Exam 1

.pdf
School
University of Florida **We aren't endorsed by this school
Course
MAR 5806
Subject
Marketing
Date
Oct 29, 2023
Pages
2
Uploaded by ConstableRamPerson2937 on coursehero.com
Marketing Strategy Profit = unit volume x (unit revenue - unit cost) - fixed cost Increase profit through increasing unit volume, increasing price, or decreasing cost. Marketing is about identifying and meeting human and social needs. Value is a ratio of the bundle of benefits a customer receives from an offering compared to the cost incurred by the customer in acquiring that bundle of benefits. Benefit is some type of utility that a firm expects its products, services, or offerings to provide to its customers. Utility is the "want-satisfying" power of a good, service, or offering. Marketing orientation: Production orientation means they care more about price than the product (Ex. Walmart, Model T & Henry Ford) and focuses on favoring product quality over price (Ex. High-end fashion/electronics). Selling orientation pushes products into customers' hands by making them aware of their benefits (Ex. Fuller brush, vacuum cleaner). Marketing concept delivering benefits more effectively and efficiently than competitors through product design, price, where it's sold, and how it will be sold (Ex. Snack foods, home products). Implications of marketing orientation include consumers don't want products but want the benefits that those products provide, options with the greatest value (benefit less cost) and consumers see competition as products that provide similar benefits, not similar products. They compete to the extent that they are viewed as a substitute. Other marketing orientations: differentiation orientation, customer orientation, relationship orientation. How does marketing fit into the overall firm strategy? Strategy is the overarching plan to achieve an objective, providing the "aim" for specific actions... Where to compete? How to compete? Major shift cam from Michael Porter- It is not about how big, it's about how profitable and it is either easy or hard to enter the market Recently, "complements" have been added as a 6th competitive force to enter a market -----------------------> A strategic planning process includes business mission - external environment/internal environment SWOT analysis - goal formulation, strategy formulation - program formulation - implementation - feedback and control; SWOT Analysis Internally - You can assess how important marketing, finance, operations, and human capital; Externally - seeing how the opportunity and threat matrix sits; Generic strategies - Porter to address 5 forces - Overall cost leadership, Differentiation, Focus; How does marketing strategy fit? Marketing plays a central role when determining the firm's mission, sources of customers, sources of competitive advantage, and answering how are we going to grow; Product-market comb. ---> Marketing strategy development/develop programs to implement the marketing strat. Industry Analysis Verizon review Industry - communication technology company, but they also connect people and things as well as business and industries as well as informing and entertaining; Competitors - information and communications technology members and matching stocks like Google, Meta, and Netflix; Verizon growth - No; Strategy - technology enhancement and quality; Forces impacting Buyers - cell phone service becomes commoditized, bargaining power increasing Potential entrants - new entrants in the internet service providing (google) Substitutes - cord cutting from cable (Hulu+) Suppliers - not a big impact (currently) Industry competitors - intense rivalry over customer base; SWOT - customer satisfaction, cord cutting, financing the high cost of 5G roll-out, highest price means vulnerable to switching, substitutes substantially eating market share; Their customers - remaining customers are older and more sensitive to switching costs, less price sensitive, longer-term relationship, believe in quality; Current strategy - 5G pricing strategy; Customer perceptions - higher coverage across the US, reliable, fast, expensive, customer service just OK Satisfaction has declined since 2021; Products offered - cell phone wireless service, landlines, FIOS internet, TV, business VIOP, digital advertising services, IOT solutions; Product market combinations to pursue (4 colored squares) Existing markets/existing products NO New markets/existing products NO Existing markets/new products YES smart home services?? New markets/new products YES cord-cutting alternative?? What product market combination works? Getting rid of bundles and letting people pay for the specific services they want. Industry analysis definitions Industry - A group of firms producing products or services that are perceived by customers as meeting the same needs Industry environment - suppliers, customers, competitor firms, other firms (including those that may enter the industry and those that offer substitute or complementary products), and government or regulatory organizations with influence over the firm. 6-step process to analyzing an industry Define (industry) - identify (key players) - analyze (players' influence of profitability) - test (test the analysis/compare prediction with observed profitability) - respond (action plan to use opportunities identified) - change (change in industry to identify future opportunity) Industry analysis - core concepts When profit is high in an industry, there is a powerful incentive for companies to enter A little simple math for marketing analysis Fixed & variable costs Fixed - don't change (Ex. building lease, advertising) Variable - do change depending on the amount of product sold; Margin calculations Unit margin is the difference between per-unit revenue and variable cost per unit; Revenue sold per unit ($95) - variable cost per unit ($46.55) = unit margin ($48.45) Percent margin is the percentage created by the division of the unit margin in dollars by the revenue per unit Unit margin ($48.45) / revenue per unit ($95) = .510 = percent margin 51% MAJOR NOTE: Percent margin is calculated by dividing by the firm's revenue received, NOT cost per unit Calculating the selling price for an expected margin Selling price = (cost)/1-(percent margin/100) (Ex. At what price must we sell a product whose variable cost per unit is $48.55 if we expect to achieve a margin of 25%?) Selling price = ($48.55)/1-(25/100) = $64.73 Percent margin = Revenue per unit ($64.73) - variable cost per unit ($48.55) = unit margin ($16.18), percent margin (25%?) Break-even volume calculation Used to identify the volume of units that need to be sold in order to cover fixed costs (BEV) BEV = Fixed cost in dollars/dollar margin per unit (Ex. What volume of units of an item with a dollar margin per unit of $48.45 must be sold to cover fixed costs of $150,000?) BEV = $150,000 / $48.45 = 3096 units Market size and share BEV share of market = BEV number of units / total
market number of units (Ex. if the total market of Gator t-shirts sold 1,450,000, what would the BEV share of the market be in the BEV for a new shirt style was 50,000 units?) BEV share of the market = 50,000 / 1,450,000 = 3.4% Apple Case Apple industry - Personal computer/PC; Key competitors - Amazon, samsung, Amazon; Strategy - Apple Watch, ability to innovate and bring unique products to the market with substantial brand loyalty; Porter 5 forces - industry competition (always develops new products) and the bargaining power of buyers (individual power is weak buy collective is strong) are the two strongest marketplace forces that can impact Apple's profitability; Customer loyalty allows high pricing, but too big of a gap in price looks too high; Always investing in R&D The Marketing Mix (4 P's) and Products and Offerings Neil Borden came up with many marketing mix elements in the 1940s Product planning, pricing, branding, channels of distribution, personal selling, advertising, promotions, packaging, display, serving, physical handling, fact-finding, and analysis; McCarthy simplified these elements into the marketing mix in the 1960s Product, place (or distribution channels), price, and promotion Today is focused on products and offerings :) A product is anything that delivers value to satisfy a need or want Ex. physical merchandise, services, software, events, experiences A product item is an SKU, but a product doesn't have to be an item; it can be an event, experience etc. Benefit is meeting a fundamental need or want by a product; the benefit is the result Ex. essential benefit of an airline? Getting from point A to B Ex. essential benefit of Starbucks coffee? Energy and hydration Core product is how firms turn the essential benefit into physical, tangible elements that can be delivered to the customer Includes all components necessary to deliver the essential benefit Can be a source of differentiation Ex. the safe airplane, pilot, etc. Ex. the cup for coffee, coffee beans, barista Enhanced product extends the core product to include additional features, designs, and innovations that exceed the customer's expectations of the core product Ex. Starbucks is much more enhanced of a product vs. Dunkin because of the ambiance, music, nice seating, etc. Offering is something that delivers customer value. It can be synonymous with the term product. Offerings usually extend beyond just one product and include many services. Offering can be bundles of products and services. Ex. Bundling hotel, rental cars, and flights as an offering American Airlines product offering Product = tangible, offering = benefit Product classifications - product nature Tangible - the product's physical aspects Tangible products offer the opportunity to see, touch, and physically experience the product Services are intangible and emotionally impact the customer Durability - the length of time the product is used Nondurable products are designed to be used and either consumed or discarded Ex. plastic bottle Durable products are designed for multiple uses ● Ex. hydro flask The nature of the product affects the willingness to buy and willingness to pay a higher price Product classifications - product usage Product usage defines who uses the product - consumers, businesses, government Consumer goods are intended to be sold to an end consumer Four major categories of consumer goods Convenience goods - bought regularly, ex. Food, gas Shopping goods - require more research and purchases less frequently, ex. Furniture, appliances, cars Speciality goods - unique purchases focus less on price and more on attributes, ex. High-end electronics, handbags Unsought goods - products required but not sought, ex. Insurance Product classifications - business and government goods Businesses (and govt) buy products based on two major dimensions Goods used in the manufacturing process, ex. Metal, wood, etc ○ Goods used to support business operations Ex. maintenance like toner and laptops, capital goods like data centers, and services like consulting and cleaning and business maintenance. What Form: size, shape, color, packaging Feature: any product attribute or performance characteristic Performance quality - must be balanced against price, ex. $80 cup of coffee Conformance quality - how well the product performs against expectations promised in marketing communication Ex. Coke's fizz Durability - how long the products last Ex. Mattress, computer Reliability - the percentage of the time the product works without failure or stoppage Repairability - the ease with which a consumer can have the item repaired if it bakes or needs maintenance Style - the aesthetic look of a product Can provide medium-term differentiation Can be difficult to copy Tied to trends Product plan - not just one product, but many A product line is a group of products that are lined through similar usage, customer profiles, price points, distribution channels or means of satisfying customer needs A product plan must address multiple factors: Number of similar item Difficulty differentiating among products Establishing meaningful product points Congested distribution channels Cannibalization Creating and sustaining marketing messages and promotion Ex. post-it note product line, Ghirardelli chocolate squares Product-mix Combining all the products offered by a company represents a product mix Developing and managing product mix is a major activity performed at the highest level of planning within large product production firms Ex. P&G 65 brands... hundreds of products 3M has 55,000 different products like adhesives, abrasives, laminates, car wax, shampoo, etc. Product decisions affect other marketing mix and firm operations decisions The product life cycle - FIVE PHASES**** Extending the product life If a firm adds additional features or changes to the product, it can affect the timing of the downturn of the curve Changing the product characteristics results in the development of "new products." Ex. toothpaste, standard versus "deluxe" versions ● New product development process definition Firm perspective "New to the world" product does not bear close resemblance to the firm's other products Upgrades or modifications of the same product Ex. Kindles Additions to existing products Ex. cherry dr pepper Repositioning existing products New target markets - Starbucks ground coffee in grocery stores Cost reduction Removing features in order to reach more value-oriented market target Customer perspective Without regard to the firm's perspective, if the customer hasn't been exposed to the product, it is "new" This can occur because of a different distribution channel or promotion or word-of-mouth Ex. Dollar Shave Club, uber If new products have a good strategy - 80% still fail for many reasons Ex. the forever roll of toilet paper What is the new product development process? 3 major activities, 8 tasks
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