Marketing 101 Midterm
Brand?
"The things that make me different are the things that make me" - point of differentiation - how are you communicating this "Marathon" - not a sprint - whole media budget on super bowl ad - Ex: GoDaddy worked well - touch points aligned Builds relationships "A unique promise kept over time" - marathon
Super Bowl Ad Considerations?
- Best mass market opportunity (new media very fragmented, US pop. 1/3 watching same thing) - Targeting/waste coverage (exceeds the target audience, ex: some BTB companies like copy machine companies advertise on Monday night football and reach people who are not in target audience) - Engagement (18% of viewers say ads are most important parts of game) - people not going on phone or bathroom - Pre-game/post-game views (Alexa ad for amazon, millions of views) - PR/Earned Media/Buzz (people talking about it creating free impressions) - Effective CPM is much lower when you account for all impressions - every impression you make w/ the ad CPM: CPM = Cost of Ad/total impressions x 1000
Competitors?
- Competitive analysis - Market space - Positioning: how a firm's offerings are perceived relative to the competitive offerings
Collaborators?
- Partners, suppliers, distributors, platforms - leverage strengths to reach common goals
Customer centric approach?
- Philosophy - Business Orientation - Outside-in - Organizational Structure and Focus - Leveraging Customer Relationship Management data and Long-term Metrics
Evolution of Marketing?
1. Product Orientation - Generally compete on dimensions of price and quality - Build scale and replicate - build and create something then sell it - making it cheaper or smaller to sell more 2. Sales orientation - can efficiently sell it and get people to buy it - make them want it 3. Demand orientation - Academic pursuit - "Marketing concept" good marketing is about desires of customers guiding actions of firm - Know what people want ahead of time and make it 4. Competitor orientation - Turned attention away from customer to competitor b/c every one was producing what the customer wanted 5. Customer Centric Orientation (marketing orientation, value marketing, new marketing concept)
Example of segmentation
2nd most widely used system - SBI VALS (Values and Lifestyle System) - Psychographic-demographic ----- VALS VALS - World in 8 segments - broken up by primary motivation (ideals, achievement, self-expression) - Then money or no money - Survey people take then run analysis off that
Loyalty?
Active (loyal and make it known) - Emotional connection - Brand advocate - Net promoters (positive WOM) Passive (still loyal but keep to self) - Habitual - No Word of Mouth - Open to switching ---- Switching costs Switching costs (change insurance? Don't wanna go through whole process but Geico says 15 minutes could save you, 15% or more on car insurance) → keeps out of re evaluation phase - GEICO makes it easy, no time - Good marketing effort
What is Customer centricity?
Aligning your entire company's development and delivery of products and services with the current and future needs of a select group of customers in order to maximize their long-term financial value to the firm. - ex: apple and iPod transformation - good marketing isn't mass marketing but understanding who most valuable customer is and keep them
Functional integration?
Amazon expanding: Amazon echo, amazon video, amazon fresh - By using more you are enhancing value of all - Building in more and more value, first thing building off the next
Good customer centric form?
Amazon.com - Creating value for customer - Use CRM system to personalize system - Leave empty seat at meeting for customer *Kindle : digital books to meet customer needs* *Amazon Prime* Because delivering so much value, people will pay more b/c not checking for a lower price anywhere else
AIDA Funnel?
Awareness (building brand) Interest Desire (persuade people to want it) Action (make them buy it) ***potential customers and need to build awareness but not all may desire it but those who desire it will buy it**
Building Strong Brands
Awareness --> Associations --> Relationship - Awareness: brand falls into a category (needs to happen before associations) - Associations: Attributes come to mind when think of brand (ex: one word association test: chanel = classy and Levy - rugged) • Emotional connection - Psychological Contract - Loyalty • Experiential Branding: - Promise + Experience = Relationship
Brand personality
Beyond Brand Image Describe Brand as if it were a person Five Personality Dimensions (Aaker) • Sincerity: true, honest (coca cola) • Excitement: daring (virgin) • Competence: reliable (IBM) • Sophistication: elegant (chanel) • Ruggedness: tough, strong (marlboro) These dimensions can vary in other countries
Meal Kit Services?
Blue Apron = biggest market share - Good job of targeting customers - People are subscribing for a month or 2 then stop - Can't hang onto customers then expensive, have to replace and put $ into marketing - Company acting as consultants to fund investors and analyze CLV and retention rate
Creative AD filters?
Brand Filters - is the framing of the benefit/key value prop compelling? - can you identify differentiation? Ex- doritos very hot - Is the expression of the brand symbolism apt? : What is mean/stand for? - building associations in customers in mind - Will the ad resonate with the target group/culture? : understand who you are speaking to (target audience) Communication filters - engaging, creative, simple, original? IS the idea - Integrated product into the story? Does the product play a starring role Campaign filter - Effective extension of campaign equity? Don't want to spend millions for it to fizzle out but extend outward in an integrated way across many platforms
Simplified CLV
CLV = Annual Contribution per Customer* Years as Customer Annual Contribution per Customer: Average amount that a typical customer would spend with the business, with expenses subtracted • Annual contribution = Unit Contribution * Units per customer per year Years as Customer: Typical length of time a customer spends with company • Not all customers stay with a product the same length of time or have the same annual profit. You may need to calculate separate CLVs for different years or different groups of customers to answer some questions.
Why is the study of Marketing important?
Careers in Marketing - Brand and product management, analyst strategy, consulting, marketing research, retail, advertising, media, entertainment, sales/sales management - Increasingly integrated throughout organization - Dispersion of marketing functions throughout organizations - Entrepreneurial value - Financial analysis of firms - You are consumers
Collaborator value for Uber?
Collaborator Value for Uber is the cities that uber operates in and value in community - Uber eats collaboration is restaurant
Five C's of Marketing?
Company, Customers, Collaborators, Competitors, Context
Post Purchase experience?
Consumers collect information online AFTER purchase → Skincare people buying product then researching after Satisfaction - Performance/quality - not highly predictive - Value ratio 1. Frame value, reference to other things 2. Cost/benefit analysis - what you pay, Kia v. Mercedes (expect perfection) - Equity/fairness - Expectations/Disconfirmation
STP and Customer Centricity?
Customer centricity is aligning an entire company's development and delivery of products and services with the current and future needs of a SELECT group of customers in order to maximize their long-tern financial value to the firm. Emphasis on Select Segmentation, Targeting, and positioning
Positioning statement?
Customer focused positioning statement: To (target segment and need) our (brand) is the (concept) that (point to difference and reasons to believe) - CRITICAL ELEMENTS: Target/need, concept/frame of reference, point of differentiation/reason to believe Competitive statement Marriott Courtyard: "To budget minded business travelers the courtyard by Marriott i the budget class business hotel that offers more space, better location for an economical price"
What customer centricity is NOT?
Customer friendliness Treating all customers equally Customer relationship management (CRM) software/systems
Customers?
Customer needs, key decision and value drivers, segmentation (demographic, geographic, and psychographic), customer lifetime value, and targeting
Active Evaluation?
Customers add/subtract brands as they evaluate options ----Most influential touch points by stage of consumer decision journey, for competitors and new customers, % of effectiveness Store/agent/dealer interactions Consumer-driven Marketing (word-of-mouth, online research, offline and/or print reviews) Past experience Company-driven Marketing (traditional marketing, direct marketing, sponsorship, in-store product experience, salesperson contact)
Why S'well?
Eco-friendly, perfectly sized, high quality, designed for all, triple-walled (no condensation, hard-working)
Where is the funnel approach lacking?
Emphasis on influence/sales closure and not customer experience and CLV - No post-purchase phase - No accounting for satisfaction or repeat purchase - AIDA focuses on finish line getting them to buy but nowadays that is the start Fails to capture all touch points - digital /social channels - Well-informed, powerful customers with wide choice No feedback loops/iterations (once you buy changes perception) Shift monologue (push influence) to dialogue (pull information) - shoving people down funnel Action is NOT the finish line (buying product is not the end)
Initial consideration set?
Evoked short-list of brands to fulfill need/solve problem (recognize a need of problem, ex: need a coat and find different stores to buy coats) Influence of accumulated impressions → what you already know ----Brand awareness, ads, previous experience, social influences, etc. → firm in this has HUGE advantage - Brands in initial consideration set are 3X more likely to be purchased than brands added later ----- Additional brands can be added during active evaluation
Effective segmentation methods?
Factor analysis to reduce variable and cluster analysis to create groups - Qualitative insight - Have a database on multiple factors and reduce # of variables and decide who is relevant then run cluster analysis: optimal number of groups to accomplish MECE → then final groups emerge
Outside-in strategy?
Firms should start and be guided by outside then go in
What is a brand?
Formally... A proprietary trademark for a specific product or service Conceptually... A "contract" from the company to its customers; A promise of specific benefits, quality, value, and experiences. A relationship... Both tangible and intangible benefits Creates value for customer - Trust, reduced risk Creates value for firm - Brand equity - asset, longer revenue streams/product life
Brand Name
Four "Easy" tests - Say, Spell, Read, Remember - Ex: Dove brand of soap, skin care - Easy to remember and say - Assoc w/ peaceful bird Four "Fit" tests: Market, benefits, culture, legal - Market: men tend to like angular letters "Axe" - Connotes benefits: Luggage name already tell you what to be used for -Culture: fit culturally (example: going to China) - Legal: Fit legally in country, whether use a brand name or not
Products and services (offerings) are delivery mechanisms for value?
Functional Monetary/economic: save you time and money Psychological: make you feel better, s'well is eco-friendly, designed for all
Marketing Plan
G-STIC - 5Cs Situational Analysis - Goal - objectives - Strategy - target, value proposition - Tactics - marketing mix (product/offering, price, place/distribution, promotion/communication) - Implementation - execution, organization, schedule - Controls - metrics, evaluation, monitoring
5 different types of segmentation?
Geographic: cheap to segment - People who live in the same zip code tend to be similar in income, position and attitudes
Holiday Inn?
In the 1950s US government began to fund US highways which led to a support of automobiles and long distance travel was easy - Then a demand for hotel rooms came about - Holiday inn took a marketing approach and tried to find the offering that would be most appealing to people traveling by car - Designed hotel rooms (lights, bed, bathrooms) - Interchangeable designs and replicated rooms all over the country - 1 or 2 set of plans to replicate - Was leaving segments undeserved? Value of customers? THEN..... Marriott saw the needs of Business travelers
Why is Allbirds authentic?
Incorporates all 4 elements - Founder inspires to start bc native to New Zealand - Return shoes for free - Natural better than synthetic - Offers meaning by letting you wear most comfortable shoes - Promises: new brand need to maintain
Brand Pyramid
Loyalty -> CLV
Customer relationship management ?
Managing customers databases to get unique relationships - Micro segmentation - moving toward a segment of one - one-for-each strategy → more effective (web-based, easy to customize) Creating and maintaining a relationship with an individual customer to build lifetime value Identify, Differentiate, Interact, Customize → offerings make custom (patterns of behavior, buy and not buy) CRM Systems - Amazon (collective behaviors, differentiate based on data interact via the email they send) - easier online retail
Toward a broader measure of customer equity?
Monetary - direct value (how much $ they are driving towards us) and relationship value (how long we can keep them, retention) Strategic - Information value (Data: facebook gets data from you and can give to other firms), Communication value (net promoter score, customers don't just bring us retention but brand advocate, good revenues or referrals, "positive word of mouth")
Focus on the customers?
No business can succeed w/o customers - Customers do not buy products, they buy benefits/value Detergent leads to clean clothes Not all customers created equally - firms must understand, attract and keep - Customer Centric firms have a superior ability to understand, attract, and keep the most valuable customers.
Targeting?
Not go after every one (most valuable) Attractiveness: Segment size, growth, value, stability → Is segment growing? People change high value customers? Compatibility: Company position with segment → Company serving segment they want to serve, do they have the tools? - Ease of Entry - Ability to Reach and Serve Segment Competitors → 5 C's competitors who can enter easier - number and strength - Ease of entry
Equity/Social Exchange Theory?
People evaluate a transaction according to the rewards and costs, which corresponds to the positive and negative things derived from the exchange Economic Model: Subtract costs from rewards. • Compare to expectations • Compare to alternatives • Equitable exchange • Fairness
Segmentation?
Process of dividing markets into distinct subsets of consumers with common needs and characteristics - Select one or more segments to target - Position with unique marketing mix (4 P's) relative to competitive offerings (offering to fit with target)
4 P's - Marketing Mix?
Product: offering Price: capturing value back Promotion: communication Place: deliver value
The Offering?
Products, services, firms, people... - Bundle of Attributes, features, design, etc. ----based in reality - Often commoditized - energy brand additional value for firms and customers - brand is much more...reputation
Profit Impact
Profit = (Unit Contribution*Units Sold) - Fixed Costs • Impact of a product on company profits • Using this expression, one can also compute the number of units that must be made and sold to achieve a specific profit target.
What inferences can be made about a brand name?
Psychological connections with brand name
Return on Marketing Investment
ROMI = Incremental Gain from Investment/Cost of Investment • ROMI is a measure of efficiency of the investment • Can be expressed in terms of net income, sales revenue, market share, or contribution margin
Effective Segmentation: criteria for good segments?
Relevance (factors on predictive behaviors interested - ex: app downloads, segment based on app usage) Homogeneous within (similarity) - similar people in a group Heterogeneous between (exclusivity) - difference between a group Comprehensive (MECE) - mutually, exclusivity, (no one belongs to more than one group) collectively, exhaustive (good segmentation in that people are categorized) Operational (measurable, accessible, actionable) taking marketing action
Customer lifetime Value formula?
Retention Rate Considers (r) • Number of customers at end of period (E) • Number of new customers acquired during period (N) • Number of customers at start of period (S) - Retention Rate = ((E-N)/S) * 100 Discount Rate (i): Rate used to determine present value of cash flow in a discounted cash flow analysis. For example, what is $1000 in one year worth to me now? • Time value of money because of inflation and uncertainty • May use Weighted Average Cost of Capital (WACC) or Capital Asset Pricing Model (CAPM)
How to create value for firms?
Revenue, profits, customer lifetime, value, user base (create data that is used and sold to other companies), brand equity (what people think/say about a brand) - focused on retaining customers not just one time use
Mass Marketing?
Same product and marketing mix for everyone - Undifferentiated, one-for-all strategy (same thing) - Simple and efficient from the supply side (4 P's are offering to appeal to biggest amount of people, one price, one place) - Downsides: customer underserved, limit potential for growth
Disconfirmation?
Satisfaction (or dissatisfaction) occurs when there is a discrepancy either positive or negative, between our expectations and the products actual performance Satisfaction (or dissatisfaction) occur when our expectations are disconfirmed Sat = f (perceived performance - expectations) - $20 salad better be good, IHOP = whatever - Keep expectations level - Idea is if you go into a nice place that if price is high, food better be good if salad is not as good does not meet expectations, objectivity not as good
CLV - Limitations of Simplified Formula
Simplified CLV formula does not account for: • Discounting profits over time • Retention Rate (mortality/attrition) • Segments with different values/lifetimes
Volvo Example?
Target - People with kids and money For upscale American families (target), volvo (brand) is the family automobile (concept) that offers maximum safety (point of differentiation) BMW: Targets single people, drive fast - Design of car, sales pitch everything revolves around safety
Marriott?
Targeted people on the road a lot - More valuable than families barely staying - "Hotel designed by business people for business people" - Methodology of what people wanted - Low price, perfect location - "Conjoint analysis" → trade off analysis, found (room configuration, place, and price) - Give up restaurant and pools
3. Strategy and Implementation
Targeting and Positioning: Who is the customer? How will the offering be positioned relative to competition? Consider Alternatives - Defend against other alternatives - Defend against no action Tactical Implementation: 4Ps Be Realistic! - Consider company resources and constraints - Stay within the timeframe of the case
Rethinking the Product-Centric Approach?
Technology : product life cycles have become shorter and firms copy innovation quickly Global Competition and borderless environment - All over the world Customer Power: informed and empowered customers - Deliver value on different dimensions
What is Marketing?
The art and science of creating value by designing and managing successful exchanges The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return - dual value creation (for firm and customer)
The Loyalty Loop?
The consumer considers an initial set of brands, based on brand perceptions and exposure to recent touch points (initial consideration set) → Consumers add or subtract brands as they evaluate what they want (active evaluation: information gathering, shopping) → Ultimately, the consumer selects a brand at the moment of purchase (moment of purchase) → after purchasing a product or service, the consumer builds expectations based on an experience to inform the next decision journey (post purchase experience, on going exposure) *not linear of funnel based but now an experience*
Brand Portfolios?
The set of all brands and brand lines a particular firm offers for sale in a particular category or market segment House of Brands: Owned by a single company but different brands - ex: Unilever owns Suave, Dove, Caress Endorsed brands: Marriott owns the marriott residence inn, courtyard, and fairfield inn & suites - creates distribution Sub-brands: Gillette fusion now has the Gillette Venus (for women_ and the foamy shaving cream) Branded house: Brand is the product - ex: Virgin
1. Identify core problem
Trends - Market Share - Sales Volume - Costs - Customer Tastes/Beliefs (what is changing? what is causing the change?) Opportunities - New Product - New Market - Change Marketing Mix Competitive Threat
2. Analyze the situation
Use Course Frameworks to Guide Analysis: - 5 Cs: Customer, Competition, Company, Collaborators, Context - SWOT: Strengths, Weaknesses, Opportunities, Threats - PEST: Political, Economic, Social, Technological - 4 Ps: Product, Price, Place, Promotion - Marketing Math: Unit Contribution, Break-Even, Market Share, Customer Lifetime Value
Category extensions
Use of established product brand name for new item(s) in different product categories - offer new products, generate more profit - does not always make sense, Levi was unsuccessful on business clothes bc brand is associated with denim - inference of brand needs to carry over
Line extension
Use of established product brand name for new item(s) in same product category New flavors, colors, added ingredients, package sizes - coke is most successful because lives up to promise coke has made to be a tradition
Core of Marketing?
Value
Brand Authenticity?
When a brand fulfills its brand promise in a unique, consistent and continuous way Consumers are more interested your brand if they relate to it (differentiation on brand and reaction consumers have) Consumers are more willing to buy your products/services bc your brand conveys qualities important to them - 91% of consumers worldwide are willing to buy from or invest in authentic brands Consumers are able to form emotional connections with your brand, resulting in a relationship - Relationship → CLV Better relationship → higher CLV
Trigger in the loyalty loop?
Where is a point of intervention? After you go through buying process, what drives you to buy again without going through evaluation phase? - Send you a promotion - Understanding when you are ready to buy - Automatic renewal
Nielson PRIZM Geo-demographic Segmentation?
Where you live and the resources you have - Uses publicly available data - Reduce variables with factor analysis then run a cluster analysis, they came up with 66 distinct consumer groups - "You are where you live" - Homogeneous if you live close together
m = i = r = AC =
annual margin (contribution) Discount rate retention rate (how many customers active a year later) acquisition cost
Positioning?
company creates a positioning statement surrounding positioning strategy - Influences how a particular segment perceives an offering in comparison to the competition - Uses the Marketing Mix (4Ps) → create unique offering, foster communication to segment, distribute product to distinct areas - Positioning statement: Internal statement that outlines essence of the strategy
Company?
develop distinct and hard to imitate resources - value proposition SWOT (strengths, weaknesses, opportunities, and threats) Internal factors: SW External factors: OT
Context?
market potential and attractiveness, PEST -macrotrends (political and legal, economic, social and technological)
Prospect theory
people choose to take on risk when evaluating potential losses and avoid risks when evaluating potential gains Demonstrated asymmetry • The response to probability/outcomes is not linear • Losses loom larger than gains, creating loss aversion • Value is judged by changes relative to a reference point • What is the reference point? • How do we categorize the changes (mental accounting)?
Zodiac?
uses CLV to out predict wall street on customer evaluation They found wayfair was spending $69 to acquire new customers but only earning $59 back from the customer over the long haul
Break-Even Volume
• Break-Even Volume (BEV) is the number of units you need to sell to cover total fixed costs Break-Even Volume = Fixed Costs / Unit Contribution • Use BEV to make decisions about new investments
Customer Lifetime Value (CLV)
• CLV: the value of the entire stream of purchases that the customer would make over a lifetime of patronage. Knowing CLV helps us decide whether to: • Acquire an individual customer • Retain or let go of an individual customer • Acquire, retain, or let go of an entire customer base or company
Variable Costs
• Changes with volume of production • What are examples of variable costs for making an IPhone? • Manufacturing, shipping, sales commissions, etc.
Authenticity
• Continuity (history, origin) • Credibility (honest, transparent) • Integrity (cares and is true to its values, environment, family) • Symbolism (connects with people, adds meaning to people's lives)
Unit Contribution
• Contribution represents the portion of sales revenue that is not consumed by variable costs Unit Contribution = Revenue per unit - Variable Costs per unit
Sunk Costs
• Cost items are considered "sunk" when money has already been spent -> unrecoverable • Items usually included here are market research, R&D expenses that have already occurred in the past Why are they sunk? • Because you have already spent the money • There's no turning back to say "We shouldn't spend money on these..." • Therefore, it cannot be a factor in your decisions moving forward because no matter the course of action, the money is gone and unrecoverable • G&A, R&D, General Operating Expense
Customer Value Analysis
• How much are your customers worth? • Customer Lifetime Value (CLV) is the net present value of all future streams of profits that a customer generates over the life of his/her business with the firm.
The Power of the Brand
• Identified versus Blind Tests - Beer - Peanut Butter • Replicated Cross Culturally • fMRI studies: Coke • The brand impacts the experience
Packaging
• Package innovation enhances value, increases usage, wins at retail, and reinforces brand message - ex: Ketchup packaging created a dip & squeeze, form better fits package, use more, more sales - All birds package, reduce waste on package style
Contribution Margin
• Relative measure of assessing unit contribution compared to selling price expressed as a % Margin = Unit Contribution / Revenue per Unit
Fixed Costs
• Stays the same regardless of level of production • What are examples of fixed costs for Apple? • Executive salaries, rent, insurance, other overhead expenses
Case preparation
• Step 1: Identify Core Problem • Look at Trends, Opportunities, Competitive Threats • Step 2: Analyze the Situation • Use course frameworks and marketing math to guide analysis (5Cs, Segmentation, etc.) • Step 3: Strategy and Implementation • Choose a course of action • Specify implementation and tactics
Brands Equity
• The commercial value that derives from customer perception of the brand name of a particular product or service, rather than from the product or service itself. • Strong brands have higher market share, higher prices, and higher margins - outperforming broader indices • Positive difference in willingness to pay, satisfaction, loyalty • 18% of B2B decisions are driven by brand (McKinsey study) • Brands are key contributors to the firm's value ---- Brands Deliver Superior Shareholder Value ---- Brand is Growing % of Market Valuation
