Marketing Notes PDF

Marketing Notes: Lecture 1: - What is marketing: - The art and science of meeting needs profitably - Examples - Debiers: creating “a diamond is forever” - NBA recognizing an underappreciated need - Things going wrong in marketing: - New coke: did...

Marketing Notes: Lecture 1: - What is marketing: - The art and science of meeting needs profitably - Examples - Debiers: creating “a diamond is forever” - NBA recognizing an underappreciated need - Things going wrong in marketing: - New coke: did well in tasting, not in focus groups - Gerber singles - Classic blunders: overpromising - Why was dominos 30 minutes or less bad? - Bad perception on quality - Reckless driving - Segmented marketing for no reason - Bic for her - Attending to the wrong type of market research - Focusing on internal capabilities not customer needs - Overpromising (and reducing perceived quality) - Diluting the brand - Failing to understand relevant segments - 5C’s framework - Context - What are the relevant aspects of the environment in which we operate? - Competitors - Whose offerings aim to fulfill the same neesd that we’re trying to fulfill? - Company - What are the competencies and strategic assets? - Collaborators - What are the entities that work with us to create value for customers? - Customers - What are the customer needs that we can meet profitably - STP - Segment - What are the relevant customer segments? - What segments should we target? - What do customers in those segments currently believe? - What do we want them to believe? - What do we need to say and do to shift beliefs? - - Target - Position - Execution - Product service  - How do we articulate our positioning and implement our strategy? - Price - Place - Promotion - Marketing Research - Friction between sales and marketing - Ad placement and effectiveness - New Product Development - Customer journey Lec2: Foundational considerations - What are the customer needs we’re trying to fulfill? - Marketing myopia: tendency to define business based on products rather than consumer benefits - Are you in the news or newspaper business? - What are we uniquely good at? - Companies have many competencies or skills? - Core competence is a skill set that is difficult for competitors to imitate - An input not an output - Generates strategic assets, which turn generate benefits for customers - Core compettence ideally provides access to multiple markets - Anyone can make tape, but 3M has many unique insights into adhesives, which opens many doors - Caveat 1 - Some strategic assets are a consequence of core competencies - But some strategic assets are no - I.e. buying something from another company - Both can be valuable - Caveat 2 - Some companies do not have a core competence - Does not mean instant failure, but will not be able to take over competition - Some companies that have a core competence do not realize it, or would have a hard time defining it - If there are multiple brands in a company’s portfolio, how should those brands relate to one another? What is the brand architecture? - Brand architecture: relationship between different brands in a companies portfolio - Not relevant for companies tht only sell one type of product or have a single location - Umbrella brand: a family of products that all deliver the same higher order benefit - Advantage of umbrella brands: once consumers trust the brand, can ext5end in various ways - Different types of brand extensions - Product line  - Category - Branded variants - Accommodating customers with different WTP often by offering cheaper versions at lower status outlets - Why so many brand extensions? - Alleviates boredom but stays within family - Pricing breadth - Lower cost - Need to create awareness of new product but not brand - Reduced production / packaging/ marketing research costs - Reduce risk of product failure - Extending brand can dilute the brand - Umbrella branding disadvantage - Not flexible - Damage from product failures can be especially high - Interesting perspective: because consumers now have better access to info, brands matter less than they used to - But research on amazon suggests that ratings correlate poorly with consumer reports - Average user ratings don’t predict resale value - Average ratings are influenced by price and brand image, even when controlling for quality - Plus some people negatively review products without purchasing - What are our goals: - Simplify decision making - Performance benchmark - Attributes of beneficial goals - prioritized - I.e. ultimate goal driven by a series of smaller behavioral goals - Quantified - Includes a temporal benchmark - Realistic - Internally consistent - Overally ambitious goals can stimulate dishonesty - Or overally focus attention: invisible gorilla - Distinct branding: firms offer several products with distinct meanings, brand names and logos, targeted to different audiences - Common in CPG - What are our goals? Acquisition and retention strategies - Marketing theory: pratice had long prioritized making sales over building relationships - Modern approach more focused on customer relationship management - About 5 times cheaper to satisfy or retain existing customers than acquire new ones  - Win backs are often cheaper than new customers - Defining customers - Common to base definition on purchase behavior - Recency frequency monetary analysis - Different industries will have different RFM cutoffs for defining current customers - Better to combine purchase data with attitude data - Reveals which profitablecustomers are vulnerable - RFM is common, but imperfect when purchase aren’t involved - Interactions between customers and firms can take multiple forms - Often in digital settings, there is no monetary exchange, free emailing or music servicing - From this perspective, retention is when the customer continues to transact with the firm - Determining the size of the customer base - Different challenges depending on whether setting is contractional or nonctractual (transactional) - In contractual settings, we the time at which customers become inactive - In noncontractual settings, we do NOT observe the time at which customers become inactive - Common to examine retention by cohort - Retention involves proactive and reactive retention campaigns - Proactive - Involves both false positives and negatives - False negatives - Failing to identify customers who intend to leave - False positives - Offering incentives to stay (renew/upgrade, etc) to customers who never had any intention of leaving - Dangers: can disrupt habits, some customers would have continued anyway: wasted money, the offer can prompt them to renew and change their consumption habits - Acquisition challenge: overcoming existing brand loyalties - Common loyalty definition: a deeply held commitment to rebuy a product or service despite situational influences and marketing efforts having the potential cause deflection - Brand keys publishes a popular brand loyalty measure - Based on interviews with about 40k consumers, assessing their cognitive and emotional attachmet to brands - Typical assumption: loyal customers become more valuable over time - Company profit v. time - Typically a smaller percentage of customers generate the majority of profits - 80/20 rule - Whales in mobile gaming - Some benefits of loyalty - Can be a barrier to entry - Inertia: allows time to respond to competitor innovations - Protections against price attacks - Can fid WTP without competition - Source of price premiums - Additional amount a customer will pay for the brand in comparison with another brand offering similar benefits - Caveats: why is the relationship between loyalty and profitability more nuanced than typically assumed? - Surveys consistently reveal that consumers elieve loyal customers deserve lower prices - Angry when new customers get perks - Loyal customers more knowledgable about product offerings, prices - Might be more price sensitive than sporadic customers - Common categorization: - Hi Profitability / Short term customers: butterflies - Lo Profitability / Short term customers: strangers - Hi Profitability / Long term customers : true friends - Lo Profitability / Long Term Customers: Barnacles - For barnacles: we need to measure size of wallet and share of wallet - Combining internal and external data: both neede dto determine whether barnacles don’t have hte money to spend or are disloyal - They are indistinguishable based on internal data alone, but call for diff relationship mgmt strategies - Infeasible to obtain transaction records from competitors - But can obtain this info from surveys, secondary sources - Customer lifetime value: we wwant to understand how profitable each customer has been and will be - CLV: present value of all future profits generated from a particular customer - Offers useful guidance: Pay no more than clv to acquire customer, or to avoid losing customer - Several different approaches to CLV: - Margins: annual revenue per customer - cost - Usually assumed to be constant, but can certainly change over time - Annual retention rate: percent of current customers who will still be with the firm at the end of the year - How leaky is our budget? How do we lose customers - Discount rate: adjusts for fact that money today is worth more than money tomorrow - 1 dollar received in 10 years is worth less than 1 dollar today  - Computing expected CLV: if producing constant annual margin stream, and if annual retention rate is constant - E (CLV) = margin (1+discount)/ 1+discount-annual retention rate - What do we mean by constant r - If r=.8 than after 1 year 80% still with the company - After 10 years, 10.7% still with the company - As m increases, ECLV increases - As r increases, ECLV increases - As d increases, ECLV decreases - Lots of ambiguity around what counts as customer acquisition cost - Ads aimed at new customers can also appeal to existing - SaaS, software as a service, usually involves customer onboarding costs, sometimes overlooked - How to focus efforts: try to acquire customers you can retain - Retain happy customers who will spread positive word of mouth - Examples: - No cola like uncola: leverage awareness of stronger competitors - Ads that focus less on product - Rewards program: increase the most from light buyers - To get right: must create incentives good enough to change behavior, but no so generous that they erode margins - Most grocery store memberships reward card ownership not loyalty - Some companies reward profitability over volume of purchases - Goal gradient hypothesis: goal pursuit intensifies the closer we get to a goal with a clearly defined end state - Loyalty programs create: - Create barriers to exit (lock in) - Airline miles that disappear if you leave - Greater share of wallet (consolidate purchases) - Encourage purchass that wouldnt normally happen - Multi tier reward programs - Costs - Forgone sales due to product giveaways - Administration, marketing, IT maintenance expenses - Who benefits the most? - Frequent purchasers - Are these customers we want to offer discounts to? - Difficult to reduce or restructure loyalty programs without disappointing customers - Building databases and loyalty isn’t for everyone - I.e. piano, sailboat Current state of marketing research and practice: - Huge effort toward predicting churn (which customers are at the highest risk of leaving) - Still working on  - Who to target - When to target and with what incentives - How to manage multiple retention campaigns - How to integrate retention programs with other marketing activities When and how to attack competitors Product: Intro stage: profits are non existant, competition is light, slow sale growth Growth: A period of rapid market acceptance and substantial profit improvement - Competitors enter aggressively Maturity stage: A slow in sales, profits stabilize or decline bc of high competition, focus on new product platforms Decline stage: sales and profits decline, reduce marketing budget Shortcomings: too variable sometimes, can be a self-fulfilling prophecy, hard to know where you are in real time Three types of attributes: search, experience, credence Interbrand criteria for assessing brand strength: - Internal clarity about what brand stands for, commitment to importance of brand - Customers understand what makes brand distinctive, generating positive word of mouth Brands serve at least 3 functions: - Simplify search - I.e. mcdonalds sign etc - Enhance value of product - Brand name can add value - Shifting towards subtle signals of group membership : dog whistle fashion - Elicit feeling - Logos etc. Packaging: sometimes referred to as the fifth “P” - Packaging must achieve several objectives - Identify brand - Have persuasive information - Facilitate product transport/protection - At home storage - Act as 5 second commercial 4 p’s : marketing mix - Product - Change quality, design, sizes, warranties, return policy, packaging - Price - Change list price, discounts, repayment period, financing terms - Promotion  - Change size of sales force, advertising campaign - Place - Change where we’re available, number of intermediaries