Marketing 6000 Quiz 1

How does Big Picture define a brand? (M4)

A name, sign, term, symbol, or design (or combination) which is intended to identify goods/services of one/group of sellers and to differentiate them from those of the competitors (ex: McDonalds is 'convenience')

Compare and contrast heart, head and hand loyalties. How does loyalty relate to core competence? (M4)

Big Picture: Heart: emotional attachment and personal identification with the brand. Pros is that the consumer will protect the brand, cons is the customer might have high expectations depending on the relationship. Head: a relationship that is rational and based on benefits of brand (like product performance). Pros is that customers will remain is it delivers identified criteria, cons is the customer can transition if another product demonstrates better benefits. Hand: habitually loyal, customers use product/service because they have for a long time and they work. It is low involvement loyalty (not interested in product features and benefits). Example is salt. Pros are high profits and quite price-insensitive. Companies must maintain quality and distribution. Loyalty and core competence: core competencies must enable the company to deliver benefits valued the customer type. Hard to please all three types of customers. Brand loyalties can vary among industries and customer loyalties can shift (move from heart to head).

What is the benefit-based category definition? (M4)

Big Picture: The benefit-base category definition: the business category (or market) is the field within which companies deploy their products/services and customers satisfy needs through the purchase of products/services. Traditionally, companies defined business categories by adding up their sales of particular types of products. Now, we do it by adding up the revenue of products that fill particular customer need.

- What is hybrid branding? (M3)

Hybrid branding is a branding approach that combines two brands, the corporate brand and separate brands, to designate differences in product or service lines. (ex: 3M uses its corporate name as a brand but maintains Post-It and Scotch Guard separate brands). It can lead to incoherent product portfolios and many companies grudgingly avoid ridding umbrella branding.

What is the distinguishing characteristic of marketing versus other strategic disciplines? (M4)

Prof view: marketing focuses on customers and is the "voice of the customer" within the company. Big Picture: Responses of customer (not market or companies) that determine marketing plan success or failure. Customer loyalty is driver of company profits.

Be able to identify the potential sources of cross functional conflict with marketing (see Marketing Insight). (M2)

Textbook: A difference in what they may want to deliver v. what marketers may want them to deliver. (p.9) 1. Research & Development 2. Production/operations 3. Finance 4. Accounting 5. Human resources

- What is meant by Green, Yellow and Red Zones? (M3)

Textbook: According to the GE model, there are three priorities and associated colors. Priority A (green) are the grid cells towards upper left that indicate high attractiveness and strength, in which the SBU should build share. Priority B (yellow) are medium in both attractiveness and strength, therefore the SBU should hold share. Priority C (red) are grid cells in the bottom right and low in both attractiveness and strength, in which the SBUs should harvest or divest.

- Be familiar with the General Electric 9 Cell Portfolio Model. (M3)

Textbook: An alternate portfolio model to include more market opportunities and competitive positions. All SBUs are classified according to strength (low, medium, high) and industry attractiveness (weak, average, strong).

- What factors would indicate Industry Attractiveness? What factors indicate Business Strength? (M3)

Textbook: Industry attractiveness based on market size (larger the better), market growth (more growth the better), profitability (high-margin better than low), cyclicality, ability to recover from inflation, and world scope. Business strength is based on market position (domestic market share, world market share, share growth, and share compared with leading competitor) and competitive strengths (quality leadership, technology, marketing, and relative profitability).

How should marketing objectives be derived? And how should marketing objectives be stated? (M2)

Textbook: The objectives are derived from the mission, but are more specific and achievable. They should reflect commitment to customer rather than profit.

Be able to relate acquisition and retention strategies to core competence, goal, fundamental entity and time frame. (M4)

Big Picture: Core Competence: Relying heavily on acquisition revenue will cause a need to have a core competence in marketing and new product development. A focus on retention will shift core competencies to cover customer service and customer research. Goal: choosing a primary metric will change marketing objective choices. Ex: selected profitability as an objective will cause a focus on less-expensive retentive objective. A objective in revenue or share will increase focus on acquisition. Fundamental entity: the way FE is defined will determine customers as targets of acquisition or retention. Customers should be counted based on the selected FE. Not doing this will cause wavering between umbrella and distinct branding (no organizational or strategic alignment). Time Frame: Acquisition of customers is more time-consuming and the objective should reflect this fact.

What is CRM and how can it help with retention? Be able to identify retention activities. (M4)

Big Picture: Customer relationship management: a set of processes to manage the connection between the company and the customer. It identifies profitable customers and develops tools to manage the relationship with the company. Includes use of IT system that captures info about demographics and behaviors, as well as firm reps and customer interactions. Increased efficiency in companies, including air travel and financial services.

What two questions must be addressed in an earning share strategy? (M4)

Big Picture: From whom? Must identify the specific brand or segment from which we intend to earn share. This can help to create a specific comparison. What is the key advantage of our brand v. theirs? The answer is the dynamic benefit (the differentiator) and foundation of the strategy.

- Be able to identify the elements of the Big Picture Framework and the order they appear (Figure 2.8, p. 53) (M3)

Big Picture: In order... Business objective, marketing objective, source of volume, STP (segment, target, position), execute (product service, price, place, promotion), evaluate.

- What criteria should be used to evaluate goals (i.e., "Goal Criteria"?) (M3)

Big Picture: Measurable: being able to quantify the goal. The use of statistics is common. $, volume, units, %, customers, etc. are preferred measurements for communication purposes. Time-dependent: answers "when". Short time frame interpreted as a crisis. Expansion seen in long-term goals. Single-minded: target individuals (professor has mixed feelings on this one). Realistic: not used to inspire, but to direct. Needs to be achievable. Integrated: linked to higher level goals.

Know the concepts of RFM analysis and CLV analysis. (M4)

Big Picture: Recency, Frequency, and Monetary (RFM) value analysis ranks customers by examining how recent they have purchased, how often they purchase, and how much they spend. Non-profits use the analysis to target mailings. Shortcomings include companies focusing on top customers, which could ultimately turn the customers away. Also, it only looks at the revenue side of the profitability equation (look at profitability analysis too). Customer Lifetime Value: total net present value of current and future profits that a particular customer will generate over lifetime of relationship with company. Formula considers how much profit is earned over particular time period and how long the customer will remain with the company. CLV=$m(r/1 + r - d) r=retention rate $m=dollar profit margin per customer d=company's discount rate. CLV provides a guide for how much a company should invest to acquire customers. CLV is sensitive to changes in retention rate (compared to margin per customer). CLV helps identified ideal retained customer.

Contrast stimulating demand with earning share activities. Be able to identify each. Identify the pros and cons of each. (M4)

Big Picture: Stimulating demand strategy: aka primary demand strategy. the firm focuses on growing the category instead of outcompeting the competition. Ex: Starbucks stimulates demand in an existing category that has been stagnant. Red Bull has broken away from the soft drink category, created the energy drink segment. There is no direct comparisons with this method and healthy category growth. Market leader in the category must always purse a stimulate demand strategy. Category growth can occur by attracting new users into the category, convince current users to consume product more often or in greater quantity, or create new value by convincing existing users to pay more by innovating the product or selling additional products/services. Earning share strategy: aka selective demand strategy. comparisons to a company or group of companies. Target the competition (which is growing the market) and make a comparison that places our brand in a favorable light. Can attract new users to the brand or increase usage among multi-brand users. New users are challenging to acquire, but bring in substantial revenue when we do. Multi-brand users can include cereal eaters that like multiple types. Important differences: Stimulate demand key benefit is the focus of the brand is on capturing high ground or thought leadership in the category (importance of building sustainable category leadership). A category leader would suffer with an earning share strategy because the credibility will be questioned and the competition will be noticed. Strategy demand strategy requires more risk taking than earning share and expends more resources. Earning share is efficient (at least in the short run) because it uses the customers' awareness of the competition brand. However, the comparative benefit must be true, competition can retaliate, and there can be negative reactions to the comparison.

What are the four B's? Why are they important? (M4)

Big Picture: The four B's are bodies, beliefs, behaviors, and bucks. Bodies: counting potential customers. Helps align strategic decisions with assessment of market potential. Beliefs: assessing beliefs in order to influence behaviors. Estimate how many people share a particular belief and how likely it is that the belief can be changed. Some sort of attitudinal research used. Behaviors: determining what customers are doing now and what we want them to do (current and desired behaviors). There will be links identified between beliefs and behaviors. Bucks: assessing potential revenue. The most common metric for measuring marketing success is almost always market share. Financial metrics used to determine potential success.

At the broadest level, what are the two sources of volume? (M4)

Big Picture: The sources of volume are stimulating demand (expanding the category) or earning share (convincing current category users to switch from a competitor to our brand).

- What are the four "key factors" to consider when choosing a brand strategy? Be able to identify each. (M3)

Big Picture: Time Frame: umbrella strategy preferred for firms with short product-development timetables to speed up time-to-market and do not need to increase awareness independently. Firms needing flexibility to change to consumer trends could prefer distinct-brand strategy. Robustness of brand positioning: a benefit-oriented, opposed to feature-based, positioning tend to be more robust (extendable to wider consumer range) and preferable for umbrella branding. Product risk: If a product has high failure risk or a risk has high negative impact, then distinct branding can help mitigate risks. Firm competencies: certain competencies align with branding. Ex: an umbrella strategy requires the firm to maintain position among multiple markets. In contrast, distinct branding firms will need strengths in product development and commercialization.

- Distinguish between Umbrella Branding, Distinct Branding and Hybrid Branding. (M3)

Big Picture: Umbrella branding is a branding approach whereby the company uses just one brand for all of its products and services. (ex: Crest may have a whitening product, but all of its products serve to benefit teeth). Distinct branding is a branding approach whereby the company creates different brands for its different products/services. Opposite of umbrella. (ex: Proctor & Gamble offer Gillette products, Tide detergent, and Lacoste fragrances). Hybrid branding is a branding approach that combines two brands, the corporate brand and separate brands, to designate differences in product or service lines. (ex: 3M uses its corporate name as a brand but maintains Post-It and Scotch Guard separate brands). It can lead to incoherent product portfolios and many companies grudgingly avoid ridding umbrella branding.

Contrast acquisition vs, retention activities. Be able to identify each. (M4)

Big Picture: Acquisition activities: depends on the goal to either bring in new users to the category or attract users from a competitive brand. Trial-based promotions (high-value coupons, trial-size packaging, and incentive pricing) must be ensured that the customer will try and LIKE the product. Otherwise, informational advertising, product/packaging improvement, and sales training can be used. Retention activities: customer loyalty programs (frequent fly/buy rewards), reminder advertising, and continuity coupons (incentives for multiple purchases, in-pack coupons). Product development may be considered a retention activity. CRM is used to manage loyal customers.

- Review the concept of "core business." (M3)

Big Picture: Core business of the firm is the central focus of a company's activity. Strategic business definitions are based on customer benefits v. tech, product, or process.

How are behavioral and attitudinal definitions of customers distinct? (M4)

Big Picture: both kinds of data should be collected if possible... Behavioral: defining a customer by observing and measuring behaviors. Common metrics are frequency of purchase, recency of purchase, and volume of purchase. These can be compared to competition or an absolute basis (how many in a certain time period?). Recency, Frequency, and Monetary (RFM) value analysis and Customer Lifetime Value is used to measure customer behavior. Attitudinal: the customers' beliefs about the product and its benefits. Attitudinal info considered in firms with not enough behavioral info (infrequent purchases) and cannot rely on behavioral info because of irregular purchases based on changing needs. Attitudinal data helps assess loyalty.

- What purpose does a Goal serve? (M3)

Big Picture: the primary purpose of a goal is to serve as a decision aid. It is used as a reference point to evaluate alternatives but sticking to consistency and integration of strategy/execution. Second function of a goal is to define performance criteria. Evaluate accomplishments based on goal statement and time frame.

What is the Marketing Concept? Be able to identify guidelines for implementing the marketing concept. (M2)

Prof view: "determining the needs and wants of target customers, and delivering satisfaction more effectively and efficiently than competitors" (Peter Drucker, 1954). A Market Orientation is the implementation of the Marketing Concept. Organizations as a whole should be more market oriented, any dept. should serve the customers. Textbook view: "an organization should seek to achieve its goals by serving its customers". Focus on customer needs/wants to offer services/products. Marketing orientation is the purpose of the marketing concept. It is to rivet the attention of organizations on serving customer needs/wants (different from production orientation). Importance of customer relationships.

What is Marketing? Be familiar with the AMA definition and the role of exchange. (M2)

Prof view: The central core of marketing is exchange. Marketers have even studied gift-giving. Marketing is persuasion. Textbook view: AMA definition is "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"

What is the "controllable" marketing mix (aka the "Four P's" of marketing)? (M2)

Prof view: The four P's are product, place/distribution, price, and promotion. Product includes goods, services, and ideas. These 4 are called Controllable Levers. Uncontrollable Forces constrain the 4P's (competitive, economic, social, technological, and regulatory forces). Represents how broad marketing extends. Bulls eye in middle to represent target customer. 5th P included in new model, people. Involved only in delivery of intangible services. Some models even include process and physical evidence (7P's).

Understand the importance of customer acquisition and customer retention. (M4)

Prof view: universities are good example of sufficient retention so the focus should be on acquisition. Big Picture: Customer acquisition is attracting new customers to the brand franchise (involving awareness creation, info delivery, and activities designed to encourage trial). Important for new/growing firms and for those with new market development. Not all acquired customers are equal, which is why retention is important. Customer retention is maintaining and strengthening the relationship between these customers and the franchise. Some firms will lock in customers with long-term contracts. Network externalities can create profit from a product sold due to high market share of a competing brand/product. Word-of-mouth effect is critical for acquiring new customers by retained customers.

- What is meant by a Fundamental Entity? (M3)

Professor view: Big Picture defines it as "the perspective from which you will evaluate decisions throughout the framework"... essentially the "unit of analysis". Big Picture: The brand level from which we conduct strategic analysis. It could be the corporate brand, a brand line, or a product brand depending on the company's brand structure. How do we shape the marketing given how customers think of the firm? The fundamental entity will mirror the consumer perspective of the brand.

- What four questions should a business ask in determining its business objective? (M3)

Professor view: 1. Who are we? (Fundamental Entity - FE) 2. What are we good at (Core Competence - aka distinctive competency) 3. Where are we going? (and how will we get there - Goal) 4. What is our main business? (Core Business)

- What is a Core Competence? How does this relate to marketing strategy and the fundamental entity? (M3)

Professor view: it is a skill that can lead to competitive advantage. Can derive from different sources (people, technology, processes, intellectual property). Distinctive competence is more of a marketing term because it relates to a capability visible to customers and superior to competitors. Core competency is more of a general management term. Big Picture: Recognizing core competencies will help decide on a marketing strategy. Evaluation of competencies of competitors is critical. An investment in core competencies at management level can allow multiple fundamental entities to profit from it.

What four key things should a statement of mission and organizational objectives accomplish? (M2)

Textbook: 1. Can be converted into specific action. 2. Provide direction. Serve as starting point for more specific/detailed objectives in lower levels of the org. 3. Establish long-run priorities for the org. 4. Facilitate management control because they serve as standards which performance can be evaluated with.

Be able to identify the 7 common shortcomings of mission statements (see Marketing Insight). (M2)

Textbook: 1. Incomplete: not specific to direction and kind of company should be created. 2. Vague: does not provide direction to decision makers when faced with choices. 3: Not motivational: does not provide purpose or commitment to something bigger than the numbers. 4. Not distinctive: not specific to our company. 5. Too reliant on superlatives: too many superlatives (i.e. most successful, recognized leader). 6. Too generic: does not specify business or industry that it applies to. 7. Too broad: does not rule out any opportunity management may want to pursue.

Know the "organizational growth strategies". (M2)

Textbook: Based on Products/Markets: focuses on directions organization can take to grow. 4 organizational growth strategies... Market Penetration Strategies: focus on increasing the sale of present products to present customers. Market Development Strategies: seeking new customers for its present products. Product Development Strategies: new products developed would be directed primarily to present customers (i.e. different versions of original product). Diversification: seeking new products (acquisitions commonly) for customers not being served currently.

Understand and be able to identify the elements of the Marketing Management process. What "uncontrollable" environments should be examined in a Situational Analysis? Be able to identify examples of each. (M2)

Textbook: Marketing management defined as "the process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives". Situation analysis is divided between six areas of concern... Cooperative environment: parties of primary interest are suppliers, resellers, other dept. in firm, and subdept. and employees of marketing dept.. Methods here are to increase efficiency through teamwork approaches. Unresolved conflicts and material shortages are downfalls here. Competitive environment: opportunities include acquiring competing firms, offering better value to consumers, and sometimes driving competitors out of industry. Economic environment: state of macroeconomy and changes in it will bring opportunities and constraints. Social environment: includes the everchanging general cultural and social traditions, norms, and attitudes. Political environment: attitudes and reactions of public, social/business critics, and other organizations. Legal environment: includes host of federal, state, and local legislation directed at protecting both business competition and consumer rights.

What is the "greatest advantage" of strategic planning with a cross-functional team? (M2)

Textbook: The ability of team members to consider a situation from a number of viewpoints. Can avoid costly mistakes and poor solutions. U.S. usually has groups divide up the work to finish a task.

What questions must be answered when deciding on a target market? (M2)

Textbook: What do customers want or need? What must be done to satisfy these wants or needs? What is the size of the market? What is its growth profile?

- What are the criticisms of the BCG Model? (M3)

Textbook: 1. Assumes market growth is uncontrollable. Can cause managers to become preoccupied with setting market share objectives instead of growing the market. 2. There are assumptions regarding market share as a critical factor affecting firm performance may not be true (especially international). 3. Assumes that a major source of SBU financing comes from internal means. 4. Does not take into account any interdependencies between SBUs. 5. Does not take into account any measures of profits and customer satisfaction. 6. (Most important) Based on underlying assumption that corporate strategy begins with analysis of competitive position.

According to Thompson et al., how should an organizational strategy be tested? (see Marketing Insight) (M2)

Textbook: 1. The Fit Test: external fit means a strategy will be well matched to industry and competitive conditions, the best market opportunities, and other aspects. 2. The Competitive Advantage Test: a strategy should enable a long-term competitive advantage. 3. The Performance Test: strategy should be above average in two indicators... profitability/financial strength and competitive strength/market standing.

What is the long-term value of loyal customers? (see Marketing Insight) (M2)

Textbook: 1. it costs more to acquire a new customer than keep an old one. 2. loyal customers buy more from your firm over time. 3. the longer a customer is kept, the more profitable they become. 4. it costs less to service loyal customers than new customers. 5. loyal customers are excellent referrals for new business. 6. loyal customers are often willing to pay more for the quality and value they desire.

- Be familiar with the BCG Portfolio Model and each quadrant. What objectives might be pursued for SBU's in each quadrant? (M3)

Textbook: The BCG model is based on assumption that profitability and cash flow is closely related to sales volume. 4 quadrants... Stars: SBUs with high share of a high-growth market. Normally cash users to protect market share position due to high competition. Cash Cows: market leaders in a slow growing market. SBUs have high share of a low-growth market, cash generators for firm. Dogs: SBUs that have low share of low-growth market. If it has loyal customers, it could be a source of profit and cash. Usually, dogs are not large cash sources. Question marks: SBUs with low share of high-growth markets. Have potential but need great resources to build market share. The objectives for quadrants are... Build share: great for promising question marks. Sacrifice immediate earnings to improve market share. Hold share: great for strong cash cows to maintain cash flow. Preserve SBU's market share. Harvest: great for weak cash cows, weak question marks, and dogs. Goal is to increase short-term cash flow without long-term impact. Market share should decline to maximize earnings and cash flow. Divest: great for dogs and question marks without resources. Sell or divest the SBU because better opportunities exist elsewhere.

Review the Strategic Planning Process and be familiar with each component. What is a "distinctive competency"? (M2)

Textbook: The Strategic Planning Process is important for short/long term by balancing financial performance and the everchanging market. Organizational Mission: accomplishing something in a larger environment and purpose, vision, or mission is clear in organization's inception. In a time of expansion, results include the organization's original purpose becoming irrelevant as the organizations expands into new areas, original mission may be relevant but managers lose interest in it, or the changes in environment make the original mission inappropriate ("drifting" organization created by these results but should be driven by mission statement). Mission statements should include the organization's history, distinctive competencies (things the organization does well in comparison to others), and the environment. Organizational Objectives: end points of mission and cover what it seeks in the long-run. Specific, measurable, and action commitments Organizational Strategies: "grand design" of major directions to reach mission/objective goals. There are three main strategic approaches: market/product based, competitive advantage based, and value based. The strategy/strategies should be chosen based on mission statement. Organizational Portfolio Plan: identify strategic business units and portfolio models (resources given to SBUs).

Should the organizational mission be focused on products or markets? What does it mean to have a mission that is achievable, motivational and specific? (M2)

Textbook: it should be focused on markets rather than products. Achievable: it should lead into visualizing new opportunities and not lead into unrealistic ventures beyond competencies. Motivational: guidance for employees/managers in dispersed units and working on independent tasks. Specific: provide direction and guidelines to management when choosing alternative courses of action.

Relate the four B's to the concepts of acquisition, retention, stimulate demand and earn share. Specifically, pay close attention to how each of the four B's relate to each combination of acquisition, retention, stimulate demand and earn share (especially note Figure 4.7 and 4.8). (M4)

see word document

Be able to relate the concepts of acquisition, retention, stimulate demand and earn share (especially note Figure 4.5). (M4)

see word document for more details. Prof view: Acquisition/Stimulate Demand: attracting new users to the category (without regard for making a direct comparison to a particular competitor). Ex: Advertising for dairy products in California (many CA farmers) Retention/Stimulate Demand: marketing to existing customers but convincing them to use more of our product or pay more. Retention/Earn Share: marketing to existing users, but taking a competitive focus because they are using other brands in the category too. They are multi-brand users. So, we want them to either use more of our product and less of our competitors, or we want them to be exclusive to our brand. Acquisition/Earn Share: attracting new users to our brand by luring them away from the category leader (or if we are the category leader, luring them away from our lesser competitors).