Final Exam Flashcards
(81 cards)
1
Q
Generic Competitive Strategies
A
- Cost Leadership: the firm sets out to become the low-cost producer in its industry
- Differentiation: the firm seeks to be unique in its industry along some dimensions that are widely
valued by consumers - Focus: the firm chooses a narrow competitive scope within an industry
2
Q
Growth Strategies: Ansoff Matrix
A
existing products–new products
existing markets – new markets
market penetration. product development
market development. diversification
3
Q
Name the growth strategies
A
- Intensive growth
- Integrative growth
- Diversification growth
4
Q
Intensive Growth
A
- Market Penetration
- Product Development
- Market Development
5
Q
Intensive Growth: Market Penetration
A
Companies often penetrate markets in one of three ways:
1. gaining competitors’ customers
2. improving the product quality or level of service (remember that value = quality / price)
3. attracting non-users or convincing current customers to use more of the company’s product
6
Q
Intensive Growth: Product Development
A
Note that product development refers to significant new product developments and not to minor changes in the existing product of the firm
7
Q
Intensive Growth: Market Development
A
This strategy may entail exploration of:
1. new segments of a market
2. new uses for the company’s product or services
3. new geographical areas in order to entice new customers
8
Q
Integrative Growth
A
- Backward Integration
- Forward Integration
- Horizontal Integration
9
Q
Integrative Growth: Backward Integration
A
The company extends its activities towards its inputs such as suppliers of
raw materials in the same business
Example: an automobile company may own a tire company, a glass company, and a metal company to create a stable supply of inputs and ensure a consistent quality in their final product
10
Q
Integrative Growth: Forward Integration
A
The company extends its activities towards its outputs such as distribution in the same business
Example: Amazon’s purchase of Whole Foods
11
Q
Integrative Growth: Horizontal Integration
A
The company moves into businesses that are related to its existing activities
Example: InBev and Anheuser-Busch
12
Q
Diversification Growth
A
It is generally not wise to put all your eggs into one basket.
When a company diversifies, it essentially moves out of its current products and markets into new areas
Three Types
1. Concentric Diversification
2. Horizontal Diversification
3. Conglomerate Diversification
13
Q
Diversification Growth: Concentric Diversification
A
The company acquires/develops new products/services that are closely related to its core business or technology to enter one or more new markets
Example: a manufacturer of leather shoes may expand into leather accessories such as belts, wallets, and purses
14
Q
Diversification Growth: Horizontal Diversification
A
The company acquires/develops new products/services that are different from its core business or technology but which may appeal to its current customers
Example: a manufacturer of leather shoes may expand into accessories such as fountain pens, cuff links, etc
15
Q
Diversification Growth: Conglomerate Diversification
A
The firm enters (through acquisition or merger) an entirely different market that has little or no synergy with its core business or technology
Example: Virgin Group
16
Q
Value Equations
A
- Value = Benefits – Burdens
Benefits: everything the customer obtains from the product offering (e.g.,
quality, satisfaction, prestige, image, and the solution to a
problem)
Burdens: everything the customer must
give up (e.g., money, time, effort,
and all non-selected alternatives)
- Value = Quality/Price
Value is a key factor in customer satisfaction and retention.
17
Q
The Value-Pricing Thermometer
A
memorize pic from slides
18
Q
The Value-Pricing Thermometer: Measures
A
- Objective Value (a.k.a. True Economic Value): The value that a fully informed buyer would or should ascribe to the product
- Perceived Value: a customer’s WTP
- COGS: Direct Materials + Direct Labor + Manufacturing Overhead
19
Q
Customer Price Sensitivity: The Idea
A
Price is varied by customer segment.
Key indicators
Product
Price
Buyer
20
Q
Customer Price Sensitivity:
Key Indicators: Product
A
- Low Differentiation of Alternatives: if there is little performance differentiation between
alternatives (e.g., home heating oil), price is likely to be important - Easy Comparability: if all available options satisfy a customer’s needs in
much the same manner, it should be easy to compare alternatives, thus heightening price sensitivity (e.g.,
brands of bottled water vs. things to do on a Friday night) - Will Perform As Expected: To what degree do we know if a product will perform as advertised?
Search goods (e.g., electronics, clothing), higher price sensitivity
vs.
Experience goods (e.g.,
restaurants, movies), lower price sensitivity)
- Not Mission-Critical: when the performance of the product is mission-critical (e.g., the car seat for the new baby), price sensitivity will be depressed
21
Q
Not on Review Sheet:
Customer Price Sensitivity:
Key Indicators: Price
A
- Easy Comparability: the ease with which prices can be compared
heightens price sensitivity (e.g., gas stations) - High in a Relative Sense: budget and disposable income (e.g., a car
vs. a coffee grinder) - Reference Prices Exist: Why do sellers often work hard to establish a
recommended selling price (e.g., MSRP), against which the actual price of a product compares favorably? - Not Needed as Quality Que: in some product categories (e.g., perfume or
fine wine), inherent product quality if difficult to judge; price = quality heuristic
22
Q
Customer Price Sensitivity:
Key Indicators: Buyer
A
- Sophisticated, Deliberative: some consumers invest time and energy in
becoming category experts - Bearing Costs: Who pays?
- Able to Switch Easily: sometimes, buyers become locked-in to a particular product, either due to preference or to habit (e.g., SAS vs. SPSS)
- Not Motivated by Prestige: for some individuals, a high price lends an air of exclusivity to a product/brand by virtue of it being priced beyond the reach of others
(e.g., Birkin bags)
23
Q
The Pain of Paying
A
Every time we part with our
money, it inflicts psychological
‘pain’.
This ‘pain’ happens no matter
how big or small the amount of
money we are paying.
This ‘pain’ is increased if we
pay in cash (instead of credit
card or an automatic payment).
Hedonic tax – a tax on
pleasure/enjoyment.
24
Q
Alleviating the Hedonic Tax Strategies
A
- Token Payment Mechanisms
- Two-Stage Mental
Budgeting: stage 1: decide on the
amount to spend stage 2: choose among the available options - Fixed Fee (a.k.a. All-You-
Can-Eat) Arrangements
25
Why Do Marketing Channels Exist?
The most basic benefit of marketing channels is contact efficiency, where channels reduce the number of contacts necessary to exchange products.
Example: What would the challenge of making breakfast be like without contact efficiency?
26
see slides for pics of centralized vs. decentralized
27
Marketing Channel Functions
Given the costs involved, it is
virtually impossible for a single
firm to perform all channel
functions well.
Channel intermediaries
typically attain a level of
specialization in one or more of
the following five functions:
Sorting
Breaking Bulk
Maintaining Inventories
Maintaining Convenient
Locations
Providing Services
28
Marketing Channel Functions:
Sorting
Manufacturers make one or a few products while customers need a wide
variety and deep assortment of different products.
Example: a candy shop
chocolate bars from Belgium
sour gummies from Japan
caramel treats from a local
bakery
29
Marketing Channel Functions:
Breaking Bulk
Manufacturers produce large quantities of a product to gain the benefits of economies of scale; customers typically want only one of a particular item.
Example: a coffee shop
sells you a single cup of coffee instead of making you buy an entire bag of beans from a wholesaler
30
Marketing Channel Functions:
Maintaining Inventories
Since manufacturers cannot
make products on demand,
the channel must provide for
the storage of products for
future purchase and use.
Example: an ice cream truck
always has a stocked freezer
full of treats, so you don’t
have to wait for ice cream to
be made from scratch every
time you want one
31
Marketing Channel Functions:
Maintaining Convenient Locations
Since manufacturers and
customers are separated
geographically, the channel
must overcome the spatial
discrepancy.
Example: vending machines
are strategically placed in
places like schools, offices,
and airports, so that you can
grab a snack or drink exactly
when you need it
32
Marketing Channel Functions:
Providing Services
Channels add value by offering/facilitating services (e.g., insurance, storage, financing) and standardizing the exchange process (e.g., payment processing, delivery, pricing).
Example: a video game store
sells games
lets customers try out demo versions, trade in old games, and get expert recommendations from staff
33
Critical Marketing Channel Configuration Decisions
A firm has to make the following fundamental decisions:
1. Direct vs. Indirect
2. Channel Coverage
3. Channel Structure: An
Integrated vs. an Arm’s Length
Approach
34
Critical Marketing Channel Configuration Decisions: Direct vs. Indirect
1. The Size and Distribution of the End Customers: if the market is fragmented and dispersed, and the value of customers' purchases are too small on average, an indirect channel is best
2. The Nature of the Product/Service: if the product requires a large amount of education and explanation to the end user, an direct channel is best
3. The Role and Position of the Product in the End Customer’s Purchasing Basket: some products (e.g., vacations) are bought as part of a bundle of products/services; such sales are better conducted through an intermediary who can bring customers’ different requirements together
4.The Nature of the Producer Firm: a startup operation or a relatively new company may not have the credibility with customers to get initial adoption;
it may need the platform of an established channel partner to position its offerings in the marketplace
5. The Relative Size of the Producer Firm: here, size is a proxy of channel power; a firm with relatively weak power relative to potential channel
partners may be forced to go through intermediaries to gain market access
6.The Business Strategy of the Producer Firm: a company may want to preserve its working capital
position and may therefore need the buffer of an intermediary whom it can bill immediately (as opposed to waiting to recover cash from multiple customers over a period of time)
35
Critical Marketing Channel Configuration Decisions: Channel Coverage
Intensive coverage is preferred when the product and its features are well-known and well-branded (e.g., Coca-Cola), or so completely commoditized that the products are indistinguishable from each other (e.g., milk).
When a product requires significant assistance of the channel intermediary in making the final sale, distributors/dealers must be chosen selectively.
Close and cooperative channel relations thrive best when channel systems are more selective rather than intensive.
36
Channel Structure: An Integrated vs. an Arm’s Length Approach
see pic on slides!!
chat
🔵 Integrated Distribution Network
Structure:
Supplier → Company-Owned Distribution Center → Company-Owned Retail Outlets
Characteristics: The company owns and operates both the distribution and retail outlets.
Pros: High control over branding, customer experience, and operations.
Cons: High cost due to owning and managing the entire channel.
Potentially lower coverage due to limited geographic expansion capacity.
🔴 Arm’s Length Distribution Network
Structure:
Supplier → Multibrand Distributor → Multibrand Retailer
Characteristics: Products are distributed and sold by independent third parties that carry multiple brands.
Pros: Low cost and high coverage since the company doesn’t manage distribution or retail directly.
Cons: Low control over how the product is marketed and sold.
Higher competition for attention among multiple brands at the retailer level.
37
How to Fix Broken Supply Chains
by Dustin Burke
If we want to build more resilient supply chains that can
withstand the next great crisis, then we need to bring new
ideas that can withstand competitive pressures.
1. Sharing Risk: Build more buffers (extra inventory): for low-probability, high-impact events, we share risk; active pharmaceutical ingredients (API).
2. Radical Transparency: We need to know who shares the same risk: in the supply chain, your risks are not tied only to your customers or your competitors, but also to those companies who are using the same inputs; we need accurate, up-to-date maps of key inputs and where they come from, in any given industry; microprocessors.
3. Automated Recommendations: Too much data can simply be overwhelming; we need technology to
help us; plastics.
38
The Goal of Integrated Marketing
Communications
The ultimate goal of marketing communications is to influence someone to make a purchase.
39
The Hierarchy of Effects Model of Marketing Communications: List
From LAST to FIRST:
1. Repurchase - Customer satisfaction.
2. Purchase Incentives (convenience, financial, and value-added).
3. Conviction - A brand’s unique value proposition (UVP) and non-refusable offers.
4. Preference Benefits (What’s in it for me?) and brand equity. Comparative
advertising.
5. Liking - Emotional appeals.
6. Knowledge - Content marketing and rational appeals.
7. Awareness - Repeated exposure.
40
The Hierarchy of Effects Model of Marketing Communications:
1. Create Awareness
People will not buy a product/service that they are unaware of.
When Amtrak initiated its
Acela Express rail service
from Boston to NYC, it
launched ads announcing
the new, high-speed service
41
The Hierarchy of Effects Model of Marketing Communications:
2. Provide Knowledge
This step involves providing
info about product/service
features.
Amtrak described Acela’s
amenities and schedule:
electrical outlets
complimentary WiFi
adjustable lighting
conference tables
a club car
‘Trains depart from Boston’s
South Station at...’
42
The Hierarchy of Effects Model of Marketing Communications:
3. Create a Favorable Impression (Liking)
People don’t buy features; instead they buy benefits –things that will make their lives better, solve a nagging problem, or save them money.
Acela boasted two customer
benefits:
it would move passengers from city center to city center in comfort
it would allow them to work productively throughout the trip
43
The Hierarchy of Effects Model of Marketing Communications:
4. Attain a Preferred Position in the Customer’s Mind (Preference)
Benefits (What’s in it for me?) and brand equity. Comparative advertising.
Acela’s PODs:
‘Take the Acela Express and you will miss airport hassles, cramped seats, long security
lines, weather delays, and cancellations.
44
The Hierarchy of Effects Model of Marketing Communications:
5. Create a Purchase Intention (Conviction)
Focus: A brand’s unique value proposition (UVP) and non-refusable offers.
If the marketer has done agood job of addressing earlier steps in the process,
the customer will resolve to make a purchase.
‘I’m going to NYC for a conference next month. This time I’ll try the Acela.’
45
The Hierarchy of Effects Model of Marketing Communications:
6. Make the Sale (Purchase)
If all the previous steps have been completed, the prospect will become a customer.
46
The Hierarchy of Effects Model of Marketing Communications:
7. Repurchase
no slide about this
47
The 6M Approach to Integrated Marketing Communications Strategy: Explanation and List
As a marketer, you face the challenge of communicating with consumers in a way that moves them toward a purchase.
The six M’s are:
Market
Mission
Message
Media
Money
Measurement
48
The 6M Approach: Market
To whom is communication
addressed?
49
The 6M Approach: Mission
What is the objective of
communicating?
50
The 6M Approach: Message
What specific points must be
communicated?
51
The 6M Approach: Media
Which communication vehicles should be used to get the message across?
One medium is seldom enough.
Traditional media (Super Bowl TV ad)
Non-traditional media (Facebook, Twitter, YouTube)
Website (Chevrolet Purple Roads)
52
The 6M Approach: Money
How much will be budgeted
for the effort?
53
The 6M Approach: Measurement
How will the impact of the communication be assessed?
# of viewers of Super Bowl
# of views for the YouTube
video
engagement on social media
# of participants
press mentions
see total reach card
54
The 6M Approach: Measurement - Total Reach I and II
Total Reach I
Total Reach = Traditional Reach + Non-Traditional Reach
Traditional Reach (Super Bowl):
111.5M
Non-Traditional Reach =
Organic Reach + Amplified
Reach = 1.8M (YouTube) + 1.5M
(Facebook/Twitter) + Amplified
Reach
How to calculate amplified
reach (a.k.a. virality)?
1.5M participants via Facebook/Twitter
Average: 200 Facebook friends/Twitter followers
Calculation: 1.5M × 200 = 300M
Total Reach II
Total Reach = Traditional Reach + Non-Traditional Organic Reach + Non-Traditional Viral Reach
= 111.5M + 1.8M + 1.5M + 300M = 414.8M
55
Measurement: CPM (Cost per Thousand)
CPM = (Cost of the campaign × 1,000) / Total Reach
= ($11M × 1,000) / 414.8M = $26.55 (i.e., every 1,000 reach will cost Chevrolet $26.55)
Measurement: CPM Comparison
CPM for Purple Your Profile: $26.55
Average CPM for a Super Bowl ad: $30-35
Was Purple Your Profile a success?
Yes, as $26.55 < $32.5
56
Customer-Based Brand Equity (CBBE):
Definition
The CBBE concept approaches brand equity from the perspective of the consumer:
the power of a brand lies in what resides in the minds and hearts of customers
Learn → Feel → Do
CBBE is the differential effect that brand knowledge has on consumer response to the marketing of that brand.
57
Customer-Based Brand Equity (CBBE):
Sources
CBBE occurs when the consumer:
has a high level of awareness of the brand
holds some strong, favorable, and unique brand associations in memory
is loyal to the brand
58
Sources of CBBE: Brand Awareness
BA is related to the strength of
the brand node in memory:
1. Brand recognition
consumers’ ability to confirm prior
exposure to the brand when given
the brand as a cue
important when decisions are
made at the point of purchase
2. Brand recall
consumers’ ability to retrieve the
brand from memory when given
the product category or the needs
fulfilled by the category
important when decisions are
made away from the point of
purchase
59
Sources of CBBE: Brand Awareness (Continued)
Complete Market Set
Awareness Set
Consideration Set
Choice Set
60
Sources of CBBE: Establishing Brand Awareness
The more a consumer experiences the brand by seeing it, hearing it, or thinking about it, the more likely he/she is to strongly register the brand in memory.
Repeated exposure is key.
61
Sources of CBBE: Brand Associations
A brand’s mental map
accurately portrays in detail all salient brand associations and responses for a particular target market
core brand associations are abstract associations that characterize the 5 to 10 most important aspects or dimensions of a brand
62
Sources of CBBE:
Brand Associations: F-A-B
Feature: (What It Is)
Advantage: (What It Does)
Benefit: (How It Helps Me)
63
Sources of CBBE: Brand Loyalty
Size & Share of Wallet
Relationship marketing focuses on the creation of brand loyalty
attitudinal
behavioral
Important metrics:
1. Attitudinal
liking
WOM+
2. Behavioral
recency
frequency
monetary (average order size in $)
64
Define Positioning
Positioning refers to creating a mental image of the product offering and its differentiating features in the minds of the target market.
65
Positioning: POPs vs. PODs
1. Points of Parity
Not necessarily unique to the brand; may be shared with other brands
2. Points of Difference
Attributes, advantages, and benefits that consumers strongly associate with a brand, positively evaluate, and believe that they could not find to the same extent with a competitive brand
66
Positioning: POPs vs. PODs Illustration
Subway:
a taste POP and a health POD with respect
to quick-serve restaurants (e.g.,
McDonald’s, Burger King)
a health POP and a taste POD with respect
to health food restaurants and cafés
67
Positioning: Non-Comparative Positioning Statement
[Offering] is the best [product category] for [target customers] because [primary reason (i.e., the most strongly relevant POD)]
68
Customer Relationship Management (CRM): Define
Managing a firm’s relationship with current and potential customers to maximize long term profits.
CLV is based on the profitability of a customer not only in current but in all future periods as long as the customer is still alive (has not dropped off).
69
Managing Customer Retention:
Defining Customer Retention
For products with short purchase cycles: The customer continues to purchase the product/service over a specified time period.
For products with long purchase cycles: The customer indicates the intention to purchase the product/service at the next purchase occasion
70
Managing Customer Retention:
Defining Customer Defection (regular and silent)
Defection: The customer has decided
to no longer use the product/service and has communicated to the firm that they are no longer a customer.
Silent Defection: The customer has decided
to no longer purchase the
product/service and has not
communicated to the firm
that they are no longer a
customer.
71
Managing Customer Retention: Determinants of Customer Retention:
Customer Satisfaction
(graph on slides)
72
Determinants of Customer Retention List
1. Customer Expectations vs. Delivered Quality
2. Value
3. Product Uniqueness and Suitability
4. Loyalty Mechanisms
5. Ease of Purchase
6. Customer Service
7. Exit Barriers
73
Determinants of Customer Retention:
Customer Expectations vs. Delivered Quality
A critical factor in determining retention is the difference between the customer’s expectations and the delivered quality of the product/service.
Raising expectation levels generates trial, but overly high expectations contribute to low
retention
74
Determinants of Customer Retention:
Value
Here, value is defined as
quality divided by price.
A firm can provide greater
value by:
offering higher quality and
matching the competition on
price
offering the same quality at a
lower price
75
Determinants of Customer Retention:
Product Uniqueness and Suitability
The more different (or less substitutable) a product is, the greater the retention rate.
It is critical that products remain relevant to customers.
76
Determinants of Customer Retention:
Loyalty Mechanisms
Loyalty mechanisms can generate high retention rates even when competing products/services are almost identical.
77
Determinants of Customer Retention:
Ease of Purchase
The key factors are:
availability
convenience
78
Determinants of Customer Retention:
Customer Service
Customer service is a top determinant of whether or not a customer would defect from a firm
79
Determinants of Customer Retention:
Exit Barriers
Examples of exit barriers include:
programs that reward continued use based on historical usage (loyalty programs)
product-design characteristics that make it difficult to change suppliers
product-learning curves that make it costly to switch to competing products
80
Managing Customer Satisfaction:
Five Rules
1. If you can’t deliver, don’t promise.
Having set customer expectations, a firm should be very careful that it doesn’t underperform.
2. Customers may not respond enthusiastically to small improvement in performance.
A firm should avoid improving performance by amounts that are not appreciated by customers.
3. Don’t cover up shortfalls in one area by shifting the customer’s focus to other areas.
E.g., product quality and support services.
4. Manage customer expectations.
The best time to manage customer
expectations is after the sale and before the product/service is delivered/used.
Educating the customer about what it is that they have bought can go a long way.
5. Delighting customers by performing far above their expectations is a great idea, but make sure you know the costs.
81
Guanxi
Guanxi (Art of Relationships):
trust (respect, know others)
favor (loyalty, obligation)
dependence (harmony,
reciprocity)
adaptation (patience,
cultivation)
