Principles of Marketing Notes PDF

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FINAL PRINCIPLES OF MARKETING NOTES Week 1 – What is Marketing? Week 2 – Relationship Marketing Week 3 – Consumer Behavior Week 4 – Segmentation Week 5 - Product Week 6 – Promotion Week 7 – Price............................................................................................................

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FINAL PRINCIPLES OF MARKETING NOTES Week 1 – What is Marketing? ...........................................................................................2 Week 2 – Relationship Marketing .....................................................................................7 Week 3 – Consumer Behavior ......................................................................................... 10 Week 4 – Segmentation ................................................................................................... 15 Week 5 - Product ............................................................................................................ 16 Week 6 – Promotion .......................................................................................................24 Week 7 – Price................................................................................................................ 28 Week 8 – Place (Distributing Value) ............................................................................... 31 Week 9 – Services and Experiences .................................................................................34 Week 10 – Branding .......................................................................................................39 Week 11 – Sustainability and Ethics in Marketing ...........................................................44

Week 1 – What is Marketing? What is Marketing? • Formal definitions of marketing: The activity of creating, communicating, delivering, and exchanging offerings that present value to individuals/groups. • A market is a site where individuals exchange goods/service for credit, cash, etc. o They can be physical/digital, they connect interested groups/individuals to exchange value. o Can involve any combination of Consumer/Business: C2C, B2C, C2B, B2B o Platforms, enabled by digital technology, makes resources and participants more accessible to one another. • Marketing is about forging connections between these markets and making connections with customers. o Knowledge – letting the customer know what we can offer o Trust – confirming that the value offering is of high value • Marketing is expensive and often fails due to lack of knowledge. • Marketing can create needs by introducing consumers to problems that they face. o Needs – difference between a consumer’s actual and desired state o Wants – desire to satisfy needs in specific ways that are socially or culturally influenced (look to esteem/self-actualization) What is value? • Marx’s definition – the labor that it took to make something o Use Value – the tangible features of something that can satisfy human wants/needs. • It’s important to create value while being aware of the unethical labor and environmental destruction. • Value is subjective and determined by the customer, not the manufacturer (who determines the price) • Quality vs Value vs Price How Marketing has Changed? • Industry 1.0: Production orientation – marketing whilst focusing on a product’s functional benefits – followed the industrial revolution when demand outweighed supply. • Industry 2.0: Sales Orientation – valued persuasion as a way to push certain products. As market’s becomes saturated it’s important to address these changes by altering price, place, etc. strategies to encourage consumers to purchase products. • Industry 3.0: Marketing Concept Era – involved identifying customer needs, wants, and interests and satisfying them better than the competition. Societal Marketing Concept – introduced the idea that marketing should preserve and enhance consumer and society’s well-being, included a range of related marketing approaches being defined: o CSR – the idea that a business has obligations beyond financial means – to adeptly manage their social and environmental implications. o Social marketing – drive social change in behaviors to benefit society o Cause marketing – promoting the corporate sponsorship of causes/charities • Industry 4.0: Holistic Marketing was later proposed, including:

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o Relationship marketing – focus on building long-term relationships with stakeholders to encourage customer retention and lifetime value. o Integrated marketing – marketing strategies that are coordinated, aligned, and create synergy o Internal marketing – marketing to meet the needs of employees o Performance marketing – measuring (financial and non-financial metrics) of marketing activities Today… Marketing Convergence – when two or more things come together to form one. Marketing Orientation – making the right decisions when implementing the marketing mix o Marketers have the responsibility to effect society ethically -> customers, employees, shareholders, society, the environment

Marketing Trends (MarTech) Today… • Internet of Everything – comprised of: o Internet of things – physical objects connecting with one another and to the internet to communicate and analyze data. o Internet of people – social networks ability to track data and information • Digital Reality – technology that provides immersive experiences and simulations of reality including 3D, VR, AR, 360 videos, etc. • Cognitive technologies – performing tasks that traditionally require human intelligence. Includes machine learning, AI, robotic automation. • Marketing networks – sharing economy • Sustainable Marketing

What is a Marketing Strategy? • “An integrated pattern of decisions that specifies the choice of markets to serve, market segments to target, marketing activities, allocation of resources to create, communicate, deliver a product that creates value.” o Which markets will be served? What segments? o What are the needs? o How does the marketing mix relate to value proposition? • Corporate strategy is utilized to provide scope as to how value is created/earnt. Helps frames an organization objective, purpose, goals. o Mission statement – clear/concise expression of firm’s reason for being. o Vision – goal of an organization, generally unachievable o CSR undermines both mission/vision What are the steps involved in the Strategic Planning Process? • Step 1: Conduct a Situation Analysis – current problems/opportunities within a business’s internal + external environment. o SWOT –

o STEEPLE analysis – used to review the major macro-environmental factors effecting a firm’s situational context

o Porter’s Five Forces Model – analysis of the micro-environment in which a firm operates within. Helps assess competition and potential partnerships.

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Step 2: Identify a Strategic Opportunity o Ansoff Matrix –

o Jobs-To-Be-Done Growth Strategy Matrix

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Step 3: Determining Marketing Objectives – should follow the SMART characteristics. Include: o Increase brand awareness, improve brand reputation, website traffic, increase sales, improve customer loyalty. Step 4: Describe the Target Market – develop a persona/customer journey map Step 5: Formulate a Marketing Strategy – according to the 4 (7) P’s. Step 6: Establish the Implementation Plan – action plans, determined by time constraints Step 7: Determine Evaluation and Control Parameters – tactics for measuring performance and adjusting.

Week 2 – Relationship Marketing Relationship Marketing • Relationship Marketing Logic o Deliver/Communicate Value -> Monitor Satisfaction -> Cultivate Relationships -> Build Loyalty -> Maximize the economics of customer retention • Why are building long-term relationships important? o Customers hold significant value once you have built trust and provided sufficient knowledge – helps save money as marketing is expensive o Many modern businesses prioritize quarterly earnings, as public-company shareholders put functional priorities ahead of customer needs. Companies exist to maximize short-term growth. • Relationships with everyone and anyone aren’t always helpful. In consumer culture there are two large groups of individuals, which you target will depend on the product you are selling. o Maximizers exhaustively seek the best, compare their decisions, expend more time and energy and are often unhappier with their decisions. o Satisficers accept good enough, don’t obsess over other options, can move on after deciding, and are generally happier with outcomes. • Marketing doesn’t just occur on the BTC level, there are several intermediaries that are important to consider – stakeholders, other firms, etc. • How can value be delivered, not concrete in its definition. Today craft consumption is increasing in popularity, consumers are interested in how, where, and who have made their product. o Product benefit vs monetary cost o Services benefit vs time cost o Personal benefit vs energy cost o Image benefit vs psychological cost • Customer Satisfaction = Benefits – Costs, a measure of how well the expectations of consumers are met by a product. o In some markets, you get out what you put in, e.g., physiotherapy and education o Can also be studied through Hygiene and Satisfier factors: Hygiene factors – attributes customers expect to be a part of the product Satisfiers – attributes that go beyond customer’s basic expectations create satisfaction. Again, satisfiers are often subjective. • Relationships are at the core of marketing; however, they change over time due to several reasons such as age or technology. • Choice was often used as a marketing strategy to target different segments within a market. However, choice can also detour customers as it introduces too much complexity. • Relationships require work, the amount however is determined by the product. For some products such as a bank or phone service, too much work can detour customers. o Disregard for customers can result in broken relationships. What is Customer Loyalty? • What is loyalty?

o The deeply held commitment to re-buy a preferred product in the future, despite potential for switching behavior. o There are a number of drivers of customer loyalty including: branding, hygiene factors. o How to build loyalty: Improving the customer experience, anticipate customer needs, making business personal, exceeding customer satisfaction, developing loyalty programs, limiting switching costs o How is customer loyalty measured? – customer surveys Net Promoter Scores: % promoters - % detractors = NPS o Assessing Loyalty Behavioral Loyalty – refers to customers who are loyal out of habit, high switching costs, laziness. Consumers may refuse to switch despite poor customer experience. Attitudinal Loyalty – loyalty due to customers attitude towards a brand. When trust is created between a brand and its consumers, they are willing to continue supporting it.

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Loyal’s – ideal customer Latent Loyalty – Positive attitudes but does not buy the firm’s products, common in automobile industry, expensive products. Occasional Loyalty – Buy’s products but has negative feelings, will switch at first convenient opportunity, provide greater value to convert to Loyal’s. Customer Relationship Management (CRM) – carefully managing detailed information about individuals to maximize customer loyalty

Economics of Long-Term Relationships • 5x more expensive to get a acquire customer than to keep an existing one. o Due to – customer acquisition, repeat customers, WoM marketing, less price sensitive.

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Some customers are expensive to retain and may provide diminishing returns Businesses with high satisfaction ratings, they prioritize relationships, will outperform competition, growing revenue at 2.5 times as fast. Customer loyalty – loyal customers are less price elastic and more likely to display repeat patronage behavior.

Week 3 – Consumer Behavior Why is it important to understand how consumers behave? • What is buyer behavior? o How prospective customers evaluate, select, buy, use, and dispose of various products. o Encompasses a vast decision-making process that is influenced by a number of sociocultural, individual, and environmental factors. o “the dynamic interaction of affect and cognition, behavior, and the environment by which human being conduct the exchange aspects of their lives.” Affect – emotional aspects of attitude Cognition – beliefs and memory structures Behavior – choices/behavioral patterns Environment – situation and shopping context • Why study buyer behavior? o Understand how consumers choose products o Identify and study markets and their respective segments o Identify/create needs and opportunities for value creation o Understand how consumers perceive brands/stores o Discover how consumer attitudes can be changed Consumer Types • There are several different types of consumers that different types of products may be better targeted towards: o Shopper Avoider – first thing they see they purchase o Impulsive Hedonic – loves shopping and will make impulsive purchases o Balanced Comparison Shopper – searches for the best choice o Recreational Brand Seeker – values well-known brands The Consumer Decision-Making Process • Need recognition -> Information search -> Evaluation of alternatives -> Purchase decision -> post-purchase behavior o Need Recognition: realizing there is a difference between an individual’s current state and some ideal state, through stimulus (internal or external). Marketing can stimulate problem recognition. This is the foundation for the jobs to be done framework, which helps provides marketers with problems they can address. o Information search: consumers will gather information about the possible options and alternatives. Gather information from several sources including: Personal sources (memory, friends), public (government, newspapers), firm (marketing campaigns), experimental Consumer involvement: perceived relevance of a product to the consumer based on inherent needs, values, and interests. Varies depending on risk: functional, financial, social, physical, obsolescence Ultimately the stage will produce a set of options, evoked/consideration set.

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o Evaluation of Alternatives – the consumer will compare the evoked set according to their unique evaluative criteria, most importantly is its ability to solve the consumer’s needs: Multi-attribute models provide a structure that captures the various chosen criteria. Individuals rely on heuristics – mental shortcuts such as loyalty, price, rating. Purchase intention – CTR, the intention was there but the customer may not follow through with their purchase. o Purchase Decision: Compensatory model of choice – the overall value of a brand is a weighted average of the brand’s position – expectancy-value model Non-compensatory model of choice – elimination of poor performing products Again, heuristics come into play – availability heuristics (easy and quick option), representativeness heuristic (an option that has been shown as the most popular choice of others, based on the opinion of others). Framing is often used by brands to present products based on the availability heuristics. o Post-Purchase: feeds back into our future information source, e.g. WoM. Customer satisfaction vs customer dissonance – the difference in buyers expectations and the ultimate experience. If satisfaction is achieved, may involve WoM. Disposal – planned obsolescence There are a variety of parties that may be involved in this process: customer vs consumer

What Influences Consumer Behavior? • Social Factors o Reference Groups

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Membership groups – family, sports, clubs – individuals we associate with, values we hold Non-Membership groups – aspirational groups, dissociative group o Opinion Leaders Celebrities (trends trickle-down), micro-influencers, experts/professionals o Social Roles Household – the role of children, partners Personal Factors o Demographics – age, life cycle, occupation, wealth o Geographic – location, weather o Psychographic – values, opinions, lifestyle, interests, personality Personality – 5 major factors of personality: openness to experiences, conscientiousness, extraversion, agreeableness, neuroticism

Cultural Factors o Culture is a collection of shared expectations and rules that will guide behavior – culture guides morality, taboos, implicit laws o Some firms target the mass market, while others target sub-cultures Sub-cultures are a way of breaking out of traditional identities and class, producing new boundaries o Our identities are determined by what we purchase and consume Situational Factors o Physical environment, time, weather, mood, natural disasters

The Marketing Funnel • This model helps capture the different touchpoints throughout the buying experience. These touchpoints each represent stages where marketers can encourage the purchase. • Digital Disruption – consumers who are ‘online’ are always plugged into hyper-active communities and an overwhelming amount of stimulus. Ultimately, there are a number of factors that can influence buyer behaviour. e.g. ultra targeted ads

The Digital Customer Journey • Customer Journey Mapping helps capture the details of the consumer decisionmaking process in the context of the digital ecosystem. o Application 1 – a brand-agnostic (no bias towards certain brands) approach to understand how consumers receive information, reactions. o Application 2 – capturing touchpoints between consumers and a firm – the individual interactions that occur. • Research at McKinsey has concluded that marketing is most effective when, o Building Brand Awareness to include in initial set o Maximize customer satisfaction with the experience to encourage customer retention/brand loyalty/ brand advocacy

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Critical developments of the customer journey map include: o Moments of truth – moment between the consumer and the brand where the relationship is at stake. First Moment of Truth – considering a product, determined by product characteristics, alternatives available. Second Moment of Truth – occurs post-purchase when the consumer evaluates if the product delivered as expected. Differences are known as friction and create a feeling of discomfort. Third Moment of Truth – the customer feedback e.g. Twitter/Yelp. Recovery occurs if a brand positively responds to customer feedback. Zero Moment of Truth – represents the shift from marketing-directed information to consumer-initiated, as consumers can now evaluate through online means. Inherent relationship with the third moment of truth. Micro-Moments o Customer Experience Management –

The B2B Buyer Decision-Making Model: • It is equally important to consider the model that represents B2B decision-making: • 1. Problem Recognition • 2. Specifications necessary to meet organizational needs, possibly resulting in an RFP or request for proposal • 3. Search for possible suppliers and related information • 4. Solicitation of bids or proposals • 5. Evaluation of alternative proposals • 6. Supplier selection and order • 7. Post-purchase evaluation

Week 4 – Segmentation What is STP? (Segmentation, Targeting, Positioning) • Often in marketing, budgets are gone to waste as advertising is targeted towards the wrong demographics, segmentation helps solve this. Marketing can be tailored towards certain groups of individuals. • Advantages: o Address specific customer needs o Optimize resources by adequately targeting consumers o Assuming a differentiated position in the market What is Segmentation? • Segmentation helps to facilitate the identification of new markets and the profiling of existing segments. Involves dividing the market into smaller sub-markets that share similar needs/wants that a business can tailor their marketing towards. • Define your market according to the following characteristics: o Geographic – climate, language, culture, location. Geospatial data allows firms to capture prospect data in real time. o Demographic – age, life-stage (children, marital status), gender, income, occupation o Psychographic – value, ideals, how they think, interests o Behavioral – what role do individuals play in the purchasing process o Loyalty status – how loyal individuals are/how often they purchase goods • Successful market segments are: o...