Exam 1 Study Guide – Marketing 360
Chapter 1 – Overview of Marketing * Inertia to Passion * * 80/20 Rule * “80% of profits come from 20% of consumers” * Economies of Scale * The more you make of something, the less it costs per unit * i. e. Microsoft Office 2014 * Wholesale – Costco * Understand Marketing Mix (4 P’s)/From Customer Perspective 4 Cs * Marketing Mix: A combination of the product itself, the price of the product, the place where it is made available, and the activities that introduce it to consumers that creates a desired response among a set f predefined consumers * Marketing Mix consists of;
Marketer| Consumer| Product| Customer Solution| Price| Customer Cost| Promotion| Communication| Place| Convenience | * Exchange * Pg. 12 “Occurs when a person gives something and gets something else in return. The buyer receives an object, service, or idea that satisfies a need, and the seller receives something he or she feels is of equivalent value” * Trade currency * Trade services * Trade behaviors * Exchange Value * Criteria for a Market A market consists of all the consumers who share a common need that can be satisfied by a specific product and who have the resources, willingness, and authority to make a purchase * Utility – Time, Place, Possession, Form, Info * Utility: The usefulness or benefit consumers receive from a product * Time Utility: Storing products until they are needed * Place Utility: Making products available where customers want them * Possession Utility: Allowing the consumer to won, use, and enjoy the product * Form Utility: Transforming raw materials into finished products * What is Value?
Components of Value * Value: Benefits a customer receives from buying a good or service * Value from the customer’s perspective: Price and benefits * Value from the seller’s perspective: Is the exchange profitable to them, has it made money * Build Value: Goal is to satisfy customer over and over again so that they can build a long-term relationship rather than just having a “one night stand” * Customers have value: Firms recognize that it can be very costly in terms of both money and human effort to do whatever it takes to keep some customers loyal to the company.
Very often these actions pay off, but there are cases in which keeping a customer is a losing proposition * Lifetime value of a customer: How much profit they expect to make from a particular customer * Provide value through competitive advantage: Distinctive competency- a firm’s capability that is superior to that of its competition * Value from society’s perspective: * Customer Satisfaction Model * Customer Equity * Combined customer lifetime value of all customers Firing Customers * Sustainable Competitive Advantage * Competitive Advantage: Ability of firm to outperform competition, providing customers with benefit competition cant * Identify distinctive competency (firm’s capability superior to competition) * Turn distinctive competency into differential benefit (important to customers) * Sustainable Competitive Advantage * Distinctive Competencies; Differential Benefits * The Value Proposition * Philosophies (eras) Societal Marketing Orientation (New Era); Triple Bottom Line * Emphasis on satisfying broader needs of society (employees, stockholders, etc. ) This is like market orientation by there is a little something more * Being concerned with social issues… doing things better for society and being genuinely concerned * Building long-term relationships * Also referred to as the “triple bottom line” * Environmental, social and financial bottom line * Building long-term relationships, not just satisfying a one time need * i. . McDonalds * Ronald McDonald House * Using paper hamburger cases vs. * If the bottoms (financial, social, environmental) become the norm, it becomes the marketing orientation * Marketing (customer) Orientation * A company that practices the marketing concept. Determining and then satisfying consumer needs and wants at a profit * Selling Orientation * Getting the product out the door! Reducing inventories.
Product supply is greater than demand * Getting excess products out the door, the decisions you make will reflect on what orientation you will use * One time purchases, do not establish relationship with the customer * Competitor Orientation * Focus is on competitor intelligence. Learning and reacting to what the competition is doing * i. e. Lowe’s – Wherever there was a Home Depot, they would place a Lowe’s * Product Orientation * Emphasis is on making the product better, production efficiencies.
Best when demand surpasses supply * How is this different from a marketing orientation? NOT asking what the customers want, making what they want. (It’s going to be cool and you’re going to want it) Chapter 2 – Strategic Planning * Mission, Marketing Myopia * Mission statement describes organization’s overall purpose * How should we develop firm’s capabilities? * What products and benefits can we create for customers? * What business are we in? * What customers should we serve? Avoid marketing Myopia – Having a really narrow mission statement, or being short sided * SWOT ANALYSIS Assessment of Organization’s internal and external environment SWOT Analysis, SWOT interactions * * External Environment Identify opportunities and threats to firm from consumers, competitors, economy, etc. Internal Environment Identify strengths and weaknesses in firms employees, technologies, facilities, finances, etc. Leverage: Strengths + Opportunities * Vulnerability: Strengths + Threats * Constraint: Weaknesses + Opportunities * Problem: Weaknesses + Threats * Portfolio Analysis Portfolio Analysis – a management tools for evaluating a firm’s business mix and assessing the potential of its SBU’s * Individual units within a company – Nike Swimming within Nike * SBU’s (Strategic Business Units)– Individual units within a firm, each having its own mission, objectives, resources, managers and competitors * BCG Matrix; Star, Dog, Question Mark, Cash Cow * Boston Consulting Group (BCG) Growth Matrix – Analyzes the potential of products to generate cash for a firm. Tells managers which products they should grow * i. . Different Products Owned by Larger Firm * Strategies for Each Portfolio * Business Portfolio: Stars * High industry growth * High relative market share * Consider potential to stay star * Requires much investment * Generates relatively high revenues * Cash Cows * Low industry growth * High relative market share * They are not spending a lot of money to communicate with consumers, they are just bringing in business * Economies of scale and high profit margins * Requires less investment * Generates relatively high revenues Helps you support other businesses and launch other business/ventures * Question Marks * High industry growth * Low relative market share * Consider potential to be star * Requires too much investment * Generates relatively low revenues * i. e. Samsung Galaxy – how to move it over to get more money? * Spending more money with less or a market share in comparison to other products * Dogs * Low industry growth * Low relative market share * Generates little profits * Fish or cut bait * Either get rid of it or reinvent it – determine a new use for it.
Find a way that it has never been used before * **Exam Question** Selling cutting boards, more people are cooking at home, market for cutting boards (market growth rate) is high. Company makes bamboo cutting boards, has 10% market share * Relative to competition * Product-Market Growth Matrix * Marketers use the product-market growth matrix to analyze different growth strategies pg. 52 (the left of the table would read MARKET EMPHASIS with “New Markets” on the bottom left and “Existing Markets” on the top left) PRODUCT EMPHASIS Existing Products New Products
Market Penetration StrategySeek to increase sales of existing products to existing markets| Product Development StrategyCreate growth by selling new products in existing markets| Market Development StrategyIntroduce existing products to new markets| Diversification StrategyEmphasize both new products and new markets to achieve growth| * Strategic Alternatives – Market Penetration; Market Development; Product Development; Diversification * Market Penetration: Growth strategies designed to increase sales of existing products to current customers, nonusers, and users of competitive brands in served markets * Market Development: Introduce existing products to new markets (geographic area, or it may mean reaching new customer segments within an existing geographic area) * Product Development Strategies: Create growth by selling new products in existing markets.
May mean extending the firm’s product line by developing new variations of the item, or it may mean altering or improving the product to provide enhanced performance * Diversification Strategies: Emphasize both new products and new markets to achieve growth. Chapter 3 – Marketing Environment * Economic Environment * Marketers must understand economy and business cycle * Level of Economic Environment; LDC, Developing Country, Developed Country * Level of economic environment: the broader economic picture of a country * Deciding whether or not a country will be a good prospect * LDC: Least Developed Country: A country at the lowest stage of economic development * In most cases, its economic base is agriculture * Africa and South Asia * Standard living is low and so are literacy levels * Developing Country When an economy shifts its emphasis from agriculture to industry, standards of living, education, and the use of technology rise * The future market for consumer goods like skin care products and mobile phones * Developed Country * Boasts sophisticated marketing systems, strong private enterprise, and bountiful market potential for many goods and services * Economically advanced and they offer a wide rand of opportunities for international marketers * Competitive Environment Marketers must know what competitors are doing (Competitive Intelligence) * Micro vs. Macro Competition * Macro – Overall industry, big picture Monopoly – one seller controls market, some companies sued for owning a monopoly * Oligopoly – small number of sellers, each with large share of market, i. e. cars * Monopolistic Competition – (we often see this as consumers) Many different sellers each offering a different benefit and each having a small share of market, i. e. soaps * Perfect Competition – Many small firms all offering similar products, no influence (rare) * Micro environmental competition– Competition for $’s with products in the same class, what product alternatives will consumers choose * Competes on 3 levels * For discretionary income – how are people spending disposable income * Product competition – different products meeting the same need, i. e. ravel * Brand competition – same product trying to meet the same need, i. e. treadmills * Competitive Market Structures; Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly * See Competitive Environment * Levels of Competition – Brand (Direct), Product, Total Market Competition (Discretionary Income) * See Competitive Environment * Technological Environment; how does this change industry? * Understanding the impact of technology on all aspects of the business * Distribution * Inventory Control * Communication, etc. * Political/Legal Environment/Federal Legislation (Acts) * Legislation that influences business. Make sure people compete fairly. Sherman Antitrust Act (1890) – intended to eliminate monopolies by prohibiting price fixing or predatory pricing * Vertical price fixing: When a manufacturer tells a retailer to sell at a fixed price * Vertical price fixing overturned by supreme court 2007 * Horizontal price fixing: When companies get together at the same level and agree to sell a product at the same price (Illegal) * Predatory price fixing: setting prices low to drive others out of business (Illegal) * Clayton Act (1914) – Prohibits tying contacts, take one product must take others * Nike – Violation of this act, LeBron shoes – Florida sued Nike for not delivering the shoes on time for “withholding” * Federal Trade Commission Act (1914) * Created the Federal Trade Commission to monitor unfair practices * Sociocultural Environment * Refers to the characteristics of the society, the people who live in that society, and the culture that reflects the values and beliefs of the society * Whether at home or in global markets, marketers need to understand and adapt to their customs, characteristics and practices * Ethnocentrism The belief that one’s own norms and the products made in one’s country are superior * Bias occurs because we tend to use our own cultural frame of reference to judge other people * Ethnography: Researcher lives with people they are studying * Demographics * Statistics that measure observable aspects of a population * Population size * Age * Gender * Ethnic Group * Income * Education * Occupation * Family structure * Social Norms * Specific rules dictating what is right or wrong, acceptable or unacceptable * What ways to dress, how to speak, what to eat and how to behave * Cultural Values * Deeply held beliefs about right and wrong ways to live, that it imparts to it’s members * Talking about sex in public * Product Standardization vs. Localization Advocates of standardization argue that the world has become so small that basic needs and wants are the same everywhere * A focus on the similarities among cultures is certainly appealing * Realize large economies of scale because it could spread the costs of product development and promotional materials over many markets * Consistent exposure also helps create a global brand because it forges a strong, unified image all over the world * Advocates for localization feel that the world is not that small; you need to tailor products and promotional messages to local environments * Marketers feel that each culture is unique, with a distinctive set of behavioral and personality characteristics Chapter 4 – Market Information/Research * Steps in Conducting Market Research (this bullet will answer almost every bullet in this section, so just read over this one it’s in detail) 1.
Define the Research Problem a. Specify the research objectives: i. Symptom or problem? ii. Selling the wine for too much money – symptom… problem is the type of cap! What is the true issue? b. Identify your population of interest: iii. Look at surrounding environment iv. What’s happening in the environment, is it a symptom or a problem? 2. Determining Research Design c. Research Design: Specifies what information will be collected and what type of study will be done d. Must determine if we are collecting primary or secondary data v. Primary: We collect data ourselves 1. Finding exactly what you want vi. Secondary: Someone else collects the data . Quality may be cheaper, but not as precise 3. Often outdated e. Determining Specific Information Needs vii. Primary information: Data specifically collected and organized for a particular marketing information need. Original viii. Secondary information: Data gathered for some purpose other than the current marketing information need (i. e. f. Primary Data – 3 types ix. Exploratory (problem identification) 4. Qualitative technique used to generate insights for future, more rigorous studies a. Interviews (1 on 1) b. Focus Groups (8-10) c. Ethnographies (researcher lives with people they are studying) d.
Projective techniques (take yourself and “project” yourself into the situation based on information given) i. i. e. Folgers instant coffee – surveyed women ii. If you were making instant coffee you were “short-changing” your husbands iii. Benefits and features x. Descriptive (problem solving) 5. Quantitative technique that probes more systematically and with more respondents e. How to quantify a qualitative data – use a scale 6. Think frequencies f. Identifying numbers (how many people walk by the mall on campus) 7. Helps identify attitudes of consumers that buy the products g. Satisfaction survey xi. Casual (problem solving) 8.
Quantitative techniques that attempt to understand the cause-and-effect relationships h. Test hypotheses i. Independent variable: manipulation j. Dependent variable: measureable outcome 9. Experiments: lab 10. Field Studies: real world 11. Causal Research Example k. I work for Nestle and I believe that chocolate country of origin has an impact on satisfaction with the chocolate iv. Dependent = satisfaction v. Independent = country of origin vi. Independent variable with 5 choices (USA, Mexico, Canada, etc) 1. The more conditions you add, the more subjects you need to have vii. Let’s add an additional IV nuts or no nuts 2.
Country of origin (5 choices) x Nuts (2 choices) = 10 conditions 12. You can have as many IV’s as you want, but this increases the number of subjects you need 13. To determine causality you look to see if there is a difference | Exploratory| Problem-Solving| Purpose| Investigation| Actionable information| Research Problem| Not well defined| Specific| Type of data| Qualitative | Quantitative| Sample| Small| Large| 3. Primary Data Collection Methods g. Communication, surveys xii. Mail questionnaires xiii. Telephone interviews xiv. Face-to-face interviews xv. Online questionnaires h. Observation xvi. Personal 14. Stores hire researchers to watch people xvii. Mechanical 15.
Device that tracks behaviors (black strip that measures how many cars pass a street…) * Different Research Study Designs * A plan that specifies what information marketers will collect and what type of study they will do * Cross-sectional design: A type of descriptive technique that involves the systematic collection of quantitative information * Longitudinal Design: A technique that tracks the responses of the same sample of respondents over time * Types of Data: Qualitative, Primary, Secondary * Primary: We collect data ourselves * Finding exactly what you want * Secondary: Someone else collects the data * Quality may be cheaper, but not as precise Often outdated * Qualitative: You cannot put a number on it… i. e. are you happy? Yes or no * Quantitative: You can put a value/scale number on it * Validity and Reliability * Validity: The extent to which research actually measures what it was intended to measure * Reliability: The extent to which research measurement techniques are free of errors * Construct – did we measure what we intended to measure? * Internal – can you identify the true causal relationship (most important) * External – generalizability; does this hold true for my population of interest? * Sampling * The process of selecting respondents for a study Probability sample: Each member of the population has some known chance of being included * Nonprobability sample: The use of personal judgment to select respondents (some cases, they just ask whoever they can find, some members of the population may not be included at all) * Convenience Sample: Nonprobability sample composed of individuals who just happen to be available when and where data is being collected * Independent/Dependent Variables * Independent – manipulation * Dependent – measureable outcome * Advantages/Disadvantages of Primary Data Collection Techniques * Advantages of primary data collecting * Original * Gathering information for a particular need * Disadvantages of primary data collecting * Expensive * Advantages of secondary data collecting * Cheaper, saves time * Disadvantages of secondary data collecting * Outdated * Data Mining Process in which analysts sift through data to identify unique patterns of behavior among different customer groups * Data mining has 4 primary applications for marketers 1. Customer Acquisition: Many firms include demographic and other information about customers in their database 2. Customer Retention and Loyalty: Firm identifies big-spending customers and then targets them for special offers and inducements other customers won’t receive 3. Customer Abandonment: A firm wants customers to take their business elsewhere because servicing them actually costs the firm too much 4. Market Basket Analysis: Develop focused promotion strategies based on the records of which customers have bought certain products * Data Collection in Other Countries and Cultures Market conditions and consumer preferences vary worldwide and there are major differences in the sophistication of market research operations and the amount of data available to global marketers * Some countries may not have phones, literacy levels may affect mail surveys * Understanding local customs and cultural differences can affect the responses * Solve this problem by including local researchers in decisions about the design * Language: To overcome language barriers, researchers use the process of back-translation – the process of translating material to a foreign language and then back to the original language Additional Topics * Stealth Marketing * When you’re being marketed to, and you don’t realize you’re being marketed to * i. e.
Camera phones – Nokia, having employees ask people to take pictures with their camera phones (w/o launching a campaign) * Guerilla Marketing * Doing something in a non-conventional, unique way * i. e. shooting someone from behind a tree… * First time using QR codes * Buzz vs. Hype * What’s the difference? Guerilla marketing is all about creating buzz (goal is to get people to talk about us) * Buzz – people talking about it * As a consumer, we believe buzz over hype * Hype – comes from the company * i. e. television commercial * Hull’s drive theory * As humans, we are wired to know what we need which drives us * Homeostasis -> equilibrium * i. e. shivering when you’re cold Study in 70’s (rise of mini theories) claim there are many contributors to consumers * Darwin’s biological determinism * What motivates us * Cowbird; lays eggs in another species nest * When that egg hatches, it automatically knows the cowbird song * BORN with what motivates us * Cannibalization * When a new product takes sales away from original (existing) product * i. e. Apple 4S to 5, or Coca cola to diet coke * Can be good and can be bad, depending on the situation * When you introduce a new product and it isn’t good… It can motivate people to move away from the brand as a whole * Negative- having to sell what’s in inventory * Traditional vs. non-traditional media types * Traditional vs.
Nontraditional * Subliminal messaging * Self-help cassette tapes * Lose weight label – people got the stop smoking message * Stop smoking – people got the lose weight message * Placebo * All of the Knuff’s Knuggets * Syphilis study – KNUGGET * Testing the spread of syphilis across the spread of African Americans * Infected some people with syphilis, some were given treatment, some were told they would be given treatment – but weren’t * Unethical, U. S. Government backed this study and eventually was sued for millions by families * Milgrim Shock Study * …Why we have the IRB * Institutional Review Boards * QR Codes Measures the effectiveness of the ad * Allows a large amount of information to be displayed in a small space * Part of technological environment * Internal validity is necessary, but not sufficient for establishing external validity *KNUGGET * We have to have internal validity, otherwise its garbage * Just because we have internal validity, does not mean we can generalize or say that we have external validity * Heider’s Balance Theory is one explanation * Suggests that we need to keep triangle in balance * or NIKE GOLF TIGER WOODS YOU All positives around the outsides, or two negatives and one positive
