Study Guide Midterm
Study Guide Midterm MARK 220-01
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This 24 page Study Guide was uploaded by Asli Acar on Sunday February 21, 2016. The Study Guide belongs to MARK 220-01 at Georgetown University taught by Simon Blanchard in Spring 2016. Since its upload, it has received 89 views. For similar materials see PRINCIPLES OF MARKETING in Marketing at Georgetown University.
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Date Created: 02/21/16
Company and Marketing Strategic Planning Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and objectives and its changing marketing opportunities 1Define the organization’s mission What is our business? Who is our customer? What do our customer’s value? What should our business be? Mission Statement: A statement of the organization’s purpose— what it wants to accomplish in the larger environment. Marketoriented and based on satisfying customer needs Meaningful and specific, yet motivating Emphasizes the company's strengths in the market Should NOT be stated in terms of sales or profits Compan y Productoriented Mission Marketoriented Mission We connect people around the world and help them share important moments in their Facebook We are an online social network. lives. They try to create an environment that will “connect” people Revlon We make cosmetics. We sell lifestyle and self expression. Coca We refresh the world by inspiring moments Cola We make beverages. of optimism and happiness. Kodak We produce photography equipment, We help people easily and quickly record cameras, films and photo printers. their memories. It is about the needs that the companies are satisfying. Starbucks doesn’t even name “coffee” in their mission. The best mission statements reflect an external focus on customer needs, not an internal focus on the company’s current offering Marketing myopia: Defining the company’s mission too narrowly can cause managers to miss opportunities for growth Under Armour's and Nike’s mission is very different even though they are both sports brands. Under Armour’s mission is to make all athletes better through passion, design, and the relentless pursuit of innovation. Every Under Armour product is doing something for you; it's making you better. While, Nike is trying to encourage everyone who has a body to be an athlete and buy their products. 2 Set objectives S.M.A.R.T. objectives—what the firm hopes to accomplish within a specific time frame Specific Measurable Attainable Relevant Timebound Organizational objectives should be consistent with, and support the realization of, the company’s mission. Objectives are not always monetary Area of Performance Possible Objectives Profitability Achieve an annual rate of return on investment of at least 15%. Market Share To make our brand #1 in terms of market share within 5 years. Innovation To double the number of transistors on our CPUs within2 years. Worker Performance and attitude To increase employee satisfaction by 20% this year. 3Establish the business portfolio In designing their business portfolios, companies must: • Analyze their current portfolio or strategic business units (SBUs) and decide which SBUs should receive more, less, or no investment. • Develop strategies for growth and downsizing that will shape the future business portfolio. Strategic business unit (SBU): A relatively autonomous division of a company that operates as an independent enterprise with responsibility for a particular range of products or activities An SBU can be a company division, a product line within a division, or a single product or brand. Portfolio analysis: The process by which management evaluates the products and businesses making up the company. Resources are directed toward more profitable businesses while weaker ones are phased out or sold. BCG Growth/Share Matrix • The Boston Consulting Group (BCG) growthshare matrix is a portfolioplanning tool for assessing and prioritizing SBUs Focuses on the potential for existing products to generate cash that the firm can use to invest in new or existing products Two dimensions: • Market growth rate (~market attractiveness) • Relative market share (~competitive strength) SBU Strategy Stars Build into cash cow via investment. Cash Cows Maintain or harvest for cash to finance new stars. Question Marks Build into stars via investment OR reallocate funding and let become dogs. Dogs Maintain or divest. Iphone: CashCow Ipad: CashCow Mac: CashCow AppleTv: Question Mark Ipod: Dogs Limitations of BCG Matrix • Assumptions about dimensions: • Growth rate = Market attractiveness? • Relative market share = Competitive strength? • It can be hard to obtain reliable measures of market share and growth • Assumes growth is uncontrollable 4Develop growth strategies: Companies must grow to: Compete more effectively Satisfy their stakeholders Attract top talent Marketing shoulders the responsibility for achieving and managing profitable growth. Product/Market Expansion Grid Market Penetration Increasing sales of current products to current market segments Encourage people to spend more buy more (toothpaste) Encourage nonusers in the target market to buy Selling current products to new customer segments • Common tactics: Communicate different uses/benefits of the product Advertise in different media Add channels of distribution Expand geographically Off Label Drugs propecia, Viagra Product Development Selling new products to current market segments • Offer new variations of the same product • E.g. Mini Oreo’s, Pretzel M&M’s, “seasons” • Some tactics: • Planned obsolescence • Fashion Diversification • Starting up or buying business outside of the firm’s current products and consumer segments • Some tactics: • Acquisitions: e.g., McDonalds purchased Aroma Cafe and Boston Market, Sara Lee purchased Coach Leather Products, Altria purchased Post Cereals, Kraft Cheese, etc. Under Armour • Option 1: changing the product positioning of its current products to a fashion brand • Option 2: maintaining focus on performance apparel to be worn by athletes • Option 3: developing a line of professional fitness equipment Common Tactics: Increase advertising Cutprice sales promotion Frequent shopper programs Increase distribution 27/01/16 Marketing Research Exploratory research Used to discover ideas or insights and to form hypotheses Generally provides qualitative data (small scale studies) Indepth probing of a few consumers who fit the profile of The “typical consumer” Various methodologies used in exploratory research: • Observation/Ethnography • Consumer interviews • Projective techniques • Focus groups • Case studies Projective Techniques • Projective tasks are useful for uncovering latent purchase motives: Manifest motives are those that are known to consumers and admitted to researcher Latent motives are either unknown to consumers or are purposely withheld from the researcher • Thirdperson techniques are useful for uncovering latent motives. For example: • “Out of $5, how much would you donate?” $2.50 • “Out of $5, how much would someone else donate?” $1.50 • How much do people actually donate? $1.50 Projective techniques: third person Research topic 1: Car company Porsche wants to know how people view the brand/car “Porsche.” Consider the following two candidate questions for potential buyers: Why would you buy porsche vs why would your neighbor buy a posrche Research topic 2: A “readytoeat microwave meals” company wanted to know why their products are bought. Consider the following two candidate questions for homemakers: Completion Technique Completion techniques can identify the sorts of things people associate with products, services, brands, etc. • Golfing is for_______ • People who visit museums are_____ • The average person considers skiing____ Responses reflect the most salient (i.e., “top of mind”) associations, which in turn tend to be the things people associate most strongly with the subject in memory (Dis)Advantages of focus groups Relatively fast Easy to execute and very flexible (Relatively) inexpensive Rich information due to interaction Dis: Not representative and hard to generalize Hard to analyze (subjective, not quantitative) Important role of moderator bad moderator gets you bad results Observational Research Unobtrusive method: Researcher simply records the consumer’s behavior – often without his or her knowledge. Human observation: people doing the observation • E.g.: Mystery shoppers Mechanical observation: nonhuman devices record behavior • E.g., A.C. Nielsen (people meters) • Arbitron “portable people meters” (PPM) • Online “cookies” to track behavior • MRI scans Descriptive research • Purpose: Describe market characteristics and or functions • Characteristics Large samples Quantitative data Well structured Crosssectional (a specific point in time), or Longitudinal (over time). • Most surveys fall into this category. But not exclusively. Sales monitoring, dashboards, etc. Survey: Pros and Cons Why so popular? Main pros: Ease: Questionnaires are relatively easy to administer to large number of respondents Reliability: Standardization reduces variability in the answers that may be caused by differences in interviewers or the interview process Simplicity: coding, analysis, and interpretation of data Source: MarketingNews 09/07 “Simple idea: the best way to find out what consumers think is to ask them” 1/2/16 Example of Casual Research It is important to use these systems to randomize it Selective Exposure Which television programs do you watch? Magazines do you read? Web sites do you browse? Social media do you use? What about your friends? What about your parents? Selective exposure refers to “where we tune in”. • Exposure: The process by which the consumer comes in physical contact with marketing elements. Even if we are part of the target audience, we may intentionally or unintentionally “miss” the message. Intentional Avoidance: Switch channels during commercial breaks Pop up blocker Junk mail Fast forwarding through commercials during recorded programs implications for ads (brand logos) Blocking senders Selective Attention: The process by which an individual allocates part of his or her mental activity to a stimulus. Characteristics of Attention • Selective: people have a tendency to pay attention to information from a particular source and exclude other information. • Can Be Divided: Multitasking... attention can be "split" and people can pay attention to more than one stimulus at a time. However, dividing attention does bring down the quality of the attention paid (e.g., talking and typing; texting and driving). • Limited: Our attention has a limited span... we cannot pay attention to every stimulus around us! Inattentional Blindness It’s easy to miss something that you are not looking for Inattentional Blindness: Failure to detect something that’s unexpected that’s fully visible. Asking for Directions (Inattentional Blindness) Change Blindness SKODA AD: Changing streets The factors that grab our attention more We pay more attention when a message is... • Personally relevant • Very pleasant or unpleasant • Surprising • Concrete • Simple Pleasant ads: Ads are more pleasant when they have... • Attractive models • Music • Humor Stimuli are surprising to the extent that they are... • Unexpected • Novel Attention is Multisensory We attend to all our senses. Marketing managers need to decide: Sight – picture versus text versus brand logo in print ads; visuals that relax or agitate; size; colors Sound – speed of voice transitions; signals of quality; background music and mood Smell – baking aisle in the grocery store Touch – “sturdy”; clothing racks cashmere, silk, ... implications for online shopping? Taste/mouth feel – comfort food; temperature What do we notice? Our attention is drawn to stimuli through our senses. What gets noticed and attended to is dependent on whether the stimulus breaks our “sensory limits.” As the sensory input decreases, our ability to detect changes in input or intensity increases. • Imagine holding 1 lbs, and then 0.5 lbs are added • Now imagine holding 100 lbs instead. Would you notice the extra 0.5 lbs? This is called the Just Noticeable Difference Companies reduce the size since people pay more attention to price. From attention to perception Suppose the consumer has been exposed and paid attention to the message the marketing manager sent out. You still have to worry about whether that consumer is correctly interpreting the information and comprehending that message. Perception is the process by which sensations are selected, organized, and interpreted Selective Perception The specific meaning we attach to a concept depends in part on how the information is organized and the context in which the information is found. It depends on how mindset, our mood, our individual traits, and framing. Research shows that consumers are more likely to buy ground beef described as 75% lean as opposed to 25% fat. The more ambiguity present, the more personal factors will govern the interpretation of the information. 03/02/16 Marketers behaving badly • Sometimes marketers take advantage of ambiguity and consumers’ lack of sophistication Misleading Consumers Intentionally FTC always seeking to prosecute those who intentionally mislead! Demonstrations e.g., Campbell’s soup – meat and potatoes above the broth because marbles were in the bottom of the bowl – now more tightly regulated. • In 1959, Palmolive made a commercial for their Rapid Shave shaving cream showing that it was so moisturizing it made sandpaper soft enough to shave—turns out it was just sand on top of Plexiglas FTC always seeking to prosecute those who intentionally mislead! Pragmatic Inferences – literally true, but figuratively false “Brand X pills may relieve pain” – “may” interpreted as “usually” – see this with weight loss programs You have to substantiate the things that you write on the products Comparison Omission – leave off comparison point “Brand X gasoline gives you greater gas mileage” Affirmation of the Consequent “Women who look younger use Oil of Olay” – flip it to “Women who use Oil of Olay look younger” – builds on people’s lack of understanding of conditional probabilities. Piecemeal Data – juxtaposition of imperatives “Brand X has more headroom than a Mercedes, more leg room than a Cadillac, and more trunk space than a BMW” Properties of Long and Short Term Memory Capacity Duration Information Coding Loss Short term 7 + 2 18 seconds Rehearsal Acoustic memory failure (sound related) Long term Unlimited Permanent Retrieval failure Semantic memory (meaning related) • Interpretation happens in shortterm memory. • We pull and add things to longterm memory, as needed. Associative Networks Information is stored in memory in an organized network structure. Network is comprised of nodes and links. Nodes = concepts/words Links = associations between related concepts Repetition strengthens the link more likely to prime related concepts/provides a context. Lack of use/strength of association diminishes...becomes less accessible in memory. Associations exercises ... Definitions Learning: A process that produces a relatively enduring change in behavior or knowledge as a result of an individual’s experience. • Happens over time. • Should influence behavior for a while. • Can occur as a result of one’s own experiences or someone else’s. Analytical reasoning and analogies (interpretation) Operant Conditioning Serial (operant) conditioning “Brute force” learning Analytical reasoning: engaging in creative thinking to restructure and recombine existing information to form new associations and concepts. Operant conditioning: Basic learning process that involves changing the probability that a response will be repeated by manipulating the consequences of that response. Reinforcing stimulus Aversive stimulus Stimulus Positive reinforcement Positive punishment (Give (Give something good something bad Target presented (+ve) Target behavior ↑ ) behavior ↓ ) Stimulus Negative punishment (Take Negative reinforcement removed ( away something good (Take away something bad ve) Target behavior ↓) Target behavior ↑) Serial Conditioning Shaping: Selectively reinforcing successively closer approximations of a goal behavior until the goal behavior is displayed. Shaping involves using operant conditioning over time to change the frequency of a series of target behaviors, culminating in a final goal behavior. 1. Launch Coupon on shelf. Big discount. 2. Postlaunch Moderate discount on bottle itself. 3. No discount at all. Learning without conditioning or reasoning Chunking – 1800safeauto; Grouping items to be processed as a unit Rehearsal – engaging jingles and slogans (McDonald’s) Repeating it over and over Elaboration – Locker combination Add additional meaning... use novel or unexpected stimuli Evaluation of Alternatives Attitudes Belief: • A descriptive thought that a person holds about something. Attitude: • A person’s consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or idea. i.e. evaluation of a belief 08/02/16 Balance Theory • With an imbalance, a person can: • Change the opinion of the object • Change the opinion of the other person • Decide the other person is mistaken • Avoid the other person and object Affective Attitudes • How marketers can change the affective component: • Using classical conditioning: pairing an stimulus that the audience likes with the brand name • Using emotions: creating arousal (positive or negative) (humor, celebrities, emotional appeals, fear, guilt, etc) • Mere exposure: repeated exposure increases familiarity and liking • Classical conditioning: pairing a positive stimulus with the product or brand The Buyer Process 1Need Recognition Occurs whenever a consumer recognizes a difference between the current state and the ideal or desired state. Once we activate a need, a state of tension exists that drives the consumer to some goal that will reduce this tension and eliminate the need. Motivation is an internal state that drives us to satisfy needs. Need rec Motivation Generate Motivation • We juggle many needs that can’t be all satisfied at once, so we prioritize. • Marketers should activate need recognition. How? • Advertise benefits—make it desirable, push for a new ideal state • Generate concern about existing state Only unmet needs are motivating. Information Search Once a need is activated, consumers search for information on how to satisfy it. Consumers conduct an internal search for information by retrieving relevant knowledge stored in memory Consumers also employ external search for information by relying on outside sources: Personal sources Commercial sources Public sources Experiential sources Evaluation of Alternatives Consumers: Identify consideration set (taken seriously): Narrow list and compare pros and cons Marketers: Educate consumers about which product attributes should be considered When brand is not part of the consideration set: Product improvement + advertising Induce trial Striking package designs and display Coupons, rebates Product Choice Rational choice suggests that we should evaluate all the information about all the alternatives, weigh it all, and then make the optimal choice. In reality, people often make choices based on heuristics—i.e., rules of thumb. Examples? Price = quality Brand name Country of origin Post purchase Evaluation How good a choice was it? Customer satisfaction: does the performance meet expectations? Exceed them? Fall short? Post purchase evaluation ultimately affects future purchase decisions—not only for this particular consumer, but also for others due to wordof mouth Two “nonrational” processes often influence post purchase evaluations Adjustment (i.e., “hedonic treadmill”) Lottery winners Amputees Cognitive Dissonance “After the sale discomfort” PostPurchase Dissonance will begin once a consumer begins to "notice" any disadvantages of their purchase, and begin to hear "good" things about the other products they did not buy. Post Purchase Opportunities for Marketers Reinforce wisdom of consumers’ choice through: Personalized contacts after sale Advertising Use recovery strategies: GE spends $10 million/year on its 800 number Answer Center (3 million calls/year). According to them, the payback is “multiple times” that. Burger King: 4,000 calls a day on its 24hour hot line 65% are complaints; 95% resolved in one call • BK calls back 25% within a month to check on satisfaction Thought Experience • “I want you to walk over to the mailroom to grab a book I left there.” • “I want you to walk over to the mailroom to grab a book I left there because I need it.” • “I want you to walk over to the mailroom to grab a book I left there because I need it for class.” • What would influence your willingness to comply in each case? Size of request Person requesting liking, similarity, authority figure Sense of obligation/reciprocity Mindlessness: Cutting Line 93% Automaticity: The “Because” Heuristic If you provide reasons for a request, people are more likely to comply. When the request is small, the mere presence of “because” is enough to gain compliance—even when the reason following “because” isn’t very compelling. When the request is large, the reason following “because” must be considered legitimate to produce compliance; people are more mindful and less “automatic” when costs are high. Commitment and Consistency Once we make a choice or take a stand, we experience pressure—both internally and externally—to behave consistently with that commitment. We respond in ways that justify our earlier decision. In the context of influence, once people agree to one request, they are more likely to agree to subsequent requests as well. • Why? • Shows consistency between attitudes and behavior • Less effortful than reprocessing all of the information that went into The initial decision making process (i.e., it’s a heuristic) • Footinthedoor: Make a small initial request, followed by a larger request later. Compliance with small initial requests makes people feel like they are good, nice, helpful people. To preserve this positive image and appear consistent, people will continue to comply with larger requests. Examples? • Signing petitions • What about job/internship hunting? Public commitments are very effective at instilling commitment. • Smoking cessation programs encourage the smoker to “tell everyone who matters to you that you are going to quit smoking” • Websites like Stickk • Lowball: get an initial commitment from an individual and then change the “deal” • People will stick with the new deal out of commitment to the old • Too much effort to think through the entire new deal • Some industries are notorious for this • Car dealerships • Airlines used to be worse SelfDefense Against These Techniques Listen to your gut when it tells you are being taken for a ride. • Ask yourself, “Knowing what I know now, would I still make the same choice?” • Tends to be effortful, but good for the big decisions (e.g., relationships, big purchases, etc.). • Tell the individual that you know exactly what they are trying to do and that it won’t work. Reciprocate • When someone does us a favor, we feel obligated to return the favor—i.e., to reciprocate Reciprocity: Techniques DoorintheFace: make a large, unreasonable request followed by a smaller, reasonable request. • More than just a contrast effect • Smaller request has to seem reasonable • Both requests must be made by the same individual • Don’t delay! Impact goes down if there’s a delay between the first and second requests. “That’s not all!” Sweeten the deal by adding bonuses. • People feel obligated to be reasonable and comply when offered a “good deal” • Leads to more sales Any potential concerns with this technique? Survey Compliance Examples • Physicians are extremely busy, and their time is very valuable • When promised $20 after returning a survey, 66% complied • When a $20 check was included upfront in the first mailing, 78% complied—an 18% increase in response rate! • Of those who did not comply, the majority did not cash the check (95% of responders cashed the check vs. 26% of nonresponders) While visiting a vintage furniture store, you find a coffee table that is appealing to you. It’s $80, but you think that the salesperson may be willing to negotiate. Present the offer: After deliberating for a while, the (seller) agrees to sell you the coffee table for $64, saying that it is her absolute lowest price. Make a favor request: However, she mentions that at this price, she would hope there would be something in it for her. Specifically, she says that after purchasing the coffee table and completing your purchase it would be nice if you would consider posting a positive review. Scarcity: When something becomes less accessible, the freedom to have it may be lost. According to psychological reactance theory, people respond to the loss of freedom by wanting to have it more. Availability may also serve as a heuristic for inferring an object’s quality or value—i.e., the more valuable something is, the more difficult it usually is to obtain As such, you may want to induce perceptions of scarcity Examples? Social Proof “Social Proof”—the perceived validity or correctness of an idea increases as the number of people supporting the idea increases • “Salting” the tip jar • “Operators are standing by. Please call now,” became, “If operators are busy, please call back later.” Halo of Attractiveness • Attractive people fare better in the judicial system Negligence victims are awarded almost twice as much in damages when they are more attractive than the defendant Attractive defendants are twice as likely to avoid jail time If convicted, attractive people receive lighter sentences Prisoners who had plastic surgery to correct facial deformities had lower rates of recidivism • Attractive people make good salespeople! Authority People are much more likely to comply when the requester has credentials or other “symbols” of expertise and authority This is often a useful heuristic for deciding how to achieve positive outcomes (e.g., for medical advice, listen to doctors, not Jenny McCarthy) But deference to authority can also have a very, very dark side, as shown in Milgram’s famous experiment AdWords Q2 AdRank: Quality and Format Impact Segmentation 1. Perform a situation analysis 2. Set marketing objectives 3. Develop marketing strategies • Segmentation • Select a target market • Develop marketing mix (4P’s) 4. Implement 5. Monitor and control (marketing metrics)
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