Marketing Exam 1 Study Guide Chapter 1 – Introduction to Marketing MARKETING – an organizational function & a set of processes for creating, capturing communicating and offering/delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders (value = cornerstone. Both parties must get something of vaIf you want to learn more check out microbiology exam
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lue out of the exchange) - Satisfies customers wants/needs - Affects various stakeholders - Entails price, product, place, position decisions - Helps create value - Performed by individuals or organizations - Entails exchange “Working Definition” – anticipating (through research) & determining the needs/wants of consumers (target market) & satisfying those needs through the use of the 4 P’s to create long term exchanges of value Marketing Plan – doc analysis of current marketing situation, opportunities, & threats to a firm, marketing objectives & strategy specified in terms of 4 P’s, action programs & projected income statement Market Place – the world of trade, but can be segmented… Target Market – those groups of consumers we pick/choose to appeal to (socioeconomic, demographic) specifically, the people who can afford the product they want EX: Lexus knows everyone wants the hybrid starting at $120k but only markets to people who will truly buy it Value = ratio of what is given up for what is obtained (each party must be better off) Value is created through the marketing mix (4 P’s) Marketing Mix – controllable set of activities firms’ use to respond to the wants of the target market Marketing Mix = Product + Price + Place + Promotion1) Product – Creating Value Through a variety of offerings including goods, services, & ideas (safety, green) to satisfy customer needs 2) Price – Capturing Value Price is everything a buyer gives up (money, time, energy) in exchange for the product Must be amount customer is willing to pay and which gives a profit Marketers determine price on basis of the potential buyers’ beliefs about its value 3) Place – Delivering Value Place, or supple chain management, all activities needed to get the product to the right customer when the customer wants it (Walmart = expert efficient supply chain/ marketing chain management) Supply Chain Management – set of approaches/techniques firms use to efficiently/effectively integrate supplier, manufacturer, warehouse, store etc. into a seamless value chain where merchandise is produced/distributed in the right quantities/locations & time while minimizing costs & satisfying customer service 4) Promotion – Communicating Value Communication that informs, persuades & reminds potential buyers about a product/service to influence their opinions or elicit a response (can enhance a product/service’s value) B2C – “business to customer” B2B – “business to business” C2C – “customer to customer” Corporate Orientations (3) Product Orientation – focus on internal capability & technology. What does the firm do best? U.S. market share for Ford, Lincoln/Mercury brands slid to 17.2% in 2005 bc of reliance on the manufacturing of SUVs & slow reaction to consumers’ shift toward fuel-efficient vehicles. Product innovation was the focus not customers wants, retailers were considered holding spots until customers came around and wanted it. Thought was “if you will build it, they will buy it”… Henry Ford, “customers can have any color they want as long as its black” Sales Orientation – (1920-50) focus on aggressive sales techniques. How to sell more of what we have? Great Dep + WWII made people spend less & make more so that manufacturers tried more personal selling/advertisement. LR, companies can’t keep their eyes off consumers or they’ll change Kholes has a big focus on sales promotion (circle savings on receipt)Marketing Orientation – value-based to discover/satisfy customer needs. What does customer want? Purpose of the organization is to discover and satisfy consumer needs/wants, while meeting organizational objectives & provide more value to consumers than competitors. More focus on customer, offering more choices and design variety Marketing Concept – make what you can sell rather than selling what you can make: Put customer 1st make what there’s demand for (what the customer wants) Social Marketing Orientation – focus on enhancing benefits to society. (Beyond the marketing concept!) How can I meet consumer needs & benefit society? Marketing Analytics: collecting data of how, when, why, where, & what people buy to inform firms’ decisions Amazon, Netflix, CVS, Starbucks etc. collect massive amounts of consumer data Relational Orientation – lifetime value of the customer CRM : Customer Relationship Management (focus on building loyalty) Value Co-Creation: when customers act as collaborations to create the product/service Focus: how will todays transactions build relationships/transactions in the future Social & Mobile Media allows for better buyer/seller connections o Buffalo Wild Wings gives away stuff for frequent visitors who check in on their phones Why is marketing important? Applicable to everyone & everything! Marketing enriches society, can be entrepreneurial, expands global presence, and strengthens channel relationships Chapter 4 – Marketing Ethics Marketing ethical dilemma: how to balance shareholder interests & society’s interests ethically Ethics: moral principles & values that govern actions Laws: society’s values enforced in court Main Importance: firms’ ability to build & maintain customer trust by conducting ethical, transparent, clear transactions for marketers through sound ethical principles as a continuous dynamic processEthical + Legal Ethical + Illegal Unethical + Legal Unethical + IllegalHow to avoid unethical behavior: the short-run goals of each employee must align with the long-run goals of the firm by imposing strong ethical rules for governing transactions (AMA gives details) Corporate Social Responsibility – (CSR) refers to the voluntary actions taken by a firm to address the ethical, social, and environmental aspects of its business operations & stakeholder concerns Framework for Ethical Decision Making 1. Identify Issues (through data collection) o If a decision goes against any of these following you should not proceed: 1) societal norms 2) general business norms 3) company norms 4) personal norms/values o Mgmt ranks all alts by preference (pros/cons) & any possible legal problems, considers any relevant issues, and avoids actions that create ethical lapses o Metric: Ethical Decision-Making Metric 2. Gather Information & Identify Stakeholders o Find facts key to the ethical issues & all relevant legal info o Stakeholders: employees (retired/current), customer groups, stockholders, community 3. Brainstorm & Evaluate Alternatives o All people relevant to a decision should get together to brainstorm any alternatives to stay ethical 4. Choose a Course of Action o Weigh all alternatives & generate the best solution for all stakeholders ethically Chapter 6 – Consumer Decision Making / Behavior Internal Locus of Control: consumers believe they have some control over their actions, generally engage in more search activity. Increasing with social media. More likely to buy individual stocks. (Dr. Mole) External Locus of Control: consumers believe fate or other external factors control all outcomes. More likely to buy mutual funds Purchase Decisions can either be:Low Involvement – less attention & peripheral processing, generating weak attitude & increased habit ∙ Low cost, standardized, not important, low risk (peripheral route to persuasion, influence stuff on the peripheral like music, jingle, endorsement celeb, not just the product itself) ∙ Type of buying process used: routine response behavior/habitual ∙ How marketers try to influence: “how to minimize the low risk decision to change routine (ex: dish soap, socks) in-store promotion, link to high involvement issue (tissue) o Ben & Jerry’s 3 part mission: “product, social, economic” linked prosperity to local places o Umano: tshirt (standardized item) but “greater good” giving kids supplies for each sold High Involvement – greater consumer attention to risk involved (central route to persuasion), deeper processing, develops strong attitudes and purchase intentions, more time and effort spent purchasing ∙ Consumers see substantial differences between alternatives so the process used is extensive ∙ Actual or Perceived Risk (5): o Performance Risk – the perceived danger inherent in a poorly performing g/s o Financial Risk – risk associated with monetary outlay; the initial cost of the purchase and the costs of using the g/s and maintaining it o Social Risk – the fears that consumers suffer when they worry others might not regard their purchases positively o Physiological Risk – “safety risk” fear of an actual harm should the g/s not perform properly o Psychological Risk – associated with the way people will feel if the product or service doesn’t convey the right image 5-Step Decision Making Process (high involvement) 1. Need Recognition ∙ When someone recognizes they need a new g/s they are influenced by internal & external stimuli ∙ The greater the difference between the 2 states (present & preferred), the greater the need ∙ Functional Needs: pertain to the performance of a g/s ∙ Psychological Needs: pertain to the personal gratification consumers associate with a g/s o Successful marketing incorporates a balance of both ^ 2. Information Search∙ Room for heavy influence here (includes risk factors mentioned above‼) ∙ Internal – buyers’ memory/knowledge about a g/s gathered through past experience o Ex: brands you know don’t work well vs. brands you’ve heard of and like ∙ External – buyer seeks info outside of their knowledge base to help make a buying choice (Google) o Access for information ∙ Attribute Sets: Universal: the list of all brands of sneakers out there o Retrieval: what consumers remember or know by name o Evoked*: brands you know you like & are considering buying (marketers want products here‼) 3. Evaluation of Alternatives ∙ Evaluative Criteria – a set of salient (important) attributes about a particular product ∙ Determinant Attributes = key factors; the things that people actually care about enough to ‘determine’ their decision against competitors (price storage camera) ∙ Consumer Decision Rule – criteria that consumers use consciously or subconsciously to quickly & efficiently select from among several alternatives ∙ Compensatory Decision Rule– chart weighing importance of determinative factors where 1 product may be low in a certain category, it can be balance out by a high score in another ∙ Multi-Attribute Model – compensatory model of customer decision making based on the notion that customers see a product as a collection of attributes or characteristics. Model uses weighted average score based on the importance of various attributes/performance on those issues ∙ Non-compensatory Decision Rule – at work when consumers choose a g/s on basis of a subset of its characteristics, regardless of the values of its other attributes ∙ Marketers need to know their target-market wants (ex: organic = non compensatory, Kashi) 4. Purchase & Consumption ∙ Important for consumer: Negotiation, payment method, delivery ∙ Important for seller: Conversion Rate – % of consumers who buy a product after viewing it, measures how well they have converted purchase intentions into purchases o EX: online carts, sellers want to make it so you’ll actually make the purchase 5. Post-Purchase Behavior ∙ “Lifetime value” customers are very important! ∙ Venn-diagram: Increase customer satisfaction, Decrease cognitive dissonance, Increase loyalty∙ Cognitive Dissonance: “buyers remorse” to minimize, get approval from friend. Focus on negative aspects of what you almost bought… “Selective Exposure” to avoid info that favors a non-choice ∙ Customer Satisfaction: ways marketers can ensure: realistic expectations, demonstrate correct product use, encourage feedback, warranties, contact customer with a thank you Neuro-market: the study of the brain’s response to a certain g/s (Coke vs. Pepsi), figure out “hot button” ∙ Commercial Alert thinks that neuro-marketing is totally unethical Negative word-of-mouth: occurs when consumers spread negative info about a g/s (ex: Kanye to LV) Factors Influencing the Consumer Decision Process 1. Marketing Mix ∙ Product, Price, Place, Promotion (same for everyone) 2. Psychological Factors ∙ Motives – a need/want that’s strong enough to cause the person to seek satisfaction o Maslow’s Hierarchy of Needs: Bottom → Top (progression of needs) o Physiological – food, water, shelter o Safety – secure employment, health, physical wellbeing o Love – friendship, family, needs expressed through interactions with others o Esteem – confidence, respect, needs that enable people to fulfill inner desires o Self-Actualization – people engage in personal growth activities & attempt to meet their intellectual, aesthetic, creative, etc. When someone is totally satisfied with life ∙ Attitudes – person’s enduring evaluation of their feelings about & behavioral tendencies towards an object/idea. Attitudes are learned & long-lasting, they can develop but don’t change fast. o Cognitive Component – reflects a person’s belief system or what they think is true o Affective Component – involved emotions or what we feel about an issue at hand (dis/likes) o Behavioral Component – the actions we undertake based on what we know and feel ∙ Perception – process where people select, organize & interpret info to form a meaningful picture of the world, we choose if we want to even opt-in to info thru “filters” varying among people.o Selective Exposure – what we choose to even let in/listen (not officially a filter) o Selective Attention – what we choose to pay attention to / watch o Selective Distortion/ Comprehension – we tend to interpret info in a way that allows us to hold onto our prior beliefs o Selective Retention – what we tend to remember (repeat exposure, jingle, endorser) ∙ Learning – a change in thought process or behavior after a marketing experience Cognitive or Experiential (free trial) ∙ Lifestyle – refers to the way a person lives to achieve goals (time/money) ∙ Demographics – age, gender, ethnic background, martial status 3. Social Factors ∙ Influenced by external social environment (culture, reference groups, FAMILY!) ∙ Reference Group: people uses as a basis for comparison regarding beliefs, feelings & behaviors by 1) offering info 2) providing rewards for specific purchases 3) enhancing a consumers’ self-image o Membership, Dissociative, Aspirational (the groups you want to be/act like) ∙ Culture: set of values, guiding beliefs, understandings, & ways of doing things shared by members of a society; exists on 2 levels: visible artifacts (behavior, dress, symbols) & underlying values (thought processes, beliefs, assumptions) ∙ Customer Socialization – family influence, you’ll probably buy whatever your mom bought 4. Situational Factor ∙ Purchasing Situation – what you’d buy for yourself, vs. someone else as a gift is different ∙ Shopping Situation – Store atmosphere (black Friday) music, scent, lighting, salespeople, crowding customers, in-store demonstrations, promotions, packaging, etc. ∙ Temporal State – if u get a parking ticket before walking into Tiffany, ur probably pissed Extended Problem Solving – a purchase decision during which the consumer devotes considerable time & effort to analyzing alternatives; often occurs when the consumer perceives that the purchase decision entails a lot of risk Limited Problem Solving – occurs during a purchase decision that calls for, at most, a moderate amount of effort & time. The customer has probably purchased a version of the product before or has experienceImpulse buying – a buying decision made by customers on the spot when they see the merchandise Habitual Decision-Making – purchase decision process where consumers engage w/ little conscious effort Chapter 9 – Segmentation & Target Marketing Segmentation – identifying & serving homogeneous groups of consumers Segments – naturally existing groups of consumers with similar needs/wants and response; customer segments already exist in marketplaces, we just need to identify them Target Markets – the segment your firm chooses to serve 3 Parts: Segmentation (steps 1 +2), Targeting (steps 3 +4), & Positioning Process (step 5) Step 1: Strategy or Objectives ∙ Derived from mission (direction of firm) & current state; who we’ll focus on, how we will grow our customer base Step 2: Segmentation Methods ∙ Geographic –in GA, walk into any store/service and see UGA, Tech, Falcon stuff ∙ Demographic –most common segmentation strategy (Holderness Family) (income, gender, age) ∙ Psychographic – self-values, self-concept, lifestyles, Vals (innovator) ∙ Benefits – different customers are seeking different benefits from same product category (UGA offers educational benefits, Banks offer straightforward, customer service meetings) ∙ Behavioral –occasion segmentation special or everyday. Loyal/usage segmentation Step 3: Evaluate Segment Attractiveness ∙ Identifiable –who is in that market? Are the segments unique? Does each segment require a unique marketing mix? Homogeneous outside but ∙ Substantial – too small & it’s insignificant; too big and it might need it’s own store… too small & its insignificant… too big and it might need its own store ∙ Reachable – can you reach consumers so they: know the product exists, understand what it can do and recognize how to buy it. Marketers want their products to “fall” in front of customers ∙ Responsive – customers must: move toward the firms g/s, be willing to accept the firms value proposition. Social media allows excellent engagement (growing) ∙ Profitable – homeowners vs. business being compared in size, FC, profit, purchase behavior (analysis: not all about segment size, but estimates profits given all factors) Step 4: Select Target Market ∙ How many segments, which specific segments. Must acknowledge different customers ∙ Differentiated – (multi-segmented) firms choose to focus on more than 1 target segment o Cannibalization – new product cuts into sales of old product; aim at new segment, hit old segment. When P&G introduced “Dreft” (for baby skin) it’s inevitable some of their other users (tide, cascade, downey) will switch so at least then its in the company instead ∙ Concentrated – (niche market) all eggs in 1 basket (smoothie king) ∙ Undifferentiated or mass market – firm assumes all consumers are the same, relative to the product category ∙ Micromarketing or one-to-one – advantage, increases loyalty. Even big firms are moving towards making consumers feel special, efforts put forth to customize/ personalize customers Step 5: Identify & Develop Positioning Strategy ∙ *** Most important! Positioning methods, using 4 P’s develop value proposition. What space is the consumers mind do I want to occupy? ∙ Value proposition – target customers must have clear understanding of your competitive advantage. Unique points of difference, value ≠ price, value = what u get for what u give ∙ Perceptual Map – marketers ways to conceptualize to consumers → only way to learn this is really just research