Marketing Essentials: Strategies, Channels, and Consumer Behavior

Unit 15: Distribution Channels

Distribution channels are organizations participating in the process of making a product or service available for consumption. Intermediaries include merchants, agents, and facilitators. Their functions are to use scarce resources, perform better through specialization, and shift among channel members. Flows include forward-flow, backward-flow, and both forward and backward-flow.

Channel Levels

  • Single
  • Dual
  • Reverse flow
  • Multichannel: Using two or more channels to reach customer segments in one market area. Benefits include lower channel cost, increased coverage, and customized selling options. Tradeoffs are the potential for conflicts and issues with control and cooperation.

Managing Multiple Channels

Establish objectives and constraints.

Distribution Decisions

  • Exclusive
  • Selective
  • Intensive

Franchising

A franchisor owns a trade or service mark and licenses it to franchisees in return for payment. Formats include manufacturer-sponsored retail & wholesale, and service firm-sponsored retailer franchise.

Channel Power

The ability to alter channel members’ behavior to take actions. Types include coercive, reward, legal, expert, and referent power.

Channel Partnerships

  • Conventional (independent producer, wholesaler, retailer)
  • Vertical (unified system of producer, wholesaler, retailers):
    • Corporate: Combining successive stages into one
    • Administered: Channel captain manages
    • Contractual VMS: Based on contracts
  • Horizontal: Two or more unrelated companies combined to exploit marketing opportunities

Channel Conflict

  • Horizontal
  • Vertical
  • Multichannel

Causes of Channel Conflict

  • Goal incompatibility
  • Differences in strategies and tactics
  • Power imbalance
  • Unclear roles

Solutions to Channel Conflict

  • Strategic justification
  • Dual compensation
  • Superordinate goal
  • Employee exchange
  • Joint membership
  • Co-optation
  • Diplomacy
  • Legal recourse

Market Logistics

Starts at the factory. Objectives consider the total system basis, customer requirements, and competition. Supply Chain Management (SCM) starts from raw material procurement. Order processing involves how to handle the order-to-payment cycle. Warehousing determines where to stock inventory, including Just-In-Time (JIT) inventory. Transportation includes containerization.

Unit 13: Integrated Marketing Communications (IMC)

IMC is an approach to managing campaigns through the coordination of different communication tools. IMC methods include horizontal (across marketing activities), vertical (with top-level objectives), internal, and external (agencies).

  • Coverage (reach)
  • Contribution (impact)
  • Commonality (common associations)
  • Complementarity
  • Conformability (consumers’ adaptation)
  • Cost

Advertising

Any presentation and promotion of goods and brands by an identified sponsor using paid media.

  • TV: Advantages include a captive audience. Disadvantages include cost and clutter.
  • Radio: Advantages include mobility and pervasiveness. Disadvantages include lacking visual images.
  • Online: Advantages include trackable results and contextual placement. Disadvantages include bogus clicks, hacking, and vandalism.
  • Native Ad: Editorial promotion
  • Place Advertising: Billboards, public spaces, product placement, point of purchase (POP)
  • Company Website: Easy, physically attractive
  • Microsites

Driving Online Traffic

  • Search Engine Optimization (SEO)
  • Search Engine Marketing (SEM)

Social Media

Online communities, forums, blogs, social networks, and customer reviews (disadvantage: low participation). Mobile communication is always on, allows immediate consumption, is interactive, and tied to one user.

Events

Managing events involves identifying target lifestyles, increasing salience, reinforcing brand image, enhancing corporate image, evoking feelings, showing commitment to the community, entertaining employees, and merchandising.

Creating Experiences

Experience the corporate offerings.

Word of Mouth (WoM)

Virality

Publicity

Attract attention to the company or offerings. The goal is to manage reputation and build relationships with the community.

Publicity Methods

Unpaid editorial space in the media for promotion. Advantages include being free and credible. Disadvantages include unpredictable outcomes. Effects include awareness, credibility, enthusiasm, and minimizing cost.

Public Relations (PR)

Programs to promote or protect corporate image among relevant stakeholders. Functions include providing press coverage, managing communications, and engaging in lobbying. Formats include publications, events, news, speeches, public service activities, and identity media.

Packaging

Principles include visibility, differentiation, and transparency.

Unit 12: Communication Models

Macromodel/Micromodel: Awareness, Knowledge, Liking, Preference, Conviction, Purchase

1. Setting the Objectives

Creating awareness, building preference, inciting actions. Benchmarks should be temporal and quantitative. Consider the product life cycle (PLC), differentiation, market share (MS), message complexity, reach, competitive communication, and available resources.

2. Identifying the Audience

Target newness to category, loyalty, light users.

3. Crafting the Messages

Rationally and emotionally meaningful, distinguished from competitors, broad and flexible to translate into other media, informational (product) or transformational (non-product related).

4. Deciding on the Media

Audience quality, attention probability, editorial quality, ad placement quality and services, Exposure (E) = Reach (R) * Frequency (F), Weighted Exposure (WE) = R * F * Impact (I). Macroscheduling and microscheduling decisions include turnover, forgetting rate, and purchasing frequency. Consider continuity, concentration, flighting, and pulsing.

5. Developing the Creative Approach

Expertise, trustworthiness, likability, principle of congruity.

6. Measuring Performance

ADPLAN Framework: Attention, Distinction, Positioning, Linkage, Amplification, Net Equity. Share of Expenditure (SOE), Share of Voice (SOV), Share of Mind (SOM), Share of Market (SOM).

Unit 11: Pricing Strategies

Pricing is a negotiation between buyer and seller, with one price for all buyers, and internet pricing. Consumer psychology includes reference prices, image pricing, and price cues.

Setting Price Steps

  1. Pricing Objectives: Short-term, market penetration, skimming, quality leadership.
  2. Determine Demand: Price elasticity.
  3. Cost Estimates: Fixed cost, variable cost, total cost, experience curve, experience curve pricing.
  4. Competitive Analysis: Value-priced competitors, taking competitors’ costs and price reactions into account.
  5. Pricing Methods:
    • Cost: Set a price floor.
    • Competitor price: Orienting point.
    • Customers’ assessment of unique features: Price ceiling.
    • Markup pricing: Unit cost / (1 – desired return).
    • Target return: Unit cost + (desired return * invested capital) / unit sales.
    • Economic value to customer pricing: Based on the image of product channel deliverables.
    • Competitive pricing: Based on competitors’ prices.
    • Price discrimination: Segment, product form, location, time.
    • Product mix: Loss-leader, optional feature, captive, two-part, byproduct, bundling.
    • Cost inflation.
  6. Finalize: Incentives consideration (consumer, retailer), defining the size and approach for incentives, determining the size, establishing conditions for participation, deciding on duration, choosing a distribution vehicle, establishing timing, setting the total sales promotion budget. Methods include allowances, free goods, price-offs, discounts for sellers, coupons, cash refunds, prizes, and tie-in promotions for retailers.

Unit 10: Brand Management

A brand is a differentiation from competitors. Branding is endowing products and services with brand power. The role for consumers is to fulfill expectations, reduce risk, simplify decision-making, add personal meaning, and be part of their identity. For firms, it helps with product handling, inventory, accounting, legal protection, loyalty, and competitive advantage.

Brand Equity

The monetary value of brands. Goodwill is the monetary value of all intangible assets. Measuring equity includes cost, market, and financial approaches.

Brand Power

Value contributed by the brand. Measuring brand power includes a brand audit to assess the health of brands and the source of brand equity, suggesting leverageable ways. Brand tracking uses the audit as an input to collect quantitative data over time.

Brand Mantra

Articulation of the brand’s soul, communicating uniqueness, simplifying essence, and inspiring.

Designing the Brand

Brand elements should be memorable, meaningful, likable, transferable, adaptable, and protectable. Brand characters are brand symbols that enhance likability and make branding interesting. Brand personality is a specific mix of human traits attributed to a brand.

Brand Hierarchy

How a brand is related to the company’s products and services.

Brand Portfolio

Sets of brands and brand lines for sale in a particular category or market. Strategies include the house of brands, branded house (variants, flagship), and sub-brands. Co-branding involves multiple brands marketed together (same company, joint venture, ingredients).

Brand Dynamics

Repositioning (back to basics, reinvention), brand extension (careful of brand dilution). Managing a brand crisis requires empathy, value, strategy, and innovation. Luxury branding involves quality, uniqueness, and finding a balance.

Unit 8: Product Differentiation and Design

Product differentiation includes core functionality, features, performance quality, conformance quality, durability, reliability, form, style, and customization. Design is the totality of features affecting the look, feel, and functions.

Power of Design

Emotionally powerful, transmits meaning and positioning, makes the buying experience rewarding, transforms an entire enterprise, and facilitates manufacturing and distribution.

Approaches to Design

Design thinking (observation, ideation, implementation). The product portfolio encompasses all offerings by a company, including product lines and categories. The portfolio has width, length, depth, and consistency. A line is a group of related products.

Product Map

Allows a company to see its main competitors and helps planning to identify segments and opportunities. Line stretching includes down-market, up-market, and two-way. Other considerations are line filling, line modernization, line featuring, and line pruning.

Managing Packaging

All the activities of designing and producing the container for products, used as a marketing tool (self-service, consumer affluence, company and brand image). Packaging objectives are to identify the brand, convey information, aid in product distribution and protection, and aid consumption.

Color

Carries different meanings in different cultures and segments and defines brands.

Labeling

Identifies, grades, describes, and promotes.

Guarantees

If failing to function as promised, then compensate. Warranties cover the repair or replacement and do not allow the return for a refund.

Unit 7: Value Proposition and Positioning

Value proposition includes functional, psychological, and monetary aspects. Total customer benefit is the perceived value of functional, psychological, and monetary benefits customers expect from an offering from the product, service, and images. Total customer cost is the perceived bundle of functional, psychological, and monetary costs incurred in evaluating, obtaining, and disposing of an offering. The customer value proposition is benefits minus costs.

Customer Value Analysis

Reveals the company’s strengths and weaknesses relative to competitors. Identify the relevant attributes and benefits customers value, assess the relative importance of these attributes and benefits, assess the company and competitor’s performance on the key attributes and benefits, and monitor customers over time.

Positioning Strategy

Designing the company’s offerings and images to occupy a distinctive place in the minds of the target market. The frame of reference serves as a benchmark against which customers can evaluate the benefits of the offerings.

Points of Difference (POD)

Attributes and benefits that consumers associate with a brand that could not be found from competitors to the same extent.

Points of Parity (POP)

Attributes and benefits associations that are not unique to the brand but shared with others.

Multiple Frames of Reference

Straddle, perceptual maps: Visual representation of perceptions and preferences.

Competitive Advantage

The ability to perform in one or more ways that competitors cannot or will not match. Leverageable advantage.

Core Strategies

Differentiate on existing attributes, introduce new attributes, and build a strong brand.

Positioning Statement

Communicating offerings’ category memberships with POP and POD and developing a narrative to convey the positioning. Communicating conflicting attributes and benefits: Consumers might want to achieve both, develop products that perform well on both, and launch two different campaigns.

Chapter 6: Target Customers

Targeting is the process of identifying customers for whom the company optimizes its product. Mass marketing is when a firm ignores segment differences and goes after the market with a single offer. Target marketing is selling different products for different segments (one-to-one approach). Mass customization is the ability of a company to meet each customer’s requirements (on a mass basis, individually designed products). Single-segment targeting is niche marketing. Targeting multiple segments includes product specialization and market specialization.

Strategic Targeting

Focuses on customers whose needs the company can fulfill by ensuring that its offerings are customized to their needs.

Tactical Targeting

Identifies the ways how the company can reach these strategically important customers. Defining customer profiles includes demographic (age, lifecycle, income, gender, race, and culture), geographic (countries, cities, regions, neighbors), behavioral (usage, user status, loyalty, occasions), and psychographic factors (traits, values). Aligning the customer value and customer profiles for effectiveness and efficiency.

Bringing Segments to Life

Personas are detailed profiles of one or a few hypothetical target consumers imagined in terms of demographic, geographic, psychographic, or other attitudinal or behavioral information. Business markets include demographics, operating variables, purchasing approaches, situational factors, and personal characteristics.

Target Compatibility

Can the company create superior value for target customers? Target compatibility is a reflection of the company’s ability to outdo the competition in fulfilling the needs of the target customers (business infrastructure, access to scarce resources, employees, technological expertise, strong brands, collaborator networks, core competency as a source of competitive advantage, making a significant contribution to perceived customer benefits, having applications in a variety of markets, and being difficult for competitors to imitate).

Target Attractiveness

Can the customers create superior value for the company? The ability of a market segment to create superior value for the company (strategic and monetary value). Monetary value includes customer revenues and the costs of serving customers. Strategic value includes social, scale, and information value.

Chapter 5: Market Research

Market research is the function that links the customer, consumer, and public to the marketer through information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; and monitor and improve marketing as a process. Its importance is to generate insights into why and how we observe certain effects in the marketplace.

Process

  1. Define the Problem: Define the decision alternatives and the research objectives.
  2. Develop the Research Plan:
    • Data sources: Secondary, primary.
    • Research approaches: Observational, focus group, survey, behavioral.
    • Research instruments: Questionnaires (close-ended, open-ended), qualitative measures (word associations, projective techniques, visualization, brand personifications), neuromarketing devices (electroencephalography (EEG), magnetic resonance imaging (MRI)).
  3. Collect Information: Contact methods include online, in-person, mail, and telephone. Data mining is used to identify prospects, decide which customers should receive a particular offer, deepen loyalty, and reactivate customer purchases.
  4. Analysis and Decision Making: Analyze information and make decisions (tabulate data and develop summary measures). Market data should lead to market insights.

Measuring Market Demand

Measure and forecast the size, growth, and profit potential of new opportunities. Define market demand.

Forecasting Market Demand

Anticipating what buyers are likely to do. Forecasts include macroeconomic, industry, and company sales. Industry sales and market share, survey of buyers’ intentions, composite of sales force opinions, expert opinion, pre-sales analysis, and market-test method.

Measuring Marketing Productivity

Metrics are a set of measures that help quantify, compare, and interpret performance. Mix modeling analyzes data from various sources to understand specific effects and activities. Dashboards provide up-to-the-minute information necessary to run business operations for a company.

Chapter 3: Consumer Behavior

Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and dispose of goods to satisfy their needs and wants.

What Influences Consumer Behavior

  • Cultural Factors: Culture, subculture, social classes.
  • Social Factors: Reference groups (all that have a direct or indirect effect on beliefs, decisions, and behaviors), primary group (family), aspirational groups, dissociative groups, opinion leaders, and influencers who offer information about a product or category.
  • Personal Factors: Age and stage of the lifecycle, occupation and economic status, lifestyle, and values.

Consumer Psychology

  • Motivation: Consumer needs (biological and psychological), wants, demands. Needs become a motive when aroused to a sufficient level to act.
  • Perception: The process of how we select, organize, and interpret information to picture the world. Selective attention: Marketers work hard to attract notice. Subliminal perception. Selective distortions: Tendency to interpret information in a way that best fits preconceptions.
  • Emotions: Leverage emotional appeal.
  • Learning
  • Memory:
    • Short-term: Temporary and limited repository of information.
    • Long-term: More permanent, essentially unlimited repository (episodic, semantic, procedural).
    • Memory: Associative network model. Brand associations (all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes).
    • Memory process: Encoding (how and where information gets into memory), memory retrieval (how information gets out of memory).

Buying Process

  1. Problem Recognition: Recognizing problems/needs triggered by internal and external stimuli.
  2. Information Search: Personal sources, commercial sources, public sources, experiential sources.
  3. Evaluation of Alternatives: Beliefs and attitudes, information processing, expectancy-value model.
  4. Purchase Decision: Decision heuristics (mental shortcuts), level of consumer involvement (elaboration likelihood model: peripheral route for low involvement), intervening factors (intention vs. action).
  5. Post-purchase Behaviors: Satisfaction, actions, use, and disposals.

Chapter 2: Marketing Strategy and Planning

A mission is a statement of the reasons for an organization’s existence, often referred to as its core purpose. It’s a long-term goal that provides company employees and management with a shared sense of purpose, direction, and opportunity.

Good Mission Statement

  • Focuses on a limited number of specific goals.
  • Stresses the company’s major policies and values.
  • Defines the major markets that the company aims to serve.
  • Takes a long-term view.
  • Short, meaningful, and memorable as possible.

Corporate Culture

The shared experiences, stories, beliefs, and norms that characterize an organization.

Strategic Business Unit (SBU)

A single business or a collection of related businesses that can exist separately from the rest of the company, has its own competitors, and has a manager responsible for strategic planning and profit performance who controls most of the factors affecting the profit. A specialized portfolio involves SBUs with fairly narrow assortments consisting of several product lines. A diversified portfolio involves SBUs with fairly broad assortments containing multiple product lines.

Allocating Resources

Assess each SBU’s competitive advantage and the attractiveness of the market where it operates: grow, harvest, hold.

Market Strategy

Involves choosing a well-defined market where the company will compete and determining the value it intends to create in the market. Tactics, also called the marketing mix, make the company’s strategy come alive.

Market Strategy’s Two Components

  • Target market
  • Value proposition

Identifying the Target Market: 5Cs

  • Customers: Whom the company plans to fulfill.
  • Competitors: Aim to fulfill the same needs of the same customers the company is targeting.
  • Collaborators: Work with the company to create value for target customers.
  • Company: Develops and manages given market offerings.
  • Context: Environment where the company and competitors operate.

Value Proposition

  • Customer value
  • Collaborator value
  • Company value

Optimal Value Proposition

Balances the value proposition of customers, collaborators, and the company.

Marketing Tactics

The market offering is the actual good the company deploys to fulfill a customer’s needs.

7Ts of Tactics

  • Product
  • Service
  • Brand
  • Price
  • Incentive
  • Communication
  • Distribution

G-STIC Framework

  1. Goal: Monetary, strategic. Benchmarks should be quantitative and temporal.
  2. Strategy: Target market (5Cs), value proposition (customer, collaborator, company).
  3. Tactics: 7Ts.
  4. Implementation Planning: Resource development, offering development, commercial deployment.
  5. Metrics
  6. Controls: Evaluating performance using benchmarks, monitoring the environment, and taking actions if necessary.

3 Main Functions of a Marketing Plan

  • Describes the goal and course of action.
  • Informs the stakeholders about the goal and plan.
  • Persuades relevant decision-makers of the viability of the proposed course of action.

Contents of the Marketing Plan

  1. Executive summary: Elevator pitch. Situation overview: Overall evaluation.
  2. G-STIC.
  3. Exhibits.

Effective Marketing Audit

Comprehensive, systematic, unbiased, periodic.

Marketing Plan

Succinct, complete, specific, realistic.

Chapter 1: Introduction to Marketing

Marketing is identifying and meeting human and social needs. It involves activities, institutions, and processes for creating, communicating, delivering, and exchanging offerings for customers and partners. Marketing management is the art and science of choosing target markets, growing customers, and communicating customer value.

Industry and Market

An industry is a group of sellers. A market is a group of customer groups.

Market Forces

Technology, globalization, physical environment, and social responsibility shape relationships among the different market entities. Market outcomes (new consumer and company capabilities, new competitive environment: deregulation, privatization, retail transformation, disintermediation, private labels, mega-brands) stem from the interplay of market forces.

Holistic Marketing

Integration of relationship marketing, integrated marketing, internal marketing, and performance marketing. It has emerged as an essential approach to succeeding in the rapidly evolving market.

  • Relationship Marketing: Customers, employees, marketing partners, and the financial community. An asset called the marketing network that consists of the company and its supporting stakeholders with whom to build mutually profitable relationships.
  • Integrated Marketing: Devised marketing activities that create and deliver value – the whole is greater than the sum of its parts.
  • Internal Marketing: Task of hiring, training, and motivating to serve customers well.
  • Performance Marketing: Financial accountability, environmental impact, social impact.

Marketing Concepts

  • Production
  • Product: Innovative products.
  • Selling
  • Marketing: What customers want.
  • Market-Value: Integration of processes.

Marketing Organizations

  • Functional
  • Geographic
  • Product or brand
  • Market
  • Matrix

Customer-Oriented Organization

Create long-term customer value and be personally engaged with customers.

Market-Oriented Company

Develop a passion for customers, organize around customers instead of products, and understand customers through qualitative and quantitative research.