Marketing Exam 2
Primary vs. secondary data - advantages and disadvantages of each
Secondary Data: are pieces of information that have been collected prior to the start of the focal research project. Secondary data include external as well as internal data sources. -Pros: free or inexpensive, readily accessible -Cons: not specific Primary Data: in contrast, are those data collected to address specific research needs. Some common primary data collection methods include focus groups, in-depth interviews, and surveys.
Glocalization
Sell the same product or service in both the home-country market and the host country
Repositioning
Example: baking soda (arm and hammer) realized that they need to find a new product because it is cheap and lasts a long time (cleaning, tooth paste, etc)
Exhibit 9.5: Evaluating segment attractiveness (identifiable, substantial, etc)
-Identifiable: Firms must be able to identify who is within their market to be able to design products or services to meet their needs. It is equally important to ensure that the segments are distinct from one another because too much overlap between segments means that distinct marketing strategies aren't necessary to meet segment members' needs. An effective marketing strategy to distinct segments might even offer similar options but with different mascots and colors, if those identifiable segments are connected with particular universities. -Substantial: Once the firm has identified its potential target markets, it needs to measure their sizes. If a market is too small or its buying power insignificant, it won't generate sufficient profits or be able to support the marketing mix activities. As China's economy started growing, there were not enough middle-class car buyers to push foreign automakers to design an entry-level vehicle. It was only after that number grew substantially that it became worthwhile for them to market to these identified consumers. -Profitable: Marketers must also focus their assessments on the potential profitability of each segment, both current and future. Some key factors to keep in mind in this analysis include market growth (current size and expected growth rate), market competitiveness (number of competitors, entry barriers, product substitutes), and market access (ease of developing or accessing distribution channels and brand familiarity). -Responsive: For a segmentation strategy to be successful, the customers in the segment must react similarly and positively to the firm's offering. If, through the firm's distinctive competencies, it cannot provide products or services to that segment, it should not target it. For instance, the Cadillac division of General Motors (GM) has introduced a line of cars to the large and very lucrative luxury car segment. People in this market typically purchase Porsches, BMWs, Audis, and Lexuses. In contrast, GM has been somewhat successful competing for the middle-priced family-oriented car and light truck segments. Thus, even though the luxury car segment meets all the other criteria for a successful segment, GM took a big risk in attempting to pursue this market. -Reachable: The best product or service cannot have any impact, no matter how identifiable or substantial the target market is, if that market cannot be reached (or accessed) through persuasivePage 189 communications and product distribution. The consumer must know that the product or service exists, understand what it can do for him or her, and recognize how to buy it. If Victoria's Secret fails to tell women that it is offering some less luxurious, more affordable options, shoppers will just walk right past the store and buy basic bras from the Macy's store in the same mall.
Characteristics of B2B buying- know how differs from B2C
-The distinction between a B2B and a business-to-consumer (B2C) transaction is not the product or service itself; rather, it is the ultimate user of that product or service. -Another key distinction is that B2B transactions tend to be more complex and involve multiple members of both the buying organization (e.g., buyers, marketing team, product developers) and the selling organization (e.g., sellers, R&D support team), whereas B2C often entails a simple transaction between the retailer and the individual consumer.
Positioning: -Value proposition -Market Positioning -Salient Attributes -Symbols -Competition -Perceptual Mapping
-Market Positioning: involves a process of defining the marketing mix variables so that target customers have a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products. -Value Proposition: which communicates the customer benefits to be received from a product or service and thereby provides reasons for wanting to purchase it. Ex. Value is a popular positioning method because the relationship of price to quality is among the most important considerations for consumers when they make a purchase decision. But value is in the eyes of the beholder. Some chocolate lovers buy only Hershey's. It has a made-in-the-U.S.A. heritage. It offers a wide assortment—something for everyone. It is perceived to be of good quality and have great taste. And, importantly, it is relatively inexpensive. Other chocoholics wouldn't think of buying such a low-priced treat, but instead portion their disposable calorie intake to only higher-priced brands such as Godiva. Godiva has stores in high-end malls, offers some handmade items such as fresh berries dipped in chocolate, and has a loyalty program. Each market, the Hershey's and the Godiva lovers, would argue that their brand is the best value, and to them, it is. Recall from our discussion in Chapter 1, value does not necessarily mean low priced. But both of these chocolatiers position their products based on value. -Salient Attributes: Another common positioning strategy focuses on the product attributes that are most important to the target market. With its all-wheel drive Quattro, Audi has positioned itself on performance and handling. Targeting a different market, Subaru positions its all-wheel drive slightly differently, instead focusing on safety and handling. -Symbols: A well-known symbol can also be used as a positioning tool. What comes to mind when you think of Colonel Sanders, the Jolly Green Giant, the Gerber Baby, or Tony the Tiger? Or consider the Texaco star, the Nike swoosh, or the Ralph Lauren polo player. These symbols are so strong and well known that they create a position for the brand that distinguishes it from its competition. Many such symbols are registered trademarks that are legally protected by the companies that developed them. -Competition: Firms can choose to position their products or services against a specific competitor or an entire product/service classification. For instance, although most luggage companies focus on building lightweight and functional designs, Saddleback Leather focuses on rugged durability and a classic look. Offering a 100-year guarantee on its products, the owner Dave positions his bags as something "they'll fight over when you're dead."24 This craftsmanship comes at a cost—its suitcases sell for more than $1,000. Marketers must be careful, however, that they don't position their product too closely to their competition. If, for instance, their package or logo looks too much like a competitor's, they might be opening themselves up to a trademark infringement lawsuit. Many private-label and store brands have been challenged for using packaging that appears confusingly similar to that of the national brand leaders in a category. Similarly, McDonald's sues anyone who uses the Mc prefix, including McSleep Inns and McDental Services, even though in the latter case there was little possibility that consumers would believe the fast-food restaurant company would branch out into dental services. -Perceptual Mapping: A perceptual map displays, in two or more dimensions, the position of products or brands in the consumer's mind.
Stages in B2B buying - know what's going on in each stage
1. Need Recognition -Buying organization recognizes, either through internal or external sources, that it has an unfilled need. (manufacturer needs to make new product because of competitor, told my customer, supplier or internal) Ex: Hypothetical University wants to ensure that its students are well educated and able to participate in a technologically connected workforce. It also seeks to grant them affordable access to required educational resources, from textbooks to library access to administrative tasks. The administration of the university also has reviewed research suggesting that portable devices, including tablet computers, can enhance students' in-class learning because they can directly and constantly interact with the materials and take notes in conjunction with the lecture and text, rather than only hearing information or seeing it on a whiteboard. The tablets also support innovative learning methodologies, such as the use of interactive clickers in lecture-based courses. Using this information, the university has determined it will issue a tablet to each of the 1,200 new first-year students. 2. Product Specification -After recognizing the need and considering alternative solutions, including laptop computers, the university wrote a list of potential specifications that vendors might use to develop their proposals. (specific and dictates what bids you will get back). The school's specifications include screen size, battery life, processor speed, how the device connects to the Internet, and delivery date. In addition, the board of directors of the university has requested that a bundle of educational apps be preloaded on the tablets, that all other apps be removed, and that each tablet come equipped with a screen protector, power cord, cover, stand, keyboard, and headphones. The school hopes to obtain a four-year service contract that includes replacement within 24 hours for any tablets that are returned to the vendor for servicing 3. RFP Process (Request for proposals) -is a common process through which organizations invite alternative vendors or suppliers to bid on supplying their required components or specifications. 4. Proposal Analysis and Supplier Selection -The buying organization, in conjunction with its critical decision makers, evaluates all the proposals it receives in response to its RFP. Hypothetical University reviews all proposals it receives, together with the board of directors, representatives from the teachers' union, and members of the student government. Many firms narrow the process to a few suppliers, often those with which they have existing relationships, and discuss key terms of the sale, such as price, quality, delivery, and financing. The university likely considers the bid by the company that installed computers in its library, assuming that provider performed well. Some firms have a policy that requires them to negotiate with several suppliers, particularly if the product or service represents a critical component or aspect of the business. This policy keeps suppliers on their toes; they know that the buying firm can always shift a greater portion of its business to an alternative supplier if it offers better terms. -The university evaluates proposals on the basis of the amount of experience the vendor has with tablet computers and similar technology products because it wants to make sure that its investment is reliable in the short term and flexible enough to accommodate new apps or updates. In addition, the school wants to be sure the technology will remain relevant in the longer term and not become obsolete. The vendor's ability to meet its specifications also is important because if the processor is too slow, students are unlikely to make use of the devices. The vendor's financial position provides an important indication of whether the vendor will be able to stay in business. 5. Order Specification -In the fifth stage of the B2B buying process, the firm places its order with its preferred supplier (or suppliers). The order includes a detailed description of the goods, prices, delivery dates, and, in some cases, penalties for noncompliance. The supplier then sends an acknowledgment that it has received the order and fills it by the specified date. In the case of the school's tablets, the terms are clearly laid out regarding when and how the vendor is expected to perform any preventive maintenance, who the contact person is for any problems with delivery or the tablets themselves, and under what circumstances the vendor will be expected to provide a replacement for a malfunctioning tablet. Issues such as maintenance and replacement are important, because the university does not plan to keep any inventory of extra tablets on hand. 6. Vendor Performance Assessment Using Metrics -Just as in the consumer buying process, firms analyze their vendors' performance so they can make decisions about their future purchases. The difference is that in a B2B setting, this analysis is typically more formal and objective.
Quotas
A quota designates a minimum or maximum quantity of a product that may be brought into a country during a specified time period. The United States, for instance, has committed to allowing at least 1.23 million tons of sugar to be imported (the quota) without a tariff because the country generally consumes more than it produces.12 It then monitors consumption closely to protect domestic sugar farmers. If demand exceeds supply, it increases the quota, but the level depends on annual consumption and production rates
Tariffs
A tariff, also called a duty, is a tax levied on a good imported into a country. In most cases, tariffs are intended to make imported goods more expensive and thus less competitive with domestic products, which in turn protects domestic industries from foreign competition. In other cases, tariffs might be imposed to penalize another country for trade practices that the home country views as unfair. For example, when the U.S. government determined the prices of solar panels imported from China were artificially low due to illegal subsidies, it imposed a tariff to help domestic firms compete.
WTO - major function
World Trade Organization (1994): deals with internal issues with trade
Definition of B2B marketing
-Business-to-business (B2B) marketing: refers to the process of buying and selling goods or services to be used in the production of other goods and services for consumption by the buying organization and/or resale by wholesalers and retailers. Therefore, a typical B2B marketing transaction involves manufacturers (e.g., GE, Levi's, Siemens, IBM, Ford) selling to wholesalers that, in turn, sell products to retailers. B2B transactions can also involve service firms (e.g., UPS, Oracle, Accenture) that market their services to other businesses but not to the ultimate consumer (e.g., you). -Formal, structured, in writing, occurs in larger quantities, use a buyer center, business will conduct a formal performance evaluation, do not experience cognitive dissonance, personal selling is used heavily, concentrated geographically (just in time delivery), exhibit derived demand
Facial recognition software and neuromarketing
-Facial recognition software is used to detect individuals from a video frame or digital images. For example, Coca-Cola's experiments using facial recognition software record participants' faces as they watch advertisements or prototypes, then assess how their eyes moved, when they smiled or frowned, and so on—but only after those participants have agreed to be recorded -Neuromarketing: is the process of examining consumers' brain patterns to determine their responses to marketing communications, products, or services for the purpose of developing marketing tactics or strategies.Such insights would be invaluable for marketers to discover what truly appeals to consumers. For example, based on results of a series of neuromarketing studies, Campbell's has recently changed its soup labels by shrinking the logo and emphasizing the soup to increase customers' emotional responses to the cans. But as anyone who has ever seen a science fiction movie can imagine, the potential for abuses of such tools are immense. And a key question remains: Do any consumers want marketers reading their brain waves and marketing goods and services to them in a manner that bypasses their conscious thoughts? One firm, NeuroFocus, used neuromarketing techniques with several global firms to garner customer information that would be difficult, if not impossible, to obtain using more traditional research methods.
Data warehouse & internal secondary data -Data Mining -Churn
-Internal Secondary Data: Internally, companies also generate a tremendous amount of secondary data from their day-to-day operations. One of the most valuable resources such firms have at their disposal is their rich cache of customer information and purchase history. -Data Warehouse: billions of pieces of individual data, which are stored in large computer files -Data Mining: uses a variety of statistical analysis tools to uncover previously unknown patterns in the data or relationships among variables. Some retailers try to customize their product and service offerings to match the needs of their customers. For instance, the UK grocer Tesco uses its loyalty card to collect massive amounts of information about its individual customers. Every time a loyalty card member buys something, the card is scanned and the store captures key purchase data specific to that member. -Churn: is the number of participants who discontinue use of a service, divided by the average number of total participants. With this knowledge, the company can focus on what it does best and improve potential problem areas.
External secondary data -Syndicated Data (and firms who provide them) -Scanner Data -Panal Data
-Syndicated Data: are available for a fee from commercial research firms such as IRI, the National Purchase Diary Panel, and Nielsen. -Scanner Data: are used in quantitative research obtained from scanner readings of Universal Product Code (UPC) labels at checkout counters. Whenever you go into your local grocery store, your purchases are rung up using scanner systems. The data from these purchases are likely to be acquired by leading marketing research firms such as IRI or Nielsen, which use this information to help leading consumer packaged-goods firms (e.g., Kellogg's, Pepsi, Kraft) assess what is happening in the marketplace. For example, a firm can use scanner data to determine what would happen to its sales if it reduced the price of its least popular product by 10 percent in a given month -Panal Data: are information collected from a group of consumers, organized into panels, over time. Data collected from panelists often include their records of what they have purchased (i.e., secondary data) as well as their responses to survey questions that the client gives to the panel firm to ask the panelists (i.e., primary data). Secondary panel data thus might show that when Diet Pepsi is offered at a deep discount, 80 percent of usual Diet Coke consumers switch to Diet Pepsi. Primary panel data could give insights into what they think of each option.
RFP and product specs
-The purchasing company may simply post its RFP needs on its website or work through various B2B web portals or inform their preferred vendors directly. Because the university does not have a preferred vendor for tablets yet, it issues an RFP and invites various tablet suppliers, technology companies, and other interested parties to bid on the contract. -Smaller companies may lack the ability to attract broad attention to their requests, so they might turn to a web portal, an Internet site whose purpose is to be a major starting point for users when they connect to the web. Although there are general portals such as Yahoo! or MSN, B2B partners connect to specialized or niche portals to participate in online information exchanges and transactions. These exchanges help streamline procurement or distribution processes. Portals can provide tremendous cost savings because they eliminate periodic negotiations and routine paperwork, and they offer the means to form a supply chain that can respond quickly to the buyer's needs.
Exhibit 9.7: Undifferentiated, differentiated, concentrated, and micromarketing strategies
-Undifferentiated: When everyone might be considered a potential user of its product, a firm uses an undifferentiated targeting strategy (mass marketing). (See Exhibit 9.7.) Clearly, such a targeting strategy focuses on the similarities in needs of the customers as opposed to the differences. If the product or service is perceived to provide similar benefits to most consumers, there simply is little need to develop separate strategies for different groups. Although not a common strategy in today's complex marketplace, an undifferentiated strategy is used for many basic commodities such as salt or sugar. However, even those firms that offer salt and sugar now are trying to differentiate their products. Similarly, everyone with a car needs gasoline. Yet gasoline companies have vigorously moved from an undifferentiated strategy to a differentiated one by targeting their offerings to low-, medium-, and high-octane gasoline users. -Differentiated: Firms using a differentiated targeting strategy target several market segments with a different offering for each. Condé Nast has more than 20 niche magazines focused on different aspects of life—from Vogue for fashionistas to Bon Appetit for foodies to GQ for fashion-conscious men to The New Yorker for literature lovers to Golf Digest for those who walk the links.Firms embrace differentiated targeting because it helps them obtain a bigger share of the market and increase the market for their products overall. Readers of Golf Digest probably are unlike readers of Architectural Digest in their interests, as well as in such demographics as gender, age, and income. Providing products or services that appeal to multiple segments helps diversify the business and therefore lowers the company's (in this case, Condé Nast's) overall risk. Even if one magazine suffers a circulation decline, the impact on the firm's profitability can be offset by revenue from another publication that continues to do well. But a differentiated strategy is likely to be more costly for the firm. -Concentrated: When an organization selects a single, primary target market and focuses all its energies on providing a product to fit that market's needs, it is using a concentrated targeting strategy. Entrepreneurial start-up ventures often benefit from using a concentrated strategy, which allows them to employ their limited resources more efficiently. Newton Running, for instance, has concentrated its targeting strategy to runners—but not all runners. It focuses only on those who prefer to land on their forefeet while running, a style that has been suggested as more natural, efficient, and less injury-prone than the style encouraged by more traditional running shoes with their heel-first construction and substantial cushioning. In comparison, though it also is known for its running shoes, Nike uses a differentiated targeting strategy. It makes shoes for segments that include basketball and football players and skateboarders; it also makes shoes for fashion-conscious white-collar workers with its subsidiary brand Cole Haan. As Adding Value 9.2 explains, Under Armour targets a specific type of runner: those willing to endure awful conditions, just to say they did it. -Micro-marketing or One-to-One: When a firm tailors a product or service to suit an individual customer's wants or needs, it is undertaking an extreme form of segmentation called micro-marketing or one-to-one marketing. CVS uses micro-marketing to each customer by analyzing what they are buying and the profitability of each item purchased from its loyalty card data.20 If a customer shops relatively infrequently, for example, once a month for her prescriptions, it may provide incentives that expire in a week. Alternatively, if another customer buys frequently, but with a relatively low market basket value of less than $20 per visit, it provides incentives to increase each visit's purchases to, say, $25. It may provide incentives to get customers who are purchasing only national brands to purchase more private-label merchandise.
Types of organizational culture (4)
1. Autocratic Buying Center: one person makes the decision alone 2. Democratic Buying Center: majority rules 3. Consultative Buying Center: use one person to make a decision but solicit input from others before doing so 4. Consensus Buying Center: all members of the team must reach a collective agreement that they can support a particular purpose
Know the steps in research (5)
1. Defining the objectives and research needs 2. Designing the research -In this step, researchers identify the type of data needed and determine the research necessary to collect them. 3. Collecting the data 4. Analyzing the data and developing insights 5. Developing and implementing an action plan
Perceptual map (6 steps)
1. Determine consumers' perceptions and evaluations of the product or service in relation to competitors' product or service -For instance, they might ask how the consumer uses the existing product or services, what items the consumer regards as alternative sources to satisfy his or her needs, what the person likes or dislikes about the brand in relation to competitors, and what might make that person choose one brand over another. 2. Identify the market's ideal points and size -For example, Exhibit 9.10B uses differently sized ovals that correspond to the market size. Ideal point 1 represents the largest market, so if the firm does not already have a product positioned close to this point, it should consider an introduction. Point 3 is the smallest market, so there are relatively few customers who want a healthy, light-tasting drink. This is not to suggest that this market should be ignored; however, the company might want to consider a niche market rather than mass market strategy for this group of consumers. 3. Identify competitors' positions -For instance, Powerade positions itself closely to Gatorade, which means they appear next to each other on the perceptual map and appeal to target market 2 (see Exhibit 9.10C). They are also often found next to each other on store shelves, are similarly priced, and are viewed by customers as sports drinks. Gatorade also knows that its sports drink is perceived to be more like Powerade than like its own Propel Fitness Water (located near target market 3) or Coke (target market 1). 4. Determine consumer preferences -For example, a huge market exists for traditional Gatorade, and that market is shared by Powerade. Gatorade also recognizes a market, depicted as the ideal product for segment 4 on the perceptual map, of consumers who would prefer a less sweet, less calorie-laden drink that offers the same rejuvenating properties as Gatorade. Currently, no product is adequately serving market 4. 5. Select the position -Continuing with the Gatorade example, the company has some choices to appeal to the "less sweet sports drink" target market 4. It could develop a new product to meet the needs of market 4 (see Exhibit 9.10D, option 1). Alternatively, it could adjust or reposition its marketing approach—its product and promotion—to sell original GatoradePage 199 to market 4 (option 2). Finally, it could ignore what target market 4 really wants and hope that consumers will be attracted to the original Gatorade because it is closer to their ideal product than anything else on the market. 6. Monitor the positioning strategy: -Markets are not stagnant. Consumers' tastes shift, and competitors react to those shifts. Attempting to maintain the same position year after year can spell disaster for any company. Thus, firms must always view the first three steps of the positioning process as ongoing, with adjustments made in step four as necessary.
Components of a country market assessment
1. Economic Analysis using Metrics -General economic environment (GDP, PPP, HDI, GMI) -Market size and population growth (expansion, distribution) -Real income (adjustments to produce or change price) --bottom of pyramid markets (single serving shampoo for cheap for the poor) 2. Infrastructure and Technology -Transportation -Channels -Communication -Commerce 3. Sociocultural Analysis -Power distance (willingness to accept social inequality) ---Ex. cast system -Uncertainty avoidance (extent to which society relies on orderliness) ---Ex. Germany, Russia -Individualism (perceived obligation/dependence on others) -Masculinity (extent to which dominant values are male orientated) -Time orientation (short or long term look at how long time will pass.) ---Ex. farmer thinks of this harvest -Indulgence (society allows for fun or suppress) ---annual vacation 4. Government Actions -Tariff -Quota -Exchange control -Trade agreement (NAFTA, European Union, CAFTS, Mercosur, ASEAN)
Global entry strategies - know what each strategy is and understand risk and level of control in each (5)
1. Export: means producing goods in one country and selling them in another. This entry strategy requires the least financial risk but also allows for only a limited return to the exporting firm. Global expansion often begins when a firm receives an order for its product or service from another country, in which case it faces little risk because it has no investment in people, capital equipment, buildings, or infrastructure. By the same token, it is difficult to achieve economies of scale when everything has to be shipped internationally. The Swiss watchmaker Rolex sells relatively small numbers of expensive watches all over the world. Because its transportation costs are relatively small compared with the cost of the watches, the best way for it to service any market is to export from Switzerland. 2. Franchising: is a contractual agreement between a firm, the franchisor, and another firm or individual, the franchisee. A franchising contract allows the franchisee to operate a business—a retail product or service firm or a B2B provider—using the name and business format developed and supported by the franchisor. Many of the best-known retailers in the United StatesPage 169 are also successful global franchisors, including McDonald's, Pizza Hut, Starbucks, Domino's Pizza, KFC, and Holiday Inn, all of which have found that global franchising entails lower risks and requires less investment than does opening units owned wholly by the firm. However, when it engages in franchising, the firm has limited control over the market operations in the foreign country, its potential profit is reduced because it must be split with the franchisee, and, once the franchise is established, there is always the threat that the franchisee will break away and operate as a competitor under a different name 3. Strategic Alliance: refer to collaborative relationships between independent firms, though the partnering firms do not create an equity partnership; that is, they do not invest in one another. Therefore, when Cisco Systems Inc. of San Jose, California, and Tata Consultancy Services of Mumbai, India, entered into their strategic alliance, they both continued to develop market-ready infrastructure and network solutions for customers, but they relied on each other to provide the training and skills that one or the other might have lacked. At the same time, Cisco maintains alliances with various other companies, including Microsoft, Nokia, IBM, and Accenture. 4. Joint Venture: is formed when a firm entering a market pools its resources with those of a local firm. As a consequence, ownership, control, and profits are shared. In addition to sharing financial burdens, a local partner offers the foreign entrant greater understanding of the market and access to resources such as vendors and real estate. 5. Direct Investment: requires a firm to maintain 100 percent ownership of its plants, operation facilities, and offices in a foreign country, often through the formation of wholly owned subsidiaries. This entry strategy requires the highest level of investment and exposes the firm to significant risks, including the loss of its operating and/or initial investments. A dramatic economic downturn caused by a natural disaster, war, political instability, or changes in the country's laws can increase a foreign entrant's risk considerably. Many firms believe that in certain markets, these potential risks are outweighed by the high potential returns. With this strategy, none of the potential profits must be shared with other firms. In addition to the high potential returns, direct investment offers the firm complete control over its operations in the foreign country.
Segmentation methods - and issues associated with each: -Geographic -Demographic -Psychographic lifestyles -Benefit -Behavioral -Geodemographic
1. Geographic Segmentation: organizes customers into groups on the basis of where they live. Thus, a market could be grouped by country, region (northeast, southeast), or areas within a region (state, city, neighborhoods, zip codes). Not surprisingly, geographic segmentation is most useful for companies whose products satisfy needs that vary by region. Firms can provide the same basic goods or services to all segments even if they market globally or nationally, but better marketers make adjustments to meet the needs of smaller geographic groups. A national grocery store chain such as Safeway or Kroger runs similar stores with similar assortments in various locations across the United States. But within those similar stores, a significant percentage of the assortment of goods will vary by region, city, or even neighborhood, depending on the different needs of the customers who surround each location 2. Demographic Segmentation: groups consumers according to easily measured, objective characteristics such as age, gender, income, and education. These variables represent the most common means to define segments because they are easy to identify, and demographically segmented markets are easy to reach. As Social & Mobile Marketing 9.1 acknowledges, demographics also can be critical to defining an overall marketing strategy. Kellogg's uses age segmentation for its breakfast cereals: Cocoa Krispies and Froot Loops are for kids; Special K and All-Bran are for adults. It also tends to adopt a gender-based segmentation; for example, marketing communications about Special K appeal almost exclusively to women. 3. Psychographic Segmentation: is the one that delves into how consumers actually describe themselves. Usually marketers determine (through demographics, buying patterns, or usage) into which segment an individual consumer falls. Psychographics studies how people self-select, as it were, based on the characteristics of how they choose to occupy their time (behavior) and what underlying psychological reasons determine those choices.7 For example, a person might have a strong need for inclusion or belonging, which motivates him or her to seek out activities that involve others, which in turn influences the products he or she buys to fit in with the group. Determining psychographics involves knowing and understanding three components: self-values, self-concept, and lifestyles. -Self-values are goals for life, not just the goals one wants to accomplish in a day. They are the overriding desires that drive how a person lives his or her life. Examples might be the need for self-respect, self-fulfillment, or a specific sense of belonging. This motivation causes people to develop self-images of how they want to be and then images of a way of life that will help them arrive at these ultimate goals. From a marketing point of view, self-values help determine the benefits the target market may be looking for from a product. Sanderson Farms targets consumers whose self-values prioritize saving money rather than worrying about antibiotic use, as Ethical & Societal Dilemma 9.1 reports. The underlying, fundamental, personal need that pushes a person to seek out certain products or brands stems from his or her desire to fulfill a self-value. -Self-Concept: is the image a person has of himself or herself; a component of psychographics. , is the image people ideally have of themselves.8 A person who has a goal to belong may see, or want to see, himself as a fun-loving, gregarious type whom people wish to be around. Marketers often make use of this particular self-concept through communications that show their products being used by groups of laughing people who are having a good time. The connection emerges between the group fun and the product being shown and connotes a lifestyle that many consumers seek. -Lifestyles, the third component of people's psychographic makeup, are the ways we live.10 If values provide an end goal,Page 184 and self-concept is the way one sees oneself in the context of that goal, lifestyles are how we live our lives to achieve goals. One of the most storied lifestyles in American legend is the Harley way of life: the open road, wind in your hair, rebelling against conventions. But the notions of freedom, rebellion, and standing out from a crowd vastly appeal to all sorts of people. In response, Harley-Davidson has shifted its STP methods to define four main target markets: core (men older than 35 years), young adults (both genders, 18-34 years), women (older than 35 years), and diverse (men and women, African American and Hispanic, older than 35 years). 4. Benefit Segmentation: groups consumers on the basis of the benefits they derive from products or services. Because marketing is all about satisfying consumers' needs and wants, dividing the market into segments whose needs and wants are best satisfied by the product benefits can be a very powerful tool. It is effective and relatively easy to portray a product's or service's benefits in the firm's communication strategies. -Hollywood in particular is a constant and effective practitioner of benefit segmentation. Although all movies may seem to provide the same service—entertainment for a couple of hours—film producers know that people visit the theater or rent films to obtain a vast variety of benefits, and market them accordingly. Need a laugh? Try the latest comedy from Adam Sandler or Melissa McCarthy. Want to cry and then feel warm and fuzzy? Go see Joy starring Jennifer Lawrence, Bradley Cooper, and Robert De Niro, for by the time you leave the theater, you are likely to feel quite happy: The lead characters will have faced obstacles, overcome them, and ultimately found succes (convenience, economy, prestige) 5. Behavioral Segmentation: divides customers into groups on the basis of how they use the product or service. Some common behavioral measures include occasion and loyalty. -Behavioral segmentation based on when a product or service is purchased or consumed is called occasion segmentation. Men's Wearhouse uses this type of segmentation to develop its merchandise selection and its promotions. Sometimes men need a suit for their everyday work, but other suits are expressly for special occasions such as a prom or a wedding. Snack food companies such as Frito-Lay also make and promote snacks for various occasions—individual servings of potato chips for a snack on the run but 16-ounce bags for parties. -Firms have long known that it pays to retain loyal customers. Loyal customers are those who feel so strongly that the firm can meet their relevant needs best that any competitors are virtually excluded from their consideration; that is, these customers buy almost exclusively from the firm. These loyal customers are the most profitable in the long term.16 In light of the high cost of finding new customers and the profitability of loyal customers, today's companies are using loyalty segmentation and investing in retention and loyalty initiatives to retain their most profitable customers. From simple, "buy 10 sandwiches, get the 11th free" punchcards offered by local restaurants to the elaborate travel-linked programs run by hotel and airline affiliates, such loyalty segmentation approaches are ubiquitous (occasion, loyalty) 6. Geodemographic Segmentation: Based on the adage "birds of a feather flock together," geodemographic segmentation uses a combination of geographic, demographic, and lifestyle characteristics to classify consumers. Consumers in the same neighborhoods tend to buy the same types of cars, appliances, and apparel and shop at the same types of retailers. One widely used tool for geodemographic market segmentation is the Tapestry™ Segmentation system developed and marketed by Tapestry Segmentation classifies all U.S. residential neighborhoods into 65 distinctive segments based on detailed demographic data and lifestyles of people who live in each U.S. block tract (zip code +4). Each block group then can be analyzed and sorted by manyPage 187 characteristics, including income, home value, occupation, education, household type, age, and several key lifestyle characteristics.
Different roles in buying center (6)
1. Initiator: the person who first suggests buying the particular product or service -For example, say you fell backward off your snowboard and, in trying to catch yourself, you shattered your elbow. You require surgery to mend the affected area, which includes the insertion of several screws to hold the bones in place. Your doctor promptly notifies the hospital to schedule a time for the procedure and specifies the brand of screws she wants on hand for your surgery. 2. Influencer: the person whose views influence other members of the buying center in the making the final decision -For years your doctor has been using ElbowMed screws, a slightly higher-priced screw. Her first introduction to ElbowMed screws came from the company's sales representative, who visited her office to demonstrate how ElbowMed screws were far superior to those of its competition. Your doctor recognized ElbowMed as a good value. Armed with empirical data and case studies, ElbowMed's sales rep effectively influenced your doctor's decision to use that screw. 3. Decider: the person who ultimately determines any part of or the entire buying decision -Even though your doctor requested ElbowMed screws, the hospital ultimately is responsible for deciding whether to buy ElbowMed screws. The hospital supplies the operating room, instrumentation, and surgical supplies, and, therefore, the hospital administrators must weigh a variety of factors to determine whether the ElbowMed screw is not only best for the patients but also involves a cost that is reimbursable by various insurance providers. 4. Buyer: the person who handles the paperwork of the actual purchase -The actual buyer of the screw will likely be the hospital's materials manager, who is charged with buying and maintaining inventory for the hospital in the most cost-effective manner. Whereas ElbowMed screws are specific to your type of procedure, other items, such as gauze and sutures, may be purchased through a group purchasing organization (GPO), which obtains better prices through volume buying. 5. User: the person who consumes or uses the product or service -Ultimately, the buying process for this procedure will be greatly affected by the user, namely you, and your broken elbow. If you are uncomfortable with the procedure or have read about alternative procedures that you prefer, you may decide that ElbowMed screws are not the best treatment. 6. Gatekeeper: the person who controls information or access, or both, to decision makers and influencers (specifications for bid) -Your insurer may believe that ElbowMed screws are too expensive and that other screws deliver equally effective results and therefore refuse to reimburse the hospital in full or in part for the use of the screws.
Cultural Dimensions (Hofstede's cultural dimensions concept) (6)
1. Power distance: willingness to accept social inequality as natural. 2. Uncertainty avoidance: the extent to which the society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life. 3. Individualism: perceived obligation to and dependence on groups. 4. Masculinity: the extent to which dominant values are male oriented. A lower masculinity ranking indicates that men and women are treated equally in all aspects of society; a higher masculinity ranking suggests that men dominate in positions of power. 5. Time orientation: short- versus long-term orientation. A country that tends to have a long-term orientation values long-term commitments and is willing to accept a longer time horizon for, say, the success of a new product introduction. 6. Indulgence: the extent to which society allows for the gratification of fun and enjoyment needs or else suppresses and regulates such pursuits.
Know the 4 key elements of infrastructure & technology
1. Transportation -airport, railroads, interstate 2. Distribution Channels -are systems timely? 3. Communication -media, ads 4. Commerce -commercial infrastructure (legal system, banking system, regulatory systems)
Derived demand
Derived Demand: reflects the link between consumers' demand for a company's output and the company's purchase of necessary inputs to manufacture or assemble that particular output. (BUSINESSES)-derived -demand for a product is derived from consumers demand) Ex. homebuilders want nails, staple, lumber because customers want a house built (CUSTOMERS)-direct demand (buy it, use it) For example, if more customers want to purchase staplers (a B2C transaction), a company that produces them must purchase more metal from its supplier to make additional staplers (a B2B transaction). In some cases though, the participants in B2B transactions come in conflict, so providers such as Facebook face a dilemma, namely, Ethical & Societal Dilemma
Questionnaire design and issues associated with it (including exh. 10.7)
Developing a questionnaire is part art and part science. The questions must be carefully designed to address the specific set of research questions. Moreover, for a questionnaire to produce meaningful results, its questions cannot be misleading in any fashion (e.g., open to multiple interpretations), and they must address only one issue at a time. They also must be worded in vocabulary that will be familiar and comfortable to those being surveyed. The questions should be sequenced appropriately: general questions first, more specific questions next, and demographic questions at the end. Finally, the layout and appearance of the questionnaire must be professional and easy to follow, with appropriate instructions in suitable places.
Exchange rate
Exchange Control Exchange control refers to the regulation of a country's currency exchange rate, the measure of how much one currency is worth in relation to another.14 A designated agency in each country, often the central bank, sets the rules for currency exchange. In the United States, the Federal Reserve sets the currency exchange rates. In recent years the value of the U.S. dollar has changed significantly compared with other important world currencies. When the dollar falls, it has a twofold effect on U.S. firms' ability to conduct global business. For firms that depend on imports of finished products, raw materials that they fabricate into other products, or services from other countries, the cost of doing business goes up dramatically. At the same time, buyers in other countries find the costs of U.S. goods and services to be much lower than they were before.
Sentiment mining
Firms collect consumer comments about companies and their products on social media sites such as Facebook, Twitter, and online blogs. The data are then analyzed to distill customer attitudes toward and preferences for products and advertising campaigns. Scouring millions of sites by combining automated online search tools with text analysis techniques, sentiment mining yields qualitative data that provide new insight into what consumers really think. Companies plugged into this real-time information can become more nimble, allowing for quick changes in a product rollout or a new advertising campaign.
GDP, GNI, PPP, HDI
GDP (Gross Domestic Product): the most widely used of these metrics, is defined as the market value of the goods and services produced by a country in a year GNI (Gross National Income): consists of GDP plus the net income earned from investments abroad (minus any payments made to nonresidents who contribute to the domestic economy). In other words, US firms that invest or maintain operations abroad count their incomes from those operations in the GNI but not the GDP PPP (Purchasing Power Parity): a theory that states that if the exchange rates of 2 countries are in equilibrium, a product purchased in one will cost the same in the other, if expressed in the same currency. -Big Mac Index: if you buy a basket of Big Macs, how the price differs HDI (Human Development Index): measure of quality of life using factors like life expectancy, educational attainment (income, ppp), and incomes sufficient for basic needs -United Nations (0-1 score) .8-1: highly developed lower than .5- impoverished
Global distribution and communication strategy issues
Global Distribution Issues -Consumers who shop at small, local, family-owned stores -Be creative (ex. Tupperware parties in Indonesia) Communication Strategies: -Literacy levels vary country by country ---send products in packages with words or pictures Ex. Gerber baby food in Africa (people couldn't read) -Firms choose whether to adapt to language differences (Coors- "get loose" --> "get diaherea") --Even if same language, words differ (bubbler) --translations (Chevy Nova) -Cultural and Religious Differences also matter --Dress
Globalization aka. Off-shoring - know different types of off-shoring
Globalization:refers to the processes by which goods, services, capital, people, information, and ideas flow across national borders. Global markets are the result of several fundamental changes such as reductions or eliminations of trade barriers by country governments, the decreasing concerns of distance and time with regard to moving products and ideas across countries, the standardization of laws across borders, and globally integrated production processes. -Off-shoring: manufacturer in other countries --knowledge economy: banking, financial advising, medicine, radiography, accounting, IT 1. Information technology outsourcing (ITO) is where outsourcing related to technology or internet such as computer programming. 2. Business process outsourcing (BPO) involves contracting out of operational functions to a third party service provider. 3. Offshore software development 4. Knowledge process outsourcing (KPO) is a type of outsourcing which involves or requires a more advanced technical skill and a higher level of expertise.
Manufacturers, resellers, institutional, government buyers
Manufacturers: Manufacturers buy raw materials, components, and parts that allow them to make and market their own goods and ancillary services. For example, the German-based Volkswagen Group, the largest auto manufacturer in Europe, owns and distributes the Audi, Bentley, Bugatti, Lamborghini, Seat, Skoda, Scania, VW, and VW Commercial Vehicles brands. Resellers: are marketing intermediaries that resell manufactured products without significantly altering their form. For instance, wholesalers and distributors buy Xerox products and sell them to retailers (B2B transaction), then retailers resell those Xerox products to the ultimate consumer (B2C transaction). Alternatively, these retailers may buy directly from Xerox. Thus, wholesalers, distributors, and retailers are all resellers. Retailers represent resellers and engage in B2B transactions when they buy fixtures, capital investments, leasing locations, financing operations, and merchandise for their stores. To appeal to resellers and keep them interested in what it has to offer, Xerox works hard to ensure that its innovative products appeal to them and their customers. (MIDDLEMAN) Institutional: such as hospitals, educational organizations, and religious organizations also purchase all kinds of goods and services. A public school system might have a $40 million annual budget for textbooks alone, which gives it significant buying power and enables it to take advantage of bulk discounts. However, if each school makes its own purchasing decisions, the system as a whole cannot leverage its combined buying power. Public institutions also engage in B2B relationships to fulfill their needs for capital construction, equipment, supplies, food, and janitorial services. Government Buyers: In most countries, the central government is one of the largest purchasers of goods and services. For example, the U.S. federal government spends nearly $4 trillion annually on procuring goods and services. If you add in what state and local governments spend, these numbers reach staggering proportions. For example, the Department of Defense was slated to receive $561 billion in fiscal year 2016, and $14 billion of that amount was to be dedicated to working with cybersecurity firms that can provide services to help the U.S. government protect against cyberterrorism attacks. Thus the government, and the Department of Defense in particular, represents a spending force to be reckoned with.
Trading bloc
Marketers must consider the trade agreements to which a particular country is a signatory or the trading bloc to which it belongs. A trade agreement is an intergovernmental agreement designed to manage and promote trade activities for a specific region, and a trading bloc consists of those countries that have signed the particular trade agreement -Trading bloc: countries in an agreement
3 type of organizational buying
New Buy: a customer purchases a good or service for the first time, which means the buying decision is likely to be quite involved because the buyer or buying organization does not have any experience with the item (involved, use all 6 steps) Modified Rebuy: the buyer has purchase a similar product in the past but has decided to change some specifications such as the desired price, quality level, customer service level, options, etc. Straight Rebuy: occurs when the buyer or buying organization simply buys additional units of products that had previously been purchased
NAICS - and how to use it
North American Industry Classification System: -replaced SIC codes -6 digit code that classifies businesses --tell if business sells shoes, makeup, etc. --look for vendors --identify potential customers, competitors
Exhibit- all 8 types of qualitative (exploratory) and quantitative (conclusive) research techniques
Qualitative (exploratory): -Uses broad, open-ended questions to understand the phenomenon of interest 1. Observation -entails examining purchase and consumption behaviors through personal or video camera scrutiny, or byPage 213 tracking customers' movements electronically as they move through a store. For example, researchers might observe customers while they shop or when they go about their daily lives, taking note of the variety of products they use. 2. In-depth interviews -trained researchers ask questions and listen to and record the answers and then pose additionalPage 215 questions to clarify or expand on a particular issue. For instance, in addition to simply watching teenagers shop for apparel, interviewers might stop them one at a time in the mall to ask them a few questions, such as: "We noticed that you went into and came out of Abercrombie & Fitch very quickly without buying anything. Why was that?" If the subject responds that no one had bothered to wait on her, the interviewer might ask a follow-up question like, "Oh? Has that happened to you before?" or "Do you expect more sales assistance there?" -In-depth interviews are, however, relatively expensive and time-consuming. The interview cost depends on the length of the interaction and the characteristics of the people included in the sample. If the sample must feature medical doctors, for example, the costs of getting sufficient interviews will be much higher than the costs associated with intercepting teenagers in a mall. 3. Focus groups - a small group of people (usually 8 to 12) come together for an intensive discussion about a particular topic. 4. Social media Quantitative (conclusive): -Structured responses that can be statistically tested 1. Experiments -is a type of quantitative research that systematically manipulates one or more variables to determine which variables have a causal effect on other variables. For example, in our earlier scenario, one thing the hypothetical McDonald's research team was trying to determine was the most profitable price for a new menu combo item (hamburger, fries, and drink). Assume that the fixed cost of developing the item is $300,000 and the variable cost, which is primarily composed of the cost of the food itself, is $2. McDonald's puts the item on the menu at four prices in four markets. 2. Scanner 3. Panel 4. Survey -a systematic means of collecting information from people using a questionnaire
Selecting target markets
The fourth step in the STP process is to select a target market. The key factor likely to affect this decision is the marketer's ability to pursue such an opportunity or target segment. Thus, as we mentioned in Chapter 2, a firm very carefully assesses both the attractiveness of the target market (opportunities and threats based on the SWOT analysis and the profitability of the segment) and its own competencies (strengths and weaknesses based on the SWOT analysis). -Subcultures ---geographic subcultures -Cultural Nuances --the way they will think about your product --Covergirl- high end in China --Coca-Cola makes little bottles in Korea -View of product and consumer role -Different positioning -Adaptation -Single Positioning Strategy
Big data
To specify this explosion of data, which firms have access to but cannot handle using conventional data management and data mining software, the term big data has arisen in the popular media. Leading firms such as Amazon, Netflix, Google, Nordstrom, Kroger, Tesco, Macy's, American Express, and Walmart already are converting their big data into customer insights—and the list of firms keeps growing. -Amazon may be the poster child for big data. Any Amazon shopper is familiar with its recommendation engine, which notes what the consumer is purchasing, analyzes purchase patterns by similar customers, suggests other items the customer might enjoy, and indicates what other people who bought the focal item also added to their shopping carts. With more than 200 million active customers and billions of pieces of shopping data, Amazon certainly qualifies as a big data user; its item-to-item collaborative filtering helps it determine which relevant products to suggest, generating almost one-third of its sales.
