Fundamentals of Marketing

Lecture 1
TOPIC 1
A definition
Why do we need marketing?
- We need it because it creates customers. Any biz has to create customers. The way to do that is via marketing.
- Peter Drucker there are 2 ways to create value: Marketing and innovation. These produce results. All the rest are costs.
- Marketing is the distinguishing, unique function of the business.

Marketing definition
- Marketing is the management process through which goods and services move from an idea to the customer.
- Marketing management is the art and science of choosing target markets and getting, keeping, and growing (GGK) customers through creating,
delivering and communicating (CCD) superior customer value.
- Marketing is based on thinking about the business in terms of customer needs and their satisfaction

It includes the coordination of 4 elements the 4Psof marketing

- 1. Concept and creation of a product
- 2. Determination of its price
- 3. Selection of a distribution channel to reach the customers place
- 4. Development and implementation of a promotional strategy

Marketing is NOT selling

- Selling concerns itself with the tricks and techniques of getting people to exchange their
cash for your product. It is not concerned with the values that the exchange is all about.
- Marketing views the entire business process as consisting of a tightly integrated effort
to discover, create, arouse and satisfy customer needs.

Marketing is not about getting customers to pay for a product, it is about developing a
demand for that product and fulfilling the customers needs.

A system

Above is the relationship between the industry and the market. Sellers and buyers are connected by four flows. Sellers send goods and services and communications such
as ads and direct mail to the market; in return they receive money and information such as customer attitudes and sales data. The inner loop shows an exchange of money
for goods and services; the outer loop shows an exchange of information.

Customers have relationships with brands. They communication with touchpoints and get info via insights.
- Insights
o Definition An insight is an accurate and deep intuitive understanding of a human truth, based on experiences, beliefs, needs or desires.
It is something that rings a bell. Its the way that brands create customers
o Insights are the hooks for a brand to establish a connection with the consumer, and try to bring them a solution to a desire, a will, or a need.
o Having a hook in communication is the key to the consumers heart and mind and typically comes in the form of an insight that is weaved
into the advertising.
o No formula per se to generate strong insights, however, there are some characteristics to look for when you are developing them.
They need to be true and universal
They need to be discovered
It needs to be emotional and logical at the same time
There should be true dilemma as without a problem no one needs a solution.

o An insight is made of the 3Ws:

What is the customer doing?
Why are they doing it?
Wow nobody has ever noticed that problem before.

Insight Examples

- Dove
o Through their research found that women were missing out on capturing some of lifes most memorable moments because they were anxious and
not happy the way they looked.

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 o They found that 77% of women are camera shy as self-conscious
o They then juxtaposed older women camera shy women with younger women who
were happy in front of camera and emitted the message When did you stop
thinking you were beautiful. The tagline captures the insight and connects with the
heart of the consumer.
o Good example of how research and quant data and deep understanding of consumer
led to breakthrough insight which is turn lead to a successful campaign.
Therefore, insight when you are little you play to the camera, when
you are older you shy away from it.
Tension I want to be as confident as I was as a girl
Campaign idea camera shy, when did you stop thinking you were
beautiful?

- Heineken created ciders Dillz.

o Targeted women. Problem to overcome was that women dont want to drink beer, but also want to fit in. Fresh as nothing similar to it on the
market (a drink serving as a direct substitute for beer).

Touchpoints can be:

- TV, digital print, social media, the website etc.
- UGC user-generated content
- When consumers encounter these touchpoints, it gives them the opportunity to compare their prior perceptions of the business and form an opinion.

Purchase funnel
- Touchpoints play a role at each step of the purchase funnel.
1. Consideration if you have never heard of the product, the tunnel will stop.
2. Evaluation do pros outweigh the cons
3. Purchase - you need a purchase
4. Advocacy you need a positive experience

A history

Trade where I find product

Production sign of quality
Sales product is great at this price point
Mkg dept - beginning of mkt dept
Relationship
Experiences going much further then products characteristics but to experience of customer.

1850-1900 / the trade era

- Early days of the marketing as we know it, due to the market revolution where the rapid development of manufacturing and advances in farming had huge
effects on how people bought and sold goods and services now branded.
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 - Marketing was all about identifying the optimal places where to sell and trade those goods. The focus was on availability, and the ads would always mention
where to get the product.
- Telling customers where you can buy products.

1900-1920 / the production era - only myself can produce this product
- The idea of mass-production is everywhere, and the public is fascinated by the science of mass-production.
- Customers blown away by companies being able to produce 1000s of same product.
- No longer about where you can find it, but now focusing on the fact that only my company can do what you want.
- Advertising tries to prove that a given company is the only company with the ability to produce such a product in both quality and quantity; partly due to their
excellent manufacturing process.

1920-1940 / the sales era how do persuade my customers to buy my products and how do I do it via price.
- Marketers now concentrate on persuasive language and prices to sell products.
- Marketing is all about selling the product, and price is at the heart of it: what do you get for what price? The man who will use his skill and constructive
imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed H. Ford
- My car is great but even greater when you consider the price

1940-1960 / the marketing department era

- The four Ps (Product / price / promotion / place) are now in place.
- The job of a marketer comes into the landscape and the advertising agencies are created. Companies become a matter of positioning brands, with short copies
to sell products making them aspirational.
- There isnt any significant difference between the various brands of whiskey, or cigarettes, or beer. They are all about the same. And so are the cake mixes
and the detergents, and the margarines The manufacturer who dedicates his advertising to building the most sharply defined personality for his brand will get
the largest share of the market and the higher profit David Ogilvy

1960-1990 / the marketing company era

- Marketing moves from how do we sell the product? to what does the company stand for? The products become a piece of a larger solution that
companies offer.
- We see a progressive move, and the marketing practice tries to be more meaningful to the customer, being customer-focused rather than product-focused
why is my product greater for you?
- The world of marketing becomes a competition to capture the feelings and emotions of a public ready to embrace what a company stands for.
o Nostalgia Madmen scene not able the technology, its about the emotions this product is bringing. Not focused on the price and place we are
focused on feelings and emotions trying to create a bond between customer and product.
o Ridley Scott Apple Ad.

1990-2015/ the relationship era

- So easy for any brand to reach any market so now personalised marketing. Mass-marketing considered slightly obsolete.
- The globalization fuels the idea that the world itself had become a common marketplace. The differentiation across products, place, price and promotion
become more difficult as now all the four Ps were replicable across the globe.
- Hence the need to move towards marketing as a way to engage a more personalized relationship with the customer.
- Customer relationship management, enriched with all the contacts between the brand and the customer across the entirety of the customers journey allow a
new paradigm to emerge: the new focus becomes conversations with customers. Brands begin to get their customers insight. Nespresso started as a club you
could only get yoru capsules via mail. They started their business by personalised relationships. They asked their customers who they wanted to represent the
brands spokesperson George Clooney was chosen.

2015- / the experiences era

- No longer the place, price, the values etc, its what you can bring to the life of the customer how can I create a memory or experience.
- Its now the company approach to solving customer needs or wants that differentiates the brand.
- With an increasingly fragmented audience and a customer that is becoming more and more concerned about their data privacy and anonymity, the only way to
deepen the relationship is to create experiences that trigger memories and loyalty.
- It is no longer about product or service excellence customers expect that. Its about the experiential dimension of this product or service.
o E.g. Nike store in NY. Personalised products NikeID.
o Power of the band and the unicity of the personalised product. When I buy a pair of shoes from that store, I am the only one that has those shoes.
o You can then test the shoes basketball court and running machines
o Also there are coaches. You book an appointment
Also see applestores free wifi, you can test anything, do what you want etc.
Starbucks etc
- Not only selling products, but offering experiences.

An inventory
What can we market?
Physical goods
o Stan Smith
Services
o BlaBlaCar
o The U.S. economy today produces a 7030 services-to-goods mix.
o E.g. airlines, hotels, car rental firms, barbers
Events
o Paris Olympic Games
Experiences
o Walt Disney Worlds Magic Kingdom allows customers to visit a fairy kingdom
Persons
o Elections e.g. Trump
Places
o Disney cruise - Went from a cartoon character to an entire world.
Properties
o 250 million dollar house
Organizations
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 o Medecins Sans Frontieres
o Tesco to the top of the UK supermarket chain industry
Information
o CNN/FoxNews
Ideas
o Change.org

Key success factors

A brands world
- Millward Brown publishes every year BrandZ, a comprehensive survey aiming at ranking the top 100 most valuable global brands, among 100,000 brands in
50 markets, combining financial information and extensive and ongoing customer surveys.
- The financial criteria are based on what each company earns.
- Based on more than 3M consumers interviews, the consumer criteria look at:
o 1. How meaningful is the brand to the customer: the brand appeal, its ability to generate love and meet the consumers expectations and needs.
o 2. How different it is: its unique features and its ability to set the trends for consumers.
o 3. How salient the brand is: is it the consumers brand of choice?

Industry split
- What are the most represented:
o Tech
o Finance
o Telecom
o etc
- This has changed a lot from 10 years ago where tech wasnt as prominent.
- Regional
o US 54
o Europe 20
o China 13
o Rest of the World 13
2 years ago china had 2.

Brands are seen not only as companies but also as friends. As friends, customers expect their friends to take positions on issues.
- Seen with companies responding negatively to end of DACA.

Wrap up
- We have said that marketing can be seen as a system a relationship between customers and brand to create value.
- Marketing is an art and a science that is able to look at the requirements of the customers to fulfil them.
- We looked at 4 Ps of marketing. We have seen that history has shifted to the experience created by brands thus transcended the 4 Ps into new grounds.

Lecture 2 - Consumer behaviour and market segmentation

What influences consumer behaviour
Analysing the consumer market.
- Successful marketing requires that companies fully connect with their customers. Adopting a holistic marketing orientation means understanding
customers gaining a 360-degree view of both their daily lives and the changes that occur during their lifetimes so the right products are always marketed to
the right customers in the right way.

Consumer characteristics

Cultural factors
- Culture is the fundamental determinant of a persons wants and behaviors. Its made of values.
- If you are raised in the US, those values in the culture will have an impact on how you consume,
- Each culture consists of smaller subcultures that provide more specific identification and socialisation for their members (nationality, regions, religion).
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 - Marketers must closely attend to cultural values in every country to understand dhow best market their products and find new opportunities.
- All societies exhibit social stratification, in the form of social classes, relatively homogenous enduring divisions in a society with some form of hierarchy and
with members who share similar status, values, interests and behaviours.
o E.g. in the US lower lowers, upper lowers, working class etc. Also, ideas of individualism and achievement etc are significant in the education and
media.
- Social class members show distinct product and brand preferences in many areas

Social factors
- Reference groups are all the groups that have direct or indirect influence on someones attitudes or behaviours.
o Primary groups are the ones with whom the person has continuous and informal interaction: family, close friends or coworkers.
o Secondary groups tend to be more formal and the require less continuous interaction: sports club, religion, charity
o Reference groups influence their members as follows
They expose an individual to new behaviours and lifestyles
They influence attitude sand self-concept
They create pressures for conformity, included in consumption
o If a reference group is strong, opinion leaders can be identified.
o An opinion leader is often highly confident, socially active and frequent users of the
category.
- The family is the most important consumer buying organisation in the society, and family members
constitute the most influential primary reference group.
o The family of orientation consist of parents and siblings.
o From parents, a person acquires an orientation towards politics, economics, sport, religion,
and a sense of personal ambition, self-worth and love.
E.g. Almost 40 percent of families have auto insurance with the same company as the husbands parents.
o The family of procreation are the spouse and the children
For expensive products and service, the decision is shared. For some categories of products or services, roles can be split or shared.
More and more influence wielded by children and teens I want to go to MacDonalds
two-thirds of 13- to 21-year-olds make or influence family purchase decisions on audio/video equipment, software, and
vacation destinations
Personal factors
o Tastes and preferences are often related
To the age and stage in the life cycle
To the number, age, and gender of people in the household
To the psychological life-cycles
To the critical life events or transitions (marriage, divorce, kids, retirement, etc).
o Economic circumstances can also influence consumption patterns (e.g. recessions)
Luxury-goods makers such as Gucci, Prada, and Burberry are vulnerable to an economic downturn.
If economic indicators point to a recession, marketers can take steps to redesign, reposition, and reprice their products or introduce or increase the
emphasis on discount brands so they can continue to offer value to target customers
o Personality
Personality can be defined by a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to
environmental stimuli including buying behaviour.
Personality can be a useful variable in analyzing consumer brand choices.
Brands also have a personality, a specific mix of human traits that we can attribute to a particular brand.
- Consumers tend to choose a brand personality similar to theirs.
o Their actual self-concept (how they view themselves)
o Their ideal self-concept (how they would like to view themselves)
o Other self-concept (how they think others see them)
- 5 brand personalities can be established - CRESS
1. Sincerity down to earth, honest, wholesome and cheerful
2. Excitement daring, spirited, imaginative, and up-to-date
3. Competence reliable, intelligent, and successful
4. Sophistication upper-class and charming
5. Ruggedness - outdoorsy and tough
- Those personalities depend on the country: in Spain and Japan, peacefulness replaced ruggedness; in Korea, two additional values are central: passive
likeableness and ascendency

Consumer Psychology
Perception
- A motivated person is ready to acthow is influenced by his or her perception of the situation.
- In marketing, perceptions are more important than reality, because perceptions affect consumers actual behavior.
- Perception is the process by which we select, organise, and interpret information inputs to create a meaningful picture of the world.
o It depends not only on physical stimuli, but also on the stimulis relationship to the surrounding environment and on conditions within each of us.
One person might perceive a fast-talking salesperson as aggressive and insincere; another, as intelligent and helpful. Each will respond to the
salesperson differently.
- Senses play a key-role in perception:
o Vision
o Touch
o Smell
o Sound
o Taste
- People emerge with different perceptions of the same object because of three perceptual processes: selective attention, selective distortion, and selective
retention.
o Selective attention the process that helps us screen most stimuli out.
Selective attention means that marketers must work hard to attract consumers notice.
People are more likely to notice stimuli that relate to a current need, they anticipate, and whose deviations are large in relationship to
the normal size of the stimuli.

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 o Selective distortion is the tendency to interpret information in a way that fits our preconceptions. Consumers will often distort information to be
consistent with prior brand and product beliefs and expectations.
o Selective retention
o Subliminal perception
- People are more likely to notice
o Stimuli that relate to a current need
o Stimuli they anticipate
o Stimuli whose deviations are large in relationship to the normal size of the stimuli
- An average person is exposed to 1,500 ads or brand communications a day
Emotions
- Consumer response is not all cognitive and rational: much is emotional and invokes different kinds of feelings.
- Creating an emotional connection is a strong way to engage loyal consumers
- Extremely central.
- Influenced by our emotions. That is why brands that are successful create emotional connection with consumers.
o E.g. Based on research showing that one in three working women recognize they ruined some of their clothes in the wash over the last year, Reckitt
Benckiser launched an online and in-store Find the Look, Keep the Look style guide for Woolite for finding fashion and keeping it looking
fabulous without breaking the bank. Based on the premise that a detergent should do more than clean, P&G positioned new Tide Total Care as
preserving clothing and keeping the 7 signs of beautiful clothes, including shape, softness, and finish.45
- Classic emotions
o Pride
o Excitement
o Confidence
o Amusement
o Wonder
Memory
- Consumer brand knowledge Is a node in memory with a variety of linked associations. The strength and organization of these associations will be important
determinants of the information we can recall about the brand
- Brand associations consist of all brand-related thoughts, feelings, perceptions, images, perceptions, beliefs, attitudes,that are linked to the brand.
- marketing is a way of making sure consumers have product and service experiences to create the right brand knowledge structures and maintain them in
memory.
- Brands need to ensure associations are created.
o See La Fnac ad about books 1998. Guy keeps visiting store to read, but doesnt buy anything. Then they use same guy for next ad.
- Marketing is then a way of making sure consumers have product and service experiences that create the right brand knowledge structure sand maintain them in
memory.

The buying process

- When we buy something, we are influenced by many factors. Some are broad e.g. culture, while some are specific personal preferences.
- Smart companies try to fully understand customers buying decision processall the experiences in learning, choosing, using, and even disposing of a product.
- When you take decision to buy, there are 5 different roles.
o Initiator
o Influencer
o Decider
o Buyer
o User

The 5-stage model of the buying decision process

Problem recognition
a. The buying process starts when the buyer recognizes a problem or need triggered by internal or
external stimuli.With an internal stimulus, one of the persons normal needshunger, thirst, sex
rises to a threshold level and becomes a drive. A need can also be aroused by an external stimulus. A
person may admire a friends new car or see a television ad for a Hawaiian vacation, which inspires
thoughts about the possibility of making a purchase.
2. Information search
a. We can distinguish between two levels of engagement in the search. The milder search state is called
heightened attention. At this level a person simply becomes more receptive to information about a
product. At the next level, the person may enter an active information search: looking for reading
material, phoning friends, going online, and visiting stores to learn about the product.
b. INFORMATION SOURCES Major information sources to which consumers will turn fall into four
groups:
Personal. Family, friends, neighbours, acquaintances
Commercial. Advertising, Web sites, salespersons, dealers, packaging, displays
Public. Mass media, consumer-rating organizations
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 Experiential. Handling, examining, using the product
c. SEARCH DYNAMICS By gathering information, the consumer learns about competing brands and their features.

3. Evaluation of Alternatives
a. How does the consumer process competitive brand information and make a final value judgment?
b. No single process is used by all consumers, or by one consumer in all buying situations
i. Beliefs and attitudes
ii. Expectancy-value model
4. Purchase Decision
5. Post purchase behavior

TOPIC 2
Market Research
Marketing research Definition
- Marketing research is the function that links the consumers to the marketer through information.
- This information is used to:
o identify and define marketing opportunities and problems
o generate, refine, and evaluate marketing actions
o monitor marketing performance
o and improve understanding of marketing as a process.

Generating insights
- Its the job of the marketing researcher to produce insight into the customers attitudes and buying behavior.
- Marketing insights provide diagnostic information about how and why we observe certain effects in the marketplace, and what that means to marketers.
- Insights are hooks for a brand to establish a connection with the consumer, and try to bring them a solution to a desire, a will, or a need.
o E.g. Gillettes Venus razor has become the most successful female shaving line everholding more than 50 percent of the global womens shaving
marketas a result of insightful consumer research that led to product design, packaging, and advertising cues that better satisfied female shaving
needs.3
o P&G if you want to know consumer best you need to continuously survey them to see if they are happy with their products.

- 4 types of firms do this - CESS

Syndicated-service research firms.
o These firms gather consumer and trade information, which they sell for a fee. Examples include the Nielsen Company, Kantar Group, Westat, and
IRI.

Custom marketing research firms

o These firms are hired to carry out specific projects. They design the study and report the findings.

Students or academics (e.g. Junior Consulting)

Employee creativity (e.g. in-house research department within marketing departments)

The marketing research process

1. Define the problem / the central question
2. Develop the research plan
3. Collect the information
4. Analyze the information
5. Present the findings
6. Make the decision

1. Define the problem

o What is the question we are trying to answer?
o Can we move forward without the information?
o Can we move forward using proxy data?
o If not, a research brief is created
- You wont do a survey if you do not have a problem. Are you missing opportunities? If the info is available, you dont need a survey. If not, you will go for a
research brief which lays out the research plan.
- Marketing managers must be careful not to define the problem too broadly or too narrowly for the marketing researcher.

2. Develop the research plan

- The research plan answers the brief and lays out the methodology and approach that will be used to tackle the problem.

- 3 types of research
o PRIMARY research fresh data gathered for that specific purpose

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 o Qualitative
Adapted to capture in depth insights and complex concepts like emotions, purchase decision behaviours etc.
E.g. focus groups, 1-on-1 interviews, shop along diaries, ethnography (following participants on their day-to-day shopping).
E.g. Roger & Gallet they are trying to enter China. Buy no brand awareness. So they are going to test.
Got a sample 12 women, 6 per group. You then spend time with those women, and you get a lot of insight.
Findings of survey ppl in China in group said that the brand conveyed premumness French heritage naturalness and
distillation expertise.
o Quantitative
Quantitative research has to provide robust, statistically significant insights into the population of interest for the research (e.g. nationally
representative, men, women, etc.)
Examples of quantitative surveys:
Ad hoc surveys interviewing a large number of people at once
Omnibus survey. Same questions fielded overtime
Survey large group of ppl ask them questions that are less intellectual and you are going to look at statistics.
E.g. LOreal they wanted to know how Chinese women used skin care products.
N=834 people interviewed.
Takeaways - showed that, e.g., women in China use 7.9 skin care products per day. That gives insights for the brand.
o SECONDARY research already available data, that were collected for another purpose and already exist somewhere

Desk research. The most popular one, aiming to gather as much information as possible to answer the question or insights that will help
answering the question via another research method
Social media listening. Using bespoke tools to understand and follow conversations on the topic of interest
Look at info that is available. You go online and look for info that is already out there.
o Digital analytics - Track online behaviors to help answer the question from the brief.

No need to ask anyone, the information is there.

E.g. Google analytics. E.g. for easyjet, you can look at how many people are looking for flights to go to a ceratin place.
Sample
- Then you have to choose your sample.
o Sampling unit: who should we survey / what shall we study?
o Sampling procedure: how should we choose the respondents?
Use the appropriate method to recruit the sample
Avoid obvious mistakes like online methodology to speak to 80+ people instance
Within budget
o Ensure the sample is representative using scientific methods
The quota methodology ensures a quantitative sample is representative of the studied population using set criteria and proportions.
o Sample size: how many people should we survey?
Statistically robust people to limit the margin of error for quantitative

3. Collect the info

The data collection, also called fieldwork, is the execution of the operational phase of the research plan.

4. Data analysis
- Scientific approach and pragmatism are critical when it comes to analyzing the results.
- Priority should always be given to answer the questions within the brief.
- Neutrality and objectivity are essential when analyzing and interpreting the results.
- Various level of sophistication of the tools to analyze the data.
o Analysis grid (capturing verbatim or reports information around the questions of the brief)
o Data tables (excel format are the most commonly used for quantitative research)
o Statistical analysis to determine correlation between factors or drivers of purchase for instance
o Big data solutions analyzing multiple sources of data
o Modelling allowing to isolate the net impact of marketing spend on the companys revenue

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 5. Present the findings
- Extremely important
- Presentation of the findings should answer the central question and include implications to the business: the So What?
- Research results can be presented face to face, by phone or video conference, or not at all.
- Material used to present the findings is dependent on the audience and the needs to communicate and socialize the research results.

6. Make a decision
- Although some research are conducted to inform marketing strategy and plans, in most cases it is used to inform a marketing decision.
- Recommendations will be made in the presentation of the research findings, however marketing executives need to bring their own judgment to ensure the
research is used properly and reflective of the reality.

7 characteristics of good marketing research

- E.g. Tropicana they decided to change their packaging. Theyve spent $30
mil to launch new packaging. In Feb, 1 month later, they reverted back. They lost 50 million.
- This sis because people had a deep emotional bond they had with the original packaging. What we didnt get was the passion this very loyal small group of
consumers have.
- Consumers feel an emotional bond. You cannot change everything at the same time.

Market segmentation
- Market segmentation divides a market into well-defined slices: a market segment consists of a group of customers who share a similar set of needs
and wants.
- The company or brands task is to identify the appropriate number and nature of market segments and decide which ones(s) to target.
- Descriptive characteristics and/or behavioral considerations can be used and combined to segment consumer markets.

Segmentation process
1. Needs-based segmentation: group customers into segments based on similar needs and benefits sought by customers in solving
a particular consumption problem
2. Segment identification: for each segment, determine which demographics, lifestyles and usage behaviors make the segment
distinct and actionable
3. Segment attractiveness: using segment attractiveness criteria (such as market growth, competitive intensity and market access)
4. Segment profitability
5. Segment positioning: for each segment, create a "value proposition" and product-price positioning strategy based on that
segments unique customer needs and characteristics
6. Segment "acid-test": create "segment storyboard" to test the attractiveness of each segments positioning strategy
7. Marketing-mix strategy: expand segment positioning strategy to include the 4 Ps of the marketing mix

Effective segmentation criteria

1. Measurable: the size, purchasing power, and characteristics of the segment can be measured
2. Substantial: the segments are large and profitable enough to serve
3. Accessible: the segments can be effectively reached and served
4. Differentiable: the segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs
5. Actionable: effective programs can be formulated for attracting and serving the segments

Segmentation factors descriptive segmentation

- geo/city size/density
o e.g. Carrefour
o Carrefour market, drive, express, city, contact, and montage.
- Age
o Signal toothpaste
Kids toothpaste
Adult tooth paste etc.
- Climate
o Tropicana
- Family-cycle
o Ikae ad where kid measures everyting
- Occupation
o Workers boots

Segmentation factors behavioural segmentation

- lifestyle
o A lifestyle is a persons pattern of living in the world as expressed in activities, interests, and opinions. It portrays the whole person interacting
with their environment
o Lifestyles are partly shaped by whether consumers are
Money constrained
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 Time constrained
- Personalities
o Lancome
Yuan Yuan
Zi Yu
Targeting 3 types of women.
- Benefits 6 benefits in the US premium wine market
o Enthusiasts
o Image seekers
o Savvy shoppers - Want to buy in a cleaver way
o Traditionalists - Family drank
o Satisfied sippers - Once a week etc
o Overwhelmed

Selecting the market segments

1. Full market coverage

- The aim to serve all customers with all the products they need. Only very large firms can undertake such a strategy.
- There are two ways to cover a whole market
o 1.Through undifferentiated or mass marketing: the firm ignores segment differences and goes after the whole market with one offer. It uses mass
production, mass distribution and mass communications, lowering the costs and trying to reach an always bigger audience.
E.g. Ford automobiles
o 2.Through differentiated marketing: the firm sells different products to all the different segments of the market. Differentiated market creates more
total sales than undifferentiated marketing. But it also increases the costs of doing business.
E.g. lego

2. Multiple Segment Specialisation

- With selective specialization, a firm selects a subset of all the possible segments, each of them being attractive and appropriate.
- There may be little or no synergy among the segments, but each promises to be a moneymaker. This strategy has the advantage to diversify the firms risk.
- A company can try to achieve some synergy with:
o 1. Product specialization: the firm sells a certain product to several different market segments (e.g. Hallamrk).

o 2. Market specialization: the firm concentrates on

serving many needs of a particular customer group. It
can gain a strong reputation among this customer group
and becomes a channel for additional products its
members can use.

3. Single segments concentration

- The firm markets to only one particular segment: through concentrated
marketing, the firm gains deep knowledge of the segments needs and
achieve a strong market presence. It also enjoys operating economies
by specializing its production, distribution and promotion.
o A niche is an even more narrowly defined customer group seeking a distinctive mix of benefits within a segment.
o Niche customers have a distinct set of needs:
1. They will pay a premium to the firm that best satisfies them
2. The niche is fairly small but has size, profit, and growth potential and is unlikely to attract many competitors
3. It gains certain economies through specialization
- E.g. La Copahne only do flights from Paris to NY.

- if you the only one, you are doing well. But, if others move in the market you lose marketing shre. Individuals as segement the dream of every company.

4. Individual marketing
- The ultimate level of segmentation leads to segments of one.
- Companies have gathered enough information about individual customers and business partners.
- Their factories are designed more flexibly.
- Mass-customization is the ability to meet each customers requirements to prepare on a mass basis individually designed products, services,
programs, and communications.
- Mass-customization is now extremely present in products, and of course in services, that can offer individualized experiences.

Brand Positioning
- Positioning is the act of designing a companys image to occupy a distinctive place in the minds of the target market. The goal is to locate the brand in the
minds of consumers to maximize the potential benefit to the firm. THIS IS POSITIONING.
- Once you have identified the segment
o Positioning the idea of locating the brand in the mind of the consumers. What a consumer thinks about the brand when they think of it or see it.
- A good brand positioning is absolutely vital to show what the brand stands for and what makes the brand unique.
- A good brand positioning helps guide marketing strategy by:
o clarifying the brands essence
o identifying the goals it helps the consumer to achieve
o showing how it does so in a unique way.
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 - Everyone in the org should understand the brands positioning and use it as context for making decisions. The brands mission.

Choosing a competitive frame of reference

- The frame of reference defines which other brands a brand competes with and the focus of the competitive analysis.
o 1.Identifying competitors, belonging to the same category that gathers companies willing to satisfy the same customer need.
o 2.Analyzing competitors
What is each competitor seeking in the marketplace?
What drives each competitors behavior?
Is the competitors mission to reach growth, to deliver profit or to be milked?
o 3.Is the market stable and established, or rapidly changing?
- Options with multiple frames of reference
o 1.Develop the best possible positioning for each type of competitors and then see whether there is a way to create one combined positioning robust
enough to effectively address them all.
o 2.If competition is too diverse, prioritize competitors and then choose the most important set of competitors to serve as a competitive frame.

Identifying points-of-parity (POP)

- To create positioning you need a frame of reference. You need to know who your competitors are or will be. You have to analyse the competition. You have
to see what their specificities are and see if they are stronger than you in those areas. To do that, you need to examine points of paradoxes. Things that all
brands have in an industry. Commonalities across brands in an industry. You need to look at PODs:
- POPs are are attributes or benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands.
- Example: category POPs. These are the necessary but not sufficient conditions for brand choice. They are the green fees necessary to be in the game.
- Three criteria to establish them.
1. Desirability. Consumers must see the brand association as personally relevant to them. They must also be
given a compelling reason to believe.
2. Deliverability. The company must have the internal resources and commitment to feasibly and profitably
create and maintain the brand association in the minds of the consumers. The ideal brand association is
difficult to attack.
3. Differentiability. Consumers must see the brand association as distinctive and superior to relevant
competitors.
- Identifying points of difference
o Sorry starbucks, the people have voted ad Costa.
o The truth is out Dunkin beat starbucks.
o Burger King v Macdonalds

5 qns if you want a successful position

1. What position do you own?
a. Instead of asking who you are, you ask what position you already own in the mind of the prospect
b. What question will be answered by the marketplace, not by the marketing manager
c. Most products have weak or non-existent products positions in the minds of most prospects.
d. => What you need to do is find a way into the mind by hooking your product, service, or concept, to whats already there.
e. What people think of you not who you are.
f. That qn must be answered by the mkt place, not the mkting manager.
2. What position do you want to own?
a. If somebody else already..
b. E.g. La Halle! they sell clothing for cheap prices.
3. Whom must you outgun?
a. Never go head-to-head against a marketing leader.
i. Try to select a position than no one else has a grip on.
ii. Prospects dont buy, they choose among brands: the merit of your brand is not nearly as important as your positioning among the
possible choices.
b. E.g. add from ZUp. /
c. Coca nuts. Uncola nuts
4. Do you have enough money?
a. It takes money to build a share of mind
b. If you dont spend enough to get above the noise level, you allow the competition to take your concept away from you.
c. Its always better to overspend in one place than to underspend in several ones.Carglass their competitor is france (pare-brise)
5. Can you stick it out?
a. A company should almost never change its basic positioning strategy. Only its tactics, short-term maneuvers that are indented to implement a long-
term strategy.
b. Owning a position in the mind is like owning a valuable piece of real estate. Once you give it up, you might find its impossible to get back again.
6. Do you match your position?
a. Advertising must match the positioning, and not be too creative.
b. Creativity by itself is worthless. Only when it is subordinated to the positioning objectives can creativity make a contribution.

Lecture 3

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Product Marketing

- Convenience light bulb - you spend 5 seconds to purchase

- Shopping goods sofa/ bike - you take more time.
- Speciality goods - Stereo car - takes more time and extra effort
- Unsought goods - Smoke detector - cityscoot

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 - You are going to create products that are different, and from those differences you will make value.
Form
- See the fragrance example different forms.
- Different features see electric cars
Style
- Different champagne similar forms, but different styles.
- Ruinart have a different form to differentiate their product.
Customisation
- Ray-Ban customisation
- It makes a product uniqe- and you also have the power of the brand.
Durability
- Ikea ad each item needs to be tested
Reliability
- Brands want to show that the customer can rely on the product.
- KIA ad a 7 year warranty
Performance
- You can be creative to sure in performance.
- Volvo truck ad steady performance
Repairability
- People want to buy products that want ot be repaired.
- Comes a way to differentiated.
- SEB French brand every product has 10 years of repairability. They will always have the pieces and the capacity to fix it.

To differentiate your products:

Packaging
- 1st thing you see when you see the product. The packaging is the silent Ad. The first touch point that a consumer is exposed to extremely important part of the
brands equity.
- 3 layers of packaging
o Primary - product itself fragrance glass
o Secondary what the product is in box the fragrance is in
o Third shipping package.
- Packaging customers identify the brand, facilitate the transportation, protection and storage, convey descriptive and persuasive info, and help product
consumption.
- Each color evokes an emotional response e.g. black is luxury
- A great packaging must allow to:
o Identify the brand
o Convey descriptive and persuasive information
o Facilitate product transportation, protection and storage
o Help product consumption
- The packaging elements must harmonize with each other and with pricing, advertising and the rest of the marketing mix.
- Color is a particularly important aspect of packaging and carries different meanings in different cultures and market segments.

- There are trends in packaging designs.

o 1. Be simple, bold and clear.
o 2. Embrace custom lettering
o 3. Go wild with colour
o 4. Repeat a pattern
o 5. Use illustration as narrative
o 6. Imagine ingenious die cuts
o 7. Find vintage inspiration
o 8. Explore eco-friendly packaging
o 9. Never underestimate the importance of wrapping
Labeling
- Difference between packaging and labelling
o Labelling is to obey the law and be compliant with regulation
o What is the product made of, the used by date etc.
o Made in . this is becoming increasingly important.
- The label can be a simple attached tag or an elaborately designed graphic that is part of the
package.
- It might carry a great deal of information.
- Even if the seller prefers a simple label, the law may require more.
Functions:
1. It identifies the product or the brand
2. It describes the product: who made it, where and when, what if contains, how it is to be used, and
how to use it safely
3. It can promote the product through attractive graphics

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Product Hierarchy
1. Need family: the core need that underlies the existence of a product family.
2. Product family: all the product classes that can satisfy a core need with reasonable effectiveness.
3. Product class: a group of products within the product family recognized as having a certain functional coherence, also known as a product category.
4. Product line: a group of products within a product class that are closely related because they perform a similar function, are sold to the same customer groups, as
marketed through the same outlets or channels, or fall within given price ranges.
5. Product type: a group of items within a product line that share one of several possible forms of the product.
6. Product variant: a distinct unit within a brand or product line distinguishable by size, price, appearance, or some other attribute.
Product Assortment
- A product assortment consists of various products lines.
- The width refers to how many different product lines the company carries.
- The length is the total number of items in the assortment.
- The depth refers to how many variants (a distinct unit within a
brand or product line distinguishable by size, price, appearance, or
some other attribute) are offered of a product in the line.
- The consistency describes how closely related the various product
lines are in end use, production requirements, distribution channels.

E.g. Michelin
- selling tires, books, and maps
- width 3
- Length 6 (tires for trucks, cars, for cycles + guides +aper maps +
digital maps)
- Depth: Large (all the variants in each product of line)
- Consistency: Historically legitimated
Product line strategic choices
- Should we extend product lines etc?
- When offering a product line, companies normally develop a platform and modules that can be added to meet different customer requirements and lower
production costs.
- Marketers need to know the sales and profits of each item in their line to determine where to invest or not.
- Every companys product portfolio contains products with different margins, and different objectives.
- Supermarket assortments
o Low margin milk cannot over price them. They draw people to the supermarket.
o Medium margin frozen lasagne
o High margin apples
- When you have products in your portfolio you ask yourself should we create more products. If you are HP you started your business with desktop computers.
If you are good at that you should then make laptops. Then cross-selling vi amaking printers. And then greater scale printers etc.
- Another objective of line extension is to protect yourself from economic ups and downs.
- Product lines tend to become longer
o Excess manufacturing capacity puts pressure on the product line manager t develop new items.
o The sales force and distributors also lobby for a more complete product line to satisfy customers.
- But as items are added, costs rise for design and engineering, inventory, etc.
- Companies seeking high market share and market growth will carry longer product lines.
- Those emphasizing high profitability will carry shorter lines consisting of carefully chosen items.
- In rapidly changing markets, modernization is continuous.
- Companies plan improvements to encourage customer migration to higher-value, higher-price items.
- Need to time improvements, so they do not appear
- too early (damaging sales of the current items)
- too late (giving the competition time to establish a strong reputation)
- Multi-brands companies all try to optimize their brand portfolios. This often means focusing on core brand growth and concentrating resources on the biggest
and most established brands.
- Thre is natural tendency of mkt to push for new products nad new liens. That is hwy multi brand companies try to rationalise and determine which brands to
keep and which to cut.
- For example P&G, decided to sell off more than half of their brands. They cut 50% of their portfolio to focus on the ones they believed would be the most
successful
Line stretching
- Line stretching occurs when a company lengthen its product line beyond its current range, whether down-market, up-market or both ways.
- Creating new products and adding new lines is
- Down-mkt stretch 3 possible reasons
o Strong growth opportunities
o Counter attack on lower-end competitors who might otherwise try to move up mkt.
o Stagnating or declining middle market.
Naming possibilities:
1.Use the parent brand name on all its offering
2.Introduce lower-priced offerings using a sub-brand name
3.Introduce the lower-priced offerings under a different name. Expensive strategy, but protection of the equity of the parent
brand name
- Risks: cannibalization / image damage.

- Line stretching
o Orange
o Sosh for Orange

- Up-market stretch
o Achieve more growth
o Realize higher margins
o Position the company as a fill-line manufacturer
o You can see this with car companies.
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 Nissan and infiniti for example
Risk is too many battles to fight.
E.g. Societe Generale trying to cover the entire market.
o Boursorama is their low-end banking option
- Naming possibilities: some companies have invented entirely new names because consumers might not have given the brand permission to stretch upward when
those lines were first introduced.
- Risks: lack of legitimacy / unreasonable investment

- Two-way stretch: to cover all segments and install the company as a fill-line manufacturer

Line filling
- A firm can also lengthen its product line by adding more items within the present range.
- Reasons to choose such a strategy:
o Reaching for incremental profits
o Satisfying retailers who complain about missed opportunities
o Utilizing excess capacity
o Trying to become the leading full-line company
o Keep out competitors

- Risks: cannibalization / consumer confusion

- The company needs to differentiate each item in the consumers mind with a just-noticeable difference
- Trying to lengthen production line
o E..g lego
Co-branding
- Hermes + Apple watch/ LOreal + Balmain
- Sometimes these fail

In co-branding, two or more well-known brands are combined into a joint product.
- Advantages:
o stronger positioning of a product by virtue of the multiple brands
o greater sales and opportunities for new consumers and channels
o cost product introduction reduction, combining two famous images
o valuable means to learn about consumers and how other companies approach them
- Disadvantages:
o Risks and lack of control of becoming aligned with another brand in consumers mind.
o Potential dissatisfaction can have negative repercussions for both
o Overexposure may dilute the power of any association
- Conditions for success:
o the two brands must separately have strong brand awareness and image
o a logical fit

Ingredient branding
- Special case of co-branding
- Ingredient brands try to create enough awareness and preference for the product so consumers will not buy a host product that doesnt contain it.
- Ingredient branding is a special case of co-branding.
- Ingredients brands try to create enough awareness and preference for their product so consumers will not buy a host product that doesnt contain it.
- Requirements for successful ingredient branding:
o 1.Consumers belief that the ingredients matter to the performance and success of the product
o 2.Consumers must be convinced that the branded ingredient is superior
o 3.A distinctive symbol or logo to signal that the host product contains the ingredient

Service Marketing (no longer talking products)

- Services are everywhere.
o Public: courts, employment services, hospitals, military forces, police and fire department
o Private non-profit: museums, charities, foundations, religious organizations
o Business: airlines, banks, hotels, insurance, law firms, consulting, plumbing repair, real estate
o Retail: cashiers, clerks, salespeople and customer service representatives
o Manufacturing: computer operators
- Consumers value convenience in services, and many person-to-person service interactions are being replaced by SSTS: Incorporating Self Service
Technologies.
o Traditional vending machines, ATMs, self-pumping at gas stations, self-checkout at hotels
o Online restaurant booking, ticket purchasing, airline checking, investment trading and customization of products.

Categories of service mix

- The service component can be a minor or major part of the total offering.

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Service differentiation

Features
- Delivery
o Amazon is successful due to their ability to deliver
o Courflour if the product is missing, it will be delivered.
o Normstrom free shipping and free returns all the time.

- Service differentiation
o Burger king v McDonalds

- Service differentiation
o E.g. Darty button that is put in yoru flat and whatever the issue, you push the button and they
call you back.

Characteristics of services
1. Intangibility: unlike products, services cannot be seen, tasted, felt, heard or smelled before they are
bought.
2. Inseparability: unlike products that can be inventoried, service are produced and consumed
simultaneously. Variability- The new touch point is every time you are testing the service.
3. Variability: the quality of services depends on who provides them, when and where, and to whom.
a. The service quality is tested at each service encounter.
b. To reassure consumers, some firms offer service guarantees.
i. 1.Invest in good hiring and training procedures
ii. 2.Standardize the service-performance process throughout the organization
iii. 3.Monitor customer satisfaction
4. Perishability: services cannot be stored. Their perishability can be a problem when demand
fluctuates.

Demand or yield management is critical the right services must be available to the right customer at the right places at the right times and right prices.

Service Marketing Excellence

- External marketing: the normal work of preparing, pricing, distributing and promoting the service to customers.
- Internal marketing: training and motivating employees to serve customers well.
- Interactive marketing: employees ability to serve the client, especially when they're given the authority to take initiatives for greater flexibility and
adaptability.

Managing service quality

Factors leading to customer switching behavior:
1. Pricing
2. Inconvenience
3. Service failures
4. Response to service failures

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5. Competition
6. Ethical problems
7. Involuntary switching

- If there is no quality of service, people will switch.

- It only takes 1 bad experience to switch and never go back. That is why if you want to launch a service that is successful in services. 1st you have to be
obsessed by your customers.

Top service companies best practices

Excellent service companies have in common
1. A strategic concept: they are customer-obsessed. They have a clear sense of their target customers and their needs and have developed a distinctive strategy
for satisfying them.
2. Top-management commitment: managers look monthly at service performance.
3. High standards: the best service providers set appropriately high.
4. VIP Customers: special customers get special discounts, promotional offers, and lots of special services.
5. Monitoring systems: they audit their service performances, and those of the competition.
6. Satisfying customer complaints: companies that encourage disappointed customers to complain and empower employees to remedy the situation on the spot
have been shown to achieve higher revenues and greater profits.

New Product Launch

- What new product was it?
- There was product that was launched a few yrs ago, Steve Jobs said it would be bigger than the PC.
- Segway Case
o It was an invention rather than an innovation.
The Segway was patented and kept under wraps until its launch. There was no user feedback or iteration in the process. Its inventors
were then surprised when people criticized or ridiculed the design.
o The Segway fell foul of regulation
The Segway fell foul of regulation in many countries where it was banned from sidewalks and roads because it did not fit any existing
categories. This is a problem for a truly revolutionary product but it was not properly anticipated.
o Expectations were too high
The Segway was described as the future of transport. As an innovation it was said to be on a par with the PC or the internet. Inevitably it
could not live up to this level of hype.
o It was a product not a solution.
The product works well but it lacked a support context. Where can you park it? How do you charge it? Do you use it on roads or
sidewalks? Our cities are designed for pedestrians or speedy vehicles and this was neither so it had no proper infrastructure to support it.
o No clear need or target market.
Who was the target market? Who really needed this? It was an appealing novelty but there was no compelling need for anyone to buy it
and it was very expensive.
- Every brand is trying to create products that are true innovations. Marketers want to be the next Steve Jobs. The reality fewer than 10% of products are
innovative.
- If you do not create new products, you will fail. E.g. Blackberry

The innovation Challenge

- In an economy of rapid change, continuous innovation is a necessity.
- New products can range from new-to-the-world items that create an entirely new markets to minor improvements or revisions of existing products.
- Fewer than 10% of all new products are truly innovative and new to the world. These products incur the greatest cost and risk. But if they succeed, they can
improve the corporate image, create a sustainable competitive advantage and produce significant financial rewards.
- Companies that fail to develop new products leave themselves vulnerable to changing customer needs and tastes, shortened product life cycles, increased
competition, and new technologies.
- To succeed in new products launch, you need:
o A strong Research & Development (R&D) team
o An efficient collaboration between R&D and marketing
o The right corporate culture
1. Consumers knowledge
2. Marketing flair
3. Risk-taking

- You have to take risks or someone will do it before you.

Why most product launches fail

- American families buy the same 150 items, which constitute as much as 85% of their household needs.
o Amazon dash button
- 3% of lunches are successful.

HBS goes through 40 reasons why.

Key success factors

- 1. The number-one success factor is a unique, superior product
o In terms of the success rate, 98% are superior products
- 2. A well-dined product concept
o Good definition and assessment of target mkt
o Clear and identifiable benefits
- 3. Other success factors:
o Technological and marketing synergy
o Quality of execution at all stages
o Ability to react to success (production)
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 o Market attractiveness

Drawing ideas - Many ways to find ideas

Drawing ideas from customers

1. Observe how customers are using your product
2. Ask customers about their problems with your products
3. Ask customers about their dream products
4. Use a customer advisory board to comment on your companys ideas
5. Form a brand community of enthusiast who discuss your products
6. Encourage or challenge your customers to change or improve your products

From your competition - Carrefour copying other brands

Concept development
- A product idea is a possible product the company might offer to the market.
- A product concept is an elaborated version of the idea expressed in consumer terms.
- To turn a product idea into a product concept:
o Who will use this product?
o What benefits should this product provide?
o When will people consume this product?

What we like to say is that every product needs to be:

18
Concept testing
Then you are going to test the concept:

Marketing Strategy development

- Following a successful concept test, the time has come to set the strategy
plan for introducing the new product into the market.
1. Target-markets size, structure and behavior
2. Planned brand positioning
3. Sales, market share, profit sought
4. Planned price
5. Distribution strategy
6. Marketing budget
7. Long-run sales and profit goals
8. Marketing-mix strategy over time

Business analysis
- Once the product concept has been developed and tested, the company needs to evaluate the proposals business
- attractiveness, to check the business opportunities.
o 1.Estimating total sales
o 2.Estimating costs
R&D costs
Manufacturing investments and production costs
Marketing support
o 3.Assessing profits

Product development
- Up to now, the product has existed only as a word description, a drawing, or a prototype. Its now time to decide whether the product idea can translate into a
technically and commercially feasible product.
- The goal of the R&D is to find a prototype that embodies the key attributes in the product-concept statement, performs normally under normal use and
conditions, and can be produced within budgeted manufacturing costs.
- Formulas, mock-ups, prototypes the idea will take many many forms before becoming a final product.

Market testing
- When the product is ready to be branded with a name, logo, and packaging, the company can decide to go into a market test.
- Its even possible to test in real conditions in a selected cities or countries.

Commercialization

Adopter Groups

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Factors influencing rate of adoption
1. 1.Relative advantage the degree to which the innovation appears superior to existing products.
2. 2.Compatibility the degree to which the innovation matches consumers values and experiences
3. 3.Complexity the degree to which the innovation is difficult to understand or use
4. 4.Communicability the degree to which the benefits of use are observable or describable to others.

Commercialization

Lecture 4
Communication and advertising
Communication Definition
Marketing communications definition
- Marketing communications are the means by which firms attempt to inform, persuade and remind consumers about the brands, products, services they sell.
- Its the voice of the brands, the a means by which the firm can start a conversation and build relationships.
- Communications allow companies to link their brands to other people, things, places, events, experiences and feelings.
- They can contribute to brand equity by establishing the brand in memory and creating a brand image.

For a campaign to be successful, it takes all of the following:

1. The right consumer is exposed to the right message at the right place and at the right time
2. The ad causes the consumer to pay attention but doesnt distract from the intended message
3. The ad properly reflects the consumers level of understanding of and behaviors with the product and the brand
4. The ad correctly positions the brand in terms of desirable and deliverable points-of-difference and points-of-parity
5. The ad motivates consumers to consider purchase of the brand
6. The ad creates strong brand associations with all these stored communications effects so that they can have an impact when consumers are considering making a
purchase. Consumers response to communication

Marketing communications mix

8 modes of communiation

1. Advertising:
o any paid form of promotion of goods, services or even ideas by an identified
sponsor via:
o Print media (newspapers & magazines)
o Broadcast media (radio & TV)
o Digital media
o Display media (billboards)

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2. Sales promotion:
- short-term incentives to encourage trial or purchase:
o Rebates
o Samples
o Coupons
o Gifts with purchase
Whereas advertising offers a reason to buy, sales promotion offers an incentive.

The challenge with promotions is to balance their short-term and long term effects
- High sales in the short run but little permanent gain in the long run
- The brand equity can be harmed

Efficient sales promotion characteristics

- Ability to be attention-getting
- Incentive
- Invitation
- Sustainability

3. Events and experiences:

o Sponsored activities and programs designed to create interaction with consumers:
Sports
Arts
Entertainment
Charities

Efficient events and experiences characteristics

1. Ability to be attention-getting
2. Relevant
3. Engaging

4. Public relations (PR):

- programs directed to consumers mainly through media to promote a companys image or its products:
o Press kits
o Events
o Annual reports
o Charitable donations
o Lobbying

Efficient PR characteristics
1. High credibility
2. Ability to reach hard-to-find buyers
3. Dramatization

5. Digital marketing:
- online activities and programs designed to engage customers or prospects and raise awareness, improve image, etc., on multiple devices with a growing
importance of mobile marketing.

Efficient online marketing characteristics

1. Interactive
2. Up-to-date
3. Influential

6. Social media:
- using Facebook, Twitter, Snapshat, Instagram, YouTube to promote a brand, products or services.

Efficient social media characteristics

1. Rich
2. Interactive
3. Up-to-date
4. Timely
5. Influential

7. Database marketing:
- use of mail, telephone, fax, email or internet to communicate directly with or solicit dialog from specific (loyal) customers and prospects.

Efficient database marketing characteristics

1. Personal
2. Proactive
3. Complementary

8. Personal selling:
- face-to-face interaction with one or more prospective purchasers to do presentations and procure orders.

Efficient personal selling characteristics

1. Customized
2. Relationship-oriented
3. Response-oriented

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4.2 DEVELOPING EFFECTIVE COMMUNICATIONS

1. Identify target audiences

On top of the usual segmentation criteria (see session 2), it can be useful to look at usage and loyalty.
Is the target new to the category or a current user?
Is the target loyal to the brand, loyal to a competitor, or someone who switches between brands?
If already a brand user, heavy or light user?

2. Set the communications objectives

1. Establish need for category: establishing a product or service category for satisfying a more-or-less expressed need.
2. Build brand awareness: fostering the consumers ability to recognize or recall the brand in sufficient detail to make a purchase
- Brand recall is important outside of the store
- Brand recognition is important inside the store
3. Build brand attitude: helping consumers to evaluate the brands perceived ability to meet a currently relevant need.
4. Influence brand purchase intention: moving consumers to decide to purchase the brand. Marketing management

2. Set the advertising objectives

- Advertising objectives must flow from earlier decisions about target market, brand positioning, and the marketing program.
- An advertising goal is a specific communications task and achievement level to be accomplished with a specific audience in a specific timing.
Informative advertising aims to create brand awareness and knowledge of new products or new features of existing products
Persuasive advertising aims to create liking, preference, conviction and purchase
Reminder advertising aims to stimulate repeat purchase of products and services
Reinforcement advertising aims to convince current purchasers they made the right choice

SO whenever you lunch the campaign of any ad, you will ask yourself how much of my target do I want to touch? How long? How many times?
- There are different types of advertisments
o Informatie advertising says who you are
o Persusiave selling who you are, more than just saying it
4. Design the communications
1. What to say? Message strategy
- In selecting message strategy, the company searches for themes or ideas that will build the brand positioning and help establish POPs or PODs.
- Some of these ideas may relate
o directly to product or service performance (quality, economy, value of the brand) or to more extrinsic considerations (the brand as being
contemporary, popular, traditional, etc.)
- Buyers expect a type of reward from a product:
o Rational
o Sensory
o Social
o Ego satisfaction

2. How to say it? Creative strategy

- Communication effectiveness depends on how well a message is expressed as well on its content.
- Creative strategies are the way marketers translate their messages into a specific communication.
- We can classify them as
either informational
or transformational
- Informational appeals elaborate on product or service attributes or benefits.
- Information appeals assume strictly rational processing of the communication on the consumers part. Logic and reason rule.
- Types of ads:
Problem-solution ads (German coast guard ad what are you sinking about?)
Product demonstration ads
Product comparisons ads
Testimonials from unknown or celebrity endorsers
- Transformational appeals elaborate on a non productrelated benefit or image.
- They often attempt to trigger emotions that will motivate purchase.
- Communicators use positive emotional appeal such as humor, love, pride and joy.
- Sometimes they can use negative appeals to get people to do things or stop doing things.

3. Who should say it? Message source

The source credibility is crucial to a messages acceptance.
Among the sources of credibility:
Expertise: the specialized knowledge of the brand
Trustworthiness: how objective and honest the source is perceived to be (Friends > salespeople / not paid people > paid people).

Select the communications channels

Next task is to select media to carry it, while finding the most cost-effective solution to deliver the desired number and type of exposures to the target audience.

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 Reach (R): the number of different persons exposed to a particular media schedule at least once during a specified time period => Important when launching
new products
Frequency (F): the number of times within the specified time period that an average person is exposed to the message => Important when there are strong
competitors
Impact (I): the qualitative value of an exposure through a given medium
Total number of exposures E = R*F
Weighted number of exposures WE = R*F*I

4. Selection the communications channels

Product placement

Different strategies are possible for any given campaign.

Continuity means exposures appear evenly throughout a period.
Concentration calls for spending all the budget in a single period.
Flighting calls for advertising during a period, followed by a period with no advertising, followed by a second period of advertising, etc.
Pulsing is continuous advertising at low levels, periodically reinforced by waves oh heavier activity

5. Establish the communications budget

"I know that half of my advertising budget is wasted, but I dont know which half " - John Wanamaker
Affordable method: just by an evaluation of what the company can afford
The percentage-of-sales method: applying a rate on the total price, just replicating the past most of the times the amount of money you spend vs your
competition. It is used to create market share. Not always reflected by marketshare.
Competitive-parity method: to achieve a certain share of voice vs. the competition
Objective-and-task method: the more rational method, starting from the objectives of sales and retro-calculating the amount to invest. you start with objects
and you determine how much you then have to invest.

1. Establish the market-share goal

2. Select the percentage of the market that should be reached by advertising
3. Estimate the percentage of aware prospects who should be persuaded to try the brand
4. Calculate the number of advertising impressions
5. Calculate the necessary advertising budget

5 factors to consider when setting the advertising budget

- Stage in the product life cycle if you want to create a product you need to over-invest.
- Market share and consumer base if you are aready established you should have to spend less.
- Competition and clutter
- Advertising frequency how much you want to touch your custoemrs
- Product substitutability is it a product that non one wants to relay with another.

6. Select the marketing communications mix

7. Measure communication results

- Communication-effect research (copy testing) seeks to determine whether an ad is communicating effectively.
- Pre-tests are done before the advertising runs.
o Post-tests are conducted to assess the overall impact of a completed campaign
o Sales-effect research can be tough to monitor. Always easier to measure in direct marketing situations and harder in brand image building advertising.
- Sales-effect research can be tough to monitor. Always easier to measure in direct marketing situations and harder in brand image-building advertising.

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Advertising elasticity
Increasing the TV advertising budget has a measurable effect on sales only half of
the time
The success rate is higher for new products and line extensions than for established
brands
When advertising increases sales, its impact lasts up to two year after peak
spending
Long-term incremental sales are double those in the first year of an advertising
spending increase
What you say (the ad copy) is more important than the number of times you
say it

Whatever the communication plan quality or efficacy, the quality of the product is the only
final truth. Example:

FOCUS ON DIGITAL MARKETING

4 categories of digital marketing

1 - Websites
Companies must all design web sites that embody their purpose, history, products, and vision.
Those sites must be attractive on first viewing and interesting enough to encourage repeat visits.

7 Key design elements of an effective website

Context
o Layout and design
Content
o Text pictures sound and video
Community
o How the site enables user-to-user communication
Customization
o Sites ability to tailor itself to different users or to allow users to personalize the site
Communication
o How the site enables site-to-user, user-to-site, or two-way communication
Connection
o Degree that the site is linked to other sites
Commerce
o Sites capabilities to enable commercial transactions

Visitors will judge a sites performance on

1. Ease of use
The site downloads quickly
The first page is easy to understand
It is easy to navigate to other pages that open quickly
2. Attractiveness
Pages are clean and not crammed with content
Typefaces and font sizes are very readable
The site makes good use of color and sound
3. Mobile-first design
Sites used to be compatible, then responsive
Today, anything that is not mobile first is a major issue
Companies must also be sensitive to online security and privacy-protection issues.

2 Display ads
Display ads (or banners) are ads that companies pay to place on relevant websites.
Interstitials are video or animation advertisements that pop up between page changes within a website or across websites.
The larger the audience, the higher the cost.
Those ads need to be more attention-getting and influential, better targeted, and more closely tracked.
But ad-blockers are a huge phenomenon.

3. Search ads
In paid search, marketers bid in a continuous auction on search terms that serve as a proxy for the consumers product or consumption interests.
When a consumer searches for any of the words with Google, Yahoo! or Bing, the ad may appear above or next to the results, depending on the amount the
company bids and an algorithm the search engines use to determine and ads relevance to a particular search.
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 Advertisers pay only if people click on the links.
The cost per click depends on how highly the link is ranked on the page and the popularity of the keyword.

Search Scope SEO

- Search engine optimization (SEO) can be described as strategies and tactics used to ensure that a site is accessible to a search engine and improves the chances that
the site will be found by the search engine.
- The goal of successful SEO is to obtain a high-ranking placement in the search results page of a search engine. Internet users do not click through pages and pages of
search results, so where a site ranks in a search is essential for directing more traffic toward the site.
- The higher a website naturally ranks in organic results of a search, the greater the chance that that site will be visited by a user.

4. Email
Email allows brands to inform and communicate with customers.
Emails can be very productive selling tools, but they can be overwhelming for consumers, hence the growing usage of spam filters.
Emails must be timely, targeted and relevant.
Privacy concerns are also growing (half of a British survey respondents said they would refuse to share any personal details with brands even if doing so would
bring them better-targeted offers).

5 ways to maximize the value of emails

1. Give the customer a reason to respond
2. Personalize the content of your emails
3. Offer something the customers cant get via other ways
4. Make it easy for customers to opt in as well as unsubscribe
5. Combine email with other communications such as social media

6. Social media
Social media scope
- Social media is an increasingly important component of digital marketing.
- Social media are a means for consumers to share information with each other and with companies, and vice versa.
- Social media allow marketers to establish a public voice and presence online. They can cost-effectively reinforce other communication activities.
- Marketers can build or tap into online communities, inviting participation from consumers.

Social media platforms

- There are three main platforms for social media

Using social media

Social media allow consumers to become engaged with a brand at perhaps a deeper and broader level than ever before. Brands are trying to engage
productively their consumers.
But social media can hardy be the sole source of marketing communications for a brand:
They might not be as effective in attracting new users and driving brand penetration
Consumers are most likely to engage with media, charities and fashion and less likely to engage with consumer goods
Although consumers may use social media to get useful information or deals and promotions or to enjoy entertaining brand content, a much smaller percentage
want use social media to engage in conversations with brands
When it comes to social media, only some consumers want to engage with some brands, and, even then, only some of the times.
Embracing social media require companies to take good with the bad, and to be prepared to face negative feedbacks.

7. Word of mouth
Word of mouth forms
Social media are one example of online word of mouth (WOM). WOM is a powerful marketing too, one of the most effective drivers of sales.
Most of WOM is not generated online:
o 75% occurs face-to-face

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 o 15% over the phone
Consumers tend to generate positive WOM themselves and share information about their own positive consumption experiences.
They tend to only transmit negative WOM and pass on informationthey heard about others negative consumption experiences.

Customer loyalty ladder

Satisfaction the consumer stick with the brand as long as expectations are met
Repeat purchase they return to the brand to buy again
WOM /buzz they put their reputation on the line to tell others about the brand
Evangelism the convince others to purchase or join
Ownership they feel responsible for the continuous success of the brand

Word of mouth forms

Viral marketing is a form of online WOM, that encourages consumers to pass along company-developed products and services or audio, video, or written
information to others online.
Only 4% of content is cascaded to more than one person beyond the initial recipient.
In deciding whether to contribute to social media, consumers can be motivated by
o intrinsic factors such as whether theyre having fun or learning
o Extrinsic factors such as social and self-image considerations

How to start a buzz?

1. Identify influential individuals and companies and devote extra effort to them
2. Supply key people with product samples
3. Work through community influentials
4. Develop word-of-mouth referral channels to build business
5. Provide compelling information that customers want to pass along

How to get a viral ad shared?

1. Dont make the brand too intrusive in the video
2. Open with joy or surprise to hook the viewers that are easily bored
3. Build an emotional roller coaster within the ad to keep viewers engaged throughout
4. Surprise, but dont shock

Lecture 5
Strongest brands
- Apple
- Google
- Microsoft

With power comes great responsibility

- Brands are not always perfect in terms of how responsible they are.
- These are all currently under attack for not paying tier taxes.

Apple stores when Apple went into retail.

- Concierge system with the genius bar.

DISTRIBUTION & PRICING

Distribution channels definition
- Most producers do not sell their goods directly to the final users. Between them stands a set of intermediaries participating in the process.
- These intermediaries constitute distribution channels.

They account for 30 to 50% of the ultimate selling price.

Channels of all types play an important role in the success of a brand and affect all other marketing decisions:
Companys pricing
Its sales force organization
Its advertising form and amount
The durability of its activity

Distribution channels importance

Push strategy when there is zero brand loyalty. The Priority target the retailer. Brand choice =
in the store.
- E.g how items are displayed at supermarkets.

Pull strategy we are pulling customer to the product. Brand choice = before getting into the store
- Poulain chocolate ad.

Top marketing companies use both push and pull strategies.

- A push strategy is more effective when accompanied by a well-designed and well-executed pull strategy that activates consumer demand.
- Without at least some consumer interest, it can be very difficult to gain much channel acceptance and support.

Multichannel marketing
- When you launch a product, you will usually launch it in different channels.
- Successful companies employ multichannel marketing, using two or more distribution channels to reach their customers.

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 - Each channel can target a different segment of buyers, or different need states for one buyer, to deliver the right products in the right places in the right way at
the least cost.
- Multichannel customers spend up to four times as much as those who only shop through one channel.

Omnichannel marketing
- Companies are increasingly employing digital distribution strategies, selling directly online to customers or through e-retailers who have their own websites.
o E.g. Macys ad they dont care if they buy online or in-store
o La Redoute used to be a paper catalogue, now online, and stores.
- They are seeking to achieve omnichannel marketing, in which multiple channels work seamlessly together and match each target customers preferred way of
doing business, delivering the right product information and customer service regardless of whether customers are online, in the store, or even on the phone.

CHANNEL LEVELS AND TYPES OF RETAILERS

Channel levels
- Each channel member must be given the opportunity to be profitable. The elements of the trade relation mix are:
1. Price policy
2. Conditions of sales
3. Distributors territorial rights
4. Mutual services and responsibilities

Zero-level channel
- Direct marketing consists in selling directly to the final customer, without a store
o Mail order
o Online selling
o TV selling
o Telemarketing
o Door-to-door sales natura (1000s of women who are going door-to-door)
o Home parties - tupperware
o Branded stores
o Vending machines

Pure-click companies
- E-commerce sites sell all types of products and services from books, music, toys, clothes to insurance, clothes, financial
services, and so on.
- They compete on various criteria:
Assortment
Prices
Site ergonomics
Delivery
Service

Key success factors:

- Fast, simple and easy to use sites
- Express-delivery
- Return policy
- Customers surveys
- Online chat
- Data security
- Privacy respect

Brick-and-click companies
- For years, many brick-and-mortar (especially in the luxury industry) have hesitated to open an e-com channel for fear of conflict with their channel partners.
- Today, this is no longer an option and most have added internet in their distribution strategy.
- Managing both on and off channels require to be cautious not to upset and harm the traditional offline retailers.
- One option is to associate the staff to the results of the online sales.

M-commerce
Consumers use their phones during their shopping, checking reviews or prices, using wish lists or asking friends advices.
Mobile offers lots of opportunities to advertise, promote, offer geolocated deals, give additional information etc.
Transactions on mobile are growing faster than on any device.

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1-LEVEL

Retailers can offer one of four levels of service:

1. Self-service: the cornerstone of all low-price retail
2. Self-selection: customers find their own goods, though = they can ask for assistance
3. Limited service: customers need more information and assistance e.g. you when need a new kitchen
4. Full service: salespeople are ready to assist in every phase of the locate-compare-select process people are entirely at your service.

Stores retailers categories

1. Department stores e.g. Macys
2. Specialty stores
3. Convenience stores
4. Drugstores
5. Discount stores
6. Off-price retailers
7. Super stores

Franchising
- In a franchising system, individual franchisees are a group of enterprises whose operations are planned, directed, and controlled by a franchisor.
1. The franchisor owns a trade-mark and licenses it to franchisees in return for royalty payments
2. The franchisee pays for the right to be part of the system (a franchise set-up fee + a certain percentage of the sales)
3. The franchisor provides its franchisees with a system for doing business.

The system must benefit both parties

Franchisors gain:
the motivation and hard work of employees who are entrepreneurs
the franchisees familiarity with local communities and conditions

Franchisees benefit from buying into a business with a well-known and accepted brand

DIGITAL VS. PHYSICAL STORES

The digital channels revolution
The digital revolution is profoundly transforming distribution:
E-com is growing at a double-digit rate
Brick & mortar retailers have extended their activity to e-com
Other companies bypass retail activity by selling online
=> All retailers strategies had to be adapted or even replaced.

E.g. Zappos

Digital v Physical

Customers expect seamless channel integration, so they can:

1. Enjoy helpful customer support in a store, online or on the phone
2. Check online for product availability at local stores before making a trip
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3. Find out in-store whether a product that is unavailable can be purchased and shipped from another store to home
4. Order a product online and pick it up at a convenient retail location
5. Return a product purchased online to a nearby store of the retailer
6. Receive discounts and promotional offers based on total online and offline purchases

Two worlds are merging. See Amazon (purchasing wholefoods)

CHANNEL DESIGN DECISIONS

Every company has to make strategic choices when selecting the right distribution channel for its product.

1. Analyzing customer needs and wants

- Consumers may choose the channels they prefer based on price, product assortment, and convenience as well as their own shopping goals (economic, social or
experiential). Among the criteria:
Desired lot size: the number of units the channel permits a typical customer to purchase on one occasion
Waiting and delivery time: the average time customers wait for receipt of goods.
Spatial convenience: the degree to which the marketing channel makes it easy for customers to purchase the product.
Product variety: the assortment provided by the marketing channel.
Service back-up: add-on services (credit, delivery, installation, repairs) provided by the channel

Channel-designs decisions

2. Establishing objectives and constraints

Marketers should state their channel objectives in terms of
- the service outputs levels they want to provide
- the associated cost and support levels

3. Identifying major channel alternatives

Each channel has unique strengths and weaknesses:
- Sales forces can handle complex products and transactions but they are expensive
- The e-com is inexpensive but may not be as effective
- Retailers can create sales but the company loses direct contact with customers

Channel alternatives differ in three ways:

1. Types of intermediaries
2. Number of intermediaries needed
3. The terms and responsibilities of each

Number of intermediaries:
- Exclusive distribution limits the number of intermediaries. This is an appropriate channel when the producer wants to ensure more knowledgeable and dedicated
efforts by the resellers, and requires a closer partnership with them.
- Selective distribution relies on only some of the intermediaries willing to carry a particular product. The company can gain adequate market coverage with more
control and less cost than intensive distribution.
- Intensive distribution places the goods and services in as many outlets as possible. This strategy serves for products consumers buy frequently or in a variety of
locations. Manufacturers are tempted to move from exclusive or selective distribution to more intensive distribution to increase coverage and sales. But this strategy
may have negative impacts:
- Price war
- Lower retailers interest
- Brand equity impact

Selecting channel members

Its necessary to determine what characteristics distinguish the better intermediaries, based on:
Location
Growth potential
Type of clientele
Number of years in business
Financial strength
Reputation
Cooperativeness
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Training and motivating channel members
The channels may be considered as the company first clients. They have to be viewed the same way it views the end consumers.
They have to be convinced by the products they will sell, they need to motivated to share a win-win strategy.
Negotiations can be extremely tough.

Different ways to manage the cooperation:

Legitimate power: according to the contract
Reward power: offer extra benefits for performing specific acts
Coercive power: threaten to terminate the relationship
Expert power: a special power the channel values
In many cases, retailers hold the power especially when they can decide if they want to stock the new products.

Evaluating channel members

Many criteria to evaluate intermediaries performance:
Sales
Inventory
Delivery time
Cooperation
Training programs
Control
Etc.

Conflicts and competition

No matter how well channels are designed and managed, there will be some conflict, if only because the interests of independent business entities do not always coincide
(differences of goals or perceptions or relationship).
Horizontal channel conflict occurs between channel members at the same level
E.g.: franchisees between themselves
Vertical channel conflict occurs between different levels of the channel
E.g.: a department store with a drugstore
Multichannel conflict exists when the manufacturer has established two or more channels that sell to the same market
E.g.: independent retailers with chains

Managing channel conflict

There are different ways to manage a conflict, preferably using
Diplomacy, mediation and arbitration
Agreement on fundamental goals
Strategic justification on the non-competition of the channels
Dual compensation: paying existing channels for sales made through new channels
Legal recourse

RETAILERS MARKETING
Class retailing is decline, but digital and off-price retail is increasing.

Everything can be bought online. Stores have lost their transaction monopoly and have to gain the experimental leadership. So for people to shop in-store there needs to be
an experience.

Channels
Retailers must decide which channels to employ to reach their customers, knowing that multichannel becomes the new normal.

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Product assortment
Once the assortment is defined, the retailer must develop a product-differentiation strategy.

For example:
Exclusive brands
Private-label merchandise
Distinctive events
Novelties all year long
Customized services
Highly-targeted assortment

Prices
Prices are a key-positioning factor and must be set in relationship to the target market, product-and-service assortment mix, and competition.
Most retailers fall into one of the two followings:
High-markup / lower volume (fine specialty store)
Low-markup/ higher volume (mass-merchandisers and discount stores)
Most retailers will put low prices on some items to serve as traffic builders or to signal their pricing policies.

Services
Services can be a great differentiator of retailers
Pre-purchase services: telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours or fashion shows
Post purchase services: shipping and delivery, gift wrapping, engraving, adjustments and returns or installations
Ancillary services: free Wi-Fi, general information, parking, restaurants, repairs, baby facilities...

Store atmosphere & experiences

Every store has a look and feel that creates a specific shopping experience.
Retailers must consider all the senses in shaping the customers experience: smell, light, odor, accessibility to the products, etc.
The e-com competition forces the physical stores to go the extra-mile to reward the customers who did the effort to go the stores instead of buying online.

Communication
Many technics are used by retailers to generate traffic and sales: ads, special sales, coupons, e-mails, shopper-reward programs, in-store sampling, etc.
They treasure loyal customers less than 15% of their customers often accountable for more than 50% of their sales, if not a lot more.

Location
The ultimate key success factor is Location, location & location.
With a close relationship between high traffic and high rents, retailers must decide on the most advantageous locations for their stores, using traffic counts,
consumers habits surveys and competitors presence.
Stand-alone or location within a larger store
High traffic locations (railway stations...)

PRICING
Price is the one element of the marketing mix that produces revenue all other elements produce costs.
1. Price also communicates the companys value positioning.
2. Pricing decisions are complex and must take into account many factors:
o the brand
o the customers
o the competition
o the marketing environment

Pricing in a digital world

Buyers now can:
o Get instant price comparisons from thousands of vendors
o Check prices at the point of purchase
o Name their price and have it met
o Get products free
Sellers can:
o Monitor customer behavior and tailor offers to the individuals
o Give certain customers access to special prices
o And both buyers and sellers can negotiate prices in online auctions and exchanges or even in person.

Macy on Amazon its tough to fight against someone who doesnt want to win

The impact of the sharing economy

3. Sharing economy you can get the product or service without being the owner of the product or service.

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Bosch drill only use it for 13 mins, therefore you can rent it.
- Were moving from a world where were organized around ownership to one organized around access to assets.
- From a vertical to a horizontal model, or even circulating model
- In the sharing economy, someone can be both a consumer and a producer, reaping the benefits of both roles.

- Bartering is making a comeback

- Renting is exploding

Consumer psychology and pricing

- Consumers actively process price information, interpreting it from:
o prior purchasing experience
o formal communications (advertising and brochures)
o informal communications (friends, colleagues, or family)
o store or online resources
- Purchase decisions are based on how consumers perceive prices and what they consider the current actual price to be.

Reference prices
- When examining products, consumers employ reference prices, comparing an observed price to an internal reference price they remember or an external frame
of reference.
- Possible consumer reference prices include:
o Fair price (what consumers feel the product should cost)
o Typical price
o Last price paid
o Usual discounted price
o Maximum most consumers would pay - Minimum most consumers would pay
o Historical competitors prices
o Expected future price

Price vs. quality

- Many consumers use price as an indicator of quality.
- Image pricing is especially effective with ego-sensitive products such as luxury products.

Price endings
- Many brands believe prices should end with a 9.
- Customers perceived an item priced at 299 to be in the 200 rather than the 300 range, as they process prices left to right rather than by rounding.
- Another explanation for the popularity of 9 endings is that they suggest a discount or bargain.

One study showed that demand actually increased one-third when the price of a dress rose from $34 to $39 but was unchanged when it rose from $34 to $44

The four prices

Setting the price

6 steps to set a pricing strategy

1. Survival - if companies are fighting to survive. As long as prices cover variable costs and some fixed costs, the company stays in business.
2. Maximum current profit. Companies estimate the demand and costs associated with alternative prices and choose the price that produces maximum profit or rate
of return on investment.
3. Maximum market share. When companies believe a higher sales volume will lead to lower unit costs and higher long-run profit, they set the lowest price. This
strategy can only work if:
o The market is highly price-sensitive
o A low price discourages the competition
4. Maximum market skimming. Companies unveiling a new technology favor setting high prices, before slowly dropping them over time. Market skimming makes
sense if:
o A sufficient number of buyers have a high current demand
o The high initial price does not attract more competitors to the market
o The high price communicates the image of a superior product
5. Product-quality leadership being the reference by offering high levels of perceived quality, taste and status with a price just high enough not to be out of
consumers reach.

1. Selecting the pricing objective

Whatever the specific objective, businesses that use price as a strategic tool will profit more than those that simply let costs or the market determine their pricing.

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2. Determining demand
The choice of a price will lead to a different level of demand and have a different impact on the objectives.
Theres a normal inverse relationship between price and demand.
Except for luxury items

There are different ways to measure the demand curves:

Surveys: how many units consumers would buy at different proposed prices
Price experiments can vary the prices of different products in a store or of the same product in similar territories to see how the change affects the sale
Statistical analysis of past prices, quantities sold and other factors can reveal their relationships.

Consumers are less price-sensitive when

They buy low-cost items
There are few or no substitutes
They do not readily notice the higher price
They are slow to change their buying habits
They think the higher prices are justified
Price is only a small part of the total cost obtaining, operating and servicing the product over time

Price elasticity of demand is absolutely key. Companies need to know how elastic (responsive) demand is to a change in price.
- If demand hardly changes with a small change in price, it is inelastic
- If it changes considerably, it is elastic

Price elasticity standards, as established in a 40 year survey:

1. The average price elasticity was -2.62 (-1%in price +2.62% in sales)
4. Price elasticity was higher for durable goods than for other goods
5. Promotional price elasticities were higher than actual price elasticities in the short run (the opposite was true in the long run)
6. Price elasticities were higher at the individual unit level than at the overall brand level

3. Estimating costs
Each company has to charge a price that covers the costs of producing, distributing and selling the product, including a fair return for its effort and risk (profitability).

To price wisely, the company needs to know how its costs vary with different levels of production. Many decisions (e.g. manufacturing capacities building) will be based
on this.

With accumulated production experience, the average production costs declines: this is the experience curve. This can be a very powerful competitive weapon. But this
strategy carries risks: aggressive pricing might give the product a cheap image. It also assume competitors are weak followers.
Target costing can be another way to reduce costs through a concentrated effort by designers, engineers, and purchasing agents. But cost cutting cannot go so
deep as to compromise the brand promise and value delivered.

With accumulated production experience, the average production costs declines: this is the experience curve. This can be a very powerful competitive weapon. But this
strategy carries risks: aggressive pricing might give the product a cheap image. It also assume competitors are weak followers.
Target costing can be another way to reduce costs through a concentrated effort by designers, engineers, and purchasing agents. But cost cutting cannot go so
deep as to compromise the brand promise and value delivered.
Cost cutting ways:
Reducing the number of varieties of a products range
Shrinking products and packages without decreasing the price
Changing labor force

4. Analyzing competitors costs, prices and offers

Within the range of possible prices identified by market demand and company costs, the firm must take competitors costs, prices, and possible reactions into
account.
Brands offering the powerful combination of low price and high quality are the winners allover the planet.

- Mark-up pricing: adding a standard markup to the products cost.

o This method doesnt usually make sense, because it ignores current demand, perceived value and competition.
- Target return pricing: the company determines the price that gives its target rate of return on investment. It also needs to calculate the break-even level.
o ! As much depends on price elasticity and competitors prices, the company needs to consider different prices and estimate their probable impacts
on sales volumes and profits
- Perceived value pricing is based on a precise understanding of the perceived value of the product by the consumers, based on the company reputation, the
services, the customer services, etc.
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 o ! The key is to deliver more unique value than competitors and to demonstrate this to prospective buyers.

Selecting the final price

All those pricing methods narrow the range from which the company must select its final price, taking in consideration as well additional factors.
1. The impact of other marketing activities
o Brands with average relative quality but high relative advertising budgets can charge premium prices, as consumers are willing to pay higher prices for
known rather than for unknown products.
o Brands with high relative quality and high relative advertising obtain the highest prices.
2. Company pricing policies: the price must be consistent with company pricing policies.
3. Impact of price on other parties: how will retailers feel about the prices? Will the sales force be willing to sell at that price? How will competitors react? Will
suppliers raise their prices when they see the companys price? Will the government intervene and prevent this price from being charged?

ADAPTING THE PRICE

Adapting the price
Companies usually do not set a single price but rather develop a pricing structure that reflects variations in many factors :
geographical demand and costs
market-segments requirements
purchase timing
delivery frequency
guarantees, service contracts, etc.
The negotiation with the retailers can be complicated and lead to subtle pricing structures, with different levels of discounts, with performance bonuses.
As a result of discounts, allowances and promotional support, a company rarely realizes the same profit from each unit of a sold product.

Prices discounts scope

Discount: a price reduction to buyers who pay bills promptly.
Quantity discount: a price reduction to those who buy large volumes.
Functional discount: discount offered by a manufacturer to its retailers if they perform certain functions, such as selling, storing and record keeping.
Seasonal discount: a price reduction to those who buy out of season.
Allowance: an extra-payment designed to gain reseller participation in special programs, such as rewarding retailers for participating in advertising and sales
support programs.

Promotional pricing
Companies can use several pricing techniques to stimulate early purchase:
Loss-leader pricing: retailers often drop the price on well-known brands to stimulate store traffic
Special event pricing: sales periods, Black Friday, etc.
Special customer pricing: special prices for loyal customers
Low-interest financing, or even no-interest financing to attract new customers
Longer-payment terms to lower the monthly payments consumers often worry less about the cost (the interest rate) of a loan and more about whether they
can afford the monthly payment
Warranties and service contracts can be added as a free or low cost service
Psychological discounting: Was 400, now 300 Promotional-pricing are often a zero-sum game. If they work, competitors copy them and they loose their
effectiveness. If they dont work, its a waste of money that could have been put into other marketing tools.

Differentiated pricing
Companies often adjust their basic price to accommodate differences.
Large volumes pricing: the seller charges less to buyers of larger volumes. E.g. : an industry
Customer-segment pricing: different customer groups pay different prices for the same product. E.g.: museum admission fee to students
Product-form pricing: different versions of the product are priced differently, but not in their proportion to their costs. E.g.: different fragrance bottles sizes
Image pricing: some companies price the same product at two different levels based on image differences. E.g.: supermarket private labels
Channel pricing: a different pricing for different channels. E.g.: Evian bottle in a coffee shop, in a restaurant, in a vending machine, in a train.
Location pricing: the same product is priced differently at different locations even though the cost of offering it at each location is the same. E.g.: places in a
theater
Time pricing: prices vary by season, day or hour. E.g.: hotels rates in weekends.

Yield management
- The airline and hospitality industries use yield management systems:

This phenomenon of offering different pricing schedules to different consumers and dynamically adjusting prices is exploding. Merchants are adjusting process
based on inventory levels, how fast items sell, competitors pricing, and advertising.
Customers are getting savvier about how to avoid overpaying, changing their buying behavior to accommodate the new realities of dynamic pricing. But most
are probably not aware of the degree to which they are the targets of different pricings.

Price cuts
Reasons to cut prices:
Excess plant capacity
Will to dominate the market through lower costs
Risks:
Low-quality trap: consumers assume quality is low
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 Fragile-market-share trap: a low price buys market share but not loyalty
Shallow-pockets trap: higher-priced competitors match the lower prices but have longer staying power because of deeper cash reserves
Price-war trap

Price increases
A successful price increase can raise profits considerably

Factors:
o Cost inflation
o Over demand
o Risks:
o Consumers generally dislike price increases
o Lack of communication that hurts customer perception

Competitors changes
Questions to ask when a competitor cuts its prices
1. Why did the competitor change the price? To steal the market, to utilize excess capacity, to meet changing cost conditions or to lead an industry-wide price change?
2. Does the competitor plan to make the price change temporary or permanent?
3. What will happen to the companys market share and Are other companies going to respond?
4. What are the competitors and other firms likely responses to each possible reactions?

Responses to low-cost competition

1. Further differentiate the product or service

2. Introduce a low-cost venture
3. Reinvent as a low-cost player

Lecture 6
3 keys to success
A strong brand equity
Defining brand equity
- Brand equiy refers to a value premium that a company generates from a product with a recognisable name, when compared to a genetic equilvanet.
o A brand has a negatieve brand equity if consumers react less favourably to marketing activity for the brand under the same circumstances.
- 1. Brand equity comes from differences in consumer response.
- 2. Differences in response are a result of consumers brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with the brand.

Brands must create strong, favorable and unique brand associations with customers.

What is a strong brand?

- Improved perceptions of product performance
- Greater loyalty
- Less vulnerability to competition
- Larger margins
- More inelastic consumer response to price increases
- Greater retailers cooperation and support
- Increased marketing communication effectiveness

Steve Jobs
- Nike never mention their shoes.
- They honour great athletes and greater athletics

Brand promise
- A brand promise is the marketers vision of what the brand must be and do for consumers.

Building brand equity

- There are 2 main sets of brand equity drivers:
o The initial choices for the brand elements (brand name, logos, characters, spokespersons, slogans, jingles, packages).
o The product and service and all accompanying marketing activities and supporting marketing programs.

Choosing brand elements

- Brand elements must be:
o Memorable: how easily do consumers recognize the brand element at both purchase and consumption?
o Meaningful: is the brand element credible?
o Likable: how aesthetically appealing is the brand element?
o Transferable: can the brand element introduce new products in the same or different categories?
o Adaptable: How updatable is the brand element? Logos for example.
o Protectable: how legally protectable is the brand element?

Managing brand equity

- Because consumer responses to marketing activity depend on what they know and remember about a brand, short-term marketing actions, by changing brand
knowledge, necessarily increase or decrease the long-term success of future marketing actions.
- Brands who want to stay leaders need to constantly improve their products, services and marketing.
- When a brand is having hard times, it needs to be revitalized.
- The first thing to do is to understand what the sources of brand equity were to begin with.
- The revitalization strategies form a continuum, from back to basics to pure reinvention, with many combinations in-between.
- The challenge is often to change enough to attract some new customers, but not enough to alienate old customers.
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A TRUE CSR COMMITMENT
Beyond legal behavior
- Organizations must ensure every employee knows and observes relevant laws.
- Examples
o Misleading consumers about the characteristics of a product
o Bribes to purchasing agents
o Industrial espionage
- Business situations can pose ethical dilemmas. Some issues can generate controversy (such as acceptable marketing to children).
- Companies must adopt and diffuse a written code of ethics, build a tradition of ethical behavior and hold their people fully responsible for observing ethical
and legal guidelines.
- In the past an unhappy customer could bad-mouth an unethical company to 12 people. Today, they can reach thousands.

Companies have a great responsibility

Governments are generally trusted less than businesses.

Social responsibility behaviour

- Marketers must exercise their social conscience in their daily interactions with customers and stakeholders.
- People, be them consumers or not, want more and more information on social and environmental responsibility to help them decide which companies to buy
from, invest in and work for.
- Communicate corporate social responsibility can be a challenge, and require consistency and transparency.

CSR definition
- CSR: Corporate Social Responsibility
- Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the
quality of life of the workforce and their families as well as of the local community and society at large.
o 1. Companies need to differentiate themselves. Companies with civic virtues will be preferred.
o 2. Employees, investors, and partners will be more motivated and loyal.

Sustainability
- One can define sustainability as the ability to meet humanitys needs without harming future generations.
- Many corporations outline in great detail how they are trying to improve the long-term impact of their actions on communities and the environment.

AN EFFICIENT: MARKETING ORGANIZATION

Marketing manager key responsibilities
- The brand (or product) management organization is the most frequent.
- The brand or product manager is at the center of a system, speaking with various departments.
- The marketing manager will: The marketing manager will:
o Develop a competitive strategy for the product
o Prepare an annual marketing plan and sales forecast
o Work with advertising, digital and merchandising agencies to develop copy, programs, and campaigns
o Initiate product improvements to meet changing market needs

Two kinds of marketing

Relationships with other departments

- All the departments need to think customer and work together to satisfy customer needs and expectations.

Organization evolution
- Many companies now focus on key processes than on departments because departmental organization can be a barrier to smooth performance.
- They appoint process leaders, who manage cross-disciplinary teams that include marketing and salespeople.

Building a creative marketing organization

Transforming the companies requires:

- Understanding customers through qualitative and quantitative research
- Developing a company-wide passion for customers
- Develop strong in-house marketing training programs
- Organizing around customer segments instead of products
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 - Change the companys reward measurement and system
Future of marketing

Engaged customers and employees make successful companies

Customers that are happy will be loyal. Ways to make them happy, is effectiveness. Also, employees need to be happy.
- Need mastery, autonomy, and purpose.

Ritz-Carlton employees get 2k to spend on customers per day without asking for permission from mgmt.

- From each attribute you have different possibilities.

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