Final Study Guide

1. The disadvantages and advantages of qualitative measurements in market research

Marketing researchers have a choice of three main research instruments in collecting primary data: questionnaires, qualitative measures, and mechanical devices. Some marketers prefer more qualitative methods for gauging consumer opinions because consumer actions do not always match their answers to survey questions.

The advantages of qualitative measurement in conducting market research are the techniques that are relatively unstructured measurement approaches that permit a range of possible responses. Also there are creative means of ascertaining consumer perceptions that may otherwise be difficult to uncover. Because of the freedom afforded both researchers in their probes and consumers in their responses, qualitative research can often be a useful first step in exploring consumers’ brand and product perceptions.

The disadvantages to qualitative market research are the in-depth insights have to be tempered by the fact that the sample size is limited and may not necessarily generalize to broader population. Also, there is a question of interpretation. Different researchers examining the same qualitative result may draw very different conclusions.

2. The advantages of using secondary data over primary data. Give examples of primary research

In conducting research, firms must decide whether to collect their own data or use data that already exist. They must also decide which research approach (observational, focus group, survey, behavioral data, or experimental) and which research instruments (questionnaire, qualitative measures, or technological devices) to use. In addition, they must decide on a sampling plan and contact methods (by mail, by phone, in person, or online).

Secondary data are data that were collected for another purpose and already exist somewhere. Primary data are freshly gathered for a specific purpose or for a specific research project. The advantages of using secondary data over primary data are that not all projects are specific. Some research is exploratory. It goal is to shed light on the real nature of the problem and to suggest possible solutions or new ideas. Some research is descriptive. It seeks to quantify demand, such as how many first-class passengers would purchase in-fight internet service for certain amount and some research is casual. It goal is to test the cause and effect relationship.

Examples of primary research are fresh data through observing the relevant actors and settings. Unobtrusively observing the consumer as they shop or consume product.

Focus group: a gathering of 6 to 10 people carefully selected by researchers based on certain demographic, psychographic, or other considerations and brought together to discuss various topics of interest at length.

Surveys are used to learn about people’s knowledge, beliefs, preferences, and satisfactions and to measure these magnitudes in the general population.

In behavioral data, customers leave traces of their purchasing behavior in the store scanning data.

Lastly, the most scientifically data is the experimental research where cause and effect relationship is used by eliminating competing explanation of the observed findings.

3. Given a situation, be able to decide what the Definition of the Problem is

4. What are some of the things that differentiate the business decision-making process from that of the consumer's decision-making process?

A consumer’s buying behavior is influenced by cultural, social, and personal factors. Cultural factors exert the broadest and deepest influence. Culture is the fundamental determinant of a persons’ wants and behaviors. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members.

The typical buying process consists of the following sequence of events: problem recognition, information search, evaluation of alternatives, purchase decision, and post purchase behavior. The marketers’ job is to understand the behavior at each stage. The attitudes of others, unanticipated situational factors, and perceived risk may all affect the decision to buy, as will consumers’ levels of post purchase product satisfaction, use, and disposal and actions on the part of the company.

Compared to consumer markets, business markets generally have fewer and larger buyers, a closer customer-supplier relationship, and more geographically concentrated buyers. Demand in the business market is derived from demand in the consumer market and fluctuates with the business cycle. Nonetheless, the total demand for many business goods and services is quite price inelastic. Business marketers need to be aware of the role of professional purchasers and their influencers, the need for multiple sales calls, and the importance of direct purchasing, reciprocity, and leasing.

The buying center is the decision-making unit of a buying organization. It consists of initiators, users, influencers, deciders, approvers, buyers, and gatekeepers. To influence these parties, marketers must be aware of environmental, organizational, interpersonal, and individual factors.

The buying process consists of eight stages called buyphases: problem recognition, general need description, product specification, supplier search, proposal solicitation, supplier selection, order-routine specification, and performance review.

5. How does storing info in a database help a CRM initiative?

A customer database is an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable, for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. Database marketing is the process of building, maintaining, and using customer databases and other databases for the purpose of contacting, transacting, and building customer relationships.

Ideally, a customer database contains the consumer’s past purchases, demographics, income, family members, psychographics, media graphics, and other useful information.

A business database would contain business customers’ past purchases, past volumes, prices, and profits, buyer team members’ names, and other useful information.

This database information will help customer relationship management (CRM) initiatives to identify the best prospect, decide which customers should receive a particular offer, deepen customers loyalty by sending appropriate gifts discount coupons and reading materials, reactivate customer purchase through mailing programs, for example, reminder of off-season promotions and finally, to avoid serious customer mistakes.

6. Given a marketing situation and market share numbers, come up with a strategic plan.

Marketing Planning begins with formulating an offering to meet target customers’ needs or wants. The customer will judge the offering by three basic elements; product features and quality, services mix and quality and price. Corporate and division strategic planning includes defining the corporate mission, establishing strategic business units, assigning resources to each SBU and assessing growth opportunities.

The appropriate strategy depends on the industry’s relative attractiveness and the company’s competitive strength in that industry. A company that is unattractive industry but possesses competitive strength should consider shrinking selectively while a company that is attractive industry but has competitive strength should consider strengthening its investment.

All marketing strategy is built on segmentation, targeting, and positioning. When a company discovers different needs and groups in the marketplace, they target those it can satisfy in the superior way, and then position its offering so the target market recognizes the company’s distinctive offering and image. If a company does a poor job of positioning, the market will be confused.

So, appropriate strategic plan should target the consumers that find the points of difference personally relevant and important, target consumer that find the point of difference distinctive and superior and target consumer that find the point of difference believable and credible.

The strategic plan must include monitoring the product life cycle at the introduction, growth, maturity and decline stages.

Product managers should try to stimulate sales by modifying other marketing program element like price cut, distribution channel, advertising expenditures, sales promotion, personal selling and services.

7. What might be the potential plusses or minuses of a decision to reach into the more price-sensitive market if you have more expensive products in your line….

Price Sensitivity is the awareness of the consumer to what they perceive to be the window of cost within which they will buy a particular product or service. Each customer will have a certain price acceptability window and different customers have different limits in their perceptions of what price is within their range. Establishing bottom line customer perceptions of price and their responses to price indicates whether a market is very price sensitive or not.

Price Penetration is most appropriate when product demand is highly price elastic. Substantial economies of scale are available when the product is suitable for a mass market (ie. sufficient demand). When the product will face stiff competition soon after introduction and there is inadequate demand in the low elasticity market segment for price skimming. In industries where standardization is important, the product that achieves high market penetration often becomes the industry standard for example Microsoft Windows and other products, even superior products, become marginalized. Standards carry heavy momentum.

Penetration pricing can gain market share. It can result in fast diffusion and adoption. This can achieve high market penetration rates quickly and take the competition by surprise, not giving them time to react. It can create goodwill among the all-important early adopter segment. It can create valuable word of mouth. It creates cost control and cost reduction pressures from the start, leading to greater efficiency. It discourages the entry of competitors. Low prices act as a barrier to entry. It can create high stock turnover throughout the distribution channel. This can create critically important enthusiasm and support in the channel that can be based on marginal cost pricing, which is economically efficient.

8. Explain what a "cash cow" does for a company.

Cash cow is a product or a business unit that generates unusually high profit margin: so high that it is responsible for a large amount of a company's operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes. Companies can effectively “milk” this “cash cow” by capitalizing on the reservoir of existing brand equity.

For example, Procter & Gamble is a cash cow. In addition to providing a steady record of growth, the company consistently generates a high free cash flow. Typically, with a slow growing company, the more free cash flow is the better. Company like P&G pay out a significant chunk of its earning as dividend and such dividend is what one would like to see in a slow grower.

In addition to returning money directly to the shareholders through dividends and buyback, a good company should earn a high return (ROI) on its stockholders money.

9. What are the benefits to a company of a well-executed BRANDING strategy? What are the benefits to a consumer?

A good brand strategy will increase sales of each product sold under the brand label because consumers will trust it based on brand affiliation. More can be charged for each product based upon its

perceived increase in value through association with the brand and other products in it One advertisement can promote all product in the brand.

The consumer can benefit because each product in the brand should be quality controlled to make sure that it does not bring down the perceived quality of the entire brand. Pricing might actually be less because the product doesn't need to be as heavily marketed individually

The heart of a successful brand is a great product or service, backed by careful planning, a great deal of long-term commitment, and creatively designed and executed marketing. A strong brand commands intense consumer loyalty. Marketers of successful 21stcentury brands must excel at the strategic brand management process. Strategic brand management combines the design and implementation of marketing activities and programs to build, measure, and manage brands to maximize their value by identifying and establishing brand positioning, plan and implement brand marketing, measure and interpret brand performance, grow and sustain brand value.

The advantages of strong branding strategy are: it improves the consumer perception of the product. It creates greater customer loyalty. It gives less venerability to competitive marketing actions and crises. It increases marketing communication effectiveness and greater trade cooperation and support. Additionally, it creates brand extension opportunities and larger profit margin.

A good branding strategy creates brand equity and in turns creates customer equity. There is no brand without customer and no customer without brands. When customers experience the company is delivering on its promise, it creates brand bonding.

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10. Marketers recognize that the marketing of services is different than the marketing of a product because of the different characteristics that distinguish them from physical products.  List these characteristics and demonstrate your understanding of what each means relative to services marketing.  What are

some marketing strategies that might be employed with services to ensure positive results?

Services have four distinctive characteristics that greatly affect the design of marketing programs.

1. Intangibility

Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are bought. To reduce uncertainty, buyers will look for evidence of quality. They will draw inferences about quality from the place, people, equipment, communication material, symbols, and price that they see. Therefore, the service provider’s task is to “manage the evidence,” to “tangibilize the intangible.” Service companies can demonstrate their service quality through physical evidence and presentation. Service marketers must be able to transform intangible services into concrete benefits.

2. Inseparability

Services are typically produced and consumed simultaneously. Because the client is also present as the service is produced, provider-client interaction is a special feature of service marketing. Several strategies exist for getting around this limitation: Work with larger groups, Work faster and train more service providers

3. Variability

Because they depend on who provides them and when and where they are provided, services are highly variable. To reassure customers, some firms offer service guarantees that may reduce consumer perception of risk. There are three steps service firms can take to increase quality control: Invest in good hiring and training procedures by standardizing the service-performance process throughout the organization. Prepare a service blueprint that depicts events and processes in a flowchart, with the objective of recognizing potential fail points and monitor customer satisfaction.

4. Perishability

Services cannot be stored. Perishability is not a problem when demand is steady. When demand fluctuates service firms have problems. Several strategies can produce a better match between supply and demand. On the demand side:

In order to ensure a positive result, companies must employ certain strategy that is relative to service marketing. Maintaining contact with customers, consistently informing them of news and relevant service-oriented information can keep them coming back to use a business's services.

First, a company must establish an excellent brand that will give credibility to its services.

Once the core business services have been formulated, it is necessary to develop its perceived value---which is how the customer will view its worth. This goal can be established in the company's mission statement and translated into every aspect of the customer relations strategy.

Thirdly, the company must provide Incentives to its customer. Incentives can be the deciding factor in choosing one service-oriented company over another. It can be linked to the business's services, like a bank offering discounted life insurance to its checking account holders.

Promotion is another way to ensure a positive result. The strategy used when promoting a service typically focuses on awareness, recall and retention.

Lastly, relationship management is made with clients. Keeping in touch with them through newsletters, mailings, follow-up phone calls helps to keep a business top of mind.

11. An important part of designing distribution channels is understanding customers’ desired service outcomes, i.e., what the consumer EXPECTS that the channel of distribution will provide them.  Describe as many outcomes that you can that customers seek. 

In designing the distribution channels, marketers must understand what the customers expect that the channel of distribution provides for them. Customers usually choose the channel based on number of factors: the place, product assortment and convenience of the channel option as well as their own particular shopping goals that is economic, social or experiential. As with product, segmentation exists, and marketers must employ different type of channels to different needs during the purchase process. In many markets, buyers fall into one of four categories: Habitual shoppers, high value deal seekers, variety-loving shoppers, and high-involvement shoppers

Marketers must understand the service output levels in its target customers want. Channels produce five service outputs:

Lot size is the number of units the channel permits a typical customer to purchase on one occasion.

Waiting and delivery time is the average time customers of that channel wait for receipt of the goods. Customer will prefer faster delivery channels.

Spatial convenience is the degree to which the marketing channel makes it easy for customer to purchase the product.

Product variety is the assortment breadth provided by the marketing channel. Customer prefer greater assortment because more choices increase the chance of finding what they need.

Service backup is the add-on service, for example credit, delivery, installation and repair. The greater the service backup, the greater the work provided by the channel.

The same consumer may choose to use different channels for different functions in making a purchase. Some consumers are willing to “trade up” and others are willing to “trade down”. Marketers use channels to distribute, i.e., to move, product from the manufacturer to the ultimate consumer via distributors and retailers. This lowers the cost of distribution to the manufacturer and makes it easier for you, the consumer, to get what you want, when you want it, and where you want it!

Each channel member (intermediary) adds value as the product moves closer to the ultimate customer. Depending on the kind of intermediary used, the channel member may store the product for eventual distribution to retailers, provide financing, transport the product, provide promotional support, or arrange for credit and returns.

Exclusive distribution occurs when you have a product with low demand, high quality, or geographic considerations. Emphasis is on controlling how the product is sold and serviced. Many times, an image must be upheld. If you want to purchase a Ferrari sports car, you won't find a Ferrari showroom in every large town and city, unlike, perhaps, a Chevrolet dealership.

Selective distribution is used more frequently. Not every jewelry store will carry a Seiko wristwatch. Seiko desires to have certain "quality" stores represent their line and wants to ensure some degree of control as to how the product will be displayed or serviced.

Intensive distribution is used when the marketer wants the product available "everywhere." Such products rarely have 'status,' thus, you will find Cricket lighters, Energizer batteries, and Beef Jerky sold wherever you find a cash register, or so it seems!

12. Cleanwipe Windshield Wipers is a manufacturer of replacement windshield wipers for automobiles and trucks. The summer season is traditionally a "slow" season for windshield wiper replacement blades.  What are some of the PROMOTIONAL "P" considerations on which you would reflect as you prepare for the upcoming summer season to help your intermediaries (i.e., channel members) move Cleanwipe products?

In selling a replacement windshield wiper for automobile and truck in the summer “slow” season, I would employ different promotional ‘P” strategies that will help my channel member to move my product in an effective and profitable ways. Companies can use several pricing techniques to stimulate early purchase:

Loss-leader pricing: Price drop will help to stimulate additional store traffic in the summer. This pays if the revenue of additional sales will compensate for lower margins on the loss leader items.

Special-event pricing: Establishing a special price in the summer to draw more customers. For example buy one get one free.

Cash rebates: This is mostly common in auto industries. Offering cash rebates will encourage purchase of Cleanwipe product within a specific time period. Rebates can help clear inventories without cutting the stated list price.

Low-interest financing: Offering low interest rate or no interest financing to intermediaries will help to sell more and attract more customers.

Longer payment terms stretches loans over longer periods and in turns lower monthly payment.

Warranties and service contracts can promote sales by adding a free or low-cost warranty or service contract.

Psychological discounting sets an artificial high price and then offers the product at a high savings: For example. Was “$15.99 now $9.99”

13. Your company manufactures a quality line of home kitchen appliances, refrigerators, stoves, dishwashers, etc -- and you are highly competitive with companies such as KitchenAid, JennAir, and others. The market is quite price sensitive. You've just learned that your primary competitor has just cut their prices to the consumer by 7%.  What might be some reasons that would support their decision to make a price reduction?  What should be your thoughtful reaction?

Several circumstances might lead a firm to cut prices: One is excess plant capacity. Most companies need additional business and cannot generate it through increased sales effort, product improvement, or other measure so they initiate a cut in price in a drive to dominate the market through lower cost. Most companies initiate price cuts in the hope of gaining market share. Cutting prices to keep customers or beat competitors often encourages customers to demand price concessions. Customers often question the motivation behind price changes. They may assume the item is about to be replaced by a new model, the item is faulty and is not selling well, the company is in financial trouble, the price will even come down further, or the quality has been reduced.

My thoughtful reaction to the price cut is that the company is using the price war trap whereby the competitor will respond by lowering their price even more to trigger price war. Many companies used other price cutting strategies like low-quality trap where customers assume the quality of the product is low. Shallow-pocket trap is used when higher priced competitors match the lower price but have longer staying power because of deeper cash reserves. Fragile-market share trap can also be used when a low price buys market share but not market loyalty.

14. Your company is about to introduce a new product that will increase the fuel mileage on ANY gasoline-powered car by 25%.  This is a genuine product that REALLY works and has received endorsements left and right, as a tool to help America become less dependent on foreign oil.  Utilizing the micropulverization capabilities of electronic frequency distribution, the GasEnhance device will take an automobile that gets 28 mpg and allow it to get 25% more mileage, e.g., 35mpg.  It REALLY works!  Your cost to manufacture this product is $115.00 and installation (which is easy) requires about one hour, or about $60 for labor. 

What Kotler pricing strategy will you use, knowing that your competition has a similar product that will likely use a slightly different technology, and that will be out in 120 days?  Rumor has it that their product will provide 35% more mileage.

For any company, effectively designing and implementing pricing strategies requires a thorough understanding of consumer pricing psychology and a systematic approach to setting, adapting, and changing prices. According to Kotler on pricing strategy, I will focus on the following to gain this market share.

Price Elasticity of Demand: The more elastic the price, the more sensitive consumers are to price changes. Surveys can explore how many units consumers would buy at different proposed prices. Price experiments can vary the prices of different products to see how the change affects sales. Statistical analysis of past prices, quantities sold, and other factors can reveal their relationships.

Penetration Pricing Strategy: Some small companies in a specific industry will use a penetration pricing strategy. The usual objective of penetration pricing is to increase market share, which is the percent of sales a company has in a market or industry. The rationale behind penetration pricing is that companies can both acquire and gain repeat business or brand loyalty with these customers.

Price Skimming: This industry pricing strategy is where companies price their products relatively high to recover production costs.

Discount Pricing: Some small companies within an industry will use discount pricing as either a permanent or temporary pricing strategy. A small company will use a permanent discount strategy when it wants to be the value leader in the industry

Geographic Pricing: Some small companies within an industry will use a geographic pricing strategy, charging various prices in different regions. The cost of living is greater in certain areas, including advertising and the cost of doing business. Therefore, charging more for products may help generate more sales and profits. Contrarily, an equally effective strategy may include setting lower prices where the cost of living is substantially low.

15. An increasing number of companies are basing their prices on the customer's perceived value of the product or service. Explain the concept of perceived value pricing and what is the "key" to pricing in this manner? How might the marketer determine the price that the consumer might pay in exchange for that value that they receive?

Number of companies based their prices on the customer’s perceived value of the product or services. The concept of perceived value pricing is centered on three fundamental premises: 

Firstly, customers buy products not for their features (e.g. Pentium chip) or their specific functionalities (e.g. pc processor speed), but rather for the perceived benefits that the products

deliver.  Features and functions - which are often the focus of product design specifications - are simply the 'envelop' for delivering the benefits that are desired by customers. Customer perceptions are critically important. A product may meet objective performance criteria but a company only 'gets credit' if the customers recognize or perceive that the product delivers the benefits.

 Secondly, potential customers make purchase decisions considering a product's perceived price. That is, how much a customer thinks that a product will cost them. These perceptions may or may not accurately reflect reality. And, though rational buyers should consider a product's fully loaded lifetime cost, some may be swayed by simpler measures like shelf price, which may not be appropriately inclusive. Thirdly, Perceived value is a consolidated measure: either the difference between the perceived benefits that a product delivers and its perceived price, or the ratio of the perceived benefits and the perceived price. As a ratio, value translates to "benefits per dollar", a standardized relative metric that enables comparison: against a specific customer's requirements (e.g. not to pay more than a certain price), across a set of reference products used explicitly or implicitly for perceptual benchmarking (e.g. this type of product should cost roughly this amount) and among substitutable products that may be directly or indirectly competitive. For example, Coke and Pepsi are directly competitive.  Coke and bottled water are indirectly competitive (since both are beverages).

  Marketers may determine the price that the consumer might pay in exchange for that value they receive by using a similar price a competitor may price the product plus price premium for durability, price premium for reliability, price premium for superior service, price premium for longer warranty to arrive at the normal price minus applicable discount to reach the final price. The key to perceived-value pricing is to deliver more value than the competitor and to demonstrate this to prospective buyers.  

Strategic vs. Tactical

The marketing plan is the central instrument for directing and coordinating the marketing effort. The marketing plan operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the value proposition the company will offer, based on the analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics which includes product features, promotion, merchandising, pricing, sales channels and service