Midterm Marketing
What we have learned so far about marketing can be summed up in one word, Value. The entire goal of marketing is to create value for a product so the product can be sold which creates revenue for the firm. From this, we have learned several concepts relating to marketing and the idea of creating value.
In order to understand marketing we must first define the word value as well as the similar term of utility. Value is the result of an evaluation of the cost and benefits of a product. If the benefits heavily outweighs the costs then the product appears to have value. In order to buy a new computer a consumer has to determine a few factors. The cost will play an important role as well as deciding if their current computer has become outdated. Additionally, a consumer has to think about what else they could be doing with that money. These are referred to as trade-offs with the next best opportunity being called the opportunity cost. Utility refers to the value or benefit that a consumer receives from a product. Form utility refers to the inputs put into the finished product. Time utility refers to if the product is offered at convenient times. Place utility is offering the product in locations that are easily accessible for consumers. Finally, ownership utility refers to favorable terms of purchase of a product.
The second concept that must be discussed is the Marketing Mix. The marketing mix is made up of the Four P's; price, product, place and promotion. Price is the literal monetary value that the company assigns to the good. Product refers to the overall quality of the good as well as all associated benefits to it that are either directly related to it or are after sale benefits. Place refers to how a company will transport the good from where it is produced to where a consumer is able to purchase the good or service. Finally, promotion refers to the communication from company to consumer. Companies spend millions of dollars a year on advertising to communicate to consumers about their goods to increase their sales and thus revenue. One of the more dramatic examples of the use of marketing mix is from Coca Cola. In the early 20th century Coca Cola began putting out advertisements with Santa Claus drinking Coca Cola. Santa Claus was transformed into a jolly man dressed in red and white clothing with of course a bottle of Coke. When a consumer thinks about Coke they will often think of joy and happiness because Saint Nick is displayed as a joyful man.
The next concept that should be discussed is the Four Degrees of Competition. This refers to the different market structures that a firm can operate in. The most competitive of the four is called Perfect Competition. In this market structure, A firm exerts only a minute of influence over price due to large number of suppliers. Additionally, the products are perfect substitutes for each other. However, as taught in Economics, there is no real life situation where this can occur, it is used rather as a benchmark for comparing the other structures. Next is monopolistic competition. There are still a large number of sellers, but the suppliers engage in product differentiation which creates imperfect substitutes, meaning the products can still be swapped out but the user will perceive that there is lost value from switching.. This allows for more influence over price by the sellers. This is where the majority of firms operate in real life. The third structure is an Oligopoly. In an oligopoly, there are only a handful of sellers. These sellers often operate in similar behavior to each other because they can work together to raise prices. Additionally, there are high barriers of entry that are often very expensive in order to actually gain a foothold in the market. As a result of the control that these sellers have, this market structure is often heavily regulated. The fourth structure is a Monopoly. Here there is only one seller in the market. This structure is often broken up by governments due to the price control that a single seller has. We can look at an example of an Oligopoly that is often used in my Econ 216 class, airplane companies. In the United States there are only a handful of major firms in the industry. This means that there is little competition between the firms because each will handle different target markets. This will often lead to an overall rise in prices.
The fourth concept that should be discussed is the internal evaluation and assignment of a product via Portfolio Analysis. The Boston Consulting Group created this in order to help firms determine what products to focus on and what to perhaps let go. The placement of the product depends on both market growth and market share of that particular product and market. For a high market growth and high market share product, the product is placed in the Star category. This means that it is a very successful product that the company should continue to attempt to maximize revenue on. Next is low market growth but high market share. This product is known as a Cash Cow which means that although there is low potential for growth, the product is dominating the market share. The company here should continue to pump money into the product for as long as possible. A perfect example of this would be the Coca Cola product Coke. The market is dominated by Coke and Pepsi and there is very low market growth potential yet Coca Cola makes hundreds of millions off of their product. The next category is a product in low market share and low market growth. These products are known as Dogs and the product will simply not make a great deal of money. The final category is the Question Mark category. There is high market growth and low market share in this category. Tn this category additional research to determine what category it will transfer to. In our Smart Projects, my team Hydro Fit wants the product to become a star rather than a dog.
In order to understand marketing we must first define the word value as well as the similar term of utility. Value is the result of an evaluation of the cost and benefits of a product. If the benefits heavily outweighs the costs then the product appears to have value. In order to buy a new computer a consumer has to determine a few factors. The cost will play an important role as well as deciding if their current computer has become outdated. Additionally, a consumer has to think about what else they could be doing with that money. These are referred to as trade-offs with the next best opportunity being called the opportunity cost. Utility refers to the value or benefit that a consumer receives from a product. Form utility refers to the inputs put into the finished product. Time utility refers to if the product is offered at convenient times. Place utility is offering the product in locations that are easily accessible for consumers. Finally, ownership utility refers to favorable terms of purchase of a product.
The second concept that must be discussed is the Marketing Mix. The marketing mix is made up of the Four P's; price, product, place and promotion. Price is the literal monetary value that the company assigns to the good. Product refers to the overall quality of the good as well as all associated benefits to it that are either directly related to it or are after sale benefits. Place refers to how a company will transport the good from where it is produced to where a consumer is able to purchase the good or service. Finally, promotion refers to the communication from company to consumer. Companies spend millions of dollars a year on advertising to communicate to consumers about their goods to increase their sales and thus revenue. One of the more dramatic examples of the use of marketing mix is from Coca Cola. In the early 20th century Coca Cola began putting out advertisements with Santa Claus drinking Coca Cola. Santa Claus was transformed into a jolly man dressed in red and white clothing with of course a bottle of Coke. When a consumer thinks about Coke they will often think of joy and happiness because Saint Nick is displayed as a joyful man.
The next concept that should be discussed is the Four Degrees of Competition. This refers to the different market structures that a firm can operate in. The most competitive of the four is called Perfect Competition. In this market structure, A firm exerts only a minute of influence over price due to large number of suppliers. Additionally, the products are perfect substitutes for each other. However, as taught in Economics, there is no real life situation where this can occur, it is used rather as a benchmark for comparing the other structures. Next is monopolistic competition. There are still a large number of sellers, but the suppliers engage in product differentiation which creates imperfect substitutes, meaning the products can still be swapped out but the user will perceive that there is lost value from switching.. This allows for more influence over price by the sellers. This is where the majority of firms operate in real life. The third structure is an Oligopoly. In an oligopoly, there are only a handful of sellers. These sellers often operate in similar behavior to each other because they can work together to raise prices. Additionally, there are high barriers of entry that are often very expensive in order to actually gain a foothold in the market. As a result of the control that these sellers have, this market structure is often heavily regulated. The fourth structure is a Monopoly. Here there is only one seller in the market. This structure is often broken up by governments due to the price control that a single seller has. We can look at an example of an Oligopoly that is often used in my Econ 216 class, airplane companies. In the United States there are only a handful of major firms in the industry. This means that there is little competition between the firms because each will handle different target markets. This will often lead to an overall rise in prices.
The fourth concept that should be discussed is the internal evaluation and assignment of a product via Portfolio Analysis. The Boston Consulting Group created this in order to help firms determine what products to focus on and what to perhaps let go. The placement of the product depends on both market growth and market share of that particular product and market. For a high market growth and high market share product, the product is placed in the Star category. This means that it is a very successful product that the company should continue to attempt to maximize revenue on. Next is low market growth but high market share. This product is known as a Cash Cow which means that although there is low potential for growth, the product is dominating the market share. The company here should continue to pump money into the product for as long as possible. A perfect example of this would be the Coca Cola product Coke. The market is dominated by Coke and Pepsi and there is very low market growth potential yet Coca Cola makes hundreds of millions off of their product. The next category is a product in low market share and low market growth. These products are known as Dogs and the product will simply not make a great deal of money. The final category is the Question Mark category. There is high market growth and low market share in this category. Tn this category additional research to determine what category it will transfer to. In our Smart Projects, my team Hydro Fit wants the product to become a star rather than a dog.
Next we will discuss the Product Life Cycle which could then be used to show where the portfolio analysis assignments would go. The PLC is a model that attempts to display the four stages a product will go through. The four stages are Introduction, Growth, Maturity, and Decline. Introduction stage occurs when the product first enters the market. The business's activities in this stage revolve around raising awareness, maximizing profits, and either trying to recuperate research and development costs or keeping prices low to attract customers and discourage competition. In the Growth stage, the investments made previously begin to pay off. As a result, the market share of the product and profits both increase. However, competition begins to enter the market so product differentiation becomes important. At this point, the product is a question mark to the firm. The Maturity stage has the highest level of profitability because the customers now are primarily repeat customers. The product is well known and mass produced so variable costs are lowered. This is where a firm will see if the product is a star or a dog. Lastly, the Decline Stage is where companies are forced to make decisions about the products future. Businesses are left with three options here. They can maintain/improve their current product which is where the business looks to add new features or look for new ways the product can be used. The company can harvest the product by making it a cash cow. The business will reduce costs associated to the product in order to maximize profits. The third option is to discontinue the product. The company ceases to support the product, sell off all remaining inventory, and focus on other products.
More recently we have learned about the Marketing Research Process. This is a three step process utilized by a firm to solve problems with the assistance of collected data. The first step is to determine what the problem is. To do this, the firm will collect information through either primary or secondary research. Primary research refers to research that is produced for the specific problem by your firm or a hired firm. Secondary research refers to research that has be produced by a firm that is unrelated to your firm. The second step is that the firm will analyze the gathered information. A common method to do this is through cross tabulation, which refers to the comparison between gathered data responses and additional responses from other questions. The third step to this is to report the findings from the research. By doing this, the firm will also present the best solution to the problem available. Over Spring Break, our professor has taken the time to gather secondary data from Simmons. This will then let my group, HydroFit, to be able to determine more information about who to target as well as specific numbers about the market.
In that same week we were taught about Marketing Research. This refers to the process of planning, collecting, and analyzing data relevant to an impending marketing decision. Two common explanations for why a firm will do this is to create quality decision making and to trace problems within the firm. Quality decision making involves decision making revolving around cutting prices, advertising budgets, and customer service. When tracing problems, a firm will look at several different areas that could threaten the long term success of the company. They will do this by researching about competitors in the market place, the explosive growth of online stores, and their current loyal customer base. When the firm analyzes the market, they are actually conducting research on three distinct markets. The total available market (TAM) refers to every single person who could possibly have a use for their product. Next is the service available market (SAM), this refers to the total number of people who can be reached through the firm's distribution channels. Lastly is the target obtainable market (TOM) or simply target market. The target market refers to the market of customers who will be most likely to purchase the product. There are often several similarities about the customers within this market such as age, career, regions, ect.
Good reflection Dan. It is Well written and your discussion of the different marketing concepts flows well together. Interesting read.
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