O O O O O TouchingFeeling use all 5 senses Personal Service sales associatemeaningful and personalized information CashCredit Payment stores only place to use cash EntertainmentSocial Immediate Grati cation Risk Reduction 0 Bene ts on Internet and Multichannel Retailing O O 0 Greater selection DeeperBroader Selection vast number of alternatives Personalization Personalized Customer Service 0 FAQ 800 numbers email 0 Online chats interactive help Marketing Notes Personalized Offering based on behavior 0 Interactive page make suggestions 0 Expand Market Presence less costly than catalogs and adding stores 0 Protecting Customer Privacy 0 Cookies can help collect data on how customers navigate monitor mouse click to track characteristics or products considered and what was looked at but not bought 50 more likely to open and click a targeted email than gene c 0 Opt In consent to receive distinct marketing emails 0 Opt Out consumer explicitly tells retailer not to use personal information 0 Parent permission prior to collecting information from under 13 0 Effective Multichannel Retailing 0 Integrated Customer Relationship Management System IR ML Centralized customer data warehousecomplete history of each interaction with retailer regardless of channel Efficiently handle complaints returns target promotions and seamless experience 0 Brand Image consistent 0 Pricing adjust based on competition in different channels Barnes and Nobel lower prices through internet because Amazon 0 Supply Chain separate unique skills and resources for each channel Sam39s Club offers 3 categories based on data from card 0 Rewards o Incentives for normal purchases 0 Crosscategory never bought 0 2030 response rate with predictive analysis 112414 Chapter 8 Global Marketind Marketing Notes McDonald s revenue from US if only 31 Now prominent in India China Brazil Russia In China within 4 years open 1 new store daily to meet goaof2000 In crowded cities instead of drivethrough hire motorbike drivers Has huge food processing plan in Moscow US market evolved regionallnationageographicaIly regionalinternationallglobal Globalization process by which goods services capital people information and ideas ow across national borders Global markets result of reductionseliminations of trade barriers by country governments decreasing concerns of distance and time regarding moving productsideas standardization of laws across borders globally integrated production processes LegosDenmark Adidas by Germany made in China blueberriesChile 4 Sets of Criteria to Assess Country39s Market o Economic Analysis o Infrastructure and Technological Analysis oGovernment ActionsInactions o SocioculturaIAnaIysis Economics Using Metrics o Greater wealth better opportunities for rms 0 Look at 3 Major Economic Factors General Economic Environment Market sizepopulation growth rate Rea income 0 Evaluating General Economic Environment To determine market potential use as many metrics as possible 1 Relative Level of importsexports o US suffers trade de cit country imports more than it exports Can signal potential for greater competition at home from foreign producers 0 Trade Surplus higher exports than importsgreater opportunity to export to more markets 2 Standard Metrics of Outputmost common 0 Gross Domestic Product GDP market value of goodservice produced by a country in a yearmost widely used 0 Gross National Income GNI GDP net income earned from investments abroad any payments made to nonresidents who contribute to domestic economy Marketing Notes US rms that investmaintain operations abroad count their income from those in the GNI but not the GDP 0 3 Purchasing Power Parity PPP states if exchange rates of 2 countries are in equilibrium product purchased in 1 will cost the same in other if expressed in same currency 0 Economist s quotBig Mac Indexquot suggests exchange rates should adjust to equalize cost of basket of goodsservices wherever it is bought Ex Big Mac Switzerland is priciest Cheapest in India 18953 undervalued compared to US 0 US average 407 Brazil 61652 overvalued Weak not always bad for USgreater demand in foreign countries because they can sell at lower price Evaluating Market Size and Population Growth Rate o Less developed nationsrapid population growth o Developed0 or negative Countries with highest purchasing power today might become less attractive because of stagnated growth BRIC countriessources of most market growth PampGstrong advantage in China Pepsi and Coke plan to invest 25 billion in China Pepsi researcheddevelopment center for Asian products quotMinute Maid Pulpy Super Milky Pepsi has cucumbercrispy pawn chips Distribution of population in particular regionsis it primarily in rural or urban areas Determines wherehow to deliver productsservices Long supply chains to reach ruraladd to product cost lndiamoving from rural to urbanrapid middle class growth Careful bankingminimal dependence on exports protect from crISIs o Increasing urbanization and protectionism by government youthful populacelndia enormous market Nanoworld s cheapest car Yellow 2000 100000 rupees56 mpg Cell phonesndia econ outpace world growth Evaluating Real Income o Adjust productsprice to meet needs of a country s market PampGsingle use shampoo in less developed nations can t afford whole bottle IO O 0 Marketing Notes Coke in rural India 10 cents Cadbury Internationalmilk shots 4 cents Textbooks cheaper Fashion and jewelry downward adjustment Smaller rms most exible in pricing Analyzing Infrastructure and Technological Capabilities Infrastructure basic facilities services and installations needed for communitysociety to function transportationcommunication systems waterpower lines schools post of ces prisons o Marketers concerned with 4 key elements 1 Transportation system to transport goodstrains roads refrigeration 2 Distribution Channels deliver products in timely manner and reasonable cost 3 Communications media access developed allow information about products available 4 Commerce legal banking regulatory systemsallow markets to function 0 that promot o agreements Tariff Analyzing Government Actions Signi cantly in uence ability to selloften result in lawsregulations e growth or close offinhibit growth lssues include tariffs quotas exchange controls and trade aka duty tax levied on good imported Arti cially raise prices lower demand Intended to make imports more expensiveless competitive with domestic productsprotects from foreign competition Imposed to penalize another country for trade practices that home country views as unfair Quota designates maximum quantity of product that may be bought into country during speci ed time period oTariffs and q impact on a Reduce availability of imported goods US allows 12 million tons sugar imported quota without tariff because consumes more than it produces Monitors consumption to protect domestic farmers If demand exceeds supply quota increases uotas can have fundamentalpotentially devastating bility to sell in another country Bene t domestic productsreduce foreign competition 0 Exchange Control regulation of country s exchange rate measure how much 1 currency worth relative to another US charged signi cantly compared to others Marketing Notes 0 When dollar falls has 2fold effect on US firm s ability to conduct global business 0 Trade Agreement intergovernmental agreement designed to managepromote trade activities for speci c region Trading Bloc consists of those countries that have signed trade agreement oEuropean Union 27 membersresulting lowering trade barriers strengthen relationships NAFTA North American Free Trade Agreement US Canada Mexico oCAFTA Central American Free Trade Agreement US Costa Rica Dominican Republic El Salvador Guatemala Honduras Nicaragua Mercosur o ASEAN Association of SE Asian Nations 0 Analyzing Sociocultural Factors 0 Understand culture crucial to success 0 Culture Extension 2 Levels 1 Visible Artifacts behavior dress symbols physical settings ceremonies 2 Underlying Values thought processes beliefs and assumptions 0 IKEA open 7 days a week except in Franceaw prevents selling on Sundays Switzerland Sunday might diminishose tourism revenue quotRetail selling 0 Geert Hofstede Cultures differ on 5 Dimensions 1 Power Distance willingness to accept social inequality as natural 2 Uncertainty Avoidance extent to which society relies on orderliness consistency structure and formalized procedures to address daily situations 3 Individualism perceived obligation to and dependence on groups 4 Masculinity extent to which dominant values are male oriented Lower indicates menwomen treated in all aspects highermen dominate positions of power 5 Time orientation short vs long term Country with long values commitments and willing to accept longer time success of new product information 0 Country Clusters Latinhigh power and low individualism USUKCanadaAustraliaow power and high individualism o USEurope business relationships governed by what is said and written formal contacts Marketing Notes o ChinaS Korea nonverbal cuesbusiness formalized by handshake trust and honor Colgate committed to understand local tastes educate about oral hygiene develop relationships with dental pros and supports communities o ColgatePalmolive oral personal homecare products and pet nutrition 0 BRIC Countries 0 Brazil able to weather and thrive transformed to global contender World s 7th largest economypredicted to be 5 Aided by large literate population and imposition of social programsmore than 12 in middle class welcoming foreign investors 0 Russia relation with US more complicated Since fall of Soviet Union gone up and down growth prospect promisingespecially consumer market Welleducated population strong demand for US products Likely become Europe s largest online market Negotiating enter to WTO to improve trade relations Aging population and low birth ratescould decline 13 Widespread corruptioncreate ethical dilemmas 0 India 15 of world s populationmedian age 251 of youngest Expanding upper and middle class Wel educated modern generation uent in Englishhighly skilled workplace Retail environment dominated by small stores lacks modern supply chain management Retail landscape changing to modern 0 China still communist embraced marketoriented economic development led to rapid gains lmprove living standards and levels of personal freedom lncrease liberalization in economy prompted large increase in GDP2nCI largest economy and 3rd largest market for US exports Each family limited to 1 kid median age 341 Facebook Mark Zuckerberg never had plan for international growth o Wants to focus on China but successful entry to Chinese Market requires blend of timing skill cultural understanding and political savvy o Blocked Nazi content in Germany o Facebook posts could lead to jail in China 0 Global Entry Strategies least risk to highest 0 Exporting produce goods in 1 country sell in another Least nancial risk limited return to rm Rolex exports from Switzerland 0 Franchising contractual agreement between franchisor and franchisee Marketing Notes Franchisee operates business using name and business format developed and supported by franchisor Ex McDonald s Pizza Hut Starbucks Dominos KFC Holiday Inn Lower risks and less investment Limited control over market options potential pro t reduced always threat franchisee breaks away and operates as competitor 0 Strategic Alliance collaborative relationship between independent rmspartnering rms not create equity partnership don t invest in each other Ex Cisco Systems Inc Cali and Tata Consultancy lndia Allied with Microsoft Nokia IBM and Accenture too 0 joint Venture rm entering market pools its resources with local rm Ownership control and pro ts shared Ex Sony teamed with Ericsson So much success Sony bought Ericsson 0 Direct Investment requires rm to maintain 100 ownership of plants operation facilities and of ces in foreign countriesform wholly owned subsidiaries Highest level of investment and exposes signi cant risks such as loss of operatinginitial investments Economic downturn caused by natural disaster war political instabilitychanges in laws increase foreign entrant s risk 0 Global Marketing Strategy Components o 1 Target Market Segmentation Targeting and Positioning More complicated than domestic Dif cult to understand cultural nuances Subcultures must be considered Consumers view products and role as consumer differently Ford FSeries popular in US but small new Figo popular in India Ford must monitor econsocial trends and adjust Yahoo relies on momshow they used social media quotGlobal Momsquothow digital technology affects family interactions mealtimes special occasions and scheduling PampG proud sponsor of Mom s Campaign 2012 Olympics o 2 Global Marketing Mix Zara retailers Citicorp nancial service Microsoft software dominate new globalization with technology skills Asian and South and Central American Countries dominate manufacturing of consumer products Global ProductService Stratedies Marketing Notes Sell same productservice in both home market and host country Sell productservice similar to that sold in home country but include minor adaptations Sell totally new products or services Strategy depends on needs of target market o Russia s latest consumers have disposable income generally mortgage free receive heavily subsidized electric and gas have little debt credit not available under communism have little interest in saving o Eat so much soup but not canned o Honda has urban motorcycles in Mexico China and India 0 Globalization rms standardizing products globally but using different promo campaigns to sell them 0 Reverse Innovations companies initially develop products for niche underdeveloped markets then expand into originalhome markets GE made EKG in India then brought to US 0 Global Pricing Strategies Spain sfashion retailer Zara inexpensive in EU priced 40 higher in US 0 Ford Fiestaone world car Jetta used to be Bora 0 Transportation costs overwhelm supply chains New economy locate factories close to supplier and nal consumers to reduce transport costs ustinTime Systems JIT Toyota if meet production deadlines at all costs is result unsafe product 0 Global Distribution Strategies complex value chainsmiddlemen exporters importers and different transportation systems Add costssimplify channels whenever possible o Unilever had new strategy for India 0 Global Communication Strategies ID elements need to be adapted to be effective Ex Literacy levels vary dramatically media availability caries ad regulations EU ban on quotjunk foodquot ads Thong has different meaningsbrand names need no preexisting meaning in any known language Ex Accenture or Avaya China has 3 main languages Microsoft quotBingquotvirus in China Nike s Chinese brand pronounced similarly to US Marketing Notes Langine s watch ad had woman s bare arm and hand and was too risqu for Muslim countrieschanged ad to show gloved arm and hand Lady Gaga shock tactics media blitz and expert use of social media channels musical talent app quotHaus of Gagaquot o Onetoone contact o Most popular living thing on FB more Twitter followers than Obama 111314 Chapter 15 Strategic Pricing Methods Groupon 0 Sold more than 22 million deals to 50 million subscribers 0 Few daily deals expected to survive as independent businesses Considerations for Setting Price Strategies o Speci c to productservice and target market 0 3 Different Methods 1 Cost Based Method determine nal price to charge by starting with the cost relevant costs xed variable overhead and pro t are added 0 quotThis total divided by total demand to arrive at a cost plus price 0 Don t recognize role of consumers or competitors prices Requires all costs to be identi ed and calculated on per unit basis Assumes these costs won t vary much Prices usually set on basis of estimates of averages costs 2 CompetitionBased Method set prices to re ect the way they want consumers to interpret their own prices relative to competitor s 3 ValueBased Method focus on overall value of offering as perceived by consumer Marketing Notes 0 2 Key Approaches o 1 Improvement Value Method represents an estimate of how much moreless consumers willing to pay relative to comparable products o FORMULA lmproved value Improved weight x Bene t Weight Importance Weighted FactorElMultiply by cost of comparison o 2 Cost of Ownership Method determines total cost of owning product over its useful life Might be willing to pay more because over its lifetime eventually cost less to own than cheaper alternative 0 Clearly Contacts 0 0 quotSaving the world from overprice eyeglasses Eliminated middlemen automated the order process and shipped directly to consumer for 5070 less oVirtual Mirror app 0 Becoming world s largest online optical store 0 Pricing Strategies 0 O 0 Everyday Low Pricing EDLP companies stress the continuity of their retail prices at a level between regular nonsale price and deepdiscount sale price competition may offer Adds value by reducing search costs Odd price can suggest lower quality HighLow Pricing relies on promotion of sales Prices temporarily reduced to encourage purchases Attracts 2 distinct market segments not price sensitive and price sensitive quotGet them while they lastquot Reference Price price you compare actual regular to discounted EDCP and HighLow Stratew In uenced by PriceQuality Relationships New Product Pricing Strategies MarketPenetration Pricing set initial price low for introduction of new Objectivebuild sales market shares and pro ts quickly 0 Experience Curve Effect as sales continue to grow costs continues to drop Discourages competitors from entering because pro t margin low Drawbacks 0 Must have capacity to satisfy rapid rise in demand Marketing Notes o Low price does not equal high quality o Avoid if some segments wiling to pay more for product Price Skimming willing to pay higher price to obtain new Appeals to those that pay premium price to have innovation rst 0 Common in technology markets After high price becomes saturated lower prices to capture skim next most price sensitive segment willing to pay somewhat lower price 0 Must be perceived as ground breaking in some way Signal high quality limit demand quickly earn back investments test price sensitivity Drawbacks o High unit costs associated with producing small vmume 0 Lower price as demand goes downmargins suffer oiPhone uses skimming pricing method 0 Shop Savvy 0 Use phone to scan barcode and compare prices nd locations 0 RedLaser app for Amazon o 20 smartphones users use frequently 0 Pricing Tactics 0 Pricing Strateg longterm approach to setting prices broadly in an integrative effort across all rm s products based on ve Cs company objectives costs customers competition and channel members 0 Pricing Tactics shortterm methods to focus on select components of ve Cs Shortterm response to competitive threat Broadly accepted method of calculating nal price for customer that is shortterm in nature 0 Pricing Tactics Aimed at Consumer Markdowns reductions retailers take on the initial selling price 0 lntegral part of highlow Get rid of slow movingobsolete seasonal items after season Match competitors prices 0 Promote and increase sales Quantity Discounts for Consumers 0 Most commonsize discount larger the quantity less cost per oz Seasonal Discounts price reductions to stimulate demand during offpeak season Marketing Notes Coupons offer discount on price of speci c items when purchased olnduce 1st time tries convert 1st time to regulars encourage large purchases protect market share against competition 0 Do little to increase store loyalty Rebates another form of discounts off nal selling price 0 Manufacturer issues refund as portion of purchase price returned to buyer as cash 0 90 never bother to redeem Great way to build customer data warehouse Leasing consumers pay a fee to purchase the right to use a product for speci c timenever own just rent Price Bundling selling more than 1 product for a single lower price Leading Pricing attempts to build store traf c by aggressively pricingadvertising a regularly purchased item often price at orjust above store s cost Probably will pick up items besides just this one that sell at higher margin Can be illegal in some circumstances Price Lining establish price oor and price ceiling for entire line of similar products then set few other price points in between to represent distinct differences in quality 0 Business Pricing Tactics and Discount Seasonal Discounts additional reduction offered as an incentive to retailers to order merchandise in advance of the normal buying season Cash Discounts reduce invoice cost if buyer pays invoice prior to end of discount period Expressed in percentage 310 n30 3gt10 days net 30ljbuyer can take a 3 discount of a total amount of invoice if bill is paid within 10 days of invoice date otherwise full net amount due within 30 days oBene t from time value of Allowance lowers nal cost to channel members offered in return for speci c behaviors 0 Advertising Allowance offers price reduction if they agree to feature product in their adpromotions o Legal as long as available to all and not favoring o Slotting Allowance fees paid to retailer to get new products into stores or to gain morebetter shelf space 0 Demanding large could be considered bribery quotpaying offquot to get preferential treatment Marketing Notes 0 Quantity Discounts provides reduced prices according to amount purchased 0 Cumulative Quantity Discount uses the amount purchased over speci ed time period and usually involves several transactions Encourages resellers to maintain current supplier because cost to switch must include loss of discount 0 Noncumulative Quantity Discount still quantity discount based only on amount purchased in single order Provides incentive to purchase more immediately Uniform Deliver vs Zone Pricing pricing tactics speci c to shipping 0 Uniform Deliver shippers charges 1 rate no matter where buyer is located makes very simple 0 Zone sets different prices depending on geographical division of delivery areas 0 Legal and Ethical Aspects of Pricing O O Deceptive or Illegal Price Advertising Certain amount of puffery is allowed Deceptive Reference Prices if in ated or ctitious it s deceptive and may cause harm quotRegular pricequotBBB suggests at least 50 sales at that price Loss Leader Pricing lowers price below store s cost Considered illegal and form of bait and switch in some states Bait and Switch sellers advertise items for very low price without intent to really sell any Aggressively pressure into purchase higher priced model comparing lower unfavorably with higher or inadequate of lower item Predatory Pricing rm sets very low price for 1 or more products with intent to drive competition out of business illegal Hard to prove because 0 1 must demonstrate intent Complainant must prove charged lower prices than average cost Price Discrimination rms sell some product to different resellers at different prices Price Fixingcolluding with other rms to control prices Horizontal illegal or vertical gray area Marketing Notes Horizontal competitors that producesell competing products colludework together to control prices taking price out of decision process oReduces competition and is illegal Vertical parties at different levels of same marketing channel agree to control prices passed on to consumers Manufacturer39s Suggested Retail Price o Reduce retail price competition o Stimulate retailers to provide complimentary services and support manufacturer merchandise Enforced by withholding bene ts 0 112414 Chapter 10 Market Research Virtual shopping tools provide more accurate information about customer behaviors than other research methods and more efficient than eld testing More then 34 global manufacturer s business initiatives rely on virtual solution toosPampG example from beginning of Chapter 10 Marketing Research prereq of successful decision makingconsists of set techniques and principles for systematically collecting recording analyzing and interpreting data can aid in decision makers involved in marketing goods services or ideas o Provides valuable information helps make segmentation positioning product place price and promo decisions ACNielsen Company largest US based marketing research rm 5 billion revenue Research valuable because o Reduce uncertainty 0 Crucial link between rm and environmentable to be customer oriented o Anticipate and respond quickly to competition O O O O O O 0 Marketing Notes The Marketing Research Procesi Will it be useful Committed and willing to abide by results quotValue if related to these questions Small or large Plan entire project in advance 1 De ne Objectives and Research Needs Establish exactly what problem to solve Complexity depends on how much timeresources available and amount of indepth knowledge it needs 2 Design the Research ID the type of data needed and determine what research necessary 3 Data Collection Procesi Secondary Data pieces of information collected prior to start of focal research projectinclude external and internal data sources Primary Data collected to address speci c research needs Focus groups indepth interviews and surveys Sample group of customers who represent customers of interest 4 Analyze Data and Develop Insights Thorough and methodical Data raw numbers or other factual information that have limited value to marketers when interpreted become information results from organizing analyzing and interpreting data and putting them into a form useful to marketing decision makers 5 Action Plan and Implementation Presentation includes executive summary body of report objectives methodology ndings conclusions limitations and appropriate tables gures and appendixes Secondary Data Come from freeinexpensive external sources census data information from trade associations reports in magazines Readily accessible might not be speci ctimely enough o Accessed through internal sources Sales invoices customer lists 0 other reports Inexpensive External Secondary Data US Census Bureau great demographic data quickly become outdated Syndicated External Secondary Data available for a fee from commercial research rms such as Symphonlel Group National Purchase Dairy Panel and ACNielsen Consumer packaged goods rms that sell to wholesalers Marketing Notes Scanner Data given unit Used in quantitative research obtained from scanner readings of UPC labels at check out Help assess what s happening in marketplace Panel Data particular person or household Information collected from group of consumers organized into panels over time lnclude records of what they ve purchased and responses to survey questions client gives to panel rm to ask 0 Internal Secondary Data Data Warehouse Data Mining uses variety of statistical analysis tools to uncover previously known patterns in datarelationships among variables Churn number of participants who discontinue use of a service divided by average number of total participants Can focus on what it does best Symphonlel 95 of Fortune 500 use to make business decisions o Recent trends privatelabel sales growing o Consumer packaged goods shopper take 4 types of trips Quick Pantry Stockup Special Purpose Fill In quot 1st 2 are 23 grocery shopper purchases 0 Harrah39s o Tracks thousands of details about each visitor o quotHigh rollersquot thought to be most important customers in conventional gambling wisdom o Found that most pro table are average middleaged working people gambling 100500 per trip but visit several times per year 0 Primary Data Collection Techniques 0 Qualitative Research used to understand phenomenon of interest through broad openended responses helps clearly formulate objectives more informal includes observation following social media indepth interviews focus group and projective techniques 0 Quantitative Research structured responses can be statistically tested Provides information needed to con rm insights and hypotheses and helps managers pursue appropriate sources ofac on Speci c experiments scanner and panel data 0 Observation examining purchaseconsumption behaviors through personalvideo camera scrutiny Bestonly way to determine how consumers use product 0 Social Media Marketing Notes Online communities Positive negative or neutral Sentiment Mining Radian 6 collect consumer comments about company and products Social Engagement joining online conversations with customers lnDepth Interviews trained researchers ask questions listen to Trained moderator guides conversation with predetermined Designed to address speci c set research questions o and record answers and ask additional questions to clarify 0 Focus Group lnterviews 812 people intensive discussion about particular topic general outline of topics Record on video or audio 0 Survey Research Survey systematic means of collecting information with questionnaire set of questions designed to gather informationaccomplish objectives Unstructured Question openended Structured Questions cose ended Developing Questionnaires Produce meaningful results No misleading questions Address 1 issue at a time Famiiar vocabulary oSequenced appropriately oProfessiona and easy to follow 0 Panel and Scanner Based Research 0 Experimental Research systematically manipulates 1 or more variables to determine which effect other variables 0 Biometric Data 1 or more physical traits
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