Principles of Marketing
Introduction (Module 1)
[Prof. Tamar Avnet, Ph.D]
In this module we are going to talk about
four topics.
The first topic is the marketing concept.
The marketing concept will help us
understand what marketing is, what is
it all about, and the important terms that we
need to know.
Then we're going to move into marketing
strategy.
Marketing strategy will help us understand
how to fit those different
marketing concept that we just learned.
We're going to discuss needs and wants on
one hand, and value and cost
and benefit on the other.
Then we're going to talk about the
marketing environment.
This is the environment which the company
functions in and the
consumers function in.
We're going to understand why it's so
important to understand the
environment, as well as what are the
different factors that are involved in
the marketing environment.
Then finally, we're going to talk about
marketing research.
Marketing research is a tool that we can use
in order to understand the
marketing environment, as well as create a
good marketing strategy.
Principles of Marketing
Marketing Concept (Module 1.1)
[Prof. Tamar Avnet, Ph.D]
Before we start talking about marketing, we
first need to understand what
marketing is.
The definition of marketing is that it's a
social and managerial process by
which individuals and groups obtain what
they need and want through
creating and exchanging products and
values with others.
Basically, what does that mean? It means
that some individuals have
specific needs and wants, and then there's
a way for a company to try to
fulfill these needs and wants.
From a company perspective, then, they
want to satisfy those needs.
Obviously, you want to do it better than the
competition.
Hence, the marketing concept is to try to
understand what are these
needs and wants, how can I deliver them,
me, the company, in a way that
will satisfy my consumers, in a way where
they will be happy, and to do it
better than what the competition can do.
Principles of Marketing
Marketing Strategy & the Process of
Planning (Module 1.2)
[Prof. Tamar Avnet, Ph.D]
Hello, welcome to Marketing Strategy and
the Process of Planning.
Before we discussed the needs of
consumers, and we were talking about
that the company wants to satisfy these
needs, and to do it better than
competition.
So here we're going to discuss how it is
actually done.
So we will talk about understanding the
marketing place.
We will talk about understanding consumer
needs and wants.
We're gonna talk about creating a strategy
that will fulfill those needs and
wants better than competition.
And we will talk about the concept of value
and the concept of loyalty,
which has to do with building relationship
with consumers.
Let's start with an example.
Henry Ford, in the 1900s, had his Model T
car, and he said, his classic
saying was, "You can get it in any color you
want "as long as it is black."
What did he actually mean by that? So Ford
relied on fulfilling the basic
need of transportation.
So the idea of getting people from one place
to another cheaper and
better than competition.
Now if you think about it, who was the
competition at the time? There we
very few other car manufacturers, so it was
mainly the horse and the
carriage, maybe some trains, maybe even
walking.
So Ford was trying to think, what could be
the competitive advantage that
he can have over the horse and carriage,
for example.
And he understood that in order for a lot of
people to buy cars, he has to
reduce the price of the car.
And he assumed that people don't really
care about the color or the look
of the car at that time, but they care more
about the fact that the car is
cheap and affordable.
So in that sense, yes, he was able to fulfill
consumer needs.
By being able to produce the car only in
black, he was actually taking
advantage of the assembly line, making
sure that it's not gonna cost so
much to make a car.
Now at the time, that was what the market
demanded and that was why
there was a market fit.
They wanted transportation, didn't really
care about how it looked, and
they wanted it relatively in a cheaper price
so they can afford it.
However, one of the problem with markets
is that they keep changing all
the time.
And this is one of the challenges that we
face as marketers.
Because the marketing environment keeps
changing.
The economy, the culture, technology.
And because of that, consumer needs also
keep changing.
So what worked in the 1900s might not
necessarily work later on in the
1920s or the 1930s.
And part of it is also because there's also
new competitors coming in
which are also trying to offer a competitive
advantage.
So let's see what happen in the case of
Ford.
So in the case of Ford, around 1927, the
market started to change.
Now Ford didn't understand that the market
changed, so Ford continued,
the company continued to focus on the idea
of mass production.
And by doing that, they actually gave up the
flexibility.
And they had what is called inertia, which is
something we don't like in
marketing because it means that you cannot
proceed and that you cannot
change yourself based on the environment.
However, the company that did realize that
change was coming was GM.
And GM responded first to this change.
And the change was that now consumers
did want to have cars that are
unique.
They wanted to be different than others, so
they wanted cars in different
colors, or maybe different models.
And unfortunately for Ford, by 1940s, GM
gained market share from 20%
to 50% while Ford market share fell from
50% to 20%.
So the conclusion is that one has to scan
the environment all the time.
However, before we discuss the marketing
environment, let's clarify some
of the terms that we used so far.
So one of the things that we want to totally
make sure we understand are
needs, wants and demands.
Needs is when you feel that you're deprived
of something.
There is a discrepancy between your
current state, meaning where I am
now, and where I wanna be, which is the
desired state.
A want, on the other hand, is derived from
the need in the sense of what
would the culture say would be a good way
for me to fulfill that need as
well as my own personality? So for
example, if I wanna go to a party and I
wanna be dressed nicely, that will be a
need, I need to be dressed nicely.
However, whether that nicely will be a suit
or will be a skirt or will be a
dress will depend on what is considered
nice in that culture.
Now a demand is when I can actually pay
for what I want.
So yes, maybe I want to have a Gucci bag,
but if I can't afford it, then
from the company's perspective, I don't
have that want because I can't
actually back it up by increasing demand for
that product.
So let's see another example.
I'm hungry.
Okay, hunger obviously is a very basic
need, we all experience it at some
point.
And I need to eat.
But how do I decide what I wanna eat? So
one of the question will be,
well, how much money can I spend on what
I eat? Can I spend $50,
$100, $10? And then how I choose to
satisfy my need will depend on
what I actually want to eat right now.
Maybe I feel like I wanna have a heavy
meal, a warm meal, a salad.
So all of these have to come into
consideration when I make the decision
to satisfy my need.
The next concept that I want to discuss is
value and satisfaction.
So what is value? Value is when a
consumer evaluates the benefits as
compared to the cost.
Now the cost obviously can be price, but it
can also be other things, like
the time it takes me to get the product, for
example if I buy something
online, or the length of time that I have to
travel.
Or maybe how much obstacles I have in my
way in order to get it.
And the benefit needs to outweigh the cost
in order for that product to
have a value.
So how do we actually measure value? So
every product we can describe
in what we call terms of attributes, benefits,
costs, and hence is the result,
value.
So an attribute is the objective features of
the product.
So for example, when I have this jacket on,
the objective feature is that it
is made of a specific type of cloth, and that
it is on me, fits me, and that,
let's say, it keeps me warm.
So that would be an objective feature.
Anybody who sees the jacket will
understand that this is the attribute of
the jacket.
Benefits, on the other hand, are derived
from these features.
So for example, the benefit of me being
warm might be stronger for me
because maybe I'm sensitive to the cold or
maybe I get sick very easily,
as compared to someone else who might
actually prefer the look over the
heat.
So their benefit will be from how the jacket
looks and not necessarily from
how much they keep us warm.
And then we have the cost.
And the costs are derived from the features,
meaning how much does it
cost for a jacket to look as nice? How much
does it cost the jacket to be
as warm? How much does it cost to have a
jacket that fits you exactly?
And so forth.
So value is when I take the benefits, not the
attributes but the benefits,
minus the cost.
And that will give me the value.
So if I have a jacket that keeps me very
warm, and this is the benefit that
I'm looking for, and it's relatively not
expensive, then it will be a valuable
jacket for me.
However, if I don't care so much about the
heat but I do care about how it
looks and I don't think it looks that good,
then for me, it will not be as
valuable, and I might not want to spend the
amount of price that the
company's charging.
So let's do an example with a very basic
and simple product, which is
potato chips.
So first, let's look at the positive features.
So the attributes that the potato chips might
have, again, objective,
anybody who sees the potato chips can talk
about those, is maybe the
flavor, the taste, maybe the texture in the
sense of whether it's crunchy or
not, and maybe the level of energy that it
gives because it is a type of
food.
But then what are the benefits that we get
from the flavor, or the benefits
that we get from the taste? So for some it
can be just pure enjoyment, just
pleasure.
I enjoy eating something that tastes good,
so that is my benefit.
Someone else maybe was hungry and they
had it as a snack and now
they're fully energized.
So for them that was the benefit.
Could be both, could be that I enjoyed
something that made me more
energized.
And then what would be the value then? So
what is the value of eating
something that you like? It makes me
happy, it comforts me.
What could be some negative attributes of
potato chips? So for example,
again, objectively, it has high calories, it has
high fat.
Might have some artificial ingredients.
Now why is that an issue? What could be
the negative benefits of it? That
it's unhealthy, that maybe it will make me
gain weight, maybe I won't be
attractive.
Now again, for some people it's more of a
concern.
For some people it's less.
Hence the value, if we talk about negative,
could be that as a result I have
a negative self esteem because I feel like
I'm overweight.
Maybe in the longterm I will have some
health issues, like high blood
pressure.
And then the question is would you buy
potato chips or not? So how can
we tell? So if you're a consumer where the
value is really to feel comfort
and to feel happy, and it outweighs the idea
of maybe having negative
self esteem or health issues, then you will
buy the potato chips.
However, if you say well, yeah, I know I'm
gonna enjoy it right now and be
happy but later on I might develop some
blood pressure issues, then you
will make the decision not to buy it.
And what the company needs to know is
what type of consumer you are.
And obviously if you're a potato chips
company, you will market it for
those who will outweigh happiness over
unhealthy consequences in the
future.
So how is value then connected to
satisfaction? Let's see.
So satisfaction reflects consumer evaluation
of a product performance.
So what is my expectations? So for
example let's take, again, the hunger.
So let's say I'm hungry and I'm stopping at a
fast food restaurant.
Now my expectations are that it's gonna be
relatively cheap, so that's the
cost, and maybe not as tasty, but it will
suffice in the sense of closing my
hunger.
So in that sense, my expectations of how
good the food will taste are not
really high.
So as long as the price makes sense and
the food is edible, then I will be
happy with it.
However, if I'm going to, let's say, high end
restaurant that let's say
serves steaks, my expectation is the food is
gonna be very good, even
though it might be more costly.
Hence if the food is not good, I'm not gonna
be satisfied, even though at
the fast food restaurant I was totally
satisfied.
So the idea is to make sure that the level of
satisfaction has to do with the
level of expectations the company
promised.
So as long as the company promises you
what it delivers, then you will be
satisfied.
If it exceeds expectation, that will be even
better.
But you don't want to promise consumers
one thing and then when they
actually get it, it's not what was promised to
them because then they will
be disappointed and not satisfied.
Principles of Marketing
Marketing Environment (Module 1.3)
[Prof. Tamar Avnet, Ph.D]
[Instructor] The marketing environment has
two components to it; one is
the SWOT assessment and one is the
environmental scanning.
The SWOT assessment has an internal
assessment which looks at
strength and weaknesses, hence the S and
the W.
And external assessment, which looks at
the opportunities in the market
and the threats in the market, hence the O
and the T.
The second component is the
environmental scanning, which also looks
at factors that are inside the company, the
micro, and outside of the
company, the macro.
So now we will go into a bit more details
looking at those two
components.
So the SWOT assessment, the best way to
look at it is from the internal
perspective or strength and weaknesses
and the external assessment of
opportunities and threats.
Then we can divide them, obviously, into
positive things, which will be the
strength and the opportunities and to
negative things, which will be the
weaknesses and the threats.
The strength are those things that the
company have that that company
can do better than the competition.
So if I have good brand equity or good
brand recognition, but my
competitor also have good brand
recognition, that's not necessarily a
strength.
But if I have a good brand equity and my
competitor does not, then this
will be a strength.
On the other hand, the weakness could be
that I might have the price
higher than my competition, maybe because
I have better technology, like
the iPhone.
So the fact that I charge more than my
competitor even though I offer
better technology is a weakness.
The same goes with opportunities and
threats.
Threats can be external factors that I have
no control over, but that can
actually hinder what I can do and what I
cannot.
Opportunities, on the other hand, are factors
in the market that, again, I
have no control over, but I can utilize in
order to get a better performance
over my competition.
Environmental scanning has a very similar
function, only here we do not
divide them into positive and negative, just
internal and external.
So the marketing environment then will
include all the actors and the
forces outside of the marketing department
that can still though affect
how marketing can work.
So let's see some of these factors.
So the micro environment then will be
talking about those factors that are
close to the company and can serve the
customers.
For example, suppliers, marketing
intermediates, customer markets,
competitors, publics, and so forth.
Here is just a nice diagram of how all of
these, for example, here we can
see customers are one of the things we
need to take into consideration,
obviously.
We just talked about satisfying customer
needs.
We can also look at competitors; we just
discussed those competitors,
and to see how they satisfy consumers'
needs better or worse than us,
and so forth.
The next environment we wanna look at is
the macro environment.
Now the macro environment are those
factors that are outside of our
reach, but yet still have a large affect on
what we can do and what we
cannot.
So, here, this diagram sort of summarize all
the forces; and you can see
we have one, two, three, four, five, six
forces.
However, it does not mean that every
company needs to take into
consideration every force.
You only take the forces that are relevant to
your product.
But let's look at some of the examples that
we can discuss.
So, for example, what can we do when we
have advancing technology?
So technology can help us create new
forms of competition.
For example, when the fax was created,
when the cellular phone was
created, the internet; that allowed, for
example, for Amazon to develop.
Before the internet, we couldn't have done
that.
Virtual reality, consumers can now
experience products in a way they
couldn't experience before, which again
might take the physical retail
store out of the equation all together.
We can also create new industries that now
can be supplied that we didn't
have before.
So it affects how people spend their time.
For example, you can work and shop from
home these days.
Again, you can do online shopping as
compared to physical shopping.
You have social media, so you can
communicate.
You can give reviews; you can give
feedback in ways that you could not
have done before.
So those are just examples of how
advanced technology can actually
affect what the company is doing and
whether they're doing it better than
competition.
Let's look at another factor in the same,
sorry, within the same, selfdriving
cars.
We have a car that drives itself.
Will that eliminate the need for cab drivers?
Will that eliminate the need
for Uber drivers? We have Google's Waymo
or we have Tesla.
All of those are advances in technology that
actually disrupt consumer
behavior.
Cell phone, for example, have now facial
recognition; and they have
augmented reality abilities, so that also
affects security and safety.
There's different methods of payment now.
We can pay online; we actually don't need
our wallet anymore.
We might not need cash anymore.
So all of those will be good examples of the
technology.
The next factor which is interesting, and
many times is being neglected, is
actually legal forces and political forces.
And of of the good examples is the law that
was passed about where
people may or may not smoke.
One of the main reasons people used to
smoke is because of the social
coolness or desirability that it reflected,
which is why people started to
smoke when they were teenagers.
Then they got hooked, and then it was very
difficult to stop smoking.
Today, however, there's almost no place
you can see people smoking.
You're not allowed to smoke in clubs.
You're not allowed to smoke in restaurants.
Some places you can't even smoke next to
a building.
That took away the social desirability
because nobody could have seen
you smoking.
That actually was a better force to reduce
the demand for cigarettes than
the risk of maybe getting some health
issues 20 or 30 years ahead.
Social and cultural forces has to do with the
cultural environment that the
company as well as consumers are working
at.
So, for example, the quality of life; some
consumers expect that they will
have leisure time, that we'll have time to do
hobbies.
Some consumer expect that they can work
everywhere all the time.
One of the big commercials that Samsung
had was European versus
Americans where Americans are busy,
busy, busy as compared to
Europeans; and their idea was to show
someone in the pool on vacation
still working on the iPhone because, well,
not iPhone, on the cell phone,
because the cell phone was waterproof.
So that is a social culture that might appeal
to Americans, but not
necessarily to Europeans, which usually
when they're on vacation, like to
stay on vacation and not mix work with
vacation.
Immigration, women's role in society, all of
those actually play a role in
social as well as in cultural forces.
Then we have demographics, and
demographics is one of the big ones
because it reflects most cultures as well as
most populations.
One of the main things now is the aging
population.
Health become much better in many
countries, and people just stay alive
longer.
So, for example, now we have a lot of
products we never had before that
cater to aging population, like the pension,
retirement; how would you
have enough saving to go an have travel
around the world when you're
60 or 70 or 80 and so forth? We also have
different types of families.
We might have single mothers or single
fathers that, again, needs to be
catered to, and so forth.
And then we have the economic
environment.
The economic environment is one of the
most important one, and usually
will apply to most companies, and that will
have to do with how much can
a consumer pay for a product.
If the environment is affluent, then they will
agree to pay more for luxury
products than if there's a recession or
there's not enough money to pay
for necessities like food.
Nobody will pay $1,000 for a Gucci bag if
they can't buy food for their
families.
However, if they have a lot of money in the
sense that it's an affluent
market, not necessarily they themselves,
but the whole market is affluent,
then they will agree to pay more for luxury
products.
Principles of Marketing
Marketing Research (Module 1.4)
[Prof. Tamar Avnet, Ph.D]
In this session, we're gonna discuss
marketing research.
What is marketing research? So marketing
research is the process that
can help us understand some of the factors
we just discussed.
So for example, it can help understand what
are the needs and wants of
our customers? What would they value?
What would they consider as
benefits? And what they could consider as
cost, which is what sometimes
we will refer to as consumer insights,
understanding things that maybe
are not obvious to the eye unless you really
do marketing research.
And that will help us then serve customers
better and give them exactly
what they want.
So let's look at the marketing information
system.
So the marketing information system have a
few things that we want to
look at.
One is the marketing environment.
So that we actually just covered.
Marketing environment, when we do
research, is actually doing a
situation analysis.
So this will be looking at the SWOT, and
this will be scanning the
environment and looking at the different
factors.
Then we also have marketing managers
and other information users that
might benefit from our research.
They might be able to also help us gain
customer and market insight as
well as use it for themselves.
Now all of these, as you can see, have
interactions among themselves
because none of them are working by
themselves.
They're all one big system.
One of the things, though, that we are
gonna concentrate on now is the
marketing information system.
So what is actually the marketing
information system and what are the
sources that we have as marketers to gain
consumer insights? So the
first one is internal databases.
Internal databases are actually database
that I can get from my own
company.
Today it will be usually electronic collection
of data.
So that will be what we call sometimes big
data analysis.
Big data analysis is when I can get
information, let's say, about sales,
about returns, about why consumers
preferred to buy one product versus
another.
If you're online, maybe why a consumer put
products in the cart but
actually never checked out.
So those can be internal databases that I
can use.
Another source of information is what we
call marketing intelligence.
Now marketing intelligence is a bit more
complicated than internal
database because usually I will actually
need to collect the data and then
do some analysis.
Now some of this is information that's
already there because sometimes
we have companies, marketing research
companies, that just create
research, let's say, about the auto industry
trends, about eating habit
trends and so forth.
And sometimes competitors created
marketing research and allowed it to
be public.
And sometimes we ourselves had marketing
research that we did in the
past and maybe we can use it in the future.
And then the third source is actual
marketing research.
This is the most difficult one to do, but then
probably the most accurate
and the one that provide us with the most
insight.
And this is where we actually design the
marketing research.
We collect the data, we analyze it, and it is
specifically relevant to
whatever situation we want to learn about.
Now why do we need to do marketing
research? Why can't we just go by
intuition? So one of the first thing is that
sometimes we really don't
understand what is going on.
One of the classic examples is that the
company sees that the sales are
down, demand is down, people are not
buying the product, but they can't
understand why.
So in that sense, the sales are down is not
the problem.
That's a symptom that something is wrong,
a little bit like when someone
is sick and they have a fever.
The fever is not the sickness.
The fever is the symptom.
Then we have to go the doctor, who does
some research to understand
why someone has a fever.
So the same is here.
So we want to understand what's changed
in the market.
Is there a new competitor coming in? Is
demand changed, just like with
Ford? Suddenly consumers want unique
cars and the price is no longer a
factor and so forth.
Then the other reason we would like to do
marketing research is because
it helps us make decisions.
So let's say we want to add a new product.
We want to do brand extension.
Let's say Diet Coke wants to come up with
Coke Zero.
How do I know if this is a good decision? So
again, I want to at least run
this idea by my consumers to see how they
react before I go out and just
create the new product, which, if not
successful, can cost me a lot of
money.
In addition, we also want to make sure that
what we are doing now is still
good.
So we want to make sure that if we came,
let's say, with a new
advertisement campaign and we wanted to
increase brand awareness,
was that successful? How do we know if the
promotion, the commercials
that we ran, the social media campaign that
we did, how do we know that
it actually achieved the goals that it was
supposed to achieve? So
marketing research can help us do that.
We also want to know better how to serve
customers because again, as
you remember from the Ford example, the
market keeps changing all the
time.
So the fact my customers are happy now
doesn't mean they will be happy
next year.
And what happens if the competition does
research pick up on the fact
that there's something better that they can
offer, and we are staying
behind because we didn't research it and
we weren't able to gain
consumer insights? So then how do we do
that? How do we do research?
So of course here, we only have a big
overall, because marketing
research can be a whole course by itself.
But these are like the basics.
So the basic steps are basically three.
One is to define the type of research.
So we will talk in a second what kind of
research are available to us.
And then also what do we want to gain from
that research? Do I want to
understand why sales are down, or do I
want to understand why sales are
down and also how to solve it? Those are
two different objectives.
Then once I understand that, I want to think
about, well, what is the
research plan? How am I planning to collect
my information? There are
different tools that are out there and are
available to me.
And then the final step is to actually collect
the data and analyze it.
Now obviously when I analyze the data I
need to understand what are the
objectives and how the information was
collected.
So let's talk more now about step one.
So what types of research and objectives
are available to us? So in any
kind of marketing research, we have three
types, exploratory, descriptive,
and causal.
Exploratory research is when I'm not really
sure what is happening.
So this will be a good example when sales
are down but I don't
understand why they're down.
So I need to explore.
Just by the nature of the name, we now
understand why it's called
exploratory research.
Let's assume that I explore.
Let's say I do a focus group, and it seems
that maybe our competitor is
offering the same product at a lower price.
So now I have the solution, and in this point,
maybe I don't need to
additional research.
All I need is to reduce the price.
However, what happens if the reason is that
suddenly the benefits of the
product are not good enough and now I
want to offer a new product that
maybe will compensate for what the old one
can't offer.
So this can bring us to what we call
descriptive research.
Descriptive research, again, from its name,
it's about describing factors.
So I want to know what consumer like and
don't like.
Maybe what's their demographic? What is
their attitude toward different
brands? How many units they're going to
buy if I offer this new product
and so forth.
So basically it helps me to describe the
situation, describe the
environment.
And then the last type of research is causal
research.
Now causal research is very unique
because what it does, it tests the
idea of cause and effect.
For example, what will happen if I reduce
the price of my product by
30%? Will sales go up, not change, or
maybe even go down? If you're a
luxury product, sometimes offering a
discount is not a good idea.
But the cause and effect means that I am
changing, I the company am
changing something in the environment,
and as a result, there will be
consequences.
There will be outcome.
And that's why we call it causal, because it's
cause and effect.
Now the second stage is about developing
the research plan.
So at this point, I already decided if I'm
doing exploratory, descriptive, or
causal.
I always have to choose one.
I can start with exploratory, then go to
descriptive.
I can start with descriptive and do causal.
However, I do need to understand which
one I'm doing first.
I also understand the objective.
Why am I doing the marketing research? So
at this point, these are clear
to me.
And now I want to say, well, how am I going
to collect the information? So
there's actually two ways one can collect
information.
One is secondary data and one is primary
data.
Secondary data is basically taking data from
somewhere else.
Doesn't matter if it's from my own internal
resources or from outside of the
company.
For example, I'm buying research that was
already done by someone
else, like Nielsen, when I'm looking at media
habits, or I can also just find
scholar, academic marketing papers that
can help me with the theory.
Primary data, on the other hand, is
information that I myself collected for
the specific purpose of whatever objectives I
had.
Now obviously there are advantages and
disadvantages of each.
So the advantages of having secondary
data is that it always will cost me
less.
Doing primary research is always more
expensive.
Also, secondary data is right there, so it
doesn't take me a long time to
collect the data.
And on some rare occasions, it's the only
way I can actually collect data.
So if I'm using Nielsen and media habits,
there's really no other way to
collect that type of data if not through a
media company.
However, the problems or the
disadvantages of secondary data as
compared to primary data is that it's not
always current because it was
collected before.
So what if it's three years, five years, six
years? Is that still relevant to the
market today? Because as we say,
consumers change, markets change.
Is it still relevant? Is it relevant to what I'm
looking for? So for example, I
can see that in the automobile industry
technology is very important.
But does that mean that it's also very
important when I'm buying a new
vacuum cleaner? Can I make that
comparison? Also, the accuracy is
sometimes questionable.
Who actually collected the data? Who were
the respondents that
responded to the data? I had no control
over it, so I don't know whether it
was done properly or not.
And then it's also impartial in the sense
that's when it's collected for me in
primary data, then I know there was no
agenda in trying to find the data.
So for example, if a company, let's say, a
nonprofit company that wants to
show that being green is better or eating
organic better, sometimes they
will do research that will help them prove
their point.
In that sense, they're not impartial because
they do have an agenda.
So if I'm a food product company, let's say,
Kraft, then I need to pay
attention to how the data was collected and
whether it was objective or
was actually trying to show a trend that
might or might not actually exist in
real life.
So this is just a nice diagram to sort of help
us summarize what we
discussed so far.
So we have secondary and we have
primary.
Now within secondary, as you can see, we
have internal sources and we
have external sources.
Again, both of them are considered
secondary data.
Why? Because they were collected not for
the purpose of my research.
So even though the fact that I collected
them myself in internal sources, it
is still considered a secondary data.
That's an important point to remember.
Then in primary data, we have observation,
we have surveys, interviews,
and focus groups, and we have
experiments.
We will discuss this a little bit later because
those will fit the type of
research I decided to use, exploratory,
descriptive, or causal.
So now we are at the final stage of
collecting and analyzing the data.
So we understood whether we're using
secondary or primary, or as
sometimes happened, we will use both.
We will start with secondary, then we will
see what are we missing, and
then we'll add primary if needed.
So we have to decide is it exploratory,
descriptive, or causal? We have to
decide are we using observation, surveys,
or experiments? So as you can
understand, exploratory works more on
observations.
It works more on focus groups and
interviews.
Descriptive usually will work very well with
surveys, but it can also work
with observation depending what type.
And causal will work on what we call
experiments.
For example, we can have one store with
30% discount, another store
with no discount, and we can see whether
sales had an effect on whether
one store had a discount versus the other.
It's very easy, for example, to do online
where you can just some
consumers who go into the website will get
a 30% discount while some
will not.
Also, we need to try to think, well, how are
we actually gonna contact the
respondent? Are we gonna use mail? Are
we gonna use the phone? Are
we gonna use an online survey method and
so forth? And then also the
sampling plan.
Who is gonna participate? And finally, are
we gonna use a paper and
pencil? Are we gonna use an electronic
device? Are we gonna have a
person who is going to interview you and fill
the survey for you and so
forth? So then let's discuss a bit further
what we talked about observation.
So observational research is when basically
you're gathering the primary
data by observing people.
So you can observe traffic patterns.
For example, you can see what are the
times that there are more traffic,
less traffic.
Should we put a stop sign? Should we put a
red light or a green light? But
you can also look at consumption patterns.
For example, you can see when a parent
goes into a store with a child,
how much effect does the child have on
what type of cereal they're gonna
choose or what type of milk or juice they're
gonna choose? And you can
just observe, either by looking without being
noticed, or actually by using
the surveillance camera of the supermarket.
A lot of supermarkets do that.
Ethnographic research is a specific
observational type of research.
In this case, you actually send the
marketing researcher, the observer, to
someone's home, and they basically
shadow them to try to see what is
that the consumer does with the product?
So Folgers at the time in the
'60s actually did an ethnographic research
trying to see how people drink
their coffee.
And one of the things they found out was
that the smell of coffee in the
morning is what makes people happy about
coffee.
So that's where they came with the idea that
you have Folgers in your
cup, and all of their commercials were about
people waking up to the
smell of their coffee machine already
brewing.
Another big ethnographic research is what
we call cool hunting.
Cool hunting is something that companies,
like Nike, for example, always
want to know, well, what is the next trend?
How do I know what is the
next trend? So I follow people who are cool
and I try to see what they
wear, how do they behave.
And by doing that, I'm trying then to imitate
it and put it into my products.
A survey research, on the other hand, is
when I have a questionnaire,
and this is, as I mentioned before, is very
appropriate to descriptive
research because it's really helpful when I
want to know attitudes,
preferences, and buying behavior.
And all the respondents are getting exactly
the same questions, so it's
very easy for me to also analyze the data,
unlike observational research,
where there's a lot of subjective
interpretation based on who is observing
the data.
And finally, experimental research, as we
mentioned before, is the type of
research that fits really well with cause and
effect.
One of the big things that companies
sometimes want to see is what's
gonna happen if they're gonna change their
logo.
Starbucks, for example, changed their logo
through the years.
Gap tried to change their logo a few years
ago and actually changed it
back because it didn't go well.
So changing a logo is cause and effect.
Will that affect how people will perceive the
brand, whether they will have
different attitudes toward the brand and so
forth? So what kind of
research approaches and type of data we
have? So in addition to primary
and secondary, we also have what we call
qualitative and quantitative.
Qualitative research is when I get very deep
type of information, very rich
information, but it's not something I can
really analyze on a statistical
level.
So we mentioned before focus groups or
interviews.
So those will be getting data from a few
consumers, but those
consumers, you spend a lot of time with
them and you speak to them.
And for example, when I do exploratory
research, I want to know why
sales are down.
Having a conversation can be very
insightful.
So for that, qualitative research can be very
good and fit.
The advantages, as I mentioned, is that it
gives me a lot of richness
because I can continue to ask but why?
Why is that cool? Why wearing
an earring instead of a necklace makes
something cool? I can dig deeper.
The problem is that because it's such a few
amount of people, the fact
that, let's say, six people think something is
cool, does that mean that the
rest of the target market thinks something is
cool? The other problem is it
really depends on the moderator.
It depends on the person on how they
interpret the data because we
cannot really use statistical analysis in order
to analyze the data.
So the other type of research can be
quantitative research.
Quantitative research I can use to
supplement to qualitative or I can use
just quantitative.
And this will be when I need additional
information.
Now the tools that quantitative research use
is big data analysis, so that
will be the internal digital sources that we
have.
It will be questionnaires.
It will be any kind of method that will allow
me to collect a large sample
and be able to be consistent across the
sample so everybody will answer
exactly the same scale, the same questions,
and the same method of
answers.
The last topic that I want to discuss is the
sampling, meaning so who is
gonna get those questionnaire? Who is
gonna be on the focus group? So
a sample is basically a segment of the
population that we decide we're
gonna do the marketing research on.
So who is gonna be surveyed? So for
example, if I'm doing something
about being cool, maybe age can be
appropriate.
Maybe lifestyle can be appropriate.
How many people should I survey? Should I
do three or four focus groups
or only one? Should I ask 1,000 people or
500 people? And how should
the people be chosen? How can I choose
which one I'm gonna ask and
which one I'm not gonna ask? Now for the
purpose of this course, this is
sort of enough.
Obviously again, when you do a marketing
research course, you go much
deeper into these questions and also
provide a much more scientific
answers.
Principles of Marketing
Introduction (Module 2)
[Prof. Tamar Avnet, Ph.D]
In this module we're going to discuss five
different topics.
The first one will talk about consumer
behavior.
We will define what consumer behavior is
and why it's important.
We will then talk about, in the second one,
the model of consumer
behavior and what is the right way of
looking at it.
We will then go into segmentation,
targeting, and differentiation and
positioning, which sometimes is referred to
as STP.
Finally, we will finish with the last topic of
business to business markets.
Because most of this course actually talks
about B2C, business to
consumer.
However, it is important to understand how
B2B is different than B2C.
Principles of Marketing
Consumer Behavior (Module 2.1)
[Prof. Tamar Avnet, Ph.D]
What is consumer behavior? Consumer
buyer behavior refers to the
buying behavior of final consumers.
We're basically looking at what we call
individuals as well as households.
That can be a family or a few people who
are living together who buy
goods and services in order to consume for
their own personal usage.
Consumer market refers then to all of the
personal consumption of the
final consumer.
Principles of Marketing
The Court Systems (Module 2.2)
[Prof. Tamar Avnet, Ph.D]
So the next topic we wanna discuss is
basically how can companies
choose which target market to serve.
Or in other words which type of consumers
to serve.
So we learned about consumer behavior
and we understand that some
consumers behave differently than others.
So today we're gonna talk about
segmentation.
So what is segmentation? Segmentation is
when we take the market that
has all the consumers and divide it into
subareas.
For example we have Segment 1 and
Segment 1 shared their needs, let's
say, for a shampoo.
So all of them want to have a shampoo that
is antidandruff.
Segment 2 on the other hand, buys
shampoo for different reasons.
They want their hair to be nice and shiny.
So although both of them are in the need to
buy a hair product, a
shampoo in this case, the needs that come
from using a shampoo are
different.
One segment wants to be antidandruff,
the other segment wants to have
shiny hair.
Now one of the main things we need to
understand is that two different
segments, can never have the same needs.
If they have the same needs, then the way
we segmented the market is
wrong.
So we always need to make sure that all the
people in the segment have
the same needs for the specific product,
and all the people that are not in
the segment have different needs or might
not need the product all
together.
So market segmentation then means that
we divide the market into
distinct groups which will require separate
marketing mixes.
And that is another issue we want to
remember.
For each segment we have to create their
own marketing plan.
Their own four P's, their own strategy.
Target marketing is when I decide to choose
which group should I appeal
to because obviously I cannot appeal to all
the segments in the market.
And then market positioning is when I
create a very clear and distinct
position in the consumer's mind relative to
competition.
For example, Volvo is positioned as being
very high on safety, Geico,
very high on low price.
Now we will discuss these terms later on,
but it's important that we
understand what they mean.
Positioning strategy is when we select then
a specific key theme in order
to communicate to the target market.
And marketing strategy basically is the
consequence that comes from all
of these STP's; segmentation, targeting,
and positioning.
So basically the two questions we want to
answer is the who and the
how.
So we want to understand how will we
decide how the needs change
based on the product that we have, which is
called segmentation.
Then we want to understand out of these
segments, which target market,
which set of consumers would our product
serve.
And that will depend on our SWOT analysis,
situation analysis and
consumer behavior.
Then once we decide on the target market,
we need to understand how
are we different than competition and what
can we position our product to
enhance our strength and reduce our
weakness.
And by doing so we can actually create
value to our target customers.
So then how do we decide how to pick the
target market.
So there are a few criteria that we want to
make sure our target market
has.
And by doing so it probably will guarantee
that this is a good choice.
So the first criteria is profitable.
Obviously we wanna make sure that we can
offer that target market a
product with a price that will bring us profit.
So if we are going with high price because
we have high cost, our target
market should have the financial means to
pay for the cost that we have.
The other thing is we wanna make sure that
this profitability is also
sustainable over time.
Meaning that the chance of another
competitor targeting this audience
with a cheaper price is not as high as if we
didn't target this market.
The other criteria is if this target market is
measurable.
Can I actually do marketing research and
see that this target market is
profitable.
Can I access those people.
So this will be the third one, accessibility.
For example, let's say that I find that they
have a nice niche, this nice
segment in Alaska, but unfortunately my
distribution doesn't go so far, or
my product are not durable and it's difficult
for me to ship them long
distances.
So the fact that I have a target market, or a
segment that want my
product, but I cannot access makes that
target market not beneficial for
my company.
Then we also want to make sure that the
segment is homogenous.
And this is what I discussed about the fact
that the people within the
segment must have similar needs.
So they all need to buy the product for the
same reason.
Because, again, if I have a segment that is
not homogenous and there
are more than a few needs within that
segment for one type of product,
then I have to resegment it again.
And finally, they're mutually exclusive.
Meaning that two segments cannot share
the same needs.
So they're homogenous and they're
mutually exclusive are probably the
two most important criteria when we choose
a target market, and then
accessibility, measurability, and obviously
profitability.
So how do we decide how to segment the
market? Basically you can
segment the market any way you want.
However, these are the typical basis of
segmentation that marketers use,
and we will go one by one to explain what
they are.
So the first one is geographic segmentation.
Geographic segmentation, as you can
understand from the name, is
when the market needs emerge from their
geographical location.
So for example, if you live in cold weather or
live in an urban terrain as
compared to rural terrain.
And the idea is that you divide the market
based on the idea that people
who live let's say, in rural areas will have
the same needs when it comes
to your product as compared to people who
live in urban areas.
For example, take a car.
People who live in an urban area might
want a car that's smaller and
easier to park, where maybe people who
live in rural areas might want a
truck or a bigger car that can go over
terrains that might not be as easy or
as developed as they are in the urban
environment.
Usually, the way we decide if we want to do
geographical segmentation
will depend on that the needs have to come
from a geographical location.
So for example if I'm having air conditions,
then obviously the need will be
effective on what weather I have within that
area.
And the same as we said with the car, what
terrain do I have.
I really don't need the big SUV or the big
truck if I'm only going on plateau
and very smooth roads.
And the other thing is that the general
pattern of consumption might be
affected by what we call social or cultural
environment like maybe political
views or ethnic flavors.
Now here it's not directly related to the
geographical location, but
occasionally it happens that subcultures
are concentrated within a
geographical location.
So for example, let's say, in Florida there's
more concentration of hispanic
population that might maybe like potato
chips that are more spicy as
compared to maybe the East coast.
So we might divide the United States based
on what types of flavors of
potato chips will sell based on the
geographical location even though
obviously it's not because Florida causes
people to like spicy food, but
because of the demographic concentration
of the people who live in that
geographical area.
Demographic segmentation is usually one
of the top ways that marketers
like to segment.
One of the main reasons is because it's the
easiest after geographical
segmentation that marketers can do.
We don't really need the cooperation of the
consumer in order to do
demographic segmentation.
We can look at the consumer and we can
see in general what the gender
is, what the age is, if they're married or not.
We don't really have to ask a lot of
questions.
So it's a very easy segmentation to do and
before the internet, before we
had social media and Google with all the
data that comes with Google,
that was the basic most popular
segmentation that marketers did.
And as you can see it comes from
demographics.
Meaning that the reason, let's say, you
would like one type of vocation
verus another, is because of your age.
Or you would like one type of product
versus another.
For example razor blades would be
because of your gender, and so forth.
So those are needs that emerge because of
your demographic
characteristics and not because other types
of characteristics.
Now psychographic and lifestyle
segmentation is probably, today, the
most used.
And the reason I say, again, today is
because it's probably the most
accurate way of segmenting the market
because as you remember for
motivation, personality, and psychological
factors affects our buyer
behavior, and hence our motivation.
So usually a lot of the needs that we have
for products will emerge from
our lifestyle.
However, in the old days before we had the
internet, it was almost
impossible to pick up on psychographic
characteristics because you
actually had to do marketing research
where you actually had to distribute
surveys and collect consumer insights.
Today, because we have Google,
companies can actually buy data that
shows how people buy and behave online
without those people even
knowing that that information is being taken.
Now it doesn't mean that someone knows,
let's say, that Tamar Avnet
has bought two pants on Gap and then she
went and bought a pair of
boots, but they do know that someone who
has my demographics and my
kind of lifestyle, my kind of hobbies, bought
that and bought that.
So this is what we mean by Google giving
data to companies.
So segmenting by psychographics means
that we divide the market or
the population into groups that the reason
they have similar needs comes
from their psychological characteristics,
their values, and their lifestyle.
So personality, maybe they like the same
things or they like the same
values.
For example, today there are many
companies who have what we call a
social component to the purchase.
Tom's shoes for example offers that for
every pair of shoes that you buy,
they donate another pair of shoes to people
in South America.
So if I'm a person who wants to also donate
to society, I might`want to
buy Tom's shoes, not necessarily because
of the look, but because of
what it symbolizes.
If there's another consumer who buys the
product exactly for the same
reason, that has to do with our personality.
Lifestyle will be in the sense of how people
live their daily life.
It can be a job, it can be consumer
activities, it can be like surfing like the
picture that we see.
People who like to golf, people who like to
watch sports.
So those people will all share, let's say,
maybe the need for a smart TV
that also has ESPN or maybe also shows
satellite programs from other
countries not necessarily the United States.
And then we have segmentation by
behavior.
Segmentation by behavior is the idea that
you segment the market
basically based on the buyer behavior.
So one of them can be if they're loyal or not.
So for example, there's a lot of ways that
companies like to reward
consumers that are loyal and give them
different prices or even different
products as compared to firsttime
consumers.
Airlines are actually very popular or known
in using loyalty and
segmenting by behavior.
You get a lot of different products and a lot
of different service treatments
if you're loyal versus if you're not.
In addition, it will depend on the type of
benefits that you get from the
product.
So those people who are most sensitive to
texture than others, for
example.
Some people will buy clothing because
they're very comfortable or they're
very soft, or they want only organic or
natural material.
So that will also be segmentation by
behavior.
Some will be based on fashion, stylish look,
but again it depends on what
they consider is fashion, so again this will
be by behavior.
The trend of the cool.
Some people are worried about allergies or
about the environment, so
that again would be segmentation by
behavior, and so forth.
And then we have usage situation.
That means when the person will use the
product.
So for example, NyQuil, actually has, and a
lot of other cold medication,
they have daytime and they have nighttime.
So for the nighttime you might want
something that will help you to sleep
and for the daytime you want something
that will not make you groggy
because you need to function.
So that will be segmentation by usage.
Johnson and Johnson will be segmentation
by the situation and by the
usage.
If you need to use it for the baby, you will
buy Johnson and Johnson
shampoo.
Johnson and Johnson a few years ago tried
to actually expand to the
segment of mothers, meaning adults.
They were trying to sell them shampoo and
conditioner and body lotion to
mothers because mothers trust the brand.
However, the brand is so strongly
associated with being used only on
babies, mothers did not want to use the
same product as the babies.
So sometimes the fact that you position
yourself very strongly on a
specific benefit can actually backfire.
So yeah, Johnson and Johnson are number
one in baby products, and
Head and Shoulders are number one in
antidandruff,
but it's very difficult
for both of them to expand outside of those
specific usage patterns.
And then we have benefit segmentation.
And we mentioned it a little bit before when
we were talking about the
cars.
So benefit segmentation would be all the
people that buy cars because of
style.
All the people who buy cars because it's
safe.
All the people who buy cars because of the
fuel economy.
So that means that you buy a product for a
very specific benefit.
And hence you and the rest of the
consumers who like that benefit, will be
part of that segment.
And this is just another good example of
how a company does
segmentation by benefits.
The toothpaste market is very much known
as well as the detergent
market.
So here this is an example of Crest.
So you have different toothpaste all made
by Crest.
One talks about the benefit of cavity
prevention, so if you care about that,
you will buy that toothpaste.
Other talks about whitening.
Another talks about tartar control and so
forth.
And the idea here is to segment the market
based on benefits, and in
case they actually cover all the markets.
So they actually pick all of those as their
target market, offering each and
every consumer market the benefit that they
like the most.
Principles of Marketing
Court Functions and Procedures
(Module 2.3)
[Prof. Tamar Avnet, Ph.D]
So now that we understand what
segmentation is and we also defined
what targeting is, the next topic would be
well what kind of targeting
strategies actually exist in the market.
So this gives us an overview where it starts
from targeting the most
people to targeting the least amount of
people.
So we're gonna go through each and every
strategy starting with the one
that does the most broadly targeting and the
one that does the most
narrow targeting.
So this targeting is called undifferentiated
targeting and sometimes we'll
also call it mass marketing and the reason
we call it mass marketing is
because we basically do not segment the
market.
We offer our product to everyone.
Now this obviously can only happen or be
beneficial when the needs that
my product satisfy are very basic needs that
probably will apply to
everyone, for example buying milk or rice or
salt or meat.
Everybody needs to eat and everybody will
need these basic spices or
these basic products.
And hence, I don't need to segment the
market.
The next one is the differentiated
segmentation or the segmented
marketing.
So this is when I have a few segments and
the company decides to target
more than one when they segment the
market.
So this will be for example the toothpaste
that we saw before so the
toothpaste example was a differentiated
strategy.
Procter & Gamble also does it with the
laundry detergent.
They have Tide that specializes in cleaners.
They have Draft that specializes in babies.
They have Gain that specializes in good
scent.
And the idea is to understand that there's
different needs for the product,
but they also want to satisfy all these needs
and basically become the
market leader by being able to target
different types of segments.
The next type of strategy is what we call
concentrated strategy and
sometimes we'll also call it niche marketing.
Now niche marketing means that I
understand that there's a lot of
segments, but I can only afford to appeal to
one target market.
Now that can be because I don't have a lot
of money because I need to
have a lot of resources to target more than
one target market or it could
be that my strength really appeals to only
one target market.
So the Head & Shoulders examples that I
showed you before or the
Johnson & Johnson is an example of
concentrated marketing where they
are the marketing leader but within a niche,
within a small target market
that there's a lot of other segments that
might not be satisfied with these
products.
And then we have the micromarketing which
basically it's what we call
individual marketing.
Now this type of segmentation and targeting
could not really have
happened before the internet because it
was very difficult to find these
people, but we still have some products like
the one that I have here like
Rolex, like Rolls Royce, that do target very
small amount of people in the
world, but the reason that these small target
markets exist is because
those are products that are very expensive
and hence provide a lot of
profit.
So the company does not need to have a
big volume of consumers in
order to be profitable within that target
market.
However, because it's so unique, the
probability of competition coming in
is very low.
So if we look again at the diagram, we can
see how it starts from basically
all the market and going all the way down to
basically targeting only a few
individuals in the world.
Now one of the reasons that you might
wanna do mass marketing is
because it's much easier and cheaper.
You have one product.
You have one marketing plan.
You use the same copies, the same
message, the same product, the
same distribution for everybody.
However, if you have a competitor that
starts to specialize, so now I'm
offering you a toothpaste that's only
whitening or only cavity fighting,
suddenly consumers will think that those
products bring them more value.
Now obviously if you think about it, I'm sure
that the toothpaste who
whitens your teeth also is against cavity
because that's the whole idea of
having a toothpaste.
But consumers will still prefer to buy a
whitening toothpaste if that's the
benefit that they want over a toothpaste that
promises them everything
which is the reason why a lot of companies
create segmentation even
when maybe sometimes like laundry
detergent and soaps and shampoos
basically appeals and can satisfy
everybody's needs.
So then when we choose a targeting
strategy, what will it depend on? So
as we mentioned, it will depend heavily on
company resources because
targeting more than one target market is
very costly and that's why only
the big companies like Unilever, like Procter
& Gamble, like Quest, like
Colgate can actually do it.
And they also usually started with one target
market and then they chose
another and another.
It's very rare that one company starts with a
few target markets at once.
Another example of mass marketing can be
Amazon.
Amazon is actually targeting everybody so
that's a good example of a
company that does mass marketing.
The other criteria to choose a strategy is the
product availability, meaning
how easy is it to get the product, how
durable is the product because
again, we want the target market to be
accessible.
So if we have more than one target market,
we need to make sure we
can actually reach all these people.
So when Rolex reaches only a few
individuals, they still need to make
sure they have at least one location in every
big city in the world because
that's where their segment is.
And then we also wanna talk about the
product's life cycle which we will
see later on in more details, meaning is this
a new product or a mature
product.
So a mature product will be like laundry
detergent so obviously I want to
open more and more target markets as I get
more mature.
A new product is more risky because we're
not sure how the market will
actually accept the product.
So maybe we wanna start with one target
market and only then increase
it to a few other target markets.
And then obviously I always have to think
about competition, so what is
the competitor doing? Are they doing mass
marketing? Are they doing
targeting? Are they doing niche? Because
that will also determine what I
am gonna do in the future.
Principles of Marketing
Jurisdiction (Module 2.4)
[Prof. Tamar Avnet, Ph.D]
So the next step now that we know how we
segment the market, and now
that we decide, which target to serve, we
want to position our product, in
a way that consumers will understand what
it stands for.
So basically positioning is the place the
product occupies in consumer
minds.
So if I say, Volvo you say safety, I said
Budweiser you say sports.
So the idea is to increase or enhance one or
two attributes of the product,
so when consumers hear the brand name
they will understand what the
brand stands for.
Now doing the buying process, consumers
categorize products and
position them in their mind in order to
compare with competition, in the
evaluation stage.
So that will be stage three, that we learned
about.
How do we do that? So there is actually a
research tool that marketers
use, which is called Perceptual Positioning
Map.
This tool is used usually in exploratory
research and can be used in focus
groups or in interviews.
And the idea is that we ask consumers to
basically place our brand in
compared to the competition, on a few
attributes that we think are
important to us.
So let's look at a and example where the
two attributes will be price and
quality.
So for example, these are just brands, we
don't even know what they
stand for.
We have our brand, which is right here.
And then we have the competition.
We have brand A, B, C, D, and E.
And we have quality, which obviously this
will be high and this will be low.
And then we have price which this will be
low and this will be high,
because basically we want to make sure
that our price is lower than
competition.
So here, based on the perceptual map, we
can see that we are the same
as Brand B when it comes to quality.
But we are actually better on price,
compared to brand B.
So based on this perceptual map, our brand
has a competitive advantage
over brand B.
On on the other hand Brand C, is actually
cheaper than my brand, but it's
also lower quality.
So then the question is, would my target
market be willing to compromise
on quality if it means that they're paying a
lower price.
And the same you can see here.
So this one, the quality is much lower, but
the price is much lower.
And here the price is high and actually the
quality is less than mine so
definitely my brand is better than the D and
E.
So this is basically how companies decide,
where to position themselves
compared to competition, and what kind of
features they want to offer to
the target market in order to gain
competitive advantage.
So choosing a differentiation and a
positioning strategy will be based on a
few criteria.
One, is identifying a set of possible
competitive advantage.
So for example, in our case we talked
quality and we talked price.
So obviously a lower prize would be an
advantage over higher quality, but
also maybe higher quality for a higher price
depending on what is the
value that our target market think is the
best.
We also want to choose the right
competitive advantage.
So is it really worth reducing the price if it
means that we also would
reduce the quality.
And then, we have to select what we call an
overall positioning strategy.
So if I have lower quality, but also lower
price, am I positioning myself
maybe as Walmart, which might not sell you
the most recent electronic
products, but you can get six months old
electronic products that are still
very competitive on the price.
So communicating them, that positioning to
the market is key, because
the market, the consumers need to
understand what is your positioning
compared to competition.
And how are you different than competition?
So identifying a set of
possible competitive advantages to build a
position is very important.
So one way of course to differentiate
yourself is to show that your product
is different.
Now, that is easier said than done, because
a lot of time you cannot
actually offer to consumers something that's
really different when it comes
to the product.
Sometimes you can.
Like Head & Shoulders for example, were
the first shampoo that was able
to treat dandruff.
So that was a product feature.
However, what happens if you can't
differentiate based on product? There
are still other ways to differentiate your
company.
So one will be service.
For example same day delivery or free
returns.
Now one of the things that Amazon did in
the retail world, the disruption
that they did was that although they're an
online company, in many big
cities they offer you same day delivery.
By doing so, they actually took the
advantage that the retail store had
where you come, you buy, and you pick it
up.
And now I can also buy on Amazon cheaper
it's exactly same brand,
same product, and I sill get it the same day.
Then we also have channel differentiation.
So channel differentiation for example will
be in distribution.
So again it can be online versus retailer.
Only here we're not talking price, but we
might be talking availability.
I might go to a Nike Store, that's a retail
store.
They might not have the size of the shoe I
want.
However, when I go online, I will get the
size that I want, if that size exists
in the market.
Because the online retail store covers many
more SKU's than the retails
store.
Another way of differentiation is what we
call through people.
So for example, the service that you get by
the service givers.
So Disney, the parks, are known as the
"happiest place on earth." So the
people who work in Disney, indeed needs to
be very happy all the time.
But they are, so when I think about Six
Flags versus Disney the
competitive advantage of Disney is that sort
of legends.
Sort of fictional world where everything is
great and everything is happy.
That's not what you get when you go to Six
Flags.
The barista, the Starbucks, one of the
reasons originally Starbucks gave
the baristas some equity in the firm was so
the baristas will treat the
customers in a way that they will feel this is
a community coffee place.
This is no longer happening but that is how
Starbucks differentiated
themselves in the beginning in addition to
also offering high quality coffee.
And then finally, we have image
differentiation, which also sometimes
we'll call branding.
And this is one of the mains reason why
companies like to build a brand.
So If I ask you what's the difference
between Nike and Adidas and Puma,
you might not really know.
But you can tell me what they stand for, and
a lot of times you will buy
Nike because of what it stands for.
That you can do it.
And that everybody is an athlete.
Maybe as compared to Adidas, that are
known to be more for athletes.
Maybe soccer, kind of sports.
And the same will be with cars, with BMW
versus Mercedes Benz and so
forth.
So then one of the things you want to ask
yourself, again going back to
the SWOT analysis and going back to the
environmental scanning, what
can your company do better than
competition? And basically, what is your
competitive advantage? So we can do what
we call repositioning.
Repositioning is when the positioning that
they currently have might not
be the best.
Part of it could be because I just made a
mistake when I originally market
the product.
But part of it, which usually is the case, is
because the market changed
and consumer changed and my product or
my positioning no longer fits
the consumers.
So the positioning is basically trying to get a
brand that's not doing so
well, but used to do well and trying to
recreate the differentiation in order
for consumers to understand why this brand
is worth purchasing.
So for example, Old Spice, a few years ago
did repositioning.
Old Spice used to target by demographics.
They used to target relatively old affluent
men.
However, as those men got older, the
market became younger and Old
Spice, started to be a brand that you only
buy for your grandparents or
your grandfather in this case.
So they wanted to reposition it as the young
man product.
Hence, they brought super football sports
figure, and they changed the
whole position that Old Spice is now for
actually young attractive men,
and they were very successful.
Bell Atlantic at the time, was known to have
very bad service, which they
could afford when they were a monopolist.
But then when they went into the cell
companies, phone, they became
Verizon because it's actually sometimes
easier to create anew brand than
to try to reposition an old one.
So in their case they decide to give up the
brand name Bell Atlantic,
which on the perceptual map was not
having any advantage and create a
new brand and just create a new positioning
altogether.
So the challenge then, is to change
perception of a brand that's forged
many, many years through advertising.
Some brands are more successful than
others in doing that.
So finally, I want to show you a map, or a
diagram, that talks about
possible value propositions.
And here, the idea is again, we're looking at
benefits and we're looking at
price.
And the idea is compare to competition
what can you afford? Well the
blue ones are suppose to be what we call, a
winning proposition, so this
is actually, where we want to be.
So if we take the first one, the more for
more, that means that I offer
something that's more expensive but also
has better quality.
So consumers understand that they have to
pay more because they're
actually getting more.
So like BMW, Mercedes Benz, what we call
Luxury products use the
more for more.
Of course, the challenge is to convince
consumers that they are actually
getting more for their price.
The other challenge is that some
consumers might be convinced they will
not have the budget to actually buy your
products.
The next strategy is more for the same.
More for the same means that I'm giving
them, more quality but actually
at a lower price.
So Lexus at the time was an attempt to
have more for the same.
Because they offer the car that was
relatively higher quality than the
regular cars, but yet they charge not as
much as the BMW and the
Mercedes.
So it's a Luxury car, but with a lower price.
Then the next strategy is more for less.
More for Less, is when I have better quality,
with lower prices.
So that will be Target, that will be Trader
Joe, maybe even Amazon in
some cases, especially now these days
when they're actually selling
some of the brand names.
And then we have, the same for less.
So that will be Geico and that will be
Walmart, where you have the same
products, but for lower prize.
So they don't have a better quality, they
offer the same quality for lower
price, and Amazon is also in that market as
well.
And then finally, you have the less quality
for lower prices, which will be
the Motel 6 It will be the Kmart.
So it will be maybe fast food restaurants.
Well you do get not as high as quality but
you don't expect to get high
quality, and on the other hand, you pay
much less than the others.
So what you want to see is that all of these
five strategies are actually
good for the company, but they have to fit
with what the company
perception is, what their positioning is and
what is the actual product that
they can deliver to the consumer.
Principles of Marketing
Businesstobusiness
Marketing (Module 2.5)
[Prof. Tamar Avnet, Ph.D]
So in this session, we're actually diverting a
bit from what we have
learned so far by looking more closely into
B2B or business to business
marketing.
Some of the things that we learned so far
might apply mostly to B2C or
business to consumer.
Hence, it's important to understand how
B2B is different than marketing to
the final or the end consumer.
So when we say B2B marketing what we
mean is those organizations
that buy the products and services in order
to make more products and
services.
So those would be organizations that are
not the final consumer but then
they will sell to either another organization
or to the final consumer.
So, what is the nature of B2B? What is it?
So, B2B most likely is much
larger than the consumer market.
And when we say larger it means by volume
but also by the amount of
money and transactions that go through it.
And of course mainly it's because many
businesses will sell to other
businesses which will then sell to other
businesses and only at the end it
will actually reach the end consumer.
So, how does B2B market demand actually
creates? How is it created?
So obviously, it has to be linked very
strongly to consumer demand.
So let's think about airplanes
manufacturers.
So airplane manufacturers will sell their
planes to an airline, then that
airline, will fly the end consumer.
Now obviously, the more consumers want to
travel the more there is a
demand for aircrafts.
The more there is a demand for aircrafts,
the more this business will
develop aircrafts.
So this is just an example of how the end
consumer demand obviously
will affect the business demand as well.
So, the demand for business product
usually will be relatively price
inelastic.
Now what does that mean? Price inelastic,
and we are going to talk more
about it when we talk about price for the P
in the four Ps, means that
there is one price and there's not a lot of
shopping around.
So for example, Boeing is one of the major
aircraft manufacturers and
they set the price of how much their aircraft
would cost.
And the airline don't have a lot of
opportunities to shop around.
So usually, B2B there's not a lot of suppliers
that can provide the
business the type of services or products
that they need in order to serve
the end consumer which creates the price
inelasticity.
Now, the demand in the business market
tends to, what we call, fluctuate
more than it does in consumer markets.
And that, again, can be because there are
very few players compared to
consumers.
There are many consumers out there, but
there are not many businesses
that offer what they can offer.
So, a lot of times the demand for their
services can be very high or very
low.
It is affected by the consumer market, but at
the end it will be
consequence, the outcome, will be in the
business to business.
So, another factor that we want to
understand is also that businesses are
usually much more informed than the end
consumer.
So if you'll remember we talked about
consumer doing information
search, however a lot of consumers don't do
really a full information
search.
And some of them do rely on heuristics, or
they rely on their friends, or
maybe on online sources.
Businesses usually don't take that chance
because they're doing
transactions that have a lot of money
involved and hence they're usually
very much informed about what is going on,
the prices, the supply, and so
forth.
Which makes them more rational decision
makers than emotional
decision makers.
Now obviously, the B2B is different from the
consumer market in a
number of ways.
So as we mentioned, there's not as many of
them.
So there's fewer business customers as
compared to the end consumer.
Also, the buying power is usually
concentrated in only few consumers, so
in only a few firms and organizations
actually rule the whole market.
Unlike consumers, which even if it's the
affluent consumers there's still
many of them and usually they're not the
one that have most of the
buying power.
They're also different in the sense that
they're a lot of times
geographically concentrated.
Part of it can be that many business to
business have to use resources
that comes from the land, so they will be
concentrated, let's say, where's
there's oil or where's there's water, or where
the weather fits whatever
manufacturing they have to do.
And also they may be what we call vertical
or they can be horizontal.
Vertical means that there are many
businesses between between the end
consumer and the original manufacturer.
But horizontal can also be that there's many
businesses that serve one
end consumer towards the end.
So this is just a nice diagram that shows
that business to business still
needs to do marketing and sales and
transaction just like a regular
organization but they're end consumer is
another business, another
organization, and not an individual person.
So, how is the buying process happening in
businesses and how is it
different than consumers? So, when you
buy or purchase from a business
it's usually a high involvement purchase as
it affects how well the
business will later on service its end
customers.
So, a lot of times what businesses do
instead of doing the service
themselves, they will outsource whatever
needs to be outsourced.
So for example, when Zappos just started
their delivery they actually, in
the beginning, used external outsourcing in
order to ship and deliver their
products.
However by doing so they lost control over
the quality of the shipping and
how the product actually reached the end
consumer which then later on
made them use their own shipping
arrangement which is also what
Amazon did.
Amazon decided not to use an external
business partner in order to do
shipping.
However, UPS and FedEx there main
business source is not individual
people but actually big companies that use
them in order to deliver their
products.
Now, firms usually are under time pressure.
Why? Because if they're stuck with
inventory they need to make sure that
those products are going out because the
more they stay in their storage
the money that it costs them.
So, a lot of times they will either create the
product based on order, like
when you create an aircraft, or they will try
to push their products in order
for another organization to buy it.
And a lot of them work or partner with other
suppliers in order for them to
work together and that way they know that
they have the competitive
advantage because they signed an
agreement to work together.
For example, Kinko and FedEx had a
corporation to work together to
reach the end consumer because they
satisfy the needs of the consumer
of delivering packages, and projects, and so
forth as well as the
photocopying, the use of their computers,
and whatever Kinko is offering.
So, what motivates a business to buy a
product? So, it's a little bit similar
to consumer which will have to do with
personal goals but usually it has to
do with the organizational goals.
So, the organization has objectives and has
goals and they also have a
current state and a desired end state.
So, there are usually three types of tasks
that would motivate an
organization to buy.
A new task buying, a straight rebuy, or a
modified rebuy.
So, a new task buying will be the highest
involved decision.
So that will be when an organization needs
to buy something they've
never bought before.
Let's take a university for example, a
university a few years ago needed
to buy computers for their students, maybe
laptops.
They never bought laptops before, so how
do they decide if they're buying
Macintosh or they're buying a PC.
One the other hand, the straight rebuy
would be that after they already
made the decision.
And today, most universities obviously do
have laptops and desktops and
computer labs for their students, they just
need to rebuy new computers
for the same brand, usually.
Or they will modify, so maybe they bought
20,000 units and now they're
gonna buy 30 or they're gonna buy 10.
So those usually are the three types of
decisions that we will see.
And each one will require a different
approach because it will be
dependent on how new the decision is to
the organization and also how
risky it is to the organization and how
involved the organization is in the
purchase process.
So there's a few things then that will affect
or influence how the decision
making process will happen in a business
as compared to when it
involves the end consumer.
So, one thing would be the number of
people involved in the business
decision.
So, if it's a trivial, routine buy usually there
will be one person.
However, if it's a new decision or a risky
decision there'll probably be
more than a few people who will need to
approve the decision.
So, we have what we call a buying center.
And in the buying center we have different
roles.
Now those roles sometimes will also pop up
in relation to the end
consumer.
However here, we do discuss them within
the B2B.
So obviously, the users will be those that
will use the product.
So if we go back to the computer example
with the students and the
university, the users will be the students
obviously.
However, nobody asks the students what
they want.
The influencers will be those that will decide
on what will be the
specifications.
So for example, what will be the size of the
screen, the memory, maybe
the price, maybe the weight, and whether
it's maybe gonna be a desktop
or a laptop.
The deciders will be those that actually
decide on the purchase.
So maybe in a university it will the provost.
So, she will get or he will get all the
information and they will make the
final decision of which computer to buy.
And then we have the gatekeepers.
The gatekeepers are the one that actually
control how much information
gets to the deciders, because we can't
bombard them with information
that might not be relevant because they're
very busy usually.
And then, finally we have the buyers who
actually purchase the process,
the order.
So, as you can see there are many roles
involved in making a decision in
your organization which usually makes it a
much longer purchase,
however usually the quantity is much higher
and the profit is much higher
so a lot of organizations are willing to wait
and see how the decision is
made.
And they're very patient because they know
that their reward at the end is
very high.
So, what kind of buying patterns do we have
in business to business? So,
business to business obviously will buy
directly from the producer
because that's what makes it a B2B, they
buy from the manufacturer to
the organization that will later on sell it to
the end consumer.
As we talked before the relationships is very
important.
Because these are such long term decisions
it's very important for the
suppliers who waited to try to have a long
term relationship with the
organization, so it will be rewarded and they
will be loyal to them in the
future.
Now, some products on the other hand are
not built very frequently while
others do.
So that really will depend on the type of the
business.
And negotiations can go on for months or
even for years, as I mentioned,
because there's a lot of people that are
involved and there's a lot of
money.
And hence, it's a very high involvement
decision.
So sometimes we have what we call a
reciprocity involved.
Meaning that one business will buy some
products from one business
and then that business will buy some
products from you.
So that can also be what we call a give and
take.
And sometimes businesses will also make
the decision based on the post
service.
So for example, let's say you are a hospital
and you buy MRIs or you buy
CTs from GE.
What kind of service will GE give to you
after, as compared to another
medical company.
So for organizations, the after sale service
is extremely important which
it's also important for a consumer but
sometimes not as much as a big
organization which sometimes it might just
shutdown the organization, if
the plane's not working or the MRI is not
working.
So, customers when it comes to B2B
actually are very much dependent
on the suppliers and also on the guarantee
that they will be able to
continually get the products but as well as
keep the service alive and well.
Now, another topic that's interesting to look
at when we think of B2B is
how you can segment the market.
So obviously, you can use some of the
same bases that we used when
we segmented the B2C.
Now, a lot of segmentation that's done in
the business market will be
based either on the type of customer or
what we call industry
classification.
So for example, when PCs are sold, let's
say by DELL, to a university that
can be a segmentation that's based on
academia.
So the industry will be academia versus
maybe a corporation, because
academia might have different needs for
their computers as compared to
a corporation.
We can also segment by the size of the
customer, so sometimes we have
very large businesses and sometimes we
have very small businesses.
So some companies, let's say even
hospitals, again with the GE example.
So some hospitals are very large and
they're in big cities, and will buy a
few MRIs or a few CTs a year as compared
to small town hospitals that
maybe will buy it once every few years.
So then, the GE will segment the market
based on the volume of the
purchase which then will affect what kind of
marketing strategy they will
offer this client.
And another type of segmentation that you
wanna consider when it
comes to B2B is also the buying situation
the customer is in.
And in general, it's more pragmatic basis for
segmentation.
Meaning, it's less psychographic, it's less
emotional, it's not about
personality, but it's more about the usage
and the benefits, and the
reward or the value that the organization
gets at the end.
Principles of Marketing
Introduction (Module 3)
[Prof. Tamar Avnet, Ph.D]
In this part of the course we're actually
going to learn how to implement
some of the strategies we discussed before.
We are going to talk about the four Ps,
which has to do with product,
pricing, placement, and promotion.
We will start by talking about product.
We'll talk about product and service
management and the difference
between a product and a service, an
actually the similarities.
We will talk about what branding is and
when companies want to brand,
and maybe sometimes not to brand.
We will talk about how a new product is
born and how it is developed.
Then we're going to move to the next P,
which is pricing.
We're going to talk about pricing strategies
and how pricing actually plays
a very important role in the marketing of a
product.
We will follow by distribution, which is place.
We will learn about the different types of
distributions that is available to
marketers.
Then we'll move to promotion and we'll talk
about how important it is to
make sure that you integrate all of your
marketing efforts into one
consistent message.
Finally, we will touch upon the application of
marketing in ecommerce and
how the four Ps actually be applied to the
ecommerce world.
Principles of Marketing
Product and Service Management
(Module 3.1)
[Prof. Tamar Avnet, Ph.D]
So now we're going to learn about the first
P, which is a product.
Before we do though, we need to define or
understand what we mean
when we say product in marketing.
So a product is anything that can be offered
for acquisition, attention, use,
or consumption.
Well, that product actually satisfies a need
or or a want.
So one of the type of products that we have
in addition to what we are
used to as an actual product is also a
service.
So a service is also referred to as a product
when we discuss marketing.
However, a service is different than a
product and we will discuss later on
really and how, but the service is any
activity or the benefit that can be
offered that is intangible, meaning we can't
really hold it, and does not
result in owning anything.
So for example, when I have a bank
account or where I have an
insurance policy, or where I travel or fly, I
don't really own anything and I
have to go through the service in order to
actually experience it.
However, we also distinguish between
product services and what we call
experiences.
Experience is also considered the product in
marketing, and that means
what actually do we benefit from when we
buy a product? So for example,
when you go on a Disney tour, the cruise
ship of Disney, part of what
they're selling is not just to show you and
get you to different places in the
world, but also the experience itself that you
are experiencing when you
go on a Disney cruise as compared to
another type of cruise.
American Girl dolls are also part of the
experience process where the
idea is that it's not just about getting the doll
at the end, but it's also about
the experience of finding it, making sure that
it looks like you, buying the
right clothes, and so forth.
So we need to remember that now on when
we discuss "product," we
actually do refer to either the product, or a
service or an experience,
everything we will talk about in this module
actually applies to all three of
them.
So let's try to discuss first what are the
levels that every product or
service has? So customer value, if you
remember, has to do with the
benefits versus the cost, and it represents
what the buyer is really buying.
Basically, what is the problem that that
product needed to solve?
Remember, the first step of the
decisionmaking
process.
So if we look at this diagram, the first thing
that we want to look at is the
core customer value.
The core customer value is the reason why
I'm actually buying the
product.
So let's say if we go back to our Gucci bag
example.
If I buy a Gucci bag, does the real reason
I'm buying it is because I need
a bag to carry my stuff or is it because I
want it for the social benefit,
where other people will see that I own a
Gucci bag and whatever social
interpretation comes with that ownership.
So this is what we mean when we say core
customer value.
And that is the real reason why people buy
products.
The next layer or the next level is the actual
product.
The actual product will be the product itself,
so that will include the brand
name, the quality, the design, the features,
the packaging, and again, it
does apply to services as well because
services also will have branding
and so forth.
And then the final layer is what we call
augmented product, and
augmented product is those additional
services or benefits that come with
the actual product.
So let's look at an example.
So this example is for a cellphone, so let's
try to think what is the core
benefit, why people actually buy a
cellphone.
So obviously the main reason is so we can
communicate with each other.
The other could be, especially with the new
smartphones is that we can
surf online, we can check social media, we
can check our emails, we can
work.
Another benefit that been developed with
the cellphone is taking pictures,
so we don't need a camera anymore.
We can organize our work life and social
lives by keeping a calendar and
so forth, so this is really the core benefit.
Now the reason it's so important to
understand is that if someone will
come up with another device that actually
does those things, the
cellphone would become obsolete.
So it doesn't have to be a phone.
Maybe we will have some other technology
that will allow us to
communicate.
Next, we will look at the actual product.
So in the cellphone example, the actual
product would be the style of the
phone, how it looks, the design, the brand
name, the manufacturer, the
size of it, how durable it is, can it hold water,
and so forth.
And then finally, the augmented part of it will
be the customer service,
stores availability.
So iPhone, do you go to the Apple Store or
do you go to your carrier, to
Verizon, to AT&T? So those would be the
augmented part of a product,
and each and every product will have those
three layers.
Again, product, service, or experience will
have these three layers and
the market will have to take into
consideration all these three layers when
they market the product.
Now in addition to product service and
experiences, we also have other
ways of categorizing different types of
products.
For example, some products will be durable
and some products will be
nondurable.
The difference, of course, is that one
expires, one says a time limit, and
one does not.
He has longer shelf life.
For example, a TV versus food.
So obviously when we market a durable
versus a nondurable,
we need
to take the time constrain into consideration.
We also have a categorization of whether
this is a consumer product or
an industrial product, like bread versus
wheat.
Remember, we discussed B to B, so B to B
also have their own products,
but those products will be treated
sometimes differently than consumer
products.
Another type of product will be within the
consumer product, so now we're
going between consumer and industrial, and
within consumer, we have
additional layers that the market will need to
pay attention to.
One type of product will be convenience
products.
Those are products that are convenient,
meaning we get them on a daily
basis.
Usually they will be necessities, but not
necessarily.
They will be bought with little time and
effort, meaning that if we
remember the decisionmaking
process, those are the products that will
be low involvement and also, will come form
further recognition straight to
the purchase, and probably we will not go
through all the five stages of
the decisionmaking
process.
The other type is shopping.
A shopping product is an extensive
comparison of the different products,
so those will be the highinvolvement
products, those will be the products
where we are gonna go through all the five
stages of the decisionmaking
process, and we are gonna look at the
evaluation set, and we are gonna
pick one out of many.
And then we have what we call specialty
products.
Specialty products are those where there's
very high loyalty and a strong
brand preference.
If you guys remember, we mentioned, for
example, Rolex or RollsRoyce.
Here, we also have an example of maybe a
doctor that you want.
So those would be products that the
consumer will go into a lot of effort
and a lot of trouble in order for to seek and
purchase that special product.
And then finally, we have a type of product
that's called unsought.
Those are products where consumers
actually prefer not to deal with, not
because they don't need them, but because
maybe they have some
negative association.
So life insurance, for example, is something
that we all need, but many
prefer not to purchase because it reminds
them of the fact that they won't
live forever.
Flu shots is another unsought product.
You know that you need it, but nobody
really wants to get the shot, and
then you get the flu and you say, "Ah, next
year I'm gonna get the shot,"
but when the next year come, you usually
don't.
So those are product where marketers
really need to motivate consumers
to overcome the negative association that's
usually immediate in order to
be able to get the desired end state, which
is usually the positive
consequence of this product.
Now what kind of decisions marketers need
to make when it comes to
product and services.
So there's usually three decisions that we
would need to make, individual
product decisions, product line decisions,
and product mix decisions.
Why do we need to make these decisions?
Because remember, we
talked about STP, segmentation, targeting,
and positioning? So the
product plays a very strong part in how we
position it in the mind of the
consumer in order for it to appeal to the
target market, provide better
value than competition.
So let's see what are the options that we
have.
So this is the first level, individual product
decisions.
Within individual product decisions, there
are five steps in which we need
to take a decision, we need to consider and
decide what we need to do,
so let's go through them one by one.
So the first level or the first stage is the
product attributes.
Basically, what is the benefit that this
product offer? So this will go
straight into the core value of the product,
the first circle that we saw
before, the first level, as well as the second
one, which will be about the
quality of the style and so forth.
So here, we do need to make a decision,
what is the positioning of the
product? The positioning needs to fit,
obviously, with the product
attributes.
However, we also need to verify and make
sure the company can offer
those product attributes, so the positioning
also has to fit with the target
market, yes, but also with the capabilities of
the company.
Once we decided on the product attributes,
the next step is branding,
branding is basically the name.
A brand is a name, that's how we identify
the product.
However, branding's not just that, it also
gives us association with the
product.
And one of the very important things that
comes with branding is what we
call brand equity.
Brand equity is when consumer can
understand what the brand stands
for, how is it differentiated from competition,
and what is the value that it
brings? Usually products with brands will be
more expensive than what
we call generic brands, meaning products
that do not have a name, do
not have a brand name, and the reason is
that in order to build a brand,
the company has to invest a lot of
resources, so this is a decision that the
company needs to make depending on what
is their target market and
how much they believe their target market
will appreciate a brand equity.
Then the next decision is packaging.
Packaging is basically the design and the
production of the package, the
container, or the wrapping of the package.
Now obviously one has to think about
making sure the product is not
damaged, the product is delivered to the
consumer as promised.
However, the packaging is also a way to
grab attention.
It is also a way to promote the product and it
must fit with the positioning.
Different packaging can send different
messages to the consumer.
And finally with packaging also comes
labeling.
Labeling is how to identify the product,
that's where the brand name is
gonna go, that is where the description is
gonna go.
So this is an example of Heinz Ketchup.
How do I know it's ketchup? Because it
says so, tomato ketchup.
How do I know there's tomato in it?
Because it says so, it's tomato.
We also see that the package is red.
A few years ago, Heinz thought that it would
be really funny or cool for
Halloween to create Heinz in different
colors, so they actually created
ketchup that was blue, green, purple.
People actually really did not like that idea
because although it was only a
color, it's not that it wasn't made with
tomatoes, it wasn't that the
ingredients were different.
Consumers did not like the idea of dipping
their french fries in purple
ketchup, so the fact that it's read is very
important because it makes the
consumers understand that it's made from
tomatoes.
And then we have the last step, which is the
product support services.
So what kind of service would the company
give at the end of the
purchase? So the idea is what happens
when you have issues, how are
you gonna support consumers, how are you
gonna be able to get
feedback, and how are you gonna be able
to improve, maybe, on your
existing product? So for example, when we
make ketchup that's purple,
how do we know consumers don't like it
even before it goes into the
market and before we see a reduction in
sales? We want to avoid that
and we want to make sure that we're in
touch with our consumer.
Today, of course, when we have online
opportunities, it's much easier to
keep track on how our customers are happy
with our product.
Then we have two other levels in which we
need to make decisions.
One is product line and their product line
decisions.
One is about the product line, the other one
is about the product mix.
So what is a product line? A product line is
a group of products that are
closely related.
Why are they related? Probably because
they satisfy similar needs.
So they function in a similar manner.
Also, they're sold to the same target market
in a similar way, meaning that
probably we will use the same marketing
plan in order to promote them.
The product mix has a few product lines and
the idea then is well, what is
the product line gonna be composed of? So
we have width of a product
line.
It refers to the number of product lines.
So for example, if I'm Coke, I have the line,
product line of Coke, and I
have Diet Coke, Coke Zero, Cherry Coke,
Vanilla Coke, et cetera, but
Coke also have Sprite, and they also have
Mountain Dew and so forth,
and each of them have products within
those product line.
So the length of a product line is the number
of items within the product
line.
So Coke, and Diet Coke, and Coke Zero, et
cetera, those will be the
length of the product line of Coke.
And then we have depth, and depth are the
number of versions of each
item that you have.
So for example, do we have Cherry Coke
Diet, regular Cherry Coke,
Cherry Coke with a twist of lemon, and so
forth? And then the part that
we really (mumbles) need to take into
consideration is how consistent
everything is.
If the products within the product line are
not really similar, one need to
create a new product line.
Why? Because again, the product line is
supposed to serve the same
target market with very similar marketing
strategy.
So let's look at the quick example.
Procter & Gamble is a big company that has
many product lines, so within
the laundry detergent, they have 11 brands
of laundry detergent.
They have eight brands of hand soap, they
have four brands of dish
washing detergent and toothpaste, and two
brands of diapers and
deodorant.
Now these represent six product lines.
Why? Because this is what Procter &
Gamble decided upon probably
because they're similar in the sense of the
needs they satisfy and the way
that Procter & Gamble will market them.
It's important to remember this is the
company's decision.
There is no right or wrong here.
Now the length of the laundry is 11.
The length of the hand soap product line is
eight, the length of the
dishwashing is four, and the length of the
toothpaste is four.
Then diapers is two and deodorants is two.
And what would be a good example of
depth? Tide, for example, have
scented and unscented, or they have lemon
scent and spring scent, so
those would be good examples of product
depth within the product line of
laundry detergent.
Now if you recall, I did mention that we are
gonna talk about services and
how they are unique as compared to
products.
So services have four important attributes.
The first one is intangibility.
Intangibility has to do with the fact that I
cannot feel, or touch, or see a
service.
So unlike a regular product where I can go
into the store, I can pick the
product up, I can try it, I can feel it, I can
maybe try it on if it's a piece of
clothing.
I cannot with a service, so a service, in a
way, is much riskier than a
product because I would not know if I made
the right choice until I actually
made it.
For example, buying an insurance car.
When I need car insurance, I will only know
if I pick the right insurance
when I'm already in an accident.
By that time, if I made the wrong choice,
that will be very difficult for me to
buy another service.
Hence, one of the things that marketers
need to do in order to overcome
that issue is to provide what we call tangible
factors.
So weirdly enough, one of the reasons we
get PINs in banks is to try to
make the bank more tangible.
Although it sounds a bit funny, but this is
really the reason why we get a
lot of freebies that are tangibles from
services like insurance, law offices,
banks, and so forth.
The next thing that you want to locate is
variability.
Variability means that the service is only as
good as the person who gives
you the service, so the company can say
oh, we provide high quality
service, but when you pick up the phone,
let's say, to speak with
someone in the insurance company, or
when you go on the cruise and
you have the waiters, you have the
entertainers, the quality of the service
really starts and ends with the person who
gives you the service, meaning
that on some occasions, you can have an
amazing experience and in
other locations you might have a horrible
experience.
So one of the things that marketers need to
pay attention to is to make
sure that their employees are trained in a
consistent way and understand
exactly how they need to react in every
single situation.
Now this is easier when you hire high
quality employees that are paid
well, as compared to hiring maybe
uneducated employees that are not
paid as well, and this is one of the issues
that sometimes you will face in
fast food restaurants.
Well, usually they pay the minimum wage
and unfortunately the quality of
service will follow.
Then, the next one is inseparability.
And this is, again, goes to the issue of
variability.
The fact that I got a negative experience
because the person I spoke to
was not consistent with the company's
policy is really irrelevant for the
consumer.
The consumer identify the service giver with
the brand and with the
company.
They do not separate the company from the
person who gave them the
service.
And then finally perishability.
That is, of course, that the service will start
and end in many cases
whether you purchase it or not.
So those, of course, will not apply to life
insurance or to automobile
insurance, but they will apply to vacations.
A cruise will go out in a specific date, a flight
will go out in a specific date
regardless of how many people actually
purchased a product.
This is why when you buy airline tickets, the
price fluctuated so much,
depending on what time you purchased it.
Airlines really prefer you to purchase tickets
way in advance because that
will reassure them that the plane is not
gonna leave half empty.
Then they will raise the price to sort of
penalize you for not buying it in
advance.
However, if you buy it same day, sometimes
you can get amazing deals,
especially with vacations because they
prefer to sell it maybe even at the
cost price than to have the hotel rooms or
airplanes completely empty.
The last topic that I want to discuss in
relation to this specific section is
how does a company know when to add
product lines, when to delete
product lines, basically how to develop new
product lines and invest in
existing ones? So there are two tools that
marketers use.
One is what we call BCG and the other one
is a product/market
expansion grid.
So what is the BCG? The BCG was
invented by Boston Consultant
Group, which is why we call it the BCG, and
basically it looks at two
components.
One is the industry growth rate, so that
means if I'm in the automobile
industry, how much growth has happened
last year within this industry? If
I'm looking at designer clothes, how much
growth has happened within
that industry? The other components I'm
looking at is relative market
share.
Relative to whom? Well, my market share
relative to competition.
So for example, in some market, owning
20% of the market share is
amazing.
In some markets, owning 20% is nothing
because we have bigger players
that own 50% or maybe 70%, so that why it
must be relative.
So we look at the industry growth and we
look at the relative market
share, and we plug our own products within
that diagram.
So we will just make like, product A will be
here, product B will be here,
product C will be here.
That means that product A relatively had a
low market share, however the
growth is very high, meaning we didn't do
so well with this product, but
there's a lot of potential in the market.
If we look here, we do have a high market
share and the market is also
growing, so this will be a good product.
Now as you can see, there are titles to
these squares.
Now this squares, and it's important to note,
are artificial, they are flexible,
and they're created by the company.
The company will decide what is consistent
as low and high, and what is
considered as low and high.
And these grid lines are really an
imaginative grid lines that a company
creates.
So this square, the green one, we will a
question mark.
A question mark is a new product where the
company just started to
investing, so we are not surprised that it's
relatively has low market share
because most of the market has not yet
been aware that the product
exists.
However, it seems that this product will be
wanted and there's a great
opportunity.
Why do we call it a question mark? Because
we don't know where it's
gonna go.
It can actually go down and lose the
opportunity and we will never make
money out of it, or it can be a star and it can
actually be a successful
product.
Hence, this is why it's a question mark.
It is not clear yet where this product is
going.
If we're looking at stars, stars are those
products that are doing very well.
They're growing in the market share as well
as within the target market,
so those will be products that we will want to
continue to invest in,
because those will be the products that will
keep us at the top of the
market.
Then we have what we call cash cows.
Cash cows are those product that are no
longer growing in the sense of
market share, probably because in the
lifecycle they have reached
maturity, meaning anybody in the market
who actually wanted to buy the
product already bought the product, but the
product is doing very well.
Why do we call it cash cow? Because this is
where we get a lot of money
and we don't have to continue to invest a lot
of money.
We can take this money and invest it in
stars and in question mark.
So every company wants to have a few
cash cows in order to finance the
stars and the question mark.
And then finally, we have the dogs.
The dogs are the one that are not
successful.
They're losing market share and there's no
opportunity for them to
succeed.
They are what we call in the decline stage
of the product life cycle.
Now a dog could be a cash cow that just
matured and declined, or it can
be a question mark that didn't go very well.
Usually with dogs, we will want to delete
them and eliminate them from
the market.
So let's see a quick example.
This is a real company.
Not really, but let's assume it is.
So real company will plug in their products.
Now if you can see, we have zero, 15, and
30 right here.
This means that this is the growth within this
specific market, so the top
was the growth, the max growth within this
markets were 30%.
Hence, we decided that 15% will be the
middle.
When we look here, this is the difference
between the larger competitor
and us.
So we have the largest competitor will be 10
times us and then we are the
least one, not necessarily us, will be only
10% and hence, we will put one
in the middle.
But again, this is arbitrary and will depend
on the company and the
situation.
Based on this, we plugged our products.
So if you can see, product A is right there, it
seems like it's doing really
well and it is within the star domain.
Hence, the strategy here will be keep on
investing because this product
seems like it's gonna be a nice success for
us.
Product B, on the other hand, is not clear.
Yes, it does fall within the star domain, but
it's really, really close to a
cash cow, so at this point the company
needs to make a decision.
Does it want to invest more money and
maybe get it back to be a strong
star, or is it willing to let it go down and
becoming a cash cow, meaning
not investing money and actually starting to
take money away from
product B in order, maybe, to invest in
product A or product F? Now
product F is a question mark.
It seems that it's starting to move toward the
star.
So on one hand, one might say we should
invest more money in product
with the hope that it will turn into a star.
Then we have product C and product D.
The difference between product C and
product D is how much they grew
within the industry.
And we can see that product C is actually
doing much better than product
D.
Product D seems like he's on his way out
and probably we should not
invest anymore.
Product C, on the other hand, maybe can
turn into a question mark.
Now here again, the question is why is
product C not doing well? Is it a
mature product that declined, or is it a
question mark that didn't really took
off, and if it didn't take off, then why? If the
reason is that maybe
promotion wasn't done correctly or maybe
the target market wasn't
identified correctly, then we can still save it
and turn it into a question
mark.
If we feel though that we did everything
correctly and it just was not a
success, maybe it's time to divest and take
it away.
And then finally, we have product E.
Product E is within the cash cow domain.
However, it seems that it's getting very
dangerously into the dog domain.
So the question is do we let it die, do we let
it decline, or are we willing to
invest a bit more to keep it as a strong cash
cow? And again, the answer
to that will be well why is product E starting
to move toward the dog? Now
analyzing our products using the BCG is not
the perfect way of doing so.
So there are a few disadvantages to this
type of method.
One is that it's not always clear to identify
an SBU, meaning what do we
mean by product A? Is it a specific product,
is it a product line, is a
variation within a product line? So for some
companies, it's easier to do
the BCG than for others.
The other one is that it is time consuming
and it is expensive, meaning
does the company have enough time to
actually do it and make decisions
when the next quarter is actually coming
around? Sometimes we need to
make budget decisions very quickly.
And finally and probably the main reason
why it's not perfect is that it only
focuses on current businesses, so it does
not take into account at all new
product development.
The next tool that we have to help us with
these decisions is product
market expansion grid.
Now that mainly discuss what kind of
strategies do I have to grow my
business.
And there are actually four types of
strategies that I can have.
Market penetration, product development,
market development, and
diversification.
Now if you can see, we divide this grid into
two.
One, existing products.
The other is new products.
Then we divide it into existing markets and
new markets.
So existing markets and new markets will
refer to target markets existing
markets mean that I will continue to market
to my own target market that's
already out there and buying my products.
New markets means that out of the
segmentation, I will choose a new
segment to target.
Now it does not mean that I will necessarily
neglect my current target
market, but sometimes it does, so that is
something the company needs
to take into consideration.
Then what do we mean by existing products
and new products? Existing
products are the products that I've already
have and I already market.
New products will be products that are new
to me.
They don't necessarily have to be new to
the market in general, they just
will be new to my specific company.
Now if I decide to use my own products with
existing markets, that will be
market penetration.
What does that mean? That means that I
want to increase the usage of
my product within my own target market.
How can one do that? So Gillette, for
example, is very clever in that kind
of strategy.
Gillette's razor blades have lines and those
lines, blue lines usually, are
there in order to tell the person when is it
time to switch the razor blade.
If you make a line that will, the blue color
will fade within a month, then
people will buy or renew razor blades every
month.
If you make a line that will fade after three
months, people will buy it every
three months.
So the idea that there's actually an
indication on the product that tells you
when the razor expires is actually a
marketing strategy to increase the
purchase frequency of razor blades.
The other type of strategy is product
development.
That is when I offer new products to existing
markets, so for example,
Head and Shoulders started with
antidandruff
shampoo and their market
really like their shampoo, the antidandruff
people.
Then they decided to add a conditioner, so
a conditioner for Head and
Shoulders will be a new product offered to
the same target market, so
that will be a good example of product
development.
The advantage of product development is
that yes, the new product is a
risk, but the market already know me and
trust me, and hence, they like
my brand, so the probability of them trying
my new product is very high.
Then we have market development.
Market development is when I have a
product that I'm already
manufacturing, but I'm targeting it now to a
new market.
Gillette was also innovative in this strategy.
In the '80s, they decided to create a razor
that specializes in women.
Before that, Gillette only targeted men.
They never targeted women.
Then they came up with a new razor,
Venus.
This razor was specifically made for women,
so that is called market
development.
They used their brand, they used their
reputation within the razor blade
industry in order to attract new customers.
And then finally, we have diversification.
Diversification is the riskiest strategy a
company can do.
Why? Because it develops new products as
well as appeal to new
markets.
It's very rare to see this kind of strategy
because of this specific risk.
Principles of Marketing
Branding (Module 3.2)
[Prof. Tamar Avnet, Ph.D]
So, one of the things that we want to put
even more emphasize on when
we are learning about the P of the product is
branding.
Because to brand or not to brand is a very
important decision on the
company's part and it's actually a decision
that it needs to make very
early on and not always can change later on
in the company's life.
So, one of the reasons is that a brand is
basically the perception a
consumer will have about the product.
So if I want to create beliefs about the
product and an attitude about the
product, an image and I want to differentiate
it from competition, I
probably must have a brand.
A brand is basically the company's promise
to deliver specific set of
features, benefits and services and
experiences.
And the promise is that every time you buy
that brand you should
experience the same quality, the same
benefits, the same value.
Now, without the brand name, the company
cannot differentiate itself from
competition and the consumer will not be
able to identify the product over
other products that exist in the market.
So, if I don't brand what might happen? I
won't be able to build it up, I
won't be able to promote it.
However, it costs a lot of money to promote
a brand and it costs a lot of
money to create a brand.
Hence, when a company does not have a
lot financial resources that
might be one of the reason they decide not
to brand.
The other reason why a company might not
want to brand is that it cannot
promise consistency.
Maybe the quality of the product is
sometimes high but sometimes low.
And finally, the products are not really easily
differentiated.
So, for example milk is not brand because
nobody can really differentiate
the different types of milk.
You do have of course the name of the farm
that maybe the milk came
from but this is not really a brand, this is just
a name of a product.
Other types of products could be maybe
screwdrivers or screws or nails
that you buy in a handy store.
Those are also products that really does not
have any difference between
other types of screws or other types of nails.
And most of the time you don't even know
who is the manufacturer of
these products.
So, when do we do want a brand? We do
want a brand when the
company wants to differentiate the products.
If you want to identify your product as
unique and different than
competition you must have a brand.
Also you will brand when you want to create
an image.
An image means that the reason people will
buy your product is not
necessarily because of the features or the
attributes but really because of
the psychological value they get from the
product.
So, Nike for example, one might say that
Nike sneakers are not really
different than Adidas sneakers or Puma
sneakers.
However, because each of those
companies have a brand most
consumers will be able to tell you why the
brand is different even though
the sneaker, the shoe itself is probably
performing sort of equal.
And then a brand offers the consumer
protection meaning that when I buy
a brand name I feel that I have a company
that supports me in case
something goes wrong.
This is a classic example is in the drug
industry.
Drugs like Advil, like Tylenol, those are
brand names.
Many pharmaceutical companies offer what
we call generic brands so
they will offer a generic Tylenol or a generic
Advil.
They do not have the name Advil, they do
not have the name Tylenol but
they have exactly the same medical
components within the drug and they
usually will cost at least 30% to 50% less.
However, many consumers prefer to buy
the Advil and the Tylenol
because they feel that they can trust this
company and that indeed the
quality of the ingredients within these
medications will be consistent and
will be of high quality.
So, when we want to brand what are the
different strategies or different
decisions that we need to go through.
So there are four steps one want to think
about when creating a brand.
We will now go one by one.
So, the first is brand positioning.
So brand positioning we need to decide on
three levels.
One is we want to decide about the
attributes.
So, what kind of positioning is the brand?
Are we offering more for more
or are we offering more for the same or
same for more? So, we need to
make sure that the attributes of the product
fit with whatever brand
positioning we have.
Then we need to think, well, what is the
benefit, what is the reason that
the company, that the consumers actually
buy products from my
company.
We need to identify those benefits and
make sure that the brand will carry
that specific benefit.
And then the beliefs and values.
What are the beliefs and values that our
brand will send out to
consumers? Toms shoes for example if you
recall says that every time
you buy shoes from their company they will
donate a pair of shoes in third
world countries.
So, the brand needs to be now about social
wellbeing and about
benefiting others as well as benefiting the
consumer.
The next strategy or the next step is how do
we select the brand name
itself? How are we gonna call our product?
So now that we know what the
product needs to stand for, what are the
attributes, then you might want to
choose a brand name that actually in the
name has some idea about the
positioning of the brand.
For example, the gym that's called Curves
or Neutrogena or Crispy Delite.
All those are brand names that when you
hear the name you sort of
understand what the band is going to be
about.
And also obviously, you want the brand to
be easy to pronounce because
you want it to be easily recognized and
easily remembered.
Which is why many times the brand name
will be short like Tide, like Silk,
like Gain and so forth.
Now a brand name also have to be unique.
You don't want it to sound like something
else.
So like Geico, like Lexus.
Those will be names that are different,
Fandango.
Then you also wanna make sure that yes,
the brand needs to say
something about the product but it also
needs to be extendable.
Meaning what happens if Starbucks no
longer sells only coffee? So, if you
recall we discussed the idea that Starbucks
changed their logo because
the original logo said coffee on the logo.
Once it says coffee, consumers will mostly
associate Starbucks with
coffee.
But then Starbucks wanted to extend.
They wanted to extend to other types of
beverages, hot and cold.
They wanted to extend into food.
And that prevented them from doing so
hence they changed the logo.
However, changing a brand name is much
more difficult.
So when you choose a brand you wanna
choose a name that yes, might
say something about the product but also
can be applied to many other
types of products.
Then the other issue is you want it to be
able to be translated into other
languages.
One example was that there was an
automobile manufacturer that had a
car that was called Nova and they actually
tried to market it in Spain.
Now, nova means that it's not going.
It's not really a clever idea to call a car not
going.
Another example is in Israel there's a
successful shoe manufacturer that's
called Nimrod.
The problem is that in the United States the
word Nimrod might have
some negative connotation so no boy, it's
for kids' shoes, no boy will wear
a shoe that's called Nimrod.
So, those are things one need to take into
consideration.
And then you also wanna make sure that
you can actually register it and
protect it legally.
So you can never choose a brand name
that's actually an English word.
You can't call your brand pizza or shoe
because those are words that
belong to everybody and you cannot
register it as unique.
The next type of decision you want to make
is sponsorship, meaning who
actually owns the brand.
Sometimes the manufacturer owns the
brand like Coke for example and
Nike but sometimes it's actually the retailer,
the private, the store itself
that owns the brand which we call a private
label.
Macy's for example have its own products.
CVS have its own products.
Now, those private labels are usually
cheaper because of the fact that
those retail stores don't have to market that
specific brand, they market it
as part of their main brand which is CVS
and Macy's.
And they usually will create packaging just
like in this example that are
very, very similar to the real brand name
and because they own the store,
they usually will place it right next to the real
brand.
And you then consumers can look at the
two and see whether they really
think it's worth paying 30% or 40% more for
a brand name as compared
to what we call a private label.
Another decision within that of who owns
the brand is licensing.
Many brands, Calvin Klein, Gucci and so
forth, mainly within the designer
business actually allow other companies to
borrow their brand name.
So for example, Gucci name or symbol
might appear on belts but Gucci
actually does not manufacture these belts.
Someone else does and they pay a
licensing fee for Gucci in order to use
their brand name.
Another type of decision is what we call
cobranding.
For example, United Airlines is working with
the Chase Bank on their Visa
card.
So if you use the Visa that Chase promotes
and you buy tickets on United
Airlines you will get royalty points that later
on you can use in United
Airline.
FedEx and Kinko is another example.
Aetna recently has joined CVS and they're
working together in order to
get new consumers.
Of course in both of these decisions the
brand needs to make sure that
the manufacturer who is using the licensing
or the brand that they chose
to work with must fit with the positioning, the
image and the target market
that the original brand wants to send out to
consumers.
And then another decision is brand
development and this goes back to
what we discussed about product lines.
So we want to ask if we want to extend our
brand to other products.
Meaning, are we using existing brand
names to create new forms, new
colors, new sizes, new ingredients and so
forth? For example, when Coke
started they only had Coke but then they
had Diet Coke and then they
had Cherry Coke.
Now, the advantage of such a thing is that
people already know the
brand, they trust the brand.
Hence, when you offer a new product with
the brand name it's more likely
that consumers will be less reluctant to try it.
However, what happens if the new product
doesn't meet expectations?
What happen if consumers don't like it? It
might actually kill the original
brand as well so this is not necessarily an
easy decision to make.
It's also used to introduce new products.
Now, this is especially important when we
have a buyer behavior of
variety seeking.
If you'll recall, variety seeking can happen
when people have low
involvement with the product and are highly
experienced with the product.
So, a beverage industry is a good example
for variety seeking, where
people yes, I like Coke but once in a while
I'll also wanna try Sprite.
So, if I use more products and create the
illusion of variety seeking,
consumers will still buy from my company
but they will buy different types
of flavors.
Another reason to extend the brand is I'll
have more brand coverage at
retailers.
It's very important again especially in low
involvement products that I will
have a big shelf space.
The more brands I can offer, the more shelf
space I will get because the
retailer wants to show that they have a
variety of brands.
And then also it helps me to use excess
capacity.
Meaning that a lot of companies are sort of
stuck with a lot of inventory
but they do not want to reduce the price
because their brand is a high end
brand.
So what they will do, they will actually sell
the same products under a
different type of brand in order to not
cannibalize on their own target
market.
So, this is again just the big pictures of how
the decisions are made and
how one leads to the next.
Now, brand extension as we say helps us to
have an instant recognition
and a faster acceptance and it does save us
the cost of building a new
brand.
Again, it's very important to understand
building a new brand takes a lot
of time and a lot of money and a lot of
resources.
However, the risk as I mentioned before is
that if it's not consistent with
the rest of the brand then it actually might
hurt the original product instead
of helping the new product penetration.
So, this is the strategies that are offered to
us as marketers.
So here on one hand we have the brand
name.
The brand name can be an existing one or a
new one and then the other
decision is about the product category.
It can be an existing one or a new one.
So, line extension that will be the strategy
where I already have a product
category that exist in the market and I'm
actually gonna use the brand
name in order to offer new products.
For example like Coke and Diet Coke and
Cherry Coke.
Then I have a new product category but
with an existing brand name, that
will be brand extension.
For example like Head and Shoulders
offering now a conditioner.
Then I will have an existing product
category but with a new brand name
so that will be like Sprite for the company of
Coca Cola.
And then I will have new product category
with new brand names and
those will be completely new brands to the
company.
Principles of Marketing
New Product Development (Module 3.3)
[Prof. Tamar Avnet, Ph.D]
So now that we learned about the product,
and we learned a little bit
about branding, the next topic would be,
well what is a new product? So a
new product is a product that is new for the
company.
Meaning that the company itself never
offered that product before.
It can also be a product that's new for the
customers.
Meaning that the target market never
actually got these products before.
So new product development refers
basically, to original products.
So those are new products that did not exist
in the market.
Those can be improvement on existing
products, modification on existing
products, and actually new brands
developed from the firm's own
research and development.
So when we talk in this scenario about new
products, we discuss
products that are totally new, and that all the
production of the company
itself.
So then let's look at an example.
How do we define what is a new product?
So the outmost new product
will be what we call, truly innovative.
So when the telephone was created, the
original telephone at the time,
that was a totally, truly, innovative products.
People before could not have
communicated with each other unless they
saw each other face to face.
So the telephone was a product that is
called truly innovative.
There is no other alternative in the market
that actually did that benefit.
Then we have the first cell phone.
The first cell phone is what we call a
replacement.
Because it replaced a truly innovative
product which was the telephone.
But it's still about communicating with
people.
But it offers maybe better quality, better
technology, and also the fact of
anytime, anywhere.
Then we can look at Motorola.
Motorola at the time was imitation of rivals.
So the company actually created the cell
phone that was new for the
company and for maybe its consumers.
But it was not new to the market in the
sense that it was an imitation of a
product that already exist in the market.
Then we can also think of new products in
the sense of new service.
So new delivery methods are considered
also new products.
Online banking for example, like ETrade,
versus traditional banking.
Or online insurance like Geico, versus
traditional insurance companies.
So these are the stages where the new
product actually needs to go
through in order to be developed.
So we will now go over them one by one.
So the first stage is idea generation.
Idea generation is when the company
knows that they need to have new
products, but they're not sure yet what this
product should be.
So if you're a member of the BCG, you'll
remember the question mark.
So the question mark is something that
companies say, We need
something in the question mark box.
We need new products that later on will
become stars.
Because otherwise we will go backwards.
But what are these new products, we're not
sure.
So the source of new product ideas can
come from internal sources as
well as external sources.
The internal sources will be the company's
own formal research and
development.
So a lot of companies have R and D
department.
The R and D department's purpose is to
develop ideas for new products.
The external sources could be outside of
the company.
It can actually be your own customers.
Customers are very resourceful source in
order to get new ideas.
They usually will have very good product
development and modification
ideas but sometimes also ideas for
completely new products.
Competitors is also a source of new
products.
And this will be where we imitate maybe the
competition or offer a similar
thing but better.
Distributors, suppliers, and basically any
other outside sources can be
considered as good external sources.
The purpose of idea generation is to create
a large number of ideas.
Why? Because it's very difficult to find a
good new product.
So we want to start with a lot in order to
minimize it to a few.
So the purpose of the next stage, which is
idea screening, is to reduce
the number of those many ideas into only a
few.
Once we have reduced it to a few, then we
have to try to test the concept.
Meaning, at this stage we're not actually
creating the product but we want
to know how the market might react to it.
So a product concept is basically a detailed
version of the idea that we
can start to talk about in meaningful
consumer terms.
So we will talk about the image.
We will talk about the positioning.
We will talk about maybe how it's gonna
look or feel.
And we want to see if it makes sense to our
consumers.
Then once we decide on that, we need to
think, well how are we actually
gonna market this new product? Again at
this point we actually don't have
a product yet.
Because we want to make sure that we see
value in this product and that
we'll be able to message, and send that
value to our consumers.
So this is the initial marketing strategy that
will help us understand how to
introduce the product to the market.
Then we want to also talk about who will be
the target market? Are we
gonna use the same target market, or are
we gonna go to a new target
market? As we mentioned before, this can
be a different strategy.
We also wanna know what is gonna be
positionings? What are the
expected sales? So we to make a prediction
based on the existing target
market.
We need to talk about market share.
How is it actually gonna be in relation to
competition? And we need to see
what is our profit goals.
What do we expect that question mark to
actually do? Then we need to
talk about other components of marketing
mix like the price that we're
gonna charge, the distribution we're gonna
use, and what budget do we
have to actually develop and market this
product? We then talk about
longterm
sales and longterm
profit goals.
And the actual marketing mix strategy.
The fifth stage is now the business analysis.
So here we're actually looking at what it's
gonna cost us to make the
product, how much sales we expect to
have, and how much profit we're
expecting to have.
And the whole idea is to make sure, that the
profit actually satisfies the
company's objectives.
Then, only then, we actually develop the
product.
So the actual development of the product
only happens at the sixth stage,
which might be not intuitive to many people.
So the product development involves the
creation and testing of one or
more physical versions by the R and D or
the engineering department.
In here, we actually need to put money in,
because obviously it's gonna
be an investment.
This is what we call a prototype.
And once we have the product, the
prototype, we can do test marketing.
Test marketing is marketing research.
So this is where we do explorative research.
We're trying to see if the market is actually
gonna like the new product.
So here we're gonna maybe do focus
groups.
Or maybe we're gonna put it in a few retail
stores, to see how the market
is going to respond to the new product.
So when though, should I test my product?
So I should test my products,
especially when my new product requires
large investment of money.
Because we do not want to have a failed
new product.
However if the product does not require a
lot of money spent, sometimes
it's cheaper and easier to actually produce
the product, send it to the
market, and if it fails, it fails.
Because marketing research is not free
either.
The other reason we wanna do test
marketing is when we are uncertain
about either the product or the way we want
to position it.
And we need the input of consumers.
We want consumer's insight to basically tell
us, what they think is the best
positioning of the product.
Now when should they not do test
marketing? Maybe if it's a simple line
extension.
If I create Coke Zero instead of Diet Coke, I
might not need to actually do
a test marketing.
If I'm copying or imitating a competitor's
product, I don't have to really test
market the product itself.
I need to just test the marketing strategy.
When creating the product as we
mentioned, it's not that expensive and
actually might be cheaper than actually
doing marketing research.
And then when management feel very
confident that they have a winner,
that they have a good product, and then
again maybe we're not as
hesitant to put it in the market.
And finally we have commercialization.
This is when we actually introduce the new
product to the market.
And here we need to make the decision,
when are we gonna launch the
new product? Sometimes a lot of
companies will like to do it when there's
peak shopping like maybe Christmas, or
other types of holidays.
We want to know where to launch.
Are we going to do it in big cities, in small
cities, where there's a lot of
target market concentrated, or maybe only a
few? And then we also want
to know how the market strategy is gonna
roll out.
So what kind of promotion are we gonna do,
what's gonna come first?
Which retailers or distributors are gonna
have the product first? And so
on.
Now one of the things that we want to talk
about is how product lifecycle
and new products actually come together.
So a product lifecycle
is the course that a product's sales and
profits take
over its lifetime.
So we have sales and profits right here.
And then we have time.
Now most products will follow this lifecycle.
We will start when there's no time, meaning
the product is just introduced
to the market.
This will be the product development stage.
We do not expect to actually have any sales
and definitely no profits.
Then we go to the introduction stage.
The introduction stage is when the product
is now out in the market and
the marketing mix is already in action.
We do expect to see some increase in sales
to show us that the
marketing strategy is working.
However we still have no profit because we
invest a lot of money in the
marketing strategy.
When we go into the growth stage, we
expect a high growth in sales.
We also start to hope to see positive profits.
And then we reach what we call the
maturity.
The maturity stage could be a flat line.
And can actually last for many, many years.
That is when I don't have to spend a lot of
money in marketing mix but my
sales are relatively consistent.
This will be a cash card example, and this
will be a style example, and
this will be a question mark example.
And then we have the decline.
The decline is when basically the product
starts to phase out.
It could be because new competitors come
in, because new technology is
coming in, or because we did not have a lot
of marketing strategy efforts
invested in this product and people start to
forget that the product exist.
Here there is starting to be also a decline in
profit.
Now what kind of strategies can a marketer
do, when they have the
product lifecycle
and introducing a new product? So we want
to modify
our marketing strategy, depending on how
we want to penetrate the
market.
So if we want to penetrate new users, new
target market, let's say men
who use disposable razor.
That was a new market for those disposable
razors.
So those will be new users.
That will be an introduction for that specific
target market even though the
product itself might be in a mature stage in
another target market.
What if you want to increase usage of
existing users? So we want them to
replace the razor blades every few weeks.
So then we want to introduce that idea that
there's an expiration date on
razors.
And we wanna see how that takes off.
And then we also have a completely new
market segment like when
Gillette was appealing for women.
So all of those can be new product lifecycle
for these products.
Just because they're new to the users, that
they're actually using them,
even though the product itself can be in
different stages of lifecycle
depending which target market it serves.
So marketing mix then needs to be modified
depending on what the
strategy is.
So later on we're gonna talk about price,
promotion, and distribution.
And we will see how those decisions will be
changed depending on where
the product is in its lifecycle.
Before we end this session, I want to
discuss a unique types of lifecycle.
One is what we call a special product.
A special product is when a product is
bought because of its style.
So that can be like art for example.
Or a specific designer.
Those usually will have a very strong
increase in growth and maybe
almost no introduction.
And then they will fluctuate with maturity,
depending on what the trend is
or what the style is.
Then we have fashion.
Fashion is also a special lifecycle.
And it's usually accepted very fast and then
dies very quickly.
So again we expect it to be very rapid and
actually almost have no
introduction stage.
And finally we have the fads.
The fads are temporary periods of unusually
high sales driven by
consumer enthusiasm.
So those will be things that, oh everybody is
now doing the Pokemon.
Everybody is collecting cards.
Everybody is doing that and then within a
few months or a year, it actually
dies and never comes back again.
Principles of Marketing
Price Strategies and Customer Value
(Module 3.4)
[Prof. Tamar Avnet, Ph.D]
The next thing we are gonna discuss now is
pricing.
Pricing is the vehicle that marketers use in
order to communicate value to
consumers.
So, it's very important to understand that
pricing is not just a financial
factor, but it's actually one of the most
important marketing strategy tools
that marketers have in their disposal.
So, price is defined as the amount of money
that is charged for a product
or a service or an experience, or the sum of
values exchanged between
the company and the consumer.
Now, one of the question is, well, what is
the lowest price a company can
charge and what is the highest price? So,
the lowest price will always be
the product costs.
Obviously, if the company cannot make
money, there is no point in
marketing the product.
However, in many occasions, the company
can charge much higher
prices than the cost price, and that will be
because of the value that
consumers put on a product.
So, luxury products, for example, designer
products, those will be a good
example where actually manufacturing the
product does not reflect the
price that the company charges.
Hence, there are two types of pricing we
can think of.
One is costbased
pricing and the other one is valuebased
pricing.
Now, costbased
pricing is based on the product.
How much does it cost to produce the
product? And there are many ways
where we can actually lower the cost based
on manufacturing.
This really has nothing to do with marketing.
It starts from the product, then, you know
how much it cost to create it,
and then you set the price.
Once you set the price, you wanna make
sure that the target market will
see the value and will agree to pay that
price.
Valuebased
pricing, on the other hand, does not start
with the product.
It starts with the customers.
So, you're thinking, when you develop your
new product, how much value
customers will see in this product.
Once you know the value, you can
determine the price.
Once you've determined the price, then you
wanna see, well, how much
is it actually gonna cost me to produce this
product? And only then you
produce the product.
This again explains why in the new product
development, only in the
seventh stage we're even thinking of
developing the product because we
always start from the consumer.
We wanna know the value.
Based on that value, we know the pricing.
And only then we wanna make sure that it's
actually worth developing the
product.
So, what kind of costs one might have?
Although they're not marketing
decisions, they are very important for a
marketer to understand, and
there's a few types of cost.
There is fixed cost and there's variable cost.
Fixed cost are those that do not vary with
the amount of unit you produce.
So, that can be like the rent you pay for
offices or for factory.
That can be the amount you pay for buying
the equipment to produce the
products.
That can be the marketing staff, the
accounting staff, and so forth.
However, variable cost do vary with how
many units you produce.
So, that can be, for example, the electricity
you need to pay depending on
how long the factory is open or maybe sales
commission.
So, how much do you pay for the sales
force depending on how many
units they sold.
Usually, the more products you sell, the
variable cost will be lower.
There is always advantage for high volume
of production.
Now, total cost, which is the cost that we
are interested in, will be the sum
of the fixed cost, as well as the variable
cost.
Now, because the variable cost vary, it will
not be a straight line.
So here, where we have Costs on one side
and Quantity on the other, we
see that the fixed cost is a straight line.
It is not dependent on how many units we
actually produce.
However, variable costs will go higher if we
produce more and will go
lower, if we will produce less.
The total cost then will be taking this plus
this together.
And hence, total costs, obviously, will be
higher than both, and also, will
get the same slope as variable costs.
Now, how do we know what price to
charge? So, we can do what we call
a breakeven
analysis.
A breakeven
analysis looks at the quantity that we sell,
as well as the
revenue and cost.
Breakeven
analysis will tell me how many units I have
to sell before I
start to make profit.
Meaning, before my total cost actually get,
is becoming lower than my
total revenue because this is where I wanna
be.
I wanna make profit.
So, if my marketing strategy and my
projection of sales tells me there's a
very good chance to make more units, than
this number, then it is worth
for me to manufacture the product.
However, if I think that even with my
marketing strategy, I will not be able
to sell so many units, which will be this
number, then it is not worth for me
to actually sell the product.
Now, some factors that are affecting the
price decision will be what we
call the type of demand.
There are two type of demands, inelastic
and elastic demand.
Inelastic demand basically means that the
demand will not change if we
only make small changes in prices.
This will work usually within the luxury
goods industry.
It can also work, let's say, in the drug
industry, medical drugs, where you
must get your antibiotics, you must get your
medication.
And even though the pharmacy will raise
the price, you must get that
drug.
But also in designer products, if Gucci, if
Rolex increase the price,
usually, the same people will still buy the
product.
It will be affected by how much income the
consumers have, but also,
how much desirability there is for the
product.
On the other hand, elastic demand, as you
can see, is relatively flat.
That means that any change in price will
carry a big change in quantity.
Those will be the products where giving
discounts and price reduction
makes a lot of sense.
However, it's almost very difficult to actually
increase the price because if
you increase the price, let's say from P1 to
P2, when you have P1, you
will sell Q1.
But when you have P2, you will sell Q2.
So, see how a small reduction or increase in
price have an effect on the
quantity of the product.
Now, there are different types of markets.
The are different types of competition.
When we have pure competition, that
means that there's many, many
players in the market.
Those players are there and have almost no
influence on the price.
This is compared to what we call pure
monopoly.
So, let's look at some of these competitors.
Competition is when we have directly similar
products.
We have, for example, different brands of
running shoes.
We have a lot of substitutes.
We also have products that are unrelated
that's actually seeking the same
amount of money.
For example, should I buy a new car or
should I take a long vacation?
Those all compete for the same amount of
money that the consumers
have.
So, what kind of pricing strategies then
should I enter? One type of
pricing would be skimming.
Skimming is when I enter at a very high
price in order to maximize my
profit.
This will happen when I have something
that's really very unique.
Also, it might happen when my production
costs are very high and I can't
afford not to charge a high price.
Now, it's difficult from competitors to enter
and undercut when I have
skimming pricing.
For example, when iPhone just started, it
did have a high cost because of
technological development.
And hence, using a skimming pricing,
charging very high prices, made a
lot of sense.
The other type of price is penetration, which
is the opposite of skimming.
Penetration is when you enter at a low
price.
And this is when you want to introduce it to
the market and reduce the
risk of actually buying the product.
Now, if you have something really unique
and desirable, you know that
people will pay the high prices because
there's a lot of value.
However, when you have a product that
you're not sure is actually gonna
be desirable, then you will use penetration.
Also, the fact that you have low price, will
deter competitors because
there's not a lot of profit to be made, and
maybe there's not room in the
market for more than one or two players.
Now, those decision really will depend on
who the target market is, how
risky the product is, and how much you
want to increase the volume in
the introduction stage as compared to
keeping a specific brand image.
So, what kind then of pricing strategies do
we have? So, those are five
different strategies that has to do with the
product mix that companies can
use.
Product line pricing is when I take into
account the cost of the differences
between the products that I have in the line.
So, for example, I might be, let's say, TUMI,
who is selling luggage.
So, they can have their top suitcase with the
four wheels that will be the
most expensive product, but you can also
buy a TUMI bag that might be a
small bag to carry your small wallet when
you're flying on a plane.
So, the pricing will start very high but can
actually go relatively low.
In other words, if you're interested in a
specific brand, you might be able
to buy something of that brand, even though
it's a wallet as compared to a
full bag.
Then we have optionalproduct
pricing.
Optionalproduct
pricing takes into account optional or
accessory
products, along with the main product.
This is usually done in the automobile
industry, where you have a price
for a car, but then they ask you what kind of,
do you want leather in the
car? Do you want a specific wheeler? Do
you want a specific type of
tires? So, all of that will be optionalproduct.
You do not have to buy them, so the
baseline is relatively low, but then
when you add up, it actually becomes quite
expensive.
Then we have captiveproduct
pricing.
This is products that you must use and buy
along with your original
product.
So, a printer is a good example.
Many years, printers, you could also only
use with their specific ink.
Meaning that the printer itself might not be
that expensive, but the
cartridge, the ink that you have to buy, is
relatively expensive.
So, those will be, and before the digital
camera, you buy the camera, but
then you have to continue to buy the film.
So, that will be a captiveproduct
pricing.
Then we have twopart
pricing.
This involves what we call a fixed fee and
then variable usage fee.
So, you're like member, but then, when you
buy something, like Costco,
so, you do pay the fixed price for
membership, but then every time you go
to Costco, obviously, you pay for the
grocery.
So, that will be the fixed fee as compared to
variable usage fee.
And then you have byproduct
pricing.
That refers to products with little or no value
that are produced as a
byproduct of another product.
So, one of the classic ones is that at the
time, 3M produced a very strong
glue and had a byproduct that was a very
weak glue, and that's how postits
were actually created.
So, they used the weak glue for postits
and created the new product as a
byproduct.
Now, when the strong glue was created, the
sales projection and profit
only came from this new product.
So actually, any amount of money they
made above that, because of the
weak glue, because used in Postit,
was a pure profit for the company.
And then we have product bundle pricing,
where we combine several
products to reduce price.
So, many times when you go to buy
something, they'll say, "Oh, if you
buy two, you get the second one 50% off."
So, that will be a good
example of product bundle.
Principles of Marketing
Distribution Channels and Logistics
(Module 3.5)
[Prof. Tamar Avnet, Ph.D]
The third P that we're going to talk about in
this session is place.
Place actually refers to distribution
channels.
Supply chain and logistics, what are we
talking about? This is the
sequence of firms that perform activities that
are required to basically
create and deliver a good or a service from
the moment it's created till the
usage for the end consumer.
This gives us a nice illustration of how it
works.
We have the suppliers on one hand that
actually supply the raw materials
and parts.
Then we have the producer.
The producer actually produces the product.
Then we have the consumers.
The distribution channels are actually here.
This is the flow between the producer and
the consumer.
This is called logistic management and this
is called supply chain
management, between the supplier network
and the marketing channel.
What do distribution channels? They
determine where the products will
be available.
When a consumer wants to buy a product,
when they actually made the
decision, "I want to purchase brand A,"
where will they be able to get
brand A? Distribution channel decision will
help us understand where.
Also, what locations will be appropriate? We
don't necessarily have to sell
our product everywhere.
We can decide on specific locations.
Then, how do we make sure that the
product makes it safely and on time
to the consumer? All of those are questions
that need to be asked when
you determine what kind of distribution
channels you will use.
Let's first discuss some definitions.
Intermediary is when I'm talking about a
business firm that renders
services related directly to the sale and/or to
the purchase of a product.
It flows from the producer to the consumer.
Sometimes we will also call them
wholesalers or retailers.
Distribution channel is consisted of the set
of people and firms that are
involved in transferring the title to the
product as the product moves from
the producer to the ultimate consumer or
business user.
Now why is it so important to have a
marketing channel? Let's assume
that we didn't have an intermediate, we
didn't have distribution, and all
manufacturers would send their products
directly to consumers.
Do you see how many connections have to
be made in order for all the
manufacturers to reach all the consumers?
However, if I have one
distributor, all the manufacturers have to do
is to be in touch with this
distributor.
In order for consumers to get the product,
all they need to do is be in
touch what this distributor.
Hence, it's much more efficient to use a
distribution channel than to
ignore it and try to sell directly from the
producer.
What is retailing then? Retailing involves the
sale of products and
services to the end consumer for personal,
nonbusiness
usage.
A retailer basically serve as the link
between the producer and the
consumer.
They perform essential services for both
parties.
The way to know if an entity is a retailer is to
ask: who buys the product
from that entity? If it's the end consumer,
then this is a retailer.
In order to choose a retailer, the company
must consider three aspects.
One is where does this retailer located?
Because we want to make sure
that that it fits with our target market.
We want to make sure that there's parking,
there's a way to actually reach
that distributor, that retailer.
And we want to make sure that it doesn't
cost either money or time in
order for the consumer to reach that retailer
and get our product.
The other aspect we want to consider is the
design.
How does the retail stores look? It has to fit
with our image.
It has to fit with our branding.
For example, if I sell something at Costco,
the design is not that
necessarily pretty because the idea is that
you get products cheaper and
it does look a little bit like a warehouse.
However, if I charge high prices for my
product like Whole Foods, then
the market, the supermarket, needs to look
as if it sells high end products.
It needs to look organized and colorful and
appealing.
Then the last aspect is the layout.
You want to know how are my products
going to be displayed in the store.
You want to have good relationship with the
retailer as well as be able to
pay the price that it would charge for your
location.
You want to know where will it be displayed.
Will there be special displayed, what the
location will be on the shelf.
Would it be easy to actually reach for that
product? Once we make this
decision, the next decision is how many
channel levels are we going to
have.
First let's look at the customer marketing
channel.
This is the end consumer.
There's actually three options to have a
channel level, and you can use, a
company can use, all three or decide to use
a combination, or just one.
The first one is when a producer directly
send their product to a
consumer.
That can be a designer store.
Nike, for example, have what we call a
flagship store in New York City.
Consumers can actually go directly to Nike
to purchase their product.
Coke, on the other hand, does not have that
option.
I cannot go to a Coke store in order to buy
Coke.
Then Nike, on the other hand, also use
retailers in order to sell their
products.
For example, Nike will sell their products to
Macy's, and I, consumer, can
go to Macy's in order to buy Nike, obviously
among other competitors.
Then you can also have a producer that use
a wholesaler.
A wholesaler then use a retailer, and then
you get the end consumer.
This will be when the markets are more
complicated either because
they're small volume markets or they might
be international markets.
Now very similar format can also be in B2B,
in business marketing
channels.
The only thing that changes is obviously the
end consumer is an
organization and not a customer, and
instead of calling it a retailer, you
call it a business distributor.
Instead of calling it a wholesaler, it's the
manufacturer representative of
that sales branch.
The format and the structure is the same.
Now sometimes we have, as we discussed
before, a producer that will
have a multichannel distribution.
The Nike example is someone that can
have a multichannel distributor.
In that sense, maybe we can say B2B can
also be athletic teams.
Here we just want to show you how one
producer can actually have all
four even though usually a company will
have only one or two of those
combinations.
What kind of decision strategies a company
needs to make? There are a
few decisions that a company needs to
make in order to pinpoint what
kind of channel they want to use.
Let's see what they are.
The first one is what is the role of
distribution, meaning do I use the
distribution only as a tool to move my
product forward to the consumer, or
does the distribution actually play a
marketing strategy role? A little bit like
pricing.
Both pricing and distribution can be just as
function to bring the product
out, but they can also serve as an important
marketing tool.
What will it be based on? It will be based on
the marketing objectives of
the firm.
Do they use a brand? What kind of image
they want to send? What kind
of differentiation? It will also depend on who
is the target market, what
kind of segments they want to reach, how
unique, how available they
want to be.
Then what kind of positioning the brand
have.
Once they know that, they can understand
what role the distribution will
play in the marketing mix.
The second decision, before that, the
consideration they want to take into
account are the type of market, the
geographic concentration.
Sometimes target markets are very easy to
reach, and hence putting it in
one or two retail store will be suffice.
Sometimes they're all over the place, and
then you want to make sure
that you can actually reach your target
market.
It also depends how much volume you think
your target market will buy at
one time.
From a product consideration, you want to
make sure that it's perishable
or not.
Do you have to have special ways in
actually storing the product? You
want to know are there any technical issues
that need to be addressed or
might be damaged depending on who is the
channel that you choose.
Maybe there need to be experts to show
how to use the product or how to
sell the product.
Then we also want to consider what we call
the intermediaries.
Who are they going to be? What services
will they offer, are there
available, and what kind of attitude they
have? If you recall, we said that
the service is only as good as their
employees.
If I have a high end product, one that
charges a high price, I need to
make sure that the retailer service also
match with the high end service.
That means that the retailer, like Saks Fifth
Avenue maybe, like
Bloomingdale's, has to match the type of
product that I want to sell.
We also want to think about what we call
control of the channel, channel
control.
Channel control is important in the sense of
can you decide for the retailer
where they're going to place your products.
How strongly are they going to push the
products? Big brands, like Coke
for example, like Nike, they usually have
channel control.
A retailer does not want Coke and Nike to
get out of their stores.
They understand it's a source of attraction
from consumers.
However, small brands have no channel
control, and hence sometimes
might want to choose retailers that are not
so big because of the fact that
they can provide more value for these
distribution channels.
Then we want to identify what can be an
alternative.
There's three types of distribution.
One is intensive, one is exclusive, and one
is selective.
Now if you recall, we talked about the
different types of products,
convenience, shopping, and special.
They sort of match with this type of
distribution.
A convenience product, most likely, will
require intensive distribution.
That means you can get it everywhere or
anywhere.
That will be a low involvement product.
The reason is that there's almost no brand
loyalty in intensive distribution,
meaning that if my brand is not at the right
time and the right place, the
consumer very easily will switch to
competition.
However, if my product is a shopping
product, then I can use exclusive
distribution.
This is a distribution where I know that there
could be high involvement
and hence brand loyalty.
I know that the consumer will put some
effort in actually searching for my
product.
It also fits very well with luxury and prestige
image.
Finally, I have selective distribution.
Selective distribution is about specialty
product.
This is when people are highly involved.
Rolex, for example, have only one store in
New York City that sells the
watch.
Why? Because they know that people who
are interested will find the time
and the effort to go and visit that store.
What is intensive distribution? This is when
a producer sells the product
through every outlet in the market, and the
consumer might find the
product.
You really want to make sure that you cover
all the retailers that are
available.
Also, usually, when we do intensive
distribution, most of the advertising
and promotion burden is on us, on the
producer.
Coke, for example, which use intensive
distribution, is the one that
markets the brand.
They're the one who are doing the
promotion and they are the one that
are doing the commercials.
By doing so, they know that it will attract
people inside the different
supermarkets, CVS drugstores, and so
forth.
In selective distribution, then, a supplier
sells its products through multiple
but not all possible retailers.
Hence, you want to make sure that the
consumer will want to search for
your product.
This is used by manufacturers that want to
eliminate what we call
marginal intermediaries.
They want to make sure that their product is
sold only by big retailers who
can actually promote their brand and
position it at the right place.
Then exclusive distribution is when a
suppliers agrees to sell its product
only to a single wholesaler, intermediary,
and/or retailer in a given market.
As we mentioned, this is only done when we
have specialty groups.
From a producer's viewpoints, exclusive
distribution is good because it
provides control over the last intermediary
level before the final customer.
Why? Because that retailers know that if the
company is not happy, they
can very easily make another exclusive
agreement with another retailer.
The intermediary provides more aggressive
support and more promotion.
The producer becomes more dependent
upon the intermediary.
From the intermediary viewpoint, it is worth
for them to do exclusive
distribution.
Why? Because they're the sole benefactor
of that area of the marketing
activity, so they know that if someone wants
that specific brand, they are
the only place where they can get it.
The intermediary may become too
dependent, though, upon the
producer, meaning that maybe most of the
profit comes from one or two
specific brands.
If that brand suffers, the retail store might
suffer as well.
Principles of Marketing
Integrated Market Communications
(Module 3.6)
[Prof. Tamar Avnet, Ph.D]
The last P that we are going to discuss in
relation to the four P's, is
promotion.
But what actually promotion entails? So
there are many things that falls
under the P of promotion; advertising,
product placement, sales
promotion, direct marketing, public
relationships, personal selling, and
even trade shows.
In this session, we will go over some of
them in more details than others.
So advertising is any paid form of
nonpersonal
presentation and
promotion of ideas, goods, or services.
So it can fall under a broadcast.
It can be print, like in newspapers.
It can be online, like digital.
It can be outdoor, like on buses or on
billboards.
It can be displays within a store and it can
be live demonstrations.
Sales promotion is the shortterm
incentive to encourage the purchase or
sale of a product.
So sales promotion is when I want the
consumer to make a direct
purchase.
It usually will come at the end of a
campaign.
Examples of sales promotion can be
discounts, it can be coupons, it can
be displays, and it can be demonstrations.
All of those, their purpose and objective, is
to make a purchase.
Public relations, on the other hand, involves
building good relations
between the company and the public, the
target market.
And the idea then is that we don't expect a
direct purchase because of a
public relation.
We do expect to build a brand image, a
brand positioning, to help
differentiate us from our competition.
Examples of a public relation are press
releases, sponsorships, for
example, when there's a sports event,
special events that are done by the
brand, and also web pages online can be
good PR.
Personal selling is when the personal
representative of a firm's sales
force comes to the client to actually pitch a
product.
This more likely will happen in a B2B than in
a B2C.
So in this case, the personal selling can
create a sales presentation or
they can have a booth in a trade show or
they can have incentive
programs that will encourage the
organization to work with this specific
company and not with another.
Direct marketing is when we're making a
direct connection with the
targeted individual consumer to obtain an
immediate response, which is a
purchase, as well as cultivate lasting
customer relationships.
One of the good examples of direct
marketing can be when a company
sends you a catalog of the products.
In today's world with the internet, that will be
the emails, promotions, and
suggestions about new events and new
products that the company sells
us.
One of the major things, when we talk about
advertising, is to understand
the communication process.
The communication process starts with the
sender.
The sender of the communication in
marketing will be the company.
The receiver of that communication will be
the end consumer.
Now there are a few stages between the
message that they send and
receiving the message.
The first one is encoding.
The reason why the communication needs
to be encoded is because a
company cannot just tell you, "Please buy
my product because it is the
best." No consumer will buy a product
based on that statement.
So the company has to create a nice
commercial and an ad that shows
why there is a problem, why the consumer
should be motivated to buy the
product, and sometimes, why is their
product better than competition.
They actually encode, then, the message of
please buy my product in that
kind of scenario.
Now, in order for the consumer to
understand that encoding, they should
be able to decode the message.
So one of the big challenges in the
communication process is to make
sure that the target market actually
understands what was the message
you were trying to send.
So being creative in your commercials and
ads is important, because it
grabs attention.
However, it can also be a downfall if it's too
creative and consumers don't
really understand what you're trying to tell
them.
Another big challenge is the media.
How do we actually send the message out?
We can use, as you saw,
television, we can use a billboard, we can
use a newspaper, we can use
the internet.
How do we know which media will expose
our message to the consumer?
If you remember, when we talked about the
perception process, exposure
to the stimuli is one of the most important
things when you want them to
understand and interpret a message.
So we need to understand the media habits
of our target market.
We need to understand where does our
target market spend most of its
time.
Is it online? Is it in social media platforms?
Is it reading the newspaper? Is
it watching specific ads on a specific TV
shows where we can place ads
in? Is it on the road? So we should put
billboards.
Now, in addition to that, we also have to
fight the noise.
Remember, when we talked about
perception, we have exposure, but we
also have attention.
How can we tell if our target market pays
attention? So we want to make
sure we reduce the noise when they are
exposed to our commercial.
Now it's not as easy to do, since we have
no control over the
environment.
So hence, we want to make sure that our
promotion pops out, that it
attracts their attention, it's unique, and it's
different than what competition
is doing.
Then we want to see, well, what is the
response.
The response is not always increase in
sales.
Sometimes it is like indirect sales, but
sometimes it is just a change in
attitude or a change in beliefs.
And then we get the feedback and we see if
we did a good job and we
start the process all over again.
So how then do we develop an effective
marketing communication? So I
kept saying that we need to fit it with the
target audience.
Now it's important to understand the
difference between a target audience
and a target market.
A target market will be the consumers my
company serves.
They're the one who will buy my product.
A target audience will be those that will be
exposed to my promotion.
Sometimes, the target audience is exactly
the target market, but
sometimes the target audience is a
subgroup
of the target market.
So the target audience will be the current
users or potential buyers,
decisionmakers,
or those who are the influencers.
So the target market will effect those five
things; what will be said, how it
will be said, when it will be said, where it will
be said, and who will say it.
Marketers want to make sure that the
purchase response that results
from consumer decisionmaking
also includes the stages of the buyer
readiness.
So if you recall the five stages of the
decisionmaking
process.
(coughing) Excuse me.
We can actually fit it with the objectives of
the communication process.
So the objectives are awareness, increased
knowledge, liking the
product, preferring it over competition, being
sure that this is the right
choice, and actually making a purchase.
Awareness fits very well with recognizing a
need.
So when we create brand awareness, we
also want to explain to
consumers why they need our product.
Then we go to the second stage, which is
information stage.
The information search stage will require us
to provide knowledge to our
consumers.
So if we promote knowledge, we need to
give them all the information
that they're looking for.
Then, if our objective is to make them like
our product, we want to create
positive attitude.
That will fit well with the evaluating
alternatives stage, because it will
effect attitudes and beliefs.
The next stage is preference.
How do they know that our product is better
than competition? Again, this
will fall into the evaluating of alternatives
and the consideration set stage
in the decisionmaking
process.
And finally, how do they know that this is the
right choice? Again, this will
go into the final stage of making a choice of
a product.
And then we have the purchase, which fits
with the postpurchase
behavior in the decisionmaking
model.
So what kind of messages can we send
out? So in general, the two
general types of appeal will be rational and
emotional.
A rational appeal is when I explain from a
rational perspective why my
product is good and better.
So I might create a problem and then a
solution.
For example, if you know the commercial for
Glad trash bags, it says,
"Don't get mad, get Glad." So they show
you where you pick up your
trash and the bag actually explodes and
everything falls on the ground.
However, if you use Glad, the garbage will
stay intact.
That's a rational approach, where the
company explains to you that if you
use their bags, which are stronger, it will be
a better solution for your
problem.
A demonstration of the product, an
infomercial, is also part of a rational
approach.
Product comparison.
AT&T and Verizon love to do product
comparison.
They try to compare which one of them has
better coverage, which one
offers better prices.
So then they will actually talk about the
competition.
This is sort of a dangerous method,
because of the fact that you actually
mention the name of the brand that you
don't want consumers to buy
from.
That kind of method mainly will be used
when the underdog is comparing
themselves to the leader.
Usually the leader will never compare
themselves to a specific brand that
is not doing as well as they are.
And then we have testimonial.
Those are commercials where we actually
ask consumers to tell us do
you like a product and why.
And finally, we have a slice of life.
A slice of life is when we see like a picture
of how a product is used.
So a lot of cereal commercials, for example,
use a slice of life, where they
show you a breakfast table with a family
eating the cereal.
The other type that a lot of companies use
are emotional.
Emotional types will also be used when you
want to grab attention and
when everybody already knows your
product.
So a lot of companies in a mature stage will
actually use emotional
appeals.
There are a lot of ways to use emotions, but
the big ones are humor, sex,
image or mood, and fear.
So humor will be when there's a joke that
happens when the commercial
is happening.
So, for example, at some point Verizon
used to mock the competition by
showing that someone is using their
cellphone and then in the middle of a
sentence, the call is dropped.
And because there's silence at the other
end, the content of the
conversation actually takes a turn and
people on the other side
understand different things than what was
intended.
Sexual commercials are those that have
beautiful women or, for example,
Old Spice commercial, where they use a
very goodlooking
man without a
shirt in order to promote their product.
Image or mood are emotional commercials
that want to make you feel
good, so they'll have nice music.
Coke, for example, for many years, worked
on the idea of happiness, that
when you open a bottle of Coke, happiness
comes out.
So they definitely used a happy mood kind
of commercials when they
promoted their brand.
And then you have fear.
Fear usually is used when you want to
prevent consumers from doing
something.
For example, don't text and drive or don't
smoke or maybe having
insurance for your car.
They're usually not as effective, as people
don't like to feel negative
emotions, but sometimes they're the only
way to explain why a product is
necessary.
Now what are they types of advertising that
we have? So one is
informative advertising.
This is when we introduce a new product
category and we wanted to build
a new demand.
So that will happen in the introduction stage
of the lifecycle.
This will be when we know the consumers
are in the second stage of the
decisionmaking
process and they're looking for more
information.
Comparative advertising, directly or
indirectly, meaning we mention the
brand or we just say other companies, will
happen when we are in the
growth stage and consumers are in the
evaluative stage of the decisionmaking
and they need to understand why are we
different and better than
competition.
Then we have persuasive advertising.
Persuasive advertising are there to
persuade you that their brand is
better.
So this will be the conviction stage, that will
be a choice in the evaluation
stage where you want to make the choice of
the product.
And that will also be, usually, in the growth
and the mature stage.
And then we have reminder advertising.
Reminder advertising is when products
need to be reminded that they
exist.
For example, you might say Twix or
Snickers, they're very mature
products, I love them, but I forgot they exist.
I haven't eaten one in a long time.
And then I see a commercial and I'm like,
"Oh yes, I forgot how much I
liked Snickers." Next time I'm in the
supermarket, I will get one.
So this will be a reminder advertising.
So here is a nice illustration that shows you
the product lifecycle in
relation to informative, persuasive, and
reminder ads.
So as you can see, persuasive can work
throughout the lifecycle of the
product.
Informative, though, is much better and
more effective when you are in
the first stages of introduction and growth.
Reminder, on the other hand, is much more
effective between maturity
and decline.
The final material that I want to say here are
what we call a push strategy
versus a pull strategy.
A push strategy is when the promotional
efforts come from the company
and they're pushing the product toward the
consumer.
A pull strategy is when the promotion is to
toward the end consumer and
we want to make sure that the end
consumer comes and asks for the
product.
So Coke, for example, promotes the product
directly to the consumer.
So they expect the consumer to come to a
supermarket and say, "Hey, do
you have Coke?" So that will be a pull
strategy.
A push strategy, on the other hand, is when
you go to a department store
and you see, as you enter, a big display of a
specific brand with
discounts.
It usually will be their private label.
So that would be a push strategy, where the
company or the retailer are
trying to push the product on the consumer.
Principles of Marketing
Marketing Application in ECommerce
(Module 3.7)
[Prof. Tamar Avnet, Ph.D]
So in this section, we're gonna dig deeper
into promotion and how it also
applied online.
So basically, there are three types of media.
We have the traditional media.
That was the one we discussed before in
the four P's, where we are using
oneway
communication tools to deliver messages to
a mass target
audience.
If you'll remember the communication
model, it mainly deals with
traditional media.
The next type of media is tradigital.
Tradigital is basically a combination of the
word traditional and digital,
because this is where you still use the
oneway
communication tool to
deliver messages to a target audience.
However, this time you're doing it online.
So this can also be referred to as digital
marketing.
The model difference is that in this case it
can also be a niche.
It doesn't have to be a mass marketing
target market.
Another advantage of tradigital over
traditional is that it has the ability to
track and measure immediate responses to
messages.
So we can get the feedback right away and
don't have to do a marketing
research with surveys and questionnaires.
The final type of media is social media.
Social media is online means of
communicating among independent and
interconnected networks of people.
So here, it's about communities and
organization enhanced by
technological capabilities, what we call
sometimes as the modern city
square.
Social media, unlike traditional and
tradigital, actually empowers
consumers because they have the ability to
be part of the communication.
They actually interact with the brand as long
as and with each other.
Consumers discuss and contribute and
collaborate and share with brands
and with each other.
Now, social media can be divided into what
we call the four zones.
There are many, many challenge.
One is the type of medium.
They can be searching, they can be
socializing, they can use it for
entertainment, and there are many vehicles,
like blogs, like websites, like
games.
So the four zones try to organize what is out
there by focusing on the
most important function of each social
media platform.
So let's see what are those four zones are.
So let's look first at the social community.
The social community is where the reason
one is online is to interact
socially.
So here, they will wanna share and
socialize and create conversations.
And these are just a few examples of the
social media platforms that are
out there.
Social commerce is when the reason I'm
online is because I wanna buy
or sell something.
So this will have the services and the
retailing and maybe even human
resources.
These are examples of some of the outlets
that are out there within the
social commerce zone.
Then we have social entertainment.
The reason why people are online in that
zone is because they want to be
entertained.
So here, we will have games, we will have
music, we will have art, maybe
TV shows.
These are only some of the outlets that are
out there that can provide
entertainment.
And then we have social publishing.
The reason why someone wanna be online
for that is that they want to
publish their own content.
They might want to write articles.
They might want to share a commercial, or
they might want to create their
own content altogether.
These are just a few options that consumers
have to share their own
thoughts and writings online.
In addition to that, the marketer also want to
understand what exactly they
can do within each type of media.
So in traditional media, usually we will do it
when we need to reach a very
large amount of people, what we call mass
media.
We don't necessarily have to be not
differentiated or not segmented, but
we still want to reach a large amount of
people.
So when we use demographics, like age or
like gender, sometimes mass
media is the best way to go.
They usually also will use a push
orientation, meaning that we push the
product, as you recall we learned before, as
compared to pulling the
product.
And here, that tension is actually gained via
the orientation, meaning the
media tool that we use, either broadcasting
or print or radio or outdoor.
Tradigital marketing, as we said, could be
both mass, but it can also be
more targeted.
And the reason is that we have that data
that Google and Gmail can give
us, and we actually know exactly in which
zone and what outlets our
target market will be on.
It is, again, a push orientation.
It actually mimics whatever the traditional
marketing is doing.
It can still have banners and it can still have
print and it can still have
commercials like YouTube videos.
It also have interactive messages in the
sense that we can see if
someone is actually pressing a button or
clicking or going to the website
as a result of that message.
And then we have social media marketing.
Social media marketing is very good in
finding niche people because we
can actually really specify based on
psychographic and lifestyle and we
can actually target the people that we want.
The attraction here is through pull.
We are not pushing the ad, but people are
actually interested in what we
have to say, so they actually want to open
our video or actually want to
participate in our social media campaign.
So the content is actually being attracted by
the traffic.
The more people share, the more
consumers will want to see it.
So then, what the social media does? So
social media needs to be a part
of the advertising campaign, so it needs to
be consistent with whatever
message is sent throughout the other
communication outlets.
It needs to be clear and consistent.
So the tool, social media, needs to focus on
the target market and reflects
whatever the overall approach is in IMC.
IMC is abbreviation for integrated marketing
communication.
Integrated marketing communication means
that whatever
communication tools we use, they all have
to be integrated together to
send the same message.
Social media will also need to be managed.
It is not like I'm creating a commercial and
putting it on TV, and then I can
take a break for a month or two, and then I
collect data and see how we
did.
Social media need to be managed basically
on a daily basis.
You need to see how consumers react to it.
You need to react back to consumers, and
you need to make sure that it
still fits with whatever other vehicles you
use.
This is an example of what kind of content
can actually be provided when
we use online media.
So the first one is what we called paid digital
media.
Paid digital media is digital media that the
company pays for it to be
online.
So those banners that we see, those emails
that we get, the company
pays for it and hence they appear as
advertisement.
Earned digital media is when a consumer
decides to put its own content
or share the content of the company.
The reason it's called earned is because the
company earned that
content.
This is actually the best type of content a
company can have.
So if I'm doing social media, and I'm asking
consumers, let's say, to post
pictures with my brand, let's say, enjoying
drinking Coke, and people
actually put their pictures when they drink
Coke.
Those pictures are called earned media,
and it means that consumers
willingly participate in my campaign and are
willing to be advocate for my
brand.
It also means that probably their own social
network can be exposed to
these kind of promotion, and they, what we
call, work for free for the
company because now they help me recruit
consumers without the
company needing to pay for it.
Those two types can also relate to what we
call owned media.
Owned media is when the company puts
media on platforms that the
company owns.
Usually one of the typical one is a website.
A website of the company is an owned
media.
Now, a company can decide to put earned
media on their platform.
A Facebook page of the company is also
owned media.
They actually control the content that is on
there, and they can put paid
digital media as well as earned media on
the owned media platform.
So then let's just see and compare between
tradigital strategy and social
strategy.
So the two obviously are online.
The main difference between them, as you
can see, is the relationship
between the company and the consumers.
If you go to tradigital strategy, you see that
the interaction is mainly
between the company and the customer.
So the customer reacts by clicking, by going
to the website, by
purchasing, but there's really no interaction
between the different
customers.
However, in social media, the company
creates the social media
campaign, but after that, it's actually up to
consumers to understand and
react and create the campaign.
So there's interaction in between the
consumers, and that interaction later
on creates that relationship with the
company.
Principles of Marketing
Introduction (Module 4)
[Prof. Tamar Avnet, Ph.D]
In the next module, we are gonna discuss
how marketing fits with society.
So we're gonna talk about some ethical
issues.
Sometimes, marketers are blamed as being
unethical so we're gonna
discuss those issues and see what kind of
solutions are offered.
The next topic will be about nonprofit
marketing where companies
actually market products or social causes
where the idea is not to make
profit but just to improve the life of others.
Principles of Marketing
Ethics (Module 4.1)
[Prof. Tamar Avnet, Ph.D]
Sometimes marketers need to understand
that it's not only about
satisfying consumer needs and wants
because there's also social effects
on society as a whole.
Hence marketing organizations are
encouraged to take what we call a
broader societal view that strikes a balance
between what consumer
wants, the goals of the firm, but also the
welfare of the society.
So marketing is often criticized for being
exploitive.
They say that sometimes they take
advantage, of unfair advantage of
people or of situations.
For example, they might charge higher
prices for beverages if you are on
the beach and this is the only beverage
supplier in the area as compared
to charging the same beverage in a
supermarket.
They're also sometimes being pervasive
and some customers are a bit
tired of being pushed around.
And some marketers are actually saying
that they're inefficient and are
using resources that are unnecessary.
And some are actually criticized for
stimulating what we call
unwholesome demand and promote
products and services that actually
might be harmful.
A recent trend in alcohol consumption of
beverages is that a lot of
companies now, when they advertise, they
say to be sensible and
intelligent when you drink to make sure that
you're not driving.
So they do try to encourage you obviously
to consume their product and
to drink, but they also encourage you to be
responsible about your
behavior afterwards and to make sure that
you're not driving and not
risking other people's health.
So what are types of criticisms of
marketing? So often it criticized that
they represent what some consider to be
inappropriate values.
For example, when you promote a luxury
product, you might actually
promote the sense of vanity or the fact that
having money or being
successful are the only ways to happiness,
putting false beliefs in
consumer's mind that the only way to
happiness is to be very wealthy or
to possess these kinds of products.
Also occasionally, marketing is being
criticized as engaging in illegal
behavior.
Perhaps, for example, in the smoking
industry, it turns out that they knew
for many, many years that smoking is not
good for our health, yet never
published this type of research and they
prevented consumers from
actually understanding the damage that
smoking can created.
And occasionally they'll also criticize of
delivering poor customer service,
meaning that they promise you one thing,
you buy the service and then
you're sort of stuck with that service.
One needs to remember that marketing is
the most visible function in a
company.
And often this is actually the only face that
the consumer sees, so it's very
important for the company to understand
how they communicate with
their consumers.
Consumers then have their own responses
to these situations.
Consumers response to this concern
through an organized consumer
movement.
They're also prepared to protect themselves
and to register complaints.
And many times, consumer can actually
boycott or influence demand for
a product because they are willing to stop
dealing with firms that do not
deliver what they want.
For example, a few years ago, Nike was
suspected and also Apple was
suspected, of using sweat shops and using
young kids in developing
countries to make the sneakers or make the
iPhone.
Those consumers made a lot of noise about
these accusations and
wanted to verified that when they buy the
product, it was not made by
children and it was not made by people who
were taken advantage of.
So they turned, the consumers, turned their
attention to broader social
and environmental issues.
These days it's very rare to find a company
that does not have some sort
of a social cause or an environmental cause
connected to their
purchases.
Many of them go all the way, like Tom's
Shoes, where if you buy a pair of
shoes, you will get one for free.
But some of them just say they will donate a
specific amount of money to
charity if you will buy their products.
The government also is not quiet on those
issues and they do a response
and sometimes regulate some of these
criticism.
For example, all of the cigarettes today on
the boxes says that smoking is
dangerous for your health.
That's a government regulation.
The fact that kids that are younger than 16
cannot purchase cigarettes is
also a government regulation.
So the government makes sure that
whatever the marketing department
is promising, it is regulated and they do try
to protect consumers.
Hence the government at all levels have
passed laws to protect
consumers and to regulate marketing.
And the idea of these laws is to protect
consumers against physical harm
as well as against just being misled.
Much of the legislation is really intended to
ensure that the customer has
enough information to make a reasoned
purchase decision.
An example could be that law that forces
chain restaurants to actually put
calories content and sugar content and fat
content on their products.
This really educates a lot of consumers who
didn't realize how much fat or
how much sugar or how many calories are
in these products and hence
they made what we call uneducated
decisions.
Some public agencies regulate and control
markets in the interest of the
consumer.
Now businesses also responds to these
kind of accusation.
So businesses have responded to criticism
with efforts to provide the
consumer with better information and to
make it accessible.
So today when we have websites, many
companies are trying to be as
transparent and as authentic as they can
because with social media and
with the internet, it is clear that all
consumers will eventually get the
information they need and if a company's
trying to hide something, it is
pretty obvious that eventually it will come
out.
So they do try to speak the truth and be
frank with their consumers.
So genuine efforts have been made to
improve the quality of products
and of customer service.
Businesses also have established what we
call selfregulatory
mechanism to regulate advertising content.
There are a few things that are not allowed
to be said, especially in the
United States.
One of them is you can never say negative
things about your competitor.
So even when we use comparative
advertising and even when we use a
brand name of a competitor, we can never
say negative things about
them.
We can say that we have better things than
them, but we can't say that
they are worse than us.
Also, whatever we say in advertising in the
United States must be true.
We are not allowed to lie in advertising in
the United States.
Maybe for us it's a given, but it's actually
very important to know that
whatever you are promised is actually true.
However, marketers do have different ways
of promising things and
sometimes consumers don't understand the
subtle differences.
For example, many cosmetic companies will
promote their cream, face
cream, and talk about reducing the
appearance of wrinkles.
Many consumers do not distinguish
between reducing the appearance of
wrinkles and reducing wrinkles.
Reducing wrinkles, as far as I know, have
not been invented yet and the
company that will invent it probably will
make a lot of money.
But there are many cosmetic companies
that promise you the reduce of
the appearance of wrinkles.
So sometimes we want to make sure we
actually listen very carefully to
what is promised to us.
Another example is when marketers use
pictures instead of words.
So we can sort of see how the actor in the
ad behaves after wearing
something or drinking something or driving
something.
That basically tell us in a nonverbal
way that the product will make us
feeling a certain way or we'll perform in a
certain way, but actually no
words were mentioned.
And that is legal.
We assume that through the perception
process, consumer will interpret
that Coke brings us happiness.
Obviously, nobody really believes that if you
drink Coke you will become
happy.
It's not an antidepressant drug.
However, there are a lot of tricks that
marketers do in order to go around
the regulation that are implied in advertising.
Many firms measure their quality of service
and have set up customer
service departments.
Again, this is mainly because of the internet
and many reviews go online
and today consumers rarely purchase a
product without reading the
reviews first.
At the time, Dell Computers had very bad
customer service.
It actually got the term of "Dell Hell".
And Dell didn't pick up on the fact it was the
early days of the internet.
They did not pick up on the fact that their
customer service and feedback
is really bad and they're being thrashed
online.
By the time they realized that, they actually
lost a lot of consumers.
That kind of thing does not happen today
because all the firms
understand that they need to control and
make sure that whatever is said
online is immediately being fixed and being
addressed.
So finally, the last topic is ethics in
marketing.
So business are occasionally faced with
situation that may be considered
unethical.
And again, it's not necessarily that they are
breaking the law, but they're
decisions that they know maybe should not
be the right decision.
So for example when we have automobile
manufacturers that knew that
their car might catch fire when the brake
and a certain speed limit is
achieved, they knew it and yet they
produced the product.
The newest Samsung phone, which the
battery catch on fire.
That again is something that maybe they
knew, maybe they didn't, maybe
they used a manufacturer that wasn't
reliable, but that is still an unethical
behavior on the part of the company.
So many firms have established now codes
of ethical behavior in order to
make sure that these things will not happen.
So they created their own guidelines and
their own regulation within the
organization to make sure that the decisions
that are happening within the
organization are ethical and consistent with
the mission of the company.
So firms have an obligation to behave and
advertise in a socially
responded manner.
Now it's not just as we mentioned because
of the fact that legally they are
required to do so, it is also in their interest
and they understand it.
Because of the fact that consumers today
do appreciate and respect the
social environment they live in and the
wellbeing of other people and
other human beings as well in the world.
So many companies have taken steps to
protect customer privacy for
example, particularly in telemarketing and
other forms of direct marketing.
A big thing in ethical behavior is privacy.
As I keep mentioning throughout the course,
Google supplies a lot of
information about us to companies, but
again, this is not about an
individual.
The company cannot pinpoint who is the
person that has this type of
information.
They just know there is a person that
behaves in a specific way.
Yes, they will market to that person, but
they don't really know them by
name.
And at least for now, Google is definitely
taking a lot of steps and doing a
lot of regulation to make sure that the
privacy of its own consumers is
being protected.
Principles of Marketing
Nonprofit Marketing (Module 4.2)
[Prof. Tamar Avnet, Ph.D]
The last topic of the course is nonprofit
marketing.
Nonprofit marketing is different than regular
marketing in the sense that it
has different characteristics.
For example, it lacks a bottom line, meaning
that profit is not really the
goal of the organization.
Because of that, often the market has to be
to multiple publics because
it's usually for the public good of society and
not necessarily for specific
target markets.
Now it may market both goods as well as
services and customer or
service user may wield less control over the
organization destiny than
those with profit.
Now this makes a lot of sense.
As we mentioned before, one of the main
reasons organizations today try
to be ethical and try to do the right thing is
because otherwise consumers
will stop buying their products, but that's
because profit is their goal.
But if an organization is a nonprofit
organization, obviously they still want
their consumers to use their product, but the
consumers are not
necessarily have so much power.
If you think about it, a university, most
universities in the United States
are not for profit.
Their idea is to educate the students and
provide education.
Yes, they do charge a lot of money, but not
enough to actually make a
profit.
In that sense, one may say that although
students are their customers, it's
very rare that students actually have a say
in any of the decisions that are
happening within universities.
Now a resource contributor may also
interfere with the marketing
program, meaning that there's usually a few
people who runs the show in
a nonprofit organization.
They are the ones that maybe provide the
funds and they might have an
agenda or a vision that's different than what
the marketing strategy
actually wants to be.
It's also important to note that there are a
few organizations out there that
are still doing good.
However, they are not nonprofit.
So for example, Disney has a fund that is
the Wish Fund and they will
grant a wish mainly for kids that have
cancer and other diseases.
So that part, they actually give profit from
their own profit.
However, the whole organization is Disney
is not a nonprofit organization.
Another example can be Dove.
Dove has established the SelfEsteem
Foundation where they encourage
girls to have better selfesteem
and they encourage them to go to science
and feel beautiful regardless of what is
considered the perfect beauty in
society.
However, again, Dove is not doing it
necessarily for the good of society,
but as part of the campaign of Dove which
is about increasing the inner
beauty.
So we wanna make sure we understand the
difference between a
nonprofit organization and an organization
that is for profit and yet does a
lot of social good in addition to making
profit.