Intro to Marketing
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Date Created: 01/27/15
CHAPTER 2 Strategic Planning for Competitive Advantage Strategic Business Units subgroup of a single business within the larger organization separate brands of a company 0 Pepsi Co and Unilever 0 Strategic Planning creating and maintaining a t between the organization s objectives and resources and the evolving market opportunitiesleoal is longrun pro tability and growth 0 3 Levels Corporate Business SBU Functional Strategic Alternatives focus on Ansoff s Opportunity Matrix and BCGP Matrix 0 Short term goal Market share 0 Long term goal Pro t and Market Share 0 Ansoff s Opportunity Matrix Market Penetration PresentPresent Increase market share among existing customers Promotions drop price Market Development Present Product New Market Attracting new customers to existing products 0 Free samples repositioning Product Development New Product Present Market create new products to existing markets 0 Different Flavors Greek yogurt to Ben amp Jerry s Diversi cation NewNew Increase sales by introducing new products new market 0 Any new product for international countries 0 Boston Consulting Group Portfolio Matrix BCGP or GrowthShare Matrix Portfolio Matrix allocating resources based on o XAxis Market Share Dominance to largest competitor vs 0 YAxis Market Growth Rate Strategies 0 Build Product improvement and ef ciency better distributionpromotion 0 Hold Preservekeep same market share Harvest Focus on increasing shortterm cash return Divest Free up by getting rid of SBU Star highhigh large pro ts but need for rapid growth 0 Strategy Build Apple iPhone Cash Cow low growth ratehigh dominance generates more cash than it needs to maintain market share 0 Strategy Hold Harvest Heinz Ketchup Question MarkProblem Child Shows rapid growth but poor pro t marginsdominance 0 Strategy Build Harvest Divest Myspace DOG low growth potential and a small market share 0 Strategy Harvest Divest Mission Statement Statement of the rm Marketing Myopia De ning business in terms of goods and services rather than in terms of the bene ts customers seek SWOTSituation Analysis 0 Internal Strengths Weaknesses 0 External Environmental Scanning Opportunities Threats Competitive Advantage Set of unique features of a company and its products perceived by the target market as signi cant and superior to those of the competition 3 Types 0 Cost 0 ProductService Differentiation o Niche 0 MOST SUSTAINABLE Competitive Advantages Marketing Mix The Four P s 0 Product starting point Tangible goods ideas and services value image brand package warranty 0 Place Available where and when customers want them Ensure products arrive in usable condition when needed at designated places Includes all activities from raw materials to nished products 0 Promotion any type of communication Bring about exchanges with target markets by 0 Informing Educating Persuading Reminding Advertising PR promotions 0 Price What a buyer must give up to obtain a product Competitive weaponadvantage but easily copied Most exible easiest and quickest to change CHAPTER 10 Product Concepts 0 Product is everything both favorable and unfavorable that a person receives in an exchange Layers of Product Concept Core Product 0 Core Product ALL the bene ts the product will provide for consumer Marketing is about SUPPLYING BENEFITS NOT PRODUCTS 0 Actual Product Physical goodsdelivered service that supplies the desired bene t 0 Augmented Product Actual product plus other supporting features such as warranty credit delivery installation and repair service after sale 0 Example CoreEntertainment ActualPens Hockey games CONSOL Center Augmented ProductPayment Plans customer service information Classifying Products by 0 How long they last Durable vs NonDurable o How they are used Business vs Consumer o How consumers by them Convenience Goodservice frequently purchased with minimum comparison and effort 0 Ex Gum milk soda Shopping Goodservice consumers spend time and effort gathering information on price product attributesqualities Compare alternatives before making purchase 0 Homogenous vs Heterogeneous Ex AppliancesCars Specialty Products Goodsservices bought with much consumer effort in an extended problem solving situation 0 Strong Preferences will NOT accept substitutes 0 Brand name is important Unsought Products Goodsservices with little awarenessinterest until a need arises Need advertisingpersonal selling to interest people 0 Ex new products life insurance retirement inves ng Product Line Strategies 0 0 Product Line rm s totay product offering designed to satisfy a single overarching need for target customers Product within the line stress different characteristics or bene ts and are closely related Vertical Ex Coco Cola Coke Zero Diet Cokesatisfy soda thirst Product Lines may become overextended Hurt pro ts ow sales cannibalization Marketingmanufacturing resources focus on slow moving products Items in the line are obsolete because of new product entries 0 Product Mix Strategies 0 O O 0 Product Mix rm s entire range of products All of 39em Strategic product decisions relate to the WIDTH of the product mix Product Line Depth Length of products in a product line Product mix WidthBreadth of product lines a rm offers 0 Depth and Width Strategies 0 Increase WidthBreadth Diversify risks and capitalize on established reputations Increase Depth Different preferences attract consumers Capitalize on economies of scale in production and marketing Even out seasonal sales patterns Product Modi cation changes in one or more of a product s characteristics quality functional style Planned Obsolescence modifying products so that those that have already been sold become obsolete before they actually need replacement Technology like phones and printers Repositioning Change consumer perception of a brand Line Extension Add products to existing product line Greek Yogurt 0 Line Contraction Deal with overextension by cutting products 0 Trading Down Reduce of features or quality Branding Decisions 0 Brand unique element of a product that identi es one rm s product from competitionljit is a signal or promise hopefully of quality 0 Brand Personality human characteristics associated with a brand name 0 Brands should be memorable positive connotation convey a certain image 0 Brand Equity added value brand name gives to a product beyond the functional bene ts provided Provides customer loyalty perceived quality competitive advantage awareness Used to establish brand extensionsSTlMULUS GENERALIZATION Brand Loyalty consistent preference for one brand 0 Packaging Functions 0 Protect the product 0 Communicate brand personality 0 Provide speci c information o UserFriendly VIEW Model for Package Evaluation 0 Visibility attract attention at point of purchase 0 Information instructions bene ts etc o Emotional Appeal evoke desired feeling or mood o Workability how the package functions CHAPTER 11 Developing and Managing Products 0 New Product Strategy 0 Stage that de nes role for a new product in terms of the rm s overall objectives 0 Links DEVELOPMENT PROCESS with the OBJECTIVES OF THE MARKETING DEPARTMEN39I39 SBU and CORPORATION 0 Makes use of Mission Statement Marketing Strategy SWOT analysis Environmental Scanning Idea Generation 0 Sources Customers Crowdsourcing obtaining needed services ideas or content by soliciting contributions from a large group of people and especially online community rather than from traditional employees or suppliers EmployeesSalespeople Distributors RampD Competitive Products Idea Screening Eliminates ideas inconsistent with organization s new product strategy FIRST FILTER in product development process 0 Concept Test evaluate a new product idea before creating prototype Successful for line extensions 0 ldea Screening and Concept Test are FIRST FILTER IN PROCESS Business Analysis Assess and evaluate how the product will t in the rm s Total Product Mix and if the product can be a Pro table contribution for the organization s product mix 0 Example What is the product s competition Development 0 Product Concept Expand ideas into complete product concepts describe features and bene ts evaluate chance for success 0 Technical Re ne design and production process develop and evaluate prototypes apply for a patent safety tests 0 Marketing Strategy Develop strategy to introduce product to marketplace Identify target market and size position pricing distribution and promotion are necessary for roll out Market Testing Try marketing plan 4 P s in a small geographic area SIMILAR to larger target market 0 Traditional test is expensive and is weak against competition 0 Simulated test markets eliminate competitive viewing and is LESS COSTLY but not as accurate 0 Crowdfunding collective effort of individuals who network and pool their money via Internet to support efforts initiated by other peopleorganizations Commercialization AKA Launch the product Final Step 0 Fullscale production distribution advertising sales promotion etc 0 Regional Rollouts Introduce product into speci c geographic areas sequentiallyElAllows productionmarketing activities to build up and minimizes risk of new product failure Grocery Products 0 O Slotting Fee Manufactures pays to place a new item on a retailers shelf Failure Fee Manufacturer penalty payment to compensate retailer for devoting valuable shelf space to a product that fails to sell a predetermined amount Types of Innovations O O O O O O Differ in degree of newnessljhelps determine how quickly products will be adopted by a target market More novel innovationslower diffusion process Innovation continuum based on amount of disruptionchange Continuous Innovation Left SideLittleno change in behaviors and minor modi cation to existing product Dynamically Continuous Innovation Middle Discontinuous Innovation Right SideNewnothing similar in market and extreme changes in behaviors Adoption consumerbusiness customer begins to buy and use a new goodserviceidea Diffusion describes how the use of a product spreads throughout a population Adoption Categories 0 O O O Innovators 25 take risks rely on impersonal information sources Cosmopolites willing to seek social relationships outside of their local peer group Early Adopters135 heavy into media concerned with social acceptance OPINION LEADERS Early Majority 34 adopt prior to mean adoption time spend more time in innovation decision process use personal sources deliberatecautious above average educationsocial status Late Majority 34 after mean adoption time olderconservative peers are primary source below average educationincomestatus wait to purchase once a necessitypeer pressure Laggards 16 last to adopt low social class TRADITION product replaced by another innovation Factors Affecting Adoption Rate 0 Relative Advantage Better than existing alternatives positively correlated with adoption rate Exist when a new product offers performance comfort save time immediacy of reward o Observability Product visibility to people highermore rapid adoption rate 0 Compatibility Fits a person s way of doing things Higher compatibilitymore rapid adoption rate Overcome incompatibility through heavy advertising to persuade consumers o Trialability Ease of sampling product firsttria experience reduces risk of dissatisfaction 0 Complexity How difficult product is to understand more complexslower adoption rate Overcome complexity with demonstrations person selling and emphasis on ease of use Product Life Cycle PLC Traces product s acceptance introduction to decline Marketing strategies must CHANGE AND EVOLVE through PLC 0 Intro Low sales high failure rate itte competitiondistribution high cost Marketing Mix Promotion focuses product awareness to STIMULATE PRIMARY DEMAND HIGH personal selling Pricing o Skimming high prices to capitalize on early buyers insensitivity Penetration Low prices to discourage competitive entry and gain market share 0 Growth Competitors enter market pro ts healthy promotion on brand advertising WIDER distribution ght for shelf space new product features for competition prices fall near end sales volume creates economies of scale 0 Maturity Sales increase at decreasing rate market saturated emphasis on style over function product line extensionwidth pricespro ts fa heavy promotions Product Reinvention o Decline Longrun drop in sales decline rate depends falling demand forces many out of market leaving few specialty Divest or Harvest o SelfFul lling Prophecy o Predict falling sales and ensure this by reducingremoving market support CHAPTER 12 Services and NonPro t Marketing 0 Service Act deed performance offered by one party to another Intangible but may involve physical products 0 Does not results in ownership 0 Creates bene ts by facilitating a desired change 0 Service Challenges 0 lntangibility o VariabilityHeterogeneity less uniformstandardized services are laborintensive consistent and quality controlled 0 lnseparability Services sold produced and consumed at same time consumers usually involved in production of services they buy 0 Perishability Services cant be store or inventoried not usedrevenue lost GoodServices Continuum o GoodDominated Products tangible assisted by services automobiles electronics 0 EquipmentFacilityBased Services reliance on equipment and personnel Hospital tanning salons 0 People Based Services reliance on personnel w little or no equipment needed accountants What we assess 0 Search qualities examine characteristics of product before purchase 0 Experience qualities Determine characteristics duringafter consumption 0 Credence qualities attributes difficult to evaluate after expenence Service Quality Scale 0 ReliabiIityAccuracyConsistency o Assurance courtesy of employees 0 Empathy o Responsiveness to provide service 0 Tangibles physical evidence Gap Model 0 Identify FIVE 5 gaps that cause problems larger gapworse service 0 Useful but requires a lot of information 0 Marketing Mixes for Services 0 Tangible Acts Directed at People PEOPLE PROCESSING hospitals airlines 0 Tangible Acts Directed at Possessions POSSESSION PROCESSING landscaping repair 0 Intangible Acts Directed at People MENTAL STIMULUS PROCESSING consulting broadcasting o Intangible Acts Directed at Possessions INFORMATION PROCESSING directed at intangible assets accounting research 0 Core products and Supplementary Services 0 Firms offer bene t packages core productgoodservice and supplementary services add value to the core 0 Mature industriesljlcore products become commodities 0 Supplementary services differentiate core products and create competitive advantage by Facilitating use of core product billing payment Enhancing value and appeal of core product hospitality consultationadvice 0 Product Strategy Customization or Standardization Service mix 0 Place Strategy Focus on issues as 0 Convenience Number of outlets 0 Direct vs Indirect distribution 0 Location 0 Scheduling 0 Promotion Strategy Stress Tangible Cues Concrete symbol of service offering Use Personal Information Sources familiarity Create a strong organizational Image Engage in POSTPURCHASE COMMUNICATION Physical Elements Provide tangiblephysical evidence of service Servicescapes environment which service is delivered and where rm interacts w customers o Create and maintain physical appearances 0 Price Strategy Revenueoriented pricing maximize income surplus vs costs Operationsoriented pricing vary prices to match supply and demand Patronageoriented pricing maximize consumers using service Internal Marketing in Service Firms 0 Internal Marketing Treat employees as customers and develop systems and bene ts that satisfy their needs Nonpro t Marketing 0 Nonpro t Organization exists to achieve goal other than pro t market share or ROI 0 How Nonpro ts are like servicesTHEY ARE SERVICES Market intangible products Production requires customers presence Variation in service delivery Cannot be stored Chapters 13 amp 14 Marketing Channels and Supply Chain Management Supply Chain Vs Marketing Channel Logistics Managing ef cient ow and storage of raw materials inprocess inventory and nished goods form point of origin to point of consumption 0 Sourcing production scheduling order processing inventory control materials handling and transportation 0 Transportation accounts for 510 of price of goods Problems include Reliability Capability Accessibility and Traceability cost and transit time Supply Chain Connected chain of all business entities both internal and external that perform or support logistics function 0 IT links entire supply chain 0 Logistics costs represent 2530 retail price of new car Marketing ChannelChannel of Distribution set of interdependent organizations that ease the transfer of ownership as products move form producer to business userconsumer Supply Chain Management Coordinates all activities performed by supply chain members into a seamless processljenhanced customers and economic value Agile Supply Change share supply and demand info reduce complexity through evaluationSKUS reduction less wait times and more customer bene ts 0 Supply Chain Integration Multiple rms in a supply chain coordinate business processes so they are linked to each other 0 Demand Supply Integration Areas in a company that create customer demand communicate frequently and ful ll created demand 0 Bene cial because enhances customer satisfaction Crossdocking Unload sort and reload products from supplier to customer 0 Walmart example ef cient supply chain and High IT investment BuildtoStock Push manufacturing environment where production begins when inventory is low or more products needs to be made 0 Disadvantage Build obsolete products that customers don t want BuildtoOrder Modern quotPullquot manufacturing environment where production occurs when customer places an order Postponement Hybrid strategy where demand guides partial production shipped to distribution center and completed when customer places order Marketing Channels 0 Utility Types 0 Form Elements compositionappearance of a product makes it desirable 0 Place Usefulness as a function of the location which a good is available 0 Time Increase customer satisfaction by making good at appropriate time 0 Exchange Increased product value created as ownership is transferred Transactional Functions Buying Selling Risktaking ownership Logistical Functions Assorting Storing Sorting Transporting o Facilitating Functions Financing Grading Marketing info and research Specialization and Division of Labor Channel Intermediaries Retailer Intermediary that sells mainly to customers Wholesaler Buys good from manufacturers and resells them to retailers takes title to goods and stores good in warehouses 0 Agents and Brokers Do NOT take ownership of product and facilitates sale from producer to end user Channel Strategy In uences Market Factors WhoWhereWhatWhenHow target market buys Product Factors Complexity customized expensive products and Product s Life Cycle 0 Shorter marketing channels 0 Producer Factors Resources more better suited for direct channels capabilities and the Need for Control Gucci ain t selling belts at Sears 0 Dual Multiple Distribution 2 channels to distribute same product to target markets 0 Example Pharmacy industry sells directly to hospitals and indirectly to consumers through retailers o Multibrand for Multiple Distribution Differentiate channels minimize cannibalization and preempt brandretailer associations HallMark Distribution IntensityljDecision Factors 0 Company Customers Channels Constraints and Competition 0 Exclusive Distribution Establishes one or a few dealers within a given area Specialty goods 0 Selective Distribution Screening dealers to eliminate all but a few in any single area 0 Intensive Distribution Have product available at any outlet where target customers might want to buy it Vertical Marketing Systems 0 Corporate Combo of successive stages of production and distribution under a single ownership 0 Forward Integration Producer own retailerwholesaler Apple 0 Backward Integration Retailer owns manufacturer Tiffany Contractual Production and distribution rms integrate efforts on contractual basis 0 Wholesalersponsored IGA o Retailersponsored Ace Hardware 0 Franchise McDonalds o Administered Coordination of production and distribution based on size and in uence of one channel member Walmart 0 StorewithinaStore Agreement in which a retailer rents part of the retailer space to be used by the producer to run an independent store BestBuy 0 Channel Control One channel member s power affects another member s behavior 0 Channel has ability to set 4 P s 0 Manufacturers want distribution channels to behave do what manufacturers want 0 Channel Power Channel member s ability to control or in uence the behavior of other channel s members Managing the Channel 0 Channel leadercaptain is the dominant rm that controls the channel 0 Have some form of power vs other members 0 Economic Expertise Identi cation Channel Con ict Clash of goals and methods between distribution channel members 0 Horizontal Con ict Occurs among channel members on same level Usually 2 retailerswholesalers that sell the same brand 0 Vertical Con ict Occurs between different levels in a channel Usually between the manufacturer and retailerwholesaler o Disintermediation Traditional intermediaries are eliminated as companies question the value added by the layers in the channel 0 Example American Airlines terminated relationship with Expedia to sell directly to consumers through AA Direct Connect Chapter 19 amp 20 Pricing Concepts and Strategies Price is a value judgment 0 Price what is given up in an exchange to acquire a good or service 0 Evaluating product alternatives by Measure of Sacri ce Information Cue 0 Consumers pay price based on perceived value 0 Customer Value relationship between bene ts and the sacri ce necessary to obtain those bene ts 0 NonMonetary Costs 0 Time 0 Effort physical or mental 0 Risk physical social psychological nancial o Opportunity Cost the value of what else I could do with my timemoney what I am giving up Example Buy tickets to see college football team What else could I be doing with that money and time o Pro tTotal Revenues Price x Quantity Total Costs xed variable PRICE DETERMINANTS Pricing Objectives 0 Pro tOriented Pro t Maximization Set prices so total revenue is as large as possible relative to total costs Satisfactory Pro ts Pro ts are consistent with the industry Target ROI Net pro t after taxes DIVIDED by Total Assets 0 SalesOriented Market Share Company s product sales as a of Total Sales Sales Maximization Disregards pro ts and competition in an attempt to increase sales used when a company needs cash or needs to sell off inventory 0 Status Quo Maintain existing prices or meet the competition s pdces The Nature of Demand 0 Demand Quantity of a product that will be sold in the market at various prices 0 Law of Demand Product price increases quantity demand lowers Product price decreases quantity demanded increases 0 Estimating Demand Demand is the customers39 desire for products 0 How much product is wanted How will this change as price changes Demand Curves Shows quantity of a product that customers will buy in a market at various prices all else equal 0 Vertical axis price changes 0 Horizontal axis of units quantity Movement Along Curve vs Shift in Demand Curve 0 Change in price Movement ALONG demand curve or changes in quantity demanded 0 To SHIFT the demand curve 0 Change in price of similar product 0 Changes in consumer income 0 Changes in consumer tastes technology seasons demographics advertising Elasticity of Demand Customers sensitivity to price changes in terms of the quantities they will buy 0 Elastic Demand Demand is sensitive to price changes 0 Egt1 o Inelastic Demand Price change not signi cant to affect demand 0 Elt1 Unit Elastic Demand An increase decrease in price is exactly offset by a decrease increase in demand 0 E1 o Elasticity E o change quantity demanded change in price ElasticInelastic Demand Curves Elastic Inelastic O 0 Impact of Elasticity on Revenue If demand is ELASTIC Inverse Price goes up Revenue goes down 0 Price goes down Revenue goes up If demand is INELASTIC Directly proportionate 0 Price goes up Revenue goes up 0 Price goes down Revenue goes down 0 Factors that Affect Elasticity Availability of Substitutes Consumer can easily switch from one product to another when substitutes are available making demand elastic Nondiscretionary products medicine tend to be INELASTIC Purchasing Power if the price is so low that is inconsequential demand will be inelastic Product Durability Durable products can be xed rather than replaced demand is more elastic Rate of In ation Higher in ation demand more elastic Cost Determinants of Pricing 0 Total Cost Fixed Cost Variable Cost 0 Variable Cost Cost varies with changes in level of output 0 Fixed Cost Does NOT change as output is increased or decreased 0 Average Variable Cost Variable CostQuantity o Markup Pricing Cost of buying the product from the producer plus amounts for pro t and for expenses not otherwise accounted for Retail Price Cost1Desired Return on Sales 0 Keystoning practice of marking up prices by 100 doubling cost 0 BreakEven Used to determine of productsunits that must be sold at a speci ed price in order to generate suf cient revenue to cover total cost All costs are covered but there isn t a penny left over Breakeven is the quantity where total revenue total costs BreakEven Quantity Fixed CostsPriceAVC 0 Everyday Low Prices EDLP Retailer pricing strategy that emphasizes offering consistently low prices and eliminates the use of markdowns Competition increasePrice Decreases o Monopolies maintain highest prices 0 Perfect Competition drives price down to marginal cost 0 Selling Against the Brand Retailer stocks branded items at higher prices to encourage sales of store brand at discounted price 0 Network Externalities Change in the bene t a consumer derives from a good when he of other consumers consuming the same kind of good changes 0 Positive Facebook fax machines 0 Negative Bandwidth highways 0 Positive externalities engage in penetration pricing Platforms TwoSides Markets Have 2 distinct user groups that provide each with usually positive externalities 0 Strategy Subsidize one group of users Give away for free to create a demand that attracts the other group Price Discrimination Firm charges different prices to different customers for reasons other than a difference in costs 0 1st Degree PD Charge each customer the most they would be willing to pay for each unit they buy Haggling over a new car Auctions 0 2quot Degree PD Charge different prices depending upon the characteristics of purchase Quantity discounts o 3quot I Degree PD Charge different customer groups prices based upon their price sensitivities Ladies Night Mad Mex student discount FlexibleVariable Pricing 1st Degree Different customers pay different prices for same merchandise bought in same quantities seller adjust price 0 Example Car dealers Price Bundling 2 39 Degree Marketing 2 products in a single package for a special price 0 Example Microsoft Office Unbundling Reducing the bundle of services that comes with the basic product 0 Example Airlines charging for checked baggage DemandOriented 0 Price Lining Offering a product line with several items at speci c price pointsljReach several market segments and reduce confusion Example Apple iPhone 55 and 5c 0 YieldManagement Charge different prices based upon supply and demand to maximize revenue for a set amount of capacity at any given time Hotels Airlines MegaBus Two Part Tariffs Establish two separate charges to consume a goodservice o Fixed feeBase Price Gym membership 0 Variable price Pay per use class fees Loss Leader Pricing Pricing a product near or below cost to stimulate sales of more pro table products Example Groupon Black Friday 0 Freemium Giving a functional but limited version for free but charge for a full version Psychological Issues 0 Internal Reference Prices Consumers have set price or price range 0 Competition as Reference Price Close priceslessimilation effect encourage customers to choose lowered product bc of similarity o OddEven Pricing Odd prices are more of a deal Even prices distinguish luxury items 0 Prestige Pricing Charge high price to help promote high quality image 0 Informational o Hedonistic 0 Status 0 Price Adjustments to Downstream Channel Members 0 Discounts Quantity Buy larger quantitiesorders by reducing unit price Seasonal Buy in offseason by lowering prices in set months Trade Discount as reward to retailerswholesalers Cash Pay up front rather than on credit 0 Allowances Tradein Reduce price when a used product is part of the payment on a new product Xbox One for Xbox 360 Promotional Cash payments or free goods to a downstream channel member as a reward for undertaking certain marketing activities to promote a product Taste Test Pepsi Co drinks Chapter 18 Social Media Synchronous interactions Occur realtime Asynchronous interactions Does not require immediate participant response Horizontal Revolution Information ows across people rather than from big companies down to people InterceptionDistribution Model Monetization strategy of social media sites to generate revenue Social Media Zones 1 Social Community Channels focused on relationships common activities of people who share the same interest Facebook Reddit 2 Social Commerce Allows interaction and user contribution to assist buying and selling products Groupon Ticketmaster 3 Social Publishing Aid in dissemination of content to an audience News Blogs 4 Social Entertainment Channels that offer opportunities for playenjoyment Ma a Wars Social Media Objectives Reputation Build awareness Promote products Customer Service Word of Mouth WOM Passing info from person to person 2 types 1 Organic Occurs naturally when people become advocates natural desire to share support and enthusiasm 2 Ampli ed When marketers launch campaigns designed to encourage or accelerate communications Chapter 16 Promotional Mix Sales Promotion Shortterm incentive motivates consumers or members of distribution channel to purchase a good or service immediately either by lowering the price or by adding value Cheaper easy to track affect behavior not attitudes Trade Sales Promotion Directed to members of marketing channeD Consumer Sales Promotion Targeted to consumer market Trade Sales Promotion Push a product through channel Trade Allowances Price reduction manufacturers to intermediaries Push Money Bonuses given to intermediaries for pushing product through channel Consumer Sales Promotion Pull a product through the channel PointOf Purchase POP Promotion induce impulsive buying Rebates Premiums Sampling Contests Public Relations Evaluates public attitudes identi es issues that may elicit public concern and execute programs to gain public understanding and acceptance Publicity effort to capture media attention Product placement Getting a product to appear in a movie show etc More in slides Advertising Costly brand awareness market shareSmall Firms long run Advertising Response Function Advertising increases sales or market share up to a certain level but then produces diminishing returns Types Institutional Advertising designed to enhance a company s image rather than promote a product Product Advertising Bene ts of a product Pioneering Advertising Stimulate primary demand early in PLC Competitive Advertising Stimulate selective demand for brands later in PLC Comparative Advertising Compare 2 brands regulated by FTC can t false advertise Advertising Appeal Identify a reason for a person to buy a product Unique Selling Proposition Desirable exclusive and believable advertising appeal selected as the theme for the campaign Alternative Media Guerilla Marketing Advertisers developing new media vehicles to cut through traditional advertising media Appropriate Media Mix Cost per thousand CPM Cost of reaching one 1000 consumers in target marketCost of 1 unit of Media ProgramSize of Media Program s Audience x 1000 Cost per click CPC Cost with consumer clicking on a displaybanner ad Cost per action CPA Advertiser pays for each action Facebook like Impressions Number of times the ad is displayed used for digital advertising Reach Number of target customers who are exposed to an ad at least once during a period Frequency Number of times an individual is exposed to an ad during a speci c period Audience Selectivity Medium s ability to reach a precisely de ned market Flexibility Noise and Life Span are also appropriate media mixes CrossMedia Advertising Campaigns quotquot Media Scheduling Designates the medium to be used the speci c vehicles and the insertion dates Continuous Advertising runs steadily through period Flighted Ads are scheduled heavily every other month or every two weeks Pulsing Combo of Continuous and ighting heavier advertising during best sale periods Seasonal Ads are scheduled to run only during times of year when product is most likely to be used Evaluating the Ad Post Testing Conducting research on consumers responses to advertising messages they have seen or head Unaided Recall What commercials do you remember seeing on TV last night Aided Recall Respondents are shown a commercial and asked about the last time they saw it Attitudinal Measures Chapter 15 Promotional Planning Promotion Any communication by marketers that informs persuades reminds and builds relationships with potential buyers of a product to in uence an opinion or elicit a response Promotional Mix Advertising Sales Promotion Public Relations Personal Selling Social Media Goals of Promotions Informing Persuading Reminding Connecting Communication Must occurred between producer and buyer when a company develops a new product changes an old one or tries to increase sales Interpersonal Communication Direct facetoface communication between 2 people Mass Communication Communicating a message to large audiences Media Types Paid Media Traditional advertising model brand pays for media space Earned Media Public relations model word of mouth people talk about brand Owned Media Brand become publishers of their own content to maximize brand value Control Continuum AdvertisingSales Promotion HIGHPRWOM Low AIDA Concept Attention Interest Desire Action Integrated Marketing Communications IMC Careful coordination of all promotional messages to assure the consistency of messages at every contact point where a company meets the consumer Pan for optimal use of elements of promotionCustomer Focused lMCHierarchy of Effects The sequence of stages a prospective buyer goes through Marketing Midterm CHAPTER 6 CONSUMER DECISION MAKING Consumer Behavior I Processes a consumer uses to make purchase decisions and usedispose purchased goods I Factors in uencing purchase decisions and product use I Consumer Decision Process 0 NeedProblem recognition I Actual vs Desired state I Internal Cues experience hunger thirst I External Cues outside source restaurant recommendation I wantgot gap need recognition triggered by stimulus input affecting five sense 0 Information search I Internal Knowledge and experience with products I External Seeking info in outside environment websitesfamily I Nonmarketing controlled personal experiences ratings I Marketingcontrolled Social media biased toward specific productlrisk and weighted lower I Extent of info search depends on I perceived risk I time I knowledge I prior experience I confidencelocus of control I interest I cost of search I Info search should yield I EvokedProduct set brands you would consider I Consideration set brands you are aware of in the product class 0 Evaluation of alternatives I Determinant Attributes Attributes that actually result in the product choice I Compensatory Consumers trade off one characteristic against another I NonCompensatory Product choice based on one or a subset of characteristics specific 0 Product choicePurchase based on heuristics I Rules of Thumb 0 Brand loyalty 0 Country of origin 0 Liking 0 Price vs quality I Cuing Upenn Study more likely to buyfavor Puma shoes if they see a picture of Puma Mars bars example I Attraction Effect When the introduction of an inferior option in uences the relative attractiveness of other alternatives in a choice set I Compromise Effect Consumers tendency to choose the middle option of a selection set rather than the extreme options I Biases 0 Endowment effect put more value on things because one owns them free trials 0 See others I Planned Purchases know What you want to buy expensive and have a lot of info I Partially Planned Purchases I want ice cream but IDK What kind I Unplanned Purchases 68 impulsive 0 Promotion products 0 Complement planned purchases 0 Stand close to shelf interact with staff Hedonic products 0 Postpurchase evaluation I Customer SatisfactionDissatisfaction based on 0 Expectations Experience and In uence of others 0 Affects future decisions and wordofmouth communication 0 What a marketer may do to encouragecapitalize on a problem recognition 0 Advertising or sales promotions 0 Survey buyer preferences 0 Create products to address gap 0 Cognitive Dissonance 0 Inner tension inconsistency between behavior product choice and valuesopinions how others perceive our choice 0 How Consumers Reduce Cognitive Dissonance I Positive reinforcement about purchase I Avoid contradicting info about purchase I Revoke original decision by returning the product 0 How Marketers Reduce Cognitive Dissonance Effective communication Detailed instructions Advertising product superiority Postpurchase customer service Provide Assurance Thank you note inside box 0 Continuum of Consumer Buying Decisions 0 Routine Response Behavior Low frequently purchased cheap 0 Limited Decision Making Previous product experience but unfamiliar With current brands Low involvement 0 Extensive Decision Making Unfamiliar expensive high involvement most cognitive dissonance 0 Involvement Amount of time and effort invested in 6step process 0 Factors determining level of Involvement Experience Interest Perceived risk Social Visibility Situation 0 Types of Involvement Product high personal relevance Situational circumstances may change Shopping Enduring Ongoing interest Emotional Emotions during consumption Olympics 0 High Involvement Purchases Informative advertisements Customer support Informative websites 0 Low Involvement Purchases Instore promotions Package design Coupons and offers Link product to higherinvolvement issue Avoid stockouts make sure its always on shelves 0 Factors In uencing Buying Decisions 0 Lifestyles pattern of living that determines how people choose to spend their time money and energy and re ects their values and preferences 0 Psychographics tool used to group consumers according to Activities Interests and Opinions o SelfConcept I How consumers perceive themselves I Attitudes beliefs and selfevaluations 0 Ideal SelfImage How an individual would like to be perceived o Perception I Select organize and interpret stimuli into a meaningful and coherent I Selective Exposure Consumer notices certain stimuli and ignores others 0 Subliminal Perception Processing stimuli by a person who is not aware the stimuli is being received Camel Joe example 0 Motives driving forces that causes a person to take action to satisfy need I Physiological needs are FIRST MOST importantfundamental to satisfy needs 0 Learning I Experiential Actually experiencing something I CuePerceive Stimulus 0 Response Action to satisfy drive 0 ReinforcementReward I Stimulus Generalization Learning when one response is extended to a second similar stimulus I Stimulus Discrimination Discriminate among similar products I Social In uences 0 Reference Groups 0 Membership People interact O Aspirational People would like to join 0 Dissociative One does not associate Abercrombie is preppy 0 Opinion leaders in uence others I WorthofMouth in uence others in conversation I Family Initiators In uencers Decision Makers Purchasers Consumers CHAPTER 8 SEGMENTING AND TARGETING MARKETS Market Segmentation 0 Consumers are not alike 0 Marketers need to 0 Break down large market into smaller groups 0 Understands needs and preferences of each group I What are Markets 0 Needs Ability to buy Willingness to buy 0 Market Segment Subgroup of people sharing characteristics that cause them to have similar product needs 0 Market Segmentation dividing a marketing into meaningful relatively Similar identi able segments groups common needs 0 Importance of Market Segmentation 0 Variety of product needspreferences and customer needs 0 Allocate resources more accurately 0 Create Value 0 Criteria for Segmentation O Substantiality must be large enough to warrant a special marketing mix Can a segment With a few people be profitable 0 Identifiability and Measurability 0 Accessibility must be reachable 0 Responsiveness 0 Bases for Segmentation 0 Geographic Market size market density climate 0 Demographic Age gender income I Largest markets Hispanic African Asian Americans I Family Life Cycle Where you are in your life 0 Stages determined by a combo of age presence of children and marital status 0 Psychographic Segmentation Personality motives lifestyles I Lifestyle Activities interests opinions beliefs I Geodemographics Segmenting POTENTIAL customers on neighborhood lifestyle categories 0 Combines geographic demographic and lifestyle segmentation 0 Benefit amp Usage Rate Behavioral I Bene t Grouping customers based on the benefits they seek from the product I Usage Rate Segmentation Dividing a market by amount of product 0 8020 Principle 20 of all customers generate 80 demand 0 Steps in Market Segmenting 0 1st Step Select a market to study 0 Choose basisEISelect Descriptors O ProfileAnalyzeDSelect Target Market 0 Last step DesignImplement MM Choosing a Targeting Strategy 0 UndifferentiatedlVIass Marketing I Appealing to A LOT of people I Efficient bc economies of scale I Effective when consumers have similar needs I Example Coca Cola Model T Ford 0 MultiSegment Marketing I Develop products for various customer groups with different product needs I Wellknown brands distinctive images different products 0 ConcentratedNiche Marketing I Ferraris I Single segment I Smaller firms 0 Customized Marketing I Onetoone Exactly meets needs of each individual hair stylists I Mass Customization modify basic goods for individual BK Nike Arguments Against Segmentation 0 Product Limitations Specialized knowledge Privacy concerns Costly Negatively impact Brand Perceptions Cannibalization Sales of firm s new product affect sales of firm s existing product Positioning Specific marketing mix to in uence potential customers overall perception relative to competitors products 0 Effective Positioning I Assess competing products position I Determine dimensions of these positions I Choose position where efforts greatest impact 0 Product Differentiation Distinguish can be real or perceived products compared to competitors 0 HeadtoHead Positioning Compete directly with competitors in same target market 0 Repositioning Changing consumers perceptions of a brand in relation to competing brands O Perception Map DisplayingGraphing location of product brands in customers minds vs competitors 0 Brand Hijacking OOOOO CHAPTER 9 MARKETI NG RESEARCH 0 Good Marketing Information Enables Marketers to Gain competitive edge Coordinate Strategy Monitor environment Evaluate performance Improve effectiveness Target the right markets I Story of New Coke 0 What went wrong 0 Tried to ADD to the product line rather than ELIMINATE existing product 0 Never accounted for emotional ties 0 Didn t consider herd instinct ignored focus group results 0 What can be learned 0 Do not tamper with tradition symbols of security 0 Media s role 0 Good marketing research takes knowledge and practice 0 Marketing Research 0 Planning collecting and analyzing data relevant to a marketing decision 0 Descriptive Gathering and presenting factual statements 0 Diagnostic Explaining data 0 Predictive Address What if questions 0 Steps in the Research Process 0 1st step Define Problem I Marketing Research Problem Info needed and how that info can be obtained efficientlyeffectively I Marketing Research Objective Specific info to solve Problem provide insight on decisionmaking I Management Decision Problem Broad problem that uses research for managers to take proper actions I Develop measures of success to evaluate solutions 0 Plan I Secondary Data Previously collected internally or externally data for other purposes Valuable at any stage of the process I Primary Data Info collected for the first time for solving particular problem under investigation 0 Neuromarketing body s responses to marketing stimuli observational method 0 Experiment discover effects of presumed causes 0 Manipulate one variable causal research 0 Required conditions I Relatedassociated I A changes must precede B changes I No existing alternative explanation 0 Control groups good 0 Lab Field Quasi 0 Social Media ConsumerGenerated I Survey Research 0 Most popular technique for gathering primary data I Survey Question types 0 OpenEnded Question respondent s own words novel response I CloseEnded Question selection from limited list 0 ScaledResponse Question measure intensity I Measurement how much one s variable set of features are possessed in another variable 0 Nominal solely for identifying objects I Ordinal Re ect the order of objects 0 Interval compare size of differences bW objects 0 Ratio Identifiable absolute zero 0 Important because better measurementljbetter analysis I Observation Research 0 Personal 0 Ethnographic human behavior in natural context 0 Mystery Shoppers Pose as customers to gather data 0 Mechanical 0 Behavioral Targeting I Consumers activity psychographicdemographic profiles I Browsers cookies I Measurement Error I Sampling Error sample does not represent the target population 0 Nonresponse Error vs Frame Error I Random Error imperfect representation of gen popltn reduced With statistical techniques I Validity accuracy of inferencesinterpretations based on data 0 Internal correctness of inferences about causeeffect 0 External study results generalize across people and settings 0 Specify I Probability Samples 0 Simple randomsame chance 0 Systematic randomevery other member is random 0 Strati edDivide into relevant group then random 0 ClusterDivide into exclusive group collect data 0 Nonprobability Samples 0 Convenienceavailable 0 Quota 0 Judgment 0 Snowball O CollectImplement I ScannerBasedsingle group continually monitored things they buy pricing promotionadvertising Giant Eagle Google I Field Service FirmInterVieWing based on a subcontracted basis 0 Analyze enter clean and code the data and Interpret analysis I Crosstabulationsresponse to one question in relation to other 0 Prepare summary methods discussion limitations 0 Follow Up
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