COMM 131:

Final Exam Notes

Annika Kwok - 2016

Class 1: Changing Your Interpretation of What Marketing Is

What is Marketing?
A more formal definition of marketing is:
A social and managerial process by which individuals and organizations obtain what they need and
want through creating and exchanging value with others.

The laymen view is that marketing is strictly selling and advertising:
Think of the evil blood-thirsty corporation pushing for people to buy products that they may not
need. Or the car salesmen willing to do anything to make a sale
Marketing is just a tool that is sometimes used by blood thirsty corporate animals
It is a tool that can also be used for good

The activity of marketing is actually much broader!

Party A
Party B

Value

Very simply, marketing is the exchange of value between two or more parties.
o The definition of exchange is very broad
o The definition of parties is very broad
o The definition of value is very broad
The simple answer is Marketing is Everything!
The ads on TV
The Unicef boxes kids wear on Halloween
The decision to charge $4.99 for a product and not $5.00 (and vice versa)
The decision to hand out free condoms during Frosh week
The decision to let a student sit in Starbucks for 10 hours baby sipping a single cup of coffee
The decision to let a line build up outside The Ale House when it is empty inside
Your decision of what clothes you put on this morning
My decision to wear a suit today
Origins in Economics
Belief that profit and business success is through efficient delivery. produce the product for as
little as possible, sell for as high as possible
Porsche SUV example: car with the highest markup
Belief that the customer is rational and predictable, they are just looking to maximize welfare
(they are motivated by money and that money buys more stuff and more stuff = happiness) -
but this is just an assumption and not always the case!
Marketing and marketing decisions have been moving away from these old assumptions, but
companies have been built from these assumptions, government policies and laws have been

made from these assumptions, they are ingrained within society. Change is happening, but it is
a slow process.

Stepping away from Economics:

Incorporating Psychology:
Customers may still be predictablebut they are predictably irrational
The behavior of a consumer can be largely impacted by small and irrelevant factors that should
not rationally impact consumer choices
Relation between arousal and intentions to have unprotected sex
Preference for romantic movies in the cold weather.
Consumers promoting products without being paid by those companies
Italian music being played in the LCBO increases sales of Italian wines

Incorporating Sociology:
Customers are not predictableeveryone is different
Understanding different consumer cultures
Marketing Revolution The times, they are changing
Social issues and sustainability less concern on money, stuff, and things
Similar movement as the 1960s (the digital hippy)
The irrational consumer view is being accepted and the marketer is seen as the enemy for
manipulating and influencing.
Don't accept everything you hear as Truth question everything.

Class 2: Starting from Scratch: The Marketing Planning Process

The Marketing Process
1. Understand the playing field
What is out there? Get a broad overview of the environment.
What are customers needs and wants? Which needs and wants are currently being met, and
which ones are not?
Some companies may be fulfilling a need but not optimally
Marketing Myopia: Focusing to much on the specific product being offered and not the needs
that this product fulfills
Ex. Nike vs. Under Armor
Ex. Trains vs. Planes
Ex. Blackberry vs. iPhone
2. Determine a Strategy
What is your philosophy? What is your assumptions regarding the role of the
marketer/organization and the customer and society? Your philosophy will guide strategy
decisions.
o Production Concept Everyday low prices
o Product Concept If you build it, they will come
o Selling Concept pushing drugs on kids
o Marketing Concept give the people what they want/need
o Societal marketing concept putting people before profits
Who are you targeting and how will you stand out from others (i.e., position and
differentiation)?
o How will you divide up the population into different groups (i.e. segmentation)?
o Divide based on income? Interests? Needs? Geographical Region? Age?
o Which one of these segments, or multiple segments will you target?
o How will you make your offering(s) (e.g., product(s), service(s)) stand out to your
targeted segments compared to competitors (i.e. positioning)
SWOT Analysis
o Internal: what are your Strengths and Weaknesses
o External: what are your Opportunities and Threats to success

o Interpreting this, how will these elements shape your strategy and influence your
marketing mix?
3. The Marketing Mix
The 4 Ps of marketing (the marketing mix):
Product: the details about what your offering is
o Quality
o Design
o Features
o Name
o Packaging
o Services
o Warranty
o Colour, Shape, and Size
Price: what does the product receiver (i.e. customer) have to give up
o Money (list price)
o Time
o Other products (replacement?)
Place: how will the offering get from you to the customer
o Channels
o Assortments
o Locations
o Inventory
o Transportation
o Logistics
Promotion: How will potential customers learn about and start to desire your product?
o Advertising
o Sales Promotions
o Public Relations
o Personal Selling
o Endorsements
4. Build and Retain Relationships
Keeping customers and suppliers is cheaper then getting new ones.
Customer Relationship Management:
o The activity of managing the relationship that exists with customers
o Very easy with the accessibility of consumer data.
E.g. Under Armour keeps good relationships with their Retailers (Sports Check) to ensure Under
Armour is front and center of the store, and they also keep good relationships with sports teams
and athletes to ensure that they are wearing Under Armour gear when seen on TV.

5. Extract value
Why did you want to provide an offering in the first place?

 What is in it for you?

What were you trying to accomplish with engaging in the marketing process in the first place?
o Make a profit?
o Help out society?
o Support a charity? Etc.

Apply to Real Life
Taking a broader definition of who the customer is and what the offering is then you can apply
the marketing process to anything.
o E.g., Consider yourself as The Product with the end goal as getting a job when you are
done university.

Class 3: How to Analyze a Business Case

Step 1: Problem Statement
A solid and simple problem statement makes the rest of the case analysis easier
o It will help you determine what information is relevant when analyzing the case.
o There is usually a lot of irrelevant information in cases (and in life), so try to
determine your problem from within all this irrelevant information.
Think K.I.S.S Keep It Simple, Stupid!
Step 2: Situation Analysis
SWOT Analysis
o Strengths: What assets or benefits does the company in question have that is
specific to them that they can use to their advantage to help solve this problem
o Weaknesses: What liabilities or disadvantages does the company in question
have that is specific to them that may make it difficult to solve this problem
o Opportunities: What external environmental situations can the company take
advantage of. (*opportunities is something that other companies could
potentially take advantage of also and are not specific to the specific company in
question)
o Threats: What external environmental situations may hinder the company in
solving their problem? (*threats are not specific to the company in question and
may also impact other companies as well)
Customer Analysis
o Who are they? What do they want? Where do they buy? Why do they buy? How
are they influenced to buy?
Competitor Analysis
o Direct Competitors: Who are the other companies that offer exactly what you
do?
o Indirect Competitors: Who are the other companies that could fulfill the same
general customer need as your company?

 Financial Analysis
o What do you have to work with? What is your monetary and time constraints?
o How much money does it cost to make money?
What are your fixed costs (rent, utilities, mortgage, salaries)?
What are your variable costs (per unit costs, such as supplies and
materials needed to make 1 product)
o Simple Profit Formula
Profit = [(#units sold) x (price)] [(#units sold) x (variable costs)] (Fixed
Costs)
o How many units do you need to sell to Break Even (make $0 in profit)
Make Profit=0 in the above formula and solve for (#units sold)
Step 3: Define Objectives
Objectives should be S.M.A.R.T
o Specific
o Measurable
o Attainable
o Relevant
o Timely
Step 4: Alternatives and Alternative Evaluations
Each alternative should be viable and could solve the problem (sometimes alternatives
are given in the case)
Alternatives should be evaluated based on how well they meet the objectives
Step 5: Recommendation
Suggest the alternative that best solves your problem.
Your reason why this recommendation has been choosing is outlined in step 4 when you
evaluated the various alternatives.

Class 4/5: Segmentation, Targeting and Positioning

Segmenting, Targeting, and Positioning

Segmenting: Dividing a market into distinct groups according to one or a combination of
factors
Targeting: Determine segments attractiveness, and selecting a segment(s) to focus
marketing on
Positioning: Tailoring marketing mix for each targeted segment
Segmentation
You cannot target everyone: Targeting everyone and hoping to convince just a small

percent of them sounds easy (shotgun approach)

o But this approach is inefficient, costly, and difficult to control.
To get a better understanding of the different wants and needs of customers you divide

them into segments based on one or a combination of variables such as,

o Geographic segmentation Dividing a market based on where they live
o Demographic segmentation Dividing a market based on observable
characteristics (e.g., income, gender, race, age, etc.)
o Psychographic segmentation Dividing a market based on unobservable
characteristics (e.g., personality, attitudes, lifestyle, social class, etc.)
o Behavioural segmentation Dividing a market based on product related
behaviour (e.g., product knowledge, attitudes, usage, loyalty, etc.)
Geographic Segmentation
Dividing a market into different groups based on location
Such as: Nations, states, regions, counties, cities, or neighborhoods
Ex. dividing market into Urban, Suburban, and Rural

Demographic Segmentation
Dividing a market into groups based on visible and tangible differences

 Such as: Age, gender, family size, family life cycle, income, occupation, education,

religion, race, nationality, generation

o Ex. Single, female, ages 18-24, with or pursuing a university education
Demographic segmentation is very convenient and easy to divide up the market and

make interpretations of the needs and wants of various demographic groups, but two
people in the same demographic profile may have drastically different preferences.
o Ex. Think of your roommates or classmates. You are likely to be very similar
demographically, but how similar are you really?
Psychographic Segmentation
Dividing a market into groups based on internal differences
Such as: Attitudes, behaviours, lifestyle, values, motivations, personality

o Ex. Liberal type A personalities who values luxurious things

o Ex. Vegetarian who is concerned about the state of the environment
o Ex. A second amendment supporting liberal anarchist
Although dividing a market based on psychographics makes it easier to accurately

determine potential consumers wants and needs, it is sometimes difficult to point these
people out of a crowd.
Behavioural Segmentation
Dividing a market into groups based on consumers product-related behaviour
Such as: product knowledge, product attitudes, product usage, usage rate, loyalty

o Ex. Experienced guitar players who are knowledgeable and prefer quality
craftsmanship over being loyal to one brand
o Ex. Beginner mountain bikers with no technical knowledge looking to start a new
hobby

Needs Based Segmentation and the Segmentation Grid

Combine multiple segments to create better-defined potential target groups whose

needs your product/offering will satisfy.

o Give each segment a name (e.g., Young Professionals)
o What is this segments primary need? (e.g., For young professionals their primary
need good be to distinguish themselves from non-professionals)
o Lastly, how do each segment compare across the various segmentation categories
(e.g., geography, demographics, psychographics, behavioural)

Example: You are looking to start a restaurant that sells premium sausages in Kingston. Create
a segmentation grid for the potential segments you could chose to target.

Segment
Name

Primary
Need

Geography

Young
Professionals

Unique and
trendy
atmosphere

Downtown

Demographics

Meat
Connoisseurs

Students

Psychographics

25-35 years
Disposable
income
Single and/or
No Kids

High quality
products and
variety

Both
Downtown
and West End

35-60 years
High Income
Empty
Nester

Cheap place for

large groups to
eat

Close to School
and Hub

17 25
Low income
Lots of
friends

Does not want

to be confused
as a student
Enjoys
quitter/casual
outings
values quality
over quantity
willing to spent
more money at
a restaurant

Values quantity
over quality
Likes spending
time with
friends and
going out in
groups

Behavioural
Goes out to
restaurants 1-2
times a week

Goes out to
restaurants 1-2 a
month and
experiments
with different
food options at
home
Goes out to
dinner whenever
others are

Targeting
After creating a segmentation grid made up of different segments that are all feasible to

target you determine which segment to focus on and target marketing efforts towards.
You should pick a segment to target that is;

o Measurable - Ability to measure numerically. Eg. size, purchasing power, and profile
of segment
o Accessible - Can be reached and served
o Substantial - Large and profitable enough to support the business
o Differentiable - Ability to find a unique position in the segment relative to
competition
o Actionable - Effective programs can be developed

Class 4/5: Segmentation, Targeting and Positioning - PART 2

Positioning
A products position is the way the product is defined in the minds of consumers based
on various attributes relative to competing products
The act of positioning a product is the deciding of the elements in the marketing mix (4
Ps) to help shape how a consumer views a product based on various attributes relative
to competition
The goal of positioning is to create psychological associations between the product
offering and elements that are believed to be important.

o In Psychology this is known as a Schema

o The goal of positioning is to make sure the schema for what you are offering is
distinctive, positive, and easily recalled to your targeted segment.
o Question to ask and answer when positioning a product:
a) How many associations should we create?
b) What associations or schemas should we create?
c) How do we go about creating those associations?

A) Number of Associations
Unique selling proposition: focusing on one attribute and aggressively promoting as
being the best benefit
Multiple selling propositions: Choosing a number of attributes to position with and
promoting them all
Value Proposition: The mix of benefits on which a product/brand is positioned

B) Type of Association
The position should relate to the needs that are important for the target market.
Should also be rooted in the companys sustainable competitive advantage
The goal is to differentiate from competitors. Stand out from the competition!

o A good tool to ensure you are standing out from competitors is to create a
positioning map.
o Map out your competition on a graph made up of 2 dimensions that represent 2
attributes of the product or service.

o In the below example is a positioning map of the Sports Utility Vehicle market,
mapped on an axis from Sporty Roomy and another axis from High- to Low
Prestige.
o You can also map out where certain segments would be placed based on their
preferences on the 2 attributes. For example, below segment 2 prefers a
roomier SUV with a bit of prestige. But Segment 3 likes a sportier SUV with a bit
of prestige. Looking at Segment 3, there is no SUV that is fully satisfying that
market.

Roomy
Audi

Segment 2
Ford
Saab
Mercury
High Prestige

BMW
Segment 1

Low Prestige

Eagle
G20

Pontiac

Honda

Segment 3

Toyota
Sporty

There are several commons basis to use when differentiating and positioning your
offering:

o Product Differentiation: differences in the product (e.g., durability, reliability,

innovation, etc.)
o Services Differentiation: differences in the services provided (e.g., faster delivery,
open later, convenience, better staff, etc.)
o Channel Differentiation: differences where the product is available (e.g.,
specialty stores with expert sales associates)
o Brand Image Differentiation: differences in how the brand is viewed (e.g.,
making the brand seem cooler than other brands)
C) Creating these Associations
Design and adjust your 4 Ps (price, product, placement, and promotion) to be instinct
with your desired positioning
Promote differences that are:

o Important: highly valued by the target market

o Distinctive: competitors do not offer the benefit
o Superior: difference is better than competitors
o Communicable: benefit can be communicated to target market
o Pre-emptive: competitors cannot easily copy the difference
o Affordable: target market can afford it
o Profitable: company can afford to offer it
Do Not:

o Underposition: Failing to really position the company at all.

o Overposition: Giving buyers too narrow a picture of the company.
o Confused position: Leaving buyers with a confused image of a company.
Repositioning

o An attempt to change an already well-established positioning. This is normally

necessary when consumers have developed a schema that is inconsistent with
the primary need of the desired segment
o In the event that this is too difficult, you may need drastic measures and change
the entire brand name. Start from scratch

Class 7: Consumer Behaviour and Decision-Making

Overview:
Our behaviour and the purchase decisions we make are influenced by many things. Knowing
what can influence us and influence our target market of consumers, we can better shape and
design marketing efforts to achieve our goals. These things can be categorized into four
categories: Cultural, Social, Personal, and Psychological Influences.
1. Cultural Influences:
Culture: The broad values, wants, and beliefs that are usually ingrained in us
from birth, from our family and other institutional factors. Culture shifts happen
over time. For example, the general culture shift toward healthier eating and
living a fit lifestyle. Or the culture shift that is occurring right now in the states
about gun regulations. An effective marketer can spot these shifts and change
their offering to get ahead of the crowd. For example, companies changing their
production process to be more green and sustainable to meet the cultural shift
of concerns about the environmental impact of our products.
Subculture: The broad values, wants, and beliefs that are shared within a group
that exists within a broader culture. These people can be part of this group
because of some common life experiences or the group can require some
formalize membership. These groups are sometimes referred to as tribes or
consumption communities. They can be very large, such as people who refer to
themselves as being part of a particular religion. Or they can be small and center
around a hobby such as the shared values, believes, and wants of avid skydivers,
or Harley-Davidson biker gangs.
2. Social Influences:
Family: The influence that your parents values and beliefs have on your purchase
decisions. Or the influence you have on what your parents buy.
Reference Groups: A group that you may consider yourself being a part of, or a
group that you one day aspire to be a part of. These aspirational reference
groups are very influential. Think about the influence of peer pressure. You
want to be part or remain part of a particular social group and therefore you are

more likely to do what they want you to do. Ex. buy drugs, steal a car, shoot
someone.
i. How much do you aspire to be associated with another group? How much
do you want to dissociate with certain groups?
Roles and Status: What is your position in these groups or subcultures? Do you
have a lot of influence over other people within these groups? Do you want to
be accepted by a group?
i. As a marketer, to be more efficient you may want target these influential
members of a group. Convincing the leader of a group to buy or value a
certain product will increase the chances that those same beliefs will
filter to the lower members. Think of the power of celebrity
endorsements.
Example: Fashion companies use the power of reference groups (the desire to be
a part of a certain group or dissociate yourself with a certain group) and peoples
roles and status within these groups to extract value.
3. Personal Influences:
Age and Life-Cycle Stage: Depending on the age and/or life cycle of an individual
will change their values, beliefs, and wants. A 16 year old may value and care
more about their appearance than compared to a 50 year old.
Occupation: an occupation can largely represent a subculture on its own. 5-10
years ago your work life and home life was very separate. But the norm today is
that you are expected to work 80 hours a week, and that you are always on call.
Organizations give their employees blackberries so that they are able to stay in
the loop and deal with work related things at all hours of the day. This blend of
work and home life may largely influence the type of things a person values and
purchases outside of work. More simply, a CEO will buy more suits than
compared to an electrician.
Economic Situation: No matter what someones job is or where they live,
economic situations can be drastically different. Specifically, some people have

more disposable income than others. A person may live in a large house and
drive a nice car, but they may not have the free cash to go out for dinner to a
fancy restaurant. People in more prosperous economic situations may have
different needs and be influenced by different factors than those in a less
prosperous economic situation.
Lifestyles: An individuals Activities, Interests, and Opinions (AIOs). Marketers
can sell more then just products, they can sell a lifestyle. For example, a person
deciding to start a new hobby (e.g., Mountain Biking) may influence many
purchase decisions from their choices of casual clothing, to their choice of car.
This is to assist, display, and represent their mountain biking lifestyle.
Personality and Self-Concept: Brands and products have personalities and values
associated with them. Therefore people may buy products and use products in a
way that are consistent with their own personality. The products we use
represent our self-concept (how we view ourselves and how others view us). Do
our personalities shape what products we buy? Or do the products we buy shape
our personality? What comes first, the chicken or the egg?
4. Psychological Influences:
Beliefs and Attitudes: a belief is a descriptive thought a person holds about
something, and an attitude is a more consistent positive or negative evaluation
toward something.
Learning: Changes in individuals behaviour that arise from experience. We are
comfortable in atmospheres that do not require much learning or much thought
because they are familiar. However, experiences that require more learning and
thought because they are not familiar are more memorable and can more
strongly influence attitudes and judgments.
Perceptions: How people see and interpret something. The same two people
may see the same advertisement, but form drastically different perceptions of
the product because people interpret the world differently. Additionally, small

things in the environment may unconsciously impact your perception of your

environment.
Motivation: A person can have many different needs at any given time. They can
be biological, such as hunger or discomfort. They can be psychological, such as
the need for recognition, esteem, and belonging. People become motivated to
satisfy a need when factors make them more pressing than others. For example,
threatening someones family safety may motivate him or her to buy a gun, or
security system, or move houses.
i. Unconscious motivations: certain things can influence our attitudes, and
behaviour without even noticing.
Ex. In analyzing Netflix rental data, it is found that more people
watch romantic movies in the winter months than compared to
the summer months. The explanation is that romantic movies
make people feel warm.
Ex. Being active on Facebook temporarily increases your self-
esteem. Temporary increases in self-esteem can motivate people
to engage in indulging behaviours that may go against long-term
goals (such as reckless spending, over eating, etc.)
Ex. Going out to eat at a restaurant with a friend who orders a
large meal will make you also eat more when they are thinner
than you compared to when they are heavier than you. Inversely,
eating with a friend who orders a small meal will make you eat
more when they are heavier than you than compared to when
they are thinner than you.

ii. Hierarchy of Needs Approach: A simple way to view motivations is based
on Maslows Hierarchy of Needs. That is people want to first satisfy their
basic needs such as Hunger and Thirst, then move up to more complex
needs such as having a positive status within society and self-

development. However, this doesn't explain why a person may buy $100
dollar shoes, when they are behind on their mortgage payments.

The Buyer Decision Process
It is believed that when people make a decision (consumer related or other) that they go
through the buyer decision process. However, this does not explain spontaneous purchase
decisions and instead more reflects the decision process of large purchases or decisions like
buying a car, picking a university, or deciding to get married.
1. Need Recognition
2. Information Search
3. Evaluation of Alternatives
4. Purchase Decision
5. Postpurchase behaviour

Class 8: Consumer Behaviour and Decision-Making PART 2

The Buyer Decision Process
It is believed that when people make a decision (consumer related or other) that they go
through the buyer decision process. Which is Need Recognition, Information Search,
Evaluation of Alternatives, Purchase Decision, and Postpurchase Behaviour. Each step
can be largely influenced by many different things (Discussed in Class 06).

Need Recognition
o A discrepancy between your current state and your desired state
o These needs can be triggered by many different things. For example, they can
be external (i.e., socially driven from your friends, or marketing driven by an
advertisement), or internal (psychologically driven from basic needs like thirst,
hunger, sex, recognition, self-esteem, impression management)
Information Search
o When the consumer searches out possible ways to satisfy their need
o If the need is strong, this step could be skipped, or it could happen quickly and
unconsciously. During spontaneous purchases and impulse buys, information
search may be skipped.
o However, during big purchases and decisions (e.g., buying a car, a house, a
university, etc.) then information search can be very extensive
Evaluation of Alternatives
o Weighing the available alternatives that can satisfy your need. A superior
alternative can be clear or it can be more difficult to distinguish between
available options.
o Consumers experience anticipated regret and anxiety during these alternative
evaluations. They want to satisfy their immediate need, but they also want to
ensure they do not make a choice that they may regret and may make them
appear negatively (e.g., making a stupid purchase)

o Consumers may weigh a lot of available information including the details of the
product as reported by the company, and the details of the product as reported
by a friend. This may contradict each other. For example, you may think that
one brand may satisfy all your needs based on the information of the product
provided by the company, but then a friend could tell you that those
company/advertised claims are false and the product doesn't work as expected.
Purchase Decision
o The decision to purchase one of the alternatives
Postpurchase behaviour
o Did the product/decision meet, exceed, or underperform to your expectations?
i.

This may largely influence your postpurchase behaviour?

ii.

Will you spread positive or negative word of mouth? Will you complain
to the company? Ask for a refund? Will you praise the product to your
friends? Will you remain silent?

iii.

When you are done with the product will you recycle it? Throw it out?
Pass it onto someone else? Donate it?

iv.

Buyers remorse may result where you feel regretful for not choosing
another available option or course of action.

Conducting Market Research
To get a better understanding of how the consumer or target market makes decisions and
experiences needs, then market/consumer research should be conducted. A simple process in
conducting market research is to determine the problem/research objectives, then develop a
research plan, implement the plan, and then analyze and interpret the data collected.

Determine the Problem/Research Objectives
o Must determine between the obvious measurable outcomes to a problem (i.e., loss of
sales, low traffic, unhappy customer, etc.) and the real problem that is causing these
outcomes (i.e., poor image, low perceived quality, no perceived value, etc.)

o The decision maker (i.e., upper management) can easily look at the numbers and see
the measurable problems. But the marketing researcher must dig below the surface
and find the real problem that is resulting in these other downstream problems.
o After determining your problem, you may want to consider your objectives for
conducting research. Do you want to do more exploratory research to gather broad
information of the problem, or descriptive research to obtain more specific details, or
casual research to determine the exact issue. For example, what is the expected
increase in sales if we increase our marketing budget by 10%.

Develop a Research Plan
o What is the exact plan of action that will gather the information needed to achieve
research objectives and help make the best marketing decisions.
o Secondary Data Collection: Information that already exists and that has been collected
for another purpose. Think of the information collected during the Canadian Census.
Additionally, companies who specify in this broad research may offer needed
information at a price. If someone has already collected the information you need, it is
usually cheaper to obtain then going out to obtain the information yourself (primary
data collection)
o There are huge amounts of data available. Companies commonly collect customer data
when purchases are made, facebook likes, google analytics, and credit card information
can all be linked and extensive research and analysis can be done on this information.
o This same process would have been extremely difficult 10 years ago.
o Primary Data Collection: Sometimes the specific data required is not readily available
and you need to collect the data yourself or contract a market researcher to conduct it
for you. There is numerous ways to collect primary data, but it all depends on what you
are ultimately trying to learn.

Qualitative Methods:
o Observational Research: Watching from an objective standpoint to help come to
conclusions. Ex. P&G puts cameras up in peoples homes (by permission) and
watches how people care for their homes to introduce new products like The
Swiffer.
o Ethnographic Research: a type of observational research that involves the research
interacting and experiencing the environment for themselves. Ex. In attempts to
understand the needs and wants of people involved in a motorcycle gang an
ethnographic researcher may buy a motorcycle and join a gang themselves.
o Focus Groups: Gathering a group of people to discuss broadly around an area. Ex.
getting people to watch a movie and then comment on the various characters. The
validity of focus groups has been largely trumped, because people take the results
and the insight to literally.

Quantitative Methods
o Survey Research: used to gather descriptive and quantitative data. This is the most
widely used form of data collection, where the researcher is looking for objective
differences between groups.
o Experimental Research: Best used for gathering causal information. Similar to a
survey, except you give 1 or more groups some sort of treatment and see how this
treatment alters their survey responses. Ex. Give participants half of the
participants drink a wine with a name they CANNOT pronounce, and the other half
drink a wine with a name they CAN pronounce, and see how this influences their
liking of the wine, the price they are willing to pay for the wine, the price they think
the wine is, their willingness to purchase the wine, etc. The results from these
experiments can help wineries decide on a name for their wine.
o Neuromarketing: A growing area of research in marketing has been in the use of
fMRI scanners that detect blood flow activity in specific areas of the brain. The use

of this research can determine real time feelings and emotions and thoughts
without asking the participant to speculate on these factors.

Implement Research Plan
o Following through with your research plan

Analyze and Interpret the Data
o A lot of companies today collect a lot of customer information through loyalty
programs, purchase data, etc.
o How do you best use this ongoing information, or results from primary and/or
secondary data collection to shape your marketing decisions?
o How do you do so without infringing on customers privacy rights? And upsetting them
with an excess of direct advertisements.

Class 9: Quantitative Analysis

Learning Objective: Know how to calculate and interpret:

a.
b.
c.
d.
e.
f.

Market share
Contribution/Profit Margin
Breakeven Analysis
Price Elasticity
Price Chains
Marketing Return on Investment (ROI)

A) Market Share
The percentage a product, brand, or company has in the entire market of those
products, brands, or companies.
Market Share = Focal Brand Sales / Total Market Sales
Step 1: Figure out your own sales
As the owner, this should be easy because you should know your own
revenue.
Step 2: Determine Total Market Sales
In real life, this is more difficult, because for this example you would have to
determine the total sales of every similar product, brand, or company.
However, there are ways to estimate this amount.
Step Down Market Size estimation approach
You may not know the total sales of a specific market, but you may know
total sales of a larger market. For example, you know Canada wide sales of a
product category, but you want to know Toronto specific numbers.
Assuming that Toronto has roughly 7% of the population of Canada you can
assume that the total sales of a certain product category is 7% of the Canada
wide sales.
Step 3: Solve for Market Share.
Example: Steam Whistle wants to determine how much of the craft beer market is made up
of their beer sales. In 2014 Steam Whistle sales in Ontario are as follows. 500 000 bottles
of beer at a price of $1.5, 200 000 cans at a price of $2, and 5 000 kegs at a price of $50.
Due to the strong hold the Canadian government has over beer producers there has been a
huge amount of government sponsored industry research. From this research it has been
determined that in 2014 Canadians spent $10 billion on beer. It is believed that 10% of this
is spend on Canadian craft beers. Knowing that Canadas population is roughly 35 million
and Ontarios population is roughly 14 million answer the following questions

 A) What is Steam Whistles total Ontario Sales?

B) What is the total sales of Craft Beer in Ontario?
C) What is Steam Whistles market share in the Ontario Craft Beer market?
B) Contribution / Profit Margins
Fix Costs (FC):
o Do not fluctuate or change with the volume of production
o Facility costs, R&D, Utilities, Fixed Salaries, Advertising, etc.

Variable Costs (VC):
o Vary with the volume of production
o Labor, Production Materials, transportation costs, etc.
Contribution Margin:

o The amount left over after accounting for variable costs (can be expressed as a
percentage or a dollar amount
o
Contribution Margin ($) = Price per unit Variable Cost per unit
Contribution Margin (%) = (Price per unit Variable Cost per unit) / Price per unit

Profit Margin:
o The amount left over after accounting for both variable costs and fixed costs (can be
expressed as a percentage or a dollar amount

Profit Margin ($) = Price per unit Variable Cost per unit Fixed Costs per unit
Profit Margin (%) = (Price per unit Variable Cost per unit Fixed Costs per unit) / Price per
unit
Example: The people at the marketing textbook company sell their textbook to university
bookstores for $40 each. When combining paper, shipping costs, and other material costs,
each book costs the marketing textbook company $15 to produce and ship. The company
employs 50 Proboscis Monkeys to write the textbook on loan from the country of Malaysia
for $100 000 for the year. Each monkey requires a 1970s IBM typewriter ($100 each) and
one cigar for everyday of the year ($5 per cigar). At year end 2014, the textbook company
sold 500 000 marketing textbooks.


A) What is the contribution margin in % of sales?
B) What is the profit margin expressed in % of selling price?

C) Breakeven Analysis

How many products must the firm sell so that total revenue equals the total cost. Therefore,
the company makes $0 from their operation. They neither make or lose money, they
breakeven. The formula to determine this can be expressed in a variety of different ways. In
its simplest form is below.

Profit = (Price per unit x Units Sold) - (Variable Costs per unit x Units Sold) Total Fixed Costs

o This formula makes it easy to visualize what you are calculating. When determining how
many units must be sold to breakeven you set Profit = 0 and solve for Units Sold.

Example: Total sales of farmed Bison in Canada is 5 000 Bison per year. These farmers sell their
Bison to butchers who then sell to consumers and local restaurants for people to consume tasty
Bison Burgers. Pheobe, a Kingston farmer, is looking to start farming Bison for this purpose and
is considering one of two options.
o Option 1): Feeding and raising the Bison as free range all organic grass fed which she
believes will cost $5000 per bison to raise from birth to sale. The extra land required to
let the Bison roam free will be $500 thousand.
o Option 2): Raising the Bison in stables and feeding them a mixture of genetically
modified corn and growth hormones which she believes will cost him $2500 per bison
from birth to sale. Construction of the stables to house the Bison will be $100 thousand.

A) Assuming Bison is a commodity and each Bison, no matter how they are raised, can be sold
for $10 000. For each option, how many Bison will Pheobe the farmer have to raise and sell to
break even? And how much of the Canadian Bison market will this account for?

B) Assuming that Phoebe the farmer knows that she can capture 1% of the Canadian Bison
market. With the organic food movement growing, prices between Bison can vary depending
on the conditions of how they were raised. What is the minimum price Phoebe will have to sell
each Bison for under each option to break even?



D) Price Elasticity

Price elasticity (PE) measures how receptive demand for a product is to price changes.
o If a products demand is more elastic that means the demand will sharply change
based on the price.
o If the products demand is inelastic that means the demand is not likely to change that
much when the price changes
Price Elasticity = % Demand / % Price

% = (New-Old) / [(New + Old)2]

Example: Consider the previous Bison example. Pheobe wants to raise and sell the Bison
organically but is wondering if the increased cost to raise each bison and the subsequent
increase in price per Bison will drastically decrease demand. She determines at $15 000 per
Bison she will be able to sell 20 Bison. However at $500 per Bison she will be able to sell
200 Bison.
A) What is the percentage change in demand?

B) What is the percentage change in price?

C) What is the Price Elasticity of Bison?

E) Price Chains

o From manufacturer to consumer, a product usually goes through a lot of different hands
(e.g., distributors, wholesalers, retailers, etc.). Each step of this chain wants their cut of
the pie and therefore the product gets more expensive for the end consumer along the
way.
o Price chain analysis looks at who in the chain has the highest mark-ups and is making
the highest margin.
o These are similar to the Contribution and Profit Margin calculations from section B)
above. Except you now apply the calculations to each person or company in the value
chain to compare who is making the most in the value chain and where the price of a
product increases the most from step to step.

%Margin = (Price Variable Costs) / Price

%Markup = (Price Variable Costs) / Variable Costs

F) Marketing Return on Investment (ROI)
o Measures the % return in terms of sales over and above marketing based spending
ROI = (Sales Spending)/ Spending
Example: For the past 10 years your company has spent 100% of the advertising budget on a
super bowl commercial. In 2012 the cost of the ad was $2 million and sales increased by $5
million in the month after the super bowl. In 2013 however, the price of an ad went up to $3
million and the increase in sales was $4 million in the month after the super bowl.

A) Calculate the ROI for the 2012 super bowl ad compared to the ROI for the 2013 super bowl
ad?

B) In 2014, your company decided not to make a super bowl ad and instead paid a 13-year-old
girl $20 dollars to live tweet on your companies twitter account during the super bowl. While
innocently tweeting out during the half time show asking if anyone knows who the Red Hot
Chili Peppers were, the tweet on the companies account got retweeted 2 million times and
sales in the month following the super bowl increased by $1 million. What was the ROI for the
2014 super bowl?

Class 10: Products and Services and New Product Development

Marketing Origins
In the early 1900s, at the start of the industrial revolution, there was all of a sudden so
much choice for consumers.
Over the course of a couple of years there was all of a sudden different types of shoes,
different types of brooms, and new products that no one has ever seen before like
mops, frying pans, radios, lawnmowers, etc.
But up until this point, products were largely made to order:
o If you needed clothes (shoes, shirts, hats, etc.) someone made it for you (or you
bought the fabric and made it yourself)
o Other than clothes all you needed were several key items that you could make
yourself or get specialty made by an expert (e.g., coopers, masons, wood
workers, smiths)
During the industrial revolution all of a sudden supply has shot through the roof.
o How do you get these products in the hands of consumers?
o How do you get consumers to know about it?
Many people think marketing started off as advertising or that marketing is just
advertising
o However, marketing started off as a product classification and distribution
problem.
At this time products could be classified into one of three major groups

1. Convenience product
An item you may need on a daily basis and is not hard to find and purchase
The need for the product and purchase generally happen very quickly.
Ex. groceries, snacks, ATM machines, iTunes, apps on the App Store
2. Shopping product
o A non-everyday item
o A product you might need to travel a further distance to find
o Still a product with lots of alternatives and competing products that fulfill the same
underlying need, but may require more conscious comparison and deliberate decision-
making by you, the consumer.
o Ex. Cars, clothing, shoes, movies, furniture

3. Specialty product
o Very unique products that do not have any alternatives
o Not a typical purchase at all, and can sometimes be considered a once in a
lifetime purchase
o A product that is sold in specialty and unique stores, not typically found in a
shopping mall
o Ex. wedding dresses, sports cars, rare collectables, made to order products
Products
Broadly a product can be considered anything that is for sale (including services).
o This includes; Goods, Services, Experiences, Organizations, Persons, Places, and
Ideas.
o It is essentially any offering from one party to another party.
Services

o Services are something that is intangible and you cannot transfer ownership
o This can range from many different things including a day at Canadas
Wonderland, Molly Maid, a night in a hotel, or getting your cars oil changed.
o More and more companies are moving towards a services type model. Think
of dollarshaveclub.com, rdio.com, cell phone plans, Netflix, renttherunway.com
The most successful companies now offer more then a Good or Service, they sell an
experience.
o Referred to by many different things (i.e., experiential marketing, platform
marketing, co-creation of value), they all generally revolve around the same idea.
Consumers want to have experiences, and your job as a company is to sell them
the tools and/or provide the arena for them have the best experience possible.
o Disney has been selling an experience for 100 years. But the same idea can be
applied to physical products
o Ex. Going to Ikea to shop is like walking through an exhibit at an amusement
park. Customers are practically guided along a tour following a winding
pathway.
o Ex. Buying a certain product may open the doors to a certain culture and
unique/exclusive experiences, such as buying a Harley-Davidson motorcycle.
o Letting the customer do what they want and/or including them in the value
creation process can enhance these experiences (Co-Creation).
o Without the customer your product is only worth the raw materials that it is
made out of. You have to sell them on the experience they will have with that
product.

 Ex. an iPhone is just a device, but with the consumers input they
customize it to their own unique toolbox with different apps.
Ex. Ikea having customers make the furniture their self serves a lot of cost
saving purposes for Ikea, but customers also feel better about themselves
and value the product more for building it themselves.
Product Levels
The various aspects of a product can be broken down into three levels (core benefit, actual
product, and augmented product).
1. The Core Benefit
This is what the product is actually doing or its customers
Ex: For a Canada Goose Jacket, its core benefit at the simplest level is that it protects
you from the cold.

2. The Actual Product
This is the specific details of the attributes of the product that distinguishes itself from
other products that provide the same core benefit
Ex: For a Canada Goose jacket, the actual product refers to quality, the brand name, the
durability, the materials, the colours, the design, the features.

3. The Augmented Product
Refers to additional customer services and benefits that are outside the specific
attributes of the actual product. Can be used to further distinguish the product from
other similar products and help further position the actual product. These are things
like free delivery, future benefits, access to a club or membership program, warranty,
installation, etc.
Ex: for a Canada Goose jacket, the augmented product components refers to any after
sales services, such as Canada Goose coming with a lifetime warranty.

New Product Development
A company can either buy an existing company (acquisition), or develop a new product
through their own efforts.
Large companies today acquire different smaller firms everyday
Ex. Google tried to buy Groupon for 6 Billion. And Groupon denied. Good idea? Bad
idea?
Ex. Facebook bought Instagram for $1 Billion
Ex. Facebook tried to buy SnapChat for $3 Billion.
If a company decides to do it on their own they typically go through the 8 stages of
new-product development

8 Stages of New-Product Development

1. Idea Generation
Most companies house a Research and Development department that is
constantly coming up with new ideas
The company 3M promotes this by forcing all their employees to spend
15% of their time to pursue their own ideas that can be pitched to the
company on a company wide portal where employees are encouraged to
post their ideas.
2. Idea Screening
Basically asking if it is feasible? And is there an interest?
3M had an idea to produce a snowboard out of Bulletproof glass. They
already produced and owned the patent for Bulletproof glass, so it
seemed feasible to find other uses for it.
3. Concept Development and Testing
The presentation of the idea to others to gather feedback. Determining if
there is an actual need for such a product
4. Marketing Strategy Development
Putting together a specific market entry strategy. How, when, where,
and to whom will the product be introduced.
5. Business Analysis
The generation of sales and cost projections
When will the product become profitable? And what is its profit potential
over 10 years, 20 years, etc.
6. Product Development
Actually produce the product and see it in its physical form. Test the
product in house. Test on employees, gather feedback, make changes,
repeat.
7. Test-Marketing
Introduce the product in a real market setting to gauge interest and
feedback. This may take the form of only introducing a product to 1 city
and seeing how it takes off.
Ex. Google Fibre in 2013 was only available in Kansas City and they have
been slowing rolling out their product to different cities like Atlanta,
Austin, and Nashville.
Ex. London ON. Is a test market for most fast-food restaurants when
introducing new meals and restaurant designs?
8. Commercialization

 The full unveil to the market.

This for most products will require a huge investment in terms of
advertisement, production, and distribution where they may not see
reimbursement for these expenses for a long time because of the
product life-cycle and how newest products are slow to gain mass appeal.
Product Life-Cycle

When a product becomes available it goes through what is referred to as the product
lifecycle. Where it catches on slowly until the growth phase where everyone starts to
jump on the bandwagon. Then you have the late people during maturity, until finally
sales start to decline and no one cares anymore.
As a marketer or firm you have to work with this lifecycle to try and extend the growth
and maturity stages. This can be done by introducing new product variations (slight
improvements on existing products).
Ex. when the iPhone was first released there was a lot of hype, but a slow adoption rate.
Then popularity began to grow, and to prevent from sales dropping off Apple continued
to release newer versions each year with minor improvements, to get people to switch
over from their previous phones and to get the early adopters to make re-purchases.

1. Introduction Stage
In the introduction stage, profits are typically negative. The firm has spent so much
money on research and development, advertising, promotions, distribution,
production, etc. And as customers slowly adopt the new idea the level of sales does
not cover these costs.
In this stage the product is usually very expensive, and customers are really taking a
risk in being the early adopters, because the product may not take off and then they
look foolish for having spent a lot of money on a product that has quickly become
obsolete (e.g., mini disk players)
Ex. Electric cars have been around for 100 years with continuous efforts to make
improvements and try to market it to the mass population. It has still never
reached the growth stage. But with increasing environmental pressures and
improvements in technology, car companies are still trying

2. Growth Stage
Products reach a tipping point where customers then look foolish for not adopting
the new product are taking a risk for choosing not to jump on the bandwagon. As
more and more people adopt the product, the risk of being an early adopter
dissipates and more people see the value in making the commitment. Everyone is a
sheep phase.
Netflix in Canada is in this stage where they have been experiencing tremendous
growth in their sign-ups and where it is now common to discuss in popular culture.
Not having Netflix is now seen as strange where as it was almost seen as strange and
confusing to have Netflix only a few years ago.

3. Maturity Stage
Most products spend their life in the maturity stage, where sales are generally
constant
Ex. Think of the Cell Phone. Everyone that is going to buy a cell phone (of any kind)
already has one, it has become a part of our lives and a necessity. The cell phone as
a general product is in the maturity stage where the amount of sales stay stagnant,
and therefore competing companies (i.e., Apple, Blackberry, Samsung, etc.) just fight
over those sales by continuing to introduce new advancements to try to stay on top.

4. Decline Stage
Sales eventually dip down, usually due to a new technological advancement
Ex. VCR players being taken over by DVD players, and DVD players being taken over
by Blu-Ray Players, and Blu-Ray Players being taken over by streaming services
This process can be very slow, as sales continually start to dwindle. Management
may decide to keep trying to revive the product, but it will reach its eventual demise.
However, some products/industries experience re-births in the decline stage. Cirque
Du Soleil entered into the circus industry when it has been long seen as a dead and
profitless industry. However, with a few classy modifications and targeting a more
upscale clientele they found a unique space in the circus industry.
Another example is vinyl and record players, an old technology found a unique
target segment in this decline stage and is squeezing the last bit of possible sales out
of this already old and out of date technology.

Class 11/12: Branding

Brand Characteristics

What is a Brand?
A name, term, symbol, design, or combination thereof that identifies a sellers product and
differentiates them from competitors products. Brands take the form as companies registered
trademarks, but they extend beyond this.

Brand Relationships
Brands represent the relationship between the company and the consumer. They are a symbol
of the perceptions and feelings about a product and its performance.

Brand Equity
Is the positive differential effect that knowing the brand name has on customer response to the
product or service?
o High Brand equity usually comes with; high consumer awareness, brand loyalty, ease
and ability to introduce new products, less susceptible to price competition.
o One measure of brand equity is the customers willingness to pay over the amount
willing to pay for an identical unbranded product
o Brand valuation is the activity of trying to estimate the financial value of a brand

Brand Personality
If the brand was an actual person, how would you see that person. Brand managers often
explain their brands in terms of personality terms like they were describing a person stylish,
fun, strong, etc.

Brand Management

Brand Positioning
How do you make brand related decisions (brand name, colour scheme, logo,
advertisements, products with that brand, etc.) to ensure that the brand is clearly
represents a distinct position in the consumer mind?

Based on:

Product Attributes:
Least effective way to position brand, easy for others to copy, and boring

 Ex. Alcohol companies usually have to distinguish themselves based on attributes (e.g.,
smooth taste, refreshing flavour, fancy can etc.)

Product Benefits
Creates an association with the brand and the desirable benefit
Alcohol is prohibited from advertising based on their product outcomes. (e.g., you
cannot advertise that it will give you confidence)
Ex. Volvo and safety, or Nike and performance, these are the benefits that you get
from using a specific brand

Beliefs and Values
Creating a deep emotional connection with the customer
A powerful brand that is marketed based on beliefs and values can easily introduce new
products under the same brand as people are devoted to them and the lifestyle that
surrounds it.
These are sometimes referred to as Lovemarks
Ex. Harley Davidson, Starbucks, Apple.




High Respect



Brands


LoveMarks


- HP, Petro-Canada, Arm&Hammer
Harley-Davidson, Apple, Nike


Low Love



High Love

Products


Fad


No-name, Bell,

Crocs, Hunter, Ugg

Low Respect

Brand Name Selection
A brand name is only as good as the image built around it.
Neologism - newly coined term, word, or phrase, that may be in the process of entering
common use, but has not yet been accepted into mainstream language (e.g., Nike, Ugg)
Suggest benefits and qualities (e.g., La-z-boy, Beautyrest, Minute Rice, Payless shoe,
Duracell, Under Armour)
Qualities
Easy to pronounce recognize & remember (e.g., Tide, Ban)
Distinctive
Translate easily

 Capable of registration & legal protection

Adaptable for brand extensions
Brand Sponsorship
o Manufacturer/National Brands
Most brands are in this form. Typically the owner of the brand also
produces the brand.
o Private/Store Brands
Brands that are established by retailers (e.g., Presidents Choice, Life
Brand, Great Value)
o Licensed Brands
A product that is using a different brand where the owner of the brand
licenses its use out to producers/manufactures to use on their own
products
Ex. Disney owns all the rights to every Disney character and they recently
purchased Pixar, Marvel, and Star-wars. Therefore any product that is
sold with one of those characters on it, Disney will get a piece of the pie.
o Co-Branding
Two or more brands teaming up to issue a new product/line extension.
Ex. is Crest toothpaste with Scope.

Brand Development
Knowing when to use an existing brand or invent a new brand. There usually has to be
some connection if you are to use the same brand. If there is no logical connection,
then consider inventing a new brand.


Product Category


Existing
New

Brand Extensions
Line Extensions


Existing
(e.g., use of a successful brand
(e.g., new flavours of Ben and
name to introduce new products
Jerrys Ice Cream)
such as Reeses Puffs Cereal)


Brand
Multibrands
Name

New Brands
(e.g., owning/introducing

multiple brands in the same
(e.g., Inventing a new brand for a
New
product category, such as P&G
product category that you
owning and selling several
currently do not sell in, such as
different brands of clothing
3M and the post-it brand)
detergent)


Line Extensions
Releasing a new product that is part of an existing product category that you are already
involved in and using the exact same brand name
Ex. Porsche makes 20 different types of there 911 model car. Each model has different
specifications, different prices, look slightly different. Each decision to introduce a new
type is a line extension

Brand Extension
Releasing a new product in a product category that you are currently not already
involved in/not known for but using the same brand name you have been using in other
product categories
Ex. Porsche is largely known for making 2 door sports cars, but has recently starting
making and selling an SUV, the Porsche Cayenne.

Multi-Brands
Releasing products within a product category that you are already involved in but under
a different brand name
Ex. Porsche is one of the largest owners of the Volkswagen Group who owns and
produces many other sports cars such as Bugatti, Audi, and Lamborghini

New Brands
Releasing products within a product category that you are NOT already involved in (or
not well known for) and under a different brand name and/or logo
Porsche also owns the Porsche Design Group which is a high-end fashion company.
Although Porsche is still used in the name of this new brand it is not prominently
displayed and they use a completely different logo.

Class 13: Integrated Marketing Communications (IMC) Direct Marketing, Personal

Selling, and Sales Promotions

The Promotion Mix

A companies, or brands, or products various communication activities, including advertising,
sales promotions, personal selling, public relations (PR), and direct marketing.

Advertising
Any paid form of communication by an identifiable sponsor that is non-personal
What most people think of when they hear the term marketing. These include TV, radio,
and print ads. Also billboards, obvious celebrity endorsement, product placement, and
new media

Advantages
Disadvantages
- Good for building awareness
- Effective at reaching a wide audience for
relatively low cost per view
- Repetition of main brand and product
positioning can help recall, build trust, and
change existing attitudes

- Impersonal and therefore cannot answer

questions
- May simulate interest but may not convince the
consumer to make the final purchase
- Noisy medium (we see 100s of adds every day)
so yours might not stand out
- Usually a high production cost and investment

Sales Promotion
Typically in the form of a short-term incentive to stimulate a purchase, such as coupons,
sales, and buy-one get-on type offers

Advantages
Disadvantages
- Can stimulate a quick increase in sales for
particular items
- Good short term tactical tool
- Effective for inducing a first trial (i.e. get the
customer hooked and then jack up the price)
- Easy to track effectives

- If used over a long time, customers may get

used to the sales and only buy when theres
promotions
- Promotions can tarnish the brand image (i.e. a
LV bag would never go on sale)

Personal Selling
Similar to advertising, but it is a paid form of communication that is personal. Think of car
salesmen, sales associate at a retail store, and telemarketers.

Advantages
Disadvantages
- Highly interactive, lots of communication
between buyer and seller
- Can easily answer customer questions and
persuade purchase
- Good for communicating complex/detailed
information such as the details of buying
something like a car/house
- Relationships can be built to create a more long-
term sales relationship built on trust

- Very costly where you have to employ a sales

force, but also have other hidden costs like travel
and training
- Difficult to manage a large sales force
- Sales person could be motivated to just make
sales and may not maintain a consistent brand
image
- Not suitable if there are many buyers

Publicity and Public Relations (PR)
Building and maintaining/managing communications with the public through unconventional
advertising mediums, such as news stories, features, sponsorships, events, and subtle
endorsements
An example of this is what companies do during the Super Bowl, where companies want to be
considered the best ad to get free publicity after the commercial is aired where people watch
it again on YouTube, discuss it in classrooms, talk about it on the news, etc. Some companies
might purposely get their ad banned from the super bowl so that they do not need to spend
the money to have the ad on the air, but that people still talk about the ad and the company
because of it being banned (e.g., AshleyMadisson.com and Godaddy.com have had ads banned
in the past)

Advantages
Disadvantages
- Often seen as more credible since the message
seems to be coming from a source thats not
affiliated with the company
- Cheap way to reach lots of people through
unpaid forms of media
- Association with quality media outlet may
enhance brand image

- Risk of loosing control as you cannot control

what these third parties can be writing or
discussing about your product
- PR campaigns can be very labor intensive to try
and get the word out there


Direct Marketing
Carefully targeted and unique communications with consumers to obtain an immediate

response and cultivate lasting relationships.
Using customer relationship management (CRM) data to customize ads. Such as
Amazon suggesting books or movies that you may also enjoy, or Gmail scanning your
inbox to better gauge your wants and needs to send more targeted banner ads

Advantages
Disadvantages
- Message customization without high costs of
personal selling
- Can build strong relationships
- Convenient for customers
- Able to reach specific target markets

- Most of it can be considered SPAM and

unwanted by target customers
- Can make people very suspicious in terms of
their privacy
- Reliance on CRM and database marketing
requires constant updating

Integrated Marketing Communications (IMC)

Is the activity of carefully and thoughtfully planning each element of the promotional mix to
work together and deliver a clear, consistent, and compelling message that efficiently and
effectively communicates to your desired target market.

Why is this necessary?

Consumers are changing:
Consumers are better informed and can easily find product related information that is
not marketer-supplied through word-of-mouth from other customers such as online
reviews.
Marketing strategies are changing:
companies are realizing that the mass marketing message is to expensive and may not
be that effective. Instead they are shifting towards building closer relationships with
customers and focusing more on smaller target segments to more efficiently get their
message. To do this, companies are looking for ways and strategies to best coordinate
and integrate the various methods to communicate to portray a clear message to all
fronts so that people are not confused when they see two different ads for the same
product

Communication Technology is changing:

Numerous ways to communicate with customers are popping up. 10 years ago there
was TV, radio, or print. Now there is numerous of other new media that companies can
use to communicate and even interact with customers. Therefore, the problem is now
how do companies best use these new forms of media that best suits how the customer
uses it themselves.
Companies still need to keep the same goal of communicating a consistent message
across all communication mediums
In recent years, companies have found themselves in trouble because they give control
of their Facebook, twitter, and/or Instagram to young and new employees who know
how to use these platforms but may not be involved in high-level strategic decisions and
therefore may post information and details that are not consistent with the companys
communication goals.

Class 14: Public Relations and Advertising

Public Relations

Public Relations (PR) agencies or a PR department within a company cover a broad range of
duties that is outside the realm of typical advertising and control.
These can include:
Press relations: feeding stories to news outlets
Product publicity: releasing information about a product
Public affairs: dealing with society from a social responsibility level such as promoting
charities and giving back to the community
Lobbying: trying to influence government to design policies and laws that work in your
favor
Investor relations: making sure your shareholders are aware of what is going on and are
happy to stay invested
Damage Control: when your firm or brand is viewed in a negative light or there is
potential to be viewed in a negative light with potential legal backlash a company will
attempt to clean up the mess by providing information by possibly accepting
responsibility and taking action, or denying responsibility and redirecting the blame.

Damage Control

PR is the act of trying to control how the media portrays you and how the public thinks of you.
You want this to be consistent with the image that you are trying to portray. However,
sometimes things can go bad where a story is released that portrays you and/or your company
in a negative light. These stories pop up all the time, especially with the ease of sharing
through Twitter and YouTube. So you can either take responsibility (if you are responsible),
deny responsibility (if you are responsible), or deny responsibility (if you are not responsible).

1. Taking responsibility when you are responsible:
Sometimes you have to just take responsibility and own up for what happened.

For example, in late December 2012 a women was kicked out of a Hollister because she was
breastfeeding her child. She took to the Internet and soon it was picked up by national news,
where new mothers were protesting Hollister stores across the country for this one incident.
Where I might argue that Hollister is not targeting new mothers, it still looks bad on their
image. Hollister then consults their PR agency where they would suggest that they have to
release an official statement and possibly show action that they will deal with that specific
manager and also implement training programs for employees in the future. This is an effort to

calm the mob of breastfeeding mothers and divert negative attention where Hollister owns up
to the issue and says that they will implement actions in the future so that it does not happen
again.

2. Denying responsibility when you are NOT responsible:
This is a difficult scenario, as people jump to conclusions and will just assume that you
are lying when you deny responsibility.
However, sometimes you have to stand by your product because sometimes people try
to take advantage of the internet and possibly spread false claims.

Example: In 2013 stories about the Tesla electric car have come out in the New York Times
where a reviewer wrote a bad review about the mileage claims of the Tesla Roadster.
However, Telsa knows that some people have a negative bias towards electric cars so they
install a black box in cars that reporters are testing so that they can review the reporters claims
after and see if what they are reporting is matching what actually occurred. Tesla found out
that the reporter said he had to get the car towed because it ran out of a charge. However,
Tesla in the face of this bad press consulted their black box, and released a statement providing
evidence that the reporter was not reporting the facts. Instead the car still had enough charge
to get to another charging station, and he also apparently did circles in a parking lot to drain the
battery (http://www.teslamotors.com/blog/most-peculiar-test-drive).

Example: In 2013 an upset customer of Ryanair took to the internet and complained that they
were charged these high fees to print boarding passes at the airport. The customer claimed
that the fees were unjust and she wanted some sort of retribution. The CEO eventually had to
respond and basically said that there rules are clear if you are stupid enough not to read their
rules and policies than you deserve to pay those high fees.

3. Denying responsibility when you are responsible
This is the worst case scenario, and sometimes companies do not even know they the
extent of their responsibility when a story breaks. This happens all the time where
companies or people deny stories that come out and then more information surfaces
where they then look even worse for trying to cover it up.

Example: Most recent and large example of this could be Lance Armstrong. Frequently accused
of steroid use and blood doping he always denied. Until new allocations came out where he
still denied, but then eventually he owned up to it. Making him look even worse. He tried to
calm the story and the negativity of his image by appearing on Oprah but he still came off as a
cheater. This has destroyed the integrity of the livestrong brand. Although they are still active,
the true impact of this scandal on donations and support for livestrong has not been fully
realized.

Publicity and Word-of-Mouth (WOM)

Information delivered by the press (e.g., major media outlets, news, radio, consumer reports)
or by an individual (e.g., a friend, family member, or some anonymous reviewer on the
internet) is seen as very credible because they have no stake in the company, product, or
person that they are talking about.

Information that is delivered to you (the potential customer) by a firm (the seller of a product)
is taken with a grain of salt. This is because the firm has a conflict of interest in the
advertisement/information they are telling you because they want to make a sale and receive
financial gains. Being aware of this conflict of interest is known as Persuasion Knowledge. As a
customer we are aware when someone is trying to sell to us, we are aware that advertisements
on TV are put there to motivate us to buy things, we are aware the information of a product on
a companys website is skewed to be positive because they want to sell their product.
Therefore, the information they tell you as a potential customer, may not be completely
accurate because they are looking out for their best interest and not yours. However, this
conflict of interest does not exist when the press or an individual provides the information of a
product.

Word-of-mouth (WOM) is information about a product that people tell each other. It can be
positive or negative, but in all cases the individual providing the WOM has no personal stake in
the company. Therefore, if you go buy or do not buy the product they are talking about, it does
not change the individuals financial well-being. Therefore, this information is seen as very
credible because the individual sharing WOM will not receive any personal financial gain for the
information/suggestions they share.

Class 15: Adverting PART 2

Advertising Objective

Before you decide on an advertising strategy (the advertising message and the media used) you
need to determine the objective of the advertising. Why do you want to advertise? Why do
you want to spend millions of dollars? What do you hope to accomplish with your
advertisement?

There are a variety of reasons to advertise. The most effective are the ads that have one clear
objective. As a marketer/advertiser you may have the urge to fill your ad with as much
information as possible (get the biggest band for you buck), but you have to fight this urge and
think of one clear objective. Your viewer will be encountering thousands of ad messages a day,
so you want your ad to be clean, simple, and clear, to cut through the noise and achieve its
objective.

There are a variety of common objectives for an advertisement:
Informative Advertising
o Largely used for new products and brands
o Helps show the uses of a product and how to use it
o Ex. Think of the Apple iPhone and iPad commercials
o These advertisements are 100% informative with no extra clutter. The product is in
the center of the screen and the ad informs viewers how the touch screen works,
how the screen looks, and how to operate certain applications, as well as profiling
certain applications. Very clean, simple, and clear. Sometimes these commercials
are quick, showing a lot of applications and uses of the iPhone or iPad, but this is on
purpose. It is a quick and easy to use tool. And they make sure that comes through
in their advertisements

Persuasive Advertising
o Is used when you want to encourage a purchase or a customer to switch brands
o They are also primarily used to try to change customers perceptions of a brand or
product
o Ex. A lot of laundry detergent advertisements do this, where they compare their
advertised brand to the leading brand in attempts to get people to switch over
from the leading brand.
o Ex. Another example is the old Mac Vs. PC ads. Where apple encouraged people to
switch to Apple as it is perceived as cooler and more laid back. This same tactic is

now being used by Samsung to get iPhone users to switch to a Galaxy, where the
iPhone users are portrayed as cult like yuppies.
o Ex. Free Coffee week at McDonalds is conveniently timed during the launch of roll up
the rim at Tim Hortons. This is on purpose to persuade coffee drinkers to switch
from Tim Hortons to McDonalds Coffee.

Reminder Advertising
o Largely used by mature products to keep customers thinking about the product.
Typically targeted at customers who are already fans or advocates of the product,
but these ads just give them a little boost to keep the product in the front of mind.
o Ex. The recent Super Bowl ads from Budweiser and Dodge Ram that were very
emotional and didn't relay any information about their product or persuade them to
purchase. They were just emotional ads that helped keep these brands in the top of
mind.

Setting the Advertising Budget

How do marketers and business owners determine how much they should spend on
advertising? Companies can easily sink millions into a campaign that does more bad than good.
And other companies can make an ad that costs nothing and it is largely effective. So how do
you determine what to spend?
Percentage of sales
o One of the most common methods companies use to determine how much to
spend on advertising is to take the percentage of their sales from the previous
year and say we are going to spend 10% of our sales on advertising. Therefore,
if we sold $1 million in sales last year, we will spend $100,000 this year on
advertising.
o This can be very easy to justify ad expenditures and it makes logical sense to
accountants and financial officers. But this view of advertising may not be
effective, as it views advertising as do we have the money for advertising?
versus what opportunities do we have to advertise?
o This perspective the money comes first: How much money do we have? And
how much advertising can we do with that amount?
Objective-and-task method
o This is the most logical method where a company sets their advertising budget
based on the objective they want to achieve
This perspective money comes last: What is our objective? What is the
most effective way to accomplish this objective? How much will it cost?

Advertising Strategy

Your advertising strategy is your message and the medium you will use to communicate this
message. You shape your advertising message and decide on the medium to use based on
objective.
Ad Message
o There are numerous types of creative messages to use, but as discussed in the
Integrated Marketing Communications class, the message needs to be consistent
across all elements of the promotion mix.
o The message should clearly communicate your desired objective
Choosing a medium
o Now that you have the message that you want to communicate, how do you
communicate it?
o Do you relay it through TV ads? Print ads? Internet? All of the above?
o Do you relay it across the country? Across the world? Focused in a certain city? A
certain street intersection?
o How many ads? How often will they be shown?
o These are the types of decisions that need to be made. What media will you
use? Who will see the ad? How often with the ad be shown?
o The number one thing to remember is that you cannot do everything. You need
to make these decisions based on your advertising objective.

Class 16: Pricing

Factors Affecting Price

Various factors (both internal and external) can impact a firms decision on how much they
should charge for an item.

Internal Factors

Marketing Objectives
Product Positioning - Ex. if you are selling a toothbrush to be a luxury/prestige brand of
toothbrush then you should charge a higher price for it since you are positioning it as a
luxury toothbrush

Pricing Objectives
What are your goals when establishing a price? Survival? Maximize profit? Increase
market share? Increase quality perceptions? These will all impact the price you decide
to charge

Marketing Mix
Your price relative to other aspects of your marketing mix
Does your price match your advertising claims? And how it is distributed? Or what the
product is made out of?

Costs
What is the bare costs of the product? The floor. This is the lowest amount that should
be charged to ensure you are not loosing money.

External Factors

Consumer Perceptions of Price and Value
This is the price ceiling you should not charge more then this price
However, this is different for individual customers, so it is hard to determine the max
amount that you can charge.

Nature of Demand
What is the market like? Is there lots of competition? Or is there a monopoly?
What is the relationship between price and demand? (price elasticity)

 Could you increase the price without impacting demand? Or will increasing the price
decrease demand?

Competitors
What is the competitors costs? Prices?
What is their pricing strategies? How will you price in comparison to competitors?
Ex. HP and Canon sell computer printers for cheap but then charge high prices for ink.
Kodak instead decides they will sell printers for a high price and the ink for a lower price.

Environment
What is the economic conditions? Is your product impacted by economic downturns?
Government restrictions? Price caps?

Pricing Strategies

Cost-Based Pricing
Determining a price at the end of the value chain just by adding a standard markup to the costs.
This is a common strategy by retailers, where they will acquire an item for X dollars from a
supplier and then just automatically increase the price by a consistent percentage to sell to the
end user
Process is: 1) design/produce a product, 2) determine costs of that product, 3) set price
at % above the price, 4) convince people to buy it.

Value Based Pricing
The opposite of cost-based pricing where this time you:
1) determine customer needs and perceptions of value
2) set a target price to match the perceived value
3) determine the cost that can be incurred for each product
4) design/produce product
Ex. Every-day-low-prices strategies Wal-Mart. They see that customers need lower
prices and see value in paying lower prices. They then set a target price of what people
are willing to pay, they then determine how much it will cost to purchase the items that
they will see. Then they acquire the products that will meet their pricing strategy to re-
sell.
Ex. Value Added pricing adding features to differentiate your product and establish
higher value.

Market Skimming Pricing
Setting a high price when a product is initially introduced, and then slowly offer it for a lower
and lower price.

People with no concern of price and who are first adopters will happily pay a high price right
away, then after some time you lower the price so that those who were on the fence about
purchasing it originally now see that value in purchasing it, then you do this again and again.

Should do this when the quality and image of your brand can support a high price and
that competitors cannot enter with a similar product at a lower price.
Ex. Apple use to do this with all their products, but they have since slowed down this
practice, but still do it to a certain extent, but they make sure that they introduce a new
product to warrant the price decrease of older products.

Penetration Pricing
Setting a low initial price in order to increase market share and get a large volume of
sales
Use this when the customer is price sensitive, your unit costs decrease as you make
more (high economies of scale), and you are able to maintain the low price over the
long-term.
A lot of cell phone apps might try to adopt this strategy, where as people start to really
enjoy the app they may be willing to pay for an upgrade.

Product Line Pricing
Setting price steps among products in a product line (ex. the different prices of iPhone
depending on the storage)

Optional-Product Pricing
Increasing the price of add-ons/complementary products, where the seller may not
make a profit off the main purchase, but make a larger profit off the little add-on items
After making one purchase, a consumer maybe more willing to buy other things as well,
so the strategy is to charge a higher mark-up for those additional items
Ex: You just commit to buying a $35 000 car and the salesperson then asks if you want
the aluminum rims for an extra $4000. You will be more inclined to say yes because
your mind has just committed to a big purchase and this $4000 extra on top of $35 000
does not seem like a lot.
Psychologists would call this the foot-in-the-door technique, where a person is more
likely to comply with an additional request (e.g., buying an additional item) after already
agreeing to an original request.
In other words, it is harder to say no once you have just said yes
Aware of this, you can convince people to buy the first item by charging a lower price,
but recoup all your costs and make profits on the add-ons and additional purchases.

Door-in-the-face Pricing
Similar to the foot-in-the-door (described above), the door-in-the-face is the reverse.
Where you price a number of items at a lower price comparative to big ticket items.
Ex. restaurants do this all the time, where on the menu there are a few items that are
very high priced such as the Surf n Turf. Now in comparison to the $50 plate of Surf n
Turf, the $20 bowl of pasta doesn't look very expensive.

Pick-your-own-price
Letting the customer decide how much they want to pay for an item.
This defies rational thinking and economics. Rationally, if given the option should,
everyone should choose to pay nothing. But a surprising number of people do not
choose to pay $0
When consumers pay what they want they typically ask themselves how much was
this worth to me? and they will come up with a number. Sometimes people will be
very honest and say it is worth a lot to them and therefore pay a lot more than you may
have asked for.

Class 17: Marketing Channels and Distribution

Marketing Channels

A set of separate organizations that help transfer ownership of a product from producer to the
consumer or the business user.

For Example: Sony produces a digital camera who then sells it to a distributor. This distributor
then sells the camera to retailers (e.g., BestBuy, Wal-Mart, Henrys, etc), who then sells it to
you, the end consumer. This is a marketing channel made up different marketing
intermediaries.

Intermediaries:
Any organization or person that stands between the product and the final user
Merchant Middlemen
o These are intermediaries who take ownership and then resell the product (e.g.,
retailers, wholesalers, distributions)
Agent Middlemen
o These people find potential customers and may negotiate on behalf of the
producer but never acquire ownership. These are brokers.

Benefits of Intermediaries:
Efficiency for customers to get a hold of products.
o Customers do not need to go to 100 different producers to see what they want
to buy, instead they go to 1 store and browse all available items before making a
purchase. (therefore there is fewer contact points)
o Producers group their products in retail stores of similar products so that a
customer does not need to go to each individual producer separately, then retail
stores group together (e.g., in malls, strip malls, city centers, etc.) so that a
customer does not need to travel to a number of different stores

Channel Effectiveness
o A marketing channel is most effective when each member (each intermediary) is
assigned tasks that it can do best, and all members cooperate to attain overall
channel goals

 Channel Length
o The number of intermediaries in a marketing channel
Indirect Channel
o A Marketing channel with one or more intermediaries, where ownership has to
be transferred at least once before it is bought and used by the end consumer
Direct Channel
o No intermediaries: direct from producer to end user
o This is a trend that technology and the Internet has made easier and more
efficient
o Producers can sell their product to their end user over the Internet, directly to
their users.

Channel Conflict
o As a producer you may sell your product to a number of different retailers for re-
sale to the end user. However, these retailers represent your brand/product and
certain activities can cause conflict

Vertical Conflict
o Conflict between different channel levels (e.g., between a producer and a
retailer)
o Ex. American Airlines and Expedia have been in a constant battle as American
Airlines hopes to eliminate middlemen (such as expedia and travel agents) and
try to sell directly to their consumers. Expedia claims this is anti-consumer as
it eliminates easy price comparisons and drives up the price of search costs as
well as the incentive for airlines to keep their prices competitive

Horizontal Conflict
o Conflict that exists between two or more intermediaries at the same channel
level (e.g., conflict between two retailers)
o Ex. a lot of big retailers offer to Price Match to provide incentive to consumers
to always shop at their store, and if they find a better price advertised else
where they will happily match that price. However, smaller retailers have been
known to advertise certain items on sale for pennies but then not carry any of it
in stock, so that customers would go to the big retailer with the price match
guarantee (where they have lots of the item in stock). Forced to price match the
big retailer has to provide the desired item for pennies causing them to loose
money.

Solutions to Vertical Conflict:

Vertical Marketing Systems
To avoid conflict the marketing channel can act as one unified system with the aim to
maximize efficiencies and profits for all intermediaries
A manufacture can also decide to own the entire marketing channel, such as Apple who
produces their product and also sells it in their own stores. Also known as Vertical
Integration.

Impact of the Internet:
Marketing Channels and Intermediaries were largely established because people didn't
know about products, they didn't know about brands, they didn't know what was
available. If people did know about a product from some sort of advertisement, it
seemed unreasonable that customers would drive all the way to the products
production facility to make the purchase. So producers put their products in stores and
malls and city centers to stimulate purchase, as well as making it easier for customers to
get multiple things at once.
The Internet has changed all of this, people can quickly Google a certain need (ex.
restaurants in Kingston, or running shoes) and search results will bring back
numerous companies and products that will satisfy that need. Customers can go
directly to the website, make a purchase, and have the item be delivered. So why is the
physical store, malls, shopping centers, still a thing?
There are a lot of explanations for why Brick-and-Mortar stores still exist with no signs
of fading away. But I believe there is something in the experience of going out on a
shopping adventure, or a shopping excursion. There is an increased value beyond the
items you purchase, where going shopping has a similar quality of going to an
amusement park. The increased stimulation of people, lights, and purchase possibilities
is exciting in itself. Additionally, the stress and anxiety of the internal tension of should
I buy it? Should I not buy it? provides some excitement, like shopping is a game, and
maximizing your satisfaction is the goal. This same excitement is not experienced from
a computer screen.
For this reason I believe physical stores will always be around. In understanding the
value in shopping being an experience rather than just a means to buy things, stores
should respond with more experiential stores rather than functional. Stores like Ikea
and Build-a-Bear utilize this idea of shopping being an experience, and more stores
should think about doing the same thing.