Marketing Final 3/17

Millennials

"Gen Y or Echo boomers" born between 1977 and 2000 Most financially strapped generation Higher unemployment and saddled with more debt Comfortable with technology

Price elasticity of demand

% change in quantity/% change in price - if decimal raise price, if decent sized number lower price

Baby Boomers

Born 1946 to 1964 Vietnam generation of WWII parents...2000's shock Spending more carefully and planning to work longer The wealthiest generation in U.S. history Control 80% of US personal wealth THE GREAT TRANSFER: $12 Trillion

Online Marketing Domains: Business to Consumer

Business to Consumer only 7% but influence 48% of total US sales

Occasion Segmentation

Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Occasion segmentation can help firms build up product usage. Campbell's advertises its soups more heavily in the cold winter months and Home Depot runs special springtime promotions for lawn and gardens products. Other marketers prepare special offers and ads for holiday occasions. For example, M&M's runs ads throughout the year but prepares special ads and packaging for holidays and events such as Christmas, Easter, and the Super Bowl. Still other companies try to boost consumption by promoting usage during nontraditional occasions. For example, most consumers drink orange juice in the morning, but orange growers have promoted drinking orange juice as a cool, healthful refresher at other times of the day. And Chick-fil-A's "Chikin 4 Brekfust" campaign attempts to increase business by promoting its biscuits and other sandwiches as a great way to start the day.

Online Marketing Domains: Business to Business

Cisco take in 80% of its orders on the Internet

Indirect Competitors

Coke vs Pepsi (water business) Starbucks vs Maxwell House Banks

People Differentiation

Companies can also gain a strong competitive advantage through people differentiation—hiring and training better people than their competitors do. People differentiation requires that a company select its customer-contact people carefully and train them well. For example, Disney World people are known to be friendly and upbeat. Disney trains its theme park people thoroughly to ensure that they are competent, courteous, and friendly—from the hotel check-in agents, to the monorail drivers, to the ride attendants, to the people who sweep Main Street USA. Each employee is carefully trained to understand customers and to "make people happy."

Marketing Micro-environment

Consists of actors close to the company that affect its ability to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.

Pull Strategy

Consumers>Retailers and Wholesalers>Producer the producer directs its marketing activities (primarily advertising and consumer promotion) toward final consumers to induce them to buy the product. For example, Unilever promotes its Axe grooming products directly to its young male target market using TV and print ads, a brand website, its YouTube channel and Facebook page, and other channels. If the pull strategy is effective, consumers will then demand the brand from retailers, such as CVS, Walgreens, or Walmart, who will in turn demand it from Unilever. Thus, under a pull strategy, consumer demand "pulls" the product through the channels.

Online Marketing Domains: Consumer to Consumer

Ebay, Craigslist, Yelp

Channel Differentiation

Firms that practice channel differentiation gain competitive advantage through the way they design their channel's coverage, expertise, and performance. Amazon.com and GEICO, for example, set themselves apart with their smooth-functioning direct channels.

Wants

Form that needs take as they are shaped by culture and individual personality

Services Differentiation

Some companies gain services differentiation through speedy, convenient, or careful delivery. For example, First Convenience Bank of Texas offers "Real Hours for Real People"; it is open seven days a week, including evenings. Others differentiate their service based on high-quality customer care. In an age where customer satisfaction with airline service is in constant decline, Singapore Airlines sets itself apart through extraordinary customer care and the grace of its flight attendants. "Everyone expects excellence from us," says the international airline. "[So even] in the smallest details of flight, we rise to each occasion and deliver the Singapore Airlines experience."

Needs

States of deprivation: -physical (food, shelter) -social (belonging, affection) -individual (knowledge, self-expression)

Target

Store Brand Power

Competitor Identification: Strategic Groups

Strategic Groups --Within a strategic group: Pursue similar competitive strategies Have similar characteristics Have similar assets and competencies (Dell vs HP) (GE profile vs LG)

Number of Marketing Intermediaries: Selective Distribution

TVs and Home Appliances use of more than one but fewer than all of the intermediaries who are willing to carry a company's products. Most television, furniture, and home appliance brands are distributed in this manner. For example, Whirlpool and GE sell their major appliances through dealer networks and selected large retailers. By using selective distribution, they can develop good working relationships with selected channel members and expect a better-than-average selling effort. Selective distribution gives producers good market coverage with more control and less cost than does intensive distribution.

Team based New Product Development

Under this approach, company departments work closely together in cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness. Instead of passing the new product from department to department, the company assembles a team of people from various departments that stays with the new product from start to finish. Such teams usually include people from the marketing, finance, design, manufacturing, and legal departments and even supplier and customer companies. In the sequential process, a bottleneck at one phase can seriously slow an entire project. In the team-based approach, however, if one area hits snags, it works to resolve them while the team moves on. The team-based approach does have some limitations, however. For example, it sometimes creates more organizational tension and confusion than the more orderly sequential approach. However, in rapidly changing industries facing increasingly shorter product life cycles, the rewards of fast and flexible product development far exceed the risks. Companies that combine a customer-centered approach with team-based new-product development gain a big competitive edge by getting the right new products to market faster. T shaped ppl

Price decisions: Monopolistic Competition

Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers

Price decisions: Oligopolistic competition

Under oligopolistic competition, the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies. Because there are few sellers, each seller is alert and responsive to competitors' pricing strategies and moves.

Product Mix Pricing Strategies: By-Product Pricing

products with little or no value produced as a result of the main product. Producers will seek little or no profit other than the cost to cover storage and delivery. (Nesquik and tea bags derived from leftovers)

Services Marketing: Selling the Invisible - Variability

refers to the fact that service quality depends on who provides the services as well as when, where, and how they are provided.

Services Marketing: Selling the Invisible - Intangibility

refers to the fact that services cannot be seen, tasted, felt, heard, or smelled before they are purchased.

Services Marketing; Selling the Invisible - Inseparability

refers to the fact that services cannot be separated from their providers.

Services Marketing: Selling the Invisible - Perishability

refers to the fact that services cannot be stored for later sale or use.

Price-Adjustment Strategies: Dynamic Pricing

prices adjusted continually to meet the characteristics and needs of the individual customer and situations (Airline pricing) Dynamic pricing is especially prevalent online, where the Internet seems to be taking us back to a new age of fluid pricing. Such pricing offers many advantages for marketers. For example, Internet sellers such as L.L.Bean, Amazon.com, or Dell can mine their databases to gauge a specific shopper's desires, measure his or her means, instantaneously tailor offers to fit that shopper's behavior, and price products accordingly. Services ranging from airlines and hotels to sports teams change prices on the fly according to changes in demand or costs, adjusting what they charge for specific items on a day-by-day or even hour-by-hour basis. And many direct marketers monitor inventories, costs, and demand at any given moment and adjust prices instantly.

Demographics

the study of human populations-- size, density, location, age, gender, race, occupation, and other statistics marketers keep a close eye on demographic trends and developments in their markets. They analyze changing age and family structures, geographic population shifts, educational characteristics, and population diversity. Here, we discuss the most important demographic trends in the United States.

Intermediaries

transform that assortment of products into assortments wanted by consumers Why do producers give some of the selling job to channel partners? After all, doing so means giving up some control over how and to whom they sell their products. Producers use intermediaries because they create greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the firm more than it can achieve on its own. (M&Ms)

Informative Advertising

used to intro a new product category to build primary demand used heavily when introducing a new-product category. In this case, the objective is to build primary demand. Thus, early producers of HDTVs first had to inform consumers of the image quality and size benefits of the new product. (First VW bug ad)

Cognitive Dissonance

discomfort caused by postpurchase conflict. After the purchase, consumers are satisfied with the benefits of the chosen brand and are glad to avoid the drawbacks of the brands not bought. However, every purchase involves compromise. So consumers feel uneasy about acquiring the drawbacks of the chosen brand and about losing the benefits of the brands not purchased. Thus, consumers feel at least some postpurchase dissonance for every purchase.

Psychographic Segmentation

divides buyers into different segments based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic characteristics. In Chapter 5, we discussed how the products people buy reflect their lifestyles. As a result, marketers often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals. Marketers also use personality variables to segment markets. For example, different soft drinks target different personalities. On the one hand, Mountain Dew projects a youthful, rebellious, adventurous, go-your-own-way personality. Its ads remind customers that "It's different on the Mountain." By contrast, Coca-Cola Zero appears to target more mature, practical, and cerebral but good-humored personality types. Its subtly humorous ads promise "Real Coca-Cola taste and zero calories."

Behavioral Segmentation

divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments

Demographic Segmentation

divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Demographic factors are the most popular bases for segmenting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables. Even when marketers first define segments using other bases, such as benefits sought or behavior, they must know a segment's demographic characteristics to assess the size of the target market and reach it efficiently.

Market skimming pricing

high initial price to "skim" revenue layers from the market Four conditions: Product quality and image must support the price Buyers must want the product at the price Cost of producing smaller volume should not offset advantage of a higher price Competitors should not be able to enter the market easily (Apple) starting their phone price at 599 - purchased only by customers who really wanted the sleek new gadget and could afford it. they later lowered the price by $200 or so. skimmed the maximum amount of revenue

Public Relations

involves building good relations with the company's various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events

Observational Research

involves gathering primary data by observing relevant people, actions, and situations. For example, Trader Joe's might evaluate possible new store locations by checking traffic patterns, neighborhood conditions, and the locations of competing Whole Foods, Fresh Market, and other retail chains. Researchers often observe consumer behavior to glean customer insights they can't obtain by simply asking customers questions. Marketers not only observe what consumers do but also observe what consumers are saying. As discussed earlier, marketers now routinely listen in on consumer conversations on blogs, social networks, and websites. Observing such naturally occurring feedback can provide inputs that simply can't be gained through more structured and formal research approaches.

Captive-product pricing

involves products that must be used along with the main product (Razor & Blades strategy, Printer & Ink)

Ethnographic Research

involves sending observers to watch and interact with consumers in their "natural environments." The observers might be trained anthropologists and psychologists or company researchers and managers. Beyond conducting ethnographic research in physical consumer environments, many companies now routinely conduct Netnography research—observing consumers in a natural context on the Internet. Observing people as they interact on and move about the Internet can provide useful insights into both online and offline buying motives and behavior. Observational and ethnographic research often yield the kinds of details that just don't emerge from traditional research questionnaires or focus groups. Whereas traditional quantitative research approaches seek to test known hypotheses and obtain answers to well-defined product or strategy questions, observational research can generate fresh customer and market insights that people are unwilling or unable to provide. It provides a window into customers' unconscious actions and unexpressed needs and feelings.

PLC: Growth

is a period of rapid market acceptance and increasing profits

PLC: Introduction

is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.

PLC: Maturity

is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.

Service

is a product that consists of activities, benefits or satisfaction that is essentially intangible and does not result in the ownership of anything

Product

is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want

Persuasive Advertising

is important with increased competition to build selective demand becomes more important as competition increases. Here, the company's objective is to build selective demand. For example, once HDTVs became established, Samsung began trying to persuade consumers that its brand offered the best quality for their money.

PLC: Decline

is the period when sales fall off and profits drop. Not all products follow all five stages of the product life cycle. Some products are introduced and die quickly; others stay in the mature stage for a long, long time. Some enter the decline stage and are then cycled back into the growth stage through strong promotion or repositioning. It seems that a well-managed brand could live forever.

Value Proposition

is the set of benefits or values a company promises to deliver to customers to satisfy their needs BMW "ultimate driving machine"

Selective Distortion

is the tendency for people to interpret information in a way that will support what they already believe People also will forget much of what they learn. They tend to retain information that supports their attitudes and beliefs.

Selective Attention

is the tendency for people to screen out most of the information to which they are exposed—means that marketers must work especially hard to attract the consumer's attention.

Selective Retention

is the tendency to remember good points made about a brand they favor and forget good points about competing brands

Price Adjustment strategies: Segmented Pricing

is used when a company sells a product at two or more prices even though the difference is not based on cost Fly Emirates - doesnt cost them a lot for first class

Product Life Cycle Strategies: Maturity Stage Modifying Strategies

-Market modifying -Product modifying -Marketing mix modifying: advertising, aggressive promotions, and new channels The manager may also look for ways to increase usage among present customers. The company might also try modifying the product—changing characteristics such as quality, features, style, or packaging to attract new users and to inspire more usage. It can improve the product's styling and attractiveness. It might improve the product's quality and performance—its durability, reliability, speed, taste. In modifying the market, the company tries to increase consumption by finding new users and new market segments for its brands. modifying the product—changing characteristics such as quality, features, style, or packaging to attract new users and inspire more usage. It can improve the product's styling and attractiveness. It might improve the product's quality and performance—its durability, reliability, speed, and taste. modifying the marketing mix—improving sales by changing one or more marketing mix elements. The company can offer new or improved services to buyers. It can cut prices to attract new users and competitors' customers. It can launch a better advertising campaign or use aggressive sales promotions—trade deals, cents-off, premiums, and contests. In addition to pricing and promotion, the company can also move into new marketing channels to help serve new users.

Managing New-Product Development: Alternatives to the older Sequential Development.

-customer centered -systematic -team based The new-product development process shown in Figure 9.1 highlights the important activities needed to find, develop, and introduce new products. However, new-product development involves more than just going through a set of steps. Companies must take a holistic approach to managing this process. Successful new-product development requires a customer-centered, team-based, and systematic effort.

Major Pricing Strategies: Value Based Pricing

1. Assess customer needs and value perceptions 2. Set target price to match customer perceived value 3. Determine costs that can be incurred 4. Design product to deliver desired value at target price uses the buyers' perceptions of value, not the sellers cost, as the key to pricing Value-based pricing is customer driven Price is considered before the marketing program is set (iPhone)

Determining Communication Objectives: Buyer Readiness Stages

1. Awareness 2. Knowledge 3. Liking 4. Preference 5. Conviction 6. Purchase Once the target audience has been defined, marketers must determine the desired response. Of course, in many cases, they will seek a purchase response. But purchase may result only after a lengthy consumer decision-making process. The marketing communicator needs to know where the target audience now stands and to what stage it needs to be moved. The marketing communicator's target market may be totally unaware of the product, know only its name, or know only a few things about it. Thus, the communicator must first build awareness and knowledge. For example, Procter & Gamble used a massive $150 million marketing campaign to introduce consumers to its innovative new laundry product, Tide Pods, single-use tablets called pods that combine liquid detergent, stain remover, and brightener. The introductory campaign, themed "Pop in. Stand out," showed consumers how simply popping a Tide pod into the washing machine could clean and freshen clothes while also making colors pop. The extensive introductory campaign used a broad range of traditional, digital, mobile, social, and in-store media to quickly create awareness and knowledge across the entire market.

Stages in the New-Product Development Process: 8 major steps

1. Idea Generation 2. Idea Screening 3. Concept Development and Testing 4. Marketing Strategy Development 5. Business Analysis 6. Product Development 7. Test Marketing 8. Commercialization A company must carry out strong new-product planning and set up a systematic, customer-driven new -product development process for finding and growing new products.

Pitfalls in Strategy Development

1—A central problem or threat is ignored 2—Strategy is a long to-do list with no sense of what's important 3—A set of goals is assumed to be a strategy 4—The strategy is a major "puff" piece "We will increase margins while addressing sustainability challenges. (Initial Apple Feedback - treated like a joke)

Sears

A fallen star, rising?

Benefits Segmenting: Loyal Status

A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Tide), stores (Target), and companies (Apple). Buyers can be divided into groups according to their degree of loyalty. Some consumers are completely loyal—they buy one brand all the time and can't wait to tell others about it. For example, whether they own a Mac computer, an iPhone, or an iPad, Apple devotees are granite-like in their devotion to the brand. At one end are the quietly satisfied Mac users, folks who own a Mac and use it for e-mail, browsing, and social networking. At the other extreme, however, are the Mac zealots—the so-called MacHeads or Macolytes. The Urban Dictionary defines a Macolyte as "one who is fanatically devoted to Apple products," as in "He's a Macolyte; don't even think of mentioning Microsoft within earshot." Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or favor one brand while sometimes buying others. Still other buyers show no loyalty to any brand—they either want something different each time they buy, or they buy whatever's on sale. A company can learn a lot by analyzing loyalty patterns in its market. It should start by studying its own loyal customers. A recent study of highly loyal customers showed that "their passion is contagious," says an analyst. "They promote the brand via blogs, fan websites, YouTube videos, and word of mouth." Some companies actually put loyalists to work for the brand. For example, Patagonia relies on its most tried-and-true customers to test products in harsh environments. In contrast, by studying its less-loyal buyers, a company can detect which brands are most competitive with its own. By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses and take actions to correct them.

Motivation & Motivation Research

A motive is a need that is sufficiently pressing to direct the person to seek satisfaction The term motivation research refers to qualitative research designed to probe consumers' hidden, subconscious motivations. Consumers often don't know or can't describe why they act as they do. Thus, motivation researchers use a variety of probing techniques to uncover underlying emotions and attitudes toward brands and buying situations. Many companies employ teams of psychologists, anthropologists, and other social scientists to carry out motivation research. One ad agency routinely conducts one-on-one, therapy-like interviews to delve into the inner workings of consumers. Another company asks consumers to describe their favorite brands as animals or cars (say, a Mercedes versus a Chevy) to assess the prestige associated with various brands. Still others rely on hypnosis, dream therapy, or soft lights and mood music to plumb the murky depths of consumer psyches. Such projective techniques seem pretty goofy, and some marketers dismiss such motivation research as mumbo jumbo. But many marketers use such touchy-feely approaches, now sometimes called interpretive consumer research, to dig deeper into consumer psyches and develop better marketing strategies.

Benefits Segmentation

A powerful form of segmentation is grouping buyers according to the different benefits that they seek from a product. Benefit segmentation requires finding the major benefits people look for in a product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

Allstate

Advertising in a competitive category

Direct Marketing Cont.

Although there are many forms of direct marketing—direct mail and catalogs, online marketing, mobile marketing, and others—they all share four distinctive characteristics. Direct marketing is less public: The message is normally directed to a specific person. Direct marketing is immediate and customized: Messages can be prepared very quickly and can be tailored to appeal to specific consumers. Finally, direct marketing is interactive: It allows a dialogue between the marketing team and the consumer, and messages can be altered depending on the consumer's response. Thus, direct marketing is well suited to highly targeted marketing efforts and building one-to-one customer relationships.

The SCA: Sustainable Competitive Advantage

An element or combination of elements that provides a meaningful advantage over both existing & future competitors (Walmart) Scale Economies Market power logistical efficiencies value reputation site location assets OR (Southwest) Point to point model fun personality reliability value reputation uncomplicated travel

Systematic New Product Development

An innovation management system... innovative development approach that collects, reviews, evaluates, and manages new-product ideas Creates an innovation-oriented culture Yields a large number of new-product ideas At companies known for their new-product prowess, such as Google, Apple, 3M, P&G, and GE, the entire culture encourages, supports, and rewards innovation. When tough economic times hit, or when a company faces financial difficulties, management may be tempted to reduce spending on new-product development. However, such thinking is usually shortsighted. By cutting back on new products, the company may make itself less competitive during or after the downturn. In fact, tough times might call for even greater new-product development, as the company struggles to better align its market offerings with changing consumer needs and tastes. In difficult times, innovation more often helps than hurts in making the company more competitive and positioning it better for the future.

Emergence of a Strategic Group

Can protect a business by creating dynamic that will affect strategies of all competitors for a long time Investors could look at "Strategic Groups" rather than say industries to invest Example: Mars Petfood's lock on the supermarket / mass merchandiser distribution rather than say, "the petfood industry"

Number of Marketing Intermediaries: Intensive Distribution

Candy & Toothpaste a strategy in which they stock their products in as many outlets as possible. These products must be available where and when consumers want them. For example, toothpaste, candy, and other similar items are sold in millions of outlets to provide maximum brand exposure and consumer convenience. Kraft, Coca-Cola, Kimberly-Clark, and other consumer-goods companies distribute their products in this way.

Image Differentiation

Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. A company or brand image should convey a product's distinctive benefits and positioning. Developing a strong and distinctive image calls for creativity and hard work. A company cannot develop an image in the public's mind overnight by using only a few ads. If Ritz-Carlton means quality, this image must be supported by everything the company says and does. Symbols, such as the McDonald's golden arches, the colorful Google logo, the Nike swoosh, or Apple's "bite mark" logo, can provide strong company or brand recognition and image differentiation. The company might build a brand around a famous person, as Nike did with its Michael Jordan, Kobe Bryant, and LeBron James basketball shoe and apparel collections. Some companies even become associated with colors, such as Coca-Cola (red), IBM (blue), or UPS (brown). The chosen symbols, characters, and other image elements must be communicated through advertising that conveys the company's or brand's personality.

Good value pricing (EDLP)

Everyday low pricing charging a constant everyday low price with few or no temporary price discounts (Walmart)

Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographical units, such as nations, regions, states, counties, cities, or even neighborhoods. A company may decide to operate in one or a few geographical areas or operate in all areas but pay attention to geographical differences in needs and wants. Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and neighborhoods. For example, Domino's Pizza is the nation's largest pizza delivery chain. But a customer ordering a pizza in Poughkeepsie, New York, doesn't care much about what's happening pizza-wise in Anaheim, California. So Domino's keeps its marketing and customer focus decidedly local. Hungry customers anywhere in the nation can use the pizza peddler's online platform or smartphone app to track down local coupon offers, locate the nearest store with a GPS store locator, and quickly received a freshly-made pizza. They can even use Domino's Pizza Tracker to follow their pies locally from store to door.

Good value pricing (HILO)

High low pricing charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items (Kohls & Macys)

Choosing Differentiation and Positioning

Identifying a set of possible competitive advantages to build a position by providing superior value from... To find points of differentiation, marketers must think through the customer's entire experience with the company's product or service. An alert company can find ways to differentiate itself at every customer contact point. In what specific ways can a company differentiate itself or its market offer? It can differentiate along the lines of product, services, channels, people, or image.

The Demand Curve: Inelastic and Inelastic

If demand hardly changes with a small change in price, we say the demand is inelastic. If demand changes greatly, we say the demand is elastic.

Price decisions: Pure Monopoly

In a pure monopoly, the market consists of one seller. The seller may be a government monopoly (the U.S. Postal Service), a private regulated monopoly (a power company), or a private nonregulated monopoly (DuPont when it introduced nylon). Pricing is handled differently in each case.

PLC: Product Development

Sales are zero and investment costs mount.

Number of Marketing Intermediaries: Exclusive Distribution

Luxury Automobiles and Prestige Clothing the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Exclusive distribution is often found in the distribution of luxury brands. For example, exclusive Bentley automobiles are typically sold by only a handful of authorized dealers in any given market area. However, some shopping goods producers also practice exclusive distribution. For instance, outdoor power equipment maker STIHL doesn't sell its chain saws, blowers, hedge trimmers, and other products through mass merchandisers such as Lowe's, Home Depot, or Sears. Instead, it sells only through a select corps of independent hardware and lawn and garden dealers. By granting exclusive distribution, STIHL gains stronger dealer selling support. Exclusive distribution also enhances the STIHL brand's image and allows for higher markups resulting from greater value-added dealer service.

Benefits Segmenting: Usage Rate

Markets can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. For instance, a recent study showed that heavy seafood consumers in the United States are a small but hungry bunch. Less than 5 percent of all shoppers buy nearly 64 percent of unbreaded seafood consumed in the United States. Only 2.6 percent of shoppers—mostly mothers buying breaded fish sticks and filets for their families—account for more than 54 percent of breaded seafood sales. Not surprisingly, breaded seafood marketers such as Gortons and Van de Kamps target these heavy users with marketing pitches emphasizing kid appeal, family nutrition, and family meal planning tips and recipes.

Benefits segmenting: User Status

Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users of a product. Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users. Included in the potential user group are consumers facing life-stage changes—such as new parents and newlyweds—who can be turned into heavy users. For example, to get new parents off to the right start, P&G makes certain its Pampers Swaddlers are the diaper provided for newborns at most U.S. hospitals. And to capture newly engaged couples who will soon be equipping their new kitchens, upscale kitchen and cookware retailer Williams-Sonoma takes the usual bridal registry a step further. Through a program called "The Store Is Yours," it opens its stores after hours, by appointment, exclusively for individual couples to visit and make their wish lists. About half the people who register are new to the Williams-Sonoma brand.

Psychological Factors

Motivation, Perception, Learning, Beliefs & Attitudes A person has many needs at any given time. Some are biological, arising from states of tension such as hunger, thirst, or discomfort. Others are psychological, arising from the need for recognition, esteem, or belonging.

Porter's Stuck in the Middle

Samsung in phone business Differentiation Advantage: Apple Differentiation w/Cost Advantage: Samsung Low Cost Advantage: Huawei

3M

New product development

Value based pricing (good value pricing)

Offers the right combination of quality and good service at a fair price. Less for Less (P&G "basic" versions of Bounty and Charmin that sell for less)

Marketing Mix & The 4 Ps

One of the major concepts in modern marketing: The marketing mix is the set of tactical marketing tools (4 Ps) that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. Product, Price, Place, & Promotion

Outside Salespeople & Inside SP

Outside salespeople call on customers in the field Inside salespeople conduct business from their offices and often provide support for the outside salespeople Technical sales support people Sales assistants

Generation X

People between 1965 and 1976 High parental divorce rates Cautious economic outlook Less materialistic Family comes first First to grow up in internet era

Mobility Barriers

Prevent a group from moving from one strategic group to another There can be significant entry and exit barriers This can protect a strategic group

Online Marketing Domains: Consumer to Business

Priceline.com Complaints.com

Coach

Pricing strategy and Exclusivity

Dove Case Study

Segmentation and Targeting

Perception

Process by which people select, organize, and interpret information to form a meaningful picture of the world from three perceptual processes: Selective attention Selective distortion Selective retention Probe to find out why they remember certain ads—was it that they broke through the clutter, that they saw them many times, or that they are in the market for that certain product? A motivated person is ready to act. How the person acts is influenced by his or her own perception of the situation. All of us learn by the flow of information through our five senses: sight, hearing, smell, touch, and taste. However, each of us receives, organizes, and interprets this sensory information in an individual way.

Push Strategy

Producer>Retailers and Wholesalers>Consumers involves "pushing" the product through marketing channels to final consumers. The producer directs its marketing activities (primarily personal selling and trade promotion) toward channel members to induce them to carry the product and promote it to final consumers. For example, John Deere does very little promoting of its lawn mowers, garden tractors, and other residential consumer products to final consumers. Instead, John Deere's sales force works with Lowe's, Home Depot, independent dealers, and other channel members, who in turn push John Deere products to final consumers.

Role and Impact of PR

Public relations can have a strong impact on public awareness at a much lower cost than advertising can. When using public relations, the company does not pay for the space or time in the media. Rather, it pays for a staff to develop and circulate information and manage events. If the company develops an interesting story or event, it could be picked up by several different media and have the same effect as advertising that would cost millions of dollars. What's more, public relations has the power to engage consumers and make them a part of the brand story and its telling.

Snickers

Repositioning

Pinterest

Revolutionizing the web through consumer value

Differentiated Marketing

Targets several different market segments and designs separate offers for each: Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing a firm decides to target several market segments and designs separate offers for each. P&G markets six different laundry detergent brands in the United States (Bold, Cheer, Dash, Dreft, Gain, and Tide), which compete with each other on supermarket shelves. Then, P&G further segments each brand to serve even narrower niches. By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segment. Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments. Thanks to its differentiated approach, Hallmark's brands account for almost one of every two greeting cards purchased in the United States. Similarly, P&G's multiple detergent brands capture four times the market share of its nearest rival. But differentiated marketing also increases the costs of doing business. A firm usually finds it more expensive to develop and produce, say, ten units of ten different products than 100 units of a single product. Developing separate marketing plans for separate segments requires extra marketing research, forecasting, sales analysis, promotion planning, and channel management. And trying to reach different market segments with different advertising campaigns increases promotion costs. Thus, the company must weigh increased sales against increased costs when deciding on a differentiated marketing strategy.

PLC Concept

The PLC concept can describe a product class (gasoline-powered automobiles), a product form (SUVs), or a brand (the Ford Escape). The PLC concept applies differently in each case. Product classes have the longest life cycles; the sales of many product classes stay in the mature stage for a long time. Product forms, in contrast, tend to have the standard PLC shape. Product forms such as "dial telephones" and "VHS tapes" passed through a regular history of introduction, rapid growth, maturity, and decline. A specific brand's life cycle can change quickly because of changing competitive attacks and responses. For example, although laundry soaps (product class) and powdered detergents (product form) have enjoyed fairly long life cycles, the life cycles of specific brands have tended to be much shorter. Today's leading brands of powdered laundry soap are Tide and Cheer; the leading brands almost 100 years ago were Fels-Naptha, Octagon, and Kirkman.

Corning

The Value Chain

PLC (Product Life Cycle)

The course of a product's sales and profits over its lifetime. It involves five distinct stages: product development, introduction, growth, maturity, and decline.

The Greatest Generation

The depression era & WWII generation Born in the 1910s 492 die each day now

Marketing Macro-environment

The macroenvironment consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces.

Income Segmentation

The marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel have long used income segmentation. Many companies target affluent consumers with luxury goods and convenience services. Other marketers use high-touch marketing programs to court the well-to-do: However, not all companies that use income segmentation target the affluent. For example, many retailers—such as the Dollar General, Family Dollar, and Dollar Tree store chains—successfully target low- and middle-income groups. The core market for such stores is represented by families with incomes under $30,000. When Family Dollar real-estate experts scout locations for new stores, they look for lower-middle-class neighborhoods where people wear less-expensive shoes and drive old cars that drip a lot of oil. With their low-income strategies, dollar stores are now the fastest-growing retailers in the nation.

Post Purchase Behavior

The satisfaction or dissatisfaction that the consumer feels about the purchase Relationship between: Consumer's expectations Product's perceived performance If the product falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is delighted. The larger the gap between expectations and performance, the greater the consumer's dissatisfaction. This suggests that sellers should promise only what their brands can deliver so that buyers are satisfied.

Team Selling

Used to service large, complex accounts. The Customer Business Development Team As products become more complex, and as customers grow larger and more demanding, a single salesperson simply can't handle all of a large customer's needs. Instead, most companies now use team selling to service large, complex accounts. Sales teams can unearth problems, solutions, and sales opportunities that no individual salesperson could. Such teams might include experts from any area or level of the selling firm—sales, marketing, technical and support services, R&D, engineering, operations, finance, and others. (Proctor & Gamble)

Demands

Wants backed by buying power

Evaluating the Competitors

What are their objectives & strategies? Their commitment? Their "exit barriers"? Plants & Equipment Pensions Labor union contracts Government & social barriers Their cost structure? What's their positioning & image? What leverage points do they have on us? (Gas pump in sea)

Reminder Advertising

advertising is important for mature products; helps to maintain customer relationships and keep consumers thinking about the product. (Heineken)

Salespeople

are one of the company's most productive and expensive assets. Workload approach to sales force size refers to grouping accounts into different classes to determine the number of salespeople needed: Sales forces may range in size from only a few salespeople to tens of thousands. Some sales forces are huge—for example, PepsiCo employs 36,000 salespeople; American Express, 23,400; GE, 16,400; and Xerox, 15,000. Salespeople constitute one of the company's most productive—and most expensive—assets. Therefore, increasing their numbers will increase both sales and costs. Many companies use some form of workload approach to set sales force size. Using this approach, a company first groups accounts into different classes according to size, account status, or other factors related to the amount of effort required to maintain the account. It then determines the number of salespeople needed to call on each class of accounts the desired number of times.

Value based pricing (value added pricing)

attaches value-added features and services to differentiate offers, support higher prices. More for More! movie theaters are adding amenities rather than cutting services to maintain lower admission prices

Experimental Research

best suited for gathering causal information. Experiments involve selecting matched groups of subjects, giving them different treatments, controlling unrelated factors, and checking for differences in group responses. Thus, experimental research tries to explain cause-and-effect relationships. For example, before adding a new sandwich to its menu, McDonald's might use experiments to test the effects on sales of two different prices it might charge. It could introduce the new sandwich at one price in one city and at another price in another city. If the cities are similar, and if all other marketing efforts for the sandwich are the same, then differences in sales in the two cities could be related to the price charged.

Product Differentiation

brands can be differentiated on features, performance, or style and design. Thus, Bose positions its speakers on their striking design and sound characteristics. By gaining the approval of the American Heart Association as an approach to a healthy lifestyle, Subway differentiates itself as the healthy fast-food choice. And Seventh Generation, a maker of household cleaning and laundry supplies, paper products, diapers, and wipes, differentiates itself not so much by how its products perform but by the fact that its products are greener. Seventh Generation products are "Protecting Planet Home." Beyond differentiating its physical product, a firm can also differentiate the services that accompany the product.

Horizontal Marketing Systems

companies join together to follow a new marketing opportunity. They combine financial, production, or marketing resources to accomplish more than they could alone. (Walmart & McDs, Safeway & Wells Fargo/Starbucks)

Channel Behavior and Organization: Vertical Marketing Systems (VMS)

consist of producers, wholesalers, and retailers acting as a unified system and consist of: Corporate VMS Contractual VMS Administered VMS One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate. The VMS can be dominated by the producer, the wholesaler, or the retailer. For the channel as a whole to perform well, each channel member's role must be specified, and channel conflict must be managed. The channel will perform better if it includes a firm, agency, or mechanism that provides leadership and has the power to assign roles and manage conflict

Target Marketing

consists of a set of buyers who share common needs or characteristics that the company decides to serve

The New Direct Marketing Model

consists of connecting directly with carefully targeted consumers, often on a one-to-one, interactive basis. Using detailed databases, companies tailor their marketing offers and communications to the needs of narrowly defined segments or individual buyers. Beyond brand and relationship building, direct marketers usually seek a direct, immediate, and measurable consumer response. For example, Amazon.com interacts directly with customers via its website or mobile app to help them discover and buy almost anything and everything on the Internet. Similarly, GEICO interacts directly with customers—by telephone, through its website or phone app, or on its Facebook, Twitter, and YouTube pages—to build individual brand relationships, give insurance quotes, sell policies, or service customer accounts.

Product Mix Pricing Strategies: Product Line Pricing

cost differences between products in the line, customer evaluation of their features, and competitors' prices management must determine the price steps to set between the various products in a line. The price steps should take into account cost differences between products in the line. More importantly, they should account for differences in customer perceptions of the value of different features (Different Car Wash Prices)

Disintermediation

occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones (Amazon over Borders) Thus, in many industries, traditional intermediaries are dropping by the wayside. For example, Southwest, JetBlue, and other airlines sell tickets directly to final buyers, cutting travel agents from their marketing channels altogether. In other cases, new forms of resellers are displacing traditional intermediaries, as is the case with online marketers taking business from traditional brick-and-mortar retailers. For example, online music download services such as iTunes and Amazon MP3 have pretty much put traditional music-store retailers out of business. And Amazon.com almost single-handedly bankrupted the nation's number two bookseller, Borders, in less than 10 years, and it has recently forced highly successful store retailers such as Best Buy to dramatically rethink their entire operating models. In fact, many retailing experts question whether stores like Best Buy can compete in the long run against online rivals. Disintermediation presents both opportunities and problems for producers and resellers. Channel innovators who find new ways to add value in the channel can displace traditional resellers and reap the rewards. In turn, traditional intermediaries must continue to innovate to avoid being swept aside. For example, superstore booksellers Borders and Barnes & Noble pioneered huge book selections and low prices, sending most small independent bookstores into ruin. Then, along came Amazon.com, which threatened even the largest brick-and-mortar bookstores through online book sales. Now, both offline and online sellers of physical books are being threatened by digital book downloads and e-readers.

Price Adjustment Strategies: Psychological Pricing

occurs when sellers consider the psychology of prices and not simply the economics (Hermes Bag, fancy wine)

Product Mix Pricing Strategies: Optional-Product Pricing

optional or accessory products along with the main product For example, a car buyer may choose to order a navigation system and premium entertainment system. Refrigerators come with optional ice makers. And when you order a new computer, you can select from a bewildering array of processors, hard drives, docking systems, software options, and service plans. Pricing these options is a sticky problem. Companies must decide which items to include in the base price and which to offer as options.

Market-penetration pricing

sets low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share Three Conditions: Price sensitive market Production & distribution costs must decrease as volume ramps up Low prices must keep competition out of the market Example of IKEA in China: When IKEA first opened stores in China in 2002, people crowded to take advantage of the freebies—air conditioning, clean toilets, and even decorating ideas. Chinese consumers are famously frugal. When it came time to actually buy, they shopped instead at local stores just down the street that offered knockoffs of IKEA's designs at a fraction of the price. So IKEA slashed its prices in China to the lowest in the world. The penetration pricing strategy worked. IKEA now captures a 43 percent market share of China's fast-growing home wares market.

Cost-based pricing

setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk Cost-based pricing adds a standard markup to the cost of the product Some companies, such as Walmart or Southwest Airlines, work to become the low-cost producers in their industries. Companies with lower costs can set lower prices that result in smaller margins but greater sales and profits. However, other companies—such as Apple, BMW, and Steinway—intentionally pay higher costs so that they can add value and claim higher prices and margins.

LL Bean

sustaining a competitive advantage

Franchises: Manufacturer-sponsored wholesaler

system—Coca-Cola licenses bottlers (wholesalers) in various world markets who buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers locally.

Franchises: Service Firm Sponsored Retailer

system—for example, Burger King and its nearly 12,300 franchisee-operated restaurants around the world. Other examples can be found in everything from auto rentals (Hertz, Avis), apparel retailers (The Athlete's Foot, Plato's Closet), and motels (Holiday Inn, Ramada Inn) to supplemental education (Huntington Learning Center, Kumon) and personal services (Great Clips, Massage Envy, Mr. Handyman). The fact that most consumers cannot tell the difference between contractual and corporate VMSs shows how successfully the contractual organizations compete with corporate chains.

Franchises: Manufacturer-sponsored retailer

system—for example, Ford and its network of independent franchised dealers

Target Marketing: Undifferentiated

targets the whole market with one offer Mass marketing Focuses on common needs rather than what's different Requires heavy advertising a firm might decide to ignore market segment differences and target the whole market with one offer. Such a strategy focuses on what is common in the needs of consumers rather than on what is different. The company designs a product and a marketing program that will appeal to the largest number of buyers. As noted earlier in the chapter, most modern marketers have strong doubts about this strategy. Difficulties arise in developing a product or brand that will satisfy all consumers. Moreover, mass marketers often have trouble competing with more-focused firms that do a better job of satisfying the needs of specific segments and niches.

The Promotion Mix

the blend of advertising, public relations, personal selling, sales promotion and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships

Price Decisions: Pure Competition

the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities. No single buyer or seller has much effect on the going market price. In a purely competitive market, marketing research, product development, pricing, advertising, and sales promotion play little or no role. Thus, sellers in these markets do not spend much time on marketing strategy.

Personal Selling

the most effective method at certain stages of the buying process, particularly in building buyers' preferences, convictions, actions, and developing customer relationships However, it is the most costly tool

Comparative Advertising

where a company directly or indirectly compares it's brand to a competitor (phone companies) You see examples of comparative advertising in almost every product category, ranging from sports drinks, coffee, and soup to computers, car rentals, and credit cards. For example, over the past few years, Verizon Wireless and AT&T have attacked each other ruthlessly in comparative ads. When Verizon Wireless began offering the iPhone, it used its "Can you hear me now?" slogan to attack AT&T's rumored spotty service.