The consumer adoption process is:

Awareness → Interest → Evaluation → Trial → Adoption →  Internalization

Diffusion of Innovation:
Innovators (2.5%), Early Adopters (13.5%), Early Majority (34%), Late Majority (34%), Laggards (16%).

The innovators buy new products as soon as they are released.  They stand in waiting lines to purchase the products the day they are released.  The Early Adopters wait a little while to purchase the new products, they want to hear the first impacts of WOM.  The early majority usually wait a month or 2 to purchase the new products.  They research the product and the alternatives.  Late majority, wait a year or so to purchase the products, and laggards wait a really long time to purchase the products.

Pervasive Computing:

Pervasive Computing- A powerful concept that implies that a single person has access to myriad computing devices to assist in performing all sorts of daily tasks.  It is based on the idea of making computing power available in virtually every aspect of everyday living and making the computers themselves invisible to the users.  The goal is to enhance the world of everyday activities by using embedded devices that perform without human intervention.  For example:  telephone calls can be automatically forwarded to wherever the recipient may be, receptionists actually know where people are, computer terminals retrieve the preferences of whoever is sitting at them, and appointment diaries write themselves.  MAJOR CHALLENGE:  This can eliminate many jobs, especially in the service sector.

We have a great deal of experience to suggest that new technologies are usually not simple, especially in the early stages of their development or user adoption.  Complexity can retard the diffusion of an innovation. Example:  Speedpass (ExxonMobil gas pumps).

The Pervasive Challenge:  Marketers must seize the opportunities presented by the changing technological environment and develop new products and services that successfully take advantage.  Companies must develop products that will be easy to use and, in doing so, will not slow down the diffusion of innovation of that product.

Strategic Drivers of Wireless Technology:

3G technology is meant to increase the speed of cell phones and other mobile devices.  Strategies:

•    Context: Providing necessary information when and where the customer need or wants it.
o    Localization: the wireless device has a built in GPS tracker.  It can tell you what businesses are around your area.
o    Personalization:  you can select what alerts you want and the frequencies of the alerts
•    Time sensitive:  Information must be provided at the time appropriate to the customer.
•    High Value:  the functions available through wireless technology must be worth enough to attract customers to adopt wireless technology.
•    Voice activation:  being able to use your wireless device hands-free to comply with certain policies, and safety precautions.
•    One-click payment mechanisms:  secure authorized methods of m-commerce whithout having to input your credit card information for every transaction.
•    Security:  users must be assured that the data transmissions are secure.
•    Privacy: and private
•    Expanded permission marketing:  the information and promotions people are willing to received on their mobile devices.

2.    Why is integrated lever selection important in a marketing plan?
o    The 2Is allow firms to choose levers that can move customers through the relationship phases faster and more effectively than ever possible.
o    The 2Is affect each category of levers differently, but the end results remain consistent across all levers.
o    Product, Pricing, Communications, Community and Distribution.

•    The potential of the 2Is demands that firms leverage the 2Is across the matrix design as much as possible in order to advance customers to the commitment stage.
•    Product – Individualization of user pages (Yahoo!) sustains commitment and increases switching costs.  Individualization also spurs users to move from awareness to exploration.
•    Pricing – Targeted price promotions, which can be both individualize and interactive in the form of a permission email, can advance users from exploration/ expansion to commitment by giving them a price incentive to make the purchase.
•    Communications – Interactive targeted banner ads are a classic example of the 2Is influence on communications levers.  Banner ads can be targeted at particular segments, and the interactivity of a banner ad allows a user to move from awareness to exploration just by clicking on it.
•    Community – In the case of eBay, the strong vibrant community sustains buyers’ commitment by ensuring a constant supply of a wide range of goods.  In turn, the large number of shoppers benefits sellers by driving up auction prices.
•    Distribution – Interactivity allows for tight linkages between suppliers and buyers, which can facilitate a collaborative relationship that results in benefits in logistics, inventory planning and responsiveness, especially just-in-time production.

3.    How did eBay’s application of the Marketspace Matrix change over time?
Ebay 95-98:

•    eBay provides a logical first example of Marketspace Matrix in action.
•    Since the product – an online auction service – was completely new, its brand had little value.
•    Thus branding levers were inapplicable at the start.
•    Yet, eBay, even in its nascent phases, developed levers in nearly every category.
Awareness
•    Novelty of internet based, dynamic, auction-based pricing system
•    Benefits to both buyers and sellers
•    Low cost
•    Viral marketing and word-of-mouth
•    Strong presence at trade shows

Exploration/ Expansion
•    Focus in one key area: website itself
•    Easy-to-use search engine and easy-to-explore community converted visitors to customers.
•    With more converted customers, eBay fostered exploration and expansion by the community equity that arose.

Commitment
•    Relied primarily upon the enabling community product lever to advance users into the commitment phase.

EBay 98-99
•    Once eBay had advanced a significant number of users into the exploration/ expansion phase, the firm needed to focus on sustaining commitment.
•    As the firm’s needs changed, so did its Marketspace Matrix.

Awareness
•    Began first major advertising campaign in late 1998.
•    Radio and print campaign with “You might just find it on eBay” slogan
•    Strategic alliances with AOL.com and the now defunct Go.com
•    Sponsored auction of famous memorabilia for free media exposure
Exploration/ Expansion
•    Added new attributes and features
•    Offered complementary services
•    Improved existing services
•    Enhanced community offerings
•    Forums where veteran eBay users will answer questions of new users
Commitment
•    Community enabling remains a constant product lever to advance user to and sustain commitment.
•    Loyalty program where seller can earn “Power Seller” status.
Dissolution
•    Needed to dissolve relationships with customers who damaged the community.
•    These were sellers who accepted bids and money and then never delivered the goods as well as buyers who bid and never paid.
•    Relied on community and feedback forum to dissuade users from dealing with these miscreants.

EBay 2000-Present:

Awareness
•    Offering price promotions to sellers to encourage them to list items for the first time – for free, provided they sign up for and accept Billpoint.
•    Television ad campaign.
Exploration/ Expansion
•    Expansion of product categories to include real estate and cars.
•    Added “buy it now” option.
•    Augment offerings, e.g. deal to provide discounted UPS shipping to all eBay users through Mail Boxes Etc.

4.    What are the four categories of principles for lever selection?
•    Which levers are customers most responsive to?
•    Which levers are least likely to generate a competitive response?
•    Which levers work best together?
•    Which levers are consistent with strategy?

5.    What the key principles for lever selection within the Marketspace Matrix?
Choose Levers to Effect a Change
➢    Firms must understand the behavioral change they are trying to create.
➢    After establishing the desired outcome, the optimal levers will be easier to pick.
➢    E.g. Amazon.com 1-click ordering capability allows users to make quick impulse purchases and its collaborative filtering suggests products likely to appeal to the customer based on prior purchases and purchases made by other similar patrons.

Determine Which Levers Have the Most Leverage
➢    Firms must understand which levers are decisive in moving customers from one stage to another.
➢    While one lever may help generate awareness or exploration, another may prove to be the tipping point from one stage to another.
➢    E.g.: Offline sale of cosmetics
➢    Magazine ads generate awareness, but decisive point is at the cosmetic counter.  Firms thus need to move customers to the counter since that is the commitment or dissolution point.

Consider Barriers to Advancement
➢    Need to understand what prevents people from moving from one stage to another.
➢    The obstacle that stands in the way of advancement should be the target of a lever.
➢    E.g.Handspring adopted Palm operating system for its devices so that Handspring users could use existing Palm applications (product lever) and was able to compete and build awareness using the price lever.

Consider the Medium’s Effect on Desired Behavior
➢    To advance from one stage to another, the medium used for the awareness stage may be quite different from the one for the commitment stage.
➢    E.g.MSN CarPoint – To enable commitment behavior, CarPoint refers customers to local dealers who have the customer’s car of choice, a unique distribution lever.

Level of Involvement Matters
➢    High-involvement purchases will have different marketing levers than low-involvement purchases.
➢    To know which lever to use, firms need to understand where the product falls on the involvement spectrum.
➢    E.g. High-involvement decision is a consumer’s choice of bank.
➢    At the exploration stage, the levers must help consumers learn about the advantages of Internet banks in general, and this Internet bank in particular.
➢    The levers need to build confidence and trust in both the product and brand.

Understand Consumer Learning Trends
➢    Firms need to understand how consumers learn about products.
➢    Often different segments learn in different ways.  Elderly customers usually do so through offline channels whereas younger consumers usually do so through the Internet.
➢    For firms to effectively reach their target customers, they must use marketing levers that are consistent with the preferred learning processes of that particular segment, especially during the awareness and exploration stages.

Credibility of the Channel Matters
➢    The credibility of the channel matters more than the literal message.
➢    A message can be ignored when delivered via one medium, but completely absorbed when delivered by another.
➢    E.g. The Blair Witch Project
➢    By choosing to initially promote the movie almost exclusively via the Internet, promoters were able to create a hype and anticipation around the movie and its release that would not have been possible through conventional channels.

The Choice of Levers Must be Consistent with Positioning Choice
➢    The firm’s marketing levers must support the choice of position the firm takes in a certain segment of the market.
➢    This would mean that certain levers would be ruled out and others will be more attractive.
➢    E.g. American Express Platinum Card
➢    Personal invitations are sent to potential members which is consistent with the positioning of prestige, exclusivity and unique services for the frequent spender.

The Medium can be the Message – or the Product
➢    By choosing the channel, the firm is already making a choice about what it is saying.
➢    E.g. By advertising in Town and Country, the firm is perceived as targeting an affluent audience with fairly conservative values, even if it sells eggs.

Matrix Design Must be Adaptive
➢    A firm must be able to adapt its matrix to respond to evaluation of the campaign and changes in the market.
➢    As levers prove ineffective or extremely effective, resources must be allocated in response to these discoveries.

1.    Is the Internet a distribution channel?

A distribution channel is the system of organizations involved in the process of making a product or service available for consumption or use.

Marketing channels therefore facilitate the exchange of goods and services between buyers and sellers.
•    The Internet, as any other marketing channel, has emerged as a way to better serve the needs of one or more customer segments.

2.    What are the functions of channel intermediaries?

Efficiency: Distribution costs are reduced only if the retailers can perform the required functions more efficiently than the manufacturers could in the direct channel.
•    While the channel intermediary reduces the number of interactions the manufacturer must undertake, the total number of interactions has increased.
•    In any distribution systems with more than two manufacturers serving two customers, the addition of a single intermediary reduces the number of transactions and therefore has the potential to reduce total distribution costs.

Effectiveness: the ability of the channel to perform functions that create value for customers.
•    For example, a retailer might provide a personal sales staff that disseminates product knowledge to the customer, increases the convenience of purchasing the product by geographic proximity, offers complementary product lines, and offers easy returns and exchanges.

3.    What is disintermediation and what are its implications for channel intermediaries and customers?
Disintermediation:
•    A strategy that involves the elimination of a channel intermediary.
•    Internet has become a driving force for disintermediation
•    Overall result is positive because channel works more closely to create value for customers.

•    Elimination of channel intermediary
•    E.g. one hallmark of the new economy is a move from traditional manufacturer-retailer-consumer channels to direct online channels that eliminate the retailer.

•    Internet – driving force for disintermediation
•    The Internet enables firms to interact at a much lower cost and higher speed than ever before.
•    Frequency and complexity of communication between buyers and sellers, but tighter links between channel members, which facilitates lower inventory and shipping costs.

4.    What are the distribution levers and how do they affect relationships between intermediaries and buyers and sellers?

Intermediary Type
Direct
•    Firms can go direct via the Internet, telephone or mail.

Traditional Retailer
•    A retailer is a business whose sales volume comes primarily from sales to final consumers.

Virtual Shopping Malls
•    Provide much the same appeal as in traditional retailing: a shopping “destination”.
•    Especially important for brands with low awareness or brands in product categories where customers want to comparison shop.

Internet Exchange
•    Equivalent of virtual shopping malls in the B2B area.

Number of Intermediaries
Exclusive distribution
•    Very limited number of intermediaries.
•    Firms such as John Deere, Acura and Kenneth Cole use exclusive distribution because they want to retain direct control over the marketing of their products and limit the extent to which their retailers compete directly with one another.

Intensive distribution
•    Opposite of exclusive distribution
•    Firm places the product in as many outlets as possible.
•    Appropriate for low-involvement products that consumers select on the basis of convenience or impulse, e.g. snack foods, toiletries, tissue and magazines.

Selective distribution
•    Middle-of-the-road strategy in which the firm seeks a balance between making the product as widely available as possible and controlling availability.
•    Provides some protection for retailers against competitive pressure and encourages them to support the firm’s brand.
•    At the same time, it ensures that the product is readily available at a price that is subject to competition.

•    Number of Channels
–    Single-Mode vs. Mixed-Mode
•    Degree of Channel Integration
Intermediary Functions and Responsibilities

1.    What is the definition of community?
A set of interwoven relationships built upon shared interests, which satisfies members’ needs otherwise unattainable individually.

2.    What are the criteria that define successful community?
1.    Membership is a conscious choice.
2.    Member base has achieved critical mass and sustainability.
3.    Members feel a great sense of trust.
4.    Members achieve benefits in scale.
5.    Roles are not hierarchical or imposed.
6.    Effective facilitation and site structure keeps community activities on track.
7.    A spirit of participation and feedback is clearly cultivated.
8.    A sense of affiliation is achieved through ownership of equity in the community.
9.    Efficiency in interaction is maximized.
10.    The community is easily navigable.

3.    What are the different types of interests that form the foundations of community?
There are three broad types of Communities, differing by their foundation of shared interests.
•    Information-driven communities
1.    Built upon shared interests in information
2.    Seek  mainly to exchange information such as facts and opinions
3.    E.g. Motley Fool community for discussing stocks and financial happenings
•    Activity-driven communities
1.    Shared interests in activities
2.    Can range from buying antiques to meeting new friends to playing a role in an online game
3.    E.g. eBay community share an interest in buying and selling items auction-style.
•    Commonality-driven communities
1.    Shared interests arising out of commonality
2.    From sharing the same profession, ethnicity, life style stage.
3.    E.g. Physicians Online

4.    What are the different ways in which communities function?
•    Real-time systems
–    Internet Relay Chat (IRC)
–    Web-based chat
–    Virtual worlds and MUDs (Multiuser Dimensions)/ MOOs (MUDs Object Oriented)
•    Asynchronous systems
–    Mailing lists
–    Newsgroups (Usenet groups)
–    Web-based message boards (bulletin board systems [BBS])

5.    What are the three primary ways in which value is created within a community?
Three patterns emerge for creating and transferring value within communities:
User to User
•    User-generated content such as member-written articles, opinions and advice.
•    User-to-user value takes many forms, whether it be through information, advice, shareware, or simply good conversation
Administrator to User
•    Administrator-created content such as exclusive research and reports and activities such as scheduled chats with special guests.
•    Administrator-to-user value can also take the form of offline events such as parties in major cities.

User to Administrator
•    User-generated value such revenue from product sales, content fees, usage fees, commissions and advertising sales.

6.    What are the benefits that community can generate for a parent firm?
•    Cost Benefits
–    Reduced Customer Service Costs
–    Reduced Customer Acquisition Costs
–    Reduced Costs from Decreased Product Flaws and Marketing Mistakes
–    Reduced Marketing Costs
•    Revenue Benefits
–    Increased Customer Segmentation and Customization
–    Increased Branding
–    Deepened Customer Relationships

7.    What are the different levels of community?

Awareness
•    Individual first becomes aware of a community – what it is about and what it offers – and might arrive at the community out of curiosity.
•    To push the transition to exploration, methods could include simply outlining the benefits of joining the community while not asking for any resources.  At the same time, a call to action could be made to persuade the individual to explore the community free of charge and to learn more about the community and what it can offer.
•    Steps for the firm to take include making the enticing to join, anticipating questions and concerns, and establishing a call to action.

Exploration/ Expansion
•    If individuals commit to exploring the community, they progress to the Novice stage.
•    Novices commit to exploration, to determine if the community content or activity is worth their time.  These individuals generally begin participating and contributing little by little.
•    Steps for the firms to take include making exploring easy, getting members to trust them by showing concern and individual attention, making the community worth something.

Commitment
•    Most dynamic and interesting stage where individuals create the most value.
•    Individuals at this stage are driven by higher levels of commitment and intensity.  The objectives toward these individuals evolve to those of increased equity building and member development.
•    Steps for the firm to take include increasing equity by recognizing an individual’s heightened participation and commitment to the community and letting them grow if they want to (e.g. allowing members the opportunity to take more responsibility and learn new skills).

Dissolution
•    Even the most committed members can reach dissolution when severe flame wars turn them off, or they feel the community’s goals have changed and no longer satisfy member needs.
•    Steps for the firms to take include spotting the departing friend early and finding possible solutions, treating the leaving process with the same care as the joining process, letting them vent and listening closely, and leaving the door open for the possibility of getting back together.

1.    How is product defined?
a.    Can be defined as both tangible goods and intangible services generally created for the purpose of transaction.
b.    Two general types of products for which the levers of product development differ – physical and services.
c.    The Internet is changing some accepted limitations of service-based offerings such as intangibility, simultaneity, heterogeneity, and perishability.
d.    Three components to overall value proposition: core benefit, basic product and augmented product.
Through this transaction, products satisfy buyers’ specific wants or needs, and provide sellers revenue or customer goodwill that will ideally provide revenue later down the road.

Physical
Characteristics include their quality level, features, styling, brand name and packaging.
Differ from services as buyers can more easily comprehend them and their benefits since prior to purchase they can often be seen or even at times directly experienced or tested.

Services
Can be defined as any actions or intangible work that one party offers to another for the purpose of transaction (to achieve either revenue or increased customer goodwill).
An additional consideration when marketing a service is that it can be a stand-alone offering (e.g. medical services) or it may be tied to a physical product (e.g. warranties and maintenance).

Intangibility
Web can help make intangible services or experiences seem more tangible by providing cues such as virtual tours, video clips, and other advanced technologies.

Simultaneity
Traditionally one limiting factor on the scalability of many services products is that the producer and customer needed to come together at a single time for the exchange of services to take place (e.g. getting a haircut).
However on the Internet the delivery of services is technologically enabled and does not require temporal concurrence between the producer and consumer.

Heterogeneity
Services have generally been provided on a personalized level, and this personalization has been historically manpower intensive and usually impossible to reproduce on a mass production level.
The Internet has removed this limitation by allowing scalable personalization.

Perishability
The perishability of services, based upon a potential imbalance between supply and demand and market inefficiencies, is an area that many providers are utilizing the Web help to address.
E.g. priceline.com and how it has help to minimize perishability of airline seats.

Core Benefit
Most fundamental value offered by the product’s category.
This is the benefit that is usually assumed  when the buyer purchases the product.
E.g. the core benefit of a car is transportation.

Basic Product
Refers to the baseline offering beyond the core benefit that a customer enters the marketplace to buy.
Represents a customer’s threshold for considering a purchase.
Basic products are differentiated from each other by the unique branding between the different products.

Augmented Product
Goes beyond a customer’s or buyer’s expectations.
Is the portion of the value proposition that is used to further differentiate one competitor’s offering from another and serve as the basis of comparison for prospective buyers.
Mature markets are suitable for companies to augment their product offerings in order to circumvent price-based competition.

2.    How do interactivity and individualization affect product?
a.    The 2Is allow a company to learn more about its customer, personalize a product to meet customer preferences, and offer CRM tools to provide more value for customers and cut costs for product sellers.
b.    Websites which require customers to register to use the site have access to numerous tools to interact with the user as an individual.
c.    Once the user has registered, the site can recognize an individual customer both on the first and return visits.
d.    Using log files, a site can track a specific individual’s clickstream, i.e.where they go on a site, length of time spent, actual sequence of page views etc.
e.    Based on such data, sellers greatly increase their ability to develop products based on their customers’ interests and preferences, especially in developing augmented products.
f.    The Internet has also changed market research – today, syndicated reports can be found, assessed, and downloaded in a matter of minutes..  These reports are highly customizable and inexpensive relative to traditional research.

3.    What are the key marketing levers for products?
Basic Product
a.    Packaging
1.    Can be used to make a product stand out from its competitors, appear more appealing, and communicate to prospective customers both consciously and subconsciously.
2.    Can increase the tangibility of a product and the unconscious cues from packaging can be quite powerful.
3.    Physical Example: Godiva Chocolates
4.    Services: Federal Express’ unique envelopes
b.    Attributes and Features
1.    Individual attributes and features specific to a product are frequently used at the basic product level to differentiate one competitor’s offering from another.
2.    They are also used to help customize an offering to individual tastes and preferences.
3.    Caution should be used since the customer should not be inundated with too many choices, nor do they want to be charged additional fees for each and every one of the attributes and features included in a product.
4.    Physical Example: SUVs
5.    Services: Syndicated sales data services such as IRI and AC Nielsen.
c.    Customer-Specified Attributes and Features
1.    Key difference is the increased ability to allow customer to specify these attributes and features.
2.    Physical Example: Dell Computers
3.    Services: Internet services
d.    Mass-Customized Product
1.    Historically allowing for numerous variations was prohibitively expensive; today it is a practical reality.
2.    Physical Example: Motorola’s beeper manufacturing process
3.    Services: LendingTree.com

4.    What does the overall product development process look like?
•    Idea generation
•    Screening ideas
•    Product design
•    Prototype development
•    Business analysis
•    Test marketing
•    Commercialization

5.    How can companies manage their product portfolio?

A strong product development portfolio generally includes:

1. New product development
2. Enhancements and line extensions of current products and services
3. Development of existing products
4. Support of current products and services

6.    How can products help enable a customer relationship?

Two primary techniques:

1.     Deploying the product development levers that are appropriate for the existing relationship and

2.     Emphasizing the elements of the value proposition that are most relevant at a given stage of the relationship.

Relationship Stage
Lever(s)

AWARENESS
•    Packaging

EXPLORATION/ EXPANSION
•    Packaging
•    Product Attributes & Features
•    Fulfillment Capabilities
•    Customer Experience    •    Availability of complementary products
•    Customer-specified attributes and features
•    Mass Customization
•    Advanced Internet Functionality

COMMITMENT
•    Upgrades
•    Customer-specified attributes and features
•    Mass Customization
•    Postsales Support    •    Loyalty Programs
•    Customer Experience
•    Enabling Community
•    Customer Relationship Management

DISSOLUTION
•    Customer Care

7.    How can a customer-centric approach to product development create strategic advantages?

New product development is impacted by:

1. Customer needs
2. Production needs and capabilities
3. Research and Development
4. Competitors and Marketplace Forces

2.    What is the role of the Internet in a marketing communications campaign?
The Internet provide new forms of media vehicles that can be easily targeted to the right people.  For example, if a sports company wants to sell memorabilia to their target audience (sports enthusiasts), then that company can use the Internet as one of its media vehicles and post ads on websites visited by those consumers.

3.    What are the main categories of communication types, and within each category, what are the tools, or marketing levers, that marketers use to communicate with consumers?
•    Marketing communications, which includes all the points of contact that a firm has with its customers, can be grouped into four categories:
o    Mass offline
o    Personal offline
o    Mass online
o    Personal online
•    Mass-Offline Marketing Levers:
o    Broadcast Media: television, radio, outdoor & public relations
o    Print Media: newspapers, magazines, yellow pages, brochures, newsletters
o    Point-of-Purchase Displays
o    Telemarketing
o    Direct Mail
o    Statement Stuffers
o    Customer Service
•    Mass Online:
o    Basic Online Tools: banners, interstitials, search engines, point-of-purchase displays
o    Applications of Basic Online Tools: partnerships and affiliate programs, sponsorships, chat rooms, serial marketing
•    Personal Online:
o    Personalized Commercial Websites
o    E-mail Marketing: viral marketing, loyalty programs, customer service

4.    What are the six steps in the communication process?
•    Identifying the Target Audience
•    Determining the Communication Objective
•    Developing the Media Plan
•    Creating the Message
•    Executing the Campaign
•    Evaluating the Effectiveness of the Campaign

5.    How do the 2is of the Internet affect marketing communications?
Interactive: Developing closer relationships with your consumers through what seems to be 2 way communication, via emails, text alerts, interactive ads.
Individual: The actual relationship with each individual.  Giving each individual a sense of importance to the company.

6.    What levers are used for the different customer stages?

Relationship Stage
Marketing Levers

AWARENESS
Online levers: online billboards, search engines, e-mail, viral marketing
Offline levers: television, magazines, radio, yellow pages, billboards/ outdoor

EXPLORATION/ EXPANSION
Online levers: online billboards, search engines, e-mail, viral marketing, website, permission marketing, serial marketing
Offline levers: television, radio, newspapers, packaging

COMMITMENT
Online levers: targeted email/ permission marketing, personalized pages
Online/ Offline levers: loyalty programs, customer service
Offline levers: telemarketing, direct mail permission marketing with personalized offers

DISSOLUTION
Personalized pages
Termination

1.    What is the relationship between price and demand? Why is it important for a firm to price at the point at which marginal revenue is equal to marginal cost?
a.    As the price of a given product or service offering goes UP, the quantity demanded for that offering will decrease, according to the rules of economics.  It is important for a firm to price at the point at which marginal revenues equal marginal costs to at least breakeven.  You want to cover all of your costs with your revenue, and any other sales after that would be your profit.
2.    Why should a firm consider fairness when pricing its goods?
a.    A firm should consider fairness when it comes to pricing its goods because oftentimes, a fair price is looked at as one of the most important attributes of the offering.  It can create positive and or negative attitudes towards the product.  If something is priced higher than what its quality is perceived to be, it will be responded to negatively and vise versa.  However, pricing also tells you a lot about the quality of a product/service.  There should be a very close relationship between very good quality and higher prices.  Sometimes that high price is what develops the perception of high quality for certain brands (such as Apple).
3.    How has the Internet enhanced opportunities for dynamic pricing strategies?
a.    The Internet has enhanced dynamic pricing in 2 ways:
i.    Decreased Menu Costs – changing prices is easy (no costs of changing price tags, catalogs etc)
ii.    Interactivity – buyers and sellers from all around the world can interact and negotiate prices
4.    Why would a firm want to implement a price-discrimination strategy?
a.    Where the company sells goods or services at two or more prices, based on segment differentiation
b.    The Internet gives the ability to recognize a consumer, then customize prices, segmenting sometimes to a segment of one
i.    Ex. anyone who has previously purchased 10 items gets a discount
5.    What is the difference between static and dynamic markets? Why must a firm consider its pricing strategies within the context of a dynamic market?
a.    Static!!!
i.    Occurs when sellers set the price, and buyers must take it or leave it
ii.    Everyone pays the same
iii.    This strategy is very common in retailing
iv.    2 types of fixed price strategy are
1.    Price leadership: A price leader is most often, but not always, the lowest-priced product entry in a particular category. The price leader is the one that sets the price levels for the market. Others follow the leader with comparative pricing (usually higher).
2.    Promotional pricing
b.    Dynamic!!!
i.    Dynamic pricing is fluid pricing
ii.    Dynamic pricing is one of the most significant contributions the Internet has made to pricing strategy.
1.    Decreased “menu” costs on the web – changing prices is easy (no costs of changing price tags, catalogs etc)
2.    Interactivity – buyers and sellers from all around the world can interact and negotiate prices
iii.    Variety of auction types
1.    “English” auction – such as e-Bay where the price starts low and is then driven up
2.    “Dutch” auction – the auctioneer announces a high price for the product, then gradually reduces it until a buyer will accept it
3.    e-Bay has a variant of this, where a seller has multiples of the same product to sell
4.    First-Price sealed bid auction (purchaser does not know the amount of the other bids)
5.    Priceline is an example of this type of auction

The Knowledge Management Continuum:

Information: Data that have been processed into more useful forms using techniques that ranfe from simple summary formats to complex statistical routines.

Knowledge:  Information to which human experise has been added.

Data:  Raw, unprocessed facts and numbers.

Expertise:  Skill or Knowledge in a particular area.

Explicit Knowledge:  Knowledge that has been or can be articulated in a relatively straightforward manner.

Tacit Knowledge:  Knowledge that has not been articulated; often subconscious and relatively difficult to communicate to other people.

The knowledge continuum:

Data (qualitative/quantitative, raw, unprocessed) → analyze → Information (in a form useful to decision makers) → Combine w/ expertise → Knowledge (to make workers more productive and automate systems).

Knowledge Management in Marketing:  Marketers are interested in a narrower set of activities that focus on integrating front-and back-office services and delivering information to customer service personnel and decision makers when and where they need it.

How do we take the ever-growing streams of customer data from all sources and fashion them into knowledge that is usable in two key ways?
•    To enable human agents to do their work better, faster, and in a way that provides maximum customer satisfaction.
•    To create automated system that perform at least as well as the most skilled human agent.

Automation:  Replacing manual tasks and processes with computers and computer controlled equipment.

Frank and Sally Mortgage Example:

Template:  A document structure into which content can be dropped.  Automated messaging software  where you input different fields of information, such as: name, date, time, etc.

Work Flow:  An automated system that electronically routes documents to the next person in the process.  Automatically sends email notification to Frank and Sally, sends out the application to the different departments that need to take an action with the application, etc.  If there are further questions about the application (interest rate)—there can be a live chat function.

Collaborative:  Working together; often refers to software that supports people working together over time and distance.

According to data retrieved from CRM, key concepts while doing transactions on the net include:
•    Tailoring products to customers’ needs.
•    Providing a personal contact.
•    Anticipating customers’ needs
•    Making customers feel appreciated.

PROTOCOLS:
•    Protocol: Detailed set of guidelines for using knowledge from several sources to provide the products, services, and support customers need.  (A set of rules that govern the sending and receiving of data).
•    Policies:  (Being used in the strategy sense):  How the enterprise intends to treat a specific group of stakeholders, in this case customers.
•    Back-end:  the internal, non-customer-facing systems of the enterprise.
•    Business process:  Each process must have “customers,” either internal or external.  Processes are usually cross function (marketing and accounting) or organizational (manufacturer and supplier)
o    Developing a new product
o    Ordering good from a supplier
o    Creating a marketing plan
o    Processing and paying an insurance claim
o    Writing a proposal for a government contract

Customer profile:  In marketing, and marketing research, a description of a person or segment.  The data are in ranges in typical marketing research style.

Explicit knowledge exists in written form in policy manuals, training materials, handbooks and guides, product specification sheets, price lists, and other corporate material.  The steps are first to locate all relevant material and then to incorporate it in the correct format into the systems.  Web padr or a template would be built to display product information.

Intranet: an enterprise Web site that serves the needs of employees.

Query:  In information systems, requestion information for a database.
•    Structured Question:  In marketing research, a question that can be answered by choosing one of the prespecified set of responses.  Very straight-forward.
•    Semi-structured Question:  Parts of the question are not defined.
•    Unstructured Question:  the question is not specific at all.

Queue:  A line of objects or people.  Sending the information to the right people at the right time to be analyzed, or worked on.

Click Stream Data.  Click Stream: The complete data record, made up of mouse-clicks, of consumer activity  on the Internet during a specified period, usually the duration of a visit to a single Web site.

Server log: record kept at the server level that records each file requested from a Web site.

Click Stream data can help with:
1.    The date to possible usability problems that need to be examined and corrected.
2.    The date are used to generate site effectiveness measures that are essential for a number of marketing purposes. These “metrics” are used in managing the site.  They are key in determining advertising rates for the site.  They are also essential to understanding the impact of various Internet marketing programs like e-mail and online advertising campaigns.
3.    They provide a mother lode of data that can be mined to develop an in-depth understanding of visitor behavior on the site.  These data can be used to improve the site and to guide the way to useful new site features and marketing programs.
4.    The fact that these data exist is becoming widely known to Internet users.  Although they may not entirely understand all the ramifications of its use, they are concerned about a perceived loss of personal privacy.

Evaluate Web Site Effectiveness: Site Usability
–This is the way visitors look at the site, the way they gauge its ease of use and value to them.
–If visitors find the usage experience satisfactory, the site has a greater chance to be successful in the long run.

Usability Test:  Ensuring that it is easy for visitors to navigate and, in general, to find desired content quickly and efficiently on a Web site.

Usability Test: Similar to the testing done by direct marketers or in advertising laboratories than to the marketing research typically used by mass media marketers.  (Qualitative research).
–Usability testing is exclusively designed to see if the site works in a user-friendly fashion according to the expectations of members of the target market.

Stages of Usability Tests:
•    Concept testing: Research performed on the idea behind a product or a communications program.
o    One ore more concepts boards are shown to respondents, who critique it from the perspective of how logical they perceive it to be and how easy they think it would be to use.
•    Prototype testing: the site design is complete and at least some parts of the site are fully functional.  Testing a prototype affords an opportunity to get reactions to the appearance of the site and to get some information about the degree to which the site structure is consistent with customer expectations.
•    Full usability testing:  site has been uploaded to a server and is fully functioning, even though it is not accessible to the general public.

Usability Tests are done in focus groups, and usually administered by one person.

Pareto Curve: A plot of number of occurences against percent of total; the source of the 80/20 rule.

Site Metrics fall into 2 basic categories:  measures of business performance and measures of site performance.  The business effectiveness measures provide data by which marketers can judge the success of various parts of the site itself and of Internet marketing programs.  They are key to managing Internet marketing activities and demonstrating ROI on those activities.

DNS:  Domain Name Systems; the process for converting the name of a Web site into its IP address.

Redirect—sending one URL to another Internet address.

Traffic, Audience, and Campaign Data:

An important measure of the business effectiveness of a site is the number and quality of its visitors.  Site effectiveness can also, of course, be measured by sales if it a transactional site.

•    Traffic data describe activity on the site.  These data include metrics such as number of visitors, sessions, and page views.
•    Audience data describe both the behavior of people on the site—where they come from, what paths they take through the site, and whether thy take desired actions—and the people themselves using both anonymous and identified profile.

Hit Counter:  A piece of software inserted onto a Web site that measures the number of visits to the site.

Coded Web page:  A technique in which a small image, usually a 1-pixel transparent image (called a pixel tag or transparent GIF), is placed on a web page.  Used in conjunction w/ a cookie on the user’s computer, the image retuned data about user activity on the Web page.

Page View:  A page actually seen by a visitor; currently measured as a page being delivered to the visitor, which is not exactly the same thing.

Unique Visitor: An identifiably distinct, although not necessarily identifiable, visitor to a Web site within a specified period.
Pixel: One dot in the matrix of dots that makes up the display on a monitor.

Cache:  High-speed storage for data that is reference frequency.

Cookies:  the visitor to be recognized when he/she returns to the site, making it possible to serve ads or contend based on data provided by the cookie.
•    Session cookies are effective for only one visit.
•    Persistent cookies remain for a specified period (a year, perhaps), and then expire
•    Third-party cookies are set by an outside service provider like an ad serving firm or a metrics service.
•    First-party cookies are set by the Web site itself.

Traffic measures simply document site activity:
•    Hits: number of files requested
•    Impressions: the number of times an ad banner is requested by a browser
•    Page views or deliveries: the number of times a Web page is requested
•    Session: the amount of activity on a site during a specified period
•    Click-throughs: the number of times visitors come to the site by clicking on an ad

Audience measure provide data about the people who visit the site:
•    Visitors: the number of people who visit a site
o    Total (included multiple visits) or unique (different people) during a specified time frame
o    Unidentified (anonymous) or identified (registered or customer)
•    Unduplicated audience: the visitors that are unique to a Web site
•    Behavior on the site
o    Number of page views
o    Session Time
o    Path through the site
o    Shopping cart abandonment
o    Entry page (many visitors do not enter through the home page)

Campaign measures provide data about the effectiveness of marketing efforts.
•    By communications channel: e-mail, mail, online banners, and so forth
•    By offer: free shipping versus 25% off, for example
•    Search effectiveness by keyword.

Metrics:
•    Average number of visits per day
•    Number of page views per month
•    Average visitor session length last month
•    Number of hits for each hour of the day
•    Paid search results for the most recent 7-day period

Dashboard: customizable display of summary data on a computer screen.  Because the summary data are always present on the specified screen, it prevents user from having to activate a function or program or visit another web site to obtain data.

Clickstream data is based on server logs and coded Web pages provide metrics for all users of the Web sites of a single business, large or small.

The most familiar response metric is CPA (cost per action) or CPC (cost per click):
•    Cost per click-through
•    Cost per order (synonymous with cost per sale and cost per conversion)
•    Cost per lead
•    Cost per qualified lead

CPM: Cost per thousand
CPA: Cost per action; a media pricing mechanism based on the number of visitors who take a specified action, for example, clicking through on an ad or making purchase.
CPC: Cost per click from an ad or referring Web site.

Consumers are concerned about cookies, and some are deleting them.

A study in the UK discovered that almost 2/3 of the respondents did not believe that customer service had improved much in the last 5 years.
•    Top two reasons are to switch: poor service or product quality (61%) and lower prices (46%)

Customers Experiencing Problems (40%)
•    Customers who do not complain (20%)
o    10% will not repurchase
•    Customer who complain (80%)
o    25% dissatisfied
•    40% will not repurchase
o    35% mollified
•    5% will not repurchase
o    40% satisfied
•    0% will not repurchase

CRM helps to:
•    Strategically manage large account customers
•    Develop effective customer service systems
•    Proactively identify customer problems and communicate resolution options
•    Leverage customer information from the service process
•    Prevent customer problems via customer education

Internet Provides:
•    Comprehensive customer service and support at the same time technology enables companies to provide them in a cost-effective manner.
•    Contribute to increasing customer expectations about service quality.

What do Consumers Want?
•    Timely response to inquiries (45%)
•    Informative content (22%)
•    Communication with a real person (17%)
•    Product displayed clearly and prominently (14%)
•    24-hour availability (14%)

The Internet not only is a key reason why expectations of both B2C and B2B customers are rising, but also can be a way in which their expectations can be met in a cost-effective manner.
•    Push: Technology that allows preselected data to be distributed to the user’s computer at preselected time intervals.

Customer Service Evolution:
•    Live Customer Service: Telephone, Call Centers
•    Web-enabled customer service: with live assistance, automated
•    Anticipatory Customer Service: Rules-based automation, Push Technology.

Call Center: Department within an organization that handles telephone sales and/or services.

Web-based Customer Service:
•    Assistance of a live person: e-mail, instant messaging, chat
•    Automate: FAQs, searchable knowledge bases, Flash or video demonstrations, Self service

Levels of costliness:
1.    Most expensive: Telephone inquiry handled by live person
2.    Email handled by live person
3.    Live chat, representative handles many customers at the same time
4.    Email in which a live person is supported by an automated email
5.    Interactive Voice Response (IVR): with no human intervention
6.    A web site inquiry
7.    Automated Email

•    77% of customer interactions still occur through telephone call centers
•    13% were handed by IVR
•    Self-service and e-mail made up 4%

Self-service customer service:
They like it when:
•    When consumer expericned a sunned need
•    When self-service performed better than alternative
•    When it simply did its job.
They didn’t like it when:
•    Technology failed
•    When the process itself didn’t work
•    It was poorly designed
•    When the customer is responsible for the failure.

Customer Service Themes:
•    Excellent customer service cannot be delivered by a single department acting in isolation from the rest of the organization
•    Providing superior customer service is a long-term endeavor.
•    The customer service culture should pervade the entire organization.
•    Creating a culture of customer service is virtually impossible in an organization that does not follow at lease some of the tenants of quality.
•    Quality programs emphasize collection of data about processes.
•    Technology also makes it possible to offer customers multiple channels of accessing customer service.

Customer Service is an excellent way to control a sustainable competitive advantage.