Adv Marketing Flashcards
(168 cards)
1
Q
How is the pyramid / hierarchy of objectives structure?
A
- Purpose (aspirational “Why are we here?”)
- Mission/Vision/Values
- Corporate objectives
- Departmental objectives
- Indiv. Objectives
2
Q
What is Purpose, Mission, Vision, Values
A
- Purpose = aspirational, share a dream, builds community and unites people around a common passion
- Mission = what do we do?
- Vision = what’s our ideal reality?
- Values = what do we believe in?
3
Q
What could be departmental objectives for Marketing and what should they always include?
A
- Marketing examples: increase sales, market share, grow brand awareness, launch new product, increase customer retention
- All objectives must include KPIs to track implementation
4
Q
What is the “difference” of STP and Marketing mix?
A
The STP is the theoretical plan and the Marketing Mix is how you execute it/Interpret it
5
Q
What is in the marketing mix?
A
- 4 Ps –> tangibles
- 7 Ps –> services: Price, Process, Product, People, Place, Physical evidence, Promotion
6
Q
What are the 5Cs and what are the there for?
A
-Before deciding on STP and marketing mix: Analysis
- Context: Macro environment
- Customers (who are they? why they buy)
- Competition
- Collaborators
- Company (resources & capabilities)
7
Q
What is marketing myopia?
A
Defining competitors with very/too narrow criteria (leaving important competitors out)
8
Q
Measurement and Monitoring
A
- Measuring and keeping track of performance
- Evaluating performance against goals
- Taking corrective action
- Feeds into future budget allocation & planning
9
Q
Budgeting and Allocation
A
- Correct allocation of resources to support the marketing mix activities
- Prioritization of goals
- Data driven for best results ( from past campaigns)
10
Q
First mover advantage: advantages
A
- Potential rewards: ease of recall, brand loyalty, economies of scale and experience, high market share at beginning
11
Q
First mover advantage: disadvantages
A
- Disadvantages: free-rider effects, technological discontinuities, shifting consumer tastes
12
Q
First mover advantage in general
A
- Strategy by which a player gains competitive advantage in a market by being the first to establish itself, It is an opportunity but not a success advantage per se / head start
- Long-term survival rate about 36%
- While pioneers often fail, it is early leaders that succeed (enter the market 13 years after)
- Timing alone will not be a major long-term success factor
13
Q
Imitation/ Fast follower (what is it?, advantages and disadvantages)
A
- Opposite of first mover
- prevalent in Tech sector
- Strategy by which a player imitates the innovations or strategy of the market leader
- Typically aligned with a lower price
- Potential rewards: gains from the challenges that first movers face and the opportunities that emerge; comparatively quick and efficient strategy
- Disadvantages: incompatible with market leadership (lacking innovation as only copying),
14
Q
Market coverage | Fighter brand (strategy, fighter brand, advantages, disadvantages)
A
- Strategy by which a player closes off opportunities to competitors by closing gaps in the market
- Usually done by launching line extensions or new brands targeted at unserved segments of the market (e.g. fighter brand)
- One part. example of this strategy:Fighter brand = low-value brand within a portfolio, designed to compete against low-price competition, while protecting the firm’s premium price offerings
- E.g. Luvs: cut R&D budget, cheaper, lower features (increased value of Pampers)
- Potential rewards: captures the low-end of the market
- Disadvantages: if not executed properly, it can lead to cannibalization, financial losses, management distraction, needs to sustain long term–>margin needs to be sustainable nevertheless
15
Q
Altius Golf Case: Altius, Problem, Solution
A
Altius:
- Prior to downturn: 60% of industry revenues, 85% of profits
- Victor TX line very successful: positioning: the most popular choice for professionals, also have midrange ball
- Gross Margin of golf ball a lot higher than competitors: 70%
- Altus offered margins to retailers at the lower end of the range
- On-Course: shops on the premises of golf courses and clubs (targeted to more serious players, more personal)
- Off-Course Channel: golf specialty stores, sporting goods stores (targeted towards casual players, lower price)
Problem:
- Industry downturn
- Market has become more price-sensitive; lower-priced competitors have gained higher market share
- New generation of golfers: casual golfers, more fun, affordable, accessible
- Market is shrinking, however, competition is winning
- Sales shifted from on-course pro shops (altius strong) to off-course retailers
- Retailers get more bargaining power
- Problem will increase in the long run
- Big Problem as loss of 2,9% of market share (units) translates into about 10% loss of yearly variable profits
Solution?
- tap into new customer (and growing) segment
- increase market share
- Increase CLV (customer livetime value)Potential to upsell
Endorsement:
Three Options
- ALTIUS PRODUCT (“Altius Elevate”)
- Brand recognition
- Problem of cannibalization rather low because the company would target two different markets and segments
- Potential to upsell as customers are brand loyal
- (brand erosion)
- ENDORSEMENT (Elevate, by Altius)
- Differentiated brand but still linked to ALtius & pos. reputation, connection to market. leader
- Will increase market share, tap into new customer segment who are more price sensitive, chance to increase CLV, potential to upsell
- If Altius lowers its price, competition will as well but Altius should keep the price always a little higher than competition because of brand recognition (and then let retailers profit from it!)
- (brand erosion)
- STAND ALONE BRAND
- No brand recognization
16
Q
How to calculate significance 2,9% in market share (vol.)? given: Total Mkt. Sales (483 mio), Mkt. Share ($, 55,2%), retailer margin (15%), Gross Margin(70%), Market Share (units, 35,1%)?
A
Look into summary doc
17
Q
Is Altius attractive to retailers? How should Altius price its product?
A
- If Altius matches its competitors in terms of price and retailer margin, retailers will be indifferent between brands (but due to Altius’ brand recognition retailers will be selling its products)
- If Altius decides to include an endorsement and have a higher price, it is possible to give the additional profit to the retailer, making it push its products more
- The company’s reputation can be used to sell at a higher price
18
Q
What do you need to keep in mind when introducing a fighter strategy?
A
- Low price vs value positioning
Lowering the total value of the product in the eyes of the customer, not just the price
Aligning with the needs of a different target: the total benefits provided by the brand as a whole should be relevant & distinct to one group - Maintain a clear differentiation compared to the premium product in the portfolio
Why would the existing premium paying customers not switch to the lower priced version if the difference is only the price?
The degree of cannibalization will depend on the distinct customer needs and the ability to keep the brands separate; literally (e.g. channels); figuratively (e.g. brand perceptions in the mind of the consumer) - Long-term financial sustainability of the strategy
Profit margins & volume expectations should be sustainable in the long-term
Not a short-term promotion that will go away
19
Q
Buffers for the downward extension risks
A
Distribution and promotion channel split
Customer needs & priorities: Pros will know what a good ball is, Amateurs will look to other markers of quality
20
Q
Strategic role of ‘entry point’ brands in the portfolio
A
Transition customers from entry product to more premium ones (upselling) as they progress from amateur to more serious player
21
Q
Segmentation: Demographic Criteria
A
Population Density, Population Growth, Income, Income Growth, Age, Gender, Family Size, Education
22
Q
Segmentation: Behavioral Criteria
A
Past Purchases, Browsing Behavior, Length of Stay, Visit Frequency, Churn Probability
23
Q
Segmentation: Psychographic Criteria
A
Mindset, Goals, Lifestyle, Values
24
Q
Correlated Spatial Preferences
A
Geographical targeting also important
- reasons why you live in specific area
- income levels, jobs, good schools
- people who live in same places often similar
25
Which targeting has the highest predictive power? 1.-3.
1. Behavioral
2. Demographics
3. Psychographics
26
What is the downturn of behavioral targeting and how can we use
- We lack the behavioral data when targeting new customers
- But we can use linear regression to see which demo/psychographics are explainatory for customers behavior with old customers
- Then we can conclude which demo/psychographics we want to target which could predict their behavior as a customer
27
Desirable Properties of Segments
LIDS
- Large: Each segment is large enough to be useful (and interpret them )
- Identifiable: Can easily assign customers to their segments
- Distinctive: Segments don’t overlap
- Stable: Minimize changes over time (avoid re-segmenting over and over)
28
What is Targeting?
A process, following segmentation, whereby a firm determines which segment(s) to serve (and how) and which segment(s) to ignore: for the ones we want to serve, we may want to use different marketing mixes
29
Desirable Properties of Targets
PFD
- Potential: Sizable(big enough) and growing (big targets that are growing)
- Fit: Must fit with core competences (“I should be the one best serving the targets”)
- Defensibility: Advantage over competitors
30
Calyx Flower Case: Calyx, Industry, Key Takeaways
Calyx Case:
- Four business units: Bear Gram (personalized bears; main customers are men), PajamaGram (gift chosen from broad assortment of pajamas, gowns, robes, and spa products; female customers specifically targeted), Tasty Gram Delivery Service (regional food specialities delivered home), and Calyx Flowers (fresh flower delivery service)
- Orders are received by phone or through a website, flowers are arranged and packaged for shipment there and sent out with a card
- Flowers are delivered within overnight or the next day to ensure fresh flowers which last longer than the ones from the competition
- Strengths: Delivered in buds for longevity/freshness &Variety
- The company has arrangements with growers around the world (some flowers are flown in from foreign farms)
- Promotion primarily through ten million catalogs: four million are mailed to prior customers (response rate 4.5%), one million send to flower recipients, rest sent to rented mailing lists (response rate 1%),
- 50% margin nevertheless has not reached full financial performance
Industry:
- Demand is seasonal with high peaks around holidays
- Efficient Distribution is crucial (growers --> distributors --> wholesalers --> retailers)
Retail competition:
- Retail florists - prepare custom bouquets, provide flower arrangement services
- 1-800-Flowers.com - network of 500 florists and own warehouse facilities (huge amount of money spend in advertisement)
- FTD (Florists' Transworld Delivery) - largest floral company in the world (20 000 North American retail florists, accounting for 10% of all floral sales), invest a lot in advertisement
- Supermarkets - lower prices but also lower flower variety and service
Key Takeaways:
CATALOGS
- ROI too low(especially mailing list & recipients)
- Only send to current customers? Do not know whether current customers would also buy without catalogs
--> we are missing control condition
- Numbers only look at one period, after one period some become current customers which then have 4,5% responce rate instead of 1%.
- Seasonal effects might have influence on numbers from catalogs
--> do not increase catalogs
--> increase internet marketing
SEGMENTATION & TARGETING
- Identify need-based segments
- Compare own values/strengths with competitors, Identify competitive offerings
- Determine which segments to target
- Link identifiable characteristics for marketing communications and distribution
- Optimal Value Proposition: Intersection of firm competences with consumer needs
o Calyx’ values Longevity & Variety intersects with segment “home décor”s needs
Benefits of need-based segmentation: potentially higher acquisition costs, but higher conversion rates too
-> Higher return on customer acquisition
31
STP Process
- Group customers based on similar needs
- Assess attractiveness of each segment & select
- Define the value proposition for the selected target
32
Positioning
- Positioning is the act of ‘designing the company's offer and image so that it occupies a distinct and valued place in the target customer’s mind’ (Keller, 2008)
- Positioning is the desired brand meaning
- Helps guide marketing strategy by clarifying what a brand is about, how it is unique and how it is similar to competitive brands, and why should consumers purchase/use the brand
- Captured in the Positioning Statement: A strategic internal statement used to guide tactical executions
33
Positioning map
- Visual presentation of what consumers think about the brand (not managers perception)
34
Positioning Statement
- Target: For whom? When? Where?
- Competitive set: relative to whom?
- Unique value proposition: what value?
- Reason to believe: Why? How?
- The positioning statement is a strategic internal statement that guides tactical executions, by answering the questions of who the target and competition are, what the main value it offers and how
VOSS:
“For upscale consumers looking to make a design statement with their choice of water, Voss is the only brand among all bottled waters that offers the purest and most distinctive drinking experience, because it derives from an artesian source in southern Norway and is packaged in a stylish, iconic glass bottle.”
35
What can you need to consider when building the unique value proposition? / Kinds to do it
PoP: Points of Parity
or
PoD: Points of Difference
36
Points of Parity
Category PoPs
- Necessary associations to be a legitimate and credible player within a category
- Necessary, but not sufficient for choice
- Important when a brand is extending to a different kind of category
- Establish competence and credibility
Competitive PoPs
- Associations designed to negate a competitor’s Point of Difference
- Trying to ‘break-even’ on important associations
-->
Vertical differentiation: Stress superiority on PoPs
- Claiming that you have the most innovative app (claiming differentiation on a point of parity)
- Westin: didn't just offer a bed, heavenly bed promised the best sleeping experience (all hotels offer beds)
- You are better than others with the same product!
37
Points of Difference
- Strong, favorable and unique associations
- May be based on any type of attribute, benefit or value association
- Customers must believe they cannot find the same attribute/benefit/value in a competitor, can be:
- Functional: performance-related considerations
- Abstract: Image-related
- Horizontal differentiation: based on unique attribute
- Focuses on a unique point of difference that nobody talks about / or had
- You are delivering something new
38
Unique Value proposition: Success criteria
Relevance = Something that consumers need (a watch that was fun, trendy and not too expensive)
Differentation = different than competitors
Credible = company's know-how and resources
39
Claims laddering
Claims laddering: Laddering of claims from attributes to benefits and values for better communication of the value proposition
Attributes: most basic, must
Benfits: builds up on attributes, what is benefit from attribute /feature
Values: more abstract
Builds up on each other --> Value best
40
Cialis
- Market is already well-educated about the product but the market leader has a strong positioning
Need based segmentation:
- Current User& Dropouts --> Duration
- Optimal Value Proposition: Intersection of firm competences with consumer needs
Cialis Marketing Funnel / who needs to be addressed:
Doctors - Purchase
- Gate-keepers
- However, highly risk averse and targeted by Pfizer
- Bombarded with new drugs every year
- Push Strategy: engage with doctors
Patients - Every stage
- Patients mostly bring the issue up with doctors
- Cialis is differentiated from Viagra, for both patients and partners; clear benefit is longer duration
- Pull Strategy: have patients ask for the drug
Consideration/Inform, Convert/Purchase, Engage/loyalty - Partners
- Are involved, huge pressure also on them, brings more flexibility to them
Vertical Positioning
- Focus on duration only: it is a clear positioning based on a feature
- Clear ranking possible
- Cialis lasts for 36h while competition lasts for 4h
- But 36h do not convey the benefits, easily attachable (Viagra could improve) how does that clinical feature effect the consumers’ lifes?
Horizontal Positioning
- How does that vertical positioning translate into preferences
- Cialis more based on intimacy, romantic (not only talking about duration anymore)
- Now, harder for competition to copy (Viagra could just be optimized to 40h)
Case Objectives:
- implement segmentation
- Introduce marketing funnel
- introduce push vs. pull strategies
- Vertical/ horizontal positioning
41
Marketing Funnel
- Attract /Awareness
- Inform / COnsideration
- Convert / Conversion /Purchase
- Engagement / Loyalty
- hurdles which customers have to overcome
42
Pull strategy - Push strategy
Pull: Target Consumers and make them want to buy
Push: Target Intermediaries (Retailers, doctors) to make them sell product
43
Repositioning the Competition
- Position yourself by telling what you are doing better than your competition
44
Product Portfolio
The complete range of products produced by a business, including product lines and individual products
45
Product line
a group of products that are closely related to each other, and are viewed as a unit because of marketing, technical, or end-use considerations (sold under the same name bc they function in the same way, marketed to similar customers, etc.)
46
Product Portfolio Management strategy goal
- Goal: portfolio that covers a variety of needs while not overlapping; maximizing the value of the portfolio of the company
- Balancing market coverage without having overlaps (diminishing risk of cannibalization)
47
Product Portfolio Breadth & Depth
- Breadth: company’s separate the divisions / categories /segments (e.g. kids/men/women in fashion business)
- Depth: “looking into segments/categories, each include several brands, each with own structures and product lines” number of items in product lines or how company can satisfy sub segments with different tastes/price sensitivities
48
Why is portfolio management important?
- Many companies show large, inefficient portfolios
- Several companies have undergone a process of cutting down the portfolio for higher efficiencies
49
What can happen when a product portfolio has too few brands?
- Too few brands: company is limiting its growth potential and opens the door for competitors to target the market gap
50
Managing the portfolio: What happens when too many products?
inefficient complexity, reducing profits, stretching budget to thin
51
Benefits of good product portfolio
- Benefits: efficient allocation of resources, identify underperforming products & gaps for growth potential
52
Optimal number of products?
Services (smaller PP) vs Products
Fast-moving vs Durables (smaller PP)
Concentrated vs dispersed competition
More brands: higher consumer loyalty and company value, but higher advertising, selling & administrative spending
53
BCG matrix
-Axen: Market share & Category/Segment growth/potential
- Portfolio management framework for prioritizing businesses/brands by degree of profitability (guides the allocation of budgets and the movement of cash)
- Ideally, the excess cash from Cash Cows (products with minimal investment generate excess cash) is invested in Question marks, so that they become Stars
- Stars ideally become Cash Cows once category growth slows down
- Pets? Discontinuing them, however, now BCG recommends to analyze pets to maximize information value
- Healthy and stable portfolio: have question marks, cash cows and stars
54
Strategic Brand Roles
6
- Strategic/Power/Focus brands: strong financial results, high loyalty, strong future momentum
- Fighter brand: low-value offering
- Niche brand: specific narrowly defined market
- Past Champion: past strategic brands/ cash cows: maintain sales levels without need for significant support
- Silver bullet: help establish/maintain the overall brand image by adding important accessories
- Entry Point: affordably priced product to serve as entry point to the brand (Longchamp)
54
Strategic Brand Roles
6
- Strategic/Power/Focus brands: strong financial results, high loyalty, strong future momentum
- Fighter brand: low-value offering
- Niche brand: specific narrowly defined market
- Past Champion: past strategic brands/ cash cows: maintain sales levels without need for significant support
- Silver bullet: help establish/maintain the overall brand image by adding important accessories
- Entry Point: affordably priced product to serve as entry point to the brand (Longchamp)
55
Line pruning
- Pruning the portfolio & restructuring takes time to succeed (if at all)
56
Line filling
- A brand extension is when a firm uses an established brand name to introduce a new product
- Parent brand = brand that creates an extension
- Family brand = if the parent brand is already associated with several products through extensions
- Extensions are broadly classified into four categories (Line extensions (portfolio depth), Category extensions (portfolio breadth), Customer extensions, Channel extensions)
57
Line Extensions
- portfolio depth
Transfers the existing brand name to a new product within the same or closely related product line
* New flavors (coke zero cherry), ingredients, formats, packaging, size
* Horizontal: Stretching horizontally at the same quality level to
accommodate different tastes (low risk, change is not radical, usually)
* Vertical: down market & upmarket (can become risky), on products with different price-value positions (down market: cheap product from luxury brand – no clear differentiation may led to customers switching to the lower version / damage brand)
* High-priced products: increase the sales of other products and communicate expertise & brand prestige
58
Category extensions
- portfolio breadth
- Transferring of a brand name to a new product or service outside of the original product category (more risky de to unfamiliar territory, how well do the primary associations of the brand fit the new product?)
e.g. Doritos introducing salsas, Colgate wanting to sell Lasagnas
59
Customer extensions
Using existing brand on new products or services sold to a different customer segment
e.g. Dove introducing men-line
60
Channel extensions
Expand to a different distribution channel (e.g. Luxury channel to mainstream)
e.g. amazonGO as physical stores
61
Asymmetric dominance
- Decoy effect
- a phenomenon whereby consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated” (e.g. Popcorn im Kino); the decoy is priced to make one of the other options more attractive
- Web 59, print &web 125, print only 125 (decoy option)
62
Compromise effect
Argues a consumer is more likely to choose the middle option in a product set over more extreme options (Tall, Grande, Venti)
63
Leveraging brand into new offerings - Where to extend?
- Associations – which are leverageable? (existing associations & brand identity, common characteristics/sources of also.: user types, ingredients, symbols..)
- Identify product categories for which there would be a fit (Vaseline- moisturizing->body care; medicinal -> antiseptic, sunscreen)
- Evaluate the category in terms of business attractiveness
- The extension concept: positioning (position similarly or different)
- Example Failures: Carlsberg, perfume Harley-Davidson, Airbnb online experience
64
Kinds of Brand architecture
- Brand House (FedEx:Express, FedEx:...): Incr. brand awareness, negative impact risk
- Sub Brands (Apple:apple iPhone, apple iPad, appletv): quality assurance, individuality -> better targeting, contamination risk, high costs when launching
- Endorsed Brands (Marriot): better targeting through Indi. identities, contamination risk, cost new brand
- House of Brands (P&G: Pringles, head&shoulders): low contamination risk, ownership for mangers, expensive, no equity build on parent brand
64
Kinds of Brand architecture
- Brand House (FedEx:Express, FedEx:...): Incr. brand awareness, negative impact risk
- Sub Brands (Apple:apple iPhone, apple iPad, appletv): quality assurance, individuality -> better targeting, contamination risk, high costs when launching
- Endorsed Brands (Marriot): better targeting through Indi. identities, contamination risk, cost new brand
- House of Brands (P&G: Pringles, head&shoulders): low contamination risk, ownership for mangers, expensive, no equity build on parent brand
65
Conditions of justifying the creation of a new brand
- All existing brands have associations that are incompatible with the new offering
- The offering would damage the brand name
- A new name is needed to realize the chance to create and own an association
- Only a new name would signal the newness of the offering
- An acquired brand has a significant loyalty that would be at risk if a name change were to occur
- A channel conflict requires a separate name
- The business is of sufficient size and longevity to justify investing in a new brand
66
Levi's Case
Determining Optimal Value Proposition
Company Value:
Levi’s brand: casual image, relationship with distributors
Customer Value:
Q2: The classic independent (21% of the market, spends more on clothing than others, wants to look right, independent)
Competition:
Haggar: not tailored, not targeting Q2
Likely competitors: prestige brands, offer tailored services
STP
Segmentation: Q1-Q5 all fine; what about the rest of the market, women?
Targeting: Potential, defensibility good but fit is missing, how do suits and jeans fit together?
- Ignored customer feedback, were already selling suits while focus groups were still ongoing (market research must inform decisions)
Distribution: Sure that the retailers will buy, but not sure they can convince customers, Most B2B relationships are B2C relationships
--> Brand associations can facilitate or prohibit a company from extending to other categories
--> The portfolio as a whole changes the perceptions of each individual product in it
--> Difficult to overcome internal bias & kill management’s our own ideas
--> Research should help make the right decision, but needs to be used carefully
67
Cost-Based vs. value-based pricing
Cost-based pricing can be described as a strategy to determine the selling prices of a company's products based on their production costs, while value-based pricing is a strategy of setting prices of a product or service based on its value perceived by customer
68
Main factors while setting prices
1. Competition and Elasticity
2. Ease of comparison
3. Preferences/WTP
69
Display ads are best for which stages of the marketing funnel?
Awareness & Consideration
70
Search Ads are best for which stages of the marketing funnel?
Comparison & Purchase
71
Theoretical process for online ads
Audience <-> Publisher <-> Supply-side platform <-> Ad Exchange <-> Demand-side platform <-> Advertisers
72
Real- time bidding
Audience <->NY Times <-> DoubleClick by Google (Ad Exchange) <-> IBM, Oracle, Adobe (manage funds of clients, making bids for Ad slots) <-> Company
- everything in 100 ms, the one that wins gets the ad
73
Cookie Matching( What is a cookie? How does it work?)
Cookie = a small amount of text that the web page is allowed to read on Alices browser (tiny file that is going to be stored on the user's hard drive); this will enable the winner to track Alice's behavior
Today:
- Alice deletes cookies; visits nyt.com
- nyt.com asks Doubleclick for an ad to serve
- Doublelick runs auction; creates/provides google_user_idto
- Auction winner; sets cookie in Alice’s browser
- Winner sets a cookie in Alice’s browser; tracks behavior
Tomorrow:
- Alice visits disney.com
- Disney.com asks Doubleclick for an ad to serve
- Doubleclick identifies Alice through cookie; runs auction and
- Provides google_user_id to bidders
- Bidder matches google_user_id to own cookie, and bids
-->Doubleclick can identify the same consumer: bidders can match their ID to their own cookie that they put on Alice's browser (now they can retarget consumers and bid more)
74
Attribution of Purchases (Ads)
Problem: throughout the process here, four ads were shown. Which Ads are performing? Making the sell? Underperforming? Which Channels make a difference?
Attribution Methods:
- "Last Touch" - the winning Ads - but is this true? Search Ads usually show up later than display ads, overweight here?
- Multi-armed bandit techniques (experimental techniques)
- Modelings and experiments (show the Facebook Ads to some users, and to others not) to find this out. A B testing
75
Search Ads- How does Google decide which slot a company gets in? -
"Generalized second-price auction"
(1) Score (companies with the highest score win and will be ranked the highest)
- "Quality " for each company (make predictions of avertisers), work with analytics and can track how busy their websites are, e.g. competing with Amazon will be hard (newcomer --> low)
- Take into consideration the company's bidding
- Does not say how much I have to pay
SCORE= quality * bid
(2) CPC (understand how much you pay) - "Cost-per-click"
- Scores are equated SCOREa = SCOREb then would be indifferrent
- Move one quality to other side: CPCb= (QUALITYa*BIDa)/QUALITYb
- If QUALITYa goes up, b has to pay more.
- pay awaited bid which ajusts for your quality score
76
Conversion Rate
Percentage of people ordering something after clicking on an Ad
77
Managing Spend
- Consumer segments
- Attribution (within and across channels, which channels are more effective/give credit)
- Click predictive model
- Bid engine+budget allocation
- Dynamic creatives / Ad copies (creation of different ads)
- Social / WOM
- Campaigns along purchase funnel
- Re-targeting
- Cross-channel purchase tracking
that times number of channels available -> vast things that can be adapted to optimize ad campaign
78
Google DoubleClick is an...?
Ad Exchange
79
Supply-side platform is on the side of the?
Audience
80
Demand-side platform is on the side of?
Marketer
81
What is rule-based bidding about?
Looking at budget for Ads
Different key words with different prices for diff positions.
CPC
Clicks
Orders
Cost per Order
82
Decision-Making Process which a company needs to overcome
Based on marketing funnel:
- Need/Problem Recognition - Awareness
- Information Search - Consideration/Inform
- Evaluation of alternatives - Consideration/Inform
- Purchase decision - Conversion
- Post-purchase behavior - post-purchase behavior
83
The Elaboration Likelihood Model
The central route to persuasion uses facts and information to persuade potential consumers.
The peripheral route uses positive association with cues such as beauty, fame, and positive emotions
84
MAERSK case
* Have very successful social media campaign, would never think containership company has that
* Why did they do that?: Want to increase awareness,
* Key takeaway: Soc Media can also work for B2B as became apparent in MAERSK case
Key Success Factors
* Importance of telling stories (positive and negative), true stories, increasing transparency, "being true"
* Made use of different channels in the most efficient way: co-creation, entertainment, information
* Changed perception of B2B social media efforts
* Making a container shipping brand interesting for social media
* Engagement: employers, also engaging family members
* Authenticity
85
How do you build a successful social media campaign?
1. Seed a message in the hopes that it spreads: rely on the initial customers you’ve attracted to do the job for you, i.e. “grab the eyeballs” of other customers (network effects: share your content, WOM)
2. Identify tactics that maximize the spreading: increase the likelihood that your content will go viral
--> Surprises, emotionality, simplicity, credibility , story arcs: when you do an activity that is high arousal, one shares more
3. extra sauce needed for content/ideas to go viral:
* Triggers: things that spark urge to share
* Activating emotions: Does not matter pos or neg
* Social capital: we share what makes us look good (when people share ads, these are ones that look good
86
Demand Elasticity formula
Elasticity(greek e)=(delta Q/Q)/(deltaP/P)= percentage change in quantity/ percentage change in demand=(change quantity/quantityt-1)/(change price/pricet-1)
If I increase price by 1% how does my sales change in percentage as well
87
When you have optimal price:
Gross Margin in %=-1/elasticity
In optimality --> When slope of Profit function is 0 and in this case therefore a maximum
- derivative =0 to achieve formula
- When elasticity increases, need to lower price/gross marging
88
Price Elasticity
Price Sensitivity
- the greater the more sensitive/elastic
89
What is the influence of ease of comparison on the price and what is it about?
- Price comparison engines (products being listed to different prices at different sellers) --> was expected to reduce Margins to 0 because of pressure
- Introduction of obfuscation so that consumers cannot do price comparisons (stoping price comparison)
- Information frictions generate margins
-->the harder price comparisons are, a company can command a higher price
90
How can you test Preferences / WTP?
Conjoint Analysis
- testing WTP by tests in which, prices & offers are changed
91
Price penetration
- Secure position with a low price
- Reason: gain market share (very quickly growing markets)
Why would we do it?
- Switching costs (huge consumer locking once you get consumers to adopt: platforms like LinkedIn / Paarship / dropbox), change price with differentiation of product
- Entry deterrence (new market that is forming with high competition, e.g. IBM with internet market)
- Network externalities (if the worth of the product depends on how many people use it)
92
Price skimming
- Enter the market with a high price and then lower it over time
- High consumer heterogeneity (need high brand loyalty)
- Durable products (old iphone versions)
- Requires high differentiation (iPhone, books, etc.)
93
Veblen Goods
- Veblen Goods: demand increases as the price increases (fewer people have it, give me utility from other people)
Birkin Bag, Ferrari etc
94
Price Quality Inferences
if something has a higher price, people associate a higher quality with it, which in turn justifies a higher price
95
Price Discrimination
Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to.
- Target multiple groups with different WTP by (self-selection)
- Promotional Pricing
- Leaky Paywalls
96
Promotional Pricing examples
Coupons,Price Matching, Rebates
97
Leaky Paywalls
- A method of restricting access to content, with a purchase or a paid subscription, especially news
- Retains Flexibility
- Allows for self-selection
- Does not shut off search and social
98
Chesse.io
- Vegan cheese production by using yeast mixture
- Regional recommendations in the U.S. market: approach largest firms first (but harder to negotiate)
- Producing cheese oneself: too hard, which is why she only sells the cheesemaking-kit
- Manufacturers: replace the kit which will lead to cost-savings
- Is product also accepted by endconsumer? B2B ist also B2C -market research needed
- Which prices? Price based (share) of the manufacturers’ profit gain
- First-Mover so no comparison & competitive pricing possible, thus, value-based or cost-based pricing
- Huge profit increase for customer but also huge initial Investment for firms would need to huge share of current
- Low-price strategy would conclude in Miracle product , high-price strategy -> risky investment
- Limit of 10 farms/key accounts
- Sales Potential is influenced by manufacturers who do not have dairy farms (30%)
The question is not only about setting the right price, but also about deciding the right entry strategy:
Establish partnership with cheesemaker:
- Prove concept at production scale
- Establish credibility in the market / leverage positive word of mouth
- Avoid negative WOM in case of failure
- Market Research is needed to figure out whether end consumer is willing to buy
99
Changing Prices (Customers reaction & what can we do)
Value function of prospect theory
- Consumers suffer more from losses than benefit from gains of the same amount (2:1)
- If one loses $20 today, need to gain $40 to make up loss and come back to happiness level
- Loses loom larger than gains! (Price increase is interpreted with a loss)
- Reference Point = Consumer’s expectation when entering the purchase
- That is why it is hard to increase prices
What can we do?
- Be consistent with firm’s positioning
- Set expectations: (get consumers used to price changes; explain why (fuel costs?; inflation?)
- Set a high price, but promote often (temporary price promotions) – will translate as a “reference point”
- Change Package size and/or new formula
- Most importantly: retain flexibility
-> Price goes directly to bottom line (if we decrease price, will decrease the revenue but can also increase demand)
-> Products that you buy rarely, consumers do not care too much about price changes (in comparison to products in the super market)
100
Price Experiments
Golden:
Respects the ceteris paribus rule: When we see price vary, this movement is not correlated with other demand factors. Hence, estimation of the price coefficient is not invalidated by other variables correlated with prices. Randomly picked -> can not be correlated with other factors
101
Instrumental Variables( What is it and what are the steps?)
Quasi-experimental approach: filters the good variation in the variable of interest (i.e., price); the good variation is independent of other demand factors that could be correlated with price
1. Predict price based on input costs (good variation, filter out bad variation e.g. seasonality)
2. Regress quantity on predicted price from step 1
102
What do you usually need to measure marketing performance?
- Control condition
- For all potential campaigns, the relevant factor is to determine the causal effect: the difference between running the campaign and not, correlation is not causality and and be reversed
* Historical data seldom provides control conditions; other variables will be confounding the effects and interfere with the relationship of interest
103
What are the two main causal approaches?
Price experiments and instrumental variables
* Experiments are often costly to run, and may go counter managerial incentives
* Instrumental variable approaches require skilled economists to be trusted
104
Gross Margin
Only Variable costs=VC)
105
Contribution Margin
Total Costs (C=VC+FC/Q)
106
Profit Formula
(P-VC)*Q-FC=Profit
107
Break-even Analysis
- Great for back-of-the-envelope calculations -
- Usually simplistic for serious analyses
- Timing? When will revenues arrive?
- Unreliable for comparing very different scenarios
108
Horizontal Positioning
--> PoD
109
Vertical Positioning
-->Pop
110
"[Increase in] Margins are great as longs....
either price or cost change, but not both."
Absolute margins do not lie. Relatives (proportions/%) ones may.
111
RocketFuel Case
- TaskaBella Handbag company
- RocketFuel: Gets budget from company and is supposed to come up with optimized Advertising campaign
- Moral hazard: Agency will never tell you that AdCampaign did not work out -> How can we check ourself?
- RocketFuel wants to prove to customer that the campaign works: Wants to split audience in two for A B testing: Publicservice Announcement(PSA) VS actual Ad
- Check whether control group was actually 4%
- Always check ROI because often wrongly calculated
Case Summary
- High Conversion Rate does not mean advertising is effective: Not Using an Experiment will Overestimate ROI.
- Control groups may be expensive, but worth it.
- Experimental design is hard and delicate.
- Cutting Edge Research is how to make control groups smaller / cheaper.
112
Control Groups
- Why are we using Control groups/AB testing? To test whether Ad has actually influence or whether people might buy anyway. Ad or different reason. -> Compare group with PSA and their purchases to Group with actual Ad and their Purchases. Everything needs to be the same for the two groups except for Ad.
-> randomize target group to have clean variation
113
How do we test for randomization?
o Seeing charity (control) vs real ad should not affect the number impressions a user is served.
o So we compare the average number of ad impression in the test group (24.82) and control group (24.76).
o People in test group saw more ads on average.
o Running t-test gives p-value of 0.827, so there is no statistically significant difference.
o Other tests: Compare User IDs -> User IDs should not be the same “If we allocate user IDs for people in those two different groups once they see our Ads based on a random number generator those” User IDs should not be different. But they are. RocketBella should check with Agency why that is the Case. When do we assign numbers?
114
Size of control group
- Experience
- Calculation tool: can be calculated afterwards
115
What is the “Conversion Rate” for display Advertising? And what are bad ways to calculate it?
- # purchases / # visitors: Problem – some people might visit more often than others
- # purchases / # clicks: Problem – some might not click Ads but nevertheless purchase
- # purchases / # impressions – Problem: Some have maybe seen multiple times/more than others
- # purchases / # unique users (saw ad): This is what we want to look at
- Rocket fuel Case: We see significant difference in conv. Rate between groups: Incremental conversion rate: 2,55% -1,78%= 0,77% (effectiveness of Ad, side note: very high normally 0,1/0,2)
116
Revenue from the a digital AdCampaign
REVENUE
Top down approach
- How much would have made without campaign? (conversion rate of control) x (total users) x $40 =1.78% x 588,101 x $40 = $418,728
- How much made with campaign? converters) x $40 = 14,843 x $40 = $593,720
- Incremental Revenue: $593,720-$418,728 = $174,992
Alternative
- Incremental Revenue per User: (2.55% - 1.78%) x $40 = $0.308
- Total Incremental Revenue: (test users) x (incremental revenue per user) =0.308 x 564,577 = 173,890
117
Cost of campaign
COST OF CAMPAIGN
- Include cost of the PSA? Yes
- (total ads) / 1000 * 9$ = 14,597,182/1000*$9=131.375
118
Do we include the cost of control group?
YES
119
ROI
(Incremental Revnue – cost)/Cost= ROI
RocketFuel case: Comparing about 33% to initial ROI of over 300%
120
Conjoint Analysis
eliciting preferences and willingness-to-pay
- Linear regression,
o computing betas to show influence of characteristics on rating
o Range highest beta- lowest beta
o Indiv. Range / sum of ranges - importance of feature category on rating of product
- Or only with pictures: less information, because there is no rating; but due to the simplified process,
* Marketing research technique to measure what consumers value most about your products and services.
* E.g. a TV manufacturer would want to know if customers value picture or sound quality more
* Conceptually simple (randomize pictures, span combinations), but relatively laborious
* Relevant for competitive benchmarks
* helps us to understand through analytics what customers vale and thus to set the correct price for it
121
Conjoint Analysis: Challenges
* Do features interact? Maybe features are intervened
* Use a software that is learning = "adaptive conjoint analysis": that software has e.g. already tested the price and knows which price range is the most attractive and then it tests other features of which the software has not yet sufficient knowledge about (learning strategically and varying features)
* Choice (easier) vs. Rating
* Sometimes it can be unreliable to extract price / demand elasticity
* People are not really buying the bike (the more levels of price we include, the more price sensitive people report to be)
122
What is adaptive conjoint analysis?
Marketing Research:
* Use a software that is learning = "adaptive conjoint analysis": that software has e.g. already tested the price and knows which price range is the most attractive and then it tests other features of which the software has not yet sufficient knowledge about (learning strategically and varying features)
123
Perceptual Maps
- eliciting perceptions and preferences
- great to consider psychological associations of different brands in the market
- Used often for finding white space
124
What is a snake Plot?
- Rating of level of characteristics & characteristics
-
125
What does a scatter plot show in regards of Marketing research?
Positioning of brand when looking at two characteristics
126
What is a perceptual map?
ONly about perception
* Compress dimensions for which consumers are responding similarily (to recognize a correlation)
* No labels, only two dimensions
* Length of lines = how much of the variation of perceptions are being driven by these components (fun is shorter than refreshing: people rated one beer over the other far more refreshing that people distinguished between the component fun)
127
Perceptions & Preferences map
Bridge preferences to ratings
128
Consumer Analytics
= used for data from digital sources; useful to assess the value of new marketing activities, but also for monitoring users and brand performance
- User testing
- Eye tracking
- Funnel analytics
- Cohort Analysis
129
What is User Testing?
= testers get task on website: great way to unlock problems communicating directly to software engineers
130
What is Eye Tracking?
= on what on the website are consumers focusing/ look at first
131
What is a funnel analysis?
Where loosing customers/hurdles
132
What is a cohort analysis?
= Tracking consumer behavior over time
* How consumers are behaving given the first time you saw them arriving on your website
* Comparing Cohorts: consumers who arrived on the website arriving first time and then take a certain action? Consumers who arrived one day before, how did they behave?
133
DryClean Express
- Suit was lost wants money for substitute
- but was found again
- policy problem
* We can only be indifferent about cash or coupon, if we can guarantee that the customer is coming back
* But on the other hand cash would be better signal, but big big risk
* Simplified CLV: less than 300$, Can not give full amount but want to keep as valuable customer (not fire)
* Main Problem: no clear policy on service quality, not managers fault rather CEOs
1. What should the motivate be for policy?
- cash is king | publicly traded; Customer is king; I rule – privately held
- Establish clear service quality policy
- Analyze customer lifetime value
- Satisfying customer requests may be less onerous on employees
- What is the customer really looking for? 3 sources of value
134
What "kinds" of Managing Service Quality exist? and why do they exist?
* Null Hypothesis: the customer makes an honest request
Type 1 error: Deny an honest request VS. Type 2 error: Satisfy a fraudulent request
* Service quality is all about policy, to be carried out by employees (more freedom could be risky, less freedom means losing upside of customer service / less flexibility)
* El Corte Ingles would rather go for 2 as CLV is higher than at Primark
135
Customer Lifetime Value Formular
= -AC + (Mg-C)/(1+i-r)
AC: AcquisitionCost
Mg: Profit Margin from Customer
C: Marketing Costs associated with Customer i: DiscountRate
r: Retention Rate
136
Levels of Products and Services
*Core customer value: What is the buyer really buying? (core benefit)
* Charles Revlon of Revlon:
“In the factory, we make cosmetics; in the store, we sell hope.”
The core product – consists of the real core benefit or service.
->This may be a functional benefit in terms of what the product will enable you to do, or it may be an emotional benefit in terms of how the product or service will make you feel (e.g. cereals).
* In service marketing one needs to augment the 4Ps with three additional Ps, process, physical evidence and people
137
What are the "stages" of managing Service Quality?
Desired Level of service -> Comp. Policy -> Employees. Behavior -> Customer Satisfaction
138
What is the Customer really looking for? (Manning Customer Service)
Customer Value:
- Functional Value: I want the suit!
- Monetary Value: Reimbursement
- Psychological Value: Apology / Admission of guilt
139
What is the segmentation matrix?
Calyx case: different segments divided by needs
140
What is Selection?
Process of selecting individuals into an organization, in order to transform their individual inputs into desirable organizational outcomes
141
Which factors help us understand which selection method to use? Just name
- Reliability
- Validity
- Utility
- Legality
142
What is reliability in regards to selection methods about?
Refers to consistency of measurement, usually across time (by the same person) but also across judges Examples:
° Zero reliability: You step on a weighing scale three times in a row right now and each time it showed: 80kg, 100kg, 45kg (not consistent across time)
° Perfect reliability: The IQ test you did gives the same score every time you take it (consistent across time)
° Perfect inter-judge reliability: 5 different interviewers all judged you to have the same level of social skill.
o Imperfect (or zero) inter-judge reliability: If they don’t agree and there’s a big difference between different judges’ judgement
Methods always contain some error or “noise” or unreliability
143
What is validity in regards to selection methods about? And draw a Ven diagram for this
Is the extent to which the technique measures the intended knowledge, skill, ability or other requirements (KSAOs)
Diagram - Look at the picture in the script:
° Selection Method 2 > Selection Method 1 (Selection method 2 has more/a higher validity)
° Methods that are not valid (if they don’t capture nothing of the required KSAOs) are useless
144
Types of Validity
* Content validity:
Degree to which the content of the selection method is representative of job
content. A test that is content valid is one that contains a fair sample of tasks and skills that are actually needed for the job in question.àhow well does selection method predict/ Reflect Job Content
- Organizations can use selection methods that don’t really represent the job content, for instance, when they use tests inherited to them without considering the changing environment of the job.
o Example: Applicants for a secretarial job take a typing speed and accuracy test. But let’s say that note-taking audio transcription software is now used at the company and the day-to-day responsibilities of secretaries don’t require much typing. --> low content validity.
- Necessary but not sufficient (high content validity ≠ criterion-related validity)
- Most organizations do a good job at this (the basis of job analysis)
* Criterion-related validity:
How well performance on a selection method predicts actual job performance-àhow well does selection method predict Job Performance
o Predictive Validity: whether scores on a selection measure can predict/correlate with future job performance
§ Example: All job applicants now take an IQ test before joining the company. 12 months later, their score on the IQ test is compared with their performance evaluations. Correlations between test score and performance indicates predictive validity of the selection measure (i.e. IQ test).
o Concurrent Validity: whether scores on a selection measure are related to job performance levels, when both are measured at roughly the same time
§ Example: The CEO of a cutting-edge tech company believes that humor is important: humor shows the ability to think out of the box and come up with innovative solutions. He tasks the HR team to design a selection method that measures applicant’s humor. They come up with a Humor-Intelligence High-fidelity Inventory (HIHI), and make all the employees take this test. Employees with high scores on the HIHI also have high performance evaluations (high concurrent validity). So, the company starts using the HIHI on future job applicants.
145
What does “predicts well” mean?
- Whether a selection method has validity or not is really about whether it correlates well or not with
job performance
Example: y-axis measuring job performance; x-axis measuring humor score --> Each dot represents an employee.
- In this case, employees are all over the place and the best fit line is flat: it is not possible to guess if someone scores low/high on the humor score, what would their score in the performance score be -> Correlation of 0
- The higher the correlation, the lower uncertainty (more certainty) in predicting whether a high/low score on humor predicts a high/low score on performance
- A negative value of correlation also creates some certainty
146
Concurrent vs Predictive Validity:
- Concurrent validity is easy and quick to determine, because you don’t need to wait between selecting someone and understanding if the selection method is predictive of the future; you can do it now, with current employees
o But this can be problematic to apply if the current workers don’t represent current job applicants (future employees)
- Predictive validity requires a large sample size for both selection and job performance scores to be available
147
Content vs Criterion-related Validity:
- Ideally, we would hope that if a selection method reflects aspects of the job (high content validity), it
will predict job performance (criterion-related validity). But in reality...
® Content Validity is necessary but not sufficient: high content validity may not predict criterion-related
validity
148
Reliability vs Validity
° Tests that are not reliable cannot be valid (Ex: weighing scale example)
° Tests that are reliable may not be valid (Ex: IQ test example with perfect reliability. If we are looking to hire some musicians, using the IQ test, instead of their proficiency in playing a number of instruments, to select is not valid)
149
Utility
Refers to the practical economic value of a selection method Depends on its validity, but also on:
1. The COST (includes time, money, effort and cost of developing) of the selection method to develop and to administer.
° IQ test [low cost] Already exists; well-developed --> Approx 50 euros/candidate assessed VS Assessment centre [high cost]: Takes time for specialists to develop -> At least 500euros/candidate assessed
2. VARIABILITY of job performance: what do you expect people’s levels of performance would be in your applicant pool. The more variability, the more utility a selection tool has
a. HIGH applicant pool variability: All applicants perform very differently (very differentiated output). It is important to hire the best performing applicantàthe utility of a selection method becomes very high
b. LOW applicant pool variability: All applicants perform the same (ex: they are all very good). No utility of having a selection method.
3. SELECTION RATIO: ratio of the number of job positions to number of applicants
a. High selection ratio (1): 1 applicant for 1 position --> the organization will hire all who apply
for the job; no selection procedure has any practical value
b. Low selection ratio (closer to 0): Many applicants for 1 position --> Organization will only hire the best applicants; large gains from the selection method
150
4. Legality
Ex: EU – Anti-discrimination Law
Making hiring decisions, organizations must consider legality.
Organizations should be careful that
1) the selection methods and criteria for hiring are not explicitly against a group of people and
2) nor should these methods and criteria systematically reduce the changes of specific groups of people from getting hired
- Ex: Managers can’t hire someone based on the football team they support
150
Types of Selection Methods ( just name)
1. Cognitive Ability Tests (or Intelligence Tests) (Verbal Comprehension, Reasoning ability)
2. Personality Tests
2.1 Big Five Personality Inventory
2.2 MBTI (Myers-Briggs Type Indicator)
2.3 Dark Triad
3. Integrity Tests
3.1 Overt
3.2 Personality-Oriented
3.3 Conditional Reasoning Test s
4. Interviews
4.1 Strcutured Interview
4.2 Unstructured Interview
4.3 Semi-Structured Interview
5. Reference and Letter of Recommendation
6. Work Sample Test
7. Others
7.1 Physical Ability Test
7.2 Language Proficiency Tests
7.3 Drug tests
7.4 Assessment Centers
151
Cognitive Ability Tests
Intelligence Tests (Verbal comprehension, reasoning ability)
because : the more intelligent someone is, the more they are able to learn and the faster they will adapt.
Can not directly measure intelligence but its subcomponents.
General Factor - g
Specific factor - s:
- Verbal
- Numerical
- Reasoning
- Deductive
- Spatial
s measures --> g
When test not holistic enough (only verbal + numerical)can not really capture
- Cognitive ability tests --> test-taking ability also matters (reading skill, education. background, practice effect)
- Not all Cognac. ab. Tests are the same
- Culture bond tests: General knowledge (e.g Us facts)--> disadvantage someone who ist not familiar (did not grow up in US
- Culture free tests: Evaluates“g”byusingabstractrelationsunderlying“s ́s”.Doesn’trequire
that much cultural knowledge
- Correlation with job performance (0.51) moderate
152
Personality Tests
2.1 Big Five Personality Inventory
Well validated: Five personality “traits” derived through the lexical hypotheses and subsequent factor analysis
° Openness to new experiences (intellectual/imagination)
° Conscientiousness: tendency to be hard-working, diligent and pay attention to detail
° Extraversion
° Agreeableness
° Neuroticism (Reversed Emotional Stability)
- 5 traits to universally quantify peoples personalities, reflect peoples characteristic patterns of thoughts, feelings and behaviors, Traits --> Spectrum
- Have correlation with job performance: Overall low but the highest among is: Conscientiousness (+0,20)
- but also depe depends on job (ex: Sales --> Conscientiousness + Extraversion)
2.2 MBTI (Myers-Briggs Type Indicator)
- Based on Carl Jung’s conceptual theory about psychological types, developed by Katherine Cook Briggs and Isabel Briggs Myers
- Many Fortune 100 use it for hiring or training sessions to help "understand" themselves or their colleagues
- McKinsey associates often know their colleagues’ MBTI types by heart
Problems:
- Research partially widersprechen die Gegenüberstellungen ex: Thinkers vs Feelers
- Week Reliability: After 5 weeks 50% changes
- Predictive Validity: Results mixed and inconsistent
- Used because Only gives positive results + description vague
2.3 Dark Triad
Assess Narcissism, Psychopathy and Machiavellianism --> they increase levels of counterproductive workplace behaviour.
- Generally, effects of the Dark Triad on Job Performance are negative.
o Only Psychopathy and Machiavellianism --> effects on job performance (the higher -->
lower the job performance)
- Managers don’t only care about performance: don’t want employees to harm colleagues, clients nor the organization.
153
Integrity Tests
Overt:
test aks about
- attitudes toward theft
- admission of theft and other wrongdoing
Personality-oriented:
Items about dependability, Conscientiousness, social conformity, thrill seeking,
trouble with authority and hostility
Conditional reasoning tests
- 2 ambiguous situations and asked to make a choice between 2 possible interpretations
- People different justification mechanisms depending on personality - can tell how aggressive my interpretation
Faking and Coaching effect?
- can improve result by faking and coaching
- faking and coaching equally improve scores
- Better to predict counterproductive work behaviors than predicting job
performance (like Dark triad) (+0.41 vs -0.47)
154
Interviews
- Structured Interviews
- Unstructured Interviews
- Semi-structured Interview
155
Which interview form is the best predictor of job performance? And why
Structured Interviews
- Clear criteria of questions to assess qualities in a candidate
--> Correlation +0.51
- Unstructured might drift of towards things unrelated to job and relevant criteria
--> correlation +0.38
might be useful at later stages to check on eg goof fit for companies team)
156
Reference Letters & Letters of Recommendation
What is a reference list? What are drawbacks and the suggestions built on that?
Reference List: List with references to contact you provide
Letters of recommendation that others write for you, either
1) With your knowledge of the content
or 2) Without your knowledge of the content
Drawback:
Often overwhelmingly positive --> become indistinguishable and redundant
Improving the validity of these selection tools:
- Content approach: Analyzing traits relevant for job
- Move away from broad focus and concentrate on relevant job specific skills
157
Work Sample Tests
When is it eg useful?
For jobs that need a lot technical and practical expertise (asked to perform exact the task that is asked foreign position)
- High reliability and validity
-Correlation: +0.54
158
Which Combination of selection methods are best? Name the 4 most valid combinations. Which are for all/entry-level positions and which for non-entry levels?
Cognitive Ability Tests + another
* Base is the Cognitive Ability Test, because:
1) one of the highest predictive validities
2) one of the easiest to administer
3) one of the most validated
4) could be applied to different jobs (doesn’t have to be specific for a job) and to different levels of a job
1. Cogn. + Integrity test: +0.65 - ENtry/All
2.+ 3. Cogn. + structured interview: +0.63 Entry/All
2.+ 3.work sample: +0.63 - Non-entry
4. Cogn. + Conscientiousnes: +0.6 - no info
159
Selection Biases and errors
Perceptual Errors: Decoy Effect
Social Desirability
Social Perception Error
Fundamental attribution error
Halo effect
Horns effect
Similarity/Liking
160
Name a perceptual error and explain it
DECOY EFFECT
When an irrelevant 3rd option can influence how people decide between 2 viable options
When asymmetric offerings make you buy something you did not want.
Price-value ratio (S:2€, M:3,5, L:4€; Normally would pick M but as only 50ct more and much more might pick L)
161
Social Desirability
We say what we think people want to hear. Small effects, but:
- Male applicants tend to have higher social desirability than female applicants
- Older applicants tend to have higher social desirability than younger applicants
--> closer look
162
Name and explain Social perception Errors
Fundamental attribution error
- Attribute behaviors to traits and personality & discount the situational factors
- Person-Situation Interactionist view: In reality, behavior is a product of both the personality and situational factors
Halo effect
Tendency to rate favorably on one aspect because of a high rating on a different aspect
- interview someone: good looking --> good in job
Horns effect
Other way around
- badly dressed -> bad at job
Similarity/Liking
Tendency to rate favorably who is similar to us
- like same football team --> think of them favorably
163
What is face validity?
Applicants’ perception that the test is relevant (and fair) for selection.
164
Which tests have the highest face validity and which lowest? What are effects of face validity?
Normally, most applicants feel that (level of importance for selection): Interviews and work samples
> cognitive ability tests > personality inventories, integrity tests and graphology
Within selection process:
- low face validity --> might not accept job, think will be unfair in future
Other outside of process:
Employer Branding: Recommend the employer to others. This limits the employer's access to the talent pool.
* View the organization favorably: if process is seen as unfair, then the company is not positively seen
* Affects applicants’ future intentions or purchase organization’s products
164
Which tests have the highest face validity and which lowest? What are effects of face validity?
Normally, most applicants feel that (level of importance for selection): Interviews and work samples
> cognitive ability tests > personality inventories, integrity tests and graphology
Within selection process:
- low face validity --> might not accept job, think will be unfair in future
Other outside of process:
Employer Branding: Recommend the employer to others. This limits the employer's access to the talent pool.
* View the organization favorably: if process is seen as unfair, then the company is not positively seen
* Affects applicants’ future intentions or purchase organization’s products
