MKT 473: Marketing Management: Policy and Strategy

committed partnerships

- long term voluntarily imposed - socially supported union high in love, intimacy, trust and commitment to stay together despite adverse circumstances - adherence to exclusivity rules expected

market segmentation

-1960s -Before 1960, coca-cola produced only one beverage and aimed it at the entire soft drink market

VW comes to US

-American imagination dominated by notions of the "good life" -scientific progress, big brands, and contradictorily little choice; consumers provided with a template for moving up the social ladder -ideology of conformism -marketers used to have more control over their brand's meanings

Background to Levitt

-Post WWII America -economic growth outpacing understanding of how growth is achieved

target markets

-a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges

the social and symbolic power of brands

-brands use stories to convey messages as a deliberate strategy to engage consumers and build connection

Factors to consider when pricing products

-cost -competitors -strategic objectives -consumer willingness to pay -context

points of contention

-elements of your offering where you and the customer may disagree on how your functionality/performance/value compares with that offered by the next best alternative

The Social Power of Brands

-functionality: the material value of a brand (what it does) -symbolism: the immaterial or intangible value (what it means)

Era 4

-mainstream fragments -specialty outlets and tracks -publish or perish -field continues to grow and evolve -demand for business degrees holding steady, but skepticism of business degrees is rising, with an increased transparency and awareness of business practices -(social) crimes of omission and crimes of commission

Consumers and their relationships

-marketing long predicated on "exchange" paradigm -value understood as something merging from exchanges

arranged marriages

-non voluntary union imposed by preferences of a 3rd party intended for long-term exclusive commitment; low-levels of emotional attachment

exchanges vs relationships

-short-term vs long-term thinking

A segment must meet four criteria

-sustainability: meaningfully large -identifiability and measurability: must be something you can see and measure in some way -accessibility: you must be able to reach them -responsiveness: segment will meaningfully alter behavior relative to other segments

Hunsk Engines

-target market - independent, adventure-seekers; culture - bull, can go unnoticed, fast -differentiated benefit - greasiness, for people by people -frame of reference - cross-country motorcycles -reason to believe - by people

Segmentation variables (bases)

Characteristics of individuals, groups, or organizations used to divide a market into segments: -geography -demographics -psychographics -benefits sought -usage rate

Customer Lifetime Value

Depends on three (3) factors: 1.Cost to acquire the customer. 2.Annual profits the customer generates for the firm. 3.Number of years the customer is likely to purchase from the firm. -CLV= m x L - AC -m is contribution margin, l is expected purchasing life of a customer, and AC is acquisition costs -knowing the customer acquisition cost in addition to the CLV helps firms determine how much they should spend on marketing

courtships

Interim relationship state on the road to more enduring commitment.

Era 3

Knowledge Development -marketing concept -market segmentation -marketing mix (4 P's) -brand image -marketing management as analysis (look at environment we are operating in), planning (make decisions on targeting), implementation (decide where you are going to place message), and control (testing) -market myopia Emergence of Science -national effort to infuse math and statistics -development of computer as a research tool -focus on systematic process of gathering and analyzing data so informed decisions could be made -recognition of importance of qualitative and quantitative approaches to data collection

Customer Orientation

Product -Focus: Internal -Customers: Don't care -Key Question: What can we make? Sales -Focus: Internal -Customers: Everyone -Key Question: How can we sell what we have? Market -Focus: External -Customers: Many different groups -Key Question: What value do consumers want?

Marketing Process

SWOT analysis Business Plan Market Segmenting Market Mix

customer divestment

a company stops providing products or services to an existing customer

sustainable competitive advantage

an advantage that cannot be copied by the competition -has to be different from competitors, customers have to know about it

secret affairs

highly emotive, privately held relationship considered risky if exposed to others.

Customer responsible for profits

in business-to-business companies, the top 20% of customers are generally responsible for 150%-300% of total profits, while the company breaks even on the middle 70% of customers and the bottom 10% of customers cause losses.6 Similarly, a multi-industry study by McKinsey & Co. found that bad customers might account for 30%-40% of a typical company's revenue

enmities

intensely involving relationship characterized by negative emotions and desire to avoid, or to inflict pain on the other.

customer co-creation

inviting stakeholders (usually customers) to participate in a design or problem-solving process to produce a mutually valued outcome -involves the joint creation of value by the company and the customer -the customer is allowed to co-construct the service/message/experience -involves the contraction and maintenance of an infrastructure that allows consumers to have an active dialogue with producers

enslavement

nonvoluntary union governed entirely by the desires of the relational partner; involves negative feelings but persists due to circumstances.

kinships

nonvoluntary union with lineage (family) ties.

Focus on your customers' needs,

not your capabilities

dependencies

obsessive, highly emotional, selfish attractions cemented by feeling that the other is irreplaceable; anxiety from separation; high tolerance for other's transgressions.

rebounds

precipitated by desire to move away from prior or available partner as opposed to attraction per se

Customer Divestment

reassess--> educate--> renegotiate--> migrate--> terminate

flings

short-term, time-bound engagements of high emotional reward; devoid of commitment and reciprocity demands.

Era 5

societal marketing

touchpoint

some element in the marketing mix where we connect with our customers

What is marketing? (AMA definition)

the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large

Value Proposition

the value promised by a particular product service, or brand to an audience (Consumers, partners, clients, society)

Frame of Reference

•Promises are relative •Other complementary or substitute products? •Chosen comparison affects how the promise is evaluated

Era 1

-Commodity approach: -focused on a particular product category -Institutional approach: -focused on a particular institutional type (retailer, wholesaler, broker, B2B, B2C, B2G) -functional approach: -focused on a particular activity (promotion, distribution, pricing, product development, customer service)

marriages of convenience

-Long-term committed relationship precipitated by environmental influence versus deliberate choice

open source branding

-a brand is embedded in a cultural conversation -consumers have power in that conversation -sometimes consumers have more power over the brand than the brand owners -a product of the influences of social collectives, transparency, criticism, and parody -underlying power dynamics reflect a shift from marketers to consumers -however, neither marketers nor consumers have total control -marketing characterized by ongoing engagement and evaluated in terms of their degree of culture-defined resonance

Brand

-a name, term, symbol, design, or combination thereof that identifies a seller's products and differentiates them from competitors' products; collection of perceptions -to marketers: utilizing strategies to raise awareness; what is promised

Marketing's contributions

-accumulate over time -diffuse through a society -occur within the context of everyday life

Customer Value Proposition Components

-all benefits: how product is good -favorable points of differentiation: how the product is better compared to alternatives -resonating focus: competitive advantage

Principles of Retro marketing

-attacking assumptions about what it means to be "customer centric" -customers don't know what they want -marketers have become mindlessly devoted to customers -customer oriented doesn't mean catering to their every whim

Myth 1

-belief: an ever-expanding and more affluent population will guarantee our growth -result: we focus on products, not customers' needs

Myth 4

-belief: technical R&D will ensure our growth -result: we think our products will sell themselves

Myth 2

-belief: there is no competitive substitute for our industry's major product -result: we fail to innovate

Myth 3

-belief: we can protect ourselves through mass production -result: we focus on selling instead of marketing

Positioning continued

-brands are promises -positioning statements outline the promise -to (target audience), (name) is the brand of (frame of reference) that (differentiated benefit) because (reason to believe) -the positioning consistent across various touch points that the firm controls

aggregate marketing system

-concerns about supply and demand -macro marketing concept -huge and sprawling human institution, embedded in the daily life of its society -marketing monitors the wants and needs of its citizens, and works to deliver satisfactions of these -suppliers, producers, consumers, and the institutions that support these relationships -derived demand -macro way of looking at suppliers, producers, and consumers and thinking about how they work together every day to meet the needs of consumers

What does marketing do?

-consumers have wants and needs: -need - state of felt deprivation -want - need that is shaped by a person's knowledge, culture, and personality -marketing connects two or more parties with unsatisfied needs who have the desire and ability to satisfy these needs, a way to communicate, and something to exchange

consumers and producers

-culture of brands is no longer created by a handful of producers and then delivered to millions of consumers -mass media has given rise to multiple media -amateurs can make good content - and they do. With the internet providing a distribution system for this content -brands need to engage consumers in a meaningful dialogue -co-creation is prevalent

targeting

-customer identification: value, profile -strategic targeting: target attractiveness, target compatibility -tactical targeting: demographic factors, behavioral factors

Entropy Model

-dissolution and deterioration stem from failures to actively maintain the relationship -characterized as a "fading away"

Dominant Logics

-economic approaches are overly simplistic when it comes to value -tyranny of efficiency and cost savings -examples where other forms of value exist but are little recognized -recognizing that markets are a way of organizing

points of difference

-elements of your offering that offer either superior or inferior functionality/performance/value compared to the next best alternative

points of parity

-elements of your offering that offer the same functionality/performance/value as the next best alternative

What unhappy customers want

-encourage "unhappy" to complain -understand what results your investments in customer service will actually produce -technology has its limits - some customers want to interact with humans -customers may be more influenced by positive WOM than negative WOM -for most, dissatisfaction is about more than money

relationship marketing

-establishing, developing, and maintaining successful relational exchanges with a variety of internal and external stakeholders -to be successful, requires both commitment and trust -"relationship marketing should be practiced when it offers, or contributes to, a firm's strategy for achieving a competitive advantage--a sustainable competitive advantage" -competitive advantage has to be unique and something customers value

Brand Management in the Open Source World

-from brand building to brand promotion (risk management) -From strategic planning to executional excellence (no longer as structured of a process) -From differentiation to resonance (reason to believe)

Marketing Myopia

-growth will continue, leading to further success of businesses -focusing on the firm capabilities is short-sighted -the purpose of business is to delight customers -the nature of how customers perceive value is often murky, and is always changing -railroads are being myopic

pivotal question

-help to improve strategic decision making by exposing take-for-granted assumptions embedded in current thinking -assumptions play a huge role in why market strategies fail -come from thinking outside-in, explore future scenarios, be a contrarian, look for patterns, create new options, and learn from failure

compartmentalized friendships

-highly specialized, but situationally confined; lower intimacy but high emotional rewards and interdependence; easy entry and exit

Consumer Identities and Brands

-identity value: the aspect of the brand's value that derives from the brand's contributions to self-expression -identity myth: a simple story that resolves cultural contradictions

casual friends/buddies

-infrequent or sporadic engagement; few expectations for reciprocity or reward

childhood friendships

-infrequently engaged, very emotionally laden, yields comfort and security of past self

relationship quality

-love/passion -self-connection -commitment -interdependence -intimacy -partner quality

challenges for firms with customer divestment

-lower profits -possible retaliation by clients -possible reputation crisis -new business for competitors -relationships with retained customers may be strained

AMA definitions

-marketing is the performance of business activities that direct the flow of goods and services from producers to consumers (1935) -Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives (1985) -Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and it stakeholders (2004) -Marketing is the activity...

target audiences

-personas that represent different segments have value as they help marketing managers better understand the lives of customers they service -targets should be identified as more than their demographic attributes; we should understand how they think, feel, and act

segmentation

-plays a key role in the marketing strategy of successful organizations -powerful marketing tool -helps marketers define consumer needs and wants precisely -helps decision makers define objectives and allocate resources more accurately -performance can be better evaluated when objectives are more precise

Positioning vs differentiation

-positioning is something you do in the mind of consumers -differentiation is something you do to the product to make it distinct from other products within the category you are competing in

4 Eras of Marketing

-production - Prior to 1900s -sales - prior to 1920s -marketing - prior to 1950s -relationship - prior to 1980s

Reasons for customer divestment

-profitability - customers no longer provide significant ROI -to increase employee productivity and morale

key segmentation principles

-relevance: customers grouped by likely response to offering -similarity: customers in a segment are relatively homogenous -exclusivity: segments should be relatively heterogeneous -comprehensiveness: all segments together should encapsulate the entire market

steps to segmentation

-select a market or product category for study -choose a basis or bases for segmentation -select segmentation descriptors -profile and analyze segments -select markets -design, implement, and maintain appropriate marketing mixes

marketers segment markets for three reasons:

-to identify groups of customers with similar needs and analyze the characteristics and buying behavior of these groups -segmentation provides marketers with information to help them design marketing mixes specifically for one or more segments -segmentation is consistent with the marketing concept of satisfying customer wants and needs while meeting the organization's objectives

poor questions

-too narrow -overly protective of the current business -imply assumptions that further restrict strategic thinking

Framework

-typical problem --> typical solution -specific problem --> specific solution

Value

-value does not equal price -perception -price can tell us something about the product, but it's the total set of attributes that allow us to understand if we see a market offering as "valuable"

best friends

-voluntary and reciprocal; endurance ensured through provision of voluntary rewards; linked with true self, honesty, and intimacy; congruency with personal interests

job to be done

-what are consumers trying to accomplish in a given circumstance -powerful social and emotional dimensions -frames the horizon of possibilities -good innovations solve problems and convert shoppers to buyers

Error of analysis (Levitt)

-what business are you REALLY in? -creativity, insights, audacity

Positioning= Value Promise

-what the customer will "get" -promise what is possible or disappointment will occur -useful to think in terms of types of experiences: -sensory experiences (senses) -affective experiences -cognitive experiences -Physical experiences, behaviors, and lifestyles (act) -Social-identity experiences (relate)

Marketing as an Art and a Science

Art: -human relationships in exchange -brands have human like qualities -creativity and art displayed in product styles, merchandising, and advertising Science: -Data-driven research decisions -systematic process for making rational marketing decisions -big data, track eye movements in stores -customer journeys tracked at various touch points to improve efficiency and performance

Stress Model

Environmental: -situationally-induce: change in physical location; continually impossible or unlikely -intrusion of alternatives: disturbances by imposing, attractive, or superior alternatives Partner-oriented: -personally-induced: disorder motivated by change in personality, roles, needs, or values rendering the relationship a poor "fit" -managerially-induced: disorder resulting from managerial decision to terminate the relationship or alter the partner role Dyadic/relational: trespass of unwritten relationship rules, breach of trust, failure to keep a promise, or perception of neglect

Era 2

functional approach: -physically supplying the market -creating opportunities for exchange -undertaking auxiliary or facilitating functions Efficiency: -associations, newsletters, journals, textbooks -1925 Journal of Retailing -1936-37 AMA established, Journal of Marketing first journal -Today, AMA supports four primary journals

value chain

the series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's products -suppliers, producers, wholesalers, retailers, end consumer -ecosystem approach includes creditors

Differentiated Benefit

Learning about situation/category needs - functional and emotional -In their words -In the context of their lives -How to present your brand/product as the solution •Depiction of what the brand stands for -Should be relatively tangible -May need to be localized -May need to adapt to dramatic cultural, economic, technological, or regulatory shifts

psychographics

•"Profiling" •Attitudes, Values, Behaviors •Activities, Interests, opinions

benefit and usage-rate

•Benefit segmentation: the process of grouping customers into market segments according to the benefits they seek from the product. •Usage-rate segmentation: dividing a market by the amount of product bought or consumed. •80/20 principle: a principle holding that 20 percent of all customers generate 80 percent of the demand.

CLV metrics

•Churn Rate (CR): defined as the % of customers who end their relationship with the company in a given period. •Retention Rate (RR): measures the percentage of customers who continue their relationship with the firm in a given period. (i.e. RR = 1 - CR) •Survival Probability (s): probability that a customer has a relationship with a firm in a given period. Assumed to be 1 in period where the consumer joins firm. •Expected Purchasing Life (L): number of periods that the customer is expected to continue the relationship with the firm.

2 basic rules of consumer behavior

•Customer value concentration: think Pareto rule (80-20); not all customers are of equal value to the brand; some are more valuable than others. •Shopping flexibility: the degree of fluidity of customer preferences based on circumstances (e.g., prefer one brand over another, but opportunistically consume brands based on convenience).

Digital Relationships

•Knowledge of End Consumer: degree to which you understand your end consumer's goals. •Business Design: delivering value as part of a value chain or contribute as part of an ecosystem delivering on a customer's total needs.

Positioning

•Positioning: developing a specific marketing mix to influence potential customers' overall perception of a brand, product line, or organization in general. •Position: the place a product, brand, or group of products occupies in consumers' minds relative to competing offerings. •Perceptual mapping: a means of displaying or graphing the location of products, brands, or groups of products in customers' minds.

relationships stability or durability

•Tolerance/Forgiveness •Biased Partner Perceptions •Devaluation of Alternatives •Attribution Biases

Reasons to Believe

•What is the evidence that I can believe the claims being made? •Testimonials •Length of time in business •Independent research