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Marketing Exam Notes
All The Frameworks
Porter’s Five Forces
Potential Entrants, Suppliers, Buyers, Substitutes, Rivalry Among Existing Firms
The Business Macroenvironment (PEST)
 Political / Legal
 Economic / ecological
 Social / Cultural
 Technology
Situation Analysis (SWOT): Strengths, Weaknesses, Opportunities, Threats
Situation Analysis (5Cs): competitors, climate (environment), collaborators, customers,
company
Customer: DMU, DMP, Value Driver, Segment, Acquisition & retention, size growth
potential
Marketing Strategy (STP): Segmentation, Targeting, Positioning
Marketing Mix (4Ps): Product, Price, Place, Promotion, Evaluation of Alternatives
Implementation & Monitoring: implement decision, monitor & control, adapt & renew
Profit = [Mkt. demand x mkt. Share x (Rev. per buyer – V Cost per buyer)] – Fixed Cost
Set profit to zero for break-even, but don’t forget cannibalization
Value Cycle
comparative advantage, value proposition, competitive advantage, perceived value, sales
share and profit leadership, customer equity, superior market value, market orientation
Segmentation Scheme (AMISH): Per Market Segmentation PPT
o Accessible, measurable, identifiable, sustainable, homogenous
ATR (used in test marketing): Awareness, Trial, Repeat
Pricing Strategy:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
know how buyers value your offering (EVC, competitor pricing),
assess price sensitivity (elasticity, conjoint),
look for variation (ex: across countries),
anticipate competitive response,
identify appropriate pricing structure,
check consistency with overall strategy,
assess response and fine tune,
assess whether it’s worth it to serve customer
NTT DoCoMo
 Customer segmentation. Do a DMP, DMU.
Barco
 Marketing myopia
o Failure to adequately define, understand, anticipate and/or respond to the
marketplace and marketplace dynamics
o Narrowly focusing on one aspect of the organization, rather than taking a
balanced approach
o Causes: organizational inertia, internal focus is easier, each function has its own
ideas, human judgment is involved
 Market oriented firm vs. technology oriented firm
Marketing Myopia – Theodore Levitt
 Shadow of Obsolescence
o No such thing as a growth industry, only companies organized to take advantage
of growth opportunities. Four danger signs:
 Belief that growth is assured by expanding and more affluent population
 Belief that there is no substitute
 Too much faith in mass production and in the advantages of rapidly
declining unit costs as output rises
 Preoccupation with a product that lends itself to scientific
experimentation, improvement and manufacturing cost reduction

Production Pressures
o Concern yourself with marketing not sales (volume)

Dangers of R & D
o Don’t pay too much attention to r & d at the expense of considering marketing
o Don’t believe that a great product will sell itself
SalesSoft
 Must understand DMU and DMP, can’t just have a great product
 who is involved, has power; use of information; stages of purchasing
 Customer Analysis Tools
 Customer Activity Cycle- customer’s view of benefits/costs of your product from
pre-consumption to consumption to post-consumption
 Economic Value to the Customer (EVC)- differentiation over reference value
i. Ex: reduced startup and turnover, reduced sales cycle and implementation
costs
 Market Segmentation
 Determines target market and who competition is
Dolan Article: Low-tech Marketing Math
 Important!
 Can calculate break-even point (# of units)
 Can convert to share of market


Profit Drivers = revenues – costs
 Sales volume x price; variable + fixed costs
Numbers are more useful when there’s a benchmark to compare to
Black and Decker
o Important! A lot of good stuff in the Marketing Plan PPT!
o Know target audience: DMU, DMP, Values
o Perform a 5C analysis
o Marketing metrics: monitor performance, be willing to change, watch new opps. And
threats
o Break even analysis: $0 = Q (P-VC)-FC
o See the notes for Mark-up and Cannibalization
Citibank
Case
 Continuous debate in whether to create a global brand or go local. Answer is of course
finding the right balance, i.e. globalize where you can, adapt where you must.
 Standardize globally to increase efficiency, adapt locally to increase effectiveness
 Think about the costs & benefits before deciding whether to globalize or localize in each
area:

Positioning

Product

Price

Promotion

Place
 Segmentation

Group Buyers on the basis of similar needs & responsiveness to marketing mix

Develop profiles

Evaluate the segmentation scheme (AMISH)
 Targeting

Target based on segment attractiveness and competitive position

Portfolio models provide important input at this point (BCG, GE)
 Positioning

Identify drivers of perceived value for target customers
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Determine the relative importance of each value driver

Determine how current offerings (company and competitors) are perceived

Select an appropriate positioning strategy (positioning sentence)

Monitor the value proposition and allocate resources to support it
Article
The Lure of Global Branding – Aaker & Joachimsthaler
Companies should work on creating strong brands in all markets through global brand
leadership, i.e. using organizational structures, processes and cultures to allocate brand-
building resources globally, to create global synergies and to develop a global brand strategy
that coordinates and leverages country brand strategies:
o Sharing insights and best practices
o Supporting global brand planning
o Assigning responsibility
o Execution
Segmentation, Targeting and Positioning Presentation
Segmentation
o Determines Organizational Systems and Structure, Investments in Technology,
Required Skills and Resources, Etc.
o Defines who is – and who isn’t – a competitor
o Why do we segment?
o More accurate information about value drivers
o Better focus for marketing efforts
o To improve competitiveness
o Even a monopolist will be better off
o Segmentation is not just classification, demographics or product differentiation
o Group people based on similar needs, develop profile, evaluate scheme (AMISH)
Targeting
o Two basic segments: benefits sensitive, cost sensitive
o Strategies: mass marketing, concentrated marketing, differentiated marketing
o BCG matrix: star, cash cow, question mark, dog
Positioning
o Positioning – selection of a meaningful and distinct competitive position as perceived
by the target customer
o Perception is reality
o Positioning criteria: distinct, dominant, desired, sustainable, simple, profitable
Nestle – Contadina
 Alternatives to test marketing:
o Historical analogy
o Pre-test market forecasting
o Conjoint experiments – forecasting based on preferences
o Regional roll outs
 BASES model used. Another model is ASSESSORS. See noted for details. Both based
on ATR (awareness, trial, repeat)
 95% of new businesses fail in first five years. 80% of new products fail at launch.
 Signs of a good NPD (new product development) process
o Top-Level support
o Solid team performance and One visionary
o Quality, cost and speed trade-offs made very carefully
o Orderly process to kill bad ideas and fix good ideas
 NPD (New product development) (7 step program):
o Idea generation
o Concept Screening / Idea Refinement
o
o
o
o
o
Product Development
Quantification of Volume
Test market
Commercial Evaluation
Introductory Tracking
Customize Your Product Development – Edward Krubasik
Crash
program
Acquisition
Step-by-step
Exit
Joint
Venture
100% Right
Development Risk -------------------------------------
Biopure
 Pricing
1. Cost based pricing = average total cost + markup
i. Simple but ignores demand
2. Reference price is what customers expect to pay (usually hard to change)
3. Steps:
i. know how buyers value your offering (EVC, competitor pricing),
ii. assess price sensitivity (elasticity, conjoint),
iii. look for variation (ex: across countries),
iv. anticipate competitive response,
v. identify appropriate pricing structure,
vi. check consistency with overall strategy,
vii. assess response and fine tune,
viii. assess whether it’s worth it to serve customer
Dolan Article: How Do You Know When the Price is Right?
 Successful pricing efforts share two qualities:
o The policy complements the company's overall marketing strategy


o The process is coordinated and holistic consider competitors' reactions
8 Steps to Better Pricing- listed above
Remember to consider competitors' reactions
Rohm and Haas
Case
 A great product with a great price is not enough. Marketing mix -4Ps- should be
collaboratively handled in order to ensure the success of the product.

Ensure your product “reaches” the customers through effectively utilizing your
distribution network (intermediaries).

“Perception is reality”. Therefore, effective promotion should be incorporated to the
marketing plan in order to convey the superior product attributes and price/cost
advantages to the customer.
 Degree of authority is also important in conducting product management. Responsiblemanager should also have the sufficient degree of authority (budget) to give required
decision about the product.
 Transaction costs can be minimized and service level can be optimized by the appropriate
use of distribution channels (intermediaries). Trade-offs comes into scene at this point.
 Channel design process:
o
o
o
o
o
o
Define the target market and positioning
Determine which services the End-User (EU) values
Develop alternative End-User Interfaces (EUI)
Determine costs of supply chains for the EUI
Select channels that minimizes channel costs and maximize services
Check with a situational analysis
 Push Strategy – Manufacturer sells vs. Pull Strategy – End user ask for the product
Article
Stern & Sturdivant – Customer-Driven Distribution Systems
There are eight important steps in forming a well-performing distribution system:
1. Find out what your customers want (conjoint analysis, hybrid modeling and constantsum scales)
a. Lot-size
b. Market decentralization
c. Waiting time
d. Product variety
e. Service backup
2. Decide on appropriate outlets
Focus on the relation between market segments and the outlets where services are normally
delivered.
3. Find out about the costs
a. Find out if what customers want is feasible for the company
b. Determine what kind of collaboration or support from other up-stream players
will be required
c. Project the total cost
4. Bound the “Ideal”
Incorporate the opinions of the company executives to the system being designed
5. Compare your options
6. Review your pet assumptions
Incorporate outsiders to review the basic assumptions
7. Confront the gap – Get together to decide between what customers want and what
management wants
8. Prepare to implement
Review Session
o Look at questions first
o Spend about 1 hr. reading the case
o Don’t spend more than 15 minutes doing the numbers
o The sample exam answers were at a Pass level. Give more detail.
o Prioritize the key problems
o Identify and evaluate alternatives
o He will post Marketing Math slides tonight
o Keep break-even analysis in mind, profit equation = $0
o Variable costs vs. fixed costs
o Market share break-even: Break even / Market size. Is it achievable?
o Mark-up = (Retail Price – Wholesale Price) / Wholesale Price
o Wholesale price = Retail price / (1+ Markup)
o TEST in D1279 at 12:10 pm
GLOSSARY OF MARKETING TERMS
Brand Equity
Brand equity is the differential effect that brand knowledge has on buyer response. The key
components of brand equity are brand awareness and brand associations.
Brand Extension
A new product that uses an existing product’s brand name.
Concentrated Marketing
The organization selects a single market segment and focuses all resources on meeting
customer needs of that segment.
Comparative Advantage
An organization is said to have a comparative advantage when it possesses unique skills and
resources that are valued by customers.
Comparative Advantage Theory
A theory of competition that suggests firms should seek to build a comparative advantage in
resources that will support a marketplace position of competitive advantage (superior
customer value), and, thereby, superior financial performance.
Competitive Advantage
A competitive advantage exists when an organization successfully delivers perceived value
more effectively and efficiently than competition. In other words, when a firm has a
marketing mix that the target market sees as offering better customer value than a
competitor's mix.
Customer Activity Cycle
A tool for mapping out the entire chain of activities customers must engage in to produce
benefits sought.
Customer Equity
The net present value of expected cash flows from customers, both current and potential.
Customer Satisfaction
Customer’s post hoc evaluation of a consumption experience.
Differentiated Marketing
Similar to concentrated marketing except that the firm develops a unique marketing program
– positioning and marketing mix - for each target market segment.
DMP (Decision-Making Process)
The buyer’s decision-making process.
DMU (Decision-Making Unit)
All those with power and stake in the decision-making process.
Early Leader
Early leaders are firms that establish a dominant position in the market before the end of the
growth phase. Early leaders enter an average of 13 years after pioneers, yet are much more
successful.
The Four P’s
An organizing framework for thinking about the marketing mix. Product - the offering or
‘input’ that produces buyer benefits (eg, physical product and features, service aspects, brand
image, website functions). Place - the ‘right’ product to the ‘right’ buyer at the ‘right’ place
at the ‘right’ time (e.g, channel logistics, information, delivery). Promotion communications about the firm’s offering (eg, advertising, public relations, direct mail, viral
marketing, permission marketing). Price - an important component of a buyer’s ‘total cost’
(eg, price, financing, billing, fees, rent, discounts).
The Five C’s
The five components of the situation analysis – company, customers, collaborators,
competitors, and climate.
Generic Customer Benefits
A framework for thinking about generic drivers of perceived benefits that cut across
industries:
Product Benefits -- Benefits derived from product consumption.
Service Benefits -- Benefits derived from service experience.
Reputation Benefits -- Benefits derived from the offering and supplier's image and reputation.
Relationship Benefits -- Benefits derived from maintaining a relationship with the supplier
(e.g., better understanding of needs, membership in a community, etc)
Generic Customer Costs
A framework for thinking about generic drivers of perceived costs that cut across industries:
Perceived Price -- Perceptions of price (e.g., fairness, value)
Transaction Costs -- Time, Monetary, Psychological, and Effort costs associated with
obtaining an offering (e.g., travel time, storage costs)
Production Costs -- Time, Monetary, Psychological, and Effort costs associated with
producing desired benefits (e.g., preparing a meal, installing irrigation pipe).
Perceived Risk -- Monetary and Psychological risk from using a particular product or service.
Generic Value Drivers
A classification scheme for thinking about benefits (product, service, reputation, and
relationship) and costs (price, transaction costs, production costs, and risk) from the
customer’s point of view.
Generic Value Positions
Three basic strategies for achieving superior perceived value – benefit leadership, low cost
advantage, and dominant value.
Lifetime Value of the Customer
Lifetime Value of the Customer (LVC) is a measure of customer equity - the net present
value of future customer cash flows and costs.
Marketing
Marketing is the process of planning and executing the conception, pricing, promotion, and
distribution of goods, services, and ideas to create exchanges with target groups that satisfy
customer and organizational objectives.
The Marketing Concept
The marketing concept holds that the key to achieving organizational goals consists in
determining the needs and wants of target markets and delivering the desired satisfaction
more effectively and efficiently than competitors. In other words, the key to success is to
deliver superior value efficiently.
The Marketing Mix
The marketing mix is the firm’s offering to the target segment --it is how the firm will
deliver on it’s value proposition.
Marketing Myopia
Failure to adequately define, understand, anticipate, and/or respond to the marketplace and
marketplace dynamics; and/or narrowly focusing on one aspect of the organization, rather
than taking a balanced approach.
Market Orientation
The entire organization is focused on delivering superior value efficiently. A marketoriented firm envisions a value proposition that is thoroughly grounded in an understanding
of the marketplace and its dynamics. The organization - people, processes, structure,
resources, skills, and tasks - is aligned to support the value proposition. All decisions, from
strategic investments in building capabilities to day-to-day operational decisions are guided
by the value proposition. To make market-oriented decisions, the firm systematically gathers
information on customers and competitors (both current and potential), analyzes that
information for the purpose of developing marketing knowledge, and uses such knowledge to
guide the creation, selection, implementation, and adaptation of marketing strategy and
tactics.
Marketing Strategy
Marketing strategy is the process of determining what value we will provide and to whom.
What group(s) of customers should we serve? And not serve? What value should we offer?
What should we not offer?
Mass Marketing
Treating the entire market as if all customers had the same needs and offering the same
marketing mix to all buyers.
Perceived Value
The customer’s perception of what they actually get (total perceived benefits) relative to
what they have to give up (total perceived costs).
PEST
An acronym for the portion of the Situation Analysis dealing with macroenvironmental
forces and trends P.E.S.T. stands for Political/Legal, Economic/Ecological, Social/Cultural,
and Technological
Perceptual Mapping
A tool for measuring customer perceptions and preferences regarding an organization’s
market offering and those of it’s competitors.
Pioneering Advantage
A (questionable) theory stating that market pioneers enjoy significant advantages in the
long-run.
Positioning
Selection of a meaningful and distinct competitive value position as perceived by the target
customer.
Positioning Statement
A concise, simple, and creative statement of our ‘points of difference’ relative to the
competition.
Pull Strategy
Stimulating end-user demand to 'pull' a product through the channel (e.g., building brand
equity).
Push Strategy
'Pushing' a product through the channel to end-users (e.g., via incentives such as
merchandising allowances).
Segmentation
Grouping together buyers with similar preferences that can be served with a distinct
marketing mix.
Situation Analysis
A framework for analyzing business situations.
STP
STP – segmentation, targeting, and positioning - is an organizing framework for thinking
about the process of formulating marketing strategy.
Superior Customer Value
Customers perceive the value provided by our marketing mix to be better than the
competition’s marketing mix.
Target Market
A group of customers that we are seeking to serve.
Targeting
Selecting which group(s) of customers to serve and not serve.
Total Product
The entire offering as perceived from the customer’s point of view.
Transaction Costs
Time, effort, psychological, and monetary costs that a customer must incur during the preconsumption, consumption, and post-consumption phases of producing the benefits they
seek.
The Value Cycle
The value cycle is a conceptual framework showing how organizations can build a
continuous cycle for creating value. Importantly, it integrates the internal (comparative
advantage, competitive advantage, and accounting measures of performance) and marketbased perspectives (value proposition, customer perceived value, and market-based measures
of performance).
Value Components
The set of perceived benefits and perceived costs that determine perceived value (see
‘generic value components’).
Value Disciplines
To align organizational processes with the value proposition, organizations utilize three
basic internal strategies – or ‘value disciplines’ – for creating value: operational excellence (
‘supply chain management’); product leadership (‘management of innovation’); and
customer intimacy (‘customer relationship management’).
Value Drivers
Aspects of the firm’s offering that affect perceived value (see ‘generic value drivers’).
Value Position
The target set of benefits and costs that we intend to provide, as perceived by a customer in
the target segment (see ‘generic value positions’).
The Value-Profit Chain
The value-profit chain is a useful tool for diagnosing and evaluating business models. It
takes a systems view of value creation by linking together comparative advantage in
resources, competitive advantage in delivering value, customer advantage in terms of
customer equity, and financial performance.
Value Proposition
A value proposition envisions a target ‘marketplace position’ – how the firm will create a
match between firm capabilities, it’s offering, and target market needs. So, choosing a value
proposition means selecting whom to serve (the target market) as well as what to provide (the
value position). A good value proposition should provide a basis for building a comparative
advantage in resources, gaining a competitive advantage in delivering value, and achieving
superior financial performance.