# Marketing equations – Flashcards

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unit market share
unit sales (#)/total market unit sales (#)
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revenue market share
sales revenue (\$)/total market revenue (\$)
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purpose of unit market share and revenue market share
indicator of product or brand market competitiveness
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market concentration
3 or 4 firm concentration = sum of 3 or 4 largest market shares
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Herfindahl Index (HI)
sum of squared market shares of all players =.__ (not a %)
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purpose of HI
indicator of overall market competitiveness
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unit margin
selling price - total cost per unit
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margin %
unit margin/selling price
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purpose of margin %
to determine the value of incremental sales and to guide pricing and promotion decisions
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markup %
unit margin/cost per unit
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contribution per unit
selling price - variable cost
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contribution margin
contribution per unit/selling price
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break even volume
fixed costs/contribution per unit
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break even revenue
fixed costs/contribution margin %
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payback period
period of time required to recoup initial investments
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promotional lift
promo avg/baseline
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breakeven price
(total fixed costs/# of units) + unit variable cost
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profit
total fixed costs + total variable costs + (investment x ROI)/ # units
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relatively inelastic
0 to -1
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relatively elastic
< -1
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perfectly elastic
-infinity
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market skimming
high initial prices -steeper demand curve -competitors won't be able to enter the market easily and undercut the high prices
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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
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product line pricing
price steps between products in same product line
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optional-product pricing
optional products along with basic product
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product-bundle pricing
several products combined
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captive product pricing
products that must be used along with another product -inexpensive razor, expensive blades
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demand-minus pricing
wholesale price = retail price/(%markup +1) -wp is retailer's cost of goods
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chain markup pricing
manufacturer's price = (retailer's price)/(%retail markup + 1))/(%distributor's markup +1)
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value
total perceived benefit/price
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off-price retailers
lower selling price through lower buying prices, changing collection of merchandise -JCPenny
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discount stores
sell merchandise at lower prices through lower margins
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vertical conflicts
occur between different levels of the same channel -franchisee and franchiser
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horizontal conflicts
occur among firms at the same level of the channel -two car dealers
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vertical marketing systems
channel members act as a unified marketing distribution system contractual -independent firms join together to obtain economies of sales impact corporate administered -ex. P;G's power over grocer retailers
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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
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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
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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
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distribution channel members
manufacturer -> intermediaries -> customers
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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
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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 IS THE PLEASURE FROM THE PRODUCT > THE PAIN OF PAYING
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gains are more valued when segregated
segregate gains -itemize all things you get in a package -unexpected extra services/gifts have a disproportional impact
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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
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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
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the perception of price
we perceive prices in CONTEXT -we use reference prices
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endowment effect
willingness to pay does not equal willingness to spend
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odd-even pricing
selling price of \$99 compared to \$100
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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
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third degree price discrimination
different customer segments are charged different prices because of different WTP within the segment -student discounts, early bird specials, coupons
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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 ELECTRCITY, WATER, GAS
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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
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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
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brand personality
people anthropomorphize brands -sincerity -excitement -competence -sophistication -ruggedness
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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
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building brand concepts that can tell a cohesive story and ultimately project self-worth for the consumer -at the apex is increased self worth
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brands that the customer proudly wears
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brand promise
marketer's vision of what the brand must be and do for consumers basically, the brand proposition
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multibrands hybrid
many products carry the same name, but some don't Marriot and Ritz
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multibrands branded house
everything the company sells is under the same brand Sony and At;t
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multibrands
branded house hybrid house of brands
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why do firms brand
to move beyond commodities and to reduce the primacy of price in the consumer decision process
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role of brands
-signify quality -create barriers to entry -secure price premium -serve as competitive advantage
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brand
the accumulation of a consumer's emotions, experiences, and beliefs about a product or service
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the product life cycle
-slow growth -rapid growth (profit peaks) -slowing down (sales peak) -rapid decline
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Yellowtail
looked at non-customers - beer and ready-mix cocktail drinkers
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labelling
identifies product or brand describes the product promotes product through graphics
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strategy canvas (value curves)
an analytical tool to capture the current state of play in the existing market space
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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
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new brand
different quality or positioning usually goes down in quality, harder to move up in quality
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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
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multibrands house of brands
owns a lot of brands p;g
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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
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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
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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
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agreement with 85 countries to review and allow a bundle of trademark protections in different international jurisdictions
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signify source or serve as badge of origin
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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)
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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
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product line length
all of the different brands
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product line width
all of the different categories within a company
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augmented product
installation, delivery, credit, warranty, after-sale services
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actual product
brand name, quality level, design, features, packaging
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core product
value proposition
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customer view of products
a bundle of tangible and intangible BENEFITS
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seller view of products
a bundle of tangible and intangible ATTRIBUTES designed to provide benefits to the customer
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examples of product types
commodities shopping goods consumer packaged goods services
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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
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search marketing tools allow you to
target local customers run experiments on your webpages accurately track response rates
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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
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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) QUALITY SCORES ARE IMPORTANT the price to be paid is price1 = (Bid2xQuality2)//Quality1
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clickstream
records of individuals' movements through time at web sites
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any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor
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perception of marketing
commercials are a subset of advertising, which is just a subset of marketing
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reach
a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time
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frequency
a measure of how many times those in the target market who are exposed the message encounter the message
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by 2019...
digital and tv ads will be the most popular
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4.5 million dollars in 2015
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ranking of advertising spenders in the US
proctor and gamble spend the most
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informational transformational
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creative decision filters
brand filters communications filters campaign filters
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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
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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
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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
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story filter (do the dew)
is it simple, understandable, entertaining, creative, original
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product integration filter (do the dew)
is the product a central component of the story?
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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
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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
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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
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promotion tools
advertising personal selling -trade shows, sales presentations sales promotion -discounts, coupons direct marketing -catalog, telemarketing, internet public relations -press lobbies, events
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IMC management
360 degree campaign -consistency in message -variation in mode -complementarily
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above the line promotion
promotes brand equity mass media promotion -television, radio, newspaper
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below the line promotion
immediate incentive to purchase non-media communication or advertising easier to measure ROI
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cottonelle
how do you roll -over or under
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coke zero
for men
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diet coke
for women
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the mere exposure effect
familiarity breeds liking people express undue liking for things merely because they have been exposed to them
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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
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ocean spray
more food energy actually meant more calories
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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
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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
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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
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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%
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when are consumers/managers most likely to behave unethically
when they see themselves in a "hole" -cheating on taxes when owe money
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what to do about unethical behavior?
1. independent audits 2. be an ethical consumer 3. promote mortality in the workplace
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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
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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
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the moral mentor test
could I share an honest and transparent account of my motives with the person I admire most?
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the golden rule test
would I like to be on the receiving end of this action and all its potential consequences?
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red oceans
all the industries in existence today (the known market space)
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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
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beacons
track what a user is doing on the page, including what is being typed or where the mouse is moving
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retromarketing
marketers get more by playing hard to get -customers want exclusivity (Harry Potter and beanie babies) -entertainment -tricksterism -secrecy -amplification
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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
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behavioral loyalty
I intend to keep going to x regularly
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attitudinal loyalty
better than behavioral (super loyal)
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customer relationship management (CRM) strategy
acquisition activities retention activities enhancement activities -cross sell or up sell
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RFM analysis
past behavior is predictive of future behavior -RFM at sears showed that they needed to shift their focus from acquisition to retention
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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
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consumers often assess satisfaction by comparing
expectations and performance
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fungibility
when units of goods are perfectly equivalent and completely exchangeable (money is not always fungible)
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affect
umbrella term for different emotional (affective experiences)
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types of affect
emotions (intense, short duration) and moods (less intense, longer duration) vs. cognitions (thoughts and evaluations, I think...)
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integral affect
when the source of emotion is related to the decision
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incidental affect
when the source of emotion is not related to the decision bridge story
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demand is less elastic
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marketing segmentation
geographic, demographic (age, gender, family), psychographic (social class, lifestyles), behavioral
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when not to use segmentation
when consumer preferences are fairly homogenous
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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
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internal data
WalMart looked ahead and stocked up on beer and strawberry poptarts
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primary data
data collected specifically for the purpose at hand qualitative -observational, ethnographic research, focus groups quantitative -more common in later stages, often used to test specific hypotheses (surveys and experiments)
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reliability
whether a test yields consistent results from one time to another
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validity
the degree to which the content of a test actually reflects the domain its supposed to cover
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random assignment
in terms of experiment and causal inference, you only need random assignment
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random selection
hard to achieve -taking findings from your sample and interpreting to what extent they matter to your population
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internal validity
ability to draw causal inferences -is the experiment free of confounds? -give people unlabeled cups of soda
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external validity
ability to generalize from research setting to other contexts in the real world -give people labeled cups of soda
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relationship between external and internal validity is
negative
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negative correlation
high with low values -running a 5k (training and time)
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positive correlation
high with high values or low with low
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correlation and causation
correlation does not equal causation
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frequency
the number of times an average person in the target market who sees an ad is exposed to the ad
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cash cows