Marketing Summary PDF

Marketing summary CHAPTER 1 – MARKETING: CREATING CUSTOMER VALUE AND ENGAGEMENT What is marketing? Marketing is the process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return. What is marketing NOT? G...

Marketing summary CHAPTER 1 – MARKETING: CREATING CUSTOMER VALUE AND ENGAGEMENT What is marketing? Marketing is the process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return. What is marketing NOT? Going against some common prejudices Marketing ≠ sales Marketing Long-term focus Larger extent on customer input Stimulating demand Sales Short-term focus Limited extent on customer input Satisfying existing demand ➜ marketing is not just about selling, but also about satisfying customer needs. Starting point Factory Focus Means Ends Selling and promotion Profits through sales volume Focus Means Ends Customer needs Integrated marketing Profits through customer satisfaction Existing products The selling concept Starting point Market The marketing concept Marketing ≠ redundant in times of economic crisis ➜ marketing is not just for “profit” as central goal 1 Marketing as ‘exchange’: (two-way) dyadic process Value can only be created by co-creation between supplier and consumer. o Supplier can provide a ‘value proposition’ o Offer only has value for the consumer upon (correct) usage with the goal of satisfying one’ s needs/wants/demand (‘value in use’) The marketing process: o Who’s in the market? o Who’s the target audience? Customer needs, wants and demands Marketing myopia: a short-sighted and inward approach to marketing that focuses on the needs of the business rather than on the needs of the consumer ➜ look beyond product, to underlying customer needs A market = all actual and potential buyers of a product/service/… 2 Elements of a modern marketing system: o Each party in the system adds value o Arrows represent relationships that must be developed and managed to create customer value and profitable customer relationships Company (marketer) Suppliers Marketing intermediaries Final users Competitors A customer value-driven marketing strategy Designing process: 1. Selecting customers to serve 2. Choosing a value proposition 3. Marketing management orientations Marketing management = the art and science of choosing target markets and building profitable relationships with them Marketing management orientations = concepts under which organizations design and carry out their marketing strategies to engage target customers and build profitable relationships with them o Production (production concept): • Products available and highly affordable • Improving production and distribution efficiency • When demand > supply o Quality (product concept): • Products with best quality, performance, innovative features • Continuous product improvements o Sales (sales concept): • Large-scale selling and promotion • E.g. unsought goods • Aggressive selling …. long-run customer relationship management? o Needs (marketing concept) 3 o Environment (societal marketing concept): • Short-term customer wants vs. long-term customer well-being An integrated marketing plan 4P’s marketing mix: o Product o Price o Promotion o Place Designing the marketing mix (4P’s) bearing in mind 4Cs they represent Product ➜ Consumer needs Price ➜ Costs for the customer Place ➜ Convenience Promotion ➜ Communication Engaging customer and managing customer relationships Elements of a modern marketing system: o Each party in the system adds value o Arrows represent relationships (with partners as well as with customers; external and internal) that must be developed and managed to create customer value and profitable customer relationships CRM = the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction Customer-perceived value = the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competitive offerings Customer satisfaction = the extent to which a product’s perceived performance matches a buyer’s expectations ➜ customer relations management (CRM) ➜ setting the expectations right ➜ do not overpromise! 4 Expectancy (dis)confirmation theory: P = performance E = expectancy o P=E o P<E o P>E CRM: o Data – knowing your customer o Relevant targeting (person- and/or location-, time-adapted) o Loyalty programs (financial, structural, community-linked basis) Customer engagement: o Marketing evolved from transaction-oriented to relationship-oriented o Customer relationship management = more than stimulating (repeat) purchases o Customer engagement marketing = making the brand a meaningful part of consumers’ conversations and lives by fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community Consumer generated marketing = brand exchanges created by consumers themselves – both invited and uninvited – by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers Capturing value from customers Customer lifetime value (CLV) = the value of the entire stream of purchases a customer makes over a lifetime of patronage Customer equity = the total combined customer lifetime values of all the company’s current and potential customers Customer relationship groups: o Cost of customer acquisition >>> cost of customer retention o Within group of existing customers: diverse degree of profitability of relationship 5 The changing marketing landscape o The digital age o Dynamic environment o Sustainable marketing 6 CHAPTER 2 – COMPANY AND MARKETING STRATEGY – PARTNERING TO BUILD CUSTOMER ENGAGEMENT, VALUE, AND RELATIONSHIPS Company-wide strategic planning: defining marketing’s role 4 steps: 1. Defining the company mission 2. Settling company objectives and goals ➜ corporate level 3. Designing the business portfolio 4. Planning marketing and other functional strategies ➜ business unit, product and market level Levels of planning: o Concern-/company level o SBU-level ➜ strategic business unit o Product/market-combinations ➜ = delineated product groups that operate on a clearly definable market ➜ = more than 1 possible per SBU Strategic planning process = the process in which the objectives and capacities (assets & competencies) of the company are continuously matched against evolving opportunities and threats in the external environment Strategic plan: o Decisions at concern level mission ➜ objectives ➜ business portfolio Marketing plans: o Decisions at the level of business units, products and markets Mission statement: = a statement of the organization’s purpose; what it wants to accomplish in the larger environment 7 How to define a ‘mission statement’? 1. Based on a VISION ➜ how management sees the branch/market in its whole 2. Start from basic needs of the market ➜ not in terms of products/technology but in terms of customer needs 3. Not delineated too narrow, but neither too broad ➜ actionable guidelines! 4. Realistic ➜ based on your company’s own unique assets and competencies 5. Motivating ➜ giving employees a sense that they can provide a positive contribution to others’ lives, rather than merely achieving the company’s profit goals Designing the business portfolio Abell-diagram – ‘what business are we in?’ o What? ➜ customer needs o Who? ➜ customer segments o How? ➜ products/technologies/services The business portfolio = the collection of business and products that make up the company Portfolio analysis = a major activity in strategic planning whereby management evaluates the prodcuts and business that make up the company Strategic business units can be a o Company division o Product line within a division o Single product or brand 8 Analyzing the current business portfolio Identify strategic business units (SBUs) Assess the attractiveness of its various SBUs Decide how much support each SBU deserves BCG growth-share matrix = designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue, or develop products o Question marks: • Build selectively • Focus on defendable niche where dominance can be achieved • Harvest or divest the rest 9 o Stars: • Build sales and/or market share • Invest to maintain/increase leadership position • Repel competitive challenges o Cash cows: • Hold sales and/or market share • Defend position • Use excess cash to support stars, selected question marks and new product development o Dogs: • Harvest or • Divest or • Focus on defendable niche Analysing current business scope: o Portfolio analysis o Deciding on what SBUs receive same/more/less budget allocation o BCG matrix Developing growth strategies: o Determining what new products/services and markets are added to the current business scope o Ansoff matrix The product/market expansion grid = the Ansoff matrix ➜ a tool used to develop business growth strategies by examining the relationship between new and existing products, new and existing markets, and the risk associated with each possible relationship 10 Existing markets New markets Existing products New products Market penetration Product development Market development Diversification o Market penetration: • Increasing market share • Encourage customers to buy more • Increase consumption situations o Diversification: ➜ a strategy in which a company seeks growth by adding products and markets of a kind unrelated to its existing products and markets Planning marketing: partnering to build customer relationships Value chain = a series of departments that carry out value creating activities to design, produce, market, deliver and support a firm’s products Value delivery network = made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve performance of the entire system Marketing strategy and the marketing mix Marketing strategy = the marketing logic by which the company aims to create customer value an achieve profitable customer relationships 11 Market segmentation = the division of a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing mixes ➜ market segment = a group of consumers who respond in a similar way to a given set of marketing efforts Market targeting = the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter Market positioning = the arranging for a product to occupy a clear, distinctive, and desirable place -*. relative to competing products in the minds of target consumers ➜ differentiation begins the positioning process Segmentation Targeting Positioning Marketing mix = the set of controllable, tactical marketing tools (product, price, place and promotion) that the firm blends to produce the response it wants in the target market 12 Mapping the 4P’s onto the 4Cs or the 4As Product Customer value Price Cost Place Convenience Promotion Communication Acceptability (P >= E?) Affordability Accessibility Awareness Managing the marketing effort and marketing return on investment 13 Marketing analysis: SWOT analysis = Strengths, Weaknesses, Opportunities and Threats ➜ tool that can help you analyze what your company does best now, and to devise a successful strategy for the future Parts of marketing plan: o Executive summary o Marketing situation o Threats and opportunities o Objectives and issues o Marketing strategy o Action programs o Budgets o Controls 14 PDCA cycle = Plan-Do-Check-Act cycle ➜ iterative cycle for continuous improvement of people, products, services, and business processes •Implement the best solution •Study results •Identifiy your problems ACT PLAN CHECK DO •Test potential solutions Marketing return on investment (marketing ROI) o Net return from a marketing investment divided by the costs of the marketing investment o Measurement of the profits generated by investments in marketing activities ROMI = ((𝑖𝑛𝑐𝑟𝑒𝑚𝑒𝑛𝑡𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 𝑏𝑦 𝑎 𝑐𝑎𝑚𝑝𝑎𝑖𝑔𝑛)−(𝑚𝑎𝑟𝑘𝑒𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑟𝑢𝑛𝑛𝑖𝑛𝑔 𝑡ℎ𝑒 𝑐𝑎𝑚𝑝𝑎𝑖𝑔𝑛)) 𝑚𝑎𝑟𝑘𝑒𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑟𝑢𝑛𝑛𝑖𝑛𝑔 𝑡ℎ𝑒 𝑐𝑎𝑚𝑝𝑎𝑖𝑔𝑛 15 Customer lifetime value (CLV) = the value of the entire stream of purchases a customer makes over a lifetime of patronage 16 CHAPTER 3 – ANALYZING THE MARKETING ENVIRONMENT The micro- and macroenvironment: The marketing environment: Includes the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers ➜ Porter’s five forces Microenvironment: Consists of the actors close to the company that affect its ability to serve its customers – the company, suppliers, marketing intermediaries, customer markets, competitors, and publics. Macroenenvironment: consist of the larger societal forces that affect the macroenvironment – demographic economics, natural, technological, political, and cultural forces In designing marketing plans, marketing management takes other company group into account o Top management o Finance o R&D o Purchasing o Operations o Accounting Suppliers: o Provide the resources to produce goods and services o Threat as partners to provide customer value o Beware of potential threats Marketing intermediaries = firms that help the company to promote, sell, and distribute its goods to final buyers o Resellers o Physical distribution firms o Marketing services agencies o Financial intermediaries Competitors: Firms must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers 17 Publics: Any group that has an actual interest in or impact on an organization’s ability to achieve its objectives: o Financial publics: this group influences the company’s ability to obtain funds o Media publics: this group carries news, features, and editorial opinion o Government publics: management must take government developments into account o Citizen-action publics: a company’s marketing decisions may be questioned by consumer organization, environmental groups, minority groups, and others o Local publics: this group includes neighborhood residents and community organizations o General public: a company needs to be concerned about the general public’s attitude toward its products and activities o Internal publics: this group includes workers, managers, volunteers, and the board of directors Customers = most important o Consumer markets: consist of individuals and households buying goods and services for personal consumption o Business markets: buy goods and services for further processing or use in the production processes o Reseller markets: buy goods and services to resell at a profit o Government markets: consist of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them o International markets: consist of various buyers in other countries, including consumers, producer, resellers, and governments o Each market type has special characteristics that call for careful study by the seller The demographic environment o o o Demography = the study of human populations Demographic environments: involves people, and people make up markets Demographic trends: include changing age and family structures, geographic population shifts, educational characteristics, and population diversity 18 The changing age structure of the population: o Baby boomers: Boomers are spending more carefully and planning to work longer. They are the wealthiest generation in the US history. o Generation X: They are a more skeptical bunch who end to research products before they consider a purchase and prefer quality to quantity. They are less receptive to overt marketing pitches and more likely to be receptive to irreverent ad pitches that make fun of convention and tradition. o Millennials: The millennials where the first generation to grow up in a world filled with computers, mobile phones, satellite TV, iPods and iPads, and online networks. As a result, they engage with brands in an entirely new way, such as with mobile or social media. In the postrecession era, the Millennials are the most financially strapped generation. o Generation Z: The GenZers make up important kids, tweens, and teens markets who represent tomorrow’s markets and influence their parents’ purchase decisions. o Generation alpha: • Promises to be the most wealthy generation, most formally educated generation and most technology-supplied generation • Important future consumers, already establishing brand preferences Increasing diversity o International o National o Ethnicity o LGBTQ o Disabled Economic environment Income distribution: Over the past several decades, the rich have grown richer, the middle class has shrunk, and the poor have remained poor. Changes in consumer spending: o Value marketing: involves offering financially cautious buyers greater value – the right combination of quality and service at a fair place Natural environment = the physical environment and the natural resources that are needs as inputs by marketers or that are affected by marketing activities 19 Trends in the natural environment: o Growing shortages of raw materials o Increased pollution o Increased government intervention o Developing strategies that support environmental sustainability Environmental sustainability = meeting present needs without compromising the ability of future generations to meet their needs Technological environment o o o Most dramatic force in changing the marketplace New products, opportunities Concern for the safety of new products ➜ price pressure ➜ buyer sophistication ➜ substitute products ➜ saturation ➜ no growth sources ➜ customer disinterest Political and cultural environment Political environment: Consists of laws, government agencies, pressure groups ➜ legislation regulation business is intended to protect o Companies from each other (prevent unfair competition) o Consumers from unfair business practices o The interests of society against unrestrained business behavior ➜ increased emphasis on ethics ➜ socially responsible behavior ➜ cause-related marketing Cultural environment: Consists of institutions and other forces that affect a society’s basic values, preferences and behaviors 20 Cause-related marketing = commercial organization trying to differentiate by sponsoring social goals (causes), in order to appeal to a target audience (mutual benefit for the commercial organization and the non-profit cause) = a commercial activity whereby companies and non-profit organizations form an alliance to market an image, product, or service at their mutual benefit o Positive brand image o Respect among employees o Customer loyalty Distinction between PROFIT and NON-PROFIT organisations 1. Product: non-profit ‘products’ tend to be characterized by a weaker USP 2. Price: what is the price one pays for voting a certain political party? what amount of money do you want to donate to charity? 3. Involvement: often extremely involved pro/con 4. Segmentation: often undifferentiated marketing as compared to profit context 5. Mission statement: cause-related rather than striving to be the best Message: o Emotional: creating memorable emotional response among the target audience of donors o Rational: giving donors a reason to donate, based on objective facts Marketing ≠ only for profit Society (human welfare) SOCIAL MARKETING CONCEPT Consumers (want satisfaction) Company (profits) 21 Cultural environment o Consists of institutions and other forces that affect society’s basic values, perceptions, and behaviors o Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, businesses, and government o Secondary beliefs and values are more open to change and include people’s views of themselves, others, organizations, society, nature, and the universe 22 CHAPTER 7 – CUSTOMER VALUE-DRIVEN MARKETING STRATEGY: CREATING VALUE FOR TARGET CUSTOMERS Marketing strategy Customer-driven marketing strategy Market segmentation = market segmentation requires dividing a market into smaller segments with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes Reasons for market segmentation: o In line with the marketing concept o Heterogenous markets – different needs o Different reactions toward marketing o Organizational capabilities are different o Competition ➜ further stimulated by new technologies and communication techniques 23 Market segmentation: 1. Segmenting consumer markets 2. Segmenting business markets 3. Segmenting international markets 4. Requirements for effective segmentation o Geographic segmentation: divides the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods o Demographic segmentation: divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation o Psychographic segmentation: divides a market into different segments based on social class, lifestyle, values or personality characteristics o Behavioral segmentation: divides a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product • Buying behaviour • Occasions • Benefits sought • User status • Usage rate • Loyalty status • Phase of buying probability • Opinion on product Independent of the product: o Geographic o Demographic o Psychographic Dependent of the product; o Behavioral!! Multiple segmentation: Used to identify smaller, better-defined target groups Consumer and business marketers use many of the same variables to segment their markets (geographically, demographically, benefits sought, user status, usage rate, and loyalty status) 24 Additional variables include: o Customer operating characteristics o Purchasing approaches o Situational factors o Personal characteristics Market segmentation of international markets: o Geographic location o Economic factors o Political and legal factors o Cultural factors o Alternative: intermarket segmentation ➜ clusters of consumers that have similar traits across borders Intermarket segmentation: Involves forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries Requirements for effective segmentation: o Measurable o Accessible o Substantial o Differentiable o Actionable Market targeting Targeting = determine attractiveness of segments and choose of target segments 1. Evaluating market segments 2. Selecting target market segments 3 factors: o Segment size and growth • What is ‘right size and growth’? o Segment structural attractiveness • Porter’s 5 forces o Company objectives and resources • “do we have what it takes?” (skills/resources) 25 Porter’s five forces model “why are some industries or markets profitable and others not?” The attractiveness of an industry of (sub)market, as measured by the long-term return on investment of the average firm, largely depends on five factors that influence profitability: 1. Intensity of competition among existing firms o Existing firms in the industry that produce and market products similar to yours o This rivalry can take many forms: price discounts, introduction new offerings, service improvements, and advertising campaigns o The more intense the rivalry, the more the industry’s profitability (thus your company’s profitability as well) is suffering 2. Threat of potential entrants o Recently started operating in an industry or threaten to do so in the near future o Are motivated by the superior profits existing firms in the industry make o New entrants to an industry put prices, costs, and ROI o The threat of new entrants depends on the presence of entry barriers 3. Substitute products o Less intense than direct competitors o A substitute performs the same or a similar function as an industry’s product by a different means o The threat substitutes puts a cap on industry profits o A company should try to differentiate itself from possible substitutes 4. Bargaining power of customers o Purchase size o Alternative supplier available o Backward integration possibilities o Price sensitivity o Customer federations 5. Bargaining power of suppliers o Concentrated supplier industry (no alternatives) o Variety of customers in diverse markets o Costs of customer of switching are high 26 Target market = a set of buyers who share common needs or characteristics that the company decides to serve Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Targeting broadly Micromarketing (local or individual marketing) Targeting narrowly Undifferentiated: marketing targets the whole market with one offer o Mass marketing o Focuses on common needs rather than what’s different Differentiated marketing: targets several different market segments and designs separate offers for each. o Segmented marketing o Goal is to achieve higher sales and stronger position o More expensive than undifferentiated marketing Concentrated marketing: targets a large share of a smaller market segment o Niche marketing o Limited company resources o Knowledge of the market o More effective and efficient Micromarketing = the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations o Local marketing: involves tailoring brands and promotion to the needs and wants of local customer segments • Cities • Neighborhoods • Stores 27 o Individual marketing: involves tailoring products and marketing programs to the needs and preferences of individual customers (sometimes in a big scale) • Customerization = customization + customer-driven • Also known as: ▪ One-to-one marketing ▪ Mass customization ▪ Markets-of-one marketing Local marketing = involves tailoring brand and promotion to the needs and wants of local customer segments Individual marketing o Mass customization o Customerization Choosing a targeting strategy depends on: o Company resources • Limited? > concentrated o Product variability • Uniform products? > undifferentiated • Can vary in design? > differentiation or concentration o Product life-cycle stage • New product? > undifferentiated or concentrated • Mature stage? > differentiated o Market variability o Competitor’s marketing strategies Differentiation and positioning Product position = the way the product is defined by consumers on important attributes Positioning: Position the market offer in in the minds of target consumers Positioning maps: Show consumer perceptions of marketer’s brands versus competing products on important buying dimensions 28 Choosing a differentiation and positioning strategy: o Identifying a set of possible competitive advantages to build a position o Choosing the right competitive advantages o Selecting an overall positioning strategy o Communicating and delivering the chosen position to the market Competitive advantage = an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices Identifying a set of possible competitive advantages to differentiate along the lines of: o Product o Services o Channels o People o Image Competitive advantage should be: 1. Important: the difference delivers a highly valued benefit to target buyers 2. Distinctive: competitors do not offer the difference, or the company can offer it in a more distinctive way 3. Superior: the difference is superior to other ways that customers might obtain the same benefit 4. Communicable: the difference is communicable and visible to buyers 5. Preemptive: competitors cannot easily copy the difference 6. Affordable: buyers can afford to pay for the difference 7. Profitable: the company can introduce the difference profitable How many differences? Unique selling proposition Under positioning Confused positioning POSITIONING More than one Over positioning Not credible positioning 29 How many differences? o 1 easier to remember + credible o If all competitors have same USP, you need multiple o With more benefits you can target more segments o Be careful with contradicting USP’s Value proposition = the full mix of benefits upon which a brand is positioned Positioning statement: Summarizes company or brand positioning using this form: To (target segment and need), our (brand) is (concept) that (point of difference) Communicating and delivering the chosen position o Choosing the position if often easier than implementing the position o Establishing a position or changing one usually takes a long time o Monitor closely and adapt over time to match changes o Maintaining the positions requires consistent performance and communication o Repositioning takes time 30 Where to compete? 1. Segmentation a. Consumer markets and segmentation criteria • Geographic: linked with consumer • Demographic: linked with consumer • Psychographic: linked with consumer • Behavioral: linked with product category b. Business markets segmentation criteria: • Geographic • Personal/operational characteristics/purchase approach • Behavioral/situational c. International markets segmentation criteria • Geographic • Economic • Political and legal • Cultural • Intermarket segmentation d. Conditions for effective segmentation • Measurable • Accessible • Substantial • Differentiable • Actionable 2. Targeting a. Undifferentiated marketing b. Differentiated marketing c. Concentrated marketing (niche) d. Micro-marketing (local/individual) 31 How to compete? 1. Differentiation a. Competitive advantage basis: • Product • Services • Channels • People • Image b. Competitive advantage conditions: • Important • Distinctive • Superior • Communicable • Preemptive • Affordable • Profitable 2. Positioning a. Positioning maps (perceptual maps) b. Positioning strategies: • Value proposition • Positioning statement • USP c. Positioning problems: • Under positioning • Over positioning • Confused positioning • Not-credible positioning 32 CHAPTER 18 – CREATING COMPETITIVE ADVANTAGE Competitive advantages require delivering more value and satisfaction to target consumers than competitors. 1. Competitor analysis: the process of identifying, assessing, and selecting key competitors 2. Competitive marketing strategies: are how companies analyze their competitors and develop value-based strategies for profitable customer relationships 3. Competitive positions Competitor analysis Competitors can include: o All firms making the same product or class of product or class of products o All firms making products that supply the same service o All firms competing for the same consumer dollars Marketing myopia: A company is more likely to be ‘buried’ by its latent competitors than by its current ones o Identifying competitors from an industry point of view o Identifying competitors from a market point of view 33 Benchmarking = comparing the company’s products and processes to those of competitors or leading firms in other industries to identify best practices and find ways to improve quality and performance Selecting competitors to attack and avoid: o Close or distant competitors o Good or bad competitors o Strong or weak competitors ➜ customer value analysis o Finding uncontested market spaces Customer value analysis determines the benefits that target customer’s value and how customers rate the relative value of various competitor’s offers = tool to assess competitors’ strengths and weaknesses o Identification of major attributes that customers value and the importance of these values o Assessment of the company’s and competitors’ performance on the valued attributes Importance-performance analysis: 34 Scaling yourself or relevant competitors Approaches to marketing often pass through 3 stages: o Entrepreneurial marketing: involves visualizing an opportunity and constructing and implementing flexible strategies o Formulated marketing: involves developing formal marketing strategies and following them closely o Intrapreneurial marketing: involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches Basic competitive strategies (by Porter) Overall cost leadership Differentiation Focus Middle-of-the road Overall cost leadership strategy: A company achieves the lowest production and distribution costs and allows it to lower its prices and win a larger market share Differentiation strategy: A company concentrates on creating a highly differentiated product line and marketing program so it comes across as an industry class leader Focus strategy: A company focuses its effort on serving a few market segments well rather than going after the whole market 35 (Middle-of-the-roaders: companies that try to be good on all strategic counts but end up being not very good at anything) Michael Treacy and Fred Wiersema suggest companies can gain leadership positions by delivering superior value to their customers in three strategies or “value disciplines”: o Operational excellence o Customer intimacy o Product leadership Operational excellence: Refers to a company providing value by leading its industry in price and convenience by reducing costs and creating a lean and efficient value delivery system. Customers want reliable, good-quality products or services, but cheaply & easily Customer intimacy: Refers to a company providing superior value by segmenting markets and tailoring products or services to match the needs of the targeted customers. Customers willing to pay a premium. Product leadership: Refers to a company providing superior value by offering a continuous stream of leadingedge products or services. Product leaders are open to new ideas and solutions and bring them quickly to the market; customers want state-of-the-art products and services regardless of the cost (price/inconvenience) Comparing T&W with. Porter Operational excellence (T&W) Customer intimacy (T&W) Product leadership (T&W) vs. vs. vs. cost leadership (Porter) focus (Porter) differentiation (Porter) Market leader = the firm in an industry with the largest market share ➜ expand total market ➜ protect market share ➜ expand market share Market challenger = a runner-up that is fighting hard to increase its market share in an industry ➜ full frontal attack ➜ indirect attack 36 Market follower = a runner-up firm that wants to hold its share in an industry without rocking the boat ➜ follow closely ➜ follow at a distance Market nicher = a firm that serves small segments that the other firms in an industry overlook or ignore ➜ by customer, market, quality, price, service ➜ multiple niching Competitive strategies for market leaders 1. Expand total market demand by developing: • New users • New uses • More usage 2. Protect current market by: • Fixing or preventing weaknesses that provide opportunities to competitors • Maintaining consistent prices that provide value • Keeping strong customer relationships • Continuous innovation 3. Expand market share by: • Increasing profitability with increasing market share in served markets • Producing high-quality products • Creating good service experiences • Building close relationships Challenge the leader (or other competitors) with an aggressive bid for more market share = market challenger Second mover advantage: Challenger observes what has made the leader successful and improves on it Competitive strategies for followers o Play along with competitors and not rock the boat o Copy or improve on leader’s products and programs with less investment o Bring distinctive advantages o Keep costs and prices low or quality and services high 37 An ideal market niche is big enough to be profitable with high growth potential and has little interest from competitors. Key idea = specialization The key to market niching is specialization: o Market o Customer o Product o Marketing mix Companies need to continuously adapt strategies to changes in the competitive environment o Competitor-centered company o Customer-centered company o Market-centered company Balancing customer and competitor orientations Not customercentered Not competitorcentered Competitorcentered Customercentered Product orientation Customer orientation Competitor orientation Market orientation Competitor-centered company: Spends most of its time tracking competitors’ moves and market shares and trying to find ways to counter them o An advantage is that the company is a fighter o A disadvantage is that the company is reactive 38 Customer-centered company: spends most of its time focusing on customer developments in designing strategies ➜ provides a better position than competitor-centered company to identify opportunities and build customer relationships Market-centered company: Spends most of its time focusing on both competitor and customer developments in designing strategies 39 CHAPTER 5 – CONSUMER MARKETS AND BUYER BEHAVIOR “consumers always act consciously and reational” “consumers have more information available which helps them make better choices more easily” “consumers have more power now than ever before” “studying consumer behavior is now more important than ever before” Consumer markets and buyer behavior Consumer buyer behavior = the buying behavior of final consumer – individuals and households that buy goods and services for personal consumption Consumer markets: Are made up of all the individuals and households that buy or acquire goods and services for personal consumption Purchase decisions: o What? o Why? o When? o Where? o With whom? o What brand? o At what price? o Decision making process? What difference do you see among these purchase decisions? What are the similarities? Similarities: ➜ structure of consumer behavior and purchase decision making Differences: ➜ characteristics affecting consumer behavior: o Cultural factors (origin) o Social factors (others around us) o Personal factors (age, income, …) o Psychological factors (we do not always act rational) 40 Model of consumer behavior A central question for marketers is: How do consumers respond to various marketing efforts a company may use? o Marketers can study actual consumer purchases to find out what they buy, where, and how much o But learning about the why’s of consumer buying behavior is not so easy – the answers are often locked deep withing the consumer’s mind o Often, consumers themselves don’t know exactly what influences their purchases The model of buyer behavior: ➜ look first at buyer characteristics as they affect buyer behavior and then discuss the buyer decision process Characteristics affecting consumer behavior For the most part, marketers cannot control such factors, but they must take them into account. 41 Factors influencing consumer behavior: Culture = the set of basic values, perceptions, wants, and behaviors, learned from family and other important institutions o Exert a broad and deep influence on consumer behavior! o Like a second skin: human behavior is largely learned in the society one grows up in • • Culture Subculture = groups of people within a culture with shared value systems based on common life experiences and situations • Social class = society’s relatively permanent and ordered divisions whose members share similar values, interests and behaviors ➜ measured as a combination of occupation, income, education, wealth, and other variables - In some social systems, members of different classes are reared for certain roles and cannot change their social positions - In the western world, however, the lines between social classes are not fixed and rigid; people can move to a higher social class or drop into a lower one ➜ often distinct preferences in clothing, furniture, travel & leisure activities, automobiles, … 42 Theory of planned behavior Attitude Subjective norm Intention Behavior Perceived behavior control Groups and social networks: Membership groups • groups with direct influence and to which a person belongs Aspirational groups • groups and individual wishes to belong to Reference groups • groups that form a comparison or reference in forming attitudes or behavior o Marketers try to identify the reference groups of their target markets o Reference groups expose a person to new behaviors and lifestyles, influence the person’s attitudes and self-concept, and create pressures to conform that may affect the person’s product and brand choices o The importance of group influence varies across products and brands. It tends to be strongest when the product is visible to others whom the buyer respects. Group and social networks: o Word of mouth influence = impact of personal words and recommendations of trusted friends, family, associated and other consumers on buying behavior 43 o Influencer marketing = enlisting established influencers or creating new influencers to spread the word about a company’s brand; serve as ‘brand ambassadors’ o Online social networks = blogs, online social media, brand communities and other online where people socialize and exchange information and opinions o Opinion leaders = person within a reference group who, because of special skills, knowledge, personality, or other characteristics exerts social influence on others Family = the most important membership reference group and consumer-buying organization in society ➜ a person belongs to many groups. Role and status can be defined by a person’s position in a group Initiator Influenc er User BUYING ROLES Buyer Decider ` Personal factors: o Occupation o Age and lifecycle stage o Economic situation o Lifestyle = person’s pattern of living expressed in his/her activities, interests, opinions (AIO) ➜ consumers don’t just buy products, they buy the values and lifestyles those products represent 44 o Personality & self-concept • Personality = unique psychological characteristics that distinguish a person or group • Brand personality = customers are likely to choose brand with personalities that match their own • Self concept = people’s possessions contribute to and reflect their identities A brand personality is the specific mix of human traits that may be attributed to a particular brand o Sincerity o Excitement o Competence o Sophistication o Ruggedness Psychological factors: o Motivation: a motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction of the need ➜ motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations o Perception: the process by which people select, organize, and interpret information to form a meaningful picture of the world o Selective attention: = the tendency for people to screen out most of the information to which they are exposed o Selective distortion = the tendency for people to interpret information in a way that will support what they already believe o Selective retention = the tendency to remember good points made about a brand they like o Learning: changes in and individual’s behavior arising from experience o Beliefs and attitudes: a belief is a descriptive thought that a person has about something based on o Knowledge o Opinion o Faith ➜ wrong beliefs can be adapted via communication campaigns 45 An attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea o Difficult to change o Put people into a frame of mind of liking/disliking things Maslow’s Hierarchy of needs: SELF-ACTUALIZATION NEEDS self development and realization ESTEEM NEEDS self-esteem, recognition, love SOCIAL NEEDS sense of belonging, love SAFETY NEEDS security, protection (pandemic constrainment measures) PSYCHOLOGICAL NEEDS hunger thirst Buying decisions behavior and the buyer decision process Types of buying decision behavior: Significant differences between brands Few differences between brands High involvement Low involvement Complext buying bahavior Varietyseeking buying behavior Dissonancereducing buying behavior Habitual buying behavior 46 Buying decision process: Need recognition Information search Evaluation of alternatives Purchase decision Post purchase behavior 1. Need recognition = the first stage of the buyer decision process, in which the consumer recognizes a problem or need triggered by: o Internal stimuli o External stimuli 2. Information research = the stage of the buyer decision process in which the customer is motivated to search for more information Sources of information: o Personal sources o Commercial sources o Public sources o Experiential sources (examining and using the product) 3. Alternative evaluation = the stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set ➜ compensatory vs. non-compensatory decision rules 4. Purchase decision = the buyer’s decision about which brand to purchase The purchase intention may not be the purchase decision due to o Attitudes to others o Unexpected situational factors 5. Postpurchase behavior = the stage of the buyer decision process in which consumers take further action after purchase, based on their satisfaction or dissatisfaction ➜ cognitive dissonance = buyer discomfort caused by postpurchase conflict ➜ expectation vs. actual performance: gap? 47 The buying decision process for new products The adoption process = the mental process an individual goes through from first earning about an innovation to final regular use (= adoption) Stages in the adoption process include: Awareness Interest Evaluation Trial Adoption Individual differences in innovativeness: o Innovators: venturesome – they try new ideas at some risk o Early adopters: guided by respect – they are opinion leaders in their communities and adopt new ideas early but carefully o Early mainstream: skeptical – although they rarely are leaders, they adopt new ideas before the average person o Late mainstream: skeptical – they adopt an innovation only after a majority of people have tried it o Lagging adopters: tradition bound – they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself Influence of product characteristics on rate of adoption: o Relative advantage = the degree to which the innovation appear superior to existing products o Compatibility = the degree to which the innovation fits the values and experiences of potential consumers 48 o Complexity = the degree to which the innovation is difficult to understand or use o Divisibility = the degree to which the innovation may be tried on a limited basis o Communicability = the degree to which the results of using the innovation can be observed or described to others 49 CHAPTER 6 – BUSINESS MARKETS AND BUSINESS BUYER BEHAVIOR Business markets Consumer buyer behavior ≠ business markets and business buyer behavior Business buyer behavior: Refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others The business buying process: The process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands Main difference with consumer markets: o Market structure and demand • Fewer but larger buyers • Derived demand = a small change in consumer demand can cause large changes in business demand (‘whiplash effect’) ➜ therefore B2B marketeers sometimes promote their products directly to final consumers to increase business demand = PULL MARKETING • Inelastic demand = price change doesn’t affect demand much in short run • Fluctuating demand = change more and more quickly o Nature of buying unit: business buyers usually face more complex buying decision than do consumer buyers • More decision participants • More professional purchasing effort • More buyer and seller interaction o Types of decisions o Decision process From “purchasing department” to “supplier development department” The systematic development of networks to supplier-partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others ➜ In B2B, buyer and seller are often much more dependent on each other 50 Business buyer behavior Model of business buyer behavior: Major types of buying situations: o Straight rebuy: a buying situation in which the buyer routinely reorders something without any modifications o Modified rebuy: a buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers o New task: a buying situation in which the buyer purchases a product or service for the first time o Systems selling: buying a complete solution to a problem from a single seller Buying center: consists of all the individuals and units that play a role in the business purchase decisionmaking process: o Users: those that will use the product or service o Influencers: help define specifications and provide information for evaluating alternatives o Deciders: have formal or informal power to select and approve final suppliers o Purchasers: have formal authority to select the supplier and arrange terms of purchase o Gatekeepers: control the flow of information to others 51 The buying center concept: presents a major marketing challenge given the varied groups involved in the decision Who participates in the decision? o Relative influence on decision by various participants o Evaluation criteria used by various participants o Are there informal participants involved in decision A model of business buyer behavior: Major influences on business buyers: o Economic factors: • Price • Service o Personal factors: o Emotion Business buyer decision process 52 1. Problem recognition: occurs when someone in the company recognizes a problem or need o Internal stimuli: need for new product or production equipment o External stimuli: idea from a trade show or advertising 2. General need description: describes the characteristics and quantity of the needed item 3. Product specification: describes the technical criteria ➜ value analysis is an approach to cost reduction where components are studied to determine if they can be redesigned, standardized, or made with less costly methods of production 4. Supplier search: involves compiling a list of qualified suppliers to find the best vendors 5. Proposal solicitation: the process of requesting proposals from qualified suppliers 6. Supplier selection: when the buying center creates a list of desired supplier attributes and identify relative importance. Negotiate with preferred supplier for favorable terms and conditions 7. Order-routine specification: includes the final order with the chosen supplier and lists all the specifications and terms of the purchase 8. Performance review: involves a critique of supplier performance to the order-routine specification ➜ a blanket contract creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period ➜ vendor managed inventory – turn over inventory and ordering responsibilities to the supplier 53 Engaging business buyers with digital and social marketing E-procurement and online purchasing: o Reverse auctions: in which they put their purchasing requests online and invite suppliers to bid for the business o Trading exchanges: through which companies work collectively to facilitate the trading process o Setting up their own company buying sites to post buying needs, invite bids, negotiate terms, and place orders o Creating extranet links with key suppliers, which are direct procurement accounts where company buyers can purchase equipment, materials, and supplies directly Advantages: o Access to new suppliers o Lower costs o Speeds order processing and delivery o Enhances information sharing o Improves sales o Facilitates service and support Disadvantages: o Erodes relationships as buyers search for new suppliers Institutional and government markets Institutional markets: Consists of schools, hospitals, nursing homes, and prisons that provide goods and services to people in their care Characteristics: o Low budgets o Captive patrons Government markets: tend to favor domestic suppliers, require them to submit bids, and normally award the contract to the lowest bidder ➜ federal, state, and local governments o Affected by environmental factors o Noneconomic factors considered • Minority-owned firms • Depressed business firms • Small businesses 54 o Many companies that sell to the government have not been very marketing oriented: • Total government spending is not dependent on market development ambitions • When product requirements are carefully specified, products differentiation is not a marketing factor • Advertising or personal selling do not matter in winning bids on an open-bid basis • However, several companies have established separate government marketing departments, anticipating on government needs and projects, participating in the products requirement formulation stage etc. 55 CHAPTER 8 – PRODUCTS, SERVICES, AND BRANDS. BUILDING CUSTOMER VALUE What is a product? Product = anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or a want Service = a product that consists of activities, benefits, or satisfaction and that is essentially intangible and does not result in the ownership of anything ➜ more and more importance to experiences Level of products and services: Customer buy benefits, not features. Product = package of benefits serving a need Products & service classification: a) Consumer products: bought by final consumer for personal consumption o Convenience products: customer buys frequently, immediately, minimum comparison and buying effort 56 o Shopping products: less frequently purchased, compare carefully on suitability, quality, price, and style. Customers spends time and effort in gathering information and making comparisons o Specialty products: products with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. Normally no comparison o Unsought products: consumer products that the consumer does not know about or knows about but does not normally consider buying b) Industrial products: purchased for further processing or for use in conducting a business o Materials and parts: include raw materials and manufactured materials and parts o Capital items: aid in the buyer’s production or operations o Supplies and services: e.g. operating supplies, repair and maintenance items, and business services c) Others: organizations, persons, places, and ideas o Place marketing: activities undertaken to create, maintain, or change attitudes and behavior toward particular places o Social marketing: to encourage behaviors that will create individual and societal well-being o Person marketing: to create, maintain, or change the attitudes or behavior of target consumers toward particular people o Organization marketing: to create, maintain, or change the attitudes and behavior of target consumers toward an organization 57 Product and service decisions Decisions need to be taken on 3 levels: 1. Individual product/service decisions Product attributes Branding Packaging Labeling and logos Product support services o Product attributes: • Product quality = good quality standard ➜ performance vs. conformance ➜ objective vs. perception measurement • Product features ➜ basic + ‘options’ (differentiation) ➜ new functions • Style and design o Branding: brand = the name, term, sign, or design or a combination of these, that identifies the maker or seller of a product or service Beneficial both sides: • Supplier = get something extra; basis for a brand strategy • Buyer = identify alternative products; quality indicator o Packaging: involves designing and producing the container or wrapper for a product – products + marketing too o Labels: identify the product or brand, describe attributes, and provide promotion o Product support services: augment actual products 2. Product line decisions: o product line = product group = a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges 58 o product line lengths = the number of items in the product line o product line filling: adding more items within the present rage of the line • mind risk for cannibalization! o product line stretching: lengthening its product line beyond its current range o downward o upward o both-ways 3. Product mix decisions o Product mix = assortment = product portfolio = consists of all the product lines and items that particular seller offers for sale o Width: number of different lines within a company o Length: total number of items/products/brands in a product line o Depth: number of versions of each product in the line o Consistency: refers to how closely related product lines are in end use, production requirements, distribution channels, … Services marketing 1. Nature and characteristics of services Intangibility: services cannot be seen, tasted, felt, heard, or smelled before purchase Variability: quality of services depends on who provides them and when, where, and how Services Inseparability: services cannot be separated from their providers Perishability: services cannot be stored for later sale or use 59 2. Extra interactive consumption – collaborative revolution “marketing has to include consumer not as a target for the products but as a coproducer of experience and value” ➜ essence of postmodern experience = PARTICIPATION ➜ or even co-creation 3. Marketing strategy for service firms Company External marketing Internal marketing Employees Customers Interactive marketing 4. Service profit chain = links service firm profits with employee and customer satisfaction 3 major marketing task: o Managing service differentiation: creates a competitive advantage • Offer (features) • Delivery • Image o Managing service quality: enables a service firm to differentiate itself by delivering consistently higher quality than its competitors provide o Managing service productivity: ref