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Marketing Management I Final Exam

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Management Core
MGCR 352
Emine Sarigollu

Marketing Final ExamNotes NNoteboook:: MGCR 352- Marketing Management I CCreated:: 27/11/2012 23:09 Upddated:: 11/12/2012 14:32 Marketing: the delivery of customer satisfaction at a profit businesses: has own department non-profit: employ most marketing agencies to differentiate themselves government: top 5 of marketing spending individuals: using communication Tasks of Marketing 1. Discovering Customer Needs 2. Satisfying Customer Needs Marketers do not create needs; customers define needs Core Concepts of Marketing Needs, wants, demand marketing influences wants. Wants are directed to specific product to satisfy a need backed by the ability to pay (demand) product or offering value and satisfaction exchange and transaction relationships and networks Delivered Value: the difference between total value to customer and total customer cost. Satisfy consumers by giving them highest delivered value Product Value: differentiate a product through price, packaging, quality, product future, and design. Technology has undermined product balue due to intensified competition. Advantages can be easily copied at a low cost. Image Value: build trust, consumer loyalty. It is becoming more important due to amount of similar products on the market. In this case, best marketing prevail. Consumer Satisfaction Comparison of performance and expectation provide simple satisfaction is not enough engineering delightful experience by recording customer personal preference dissatisfied customers have major impact toward a company's reputation due to the technology in communication Careful not to set the expectation too high from your marketing Satisfaction < expectation = dissatisfied Satisfaction = expectation = satisfied Satisfaction > expectation = delighted Company Orientation Concepts Production Concept focus on production, distribution, operation consumers favor, readily available products, affordable products Demand > Supply Ex. Texus Instrument- graphic calculator Some consumers always go for the lowest price company that has the most efficient production meets this demand lowest production cost -> mass production Product Concept focus on the product (I.T industry) best quality, best performance, most innovative focus too much on the product -> marketing myopia oversees competition Selling Concept focus on forceful sales hard sell insurance, political campaigns often blamed; however it may be ethical Marketing Concept focus on customer wants and needs customer importance is emphasized Defining businesses based on consumer needs gives companies a bigger market- compare company mission statements to differentiate between product concept & marketing concept Societal Marketing Concept businesses are held to higher standard not negatively impacting the society improve the well-being of consumers moving toward this trend as consumers are more educated, connected, and demanding Marketing Strategy Planning Process 1. Define mission 2. Define organizational Objectives 3. Define marketing objectives 4. Create Marketing Plan The Marketing Plan: central instrument for directing & coordinating marketing effort 1. Executive Summary and Table of Contents 2. Analysis of Marketing Opportunities Analysis of market & environmental opportunities and threats SWOT Objectives generation 3. Description of Marketing Strategy segment by positioning SWOT of each positioning BCG portfolio analysis marketing strategy generation 4. Description of Implementation Strategy: Action Program 5. Financial Projections and Evaluation Measures Analysis of Marketing Opportunities Tracking Environmental Trends Social- demographic shifts, cultural changes Economic- macroeconomic conditions, consumer income Technological- impact on marketers & consumers Competitive- alternative forms of competition; component of competition Regulatory forces- laws protecting competition; self regulation; consumerism Setting Strategic Direction SWOT external: O & T internal: S & W BCG Market- Product Analysis Market penetration- a marketing strategy of increasing sales of present products in existing markets by selling more products (better distribution or promotion) by selling at a higher price Market development- selling existing product to a new market new geographic market new market segment, etc Product development- selling new products to existing markets Coca Cola sells its customers a new line of chai tea Diversification- developing new product and selling them in new markets riskier growth related diversification occurs when new products and new markets have something in common with its existing operation. ie. a restaurant buy out another restaurant unrelated diversification enters the business into a completely different market Description of Marketing Strategy segmentation target market positioning/differentiation product,price,promotion,distribution strategy Description of Implementation Strategy: Action Program launching time objectives break even analysis financial performance evaluation criteria Marketing Control: Set goals -> measure performance -> evaluate performance -> correction Marketing Environment Microenvironment: company's internal environment (management, R&D, accounting, purchasing, manufacturing, financing) External Environment: Social: size, density, location, age, sex, race, occupation Generation Cohorts Baby Boomers- these people (1946-1964) have become an important consumer market this group accounts for the majority of the purchases company shifts toward healthier living/ future for grandchildren to suit the demand Wasn't there for Europe or Japan. Economic Boom period/ economic prosperity. Good jobs without much education/ good retirement benefits Particularly shaped by televisions- uniformed values and experiences (easy to build brands- IBM, Coca Cola) Particularly targeted housewives- soap companies started to sponsor tv shows -> the reason of "soap" Generation X(1965-1978) - baby bust because of the decline of new-born children the years after 15% less population than baby boomers Although with higher education, there are less jobs around (economic difficult period) Different tv channels created a more heterogeneous group Emerge of internet Self-reliant, entrepreneurial, supportive of ethnic diversity, better educated taking advantage of retirement plan, more well thought/ planned out Generation X has became the parents market- firms have changed their products according to suit their needs (product development) Generation Y(1979-1994)- period of increasing birth. Exerts influence on wireless communication, the newly emerged adult market Most comfortable with digital technology (born into the technology) Very digitally connected, very diverse in interest, Like choices, uniqueness, customization Generation Z (1995- now)- wants similarity in products Marketers have developed generational marketing programto target each of the specfic groups- QR codes (Quick Response) for generation Y & Z for instance. Standard Canadian families are changing in size and structure, giving birth to blended family, one formed by the merging of divorce adults Population shifts in census metropolitian areas (CMAs) to major urban regions give marketers chance to reach large segments of the Canadian population efficiently and effectively The Great Rebalancing: There are many more people who earn more income than they used to. Million of new middle class arises every year. Growth opportunities for many companies that supplies the "wants" Ethnic Diversity- visible minorities; ethnic marketing: multicultural marketing- combinations of marketing mix that reflects the unique attitudes, race, or ancestry of ethnic Canadians. Ex. Running native language ads, community involvement, etc. Cultural- attitudes and values Core values- highly persistent freedom, equality, working, self-respect Secondary values- more prone to change self-image, society, nature, universe Economic Macroeconomic Conditions inflationary or recessionary state of the economy if price rises faster than consumer incomes, number of sales decreases inflation= period of price increases recession= time of slow economic activity: business decreases productivity and unemployment rises. Usually products targetted to middle class suffer the most sevferely in a recession assessing consumer expectations of the state is an important element of environmental scanning As market is growing for a certain type of product, some other markets are shrinking develop an index called a consumer confidence or consumer sentiment index As economic power shifts to Asia, its culture will become more global Consumer Income Gross income total amount of money made in one year by one unit (individual, household, family, etc) Disposable income money a consumer has after paying taxes to use for necessities such as food, shelter, clothing, and transportation average Canadian families spend 20% of their incomes on tax; 45% on transportation Discretionary income money remained after paying for tax AND necessities: used for luxury items Technological Fast pace of change -> shorter product life cycle Internet Biotech Information revolution Competitive Selling similar products & services to same customers at same prices : brand All firms making same product or class of products : industry All companies making products that supply the same service: form All competing for same consumer dollar: generic Market Segmentation: dividing market into distinct subsets of customers Four levels of market segmentation 1. Mass Marketing 2. Segment Marketing 3. Niche Marketing 4. Micro Marketing Segmentation Process 1. Define the market: define common customer needs 2. Select segmentation variables These needs may have different solutions 3. Determine methodology Statistical methods (A Priori and Post Hoc), sample, data, software 4. Describe Segments Group consumers with similar interest 5. Evaluate Segment Attractiveness 6. Select Target Market Single segment (selective specialization)- getting to know the market well, satisfying the wants and needs well. No diversification. Big risk if problems arise in the segment Market Specialization (product specialization)- focus on a specific market and try to satisfy all their wants and needs. Specialize in university labortory (produces everything that a lab may need) A microscope company may produce products ranging from toy microscope to government used microscope. Full Market Coverage- Target all segments in all market (ex. Coke, IBM) Positioning 1. Identity a set of competitive advantage 2. Select the right competitive advantage Important? Distinctive? Superior? Preemptive? Affordable? Profitable? 3. Deliver and effectively communicate the chosen position Positioning statement Positioning Map Consumer Behavior Influencing consumer behavior Influences on the consumer purchase decision process Psychological influences: motivation, personality, perception, learning, values, beliefs, attitude, lifestyle Sociocultural influences: personal, reference groups, family, culture, sub-culture, social class Marketing Mix influences Situational influences Consumer Decision Process 1. Need/ Want Recognition: replacement/repeat purchase, advertisement, promotions, social interaction 2. Information Search: personal, commercial, public, experiential Levels of information search depends on involvement, degree of risk (social, performance, financial), brand differentiation Also related to past experience and familiarity with product/service category. Extended problem solving (many brands), limited problem solving (few brands), routine problem solving (one brand) 3. Alternative evaluation: Product & service Product: a cluster of benefits that is offered to a market to use or consumption to satisfy a want or need Product Attributes Quality: ability for a product to perform its function Features: a tool for differentiation Design: competitive weapon Style: visual impact Product- Service Continuum Service Characteristics Intangibility: cannot be seen, tasted, felt, or smelled Variability: depends on who provides Inseparability: from the provider Perishability: cannot be stored for resale or later use Brand: a name, logo, signage that uniquely identifies the goods/services of a particular firm Importance of branding: more important as imitations of product is challenging differentiation 1930/40 begins major branding activities (television advertisement, newspaper, media) 1990 cheaper alternatives for detergent, branded company stoped advertising. 1980 branding was undone in 1990 because prices were competitive 2000 banks went back to branding, newcomers (water industry, computer chips) also begin to brand their products Drugs market- clear evidence for similar products could differentiate through branding Therefore commodities begin to branding themselves after 2000 Why use branding? Higher profitability A name that identifies, customer loyalty, convenient for consumers Help positioning strategy Trademark protection (Xerox was generic- consumers started to call competitors Xerox's name) Commodization of a brand Major Branding Decisions 1. To brand or not to brand When a product is a commodity, the major decision is PRICE. But if you dont have the best price, then brand your product. You might decide to create a product and sell it to other companies to brand it- becoming a manufacturer 2. brand name selection suggest benefit and qualities easy to pronounce/ recognize/ remember/ distinctive adaptable for brand extensions 3. brand strategy Brand extension introduces products into a different product category: they want to grow their profit; if they have reached capacity in a market, they might extend to another market. It is the best way to grow their profit: consumers see less risk in trusting the brand. However, if an extension fails in another category, it may adversely harm the brand in another category. If you extend your brand too much, you may lose exclusivitity- brand dilution. Ex. Assume McGill has campus around the world, online diploma, there should be a limit for prestigious brand before they lose exclusivity. Line Extension: target a different segment in the same market for different wants and needs; if they have idle production capacity, improve the economy of scale; therefore they go for the lowest risk formula. Ex. diet coke Multibrand Line Extension introduces a new brand name into a category in which you have other brands. Ex. P & G Benefits of Line Extension capture variety seekers obtain higher market share economy of scales target a different segment more shelf space Disadvantage of Line Extension brand cannibalism retail & consumer reluctance 4. brand repositioning packaging 5 seconds advertisement/ better shelf life labeling identify product or brand, quantity sold, state name or place of production product characteristics, promotion, legal issues New Product Development and Life Cycle Strategies New Product Development source of competitive advantage (innovative) reinforce or change strategic direction enhance corporate image capitalize outstanding production resources Development Process 1. Idea generation Search for unsatisfied needs or wants from customers, internal sources, competitors, or distributors 2. Idea screening Generate thousands of ideas and select only a few to develop further 3. Concept development & testing Do segmentation and positioning analysis (market opportunities analysis) Generate product concepts Select one concept from market research 4. Marketing Strategy Create a prototype Write the marketing strategy, implementation, and financial analysis section in the marketing plan 5. Product Development Combine R&D and engineering department Create physical product Require the most investment 6. Test Marketing Testing markets, product use tests, demonstration 7. Commercialization major investment in manufacturing high advertising and promotion expenses Product Life Cycle Introduction Sales are low; consumers are not aware or available for the customers. Company may not have capacity to mass produce the product. Costs are highest; have not gained economy of scale Profit is negative Customers are innovators Very few competitors: first to have the product, competitors are waiting to jump in later Marketing objective: create awareness and trial Ex. Yogo, Windows 8 One product: basic Price: cost-plus; may not be practical in some industries Distribution is selective because output is limited; even distributed widely there may not be any sales Advertising is about building awareness Heavy promotion to encourage sales; luxury products, however, should not use heavy promotion Growth Increasing sales Average cost Rising profits Increasing competitors Marketing Objective : maximize your market share before other takes over Ex. Lenovo, tablets, galaxy note Offer product warranty and other services to get an edge over competitors May decrease the price to penetrate the market Intensive distribution: wal-mart, zellers Build awareness in bigger markets Maturity Sales peak Company tries to expand as much as possible (cashcow) High profit used for mass marketing Customer base is middle majority Marketing objective: maximize profit and defending market share Stable number of competitors Ex. Automobile, softdrinks, microsoft, IBM, tropicana Product development (different versions of the original product) Develop and revision in other marketing mix elements; ex. Distribution, better pricing Expand to a new segment or geographical regions Increase promotion for brand switch (interchangable customers) Decline Sales are declining (technology becoming obsolete, changing consumer taste) Costs are lower per customer as you have an economy of scale; you have had advertising and product related expenses Declining competition/ profits Marketing Objective: reduce expenses and milk the brand Sales promotions are used to liquidate inventories as early as possible Ex. DVD players, CDs Adoption Process How fast do consumers go and buy the product Diffusion curve of innovation: borrow from science Slope of the curve is different for each product It is what drives all the adoption in the market Innovators are people who really need the product or people who really desire it. Ex. Fashion items, electronic gaggets Early adopters are people who are interested in the product, yet waiting for some features. Ex. DVD machines did not have recording feature Early majority is price sensitive and expects variety on the products: different features, brands, price competition. Late majority is only price sensitive, waiting for price to go down Laggards simply do not see advantage in the product; they may or may not buy it eventually. Not because they can't afford it but not showing interest in the product Accessibility, communication accessability, risk perceived are all factors that influence diffusion Distribution Strategy Intermediaries: make possible the flow of product from producers to buyers transactional: buying, selling, risk taking logistical: gathering, storing, dispersing of products facilitating: make goods and services more attractable Types of intermediaries: Agent or broker: act behalf of manufacturer Wholesaler: sells to other intermediaries, usually to other retailers or consumers Retailer: sells to consumers Distributor: perform a variety of distribution functions: selling, packaging Dealer: includes all of the above Functions of distribution channels information communication negotiation ordering financing risk taking physical distribution payments transfer Consumer Marketing Channels Direct channel (0 level channel) refers to direct transportation from manufacturer to consumers (door-to-door service): Ikea, Dell, farmers market, shopping channels, Apple store, Gap, franchises A lot of big companies use one-level distribution channel; only use wholesaler when it is owned by the parent company. Two level channels are used a lot by small companies because they need to first go with the wholesaler a
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