Principles of Marketing: Exam 1 Study Guide
Principles of Marketing: Exam 1 Study Guide MARK 30653
Popular in Principles of Marking
English 491-01 (3674)
verified elite notetaker
Popular in Marketing
This 26 page Study Guide was uploaded by Francia Maria on Monday February 29, 2016. The Study Guide belongs to MARK 30653 at a university taught by Mr. Freling in Winter 2016. Since its upload, it has received 200 views.
Reviews for Principles of Marketing: Exam 1 Study Guide
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/29/16
Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner 1 Chapter 3: Ethics and Social Responsibility A. Determinants of a Civil Society 1. Ethics: moral principles or values that generally govern the conduct of an individual or group. 2. Laws: Often… ethical rules and guidelines are codified into law. • Laws created by gvmnt. Are enforced by gvnmental authority • Not perfect for ensuring good corporate and employee behavior • Just because something is legal it doesn’t mean it’s ethical 3. Formal and Informal Groups: businesses, pro organizations, clubs… all have their codes of conduct. • Codes prescribe acceptable and desired behaviors of their members • Ex: American Marketing Association, American Medical Association 4. Self-regulation: Voluntary acceptance of standards established by nongovernmental entities • Ex: American Association of Advertising Agencies – deals with deceptive advertising 5. The Media: play a key role in informing the public about the actions of individuals and organizations both good and bad 6. Active Civil Society: informed and engaged society can help mold individual and corporate behavior • Boycotts, social media bombardments, petitions, etc. B. Ethical Theories 1. Deontology: states that people should adhere to their obligations and duties when analyzing an ethical dilemma • Person will follow his/her obligations to another individual/society because upholding one’s duty is what is considered ethically correct • Not necessarily concerned with the welfare of others 2. Utilitarianism: founded on the ability to predict the consequences of an action • Choice that yields greatest benefit to the most people is the choice that is ethically correct • Provides logical and rational argument for each decision and allows a person to use it on a case-by-case context • Two types: o Act utilitarianism: a person performs the acts that benefit the most people, regardless of personal feelings or societal constraints such as laws o Rule utilitarianism: takes into account the law, concerned with fairness. Benefit most people but through fairest and most just means available 3. Casuist: compares a current ethical dilemma with examples of similar ethical dilemmas and their outcomes • Allows one to determine severity of situation and create best possible solution according to other’s experiences 2 • Involves using wisdom of previous situations • Drawback: may not be a similar example from the present ethical dilemma 4. Moral Relativism: belief in time and place, which means ethical truths depend on the individuals and groups holding them • Weighing the competing factors at the moment and then making a determination to take the lesser of the evils as the resolution • Moral relativists: don’t believe in absolute rules 5. Virtue Ethics: people solve ethical dilemmas when they develop and nurture a set of virtues • Virtues: is character trait valued as being good • Virtues for businesspeople: caring, courage, compassion, honesty, responsibility, enthusiasm C. Ethical Behavior in Business • Boundaries of ethical decision making are predicated on which ethical theory one is following Morals: the rules people develop as a result of cultural values and norms o Culture is a socializing force that dictates what’s wrong/right o Moral standards may also reflect the laws and regulations that affect social and economic behavior Morality in Business Ethics • Ethical values are situation specific and time oriented • An approach to developing a personal set of ethics is to examine the consequences of a particular act • Second approach: importance of rules • Third approach: development of moral character within individuals. • In last approach, ethical development is thought to consist of three levels a. Preconventional morality: most basic level o Self-centered, calculating, selfish, based on what will be immediately punished or rewarded b. Conventional morality: moves from egocentric viewpoint toward the expectations of society. o Concerned only with whether a proposed action is legal and how it will be viewed by others c. Postconventional morality: morality of a mature adult o People are less concerned about how others might see them and more concerned about how they see and judge themselves over the long run Ethical Decision Making Following factors tend to influence ethical decision-making and judgments 1. Extent of ethical problems within the organization: the healthier the ethical environment, the more likely it is that marketers will take a strong stand against questionable practices 2. Top management’s actions on ethics: can influence the behavior or marketing professionals by encouraging ethical behavior and discouraging unethical behavior 3 3. Potential magnitude of the consequences: the greater the harm done to victims, the more likely the marketing pros will recognize a problem as unethical 4. Social consensus: greater the degree of agreement among managerial peers that an action is harmful, the more likely that marketers will recognize a problem as unethical 5. Probability of a harmful outcome: if marketers think problem will result in harmful outcome, then they will mark decision as unethical 6. Length of time between the decision and the onset of low consequences: if there’s a short amount of time between the action and negative consequences, then problem will be marked unethical 7. Number of people to be affected: if there’s a great number of people affected by the negative outcome, then problem will be recognized as unethical Ethical Guidelines -Many companies have developed a code of ethics as a guideline to help marketing managers and other employees make better decisions Corporate Social Responsibility • CSR: business’s concern for society’s welfare • Demonstrated by managers who consider LT best interest of company and company’s relationship to the society 1. Stakeholders and Social Responsibility • Stakeholder theory: states that social responsibility is paying attention to the interest of every affected stakeholder in every aspect of a firm’s operation • Stakeholders include: employees, management, customers, local community, suppliers, owners 2. Pyramid of Corporate Social Responsibility: portrays economic performance as the foundation for the other three responsibilities • Economic: make profits • Legal: obey law • Ethical • Philanthropic: be good corporate citizen 3. Arguments for and against Social Responsibility o Milton Friedman: says company should only spend necessary money, pay dividends, and let stakeholders spend these money how they like o Supporters say it’s the right thing to do, businesses have the resources to solve social problems o Also, if businesses aren’t socially responsible, government will create new regulations and levy fines against them o CSR is profitable. Ex: Starbucks reusable tumbler, which saved the company money (they didn’t have to buy as many plastic cups now) Green Marketing -The development and marketing of products designed to minimize negative effects on the physical environment or to improve environment -Drawback: not every person is willing to pay extra for green marketing products Cause-Related Marketing -The cooperative marketing efforts between a for-profit and a nonprofit organization -Tied to consumer revenues 4 -Ex: If you purchase from for-profit, $1 goes to nonprofit -Require LT investments and processes -Benefits: creates good PR for firm and will often stimulate sales of the brand -However, growth of this technique has lead to consumer fatigue Chapter 4: The Marketing Environment A. The External Marketing Environment • Managers must alter the marketing mix because of changes in the environment in which consumers live, work, and make purchasing decisions o Marketing mix: unique combination of 4Ps • New customers become part of their target market as they mature • The customers that remain in TM may have different tastes, needs, incomes o Target market: group of people or org for which an organization designs, implements, and maintains a marketing mix intended to meet the need of that group, resulting in mutually satisfying exchanges • Managers can control marketing mix but not external environment • Environmental forces include: social, economic, technological B. Understanding External Environment • Marketers engage in environmental scanning: evaluating environmental info to identify future opportunities and threats • Outcomes of understanding: o Current customers: where, when, why, what they buy o What drives consumer decisions o Identify the most valuable customers and understand their needs: must understand what drives loyalty and then take steps to ensure that those drivers are maintained and enhanced o Understand competition: attempt to forecast competitors’ future moves • Environmental Management: when a company implements strategies that attempt to shape external environment within which it operates o Factors include: social, demographic, technological, political and legal, competitive C. Social Factors -Most difficult external variable for marketing mangers to forecast, influence, or integrate into marketing plans • Attitudes • American Values: self-sufficiency, upward mobility, work ethic, conformity o Values are key determinants of what is important and what isn’t o Formed through interaction with family, friends, or religious beliefs, etc. o Influence on buying habits • Lifestyles o Practice of choosing goods and services that meet one-s diverse needs and interests rather than conforming to a single, traditional lifestyle o The way people decide to live 5 o Increase complexity of buying habits: each lifestyle requires different marketing mix D. Demographic Factors -Demography: study of people’s vial stats, like age, race, ethnicity, location -Important because basis for each market is people Age Cohorts • Tweens (8-12): more than 20 million o Responsible for $180 billion in spending, they spend $30 themselves and the rest spent by parents o High budget for back-to-school clothes o Attractive group to many markets o Fastest growing market: mobile games, micro transaction-based apps o Vast majority use electronic entertainment or communication devices • Teens (13-19): 25 million teens in the US o Spend many hours plugged in: music videos, video games, Internet, cell phones o Most have FB account o Purchases are influenced by their friends o Like to physically shop because it’s a social activity o Most spending towards: clothing, shoes, accessories • Millennials (Gen-Y): born between 1979 and 1994 o 77 million in the US o Spend $200 billion o Most tech-savvy: use more social media than traditional media o Two different stages of life cycle § Born in ’94: entering adulthood § Born in ’79: approximately 35, started careers, becoming parents, dramatic life changes, spend money on baby products • Gen-X (born between 1965 and 1978) o 50 million in the US o Independent, resilient, adaptable, and skeptical: because didn’t grow up with adult support o Hit hard by Great Recession: largest % decline in net worth from 2005- 2010 o Became big spenders at financial discounters (Wal-Mart) o Almost half with children in household: primary target for family-oriented p/s • Baby Boomers (1946-1964) o 75 million o Control wealth in the US o Willing to switch brands: affluent, experienced, flexible o Have lots of financial obligations o $1.8 trillion (including food, cards, healthcare) E. Growing Ethnic Markets Hispanic • Largest group 6 • Strongly committed to household and family, strongly connected to culture • Choose brands that reflect their culture • Men (dads) are household decision makers • More likely to be influenced by ads on Spanish-language TV than English • Make purchasing decisions based on package and design compared to general population African Americans • Youngest • Strongly connected to radio • More AA households than Hispanic households • More than half only raised by their mom • Most below poverty line • Promo dollars spent on AA continue to rise, also black media choices Asian Americans • Highest family income • Family oriented, interested in education, embrace tech • Fastest growing among minority groups • Early adopters of latest digital gadgets • Like to shop in businesses owned by other Asians F. Economic Factors 1. Consumer’s income: average US incomes have fallen ($51k in 2014) • Disposable income: after-tax income • With inflation, incomes have dropped about 8% • Education is primary indicator of person’s income: people with bachelor’s degree earn more • Many customers have switched to cheaper brands 2. Purchasing Power: comparison of income versus the relative cost of a standard set of goods and services in different geographic areas • Or… income – cost of living (expenses) • Gross income: pre-tax income • Disposable income: available for spending and saving (after taxes) • Discretionary income: for spending, investing, saving after taxes and necessities • When income is high relative to cost of living: more discretionary income 3. Inflation: measure of the decrease in the value of money, expressed as percentage reduction in value since the previous year • “Measure of the decrease in the value of money” • “Rising prices of demand over time” • As consumers: want low inflation • As businesses: high inflation • In low inflation: businesses con only improve profits by increasing efficiency, not prices 4. Recession: period of economic activity characterized by negative growth, which reduces demand for g/s 7 • Occurs when gross domestic product falls for two consecutive quarters • GDP: total market value of all final g/s produced during a period of time • Great Recession: 2008-2009 • Great Depression: 1929 to 1939 G. Technological Factors -Technological success is based upon innovation, which requires imagination and risk taking • Basic research (or pure): attempts to expand the frontiers of knowledge but is not aimed at a specific, pragmatic problem o Aims to confirm an existing theory or learn more about a concept or phenomenon • Applied research: attempts to develop new or improved products H. Political/Legal Factors Federal Legislation US Laws that affect marketing: 1. Sherman Act of 1890: against restraint of illegal trades, monopolies 2. Clayton Act of 1914: outlaws price discrimination and tying of contracts 3. Lanham Act of 1946: protects trademarks 4. Foreign Corrupt Practices Act of 1977: prohibits bribery of foreign officials to obtain business Laws for Consumer Protection 1. Food and Drug Act (1906): adulteration and misbranding of food and drugs 2. Public Health Cigarette Smoking Act (1971): prohibits cigarette advertising in radio and TV; revises packaging warnings 3. Digital Millennium Copyrights Act (1998): protection of digital media copyrights 4. Aviation Security Act (2001): requires airlines to take extra security measures 5. Homeland Security Act (2002): protects consumers against terrorist attacks 6. Do Not Call/Can-Spam Acts (2003): prohibits unsolicited marketing Regulatory Agencies 1. Federal Trade Commission • Empowered to prevent persons or corporations from using unfair methods of competition in commerce • Has created several bureaus to better organize its operations • One of the most important: Bureau of Competition 2. Consumer Product Safety Commission • Sole purpose: protect health and safety of consumers in and around their homes • Has power to set mandatory safety standards for almost all products consumers use • Can fine offending firms • Can ban dangerous products from marketplace • Consumer Product Safety Improvement Act: aimed at children’s products 3. Food and Drug Administration • Enforces regulations against selling and distributing adulterated, misbranded, or hazardous food and drugs products 8 • Tobacco Control Act: gave FDA authority to regulate tobacco products I. Competitive Factors • Competitive environment encompasses the number of competitors a firm must face, the relative size of the competitors, and the degree of interdependence within the industry • Exerted by alternative firms that could provide a product to satisfy a specific market’s needs o Ex: entry, power of buyers/suppliers, existing competition and substitution, start-ups, entrepreneurs, small businesses Chapter 6: Consumer Decision Making A. The Importance of Consumer Decision Making 1. Consumer behavior: processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased g/s; also include factors that influence purchase decisions and product use 2. Consumer roles: o Buyer o Payer o User B. Consumer Decision Making Process -Consumer decision-making process: a five-step process used by consumers when buying g/s 1. Need Recognition: result of an imbalance between actual and desired states • Triggered when consumer is exposed to internal/external stimulus • Stimulus: any unit of input affecting one or more of the five senses: sight, smell, taste, touch, hearing • Psychological processing: motivation § A motive is the driving force that causes a person to take action to satisfy specific needs § Why are people driven by particular needs at particular times? § Maslow’s hierarchy of needs: arranges needs in ascending order of importance: physiological, safety, social, esteem, and self- actualization o Physiological: most basic human needs, are essential for survival, must be satisfied first o Safety: security and freedom from pain and discomfort o Social: love and sense of belonging o Self-esteem: self-respect and sense of accomplishment o Self-actualization: self-fulfillment and self-expression; when people feel they are what they should be 2. Information Search: after recognizing need/want, consumers search for info about all alternatives available ü Internal info search: the process of recalling past information stored in the memory ü External info search: process of seeking info in the outside environment ü Determinants of Search § Involvement: amount of time and effort a buyer invests in the search, evaluation, and decision processes of consumer behavior A. Routine response behavior: type of decision making exhibited by consumers buying frequently purchased, low-cost goods and services; requires little search and decision time B. Limited decision making: requires a moderate amount of time for gathering info and deliberating about an unfamiliar brand in a familiar product category C. Extensive decision making: most complex; used when buying unfamiliar, expensive product or an infrequently bought item; requires use of several criteria for evaluating options and much time for seeking info § Factors affecting involvement: (high consumer involvement) 1. Product involvement: the product category has high personal relevance. § Product enthusiasts are consumers with high involvement in product category § Ex: fashion industry 2. Situational involvement: the circumstances of a purchase may temporarily transform a low-involvement decision into high-involvement one § Ex: You buy cheap liquor for parties, but when your boss comes over you spend a little extra 3. Shopping involvement: represents personal relevance of the process of shopping 4. Enduring involvement: represents ongoing interest in some product, such as kitchen gadget, or an activity such as fishing. § Consumer always searching for opportunities to consumer product or participate in activity 5. Emotional involvement: represents how emotional a consumer gets during some specific consumption activity • Psychological processing: Perception § The process by which people select, organize, and interpret stimuli into a meaningful and coherent picture § How we see the world around us § Selective perception includes the following: o Selective exposure: process whereby a consumer notices certain stimuli and ignores others o Selective distortion: process whereby consumer changes or distorts info that conflicts with feelings or beliefs o Selective retention: process whereby consumer remembers only that info that supports personal beliefs 3. Evaluation of alternatives o Evoked set (consideration set): group of brands resulting from an info search from which a buyer can choose o From this set, buyer will further evaluate and make a decision o After getting info and constructing evoked set, consumer is ready to make a decision o Consumer will use info stored in memory and obtained from outside sources to develop a set of criteria • Psychological processing: Attitude Formation § Attitude: learned tendency to respond consistently toward a given object o Rest on an individual’s value system, which represents personal standards of good and bad, right and wrong, etc. o Tend to be more enduring and complex than beliefs § Belief: organized pattern of knowledge that an individual holds as true about his or her world o May be based on knowledge, faith, or hearsay o Develop beliefs about a product and then form a brand image • Psychological processing: Integration § The way product knowledge, meanings, and beliefs are combined to evaluate two or more alternatives 4. Purchase • Buy or not buy: must decide upon… § Whether to buy or not § When § What § Where § How to pay 5. Post-purchase behavior • For a marketer: reducing any lingering doubts that the decision was sound if very important • Cognitive dissonance: inner tension that a consumer experiences after recognizing an inconsistency between behavior and values or opinions • Consumers try to reduce dissonance by justifying their decisions • They may: o Seek new info that reinforces positive ideas about purchase, o Avoid info that contradicts their decision, or o Revoke the original decision by returning the product • Psychological processing: Learning o A process that creates changes in behavior, immediate or expected, through experience and practice o Experiential learning: occurs when an experience changes your behavior § Ex: Nyquil doesn’t cure your cold, so take new med o Conceptual learning: not acquired through direct experience but based upon reasoning § Ex: Want a soft drink from a machine but there’s only diet, you remember diet leaves aftertaste because your friend told you, so you learn not to like this drink even if you haven’t tried it yet Chapter 8: Segmenting and Targeting Marke ts A. Market Segmentation 1. Market: people or organizations with needs/wants and the ability and willingness to buy 2. Market segment: subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs 3. Market segmentation: process of dividing a market into meaningful, relatively similar, and identifiable segments or groups • Role of Marketing Segmentation in Marketing -Nearly all markets include groups of people or organizations with different product needs and preferences -Segmentation: helps marketers define customer needs/wants more precisely Helps decision makers to more accurately define marketing objectives and better allocate resources B. Criteria of Successful Segmentation 1. Sustainability: a segment must be large enough to warrant developing and maintaining a special marketing mix 2. Identifiability and measurability: segments must be identifiable and their size measurable 3. Accessibility: firm must be able to reach members of targeted segments with customized marketing mixes 4. Responsiveness: markets can be segmented using criteria that seem logical C. Bases for Segmenting Consumer Markets 1. Geographic • Refers to segmenting markets by region of a country or the world, market size, market density, or climate • Market density: number of people within a unit of land • Climate: because it has dramatic impact on residents’ needs and purchasing behavior 2. Demographic a. Age: newborns, infants, tweens, teens, Millennials, Gen-X, etc. b. Gender: females make 85% of purchases of consumer goods each year; they view money differently: to provide for families, not to accumulate, are approached differently than men c. Income: income level influences consumers’ wants and determined their buying power. High income customers: look for good customer service d. Ethnic: minorities have grown in the US and marketers needs to approach them differently e. Family life cycle: series of stages determined by a combination of age, marital status, and the presence or absence of children • Different stages of life cycle have different needs 3. Psychographic • Segmenting markets on the basis of personality, motives, lifestyles, and geodemographics o Personality: reflects a person’s traits, attitudes, and habits o Motives: everyone has a different motive to buy a product o Lifestyle: groups according to the way they spend their time, importance of things around them, beliefs, income, and education 2. Geodemographic • Segmenting potential customers into neighborhood lifestyle categories • Combines geographic, demographic, lifestyle segmentations • Geodemo helps marketers develop marketing programs tailored to prospective buyers who live in small geographic regions or who have specific lifestyle and demographic • Rich profiles may predict sales • Expensive and difficult to measure • Close to psychological motivations that drive behavior • One example is VALS: are you liberal? Conservative? Do you follow fashion? 3. Benefit Segmentation • The process of grouping customers into market segments according to the benefits they seek from product • Groups potential customers on the basis of their needs or wants rather than on some other characteristic, like age, etc. • Customer profiles developed by examining demographic info associated with people seeking certain benefits 4. Usage rate segmentation • Divides a market by amount of product bought or consumed • Categories include some combination of the following: heavy users, first- time users, light users, former users • 80/20 principle: 20% of customers generate 80% of demand • Pros/Cons: ü Fairly easy ü Great place to start ü Highly predictive of sales D. Steps in Segmenting a Market 1. Select a market or product category for study: define market/product. 2. Choose a basis or bases for segmenting the market: requires managerial insight, creativity, and marketing knowledge o Successful segmentation scheme must produce segments that meet the four basic criteria 3. Select segmentation descriptors: descriptors identify the specific segmentation variables to use o If company chooses demographics, then has to choose age, gender, etc. o If company chooses usage: then has to choose to market to heavy users or former users etc. 4. Profile and analyze segments: Profile should include segment size, expected growth, purchase frequency, current brand usage, brand loyalty, LT sales and potential profits 5. Select markets: it’s a natural outcome of segmentation. o Major decision that influences and directly determines firm’s mix 6. Design, implement, and maintain appropriate marketing mixes E. Strategies for Selecting a Target Market • Target market: a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges • Three general strategies: o Undifferentiated targeting: marketing approach that view the markets as one big market with no individual segments and thus uses a single marketing mix § Pro: potential savings on production/marketing costs § Cons: unimaginative product offerings; company more susceptible to competition o Concentrated targeting: strategy to select one segment of a market for targeting marketing efforts § Pros: concentration of resources; can better meet needs of narrowly defined segment; allows small firms to better compete with larger firms; strong positioning § Cons: segments too small or changing; large competitors may more effectively market to niche segment o Multisegment targeting: strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each § Pros: greater financial success; economies of scale in producing/marketing § Cons: high costs; cannibalization -Niche: one segment of a market F. Positioning • Developing a specific marketing mix to influence potential customer’s overall perception of a brand, product line, or organization in general • Position: the place a product, brand, or group of products occupies in consumer’s mind relative to competing offerings • Positioning assumes that consumers compare products on the basis of important features • Repositioning: changing consumer’s perceptions of a brand in relation to competing brands • Product differentiation: a positioning strategy that some firms use to distinguish their products from those of competitors G. Positioning Bases • Attribute: a product is associated with an attribute, product feature, or customer benefit • Price and quality: high price as signal of high quality or low price to emphasize value • Use or application: stressing uses or applications can be effective means of positioning a product with buyers • Product user: personality or type of user • Product class: position product as being associated with particular category of products; or they can also be dissociated with category • Competitor: positioning against competitors is part of any positioning strategy. • Emotion: focuses on how product makes customers feel
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'