5/28/2009 3:57:00 PM What is Marketing?

An exchange between firm and consumer Technically is it the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers and develop and maintain favorable relationships with stakeholders in a dynamic environment What is the long-term benefit to having satisfaction in an exchange? y y The long-term benefit to having satisfaction in the exchange is expressed through Relationship Marketing, the belief that establishing long-term, mutually satisfying buyer-seller relationships is beneficial to a firm What can we market? y Goods, services, experiences, events, people, places, information, ideas, industries, companies What are market orientations? y y y y Product/production orientation: Build it and they will come, make a good product, however, with less focus on the customer and more on innovation Selling orientation: The hard sell, again, less focus on the consumer and more focus on selling a product

Marketing/customer orientation: Relationship focused o Modern marketing it is an organization-wide commitment to researching and responding to customer needs. Marketing should run through the entire firm, from the CMO to a salesperson y Quantification useful if possible

The Marketing Framework: Begin analysis with the 5Cs, an environmental analysis, always in flux Customers: y Who are they? What are the like? Do we want to draw different customers Company: y Context: y What is happening in our industry that might reshape our future business? Collaborators: What are our strengths and weaknesses? What customer benefits can we provide? What are our competencies and how can we use them to attract customers?

Can we address our customers needs while strengthening our B2B partnerships? Who can help us in our business Competitors: y y Who are the competitors we must consider? What are their likely reactions? Who will be attempting to attract our customers

Proceed to STP (Strategic Marketing Planning) Segmentation y Targeting Attracting some of those customers makes better sense than going after others, focus your efforts on either a specific group of customers or a few groups; target the segments Positioning y Communicate your benefits clearly to your intended customers, position your product to the targeted segment Proceed to 4Ps, the Marketing Mix Product y y Price y Place y What channels can we use to sell the product Promotion y What can we do to entice our customers, what will be our advertising strategy? Will customers pay, what is the appropriate price? Will customers want what were offering Customers arent all the same; they vary in preferences, needs, and resources, therefore, segment the market

How can we judge whether or not marketers made the right decisions? The 5 Cs, Customers There are essentially two types of customers: B2B and B2C B2C: These are ultimate purchases, their purchases are distinguished by the amount of involvement put into them, they are: Convenience purchases: y Staples: routinized behavior purchases

Impulse: unplanned buying behavior, really separate, there is not though process with impulse shopping Shopping purchases: limited problem solving Specialty purchases: extended problem solving y Involvement y y Enduring: long-term, a technophile Situational: temporary, someone purchasing a car

The decision making process for consumers: problem recognition (aware of desired state and actual condition) information search (repetition in advertisements help) evaluation of alternatives (marketers attempt to frame the alternatives, that is, describe them, to influence this stage to the decision process) purchase evaluation (this is when cognitive dissonance can occur) Three categories influence the buying decision process: y Situational: o physical surroundings, o social, o time (time required, diamonds), o reason (what should the purchase accomplish), o mood (happy, sad) Psychological: o perception (three-step process: selection, organization, interpretation), o motives (Maslow), o learning (past experiences with a product), o attitudes (cognitive, affective, and behavioral) o personality (introvert, extrovert, competitive) and self concept (buyers purchase products that enhance their self-concept) o lifestyle Social: o roles ( a person is a particular position should behave this way) o family (this is where consumer socialization often occurs) , o reference groups (membership: actually belongs (takes on values), aspirational: aspires to belong (emulates values), and disassociative: does not

wish to belong ( does not want to take on values)) and opinion leaders (held in high esteem, transfers information to others)  An example of a buying decision in the family household Gatekeeper: collects and holds information Influencer: expresses opinion Decider: Adults User: All members o digital networks o social classes o culture (the accumulation of values that are passed on to future generations) and subcultures B2B: Products are purchased for resale, production, or daily operations and the number of customers is relatively small and frequently it relies on reciprocal relationships There are four types or BMarkets: y y Producer: purchases used to make other products Reseller: intermediaries that sell finished goods (do not change the physical characteristics of products) o Resellers consider level of demand, space required relative to potential profit, ease of placing orders, availability of technical assistance, training programs from producers, competes or complements Government: providing products to their constituencies (a lot or red tap, however, can be lucrative) o Bidding: Specifications Qualified firms Bids Lowest accepted contracted awarded Institutional: NGOs o Firms to know: Sustainable endowments institute  Awards and ranks sustainability amount schools

B2B differs from B2C in purchasing behavior because purchasers are usually better informed, chief considerations are: y y y consistency/service/reliability (market information, inventory, maintenance, on-time delivery, and repair services) quality price (investment required to receive a said return)

y supplier relationships Characteristics of a business transaction: Large orders, frequent replenishment, long-term contracts, time sensitive selling, purchasing committees, reciprocity Attributes of Business Customers: Better informed, demand detailed information, buying agents psychological goals, partnerships are often formed

The Business decision process is more complex due to roles within the organization y y y y y y Initiators: the ones who recognize the problem Users: the members who actually use the product Influencers: technical personal Buyers: select suppliers and negotiate terms Deciders: choose the product Gatekeepers: control information

Straight rebuy: routine purchase Modified rebuy: new-task purchase that is changed on subsequent orders, brush-up education New buy: initial purchase, no experience, need education

some experience,

The decision making process for businesses: problem recognition development of specifications search for and evaluation of products product selection and order evaluation of performance Major Influences on the Buying Decision y y y y Environmental: competitive and economic factors, political, legal and regulatory, technological, and sociocultural Organizational: company objectives, purchasing policies, resources, size and composition of buying center Interpersonal: people in the buying center Individual: personal characteristics in the buying center

Methods of buying for a business: y y Description: products are organized according to attributes Inspection: used vehicles

y y

Sampling: homogeneous product Negotiation: bids

Demand for business products: y Derived: from consumer demand y Inelastic: insignificant cost y oint: axe head and handle y Fluctuating: large orders, Wal-Mart The Buying Center y Within the organization buying center Industrial Classification y NAICS, helps identify potential business customers

How does a buyer decide? (this is the disconfirmation process) y y y Lexicographic method: Attributes are compared and separated in sets, and so forth, until a decision is made Average method: One attribute cannot eliminate or qualify a product Use attribute importance: Assists with segmentation

Marketing Strategy: A plan of action for identifying and analyzing a target market and developing a marketing mix, this is the link between corporate goals and operational tactics y Where are we? y Where do we need to go? How do we evaluate a portfolio? y BCG matrix o Star: optimize o Dog: minimize or divest o Cash cow: milk o Question mark: unknown

Companies can have a combination of cash cows and stars to maintain dogs and question marks, there should be a diversified portfolio of products Corporate Identities y y Leader: 1st to market or largest market share or quick and innovative; a company may be a leader for some of its brands, not necessarily all, first to market is not always a good thing, there is a lot of risk involved with that Offensive: may vary with product, to diversify

y y

Defensive: same Follower: first to market is not always a good thing, there is a lot of risk involved with that, therefore a company may diversify its portfolio being a leader in some markets and a follower in others

How do we measure the effectiveness of a marketing strategy? y Profitability ( a tree may be used to map a plan of action to increase profitability), sales, share, average prices, level of awareness, penetration in trial, customer satisfaction, employee satisfaction

Dashboard: an indicator of a companys success given by specific factors, a dashboard can help with evaluating a marketing strategy Goals for a strategy: y Monetary/financial: currency, market share, units sold, change from last quarter/year, regional growth, Investments (ROI, ROE, ROM (marketing), ROQ (quality)), growth Customers: customer satisfaction, loyalty, give rewards to customers who do a lot of business, have the word about company or product spread, offer personalization, increase customer lifetime value Redefine our position o Product: build new sales, build category, build brand equity o Promotion: spend ad dollars more wisely, determine appropriate media, frequency, and message o Place: appropriate channels, lower cost channels, outsourcing o Price: increase or lower

Broader concerns: beyond marketing, societal concerns charitable contributions, stability of local employment, environmental concerns Goals can be complex and overwhelming, it is important to focus on the most important goal first, consider the time frame and financial requirements y Basic Strategies y y y Do nothing, let the brand fend for itself Do nothing differently, not exactly sure what this means Take action, do something different, we have control over STP and 4Ps

The Marketing Environment Responding to the environment: There are three kinds of companies: those who make things happen, those who watch things happen, and those who wonder whats happened. y The forces outside that affect managements ability to build relationships with its target customers o Micro: close to the company  Company: marketing must consider finance, R&D, purchasing, operations, and accounting  Suppliers: availability and pricing, effective relationship management is essential  Intermediaries (and examples is target using Amazon): Help promote, sell and distribute; resellers, physical distribution firms, marketing agencies and financial intermediates, again, effective relationship management is essential  Customers: 5 types, Consumer, Business, Reseller, Government, International  Competitors: conduct analysis and monitor competitors  Publics: Seven publics, Financial, Media, Government, Citizen-action, Local, General, Internal o Macro: societal forces  Demographic: changing age in the US is a very important trend  Economic:  Natural: natural resources, pollution, government intervention  Technological: creates new opportunities, and causes others to become obsolete  Political: Laws  Cultural: a societies base values, perceptions, behaviors, and preferences Cause Related Marketing y Types of Competitors y y Brand competitors: Firms that market products with similar features and benefits to the same customers at similar prices Product competitors: Firms that compete in the same product class but market products with different features, benefits, and prices Builds a link between brand and charitable organization

Generic competitors: Firms that provide very different products that solve the same problem or satisfy the same basic customer need

Marketing Research Decisions should be based on fact, research is about gathering those facts and the information should be gathered constantly The Marketing Research Process y y y Define Problem Attempt to use Secondary Data o This is data that has already been collected for another purpose, less expensive and often times easy to obtain Design Primary (this is called research design) o Samples o Technique  Qualitative  Quantitative o Instruments o Modality of administration Collect Data Analyze Data Communicate Results For the design process: o Exploratory: Research conducted to gather more information about a problem or to make a tentative hypothesis more specific, focus groups and interviews are good o Descriptive: Research conducted to clarify the characteristics of certain phenomena to solve a particular problem, surveys and scanner data are used o Causal: Research that allows marketers to make causal inferences about relationships, also know as experimental data, experiments are used to manipulate marketing mix variables to see if there is a causal relationship with sales and customer attitudes

y y y y

Seven popular techniques: y Cluster for segmentation o Form groups within groups with similar attributes, helps identify segments

Perceptual mapping for positioning o Helps understand how customers view the marketplace  Attribute based Simple averages of surveys are taken over questions resulting in a pair of means for each attribute Mean are plotted in a two dimensional space  Multidimensional Scaling Survey, results are plotted, similar items are close, different hotels are father apart, you can position a product according a segments desires Focus groups for concept texting, exploratory technique o 8-10 consumers discuss products, usually 3-4 groups are conducted, not good from predicting marketplace response  bring out quieter members, controls overbearing members  topics are kept open until they are through with discussion, lasts 1.5 hours Other Qualitative techniques o Can give rich understandings of motivations o Secret shoppers Conjoint analysis: run to understand how consumers make trade-offs o What do they really want if they cannot have everything?  Regression is used Scanner data for pricing and coupon experiments and brand switching o Forecast demand, watch responses to changes in the marketing mix, brand switching, can be compared across stores  Experiment: Manipulate on variable and control the rest, high internal validity (a affects b)  Or Natural: do not manipulate and watch everything, high external validity (can be generalized) Surveys for customer satisfaction, B2B and B2C o Should be short, factor analysis is used to examine correlations Network methods to identify opinion leaders in buzz marketing Market research online: cheap, but can be less than accurate

y y

Customer Evaluations

Marketers are interested in: customers satisfaction, customer perceptions of quality, customer intention to repurchase, and likelihood of word of mouth o Intention is to convert new customers frequent purchasers loyal customers

The Comparative Evaluation Model y Inputs: Expectations and Perception pre experience Gap or Disconfirmation y Output: Perceived quality is a comparison between expectation and experience with a marketer hoping the experience was greater than expectations

The model and how it applies to consumers level of involvement: y Low involvement: may be quickly forgotten; expectations are usually are latent, however if disappointed may become more explicit; it is important to consider that what may be low involvement for one group may be high for another Disney World

High involvement: Deliberate comparison process, expectation must be met as purchases are researched and thought out Types of Purchases y y Search: Shoes, obvious qualities o Comparative process is straight forward  Attribute-by-attribute, holistic, ect. Experiential Purchase: Evaluation cannot be completed until after consumption o A less linear process: experience and expectations shape evaluation simultaneously

Credence Purchase o Most customers do not have the expertise to evaluate the quality of the product Where do our expectations come from? y y Experience o Direct: Prior visits o Indirect: Prior visits in another city, or a new experience that you expect to be somewhat related to other experiences Friends: friends have no commercial gain, this is a major desire of companies Advertisements and other marketing information:

y y

o From within the company, these are the least trusted  Positioning in advertisements  Price inferences  Frequency of sales/coupons  Exclusivity of distribution  Performance descriptions from sales people third party communication (out of marketers control, considered valid by consumers) o Consumer reports, movies, internet What about these experiences y The core of a purchase is evaluated, that is, reliability, performance, clues of quality Interpersonal aspects as well, responsiveness, competence, empathy Core vs. Supplemental o If the core is good, satisfaction is not affected, however, if it is bad, dissatisfaction occurs o Supplemental can have an affect on both the level of satisfaction and dissatisfaction How does a marketer monitor and control customer experiences? y y y y Quality y Three levels of quality o Ideal: Some segments are demanding and expect above average excellent quality o Predicted (expected): most segments expect average-level quality o Adequate: The bare minimum is acceptable for an unimportant purchase Zone of tolerance o The amount a person is willing to give tolerate in terms of service Via a flowchart, every point of the customer experience is depicted such that quality controls can be created, measured, and improved

y y

Value o Level of quality compared with price Expectations vary across cultures and time Measuring Quality & Satisfaction y y Measuring quality is difficult because it is the process of measuring perceptions, however, it is possible and common to use the measures to gauge performance Also it is difficult to set precise quality standards and conform to them

y y y

Information obtained should not be actionable and specific gauges of quality should be asked not just: are you satisfied.

Also, information about each segment should be accessible and available Research has found that large levels of sales, leading to a growing segment, can lead to lower levels of satisfaction as a consequence of a larger variety of expectations. Dissatisfaction Empowerment is a powerful tool to give to frontline employees in dealing with a dissatisfied customer, as is empathy and perks. Customer Relationships y Satisfaction is the first step in long-term relationships Leads to repeat purchasing, word of mouth promotion, and loyalty to a brand, CRM (Using information about customers to create marketing strategies that develop and sustain desirable customer relationships.) techniques relate well to this RMF: Recently, Frequently, Monetary y y y y Most sought out customers have high levels of all three variables RMF is a way to value a customer based on three factors, each factor is judged independently and then as a whole

y The results are standardized and customers are treated accordingly CRM: Customer Relationship Management y y Money, planning, and constant monitoring (calls, website viewing habits, purchasing catalogs, emails sent to them, returns, everything helpful)

Requires a database to integrate all inputs, information needs to be process in readable form for management in order to make decisions o Potential variables:  Contact Data, name, address  Demographics, socioeconomic  Lifestyle, homeowner or renter  Transaction data, purchases etc. CLV: Customer lifetime value y y y Customer worth, like a perpetuity, in where a customers lifetime value is quantified and used as a way to chose valuable in undesirable customers May help identify a targeted segment Lesson: it is more expensive to get a customer than keep one

STP In general a firm will:

y y y y y y

Identify an appropriate targeting strategy Determine segmentation variables Develop market segment profiles Evaluate relevant market segments Select target markets Position or reposition products

Segmentation: Because it is both difficult and ineffective to attempt to satisfy all customers needs, segmentation is a useful tool which is indispensible for a marketer in a heterogeneous market y A segment is a group of customers who share similar inclinations toward a brand or its characteristics, essentially segmentation is the process of separating a heterogeneous market in homogenous pieces better allowing a firm to meet its consumers needs while still being large enough to be profitable Segmentation can be seen as being in the middle of a continuum in where one-to-one marketing is on one side and mass marketing is on the other; an example of one-toone marketing (each customers needs are met) is bespoke suits or private jets, while mass marketing (where all customers are treated the same) would be a local newspaper to a city Niche marketing is breaking a segment into a smaller piece, an example of this is a boutique consulting firm in northern California specializing in small technology firms, this further increases a firms ability to meet the needs of its customer base Segments are created using bases (variables that the market is segmented with) o B2C  Demographics (easy to identify): gender, race, age  Geographic  Psychological (difficult to identify, however, may be more insightful), VALS has been successful in isolating  Behavioral (grocery scanner data) o B2B  Type of firm  Attitudes: risk, culture, profitability, high or low maintenance  Customer size  Product use

Marketers integrate their knowledge of the marketplace with market data (which gives insight into preferences and relationships) o Cluster analysis is used and everything involved (reliable and valid) o A good segment is not only identifiable, but reachable (youth tobacco market) o Indirect access o A segment does not have to be large to be profitable o A chosen segment should align with a firms goals  Would Harley Davidson market Japanese products?  Who will be our competition  Also, a segment should be actionable; it should be available Segmentation Strategy (go into more detail) o Breadth: reaching multiple segments with a single product o Depth: serving one segment with multiple products o Tailored Strategy: Customizing products for each segment o A Market Segment profile describes the similarities among potential customers within a segment and explains the differences amount people and organizations in different segments o After analysis of these profiles a marketer will identify relevant segments to analyze and eventually target, the selection should be appropriate, therefore, in line with the marketing concepts

Targeting: selecting a market to pursue When choosing a proper market to pursue, a firm must consider its strategic implications: o Example: Proctor and Gamble making Swiffers, a mechanical product, we must consider how a chosen market fits with a firms resources, capabilities, and possibly competencies y A two-by-two matrix in helpful is evaluating a market segment: Attractive Not Go for it Hmm

Strengths

Hmm

Avoid

Less Capable

A marketer should ask two questions: y y Does the market fit within a the firms capabilities What is the profit potential

Market Fit: can we satisfy this market with our competencies and do our culture, brand offerings and goals, fit the segment? SWOT helps: Favorable Strengths Un Weaknesses

Opportunities

Threats

Internal

External

Internal (corporate): o Strengths: What do we do well o Weaknesses: What do we not  Firm relative to competitors?  Utilize the customer point of view External o Opportunities: what is favorable o Threats: what is not What is different or what is the environment with respect to the 5Cs? A perceptual map can be useful in showing how customers perceive a firm relative to competitors using price and qualities as variables

y y

Potential: Is this worth our resources? y Market size: a precisely defined target improves the quality of a size estimate/projection, use lower and upper bounds and run sensitivity tests, compare the size of each segment o Bottom up vs. o B2B: on approach: begin with total population, break it down into relevant proportions Market Growth: projecting growth is risky, may be done with empirical data and a moving average mean, utilizing regression analysis; compare with each market Competitive: identify the number of competitors in each market and compare the markets (yellow pages, internet, NAICS)

y y

y Estimate Profitability: estimate price and costs and compare Targeting Strategies: y Undifferentiated: single marketing mix directed at an entire market product; effective under two conditions: large group of people with similar needs, must be able to maintain a singular mix that satisfies needs

Concentrated: Mix directed at single segment, for segmentation five conditions must exist: o Heterogeneous needs, segments must be identifiable and divisible, must be able to compare with respect to estimated sales potential, costs, and profits, at least one segment must have enough profit potential, and chosen segment must be reachable Differentiated: two or more segments, two or more mixes

Positioning: A common basis for positioning products is to use competitors (it would be difficult to differentiate yourself without comparisons), it can be based on specific product attributes or features, other bases include price, quality level, and benefits. y Perceptual maps graphical interpret where a product is positioned in a consumers mind, it also helps marketers envision strengths, and where it lies with respect to competition and substitutes Perceptual maps help evaluate whether a product is optimally positioned, if we are in our intended position, and how well are we serving the markets o If we find our position undesirable, we can use a perceptual to evaluate alternative positions: reposition via advertisements, etc. Perceptual maps can be used to determine which attribute are important to customers For competitive analysis (an analysis that compares differentiating characteristics of the marketplace price, convenience, etc. customers prefer) o Other charts may be better suited for comparing multiple strengths and weaknesses, however, b/c a perceptual only addresses two factors Positioning Matrix o Marketers use the matrix to determine the best position for the firm (it is difficult to offer a product that has the value of say, bic pen, with the quality of a Mont Blanc, as such, we choose a side from a given product and adjust variables accordingly: a matrix can help us with this o Some common facts: low price and high quality are rare (firms will either raise price or lower quality) likewise, low quality and high price are rare (firms will either raise quality or lower price), however, basics and high end are natural  Brands tend to occupy the more natural positions Positioning Strategies

y y

o Treacy and Wiersemas  Operating excellence  Product leadership  Customer intimacy o Porter  Cost advantage  Differentiation  Niche positioning y The positioning statement communicates a firms position to all audiences: customers, employees, shareholders, general public o Target the audience whom you are attempting to persuade o Writing a positioning statement: USP (unique selling proposition) express your SP (selling position) and U (competitive advantage)  You should be able to answer how you are better, if a real difference does not exist create the perception of one  It should be simple and focused on benefits offered

Question: can a company have different positions? Must it use a new brand? 4Ps Product: both goods and services, it may also refer to the whole product profile the 4Ps generally it is the center of an exchange y y Exchange: the intersection of what customers what and what we can offer them, market research can facilitate the process of matching competencies with demand

Relationship Marketing: a successful exchange should lead to a trust, and trust should lead to a relationship, long-term relationships are essential to an organization More attributes of purchases with respect to level of involvement: y With convenience o Customers:  Engage in limited word-of-mouth  Exert minimum effort retrieving  More price sensitive (why is this) o Marketers  Offer price-related loyalty programs  Aggressive distribution

 y

Attempt to capture customers attention

With specialty and new buys: o Customers  Considerable word-of-mouth  Exert effort retrieving product  Less price sensitive o Marketers  Community related loyalty programs (like a Harley Davidson club?)  Selective distribution  Offer lots of information about product Goods vs. Services y There are almost no pure goods, however, the level of tangibility a product has determines its status as a good or service o Tangible: socks o Service: Medical procedure o Mix: Rental Car

Goods frequently possess search and experience qualities Services frequently possess experience and credence qualities Services: an intangible product that involves a deed, a performance, or an effort that cannot by physically possessed; its level of intangibility is greater, or more pronounced than its tangibility y Because they are mostly intangible, marketers need to signal quality to customers when selling services, often times providers are likely to promote price, guarantees, performance documentation, availability, and training and certification of contact personal There may be intermediaries: travel agents Pricing: should be priced with consumer price sensitivity, the nature of transaction, and its costs in mind, when services are similar, customers choose the lowest priced one often, when they are differentiated or very important, price is used as an quality indication (medical procedures) Because of the experience and credence qualities of services, they are hard to sample o Dimensions of service quality  Tangibles (physical evidence), reliability (consistency), responsiveness (willingness to provide), Assurance (knowledge on behalf of provider), empathy (caring)

y y

y y

Expectations are still a factor for service evaluation, and the expectation is renewed after using a service Services are often o Perishable: unused capacity cannot be stored o Inseparability: produced and consumed simultaneously, one problem or concern is that other customers can affect the experience of each other (smoking in a restaurant) o Subject to heterogeneous quality: variation in service b/c they are dealing with people and systems  Variation can be good and bad: a customized experience is good, therefore, efforts are made to minimize bad variability and encourage good variability o Peak Demand: often time services are demanded at a certain time (tax time) and can use demand pricing Delivering Exceptional Service Quality o Factors that affect quality:  Analysis of customer expectations (use research to determine)  Service quality specifications (Set in terms of employee or machine performance)  Employee performance (measured using sales volume, however, these measures miss factors like employee friendliness)  Management of service expectation (advertiser should not promise more than it can deliver)

Differences in goods and services influence business decisions: Advertising, branding, pricing, logistics, etc. y y Traditional services doctors, accountants target customers, build brands, promote, and chose strategic office locations: this is somewhat new Beyond traditional services: the whole experience (Nike Town, Volkswagens Transparent Factory), online purchases are a mix of goods and services (what are the implications of this mix?) Two categories: organization marketing (goals do not include profit) and social marketing (the spreading of ideas/concepts) o Nonprofit vs. for profit

Nonprofit y

Beneficiaries of a for profit are owners while nonprofits often benefit the public at large, also nonprofits are sometimes controversial o Target Public vs. Target Market: public are those concerned, market are those who the public is concerned for o Product mix: usually ideas that are distributed via advertisements, etc,; a short communication channel is the norm; personal selling also is used (church donations), pricing is either a fee (fixed), a donation (variable), or actual time (measured as an opportunity cost) Core vs. Value y y The core is what solves the original problem, value-added is a supplement and is used to differentiate core products

For the most part, a core product determines whether a customer is satisfied or not, however value-added factors influence the level of satisfaction on the consumers part Core Elements y What you have to have in the product Dynamic Strategies y Core businesses might change as the industry changes or as the firms competencies change o What is our business, what do we want to provide, who is our competition and how can we match our competencies and resources and capabilities to the market? Competition can be as immediate as a similar product offering or as distant at a different product that solves the same problem (H&R Block vs. Quicken)

y y

It is important to focus on what we do well, not what we think we can do well (Pepsi: selling soda is different than managing food establishments) Product Mix: The total group of products that an organization makes available to customers y y y y The Breadth (Width): The number of lines o What is the virtue as far as segments are concerned? The Depth: the number of products in a line o What is the virtue as far as segments are concerned? Product extensions should be strategic Line extensions are the development of a product that is closely related to one or more products in the existing product line but designed to meet somewhat different customer needs; less expensive, less risky way to increase sales, it may attempt to reach a new segment, or satisfy the needs of people in existing segment

Modifications: characteristic changes, may improve product mix but only under certain conditions o Must be modifiable o Must be able to perceive the modifications o The modification should make the product more consistent with customers desires New Products: can be a genuinely new product, or it can just be better, or it can be new to a company, or it can be new to a market Approaches: o Top Down Approach (not marketing oriented)  Idea comes from inside the company, outside feedback is sought later Idea creation design and development and commercialization  This is found in companies with strong engineering departments, as well as pharmaceutical firms, financial services, high-technology companies o Co-Creating Approach  Customer feedback and market research is sought at most phases of the process

y y

y y

Development: idea generation concept testing product development marketing sales forecasting commercialization

test

Idea Generation: identifying customer challenges, observing trends, listening to customers, observing competitors, speaking with lead users (?) o Target segment, what is its size, who are the competitors, what products might we cannibalize with a new product, do we have distribution channels, how does this fit our goals Concept Testing: obtain feedback on most promising ideas using focus groups, wed surveys, conjoint study, etc. o Conjoint study  Combinations of attributes are compared to determine best, next best, etc. o Screen: refine ideas to determine a single prototype Product Testing: observe customer reactions to beat version, if possible, observe customer reactions to price point, advertising (with a beta?), etc Test marketing: try on a small scale, micro release done in small metropolitan areas,

y y

o Area Markets: some of the markets are used as controls to compare with (is advertising done in all areas?), expensive, tips off competition, and may not represent the intended population o Electronic test markets: more valid than area test markets, control or test households, test are exposed to marketing, controls are not, tests have better access to distribution, controls do not o Simulated test markets: play money, advertising is used, purchases are recorded and surveys are taken, helps forecast sales, tight controls, protected from competition learning, quick, less expensive y y Forecasting, market potential (estimate from secondary data), purchase intention(estimate from test marketing data), price Ways to commercialize: Roll out (introduction is in stages), this is desirable for several reasons: reduces risks of costs of failure, also, it is difficult to introduce a product market-wide overnight, further, if the product is successful, production will be able to keep up with demand, and finally, the market mix variables can be finetuned

Timing o Internal and external delays, copyrights and regulatory The product cycle (is the product life cycle for a line or an individual product) y y Introduction: The more marketing orientated a firm, the more likely it will be to launch new products, it can be difficult for sellers who lack resources, technology and marketing know-how, also, in order to recoup development costs, the initial price might be high, however, this can mean trouble for sales o Penetration: low pricing o Skimming: high pricing Growth: strong competition begins, attempts to develop strong brand loyalty, develop market share, promote brand superiority, prices may be able to be increased, profit curve peaks Maturity: sales cure peaks, competition intensifies often time resulting in price competition and high promotion, weaker firms leave, try to find more benefits o Three objectives may be pursued  Generate cash flow (helps with new product launches), maintain market share, increase share of customers (how do you do this with one product?) Decline: attempt to postpone or accept inevitability o Harvesting approach: gradual reduction

o Divesting approach: withdraws all marketing o Rejuvenate: Refurbish o Maintain: New market y Levels of product failure: o Absolute: loses money on a new product because it is unable to recover development, production, and marketing costs o Relative failure: profit is not high enough to meet objectives

Product Deletion: o Phase out: no change in strategy o Run out: exploits any strengths left o Immediate drop: for an unprofitable product Diffusion of Innovation y y y y y y Innovators: 3-5% o Willing to take risks Early Adopters: next 10-15% o More influential than opinion leaders, not considered zealots Early majority: next 34% o More risk adverse, waiting to hear about favorable experiences, profit Late majority: next 34% o Cautious, conservative, base for a cash cow

Laggards: next 5-15% o Risk adverse, skeptical of new products, stereotypically lower in income Tipping point, inflection point, where rate changes May be used to: y y Model y A decreasing time of movement to the saturation point (the tipping point) o How many customers are going to adopt given the level of time observe current sales data, fitting model and predicting future sales by plugging in past results you can predict future sales

Products are accepted when: y y y y their advantage is clear compatible with lifestyle not overly complex easily tried

Companies vary y Pioneers have difficulty with really new products y First movers may have advantages in launching incrementally new products, less risk y Earlier follower firms have the same survival risks Are companies innovators or reactors Strategic Growth Current Products New Products Current Markets Market Product Penetration New Markets Development

Market Diversification Development

Market Penetration, lowest risk, same product Sell more of the same to current markets o New ways to use products o Baking soda ocean spray Product Development, new product development, slight risk y Sell new or modified products to current markets o Brand and line extensions or new variations of existing products o Fabreez Market Development: Sell existing products to new markets, more risk y y International, appeal to younger segment y Modify image, expand channels y ipods for school Diversification: Pursue new markets with new products y More difficult y They dont know and love you, make a name for yourself y Lexus, Acura, Infinity Trends to watch: demographic, lifestyle, environmental/corporate, cultural differences Aging population, Hispanic population growth, growth in affluence, concern for environment an social responsibility, internet usage, role of China in global economy as well as other growing economies Buzz Marketing y y Viral Marketing o Opinion leaders spread buzz o Information technology allows more interactivity between customer and company  Blogs, social networks, websites Networks are the structure through which the word of mouth flows Marketers are concerned with measuring buzz and its impact on subsequent customers behaviors Companies try to actively generate word-of-mouth

y y y

Brands: have value that transcends a product, a brand is a portfolio of qualities associated with a name y Qualities that are controllable:

o Shape, packaging, logos, shapes and symbols, colors, jingles and slogans, spokespeople What is not o Personal memories Brand Equity=name awarness+perceived quality+associations+loyality y Measurement o The price premium of a brand (how much more are you willing to spend for brand products) o How does it compare to unbranded o Interbrand: looks at value of brands; subtract physical assets, calculate brand contribution index The name: some convey information, some suggest benefits, some are the same as their y founders, it is important that the name convey some piece of information (there are, however, cases where names are chosen to insure that customers have not memory associate with the brand name), a brand exists independently in a consumers mind y y y Visual: colors and logos can be powerful way to communicate Names as symbols and logos: can give clues as to what the brand does (Disney) What are the benefits: o Customer: convey information (sony=quality), consistent quality (predictability), confer status (BMW, possibly cultural identity: consumers find useful in cementing identity), reduce risk of purchase, make decision easier (know what to expect) o Company: brand loyalty (stable market share, three degrees exist: recognition (a viable alternative to preferred), preference (loyal, however, will not go out of her way), insistence (strongly prefers and will go out of his way)), price premium, assist in STP (with multiple brand, multiple segments can be targeted), somewhat inoculated from competition, encourage channel partners o Associations (is this in the consumers mind?), a marketer works to connect a lifestyle or personality type with a specific brand  Product attributes Color, shape, size, flavor  Benefits are difficult to create, however are powerful Product Benefits y Intangible (flattering sweater) Emotional y Even more intangible (flattering sweater=attractive)

Social functions An expression of a customers ideal self (teenagers with shoes) Can be the focal point of bonding (Harley Davidson riders) o Association Network  Depiction of connections, when name is activated, associations are triggered, links closest are retrieved first Product benefits emotional benefits end goals is association network y y y Brand Personalities o Able to capture holistic position, MTV: the cool persons network Brand Communities o Harry Potter Branding Strategies o Umbrella Brands  same brand for all products, product introductions are easier, higher initial awareness o House of brands  Different brand name from every line, the performance of one brand should not impact another, able to reach multiple segments Brand Extensions, leverage the brands good name to market something new o Line extensions: apply brand to a product within a line (new flavors and sizes, Tylenol extra strength pm, Febreeze candles, swiss army) o Category extensions: apply to a different line (Bic pens making razors or lighters, special K being used for a water brand) Co-Branding: works well with new product attributes (Kraft Lunchables) Self-Branding: branding an ingredient to differentiate quality (Tides EverFresh scent) Packaging serves as a way to protect the product, offer convenience to the customer, promotion, signal quality, a marketer may consider changing a brands packaging to reposition it o Secondary-use packaging (like a cool whip jar used to keep food) often viewed as adding value o Traditional packaging (honey bottle) for certain categories help customers recognize a product and help marketer introduce new brands o Innovative packaging: marketers use unique packages that are inconsistent with traditional packaging practices to make the brand stand out

y y y

o Multiple packaging: may increase demand from greater availability at point of consumption o Handling-Improved packaging: the producer may change packaging for better handling, at the retail level, she may change it for better shelf space Fair Packaging and Labeling Act: focus on labeling requirements and voluntary adoption of packaging standard by firms within industries, and the provision of power to the Federal Trade Commission and the Food and Drug Administration to establish and enforce Global Brands y 30% of brands revenues come from other countries Options, o glocalization: manufacture globally, brand locally o use the same name globally, Store Brands y y y Private label o There is brand equity in store name, different than generic, which has no brand association o Less expensive and more of a me-too product offering (Targets Archer Farms) o Give retailer the ability to offer decent quality for lower prices

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