Chapter 11: Unique Marketing Issues

Question 1

CH11 What is a target market?

Why is it important for a firm to choose its target market early in the process of launching its revenue?

Answer 1

Target market is the limited group of individuals or businesses that a firm tries to APPEAL TO

It’s important that a new venture choose its target market because VIRTUALLY all of its marketing choices HINGE ON these initial choices.

Question 2

CH11 Explain the importance of market segmentation.

What are several ways markets can be segmented?

Answer 2

• First step in selecting a target market
• Market segmentation is important because a new firm typically has only enough resources to target one market segment, at least initially.
• GEOGRAPHY (city, state, country), DEMOGRAPHIC VARIABLES (age, gender, family size, income), PSYCHOGRAPHIC VARIABLES (personality, lifestyle, values), BEHAVIORAL VARIABLES (benefits sought, product usage rates, brand loyalty), and PRODUCT TYPE (varies by product)
  Firms sometimes segment its market on more than one dimention to drill down to a specific market segment that the firm thinks it is uniquely capable of serving.

Question 3

CH11 How should a firm go about constructing a product attribute map?

Answer 3

Once a firm’s identified its position in target market and positioning differentiation from its competitors -> develope a product attribute map, which illustrates a firm’s positioning strategy relative to its major rivals.
To conduct a product attribute map, a firm need to look at primary attributes that its target customers look for in an product/service -> to assess the firms, as well as its major rivals strength/weakness -> stress/focus on strength to offer values to customers.

Question 4

CH11 What is a niche market?

Answer 4

• A niche market is a place within a market segment that represents a narrow group of customers with SIMILAR INTERESTS.
• Most firms target a niche market within the segment to ensure high value offering to customers.
• Its help the firms become an expert in that market by focusing on what to do.

Question 5

CH11 What are three steps entreprenuerial firms use to identify their customer?

Answer 5

1. SEGEMENTING THE MARKET: study the industry in which the firm intend to compete and determine different potential target markets in that industry
2. SELECTING A TARGET MARKET: must be sufficiently attractive and the firm must be able to serve it well
3. CRAFTING A UNIQUE MARKET POSITION: establish a positions that differentiates a firm from its competitors. Position is concerned with how the firm is situated relative to competitors.

Question 6

CH11 What is a tagline in a firm’s positioning strategy?

Answer 6

A CATCHY PHRASE that used consistently in a company’s literature, advertisements, stationery, even invoices, and thus becomes associated with that company -> to reinforce the position it has staked out in the market.

Eg. Nike: Just Do It
A company has created a successful tagline if the message makes you think of its products/services and the position it has established in its market

Question 7

CH11 What are requirements for successful market segmentation?

Answer 7

• HOMOGENEITY of needs and wants appears within the segment
• HETEROGENEITY of needs and wants exists btw the segmentS
• Differences within the segment should be SMALL compared to differences across segments
• The segment should be DISTINCT ENOUGH so that its members can be easily identified.
• It should be possible to determine the SIZE of the segment
• The segment should be LARGE ENOUGH for the firm to earn profits

Question 8

CH11 What are some online database that provide segment suggestions?

Answer 8

IBIS World, Mintel, and BizMiner (available through large university libraries.

Question 9

CH11 What is the consequence of overlooking market segmentation?

Answer 9

Overlooking this step can result in a FAULTY ASSESSMENT of the SIZE of the potential market for a new product/service. Entrepreneurs should enter the business with a REALISTIC ASSESSMENT of the size of its market

Question 10

CH11 Why is niche market important?

Answer 10

Because by focusing on a clearly defined market, a firm can become an expert in that market and then be able to provide its customers with high level of value and service. Focusing on a clearly defined market requires a firm to know what NOT TO DO along with what to do

Question 11

CH11 What are requirements of target market?

Answer 11

A firm’s choice of target market must also be in sync with its business model and the background and the skills of its founders and other employees.

A firm must also continually MONITOR THE ATTRACTIVENESS of its target market since SOCIETAL CHANGES could cause a target market to loose its attractiveness for a firm and the product or service it has to offer customers.

Question 12

CH11 What is a brand?

Answer 12

• A brand is the SET OF ATTRIBUTES - positive or negative- that people ASSOCIATE with a company.
• It could be negative, such as cheap, difficult to deal with; or positive, such as trustworthy, easy to deal with
• The customer loyalty a company creates through its brand is one of its most valuable assets.

Question 13

CH11 What is the purpose of brand management?

Answer 13

• Some companies monitor the integrity of their brands through brand management
• A program used to PROTECT THE IMAGE AND VALUE of an organization’s brand in consumers’ minds.

E.g: If a company discovered that some of its products/services didnt as good as it has promised to customers, it would take immediate steps to correct the problem.

Question 14

CH11 How does a new firm develop a brand?

Answer 14

1. On a philosophical level, a firm must have MEANING in customers’ lives
   E.g: If a young couple invites neighbors to play Cranium, a group board game, and playing the game results in lasting relationships, Cranium will have a special place in their hearts
2. On a more practical level, brands are build through a numbers of techniques, including advertising, public relations, sponsorships, support or social causes, social media and good performance.

Question 15

CH11 What are mistakes in brand building?

Answer 15

1. Placing an overreliance on advertising.
   Instead the company should create buzz or try to receive a favorable review of its product/service in magazines, trade journals, newspapers, or highly respected blog (to lend a sense of legitimacy to a firm that would be hard to duplicate through advertisements.
2. Focusing to much on the features and benefits of their products.
   Journalists are typically skeptical when entrepreneurs start talking about how great their products are. Instead the company should focus on a HUMAN INTEREST STORY about why a firm was started or a story focused on s.th that ‘s distinctly unique about the start-up

Question 16

CH11 What is meant by creating a “buzz” for a company?

Answer 16

• Creating buzz means creating AWARENESS and a SENSE OF ANTICIPATION about a company and its offerings.
• This process can start during feasibility analysis, when a company shows its concept statement or product prototype to prospective buyers or industry experts.
• It hopes that people start talking about it and its exciting new product/service.

Question 17

CH11 What is meant by the term “brand equity”?

Answer 17

“Brand equity” is the term that denotes/represents the SET OF ASSETS AND LIABILITIES that are LINKED to a brand and enable it to raise a firm’s valuation.

5 categories of the assets and liabilities making up a brand equity:

• Brand loyalty
• Name recognition
• Perceived quality ( of a firm’s products/services)
• Brand association in addition to quality (e.g., good service)
• Other proprietary assets, such as patents, trademarks, and high-quality partnerships

Question 18

CH11 Why is building brand important?

Answer 18

1. A strong brand can be a very powerful asset of a firm. Over 50% of customers would buy a product because of its brand -> allow a company to charge a price for its products that is consistent with its image.
2. A successful brand can also INCREASE THE MARKET VALUE of a company by 50 to 75% -> increased valuation can be very important for a firm if it is aquired, merges with another firm, or launch an initial public offering (IPO).

Question 19

CH11 What is a aspect of branding that start-up should be alert to?

Answer 19

It is the possibility of forming CO-BRANDING RELATIONSHIPS, which is when 2 companies form a partnership to combine their brands (to combine the strengths of the brands). It could be SHORT-TERM, to promote specific event or product launch, or can be LONG-TERM, such as opening co-branded stores.

Question 20

CH11 What is a firm’s marketing mix?

Answer 20

A firm’s marketing mix is the set of controlable, tactical MARKETING TOOLS that it uses to PRODUCE THE RESPONSE it wants in the target market.

4Ps: PRODUCT, PRICE, PROMOTION, PLACE license its products to other firms.
-> A firm’s marketing program should be consistent with its business model and its overall business plan

Question 21

CH11 What kind of product investors prefer to fund?

Answer 21

Investors prefer to fund firms that protentially have breakthrough products, such as a software firm that is working on a product to eliminate e-mail spam or a biotech firm that is working on a cure for a disease -> these products are PAIN KILLERS because their benefits would be felt intensely and quickly. In contrast, a new restaurant start-up or a new retail store are more akin to VITAMINS than pain pills.

Question 22

CH11 What is the difference btw a core product and a actual product?

Answer 22

While a core product maybe a Iphone, the actual product, which is what the customers buy, may have as many as five characteristics: a quality level, features, design, a brand name, and packaging.

When first introducing a product to the market, a firm needs to make sure that more than the core product is right. Attention also needs to be paid to the actual product- the features, design, packaging, and so on that constitude the collection of benefits that customers ultimately buy.

Question 23

CH11 What do a “reference account” help a new firm?

Answer 23

A “reference account” is an EARLY USER of a firm’s product who is willing to give a TESTIMONIAL regarding his/her experience with the product.
A testomonial would pave the way for the sales force of the new firm, and the new firm could use it to REDUCE FEARS that it was selling an untested and perhaps ineffective product.

Question 24

CH11 How to obtain “reference account”?

Answer 24

New firms must often offer their product to an initial group of customers for free or at a reduced price in exchange for their willingness to try the product and for their feedback.

Several advantages to getting a strong set of endorsements: credibility with peers, non-company advocates who are willing to talk to the press, and quotes or examples to use in company brochures and advertisements.

Question 25

#CH11 What is price in marketing mix? Why is it important?

Answer 25

- Price is the amount of money comsumers pay to buy the product. It is the only element in the marketing mix that produces revenues; all other elements represents cost - Price is extremely important because it ultimately determine how much money a company can earn. It also send a clear message to its target market. E.g., if a firm positions its product as high quality and charges a low price for its product, it would send confusing signals to its customers, and customers would wonder if the firm's products are high quality or not

Question 26

#CH11 Contrast cost-based pricing and value-based pricing?

Answer 26

1. In cost-based pricing, the list price is determined by ADDING UP A MARKUP PERCENTAGE to a product's cost. The markup percentage maybe standard for the industry or may be arbitrary determined by the firm. - Advantage: straight forward and easy to justify the price of a good/service. - Disadvantages: once the price is set, it is difficult to raise it; based on what a firm think it should receive rather than on what the market/customers think a good/service is worth. 2. In value-based pricing, the list price is determined by estimating what customers are WILLING TO PAY for a product and then backing off a bit to provide cushion. Most experts recommend value-based pricing because it hinges on the perceived value of a product/service rather than cost plus markup, which is the formula that ignores the customers

Question 27

#CH11 What is meant by "price-quality attribution"?

Answer 27

Most experts warn entrepreneurs to resist the temptation to charge a low price for their products in hopes of capturing market share. This approach can win a sale but generate little profit. In addition, most customers make a "price-quality attribution" when looking at the price of a product. This means that consumers naturally assume that the higher-price product is also the better-quality product. If a firm charges a low price for its products, it sends a signal to its customers that the product is low quality regardless of whether it really is

Question 28

#CH11 What are the issues a firm should consider when developing its positioning and branding strategies relating to pricing?

Answer 28

The price a company is able to charge is largely a function of (1) the OBJECTIVE QUALITY of a product/service and (2) the PERCEPTION OF VALUE that is created in the minds of customers relative to competing products in the marketplace.

Question 29

#CH11 What is promotion?

Answer 29

Promotion refers to the activitives the firm takes to communicate the merits of its product to its target market -> to persuade people to buy the product. Most start-ups have limited resources, meaning that they must carefully study promotion activities before choosing the one/ones they will use.

Question 30

#CH11 What are most common activities entrepreneurs use to promote their products?

Answer 30

1. Advertising 2. Public Relations 3. Social Media 4. Other Promotion-related activities: free sample, free trials, viral marketing, and guerrilla marketing

Question 31

#CH11 What is advertising and its major goals?

Answer 31

Advertising is making people aware of a product in hopes of persuade them to buy it. Advertising major goals are: - Raise CUSTOMER AWARENESS of a product - Explain a product's COMPARATIVE FEATURES AND BENEFITS - CREATION ASSOCIATION btw a product and a certain lifestyle These goals can be accomplished through a number of media including direct mail, magazines, newspapers, radio, the Internet, blogs, television, and billboard advertising.

Question 32

#CH11 What are weakness of advertising?

Answer 32

- Low credibility - The possibility that a high percentage of people who see the ads will NOT BE INTERESTED - MESSAGE CLUTTER (meaning after hearing or reading so many ads, people simply tune out) - Relative COSTLINESS compared to other forms of promotions - The perception that advertising is intrusive (affecting someone in a way that annoys them and makes them feel uncomfortable)

Question 33

#CH11 What are some resonable price advertising tools mostly using by start-ups?

Answer 33

1. Hybrid promotional campaigns 2. Advertising in TRADE JOURNALS 3. PAY-PER-CLICK advertising (AdWord, AdSense, Yahoo Bing Network -> allow firms place their ads in front of people who are already searching for information about their product Mediums 4. Online advertising (people who know a lot about a particular topic launch a website, share tips/knowledge, and make money online by essentially selling access to the people attracted to the website) 5. Social media (Facebook)

Question 34

#CH11 Describe steps involved in putting together an advertisement

Answer 34

1. Identify the PURPOSE of the ad: Clearly identify one or more purposes that you expect the advertisement to achieve 2. Determine the target AUDIENCE: identify who you want to see the ad 3. Select a MEDIUM: such as televison, radio, or newspaper 4. CREATE the ad: create the ad that is appropriate for your audience , product, and budget 5. Select the PLACE and TIME for the ad to appear 6. Fulfill expectations: make sure to have enough product on hand (or people to take orders) if the ad is successful Typically, for start-up firms, advertisements are the most effective if they’re part of a coordinated marketing campaign

Question 35

#CH11 What is public relations?

Answer 35

One of the most cost-effective ways to increase the awareness of the products a company sells is through public relations. Public relations refers to efforts to establish and maintain a company’s image with the public. The major difference between public relations and advertising is that public relations is not paid for directly. Many start-ups emphasize public relations over advertising primarily because it’s cheaper and helps build the firm’s credibility

Question 36

#CH11 What are techniques to enhance public relations?

Answer 36

1. Using blogs as a steppingstone to generate substantial buzz about start-ups 2. PRESS KIT: a folder that contains background information about the company and includes a list of its most recent accomplishments. A press kit is normally distributed to journalists and made available online 3. TRADE SHOW: an event at which the goods or services in a specific industry are exhibited and demonstrated

Question 37

#CH11 What is the purpose of using social media for promotion?

Answer 37

Use of social media consists primarily of blogging and establishing a presence and connecting with customers and others through social networking sites such as Facebook or Twitter. The idea behind blogs is that they familiarize people with a business and help build an emotional bond between a business and its customers

Question 38

#CH11 What is social plug-ins?

Answer 38

Social plug-ins are tools that websites can use to provide their users with personalized and social experiences

Question 39

#CH11 What is viral maketing?

Answer 39

Viral marketing is a technique that facilitates and encourages people to pass along a marketing message about a particular product. The success of viral marketing depends on the pass-along rate from person to person

Question 40

#CH11 What is guerrilla maketing?

Answer 40

This is a technique related to both viral marketing and creating buzz. Guerrilla marketing is a low-budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques. The point is to create awareness of a firm and its products, often in unconventional and memorable ways Guerrilla marketing is particularly suitable for entrepreneurial firms, which are often on a tight budget but have creativity, enthusiasm, and passion to draw from

Question 41

#CH11 What is distribution channel?

Answer 41

A distribution channel is the route a product takes from the place it is made to the customer who is the end user, which includes SELLING DIRECT and SELLING THROUGH INTERMEDIATE Within most industries, both choices are available, so the decision typically depends on how a firm believes its target market wants to buy its product.

Question 42

#CH11 What are advantages and disadvantages of selling direct?

Answer 42

1. Advantages: Being able to control the process of moving their products from their place of origin to the end user instead of relying on third parties. 2. Disadvatages: - a firm HAS MORE OF ITS CAPITAL TIED UP IN FIXED ASSETS because it must own or rent retail outlets, must maintain a sales force, and/or must support an e-commerce website. - must also FINDS ITS OWN BUYERS rather than have distributors that are constantly looking for new outlets for the firm’s products

Question 43

#CH11 What is disintermediation?

Answer 43

The process of eliminating layers of middlemen, such as distributors and wholesalers, to sell directly to customers is called disintermediation

Question 44

#CH11 What are advantages and disadvantages of selling through intermediates?

Answer 44

1. Advantages: - the firm does not need to own as much of the distribution channel - the firms can also rely on its wholesalers to manage its relationship with Best Buy and Walmart and to find other retail outlets in which to sell its products 2. Disadvantages: - a firm loses a certain amount of control of its product - be expensive, not make a lot of profit

Question 45

#CH11 What is Exclusive distribution arrangements?

Answer 45

Exclusive distribution arrangements give a retailer or other intermediary the exclusive rights to sell a company’s products The advantage to giving out an exclusive distribution agreement is to motivate a retailer or other intermediary to make a concerted effort to sell a firm’s products without having to worry about direct competitors

Question 46

#CH11 WHat is sales process and its steps?

Answer 46

1. A firm’s sales process depicts the steps it goes through to identify prospects and close sales 2. 7 steps of sales process - Prospect for (or gather) sales leads - Make the initial contact - Qualify the lead - Make the sales presentation - Meet objections and concerns - Close the sale - Follow up

Question 47

#CH11 What is the purpose of having an organized sales process?

Answer 47

- it enables a firm to fine-tune its approach to sales and build uniformity into the process. - it helps a firm qualify leads, so the firm can spend its time and money pursuing the most likely buyers of its products or services. (The most frustrat ing thing a salesperson encounters is spending time and effort working with a potential buyer, only to find that the buyer doesn’t have the money or the authority to make a purchase)