Ex

Question 1

Differentiate (a) marketing from sales (marketing = sales)

Answer 1

Sales refers to activities that lead to the selling of goods and services, whilst marketing is the process of getting people interested in the goods and services being sold.

Question 2

Differentiate (b) push from pull strategy

Answer 2

Push (Sales): Taking the product to the customers. Mostly occurs at point-of-sale, i.e. perfumes;
Pull (Marketing): Customers comes to you / seek out the brand in an active process (lots of advertising, i.e. children’s toys).

Question 3

AMA (2007)’s Marketing Definition

Answer 3

“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large.”

Question 4

Marketing Triangle

Answer 4

3 dimensions are essential when developing marketing strategies; They are called Marketing Triangle.

Consumer: Consumers’ needs are the starting point for any strategy development. They define the direction of all efforts, and focus on the most relevant attributes from consumers’ perspective.

Competitors: Strategies must be developed in order to address competitors’ strengths and weaknesses. I.e. Companies should focus on market segments where they are able to compete successfully, and ensure that potential future competitors’ marketing actions are considered when defining own strategies.

Manufacturer: Strategies must consider own competencies and assets, and ensure that we are able to satisfy consumers’ needs (= provide higher value to consumers’) in order to build and sustain one of more CCAs.

Question 5

Net Benefit, Unique Selling Proposition, Relative Net Benefit, Comparative Competitive Advantage

Answer 5

Net Benefit (NB): Overall utility from an offering is higher than its costs.
Unique Selling Proposition (USP): Offer provides higher as well as unique utility when compared to competitor’s;
Relative Net Benefit (RNB): Offer A provides a higher net benefit compared to all competitors’s offers;
Comparative Competitive Advantage (CCA): Offer A provides a higher net benefit compared to competitors’ offers & is efficient.

Question 6

What’s Net Present Value?

Answer 6

NPV is used in capital budgeting to analyse the profitability of a project / an investment.

Question 7

What’s Marketing Mix and its aim?

Answer 7

McCarthy’s 4 P’s: Product, Price, Promotion and Place.

It’s a summary of marketing actions that need to be managed. They influence customers and retailers’ decision-making.

Question 8

Definition of a Brand

Answer 8

Traditional, product-centered definition: “A name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.”

Modern, customer-centered definition: “The associations that consumers have with something that can be managed professionally (e.g. a product, service, person, name, term, design, symbol, or any other feature).”

Question 9

Definition of Brand Equity

Answer 9

The worth of a brand in and of itself — i.e. the social value of a well-known brand name. The owner of a well-known brand name can generate more revenue simply from brand recognition, as consumers perceive the products of well-known brands as better than those of lesser-known brands.

Question 10

What are the brand effects from a company’s perspective?

Answer 10

1. Sales Effect Low prices are part of the brand identity. Consequently, the brand can sell more units;
2. Price Effect: Brands can charge a premium (higher) price.
3. Sales & Price Effect.

Question 11

Brand and Halo Effects in Brand Management

Answer 11

Halo Effect is the bias shown by customers towards certain products because of a favourable experience with other products by same company / overall brand impression (→ driven by brand equity).
It establishes brand and customer loyalty; and through it enables company to become industry leader.

Question 12

What are the brand functions from a consumer perspective?

Answer 12

1. Risk reduction: Consumers might experience difficulties in assessing product quality; Therefore, they apply decision heuristics to make choices and reduce perceived risk. Brands are a surrogate for quality information.
2. Search cost reduction: Search costs prevent consumers from considering all alternatives and all possible consequences. Brands are a shortcut for decision-making, as they provide symbols of predictable attributes and benefits.
3. Symbolic device: Brands communicate a certain status, provide an intrinsic self-identity function, and give consumers the feeling of “belonging” to certain social groups.

Question 13

Associative Models

Answer 13

Help better understanding the brand knowledge → “What do you think about a [brand]?”

Question 14

What is category membership?

Answer 14

Consumers categorize the product into a specific group and understand what the brand offers and what makes it a superior competitive choice.

For example, Consumers are aware that Lakme is a leading brand of cosmetics.

Question 15

What are the four tasks to manage a brand?

Answer 15

1. Develop a deep knowledge how your consumers make decisions.
   Reach consumers at the stages in a buying process that influence their decisions (→ customer touch points). E.g. Increase awareness, familiarity etc. (= psychological goals) in order to reach economic goals (= sales, customer loyalty).
2. Conduct market research to identify bottlenecks.
   The Brand Funnel Approach
3. Why do these bottlenecks exist? Focus strategies and spending on the most influential touch points.
4. Repeat. It’s a dynamic problem.

Question 16

What’s STP Marketing?

Answer 16

Segmentation: Identifies variables that allow market segmentation;
Targeting: Evaluates segments’ attractiveness, and chooses one to target at;
Positioning: Positions brand/product to meet needs of targeted segment.

Question 17

What’s Brand Positioning?

Answer 17

Brand Positioning is the act of designing the company’s offer and image so that it occupies a distinct valued place in the target customers’ mind, and meet customers’ needs.

Question 18

How to position a brand?

Answer 18

1. Identify target market — Position of a corporate brand (i.e. BMW) or product brand (i.e. BMW 6-series);
2. Identify main competitors;
3. Determine Points of Parity (→ associations that are not unique to brand):
   Category PoP’s: necessary associations to be considered credible → What does our car has to have to be considered one?
   Allow to profit from halo effect of extremely strong brands, and establish category membership.
4. Determine Points of Difference (→ strong, favourable and unique brand associations to distinguish from competitors).

Question 19

What’s product variation?

Answer 19

Improvement of an existing product in order to adapt it to changing customer needs, and or to differentiate it from competition.

• Maintenance: Continuous improvement of product w/ minor changes. Aims to solve problems, perform more efficiently, and ensure actuality (up to date).
• Relaunch: Comprehensive changes to one or several features of product. Aims to reactivate stagnating or declining sales, and extend the product’s life cycle.

Question 20

What’s product differentiation?

Answer 20

Offering several product types to satisfy different target group’s needs.

• Narrow Sense: Offers different product types to better target different customer groups, and satisfy their need of individualised products (i.e. mass customisation).
• Broader Sense: Offers different products that are not targeted at different customer groups. These products may cannibalise each other; but provide higher sales due to higher purchase intensity.

Question 21

What’s the difference between Invention and Innovation?

Answer 21

Invention is a new technology or product that may or may not deliver benefits to customers; whereas innovation is an idea/product/technology developed and marketed to customers and perceived it as novel or new.

Question 22

What are the challenges in New Product Development (including the 8 steps in NPD)?

Answer 22

• High failure rates: Too much focus on technology push;
• High resources expenditure: High costs on R&D, market research, market introduction;
• Organisational resistance: Resistance against anything new at all levels of the company;
• Market risks: Entering the market at the right time frame is critical → Too early = unaccepted product; Too late = established market.

Question 23

What are the pros and cons if your ideas for NPD come from a technology push or a market pull?

Answer 23

Technology Push: R&D looks for need and creates new inventions → Attempt to interest the market in new products based on new solutions;
Market Pull: Customers’ needs push R&D to meet them → Provide products that market demands.

Question 24

How could you decrease uncertainty of market acceptance of a potential new product and why is it important?

Answer 24

Uncertainty of market acceptance can be decreased through market research, i.e. conjoint analysis. It is extremely important because the costs of developing a product substantially rise with each successive development stage. If a research is conducted correctly, development of the product is dropped prior to its launch and company avoids spending a large amount of money.

Question 25

What’s Idea Screening (Scoring Model)?

Answer 25

Evaluation by an executive committee of ideas generated in the first step of NPD. It analyses the degree to which a product meets customers’ needs, if it offers CCA’s, the expected sales volume, product price and profits, an if company has enough capital, assets and competencies to produce and market the product.

A scoring approach is adopted → Minimum acceptance score is defined, and ideas below this number are eliminated.

Question 26

What are the advantages of using conjoint analysis in new product development?

Answer 26

Conjoint analysis is the most widely-used quantitative method in Marketing Research. It is used to measure preferences for the product features, to learn how changes to price affect demand for products or services, and to forecast the likelihood to accept a new product in the market.

Its advantages are: Providing information on customer preferences, segment as well as the size of the segment, market share predictions for all possible alternatives, and optimal prices.

Question 27

What are the Advantages and Disadvantages of Test Markets?

Answer 27

Test markets provide a lot of data; However, it needs to be “unknown” in order to achieve accurate results, and it only represents certain parts of the society.

Question 28

What is target costing?

Answer 28

Target costing is an approach to determine a product’s life-cycle cost which should be sufficient to develop specified functionality and quality, while ensuring its desired profit. It involves setting a target cost by subtracting a desired profit margin from a competitive market price. A target cost is the maximum amount of cost that can be incurred on a product, however, the firm can still earn the required profit margin from that product at a particular selling price.

Question 29

What’s Lead User Pyramid Networking within the Lead User Idea-Generation Process?

Answer 29

It is the step in which users in target and other markets with similar needs are identified and it is learnt from them. → People with a strong interest in a topic tend to know people more expert.

Question 30

What are the Benefits of Customer Co-Creation?

Answer 30

For companies:

• Firms obtain access to info about consumers’ needs, and solution to it — impossible to get with classical analysis;
• Innovation has a higher fit with the estimated market needs → Failure rate decreases;
• WTP may increase;
• Activation of shared learning processes.

For consumers:

• Creates expectations to use the product innovation themselves;
• Material reward;
• Puzzling as being fun considered the challenged;
• Obtain acceptance from others;
• Connects to people w/ similar interests.

Question 31

What’s too-much-choice effect?

Answer 31

Consumers make non-satisfying choices and are in general less likely to make a choice at all if too many choice has to be made.

Question 32

What’s the general definition of Defaults and importance for mass customization?

Answer 32

Default Design is a basic option if chooser does nothing. Consumers have the tendency of choosing the path of least resistance. By providing a default design, firms can increase customer satisfaction and profits; However, the design of default options has to be careful and thorough.

Mass Customisation is a strategy that creates value by allowing interaction between the company and its customers during assembly stage. Together, they will create customised products with production costs and price similar to those of mass-produced products.

Question 33

Expecting error: What are the types of error and how to overcome?

Answer 33

Types of errors: 1) skill, 2) rule, and 3) knowledge errors.

Errors can be overcome by designing a [choice] system that expects and forgives errors.

Question 34

Explain Mapping and how it helps consumers

Answer 34

Mapping is the mental relation between choice and welfare.
Help consumers by designing choice systems that improve consumers ability to map and to select options that will make them better off, as consumers often don’t have information to make a trade-off or imagine specific outcomes.

Question 35

What’s the halo effect?

Answer 35

A type of bias where one characteristic of a person or one factor in a situation affect the evaluation of the person’s other traits.
I.e. Books labeled with “Harvard Classics” can demand 2x the price for the same book w/o this label.

Question 36

What’s the halo effect?

Answer 36

A type of bias where one characteristic of a person or one factor in a situation affect the evaluation of the person’s other traits.
I.e. Books labeled with “Harvard Classics” can demand 2x the price for the same book w/o this label.

Question 37

What’s price elasticity?

Answer 37

Price Elasticity of Demand represents the relative impact of price on relative demand changes. It describes effect f change in price on overall demand.

Question 38

What are the drivers of price elasticity?

Answer 38

Necessity vs. Luxury Goods;
Price of other substitutes;
Definition of the good (narrow market → lots of substitutes → high elasticity);
Short vs. long run;
Product differentiation;
Switching costs;
Brand value;
Share of budget (if only a tiny amount is spent on product, its price rise doesn’t affect budget much).

Question 39

What’s the relevance of behavioural pricing?

Answer 39

Behavioural pricing tries to analyse how consumers gather and process prices/price information, react to prices, as well as use price information for judgements and decisions.

Two observed phenomena:
1. Consumers’ WTP is influenced by price expectations and perceived price fairness.
Expectations: Consumers expect different prices at a local store vs. a luxury hotel;
Fairness: Customers are aware of higher fixed costs at hotel, and these costs justify its higher prices;

2. Perceived extent of price changes (e.g. price reductions) is evaluated based on relative rather than absolute price changes.

Question 40

Price Information Evaluation

Answer 40

Price Comparisons: Comparing relevant prices rather than value-for-money;
Price-dependent Quality Evaluations: Using price as an indicator of quality;
Reference Prices → Price thresholds: Customer uses price as a benchmark for evaluating other prices.

Question 41

What’s Price thresholds? What’s absolute vs. relative thresholds?

Answer 41

Price thresholds are the price levels at which customers’ price evaluations change.

• Absolute: Absolute minimum/maximum prices deemed acceptable by customer;
Products outside range will not be purchased.

• Relative: Evaluating prices within the “acceptable” range;
How big does the price difference have to be for prices to be perceived different? → If a relative price threshold is exceeded, the evaluation of the price cheapness degrades immediately so that the modified price has to be reassigned to another category of price cheapness.

Question 42

What’s level & image effects?

Answer 42

• Level Effects → Reason how 9er-endings may lead to underestimation.
Prices are read from the left to the right, and people only remember the first digit.
Rounding off the 9-er.

• Image Effects → If the last digit is very important.
9er-endings as a signal for a price reduction (price-image-effect);
9er-endings as a signal for poor quality (quality-image-effect).

Question 43

Price-Quality Relations: why is it important for consumers?

Answer 43

Classical price theory assumes that the evaluation of product quality is independent of price. In reality, though consumers are not able to correctly judge the quality of products, they make purchases on incomplete quality information.
Consumers look for indicators (i.e. brand name, manufacturer, store, or price). These indicators are easily accessible, and useful to judge the quality of the product.

Question 44

How is our price knowledge manipulated by retailers?

Answer 44

Consumers’ price knowledge is manipulated by retailers through price tags / fantasy prices (→ too high); payment method (i.e. cash vs. card); communication of price changes; decoy effect/compromise effect; low base price.

Question 45

Price differentiation: why is it important? what are its preconditions and types?

Answer 45

Pricing Differentiation is offering the same (or slightly different) product to different target groups at varying prices. Customers often exhibit a different WTP for the same product; therefore, price differentiation/discrimination aims capturing the market’s consumer surplus and generate more revenue as possible for the product.

Types:
Temporal: airfare, fruits;
Geographical: beer (national / regional markets);
Demographic: age (special prices for children), gender (hair salon prices), income (lower price for students);
Benefit-based: modify add-on benefits such as comfort (economy vs. business class);
Quantity-based: volume discounts, loyalty programs;
Bundling.

Preconditions:
Different customer groups that exhibit different WTP for the same product must be identifiable;
Different marketing strategies should be applied for each target group;
Customers cannot easily switch products.

Question 46

What are the dynamic pricing strategies?

Answer 46

• Skimming Price: Products are sold at a comparably high price when entering market;
• Penetration Price: Establish relatively low prices in order to achieve rapid diffusion of the product to gain market share.

Question 47

What’s Pay What You Want? What are its drivers?

Answer 47

It absolute integrates customer into the process of price setting. The buyer (a.k.a. customer) can set any price as the final price for transaction — even 0 —, and the seller must accept it.
It is the maximum of price fairness for customers.

Drivers: Fairness, altruism, loyalty, income, reference price, satisfaction.

Question 48

What’s marketing communication?

Answer 48

Marketing Communication is used to persuade an audience to take or continue some action, usually in relation to a commercial offering.

It is the systematic planning, coordination, and controlling of all communication activities in order to achieve communication, psychographic, and economic goals.

Question 49

How’s the communication environment, and the challenges in it?

Answer 49

Traditionally, companies actively influences customers relationships through their marketing actions, including relationship instruments such as loyalty programs, public relations, advertising etc.
Customers were predominantly passive “receivers” of marketing and media information, and companies were able to “control” brand-shaping messages through their own actions (4 P’s).
Today, the flow of information about a brand becomes multidirectional, interconnected, and difficult (if not impossible) to predict. Marketers have (at least to some extend) lost control over their brands, but now participate in a conversation about the brand. Like playing pinball, companies serve up a ball (brand or marketing messages) into an environment which ins the accelerated and diverted by new media “bumpers” (users) that may change the course in chaotic ways. Marketing managers should try to control the ball with the use of “flippers” but the ball does not always go where it was intended and the slightest miscue might be amplified into a catastrophic crisis.

Question 50

What’s a communication goal? Give an ex. of a comprehensive communication goal.

Answer 50

Goals must be: in line with marketing and corporate goals, and complete.
Ex. “Our goal is to increase aided recall in our core target group of 18 to 49-year old people in Germany from 15% to 30% within a year.”

Question 51

Why is reach not comprehensive measure to select a specific media channel?

Answer 51

Reach is the total number/different people/households exposed at least once to a medium during a given period. The advertising impact depends on the medium/media in which it appears, and there must be a fit between the target group and specific media channel.

Question 52

What’s copy strategy?

Answer 52

Copy strategy is the starting point for defining a communication message. It is a written line of arguments and design guidelines.

Question 53

What are the objectives of the distribution and sales management?

Answer 53

Reduction of distribution cost;
Distribution coverage/intensity;
Growth: Reputation of channel member;
Growth: Market and customer knowledge.

Question 54

What are the levels of distribution intensity?

Answer 54

• Intensive distribution: firm’s products in nearly every available outlet. Requires cooperation of many intermediaries;
• Selective distribution: limited number of retailers to distribute its product lines.
• Exclusive distribution: limits market coverage in a specific geographical region.

Question 55

What are the 4 forms of attention?

Answer 55

• Attentional Orienting: Channeling attention to a specific direction or a chronological sequence.
• Selective Attention: Attention is directed at one particular stimulus whilst other stimuli are ignored.
• Divided Attention: Simultaneous processing of multiple stimuli. Reveals limits of processing capacity.
• Sustained Attention: Attentional situation is kept for seconds up to minutes without distraction.