Marketing Strategy Intro

Introduction to Marketing Strategy

• Marketing is about communicating with customers to understand and deliver customer value using elements known as the 4P's
• Effective marketing builds long-term customer relationships and intangible assets like brand equity
• Marketing is an investment that generates firm value and returns, not just a cost
• Marketing analytics, data driven insights, is more important than just creativity
• Marketing is a set of institutions and processes involved in creating, communicating, delivering, and exchanging offerings of value
• The exchange process involves fulfilling needs and wants

Marketing Strategy Definition and Importance

• Market strategy involves sustainable competitive advantage, delivering superior customer value and enhancing firm performance
• Target positioning uses the 4 P's which includes price, product, place and promotion
• Competitive advantage is primarily external to the firm and intangible
• Relational market-based assets arise from relationships between a firm and its stakeholders
• Intellectual market-based assets consist of the knowledge a firm has about a market and its evolution, including its ability to reach it, change

Challenges and Reasons for Marketing Strategy

• Formulating a marketing strategy is challenging because of heterogeneous customers, marketing mix interaction, competition reaction, immediate response and geographical coverage
• Understanding rapidly changing customer preferences, consumer sophistication, and skepticism are key reasons for a marketing strategy
• Understanding competitors and their reactions is crucial
• Marketing accountability, understanding the competitive market, and meeting demands are all important
• Marketers face challenges regarding effectiveness and assessing performance

Data & Marketing Analytics

• Data explosion characteristics include volume, velocity, variety, enhanced data gathering methods, and improved ways to gather data
• Descriptive marketing analytics involve summary statistics and tests
• Diagnostic marketing analytics involve estimating relationships between variables and hypothesis testing
• Predictive marketing analytics involve forecasting variables and simulating strategy effects
• Prescriptive marketing analytics help determine optimal marketing strategy levels

Contemporary & Ethical Considerations

• Current trends in traditional offline retail includes sensors that capture consumer activities, which are evaluated based on touch, pick-up, and return
• There are ethical concerns, as 50% of consumers believe advertisers don't comply with privacy laws, which leads to emphasis on data minimization

Identifying and Analyzing Markets

• Effective marketing avoids a one-size-fits-all approach and understands different consumer types
• Strategic decisions involve marketing segmentation, which divides a heterogeneous market into smaller, homogeneous segments based on various factors
• Segmentation and targeting is selecting which customers to serve
• Differentiation and positioning involves deciding on a value proposition

Market Analysis

• Analyzing markets involves understanding the current market situation which focuses on target market, position, market description, product review, competition review, and distribution
• It also involves analyzing threats and opportunities in relation to their brand and strategy impact
• Market-level analysis covers market size, growth, turbulence, competition, and distribution structure

Formulas for Market Analysis

• Market growth calculation includes (Sales t – Sales t-1) / Sales t-1
• Market turbulence is the standard deviation of 5 years sales divided by the mean of 5 years sales
• The Herfindahl-Hirschman Index (HHI) measures market concentration

Formula and Interpretation of HHI

• HHI = (s1)² + (s2)² + (s3)² + … (sn)², where s = market share percentage of each firm
• HHI < 1500 indicates a competitive market
• HHI between 1500 and 2500 indicates a moderately concentrated market
• HHI > 2500 indicates a highly concentrated market

Marketing Environment

• Microenvironment encompasses the company, suppliers, marketing intermediaries, competitors, public, and customers
• Macroenvironment encompasses demographic, economic, natural, political, cultural, and technological factors
• The natural environment includes physical aspects and resources, which companies prepare for since they cannot control it
• Political and social factors include laws, government agencies, and pressure groups that influence/limit organizations and individuals
• Regulations may limit a firm's ability to expand internationally
• Technology provides opportunities for marketers

Positioning

• Product position is how consumers define a product based on important attributes and the space it occupies in their minds
• Consumers have limited attention and cognitive resources
• Consumers are overloaded all the time with products
• Consumers have no ability to reevaluate products every time

Survey Research

• Survey research helps to gauge attitudes and overall assessment, like consumer awareness and knowledge
• Surveys can be administered in person, by phone, or self-administered via mail or email
• Survey research is versatile and can collect large data amounts for individuals

Customer Satisfaction Factors

• Customer satisfaction has a measure of loyalty and quality of the customer base
• Customer satisfaction is a latent variable because it is not directly observable
• Customer satisfaction involves considerable allocated resources to measure through surveys

Aspects of Customer Satisfaction

• Customer satisfaction is the sum of perceived quality/performance, perceived value, and customer expectation
• Perceived quality/performance consists of the evaluation of a consumer’s experience
• Customization is the degree to which a firm's offering meets heterogeneous needs
• Reliability is the degree to which a firm's offering is reliable and standardized

Perceived Value & Customer Expectation

• Perceived value uses price information to measure the rating of quality given price and the rating of price given quality
• Customer expectation is a forecast of a firm's ability to deliver quality in the future
• Pre-purchase customization and reliability are also part of customer expectation

American Customer Satisfaction Index (ACSI)

• American Customer Satisfaction Index (ACSI) uses a rating from 1 to 10, overall satisfaction, expectancy disconfirmation, and comparison to its ideal
• ACSI is used for evaluating durable goods, services, and government services

Observations About Customer Satisfaction

• Manufactured goods generally lead to higher customer satisfaction compared to services
• Quality is more important than price in satisfying customers
• The more service required, the less high customer satisfaction will be for a product or service
• Price promotions provide only a short-term boost

Long-Term Perspectives

• Price cutting is unsustainable in the long term
• Mergers and acquisitions can negatively affect customer satisfaction

Importance of Customer Satisfaction

• Customer satisfaction leads to loyal customers that are less costly to serve, willing to pay, and more likely to accept product extensions
• High customer satisfaction also creates barriers for new competitors

Consumer Choice and Marketing Strategy

• Understanding different factors influences the consumer, purchasing a product, clicking on an ad, and acting on marketing
• Consumer choice can be affected by sales promotions, leading to brand switching, timing acceleration, and quantity acceleration
• Choices can vary because of heterogeneity, and consumers learn and make decisions

Post-Promotion Dip & Consumer Decision Making

• Increased consumption and competitive promotions can mask post-promotion dip and influence repeat purchase behavior
• The environment influences the buyer's black box, which in turn influences the buyer's response
• Environment involves market stimuli such as the 4Ps and other factors
• Black box represents the characteristics and decision process of a buyer
• Response reveals the attitude, preferences, and behavior of the buyer

Need Cognition and Information Search

• Need cognition: A consumer's decision-making process starts with the recognition of a need or a want
• This involves internal and external stimuli influencing the customer's state
• Information search consists of motivation to search for more information on products or services
• Information sources include personal, commercial, public, and experiential ones
• Information search involves the creation of consideration sets

Evaluation & Purchase

• Evaluation of alternatives involves basing decisions on consideration sets and different attributes & personal preferences
• The purchase decision involves purchasing a preferred brand from an intention to purchase

Post-Purchase Evaluation

• Post-purchase decision making involves evaluating the difference between the expectation level and perceived performance
• The gap between these two variables determines customer satisfaction
• Cognitive dissonance is discomfort caused by a purchase, due to acquiring drawbacks or losing benefits
• Satisfied customers repeat purchases and pay less attention to competing brands
• Unsatisfied consumers will have a negative experience, but this may not be communicated to the firm

Consumer Complaints

• Unsatisfied consumers may not complain because it is not worth the time, no one would care, or no idea where to go or do
• Marketers can study the consumer decision process to help consumers move through this state of unsatisfaction
• Marketers can improve awareness in order to change consumer behaviors through messaging

Consumer Involvement

• Consumer involvement represents the degree of information processing and importance a consumer places to the product
• High involvement products are expensive, purchased infrequently, and self-expressive
• Low involvement products are purchased frequently and not risky

Choice and Decision Making

• In Cognitive decision-making the consumer shows deliberative, careful, and information-based processing
• Emotional decision-making is related to the consumer liking or feelings

Brand Strategy

• Understanding these preferences helps marketers apply consumer decision making
• Cognitive decisions are slow, systematic, and exhaustive
• Emotional decisions are quicker and spontaneous

Defining a Brand

• A brand is an intangible asset that includes intellectual property, image, identity, emotional connection, name, symbol, heritage, and overpricing
• Brands identify the maker/seller of a product/service through name, term, sign, symbol, design, or a combination of these elements
• Brands create awareness, reputation, and prominence for marketing managers
• Brands signify differentiation from competitors and the goods & services of the seller

Brand Differences

• Brand is a dimension of product differentiation designed to satisfy the same needs, differences on the product performance, or the symbolic
• Product is a physical good offered by a firm to satisfy needs

Importance of a Brand

• Firms differentiate their product, therefore reducing marketing costs allowing premium pricing and competitive advantage
• Consumers reduce risk through information on product quality and meaning, reducing time and effort in making decisions

Brand Building

• A brand equity needs both brand awareness and brand image
• Brand recognition and recall come as a result of brand awareness
• Brand recognition requires consumers to recognize a brand that they're exposed to

Brand Recall & Image

• Brand recall is the consumer's ability to retrieve the brand from memory, given a category
• Brand image is crafted through creating brand awareness by increasing familiarity of product via repeated exposure
• Strong product associations and related purchase cues also increase brand awareness

Elements of a Brand Image

• Brand image is built from brand association, which includes brand attributes and benefits.
• Brand attributes include descriptive features of the product
• Brand benefits are the value and meaning attached to a product's attributes; those also need to be strong, unique, and favorable

Brand Positioning and Strategy

• Brand positioning requires marketers to position a brand in target consumer minds
• The benefit to consumers should be engaging on a deep and emotional level, with strong product attributes, beliefs, and values
• Branding strategies include national brand versus store brands and corporate branding versus individual branding
• Corporate branding uses a firm's corporate brand name for all products
• Individual branding uses different brands for different products
• Store brand is purchased given reasonable prices

Line & Brand Extensions

• A line extension involves extending existing brand names to new forms within an existing product category
• This strategy has a low cost and risk, but can lead to consumer confusion
• Brand extension is modifying an current brand into a new product category
• Brand extensions lead to immediate acceptance at a lower cost
• Brand extensions also lead to risks and potential confusion

Multi-branding

• Multi-branding uses new brand names in existing product category
• This allows for establishing different features that can appeal directly to specific customer segments
• The goal of multibranding is to capture large market shares

New Brands & Valuation

• The concern with making new brands is waning of existing brands
• Also too many brands is a huge cost for the firm
• Brand equity assesses awareness and attitudes, though it is difficult to measure and has no monetary value

Pillars of Brand Equity

• Differentiation helps the brand stand out
• Relevance to the customers perspective
• Esteem reflects measure such as high quality, leader, reliability, personal regard
• Knowledge reflects brand awareness; consumers ability to recall/recognise a brand, familiarity with a brand

Brand Valuation Model

• Interbrand has a report of 100 best global brands
• Aspects include financial performance, role of the brand, strength to secure earnings
• Brand value = financial analysis + role of the brand index + brand strength