Marketing Midterm 1

General public.

A company needs to be concerned about the general public's attitude toward its products and activities. The public's image of the company affects its buying behavior.

Citizen-action publics.

A company's marketing decisions may be questioned by consumer organizations, environmental groups, minority groups, and others. Its public relations department can help it stay in touch with consumer and citizen groups.

Marketing management Orientation

wants to design strategies that will engage target customers and build profitable relationships with them. But what philosophy should guide these marketing strategies? What weight should be given to the interests of customers, the organization, and society? Very often, these interests conflict. There are five alternative concepts under which organizations design and carry out their marketing strategies: the production, product, selling, marketing, and societal marketing concepts.

In the United States, the Environmental Protection Agency (EPA)

was created in 1970 to create and enforce pollution standards and conduct pollution research. In the future, companies doing business in the United States can expect continued strong controls from government and pressure groups. Instead of opposing regulation, marketers should help develop solutions to the materials and energy problems facing the world.

selling concept

which holds that consumers will not buy enough of the firm's products unless it undertakes a large-scale selling and promotion effort. The selling concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such as life insurance or blood donations. These industries must be good at tracking down prospects and selling them on a product's benefits.

partner relationship management

In addition to being good at customer relationship management, marketers must also be good at partner relationship management—working closely with others inside and outside the company to jointly engage and bring more value to customers.

Generation Z

, young people born after 2000 (although many analysts include people born after 1995 in this group). The approximately 82 million Gen Zers make up the important kids, tweens, and teens markets.

Secondary beliefs and values are more open to change

. Believing in marriage is a core belief; believing that people should get married early in life is a secondary belief. Marketers have some chance of changing secondary values but little chance of changing core values. For example, family-planning marketers could argue more effectively that people should get married later than not get married at all.

The Marketing Process

1. Understand the marketplace and customer needs and wants 2. Design a customer-driven marketing strategy 3. Construct an integrated marketing program that delivers superior value 4. Build profitable relationships and create customer delight 5. Capture value from customers to create profits and customer equity

generation x

1965 and 1976. Author Douglas Coupland calls them Generation X because they lie in the shadow of the boomers.

marketplace concepts.

: (1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value and satisfaction; (4) exchanges and relationships; and (5) markets

Marketing Information System

A marketing information system (MIS) consists of people and procedures dedicated to assessing information needs, developing the needed information, and helping decision makers use the information to generate and validate actionable customer and market insights.

A marketing strategy

A marketing strategy consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels

sample

A sample is a segment of the population selected for marketing research to represent the population as a whole. Ideally, the sample should be representative so that the researcher can make accurate estimates of the thoughts and behaviors of the larger population.

Market targeting

After a company has defined its market segments, it can enter one or many of these segments. Market targeting involves evaluating each market segment's attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.

marketing mix

After determining its overall marketing strategy, the company is ready to begin planning the details of the marketing mix, one of the major concepts in modern marketing. The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to engage consumers and deliver customer value. The many possibilities can be collected into four groups of variables—the four Ps.

shortages of raw materials.

Air and water may seem to be infinite resources, but some groups see long-run dangers. Air pollution chokes many of the world's large cities, and water shortages are already a big problem in some parts of the United States and the world. By 2030, more than one in three people in the world will not have enough water to drink.37 Renewable resources, such as forests and food, also have to be used wisely. Nonrenewable resources, such as oil, coal, and various minerals, pose a serious problem. Firms making products that require these scarce resources face large cost increases even if the materials remain available.

marketing control

Because many surprises occur during the implementation of marketing strategies and plans, marketers must practice constant marketing control—evaluating results and taking corrective action to ensure that the objectives are attained. Marketing control involves four steps. Management first sets specific marketing goals. It then measures its performance in the marketplace and evaluates the causes of any differences between expected and actual performance. Finally, management takes corrective action to close the gaps between goals and performance.

differentiation

But if the company promises greater value, it must then deliver that greater value. Thus, effective positioning begins with differentiation—actually differentiating the company's market offering to create superior customer value

Market Offerings

Consumers' needs and wants are fulfilled through market offerings —some combination of products, services, information, or experiences offered to a market to satisfy a need or a want. Market offerings are not limited to physical products. They also include services—activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything. Examples include banking, airline, hotel, retailing, and home repair services. other entities, such as persons, places, organizations, information, and ideas

internal value chain.

Each company department can be thought of as a link in the company's internal value chain. That is, each department carries out value-creating activities to design, produce, market, deliver, and support the firm's products. The firm's success depends not only on how well each department performs its work but also on how well the various departments coordinate their activities.

strategic planning

Each company must find the game plan for long-run survival and growth that makes the most sense given its specific situation, opportunities, objectives, and resources. This is the focus of strategic planning—the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities.

Big Data

Far from lacking information, most marketing managers are overloaded with data and often overwhelmed by it. This problem is summed up in the concept of big data. The term big data refers to the huge and complex data sets generated by today's sophisticated information generation, collection, storage, and analysis technologies

Marketing plays a key role in the company's strategic planning in several ways.

First, marketing provides a guiding philosophy—the marketing concept—that suggests the company strategy should revolve around creating customer value and building profitable relationships with important consumer groups. Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and assessing the firm's potential to take advantage of them. Finally, within individual business units, marketing designs strategies for reaching the unit's objectives. Once the unit's objectives are set, marketing's task is to help carry them out profitably.

business portfolio

Guided by the company's mission statement and objectives, management now must plan its business portfolio—the collection of businesses and products that make up the company. The best business portfolio is the one that best fits the company's strengths and weaknesses to opportunities in the environment.

A second environmental trend is increased pollution.

Industry will almost always damage the quality of the natural environment. Consider the disposal of chemical and nuclear wastes; the dangerous mercury levels in the ocean; the quantity of chemical pollutants in the soil and food supply; and the littering of the environment with nonbiodegradable bottles, plastics, and other packaging materials.

customer lifetime value

Losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage.

Government publics.

Management must take government developments into account. Marketers must often consult the company's lawyers on issues of product safety, truth in advertising, and other matters.

SBU

Management's first step is to identify the key businesses that make up the company, called strategic business units (SBUs). An SBU can be a company division, a product line within a division, or sometimes a single product or brand.

Internal databases

Many companies build extensive internal databases, collections of consumer and market information obtained from data sources within the company's network. Information in an internal database can come from many sources. The marketing department furnishes information on customer characteristics, in-store and online sales transactions, and web and social media site visits. The customer service department keeps records of customer satisfaction or service problems. The accounting department provides detailed records of sales, costs, and cash flows. Operations reports on production, shipments, and inventories. The sales force reports on reseller reactions and competitor activities, and marketing channel partners provide data on sales transactions. Harnessing such information can provide powerful customer insights and competitive advantage.

Market Myopia

Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products. These sellers suffer from marketing myopia

marketing return on investment (or marketing ROI).

Marketing ROI is the net return from a marketing investment divided by the costs of the marketing investment. It measures the profits generated by investments in marketing activities.

product/market expansion grid

Marketing needs to identify, evaluate, and select market opportunities and lay down strategies for capturing them. One useful device for identifying growth opportunities is the product/market expansion grid

customer value delivery network

More companies today are partnering with other members of the supply chain—suppliers, distributors, and, ultimately, customers—to improve the performance of the customer value delivery network

Other companies take a proactive stance toward the marketing environment.

Rather than assuming that strategic options are bounded by the current environment, these firms develop strategies to change the environment. Companies and their products often create and shape new industries and their structures, products such as Ford's Model T car, Apple's iPod and iPhone, Google's search engine, and Amazon's online marketplace.

Problems with Matrix Approaches

The BCG and other formal methods revolutionized strategic planning. However, such centralized approaches have limitations: They can be difficult, time consuming, and costly to implement. Management may find it difficult to define SBUs and measure market share and growth. In addition, these approaches focus on classifying current businesses but provide little advice for future planning.

A third trend is increased government intervention in natural resource management.

The governments of different countries vary in their concern and efforts to promote a clean environment. Some, such as the German government, vigorously pursue environmental quality. Others, especially many poorer nations, do little about pollution, largely because they lack the needed funds or political will.

business portfolio analysis

The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses that make up the company. The company will want to put strong resources into its more profitable businesses and phase down or drop its weaker ones.

Government markets

consist of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them.

customer-engagement marketing

The new marketing is customer-engagement marketing—fostering direct and continuous customer involvement in shaping brand conversations, brand experiences, and brand community. Customer-engagement marketing goes beyond just selling a brand to consumers. Its goal is to make the brand a meaningful part of consumers' conversations and lives.

baby boomers

The post-World War II baby boom produced 78 million baby boomers, who were born between 1946 and 1964.

market segmentation.

The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes is called market segmentation.

Customer insight

The real value of marketing information lies in how it is used—in the customer insights that it provides. Based on such thinking, companies ranging from PepsiCo, Starbucks, and McDonald's to Google and GEICO have restructured their marketing information and research functions. They have created customer insights teams, whose job it is to develop actionable insights from marketing information and work strategically with marketing decision makers to apply those insights.

Consumer markets.

consist of individuals and households that buy goods and services for personal consumption

Media publics.

This group carries news, features, editorial opinions, and other content. It includes television stations, newspapers, magazines, and blogs and other social media.

Local publics.

This group includes local community residents and organizations. Large companies usually work to become responsible members of the local communities in which they operate.

Internal publics.

This group includes workers, managers, volunteers, and the board of directors. Large companies use newsletters and other means to inform and motivate their internal publics. When employees feel good about the companies they work for, this positive attitude spills over to the external publics.

Financial publics.

This group influences the company's ability to obtain funds. Banks, investment analysts, and stockholders are the major financial publics.

Concern for the natural environment has spawned an environmental sustainability movement.

Today, enlightened companies go beyond what government regulations dictate. They are developing strategies and practices that create a world economy that the planet can support indefinitely. Environmental sustainability means meeting present needs without compromising the ability of future generations to meet their needs.

growth-share matrix

Using the now-classic Boston Consulting Group (BCG) approach, a company classifies all its SBUs according to the growth-share matrix, as shown in Figure 2.2. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. The growth-share matrix defines four types of SBUs: Stars. Stars are high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows. Cash cows. Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment. Question marks. Question marks are low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out. Dogs. Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash.

demands

When backed by buying power, wants become demands. Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction.

The major marketing mix tools

are classified into four broad groups, called the four Ps of marketing: product, price, place, and promotion.

Resellers .

are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers that buy and resell merchandise.

needs

are states of felt deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression.

Wants

are the form human needs take as they are shaped by culture and individual personality. An American needs food but wants a Big Mac, fries, and a soft drink. A person in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped by one's society and are described in terms of objects that will satisfy those needs.

Marketing services agencies

are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets.

Marketing Management

as the art and science of choosing target markets and building profitable relationships with them. The marketing manager's aim is to engage, keep, and grow target customers by creating, delivering, and communicating superior customer value. Once a company fully understands its consumers and the marketplace, it must decide which customers it will serve and how it will bring them value.

Marketing

as the process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return.

Business markets

buy goods and services for further processing or use in their production processes, whereas

reseller markets

buy goods and services to resell at a profit.

international markets

consist of these buyers in other countries, including consumers, producers, resellers, and governments. Each market type has special characteristics that call for careful study by the seller.

A market segment

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

The economic environment

consists of economic factors that affect consumer purchasing power and spending patterns. Economic factors can have a dramatic effect on consumer spending and buying behavior

The cultural environment

consists of institutions and other forces that affect a society's basic values, perceptions, preferences, and behaviors. People grow up in a particular society that shapes their basic beliefs and values. They absorb a worldview that defines their relationships with others.

.The political environment

consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society.

The microenvironment

consists of the actors close to the company that affect its ability to engage and serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics.

The macroenvironment

consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces. We look first at the company's microenvironment.

Customer satisfaction

depends on the product's perceived performance relative to a buyer's expectations. If the product's performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted.

Marketing intermediaries

help the company promote, sell, and distribute its products to final buyers. They include resellers, physical distribution firms, marketing services agencies, and financial intermediaries.

Physical distribution firms

help the company stock and move goods from their points of origin to their destinations.

The marketing concept

holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customer focus and value are the paths to sales and profits. Instead of a product-centered make-and-sell philosophy, the marketing concept is a customer-centered sense-and-respond philosophy. The job is not to find the right customers for your product but to find the right products for your customers.

The production concept

holds that consumers will favor products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. This concept is one of the oldest orientations that guides sellers.

Financial intermediaries

include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods

Place

includes company activities that make the product available to target consumers. Ford partners with a large body of independently owned dealerships that sell the company's many different models. Ford selects its dealers carefully and strongly supports them. The dealers keep an inventory of Ford automobiles, demonstrate them to potential buyers, negotiate prices, close sales, and service the cars after the sale.

Operating control

involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its annual plan. It also involves determining the profitability of different products, territories, markets, and channels.

Observational research

involves gathering primary data by observing relevant people, actions, and situationsi

Strategic control

involves looking at whether the company's basic strategies are well matched to its opportunities. Marketing strategies and programs can quickly become outdated, and each company should periodically reassess its overall approach to the marketplace.

The natural environment

involves the physical environment and the natural resources that are needed as inputs by marketers or that are affected by marketing activities

Business portfolio planning

involves two steps. First, the company must analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing.

Digital and social media marketing

involves using digital marketing tools such as websites, social media, mobile ads and apps, online video, email, blogs, and other digital platforms to engage consumers anywhere, anytime via their computers, smartphones, tablets, internet-ready TVs, and other digital devices.

A mission statement

is a statement of the organization's purpose—what it wants to accomplish in the larger environment. A clear mission statement acts as an "invisible hand" that guides people in the organization.

A public

is any group that has an actual or potential interest in or impact on an organization's ability to achieve its objectives. We can identify seven types of publics:

Positioning

is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Marketers plan positions that distinguish their products from competing brands and give them the greatest advantage in their target markets.

Exchange

is the act of obtaining a desired object from someone by offering something in return. In the broadest sense, the marketer tries to bring about a response to some market offering

Price

is the amount of money customers must pay to obtain the product. For example, Ford calculates suggested retail prices that its dealers might charge for each Escape. But Ford dealers rarely charge the full sticker price. Instead, they negotiate the price with each customer, offering discounts, trade-in allowances, and credit terms. These actions adjust prices for the current competitive and economic situations and bring them into line with the buyer's perception of the car's value

acceptability

is the extent to which the product exceeds customer expectations;i

customer relationship management

is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, engaging, and growing customers.

A product's position

is the place it occupies relative to competitors' products in consumers' minds. Marketers want to develop unique market positions for their products. If a product is perceived to be exactly like others on the market, consumers would have no reason to buy it.

. Marketing implementation

is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives. Whereas marketing planning addresses the what and why of marketing activities, implementation addresses the who, where, when, and how.

market

is the set of actual and potential buyers of a product or service. These buyers share a particular need or want that can be satisfied through exchange relationship

Demography

is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. The demographic environment is of major interest to marketers because it involves people, and people make up markets. The world population is growing at an explosive rate. It now exceeds 7.3 billion people and is expected to grow to more than 8 billion by the year 2030.5 The world's large and highly diverse population poses both opportunities and challenges.

Marketing research

is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. Companies use marketing research in a wide variety of situations. For example, marketing research gives marketers insights into customer motivations, purchase behavior, and satisfaction. It can help them to assess market potential and market share or measure the effectiveness of pricing, product, distribution, and promotion activities.

Competitive marketing intelligence

is the systematic monitoring, collection, and analysis of publicly available information about consumers, competitors, and developments in the marketplace.

Customer equity.

is the total combined customer lifetime values of all of the company's current and potential customers. As such, it's a measure of the future value of the company's customer base. Clearly, the more loyal the firm's profitable customers, the higher its customer equity. Customer equity may be a better measure of a firm's performance than current sales or market share

The purpose of strategic planning

is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. For this reason, most standard portfolio analysis methods evaluate SBUs on two important dimensions: the attractiveness of the SBU's market or industry and the strength of the SBU's position in that market or industry.

Product

means the goods-and-services combination the company offers to the target market. Thus, a Ford Escape consists of nuts and bolts, spark plugs, pistons, headlights, and thousands of other parts. Ford offers several Escape models and dozens of optional features. The car comes fully serviced and with a comprehensive warranty that is as much a part of the product as the tailpipe.

millenials

millennials (also called Generation Y or the echo boomers). Born between 1977 and 2000, these children of the baby boomers number 83 million or more, dwarfing the Gen Xers and becoming larger even than the baby boomer segment.

Marketing analytics consists

of the analysis tools, technologies, and processes by which marketers dig out meaningful patterns in big data to gain customer insights and gauge marketing performance

online marketing research: internet and mobile surveys,

online focus groups, consumer tracking, experiments, and online panels and brand communities.

The societal marketing concept .

questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare. Is a firm that satisfies the immediate needs and wants of target markets always doing what's best for its consumers in the long run? The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer's and society's well-being. It calls for sustainable marketing, socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs

Promotion

refers to activities that communicate the merits of the product and persuade target customers to buy it. Ford spends nearly $2.5 billion each year on U.S. advertising to tell consumers about the company and its many products.12 Dealership salespeople assist potential buyers and persuade them that Ford is the best car for them. Ford and its dealers offer special promotions—sales, cash rebates, and low financing rates—as added purchase incentives. And Ford's Facebook, Twitter, YouTube, Instagram, and other social media platforms engage consumers with the brand and with other brand fans.

awareness

the extent to which customers are informed about the product's features, persuaded to try it, and reminded to repurchase.

affordability

the extent to which customers are willing and able to pay the product's price

accessibility

the extent to which customers can readily acquire the product;

marketing strategy

the marketing logic by which the company hopes to create this customer value and achieve these profitable relationships. The company decides which customers it will serve (segmentation and targeting) and how (differentiation and positioning).

Survey research,

the most widely used method for primary data collection, is the approach best suited for gathering descriptive information. A company that wants to know about people's knowledge, attitudes, preferences, or buying behavior can often find out by asking them directly.

customer relationship management (CRM)

to manage detailed information about individual customers and carefully manage customer touch points to maximize customer loyalty.

market development

—identifying and developing new markets for its current products

market penetration

—making more sales in its current product lines and markets. It can spur growth through marketing mix improvements—adjustments to its product design, advertising, pricing, and distribution efforts

marketing dashboards

—meaningful sets of marketing performance measures in a single display used to monitor strategic marketing performance.

product development

—offering modified or new products to current markets.

public policy to guide commerce

—sets of laws and regulations that limit business for the good of society as a whole. Almost every marketing activity is subject to a wide range of laws and regulation

diversification

—starting up or buying businesses outside of its current products and markets.

customer-perceived value

—the customer's evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Importantly, customers often do not judge values and costs "accurately" or "objectively." They act on perceived value.

share of customer

—the share they get of the customer's purchasing in their product categories. Thus, banks want to increase "share of wallet." Supermarkets and restaurants want to get more "share of stomach." Car companies want to increase "share of garage," and airlines want greater "share of travel."