Principles of Marketing.docx

Session 1 - Marketing History, Basic Terms, & Concepts  After World War II, there was so many warehouses that manufactured weapons and ships etc., and there were so many potential unemployed workers, so the USA decided to market everything to the public. Instead of producing ships, now they'd pr...

Session 1 - Marketing History, Basic Terms, & Concepts  After World War II, there was so many warehouses that manufactured weapons and ships etc., and there were so many potential unemployed workers, so the USA decided to market everything to the public. Instead of producing ships, now they'd produce cars etc.   But how would they market it to the public? How would they make it appealing to the public? How do you make people want to purchase your new product? This is the genius of marketing.     Marketing Management Philosophies    Product Oriented  Production concept = consumers want products that are cheap and accessible  Product concept =  consumers want the best product  Selling concept = consumers will buy whatever is sold and marketed enough  Consumer Oriented  Marketing concept = company must determine needs and wants and deliver the desired satisfaction better than the competition. Client customization concept = target wealthier customers with higher-end products  Social marketing concept = company should make marketing decisions by considering wants, company’s requirements and society’s long run interests. EX: more environment-friendly  Value, Satisfaction Customer value: The difference between the values the customer gains from owning and using a product and the cost of obtaining the product. Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s expectations. Cognitive dissonance: difference between our thoughts (customer value) and our experience with the product (satisfaction) Globalization Globalization refers to the integration of economics and societies all over the world. It refers to the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in international markets. Some products have global demand, such as software Centralized core competence activities. R&D, Software Adaptation: to adapt marketing efforts to each region: McDonalds Standardization: the firm simply replicates, without any changes, the same strategy in the different markets in which it operates. Coca-cola Marketing definition Selling something to someone Create value for customers by improving benefits or reducing price Improve the product Find new distribution channels Create better communications Cut monetary and non-monetary costs and prices Marketing management Choosing target markets and building relationships with them (build customer relationships to keep customer value high) Session 2 - The Market Environment, Strategic Planning  Marketing Mix (4 P's)    Product  Place  Price  Promotion     Needs - states of deprivation    Physical  Food  Clothing  Warmth  Safety  Social  Belonging  Affection  Individual  Knowledge  Self-expression    Wants - form that human needs take as they are shaped by culture and individual personality    Product - anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need     Service - any activity or benefit that one party can offer to another, which is essentially intangible and does not result in the ownership of anything    Value = Benefits/Price (Money, Time, Effort, Etc.)    PEST Analysis - Strategic Planning  Political - the current and potential influences from political pressures    Economic - the local, national, and world economic impact    Sociological - the ways in which changes in society affect the project    Technological - how new and emerging technology affects our project/organization      SWOT Analysis  Strengths  Weaknesses  Opportunities  Threats     Session 3 - Market Research, Methods, Measurements, Challenges, Proposed Solutions  The Circle of Knowledge - the belief that there are certain things we know, certain things that we are aware of but don't know (that can then be learned), and many things we aren't aware of    In general, market research is taking people from the category of mere awareness and moving them to the category of knowledge. In some instances, it is also about making people aware of something and also educating them.     Buyer Behavior Research   Brand preferences  Brand attitudes  Purchase behavior studies  Consumer segmentation studies    Product Research   Concept development  Brand name generation and testing  Product testing  Competitive product studies  Package design studies  Test marketing  Distribution Research  Import and export analyses  Channel performance and coverage  Plant/warehouse location studies    Promotion Research  Studies of premiums, coupons, and deals  Advertising effectiveness research  Local media research  Studies pertaining to personal selling activities    Pricing Research  Studies projecting demand  Studies of inflation rates and pricing  Studies of negotiation tactics  Includes psychological pricing ($9.99 is better than $10)    The International Marketing Research Process    Step 1: Identifying the research problem  Step 2: Developing a research plan (finding out things you didn’t know before)  Exploratory research (more expensive): typically seeks to create hypotheses rather than test them. Data is qualitative. Includes: Focus groups  One-on-one interviews  Meetings with experts  Descriptive research (cheaper): is used to describe a population or phenomenon. Includes: surveys, questionnaires, case study Causal research (usually the most expensive): evaluates whether two different situations have a cause-and-effect relationship. Step 3: Collecting data Secondary data: from sources that already exist. Advantages: minimal effort and cost Problems: availability, credibility. Ex: Electronic databases, governments Primary data: when secondary data are inadequate. Provides accurate data which give exact answers to a given research problem. Problems: costly, takes a lot of time Primary data research approaches: Qualitative research or exploratory research - particularly useful as first step in studying marketing phenomena. Ex: focus groups, interviews Constraints: Responses can be affected by the interviewer Quantitative research - more structured research involving other descriptive research approaches, such as survey research or causal research approaches (experiments, surveys). Ex: observation, experimental research Constraints: Respondent factors, infrastructure factors Step 4: Analyzing research data  Step 5: Presenting the findings    Proposal for improving marketing research Make extensive use of secondary sources Seek help from government agencies Appoint single market research coordinator Use alternative data collection methods Consumer Behavior  Why study consumer behavior? Understanding consumer behavior will help you become better marketers as it is the foundation for: Segmenting markets Positioning products Developing an appropriate marketing   Theories of consumer behavior Abraham Maslow created a pyramid of needs which represents people's priorities. According to him, the most important thing is physiological needs (water, food, sleep, sex, breathing). Then, the next thing is safety. Following that is love/belonging needs. After that comes esteem needs which is finally followed by self-actualization.   Sigmund Freud developed a different way of thinking. He contended that Id, which represents the need to have things immediately, is the first step. The next thing is ego, which represents reality and rational thinking. For example, id tells me to smoke on a plane, but the ego tells me that I'll get into trouble. If I really want to smoke, I should go into the bathroom and cover the sensor. This is the conflict between id and ego. Finally, we have the superego which represents the need for morality and rules. Market research will determine which part of the person to target.     Consumer Decision-Making Process    Need recognition - how important is it?  Information search - how will it work?  Evaluation of alternatives - are there any better options?  Purchase  Post-purchase behavior   Cognitive dissonance - the comparison between your expectations before the purchase and the results after the purchase  Did I make a good decision?  Did I buy the right product?  Did I get good value?     Decision Making Unit (DMU)    Decision-makers   Buyers  Influencers  Initiators  Users  Coordinators   Depending on each product, marketers need to decide which part of the DMU to target. For example, drug companies exclusively market to influencers because the doctors make all the decisions. Nowadays, it isn't exclusive anymore because now regular people are marketed to by the drug companies.   Session 4 - Developing a Marketing Mix  Perceived Risk Before Purchasing    Functional - what I purchase won't work  Physical - what I purchase will hurt me  EX: unsafe car  Financial - what I purchase will cause me to lose money  Social - what I purchase will cause me social harm  EX: a shirt with a swastika that you didn’t know about  Psychological - what I purchase will cause me mental harm  Time - what I purchase will cause me to lose time  EX: you will constantly go to the mechanic to fix car    Types of Buying Behavior      High involvement  Low involvement in the decision making Significant differences between brands  Complex buying behavior  Variety-seeking buying behavior. Few differences between brands  Dissonance-reducing buying behavior. Habitual buying behavior    1. Complex Buying Behavior (significant differences between brands X high involvement): This means they are deeply invested in the decision-making process. It also suggests that consumers in this category are willing to thoroughly evaluate and compare various brands before making a purchase. This buying behavior is typically observed when consumers are making important or expensive purchases, such as buying a car or choosing a college. 2. Dissonance Reducing Buying Behavior (few differences between brands X high involvement): Consumers are still highly involved in the purchasing decision, indicating that they care about the choice they are making. However, there are only minor differences perceived between brands. This suggests that consumers in this category might experience post-purchase dissonance or buyer's remorse. They may feel the need to justify their decision after the purchase. This behavior is often seen in situations where consumers have limited information about the differences between brands, but they are emotionally invested in the purchase, such as buying a high-end gadget, for example a smartphone, or even medications. 3. Variety-Seeking Buying Behavior (significant differences between brands X low involvement): Consumers are not very interested or invested in the choice, but they perceive significant differences between brands. This suggests that these consumers are open to trying different brands or products from time to time, even if the decision is not of great importance to them. This behavior is commonly observed in low-cost, frequently purchased items like snacks or soft drinks, where consumers may not spend much time researching their options. 4. Habitual Buying Behavior (few differences between brands X low involvement): Consumers don't dedicate much time or effort to choosing between brands and there are only minor differences perceived between them. This suggests that consumers in this category tend to stick to one brand or product out of habit or convenience without actively considering alternatives. Habitual buying behavior is often seen in routine, everyday purchases like basic commodities (salt/sugar), toothpaste or laundry detergent. EX: There is a significant difference between brands by electronics, but not so much by lighter matches. Regarding involvement, certain products require more investigation before purchase more than others, such as buying a car.     The goal of a company is to transform variety-seeking buying behavior into habitual buying behavior.     Marketing mix - the four P's used to implement a company's marketing strategy (product, price, promotion, place)      The Boston Consulting Group (BCG) Matrix    The marketing growth rate is how much the market grows per year. 10% is generally very high, 2-3% is low because that's the growth rate of the population, and 5-6% is average.   The relative marketing share is how relevant you are in the market.     Cash cow - a product that has high market share but has a low marketing growth rate   You 'milk' this product to its fullest, profits are high because of the high market share Offer different versions of the product  EX: T'nuva milk in Israel; they should expand their product (i.e. offer different products like vanilla milk)  Dog - a product that has low market share and low marketing growth rate  Usually is discontinued  Question mark - a product that has low market share but a high marketing growth rate  This product is a dilemma because what do you do? Do you kill it or no?  Usually requires the most deliberation  A question mark that is ignored becomes a dog because a market cannot grow rapidly forever.   Star - a product that has high market share and high marketing growth rate  The most important products  Will make the most money in the future (and become a cash cow) if its relevance is maintained  Many competitors constantly entering the market      Roger's Model for the Adoption and Diffusion of Innovations    Roger contends that there are five groups of consumers for a product from when it's introduced until later on. Innovators  Usually younger  Higher income  More secular (not traditional)  More open-minded  Marketing should target specifically this group  Early adopters  Market-mavens  Know which brands and products that are very popular  Generally opinion leaders  Usually have the most influence to decide what becomes a market success  The "Tipping Point" is a dramatic moment that can help the product go viral.  Early majority  Provide legitimization of the innovation  Late majority  More skeptical  Follow the majority of the population  Laggards   Change-averse  Trust the status-quo  Usually more frugal    Factors That Influence Innovation Diffusion    Relative advantage – more adoption if innovation has clear advantages Compatibility – more adoption if innovation is consistent with pre-existing Complexity of transition – less adoption if complex changes Possibility of testing – more adoption if possibility to test Visibility of benefits – more adoption the more obvious the benefits are   Product Life-Cycle (PLC) Stages    Product development  Begins when the company develops a new-product idea. Sales are zero. Introduction: Low sales. Innovators are targeted. Marketing strategies: Product – Offer a basic product Price – Use cost-plus basis to set Distribution – Build selective distribution Advertising – Build awareness among early adopters and dealers/resellers Sales Promotion – Heavy expenditures to create trial Growth: rising sales and profits. Early adopters are targeted. Marketing strategies: Product – Offer product extensions, service, warranty Price – Penetration pricing Distribution – Build intensive distribution Advertising – Build awareness and interest in the mass market Sales Promotion – Reduce expenditures to take advantage of consumer demand Maturity: Sales peak, low cost per customer. Middle majority are targeted Marketing strategies: Product – Diversify brand and models Price – Set to match or beat competition Distribution – Build more intensive distribution Advertising – Stress brand differences and benefits Sales Promotion – Increase to encourage brand switching Decline: decline is sales, laggards are targeted Marketing strategies: Product – Phase out weak items Price – Cut price Distribution – Use selective distribution: phase out unprofitable outlets Advertising – Reduce to level needed to retain hard-core loyalists Sales Promotion – Reduce to minimal level Session 5 - Market Segmentation, Targeting, & Positioning  Market Positioning, Targeting, and Segmentation    Define segment, choose which to target, position. Positioning - developing a distinct image for the product in the mind of the consumer  Successful Positioning includes:   Communicating the benefits of the product, rather than its features  Communicating a unique selling proposition for the product  Partly controlled by the marketer (marketing mix) and partly not  Visualized by a "positioning map"     Segmentation - the process of dividing the market into subsets of consumers with common needs or characteristics  Geographic  Geographic subsets  Demographic  EX: age, gender, income, occupation  Behavioral  Whether and how much people buy or use a product  Usage rates: heavy, medium, light users, non-users  User status: potential users, non-users, ex-users, regulars, first-timers, and users of competitors' products  Benefit  Consumers' basic needs are fulfilled and therefore, they seek additional value from purchase decisions  EX:  a car's image and superior engine power    Targeting - selecting one or more of the segments to pursue  After markets have been segmented, targeting evaluates and compares the identified segments to select one or more as prospects with the highest potential.   Criteria for Targeting includes:  Current size of the segment and anticipated growth potential  Competitive intensity and potential competition  Compatibility with the company's overall objectives and the feasibility of successfully reaching a designated target    Target Market Strategies    Standardized marketing - mass marketing, the same marketing mix for a broad market of potential buyers  EX: Revlon  Concentrated marketing - targeted at a single segment of the global market  EX: Winterhalter, a German dishwasher company for hotels  Differentiated marketing - two or more different segments  EX: Volkswagen cars for various target groups (Porsche, Skoda, VW Golf, etc.)    Summary Before a company starts marketing it should analyse the global environment. market segmentation aims at identifying similarities and differences of potential customers. Targeting: The market segments are evaluated and compared, then an appropriate targeting strategy is developed. To reach the targeted market segment(s) a positioning strategy must be chosen. Product - Market Expansion Grit                        Existing Products                 New Products       Existing Markets  Market Penetration  Product Development          New Markets  Market Development  Diversification    Market penetration is when you convince (or deceive) your current consumers to consume more of your existing product that they have already been using.   EX: Toothpaste companies convince their consumers that they need to brush twice a day.  Market development is when you start selling your current product in a new market.  EX: You start selling your Israeli toothpaste in a different country.  Product development is when you offer a new product to your current customers.  EX: Coca Cola offers a new coffee product to their customers.   Diversification is when you offer a new product to a new customer base.  Not so common    Pricing Strategy    Market determines the price: Go according to the demand curve  Price as an expression of quality: Convincing people that your product is worth its price  Price as a method of gaining market share: Start low to gain shares and slowly go up  Cost + pricing: Taking your product's cost and adding pricing to it. EX: clothing companies tripling the price of their merchandise  Session 6 - Distribution Strategy  Production site -> distributor->wholesaler-> retailer -> consumer Or production site -> consumer Marketing channels exist to create the following utility for customers:  Place utility - availability of a product/service in a location that is convenient to a potential customer  Time utility - availability of a product/service when desired by a customer  Form utility - availability of the product processed, prepared, in proper condition, and/or ready to use  Information utility - availability of answers to questions and general communication about useful product features and benefits    Factors That Affect Choice of Channels    Cost - investment cost of developing channel and cost of maintaining the channel  Control- how much control is desired  EX: A company's own sales force uses more control than when they use middlemen.   Coverage - full market coverage, or targeted coverage to densely populated areas  Character - channel of the distribution system must meet the standards of the company seeking to do business  Continuity - ensuring longevity    Wholesaling Primary functions of wholesaling: Making contact Negotiating Buying Selling Warehousing These vertically and horizontally integrated firms become gate-keepers to the local market – entry barriers Retailing Retailers are the middlemen who buy from wholesalers and manufacturers and sell directly to the ultimate consumer. The retailing structure involves stores (supermarkets, department stores, specialty stores) as well as banks, restaurants, mail-order, etc. The retailing structure has to adapt to the varying living conditions (the lifestyles) of individual households Session 7 & 8 - Marketing Communications Awareness  EX: A new pizza store - TV ads, billboards  Knowledge  EX: How much does the pizza cost? What types of pizza do you serve?  Liking  EX: The pizza is healthy; I employ disabled persons; I donate leftovers to charity, etc.  Preference  Convincing the public to choose you over your competitors  Why are you better than your competition?  EX: Your pizza will be delivered within 30 minutes (and other stores don't do it).   Conviction   Convincing the consumer base that they need your product  Convince them that they need it now  Purchase     Marketing Communications     Primary purpose is to tell customers about the benefits and values that a company, product, or service offers  Major tools include:  Personal selling  Advertising - any sponsored, paid message that is communicated in a non-personal way  Risks include:  Very expensive  Intangible  Consumers are hesitant, don't believe the advertisement  Advantages: Creates awareness  Sales promotion  Short-term incentive to buy a product/service  Refers to any consumer/trade program of limited duration that adds tangible value to a product or brand  Examples include sampling, couponing  Public relations   Sponsoring  News releases, press conferences, etc.   Personal selling  Short-term goal- make a sale  Long-term goal - build a relationship