Exam 2 Flashcards
Mission Statement
The organization’s purpose;
what it wants to accomplish in the larger environment
Business Objectives
- build profitable customer relationships
- invest in research
-improve profits
-affect entire company
Marketing Objectives
-increase market share
-create local partnerships
-increase promotion
Analyzing the current business portfolio
- identify strategic business units (SBUs)
- assess the attractiveness of its various SBUs
- decide how much support each SBU deserves
BCG Growth-Share Matrix
- Under the classic BCG portfolio planning approach, the company invests fund from mature, successful products and businesses to support promising products and businesses in faster-growing markets
-the company must decide how much it will invest in each product or business (SBU), it must decide whether to build, hold, harvest, or divest
Problems with Matrix Approaches
- Difficulty in defining SBUs and
measuring market share and growth - Time-consuming
- Expensive
- Focus on current businesses, not
future planning
The Product/Market Expansion Grid
Companies can grow by developing new markets for existing products
- through diversification, companies can grow by starting or buying businesses outside their current product/markets
Product Form Competition
Products or services of the same product type
Product Class/Category Competition
Products that have similar features and provide the same basic function
Need-level Competition
- Products and services that the consumer views as fulfilling the same need
- Think about substitutability
Budget Competition
- Products and services that are purchased from the same general budget (e.g., groceries, discretionary income)
- Key Concept: Mental Accounting!
Levels of Competition
Form, Class, Need, Budget
Beyond Customer Competition
Competition is best defined primarily through customers’ perspective.
BUT competitors don’t just fight for market share…
- Suppliers/Inputs (smartphone glass, chips)
- Shelf Space and Partnerships
Talent (designers, programmers, actors)
- R&D and Intellectual Property (drug patents)
First Mover Advantage
In some markets, whoever enters
first gains significant advantages
over competitors who arrive later
First Mover Advantage
Slow technological evolution + slow product adoption = likely and long lasting
Slow technological evolution + fast product adaptation = Likely, but High
Competition also Likely
Fast technological evolution + Slow Product Adoption = unlikely
Fast technological evolution + fast product adaptation = likely, but short-lived
Product Adoption Curve
innovators – early adopters – early majority – late majority – laggards
tech enthusiasts – visionaries – pragmatists – conservatives – skeptics
Customer insights
information-based understandings
of customers and the marketplace that become the basis for creating customer value, engagement, and relationships
* Important but difficult to obtain:
* Needs and buying motives not obvious
* Customers usually can’t tell you what and why
Marketing Research
the process of planning, collecting, and analyzing data relevant to a marketing decision
“Begin with the End in Mind”
What is my research question?
How will I use and analyze the data?
What kind of inferences do I hope to make?
What decision will this influence?
Gathering Consumer Insights
- An “investment” to reduce uncertainty
- Can help guide decisions on
– Whether to enter
– Product characteristics
– Promotional strategy
– Positioning - Must weigh costs and benefits of research
– Money
– Time spent
Market Research Process
Defining the problem and research objectives — Developing the research plan for collecting information —- Implementing the research plan: collecting and analyzing the data — interpreting and reporting the findings
Examples of Primary Data
– Survey
– Test market
– Focus group/interviews
– Observation
– Experiments
Examples of Secondary Data
– Transaction data (e.g. scanners)
– Browsing/clickstream data (Amazon)
– User Generated Content
– Mobile
– Government or 3rd party data
Primary Data Advantages
– Allows investigation of a specific issue of interest
– Often more relevant outcomes than secondary data
– Can look at causality and what-if scenarios
Primary Data Disadvantages
– Expensive
– Time-consuming
– Many potential biases
Primary Data
Data that did not exist prior to this specific research effort and must be created by the marketer.
Most helpful for decision support research (the 4 Ps)
Secondary Data
Data that already exists somewhere (prior to this specific research effort) and was collected for another purpose.
- Can be external or internal to the company
- Most helpful for situational marketing research (the 3 Cs)
- Often the domain of marketing analytics
Secondary Data Advantages
– Abundant, easy to find
– Can be low cost or even free
– Can be more real market behavior (scanner data)
Secondary Data Disadvantages
– Not customized to your needs
– Procedural details may be unknown to you
– Limited insights about causation
Panel Data
Group (panel) of consumers —-Survey or sales receipts —- What are they buying or not buying?
- important for secondary data
Social Media Data
- User-generated content
- Social graph (connections)
- Interests (following pages, subreddits)
- Some is publicly available (Twitter),
other data can be purchased
Attributes of Good Market Research
— Reliability: Would a repeat test find the same insights?
— Validity: Do the findings apply to the business problem you’re solving?
— Generalizability: Is your data representative of the wider society?
Probability Sampling
- Sample members are drawn at random from the population of interest
- Ideally they will have no systematic differences in characteristics compared to that population
- simple random sample
- stratified random sample
Non-Probability Sampling
Sample members are NOT drawn at random from the population of interest and may have systematic differences in characteristics
—- Non-probability samples can actually work much better in some
cases, but you must be careful about generalizing your findings.
Most real-world samples are convenience samples to some degree.
Convenience sample
Includes whoever is easiest to recruit
Judgment sample
includes the “best” respondents according to the researcher’s judgment
Primary Research Methods
Observation
Interviews and Focus Groups
Surveys
Experiments
Observation
- Involves watching and interpreting people’s behavior with minimal interaction or intervention
- Great for exploratory research and for finding unarticulated needs
Observational Research Example:
McDonald’s Milkshakes
People were buying milkshakes early in the morning.
Buyers were often adults eating alone.
Insight: People wanted these milkshakes while they were stuck in traffic on their commute.
Marketing decisions: Design to last longer, design for straw vs. spoon, list on breakfast menu, morning price promotions, shift McCafe products to meet this need
Interviews and Focus Groups
- Conversation with (potential) customers to directly ask them about their thoughts and feelings
- Focus group is an interview with multiple people at once, led by a moderator
- Have a lot of interaction and can be guided by an expert interviewer/moderator
- Fairly unstructured and anecdotal, so more useful for exploratory research than for making final decisions or generalizing to all customers
- Focuses on articulated needs
Survey Research
- More structured than interviews or observation
- More consistent and comparable data across respondents
- Greater up-front cost to design survey, lower marginal cost to get responses (esp. online)
- Lots of issues to consider for effective question design
Issues in Question Design
List Framing Effects
Order Effects
Double-Barreled Questions
Response Biases
– Memory Errors
– Social Desirability Effects
– Demand Effects
Order Effects
Responses are influenced by previous question
List Framing Effects
Marketer’s Question: What % watch more than 2.5 hrs of TV?
- Version A: Low frequency
- Version B: High Frequency
Double-Barreled Questions
Questions that ask about two separate pieces of information at the same time, making interpretation difficult or impossible
Example:
Please indicate how much you agree or disagree with each of the following statements about your shopping experience:
1) I felt welcomed by the staff and my needs were well taken care of.
Better (not double-barreled) version:
1) I felt welcomed by the staff.
2) My needs were well taken care of.
Memory Errors: Behavioral Frequency
How many times have you purchased coffee in the last year?
- Impossible to actually count from memory
- Educated guess at best
Better: When was the last time you bought coffee?
- Much more likely to remember
- Specific episode (vs. full history) is more memorable
- Recent (vs. distant) experience
Social Desirability Effects
For certain questions, respondents are biased to answer in a way that they perceive to be socially desirable. (Self- presentation)
This makes some research questions very hard to address:
- What % of the US population cheats on their spouse/partner?
- What % of the US population washes their hands every time they go to the bathroom?
- What % of UW students use illegal drugs regularly?
Demand Effects
Respondents often feel pressure to answer questions in a way that they think the asker wants to hear.
(Politeness) “How often have you been flossing?”
Promoting Honest Response
- Ensure anonymity
- Ask indirectly (projection)
- For example, ask respondents to guess the portion of the population that uses illegal drugs
The King of Survey Questions:
Net Promoter Score (NPS)
How likely are you to recommend this product/brand to a friend or colleague? (1-10)
Formula: Promoters (9-10) - Detractors (1-6)= NPS
Examples:
Tesla 96 (cars average 58)
USAA 75 (banking average 18)
Apple 72 (laptop/tablet average 43-56)
Verizon 26 (telecom/ISP average 0)
United 10 (airline average 38)
NPS: What do we with it?
- Measure overall customer satisfaction indirectly (reduces demand effects)
- Compare customer satisfaction over time and against competitors on a standardized scale
- Identify low-NPS categories/industries to disrupt (e.g., Apple credit card, AWAY suitcases, Netflix)
- Categorize customers (Promoter, Passive, or Detractor) for potential targeting
- Try to fix issues for detractors, or “fire” them for future damage control
- Encourage reviews and referrals from Promoters
- Target Promoters for cross-selling of other offerings
Experiments: Causal research
- Experimentation involves the deliberate manipulation of one or more variables by the experimenter in such a way that its effect on other variables can be measured.
- The variable being manipulated is called the independent variable (a.k.a. cause).
- A variable that will reflect the impact of the independent variable is called a dependent variable (a.k.a. effect).
- By assigning manipulations in a way that is not related to any other relevant factors (randomization), experiments can rule out anything else as a potential cause of the observed outcome.
When is Mass Marketing Appropriate/Effective?
- Goods are a commodity (products considered interchangeable and sold in bulk – e.g.: oil)
- Consumers have (virtually) the same needs
- Little to no competition
Targeted Marketing
- An alternative to mass marketing
– When you can’t serve everyone
– When group needs differ substantially
– When competitors can better serve some customers - Involves three key steps:
1. Segmenting the market (“S”)
2. Choosing the target segment(s) that are right for you (“T”)
3. Positioning the product for a chosen target segment (“P”)
Benefits of STP to the Firm
- Identification of valuable customer segment(s)
- Efficiency in marketing communications
- Higher customer lifetime value
——-> Increase profit
Benefits of STP to the Customer
- Customized products & services
- Relevant promotions
- Personalized and efficient interactions with firm
——–> Higher Satisfaction
Segmentation
- Grouping consumers by some criteria, such that those within a group will respond similarly to a marketing action and those in a different group will respond differently
- Divides a broad target market into subsets of consumers who have common needs and who can be addressed as a group
- A study by Harvard Business Review argued that in the US, 85% of 30,000 new product launches failed because of poor market segmentation
Segmentation: How can we divide the marketplace?
Demographic
* Gender
* Age
* Income
Psychographic
* Social class
* Values
Geographic
* Continents
* States
* Cities/suburbs
Behavioral
* Benefits sought from purchase
* Occasion
* Loyalty
