Marketing Final

Value to Bulk Ratio

"value to bulk" ratio: does the product have a lot of value squeezed into something that is small and easy to ship? For example expensive jewelry or an Iphone. Or is it bulky and low value such as low end furniture

Consumer Value

The central idea behind marketing Value = Benefits Recieved/Cost Value can be created in a number of different ways. Not just products but also adding intangible services

Scanner Data (Primary Research Method)

Using a customers shopping card to collect data such as shopping history and compare it toe demographic information of the shopper to gain insights. Helps to see what factors are affecting consumers choices

repositioning

an attempt to change customer perceptions of a band, usually because the existing position that brand holds has become less attractive. Repositioning is very difficult to accomplish and often large amounts of money need to be spent on advertising. In many cases the repositioning fails.

Physiological Measures (Primary Research Method)

certain types of market research measure consumers physiological responses. For example attaching a small camera to eyeglasses they are wearing and watch where their eyes focus or using electrodes to measure their brain waves.

Collaborative filtering

comparing a customers purchase history to others to identify items bought by large percentage of similar customers. Then using this information to provide recommendations to the customer.

Ability to sell multiple items together

if a customer orders multiple items together the firm can save on the cost of packaging and shipping. The more different but complimentary items an online vendor carries the more likely that customer orders will tend to include different items

Relative costs in selling online, in retail settings, and combined mode

in comparing online and retail settings it appears that absolute margins and the extents to which the assembly and shipping process are automated are two of the most significant factors.

Volumes sold

one way to limit labor costs of online sales is to automate as much as possible. Although there is a high upfront cost if you can sell in high volumes it will drive expenses down. This also applies for getting a better rate on shipping per item if you make a lot of them.

Location for low labor and land costs

online vendors can locate in areas such as small towns that have lower real estate costs or in areas were wage levels tend to be lower. Because of access to UPS and FedEx there is no significant advantage to being located in major cities.

Parallel Distribution Structures

refers to the fact that products may reach consumers in different ways. Most products flow through traditional manufacturer --> retailers --> consumer channel. Certain large chains may demand to buy directly from the manufacturer.

Basic Internet Economics

some people think that the internet is a less expensive way to distribute products. However in most cases selling online will be more costly due to high costs of processing orders and direct shipping to the customer. In a store, the customer does all the work except for maybe the checkout. Online you have to pay someone to go get the product, package, and ship it. ** Non checkout personnel. Some stores for example best buy have dedicated sales people. Which could raise costs in a brick and mortar store. However sometimes these sales people add value and convenience that can't be found online.

Vulnerability of inventory to loss of value

things like computers are seen as losing their value relatively quickly. Estimated at 1.5% per week because of technological improvements. Therefore it makes it economically viable to ship directly to customers to "save" some of the products value.

Projective Techniques (Primary Research Method)

used when a customer may feel embarrassed to admit certain things. People will respond more openly if the can talk about "someone else's" experience with the product in question. The main problem is that this method is difficult to analyze

Confounds

A confound may occur when one of two variables that are correlated appear, on the surface, to cause the other. For example, research suggests that the higher the number of toys a child has, the higher, on the average, will be his or her IQ. One might reasonably suspect that playing with more toys would result in stimulating more areas of the brain, potentially enhancing intelligence. However, in this case, it is possible that both the toys and the IQ could be caused by a third variable such as family income. A family with higher income could afford to buy not more toys but also better food. Schools in an area where a more affluent family lives may also offer more opportunities for intellectual development. Experimentation can sometimes be used to eliminate or reduce confounds by "controlling" such "lurking" variables.

Price as a Ratio and Ways to Change a Price

A logical examination suggest that price should be defined as price = resources given up / goods received That means we need to consider the quantity you receive as well as the amount of money you have to fork out. To say that gasoline costs $1.29 is meaningless outside the context that this cost is per gallon.

Taste tests and the "triangle test" (Primary Research Method)

A taste taste in which everyone taste the same new product is not an experiment since everyone is treated the same way. In a triangle test each respondent is given three samples. One taste of A, one taste of B, and one taste of either A or B. They are asked to identify which is the odd one out. This allows researches to see if consumers can tell the difference between an existing product and a new product that could be potentially introduced

Absolute Margin

Absolute margin is the actual amount of profit in dollars you get for selling a product. Not the percentage profit. Even if something that costs a dollar to make is marked up 100 percent. That's only a dollar of absolute margin which can make it hard to pay for things like packaging and shipping. Merchants can charge for shipping but it makes them less competitive

Targeting

After the market has been broken up into relevant and useful segments for a firm the next step is to decide which segments to pursue as customers. This is called Targeting. There are several factors to consider when making this decision. First, how well are existing targets served by other firms. How large are the segments and are they expected to grow. Are there strengths the firm has that helps it appeal to one group over another? For example McDonalds has a reputation for convenience and low price. It wouldn't make sense for them to try and go after customers who preferred Gourmet foods because that is not what they are known for. They would have better success targeting other segments.

Location minimization of sales taxes

Although sales tax laws on out of state items are complicated in some cases online merchants avoid collecting sales tax

Laws of interest to U.S. firms doing business abroad

Anti-trust -- U.S. anti trust laws are generally enforced in US courts even the alleged transgression took place outside US jurisdiction The Foreign Corrupt Influences Act -- U.S firms are not allowed to bribe foreign officials and can be prosecuted even if the illegal action takes place entirely outside of the united states Anti-Boycott Laws: It is illegal for U.S firms to boycott other countries not sanctioned by the U.S government. The emphasis for this is on Israel Trading with the Enemy: it is illegal for U.S firms to trade with certain countries that are viewed to be hostile to the U.S. (e.g. Cuba, North Korea, Libya, Iran) Extra-terratoriality- In some instances U.S. laws will be applied by U.S. courts to behavior that took place entirely abroad

Branding

Brand Equity refers to the effective value of a brand. This value comes from a reputation that has been established over time. Different firms have different policies on the branding of their products. While 3M puts its brand name on a great diversity of products, Procter & Gamble, on the opposite extreme, maintains a separate brand name for each product. the use of brand extensions (putting the brand name on a new product) Research shows that consumers are more receptive to brand extensions when (1) the company appears to have the expertise to make the product [McDonald's was not thought as credible as a photo-finishing service], (2) the products are congruent (compatible), and (3) the brand extension is not seen as being exploitative of a high quality brand name [e.g., one should not use a premium brand name like Heineken to make a trivially easy product like popcorn]. Genericide refers to a situation where a brand name, in the informal day-to-day speech of consumers, comes to be synonymous with the product category. Many people, for example, refer to a "Xerox" without meaning to specify that the copier would necessarily be made manufactured by Xerox. It is common to refer to a "Kleenex" even though one would be just as happy with a "facial" tissue made by another manufacturer. People have even gone so far as to turn some brand names into verbs. People may, for example, promise to "Fed Ex" something to someone who needs the delivery the next day without meaning to promise that this exact shipper will be used. Because Google has an overwhelming market share today, someone who refers go "Googleing" someone or something probably intends to use the search engine implied, but other search engines were to gain significant market share in the future, it is not clear that the recently invented verb would exclusive to the search engine from which it is named.

Break-Even Analysis

Break even analysis involves calculating fixed and variable costs and determining how many units need to be sold in order to cover costs

Channel Structures

Channel structures vary somewhat by the nature of the product. It could go straight from the producer to the consumer for example a commercial jet airline is custom made and shipped directly to the airline. Another example, automobiles go to a dealer because it would be inefficient for consumers to come to Detroit or Tokyo to get a car. So in the case of the automobile it is most efficient to have one intermediary. Other products might require a wholesaler to bundle them with other products and sell them to be most efficient. Occasionally agents might also be involved to handle negotiations between all parties.

Conjoint Analysis (Primary Research Method)

Conjoint analysis is used to determine the relative importance of various attributes of a product. Consumers have to rate a number of products with different combinations of attributes ("profiles"). The consumer evaluates the combination as a whole and then statistical analysis can infer the relative importance of each attribute

Internal and External Search

Consumers engage in both internal and external information search. Internal search involves the consumer identifying alternatives from their memory For "low involvement" products it is important marketing programs achieve "top of mind" awareness. Few people will search the yellow pages for fast food restaurants. The consumer must be able to retrieve a restaurant from memory for it to be considered. High involvement products , consumers are more likely to use an external search. They will read reviews, ask friends, and visit several retail locations. Firm that make high involvement products are selected predominantly through external search must invest in having information available to the consumer

The Means-End Chain

Consumers often buy products not because their attributes but rather because of the ultimate benefits that these attributes provide. The means end chain starts with a concrete attribute and logically progresses through a series of consequences that end with a value being satisfied Attributes -> consequences -> values acceleration on car --> makes car go fast --> make's owner seem cool --> boosts self esteem

Consumer Reference Prices

Consumers typically maintain references prices for products. This is what in their head they think it should cost. Internal references prices are based on the consumers experience while external reference prices are supplied my a marketer to make a customer feel like he/she is getting a good deal. Both previous prices paid and prices of competing brands influence a consumer's internal reference price. Manager used to think that a discount of 15-20 percent was needed to entice consumers to purchase however more recent research has shown discounts of only .5% can get a consumer to bite. Another experiment showed simply putting "Every Day Low Price" signs randomly throughout a store increased sales by 20%.

Innovation Types

Continuous innovation includes slight changes and improvements over time. A dynamically continuous innovation involves some change in technology, although the product is used much the same way that its predecessors were used—e.g., jet vs. propeller aircraft. A discontinuous innovation involves a product that fundamentally changes the way that things are done—e.g., the fax and photocopiers. In general, discontinuous innovations are more difficult to market since greater changes are required in the way things are done, but the rewards are also often significant.

Diffusion of Innovation

Diffusion of Innovation is how new products, practices, or ideas spread among people. Usually new things are only adopted by a small group of people then spread to others later The saturation point is the maximum proportion of consumers likely to adopt a product. For example, refrigerators will be at almost 100% while video games will be significantly lower. Some cultures tend to adopt new products more quickly than others, based on several factors: Modernity: The extent to which the culture is receptive to new things. In some countries, such as Britain and Saudi Arabia, tradition is greatly valued—thus, new products often don't fare too well. The United States, in contrast, tends to value progress. Homophily: The more similar to each other that members of a culture are, the more likely an innovation is to spread—people are more likely to imitate similar than different models. The two most rapidly adopting countries in the World are the U.S. and Japan. While the U.S. interestingly scores very low, Japan scores high. Physical distance: The greater the distance between people, the less likely innovation is to spread. Opinion leadership: The more opinion leaders are valued and respected, the more likely an innovation is to spread. The style of opinion leadersmoderates this influence, however. In less innovative countries, opinion leaders tend to be more conservative, i.e., to reflect the local norms of resistance.

Intermediaries: Value added, functions, and types

Distribution is getting the product from the manufacturer to the ultimate consumer. Some firms claim that they save consumers money by selling directly and "eliminating the middleman". However, the truth is that intermediaries, such as retailers and wholesalers tend to add efficiency because they can do specialized tasks better than they consumer or the manufacturer. Distributors such as wholesalers and retailers add efficiency by: Breaking bulk - the consumer can my small quantities at a time Consolidation and Distribution - makes it so that customers don't have to go to many different stores to get all the products they desire. Wholesalers consolidate products from different manufacturers so that a large number of different products can be received in one shipment. Carrying inventory - this service reduces the temporal discrepancy between manufacturers who need to schedule production at constant levels and consumers who need certain products only at certain times. Financing - Certain small manufacturers may have difficulty waiting for payment until goods are sold to the end-customer. Wholesalers and retailers may negotiate lower prices from the manufacturer in return for quick payment. Cost savings that come from intermediaries results from specialization. Manufacturers specialize in making the products, wholesalers specialize in moving goods, and retailers specialize in selling the products

Diversion

Diversion occurs when merchandise intended for one market is bought up by a distributor that then ships it to a different market. This could occur when a manufacturer offers a promotion or discount in one particular region. Distributors would buy up that product and ship to another region where they call sell it at a lower price than is being charged through a regular channel.

Marketers and Economist: Contrasting Perspectives on Price

Economists generally assume—quite unrealistically—that consumers have perfect information about: The quality of all brands available. The price charged by each retailer for each respective brand. Economists contend that although these assumptions are unrealistic, they nevertheless yield accurate predictions. In marketing, however, it is recognized that consumers are often hit with considerable information overload and that, in practice, finding out all this information can be quite difficult and costly. This results in certain phenomena: In some cases, consumers will infer that a higher priced product is of higher quality. Consumers have imperfect memories of prices previously observed and paid. Consumers, in some cases, do not accurately compute prices. It has been found, for example, that many consumers will tend, without doing the calculations, to buy larger sized packages under the assumption that there will be a "quantity discount." In fact, per unit costs for larger packages are often higher. Economists, of course, base most of their conclusions on the idea of an equilibrium of supply and demand This idea is generally valid, but it does not explain the entirety of consumer choices and firm pricing strategies.

Geographic dispersal of customers

Electronic commerce, when value-to-bulk ratios and absolute margins are not favorable, is often not viable when customers are located conveniently close to a retail outlet. However, for some products—e.g., bee keeping equipment—customers are widely geographically dispersed and thus, a centralized distribution center may be more economically viable.

Experimentation (Primary Research Method)

Experimentation involves an attempt to determine causality. Generally the idea is either to vary the way different groups of people are treated or to vary the way one person is treated at different times. Experiments are usually cumbersome to carry out but can be used to test how people actually respond to a particular treatment rather than how they think they will respond

Product Standardization, Adaption, and Customization

Firms have several choices when marketing their products on an international level. An extreme strategy is customization, whereby the firm introduces a unique product in each country The other extreme is standardization where the company makes one global product in the belief that the same product can be sold across markets without significant modification. The benefits of standardization are that a company can achieve economies of scale and it is easier to establish a global brand that will be recognized anywhere. The downside is that products can't make up for differences in cultures and environments However in most cases firms will resort to some kind of adaptation, where a common product is modified to some extent to suit different markets. For example McDonalds changes up their menu slightly in different countries. There are mandatory adaptions for example changing the voltage on appliances for products from the US and products in Europe. Discretionary adaptions are up to the firm and are made because they are believed to make the product more appealing in that particular market. There can also be adaptions to how the product is promoted in additional to physical changes to the product

Focus Groups (Primary Research Method)

Focus groups are well suited for finding out what kinds of issues are important for consumers in a given product category. The are much more open ended than a questionnaire because the focus group leader can follow up on any comments the respondents makes Some drawbacks are the small sample sizes. Focus groups are social meaning respondents will say things that may be untrue to make themselves look good

Extent of Customization needed

If the product needs to be customized, such as an airline ticket, online processing can be helpful because the customer can do a lot of the work themselves

Extraterritoriality

In some instances, U.S. law will be applied by U.S. courts to behavior that took place entirely abroad. For example, if two Koreans firms were to conspire to fix the U.S. market for high definition television sets, these firms might under certain circumstances be sued in U.S. courts even if all planning, meetings, and other communication were done within Korea. If the Korean firms had assets in the U.S., these could be seized to pay for any damages awarded.

Individual Interviews (Primary Research Method)

Individual interviews involve in depth questions of an individual about his or her interest in or experiences with a product. The benefit is that the responses will be very in depth and detailed however this method is extremely susceptible to bias

Stages of the Product Lifecycle

Initially a product is introduced, since the product is not well known and is usually expensive, sales are limited. If the product reaches the growth phase, sales increase dramatically. More firms enter the market selling a version of said product. Next is the maturity stage where little growth is seen Finally the decline stage might be experienced because the product has been replaced by something better The product life cycle is linked to the phenomenon "diffusion of innovation" New products are adapted by people who are more innovative than others. Products are either new or existing. Products can be new to the market, new to a firm, or new to a segment.

Potential for repeat sales to the same customer

It is more cost effective to sell to existing customers than constantly trying to reach new ones. Based on knowing what the customer has bought in the past it is possible to identify other customers who have bought these same items and identify additional common purchases among these relatively similar individuals. This process is known as collaborative filtering.

Introductory Price Effects

It is very hard to raise prices after a product has been introduced at one price. An experiment in the 1950s found that laundry detergent introduced at a higher price ultimately sold more units than laundry detergent sold at a lower price at first and then raised.

Observation (Primary Research Method)

Looking at how consumers elect products may yield insights into how they make decisions and what they look for. Observation may help us determine how much time consumers spend comparing prices, or whether nutritional labels are being consulted. For example when American manufacturers observed Japanese customers they noticed that they were looking for and not finding a major brand name on the package.

Market Research as an Investment

Market research is needed to ensure that we produce what customers really want and not what we think they want. An investment in market research helps reduce the uncertainties in making marketing decisions however it does not guarantee success.

Distribution Intensity and Selectivity

Most manufacturers would prefer to have their products distributed widely, meaning in as many stores as possible. Especially for convenience products where the customer has little motivation to go to a less less convenient retail outlet. However for most manufacturers, wide distribution is not realistically obtainable. Most smaller convenience stores have to carefully select only a few brands. In some cases manufacturers prefer to have their products selectively or exclusively distributed.

Perceptual Maps and Multidimensional Scaling

Multidimensional scaling is a way of identifying consumers percpetions of a product on two or more dimensions. This can be helpful when trying to reposition a brand. The a priori approach is when market researchers identify dimensions of interest and then ask consumers about their perceptions on each dimension of each brand. This is useful when the market researcher knows which dimensions are of interest and the customer's perception on each dimension i relatively clear. The similarity rating approach is used to have respondents compare the similarity of two products such as 3 musketeers and snickers. Then using an algorithm a computer then identifies positions of each brand on a map of a given number of dimensions. This is more useful when market researchers don't know which particular dimensions of a product are most relevant

Online Research (Primary Research Method)

Online research provides new opportunities for market research. The surveys can be easier to use than a traditional pencil and paper survey. However respondents often pay less attention when doing an online survey. Other forms of market research online are search data and page visit logs

Retail Trends

Over the past decade there as been considerable growth in both low price, low service models (walmart) and high price, high service models (nordstrum) and less growth in any category between these two. For a period of time during the mid 2000s financial crises, stores like walmart actually saw increased sales as customers switched over to try and save money. However it seems that all the customers that can switch over for this reason have already done so and Walmart has recently felt the effects of a weak economy. "Category Killer" chains such as best buy and staples have expanded rapidly over the past 2 decades. The reason that they do so well is their high sales volume allows them to make large orders and thereby gives them bargaining power with the manufacturers

Positioning

Positioning is the implementation of the targeting strategy. It is how you promote yourself so that you appeal to the selected segments you are trying to target. Repositioning is attempt to change consumer perceptions of a brand usually because that brand has become less attractive. It is very hard to do and it often fails

Price Discrimination

Price discrimination is used to get each customer group to pay the maximum that it is willing pay for a certain product Explicit Price Discrimination involves a requirement that a customer must meet a special condition - such as being a student or a senior citizen to get the lower price. Implicit price discrimination does not expressly impose an eligibility requirement but makes it less attractive for certain customers to go for the lower prices alternative. Airlines, for example, often impose advance purchase requirements on airfares. This is often fine for leisure travelers who know well in advance when they will travel. It is, however, not attractive for business customers who may need to travel to see a client on short notice.

Pricing Strategies

Pricing strategies can be categorized based on several different variables. One variable relates to the consistency of prices. Some retailers offer everyday low pricing where prices are generally lower but there are no real sales. The other model has slightly higher prices but has sales more often. These high-low and everyday low strategies are intended to take advantage of differen price elasticities across people. Another variable to consider is introductory price. Skimming is when a product is first offered at a high price and then the price comes downs. Cost-plus pricing is inappropriate

Primary vs. Secondary Research Methods

Secondary research involves using information that others have already put together. Primary research is research that you design and conduct yourself. Research helps us reduce risks associated with a new product but it cannot take the risk away entirely.

Survey (Primary Research Method)

Surveys are useful for getting a great deal of specific information. Questions can be open ended or close ended Open ended questions can be useful because respondents are not limited to a list of options but often respondents skip these questions because they are more challenging In order for surveys to be useful sample sizes over 100 are often required. And researches need to be careful of bias It is better to employ a continuum rather than a binary scale. Questions to be avoided include difficult to answer questions, two in one questions, leading questions, non exhaustive, and non mutually exclusive questions

Issues of the Product Life Cycle

The Product Life Cycle (PLC) impacts a number of strategic issues. As a market matures, firms will generally face more competition. Since the growth of the market is limited, they cannot grow much unless they do so by taking market share away from competitors. Therefore, firms will find it more difficult to reinvest profits in growth. There will generally be a strong downward pressure on prices. In addition, competition is likely to grow in terms or features and quality. The product category will also likely compete with an increasing number of other product categories to satisfy similar customer needs. At later phases of the PLC, the firm may need to modify its market strategy. For example, facing a saturated market for baking soda in its traditional use, Arm & Hammer launched a major campaign to get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used before vacuuming were also created.

Legal Issues in Pricing

The US maintains relatively stringent anti trust laws. The following are some anti trust issues relevant to pricing Minimum prices: Is is generally illegal to sell products below your cost of production (For firms holding a large market share, these costs, in accounting terms, must be "fully absorbed"—that is, overhead and development costs must be apportioned among products sold). In selling to entities that compete against each other, price discrimination or volume discounts are generally only legal to the extent that a manufacturer can prove actual cost savings associated with serve a large account. Anti-competitive pricing, for example firms colluding to fix prices is outright illegal in the United States. Price maintenance refers to the practice of encouraging a certain minimum resale price of products. A supreme court ruling in 2007 established that it is not automatically illegal for manufacturers to require a minimum price the item will be sold at as a condition of the sale. However courts can decided that certain agreements are illegal. Tying: it is generally illegal to require a customer to buy a less desired product in order to buy a more desired one.

The Associative Network of Knowledge

The brain uses associations between different "nodes" (pieces of information) to activate related others. Each node potentially triggers others. From a brand management perspective it is useful to have ones product tied to as many positive nodes as possible. This allows for more opportunities for the product memory to be triggered

Direct Mail and the "Merge-Purge" Process

The direct marketing industry has developed very sophisticated targeting methods. These are often useful when there is a need to reach buyers of specialty products through catalogs. Today, it is possible to buy lists of consumers based on a variety of characteristics. Some of these lists may be based on: Magazine subscriptions Purchases from other online merchants Motor vehicle and real estate titles Ownership of products based on warranty registration Membership in associations Government licensure (e.g., veterinarians, dentists, attorneys) Yellow page listings Medical conditions People who have recently moved Any one individual source is unlikely to contain all the names of potential buyers for a given criterion. Therefore, direct mailers will often buy numerous different lists (the "merge" process). These lists, however, overlap a great deal. It is likely, for example, that many surfing enthusiasts will subscribe to several magazines, be members of at least one organization, and shop from one or more merchants. Therefore, there will be a number of duplicates. In the "purge" process, these duplicates are removed. This, however, is not as easy as it may sound since the way that names (e.g., John Jones and J. E. Jones) and addresses(e.g., 123 Main Street #45; 123-45 Main Street; 123 Main St., Apt 45) are written may differ between lists. Therefore, lists are first standardized to a chosen format. In addition, given that many names are often misspelled, phonetic comparisons are often used.

The Promotional Signal

The promotion signal refers to a phenomenon whereby some customers will tend to look only at whether something on sale or not—not by how much the sale was. These consumers tend not to adjust their behavior much based on whether this is a "legitimate" sale where one saves at least, say, 15% as opposed to 2%. This is an example of the use of a heuristic—or simplified decision rule—to favor products on sale with the assumption that at least on the average, these will good deals. Other customers have been found to scrutinize the magnitude of the sale more carefully.

Country of Origin Effects

Traditionally, a products country of origin has had a considerable impact on how the product is percieved by customers. Some countries were known for being good at producing certain products Today, consumers are increasingly aware that products are often not made in the country associated with the brand. For example many Japanese cars are often made in the United States. The country of origin effect is considerably less today than it has been in the past.

Compensatory vs. non compensatory decision strategies

compensatory decisions involve trade offs. A consumer might buy a car that has good gas milage and a low price but sacrifice having fast acceleration. non-compensatory decision means that there is one certain attribute the consumer will not compromise on. For example a parent might reject all drinks with artificial sweetener regardless of taste, calories, or price. It is a non-negotiable attribute

Reality of online economics and competition

costs of handling online orders is higher than that of distributing through traditional stores. online merchants compete against other online merchants. By the forces of supply and demand online prices will be driven down so that the profit from selling online will be no greater than that from traditional retailing. competition will be greater for products that have large markets than for those where markets are smaller and more specialized. For example Amazon must deeply discount best seller books because everyone wants them and a lot of places are selling them. While they could charge more for more specialized books online merchants could run out of cash before their business becomes profitable

Segmentation

segmentation involves finding out what kinds of consumers with different needs exists. In general, it holds true that "You can't be all things to all people," and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable. There are 3 approaches to marketing. In the undifferentiated strategy, all consumers are treated as the same, with firms not making an specific efforts to satisfy a particular group. This may work when the product is a standard one where one competitor really can't offer much that another one can't. Another strategy is the concentrated strategy. In this strategy a firm chooses to focus on certain segments and leave other segments to competitors. For example SouthWest air focuses on price sensitive customers and doesn't try to attract customers looking for a more luxury experience. A differentiated strategy is when firms have different options for different segments of customers. For example offering a higher priced option with more benefits and a lower priced option There are many variables that can be used for segmentation and so firms must choose a few that are the most relevant to their product in order to try and split up the market. Variables for segmentation include: Demographics, Benefit Desired, Behaviors, Usage occasion, Lifestyle and Values.

Firm reputation/credibility

since e commerce involves buying a product without inspecting it consumers need to have a certain confidence in the firm. Firms with stronger reputations will be more likely to receive orders.

Willingness of customers to pay for convenience

some customers would be willing to pay for the convenience of having a product delivered to their door. For example delivering high bulk low values is usually not efficient but some customers are willing to pay for it

Synergy with traditional retail store operations. "bricks and clicks"

well know retail chains are going to have more confidence from customers in online ordering than less known vendors. Also having online as well as retail operations makes exchanges and returns easier for the customer. Combined higher sales for both online and in store give retailer more bargaining power with suppliers. This could allow the retailer to lower prices and lead to even higher sales volumes