MKT 555 - Final
Viral Marketing
A form of online word of mouth, or "word of mouse", that encourages consumers to pass along company-developed products and services or audio, video, or written information to others online
Brand
• A name, term, sign, symbol, or design, or combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors
Brand Equity
• Added value endowed to products with consumers because of the brand
Packaging
• All the activities of designing the product and producing the container for a product 1) Identify the brand 2) Convey descriptive and persuasive information 3) Facilitate product transportation and protection 4) Assist at-home storage 5) Aid product consumption
Growth Approaches for Market Challengers
• Challenger can attack the market leader (high risk, high reward) • Challenger can attack firms its own size that are not doing the job and are underfinanced • Challenger can attack small local and regional firms • Challenger can attack the status quo (contrasting services vs. competitors)
Customer Lifetime Value
• Customer Lifetime Value - the net present value of the stream of future profits expected over the customer's lifetime purchases ex) Revenue per customer - Variable cost per customer = Margin per customer Margin per customer X # of customers = Total cost or profit NPV = Total cost or profit X (1 + discount rate)^t - Revenue = Price X Quantity - Cost = Acquisition cost (one time charge) + Cost to serve (annual, not X the # of purchases) + COGS (annual, X the # of purchases)
Eight Common Communication Platforms
1) Advertising - print and broadcast ads, packaging-outer, packaging inserts, cinema 2) Sales Promotion - contests, games, sweepstakes, lotteries, premiums, gifts, sampling, fairs, and trade shows 3) Events and Experiences - sports, entertainment, festivals, arts 4) Public Relations and Publicity - press kits, speeches, seminars, annual reports 5) Online and Social Media Marketing - Websites, email, search ads, display ads 6) Mobile Marketing - text messages, online marketing, social media marketing 7) Direct and Database Marketing - catalogs, mailings, telemarketing, electronic shipping 8) Personal Selling - sales presentations, sales meetings, incentive programs, samples
Three Considerations When Selecting a Pricing Method
1) Costs = price floor 2) Competitors' prices = orienting point 3) Customers' assessment of unique features = price ceiling
New Product Development Decision Process
1) Idea Generation 2) Idea Screening 3) Concept Development and Testing 4) Marketing Strategy Development 5) Business Analysis 6) Product Development 7) Market Testing 8) Commercialization
Ways to Find New Product Ideas
1) Informal customer sessions 2) Time off for technical people 3) Customer brainstorming 4) Survey your customers 5) "Fly on the wall" research 6) Iterative rounds with customers 7) Scan trade publications 8) Trade shows to gather intelligence 9) Have employees visit supplier labs 10) Set up an idea vault
Steps in Setting a Pricing Policy
1) Selecting the pricing objective 2) Determining demand 3) Estimating costs 4) Analyzing competitors' costs, prices, and offers 5) Selecting a pricing method 6) Selecting the final price
Factors That Draw Companies Into the International Arena
1) Some international markets present better profit opportunities than the domestic market 2) Firm needs a larger customer base to achieve economies of scale 3) Firm wants the reduce their dependence on any one market 4) Firm counterattacks global competitors in their home markets 5) Customers going abroad require international service
Labeling
Identifies, grades, describes, and promotes the product
Design
The totality of features that affect the way a product looks, feels, and functions to a customer - Contributes to a product's usefulness as well as its looks
Net Promoter Score
• An index ranging from -100 to +100 that measures the willingness of customers to recommend a company's products or services to others on a 1-10 scale - Used as a proxy for gauging the customer's overall satisfaction with a company's product or service and the customer's loyalty to the brand - Detractors (0-6), Passively Satisfied (7-8), Promoters (9-10) ex) To calculate: (Number of Promoters — Number of Detractors) / (Number of Respondents) x 100
Growth Strategies
• Building your market share • Developing committed customers and stakeholders • Building a powerful brand • Innovating new products, services, and experiences • International expansion • Acquisitions, mergers, and alliances • Building an outstanding reputation for social responsibility • Partnering with government and NGOs
Consumer Behavior Influences
• Consumer Behavior - the study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants • Influenced by: 1) Cultural Factors: - Subcultures - Social Classes 2) Social Factors: - Reference Groups - Cliques - Family - Role - Status 3) Personal Factors - Age and Stage in Life Cycle - Occupation - Economic Circumstances - Personality and Self-concept - Lifestyle and Values
Mature Stage Market Modification Strategy (Alternate Ways to Increase Sales Volume)
• Expand the Number of Users: 1) Convert nonusers 2) Enter new market segments 3) Attract competitors' customers • Increase the Usage Rate Among Users: 1) Have consumers use the product on more occasions 2) Have consumers use more of the product on each occasion 3) Have consumers use the product in new ways
Growth Approaches for Market Leaders
• Expanding Total Market Demand: 1) New customers 2) More usage - increase amount, level, or frequency of consumption 3) Protect market share through continuous innovation
Major Environmental Market Forces
• Firms must monitor 6 major forces in the broad environment: 1) Demographic - main factor marketers monitor is population, including the size and growth rate of population in cities, regions, and nations; age distribution and ethnic mix; educational levels; and household patterns 2) Economical - purchasing power depends on consumers' income, savings, debt, and credit availability as well as the price level ex1) Consumer psychology ex2) Income distribution ex3) Income, savings, debt, and credit 3) Social-Cultural - from our social-cultural environment we absorb, almost unconsciously, a world view that defines our relationships to ourselves, others, organizations, society, nature, and the universe ex1) Core cultural values ex2) Subcultures - groups with shared values, beliefs, preferences, and behaviors emerging from their special life experiences or circumstances 4) Natural - corporate environmentalist recognizes the need to integrate environmental issues into the firm's strategic plans 5) Technological - marketers should monitor the following technology trends ex1) Accelerating pace of change ex2) Unlimited opportunities for innovation ex3) Varying R&D budgets ex4) Increased regulation of technological change 6) Political-Legal - consists of laws, government agencies, and pressure groups that influence organization and individuals
Modes of Entry Into Foreign Markets
• Five Modes of Entry into Foreign Markets (least to most commitment, risk, control, and profit potential): 1) Indirect Exporting 2) Direct Exporting 3) Licensing 4) Joint Ventures 5) Direct Investment
Michael Porter's Five Forces
• Five forces determine the intrinsic long-run attractiveness of a market or market segment: 1) Threat of Rivalry - market is unattractive if is already contains numerous, strong, or aggressive competitors 2) Threat of New Entrants - most attractive segment is one in which entry barriers are high and exit barriers are low 3) Threat of Substitutes - segment is unattractive when there are actual or potential substitutes for the product 4) Threat of Buyers' Bargaining Power - segment is unattractive if buyers posses strong or growing bargaining power 5) Threat of Suppliers' Bargaining Power - segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied
Product Differentiation
• Form - the size, shape, or physical structure of a product • Features - things that enhance the basic function of a product • Performance Quality - the level at which the product's primary characteristics operate • Conformance Quality - the degree to which all produced units are identical and meet promised specifications • Durability - measure of a product's expected operating life under natural or stressful conditions • Reliability - measure of the probability that a product will not malfunction or fail within a specified time period • Repairability - measures the ease of fixing a product when it malfunctions or fails • Style - the product's look and feel to the buyer • Customization - allows users to create their own personalized version of the product
Major Market Segmentation Variables
• Geographic - Region, Country, City, Suburbs • Demographic - Income, Sex, Age • Psychographic - Personality Traits, Lifestyle, Values • Behavioral - Knowledge of, attitude toward, use of, or response to a product
Price/Demand Elasticity
• If demand hardly changes with a small change in price, it is inelastic • If demand changes considerably with a small change in price, it is elastic • Each price leads to a different level of demand and has a different impact on a company's marketing objectives • The normally inverse relationship between price and demand is captured in a demand curve: the higher the price, the lower the demand • For prestige goods, the demand curve sometimes slopes upward - Sometimes consumers take the higher price to signify a better product but if the price is too high, the demand will fall
Growth Stage Strategies
• Improve product quality and add new features • Add new models and flanker products • Enter new market segments • Increase distribution coverage and enter new distribution channels • Shift from awareness and trial communications to preference and loyalty communications • Lower prices to attract the next layer of price-sensitive buyers
Marketing Advantages of Strong Brands
• Improved perceptions of product performance • Greater loyalty • Less vulnerability to competitive marketing actions • Less vulnerability to marketing crises • Larger margins • More inelastic consumer response to price increases • More elastic consumer response to price decreases • Greater trade cooperation and support • Increased marketing communications effectiveness • Possible licensing opportunities • Additional brand extension opportunities • Improved employee recruiting and retention • Greater financial market returns
Points of Difference
• Points of Difference - attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand ex) Three criteria determine whether a brand association can serve as a point of difference: desirability, deliverability, and differentiability
Points of Parity
• Points of Parity - attribute or benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands ex) These types of associations come in three basic forms: category, correlational, and competitive
Public Relations
• Press Relations - presenting news and information about the organization in the most positive light • Product publicity - sponsoring efforts to publicize specific products • Corporate Communications - promoting understanding of the organization through internal and external communications • Lobbying - dealing with legislators and government officials to promote or defeat legislation and regulation • Counseling - Advising management about public issues as well as company positions and image during good times and bad
Four P's
• Product - product variety, quality, design, features, brand name, packaging, sizes, services, warranties, returns • Price - list price, discount, allowances, payment period, credit terms • Promotion - sales promotion, advertising, sales force, public relations, direct marketing • Place - channels, coverage, assortments, locations, inventory, transport
Public Relations Tools
• Publications • Events • Sponsorships • News • Speeches • Public Service Activities • Identity Media
Reach, Frequency, and Impact (RFI)
• Reach (R) - the number of different persons or households exposed to a particular media schedule at least once during a specified time period • Frequency (F) - the number of times within the specified time period that an average person or household in exposed to the message • Impact (I) - the qualitative value of an exposure through a given medium (thus, a food ad should have a higher impact in Bon Appetit than in Fortune magazine)
Satisfaction
• Satisfaction - reflects a person's judgement of a product's perceived performance in relation to expectations
Customer-Driven Marketing Strategy (creating value for targeted customers)
• Segmentation - divide the total market into smaller segments • Targeting - select the segment or segments to enter • Differentiation - differentiate the market offering to create superior customer value • Positioning - Position the market offering in the minds of target customers
Style, Fashion, and Fad Lifecycles
• Style - a basic and distinctive mode of expression appearing in a field of human endeavor • Fashion - a currently accepted or popular style in a given field. ex) Pass through 4 stages: distinctiveness, emulation, mass fashion, and decline • Fads - fashions that come quickly into public view, are adopted with great zeal, peak early, and decline very fast
Pricing Objectives
• Survival: - Price to cover variable costs and some fixed costs - Companies use this method when plagued with overcapacity, intense competition, or changing consumer wants - Short-run objective • Maximum Current Profit: - Firm estimates the demand and costs associated with alternative prices and choose the price that produces maximum current profit - Assumes the firm knows its demand and cost functions • Maximum Market Share: - Set the lowest price, assuming the market is price sensitive - Company believes a higher sales volume will lead to lower unit costs and higher long-run profit • Maximum Market Skimming: - Prices start high and drop slowly over time - Used by companies unveiling a new technology
Factors That Reduce Price Sensitivity
• The product is more distinctive • Buyers are less aware of substitutes • Buyers cannot easily compare the quality of substitutes • The expenditure is a smaller part of the buyer's total income • The expenditure is small compared to the total cost of the end product • Part of the cost is borne by another party • The product is used in conjunction with assets previously bought • The product is assumed to have more quality, prestige, or exclusiveness • Buyers cannot store the product
Customer Equity
• The total combined customer lifetime values of all the company's customers ex) Affected by revenue and by the costs of customer acquisition, retention, and cross-selling
How Companies Price
• Understand consumer pricing psychology • Detailed, up-to-the-moment competitive comparisons • Consistently applying a systematic approach to setting, adapting, and changing prices
Value
• Value - a combination of quality, service, and price (customer value triad) ex1) Value = Benefits/Costs ex2) Value = PrB+SB+PB+IB/MC+TC+EC+PC Benefits = Product, service, personnel, image Costs = Monetary, transaction, effort, psychic
Services Blueprint
Can map out the service process, the points of customer contact, and the evidence of service from the customer's point of view
Style
Describes the appearance of the product
Product Life Cycle
See study guide (#24)
Customer Adoption Lifecycle
See study guide (#25)
Elements in Communications Process
See study guide (#52)
Price/Benefits Positioning
See study guide (#6)
Online Marketing Options
• Websites • Search Ads (paid search or pay-per-click ads) - 35% of all searches are reportedly for products and services. Marketers bid in a continuous auction of search terms that serve as a proxy for the consumer's product or consumption interests. Advertisers pay only if people click on the links. Average click-through is approximately 2%. • Search Engine Optimization (SEO) - describes activities designed to improve the likelihood that a link for a brand is as high as possible in the rank order of all non-paid links when consumers search for relevant terms. • Display Ads - also known as banner ads; small, rectangular boxes containing text and perhaps a picture that companies pay to place on relevant websites. Interstitials are advertisements, often with video or animation, that pop up between page changes within a website or across websites. Average click-through is much lower than search ads. • Email - allows marketers to inform and communicate with customers at a fraction of the cost of a direct mail campaign. Emails can be very productive selling tools.
Product/Mix Assortment
• Width of a product mix - how many different product lines the company carries • Length of a product mix - the total number of items in the product mix • Depth of a product mix - how many variants are offered of each product in the line • Consistency of the product mix - describes how closely related the various product lines are in end use, production requirements, distribution channels, or some other way
Social Media
Allows marketers to establish a public voice and presence online • Online Communities and Forums - come in all shapes and sizes. Many are created by consumers or groups of consumers with no commercial interests or company affiliations. Others are sponsored by companies whose members communicate with the company and with each other through postings, text messaging, and chat discussions about special interests related to the company's products and brands. • Blogs - regularly updated journals or diaries. They have become an important outlet for word of mouth. There are millions in existence, and they vary widely, some personal for close friends and families, others designed to reach and influence a vast audience. One obvious appeal of blogs is that they bring together people with common interests. • Social Networks - have become an important force in both B2C and B2B marketing. Major ones include Facebook, LinkedIn, Twitter, Tumblr, Instagram, and Snapchat.
Service
Any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything
SERVQUAL
Scale that measures services quality based on 21 total items • Based on these attributes: 1) Reliability 2) Responsiveness 3) Assurance 4) Empathy 5) Tangibles
Price
The amount of money charged for a product or service, or the sum of all the values that customers exchange for the benefits of having or using the product or service
Warranty
The formal statements of expected product performance by the manufacturer
Advertising Objectives
• Informative - aims to create brand awareness and knowledge of new products or new features of existing products. Consumer packaged goods companies like Colgate, General Mills, and Unilever will often focus on key product benefits • Persuasive - aims to create liking, preference, conviction, and purchase of a product or service. Some persuasive advertising is comparative advertising, which explicitly compares the attributes of two or more brands. Comparative advertising works best when it elicits cognitive and affective motivations simultaneously and when consumers are processing advertising in a detailed, analytical mode • Reminder - aims to stimulate repeat purchases of products and services. An example is Walgreens advertising annually but only before and during flu season for in-store flu shots • Reinforcement - aims to convince current purchasers they made the right choice. Automobile ads often depict satisfied customers enjoying special features of their new car
Service Characteristics
• Intangibility - services cannot be seen, tasted, felt, heard, or smelled before purchase • Variability - quality of services depends on who provides them and when, where, and how • Inseparability - services cannot be separated from their providers • Perishability - services cannot be stored for later sale or use
Ethical Issues in Direct Marketing
• Irritation - many people don't like hard-sell direct marketing solicitations • Unfairness - some direct marketers take advantage of impulsive or less sophisticated buyers or prey on the vulnerable, especially the elderly • Deception and Fraud - some direct marketers design mailers and write copy intended to mislead or exaggerate product size, performance claims, or the "retail price" • Invasion of Privacy - marketers may know too much about consumers' lives and they may use this knowledge to take unfair advantage
Promotional Pricing
• Loss Leader Pricing - Supermarkets and department stores often drop the price on well-known brands to stimulate additional store traffic. This pays if the revenue on the additional sales compensates for the lower margins on the loss-leader items • Special Event Pricing - Sellers will establish special prices in certain seasons to draw in more customers. Every August, there are back-to-school sales. • Special Customer Pricing - Sellers will offer special prices exclusively to certain customers • Cash Rebates - Auto companies and other consumer goods companies offer cash rebates to encourage purchase of the manufacturers' products within a specified time period • Low Interest Financing - Instead of cutting its price, the company can offer low interest financing • Longer Payment Terms - Sellers, especially mortgage banks and auto companies, stretch loans over longer periods and thus lower the monthly payments • Warranties and Service Contracts - Companies can promote sales by adding a free or low-cost warranty or service contract • Psychological Discounting - This strategy sets an artificially high price and then offers the product at substantial savings; for example, "Was $359, now $299."
Market Leader, Challenger, Follower, and Nicher
• Market Leader - Firm that has the largest market share of a market • Market Challenger - Firm that has a market share below that of the market leader, but enough of a market presence that it can exert upward pressure in its effort to gain more control • Market Follower - Firm that is willing to maintain its market share and not rock the boat • Market Nicher - Firm that serves small segments larger firms don't reach
Mature Stage Strategies
• Market Modification - expand the market by increasing the number of brand users and usage rate per customer • Product Modification - stimulate sales by improving quality, features, or style • Marketing Program Modification - stimulate sales by modifying non-product elements such as price, distribution, and communications
Brand Element Choice Criteria
• Memorable - how easily do consumers recall and recognize the brand element, and when? (ex - Tide, Crest, Puffs) • Meaningful - is the brand element credible? (ex - Lean Cuisine, DieHard auto batteries, Mop & Glo floor wax) • Likable - how aesthetically pleasing is the brand element? • Transferable - can the brand element introduce new products in the same or different categories? (ex - Amazon instead of Books'R'Us) • Adaptable - how adaptable and updatable is the brand element? (ex - Shell logo) • Protectable - how legally/competitively protectable is the brand element?
Needs, Wants, Demands
• Needs - basic human requirements such as air, food, water, clothing, and shelter • Wants - needs directed to specific objects that might satisfy the need • Demands - wants for specific products backed by an ability to pay
Research Approaches
• Observational Research - researchers can gather fresh data by observing unobtrusively as customers shop or consume products • Focus Group Research - a gathering of 6-10 people who are carefully selected based on certain demographic, psychographic, or other considerations and brought together to discuss various topics of interest ex) Useful exploratory step but researchers must avoid generalizing to the whole market because the sample is too small and is not drawn randomly • Survey Research - a method of sociological investigation that uses question based or statistical surveys to collect information about how people think and act • Behavioral Research - the study of the variables that impact the formation of habits
Services Differentiation
• Ordering Ease - how easy it is for the customer to place an order with the company • Delivery - how well the product or service is brought to the customer, including speed, accuracy, and care • Installation - the work done to make a product operational in its planned location • Customer Training - helps the customer's employees use the vendor's equipment properly and efficiently • Custumer Consulting - includes data, information systems, and advice services the seller offers to buyers • Maintenance & Repair - programs that help customers keep purchased products in good working order • Returns - sending the product back to the manufacturer
Paid, Owned, Earned Media (core marketing concepts)
• Paid Media - include TV, magazine and display ads, paid search, and sponsorships, all of which allow marketers to show their ad or brand for a fee • Owned Media - communication channels marketers actually own, like a company or brand brochure, web site, blog, Facebook page, or Twitter account • Earned Media - streams in which consumers, the press, or other outsiders voluntarily communicate something about the brand via word of mouth, buzz, or viral marketing methods
Products Are...
• Physical Goods • Services • Experiences • Events • Persons • Places • Properties • Organizations • Information • Ideas