Marketing Final

Is customer satisfaction the ultimate goal of customer-centred markets?

- No, it is sought by customer-centred market but is not the ultimate goal. - Although customer-centered firms seek to create higher customer satisfaction, this should not be their ultimate goal. Increasing customer satisfaction by lowering price or extending product warranty may result in lower profit which can hurt the firm's ultimate business goal.

How can companies increase their profitability?

- Training customer service representatives to provide a better service - Focusing on product attributes that matter more to customers - Improving manufacturing processes - Developing innovative products - must keep in mind that they must deliver a high level of customer satisfaction subject to also delivering high levels of satisfaction to other stakeholders, of course given the company's overall resources.

What factors influence supply?

- price - costs of inputs - availability of inputs such as raw materials, skilled labor - technology - conditions of production such as weather

What factors influence demand?

- price - regulation - disposable income - consumer tastes/preferences

A key principle employed by marketers and businesses in general is to own and develop the resources and competencies that:

-Essence: make up the essence of the business of the business -Value: that are at the core of value creation -Critical: that are most critical for business success

What characterizes high competitive zones when talking about the satisfaction-loyalty relationship?

-Many substitutes -Low switching costs -Not very important -Commoditization -Low differentiation -Consumer indifference

What is the psychological process, memory, and how does it influence consumer response?

-Memory = the capacity of the mind by which information is encoded, stored, and retrieved Cognitive psychologists distinguish between: -Short-term memory (STM) = a temporary and limited repository (a place where things are stored) of information -Long-term memory (LTM) = a more permanent, essentially unlimited repository of information

What are some aspects of the developments stage in the PLC and what does the length of the stage depend on?

-NPD (new product development) -R&D (research and development) -the need for market research -requires significant resources -may involve a lead time before launch (time between when a product is developed to when it is put in the market) Length depends on: - complexity, technology - regulation (drugs, vaccines) and approval

Within the 9 effects on price sensitivity to product price, what is the sunk investment effect?

-Sunk investment = an investment that has already been made and cannot be undone -Purchasing products in conjunction with assets already bought → PS↓. This refers to the likelihood of buyers to lessen the implications of additional costs due to sunk costs. -Someone who just purchased a new TV screen will be less sensitive to the additional price of a matching soundbar. "I already bought this TV screen, I need to buy this soundbar to go with it." -This plays into cross selling/upselling at the point of purchase for large ticket items. It is a huge advantage for businesses such as electronics, retailers, and car dealers.

What is target-return pricing?

-The firm determines the price that yields its target rate of return of investment (ROI) -Frequently used by public utility companies -Need to make a fair/regulated ROI -Return on investment (ROI) = a ratio used to calculate the profit (benefit, return) an investor receives in relation to its invested capital (all the money you spend)

What is markup pricing?

-The most elementary pricing method (many people benefit from this simplicity and many customers think that this method is fair) -adding a standard markup to a product's cost -Markup = desired return on sale value Price = costs + standard markup (Important! The markup is not taken for the price of the cost, it is taken from the price that the product is sold for)

What are some aspects of the pricing objective - maximum current profits?

-estimate demand and costs for alternative prices and choose the one that produces the most profit -price high if there is not much competition, because then there is inelastic demand -price low if the customers are stronger, there are more alternatives, and low switching costs -price discrimination may apply (ex. cheaper movie tickets for senior citizens but must be careful because it can make customers upset and also it is difficult to apply)

What things make up the pricing policy in the marketing mix?

-exchange for the product, typically money -what customers are willing to pay (due to income, brand, quality, social value -uniform pricing vs. price discrimination across segments and over time for ex. holidays -compare to competition -consumer price vs. reseller price

What does the CLV formula help marketers do?

-predict the effectiveness future/potential marketing actions and alternative marketing strategies -make better decisions in light of their objectives (how much to spend on customer acquisition and customer retention

How should you market for nonprofit and governmental markets?

-pricing needs to be careful and cautious because the customers have less purchasing power than businesses for ex. -lower selling prices by offering products with more limited features and quality -focus on practical solutions and lower bids

What are a channel's direct effects on a market in an integrated channel strategy?

-sales -brand equity

How do we evaluate customer profitability?

-we emphasise the lifetime stream of revenues and costs (including advertising and service costs), we look at their purchases over time and not from a specific individual transaction

What things make up product policy in the marketing mix?

-what products to sell -product development -product design -product improvement -product mix decisions (assortment and packaging, varieties/versions)

What is full demand?

-when consumers are adequately buying all products put into the marketplace -demand=supply -ex. medicine

What is declining demand?

-when consumers begin to buy the product less frequently or not at all (ex. pocket calculator, soft drinks)

What are the downsides of the survey method in estimating a demand curve?

1. Consumers may understate purchases intentions at higher prices to discourage companies from pricing high 2. On the other hand, other consumers may exaggerate their willingness to pay for new products 3. Consumers may be unable/unwilling to cooperate and provide reliable answers

In the What's Your Best Innovation Reading, what are the 3 steps to help companies where there next breakthroughs should be?

1. Identify Key Dimensions (thinking about top few dimensions that are important for your product) 2. locate your position (determine the shape of the utility curve of each dimension) 3. determine your focus (identify which dimension should be focused on and needs/can be improved)

What are the 5 types of needs?

1. Stated Needs (ex. I want a Ferrari) 2. Real Needs (ex. wanting low operating cost) 3. Unstated Needs (ex. customer expects good customer service) 4. Delight Needs (ex. including GPS or Mobileye in the car) 5. Secret Needs (ex. how you want to be perceived by your finds, don't state it or might be even unaware of it)

Within performance marketing, having financial accountability means that marketers need to justify their investments in which 3 major aspects?

1. in terms of financial return on investment and profitability 2. in terms of building the brand 3. from growing the customer base point of view This comes from assets such as: -brands -customer base -distributor and supplier relations -human capital (employees) -intellectual property

According to the serve or create reading, what are 4 strategic orientation modes for the firm?

1. isolate - little product development and when it occurs, no regards to customer needs - focuses on its own internal problems 2 . follow - customer drives the innovation 3. shape - innovative technology shapes the market - product defines human needs and changes people's behaviour - 2 forms of shaping strategy (defining, in which someone is the first in the market like the Chrysler minivan and, influencing, in which someone is not the first but creates a huge impact like Apple computers) 4. interact - customer and technology both impact product

The need for integrated marketing is related to what 2 key principles?

1. many different marketing activities can create, communicate, and deliver value to customers 2. marketers should design and implement any one marketing activity with all other activities in mind

What are some positive outcomes of marketing (from company success to jobs)?

1. marketing - understanding customer needs at various levels, product development and design become more relevant, brand position improves 2. demand for brands - sales increase, customer loyalty increases, competitive advantage 3. financial success - revenues lead to profit increase, firm's growth and stability, enhances firm value 4. jobs - financial success creates jobs and economic growth which is good for society as a whole

What are 2 types of price-setting methods?

1. markup pricing 2. target-return pricing

What are the 4 key psychological processes that influence consumer response?

1. motivation 2. perception 3. learning 4. memory

What are the 8 demand states?

1. negative demand 2. nonexistent demand 3. latent demand 4. declining demand 5. irregular demand 6. full demand 7. overfull demand 8. unwholesome demand

ATC (Average total cost) equation

ATC = TC/Q TC = FC+VC

What is one of the best known theories of human motivation?

Abraham Maslow's hierarchy of needs. It has important implications for consumer analysis and marketing strategy. Maslow thought to explain why people are driven by particular needs at particular times. According to his theory, human needs are arranged in a hierarchy from most to least pressing (physiological needs being the most pressing).

What is culture and how does it influence consumer behaviour?

Culture = characteristics and knowledge of a particular group of people (values, behavioral norms, and shared patterns of behavior) a person in India will have different values and interests that someone in the U.S.

What is the stimulus-response (S-R) model?

Model that says that marketing and environmental stimuli enter the consumer's consciousness, and a set of psychological processes combine with certain consumer characteristics to result in decision processes and purchase decisions (marketing stimulu are usually controlled by the marketer except for economic or political factors)

What are opinion leaders and how can they influence consumer behaviour within reference groups?

Opinion leader = a person who offers informal advice or information about this specific brand, product, or product category such as which of several brands is best or how a particular product may be used. Marketers should reach and use them to influence the masses.

What is the Product Life-Cycle (PLC)? What does it describe and what does it help with?

PLC = the life course of a product in the market from birth to death It describes the product sales ($) over time (t) and the stages a product goes through during its life. It helps with: - sales trends prediction - marketing positioning and targeting - marketing mix management (price, play to distribute) - product portfolio management (if there are various products, which ones should we invest more and market)

Within social factors, how do roles and statuses affect consumer behaviour?

People's positions in a society may be defined in terms of their status. Accordingly, they choose products and brands that have them reflect and communicate their roles and their actual or desired status in society. In light of such behavior, marketers have designed particular products and brands that symbolize consumers' status or prestige.(ex. position in a company)

Within the personal factors, how does personality/self-concept influence consumer behaviour?

Personality = a set of distinguishing human psychological traits that lead to consistent and enduring responses to environmental stimuli Brands have personalities and their interaction with consumers affect brand choice. Specifically, research shows that consumers are likely to choose brands whose personality matches their own. Brand personality = the specific mix of human traits that we attribute to a particular brand

What is price ceiling and price floor?

Price ceiling is the maximum price that you should set your product at (which is demand) and price floor the minimum price (which is costs). You don't want to go near them, your goal is to have the price of your product be between the two and not close to either.

What are some aspects of the pricing objective - maximum market skimming?

Price skimming -A marketer first starts off by charging the highest possible product price -Once the demand at this level is satisfied, you lower the price a little bit, let's say 5 or 10% -Lowers P → attracts a more price-sensitive segment Helps recover initial costs quickly before competition lowers market price and shrinks the company's margins Often applied when introducing a new tech (ex. Bluetooth headphones - a few years ago they were first priced at a very high price and now they are more affordable)

When do marketers set prices?

Product Development Stage - When the company develops a new product - part of the business plan Introduction - A new market or geographical area - A new distribution channel Bid Proposal - When the company enters bids on new contract work - When giving price quotes

How do reference groups influence consumer behaviour?

Reference groups influence members in at least 3 ways: 1. They expose an individual to new behaviors and lifestyles 2. They influence attitudes and self-concept 3. They create pressures for conformity

Gross Domestic Product (GDP) =

a quantitative measure of a nation's total economic activity

amenity creep =

a rapid increase of features added to attract new guests

retention rate (r) =

fraction of current customers retained each time period

subgroups/segments =

individuals who share common characteristics, respond in a predictable manner to marketing/promotional offers

To serve or create reading: innovation orientation = customer/market orientation =

innovation orientation = asserts that customers will prefer products that generate the greatest interest, features, quality, value, technological superiority customer orientation = contends that the satisfying needs and wants of the target market is key

customer value =

perception of what a product is worth versus the possible alternative

What are needs?

physiological sense: basic human requirements, something that is necessary for consumers to live a healthy life, we need them on a regular basic (ex. food, safety, shelter, medical treatment) psychological sense: features that arouse consumers to action towards a goal and giving purpose to direction and behavior (self-esteem, self-actualisation, love)

Within performance marketing, the macro-broader environment consists of which factors?

political-legal, social-cultural, communal, economic, technological, geographic-physical, environmental, demographic, ethical, etc.

economies of scale =

reduced costs per unit that arise from increased production

Who sets prices in a business?

small business: owners large corporation: product line managers who are in charge of a certain product category or brand

marketing management =

the art and science of: - choosing target markets - getting and keeping customers through delivering superior customer value

Total Customer Benefit =

the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of the product, service, people, and image

customer expectations

the perceived value a customer seeks BEFORE purchasing a product, it is very subjective because each person will perceive it differently, can affect customer satisfaction

consumer behaviour =

the study of how consumers formed by individuals, groups, and organizations, behave in the context of the marketer's offering, how they choose, how they buy, how they use and dispose of goods, services, ideas, or experiences to satisfy their needs and wants

value

the sum of the tangible and intangible benefits and costs, a combination of 3 elements knows as the customer value triad: 1. quality 2. service 3. price value perception increases with quality and service and decreases with price

market =

traditionally: a physical place where buyers and sellers gather to buy and sell goods and sometimes to bargain according to economists: a collection of buyers and sellers that share some needs and wants regarding a product and both are able to carry out exchange

When considering a customer size, what 4 things must you consider?

transaction costs, service costs, price, profitability

unit cost equation

unit cost = VC per unit+FC/Q

feature fatigue =

when customers are initially attracted products that have more features, but their preferences change once they use the product and they are consistently more satisfied with products that have fewer features

Under what circumstances may consumers use produce price as a key indicator of quality?

when there is no information, they use price as an indicator of quality

convenient involvement segment =

within the lifestyle factor in personal factors of consumer behaviour, these are people who seek both convenience and some involvement (ex. adding baking powder to a brownie mix)

In the process of pricing, what are marketers' perspective on consumers?

- Actively process price info (They can look at a price and make something out of it which is not 10 euro) - Interpret info from the context (the timing, the setting, what happened right before seeing the price, etc. ex. Same black t-shirt sold by brand vs. non-brand makes customers view the products differently)

What is the psychological process, perception, and how does it influence consumer response?

- Consumer perception is reality, it is often more important than reality itself. This is because perception significantly affects consumers' actual behavior. - Perception = the process by which we select, organize, and interpret information inputs to create a meaningful picture of the world

Let's say the satisfaction is rated from 1-5 stars, as in most retail websites. What do 2-4 stars entail?

- Customers are fairly satisfied - Low confidence/trust of value received (they might still not be confident that they get the best value they can and might not fully trust the marketer) - Easily switch to competitors (Therefore, they find it easy to switch to a competitor when a better offer comes along) - Loyalty depends on competitors' actions (this means that the chance that these customers will stick with the company depends heavily on our competitors' actions rather than ours Ex. quality of product, its availability, price, sales promotions, and competitors' salespeople efforts/ special offers. They all affect the chance that our customers will switch to competitors.

Let's say the satisfaction is rated from 1-5 stars, as in most retail websites. What does 1 star/low rating entail?

- Customers are likely to abandon the company - The may even bad mouth it - The company loses sales of existing customers as well as potential sales of prospective clients who are discouraged from doing business with the company

Why do certain customers not complain when they are dissatisfied?

- Don't know how/to who to complain - Feel that complaining is not worth the effort - Did not have the chance to do so - Just stop buying from the company

Let's say the satisfaction is rated from 1-5 stars, as in most retail websites. What do 5 stars entail?

- Lower sensitivity to competitors' price (Our customer is less sensitive to lower prices offered by competitors) - Less likely to meet competitors' salespeople (reluctant and less likely to meet our competitors salespeople and listen to their pitch) - Very likely to repurchase our products and upgraded versions - Highly satisfied customers are also likely to generate revenues with less fluctuations - Spread good word of mouth about the company, eWOM, they may contribute to sales growth by referring new customers to the companies - Emotional bond (high satisfaction and delight can cause an emotional bond with the brand and not just a rational preference)

ROI =

return on investment, a ratio used to calculate the profit an investor receives in relation to its invested capital * 100

gross margin (M)=

revenue - cost

break even point =

(1) the number of product units the marketer needs to sell in order to cover its overall costs (i.e. investment) (2) the dollar figure needed to breakeven (i.e. revenue), the point in which the profit is zero and they just cover the costs

Why is handling complaints properly so important?

- Handling complaints properly and increasing satisfaction in general is important not only because it improves customer retention. It also supports the company's reputation and helps recruit new customers. Buyers whose complaints are well resolved tell an average of 5 people about the good treatment they received. Those who receive bad treatment will be more active and will tell about 11 people about their experience. If each of those customers tells other people, the number of people who receive bad word of mouth will grow exponentially. - Provided that product and service failures cannot be prevented entirely, the next best thing a company can do is make it easy for customers to complain. Tools that allow for an easy 2 way communication include suggestion forms, Facebook chats, etc. Marketers should encourage their unhappy customers to complain. - Listening to complaints drives innovation

What is systematic monitoring in relation to customer satisfaction?

- Identify driving factors, what shapes satisfaction - Changing marketing activities - companies monitor customer satisfaction regularly because it is a key driver of customer retention, not in the sense of keeping the customer by imposing legal restrictions or by raising the cost of switching to competitors, but rather by keeping them pleased with the product or service

What is selective distortion and how does it influence how someone may perceive an object?

- Selective distortion = the tendency to interpret information in a way that fits our preconceptions - Consumers distort information to be consistent with prior product beliefs and expectations and with decisions they've made that cannot be undone (ex. the Trevi fountain hotel example, the change in packaging for Coors beer and Bamba)

What is selective retention and how does it influence how someone may perceive an object?

- Selective retention = the process by which people remember more accurately information they find meaningful, interesting, or closer to their beliefs and values Because of selective retention, we tend to remember information about likable brands and enjoyable products, and tend to forget pieces of information about products that don't mean much to us.

What are marketing implications due to selective retention?

- Selective retention can explain the benefit of likeability and positive attitudes toward the brand (regardless of sales) - It also works to the advantage of stronger brands (ex. Apple has an advantage over other marketers of great products such as Huawei) - It also explains why message repetition is important to make sure that the marketer's/brand's message is not forgotten. Although an overly repetitive message can be annoying, repetition is pretty important.

How can marketers manipulate a reference price and what are the implications?

- Sellers situate a product among expensive competitors, implies that it belongs in the same fancy class - Department stores display apparel brands in separate sections/departments, implies that brands are differentiated in price and jeans in the designer section are upscale - Fewer items on stores display, implies luxury brand - Stating a high MSRP (manufacturer' s suggested retail price)If it says $25, it implies that the suggested price is $25, but if I see that the price is $22, then it is a new reference price and I will think I got a good deal) - Point to a competitor's high price, implies the product's competitive price and that it is a steal

What are the the theoretical and practical aspects of consumer behaviour?

- The theoretical aspect provides a structured depiction of the behaviors of interest. Strong theories can be generalized extensively over and beyond specific cases that students or practitioners (someone actively engaged in a discipline or profession) may encounter during the training. - The practical aspects are critical for managers and practitioners who make actual decisions regarding real marketing issues. Theories often do not match exactly the problems that executives cope with in the industry, so the practical application of the theory has to be adjusted to reality.

How do customers make the right choice (CPV lesson)?

- They tend to be value maximizers within the bounds of search costs and limited resources such as knowledge, time, income, and mobility. - Estimate alternative offers: Usually, customers would estimate which offer they believe for whatever reason will deliver the most perceived value and act on it. - Evaluate: value delivered vs. expectations: Whether the offer that was delivered by the marketer lives up to their expectation affects significantly customer satisfaction and the likelihood that the customers will purchase the product again.

What is the marketing orientation?

- a customer-centred orientation in which the marketer's job is to find the right products for your customers vs. the other way around -a key principle is to be better than competitors in delivering and communicating superior customer value to your target markets -long term customer relationship -a time of business can show if a company is oriented (ex. Samsung)

What is negative demand?

- created when product is disliked -customers may avoid it -product may be beneficial, but customer doesn't want it -ex. dental care services or vaccines -causes positive demand for other products such as floss and mouthwash

customer loyalty =

- customer's commitment or attachment to a brand, store, manufacturer, service provider, or other entity - an important outcome of customer satisfaction Has 2 aspects: - behavioural brand loyalty that refers to a customer's choice or spending over the product - attitudinal brand loyalty that reflects the way customers feel towards the product/brand, it generates good word of mouth and is characterised by relationship commitment

In the process of pricing, what are economists' perspective on consumers?

- customers viewed as passive "price takers" (being a price taker means that consumers don't have an influence on the price, take it or leave it) - Accept prices at "face value" = as given (if a price of a product is 10 euro, it doesn't matter how a customer comes across the price, it is still 10 euros)

What are some aspects of the introduction stage of the PLC?

- product is launched and we see if it's accepted by market - product awareness is low and competitions is low - production cost is high (because capacity utilization is low and average unit cost is high, producing less products than factories can because demand is low) - cash flow is negative -marketers target consumers who could be early adopters -marketers create awareness and communicate the product rather than brand -pricing method can be skimming (start high and skim) or penetration (start low) -product: basic version -distribution is limited and difficult to find distributors to carry the product at this stage

What are some aspects of the growth stage in the PLC model?

- sales and revenue increase steeply - customer base expands due to WOM and recommendations - competition intensifies - production cost decreases, economies of scale = reduced unit cost due to increased production - cash flow: positive - marketing strategies aim to sustain growth - distribution is intensive and look to add outlets - reach wider target audiences - build and increase market share = a brand's sales/total product category sales -improve and add features/versions, to the product

What are some aspects of the decline stage in the PLC?

- sales fall - declining demand for the product - excess production capacity leads to rise in unit cost - reduction in profits - cash flow is weak/unstable - most competitors leave the market Marketing strategies: - squeeze last bits of profit - cut back spending - cut prices - support loyal customers - shut down/discontinue the product

What are some aspects of the maturity stage in the PLC?

- sales growth slows down/halts - market saturation = happens when products or services in a particular market are no longer in demand due to competition or simply less demand - competition intensifies - price decreases - marketing strategies aim to maximize ROI (return on investment = a ratio used to calculate profit in relation to its invested capital, profit/invested capital * 100) - maximum operational efficiency to lowest cost unit - weak competitors start to leave the market -employ extension strategies such as re-design packaging, discounting, seeking new customers, repositioning the product, develop new uses

Why do products enter the decline stage?

- technological advances - increase in competition - change in consumer's preferences

How do buyers form their expectations?

- the customers' buying experience in the past - advice or recommendations given by friends - critical reports of consumer organizations - stories about the brand or company reported in the press - marketers' promises and information communicated by the company itself and its competitors

Customer Perceived Value (CPV) =

- the difference between customers' evaluations of all the benefits and all the costs of a specific offering, how much value they get from buying the product - one product can have more benefits, but the cost is also higher and overall leads to a smaller customer perceived value

What are some aspects of the pricing objective - product-quality leadership?

-"Affordable luxuries" (not very high end, but more affordable) -High perceived quality, taste, and status -A price just high enough not to be out of reach (ex. Victoria's Secret is not out of reach, most people can afford it but it is relatively expensive and gives a bit of a feel of higher-end products) -Most people would not be able to tell the difference between the taste of different brands of vodka, but most people would be willing to buy the higher price vodka versus cheap Absolute Vodka)

Within the 9 effects on price sensitivity to product price, what is the price-quality effect?

-As importance of quality escalates → PS↓ -Well known brands with high quality reputation can charge higher prices because price sensitivity is lessened. -This seems similar to unique value, but has more to do with potential for downsides. -You buy top-quality mountain climber gear because it's a matter of life and death. It doesn't matter how much it costs. -You pay for the best doctors/lawyers because the down side is inconsiderable.

What is selective attention and how does it influence how someone may perceive an object?

-Attention = the allocation of processing capacity to some stimulus -Voluntary attention: conducted on purpose (ex. While driving a car, we intentionally and actively look for pedestrians, bikers, and other cars to avoid accidents) -Involuntary attention: grabbed by someone or something without the person's intention (ex. We don't walk into the shopping mall searching for a bottle of coke, but if we cross one it will surely grab our attention) Selective attention: when faced with stimuli overload, screening some/most stimuli out (Consumers are exposed to hundreds of ads or brand communications a day. Because we cannot possibly attempt all of these cues/signals, we screen most stimuli out.)

What do marketers believe about price?

-Believe that price may indicate product quality (desired properties) -Consumers may prefer to pay more, often under conditions of image pricing

What factors influence behaviour loyalty?

-Customer's habit -Substitute availability -Regulation -Competitors' sales promotion

Within the 9 effects on price sensitivity to product price, what is the inventory effect?

-Ease of product storage→PS↑ -On the other hand, price sensitivity for perishable items which cannot be stored is lower. -Discounting canned food/wine prompts a purchase in large quantities, even though buyers might not use these products for several months or even years. -Discounting fresh fruits/vegetables/dairy will not increase purchase at the same rate. -For perishable items, it's harder to stimulate demand by lowering the price. For them, there has to be a closer match between time of purchase and time of consumption.

Within the 9 effects on price sensitivity to product price, what is the end-benefit effect?

-End overall benefit↑→PS↓ -End-benefit effect is especially important in B2B marketing, that is, when selling to other businesses. Meat suppliers selling to steakhouses know that the cost of the meat comprises a large component/% of the cost of a steak dinner. A steakhouse manager will be very sensitive to the price of the meat. On the other hand, when the meat is sold in delis and coffee shops, the meat cost is relatively minimal compared to the other ingredients used in the dishes served. In this case, price sensitivity is lower.

Within the 9 effects on price sensitivity to product price, what is the difficult comparison effect?

-Even if buyers are aware of the alternative products available in the marketplace, they still need to be able to compare them in order to use this knowledge. -when difficult to compare substitutes↑→PS↓ -Insurance companies employ this strategy by offering countless terms and features among their health policies, making it deliberately very difficult to compare one company's offering to another. People who are unfamiliar with the insurance terminology/jargon, may also find it difficult to compare alternative offerings. Jargon = special words or expressions that are used by a particular profession or group and are difficult for others to understand -Comparison shopping engines enable easy and instantaneous side by side comparisons of alternatives and therefore they may increase consumers' price sensitivity.

Within the 9 effects on price sensitivity to product price, what is the total expenditure effect?

-Expenditure (the action of spending funds) for a product↑→PS↑ -"Expenditure" here is in terms of a share of a person's income. In other words, consumers are more price sensitive when shopping for items that comprise a larger percentage of their budget/their income. -The purchase becomes more significant and they naturally pay more attention to shopping for the best price. -A consumers' price sensitivity related to household cleaning products and groceries would change according to: -Income -Age - Stage in the life-family life cycle (DINK). A DINK couple, a household with double income and no kids, will be less sensitive to grocery prices than a family with 5 children.

What characterizes noncompetitive zones when talking about the satisfaction-loyalty relationship?

-Powerful loyalty plans -High switching costs -Regulated monopoly -Few substitutes -Dominant brand equity -Proprietary technology

In relation to the second step of the pricing process, determining demand, what is price sensitivity?

-Price sensitivity = the degree to which price affects the demand for a product or a service -A greater slope of the demand curve means a steeper curve, a less elastic demand, and lower price sensitivity.

What is performance marketing within the holistic marketing orientation?

-Refers to the range of potential outcomes that affect the company and their implications within and beyond the company's boundaries (both at the micro and macro levels) -requires understanding the financial and non financial returns (ex. social responsibility) to both business and society for marketing activities

In what cases are markups likely to be higher?

-Seasonal items (to cover the risk of not selling, you not you might not sell everything so you will increase the price so that you can cover the losses) -Speciality items (wedding gowns, antiques, artwork, they are products that consumers actively seek because of unique characteristics or loyalty to a specific brand, they will spend time and effort to get it, will not easily accept substitute products) -Slower-moving items (not shipped in a long time, means that they are less available like Jenny's piano) -Highly depreciated items/with high storage and handling costs (fresh foods: sprouts, strawberries) -Demand-inelastic items (prescription drugs, masks, etc.)

Within the 9 effects on price sensitivity to product price, what is the shared cost effect?

-Sharing cost with someone else/another buyer →PS↓ -In addition, when buyers spend someone's else's money on themselves, they become less price conscious and less price sensitive. -Ex. While employees travel on a company's business, employees pay for a variety of services like lodging, flights, transportation, and meals. They are less sensitive to the price paid for such services, although these expenses come out of the employee's limited travel budget. This is one reason why airlines, hotels, and rental car companies can all price discriminate against business travelers, simply because most of them are not paying their own way.

Within the 9 effects on price sensitivity to product price, what is the substitute awareness effect?

-This connects price sensitivity with customers' awareness of alternatives and their presence -unawareness/lack of alternatives↑→PS↓ -Awareness enhancing tools: -Recommendation engines + mobile apps assist marketers to inform buyers about the retailers that carry the product, the brands that are available in the marketplace, substitute solutions, and alternative professionals that can provide a service. -Advertising can also help in increasing brand awareness. This is crucial especially for new brands and new product models.

Within the 9 effects on price sensitivity to product price, what is the unique value effect?

-This effect is probably the most important determinant of price sensitivity (PS). -Unique features and benefits of the product compared to a competing product → PS↓ - Lowers price sensitivity - Raises customers' willingness to pay -To prove or persuade customers of their product's uniqueness, marketers should provide: - Hard facts - Solid testimonials of other customers - Hands-on trial use

What factors influence attitudinal loyalty?

-Trust perceived risk (customer's trust of the marketer) -History with the company -Relationship over time -Reputation of the brand

customer satisfaction =

-a customer's feelings of pleasure or disappointment that results from comparing a product's perceived performance (our outcome) to expectations -customer satisfaction = f(product performance-expectations) -If their perceived performance falls short of expectations, the customer is dissatisfied. If it matches expectations, the customer is satisfied. If it exceeds expectations, the customer is highly satisfied or even delighted.

What is the function of communication channel in the supply chain?

-deliver/receive messages form target buyers -advertising, commercials, and use of social media -firms communicate through the look of their retail stores and websites

Customer Lifetime Value (CLV) =

-a formal quantitative framework for planning customer investment and helps marketers adopt a long-term perspective -the dollar value of an individual customer relationship (not an actual specific customer buy a type of customer) -a net present value (NPV) of a customer-company relationship, the expected cash flows that will be received from a customer relationship -the same of all future customer revenue streams minus product, servicing, and retention costs -focuses on the profit from multiple transactions over time and not on the profit from a particular business deal -it is both backward forward looking, meaning that is calculates the value of past customers to predict future value -helps us identify how much to spend to acquire or retain a new customer -follows 2 assumptions: customer will stay loyal for entire time horizon and will keep paying initial subscription rate

What is the holistic marketing orientation (HMO)?

-a key principle is that marketing has a broad scope and dramatic impact on the firm -important to coordinate various elements/factors/departments across the organization such as processes and activities

attitude =

-a person's feelings, beliefs, or behavioural intention toward an object -In the context of marketing, this object can be a brand, a product, a corporation, a commercial, etc.

How should you market for business markets?

-because these are professional buyers and negotiators, demonstrate how a product helps increase revenue or lower costs -focus on salesforce, price, reputation -advertising (not as influential as the others)

What do economists believe about price?

-believe that consumers would ALWAYS prefer lower prices -Based on the law of demand

What behavioural factors may influence the profit we can earn from less profitable customers?

-buys only when product is discounted -purchases small quantities -demands compensation for service failure -requires frequent maintenance/tech support -often switches to competitors

How can marketers asses profitability at different levels?

-by channel (through apps, websites, physical stores) -by marketing segment (younger people behave differently than older, married couples different than singles) -individuals

What is that statistical analysis method in estimating a product's demand curve?

-calculating data such as past prices and quantities sold -the data can be longitudinal (same consumers over time) or cross-sectional (different consumers at different locations at the same time) -important to control other factors such as competitors' response and advertising, packaging, etc. which can be hard to do

What is unwholesome demand?

-consumer may be attracted to products that have consequences (ex. cigarettes, drugs)

What is nonexistent demand?

-consumers do not actively avoid the product, but there is a lack of interest -consumers might not even now it exists, unaware -constraints prevent consumption such as affordability or health issues -may be overshed by powerful competing brands

What is latent demand?

-consumers may share a strong need that cannot be satisfied by an existing product, things are not yet available to us (ex. nutritious candy, cancer medicine)

What is irregular demand?

-consumers purchase on a seasonal, weekly, or hourly basis (ex. ski gear, christmas trees, bathing suits)

How should you market for consumer markets?

-create a strong brand image -develop a superior brand -packaging design -ensuring product availability -engaging marketing communications and reliable service

Within performance marketing, the micro-task environment consists of which factors?

-customers -competitors -suppliers -intermediaries

How does family influence consumer behaviour?

-family is the most influential primary reference group Two types of families: 1. family of orientation (parents and siblings) - parents many times influence their kids' values ex. what health insurance to have 2. family of procreation (spouse and kids) - has a more direct influence on everyday buying, each person has their role in one category even kids can persuade their kids to buy them something

What are the differences between the selling and marketing orientations?

-focus on the needs of the seller vs. buyer -satisfying seller's needs or customer's needs -selling oriented businesses want to close immediate deals while marketing oriented businesses focus on maintaining a long term relationship with customers -selling focuses on the products and marketing focuses on the solutions

What is the production orientation?

-holds the view that consumers prefer products that are widely available and inexpensive -therefore, managers of production oriented businesses concentrate on: -achieving high production efficiency -reducing costs -mass distribution -ex. Lenovo who takes advantage of the labor pool in China -marketers also use the production orientation when they want to expand the market and sales have already been maximised

What things make up the promotion policy in the marketing mix?

-how consumers will be informed about the product and persuaded to chose/consume/recommend the brand -advertising, personal selling, sales promotion, publicity, discounts, collaborations (ex. "we only have 4 left") -message type/appeal -media selected

What is unique about price?

-it is the one thing that generates revenue -it is easy to adjust (can change it very quickly, allows to respond quickly to competitors' pricing) -signals intended value -various forms and functions (ex. paying in money or frequent flyer points for a flight)

What are some aspects of the pricing objective - maximum market share?

-marketers set the price as low as they can, assuming that the market is price sensitive -leads to higher market share because they are going to sell more -sales volume may increase and therefore they will need to manufacture more -when they need to manufacture more, then the unit cost goes down -then they expect to see a long-run profit

What are the multiple departments involved in setting a price?

-marketing -sales -production -finance -accounting

What is overfull demand?

-more consumers would like to buy the product that can be satisfied - more demand than quantity of products (ex. public transportation in rush hour or real estate in NYC)

What are some aspects of the pricing objective - survival?

-overcapacity and the company needs to get ride of products -intense competition -rapid changes in consumer wants -price lowered to increase sales and stay in the business -company accepts short term loss to stay in long term

What behavioural factors may influence the profit we can earn from more profitable customers?

-pays full price -purchases large quantities -recommends the brand/store to others -no service calls, no product returns -loyal

What factors may affect the satisfaction-loyalty relationship? Under what conditions is it likely to become stronger/weaker/eliminated altogether?

-the competitive environment - factors outside the company that compete with the products and services the marketer offers (ex. Suppliers of the same brand, other brands, other products, and other solutions that can act as substitutes for the marketer's offerings) -coffee shops are very competitive and will only have loyal customers if they are extremely satisfied with it, also it is a low cost to switch to somewhere else vs. airlines that you have acquired points/miles

image pricing =

-the marketing practice of setting a product price artificially high in order to encourage buyer favorable perceptions based only on its price (ex. Luxury items) -especially effective with ego sensitive produces like cars and jewellery

Aside from the 5 basic markets, what are other markets that marketers should consider?

-the need market (ex. diet-seeking market) -product market (ex. shoe market) -demographic market (youth, retired, etc.) -geographic market (ex. the Chinese market) -voter markets (votes) -labor markets (workers) -donor markets (money donations)

What things make up the place/distribution policy in the marketing mix?

-the point where products are available to consumers -geographic areas such as countries, downtown vs. suburbs -locations such as malls, websites, apps, etc. -which channels of distribution -sold directly or through intermediaries

reference price =

-the price that consumers anticipate paying, or consider reasonable to pay for a particular good or service, used as a benchmark when we examine products -difference between the actual price and reference price affects the price judgement

What in internal marketing drives the holistic marketing orientation/concept?

-the recognition that marketing activities within the company can be as important or even more important than those directed outside the company -it makes no sense to promise excellent service before the company staff is actually read to prove it

quality =

-the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs -We can say that whenever a seller's product or service's actual performance meets or exceeds customers' expectations, the seller has delivered quality -when quality increases, customer satisfaction increases, which supports higher costs and profitability

How should you market for global markets?

-the trend of doing global business has enhanced due to globalisation, technology, and free trade agreements between countries -companies must decide which countries to enter, how, etc. -companies must decide how to adapt the product/service to the country, what price to set, and how to advertise for different cultures -must consider cultural language, legal and political differences, etc.

What are the functions of distribution channels in the supply chain?

-they are employed by marketers to display, sell, or deliver the physical product or service to the buyer or user

What is the selling orientation?

-this orientation assumes that if customers are left alone, they will not buy enough products -this is typically used with unsought goods that customers don't actively think of buying (ex. insurance) or when firms with overcapacity aim to sell what they make vs. what the market wants -hard selling can be risk because it can lead to bad word of mouth if they feel pressured

What is the product orientation?

-this orientation proposes that consumers favour products that offer the most quality, highest performance, and innovative features -However, marketers should be careful of creating innovative products that don't serve the customers' needs well (ex. Google glasses, colourful Ketchup). New or improved products need to be priced, distributed, advertised, and sold properly.

What is the function of service channels in the supply chain?

-to carry out transactions with potential buyers -to support reliable delivery and transactions such as packaging, logistics, and transportation (ex. FedEx, UPS) -marketers use banks, financing, and insurance companies that provide supporting financial services -they also use payment systems, payment processing, and clearing services such as Visa, MasterCard, and PayPal

What procedures can help recover customer trust?

1. A 24/7 toll-free hotline to receive and act on customer complaints 2. Contact the complaining customer as quickly as possible. The slower the company is to respond, the more dissatisfaction may grow. 3. Accept responsibility for the customer's disappointment, don't blame the customer/avoid blame 4. Use customer service reps who are empathic 5. Resolve the complaint swiftly and to the customer's satisfaction. Some complaining customers are not looking for compensation so much as a sign that the company cares. A compensation is a sign that the company cares. 6. Record, analyze, improve. Record every complaint and treatment provided and work to prevent the problem from happening with other customers.

What supporting conditions need to take place in order for the maximum market share objective to work?

1. A highly price sensitive market AND a low price → stimulates market growth 2. Production and distribution costs fall with accumulated production experience (in other words, unit cost goes down) 3. A fixed cost structure (If the overall costs are based mostly on fixed costs, then this process may work). 4. A low price discourages competition - both actual and potential ones (price goes down, competition goes down)

Consumers tend to choose and use brands with a brand personality consistent with which 2 selves?

1. Actual self-concept: how they view themselves 2. Ideal self-concept: how they would like to view themselves 3. Others' self concept: how they think others see them These effects may be more pronounced for publicly consumed products than privately consumed products.

What are the 4 rules to follow in order to build cumulative advantage (Customer Loyalty is Overrated article)?

1. Become popular early (gain more market share) 2. Design for habit (like bright orange color for Tide) 3. Innovate inside the brand (like giving the name "Liquid Tide" and not a new name so that it is still familiar 4. Keep communication simple (commercials should be straightforward because people "think fast" and products should be easy to use like Facebook vs. MySpace)

Learning is produced through the interplay of of which elements?

1. Drives: a person's urge to act to accomplish a goal or satisfy a need 2. Stimuli: something like an object or event that evokes a response 3. Responses: a behavioral reaction 4. Cues: a signal or minor stimulus that affects a person's response, usually a piece of information received by consumers and may determine when, where, and how a person responds 5. Reinforcement: the process of encouraging or establishing a pattern of behavior, especially by reward

What 2 characteristics lead to uniqueness and justify premium pricing?

1. Exclusivity (ex. luxury goods) 2. Scarcity (there is a limited amount of products, only 20 are available around the world, limited edition)

What are the 9 types of reference prices?

1. Fair/reasonable price (what we think is fair) 2. Average price (looking at the prices of similar products on the shelf, a more formal way to average prices) 3. Typical price (sometimes you don't have the information of the average price in front of you, so you just look at the general price) 4. Last price paid (base it off what you got last time) 5. Upper-bound price (compare to the upper threshold) 6. Lower-bound price (lower threshold) 7. Competitor prices 8. Expected future price (things like Black Friday, you know that if things will go on sale you will wait until then) 9. Usual discounted price (certain brands or products that are discounted on a regular routine, like the first Thursday every 3 months, this might be used by some buyers as the reference price)

Companies outsource so much of their value chain because this strategy enables what 3 things?

1. Flexibility - Fast new product reconfigurations due to short product life cycles -Enables volume flexibility as the contract factories can increase production from pilot to maximum demand very quickly (like the long lines of Apple stores when a new product launches and then the line disappears a few days later) -Product mix flexibility which enables Apple to respond quickly to changes in customer preferences of a various product generations and models 2. Quality - Enables contracting with high quality manufacturers and suppliers - Those suppliers can commit to timely supply 3. Cost - Offshore outsourcing to developing countries drastically reduces labor cost, especially compared to highly developed countries such as the U.S. and Europe

How do the elements involved in the process of learning affect consumer behaviour/what implications do they have on marketers?

1. Generalization = responding in the same way to similar stimuli (having a good experience with an LG phone so you buy and LG TV) 2. Discrimination = learning to recognize differences in similar stimuli, adjusting response accordingly (switching from LG to Sony because they have better customer service)

The 9 strategically relevant activities outlined by the value chain can be divided into 5 primary and 4 support activities. What are the 5 primary activities?

1. Inbound logistics: involves bringing materials into the business so they be will available for production 2. Operations: activities that convert materials into final products 3. Outbound logistics: responsible for shipping out final products produced by operations 4. Marketing & sales: potential customers are targeted and deals are closed 5. Service: a set of functions that ensures that the customer can use the proper product after the transaction has been completed

What are the 5 levels of brand loyalty?

1. Indifference: the lowest level, denotes no loyalty and exists when customers have no preference for the brand over its competitors 2. Divide loyalty: reflects one's loyalty to a small group of brands who share her or his loyalty 3. Switched loyalty: customers are loyal to a couple of brands, but switch from one to another after a while 4. Occasional switcher: loyal to our brand, but once in a while tries or purchases something else 5. Undivided loyalty: reflects the ultimate level of customer commitment to a brand, the buyer never switches to another brand whatsoever

What are 3 downsides/risks of outsourcing?

1. Low control - The marketer gives up full control of the outsource functions. The manufacturing plants are not owned by the marketer and therefore the people who work for Apple indirectly are not committed to Apple as they are to their real employer - Employment policy 2. Company's image The company's image may get hurt as a result of unethical employment policy and working conditions at those plants. These conditions are not determined or fully controlled by Apple. 3. Criticism It has invited public criticism that Apple could have created more jobs and reduced income inequality in America (saying that Apple doesn't contribute to the U.S. economy) Has also invited government political pressure to manufacture its products in US plants on American ground. This pressure has had an effect on the company who has reported to consider complying with this demand by building several new plants in the United States

Why does customer satisfaction matter so much to marketers? What are 7 things they can gain from keeping customers happy?

1. Loyalty: highly satisfied customers stay loyal longer 2. Spending: they buy more as the company introduces new and upgraded products 3. Word of mouth: they talk favorably to others about the company and its products 4. Competition: they pay less attention to competing brands. 5. Price sensitivity: a satisfied customer is less sensitive to price 6. Insights re product fit: they offer inputs regarding product or service features and insights into how they fit customer needs 7. Cost: it usually costs less to serve an existing satisfied customer than getting a new one because transactions can become routine

NPV equation =

1/(1+d)to the power of t *

What are the implications of consumer selective attention on marketers?

1. People notice stimuli that relate to a current need (ex. a person who is motivated to buy a laptop will notice more laptop ads than phone ads) 2. People tend to notice stimuli they anticipate (ex. a shopper is more likely to notice a laptop in a computer store than backpacks) 3. People are more likely to notice stimuli whose deviations are large in relationship to the normal size of the stimuli (ex. an ad offering a 25% discount vs. 10%) Selective attention means that marketers must work hard to attract consumers' notice. Marketers may attempt to promote their offers intrusively but not too aggressively in order to bypass consumer selective attention filters.

What are quality's 8 different aspects?

1. Performance - relates to the main characteristics of the product, to the purpose for which the product is purchased (car drives well, hotel rooms clean) 2. Features - refers to extra characteristics or capabilities of the product, beyond the basic-elementary required capabilities (ex. GPS, spa) 3. Reliability - relates to operational consistency. Product performance that can be depended upon with a high level of assurance (car starts every time, room key works) 4. Conformance - product's conformity with customer's expectations - compliance with standards the marketer has specified (meeting promised fuel consumption as advertised) - the degree to which the measured production qualities correspond to the designed quality standards that have been specified by the marketer 5. Durability - deals with product endurance in the face of use and stress (car still driving well after 100,000 miles, hotel room is not worn out) 6. Serviceability - how often is service required, how difficult/costly is it to service and repair the product (ex. car maintenance) 7. Aesthetics - refers to the product's appearance, smell, taste, sensory and emotional judgements (a car's and hotel's design styling) 8. Perceived - customers' indirect evaluation/perception of quality and product's various attributes, integrates the prior 7 dimensions from the customer's view with manufacturer's overall reputation (ex. a car's reputation)

What are 5 things that affect the way that customers view a price of a product?

1. Prior purchasing experience (if you have been given great service previously, then someone will think it is a reasonable price, but if not you will think it is not good value) 2. Mood (having a good mood will make us look at the product more in a positive light) 3. Formal communications (salesforce, the communication we have with a salesperson, what they say and how they say it, also the quality of brochures) 4. Informal communications (reviews, what people post) 5. POP (point of purchase, if purchased on website, in store, on shelf)

The 9 strategically relevant activities outlined by the value chain can be divided into 5 primary and 4 support activities. What are the 4 support activities?

1. Procurement: involves purchasing raw materials and supplies on one hand and sourcing certain functions the organization cannot or refrains from carrying out 2. Technology development: responsible for developing new, sometimes unique knowledge and competencies (ability to do something successfully). Technology development is usually more important for innovative companies. 3. Human resource management: handles recruiting the right people among other things 4. Firm infrastructure: covers the costs of general management planning, finance, accounting, legal and government affairs

What are the 6 steps in the process of pricing?

1. Selecting the pricing objective 2. Determining/estimating demand 3. Estimating costs 4. Analyzing competitors' costs, prices, and offers 5. Selecting a pricing method 6. Selecting the final price

People may perceive the same object differently because of which 3 perceptual processes?

1. Selective attention 2. Selective distortion 3. Selective retention

What are the 5 dimensions/key traits of brand personality?

1. Sincerity: if the brand seems to be down to earth, honest, genuine, wholesome, and cheerful. Ex. Tropicana, the American orange juice brand, is the "real thing" - real squeezed oranges. Its wholesomeness is conveyed by the slogan "nothing added, nothing taken away". 2. Excitement: daring, spirited, imaginative, playful, and up-to-date. Ex. pepsi 3. Competence: reliable, intelligent, successful, and have expertise. Ex. IBM 4. Sophistication: upper-class, elegant, charming, refined. Ex. Loreal cosmetics 5. Ruggedness: tough, outdoorsy. Ex. Wrangler - many of its ads display the product in the outdoors.

What does designing pricing strategy require?

1. Understanding consumer psych and response 2. A systematic approach to setting/adapting prices (you want to adapt a system for pricing)

What are the 9 factors that affect price sensitivity to product price?

1. Unique value effect 2. Substitute awareness effect 3. Difficult comparison effect 4. Total expenditure effect 5. End-benefit effect 6. Shared cost effect 7. Sunk investment effect 8. Price-quality effect 9. Inventory effect

What are 4 personal factors that influence consumer behaviour?

1. age/stage in the life cycle 2. occupation/economic circumstances 3. personality/self-concept 4. lifestyle

What are psychological processes involved in consumers' buying decisions?

1. attention to stimuli such as advertisements 2. awareness of certain brands 3. knowledge of brands 4. recollection of brands over time 5. judgement of marketing offerings available to them 6. willingness to pay higher or lower prices 7. preference for products or brands 8. purchase decisions/frequency of consumption 9. loyalty 10. advocacy, say high things of the brand

What is marketing's task?

1. attract new customers 2. retain existing customers so that they don't switch to the competitor

What are the values of marketing?

1. business value: competitive advantage leads to higher revenue, higher profit, and increases the firm's value 2. social value: economic growth, jobs, desirable values and behaviour

Social responsibility marketing becomes a must for corporations due to which 2 interesting trends?

1. commoditization = the process by which distinguishable goods become simple commodities in the eye of the market, seems the same no matter who produced them (ex. copper) commoditization often lowers customer loyalty therefore emphasising social responsibility makes you stand out 2. increase in consumer social conciseness (many customers care about the environment and therefore this allows companies to build consumer preference and increase sales, it may lead to higher prices)

A marketing system consists of several actors that belong to the industry (sellers) and the market (buyers). What 4 flows are they connected by?

1. communication (ads) 2. goods/services 3. money 4. information sellers to buyers: -communication -goods buyers to sellers: -money -market information such as customer attitudes, interests, and sales data

What are the 3 types of marketing channels in the supply chain?

1. communication channels 2. distribution channels 3. service channels

What are the 4 key customer markets?

1. consumer markets (individual end-users who purchase/consume the product themselves or for their family/friends, ex. cosmetics, shoes, air travel) 2. business markets (business, organizations, etc. that use the product to generate revenue, resell products ex. raw material parts, machinery, logistics services) 3. global markets (buyers are outside a country and can be anywhere in the world) 4. nonprofit and governmental markets (pursue a goal without excess revenue)

What are 3 major considerations in price setting (3 Cs)?

1. costs 2. competitors' prices/substitutes prices 3. customer demand/customer's evaluation of unique features

What are the 3 main factors that influence consumer behaviour?

1. cultural 2. social 3. personal

What are 3 factors within cultural factors that influence consumer behaviour?

1. culture 2. subculture 3. social class

What are 3 interrelated concepts that drive long-term relationships between companies and customers?

1. customer perceived value (CPV) 2. satisfaction 3. loyalty

In relationship marketing within the holistic marketing orientation, what 4 key factors/groups of people should the company maintain long-term relationships with?

1. customers (individual and businesses) 2. employees (should be motivated and understand their impact on customers) 3. marketing partners (channels, suppliers, distributors, dealers, etc., product visibility such as shelves or online home page ads depend on these partners) 4. members of the financial community (shareholders, investors, analysts)

In the pitfalls of algorithms reading, to better control what algorithmic pricing says to customers and how it impacts customer relationships, what 4 recommendations do they offer?

1. determine an appropriate use case and narrative (like Ikea) 2. designate a pricing algorithm owner 3. set and monitor guardrails (like Disney) 4. override the algorithms when necessary

What are the 5 stages of the Product Life-Cycle?

1. development (NPD, R&D, product not launched yet) 2. introduction (slowly sales increase, product is adopted slowly) 3. growth (sales accelerate, steep revenue increase) 4. maturity (sales increase but sales growth rate slows) 5. decline (sales decline gradually/sharply)

What are 8 tasks market management does in order to achieve their goals?

1. develops marketing strategies and operational plans (after identifying its potential long run opportunities) 2. capturing marketing insights (using a marketing research team and system to monitor the marketing environment and forecast demand) 3. connecting with customers (divide customers into segments, choose most effective target market, develop strong long-term relationships with customers) 4. building strong brands (in case of existing brands, marketers need to understand its strengths and weaknesses and in case of new brands, marketers need to think about design, core values, and position strategy) 5. shaping market offerings (focus on product policy such as product features, product quality, product design, packaging, and focus on pricing policy such as price, price discrimination or change over time, would the price match the customers' expectations) 6. delivering value (deciding which channels to use and partner with marketing facilitators to supply the product efficiently to target customers) 7. communicating value (using communication channels to show the value of the product to the target market) 8. creating successful long-term growth (initiate new product development and take into account changing global challenges)

What are the 2 forms of distribution channels?

1. direct - internet, mail, mobile devices, sold directly with no middle man involved 2. indirect - with distributors, wholesalers, retailers, and agents as intermediaries (ex. songs not sold directly but through Apple music and Spotify)

What are factors that are important to take into consideration when choosing an orientation mode (serve or create reading)?

1. environmental factors 2. economic power of existing customers 3. competitive factors 4. political factors

What are the two types of market/price experiments when trying to estimate a demand curve?

1. field experiments - the idea is to vary the price of the product to see the response while keeping other market conditions stable, however the problem is that those other factors like demographics are hard to control 2. controlled experiments - giving money to a shopper to shop in a virtual store and changing the location and price of the product, however behaviour may be biased because participants know that they ar being watched

What are the 3 principles to help with the downside of innovation (problem with product proliferation reading)?

1. focus on integration, not variety (not to sell a large variety of products that can go unmanaged) 2. eliminate the separation between your innovators and complexity handlers/employees (both should be a part of the process so that employees can help customers) 3. commit to a vision to direct innovation (create a main goal of the brand or company and stick to it)

What are the 10 types of entities that can be marketed?

1. goods (products) ex. food, TV's, cars, shoes 2. services ex. airlines, hotels, accountants, barbers 3. events ex. concerts, trade shows, sporting events 4. experiences ex. escape room, theme parks 5. persons (singers, lawyers, doctors, politicians to increase familiarity and price people are willing to pay for them) 6. places ex. cities, nations for tourism or neighbourhoods for real estate 7. properties ex. physical properties like real estate or financial properties like stock bonds 8. organizations ex. universities, museums, non profit to boost public image and compete for funds 9. information (books, magazines, music, movies) 10. ideas ex. quit smoking or stop littering

The classic 4 P's have been extended. What are the additional 4 elements (4 P's)?

1. people -understanding people's needs not just in buying context -what are their interests, needs, attitudes -internal marketing: employees are critical to marketing success 2. processes -implementing structure process, system decision making, avoiding ad hoc solutions which are specifics solutions to a problem rather than general 3. programs -need to be consumer oriented (what the customer wants and not just the product itself) -need for integration of all marketing activities 4. performance -capturing outcomes with financial and non financial implications like loyalty and brand's strength -looking at performance over time -implications beyond company itself such as social responsibility

How can marketers measure customer satisfaction and what aspects of satisfaction should be assessed?

1. periodic surveys to their own customers (asking their satisfaction, intention to repurchase, willingness, to recommend, etc.) 2. competitive advantage and timeline (measure customer satisfaction right after the purchase and after a long period of time and they can do so in order to gain advantage over competitors) 3. monitor competitors' performance (monitor their customer loss rate and contact those who have stopped buying or switch to see why, use mystery shoppers to identify strong and weak aspects of competitors and their own company) 4. counting complaints (the problem though is that even if 25% of customers are dissatisfied, only about 5% will complain) 5. product service and quality

What does the psychological process perception depend on?

1. physical stimuli 2. environment (the stimuli's relationship to the surrounding environment) 3. unique conditions to each one of us Ex. One customer can perceive a fast talking salesperson as aggressive, insincere, and annoying and another can perceive them as intelligent and helpful. Each will respond to the salesperson differently.

The marketing mix is commonly executed throughout what 4 strategic marketing decisions (4 P's)?

1. product policy 2. pricing policy 3. place/distribution policy 4. promotion policy

What are the 5 market orientations?

1. production orientation 2. product orientation 3. selling orientation 4. marketing orientation 5. holistic marketing orientation

What are 3 factors within social factors that influence consumer behaviour?

1. reference groups 2. family 3. roles and status

What are the 4 major broad components of the holistic marketing orientation?

1. relationship marketing - employed when marketers maintain ongoing relationships with customers, channel members, suppliers, etc. In order to do so they also outsource various activities to other firms that can do them better like Nike 2. integrated marketing - coordinating effectively the multiple means of creating, delivering, and communicating value 3. internal marketing - ensuring that everyone in the company follows appropriate marketing principles including employees and senior management 4. performance marketing - quantifying return to the business for marketing activities as well as addressing their broader legal, ethical, environmental, and social effects

What are the different departments that work together to achieve customer goals in firms?

1. research and development (should design the right products and listen to consumers' problems/needs) 2. purchasing (searches for the best suppliers, builds long-term relationships with reliable vendors, and buys the right raw materials from them) 3. manufacturing (makes the product within deadlines at the right quality and works overtime if faced with technical failures or unexpected changes) 4. logistics (makes sure that are products are delivered in a timely manner and appropriate condition) 5. accounting (measures profitability in the right way and pays company's suppliers) 6. finance (provides the required amount of funding which is needed for developing new products and promoting them)

In the modern economy, what are the 5 basic markets that exchange value with each other?

1. resources markets (raw materials) 2. manufacturer markets (create the product form raw materials) 3. intermediary markets (they get the finished product from the manufacturers and sell them to consumers) 4. consumer markets (sell their labor and receive money which gives them buying power) 5. government markets (collects tax revenues from all markets to buy resources and products for roads, public transportation, etc.)

What 3 methods can companies use to estimate the demand curve for their products?

1. surveys (ask them how much they would buy or the price that they would be willing to pay) 2. market/price experiments 3. statistical analysis

What are the 5 different types of pricing objectives in the first step of the pricing process?

1. survival 2. maximum current profits 3. maximum market share 4. maximum market skimming 5. product-quality leadership

How have marketers embedded customer-centricity in their companies?

1. symbols - to show the importance of customers (ex. Jeff Bezos bringing in an empty to chair to meetings) 2. call centers - everyone in the company should be able to work in a call centre to gain insights to customers' perspectives 3. hiring process - especially trained employees (bar-raisers) and hire only qualifying candidates 4. new product development - designing new products based on customer needs and not employee opinion for ex. Amazon write a hypothetical product release to see if it is a good product 5. culture of metrics - routinely testing customers' reactions to different product qualities, features, and designs

transaction cost =

1. the cost of doing business: marketing communication, negotiation, legal fees, transportation, distribution 2. the cost of providing customer service, and maintenance

What are the 3 factors of the marketing environment in which a firm operates?

1. the internal environment 2. the external micro environment 3. the external macro environment

What are the dimensions/factors of an actual offering?

1. the product itself (2 most essential) - like the car itself 2. supporting services (2 most essential) - ex. maintenance and technicians 3. information provided to consumers - ex. car experts or info meetings 4. experiences - ultimate driving experience, group driving trips

In what 3 ways should marketers adjust complaint management procedures to the specific contexts they operate in?

1. timing/situation - how long has passed, holiday season 2. industry/product industry - food and medication industries are more critical 3. prioritise customers by type/size - treat more profitable customers accordingly

The value chain is a model used for identifying ways to do what 2 things?

1. to create more customer value 2. increase profits and earning

What is the case study of the Teatreneu club in Barcelona?

2000: comedy theatre founded 2008: affected by the recession, world financial crisis, Great Spanish Depression, there was an increase in real estate prices which affected high GDP growth rate (a quantitative measure of a nation's total economic activity) 2010: unemployment crisis (reach 20%), consumers' disposable income shrinks, tourist industry decreases 2012: Spain undergoes the Eurozone debt crisis, Spain applies from 100 billion euro loan from EU, unemployment increased 2013: a new tax policy because EU wanted to make sure that Spain manages the debt, Spain raises tax on theatre tickets from 8% to 12% and audience switched to movies 2014: the business problem, revenue declined, ticket price decreased by 20% and sales 30% 2015: a strategic marketing solution - develop an innovative fair pricing method - increase customers' willingness to pay - engage consumers in spreading the word pay per laugh system due to facial recognition technology, caused price to increase by 40% and they gained publicity

What are the downsides of focusing on behavioral brand loyalty alone?

A customer might be making a repeated purchase, not because of true loyalty or commitment but because of other temporary reasons including: -convenience -Price sensitivity -Brand availability + premium shelf space -Repeated stock outs of the competing brand - Behavioral inertia due habit, Inertia - habit, suggests a low sensitivity to the brand since purchases are made with no sustainable motive for choice → vulnerability -Competitors can easily hurt our brand loyalty: lower price, recover inventory so that they can sell again, use aggressive sales promotion Therefore, what might seem like a loyalty at first can vanish

What are mental maps in regards to the psychological process of memory?

A mental map is a useful marketing tool that depicts consumers' knowledge of a particular brand in terms of: -the key associations that are likely to be triggered in a marketing setting -Their relative strength -Favorability -Uniqueness to consumers ex. McDonald's mental map

What is the associative network memory model?

A model that views long-term memory as a structure of nodes and links. Nodes = stored pieces of information connected by links Links = connectors that vary in strength A spreading activation process from one node to another determines our recollection. Recollection = what information we can actually recall and how much we retrieve at any given situation When a specific node becomes activated, other nodes become activated if they are strongly enough associated with that node. Activation may be initiated by: -retrieving internal information from long-term memory when we think about some concept for example -encoding external information for ex. when we read or hear a certain word or phrase

Within reference groups in regards to consumer behaviour, what are aspirational and dissociative groups?

Aspirational groups = a group a person hopes to join Dissociative groups = a group whose values and behaviors an individual rejects

attrition rate =

Attrition rate is the percentage of existing customers that stop using the services and move to the competitors or quit altogether Attrition rate = 1 - Loyalty Rate

How can we analyse customer profitability?

CPA (customer profitability analysis), looking at customers and if the products they purchase are unprofitable or unprofitable like we did with the 3 customers. Those who buy more expensive products like VOD and eBooks over toilet paper and bottled water are more profitable. Marketers can make $50 purchase minimum or to a business deal with another business to make customers more profitable.

What is the external macro environment in a marketing environment?

Components: - The political-legal environment (political-legal factors are for ex. The existence or absence of open markets, free trait treaties, or tightened regulation) ex. - Economic changes (ex. Economic growth or recession may affect most companies in lots of industries) - Social-cultural environment (ex. Demographics are also very influential) ex. immigrants) - Technological environment (ex. Development of self-driving cars and smart homes) they can have a huge impact on marketers - Natural environment (factors such as the availability of natural resources including oil, natural gas, air quality, and water quality)

What aspects does attitudinal brand loyalty include?

Customers' favorable emotions Attitudes Preference Intentional commitment expressed over time

What are demographics and psychographics?

Demographics- age, gender, ethnicity, education, race, income, occupation, location Psychographics- preferences, values, lifestyle, attitudes, beliefs, personality traits, interests

fixed cost =

Fixed costs are costs that do not change when the output is increased. (ex. Rent of a building, utilities, salaries, that price does not change no matter how much a company sells).

What are the marketing implications due to the associative network memory model?

In this model, consumer brand knowledge is represented by nodes in the memory with a variety of linked associations to other objects for ex. the package of the product or more obstruct concepts such as music or happiness and various pieces of information stored in our brain such as certain events that are associated with the brand, with the company, or its leaders. The strength and organization of these associations are important determinants of: -the information we can recall about the brand -how rich this recalled information will be -how fast we retrieve it (speed of retrieval) In general, brand associations consist of all brand related thoughts - feelings, perceptions, images, experiences, beliefs, attitudes, etc. All those elements become linked to the brand node.

What is the external micro environment in a marketing environment?

Includes the actors engaged in producing, distributing, and promoting the offering: - Suppliers (material suppliers, service suppliers, advertising agencies, banking firms, insurance carriers, etc.) - Intermediaries (distributors and dealers such as agents, brokers, manufacturer representatives, and others who facilitate finding customers and selling the products to them) - Competitors (all actual and potential rival offerings and substitutes a customer might consider buying or consuming) -Target customers

How does age/stage in the life cycle affect consumer behaviour? What are the different stages in the life cycle?

It affects their preference for products and brands (food, clothes, music, etc.) Stages: 1. children - don't have much to say about to choice until they get a bit older and persuade their parents 2. teenagers - get help financially from parents but make choices themselves 3. single adults 4. new married couples/couples with no kids 5. young family with children 6. family with college kids 7. empty nesters 8. retired - more likely to consume more medication

Is pricing a key marketing decision?

It depends. There are price-dependent products and price-independent products like toilet paper, food, gas, etc.

What is the psychological process, learning, and how does it influence consumer response?

Learning = the process leading to relatively permanent behavioral changes as result of experience Learning drives changes in our behavior resulting from experience and ongoing interactions with our environment.

Within the personal factors, how does lifestyle influence consumer behaviour?

Lifestyle = a person's pattern of living as expressed in activities, interests, and opinions -Marketers often search for relationships between their products and lifestyle groups because products and brands can facilitate consumers' lifestyles -Lifestyles are shaped partly by whether consumers are money constrained (Walmart has low prices) or time constrained (amazon gives one or two day shipping). -people have core values = the belief systems that underlie attitudes and behaviours (if people have core values about fast fashion or organic fruit because of the environment, it will affect the products they purchase)

loyalty/retention rate =

Loyalty/retention rate is the percentage of customers that stay from month 1 to month 2 to so on... loyalty rate = 1 - attrition Rate

Within personal factors, how does occupation/economic circumstances influence consumer behaviour?

Marketers try to identify the occupational groups that have above-average interest in their products and services and even tailor products for certain groups. Ex. mobile apps and software companies design unique products for physicians, engineers. etc. The economic circumstances greatly affect product and brand choices especially in times of economic recession or prosperity. Such circumstances include: -Disposable income (its level, stability, and time pattern) -Savings and liquid assets -Debts, borrowing power, and consumers' attitudes toward spending vs. saving Discount food retailers face a business opportunity during an economic downturn/recession. If economic indicators point to a recession, consumers are likely to become more price conscious. Marketers such as Little and ALDI that have increased the emphasis on their low prices and their discounted private label products, have enjoyed market share growth during such circumstances.

Should marketers retain ALL customers?

No, they should keep the most profitable customers and get rid of the company's worst customers

Does customer size (how much a customer purchases increase profitability?

No, you also have to look at other factors. For large customers, their service cost is very hight and they also require bulk discounts.

What are subcultures and how do they influence consumer behaviour?

Subculture = a group of people that exists within a dominant, mainstream culture. It has its own separate values, practices, beliefs, and social norms. Each culture consists of smaller subcultures that provide more specific identification and belongingness for the members including: nationalities (South Korean vs. Swedish) Religions geographic regions ethnic-racial groups - exist in most countries and may be defined by their race, religion, or their original nationality. Subcultures may be often defined by their individuals' lifestyles or recreational activities such as hipsters, gamers, gothics, bikers, surfers, etc. Belonging to a particular subculture, often shapes consumer's preferences/actual consumption and membership can often predict: -Extent and type of media exposure -Food preferences -Demand for distinctive clothing -Political inclination -Willingness to try new products -Leisure activities An important part of the specialized marketing program is often offering unique products and developing specialized brands that the relevant subculture members would find appealing.

What is internal marketing?

The task of hiring, training, and motivating employees across the firm to serve customers well and to act in accordance with marketer's objectives. It ensures that everyone in the organization adopts appropriate marketing principles, field employees, as well as senior management. This kind of coordination across all departments can happen only when management has a clear vision of how the company's marketing orientation and philosophy serve customers. It requires horizontal alignment with other departments and vertical alignment with senior management.

value chain =

Traditionally: Companies owned and fully controlled most of the resources required for their business including labor, materials, machines, information, and energy Today: Many companies outsource resources and inputs which are less critical to the business if they can obtain better quality or for lower cost

When information is fully available → how can marketers justify premium pricing?

Uniqueness (you associate your product with prestige or celebrities or the high-level process of manufacturing, people will pay more for exclusivity)

variable costs =

Variable costs are costs that do change according to the output produced (ex. Cost of material used to make clothes).

What is the psychological process, motivation, and how does it influence consumer response?

We all have human needs at any given time including: -Biogenic needs: arise from physiological states of tension (hunger, thirst, discomfort) -Psychogenic needs: arise from psychological states of tensions (need for recognition, esteem, belonging) A need becomes a motive when it is aroused to a sufficient level of intensity that drives us to act. Motivation has both: -Direction: people choose one goal over another -Intensity: we pursue the chosen goal with more/less energy

Is there such a thing as absolute loyalty?

Yes, if there is a monopoly and only one company provides the product. But usually it is not the case and there is competition.

market share =

a brand's sales/total product category sales

brand =

a business firm, organization, or person that customers are familiar with, good brands provide consumers with confidence about performance

marketing mix =

a combination of factors that a business uses to carry out its marketing strategy to influence the delivery of value and meet customer needs/a framework used by marketers to design their offerings

break-even chart =

a graphical representation of costs at various levels of activity shown on the same chart as the variation of income (or sales, revenue) with the same variation in activity

a distribution of a variable =

a listing showing the possible values of the variable and how often they occur

supply chain =

a longer channel stretching from raw materials to components to finished products that are carried all the way to the final buyer

target market =

a market segment to which the marketer aims its marketing efforts and provides the company with the best business opportunities for each target market, develop a market offering and position it in the buyers' minds as delivering benefits

value proposition

a set of benefits that satisfies a customer's needs, it is made physical by an actual offering

How can marketers use knowledge from CLV to make better marketing decisions?

a. customer acquisition cost (CAC) management - know how much a customer should spend on recruiting a new customer b. customer base management and how to keep customer base large enough 2 strategies to do so: 1. offensive marketing - focusing on customer acquisition 2. defensive marketing - focusing on customer retention c. retention cost management - how much to spend on existing customers

Within relationship marketing in the holistic marketing orientation, how do companies tailor their offers, services, and messages to customers?

based on demographics, psychographics, past transactions, media preferences, and distribution preferences that are collected by big data technologies

What 2 methods can be useful for firms to analyse cost and performance and look for ways to improve it within creating value?

benchmarks/baselines - managers should estimate their competitors' costs and performances as benchmarks or baselines against which to compare their own Best practices - managers can also study the best practices of other companies and apply them in their own firm

What does it mean by saying that marketing communication must be integrated?

choosing communication options that reinforce and complement each other (ex. having GE healthcare sales people be highly knowledgable about an MRI device sold because customers not only expect to buy the product but to get good training services on how to use it)

discount rate (d) =

discount rate for the firms loans, cost of capital for the firm because money has a time value and can change due to inflation, investment, etc.

segmentation =

division into separate parts or sections

behavioural factors =

factors stemming from consumers' human behaviour (due to personality, preferences, etc.)

market saturation =

happens when products or services in a particular market are no longer in demand due to competition or simply less demand

In terms of profitability of customers, what does a bell curve depict?

how many customers we have at each probability level

What are demands?

human wants that are backed by buying power (if you can afford it then also whether or not you will buy it depends on supply, availability, regulations, etc.)

What are a chanel's indirect effects on a market in an integrated channel strategy? What happens when there are too few or too many channels?

interactions with other channels too few channels: -missing market opportunities -insufficient market coverage too many: -lack of support -conflict among channel members

What is the difference between internal reference price and external reference price?

internal reference price = what you can remember easily by based on your previous experience and what you know external reference price = pulling out a smartphone and looking up prices in others stores to see if it is a good deal

scarcity marketing =

involves motivating people to buy something by letting them know here is a shortage in what is available and a limited time to act

What is the equation for margin?

margin ($) = product selling price - cost of production

What are wants?

needs that are shaped by culture and an individual's personality objects that can satisfy basic needs or specific wants (ex. Burger King vs. just any food)

What is the profitability equation?

profitability (%) = profit($)/cost ($)

Within social factors on consumer behaviour, what are reference groups and what are their 2 subgroups?

reference groups = all the groups of people that have a direct or indirectly influence on consumers' attitudes/behavior Within reference groups there are: - Membership groups = groups with a direct influence. Some of these are primary groups with whom the individual consumer interacts fairly continuously and informally such as family, friends, neighbors, and coworkers. - Secondary groups = groups with an indirect influence. This includes religious groups, professional/trade-unions, etc. These tend to be more formal and require less continuous interaction.

What is the internal environment in a marketing environment?

relates to the company itself, its employees, their quality, commitment to their employer, the company's financial capabilities such as its ability to product positive cashflow or to invest in research and product development

What is social class and how does it influence consumer behaviour?

social class = homogeneous divisions in a society, hierarchically ordered, with members who share similar values, interests, and behavior -Higher social class means higher social status, esteem, and prestige, but also greater accumulated wealth. -Social class members show distinct product and brand preferences in many areas including clothing, home furnishing, leisure activities, and automobiles. -They also differ in media preferences and television or video genres. Therefore, advertising media should be planned accordingly. -Finally, there may be language and slang usage differences, therefore advertising copy and dialogue must be tailored to the targeted social class.

market offerings =

some combination of products (good, services, information, experiences) offered to a market that they find valuable

marketer =

someone who attempts to influence or manage the demand for their products

marketing system =

system that consists of: -actors that interact with one another (buyers and sellers) -company, suppliers -competitors, intermediaries -ends users of its market offerings

marketing =

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

price =

the amount of money or compensation that has to be paid by customers to acquire a product

retention spending (R) =

the amount of money spent on keeping a customer (ex. advertising)

NPV =

the difference between the present value of cash inflows and the present value of cash outflows over a period of time, the value in today's dollars of the profit you'll earn from all of a customer's purchases over time

customer satisfaction

the extent to which products meet or surpass customer's expectations most marketers try to have performance exceed expectations, but it is problematic because then they will have high expectations next time

worth =

the extent to which the customer feels they got benefits beyond the cost they paid

What is a core competency and what are its 3 characteristics?

the functions that should be kept in performed in the company and should not be outsourced because the company performs them the best or it is the essence of the company 3 characteristics: 1. It is a source of competitive advantage and makes a significant contribute to perceive customer benefits 2. It has applications in a wide variety of markets, so its potential business impact is major and significant 3. It is difficult for competitors to imitate, so its positive impact on marketing and business results is expected to be long lasting

What are supply and demand?

the key concept for marketing and business supply = the amount of products that marketers are willing and able to provide to the marketplace demand = the amount of products that people are willing or able to purchase

prospect =

the party who is solicited in the marketing process (consumer, investor, voter)

total customer cost =

the perceived bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychological costs