MARK 3000 / 3001: Exam One Study Guide
MARK 3000 / 3001: Exam One Study Guide MARK 3000
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This 19 page Study Guide was uploaded by Ariana Cammllarie on Monday February 8, 2016. The Study Guide belongs to MARK 3000 at University of Georgia taught by Kristy McManus in Spring 2016. Since its upload, it has received 68 views. For similar materials see Principles of Marketing in Business at University of Georgia.
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Date Created: 02/08/16
Principles of Marketing MARK 3000/3001 Study Guide for Exam 1 Marketing is: 1. an organizational function and a set of processes 2. for creating, capturing, communicating and delivering value to customers and 3. for managing customer relationships in ways that benefit the organization and its stakeholders. Anticipating and determining the needs and wants of consumers and satisfying those needs through the use of the 4 Ps to create long-term exchanges of value. - “anticipating” = researching the target market - “consumers” = target market - “create long-term” = 4 Ps Exchanges of value: Value: ratio of what is given up for what is obtained - “given up” = money, time, effort - “obtained” = good, service The 4 Ps: 1. Product [Creating Value] a. Goods, services or ideas b. Used to satisfy a consumer 2. Price [Capturing Value] a. Everything a buyer gives up à money, time, effort b. Balance between what a customer will pay and what will give a decent profit c. Price is a key indicator in value i. Low price = low quality; high price = high quality 3. Place [Delivering the Value Proposition] a. Supply chain management b. All activities needed to get the product to the right customer at the right time 4. Promotion [Communicating the Value Proposition] a. Informs, persuades and reminds buyers about a good or service b. A communication that can influence opinions or elicit responses Corporate Orientations: Production-oriented: “good products will sell themselves” - Pre-WWII - Henry Ford philosophy - Focus on internal capabilities + technology - What does the firm do best? Sales-oriented: “personal selling + advertising” - During WWII - Surplus of goods with low demand à need to encourage consumers to buy - Focus on aggressive sales techniques - How can we sell more of what we already have? Market-oriented (Marketing concept): “customers are king” - After WWII à Current - Catering to the wants and needs of the consumer; Bill Ford philosophy - Focus on value o satisfying customers needs while still reaching organizational objectives o must be able to provide more value than competitors - What does the customer want? Societal market-oriented: “give back to the world” - Contemporary ideals - Focus on enhancing benefits to society o Environment, charities - How do I meet customer needs and benefit society at the same time? How to become “value-driven:” 1. Share information about customers and competitors with all departments 2. Balance customer benefits + costs 3. Build relationships with customers 4. Embrace social media + contemporary technology Be contingent on customer demands, today's and tomorrow's Marketing Concept: Make what you can sell not sell what you can make Marketing enriches society because it: 1. can be entrepreneurial 2. can expand global presence 3. can strengthen channel relationships Chapter 1 Vocabulary: Marketing plan: written document composed of an analysis of the current marketing situation opportunities and threats for the firm, marketing objectives and strategy specified in terms of the 4 Ps, action programs and projected or pro forma income statements. Exchanges: the trade of things of value between the buyer and the seller so that each is better off as a result. Marketing mix: 4 Ps [product, price, place, promotion]; a controllable set of activities that a firm uses to respond to the wants of its target markets. Goods: items that can be physically touched. EX: chair, TV, homework. Services: offerings that involve effort that cannot be physically possessed. EX: concerts, lectures, movie theaters. B2C (Business to Consumer): process in which businesses sell to consumers. EX: Target, Walmart, Best Buy. B2B (Business to Business): process of selling merchandise or services from one business to another. EX: Pampers à Target; Coke à Walmart. C2C (Consumer to Consumer): process in which consumers sell to consumers. EX: Ebay, Etsy, “Free & For Sale” FB page. Value: reflects the relationship of benefits to costs, or what the consumer gets for what the consumer wants. Value co-creation: customers act as collaborators with a manufacture / retailer to create a product or a service. EX: Design your own Nike shoe. Relational orientation: a method of building a relationship with consumers based on the philosophy that buyers and sellers should develop a long term relationship. CRM (Customer Relationship Management): business philosophy and set of strategies that focus on identifying and building a loyalty amongst the firm’s most valued customers. Supply chain: a group of firms that makes and delivers a given set of goods and services. Marketing channel: a set of institutions that transfer the ownership of and move goods from the point of production to the point of consumption. What is Market Strategy? - The target market, the related marketing mix (4Ps), sustainable competitive advantage (long term) and marketing plan How to hold a sustainable competitive advantage? 1. Customer Excellence (loyalty + customer service) a. View customers with a lifetime value perspective rather than on a transaction to transaction basis b. Implement membership cards to track what your TM purchases and when they purchase it c. Customer service relies on the inconsistency of humans 2. Operational Excellence (efficiency) a. Develop sophisticated distribution, information systems and strong vendor relations b. By having strong vendor relations, you can sell merchandise in unique regions, obtain special terms of purchase not available to competitors and receive popular merchandise that is in short supply 3. Product Excellence (strong brand + clear position in the marketplace) a. Develop “good” products and services that are better in some aspect to all of your competitors 4. Locational Excellence (placement of store + product) a. High density of stores in one area makes it hard for competitors to enter into the market Firms need excellence in more than one area to maintain a competitive advantage for a long period of time = Customer value! Marketing Planning: A marketing plan document provides a reference point for the firm and its stakeholders to evaluate whether the firm has met its objective or not. Step 1: Business mission & Planning objectives Phase Step 2: Situation analysis SWOT Step 3: Identify opportunities Segmentation Targeting Positioning Implementation Marketing Phase strategy Step 4: Implement marketing mix Product Price Place Promotion Step 5:Use marketing Control Phase metrics to make decisions Step 1. Figure out a mission statement that includes all business objectives - Should reflect the corporation as a whole - “Who are we and who do we want to be?” Step 2. Use SWOT and assess CDSTEP changes that could affect the marketplace - SWOT: Strengths + Weaknesses (Internal); Opportunities + Threats (External) - CDSTEP: Cultural, Demographics, Social, Technological, Economic, Political - Use these tools to determine your corporation’s competitive advantage Step 3. Make a STP (Segmentation, Targeting, Positioning) - Separate markets and choose a specific market you want to focus on then position your products to cater to said market Step 4. Implement the 4Ps and allocate resources to add to the “customer value” Step 5. Use metrics to determine if a firm achieved its objectives - Look at portfolio analysis or financial performance metrics - Financial performance metrics: assess sales / profits overall or over length of time - Portfolio analysis: method to classify current business units + products and determine how to allocate resources - Portfolio analysis indicates whether to grow or consolidate o Ways to consolidate: Harvest (cut back on resources devoted to product/market) or Divestment (eliminate entire product lines) *A marketing plan does not have to follow step-by-step consecutively Boston Consulting Group Growth Matrix (BCGGM) Stars: High growth market, high market shares (invest + grow) Cash Cows: Low growth market, high market shares (maintain + milk) Question Marks: High growth market, low market shares (watch + hold) Dogs: Low growth market, low market shares (harvest or consolidate) Growth Strategies: 1. Market Penetration: focus on same product, same TM 2. Market Development: focus on same product, new TM 3. Product Development: focus on new product, same TM 4. Diversification: focus on new product, untapped TM PRODUCTS AND SERVICES Current New t Market Product Penetration Development K M e N Market Diversification Development The Marketing Environment: uncontrollable elements outside of any organization that may affect its performance The Cool Hunter + Trend Hunters are two leading companies that help firms keep up on all latest trends / styles about consumers and the environment (society). The Marketing Environment has many different aspects labeled into 2 categories 1. Immediate Environment à Internal Factors 2. Macroenvironment à External Factors The Consumer is at the very center of these two categories. The Immediate Environment: Firm’s have some control over these elements - Company (Your SWOT analysis) - Corporate Partners (Depends on your ability to be Efficient) - Competitors (Rival’s SWOT analysis) Macroenvironment: Firms have no control over these elements - Culture / Social (values + beliefs) o Influence who what when where and why a consumer buys things o Country Culture VS Regional Culture § Country = universal TM appeal within countries; EX: Mini Cooper cars are universally appealing to young adults § Regional = identifying what appeals to a TM in each location; EX: Pepsi is popular in the Midwest, Coke is popular in the South o Pay attention to social trends within a TM § Are they concerned about health/wellness? The environment? Their privacy? About saving time or money? - Demographics (population statistics) o Who people are § Age, Gender, Ethnicity § Income, Education o Generational Cohorts: a group of people of the same generation that generally share experiences + purchase behaviors o There are four generational cohorts: § Generation Z: (2001-201X) • Digital natives; access information easily; cynical view towards ads; socially connected § Generation Y + Millennials: (2000-1977) • Largest cohort; children of the “Baby Boomers;” emphasis on balancing work + play; multitaskers + good time managers; identify with ads § Generation X: (1976-1965) • Value time and education; focus on bettering their own children since most of their parents divorced; biggest spenders at mass merchandisers; finicky buyers § Baby Boomers (1964-1946) • Largest 50+ older consumer pool; individualistic + independent; enjoys time with family; control 80% of personal wealth o Ethnicity: § Currently minorities represent 37% of US population; by 2050 minorities are estimated to be 50% of the population § Minorities assimilate but hold strong ties to preserving their native heritage o Education: § Higher education = high income level jobs à more spending money o Income: § Income distribution in the US has grown more polarized with the rich getting richer + poor getting poorer § Family incomes are stagnant while cost of living is rising - Technological (innovation) o Technological advances have impacted every aspect of marketing by introducing new products, new forms of communication and new retail channels - Economic (income + business) o Marketers must monitor the entire economic situation in their home country and abroad since the economy affects the way consumers buy products o Three factors influence the economy, therefore, the firm’s ability to market a good or service depends on: § Inflation: persistent increase in the prices of goods and services; increasing prices lowers the value of currency § Foreign Currency Fluctuations: changes in the value of a country’s currency relative to the currency of another country; influences consumer spending § Interest Rates: the cost of borrowing money; high interest rates can keep consumers in debt o Business cycles affect marketing plans: § Recession (falling income, employment and production) • Focus on value § Recovery (rising income, employment and production) • Focus on buying now for rewards later on § Prosperity (high income, employment and production) • Focus on convenience and rewards § Depression (low income, employment and production) • Focus on basic needs § Look at GDP, Country by Country Recovery + Employment Data to determine where your firm is on the business cycle - Political / Legal (laws) o Laws and regulations are in place to protect competition and consumers o Important laws include: § Sherman Antitrust Act (1890): prohibited monopolies or anything that inhibits fair trade in a free market § Clayton Act (1914): prohibited the combustion of two or more competing corporations though pooling ownership of stock and restricting pricing policies § Federal Trade Commission (1914): established to regulate unfair competitive practices that deceive consumers § Robinson-Patman Act (1936): outlawed price discrimination towards wholesalers, retailers or other producers and requires seller to maker ancillary services available to all buyers on equal terms § Wheeler-Lea Act (1938): added onto the FTC by stating it was unlawful to partake in unfair or deceitful practices for both consumers and competition § North American Free Trade Act or NAFTA (1993): established a free trade zone in North America, lifting tariffs on the majority of goods produced by other nations (Canada and Mexico) - Competitive (what other firms are doing) Marketing Vocabulary: Chapter 5 1. Macro-enviornmental factors: Aspects of the external environment that affect a company’s business (culture, demographics, social issues, technological advances, economic situation and political/ legal environment). 2. Culture: a set of values, understandings, guiding beliefs, and ways of doing things shared by members of a society; exists by visible artifacts (behavior, dress, symbols, physical settings, ceremonies) and underlying values (thought processes, beliefs, and assumptions). 3. Country culture: entails easy-to-spot visible nuances that are particular to a country (dress, symbols, ceremonies, language, colors, foods and preferences). 4. Regional culture: the influence of the area within a country in which people live. 5. Demographics: information about the characteristics of human populations and segments, especially those used to identify consumer markets by age, gender, income and education. 6. Generational cohorts: a group of people of the same generation who generally share the same beliefs or purchasing behaviors. 7. Generation Z: Digital natives who were born into a world full of electronic gadgets such as the internet and social media. 8. Generation Y: Children of the baby boomers or the Millennials who are born between the ages of 1977-2000 9. Generation X: People born between the years 1965-1976 10.Baby Boomers: People born after WWII between the years 1946-1964 11.Green marketing: involves a strategic effort by firms to supply customers with environmentally friendly merchandise. 12.Greenwashing: exploiting a consumer by disingenuously marketing products or services as environmentally friendly with the goal of gaining public approval and sales. 13.Inflation: persistent increase in the prices of goods and services 14.Foreign currency fluctuations: changes in the value of a country’s currency relative to the currency of another country. 15.Interest rates: cost of borrowing money 16.Political / regulatory environment: comprises political parties, government organizations and legislation and laws. Marathon Gas Station Guest Speakers Fun Fact Quiz: - There are 5 petroleum refining companies in Fortunes 500 (Exxon, Chevron, Phillips, Valero + Marathon) - Marathon makes 3-5 cents per dollar sold - The last petroleum refinery built in the US was in 1976 Background: - Marathon was created in Ohio in 1887 - It is the #1 seller in the Midwest region - Oil is produced in Louisiana and sent up a pipeline to the markets they’re being sold in - There are two divisions in Marathon’s company: o Wholesale / commercial accounts: large customer base; impersonal o Brand marketing: 7-9 customers; very personal Marathon’s Marketing Environment: 1. Our customer (known as distributors or jobbers) 2. The retailers (gas stations) 3. The end user (consumers like us) 4 Ps of Marathon: Product: they sell not only fuel but… - Their company, people, logistics, image, programs, quality of products and must maintain strong customer relations - Gasoline quality campaigns: Marathon = STP (this mixes with the gasoline to make Marathon’s gas unique from Shell, BP, etc.) Price: gas is a commodity that’s price is determined by a complex market - Marketing based price should always be a last resort o Cannot promise a customer a certain gas price since they fluctuate so often o Crude oil costs equal 62% per gallon (price weighed heavily on the barrel prices) - Location also determines price o Regional price factors = state taxes (which differ immensely from state to state) Place: - Goes from the refineries (produce the oil) à terminals (store the oil) à transport truck (transport the oil) à retailers (sell the oil) - Between the terminals + transport trucks, the STP is mixed into the oil to make it unique o The transport trucks are an independent company and all responsibility transfers from Marathon to them once they pick up the oil Promotion: Market to either the distributors or the end consumers - Target the primetime for gas fill-ups (3pm-7pm) Consumer Behavior To understand consumer behavior we must ask why people buy goods/services. Involvement: degree of interest in product 1. High involvement à scrutinize information a. More research when buying a home than a granola bar 2. Low involvement à less attention to detail a. Impulse or Habitual purchases 3. Extended problem solving à high risk purchases 4. Limited problem solving à low-neutral risk purchases Consumer Decision Process: 1. Need Recognition 2. Search for Information 3. Evaluation of Alternatives 4. Purchase + Consumption 5. Postpurchase Need Recognition: functional needs (the performance of a good/service) VS the psychological needs (desires or wants). a. Present state VS Preferred state (where consumers want to be) b. Marketers must balance these needs to best appeal to their TM Search for Information: internal (gathered through past experiences) VS external (seeks help from outside sources) Factors affecting search processes: • Perceived Costs VS Perceived Benefits • Locus of control à internal (can control) VS external (can’t control) • Actual VS Perceived Risk 1. Performance à what if the product doesn’t work as expected? a. Longevity 2. Financial à what are the product’s initial and extended costs? a. Worth the investment 3. Social à what will other people say about the product? a. Peers influence 4. Physiological à is the product harmful or dangerous? 5. Psychological à does the product make the consumer feel good? a. Do I have control over this purchase Evaluation of Alternatives: consumers look at evaluative criteria when deciding upon a purchase (pro VS con) • Universal à all possible choices • Retrieval à all choices brought forth from memory • Evoked à all choices consumers actually consider EX: You want to buy a pizza in Athens. You can remember you can order from Papa Johns, Little Caesars, Dominios, Mellow Mushroom and Your Pie (retrieval set). You forgot about Pizza Hut, Depalmas and Transmetropolitan (universal set). You would only actually consider buying from Papa Johns or Your Pie (evoked set). • Determinant attributes help make decisions since they distinguish brands Compensatory VS Non Compensatory: 1. Compensatory: tradeoffs a consumer must consider when deciding between different products EX: You are looking for a cereal to buy. You are deciding between Cheerios, Kashi, Captain Crunch and Reese Peanut Butter Cups. You know that the Captain Crunch and Reese cereals taste the best but are the most unhealthy and above average price. Kashi is the healthiest option but doesn’t taste the best. Cheerios, however, taste pretty good and are being sold at a reasonable price. You decide to buy the Cheerios (Compensatory purchase). 2. Non-Compensatory: one specific characteristic determines whether a consumer will purchase a product or not EX: If you were looking for the healthiest cereal, you would have chosen Kashi hands down, even if it was much more expensive and not the best tasting. (Non-Compensatory purchase) Purchase + Consumption: using the conversion rate to determine if consumers converted purchase intentions into actual purchases (important for the seller) Post-Purchase: customer satisfaction (the less regret of a purchase, the more loyalty gained) • Cognitive dissonance à questioning your purchase decisions • Customer loyalty à being satisfied with a brand so consumers continuously purchase it • Undesirable consumer behavior à passive consumers (don’t help or hurt your brand) and negative consumers (hurt your brand) Factors influencing the consumer decision process are: 1. Marketing Mix (4Ps) 2. Psychological 3. Situational 4. Social Psychological: 1. Motives: need or want that is strong enough to cause a person to seek satisfaction a. Maslow’s Hierarchy of Needs: i. Physiological à basic necessities of life ii. Safety à protection + well being iii. Love à interaction with others iv. Esteem à satisfy inner desires v. Self-Actualization à 100% happy with your life b. Maslow’s shows consumer’s needs and how marketers can satisfy them 2. Attitudes: enduring evaluation of about or towards and object or idea a. Cognitive à what we believe to be true b. Affective à what we feel or like / dislike c. Behavioral à actions we take based on 1 & 2 3. Perceptions: select, organize and interpret information to form a meaningful picture of the world a. Screened through attention, distortion and retention 4. Learning: change in thought process that arises from experience a. This affects the consumer decision behavior 5. Lifestyle: how we spend our time and money Social: 1. Family: who makes the purchasing decisions? a. We learn how to buy from our family members and their roles influence purchase behavior 2. Reference groups: people that influence a consumer’s beliefs / feelings / behaviors a. Memberships (I’m in) aspirations (I want to be in) and dissociative (I don’t want to be in) b. Friends, co-workers, celebrities c. Helps consumer create, enhance and maintain their self image 3. Culture: shared beliefs, meanings, morals and values Situational: 1. Purchase situation: special occasion items; for yourself or someone else? 2. Shopping situation: in store factors a. Store atmosphere b. Salespeople c. Crowding d. In-Store Demo e. Promotions f. Packaging 3. Temporal state: depends on mood / time of day Segementation, Targeting and Positioning (STP process) • Segmentation: identifying and serving homogenous groups of customers • Segments: naturally existing groups of consumers with similar needs / wants and responses • Target markets: the segments your firm chooses to serve STP Process: Segmentation 1. Strategy / Objectives 2. Segmentation Targeting 3. Evaluate Segment Attractiveness 4. Select Target Market Positioning 5. Identify and Develop Positioning Strategy / Objectives a. Consistent with company’s mission statement / SWOT Segmentation • Geographic: grouped based on where they live o Zipcodes, cities, regions, nations • Demographic: grouped by characteristics (most common strategy) o Age, gender, income, education • Psychographic: grouped based on self concept, self value and lifestyle o Self concept: image of yourself o Self value: goals for life o Lifestyle: way we live (VALS survey) • Benefit: grouped based on the benefits people derive from products • Behavioral: grouped based on o Occasion: when product is purchased o Loyalty: investing in current customer base A combination of segmentation help narrow groups down to a reasonable target market • Geodemographic: geographic, demographic and lifestyle segmentation combine o Use PRIZM (Potential Rating Index by Zip Markets) or ESRI Tapestry to find these segments Evaluate Segment Attractiveness: make sure your market is… 1. Identifiable: who is clearly in the market? Are they unique? 2. Substantial: big enough market to pursue (if its too small, its not worth pursuing) 3. Reachable: can we get product to this TM? Do they know it exists? 4. Responsive: does TM care about our product? Are they willing to buy it? 5. Profitable: focus on specific elements a. Market growth à current and expected b. Market competitiveness à # of competitors and substitutes on market c. Market access à easy distribution and brand familiarity d. Segment size à # of people in a segment e. Segment adoption percentage à % of who would actually buy it f. Purchase behavior à cost + how many purchases g. Profit margin % à selling cost – costs / selling price h. Fixed costs à advertisements / rent / utilities / insurance, etc. Select Target Market: 1. Undifferentiated Market: Mass marketing à one for all, all for one (no customization 2. Differentiated Market: customized strategies per TM a. Cannibalization: when a new product cuts the sales of another product i. EX: When Coke Zero was introduced for men, women who drank Diet Coke stopped drinking it to drink Coke Zero instead 3. Concentrated Market: Niche marketing à focus on one sole TM 4. Micromarket: one-to-one à customized per person a. Use the internet cookies to help craft this market Develop Positioning Strategies: use 4Ps to develop these 1. Value Proposition: shows customers the product benefits a. The value of a product (meaning price matches quality) is extremely important b. Play up on all product attributes and symbols people associate the product with (EX: Swoosh sign is universally known as Nike) c. Emphasis on your company’s competitive advantage 2. Perceptual Map: position a product is in according to the customer’s mindset or public opinion a. Ideal points on the map show segments preferred place to be b. What your company wants and what the customer sees are two different things, so be aware of your reputation
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