Class 1 Flashcards
1
Q
Definition of Marketing
A
- Marketing is about creating value focusing on benefits and not on the product.
- Related to the reading “marketing myopia”
- Companies should focus on the benefits and not on the product (consumers buy drills and not holes)
- Keeping costumers is more profitable than attracting new ones (Cost of attracting a new customer can be up to 5 times the cost of keeping a current one)
2
Q
Customer Value
A
- Basic segment attractiveness (big, growing, stable: without volatility due to seasonality)
- Customer attractiveness (high volume users with willingness to pay a lot)
- Cost (low acquisition costs: how easy to reach them, conversation rate)
3
Q
3C’s - Marketing Analysis
A
- Customer needs (who, what, how)
- Company’s strength & weaknesses (mission, image, profitability)
- Competitors position (current & future)
4
Q
4P’s - Marketing Mix
A
- Product (line, design, branding)
- Price (setting, communication, skimming vs. penetration)
- Promotion (advertising, sales)
- Place (distribution channels)
5
Q
Word-of-mouth
A
- Word-of-mouth = a very effective way to attract new customers
- Friends know us better than companies -> Trust: people are much better persuaded by their friends than by a commercial
- Negative word of mouth is spread much broader (five times more when something negative, two if something positive happens)
- It is 10 times more effective than traditional advertising
6
Q
Prospect Theory
A
- People are risk averse towards gains and risk seeking towards losses
- Pain of losing is about twice as powerful as pleasure of gaining (e.g. it is better to not lose 5€ than to find 5€)
- Explains bad decisions in the stock market: sell good stocks because of being risk averse towards gains and not the bad stocks because of being risk seeking towards losses (Disposition Effect)
7
Q
Unconscious decisions
A
- Consumers often make choices that are sometimes not consistent with their own previous choices or with what they say they would buy (irrational choices)
- This is because consumers are influenced by the context in which choices are made (buy
French wine when French music is played) - Consumers are also influenced by a concept that is highly accessible when making a decision (buy the tennis shoes of PUMA after seeing many pictures of dogs)
- Consumers often make better choices when basing their decisions on their immediate emotional reaction
- Unconscious decision: go to bed, sleep over it
8
Q
Normative influence
A
- Brand-choice congruency = Likelihood that consumers will buy what others in their group buy
- Conformity = Individual is likely to behave as group behaves
9
Q
Decision-making
A
- Consumers want to simplify their choices and get tired when having to make too many choices and when a choice is very difficult to make
- They are focused on immediate gratification such that
they say they would prefer to eat a fruit in the future, but they prefer a candy for now - When selecting several products for future consumption, consumers tend to seek variety
10
Q
Difference between market driven and market driving strategies
A
- Market driven is focused on satisfying current customers
- Market driving is about creating new customers (by focusing on innovation and considering
competition broadly) - That’s why it is so important to understand consumers
needs (be externally oriented) and to try to connect the brand with consumers’ goals
11
Q
Prospect Theory
Sunk-Cost Effect, Status Quo Bias, Anchoring Effect, Segregation of gains, combination of losses, endownment effect
A
- Making choices in a way that justifies past, faulty choices (Sunk-Cost Effect)
- Favoring Alternatives that perpetuate (nicht verändern) existing situation (Status Quo Bias)
- Giving disproportionate weight to first information you receive (Anchoring Effect)
- Prefering several smaller gains over loosing more often (Segregation of gains, combination of losses)
- Explains why people overvalue the things they own (endownment effect).
12
Q
Decision-making
Attribute substitution, Choice aversion, Decoy effect
A
- Choices are justified by comparing alternatives in a set and so an alternative is considered as being more attractive if presented together with a clearly worse alternative (attribute substitution)
- Consumers are averse to making a difficult choice and so if presented with two similar options and one different option they will choose the different one to avoid the difficult choice (choice aversion)
- Consumer will tend to have a specific change in preference between two options when also presented with third option that is asymmetrically dominated (Decoy Effect)
