Marketing Midterm #1 Study Guide/Outline Chapters 1-5, 7-9, & 14 Chapter 1: Marketing: Creating and Capturing Customer Value

Objective 1- Define Marketing and outline the steps in the marketing process I. Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return II. 4 Ps: product, price, place, and promotion III. 5 steps: The first 4 aim to create value for customers a. Understand marketplace and customer needs and wants b. Design a customer-driven marketing strategy c. Construct a marketing program that delivers superior value d. Building profitable customer relationships and creating customer delight e. Reaps rewards of strong customer relationships by capturing value from customers Objective 2- Explain the importance of understanding customers and the marketplace and identify the five core marketplace concepts I. Understanding needs, wants and demands II. Capture customer lifetime value and greater share of customer (the portion of the customers purchasing that a company gets in its product categories) which results in increased long-term customer equity (total combined customer lifetime values of all the companys customers) for the firm III. Value proposition (the set of benefits or values it promises to deliver to consumers to satisfy their needs) is fulfilled through a market offering, which delivers customer value and satisfaction. IV. Marketing myopia: the mistake of paying more attention to the specific products a company offers tan to the benefits and experiences produced by these products Objective 3- Identify the key elements of a customer-driven marketing strategy and discuss the marketing management orientations that guide the marketing strategy I. Dividing the market into segment of customers (market segmentation) and selecting which segments it will cultivate (target marketing) II. Decide how it will differentiate and position itself in the marketplace III. Marketing management orientations a. Production concept: improving production and distribution efficiency because customers will favor the products that are available and affordable b. Product concept: Product improvements c. Selling concept: consumers will not buy enough of the product unless the firm launches a large-scale selling and promotion effort -Factoryexisting productsselling & promotingprofits through sales volume d. Marketing concept: knowing the needs and wants of target markets and delivering the desired satisfactions better than other competitors do

-Marketcustomer needsintegrated marketing profits through customer satisfaction e. Societal marketing concept: a company's marketing decisions should consider consumers wants, the companys requirements, consumers long-run interests, and societys long-run interests Objective 4: Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return I. CRM- Customer relationship management: the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction a. Customer-perceived value: evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers b. Customer satisfaction: the extent to which a products perceived performance matches a buyers expectations II. Customer relationship levels and tools a. Basic relationships- companies with low-margin customers b. Frequency marketing programs c. Club marketing programs d. Consumer-generated marketing: consumers submitting homemade ads e. Supply-chain management Chapter 2: Company and Marketing Strategy: Partnering to Build Customer Relationships Objective 1- Explain company-wide strategic planning and its four steps I. Strategic planning: the fit between the organizations goals and capabilities a. Defining the companys missionmission statement: what the company wants to accomplish in the larger environment b. Setting company objectives and goals c. Designing the business portfolio o The collection of businesses and products that make up the company o Current and future to decide strategies for growth and downsizing o Portfolio analysis: management evaluates the products and businesses that make up the company SBU (strategic business units) which can be a company division, product line within a division, or sometimes a single product or brand

o Growth-share matrix: evaluates SBUs in terms of its market growth rate and relative market share problem: too current

d. Developing functional plans o Product/market expansion grid: identifies company growth opportunities Market penetration: increasing sales of current products to current market segments without changing the product Market development: identifying and developing new market segments for current company products Product development: offering modified of new products to current market segments Diversification: starting up or acquiring businesses outside the companys current products and markets Objective 2- Explain marketings role in strategic planning and how marketing works with its partners to create and deliver customer value I. Value chains a. Value delivery network: made up of the company, its suppliers, its distributors and customers who partner with each other to improve the performance of the entire system Objective 3- Describe the elements of a customer-driven marketing strategy and mix and the forces that influence it I. Customer value and relationships are the crux of marketing strategy and programs a. Market strategy: the logic by which the company hopes to create customer value and achieve profitable customer relationships b. Market segmentation: dividing the market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing programs c. Positioning: arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers 4 Ps and 4 Cs (customer solution [product], customer cost [price], convenience [place], and communication [promotion]

Objective 4- List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing return on marketing investment I. Marketing planmain components a. Executive summary: brief summary of main goals and recommendations of the plan for management review b. Current marketing situation: describes the target market and a companys position in it including info about the market, product, performance, competition, and distribution o Market description: defines market and major segments and reviews customer needs and factors that may affect purchases o Product review: shows sales, prices, and gross margins of the major products in the product line o Review of competition: identifies major competitors and assesses their market positions for the 4 Ps o Review of distribution: evaluates recent sales trends and other developments in major distribution channels c. Threats and opportunities analysis: assesses major threats that the product may face d. Objectives and issues: states marketing objectives and key issues that will affect their attainment e. Marketing strategy: outlines the broad marketing logic how will the company create value for customers in order to capture value from customers in return f. Action programs: what will be done, when will it be done, who will do it, and how much will it cost? g. Budgets: expected revenues, cost of production, distribution, and marketing. The difference is the projected profit h. Controls: outlines the control that will be used to monitor progress evaluating the results and taking corrective action to ensure that the objectives are achieved II. Marketing analysis a. SWOT analysis: an overall evaluation of the companys strengths, weaknesses, opportunities, and threats III. Marketing department organization a. CMO: chief of marketing officer heads the marketing departments b. Types of marketing organizations o Functional organization (most common): different marketing activities are headed by a functional specialista sales manager, advertising manager, marketing research manager, customer service manager, or a new product manager o Geographic organization (sells across the country of internationally): sales and marketing people are assigned to specific countries, regions, and districts

o Product management organization (companies with many different products or brands): product manager develops and implements a complete strategy and marketing strategy or plan o Customer management organization: similar to product management organization but the strength is that the company is organized around the needs of specific customer segments IV. Measuring and managing return on marketing investment a. Return on marketing investment (marketing ROI): the net return from a marketing investment divided by the costs of the marketing investment o Tough to measure o Marketing dashboards: meaningful sets of marketing performance measures in a single display used to monitor strategic marketing performance Chapter 3: Analyzing the Marketing Environment Objective 1-Describe the environmental forces that affect the companys ability to serves its customers I. Marketing environmentthe actors and forces outside marketing that affect marketing managements ability to build and maintain successful relationships with target customers a. Microenvironment: consists of the actors close to the company that affect its ability to serve its customersthe company, suppliers, marketing intermediaries, customer markets, competitors, and publics o Marketing intermediaries: firms that help the company to promote, sell, and distribute its goods to final buyers o Publicsfinancial, media, government, citizen-action, local, general, and internal publics b. Macroenvironment: consists of the larger societal forces that affect the microevnvironmentdemographic, economic, natural, technological, political, and cultural forces Objective 2- Explain how changes in the demographic and economic environments affect marketing decisions I. Demographic Environment a. Baby boomers: the 78 million people born during the years following WWII and lasting until 1964 b. Generation X: the 45 million people born between 1965-1976 in the birth dearth following the baby boom burden of the bb c. Millennials (Generation Y): the 83 million children of the baby boomers born between 1977 and 2000 II. The economic environment a. Economic factors that affect consumer purchasing power and spending patterns b. Industrial economies, subsistence economies, and developing economies c. Changes in consumer spending and income distribution

d. Natural environment: involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities o Shortages of raw supply o Increased pollution o Increased government intervention in natural resource management o Environmental sustainability: developing strategies and practices that create a world economy that the planet can support indefinitely III. The technological environmentforces that create new technologies, creating new product and market opportunities a. RFID- radio-frequency identification transmitters that are embedded in products that we buy American Apparel (pg 80) IV. The political and social environment a. Political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society o Increasing legislation: fair trade practices, environmental protection, product safety, truth in advertising, etc o Federal regulatory agencies: FTC, FDA o Increased emphasis on ethics and socially responsible behaviors Socially responsible behavior: do the right thing Cause-related marketing: ex. TOMS shoes corporate giving V. The cultural environment: institutions and other forces that affect societys basic values, perceptions, preferences, and behaviors core beliefs and secondary beliefs a. Shifts in secondary beliefs: how people see themselves, others organizations, society, nature, and the universe Chapter 4: Managing Marketing Information to Gain Customer Insights Objective 1- Explain the importance of information in gaining insights about customers I. Customer insights: fresh understandings of customers and the marketplace derived from marketing information that become the basis for creating customer value and relationships a. Marketing information system (MIS): people and procedures for assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights Objective 2- Define the marketing information system and discuss its parts I. A well-designed information system begins and ends with users a. Assessing information needs b. Developing information rom internal databases, marketing intelligence activities, and marketing research

c. Internal databases provide info on the companys own operations and departments d. Marketing intelligence activities supply everyday info about developments in the external marketing environment e. Market research: collecting info relevant to a specific marketing problem faced by the company f. MIS helps users analyze and use info to develop customer insights, make marketing decisions, and manage customer relationships Objective 3- Outline the steps in the marketing research process I. Defining the problem and research objectives a. Exploratory research: marketing research to gather preliminary information that will help define problems and suggest hypotheses b. Descriptive research: to describe things such as the market potential for a product or the demographics and attitudes of consumers who buy the product c. Casual research: to test hypotheses about cause-and-effect relationships II. Developing the research plan a. Must be translated into specific information needs b. Secondary data: info that already exists somewhere having been collected for another purpose much easier to obtain and cheaper to get than primary data c. Primary data: information collected for the specific purpose at hand o Research approaches- observational, ethnographic, survey, and experimental o Contact methods- mail, telephone, and personal interviewing Focus group interviewing: personal interviewing that involves inviting 6-10 people to gather for a few hours with a trained interviewed to talk abut a product, service, or organization. The interviewer focuses on the group discussion on important issues Immersion groups: small groups of consumers who interact directly and informally with product designers without a focus group moderation present Online marketing research: well suited to quantitative research speedy and costly Online focus groups: trained moderator and small group chatting about products, services, or organizations Objective 4- Explain how companies analyze and use marketing information I. Customer relationship management a. Managing detailed info about individual customers and carefully managing customer touch points to maximize customer loyalty b. CRM analysts develop data warehouses and use sophisticated data mini techniques to unearth the riches hidden in customer data c. Regular reports and updates

d. Intranet: provide ready access to research info, customer contact info, reports, shared work documents, contact info for employees and other stakeholders and more e. Extranets: suppliers, customers, resellers, and select other network members may access a companys extranet to update their accounts, arrange purchases, and check orders against inventories to improve customer service Chapter 5: Consumer Markets and Consumer Buyer Behavior Objective 1- Define the consumer market and construct a simple model of consumer buyer behavior I. Model of consumer behavior a. The environment marketing stimuli o Product, price, place, promotion o Economic, technological, social, cultural b. Buyers black box o Characteristics o Decision process c. Buyer responses o Buying attitudes and preferences o Purchase behavior o Brand and company relationship behavior Objective 2- Name the four major factors that influence consumer buyer behavior I. Characteristics affecting consumer behavior a. Cultural factors culture, subculture, and social class o Subcultures Hispanic American cultures are much more family oriented and children have a big say in what brands they buy. Most families are also first-generation immigrants, are very brand-loyal, and they favor brands and sellers who show special interest in them African American cultures is growing in affluence and sophistication Asian American cultures most affluent U.S. demographic segment, most brand conscious b. Social factors o Word of mouth influence and buzz marketing Opinion leaders: a person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts social influence on others II. Types of buying decision behavior a. Complex buying behavior o High consumer involvement in a purchase and significant perceived differences among brands b. Dissonance-reducing buying behavior

o Consumer buying in situations characterized by high involvement but few perceived differences among brands o Postpurchase dissonance c. Habitual buying behavior o Characterized by low-consumer involvement and few significantly perceived brand differences d. Variety-seeking buying behavior o Low consumer involvement but significant perceived brand differences III. The buyer decision process a. Need recognition, information search, evaluation of alternatives, purchase decision, and postpurchase behavior b. New products: awareness, interest, evaluation, trial, and adoption Chapter 7: Customer-driven strategy Market targeting: evaluating each market segments attractiveness and selecting one or more market segments to enter Differentiation- differentiating the market offering to create superior customer value Positioning- arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers