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Terms in this set (139)
who cares about food marketing?
Business (along the food chain), Policy makers, Consumers all care about food marketing
why is the paleolithic a useful benchmark for diet?
-because 10,000 years is not enough time to make an evolutionary difference
-our species evolved to function in the paleolithic environment
how was the paleolithic diet different from current diets and what is the consequences of this difference?
-Paleolithic diet has more protein and fat but fewer carbs
-comprised entirely of meat, fish, nuts, fruit, vegs, egg, insects, honey, breast milk
many of the most dramatic trends in food mktg originate from consumer reactions to ag and food system practices. What are some examples of these?
-domestication of crops 11,000 bce in fertile crescent
-domestication of animals 6000 bce
-widespread use of ag 5000 bce large scale food marketing
-sizable surpluses were generated
-storable variables eg wheat allowed surplused to be used over time
- now can be transported
-sizeable cities formed
in what ways is food different from other types of products and how do these differences affect the way foods are marketed?
-Non durable: only one use
-perishable: food goes bad,
-inelastic short term supply "sell it or smell it"
-more costly to warehouse
-Scalable: more than one unit is purchased at a time, allows for quantity discounts
-usage variant: food used in arbitrary amounts (chairs have fixed quantities while potato chips are eaten in arbitrary amounts
-High Frequency: suppliers and retailers must keep constant flow of goods and services
-Necessary good: food market will always be large
-Nutrition and health
-Input to household production: food is further processed at home
-cultural significance: cultural identifier (pork forbidden by jews)
-food can kill you: allergies
-food is undifferentiated
- food availability is a national security issue
what is meant by "bounded rationality" and why is it crucially important in food marketing?
Bounded Rationality is when an economic agent is unable to make fully informed decisions because they do not have the time or ability this is important in food marketing because people will use heuristic such as brand identification and habits to navigate so many decisions.
why did Birds Eye need to be vertically integrated early on?
Birds Eye needed to vertically integrate because there wasn't a supply chain in place for them (refrigerated cars, freezer containers)
how did the value added food chain change in frozen foods throughout since frozen foods emerged?
what is the necessary condition for a value added food chain to exist? What marketing eras underlying philosophy reflects this condition?
what is a need?
A need is the difference between customers actual conditions and their desired conditions
what is a desire?
A desire is a particular choice that people make to satisfy needs (brands)
what is market myopia and when is it likely to occur?
Marketing Myopia is management's failure to recognize the scope of their business. This occurs when a company identifies with their product or past structure instead of customers needs
how is market myopia avoided?
To avoid marketing myopia companies must broadly define organizational goals towards the consumers needs. focus on consumer benefits.
what is the basis for forming a consumer (market) oriented description vs. a myopic description?
The basis for forming a consumer oriented description rather than a myopic description growth will be limited, and you will be in serious trouble if tastes change, demographics change, or competition cuts in.
the 4 P's of marketing?
what constitutes a "product"?
products are goods and services, package design, the idea of the goods, customer service, brand names, product life cycles, warranties, etc
what is a target market and why is it useful to have one?
The target market is a group of people toward whom the firm decides to direct its marketing efforts
what were the 4 marketing eras and what was their underlying philosophies?
-Production: prior to 1920's, a good product will sell itself
-Sales: prior to 1950/60's, simple marketing (advertising) and selling will overcome consumers resistance and convince them to buy
-Marketing: since 1950/60's, the consumer is king, find a need and fill it
-Relationship: began 1990's, long term relationship with customers and other partners lead to success
what has been given increasingly more emphasis in the history of food marketing (particularly in the last 2 eras)?
Consumer focus has been given increasingly more emphasis in the history of food marketing
what are the characteristics of the current marking era?
-firms will stray further from original products to fulfill customers needs
-shift away from transaction based marketing
-easier to retain customers than attract new ones
-business decisions are made with a longer time horizon
what is the underlying idea behind the levels of marketing relationships?
what is own price elasticity?
own price elasticity is the elasticity of your product. If you raise the price of your good the demand will decrease (change in demand over change in price) usually negative
what does it mean if demand is elastic or inelastic?
Elastic: when the absolute value is greater than 1 (more price sensitive)
Inelastic: when the absolute value is less than 1 (less price sensitive)
do demand elasticities reflect the demand or supply side?
Elasticity affects the demand side
what are the components of the competitive environment?
A competitive environment: the interactive process that occurs in the marketplace among marketers of directly competitive products, marketers of products that can be substituted for one another and marketers competing for the consumers purchasing power.
how do demand elasticities affect prices?
Demand elasticities affect price because some products (inelastic ) you can change the price without a large loss of demand while elastic products you can't jack the prices up
as an industry becomes more concentrated, what happens to the price mark up?
you can increase the price of the industry becomes more concentrated
what factors determine the concentration in an industry?
why is too much market power (viz. concentration) seen as especially bad in food industries?
Too much power is seen as a bad thing because it results in higher price markups.
what are the first and second mover advantages?
-First Mover Advantage: The often large advantage that the first firm to market a product service or address a customer need has over subsequent entrants (people buy the same food repeatedly)
-Second Mover Advantage: The advantage gained when another firm enters the market ( avoid mistakes of the first, or can simply adopt the innovations of the first.
whom are you competing against when you employ direct, indirect, and all consumer competitive strategies?
-Direct: battle of the brands usually hurts both
-indirect: product type competition between substitutes ( OJ and Milk)
-all consumer purchases: competition for disposable income, against the decision not to make the purchase whatsoever (manufacturers compete for stomach share)
what are some of the food marketing trends that are based in out social cultural environment?
-green marketing (organic)
-nutrition marketing (all natural etc)
-Social consumer activism
-Locavore (farmers markets, local shit)
how have people's value of time changed and how has that affected their desires and needs?
Peoples value of time is increasing this causes more of a need/desire for convenience products
what is JFK's Statement of Consumer Rights and what is it the basis for?
JFK statement of consumer rights is a basis for the conceptual framework for the food industry regulation
-right to choose freely
- right to be informed
-right to be heard
-right to be safe
what is a luxury good? what is an inferior good? what are food examples of these?
-Luxury good: goods whose share of expenditure rises with income (organics, high quality food) turn my tuna into lobster
-inferior good: goods that people purchase more when there is an income decrease ( beer, low quality foods, potatoes, canned food)
what does the FDA do?
-food safety (new ingredients, common ingredients GRAS (generally recognized as safe) don't need approval)
-nutritional information (though USDA is in change of standard reference of nutritional info)
what does the USDA do?
regulates livestock and poultry products, raw ag products...
-food assistance programs ((supplemental nutrition assistance program (SNAP) formerly known as food stamps, Woman infant and children WIC)
what are the primary ways markets are segmented?
-Geographic segmentation: dividing an overall market based on location
-demographic segmentation dividing based on age, sex, income, occupation, education, household size and stage in life cycle.
-psychographic segmentation based on psychological characteristics, values and lifestyles
-product related segmentation based on relationship to product (brand loyalty)
why do food marketers segment markets?
allows firms to develop more efficient and effective marketing strategies
what aspects of the marketing mix should you tailor to your target market?
what is the difference b/n a consumer and customer?
customers buy products to sell consumers use products
besides short term demand, what other factors might be important to customers?
what are the criteria for a market segment to be useful for targeting?
what are some of the advantages of segmenting geographically?
-lower promotion cost
-lower distribution costs
what is a cohort effect and how is it different from age effects?
tendency of generation members to be influenced and bound together by significant events in their lives. formative years are the most crucial: 17-22
what is the purpose of segmenting by demographics?
how do food consumers change as they get older and go though the life cycle?
food consumers change as they get older
-become less impulsive
-more savvy to ads and gimmicks
-care about different things
in what part of the life cycle if time most scarce? how does this interact with bounded rationality? what consequences does this have for food marketers?
time is most scarce at age 30-34, 35-39, 40-44
who makes most of a household's food purchases?
women make the most household food purchases
how are households changing and what consequences does this have for food marketers?
households are changing
-men cook more and spend time with kids
-women work outside the house more
what ethnic group is growing the fastest in the US?
what is Engel's Law?
Engel Law: as family income increases a smaller percentage of expenditure goes to food
what is psychographic segmentation?
-divides a population into groups that have similar psychological characteristics values, and lifestyles.
What are AIO statements and what popular AIO system did we look at in class?
AIO statements: researchers ask consumers of a product group a series of questions to elicit their ACTIVITIES INTERESTS and OPINIONS. Vals (Value of Life ) is a popular system
what are some common product-related segments?
common product related segments
-benefits sought- focus on the attributes of the products and the benefit they expect to receive
-usage rates- according to the amounts of product they buy and use
how would you market towards heavy users vs. light users?
marketing to heavy users
-buy more in response to quantity discounts
-purchase large package sizes
-respond to ads showing heavy usage
-be different in some crucial way from light users
what percentage of consumers will typically account for 80% of a brand's sales?
80% of sales come from 20% clients
what is a positioning map?
A positioning map uses attribute-space to compare different products in relation to one another
why are positioning maps useful?
Positioning maps are useful because to decide a competitive position and enables them to distinguish one product from those of the competition.
what is mass marketing, what are its advantages and disadvantages, and what are some examples of foods that are mass marketed?
Mass marketing is when you treat the entire market as one big segment (milk ,rice and produce are mass marketed)
advantages: low cost way to produce and market products
disadvantage: Hit or miss
same for concentration strategy
Concentration strategy uses only one marketing mix for one target segment
-allows smaller firms to compete with larger firms
-production cost saving from specialization
-require one marketing mix
-risky because of lack of portfolio diversification
-if target market changes sales will drop
same for Multi-segment strategy
uses multiple marketing mixes to target multiple market segments
-increased market coverage
-diversified product portfolio
-differential price maintainability
-higher willingness to pay
-targets can shift from one to another
-production costs increase
same for Customization strategy
treat each consumer as a segment
-Costly to produce, promote and distribute
-high level of customer involvement
same for Social Network strategy
sells through representatives (pampered chef) or social media
what are the steps to forming a market segment strategy?
-Develop a relevant profile for each segment
-forecast potential market
-forecast probable market share
-select specific market segments
when it comes to marketing healthy and novel products such as yogurt and soy products, who should be targeted?
minority taste motivated consumers should be targeted for healthy or novel products like yogurt and soy
why should these people be targeted?
Taste motivated people should be targeted for healthy foods because they were more likely to influence others using experience attributes (it tastes so good)then credence attributes(its so healthy)
what are who are food gate keepers?
-have greater predisposition to adopt and continue use
- influence over others eating habits
-eat food not as a means to an end
why have most public health initiatives to get people to eat healthier failed?
Most public health initiatives have failed because most gatekeepers are taste motivated. nutrition is a plus but not sufficient for adoption of new products
what is a mental map and how are they constructed?
A mental map is the hierarchical organization of consumers perceptions and product knowledge.
what are attributes, consequences and values?
-Attributes: physical characteristics of the product
-consequences: the outcomes that consumers associate with the use of the product (because of attributes)
-Values: are derived from associating consequences and the personal value system
describe the consumer decision process?
The consumer decision process can be broken down into high and low involvement
how does Maslow's hierarchy of needs relate to mental maps and increasingly popular food trends such as organic, local, etc.?
Popular food trends such as organic local etc are driven by the esteem and self actualization needs (highest two) because food satisfies the lower needs
what is the difference b/n and examples of stimulus factors and individual factors with respect to perceptions?
-Stimulus factors: Characteristics of the physical object such as size color weight and shape
-individual factors: unique characteristics of the individual including not only sensory processes but also experiences with similar inputs and basic motivations and expectations
what characteristics are red, yellow, orange, green, and blue associated with?
Orange yellow and red innately stimulate appetite, green suggest low in fat healthy and natural, blue suggests clean and pure
what are the 3 components of attitude and what exactly is meant by them?
-Cognitive: Knowledge about an object or concept
-Affective: feeling or emotional reactions
-Behavioral: tendencies to act in a certain manner
what is meant by "learning" in the class and how is learning theory used by food marketers?
learning is knowledge or skill that is acquired as a result of experience which changes consumer behavior
what are the facets of self identity and which self is typically marketed towards?
based on the type of info asymmetry, what are the 3 types of products attributes, what are examples, and which necessitate regulation and labeling?
Search attributes: consumer can determine the products quality in the store
-no info asymmetry between consumer and seller
-no need to regulate
-branding transforms experience goods into search goods
-Example: most fruits and vegetables
Experience attributes: consumer can determine the quality only after purchase
-temporary info asymmetry between buyer and seller
-typically no need to regulate if purchased in high frequency
-Example: taste, shelf life, quantities of prepackaged items
Credence attributes: consumer can not confirm the quality and must rely on info provided by the seller, government, or 3rd party
-persistent info asymmetry between buyers and sellers
-typically requires regulation to avoid swindling
-Example: nutrition and health, organic, animal welfare, country of origin etc
what info is mandatory on packaging?
-Statement of identity
-Country of origin (USDA regulated food s only
-bar code for products sold through retailers
what is the statement of identity?
the name of the food
what is the issue surrounding chocolate milk's statement of identity?
The issue around chocolate milks statement of identity is that because of artificial sweeteners it is no longer considered milk
what demographics are most influenced by nutrition labels?
the demographic most influenced by nutritional labels are women, some college, age 65+
what demographics are not interested in nutrition labels at all?
The demographic not interested in labels at all are men,, no college, age 18-34
what are the differences b/n the old and new FDA nutrition panel?
- serving are larger bolder type
-updated daily values
-%DV comes first
-new added sugars
-change of nutrients required
-potassium and D are new
-serving size updated
-Calories are larger type
-actual amounts declared
-new footnote to come
to what extent do nutrition labels change taste perceptions and what belief does this reflect?
how do food marketers make it seem like there is none of a "bad" nutrient when in fact there is?
what "added" nutrient is set to be a part of the FDA's proposed new nutrition label in an effort to help consumers make better decisions to avoid heart disease, obesity, and diabetes?
Potassium and Vitamin D are set to be part of the FDA's new nutrients
what food component listed on the nutrition label does not have a recommend % daily value and what consequence does this have for nutrition and health claims?
Sugars does not have a recommended daily value
what is "facts up front" labeling program?
Facts up front has four basic icons (calories, saturated fat, sodium, and sugars) plus two others
what order are ingredients listed?
Ingredients are listed in order of decreasing weight of how much is in the product.
what are the 4 types of regulated claims for food labels?
4 types of regulated claims on food labels
-Nutrient content claims
generally speaking, when and why are disclosure statements required?
Disclosure statements calls the consumers attention to one or more nutrients in the food that may increase the risk of a disease or health related condition that is diet related, must be place next to NCC.
-required when NCC is made and a bad nutrient in the food exceeds certain
prescribed levels per reference amount customarily consumed rACC per labeled serving or small foods per 50g
-This deter a lot of unhealthy foods from making a positive nutrition claim
do you need FDA approval to use a nutrient content claim?
Nutrient content claims must meet through FDA standards
do you need FDA approval to use a health claim?
Health claims must be reviewed by the FDA PRIOR to use
do health claims require an FDA approved disclaimer?
Health claims do require by an approved disclaimer from the FDA
What are some ways to effectively use a claim?
Successfully using FDA health claims
-Target a specific group
-Piggyback on hot topics in the media
-Make it personal
-Make it quantifiable/observable
how are qualified health claims different from health claims?
Qualified health claims are different from health claims because they are based on inconclusive evidence
how often are qualified health claims used?
qualified health claims are seldom used
for what reason did the FDA decided to allow qualified health claims?
what limits the effectiveness of qualified health claims?
The main factor that limits the effectiveness of qualified health claims is consumers do not respond well to uncertainty in qualified health claims very well. They also didn't understand the report card, though low grade meant the food was unhealthy.
do health claims require an FDA approved disclaimer?
what is a structural/functional claim?
Structure/function claims cannot imply that a nutrient or functional component affects disease.
approximately what % of food products use some sort of regulated claim?
49% of food has some sort of regulated claim
what limitations are imposed on the use of terms such as 'natural'?
In order for a product to be natrual it must not contain added color, artifical flavors, or synthetic substances
what are most court cases related to the use of "natural" claims and why?
Most court cases related to the use of "natural" claims are from California
why are 3rd party labels used?
-provide information to consumer
-signal of quality
-improve market efficiency
what sort of attributes do 3rd party labels ensure?
when are voluntary industry labels reliable and when are they not reliable?
Voluntary Industry labels are reliable when a reputable 3rd party certifies to guarantee that producers adequately compensated, are unreliable when made by the company (smart choice, Pepsico)
what are the requirements for an ag enterprise to be deemed sustainable?
Agriculture is sustainable if
-Is sufficient for human needs
-maintains or enhance environmental quality and resource base
-sustains economic viability of agriculture
-maintains or improves the quality of life for farmers, farm workers, and society as a whole
what is Triple Bottom Line?
Triple bottom line expands the traditional reporting framework to account for ecological and social performance in addition to financial performance
-Planet, Environmentally sound
-Profits, Economically feasible
-People, Socially equitable
why is info regarding animal welfare so difficult to obtain?
Information regarding animal welfare is difficult to obtain because the threat of costly lawsuits is used by industry to deter journalists from reporting on animal welfare.
what evidence is there that consumer demand is responsive to animal welfare concerns?
Consumer demand is responsive to animal welfare concerns because they are willing to pay more for humanely grown meat.
how does USDA organic certification work?
-USDA certified through 56 accredited agencies
-Products must comply with the organic foods production act
-crops cannot use synthetic pesticides, petroleum based fertilizer, sewer sludge, and GMO's
-Animals must be given organic feed, have access to outside and cannot be given antibiotics for growth
what are the requirements for the various permitted USDA organic label?
to what degree has demand for organic food taken off?
Organic food has increased in sales from 3.6 billion in 1997 to 21.1 Billion in 2008
what types of stores are organic foods sold in and what does this say about the consumers that buy them?
Organic foods are evenly sold through conventional retailers and through natural product retailers
are organic foods more nutritious than conventional comparable foods?
Organic foods are not more nutritious than conventional foods.
what measurable difference is there b/n organic and non-organic produce?
The difference between organic and non organic is the amount of pesticides in produce organic has much less.
if you were marketing organic foods, how would you segment in order to identify a target?
Profiling an organic consumer
-Higher education level
-Children in the household
-Psychographic profiling works best
how do prices for organic products compare to those of conventional products?
Prices of organic foods are 10-30% higher than conventional foods.
has supply kept pace with increasing demand for organic food?
There is an imbalance of retail sales growth and organic farmland
in the experiments discussed in the slides, did descriptive names decrease/increase sales not at all/a little/a lot?
Descriptive names raised sales by 27%
do descriptive names: make the food look better? make the food taste better? make people feel more satiated? make people believe they consumed more calories?
-raise consumer expectation
-make the food look more appealing
-make the food taste better
-make people feel fuller
- make the people believe the food has more calories
-result in more positive consumer experience
what 3 things does advertising do?
-compliments the product
informative advertising is most important when what type of attributes are important?
Informative advertising is important when you are advertising experience/credence goods
what kind of info are ads for search goods dominated by?
Search goods are dominated by direct information.
what kind of info are ads for experience goods dominated by?
Experience goods are dominated by indirect information
what 3 effects are associated with indirect advertising info?
-Signaling efficiency Effect
-Matching products to Buyers effect
-Repeat business effect
what happens to demand when a premium brand advertises without price info? What are the two effects and why do they happen?
premium Brand advertising without price info
-demand shifts out (greater product awareness)
-Makes demand more inelastic (strengthens brand image)
what happens when price info is included?
Advertising with price info
-demand shifts out (greater visibility)
-makes demand more elastic (consumers become more price aware)
why might a premium brand advertise a low price?
Why do premium brands advertise temporary low prices
-attract new customers
-change in supply curve (higher inventories, lower cost)
-increased demand in long run
-risk: price tarnishing
what are the possible long term effects of a premium brand advertising price?
one long term effect of premium brands advertising price is price tarnishing
what are the long term effects of advertising?
Long term effects on advertising
-Shifts demand curve out
-economies of scale shift supply curve down
-increases selling costs
-long term price effects are ambiguous
-advertising increases barriers to entry
-increases total demand within the industry
what government agency regulates advertising?
The Federal Trade Commission regulates advertising.
what voluntary industry regulator does most of the ad regulating and are the weaknesses of this voluntary industry regulator?
The voluntary food regulator that does most of the ad regulating is the National Advertising Division NAD.
Some weaknesses are
-has low standards for scientific evidence
-has no enforcement power
what is puffery?
Puffery is exaggerated subjective claims that a sane person would not take literally.
is puffery illegal?
Puffery is not illegal.
why might the rationale underlying the guiding principle of puffery not apply to children ads?
the rationale regarding puffery not applied to children ads because they can't tell the difference.
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