Chapter 4 - economic Approach

Question 1

economic approach definition

Answer 1

• builds on one of the most fundamental concepts in marketing: idea that right marketing mix will generate optimal sales
• use of neoclassical economics and classical marketing theory
• use of 4 Ps (price, product, place, promotion)

Question 2

economic approach assumptions

Answer 2

• the brand can be controlled and managed by the sender (strong and successful brand when management get marketing mix right)
• consumers are perceived to be (+/-) passive receivers of marketing messages

Question 3

theoretical building blocks of the economic approach

Answer 3

• transaction costs
• four P’s

Question 4

transaction costs

Answer 4

= barriers to utility maximization, goal for BM in economic approach is to eliminate these transaction costs and facilitate that transactions take place
- focused short term
- managerial efforts = directed to tactical management and improvement of marketing mix
- consumer has limited bounded rationality –> not able to have complete overview of options

Question 5

Four P’s

Answer 5

= managerial planning tool to facilitate transactions and exchange of goods
- Product: benefits that customer gain from consuming it (design, brand name, functionality, quality, safety, packaging, etc) –> aim satisfy functional demand
- Price: based on total manufacturing costs of product, distribution and advertising costs, consumer willingness to pay –> closely linked to promotion
- Place: distribution of product from manufacturer to end consumer –> supply chain strategies are essential
- Promotion: communication and persuasion –> higher goal is to raise awareness and knowledge of products

Question 6

methods and data of economic approach

Answer 6

• objective of research and data collection is to investigate how manipulating one or more factors of marketing mix will affect consumers’ brand choice
• investigation of causal effects between 2 or more variables of marketing mix
• use statistical tools

Question 7

critiques of economic approach

Answer 7

• represent a ‘push’ approach to marketing of brands (newer approaches = ‘pull’ brand strategy)
• lack of consideration of consumer interactivity with brand
• short term focus; marketer concerned with ‘hooking new clients’, sales figures, isolated transaction of exchange between brand and consumer
• inability to portray world of consumption adequately with functional and transactional exchange paradigm