BASIC MARKET CONCPTS
BASIC MARKET CONCPTS MAR 3023
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This 20 page Class Notes was uploaded by Shanel Mertz on Thursday September 17, 2015. The Class Notes belongs to MAR 3023 at Florida State University taught by Phillip Downs in Fall. Since its upload, it has received 53 views. For similar materials see /class/205379/mar-3023-florida-state-university in Marketing at Florida State University.
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Date Created: 09/17/15
10 11 1222 Which marketing tool is an impersonal oneway communication Sales Promotion Public Relations Personal Selling Direct Marketing is defined as the decisions and activities that make products available to customers when and where they want to purchase them b Marketing Intermediary c Strategic Channel Alliance d Channel Power The following are all factors influencing market channel selection EXCEPT a Customer Characteristics Product Attributes Type of Organization b c d Competition The The quotoldquot and quotnewquot kings of identifying new uses for their brands are Budweiser and JellO JellO and Sprite Coke amp JellO None of the above mUOEUZD Which best describes the idea behind the CocaCola Company producing Vanilla Coke Cherry Coke Diet Coke and Coke Zero A Brand Distribution B BurnOut C Scope Creep r Wm E Product Placement 23 What is the process called when a new product rises in a market and then eventually dies uct Strategy A Prod B a C Product Design Costs D Product Homogeneity E Product heterogeneity 24 Which of the following is NOT part of promotion A Advertising C Personal selling D Sales promotion E Publicity 25 Which of the following is not a decision we need to make within distribution N N N N A Intensity of distribution system B Inventory eves C Image of our distributors E All of the above are part ofdistribution Perceptual maps show all of the following EXCEPT A How a brand is perceived by the marketplace B How competing brands are perceived by the marketplace C What product benefits are important to consumers when making brand decisions E All of the above The quottotalquot product includes all of the following except A Retailer s prestige B Manufacturer s prestige C Package E All of the above The screening step in new product development process is B Qualitative analysis C Quantitative analysis D Product development E Concept testing Peoria is no longer a good test market because of all of the following EXCEPT A Too many products have been tested there B Media pricing has taken advantage of the city s popularity as a test market C Consumers are jaded after trying so many new products D The demographics are no longer representative 30 Tallahassee is A A bad test market for all products C A good test market because its educational level is high D A good test market because it has a high percentage of blue collar workers E A good test market because it suffers no spill in 31 All test markets suffer some spill in B False 32 Repositioning refers to A Limiting the amount of cognitive dissonance C Moving a brand to a more favorable spot on the supermarket D Moving advertisements to a website that has better traffic E Placing an advertisement in the proper location on a page 33 Marketers who claim that all marketing battles take place between customers ears that is in customers minds are keenly aware of L 7 CM B Shelf location of products C The best way to organize a company s new product development process D The limitations of test markets E How to measure test market results 34 Featuring vitamin C in orange slices is an example of A Product extension B Changing the physical product C Inventing new uses D Moving the co 3S Subway s ad campaign that tells how manyjumpingjacks one has to do to work off calories from eating McDonald s is an example of A Product extension B Changing the physical product C Inventing new uses 39w quot9 4 full 9m E Inventing new product attributes 36 The limitation ofa New Product Department for generating new product ideas is A 5 ma 39 l B It is comprised of low to midmanagement employees C No one is solely responsible for generating new ideas D It utilizes theory X rather than theory Y E It does not fit dotcom business 37 Good reasons for staying in a test market longer include39 05 Minimizing opportunity costs and explicit costs C Minimizes spill in and spill out D Confusing competitors and getting information needed to assess the effectiveness of the marketing strategy E Ability to tweak the marketing mix and opportunity to reduce consumers cognitive dissonance 38 Budweiser s quotBorn on Datequot A Is effective in reducing underage drinking B Introduces a new attribute to the competitive arena c Targets new users E None of the above 39 In a good test market we should try to Minimize spill in and maximize spill out 1I ll uh C Minimize spill in and minimize spill out D Maximize spill in and maximize spill out E Not worry about spill in and spill out 40Changing your oil every 3000 miles shampooing rinsing and repeating and changing the box of Arm amp Hammer in your refrigerator every month are examples of which product strategy A Changing the perceptual product Changing the physical product Identifying new markets Identifying new uses B C D E it C Identifying mew markets D Identifying new uses E Increased usage 42 Sabotage is a concern in test markets because it disturbs the normal competitive environment so we are less able to determine the effectiveness of our test market marketing mix strategy B Fals 43 The unique component of personal seing compared to other types of promotion is People are involved in the process C It reInforces the posItIonIng strategy D Encoding and decoding are less important E There is a feedback loop 44 The medium with the shortest effect time is Newspapers Magazines Billboards Transit buses subways etc mUOEU J U The medium with the latest closing date is A Television B Radio D Internet E Billboards J 0quot Ciga rettes req uire w ll m B Selective distribution C Exclusive distribution D Guerilla distribution E Dual distribution J 2 C Minimize the supply chain captain s costs D Increase trial rates E Increase advertising efficiency 48 The 4 types of promotion are advertising sales promotion publicity and personal selling A m B False 49 The unique characteristic of publicity is that it is free A True B 50 Atmospherics in the Propaganda model of persuasion include all of the following EXCEPT A Architecture B Dress codes C Vehicles that salespeople drive D Product placement E 51 Which of the following SHOULD come first in setting up a promotional plan A Setting the budget B imnm u C Determining the media mix D Determining the Promotional mix E Selecting specific media vehicles 52 An advantage of sales objectives rather than communication objectives is that they relate to the bottom line characteristics such as sales market share and profit M TOD SHELF NOTES MAR3020 Test 4Final 44 NO real world example Price Price is the only one of 4P39s that we don t want to compete on because it39s so easily matched WalMart competes on price by having the absolute lowest possible price Price includes Monetary 198 this is the actual monetary price NonMonetarv risk 39 39 quot 39 involved in the purchase ie can of soda in a vending machine125 at Sam39s club 50C but also is the risk of getting to Sam39s and them not having the soda and the hassle of having to drive all the way out there Vending machine soda is convenient if we have high price then we need to have high quality Pricing Feasibility Set every single price is included in this set BUT we eliminate prices because of There is a price beyond which the market will not pay for your product 1 So while there are many people who may pay up to 300 for a pair of good jeans there aren39t many who would pay 3000 there are some prices below which we cannot keep in business 2 Pif we use retailers and wholesalers then we don t totally control the price 3 Corporate and Pricing objectives while WalMart aims to always have the lowest prices Mercedes has a quality philosophy that makes their prices higher 4 Competition what are they doing If the competition has a similar product for 12 we can39t price ours at 15 unless it is better quality 5 Marketing Mix based on marketing and distribution costs 6 legal environment not allowed to fix prices or discriminate 7 After we ve gone through all the pricing constraints the window of possible prices should be very small l Corp Objectives 4 Price Feasibility Set all prices included r 1 l H 39 Narrow window of possible prices after applying price constraints Costs 2 Legal Environment 7 Reta ilersWholesa lers 3 Com petition 5 Monetary and NonMonetary example Pl 1 Carat Solid diamond ring from a guy on the street in NYC for 200 200 is the monetary price Non monetary price could include going to jail for buying stolen goods in a sting operation and having to explain to your girlfriend that you are in jail for trying to buy her a 200 stolen ring or it ending up being a fake and your motherinlaw finds out P2 1 Carat diamond ring for 700 at a pawn shop monetary The diamond could be flawed nonmonetary risk P3 1 Carat diamond ring at Tiffany39s for 10000 monetary with certificate of authenticity and papers to show where the diamond came from While the monetary costs are high the nonmonetary costs are extremely low in regards to risk Price and the Other Ps relationships between them ProductPrice Product Quality l price as a surrogate for quality PriceJ Product Quantity l Marketers reward buyers for purchasing larger quantities by lowering the prices like when you buy in bulk at Costco They do this because buying in large quantities raises cost efficiency in production and marketing as well as the fact that if you buy 1000 aspirin you won39t be back in the market for a while so it is a longer time that they have a hold of you as a customer Promotion Monetary Price l Promotion l the more you promote the more costs you have to cover which drives the price up Total Price l xl Promotion l effect on total price monetary amp Nonmonetary may vary since promotion usually DECR Risks at least psychologically for consumers DistributionPlace Monetary Price l Distribution l distribution costs drive the price up Total Price l xl Distribution l effect on total price may vary since distribution costs usually reduce the total hassle involved in buying a product Cost Plus amp Demand Based Pricing how marketers decide prices Cost Plus most common practice Focus on the cost structure how much it costs to make and market a product and then add markup independently of how consumers value a product Manufacturer9Wholesaler9Retailers9Consumers Demand Based Focus on consumers and competitors insynch with the marketing concept consumer is the center of our world Find out what the market is willing to pay and base price on that Price backwards from what the consumer is willing to pay to figure out what to price a product at to the wholesaler Manufacturer Wholesaler Retailer Consumer Beginning and Ending Prices PbBeginning Price PeEnding Price Pb Pe 10 Manufacturer 15 15 Wholesaler 20 20 Retailer Market Price Price the consumer pays is the Retailer39s ending price 25 So in words the manufacturer pays 10 Pb to manufacture a product and sell it at 15 Pe to a wholesaler The wholesaler39s Pb is the price at which the product was purchased from the manufacturer 15 Therefore the Manufacturer s Ending Price Pe is the Wholesaler Beginning Price Pb Then the wholesaler puts a markup on the product making it39s Pe 20 which will in turn be the Pb for the retailer who will purchase the product at 20 mark it up 5 and have a Pe of 25 which will be the final market price for a consumer Markup either based on the beginning or the ending price Based on Beginning Price9 MUPb Pbpb ie Pe15 Pb10 151010 510 5 50 Markup Based on Ending Price9 MUPE Lg 15 1015 515 13 3333 Markup Same markup in concerns to each being 5 more from Pb to Pe but different markup based on which on use will almost always be higher when it39s calculated based on Pb because the ending price is always supposed to be higher than the beginning price Basicaly you39re taking the difference between the ending price and the beginning price so however much you went up in price from beginning to ending and dividing that by either the Pb or Pe 411 Pricing Companies make money by marking up prices and selling inventory stockturn rate More on this later 4 Pricing Scenarios we ll have to solve for Given 20 40 50 M W 10 What is the Price to the consumer Use MUPb Since we are going from the ma nufacturer39s towards the consumer we use Cost Plus pricing To find Manufacturer Ending Price Pgipb The Redjust shows what we have done Markup 20 02 PbM 10 MUPb T in each step 02 PEM 1010 plug the given into the equation 0210 PEM 104eO4eO Multiply both sides by 10 to cancel out the denominator 2 10 PeM 40 10 Add 10 to each side to isolate Pem 12 PeM Ending Price for the Manufacturer is 12 To Find Wholesaler Ending Price Markup 40 04 wa 12 04 Pew1212 plug it into the equation 0412 Pew121212 Multiply both sides by 12 to cancel out denominator 48 12 Pew1 2 1 2 Add 12 to each side to isolate Pew 168 Pew Ending price for Wholesaler is 16 80 To Find Retailer Ending Price Market Price for Consumers the answer Markup 50 05 PbR 1680 05 PER168168 plug it into the equation 05168 PeR168168168 Multiply both sides by 168 to cancel out denominator 84 168 PeR168168 Add 168 to each side to isolate PER 252 PER Ending price for Retailer is 2520 Answer 20 40 50 M W R 10 g 1680 2520 the Consumer pays 2520 The shortcut way of doing these problems if we know that the Pb for the manufacturer is 10 and we want to markup the price by 20 all we have to do is multiply the Pb by 12 why 12 02 would be the 20 INCR plus 1 to include the 100 of the beginning price because a 20 markup is actually 120 of the original price Pb 50 101212 for the wholesalers ending price wejust multiply 12 by 14 1214 168 and for the final price we multiply 168 by 1516815 252 2 Given the same but instead use MUPe This one39s a little more difficult To Find the Manufacturer s End Price MU02 Pbm10 MUPe P1 02 PeM1oPeM 02PeM PemlOVRewNPew WSW 042 Perm10 02PeM 0 10 08PEM4Q 430 1008 Q PeMQeg 125 PeM Same thing with the Wholesaler39s ending price MU 04 wa 125 04 Pew125Pew 04Pew PeM1252ewnew 426w 4Pew Perm125 4Pew 0 125 06Pew 432 441 12506 Q 6PeW9 6 2083 Pew Same thing with the Retailer39s ending price MU 05 PbR 2083 5 PER2083PEM 5PeR PeR2083ReuRea Plug the given into the equation Multiply both sides by Pam to cancel out the denominator subtract 02PeM from both sides to get all the variables variables are the ones we re solving for in this case Pem on one side Add ten to both sides to isolate the 08PeM Divide both sides by 08 to get the answer Manufacturer s ending Price is 1250 Plug the given into the equation Multiply both sides by Pew to cancel out the denominator subtract 04PeM from both sides to get all the variables variables are the ones we re solving for in this case Pew on one side Add ten to both sides to isolate the 06Pew Divide both sides by 06 to get the answer Wholesaler39s ending Price is 2083 Plug the given into the equation Multiply both sides by PER to cancel out the denominator UJ 5ilea 5ilea PER2083 5PER subtract 05PeM from both sides to get all the variables variables are the ones we re solving for in this case PER on one side Add ten to both sides to isolate the 05PeM 0 2083 05PER 420183 2918 208305 Q PeRQ Divide both sides by 05 to get the answer 4166 ZPER Retailer39s ending Price is 4166 20 40 50 M W R 10 the Consumer pays 4166 Shortcut this one is a little more confusing but it works for me Basically you take 1 and subtract whatever the markup was from that and then use that number to divide the beginning price Manufacturer Markup2002 102 08 1008 125 Wholesaler 104 06 125062083 Retaller 15O5 208305 4166 20 40 50 M W R Given 40 What is the Beg Price to the manufacturerr Use MUPe Since we only have the price that the consumer is willing to pay the retailer s ending price we must use Demand Based Pricing Which basically means we39re going backwards from the consumer to the manufacturer To find the Retailer39s Pb 7 b MU05 PeR4o MUPe 05 40PbR4O Plug the given information into the equation 0540 40PbR4Q40 Multiply both sides by 40 to eliminate the denominator 20 40 40 39PbR4Q Subtract 40 from both sides to isolate the variable 20 1 39PbRl Multiply both sides by 1 to get rid of the negative sign 20 PbR The Beg Retailer39s Price is 20 To Find the Wholesaler39s Pb P MU O4 Pew20 04 20wa20 Plug the given information into the equation 0420 20wa2Q20 Multiply both sides by 20 to eliminate the denominator 8 20 20 wa2Q Subtract 20 from both sides to isolate the variable 12 1 wa 1 Multiply both sides by 1 to get rid of the negative sign 12 wa The Beg Wholesaler39s Price is 20 To find the manufacturer s Pb MU02 Pem12 02 12PbM12 Plug the given information into the equation 0212 12Pbm1212 Multiply both sides by 12 to eliminate the denominator 24 12 12 PbM 12 Subtract 12 from both sides to isolate the variable 96 1 Pbm1 Multiply both sides by 1 to get rid of the negative sign on both sides 96 PbR The Beg Manufacturer s Price is 960 Answer 20 40 50 M W R M 40 The manufacturer39s beginning price is 960 What if when using demand based pricing we come up with a beginning price that s too low What if it costs more than 960 to manufacture the product can we work on these markup percentages Maybe negotiate with the wholesaler39s and retailers to bring their markup percentages down so everyone can profit do we change our product to make it cheaper to produce Channe captains decide these issues Given the same but use MUPb To find the Retailer39s beginning price MU05 PeR4o MUPb 1 05 40 PbRPbR Plug the given into the equation 05PbR 40 PbRilba2ba Multiply both sides by PbR to cancel out the denominator O ilba O llba 4O PbR 05PbR Subtract 05PbR from both sides to get all the variables on 0 40 4015PbR 40 401 l5PbR1 4015 4 PbR4 5 26666 PbR one side subtract 40 from both sides to isolate the variable Multiply both sides by 1 to get rid of the negative sign on both sides Divide both sides by 15 The Retailer39s beginning price is 2667 round off To find the Wholesaler s Beginning price M U04 Pew26 67 04 2667 wawa 04wa 2667 wawa2bw 2667 wa 04wa 0 2667 26 61 14wa 2667 26671 l4wa1 266714 4 4wa4 4 1905 wa To find the Manufacturer s Beg Price MUO2 Pem1905 02 1905 PbMPbM 02PbM 1905 PbWPbu iilbw gram02250 1905 PbM 02pm 0 1905 1Q 5 12PbM J 705 19051 l2PbM1 190512 4 ZPbM4 2 15875 PbM Plug the given into the equation Multiply both sides by wa to cancel out the denominator Subtract 04wa from both sides to get all the variables on one side subtract 2667 from both sides to isolate the variable Multiply both sides by 1 to get rid of the negative sign on both sides Divide both sides by 14 The Retailer39s beginning price is 1905 Plug the given into the equation Multiply both sides by PbM to cancel out the denominator Subtract 02PbM from both sides to get all the variables on one side subtract 1905 from both sides to isolate the variable Multiply both sides by 1 to get rid of the negative sign on both sides Divide both sides by 12 The Manufacturer s beginning price is 1588 round off Answer 20 40 50 M W R 1588 1905 2667 40 The manufacturer39s beginning price is 1588 Shortcut divide the ending price by 1the decimal value of the markup to get the beginning price Retailer 4010240152667 Wholesaler 2667141905 Manufacturer 190512 1588 Markup on Pb the markup is 100 on Pb if Pe2Pb Markup on Pe the markup is 100 if and only if Pb0 in other words if you re doing markups based on ending price the only way to get a markup of 100 if the beginning price is 0 The markup can only be gt100 if f Pblt0 the markup can only be greater than 100 if the beginning price is negative like if someone paid you to take something for instance oil you pay someone to remove oil which they then sell making over 100 markup on the oil since the price of it was negative Pb59 Pe109MU50 Pb19Pe1009MU99 PbSS PeSZO MU75 Pb09 Pe1009MU100 PbS 9Pe 9MU gt100 Problems that are unworkable anything asking for gt100 markup using MUPe that has a Pb that is positive when there isn t enough info to solve a problem we need at least two of the following MU Pe Pb any problem like the two mentioned above is a trick question Making 2 ways MU buying things at a much cheaper price and then marking them up to make money on each sale jewelry store Stockturn rate the rate at which you sell your inventory the faster you sell the more you can sell grocery store usually inversely correlated so a store that can sell it s inventory quickly like a grocery store can keep it s markups low because it makes money off of the amount that it sells and its stockturn rate where as a jewelry store would have to markup its items really high and depend on much less volume being sold because they make their money on the high markups Formulas STRStockTurn RateCGSCost of Goods SoldAIAverage Inventory at cost CGSCost of Goods Available for Sale Ending Inventory EI Cost of Goods Available for SaleBeginning Inventory BI Purchases Average Inventory BIEI2 Net SalesNS Gross SalesGSReturnsampAllowancesRampA Gross MarginGM NSCGS Net Profit GM Expenses he went over these formulas in class and talked about how they all relate to each other but didn t give us any problems based on them at the time 413 Brand Promise went over his brand promise again we should all have llbrand Promises in the business and personal worlds and we should be consistent with them if we bring our AGame every day you will be happy and successful asking for the salequot when you go to interview for a job job evaluation or even in a relationship Brand promise this is what you should expect establishes guidelines if you ve kept your brand promise then later you can llask for the salequot9 llI have met expectations and stayed true to my brand promise so now I want a raise or a good evaluation etcquot many people may meet expectations but they don t llask for the salequot If you don t ask you definitely won t get it Bidding a lot of business to business or business to government transaction don t have a set price but operate on bids Bids are offers that a company makes to sell their goods at a certain price when bidding you are competing with others and you don t know what their bid will be usually you are pursuing many jobs Example the Navy needs 100 computers and sends out a message that computer companies can start bidding on the contract for the 100 computers Different companies will be placing bids on the contract as well and we don t usually know how much they are going to bid Our company wants to place a bid how do we do that when we bid we think about the future We assume that all bids in the near future will be of the same amount we want to maximize LRAEP Long Run Average Expected Profit LRAEP Profits or Losses multiplied by the probability of the bid being successful The probability that a bid will be taken is an estimate based on past experience Basically an educated guess The hardest part of the equation to determine in the real world Never 100 accurate Bid Costs Pg L Probability LRAEP 70K 100K 30K 09 27K 90K 100K 10K 08 8K 110K 100K 10K 06 6K 120K 100K 20K 04 8K 150K 100K 50K 01 5K we bid 120K prices aren t realistic if we want to maximize LRAEP Objectives when placing a bid 1 Maximize LRAEP Unless stated otherwise always assume that the objective is to maximize 2 Market Share when trying to INCR market share you choose the bid with the highest probability in the hopes that eventually you will get to call the shots or you will become their sole supplier and then raise prices 3 Keep our people working Choose the bid with the highest probability Even if we are losing S we want to keep our experienced people as long as possible because hopefully times will get better and we don t want to have to hire new inexperienced workers when that happens Dipping into reserves until the economy turns because our skilled employees are assets and we have put resources into developing them 4 Maximize Revenue choose the bid with the highest revenue This is important when a company needs cash flow to cover debts or pay bills and payrolls they hope times will get better or the government will bail them out Revenue of contracts you are going afterlls of BidProbability say in the example above we were going after 100 similar contracts the bid with the highest revenue would have been 90K Price Elasticity Relationship between price and total revenue anecdote the original SuperLube owners started out selling oil changes at 1275 they wanted to see if they continued to raise the price at what price people would stop paying for oil changes They never found the point where people would stop buying Price l Total Revenue Price Total Revenue Price l Total Revenue Price Total Revenue Price l Total Revenue 9stays the same Price Total Revenue 9stays the same Unitary ElaStiC Formula E1 Ep 19 unitary elastic Ep gt 19 elastic Ep lt 19 inelastic W 1 2 2 in the equation the straightline brackets are absolute value signs they mean that the answer will always be positive So if you get a negative number just drop the negative sign In the real world Trying to guess the quantity demanded Q is the hard part Try to guess based on experience or other s experience Example at last year s FSUUF game they sold 100000 cokes Q1at 2 P1 This year they expect to sell 75000 cokes Q2 when they raise the price to 3 P2 Should they increase the price And is the market elastic or inelastic Screw the formula just look at the quantity multiplied by the price in each to come up with the total revenue Remember that if price goes up and Total Revenue goes down then the cokes are an elastic product if total revenue goes up with price then it is an inelastic product and if it stays the same then the cokes are a unitary elastic product P12 Q11000009 total revenue 200000 P2 3 Q2750009 total revenue 225000 since total revenue went up when price went up the cokes are an inelastic product and they should definitely raise the price What is the elasticity coefficient Just plug it into the equation 75000100000 2 25000 25000 75000100000 l 750002 87500 02857 Ep 32 1 l 1 04 71425 round to 71 232 l52 l25l 418 Satornino Linked we are all connected Studying networks is another way to study people who have something in common their connection to each other Related to studying segments Some definitions Social Influences the forces that others exert on your behavior Consumer socialization the process of learning to consume Roles the activities and actions you are expected to engage in based on your social position Reference group group with which you identify so strongly that you adopt its values attitudes and behaviors Opinion Leaders member ofan informal group who provides information about a specific topic to other group members that seek out that information who you go to when you want to know what the best computer to buy is or the best coverup or something Culture the accumulation of values knowledge customs objects and concepts that a society uses to cope with its environment and pass on to future generations Subculture a group of individuals whose characteristics values and behavior patterns are similar within the group and different from the surrounding culture Digital Networks facebook twitter etc Social Networks all the textbook definitions above help you define what your social network is We are all Nodes in someone s network What is a node 939 Nodes are basically little points in a web of interconnectivity Everyone is a node and we connect to other people All nodes are NOT EQUAL Some nodes are called quotHubsquot These have a significantly larger amount of connections or links to other nodes Hubs are different from opinion leaders in that they do not have to be specifically knowledgeable in one area like opinion leaders they only need to know a lot of people According to Dunbar s Number Malcolm Gladwell author ofThe Tipping Point says that the maximum number of social relationships one can maintain is 150 The BernardKillworth number is 231 but this doesn t mean you should purge your facebook the people you are weakly connected to actually make your network more powerful and influential according to Barabasi author of Linked Why GroupNetwork group members because of their frequent interaction tend to think alike over time This reduces the diversity of ideas and in the worst case scenarios leads to quotgroupthinkquot Strong Ties these are relationships between people who work live or play together They are utilized frequently and need a lot of management to stay healthy Over time people with strong ties tend to think alike since they share ideas all the time Weak Ties weak ties are relationships between members of different groups They are utilized infrequently and therefore don t need a lot of management to stay healthy They lead to a diversity of idea as they tie together disparate modes of thought Weak links can have a more powerful impact on a network because they bring new information to a group faster than if the information only passed through the strong links The llrules of lifequot in a network according to Christakis author of Connected 1 We shape our network Homophily the conscious or unconscious tendency to associate with people who resemble us we choose the structure of our networks how many people are in it how densely interconnected our network is and how central we are to the network 2 Our network shapes us Siblings firstborn children score a few points higher in intelligence than secondborn children who score higher than thirdborns Is this biological or social Norwegian study said that when a first born died the second born child s IQ raised to about that of the First born Same thing goes for a third child who loses one or two siblings Must be social 3 Our friends affect us what flows across the network affects us Human tendency is to influence and copy each other Each connection is an opportunity to be influenced or to exert influence 4 Our Friends Friends affect us Hyperdyadic Spread tendency of effects to spread from person to person beyond an individual s direct social ties Marketers want to tap into this effect 5 The Network has a life of its own The Wave a group of physicists studied people doing quotthe wavequot at sporting events and found that it was usually clockwise consistently moved at 20 seats per second most importantly the wave could be understood without including biology or human psychology Hubs are important in networks because they close the distance from marketer s to consumers when a hub does something their actions affect the entire network so if we can get a hub to do it or buy it many more people will see it and want it or at least know about it Marketers want to engage and recruit hubs we want to harness the power of their connections hoping that when they consume their connections will consume as well What does it take to be a hub more than just connections Fitness the strength of those connections Preferential attachment Network growth robustness Not on the quiz The Oracle of Kevin Bacon proving that Kevin Bacon was god by connecting him to any actor named through other actors he costarred with and the actors they costarred with this works because the Hollywood acting community is a network she said our quotBacon Number is 4quot but id ont think that ll be important this is possible and Kevin bacon isn t even a hub in the Hollywood acting community According to the Milgram Study the average number of intermediary persons connections between any two people in the US is approximately 55 this is where the phrase the six degrees of separation comes from In real life all this stuff is important because Network theory can explain how economic markets function network theory is being used in military strategies against terrorism network theory is used to predict the spread of HIV and other diseases Then she named a whole bunch of books that I don t think will be important Dr Vidal uses network theory in his work on breast cancer In Marketing Google Buzz and Orkut beta Twitter Facebook myspace Linked in Apple Discussions is becoming Apple Support Communities Pampers Village community for mom s using pampers diapers One FSU Social Go create your own social network
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