chapter 1

Question 1

4 P’s of Marketing Mix

Answer 1

product, price, place, promotion

Question 2

First Principles of marketing strategy

Answer 2

1 All customers differ.
2 All customers change.
3 All competitors react.
4 All resources are limited.

Question 3

marketing strategy:

Answer 3

1 Decisions and actions
2 Differential advantages over competitors
3 Sustainability
4 Ability to enhance firm performance
5 Customer perspective.

Question 4

search for ways to explain firms’ performance by using smaller and smaller units of analysis which are

Answer 4

industries, to firms, to individual customers. Each new level of analysis provides another set of variables that can explain firm performance.

Question 5

Customers represent the fundamental unit of analysis for marketing strategy, because

Answer 5

because each individual customer is an independent, decision-making entity.

Question 6

Marketing strategy

Answer 6

consists of decisions and actions focused on building a sustainable differential advantage, relative to competitors, in the minds of customers, to create value for stakeholders.

Question 7

diff btw marketing and corporate stategies

Answer 7

marketing focuses specifically on how the firm interacts with its customers.

Question 8

Some key questions should define any entity’s marketing strategy:

Answer 8

• Who are your customers?
•What value do you provide your customers (e.g.,product, service, experience, status)?
• How are you building a differential advantage, relative to competitors, for these customers?
• What value do you earn from your customers due to this differential advantage (sales, profits, referrals)?
• How will you sustain this differential advantage into the future?

Question 9

corporate strategy

Answer 9

the direction and scope of an organization over the long term: which achieves advantage for the organization through the configuration of resources within a changing environment, to meet the needs of markets and fulfill stakeholder expectations

Question 10

marketing actions

Answer 10

brand and selling expenditures

Question 11

intermediate marketing metrics

Answer 11

customer satisfaction, loyalty, market share

Question 12

marketing strategy

Answer 12

Decisions and actions focused on
building a sustainable differential advantage, relative to competitors, in the minds of customers, to create value for stakeholders.

Question 13

Firm’s Sales Revenues, According to the Chain Ratio

Answer 13

market demand (units) × market share (%) × average selling price ($)

Question 14

profit equation includes …

Answer 14

sales and marketing expenses.
decreases profit but are an investment that positively affect the sales revenue ration

Question 15

Effective marketing strategies that build a strong, loyal customer base thus can affect profitability by significantly reducing these sales and marketing expenses, in two main ways:

Answer 15

1. First, loyal customers are less expensive. They do not require expensive retention or recruitment efforts, like potential or less loyal customers do.
2. Second, loyalty among current customers can reduce new customer acquisition costs. Loyal customers often engage in positive word of mouth, which persuades other customers to give the firm a try.

Question 16

First Principles of marketing strategy

Answer 16

1 All customers differ.
2 All customers change.
3 All competitors react.
4 All resources are limited.

Question 17

Each First Principle, when matched with associated marketing decisions, produces a

Answer 17

marketing principle

Question 18

ALL CUSTOMERS DIFFER —–

Answer 18

MANAGING CUSTOMER HETEROGENEITY

Question 19

Various factors lead customers to differ in their preferences,

Answer 19

basic, personal differences; varying life experiences; their unique uses for the product; distinct aspirational self-identities (i.e., who they hope to be); and how persuasive efforts (e.g., advertising) have influenced them in the past.

Question 20

customer heterogeneity

Answer 20

defined as variation among customers in terms of their needs, desires, and subsequent behavior

Question 21

STP

Answer 21

Segmentation, target, positioning approach
The general approach of grouping customers into segments, selecting target segments,
and using marketing activities to improve a firm’s positioning in the target segment.

Question 22

customer centric approach

Answer 22

A company- wide philosophy that places customers’ needs at the center of an organization’s strategic process and uses the resultant insights to make decisions.

Question 23

Input- output framework

Answer 23

input (3c’s): Customer, company, competitors
-strategy of the firm
outputs: industry segmentation, target segment, positioning statement

Question 24

positioning statement questions

Answer 24

Whom should the firm target?
• What needs and benefits are being fulfilled?
• What are the relative advantages of this offering versus competitive offerings?

Question 25

ALL CUSTOMERS CHANGE —-

Answer 25

MANAGING CUSTOMER DYNAMICS

Question 26

customer dynamics

Answer 26

The processes by which customers’ desires and needs change over time.

Question 27

Seminal Event

Answer 27

The needs and preferences of individual customers change in response to life events, whether anticipated or not, such as a car accident, graduation, a major promotion, or a new job.

Question 28

life stages

Answer 28

Historically, people have moved relatively steadily through typical lifecycle stages as they mature (e.g., single –> married –> children –> parent of teens –> empty nesters –> retirement), which influences their product and service priorities.30

Question 29

knowledge/ expertise

Answer 29

When people gain experience with a product, they consider different attributes more critical, due to the learning effect. For example, a first-time guitar buyer might focus on price, color, and whether it “looks like the one Slash plays.” As this musician gains skills and learns which attributes affect playability and sound quality, the preferences might shift to highlight the guitar’s neck width, fret board material, and tone woods.

Question 30

learning effect

Answer 30

The process by which customers become familiar with the product by using it, which changes their weighting of the relative importance of different attributes due to their enhanced knowledge and experience.

Question 31

product category maturity

Answer 31

Another learning effect occurs at individual and market levels as a product category becomes more familiar over time. For example, even novice digital photographers likely consider a camera’s pixels and zoom rates, because these technical qualities, once known only to professional photographers, have become familiar to nearly everyone through the growth of this market.

Question 32

regular exporuse to relevant information

Answer 32

Finally, persuasive information is virtually everywhere, in communications received from marketers, firms, other organizations (e.g., government agencies, trade groups, nonprofit organizations), friends, and acquaintances – all of which can influence a person’s needs and preferences.

Question 33

customer lifecycle

Answer 33

The average change or migration among customers as they age, independent of any product or industry differences.

Question 34

product or industry lifecycle

Answer 34

Typical user experiences and industry developmental effects that can be observed as the product category matures.

Question 35

acquisition, expansion, retention (AER) approach

Answer 35

An approach that groups existing customers into three stages – those recently acquired, longer term customers, and those lost or at risk of being lost – can offer some insights into customer dynamics.

Question 36

customer lifetime value

Answer 36

An approach that attempts to capture the financial contribution of each customer by determining the discounted value of the sales and costs.

Question 37

ALL COMPETITORS REACT —-

Answer 37

MANAGING SUSTAINABLE COMPETITIVE ADVANTAGE

Question 38

sustainable competitive advantage (SCA

Answer 38

An advantage that a firm has when it is able to generate more customer value than the other firms in its industry and when these other firms are unable to duplicate its effective strategy.

Question 39

customer equity

Answer 39

the total of the discounted lifetime values of all of [the firm’s] customers.”

Question 40

brand, offering, relationship (BOR) equity stack

Answer 40

A stack of brand, offering, and relationship equities that represents the firm’s overall customer equity.

Question 41

customer equity is analogous to

Answer 41

CLV

Question 42

ALL RESOURCES ARE LIMITED —-

Answer 42

MANAGING RESOURCE
TRADE-OFFS

Question 43

resource slack

Answer 43

refers to usable resources a firm has. With more slack, it can undertake changes to its marketing strategy more easily.

Question 44

changes in customer needs

Answer 44

alter the size and attractiveness of segments, as well as the number of segments the firm wants to target. Therefore, they might require the firm to reallocate its resources to match its shifting commitment to various segments.

Question 45

Lifecycle stages of a firm’s product portfolio

Answer 45

emerge and require the firm to rebalance its product portfolio to include products that address advanced lifecycle stages and varied target segments.

Question 46

Changes in the product market landscape

Answer 46

result from the entry or exit of competitors. An advantageous market position attracts competitors, trying to steal market share from one another. To combat these efforts and retain its SCA, the firm might need to reallocate its resources.

Question 47

effectiveness of marketing activties

Answer 47

depends on changing customer segments, values, and tastes, the competitive landscape, and economic conditions. The same resources might be rendered more or less effective due to external changes.

Question 48

heuristic-based processes

Answer 48

A decision- making process where an individual uses lay theories or common beliefs (heuristics) to make decisions with uncertain outcomes.

Question 49

attribution-based processes

Answer 49

A method for gauging marketing effectiveness that attributes causal economic effect to a marketing investment, in environments where multiple marketing and confounding events may shape an economic outcome.

Question 50

Budget per marketing activity,

Answer 50

or the commitment the firm makes to the marketing activity.

Question 51

Allocation across categories,

Answer 51

which reflects the percentage split of the marketing budget for a specific activity across categories.

Question 52

time horizon

Answer 52

indicating the timespan for which the firm commits to this marketing budget.

Question 53

A firm can increase its data capabilities by building databases that contain three forms of intelligence:

Answer 53

(1) economic data that reflect the trading environment and changes in business conditions, (2) customer data that capture customers’ needs and behaviors, and (3) competitive data that reveal the competitive landscape, threats, and opportunities.