Marketing Management Lecture WEEK 3 FALL 2010 EVC ECON OPTIONAL

Marketing Management Lecture WEEK 3 FALL 2010 EVC ECON OPTIONAL

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ARJUN CHAKRAVARTI Spring 2010 MARKETING MANAGEMENT WEEK 3 / 4 : Tools for Understanding Consumer Behavior (Part I)
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Individual Consumer and Market Segmentation Analysis
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Bottom-Up Market Segmentation Step 1. Understanding Attributes that the Consumer Values
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Learning to this point: Elasticity: % Change X / % Change Qd Possible variables? Movement: Own price Shifters: Cross price, Income, Tastes, etc. Do other variables (e.g., product features) affect Qd?
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Learning to this point: Microeconomics class: focus on how to think about the economy in the aggregate. (Qd) But we can generalize these lessons to look at individuals’ attitudes and choices as well.
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Learning to this point: Plan for this lecture:
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Learning to this point: Aggregate Market Demand Regression (Terms are in logs changes in percentage terms) SALES i = 28.0 – 4.29 (Pi) + 4.59 (Pj) + 0.85 (POP) + … + 0.25 (Per capita inc) + 1.09(%POP<18) + 0.85 (ADV) Interpretations Note: “Sales i ” equals Qd in the market. - a 1 percent change in Pi leads to a -4.29 percent change in sales - a 1 percent change in Pj leads to a 4.59 percent change in sales - a 1 percent change in ADV Expenditure leads to a 0.85 percent increase in sales
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Learning to this point: Aggregate Market Demand Regression (Terms are in logs changes in percentage terms) SALES i = 28.0 – 4.29 (Pi) + 4.59 (Pj) + 0.85 (POP) + … + 0.25 (Per capita inc) + 1.09(%POP<18) + 0.85 (ADV) Individual Demand Regression (What person X wants / WTP) What are some dependent variables that we might use? (Instead of Qd) - Willingness to pay - Price actually paid - Probability of Choice (Requires more complex statistical methods)
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From Aggregate to Individual Demand Individual Demand Regression (Terms are in logs changes in percentage terms) Price Paid =
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Independent Variables in Individual Analysis Some variables that could potentially affect the price / choice of a your product (1) Product attributes & Aesthetics (2) Context and Location variables (3) Perceived reliability and quality (4) Brand Reputation “Badge Value” (5) Social Conformity & Interoperability NOTE: DO NOT DEAL WITH COMPETITION YET
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Product Attributes/Product Design Hypothetical Regression for an MP3 Player (Terms are in logs changes in percentage terms) Comparing MP3 players with different attributes Price Paid i = 28.0 –4 .29±(1GB)± + 4.59 (Chrome Finish) + 0.85 (Quality Rate) + 0.25 (Purchase Before) We ultimately want to be able to write models like this. I’ll show you how starting next week.
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Economic Value to the Consumer Let’s discuss formulating a price at a conceptual level first.
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Economic Value to the Consumer Consumers buy not just on the basis of price, but on the basis of the value that the price represents.” * sometimes called EVA or more generally, “Value in use” Represents the most basic building block of economically based decision making. What are the components of EVC?
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Economic Value to the Consumer What are the components of EVC?
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This note was uploaded on 11/07/2011 for the course ECON 101 taught by Professor Johnson during the Spring '11 term at Sciences Po.

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Marketing Management Lecture WEEK 3 FALL 2010 EVC ECON OPTIONAL

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