Marketing equations

unit market share
unit sales (#)/total market unit sales (#)
revenue market share
sales revenue ($)/total market revenue ($)
purpose of unit market share and revenue market share
indicator of product or brand market competitiveness
market concentration
3 or 4 firm concentration = sum of 3 or 4 largest market shares
Herfindahl Index (HI)
sum of squared market shares of all players

=.__ (not a %)

purpose of HI
indicator of overall market competitiveness
unit margin
selling price – total cost per unit
margin %
unit margin/selling price
purpose of margin %
to determine the value of incremental sales and to guide pricing and promotion decisions
markup %
unit margin/cost per unit
contribution per unit
selling price – variable cost
contribution margin
contribution per unit/selling price
break even volume
fixed costs/contribution per unit
break even revenue
fixed costs/contribution margin %
payback period
period of time required to recoup initial investments
promotional lift
promo avg/baseline
breakeven price
(total fixed costs/# of units) + unit variable cost
total fixed costs + total variable costs + (investment x ROI)/ # units
perfectly inelastic
relatively inelastic
0 to -1
relatively elastic
< -1
perfectly elastic
market skimming
high initial prices

-steeper demand curve
-competitors won’t be able to enter the market easily and undercut the high prices

penetration pricing
low initial prices

-flatter demand curve
-attract a larger number of buyers for a larger market share
-can use in captive product pricing scenarios

product line pricing
price steps between products in same product line
optional-product pricing
optional products along with basic product
product-bundle pricing
several products combined
captive product pricing
products that must be used along with another product

-inexpensive razor, expensive blades

demand-minus pricing
wholesale price = retail price/(%markup +1)

-wp is retailer’s cost of goods

chain markup pricing
manufacturer’s price = (retailer’s price)/(%retail markup + 1))/(%distributor’s markup +1)
total perceived benefit/price
off-price retailers
lower selling price through lower buying prices, changing collection of merchandise


discount stores
sell merchandise at lower prices through lower margins
vertical conflicts
occur between different levels of the same channel

-franchisee and franchiser

horizontal conflicts
occur among firms at the same level of the channel

-two car dealers

vertical marketing systems
channel members act as a unified marketing distribution system

-independent firms join together to obtain economies of sales impact


-ex. P&G’s power over grocer retailers

conventional (independent) distribution systems
-channel members are independent

-members include producers, wholesalers, and retailers, each seeking to maximize profits

-little control over other members

-no formal means for assigning roles and resolving conflict

multichannel distribution systems (aka hybrid marketing channels)
a single firm sets up two or more types of marketing channels to reach one or more customer segments

-address consumer and product heterogeneity

why are intermediaries used
1. bulkbreaking
2. grading
3. assorting
4. distribution economies (Sears)

-offer the firm more than it can achieve on its own

-efficiency in making goods available to target markets

-match supply from producers to demand of consumers

distribution channel members
manufacturer -> intermediaries -> customers
tightwads vs. spendthrifts
across all samples (N>20,000) tightwads outnumber spendthrifts by 3:2 ratio

-tightwads save more and have less debt than spendthrifts at each income level

opportunity cost
what you could be spending that $100 on

-but customers often fail to spontaneously assess the oc of money

-brain needs a way to compare delayed, intangible outcomes to immediate, tangible ones
SOLUTION: pain of paying

-how consumers actually consider purchases


gains are more valued when segregated
segregate gains

-itemize all things you get in a package

-unexpected extra services/gifts have a disproportional impact

losses are more acceptable when integrated
aggregate losses

-add shipping into cost of order

-include dessert or beverage with meal

-one price for the whole set

reference price
standard of comparison against which an observed price is compared

experience dependent
-what is the fair price to you
-what is the most often charged price

context dependent
-regular retail price
-what’s around you

the perception of price
we perceive prices in CONTEXT

-we use reference prices

endowment effect
willingness to pay does not equal willingness to spend
odd-even pricing
selling price of $99 compared to $100
coupons and rebates
those customers who are more price elastic will tend to use the coupon/rebate more often when they purchase the product than those who are less price elastic
third degree price discrimination
different customer segments are charged different prices because of different WTP within the segment

-student discounts, early bird specials, coupons

second degree price discrimination
customers are charged one price for the first block of units they purchase then a different price for the second block

occurs when surplus inventory sold off at lower price

common in industries where fixed costs are high and variable costs are low


first degree price discrimination
firm segments the market at the level of the individual consumer and charges each consumer his/her reservation price

closest example is negotiating price, car dealerships

price discrimination
market must be divisible into sub-markets and demand conditions must be different

exists when the same product is sold for different prices, that are not attributable to differences in the cost

brand personality
people anthropomorphize brands


the case of non-profits
perceived competence drives WTP

-consumers are less likely to buy the same product from a non-profit than for profit BUT subtle cues promoting the credibility erase this effect

brand laddering
brand laddering
building brand concepts that can tell a cohesive story and ultimately project self-worth for the consumer

-at the apex is increased self worth

badge brands
brands that the customer proudly wears
brand promise
marketer’s vision of what the brand must be and do for consumers

basically, the brand proposition

many products carry the same name, but some don’t

Marriot and Ritz

branded house
everything the company sells is under the same brand

Sony and At&t

branded house
house of brands
why do firms brand
to move beyond commodities and to reduce the primacy of price in the consumer decision process
role of brands
-signify quality
-create barriers to entry
-secure price premium
-serve as competitive advantage
the accumulation of a consumer’s emotions, experiences, and beliefs about a product or service
the product life cycle
-slow growth
-rapid growth (profit peaks)
-slowing down (sales peak)
-rapid decline
looked at non-customers – beer and ready-mix cocktail drinkers
identifies product or brand

describes the product

promotes product through graphics

strategy canvas (value curves)
an analytical tool to capture the current state of play in the existing market space
Blue Ocean
about creating value in a new way that didn’t exist before

not about creating value by offering more of the same

ex. Yellowtail wines
-fastest growing wine in the history of the US and Australia

new brand
different quality or positioning

usually goes down in quality, harder to move up in quality

brand extension
same quality and positioning

extending a brand name works best when the “fit” is good

-complimentary of use
-functional attributes
-same user segment
-similar manufacturing and image

house of brands
owns a lot of brands
pepsi challenge
1/2 of participants said they liked coke more
1/2 preferred coke in an anonymous taste test (behavioral preference)
BUT there was no significant correlation between stated and behavioral preference

-coke greater DLPFC activation

Noah’s winery wine
labeled from either California or North Dakota

-they expected toolkit Cali more so they did and they also ate more of their meals

-same wine

brand equity
arises from differences in consumer response to a product when a brand is present

the added value that a brand gives to its products

-a set of brans assets and liabilities linked to a brand that add or subtract from the product value

the madrid system
agreement with 85 countries to review and allow a bundle of trademark protections in different international jurisdictions
signify source or serve as badge of origin
brand sponsorship options
national brands (kellogg’s)

private brands (Schnuck’s)
-growing in popularity
-55% of people said they shopped at private brands

licensed brand

co-brand (Nike ipod sport kit)

line extension
low cost/low risk way to address different consumer segments and heterogenous consumer needs

-con is that it reduces brand loyalty/confuses customers

product line length
all of the different brands
product line width
all of the different categories within a company
augmented product
installation, delivery, credit, warranty, after-sale services
actual product
brand name, quality level, design, features, packaging
core product
value proposition
customer view of products
a bundle of tangible and intangible BENEFITS
seller view of products
a bundle of tangible and intangible ATTRIBUTES designed to provide benefits to the customer
examples of product types

shopping goods

consumer packaged goods


search marketing
internet advertising is becoming more important because people are spending more time online and more people are seeking information from the web

you can improve your company’s search standing either in organic searches, sponsored searches, or both

search marketing tools allow you to
target local customers

run experiments on your webpages

accurately track response rates

search engine optimization (SEO)
improving traffic to your website via organic searches

how you get on the list
-a web page crawler finds the page (googlebot)
-the page is indexed (all of the meaningful page text is stored)
-the query processor searches for keywords in the text, yields a list of relevant terms (google considers over 100 factors in its page rank algorithm

you have to use unique and accurate pages titles, make use of the meta-tag, make the URL’s meaningful, make your website easy to navigate

search engine marketing (SEM)
increasing traffic to your website via paid placement

google adwords
-priced via second-price auction
-billions of auctions run every week
-google’s main source of revenue ($59 billion)


the price to be paid is price1 = (Bid2xQuality2)//Quality1

records of individuals’ movements through time at web sites
any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor
perception of marketing
commercials are a subset of advertising, which is just a subset of marketing
a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time
a measure of how many times those in the target market who are exposed the message encounter the message
by 2019…
digital and tv ads will be the most popular
how much does a Super Bowl advertisement cost to run
4.5 million dollars in 2015
ranking of advertising spenders in the US
proctor and gamble spend the most
advertising message strategies


creative decision filters
brand filters

communications filters

campaign filters

benefits filter (do the dew)
does the ad communicate the brand’s benefits in a compelling manner?

-thirst quench
-energizing or exhilarating feeling from drinking mountain dew

symbolism filter (do the dew)
does the proposed ad evoke brand symbolism

-historically mountain dew has symbolized masculinity based on unrestrained instincts, taking risks, and creating fun

resonance filter (do the dew)
will the ad resonate with the target customer?

-18 year old males who live in more rural and blue collar areas
-secondary target: 20-39 year old males

story filter (do the dew)
is it simple, understandable, entertaining, creative, original
product integration filter (do the dew)
is the product a central component of the story?
campaign extension filter
does the ad fulfill a role in the broader campaign?

-do the dew campaign, want to continue but freshen
-consistent elements of do the dew: dew dudes, melodramatic, extreme sports excursions, pop culture parodies, rock music to animate athletics, playful do the dew signature

the AIDA model
many advertisements do a great job of getting attention and holding interest, but do not arouse desire or obtain action

Get Attention
Hold Interest
Arouse Desire
Obtain Action

integrated marketing communications (IMC)
with IMC, the company carefully integrates and coordinates its many communication media to deliver a clear, consistent, and compelling message about the organization and its product or service
promotion tools

personal selling
-trade shows, sales presentations

sales promotion
-discounts, coupons

direct marketing
-catalog, telemarketing, internet

public relations
-press lobbies, events

IMC management
360 degree campaign

-consistency in message
-variation in mode

above the line promotion
promotes brand equity

mass media promotion
-television, radio, newspaper

below the line promotion
immediate incentive to purchase

non-media communication or advertising

easier to measure ROI

how do you roll

-over or under

coke zero
for men
diet coke
for women
the mere exposure effect
familiarity breeds liking

people express undue liking for things merely because they have been exposed to them

advertising rules and regulations
the federal trade commission (FTC) regulated most advertising
-no “bait and switch”
-no deceptive pricing

FDA regulates food and drug categories
-disclosure of side effects in drug advertising

ocean spray
more food energy actually meant more calories
personal selling
the interpersonal part of the promotion mix can include:
-face-to-face communication
-telephone communication
-video or web conferencing

pros: personal, flexible, persuasive
cons: expensive, not always consistent

major roles of salespeople
critical link between firm and customers
-match company interests with customer needs in the exchange
-salespeople are the company
-often the only link between customers and firm
motivated reasoning
people are not great judges of their own ethicality
-motivated reasoning and self-serving biases

we can’t help but be motivated by our own best interests

self-serving biases
physicians don’t believe they are influenced by financial arrangements with pharma

when asked to report the percentage of household tasks that they perform, married couples’ estimates total above 100%

when are consumers/managers most likely to behave unethically
when they see themselves in a “hole”
-cheating on taxes when owe money
what to do about unethical behavior?
1. independent audits

2. be an ethical consumer

3. promote mortality in the workplace

corporate culture
you can make money without doing evil (google)
-google only displays ads that are relevant, don’t accept pop-up ads, clearly identified sponsor links

low price but not at any price (ikea)
-ikea suppliers must meet several criteria about working conditions and environmental responsibility

maintain zero-water and sell environmentally friendly products (Walmart)
-impact: packaging and light bulbs

the publicity test
would I want to see this action that I am about to take on the front page of the local paper or in a national magazine
the moral mentor test
could I share an honest and transparent account of my motives with the person I admire most?
the golden rule test
would I like to be on the receiving end of this action and all its potential consequences?
red oceans
all the industries in existence today (the known market space)
blue oceans
all the industries not in existence today
-not about technology innovation
-incumbents often create blue oceans – and usually within their core businesses
-company and industry are the wrong units of analysis – instead STRATEGIC MOVE
-creating blue oceans builds brands
unknown market space, untainted by competition

example: Cirque de soliel or yellowtail

track what a user is doing on the page, including what is being typed or where the mouse is moving
marketers get more by playing hard to get
-customers want exclusivity (Harry Potter and beanie babies)
marketing myopia
you have to define your business correctly
-compact cars in detriot were selling well, but the auto companies there refused to change and lost millions of customers to other small-car manufacturers
behavioral loyalty
I intend to keep going to x regularly
attitudinal loyalty
better than behavioral (super loyal)
customer relationship management (CRM) strategy
acquisition activities

retention activities

enhancement activities
-cross sell or up sell

RFM analysis
past behavior is predictive of future behavior
-RFM at sears showed that they needed to shift their focus from acquisition to retention
prospect theory
a theory that attempts to describe how people make decisions between alternatives, or prospects

1. changes are evaluated with respect to reference points
2. losses loom larger than gains
3. diminishing marginal returns

consumers often assess satisfaction by comparing
expectations and performance
when units of goods are perfectly equivalent and completely exchangeable (money is not always fungible)
umbrella term for different emotional (affective experiences)
types of affect
emotions (intense, short duration) and moods (less intense, longer duration) vs. cognitions (thoughts and evaluations, I think…)
integral affect
when the source of emotion is related to the decision
incidental affect
when the source of emotion is not related to the decision
bridge story
business to business
demand is less elastic
marketing segmentation
geographic, demographic (age, gender, family), psychographic (social class, lifestyles), behavioral
when not to use segmentation
when consumer preferences are fairly homogenous
secondary data
collected for other purposes
-internal sources (previous studies)
-external sources (government sources, commercial, internet)

our of date, too general, not relevant but fast and low cost

internal data
WalMart looked ahead and stocked up on beer and strawberry poptarts
primary data
data collected specifically for the purpose at hand

-observational, ethnographic research, focus groups

-more common in later stages, often used to test specific hypotheses (surveys and experiments)

whether a test yields consistent results from one time to another
the degree to which the content of a test actually reflects the domain its supposed to cover
random assignment
in terms of experiment and causal inference, you only need random assignment
random selection
hard to achieve
-taking findings from your sample and interpreting to what extent they matter to your population
internal validity
ability to draw causal inferences
-is the experiment free of confounds?
-give people unlabeled cups of soda
external validity
ability to generalize from research setting to other contexts in the real world
-give people labeled cups of soda
relationship between external and internal validity is
negative correlation
high with low values

-running a 5k (training and time)

positive correlation
high with high values or low with low
correlation and causation
correlation does not equal causation
the number of times an average person in the target market who sees an ad is exposed to the ad
cash cows
low growth, high share businesses or products
they generate a lot of money that the firm uses to pay its bills and support other SBUs that need investment
selling concept
consumers will buy products only if the companies promote/sell these products
marketing concept
focuses on needs/wants of the target market and on delivering value better than competitors do

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