AEM 2420 Marketing Midterm

Marketing Strategy definition

marketing logic by which the company hopes to create customer value and achieve profitable customer relationships

Growth

rapid market acceptance and increasing profits

Selective retention

remember the strengths of the brand they like and forget about the weaknesses. Also don't recall strengths of competing brands

Decline

sales fall of and profits drop

Micro marketing environment

-3 C's (company, customers, competitors) -Suppliers -Intermediaries -Public

Example=Buying a pot with rubber handle for brand ladder

-Attributes: does not get hot (handle) -Functional Benefits: will never burn me -Emotional benefits: kids are safe, i am safe, less stress -End benefits: I am a good parent

Dangers of line extensions

-costs -confuses customers -reduce brand loyalty -stagnant category demand

Macro marketing environment (not controllable)

-demographic -cultural -technological -economic -political/regulatory

A positioning statement is intended for...

-internal communication -guiding statement for your marketing activities/tactics -defines your brand

Why line extensions are popular

-low cost/low risk way to address different consumer segments and heterogeneous consumer needs -opportunity to offer a broader range of price points -retailers want it

Positioning Statement (4 parts)

-target market -company/brand/product reference -point of difference -reasons to believe

When NOT to use segmentation

-the market is too small -The market potential is largely untapped -consumer preferences are fairly homogeneous

3 steps of strategic planning

1. Define a Mission 2. Set company's objectives 3. Analyze current situation

Problems with matrix approach

1. Difficult to measure market share/growth 2. Categorization difficulty. Most SBUs end up in center of the matrix 3. Focus on current businesses, but not future planning 4. Can lead to unwise expansion or diversification

Buyer decision process (5 steps)

1. Need recognition 2. information search 3. evaluation of alternatives 4. purchase decision 5. post purchase behavior

3 factors needed for causation

1. concomitant variation (correlation) 2. temporal antecedence (x must occur before y) 3. No third factor driving both x and y

Market research steps (5)

1. identify problem/question 2. select research method and design the study 3. collect data 4. analyze data and draw conclusions 5. implement findings

disadvantages of focus groups

1. peer pressure 2. difficult to moderate, interpret and analyze 3. discussion influenced by moderator 4. generalization to a large population is hard

Baby Boomers

25% of population. Known for idealism, competitiveness, questioning authority. The "me" generation. Sex, drugs, rock n roll.

Consumer's perspective or a brand

A brand is a promise by the marketer to provide a set of features, benefits, and services consistently

Marketer's perspective of a brand

A brand is the accumulation of a consumer's emotions, experiences, and beliefs about a product or a service

Seller view of a product

A bundle of tangible and intangible attributes designed to provide benefits to the customer

Customer view of a product

A bundle of tangible and intangible benefits

Endowment Effect

A customer values something more when they own it. Ways to lessen effect: test drive, fitting rooms, trial offers, free samples

Service

A product that consists of activities, benefits, or satisfactions that are essentially intangible and does not result in the ownership of anything

Brand equity

A set of brand assets and liabilities linked to a brand, its name and symbol, that add or subtract from the value provided by a product or service

Mission Statement

A short sentence or paragraph that defines WHAT a company is and does

Internal validity

Ability to confidently draw causal conclusions

Value Proposition

An easy to understand reason why a consumer should by a product from a firm. A statement that summarizes why a customer should by the product

GE(McKinsey) Portfolio Matrix

Analyzes SBUs in search of growth opportunities. Plots Industry attractiveness vs. Business unit strength.

BCG Matrix

Analyzes product lines (SBUs) in search for growth opportunities. Understand a company's potential. Plots Market share/Cash generation (top) vs. Growth rate/cash use (left)

Product

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

Prospect theory

Attempts to describe how people make decisions between alternatives. Losses loom larger than gains (important point). Diminishing marginal returns

the brand ladder

Base-up (each supports next) 1. attributes/reasons to believe 2. functional benefits 3. emotional benefits 4. end benefits

GE portfolio matrix Business Unit Strength

Based on market share, growth in market share, brand equity, distribution channel access, brand image, product quality.

Differentiation

Begins the positioning process

Shelf Space heuristic

Brands with more shelf space must be more popular

Cognitive dissonance

Buyer discomfort caused by post purchase conflict.

New task (buying situation)

Buyer purchases a product or service for the first time

Modified rebuy

Buyer want to modify product specifications, prices, terms, or suppliers

Systems selling

Buying a complete solution. Example= Keurig in the office

Market targeting

Choose which segments to target and how many

Business Portfolio

Collection of business units that make up a firm (made up of SBUs)

Product Mix

Consists of all the product lines and items that a particular seller offers for sale

Unsought products

Consumer does not know about, or knows about but does not normally think of buying (i.e. life insurance, funeral services)

Marketing Environment

Customers, Company, Competitors

Portfolio Analysis

Deciding which SBU to invest money in and how much

Geographic segmentation

Divides market into different geographical units from nations to even neighborhoods

Demographic segmentation

Divides market into segments based on variable such as age, life cycle, income, religion, etc.

Market segmentation

Division of a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing mixes

BCG Matrix Cash Cows

Establish and successful SBUs, Competition weakened, No serious investments, Produce cash. Generate more cash than they consume. Provide the cash to turn question marks into market leaders. Companies should invest in cash cows to maintain the current level of productivity.

Line extension

Existing brand name- existing product category

Brand extension

Existing brand name- new product category

Post Purchase Behavior

Fifth and last stage of buyer decision process where consumers take further action after purchase, based on their satisfaction or dissatisfaction. This is important for retention and acquisition (word of mouth).

Need recognition

First stage of buyer decision process in which the consumer recognizes a problem or need triggered by internal or external stimuli

Purchase decision

Fourth stage of buyer decision process. Buyer decides about which brand to purchase

Market Segment

Group of consumers who respond in a similar way to a given set of marketing efforts

Product line

Group of products that are closely related because they function in similar manner, sold to same customer groups, marketed through same types of outlets, or fall within given price ranges. Virtually same as product category

Product idea

Idea for a possible product that the company can see itself offering to the market

Marketing

Identifying needs and wants in the market and creating products/services that match these needs and wants in a way that satisfies customers better or differently than competitors do

Primary data

Information collected for specific purpose at hand

Secondary data

Information that already exists, having been collected for another purpose

Shopping (search) goods

Less frequently purchased products/services that the customer compares carefully on suitability, quality, price, and style. (i.e. cars, furniture, appliances, clothing)

Convenience products

Low costs and replaced often. Usually bought quickly

BCG Matrix Dogs

Low profit potential, usually discontinued. Don't earn or consume a great deal of cash. Companies should divest in dogs.

Marketing Defined

Marketing is a process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return

Company's objectives

More specific than the mission. Helps promote action towards the mission

Multibrands

New brand name- existing product category

New brands

New brand name- new product category

Selective distortion

People interpret info in support of their beliefs

Selective attention

People screen out most info

Marketing Strategy

Segmentation, Targeting, Positioning

BCG Matrix Question Marks (problem child)

Potential to turn into stars, require cash to build market share. Use a lot of cash but bring little in return. Companies should invest in question marks is there is growth potential, or to sell if it doesn't.

Marketing Mix (four Ps)

Price, Product, Promotion, Place

What is wrong with marketing Myopia

Product centricity results in a narrow market definition and can prevent growth and be vulnerable from threat of substitutes. CUSTOMER CENTRICITY can ensure continued growth

Specialty products

Products/services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort (i.e. medical services, designer clothes, high end electronics)

BCG Matrix Stars

Profit potential, attract competition, need heavy investment due to high growth rate (usually same money going out as coming in). First to market products and monopolies are considered stars. Can become cash cows if success is sustained. Companies should invest in stars.

Information search

Second stage of buyer decision process where the consumer is motivated to search for more information. Looks for more info depending on price and importance of product

Market penetration

Selling existing product in existing market to gain more market share. Low risk

Market Development

Selling existing product in new market

Product Development

Selling new product in existing market

Diversification

Selling new product in new market

Heuristics

Simple mental shortcuts to quickly come up with a judgement/decision that otherwise would require long and effortful thought. Efficient and can usually work well

Maturity

Slow sales growth and profits level off or decline

Millennials

Special, sheltered, confident, conventional, pressured, tech savvy, team oriented

Anchoring and adjustment

Start with anchor number and usually insufficiently adjust. So 10 for $10 soda deal. You only went to buy 3 but now buy 5 because of deal despite the fact it was still $1 a bottle anyways

Biases

Systematic deviations caused by heuristics. Cause poor choice

Concept testing

Testing new product concepts with groups of target consumers

Position (an outcome)

The actual perception of the brand in the minds of target consumers, relative to competitors

Market Positioning

The arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of the target customers

Market Targeting

The process of evaluating each market segment's attractiveness and selecting one or more segments to enter

What is the study of consumer behavior?

The study of the processes involved when consumers select, purchase, use and dispose of products, services, ideas and experiences

Evaluation of alternatives

Third state of buyer decision process where consumer uses information to evaluate alternative brands in the choice set. See's bundle of attributes and weights those attributes according to individual importance

SWOT analysis

Used to analyze the current situation of a company. Strengths, Weaknesses, Opportunities, Threats

Price-Quality Heuristic

We assume that higher price = higher quality

Scarcity heuristic

We assume that scarcity of an item means it is desirable

Fungibility

When units of a good are perfectly equivalent and completely exchangeable. Money not always fungible

Market positioning

Your product or brands place in consumer's minds against your competitors

Product development

Zero sales and increasing investment costs

Strategic Business Units (SBU)

a relatively autonomous part of the firm that has a distinct mission, objectives, products, competitors, and can be planned independently. Because they are smaller and agile, they allow the owning conglomerate to respond quickly to changing economic or market situations

External validity

ability to generalize from research setting to other context

GE portfolio matrix Industry attractiveness

based on market growth rate, market size, profitability, competition, global opportunities.

Straight rebuy

buyer routinely reorder something without any modifications

product concept

detailed version of the idea stated in meaningful consumer terms

Characteristics of a good mission statement

distinctive competencies Motivating Market oriented realistic specific

Behavioral segmentation

divides market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product

Psychographic Segmentation

divides market into segments based on social class, lifestyle or personality characteristics

Marketing mix

set of controllable, tactical marketing tools (product, prices, place, promotion) that the firm blends to produce the response it wants in the target market

introduction

slow sales and nonexistent profits

Positioning (an action)

the act of framing the brand in the minds of target consumers so it occupies a distinct and valued place in relation to competitors

Societal Marketing

the idea that a firm should make marketing decisions by considering the customers wants, the company's requirements, and society's long term interests

Production Concept

the idea that consumers will favor products that are widely available and highly affordable

Product Concept

the idea that consumers will favor products that offer the best quality, performance, and features

Selling Concept

the idea that customers will not buy a product unless pressured to do so. Firms must make selling and promotion efforts. (inside out)

Marketing Concept

the idea that firms should identify the needs and wants of the customers and then make decisions to satisfy those needs better than the competition. (outside in)

Product image

the way consumers perceive an actual or potential product