Marketing - Midterm Notes PDF

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Chapter 1: Overview of Marketing ●

What is Marketing: ○ The activity or set of institutions, and processes for creating, capturing, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large ○ Good marketing is not a random activity, it requires thoughtful planning with an emphasis on ethical implications ○ Marketing Plan: ■ Specifies the marketing activities for a specific period of time ■ Broken down into various components, such as price, design, etc. ○ Core Aspects of Marketing: 1. Marketing helps create value ● Production Oriented Era: ○ Around the turn of the 20th century, most firms were product oriented and believed that a good product would sell itself ○ Concerned with product innovation, not with satisfying needs of individuals ● Sales Oriented Era: ○ Between 1920 & 1950, production and distribution techniques became more sophisticated; at the same time, the Great Depression and World War II conditioned customers to consume less or manufacture items themselves ○ Became dependant on heavy doses of personal selling and advertising ● Market Oriented Era: ○ After World War II, manufacturers turned from focusing on the war effort toward making consumer products ○ Some products once in limited supply because of the war, became plentiful ○ When consumers again had choices, they were able to make purchasing decisions on the basis of quality, convenience, and price ○ Manufacturers and retailers thus began to focus on what consumers wanted and needed before they designed, made, or attempted to sell their products and services ● Value Based Marketing Era: ○ Value: ■ Reflects the relationship of benefits to costs or what you get for what you give ■ The most valuable thing to consumers is penis, especially BBC ○ Value Co Creation:

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Customers can act as collaborators to create the product or service ■ Or working with their investment advisers ○ Firms become value driven by focusing on four activities: 1. Share information about their customers and competitors across their own industry to help them get the product or service to the marketplace 2. They strive to balance customer’s benefits and costs 3. Concentrate on building relationships with customers 4. Take advantage of new technologies and connect with their customers using social and mobile media ● Relational Orientation: ○ Marketers have begun to think about their customers in terms of relationships rather than transactions ○ Firms focus on the lifetime profitability of the relationship, not how much money is made during each transaction ○ Customer Relationship Management (CRM): ■ A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty among the firms most valued customers ■ Systematically collect information about their customers’ needs and then use that information to target their best customers with the promotions that appear most important to them 2. Marketing is about satisfying customer needs and wants ● Marketplace: ○ Refers to the world of trade ○ Can be segmented into groups of people who are pertinent to an organization 3. Marketing entails an exchange ● Exchange: ○ The trade of things of value between the buyer and the seller ○ The buyers complete the exchange by giving money and information to the seller 4. Marketing requires product, price, place, and promotion decisions ● Marketing Mix: (the four Ps) ○ Controllable set of decisions or activities that the firm uses to respond to the wants of its target markets ● Product: ○ Creating value (goods, services, and ideas) ○ Goods: ■ Items that you can physically touch ○ Services:

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Price: ○ ○ Place: ○ ○

Intangible customer benefits that are produced by people or machines and cannot be separated from the producer

Ideas: ■ Include thoughts, opinions, and philosophies Capturing value Everything the buyer gives up (money, time, energy, etc)

Delivering value Represents all the activities necessary to get the product to the right customer when that customer wants it ○ Supply chain management ● Promotion: ○ Communicating value ○ Communication by a marketer that informs, persuades, and reminds potential buyers about a product or service so as to influence their opinions and elicit a response 5. Marketing can be performed by individuals and organizations ● Business to Consumer Marketing (B2C): ○ The process by which businesses sell to consumers ● Business to Business Marketing (B2B): ○ The process of selling merchandise or services from one business to another is called ● Consumer to Consumer Marketing (C2C): ○ Consumers sell to other consumers ○ Individuals can also undertake activities to market themselves (style, resume, etc.) 6. Marketing affects various stakeholders ● Not just a way to facilitate the sale of products or services to customers, but marketing can also affect several others (supply chain partners, society at large, etc.)

Chapter 2: Developing Marketing Strategies ●

Marketing Strategy: ○ Identifies: 1. A firm’s target market(s) 2. A related marketing mix (four Ps) 3. The bases on which the firms plans to build a sustainable competitive advantage ● An advantage over the competition that is not easily copied and can be maintained over a long period of time

Four macro and overarching strategies that focus on aspects of the marketing mix to deliver value and to develop sustainable competitive advantages 1. Customer Excellence: ● Focuses on retaining loyal customers and excellent customer service 2. Operational Excellence: ● Achieved through efficient operations and excellent supply chain and human resource management 3. Product Excellence: ● Having products with high perceived value and effective branding and positioning 4. Locational Excellence: ● Having a good physical location and internet presence The Marketing Plan: ○ Written document composed of an analysis of the current marketing situation, opportunities, and threats for the firm, marketing objectives and strategy specified in terms of the four Ps, action programs, and financial statements ○ Planning: 1. Define the mission and/or vision of the business ● Mission Statement: ○ Broad description of the firm’s objectives and the scope of activities it plans to undertake 2. Then they evaluate the situation by assessing how various players both inside and outside the organization affects the firm's potential success ● SWOT analysis ○ Implementation: 3. Marketing managers identify and evaluate different opportunities by engaging in a process known as segmentation, targeting, and positioning (STP) ● The firm first divides the marketplace into subgroups or segments, which determines which of those segments it should pursue or target, and finally decides how it should position its products or services to best meet the needs of the chosen targets ● Segmentation: ○ Market Segment: ■ A customer segment consisting of consumers who respond similarly to a firm’s marketing efforts ○ Market Segmentation: ■ The process of dividing the market into groups of customers with different needs, wants, or characteristics ● Targeting: ○ After a firm has identified the various market segments it might pursue, it evaluates each segment’s attractiveness and decides which to pursue using this process ● Positioning: ○

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The process of defining the marketing mix variables so that target consumers have a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products 4. Then they are responsible for implementing the marketing mix using the four Ps and allocating resources ● Product and Value Creation Products: ○ Firms attempt to develop products and services that customers perceive as valuable enough to buy ● Price and Value Capture: ○ Firms charge a price that customers perceive as giving them a good value for the product they receive ● Place and Value Delivery: ○ Firm must be able to make the product or service readily accessible when and where the customer wants it ● Promotion and Value Communication: ○ Encompasses a variety of techniques (advertising, public relations, social media, etc) in combination to provide clarity, consistency, and maximum communicative impact Control: 5. Entails evaluating the performance of the marketing strategy using marketing metrics and taking any necessary corrective actions ● Metric: ○ Measuring system that quantifies a trend, dynamic, or characteristic ○ Used to explain why things happened and also project the future ● Boston Consulting Group Matrix: ○ One of the most popular portfolio analysis methods, developed by the Boston Consulting Group ○ Requires that firms classify all their products or services into a two by two matrix ○ Stars: ■ Occur in high growth markets and are high market share products ■ Often require a heavy resource investment in such things as promotions and new production facilities to fuel their rapid growth ■ Produces high profits; invest to keep as a star and to eventually turn into a cash cow ○ Cash Cows: ■ Occur in low growth markets but are high market share products ■ Because these products have already received heavy investments to develop their high market share, they

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have excess resources that can be spun off to those products that need it ■ Produces good cash flow; use to support question mark or star Question Marks: ■ Appear in high growth markets but have relatively low market shares ■ Thus they are often the most managerially intensive products in that they require significant resources to maintain and potentially increase their market share ■ Low profits but potential star or cash cow; invest for growth or discontinue Dogs: ■ Occur in low growth markets and have relatively low market shares ■ Although they may generate enough resources to sustain themselves, dogs are not destined for stardom and should be phased out unless they are needed to complement or boost the sales of another product or for competitives ■ Produces poor profits; make the most of profits or discontinue Relative Market Share

Market Growth Rate

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High

Low

High

Stars

Question Marks

Low

Cash Cows

Dogs

Growth Strategies: Products and Services

Markets

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Current

New

Current

Market Penetration

Product Development

New

Market Development

Diversification

Market Penetration: ■ Employs the existing marketing mix and focuses the firms efforts on existing customers

May be achieved by attracting new customers to the firm's current target market or encouraging current customers to patronize the firm more often or buy more merchandise each visit ■ Generally requires greater marketing efforts, such as increased advertising and additional sales and promotions, or intensified distribution efforts in areas where the product or service is already sold ● Ex. Marvel has expanded its movie offerings to include new heroes to the big screen. As well as expanding the distribution of its films, shown across several different streaming platforms ■ The best kind of penetration is anal Market Development: ■ Employs the existing marketing offering to reach new market segments, whether domestic or international ● Ex. Marvel releases its Avengers movies in global markets Product Development: ■ Offers a new product or service to a firm’s current target market ● Ex. Marvel has launched several successful series on Netflix Diversification: ■ Introduces a new product or service to a market segment that currently is not served ■ Opportunities may be related or unrelated ■ Related Diversification: ● The current target market or marketing mix shares something in common with the new opportunity ● In other words, the firm may be able to purchase from existing vendors, use the same distribution and or information systems, or advertise in the same newspapers to target markets similar to their current consumers ○ Ex. Collectibles and t-shirts have been a long staple of the comic market, but Marvel also has diversified its offerings, expanding to include lamp shades ■ Unrelated Diversification: ● The new business lacks any common elements with the present business ● Do not capitalize on either core strengths associated with markets or with products ● Very risky ○ Ex. If Marvel ventured into the child day care service industry, it would be so different from its core business and therefore risky ■

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Chapter 6: Consumer Behavior ● ●

Unit Market Share = Brand Units Sold (#) ÷ Total Market Units Sold (#) Revenue Market Share = Brand Sales Revenue ($) ÷ Total Market Sales Revenue ($)

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Relative Market Share = Brand Market Share ÷ Largest Competitor’s Market Share Market Penetration = Users of Brand (#) ÷ Total Population (Geographical Area)

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The Consumer Decision Process: ○ Model that represents the steps that consumers go through before, during, and after making purchases 1. Need Recognition: ■ The process begins when consumers recognize they have an unsatisfied need and they would like to go from their actual, needy state to a different, desired state ■ Consumers need can be classified by the following: ● Functional Needs: ○ Pertain to the performance of the product or service ● Psychological Needs: ○ Pertain to the personal gratification consumers associate with a product or service 2. Search for Information: ■ After a consumer recognizes a need, they search for information about various options to satisfy that need ■ The length and intensity of the search are based on the degree of perceived risk associated with purchasing the product or service ■ Internal Search for Information: ● The buyer examines his or her own memory and knowledge about the product or service gathered through past experiences ■ External Search for Information: ● The buyer seeks information outside his or her personal knowledge base to help make the buying decision ■ Factors Affecting Consumers Search Processes: ● The perceived benefit versus perceived costs of search: ○ Is it worth the time and effort to search for information? ● The Locus of Control: ○ Internal: ■ People who believe they have some control over the outcomes of their actions, in which case they generally engage in more search activities ■ Ex: investing in stocks ○ External: ■ Consumers believe that fate or other external factors control all outcomes, in which it doesn’t really matter how much information they gather ■ Ex; Investing in mutual funds ●

Actual or Perceived Risk: ○ The higher the risk, the more likely the consumers is to engage in extended search

Marketers seek to minimize these risks and make the search easier ○ Performance Risk: ■ Involves the perceived danger inherent in a poorly performing product or service ■ Ex: New interview outfit will shrink when washed ○ Financial Risk: ■ Associated with a monetary outlay and includes the initial cost of the purchase as well as the costs of using the item or service ○ Social Risk: ■ Involves the fear that consumers suffer when they worry others might not regard their purchases positively ○ Physiological Risk: (Safety Risk) ■ Refers to the fear of an actual harm should the product not perform properly ○ Psychological Risks: ■ Associated with the way people feel if the product or service does not convey the right image 3. Evaluation of Alternatives: ■ Once a consumer has recognized a problem and explored the possible options, he or she must sift through choices available and evaluate the alternatives ■ Attribute Sets: ● Universal Sets: ○ Include all possible choices for a product category ■ Because it would be unwieldy for a person to recall all possible alternatives for every purchase decision, marketers tend to focus on only a subset of choices ● Retrieval Sets: ○ Those brands or stores that can be readily brought forth from memory ● Evoked Set: ○ Comprises the alternative brands or stores that the consumer states he or she would consider when making a purchase decision ● Evaluate Criteria: ○ Consist of salient, or important, attributes about a particular product ○ Ex: price, fit, quality, reputation of brand ● Determinant Attributes: ○ Are product or service features that are important to the buyer and on which competing brands or stores are perceived to differ ■ Stitching on jeans: psychological ■ Nutrition facts: rational ○

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Consumer Decision Rules: ● Set of criteria that consumers use consciously or subconsciously to quickly and efficiently select from among several alternatives ● These rules are typically either compensatory or noncompensatory ● Compensatory: ○ Assumes that the consumer, when evaluating alternatives, trades off one characteristic against another, such that the good characteristics compensate for bad characteristics ○ Ex: although cereal is highly priced, taste makes up for it ● Noncompensatory: ○ In which consumers choose a product or service on the basis of one characteristic or one subset of a characteristic regardless of the values of its other attributes ○ Ex: Consumer might pick healthier cereal over better tasting and highly recognized branded cereal;Health is most important to consumer ○ One factor is more important than the rest 4. Purchase and Consumption: ■ After evaluating alternatives, customers are ready to buy ■ Conversion Rate: ● Measure how well Retailers have converted purchase intentions into purchases ● % of consumers who buy a product after viewing it ● Can be measured by how many carts are left unpaid for on an online shopping site 5. Postpurchase: ■ Final step of the consumer decision process in which marketers are particularly interested in because it entails actual rather than potential consumers ■ Customer Satisfaction: ● Setting unrealistically high consumer expectations of the product through advertising, personal selling, or other types of promotion may lead to high initial sales, but will eventually result in dissatisfaction if the product fails to achieve high performance expectations ○ This failure can lead to dissatisfied customers and negative word of mouth ○ Setting customers expectations too low is just as dangerous 1. Build realistic expectations, not too high, not too low 2. Demonstrate correct product use, improper use can cause dissatisfaction 3. Stand behind the product or service by providing money back guarantees and warranties 4. Encourage customer feedback, which cuts down on negative word of mouth and helps marketers adjust their offerings 5. Periodically make contact with customers and thank them for their support

○ Shows customers you care and want their needs to be satisfied Postpurchase Cognitive Dissonance: ● An internal conflict that arises from an inconsistency between two beliefs or between beliefs and behavior ● Generally occurs when a consumer questions the appropriateness of a purchase after his or her decision has been made ○ Is this expensive TV really better than the cheaper one or even needed at all? ● Especially likely for products that are expensive, are infrequently purchases, do not work as intended, or are associated with high levels of risk ■ Customer Loyalty: ● In the postpurchase stage of the decision making process, marketers attempt to solidify loyal relationships with their customers ■ Undesirable Consumer Behavior: ● Negative word of mouth ● Passive consumers: when expectations are met, don’t recommend product or repeat purchase ● If customer believes positive action will be taken from complaint, she is less likely to spread negative feedback to peers Factors Influencing the Consumer Decision Process: ○ Psychological Factors: ■ Motives: ● A need or want that is strong enough to cause the person to seek satisfaction ● Maslows’s Hierarchy of Needs: (Pyramid) ○ Maslow categorized five groups of needs: physiological, safety, love, esteem, and self actua...