Marketing Study Guide Chapter 6 Customer Value driven market strategy Target marketing - identifying market segments, selecting one of them and catering their marketing techniques towards them. Marketing segmentation - dividing customers into different groups based on needs, characteristics and behaviors and creating different marketing strategies for them. - 1. Selecting customers to serve - divide the market (segmentation) - select which one to enter (targeting) 2. Decide on a value proposition - Differentiate the market offering to create superior customer value - Position the market offering in the mind of consumers Types of segmentation - there is no clear format to segmenting. Marketers must try new and different things and see which one works the best. Geographic segmentation - segmentation based on country, state, zip code, city, etc. Companies may decide to operate in all these different areas but they should be aware of the diverse needs and wants of the people within this area. (ex: the target in cambridge thats tiny af and has a lot of dorm room type stuff) Demographic segmentation - based on age, life cycle, race, ethnicity, occupation, education, religion. Arguably the most important part of the demographic segmentation. Psychographic segmentation - lifestyle & personality Behavioral segmentation - occasions, benefits, user status, loyalty status Intermarket - buyers who have similar needs despite being in different countries. Requirements for effective segmentation: - Measurable - the size, purchasing power and profiles of the segments can be measured. - Accessible - Market segments can be effectively reached and served - Substantial - The segment should be large and profitable enough to actually serve - Differentiable - conceptually distinguishable and respond to the market segment ut is trying to deserve, - Actionable - actually having the action taken for all these different segments trying to be served. Evaluating market segments - Size and growth of the segment - Segment’s attractiveness - Company’s objectives and resources Undifferentiated marketing / mass marketing - ignoring the idea of market segments or target marketing and deciding to target the whole market by catering to a common need they may have. This being said : differentiated marketing == segmented marketing == target marketing Concentrated marketing / niche marketing : going after a small share of a large market. Niching lets smaller companies focus on a smaller audience that caters to a small amount of resources. Individual marketing - customizations basically, tailored suit, tailored headphones, tailored sneakers. For you created by you. Expenses with the flex of “custom-made” basically. Choosing a market strategy: Undifferentiated marketing : - uniform products such as strawberries - Market variability - consumers respond the same way to things - Competitor’s market strategies - knowing how the competition is moving Differentiation and positioning: - Product positioning - how consumers see the products, where is it placed in their minds. - Competitive advantage - an advantage over the competitors received by gaining higher customer value by having lower prices or providing benefits that justify the high prices. - Positioning strategies: - important - delivers high benefit to the consumer - distinctive - , its unique, or it is offered in a more distinctive way - superior - superior in so many ways that customers want the benefit - communicable - worth can be obviously spotted, product speaks for itself - preemptive - buyers cannot easily replicate or copy difference - affordable - buyers can afford it duh - profitability - company can introduce the difference profitably Positioning statement - statement that asserts the company’s goals and values towards the customers. To (target segment and need) our (brand) is (concept) that (point of difference). Delivery : If the company decides to build a position on better quality and service, it must first deliver that position. Designing the marketing mix—product, price, place, and promotion Chapter 7 Products, Services and Brands What is a product? - A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or a need. - Under products are services : services are a type of product that are intangible although still being sold. They are usually experiences and do not result in any sort of ownership. Ex: flying on an airline, staying at a hotel, going for a consultation on anything.. Levels of products and services: Level one : “what is the customer really buying?” - Products are an essential part of market offerings (what is being sold). They also play a key role in the marketing mix. Without the product there is no place, promotion or price to consider. - As time has evolved it is no longer just pure product or pure services but rather a mix of both. Example: - Someone wants to buy a Harley Davidson motorcycle. Are they really just buying a Harley Davidson motorcycle? - No, they are buying freedom, self expression and the power that comes with riding on a Harley davidson motorcycle. Level two : Delivering the actual product. - The product must then be created. It must bring the dreams into an actual tangible reality that represents what the customer is really buying. Level three : Augmented product - Providing additional customer services that come with owning the product. consumer products vs. industrial products - Consumer products - are the final products purchased by consumers for personal consumption. The products differ in the way consumers buy them so marketers like to analyze these trends in order to build value. - consumer products usually include convenience products, shopping products, speciality products and unsought products Understanding these products: - Consumer products - purchased frequently with little to no thought, low priced, can be found anywhere and mass promotion buy the producer (ex : toothpaste, hand sanitizer) - Shopping products - less frequently purchased, lots of thought put on the price, the quality, the style. Usually a higher price with lesser distribution, advertising and personal selling by both producers and resellers (televisions, good pair of jeans from the mall) - Specialty products - strong brand preference and loyalty, little comparison of brand, low price sensitivity. Probably has the highest price. Exclusive distribution. More carefully targeted promotions as well. (ex: rolex, hermes ) - Unsought products - little to no product awareness. Price and distribution vary. Aggressive advertising (life insurance, random credit card companies) Industrial products - Industrial products - a product bought by a company in order to further or continue their own company. If a consumer buys a lawn mower to mow the lawn it's a consumer's product. If a consumer buys a low mower for a landscaping business it's an industrial product. Understanding these industrial products : - Materials and parts : sold directly to the industrial users. Price and service are the factors that tend to matter the most. Branding and advertisement don’t. Ex : beer company buying barley from a farm. - Capital items : industrial products that aim at the buyer’s operations and productions. These types of equipment have shorter lives than do installations and simply aid in the production process. - Supplies and services : include operating supplies, maintenance and repair. Supplies are the convenience products of the industrial field because they are usually purchased with a minimum of effort or comparison Broadened concept of market offerings : Organizations, Persons, Places, and Ideas - Organization - activities carried out to essentially sell the organization itself to the consumers. They want to create, maintain and change attitudes of the company to consumers. (ex : h&m going from being eh, teen af to kinda like zara) - Persons - people can also be thought of as products. Hence consumers' attitudes on personal matters and they need to maintain this attitude in order to be trusted. Ex: doctors, lawyers, individual consultants, presidents. - Place - marketing involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places. (Chicago - windy city or Chiraq?) - Ideas - using “social marketing” to convince and encourage individuals that a certain product will help them as an individual and fit into societal standards. Product and service decisions : Product Attributes : - Product quality - quality is when customers come back but the products don’t. Quality affects a products or service performance. - Product features - company begins with a striped down model and continues to grow by adding more innovative and cooler features that attracts customers. - Product style and design - working on a good appearance that goes beyond the outer look but penetrates the product itself adding to both usefulness and how it looks. Branding - identification of a seller or a maker of a product or service. Packaging - involves designing and producing the container or wrapper for a product so it looks more appealing and draws attention to the customers. Labels & Logos - add support to the companies brand and help with identification ex : coca-cola, nike “just do it”. A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same Product line length - a product line is too short when a manager can increase profits by adding more to the line and it's too long when they can increase profits by reducing. Line filling - basically like coke, diet coke, white coke, risk of cannibalization because its not making you any money. The people who were purchasing reg coke just move to diet coke. NO NEW USERS. Line Stretching - introduces new products beyond the current range. EX: making a fancier car to attract wealthier customers. Make decisions on the basis of 3 things: - Individual product line decisions - - Product line decisions - - Product mix decisions - or product portfolio is the range of items a company is selling. The categories include: width, length, depth and consistency. ★ - length - how many things (coke company itself, all drinks) ★ - depth - number or versions of each product in the line (coke) ★ - width - number of product lines the company carries ★ - consistency - how closely related are the product lines to each other Why? Provide background for the product strategy. It can now improve the business based on these four variables. The Nature and Characteristics of a service: - Four special characteristics must be considered: - Intangibility - cannot be seen tasted felt heard or even smelled before the purchase (cosmetics surgery) - Variability - quality of services depends on who provides them (good lawyer v bad lawyer) - Inseparability - services cannot be separated from their providers - Perishability - services cannot be stored for later sale or use Service profit chain - which links service firm profits with employee and customer satisfaction. Customer happy = service was good = profits will be good - This chain consists of five links: - Internal service quality - quality environment - Satisfied and productive service employees - if employee likes working there it will show to the customer - Greater service value - value is created for the customers efficiently - Satisfied and loyal - ryan and united Good customer marketing in services: - External marketing : ads, branding, design, visit a hilton - Interactive marketing : how is the concierge treating you, how do the employees treat you, basically marketing when there. Was it an enjoyable stay? - Internal Marketing : employees are marketed to by companies giving them benefits and telling them the importance of having delighted customers. Building strong Brands - Brand Equity - name recognition to customers. Think of having an apple phone or going to DISNEY world or getting McDonalds. - Brand Value - the total financial value of a brand Building a brand: - Step one : brand positioning their attributes, values, benefits and beliefs. - Step two : Brand name selection : choosing a recognizable notable name that could be useful for brand equity - Step three : brand sponsorship : licensing co brand etc - Step four : brand development : line extensions etc Chapter 8 Developing new products Product life cycle : It is born, goes through several phases, and eventually dies as newer products come along that create new or greater value for customers. A firm can obtain new products by 1. Acquisition — which is buying a new company, new patent, new licence etc or new product development. New Product Development strategy 1. What are new products? New products are original products, product improvements, products innovated etc. 2. Why new products? New products are important to both customers and the marketers who serve them: They bring new solutions and variety to customers’ lives, and they are a key source of growth for companies 3. New product development process: - Step one : have an idea. Idea generation is the process of searching for new product ideas. They go through thousands of ideas before reaching their selection. They have to use both internal and external sources. - - Internal = using their own people and connections to generate ideas - External = using competitors or distributors in order to generate ideas Step two : screen the idea. Idea screening is basically weeding out good ideas from bad ones. Product development makes costs add up so they simply want to put money into an idea that will generate money. - Step three : product concept - the most attractive idea is then developed into a more detailed idea that consumers can actually see. - Step four : concept testing - the concept is then put out to the target customers either symbolically or physically in order for them to test it and rate enjoyability. - Step five : marketing strategy development - designing an initial marketing strategy for introducing this car to the market. - Step six : actual product development - the physical real thing is created. - Step seven : market testing - if the product passes both the concept and development stage it goes through the real market testing and gets the whole strategy of targeting and positioning strategy, advertising, distribution, pricing, branding and packaging, and budgeting. This is also called commercialization and it is simply introducing a new product to the market Other new product development: - Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer-satisfying experiences. - Team-based new product development - Under this approach, company departments work closely together in cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness - Systematic New Product Development - It can set up web-based idea management software and encourage all company stakeholders— employees, suppliers, distributors, dealers—to become involved in finding and developing new products. - an innovation management system can be created to collect, review, evaluate, and manage new product ideas. First, it helps create an innovation-oriented company culture. It shows that top management supports, encourages, and rewards innovation. Second, it will yield a larger number of new product ideas, among which will be found some especially good ones The product life cycle: Company finds and develops a new product, during product development, sales are zero, and the company’s investment costs mount. - Introduction period is a period of slow growth as the product slowly adjusts in the market. - Growth is a period of rapid marketing acceptance and increasing profits - Maturity is a period of slowdown in sales because the people who want the product know that they want it, the people who don’t don’t. - Decline is when the sales drop Chapter 9 Pricing Major pricing strategies: Price floor - no profits below this price due to production costs Price ceiling - no profits above this price due to customer-perceived value - Customer-value based pricing: uses buyers’ perceptions of value as the key to pricing. Value-based pricing means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with all other marketing mix variables before the marketing program is set. - How to meet these need: - Assess customer needs and value perception - Set target price to match customer perceived value - - Determine costs that can be incurred - Design a product that delivers this Good Value pricing : offering the right combination of quality and good pricing - Value added pricing : Rather than cutting prices to match competitors, they add quality, services, and value-added features to differentiate their offers and thus support their higher prices. - Cost-based pricing: costs play an important place in setting a price because they don’t want to not gain any profit from the production. - Types of costs: - Fixed costs are costs that do not vary with production - Variable costs are costs that vary directly with the production - Total costs = fixed costs + variable costs - Cost plus pricing - adding a standard markup to the cost of the product. Ex: seller pays 20$ for jewelry but sells the jewelry for 40$ - Break even pricing / target return pricing - set even pricing to break even on the cost of making and marketing a product - How these needs are met: - Design a good product - Determine product costs - Set price based on cost - Convince buyers of product value - Competition-based pricing: involves setting prices based on competitors’ strategies, costs, prices, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products Price Adjustment strategies and price changes: Most companies will adjust their prices to reward customers for their actions in earning profit and further generate that customer value. - Discounts : discounts are a direct reduced cost from the original payment during a stated period of time or based on quantity. Ex: pay 2/10 net thirty means that if a customer pays within 10 days then they will get 2% off. - Allowances - promotional money paid by manufacturers to suppliers in order to feature something made by the manufacturer or they can do trade in allowances in which they get a certain amount off for giving something back - Segmented pricing - two or more versions of pricing that is designed due to to external factors and differences in customers, products and location. - Psychological pricing - sellers consider how customers perceive the pricing not just based on economics ex: who is better a 50$ lawyer or a 500$ lawyer - Promotional pricing - companies will temporarily price their products below list price—and sometimes even below cost—to create buying excitement and urgency. - Geographical pricing - Setting prices for customers located in different parts of the country or world. - Free on board (once it gets on board the price is set by them picking it up) - Uniform delivered shipping - customers get set price for the shipping - Zone pricing falls between FOB-origin pricing and uniform-delivered pricing. The company sets up two or more zones. All customers within a given zone pay a single total price; the more distant the zone, the higher the price - Dynamic pricing - adjusting prices continually to meet the needs of consumers (uber) - International pricing - most companies will adjust their prices based on the economic conditions of that country Public policy and pricing: - The most important pieces of legislation affecting pricing are the Sherman Act, the Clayton Act, and the Robinson-Patman Act, initially adopted to curb the formation of monopolies and regulate business practices that might unfairly restrain trade - Price fixing - talking to competitors and setting a price so that customers will have to pay a higher cost of either product - predatory pricing—selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business. Chapter 10 Marketing Channels Value delivery Network - a network composed of the company, suppliers, distributors, and ultimately the customers who partner up with the company to improve performance. Marketing channel - a set of individual organizations that help deliver a product. Number of channel levels: What are channel levels? A layer of intermediaries that bring the buyer closer and closer to its product. Direct marketing channel? A marketing channel that has no intermediary levels. Indirect marketing channel? A marketing channel containing one or more intermediary levels Channel behavior and organization: Channel conflict : disagreements within channels based on goals, values, roles and rewards. 1. Horizontal conflict occurs among firms at the same level of the channel. For instance, some Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories. Vertical Marketing systems: - Conventional distribution channel - one or more independent retailers who work in their own self interest. (one person can fuck up everything) - Vertical marketing system - a channel structure in a unified system. One channel either owns, has contracts or wields so much power that they must be corporate. VMS can be dominated by the producer, the wholesaler or the retailer - Types of VMS: - Corporate - production and distribution are owned by them - Contractual - production and distribution work together due contracts and manage conflict through contracts. (franchise organization = most common type) - Administered - by de facto power of their size and power theta are OP af Horizontal Marketing systems: Companies join together in order to accomplish more than they would alone using the different resources they have. Multichannel distribution systems : when a single firm sets two or more distribution firms to reach different types of customers Changing channel organization: Disintermediation - The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries. Basically cutting out the middle man. Marketing channel design - designing effective marketing channels for the customers. Marketing logistics—also called physical distribution— involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. Supply chain management - Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consume Integrated logistics management - The logistics concept that emphasizes teamwork—both inside the company and among all the marketing channel organizations—to maximize the performance of the entire distribution system. Third-party logistics (3PL) provider - an independent logistics provider that performs any or all of the functions required to get a client’s product to market.(DHL, UPS, FED-EX) Chapter 11 Retailing and wholesaling What is retailing? All the activities that involve selling goods to the final consumers for their own personal use - Retailer - someone whose business comes from retailing Shopper marketing? - Complete focus on turning shoppers into buyers - Shopper marketing builds around what P&G has long called the “First Moment of Truth”—the critical three to seven seconds that a shopper considers a product on a store shelf. Omni-channel retailing: Seamlessly connecting in store, online and mobile shopping all together since consumers today like to do a lot of online research before heading in store. Types of stores : Category killer - A giant specialty store that carries a very deep assortment of a particular line Corporate chain - two or more outlets controlled by a big corporation Voluntary chain - Wholesaler-sponsored group of independent retailers engaged in group buying and merchandising. Retailer cooperative - group of independent retailers who came together to establish a central buying organization Franchise organization - contractual association between a franchisor (mcdonalds, chickfia) Chapter 7 Chapter 8 Chapter 9 Chapter 10
