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BCOR 2400: EXAM 1
Marketing |
The activity for creating, communicating, delivering, and exchanging offerings that benefit its customers, the organization, its stakeholders, and society at large |
Marketing seeks... |
(1) to discover the needs and wants of prospective customers and (2) to satisfy them
|
Exchange |
The trade of things of value between buyer & seller so that each is better off after the trade |
Four factors needed for marketing to occur |
- Two or more parties (individuals or organizations) with unsatisfied needs
- A desire and ability on their part to be satisfied
- A way for parties to communicate
- Something to exchange |
First objective in marketing? |
Discovering the needs of prospective customers |
Need |
Occurs when a person feels deprived of basic necessities such as food, clothing, and shelter |
Market |
People with both the desire and the ability to buy a specific offering |
Why do companies participate in dumping? |
Gain share (market entry)
Get rid of inventory (old stuff)
Regain some costs
Disrupt a competitor |
Target market |
One or more specific groups of potential consumers toward which an organization directs its marketing program |
Four P's |
Product
A good, service, or idea to satisfy the consumer's needs
Price
What is exchanged for the product
Promotion
A means of communication between the seller & buyer
Place
A means of getting the product to the consumer |
Marketing mix |
The marketing manager's controllable factors - product, price, promotion, place - that can be used to solve a marketing problem |
Customer value proposition |
A cluster of benefits that an organization promises customers to satisfy their needs |
Environmental forces |
The uncontrollable forces in a marketing decision involving social, economic, technological, competitive, and regulatory forces |
Customer value |
The unique combination of benefits received by targeted buyers that includes quality, convenience, on-time delivery, and both before-sale |
Relationship marketing |
Links the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefit |
Marketing program |
A plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers |
Marketing concept |
The idea that an organization should (1) strive to satisfy the needs of consumers (2) while also trying to achieve the organization's goals |
Market orientation |
An organization that focuses its efforts on (1) continuously collecting information about customers' needs, (2) sharing this information across departments, and (3) using it to create customer value |
Customer relationship management (CRM) |
The process of identifying prospective buyers, understanding them intimately, and developing favorable long-term perceptions of the organizations and its offerings so that buyers will choose them in the marketplace |
Customer experience |
The internal response that customers have to all aspects of an organization and its offering
|
Social responsibility |
The idea that organizations are accountable to a large society |
Social marketing concept |
The view that organizations should satisfy the needs of consumers in a way that provides for society's well-being |
Product |
A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in exchange for money or something else of value |
Ultimate consumers |
The people who use the goods and services purchased for a household |
Organizational buyers |
Those manufacturers, wholesalers, retailers, and government agencies that buy goods & services for their own use or for resale |
Who benefits from effective marketing? |
- Consumers who buy
- Organizations that sell
- Society as a whole |
Utility |
The benefits, consumer value, or usefulness received by users of the product |
Form utility |
The production of the good or service, customization that empowers customer
ex: frozen yogurt, bike. |
Place utility |
Having the offering available where consumers need it
ex: vending machine, starbucks |
Time utility |
Having it available when needed ex: express lane, Cosmos |
Possession/Ownership utility |
The value of making an item easy to purchase through the provision of credit cards or financial arrangements
ex: buying an apartment |
Service utility |
clean or fix my car |
Experience utility |
Example of Disneyland or a great restaurant |
Marketing creates...? |
Mutually beneficial exchanges by offering a combination of product, price, place, and promotion in an effort to create value for consumers |
What is the key deliverable of marketing? |
Value, which is delivered when consumers' wants & needs are satisfied |
What is a brand? |
- Tangible and intangible attributes of a company or product
- A promise and all the associations that come to mind
- Consumer-owned! |
What are the three areas in which consumers obtain brand benefits? |
- Functional (what is seen, touched, heard)
- Intellectual (what is thought)
- Emotional (what is felt) |
Uncontrollable factors in marketing |
Social (Facebook, Twitter)
Economic (recession, foreign markets, unemployment, inflation, income)
Technological (smart phones, apps, privacy issues)
Competitive (what are your competitors doing?)
Regulatory (privacy, labeling regulations) |
Common criticisms of marketing |
o Poorly designed product
o Marketing makes people too materialistic, motivates them toward "things"
o Consumer credit marketers make people buy things they don't need and can't afford
o Advertising can be annoying & wasteful
o Advertising creates an unrealistic standard for women & men, which leads to problems in society
o Products are not safe or the quality is poor
o Middlemen add to the cost of distribution and raise prices while adding minimal value
o Marketing exploits the poor, the less educated, or other vulnerable segments of society
o Advertising is a monologue
o Packaging and labeling are often confusing & deceptive |
Government's role in marketing |
- Food and Drug Administration (FDA)
- Federal Communications Commission (FCC)
- Federal Trade Commission
- Protect consumers, police the industries, and ensure fair competition
Market economy Consumers (highest quality at lowest price, exercise your freedom)
Marketers (maximize profitability within the law and ethics)
Government (keeps markets competitive, address market failures, and protect the vulnerable)
Self-interest in a competitive market yields the goods/services society wants at the lowest possible price
- Creates a higher standard of living
- Leads to efficient use of society's resources |
Marketing organization |
Organizational Foundation (why: mission, core values, culture)
+Organizational Direction (what: SMART goals/objectives)
=Organizational Strategies (how:) |
Mission/vision |
A statement of the organization's function in society, often identifying its customers, markets, products, and technologies |
Organizational culture |
- Consists of a set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization
- Culture trumps strategy
-behavior consistent with values, and may increase profitability. |
Strategic Business Units (SBUs) |
-Greater focus and quicker decision making.
- Distinct mission and target market.
-Control over their own resources
-Their own competition
-Independent from other businesses in the organization.
Ex: Nike's=apparel, footwear, equipment, & accessories
Ex: Apple=iTunes,iPhone,iMac |
Boston Consulting Group (BCG) Business Portfolio Analysis |
-Where do we want to go?
- Goal is to strike a balance regarding cash generation, cash usage, future growth and risk.
- Y-axis: market growth rate
- X-axis: SBU relative market share
- Stars: build/maintain
- Question marks: grow/build/harvest, almost all companies begin here
- Cash cows: hold (market no longer growing)
- Dogs: harvest/divest (unprofitable) |
Situation (SWOT) Analysis |
- Strengths, Weakness, Opportunities, Threats
- Look both inside and outside the organization
- Identify industry trends
- Analyze competitors
- Assess the organization
- Research present and prospective customers
- Helps you make strategic choices |
Point of difference |
- Attributes of superiority
- Could be tastes, speed, values, durability, easier, makes me cool, comfort, etc. |
Market segmentation/target markets |
-Who to target/who NOT to target
-Which products to which markets?
ex:minivan targeted at big families. |
Product Positioning |
- A promise you own in the consumer's mind
- Ex: Disneyland=family fun!
Walmart=Lowest Prices |
Social Demographic Trends |
Demographics
- Aging population
- More women in the workforce
- The end of the majority (diversity)
- Marriage delayed
- Rise of the self-employed
Cultural
- Trust at an all-time low
- Allure of the bargain ex: IKEA
- The new selling process
- Conscious consumption (fewer wasteful purchases/less spending)
- Green Movement |
Technological Environment |
- Here comes the cloud
- Localization of the Internet
- Going mobile
- Data synthesis
- Pay anywhere
ex: Netflix: instant streaming vs. Dvd mail rental |
Competitive Environment |
-Nature of your market (monopoly, oligopoly, monopolistic competition, or pure competition)
-new products, pricing, sales tactics, advertising product features, distribution, sales performance/market share. |
Regulatory environment |
- Phone use in vehicles
- Dodd-Frank (oversight in financial industry)
- FDA (labeling for ingredients, organic, etc.)
- Tobacco packaging/labeling |
Ethics |
Beliefs about what is right & wrong or good or bad in actions that affect others |
Radical transparency |
Everyone sees everything! |
Ethics vs. laws |
Ethics
-your personal principles and values
Laws
-society's values & standards |
Utilitarianism |
Driven by delivering "the greatest good for the greatest number of people" |
Deontology |
Duties, principles, and obligations
-simply a "right way" to do things
-a duty to do the right thing without qualification (acting blindly)
-moral idealism=I can't lie! |
AMA (American Marketing Association) Ethical Norms |
- Do no harm
- Foster trust in the marketing system.
- Embrace ethical values |
The role of a business in society |
Classical view maximize shareholder wealth, enlightened self-interest.
Stakeholder view add value to all stakeholders, reduces shareholder wealth
Sustainability view people, planet, profit, future generations |
Brands are personal & must be rated on a scale of...? |
Consciousness, trust, & social responsibility |
Placebo effect |
Mental associations -> body reacts as though you were taking the pill, no psychological effect, but still a benefit |
What is the #1 most common form of cheating? |
- Employee theft!
- More cheating than you'd imagine |
Certified B Corporation |
- Our generation is more environmentally aware/conscious & cares more about sustainability
- B-Lab audits companies based on environmental awareness |
"Be buff" |
Act socially responsible because all things will be exposed eventually |
Global trade |
- Importing and exporting goods between countries is dramatically increasing.
- More competition = companies have to be better
- Everyone benefits from trade
- Pros: more consumer choice, jobs!
- Cons: shipped, carbon footprint |
Trade Protectionism |
The use of government regulation to limit the import of goods and services |
Pros of Trade Protectionism |
Protects domestic industries
emerging industries
jobs
national security
counter foreign practices |
Cons of Trade Protectionism |
Reduces Competition/Restricts Free Trade
increases prices
reduces export gains
negative effect on the "freeness" and the success of the international marketplace |
Tariffs |
Taxes on imports to protect domestic producers |
Quotas |
Limit on imports
ex: sugar |
Embargos |
Complete ban on an import or export. |
Subsidies |
Support of an industry
ex: agriculture |
World Trade Organization (WTO) |
- The only global international organization dealing with the rules of trade between nations
- Negotiate & sign agreements, by the bulk of the world's trading nations and ratified in their parliaments
- Polices/referees to make sure every country plays fairly |
Dumping |
When a firm sells a product in a foreign country below its domestic price or below its actual cost, subject to penalties & fines. |
Grey Market/Parallel Importing |
When a company sells products at significantly different prices in various markets, and individuals in low priced markets sell into high priced markets in an unauthorized manner.
ex: the expensive watch's price at COSTCO vs at Nordstom. |
JFK's Consumer Bill of Rights |
- To safety
- To be informed
- To choose
- To be heard |
Consumer Ethnocentrism |
-Belief that it's inappropriate/immoral to purchase foreign made goods.
-Because it hurts US business, NOT based on product attributes.
-Provides sense of identity. |
Country of Origin Effect |
Beliefs based on merits (quality,service,price)
ex: Wine from France is automatically the best. |
Foreign Corrupt Practices Act |
Anti-bribery provisions make it illegal to offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business
-Dual Enforcers= SEC(Securities and Exchange Commission) & DOJ (Department of Justice) |
Global Economic Considerations |
Stages of economic development
-developed vs. underdeveloped (GDP,literacy,life span)
-bottom of the pyramid (largest and poorest socioeconomic group in the world)
Consumer purchasing power
-Affordability, Availability, Acceptance, Awareness.
Economic infrastructure
-communications, transportation, financial, exchange rate volatility. |
Consumer Purchasing Power |
Affordability (disaggregate unit size (sachets), aggregate consumers (shared loans), reinvent the product ($100 PC with remote apps and storage), low margin, high volume strategy)
Availability ("creating" your sales force to overcome lack of distribution, to reach remote and rural consumers, offering microfinance to enable local entrepreneurs, spawning phone kiosks, supporting "micro-stores", labor intensive distribution)
Acceptability (requires deep understanding of needs, culture, traditions, daily life, innovation and adaptation mandatory)
Awareness (traditional modes not available or adequate) |
Direct exporting |
My employees, my assets |
Indirect exporting |
Licensing, joint venture (JV), strategic alliance, contract manufacturing, foreign direct investment (FDI), EXISITING EMPLOYEES (fastest method!) |
Profit potential (in order from least to most) |
Exporting, licensing, joint venture, and direct investment |
In the article by AT Kearney titled Serving the Low Income Consumer, why did Unilever use street magicians to generate brand awareness? |
Traditional methods were not available |
Consumer Behavior Research |
- Significant time and money spent understanding WHY consumers do what they do
- Control of marketing stimuli, no control of other external stimuli -> different buyer characteristics and buyer decision making process for each consumer. |
Behaviorist learning |
- Learning is a relatively permanent change in behavior due to experience
- Refers to a change in behavior, an external change that we can observe
- Example: I see that older bank customers use ATM's less than younger bank customers. |
Cognitive learning |
- Learning is a relatively permanent change in mental associations due to experience
- A change in mental associations, an internal change that we cannot observe
- Example: I want to understand WHY this behavior exists |
The marketing process |
- We vary stimuli (the 4 P's) and monitor response
- We can observe behaviors, and we can ask a number of consumers WHY they do what they do, but attempting to project how consumers will respond is difficult. |
We can predict group behavior, but not...? |
Individual behavior! |
Consumer Decision Process |
1) Problem Recognition
2) Information Search
3) Evaluation of Alternatives
4) Purchase Decision
5) Post-purchase Evaluation |
1. Problem Recognition |
- You notice a gap between actual and desired state
- Triggered by:
• Internal stimulus (stomach growling, look in mirror at yellow teeth)
• External stimulus (non-marketer dominated, you see someone eating, hear a song)
• Marketer dominated (advertising, pop up, Facebook likes) |
2. Information Search |
-Internal Search my own experience
- External Search:
• Non-marketer dominated (word of mouth, friends, family, web, reviews, influencers, independent sources, social media)
• Marketer dominated (web site, direct mail, advertising) |
3. Evaluation of Alternatives |
- Potential brands
ex:Apple, Samsung, Nokia, Nextel, Blackberry, Motorola.
-Evaluative criteria (personal) ex:price, features, durability, etc.
-Consideration set (evoked set)
ex: Apple, Droid, Samsung |
67% of consumer product sales attributed to...? |
Word of mouth |
4. Purchase Decision |
- Three scenarios:
• Decide not to purchase/exchange (doesn't create enough value/utility, found a better option, unable to decide on what to buy (paralysis)
• Decide to purchase, and you don't end up buying (unanticipated circumstances)
ex:out of stock or interrupted
• Purchase |
Post-purchase evaluation |
Satisfaction, dissatisfaction, & cognitive dissonance (second guessing) |
Dissatisfied consumers complain to how many people? |
NINE! |
Reducing Cognitive Dissonance |
- Search out decision supporting information
- Avoid decision contradicting information
- Minimize importance of the purchase
- Minimize control of the purchase
- Rationalize the purchase |
LTV |
Life Time Value of a consumer (ex: Safeway = $50,000/10 years) |
Involvement |
The personal, social, and economic significance of the purchase to the consumer |
Level of Involvement |
Determined by Cost, Consequences, and Impact on your social image.
-Extended Problem Solving (High) ex: choosing a college or major!
- Limited Problem Solving (Medium)
ex: picking an apartment
-Routine Problem Solving (Low) ex: a place to eat for lunch |
Keys to Success Relative to Level of Involvement |
- Low involvement: location, inventory levels, and maintain quality
- High involvement: advertising, personal selling, reinforce decision |
For most consumers, dealing with foot pain is a...? |
- Low involvement purchase
- Superfeet is a high involvement product in a low involvement purchasing decision -> most people default to Dr. Scholl's! |
Perception |
- How we select, organize and interpret information to create a view of the world.
1) Selective Exposure
ex: billboard and how many cars will drive by/how often, Tour de France.
2) Selective Attention
An impression is made. ex: sign outside door.
3) Selective Comprehension Strive to maintain cognitive consistency, new information is processed/altered in relation to what we already know and believe. ex: Republican politician commercial, take out what you agree with, ignore what you don't.
4) Selective Retention
Marketers like to create cues that trigger a consumer's memory of a brand or an attribute
ex: Nike swoosh, Energizer Bunny |
We see 3,000 to 20,000 messages a day -> selective exposure/attention -> selective comprehension -> selective retention! |
:) |
Weber's Law |
- The stimulus change needed to reach the differential threshold to produce a "just noticeable difference"
- 25%=Change needed to be noticed
K=(change in S)/S
K= Constant of proportionality
S= Original stimulus intensity
change in S= Change in stimulus intensity required to reach the j.n.d. (just noticeable difference) threshold. |
Strategies to Reduce Perceived Risk |
- Seals of approval (ex: Sierra Club seal on Clorox's "GreenWorks")
- Endorsements (ex: 4 out of 5 dentist recommend Crest!)
- Trials/samples
- Extensive (easy to follow) instructions
- Warranties, price guaranties, etc. |
Strategies to Reduce Anticipated Guilt |
- Increasingly conscious consumption (ex: guilt of $1,000 purse)
- Build-a-Bear lined up with WWF |
Learning |
The acquisition of attitudes and knowledge that creates changes in thinking and behavior, immediate or expected |
Cognitive theories |
Deeper thought, active problem solving, our filter is engaged, higher involvement purchases |
Operant conditioning |
Drive (a need that moves an individual to action (problem recognition) -> cues -> response |
Classical conditioning |
Learning based on a close association (congruity) between a secondary (or conditioned) stimulus and a primary (or unconditioned) stimulus which elicits some type of response
ex: lemon considered fresh=lemon cleaning agents |
Attitude formation |
Values (personally preferable mode of conduct or state of existence) affect our beliefs (subjective perception of how a brand will perform) which affect our attitudes (learned predisposition to respond to something in a consistently favorable or unfavorable way)
ex: I value healthy living. Green Works is healthier for my family. Green Works makes sense for me. |
It is difficult to change attitudes about your brand. There is a greater opportunity to affect: |
Beliefs about my brand's attributes ex:cruise lines "fun ship"
- Change perceived importance of attributes ex: Southwest offers free bags
- Add new product attributes
ex: calcium in orange juice |
Brand loyalty |
- A favorable attitude toward and consistent purchase of a single brand over time
ex: Haagen Daz isn't there? Don't buy ice cream.
- Different from a repeat purchase (ex: Trepp Café) which is done out of convenience, would go somewhere else but it's closest. |
Lifestyle |
A mode of living that is identified by how people spend their time and resources, what they consider important in their environment, and what they think of themselves and the world around them |
Prizm Lifestyle Clusters |
Consumer segments based on demographics and psychographic data |
Opt-in vs. opt-out |
- Faced with a decision, people typically accept the default choice (the one that is given to them)
Ex: Organ donation (states & countries with opt-in have a much lower rate of sign-ups) |
Perception is Relative |
-We want choices (less likely to buy if there is only one option)
-comparisons |
Marketing research |
the planning, gathering, and analysis of information in order to make more informed marketing decisions...thereby reducing risk |
Marketing research steps: |
1) Define the Problem
2) Develop research plan
3) Collect relavent info/data
4) Develop findings
5) Take marketing action |
exploratory research |
Marketing research to gather preliminary information; focus groups, brainstorming |
Descriptive and Casual Research |
Marketing research that gathers specific information; experiments, mail, telephone |
Statistical Interference |
making conclusions about a population based on data collected from samples taken from the population |
primary data |
Data that you gather yourself ;observational or questionair |
secondary data |
Data previously collected for any purpose other than the one at hand; internal or external |
mechanical method |
collect , primary data: watching people |
personal observation method |
Anecdotal Evidence |
ethnographic research |
A form of observational research that involves sending trained observers to watch and interact with consumers in their "natural habitat" |
sales forcasting |
an attempt to estimate the future sales of an existing product |
market potential |
The total amount of revenue that can potentially be generated in a specific industry or market. |
Strategic Planning 5 C's |
Where are we now?
-Company
-Customers (information on products)
-Competitors
-Collaborators (suppliers)
-Context (climate they operate in) |
Market Product Focus |
Points of Difference
Product Positioning
Market Segmentation
Target Market |
Top US Exports (Global Trade) |
1. Machinery
2. Electronic Equipment
3. Mineral Fuels including Oil
4. Vehicles
5. Aircraft and Spacecraft |
Comparative Advantage |
Do what you do best, outsource the rest. |
Aspects of Global Cultures |
Values-consumer ethnocentrism, country of origin effect
Customs-cultural relativism ex:Japanese gifts (perishable)
Symbols-ex: A broken glass means fragile in US, but in Africa they thought it meant trash.
Language-ex: "Sweat" wouldn't be used on a US drink, but in China it shows the consumer that it refuels your electrolytes. |
Global Market Entry Strategies |
Import/Export (Lowest risk, financial commitment, and marketing control, lowest profit potential)
Licensing (low risk, profit potential, financial commitment, marketing control)
Joint Venture (Moderate risk, financial commitment, marketing control, profit potential)
Direct Investment (Highest risk, financial commitment, marketing control, profit potential) |