BU352 Key Concepts PDF

Chapter 2: The Marketing Plan Marketing Strategy Strategy is the plan that outlines how to achieve long term goals or objectives (What is it) ○ Understand the environment ○ Make informed decisions ○ Use resources to gain an advantage or success ○ 4...

Chapter 2: The Marketing Plan Marketing Strategy Strategy is the plan that outlines how to achieve long term goals or objectives (What is it) ○ Understand the environment ○ Make informed decisions ○ Use resources to gain an advantage or success ○ 4 P’s: product, place, price promotion Sustainable competitive advantage: advantage over the competition that is not easily copied Customer Value Value: Benefit- cost 4 Main strategies: ○ Customer excellence: retaining loyal customers and good customer service Value based strategies Retaining Loyal Customers Create an emotional attachments through loyalty program Outstanding Customer service ○ Operational Excellence: efficient operations and excellent supply chain and HR management The second way to achieve a sustainable competitive advantage Having strong relationships can come with exclusive rights ○ Product Excellence: high perceived value and effective branding and positioning ○ Locational excellence: having good physical location One of the most important Important for growth Marketing Plan Strategic Framework 1. Business Mission and Objective - Mission statement - What type of business? What do we need to accomplish goals and objectives? 2. Situation Analysis: SWOT - Assess the marketplace and changes in cultural, demographic, social, technological, economic, and political forces (CDSTEP) 3. Identify Opportunities: Segmentation, Targeting, Positioning - Positioning- process of defining the marketing mix variables so that customers have a clear, distinct, desirable understanding of the product 4. Implementation Marketing Mix: Product, Place, Price, Promotion - Be fully integrated for a coherent strategy 5. Evaluate Performance by metrics - Metrics: a measuring system that quantifies a trend, dynamic or characteristic - Explain why things happen BCG Product and Portfolio Analysis Portfolio Analysis: Allocates resources according to which products are expected to be the most profitable for the firm in the future ○ Performed by the strategic business unit( SBU) or product line level Stars: in high growth markets and are high market share products - Heavy investment needed Cash Cows: low-growth markets but are high market share products - Have received high investments so can be spun off to other products Question Marks: high-growth markets but low market share - Managerial intensive, high resources to increase MS Dogs: low growth markets and low market share  - Enough resources to maintain but not stardom Market/Product and Services Strategies Market Penetration: Employs the existing marketing mix and focuses the firm's effort on existing customers - Requires greater marketing efforts, such as increased advertising, additional sales and promotions, or intensified distribution efforts in geographic areas Market Development: Employs the existing marketing offering to reach new market segments, whether domestic or international Product Development: Offers a new product or service to a firm's current target market Diversification: new product to a segment that is not served - Related: current TaM has something in common with the new opportunity. Firm can use current vendors and practices - Unrelated: business lacks any common elements with the present business. Don’t capitalise on current strengths - Downsizing: exiting or reducing products - Reasons: new market with no knowledge, doesn’t align with current offerings, little value, declining demand Chapter 3- Analyzing the Marketing Environment Macro Environmental Factors Company Capabilities ○ The firm itself ○ Core Competency = satisfy customer needs ○ Knowledge, facilities, patents, technology people etc → target market, products, etc. Competition ○ Look at direct and indirect competitors and their strengths and weaknesses ○ Competitive Intelligence (CI) used to collect and synthesize information ○ Must know competition to from the competitive strategy Should we compete? Where? How? Corporate Partners ○ Alliances: work together, firm’s don’t work in isolation ○ Suppliers, part manufactures, union, transport Micro Environmental Factors Culture: shared meaning, beliefs, morals, values & customs of group of people ○ Transmitted by words, literature & institutions, it’s passed down through generations ○ Influences what, why, how, where, and when to by ○ Country Culture: visible nuances Artifacts, behaviour, dress symbols, physical setting, ceremonies, language differences, colour, taste Difficult to identify specific so better do use a universal appeal (same ad different language) Can also do different ads to the different countries based on their culture ○ Regional Subcultures: region that people live affects their reaction to cultural rituals or how they prefer products Help to create connections with the customer E.g. Ontario and Quebec- Q is less likely to buy prepared hot meal than O Demographics: characteristics of human populations and segments ○ Age, race, gender, income, ethnicity ○ The demographics help provide a snapshot of the target market ○ Generational Cohorts: similar purchase behaviour because of shared experience and same stage of life Gen Z: social media is the biggest shopping influence Gen Y: skeptical on what their hear on SM. don’t like if the sell is “too hard” Gen X: first latchkey kids, higher debt, travel, move away, high spending power, convenience, Difficult to market to but word of mouth is best because of trust Baby Boomer: individualistic, make leisure time priority, take care of themselves, like maintaining youth ○ Income: classified into groups baked on income, background, education, occupation purchasing power is tied to income Families are feeling a decline in purchasing power Depending on income people assign value differently (customers are searching for value today)  Upper Class: spending not influenced by economy, likely to be educated, managerial roles Middle Class: afford good like most time, careful spending, value conscious Working/Low Class: barely sufficient income ○ Education: higher levels lead to better jobs → more income → more spending power Knowing education and occupation and income can make it easier to predict purchase patterns ○ Gender: used to be more clear male/female. Change in gender affects the way forms design and promote their product Women make up most purchasing decisions and influence most of the remainder Show the change in gender roles in marketing Women earn less ○ Ethnicity: 1/5 Canadians not born in Canada Immigration has been responsible for over 75 percent of Canada's total population growth since 2016 People settle in Montreal, Toronto, Vancouver The shift in ethnic groups is a challenge and marketing opportunity Technological Advances: accelerated greatly, improving the value of both products and services ○ New products, new forms of communication, new retail channels ○ Artificial Intelligence AI can be referred to as solutions, which rely on computer systems to perform tasks that typically would require human intelligence, such as speech recognition, decision-making, or translations Marketers that are embracing (AI) primarily use it for: Advanced customers segmentation Media selection and buying Customer engagement ○ Robotics: robotics application typically perform work that previously was the responsibility of human workers ○ Internet of Things: smart devices that are connected to help consumer and companies consume more efficiently Economic Situation: affect the way consumers buy merchandise and spend money including ○ Look at both home country and abroad ○ Inflation: the persistent increase in the prices of goods and services ○ Foreign Currency fluctuations: changes in the value of a country's currency relative to the currency of another country ○ Interest Rates: the cost of borrowing money Political/Legal Environment: laws and legislation that promote or inhibit trade and marketing activities ○ No misleading advertising ○ Must identify harmful materials ○ Laws to increase competition in industries Social and Natural Trends: shape consumer values ○ Emphasis on sustainability, climate change action, health and wellness, diversity, inclusion, gender equality ○ Greener consumers: involves a strategic effort by firms to supply customers with environmentally friendly merchandise ○ Privacy Concern: loss of privacy, identity theft, don’t call or email ○ The Time-Poor Society: difficult to grab markets attention, less time for leisure ○ Efficient Distribution of Food: Trying to reduce food waste, encouraging restaurants to donate leftovers ○ Health and Wellness: Trying to reduce food waste, encouraging restaurants to donate leftovers Chapter 4- Consumer Behaviour Consumer Decision Making Process (5 Steps) 1. Need Recognition: occurs when consumers recognize they have an unsatisfied need, and they want to go from their current state to a different desired state Functional Needs: pertain to the performance of a product or service Psychological Needs: Pertain to the personal gratification consumers associate with a product or service Goods and services must satisfy both functional and psychological needs Marketers must find the correct balance for their target market 2. Information Search: search for various options to satisfy the needs Length and intensity: what is the risk, how important is the product Internal Search: examine their own memory and knowledge about the product/service External Search: seek information outside their personal knowledge base to help make the buying decision ○ Fill the gaps by taking to friends, family, salesperson, TV, radio ○ Most common is the online search 3. Alternative Evaluation: Shift through choices available and evaluate the alternatives Customers are engaged in the search Attribute Sets: retrieval and evoked ○ Retrieval sets: brands that can be readily brought forth from memory ○ Evoked sets: brands considered when making a purchase decision Increases the likelihood of purchase and reduces the search time Evaluation criteria: set of important attributes about a particular product that are used to compare alternative products Consumer Decision Rules: set of criteria that consumers use consciously or subconsciously to quickly and efficiently select among alternatives ○ Compensatory decision rules: assume that the consumer trades off one characteristic against another, such that good characteristics compensate for bad characteristics. ○ Noncompensatory rule: choose a product on the basis of a subset of its characteristics, regardless of the value of its other attributes ○ Decision heuristics: mental shortcuts that help a consumer narrow down their choices. Some examples of these heuristics include price, product presentation, and brand. 4. Purchase Decision: Consumers don't always buy the product from where they were originally looking at it Use conversion rate to measure how well intended purchases are converted to actual Increase Conversion Rate ○ Reduce real or virtual abandoned carts (make it easy) ○ Merchandise in stock (plenty on hand) ○ Reduce wait time (open more checkouts) 5. Post Purchase Customer Loyalty: develops over time with multiple repeat purchase of the product or brand from the same marketer Customer Satisfaction: setting too high results in initial sales but not long term, too low may not lead to sales Post Purchase Dissonance: internal conflict that arises from an inconsistency between two beliefs or behaviour Factors Affecting consumer Search Process Perceived Benefit vs Perceived Cost: is it worth the time? Locus of Control ○ External: fate and external factors affect all outcomes ○ Internal: control over their outcome Actual or perceived risk ○ 5 types of risk Performance: danger from poorly performing product or service  Financial: associated with monetary outlay and initial cost of purchase and using product Social: worry that others may not regard their purchase positively Physiological (Safety): fear of actual harm should the product not perform Psychological: way people will feel if the product doesn’t convey the right message Factors influencing Consumer Behaviour Psychological Factors: affect the way people receive the marketers message ○ Motives: a need or want that is strong enough to cause the person to seek satisfaction ○ Attitudes: A person's enduring evaluation of their feelings about and behavioral tendencies towards an object or idea. Slow to change Affective Component- what we feel about the issue at hand (like or dislike) Cognitive Component- What we believe to be true Behavioral Component- the actions we take ○ Perceptions: The process by which we select, organize and interest information to form a meaningful picture of the world Selective exposure: the tendency of individuals to seek out information that aligns with their existing beliefs and attitudes while avoiding information that contradicts them. Selective attention: the process where people focus their attention on specific stimuli while filtering out information that is deemed less relevant or important Selective comprehension: interpreting information in a way that is consistent with one's pre-existing beliefs and attitudes, even if the information itself is ambiguous or contradictory Selective retention: the tendency to forget information that one sees, reads, or hears ○ Learning: A change in a person's thought process or behaviour that arises from experience and takes place throughout the consumer decision process Affects both attitudes and perceptions ○ LifeStyle: Way consumers spend their time and money to live Difference between actual and perceived/want Social Factors ○ Family: The entire family will consume or use products, so markers. Influence the whole family ○ Reference Groups: One or more persons an individual uses as a basis for comparison regarding beliefs, feelings and behaviors Friends, family, co-workers, celebrities Offer information, provide rewards, enhance self image How consumer wants to be perceived affects the choice ○ Culture: Shared meanings, beliefs, morals, values, and customs of a group of people Affects leisure time Situational Factors: specific to the situation that override or at least influence psychological and social issues ○ Purchase: predisposed to purchase certain products or services because of underlying traits and facts ○ Sensory: might be ready but for reasons be derailed once at the store Store atmosphere, salespeople, crowding, demonstrations, promotions, packaging ○ Temporal State: current state of mind can alter preconceived notions for what we purchase Involvement and Consumer Buying Decision Involvement: consumer’s degree of interest in or concern about the product or service Extended problem solving for high priced, risky, infrequent, or highly highly expressive purchases ○ Greater attention, deeper processing Limited problem solving, includes impulse buying and habitual purchases/decision making ○ Less attention, peripheral processing Chapter 5- Business to Business Marketing B2B Markets Focus their efforts in serving specific types of customer markets to create value for those Manufacturers or Producers: Buy raw materials, components, and parts that allow them to manufacture their own goods Resellers: Buy raw materials, components, and parts that allow them to manufacture their own goods Institutions: purchases a variety of goods and services for the people they serve. Fulfill their needs for capital ○ Hospitals, educational organizations, prisons, non-profits Government: the largest purchasers of good and services B2B Buying Process (6 Steps) 1. Need recognition: Buying organization recognizes their unfilled needs 2. Product Specification: Create a list of potential vendors that they might want to use to develop the product 3. RFP Process: Request for proposals (RFP): buying organizations invite alternative suppliers to bid on supplying the required needs - When there is no preferred vendor 4. Proposal Analysis and Supplier Selection: Evaluate all the proposals from the RFP - Evaluate all the proposals from the RFP 5. Order Specification (purchase): Places the order with the preferred supplier - Supplier acknowledges that the order is received 6. Vendor performance Assessment using Metrics: Analyze their vendors performance so they can make decisions about their future purchase The Buying Center. Organizational Culture, Buying Situations Buying process in influenced by three factors: buying center, organization’s philosophy, situation Roles in the Buying Center ○ The Initiator: initiates the buying process by determining the products and services that will best address (doctor) ○ The influences: What is available ( medical devices, pharmacy) ○ The decider: responsible for deciding whether to make the buy (hospital, management) ○ The buyer: the one doing the transaction ○ The gatekeeper: person with the final decision, controls information access to decision makers and influencers Organizational Culture: Reflects the set of values, traditions, and customs that guides its managers and employees behaviour ○ Autocratic: one person makes the decision alone ○ Democratic: majority rules ○ Consultative: one person makes the choice but has inputs from others ○ Consensus: all members must reach a collective agreement Buying Situation ○ New Buy: first time, quite involved, all six steps ○ Straight Rebuy: additional units, most B2B are in this category ○ Modified Rebuy: similar product changing slightly, current vendors have the advantage Chapter 6- STP STP Process (5 steps) Segmentation 1. Strategy or Objectives: consistent with mission statement and firms objectives - Align with SWOT 2. Segmentation Bases: formal approach to segment the market - Descriptions of the different target segmentations - Geographic: where they live - Demographic: who they are - Psychographic: how they live - Self values, self image, lifestyle - Values and lifestyle survey (VALS) - Behavioural: why they buy, how often they use it - occasion, benefit, loyalty, usage Targeting 3. Evaluate segment attractiveness: determine if the target market is worth pursing by the following criteria - Identifiable: Who within the market to be able to design the product and meet the needs - Reachable: Even if the product/service is great it won't have an impact if the market can't be reached - Know, understand, recognize - Responsive: Customer in segment must act similarly and positively to the firm's offering - Substantial and Profitable: Measure size and growth potential - Segment profitability: (size * adoption % * purchase behaviour * profit margin %) - fixed costs 4. Select target market: marketer's ability to pursue such an opportunity or target segment (Look at SWOT) - Differentiated Targeting: targets several market segments with a different offering for each - Concentrated targeting: selects a single primary target market and focus all its energies there - Micromarketing: Made to suit an individual customer's wants or needs Positioning 5. Identify and develop positioning strategy: Positioning is the mental picture or perception that people have about the company and brand. Positioning Strategies: - Value - Product attributes - Benefits and symbolism - Competition - Market leadership Perceptual Maps Displays the position of products or brands in the consumer’s mind ○ Determine consumer perceptions & evaluations in relation to competitors ○ Identify the market’s ideal points & size ○ Identify competitor’s positions ○ Determine consumer preferences ○ Select the postino ○ Monitor the positioning strategy Repositioning: marketers hange a brands focus to target new markets or realign the brand’s core emphasis with the changing market preferences Chapter 7: Market Research Research Process (5 Steps) Must plan the entire project in advance before doing the research project 1. Define Research Problem and Objectives: Establish what needs to be solved first because research is expensive and time consuming - Correctly defining the problem is important because wrong problem = wrong solution 2. Design Research Plan: Identify the type of data needed and determine the type of research necessary to collect it - Project objectives drive type of data needed 3. Collect Data: Data collection only begins after the research design process - Secondary: collect prior to the start of the focal research project. External or Internal - Primary: collected to address the specific research needs - Quantitative & Qualitative - Use a sample: a group that represents the interest of the consumer market for collecting data 4. Analyze Data and Develop Insights: must be thorough and methodical - Make use of the data, it is just a raw number until analyzed. Convert to information by - Describe, explain, predict, evaluate - Use the information to develop insights 5. Determine Action Plan: prepares and presents the results to the decision makers Types of Data Internal Secondary data ○ Most valuable is the company’s customer information and purchase history ○ Data mining ○ Big Data: Volume, Variety, Velocity, Veracity, Value External Secondary Data ○ Must be current, relevant and low cost ○ Scanner Data: scanning UPC codes and using the data in quantitative research ○ Panel Data: collected from groups of consumers over time includes reports on what was purchased, and responses to survey questions Primary Data ○ Ways to collect: observing, focus groups, surveying, interviews, in-person ○ Advantage: can be tailored to research questions ○ Disadvantage: more costly and takes longer ○ Qualitative research: reliability, validity, sampling ○ Reliability: extent to which you will get the same result when repeated in identical situations ○ Validity: extent to which the study actually measures what it is supposed to measure ○ After the qualitative research the firm looks at quantitative research Chapter 8- Developing New Products Why Firms Create New products Changing customer needs Market Saturation Managing Risk Through Diversity Fashion Cycles Improving Business Relationships Adoption of Innovation: Consumer Adoption Cycle Diffusion of Innovation: process by which innovation spreads throughout a market group over time Pioneers: new to the market ○ First movers and create the market and product category. Become recognizable Disruptive Innovation: simpler and less expensive than existing products or services Product Failure: Occurs because the market isn't accessed right and not enough product testing ○ Too complex Innovators: those buyers who want to be the first on the block to have the new product ○ Enjoy taking risks ○ Not price sensitive Early Adopters: use the product or service innovation, don’t like to take as much risk ○ Help to spread the word ○ The smaller this group the smaller the total adoption is Early Majority: don’t like risk and wait till the bugs have been worked out ○ Product can’t be profitable till this stage Late Majority: product is at it’s full market potential Laggards: avoid change and like traditional products ○ Sometimes they never adapt the product Factors Affecting Product Diffusion Speed Compatibility: Faster or slower diffusion time based on a variety of features including cultural differences Observability: When easily observed, their benefits or uses, enhances the diffusion process Complexity and Trialability: Less complex and easy to try have a high diffusion speed Relative Advantage: Perceived to be better than sub substitutes, then the diffusion will be relatively quick NPD Process (6 Steps) Not a linear process and has feedback loops built in. Not necessary to take product through every stage 1. Idea Generation: Internal R&D, Licensing, brainstorming, competitor’s products (reverse engineering), customer inputs Want to have several ideas to take to the next stage 2. Concept Testing: ideas are developed further into concepts Present to potential buyers to see reactions to save money 3. Product Development: balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or services Alpha testing: attempts to determine whether the product will perform according to its design and whether it satisfies the need for which it was intended Beta Testing: potential customers examine in a "real use" setting to see the performance 4. Market Testing: Must test the market for the new product. Premarket Tests: before they actually bring a product to market to determine how many customers will try the product Test Marketing: offering to a limited geographical area prior to national launch ○ Stronger predictor of success 5. Product Launch: promotion, place, price, timing 6. Evaluation of Results: Have a post launch review to see if it was a success or failure and what other resources are needed or changes to the marketing mix Product Life Cycle Introduction Stage: ○ Low Sales, negative or low profits, innovators, few competitors Growth Stage: ○ Rising Sales, Profits rapidly rising, early adopters and early majority, increasing competitors Maturity Stage: ○ Peak sales, peak/declining profits, late majority, high competitors Decline: ○ Deccling sales and profits, laggards, low competitors Chapter 9- Product, Branding, Packaging Types of Products At the center of the product is the core customer value Specialty: Customers show such a strong preference that they will expend considerable effort to search for the best supplier Shopping: Spend a fair amount of time comparing alternatives Convenience: Customers not willing to spend any effort to evaluate prior to purchase, Frequently bought commodity items Unsought: Consumers do not normally think of buying or don't know about. Requires a lot of marketing effort Product Mix and Product Line Decisions Product Mix: the complete set of products offered by a firm Product Line: groups of associated items, consumers link together, that make up the product mix Product category: an assortment of items that the consumer sees as reasonable substitutes for one another (within each product line) Product mix breadth (or variety): number of product lines offered by the firm ○ Increase breadth: increase sales and compete in new venues ○ Decrease Breadth: delete product lines Product line depth: number of products categories within each product line ○ Too much variety is costly to maintain and having too many brands can dilute the firms reputation ○ Increase Depth: Addresses changing consumer preferences or compete with competitors by adding a new product ○ Decrease Depth: helps to realign resources, eliminate unprofitable products Branding: Value, Brand Equity, Brand Awareness, Brand Ownership, Brand Name Strategies Brand is important for a company to survive because without it consumers don't know what products they sell ○ Allows for differentiation of product offerings What marks a brand: name, logo & symbols, characters, slogans, jingles Value of Branding: ○ Brands Facilitate Purchasing ○ Brands Establish Loyalty ○ Brands Protect from competition and price competition ○ Brands reduce marketing Costs ○ Brands are assets ○ Brands impact market value Branding ○ Brand Equity (value of the brand) Brand awareness: How many consumers in a market are familiar with the brand and what it stands for Perceived Value: The relationship between a product and service's benefits and its costs Brand Associations: Reflect the mental links that consumers make between a brand and its key product attributes Brand Loyalty: Consumer buys the same brand's product over and over again (less costs) ○ Brand Ownership Strategies Generic: no brand names sold in commodity markets Manufacturer: e.g. Nike, Marriott Private label or store brand: cheaper Often owned by: retailers, wholesaler, manufacturer ○ Brand Name Strategies The more products vary in performance the more individual brands should be used Should be descriptive and suggestive Individual brand: name for each product  Family brand: the use of combination of the company name and individual Branding Strategies ○ Brand extension: use of the same brand name for new products being introduced to the same or new markets ○ Brand Licensing: contractual arrangement between firms, whereby one firm allows another to use its brand name, logo, etc. ○ Cobranding: practice of marketing two or more brands together Packaging and Labelling Packaging: important brand element with tangible benefits, attracts consumers Labelling: provide information that consumers need to make a purchase decision ○ Legal requirements Chapter 10- Service Core Differences Between Services and Goods Inseparable Production and Consumption: The interaction with the service provider has a impact on the customers perception of the service outcome ○ Can’t try before they buy so offer guarantees Inconsistent: The more humans needed to provide the service, the more likely it will be inconsistent ○ Once damage is done it can’t be undone ○ Training and standardization, use machines Inventory: can’t be stores for future use ○ Have to balance demand and capacity challenges Intangible: It makes it challenging to convey the benefit of the service ○ Add a tangible feature (e.g. nice waiting room) The Gaps Model Knowledge Gap: difference between customer expectations and the firm's perception of the expectations ○ Close by matching expectations with service Standards Gap: difference between the firm's perceptions of expectations the service standards it sets ○ Close by setting appropriate service standards and measuring the performance Delivery Gap: difference between firm's service standards and the actual service it provides ○ Close by getting employees to meet the standard ○ Provide support ○ Use technology Communication Gap: difference between actual service provided to the customer and the service the firm's promotes and promises ○ Close by being more realistic with the services being provided ○ Listen to the customer ○ Provide a fair solution ○ Resolve the problems quickly Building Blocks of Service Quality Reliability: the ability to perform the service dependably and accurately Responsiveness: the willingness to help customers and provide prompt service Assurance: the knowledge of and courtesy by employees and their ability to convey trust and confidence Empathy: the caring, individualised attention provided to customer Tangibles: the appearance of physical facilities, equipment, personnel, and communication materials Zone of Tolerance: the area between customer expectations regarding their desired service and the minimum level of acceptable service Chapter 11- Pricing 5 C’s of Pricing Company Objectives: reflect how firm intends to grow ○ Sales Orientation: Set prices believe that increasing sales will help the firm more than increasing profits ○ Competitor Orientation: Strategize according to the premise that they should measure themselves against competition (adds value) ○ Customer Orientation: Focus on customer satisfaction and setting price to meet expectations (Explicitly invokes the concept of value) ○ Profit Orientation: Focus on target profit pricing, maximizing profits, target return pricing Customers (most important C) ○ Supply and demand curves ○ Prestige products that are purchased for statues rather than functionality have a curved curve ○ Consumers are less sensitive to price increases if the product is a necessary item ○ Price Elasticity of demand =(% change in quantity demanded / % change in price) Elastic when -1 (the market for products is normally this) Customers are more sensitive to increases than decreases Affected by: Income effect: as income increases so do spending habits Substitution Effect: ability to substitute with other products ○ Dynamic pricing: charging different prices for good or services based on the type of customer, time of week, or season Costs ○ Have to know costs to see profit levels ○ Variable costs: vary with products ○ Fixed costs: remain constant Competition ○ Monopoly: one firm controls the market (less price competition and fewer firms) ○ Oligopoly: a handful of firms control the market ( more price competition and fewer firms) ○ Monopolistic Competition: many firms selling differentiated products at different prices (less price competition and many firms) ○ Pure competition: many firms selling commodities for the same price (more price competition and many firms) Channel Members ○ Manufactures, wholesalers, and retailers ○ Grey market: employs irregular but not illegal methods Pricing Methods Cost Based Methods: Determines the final price by starting at the costs ○ Doesn't look at the role that consumers play Competitor-based Methods: reflect how the firm wants the consumer to interpret the products ○ Good since consumers compare the prices of products Value-Based Methods: Setting prices that focus on the overall value of the product perceived by the consumer ○ Improvement Value Method: estimate the improvement ○ Cost of ownership method: Setting prices that focus on the overall value of the product perceived by the consumer Pricing Strategies Pricing Strategy: long term approach to setting prices broadly in an integrative effort based on five C’s Everyday Low Pricing (EDLP) ○ Stress continuity of their retail prices at a level between the regular, non sale price and the deep discount ○ Adds value because consumers don’t need to compare prices  High/Low Pricing: Relies on the promotion of sales ○ Prices are temporarily reduced New Product Pricing ○ Price Skimming: pricing higher and then dropping the price later Appeals to those who will pay a premium ○ Market Penetration: set the price low for introduction Build sales, market share and build profits quickly Pricing Tactics Pricing Tactics: short term methods that focus on select components of the five C’s Consumer Pricing Tactics: focus on products aimed directly at consumers ○ Price lining: establishing a price floor and ceiling for an entire line and then have prices in between to signify quality differences ○ Price Bundling: pricing of more than one product for a single, lower price Encourage bulk buying so they don’t go to competitors ○ Price Bundling: pricing of more than one product for a single, lower price Consumer Price Reductions ○ Markdowns: the reductions retailers take on the initial selling price of the product or service. ○ Quantity Discounts for Consumers ○ Coupons and Rebates Coupon: retailers handle the discount Rebates: manufacturer issues the refund Business-to-Business Tactics ○ Seasonal Discounts: additional reduction offered as an incentive to retailers to order merch in advance of the normal buying time Good to get rid of stock (A) and larger profit margins (B) ○ Cash Discounts: paying the invoice prior to the end of the discount period reduces the amount owed ○ Allowances Advertising allowance: price reduction to channel members if they agree to feature the product in an ad or promo Listing allowance: fees paid to retailers to get new products into stores ○ Quality Discounts: provides a reduced price according to the amount purchased. The more bought, the higher the discount ○ Uniform Delivered vs Geographic Pricing Uniform delivered pricing: shipper chargers one rate, no matter where the buyer is located. Makes it simple for both seller and the buyer Geographic pricing: sets different prices depending on the geographical region Legal and Ethical Aspects of Pricing Deceptive or Illegal Price Advertising: When the prices are set with the intent to drive the competition out of business Predatory Pricing: When the prices are set with the intent to drive the competition out of business Price Discrimination: When the price is different to wholesales, distributors, or retailers Price Fixing: When the price is different to wholesales, distributors, or retailers ○ Horizontal Price Fixing: competitors that product and sell collude ○ Vertical price fixing: at different levels of the same marketing channel collude Chapter 12- Distribution Channels Distribution Channels Distribution channel: transfer ownership of good and moves them from the point of production to the point of consumption ○ Part of the supply chain between producers and consumers Direct channel: manufacturer → customer Indirect channel (one intermediary): manufacturer → retailer → customer Indirect channel (two intermediary): manufacturer → wholesaler → retailer → customer Push Vs Pull Strategies Push: manufactures focus on its promo efforts to convince channel members to carry its product ○ Pushes the product through the distribution channel ○ Need to pay listing fees to have shelf space Pull: promo efforts directed at the consumer to build up demand ○ Good when channel members are reluctant to stock the product Distribution Intensity Refers to the number of channel member to use at each level of the supply chain Product characteristics drive supply chain structures Intensive Distribution: get products into as many outlets as possible ○ The more exposure the more it sells Exclusive Distribution: granting exclusive geographic territories to one or very few retailers Selective Distribution: this is between the other two. Available in a few places ○ Helps maintain a particular image ○ Can help with sales Logistics and Supply Chain Vertical Conflict: between manufacturer and retailer Horizontal Channel Conflict: Disagreement among members at the same level in a marketing channel Vertical Marketing Systems: ○ Corporate: parent companies have complete control ○ Contractual: independent firms at different levels of SC joining together with contracts to obtain economics of scale ○ Administered: a system in which coordination and control over the distribution process are achieve through the influence and power of a dominant channel member Strategic Relationships: supply chain members are committed to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial ○ Mutual Trust ○ Open communication ○ Common goals ○ Credible commitments Logistic Management ○ Flow 1: customer to store ○ Flow 2: store to buyer ○ Flow 3: Buyer to manufacturer ○ Flow 4: Store to manufacturer ○ Flow 5: store to distribution center Chapter 13- Retailing Choosing a Retail Partner (3 considerations) Channel Structure: The level of difficulty in getting relaters is determined by the degree of vertical integration ○ Vertical Marking system: stores simply get the product automatically because their supplier is their owner Customer Expectations: Need to know customer preferences regarding manufacturers Channel Member Characteristics: The more sophisticated the channel member, the less likely for intermediaries ○ How much power to give to the manufacturer Identifying Types of Retailers Food Retailer ○ Conventional super markers ○ Big Box Food Retailer: supercenters, hypermarkets, warehouse clubs ○ Convenience Store: limited number of items General Merchandise Retailers: sell through multiple channels ○ Discount store: broad variety, limited service, low prices ○ Specialty stores: limited number of merchandise categories in small stores ○ Category specialists: narrow variety with a deep assortment of merchandise ○ Department stores: broad variety and a lot of each type (deep assortment) ○ Drugstores: specialty on health and personal grooming merchandise ○ Online retailers ○ Off price retailers: e.g Winners, Marshalls, Homesense ○ Service retailers Developing a Retailer Mix Retailers must understand the consumer's attitudes, behaviours, and preferences Retail Mix ○ Product (merchandise assortment): providing the right mix of products to the consumers Assortment helios to help attract and maintain customers ○ Promotion: retail environment and through mass media Perception of value, patronage intentions, purchases, loyalty, share of wallet Cooperative Advertising: an agreement between a manufacturers and retailers in which hte manufacturer agrees to defray some advertising costs ○ Price: defines the value of merchandise and service Price range of store helps to build image ○ Presentation: promote and showcase what the store has to offer Provide convenient store layouts Wheel of retaining Low prices, margin status Higher pisces, margin, status, Still higher prices, margin and status New for of outlet enters retailing environment with characters of outlet ○ Personnel: Personal selling and customer service are part of the overall promotional package Make it easier to buy and use the product Provide the best service to the best customers and the ones who will buy Customer Relationship Management (CRM): Knowledge gained from instore, online, and data collection of habits can be used ○ Place: location of the store and supply chain management Convenience is success Consumers most important criteria Omnichannel Integrated CRM, Seamless Experience, Brand Image, Pricing, Supply chain Chapter 14- Integrated Marking Communications The Communication Process 1. The Sender: where it originates - Clearly identified to the intended audience 2. The Transmitter: works with the creative department to develop the marketing communications - Mobile, social media, websites, apps, flyer 3. Encoding: converting the sender's idea to a message - visual or verbal 4. The Communication Channel: medium that carries the message - Must be appropriate to connect the sender with the recipient 5. The Receiver: pearson who read, hears or sees and process the information - Decoding: the process by which the receiver interpret the sender’s message 6. Noise: Interference that stems from competing messages, lack of clarity, or flaw in the medium 7. Feedback Loop: Allows the receiver to communicate with the sender thereby informs the sender whether the message was received and decoded properly Steps in Planning and IMC campaign (7 Steps) 1. Identity target audience: Success depends on how well the advertiser can identify the target audience - Doesn’t have to be the same as the current users 2. Set objectives: derived from the overall objectives of the marketing program - Not the desired outcomes - Long term and short term - To Inform, persuade, remind (Push vs pull) 3. Determine budget: attempt to meet overall objective, expenditures over life cycle, nature of market - Objective and task: based on the cost of specific tasks - Competitive parity: firm share of the communication expenses is in line with its market share - Percentage of Sales; fixed percentage of the forecasted sales - Affordable budgets: uses sales, expenses, excluding communications 4. Convey message: what message you want to convey about the product or service - Key message you want to communicate - Appeal would be most effectively convey the message - Rational Appeal: Functional information and strong arguments built around relevant issues that encourage consumers to evaluate the brand favorably on the basis of the key benefits it provides - Logic and reasoning - Emotional Appeal: Satisfy consumers emotional desires rather than their utilitarian needs - Fear, humour, safety, happiness, love, comfort 5. Evaluate and select media - Media Planning: process of evaluating and selecting the media mix - Media Mix: the combination of the media used and the frequency of advertising in each medium - Media Buy (the purchase of airtime or print pages) is the largest expense you have to choose carefully - Mass Media: reaching large anonymous audience members - Niche Media: more focused and used to rach narrower segment - Paid, Owned, Earned - Types of Advertising Schedules - Continuous - Flighting: spurts with heavy ads and some with none - Pulsing: a combination, always some but some with heavy amounts 6. Create communication: Media Buy (the purchase of airtime or print pages) is the largest expense you have to choose carefully - Convey a certain image, appeal to target market, promote price - Creativity should not overshadow the message  7. Assess impact - Pretesting: before the ad campaign - Tracking: includes monitoring key indicators - Post testing: the evaluation of the IMC campaign’s impact after it has been implemented - Traditional Media: how often and when consumers are exposed (frequency and reach) - Digital Media: web tracking to see how much time viewers spend on ad - Click through tracking IMC Tools Advertising: paid form of communication form an identifiable source (print and online) ○ Most visible, good at creating awareness and interest Personal Selling: two way flow of communication between buyer and seller designed to influence purchase decision ○ Face to face, video, phone, internet ○ Good for B2B ○ High cost Sales Promotion: special incentives that encourage the purchase of a product or service ○ In conjunction with other programs ○ Directed at end user or channel members Direct Marketing: Communicate directly with target customer to generate response and transaction ○ Direct Response TV: strong call to action ○ Direct Mail/Email: if you choose the wrong list it will end up in the junk box ○ Catalogue: used to build the business (online and physical) ○ Kiosk: used to facilitate the way service companies deliver their services to customers Chapter 15- Advertising, Sales Promotion, Personal Selling Advertising: AIDA Model Attention: customer needs attention for the message to be received ○ Aided Recall: consumers recognize the brand when its name is presented ○ Top-of-mid awareness: prominent place in people’s memories that trigger a response without them having to put in any thought Interest: Communication to increase interest level ○ Customer must want to further look into the product Desire: change the mindset form “i like it” to “i want it” Action: previous steps should lead to action if performed correctly Lagged Effect: don’t act immediately, takes multiple exposures for an ad to be processed Advertising Objectives Inform: communicates to create and build brand awareness, with the ultimate goal of moving the consumer through the buying cycle to a purchase ○ Determines the early stages of the life cycle Persuade: motivate consumers to take action ○ Occurs in the gown and early maturity stages Remind: used to remind consumers of a product or to promote repurchase ○ Top of mind awareness Focus of Advertisement Product Focused advertisements: inform, persuade, or remind about a specific product or service Institutional Advertisements: about issues to place, politics, an industry or corporation Product Placement: include the product in nontraditional situations Public Service Announcements: foxes on public welfare and generally is sponsored by non profits Sales Promotion Types Sales Promotions: special incentives or excitement-building programs that encourage consumers to purchase a particular product or service Consumer Sales Promotions ○ Coupons: discount on the price for specific items ○ Deals: short term price reductions ○ Premiums: Offers an item for free or at a bargain price to reward some type of behaviour, such as buying, sampling, or testing ○ Contests: Brand-sponsored competition that requires some form of skill or effort In canada it can’t be on chance alone ○ Sweepstakes: Offers prizes based on a change of drawing of entrants names ○ Samples: Offers potential customers the opportunity to try a product or service before they make a buying decision ○ Loyalty Programs: Specifically designed to retain customers by offering premiums or other incentives to customers who make multiple purchases over time ○ Point of purchase displays: Merchandise display located at the point of purchase, such as at the checkout counter ○ Rebates: Price reduction in which a portion of the purchase price is returned by the seller to the buyer Trade Channel Sales Promotions ○ Discounts and allowances: maintain or increase inventory levels in the distribution channel Case Allowance: allow a few dollars off each case ○ Cooperative advertising: Helps to compensate trade channel members for money they spend on promoting products and encourages them to feature products more often Manufacturers pay 50% of ads ○ Sales force training: Since retailers have contact with end consumers, manufactures may offer to train the retailer's sales staff Regulatory and Ethical Issues in Advertising Deceptive advertising: is a representation, omission, act, or practice in an advertisement that is likely mislead consumer acting reasonably under the circumstances Puffery: the legal exaggeration of praise, stopping just short of deception Sales Promotions using Metrics Realized margin Cost of Additional inventory: because you have to carry more products Potential increase in sales Long term impact Potential loss from switches from more profitable items Additional sales by customers Personal Selling (5 Steps) 1. Generate and Qualify Leads: list of potential customers (leads) and assess their potential (qualify) - Talking to current customers, research online, network, trade shows - Cold calls, telemarketing - qualifying potential can be dangerous and possibly illegal, because you shouldn’t assume someone caan’t afford something 2. Preapproach and the use of CRM Systems: occurs prior to the meeting the customer for the first time and extends the qualification process - Conduct additional research and develop plans for meeting the customer - Establish goals 3. Sales presentations and overcoming objections - The Presentation: person-to-person meeting, getting to know the customer, attention, create interest - Align with the B2B buying process - Need to listen and ask questions - Handle objections about the product or service - Often can be predicted and prevented 4. Closing the sale: obtaining commitment from the customer - Even if unsuccessful, still a good stepping stone for building relationships - Read body language 5. Follow up: solidifies the relationship with the customer - 5 service quality dimensions - Reliability: the salesperson and the supporting organization must deliver the right product or service on time - Responsiveness: must be ready to deal quickly with any issue, question, or problem - Assurance: customers must be assured through guarantees that their purchase will perform - Empathy: good understanding of the problems and issues the the customer is facing - Tangibles: physical characteristics of the seller's business, it is the most influential than the other 4 dimensions Chapter 16- Global Marketing Globalization: the increased flow of goods services, people, technology, capital, information & ideas around the world PEST Tools Political (government actions) ○ Tariff: A tax levied on goods imported into a country Makes imported goods more expensive Dumping: selling a good in a foreign market at a price lower than domestic US 25% Tariff on steal to attempt to product US steel production from competition ○ Quota: Designates the max quantity of a product that may be brought into a country during a specified time period ○ Boycott: Pertains to a group's refusal to deal commercially with an organization to protest against its polices Called by government or non-government parties ○ Exchange Control: Refers to the regulation of a country's currency exchange rate, the measure of how much one currency is worth in relation to another Makes it more or less expensive to sell in other countries Exchange Rate: measure of how much one currency is worth in relation to another ○ Trade Agreement: intergovernmental agreement designed to manage and promote trade actives for specific regions Trading bloc: consists of those countries that have signed a particular trade agreement Affects how canadian firms conduct business in the member countries ○ Trade Sanction: penalties or restrictions imposed by one country over another country for importing and exporting goods Economic ○ General Economic environment: healthy economies provide better opportunities Trade deficit: imports more than exports Trade Surplus: higher level of exports than imports Gross domestic product (GDP): market value of the goods and services produced by a country per year Purchasing power parity (PPP): if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same as in the other currency ○ Market size and population growth rate: The distribution of he population within a particular region ○ Real income: Firms make adjustments to an existing product or change the price to meet the unique needs of a particular country's market Normally for cheaper products Can be for expensive products Socio-Cultural Factors ○ Power Distance: willingness to accept social inequality as natural ○ Uncertainty Avoidance: the extent to which society relies on orderliness, consistency, structure, and formalized procedures to address situations ○ Individualism: perceived obligation to and dependence on groups ○ Masculinity: how male-oriented Lower rating means men and women are more equally treated ○ Time orientation: short vs long, long values commitment and willing to accept longer horizon for success of product ○ Indulgence: the extent to which society allows for the gratification of fun and enjoyment Technology: markets are concerned with 4 elements ○ Transportation ○ Distribution channels ○ Communications  ○ Commerce Appeal of BRIC Countries Brazil: regional powerhouse, 9th largest economy, welcomes investors Russia: growth prospects appear as promising for consumer goods, corruption is widespread India: 17% of the world’s population, fastest growing economies, well educated, Chine: increase liberalization, unequal economic distribution, Choosing a global Marketing Entry Strategy Exporting: producing goods in one country and selling them in another ○ Indirect exporting: occurs when the exporting firm sells its goods in the host country directly through an intermediary ○ Direct exporting: occurs when the exporting company sells its products in the host country directly without intermediaries Franchising: contractual agreement between a firm and another firm, allows the franchisee to operate a business, using a name or format developed and supported by the franchisor Strategic Alliance: a collaborative relationship between independent firms, through the partnering firms do not create an equity partnership (do not invest in one another) Joint Venture: formed when a firm entering a new market pools its resources with those of a local firm to form a new company in which ownership is control, and profits are shared Direct investment: when a firm maintains 100% ownership of its plants, operation facilities, and offices in a foreign country, often through the formation of wholly owned subsidiaries Choosing a Global Marketing Strategy STP process is more complicated than domestic STP ○ Firms considering expansion have difficulty understanding the cultures ○ Must consider subcultures ○ Consumers view the role of products differently in different countries ○ Identify the positioning in the market and then decide how to implement its marketing strategies Cultural nuances Subcultures View of product and consumer role Different positioning Product adaptation Alter marketing mix as needed Global Marketing Mix Global Product or Service Strategies ○ Sell the same product or service in both home and host ○ Sell a product or service that is similar but with adaptions ○ Sell a totally new product Global Pricing Strategies ○ Some countries have restrictions on when discounts can be implemented ○ Must follow the local pricing structure even if not aligns with current company pricing Tariffs, quotas, anti-dumpBing polices, currency exchange policies Global Distribution Strategies ○ Lots of intermediaries, exports, importers, transportation systems Global Communication Strategies ○ Differences in language, customs, and culture complicate the ability to communicate Ethical Issues in Global Marketing Environmental Concerns Global Labour Issues: includes concerns about working conditions and wages paid to factor workers in developing countries Cultural Imperialism: belief that one's own culture is superior Chapter 17- Ethics Business, Personal Marketing Business Ethics: concerned with distinguishing between right and wrong actions and decisions that might arise in a business setting Marketing Ethics: refers to those ethical problems that are specific to the domain of marketing Ethical Climate: set of values within a marketing firm, or division, that guides decision making and behaviour Why People Act Unethically ○ People grow emotionally in their understanding of what is and is not ethical Ethical Workplace Climate: ○ Values: establish, share, understand ○ Rules: management commitment, employee dedication ○ Controls: rewards, punishment Corporate Social Responsibility CSR: refers to the revolutionary activities undertaken by a company to operate in an economically, socially, and environmentally sustainable manner ○ Firms should implement programs that are socially responsible ○ Employees should act in an ethically responsible manner Ethics vs Social Responsibilities ○ Both ethical and responsible ○ Ethical firm not involved with larger community (not SR) ○ Questionable firm practices (unethical), yet donates to the community ○ Neither ethical or SR Who is impacted ○ Society ○ Environment ○ Employees ○ Customers ○ Marketplace Framework for Ethical Decision Making 1. Identify issues - Using results to mislead or even harm the public - Data collection methods - Hiding the real purpose of the study 2. Gather information and identify stakeholders - Identify all ethical issues and relevant legal information - Get inputs from stakeholders on any identified ethical issues 3. Brainstorm and evaluate alternatives 4. Choose a course of action - Weigh the alternatives Integrating Ethics into Marketing Strategy Planning Phase: the mission or vision statement sets the ethical tone Implementation Phase: Control Phase: check successful implementation and reaction to change