Likly to be asked

Definition of marketing: marketing is about creating value, focusing on benefits and not on the product. This is related to the reading “marketing myopia” that students were supposed to read for the class. Companies should focus on the benefits and not on the product (consumers buy drills and not holes). An important aspect of marketing is word-of-mouth = a very effective way to attract new customers. Keeping customers is more profitable than attracting new ones.

Definition and consequences of prospect theory: people are risk averse towards gains and risk seeking towards losses. It explains why people make bad decisions in the stock market: sell good stocks because of being risk averse towards gains and not the bad stocks because of being risk seeking towards losses. Explain why people overvalue the things they own (endownment effect).

Importance of segmentation: not all customers are the same. Segmentation is essential because the market is not homogeneous, so the companies have incentives to try to divide it in segments that are relatively homogenous. Competing companies may be better suited for certain segments, difficult or too costly to satisfy all customers, and the company has limited resources. Thus every company should focus on customers with the highest return on marketing investment. There are three criteria for segmentation. Segments should be distinctive (respond differently to the marketing mix), operational (can be identified and reached) and substantial (enough to support profitable programs).

Targeting: Targeting is about addressing the right people who want to buy the product.  The company needs to be customer-focused (what benefits are important for what segments), company-focused (how good is the company at providing those benefits) and competitive focused (how good is the competition at providing those benefits). If the company wants to target an undifferentiated segment they can use a mass marketing strategy like Coca-Cola does; when facing a concentrated segment they can use a single target market approach or a narrower version called "niche strategy"; and finally a multiple target market approach (most used strategy) if they deal with differentiated segments. Definition and consequences of the mere-exposure effect: people like things they get exposed to very often. It is important to have a clear positioning and get consumers exposed to it very often.

Positioning is about occupying a position in consumers’ minds. A good Positioning Statement contains all the relevant info about a brand: target; frame of reference; point of difference; and reason to believe. Tools for positioning: perceptual maps (quantitative technique) and ZMET (qualitative technique). Perceptual maps technique involves selecting two important attributes and plotting the competitors in a graph with those attributes. For perceptual maps, marketers should use factor analysis to reduce the number of attributes to plot and regression analysis to examine what factors are most important. ZMET involves asking customers to collect images of the brand such that at the end the manager has an illustration of how the consumer views the brand.

Priming (unconscious activation of ideas) has a strong influence on consumers. This is because we are much influenced by what was just activated in our minds. If this activation is nonconscious, we cannot avoid it. We don’t have the mechanisms in place to counteract its influence. Thus, companies should try to activate the brand unobtrusively by embedding the brand in movies, video games, shows…  

Brand extensions must deal with category fit (perceived fit between product categories), and association fit (relevance of existing brand associations in new category). Transfers of perceived quality of a brand is enhanced when the two product classes fit. Poor fit not only detract from the transfer of positive associations but can actually stimulate undesirable associations.

Liking = we comply with those who like us. The sources of liking include:

1.     Physical attractiveness: we like pretty people because we believe they have other qualities as well (the halo effect);

2.     Similarity: we like similar others and those who mimic us;

3.     Familiarity: we like familiar things (the mere exposure effect);

4.     Liking: we like those who signal they like us though smiles and touch. In a restaurant context both men and women give more tips and evaluate the service as better when they receive small touches in hands, arms and shoulders. Touching is neutral among those who don’t like to be touched.

The Beijing study is another example of the effect of reference groups. Highlighting the most popular items in the menu of a restaurant in Beijing increase orders by 13% to 20% and increased customers’ satisfaction significantly. This is because by highlighting the most popular items we signal that these options are good, they are approved by others. In addition, we make choice easier. Thus, someone who was in doubt about asking for desert, now has a good reason to ask.

The small area hypothesis: In general, we are more motivated the closer we are to a goal. But we can get even more motivated if we focus on the progress already made at the beginning of goal pursuit and on the effort remaining at the end of goal pursuit. When motivating customers to buy more in a loyalty program it is best to say: “you have achieved 30% of the Silver level” and “you have 30% left to move to the Gold level”.