EXAM4 Study Guide

Study guide for Lecture 1: Overview
*What is marketing? *Definition of marketing *American Marketing Association (August 2004) *"Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders." *Three issues *Organizational function *Assume context of a large organization *Is this valid? *No the marketing concept is universal *Yes, for the purposes of this class it is useful *For the benefit of the organization *All organizations have a reason to exist *Most businesses exist to make profits for their investors *Without profits, the business cannot continue to provide benefits for its customers *In a not-for-profit, money is not the primary reason *But without money, the organization will fold *For the benefit of Stakeholders *Individuals or organizations who are affected by what the company does and how well it performs *This is a relatively new concept *Multiple stakeholders *Customers, suppliers, employees, labor unions *In the long-run a business cannot succeed unless it meets the needs of all of its stakeholders *Satisfied customers, healthy employees, a sustainable environment, etc
*Creating and delivering value

Marketing 431 Study Guide Lecture 12 Price Theory page 1 2006 Bruce Robertson
*Needs satisfy wants rather than needs *What is a need? *A perceived lack of something *Difference between actual state and desired state *Some needs are stronger than others *Wants *Culturally and socially influenced ways to satisfy needs *Starbucks anyone? Utility *Marketers create utility *The opposite of diminishing returns *Textbook: *The usefulness or benefit consumers receive from a product *Four kinds of utility *Types of utility *Form *Place *Time *Posession -- Ownership *Information *Image Features vs. Benefits *Feature: *An attribute of a product/offering *Producers determine features *Benefit: *Need satisfaction *Customers determine benefits
Value *The ratio of perceived benefits to perceived price
An Explanation *According to Bruce *There are self-evident truths in the world *There are truths that are evident to me, but you may take issue with *This is the gospel according to Bruce *The point: *Marketers succeed by satisfying customer needs *Satisfaction is determined by the customer *Stupid Customer syndrome *Our product is obviously the best, yet customers dont buy it. *Obviously, we are dealing with stupid customers *Manage relationships Exchange *There are 3 ways to satisfy a need *Make it *Steal it *Buy it *An exchange happens when you buy it *A transaction is the unit of exchange *To be technical about it an exchange requires *2 or more parties *Voluntary participation *Each side has something of value *Means of communication
Relationships *Transactions are not independent of each other

*Few businesses have just one exchange with a customer *It is easier to be dishonest on a one-shot deal *Used car anyone? *Each transaction is influenced by the history *Relationship marketing looks beyond the transaction *Value of a customer rather than a transaction *May lose money on a transaction to maintain a profitable relationship Markets *What is a Market *Short answer *All of the potential customers for your product *In economic terms potential demand *What is a customer? *The ultimate user of a product *Receives benefit from product *Has the resources needed to exchange *Ability *Time *Money *What is a target market *Law of large numbers *No two people are exactly alike *Given enough people *Subset similar to each other with respect to your product *This subset may be large enough for you to make money *This is what segmentation is all about *A subgroup of people or organizations *Market segment *Similar to each other *Different form everybody else *Reachable *Economically viable *More on this later *The segment you choose to address *You cant please everybody *You dont have to please everybody to make a good living *More on this later
What is the Marketing Concept? Evolution of Marketing *Major trends driving the evolution of marketing *Population/market size *Logistics/transportation *Technology *Communication *4 (or more)Phases *Pre-industrial era *Production era *Sales era *Marketing era *Customer era? *The point *Not every market is in the Customer era *Different countries *Different industries *You need to understand what the market is like for you Marketing Concept *A management orientation that focuses on identifying and satisfying consumer needs to ensure the organizations long-term profitability *Keys to success in the marketing era *Three fundamental principles *Consumer orientation *Coordinated activities making the customer satisfied so the organization is profitable *Long-term profitability *This is not always easy to do *According to Bruce *Perceived irrelevance of marketing *Turf issues *Art for arts sake
What is the marketing function? *Listen to the market

*Environmental scanning *Market research *Marketing information *Intelligence *Formal research *Identify Consumer needs *Understand the consumer *This is not easy *Business versus individuals *Create need-satisfying offerings *You need to have the right product at the right place at the right price with the right promotion *Develop marketing programs *Planning *Strategies *Product portfolio *Implementation *Controlling Whats the Big Deal With Marketing? Marketing Affects Your Life *The concepts in Marketing are universal *Two major life tasks that benefit from marketing skills *Relationship *Career *Getting a job *After you land a job Marketing Affects the World You Live in *Social structure *Shopping as a need satisfying activity *Status products *Trends *Products inspire trends *Trends inspire products *Entertainment *Sponsorship model *Blurring of the line between advertising and entertainment
Study guide for Lectures 2 and 3 - Consumer Behavior

What is a consumer? *A person *Unmet needs *Purchases things for personal consumption *Unique *No two people are alike *From last time *Ultimate user of the product *Receives benefit from the product *Has the resources needed for exchange *Law of large numbers *Cant say what any individual will do *Given a large enough number we can predict what a subset will do with respect to your product The Consumer Buying Process *Purchasing is problem solving *As human beings, we always choose the best product available *Economic theory assumes rational behavior *Consumers are not rational *Otherwise, everybody would be using Macintosh The Consumer Buying Process *There are 5 stages we go through in making a purchase *This applies to more than just purchasing products *This is the way we as human beings solve problems *Decision making *Not all people go through all five steps every time
*Effort is a function of Involvement *Personal, social, and economic significance *Expensive? *Serious personal consequences? *Reflect on your social image? *May drop out of the process at any time *High involvement *Extended Problem solving *Lots of effort *Medium involvement *Limited problem solving *Low involvement *Routine problem solving *Automatic purchases *Problem Recognition (Need recognition) *Can be internal or external *Can be sudden or gradual *If you lose your cell phone, you need a new one *Now *Gradual needs are can be stimulated by a trigger *Feel hungry when you walk past a bakery *Odor of fresh bread is a trigger *This is what impulse advertising is all about. *Dissatisfaction with a current product may stimulate a need *Wonderful opportunity for new products *Just because we feel a need doesnt mean were going to make a purchase *Can drop put for any number of reasons
*How can marketers stimulate needs? *Create dissatisfaction with current products *Fashion *Planned obsolescence *Come up with better products
*New and improved *Provide triggers *Time-sensitive advertising *Point of purchase *Identification of alternatives *The textbook calls it information search *This is the awareness set *You cannot purchase something unless you are aware of its existence *How actively we look for new alternatives depends on *How satisfied we are *The cost of acquiring new information *Search strategies *Internal search *Memory based *External search *Personal sources *Public sources *Commercial sources (marketer-dominated) *How can Marketers increase awareness? *Point of purchase *Awareness advertising *Intrusive advertising *Unsought products
*Evaluate alternatives *Consideration set *Evaluative criteria *Attribute: A quality or characteristic inherent in or ascribed to someone or something
*A term we use to identify features of products *Factors you use to make the decision *Single vs multiple criteria *How are the criteria weighted *Evaluation is based on perception *Our evaluations are biased *Cognitive miserliness *More on this next time *Unconscious motivations *Heuristic decision making *How can marketers help evaluate alternatives? *Personal selling *Comparative advertising *Establish criteria for comparison *More miles per gallon *Reference groups *Celebrity endorsement *Packaging *Decision *What is the product/service bundle that will best serve my needs? *Involves an evaluation of the seller as well as of the product *Would you buy a Rolex watch at Walgreens? *How to take possession *Payment
*How can marketers help a consumer make up his/her mind? *Convenience *No money down *Free delivery *Create sense of urgency *Limited time offer
*Loss aversion principle *Personal selling *Postpurchase behavior *Consumer satisfaction/dissatisfaction *Buyers remorse *AKA Cognitive dissonance *Having made our choice we face the alternatives we let get away *Depends on *Cost of the purchase *Similarity of the alternatives *What can marketers do about buyers remorse? *Postpurchase advertising *After-sale service *Satisfaction survey *Relationship building
This is about where lecture 2 will finish
Factors that influence buying *The reason marketing is so difficult is that you are only one of several factors that influence purchasing *And you are by no means the most important Psychological factors
*Motivation *In psychology we call them drives *Two basic sources *Physiological *Food *Psychological *Friends *Some needs are more motivating than others *Maslows pyramid *Point basic needs must be satisfied before higher level needs become motivators Maslows Hierarchy of Needs Physiological Safety Belongingness Ego needs Self actualization *People are not always consciously aware of their true motivation *Social disapproval *Self-image maintenance *Personality *Different people are different *Personality traits *Innovativeness *Self-confidence *Sociability *Myers-Briggs Typology *Extrovert-Introvert *Sensing-Intuitive *Thinking-Feeling *Judgment-Perception *Self concept *Actual self concept *How you see yourself *Ideal self concept *How you would like to see yourself
*Consumption is an important factor *Social goods *Do people really pay $100,000 for a car because it runs better? *Perception *Cognitive miserliness *People do the least amount of thinking possible to solve a problem *Result: First acceptable solution rather than the best solution *Selective attention *We ignore things that are present *Selective interpretation *Confirmation bias *We see things that arent there *Selective retention *We remember in categories *Dissociation of object and evaluation over time *Familiarity effect *Perceived Risk *Hard to assess *Loss aversion principle *Work harder to avoid losing $100 that you thought was yours than you would to earn $100.
*Attitudes *Learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way *Learned *Have an object *Have valence *Relatively stable *Attitudes change over time *Behavioral learning
*Experience with the product *Post purchase evaluation *Cognitive learning *Observing others *Have an object *You cant just have attitude *Have valence *Cognitive and affective components *Beliefs *Either good or bad, never neutral *Relatively stable *Branding is based on attitude *A brand is an attitude about a product *More on this later *Brand loyalty takes advantage of the fact that attitudes are relatively stable over time Social Influence *Family *Consumer socialization *We learn how to consume from our family *Brand preferences by age 2 *Attitudes *The patterns we take with us for the rest of our lives are largely in place by age 16 *Family roles in decision making *Information gatherer *Influencer *Decision maker *Spouse-dominant *Joint *Purchaser *User *Culture *A set of values, ideas and attitudes that are learned and shared among members of a group
*Food preferences *Socially acceptable behavior is frequently cultural *Rituals *Subcultures *Subgroups with unique values, ideas, and attitudes *A way for a group of people to maintain a sense of identity within a larger population *According to Bruce: *We have more choice in the subcultures we adopt *This makes them important as segmentation variables *We look for ways to affirm our membership *Reference Groups *An actual or imaginary individual or group that has a significant effect on an individuals evaluations, aspirations, or behavior *Membership groups *Conformity group identity *Aspirational groups *Heroes role models *Dissociative groups
*Social Class *The relatively permanent, homogeneous divisions in a society into which people sharing similar values, interests and behavior can be grouped *Varies from culture to culture *In this country, wealth is an important criterion *In other countries ancestry is more important *Three categories *Upper *Middle *Lower
*Determinants *SOURCE of income *Occupation *Education Situational factors *Task *Atmospherics *Physical surroundings *Social surroundings *Temporal *Time of day *How rushed you are *Mood (antecedent states) *How you feel at that moment *Rich *Happy Information *Social sources *Opinion leaders *Word of mouth *Commercial sources *Exposed to 300 ad messages/day (1972 study) *Notice about 76 *React to 12 *Point it is expensive and difficult to convince people to buy your product through advertising How marketers describe consumer markets *There 295,140,100 of them in the US (SMM 2005) *They live in 111,007,700 households *Need a way to break it down into manageable chunks *Look for subgroups
*Market segments *Similar to each other *Different from everybody else *Reachable *Economically viable *Cute names are important *i.e., baby boomers, empty nesters, Yuppies *Subgroups described in terms of *Geography *Urban *Rural *Suburban *Geography is important for logistical reasons *Media Markets *Transportation *Demographics *Age *Family life cycle *Education *Income *Ethnicity *These are the most common way of segmenting markets *Psychographics *How they think *Hard to reach psychographic segments *Behavioral *What they do *Schaeffer beer the one beer to have when youre having more than one *Lifestyle *VALS profile *Channel of Distribution *Original equipment (OEM) vs aftermarket *Retail vs wholesale *Online vs offline
Study Guide for Lecture 4 Business markets

What is a business consumer *Someone who doesnt get to enjoy what they bought *Use to make other stuff *Resell to other people *Used to run the organization *Actually, its usually another business *B2B *Definition: Business marketing is the marketing of goods and services to companies, governments, or not-for-profit organizations for use in the creation of goods and services they can produce and market to others. *And if you thought the consumer market was big *Retail sales $4.1 trillion (Census 2005) *GDP $13.4 trillion (BEA 2006 ) *Doesnt count intermediary goods *You do the math *Industrial firms 12,000,000 *Manufacturers 350,000 *Agribusiness 2,000,000 *Services 7,700,000 *Not for Profit 56,000 *Resellers 3,800,000 *Government 88,000 Aside *According to Bruce *There are tremendous job opportunities in the B2B sector *Every company has at least one salesperson Characteristics of Business Markets
NAICS *A way of categorizing businesses by industry type *6 Digit code *3 *4 *5 *6 digit digit digit digit industry subsector industry group industry US industry
*Why is NAICS important *Industry Sales *Employment *Number of firms *Salaries *http://www.census.gov/econ/census02/data/comparative/U SCSA.HTM *The downside *Only one NAICS code per company *Government data is relatively old Market Structure *Larger transactions *Buying authority *Competitive bids *Fewer Customers *How many car companies are there? *Mass marketing techniques less effective* *Buying objectives *Organizational objectives *Maximize profits *Buying is a cost to be minimized *Our customers are indirect customers of our suppliers *Buying criteria *Price *Quality *Delivery *Technical capability *Warranties *Past performance *Production capacity
*Personal objectives? *Promotion *Ego *Friensdhips *According to bruce *This is why personal selling is so important to business markets *All things being equal, people buy from people they like *Your job is to be liked Demand *The point is that B2B products are a means to an end not an end in themselves *Demand is derived *The consumer products drive demand for components *Intel cant sell chips without a computer to go around them *Demand for computers determines what Intel produces *Demand is inelastic *Business products insensitive to price fluctuations *Any one component is only a small part of what the consumer buys *How much corn is in those corn flakes? *8% by weight *5% of cost *Remainder is packaging and advertising *Demand fluctuates *Acceleration principle *Small changes in demand for the end product can make large changes in demand for component products *Drivers *Capacity *Price *When demand for computers picks up *Everybody needs chips to make computers *Intel cant make chips fast enough *The price skyrockets *Intel builds new factories
*When demand for computers declines *Nobody orders chips *Intel has to lay off people *The price plummets Buying center Professional buyers *Can you imagine shopping for a living? *Trained negotiators *Fewer products to consider *Goal is to minimize costs *Less susceptible to persuasive advertising *Or not? *Buying Center *The group of people in an organization who participate in the buying process and share common goals, risks, and knowledge important to a business decision *Cross-functional *May vary from decision to decision *5 roles *Initiators *Users *Influencers *Deciders *Gatekeepers *Buyers *Buying center example *Laptop Computer *Home use *Through SFSU Business buying process *5-Step process the same as consumer markets *Business buying is problem solving *Dont make me go through this again! Problem Recognition
*Make or buy *outsourcing Type of Decision *Straight rebuy *Routine purchases *If you dont have routine purchases automated, somebody else is eating your lunch *New Task Buying *First-time or one-time purchase *Extensive problem solving *The way to reach new task buyers is through personal relationships. These are the deals that are made on the golf course *Modified Rebuy *Some reason to be dissatisfied with current solution *This is why you keep calling on customers who arent currently buying from you Information search *Product specification *The ideal is to help your customer design the product specification *This applies to a job search as well *Proposals *RFP *Bidding Evaluate Alternatives *Buying criteria *More likely to consider non-financial costs *ISO 9000 certification *Multiple suppliers *Bidders list *Approved vendors Decision
*Single source vs. Multiple source *Production vs. outsourcing *Reciprocity *Terms *JIT *Financing Post-Purchase Evaluation *Business purchases tend to be longer term *Value chain *My customers are your customers *Relationship marketing *Long-term cooperative relationships focused on creating value for the end customer Online Buying *E-market places *Auctions *Traditional auction *Sell surplus quickly *Reverse auction *Advantage *Reduce cost *Disadvantage *Minimizes relationship
Study Guide for Lecture 5 Market Research I

Definitions *Decision *A conscious choice from among two or more alternatives *There has to be more than one option *You must take different courses of action for each alternative
Good decision comes out the way you expected Theres no such thing as a good decision or bad decision in business at the time you make it! Therere only defensible decision how well you defend the decision you depend on. SWAG decision: Scientific Wild Ass Guess Decision: conscious choice between two or more option *Data *A fact *Information *A fact that is used to make a decision *Intelligence *Data *Raw and unadorned *Information (e.g. Walmart) *Endowed with context and meaning *Filtered, synthesized, aggregated *Intelligence *A full appraisal of information, past, present, options *A property of the organization
Barriers to intelligence *Human barriers *Ego *Inaccuracy *Non-compliance *Technological barriers *Legacy systems *Information silos *Database proliferation *Pseudo-Research
*Data that is developed to justify a decision that has already been made *CYA Cover your behind Marketing Information *In order to make good decisions, you need good information *GIGO *Today, we live in a computer-mediated networked world *We need systems to deliver *The right information *In the right form *At the right time *Marketing Information System (MIS) WALMART, UPS *A conceptual framework for understanding how to get good information at the right time *This is the ideal to which we aspire *Doesnt exist yet *Companies are building a competitive advantage by trying 0100090000037800000002001c0000000000040000000301080005 0000000b0200000000050000000c02e7012b03040000002e011800 1c000000fb021000070000000000bc020000000001020222537973 74656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000 000000009001000000000440001254696d6573204e657720526f6d 616e0000000000000000000000000000000000040000002d010100 050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 QUIZ!! *4 sources of information *Internal data *Marketing intelligence *Marketing Research *Acquired Database *Computer systems
*A person who is making a decision Sources of Information *Internal Data *Types of information *Sales data *Order data *Customer database *Customer service logs *Cost information *Scheduling *Technology *PC-based *LAN *Intranet *Issues *Who owns the data *Information silo or data silo functional silo is each department has the database to support the dept *What form is the information *Marketing Intelligence information that is gain in the outside world about your company aka spying or environmental scanning *What is going on in the world around us *AKA Environmental scanning *According to Bruce *The environmental scan is one place where you, as a marketing manager, have control. *The better your environmental scan, the better your decisions
*Typical environments *Economic *Competitive *Technological *Legal
*Socio-cultural *Natural *Marketing Intelligence sources: *External, usually secondary *Industry-level statistics *Clipping services *Field reports *Syndicated reports *Nielsen *J.D. Powers *Market Research *The process of defining a marketing problem and opportunity, systematically collecting and analyzing information, and recommending actions *Custom research *Syndicated (e.g. Nelson TV ratings) *More on this next time *Acquired databases/Internet *Free information *Government data *www.doc.gov *Public information *License information *Legal filings *Free for a fee *Proprietary information *Lexis-nexis
*Computer systems *Network issues *Intranet *Extranet *Access points & permissions
*Software issues *Formatted reports *Ability to manipulate data *Maintenance *Information for decisions *Routine reports usually tied to a strategic plan *Progress reports *Longer-term *Progress toward goals *Exceptions reports *Identify problem areas *Dailies/real-time information *Facilitate immediate response *Data Mining *An attempt to generate business assets from the masses of information we now routinely collect *Integrate internal information *Include external databases *This is a hot area *The privacy issue
*Four applications *Customer acquisition *Customer retention *Customer abandonment *Market basket analysis *Lands End site location
*Decision Support Systems *The ability to base ad-hoc decisions on data *Unanticipated decisions *One-of-a-kind decisions *Respond to situations *Typical decision areas *New product development *Advertising *Focus groups *Audience tests *Pricing *Distribution *Issues *Information *The broader the scope of information, the better *There is always a time constraint *You cant build an MIS in response to a question *The information is there or it isnt *Systems *Is the information in the network *Is it current *Can it be imported into the software used to analyze the data *People *Are the decision makers trained to make data-based decisions *The ability to play what if games on a spreadsheet is a minimum *Is there support for advanced analysis
Study Guide for Lecture 6 Market Research II

Market Research Process *5 step process *Define the problem *Develop the research plan *Collect relevant information *Develop findings *Take action Define the problem *Set research objectives *Exploratory *What are the questions we should be asking *Descriptive *Answer specific questions *Causal *Prove it *Controlled experiment *Identify possible marketing actions *What is the decision being made *Who is responsible for using the results *What are we measuring (Metric) *What is good, what is bad *What is the population being studied *What action will we take based on the results *Who else will be affected by the results
*Define the problem *Point This is the most important step. If you dont have a clear reason for doing the research, you are wasting money Develop the research plan *Specify constraints *How much is the information worth *Time *Budget *Identify information needed *Can we measure what we need to measure (Indicators) *How accurate is the information likely to be *How difficult will it be to collect the information *Cost benefit analysis *Determine how to collect the data *Concepts *How do you ask the question *Consumers are not good at visualizing something different than what they know *You have to give them a hint *Methods *Three goals *Validity *Are you measuring what you thought you measured *Reliability *Can you repeat the measurement and get the same result *Representativeness *Do your findings apply to the target population *Aka Generalization
*Sampling *Probability sample *Needed for representativeness *Random sample *Stratified random sample *Non probability sample *Leads to biased results *Convenience sample *Snowball sample *Statistical inference *Guesses about the population based on what you learned from your sample Collect relevant information *Primary data *Creating information specifically for your decision *Advantage *Specific to the question *Disadvantage *Expensive *Time consuming *Prone to error *Secondary data *Research that already exists *Advantage *Relatively inexpensive *Immediately available *Disadvantage *Old data *May not address/ or be specific to your question *No control over methodology/subjects
*Internal Inside the company, previous data kept *External Outside the company *Primary research techniques *Exploratory research (qualitative) *Observational *Scanner *Video *Interviews *One-on-one *Focus-groups *Case Study *Ethnography *Descriptive research (correlation/quantitative) *To find answers to questions *Question is specified in advance *Generates quantitative data *Correlation *You can infer relationships, but cant prove cause and effect *i.e., violent crime and ice cream cone sales *Cross-sectional *snapshot *Longitudinal *Time series *Tracking *Causal research *Attempt to show cause and effect *Need an experiment *Theoretical framework *Dependent variable
*Independent variable *Control group *Probability sample *Quasi-experiments *Almost as good as experiments, but lack one or more requirements *Convenience sample *Field study (No control group) *A cost-effective approach *Limitations need to be considered *Data Collection methods *Interactive data collection *Face-to-face interviews *Telephone interviews *Advantages *Ability to clarify questions *Follow up with specific questions *Disadvantages *Expensive *Consistency of interviewer *Questionnaires *Online surveys *Mail surveys *Advantages *Inexpensive *Easy to tabulate
*Disadvantages *Response rates *May not capture what the person wants to say
*Observational *actions speak louder than words *Advantage *People dont always know why they do things *Disadvantages *Difficult to analyze results *Expensive to collect *Data collection techniques *Avoid bias *Translation *Quality of the instrument *Single source data *Combine scanner data with other sources to develop a better understanding of how consumers shop Develop findings STOPED HERE TO BE CONTINUED *Analyze and interpret the data *How does what weve learned affect our decision *Statistical analysis *Descriptives *Cross-tabulation *Correlation *Regression *Advanced statistical techniques *Understand the assumptions that went into the research
*Recommendations *Dont read more into the data than is there

*Prepare the research report *Executive summary *1 page maximum *Methodology *Results *Analysis methods *Findings *Limitations *What compromises did you have to make *How might these affect the interpretation *Conclusion *Recommended action based on the research Take marketing actions *Recommendation *Implement decision *Based on criteria established in advance *Evaluate the results *Evaluate the decision *Evaluate the process
Study Guide for Lecture 7 Target marketing I

Segmentation
*From lecture 1 *A market is all the people who *Benefit from your product *Have the resources needed to exchange *Money to spend *Willingness to spend it *Authority to make the exchange *The law of large numbers *No two people are exactly alike *Given enough people *Subset similar enough with respect to your product *This subset may be large enough for you to make money *This is what segmentation is all about Target market Market segment is a potential target *What is a segment? *Relatively homogeneous groups of prospective buyers who are similar to each other in terms of their consumption behavior *4 conditions for a segment *Similar to each other *Different from everyone else *Reachable *Economically viable *Why Segment? *So you can respond more effectively to the wants of groups of potential buyers *And thus increase sales and profits You cant make everybody happy so you have to segment *Two fundamental strategies (Porter) *Low cost producer *Differentiation *There is only room for one low cost producer *Everyone else has to differentiate *The point: *Unless you are the low cost producer in your industry you will have to differentiate your product in order to succeed *This will make your product more expensive
*By definition *Segmentation gives you a better chance of earning back the increased cost *Once you have identified market segments you can develop specific product/market offerings for the segment *The four Ps *This is an example of discovering unmet needs How to segment Group buyers into segments *Bases for segmentation (ways of segmentation) *Business vs. consumer *Geographic *Demographic *Psychographic *Buying situation Business segment *Reachable? *Trade Publications *Sales force *Measurable? *NAICS *Industry data Geographic segmentation *Why geographic *Logistics *Regional differences *Suntan lotion in San Francisco? *Cultural differences *Market Areas *SMM survey of buying power *SMAs *Media Markets *Buying Power *Product categories *Reachable? *Local media *Regional editions of national media
*Event marketing Demographics *The most common way to segment markets *Age *Income *Ethnicity *Occupation *Very easy to measure *Useful differences *Age *Age groups *Cohorts have similar experiences *Baby Boom *Generation X *Generation Y *Biology *Lifestage *Family life cycle *Ethnicity *Both race and culture play a role in consumption patterns *There is a fine line between ethnic marketing and stereotyping *Win identify unmet needs *Lose waste money and offend people *False assumption *Ethnic groups are homogeneous *African American *Quality and choice *Hispanic *Quality and brand conscious *Asian *Fastest growing segment Psychographics *Segmenting based on the social self *Personality *Lifestyle *Values
*VALS profile *Eight unique consumer segments *Primary motivation *Resources *Difficult to measure *Who is and who isnt environmentally conscious? *Reach is indirect *Specialty Magazines *Organizations Buying situations *Outlet type *Benefits sought *Usage *Awareness *Involvement *Criteria for determining segments *Point you can use any combination of segmentation variables to come up with a segmentation scheme that works for you *Potential for profit *Similarity within *Differences between *Response to marketing *Difficulty of implementing segmentation Group products into categories *Judgment call *Does it make sense from a customers perspective
Market-product grid *Planning tool *2x2 matrix *Market segments on one axis *Product offerings on the other axis *Indicate the potential of each cell *Assumption *Most businesses have more than one product and more than
one potential market segment Targeting *What is a target market *The segment you choose to target *Duh! *Evaluate market segments *What is the opportunity associated with each segment *Size/market potential *Growing/shrinking *Competitive position *Cost of reaching the segment *Synergies *Strategic considerations *Cutting edge *Full service *Frequently you target more than one segment *Maximize profits given the resources available *Targeting strategy *Book: 3 basic approaches *One product/multiple segments *Multiple products/multiple segments *Mass customization
Undifferentiated *Mass marketing *Concentrated *Focus on one segment *Niche marketing *Portfolio approach *Mix of segments *Always changing
*New opportunities *Get rid of dead wood
Develop marketing programs *You need to develop a specific marketing program for each segment you are targeting *We will spend the next several weeks talking about how *The four ps
Study Guide for Lecture 8 Target marketing II

Three marketing Reliable, Valid and Generalizable Positioning *Definition *Developing a strategy aimed at influencing how a particular market segment perceives a good or service in comparison to the competition *According to Ries and Trout *Consumers organize products into categories in their mind. The goal of positioning is to be the first thing that comes to mind in the category. *Word association test *Cookies *Soda *Luxury Cars *These are the products that occupy these positions in your mind *Two approaches *Head to head positioning *Direct competition *Same attributes *Differentiation positioning *Different attributes than the market leader *According to Bruce
*It is better to be first place in a small category than second place in a larger category *America loves a winner *Who was the second person to set foot on the moon *Who was the first woman in space *Seven up is the largest selling caffeine-free clear soft drink *Ridiculous sports statistics
*How to you become the category leader? *The easy way *Be there first *First name in computers? *First name in copiers? *The hard way *Use the marketing mix to create a marketing position *Expensive *Remember about commercial information *Hard to do *Three step process *Figure out who you are *Figure out where you want to be *Design a plan to get from here to there Figure out who you are *According to Bruce: *Many companies dont know how their customers actually perceive them *Three usual sources of information *Sales *Feedback from people who make a living from you *Self knowledge *Three good sources of information *Complaints *Critics *Market research
*Internal marketing audit *SWOT analysis *The goal is to develop an honest and balanced understanding of who you are to your customers
Figure out where you want to be *Identify the important attributes for a product class *Statistical tools *Conjoint analysis *What is important to the customer *Multidimensional scaling *Who is doing what *Judgment *Perceptual map *Graphic representation position *Plot products graphically *Identify gaps Design a plan to get there *What will it take to succeed in the new position *Changes to the product *Features *Organizational resources *To support the change *To defend the position once the change is successful *Anticipate competitive response *Two basic approaches *Create a new category *In the consumers mind *The key is that you must be first in this category *Swiffer product *Leggs distribution
*Repositioning *Against the competition *Create a new category relative to something familiar *The Uncola *Against yourself *Miller Lite *Prell Forecasting What is a forecast? *Book*: Estimated sales of a product for a defined future period *Bruce: A guess *The effort you put into the guess depends on: *How much is at stake *The amount of uncertainty *How the forecast will be used *Terminology *Market size *Dollars *Units *You need both to understand market dynamics Example: Movie industry *Market potential (Industry potential) *Upper limit for the market *If everybody who needed one bought one *Sales potential *Upper limit for you *If everything went right, who much could you sell? *Market share *The portion of a market captured by a single entity *Usually expressed as a percent *Market factor *Exists in a market *Is measurable *Related to demand
*Sales Forecast *An actionable sales estimate based on: *Sales potential *Marketing plan *Known mitigating factors *Unknown mitigating factors things that you cannot predict *Tennessee windage allow extra in case theres a mistake *Over optimism human biases; *Methods Market factor analysis *Correlation between demand and known market factors *Advantages *Relatively easy *Reliable *Disadvantages *Requires known market factor *Less useful for fashion and other volatile products *Works well in industrial markets *OEM (Original Equipment Market) *If you are making tires, each new car starts out with 4 tires and a spare *New car production schedules are market factors *Aftermarket *Sparkplug example Survey knowledgeable people *Buyers intentions *Ask your customers what they plan on purchasing in the next period *Formal methods *Survey *Informal methods *Canvassing *i.e, working the crowd at conventions *Works best in business markets *Relatively few buyers *Buyers know what they need *Advantage *The customer is forecasting demand *Disadvantage
*Can be used as a negotiating tactic *Overestimate demand in order to get concession *Assumes loyal customers *Salesforce survey *Similar to buyer intentions *Ask salespeople to estimate customer purchases *Advantages *Easier to get cooperation *Front-line information *Disadvantages *Fear of quotas *Salespeople are optimistic by nature Statistical methods *Trend analysis *Future sales are projected based on previous results *Time series analysis *Cyclical adjustments *Widely used in industries with relatively stable demand *Best for short-term predictions *Advantage *Very easy to use *Disadvantages *Straight line projection fallacy *Ignores foreseeable environmental factors *Henry Sibley High School *Test marketing *Introduce product on a limited scale *May be a full-blown introduction *Complete marketing mix test *May be used to test components of the marketing mix *Product *Promotion *Most useful for new or unpredictable products *Advantages *Reliable information if done right *Ability to fix things before going into large scale production *Disadvantages
*Expensive *Time-consuming *Give competitors a chance to copy you and be first to market Judgment *Direct forecast *Senior executives estimate demand *Best used in early stages of strategic projects *Lost horse method *Start with what you know about a historical fact *Make assumptions about what has happened since *Advantage *Timely *Inexpensive *You have some very smart people *Disadvantage *You are asking for opinions *Biases Chain ratio method *According to Bruce *Combines the best of the other techniques *Integrates forecasting into strategic management *Conceptually *Start with market potential *Reduce the potential with a series of facts/assumptions that are critical to the strategic plan *You end up with an actionable estimate that takes into account everything you know about the market *Example Selling coffee in class *Market potential 1000 (market factor) *x 10% attendance 100 (trend analysis) *x coffee drinkers 50 (research) *x havent already bought 15 (Judgment) *x $1.00/cup - $15 *Baseline forecast - $15 *Now we play the what if games
*How to use a sales forecast *Recognize it is a guess *Develop multiple scenarios *Best case *Worst case *If you cant live with the worst case scenario, dont do it. *Most likely *Develop contingency plans *What do you do if it works *How to maximize profit *What do you do if it doesnt *Diagnose problems *Minimize losses
Study Guide for Lecture 8 Target marketing II

Three marketing Reliable, Valid and Generalizable Positioning
*Definition *Developing a strategy aimed at influencing how a particular market segment perceives a good or service in comparison to the competition *According to Ries and Trout *Consumers organize products into categories in their mind. The goal of positioning is to be the first thing that comes to mind in the category. *Word association test *Cookies *Soda *Luxury Cars *These are the products that occupy these positions in your mind *Two approaches *Head to head positioning *Direct competition *Same attributes *Differentiation positioning *Different attributes than the market leader *According to Bruce *It is better to be first place in a small category than second place in a larger category *America loves a winner *Who was the second person to set foot on the moon *Who was the first woman in space *Seven up is the largest selling caffeine-free clear soft drink *Ridiculous sports statistics
*How to you become the category leader? *The easy way *Be there first *First name in computers? *First name in copiers? *The hard way
*Use the marketing mix to create a marketing position *Expensive *Remember about commercial information *Hard to do *Three step process *Figure out who you are *Figure out where you want to be *Design a plan to get from here to there Figure out who you are *According to Bruce: *Many companies dont know how their customers actually perceive them *Three usual sources of information *Sales *Feedback from people who make a living from you *Self knowledge *Three good sources of information *Complaints *Critics *Market research *Internal marketing audit *SWOT analysis *The goal is to develop an honest and balanced understanding of who you are to your customers
Figure out where you want to be *Identify the important attributes for a product class *Statistical tools *Conjoint analysis *What is important to the customer *Multidimensional scaling *Who is doing what
*Judgment *Perceptual map *Graphic representation position *Plot products graphically *Identify gaps Design a plan to get there *What will it take to succeed in the new position *Changes to the product *Features *Organizational resources *To support the change *To defend the position once the change is successful *Anticipate competitive response *Two basic approaches *Create a new category *In the consumers mind *The key is that you must be first in this category *Swiffer product *Leggs distribution *Repositioning *Against the competition *Create a new category relative to something familiar *The Uncola *Against yourself *Miller Lite *Prell Forecasting What is a forecast? *Book*: Estimated sales of a product for a defined future period *Bruce: A guess *The effort you put into the guess depends on: *How much is at stake *The amount of uncertainty *How the forecast will be used
*Terminology *Market size *Dollars *Units *You need both to understand market dynamics Example: Movie industry *Market potential (Industry potential) *Upper limit for the market *If everybody who needed one bought one *Sales potential *Upper limit for you *If everything went right, who much could you sell? *Market share *The portion of a market captured by a single entity *Usually expressed as a percent *Market factor *Exists in a market *Is measurable *Related to demand *Sales Forecast *An actionable sales estimate based on: *Sales potential *Marketing plan *Known mitigating factors *Unknown mitigating factors things that you cannot predict *Tennessee windage allow extra in case theres a mistake *Over optimism human biases; *Methods Market factor analysis *Correlation between demand and known market factors *Advantages *Relatively easy *Reliable *Disadvantages *Requires known market factor *Less useful for fashion and other volatile products
*Works well in industrial markets *OEM (Original Equipment Market) *If you are making tires, each new car starts out with 4 tires and a spare *New car production schedules are market factors *Aftermarket *Sparkplug example Survey knowledgeable people *Buyers intentions *Ask your customers what they plan on purchasing in the next period *Formal methods *Survey *Informal methods *Canvassing *i.e, working the crowd at conventions *Works best in business markets *Relatively few buyers *Buyers know what they need *Advantage *The customer is forecasting demand *Disadvantage *Can be used as a negotiating tactic *Overestimate demand in order to get concession *Assumes loyal customers *Salesforce survey *Similar to buyer intentions *Ask salespeople to estimate customer purchases *Advantages *Easier to get cooperation *Front-line information *Disadvantages *Fear of quotas *Salespeople are optimistic by nature Statistical methods *Trend analysis *Future sales are projected based on previous results *Time series analysis *Cyclical adjustments
*Widely used in industries with relatively stable demand *Best for short-term predictions *Advantage *Very easy to use *Disadvantages *Straight line projection fallacy *Ignores foreseeable environmental factors *Henry Sibley High School *Test marketing *Introduce product on a limited scale *May be a full-blown introduction *Complete marketing mix test *May be used to test components of the marketing mix *Product *Promotion *Most useful for new or unpredictable products *Advantages *Reliable information if done right *Ability to fix things before going into large scale production *Disadvantages *Expensive *Time-consuming *Give competitors a chance to copy you and be first to market Judgment *Direct forecast *Senior executives estimate demand *Best used in early stages of strategic projects *Lost horse method *Start with what you know about a historical fact *Make assumptions about what has happened since *Advantage *Timely *Inexpensive *You have some very smart people *Disadvantage
*You are asking for opinions *Biases Chain ratio method *According to Bruce *Combines the best of the other techniques *Integrates forecasting into strategic management *Conceptually *Start with market potential *Reduce the potential with a series of facts/assumptions that are critical to the strategic plan *You end up with an actionable estimate that takes into account everything you know about the market *Example Selling coffee in class *Market potential 1000 (market factor) *x 10% attendance 100 (trend analysis) *x coffee drinkers 50 (research) *x havent already bought 15 (Judgment) *x $1.00/cup - $15 *Baseline forecast - $15 *Now we play the what if games
*How to use a sales forecast *Recognize it is a guess *Develop multiple scenarios *Best case *Worst case *If you cant live with the worst case scenario, dont do it. *Most likely *Develop contingency plans *What do you do if it works *How to maximize profit *What do you do if it doesnt *Diagnose problems *Minimize losses
Study Guide for Lecture 9 Product Development

What is a Product Definition *Textbook *Product: A good, service or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value. Layers of the Product
A way of viewing the product from the customer perspective *Useful in developing products *Three layers *Core benefit *What is the need you are satisfying *A product may offer different benefits to different people *The only benefits I care about are the ones that satisfy my needs *This is a basis of positioning *Actual product *Whats in the box *This is what we usually think of as the product *In reality it is just a way to deliver the benefit to the consumer *Lots of different ways to deliver the same benefit
*Augmented product *The actual product in the context of the marketing mix *4 ps *Add to benefits received *May or may not be bundled into the product *Extended warranties *Carrying case *Example cars Taxonomies
*How do we categorize products? *Business Goods *Derived demand *Consumer goods *Will be used by consumers in its present form Business goods *Production goods *Raw materials *Components *Support goods *Installations *Accessory equipment *Supplies *Industrial services Consumer goods *Classified by how long they last *Durable *Last a long time *Extensive problem solving *Non durable *Consumed *Frequent purchases *Classified by how they are purchased *Convenience *Shopping *Specialty *Unsought New product development Need for innovation *Marketing is a moving target *Technological change *Competition
*Copycat products *In order to thrive, a business must introduce successful new products *Profit leaders 39% of sales from new products *Profit laggards 23% of sales from new products Definition of new *What is a new product *FTC: *Significantly changed *Less than six months old *New to the company *Line extension *New technology *Revolutionary new product *Consumer perspective *Continuum from small, incremental changes to radically different products *Continuous innovation *Modification of an existing product *Create distance from the competition *Positioning *Eliminate distance from competition *Knockoffs *Easy to do, easy to imitate *Incremental vs sustainable advantage *Dynamically continuous innovation Coke, fairly major change but you still understand what itz all about *New to the customer *Same benefits, new package *Requires consumer education *Convergence *Coming together of two or more technologies to create synergies *Discontinuous innovations *New to the world *Major changes to the way we live
*Internet Why new products fail *Innovation is not easy *80%* of new products fail *Good ideas dont make it to the market *Bad ideas make it to the market *From research *Insignificant point of difference *Incomplete market and product definition *Too little market attractiveness *Poor execution of marketing mix *Poor product quality *Bad timing *No economical access to buyers *Point *You cant say in advance whether or not any one of these considerations will be fatal *Many products fail that do well against these criteria *Some products succeed that shouldnt *However you should look at these issues before risking a lot of money *Defensible decision
NPD Process *Seven phases *NPD strategy *What role do new products have in the companys overall strategy *What techniques does the company use to support new product development *New product department *Cross-functional team *Product champion
*Idea generation *Broader is better *Customers *Complaints *Employees *Research *Competitors *Screening and evaluation *Identify feasible ideas *Develop product concepts *Internal *External *Business analysis *Marketing strategy *Who is the customer *Economic analysis *Forecast demand *Pro-forma income statement what you think your income statement might look like *Technical development *Prototype *Test version of proposed product *Physical product *Simulation *Market testing *Advantages *Better information *Disadvantages *Lost time *Lost money *Commercialization *Introduction into product mix *Rollout strategy
*Risk management *Time to market New product adoption *Adoption Process *How an individual accepts a new product *Diffusion theory *How a new product is accepted by a population *Adoption Process *Awareness *Interest *Evaluation *Trial *Adoption *Confirmation *Factors that affect new product adoption *Relative advantage 4 blade razor *Compatibility *Complexity *Trialability *Observability observable difference *Diffusion theory *We know how new products are received by people in the market place *A taxonomy in 5 stages *These stages are closely related to product life cycle *Innovators (2.5%) of market *Bleeding edge have to have it *Early adopters (13.5%) *Opinion leaders *Early Majority (34%) *Up to date, but not cutting edge *Late Majority (34%) *Dont believe advertising *Laggards (16%) Wont buy it unless they absolutely need it
*Who needs a color printer anyway *Non-adopters regardless of how useful it is, they wont buy it.
Study Guide for Lecture 10 Product Management

Product mix *Assumption: *No company has only one product. *Is this true? *Product line *A group of products that are closely related *Satisfy a class of needs *Used together *Sold to the same customer group *Distributed through the same outlet *Fall within a given price range *Will vary from company to company *Product item *A specific product *Aka SKU stock keeping unit in UPC codes The smallest and least common denominator is the SKU the ISPN # for example *Product mix *The number of product lines offered by a company *Two issues breadth (# of diff line) and depth (how many offering or SKU you have in each line) or width and length *Length (Depth) *The number of choices within a product category
*Is how you target more than one segment *Example: Coffee *Instant coffee *Decaf coffee *Ground coffee *Whole bean coffee *Brewed coffee *Each item satisfies a slightly different need *Width (Breadth) *The number of product categories (lines) *Allows you to meet other needs of your target market *Example: Coffee *Coffee makers *Coffee mugs *Breakfast foods *Each product line represents a need a coffee drinker may also have *Cannibalization *The loss of sales of an existing brand when a new item in a product line is introduced *Represents overlap between target markets *Example *Ground coffee drinkers may switch to instant coffee when instant coffee is introduced. Product Life Cycle *Concept that explains how products go through four distinct stages from birth to death: introduction, growth, maturity and decline *Aggregate demand over the lifetime of a product *Applies to generic products, or product categories rather than individual brands *Two curves *Sales *Profit *Shape will vary from product to product
*Introductory stage *Goal: *Get people to try the product *Primary demand *Adoption process *Issues *Cash outflow before product comes to market *Profits negative at first *Introductory stage strategies *Market entry *First mover *Riskier, but gain advantage *Second mover only when youre big (like Microsoft) *Requires strong asset base *Pricing *Penetration pricing *Anticipate competition pricing below market price *Skimming set prices as high as possible to get cost back and then lower it later (electronics) *Recover development costs *Growth stage *Goal *Build market share *Differentiate the product *Issues *Increasing demand and high profits encourages competitors *These are stars and question marks in the BCG analysis *Eventually competition reduces profits *Growth stage strategies *Branding *Build a brand identity through advertising *Differentiate the product *Positioning *Market develops sub segments
*Maturity stage *Goals *Maintain market share *Extend life of product *Issues *Demand for the product peaks *Late majority are buying *Weak competitors are forced out *Maturity stage strategies *Incremental innovation *Extend the maturity stage by adding features *New and improved *Repositioning *A new market for your product starts a new product life cycle *Increase profits by increasing efficiency *Cost cutting *Economies of scale DEFINITION OF PROFIT = REVENUE - EXPENSES *Decline stage *Goals *Maximize profit *Issues *One or two competitors left in market *Some residual demand *Replacements *Laggards *Decline stage strategies *Milk the product *Cut cost *Carry product as long as it is profitable *Exit the market *Divest *Close down
Dimensions of the Product life cycle *Length *Shape *Product level *Class *Industry life cycle *Form *Product life cycles within the industry Fashion Definitions *Style *Distinctive manner of construction or presentation *Fashion *A style that has been adopted by a significant number of people for a reasonably long period of time *Style obsolescence *Superficial characteristics of the product are altered making people feel out of date if they continue to use older products *According to Bruce *Fashion marketing is the intentional altering of superficial characteristics of products used by a significant number of people in order to create style obsolescence *Fashion marketing works because of two competing social phenomenon *We like to be part of a group *We want to be unique *Because fashions keep changing, it allows us to be different and, at the same time, be part of the group Fashion and the product life cycle *Fashion products have a product life cycle of from a few months (clothing) to several years (houses) *Fashions may come back over time
*Products with extremely short life cycles are called fads Fashion issues *Forecasting *Following trends is important *Recognize that fashions are adopted by successive groups
*Inventory management *The key is that fashion inventory loses value over time *Too much is bad *Too little is not as bad *Just right is very profitable Product management *Managing a companys products as they go through the product life cycle *Product manager *The person responsible *Three approaches *Modify the product *Modify the market *Reposition *Portfolio approach *Balance of currently profitable and potentially profitable products in the mix Quality *Quality is in the eyes of the beholder *Two issues: *Benefits received (level of quality) *Quality is a perception issue *Stupid Customer Syndrome
*We engineer features into products in the hope that they are perceived as benefits *Consistency *Can you replicate the experience *With goods, consistency is zero defects *With services, consistency is delivered through systems *Is McDonalds number one because of the food?
Study Guide for Lecture 11 Product Branding

The ABCs of branding What is a brand *Brand name *Any word, device (design, sound, shape, or color), or combination of these used to distinguish a sellers goods or services *Trade name *The name under which a company does business (DBA doing business as) *E.g. Legal business name vs. face name
*Trademark (service mark) *A legally protected brand name (cough drops... trademark) *Types of brands *National brand *(aka producer brand) *Private-label brand *(aka middleman brands) E.g. Dealer, Safeway Select, Target, *Generic brand *(aka no brand) *In theory eliminates advertising cost *No longer in fashion *According to Bruce *A brand is a promise *Your brand will be successful if the promise is valuable to your customers and if you keep your word. *Why Brand? *Assurance of quality for consumer *Create competitive advantage *Barrier to entry (e.g. ready to eat cereal) *Average of $7.5 million to introduce a new brand How to create a brand *Classical conditioning works over repeated exposure *The learning that occurs when a stimulus eliciting a response is paired with another stimulus that initially does not elicit a response on its own but will cause a similar response over time because of its association with the first stimulus *Stimulus generalization *Behavior caused by a reaction to one stimulus occurs in the presence of other, similar stimuli *Branding is classical conditioning (e.g. Pepsi and Michael Jackson)
*You pair the trademark with the benefit *This becomes the brand promise *Similar to positioning *The brand becomes the category and you are the first name in it *Repetition is the key *Familiarity affect *Characteristics of a good brand name *Suggests a product benefit *Memorable, distinctive, positive *Fit the company/product image *No legal restrictions *Example: Lite *Simple *Easy to pronounce *Emotional *Conditions favorable to branding When should you brand?? water, CEREAL! E.g. McDonald, Bottle
*The product is easy to identify by brand *Quality and value are easy to maintain *Widespread availability *Sufficient demand to support premium pricing *Economies of scale *Favorable sale locations How to protect a brand *Legal protection *Lanham act *Copyright protection act *In order to claim legal protection, you have to register *US Patent Office (www.uspto.gov) *In order to preserve a brand name, you must defend it *Infringement *Imitation
*Appropriation *Counterfeiting *Common usage *Kleenex, Xerox *Quality *Tylenol Brand Strategies *Family branding (multiproduct branding) Trader Joes, anythg they put their name on is guarantee to be organic and healthy. *One brand name for all products in the class *Advantage: spread cost of developing brand over more products *Line extensions and sub brands *Use name for new product items in the line *Cherry Coke *Brand extensions *Use name for new product lines *Starbucks ice cream
*Disadvantage *Cannibalization *Brand dilution more categories associated with the brand and they get confused *Individual brands (multi branding) -- Tide *Create a unique brand for each product *Example P&G *Advantage: Clear brand identity, build powerhse brand *Disadvantage: expensive, one by one from scratch *Have several brands in the same product category
*Good, better, best strategy *Flanker brands *Mattress companies *Anheuser Busch *Respond to competition *Fighting brands *Private brands *Issue: to whom does the customer have allegiance *National brand MFR *Store brand retailer *Store brands work best when the retailer is large and has a brand identity of its own *J.C. Penney, Trader Joes Brand Equity *What is brand equity *The value a brand adds to the product *Advantages *Customer loyalty *Premium pricing *Developed by *Advertising *Product experiences Worlds most valuable brands Coke, Microsoft, IBM *Creating brand equity *Components (Aaker) *Brand awareness *Brand associations *Perceived quality *Brand loyalty *Other proprietary brand assets *A brand is an attitude *Behavioral learning
*Experience *Cognitive learning *Advertising *Word of mouth *Four stages *Create brand awareness *Advertising *Create positive brand associations *Experience and advertising *Did you keep your promise? *Create an emotional connection *Cognitive and affective component of attitude *Positioning *Create brand loyalty *Relationship marketing *Leveraging brand equity *Other sources of brand-related revenue *Licensing *Selling the right to use your brand name *Co-branding *Joint venture *Ingredient branding Warranties *Warranty *A statement indicating the liability of the manufacturer for product deficiencies *Express warranties *A written promise *Full warranty *We cover everything
*Limited warranties -- Automobile *What is and isnt covered *Aka the fine print *Implied warranties *You are responsible whether or not you want to be. *Implied warranty of merchantability *A clock should tell the time *Strict liability *Liability without fault To Be Continued. Packaging *Package *The covering or container for a product that provides product protection, facilitates product use and storage, and supplies important marketing communication *Purpose of packaging *Functional benefits *Protect the product *Meet intermediary needs *Perceptual benefits *Image presentation/ perception *Heuristic *Post-purchase utility altoids, tin box can be reused even after were finished with it... *Communication tool *Labeling *Silent salesperson product itself, when youre in the store and youre not sure what to get, your decision is based on what they put on the side of the box. Esp for convenience products *Labeling *Three types of labels *Brand label *Descriptive label *Grade label
*Statutory labeling requirements warning labels *Inform customers *Avoid product liability Packaging Strategies *Product line packaging *Family packaging E.g. Campbell soup, any one of the soup is a Campbell soup they all look the same but different flavor. *Multiple packaging 3 pack, the bigger the package, the more stuff in it, no need to go to the store so often. *Increase sales *Convenience *Changing the package *Increase utility *Attract attention *new and improved Packaging issues *Packaging issues *Depleting natural resources *Health hazards in packaging *Disposal of used packaging *Deceptive packaging *Size *me too products products that look identical to the products that youre used to buying. *Expense Cereal packaging are expensive.
Study Guide for Lecture 12 Service Marketing

Why do a separate lecture *We talked about the product/service bundle *All products have a service component *Standard marketing principles apply *4 ps
*However, when the product is primarily intangible, there are some unique issues *These issues give us an opportunity to develop more focused marketing programs Marketing Intangibles What are intangibles? Things you cannot touch *People *Places *Ideas *Services Marketing People *Issue people can be packaged *Create a brand personality around the person *Can separate the humanity from the product *Image is everything E.g. Jamie Lee We dont like that people are complex; to market a person, you have to be unidimensional, this is especially so for celebrities. *Strategies for packaging people *Pure selling *Package the person and find a market (E.g. Tiger Woods as a golfer) *Product improvement *Repackage the person to (E.g. Pat Boone reposition himself from Mr. Nice guy to heavy metal) *Market fulfillment *Find a niche and create a personality to fill it (E.g. Taylor Hicks from American Idol) Marketing Places *Strategy: Create brand personality for the place (E.g. Jamaica) Marketing Ideas *Two Strategies
*Awareness Issue that ppl are not aware of *Persuasion trying to get ppl to accept one side or another of an issue. Example: Abortion Trying to target ppl that are young or undecided What is a Service *Service: Intangible activities or benefits that an organization provides to consumers in exchange for money or something else of value You cant market effectively to ppl outside org unless ppl inside org is on board. *Internal marketing: A service organization must have employees on board before successful programs can be directed at customers *Goods/services continuum *No such thing as a pure good or a pure service *Good dominated offering *BMW service plan *Toll free number on a can of peas *Service dominated offering *Dental checkup *Balanced offering *Tanning booth, Ferris wheel ride *Classifying services *People vs. equipment based *People based *Unskilled *Skilled *Professional *Equipment based *Automated
*Unskilled operators *Skilled operators Characteristics of services Intangibility, Variability, Inconsistency How do you sell a product that you cant touch, feel or smell? *The goal is to make the product real *Visualization (E.g. Jamaica Ad) *Create a picture in the customers mind *Association (Beyonce and Pepsi) *Pair the service with a tangible object, or known celebrity *Physical representation *Productization Education (College Students) *Documentation *Past Performance McDonalds *Capability good car repair
Variability *Issue services are performed by people and people are not machines *Training *Franchising packaging and selling the system; buying the McDonald way of doing business. *A promise of Consistency *Uniforms America, wearing uniform to a job. The uniform dehumanizes the employees and makes it easier for the customers. *Appearance of consistency Keeping consistencies in the job, like getting the right answers from Home Depot. Inseparability
*The issue logistics *Producer and consumer work together to create service *The Dolly Parton solution (her very large wig hair) *Maximize efficiency of producer *Dentist office *Drive up window *Disintermediation *Eliminate people from routine transactions (Routine bank transactions from home) *Price rationing *Lawyers *Paralegal *Associate *Partner Perishability *The issue: Unused capacity for providing services is gone for ever (e.g. Empty seats on airplane; once it takes off, the empty seats gone to worst) *Capacity management *Price rationing *Scheduling *Reservations *Critical for industries with high fixed costs Inseparability No notes for this Managing Services Service Encounter *Point of contact between the provider and the customer *Role of provider *Initial contact *Social dimension this is a people business
*Environment/impression management *Direct customer through service *Service as theater analogy service is the stage and you need to direct the customers through. *Make sure the customer understands her role *Role of customer *Customer participates in service creation *Communicate expectations *Share information Service Quality *What is service quality *Service quality is exceeding expectations *delight the customer *Three dimensions to service quality *Search qualities *Product characteristics the customer can examine prior to purchase *These are attributes a customer can compare before purchasing the service *Price *Advertising *Can be used to encourage a customer to buy *Experience qualities *Product characteristics that customers can determine during or after consumption *Can only be assessed after the purchase *Fun *Convenient *Play a role in loyalty and satisfaction *Credence qualities E.g. whether the doctor interpret the x-ray correctly
*Product characteristics that are difficult to evaluate even after the service has been performed *Professional services *Certification *Franchise/brand promise To Be Continued *Measuring service quality *Service quality is exceeding expectations *delight the customer *In order to exceed customer expectations, you have to know what they are *Gap analysis *Research that measures the difference between a customers expectation of a service and what really happened *Aka reality check *Typical gaps gap analysis *Customer expectation/management perception *Management perception/written standards *Quality standards/service delivery *Service quality standards/customer expecations *Expected service/perceived service *Techniques *Secret shopper *Critical incident technique *Use complaints to identify specific situations where service can be improved *Sometimes a problem cant be solved *The way it is handled makes a huge difference *How to say no nicely *Wrong way your call is important to usplease continue holding *Service Failure
*Identify service failures *1out of 10 will complain *Resolve customer problem *Next section *Communicate and classify *Learn from your es *Implement changes *Build learning into service delivery
*What to do when you screw up *Anticipate problems *What could go wrong *What will we do *Deal with the problem promptly *Admit the mistake *Work with the customer to resolve the problem *The customer is not always right *The customer is always the customer Not-for-profit marketing *An organization whose business purpose has been designated as in the interest of the public good *Preferential tax status *The big issue in not-for-profit marketing is there are multiple customers *AKA Constituencies *Donors *Recipients *Each has very different needs met by the organization *There are opportunities to gain managerial experience in Marketing
by working in the not-for-profit sector *Volunteering *Network *Experience *Not for profits more likely to hire right our of college *Responsibilities increase rapidly
Study Guide for Lecture 13 Price Theory

What is Price *The element of the marketing mix that determines how much money you make *Too low give money away *Too high drive customers away Price has to be just right *Textbook: The money or other considerations (including other goods or services) exchanged for the ownership or use of a good or service. *Barter: Exchanging goods and services for other goods and services rather than for money. *A major factor in determining value *Value= Perceived benefits Perceived cost (price) *Increase value by increasing benefits or decreasing cost *Value pricing
*Most consumers do not fully consider the non-financial costs *Transaction costs *Opportunity costs *Price/value heuristic *As a rule of thumb, we expect the more expensive item to be better E.g. BEVMO *Positioning (e.g. Rolex watch) *Relative pricing is a signal to the market place *Inverse demand curve for luxury products *So what should the price be? *Its not that simple *Depends on *Organizational objectives *Demand *Costs *A lot of other stuff (next time) Objectives and constraints *Objectives *Profit *Long-term *Short term *Target return *Publicly traded companies *Assuming profits enough to stay in business you also want to look at: *Market share *Unit volume *Survival *Social Responsibility *Constraints *Issues that affect the price you can charge *Demand *Higher demand=higher price
*Stage in the product life cycle *Introductory *Growth *Maturity *Decline *Product issues *Single product vs. product line *What is the effect on other products *Cost *Long run cover all costs *Short run cover variable costs *Ability to change prices
*Market issues *Monopoly *No short-run constraints *Oligopoly *Market leader pricing *Monopolistic competition *Market price set by large players; economy of scales, low cost producer *Pure competition *Commodity pricing; low cost production and very small profit *Channel issues *If you sell through a channel of distribution, the price has to support other businesses as well *Wholesalers, retailers *$10 movie ticket example *$1.90 theater *$3.00 distributor
*$5.10 Studio *$2.00 Advertising *$0.80 Actors *$2.30 revenue *Competitor issues *What are competitors charging *How do you respond to a competitors price change *What is the response to your price decision likely to be *Price wars *Expected price (perceptual issue/ attitude) *We have a sense of what the right price is *Usually a range *Research can help verify it (everybody has a different perception of what the expected price is) *People perceive prices relative to the expected price *Anchoring and adjustment further away from the expected price pen example
Demand and revenue What is a Demand Curve *The quantity of a given product customers will buy at a given price if all things are the same *The law of demand *If price increases customers buy less *If price decreases customers buy more Normal demand curve
*Shift in demand
*Customers will buy more (or less) at every price point *Demand factors *Consumer tastes *Availability of substitutes *Consumer income Price Elasticity %change in *Elasticity *quantity/% change in price *Easy to understand conceptually *Difficult to measure
*When elasticity is high, price cuts can increase revenues *Stock up sale *When elasticity is low, price increases can increase revenue *People have few alternatives in the short run
*Factors that influence elasticity *Availability of substitutes *Income effect *+ Normal goods and luxury goods *- Inferior goods *Cross-elasticity (price of one product affects another product if gasoline increases.. sales of priuses will increase) *Complementary products *Batteries *Substitute products Types of Demand Curves *Normal As prices increase, quantity and demand decreases. *Inverse demand curve *Prestige products (you will sell more Rolex if you increase the price)
*Kinked Demand Curve ( if you raise your price you will get lesser revenue) *Oligopoly products (avoid cannibalism; if you raise your price and your competitor doesnt follow, you lose market share) Prices tend to stay the same in Oligopoly market Price Signaling see if competitor will follow *E.g. Coke versus Pepsi 0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 *Point *You need to understand the shape of the demand curve for your situation *The expected demand changes as the price changes *Price strategies involve dynamic systems Revenue *Total revenue= Unit price X Quantity sold *Quantity sold comes from demand curve *Unit price is what we are trying to determine *Three revenue concepts *1. Total revenue *2. Average revenue *Total revenue/quantity sold *AKA per unit revenue
*3. Marginal revenue *Change in Total revenue/ Change in quantity *The amount of revenue from the next unit sold *Very important *When marginal revenue is positive and price decreases *Unit sales increase *Average revenue decreases *Total revenue increases *When marginal revenue is negative and price decreases *Unit sales increase *Average revenue decreases *Total revenue decreases Costs Cost Structure *Variable cost (changes with every unit sold) *The costs of production (raw and processed materials, parts, and labor) that are tied to, and vary depending on, the number of units produced. *Per-unit variable costs remain constant *Pretty much *Total variable costs increase with each unit sold *Fixed cost *Costs of production that do not change with the number of units produced *E.g., rent, salaries, advertising *Per-unit fixed costs decrease as sales increase *Total fixed costs stay the same *Pretty much *Total cost *The sum of fixed and variable cost *Decreases with increased production as fixed costs are spread out
*Point *In the long-run, you have to exceed your total average cost in order to be profitable *In the short-run, you have to exceed variable costs to maintain your cash flow *If you cant meet variable costs in the short-run, there is no long-run
Breakeven Analysis *Looks at revenue and costs together *The quantity you need to sell in order to break even *The litmus test for pricing decisions will it be profitable at the level of production that you can sustain *The basis for best case-worst case scenarios *Is the proposed offering profitable? *Breakeven point *The point at which total revenue and total costs are equal *Anything over the breakeven point is profitable *Anything under the breakeven point is a loss *Contribution per unit *The difference between unit price and variable costs Formulae: Unit breakeven volume=Total dollar fixed cost/(unit price-unit variable cost) Unit breakeven volume=Total dollar fixed cost/unit contribution *Marginal analysis *Marginal cost the increase in total cost associated with producing one more unit
*Marginal revenue the increase in total revenue associated with selling one more unit *Point profit is maximized when marginal cost equals marginal revenue
Theoretical Framework 0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 *Over the long term, price has to be greater than total cost *There is a range of possible prices for a product/offering *Minimum is based on cost *Maximum is based on perceived value *All pricing strategies have to take place within this range Theoretical Framework
Study Guide for Lecture 14 Price Strategy

Legal Issues *Price fixing *Horizontal price fixing *Sherman antitrust act you can send signals but you cannot sit down in a room and discuss the price *Temptation for oligopolies *Price signaling *Vertical price fixing *Consumer Goods Pricing Act *Manufacturers cannot dictate prices to retailers (E.g. Ipod) *MSRP *Price Discrimination *Robinson-Patman act *It is illegal to sell the same product to different customers at a different price *Unless there is an economic basis for the difference *Products at Costco are different than products at Safeway *Deceptive pricing *Bait and switch (E.g. you go to a store for a low price you saw on an Ad and they dont have it and try to get you to buy another product) *Advertised merchandise is not available *Quantities limited *Reference pricing *Comparison prices *Have to actually sell one at that price *Make it clear this is not the stores price
*Predatory pricing Only illegal when you have intent to put someone out of business *Selling below your cost of production in order to drive a competitor out of business *Price wars Price Strategies New Product Pricing *Three approaches to market entry *Skimming *Charge high prices *Pay back development costs *Introductory phase of product life cycle *Prices drop as demand picks up and competition increases *Penetration *Charge low prices *Capture market share *Growth stage of the product life cycle *Discourage competition *Experience curve *Unit cost decreases 10-30% every time production doubles *Trial pricing *Pricing a new product at a low price for a limited period of time *Encourage trial *Limited time offer *Pre-publication price
Demand-based Strategies
*Consumer preferences more important than cost *Prestige pricing *Socially consumed goods *Set high price *Symbol of quality *Status symbol *Inverse demand curve *Price Line Strategy *Good, better, best pricing (e.g. ping pong table) *Odd-even pricing *Consumers perceive odd number prices to be significantly lower than even numbered prices (huge power for round numbers) *$99.99 is much less than $100 *Gas station pricing *Target profit *Identify a price point (what customer will be willing to pay) and develop a product to meet that price *Advantages: *Market driven *Positioning based on consumer price points *Disadvantage: Easily imitated *Price bundling *Multiple products for a single price *Multi packs *Complementary products *Bonus packs *Captive pricing *Two products that work together (e.g. printers and cartridges, where the cartridges are priced higher than printers) *One priced low for penetration *The other priced high for profit
*Yield management pricing (early bird special in restaurants) *Charge different prices to different market segments *Airline pricing *Advantage: maximize revenue for fixed capacity products *Disadvantage: perception of unfairness Cost-based pricing *Standard markup pricing *Price=Total cost + Desired Profit *Usually a percentage *Markup *Advantages: *Easy to use for large numbers of products *Perceived to be fair *Disadvantage: *Ignores customers perception of value *What if your costs are too high? *Cost-plus pricing *Profit is negotiated in advance *Cost may be variable *One of a kind products *Projects where the total cost is hard to estimate *Construction *B2B contracts *Price floor pricing ( good for boosting market share) *Price product below total cost *Cover marginal cost *Short-term strategy *Risk of competitors meeting the price and forcing overall prices to an unprofitable level
Marketing 431 Study Guide Lecture 1 overview page 101 2006 Bruce Robertson
Competition-based strategies *Customary price *What is the expected price for the product *Above- at- or below- pricing *Positioning your product relative to the expected price *Price leadership *Common in oligopolies (mostly the larger players) *Market leader sets prices *Others follow or dont follow *Price signaling *Loss leader *Heavily advertised product at a very low price to draw customers into the store *Buy one get one free is better than 50% off *Non-price competition (e.g. Dryers Ice cream or Ipods with bundles) *Increase/decrease the value without changing price *Allows for price competition when customary prices are strong Price Tactics Single price vs. multiple prices *Single price *Two-price *Divide the product into two parts *Country club membership *Initiation *Annual dues *Direct Mail *Price *$5.95 shipping and handling
*Multiple payments *Divide the price into a series of easy payments *One-price vs. flexible prices *Fixed prices *One price for everybody *Fixed prices typical in American retail stores *The power of the printed price *Hard to argue with a scanner *Single-price strategy *Dollar store *Dynamic pricing *Different prices for different customers *Negotiated price *Big ticket items are more negotiable *Youd be surprised how many prices are negotiable *Behavior based pricing *Clickstream *Perception may be unfair *EDLP *Every Day Low prices *Attractive to customers who dont want to shop around *Hard to maintain in the long-run *Saturn cars *Wal-Mart *TPR *High-Low pricing *High list prices *Many items on sale *Creates the overall *Perception of low prices *Issues
*Train customers to buy on sale *Merchandise has to sell at the regular price for some portion of the year *Expensive to re-price the store every week *Geographic pricing *Issue is who pays for the freight *FOB (Free on board) Factory Pricing *Buyer pays for shipping *Uniform delivered price *Postage stamps *Zone delivered pricing *UPS, BART (different prices for different location) *CIF (Freight Absorption) when it arrive at ur house you own it *Seller pays freight *Adjustments *Discounts *Quantity *Seasonal *Trade *Allowances *Trade-in *Promotional
Study Guide for Lecture 15 Distribution Theory

What is a channel *Definitions *Channel of distribution. Individuals and firms involved in the
process of making a product or service available for use or consumption by consumers or industrial users *Always includes 2 people (producer and consumer) *May also include intermediaries (most of the time, for example, we deal with the dealer when buying a Toyota) *The goal of a channel of distribution is to create the most efficient way to move products from producer to consumer *Create place, time, form, possession utility *Channel Flow *Channel flow - a set of functions needed to move product from producer to consumer *This is a little different than in the book 0100090000037800000002001c00000000000400000003010 800050000000b0200000000050000000c02e7012b0304000 0002e0118001c000000fb021000070000000000bc0200000 0000102022253797374656d00012b03000060bf1100fce2d4 30d0a219000c0200002b030000040000002d010000040000 00020101001c000000fb02ceff00000000000090010000000 00440001254696d6573204e657720526f6d616e000000000 0000000000000000000000000040000002d0101000500000 00902000000020d000000320a2d000000010004000000000 02903e40120b81600040000002d010000030000000000 (Stern, Al Ansary & Coughlin 1996) All of these needs to take place for a transaction to happen *The point is *All of these functions have to be performed by somebody *Not all businesses are equally good at performing all of these functions *Intermediaries *Intermediary - One who, or that which, is intermediate; an interagent; a go-between. (dict.die.net) *Examples *Middleperson
*Agent *Broker *Wholesaler *Retailer *Distributor *Dealer *Value created by intermediaries *Specialize in a channel flow (create value) *Economy of transactions *Value added functions (creating value by taking on risks, e.g. insurance companies) *Economy of transactions *Intermediaries can create economic efficiencies by reducing the number of transactions needed to create an efficient market (they are more efficient than anyone else)
number
of producers in most market, you got more than one producers/retailers, so a middleman would come in really useful in contacting the retailers and the number of transaction is decreased (saving money and simplify communication)
number
of products (assortment) *Value added by intermediaries *Create assortment *Break bulk goal to have large production run to achieve economy of scale e.g. Wal-Mart buys trainload of detergent from P&G and then distribute it to the different stores and one customer buys a few *Storing *Transportation *Grading store helps customer with the grading (FDA, USDA, Consumer reports) *Intermediaries will succeed as long as the channel delivers more value to customers with them than without them *Create efficiency *Add value
Channel structure *Number of intermediaries
*Direct (Simplest) *Sell directly to customer *Catalog *Direct mail *Interactive marketing (Dell) *Indirect *Use intermediaries (Apple) *Consumer retailer, wholesaler, agent *Business distributor, agent *How many channels *Reasons to have more than one channel *Avoid dependence on a single middleman *Different market segments *Different products *Geographic concentration *Large vs. small customers *Disadvantages *Channel conflict *Channel alliances *Strategic partnership to sell one companys product through another companys distribution network *Advantages win-win *One company is able to offer new products to meet the needs of their customers *One company is able to reach customers they might not otherwise reach *Disadvantages *Who benefits most from the relationship *What if one partner doesnt perform
*The role of the internet (everythg except the physical product can be digitize) *Currently the internet is causing us to re-consider how channels
are managed *Disintermediation *Elimination of intermediaries *Software stores *Reintermediation *Creation of new intermediaries *E-bay *Wholesalers *Provide some or all of the functions/flows from producer to consumer *Three major types of intermediaries *Wholesalers *Agents/brokers *Middlepeople *Retailers *Next week *Take title (ownership, risking) *Merchant wholesalers *Full service *General/specialty *Limited service *Rack jobbers (greeting cards; retailers dont own it, the company has a rep to take care of the rack; share revenue but responsibility of the company to go into the store to take care of the rack) *Cash and carry (COSTCO) *Drop shippers (Handling transaction for other company; like Amazon; where they take the order/information and the book is from another distributor) *Truck jobbers (Frito Lay; deliver products through trucks, franchise on wheels) *Dont take title (communication, transactions) *Agents *Represent a product/products *Brokers *Make deals *Manufacturers offices *Perform same functions, just company owned
*Vertical marketing systems *Professionally managed and centrally coordinated marketing channels (provide value to the end customer; everyone working for the good of the team) *Corporate systems (Apple store; control over retailing experience) *Forward integration (BP buying their distribution) *Backward integration *Contractual systems (group of companies that are bound by contractual arrangements) *Wholesaler sponsored *Retailer sponsored *Franchising (McDonalds dictate quality and presentation) *Administered systems (May not be a contractual arrangements; but one member has a lot of power and everyone just chose the line) *Channel leader calls the shots *Wall Mart *Channel partnerships (Amazon.com) *Agreements between companies to coordinate channel activities; companies sell through companies like Amazon
Channel management *Design considerations *Strategy *What role does Place serve in the overall marketing plan *Core product *Augmented product *Is distribution your distinctive competency?
*Typical issues addressed through distribution *Service level when you go to the store for the pizza, is it there? What is the likelihood that the customer will find what they want. *Market coverage *Inventory management *Market Coverage *How many outlets in a given market *1. Intensive distribution (as much coverage as possible; want everyone to buy the product; convenience product; Coca Cola strategy where you can get coke within a certain distance) *Sell to anybody *Goal is to saturate market *Impulse items/package goods *2. Selective distribution (make product important to people carrying it; better service and more/better attention to be paid to the brand; Cars for example; Toyota dealers pays a 100% of their attention) *Limited number of outlets to try to increase sales *Increase importance of line to retailer *Allows for support of service/selling by retailer *3. Exclusive distribution (After sales service; a lot of explanation; Rolls Royce) *Only one outlet in market *High-value items *High levels of service *Selection factors *Environment *Issues in the larger world *Social *Economic *Technological *Competitive *Regulatory *More on this later
*Customers *Type of market/customer *Number of customers *Geographic concentration *Order size *Product factors (diamonds vs. kitty litter) *Unit value *Perishability *Technical nature *Company factors *Control *Service *Internal capability *Financial resources
*Middleperson requirements *What they provide to your customers *Information *Convenience *Variety *Attendant services *What you provide to them *Most textbooks assume that all you have to do to gain distribution is to ask but its actually hard *A practice you have to sell yourself to gain distribution *Slotting fees if you want the grocery store to carry ur product you have to pay them a fee. Theory behind it is that theres cost to carry the product *Channel relationships *Conflict *When one member of a channel perceives another member keeping it from its goals
*Horizontal conflict *Too many outlets (Starbucks; if theres another Starbucks down the street) *Vertical conflict *Producer doesnt think middlemen are pulling their weight sales people are not working hard for the money *Middlemen think producer doesnt appreciate the value they add to the channel *Cooperation (everybody work together for more efficient channel) *Channel captain *Member of the channel who coordinates the activities of the rest of the channel *Usually the largest/strongest (dictates how channels look like) *Channel control *The ability to regulate other members of the channel *Who divvies up the profits *Traditionally producers had control *Recently retailers are in control *The future Consumers in control? *Legal issues *Intent is to promote competition *Channel issues: Clayton act, Sherman antitrust act *Things that may be illegal *Dual distribution *Vertical integration *Exclusive dealing *Tying arrangements *Refusal to deal
Study Guide for Lecture 16 Logistics
Supply chain *Logistics management *Organizing the cost-effective flow or raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements *Supply chain (subset of distribution channel) more teamwork/cooperation *The sequence of firms that perform activities to create and deliver a good or service to consumers or industrial users *Supplier network *Firms providing materials to the producer *Upstream *Marketing channel *Firms moving the product from producer to consumer *Downstream *Supply chain management (invisible to customer) *Supply chain is a tool to help you achieve marketing strategy *Strategy comes first what do you want the customer experience to be? *Value chain *Each member of the supply chain adds value Marketers: reaching goals Warehouse ppl/logistic: keeping cost down
*Two major issues *Efficiency low cost *Wal-Mart *Responsiveness gratifying the customer *Dell *Usually one comes at the expense of the other; mutually exclusive
Information and logistics *Information *Objective smooth the flow of goods *Share information among supply chain members *Inventory *Transportation *Example UPS tracking number *Logistics concept *Tradeoff between cost and service *Costs *Inventory *Transportation *Materials handling *Storage *Order processing *Stockout when you go to the stock and the pants are on sale but they have all sizes except for your size. *Service *Time *Lead time *Dependability/ reliability (Just in Time) *Communication 24/7 real time *Convenience
Logistics functions *Transportation (in order of speed/cost) *Air (high value/perishable items like flowers, diamonds) *Truck (cost effective to business center, more flexible) *Rail
*Pipeline (high fixed cost; low unit cost like Oil, Natural gas) *Water *Materials handling/warehousing *Materials handling *Objective is speed *Time in transit *Accuracy of order *Issue is loss control *Damage *Breakage *Tools *Forklifts Conveyer belts
Containers Creating products/packaging that fit in standardized shipping containers Reduce spoilage Reduce cost Reduce theft
*Intermodal *Piggyback (truck), Fishyback *Warehousing *Storage warehouses *Hold inventory *Climate control *Be near customer *Distribution centers *Transshipment of product *Suppliers trucks in one side *Retailers trucks out the other side *Inventory management
*Reasons for inventory *Buffer against supply interruptions *Customer service *Production efficiency *Hedge against inflation *Volume discounts *Inventory costs *Capital costs *Service costs *Insurance, taxes *Storage cost *Risk cost *Loss, damage, obsolescence, spoilage *Strategies *Spread costs over the supply chain *Just in Time (Toyota) *Supplier holds inventory until producer needs it Disadvantage: Shipping cost back up the supply chain *Vendor managed inventory *Supplier handles ordering *Economic order quantity (EOQ) *Tradeoff between inventory costs and ordering costs *Third party providers *Intermediaries specializing in logistics *Freight firms *Import/export firms *Freight forwarders *Fulfillment companies (collect coupons to get free T-Shirt) Reverse logistics (E.g. inkjet printers) *The supply chain from customer back to supplier *Recycling *Returns/warranty work
Study Guide for Lecture 17 Retailing

What is a retailer? *Retailing *All activities involved in selling, renting, and providing goods and services to ultimate consumers for personal, family, or household use. *Retailing facts *Size of market *Huge - $2 trillion + *Concentrated 0.3% of stores account for 44% of sales *Margins *Operating expense 28% of sales *Profits 3% of sales Did I say HUGE? Selected GDP USA $12,455 Hong Kong 173 Vietnam 44 Belarus 27 Latvia 14 Annual Revenue Wal Mart $315 Carrefour 83 Target 53 Safeway 35 Office Depot 14 And this means to you *15,197,000 Employed in retail (Bureau of labor Statistics, October 2006) *10% of workforce *If you havent yet worked in a retail situation, you probably will before you retire. *Even if you dont, you need to understand retailing to
understand how business works The changing nature of retailing (slides of shopping spaces from 110 CE to the Present Day) The Point: *A store is a building designed to facilitate retail functions. *Retailing is Human activity determines the design. *Technology expands the possibilities. Evolution of Retailing *Retailing is a human activity and it hasnt changed much over the years, its a moving target. Successful new models are continually being introduced while outmoded models are being discarded. *Anybody know what a greengrocer is? Its a grocery store thats promoting themselves as environmentally friendly. *Two theories *Wheel of retailing hypothesis *All new retail concepts enter at the cheaper, lower end of the market and gradually move upscale *Low prices give them a foothold *Gradually move upscale in order to improve margins *Target
*Wal-mart
*Higher margins create opportunity for new low end outlets *Retail life cycle *Retail concepts have a product life cycle *Introduction concept is new *Growth concept attracts imitators *Maturity Industry is over-stored *Decline *Exit market *Evolve
*Factors that drive the evolution of retail concepts *Demographics Toys R Us Baby R Us Kids R Us *Current customers age (customers are always aging) *Other attractive segments develop *Technology *Internet (One of the big things) *Trivia what is the single most important technological innovation in retail stores in the 20th century? Answer: Air conditioning (windowless space; year round comfort; reduce spoilage; greater sized building), people started going to the mall recreationally. *Globalization *Transfer of retail ideas across borders *Concepts *Hypermarket Carrefour or Myers *Products *Sushi at Safeway? Classifying Retailers Type of ownership *Corporate chains *2 or more stores *Centralized management *Standardized format *Independent stores *Usually small *Higher prices *Service-oriented *Vertical marketing systems *Co-ops *Defensive maneuver against corporate chains; they bands together to give advantage of vertical integration without giving away too much. *Franchises
*2,500 franchises with 760,000 units *Product and trade name *Cars, Gas *Business format franchising *Fast food (McDonalds) *Services *Why Franchise? (Its a partnership) *Access to capital *Motivated ownership (stake in the business and you work harder) *Leverage brand equity *Why this is important? *Ownership structure determines how you approach the store *Headquarters approach *Local Owner *Local manager Service Level *Self-service *Gas stations *You pump, you pay *Full service *Personal selling is part of the package *Gift wrapping *Limited service *Take a number Merchandise Mix *The total set of all products offered for sale by a retailer, including all product lines sold to all consumer groups *Traditionally based on product category *Food vs non-food *Consumer vs durable *Scrambled merchandising (you know who your customers are and you try to find value for your customer) (e.g. banks/doctor inside of grocery store because the typical customer has time constraint)
*Based on consumer habits *Build a store around an experience *Modern grocery store
*Nature of the merchandise assortment *Breadth (lots of stuff) vs Depth (a lot selection within each choice) 0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 *Convenience store *Supermarket *Specialty stores *Discount stores *Warehouse clubs *Department Stores *Hypermarket Important as a manufacture; if you sell to Costco or Wal-Mart, you want to stand out. Non-store retailing (growing market) *Direct selling *Door-to-door *Party plan *Multi-level *Telemarketing *Vending *E-tailing *Direct marketing *Direct mail *Catalogs *TV shopping
*Multi-channel retailing (Internet) *Bricks and clicks beautiful job of retailing and maximization; buy a physical product and pay for it and pick it up at the store; the best of both world. *Why this is important *Significant opportunities have been created through non-store retailing (E.g. SEARS) *Mail-order catalogs 19th century *E-tailing 20th century Developing a Store Positioning Strategy *The goal of destination retailing (recognizes shopping is more than a transaction) is to create a retail experience that is valued by the target market *Shopping is more than evaluation products *Social experience *Excitement *Information *Birdcage mall Structure in the middle of a mall that had birds in it; makes people feel that they are in another world; entertainment and getting people out of their mindset. *Retail position matrix *2x2 matrix *Breadth of offering *Value added *Different approaches for each position in matrix
*Positioning variables *Merchandising (important job in retailing) the image (consumer perception; pricing and location) *What is the breadth and depth of your product line *Category manager *Individual responsible for managing related products *Selection *Purchasing *Pricing *Display *Store image *The way the store is defined in the shoppers mind *Functional *Psychological
*Issues: *Store design *Layout *Use the fixtures to direct traffic *Fixture type and merchandise density *Atmospherics *Create a mood *Lighting *Music *Scent *Personnel *Availability *Training *Appearance *What is the service component *Pricing *Perceived prices should reflect value *High-end *Full service *Low-end *Self service *Issue: Stockouts (when something is on sale and its not there, you piss off a customer.) *Markup *How much is added to COGS *Original markup - planned selling process *Gross margin how much you actually get *Markdown discount from the original markup *Move inventory *Increase traffic
*Store location *Business district (no weekend/ evening) *Shopping centers *Regional malls *Factory outlet malls *Big box centers *Strip malls *Free-standing stores *Non-traditional locations (in the middle of nowhere e.g. gas stations, motel, one of a kind product that ppl are gonna go out of their way for) *Issues: *Trade area *Where do your customers live, shop and work *Demographic analysis *Competition *Convenience products locate near customer *Infrequent, shopping goods locate near other stores *auto mall *Furniture row
Study Guide for Lecture 18 Promotion Theory

What is promotion
*Promotion is communication *One requirement of a market segment is reachable *Promotion is how you reach them *Definition *The coordination of a marketers communication effort to influence attitudes or behavior Diff between mktg comm. And comm.comm. Is that its intended to change attitude and behavior, its persuasion *Four roles for promotion *Inform *Persuade *Remind *Build relationships
*Promotion and the consumer buying process
E.g. For decision, persuasion would come in useful
*Promotion and the product life cycle Reposition the product would require persuasion; Introductory stage is to inform that the product exist. Communication process *Basic communication model 0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 *The point: *This is the process any message goes through when you communicate with a customer (almost every commercial msg need to go through a writing stage at some point) According to Bruce Most commercial messages are in writing at some point in the process This is why writing skills are so critical to business in general and Marketing in particular Each stage has implications for promotion
Information theory *Channel *The medium for transmitting information; many communication use more than one channel. *Cues *Means of encoding information (e.g. body language, dress code, PowerPoint slides, raising the volume)
*Channel richness *The number of different cues a channel of information can carry *Examples *Face to face (also touch, smell) *The richest medium *Television *Print, graphics, sound, motion, color; no interaction (heres where the internet comes in) *Print *The sparsest medium *The point *The information richness of a channel is a constraint on the type of message we can transmit *P&G, Television needed to stimulate emotions and to introduce a new campaign to create emotional connection.
AIDA *Model for persuasive communication *Attention *Interest *Desire *Action *The point: *All persuasive messages have all four stages The promotional mix *The tools you have to communicate with your target market *Personal selling *Advertising *Sales promotion *Public relations *More on this later
*Factors that affect the promotional mix *Target market *How do you reach them *Objective of the promotion *Inform, persuade, remind, build relationships *Nature of the product *Impulse, shopping, specialty *Complexity *Risk *Ancillary services *Product life cycle *Primary demand, differentiate *Diffusion process *Early adopters, laggards *How much money you have *Cost varies dramatically by medium *Personal selling most expensive (the richer the medium the more expensive) Promotion planning Issues in promotion planning *Push vs. pull *How to work with intermediaries (channel partners) to meet customer needs *Push Convince channel members (retailers) to carry the product. Example: Walk into the store, and you didnt realize the product existed till you walked into the store, the mfg had to convince the retailer to promote their product. Incentives, trade promotions, get reseller to run it in their ad. Intermediary is the end youre trying to communicate with and you try to ask the reseller to push it to the customers. *Pull create desire among consumers so that they convince channel members to carry the product.
Example: Communicate directly with customer; example: send coupons to customers so they go to the store. Customer is the end user youre trying to communicate and you get the customer to pull it through the chain. *Control *How much influence marketers have over the message received by the consumer *In order of control *Advertising (we buy and say what/when the msg is comm.) *Sales promotion *Personal selling (you can train sale ppl but you dont know what they are gonna say) *Public relations *Word of mouth *In order of influence *Word of mouth (you cant buy but you can try) *Public relations *Personal selling *Sales promotion *Advertising *Mass appeal vs. personal appeal *Mass appeal *The same message to multiple customers *Customers self-select whether they receive the message *More expensive overall, less expensive on a per-person basis *Best for inform, remind goals *Personal appeal *Message is crafted to the needs of the individual *Personal selling, interactive marketing *Less expensive overall, more expensive on a per-person basis *Better for persuade, build relationships The Promotional Plan 1. Establish objectives (most important part)
*What is the outcome you would like to see *Be specific *Who is the target audience *Measurable (whether you succeeded in obj) *Defined time period *Needs to be a business reason *Avoid art for arts sake 2. Determine the budget Most common Competitive parity lose everytime you try to match the competition All you can afford % of sales method
Objective-task method how much/ what obj? and then you allocate, takes time Best approach when practical 3. Allocate budget/Design the promotion mix *This is the hard part *How do you achieve the greatest impact with the resources available? *It depends *What your competencies are *Who your customer is *What your product is *Etc, etc, etc. *Typically *Personal selling is the largest allocation *Then sales promotion *Then advertising *Then public relations *Each organization will have a different set of priorities
4. Evaluate effectiveness *Measuring promotion effectiveness *The dirty little secret therere a lot of things besides ads that affected the outcome. *There is a very low correlation between promotion expenditures (inputs) and sales performance (outputs) *I know that half of my advertising budget is wasted; but I dont know which half. - John Wanamaker *According to Bruce *The metric should be established at the same time as the objective *The goal dictates the measurement *Inform *Persuade *Remind *Build relationships
Integrated Marketing Communications *Ties directly to the marketing concept *All the organizations activities should be focused on the customer *IMC says all promotional activities should be focused on a specific promotional objective *Understand people receive information through multiple channels *A strategic effort to have consistent communications across channels *Message strategy/creative platform *Coordination and timing of promotional mix *M-life example *861,000 hits from Superbowl ad *Site wasnt ready
Movie marketing (disney) example are the best integrators How many reminders will you see between now and December 15 for Eragon?
*Barriers *Turf *Requires a company-wide commitment to coordinate all marketing activities *Many functional areas may not see themselves as marketingrelated *Bank loan example
Study Guide for Lecture 19 Advertising, Public Relations and Sales Promotion
Advertising What is advertising *Textbook: *Any form of non-personal communication about an organization, a good, a service or an idea by an identified sponsor *Four Criteria *Message *Sponsor (identified) *Medium *Payment 0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000
*Advertising is changing dramatically *Ad clutter *3,500 messages/day *16 minutes/hour of TV ads *Many shorter messages *Basic principles are the same *Issue is how do you get people to pay attention *Content *Distribution
*Two types of ads *Product ads *Pioneer (inform) -- competitive *Competitive (persuade) remember brand identity *Reminder (remind) *Institutional advertising (E.g. BP) *Advocacy *Pioneer *Competitive *Reminder Developing the Campaign *We speak of advertising campaigns *More than one advertisement *More than one medium *Defined length of time *Frequently advertising is the spearhead of an integrated marketing communications campaign *Advertising introduces *Collaterals (related to the main campaign) support the message *Cost *$10,000+ for a local campaign (small biz) *$100,000,000 not unusual for a national campaign
Developing the Campaign (7 steps) *Identify the market *Establish goals *Message *Budget *Design the ad *Choose the medium *Schedule the media *Evaluate results
Design the Ad *Two big issues *1) The appeal (what you want to say) [How to get ppl to engage?] *The central idea of theme of an advertising message *Unique selling proposition (why ours is better than urs; e.g. blue pain reliever) *Comparative *Demonstration *Testimonial *Slice of life Lifestyle *Fear (public service; dont usually work. E.g. dont smoke) *Sex *Humor *Slogans /Jingles (rhymes create positive impressions) *2) Execution (how you say it) *This is where creativity comes in E.G. GOT MILK COMMERCIAL Something else is always more interesting than milk the point of the commercial is that people dont realize that they cannot do without milk. *Pre-tests (market research) give confidence about the execution *Concept testing (do consumer relate to concept?)
*Copy testing (execution right) *Portfolio tests *Jury tests *Test commercials *Theater tests Choose the Medium *The Channel you choose to carry your message *Each medium has different characteristics *Bandwidth amount of info cues a channel can carry *Cost (CPM) Cost per thousand how much it cost to reach 1000 impressions (mass mktg is less expensive) *Distribution run an ad at a specific show, time. *Once you have selected the medium, you need to choose the vehicle Ad is a perishable good pricing is very flexible if youre willing to bend, you can get inexpensive rates. *Figure 19-2, 19-4 from book Where the money goes? TV is the biggest
Schedule the Media *Media schedule - the plan that specifies the exact media to use and when *Issues: *Exposure *Impressions opportunity to see ad *Reach - % of target market that you accomplish *Frequency number of exposures *Measurement *Gross ratings points Reach x frequency *Cost per thousand (CPM) how much does it cost for 1000 exposures *Tactics *Continuous schedule *Consumer package goods *Pulsing (save money for ad and spend it over a short period of time) *Seasonal advertisements (Easter Day products) *Flighting (continuous schedule + pulsing) *Intermittent bursts of advertising
*Minimizes wear-out *Less expensive than continuous advertising Evaluate results *Difficult to do (hard to say the impact of the ad) *Low correlation between an advertisement and sales *Common measures of ad effectiveness *Recognition *Aided recall *Unaided recall (remember w/o prompting) *Attitude change (like more or less after ad. E.g. Political campaign) *Behavioral measure (Internet ad; banner ad) *Inquiries *Sales
Agencies *Advertising agencies are independent companies that specialize in advertising services *Traditionally, advertising agencies were paid a commission based on the media buy *Commission 15% *Creative is overhead *Two types of agencies *1) Full-service agency *Provides a variety of marketing services *Advertising *Research *Public Relations *Internet *Fulfillment *You name it *Tend to work very closely with the client *2) Specialty shop (limited service)
*Tend to be smaller (web company, graphics shot, production) *Provide one service *Mailing *Graphics *Production *May subcontract to a full-service firm *Many are one-person free-lancers
Public Relations What is Public relations *A form of communication management that seeks to influence the image of an organization and its products and services *Key good PR versus advertising is that it appears to be spontaneous and not always sponsor identified and unpaid *Different kind of credibility than paid for, sponsor-identified messages
PR Tools *1) Publicity *Unpaid mass media communications *Publicity is measured by estimating what you would have paid for the free coverage *Techniques *Press releases *Stunts *Press conferences *2) Press kits *Information an organization makes available to the media and people *Background information on the people in business. *Bios of principals *People relate to people *Company history *Product information
*Logos, graphics, photos *This information should be online *Issue anything a reporter could reasonably want to know about your organization should be available 24/7 *Assume reporters are lazy *The closer your material is to a finished product, the more likely it will be used as is *This is an ethical issue in journalism *Video news releases *3) Sponsorships *A PR activity through which companies provide financial support to help fund an event in return for publicized recognition of the companies contribution *Types of sponsorships (usually non profit) *Sports *Charity *Arts *Education 4) Guerilla marketing (coming up in places you wouldnt expect to see) *Achieving conventional goals, such as profits and joy, with unconventional methods, such as investing energy instead of money *Issues in guerilla marketing *Hijacking pretend to be an official sponsor *Atlanta Olympics *Panasonic official sponsor, logo on CNN tower, 3% awareness *Samsung not a sponsor, display in parking lot outside of Olympic grounds, 9% awareness *Social responsibility/legality *Dodge Neon Billboard campaign idea was the car had a personality; people wanted ppl to graffiti on the billboard. -- WKRP had a thanksgiving promotion where they throw the turkey out of the helicopter.
Sales Promotion most difficult to of promo mix to define *Programs designed to build interest in or encourage purchase of a product during a specified time period *In other words, everything that isnt advertising, personal selling or public relations *Consumer promotions *Covered well in book *Trade promotions *Everything in the consumer toolbox as well as *Allowances/discounts *Cooperative advertising *Sales training/sales meetings *Co-op advertising *Share the cost with your partner *Usually a percentage of sales *MFR has escrow account *Partner submits proof of advertising *Can involve non-cash support *Print-ready advertising/photography *Media scheduling Issues with sales promotion *Short-term solution (cracked cocaine of mktg) *This is both good and bad (ppl dont buy it unless theres a deal) *A quick way to boost sales *Customers can become addicted *Encourage retailers not to act in the customers best interest
Study Guide for Lecture 20 Personal Selling and Sales Management

Selling philosophy *Examples of selling situations *The dog ate my homework *Who wants to go to the movies *Will you marry me *You never call me anymore *What features do you look for in a luxury car *The single most important activity in the world *Everybody is selling something all of the time *1 out of 10 Americans do it for money *Definition *The two-way flow of communication between a buyer and a seller designed to influence the purchase decision (behavior) *Selling means more than getting the customer to write a check... getting the customer to like them, not buy from the competitor *3 approaches to selling *1) High pressure sales/Hard sell *This approach is still used in many circumstances *Unsought goods (life insurance) *Postponable purchase (cars) *Infrequent purchase *High information differential *Why? Because it works, information differential (disappearing in the internet age), when the customer doesnt know what the product is really worth. *2) Consultative selling (good kind of selling; problem solving; B2B selling) *Book calls it needs-satisfaction selling *Aka adaptive selling *Salesperson acts as consultant *Help customer solve problems *High likelihood your product will play a role in the solution *Good for long-term relationships
*3) The shotgun approach *Ask as many people as you can *Those interested in your product say yes *This is the approach used by telemarketers *Call 100,000 people *99,000 are annoyed *1000 become customers
*This is what a 1% close ratio means
*Why salespeople are obnoxious *Look at how they are compensated *Hard sell is almost always 100% commission *The salesperson starves if you dont buy *What if you are the only prospect this week *Consultative selling can be obnoxious too *How many calls do you get after you say no *Telemarketers use poorly targeted lists to save money *The 99% of the people they annoy arent customers anyway *Spammers consider a .0001% closing rate to be successful *Generate millions of e-mails in order to generate a handful of orders Selling as a profession *Two major types of sales jobs *Inside sales *Customer comes to you *No travel *More supervision *More clerical support *Lower value transactions *Lower pay
*Outside sales *You go to the customer *Travel required *Less supervision *Less clerical support *Higher value transactions *Higher pay *Facts about selling *Selling is expensive *Average call: $350 in person; $25 telemarketing *Six calls per order *Rejection is a big part of the job *The best salespeople are people people *Introvert vs. extrovert *85% extroverts The sales process *Three roles of salespeople *1) New customer development *Missionary sales *Detail men *2) Transactions *Order takers *Order getters *3) Customer support *Manage the ongoing relationship *Especially in B2B *Market research *The other third role
*Six stage process
Prospecting *Things you have to do before you make personal contact *Identify the people you want to talk to *Generate leads *Qualify leads (screening) *Create the opportunity *Set appointments Pre-approach *Know as much about your customer as you can *Publicly available information *Annual report *Recent ads/promotions *Awards* *Habits & preferences *Buying history *Personal information* *Names of spouse/kids *Birthday* (powerful) *McKay 66 (http://www.harveymackay.com/pdfs/mackay66.pdf) Approach *Selling is personal contact *The most common mistake in selling is trying to sell before you have created rapport *Goal *Create trust *Clarify roles *Techniques *Icebreaker *Checking in Operation table pad Presentation
*Formats *Stimulus response *Anticipate needs *Do you want fries with that *Formula *Canned presentation *Useful with inexperienced salespeople *Need satisfaction (no script) *This is the assumption for this lecture *Uncover needs *Ask questions to uncover needs *This is where you LISTEN *Clarifying questions to make sure *The better your understanding of the prospects needs, the better the solution you will create *A mediocre salesperson will try to close when the prospect mentions something in your bag *You are assisting with need recognition and alternative identification stages of buying process *Develop solutions *Help the prospect understand how your offering will be the best solution to the problem *The reason you are using personal selling in your promotional mix is because the customer needs help in understanding how your product will satisfy her needs *Objections (questions) happen when the customer doesnt understand the solution you are proposing *Validate the objection *Restate the objection to make sure you are answering the right question *Handle it *If it is factual issue, provide the facts
*If it is an emotional issue, try to determine what is causing the emotional reaction Close *Always ask for the order *Dont hint *The worst that can happen is that they will say no *If you dont ask them, they wont ask you *Mediocre salespeople make the decision for the customer by not asking *Techniques *Trial close *Assumptive close start this week or next week? *Urgency close (high pressure) stop you from researching more information Follow-up *This is especially important for repeat customers *Service *Goodwill *Critical source of market information *Timing of next purchase Sales teams *The latest trend in sales technology is to unbundle the sales process *Prospecting *Pre approach (customer analysis) *Negotiating *Closing *Post sales service
*Different people are better at different sales tasks *Schmoozers

*Generate leads *Analysts *Develop solutions *Closers *Good negotiators *Detail oriented *Customer service *Examples *Team selling *Call centers *Customer support *Transaction processing *Closers (auto dealers) *Telemarketing *Internet Sales management *Strategic issues *The role of the salesforce in the promotional mix *Customer coverage *Territory management *A, B (potential to be large acct), C accounts *New accounts vs. established accounts *Management issues *Recruitment and Selection *Assimilation *Training *Motivation *Compensation *Supervision *Performance evaluation
Recruitment and selection *Turnover is high *Always looking for good people
*You want more applicants than you have jobs *Looking for green peas *Schoolteachers *Hiring experienced reps from the competition Compensation *Most sales jobs have a performance-based compensation structure *Commission, bonus *Salespeople will do what it takes to earn the most money *Trade-off between salary and commission *The higher the salary, the more control *The higher the commission, less overhead *Commission is a variable cost. Performance evaluation *Directly related to compensation *Commission based on sales *Performance includes *Sales *Activities that generate sales *Non-sales related marketing activities *Reporting (paperwork) Salesforce automation *The use of technologies to make the sales function more effective and efficient *Trends *Computerization *Systems integration *Customer relationship management (CRM) *Mobile communication *Wireless laptop *Cell phone
Study Guide for

Lecture 21 Ethics in Marketing

What is Ethics *Definition *Textbook *Moral principles and values that govern the actions of decisions of an individual or a group *Guidelines on how to act *Ethical legal framework Figure 4-1 from book According to Bruce: *There are three levels of right behavior *That which is right *That which is legal *That which is profitable *The bottom line is that if it is profitable, someone will do it *And feel good about it *Societal culture and norms *Culture is a socializing force that determines what is right and wrong *Based on *Customs *Religion *Complicating factors *International standards *What is right and what is legal varies from place to place *Three approaches to International ethics *Home market standard *Highest market standard *When in Rome, do as the Romans do *Personal values *Two traditional perspectives on ethical behavior
*Moral idealism (deontological) *Right is right and wrong is wrong *The important thing is your motive *Utilitarianism (teleological) *The greatest good for the greatest number *The end justifies the means *The important thing is the consequences *Tends to be more common in business *The first choice you have to make is which standard to hold yourself to *Rightness is culturally defined *Religious principles *Local Customs *The letter of the law *Its the governments responsibility to catch me *The bottom line is that if it is profitable, someone will do it *And feel good about it *I recommend the newspaper standard *If your mother was to open up tomorrows Chronicle and the lead story was the decision you made today, would you still make the decision Ethics in business Business culture According to bruce *The basic norm of business behavior is to tell the truth *My word is my bond *A contract is a contract *This is what makes exchange possible *You couldnt do business if you needed a lawyer and the police every time you ordered a case of copier paper *Consumer bill of rights *Before 1960 caveat emptor
*President Kennedy four rights *Safety *Informed *Choice *To be heard *These are NOT the law *They DO guide the thinking of the courts and the legislature *Ethics of competition *Bribery *Illegal in US *Foreign corrupt practices act *Illegal to bribe government officials in other countries *Espionage *Clandestine collection of trade secrets or proprietary information *Difference between intelligence and espionage *Methods *Information sought Company culture *Code of ethics *Written standards of behavior *In business, we succeed by making the numbers *There is a temptation to bend the rules, if necessary, to make the numbers *The Enron effect *Only have meaning when they have been upheld in a situation that was unprofitable for the corporation *Jerry Porras Visionary Companies *Ethical behavior of others in the company *Top management *Immediate supervisor *Co-workers *Consequences *Examples *Pressure to perform *Groupthink
*How is dissent handled *Whistle blowers Ethical issues in business Social responsibility *Three levels of social responsibility (figure 4-4 from book) *Profit responsibility *It is up to the shareholders to do good with the profits earned on their investment *Stakeholder responsibility *Obligations to those who can affect the organizations ability to achieve its goals *Social responsibility *Organizations have an obligation to the environment and to the general public *Ethical audit *Systematic assessment of a firms objectives, strategies and performance in terms of social responsibility *5 step process *What is the firms position *Determine appropriate programs *Establish objectives for programs *Allocate resources *Evaluate results
*Environmental stewardship *Protect or enhance the environment as part of the business *Green marketing differentiate based on environmentalism
*Issues *Cost benefit *Many cost-saving decisions have environmental consequences *Is the environment a primary consideration *Cause marketing *Partnering with a not-for-profit to tackle a social problem *Issues *Doing good versus feeling good *Are you really saving whales? *What if the cause isnt trendy *Who makes the decision *Is it the organization supporting the cause, or is it the nephew of the CEO using the organization to make a donation *Promoting Diversity *Actively include people of difference *This is smart business a homogeneous organization is at a disadvantage in the global marketplace *Issues *Not easy to do *Ethnocentrism it is easy to see the virtue of people who look like you and think like you Quality *The level of performance, reliability, features, safety, cost, or other product characteristics that consumers expect to satisfy their needs and wants *Ethics in products
*TQM *Empower the organization *It is cheaper to build quality products
*Malcolm Baldrige awards *ISO 9000 *International standards *Focus on documented processes rather than on delivering value Ethics in Marketing Ethical Criticism (From Lecture 2) *Do marketers create artificial needs? *Does marketing teach us to value people for what they own rather than for who they are? *Do marketers over promise? *Consumer behavior *Unethical consumption *Stealing *stealing *Rationalizations *Everybody does it *It is only a small amount and they are a big company *Privacy *Information sharing on databases *Medical information *Telemarketing *Do not call list *Except politicians
*Product Safety/Liability *Issue: It is impossible to make a product that is 100% safe *Sugar causes cancer in high enough doses
*What is the appropriate level of safety *Issue: Who is responsible for the damage when product problems happen? *Strict liability *Warnings/protections for manufacturers *Marketing to vulnerable groups *Elderly *Children *Disadvantaged *Pricing *What is a fair price *Price discrimination is wrong *Slotting fees *Paying a fee to get your product featured *Advertising *Issue truth in advertising *FTC false advertising *Any claims must be substantiated *If 9 out of ten doctors agree, show me the survey *Corrective ads *Puffery *Exaggeration *Non-specific claims
Study Guide for Lecture 22 Environmental Scanning

Why environmental scanning
*Definition *Gathering information about the environment, analyzing it and predicting the impact *Macro affects all companies *Micro affects your company *External beyond your control *Internal within your control
0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 *Defense against Marketing myopia (Levitt, 1960) *Every major industry was once a growth industry *The reason growth stops is a failure of management *Narrow conception of the business *Failure to change in light of changing circumstances *Technology *Customer needs
*According to Bruce *In marketing, there is no such thing as a good decision or a bad decision at the time you make it. *You find that out later *There are only defensible decisions *An environmental scan is a systematic approach to understanding the world *Helps make your decisions defensible
0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 *The point *The environmental scan is the first chance you have to make a difference *The better your environmental scan, the better your strategic planning *This is you best chance to avoid being blindsided External Macroenvironment Social *Demographic characteristics of the population and its values *Demographics *Describing a population according to characteristics such as age, gender, ethnicity, income, and occupation *Basis for segmentation *It is easier to succeed when your segment is important and growing
*Population *World *6.3 billion people *9 billion people by 2050 *India #1 *US *300 million people *350 million people by 2025 *20% over 65 *Ethnicity is multicultural issue rather than minority issue *Generational cohorts
*Grouping people by age *Shared experiences *Baby boom 78 million people born between 1946-64 *Aging is an issue *Biggest transfer of wealth in history? *Generation X born between 1965 and 1976 *Better educated, socially aware *Moving through the family stage *Generation Y born between 1977 and 1994 *The wired generation *Population shifts *Migration West and South *California, Texas, Florida *Exurbia *Trend from suburbs to distant suburbs *30% urban *50% suburban *20% rural *362 Metropolitan statistical areas > 50k *83% of population *573 Micropolitan statistical area < 50k *10% of population *Households *Single/working mothers *Non-traditional households *Smaller households *Blended families *Diversity *US is increasingly multicultural *40% ethnic by 2025 *Geographic clustering *Culture
*Attitudes *Sex-based consumer roles diminishing *Men buy detergent, women buy cars *Values *Personal growth *Value consciousness *Religion *Growth of fundamental protestantism *Non-secular spirituality *Non-christian faith Economic *Business Cycle *Prosperity, recession, recovery *Last trough July 2003 (National Bureau of Economic Research) *Economic indicators *Leading economic indicators .1% in September (Conference Board) *Inflation *202.9 in Sept , 0.5% (Bureau of labor Statistics)
*Income *Gross income *Average $43k in US *Disposable *After taxes *Available for necessities *Discretionary *Available for luxury goods *Savings is always an alternative use *Point *You can make money in an up market
*You can make money in a down market *IF you know whether or not you are in an up or a down market Technology *Impact *New industries *Disruptive innovations *DuPont Dacron 1950s *wash n wear *Fashion innovation of the century (Council of Fashion Designers of America, 1999) *Incremental change *Trends *Internet *Cellular *Wireless *Genetics
Competition *Three levels of competition *Brand Competition *Product Competition *Discretionary income *Industry Structure *Monopoly *Oligopoly *Monopolistic competition *Brand-based barriers to entry
*Perfect competition *Factors that drive competition *Entry *Barriers to entry *Bargaining power *Suppliers *Customers *Existing competition *Direct competitors *Substitute products *International competition Regulatory *Restrictions state and federal law place on business *Federal, state and local regulations set the ground rules *Case law determines how it applies *Common law *Everything is legal unless the courts have decided otherwise *Other countries use civil law
*In general, the intent of US government regulation is to *Increase competition *Protect consumers *Uniform commercial code *Guidelines to create consistency among the states *Self regulation *Industry oversight as an alternative to government oversight *Licensing *Better business bureau External microenvironment *Suppliers
*Always have more than one *Salespeople as a source of intelligence *Intermediaries *Make vs. Buy decision *The market *Who is buying our product *Future trend *Who should be buying our product *Alternative segments Internal Microenvironment *Corporate resources and competencies *What are you better at than anyone else that people will pay you money for
Study Guide for Lecture 23 Strategic Planning

What is Strategic Planning *A process that matches an organizations resources and capabilities to its market opportunities for long-term growth and survival *Generally involves strategies and objectives that will take more than a year to achieve *Many times the process is as important as the plan *In a nutshell *A. Figure out where you are now *B. Figure out where you want to be *Figure out how to get from point A to point B Hierarchy of Concerns
*Type of business *Profit *Privately owned organization that serves its customers in order to make a profit *Not-for-profit *Non-governmental organization that serves its customers but does NOT have profit as an objective *Frequently given tax-advantaged status *There is a difference between non-profit and not-for profit *Even not-for-profits have to bring in more money than they spend or they will not be around *Not for profits are a great way to get hands-on experience
*Level of concern *Corporate level *An issue in multi-product/multi-market firms *Aka C level *Business unit *A set of related products and markets *Functional area *Specialized interdependent activities within a business *More of an issue with large organizations *Smaller businesses everybody wears a lot hats *In large organizations there can be friction among different functional areas *Each area has different measures of success *Some areas are naturally at odds with each other *Marketing vs. Manufacturing *Marketing vs. Finance *Cross-functional teams
*Interdisciplinary groups focused on a specific project *New product development *Facilitates cooperation and speeds development *The point *Each of these levels requires strategic planning *Lower-level plans achieve what is called for in higher-level plans *Corporate ROI objective becomes parameter of business unit plan
*Vision/mission *Role of top management *What business are we in *Where we compete *How we compete *What businesses we are not in *What is the playing field *May or may not be written *Mission Statement *Formal statement of the organizations scope, often identifying its customers, markets, products, technology and values. *Specific enough to be useful *Vague enough to allow managers maneuvering room *Frequently inspirational *The test of a good mission statement *If you have a wild idea, the mission statement should be able to tell you whether or not the idea is something your company would be interested in pursuing *Objectives *Targeted levels of performance that the planning entity wants to
achieve *If at the end of the planning horizon, these things have happened, we will be happy to call our outcome a success *Objectives should be *Specific *Measurable *Achievable *Include a time-frame
*Strategies *What broad initiatives will you undertake to achieve the objectives *More than one year time horizon *Outcome is sustainable competitive advantage *Tactics *What specific things do you have to do in order to make the strategies work *Less than one year *Monthly *Quarterly *Annual review *Outcome is measurable progress toward strategic goals Corporate-level planning *Corporate level issues *Mission *Corporate-level objectives *Business portfolio *What are the Strategic Business Units (SBUs) *Do we have a healthy portfolio *BCG matrix approach
*Point *You have a portfolio of offerings *For sustainable growth, you need a balance *Cash cows provide cash flow now *Stars are the future of the company *Question marks (Problem children) and dogs depend on how you are set for cows and stars
Business vs. Marketing Plan *There is a lot of confusion about the difference between a business plan and a marketing plan *For marketing-oriented companies, the business plan is the marketing plan *Most business plans address key marketing issues *Who is the customer *Sales *Business plan *Mission *Objectives *Situation analysis *Strategies *Marketing *Production *Finance *Evaluation and Control *Marketing Plan *Objectives *Situation Analysis *Strategies *Tactics *Product *Price *Distribution *Promotion *Budget and timetable *Evaluation and control
Developing the Marketing Plan Situation Analysis *Environmental Scan *How well do you understand the world in which you compete *Dont make me go over that again *SWOT *Is it good or bad? *Builds from the environmental scan *The environment is evaluated relative to its impact on the company *Whether it is good or bad *Whether it is internal or external *Internal means you have control over it 0100090000037800000002001c0000000000040000000301080005 0000000b0200000000050000000c02e7012b03040000002e0118001 c000000fb021000070000000000bc02000000000102022253797374 656d00012b03000060bf1100fce2d430d0a219000c0200002b030000 040000002d01000004000000020101001c000000fb02ceff00000000 00009001000000000440001254696d6573204e657720526f6d616e0 000000000000000000000000000000000040000002d01010005000 0000902000000020d000000320a2d0000000100040000000000290 3e40120b81600040000002d010000030000000000
*Strengths *Distinctive competency *Three levels of competency *Same as everybody else *This is the bar *Expected *Special capabilities *Opportunities to distinguish yourself from everyone else *Competitive advantage *What is it that you do better than everyone else that people are willing to pay you money for? *Caveats *Be honest *Verify key assumptions *Non-profit example *Only include things in the SWOT that are relevant to your planning process *The environmental scan is where you want to be comprehensive Set product/market focus *What is the desired outcome of the marketing program *Numbers are good *Should relate to corporate/business level objectives *How much of the corporate plan is marketings responsibility *For each segment: *What are the goals *Target markets *Positioning *Points of difference
Strategies *Activity that will lead to achieving the organizations objective *Broad-approach *Take advantage of a strength/opportunity *Minimize a weakness/threat Strategies *Product/market growth matrix *There are only 4 basic approaches to increasing sales *Market penetration *Least risky *Product development *Market development *Diversification *Most risky *Maximize a strength/opportunity or minimize a threat/weakness. *Thats how the quality of your situation analysis determines the quality of your strategies *Strategic window *The timeframe when the opportunity matches the organizations resources. Marketing mix *In order to succeed, you need to have the right product at the right price at the right place with the right promotion *What, specifically do you have to do with *Product *Price *Promotion *Distribution *These are the tactics marketers use
Budgets and timetable
*How much does it cost *Who is responsible *When will it be done *Are there contingencies *Go no go decision The Marketing Plan *Overview *Company mission and goals *Situation analysis *Internal *Company background *Products *Previous results *Channels *External *SWOT *Critical issues *Marketing Objectives *Marketing Strategies *Target markets *Product *Price *Promotion *Distribution *Implementation *Budgets *Schedules *Research *Evaluation and control
Study Guide for

Lecture 24 Marketing Management: Controlling

What is marketing management? *Three roles *Develop the plan *Implement the plan *Evaluate the plan *This whole course has focused on the first point *This section focuses on implementation and evaluation *From research: 4 basic practices that work *Strategy *Clear and focused *Execution *Culture *Performance-oriented *Structure *Flexible, fast *The biggest weakness in strategic planning? (According to Bruce) *No clear connection between Increase market share by 15% in 2 years and What am I supposed to do Monday Morning? *This is where implementation comes in Planning process 0100090000037800000002001c00000000000400000003010800050000000b0200000000 050000000c02e7012b03040000002e0118001c000000fb021000070000000000bc020000 00000102022253797374656d00012b03000060bf1100fce2d430d0a219000c0200002b030 000040000002d01000004000000020101001c000000fb02ceff0000000000009001000000 000440001254696d6573204e657720526f6d616e00000000000000000000000000000000 00040000002d010100050000000902000000020d000000320a2d00000001000400000000 002903e40120b81600040000002d010000030000000000 Implementation The art of management *How to improve implementation
*Communicate goals and how they will be accomplished *Use champions *The person responsible *Reward success *Be decisive *Listen *Open communication to surface problems *Schedule precise tasks, responsibilities, deadlines Tactical plans *Each management unit should know *What is expected *How to achieve it *Relevant time frame *Priorities Organization *Does the structure match your activity? *Communication *Accountability *Organization chart *Traditional organization *Clear lines of authority *Line vs. staff responsibility *Functional specialization *Coopetition between functional areas *Sales is a marketing function *Organization trends *Flatter organizations *The end of the middle manager
*Empowerment *Put the decision-making authority as close to the customer as you dare *Cross-functional teams *This is why you have so many projects *The difference between school and the real world *Similarities between school and the real world *Marketing organization *Sales specialization *Geographic *Product *Customer *Product line organization *Each product has its own marketing functions *Regional organization *Each region has its own marketing Allocate Resources *Budgeting *This is how tactical plans are made real *Top-down budget is determined at corporate *Strategic investment in marketing *Bottom-up budget is developed by the marketing manager *What will it cost to carry out the plan *Dollars associated with the tactical goals *Sales response function *What is the return on marketing investment *The two need to be approximately equal *If not, you need to make a case *Why you need more money to accomplish your task *What you will have to do differently if the money isnt there *In an organization, budget=power *There are other people who have plans for this money also
Controlling the plan *Controlling: *Measuring actual performance, comparing it to planned performance and making necessary changes in plans and implementation *As the goals were established earlier *The key issue becomes Measurement What is a metric *The criteria against which progress is measured *In order to be meaningful, measures should be *Objective *Quantifiable *Timely *Relevant *That which is measured improves *Both the measure and its interpretation must be agreed to in advance *Buy-in from stake-holders *The un-aimed arrow never misses its target *As marketers, we can always concoct an after-the-fact explanation *There are two things you need to know about a number to understand it *Is it good or bad *Is it getting better or worse *The book calls this trend analysis Process measures *Diagnostic tool
*Indicate whether or not the plan is working *Measure intermediate steps associated with ultimate success *i.e., hits, unique visits *Only measure things that are actionable *Measure suggests ways to improve future performance rather than allocating the blame when things go wrong Outcome measures *Evaluative tool *Indicate whether or not the site is successful *Measures should be tied directly to the strategic objectives of the site *i.e., sales *Two reasons why you may not reach objectives *Poor strategy *Poor execution *Process measures control for execution Contingency plans *A series of what if scenarios *Identify critical points in the process *Check points for the execution of multi-stage plans *If stage one achieves an agreed upon level of success, we proceed to stage two *Minimize losses if things go wrong *Maximize gains if things go right *Continuous improvement for iterative processes *Learning curve *Minimum three scenarios *Best case *Worst case
*Most likely *Plan on the most likely *Be prepared for best or worst cases Sales metrics *Sales data is an important source of marketing metrics *Definitely an outcome measure *Can be a process measure *Typical sales measures *Volume *Market share *Cost Volume *How much did we sell *Units? *Dollars? *Is it good or bad *Compared to plan *Compared to competition *Is it getting better or worse *Why? *Process measures Market share *What percentage of the market do we have *Relative to our target market *Relative to our competitors
*Is it good or bad *Compared to plan *Customer analysis *80-20 rule

*Is it getting better or worse *Why? *Process measures Cost *Frequently used as process measures *How much are we spending on a specific activity *Is it good or bad? *Relative to the plan *Is it getting better or worse *Why *Issues in cost analysis *Defining a cost *Fixed vs. variable costs *Allocating overhead *Planned vs. Actual *It is not uncommon to evaluate results relative to previous year rather than to the plan *Once the budget is set, the plan disappears Evaluation *How did we do? *Did we achieve our goals *Are there things we could have done better? *Feeds back into the planning process *The marketing audit *A comprehensive review of the organizations marketing function *Major investment
*Reactive somethings not working *Identify problems to fix *Proactive validate what we are doing *Identify opportunities to improve *Best if done by someone outside of the organization *According to Bruce *Include indicators in your plan before you implement *Process measures tell you why it happened *Contingency plans tell you how to fix it
Study Guide for Lecture 25 Internet Marketing

Assumptions *The Internet is part of an organizations overall business strategy *There are some things the Internet does very well *There are some things the Internet doesnt do very well *Both online and offline activities are needed to achieve an organizations goals *The Internet represents opportunity *Marketing is driven by technological change *The technological environment is in turmoil Whitewater of constant change *You have to understand this technology to succeed in marketing today
*First among equals *Theory of diffusion of a technology *Three phases (Naisbit, Megatrends) *Solve a specific problem *Improve productivity of existing practices *Innovative uses *Gospel according to Bruce: *We are in leaving phase two and entering phase three *You will take us to phase three
Characteristics of the Internet Computer-Mediated *Issues: *Equipment plays a role in the experience *Different customers will perceive your website differently *Bandwidth *Customers memory can be augmented *Automatic access to routine information *Consequences: *Firms must design for the customers equipment *Automated routine interactions *Increased consideration set for customers *Able to address multiple constituencies Graphic Interface *Issues: *Customers navigate using a combination of verbal and nonverbal cues *Look and feel *Consequences: *Badly designed sites create frustration *Visual appeal is a cue to the quality/legitimacy of the site
Information-rich environment *Issues: *Graphics, animation, text, sound *Too much information can overwhelm customers *Consequences: *Organization and navigation to minimize information overload *The more information people have about a product, the more they are willing to pay Global presence *Issues: *No geographic boundaries *Open architecture *Consequences: *Security *Trans-national compliance *More potential customers 24 / 7 Availability *Issues: *What are business hours *Consequences: *No downtime for maintenance *Timely response for interactivity *Automated responses *Time zone collaboration *Customers have more opportunities to consider other options Interactivity *Issues: *Intimacy *One-to-one; one-to-many; many-to-one *Synchronicity *Real-time vs. asynchronous *Customer-provided content
*Consequences: *Customers have a positive attitude when they have control *Target market of one *Expectation of a response *Flow state when ability matches challenge User Control *Issues: *Customer determines direction and flow of content *Consequences: *Re-configure persuasive arguments *Pull rather than push strategy *Fire hose vs. pond Extremely low-cost information storage and transmission *Issues: *How much to put on the Web *Intellectual property rights *Consequences: *Tremendous cost-savings for print-heavy businesses *Expectation that the answer is on the Internet Internet Culture *Issues: *Gift mentality *Netiquette *Emoticons, Chat room Shorthand *Consequences: *Customers reluctant to pay for content *Intrusive marketing is OUT *Ability for offended people to take revenge Three Paradigms *Paradigm: An outstandingly clear example or archetype. *A way of looking at the world *Guides our decision processes
*Three common paradigms for web businesses *The Web as a communications medium *The Web as a channel of distribution *The web as a platform for commerce Communications Medium Public Relations *Traditional *Push medium *TV, radio *Relationships with journalists *Press kits *Special events *Internet *Pull medium *Invite audiences to participate *Interactive *Sticky sites *Give them a reason to come back *Audiences *Have to be online to have a voice Advertising *Traditional *Agency gets commission for media buy *Accepted measurement *Content - persuasive message *Push media *Linear communication *Internet *Agencies charge on an hourly basis *No reliable ratings *Content - message + information *Pull Medium *Interactive communication Customer Service *Providing information to customers after the purchase *Way to differentiate from competitors
*Cost savings *Source of information *Profitability *It costs 10 times as much to sell to a new customer than it does to sell to a repeat customer *E-mail *Expected by customers *Frequently Asked Questions *Self-service customer service *Information presented in customer-friendly terms *Opportunity to ask questions not on the list *Real-time customer service *Chat *Streaming video *Point *The Internet offers cost-effective ways to manage customer relationships Affiliate Marketing *The Google model *Site developer provides free content to draw traffic to site *Entertainment *Information *Search *Banner ads on site generate revenue based on clickthrough Social sites *Creating a community online *Networking *Friendster *Expression *You tube *Interaction *Second Life *Phase 2? *The point (according to Bruce)
*If the purpose of the social site is to generate traffic and monetized through keyword ads it is phase 2 *If the purpose is to create an virtual economy where value is created and consumed on the Web this is phase 3 Channel of distribution *Channel flows *Physical possession *Title (ownership) *Promotion *Financing *Risk *Negotiation *Ordering *Payment *Many of these flows are largely digital *The Internet is a very efficient way to handle digital stuff Commerce Platform *7 strategies businesses use to create value for customers over the Internet (Kleindl, 2001) *Online Purchasing *Digital Communications *Service *Business Process *Market of one *Auction *Pricing Online Purchasing *Buying and selling of goods and services online *eToys.com *Pure play vs. bricks and clicks Walmart.com *Niche Markets *MuseumReplicas.com
*Multichannel marketing *The blending of different communication and delivery channels that are mutually reinforcing *Websites *Retail stores *Kiosks *Personal selling
Study Guide for Lecture 26 Global Marketing

Background Marketing vs. Global marketing *The marketing concept is universal *There are certain issues that come into play when you cross a political boundary *This lecture will highlight these issues *The perspective of an American-based company Theory of comparative advantage *Some countries are better at stuff than other countries *Access to resources *Labor *Technology *Capital *By specializing, global output increases *Porters model *Four keys to comparative advantage *Demand conditions *How sophisticated are domestic consumers *Is the domestic market attractive *Related and supporting industries *Opportunities to create value chains *Availability of expertise *Experienced people *Factor conditions *Resources *Infrastructure *Demographics *Company strategy, structure, rivalry *How tough is it to compete domestically
Environments Economic *National demographics *Wealth *GDP *GDP per capita *Economy *Unemployment *Inflation *Population *Size *Age *Literacy *Public health *Birth rate *Death rate *Source: CIA World Factbook *http://www.cia.gov/cia/publications/factbook/index.html *Stage of development *Less developed country (LDC) *Characteristic *Low standard of living <$1,700 GDP per capita *Agriculture *Little disposable income *Needs *Staples *Develop economic infrastructure
*Developing countries *Characteristics ($1700-$5500 GDP per capita)
*Emphasis on basic industries *Emergence of a middle class *77% of the worlds population *Needs *Beginnings of consumer markets *Value-added industry *Developed countries *Sophisticated consumers *High standard of living >$5,500 GDP per capita *Needs *Marketing orientation *Infrastructure *The basic physical systems of a country's or community's population, including roads, utilities, water, sewage, etc. These systems are considered essential for enabling productivity in the economy. Developing infrastructure often requires large initial investment, but the economies of scale tend to be significant. www.investorwords.com *Distribution *Transportation *Communication *Telephone *Internet *Financial *Education
Political and legal *Political stability

*Form of government *Minority groups *Civil unrest *Attitude toward foreign business *Nationalization *Forced sale *Expropriation *Government regulation of business *Employment rules *Expatriation of profits *Government-sponsorship *Intellectual property *Trademark infringement *Copyright protection *International patents *Source: State Department Travel warnings *http://travel.state.gov/travel_warnings.html *Consular Information Sheets *Unusual immigration practices *Health conditions *Minor political disturbances *Unusual currency and entry regulations *Crime and security information Cultural *Values *A societys deeply held beliefs about the right way to live *Book socially preferable modes of conduct or states of experience that tend to persist over time *Religion plays a strong role *Ethnocentrism
*According to Bruce *There is frequently a level of cultural values consistent with political boundaries *National consciousness
*Cultural values (Ferraro, 2002) *Individual/collective *Equality/hierarchy *Tough/tender *Uncertainty avoidance *Time *Determining right from wrong *Custom *Basic behaviors based on tradition *Mores *Customs with a moral basis *Conventions *Rules for everyday life *Symbols and superstitions *Semiotics *Hard to assess as an outsider *Very powerful *Hotels dont put guests on the 13th floor *Significance of colors *Red
*Language *Language is a cornerstone of any culture *Multiple languages *Dialects

*Accents *Translation *Very tricky *Pinto *Back translation *Cultural change *Trends *Culture is a moving target *Languages disappearing *3000 active languages *Five dominate *Chinese, English, Spanish, Russian, Hindi *Working Group on Traditional Resource Rights http://users.ox.ac.uk/~wgtrr/bul2cont.htm#contents *The homogenization of the world *AKA the Americanization of the world *AKA cultural imperialism *Drivers *American television MTV *Hollywood movies *Internet
Marketing mix Product *The issue is global vs. local products *Global products increase economies of scale *Local products are better accepted by the market
*Three approaches *Standardization (global) *Proactive- global brand *Economies of scale *Synergies *Reactive straight extension *Use existing product to open new markets *Adaptation (localization) *Global brand *Product adapted to local tastes *McDonalds *Beer in France *Frito-lay *Seaweed potato chips in Asia *Invention (local) *Develop products specific for the market *Competence is developing products for specific markets *Possible source of new products in home market *Pantene *Backward invention *Developing products around lack of infrastructure *LDC strategy
Price *Dumping *Selling below the domestic market price *Market entry strategy *Selling below the cost of production
*Price differential *Why are pharmaceuticals so expensive here? *Currency issues *Exchange rates *1972 Olympics *Hard vs. soft currency *Pepsi/Stolichnaya Distribution *Gray markets *Selling a product outside of the agreed upon marketing area *Takes advantage of price differential *Bribery *A way of life in many countries *Illegal in the US *Local partners *Some countries have different laws for foreigners Promotion *Media mix varies from country to country *Communications infrastructure is an issue *Posters in India *Movie trailers in Europe *Government control of mass media *State controlled television *Restrictions on advertising *Restrictions on content *Threats to government control *Internet *Cable *Video *Tastes vary *Advertising is rooted in culture
*Corporate culture *Values, norms, beliefs in an organization *Risk-taking *Profit centered *People centered *Different functional areas *Operations *Finance *Accounting *R&D *Physical facilities *People *Typically, marketers are boundary spanners According to Bruce *The value of a business education *Understand purpose of different functions *Source of competitive advantage *Ability to work in cross-functional teams *Internal communication *Face to face *E-mail *Subject says it all *Memo *1 page max *Pro-forma *Plan with numbers attached

EXAM4 Study Guide

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EXAM4 Study Guide

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Study guide for Lecture 1: Overview

*Creating and delivering value

Value *The ratio of perceived benefits to perceived price

Relationships *Transactions are not independent of each other

What is the marketing function? *Listen to the market

Study guide for Lectures 2 and 3 - Consumer Behavior

This is about where lecture 2 will finish

Study Guide for Lecture 4 Business markets

Study Guide for Lecture 5 Market Research I

*Typical environments *Economic *Competitive *Technological *Legal

Study Guide for Lecture 6 Market Research II

*Recommendations *Dont read more into the data than is there

Study Guide for Lecture 7 Target marketing I

*New opportunities *Get rid of dead wood

Study Guide for Lecture 8 Target marketing II

Study Guide for Lecture 8 Target marketing II

Study Guide for Lecture 9 Product Development

Study Guide for Lecture 10 Product Management

Study Guide for Lecture 11 Product Branding

Study Guide for Lecture 12 Service Marketing

Study Guide for Lecture 13 Price Theory

Study Guide for Lecture 14 Price Strategy

Study Guide for Lecture 15 Distribution Theory

Channel structure *Number of intermediaries

Study Guide for Lecture 16 Logistics

Study Guide for Lecture 17 Retailing

Study Guide for Lecture 18 Promotion Theory

*Promotion and the consumer buying process

E.g. For decision, persuasion would come in useful

Study Guide for Lecture 20 Personal Selling and Sales Management

*Six stage process

*Different people are better at different sales tasks *Schmoozers

Study Guide for

Lecture 21 Ethics in Marketing

*TQM *Empower the organization *It is cheaper to build quality products

Study Guide for Lecture 22 Environmental Scanning

Study Guide for Lecture 23 Strategic Planning

Budgets and timetable

Study Guide for

Lecture 24 Marketing Management: Controlling

*Is it good or bad *Compared to plan *Customer analysis *80-20 rule

Study Guide for Lecture 25 Internet Marketing

Study Guide for Lecture 26 Global Marketing

*Developing countries *Characteristics ($1700-$5500 GDP per capita)

Political and legal *Political stability

*Language *Language is a cornerstone of any culture *Multiple languages *Dialects

S-ar putea să vă placă și

Typical environments Economic Competitive Technological *Legal

Recommendations Dont read more into the data than is there

New opportunities Get rid of dead wood

Different people are better at different sales tasks Schmoozers

TQM Empower the organization *It is cheaper to build quality products

Is it good or bad Compared to plan Customer analysis 80-20 rule

Developing countries Characteristics ($1700-$5500 GDP per capita)

Language Language is a cornerstone of any culture Multiple languages Dialects