Lecture 1: Introduction
Definitions:
- Marketing strategies:
o A thoughtful plan by a company to produce desired outcomes
o An organization’s pattern of decisions that specify crucial choices that offer value to
customers and thereby enables the organization to achieve specific objectives
o To create a sustainable competitive advantage
- Strategic marketing decisions: Long-term decisions concerning the future direction of the firm.
o Major resource commitments
o Longer time period
o Distinguishable competitive advantage
o Irreversible
o Entails trade-offs
o Higher level of the organization
o Interdependencies with other strategic decisions
- Tactical marketing decisions: short-term decisions to execute the strategic decisions.
Lecture 2: strategic decision making
The ability to learn faster than your competitors may be the only competitive advantage. Organizational
learning is not just a marketing issue, but marketing can and should lead to process.
Business cycle fluctuations are more pronounced in durable goods, and less in grocery expenditures.
Durables bounce back, Private labels don’t fall back
Definitions:
- Organizational learning: the process of improving actions through better knowledge and
understanding or as the outcome of such a process.
- Organizational knowledge: accumulation of the knowledge bases of all the individuals within an
organization and the social knowledge embedded in the relationships between those individuals.
More than the sum of parts. Is about exchanging and sharing individual assumptions across the
organization at various levels.
- Individual learning: insufficient for the organization without sharing or transferring it.
- Explicit knowledge: can be codified, systematic, formal, easy to transfers manuals
- Tacit knowledge: context-specific, personal, subjective, not easy to transfer. Low codifiability,
know-how, high complexity. Hard to transfer, therefore hard to imitate.
- Single loop (adaptive) learning: occurs within the learning boundary. Solves problems, but ignores
the reason why the question arose.
- Double loop (generative) learning: questioning long-held assumptions.
- Culture: deeply rooted values and beliefs.
o Market orientation: the market is central, focusing on collecting information and
delivering superior customer value. Important to respond quickly to opportunities and
threats.
o Entrepreneurship: new businesses are created and existing businesses revived or
renewed.
- Climate: structure and processes that facilitate
o Facilitative leader
o Organic organization: informal communication, decentralized organization.
Interdependence, willingness to cooperate and share information.
o Decentralized strategic planning: planning is steered by a stable vision and
operationalized through flexible and task-oriented planning
, o Primary data: collected specifically for current purpose
o Secondary data: collected for other purpose cheaper in time and money.
o MMSS: the link between all the data and useful information.
- Expected value: how much will I make based on probabilities
- Maximax: optimism, a=1
- Maximin: pessimism, a=0
- Criterion of realism: a=0.8
- A= coefficient of probability on the favorable state of nature
- Minimax regret: minimize maximum opportunity loss
- Game theory: considers the impact of the strategy of competing firms on our own strategy
outcomes.
- Zero-sum game: the gains of company x, are the losses of company y.
Rijtjes:
The process of organizational learning and knowledge:
- Information acquisition
o Exploitation (internal)
o Exploration (external)
- Information dissemination
- Shared interpretation of information
- Utilization: behavior change
o Action oriented: solve problems
o Knowledge enhancing: influences managerial perspectives on problems
o Affective use: increase satisfaction with a change.
How can MMSS help?
- Problem recognition
- Avoid limitation of cognitive constraint
- Model building
- Collecting/ integrating/ organizing/ presenting knowledge
- Selecting problem solving approach
- Evaluating options and choices.
ORAC: distinguish between 4 different marketing problem solving modes (MPSM)
- Optimizing: optimal solution
- Reasoning: mental modes
- Analogizing: start from prior experience and solutions
- Creating: out of the box thinking
Which decision mode is activated, depends on:
- Problem
- Decision environment
- Decision maker
Managerial behaviors during recessions:
- R&D and product innovations are reduced helps PL share
- Prices are occasionally reduced would hurt PL share
- Promotions are reduced helps PL share
Market effectiveness during recessions
- Increase R&D investments
- Try to decrease prices
- Advertising is more effective
- Customer satisfaction is more successful
Good decisions:
- Uses all available information
, - Based on logic
- Considers all possible alternatives
- Applies the appropriate quantitative technique
6 steps in decision making
1. Define the problem
2. List the alternatives
3. Identify possible outcomes considering the state of nature
4. List the payoffs
5. Select quantitative decision model
6. Apply the model to select a strategy
Decision biases and how to overcome them:
1. Self-interested biases: are there errors of self-interest? Review the proposal with extra care.
2. Affect heuristic: apply all quality controls
3. Groupthink: were there dissenting opinions, and are they explored? Solicit dissenting views
4. Saliency bias: overly influenced by memorable success? Ask for more analogies and analyze the
similarities.
5. Confirmation bias: dissonance reduction (avoiding dissonance information and search for
confirming information), selective participation (disconfirming information is regarded as
inaccurate)
6. Availability bias: what information would you want?
7. Anchoring bias: initial estimates/ best guesses, extrapolation from history, deliberate
manipulation. Reanchor
8. Halo-effect: (Horns effect), eliminate false inferences and search for more examples
9. Sunk-cost: new CEO
10. Overconfidence: use war games and make estimations based on outside view, statistics and
similar project.
11. Loss aversion: losses weight heavier than gains. Minimax regret
12. Causal attribution: good performance internal and bad performance external
Three forms of learning myopia
1. Tendency to overlook distant times
2. Tendency to overlook distant places
3. Tendency to overlook failure
Diminishing myopic behavior
- Put more weight on long-term future market outcomes
- Increase the amount of information disclosure
- Better understanding of various marketing metrics
- Developing better models an understanding what managerial incentives lead to myopic marketing
decisions.
Optimizing Reasoning Analogizing Creating
Problem High Moderate Low structuredness No precise
structuredness structuredness problem
formulation
Precise knowledge Knowledge of Weak theory No theory
of relationships most important
relationships
Quantitative data Quantitative or Experience/ cases Remote
qualitati3ve data associations
Decisionmaker Analytical decision Analytical Heuristic Heuristic
maker decision maker decisionmaker decisionmaker
- Experienced Experienced No specific
Definitions:
- Marketing strategies:
o A thoughtful plan by a company to produce desired outcomes
o An organization’s pattern of decisions that specify crucial choices that offer value to
customers and thereby enables the organization to achieve specific objectives
o To create a sustainable competitive advantage
- Strategic marketing decisions: Long-term decisions concerning the future direction of the firm.
o Major resource commitments
o Longer time period
o Distinguishable competitive advantage
o Irreversible
o Entails trade-offs
o Higher level of the organization
o Interdependencies with other strategic decisions
- Tactical marketing decisions: short-term decisions to execute the strategic decisions.
Lecture 2: strategic decision making
The ability to learn faster than your competitors may be the only competitive advantage. Organizational
learning is not just a marketing issue, but marketing can and should lead to process.
Business cycle fluctuations are more pronounced in durable goods, and less in grocery expenditures.
Durables bounce back, Private labels don’t fall back
Definitions:
- Organizational learning: the process of improving actions through better knowledge and
understanding or as the outcome of such a process.
- Organizational knowledge: accumulation of the knowledge bases of all the individuals within an
organization and the social knowledge embedded in the relationships between those individuals.
More than the sum of parts. Is about exchanging and sharing individual assumptions across the
organization at various levels.
- Individual learning: insufficient for the organization without sharing or transferring it.
- Explicit knowledge: can be codified, systematic, formal, easy to transfers manuals
- Tacit knowledge: context-specific, personal, subjective, not easy to transfer. Low codifiability,
know-how, high complexity. Hard to transfer, therefore hard to imitate.
- Single loop (adaptive) learning: occurs within the learning boundary. Solves problems, but ignores
the reason why the question arose.
- Double loop (generative) learning: questioning long-held assumptions.
- Culture: deeply rooted values and beliefs.
o Market orientation: the market is central, focusing on collecting information and
delivering superior customer value. Important to respond quickly to opportunities and
threats.
o Entrepreneurship: new businesses are created and existing businesses revived or
renewed.
- Climate: structure and processes that facilitate
o Facilitative leader
o Organic organization: informal communication, decentralized organization.
Interdependence, willingness to cooperate and share information.
o Decentralized strategic planning: planning is steered by a stable vision and
operationalized through flexible and task-oriented planning
, o Primary data: collected specifically for current purpose
o Secondary data: collected for other purpose cheaper in time and money.
o MMSS: the link between all the data and useful information.
- Expected value: how much will I make based on probabilities
- Maximax: optimism, a=1
- Maximin: pessimism, a=0
- Criterion of realism: a=0.8
- A= coefficient of probability on the favorable state of nature
- Minimax regret: minimize maximum opportunity loss
- Game theory: considers the impact of the strategy of competing firms on our own strategy
outcomes.
- Zero-sum game: the gains of company x, are the losses of company y.
Rijtjes:
The process of organizational learning and knowledge:
- Information acquisition
o Exploitation (internal)
o Exploration (external)
- Information dissemination
- Shared interpretation of information
- Utilization: behavior change
o Action oriented: solve problems
o Knowledge enhancing: influences managerial perspectives on problems
o Affective use: increase satisfaction with a change.
How can MMSS help?
- Problem recognition
- Avoid limitation of cognitive constraint
- Model building
- Collecting/ integrating/ organizing/ presenting knowledge
- Selecting problem solving approach
- Evaluating options and choices.
ORAC: distinguish between 4 different marketing problem solving modes (MPSM)
- Optimizing: optimal solution
- Reasoning: mental modes
- Analogizing: start from prior experience and solutions
- Creating: out of the box thinking
Which decision mode is activated, depends on:
- Problem
- Decision environment
- Decision maker
Managerial behaviors during recessions:
- R&D and product innovations are reduced helps PL share
- Prices are occasionally reduced would hurt PL share
- Promotions are reduced helps PL share
Market effectiveness during recessions
- Increase R&D investments
- Try to decrease prices
- Advertising is more effective
- Customer satisfaction is more successful
Good decisions:
- Uses all available information
, - Based on logic
- Considers all possible alternatives
- Applies the appropriate quantitative technique
6 steps in decision making
1. Define the problem
2. List the alternatives
3. Identify possible outcomes considering the state of nature
4. List the payoffs
5. Select quantitative decision model
6. Apply the model to select a strategy
Decision biases and how to overcome them:
1. Self-interested biases: are there errors of self-interest? Review the proposal with extra care.
2. Affect heuristic: apply all quality controls
3. Groupthink: were there dissenting opinions, and are they explored? Solicit dissenting views
4. Saliency bias: overly influenced by memorable success? Ask for more analogies and analyze the
similarities.
5. Confirmation bias: dissonance reduction (avoiding dissonance information and search for
confirming information), selective participation (disconfirming information is regarded as
inaccurate)
6. Availability bias: what information would you want?
7. Anchoring bias: initial estimates/ best guesses, extrapolation from history, deliberate
manipulation. Reanchor
8. Halo-effect: (Horns effect), eliminate false inferences and search for more examples
9. Sunk-cost: new CEO
10. Overconfidence: use war games and make estimations based on outside view, statistics and
similar project.
11. Loss aversion: losses weight heavier than gains. Minimax regret
12. Causal attribution: good performance internal and bad performance external
Three forms of learning myopia
1. Tendency to overlook distant times
2. Tendency to overlook distant places
3. Tendency to overlook failure
Diminishing myopic behavior
- Put more weight on long-term future market outcomes
- Increase the amount of information disclosure
- Better understanding of various marketing metrics
- Developing better models an understanding what managerial incentives lead to myopic marketing
decisions.
Optimizing Reasoning Analogizing Creating
Problem High Moderate Low structuredness No precise
structuredness structuredness problem
formulation
Precise knowledge Knowledge of Weak theory No theory
of relationships most important
relationships
Quantitative data Quantitative or Experience/ cases Remote
qualitati3ve data associations
Decisionmaker Analytical decision Analytical Heuristic Heuristic
maker decision maker decisionmaker decisionmaker
- Experienced Experienced No specific
