Exam 2 Flashcards
(146 cards)
1
Q
Mission Statement
A
The organization’s purpose;
what it wants to accomplish in the larger environment
2
Q
Business Objectives
A
- build profitable customer relationships
- invest in research
-improve profits
-affect entire company
3
Q
Marketing Objectives
A
-increase market share
-create local partnerships
-increase promotion
4
Q
Analyzing the current business portfolio
A
- identify strategic business units (SBUs)
- assess the attractiveness of its various SBUs
- decide how much support each SBU deserves
5
Q
BCG Growth-Share Matrix
A
- Under the classic BCG portfolio planning approach, the company invests fund from mature, successful products and businesses to support promising products and businesses in faster-growing markets
-the company must decide how much it will invest in each product or business (SBU), it must decide whether to build, hold, harvest, or divest
6
Q
Problems with Matrix Approaches
A
- Difficulty in defining SBUs and
measuring market share and growth - Time-consuming
- Expensive
- Focus on current businesses, not
future planning
7
Q
The Product/Market Expansion Grid
A
Companies can grow by developing new markets for existing products
- through diversification, companies can grow by starting or buying businesses outside their current product/markets
8
Q
Product Form Competition
A
Products or services of the same product type
9
Q
Product Class/Category Competition
A
Products that have similar features and provide the same basic function
10
Q
Need-level Competition
A
- Products and services that the consumer views as fulfilling the same need
- Think about substitutability
11
Q
Budget Competition
A
- Products and services that are purchased from the same general budget (e.g., groceries, discretionary income)
- Key Concept: Mental Accounting!
12
Q
Levels of Competition
A
Form, Class, Need, Budget
13
Q
Beyond Customer Competition
A
Competition is best defined primarily through customers’ perspective.
BUT competitors don’t just fight for market share…
- Suppliers/Inputs (smartphone glass, chips)
- Shelf Space and Partnerships
Talent (designers, programmers, actors)
- R&D and Intellectual Property (drug patents)
14
Q
First Mover Advantage
A
In some markets, whoever enters
first gains significant advantages
over competitors who arrive later
15
Q
First Mover Advantage
A
Slow technological evolution + slow product adoption = likely and long lasting
Slow technological evolution + fast product adaptation = Likely, but High
Competition also Likely
Fast technological evolution + Slow Product Adoption = unlikely
Fast technological evolution + fast product adaptation = likely, but short-lived
16
Q
Product Adoption Curve
A
innovators – early adopters – early majority – late majority – laggards
tech enthusiasts – visionaries – pragmatists – conservatives – skeptics
17
Q
Customer insights
A
information-based understandings
of customers and the marketplace that become the basis for creating customer value, engagement, and relationships
* Important but difficult to obtain:
* Needs and buying motives not obvious
* Customers usually can’t tell you what and why
18
Q
Marketing Research
A
the process of planning, collecting, and analyzing data relevant to a marketing decision
19
Q
“Begin with the End in Mind”
A
What is my research question?
How will I use and analyze the data?
What kind of inferences do I hope to make?
What decision will this influence?
20
Q
Gathering Consumer Insights
A
- An “investment” to reduce uncertainty
- Can help guide decisions on
– Whether to enter
– Product characteristics
– Promotional strategy
– Positioning - Must weigh costs and benefits of research
– Money
– Time spent
21
Q
Market Research Process
A
Defining the problem and research objectives — Developing the research plan for collecting information —- Implementing the research plan: collecting and analyzing the data — interpreting and reporting the findings
22
Q
Examples of Primary Data
A
– Survey
– Test market
– Focus group/interviews
– Observation
– Experiments
23
Q
Examples of Secondary Data
A
– Transaction data (e.g. scanners)
– Browsing/clickstream data (Amazon)
– User Generated Content
– Mobile
– Government or 3rd party data
24
Q
Primary Data Advantages
A
– Allows investigation of a specific issue of interest
– Often more relevant outcomes than secondary data
– Can look at causality and what-if scenarios
25
Primary Data Disadvantages
– Expensive
– Time-consuming
– Many potential biases
26
Primary Data
Data that did not exist prior to this specific research effort and must be created by the marketer.
Most helpful for decision support research (the 4 Ps)
27
Secondary Data
Data that already exists somewhere (prior to this specific research effort) and was collected for another purpose.
- Can be external or internal to the company
- Most helpful for situational marketing research (the 3 Cs)
- Often the domain of marketing analytics
28
Secondary Data Advantages
– Abundant, easy to find
– Can be low cost or even free
– Can be more real market behavior (scanner data)
29
Secondary Data Disadvantages
– Not customized to your needs
– Procedural details may be unknown to you
– Limited insights about causation
30
Panel Data
Group (panel) of consumers ----Survey or sales receipts ---- What are they buying or not buying?
- important for secondary data
31
Social Media Data
- User-generated content
- Social graph (connections)
- Interests (following pages, subreddits)
- Some is publicly available (Twitter),
other data can be purchased
32
Attributes of Good Market Research
--- Reliability: Would a repeat test find the same insights?
--- Validity: Do the findings apply to the business problem you're solving?
--- Generalizability: Is your data representative of the wider society?
33
Probability Sampling
- Sample members are drawn at random from the population of interest
- Ideally they will have no systematic differences in characteristics compared to that population
- simple random sample
- stratified random sample
34
Non-Probability Sampling
Sample members are NOT drawn at random from the population of interest and may have systematic differences in characteristics
---- Non-probability samples can actually work much better in some
cases, but you must be careful about generalizing your findings.
Most real-world samples are convenience samples to some degree.
35
Convenience sample
Includes whoever is easiest to recruit
36
Judgment sample
includes the “best” respondents according to the researcher’s judgment
37
Primary Research Methods
Observation
Interviews and Focus Groups
Surveys
Experiments
38
Observation
- Involves watching and interpreting people’s behavior with minimal interaction or intervention
- Great for exploratory research and for finding unarticulated needs
39
Observational Research Example:
McDonald’s Milkshakes
People were buying milkshakes early in the morning.
Buyers were often adults eating alone.
Insight: People wanted these milkshakes while they were stuck in traffic on their commute.
Marketing decisions: Design to last longer, design for straw vs. spoon, list on breakfast menu, morning price promotions, shift McCafe products to meet this need
40
Interviews and Focus Groups
- Conversation with (potential) customers to directly ask them about their thoughts and feelings
- Focus group is an interview with multiple people at once, led by a moderator
- Have a lot of interaction and can be guided by an expert interviewer/moderator
- Fairly unstructured and anecdotal, so more useful for exploratory research than for making final decisions or generalizing to all customers
- Focuses on articulated needs
41
Survey Research
- More structured than interviews or observation
- More consistent and comparable data across respondents
- Greater up-front cost to design survey, lower marginal cost to get responses (esp. online)
- Lots of issues to consider for effective question design
42
Issues in Question Design
List Framing Effects
Order Effects
Double-Barreled Questions
Response Biases
– Memory Errors
– Social Desirability Effects
– Demand Effects
43
Order Effects
Responses are influenced by previous question
44
List Framing Effects
Marketer’s Question: What % watch more than 2.5 hrs of TV?
- Version A: Low frequency
- Version B: High Frequency
45
Double-Barreled Questions
Questions that ask about two separate pieces of information at the same time, making interpretation difficult or impossible
Example:
Please indicate how much you agree or disagree with each of the following statements about your shopping experience:
1) I felt welcomed by the staff and my needs were well taken care of.
Better (not double-barreled) version:
1) I felt welcomed by the staff.
2) My needs were well taken care of.
46
Memory Errors: Behavioral Frequency
How many times have you purchased coffee in the last year?
- Impossible to actually count from memory
- Educated guess at best
Better: When was the last time you bought coffee?
- Much more likely to remember
- Specific episode (vs. full history) is more memorable
- Recent (vs. distant) experience
47
Social Desirability Effects
For certain questions, respondents are biased to answer in a way that they perceive to be socially desirable. (Self- presentation)
This makes some research questions very hard to address:
- What % of the US population cheats on their spouse/partner?
- What % of the US population washes their hands every time they go to the bathroom?
- What % of UW students use illegal drugs regularly?
48
Demand Effects
Respondents often feel pressure to answer questions in a way that they think the asker wants to hear.
(Politeness) “How often have you been flossing?”
49
Promoting Honest Response
* Ensure anonymity
* Ask indirectly (projection)
- For example, ask respondents to guess the portion of the population that uses illegal drugs
50
The King of Survey Questions:
Net Promoter Score (NPS)
How likely are you to recommend this product/brand to a friend or colleague? (1-10)
Formula: Promoters (9-10) - Detractors (1-6)= NPS
Examples:
Tesla 96 (cars average 58)
USAA 75 (banking average 18)
Apple 72 (laptop/tablet average 43-56)
Verizon 26 (telecom/ISP average 0)
United 10 (airline average 38)
51
NPS: What do we with it?
- Measure overall customer satisfaction indirectly (reduces demand effects)
- Compare customer satisfaction over time and against competitors on a standardized scale
- Identify low-NPS categories/industries to disrupt (e.g., Apple credit card, AWAY suitcases, Netflix)
- Categorize customers (Promoter, Passive, or Detractor) for potential targeting
1. Try to fix issues for detractors, or “fire” them for future damage control
2. Encourage reviews and referrals from Promoters
3. Target Promoters for cross-selling of other offerings
52
Experiments: Causal research
- Experimentation involves the deliberate manipulation of one or more variables by the experimenter in such a way that its effect on other variables can be measured.
- The variable being manipulated is called the independent variable (a.k.a. cause).
- A variable that will reflect the impact of the independent variable is called a dependent variable (a.k.a. effect).
- By assigning manipulations in a way that is not related to any other relevant factors (randomization), experiments can rule out anything else as a potential cause of the observed outcome.
53
When is Mass Marketing Appropriate/Effective?
* Goods are a commodity (products considered interchangeable and sold in bulk – e.g.: oil)
* Consumers have (virtually) the same needs
* Little to no competition
54
Targeted Marketing
* An alternative to mass marketing
– When you can’t serve everyone
– When group needs differ substantially
– When competitors can better serve some customers
* Involves three key steps:
1. Segmenting the market (“S”)
2. Choosing the target segment(s) that are right for you (“T”)
3. Positioning the product for a chosen target segment (“P”)
55
Benefits of STP to the Firm
* Identification of valuable customer segment(s)
* Efficiency in marketing communications
* Higher customer lifetime value
-------> Increase profit
56
Benefits of STP to the Customer
* Customized products & services
* Relevant promotions
* Personalized and efficient interactions with firm
--------> Higher Satisfaction
57
Segmentation
* Grouping consumers by some criteria, such that those within a group will respond similarly to a marketing action and those in a different group will respond differently
* Divides a broad target market into subsets of consumers who have common needs and who can be addressed as a group
* A study by Harvard Business Review argued that in the US, 85% of 30,000 new product launches failed because of poor market segmentation
58
Segmentation: How can we divide the marketplace?
Demographic
* Gender
* Age
* Income
Psychographic
* Social class
* Values
Geographic
* Continents
* States
* Cities/suburbs
Behavioral
* Benefits sought from purchase
* Occasion
* Loyalty
59
Characteristics of Good Segmentation
* Separate prospective buyers into groups such that
– within a group:
* Similarity is high
* Needs are common
* Responses to marketing action are similar
– between groups:
* Similarity is low
* Needs are different
* Responses to marketing action are different
* Segmentation variables are observable and actionable
* And at least 1 segment is actually attractive to target!
60
Targeting
Deciding which customers to serve and which to ignore
61
Targeting Strategy Types
Mass marketing, Differentiated targeting strategy, Concentrated targeting strategy, One-to-one marketing
62
Oversegmented Targeted
Failure to identify trends and update targeting strategy may lead to over segmentation.
63
Evaluating Potential Target
Segments: Segment characteristics
– The target segment must offer long term revenue potential (consider
segment size, growth, buying power, loyalty)
– Target segment must be accessible (both observable and reachable)
64
Evaluating Potential Target
Segments: Competitive Market
– What is the level of competition for the segment?
– Segment should have some unmet needs the company can distinguish
itself by addressing
65
Evaluating Potential Target
Segments: Segment compatibility
– Addressing the target segment should be compatible with the company’s core competency, brand image, and goals
66
An Ideal Target Segment
* Accessible
– Defined by observable features
– Relatively inexpensive to reach with both communications and sales channels
– Ideally reachable in a focused/exclusive way
* Profitable
– Large, growing, has discretionary income
– High likelihood of buying your product, high willingness-to-pay (WTP)
– Low competitive intensity
* With unmet needs
* Where you have a competitive advantage
– Current brand; channels; competencies; resources; scale; synergies
* Compatible with your image, goals, and capabilities
– Not alienating customers/employees/investors/partners
67
Choosing Your Target
1. Customer Value Analysis
2. Competitive Benchmarking
3. Evaluating Fit of Offerings
(After already analyzing the market and environment, especially consumer needs and competitors)
68
Step 1: Customer Value Analysis
Rate each segment on how much they value each need
69
Step 2: Competitive Benchmarking
Rate each competitor on how well they meet consumers’ relevant needs
70
Step 3: Evaluating Fit
Compare results of Steps 1 and 2 to identify targeting opportunities and evaluate planned (or current) offerings
71
Positioning
* Strategy for what you want your offering to look like in the minds of consumers
– Consider your competitive advantage(s)
– Define your unique value proposition
72
Two Ways to be Different
Vertical Differentiation and Horizontal Differentiation
73
Vertical Differentiation
competing directly with competitors based on what’s a better or worse offering
More/ Smaller/ Cheaper/ Faster/
74
Horizontal Differentiation
Finding a different angle or niche based on customers’ different needs and preferences
Different/ Lifestyle
75
Perceptual Maps: A Key Tool for
Positioning
Perceptual maps measure the way products are positioned in the minds of consumers and show these perceptions on a graph whose axes are formed by product attributes
76
Positioning Statements
Communicates strategy and serves as a reminder that all of your tactics should be consistent with the segment you’re targeting, the needs you’re addressing, and the value proposition you’ve chosen
77
What is a product?
“Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.”
78
Product Line
A group of closely related products from a single company
› Similar functions, target customers, channels, branding, usage occasions, or firm resources (inputs, people, etc.)
› Classic version is a vertical line (nicer/cheaper versions of core product)
79
Product Line Characteristics
Product Line Length – how many items it includes
Product Line Range – how far the line stretches (top to bottom)
Product Line Density – how close together items in the product line are
80
Line extension
Adding a new product to an existing line
81
Line vs. Brand Extension
Line extension: new product added to existing line
Brand extension: new product(s) outside existing line(s)
82
Line Extension Types: Upward
Stretching
– Upgrade current customers, add brand prestige, target premium segment, increase margins
– May fail if poor fit with capabilities, or if low-end brand alienates premium segment
83
Line Extension Types: Downward
Stretching
example:
Balmain x H&M
Jason Wu for Target
84
Identifying Promising Brand Extensions
Fits firm capabilities
–e.g., Uber Eats
Fits current customers
Fits usage occasion (complementary)
–e.g., Starbucks mugs
Fits brand associations (positioning, personality, etc.)
–e.g., Harley-Davidson
85
Product Mix/Portfolio
A company’s complete assortment of goods and services
86
Product Mix Dimensions
Width
- # of product lines
Length
-# items within each product line
Depth
-# versions offered of each product in product line (colors, sizes, add-ones, etc.)
Consistency
-How closely related the products are in their target segments, benefits, and firm capabilities
87
Strategic Portfolio Management
1. Add new product lines (brand extensions)
2. Lengthen existing product lines (line extensions)
3. Add more versions of each product (increase depth)
4. Trim or streamline portfolio (for consistency and efficiency)
88
Managing the Product Through
its Life Cycle
Introduction — Growth — Maturity — Decline
89
Customers and Targeting in the PLC
Customers can be segmented based on when they adopt new products
Five categories:
1. Innovators
2. Early Adopters
3. Early Majority
4. Late Majority
5. Laggards
90
PLC Shapes Vary
Fads, Fashion, Classic, Slow Starters
91
What is a brand?
A name, term, sign, symbol, or design, or a combination of these that identifies the maker or seller of a product
92
Brand Representations
Names
Logos and Symbols
Slogans
Characters
Jingles/Sounds
93
Brand Associations and Positioning
- Everything the brand represents in consumers’ minds.
- Includes quality, symbolism, status, and personality, among many others
- Associations should align with the firm’s intended positioning!
94
Brand Equity
Consumer value of a product (willingness-to-pay) due to brand name over and above other aspects of the product offering
95
Brand Equity:
National vs. Private Label Brands
Manufacturer brands
(also referred to as national brands)
- Pantene
Brand Equity:
National vs. Private Label Brands Private-label brands or Store Brands
* Generic
* Often imitations of national brands
* Used as baseline for identifying brand equity
- Ex. Costco's Kirkland
96
Why are people willing to pay for
brands?
Informational Value
- Quality (performance and conformance)
- Reputation, Trustworthiness, Accountability
- Ethics, Supply Chain, Sustainability
Symbolic Value
- Identity, self-expression, status
- History, nostalgia
- Good feelings from associations
Performance Value
- Top-down perception (actually tastes better)
- Less decision effort and information search required (especially if loyal customer)
97
Why are brands valuable to firms?
* Price premium
* Barrier to entry
* Negotiating power (with retailers)
* Attractive to employees
* More support from public & regulators
* Transferable to other offerings
98
How do you assess brand strength?
– Brand Equity (price premium in sales data or experimental research)
– Awareness (survey research)
– Specialty research firms: Y&R Brand Asset Valuator (Differentiation, Relevance, Knowledge, Esteem)
99
Rules for Effective Brand Names
(1) Be distinctive (more memorable, searchable, and legally protectable).
(2) Be readable/pronounceable and appealing.
(3) Suggest something about the product's qualities or benefits.
(4) Shorter is better.
(5) Work across cultures (pronounceable, no undesirable meanings).
(6) Be extendable (to other/future offerings).
100
Brand Associations
- Associations are everything linked to the brand in a consumer’s mind.
- They can be based on the brand name, design, products, ads, or any other mental association.
101
Building Brand Associations
through the 4 P’s
* Advertising messages, public relations
* Brand design (name choice, logo, colors, fonts)
* Product decisions (features, quality, packaging, services)
* Pricing decisions
* Place/channel decisions (exclusivity, store atmosphere, other nearby products & customers)
102
Where Do Brand Associations
Come From?
* Company generated (4P’s)
* Non-company generated
* Personal experience
* Peer experience and word-of- mouth
* Competitors
* News/media
* Product crises and scandals
* Random coincidence (Corona)
103
Co-Branding
* Leverages fit of customers,
reputation, and/or associations
* Connects you to partner’s customers, reputation, and associations
* Draws on capabilities of both firms
* Requires trust, coordination, and
complex contracts
104
Co-Branding: Component
Branding
* Creates brand equity for traditionally “industrial” products
* Product brand can leverage reputation of component supplier
* Boosts negotiating power of supplier
* Product brand may be reluctant to give up credit and control
105
Creating New Brands
* Leverages fit of firm capabilities
and knowledge
* Doesn’t require fit with existing
brand
* Doesn’t benefit from brand equity
* Avoids diluting brand and prevents clashing associations or segments
* Builds a “house of brands”
106
Multibrands
* Competing brands in a category
with same owner
* Target different segments,
increase market share
* Can be used to fill shelf space
and block out other competitors
* High risk of cannibalizing and
limits brand equity
107
Creating Sub-Brands
* Compromise between pure brand extension and all-new brand
* Still leverages fit of firm
capabilities and knowledge
* Partially leverages (and requires)
fit with main brand and current customers, but allows some separation
* Builds a “branded house”
108
Why Reposition a Brand?
* Current brand, products, etc. are declining (or at least not growing)
* Adapt to recent or expected trends in tastes, culture, competition, etc. (e.g., Apple’s privacy campaign)
* Unlucky or mismanaged brand needs a “refresh”
* Brand is taking on a new, more distinctive “job” in a company’s portfolio (e.g., Ford Ranger)
109
Major approaches to pricing
- cost-based pricing
- value-based pricing
110
Cost-based Pricing
Variable costs
- Vary with production volume (more unit sales = more costs)
- e.g., ingredients in a restaurant, metal and glass in iPhones
Fixed costs
- Unaffected by production volume
- e.g., rent and appliances in a restaurant, factories and R&D for iPhones
Variable Costs + Fixed Costs= Total
Costs
111
Tool #1: Cost-Plus (Markup)
Pricing
Calculate your total costs per unit and add a standard markup (% or $ amount) to set your price
112
Tool #2: Breakeven Analysis
What combination of price and units sold is required to break even on total costs?
113
Cost-Based Pricing:
Break-Even Point
Break-even point: # of units to sell in order to cover the total costs at a given price.
𝑄= 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠/
𝑃 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
114
Tool #3: Target Return Analysis
Just like break-even, but goes beyond just making up for
costs ($0 profit) to aim for a specified amount of profit.
𝑄= ( 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠 +𝑻𝒂𝒓𝒈𝒆𝒕 𝒓𝒆𝒕𝒖𝒓𝒏 ) /
𝑃 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
115
Value-Based Pricing
* Total amount of perceived value the product creates for the customer.
* Maximum “ceiling” for potential price.
* Measure willingness-to-pay, estimate value over alternatives
(especially for B2B customers)
116
Value-Based Pricing:
Price Elasticity of Demand
E = % change in quantity demanded /
% change in price
117
Value-Based Pricing:
Price Elasticity
Factors Affecting Price Elasticity:
Uniqueness and Switching Costs
Importance and Price
Ability to stockpile
Price-quality inferences
Ease of searching products/prices
118
New Product Pricing
* Price skimming involves setting a high initial price and (possibly) reducing it over time.
* Penetration pricing involves setting a low initial price and (possibly) raising it later.
119
Price Skimming:
Why
* Bigger profit margins right away.
* First adopters are often more passionate and higher income (higher WTP).
* Costs tend to be higher at first (economies of scale).
* Fewer competitors at first.
* Starting with high-end customers helps build brand prestige.
* Sets high reference price for future customers.
120
Price Skimming: When
* Very innovative product (targeting innovators, minimal competition, high R&D costs to cover).
* Prestige brand positioning.
* High variable costs to produce.
* Limited economies of scale.
121
Penetration Pricing: Why
* Captures market share quickly.
* Discourages competitors.
* Builds customer relationships and brand awareness.
* Captures economies of scale quickly.
* Accelerates firm learning, builds capabilities.
122
Penetration Pricing: When
* High switching costs or customer lock-in
* Strong threat of competitor entry
* Low variable costs to produce
* Also selling captive products or complements
* Significant network effects
123
Uniform Pricing
Charging the same price to every customer, regardless of differences
in WTP, costs, or other factors
124
Tactics for Non-Uniform Pricing
(Price Discrimination)
- Personalized or Segmented Pricing
- Pricing by Place and Time
- Versioning
- Promotional
Pricing
125
Personalized Pricing
Charging (or negotiating) a
unique price for each customer
126
Segmented Pricing
Charging different prices for different
groups or types of customers
Common examples: Kids,
students, seniors, military
127
Location-based Pricing
Charging different prices for
different stores or locations
Examples: snacks at movies
theaters or stadiums
128
Time-based Pricing
Charging different prices for different days or times
Examples: last-minute flights, rush
hour Ubers, off-peak workout
classes
129
Product Versioning
Charging substantially more for versions that different target segments will self-select
Examples: first-class airline seats,
car trim options, data plans
130
Promotional Pricing
Offering lower prices based on temporary discounts and sale events, coupons, or rebates
Examples: coupons, discount
codes, holiday sale events
131
Psychological Pricing
Reference Prices
Left-Digit Bias
Roundness
Price-Quality Inferences
Methods of Payment
Fairness and Customer Blowback
132
Left-Digit Bias
* People tend to overweight the left most digit(s) of a price, subconsciously rounding down.
* Marketers take advantage of this by pricing just below the next dollar value (or other round number) – everything ends in 99!
133
Roundness
* Round numbers can signal prestige/luxury
* Non-round numbers seem more precise, math-y, and potentially fair (less arbitrary)
134
Price-Quality Inferences
Price is used as an indicator of quality when other info or experience is limited.
This often means that higher prices can make a product more appealing (increase demand).
135
Methods of Payment
Different forms of money show differences in the pain of payment.
* Cash > credit > debit > store credit (Where would you rank ApplePay?)
* “Fake money” is treated as less valuable (casino chips, store credit, in-app account balances)
The timing of payment is also a very important consideration.
* One-time payment vs. subscription or installments
* Pay in advance vs. afterward
* People discount future money aggressively, especially in the first few weeks (but companies are mostly rational, patient)
136
Fairness and Blowback
Even if the price makes sense for a customer otherwise, they may get very angry if:
* Price decreases after they buy
* Price goes up for the wrong (perceived) reason
* Ongoing price goes up after they’re locked in
* They see others paying less (example)
137
Customer Lifetime Value (CLV)
Big Picture
1. Maximize overall relationship, not single purchase.
2. Retention is extremely valuable!
3. Use CLV to guide advertising and
targeting decisions.
4. Recognize the side effects of
strong customer relationships!
138
Calculating CLV
CLV = (p-c) * q * T
CLV – AC = PLV (Prospect Lifetime Value)
139
Customer Lifetime Value (CLV):
Other Positive Side Effects
Cross Selling – selling additional products to the same customer
Word-of-Mouth (WOM) – Conversations about your product between customers
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cross-selling
selling additional products to the same customer
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Word-of-Mouth (WOM)
Conversations about your
product between customers
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Integrated Marketing Communication
involves carefully integrating and coordinating the company’s many communications channels to deliver a clear, consistent, and compelling message about the organization and its products.
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Steps in Developing Effective
Marketing Communication
* Identify the target audience
* Determine the communication objectives
* Design the message
* Choose the media to send the message
* Select message source and collect feedback
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Message Content – “What to Say”
- Rational appeal relates to the audience’s self-interest.
- Emotional appeal is an attempt to stir up positive or negative emotions to motivate a purchase.
- Moral appeal is directed to an audience’s sense of what is right and proper.
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Designing a Message
Message content is “what to say.”
Message structure and format is “how to say it.”
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