The Basics Flashcards
Foundation Basic Terms & Concepts
The Marketing Mix
The combination of factors that a business or service uses to carry out its Marketing Strategy; to influence the transfer of value and meet customers’ needs
The Four P’s
Product, Price, Place, Promotion
Basic Product Concepts
“The Offering”
- Development
- Design
- Features
- Improvement
- Decisions in Product Line (Assortment, Varieties)
Basic Price Concepts
“The Exchange”
- Reference Price (How much are customers willing to pay?)
- Uniform Pricing (Same price across markets) vs Price Discrimination (Differentiated prices according to the specific market conditions: Target group, time, demand, etc)
- Competitor Prices comparisons
- Consumer prices vs. Reseller prices
Basic Place Concepts
“The point of availability”
- Geographical Areas (Region)
- Specific Locations (Malls, Stores, Your mom’s house, etc)
- Utilization of the Channels of Distribution
- Directly selling or through intermediaries
Basic Promotion Concepts
“Communication, Information and Persuasion”
- Utilization of the Channels of Communication (Advertising, promotions, social media..etc)
- Message behind your offering
- Publicity (Mass response)
The Needs of a Human Being
Popularly defined by Abraham Maslow’s “Hierarchy of needs”
- Physiological Needs: Food, Sex, Water, Rest, Sex
- Security Needs: Shelter, Personal Security Financial Security
- The Need to Belong, to love or be loved: Friendships, Family, Sexual Intimacy
- Esteem: Respect of others, Respect by others, Self- Confidence, Ego…etc
- Self-Actualization: Morality, Creativity, Generosity, Problem Solving,Acceptance of facts
The 5 types of Consumer Needs
- Stated Needs – “I need an inexpensive car”
- Real Needs – “The customer wants a car whose operating cost is low; What does the customer REALLY need?”
- Unstated Needs – “The customer expects good service from the dealer; Common Sense”
- Delight Needs – “The customer would like the dealer to include onboard systems; Luxury” (GPS, Mobileye).
- Secret Needs – “Want to be seen as a sophisticated person, or sensitive to the environment; True motivations”
The Wants of a Human Being
Needs that were actively shaped by culture and personality over time (e.g. eating at a specific brand such as McDonalds
Calories is what you need, the brand/type of food is what you want)
The Value of Marketing
Marketers influence people wants, not needs.
Marketers seek:
- Attention
- A purchase
- A donation
- A vote
The Things Marketers Promote
Goods, Services, Events, Experiences, Persons, Places, Property, Orgs, Information, Ideas…Basically anything
Demand/Supply
You should know this shit
Demand States
Describes various consumer behaviors and requires specific marketing actions to said behaviors .
(Demand State) Negative Demand
Created if the product is disliked in general or if customers avoid it
Example: Going to a dentist. Some people dislike dental work so they try to improve their daily hygiene
(Demand State) Non-Existent Demand
Lack of awareness/interest or limitations that prevent a consumption
Example: New brand that is overshadowed by dominant brand, New technology that is unsupported by current platforms
(Demand State) Latent Demand
A shared need that cannot be satisfied by any existing product
Example: The pill from the movie Limitless.
(Demand State) Declining Demand
Consumers inclined to buy products less frequently or not at all
Example: pocket-calculator, CD’s
(Demand State) Irregular Demand
Consumer needs vary on a seasonal basis
Example: Ski jackets, Christmas trees.
(Demand State) Full Demand
Demand = Supply
Example: Spacecraft, Made to order products, Fresh produce
(Demand State) Overfull Demand
More consumers would like to buy the product than can be satisfied
Example: Taking the train in Israel on a Sunday morning (fckn nightmare)
(Demand State) Unwholesome Demand
Consumers may be attracted to products that have undesirable social consequences
Example: Red Light District in Amsterdam
A Market
A collection of buyers and sellers that share needs/wants, often regarding a specific product
Sometimes referred to as this way:
Industry - Sellers
Market - Buyers
Market Offerings
A combination of goods/services presented to a market to satisfy needs and wants
The 4 Market Flows
- Sellers provide goods and services to buyers
- Buyers provide sellers with money
- Sellers communicate product to buyers
- Marketers provide information to sellers.
Types of Markets
- Consumer
- Business
- Global
- Non-Profit/Governmental
Consumer Markets
Individual end-users who purchase and consume the product themselves
- A strong brand image is required for success
- Developing superior brand
- Packaging design
- Ensure product availability
Business Markets
Businesses, organizations, professionals and resellers that buy goods to make or resell products to others at a profit.
- Facing well informed professional buyer not consumers
- Marketers demonstrate how product helps increase revenue or lower costs (business, not personal interest) -
- Key factors: sales force, price, reputation
Global Markets
Buyers may be anywhere in the world; Large international network
- Globalization, World trade
- Needs high technology
- Marketers strategic decisions: which countries to enter and how?
- Adaptation, product features, pricing in different countries and regions, design communications for different cultures
- Environmental factors, income, language, legal and political implications must be accounted for
Non-Profit/Governmental Markets
- Customers have limited purchasing power
- More limitations
- Need to price carefully
Example: Charitable organizations, universities, churches etc.
Marketing Channels
A marketing channel is the people, organizations, and activities necessary to transfer the ownership of goods or services from the point of production to the point of consumption.
- Communication
- Distribution
- Service
Communication Channels
Send/Receive information to/from your consumers
- Deliver and receive messages from target buyers
- Newspapers, magazines, radio, TV, billboards etc.
- Facebook fan pages, twitter and blogs
- Design or retail stores, and websites
Distribution Channels
Send/Receive goods/services to/from your consumers
- Display, Sell or Deliver products to buyers
- Can be Direct – with no middleman at all. Done through the internet, mail, mobile devices
- Can be Indirect – with distributors, wholesalers, retailers and agents as intermediaries
Service Channels
Send/receive solutions and provide logistics to/from your consumers
- Support delivery and transaction
- Includes warehousing, packaging, logistics and transportation (such as FedEx)
- Banks, financing and insurance companies
- Payment processing, clearing services
The Supply Chain Process
Step 1: Raw Materials : Fat Cows
Step 2: Components : Killing them and harvesting their meat
Step 3: Finished Products : Converting into ground meat, shaping them into form and packaging them
Step 4: Delivery : Distribution to retail locations in refrigerated trucks
Step 5: Final Buyers : On-site customization to consumer preferences, sold with marketable service.
Customer Profitability
A customer is profitable when the revenue is greater than the costs
- Costs include but are not limited to: attracting, selling or serving to said customer
- The relationship between revenue and cost is much more valued over time, not on the profit from one particular transaction (Long Term/Short Term).
This concept consumes at least 40% of this class’s curriculum and it’s advanced concepts are in another flashcard deck
The Value Chain
“A set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.”
- The relationship between PRIMARY and SUPPORT activities of a given firm/industry IS the value chain
- The value chain can be improved based on baseline market data & proven practices; Usually to cut costs/increase profit.
- The firm will need to research intelligently in order to achieve peak state of value chain
Primary Activities
- “Inbound Logistics” – Bringing raw materials/components/services into business for production
- “Operations”– Activities that process/convert materials into final products
- “Outbound Logistics” – Shipping out final products produced by operations
- “Marketing; Sales” – Potential customers targeted
- “Service” – Set of functions that ensures that the customer can use the product properly after the transaction has been completed
Support Activities
- “Procurement (Acquisition)” – Involves purchasing raw materials and supplies, and sourcing certain functions the organization carries out
- “Technology and Development” – Responsible for creating new products. Usually more important for innovative companies
- “HR Management” – Recruiting people/performance
- Firm Infrastructure” – Planning, legal, finance, accounting etc.
Outsourcing
- Creating parts of the Value Chain “outside” of the company; instead of having an in-house department or employee handle them.
- These functions can be outsourced to either a company or an individual.
- Companies should make sure that every single function in the chain creates value.
- If someone else can perform this more effectively, the company may consider outsourcing.
Benefits of Outsourcing
“Costs”
- Consolidating expensive practices in value chain - Perhaps lower wages exist elsewhere
- Legal/pension fees may be lower
- Contractual basis - Less company commitment to employee
“Flexibility”
- Product development range
- Product capability
- Product Mix
“Quality”
- Higher quality suppliers
- Timely supply
Example: Every technology company in America
Downsides of Outsourcing
“Less Control”
- Supplier commitment
- Employment Policy
“Public Criticism”
- Can be hurt due to inhumane conditions or unethical policy
- Common critique
“Political Criticism”
- More jobs could have been created in base country
- Government political pressure
The Eight Dimensions of Quality (of a product)
- Performance
- Features
- Reliability
- Conformance - The degree to which the actual quality of production/design translates to the quality of production that have been marketed to public; Think ‘big macs’ they never look as good as advertised
- Durability
- Serviceability – Related to how often service is required.
- Aesthetics – Products appearance, smell, taste 8. Perceived – Customers indirect evaluation of quality aka “Reputation”
PLC Model (Product Life Cycle)
The life course of a product in the market from life to death
Stages:
- Development
- Introduction
- Growth
- Maturity
- Decline
(PLC) Development Stage
- NPD – new product development
- R&D - Lengths depend on advancement of technology, regulation, market research
- Requires significant resources
- Long lead time before product launch
(PLC) Introduction Stage
- New product is launched at the right time
- Product awareness is low
- Competition is low
- Cash flow usually negative
Strategy:
- Encourage product adoption and optimize the search for the target market
- Utilize Communication Channels – create awareness , communicate benefits
- Pricing – Skimming (start high) vs penetration (start low)
- Release Basic version of the product, and expand line as sales increase
- Distribution – limited, focused, selective
(PLC) Growth Stage
- Product indicated as success or potential for success
- Sales/interest increase steeply
- Customer base expanding fast
- Competition intensifies, replications of products among competitors production cost
- Economies of scale (Produce more, cost less), additional units lower costs
- Cash flow is positive
Strategy:
- Sustain growth
- Intensive, maximized product distribution
- Reach wider target audiences
- Market penetration (expand market share)
- Improve product/line (launching new version, features)
(PLC) Maturity Stage
- Sales growth is in recline or stagnation
- Competition is intense, new rivals, multiple competitors, many substitutes
- Price decreases
Strategy:
- Maximize ROI
- Maximize operational efficiency, lowering costs
- Influence weaker competitors to leave market
- Employ extension strategies such as rebranding, redesigning, discounts etc.
(PLC) Decline Stage
- Falling Sales and Profit
- Market in Decline
- Product Withdrawal
Strategy:
- Decide if it is economically sound/beneficial to produce product; liquidate stock?
- Continue sales at much cheaper Production
- Take advantage of cheaper markets
Market Segment
A group of customers or people who share one or more common characteristics, needs or wants. These individuals are lumped together for marketing purposes.
- Demographic
- Psychographic
- Behavioral
Target Market
A market segment to which the marketer aims its marketing efforts (to which he believes offers the greatest opportunities)
Example:
- Volvo – develops cars around consumers who are most concerned with safety
- Porsche – Cars with driving experience (positions itself as the car that provides the ultimate driving pleasure)
Bottom Line
Net profits
Customer defection
The rate customers stop using products at a given time
Customer defection also known as: Attrition, turnover or churn
Retention rate = 1 – Attrition rate
Product Proliferation
Product proliferation occurs when organizations market many variations of the same products.
- This can be done through different colour combinations,product sizes and different product uses.
- Done to capitalize more market share
