MARKETING TEST 2

CHAPTER 5: CREATING LONG-TERM LOYALTY RELATIONSHIPS

Definitions:
o Customer-perceived value (CPV)- the difference between the prospective customers evaluation of all the benefits
and all the costs of an offering and the perceived alternatives
o Total customer benefit- the perceived monetary value of the bundle of economic, functional, and psychological
benefits customers expect from a given market offering because of the product, service, people, and image
o Total customer cost- the bundle of costs consumers expect to incur in evaluating, obtaining, using, and disposing of
the given market offering, including monetary, time, energy, and psychic costs
o Customer value analysis- report of the companys strengths and weaknesses relative to various competitors
o Value proposition- the whole cluster of benefits the company promises to deliver customers
o Loyalty- a commitment to rebuy or repatronize a preferred product or service
o Value delivery system- all the expectancies the customer will have on the way to obtaining and using the offering
o Quality- the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or
implied needs
o Profitable customer- a person, household, or company that over time yields a revenue stream that exceeds by an
acceptable amount the companys cost stream of attracting, selling, and servicing that customer
o Customer profitability analysis (CPA)- a means of assessing and ranking customer profitability through
accounting techniques such as activity-based costing (ABC)
o Activity-based costing (ABC)- accounting procedures that can quantify the true profitability of different activities
by identifying their actual costs
o Customer lifetime value (CLV)- the net present value of the stream of future profits expected over the customers
lifetime purchases
o Customer churn- high customer defection
o Marketing funnel- identifies the percentage of the potential target market at each stage in the decision process,
from merely aware to highly loyal
o Frequency programs (FPs)- designed to provide rewards to customers who buy frequently and in substantial
amounts
o Club membership programs- programs open to everyone who purchases a product or service or limited to an
affinity group of those willing to pay a small fee
o Brand community
o Customer relationship management (CRM)- the process of carefully managing detailed information about
individual customers and all customer touch points to maximize loyalty
o Customer value management (CVM)- the analysis of individual data on prospects and customers to develop
marketing strategies to acquire and retain customers and drive customer behavior
Summary
o Customers are value maximizers. They form an expectation of value and act on it. Buyers will buy from the firm and
they perceive to offer the highest customer delivered value, defined as the difference between total customer benefits
and total customer costs
o A buyers satisfaction is a function of the products perceived performance and the buyers expectations.
Recognizing that high satisfaction leads to high customer loyalty, companies must ensure that they meet and exceed
customer expectations
o Losing profitable customers can dramatically affect a firms profits. The cost of attracting a new customer is
estimated to be five times the cost of keeping a current customer happy. The key to retaining customers is
relationship marketing
o Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or
implied needs. Marketers play a key role in achieving high levels of total quality so that firms remain solvent and
profitable
o Marketing managers must calculate customer lifetime values of their customer base to understand their profit
implications. They must also determine ways to increase the value of the customer base
o Companies are also becoming skilled in customer relationship management (CRM), which focuses on developing
programs to attract and retain the right customers and meeting the individual needs of those valued customers
Other Concepts
o Decision-making theory succeed in selling to buyer by:
Increase total customer benefit by improving economic, functional, and psychological benefits of its
product, services, people, and/or image
Reduce the buyers nonmonetary costs by reducing the time, energy, and psychological investment
Reduce its products monetary cost to the buyer

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Steps in consumer value analysis

Identify the major attributes and benefits that customers value
Assess the quantitative importance of the different attributes and benefits
Assess the companys and competitors performances on the different customer values against their rated
importance
Examine how customers in a specific segment rate the companys performance against a specific major
competitor on an individual attribute or benefit basis
Monitor customer values over time
To reduce defection rate, company must:
Define and measure its retention rate
Distinguish the causes of customer attrition and identify those that can be managed better
Compare the lost customers lifetime value to the costs of reducing the defection rate
Improving value by doing well at strategies:
Reducing the rate of customer defection
Increasing the longevity of the customer relationship
Enhancing the growth potential of each customer through share of wallet, cross-selling, and up-selling
Making low-profit customers more profitable or terminating them
Focusing disproportionate effort on high-profit customers
Building loyalty
Interact closely with customers
Develop loyalty programs
Create institutional ties
Characteristics identifying brand communities
A consciousness of kind, or a sense of felt connection to the brand, company, product, or other
community members
Shared rituals, stories, and traditions that help convey the meaning of the community
A shared moral responsibility or duty to both the community as a whole and individual community member
Recommendations for making online brand communities more effective
Enhance the timeliness of information exchanged.
Enhance the relevance of information posted
Extend the conversation
Increase the frequency of information exchanged

CHAPTER 6: ANALYZING CONSUMER MARKETS

Definitions:
o Culture- the fundamental determinant of a persons wants and behavior
o Subcultures- groups with shared values, beliefs, preferences, and behaviors emerging from their special life
experiences or circumstances, such as with nationalities, religions, racial groups, and geographical regions
o Social classes- homogeneous and enduring divisions in a society, which are hierarchically ordered and whose
members share similar values, interests, and behavior
o Reference groups- all the groups that have a direct or indirect influence on a persons attitudes or behavior
o Membership groups- groups having a direct influence on a person
o Primary groups- groups with which a person interacts continuously and informally, such as family, friends,
neighbors, and coworkers
o Secondary groups- groups that tend to be more formal and require less interaction than primary groups, such as
religious, professional, and trade-union groups
o Aspirational groups- groups a person hopes or would like to join
o Dissociative groups- those groups whose values or behavior an individual rejects
o Opinion leader- the person in informal, product-related communications who offers advice or information about a
specific product or product category
o Family of orientation- parents and siblings
o Family of procreation- spouse and children
o Role- the activities a person is expected to perform
o Status- ones position within his or her own hierarchy or culture
o Personality- a set of distinguishing human psychological traits that lead to relatively consistent responses to
environmental stimuli

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Brand personality- the specific mix of human traits that may be attributed to a particular brand
Lifestyle- a persons pattern of living in the world as expressed in activities, interests, and opinions
Multitasking- doing two or more things at the same time
Core values- the belief systems that underlie consumer attitudes and behavior and that determine peoples choices
and desires over the long term
o Motive- a need aroused to a sufficient level of intensity to drive us to act
o Perception- the process by which an individual selects, organizes, and interprets information inputs to create a
meaningful picture of the world
o Selective attention- the mental process of screening out certain stimuli while noticing others
o Selective distortion- the tendency to interpret product information in a way that fits consumer perceptions
o Selective retention- good points about a product that consumers like are remembered and good points about
competing products are forgotten
o Subliminal perception- receiving and processing subconscious messages that affect behavior
o Learning- changes in an individuals behavior arising from experience
o Drive- a strong internal stimulus impelling action
o Cues- stimuli that determine when, where, and how a person responds
o Discrimination- the process of recognizing differences in sets of similar stimuli and adjusting responses
accordingly
o Hedonic bias- when people have a general tendency to attribute success to themselves and failure to external causes
o Short-term memory (STM)- a temporary reposition of information
o Long-term memory (LTM)- a permanent repository of information
o Associative network memory model- a conceptual representation that views memory as consisting of a set of
nodes and interconnecting links where nodes represent stored information or concepts and links represent the
strength of association between this information or concepts
o Brand associations- all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes, and so
on, that become linked to the brand node
o Memory encoding- how and where information gets into memory
o Memory retrieval- how and from where information gets out of memory
o Marketing partitioning- the process of investigating the hierarchy of attributes consumers examine in choosing a
brand I they use phased decision strategies
o Belief- a descriptive thought that a person holds about something
o Attitudes- a persons enduring favorable or unfavorable evaluation, emotional feeling, and action tendencies toward
some object or idea
o Expectancy-value model- consumers evaluate products and services by combining their brand beliefspositive
and negativeaccording to their weighted importance
o Heuristics- rules of thumb or mental shortcuts in the decision process
o Noncompensatory models- in consumer choice, when consumers do not simultaneously consider all positive and
negative attribute considerations in making a decision
o Conjunctive heuristic- the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first
alternative that meets the minimum standard for all attributes
o Lexicographic heuristic- a consumer choosing the best brand on the basis of its perceived most important attribute
o Elimination-by-aspects heuristic- situation in which the consumer compares brands on an attribute selected
probabilistically and brands are eliminated if they do not meet minimum acceptable cutoff levels
o Consumer involvement- the level of engagement and active processing undertaken by the consumer in responding
to a marketing stimulus
o Availability heuristic- when consumers base their predictions on the quickness and ease with which a particular
example of an outcome comes to mind
o Representativeness heuristic- when consumers base their predictions on ho representatives or similar an outcome
is to other examples
o Anchoring and adjustment heuristic- when consumers arrive at an initial judgment and then make adjustments of
their first impressions based on additional information
o Mental accounting- the manner by which consumers code, categorize, and evaluate financial outcomes of choices
o Prospect theory- when consumers frame decision alternatives in terms of gains and losses according to a value
function
Summary:
o Consumer behavior is influenced by three factors: cultural (culture, subculture, and social class), social (reference
groups, family, and social roles and statuses), and personal (age, stage in the life cycle, occupation, economic
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circumstances, lifestyle, personality, and self-concept). Research into these factors can provide clues to reach and
serve consumers more effectively
Four main psychological processes that affect consumer behavior are motivation, perception, learning, and memory
To understand how consumers actually make buying decisions, marketers must identify who makes and has input
into the buying decision; people can be initiators, influencers, deciders, buyers, or users. Different marketing
campaigns might be targeted to each type of person
The typical buying process consists of the following sequence of events: problem recognition, information search,
and evaluation of alternatives, purchase decision, and post purchase behavior. The marketers job is to understand
the behavior at each stage
Consumers will not necessarily go through the buying process in an orderly fashion and make skip and reverse
stages and alternative between going online and offline
The attitudes of others, unanticipated situational factors, and perceived risk may all affect the decision to buy, as will
consumers levels of postpurchase product satisfaction, use and disposal, and the companys actions
Consumers are constructive decision makers and subject to many contextual influences. They often exhibit low
involvement in their decisions, using many heuristics as a result

CHAPTER 7: ANALYZING BUSINESS MARKETS

Definitions:
o Organizational buying- the decision-making process by which formal organizations establish the need for
purchased products and services and identify, evaluate, and choose among alternative brands and suppliers
o Business market- all the organizations that acquire goods and services used in the production of other products or
services that are sole, rented, or supplied to others
o Institutional market- schools, hospitals, nursing homes, prisons, and other institutions that must provide goods and
services to people in their care
Summary
o Organizational buying is the decision-making process by which formal organizations establish the need for
purchased products and services, then identify, evaluate, and choose among alternative brands and suppliers. The
business market consists of all the organizations that acquire goods and services used in the production of other
products or services that are sold, rented, or supplied to others
o Compared with consumer markets, business markets generally have fewer and larger buyers, a closer customer
supplier relationship, and more geographically concentrated buyers. Demand in the business market is derived from
demand in the consumer market and fluctuates with the business cycle. Nonetheless, the total demand for many
business goods and services is quite price inelastic. Business marketers need to be aware of the role of professional
purchasers and their influencers, the need for multiple sales calls, and the importance of direct purchasing,
reciprocity, and leasing
o The buying center is the decision-making unit of a buying organization. It consists of initiators, users, influencers,
deciders, approvers, buyers, and gatekeepers. To influence these parties, marketers must consider environmental,
organizational, interpersonal, and individual factors.
o The buying process consists of eight stages called buy-phases
Problem recognition
Proposal solicitation
General need description
Supplier selection
Product specification
Order routine specification
Supplier search
Performance review
o Business marketers are strengthening their brands and using technology and other communication tools to develop
effective marketing programs. They also are using systems selling and adding services to provide customers added
value
o Business marketers must form strong bonds and relationships with their customers. Some customers, however, may
prefer a transactional relationship
o The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that provide
goods and services to people in their care. Buyers for government organizations tend to require a great deal of
paperwork from their vendors and to favor open bidding and domestic companies. Suppliers must be prepared to
adapt their offers to the special needs and procedures found in institutional and government markets
Other concepts
o Biggest hurdles for B-to-B marketing
Building stronger interfaces between marketing and sales
Building stronger innovation-marketing interfaces
Extracting and leveraging more granular customer and market knowledge
o Positives for business marketers

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Fewer, larger buyers
Derived demand
Close supplier-customer
Inelastic demand
relationship
Fluctuating demand
Professional purchasing
Geographically concentrated
Multiple buying influences
buyers
Multiple sales calls
Direct purchasing
Three types of buying situations
Straight rebuy- purchasing department reorders items like office supplies and bulk chemicals on a routine
basis and chooses from suppliers on an approved list
Modified rebuy- change product specifications, prices, delivery requirements, or other terms
New task- buys a product or service for the first time
Electronic marketplaces companies purchases from online
Catalog sites
Private exchanges
Vertical markets
Barter markets
Pure Play auction company
Buying alliances
Spot (or exchange) markets

8 categories to classify the buyer-supplier relationship

Basic buying and selling- simple routine exchanges with moderate levels of cooperation and information
exchange
Bare bones- more adaption by the seller and less cooperation and information exchange
Contractual transaction- defined by formal contract and generally have low levels of trust, cooperation, and
interaction
Customer supply- competition rather than cooperation is the dominant form of governance
Cooperative systems- united in operational ways, but neither demonstrates structural commitment through
legal means or adaptation
Collaborative- trust and commitment lead to true partnerships
Mutually adaptive- buyers and sellers make many relationship-specific adaptations, but without necessarily
achieving strong trust or cooperation
Customer is king-the seller adapts to meet the customers needs with out expecting much adaptation or
change in exchange

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o CHAPTER 8: TAPPING INTO GLOBAL MARKETS
Definitions:
o Global industry- an industry in which the strategic positions of competitors in major geographic or national
markets are fundamentally affected by their overall global positions
o Global firm- a firm that operates in more than one country and captures R&D, production, logistical, marketing,
and financial advantages in its costs and reputation that are not available to purely domestic competitors
o Joint venture- a company in which multiple investors share ownership and control
o Straight extension- introducing a product in a foreign market without any change in the product
o Product adaptation- altering the product or meet local conditions or preferences
o Product invention- creating something ne via product development or other means
o Backward invention- reintroducing earlier product forms that can be well adapted to a foreign countrys needs
o Forward invention- creating a new product to meet a need in another country
o Communication adaption- changing marketing communication programs for each local market
o Dual adaptation- adapting both the product and the communications to the local market
o Price escalation- an increase in the price of a product due to added costs of selling it in different countries
o Transfer price- the price a company charges another unit in the company for goods it ships to foreign subsidiaries
o Dumping- situation in which a company charges either less than its costs or less than its charges in its home market
in order to enter or win a market
o Arms-length price- the price charged by other competitors for the same or a similar product
Summary:
o Despite shifting boarders, unstable governments, foreign-exchange problems, corruption, and technological pirating,
companies selling in global industries need to internationalize their operations
o Upon deciding to go abroad, a company needs to define its international marketing objectives and policies. It must
determine whether to market in a few or many countries and rate candidate countries on three criteria: market
attractiveness, risk, and competitive advantage
o Developing countries offer a unique set of opportunities and risks. The BRICS countriesBrazil, Russia, India,
China, and South Africaplus other significant markets such as Indonesia are a top priority for many firms
o Modes of entry are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. Each
succeeding strategy entails more commitment, risk, control, and profit potential
o In deciding how much to adapt their marketing programs at the product level, firms can pursue a strategy of straight
extension, product adaptation, or product invention. At the communication level, they may choose communication
adaption or dual adaptation. At the price level, firms may encounter price escalation, dumping, gray markets, and
discounted counterfeit products. At the distribution level, firms need to take a whole-channel view of distributing
products to the final users. Firms must always consider the cultural, social, political, technological, environmental,
and legal limitations they face in other countries
o Country-of-origin perceptions can affect consumers and businesses alike. Managing those perceptions to best
advantage is a marketing priority