Unit 2: Marketing

Marketers collect demographic data (age, income, location) and psychographic data (interests, values, lifestyle) about customers. They use it to split a market into segments, choose target customers and write a customer profile, a made-up sketch of one typical buyer. Strong customer relationships can lower customer acquisition cost (marketing and sales spending per customer gained) and raise lifetime value (what a customer spends over time). But collecting customer data creates privacy, fraud and identity-theft risks for customers and for the business.

You think carefully about big purchases, like a car, but most small ones, like a snack, are habits. Personal, psychological, social and situational factors (such as store layout and timing) shape what you buy, and laws and new technology change buying patterns over time. Marketers use psychologist Robert Cialdini's principles of influence to nudge customers toward yes: scarcity, authority, consensus, liking, reciprocity, consistency and unity.

Market research collects quantitative data (how many, how much) and qualitative data (why, how). It checks whether a product is desirable (customers want it), feasible (the business can make it) and viable (it can earn a profit). Businesses usually start with cheaper secondary research, using information others have already published. Then they test a business hypothesis with primary research, such as surveys, interviews, focus groups, experiments or A/B tests. Good research uses big enough samples and neutral questions, and shows results with the chart that fits best.

Product development usually runs through six stages: ideation, validation, design, messaging, production and launch. An MVP tests for product-market fit (enough demand to make a profit), and a value proposition says who the product is for, what problem it solves and why it beats the alternatives. Branding gives a product an identity customers recognize. Marketing changes across the product life cycle, from building awareness at introduction to cutting costs or redesigning in decline.

A product only makes a profit if its price is above its per-unit cost. Common pricing strategies are value-based (what customers think it's worth), competitive (set against rivals' prices), cost-based (cost plus a set profit per unit) and penetration (start low to win customers fast). Pricing power, the room to raise prices without losing customers, depends on competition, how different the product is and how strongly customers react to price changes (price elasticity). Laws ban price fixing and price discrimination based on protected traits like race or sex, and many states ban price gouging in a crisis.

Place is where and how customers get a product. It's set by the business's marketing (distribution) channels, the last stage of the supply chain: business-to-consumer (B2C) for consumer products and business-to-business (B2B) for business products. Direct channels, like a company website or store, give more control over price and the customer experience but cost more to build and may reach fewer people. Indirect channels through wholesalers and retailers bring reach and expertise, but rivals may already dominate them.

A marketing campaign draws on the promotional mix: media advertising, personal selling, sales promotions, direct marketing and public relations. Businesses pick the tools that match how customers decide: a big purchase may need a salesperson, while a routine one may only need an ad. Digital marketing through websites, email, social media and apps reaches targeted customers with more personal messages at lower cost, and collects big data on what makes people buy.