BUAD 307 Midterm
General Ethical Concerns:
- Misleading Communication - Potentially Harmful Products - Taking Advantage of Ignorance - Managers face the choice of doing whats beneficial for them in the short run vs the firm/society in the long run
Framing
- The way an issue is posed - How an issue is framed can significantly affect decisions and judgments Ex: "$35 a month" or "about a dollar a day"
Capturing Value
- This is what the firm, marketer, or seller gets back in the exchange - This is usually money, but it could also be something that helps the firm get toward long term profitability (e.g., increased brand name recognition or increased brand value through association with quality)
Triple Bottom Line
- Triple bottom line: economic, social, and environmental performance Corporate social responsibility (CSR): in addition to economic and legal duties, firms have responsibilities to society that are not mandated but are associated with demands and expectations of stakeholders - Recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth
Search Engines
- Use an algorithm to identify optimal links (popularity, key works, "click-through" rates, location) Algorithm Takes Into Account: - Popularity (number of links) - Key words - Location - Click-through rates
Collaborative Filtering
- Using a buyer's purchase history to compare with others who have bought the same items and predict which items will appeal to that buyer based on purchases by others - Product Level: items bought together at higher rates than chance - Individual Level: comparing an individual to "similar others" -Matter of "brute force" computer analysis
Core Competencies
- What differentiates an organization from its competition Ex: Stylish design of electronics Apple
"Showrooming"
Customers go in store to touch, feel a product and even discuss it with a sales associate, then instantly compares the prices online to see if a better deal is available
Six Principles of Contagiousness
STEPPS 1. Social Currency 2. Triggers 3. Emotion 4. Public 5. Practical Value 6. Stories
Compensatory vs. Non-Compensatory Decision Strategies
*Compensatory*: Decisions based on overall value of alternative (good attributes can outweigh the bad) - Involves tradeoffs: in the good and bad aspects of products (good gas mileage vs. slow) *Non-compensatory*: *must* meet at least one important criterion - One factor is non negotiable (car must have automatic transmission)
Approaches to Alternative Identification (Solution Search): Internal vs. External Search
*Internal*: What's 'inside' the consumers mind - Memory - Thinking (Typically used for *low involvement products*; they need to work to become "top of mind" so that customers choose them without thinking) *External* - Word of mouth/asking friends - Media (reading reviews) (Typically used for *high involvement products* when people really want to know all the facts about the product)
Consumer Problems, Recognition, and Solutions
*Problem*: - Discrepancy between the current and ideal situations - Can be very small or very large Ex: Hairloss *Recognition*: - Evaluate alternatives Ex: Find option of what you can do about it (Propecia) *Solutions*: - *Internal*: Memory, thinking - *External*: Word of mouth, media
Consumer Information Processing
*Takeaways* - Not all stimuli are given conscious attention - Message may not be comprehended under low involvement - Retrieval is unlikely without triggers - Relevant behavior & elaboration strengthens memory in storage & and may add new triggers - The more attention, the more linking
Level of Involvement and Decision Characteristics: Duration, Magnitude, Manifestations
*Temporary Involvement*: may be highly involved and then lose interest (buying a car) *Enduring Involvement*: lasting interest in product category (looking at watches)
Cryptocurrencies
- A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank - Anonymous transactions
Metrics
- A measuring system that quantifies a trend, dynamic, or characteristic - Used to explain why things happened and also project the future
Business Models
- A representation of how a firm intends to achieve desired objectives (usually eventual profitability) over time - Ex: "freemium" products: get some of the product for free to spread awareness, have to pay a premium to access the full version - Ex: ride sharing (Uber): a commission is earned as the firm creates value by connecting customers and service providers
Efficiencies of E-Commerce
- A smaller number of locations is needed - Distribution centers can be located in areas with lower real estate and labor costs - In the distribution center, products can be packed and shipped at a constant rate, while stores may need to adjust staffing depending on the time of the day - Collaborative filtering allows for identifying more items of potential interest to the customer, thus potentially increasing the average sale - The amount of time between the manufacturing of the product and reaching the customer can be reduced
Inefficiencies of E-Commerce
- All the work done by the customer in the retail setting must be done by employees or outside contractors (e.g., collecting all items in the purchase, bringing items to the cashier for checkout, and transporting the items home) - Several delivery attempts may need to be reach the customer at home - Many common products are considered "hazardous" goods and cost more to ship (liquid laundry detergent) - The costs of handling each returned item are higher - Rates of returned items are likely to be higher since customers did not have an opportunity to examine the merchandise closely - Additional costs of packaging
Priming
- An enhanced ability to think of a stimulus, such as a word or object, as a result of a recent exposure to the stimulus Ex: Credit Card Study - People were asked to donate - When a credit card was present, they donated more - When there was no credit card, they donated less
Organizational Mission/Mission Statement
- Brief statement of the "big picture" of what the organization exists to do Ex: - Apple: to produce elegant, user friendly consumer technology
Types of Organizations that Use Marketing
- Business-to-Business (B2B) (General Electric) - Business-to-Consumer (B2C) (Walmart) - Consumer-to-Consumer (C2C) (Air bnb)
Problems with Cryptocurrencies
- Can be used for criminal purposes - Can allow terrorist organizations to engage in money making activities - Can facilitate income tax evasion since untraceable payments and receipts can be hidden from authorities
Immediate Environment
- Company's Capabilities - Competitors - Corporate Partners
Sentiment Analysis
- Computers analyze what people post on social media to increase awareness of what consumers want *Advantages:* - Get direct and accurate feedback from customers (positive and negative discussion) - Improve customer service through constant monitoring *Disadvantages:* - Data can get complicated because of sarcasm, irony - Shouldn't be solely relied on
CDSTEP
- Cultural forces - Demographic forces - Social forces - Technological forces - Economic forces - Political forces
Value Co-Creation
- Customers act as collaborators with a manufacturer to create the product or service - Ex: Nike allowing customers to custom design shoes
Communicating Value to Customers
- Customers must know the product exists (advertising, word of mouth, social media) - For some products, customer must see a demonstration of functions (pillow pet)
International Issues With Social Media
1. Censorship (China, Russia) 2. Country/region specific platform (AliBaba = China)
Extent of Customization Needed
- Customization refers to the extent to which a product must be individualized—e.g., an airline ticket must have a name, destination, departure time, and return time - An insurance premium may depend on information entered - Here, the online setting actually allows the customer to do the work, thus reducing cost
Delivering Value to the Customer and in a Convenient and Cost-Effective Manner: Online
- Delivery to customer must be cost-effective - The customer must know where to order - The product must be findable at the site
Marketing As An Exchange
- Each side receives something more valuable than what it gave up - Ex: Customer thinks the product is worth more than money gave up, seller thinks the money is worth more than the product
Sources of profitability for Amazon.com
- Electronic content (e-books, music) - Consumers selling used merchandise to other consumers (books, CDs) - Hosting websites (Netflix) - Services provided to smaller online retailers (disbursing sales tax for other online merchants)
Web Metrics
- Evaluating sites - Variables: Unique visits, repeating visits, average time spent on site
Profitability of Online Firms in Markets Where Costs of Selling Online Are Lower
- Even if online selling is more cost effective in some situations, a firm selling online will, in the long run, be competing with other online merchants—not just against traditional "brick-and-mortar" stores. By the forces of supply and demand, online prices will then be driven down so that the profit from selling online will be no greater than that from traditional retailing. Any reduced costs would then be expected to go to customers. - Competition will be greater for products that have large markets than for those where markets are smaller and more specialized. Amazon.com, for example, has found it necessary to discount best selling books deeply. Higher prices—closer to the list price— can be charged for specialty books, but for a large part of the market, competition will be intense.
Price: Capturing Value
- Everything that the buyer gives up (time, money, energy) in exchange for the product - The key to determining prices is figuring out how much customers are willing to pay so that they are satisfied with the purchase and the seller achieves a reasonable profit
Delivering Value to the Customer and in a Convenient and Cost-Effective Manner: Brick-and-Mortar Stores
- Existing stores must generally drop an existing product to make room for a new one - The customer needs to be able to find the product
Firm Level Factors Affecting Online Sales Potential
- Firm reputation/credibility - Volume: Negotiating prices or automating with machinery - Selling multiple items together lowers shipping costs (ex: if someone order 2 different things from Amazon) - Having retail stores creates a reputation and ease of accepting returns - Possibility of avoiding taxes (if you ship something somewhere where there are no sales taxes) - Firms can be located in areas with cheap labor and real estate - Allows for repeat customers (knowledge of what they've bought in past)
"Bottom of the Pyramid" Market
- For people living in extreme poverty, basic phones offer a vast opportunity for consumptions - Mobile payment services allow consumers to load as little as a dollar on their phones - Now, Africa has become the fastest-growing mobile market in the world
Product: Creating Value
- Fundamental purpose of marketing is to create value by developing a variety of offerings that satisfy customer needs - Can be a luxury item, a cost-conscious product, an experience, etc. - A controllable set of decisions or activities that the firm uses to respond to the wants of its target markets
Some Obstacles to Delivering Customer Value
- Hard to get your product out there (let people know that it exists) - Hard to get products in stores (stores need to make room for your product) - Hard for people to see your product when it is in a store
Exchanging Value
- Here, the customer provides the seller compensation (usually money) in return for getting the product or service - Note that, for a deal to go through, both sides must value what they get more than what they give up
Service Level Strategy
- High and low service levels can be provided both online and in brick-and-mortar stores Ex: - Walmart offers very low cost retail distributions, but with limited service - Best Buy offers high level of customer service - Retail chains that also sell online can offer services for online customers to retail stores (easy returns/bricks and clicks)
Value-to-Bulk Ratio
- High value, low weight/volume items can be more readily handled and shipped - Note that "bulk" here refers to anything that makes it more difficult to handle an object—e.g., weight, size, odd shape, fragility, or hazardous material
"Normal" Profits in Free Markets
- In a free market where there are no major barriers to entry, prices, in the long run, are driven down to such levels that firms can make only profits in accordance with the risk levels, investment required, cost of operations, and other relevant industry factors - Some firms are more efficient than others, but, in the long run, the less efficient ones tend to go out of business - If profits in an industry are exceptionally high, other firms will generally enter until prices are driven down to normal levels
Geographic Dispersal of Customers
- In some cases, customers for a niche product (e.g., civil war memorabilia) may be spread over the country to the extent that a store with these items cannot be run efficiently in any one area - Thus, direct-to-customer sales may be the lesser of two evils, but the cost of distribution will be very high
Marketing Environment
- Involves factors that are beyond the control of the company - Thus, the company must adapt to these factors 1. Immediate Environment 2. Macro-Environmental Factors: aspects of external environment (*CDSTEP*)
Heuristics
- Low effort decision rules for low stakes decisions that should be made quickly Ex: If either Coke or Pepsi is on sale, buy that brand, if not, buy coke
Relationship Marketing
- Maintaining a relationship with the customer over time rather than just focusing on immediate sales Ex: - Anticipating customer needs - Providing solutions - Investing in products and services optimized for the customer
Strategic Objectives
- Part of the strategic planning purpose - Something that a firm sets out to accomplish Ex: profit level, profit growth, brand name recognition, growth in unit/dollar sales, etc. - Certain objectives must be accomplished (brand awareness) before others can be effectively attempted (profit level)
Marketing Mix (Tools to Provide Customer Value): The 4 P's
- Product - Price - Place - Promotion
Promotion: Communicating the Value Proposition
- Products will go unsold if marketers cannot communicate its value to customers - Informs, persuades, and reminds potential buyers about products so as to influence their opinions and elicit a response
Scope of Marketing
- Providing value for customers - Distributing products/services to customers
Search Engines Optimization
- Quality of link (most important factor) - # of links to the site - Highly ranked sites have greater impact - If 2 complementary sites link to each other, both site rankings increase
Absolute Margin
- Refers to a dollar amount rather than a percentage - Even if the percentage margin on a high price item is low (e.g., 15%), the absolute margin can cover considerable expenses (e.g., 0.15x$1,000=$150) - On the other hand, if a $5 item is marked up 100%, that still only leaves you $5 to work with
Bounce Rates
- Refers to the percentage of times a visitor leaves the site almost immediately - Analyzing which pages are the most frequent entry and exit locations provides direction on how to make a website more effective
Value
- Reflects the relationship of benefits to cost or what you get for what you give - Value = benefits received (convenience, reliability, durability) / sacrifices made (money, time, risk)
Place: Delivering the Value Proposition
- Represents all the activities necessary to get the product to the right customer when that customer wants it - Ex: Starbucks rapidly expanding/opening new stores so that they are easily accessible to customers
What Goes Into Strategy
- Resources - Environment - Experience - Opportunity Costs
Click Paths
- Shows how users proceed through the website's information - Firms can use this information to provide users with easier navigation so they can more quickly find what they are looking for
Tippability
- Small factor that can tip a decision Ex: Snapple "fun facts" tip consumer Ex: Staples carrying amazon kindle; difference between consumer going to office depot or staples
Convenience to the Customer and Willingness to Pay For This Convenience
- Some consumers may be willing to pay more for door-to-door delivery - Some customers pay a fee to have groceries delivered - Similarly, customers may be willing to pay more to have an item mailed to them than they would pay in an inconveniently located specialty store
Need for Assortment of Variations
- Some products require a large number of potential variations on the basic product - For example, a clothing item may need to be available both in different colors and sizes - For a single store location, this introduces a need to carry a large total number of items (e.g., 5 colors x 7 sizes = 35 variations) - This makes it more difficult to predict the specific count required at each location, and it may require heavy use of valuable real estate to display available options
Ability of Consumer to Evaluate Quality and Fit Through Online Description
- Standard branded items from a trusted source can be more easily evaluated than items that need to be examined up close - A given model of an iPod will be the same whether bought on Amazon, Costco.com, BestBuy.com, or other reputable online dealers - The customer may already have seen a friend's product and have decided that he or she wants one of those—thus, no additional inspection is needed prior to purchase Clothing, in contrast, must often be inspected or even tried on
The "Scarf of the Tiger"
- Tested different potential versions of Tony but scarf performed best - Customers responded more favorably when Tony the Tiger (frosted flakes) wore a scarf because it added more human characteristics
Associative Network of Knowledge
- The *brain links concepts with other concepts* and a *trigger* of an idea may bring associated concepts to mind and so forth - *Companies try to associate their product with other positive nodes* in order to increase the probability of their product being brought to mind
Customer Benefits and Delivering Value
- The central idea behind marketing is the idea that a firm or other entity will create something of value to one or more customers who, in turn, are willing to pay enough to make the venture worthwhile considering opportunity costs - Both sides (consumer/producer) must benefit for the transaction to take place - Value = Benefits Received/Cost - Value is based on the consumer's subjective evaluation
Customer Sensitivity to Delayed Delivery
- The need for some products—e.g., birthday and holiday gifts—can often be anticipated in advance - For people who plan ahead, buying online can be practical
Broad Implications of Aging Populations in the U.S., Japan, and China
- The portion of old people in these countries is growing (has to do somewhat with babies being expensive to take care of) - Leads to demand for different types of products Ex: Fewer children, less demand for children products *more people will be over the age of 65*
Information Search
- The process whereby a consumer searches for appropriate information to make a reasonable decision - Trying to find alternative ways to solve a problem
Delivering Value
- The product must be available to the potential customer in a reasonably convenient manner Ex: It is not convenient for most car buyers to pick up the car at the manufacturer's site - The product must also be available in a quantity convenient for the customer Ex: A consumer usually wants to buy pencils in quantities of one to ten rather than in the bulk they are sold to wholesalers and large retail chains
The Case of Dell Computers
1. Claim: Cheaper to customize computers with only parts that customers want 2. Reality: Incorrect; cheaper to have several options at lower prices so customers get slightly more than they want at lower prices - Computer parts decline in value very quickly; selling online will prevent the computer from declining too much before getting to the customer - Customization and value decline effects roughly cancel out; Dell sells in both ways so customers can choose which way they prefer
Reality of Online Economics and Competition
1. Cost of handling orders online is higher than in traditional stores 2. In the long run, online selling will decrease prices due to the increase of supply and laws of supply and demand 3. Competition is much greater for products in large markets than smaller, specialized markets 4. Online merchants must compete with traditional merchants who have the cash to stay in business, and the online merchant may run out of cash before they can become profitable
Consumer Decision Stages: Theory and Reality
1. *Problem recognition*: Buyer recognizes that they have an unfulfilled need (internal/external factors) Ex. Car is breaking down 2. *Information search*: Trying to find alternative ways to solve a problem Ex: Get a new car, Uber around 3. *Evaluating the alternatives* Ex: Analyze the alternatives 4. *Purchase* Ex: Buy a new car 5. *Post-purchase Evaluation Behaviors* Ex: Return the car (People can go back and forth between stages)
Relative Costs in Selling Online, In Retail Settings, and Combined Mode
1. Brick and mortar only costs - Retail space - Retail workers - Greater loss of value in inventory over time 2. Online only costs - Assembling order - Packaging order - Cost of shipping - Greater handling of returns costs (Online sales mitigate loss of inventory value and costs from expensive real estate) - Selling online is MORE expensive than through retailer Products with high value-to-bulk ratio and high absolute (dollar) margins tend to be better suited for online sale Ex. Amazon: electronic contents, server service (array of options)
M-Commerce: Mobile Phone
1. High growth in mobile technology with internet access 2. Smart phone 'apps' Ex: - Mobile tickets and documents - Banking information 3. Countries running ahead of US 4. Growth opportunity with tablets
Basic Internet Economics
1. Online sales are actually more costly than traditional retail: the work that customers would normally do is done by staff Exceptions: - If a customer needs a product from the back Problem: - If customers have a questions about a product 2. Eliminating intermediaries results in higher costs (*add* value through specialization of labor and consolidation of tasks) Intermediary: a person who acts as a link between people or things Who Does the Work? Self Service: More customer than merchant Online Sale: Merchant
Social Media
1. Paid Advertising Sponsored post targeted by: - Demographic - Search Behavior - Interests 2. Unpaid Firm/Brand Pages (channels) 3. Hashtags - Brand - Product category - Context
Micro-Payments: Problems, Opportunities, and Applications
1. Problems - Costly: Charge per transaction fee (credit cards charge a fee of about $.30-.35 + 3.5% of the sale; very low margins) - Chicken and egg problem: merchants won't accept this payment until there are enough customer, but customers won't sign up unless they know merchants will accept it -Inconvenient: customer may not be willing to enter much info Micro-Payments are NOT for: a. Tangible Goods (shipping = too $$ for small amounts; low absolute margin) b. Paying Over Time (cost of cutting payments is too high given transaction fees) 2. Opportunities - Mobile technology (with active login) 3. Applications - Opportunity to create "escrow" accounts of a prepaid amount to avoid multiple base fees (pay $20 on Bird and then use that to pay for rides) - Cell phone service providers may be able to do this soon as more people switch to ordering on mobile devices
"Bricks-and-Clicks" Potential
1. Retail chains and online sales are connected - Online access to store info (hours, location) - Online order with store pickup - Checking on "in stock" status on local stores - Items sold online can be returned in store 2. Brand equity - If you have a good reputation, then people will buy from you online 3. Volume purchasing powers - Increased sales volumes from retail and online allow sellers more bargaining power with suppliers 4. Inventory assortment warranted by combine store and online sales - Can have more inventory
Consumer Uncertainty
1. Understanding the product market 2. Considering a subset of brands 3. Choosing one brand within the consideration set 4. Using and consuming the chosen brand Consumers can sometimes be uncertain and not know about the product/information they are looking for
Business Mission
A statement that identifies the purpose of a business and what makes that business different from others
Sustainable Competitive Advantage
Advantage over competition that is not easily copied and can be maintained over a long period of time (a firm can persistently do better than its competitors)
Internet of Things
An increasing # of devices/appliances can be connected to internet through: - Wi-Fi - Cellular connection Ex. Amazon Alexa, Irrigation Times (adjust temperatures) *Benefits* - Remote controls - Authorizing controls *Issues* - Privacy/security (hacking)
Universal, Retrieved, and Evoked (Consideration) Sets
Attribute Sets *Universal* : includes all possible choices (usually focus on subset of purchase choices) *Retrieved* : brand/stores that readily come to mind *Evoked* : alternative brands/stores that are considered by the consumers when making purchase decisions
Market Balance
Different firms should attempt to offer different forms of value appealing to different customer segments otherwise competition goes to price competition
Conscious Marketing
Entails a sense of purpose for the firm that is higher than simply making a profit by selling products and services by encompassing four overriding principles
"Win-Win" Opportunities for Firms and Non-Profit Organizations
Ex: A sponsor pays for all the expenses for a benefit concert tour. A singer donates his or performance. A non-profit organization benefits from the revenue. The sponsor benefits both from the publicity and the reality that the only place you can buy a ticket is on its web site, thus generating traffic and interest. The performer gains publicity as well
Consumer Involvement
Extent of effort consumer is willing to make to make best decision
"Deep" Learning in Artificial Intelligence
Function that imitates the workings of the human brain in processing data and creating patterns for use in decision making
Value Engineering
Increasing value by: - Decreasing costs - Improving durability, performance, reliability, convenience, aesthetics
Considerations in Determining Suitability for Products and Services for Sale Online
On next 8 flashcards
Marketing
Set of institutions/processes for creating, capturing, communicating, delivering and exchanging offerings that have value for customers
Model for Identifying Ethical Concerns
Step 1: Identify Issues Step 2: Gather Information and Identify Stakeholders - Gather info important to ethical issues (legal info) + identify anyone w a stake in resolving issue Step 3: Brainstorm Alternatives Step 4: Choose a Course of Action - Weigh the various alternatives and chose which generates the best solution for stakeholders
SWOT Analysis
Strengths (Internal Environment) Weaknesses (Internal Environment) Opportunities (External Environment) Threats (External Environment) - Help identify strategic priorities by finding ways to use the firm's strengths and opportunities to compensate for weaknesses and threats Ex. Apple Strength: leading market position Weakness: product recalls Opportunities: increasing global demand for smart phones Threats: Android, unstable economy - Develop "must have" apps only for iOS - Feature new iPhone in "hot" movies
Value Capture
The appropriation of the value created by a product, service, or process
Strategy -- Purpose
To achieve desired objectives (profit, market share) based on available resources (patents, brand name) subject to choices made (risk willingness, short vs long term goals)
Marketing Mix
Tool to help understand what the product or service can offer and how to plan for a successful product offering (Executed through 4 P's: Product, Price, Place, Promotion)
Creating Value
Value is created through the special competencies of the firm and/or the use of other resources