MidTerm Summary

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Mid-Term Summary

• Summary
• MC answers on the web-site.
• http//faculty.haas.berkeley.edu/shanmuga/ugba106.
  html
• Grader office hours on mid-term from 1230-2pm on
  Monday October 29th in F308.

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Question 1 Decision Making Process
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Question 1

• Each step 2points
• Need to correctly identify/explain each step and
  provide example.
• In general the class did very well on this
  question

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Question 2

• The chairman of the board of a large oil company
  once said The marketing concept is fine for
  packaged consumer products. These are
  differentiated products in highly competitive
  industries that need to advertise to stimulate
  demand. But we are producing standardized
  products in a situation of scarcity. Our main
  concern is not satisfying consumer needs, but
  trying to discover and exploit scarce resources.
  
• Would you support the chairmans position? Why
  or why not? Identify a market condition under
  which the chairman might become more concerned
  with satisfying consumer needs?

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Question 2

• Demonstrates understanding of the marketing
  concept (2 pts)
• Explain for why (or why not) the marketing
  concept is important for a firm selling a scarce
  product and why the chairman should be concerned?
  (5 pts)
• Example of a market condition in which the
  chairman would particularly be concerned with
  consumer needs (3 pts)

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Question 2

• Even if you are producing standardized products
  under scarcity, you should still care about the
  marketing concept of consumer orientation,
• Because understanding and responding to consumer
  needs might help the firm to add value to its
  products and thereby extract more consumer
  surplus.  
• Example in this industry if consumers care about
  environmentally safe gas, then responding to this
  need can help the firm to increase profitability.
   
• Remember even a monopoly needs to care about the
  demand curve and cannot charge an infinite price.
   
• Even if you are monopolist with a scarce product
  you can think of marketing actions that can make
  demand more inelastic or shift the demand curve
  out.
• For a scarce resource good marketing research and
  consumer information can help you identify the
  consumers who are willing to pay the most and
  thereby increase profitability.
• Understanding consumers better might help you to
  serve them better and thereby cut costs.
• The marketing orientation teaches the company
  that it is in the business of energy (a consumer
  need) and not oil (a product).  
• It is possible that in the future there might be
  an alternative to oil (solar) and then a
  marketing oriented company which thinks of itself
  in the energy business will strategically prepare
  itself better.

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Question 3 Sources of Brand Equity

• Lowers consumers search cost
• Acts as a symbol that enables a purchaser to
  identify goods or services that have been
  satisfactory in the past and to reject goods or
  services that have failed to give satisfaction.
• Tells the consumer about what features and
  benefits to consistently expect (Crest, Mercedes
  Benz).
• Carves out a competitive position for the product
  in the consumers mind.
• What do I stand for? (Volvo).
• Differentiates a product from competition.
  Anybody can make a can of flavored water.
• Investing in Brand Equity to signal social status
  or social matching.
• Polo shirts

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Question 3 Virtuous Cycle

• Brand investments are like the posting of a
  credible bond to consumers.
• Consumers use branding as a signal of quality or
  reliability.
• Acts as a symbol that enables a consumers to
  identify products that have been satisfactory in
  the past and to reject products that have failed.
  
• The consumers dependence on brands motivates the
  firm to invest in its product and attempt to
  maintain or improve quality over time.
• Successful branding therefore creates a virtuous
  cycle

Consumers use brand as a credible signal of
quality
Firm invest in Branding Quality
Firms with greater brand value will lose more if
they cheat on quality
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Question 3

• Distinction between a conceptually general and
  foundational source of brand equity and specific
  marketing actions like pricing, quality, image
  advertising that may be related to brand equity.
• Generous on awarding partial credit for answers
  explaining marketing activities that may be
  related to brand equity.