Old Lecture Material for Final Exam
 Benefits:
o Functional (ex: hammer, drugs, learn about marketing/get credit)
o Social (ex: clubs, beer, board games, meet friends/business partners)
o Personal (ex: gym, Mercedes Benz, feel good about learning)
o Experiential (ex: comedian, sporting event, laugh, entertainment)
 Costs:
o Monetary (ex: tuition, book fees)
o Temporal (ex: time spent in class/studying)
o Psychological (ex: stress)
o Behavioral (ex: expending energy)
 Porter’s Five Forces
o Industry Competitiveness – intensity of competitors; low intensity=high
profitability
o Availability of Substitutes – can choose different product as sub; few or no
subs=high profitability
o Threat of Potential Entrants – high barriers to entry=high profitability
o Supplier Power – low bargain power=higher profitability
o Buyer Power – low bargain power=high profitability
 Boston Consulting Group Portfolio
o Star – high growth rate, high relative market share (ex: Red Bull in energy
drink market)
o Question mark – high growth rate, low relative market share; has potential to
grow to a star (ex: AMP in energy drink market)
o Cash cow – Low growth rate, high relative market share (ex: Anhueser Busch)
o Dog – low growth rate, low market share (ex: Oldsmobile)
 Growth Strategy Model
o Market penetration – company tries to sell more f its present product to its
present markets (ex: Wrigley’s gum for non-smoking places)
o Market development – firm continues to sell present product, but to new
markets (ex: McDonald’s in new countries)
o Product development – firm develops new products to sell to its existing
markets (ex: PS3, Wii, Xbox 360, etc.)
o Diversification – company develops new products to sell to new markets
 Consumer Buying Process
o Problem recognition (Maslow’s hierarchy of needs; innate and acquired needs)
o Information search – identifying alternatives
o Evaluation of alternatives
o Purchase decision – buy the product/service
o Postpurchase behavior – satisfaction level
 Types of decision making
o Routine – low involvement, few alternatives (ex: supermarket items)
o Limited - medium involvement, several alternatives (ex: clothing)
o Extensive – high involvement, time and effort spent, high priced purchases
usually (ex: car, boat, etc.)
 Types of market segmentation – ALWAYS SEGMENT THE MARKET
o Demographic – age, gender, ethnicity, income, education, occupation, family
type, martial status
o Geographic – nation, region, urban/rural, climatic
o Psychographic – attitudes and lifestyles
o Purchase behavior
 Usage – light, medium or heavy users of the product
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 Loyalty status – brand loyal or variety seekers
 User status – users vs. non-users, former users
o Benefit – importance of a particular product benefit
Positioning – the way a firm’s product, brand, or organization is view relative to the
competition. Goal is to create a brand essence.
Market demand methods
o Market-factor analysis – demand is assumed relative to a behavior of certain
sales activity (ex: ski resort uses snow to predict customers)
o Survey of buyer intentions – how much customer would buy at a certain price
and time
o Past sales and trend analysis - % applied to volume achieved last year
o Sales-force composite – salesmen estimate their sales for a period
o Executive judgment – opinions from one or more execs on future sales
o Test marketing – markets product in limited area and forecasts from there
Primary Data – data that has to be collected
o Observational, focus-group, survey, behavioral, experimental
Secondary data – data that has already been collected. Always use first is possible
because it’s cheaper.
o Internal sources, government publications, periodicals and books, commercial
data, online data
Market share = firm’s sales ÷ industry sales
Product life cycle
o Introduction – stimulate demand for product, profits low, target innovators
o Growth – competition expands, differentiate product, target early adopters
o Maturity – sale plateau, competition intense, promotion increases while price
decreases, target early majority and late majority
o Decline – competition increases outside product class and decreases within
product class, find new uses for product, target laggards
Adoption process
o Awareness – first exposure to product
o Interest – consumer is interested in product and searches for info.
o Evaluation – consumer decides whether or not product will satisfy a need
o Trial – uses product on a limited basis
o Adoption (rejection)
Penetration pricing
o Price is set low to gain immediate sales/market share, scare off entry. Hard to
recover investment (ex: Microsoft IE, new airline route)
Price skimming
o Set price high to achieve quick/large profits (ex: Apple, Intel, Gillette Razors)
Flexible pricing
o Need a flexible pricing structure for products that are perishable:
 Foods – produce, breads, bakery items
 Services – airline flights, sporting events, concerts
 Short time demand- Christmas cards, high-fashion clothing
Discriminatory pricing – legal as long as it doesn’t hinder competition substantially
o Regional – Victoria’s Secret is more expensive in LA than STL
o Time/age – movies charge different prices for rush hour shows and for seniors,
students, and adults
o Form discrimination – Evian 48 oz water for cheaper than 1.7 oz spray bottle
moisturizer
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Coverage strategies – price goes up, intensity of distribution goes “down”
o Intensive distribution
 Provide offering in as many outlets as possible
 Maximum coverage and no sale effort at point of purchase
 Usually low priced items
 Ex: gum, Hershey’s chocolate
o Selective distribution
 provide offering in selective outlets (only some)
 middle ground- medium coverage and sales effort; need some sales
effort
 ex: Compaq computers at Fry’s Computerland but not Sears
o Exclusive distribution
 Using only one outlet in geographic area
 Maximum sales effort at the point of purchase, minimum coverage
 Ex: Ferrari, Rolex
Promotion
o Advertising – paid form of non-personal communication
o Personal Selling – two-way, personal communication (face-to-face)
o Public Relations – communications management that seeks to influence
stakeholders (publicity, events, lobbying)
o Sales Promotion – short-term inducement of value to arouse interest (ex:
coupon, samples, contest)
Factors affecting promotional mix:
o Target audience, stage of product life cycle, product characteristics, buyer
decision stage, distribution channel strategy
Push strategy – target channel members
o personal selling
o sales promotion
Pull strategy – target consumers/end users
o Advertising
AIDA
o Attention – get the attention of the target market
o Interest – generate interest in what you’re selling
o Desire – build desire by using logic and emotion
o Action – get target market to act; always call for action (sale)