Marketing Principles Midterm #1
Application of Maslow's Hierarchy of Needs
"Good marketers add value to their products by nudging people up the needs hierarchy and offering information on as many of the pyramid needs as they can."
Marketing Evolution in the US: Before 1860s
"simple trade era" - people produced what they consumed or purchased it in local general store
Growth Rate Formula
(Newer number - older number) / Older Number
Strategic Market Planning Process
(planning phase) Step 1: Define business missions & objectives; Step 2: Conduct a situation analysis (SWOT); (implementation phase and marketing strategy) Step 3: Identify and evaluate opportunities (STP); Step 4: Implement marketing mix; (control phase) Step 5: Evaluate performance using marketing metrics (planning is usually an iterative process - not necessarily linear)
B2C Elements of Value (Bain's Model 2018)
(reminiscent of Maslow's Hierarchy of Needs) states that the elements of value fall into four categories: functional (saves time, simplifies, makes money, reduces risk, organizes, integrates, connects, reduces effort, avoids hassles, reduces cost, quality, variety, sensory appeal, informs), emotional (reduces anxiety, rewards me, nostalgia, design/aesthetics, badge value, wellness, therapeutic value, fun/entertainment, attractiveness, provides access), life-changing (provides hope, self-actualization, motivation, heirloom, affiliation and belonging), and social impact (self-transcendence)
The 5 Core Aspects of Marketing
- Affects various stakeholders - Is about satisfying customers needs and wants - Entails an exchange - Requires decisions about the 4 P's - Can be performed by individuals and organizations
Four Ways to Create Value
- Build long-term relationships with customers - Gather and analyze customer and competitor information - Connect with customers using social and mobile media - Balance benefits and costs
4 key tools to conduct a situation analysis
- Environmental Scan (immediate environment (company capabilities, competitors, corporate partners, and physical environment) + macroenvironment (CDSTEP --> Culture, Demographics, Social trends, Technological advances, Economic situation, Political/legal environment) = marketing environment - SWOT Analysis - BCG Matrix - Ansoff matrix
Typical Strengths
- Financial performance = strong sales, profitability, cash flow - Concentration of source of sales, profit, product, customer, business unit, geography = wide variety of sources for sales and profit - Brand Awareness and favorability = strong brand awareness and favorability - Innovation = proven track record for developing and launching new products - Distribution channels -= positive relationships with suppliers, distributors, and retailers - Product Quality = few issues with product quality
Typical Weaknesses
- Financial performance = weak sales, profitability, cash flow - Concentration of source of sales, profit, product, customer, business unit, geography = high concentration of sales on limited number of sources - Brand Awareness and favorability = weak brand awareness and favorability - Innovation = consistent misses in new product development - Distribution channels -= weak relationships with suppliers, distributors, and retailers - Product Quality = many issues with product quality
Firms can reduce the risk of buyer's remorse by...
- Frequent communication about status of delivery - Robust return policies and return approaches - Thank-you letters - Congratulation letters - Tags on garments - Online product FAQs and support - Brand communities
Generational Cohorts
- Generation Z (born 1997 - 2012) - Millennials (born 1981 - 1996) - Generation X (born 1965 - 1980) - Boomers (born 1946 - 1964) - Silent (born 1928 - 1945)
Typical Threats
- Growth in existing industries and markets = contraction - New Markets = N/A - New products = N/A - Costs from suppliers and local labor markets = increasing costs - Competitive intensity, including disruptive tech and substitutions = new competitors (including disruptive tech and substitutions) - Customer consolidation = customers consolidating - New laws, trade agreements = unfavorable
Typical Opportunities
- Growth in existing industries and markets = strong growth - New Markets = potential new markets appear promising - New products = new products in development pipeline or within acquisition targets appear promising - Costs from suppliers and local labor markets = decreasing costs - Competitive intensity, including disruptive tech and substitutions = competitors leaving industry - Customer consolidation = N/A - New laws, trade agreements = favorable
Marketer's Top Challenges
- Ineffective use of tools and technologies - Measuring marketing ROI/attribution - Balancing personalization with customer comfort levels - Building/retaining trust with customers - Resistance to new marketing strategies/tactics
Marketing Trends in 2023
- Influencer marketing will evolve into a common marketing tactic - Video marketers will keep content short - Social media will become a customer service tool - More businesses will leverage SEO to concur search traffic - More companies will prioritize social responsibility - Experiential marketing will make a comeback - Virtual reality and augmented reality will experience slow adoption in market sphere - More brands will test out native ads
How to Market to Generation Z
- Make the message quick, to the point, and in their language - Social media in important, but it differs from Millennials' usage - Authentic experiences and two-way conversations are a must - Humanize your brand - They want realistic and relatable - Let them make it their own - Quality matters - Show you care, too - Video content and cord-cutting is big
The Ansoff Matrix
- Market penetration (new stores, price drop, more promotion) = top left corner (existing products and existing markets) and the least risky - Product development (R&D investment for new products, acquire competitor) = top right corner (new products and existing markets) and relatively riskier - Market development (new domestic/foreign market, new customer segment) = bottom left corner (existing products and new markets) and relatively riskier - Diversification (related, unrelated) = bottom right corner (new products and new markets) and the riskiest
Types of Reference Groups
- Membership reference group (people you know) - schools, friends, clubs, associations religious organizations - Aspirational reference group (people we don't know but admire) - celebrities, influencers - Avoidance group (people you don't want to become like)
Pourri's Marketing Decisions
- Product = which product categories to expand into = home air and fabric odor, shoe and foot odor, underarm deodorant; which new product names to adopt (and whether they should be linked to the original name) = Home-Pourri, Sole-Pourri, Pit-Pourri, Pot-Pourri, Pet-Pourri, Car-Pourri; which new company name to adopt = Pourri; which new packaging to adopt = bottle shapes different, but "logo design and art style" consistent - Place = where to sell the new products = national retailers (Target, Walmart, Bed Bath & Beyond) - Promotion = where to promote the new products = article doesn't speak to new products, but mentioned history of viral YouTube ads - Marketing Research = whether to solicit customer feedback about the proposed changes; which tool(s) to use to solicit customer feedback = surveys
Factors influencing the Consumer Decision Process
- Psychological: perception, motivation, lifestyle, learning, attitude - Social: family, reference group, culture - Situational: purchase situation, shopping situation, temporal state - Marketing mix: product, price, place, promotion
Situational Factors
- Purchase Situation: customers may be predisposed to purchase certain products, but the situation may change approach (purchase for friend v.s. self) - Shopping Situation: in-store environment while shopping (store atmosphere, crowding, in-store demos, promotions, point-of-purchase displays) - Temporal State: state of mind while in purchase situation (bd mood from traffic ticket on way to store, hungry while grocery shopping, experiencing flu symptoms)
Firms can increase the likelihood of customer satisfaction by...
- Setting realistic expectations about product and delivery cycle time - Demonstrating correct use - Providing satisfaction guarantee - Encouraging customer feedback
BCG Matrix
- Stars = top left corner (high relative market share and high market growth rate) --> invest - Question marks = top right corner top left corner (low relative market share and high market growth rate) --> invest or discard - Cash cows = bottom left corner (high relative market share and low market growth rate) --> milk for cash to reinvest - Dogs = bottom right corner (low relative market share and low market growth rate) --> liquidate, divest, or reposition
B2B Buying Process
1. Need Recognition (develop initial business case) 2. Product Specification (agree as organization on what's wanted) 3. RFP Process (generate proposals from suppliers) 4. Proposal Analysis and Supplier Selection (Evaluate proposals, select finalist) 5. Order Specification (negotiate final agreement) 6. Vendor Performance Assessment (implement solution, evaluate performance)
The Consumer Decision Process (B2C)
1. Need Recognition (functional vs psychological need; high or low involvement decision) 2. Information Search (focus; perceived benefits and costs; locus of control; risks) 3. Alternative Evaluation (attribute set; evaluation criteria; consumer decision rules) 4. Purchase & Consumption (conversion; abandonment) 5. Post-purchase (satisfaction; dissonance; loyalty; negative word of mouth)
Marketing Evolution in the US: 1950s to 1990s (World War II)
Market-Oriented - return of consumer demand as soldiers returned home; firms had more sophisticated manufacturing and research capabilities; rise of corporate marketing departments with marketing academics; "the customer is king"
Market Share Formula
Measure (revenue) for company / Measure (revenue) for entire industry
Relative Market Share Formula
Measure (revenue) for company / Measure (revenue) for largest company in industry
Marketing Evolution in the US: 1860s to 1920s (Civil War and Second Industrial Revolution)
Production-Oriented - production more efficient and distribution more widespread; offerings standardized with limited focus on individual customer preferences; "a good product will sell itself;" "customers can have any color T-shirt they want, so long as it's blue"
Marketing Evolution in the US: 1920s to 1950s (WWI and Great Depression)
Sales-Oriented - consumers couldn't afford to purchase products; excess production capacity led to excess inventory; firms stepped up advertising and personal selling
SWOT Analysis
Strengths = internal origin + helpful Weaknesses = internal origin + harmful Opportunities = external origin + helpful Threats = external origin + harmful
How does the BCG Matrix connect to the other situation analyses?
Through company capabilities in the environmental scan
How does the SWOT Analysis connect to the other situation analyses?
Through the entire environmental scan (internal and external)
How does the Ansoff Matrix connect to the other situation analyses?
Through the opportunities aspect of the SWOT Analysis
Capacity Utilization Formula
United produced / Total capacity
Customer Value
Value = Benefits - Costs (customers generally attempt to maximize value: they want the greatest benefitfrom the lowest possible cost)
Marketing Evolution in the US: 1990s to Present (rise of new tech enabling customer interaction and tracking + prevalence of digital marketing)
Value-Based Marketing - relational orientation: long-term relationships; Customer Relationship Management (CRM) systems: data capture, marketing analytics and data privacy; value co-creation; broader, societal focus
Mission Statement
a brief description of what a firm exists to do: "What business are we in?"
Competitive Advantage
a firm is said to have competitive advantage when it generates larger profits than its rivals in its industry
Marketing Strategy
a firm's target market (to whom will you market your product?) + a related marketing mix (how will you market it to them?) + sustainable competitive advantage (what enables you to generate larger profits)
Sports-washing
a term used to describe the practice of individuals, groups, corporations, or governments using sports to improve reputations tarnished by wrongdoing
Compensatory Decision Rules
all determinant attributes have some influence on decision: "trade off" between good and bad attributes - good compensates for bad (think weighted total score)
Evaluative Criteria
all features and benefits that a consumer considers as relevant to their decision
Place
all the activities necessary to get right quantity of right product to right customer when customer wants it
Strategy
an integrated set of choices that positions an organization within its environment to achieve its vision over the long term; should deliver clarity internally ad externally; falls third in the hierarchy of organizational objectives behind mission and vision, but above tactics
Product
anything of value to a consumer and that can be offered through a voluntary marketing exchange
Insurgent Brands
brands that have grown 10x faster than their category over the last 5 years with minimum revenue of $25 million
BCG Matrix Analysis
can be applied at multiple levels in a company
Of the 4 P's: price entails...
capturing value
Of the 4 P's: promotion entails...
communicating value
Promotion
communication by marketer that informs, persuades, and reminds potential buyers about product to influence their opinions and elicit response
Product Excellence
continuous stream of state-of-the-art products with features providing unique benefits; creative, fast, solve problems of latest products; increases willingness to pay; examples include Apple
Of the 4 P's: product entails...
creating value
Post-purchase Outcomes
customer satisfaction, post-purchase cognitive dissonance (perception of contradictory information, and the mental toll of it), customer loyalty
Of the 4 P's: place entails...
delivering value
Primary use of the Ansoff Matrix
devise strategies for future growth
Segmentation
divide market into groups of customers (i.e., segments) with common needs who will respond positively to your marketing mix
Price
everything a buyer gives up - money, time, energy - in exchange for product
Operation Excellence
focus on process efficiency; forge strong supplier relations, minimize overhead costs; lowers cost to produce; examples include Dell
Shift in consumer attitudes according to Bain & Company's Value Research
functional elements to emotional and higher elements
Simple breakdown of the evolution of marketing's focus
get customers --> get customers to come back repeatedly --> get customers to come back repeatedly and advocate for you
Two Major Categories of Decisions
high involvement --> extended problem solving v.s. low involvement --> limited problem solving (skips the second and third steps of the consumer decision process)
Customer Excellence
hiring + training --> outstanding customer service; strong loyalty programs, with focus on lifetime value; lowers cost to produce and increase willingness to pay; examples include The Home Depot and The Ritz-Carlton
Examples of internal stimuli
hunger, thirst
Marketers' focus...
increase conversion rate
Greenwashing
involves making an unsubstantiated claim to deceive consumers into believing that a company's products are environmentally friendly
Stakeholder Capitalism
it's not just about maximizing profitability; we need to consider other groups impacted by our organization's actions (lenders, customers, suppliers, employees, state and society, economy)
Shareholder Capitalism
it's only about maximizing profitability for our owners—the shareholders
Which of the following statements about Zipcar illustrates how marketing can help to enrich society?
one of Zipcar's core missions is to change the world through urban and environmental transformation"
Four Macro Strategies for Sustainable Competitive Advantage
operational excellence, product excellence, customers excellence, locational excellence
Maslow's Hierarchy of Needs
our needs must be fulfilled in order, from the bottom of the pyramid: psychological (medicines, staple items, generics) --> safety (insurance, alarm systems, retirement, investments) --> belongingness (clothing, grooming products, clubs, drinks) --> ego needs (cars, furniture, credit cars, stores, country clubs, liquors) --> self-actualization (hobbies, travel, education)
Conversion Rate
percentage of consumers who buy a product after viewing it in store or online
Zipcar's goal is to have an available zipcar located within 10-15 minutes of its members. This is an example of what component of the marketing mix?
place
Primary use of the BCG Matrix
portfolio analysis: which products to invest in? which products to stay the course on? which products to let go?
Evaluation of Alternatives
product category --> universal set (all brands) --> retrieval set (known brands v.s. unknown brands) --> evoked set (acceptable brands v.s. unacceptable, indifferent, or overlooked brands) --> purchased brand (or not purchased brand)
Non-compensatory Decision Rules
product must possess a particular attribute: "I reject any option that doesn't have this particular attribute" - good CAN'T compensate for bad (think highest score for a particular factor)
The Elements of Value
products delivering more benefits or elements (found to be more than four) than competing products tend to grow faster, generate higher profitability, and build stronger customer loyalty; however, too many benefits become too expensive
Locational Excellence
proximity to customers; proximity to natural resources; lowers cost to produce and increases willingness to pay; examples include CVS and Starbucks
Marketers can increase value by:
raising the benefits offered, lowering costs, or both (managers tend to focus on reducing costs rather than increasing benefits, but efforts to expand benefits have been proven to grow revenue and profitability)
Psychological Need
relates to personal gratification
Functional Need
relates to product performance
Need Recognition
results from gap between actual state and desired state
Common Business-Objective Themes
revenue, profit, cash flow, market share/position, brand awareness, customer satisfaction, productivity, innovation, time to market, employee engagement, quality and reliability, sustainability
Consumer Decision Rules
rules that consumers follow consciously or subconsciously to select from among several alternatives
Examples of external stimuli
social media post, TV ad, friend's comment, broken possession, product placement in movie, medical diagnosis
B2B Elements of Value
states that elements of value fall into five categories: inspirational value ( further broken down into purpose (vision, hope, social responsibility)), individual value (further broken down into career (network expansion, marketability, repetitional assurance) and personal (design & aesthetics, growth & development, reduced anxiety, and fun & perks)), ease of doing business value (further broken down into productivity (time savings, reduced effort, decreased hassles, information, and transparency), access (availability, variety, and configurability), relationship (responsiveness, expertise, commitment, stability, and culture fit), operational (organization, simplification, connection, and integration), and strategic (risk reduction, reach, flexibility, and component quality)), functional value (further broken down into economic (improved top line and cost reduction) and performance (product quality, scalability, and innovation)), and table stakes (meeting specifications, acceptable price, regulatory compliance, and ethical standards)
Need Recognition Pathway
stimulus as trigger --> actual, needy state --> pathway options --> future, satisfied state
Consumer Behavior
study of processes involved when individuals or groups select, purchase, use or dispose of products to satisfy needs
3 Key Social Trends
sustainability, health & wellness, and efficient utilization & distribution of food
Marketing
the activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large
Determinant Attributes
the most important evaluative criteria related to the actual choice made
Rainbow-washing
the practice of portraying a company's products, activities, or policies as being committed to corporate diversity and LGBTQ+ rights when they aren't
Exchange
the trade of things of value between the buyer and seller so that each is better off as a result
How firms grow...
through products and through markets
Other terms used to mean "price"
tuition, rent, interest, fee, premium, fare, toll, salary, wages, and commission
Zipcar is an example of what type of market orientation?
value-based marketing
Zipcar traditionally focused on marketing toward individuals without cars as a convenient form of alternative transportation. Zipcar has now begun to also focus its marketing toward businesses and organization to se Zipcar for their employees. This is an example of
B2B marketing
B2B Decision Making Unit (DMU)
Buying Center --> influencer (their views influence others involved in the buying decision (engineers, researchers, product managers)); decider (ultimately determines any part of or the entire buying decision (CEO)); buyer (handles the paperwork of the actual purchase (purchasing agent)); user (Uses the product purchased by the buying center (office staff)); gatekeeper (controls information or access to decision makers and influencers (administrative assistants)); initiator (first to suggest buying the product);
How does the Environmental Scan connect to the other situation analyses?
Frames the SWOT Analysis
