Marketing

What is within the promotional mix

1. Advertising - any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor - develop advertising objective (informative, persuasive, reminder) - Develop advertising strategy (message = WHAT, creative = HOW = 3 appeals and 9 execution styles, media = WHERE/WHEN) - decide on reach, frequency and media impact 2. Sales promotion - short term incentives to encouage the purchase or sale of a product or service - 3 objectives (consumer promotion, trade promotion and business promotion) - tools = samples ,coupons, cash refunds, promo products, premiums) 3. Personal Selling - interpersonal arm of promotional mix (personal communication b/w company and customers) - effective tool for i nfluencing buyers' preference - allows for feedback and adjustements from both company to customer and customer to company 4. Public Relations - building good relations with company's various publics by obtaining favorable publicity, building good image, handling or heading off unfavourable events/rumours. - public awareness at lower costs then advertising, creates crediblity - tools include: speeches, buzz marketing, mobile marketing, special events 5. Direct marketing - Marketing communciation channel without intermediaries. - Direct mail, telemarketing, kiosk marketing, apps - benefit for buyer = conveinece, immediate - benefit for seller = tools to build customer relationships, low cost, flexible

different ways to budget advertisements

1. Affordable method (Company spends money on whatever it can afford and then the rest of the money just goes to budgeting - aka no logic or thought) 2. Percent of sales (advertising budget will be ___% of sales from last quarter - advertising should increase share and so we should try to have an advertising level that will increase sale so here we are reversing order of causation - we don't want to do this). 3. Competitive parity method (just following competitors - issue is that we assume the competitor is being sensible also your situation is not always the same as your competitors) 4. Objective/task method - say upfront objective of advertising (ex: I want to increase sales of product by 10% for males over 25 and then you figure out how much $$ I need to put in to achieve that method) - More logical but only issue is that it doesn't tell you the best objective 5. Model-based /Response Model approach aka ADBUDG - assume the firm has an objective function to maximize (set advertising level to maximize that objective function)

Marketing Information System

1. Assessing the Information needs 2. Development needed information - Define problem and research objectives (exploratory research, descriptive research and casual) and to do this, you use either secondary data or primary data) - SECONDARY data is INTERNAL sources (financial statements, research report files...aka infomration already in the company) or EXTERNAL (census reports, commerical reports) - PRIMARY data is OBSERVATIONS (either primary which is immersing into consumers life to develop insight for creative ideas or ethnographic which is when you watch consuemrs in their natural habitat) or QUESTIONING (look at wording, order and make it open-ended) or EXPERIMENTS (obtain cause-effect results) 3. Helping decision makers use the information for customers WHEN DOING RESEARCH YOU SHOULD SAMPLE IN 3 WAYS (simple random, stratified random, cluster)

What are the 3 objectives for sales promotion

1. Consumer promotions - increase short term sales or long term market share - generate product trial - price discrimination/customization (ex: coupons) 2. Trade promotions - obtaining distribution and shelf space - encouarge retailers to advertise the brand (often use push strategy) 3. Business Promotions - geneate business lead - signing up new accounts - motivate sales people

Carry over equation to find share at time t

Decay is exponential Sharet= = long-run-min + persistence * (sharet-1- long-run-min) + (a-b)(Xc/d+Xc) long run min = lowest possible share in the future if you stop advertising. Persistence = With 0 ads, the difference between where you are now vs yuo rmin share

What are the 4 types of consumer products

1. Convenience (frequent purchases bought with minimal buying effort and little comparision. Low price, widespread distribution) 2. Shopping (less frequent, lots of comparision effort, higher pricing than convenience, selective distribution and person selling/advertising) 3. Specialty (strong brand prerefernce and loyalty. For special purchase, hgih price, exclusive distribution, carefully targetted promotions) 4. Unsought (little product awareness and knowledge, things that we don't want to think about buying such as life insurance. requires aggressive advertising and personal selling) Reseller support increases from convenience to specialty

What are the assumptions made in ADBUDG

1. If advertising is cut to zero, brand share will decrease, but there is a floor (min), on how much share will fall from its initial value by the end of the period. 2. If advertising is increased a great deal, say to something that could be called saturation, brand share will increase but there is a ceiling (max), on how much can be achieved by the end of one period. 3. There is some advertising rate that will maintain initial share. 4. An estimate can be made by data analysis or managerial judgement of the effect on share by the end of one period of a 20% increase in advertising over the maintenance rate.

What is the Distribution Channel

A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. Channel Design: How to bring products to markets Channel Management: How to coordinate with channel members to produce desired services for end users (Channel conflict occurs when channel members do not perform values as designed --> Horizonal and Vertical) - in order to improve vertical marketing systems create franchise (manufacturer-sponser franchise or business format franchise...manage through contractual arrangements) or vertical integration (everyone is operated by same company) - helps with market power (economic power, rewards, expertise) Producer --> Wholesaler --> retailer --> consumer

How should a firm set their price

A firm's final goal is profit maximization (even if this doesn't mean max profit in current period, you want max value in future) firm must consider: Cost structure, demand and competition Different types of cost: Fixed, variable, Total and Marginal (change in total cost for 1 unit change in quantity = DERIVATIVE OF TC*Q P = a-bQ...R = PQ...MR = a-2bQ or just derivative or R In monopoly you want MC=MR to find optimal quantity Profit = Revenue - Cost

What is the adoption process / the buyer decision process for new products

Adoption: the mental process an individual goes through from first learning about an innovation to final regular use awareness --> interest --> evaluation --> trial --> adoption

What is a competitive advantage?

An advantage over competitiors gained by offering greater customer value, either through lower prices or by providing mroe benefits that justify higher prices

A monopolists optimal price increases for:

An increase in demand an increase in cost a decrease in the price elasticity of demand (demand changes less based on every change in price)

What is a product

Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need

Perceptual Mapping analysis: strength, weakness & application

Application --> Identify gaps and opportunities, identify positioning relative to competition, predict market share. Advantages: · How you are perceived in comparison to competition · Creates visualization · Find gaps in the market · Determine if how consumers perceive product = company's positioning goals Disadvantages: · The perceptions of the respondents are only based on the attributes given in the survey (attributes may be missing from the survey for the respondents to review) · Sometimes unclear as to how many dimensions to use (more dimensions allow for better analysis however it is unrealistic to look at all possible dimensions) · Additionally, a perceptual map is often only beneficial for a low-involvement purchase decision as to when there is more risk involved in the purchase (ex: for a car) there are often more factors that are involved in the decision-making process.

What is the push vs. pull strategy?

In push marketing, the idea is to promote products by pushing them onto people. For push marketing, consider sales displays at your grocery store or a shelf of discounted products. On the other hand, in pull marketing, the idea is to establish a loyal following and draw consumers to the products (ex: through advertisements).

What are marketing intermediaries

firms that help you get your product to customers/communicate with customers Physical distribution firms = you manufacture product, it gets picked up by distribution firm, then it goes to warehouses and then is distributed to resellers Financial intermediaries = bank or insurance company that helps finance the transaction b/w consumer and firm Marketing service agenecies = help you design marketing campaign to marketing research Resellers = Retailors (any company that sells their product directly to consumer) —> walmart, best buy

Developing the advertising strategy

message = WHAT, creative = HOW, media = WHERE/WHEN Under creative you have 3 types of appeals (rational, emotional and moral) and multiple execution styles (slice of life - using product in nromal setting, lifestyle, fantasy, mood/image, musical, personality symbol, technical expertise, scientific evidence, testimonial evidence). Also decide which media strategy (depends on objective, audience coverage, message, time/location, cost)

What is a need vs want vs demand

need = state of deprevation (fundamental to human condition) want = form that needs take as they are shaped by culture and individual personality demands = if you have the money to buy the item you want, then you have the demand

What is integrated marketing communications?

The careful coordination of all promotional messages to assure the consistency of messages at every contact point where a company meets the consumer.

What are factors that reduce price sensitivity

· Income (you are willing to pay more if you have a higher income) · Short time horizon to react (when you have to search for alternatives, you will just take any price) · Fewer perceived substitutes (e.g., Disney theme parks, concerts, patented technologies) · Unique value/strong brand equity (e.g., Volvo, Heinz Ketchup)

What are competitive forces

1. Monopoly - Market power - ability to affect market price - Can charge high price (depending on elasticity of demand), may be able to price-discriminate - Faces no competitors, but may compete against potential entrants (limit pricing) - ex: LCBO 2. Oligopoly - Fewer firms - Prices tend to be strategic complements (move together - aka if someone raises their price, so will competition) - Firms can usually charge relatively high prices if the products are differentiated from rivals (if you are too similar, you will compete heavily with them) - The more differentiated firms' products are, the more market power each firm has - ex: air-travel 3. Monopolistic competition - Many firms, some market power. - Firms price very competitively, but they do have a degree of control over price - Unique but substititable and have to differentiate through marketing mix - ex: restaurant 4. Perfect Competition - Many firms, no market power - Firms are price takers - Very little or no mark-up at the margin - distribution is important - ex: agricultural products

What is the consumer buying process

1. Pre- purchase (recognition of needs - trigger), search for alternatives, collect info about alternatives) - go through purchasing funnel which is the process of being aware of a product to actually making the purchase: total set --> awareness set --> consideration set --> choice 2. Purchase (brand/what, where, how much, when, how to pay) 3. Post Purchase (dissonance, delivery/installation, maintenance, warranty, feedback)

What are dynamic pricing strategies

1. Price skimming - Enter at a high price to take maximum short-term profit and reduce price over time - Objective: inter-temporal price discrimination (some people always want to buy the new thing and aren't willing to wait so you will always charge a high price at the beginning and then will drop it after) Conditions (Sufficiently high quality image to attract buyers and High production costs don't wipe out price advantage (difficult for competitors to enter and undercut initially) 2. Penetration Pricing - Low initial entry price to induce diffusion and adoption, and to build market share - Low prices discourage entry (competitors wont enter bc they cant have an equally low price) - Conditions = Economies of scale (the more you produce, the more your MC go down) and Large market growth with lower price; i.e., price elastic

What are the individual product and services decisions (aka 5 levels of service decisions)

1. Product and service attributes (quality, features, style/design) 2. Branding 3. Packaging (primary, secondary and shipping packages...contains and protects product, promotes product and differentates product) 4. Labelling (identify product, describe product, promote, name ingredients and safety warnings) 5. Product Support Services (survey customers regularely toa ssess current customer services)

What do we know aobut advertising response

1. Sales respond dynamically upward and downward, respectively, to increases and decreases of advertising and frequently do so at different rates 2. Steady-state response can be concave or S-shaped and will often have positive sales at zero advertising (if you put a product out there, SOMEONE will buy it despite the advertising) 3. Competitive advertising affects sales 4. The dollar effectiveness of advertising can change over time as the result of changes in media, copy, and other factors 5. Products sometimes respond to increased advertising with a sales increase that falls off even as advertising is held constant

How to use conjoint analysis and how to design one

1. Select Attributes relevant to product or service (use focus groups/pilot sutdies or secondary data such as consumer reports), select levels for attribute, develop product bundles 2. obtain data from a smaple of respondents - design data-collection procedure (can either show people pairs of products and ask to allocate 100 points between them, show all bundles and ask to rank, show all bundles and ask to give a rating 0-100 for each, choice based so allow people to choose 1 option from a set of options) - select a computation method for obtaining part-worth functions (full profile conjoint, adaptive/hybrid which is before showing bundles ask respondent to rate level of each attribute and then give limited set of bundles that mainly have that one attribute changing or choice based conjoint which is when respondents choose from a set of alternatives that represent options in marketplace 3. Evaluate product design options - segement customers based on part-worth functions (ex: some customers want thin crust, some want thick) - design market simulations - select choice rule and objective for evaluating product options (objective = market shareor profit. choice rule = max market share - you pick your top option, share of utility - the probability of picking your highest utility, logit choice rule - larger weights to the more preferred alternatives and smaller weights to less preferred)

How to design a customer driven marketing strategy

1. Select customers to serve (market segmentation and target marketing) 2. Chose a value proposition (set of benefits or values a company promises to deliver to a customer to satisfy their needs. Amount you value the product minus the price) 3. Chose positioning (image of the product in the minds of the consumers relative to the competition)

What are the 5 steps to the marketing process

1. Understand the marketplace and customer needs and wants and demand 2. Design a customer-driven marketing strategy (chose segment and how will we be different) 3. Construct an integrated marketing program that delivers superior value (determien marketing mix and 4 P's) 4. Build profitable relationships and create customer delight (are we actually creating value) 5. Capture value from customers to create profits and customer equity

What are the factors that influence consumer behaviour

1. cultural 2. social 3. personal 4. psychological - motivation - ladder interview - perception - selective attention, distortion, retention - learning - drives, stimuli, cues, responses, reinforcement - beliefs - attitude

What are the 3 types of advertising objectives

1. informative advertising (generate awareness, knowledge, new products) 2. persuasive advertising (enhance demand amonsgst those that already know of the product) 3. Reminder advertising (maintain top-of-mind awarenesss)

Conjoint analysis: strength, weakness & application

Application --> Use for new product analysis. Used in design of new products. Used to estimate the importance of new product attributes in consumer utility functions and choice decisions. Can be used to predict the market shares of new products. Advantages: · Understand how much value their customer places on different attributes of a product, using feedback received from the customer about specific attributes. · Can help them understand the trade-offs their customers are willing to endure, allowing product designers to focus more on certain attributes than others, while still maintaining high utility in the perspective of their customers. · Can be used to gain an insight into how hypothetical bundles compare with the existing bundles provided by their competitors (can allow them to exploit existing gaps in the market and create marketing strategies that can specifically focus on attributes that are preferred by the customers but are not offered by the competitors) · Simulate the decision making process of the customers and understand the percentage of market share and/or profitability they can obtain Disadvantage: · Finding which attributes to focus on can often be extremely costly (ex: focus groups or pilot studies). · The price of bundles being randomly chosen by the program can also prove to be a limitation when running conjoint analysis. Respondents are also often known to take the price of the bundle and use it to determine the value of the product, possibly leading to inaccurate results (if its more expensive, it's a better product). Thus it is important to make sure that the respondents know that the price is not correlated with anything else.

ADBUDG strength, weakness, application

Application --> Used to forecast the impact of advertising spending on market share. The dynamic version of the model allows one to forecast the impact of spending on future market share. Advantage: · Simple model · Sets budgets according to objectives and goals (market share vs profitability) · This tool also has the ability to incorporate non-linearities, as well as, demonstrate carry over effects through the use of persistence where high market shares from high levels of advertisements will positively affect future periods. Disadvantage: · judgement based model -if an individual does not put time into developing the minimum and maximum values, then the inputs may not be realistic, ultimately leading to ineffective outputs · Missing other marketing mix elements (e.g. price). It is possible that the product price would influence the customers' buying behavior regardless of the advertisements. · Does not account for competition. If a company saturates the market with advertisements then the competition would also be inclined to increase their advertisements.

What is Ernest Engel Law

As income rises: - The % spent on food declines (% of money you spend out of your budget on food declines (ex: if you have more $, if you spend the same amount of $ on food, than that's a smaller % of your budget) - The % spent on housing remains constant - The % spent on savings increases (if we enter into a recession, the % of money ppl spend of food will go up)

What are the 3 levels of a product

Core (benefit), Actual (brand name, quality, package), Augmented (warranty, after-sale service)

When/why would you use a Indirect Channel of Distributinon vs Direct

INDIRECT - Fewer contacts and interactions - assortment of products at retailer (1-stop shop) - access value (where to find it - neighbourhood locations) - flexible order size DIRECT - greater control (for complicated items so you want company that makes it to maange it bc they know the most about it) - direct contact with customer needs (consultative sales, customization) - quicker response or changes in marketing mix (ex: zara owns distribution system and retail) - internet makes direct distributiion easier

What is the marketing mix

Figure out what to offer our customers (4 P's) Price, Product, Place, Promotion

How to analyze Marketing Environment and definition of marketing environment

Marketing Environment = the actors and forces outside the marketing that affect marketing magnaemnts ability to build and maintain successful relationships with customers SWOT Analysis --> SW is internal, OT is external. - pro: organize thoughts. match strength to opportunities - con: it just lists SWOT but doesn't tell you how to go about objectives. It doesn't prioritize DEPEST --> demographic, environment, political, economic, social/cultural, technology SW is microenvironment (customers, the company, suppliers, marketing intermediaries, customer markets, competitors, and publics...publics = any group that has an actual or potential interest in or impact on an organizations ability to achieve its objectives for instance financial is bank DEPEST and OT are macro

Maslow's Hierarchy of Needs

Needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher up. In marketing we want to convert some of these needs into wants (level 1) Physiological Needs - needs for survival (level 2) Safety and Security (level 3) Relationships, Love and Affection - sense of belonging (level 4) Self Esteem - self estmeem, recognition, status (level 5) Self Actualization - self development

How do you target a segment

One you have profiled segments, decide one or more to enter. To do this decide if you want undifferentiated, differented or niche marketing strategy Then evaluate target marketing strategy (target segments should be compatible with organizations goals, match company's resources, generate profit, and have a competitive advantage) Then look at segment attractiveness criteria (size + growth, structural characteristics (competition, segment saturation, barriers to enter, environmental risk) and create a GE-mckinsey targetting matrix (segment attractiveness on X axis and Firms Fit on Y axis). USE THIS TO PICK YOUR TARGET MARKET

What is a partworth/utility

Partworth utilities/utility are numerical scores that measure how much each feature influences the customer's decision to make that choice. Least preferred level of each attribute gives you 0 and most preferred combination amongst all attributes gives u=100 ex: 22% of utility is devoted to crust and then within crust the largest parthworth is 22 for thick, 14 for thin and 0 for pan

What are the individual differences in innovativeness

People differ ont heir readiness to try new products Innovators (2.5%) --> Early Adopters (13.5%) --> Early Majority (34%) --> Late Majority (34%) --> Laggards (16%)

How do you position yourself?

Positioning: Implants unique benefits and differentiation of the product in the customers mind (has to be important, distinctive, superior, communicable, pre-emptive, affordable and profitable). IDENTFY DIFFERENTIATING COMPETITIVE ADVANTAGE, PICK THE RIGHT ONE AND THEN COMMUNICATE POSITION Can use perceptual map to determine where there might be a gap in the market (which is a graphical representatino of competitive positioning in a category as percieved by customers). Derived from data of custoemr perceptions of existing products along attributes and the brands that are close togheter tell you which brands compete and how the public see's each of the brands) - the longer the line, the grater is the importance of the attribute in helping you interpret map - attributes that are close to axis and are relatively important can help determine dimension. - joint space map adds in individuals preferences - when predicting market share either use FIRST CHOICE (you always chose what we think you will like the best) or PREFERENCE SHARE (product purchased in proportion to the sum of its preference value over all products -- good when there is randomness in picking) To communicate: Make positioning statement To (target segment), our (brand) is (concept) that (point out difference) ex: for upscale amaerican families, Volvo is the family automobile that offers a maximum safety

What are the 2 types of price discrimination

Price Discrimination = · Different customers pay different prices for the same (or similar) product (ex: airlines operate slightly different seats for different prices) 1. Perfect Price Discrimination (change based on consumers willingness to pay) - firm must be able to observe each consumer's WTF, set different price for each customer, prevent resale) - ex: flea market, buying a house) 2. Screening - Charge different prices to different groups (which differ in their WTP) - Two types: 1. Different consumer segments are observable (have to be able to identify consumer segments, force different segments to pay different and prevent resale.....ex: age) 2. Different consumer segments are unobservable (exploit correlation b/w willingness to pay and some other characteristic. EX: airlines, coupons, books) Perfect price discrimination you are charging a different price to every consumer ( but for screening you are charging a group a certain price but within a group you are charged the same price

What is loss leader pricing?

Selling one product at a price below variable cost in order to stimulate demand for - and hence profits from - another product 1. Same-store sales (static). Stimulate demand for complementary product in the same period. Just want to get you in the store (ex: give something for super cheap and hope people will keep shopping) - ex: milk 2. Dynamic loss-leader pricing for highly complementary goods (ex: Printers & cartridges - printers are super cheap but the ink is not)

Sale reponse to advertising (shape, dynamics)

Shape: - Saturation point - the product has reached all the potential customers adn advertising more won't help - Threshold - you have to show people a message around 2-3 times before they remember it - S shaped is good Dynamic Carryover is a phenomenon in which a marketing stimulus in one period is carried over to a later period where it affects sales. Lagging advertising effects, a buildup of goodwill, customer holdover or loyalty, or word-of-mouth communication can all have a carryover effect. But, unlike hysteresis, carryover is temporary and decays over time. In Hysteresis, if advertisements stops, there is a decline in sales but not decline is not greater than growth

How do you segment a market?

Step 1: Benefit segmentation - identify need dimensions to effectively segment the market Step 1: Use Wards Method to decide how many clusters you should have (when ESS has a big jump, cut it off). Grouping clusters with similar needs - hierarchial technqiue (build up larger clusters from smaller ones) Step 3: Understand consumer profiles (geographical, demogrpahic, psychographic, behavioural, all of the above). Use segment descriptors that the firm can use as characteristics to target Step 4: Make sure your segmentation is effective (MASDA --> Measurable, Accessible, Substantial, Differentiable, Actionable)

Effective Advertising Equation

adv= [media efficiency (t)] x [copy effectiveness (t)] x [adv dollars (t)] copy effectiveness - how effective is your advertisement (if it was 0.95 that means that your current advertising campaign is 5% less effective than most campaigns) Media efficiency - use index of 1

Marketing Management Orientations

production concept (mass production -- available and highly affordable) product concept (focuses on product FEATURE instead of benefit...Marketing mypoia = A short-sighted and inward looking approach to marketing that focuses on the needs of the company instead of defining the company and its products in terms of the customers' needs and wants. It results in the failure to see and adjust to the rapid changes in their markets) selling concept (consumers will not buy enough fo the firms products unless it understakes a large scale selling and promotion effort --- would you like fries with that) marketing concept (focuses on the CUSTOMER's needs and wants) societal marketing concept (company should make good marketing decisions by considering consumers' wants, the company's requirements, consumers' long-term interests, and society's long- run interests)

What is the purpose of multidimensional scaling?

purpose of multidimensional scaling (MDS) is to provide a visual representation of the pattern of proximities (i.e., similarities or distances) among a set of objects.

What does each variable mean in ADBUDG

· Y = b+ (a-b)(Xc/d+Xc) · Y = market share · B = min level of share you would get with 0 ads · A = max level of share if you increase advertising level to saturation · Xc= advertising expenditure (c will control shape of advertising curve)...S-shaped (c > 1) or concave (0 < c <1) · D = parameter - how quickly does ad response function increase IF YOU ARE GIVEN PROFIT MARGIN AND TOTAL POSSIBLE MARKET SIZE THEN DO: [market size (Y)]/100 (margin) - X this gives you how much to spend on advertising for highest profit. just plug random things into X EX: Suppose that the margin the company receives on each drink is $4, and the total possible market size is 10 million units. [10 (Y) / 100][4] - possible values of X