What did Peter Drucker state as the purpose of business in the early 1970s?
To create a customer.
What addition did Theodore Levitt make about business purpose?
A business must create and keep a customer.
Which author stated the purpose of business is to create a customer in the early 1970s?
Peter Drucker.
What did Theodore Levitt argue is required to achieve customer and financial goals?
Differentiating what a firm does and how it operates.
What does marketing strategy formation set?
Overall long-term goals and basic approach to the marketplace.
What key elements are included in marketing strategy formation?
Customer groups to serve, customer wants to address, and best way to create customer value.
What are the components of Shapiro’s customer-centered marketing process?
Marketing strategy formation, marketing planning, programming and budgeting, implementation, monitoring and auditing, and analysis and research.
What does the aspiration decision specify in marketing strategy?
What the firm hopes to achieve in the market by segmenting, targeting, and positioning.
How does the action plan decision relate to the aspiration decision?
It translates the aspiration into the four Ps of product, promotion, place, and price.
Which elements create value for customers in marketing?
Product, promotion, and place create value for customers.
What is the primary role of price in marketing strategy?
To capture part of the value as revenue to fund operations and provide profit.
What limits the maximum price a company can charge customers?
The value created through product, promotion, and place.
What condition must the price bound exceed to be viable?
The unit cost must be exceeded by the price bound.
What five elements does the five Cs analysis examine before marketing decisions?
Customer behavior, company capabilities, collaborators, competition, and context.
What is a decision-making unit in purchasing?
An individual or group involved in some or all purchase decision aspects.
Which six roles did Bonoma identify in buying situations?
Initiators, gatekeepers, deciders, influencers, purchasers, and users.
Who identified six roles in buying situations?
Thomas Bonoma.
What defines a core competency according to Prahalad and Hamel?
A company capability contributing significantly to customer value and hard to imitate.
Who defined the concept of core competency?
Prahalad and Hamel.
Why does context analysis monitor cultural and regulatory factors?
Because changing context can disrupt marketing strategy possibilities.
What variables does market segmentation use to divide customers?
Demographic, geographic, psychographic or lifestyle, benefit-sought, and usage-related characteristics.
What defines a target market after considering corporate goals?
The customer group or groups selected for service.
What four elements does a positioning statement specify?
Target customer, that customer’s wants, product type and category, and key benefit provided.
Why does a meaningful target market exclude some customers?
To focus on customers whose wants fit the firm’s comparative advantage.
What is the marketing mix according to Neil Borden?
A set of activities composing a firm’s marketing program blended coherently.
Which four Ps are commonly used in the marketing mix?
Product, price, promotion, and place.
Which marketing mix element corresponds to the offering?
Product.
Which marketing mix element corresponds to communications strategy?
Promotion.
Which marketing mix element corresponds to distribution channels?
Place.
What does the total product include beyond core functionality?
Brand, reputation, ease of use, assistance, and warranty.
What does product line breadth refer to?
The variety and number of product lines offered.
What does product line depth refer to?
The number and relationship of offerings within a given line.
Which methods can product testing use to obtain customer feedback?
Surveys, taste tests, simulated test markets, actual test markets, and beta tests.
What is the purpose of product testing methods like surveys and beta tests?
To guide design refinements and the go/no-go decision.
Who is associated with the concept of product testing methods in this context?
Robert G. Cooper.
What stages does promotion move customers through?
From product awareness to knowledge, interest, trial purchase, and retention.
What does the 6 Ms model organize in communication planning?
Market, Mission, Message, Media, Money, and Measurement.
What defines one-way communication?
An outbound message sent without interaction.
What defines two-way communication?
An exchange where the receiver can respond and the sender can adapt the message.
What is the goal of a push strategy in promotion?
To induce intermediaries to create demand for a product.
What is the goal of a pull strategy in promotion?
To create strong customer preference so intermediaries mainly make the product available.
What are the four main functions of a market channel?
Generating demand, fulfilling demand, providing after-sales service, and gathering customer feedback.
How does a direct channel differ from an indirect channel?
A direct channel has the manufacturer perform all go-to-market functions, while an indirect channel assigns some to partners.
What is price realization in sales?
Revenue obtained from selling a given bundle of goods.
What income increase results from a 1% price realization improvement at Siemens?
€0.83 billion in additional income.
How much can Siemens' net income improve with a 1% price realization increase?
By 14%.
What differentiates a posted price from an auction price?
Posted price is supplier-stated; auction price is set by buyers' willingness to pay.
What should effective pricing primarily consider instead of cost?
Customer value.
How is true economic value calculated?
By comparing the offering’s value to the customer’s next-best alternative.
What does price customization adapt prices to?
Differences in customers’ willingness to pay.
What does a uniform pricing policy charge?
The same price to all customers at all times.
What are the three general forms of price customization?
Pricing based on buyer characteristics, transaction characteristics, and product line variations.
What is the optimal uniform price for the video game with zero marginal cost?
$70
How many customers buy the video game at the optimal uniform price of $70?
5 customers
What total contribution results from selling the video game at $70 to 5 customers?
$350
What are the optimal prices for new buyers and upgraders of the video game?
$95 for new buyers and $40 for upgraders
What total contribution is achieved by separating video game customers into new buyers and upgraders?
$405
By what percentage does separating customers improve total contribution over the best uniform price?
15%
What is the role of analysis and research in the marketing process?
It gathers data from inside and outside the company before each of the first four action steps and continues throughout the process.
How does marketing strategy formation link analysis, decisions, and outcomes?
Through an interactive rather than linear process.
How must competition be defined in competitive analysis?
Broadly, including current and future alternatives seeking the same customers.
What is the focus of an effective positioning statement?
One or two points of difference that deliver the greatest value to target customers.
Which authors defined the rule for an effective positioning statement?
Anderson, Narus, and van Rossum.
How many marketing-mix elements did Neil Borden originally specify?
Twelve distinct elements.
What range of elements did Borden's original marketing mix include?
From product planning to display.
What three concepts does Benson Shapiro distinguish in marketing mix?
Consistency, integration, and leverage.
Who distinguished consistency, integration, and leverage in marketing mix?
Benson Shapiro.
What is a common product-line architecture called?
A good, better, best structure.
How are higher-priced items perceived in a good, better, best structure?
As higher quality.
Why should channel design minimize conflicts?
Because partners compete for a larger profit share despite sharing the goal of enlarging total profit.
How many company-operated stores did Gap Inc. have in 2018?
3,194 company-operated stores.
How many franchised stores did Gap Inc. operate in 2018?
472 franchised stores.
How many suppliers did Gap Inc. outsource manufacturing to in 2018?
700 suppliers.
How does Disney customize prices for Florida residents?
By offering a three-day pass at a 30% discount and charging $60 extra for the Park Hopper Option.
How does Walt Disney World offer discounts to Florida residents?
A three-day pass at a 30% discount with documented Florida residency.
What does product line variation allow price-sensitive customers to do?
Choose a base model.
What do customers with higher willingness to pay choose in product line variation?
An upgraded model.
Which car models illustrate product line variation in the example?
Audi’s A3 and S3 sedans.
What were the prices of Disney World tickets on July 25, 2019?
$109 for one-day, $424.40 for four-day, and $444.45 for six-day passes
What does Disney’s Park Hopper Option cost and what does it allow?
It costs $60 and allows admission to multiple parks per day
Answer 42 questions on Marketing Strategy Formation Framework.
1. Which distinction did Theodore Levitt add to Peter Drucker’s statement about the purpose of business?
2. According to Theodore Levitt, how can a firm pursue both customer goals and financial goals?
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