Business Explain: September 2018

Archive for September 2018

What is the product life cycle and what is it based off of?

The course of a product's sales and profits over its lifetime

Four premises:
1. Products have limited life
2. Product sales pass through distinct stages, each with different marketing implications
3. Sales and profits from a product vary at different stages in the life cycle
4. Products require different strategies at different life-cycle stages

What are the types of brand valuation?

1. Market-based: valuation is based on an estimation of the amount for which a brand can be sold
2. Income-based: valuation is based on the future net revenues directly attributable to the brand, discounted to the present value using an appropriate discount rate
3. Formulary: valuation is based on profitability, leadership, stability, market, internationality, trend, support, and protection

What counts most in motivating the sales force?

1. A clear sales task: ensure that the linkage between effort expended and actual sales results is good and tight
2. Need for achievement: salespeople who value achievement exhibit higher levels of performance than do salespeople who emphasize other values
3. Incentive compensation and recognition: incentive compensation makes a strong link between reward (and often recognition) and expended effort
4. Good leadership: goal setting, coaching, evaluation, empathy, and knowledge are leadership skills that can contribute to salesperson performance

What are the determinants of service quality?

1. Reliability: the ability to perform the promised service dependably and accurately—the first time
2. Responsiveness: helping customers promptly
3. Assurance: providing the service with competence, courtesy, credibility, respect, and security
4. Empathy: providing easy access, clear communication, and listening to understand customer needs
5. Tangibles: the appearance of physical facilities, equipment, and personnel

What are the characteristics of services marketing and what are their marketing problems/solutions?

1. Intangible: marketing problem- services cannot be easily displayed or communicated; marketing solution- tangible cues and physical environment
2. Inseparable: marketing problem- consumer and provider are part of the service; marketing solution- people, care/quality, and personal attention
3. Variability: marketing problem- services depend on who provides them and when and where they are provided; marketing solution- process, standardization, and training
4. Perishable: marketing problem- services cannot be stored; marketing solution- predict demand fluctuation and balance supply and demand

What is a product mix? What are the four dimensions of a product mix?

Product mix, also known as product assortment, refers to the total number of product lines that a company offers to its customers.

For example, a small company may sell multiple lines of products. Sometimes, these product lines are fairly similar, such as dish washing liquid and bar soap, which are used for cleaning and use similar technologies.

Other times, the product lines are vastly different, such as diapers and razors. The four dimensions to a company's product mix include width, length, depth and consistency.

Small companies usually start out with a product mix limited in width, depth and length; and have a high level of consistency.

However, over time, the company may want to differentiate products or acquire new ones to enter new markets.

A company can also sell the existing products to new markets by coming up with new uses for their product.

What is a brand? What are the advantages of branding?

Enhances Product Recognition - Brands provide multiple sensory stimuli to enhance customer recognition.

For example, a brand can be visually recognizable from its packaging, logo, shape, etc. It can also be recognizable via sound, such as hearing the name on a radio advertisement or talking with someone who mentions the product.

Helps Build Brand Loyalty - Customers who are frequent and enthusiastic purchasers of a particular brand are likely to become Brand Loyal.

Cultivating brand loyalty among customers is the ultimate reward for successful marketers since these customers are far less likely to be enticed to switch to other brands compared to non-loyal customers.

Helps With Product Positioning - Well-developed and promoted brands make product positioning efforts more effective. The result is that upon exposure to a brand (e.g., hearing it, seeing it) customers conjure up mental images or feelings of the benefits they receive from using that brand. The reverse is even better.

When customers associate benefits with a particular brand, the brand may have attained a significant competitive advantage.

In these situations the customer who recognizes he needs a solution to a problem (e.g., needs to bleach clothes) may automatically think of one brand that offers the solution to the problem (e.g., Clorox). This "benefit = brand" association provides a significant advantage for the brand that the customer associates with the benefit sought.

Aids in Introduction of New Products - Firms that establish a successful brand can extend the brand by adding new products under the same "family" brand.

Such branding may allow companies to introduce new products more easily since the brand is already recognized within the market.

Builds Brand Equity - Strong brands can lead to financial advantages through the concept of Brand Equity.

What is a product? what are three levels of a product?

The CORE product is NOT the tangible physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly.

The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car, it is the vehicle that you test drive, buy and then collect. You can touch it. The actual product is what the average person would think of under the generic banner of product.

The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car's manufacturer and any after-sales service. The augmented product is an important way to tailor the core or actual product to the needs of an individual customer. The features of augmented products can be converted in to benefits for individuals.

Describe the different types of value propositions on which a company might position its products.

Individual buyers and organizational buyers both evaluate products and services to see if they provide desired benefits. For example, when you're exploring your vacation options, you want to know the benefits of each destination and the value you will get by going to each place.

Before you (or a firm) can develop a strategy or create a strategic plan, you first have to develop a value proposition.

A value proposition is a thirty-second "elevator speech" stating the specific benefits a product or service offering provides a buyer. It shows why the product or service is superior to competing offers.

Explain the four major segmentation variables for consumer markets.

The four major segmentation variables for consumer markets are:

A. Demographic Segmentation
B. Geographic Segmentation
C. Psychographic Segmentation
D. Behavioural Segmentation

A. Demographic Segmentation:

Demographic segmentation divides the markets into groups based on variables such as age, gender, family size, income, occupation, education, religion, race and nationality. Demographic factors are the most popular bases for segmenting the consumer group. One reason is that consumer needs, wants, and usage rates often vary closely with the demographic variables. Moreover, demographic factors are easier to measure than most other type of variables.

1. Age:

It is one of the most common demographic variables used to segment markets. Some companies offer different products, or use different marketing approaches for different age groups. For example, McDonald's targets children, teens, adults and seniors with different ads and media. Markets that are commonly segmented by age includes clothing, toys, music, automobiles, soaps, shampoos and foods.

2. Gender:

Gender segmentation is used in clothing, cosmetics and magazines.

3. Income:

Markets are also segmented on the basis of income. Income is used to divide the markets because it influences the people's product purchase. It affects a consumer's buying power and style of living. Income includes housing, furniture, automobile, clothing, alcoholic, beverages, food, sporting goods, luxury goods, financial services and travel.

4. Family cycle:

Product needs vary according to age, number of persons in the household, marital status, and number and age of children. These variables can be combined into a single variable called family life cycle. Housing, home appliances, furniture, food and automobile are few of the numerous product markets segmented by the family cycle stages. Social class can be divided into upper class, middle class and lower class. Many companies deal in clothing, home furnishing, leisure activities, design products and services for specific social classes.

B. Geographic Segmentation:

Geographic segmentation refers to dividing a market into different geographical units such as nations, states, regions, cities, or neighbourhoods. For example, national newspapers are published and distributed to different cities in different languages to cater to the needs of the consumers.

Geographic variables such as climate, terrain, natural resources, and population density also influence consumer product needs. Companies may divide markets into regions because the differences in geographic variables can cause consumer needs and wants to differ from one region to another.

C. Psychographic Segmentation:

Psychographic segmentation pertains to lifestyle and personality traits. In the case of certain products, buying behaviour predominantly depends on lifestyle and personality characteristics.

1. Personality characteristics:

It refers to a person's individual character traits, attitudes and habits. Here markets are segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc. This type of segmentation is used when a product is similar to many competing products, and consumer needs for products are not affected by other segmentation variables.

2. Lifestyle:

It is the manner in which people live and spend their time and money. Lifestyle analysis provides marketers with a broad view of consumers because it segments the markets into groups on the basis of activities, interests, beliefs and opinions. Companies making cosmetics, alcoholic beverages and furniture's segment market according to the lifestyle.

D. Behavioural Segmentation:

In behavioural segmentation, buyers are divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. Behavioural segmentation includes segmentation on the basis of occasions, user status, usage rate loyalty status, buyer-readiness stage and attitude.

1. Occasion:

Buyers can be distinguished according to the occasions when they purchase a product, use a product, or develop a need to use a product. It helps the firm expand the product usage. For example, Cadbury's advertising to promote the product during wedding season is an example of occasion segmentation.

2. User status:

Sometimes the markets are segmented on the basis of user status, that is, on the basis of non-user, ex-user, potential user, first-time user and regular user of the product. Large companies usually target potential users, whereas smaller firms focus on current users.

3. Usage rate:

Markets can be distinguished on the basis of usage rate, that is, on the basis of light, medium and heavy users. Heavy users are often a small percentage of the market, but account for a high percentage of the total consumption. Marketers usually prefer to attract a heavy user rather than several light users, and vary their promotional efforts accordingly.

4. Loyalty status:

Buyers can be divided on the basis of their loyalty status—hardcore loyal (consumer who buy one brand all the time), split loyal (consumers who are loyal to two or three brands), shifting loyal (consumers who shift from one brand to another), and switchers (consumers who show no loyalty to any brand).

5. Buyer readiness stage:

The six psychological stages through which a person passes when deciding to purchase a product. The six stages are awareness of the product, knowledge of what it does, interest in the product, preference over competing products, conviction of the product's suitability, and purchase. Marketing campaigns exist in large part to move the target audience through the buyer readiness stages.

Explain the four major steps in designing a customer-driven marketing marketing strategy.

Conduct Market Research

The first step in planning a customer driven marketing strategy is research. Market research can be as informal as an online survey you send out to your email list or a phone survey. Make your survey questions simple and easy to understand, starting with general questions that move into more specific questions as the survey goes along. Always pretest your questions with a sample group to identify any problems so you have the opportunity to revise them before sharing your survey with your respondents.

Analyze Research Results

The simplest method for presenting statistical data is descriptive data analysis, a simple quantitative summary of the data collected in a survey. For example, your target audience's responsiveness to products and services, preferred methods of customer contact and advertising formats can be summarized in a series of brief statements like, "80 percent of participants strongly preferred being contacted by phone to being contacted by text messages," or "A third of our survey respondents preferred Product A to Product B."

Integrated Marketing Campaign

An integrated marketing campaign is designed to "touch" your prospects and customers in the ways they prefer to be reached. Normally this means combining one or two traditional print media methods with online marketing techniques to ensure your brand is everywhere your audience is. For some markets this amounts to a monthly postcard campaign, weekly delivery of an e-newsletter and a text message to announce special promotions and discounts. Some of the many possibilities for reaching your audience include content marketing, text messaging, social media or a good old-fashioned phone call.

Follow Up

A marketing strategist's work doesn't end when the online marketing campaign has been e-delivered or the flyers have been distributed. Tracking customer response to a campaign will provide important information on its success, and will streamline the planning process for future marketing efforts. Create a clear method for tracking results, from tracking opens of your e-newsletter, to tracking coupon codes from a print campaign in a simple, easy to update database. Update your spreadsheet whenever you receive information about how a customer found you -- and always remember to ask.

Explain the major types of buying situations.

New buy: A purchasing situation requiring the purchase of a product for the very first time.

Modified re-buy: A purchasing situation where the buyer's revisions to the order require additional analysis or research

Straight re-buy: A purchasing situation where the buyer reorders the same products without researching or considering other suppliers

Identify and describe the stages in the adoption process of a new product.

Stage 1 - Product Awareness
Stage 2 - Product Interest
Stage 3 - Product Evaluation
Stage 4 - Product Trial
Stage 5 - Product Adoption

Describe the steps of the buyer decision.

I. Need recognition / Problem recognition
II. Information search
III. Alternative evaluation
IV. Purchase decision
V. Post-purchase behavior

Stage 1 - Need recognition: It's sunday night. You're hungry (internal physiological stimuli) and there is nothing in the fridge. You will order food (statement of need).

Stage 2 - Information search: You already have ordered to the Indian restaurant in your street last month (internal information). A friend recommended a pizzeria in your neighbourhood (external information from environment). And this morning you've found a flyer for a sushi restaurant in your mailbox (external information from advertising).

Stage 3 - Alternative evaluation: You have a bad opinion of the Indian restaurant since you've been sick the last time (inept set). The pizzeria is both recommended by your friend and also happens to be a well-known brand (positive perception - evoked set). As for the sushi restaurant, it got good reviews on Tripadvisor (positive perception - evoked set).

Stage 4 - Purchase decision: After evaluating the possibilities, you've decided to choose the well-known pizza delivery chain. In addition, a new episode of your favorite TV show is broadcasted tonight on TV.

Stage 5 - Post-purchase behavior: The pizza was good (positive review). But you know there was too many calories and you regret a little bit (mixed feelings about yourself). The next time you will choose the sushi restaurant. There is less fat in sushi than pizza (next purchase behavior)!

Explain Maslow's hierarchy of needs.

1. Biological and Physiological needs - air, food, drink, shelter, warmth, sex, sleep.

2. Safety needs - protection from elements, security, order, law, stability, freedom from fear.

3. Love and belongingness needs - friendship, intimacy, affection and love, - from work group, family, friends, romantic relationships.

4. Esteem needs - achievement, mastery, independence, status, dominance, prestige, self-respect, respect from others.

5. Self-Actualization needs - realizing personal potential, self-fulfillment, seeking personal growth and peak experiences.

What is the customer relationship management (CRM)? What are the functions of CRM? How do firms benefit from CRM systems?

Customer relationship management (CRM) is a term that refers to practices, strategies and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention and driving sales growth.

CRM systems are designed to compile information on customers across different channels -- or points of contact between the customer and the company -- which could include the company's website, telephone, live chat, direct mail, marketing materials and social media.

CRM systems can also give customer-facing staff detailed information on customers' personal information, purchase history, buying preferences and concerns.

Differentiate between the three types of marketing research objectives: exploratory research, descriptive research, and causal research.

Exploratory Research

Exploratory research is an important part of any marketing or business strategy. Its focus is on the discovery of ideas and insights as opposed to collecting statistically accurate data. That is why exploratory research is best suited as the beginning of your total research plan. It is most commonly used for further defining company issues, areas for potential growth, alternative courses of action, and prioritizing areas that require statistical research.

When it comes to online surveys, the most common example of exploratory research takes place in the form of open-ended questions. Think of the exploratory questions in your survey as expanding your understanding of the people you are surveying. Text responses may not be statistically measurable, but they will give you richer quality information that can lead to the discovery of new initiatives or problems that should be addressed.

Descriptive Research

Descriptive research takes up the bulk of online surveying and is considered conclusive in nature due to its quantitative nature. Unlike exploratory research, descriptive research is preplanned and structured in design so the information collected can be statistically inferred on a population.

The main idea behind using this type of research is to better define an opinion, attitude, or behaviour held by a group of people on a given subject. Consider your everyday multiple choice question. Since there are predefined categories a respondent must choose from, it is considered descriptive research.

These questions will not give the unique insights on the issues like exploratory research would. Instead, grouping the responses into predetermined choices will provide statistically inferable data. This allows you to measure the significance of your results on the overall population you are studying, as well as the changes of your respondent's opinions, attitudes, and behaviours over time.

Causal Research

Like descriptive research, causal research is quantitative in nature as well as preplanned and structured in design. For this reason, it is also considered conclusive research. Causal research differs in its attempt to explain the cause and effect relationship between variables.

This is opposed to the observational style of descriptive research, because it attempts to decipher whether a relationship is causal through experimentation.

In the end, causal research will have two objectives:

1) To understand which variables are the cause and which variables are the effect, and
2) to determine the nature of the relationship between the causal variables and the effect to be predicted.

For example, a cereal brand owner wants to learn if they will receive more sales with their new cereal box design. Instead of conducting descriptive research by asking people whether they would be more likely to buy their cereal in its new box, they would set up an experiment in two separate stores. One will sell the cereal in only its original box and the other with the new box.

Taking care to avoid any outside sources of bias, they would then measure the difference between sales based on the cereal packaging. Did the new packaging have any effect on the cereal sales? What was that effect?

Explain the steps involved in the marketing research process.

Step 1. Define the Objective & Your "Problem"
Step 2. Determine Your "Research Design"
Step 3. Design & Prepare Your "Research Instrument"
Step 4. Collect Your Data
Step 5. Analyze Your Data
Step 6. Visualize Your Data and Communicate Results

Marketers can obtain needed information from internal data, marketing intelligence, and marketing research. Describe some common sources of each of these.

Sources of internal data, marketing intelligence and marketing research Internal data, marketing intelligence and marketing research are methods that a firm can use to acquire information to stimulate and operate its MIS (market information system).

Internal data Electronic collection of consumers and market information gathered from data sources within the company network.

It is used to identify marketing opportunities and problem, plan program and evaluate performance, so that a company can make better marketing decisions.

Sources Furthermore, data sources are the marketing departments within the company that carry information on customer transactions, demographics, psychographics and buying behaviors. Such as, accounting department, customer service department, operations, the sales force, marketing channel partners and harnessing.

Discuss the four Ps of the typical marketing mix.

Price: The first of the four P's is price. From the manufacturer to the customer, price must be thoroughly examined all the way through the buying/purchasing process. Make sure you consider everything that the price of a product entails; variables that affect price include distribution, location of distribution, the retailer's price mark-up, competitor pricing and payment plans.

Product: The second of the 4 P's is product. In determining the product, you must ask pertinent questions to further understand the product that you want to sell. For example, "What problem will this product solve?" or "What will be the features and benefits of this product?" You must determine how your product is unique to the market and who is most likely to purchase the product. One important note: make sure you address the features that aren't found in this product. No one product can do everything, so narrow down the features and benefits as well as what the product is lacking.

Promotion: The third P is promotion. How are you going to promote this product? Whether it's through web promotions, traditional advertising, event marketing or another tactic, you need to make sure that your marketing strategy is appropriate for the product, price and customer. An inadequate promotional initiative can waste time and revenue.

Placement: The fourth and final P is placement. Placement clarifies where a product will be sold. Will it be available in both brick-and-mortar retailers and through online merchants? It is important to figure out if product is suited for the placement that you've selected. It is also wise to determine an exit strategy if your product does not do well and you need to find a new sales channel.

Discuss the four Ps of the typical marketing mix.

What is a business portfolio? How does a company typically conduct a portfolio analysis?

A business portfolio is a company's set of investments, holdings, products, businesses and brands. A product portfolio is the product's mix of market segments.

1) Identify the businesses making up the company.

2)Assess the attractiveness of its various SBUs.

3) Determining Business portfolio's health.

4) Having identified the business units that result from the analysis, the company's next task is to determine what objectives, strategy and budget to assign to each business unit.

Define customer equity, and explain why it is important to a company.

Customer equity is the total of lifetime values of all your current and future customers - the sum total of all the value you'll ever realize from customers. Because customers create all value, this means that customer equity is virtually the same number as the "going concern" value of your business.

Compare and contrast the product and production concepts.

Production Concept: The production concept holds that the consumer prefer the goods which are easily available at lower prices. Therefore, it is necessary to produce in large quantities at lower costs.

• Product Concept: It is a belief of the management that consumers favour the products of superior quality, better performance and innovative features. Therefore, successful marketing requires continuous product planning and development and improvement in quality standards.

Using suitable examples, briefly compare and contrast the concepts of needs, wants, and demands. Discuss how these concepts relate to the marketing practices.

Needs wants and demands are a part of basic marketing principles. Though they are 3 simple worlds, they hold a very complex meaning behind them along with a huge differentiation factor. In fact, A product can be differentiated on the basis of whether it satisfies a customers needs, wants or demands.

Each of them is discussed in detail in this article.

Needs -Human needs are the basic requirements and include food clothing and shelter. Without these humans cannot survive. An extended part of needs today has become education and healthcare. Generally, the products which fall under the needs category of products do not require a push. Instead the customer buys it themselves. But in today's tough and competitive world, so many brands have come up with the same offering satisfying the needs of the customer, that even the "needs category product" has to be pushed in the customers mind.

Example of needs category products / sectors - Agriculture sector, Real Estate (land always appreciates), FMCG, etc. Wants - Wants are a step ahead of needs and are largely dependent on the needs of humans themselves. For example, you need to take a bath. But i am sure you take baths with the best soaps. Thus Wants are not mandatory part of life. You DON'T need a good smelling soap. But you will definitely use it because it is your want. In the above image, the baby needs milk but it WANTS candy :)

Example of wants category products / sectors - Hospitality industry, Electronics, Consumer Durables etc, FMCG, etc.

Demands - You might want a BMW or a Mercedes for a car. You might want to go for a cruise. But can you actually buy a BMW or go on a cruise? You can provided you have the ability to buy a BMW or go on a cruise. Thus a step ahead of wants is demands. When an individual wants something which is premium, but he also has the ability to buy it, then these wants are converted to demands. The basic difference between wants and demands is desire. A customer may desire something but he may not be able to fulfill his desire.

Example of demands - Cruises, BMW's, 5 star hotels etc.

The needs wants and demands are a very important component of marketing because they help the marketer decide the products which he needs to offer in the market. Thus the flow is like this.

What is marketing? briefly describe the marketing process.

Marketing is the process of building profitable customer relationships by creating value for customers and capturing value in return. The first four steps of the marketing process focus on creating value for customers.

The company first gains a full understanding of the marketplace by researching customer needs and managing marketing information. It then designs a customer-driven marketing strategy based on the answers to two simple questions.

The first question is "What consumers will we serve?" (market segmentation and targeting). Good marketing companies know that they cannot serve all customers in every way. Instead, they need to focus their resources on the customers they can serve best and most profitably. The second marketing strategy question is "How can we best serve targeted customers?" (differentiation and positioning). Here, the marketer outlines a value proposition that spells out what values the company will deliver to win target customers. With its marketing strategy chosen, the company now constructs an integrated marketing program—consisting of a blend of the four marketing mix elements—the four Ps—that transforms the marketing strategy into real value for customers.

The company develops product offers and creates strong brand identities for them. It prices these offers to create real customer value and distributes the offers to make them available to target consumers. Finally, the company designs promotion programs that communicate the value proposition to target customers and persuade them to act on the market offering. Perhaps the most important step in the marketing process involves building value-laden, profitable relationships with target customers.

Throughout the process, marketers practice customer relationship management to create customer satisfaction and delight. In creating customer value and relationships, however, the company cannot go it alone. It must work closely with marketing partners both inside the company and throughout its marketing system. Thus, beyond practicing good customer relationship management, firms must also practice good partner relationship management.

The first four steps in the marketing process create value for customers. In the final step, the company reaps the rewards of its strong customer relationships by capturing value from customers. Delivering superior customer value creates highly satisfied customers who will buy more and buy again. This helps the company capture customer lifetime value and greater share of customer.

The result is increased long-term customer equity for the firm. Finally, in the face of today's changing marketing landscape, companies must take into account three additional factors. In building customer and partner relationships, they must harness marketing technology, take advantage of global opportunities, and ensure that they act in an environmentally and socially responsible way.