BA 390 Week 3
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This 15 page Class Notes was uploaded by Samantha Tucker on Saturday January 23, 2016. The Class Notes belongs to BA 390 at Oregon State University taught by Toombs in Winter 2016. Since its upload, it has received 122 views. For similar materials see Marketing in Business at Oregon State University.
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Date Created: 01/23/16
How do we spend money? Depends on whose money it is (source) Depends on who we spend the money on (use) On Whom the Money is Spent (Whose money is spent) Yourself Someone Else Yours Economize & Seek the Highest Economize & Don’t Seek the value (McDonalds, value) Highest Value (Pearl necklace) Someone Else’s Don’t Economize & Seek the Don’t Economize & Don’t Seek Highest Value (Lobster, Cost the Highest Value (Healthcare, doesn’t matter) $500 hammer, inefficient) Don’t Economize & seek the highest Value: Example: American airlines was the first airline to offer frequent flier miles. AS a consequence of this, businessmen began booking more often with American airlines because the points went directly to the individual instead of the company. American airlines began to fill up, so they raised prices. However, even though other airlines had lower prices, the businessmen kept booking American Airlines for the miles. Chapter Six Business Markets and Business Buying Behavior Business Markets Business buyer behavior refers to the buying behavior of the organizations that buy goods and serviced for use in production of other products and services that are sold, rented, or supplied to others. Business buying process: the process where business buyers determine where business buyers determine which products and services are need to purchase, and then find, evaluate, and choose among alternative brands. Market Structure and Demand o Fewer and larger buyers o Derived demand Inelastic demand Fluctuating demand Business Markets Decision Process More complex More decision participants More professional purchasing effort Buyer and seller more dependent Business Markets Decision Process o Supplier development is the systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials that companies will use in making their own products or reselling to others. Business Buyer Behavior [DIAGRAM] Major Types of Buying Situations o Straight rebuy: is a routine purchase decision such as reorder without any modification OSU and Pepsi have a relationship; on average OSU buys a certain amount of cases each week. The Pepsi company sends these to OSU each week, and they will get them every week. o Modified rebuy: is a purchase decision that requires some research where the buyer wants to modify product specification, price , terms ,or suppliers Instead of a certain number of cases, we’ll do half in bottles and half in cans because of the recession not as many students can afford the bottles. o New task: is a purchase decision that requires thorough research such as a new product Pepsi finds out that 5-hour energy is capturing a lot of market share on campus and Pepsi wants to see how a more energy focused product would do (ie Pepsi Maxx) o Systems selling: involves the purchase of a packaged solution from a single seller Participants in the Business Buying Process o Buying center is all of the individuals and units that participate in the business decision- making process Users: those that will use the product or service Influencers: help define specifications and provide information for evaluating alternatives. Buyers: have formal authority to select the supplier and arrange terms of purchase Deciders: have formal or informal power to select and approve finals suppliers Gatekeepers: control the flow of information o Buying center provides a major challenge o Who participates in the process Their relative authority What evaluation criteria each participant uses Informal participants The Model of Business Buyer Behavior o Environmental Economic developments Supply conditions Technological change Political and regulatory developments Competitive developments Culture and customs Competition Demand for product o Organizational Objectives Policies Procedure Organizational structure Systems o Interpersonal Authority Status Empathy Persuasiveness o Individual Age Income Education Job position Personality Risk attitudes Motivates Perceptions Preferences o Buyers Major influences on business buyers o Economic factors: Price and Service o Personal factors: Emotion The buying process o Problem recognition General need description Product specification Supplier search proposal solicitation Supplier selection order-routine specification Performance review o Problem recognition: occurs when someone in the company recognizes a problem or need Internal stimuli Need for new product or production equipment External stimuli Idea from a trade show or advertising o General need: describes the characteristics and quantity of the needed item o Product specifications: describes the technical criteria o Value analysis: approach to cost reduction where component are studied to determine if they can be redesigned, standardized, or made with less costly methods of production. o Supplier search: involves compiling a list of qualified suppliers o Proposal solicitation: the process of requesting proposals from qualified suppliers. o Supplier selection: the process when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditions. o Order-routine specifications: the final order with the chosen supplier and list all of the specifications and terms of the purchase. GlenDimplex example: o World’s largest manufacturers of electric heaters o Private company o Headquartered Dublin, Ireland o Primary Market Europe o Wanted to Expand into the US market o Walmart Large publicly traded company US only Wants to Expand to Europe o Went to Hong Kong to meet with some Walmart officials, they were disappointed because they wanted help breaking into the European market, not to help Dimplex break into the US. But both of them could help each other—so “Chuck” became the go between with dimplex and Walmart and made $1 million sale that day. Chapter Seven Customer-Driven Marketing Strategy: Creating Value for Target Customers Market Segmentation Select customers to serve o Segmentation: Divide the total market into smaller segments o Targeting: Select the segment of segments to enter Decide on a value proposition o Differentiation: Differentiate the market offering to create superior customer value o Positioning: Position the market offering in the minds of target customers Create value for targeted customers Market Segmentation: requires dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes o Segmenting consumer markets Geographic segmentation: divides that market into different geographical means such as nations, states, cities, etc. Ex: In Cincinnati, Chile comes on pasta with cheese, onions, and beans— very different from the rest of the USA’s perception of chile. Snow shoes in Alaska, flip flops in Florida/California Demographic segmentation: divides the market on the basis of age, gender, family, income, occupation, race, generation, education, etc. Ex: Caviar v. Canned Tuna Age and life-cycle stage segmentations: is the process of offering different products or using different marketing approaches for different age and life-cycle groups Gender segmentation: divides the market based on sex. Income segmentation: market divided into upper, middle, or low income consumers Psychographic segmentation: divides based on social class, lifestyle choices, or personality traits. Behavioral segmentation: buyers into groups based on their knowledge, attitudes, uses, or responses to a product Occasions: Birthday, anniversary, etc Benefits sought User status Usage rate Loyalty status Using multiple segmentation bases Multiple segmentation: used to identify smaller, better-defined target groups PRIZM NE classifies every American household into 66 unique segments organized into 14 different social groups o Segmenting business markets Consumer and business marketers use many of the same variables to segment their markets Additional Variables: o Customer operating characteristics o Purchasing approaches o Situational factors o Personal characteristics o Segmenting international markets Geographic Location Economic factors Political-legal factors Cultural factors Intermarket segmentation: divides consumers into groups with similar needs and buying behaviors even though they are located in different countries. o Requirements for effective segmentation To be useful, market segments must be: Measurable Accessible Substantial Differentiable Actionable Market Targeting Evaluating Market segments o Segment size and growth o Segment structural attractiveness o Company objectives and resources Selecting Target market segments o Target market: consists of a set of buyers who share common needs or characteristics that the company decides to serve. Target Marketing Strategies o Undifferentiated marketing targets the whole market with one offer Mass Marketing Focuses on common needs rather than what’s different o Differentiated marketing: targets several different market segments and designs separate offers for each Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing o Concentrated marketing: targets a small share of a large market Limited company resources Knowledge of the market More effective and efficient o Micromarketing: the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Local marketing Individual marketing Ex: Amazon Prime o Local marketing: involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores o Individual marketing: involves tailoring products and marketing programs to the needs and preferences of individual customers Also known as: One-to-one marketing Mass customization o Depends on: Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies Differentiation and Positioning Product position: the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products o Perceptions o Impressions o Feelings Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions. Choosing a differentiation and positioning strategy o Identifying a set of possible competitive advantages to build a position By providing superior value from Product differentiation Service differentiation Channel differentiation People differentiation Image differentiation o Choosing the right competitive advantages Difference to promote should be: Important Distinctive Superior Communicable Preemptive Affordable Profitable o Selecting an overall positioning strategy Value proposition is the full mix of benefits upon which a brand is positioned. o Communicating and delivering the chosen position to the market Identifying possible value differences and competitive advantages o Competitive advantage: advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. Branding Creating Product Equity How branding started 300 years ago, from old norse language o Brandr: Means to burn Permanent mark to identify a product Brand Evolution Industrial Revolution o Assembly Lines (Ford) o Low Marginal Cost o High Volume How did this happen? o Just in time delivery o Quick change tooling o Different products, same marginal cost o Expand selection o Technology advanced What is a Brand? Differentiator: Ex: Coke v. Pepsi Can Value Association: Ex: Walmart (cheap) v. Neiman Marcus (expensive) Pride: Ex: school mascots (ie. The OSU Beavers) What is a Good brand? Commands a premium price: Jordan’s bball shoes & Converse Sells more units at a higher price Attract and retain stronger employees: Nike What a Brand is Not A trademark A mission statement A logo or a slogan A product or service What a brand is A point of view: Walmart and Target o They source almost exactly the same products but are positioned differently o Walmart POV Kills the local economy Replaces good paying jobs with part time work Exploits low cost labor in Asia Free rides on social programs o Or…. Lowest prices Best value Open 24 hours Great selection o Amazon POV Free 2 day shipping (prime members) Great selection Good Prices Easy to shop Walmart Amazon Replaces local high paying jobs with low payingReplaces local low paying jobs with no local jobs jobs Place to touch and feel the merchandise Have to go to Wal-Mart for that Buys cheap imported merchandise Buys the same amount of imported merchandise Hostile to unions Automated storage and retrieval systems means no people, no unions Customer Values o Sustainable o Healthy o Wholesome o Fresh o Ex: Whole Foods, Disney Competitive Advantage o Faster o Cooler o State of the art o Cutting edge Engineered into the strategic planning process o All product decisions o All price decisions o All distribution decisions o All promotion decisions Cheating in a Free Market What is cheating? (Caveat Emptor) Promising one thing, delivering another o Ex: Fake brand watches in China Common Acts of Cheating “Tourist Traps” (positioned one way but delivers another quality) Used cars (Salesmen try to convince you that the car is in good condition, breaks down a few miles down the road) Buying a time share (have a negative value for the most part; maintenance fees tend to go up) University of Phoenix (for profit, pretends to be an academic institution, but are nowhere close to other universities; they won’t be treated the same way as graduates from other schools) Economics of Cheating (Rolex) There has to be a monopoly in something for cheating to be facilitated When is it hard to cheat? Local Grocery store (people can simply change stores if one store makes you sick/offer low quality) Local Restaurant (Yelp and other sites can destroy a reputation, and there are many other restaurants) Local Hardware store Nordstrom (they take everything back no questions asked) Why does it pay to cheat? One period world Single transaction Never see customer again Why does the USDA grade meat? Protect the consumer Inform the consumer IS the USDA grading meat a public good? o Not everyone eats meat (Can’t check a box on a tax return to not support the grading of meat) o Not everyone who eats meet can afford it (Same example with the tax return) o If Fred Meyer does sell tainted meat, doe the government insure us? (no) o What if there was a market for tainted meat? (yes, chickens about the expire are roasted) o It doesn’t give Fred Meyer more or less of an incentive to cheat people by selling tainted meat because they wouldn’t sell tainted meat even without the USDA regulating it. The First P: Product Product Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Services: Activities, benefits, or satisfactions offered for sale o Intangible and do not result in ownership of anything Products, Services, and Experiences Market offerings include both tangible goods and services. Companies create and manage customer experiences with their brands or companies o To differentiate their offers from that of the competitors Ex: Starbucks founder originally wanted to sell espresso machines to restaurants, but this was before espresso was introduced to the USA and restaurants just wouldn’t buy into because they couldn’t buy a $2 cup of coffee. So he started his own business and….voila! $5 cups of coffee as a norm. Three Levels of Product Core customer value Actual product o Brand Name o Quality level o Packaging o Design o Features Augmented product o Delivery and credit o Product support o Warranty o After-sale service Product and Service Classifications Consumer products: Bought by final consumers for personal consumption Industrial products: Bought by individuals and organizations for further processing or for use in conducting a business o Materials and parts, capital items, and supplies and services. Marketing Considerations for Consumer Products Marketing Convenience Shopping Specialty Unsought Considerations Customer buying Frequent Less frequent Strong brand Little product behavior purchase; little purchase; much preference and awareness or comparison or planning and loyalty; special knowledge (or if shopping effort; shopping effort; purchase effort; aware, little or low customer comparison of little comparison even negative involvement brands on price, of brands; low interest) quality, and style price sensitivity Price Low price Higher price High price Varies Distribution Widespread Selective Exclusive Varies distribution; distribution in distribution in convenient fewer outlets only one or a few locations outlets per market area Promotion Mass promotion Advertising and More carefully Aggressive by the producer personal selling targeted advertising and by both the promotion by personal selling producers and both the producer by the producer resellers and resellers and resellers Examples Toothpaste, Major appliances, Luxury goods, Life insurance and magazines, and televisions, such as Rolex Red Cross blood laundry detergent furniture, and watches or fine donations clothing crystals Other marketable entities Organization marketing o Ex: Oregon State University Person Marketing o Ex: New football coach from Wisconsin; keeping up a personal brand Place Marketing o Ex: Sports Authority Field at Mile High; Denver Broncos stadium Social marketing o Ex: Green Peace Individual Product Decisions Product Attributes Branding Packaging Labeling Product support services Product Line Decisions Product line: Closely related products that: o Have similar functions and customer groups o Are sold through similar outlets or fall within given price ranges Product line length: Number of items in the product line o Product line filling o Product line stretching Product Mix (or Product Portfolio) Set of all product lines and items that a particular seller offers for sale Product mix decisions o Width Number of different product lines the company carries o Length Total number of items a company carries within its product lines o Depth Number of versions offered for each product in the line o Consistency Relativity of the various product lines in end use, production requirements, distribution channels, or some other aspect. Brand Equity The differential effect that knowing the brand name has on customer response to the product or its marketing With positive brand equity, consumer react more favorably to the brand than to an unbranded version of the same product With negative brand equity, consumers react less favorably to the brand than to an unbranded version. Consumer perception dimensions include: o Differentiation o Relevance o Knowledge o Esteem Brand valuation is the estimation of the total financial value of a brand. Customer equity is the value of customer relationships that the brand creates. Major Brand Strategy Decisions Brand Positioning Strategy Decisions o Brand Positioning Attributes Benefits Beliefs and value o Brand name selection Selection Protection o Brand sponsorship Manufacturer’s brand Private brand Licensing Co-branding o Brand development Line extensions Brand extensions Multibrands New brands Brand Positioning and Brand Name Selection Marketers should establish a mission and vision for the brand when positioning it. Desirable qualities for a brand name should: o Be based on the product’s benefits and qualities o Be easy to pronounce, recognize, and remember o Be distinctive and extendable o Translate easily into foreign languages o Be capable of registration and legal protection Brand Sponsorship o National brands Marketed under the manufacturer’s own name Ex: Whole Foods 365 brand o Store brands Created and owned by a reseller of a product or service o Licensing Use names and symbols created by other companies or well-known movie characters or celebrities for a fee o Co-branding Use the established brand names of two different companies on the same product. Ex: people pairing with Sriracha sauce to make other products. Brand Development strategies Existing New Existing Line extension Brand extension New Multibrands New brands Managing brands Communicate the brand’s positioning Manage all brand touch points Train employees to be customer centered Audit the brands’ strengths and weaknesses
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