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Definition of Marketing

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Marketing is the study of exchange. It's the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and service to create exchanges that satisfy objectives.

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Tasks of Marketing

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1) Discover customer needs 2) Satisfy customer needs Also called the Marketing Concept

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Why does a new product fail when it's introduced?

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The marketing concept wasn't follow. There wasn't sufficient need for the product. Perception is reality.

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Marketing Mix / 4 P's

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Product Price Promotion Place Product is most important

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Benefits of Marketing

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Functional (hammer, toothbrush) Social (cell phone, social media) Personal (sports events, traveling) Experiential (gym membership, healthy foods)

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Types of Costs

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Monetary (tuition) Temporal (time spent in class/studying) Psychological (stress studying) Behavioral (energy spent walking to class)

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Monetary vs. Non-Monetary Costs (IKEA example)

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- temporal --> time wasted in the store, time installing the furniture - behavioral --> getting pissed installing the furniture But it's good furniture for cheap

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Analyzing the marketing environment: People want to focus on a healthy lifestyle -- how does the market respond?

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Increased marketing of gym memberships, organic/healthy foods, exercise equipment

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Porter's Five Forces Model

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Industry Competitiveness Availability of Substitutes Threat of New Competition Supplier Power Buyer Power

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Industry Competitiveness

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- low intensity = high profitability - lower price competition and fewer firms - When few firms compete, intensity is low ex. Boeing/Airbus

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Availability of Substitutes

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- Customers can choose different product as a substitute - Few or no substitutes = high profitability

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Few/No Substitutes

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Soft drinks Gasoline

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Many Substitutes

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beer & wine

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Is Coke a substitute for Pepsi?

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No, they are competitors

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Threat of Potential Entrants

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- High barriers to entry = higher profitability -- high capital requirements -- economies of scale are present -- high product differentiation -- network externalities

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Economies of scale

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high volume production

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What happens when there are low barriers to entry?

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Firms dominate then create barriers

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How does Amazon create a business model with high barriers to entry?

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1) the huge number of users creates a barrier to entry -- google searches lead to Amazon, more buyers = more positive reviews 2) Amazon makes it easy to buy online

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Suppler and Buyer Power

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- Low bargaining power of suppliers/buyers = high profitability low supplier power -- computer industry, disk drives low buyer power -- medical services

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When is there low bargaining power?

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When there's a high number of options with little information

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How is the airline industry regulated by Porter's Five Forces Model?

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The commercial airline industry has tremendous buyer power. They know a high amount of information and there's only two suppliers of aircraft. Each aircraft is tremendously expensive/valuable.

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Sustainable competitive advantage

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an advantage over the competition that can be maintained consistently over time

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How does McDonald's maintain a competitive advantage

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- Convenience - Price - Operational Efficiency

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Market Penetration

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existing products, existing markets increase distribution, lower price ex. products go on sale

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Market Development

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existing products, new markets expanding into a new state/country

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Product Development

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New products, existing markets releasing new iPhones

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Diversification

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new products, new markets Quaker Oats buying Snapple

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Market Leader Strategy

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Attack substitute products ex. EJ Gallow (leading producer of wine) releasing new wine aimed at younger consumers to take away the beer market share

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Exploratory

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Focus Groups Depth Interviews Projective Techniques

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Focus Groups

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Adv - speedy collection of data, interaction flexibility Disadv - small sample size, analysis difficult

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Depth Interviews

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A - greater depth/insight, no social/group pressure D - high cost, analysis difficult

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Projective Techniques

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A - elicit responses from people normally unwilling, increased validity of responses, ability to uncover subconscious motivations D - high cost, interpretation bias

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Mall Intercept

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A - interaction flexibility, speedy collection of data, high response rates, visual stimuli D - moderate to high costs, interviewer bias, sampling bias

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Telephone survey

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A - moderate cost, speedy collection D - limited question types

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Internet survey

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A - inexpensive, speedy, convenience of response time-frame D - lack of control over bogus responses, self-selection bias, not random sample

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Mail survey

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A - cost effective, response time-frame, anonymity D - low response rate, limited depth of response, slow collection

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Observation

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A - collection of actual behavior, useful for collecting sensitive data D - expensive, time-consuming

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Syndicated research services

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3rd party research company that sells market research to companies

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Marketing information system (MkIS)

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people, equipment, and procedures needed to give information to marketing decision makers - internal to the company

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Marketing Research Process

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1) Defining problem and research objectives 2) Developing Research plan 3) Collect Information 4) Analyze the information 5) Present the findings

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Which step is the most time-consuming?

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Defining the problem and research objectives

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Exploratory research

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sheds light on problem - suggests new solutions or new ideas

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Descriptive research

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find out what's most important

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Causal research

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test cause-and-effect relationships

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Primary Data

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research approaches -- observation, focus-group, etc. - collected for a specific puprose

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Secondary Data

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Internal sources, government data, periodicals and books, commercial data, internet Data is always cheaper if already collected Ex. US Census

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Good Market Research

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1) is scientific (objective/unbiased) 2) is creative 3) uses multiple methods 4) realizes the interdependence of models & data 5) Limits the number of methods/research as a whole ($) 6) maintains healthy skepticism 7) is ethical

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What is market share?

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brand's sales / total industry sales

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Sales Forecast

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- based on a specific marketing plan - expressed in dollars or product units - usually covers a 1 year period

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Demand Forecast

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estimating the sales of product during a future time period

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Market Factor Analysis

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demand for a product is assumed to be related to the behavior of certain sales activity

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Survey of buyer intentions

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a sample of current or potential customers are asked how much of a particular product they would buy at a given price during a specified future time period

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Past sales and trend analysis

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flat % increase applied to a past volume or a past volume average

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Sales-force composite

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a bottom-up method consisting of collecting estimates of sales for the future period from all salespeople

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Executive judgment

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obtaining opinions regarding future sales volume from one or more executives

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Test marketing

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a firm markets its product in a limited geographic area, measures sales, and then projects the company's sales over a large area

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Market Segmentation

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1) Identify segmentation variables and segment market 2) Develop profiles of resulting segments

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Market Targeting

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3) Evaluate attractiveness of each segment 4) Select the target segment(s)

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Market Positioning

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5) Identify possible positioning concepts for each target segment 6) Select, develop, and communicate the chosen concept

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Why segment the market?

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1) People have differences in buying habits 2) Goods/services differ in the way they are used - Mass marketing is not a good approach - Always segment the market as much as possible

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Market Segmentation allows managers to:

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- visualize specific customers - concentrate their resources, more efficiently use their resources

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Segmentation Process

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- Identify current and potential needs/wants within a market - Identify distinguishing characteristics - Determine the potential for segments and how well they are being satisfied

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Demographic market segmentation

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age, gender, ethnicity, income, education, occupation, family type, marital status

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Geographic market segmentation

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nation, region, urban/rural, regional, climatic

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Psychographic market segmentation

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attitudes and lifestyles

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Purchase behavior market segmentation

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- usage (low, medium, high) - loyalty status (brand loyal or brand neutral) - user status (user, nonuser, former user) For subscription-based products, former users are the primary target

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Guidelines for Market Segmentation

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- Buying behavior of a segment is rarely traceable to a single characteristic - The first segmentation characteristic should be the one that provides the clearest and most distinctive division - Marketer should be aware of the interrelationships among characteristics

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Conditions for Selecting a Market Segment

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- Identifiable - Substantial - Reachable - Responsive

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Niche Marketing

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one product for one segment

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Differentiated Marketing

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multiple products for multiple segments ex. Honda, Levi's

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Individualized Marketing

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customizing product/service for individual ex. Nike ID, gaming

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Competitive-Based Positioning

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1) Hierarchical order of categories -- lowest to highest ex. Pepsi - diet soft drinks - soft drinks - non-alcoholic beverages --- two lowest are most important 2) Category Membership - statement of new membership, for new products, shows they belong

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How to establish category membership?

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Ad showing your product, A comparison ad comparing your product to a well-known brand

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Points of Difference - How is your brand superior to others

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1) Benefits Selected - strongest positions are ones where brand has point of difference on the most important benefit - small brands find niches 2) Stress one benefit in promotion

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Most important association for points of difference

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If most people believe your brand is the best at doing what is driving its demand ex. Tide - laundry detergent's cleaning ability Walmart - low prices

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Why should you only stress one benefit initially?

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- Way to make a powerful statement - Easiest positions to defend are extreme positions

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Correlational Inferences

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- inferring one thing from another ex. high price = high quality ex. fast, fun car does not equal a safe car

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Brand Essence

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- Abstracted benefits that related to consumer goal - communicating your brand image to match with your target customers ex. a benefit can be used infer another benefit

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Laddering Up

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showing the experience/feeling the brand conveys ex. Herbel Essence commercial

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Personality Dimensions of a Brand

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1) Sincerity 2) Sophistication 3) Competence 4) Ruggedness 5) Excitement

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Laddering Down

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showing features to support the brand image ex. F-150

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Product Orientation Philosophy

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- Best suited for situations where demand exceeds supply - Based on the idea that the product will sell itself through low price or high quality

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Sales Orientation Philosophy

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- Philosophy is to sell/persuade people to buy what is made

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Marketing Orientation Philosophy

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- Requires information about the market - Making what is desired or wanted - First requires the company to find out what is desired or wanted - Focused on long term success

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Three elements of the Marketing Orientation Philosophy

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- Customer focus - Coordinated marketing effort - Long-term success

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Relationship Marketing

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- Way to maintain long-term relationships - need to surpass expectations through superior product or service performance

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Strategic Planning

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Developing a company mission, objectives and goals, choosing organizational strategies, and developing a portfolio plan

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Marketing Planning

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1) Conduct a situational analysis 2) Developing marketing objectives 3) Segmentation and Selecting Target Markets 4) Determining product position 5) Designing a strategic marketing mix

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Situational Analysis

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- Conduct an environmental analysis that will identify external forces

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Demographics

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characteristics of a population

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Economic Trends

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business cycles - prosperous growth or decline -- affects almost every marketing program -- generally growth plans and prices are cut back during recessions

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Competitive Environment

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- brand competition - monitoring substitutes

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Sociocultural trend

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Gatorade becoming a substitute for Coke when consumer taste changed

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Political/Legal

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laws that regulate competition or protect consumers

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Technological advances

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Internet, tables, smart phones and how these affect marketing strategies

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Developing marketing objectives

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effective objectives are specific, measurable, and attainable

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Determining Product Position

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- Every product should have something special about it that makes a particular group of consumers select it over an alternative

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Marketing Mix

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- must be uniquely designed for each target market Product Place (distribution) Pricing Promotion

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Random Sampling

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equal chance for each member of the population to be selected

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Stratified Sampling

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population is divided into groups based on a common characteristic then a random sample is taken from each group

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Area Sampling

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same as stratified, but using geographical area as the basis for groups

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When is category membership important?

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- Introduction of a new product - When consumers may not be convinced a certain product belongs in a certain class ex. Consumers may not be certain if Dell is in a class with Apple of HP

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Points of Parity

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benefits that imply category membership that are common to most (if not all) brands

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Exemplars

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a way for companies to efficiently specify category membership ex. Subaru advertising like Volvo - safe cars

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Point of Difference

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How a brand dominates other members of its category

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Benefit Selection

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- Important to identify accepted consumer beliefs to identify benefits that will be a point of difference - Smaller brands generally try to establish a niche

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Normative Benefits

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- Benefits that customers say are important because of societal standards rather than because these benefits actually influence behavior

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Category Essence

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- Uses insight about how a category fits with consumers' goals as a brand's point of difference - Assumes that if a brand understands a person's problems, that brand is the solution

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