Marketing Principles PDF

Cite sources using the APA method Class 1 What is marketing? ❖ Goal: exchange Repeated loyalty At acceptable costs Seeks benefits ❖ Should provide value Helps with job to be done Minimizes pain Maximizes gain ❖ Occurs on ma...

Cite sources using the APA method Class 1 What is marketing? ❖ Goal: exchange Repeated loyalty At acceptable costs Seeks benefits ❖ Should provide value Helps with job to be done Minimizes pain Maximizes gain ❖ Occurs on markets International B2B B2C B2G Dist. int ❖ Generates demand Actual Potential Projected ❖ The management process responsible for identifying, anticipating and satisfying customer requirements profitably ❖ The strategy of adaptation of organizations to competitive markets for them to influence the behaviour of the public on which they depend, through an offering whose perceived value is durably superior to that of competitors. In the commercial sector, the role of marketing is to create economic value for the company by creating value as perceived by customers. ❖ The process of creating, communicating, and delivering offerings that have value for customers ❖ Tangible elements (product performance) ❖ Symbolic elements (branding, communications) ❖ Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large The goal of marketing: to facilitate an exchange 1 Some definitions ❖ Consumer: An entity (usually a person, sometimes a business) that expresses wants and needs by exchanging for products, services or ideas. ❖ Customer: A consumer who buys from your business. ❖ The market: All consumers Companies' orientation towards the marketplace ❖ Production concept The idea is that consumers will favour products that are available or highly affordable ❖ Product concept The idea is that consumers will favour products that offer the most quality, performance and features and that the organization should therefore devote its energy to making continuous product improvements ❖ Selling concept The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort The marketing concept ❖ It holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering and communicating superior customer value to its chosen target markets Example: walkmans become iPods, iPods become smartphones ❖ Balance customer orientation, inter-functional coordination and competitor orientation to achieve long-term profit focus The concept of value ❖ Exchange value What the value of a product is to the consumer and therefore what it could be exchanged for, usually its price ❖ Use value The value of a product to the consumer in terms of the usefulness it provides ❖ Symbolic value The symbolic meaning consumers attach to products to construct and participate in the social world ❖ Value = benefits - cost ❖ We must make sure we bring value to the target customers How to bring value to the consumer? ❖ Step 1: understand the customer 2  Customer’s job-to-be-done1 What is the customer trying to accomplish when they buy your product? The pain they are trying to avoid What usually feels bad or goes wrong for customers trying to do this job? The gains they are seeking Things that delight customers while performing their job-to-be-done ❖ Step 2: value creation This is accomplished when a company proposes a solution to a customer’s needs or difficulties, alleviating pain or creating gain. This process together is called the value proposition matrix ❖ Example: Spotify Job-to-be-done: listen to music Pain: pay for every song or album Gain: free music, monthly subscription and download Innovation: pre-made playlists for you, unlimited music, music anytime, Spotify wrapped, access on different devices, listen to other people’s playlists Exchange An exchange is the process by which an organization exchanges benefits for customer resources ❖ Benefits A product creates value if it meets customer needs in a cost-effective way Customer needs can be: Functional (if I need to do a task) Social (I need to fit in) Esteem (I need to feel good about myself) ❖ Resources A resource is a form of capital that can be exchanged: Money Time Physical space Energy Social capital ❖ Examples Levi’s wants your money in exchange for clothes Blood drive wants your blood in exchange for recognition Obama wants your vote in exchange for his promises The bakery wants your engagement in exchange for a cake 1 Job-to-be-done in marketing defines the task that the customer is trying to accomplish. This could be cleaning their bathtub, relaxing after work, or impressing their mother-in-law. 3 Filling a need Needs ❖ A state of lacking something Hungry Thirsty Lonely Wants ❖ A way of meeting your need McDonald's Drinking a smart-water Going to a board-game café We may want a product because it’s high quality, signals something about us to others, or signals something about us to ourselves Exchange over time ❖ Exchanges can be one-time or can be repeated ❖ Companies will make more money if they can get consumers to come back repeatedly. Customer Lifetime Value: In present-day money, the sum of all the profits that can be made from a particular customer over their lifetime. The cost of obtaining a new customer is 5x that of retaining an old customer. ❖ To encourage repeat exchange, make sure your product performs as well as or better than expected (bonus: delight your customer in other ways as well) Customer loyalty ❖ There are two aspects of customer loyalty Customer retention: How long has that customer been buying from your brand? Customer share: The proportion of a customer’s relevant purchases from your brand (e.g., what percentage of someone’s cereal purchases are General Mills?) The fastest way to customer loyalty is (usually) customer satisfaction. What is demand? ❖ The quantity of a good or service that economic agents (people, companies, governments) buy in a given market Can be measured in units (Americans & Canadians bought 492.2 million movie tickets in 2021) Can be measured in dollars (Americans & Canadians spent over $4 billion on movie tickets in 2021) ❖ Types of demand Actual demand: a company’s actual sales (or volume) at a specific point in time Potential demand: maximum demand that can be reached at any point in time if every single consumer is buying the product/service 4  Demand projection: based on consumers who might be receptive to the product (if they can afford it, it meets their preferences, they can be marketed to), what might demand be in the future? The market A set of consumers (individuals or businesses) that express wants and needs by buying products, services or ideas ❖ Types of markets Brand: tekinon (office chairs) Brand to consumer: consumer goods market Brand to Amazon to the consumer: distribution intermediaries market Brand to HEC Montréal: business market (B2B) Brand to the Canadian government: government market (B2G) Brand to US consumers: international market ❖ Not all brands can sell to all markets Market share ❖ Market share = company demand/market demand ❖ Example Canadians spent 876 million dollars at the movies in 2021. $657 million was spent at Cineplex What is Cineplex’s market share? Market share = $657 million/$876 million = 75% Company Mission ❖ A mission statement is a concise explanation of the organization’s reason for existence. It describes the organization’s purpose and its overall intention (for employees, collaborators and customers) The American Marketing Association code of conduct ❖ A product must be safe ❖ The price must be fair (no price-fixing) ❖ Advertising may not use fraudulent or inaccurate arguments ❖ Customer service quality must be consistent, no matter who the customer is What’s wrong with this ad? ❖ Wendy’s ad Potentially encouraging customers to eat by this standard Inaccurate portrayal of burger ❖ Arby’s ad Sexist against women Not neutral 5  ❖ Gillette ad Creates a new societal standard: shaving armpits Creates a false need Class 2 Different ads for soft drinks ❖ Coca-cola Energetic Dancing music, very happy A lot of people were dancing ❖ Pepsi Sentimental Emphasizes the joys of life Back to a better tomorrow Marriage, sports games, love, different cultures, Pepsi unites people ❖ Canada dry Bold Humour, laugh with the grandma Short and simple Trying to say that it isn’t just for grandmas and can be for younger people, attempt to reposition themselves ❖ Bubly Celebrity endorsement Joke with the name-fixing and boost of caffeine helping him continue correcting it as bublé Targets what’s in the product Marketing planning product Analytical marketing ❖ Macro and micro-environment. Qualitative and quantitative demand analysis, intermediaries, suppliers, and competitors analysis Strategic marketing ❖ Segmentation and profiling, market targeting and positioning strategies (deciding on value proposition) Marketing implementation ❖ Deciding and implementing the marketing mix (product, pricing, promotion and distribution (place) policies (to reach the desired position in the relevant product/market context) 6 The marketing plan ❖ Based on an analysis of the current internal and external situation, including markets and customers ❖ Clear marketing direction, objectives, strategies and programs for targeted customer segments ❖ Support through customer service and integral marketing programs ❖ Management of marketing activities through implementation, evaluation and control ❖ Since the marketing environment has become so volatile, successful companies have to continuously update their marketing plans to remain competitive and provide customer value ❖ A good marketing plan must be dynamic and foresees future trends A marketing plan requires some essential elements, which can be outlined with the SOSTAC method. It can help remember key elements and can be applied to any kind of plan (corporate marketing, marketing communications, direct mail or a personal plan) ❖ Situation analysis (where are we now?) ❖ Objectives (where do we want to go?) ❖ Strategy (how do we get there?) ❖ Tactics (details of the strategy) ❖ Action (putting the plans to work) ❖ Control (measurement, monitoring, reviewing, modifying) 3Ms: key resources to every plan ❖ Men/women (human resources) ❖ Money (budget available and how to raise budget) ❖ Minutes (time to accomplish the task/plan) Components of a situation analysis ❖ Markets Have market segments changed? Demand forecast? Are our distribution intermediaries still working for us? ❖ External environment How are changes in the external environment (government regulations, competition) likely to affect us? ❖ The company Are we acting in line with the company’s mission & objectives? How are we performing on key metrics like sales & market share? What challenges will we face in the future? What strengths set us apart? Setting objectives The company sets goals that are quantifiable, measurable and realistic for: ❖ Sales 7  ❖ Market share ❖ Contribution to profits These marketing objectives should be informed by the business mission and strategy. ❖ Specific Your goal must focus on one clearly defined metrics ❖ Measurable You must have a way to measure the content you publish against that metric ❖ Achievable You must be able to realistically achieve your goal within a set timeframe with the resources you have ❖ Relevant Your goal must align with your desired goals and objectives ❖ Timely Your goal must have an end date upon which you will achieve this metric Resource allocation Always done before marketing strategy ❖ Human resources Are your staff motivated, qualified and competent? ❖ Financial resources Do you have the money to pay for R&D or advertising? ❖ Informational resources How well do you understand the needs of your customers? ❖ Purchasing resources Do you have direct and reliable suppliers? Are my objectives & strategies in line with the resources that I have? Marketing strategy ❖ Marketing strategy is all about choosing who to market to ❖ Not all products provide value to all customers, and it’s generally more effective to focus our marketing on people who will get the most value from our products ❖ Main question: how do we “get to” our objectives? Specifically, which consumers should we target with our products? Wyrmwood modular gaming table ❖ Who are they advertising to? Families People who have many hobbies People who have many friends over People that don’t have a lot of space ❖ What do they like to do? Emphasize it being made in America. Show that they use real wood and no dyes or stains 8  ❖ What do they think is important? Give price options Show the durability Show the construction process Marketing mix Used to determine the tactics for marketing the organization's products and/or services ❖ Product A tangible object, service, idea or cause ❖ Price The monetary value attributed to the product. Not necessarily based on the cost of manufacture ❖ Place The physical distribution of the product Distribution networks Where the product is sold (the store) ❖ Promotion The process of promoting the product, given its price and place Implementation of the marketing mix ❖ What Make a specific statement for each of the marketing mix variables (post on social media 3x/week; offer 3 sales promotions in 2023) ❖ Who Who is the team/person responsible for this variable? What teams need to work together? ❖ When Creating a schedule or a calendar for each of the goals Control & contingency planning ❖ Control: how we measure progress towards achieving the marketing objectives ❖ Contingency plan: possible solutions to deal with unforeseen circumstances ❖ The process of control and contingency planning is ongoing as a marketing campaign is running Marketing audits A form of control & contingency planning wherein the company comprehensively, systematically and critically examines their entire marketing plans ❖ Situation analysis What is the current level of demand? Potential demand? What are the company’s strengths and weaknesses? ❖ Objectives and strategies What results have been achieved towards our objectives? Is the marketing strategy consistent with the company’s overall strategy? 9  ❖ Marketing mix What is the pricing strategy? What is the communication strategy? Is the pricing strategy consistent with the communication strategy? They also include an analysis of how well the plan is currently being enacted and what is likely coming in the future. Based on all these, the marketing audit ends with suggestions. ❖ Enacting the marketing plan Was a schedule of operations created? Was it used? How were actions coordinated across different teams? ❖ Forecasting the future How is the company likely to evolve? What attractive opportunities might come in the future? Are we ready to deal with changes in the environment? ❖ Suggestions Should we change our objectives and strategies? If so, which ones? If change is needed, how should we go about enacting it? What will it cost? The marketing information system A set of resources and procedures for collecting and analyzing data from the organization’s internal and external environment. The system transforms this data into useful information to inform decision-making. Some examples of what types of decisions the marketing information system can help with: ❖ Targeting Which customer groups are valuable to my business? ❖ Positioning What features of my product will appeal to my target group? ❖ Control & contingency Are my marketing actions having the intended effect? Types of data Primary data ❖ Data that the firm gathers to answer a specific question. Common collection methods include focus groups, surveys and experiments. ❖ Also called market research. ❖ Collection of data by the firm with a specific research question in mind ❖ Can include interviews, focus groups, observation, experiments and surveys ❖ Types of primary data collection Exploratory research There is a crucial decision the company must make, but they don’t have enough information to do so 10  Often done when something goes wrong (drop in sales, drop in traffic) and the company doesn’t know why Can also be done to explore whether a new business opportunity is likely to be successful Suited to flexible, unstructured research methods (like interviews and focus groups where questions are exploratory and changeable) Example: Swiffer failed miserably in Italy because although the women spent 21 hours a week on non-cooking tasks, they enjoyed the process of cleaning. Descriptive research Descriptive research describes the current situation. It can be used for assessing positioning, customer satisfaction, the profile of the target customer, etc. Can involve more structured forms of data collection, like surveys or interviews where questions are pre-planned and specific Example: Lego trying to find out why girls older than nine don't play with them anymore. Turns out that girls wanted their play characters to interact more with the environment. Until then, Lego had been focused on single structures (castles, ships) but not on creating entire ecosystems/neighbourhoods for play. Causal research Companies want to understand a cause-and-effect relationship (if X then Y). They randomly assign customers to one condition or the other and observe if there is a statistical difference. Causal research takes care to eliminate external influences on consumers and just look at the specific effects of one thing on another. Example: Netflix testing out different thumbnails to find out which ones will make the most people want to watch the show How to assess if primary data is good ❖ Is it relevant? Does this information help us solve an important problem? ❖ Is it reliable? If we did this test again, would the results be the same? ❖ Is it valid? Are we measuring what we think we’re measuring? Secondary data ❖ Pre-existing data that the firm can use to answer questions. This may be collected by a third party or by the firm. ❖ Internal data collection Data the organization collects on itself regarding its suppliers, distributors and customers 11  In e-commerce, this can be very helpful (lifetime value attrition, response to advertising) ❖ Marketing intelligence Data regarding the external environment (laws, trends, technological developments) Often collected by government agencies or professional associations How to assess if secondary data is any good ❖ Who collected the data? ❖ Why was the data collected? ❖ Are the data consistent with other independent sources? ❖ How was the data generated? ❖ When was the data collected? Apple Activity ❖ Why do people adopt the product? Innovative marketing and product Walkman into iPod into iPhone, good adaptation into modern times and customer needs High-quality product and advertising Synchronize with other Apple products Part of a community, genius bar Easy to use ❖ Why are people willing to pay so much more for Apple? Extremely versatile Aesthetically pleasing Impression of luxury Establish social status, you have enough money to drop $2000 on a new phone. ❖ Do people use all functionalities? No, but they like knowing they have access to them. The Apple Watch Product ❖ What consumer need does this fill? Need to be connected Tracking health Need to feel safe (calls) Not having to pull out your phone ❖ How do our functionalities compare to competitors? Accuracy Compose texts Price ❖ Where are we priced? Very expensive 12  As high as the demand, which is not as much for smartphones ❖ How does the price vary across offers? Student discounts Pay over 24 months Cheaper at Costco than at the Apple store Some models with fewer features are offered for a lower price Place ❖ Where can people purchase the watch? Online Apple stores Secondhand market No control over sellers or warranties. Although people are getting products at a discount, people still want Apple products. Third-party sellers (Costco, Walmart) Less control over companies and less profit, but a possibility to uphold the standards of the company. Telecom companies: Videotron, Bell, Rogers ❖ How fast is it getting to them? Stores: Immediate Online: delivery times can vary depending on how far away the seller is Promotion ❖ How do they promote the product? Advertisements on cable and online Posters in metro stations Social media Paid promotions Brand ambassadors Gyms People wearing it (free publicity) Class 3 The internal environment Three ways of assessing strengths and weaknesses within the internal environment. They can and should all be used together. ❖ Assessing the components of the internal environment ❖ The value chain ❖ Benchmarking The internal environment includes ❖ Resources & competencies Human resources Are your staff motivated, qualified and competent? 13  If they are, they have great customer service, can perform tasks more efficiently, and lose less money to employee turnover. Financial resources Do you have the money to pay for R&D or advertising? If they do, they can invest in large-scale promotional campaigns and invest R&D money in developing innovative products. Informational resources How well do you understand the needs of your customers? If they do, they are better able to create and modify products to fit consumer needs. Purchasing resources Do you have direct and reliable suppliers? If they do, they can efficiently purchase the goods (or services) they need from suppliers have an advantage because it allows for more efficient production. Example: Zappos (shoe company) prioritizing employee happiness and not forcing them to use a script to sell, instead trusting them to find their own selling method that works ❖ Current offer What do you currently offer and is it working? Ask yourself… Is what we are offering consistent with our mission? Is what we are offering consistent with how consumers see our brand? Could some products be changed or developed further to better meet the needs of our audience? Example: Colgate beef lasagna ❖ Past performance What have you offered in the past that worked? That didn’t work? Why? In this step, marketers analyze which products are generating more or fewer customers than expected. They will change or drop products that aren’t performing as well as expected before they can hurt the brand. They will try to replicate big successes. Example: Starbucks sells limited edition cups and has customers rush to the stores. However, people weren’t nearly as interested when they sold them in bulk. ❖ Relations with business partners Distributors Good relationships with distributors make sure your product can be present in the stores your consumer shops at (with a good shelf position) Partners Partnerships can represent strengths (ways to outsource things you’re bad at or reach a new consumer group) or weaknesses. 14  For example, Nike discontinued its smart wristbands in collaboration with Apple. However, they released it in 2009 and did not hit the correct market, as people weren’t as obsessed with fitness as now. When Apple started developing the Apple Watch, they hired people who had worked on the Nike wristband. The first way to evaluate the strengths and weaknesses in your internal environment is to examine each of the components of the environment and determine what parts are strong/weak. The value chain ❖ To grasp the competitive advantage of a company, one must analyze the whole entity simultaneously. ❖ The value chain consists of 5 primary activities and 4 support activities Primary activities ❖ Inbound logistics Can you procure, receive and store materials affordably and quickly? ❖ Operations Can you produce a high-quality product quickly & affordably? ❖ Outbound logistics Can you efficiently get products to consumers? ❖ Marketing & Sales Segmentation, targeting, positioning ❖ After-sale service Installation, repair, return Support activities ❖ Infrastructure Do you have management, financial, and legal systems in place to manage resources and make decisions? ❖ Human resources Do you have systems in place to recruit, train, and keep excellent employees? ❖ Technological development Can you technologically innovate to gain an advantage in any of the primary activities? ❖ Purchasing & procurement Can you get materials affordably and quickly? Benchmarking ❖ Knowing the components of your internal environment and your value chain can help you understand your company’s strengths and weaknesses. ❖ Benchmarking helps you know how to improve. ❖ When companies benchmark, they compare themselves to their strongest competitors. ❖ You can benchmark any part of your internal environment. Benchmarks of a value chain are called “strategic priority analysis” 15  Cell 4 Cell 1 Unimportant advantage Key advantage to a very important activity Poor allocation of resources, reassess Maintain and reinforce these activities Cell 3 Cell 2 Unimportant activities that are not an Key weakness related to a very important advantage for the company activity Do not spend resources to correct weakness Prioritize correcting this weakness Horizontally: unimportant to important (strategic importance of the activity) Vertically: better to worse (performance compared to the main competitor) The shop around the corner ❖ Can’t buy in bulk (high cost to acquire goods) ❖ Small store (low ability to store inventory) ❖ Often has to order books for customers, but they don’t mind ❖ Loyal group of customers ❖ Established in the community ❖ Excellent customer service, including the ability to return books. Fox & sons books ❖ Buys in bulk (low cost to acquire goods) ❖ Large chain of stores (lots in stock, ability to store) ❖ Convenience shoppers ❖ New to the community ❖ Poor customer service, low ability to return books Horizontally: unimportant to important (strategic importance of the activity) Vertically: better to worse (performance compared to the main competitor) 16 The micro-environment Components of the Microenvironment: Porter’s 5 forces ❖ Suppliers (Bargaining power of suppliers) Powerful suppliers can demand higher costs Suppliers tend to be powerful when… Their offering is critical to the firm There are few substitutes for their offering The industry is not an important customer of theirs The firm has high switching costs They can vertically integrate (take over more of the production chain) Suppliers can also halt production entirely if they experience issues manufacturing or delivering the product ❖ Substitutes (Threat of substitute products or services) Substitutes: Products that satisfy the same needs as your product, but may be more efficient or more affordable. Spotify replacing CD sales Reusable water bottles replace plastic Laser hair removal replacing shaving Substitutes present a high risk when: Consumer switching costs are low Substitute is cheaper and/or higher quality than the industry product ❖ Newcomers (The threat of new entrants) New businesses (established or new) entering your competitive market may take customers away 6 barriers to entry make it more difficult for newcomers to enter your market Economies of Scale Differentiation / Brand Loyalty Capital Requirements Advantages linked to costs (e.g., suppliers, subsidies, patents) Government policies (e.g., disincentivizing foreign competition) Access to distribution ❖ Customers (Bargaining power of customers) Customers can try to force lower prices and higher quality by switching to other brands or boycotting. Customers are powerful when… They represent a larger portion of the firms’ sales The firm’s offerings are undifferentiated from other firms, and switching costs are low When there are fewer customers overall Vertical integration (e.g., a company sells to a store that has its own store brand) ❖ Industry competitors (Rivalry among existing firms) The growth rate of the industry Lower growth = fewer new customers = more competition 17  Number of competitors More competition in highly concentrated industries (Canadian beer market) Less competition in less concentrated industries (restaurants) Product differentiation & transfer costs More competition if switching costs are low More competition if products are minimally differentiated Switching costs Time Making you wait on hold, taking a long time to send paperwork Money Charging you for switching or “breaking contract” Effort Effort to learn a new system Psychological Effort to build new relationships Who is in your microenvironment? ❖ Very challenging to define the market and sector associated with your product ❖ Think about who your competitors are, how many competitors you have, and what their market shares are ❖ Netflix Other streaming services Traditional television Any video streaming Fortnite Anything that entertains consumers Sleep Controlling the microenvironment ❖ It’s semi-controllable ❖ Organizations can adopt one of two strategies Pro-active organizations track and react to their microenvironment Passive organizations react to market changes as they occur ❖ Pro-active organizations do better because they have time to prepare (to pivot, to face competition effectively) The Macro-Environment All factors of the external environment that the organization cannot control, but that may affect supply and demand in the market ❖ Political The political situation of a company affects companies that: Operate there Export there Have production there 18  Examples: government subsidies for electric cars, price-setting for prescription drugs ❖ Economic When economies are strong: Consumers have more purchasing power Companies may have more money to invest Consumers are open to trying new products (good time to launch) When economies are weak: Consumers limit purchases to essentials ❖ Social Describes the demographic and socio-cultural makeup of society At different ages, consumers have different needs People from different backgrounds may also have different needs ❖ Technological Technological changes have brought new challenges and opportunities to businesses. The rise of online shopping The aversion to physical goods The uber-ization of industries Direct-to-consumer companies ❖ Ecological Changes to the ecological practices of companies can be mandated by governments or result from pressure from consumer groups Not testing on animals Food labelling (GMO-free, local) Plastic bag bans ❖ Legal Laws can regulate what businesses can do with their products Examples include: Privacy laws (the right to be forgotten) Mandatory labelling laws (nutrition facts, source labels) Supply bans (DDT) SWOT Using the example of a food truck outside HEC Montréal ❖ Strength Delicious food ❖ Weakness High employee turnover ❖ Threat Rising ingredient costs ❖ Opportunity High foot traffic between the metro and hec 19 Horizontal: negative to positive Vertical: internal to external Class 4 Benchmarking: to assess your internal environment Porter’s 5 forces: to assess your micro-environment PESTEL: to assess your macro-environment SWOT: to assess positives and negatives in your internal and external environments Inflation increases the cost of goods and customers are reluctant to try their product: threats. Acquired a new warehouse and can store more products and ship them faster to customers: strength (internal to the company) Consumer behaviour How do we make purchase decisions? ❖ Process of a product purchased this week: poutine on Monday Went to the cafeteria, and Anne mentioned wanting a poutine, I was hungry too so we went to the counter and ordered one ❖ Process of an expensive product: drawing tablet in May I wanted to try digital art and create animations, so I wanted to purchase a drawing tablet that wouldn’t be too expensive if I didn’t use it. I went through 20  different brands and figured out which one would better fit my needs, along with consulting reviews on the brand and the tablet itself, as well as measuring how big it would be. I then waited a couple of weeks to make sure I wanted it before purchasing it from the Huion website. After it arrived, I bought a pink computer sleeve to keep everything safe. ❖ Buying some cute stickers I love the game Slay the Princess and would like some new stickers. I buy them from the developer’s official shop and not from another website because I want to support them as much as I can ❖ Trying to find my favourite brand of instant ramen I buy each brand to figure out which one I like best and try them at home. Processing effort ❖ Low: poutine and stickers ❖ High: tablet and ramen Involvement ❖ Low: poutine and ramen ❖ High: tablet and stickers Stickers (2) High involvement Tablet (4) Low processing effort High processing effort Poutine (1) Low involvement Ramen (3) 1. Brand laziness a. Habitual purchases made based on familiarity and convenience b. Consumers quickly shift preferences to the best deal or the most convenient option 2. Brand loyalty a. Commitment to a brand based on the benefits and values it provides to a consumer i. Quality ii. Emotions b. Is measured in two ways i. Positive attitudes towards the brand ii. Consistently purchasing an item from this brand 3. Variety seeking a. Consumers are invested in the category (I like ramen) but they don’t have set preferences. b. Consumers are seeking to gather information on a category, and are therefore unlikely to choose the same brand repeatedly. 4. Problem-solving a. Typically involves unfamiliar, expensive products that are purchased infrequently. 21  b. Consumers collect as much information as possible and carefully evaluate each alternative. c. Consumers decide what features are important to them, and make a purchase decision based on these features. The decision lifecycle Need recognition ❖ The desire-got gap Information search ❖ Internal search Accessing information from long-term memory to identify what might best close the want-need gap Remembering experience with brands Recalling the possible options Recalling relevant evaluation criteria ❖ External search Engaging external sources to learn more about a product category Asking friends or family for recommendations Examining marketing information Trying the product (free trial or engaging in-store) ❖ Influences on information search Enduring involvement (clothes) Situational involvement (washing machine) ❖ Who seeks the most information The riskier a decision is, the more people search for information. Decisions can be risky in a variety of ways. Monetary The money you spend in buying (or owning) the product Relatively costly purchases (cars) Things you will pay for over the future (pets) Physical Risks related to your physical body, health and wellbeing Things related to our well-being (stelara) or the well-being of our loved ones (car seats) Social Risks related to your social status or friendships Things that other people see you consume that might affect you socially (jewelry, clothing, sports equipment) Psychological Risks related to self-esteem and confidence Products that might make you feel bad if they don’t work (fitness regimes, wrinkle creams, GRE-prep books) Functional 22  Risks related to the performance of the product and its ability to meet the need Subscriptions to internet services, cell phones, insurance policies Evaluation of alternatives ❖ The consideration set: the group of brands the consumer will make her choice from. These can be brands she already knows or those that emerge from an information search. ❖ True brand universe: all possible screw-top cold water bottles ❖ Consideration set: brands that the consumer considers buying from ❖ Product market perceptions Incomplete information: the consumer is not aware of a brand Incorrect information: The consumer had old or incorrect information that makes her think it doesn’t fall within her consideration set ❖ Evaluation of alternatives Multiple attributes can be balanced: for this situation, we want a good price and aesthetics. Choice ❖ Purchase (hydro flask) ❖ No purchase (try to get the person to buy the product by giving them a promo code) ❖ Choices for or with others Shared, solo or other consumption Post-purchase evaluation ❖ If there is a dislike for the product, we start over again ❖ If we like it, we are probably going to buy it again ❖ Dissatisfaction (worse than expected), expectation (no emotional reaction), better than expected (delight) Do we always follow a rational decision process as consumers? ❖ Impulse buying Unplanned No information gathered Urge to buy Low involvement Salience is critical ❖ Internal influences Central psychological processes How motivated is the consumer to put the effort in (high processing effort, enduring involvement)? Does the consumer perceive (see, pay attention to, and process) the advertisement? What knowledge and cognitions does the consumer have (mental categorizations, heuristics)? What is the consumer’s emotional experience of your brand (guilt, happiness)? 23  Attitudes Beliefs about the brand (reliable, sustainable) Emotional reaction to the brand (nostalgia, happiness) Behavioural response to the brand (purchase, boycott) Psychographic variables Who you want to be, what you value, what you’re interested in (lifestyle) ❖ External influences Reference groups Real or imaginary groups that influence a person’s evaluations, aspirations or behaviour I want to be just/nothing like them People can be influenced in three ways Information influence ◆ When our attitude changes because a group provides us with new information (TripAdvisor reviews, advice from friends) Normative influence ◆ When we notice the norms of a group (language, clothes) and behave to accord with these norma or purposefully diverge from them Comparative influence ◆ A comparison point can create a reference point that we evaluate our performance against (most people have $58 900 saved by the time they are 35) Subcultures A group whose members share beliefs and experiences that differentiate them from other groups (generations, ethnic groups, social classes) Culture ❖ Contextual influences Mood Consumers who are in a good mood will evaluate products more favourably, use more heuristics, and make riskier choices than people in a bad mood. Time available People in a rush will choose quickly, use more heuristics, and be more risk-averse. Physical & social environment Features of the social (who are you with?) and physical environment also affect purchasing. ❖ Influences of the marketing mix Product Price Place Promotion 24 Class 5 Segmentation and targeting ❖ Segmentation is the process of grouping them into categories that are meaningful to consumption. ❖ Once a population is segmented, you choose which groups you want to target (based on how profitable they will be to you) Choose a segment because of low competition Choose a segment because it’s large ❖ Once you know who you’re targeting, you figure out what appeals to them, and position your brand that way. ❖ Once you have your brand positioned, you have to differentiate from other brands with similar offerings. Segmentation ❖ Grouping consumers based on their… Buying Behaviour Needs & Expectations Response to marketing Marketers can segment consumers based on: ❖ Socio-demographics Grouping based on demographic, economic & social characteristics (income, age, education, gender, ethnicity, religion, marital status) Examples: Subaru targeting lesbians, lululemon targeting men, dove targeting older women ❖ Geographic Grouping based on region of the world, neighbourhood, climate type, and physical environment Don’t just think about where your product can be sold For example, anyone in North America could purchase a smart car (they are accessible everywhere). But, North America is not a geographic segment. Instead, they target people who live in cities because smart cars provide the most value to them. ❖ Psychographic Grouping based on consumer mindsets, values, opinions and attitudes People’s motivations behind making a purchase They want to affirm a particular identity (I am masculine, I am important) The brand fits with their values (buying local, buying green) The brand aligns with their interests (lululemon consumers like yoga) Example: Kotn customers value the history of cotton and the harvesting being done in good conditions Identifying attitudes that affect a person’s lifestyle and purchasing behaviour (innovator vs achiever vs thinker) 25  AIO method Activities Interests Opinions Demographics Lifestyle: who we are, what we do Lifestyle refers to a pattern of consumption reflecting a person’s choices of how he or she spends time and money Each person adds their individuality to a chosen lifestyle A lifestyle marketing perspective recognizes that people sort themselves into groups based on the following: Things they like to do How they like to spend their leisure time How they choose to spend their disposable income ❖ Behavioural Grouping based on consumer needs, expectations, and behaviours related to the product Occasion Special promotions & labels for holidays Special products for special occasions Benefits sought Different segments desire different benefits from the same products Loyalty status Nonusers, ex-users, potential users, first-time users, regular users Usage rate Light, medium, heavy What do people need to do with your product Coffee shop behavioural segments Grabbing a coffee on the way to work ◆ Quick service (order ahead?) ◆ Takeaway If using a coffee shop as a workplace ◆ Comfortable seating ◆ Plugs and wifi Tent behavioural segments Going backwoods camping ◆ Light, so easy to carry on back ◆ Easy to set up and take down Going car camping ◆ Size and weight don’t matter ◆ High value on comfort Example of benefits segmentation (enhanced bust) Why do consumers buy pregnancy tests? 26  People who want to be pregnant (hopefuls) Brand name: conceive Packaging: smiling baby Position: near ovulation tests Quantity: buy in bulk People who do not want to be pregnant Brand name: rapidvue Packaging: plain, no baby Position: near condoms Quantity: 1 or 2 ❖ Volume & profitability Grouping potential and actual customers based on their purchase volume and profitability How much money does this customer make for you? Frequent flier (delta medallion) Sephora VIB (vs VIB rouge) Small businesses where “regulars” get special treatment ❖ Other segmentation possibilities Variables specific to a market Home renovation: owner vs renter Auto parts: type and age of vehicle Combination of variables You do not need to segment everything ❖ To be useful market segments must be: Measurable: to what extent size, purchasing power and profits of a market segment can be measured; Accessible: the market segments can be effectively reached and served; Substantial: the market segments are large or profitable enough to serve; Differentiable: the segments are conceptually distinguishable and respond differently to different marketing mix elements and programmes; Actionable: effective programmes can be designed to attract and serve the segments. B2B market segmentation ❖ Economic Number of customers, industry, growth, financial resources ❖ Organizational culture & procurement policy Grouping based on company culture (Relationships with suppliers) and procurement (purchasing process) Targeting The decision on the number of different segments to select and serve, and the best actions to reach the identified segments 27 How to choose your target ❖ Good targeting is… Profitable Relevant to the consumption of the product Profitability ❖ A market strategy wherein a company selects the segments, markets or customers that they want to win over and retain. It is best to choose targets based on their profitability, which is affected by… Segment size Growth Accessibility Competition Types of targeting ❖ Mass The same marketing mix is applied to the entire target market. Products are designed to satisfy average needs at low prices. Just because everyone can buy from a brand, doesn’t mean that the brand is doing mass targeting. It’s all about who you put marketing money into attracting and retaining. Everyone can buy a smart car, but they engage in niche targeting (city dwellers who don’t have large families) Everyone can buy from Dollarama, but they engage in segmented targeting (people with low income, money-conscious people) Everyone can buy a Coke that says Laura on it, but Coke is engaging in personalized targeting for people named Laura. ❖ Segmented The marketing mix is applied to 2+ segments, targeting segments and designing separate offers for each (company cannibalization) Concentrated: marketing to a small number of segments Broad: marketing to a large number of segments Comprehensive: marketing to almost all segments ❖ Niche A single marketing mix thoroughly adapted to a single small (under 10% of the market) segment. Market coverage strategy, seeking a large share of one or a few segments/niches ❖ Personalized Adapting a company’s offering (i.e., marketing mix) to each of the customers it plans to win over. Tailoring products and marketing programs to the needs & wants of specific individuals (aka one-to-one marketing) 28 Class 7 Positioning ❖ A marketing strategy that consists of defining the position that the brand occupies (or wishes to occupy) Both cognitively and emotionally (hearts and minds of consumers) Concerning competing brands or businesses ❖ It pertains to the identity, personality, and image that marketing managers want their brand to have ❖ The act of designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the target customer’s minds ❖ Effective positioning is based on differentiation (real or perceived) LinkedIn: business-related social media Pinterest: recipes and crafts on social media Fundamental elements ❖ Physical attributes: the functionality and capability that a brand offers High-quality material, construction, craftsmanship ❖ How the brand is communicated and how consumers perceive the brand relative to other competing brands in the marketplace Italian style and family values, luxury, aspirational Positioning strategies ❖ Functional positioning (features and benefits) product features: attributes, features and benefits relative to the competition Uniqlo: good clothes, affordable prices price/quality: price as a signal of quality Primark: low prices, low quality use: how a product can be used Nike: running shoes, sneakers, soccer shoes ❖ Symbolic (expressive) positioning (ego, social and hedonic satisfaction) user: by a clear identification of the target audience Lululemon: yoga girlies benefit: by proclaiming the benefits the usage of the product confers on those that consume it Olay: younger-looking eyes heritage: heritage and tradition are used to symbolize quality, experience and knowledge Burberry: tale of Thomas Burberry Types of positioning ❖ All brands have a desired positioning (how they want to be seen) Consumers aren’t aware of the brand - the brand has no actual positioning Consumers think of the brand differently than the brand would prefer - the brand has an actual positioning that is different from their desired positioning 29  Consumers think of the brand in the way the brand prefers - the brand’s actual positioning and desired positioning are the same ❖ In marketing, you can only control your marketing mix How do brands decide their desired positioning? ❖ If you’re a new brand in that market… Do a market study of target customers. See what they value (e.g., low prices, variety, customer service) and which of those options is doable for your brand. Use variables in your marketing mix (e.g., your ads, your packaging, your price) to position yourself in a way that appeals to your customers. ❖ If you’re an existing brand in that market… Do a market study of target customers Determine your actual positioning and the positioning of your competitors If you have your desired position, just reinforce it. If you do not hold your desired position, make changes in your marketing mix. Ensuring successful position ❖ Positioning must be consistent with targeting Consistent with Spotify’s target market of… Young people (millennials and Gen Z) People who largely enjoy the personalized listening provided by playlists People who are looking to move away from the music on the pop charts ❖ Positioning must represent tangible or symbolic value to the customer Tangible value: being clear about the real-world benefits of the brand (being dairy-free, affordable, convenient Symbolic value: making the brand seem like it fits with your identity (awkward, quirky) or who you want to be (cool, sophisticated) It is important to maintain a consistent positioning over time ❖ You can change your slogans and ads over time, but make sure you’re getting at the same underlying ways that you bring value to customers Re-positioning ❖ Expensive and takes time ❖ Frog princes are rare It is extremely difficult to reposition a well-known mid-range brand as a high-end brand. ❖ People’s princesses are common It is easier to take a high-end brand and position it as a mid-range brand But be careful, this will likely result in you losing high-end customers ❖ When the actual positioning of the brand is very different from the desired AND it seems hard to change positions, it might be time to introduce a new brand. Kate Spade (girly) vs Jack Spade (more masculine) 30 Differentiation How an organization stands out. Based on getting target customers to perceive it as different from the competition (in a good way), based on one or more attributes that customers care about How do we differentiate? ❖ Differentiate your product based on one or more of the marketing mix variables. ❖ Price Actual price Billing & payment terms Packages offered Volume discounts ❖ Product The product/service offered The variety of products Product Quality Customer service Guarantees & warranties Installations & after-sale service ❖ Place Geographical coverage Business hours Intermediaries ❖ Promotion The brand image transmitted by advertisements Loyalty program Sales team ❖ Brainstorm ways that your product differs from the competition in ways that consumers care about ❖ My product meaningfully differs from the competition Promote your differences so that consumers know about them. ❖ My product does not meaningfully differ from the competition Innovate on 1 or more of the 4Ps such that you are different Remember that your differentiation can be symbolic or tangible (Keurig and Nespresso both make a cup of coffee, but they are differentiated) Points of parity ❖ Points of Parity: Features of the product that are similar across competitors Allow consumers to categorize the product (e.g., this is an automated coffee maker) Important to have some points of parity so consumers understand what your brand or product does. ❖ Points of Differentiation The distinctive elements of what makes your brand/product special 31  You should have between 1-3 points of difference. Any more will confuse consumers. Example: Emma mattresses Mattress company wanted to differentiate itself in the busy online mattress market. Positioning based on points of difference (price, delivery, relaxed return policy, and the brand mascot) Based on the « Don’t worry. Sleep Happy » slogan Result: A highly distinguished European mattress brand Positioning statement ❖ For (the target segment), (brand) is a (concept) that is a (most important benefit) because (justification) For environment-minded people who want to rent a car, Communauto is a car rental company that specializes in very short-term rental and it makes it possible to easily locate good, clean cars in urban areas. For heavy social media users, BeReal is a photo-sharing app that helps you discover who your friends are because the filters and posed photos aren’t the real you. ❖ Positioning Statements Should… Provide value for the target customer. Be relevant to the target customer. Be clear Be communicated without confusion Be consistent over time Successful Marketing Strategy? How do we know if a brand’s marketing strategy (i.e., their segmentation, targeting, positioning, and differentiation) will be successful? Do they target a profitable segment? Does their positioning statement follow the rules of good positioning? The perceptual map A way to optimize differentiation by finding your brand’s place in the market and comparing it to your competitors ❖ Choose two axes to plot your brand and the competitors on. These should be attributes that are: Important to your customers Realistically different across brands in your place ❖ Plot all your competitors and yourself on this perceptual map You may need to do market research to figure out consumers actual perceptions of brands How to use perceptual maps ❖ Clarify the current position of your brand ❖ Identify direct competitors ❖ Identify opportunities 32  Just because it’s a space doesn’t mean it’s an opportunity Midterm review There’s too much text in the slides to transcribe it, so use the slides themselves. I’ll just be putting in the correct wooclap answers. Winters are getting warmer in Canada, leading more consumers to put all-weather tires on their cars rather than snow tires. When this trend first arose, companies that sold winter tires had to adjust their: 1. Actual demand 2. Potential demand 3. Demand projection 4. Market segmentation Which of the following is not a need? 1. Sal is hungry 2. Charlotte gets Botox 3. Ricky is lonely 4. Penelope turns the heating on in the winter ❖ This isn’t a need because she can just use a blanket. To turn this into a need, you can formulate it into Penelope's freezing 5. B and C 6. B and D You sell children’s piano lessons. Currently, you make about $30,000 a year and have a 20% market share in your town. If your goal is to make more money, what’s the best way to do that? 1. Get children who don’t play piano to start taking lessons 2. Attract customers from your competitors 3. Charge more for each music lesson 4. All of the above would increase profit Which of the following is not a key aspect of the Place “P”? 1. Determining which countries your product will be available in 2. Determining where your product is on the store shelf 3. Figuring out where to run ads (e.g., radio, TV, TikTok) ❖ This is promotion 4. Determining if you should pay for an end-cap display in a store 5. Figuring out which stores should carry your product 6. Making sure products ship to consumers on time ❖ Distribution, part of the place Bo Burham’s Inside (a “comedy special”) was released on Netflix in 2021. It won a Grammy, an Emmy and a Peabody Award. Netflix did not put a lot of advertising into Inside, assuming it 33 would only appeal to Bo Burnham’s fanbase. Instead, the audience for the film grew largely from word of mouth. Which of the following marketing Ps was not mentioned in the passage above? A. Product B. Price C. Place D. Promotion E. Product and Price F. Place and Promotion Charlotte buys cereal every week and has been doing so for the past 10 years. When she goes into the store, she buys Cheerios 30% of the time, Harvest Crunch 20% of the time, and Bran Flakes 50% of the time. What can be said of Charlotte’s loyalty to Harvest Crunch? 1. Harvest Crunch has a high percentage of Charlotte’s customer share 2. Harvest Crunch has high customer retention for Charlotte 3. On all metrics, Charlotte is very loyal to Harvest Crunch 4. On all metrics, Charlotte is NOT very loyal to Harvest Crunch Which of the following reflects a reason why customers might not be loyal to a brand: 1. They are dissatisfied with that brand 2. They like to try new things in that product category (i.e., variety seeking) 3. They like your brand but they are checking to see if there’s something better out there 4. All of the above Which of the following is true about markets? 1. It is possible for all businesses to sell on all markets, they just need to adopt the right strategy 2. B2B businesses operate in largely the same way as B2G businesses 3. It is uncommon for businesses to only sell on the B2B market 4. When entering an international market, it’s best to do market research to understand your new set of consumers and competitors 5. None of the above are true The product Harvest Crunch cereal is made by Quaker and is only available in grocery stores in Canada. What market is Quaker using to sell Harvest Crunch? 1. Consumer goods market 2. Distribution Intermediaries Market 3. B2B 4. B2G 5. International Market A business sells goat’s milk to high-end grocery stores (e.g., Whole Foods). Recently the business (A) negotiated for more shelf space in the grocery store, and (B) launched an advertising campaign targeting athletes. Classify the actions based on whether they are a marketing strategy or tactic 1. Both A and B are strategies 34 2. Both A and B are tactics ❖ A is a distribution tactic ❖ B is a promotion tactic 3. A is a strategy and B is a tactic 4. B is a strategy and A is a tactic You visit the website of a company that makes sneakers. You notice two things: (A) A statement that says: We connect with our community by providing sneakers based on what’s trending now (B) a promotion for a recent collaboration they did with Yung Gravy. Classify the actions based on whether they are a marketing strategy or tactic 1. Both A and B are strategies 2. Both A and B are tactics 3. A is a strategy and B is a tactic 4. B is a strategy and A is a tactic In 2013, Néstle Canada Inc., Hershey Canada Inc., and Mars Canada Inc. were charged with a federal crime. All 3 companies had agreed to charge around the same amount for chocolate bars (i.e., not compete on price). Does this violate a marketing ethic? If so, which one? 1. The product must be safe 2. The price must be fair 3. Advertising must not be fraudulent 4. Customer service quality must be consistent 5. This does not violate a marketing ethic As of January 2023, people who are not Canadian citizens are banned from buying homes in Canada for two years. Imagine you’re a real estate company like RE/MAX, how would this change your assessment of Porter's 5 forces for your company? 1. This increases the power of customers 2. This decreases the threat of new entrants 3. This increases competition between firms 4. This decreases threats from substitutes 5. Both 1 and 2 are true 6. Both 1 and 3 are true We may enter a recession in the next year or two that could affect consumers’ purchasing behaviour. What type of external force would this be? 1. Macro-environmental; A social force 2. Micro-environmental; Power of suppliers 3. Macro-environmental; an economic force 4. Micro-environmental; An Economic force 5. Macro-environmental; a legal force 35 You run a company that runs bicycle tours of Montréal. You do a benchmarking analysis to see how you stack up against your closest competitor. Which of the following facts indicate areas in which you should make a change? 1. Consumers prefer e-bikes, and we offer more e-bike tours than our competitors 2. Consumers like tours that stop for food, but we have fewer partnerships with local restaurants than our competitors 3. Consumers like tours between 3-4 hours in length. Your tour is 3 hours and your competitor's is 4. 4. B & C If you want to understand your strengths and weaknesses in comparison to a competitor, you should use ________. If you want to understand the power of competitors in your environment you should use ________. 1. Benchmarking; PESTEL 2. Porter; PESTEL 3. Benchmarking; Porter 4. PESTEL; Benchmarking 5. Benchmarking for both You run a small single-screen movie theatre that targets consumers in your small town. Assume that all of the following are realistic goals, which would you not recommend setting? 1. Have $200,000 in profit next year 2. Get more people to come to the movies ❖ Too vague 3. Gain 40% market share among consumers in my town by 2025 4. Increase concession purchases such that they contribute 50% to our final profit by 2025 Which of the following represents a desire-got gap (i.e., need recognition)? 1. Julie thinks her closet is too full and wants to get rid of things 2. Joel decides he needs a haircut 3. Jim wishes he owned a Porsche 4. Jackson is lonely 5. All of the above are want-got gaps 6. None of the above are want-got gaps You have a friend coming into town and are trying to brainstorm places to get lunch. You create a list of all the places you’ve tried in the past and enjoyed. In this scenario, you are… 1. Recognizing a need 2. Performing an internal search 3. Performing an external search 4. Evaluating alternatives 5. Making a choice 36 Victor and his husband Eli are expecting a new baby! They go shopping for all the things they need for the nursery. They spend a lot of time thinking about the baby monitor and the crib. The baby monitor is relatively cheap, but Victor and Eli want to be sure it’s going to be able to pick up all the sounds the baby makes. On the other hand, cribs are expensive and Victor & Eli want to make sure they get a good value for the money. What types of risk are Victor and Eli considering? 1. The baby monitor is a functional risk and the crib is a monetary risk 2. Both the baby monitor and the crib are monetary risks 3. Both the baby monitor and the crib are functional risks 4. The crib is a social risk and the baby monitor is a functional risk Janine looks at all her options and realizes they differ in the following ways: size, weight, operating system, price, warranty, and battery life. In this scenario, she is… 1. Recognizing a need 2. Performing an internal search 3. Performing an external search 4. Evaluating alternatives 5. Making a choice Which of the following is not a consumer choice? 1. George joins his company’s union (this is not mandatory at his company) 2. Alexis begins another episode of White Lotus 3. Graham buys tickets to Disney Land 4. Samantha decides not to buy the textbook for Accounting 101 5. Michelle places her order at a restaurant 6. These are all consumer choice You see on Instagram that your friend is trying TimBiebs for the first time and talking about how tasty they are. You decide to try TimBiebs on your next trip to Tim Hortons. What has influenced your decision? 1. Informational Influence 2. Central Psychological Processes 3. Psychographics 4. Contextual Influences In 2020, many Democratic consumers began boycotting the brand Goya Foods (who largely sell canned beans). They boycotted the brand because the CEO of Goya praised Donald Trump, saying his leadership was a “blessing.” What factors influenced the Democratic boycott of Goya? 1. The decision to boycott was determined by comparative influence 2. The decision to boycott was influenced by psychographics 3. The decision to boycott was determined by motivation 4. Boycotting is not a consumer decision 37 Evolution Juice just changed the packaging on their line of juices. Consumers who try the brand for the first time after the packaging change are having their decision process influenced by… 1. Internal Influences 2. External Influences 3. Contextual Influences 4. The Marketing Mix Delta Airlines gives “medallion status” to consumers who spend more than $4000 a year on flights with Delta. Because big spenders are often people who travel for business, Delta is considering dividing medallion status into ”business medallion” and “standard medallion” (for non-business travellers). Which of the following segmenting strategies is Delta using? 1. Geographic 2. Psychographic 3. Behavioural 4. Volume and Profitability 5. Both 3 and 4 are correct 6. Both 1 and 4 are correct Anolon is a brand of cookware that sells directly to restaurants. When Anolon is selling, which of the following segmenting strategies would be inappropriate? 1. Sociodemographic 2. Geographic 3. Psychographic 4. Behavioural 5. Value and Profitability A brand divides customers into groups based on their age and gender. They decided to target 30-50-year-old men because they believe this segment will be the most profitable. Which of the following segmenting techniques have they used? 1. Geographic 2. Psychographic 3. Behavioural 4. Sociodemographic 5. Volume and Profitability 6. Both sociodemographic and Volume and Profitability Decide what segment of the population to target. Your options are: i. A small, but growing, segment of the population interested in improving their microbiome (i.e., gut health) ii. A multi-vitamin with broad appeal to adults aged 20-50 iii. An affordably priced vitamin-D injection for use in people who live above the Arctic Circle. Which is likely to be the most profitable in the future? 1. All of the above could be very profitable 2. Both i and ii could be very profitable 38 3. Only ii 4. None of the above are likely to be profitable Which of the following is not differentiation? 1. The clothing brand Universal Standard will exchange clothing if the consumers’ size changes within the first year (no other brands do this) 2. The brand Holos makes overnight oats that contain more protein than the competitors. 3. Tesla tries to get consumers who are mostly middle- and upper-class 4. The US-based sustainable clothing manufacturer, Big Bud Press, will ship to Canada whereas many other companies will not. 5. All of the above are differentiation You are a marketing manager at a car company who is thinking about launching a large sporty vehicle. You plot the following perceptual map (see slides for data). What advice would you give your company about this launch? 1. It would be easy to differentiate from competitors 2. Consumers might not want this product 3. Volkswagen will be a close competitor 4. Both 1 and 2 are true What key component of a positioning statement is missing in the example below? Taco Bell is a fast-casual restaurant that provides great-tasting Mexican food because hamburgers get boring. 1. Statements about the marketing mix 2. A target segment 3. A concept for the brand 4. Overall marketing objectives Class 8 Products ❖ A basket of benefits that is offered to customers ❖ These benefits are concretely manifested by a set of attributes, function and uses (proposed by the company) ❖ Marketers act directly on these dimensions by implementing a product management process and marketing objectives (market share, sales, profits and brand image) Core product ❖ Benefits - fit needs ❖ Benefits =/= attributes People don’t want a quarter-inch drill, they want a quarter inch hole Core product dimensions ❖ Quality Perceived by the consumer 39  ❖ Brand Sound, name, logo, everything that makes the brand unique ❖ Packing How the brand makes the packaging look appealing by choosing specific colours and shapes that target their specific market ❖ Design Unique to a specific brand, how each product looks ❖ Other Importance-performance analysis ❖ Figure 8.3 pp. 228 ❖ Invest in things that are important ❖ Avoid high performance in areas that aren’t valuable (unless they’re costless) Product portfolio management Portfolio analysis - the BCG matrix ❖ When managing a collection (or portfolio) of market offerings, it is important to assess the relative performance of each offering ❖ Companies should aim to create a balance of old, mature, established, growing and new offering ❖ BCG (Boston Consulting Group) matrix is a popular tool used to assess a portfolio of market offerings on two dimensions: rate of market growth and relative market share ❖ Stars High market growth and high market share, invest in these ❖ Cash cows Low market growth and high market share, very mature on the market, brings money without much effort ❖ Question marks High market growth, low market share, requires careful consideration when thinking of investing in this one, as it could turn into a star or a dog ❖ Dogs Low market growth, low market share, don’t invest in them Product portfolio ❖ Products offered by a company Product ranges ❖ A set of products of the same category or that meet the same type of need. A range is made up of product lines. Product line ❖ A group of products intended for a specific market, or that solve a specific problem for the consumer Width of the range 40  ❖ A number of lines that make up the range ❖ Butters, cups and bars (3) Depth of the range ❖ Number of models per line ❖ 8 butters, 5 cups, 3 bars Length of the range ❖ Total number of products in the range ❖ 16+ products Product lifecycle management Product lifecycle ❖ Continuous innovations Products for which new characteristics do not necessarily call for redefining the product category (new toothpaste flavour or beer ingredient) Pink Tero for Valentine’s Day Different shapes ❖ Discontinuous innovations Radically new products, ideas or services, which disrupt established habits or create an entirely new product category (penicillin, google, electricity) Tero using batteries for people in parts of countries that don’t have reliable access to electricity ❖ Introduction Slow sales, limited profits or losses Competition is generally limited Innovators are consumers ❖ Growth Sales ramp up; profit grows Growing demand for product - early adopters (13.5%) and early majority (34%) join as consumers First competitors arrive ❖ Maturity Sales and profits stabilize or begin to decline Competition stabilizes or declines (as others exit the market) Late majority join as consumers (34%) ❖ Decline Decline in sales and profits Competition declines Laggards may join (16%) Services ❖ An action or effort offered by one party to another ❖ Four characteristics differentiate services from other products 41  Intangibility - can’t be touched/no physical presence Inseparability - product is tied to consumption Variability - quality depends on situational factors of delivery Perishability - cannot be stored or saved SERVQUAL analysis ❖ A tool for measuring service quality Reliability Responsiveness Assurance Empathy Tangibles Related services (brancing off core product dimensions) ❖ Delivery and credit ❖ Guarantee ❖ After-sales service ❖ Installation Brand Brand management ❖ The activation of signs and stories to maximize brand equity Brand equity ❖ Added value that a brand gives a product ❖ How to determine your brand’s value? Customer-based approach Surveys to directly evaluate loyalty, awareness, perceived quality, and brand associations Price differential approach A mathematical approach examining the differences between what customers will pay for the same attributes from different brands Income-based approach Proportions of the company’s future income attributable to the brand Strategic branding decisions ❖ How to organize your brands within a product portfolio, brand extension, and brand alliance ❖ Umbrella brand A brand whose name and sign appears on all products marketed by a particular company (general electric) If the general brand doesn’t perform well, products with its name slapped on it might perform less well ❖ House of brands Each brand in the portfolio is treated independently (unilever) 42  Requires a lot of time and effort, as each brand has different marketing and markets, but the reward is that you can reach all parts of the market and expertise everywhere. They cater to many segments. They need to be careful, as if one brand does significatively better than others in the same market, this can steal market shares from your own products (cannibalization) Brand ext and launch (starbucks example) ❖ Line extension Existing product and existing brand Starbucks reserve ❖ Brand extension New product and existing brand Packaged coffee sold in grocery stores ❖ Multibrand approach Existing product and new brand Starbucky coffee ❖ New brand creation New product and new brand Starbucks acquiting teavana ❖ Brand alliances Starbucks x stanley Extends exposure for both brands, but can diminish support for a brand if it associates itself with a problematic brand Tests reception with a new market while diminishing risks Increases brand awareness Innovation Creating value ❖ Value creation is accomplished when a company proposes a solution to a customer’s needs or difficulties, alleviating pain or creating gain Companies can change their value propositions (creating innovative solutions to previously unseen problems) by better understanding their consumer’s gains and pains ❖ Dove soap and beauty ads ❖ Google creating a search engine ❖ Airbnb creating a whole new market New product development ❖ Innovation and the development of new products and services powers the long-term success of a company ❖ The development and introduction process consists of three main phases: idea generation, test, and launch 43  ❖ There are many “systems” or ways for introducing new concepts (design thinking, journey mapping, customer centric design) Adoption Adoption lifecycle ❖ Innovators: 2.5% ❖ Early adopters: 13.5% ❖ Early majority: 34% ❖ Late majority: 34% ❖ Laggards: 16% Table 4.1 on pp. 101 covers this well Adoption factors ❖ Relative advantage What are the tangible benefits relative to its competitors (differentiates differences)? ❖ Compatibility Does it accord with the “usual way” of doing things? Does it work with other products, environments, behavioural ecosystems? ❖ Triability How easily can the innovation be tried? ❖ Observability How easily are the new innovations observed publicly? ❖ Perceived complexity How easy is using the new innovation? Causes of launch failure ❖ Overestimation of the market ❖ Flawed design ❖ Poor positioning on the market ❖ Pricing errors ❖ Ill-designed sales communication ❖ Production orientation rather than customer orientation ❖ Cost overruns ❖ Competition Class 10 Pricing Price ❖ It’s what a customer gives up or is willing to sacrifice to obtain a set of benefits ❖ We mot often measure price in money ($), but don’t forget that it also includes 44  Time The time invested to research, obtain (wait in line) and consume (learning curve) the product Psychological cost The psychological costs of consumption (taking a risk on a new product) ❖ In the marketing mix The monetary value attributed to the product Not necessarily based on the cost to manufacture Can be anything between cost (price floor) and value where only a few sales is expected (price ceiling) Pricing objectives ❖ Pros of pricing low Increase demand Increase competitiveness (to capture market share) ❖ Cons of pricing low Decrease profits Race to the bottom (your competitors may still undercut you in price) ❖ Pros of pricing high Increase profit margins Position as a luxury product - attract a new target customer ❖ Cons of pricing high Decrease demand Increased competition from those who price below you Environmental influences on pricing ❖ Internal Company’s costs Existing product line Product life cycle ❖ External Competition Consumers Distribution intermediaries Economic environment Governments Legal environment ❖ Both impact the price setting process The pricing process ❖ Pricing objectives What objectives do we want to reach? Profit-oriented objectives 45  Make an acceptably high profit to meet company goals (e.g., paying the small business owner; satisfying shareholders) Businesses may adopt a “cost plus” pricing strategy Setting a price that lets the company achieve a (small, sustainable) profit margin Ignores info about consumers and competition (or is used when managers don’t have this information) Example: a small local bakery that sets a profit margin of 20% on its products. This profit allows the business owner to pay themselves a steady income, reinvest in the bakery for new equipment or recipe development, and meet the expectations of any shareholders or investors involved Competition-oriented objectives Focuses on capturing market share (often through lower prices) Lower short-term profits in favor of higher long-term profits Example: walmart Sales-related objectives Focuses on selling a certain number of product units Often used as a short-term strategy when companies over-produce a good Profit or competition-oriented strategies make more sense in the long-term Example: end of season sale Customer perception-related objectives How do the consumers perceive the price? Often higher prices signals exclusivity and luxury Lower price signals accessibility Example: pricing low for customer perceptions: costco chickens Example: pricing high for customer perceptions (also called prestige pricing): smirnoff vodka Distribution intermediary-related objectives The demands of distribution intermediaries (walmart) can drastically affect the pricing for many producers Example: chanel makeup in airports and malls but clothes in their stores ❖ Pricing strategies How can we attain these objectives? Determined by consumer preference Setting a price that will project the desired image of the product to consumers Price signaling (prestice price) In markets with lots of competition Price leadership A brand adjusts their price and assumes the competition will do the same (often used by market leaders) 46  Competitive parity A brand sells at the same price as the market average or the market leader Low-cost strategy Always offering the lowest price in the market (only viable for businesses that have a competitive advantage in production costs) Based on business costs Cost-plus pricing This means adding a small, sustainable margin above the cost to produce the product Ignores info about consumers and competition For a product line Complementary product pricing Selling the central product at a low price, while complementary goods are sold at a higher price Example: printers and ink cartridges Price bundling Offering a product with a group of items that is sold at a lower price than the sum of all products at their regular cost Example: seasons tickets in sports of meal bundles at fast food Customer value pricing Pricing a product very competitively, but offering fewer options than others in the line Example: purchasing cjheaper plane tickets with no ability to cancel or change Initiation phase Skimming strategies Setting a high price that is then lowered across product lifecycle Why? To establish an image of quality and not prompt so much demand that production can’t keep up Who? Effective for highly differentiated products that some people don’t mind paying more for Example: Tesla Penetration strategy Setting an initial low price intended to minimize the competition. Note that if you can take advantage of economies of scale, you don’t need to raise price over time Why? To quickly capture market share from the competition Who? A product that is similar to the competition, in a market that is sensitive to price Example: Uber Growth and maturity (price reduction strategy) 47  Duri