EXAM 1 Flashcards
Why is marketing valuable?
- Marketing lends itself to financial success
- Marketing builds demand for products
- Marketing creates jobs
- Marketing builds strong brands and loyal customers (intangible assets) which add value to a firm
What is marketing?
- Identifying and meeting human and social needs
- Creates, communicates, delivers, and exchanges offerings that have value for customers
What is marketing management?
- The art and science of choosing target markets
- Getting, keeping, and growing customers
- Creating, delivering, and communicating superior customer value
What can be marketed?
Goods, services, events, experiences, people, places, properties, organizations, information, ideas
-Anything that creates value for customers
How is value delivered?
Value is created by a producer and delivered to consumers in the form of a ‘core value unit’
What is a marketer?
- Someone who seeks a response (attention, purchase, vote, donation, etc.) from another party (the prospect)
- They try to estimate demand in order to meet a company’s objectives
Negative demand
When consumers dislike the product and may even pay to avoid it
Nonexistent demand
When consumers are not aware of or not interested in your product or service
Latent demand
When consumers have a strong need for a product that does not yet exist or they are unable to identify it/afford it
Declining demand
When consumers buy a product with less and less frequency
Irregular demand
When consumer purchases vary on a seasonal (or other trend) basis - aka: fluctuating demand
Full demand
When demand and supply are balanced
Overfull demand
When the supply cannot satisfy the demand (supply shortage)
Unwholesome demand
When the demand for a product has a negative effect on society (ex: demand for cigarettes)
4 types of customer markets
- consumer markets
- business markets
- global markets
- nonprofit and gov. markets
Difference between needs, wants, and demands
Needs: a basic human requirement, such as food, air, water, clothing
Wants: a specific object that might satisfy the need (not backed by an ability to pay)
Demands: want for a specific product backed by an ability to pay
Does marketing create or satisfy needs/wants?
Opinions vary on this.
Segmentation
Identifying and profiling distinct groups of buyers - can be based on demographics, psychographics, etc.
Target markets
The segments that present the greatest opportunity
Positioning
Establishing the image or identity of a brand or product so that consumers perceive it in a certain way
Products are often positioned in relation to other products on the market
Value proposition
A set of benefits that satisfy consumer needs
Is often a statement that a company uses to summarize why a consumer should buy a product or use a service
Offerings
A combination of products, services, info, and experiences offered to your customers.
An offering is more than the product itself and includes elements that represent additional value to your customers, such as availability, convenient delivery, technical support or quality of service.
Brands
Are specific offerings from a known source.
Paid media
Includes TV ads, magazine ads, display ads, paid searches, and sponsorships
-Usually not as trusted by the consumer but liked by the company because they have full control
Owned media
Is developed and put of by the company itself. Includes a company’s own brand brochure, website, blog, Facebook page, or Twitter account
Earned media
Includes word of mouth, buzz, or viral marketing
-Usually trusted more by consumers but can be risky for the company because they have no control
Impressions
When a consumer views a communication
Engagement
The extent of a customer’s attention and active involvement with a communication
Value
A combination of quality, service, and price (QSP: customer value triad)
Satisfaction
A person’s judgment of a product’s perceived ‘performance’ in relationship to their ‘expectations’
Supply chain
A channel stretching from raw materials to components to finished products to final buyers
Competition
All the actual and potential rival offerings and substitutes a buyer might consider
Forces of change in our current marketplace
Technology, globalization, changing demographics, and social responsibility
New customer capabilities
- Using the internet for information gathering and purchasing aid
- Being able to search, communicate, and purchase on the move
- Tapping into social media to share opinions and express loyalty
- Actively interacting with companies
- Rejecting marketing they find innappropriate
New company capabilities
- Using the internet as an information tool and sales channel
- Collecting fuller and richer information about markets, customers, prospects, and competitors
- Reaching customers quickly and efficiently through social media, mobile marketing, targeted ads, coupons, and information
- Improved cost efficiency
- Improved purchasing, recruiting, training, and internal/external communications
How channels are changing in today’s marketplace
Disintermediation: reduction in the use of intermediaries between producers and consumers
EX) investing directly in the securities market rather than through a bank
Retail transformation: a shift towards online shopping has forced brick and mortar stores to adapt
Factors that have heightened competition in the marketplace
- Private brands
- Mega-brands
- Deregulation
- Privatization
Price dispersion
When you vary the price of a product across sellers
This is harder to do now that customer’s can easily price match on their phone (it has almost disappeared completely)
EX from class: Fisherman in South India used to sell only to their local markets. Prices of the same product would vary greatly across markets - this was very inefficient and led to a mismatch between supply and demand. After the introduction of mobile phones, fisherman could communicate and coordinate where to sell their fish. Prices across all the markets stabilized. Profits rose and average price paid fell, proving that technology can promote social welfare.
Showrooming
The practice of visiting a store or stores in order to examine a product before buying it online at a lower price.
Webrooming
When consumers research products online before going into the store for a final evaluation and purchase.
Holistic marketing
A business marketing philosophy which considers business and all its parts as one single entity and gives a shared purpose to everyone involved.
Recognizes the breadth of interdependency
Connects internal marketing, integrated marketing, performance marketing, and relationship marketing into one.
EX) CVS ending the sales of tobacco because it doesn’t align with their overall image of a health company
Relationship marketing
Aims to build mutually satisfying long-term relationships with key constituents to earn and retain their business
Integrated marketing
An approach to creating a unified and seamless experience for consumers to interact with the brand/enterprise
‘the whole is greater than the sum of its parts’
Internal marketing
Hiring, training, and motivating employees who want to serve customers well
Promoting a company’s objectives, products and services to employees within the organization. The purpose is to increase employee engagement
Performance marketing
A comprehensive term that refers to online marketing and advertising programs in which advertisers pay marketing companies when a specific action is completed; such as a sale, lead or click.
Indicators of financial accountability
Sales revenue, brand and customer equity, customer satisfaction, product quality
Types of social responsibility
Ethics, environment, legal, community
Societal marketing
Preserving or enhancing customers’ and society’s long-term well-being
Traditional vs Modern Four P’s
Traditional:
Product, price, place, promotion
Modern:
People, processes, programs, performance
Tasks of a marketing manager
Develop market strategies
Capture marketing insights
Connect with customers
Build strong brands
Create/deliver value
Create long-term growth
Examples of new technology in marketing
RFID has allowed marketers to measure a consumer’s purchasing journey in a store and shopping patterns
Finding: when consumers spend more time in a store, they become more purposeful
EX) Netflix has interactive episodes
EX) race to make it to a shoe store before the sale on your phone counts down
Value delivery process
- Choose the value
- Use STP marketing - Provide the value
- Identify specific product features, prices, and distribution - Communicate the value
- Use the internet, advertising, sales force, etc. to announce and promote the product
(steps go from before the product exists to after it is delivered and gets feedback)
Value chain
The process of activities by which a company adds value to a product/service
Ever firm is a synthesis of activities performed to design, produce, market, deliver, and support its products
Breakdown of the value chain
Support activities
- Firm infrastructure
- Human resource management
- Technology development
- Procurement
Primary activities
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and sales
- Service
Margin
*Reference diagram
Market-sensing process
All activities in gathering marketing intelligence and acting on the information.
New offering realization process
Focuses on all the activities in research, development and launching new quality offerings
Core business process
Is an idealized construct intended to express an organization’s “main” or “essential” activity.
Customer acquisition process
Focuses on locating a target market
Customer relationship management process
Focuses on maintaining your current customer base
Fulfillment management process
All the activities in receiving and approving orders, shipping out on time and collecting payment.
Also focuses on collecting consumer feedback
Core competencies
A defining capability or advantage that distinguishes an enterprise from its competitor
3 characteristics:
- Are a source of competitive advantage
- Has applications in a wide variety of markets
- Is difficult for competitors to imitate
3 steps of realigning a business
- Redefine the business concept or big idea
- Reshape the business scope
- Reposition the company’s brand identity
VRIO framework
- Valuable
- Rare
- Inimitable
- Organized
By satisfying this criteria, you will uncover and protect your resources and capabilities, giving you long-term competitive advantage
Sustained competitive advantage
When you meet all 4 factors of the VRIO framework
3 roles of strategic planning
- Manage the business as an investment portfolio
- Assess the market’s growth rate and the company’s position in that market
- Establish a strategy
3 steps of running a business
Plan
-corporate, division, business, and product planning
Implement
-organizing and implementing
Control
-measuring results and taking corrective action
3 types of growth opportunities
Intensive growth
- improving existing business
- introducing a new product, entering a new market, or further developing your own competency
Integrative growth
- growth outside of your current range
- a company increases its sales and profits through vertical, horizontal & concentric integration within its industry
- can include mergers and acquisitions
Diversification growth
- adding unrelated business
- entering into a new market or industry in which the business doesn’t currently operate, while also creating a new product for that new market.
Product market expansion grid (type of intensive growth)
Market-penetration strategy
-gaining more market share using the current market and current products
Market-development strategy
-developing new markets for a current product
Product-development strategy
-developing a new product for a current market
Diversification strategy
-developing new products for new markets
Types of integrative growth
- Horizontal integration
- increasing the production of goods or services at the same part of the supply chain
- can be done with internal expansion, acquisition, or merger
Benefits: economies of scale and increasing your consumer base
Disadvantages: risk of losing distinguishing parts of your brand
- Vertical integration
- when a company controls more than one stage of the supply chain
- backward vs. forward
EX) Disney is involved in both vertical and horizontal integration, allowing it to become a monopoly
Diversification growth
Is a good idea to pursue when opportunities exist outside the present businesses
Should be done when the industry is highly attractive and the company has the right mix of business strengths to succeed
EX) Disney now works with: licensing characters, publishing fictions, entering the broadcast industry, theme parks, vacation and resort properties
The importance of downsizing
Downsizing can free up resources and reduce costs
Companies should prune, harvest, or divest tired old businesses to reduce costs
Business mission
A broad goal that goes along with the company’s overall goals
SWOT analysis
Strengths
-core competencies that are superior to the competition
Weaknesses
-core competencies that are inferior to the competition
Opportunities
-areas of high profitability
Threats
-challenges posed by unfavorable trends or developments
Used to evaluate the environment
MOA: market opportunity analysis
Questions to ask in determining if a market opportunity exists:
- Can we articulate the benefits?
- Can we locate the target market and reach them with cost-effective media and trade channels?
- Does our company possess or have access to the critical capabilities and resources needed to deliver consumer benefits?
- Can we deliver the benefits better than competitors?
- Will the financial rate of return meet or exceed our required threshold for investment?
Opportunity Matrix
One side: success probability
Other side: attractiveness
Threat Matrix
One side: probability of occurrence
Other side: seriousness
Goals
Objectives that are specific in magnitude and time
Manage by objectives
A personnel management technique where managers and employees work together to set, record and monitor goals for a specific period of time
Objectives must be arranged hierarchically
Objectives should be quantitative
Objectives must be consistent
Objectives require tradeoffs, like short-term profits vs long term growth
Strategic formulation
The process by which an organization chooses the most appropriate courses of action to achieve its defined goals
Porter’s generic strategies
Includes
- Cost leadership: you target a broad market (large demand) and offer the lowest possible price
- Differentiation: you target a broad market (high demand), but your product or service has unique features. With this strategy, you make your product as exclusive as possible, making it more attractive
- Cost Focus: you target a niche market (little competition, ‘focused market’) and offer the lowest possible price
- Differentiation Focus: you target a niche market (little competition, ‘focused market’) and your product or service has unique features. This strategy often involves strong brand loyalty among consumers
Mckinsey’s Elements of Success
Hardware: easier to define or identify
- Strategy: the plan devised to maintain and build competitive advantage over the competition
- Structure: the way the organization is structured and who reports to whom
- Systems: the daily activities and procedures that staff members engage in to get the job done
Software
- Shared Values: the core values of the company that are evidenced in the corporate culture and the general work ethic
- Style: the style of leadership adopted and common way of thinking
- Staff: the employees and their general capabilities
- Skills: the actual skills and competencies of the employees working for the company
Feedback and control
It is more important to do the right thing than to do things right
Example of Netflix’s response to changing technology
When DVD mailing started to die, he separated this market from the streaming market in order to adjust to changes in the market
Marketing Plan
A written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives
Can be written for a:
- brand
- product line
- product
- customer groups
- company
Marketing strategy vs tactics
Strategy: lays out the firm’s mission, target markets, and value propositions based on the best market opportunities
Tactics: specifies the marketing activities, including product features, promotion, pricing, channel, and service (actual means used to gain an objective)
Objectives of a marketing plan
Define the current business situation
Define problems and opportunities facing the business
Establish objectives
Define the strategies and programs necessary to achieve the objectives
Pinpoint responsibility for achieving product objectives
Encourage careful and disciplined thinking
Time horizons of marketing plans
Most plans are 1 year plans, because there is a desire to reevaluate the environment frequently
This can be expensive, time consuming, and stray from a long-term goal focus
Contents of a marketing plan
Executive summary Situation analysis Marketing strategy Marketing tactics Financial projections Implementation controls Marketing research Specifications for internal and external relationships Action plans and schedules
These will vary according to the firms, authors, intended audience, etc.
Evaluating a marketing plan
Is it: simple, succinct, complete, realistic?
6 forces in the broad environment
Demographic, economic, socio-cultural, natural, technological, political-legal
Demographic environment
Includes:
- population growth (usually divided into generations)
- population age mix
- ethnic and other markets
- educational groups
- household patterns (increasingly less traditional)
Economic environment
Includes:
-purchasing power (income, savings, debt, credit)
-consumer psychology (ex: recessions change
spending patterns; reference groups/opinion leaders influence spending)
-income distribution (ex: US household income is mostly from 25-100,000)
Sociocultural environment
Includes:
-views of ourselves, others, organizations, society, nature, and the universe
- core cultural values: persist a long time, are passed from parents to children, and are reinforced by social institutions
- subcultures: groups with shared values, beliefs, preferences, and behaviors emerging from their special life experiences or circumstances
- Some are more fixed, others change over time
Natural environment
Includes:
-Corporate environmentalism
Trends to be aware of:
-Shortage of raw materials, increased cost of energy, increased pollution, changing role of government
Green marketing isn’t always successful because many companies have lied about it and aren’t truly green
EX: Tesla’s gigafactory that generates clean energy
Technological environment
Trends:
- accelerating pace or change
- unlimited opportunities for innovation
- varying R&D budgets
- increased regulation
EX: Stitch Fix, an online personalized wardrobe and stylist
Political-legal environment
Includes:
-laws, government agencies, pressure groups
Trends:
- increased business legislation: protecting consumers and companies from unfair competition
- growth of special-interest groups (ex: consumerist movement)
EX: Trade war with US and China
Types of markets
Potential market: consumers with sufficient interest, but not sufficient income
Available market: consumers with sufficient interest and income
Target market: the qualified, available market that the company decides to pursue (most marketing effort is concentrated here)
Penetrated market: set of consumers who are currently buying the company’s products
Market demand
Is not a fixed number, but a function of stated conditions, such as geographical area, time periods, etc.
Demand is affected by: marketing expenditure and economic conditions
Market share
The portion of a market controlled by a particular company or product.
Market-penetration index
Compares the current market demand and potential market demand
Market penetration can also be a measure of one company’s sales as a percentage of all sales for a product
Shared-penetration index
A low number means the firm can greatly expand its market share. A high number means it will be hard to improve the current market share.
Market forecast
It projects the future numbers, characteristics, and trends in your target market. A standard analysis shows the projected number of potential customers divided into segments.
Market potential
Is the entire size of the market for a product at a specific time. It represents the upper limits of the market for a product. Market potential is usually measured either by sales value or sales volume.
Company demand
A specific corporation’s portion of the overall market’s purchasing interest for a good or service over a given time frame.
Company sales forecast
Is the process of estimating future sales
Company sales potential
The highest market share that a product can reasonably be expected to achieve within a given time frame.
Total market potential
Max sales to all firms in an industry during a given period, under a given level of marketing effort and environment conditions
= (potential # of buyers) x (avg quantity purchased) x (price)
Chain-ratio method
A method of calculating total market demand for a product in which a base number, such as the total population of a country, is multiplied by several percentages, such as the number in the population above and below certain ages
Ways to estimate area market potential: for a city, state, region, etc.
Multiple-factor index (used for B2C markets): It is a forecasting method that identifies market factors that correlate with market potential and combines them into a weighted index
BDI: brand development index
BDI = ($ brand sales per capita in a territory)/($ brand sales per capita nationally) x 100
Round to the nearest whole number
National avg = 100
CDI: category development index
CDI = ($ category sales per capita in a territory)/($ category sales per capita nationally) x 100
Round to the nearest whole number
National avg = 100
Ways to estimate current demand
Look at industry reports
Buy market research reports
Identify competitors and overall sales
Use surveys of buyers’ intentions
Gather the opinions of your sales force
Look at past-sales (ex: time-series analysis)
Linear equations can be used as a predictor
Marketing research
The function that links the consumer, customer, and public to the marketer through information
Info is used to:
- identify and define marketing opportunities and problems
- refine and evaluate marketing actions
- monitor marketing performance
- improve understanding of marketing as a process
Who does marketing research?
Marketing departments in large firms
Everyone in small firms
Marketing research firms
- syndicated service research firms (not done for a specific client)
- custom marketing research firms (design studies for you)
- specialty-line marketing research firms (provide specialized research)
Steps of the marketing research process
- define the problem and research objective (make sure it isn’t too broad or narrow)
- design the method for collecting info
- collect the data
- analyze the results
- communicate findings
- make the decision
Exploratory research
Used to identify the problem and suggest possible solutions
Descriptive research
Is used to describe characteristics of a population or phenomenon being studied. It does not answer questions about how/when/why the characteristics occurred
EX) quantifying demand
Causal research
Used to test cause-and-effect relationships
Secondary data
Collected for another purpose
Already exists
Low-cost
Primary data
Freshly gathered data for a specific purpose or project
Costly
How to collect it:
- questionnaires
- qualitative measures
- technological devices
Observational research
Pro: observing people in action (real behavior)
Doesn’t answer WHY people act the way they do
Con: bias in interpretations; must wait for behavior to occur
Focus groups
Selecting small samples of people to test
Pros: quickly collect info and generate new ideas
Cons: is not very representative; can be biased (groupthink)
Survey research
Directly asking for people’s opinions
Can be done online, in-person, by phone, etc.
Pro: cheap, quick, and more representative
Con: biased/leading questions, scale used, survey burnout
Behavioral research
Is the study of the many variables that impact the formation of one’s habits
EX: store-scanning data
EX: consumer databases
Pro: large amounts of data; actual purchases
Con: large amounts of data = more time/money
Experimental research
Is the most scientifically valid and meant to capture the cause and effect relationships
Pro: establish cause-effect relationship
Con: lacks generalization to population; highly contrived
Types of questionnaire questions (close-ended)
Dichotomous (question w/ 2 possible answers)
Multiple choice
Likert scale (states level of agreement)
Semantic differential (scale based on 2 opposite words)
Importance scale (rating the importance of an attribute)
Rating scale (rating an attribute from poor to excellent)
Intention to buy scale
Types of questionnaire questions (open-ended)
Completely unstructured (open to any response)
Word association (write the first word that comes to mind)
Sentence completion
Story completion
Picture (ex: fill in dialogue on a cartoon)
Thematic Apperception Test (TAT) (make up a story based on what they see in a photo)
Questionnaire do’s and dont’s
- Use unbiased questions (don’t lead them into answers)
- Make the questions simple and specific
- Avoid jargon and shorthand
- Don’t use sophisticated vocabulary
- Avoid ambiguous words, such as usually or frequently
Other qualitative measures
Word association (for brands)
Laddering (why? why?) – ask a series of increasingly specific why questions
Projective techniques (“bubble exercises” – having people fill in a speech bubble based on an image) – provide an ambiguous stimulus
Visualization (collages) – use photos to depict your perceptions
Brand personification ask people to describe a brand as if it were a person
ZMET approach – gives insight into a consumer’s subconscious to deeply understand them
Technological forms of research
Galvanometer – measures interest or emotions
Tachistoscope – flashes an advertisement for fractions of a second and the consumer responds with everything they recall
Eye-tracking
Facial detection
Skin sensors
Brain wave scanners
Full body scanner
GPS
Neuromarketing
How to gather your research sample
- Choose your sampling unit (who you will survey)
- Choose the sample size (larger is usually better)
- Choose the sampling procedure (how you pick your respondents)
Probability Sampling: is a sampling technique in which sample from a larger population are chosen using a method based on the theory of probability
Ways to contact your research participants
Mail (low response rate)
Phone
In-person
Online
Pros/cons of online research
Pros:
- Wide reach
- No geographic barriers
- Collect info quickly
- Inexpensive
- Versatile
- People may be more honest and thoughtful
Cons:
- Small
- Skewed
- Excessive turnover
- Tech problems
- Some low income/rural populations have smaller chance of participating
Marketing metrics
Are used to directly assess the effects of a marketing campaign
Marketing-mix modeling
Analyzes data from a variety of sources to understand more precisely the effects of the the specific marketing activities
Looks at causal relationships and how marketing actions impact consumer actions
Uses statistical analysis on sales and marketing data to estimate the impact of various marketing tactics (marketing mix) on sales, and then forecast the impact of future sets of tactics
EX of data analyzed:
-retailer scanner data, company shipment data, pricing, media, promotion spending data, multivariate analyses
Cons:
- Focuses on incremental growth instead of baseline sales or long-term effects
- Limited integration of important metrics
- Fails to incorporate metrics related to competitors, trade, or sales force
Marketing dashboard
A reporting tool that displays marketing analytics, KPIs, and metrics using data visualizations
Shows interconnected performance drivers across an organization
Uses color-coding, charts, tables, etc.
Includes a customer-performance scorecard and stakeholder-performance scorecard
External measures of marketing metrics
Awareness Market share Relative price Number of complaints Consumer satisfaction Distribution/availability Total number of customers Perceived quality/esteem Loyalty/retention Relative perceived quality
Internal measures of marketing metrics
Awareness of goals Commitment to goals Active innovation support Resource adequacy Staffing/skill levels Desire to learn Willingness to change Freedom to fail Autonomy Relative employee satisfaction
International marketing decisions
Decide:
- Whether to go abroad
- Which markets to enter
- How to enter the market
- Which marketing program to use
- Organization of the marketing plan
Factors that draw companies into the international arena
- Better profit opportunities
- Larger customer base to achieve economies of scale
- Reducing dependence on any one market
- Counterattacking global competitors
Factors to consider when going abroad
- Understanding foreign preferences
- Understanding foreign cultures
- Underestimating foreign regulations
- Lacking managers with international experience
- The possibility that the foreign country changes commercial laws, devalues currency, or expropriates foreign property
Ways to enter a foreign market
Waterfall approach:
-when the firm gradually enters various countries, one by one
Sprinkler approach:
-when the firm enters many countries simultaneously (requires a lot of resources)
Born global:
- when a firm is international from the start
- usually common for tech firms and online ventures
Factors in evaluating potential markets
- Many companies prefer entering neighboring countries because this gives them a greater degree of control
- Psychic/cultural proximity: the more familiar the language/culture is, the easier it will be to expand
- Operating in fewer countries allows you to have deeper penetration in these markets
Developing markets
BRICS: Brazil, Russia, India, China, South Africa
CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa
Five modes of entry into foreign markets
Direct investment
Joint venture
Licensing
Direct exporting
Indirect exporting
Indirect exporting
Working through independent intermediaries
Advantage: lower investment required
Disadvantage: low control, easy to misunderstand the foreign market, company has limited info
Examples:
-Domestic-based export merchants: buying products and selling them in different countries
- Domestic-based export agents: selling in foreign markets for a commission
- Cooperative organizations: conduct exporting activities for different manufacturers
- Export-management companies: manage a company’s exporting for a fee
Direct exporting
Handing one’s own exports
Examples:
-Domestic-based export department: department in your own firm handles exports
- Overseas sales branch: handles sales, distribution, warehousing, promotions, etc.
- Traveling export sales representative: are home-based sales reps who travel
- Foreign-based distributors or agents: are 3rd parties that have rights to represent the company in foreign spots
Licensing
Home company (licensor) issues a license to a foreign company (licensee) to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty
Disadvantage: When the license ends, the licensee can become a potential competitor
Advantage: divides the workload
Franchising
Offers a complete brand concept and operating system
Joint ventures
Foreign investors join local investors in a joint venture company in which they share ownership and control
Advantages:
-acquire the knowledge of foreign market via partners
Disadvantages:
- partners disagree over investment
- prevent a multinational company from carrying out specific manufacturing and marketing policies on a worldwide basis.
Direct investment
The foreign company can buy part or full interest in a local company or build its own manufacturing or service facilities
Advantages:
-cost, firm’s image, local relationship, full control
Disadvantages:
-larger risk (e.g. devalued currencies, worsening market, policy changes)
Acquisition
Many companies choose to acquire local brands for their brand portfolio
Prod and cons of a globally standardized marketing program
Advantages
- Simple
- Not a lot of work, time, or money required
- It guarantees a consistent brand image
- Uniformity of marketing practices
- Economies of scale
Disadvantages
- Fail to adapt
- Ignores differences in consumer needs, wants, and usage
- Probably isn’t a good fit for all markets
- Ignores differences in brand development process
- Ignores differences in legal environment
Pros and cons of a globally adapted marketing program
Pros:
-Adapts to various cultures
Cons:
-Expensive and time consuming
Globalization’s impact on global marketing
New technology has led to the convergence of lifestyles
Products are becoming more standardized because the world is becoming more homogenous
Hofstede four cultural dimensions
Individualism vs collectivism
-In collectivist societies, individual self-worth is rooted in the social system rather than individual achievement
High vs low power distance
Masculine vs feminine
Weak vs strong uncertainty avoidance
How brands position themselves around cultural differences
EX: Honda
- In Japan, the attractiveness of the car was emphasized
- In America, the functionality of the car was emphasized
Elements you can adapt to various markets
Product features Labeling Colors Materials Sales promotion Prices Advertising media Brand name Packaging Advertising execution Advertising themes
EX: McDonald’s adapting their menu in each country
Which products are usually highly standardized?
High end products
Various ways to invent global products
Backward invention:
-Reintroducing earlier product forms, but adapting them to a foreign country’s needs
Forward invention:
-Creating new products to meet a need in another country
Global communication strategies
You should adapt your communication so that it is legally and culturally acceptable
You must vary the message so that it appeals to diverse audiences
Personal selling tactics will also vary
Comparative advertising
Is a marketing strategy in which a company’s product or service is presented as superior when compared to a competitor’s
3 choices for setting prices
Uniform price everywhere
Market-based price
Cost-based price
Why did Target fail in Canada?
The discount market is fairly saturated
Stores weren’t up to par with Target’s US look
Less ideal locations (small, hard to access)
Failure in channel management (struggle with distribution challenge, stock-out)
They were overambitious (124 stores in 10 months)
Pitfalls of global marketing
Insufficient research
Over-standardization
Poor follow-up - must monitor progress continually
Narrow vision
Rigid implementation - forced compliance will often destroy commitment to a project
Why is Louis Vuitton so successful?
It has efficient management practices
Quality products that were tailored to local markets
Production and quality controls
They target Japan as a key market for luxury brands
Consumer behavior in Japan:
- Group-oriented
- Pressure to possess luxury stuff
- What you own is a form of social expression
What is a brand?
A name, term, sign, symbol, or design intended to identify the goods or services of one seller and differentiate them from competitors
Can be more functional and tangible; can be more symbolic and intangible
A brand is a promise between the firm and the consumer
How brands help consumers
It sets expectations
It simplifies decision making
It becomes part of someone’s identity and takes on personal meaning
EX: Advil vs generic ibuprofen
-about 25% of consumers will still buy Advil, even though its more expensive, because the brand communicates quality, safety, and reliability
Consumers often can’t even tell the difference between products when not given the brand name
How brands help firms
They simplify product handling
They offer legal protection
They create brand loyalty
They secure competitive advantage (gives a barrier of entry)
How to get more revenue by establishing loyalty
Loyal customers make you more money than new customers. For this reason, it can be smart to start your pricing low and gathering loyalty, THEN increasing your prices. At that point, more loyal customers will be willing to pay the high price point
Branding
The process of endowing products and services with the power of a brand
What does branding teach a consumer?
WHO the product is (brand ID)
WHAT the product does
WHY consumers should care
Advantages of a strong brand with high brand equity
Improved perceptions of product performance
Greater trade cooperation
Greater loyalty
Larger margins
Less vulnerability to marketing crises
More elastic consumer responses to price drops
Possible licensing opportunities
Improved employee recruiting and retention
Customer-based brand equity
This expresses the effect that brand knowledge has on a consumer’s response to marketing campaigns
Each consumer’s response is different and reflects their brand knowledge
Drivers of brand equity
Brand elements:
-Brand name, logo, symbol, character, spokesperson, etc.
The product itself and its marketing
Brand elements should be:
Memorable Meaningful Likable Transferable Adaptable Protectable
Indirect approach to measuring brand equity
Attempts to assess potential sources of customer-based brand equity by measuring brand knowledge (i.e., brand awareness and brand image)
Useful in identifying what aspects of brand knowledge cause the differential response that creates customer-based brand equity
Direct approach to measuring brand equity
Attempts to measure customer-based brand equity more directly by assessing the impact of brand knowledge on consumer response to different elements of the firm’s marketing program
Useful in determining the nature of the differential response
Assess the actual impact of brand knowledge on consumer responses
Brand reinforcement
Requires that a brand is always moving forward
Getting those consumers who have tried a particular brand to become repeat purchasers along with attracting new users
Brand revitalization
The marketing strategy adopted when the product reaches the maturity stage of product life cycle, and profits have fallen drastically. It is an attempt to bring the product back in the market and secure customers
This falls somewhere between total reinvention and going back to the basics
Brand extensions
Introducing new products under a firm’s existing strong brand names
When deciding to extend a brand, consider the following:
- does the parent brand have strong equity?
- is the parent brand a good fit for the new product?
- will creating a new brand be more profitable in the long-term?
- what implications will the extension have for the parent brand?
Pros/cons of brand extensions
Pros:
- Cost of developing new brand is saved
- It increases brand image
- The risk perceived by the customers reduces
Cons:
- may lead to loss of reliability if a brand name is extended too far
- the new product may generate implications that damage the image of the core/original brand
STP: segmentation, targeting, positioning
Segmentation:
-identify market segments
Targeting:
-select market segments by evaluating the attractiveness of each
Positioning:
-create a competitive advantage
Mass marketing vs target marketing
Mass marketing tries to reach as many people as possible, while targeted marketing attempts to reach a specifically defined and profiled audience.
Benefits of STP
Marketing resources are focused to better meet customers’ needs and deliver more value to them
Customers develop preferences for brands that better meet their needs and deliver more value
Brand/supplier loyalty leads to increased market share and creates a barrier to competition
Fewer marketing resources are needed over time to maintain share due to brand or supplier loyalty
Profitability increases
Market segment
A group of customers who share a similar set of needs and wants
Must have heterogenous needs and wants
Must cluster into specific groups within which members’ needs are more similar to those of fellow customers in that group than those in other groups
The overall costs of serving customers in each segment must be equal to less than the prices they are willing to pay
Market segmentation
Evaluating the attractiveness of each segment and selecting those segments that you can serve effectively and profitably
Bases for segmenting consumer markets
WITHIN a group: homogenous characteristics
ACROSS a group: heterogeneous characteristics
Types of segmentation
Geographic
Demographic
Psychographic
Behavioral
Occupation
Religion
Usage rate (light, avg, or heavy user)
Behavioral occasions
Life Stage (a person’s major concern, such as marriage, buying a home, etc.)
Product benefits sought by consumers (quality, low price, etc.)
**It is important that you adjust the marketing program to recognize key consumer differences
Nielsen Claritas’ PRIZM (Potential Rating Index by Zip Markets)
Is a geo-clustering approach to segmenting markets
It divides people into 68 distinct lifestyle segments (called PRIZM clusters)
Based on: Education and affluence Family life cycle Urbanization Race and Ethnicity Mobility
EX: Money and Brains - city dwellers with advanced degrees, a few kids, and a fashionable home
VALS Segmentation System
Buyers are divided into groups on the basis of psychological/personality traits, lifestyles, or values
More ways to segment markets
Marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product
Needs-based segmentation
Benefits-based segmentation
How to evaluate a segment’s attractiveness
Look at its size and growth
Look at the competition and saturation
See if you can protect it from environmental risk
See it it’s a good fit for your company
See if it is profitable
Types of market coverage
Concentrate on a single segment (most attractive one)
Provide one offering to many segment
Provide a range of offerings to a specific segment
Select segments in which to specialize
Cover the whole market (all offerings to all segments)
Customer self-selection
Common in retail settings
Discriminant analysis
A tool used to assess the adequacy of a classification
Requires identifying a small subset of variables that can be used to assign customers to segments
USP (unique selling proposition)
Something that only you can offer
Positioning
Requires that you build USPs and occupy a distinct position in the minds of target consumers
Value proposition
A reason why the target market should buy a product/service
Can often be written in 1 or 2 sentences
Competitive frame of reference
Defines which other brands a brand competes with and which should thus be the focus of competitive analysis
Firms should usually broaden their competitive frame to look at more advantageous comparisons
Key success factors
Customer awareness
Product quality
Product availability
Technical assistance
Selling staff
PODs (points of difference)
Attributes/benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand
Strong brands have multiple PODs
POPs (points of parity)
Attribute/benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands
The brand is “good enough”/ as good as its competitors
Perception Maps
Are visual representations of consumer perceptions and preferences
Used to answer:
- How do our customers view our brand?
- Which brand do these customers perceive to be our closest competitor?
- What product and company attributes are most responsible for these perceived differences?
Positioning statement
An expression of how a given product, service, or brand fills a particular consumer need in a way that competitors don’t (usually a few sentences)
The statement is directed towards potential customers
