MKT 111 Exam 1

Chapter 4: Managing Marketing Information to Gain Consumer Insights

Marketing Information and Consumer Insights - In order to engage the most profitable customers and build meaningful exchange relationships, marketers must have the ability to tap into a wide swath of marketing data regarding consumer needs, wants, and demands. Unfortunately, this data is not easy to obtain, and consumers themselves are often unaware of what it is they would like. - Marketing Information and Today's Big Data - In today's economy/world, there is information being generated at an exponential rate. Not only is there historical information, but digital and social medias allow for consumers themselves to continuously generate data regarding their preferences, information, wants, etc. This explosion in data generation/availability has led experts to coin the term "big data," which refers to the huge and complex data sets generated by today's sophisticated information generation, collection, storage, and analysis technologies. - While the advent of big data is exciting, it poses both opportunities and challenges to marketers. On the one hand, tapping into this data can allow them to gain insight into rich consumer information that can motivate actionable insights; however, sifting through this data and being able to extract these useful insights can be particularly difficult, and it can also be costly/expensive. If Coca Cola wanted to examine consumer engagement/reaction regarding its brand, they would likely have to sort and filter 6 million threads a day. This is extremely time consuming, and this process requires great mental and financial investment. - B/c of the swarm of data available via big data, marketers don't need more information, they need better information, and they need to learn to make better use of that information. - Managing Marketing Information - When looking at marketing data, the ultimate goal is to be able to extrapolate useful information. Indeed, customer insights is a term coined to useful information extracted from data. Consumer insights is defined at fresh marketing information-based understandings of consumers and the marketplace that form the basis of (motivate further) customer interaction, such as engaging customers and building profitable exchange relationships. - In order to effectively generate and utilize marketing information, marketers need to create Marketing Information Systems (MIS), which consists of people and procedures dedicated to assessing informational needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights. A MIS is very much circular - it begins with information users (marketing managers, internal and external parties, etc.) who set the precedent for what informational needs there are and what it will be used for. This query is then addressed through information development through marketing intelligence, internal databases, and marketing research. The produced information is the presented to decision makers, and it is used to inform and motivate further interaction/engagement with customers. Assessing Information Needs and Developing Data - Assessing Marketing Information Needs: Typically, marketing data is requested by company marketing managers, as well as other senior employees. In addition to this, however, suppliers, distributors, marketing agencies, etc. might also benefit from this information, and it is often the case they would require some information as well. But, sticking with managerial staff, marketing managers will typically desire to obtain a wide swath of information, and it is often the case they may request too much simply b/c the technology enables them to do so. Conversely, they may not request enough. Both are detrimental. Researchers within the company should facilitate the decision-making with respect to what is needed/required and what is wanted. Everyone in the company should also be aware of the costs associated with collecting data. Not only can they increase in total, but the MC is also important. Organizations would be wise to assess the MB and the MC. - Developing Marketing Information: Marketers can obtain information from three sources: - 1) Internal Databases: Internal databases are repositories/databases that exist within the company which contain collections of consumer and market information obtained from data sources within the company network. Internal databases reflect historical figures and are used to determine forward-looking projections. The information can come from a variety of sources. For example, accounting/finance will have credit history, cash flows, etc. Sales will have order history, re-order data, etc. The point is that a single element (consumer) will produce data that is used by a number of different departments within the organization for their own purposes. Marketers can use this data to learn about consumers. Internal databases are examples of secondary data; it was intended for something else, but it was used by marketers. - 2) Competitive Marketing Intelligence: The systematic monitoring, collection, and analysis of publicly available data regarding consumers, competitors, and developments in the marketing environment. Competitive Marketing Intelligence seeks to preemptively address opportunities and threats by observing customers, online research, and real-time monitoring of digital/social media. More sophisticated, capitalized companies will have social media command centers, where a data dashboard presents them with a diverse set of information concerning consumer responses to products, reactions, inter-consumer dialogue regarding the product, and social media activity related/relating to the brand. Most of this data is generated in real time, which means it allows companies to respond to situations immediately. Companies will perform this for their own information, but they will also do this for competing organizations. Finding out information regarding customer interactions/reactions to competitors can allow companies to formulate their own marketing strategy. Additionally, some organizations will purchase goods/services from their competing customers in order assess their customer service, speed-to-market, and product quality. The competitive marketing intelligence game goes both ways, however, and it is important that companies check themselves in order to determine if private/competitive information is at risk of being used against them. - The one caveat to competitive marketing intelligence is that it raises ethicality/morality concerns, as it becomes unclear when a company has "too much" information or when it has gathered unfair/private information. Indeed, with the advent of big data and the swarms of publicly available information, companies should not have to resort to accessing illicit data or obtaining data through immoral ways. Marketing Research - Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. Marketing research can provide organizations with actionable insight. It can be conducted internally, outsourced, or simply purchased. Depending on the industry, size, and financial status of the firm, different techniques will be employed to acquire the marketing research information. - Traditional Marketing Research in Transition: Traditional marketing research consists of focus groups and surveys, which provide marketers with high-quality data at the cost of higher expenses and greater time. Digital marketing research (social media monitoring, online surveys, etc.) provides marketers with information at a low cost in a timely manner, but it should not be viewed as a substitute to traditional marketing research. Rather, it should complement marketing, where organizations can obtain, quick, impersonal online data that can be used in conjunction with more expensive, more intimate data regarding consumers, consumer preferences, and marketing insights. - The Marketing Research Process: The research process has 4 steps: - 1) Defining the Problem and Research Objectives: Prior to formally collecting the research, marketing managers and researchers must work closely together to determine what the information will be used for (why it is needed; this is usually set by the marketing manager) and how it will be obtained (the research methods; this usually set by the researcher). More often than not, each does not have cross-functional skills, so they must work together to arrive at a point where both of their needs are satisfied. That is, marketing management feels the appropriate information is being collected and the researcher(s) themself(ves) feel it is being collected in the proper way. Once the problem has been defined, it can then motivate and facilitate an action plan used to determine how the research will be conducted and what the objectives are. The research can either be a) exploratory research (marketing research to gather preliminary information that will help define problems and suggest hypotheses), b) descriptive research (similar to the concept of descriptive statistics, descriptive research seeks to describe marketing problems, situations, or markets, such as the market potential for a product or the demographics and attitudes of consumers), and c) causal research (this type of research seeks to identify cause-and-effect relationships; for example, would a 10% decrease in the price of tuition increase enrollment). Indeed, these three types of research will produce different outcomes and are all used for different purposes. Organizations usually begin with exploratory research and then delve into descriptive and casual research. Defining the problem and determining the research objectives are extremely crucial for all downstream work/engagement. - 2) Developing the Research Plan: The research plan spells out things like what information is to be collected, how is it going to be collected (sampling plan, contact methods, research approaches/methods), and how it will be presented to management. The research objectives must be translated into specific informational needs that can be addressed through the research methods utilized during the process. Once a research plan is identified (what is to be collected, how it is to be collected, and how it will be presented to management), it should be written out in a research proposal, which becomes especially important when the research project large/complex and/or when any outsourcing is occurring. Typically, the proposal covers the problem defined in the 1st step, the research objectives (i.e., what type of research is being conducted), the information to be obtained, how it will be obtained, and how it will help management's decision-making. The proposal should also include estimations of research costs. - When determining what information is to be collected, managers can collect primary or secondary data. Secondary data consists of information that already exists and has been created for another purpose, such as consumer credit reports. Primary data is new data that was generated for s specific purpose. This can be consumer surveys, focus groups, etc. - Gathering Secondary Data: Typically, marketers will begin by gathering/collecting secondary data, as it is inexpensive, easy to access, and simple to digest. Normally, companies will begin their secondary data search process through looking into their internal databases, but they can also access a number of external sources (competitors' information, census information, etc. - there are actually a number of different sources they can tap into). While secondary data is cheap and easy to excavate, and it can sometimes provide companies with data they cannot collect on their own, it is seldom sufficient to motivate and inform action plans and marketing efforts. Thus, it should not be used in isolation. Marketers can also use commercial online databases (some require a fee; other, more discrete sources are free), internet search engines, etc. Good data in general should be relevant, accurate, current, and impartial. - Primary Data Collection: While secondary data can provide organizations with a good starting point in their research process, it is seldom enough to terminate the research process, as it likely does not address all informational needs. After a company has conducted some secondary data collection, it can then collect primary data, which is new data generated and collected for a specific purpose. When collecting primary data, researchers need to adhere to a plan, which consists of delineating research approaches, contact methods, the sampling plan, and research instruments. - 1) Research Approaches: A firm can approach their primary data research process in 1 of 3 ways. They can - 1) Observational research, which involves gathering data through observing relevant people, actions, and situations. Observational research is helpful b/c it allows marketers to glean consumer insights they may not be able to when in a face-to-face situation. By observing from a distance, marketers are allowing consumers to elicit unbiased behavioral reactions and opinions. The impetus behind gathering observational research is it provides marketers with insights that may not necessarily be capable of being gained through structured, formal research that may prompt the subject to be influenced. Un-influenced, un-biased observation (whether physical and in-person or virtual and via/through digital/social media) can provide raw infuriation about consumer reactions, interactions, and preferences. Some companies may be more noticeable when conducting observational research. Ethnographic research consists of sending trained psychologists / other social scientists to observe consumers in their natural environment (usually this is their home). The rationale behind this is that consumers will act more freely and naturally; additionally, their responses to products, services, etc. may be less filtered. Observational research is primarily responsible for delivering behavioral insights. Although observational research can provide marketers with fresh insights that can only be observed, not all values, perceptions, and reactions can be observed. Deep-set values and beliefs cannot necessarily be observed. Observational research is best for exploratory research. - 2) Survey research, which is the act of gathering primary data by asking people questions about their knowledge, attitudes, preferences, and buying behavior. Survey research is effective for gathering descriptive research, such as what % of people enjoyed the new product, or which demographics frequently purchased product X. Indeed, survey research is considered the backbone of traditional market research, and the explosion of digital media/platforms has allowed survey research to become even more flexible and convenient. The only downside to this is the fact that a) people may not be willing to answer certain questions and b) some answers may be overly generous in oder to please the marketer, which undermines the survey's ability to collect honest feedback. - 3) Experimental Research: Experimental research is gathering primary data by selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking for differences in group responses. Obviously, the independent variable is the variable of interest, and all other variables which are held constant are the control variables. The goal is to induce exogenous effects to the subjects and observe how the variable of interest responds to a shock. The new revolution occurring within the experimental research space is the advent of online research, which allows marketers to conduct comparable research, only digitally. - Contact Methods: - 1) Mail, Telephone, and Personal Interviewing: Mail interviewing is good in the sense that it provides marketers with an outlet they can use to gather data in an unbiased, un-intrusive way; however, it can be a time-consuming process and is prone to low response rates. Telephone interviewing is more instantaneous and can provide marketers with higher response rates, a more flexible way to communicate, and the ability to help respondents with confusing/difficult questions. Although there are many benefits to marketing research, there are also many drawbacks, such as increased skepticism with regards to accepting unsolicited phone calls from marketers, the idea of interviewer bias, and greater cost / respondent. Personal interviewing can either be individually conducted or it can be done with a group of people. When it is done individually, this is usually done at grocery stores, shopping malls, or on the street. This type of interviewing is much more flexible, and it can allow marketers to walk through difficult questions and/or uncertainties. However, similar to phone interviews, actually to a grater extent, interviewer bias comes in, and it is more costly than telephone interviewing, which is already pretty expensive. Group interviewing, which is typically focus group interviewing, consists of convening a small group of people to discuss a specific product, brand, service, etc. with the help of a moderator who "focuses" the conversation. These types of interviews are great for not only receiving insight into product offerings, but they are a great way for marketing managers to silently/secretly observe behavioral responses to questions and/or any group interplay that might occur. In this case, focus groups as a contact method allows for marketers to gain raw qualitative data regarding consumer behavior and preferences. While these are all benefits, the negatives associated with focus groups are their small sample sizes, which sometimes make it difficult for generalizations; additionally, some respondents may provide the interviewers with not entirely true/accurate responses, which can make results less credible. Indeed, almost every form of marketing research is prone to this bias, however. - 3) Online Marketing Research: The last contact method that can be used is online marketing research. Due to the explosion of big data and digital platforms, online marketing research is becoming increasingly common. With online marketing research, primary data is collected through internet and mobile surveys, online focus groups, consumer tracking, experiments, and online panels and brand communities. Online marketing research can be things such as inviting online responses in a forum, or tracking online conversations, or even conducting online interviews. Such techniques are excellent for conducting quantitative research. In fact, most mail and telephone interviews are being replaced by online engagements. Internet surveys are inexpensive, easy to conduct, able to reach a wide array of respondents due to the flexibility of the internet, and tend to produce higher response. While online surveys are good for qualitative research, qualitative research can also be conducted online. For example, online focus groups are becoming increasingly popular, and they allow marketers to engage with consumers in a more flexible, low-cost manner. Consumers may also feel more comfortable from the comfort of their own home, which may lend them to be more liberal in their responses. While some facial expressions can be caught, whole-body behavioral reactions are more difficult to read, and group interplay is less visible. Again, the flexibility of going online makes it possible for just about anyone to watch/stream the interview. - 4) Online Behavioral and Social Tracking and Targeting: As was mentioned with the social media command centers, many marketers are exploiting the vast expanse of marketing information being generated by consumers on social media pages and/or other outlets. Many organizations now track social media forums, blog posts, discussion threads, etc., and some even respond in real-time to consumer feedback/comments. Through this information and data, marketers conduct behavioral targeting, or the process of using online consumer tracking data and analytics to target advertisements and marketing offers to specific consumers. While the breadth of behavioral targeting can allow marketers to target specific consumers with tailored marketing efforts/programs, the concern of data privacy/ethicality arises, and although consumers may be receiving more more tailored content, is this coming at a cost? - 3) Sampling Plan - Once marketers have determine the type of research they will be conducting and how they will engage respondents, they must determine who exactly they will be reaching. The question of who is to be studied concerns the sampling unit. The sampling unit is not always extremely easy to determine. After that have determined who is to be studied, they must then determine how many people are to be included - the sampling size. Next, they need to determine how they are going to be chosen - the sampling procedure. This can either be a probabilistic or non-probabilistic sample. Certainly, probabilistic samples will tend me more accurate and effective, but the more cost-effective way is to opt for a convenience sample, which is the act of collecting a sample easiest to collect. - 4) Research Instruments - 1) Questionaries: Whether administered by phone, mail, telephone, or in person, questionaries are by far the most common, and they are extremely flexible, as there are different ways to pose questions: open-ended or close-ended (MC or scale). Open-ended questions are particularly useful for exploratory research, when the researcher is trying to assess how people think, not how many people think a certain way. MC and scalar questions (close-ended) are good for descriptive research, and they are difficult to use for causal research. - 2) Mechanical Instruments: Mechanical instruments, although less common than questionaries, can be used. Some examples include bio marketing (tracking physiological responses to stimulus/stimuli). Biomarketing is often used in conjunction with biometric measures, which determines heart-rate data and other physiological data points. This allows marketers to really understand how consumers are feeling in response to a brand or product. While neuromarketing is helpful, it is often difficult to collect and interpret, so it is used in conjunction with more normative research instruments, such as surveys. - 3) Implementing the Research Plan: Once the organization has determined the research objectives, determined the sampling plan, contact methods, types of research to be conducted, etc., it can then actually implement the plan. It is important for the organization to carefully monitor the results and control as necessary. - 4) Interpreting and Reporting the Findings: More complex than might be perceived, actually interpreting and reporting the findings can be difficult, as researches should not overwhelm managers with large amounts of fancy statistics and summarizations. There is also the issue of researches giving more weight to certain findings, and marketing managers giving weight to certain findings which they feel is beneficial to them. Thus, the role of summarizing the findings should not be left to researchers or managers; it should be an inclusive effort. Analyzing and Using Marketing Information - Once the data has been processed, it may then be further analyzed through analytics tools and/or other softwares in order for marketing managers to make information-based deacons that can inform and motivate further interactions with customers that are intended to create value and profitable exchange relationships. - CRM: The act of managing detailed information about individual customers and carefully managing customer touch points to maximize customer loyalty. Common CRM tools are salesforce, oracle, SAP, etc. CRM can allow companies to provide higher levels of customer service to valuable customers and bolster an understanding of their needs/wants. - Big Data, Marketing Analytics, and AI: Marketing analytics, often fueled by AI, is the act of churning out the critical few pieces of data in an overwhelmingly large set of data generated through the advent of big data. Marketers do not need more data, they need more high quality data and controls/processes they can use to analyze quality in a more effective manner. Broadly speaking, AI is technology by which highly intelligent machines think and learn in complex ways that proves to be useful for humans. Indeed, markets must ensure that they do not fall victim to relying extensively on marketing analytics and AI to conduct CRM. They should first start with the R (relationship(s)) and then employ high-tech tools to augment ongoing efforts. - Distributing and Using Marketing Information: In addition to users having the ability to extrapolate actionable insights relating to consumers, they must also be armed with the information in a timely manner. It is important that marketing information and research is given to users at appropriate times and/or when it is needed (may be ad-hoc). Some organizations use intranets to facilitate the dissemination of data. Internal CRM systems may also allow client-facing employees to readily access consumer data when he/she visits a store, contacts the organization, or some other similar communication. Extranets are also being used more, thereby re-enforcing the idea that, not only does a firm's value chain have to be oriented to perform PRM, but its entire value delivery network must be marketing oriented and understand the customer.

Chapter 1: Creating Customer Value and Engagement

Marketing at a High Level: Engaging customers and managing profitable relationships. Marketers' goals are two-fold: attract new customers by promising (and delivering on) superior value and to keep and grow current customers by delivering superior value and satisfaction. Marketing Defined: The process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return. x The Marketing Process: - The 1st 4 steps are oriented around creating customer value, and the last step is capturing the benefits of creating this value by capturing value. - 1) Understand the Marketplace and Customer Needs/Wants - Needs: States of felt deprivation. The need can by biological/physical (hunger, warmth, rest, etc.), or it can be psychological (attention, affection, social status, etc.). - Wants: Wants are the physical and intangible byproducts/forms that address your needs, and they are a function of culture and individual personality. - E.g., if hunger (biological type) is one's need, then desiring a Big Mac is the want for a typical American consumer, but an Italian consumer may want pasta. Indeed, culture, individual personality, and cultural/social norms will dictate a person's wants, and they will most likely vary the most across international borders. - Demands: Demands are your wants that are backed by purchasing power. Your average Joe may be hungry (biological need), want a Big Mac (the form his needs take as a result of his exposure to society, culture, and his individual personality), and demand a Big Mac (his demand backed by resources (financial) and wants (backed by needs and external factors sharing the form those needs take)). - Companies go to great lengths to uncover information regarding consumer wants, needs, and demands, as this can allow marketers to target consumers with specific stimuli that addresses their wants and satisfies their underlying needs. - In order to address underlying needs/wants, marketers and firms need to deploy market offerings. - Market Offerings - Products, Services, and Experiences - Market offerings are some mix of products, services, information, and/or experiences, offered to a market to satisfy a need or a want. - As is evident in the preceding list, a market offering need not be a tangible good (product), it can also be a service (banking, airline, hospitality, etc.), some information (if someone is suicidal, his need is to regain happiness, and his want is to feel better; a marketer may provide suicide hotlines/support information that can address his/her underlying needs). The point is that a market offering simply attempts to address and satisfy a customer's needs and/or wants. - Marketing Myopia: Paying too much attention to the products/services being offered and their ability to address wants, thereby overlooking the underlying need the product is actually aiming to combat. People want a 1/4 hole, not a 1/4 inch drill. Marketers need to realize that consumers will purchase the product they feel best addresses underlying needs/wants. The product itself is not valuable, it is simply a medium to achieve a stated or implied need, whose value is derived from its ability to do so. Needs are relatively permanent, whereas wants are contingent upon personality, cultural factors, and other economic/social considerations. - Customer Value and Satisfaction: Customers form expectations about the perceived value and satisfaction (utility) of a given product, and choose the product they perceive as being able to maximize their utility. Those products that provide a level of satisfaction equal to greater to their expectations will benefit, and those who fall short will not. Marketers, and firms, must be careful when attempting to install a specific level of expected value and satisfaction. If it's too low, consumers will not even choose to buy. If it's to high, consumers' actual satisfaction will be less than what they expected their satisfaction to be. This will deter future purchases and may even lead to inter-consumer discouragement. - Exchanges and Relationships: Exchange relationships are those relationships wherein a desired response in elected as a result of some initial stimulus. In marketing, markets try to expose consumers to marketing stimuli in order to generate a response (a purchase). - Formally defined, an exchange is the act of obtaining a desired object from someone by offering something in return. - Markets: The set of all actual or potential buyers of a particular product/service (e.g., the capacity market; the labor market; the market for automobiles, etc.). Typically, the set of actual and/or potential buyers have needs/wants that can be satisfied through cultivating an exchange relationship. - Marketers must identify and develop profitable exchange relationships. This will be a significant undertaking, and it will require research, engagement, and digital and social media marketing. Once marketers do find a set of actual or potential buyers, they must identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them. - Most marketing efforts are taken on by markets themselves and the firm at large (sellers), but the explosion of digital and social media has allowed customers to partake in marketing efforts, ranging from product location and selection, blog posts, and forums, as well as brand advocacy and/or other types of communication involving inter-consumer interactions oriented around a specific product, service, information, and/or experience. Customer Relationship Management (CRM) is becoming just as important as Customer-Managed Relationship. Customers can indeed exert influence on marketers and organizations. - The marketing system consists of company's and competitors relying on suppliers to provide the products/services to be used in producing a good/service the final consumer will appreciate (actual value/satisfaction >= excepted value/satisfaction), all while dealing with major environmental forces (economic, cultural, political, technological, etc.). Developing supplier relationships is immensely important, as the ability to deliver on promised value/satisfaction is contingent upon the firm's ability to develop profitable exchange relationships w/ vendors. - 2) Designing a Customer Value-Driven Marketing Strategy and Plan - Customer Value-Drive Marketing Strategy - Marketing Management: The art and science of choosing target markets and building profitable (exchange) relationships with the decision participants within the market (the set of actual and/or potential customers within a given market). Once a firm has developed an understanding of the marketplace and the needs/wants of the associated customers, it must then design a customer-value driven strategy and employ marketing management. - The marketing manager's job/role is to engage, keep, and grow target customers by creating, delivering, and communicating superior customer value. - To design a winning marketing strategy, a firm must go through 2 steps: - 1) Selecting Customers to Serve (Target Market): This is the process of identifying a target market through market segmentation. Rather than identifying all potential customers, marketing managers want to identify the customers they feel they can most profitably, and most effectively, serve. They know they cannot serve all customers well. - Ultimately, once marketing managers decide on which customers to serve (which segment of the market to address), marketing managers must decide on the level, timing, and nature of their (target consumers) demand in order to tailor their marketing programs. Thus, marketing management is customer management and demand management. - 2) Choosing a Value Proposition (how will we serve our customers best): This is the question addressing the firm's positioning and differentiation strategy. The value proposition is the set of benefits or values a firm promises to deliver to its consumers in order to satisfy their needs. The value proposition (USP) must justify why a consumer would want to purchase a firm's product instead of a competitor's. There are generally 5 value propositions that guide a firm's USP: - 1) Production Concept: The idea/philosophy that customers prefer products that are readily available and affordable. Thus, management should focus on mass production at the lowest possible cost (i.e. focus on improving production and distribution efficiency). This is one of the oldest (marketing) management orientations, and it is applicable in markets with highly sensitive customers. This concept, however, can lead to firm's placing too much emphasis on the product itself and the firm's production and distribution governance, causing the firm to potentially lose sight of the underlying needs causing the production.. This can lead to marketing myopia. - 2) Product Concept: The idea/philosophy that consumers will favor products that offer the most quality, performance, and features; therefore, the organization should devote its energy to making continuous product improvements. Indeed, as in the production concept, the product concept leads the firm to focus on attributes inherently inward, also increasing the firm's risk of succumbing to marketing myopia. Both the production and product concept place too much emphasis on the product itself, disregarding the importance of managing profitable exchange relationships and the underlying need motivating the consumer's purchase - both of which can lead to marketing myopia. - 3) The Selling Concept: The idea/philosophy that consumer's will not buy enough of the firm's products unless they are exposed to a breadth of marketing stimuli and promotions. The selling concept is typically practiced with unsought goods that consumers may not necessarily think of buying. Indeed, by attempting to convince consumers of their need to buy the good, the selling effort does not address a specific need; rather, it creates a product and then finds ways to effectively market that product. It is starting with the product, not with the consumers, and it does not focus on creating and building L-T profitable exchange relationships. The selling concept also assumes that a) enough marketing stimuli and promotion will coax a consumer into a purchase and b) if the consumer is dissatisfied, he/she will forget about their dissatisfaction and repurchase. B/c both are poor assumptions, the selling concept is often a poor belief/philosophy organizations can use to guide value proposition strategies. - 4) The Marketing Concept: The belief/philosophy that achieving organizational goals depends on understanding and addressing customer needs/wants and delivering value/satisfaction to customers better than competitors. In contrast to the first 3, the 4th (marketing concept) stipulates that marketers and organizations should devise a strategy oriented around the consumer, not the product. This is indeed a direct contradiction to the idea of marketing myopia, as it seeks to deliver value through addressing underlying needs and focusing on the customer, not focusing on the product itself and/or its benefits. This is the idea of finding the right products for your customer, not the right customer for your product. The selling concept begins with the product, but the marketing concept begins with the customer. The issue with this is being able to identify what customers want, which, often times, customers themselves are unaware of. Organizations are now practicing customer-driven marketing (understanding customer needs and wants better than customers do and creating products/services that meet explicit and implicit needs, both now and in the future). - 5) The Societal Marketing Concept: The belief/philosophy that a company's marketing decision(s)/strategy should consider consumers' wants/needs, the company's requirements, consumers' L-T interests, and society's L-T interest. Slightly different than the marketing concept, the societal marketing concept seeks to satisfy and address the company, consumers, and society, not just consumers. This is a more comprehensive approach to communicating and delivering value/satisfaction, and it promoted CSR and ESG. This is also synonymous with the idea that a consumer's S-R wants need not be in their best interest. Indeed, company's should consider whether or not delivering on a S-R need is best for the consumer in the L-R. Also touches upon the idea of shared value, or the idea that societal, not just economic, needs define markets. The shared value concept argues that economic value should be created in a way that also creates value for society at large. - 3) Preparing an Integrated Marketing Plan and Program - Once a company has identified implicit/explicit customer needs/wants and devised a customer value-driven marketing strategy and plan it can use to identify the most profitable market segment and how it will best serve those customers, firms/organizations can begin to develop formal plans for creating an integrated marketing program it can use to actually deliver promised value/satisfaction. In order to actually achieve differentiation, it must actually deliver on the value/satisfaction it has attempted to instill within consumers during the positioning process. - A firm's Marketing plan and program is oriented along its marketing mix tools: the 4 Ps (Product (it must create a need-satisfying product), Price (it must decide how much to sell the need-satisfying product for), Place (it must determine how it will make the product available to consumers), and Promotion (it must engage target customers, communicate the offering and its value, and persuade customers of its merit)). From the consumer's standpoint, a firm's marketing mix can be thought of as the 4 As (Acceptability, Affordability, Accessibility, and Awareness). - 4) Engaging Customers and Managing Relationships - Customer Relationship Management (CRM): The overall process of building and maintaining profitable customer relationships (largely exchange relationships, however) by delivering superior customer value and satisfaction. - Relationship Building Blocks: Customer Value and Satisfaction - Customer-Perceived Value: A customer's evaluation of a particular offering's benefits and costs relative to other market offerings. Indeed, the calculation of costs and benefits is purely based on expectations, and is not necessarily accurate. A customer's evaluation is a function of the marketing stimuli he/she is exposed to and the selling firm's ability to communicate sentiments of outstanding customer satisfaction. Customer Value can either be upon the basis of price (high-perceived value due to affordability) or quality (high-perceived value due to luxurious product specifications; willing to deploy more cash; even though in nominal terms the cost might be high, the benefit (or the utility) significantly outweighs the cost and/or the real cost to the consumer is far lower than its nominal value). - Customer Satisfaction: The extend to which a product's perceived performance (satisfaction) matches a buyer's expectations. A customer is dissatisfied when the actual value is less than the perceived value; satisfied when the actual value is equivalent to the perceived value; and delighted when the actual value exceeds the perceived value. Delighted customers can arise from delivering only what you can promise and delivering value over in excess of that, and it can lead to brand advocacy and repeat purchases (CLV / Customer Equity). Again, the perceived and actual value can be referenced across quality spectrums (how luxurious is a specific product) or cost spectrums (how affordable is a product). The basic value-proposition will play a key role in how a firm intends to deliver value and satisfaction. Of course, customer value must be generated profitably; a firm could sell its products for nothing and maximize consumer value, but it would go bankrupt. A firm must balance its own profit-maximizing objectives with the value-maximizing objectives of consumers. - Customer Relationship Levels and Tools: Depending on the level of the customer and the margins being achieved by the customer. Indeed, the target market will vary according to the product, and the nature of buyers in that target market will dictate the exact tools used to practice CRM. For P&G's Tide brand, there are many, low-margin customers. As such, P&G will not individually contact each customer; rather, they will create engagement and relationships through product experiences, brand-building advertising, social media, etc. However, if Rolls Royce has a small, concentrated target market with high margins, they may want to develop close relationships with customers and decrease the extent to which the practice passive CRM. Companies that have mild margins will employ a version/intensity of CRM somewhere in between these 2 extremes. - Beyond delivering and communicating superior value and satisfaction, marketers (and firms) can employ specific marketing tools to strengthen profitable exchange relationships, such as frequency marketing programs (essentially monetary rewards for customer who frequently purchase from the firm; an airline, for example, offers frequent-flier program(s)). At its core, this is simply a loyalty reward program. - The explosion in digital and social media has provided firms with many different avenues they can use to engage with consumers and facilitate consumer-brand engagement and develop profitable exchange relationships. - Customer Engagement and Today's Digital, Mobil, and Social Media - Customer-Engagement Marketing: Making the brand a meaningful part of consumer's conversations and lives by fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community. Customer-managed relationships (those relationships wherein customers connect with companies and with each other share brand experiences; this is exactly customer-engagement marketing, as it permits direct consumer involvement in shaping brand conversations, experiences, and communal attributes in a way that makes the brand and its associated image a meaningful part of the consumer's conversations and life). Indeed, customer-managed relationships are what can lead to brand advocacy, which is a significant benefit for any firm. - B/c consumers are becoming more empowered and gaining access to a wide swath of digital and social media tools, markets must practice marketing by attraction, not intrusion, as today's modern consumer is equipped with the resources to choose as he/she pleases. The key to this is not only delivering and communicating superior customer value, but it is also this idea that customer-brand engagement is becoming increasingly important and must be implemented. It should also be noted that engagement marketing must be genuine, authentic, and material in order to become a meaningful part of consumers' lives and conversations. - Consumer-Generated Marketing: A form of engagement-marketing whereby brand exchanges are created by consumers themselves (both invited and uninvited), thereby allowing consumers to play an increasingly central role in shaping their own brand experiences and those of others. This can be C2C (blogs, forums, newsletter, etc,), or B2C (invited consumers to try and create a new brand they would like to see (e.g. Oreo #MyOreoCreation)). As we progress into the future, brand engagement and consumer-engagement marketing will become increasingly important, and firms must learn to understand how digital and social medias can inform and motivate customers. - Partner Relationship Management: In addition to being able to practice CRM, firms must also be able to practice PRM, which is equally as important to a firm in order for it to deliver on its intended value. PRM is the practice of developing close relationships with internal and external actors to jointly deliver superior customer value. This can be internal (making sure every organizational unit understands marketing and is customer obsessed) or external (linking w/suppliers and coordinating supply chain activities; conception in today's economy is between supply chain, not between firms). If companies can develop close, strategic relationships with supplier, distributors, and other supply chain members, as well as cultivate an organization whose entire structure is customer centric, they will achieve their organizational strategy and presumably attain some level of differentiation. - 5) Capturing Value from Customers: Once a firm has created value, it then has the opportunity to capture value in the form of sales, market share, and customer profits. When a firm creates customer delight and effectively practices engagement marketing (consumer-engagement marketing and customer-generated marketing), that person will practice brand advocacy and engage in repeat orders (CLV / Equity). - 1) Creating Customer Loyalty and Retention - The incentive to creating loyal customers is certainly economic: when creating customer delight, that customer will advocate for the brand, repeat purchases, and become more loyal. The loyalty associated with delighted customers is FAR greater than the loyalty observed in unsatisfied customers. It is also much costlier to acquire new customers than it is to retain old ones. Thus, firms must ensure that they are delivering customer delight and proving superior value. - Customer Lifetime Vale: A DCF approach to computing the monetary value a customer brings. - 2) Growing Share of Customer - Good CRM is useful for not only increasing CLV, but also for increasing share of customer (or, specifically, increasing the percentage of the total customers in the market (actual or potential) that have chosen to buy from their firm, instead of others' firms). To increase share of customer, firms can diversify their product offerings or develop existing offerings. - 3) Building Customer Equity - Customer equity is the aggregated sum of all consumers' CLV's. In order to maximize customer equity, firms need to increase CLV as much as possible, which is done by a) securing as many customers as possible, and b) securing them as early as possible. - Building the Right Relationships with the Right Customers: When attempting to determine which customers' CLVs a firm would like to capture, it can divide customers into 4 broad categories referenced along projected loyalty and potential profitability: - 1) Strangers are those with a S-T projected loyalty and a low potential profitability - firms should not invest any money into engaging, managing, and developing their CLV. They should only focus on passively accepting any revenue or share of market increase that results. - 2) Butterflies have a low project loyalty but a high potential profitability. Firms should realize they will be around for a short time, but they will be highly enjoyable. Companies should focus on extracting as much benefit from them as they can, but they should not invest in them once they leave. - 3) True Friends are those who have a high projected loyalty and a high potential profitability. The firm should try to continually invest in their delight and satisfaction in order to keep, engage, retain, and grow them. - 4) Barnacles are those with a high projected loyalty but a low potential profitability. Like barnacles on a ship, they create "drag," and they should be dispelled if different profit-bolstering techniques prove to be inadequate. - The underlying theme here is that consumers should develop different relationships with different people, and in order to maximize the captured value, it should employ the preceding analysis. The Changing Market Landscape - Today's market is ever-changing, and there are 4 main drivers facilitating and accelerating this change. - 1) The Digital Age: Online, Mobile, and Social Media Marketing - We live in an Information Age, where primary drivers of production are now associated with IS and IT, not necessarily industrial factors of production. This era has also lead to the concept of the IoT, a global environment where everyone and everything is connected via the internet. Globally, more than 4Bn people (52%) are online, and 80% of all Americans own a smartphone. - Digital and Social Media Marketing: Using digital (online) marketing tools such as NLs, blog posts, discussions forums, various forms of social media, mobile apps/ads, etc. to engage customers anytime, anywhere via their digital devices. - Social Media Marketing: B/c of the expansive network of people connected to social media, many firms maintain an active presence on various social media platforms in order to create consumer-generated marketing and general engagement marketing - they want to promote discourse that can allow customers to play a direct and continuous role in shaping brand conversations, experiences, its community. Social media plays an important role b/c it can congregate consumer and foster consumer-generated marketing, and this can be done through posts, contests, re-tweets, etc. - Mobile Marketing: 4 out of 5 smartphone holders use their phone to shop. Thus, marketers can finely target consumers through their integrated marketing program to attract specific consumers in their target market and create new, profitable exchange relationships. The use of smartphones also allows marketers to incorporate a personalized element to a given marketing effort/stimulus. Mobile advertising now accounts for 75% of all digital ad spending. - Online, Social, and Mobile marketing can be extremely powerful tools when leveraged correctly, but firms are still learning how each can fit into its integrated marketing program, as well as how each can augment companies' efforts to manage and engage profitable exchange relationships. - Big Data and AI: Big Data has presented markets with mountains of consumer data that can be used to improve research and a general understanding of the marketplace and customer needs/wants, as well as the level of satisfaction observed and any customer feedback associated with customer-generated marketing. Marketing Analytics must be done in order to extract information from these swarms of data, and this is done through AI. - 2) The Growth of Non-Profit Marketing - Common non-profit organizations include schools, hospitals, museums, zoos, etc. Due to funding constraints and the non-profit stature, many of these organizations rely on sound marketing to attract customers. Donors for St. Jude, for example, contribute about $1.3Bn each year, and the demographics across donors varied greatly. - Government agencies also rely on marketing and consumer-brand engagement. For example, defense branches rely on recruits for success. As such, it is important they attract new members though accurate, customer-driven marketing efforts. - 3) Rapid Globalization - 75% of McDonalds' revenue comes from outside the U.S. - B/c more companies are globalizing (vendors, customers, operations, stores, etc.), firms must attempt to uncover what affect this will have on marketing efforts and who/what the target market(s) is/are, as differences in global culture will influence engagement, relationships, access to technology, etc. - 4) Sustainable Marketing - The Call for More Environmental and Social Responsibility. - Similar to the societal marketing concept, the role of sustainable marketing is one marked by an increase emphasis consumers are placing on CSR and sustainable behavior. In particular, firms must demonstrate their deference to the environment and deliver value in a sustainable way. - Those who view this laborious will suffer, and those who view this as an opportunity to do well by doing good will succeed.

Chapter 6: Customer Value-Driven Marketing Strategy

Most companies today realize they are incapable of serving the entire consumer market in equally profitable ways. For many companies, they must determine who they can most profitably serve, and this is often done through market segmentation. Marketing Strategy - A firm's marketing strategy consists of 4 distinct steps: 1) Segmentation, 2) Targeting (or Target Marketing), 3) Differentiation, and 4) Positioning - 1) Market Segmentation - In general, segmentation is practiced b/c marketers need to be able to effectively target the most attractive group of buyers in a widely diverse marketplace containing consumers with varying needs, wants, demands, and resources. In order to concentrate their effort son only the most profitable customers, marketers and organizations practice market segmentation. - Segmenting Consumer Markets: 1) Geographic Segmentation. Applicable to all forms of segmentation, marketers must, and should, utilize a number of different variables to try and understand what types of customers comprise the underlying market. The first way marketers can accomplish this is by practicing geographic segmentation - the exact parameter can be nations, states, regions, etc. Many companies are now practicing localized geographic segmentation, where they seek to better understand specific geographic areas which may comprise a niche market. For example, Target has smaller, more budget conscious on-the-go stores at college campuses. The surge in digital and social media has given birth to the movement of hyperlocal social marketing. This is a practice wherein marketers avail digital and social media channels to garner information that can be used to catalyze location-based marketing for specific communities. 2) Marketers can also practice demographic segmentation. Demographic segmentation is often used the most, and this is the case b/c consumers with similar demographic characteristics will often have similar wants, needs, demands, etc. Demography, as it stands, is not a single-meaning word. Demographics can take multiple shapes and forms. Marketers utilize the following variables when practicing demographic segmentation. First, they can practice age and life-cycle stage demography. This can be done by looking at specific family life-cycle stages, or it can be done by looking at the consumer level and focusing on millennia's. While age can be useful, it can often lead to marketers making stereotypical conclusions which may offend certain age groups. For example, if P&G has gum-sensitive toothpaste and they have decided to target seniors, they mustn't display commercials of older individuals engaging in stereotypical activities, as this may not be entirely accurate and it may offend some. At its core, age and life-cycle stage is helpful, but it is not always the best measure of things like preferences, needs, buying power, etc. Marketers can also look at Gender-based segmentation. Indeed, there are two spaces in particular that have utilized gender as a way to segment the market by demography. Within the self-/personal-care product market, there has been an explosion in goods/services for men, very much a reflection of changing gender norms and stereotypes, as well as needs, wants, and demands. Additionally, many athletic clothing companies have begun to expand their female clothing line, exploiting the rise in "athleisure" and the fact that women make up half of all sporting goods shoppers. Marketers can also use income to segment the market based on demographic factors. For product and services such as automobiles, credit cards, financial services, etc., the idea of income segmentation has been a long-standing tradition. Indeed, income segmentation can be used to target affluent or working class citizens. Ferrari is targeting a specific consumer who certainly fits into the upper class. Conversely, a store like 5-Below may look to set up shop in a middle-class area with working-class people who are cost-conscious. It goes both ways. 3) Marketers can also use Psychographic Segmentation. Here, marketer's are looking at the consumer's AIO, their lifestyle and personality characteristics. Indeed, as was discussed in Ch. during the self-concept, consumers a) purchase from brands they identify with / who have compatible personalities and b) purchase goods/services that reflect their personality. Thus, especially within the same demographic group such as age / life-cycle stage, consumers will have very different interests and personalities, and their purchasing behavior will be reflective of that. This also goes back to the discussion of personality archetypes. Lululemon may target the urban-active woman. 4) Marketers can also use behavioral segmentation to divide the entire consumer market into distinct segments. The basis for behavior segmentation is formulated on observing consumer knowledge, attitudes, uses, and/or responses to a product. Within behavioral segmentation, marketers can look at a) occasions. Occasion segmentation is the practice of paying particular attention to the timing of when consumers purchase, get the idea to purchase, and/or use a specific product/service. An example of this would be Starbucks and their PSL. Consumers seem to demonstrate an increased level of demand for PSLs in the fall. Starbucks can look at this behavioral data and segment the market based on which customers are fleeing to Starbucks during the fall months. Marketers can also look at, within behavioral targeting, b) benefit segmentation, which deals with dividing the market into groups of consumers accordion to the specific benefits each seeks in a particular product. For example, when people are looking to purchase a device like the Fitbit, these consumers are really seeking health benefits that can help them track their caloric intake, physical activity, and overall health. When marketers perform behavioral segmentation and look specifically at benefit segmentation, they can target consumers in extremely effective ways. Marketers can also look at c) user status. With user status segmentation, markets are specifically looking for current users, ex-users, and potential users. The goal is to retain existing users, target potential users, and reinvigorate relationships with ex-users. Families going through family life-cycle stage changes may be a diaper company's potential user, and they may even try to induce the consumer into becoming an adopter of the product, assuming it is the consumer's first time buying the product. Marketers can also look at d) usage rate. Similar to the idea of user status, usage rate looks at a customer and determines how frequently that consumer purchases or uses the product/service. For example, most companies will try to target their critical few (Pareto Principle), and it is then true they are current users. Thus, rather than just looking at their status, usage rate looks to exploit their usage rate. Marketers can also e) look at loyalty status. Consumers can be loyal to brands, stores, or companies. In either event, organizations pay close attention to customer loyalty, as they will often try to put these consumers at the forefront of their marketing strategy. Additionally, many marketers might look at their least loyal consumers and seek to understand why a competitor, or a set of competitors, is/are deterring revenue generation. 5) Lastly, marketers can actually use multiple segmentation bases. In this case, they simply combine 2 or more previously outlined segmentation tools to target a very specific market segment based on a number of different factors. - Segmenting Business Markets: While the same 4 segmentation tools can be used to divide up business markets (geographic, demographic, behavioral, and psychographic), marketers can also segment business markets by looking at attributes like operating characteristics, purchasing approaches, situational factors, and personal characteristics. However, in addition to providing the product or service to the customer, business marketers may also provide assistance after the purchase has been made. - Segmenting International Markets: International firms face a much greater challenge with respect to segmenting their globalized consumer. Some may try geographic segmentation, although this presupposes countries proximal to each other will have similar traits and behaviors. More often than not, this claim is invalidated. Companies can also practice economic segmentation, wherein they look at things like nominal GDP / capita. Looking at emerging markets is also another way to segment different economies and target specific segments. Companies can also look at things like the legal and political environment - such as, how receptive is this country to foreign organizations? Capital owning laws for foreigners? Companies can also use cultural segmentation, wherein markets are grouped together according to common religions, languages, etc. Indeed, whether looking at geographic, economic, political, and/or cultural factors to segment consumer markets, they all presuppose that traits, behaviors, and needs are similar across consumer markets and that one country cannot be heterogeneous. Indeed, this negates the fundamental idea behind domestic segmentation practiced by marketers, wherein domestic organizations realize the consumer market is large and diverse, and that, even within a country, many different segments exist. The last point to make is that, b/c of this, many marketers are utilizing many of the fundamental analysis discussed earlier (behavioral, psychographic) in conjunction with the explosion in big data and digital and social media to practice intermarket segmentation: where they appeal to consumers with similar needs and buying behaviors, regardless of their geographical origin(s). - Requirements for Effective Segmentation: The exact segmentation tool used must be effective within the context of situation. Segmentation based on hair color (which could be demographic) would not be effective at all, as needs, buying behavior, and values and personality traits are not reflected in something like hair color. Thus, in order to add value, a segmentation tool should adhere to the following principles: - Measurable: The size, purchasing power, and profiles of the segments can be measured. - Accessible: The market segments can be effectively reached and serviced. - Substantial: The marketing segment itself should be large enough to pursue, and it should be as homogenous as possible. - Differentiable: At the very least, the different segments respond differently to different stimuli/efforts. If one segments that market based on gender, it should hold that men and women do not react the same way to marketing stimuli. If they do, the segments are not differentiable. - Actionable: Lastly, there must be effective programs that can be implement to reach the targeted segments. - 2) Market Targeting - Evaluating Market Segments: Once a company has identified the segments in the market based on whichever segmentation tool it used, it must decide which segment or segments it will elect to purse. When selecting the targeted segments, marketers must bear in mind three things: segment size and growth, segment structural attractiveness, and company objectives and resources. When looking at segment size and growth, the most attractive segment is not necessarily the best option. Smaller companies will lack the resources to pursue upper-class consumers, but they can purse lower-class consumers in a way that is profitable for them. Secondly, marketers are also keen to look out for the structural attractiveness of the segment. Specifically, the company will utilize Porter's 5 Forces Model to determine whether or not targeting that segment would be fulfilling and profitable. Lastly, organizations will consider their own resources and objectives and assess whether or not targeting a specific segment is a good idea based on their L-T objectives and the skills/resources they have at hand to generate profitable exchange relationships with consumers. - Selecting Target Market: After a company has looked at the relative size and growth, the 5 forces, and the alignment with the firm of all segments, it must the determine which segment it will pursue. Once it has delineated the segment of segments it plans to target, the firm has engaged in target marketing, wherein it identifies a set of target buyers who share common needs or characteristics and elects to engage them in the hope of developing profitable exchange relationships. - 1) Undifferentiated (Mass) Marketing: In this approach, the organization pursues a marketing strategy analogous to a total marketing strategy. Rather than concentrating their efforts on a particular segment, they elect to appeal to the similarities in the wide swath of consumers and consumer segments implicit in the marketplace. This is less effective than other techniques b/c a) developing a product that appeals to the needs and traits of many different buyers is difficult and b) mass marketers will be outperformed by marketers who have chosen to concentrate their efforts on targeting needs and satisfying wants of specific consumers. - 2) Differentiated Marketing: With differentiated marketing, companies and marketers will pursue multiple different segments in unique ways. This is advantageous to undifferentiated/mass marketing, as it appeals to specifically delineated needs/wants/traits implicit in the chosen market segments. The goal here is to improve/bolster overall sales revenue, wherein each separate product in the range of segments grows its share of market and improves returns to the firm. The only downside to differentiated marketing is that it raises costs. - 3) Concentrated Marketing: In concentrated marketing, organizations pursue a few segments/niches in the hopes of acquiring a substantial share of market. B/c of the inherently concentrated nature of the program, marketers can develop deep insights into the specific segment, and they can prepare tailored, localized marketing efforts that are highly specialized. Many companies begin with niche marketing and transition to more differentiated marketing strategy. There are downsides associated with nice marketing, however. To begin, hedges against revenue cycles are obsolete - if the one or two segments you are targeting underperform, your business as a whole will underperform. Additionally, there is the threat of a more powerful player entering the market and inhaling market share. This represents the high rise associated with niche marketing. - 4) Micromarketing: At the most concentrated level, micromarketing is the act of targeting specific customers and locales. Micromarketing is comprised of local marketing and individual marketing. Local marketing is the act of tailoring brands and other marketing efforts to the wants/needs of specific local customer segments. Technology and big data have only augmented localized marketing. For example, Walgreens uses its mobile application to notify local shoppers of relevant deals based on their shopping history and perceived AIO. Companies can also practice individual marketing, wherein they tailor products and marketing programs to the needs and preferences of individual customers. This is the act of taking local marketing and further concentrating into focusing on specific individuals within that locale. Indeed, previous models of customer care were oriented around the individual consumer, and this previous model of care is now being made possible again through mass customization. Wherein organizations work 1:1 with the masses. An example of this is M&M allowing consumers to personalize their product, or Nike allowing for NikeID. In addition to the product itself, marketers can customize marketing schedules and efforts via mobile and digital media, and this is only further evidence that speaks to the ubiquity of individual marketing within the branch of micromarketing. - Choosing a Target Strategy: Depending on the firm's resources and the product itself, different targeting strategies will make the most sense. For example, if the firm is limited in capital and resources, niche marketing may be advantageous, or even micromarketing. If the firm is considering a marketing strategy for an uncoutomizable product such as fruit or steel, then an undifferentiated marketing strategy might be best. If the product in question is something like a luxury car, niche marketing might make more sense. In short, the degree of product variability is important. Secondly, firms must also consider the life-stage of the product. If a product is in its infancy, it might be best to launch one version only and practice either undifferentiated marketing or niche marketing. Lastly, firms should also consider market variability. In other words, do most consumers in the market exhibit similar buying behavior, have similar values, and hold similar AIO? If so, then undifferentiated marketing is fine. Lastly, firms should also be cognizant of what competitors are doing. If a competitor is practicing differentiated or niche marketing, exercising an undifferentiated marketing strategy can be suicidal. Conversely, if competitors are practicing an undifferentiated marketing strategy, then an organization should indeed aim to practice differentiated or niche marketing, as they can quickly grow their share of market. - Socially Responsible Target Marketing: Although targeted marketing can benefit consumers, as they are receiving exposure to specific, tailored marketing efforts aimed at satisfying their needs and wants, there are also downsides. Some organizations might practice deceptive marketing, whereby they target unaware/naive consumers in an attempt to attract consumers. Additionally, the advent of technology and big data has allowed marketers to engage with individual consumers, and some fear that children are exposed to predatory marketing practices aimed at invigorating a specific response/action. - 3 and 4) Differentiation and Positioning - Once an organization has segmented the market and evaluated and chosen the most attractive segment, it can then begin to put forth its value proposition - or how it will create value for the customer. When thinking in terms of the specific offering, a product position is the way a product is defined by consumers on important attributes. Indeed, products are made in factories, but brands and affinities are consumer-generated, and they often occur in the minds of consumers. Generally speaking, a product's position is the set of complex perceptions, impressions, and feelings that consumers have/generate for a specific product, relative to other market offerings. - Positioning Maps: In general, perceptual positioning maps graphically depict how consumers view products against one another in terms of quality and style. As was shown in class, the size of the bubble is market share, and the position is referenced against quality and style. - Choosing a Differentiation and Positioning Strategy: Firms must forge a scenario wherein the perception preference map conforms to the product position and value proposition the firm is seeking instill within the minds of consumes, and they must do so while continuing to meet the needs of the underlying consumers. Often times, 2 or more firms will attempt to achieve the same product position - in this case, the two must then compete on another product attribute that can differentiate them. - In general, there are 3 steps to choosing a differentiation and positioning strategy: - 1) Identifying Possible Value Differences and Competitive Advantages: When an organization is seeking to achieve a competitive advantage, it often does so b/c it has delivered a certain aspect of quality, need-satisfaction, etc. that a competitor has not. Typically, competitive advantages are advantages gained over competitors by competing on cost or quality. Indeed, when companies seek to position themselves within the mind of consumers in a particularly way, it is imperative they actually deliver on this promise, as failure to do so will significantly erode goodwill and customer satisfaction. When attempting to differentiate itself, alert organizations can seek to differentiate themselves through adding value at any and all touch points. For example, an organization can differentiate itself through the quality of its products, the quality of its service, the quality of their distribution channels, and the quality of its employees, which sort of dovetails back into the previous point alluding to superlative customer service. Lastly, a company can achieve a competitive advantage through brand image differentiation. - 2) Choosing the Right Competitive Advantages: If a company has found that it can differentiate itself on multiple aspects, it must determine which form of differentiation to pursue, and it can do so utilizing the following techniques. The 1st of which is deciding how many differences to promote. There is mixed opinion over which attributes a brand should promote. Some marketers believe that brands should focus on only one attribute - their USP. The rationale behind this is the costumers will tend to remember the one best thing. Additionally, others argue that brands should focus on multiple product attributes, especially when 2 or more firms are competing for identical or near identical product positions. - 3) Which Differences to Promote: Again, this can aid in the preceding decision making question. The point here is that brands should concentrate their efforts on specific differences. These concentration efforts should be based on the following set of criteria: Importance (the difference delivers a highly valued benefit to the target buyer), distinctive (competitors do not offer the difference, or, if they do, they do not offer it at comparable levels of delight), superior, communicable, preemptive (competitors cannot easily copy the difference), affordable, and profitable. - Selecting an Overall Positioning Strategy: A brand's value proposition entails the full positioning of a brand - the marketing mix used to position and differentiate itself in the market. - Generally, there are 5 winning propositions and 3 losing propositions. The 5 winning proportions are more for more (as in pay more for more benefit), the same for more, less for more, less for the same, and less for less. The X-Axis of the value proposition matrix is the price, and the Y-Axis is the benefit (or quality). The losing value propositions are more for the same (as in pay more for the same benefit), more for less, and the same for less. The same for same is ambiguous and will likely not lead to a winning, nor a losing value proposition. If two companies are competing for the same product position, the same for same can be thought of as a losing proposition. Developing a Positioning Statement - Once an organization has deiced what it would like to showcase in terms of its differentiating factors based on its competitive strategy, the number of attributes to consider, and the relative importance of each attribute, it must then develop a positing statement. A positioning statement is as follows: To (target audience), (brand/product) is a (concept category) that offers (point of difference) by (reasons to believe). This is similar to the USP. - The brand's USP should solve a problem/need, offer both functional and emotional benefits, differ from the competition, and be supported with reasons to believe. Levels of Positioning Power - The band pyramid, analogous to the idea of Maslow's Hierarchy, looks at the power and influence capable of being wielded as marketers address product attributes, functional and emotional benefits, and values and beliefs. The top level, values and beliefs, connects the customer to an emotional attribute.

Chapter 2: Company and Marketing Strategy: Partnering to Build Customer Engagement, Value, and Relationships.

Company-Wide Strategic Planning: Defining Marketing's Role - Strategic Planning: The process of maintaining a fit between the organization's goals, capabilities, and challenges. Essentially, strategic planning is the process whereby firms posit a L-R plan concerning their growth and survival that makes the most sense (is most feasible and effective) given their current opportunities, objectives, and resources. - At a broad, corporate level, the process begins by defining the company mission. When the mission is defined, there are specific, measurable, realistic, and attainable goals/objectives set which align with the firm's opportunities, objectives, and resources. Once strategic planning takes place at the corporate level, the organization must then determine what the optimal business portfolio will consist of (what products/services/brands will be operational in order to achieve the company goals/objectives previously stated). Lastly, once the firm has determined its business portfolio, each business unit develops detailed marketing and/or other business plans to support the overall organization's goals and objectives. Thus, it is clear marketing planning and marketing as a function occurs at the business unit/product level and serves to support broader organizational themes, goals, and objectives set at the corporate level. The following is a list of the business/strategic planning process: - 1) Defining a Market-Oriented Mission - A firm's mission statement is a statement of what the organization's purpose is, or what it hopes to accomplish within the context of the larger environment. Presumably, mission statements can answer questions such as "What is our business?" or "What do customers value?". A firm's mission statement should serve as the invisible hand (Adam Smith) for the organization's activities, guiding them in the business decision-making process. - A mission statement should reflect attention to marketplace/customer needs and strengths embedded within the firm. They should NOT address the product/service being sold, as products are temporary but needs are permanent. For example, Instagram would not say "We are a photo-sharing social media firm;" rather, they would say "We help people capture and share the world's moments." Notice, the variation in diction. The first describes the product itself (which is dependent on individual characteristics and culture, insinuating it can change w/ time); the second describes the underlying need their service is addressing. It is difficult to change needs, and by defining their mission statement w/ respect to the customer's need, Instagram is fostering a positive brand image. - 2) Setting Company Objectives and Goals - Once a firm has delineated its market-oriented mission, it must then begin to set specific, attainable goals for supporting levels of management in order for each level of the organization to be equipped with the knowledge/information needed to carry out the organization's mission. - Typically, a firm will set business and marketing objectives. For example, CVS' business goal will be to improve health care and increase affordability. This will require capital and other resources, most of which will require the use of money. The firm can try to increase revenue YoY and bolster profits. Thus, marketing objectives may be to increase net income 12.0% Q3. This can be carried out through greater customer engagement, more mobile advertising, greater CRM, greater customer-generated marketing, etc. The marketing objectives set at a high level will be even further expanded on when looking at the individual business unit level within the firm's portfolio. - 3) Designing the Business Portfolio - Once a firm has created a market-oriented mission statement and delineated organizational goals and objectives that align with the mission statement, it them must construct a business portfolio consisting of lines and brands that best fit the company's strengths and weaknesses to opportunities in the environment. Many firms/organizations, especially conglomerates, may have many, and many unrelated, lines of business / brands, so it is important that the firm matches strength and weaknesses with opportunities while remaining cognizant of previously laid out goals and objectives that align with the firm's market-oriented mission. In general there are 2 steps a firm must take when constructing its portfolio for the upcoming FY: - 1) Analyzing the Current Business Portfolio: Portfolio Analysis is the process whereby management evaluates the products and business that make up the company. Ultimately, management will want to allot more resources to profitable business and decrease the amount of resources allocated towards unprofitable brands/products/businesses. When looking at Strategic Business Units (SBUs) within the context of portfolio analysis, a manger's goals is to use its strengths to take advantage of the opportunities present in the environment. BCG has created a growth-share matrix diagram which allows firms to analyze their current business portfolio against relative market share and market growth rate. The following is a list of the 4 types of categories a firm's businesses can fall under: - 1) Cash Cow (High relative market share and low market growth rate); as Prof. said, "milk" that cash. These are businesses that have become mature and have attained a large share-of-market. Unfortunately, future growth is limited, so the company should focus on limiting outlays for any SBUs in this category and just deviate their attention towards generating and securing any inflows associated with that business. The strategy for a cash cow would be to hold/maintain the SBU. - 2) Stars (High relative market share and high market growth rate). These are SBUs that are relatively young and have secured a large share-of-market in a high-growth space. They will be capital-intensive during their growth phase, as high levels of financing will be required to facilitate the growth. The hope is that their market share will remain unchanged or grow, and the market itself will begin to slow in its growth, thereby resulting in a cash cow. The strategy for a star would be to build/invest in the SBU. Hopefully it will become a cash cow. - 3) Question Mark (Low relative market share in a high-growth market). As is evident, there is a question mark b/c it is unclear whether this will turn into a start (by increasing its market share), which may then allow it to become a cash cow, or whether it will remain at or lose even more of its market share status, thereby becoming an unattractive SBU. Additionally, they will require a lot of cash to maintain their position, and even more cash to finance market share growth. The strategy is either to build/invest in or divest/sell the SBU. Management will have to decide whether they believe it can become a profitable SBU (build/invest) or whether prospects for market share growth and overall profitability seem bleak, in which case they should divest/sell. - 4) Dog (low market share in a low growth market). Dogs may generate enough cash to sustain themselves, but they are unlikely to become principal sources of cash for the firm. The firm should either divest/sell the SBU (not totally disregarding the SBU's future market share, but reallocating the cash generated from some liquidation in order to put resources elsewhere) or harvest it (ease any and all investment positions and disregard any effects this may have on market share or growth; focus on optimizing short-term inflows). - The circles placed in various quadrants represent the SBU, and the size of the circle represents annual sales dollars. - Many products/businesses within a firm will flow through the growth/share matrix, and starting new SBUs is key to financing further new SBUs that can hopefully become stars and then cash cows and later dogs when they reach the end of their life cycle. - Problems with Matrix Approaches: Given the centralized nature of the BCG Growth/Share Matrix, attempting to define SBUs, their relative market share, and the growth rate of their market, can be difficult and expensive to do. In light of this issue, many organizations have adopted a decentralized portfolio planning/analysis process that suits their specific needs, specifically giving close-to-market managers and cross-functional heads more influence over assessing and designing the current portfolio. Another thing to note about the BCG growth/share matrix is its parochial outlook w/respect to time. The growth/share matrix only focuses on existing (current) businesses and does not provide a lens for examining future SBUs / business lines which can be profitable for the firm. - 2) Developing Strategies for Downsizing and Growth (Analyzing the future business portfolio) - In addition to conducting diligent portfolio analysis (whether that be BCG's growth/share matrix or another business portfolio categorization tool), firms must also recognize the role of further planning and analysis in order to assess how business products/lines/brands will shape growth. A firm's objective within the context of looking at the future business portfolio should be to manage profitable growth. - Product/Market Expansion Grid: A portfolio-planning tool used to identify new products and/or new markets a firm can exploit in order to catalyze future growth and inject value into its current business portfolio. The product/market expansion grid consists of products vs markets. There are 4 categories: - 1) Market Penetration (Existing products, existing markets). With market penetration, the firm is simply aiming to increase its share-of-market without introducing new products. - 2) Market Development (Existing products, new markets). With this, firm's may try to offer existing products to new customer bases/markets/segments. - 3) Product Development (new products, existing markets). This is taking existing products and bringing them to new market segments and customers. - 4) Diversification (new products, new markets). - All 4 of these quadrants w/ relation to the product/market expansion grid are concerned with growing the business portfolio, but there are also concerns related to downsizing certain SBUs and/or certain products/brands within the portfolio. A firm may want to abandon certain goods/services b/c a) it may have grown too fast and/or entered a space where it lacks experience, b) there may have been an exogenous shock in the market environment which has made profitability more difficult, and c) there may be certain products/brands/SBUs approaching the end of their product lifestyle. When faced with a business or brand that is no longer cash flow generative and/or profitable, it must divest or harvest them. The rationale behind this is opportunity cost. Weak businesses require chronic management attention, and that attention can be more effectively spent on developing and investing in promising businesses poised to experience high rates of growth. - 4) Planning Marketing: Partnering to Build Customer Relationships - Once a company has elicited a market-oriented mission, determined what its company-wide goals and objectives are/will in order to align itself with the mission statement, and determined which businesses to include in its portfolio in order to achieve the stated objectives and goals, it must then establish business unit-level planning for each SBU/business/product in order to support broader organizational goals. - Marketing plays a key role in setting business-/unit-level planning and the setting of strategic objectives. It determines the company's guiding philosophy (how will we serve our most attractive customers best), assists with identifying attractive market opportunities the firm can exploit in order to achieve organizational goals / strategies, and designs marketing strategies that can support business objectives for individual SBUs so, collectively, all SBUs can carry out company-wide goals and objectives. - In order for marketing to assist the organization in its planning, implementation, and operation aspects, marketers must practice not only CRM, but also PRM to form robust value chains linking internal and external company actors, as well as a superior value delivery network that can be used to create customer delight. - Partnering with Other Company Departments - A company's value chain is its link of internal departments that carry out value-creating activities in order to help design, produce, market, deliver, and support a firm's products. Essentially, a value-chain is a chain of internal company actors/departments who add value to any goods/services being sold by the company. This can be finance, operations, marketing, etc. B/c of the interconnectedness, a firm's efficacy in creating a value chain depends not only on how well each department performs, but also on how well they coordinate activities among/between each other. Marketing will provide the firm with tailored programs, foster customer engagement, and deliver on positioning and differentiation, but their ability to do so will depend on reliance from operations to secure high-quality inventory, and IT to provide the firm with insightful data. - A chain is only as strong as its weakest link. It is important for all entities to be able to communicate effectively and cooperate efficiently. It should also be noted that what marketing should lead the effort to engage the consumer and set a precedence, but other departments need to coordinate effectively as well and understand their obligation to the customer and to delivering value to the customer. - Partnering with Others in the Marketing System - A company's value deliver network consist of its suppliers, distributors, retailers, and, customers (its supply chain), with each link/actor playing an important role in improving the ending value delivered to the customer. Competition in today's economy is between value delivery networks, not necessarily individual companies. Competition between Toyota and Ford is competition between their value delivery networks, not necessarily between Ford and Toyota. Marketing Strategy and the Marketing Mix - Marketing Strategy: the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships. A firm's marketing strategy begins by determining who the firm will serve (based on market segmentation). Then, after the firm has made this decision, they will decide on how they plan to serve them (positioning and differentiation). - At its core marketing is about creating value and relationships. In order to create profitable exchange relationships, marketers must identify the target market through segmentation and then position themselves favorably within the target market's mind, and then deliver on the value they have proposed, leading to differentiation. This is their marketing strategy. Guided by the marketing strategy, a firm then designs an integrated marketing program (4 Ps). Customer Value-Driven Marketing Strategy: - B/c companies cannot profitably serve all customers in a given market, they must divide up that market into segments and determine which segment will be most lucrative for the organization. In the overall process of creating a customer-value driven marketing strategy, there are four steps involved - 1) Market Segmentation: In order to divide the market into groups or classifications, firms must segment it, or divide the market into distinct groups of buyers who have different needs, characteristics, and/or behaviors and who might require different separate marketing strategies or mixes. The exact differentiation factor will vary according to the company and industry, but it should be useful and provide for enough segments in order to help the firm understand its marketplace. High- vs low-income buyers is not helpful, but single-women over 35 may be more helpful. - A market segment is a group of consumers who respond in similar ways to marketing efforts/strategies. E.g., a car company might divide the market into those who enjoy the latest, most expensive model and those who wait until the price drops severely. Certainly, it would be impossible to cater to both groups' needs. Understanding the different segments, however, can allow the firm to better understand how each segment might respond to a given marketing strategy and/or effort. - 2) Market Targeting: Evaluating each segment's attractiveness and selecting one or more segments to serve. A company can serve a niche market segment, or it can serve all segments (consumer goods brands such as P&G market their goods/services to many different segments). Other companies may be highly niche in their segmentation and targeting. For example, McLaren targets a very specific market segment suited for its products. It should also be noted that companies may market to multiple different segments with the same basic needs (e.g. Gap, Inc. and its many brands within its portfolio). - Market targeting (the act of choosing one or more segments) may also be used to assess the growth/value implicit in a particular segment. Firms will "try out" different markets and determine whether product development in that market seems feasible and/or economically rational. - 3) Market Differentiation and Positioning: Positioning occurs when marketers arrange for a product to occupy a clear, distinctive, and desirable place, relative to competing products, in the minds of consumers. Before differentiating themselves within the target market, marketers must determine how they are going to do that and what techniques/focal points it would like to focus on, ultimately aiming to instill within the consumers of the target market some sort of favorable, clear, and distinctive position relative to competitors. This is going to be especially important when consumers evaluate competing alternatives. This can be done through simple statements or advertisements. It should also be noted that a firm's decision to position itself should exploit certain values the consumer considers to be important. For example, if consumers value affordability, marketers may try to underscore the low cost of their product and position their product within the consumer's mind, relative to there products as being most affordable. Indeed, now there is some value it has promised to the consumer. - To actually deliver on the promised value is what can cause differentiation. The company's entire marketing program should support the chosen positioning strategy so that differentiation can actually occur. Developing an Integrated Marketing Mix - A firm's marketing mix is essentially the combination of the 4 Ps used to produce a desired response in the market. The marketing mix should support the firm's marketing strategy, or its segmentation, targeting, positioning, and differentiating efforts. - From the consumer's POV, the 4 Ps can be thought of as the 4 As: Acceptability, Affordability, Accessibility, and Awareness. - A company's marketing program should integrated marketing tools and deliver value to the intended customer in order to achieve some level of differentiation as a result of re-enforcing previously laid out positioning efforts. Managing the Marketing Effort and Marketing ROI - Managing the Marketing Effort - While marketing and customer engagement is extremely important for any marketing manager, having the ability to manage the marketing efforts and oversee systems, as well as control any processes is extremely important. There are 5 steps to managing the marketing effort: - 1) Marketing Analysis: Marketing management begins with conducting a SWOT analysis. Strengths (S) and Weaknesses (W) are internal w/ respect to the firm, and they should be used when devising integrated marketing programs and marketing strategies to be used in carrying out organizational goals and objectives. The marketing manager should try to match the firm's strengths with its opportunities and mitigate weaknesses. A firm's opportunities (O) and threats (T) are exogenous (external) factors which can have an impact on the firm's ability to engage customers, build profitable relationships, and grow share of market. - 2) Marketing Planning: When a company is undergoing marketing planning, it must determine which marketing strategies will help the firm attain its overall objectives. For each SBU/product/brand, a detailed marketing plan is needed, and it must clearly spell out objectives/issues, action programs, budgets, and controls. - 3) Marketing Implementation: Turning marketing plans and strategies into marketing actions to achieve marketing objectives. Marketing planning addresses the "what" and the "why" of marketing activities, whereas marketing implementation addresses the "who," "when," "where," and "how." - In reality, both planning and implementation are extremely important, and a firm cannot be successful without perfecting both. Many organizations today may have similar strategies, but when it came down to their value delivery networks implementing the plan, they fell short. This again reiterates the idea of ensuring all actors inside and outside the firm understand their responsibility in assimilating marketing and being customer-centric. Marketing Department Organization - Depending on the size and scale of the firm, the number of decision participants in marketing will vary. Many corporations and large companies employ a CMO to head all marketing efforts (analysis, planning, and implementation). - Modern marketing departments can be divided across the following attributes: - Functional Organization: different marketing specialists handle specific roles suited to their strengths (e.g., mobile advertising. research, consumer engagement, etc.) - Geographic Organization: Assigning sales, research, and/or planning, for example to specific locations - Product Management Organization: Common in companies with many different brands or products - Customer Management Organization: Common in companies with extremely diverse segments as part fo the customer base. - Marketing management has become an extremely customer-centric job, and it is becoming increasingly common for managers to view themselves as in the business of customer management, marketing management. Marketing Control - The role of marketing control is to measure and evaluate the results of marketing strategies and plans and to take corrective action as needed to ensure previously laid out plans are met or exceeded. - 2 Different Types of Control: - 1) Operating Control: checking ongoing performance (day-to-day and more broader quarter/yearly earnings data) against the annual plan and taking corrective action as necessary. Particular attention given to sales, profits, and other goals set out in the annual plan. - 2) Strategic Control: looking more so at the company's overall strategy and base principles underlying its strategy to determine whether or not a realignment should occur in response to a SWOT analysis, a mission statement change, changes in the business portfolio, etc. Measuring and Managing Marketing ROI - Marketing ROI = net return on investment / costs. Marketers are no longer given free reign to frivolously spend on flash ad- and marketing-campaigns on the basis of "intangible indictors which promote the brand." Rather, they are being held to a greater level of accountability when making large investments in marketing advertisements. - Often difficult to measure due to the inability to directly posit a cause-and-effect relationship between an increase in sales dollars and an increase in marketing efforts. Correlation need not equal causation. - Typically, marketing returns are classified as improved customer value and engagement, which leads to greater customer attraction and greater customer retention, which bolsters customer equity and CLVs. This increase in customer equity can be thought of as the theoretical return on marketing expenditures. The ROI = the net increase in customer equity (net returns on investment) / outlays associated with the investment.

Chapter 5: Understanding Consumer and Business Buyer Behavior

Consumer Markets and Consumer Buyer Behavior - When thinking of consumer buyer behavior, marketers are alluding to the purchasing patterns and behavior of final consumers - the households/people that comprise the consumer market. Ultimately, demographic diversity observed in consumers makes the consumer market a difficult to navigate environment, and it is important for markets to be able to use actionable insights derived from market research in order to affect consumer buyer behavior. - Model of Consumer Behavior: Generally, marketers are interested in learning more about how marketing stimuli (4 Ps) and other marketing efforts influence buying behavior - the what, when, where, and how. The why, however, is much more difficult to capture - even in the presence of abundant consumer buying data. The model of consumer buyer behavior begins with marketing stimuli, transitions into the buyer's black box (which is comprised of the buyer's characteristics (their demographic and other related factors) and the buyer's decision process (need recognition, informational search, evaluation of alternatives, purchase decision, and postpurchase decision)), which then leads to the/a buyer response. - Characteristics Affecting Consumer Behavior: While there are a wide swath of items affecting consumer (buying) behavior, marketers know they cannot control/manipulate all of them, but they are certainly aware of them: - 1) Cultural Factors: There are 3 distinct cultural factors. 1st is Culture itself. A person's culture is known as the set of values, beliefs, and perceptions instilled within the individual through learning from institutional (school, religious infrastructure, etc.) and family actors. While culture directly affects values and beliefs, it also affects wants. When culture shifts occur, consumer wants and demands shift, as they are a function of societal norms. This means that marketers are intently focused on being able to spot cultural shifts. If a society develops a greater propensity towards a culture of health and fitness, then health services and physical education producing firms may want to monetize this shift by offering a competitive product/service tailored to the times. The 2nd cultural factor is subculture. While culture refers to a much larger congregation of people, subculture refers to specific sects of people nested within larger branches of society. These people have shared value systems based on homogeneous life experiences. For example, if American is a culture, African American is a subculture. Again, similar to the preceding point, marketers must be aware of the different subcultures that exist, as each may represent a fast-growing market with different value systems and wants - the marketer's ability to capitalize on this is contingent upon the ability to recognize and address different needs, wants, and demands. Within each subculture, there may be subsegments. This makes subcultures not only distinct from other subcultures, but it can cause distinct, yet nuanced, bifurcations within that subculture. This only complicates the marketer's job! Additionally, each subculture may engage with brands in unique and distinct ways. For example, African Americans are strongly motivated by quality and selection. Marketers would be keen to convey this narrative when targeting that specific subculture. Hispanics are very family oriented, and Asian Americans are considered the most affluent demographic segment. Asians are unequivocally the most heterogeneous subculture. The last cultural aspect to consider is social class. A social class, in formal terms, is a set of relatively permanent and ordered divisions within society that share similar values, interests, and behaviors. In the U.S., social scientists have identified 7 social classes: upper-upper class, lower-upper class, upper-middle class, middle class, working class, upper-lower class, and lower-lower class. While income is primarily a determinant of social class, other factors are also important to consider: wealth, education, employment, etc. Indeed, the idea of a social class is important b/c it provides marketers with information that can be used to understand how different social classes respond to and act on marketing stimuli. The U.S. social class system tends to be fluid and permissible to movement, which can, in part, mean marketers may not be targeting the same elements within a specific social class over their lifetime. - Total Marketing Strategy: Indeed, while segmenting the market based on subcultures can be useful to exploit differences in values, perceptions, beliefs, and wants, some marketers will elect to pursue a total marketing strategy that appeals to the similarities, not differences, between subcultures in order to appeal to a wider array of consumers. The idea here is that ethic themes are integrated in a cross-culture fashion through their mainstream marketing practices/efforts. - 2) Social Factors: The 1st social factor to consider is a consumer's group and social networks. In any society, people have reference groups. These are groups the consumer is not a part of, but frequently looks to for comparison purposes. A reference group can be good or bad, however. An aspirational group is one which the consumer desires to identify with and be associated with, but, again, he/she is not a member of that group. Conversely, there can also be a dissociative group, wherein the consumer actually wants to avoid ever being a part of that group, and laments the idea of being a member in that reference group. Conversely, there can also be membership groups a consumer is a part of. These membership groups can be either be primary (family, coworkers, friends, etc.) or secondary (religious communities, professional associations, etc.). Primary membership groups obviously have more influence than secondary. In all, the idea of dividing social groups into reference groups based on membership and non-membership is important b/c consumer buyer behavior is not only a function of individual needs, wants, and demands, but it is also a function of what other people do and the choices they make. Within the reference group matrix, there are important actors to consider. First, there is always an opinion leader. Again, they can be from a direct or indirect reference group, but the essential/core point to consider is the fact that they have the ability to exert strong social influences and affect consumer buyer behavior. There is also the idea that word-of-mouth influence can be powerful. Indeed, this is the idea behind brand advocacy. When consumers engage with each other about the brand, this creates value for the firm. In addition to opinion leaders instilling change and word-of-mouth influence affecting consumer buyer behavior, there is also the idea of influencer marketing. These individuals are not necessarily opinion leaders, as they are well-known for their social status, but they are people capable of wielding powerful social influence. This means marketers will enlist the help of celebrities and other well-known, well-followed people to help them influence final consumer purchasing behavior. Indeed, the marketer's ability to engage with exogenous extrema is being augmented by the advent of technology, big data, and the IoT (partially). With online social networks, marketers can utilize blogs, social media, forums, or even online communities to practice things like influencer marketing, word-of-mouth influence, etc. Indeed, while sourcing talent for influencer marketing is usually based on that person's credibility and following, it is also based on that person's alignment with the brand image and narrative. Organizations are keen to seek out high quality candidates who can influence final consumer purchasing behavior. The second social factor to consider is the idea of family. Within the total available reference groups, family is the most important membership group. Indeed, within the family, husband-wive purchasing parity is becoming uneven. In recent years, men are playing an increasingly central role in grocery shopping, laundry servicing, etc. Women, however, influence 80% of car purchases and outspend men 3 to 2 on new technology purchases. These subtle nuances can help marketers understand what their final consumer market is and how they might respond to stimuli. Children can also play an important role in shaping family buying behavior. They are assuming an increasingly active role in shaping purchasing behavior and decisions. The third component to consider when thinking about social factors that can influence purchasing behavior is this idea of roles and status. The basic idea behind this is that people hold many hats and belong to many different groups/communities, serving a distinct role and holding a certain status in each one. Depending on the expected tasks/responsibilities a member is expected to complete (role) and the relative hierarchical position of that member within the context of the larger group (status), buying behavior may vary. The CEO of Citi will likely buy higher-end clothing to convey his leadership role. A sanitation services worker will likely buy different clothing and may also have less to spend. - 3) Personal Factors: The 1st personal factor to consider is the person's occupation. A nuanced allusion to the previous item, there is this idea that a person's occupation will affect their buying behavior. A CFO will have a specific set of criteria he expects to be met in his clothing selection, and this is often wildly different than a janitor, for example. The second point to consider is age and life stage. The core point in this idea is that no two people are necessarily at the same life stage. Some may be starting a family, others may be starting a career, and others may be retiring. Marketers will use this information to segment their target markets based on life-cycle stage. This logic can also be applied to families and the different life-cycle stages they go through. Companies will try to understand this information as they work through their marketing strategy, which begins with segmentation and target marketing (targeting). In order to segment the market, they will often utilize a wide swath of factors, including life-stage cycle and demographic factors. Beyond occupation and age and life stage factors, marketers are also keen to consider economic situations. Again, this was also alluded to in a previous section, but large-cap spending has been somewhat more frugal and calculated in recent years post-2008 Recession. Target, for example, has begun to put more emphasis on the "pay less" part of their marketing efforts. Beyond occupation, age and life stage, and economic social factors, marketers must also consider lifestyle factors. Marketers typically tend to segment consumers based on AIO preferences - activities, interests, and opinions. These attributes form a person's psychographic profile, and groups of people with similar psychographic profiles are said to be having similar lifestyles. A consumer's lifestyle is important b/c people want to purchase goods/services from and engage with brands/companies that represent their ideals and attitudes. That is why marketers must also take into account lifestyle. The last social factor is personality and self-concept. When thinking about personality and how it relates to consumers, a consumer's personality is the set of unique psychological factors that distinguish a person or a group. Often, personalities are defined in terms of traits - such as autonomous, timid, aggressive, dominant, etc. The idea here is that brands and consumers have personality traits/characteristics, and it is the case that consumers will choose to buy from brands/companies with compatible/complementary traits. While consumer personality has its own parameters, brand personalty also has its specific set of attributes. When thinking about brand personality, one is trying to describe the specific mix of human traits the brand appears to be conveying. In general, there are 5 brand personality traits: sincerity (down-to-earth, wholesome, and cheerful), excitement (daring, spirited, imaginative, and up-to-date), competence (reliable, intelligent, and successful), sophistication (glamorous, upper class, charming), and ruggedness (outdoorsy and tough). Indeed, certain brands are associated with specific traits. Ford, for example, is synonymous with ruggedness. Conversely, the Washington Post is associated with competence. A closely related item for determining personality is self-concept, which is the idea that a person's possessions and associations determine the underlying characteristics of that person - "we are what we consume." - 4) Psychological Factors: The 1st psychological factor to consider is motivation. When someone recognizes a need (whether that be biological/physiological, such as hunger, or physiological, such as attention), that person can choose to act on it or dismiss it. When the need intensity becomes material enough to prompt action, it becomes a motive/drive. Often times, however, consumers may be unaware of what promoted the purchase of a good/service, or what catalyzed the need recognition. B/c of this, it can be difficult for marketers to inject the marketing environment with actionable stimuli in the absence of knowledge pertaining to what motivates consumers. Many marketers practicing interpretive research, where they invite consumers to participate in seemingly strange and complex games/activities in order to gain insight into what motivates them and how they think. Sigmund Freud argues that humans' motives (drives) are largely driven by real physiological forces that people are unconscious/unaware of. Abraham Maslow created a triangular structure to describe humans and their needs. This does not directly address what motives consumers, but it describes the steps in which a consumer satisfied a need by addressing a motive. Humans will first address physiological needs, then safety needs, then social needs, then esteem needs, and, finally, self-actualization needs. The second psychological factor to consider is perception. When thinking about a formalized definition, perception is the way in which people conceive and perceive sensory information in order to determine how they will respond to a given motive/drive/need. There are 3 main explanations for differences in perceptions. 1st, there is selective attention. B/c of big data and the explosion of digital and social media, consumers cannot possibly pay attention to all the marketing stimuli they receive exposure to. B/c of this, marketers are in effect computing for consumer attention. Beyond selective attention, there is also selective distortion and selective retention. People will a) tend to conceive and interpret information in a way that conforms to their modes of thinking and b) retain only certain pieces of information when exposed to it. Indeed, there is also a unique phenomenon that impacts marketing effort and strategy. Subliminal advertising is applied to marketing efforts that are often done to imbue some effect/feeling within the consumer without him/her consciously thinking about it. The third physiological factor to consider is learning. Generally, learning consists of changes in behavior due to learned and had experiences. The elements of learning are drives, stimuli, cues, response, and re-enforcement. When a need becomes material enough to become a motive, that person will direct their motive to a particular stimulus object (and simultaneously be affected by marketing stimulus). Their response will be influenced by minor cues and other factors. Once they purchase it, they will assess customer satisfaction. If actual satisfaction is greater than or equal to expected satisfaction, the consumer's response will undergo re-enforcement. The idea here is that marketers can utilize the idea of cues and re-enforcement(s) to drive demand and foster strong motivations. The fourth physiological factor to consider is beliefs and attitudes. In nuanced ways, beliefs and and attitudes are largely an extension of the previous section. Through learning and doing, people will form beliefs and attitudes. Beliefs are a descriptive thought someone holds about something. These beliefs are typically grounded in experience, thought, or opinion, and they may or may not bear emotional weight. If a consumer's belief about a specific product is fundamentally flawed, marketers will be keen to address this and correct it. A person's attitude refers to their relatively consistent favorable and/or unfavorable evaluations, feelings, and tendencies toward a specific product/service. Indeed, attitudes are less easy to change due to their illiquid nature, and it is often the case that a person demonstrates a pattern of attitudes, insinuating that changing one would warrant adjustments to others. Beliefs are less illiquid. B/c attitudes drive purchasing behavior, however, firms are wise to convey a narrative to their target market that aligns with their existing attitudes. Buyer Decision Process - The BDP begins long before the purchase and continues on well after the purchase. The exact process undertaken may vary according to the individual, the product, and the situation. Such differences may be time elapsed, cash deployed, etc. - 1) Need Recognition: The BDP begins with the final consumer recognizing there is a need material enough to be addressed. This can be triggered through internal stimuli (feel hungry, for example) or external stimuli (marketing stimuli and/or other marketing efforts). - 2) Information Search: Once a need is recognized, the buyer's motivation to locate a stimulus object depends on the need intensity. If a consumer decides to undertake an informational search designed to uncover more information, he/she can turn to 4 sources: commercial, personal, public, and experiential. Typically, consumers can gather preliminary information related to a product through commercial sources, but personal sources are usually the ones which legitimize the product and catalyze a purchase decision. Although personal sources tend to be in-person, many are now transpiring digitally though forums, online communities, etc. - 3) Evaluation of Alternatives: Ultimately, consumers may prefer certain attributes to the product more than others. Additionally, the Fishbein model can be used to explain how products vary according to different attributes. When making evaluations, the exact methodology used, the time elapsed, etc. will vary according the purchase type and the consumer. - 4) Purchase Decision: While a consumer may form purchase intentions, the resulting purchase decision may vary due to 1) attitudes of others and 2) unexpected situational factors. Both can cause consumers to deviate from their intended plan of action. - 5) Postpurchase Behavior: Once a consumer finally purchases a product, they then go through the post purchase process. Here, they are particularly concerned with looking at expected and actual satisfaction. It is also the case that many do go through a phase of cognitive dissonance, wherein they lament the fact they have foregone alternatives and assumed any drawbacks/negatives associated with the product they purchased. Indeed, if customer dissatisfaction occurs, it is imperative marketers have the infrastructure in place to address any unwanted negativity and encourage consumers to speak up. Buyer Decision Process for New Products - A new product is not necessarily something that has been recently launched; rather, b/c the BDP is oriented around the consumer, it is a product which the consumer has only recently been exposed to. The adoption process for a new product may or may not happen, and the exact reasons as to why will vary according to the product. - Stages in the Adoption Process: - 1) Awareness - 2) Interest (informational search once a motive becomes materially significant) - 3) Evaluation (evaluation of that specific products, relative to its peer items) - 4) Trial (risk-free, small-scale trial in order to see if adoption is feasible/desirable) - 5) Adoption (consumer becomes a regular user) - Individual Differences in Innovativeness: - For every new product, there are groups of people on a time scale who try the product at different rates. Innovators are the first 2.5% who try the product first. Following this are early adopters (12.5%), early majority (34%), late majority (34%), and laggards (16%). - Influence of Product Characteristics on Rate of Adoption: - Relative Advantage: What is the benefit of going with a new product, rather than purchasing an existing product? Is this new product more powerful in its ability to satisfy my underlying need? - Compatibility: Does this product align with my beliefs and attitudes? Personality? Values? - Complexity: How much more difficult is this product to use relative to existing need-satisfying products? EVs are not more difficult to drive than gas-powered cars - this will speed up adoption. - Divisibility: Can I try this product out for free, at a low risk, and at a small scale in order to assess its value? - Communicability: The extent to which the product's benefits/utility can be conveyed to other people. Business Markets and Business Buyer Behavior - In B2B markets, the fundamental underlying steps are similar in that there is recognizing a need, finding information, choosing suppliers based on attributes, and then purchasing. The study of purchasing behavior as it pertains to institutionalized organizations is referred to as Business Buyer Behavior. - Business Markets: The business market, in nominal value, is much larger than the consumer market. This is attributable to not only the sheer buying power companies, and not people, have relative to consumers but also to the fact that every consume purchase usually entails 5 business transactions that facilitated a POS event. - The main differences in business markets vs consumer markets is as follows: - 1) Market Structure and Demand: In terms of market structure, business markets usually comprise far fewer, but far larger, players. This is analogous to the idea that there are less corporations than SPs, but corporations account for a large majority of annual receipts. Secondly, in terms of market demand, business buyers have less elastic and more volatile demand. Businesses do not respond dramatically to price changes, as they will still require outputs. Secondly, their demand can be much more volatile due to derived demand. When organizations notice a spike in final consumer demand, they may overpurchase supplies in response. - 2) Nature of the Buying Unit: The business buying unit is comprised of more people, and these people typically spend much more time on a purchase evaluation/decision than do retail buyers. There is also much more effort expended. - 3) Types of Decisions and the Decision Process: Not only are the purchase decision being evaluated much more complex and large scale, but it is also the case these decision take longer to address. Lastly, in the B2B market, buyers and sellers are much more dependent on each other, which means developing profitable exchange exchange relationships depends on the supplier's ability to meet S-T needs and help the organization with its L-T strategic goals/objectives. In fact, many companies are now practicing supplier development, which is the act of developing a systematic network of supplier-partners in order to ensure a dependable source of supply. Business Buyer Behavior - The business buyer decision process is nested within the buying center of the buying organization. At a firm-wide level, the decision to purchase is influenced by marketing stimuli, as well as other macroenvironemtnal forces. At the microlevel, the buying center is influenced by interpersonal and individual influences. Major Types of Buying Situations - 1) Straight Rebuy: In a straight rebuy, the buying center routinely purchases the same good/service and does not give extensive time or thought to the decision. "In" suppliers simply aim to maintain customer engagement, product service, and product quality. "Out" suppliers seek to find ways they can add value and/or exploit dissatisfaction as a point of entry. - 2) Modified Rebuy: A modified rebuy is one in which the buying organization makes slight modifications to the product order. "In" suppliers may become nervous, thereby prompting them to deliver the highest possible quality of service in order to protect the account. "Out" suppliers may view this as an opportunity to gain a new account. - 3) New Task: A new task is a situation in which buying organizations are purchasing a new product for the first time. This often means that there will be many decision participants and the time elapsed may elongate. Again, the exact magnitude of each change will depend on the product and buying situation. - 4) Systems (Solutions) Selling: In this scenario, the buying organization will purchase a packaged solution they can utilize to address multiple problems within the firm. Rather than purchasing individual solution components from different suppliers, companies will buy tailored solutions that come in a package and address all outstanding needs. Types of Searches (Consumers/Businesses) - 1) Routine Purchases (this is analogous to the idea of a straight rebuy): Similar to a straight rebuy, consumers/business can go through a routine purchase wherein they employ a low-involvement degree of search effort. An example product would be bread. - 2) Limited Search: In a limited search process, consumers/business employ a moderate degree of search effort with medium involvement. An example product would be a phone. - 3) Extended Search: Boasting the highest level of involvement, an extended search is analogous to a new task wherein many decision participants may be involved (business buyer behavior) and more time will elapse (both business and consumer). Participants in the Business Buying Process - The buying center of the buying organization comprises the group of people that will make the buying decisions on behalf of the entire corporation. Indeed, in most scenarios, the buying center changes, as it is a function of the product/situation on hand. For something like a straight rebuy, the buying center may only consist of one administrator from purchasing. For a new task, the buying center will likely be a) larger in quantity and b) more eclectic in nature. Indeed, the marketer's challenge is identifying who is in the buying unit and what the relative influence of each member is. In some cases, even the buying unit itself may not be aware all decision participants, especially in an organization with national and/or global operations. Major Influences on Business Buyers - While economic factor are certainly important forces to bear in mind, personal factors can also play a role. B2B marketers must recognize this and form deep, meaningful relationships with purchase agents/managers. Beyond personal and economic factors, business buyers are also influenced by environmental factors (typically more macro-level view; interest rates, GDP, demographics, technological, etc.), organizational factors (things such as corporate strategy, objectives, structure, etc.), interpersonal factors (influence leaders, expertise, dynamics, etc.), and individual factors (age, income, experience, occupation, etc.). Typically, interpersonal factors are more difficult to address, as highly influential people usually do not have explicit indicators of their position, and group interplay is a largely intangible concept. The Business Buyer Decision Process - 1) Problem Recognition: A firm can recognize a need that can be solved with a purchase through internal or external stimuli. A machine could break down, prompting the need for new capital. A salesperson could come to the firm and identify a potential problem and the associated solution. This would be an example of external stimuli. - 2) General Need Description: Once a need has been recognized and it has become a motive, the buying organization, typically through the buying center, outlines general descriptions, such as quantity and product characteristics. - 3) Product Specification: Once the buying organization has stipulated preliminary product attributes, it then, typically in conjunction with a value analysis engineering team, defines the product's desired technical specifications. Value Analysis Engineering is the meticulous process by which engineers and other consultants seek to assess whether or not certain components can be made/acquired at a lower cost, either through process redesign, standardization, and/or other less costly methods of production. Indeed, sellers can consult on value analysis engineering by looking at a straight rebuy and offering a need-satisfying product at a lower cost, thereby making it a new task. - 4) Supplier Search: When conducting the vendor search process, the buying center will typically exploit the internet, which has, to some extent, democratized the supplier search process for suppliers. When the buyer engages in online searching, suppliers' goals are to ensure their firm is listed in credible databases. - 5) Proposal Solicitation: During the proposal solicitation process, buyers will invite suppliers to submit proposals. In something like a modified rebuy, this may simply entail redirection to the company's website. In something like a new task, this may entail formal written proposals, confidence-inspiring presentations, etc. - 6) Supplier Selection: During the suppler selection process, the ranking of suppliers against attributes occurs. The firm may look at things like CSR, ESG, etc. The firm then elects to purchase from the firm who has demonstrated superlative performance on the firm's most important attributes. For preferred suppliers, the buying center may attempt to induce price concessions, but it will not compromise the arrangement on the basis of just price. Also, some buyers may choose multiple suppliers (maybe even cross sourcing) in order to avoid dependency. - 7) Order-Routine Specification: The goal here is to establish, formally and finally, oder quantity, technical specifications, expected delivery time, warranty, repairs, etc. These are formalized terms spelled out in the order contract to avoid confusion/inconsistency later on. Many organizations are now practicing VMI, wherein suppliers have access to inventory levels and customer demand data and provide the firm with JIT, or near JIT, delivery services. - 8) Performance Review: At this stage, the buying organization may contact users of the product to assess product quality and satisfaction. Depending on how well the product performed, this may lead the buying unit to re-evaluate. re-affirm, or reconstruct their buying process. Similar to consumer marketing, the goal is to create customer delight. Differences Between Business and Consumer Buying: - The largest differences are formality, number of decision participants, sophistication, complexity, and length of process. Issues in B2B Marketing - 1) Exit Ramps: Buyers might fail to diagnose what their core problem is. They also fail to realize the fact that you had viable solutions to their product. Again, the latter is something the B2B marketer should always seek to mitigate. The former is something which underscores the following point: B2B salesmen must patience levels multiple orders of magnitude above the average salesman. - 2) Distractions

Chapter 7: Products, Services, and Brands - Building Customer Value

Products/Services - Once an organization has determined it will differentiate itself through its product/services (maybe opposed to its image, channel, and/or people), it must realize its product/service must be fundamentally different than their peers, as, typically, by the 3rd identical product, consumers will be entirely indifferent. Recall, a product is tangible, can usually be stored, etc. Importantly, a product can be acquired, used, or consumed. A service is more intangible, may involve a product, typically cannot be stored, is a benefit, etc. Importantly, a service, does not result in the ownership of anything. - Levels/Types of Product: - 1) Core Customer Value: Combine to deliver the core value through functional and emotional benefits. Functional benefits can lead to emotional benefits, and both can lead to values and beliefs that are high in the product power pyramid. - 2) Actual Product: Looking at things like features, design, packaging, quality level, and brand name. These are things that would be considered product attributes. - 3) Augmented Product: Looking at things like After-sale service, warranty, product support, and delivery service. These are ancillary items associated with the product that occur after the product, but they are extremely important with regards to the idea of add ons that make the product more than just an acquired, used, or consumed good - they make it a meaningful experience. - Classification of Consumer Products: - Convenience Good: A good that is similar to a routine buying/shopping good you don't spend much time thinking about. - Shopping Good: Might spend some time shopping for it. - Speciality Good: Has unique features that compel you to purchase the good, and, additionally, you refuse to accept substitute goods for it. - Unsought Good: Never wanted to buy, ended up needing to buy. - Classification of Industrial Goods: - Supplies and Services: Routine purchases, similar to a convenience good - Materials and Parts: Components to other products - Capital Products: Items/goods you have to invest significant capital in. - Other "Products": - Organizations - People - Places - Causes - All examples of ancillary goods/services that can be marketed to consumers, and they would all be categorized as "other" - Product Line/Mix: - Product Line: Same or similar goods with respect to their a) usage/function, b) customer segments, c) price ranges, d) product category. - Product Mix: Different with respect to a) usage occasions, b) customer segments, c) product lines, d) competitive category (if there is a product mix, the product portfolio is diverse) - The Product Mix/Portfolio Decisions: The width of the product mix/portfolio is the number of different product lines, the length is the number of items across all product lines, and the depth of each product line represents the number of available versions for each product within a given product line. For PepsiCo, the product portfolio would be food & beverage. The beverage portion represents the product line. The depth of Coke is the depth of a specific product within the beverage product line. A narrow/shallow product mix is a product portfolio with a limited number of product lines with few, even zero, versions offered for any given product within a given product line. - Services: - Characteristics of Services: More of an activity, benefit, or an experience, but it is intangible and fails to amount to any form of ownership. - 1) Intangibility: Difficult to be tried/experienced prior to purchase (can't try a concert) - 2) Variability: Quality depends on who the service provider is (haircut quality will be different depending on who is performing the service) - 3) Inseparability: Cannot be separated from their providers (if an uber driver leaves, the ride-sharing service is non-existent) - 4) Perishability: Cannot be stored for later use (a concert ticket for a specific venue/date is worthless after the event has transpired) - Types of Service Marketing: Triangle - 1) External Marketing: A company engages with its customers directly, and all the marketing stimuli/strategy is in the interest of engaging the end consumer. - 2) Interactive Marketing: Customer to employee. In this case, employees are a crucial part of the service process, thereby making the customer a part of the marketing process. - 3) Internal Marketing: This is companies to their own employees. This is known as training, and it is crucial for organizations to market to their consumers that they are capable of rendering the services effectively. Brand: - A brand is a distinctive identity that differentiates a relevant, enduring, and credible promise of value. - Brand Value vs Brand Equity: Brand value is typically something relating to financial measures of success. Brand equity, however, refers to the impact of the brand name on consumer response - the goodwill. - Aspects of Branding: - At its core, a firm's branding strategy should be oriented around attaining brand equity - emotional/attitudinal perceptions about a brand and the associated responses - the goodwill. Before brand equity can occur, however, it is important to bear in mind the following. - Awareness: When a consumer is asked about soft drinks, do they think of Coke or Mountain Dew? Indeed, it is important for organizations to realize they are competing with consumers for real estate. When a consumer is asked about a specific product/service, the relative awareness they have of the availed brands will speak to their strengths. - Loyalty: With loyalty, companies are looking at repeat purchases, usage rates, loyalty status, etc. - Perceptions: Perception/Preference map(s) and Fishbein Model. Where do you fall in ratings of attributes and benefits important to the consumer? - Associations: What do people associate your brand with? - Brand equity helps consumers with their ability to process info, have confidence in their decision, and be satisfied in their purchase. Brand equity also helps companies improve their marketing effectiveness, brand loyalty, margins, brand extensions (introduce new products), trade leverage (with retail consumers, they have an advantage over generic products), and competitive advantage. - Brand Positioning: With brand positioning, organizations are focused on the idea of product positioning and making the products, attributes, functional and emotional benefits, and values and beliefs well-known to the consumer. A solid positioning statement helps you crystalize what's in the brand, and it builds the foundation for all subsequent activities. - Brand Naming: A good name might a) hint at the benefits/qualities of the underlying product, b) be easy to pronounce and/or remember, c) be distinctive (stand out and not be generic), d) be extendable (you can take it from one area to another), e) be translatable (things that work in one language may be lost in translation when converted to another language - this is the NOVA ("No go") by Chevy example is a great example of how a particular brand name was not translatable), and f) be legally enforced through a patent, trademark, etc. - Brand Sponsorship: The crux of this idea is "Who sponsors this brand?" A firm can have a brand name the is a a) national brand (under the umbrella of a major company, for example), b) private brand (usually put out by a retailer that has their own house brand; for example, 365 by Giant, or Kirkland by Costco), c) licensed brand (pay another entity for access to their brand name), and d) Co-brand (2 distinct brands converge to form a unique hybrid brand). - Brand Development: Essentially a 2x2 matrix. - Line Extension: For a new brand name and an existing product category, one is practicing a line extension. Line extensions are essentially just 1st derivatives of existing product lines through slight modifications (maybe color). For example, a common line extension is the gold American Express card. - Multibrands: New brand, existing product. Rather than Coke to Diet Coke, Coke to Sierra Mist. - Brand Extension: Existing brand, new product category. Apple iPhone to Apple Watch. - New Brands: New brand, new category: Toyota may exist, and Lexus may be a new brand, wherein Lexus is an entirely new brand and new product line (luxury vehicles, for example).

Chapter 3: Analyzing the Market Environment

The Microenvironment and the Macroenvironment - A company's marketing environment consists of the forces and actors existing outside of the marketing department which affect marketing management's ability to effectively build profitable exchange relationships with targeted customers. Essentially, a firm's marketing strategy is undermined through environmental forces. Marketing and marketers must have the ability to stay abreast of the changing landscape and have the competency to recognize how this might affect their ability to engage customers and build profitable exchange relationships with targeted customers. - The microenvironment consists of those actors close to the company that affect its ability to serve customers - the company itself, suppliers, marketing intermediaries, customer markets, competitors, and publics. - The microenvironment consists of larger societal forces that affect the company's ability to serve customers - demographic, economic, natural, technological, political, and cultural forces. - The Microenvironment - As discussed previously, marketing's ability to serve its customers and develop profitable exchange relationships with targeted segments depends on the strength of its value chain and its value delivery network, which depends on its ability to partner with actors close to the company: suppliers, competitors, marketing intermediaries, other company actors, publics, and customers themselves. A firm's customers are the most important component of the microenvironment, as the entire value delivery network is oriented around the customer. - 1) The Company: The company's overall strategy and objective is set by top management and marketing works with other company departments (ideally, leads the charge in doing so) to achieve and attain the broader organizational goals stressed by top management. Marketing ensures that ALL company departments are aware of their role to serving the customer and have a general understanding of marketing and customer satisfaction/delight. - 2) Suppliers: A firm's suppliers constitutes a component nested within the overall value delivery network, and it is crucial, nay obligatory, marketing develops close, strategic partnerships with their suppliers, as supply shocks, price hikes, and/or shortages can be costs of underage and costs of lost goodwill due to unhappy customers and damaged satisfaction. Indeed, marketing must work closely with suppliers to ensure customer delight can be promised and delivered on. - 3) Marketing Intermediaries: Firms that help the company promote, sell, and distribute its goods to final buyers (Point 412). On a practical level, this can be distributor, resellers (wholesalers), marketing services agencies, and/or financial institutions (if the transaction involves acquisition of debt or some other financial backing). Resellers are essentially wholesalers and/or other firms that purchase and resell the good. Physical distribution firms help the company stock and move goods from their point of origin to their destination(s). If a good is manufactured in Chicago, IL, and it is to be sold at Target in New York, NY, the reseller would be target and the physical distribution firm would be UPS, FedEx, or some other transportation agency that assists with the transportation and relocation of the final product to its end-point. - 4) Competitors: Being in any market requires a coherent understanding of one's competitors, and the very basis of positioning and the subsequent differentiation hinges on the idea of engaging customers with a value proposition superior to that of your competitors, or at least different. - 5) Publics: Any group that has an actual or potential interest in or impact on an organization's ability to achieve its objectives. These are people/actors who are not necessarily involved in the firm's day-to-day operations, but who have an interest in them and have the ability to impact them. In general, there are 7 (types of) publics: - 1) Financial Publics: Financial publics can be institutional (banks, funds, corporations, etc.) or retail (investors, investment analysts, etc.). And their analysis of a firm's financial performance can influence the firm's ability to raise capital and expand their business (potentially expand their business in order to grow their future portfolio into different markets (market development)). If, after looking at a product/market expansion grid, a firm needs to finance a market development plan, bearish outlooks on the firm's performance can pose a threat. - 2) Media Publics: This group consists of news, media outlets, features, Op-Eds, etc.. - 3) Government Publics: The government plays a key role in monitoring and regulating the firm's financials. Because of this, marketers must attentively consult lawyers to discuss issues of legality and/or risk. - 4) Citizen-Action Publics: A firm's PR department must work closely with citizen-action publics (environmental groups, racial activists, etc.) to ensure citizens are not intentional seeking to malign the company. - 5) Internal Publics: This group includes workers, managers, volunteers, and the BOD. Large organizations will use newsletters and other mass/undifferentiated forms of communication which can motive employees, motivate them, and bolster output. Additionally, when employees feel good, their positivity and exuberance spills over onto external publics. - 6) General Public: Besides citizen-action groups, companies also need to be aware of the general public and the POV of constituents. - 7) Local Publics: These are similar to citizen-action groups but pursue a more localized scale and work to become responsible, good-willing members of their community. - 6) Customers: The most important actor in the company's microenvironment. The entire goal of an organization is to build a functional value delivery network that can deliver value to target customers and create customer delight and profitable exchange relationships with those targeted customers. Indeed, there is not just one types of customer. An organization faces 4 different types of customer markets - 1) Consumer (B2C) - 2) Business (B2B) - 3) Government - 4) International - Each market will require different approaches and will entail different marketing strategies, but regardless of the market, it holds that the primary focus of an organization is to profitably engage target segments within each of these customer markets through building a robust value delivery network, which will require CRM and PRM. The Macroenvironment - All organizations are subject to changing macro- forces, and these are often more difficult to control as they occur on a societal level. Organizations must stay abreast of these changes and ensure adaptation. - In general there are 6 Macro-environmental forces that can affect a company's ability to serve its customers: - 1) Demographic: Demography is the study of the human populations in terms of size, age, gender, location, race, density, etc. Many demographic trends are occurring, and they pose both opportunities and threats for organizations. Things such as family structure, geographic movement, population diversity, etc. are all changing and are all causing material shifts in the way marketers can and should interact with and engage target markets and markets as a whole. - 1) The Changing Age Structure of the Population: The U.S. population, largely due to falling birthrates and longer life expectancies, is getting older. In 1970 the average age was 28; by 2016, this figure has jumped to 38. The gradually increasing age of the population poses opportunities for marketers to capitalize on. America's age "quintiles" can be categorized as follows: - 1) The Baby Boomers: There are currently 74 million baby boomers. These people were born between the years of 1946 an 1964 (50 and 70 years old is the applicable age range). Due to old age, the baby boomers constitute a segment of the population in retirement. As such, they are popular with financial services, new housing, new cars, etc. The baby boomers comprise 22% of the U.S. population but 42% of the spending power. Thus, they are a powerful force to be reckoned with and marketers should be aware of their presence. In terms of marketings strategy, marketers should be aware that baby boomers appreciate advertisements underscoring their former youthful and zestful thinking. They are also well integrated into technology and mobile internet. - 2) Gen. X: Gen X is commonly the generation which bears the title of the "birth death." Gen. X'ers are born between 1965 - 1980, and constitute 42 million people. Many Gen Xers are homeowners and family-oriented individuals, placing children and their aging parents first and their career second. Much more aloof in terms of openly accepting marketing efforts and new products. Once they locate a preferable product, however, they stick with it. Many are also well adjusted to the times, with many not growing up with the internet but later adopting it. Because many Gen Xers are in their 30s and 40s, many have homes and are proud head of households. Because of this, home-and-heath marketers focus heavily on conveying to the 82% of Gen Xers who own homes the value and delight they can provide this specific segment of the consumer market. - 3) Millennials: 75 million born between 1981 and 1997. Almost all millennials embrace technology and exhibit a high level of comfortability with it. Many perform services and shop for goods online and through mobile devices. Specifically within the context of engaging with brands, millennials seek authenticity, value, and opportunities to shape their own brand experiences and share them with others (brand advocacy). Many millennials are also somewhat frugal in their spending, and require meaningful engagement before conducting any outlays. - 4) Gen. Z: People born between 1997 and 2016. The youngest generation to date, Gen. Z constitutes young adults, teens, and children. This generation has very much grown up with technology, and "if they are awake, they are online." For Gen. Z, they are extremely young, which poses issues to marketers regarding issues of legality and ethicality. Gen. Z is also known for being rather aloof and difficult to locate. Marketers must work closely and attentively to locate and identify Gen. Zers on the Internet and deploy targeted marketing campaigns that can convince an informational search and/or at least a trial. - Generational Marketing: Even though markets have the option to segment the market based on a demographic factor such as age, doing so may not be effective. Even within generations, there is much deviation, and differences in needs, values, and lifestyles are much more important indictors to marketers. They should also be wary of engaging in zero-sum marketing, where a campaign targeted towards one segment perturbs another. - The Changing American Family: The largest disruption occurring within America is a change in marital norms (later marriages, more divorces, more same-sex) and the role these changes have in affecting households - a full 35% of households are non family. The traditional image of a 2 child, 2 car, suburban household is quickly losing its ubiquity within society, and marketers must have the ability to recognize and adapt to this. People want to associate with brands they feel align with they values and identity. Thus, b/c single-father households are becoming more common, Georgia Specific depicted a single-father raising a daughter. There are also more women in the labor force, which is causing fewer children (OC of more children increases). B/c of these structural shifts in the way society is oriented, commercials and brands need to reposition themselves within target markets and portray a relatable set of values and needs. There has also been an increase in the number of same-sex commercials and advertisements concerting the LGBTQ+ community. - Geographic Shifts in Population: There has been a growing trend towards moving to the South and West, and there has been an exodus for the Northeast and Midwest. While not necessarily information that immediately strikes someone as profound, this has real implications on purchasing behavior and patterns, as different geographic regions will have different tastes/preferences. Beyond pure location, there has also been an increase in the proportion of the population migrating to more urbanized areas (specifically, micropolitan areas: these regions provide the benefits of a city but do not come with the drawbacks of a large urbanized hub such as heavy traffic, poverty, high taxes, etc.), signaling a retreat from rural areas. This change in residence has also upended employment traditions. Many more are telecommuting, which provides an opportunity for marketers to exploit a large market geared towards the idea of WFH and/or renting out shared work spaces. The main industries concerned with an uptick in modernized work practices are software companies that can connect and augment a firm's communication, and shared-office agencies who can provide willing and able clientele with the space to conduct their work from. - A Better-Educated, More White-Collar, More Professional Population: The number of people with a bachelor's is rising (in 2015, 90% of the U.S. population over the age of 25 had completed high school and 34% had attained a bachelor's). There is also indication that white-collar jobs (professional jobs that are more mentally demanding) are in a higher state of growth then manufacturing and other blue-collar jobs. - Increasing Diversity: The U.S. is a "salad bowl" of races, faiths, and sexual orientations. While not a homogenous substance, the U.S. has very much become an inclusive country where people can be well integrated yet well invested into their own respective cultures and traditions. Beyond ethnic diversity, diversity in sexual orientation has grown, and the LGBTQ+ population is comprising a large share of the population and annual spending power. B/c of this, firms are creating and producing advertisements which can align with the LGBTQ+ community. Disabled people also represents a general theme of growing diversity. - 2) Economic Environment: The economic environment refers to economic factors/variables that affect consumer purchasing power and spending pattern(s). Since the Great Recession, consumers have been more frugal. That is not to say big-spend purchases do not occur. They still do, but consumers are more calculated and rational in their approach towards making expensive purchases. In short-there isn't unlimited free-spending; there is a healthy middle which encourages rational, carefully calculated consumer spending. Particularly, there is an emphasis on value/utility. Target has now increased their emphasis on the "pay less" part of their "expect more. pay less" slogan. They also pay attention to offering you more for your money. Most companies and marketers are now trying to match their strengths (their value proposition) with the current times (opportunities) which balancing and maximizing customer equity. It is important not to entirely slash costs, as this may have a net negative affect. Marketers should be aware of CPI, PPI, GDP YoY, etc. - 3) Natural: The natural environment refers to the physical environment and natural resources that are needed as inputs by marketers or that are affected by marketing activities. Although natural disasters and/or unfavorable conditions which induce supply shocks may be bad for one firm, it may not necessarily be bad overall. Indeed, firms that produce natural resources, or that depend on natural resources for production, will certainly suffer and may experience lost CLV, lost customer delight, etc., but demand for other goods that depend on cold seasons (salt, snowblowers, snow pants, etc.) may go up. Indeed, there should be processes in place which hedge against interim shocks and ensure a firm's value delivery network isn't comprised at the fate of one incident. In general, however, managers should be (made) aware of several trends in the natural environment: - 1) Shortage of Raw Materials: This should be a particular point of concern for firms and organizations tat depend on nonrenewables for energy generation and/or production. - 2) Increased Pollution: Largely fueled by industry production and manufacturing. Continued accumulation of pollution can have detrimental consequences moving forward. - 3) Increased Government Intervention: While the degree of government intervention will vary by country, it is the case most developed countries experience high(er) rates of government intervention, which plays the role of monitoring pollution and tracking damage to the environment. In the U.S., the EPA was created to create and enforce pollution standards. However, in today's economy, innovative organizations are going beyond what the government mandates. Many are practicing environmental sustainability, which is the idea that they can develop strategies and practices that create a world economy the planet can support indefinitely. This is common in the case of enlightened companies, who are proactive and innovative. Indeed, by saving resources and practicing sustainability, Walmart has seen serious gains in financial savings and loosening their cost structure. - 4) Technological: The technological environment refers to the forces that create new technologies, creating new product and market opportunities. Specifically, the IoT has allowed seemingly regular devices to gain internet access and connectivity ability. This is important to marketers b/c this changes the way people buy, which ultimately changes the way marketers engage with consumers and build relationships with them. Beyond shopping itself, there are also technological forces that can improve existing products. Disney is, at its core, an entertainment services firm, and with the implementation of its RFID wristband, park visitors can enter rides, buy food, shop at the gift shop, etc. This not only makes the experience easier for them, but it positions Disney in a position within the market to effectively differentiate itself and create value it can then later capture. As a parting note on technological forces, marketers also need to be aware of where the market is headed and how/when a technological disruption may hurt a business. It should also be noted that the FDA and the CPSC plays a key role in monitoring and regulating new goods/services introduced in the market and ensuring they are adequate for consumer use. - 5) Political: The political environment is focused more on the legal side of the word "political." It looks at laws, government agencies, and pressure groups that limit various organizations and individuals within society. - 1) Legislation Regarding Business: Although decentralized, market economies thrive in free-engagement, even some say that some regulation is good for an economy, as it can bolster competition. There is also legislation on business to protect businesses and consumers (anti-trust, monopolistic competition), as well as society (this is b/c it is assumed most industrial production has some degree of externalities and thus imposes a loss to society). Marketers need to be aware of new laws put forth by regulatory agencies (FDA, FAA, FTC, etc.) in order to avoid penalties and/or brand misalignment. - 2) Increased Emphasis on Ethics and Socially Responsible Actions: Major organizations are emphasizing "doing the right thing" and acting ethically. But internally, when laws don't necessarily guide operations, controls, and/or processes, it can be difficult to enforce this, and it can also be difficult to posit a claim without infringing on another's idea. Because of this, many companies are now instituting codes of ethics and other written documents that can help the company act ethically and morally. Indeed, there is also the issue of privacy and/or ethicality concerning data collection and mining. While many data are collected with consent, a large portion of companies illicitly collect data and track browsing history to uncover actionable insights about the consumer. There is a fear of when this might become too much. Although there have already been instances of litigation, the question arises as to whether or not those continued behavior should be allowed. There is also the idea of cause-related marketing, in which a company attaches its brand to a socially righteous issue and pledges to be supportive and inclusive of surrounding community actors and national issues. For example, ATT and the "it can wait" campaign targeting texting while driving is an example. This also ties back to the idea of environmental sustainability, but more so as a derivative, as socially sustainable behavior. The idea that firms can do well by doing good, that these are not mutually exclusive outcomes. Companies should be worried, however, about not practicing cause-exploitative marketing. Indeed, there is fine line between when cause-related marketing becomes a strategy and when it is a sincere affirmation to charitable governance. When done correctly, the monetary gains can be significant. - 6) The Cultural Environment: The cultural environment consists of institutions and other forces that affect society's basic values, perceptions, preferences, and behaviors. - 1) The Persistence of Cultural Values: Many individuals, through exposure to schools, businesses, and other institutions, subscribe to a specific set of core values that are passed down from generation-to-generation. These core beliefs are immobile and inform and motivate everyday activities. Secondary beliefs are more liquid and may be subject to change. For example, if someone believes marriage is a must, this is a core belief. But a secondary belief may be different for different people: some may say it should be before 25, some might say after. Both could converge to 25 after some persuasion. The underlying point is that core beliefs are rigid, but secondary beliefs are more subject to change. - 2) Shifts in Secondary Cultural Values: Because secondary beliefs can change/shift, marketers want to be aware of any changes that might occur, and society's major cultural values may be expressed in the following ways: - 1) People's View of Themselves: People buy and associate themselves w/ brands they feel are emblematic of their underlying archetype. If someone is courageous and outgoing, marketing efforts depicting young, positively rambunctious individuals may compel them to purchase that brand. - 2) People's View of Others: B/c people are becoming increasingly connected and integrated, they are creating online personas that may reflect their digital profile, specially their social media personality. Social media in particular has given way to a medium in which consumers and individuals can interact with one another, and, depending on if the person in question is looking at someone who belongs to an aspirational group, a dissociative, group, a primary membership group, or a secondary membership group, people may be influenced to purchase different goods/services depending on what they are witnessing and observing from other people. - 3) People's View of Organizations: They view corporations in particular with a degree of less trust, and they view work as becoming more of a chore. Millennials and Gen. Z are becoming increasingly aware of seeking out employment which can be meaningful to them, but overall distrust and obligatory work are most synonymous with people's views of organizations. - 4) People's View of Society: In any given society, there were nationalists and those who do not want to identify with the society. The amount of patriots has only grown in the last 20 years, and brands such as Jeep and Levi Strauss are considered to be patriotic. Their image and identity can very much play a key role in alluring or deterring different customers based on their preferences and identities. - 5) People's View of Nature: A reversion of the trend towards mastery over a bountiful planet, many consumers now see nature and natural resources as inherently scarce. Thus, people want to identify with organizations that promote environmental sustainability. - 6) People's View of the Universe: Although less religious and devoted to institutionalized faith, many individuals are invested in spirituality and a deep sense of wonder. Responding to the Market Environment: Companies can either change the environment themselves (proactive), watch what happens, or wonder what happened. Indeed, many companies have taken the approach of accepting the illiquidity of the market environment, opting to develop robust procedures that can be used to reposed and adapt to changes in the market environment. Others have tried to change the market environment and take a proactive stance. This may entail lobbying the political environment, working with media publics or citizen-action publics to generate structural shifts in the market, etc.