COMM 131 Introduction To Marketing Review Slides Fall 2024 PDF

COMM 131 INTRODUCTION TO MARKETING Review Slides Fall 2024  2 Perceptions of Value One of the primary drivers of purchase behavior Formed based on perceived benefits relative to perceived costs Perceptions of value are relative (usually to...

COMM 131 INTRODUCTION TO MARKETING Review Slides Fall 2024  2 Perceptions of Value One of the primary drivers of purchase behavior Formed based on perceived benefits relative to perceived costs Perceptions of value are relative (usually to other products in the category) Because these perceptions are relative, they could be influenced by marketers!  3 Satisfaction Another primary driver of purchase behavior Based on consumers’ experience with the product/service Why is it problematic to focus on “exceeding the expectations” to increase customer satisfaction? Seems to have little effect, hard to do it, and it is very costly! How to increase satisfaction? Ensure to fulfill your basis promises Reduce customer effort (ease) and make them feel valued (respect) These are universally applicable and generalizable to any purchase scenario you can think of  4 Segmentation Segmentation is the process of dividing the market into distinct groups The primary basis of segmentation = the set of NEEDS that your product satisfies for consumers Consider both positive needs and negative needs Negative needs refer to potential drawbacks/shortcomings of the product To figure out negative needs, you can look at alternative solutions in the market Your ideal target market should value all the things this product is doing for them AND is willing to accept shortcomings of the product  5 Segmentation (cont.) Traditional segmentation variables provide additional information about the kinds of people who possess those needs. How to segment your market? Step 1: Identify the full combination of needs your product satisfies Step 2: Identify groups of people who possess these needs Step 3: Use traditional segmentation variables to a) Describe the type of people in each segment b) Measure how small/large each segment is c) Figure out how to reach them  6 Targeting Ultimately, we want to choose the segment(s) with the highest overall profit potential! To assess your segments’ profit potential, consider the following: How substantial are they (i.e., market size – how large is each segment?) How much are they willing to pay for this product? When it comes to promotion, how accessible/actionable are they. (i.e., where/how to reach them most easily and profitably with your promotion tools)? When it comes to distribution, how accessible/actionable are they. (i.e., where/how to reach them most easily and profitably with your distribution tools?) How stable are they (will they be around long enough to serve them)?  7 Decision Matrix Decision Factor We typically target the Segments Accessible / Accessible/ Overall segment with the largest Size ↑ WTP Actionable Actionable Profit profit potential (Promo) (Channels) Potential It is reasonable to target Segment 1 multiple segments only if Segment 2 they are highly synergistic (i.e., if it is viable to target Segment 3 them simultaneously by Segment 4 using the same marketing mix)  Branding and Positioning 8 Key Concepts Brand Elements (how to build a strong brand) Brand Goals and Associations Brand Equity vs. Consumer Equity Possible Differentiation Strategies Using the Brand Positioning Map Positioning Statement “For [target market], Brand X is the [frame of reference] that [point of differentiation] because [reasons to believe].”  9 Product Levels Core Benefit: What is the buyer really buying? What is the primary need the product is satisfying? Actual Product: Specific attributes of the product. Augmented Product: Additional customer services and benefits  10 Consumer Product Classes Marketers do not have to treat every product as entirely unique when starting to plan their marketing mix strategies. Product classes are defined based on how consumers think about and shop for products How do consumers go about buying them? Products in the same class typically require similar marketing mixes.  11 Product Characteristics that Impact Adoption Rate 1. Relative Advantage - superior to existing products in a meaningful way. 2. Compatibility – fits the values, needs and experiences of potential consumers. 3. Complexity – difficulty to understand or use. 4. Trialability – can be tested or tried before a commitment to adopt is made. 5. Observability – results of using the new product are tangible, can be observed and described to others.  12 NEW PRODUCT DIFFUSION CURVE Penetration Curve Cumulative number of adopters  13 PRODUCT LIFE CYCLE The stages a product goes through between being introduced into the market until it is taken off the shelves.  14 Price Setting Strategies: Cost-Based vs. Value-Based Pricing Decision starts with the product Decision ends with the customer Decision starts with the customer Decision ends with the product  15 Pros and Cons of Value-based and Cost-based Pricing : Cost-based Value-based Pros Easy to calculate because costs are Stems from a deep understanding of customer known, less uncertainty. needs, perceptions of value and WTP. Allows higher price points. Takes competitors into consideration. Perceived as a ‘fair’ process by most More innovative products that resonate with consumers target market (b/c you’re asking how can we create additional customer value, and thus increase WTP) Cons / Ignores all aspects related to demand, Highly sensitive to what consumers use as Obstacles such as consumers’ WTP, price elasticity a reference price. of demand, and competitors’ prices and strategies. How to calculate differentiation value is Likely to result in unrealized potential (i.e., less straightforward. unaccrued profits)  16 New Product Price Setting Strategies: Price Skimming vs. Penetration Pricing Time in the Product Life Cycle  17 PRICE ADJUSTMENT STRATEGIES Discounts and Promotional Pricing: Temporarily pricing below list price to create buying excitement and urgency Loss leader strategy: A popular item is priced below cost to Cash discounts: %30 off, “$50 off on all attract customers, hoping that purchases over $250” they will buy other, more Quantity discounts: ”Buy one get one free”, 3 for $5 (vs. 1 for $2) profitable items. Cash rebates / coupons Special event pricing (Boxing Day, Black Friday) Trade-in allowances  18 PRICE ADJUSTMENT STRATEGIES Segmented Price Strategies Geographic pricing: Accounting for the geographic location of Types: customers (e.g., delivery 1.Customer-segment (e.g., student/senior charges) pricing at movie theaters) 2.Location pricing (e.g., different prices for concert tickets) Product bundle pricing: Setting 3.Time pricing (e.g., peak v. off-peak one price for a set of products pricing for electricity) sold together. 4.Freemium pricing (e.g., free tier with limited options, Dynamic pricing: Continual premium tier with additional features) adjustments to price to respond to changing consumer demand in real-time  19 Psychological Pricing Price and Quality Heuristic: Higher-priced products perceived as higher-quality, discounted products may signal problems. Consumers use price as a signal particularly when quality cannot be judged easily. Number Effects and Power of “9”: Numeric digits have symbolic and visual qualities that psychologically influence consumers’ valuation, especially the number “9”. Judgments of numerical differences are anchored on the left-most digits ($19.98 is much closer to $20 than it is to $19, but it doesn’t “feel so”.) Odd number + fractional pricing → indicates a deal in customers’ minds. A price ending in a whole number (vs. decimals), typically “0” or “5”, used by higher end brands Pain-of-Paying: Disutility of spending money. Less “pain” → Higher, more impulsive spending  20 Setting SMART Objectives Our objective is… Specific To increase sales Ex: To increase the number of our first-time customers by 10% by February 2025 Measurable To maximize profits To increase our year-end profits by 10% To increase market share Achievable To increase our market share from 5% to 8% To better serve our by the end of 2025 customers Relevant To increase the number of repeat customers To increase customer by 20% by the end of 2025 engagement Time-bound To increase our follower base on Instagram by 20% over December 2025 * Each objective must have all 5.  21 Paid, non-personal content (especially Promotion Mix | Summary traditional) Limited targeting (higher with digital) One-way communication High reach Advertising Short-term incentives to encourage immediate action Ability to tailor message and trial Low reach, high cost, Can be integrated with other Sales Personal Effective for relationship- tools (e.g., direct marketing) Promotion Selling building Easy to measure ROI Effect is short-lived, risk of harming brand image Promote brand image & create Direct Public ‘buzz’ Digital or traditional Marketing Relations Not focused on immediate Carefully targeted action When digital, content can be personalized Hard to measure effectiveness Encourage immediate action Less control over narrative Easy to measure ROI  22 Using Intermediaries: When and Why? (+) Increased efficiency / (-) Lower profit margin lower workload per unit *does not mean lower profit in general (-) Less knowledge / data re: consumers (-) More competition (contact & preferences) (-) Limited / no control over other marketing mix elements (+) Increased reach and exposure  23 Distribution Intensity Intensive Selective Exclusive Many outlets Some outlets Very few outlets Greater reach Balance between reach & Limited market coverage No / limited control control Greater control Convenience goods Shopping or specialty Specialty goods (typically) goods (typically) (typically) Limited customer Customer service Customer assistance not assistance needed and expected and provided needed / not provided provided  24 Convincing Retailers: Push vs. Pull Strategy ”Is there enough demand for this product to justify shelf space?”  25 Channel Conflict Conflicts/disputes between different partners in the same marketing channel. Vertical conflict Horizontal conflict (different channel levels) (same channel level)  26 Integration Sessions | Key Concepts CMu = P − VC u PM u = P − VC u − FCu Fixed Costs vs Variable Costs P -VCu P -VCu - FCu Contribution Margins CM %P = PM %P = P P Profit Margins Break-Even-Point (BEV) and its relationship to Market Share TFC BEV = P -VCu Price Chains and Channel Conflicts TFC BE($) = Focal Brand Sales u($) VC MS u ($) = 1- u Total Market Sales u($) P