Marketing 3000 – Mizzou

Definition of Marketing
Marketing is the study of exchange. It’s the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and service to create exchanges that satisfy objectives.
Tasks of Marketing
1) Discover customer needs
2) Satisfy customer needs

Also called the Marketing Concept

Why does a new product fail when it’s introduced?
The marketing concept wasn’t follow. There wasn’t sufficient need for the product.

Perception is reality.

Marketing Mix / 4 P’s
Product
Price
Promotion
Place

Product is most important

Benefits of Marketing
Functional (hammer, toothbrush)
Social (cell phone, social media)
Personal (sports events, traveling)
Experiential (gym membership, healthy foods)
Types of Costs
Monetary (tuition)
Temporal (time spent in class/studying)
Psychological (stress studying)
Behavioral (energy spent walking to class)
Monetary vs. Non-Monetary Costs (IKEA example)
– temporal –> time wasted in the store, time installing the furniture
– behavioral –> getting pissed installing the furniture

But it’s good furniture for cheap

Analyzing the marketing environment: People want to focus on a healthy lifestyle — how does the market respond?
Increased marketing of gym memberships, organic/healthy foods, exercise equipment
Porter’s Five Forces Model
Industry Competitiveness
Availability of Substitutes
Threat of New Competition
Supplier Power
Buyer Power
Industry Competitiveness
– low intensity = high profitability
– lower price competition and fewer firms
– When few firms compete, intensity is low
ex. Boeing/Airbus
Availability of Substitutes
– Customers can choose different product as a substitute
– Few or no substitutes = high profitability
Few/No Substitutes
Soft drinks
Gasoline
Many Substitutes
beer & wine
Is Coke a substitute for Pepsi?
No, they are competitors
Threat of Potential Entrants
– High barriers to entry = higher profitability
— high capital requirements
— economies of scale are present
— high product differentiation
— network externalities
Economies of scale
high volume production
What happens when there are low barriers to entry?
Firms dominate then create barriers
How does Amazon create a business model with high barriers to entry?
1) the huge number of users creates a barrier to entry — google searches lead to Amazon, more buyers = more positive reviews
2) Amazon makes it easy to buy online
Suppler and Buyer Power
– Low bargaining power of suppliers/buyers = high profitability

low supplier power — computer industry, disk drives
low buyer power — medical services

When is there low bargaining power?
When there’s a high number of options with little information
How is the airline industry regulated by Porter’s Five Forces Model?
The commercial airline industry has tremendous buyer power. They know a high amount of information and there’s only two suppliers of aircraft. Each aircraft is tremendously expensive/valuable.
Sustainable competitive advantage
an advantage over the competition that can be maintained consistently over time
How does McDonald’s maintain a competitive advantage
– Convenience
– Price
– Operational Efficiency
Market Penetration
existing products, existing markets
increase distribution, lower price

ex. products go on sale

Market Development
existing products, new markets

expanding into a new state/country

Product Development
New products, existing markets

releasing new iPhones

Diversification
new products, new markets

Quaker Oats buying Snapple

Market Leader Strategy
Attack substitute products

ex. EJ Gallow (leading producer of wine) releasing new wine aimed at younger consumers to take away the beer market share

Exploratory
Focus Groups
Depth Interviews
Projective Techniques
Focus Groups
Adv – speedy collection of data, interaction flexibility
Disadv – small sample size, analysis difficult
Depth Interviews
A – greater depth/insight, no social/group pressure
D – high cost, analysis difficult
Projective Techniques
A – elicit responses from people normally unwilling, increased validity of responses, ability to uncover subconscious motivations

D – high cost, interpretation bias

Mall Intercept
A – interaction flexibility, speedy collection of data, high response rates, visual stimuli

D – moderate to high costs, interviewer bias, sampling bias

Telephone survey
A – moderate cost, speedy collection
D – limited question types
Internet survey
A – inexpensive, speedy, convenience of response time-frame
D – lack of control over bogus responses, self-selection bias, not random sample
Mail survey
A – cost effective, response time-frame, anonymity
D – low response rate, limited depth of response, slow collection
Observation
A – collection of actual behavior, useful for collecting sensitive data
D – expensive, time-consuming
Syndicated research services
3rd party research company that sells market research to companies
Marketing information system (MkIS)
people, equipment, and procedures needed to give information to marketing decision makers

– internal to the company

Marketing Research Process
1) Defining problem and research objectives
2) Developing Research plan
3) Collect Information
4) Analyze the information
5) Present the findings
Which step is the most time-consuming?
Defining the problem and research objectives
Exploratory research
sheds light on problem – suggests new solutions or new ideas
Descriptive research
find out what’s most important
Causal research
test cause-and-effect relationships
Primary Data
research approaches — observation, focus-group, etc.

– collected for a specific puprose

Secondary Data
Internal sources, government data, periodicals and books, commercial data, internet

Data is always cheaper if already collected
Ex. US Census

Good Market Research
1) is scientific (objective/unbiased)
2) is creative
3) uses multiple methods
4) realizes the interdependence of models & data
5) Limits the number of methods/research as a whole ($)
6) maintains healthy skepticism
7) is ethical
What is market share?
brand’s sales / total industry sales
Sales Forecast
– based on a specific marketing plan
– expressed in dollars or product units
– usually covers a 1 year period
Demand Forecast
estimating the sales of product during a future time period
Market Factor Analysis
demand for a product is assumed to be related to the behavior of certain sales activity
Survey of buyer intentions
a sample of current or potential customers are asked how much of a particular product they would buy at a given price during a specified future time period
Past sales and trend analysis
flat % increase applied to a past volume or a past volume average
Sales-force composite
a bottom-up method consisting of collecting estimates of sales for the future period from all salespeople
Executive judgment
obtaining opinions regarding future sales volume from one or more executives
Test marketing
a firm markets its product in a limited geographic area, measures sales, and then projects the company’s sales over a large area
Market Segmentation
1) Identify segmentation variables and segment market
2) Develop profiles of resulting segments
Market Targeting
3) Evaluate attractiveness of each segment
4) Select the target segment(s)
Market Positioning
5) Identify possible positioning concepts for each target segment
6) Select, develop, and communicate the chosen concept
Why segment the market?
1) People have differences in buying habits
2) Goods/services differ in the way they are used

– Mass marketing is not a good approach
– Always segment the market as much as possible

Market Segmentation allows managers to:
– visualize specific customers
– concentrate their resources, more efficiently use their resources
Segmentation Process
– Identify current and potential needs/wants within a market
– Identify distinguishing characteristics
– Determine the potential for segments and how well they are being satisfied
Demographic market segmentation
age, gender, ethnicity, income, education, occupation, family type, marital status
Geographic market segmentation
nation, region, urban/rural, regional, climatic
Psychographic market segmentation
attitudes and lifestyles
Purchase behavior market segmentation
– usage (low, medium, high)
– loyalty status (brand loyal or brand neutral)
– user status (user, nonuser, former user)

For subscription-based products, former users are the primary target

Guidelines for Market Segmentation
– Buying behavior of a segment is rarely traceable to a single characteristic
– The first segmentation characteristic should be the one that provides the clearest and most distinctive division
– Marketer should be aware of the interrelationships among characteristics
Conditions for Selecting a Market Segment
– Identifiable
– Substantial
– Reachable
– Responsive
Niche Marketing
one product for one segment
Differentiated Marketing
multiple products for multiple segments

ex. Honda, Levi’s

Individualized Marketing
customizing product/service for individual

ex. Nike ID, gaming

Competitive-Based Positioning
1) Hierarchical order of categories
— lowest to highest
ex. Pepsi – diet soft drinks – soft drinks – non-alcoholic beverages
— two lowest are most important
2) Category Membership
– statement of new membership, for new products, shows they belong
How to establish category membership?
Ad showing your product, A comparison ad comparing your product to a well-known brand
Points of Difference – How is your brand superior to others
1) Benefits Selected
– strongest positions are ones where brand has point of difference on the most important benefit
– small brands find niches
2) Stress one benefit in promotion
Most important association for points of difference
If most people believe your brand is the best at doing what is driving its demand

ex. Tide – laundry detergent’s cleaning ability
Walmart – low prices

Why should you only stress one benefit initially?
– Way to make a powerful statement
– Easiest positions to defend are extreme positions
Correlational Inferences
– inferring one thing from another
ex. high price = high quality
ex. fast, fun car does not equal a safe car
Brand Essence
– Abstracted benefits that related to consumer goal
– communicating your brand image to match with your target customers

ex. a benefit can be used infer another benefit

Laddering Up
showing the experience/feeling the brand conveys

ex. Herbel Essence commercial

Personality Dimensions of a Brand
1) Sincerity
2) Sophistication
3) Competence
4) Ruggedness
5) Excitement
Laddering Down
showing features to support the brand image
ex. F-150
Product Orientation Philosophy
– Best suited for situations where demand exceeds supply
– Based on the idea that the product will sell itself through low price or high quality
Sales Orientation Philosophy
– Philosophy is to sell/persuade people to buy what is made
Marketing Orientation Philosophy
– Requires information about the market
– Making what is desired or wanted
– First requires the company to find out what is desired or wanted
– Focused on long term success
Three elements of the Marketing Orientation Philosophy
– Customer focus
– Coordinated marketing effort
– Long-term success
Relationship Marketing
– Way to maintain long-term relationships
– need to surpass expectations through superior product or service performance
Strategic Planning
Developing a company mission, objectives and goals, choosing organizational strategies, and developing a portfolio plan
Marketing Planning
1) Conduct a situational analysis
2) Developing marketing objectives
3) Segmentation and Selecting Target Markets
4) Determining product position
5) Designing a strategic marketing mix
Situational Analysis
– Conduct an environmental analysis that will identify external forces
Demographics
characteristics of a population
Economic Trends
business cycles – prosperous growth or decline
— affects almost every marketing program
— generally growth plans and prices are cut back during recessions
Competitive Environment
– brand competition
– monitoring substitutes
Sociocultural trend
Gatorade becoming a substitute for Coke when consumer taste changed
Political/Legal
laws that regulate competition or protect consumers
Technological advances
Internet, tables, smart phones and how these affect marketing strategies
Developing marketing objectives
effective objectives are specific, measurable, and attainable
Determining Product Position
– Every product should have something special about it that makes a particular group of consumers select it over an alternative
Marketing Mix
– must be uniquely designed for each target market

Product
Place (distribution)
Pricing
Promotion

Random Sampling
equal chance for each member of the population to be selected
Stratified Sampling
population is divided into groups based on a common characteristic then a random sample is taken from each group
Area Sampling
same as stratified, but using geographical area as the basis for groups
When is category membership important?
– Introduction of a new product
– When consumers may not be convinced a certain product belongs in a certain class

ex. Consumers may not be certain if Dell is in a class with Apple of HP

Points of Parity
benefits that imply category membership that are common to most (if not all) brands
Exemplars
a way for companies to efficiently specify category membership

ex. Subaru advertising like Volvo – safe cars

Point of Difference
How a brand dominates other members of its category
Benefit Selection
– Important to identify accepted consumer beliefs to identify benefits that will be a point of difference
– Smaller brands generally try to establish a niche
Normative Benefits
– Benefits that customers say are important because of societal standards rather than because these benefits actually influence behavior
Category Essence
– Uses insight about how a category fits with consumers’ goals as a brand’s point of difference
– Assumes that if a brand understands a person’s problems, that brand is the solution