MKT 850 Study Guide Chapter 5 * SWOT Analysis: * One of the most useful tools in analyzing marketing data and information * Links company’s situation analysis and development of marketing plan * Uses structured information to uncover competitive advantages and guide selection of the strategic focus of the marketing strategy. * Broken down into: * Strengths, Weaknesses, Opportunities & Threats * Productive SWOT (manager should…) : * Use a series of SWOT analyses focusing on specific product/market combinations * Search for competitors both present and future Collaborate with other functional areas by sharing information and perspectives * Examine issues from the customers perspective by asking employees: * What do customers believe about us as a company? * Which of our weaknesses translate into a decreased ability to serve customers? * Looks for causes not characteristics considering the firms resources for each part * Separate internal and external issues using this key test: * Would this issue exist if the firm did not exist? * If yes, issue classified as external * Strengths & Weaknesses: Exist because of resources by the firm, or due to the nature of key relationships between the firm and its customers/employees/outside organizations * May be leveraged into capabilities (strengths) or overcome (weaknesses) * Meaningful only when they assist or hinder the firm in satisfying customer needs * Opportunities & Threats: * Not potential marketing actions. Issues/situations that occur in the firm’s external environments. * Not ignored as the firm gets caught up in developing strengths and capabilities for fear of creating an efficient, but ineffective organization. Stem from changes in the competitive, customer, economic, political/legal, technological, and sociocultural environments. * SWOT Matrix: * Allows marketing manager to visualize the analysis * Serves as a catalyst to guide the creation of marketing strategies that will produce desired results. * Allows manager to see how strengths and opportunities might be connected to create capabilities that are key to meeting customer needs * Assesses the magnitude and importance of each strength/weak/opp/threat. * Competitive Advantage: Capabilities in relations to those held by the competition * Based on both internal and external factors * Based on reality and customer perception * Based on the basic strategies of operational excellence, product leadership, and customer intimacy. * Strategic Focus Establishment * Based on developing an overall concept or model that guides the firm as it weaves various marketing elements together into a coherent strategy * Tied to firm’s competitive advantage * Use results of SWOT as firm considers four directions of strategic efforts: * Aggressiveness Diversification * Turnaround * Defensiveness * Ensures the firm does not step beyond core strengths to consider opportunities outside its capabilities * Visualized through the use of a strategy canvas where the goal is to develop a value curve that is distinct from the competition * Downplay traditional industry competitive factors in favor of new approaches * Lays groundwork for development of marketing goals and objective, connects SWOT outcomes to the rest of the marketing plan. * Marketing Goals: Broad, desired accomplishments started in general terms. * Indicate the direction the firm attempts to move in, as well as the set of priorities will use in evaluating alternative and making decisions. * Should be attainable, realistic, internally consistent, comprehensive, and clarify the roles of all parties in the organization. * Involves some degree of intangibility * Marketing Objectives: * Specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals * Should be attainable with reasonable effort Continuous or discontinuous depending on the degree to which they depart from present objectives * Assigned to specific areas, departments, or individuals who have the responsibility to accomplish them Chapter Six * Buyer Behavior in Consumer Markets: * Often irrational and unpredictable as consumers say one thing and do another * Progress through five stages: * Need Recognition * Information Search * Evaluation of Alternatives * Purchase Decision * Post Purchase Evaluation Don’t always follow these stages in order or may skip stages * May be characterized by loyalty where consumers simply purchase the same product that they bought last time * Involves parallel sequencing of activities with finding the most suitable merchant. * Consider what product they want, and where to buy it * Can occur if a consumer is fiercely loyal to a merchant * Can be affected by: * Complexity of the purchase and decision making process * Demographics, Psychographics, and Sociocultural factors * Social influences: culture, social class, family, opinion leaders, reference groups. Situational influences: physical and spatial influences, social and personal influences, time, purchase task/usage, consumer disposition * Consumers Wants & Needs: * Shouldn’t define needs as necessities because everyone has a different perspective on what constitutes a need * Needs occur when a consumers current level of satisfaction doesn’t equal their desired level * Wants are consumers desire for a specific product that will satisfy a specific need * Firm must understand basic needs fulfilled by its products. Allows firm to segment markets and create marketing programs that show needs into wants for their product * Most products are marketed on the basis of wants not need fulfillment * Wants are not the same as demand * Demand: occurs when the consumers ability and willingness to pay backs up a want for a specific product * Information Search: * Passive and Active: * Passive- consumer become more attentive and receptive to information * Active- consumer engages more aggressive seeking information search * Depends on several issues: Degree of risk * Level of expertise * Actual cost of search (time and money) * Culminates in an evoked set of suitable buying alternatives * Evaluation of Alternatives: * Translates needs into wants for specific products or brands * Evaluate products as bundles of attributes that have varying abilities to satisfy their needs * Priority of each consumers choice criteria can change * Want the product to be in the evoked set of potential alternatives * Constantly remind them of their company and products * Purchase Stage: Intent to purchase and the actual act of buying are distinct concepts * Key issues: * product availability: how easy is it to get the product where the consumer is * possession utility: how easy is it to transfer ownership * Postpurchase Evaluation: * Outcome of buying process is linked to the development of long-term customer relationships. Closely follow customers’ responses to monitor performance and ability to meet customers’ expectations * Will experience one potential outcomes: Delight, satisfaction, dissatisfaction, or cognitive dissonance * Business Markets: * Purchase products for their use in their operations, like buying raw materials, buying office supplies, or leasing cars * Consists of four types of buyers: * Commercial markets * Reseller markets * Government markets * Institutional markets * Four unique characteristics not found in consumer markets: * The buyer center: economic buyers, technical buyers, and users * Hard and soft costs are equally important Hard- monetary price or purchase costs * Soft- downtime, opportunity costs, HR costs * Reciprocity: business buyers and sellers often buy products from each other * Mutual dependence: sole-source or limited-source buying makes both buying and selling firms mutually dependent * Business Buying Process: * Sequence of Stages: * Problem Recognition * Development of product specifications * Vendor identification and qualification * Solicitation of proposals and bids * Vendor selection Order processing * Vendor performance review * Can be affected by several factors including: environmental conditions, organizational factors, and interpersonal/individual factors * Market Segmentation: process of dividing the total market for a particular product or product category into relatively homogeneous segments or groups * Groups should have similar members, but groups must be dissimilar from each other * Fundamental decision of whether to segment at all Allows firms to be more successful due to the fact that they can tailor products to meet the needs of a particular market segment * Traditional market segmentation approach: * Used successfully for decades, not out of date, and are used by many of today’s most successful firms * Can be used in combination with newer approaches by the firm, depending on the brand/product or market in question * Successful segmentation: Must be identifiable and measureable * Substantial * Accessible * Responsive * Viable and sustainable * Avoid ethical/legally sensitive segments * Avoid viable segments that don’t match firm’s mission * Mass Marketing: no segmentation and is aimed at the total market for a product * Undifferentiated approach assumes all customers have similar needs/wants * Works best when needs are relatively homogeneous Advantage- production efficiency and lower marketing costs * Disadvantage- risky because a standardized product is vulnerable to competitors that offer specialized products that better match customers’ needs * Differentiated Marketing: divides the total market into groups of customers having relatively homogenous needs, attempting to develop a marketing program that appeals to one or more of these groups * Necessary when customer needs are similar within a single group, but the needs differ across groups * Two options: * Multi-segment approach * Market concentration approach Niche Marketing: focusing efforts on one small, well defined market segment or niche that has a unique, specific set of needs * Requires that firms understand and meet needs of target customers. Although small in size, firms substantial share makes the segment highly profitable * Individualized Segmentation Approaches: * Viable due to advances in technology especially in communication and the internet * Organizations can now track customer with a high degree of specificity * Allows firms to combine demographic data with past/current purchasing behavior. Tweak marketing programs in ways that allow them to precisely match customers’ needs, wants, and preferences * Become more important in the future because their focus on individual customers makes them critical to the development and maintenance of long-term relationships * Expensive to deliver * Two important considerations: * Automated delivery of the marketing program * Personalization One-to-one Marketing: involves the creation of an entire unique product or marketing program for each customer in the target segment * Common in business markets where unique programs and systems are designed for each customer * Growing rapidly in consumer markets, in luxury or custom made products or services * Mass customization: providing unique products and solutions to individual customers on a mass scale * Cost-effective and practical due to advances in supply-chain management. real time inventory control) * Used frequently in business markets, especially electronic procurement systems * Permission Marketing: different from one-to-one marketing because customers choose to become a member of the firm’s target market * Commonly executed via opt in email lists * Advantage: customers already interested in firms offerings * Allows precise target of individuals, eliminating the problem of wasted marketing effort and expense * Identify Market Segments: selecting most relevant variables to identify and define the target market, many of which come from the situation analysis of the marketing plan. Isolation of individual characteristics that distinguish one or more segments from the total market (must have homogeneous needs) * Consumer markets involved examination of factors of one of these categories: * Behavioral segmentation: most powerful approach because it uses actual consumer behavior or product usage helps to make distinctions among market segments Demographic segmentation: divides markets using factors such as gender, age, income, and education * Psychographic segmentation: state-of-mind issues such as motives, attitudes, opinions, values, lifestyles, interests, and personality * Geographic segmentation: most useful when combined with other segmentation variables, geodemographic segmentation or geoclustering. * Business markets are based on types of market or on things such as: organization, characteristics, benefits sought/buying process, personal/psych characteristics, or relationship intensity. Top Marketing Strategies: * Based on evaluation of the attractiveness of each segment and whether each offers opportunities that match firms capabilities and resources * Single segment targeting, selective targeting, mass market targeting, product specialization, and market specialization. * Also consider issues related to noncustomers, like why they do not buy and finding ways to remove obstacles to purchase. Chapter 7 Product Strategy: at the heart of every organization and it defines what the organization does and why it exists * Creating a productive offering that is a bundle of physical (tangible), service (intangible), and symbolic (perceptual) attributes designed to satisfy customer wants/needs. * Strives to overcome commoditization by differentiating product offerings via the service and symbolic elements of the offering * Product Portfolio: * Used in both consumer (convenience, shopping, specialty, etc. and business markets (raw materials, process materials, installations, etc. ) * Used in most firms due to the advantages of selling a variety of products * Consists of a group of closely related product items (product lines) and the total group of products offered by a firm (product mix) * Involves strategic decisions such as variety and assortment of offerings * Can create benefits including: economies of scale, package uniformity, standardization, sales and distribution efficiency, etc. Service Products Challenges: stem from the intangibility of services. Other characteristics include simultaneous production/consumption, and perish ability/client based relationships * Other issues: * Experience problems in balancing supply and demand * Time and place dependent because customers must be present for delivery * Customers have a difficult time evaluating quality of service before it is purchased * Quality of service is often inconsistent and hard to standardize * Need for some services are not always apparent to customers.
Service marketers often have trouble tying offerings to needs * New Product Development: vital part of a firm’s efforts to sustain growth and profits * Six strategic options related to newness of products: * New-to-world products (discontinuous innovations)- which involve a pioneering effort by a firm that leads to the creation of an entirely new market * New product lines- represent new offerings by the firm, but they become introduced into established markets * Product line extensions- supplement an existing product line with new styles, models, features, or flavors * Improvements/Revisions of existing products- offer customers improved performance or greater perceived value * Repositioning- targeting existing products at new markets or segments * Cost reductions- modifying products to offer performance similar to competing products at a lower price * Depends on firms ability to create differential advantage for the new product * Proceeds through five stages: * Idea generation * Screening and evaluation * Development * Test marketing * Commercialization * Branding Strategy: selecting the right combination of name, symbol, term, and design that identifies a specific product * Two parts: * Brand name: words, letters, and numbers * Brand mark: symbols, figures, or a design * Critical to product identification and factor used by marketers to differentiate a product from its competition * Successful- capture product offering in a way that answers a question in consumers mind *
Involves many attributes that make up the way customers think about brands: * People (employees and endorsers) * Places (country of origin) * Things (events, causes, third party endorsements) * Other brands (alliances, the company, extensions) * Advantage- make it easier for customers to find and buy products * Four key issues: * Manufacturer vs. private-label brands- private label brands are more profitable than manufacturer brands for the retailers that carry them. Manufactured brands have built-in demand, recognition, and product loyalty. * Brand loyalty- positive attitude toward a brand that causes customers to have a consistent preference for that brand over all competing brands in a product category. Three levels: brand recognition, brand preference, and brand insistence * Brand equity- the value of a brand or the marketing and financial value associated with a brand’s position in the marketplace. * Brand alliances- branding strategies, such as co branding that involve developing close relationships with other firms. * Packaging and labeling: * Part of developing a product, its benefits, its differentiation, and its image * Issues such as color, shape, size, convenience of the package or container * Are often used in product modifications/co branding to reposition the product or give it new features. * Vital in helping customers make proper product selections * Important environmental and legal consequences * Differentiation and Positioning: Creating differences in the firm’s product offering that set it apart from competing offerings (product differentiation) and the development and maintenance of a relative position for a product in the minds of the target market (product positioning) * Can be monitored through perceptual mapping- a visual, spatial display of customer perceptions on two or more key dimensions * Based on the brand, but also product descriptors, customer support services and image * Includes positioning strategies to strengthen current position, reposition, or reposition the competition * Managing Products and Brands over time: * Traditional product life cycle five stages: Development: a time of no sale revenue, negative cash flow and high risk * Introduction: time of rising customer awareness, extensive marketing expenditures, and rapidly increasing sales revenue * Growth: time of rapidly increasing sales revenue, rising profits, market expansion, and increasing numbers of competitors * Maturity: time of sales and profit plateaus, a shift from customer acquisition to customer retention, and strategies aimed at holding or stealing market share * Decline: time of persistent sales and profit decreases, attempts to postpone the decline, or strategies aimed at harvesting or divesting the product * Influence by shifts in the market, or actions of the firms within the industry as they constantly reinvent themselves. Chapter 8 * Pricing: * Key factor in producing revenue for a firm * Easiest of all marketing variables to change * Important consideration in competitive intelligence * Only real means of differentiation in mature markets that are commoditized * Among most complex decisions to be made in developing a marketing plan * Sellers Actions regarding Price: Tend to inflate prices to receive as much as possible in exchange * Consider four issues in pricing strategy: * Costs * Demand * Customer value * Competitors’ prices * Have increased power over buyers when products are in short supply, high demand, or good economic times. * Buyers Actions regarding Price: * See prices as being lower than the market reality dictates * Two issues: * perceived value * price sensitivity * Considered value to be the ratio of benefits to costs. “More bang for the buck” * Increased power over sellers when large number of sellers, economy is weak, product information easy to obtain, or price comparisons are easy to make * Cutting prices: Viable means of increasing sales, moving excess inventory, or generating short-term cash flow * Based on two general pricing myths: * When business is good, a price cut will capture greater market share * When business is bad, a price cute will stimulate sales * Risky because a price cut must be offset by an increase in sales volume to maintain the same level of gross margin * Not always best strategy, maybe build value into the product instead. * Pricing strategy issues: * Pricing objectives * Nature of supply and demand in the market * Firms cost structure * Nature of competition and the structure of the industry * Stage of the product life cycle * Firms cost structure: Typically associated with pricing through breakeven analysis or cost-plus pricing * Not be the driving force behind pricing strategy because different firms have different structures * Used to establish a floor below which prices cannot be set for an extended period of time * Pricing Strategy in Services: * Critical as price may be the only cue to quality in advance of the purchase experience * Becomes important and more difficult when: * Service quality hard to detect prior to purchase * Costs associated with providing the service are difficult to determine * Customers are unfamiliar with the service process * Brand names are not well established * Customers can perform the service themselves * Service has poorly defined units of consumption Advertising within a service category is limited * Total price of the service experience is difficult to state beforehand * Often based on yield management systems allowing a firm to both control capacity and demand in order to maximize revenue and capacity utilization * Yield management: knowing when and where to raise prices to increase revenue or to lower prices to increase sales volume. * Implemented by limiting the available capacity at certain prices, controlling demand through price changes, and overbooking capacity * Common in services characterized by high fixed costs and low variable costs, like airlines, hotels, rental cars, cruises, etc. Allows firm to offer same basic product to different market segments at different prices * Price elasticity of demand: * Customers’ responsiveness or sensitivity to changes in price * Inelastic: quantity demanded does not respond to price changes * Elastic: quantity demanded is sensitive to price changes * Unitary: changes in price and demand offset, keeping total revenue the same * Not uniform over time and place because demand is not uniform * Price Sensitivity Increases: * Substitute products are widely available * Total expenditure is high * Changes in price are noticeable to customers * Price comparison among competing products is easy Price Sensitivity Decreases: * Substitute products are not available * Products are highly differentiated from the competition * Customers perceive products as being necessities * Prices of complementary products go down * Customers believe the product is worth the price * Time pressures or purchase risk are involved for consumers * Major base pricing strategies include: * Market introduction pricing: used of price skimming or penetration pricing when products are first launched into the market * Prestige pricing: intentionally setting prices at the top end of all competing products in order to promote an image of exclusivity and superior quality Value-based pricing (EDLP)- setting reasonably low prices, but still offering high quality products and adequate customer service * Competitive matching- charging what is considered to be the “going rate” for the industry * Nonprice strategies- building a marketing program around factors other than price * Strategies for adjusting prices in consumer markets: * Promotional discounting: putting products on sale * Reference pricing: comparing the actual selling price to an internal or external reference price * Odd-even pricing: setting prices in odd numbers, rather than in whole, round numbers * Price bundling: bringing together two or more complementary products for a single price * Strategies for adjusting prices in business markets: Trade discounts: reducing prices for certain intermediaries in the supply chain based on the functions that they perform * Discounts and allowances: giving buyers price breaks, including discounts for cash, quantity or bulk discounts, seasonal discounts, or trade allowances for participation in advertising or sales support programs * Geographic pricing: quotes prices based on transportation costs (distance) * Transfer pricing: pricing when one unit in an organization sells products to another unit * Barter and countertrade: full or partial payments in goods/services/buying agreements rather than in cash * Price discrimination: charging different prices to different customers * Dynamic Pricing: * Started to replace fixed pricing in many product categories * Growing in importance and popularity due to the growth of online auction firms * Three pricing levels: * Opening position * Aspiration price Price limit * Long process, but is most logical and systematic way for two parties that don’t initially agree to reach agreement * Legal & Ethical Issues of Pricing: * Price discrimination: different prices to different customers. Illegal unless its basis is the actual cost differences in selling products to one customer relative to another. * Price fixing: when two or more competitors collaborate to set prices at an artificial level * Predatory pricing: firm sets prices for a product below the variable cost to drive out competitors or out of the market * Deceptive pricing: firm intentionally mislead customers with price promotions.