Midterm Flashcards
What is the definition of a business model
A business model describes the rationale of how an organization creates, delivers and captures value
- a story that explains how an enterprise works
What is the impact of a business model
It is a design of a blueprint that makes work easier
-your strategy and way of operating
How do you deliver value
Through a value network and community of partners, suppliers and such
How do you create value
By differentiating yourself from competitors and by meeting an unserved need in the market
How do you capture value
By monetizing/ converting your offerings and ensuring your revenue streams can support your cost structure
Why is it important to understand your business model
Because it provides and visual and tangible way to understand your company’s benefits that you offer and how they fit with the customer characteristics that you aim for
What are the 4 reasons why business models fail
1) flawed logic
2) limited market/ strategic choices
3) incorrect assumptions about value chain
4) imperfect value creation and capture assumptions
What does flawed logic mean
When assumptions about the environment are not correct, you end up facing challenges in executing the business model
What does limited market or strategic choices mean
When a business model does not address both creating value and capturing value
Ex. Disruptive technology can have a lot of value but has a hard time capturing value because their is no market who needs the value
What does incorrect assumptions about the value chain mean
Entrepreneurs often think the value chain is static- which means they think nothing will change
What does imperfect value creation and capture assumptions mean
If a business model has a weak/ non existent value it will not be able to capture value/ make money
What are the 2 main types of business model patterns
Multi sided and freemium
What is a multi sided platform
Value is created by facilitating interactions between 2 distinct but interdependent groups of customers
- network effect- value created as more users join
- ex. Social media, visa, Uber
What is a free business model pattern and what 3 types are there?
At least one substantial customer segment is able to continuously benefit from a free of charge service, financed by another part of the model or another customer segment
1) freemium
2) advertising
3) bait and hook
4) others
What is a freemium
Someone getting something for free but would have to upgrade at a cost
What is a bait and hook
Offering an initial purchase at a cheaper price but making future required purchases more expensive
What is advertising mean in the free business model pattern
Social media users for free but paid through advertising companies
What other business model patterns are there
Memberships and crowdsourcing
What are the differences between a social BMC and normal BMC
Surplus in revenues
Your solution
People instead of customer Relationships (stakeholders, beneficiaries, customers)
What is a problem- solution fit
A solution that solves/ addresses a problem- how you create value
- from customer Segments to value proposition
- creates value
What are the 4 steps in the business model process
1) understand contexts and resulting implications- pull from research
2) gain customer insights- talk to them
3) prototype different canvases
4) tell the story
What is the value proposition statement
For (target customer) who (need/ opportunity). The (product) is a/an (product category) that (statement of benefits), unlike (competitors)
Definition of marketing
An integrated system of activities designed to plan, price, promote and distribute, want- satisfying goods to present and potential customers
- works internally with finance, Human Resources and operations
What are the 2 keys to successful marketing
1) provide a unique benefit- something the customer wants or needs- a solution that fits with a problem
2) convince the customer that you provide a unique benefit through consistent product, pricing, promotion and place
What is a target market and what are the 2 steps to determine it
A group who has wants or needs that have not been met who you wish to direct your product toward
1) market segmentation
2) market selection: perceptual mapping and preference analysis
What are the 4 groups that you divide your market segmentation
1) state of being
2) state of mind
3) product usage
4) benefits sought
What is the benefits sought of market segmentation
Identifying the pains, gains, price, design and ways to differentiate
What is the state of being of market segmentation
Demographics and geographic
What is the state of mind of market segmentation
Psychographics- how do they think? Lifestyles? Values?
What is the product usage of market segmentation
How much do they actually use the product, behaviours with the product
What is perceptual mapping and how do you do it
Are their needs being met by competition
- place the competition names on the axes
What is preference analysis and how do you do it
What they really want
You put the Segments on the axes
When you put both the perceptual map and preference analysis together what do you do
Draw lines from competitors to segments and choose your target market based on the longest line
What are the 5 other factors to consider when choosing a position in the market
Ability to design and conceive Ability to finance Ability to manage and execute Ability to produce Ability to market Your competitors reaction
What does positioning mean
Finding a distinct position for your product in your customers mind, be able to communicate your unique benefit and position on mind (perceptual) as close to your ideal (preference)
What are the 2 approaches to positioning and what do they mean
Consumer approach: put your product in their mind on what currently matters to that customer through communication
Competitive approach; position yourself in your targets mind and compare the benefits you provide vs others (perception)
What does a positioning statement do
Convince the customer that your product provides a unique benefit through consistent product, price, place and promotion
What is the positioning statement
“Our (product name) is (single most important claim) among all (product category) because (single most important support)
What is the integration of the marketing mix
All the variables in the marketing mix (4Ps) are dynamic: if you change one thing it affects the other
What does the product life style show
What stage you are in/ industry and how will it evolve and how will you be competitive
What are the implications of being in the introduction of the product life cycle (what is your strategy)
- marketing: encourage trial, establish distribution
- product: establish competitive advantage
- distribution: establish network
- promotional: brand awareness
- pricing: set introductory price (skimming or penetration)
What is the strategy for being in the growth section of the product life cycle
- marketing: attract new users and repurchases
- distribution: solidify networks
- product: maintain quality
- promotion: provide information
- pricing: maintain prices until near end
What is the strategy for being in the maturity section of the product life cycle
- marketing: seek new users or uses for your product
- product: modify product
- distribution: provide incentives to ensure support
- promotion: reposition product
- pricing: reduce prices to meet competition
What is the strategy for being in the decline of the product life cycle
- marketing: reduce marketing expenses and keep loyal users
- product: maintain product
- distribution: eliminate trade allowances
- promotion: eliminate most advertising expenses and promotions
- pricing: maintain prices
What does product classification mean?
How customers behave with your produce and how do you need to sell it based on that
Why are the 4 product classifications
1) unsought
2) convenience
3) shopping
4) luxury
What is in the unsought product classification and what is the strategy to sell it
No effort to buy because no one thinks about buying it
-intensive personal selling, highly persuasive advertising, direct mail, telemarketing
What is the convenience part of product classification and what is the strategy to sell it
Inexpensive products that require minimal effort to buy
- staple: need it on hand at all time- make it about your BRAND and spot on shelf
- impulse: guilty pleasures- extensive distribution, spots on shelf
- emergency: need it all of a sudden
What is the shopping part of product classification and what is your strategy to sell
Moderate effort to buy, bought after brand to brand or store to store after comparing qualities
- heterogenous: evaluating the criteria
- homogenous: only look at price
- make it readily available, next to competitors to compare
What is the luxury component of product classification and how do you market it
High effort, consumers search long and hard
- distribution limited to 1 or 2 sellers in a given region
- exclusive
What is the total product concept and why is it important
The unique mix of product, price, service, relation, and image that a company offers to a group of targeted clients
- understand that to them a product is the total package of benefits
- every experience they have is focused on them
What is a brand
Name, design, symbol, specific colour, slogan or any feature that identifies a product, distinguishes it from others and created a perception in the minds of consumers
- collection of perceptions
What is brand loyalty
A customers preference for a particular brand that results in advocating for that brand (recommends to others)
- when brand strategy increases, brand equity increases which increases value
What are the 5 drivers of brand insistence
1) relevant differentiation
2) emotional connection
3) awareness
4) value (affordability)
5) accessibility
What is the marketing concept
Idea that firms should analyze the needs of their customers and then make the decisions to satisfy those needs, better than competition
What are the 4As
Acceptability
Awareness
Affordability
Accessibility
What is the acceptability part of the framework
The extent to which the firms total product offering meets and exceeds customer expectations
- functional: does it meet needs
- psychological: do they like using these products
What is the affordability part of the framework
The extent to which customers in the target market are able and willing to pay for the price
- economic: are they able to pay
- psychological: willingness to pay
What is the awareness part of the framework
Extent to which customers are informed regarding product characteristics, persuasion, reminded to purchase it
- brand awareness: positive association with brand, how involved is customer
- product knowledge: do they know about the product and how to use it
What is the accessibility part of the framework
Extent to which customers are able to readily acquire and use the product
- availability; can they acquire it, use it
- convenience; is it there when they need it, how easy is it to get packaging, assembling
Which 4As connect to the 4Ps
1) product- acceptability
2) price- affordability
3) promotion- awareness
4) place- accessibility
What are the 5 ways to use the 4As
1) market value coverage is the goal: measured how well strategy succeeds- the 4As are multiplicative (if one is 0 it will wipe out)
2) dimensions of each one are additive
3) the 4As are integrative and can move in tandem (ex. New tech can be produced and increase acceptance)
4) sequencing matters
5) leverage all resources to increase MVC (finance, HR, operation)
What are the 3 primary focuses for marketing’s troubles
1) misguided resource allocation
2) faulty metrics
3) lack of customer focus
What is the management by objectives framework mean
By peter drucker
- company leaders who use this framework establish a set of goals, communicate them throughout the organization and work to achieve them in a resource efficient manner
- ensures that everyone has a clear understanding of their roles and responsibilities
- focus on results, not activities
What does the 4As framework (MBO?)
Marketing by objectives
- deliver a clear and compelling set of goals: they can easily communicate throughout the organization and managers can be given a greater leeway in determining the most effective and efficient ways to achieve
- allow to predict the success of goods before launching
What is the examples that were used in the lab manual for the 4A framework
1) roomba vs Segway
2) airfone vs DirecTV
3) iridium vs cell phones
What are the 3 common pricing objectives
1) maximize profits
2) achieve a target return on investment
3) offering good value at a fair price
What are the 6 produce pricing strategies
1) price slimming
2) price penetration
3) leader pricing
4) bundling
5) odd even pricing
6) prestige pricing
What are the 2 ways of setting prices
1) break even
2) mark up pricing- certain dollar amount added to cost to create retail price
What are some things to consider when pricing
Costs
Completion prices
Feedback
Value chain partners
What are the implications of an indirect channel
1) must sell to intermediary as well as customer- need retailer to believe in you
2) lose control over how it is sold and effort made
3) retailers have full shelves and a lot of power- don’t assume they will agree to sell your product
What is a push approach
Try to make life easier for your intermediaries, incentivize them to sell your product, make it easier to sell your product (displays)
What is a pull approach
It’s hard to get the attention of intermediaries so focus efforts on consumer advertising so that they walk into retail stores and demand your product so retailers come to you
What is demand backward pricing
Consider the price you believe the customer will pay to make sure you incorporate what the customer can afford and what retailer will expect to be paid for
What are the promotional elements and the integrated marketing communications (IMC)
1) advertising
2) personal selling
3) sales promotion
3) publicity
IMC; make sure they are consistent and communicate to promote the same value
What is advertising
Any form of non personal sales presentation of a relatively long term nature that is paid for by a sponsor
What is personal selling
Dialogue, integration with customers, phone chats
What is a sales promotion
Short term, non- personal, paid for by a company (ex. Coupons)
What is publicity
Non personal, not paid for
Social media, news
What are the advertising objectives (AIDA) and why is it important
Attention
Interest
Demand
Action
To communicate your value proposition and position it in your customers mind
And to communicate brand in a way that increases sales
Why are the laws of going viral
Shares are more important
Make sure it translates what you want
What is the valuable virality equation
of invited friends x the % conversion rate
What is forecasting demand and the 2 methods with it
Projections based on research and logic, market potential does not equal sales
1) bottom up
2) top down
What is top down forecasting
Start from large market and narrow it down
What is bottom up forecasting
What you can actually do given capacity, resources and strategy, compare to beak even
What are the elements of the product adoption curve
Innovators Early adopters Early majority Late majority Laggers
What is the product adoption curves effect on forecasting
Makes sure you realize that there is not going to be a big rush of sales- who to expect next
How does the product adoption curve help your choice of target
You should target early adopters to show the rest how the product works and how well it works
What is the chasm and what do you change your marketing strategy from it
Only so many people you can sell to at this point, you hit a wall
- find other niches or adjust value proposition
- bowling alley effect increases sales after going over chasm
What is the tornado part of the product adoption curve
Sales increase dramatically so you have to make sure you can keep up with it
