Midterm Exam – Marketing Principles October
10, 2018
exam format (will consist of two parts):
1. multiple choice
2. open ended responses
SESSION 2 – OVERVIEW OF MARKETING






what is marketing?
o marketing: the process of planning and executing the conception, pricing, promotion,
and distribution of ideas, goods, and services to create exchanges that satisfy individual
and organizational objectives
key ideas in the definition of marketing
o process involving strategy and tactics
o involves the four P’s – produce, price, place, promotion
o includes more than goods
o exchange is key (each party give up something in order to get something)
marketing misconceptions
o isn’t marketing just selling and advertising?
 sales and advertising are two functions of marketing – these are just the most
“visible” consequences of a marketing strategy
o pricing low will fix most problems by bringing in more customers
 competing on price is one of many strategies a firm can use
 while low price may increase market share in the short run, it usually has
disastrous long-term consequences (why do firms use promotions sparingly?)
o we don’t need marketing. we already make a superior product.
 unless the product is properly positioned to the right target segment how will
you generate revenues?
what can we market?
o places, causes, events, organizations – profit/nonprofit, people, ideas
customer value
o customer value: a function of total perceived benefits relative to total perceived costs
o only when benefits > cost have we created customer value
the 4ps of marketing
o product strategy – create value
 provide the benefits, tangible and intangible, consistent with chosen positioning
and target segment
 features, brand name, packaging, service, warranty
o pricing strategy – capture value
 product revenue
 communicate value to customer
 list price, discounts, allowances, credit terms, payment period
o promotional strategy – communicate value
 build awareness and get distribution
 convey information
 develop positive associations/identity
 increase intent to purchase
 advertising, personal selling, sales promotion, publicity
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018

place (distribution) strategy – deliver value
 deliver your product/service at the right place, right time, and right
quality
o outlets, channels, transportation, inventory level
SESSION 3.1 – STRATEGIC PLANNING AND OPPORTUNITY ANALYSIS



four strategies to build competitive advantage
o customer excellence
 retaining loyal customers
 customer service
o operational excellence
 efficient operations
 excellent supply chain management
 human resource management
o product excellence
 high perceived value
 effective branding and position
o locational excellence
 good physical location
 internet presence
marketing plan elements
mission statement
o mission statement: vision for the company
o audiences
 internal (strategic direction)
 external (customers)
o scope
 broad (lack of direction)
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018



narrow (missed opportunities and threads)
 marketing myopia: when a company views marketing strictly from the
standpoint of selling a specific product rather than from the standpoint
of fulfilling customer needs
 “just right”
 based on market-orientation, benefit focus (e.g. entertainment)
 broad view of competition, differential advantage
marketing objectives (types and criteria for good objectives)
o stated objectives provide a standard for selecting strategy and tactics, as well as
evaluating performances
o characteristics of useful objectives: SMART APPROACH
 (s)pecific
 (m)easurable
 (a)chievable
 (r)elastic
 (t) time-specfic
o types:
 financial objective (profit based): increase net profit by $3.5M in 6 months
 market share objective: increase market share from 15% to 18% in 6 months
 sales objective: increase level of sales by 10%
 customer satisfaction objective: bring customer satisfaction to 90%
identifying marketing opportunities and growth strategies:
o market-product analysis matrix
o
swot analysis
 involves taking stock of where the firm or product has been recently, where it is
now, and where it is headed in light of the organization’s plans and the external
factors and trends affecting it
 (s)trengths
 (w)eaknesses
 (o)pportunities
 (t)hreats
 goal: to provide a strong foundation for making better marketing decisions
 asses the 3C’s:
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018


customers
o desired values and unfulfilled needs
o *determine requirements to fulfill goals
 competition
o nature of competition
o goals and capabilities
o *determine strategic changed by competitors
 company (and collaborators)
o organizational goals and capabilities
o *determine strength and weaknesses
scan the environment (PEST factors)
 *determine opportunities and threats
SESSION 3.2 – MARKETING METRICS





cost: fixed, variable, total
o fixed: the expenses you incur regardless of the number of units you produce (TFC)
 stay the same regardless of level of production
 ex. executive salaries, rent, insurance, other overhead expenses
o variable: those which are directly traceable to the volume of the units produced (VC)
 change with volume of production
 ex. manufacturing, shipping, sales commissions
o **𝑇𝐶 = 𝑇𝐹𝐶 + 𝑉𝐶
unit variable cost
o the production cost for each unit produced that is affected by changes in a firm's output
or activity level
unit margin (also called unit contribution or unit markup)
o the difference between the per unit revenue received by the firm and the variable cost
per unit
o **𝑈𝐶𝑀 = 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡
o ex. if a bar of soap costs a store $1 and it sells the soap for $1.5, the margin on sale is
$0.50
percent margin
o percent of selling price associated with profit
𝑈𝐶𝑀
 ** % 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡 OR

** 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 + (% 𝑀𝑎𝑟𝑔𝑖𝑛 𝑥 𝑆𝑒𝑙𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒) = 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 OR

** 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 = (1−% 𝑀𝑎𝑟𝑔𝑖𝑛)
𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡
break even volume
o BEV: the number of units you need to produce to cover total fixed costs
𝑇𝐹𝐶
o **𝐵𝐸𝑉 = 𝑈𝐶𝑀
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018


profit target
o ** 𝑈𝑛𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑥 𝑈𝑛𝑖𝑡𝑠 𝑆𝑜𝑙𝑑 = 𝐹𝐶 + 𝑇𝑎𝑟𝑔𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝑇𝐹𝐶+𝑇𝑎𝑟𝑔𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
o ** 𝑉𝑜𝑙𝑢𝑚𝑒 𝑛𝑒𝑒𝑑𝑒𝑑 𝑡𝑜 𝑎𝑐ℎ𝑖𝑒𝑣𝑒 𝑡𝑎𝑟𝑔𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 =
𝑈𝐶𝑀
market share
o market share: unit sales as a percentage of all like products sold
 break even market share
o break even market share is the market share we need to achieve in order to break even
𝑏𝑟𝑒𝑎𝑘−𝑒𝑣𝑒𝑛 𝑣𝑜𝑙𝑢𝑚𝑒
o ** 𝐵𝑟𝑒𝑎𝑘 𝐸𝑣𝑒𝑛 𝑀𝑎𝑟𝑘𝑒𝑡 𝑆ℎ𝑎𝑟𝑒 =
𝑚𝑎𝑟𝑘𝑒𝑡 𝑠𝑖𝑧𝑒
o how do we define “the market”?
 ex. toyota prius  all hybrids or all cars sold in the US?
 channel pricing (remember: previous channel member’s price is the next channel member’s variable cost)
 examples in the slides (make sure you know how to solve them)
SESSION 4 – SCANNING THE MARKETING ENVIRONMENT
 direct marketing environment – 3C’s
 external market environment the PEST factors
SESSION 5 – SEGMENTATION, TARGETING, AND POSITIONING



how did the idea about segmentation start?
o malcolm gladwell ted talk
 horizontal segmentation and spaghetti sauce; there is no single best product –
customers want variety of the same product (chunky, reduced sodium, etc.)
 people can’t say/don’t know what they want
market segmentation
o customers are heterogeneous in their:
 needs/preferences
 responses to marketing mix offerings (4P’s)
o segmentation is the process of dividing heterogeneous customers into smaller subsets of
customers with similar needs and responsiveness to marketing mix offers
 select one or more segments to target
 position with unique marketing mix
steps in the segmentation, targeting, positioning process
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018




why segment the market?
o benefits of segmentation:
 allows company’s to provide the right product to the right person
 better allocate marketing resources
 enhances competitiveness
 capture bigger share of the market
evaluating segment attractiveness:
o identifiable:
 who is in their market
 are the segments unique?
 does each segment require a unique marketing mix?
o substantial:
 large enough to be profitable
 have the potential for increased profit
o reachable:
 the segments can be effectively reached and served
 each segment can be reached through persuasive communication and product
distribution
o responsive:
 different segments must respond to a marketing mix differently from other
segments
 consumers within the same segment should reach similarly and positively to the
firm’s offering
o profitable:
 current and future profitability
 𝑆𝑒𝑔𝑚𝑒𝑛𝑡 𝑃𝑟𝑜𝑓𝑖𝑡𝑎𝑏𝑙𝑖𝑡𝑦 = (𝑠𝑒𝑔𝑚𝑒𝑛𝑡 𝑠𝑖𝑧𝑒 × 𝑠𝑒𝑔𝑚𝑒𝑛𝑡 𝑎𝑑𝑜𝑝𝑡𝑖𝑜𝑛 % ×
𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑏𝑒ℎ𝑎𝑣𝑖𝑜𝑟 × 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 %) − 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
possible bases of segmentation
o demographics:
 age, gender, household size, family life cycle, income, occupation, education,
nationality, religion, ethnicity
o geographic:
 region, city/county size, population density, climate, city, neighborhood
o psychographics:
 lifestyle, personality, attitudes, values, risk attitudes
o benefit segmentation:
 group consumers according to the benefits they seek in a product (product
features, quality, service)
o behavioral segmentation:
 usage rate: divide consumers by the amount of product bought or consumed
(heavy users, light users, nonusers)
 occasion segmentation: segment based on when the product is purchased or
consumed
targeting strategies
 concentrated targeting strategy (niche strategy):
o target only one group of consumers
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018



o kinda risky~ eggs are all in one basket
 differentiated targeting strategy/multiple target market strategy
o choose two or more segments and offer different marketing mixes for each
segment
o higher cost operation: product modification costs, manufacturing costs,
promotion costs, inventory costs, etc.
 undifferentiated targeting approach:
o adopt mass market philosophy, and view the market as one big market. use one
marketing mix for the entire market.
o it focuses on the common needs across segments
o advantages: low costs, operational efficiency
 one-to-one marketing approach
o a unique marketing mix for each customer
positioning
o the place the product occupies in consumers’ minds relative to competing products it is
the “big idea” associated with the product in consumers’ minds
 ex. volvo positions on safety
o choose to emphasize something that:
 is important to target market
 you can do better than competitors
perceptual maps (what are they; how do they help marketers; what do they tell us; what don’t they tell us)
o what are they?
 a technique of graphing and displaying in two dimensions the position of
products or brands in the minds of consumers
o how do they help marketers?
 learn how brands in the market are perceived
 learn what is desired by consumers and whether those desires are already being
fulfilled
 construct a model for predicting consumer preferences and market share of new
or modified products
o what do they tell us?
 give us an easy way to spot opportunities and niches that are not currently
served in the market
 who is your competition?
 what segments are being served?
 if you modified a product (or its perception), who you would steal share
from?
 if you want to develop a new product, where should you position in the
perceptual space of consumers?
o what don’t they tell us?
 specific tactical advice about how to succeed in those niches
 a forecast of how consumers will respond to new (or modified) offerings that try
to exploit these opportunities
positioning statements
o a concise, simple, and creative statement of our “points of difference”
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018

o
usually just one to three point of differentiation aka value proposition, core
benefit proposal, unique selling proposition
statement should provide a “reason to believe”
 what benefits does the product have to offer? explain how the product meets
the needs of the target market
 what makes it unique? differentiate the product and reduce competition
SESSION 6 – CONSUMER BEHAVIOR PART 1
 motivations
o the inner reasons or driving forces behind human action as consumers are driven to
address real needs.
o human motivations are oriented toward two key groups of behavior:
 homeostasis:
 the body naturally reacts in a way so as to maintain a constant, normal
blood stream.
 self-improvement:
 changing one’s current state to a level that is more ideal.
 maslow’s hierarchy of needs


if you want people to do things, how can you motivate them? (main ideas discussed in the video “dan pink:
the puzzle of motivation”)
o long story short people are less creative and take more time to do things when motivated
by money/rewards
o studies show time and time again that reward-based motivation ain’t shit
intrinsic vs. extrinsic motivation
o intrinsic motivation: fun, internal rewards
 preserve a broader focus
 good for creative, conceptual projects
o extrinsic motivation (if-then rewards): money, tangible rewards
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018




 create a narrow focus
 good when there’s a simple set of rules, clear destination
crowding-out hypothesis
o crowding-out hypothesis (blood donation)
 paying people to donate blood undermines intrinsic motivation
attitudes (definition and components)
o attitude:
 general evaluation that people hold about themselves, others, and things.
o components:
 affect
 behavioral intentions
 cognitions/beliefs
persuasion
o the application of rational and/or emotional arguments to convince others to change
their attitudes
elaboration likelihood model (know thoroughly the two routes to persuasion and the factors that are
important for each one of them; when is each route used)
o ELM is a model of how attitudes are formed and changed.
o model suggests that attitude change depends on how likely the person is to elaborate
(i.e., process) a given message.
o elaboration continuum


central route:
o consumers process message arguments and respond based on diligent processing:
 careful scrutiny of a persuasive communication to determine the merits of
the arguments.
 unique cognitive responses to the message determine the persuasive
outcome
 leads to enduring change
 peripheral route:
o requires little thought; consumers process message lazily, instead relying on some
peripheral cues:
 rely on judgmental heuristics (e.g., # message arguments = cues strength)
 surface features of a message or its source (pleasant visuals, music, humor,
emotional content (including sexual))
 leads to more temporary change
involvement (definition and different types of involvement)
o consumer involvement:
 the degree of personal relevance a consumer finds in pursuing value from a given
consumption act.
o types:
 product
 shopping
 situational
 enduring
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018
o
o
o
 emotional
classifications of involvement
 enduring
 situational
typical high and low product involvement:
 high product involvement
 dresses
 televisions
 champagne
 bras
 low product involvement
 detergents
 facial soap
 toothpaste
 yogurt
effects of consumer involvement on routes to persuasion
 high-involvement:
 “central” route to persuasion; more extensive processing of relevant
attributes
 ability of product to meet needs matters here
 low-involvement:
 “peripheral” route
 peripheral cues produce persuasion (e.g., number of arguments
presented in ad, expertise of communicator, celebrities)
SESSION 7 – CONSUMER BEHAVIOR PART 2
 five stages of the consumer decision-making process
decision making approaches:
 routine problem solving:
 low risk, cost
 frequently bought
 low importance
 extensive problem solving:
 high cost, risk
 infrequently bought
 very important
 unfamiliar with product
problem recognition
o a perceived difference b/w the actual state and the ideal state
o causes?
 inventory runs out, family life cycle, changing reference groups, dissatisfaction,
boredom/novelty seeking, new needs – stimulated by ads/new products
o

MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018
o



how can the marketer influence problem recognition?
 educate about problem
 remind about problem
 exaggerate problem
search
o pre-purchase vs. ongoing
 pre-purchase:
 problem specific
 often temporary
 motive: make better purchase decisions
 ongoing:
 not problem specific
 long-term search
 search itself is sometimes the consumption activity
 motive: enjoyment from the search; gather info for future use
o internal and external search
 internal:
 memory of own experiences, beliefs, attributes
 brands: evoked vs. consideration set
 external:
 magazines, salespeople, opinion leaders, word-of-mouth
o evoked vs. consideration set
compensatory and non-compensatory models (definitions)
o compensatory: greatest number of positive features
 multi-attribute (MAUT) model
 additive difference model
o non-compensatory: reject negative features
 conjunctive model
 disjunctive model
 lexicographic model
 elimination by aspects (EBA) model
determinant vs. evaluative criteria
o evaluative criteria: attributes, features, or potential benefits that consumers consider
when evaluating possible solutions to a problem.
 features are performance characteristics
 benefits are perceived favorable outcomes that result from the presence of a
particular feature.
o determinant criteria: (determinant attributes) are the evaluative criteria most carefully
considered and directly related to the actual choice that is made.
 marketers can influence these!
 bud’s “born on date”
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018

multi-attribute (MAUT) model

additive difference model

elimination-by-aspects model
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018

lexicographic model

what determines which rules are used by consumers?
o number of alternatives
post-purchase evaluation
cognitive dissonance (what is it, when is it most likely, how can we reduce it)


SESSION 8 – MARKETING RESEARCH
 what is marketing research?
o is the process of defining a marketing problem and opportunity, systematically collecting
and analyzing information, and recommending actions
 the marketing research process
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018

secondary and primary data
o primary: research conducted after you realize your research need
o secondary: pre-existing research collected before you realize your research need

qualitative vs. quantitative research

types of qualitative research techniques
o depth interview
o focus groups
o projective techniques
 thematic apperception test (tat)
o ethnographic/observational studies
o wrigley’s “5” gum
o “call of the mall” by paco underhill
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018

the 4 interesting findings from “call of the mall” book of paco underhill

ZMET
o
o
o
o

zaltman metaphor elicitation technique
 zmet is a research process dedicated to understanding people at deep,
emotionally rich levels
 below the easily observable surface level
one-on-one personal interviews
 1 1/2 to 2 hours in-depth interview
 plus 1/2 hour digital image search
highly involving/interesting for participant
small sample sizes
 typically, they interview 10 to 15 people per defined group (segment)
 sufficient to understand nearly all the deep ideas that would be expressed by
many more people
garbology and its discoveries
o residual analysis that help us learn a lot about how people really live by examining their
trash.
o garbageology steps:
 sort by type
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018







sort by function
sort by brand
figure out who is in this household…
 number of people
 ages
 ethnicity
 professions
 income level
 what are they the target market for?
quantitative research techniques
o quantitative research seeks structured responses that can be summarized in numbers.
o surveys (read in textbook)
o experiments (will cover in class)
o observational
 personal (observers collect data)
 mechanical
 upc scanners
 nielson media’s black boxes
4 types of quantitative research
o descriptive
 who, what, when, and where?
o correlational
 ex: attendance and exam grades
 correlation does not imply causation!
 spurious correlation
o experimental
 establishes a cause-and-effect relationship
o quasi-experimental
 used when independent variable cannot/should not be manipulated; lacks
random assignment
spurious correlation (be able to give an example)
o a mathematical relationship in which two or more events or variables are not causally
related to each other, yet it may be wrongly inferred that they are, due to either
coincidence or the presence of a certain third, unseen factor
experiments
o independent vs. dependent variable
 independent (IV): experimental manipulation
 dependent (DV): the outcome or factor measured
o critical features of experiments
 controlled manipulation of the iv by experimenter
 all other variables which might influence the results (confounding or extraneous
variables) are held constant or eliminated.
 random assignment
o random assignment
 used in most and the best experiments
 protects against confounds
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA
Midterm Exam – Marketing Principles October
10, 2018



different treatment groups will, on average, be similar in terms of everything but
the manipulation
formal conditions of causality
o covariation:
 the degree to which a variable x (e.g., advertising expenditures) thought to be a
cause covariates with a variable y (e.g., sales) thought to be an effect.
 x and y are related
o temporal ordering:
 the cause of an event should precede the event’s occurrence in time.
 x y not y x
o control of other causal factors:
 it must be demonstrated that all other possible causal variables are eliminated
from candidacy.
 x  y, z y, z x
choice overload hypothesis
MIDTERM – MACROECONOMICS EXAM
NTHABI KAMALA