Midterm Flashcards
Ethics
adhering to some agreed upon human values
ex- rights, obligations, benefits to society, fairness, honesty
why are ethics important?
Morally, but also monetarily. If consumers do not trust a company, they won’t continue to buy products
American marketing association norms and values
- do no harm
- foster trust in the marketing system
- embrace ethical values (honesty, responsibility)- consumer confidence
corporate social responsibility
voluntary firm endeavors that benefit society
stakeholders- employees, consumers, investors, community, suppliers
responsibilities- transparency
benefits- consumer loyalty, avoid legal repercussions, tax cuts
triple bottom line
people, planet, profits
social, environmental, economic
needs of customer now, needs of business now
marketing
needs of customer now, needs of business future
strategic planning
needs of customer future, needs of business now
societal marketing
needs of customer future, needs of business future
sustainable marketing (this is the goal)
Is CSR a necessary cost of business or optional?
Corpsumers are a large part of the market, so yes.
CSR also leads to a quality product, but it is possible to have a quality product without CSR
Moral reasoning model- is something ethical?
what are the relevant facts? what are the ethical issues primary stakeholders? possible alternatives? ethics of alternatives? practical constraints? what actions should be taken?
unethical marketing practices
unsafe products knockoffs planned obsolescence mislabeled products price gauging (increasing price in times of consumer need) price fixing (working with competitors to set price-illegal) deceptive advertising, sales technique puffery- exaggeration
criteria for successful CSR/ corpsumer campaigns
authentic, committed, relevant, knowing customer base
3 dimensions of how customers create value
function, economics, psychology
lessons from meal kit services
retention rates are important. They cast too wide a net. If they focused on the customers that stay, they would have a higher CLV
how to increase customer base CLV
increase margin and yearly profit, reduce discount
CLV= m(r/(1+i-r))- AC
customer aquisiton
find the best/right customers- which type, demographic, etc. Put the most money into those that will stay.
justify acquisition costs- can’t spend 160 on those worth 133, but can on those worth 1400
customer expansion
increase margin- meal kits can’t give much more, can’t sell the things grocery stores can
data mining for cross-selling. Customer retention is most important
increase satisfaction to increase loyalty. Give real value to the right customers who appreciate the value. Incentivize staying.
Switching costs- even if unsatisfied, customers likely to stay if high costs to leave
customer equity
what the whole customer base if worth/aggregate value
what drives customer equity? (4 types of value)
direct value- how much money is a customer driving to you today?
relationship value- retention- how much can we expect in the next years?
Information value- learning from the current base to use in the future. Or monetize data like facebook
communication value- recommendations, referrals, words of mouth, reviews
AIDA funnel
to describe customer decision making process
Awareness, interest, desire, action
why is AIDA weak
emphasis on influence, sales closure, acquisition, ends at purchase. No retention, satisfaction. Doesn’t take into account that the second purchase is different than the first. Fails to capture all touch points- digital/social channels, well informed customers with wide choices. Marketing does not stop at customer acquisition. It is the beginning point.
Customer journey- loyalty loop
- Initial consideration set-trigger
- active evaluation- info gathering, shopping
- moment of purchase
- post purchase experience- ongoing exposure
loyalty loop back to 3
customer builds expectations based on experience. Loop sometimes goes through whole process again
initial consideration set
short list of brands- already in head from all marketing over time. Coke and mcdonalds keeps advertising with 100% awareness to keep at top of consideration set.
Usually 2-4 brands, 1-2 added during active evaluation
company driven marketing huge in initial consideration but goes down by closure, where consumer driven marketing and store interactions important
prospect theory
how customers evaluate value- see graph in notes
Value (on y axis) and gains (on x axis)
based on a reference point in the middle
Same amount of losses makes less value than same amount of gains increases value
risk- loss aversion
humans are more averse to loss than attracted to gains.
Gain has to be 2x loss in order for most people to play the game
Value is judged by changed relative to reference point. Deals marketed as gains even though still using money
Correlation between satisfaction and performance/quality
little correlation
value ratio
what you over out of it vs what you put into it
equity/fairness
correlate to satisfaction
compare to expectation/alternatives
fairness- more satisfied if the price was fair instead of cheap
related to reference point- monkey example
discomfirmation
(dis)satisfaction is when there is a discrepancy , either positive or negative between expectations and actual performance
If low expectations, even a small surprise is great
Southwest manages expectations. Have high satisfaction even though objectively worse than other airlines
Loyalty
active- emotional connection, brand advocate
passive- habitual, no word of mouth, open to switching
mass marketing
same product, marketing to everyone. Undifferentiated, one-for-all strategy
advantages-simple and efficient from supply side
segmentation
dividing markets into distinct subsets of consumers with different needs and characteristics
segmentation based on:
geographic, demographic, psychographic, attitudinal, behavioral
psychographic
personality, media, lifestyle,
additudinal
benefits sought, price sensitivity, brand loyalty
behavioral
usage occasion, usage rate, repeat purchasing
criteria for good segments
relevance, homogeneous within, heterogeneous between, comprehensive, operational (measurable, accessible, actionable)
MECE
mutually exclusive (everyone is only in 1 group), comprehensively exhaustive (everyone is in a group)
methods for segmentation
factor analysis to reduce variables to few useful factors
cluster analysis to create groups- stat procedure- maximize homo within and hetero between
qualitative insight needed to see meaning in groups
Neilson- Geodemographic
US market is broken 66 groups based on environment (urban v rural) and income/resources
SBI VALS
(value and lifestyle system)
8 segments based on attitudinal/ psychographic
Customer relationship management
Micro-segmentation- individual approach
creating and maintaining relationship with individual customer to build lifetime value
example: amazon
4 pillars f CRM
identify, differentiate, interact, customize
attractiveness (targeting)
segment size, growing segment, monetary and strategic value, stability
compatibility (targeting)
company position to address and serve segment
ease of entry, ability to reach and serve
competitors (targeting)
number and strength, ease of entry
targeting- 3 things to take into accoun
attractiveness, compatibility, competitors
positioning
influencing how segment views offering in comparison to competition
positioning statement
to (target segment and need) our (brand) is the (concept) that ( point to difference and reason to believe)
customer centricity
not treating all customers
Marketing research steps
Analysis (5Cs) -> strategy (STP) -> implementation (4PS) -> metrics (effectiveness)
direct elicitation
focus groups, interviews, surveys
likert scale
semantic meaning translated to numbers (rate 1-10)
Multi-attitudinal model
Use direct elicitation data
asks 2 questions- rate the importance of each attribute from 1-7 and the strength of each attribute for each company from -3 - 3
Multiply the importance x the strength and add all together for each company to find which company is best in the eyes of customers, relative to the other companies
Positioning/ perceptual map
plotting perception of different brands on 2 dimensions of two most important attributes. Can see where each company lies in relation to others
problems with surveys and data
customers may not know preferences
may be unable/reluctant to share
people bad about determining what factors actually contributed to choices
ideal offering not a simple sum of its parts
conjoint analysis
Infers importance of product features and values of products by how consumers evaluate hypothetical products
Create all possible combos of what a product could look like and make people choose (ex forced choice, rate, rank). Then figure out which attribute at each level influenced choices.
New methods for data
Phone and internet, purchase histories, eye tracking, brain scans
(self reporting less related to real world results than brain activity)
profitability
revenue- costs
fixed costs
same regardless of level of production
ex- executive salaries, rent, insurance, overhead expenses
variable costs
changes with volume of production
ex- manufacturing, shipping, sales commissions
sunk costs
money spent, unrecoverable
market research, R&D, general operating expenses
unit contribution
portion of sales revenue not consumed by variable costs
= revenue per unit- variable costs per unit
contribution margin
unit contribution/ revenue per unit (in %)
profit
(unit contribution x units sold) - fixed costs
break even volume
number of unites that need to be sold to cover fixed costs
BEV= fixed costs/unit contribution
sales/revenue market share
% of sales accounted for by firm within product category
firm sales/ total market sales
volume market share
% of units accounted for by the firm within product category
firm units sold/ total market units sold
customer market share
% of customers the firm has relative to total customers
firm customers/ total customers
customer lifetime value
the value of purchases the customer would make over a lifetime of patronage
Net present value of all future streams of profits over a lifetime
knowing CLV helps us decide whether to:
acquire, retain, or let go, of an individual customer or entire customer base of company
CLV=
annual contribution per customer x years as a customer
annual contribution per customer=
unit contribution (how much spends on each thing) x units per customer per year
CLV does not account for
discounting profits over time
retention rate
segments with different values lifetimes
retention rate=
[(E-N)/S] x 100
E= # of new customers at end of period
N= # of new customers acquired during period
S= # of customers at start of period
CLV equation
m( r/(1+i-r))-AC m=margin i=discount rate r=retention rate AC= acquisition cost
return on marketing investment (ROMI)
= incremental gain from investment/ cost of investment
measure of efficiency of investment
can be expressed in terms of net income, sales revenue, market share, contribution margin
margin analysis
understand where incentives lie
retailer margins show which products retailers want to push/ feature
manufacturers margins show which products are driving profits
