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You can read the details below. By accepting, you agree to the updated privacy policy. Thank you! View updated privacy policy We've encountered a problem, please try again. This summary of Marketing Management by Kotler and Keller is written in 2013-2014. Nowadays economy is based on the Digital Revolution and information management. It promises more accurate levels of production, more targeted communications, and more relevant pricing, and is therefore characterized by the so-called Information Age. The new economy differs a lot from the old economy, which was based on the Industrial Revolution, manufacturing industries, and standardization of products to achieve economies of scale. The old economy is characterized by the Industrial Age, which focused on mass-production and mass-consumption with a focus on efficiency. The new economy has provided more capabilities to both consumers and businesses. Consumers can now:
Compare notes on products and services. Companies can now operate powerful new information and sales channels to inform the consumer and promote their businesses and products. e.g. Using Web sites:
e.g. Intranet:
e.g. Extranets with suppliers:
e.g. Internet, allows organizations for the comparison of prices, improving purchasing, logistics and operations, saving costs and improving accuracy and quality. These new capabilities of consumers and customers create new forces, which raise the question and focus on how these new forces will change marketing. Marketing deals with identifying and meeting human social needs; it is about meeting peoples’ needs profitably. Companies are motivated to take a private or social need and turn it into a profitable business opportunity, e.g. Ikea identified the need for good furniture and lower prices. Companies at greatest risk are those that fail to monitor their customers and competitors and to continuously improve their value offerings. Marketing Tasks There is a new way of marketing in which firms focus on delivering high product quality and winning long term customer loyalty (Harley Davidson). This way of marketing is calld Radical Marketing. The ten rules of “radical marketing” are guidelines including CEO direct involvement, being close to the customer, rethinking the marketing mix, and focusing on brand integrity. The three stages of marketing practice are as follows:
There are many ways in which effective marketing can take place. Whatever way one uses, marketing is the task of creating, promoting, and delivering goods and services to consumers and businesses. The scope of marketing involves a broadened view of marketing (including goods, services, and ideas). Marketing entities have broadened to include marketing of goods, services, experiences, events, properties, people, places, organizations, ideas, and information. Market managers nowadays are also responsible for demand management in which they seek to influence the level, timing and composition of demand. There are eight different states of demand that they can find and influence; each with corresponding marketing tasks:
Task: Synchromarketing: Use flexible pricing, promotion, and other incentives to alter the pattern of demand. Marketing tasks have gained a broadened view to include more decisions, which vary in importance depending on the marketplaces they operate in: consumer, business, global, and nonprofit markets. For example, tools to better understand the customer are less important in nonprofit and governmental markets than in consumer and business markets, where more purchasing power is present. Marketing Concepts and Tools Marketing is an organizational function and a set of processes for creating, communicating , and delivering value to customers and for managing customer relationships in ways that are beneficial for the organization and its stakeholders. Marketing Management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior value to the customer. Segmentation means dividing up the market and identifying market segments by examining demographic, psychographic, and behavioral differences among consumers. Target Markets are the segments that provide the greatest opportunity. A marketplace is physical while a marketspace is digital (e.g. internet shopping). A metamarket is a cluster of complementary services and products, which are closely related in the minds of consumers but are spread across a diverse set of industries. A marketeer is someone actively seeking one or more prospects for an exchange of values. A prospector has been identified as willing and able to engage in an exchange. A need consist of basic human requirements. Wants are desires for specific satisfiers of needs. Demands are wants for specific products that are backed by an ability and willingness to buy them. There are five different kinds of needs:
Marketing is becoming more and more involved in key general management activities. There are five key functions for a Chief Marketing Officer (CMO) in leading marketing within the organization:
A value proposition is a set of benefits and values a company offers to customers to satisfy their needs. An offering is the intangible value proposition. A brand is an offering from a known source. The process of obtaining desired product from someone by offering something in return is called an Exchange. When making an exchange it is important to analyze the wants of both parties. A basis for a transaction exists if there is a sufficient match or overlap in the want lists. A transaction is a trade of values between two or more parties. Trading goods or services for other goods or services is called a barter transaction. Transfer (different from transaction) is the passing of a product without necessarily receiving anything tangible in return. The Holistic Marketing Concept isan approach that tries to recognize and reconcile the scope and complexities of marketing activities. If one would apply the holistic marketing concept, internal marketing, integrated marketing, performance marketing and relationship marketing all have to be included. Relationship marketing: aims to build a mutually satisfying long-term relationship with customers and business partners. Integrated marketing: there are many marketing activities that can create value for customers but they all have to be coordinated well in order to maximize their joint effects. Marketers should always conduct one marketing activity with all other activities in mind. Internal marketing is done byhiring, training and motivating employees who want to serve customers well Performance Marketing: understanding returns to the business from marketing activities and programs. A reaction sought by marketers is called the Behavioral response. Marketing includes actions undertaken to elicit desired responses from a target audience. Relationship marketing tries to build long-term, “win-win” transactions between marketers and key parties (suppliers, customers, distributors), building a mutually satisfying long-term relation with key parties, cutting down transaction costs and time. The ultimate desired outcome of relationship marketing is an unique company asset called a marketing network of mutually profitable business relationships. Competition is increasing between marketing networks; which indicates that success depends on the better network. Marketing channels are means used to reach a target market and are critical for successful marketing. There are three channels for marketing offerings:
A supply chain refers to the long channel process which reaches from the raw materials and components to the final product/buyers. It represents a value delivery system Competition - Includes actual and potential rival offerings and substitutes. A broad view of competition is need for the marketer to recognize the levels of competition, based on substitutability: brand, industry, form, and generic competition. The marketing environment consists of: The task environment (immediate actors in the production, distribution, and promotional environments). The broad environment (demographic, economic, natural, technological, political/legal, and social/cultural). Marketing mix is the set of marketing tools firm uses to pursue marketing objectives with the target market. These tools can be classified into the following groups which represent the sellers view of the marketing tools available for influencing buyers: product, price, place, promotion. The 4 P’s correspond with the customer’s four C’s (customer solution, customer cost, convenience, communication). Company Orientations toward the Marketplace There are six competing concepts under which organizations conduct marketing activities, they include: 1. Production concept: assumes consumers will prefer those products that are widely available and low in cost. 2. Product concept: assumes consumers will prefer those products that offer the best combination of quality, performance, or innovative features. This concept has little or no customer input or competitor research and can therefore have a negative effect. It can lead to Leavitt’s marketing myopia: “customers do not buy drill bits; they buy ways to make holes”. 3. Selling concept: This concept assumes that in order to enact exchanges with consumers, organizations must undertake aggressive selling and promotion efforts because of consumers’ passiveness. Consumers must be “coaxed” into buying. It is practiced mainly with unsought goods (insurance, encyclopedias), in non-profit areas (charity), and when a firm has overcapacity. High risks are involved since an unsatisfied customer can easily spread complaints to others. 4. Marketing concept: assumes that being more effective than competitors in integrating marketing activities toward determining and satisfying the needs and wants of target markets is the key to achieving organizational goals consists. E.g. “The job is not to find the right customers, but the right products for your customers”. Companies must carefully chose their target market, understand customer needs, engage in integrated marketing (having all departments of company work together to serve the customers interests) and finally produce profits by satisfying their customers. Hurdles to adopting the marketing concept include organized resistance, slow learning, and fast forgetting. 5. Customer concept: this concept is about shaping separate offers, services, and messages to individual customers, relying on the building of high customer loyalty and lifetime value. It requires large investments in order to gather the information, hardware and software. 6. Societal marketing concept: The task of the organization is to determine the needs, wants, and interests of target markets, which requires marketers to build social and ethical considerations into their marketing practices in such a way that preserves or enhances the consumer’s and the society’s well-being. It calls upon marketers to find a balance between company profits, consumer want satisfaction, and public interest. Cause-Related Marketing is one form of this concept, in which a business with an image, product, or service to market builds a relationship or partnership with a “cause” for mutual benefit; e.g. Patagonia sells sweaters made from recycled plastic bottles. Because of major new forces of globalization, deregulation, and technological advances, business and marketing are changing. Customers are expecting more and better products and services, increasing brand competition leads to increasing promotion costs and decreasing profit margins, and store-based retailers suffering because of the many new channels allowing for more competition. Company responses and adjustments include re-engineering the firm, outsourcing goods and services, e-commerce, benchmarking, alliances (networking), partner-suppliers, market-centered, local and global marketing (versus only local), decentralization to encourage innovative thinking and marketing (more entrepreneurial). Marketer are responding and adjusting through customer relationship marketing, customer lifetime value, customer share, target marketing, customization, customer database, integrated marketing communications to deliver consistent brand image, consideration of channel members as partners, recognizing every employer as a marketer, and basing decisions on models and facts. The value delivery process (to customers) involves choosing and superior value. The value chain is a tool for identifying key activities that are responsible for creating value and costs in a specific business. Michael Porter of harvard has proposed the value chain as a tool for identifying ways to create more customer value. The value chain consists of:
Supply chain: the partnering together of companies with specific suppliers and distributors in order to create a superior value delivery network. Core competency:
One view suggests that holistic marketing maximizes the exploration of value by understanding the relationships between the customer’s cognitive space, the company’s competence space, and the collaborator’s resource space. The marketing plan: the central instrument for coordinating the marketing activities. It operates at two levels:
All corporate headquarters undertake four planning activities:
Characteristics of a Strategic Business Unit (SBU):
For example the Ansoff’s product-Market Expansion Grid was developed to help with the assessment of growth opportunities
Integrative growth: a company can achieve an increase in sales by integration within its industry. For example by buying suppliers. Diversification growth: increasing sales by making use of good opportunities outside the present businesses. If all these opportunities don’t exist there is the opportunity of downsizing and divesting older businesses. A company’s organization: it structures policies and corporate culture. A corporate culture: the shared experiences, stories, beliefs and norms that characterize an organization. Strategic planning occurs when a firm reconsiders in which businesses or markets it should grow, maintain, harvest, or terminate and which new markets it should enter. Strategic planning deals with the adaptability of the firm to the rapidly changing environment. The aim of strategic planning is to shape the company’s businesses, products, services, ad messages in such a way that they achieve the targeted profits and growth. It should be based on the recognition that companies succeed by providing superior customer value. The three key areas of strategic planning are:
There are four organizational levels of companies at which strategic planning takes place, which are:
Corporate and Division Strategic Planning Corporate strategic planning: the start of strategic planning which establishes the framework within which the divisions and business units prepare their plans. Their activities include: I. Defining Corporate Mission Statement – There are 3 characteristics of good mission statements, which are: The number of goals are limited, it stresses major policies and values of the company, defining the major competitive scope within which the company will operate, including the scope of the industry, the scope of the products and applications, the scope of the competence, market-segment scope, vertical scope, and geographical scope. II. Establishing and identifying SBU’s (Strategic Business Units) – SBU’s are business units for which it can be beneficial to plan separate, to face specific competitors, and to be managed as profit centers. Extending to new customer groups, customer needs, and technology allows for strategic business units. Organizations that define their business in ‘market definition’/strategic market definition include broader views of their opportunities, competition, and business as opposed to focusing on the products. E.g. IBM redefined itself from a ‘hardware and software manufacturer’ to a ‘builder of networks’. III. The allocation of Resources to each SBU – This decision is based on their market attractiveness and business strength. In order to determine which SBU’s to build, maintain, harvest, or divest (separate from the rest) organizations can use portfolio models help, Example of these models include: The Boston Consulting Group Approach, The General Electric Model. IV. Planning new businesses, downsizing, or terminating older businesses – Not rarely the project sales for an organization are not as much as what is achieved. When project sales are less than actual sales, there is a Strategic Planning Gap. A Strategic Planning Gap provides management with the opportunity to fill the gap through the development of business strategies. In order to fill the gap, there are three options available to. Opt for:
Business unit strategic-planning process consists of these steps:
4. Strategy formulation: Michael Porter has proposed a model which holds three generic strategies that provide organizations with a good starting point for strategic thinking:
5.Program formulation and implementation: implementation of the strategy is one of the most crucial things to make a strategy work. 6. Feedback and control: A firm always has to keep focussed and willing to adjust to a changing environment. Even for giant company’s, alliances can be important to achieve leadership. There are forms of strategic alliances:
Partner relationship management (PRM): the ability to form and manage partnerships as core skills. Sales Information Systems Marketing managers have a need for accurate and timely updates on current sales. To accomplish this they can use sales information systems, which give up to date information. Companies must carefully interpret the sales data to make sure they won’t draw the wrong conclusions. The order-to-payment cycle is the heart of the internal records system. It is the cycle which starts at the moment where sales representatives, dealers, and customers send order to the firm. The sales department prepares invoices, transmits copies to various departments, and back-orders items that are out of stock. The cycle ends when the invoices are paid. A data warehouse collects and enables personnel to capture, query and analyze data on contacts between the customer and the company. Inferences can be drawn about an individual customer’s needs and responses Data mining involves the use of sophisticated mathematical and statistical and techniques to extract useful and valuable information about individuals, trends, and segments from mass data. Ways to use databases include: Identify prospects, decide which customers should receive a particular offer, to deepen customer loyalty, to reactivate customer purchases, to avoid serious customer mistakes There are also disadvantages of database marketing, which include: A large investment is required in computer hardware, database software, analytical programs, communication links, and skilled personnel. It may not always be worthwile building a customer database: e.g. with once in a-lifetime purchase products (e.g., a grand piano), with brand-loyal customers, small unit sale (e.g., a candy bar), high costs on gathering information. Employees may not want to be customer-oriented or use the available information. Customers may not want to give and allow for the use of personal information, and may not want a relationship with the company. Marketing intelligence system: in order to obtain everyday information about developments in the marketing environment, manager use a set of procedures and sources. Several steps to improve the quality of the marketing intelligence:
The boosting success of internet have provided marketers with more ways of seeking information about the consumer and the competition. There are five main ways in which this is done:
Analyzing the Macro environment Successful companies recognize and respond profitably to unmet needs and trends. A fad is unpredictable, short lived and without social, economic and political significance. A trend is a sequence of events that has some momentum and durability. A Megatrend has more durability and can be described as large social, economic, political and technological changes that are slow to form, and long in place, they influence us for some time between seven and ten years (or longer). Because of the dynamic world and its’ changes, fast marketers must monitor six major environmental forces: demographic, economic, social-cultural, natural, technological and political-legal. Demographic Environment (population growth, population age mix – age concentrations of people differ per country, ethnic and other markets differ in needs, wants and habits, educational groups (implications for e.g. demand on books), patters of household , geographical shifts in population.) The effect of these changes is fragmentation of the mass market into number micro-markets differentiated by age, sex, ethnic background, etc. These trends are reliable for short and intermediate run. Economic Environment Purchasing power is a requirement of a market, and relies on income distribution and savings, debt and credit availability. These changes have implications for tailoring of products and business. Natural Environment The natural environment shows potential shortages of raw materials, increases in pollution levels, unstable costs of energy, and the changing role of governments in environmental protection. Technological Environment Every new and innovative technology is a force for “creative destruction”, the introduction of one innovation may hurt another industry. (TV’s newspapers) Trends in technology which should be monitored and taken into consideration:
Political-Legal Environment: This environment is composed of: Legislation – laws protecting competition, consumers and society. Special interest groups (e.g. political action committees) have grown in strength and number, and thereby put constraints on marketers. Consumerist movement: an organized movement of citizens and government to strengthen the powers and rights of buyers in relation to sellers. Social-Cultural Environment refers to beliefs, values and norms. People vary in views of: others, themselves, organizations, nature, society, and of the universe. Marketers must understand this, and market products that correspond to society’s core and secondary values, and address the needs of different subcultures within a society. The interactions of the forces in the macro-environment may lead to new opportunities and threats. A change in one environment may have implications for all others. The Marketing Research Process consists of six steps:
These steps will be further explained in this chapter. Step 1: Define the problem, the alternative decisions, and the research objectives. Step 2: Develop the research plan. In this step the most efficient plan for acquiring the needed information will be developed. In order to design a research plan there has to be made decisions about the data sources and the research approaches, sampling, and contact methods. The researcher can gather primary data, secondary data, or both. Primary data: new information gathered by the researcher self. Secondary data: data collected for another purpose and already existing. There are six ways that a researcher can collect primary data:
There are two main instruments in collecting primary data:
There is however an increasing interest in qualitative methods. It is interesting to get into consumers mind and find out what they feel and think. This can be done with the following measures:
Sampling plan: When the research approach and instruments are chosen, the researcher must design a sampling plan. This calls for three decisions:
There are several contact methods how a researcher can contact the subjects: by mail, by telephone, in person, or online. Online research has the advantage that it is inexpensive, fast, versatile and respondents tend to be very honest because of the feeling of anonymity. Step 3: Collect the Information Step 4: Analyze the Information Step 5: Present the Findings Step 6: Make the Decision More and more organizations are using a market decision support system to help their marketing managers make better decisions. MDSS Marketing Decision Support Analysis (MDSS) is a coordinated collection of data, systems, tools, and techniques with supporting software and hardware by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action. It helps managers interpret relevant information and turn it into a basis for marketing action. Measuring Marketing Productivity A wide variety of measures to assess marketing effects are employed by marketers. Marketing metrics is the set of measures that helps them quantify, compare and interpret marketing performance. In order to estimate more precisely the effects of different marketing investments, Marketing-mix models can be used to analyze data from a wide variety of sources. Firms can also make use of Marketing Dashboards. These are visually displays of the information. There are two key marked-based scorecards that reflect performance and provide possible early warning signals:
Measuring Demand Market demand: the total amount that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Market penetration index: the comparison between the potential demand level to the current level of market -demand . A high index means an increase in price competition and lower margins. Share penetration index: the comparison between the potential market share to the current market share. (When low, underlying factors e.g.: lows bran awareness, low brand availability, benefit deficiencies, too high price.) Market forecast: the market demand that corresponds to the (one) level of industry marketing expenditure that will actually occur. Market potential: the limit approached by market demand as industry marketing expenditures approach infinitely for a given marketing environment. In order to find this organizations may use the product penetration percentage figures. Company demand is the company’s estimated share of market demand at alternative levels of company marketing effort in a defined time period. Company sales forecast: the level of company sales expected based on chosen marketing plan and an assumed marketing environment; this results from an assumed marketing expenditure plan. Sales quota: the sales goal set for a product line, company division, or sales representative. (good to stimulate sales effort). Sales budget: a conservative estimate of the volume of sales expected. It is primarily used for making current purchasing, production, and cash flow decisions. Company sales potential: the sales limit approached by organization demand as organization marketing effort increases relative to that of competitors. It is often less than market potential. Estimating current demand requires the determination of four factors: (1) total market potential, (2) area market potential, and (3) industry sales and (4) market shares. Total market potential – the maximum amount of sales that might be available in a given time period to all firms in an industry, under a given level of industry marketing effort and environmental conditions. Total demand can be estimated through the chain ration method, which involves multiplying a base number by several adjusting percentages. Area market potential: The market potential in certain territories and the allocation of budget among the territories. Market-Buildup Method – for business marketers. Multiple-Factor Index Method – for consumer marketers. Forecasting methods for future demand include: buying expert opinions, market tests, time-series analysis, and statistical demand analysis. Customer perceived value (CPV) is The worth that a product or service has in the mind of the consumer. The consumer’s perceived value of a good or service affects the price that he or she is willing to pay for it. It is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Total customer cost is the collection of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering. Sources include monetary cost, time cost, energy cost, psychic cost. Customers are focused on maximizing value. For a customer to decide which company delivers the highest perceived customer value, the buyer will evaluate and compare the total customer value (from its sources) to the total customer cost (also from its four sources). In order to know how his or her offer rates in the buyer’s mind, the seller must assess the total customer value and total customer cost associated with each competitors offer. When the seller is at a customer perceived value disadvantage, it can decrease total customer cost or increase total customer value. Customer Satisfaction refers to an individual’s perceived feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations. The link between customer loyalty and customer satisfaction isn’t proportional. To generate customer satisfaction, companies must match the delivering performances with customer expectations. Companies must deliver high customer value in order to generate high customer loyalty. Value proposition: consists of the whole cluster of benefits the company promises to deliver; a statement of resulting experience. Value delivery system: includes all the experiences the buyer will have on the way to obtaining and using the offering, for a company to keep promise they must manage this. Methods to measure customer satisfaction include: complaint and suggestion systems, mystery shopping (hiring people to act as potential buyers and report feedback), customer satisfaction surveys, last customer analysis (through contacting former/ex-customers). High performance businesses are organizations that reach their customer value and satisfaction goals. These companies set strategies to satisfy their key stakeholders, by improving business processes, and align resources and organization. “Build to Last” Commonalities of high performance businesses include:
The value chain is a tool for identifying ways to create more customer value. The value delivery system (supply chain) refers to working with partners to find competitive advantages beyond own operations. (E.g. Levi’s works with Sears to determine demand). Customer Relationship Management (CRM) means building stronger relationships with customers. The CRM goal is to produce high customer equity, which is the total of the discounted lifetime values of all of the firm’s customers. The drivers of CRM include:
The different CRM levels of investment are: basic marketing, reactive marketing, accountable marketing, proactive marketing, partnership marketing. To form strong customer bonds companies can:
Customer lifetime value (CLV) refers to the present value of the profit stream that the firm would have accomplished if the customer had not defected prematurely. In order to measure CLV: Subtract from the expected revenues the expected costs of attracting, selling, and servicing that customer. Attracting customers requires a lot of time and resources, and can lead to expanded profits and sales. (Ways of attracting: mail, ad’s, salespeople). Customer churn is high customer defection; the problem of attracting and retaining customers. (Defection: customers that leave, retention: customers that stay).To reduce the defection rate (churn), the company has to define and measure the retention rate, distinguish the causes of customer attrition and identify those that can be managed better, estimate profits lost from losing customers, calculate cost of reducing defection rate, and listen to customers. Companies must also focus on retaining customers. Retaining current customers is cheaper than attracting new customers. Ways to strengthen customer retention include: delivering high customer satisfaction or erecting high switching barriers. A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer. Measuring individual customer profitability is important. To deal with unprofitable customers, companies must either reduce service support or raise fees. To analyze profitability, you can use: Customer Profitability Analysis (CPA), which can best be done through Activity Based Costing (ABC). To make company profitability higher, companies should build sustainable competitive advantage or competitive advantages it can leverage. The key to value creation and customer satisfaction is total product and service quality; organizations that wish to remain solvent and profitable implement. Total Quality Management is an organization-wide approach to continuously improving the quality of all the organization’s products, serices, and process. One-to-one marketing four step framework:
Reducing defection (customers leaving) is crucial. Just adding new customer is not enough. To reduce retention rate, a company must:
Customers can develop from potentials (who haven’t bought the product yet but might purchase it) to partners (customers who enthusiastically recommend the company and its products and services to others) The Customer-Development Process describes this process: potentials > prospects > first-time customers > repeat customers > clients > members > advocates > partners. This process reflects the perfect situation, from the point where customers are first-time customers to the point where they become partners they can always become inactive of ex-customers if they decide not to further purchase the product or service. Companies can create tight connections to customers by increasing their loyalty. This can be done by:
A customer database is an organized collection of comprehensive information about prospects or individual customers that is current, accessible, and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. Database marketing: The process of building, maintaining, and using customer databases and other databases for the purpose of contacting, transacting, and building relationships. Customer mailing: Lists simple holds the customer contact information, while the customer database holds more information. A data warehouse: Collects, and enables personnel to capture, query and analyze data on contacts between the customer and the organization. Inferences can be drawn about an individual customer’s needs and responses Data mining: Involves the use of sophisticated statistical and mathematical techniques to extract useful information about individuals, trends, and segments from mass data. Ways to use databases include: Identify prospects, decide which customers should receive a particular offer, to deepen customer loyalty, to reactivate customer purchases, to avoid serious customer mistakes The disadvantages of database marketing include: It needs a high investment in computer hardware, database software, analytical programs, communication links, and skilled personnel. It may not always be worthwhile building a customer database: e.g. with once in a-lifetime purchase products (e.g., a grand piano), with brand-loyal customers, small unit sale (e.g., a candy bar), high costs on gathering information. Employees may not want to be customer-oriented or use the available information. Customers may not want to give and allow for the use of personal information, and may not want a relationship with the company. When analyzing consumer markets and buyer behavior, different questions should be asked, such as: Why did the Wal-Mart design not succeed in Latin America? How do the buyers’ characteristics influence buying behavior? Factors that influence buyer behavior include: Cultural factors Culture – perceptions, values, preferences, and behaviors that are the most fundamental determinant of a person’s wants, needs and behavior. Subculture – nationalities, religions, racial groups, and geographic regions. Social Classes – relatively homogeneous and enduring divisions within a society, that are ordered hierarchically and in which the members share similar values, interests, and behaviors. The difference in, e.g. media preferences, program preferences, language use, product and brand preferences. Social factors Reference groups – all groups that have an impact on behavior or attitudes. Major influences are exerted by membership groups, especially members such as family, friends co-workers, and other members of primary groups. Family is the most influential reference group. Secondary groups, trade union, religious, exert less influence. People are also influenced by groups they’re not in, but wished she/he were in, so called aspirational groups, and groups that oppose the persons values, called dissociative groups. Marketers can try to understand groups using Opinion Leaders, who give information on products or brands. There are some important aspects for marketers, such as the roles of husband, wife, and children in purchases, direct influence from children and teens (“I want to go to McDonalds), and indirect influence (parent’s trust in McDonalds leads to the purchase without requests from children/teens). Roles are the activities an individual is expected to perform, each carry a certain status. In marketing, the status-symbol of the product is an important consideration. Personal factors Age and Stage in the Life Cycle: People buy different products over their lifetime.
Besides age and Life cycle stage, product choice also depends on economic circumstance, and occupation. E.g. Company president travels, buy cars, suits, golf club memberships. Lifestyle refers to a person’s pattern of living in the world as expressed in interests, opinion, and activities. Psychographics is the science of using psychology and demographics to better understand consumers. Personality is the set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli. Brand personality refers to the specific mix of human traits that may be attributed to a particular brand. Marketers try to develop brand personalities that will attract consumers from the same self-concept (how they view themselves). There are five traits of brand personality: excitement (daring, spirited, up-to-date), sincerity (down-to-earth), sophistication (upper class and charming), competence (reliable, intelligent, successful), and ruggedness (outdoorsy and tough). Psychological factors A motive is a need that is to such an extent pressing that it drives the person to act. Theories of human motivation include:
Abraham Maslow’s Theory The aim of this theory is to explain why people are driven by particular needs at particular times. Maslow’s Hierarchy of Needs is a triangle, that shows the order of needs from most pressing to least pressing:
Frederick Herzberg’s Theory Dissatisfiers: factors that cause dissatisfaction; e.g. no toilet paper Satisfiers: factors that cause satisfaction, e.g. an exceptional clean toilet Two-factor theory, in which there must be satisfiers for a motivation to purchase. Absence dissatisfiers with satisfiers, (e.g. having a warranty), would not be enough to motivate the purchase. Perception is the process by which a person selects, organizes, and interprets information inputs to create a meaningful picture of the world. Selective attention is the process through which an individual unconsciously screens out certain stimuli, (e.g. when seeing 500 adds in 1 day, you will not be able to remember/notice all 500). Marketers need to make sure their stimuli is being the one noticed. People are more likely to notice stimuli that they anticipate. People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli. People are more likely to notice stimuli that relate to a current need. Selective distortion is the tendency an individual may have to twist information into personal meaning. Selective retention is the tendency to remember information that supports attitudes and beliefs. Selective retention is the tendency to remember the information that support our current attitudes and believes. Subliminal perception refers to subliminal messages marketers use in their promotion, off which consumers are unaware but yet they unconsciously are affected by it. By learning an individual changes his or her behavior arising from experience. Drive refers to a strong internal stimulus leading to action. Cues minor stimuli that determine when, where, and how a person responds. One example of generalization is “Compaq gave me a good monitor so the computer must be good too.” Discrimination means recognizing sets of similar stimuli. Marketers are able to build up demand for a product by associating it with strong drives, using motivating cues, and providing positive reinforcement. A belief is a descriptive thought that an individual holds about something. An attitude is an individual’s enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. Current beliefs of consumers may impact the success of a product. E.g. the country of origin for leather jackets is “believed” to be off better quality when they are from Italy than from Korea. Ways companies can deal with this is by engaging in co-production (production in Korea and finishing in Italy) and/or adapting a strategy to achieve world class quality. Companies can best fit products to existing attitudes. Acting in the contrary can (rarely) work: e.g. “Got Milk?” ad’s to change attitudes towards milk. Deciding to Buy The consumer’s buying decision is important for managers to understand. There are different roles consumers can play in the buying decision. A person can be an/a:
Buying Behavior - four types:
Different Strategies Marketers can take for each behavior:
Stages of the buying decision process Marketers can try to understand the customer’s behavior in connection with a product through the mapping of the customer’s consumption system How to learn about the stages in the buying process of a company’s product:
Metamarket: activities that together constitute the purchasing of a product (e.g. choosing the purchase, financing the purchase, buying insurance, accessories) Metamediaries: firms that help customers navigate through these activities. Five-Stage Model of the Consumer Buying Process Problem recognition: this occurs when there is a difference between desired and actual state (e.g. admiring your friends car).
Information search: In this stage, people have a heightened attention (openness to more information) or engage in more active information search (look to learn more about the product).
Evaluation of alternatives: this stage involves weighing product attributes (by importance), and the individual’s beliefs about each computer’s (brand) attribute (in other words, their ability to deliver benefits). These two factors yield perceived value for each computer. Purchase decision: The actual purchasing decision can be influenced by attitudes of other people, and unanticipated situational factors. Perceived risk (which varies with amount of money involved), can strongly influence a consumer’s decision to postpone, modify, or avoid a purchase decision. There are different kinds of risk:
Infomediaries: publish evaluations of products (consumer reports), is an example of influences by other people on the decision to purchase a product. Subdecisions when purchasing: Brand decision, Vendor decision, Quantity decision, Timing decision. Payment-method decision Post purchase behavior A consumer feels dissatisfaction or satisfaction after the purchase.
Other models of the buying decision process: Elaboration likelihood model: consumers make decisions in both high- and low-involvement circumstances. Information in the elaboration likelihood theory has two routes; the central route, where consumers have spend significant consideration to the most crucial product information; and the peripheral route where attitude formation or change results from the association of a brand with either positive or negative peripheral cues. Consumers don’t always make decisions in a rational manner. According to behavioral decision theorists many different heuristics and biases in everyday consumer decision making occur:
Mental accounting: the way that consumers categorize, code, and evaluate financial outcomes of choices. People do this based on a set of key core principles:
Organizational Buying Business Market characteristics vs. Consumer Market Business market: Fewer buyers, larger buyers, geographically concentrated buyers, close supplier-customer relationship, inelastic demand, derived demand, fluctuating demand, several buying influences, professional purchasing, multiple sales calls (takes long to finalize a sale), direct purchasing (as opposed to through intermediaries), leasing, reciprocity. Three buying situations:
Participants in the Business Buying Process The buying center – consists of all those people and groups who participate in the purchasing decision-making process, who share some common goals and the risks arising from the decisions. There are seven roles group members can play in an buying decision: Initiators, users, influencers, deciders, approvers, buyers, and gatekeepers. The Purchasing/Procurement Process Companies have different purchasing orientations than individuals:
Stages in the Buying Process: Stage1: problem recognition, 2: the general need description and product specification, 3: search for supplier, 4: proposal solicitation, 5: selection of the supplier, 6: order routine specification, and finally the 7: performance review.
The Procurement Process from the Suppliers Point of View (Job of Marketers):
Institutional and Government Markets Major buyers of goods and services: A. Institutional market – consists of hospitals, nursing homes, schools, prisons, and other institutions that are obligated provide goods and services to people in their care.
B. Government organizations – are also major buyers. For suppliers:
Mass marketing: the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers. Homogeneous preferences – consumers have the same preferences, existing brands are similar. Diffused preferences – consumer’s preference may vary greatly. Brands that enter first have an advantage, or brands differ greatly if there are several in the market. Clustered preferences – natural market segments, in which customers are clustered in distinct preferences. A firm can try to appeal to all clusters, set up many brands to appeal to each cluster, or position itself in the biggest segment which is called concentrated marketing Niche: is a narrowly defined group of customers seeking a distinctive mix of benefits. For market segments to be effective, they must be: substantial, accessible, measurable, differentiable, and actionable. Segmenting Consumer and Business Markets Consumer Markets – bases for segmenting, segmentation variables: Demographic Segmentation – dividing the market into, e.g. age, life-cycle state, life stage (divorce, married), gender, income, generation, or social class. Geographic Segmentation – dividing the market into, e.g. nations, states, regions, etc. Behavioral Segmentation – dividing customers into e.g. occasions for buying, benefits (convenience, low price, quality service), user status (non-user, ex-user, potential users.), usage rate (light, medium, heavy), loyalty status, buyer-readiness stage, or attitude. Psychographic Segmentation – dividing the market into, e.g. life-style (attitudes, activities interests), personality (e.g. exciting NIKE, competent HP, rugged Timberland…), and values. Criteria for market segments:
Michael Porter has identified five forces that together determine the intrinsic long-run attractiveness of the industry that is being analysed. These threats are:
A brand is ‘a name, sign, term, symbol, or design, or combination of them, with the intention to identify the services or goods of one seller of group of sellers and to differentiate them from those of competitors’. Branding is endowing services and products with the power of a brand. Brand equity is the added value endowed on services and products. It can be reflected in the way consumers feel about a brand. Customer-based brand equity: the effect that brand knowledge has on consumer behavior and attitude to the marketing of that brand. Brand knowledge: consists of all the feelings, thoughts, experiences, images, beliefs etc that become associated with the brand. Building brand equity depends on three main factors:
A brand audit: assesses the health of the brand and assesses the sources of brand equity and suggests ways to improve its brand equity. Brand valuation: should not be mistaken for brand equity. Brand valuation is the estimated financial value of the brand. Companies must always keep track of shifts and changes in the environment that can cause a brand to lose popularity or marketshare. If a firm wants to revitalize a brand it should first begin with going back to the sources of brand equity from the beginning of the brand. When a firm introduces a new product it has three main choices:
When an organization uses an established brand to introduce a new product the product is called a brand extension. A sub brand: a combination of a new brand with an existing brand. The parent brand: the existing brand that ’gives birth’ to a brand extension. In a line extension the parent brand covers a new product within a product category it currently serves. In a category extension the parent brand is used to enter a different product category from the one it currently serves. A brand line consists of all of the products that are sold under a particular brand. A brand mix: is the set of all brand lines that a particular firm makes available to buyers. A licensed product: one whose brand name has been licensed to other manufacturers that actually make the product. Advantages of brand extensions: they can enhance the acceptance of the new product by customers; they can provide positive feedback to the parent brand and company. Disadvantage of brand extension: because of line extensions the strength of the brand name can decrease and get less strongly identified to one product. This is called brand dilution. Brands can play a number of different roles within a brand portfolio. Each brand must have a well-defined position in the portfolio. Cash cows: low growth opportunities but they still are profitable enough for management to keep around. Flankers: are positioned with respect to the competitors brands so that more important ‘flagship’ brands can retain their desired position. Low-end entry level: relatively low-priced brand in the portfolio often may be to attract customers to other (more expensive) brands. High-end prestige: relatively high priced brand to add prestige to the entire portfolio. Customer equity: the sum of lifetime values of all customers Positioning: designing the company’s offering and image in order to occupy a distinctive place in the minds of the target market. Category membership: the products or sets of products with which a brand competes and which function as close substitutes. Points-of-difference (POD’s): attributes or benefits can help consumers strongly associate with a brand, especially when they believe they cannot find this in a competitive brand. Points-of-parity (POP’s): attributes shared with other brands. Category point-of-parity associations are associations consumers view as being necessary to a credible product offering within a certain category. Competitive point-of-parity associations are those associations designed to negate competitors points-of-difference. Dimensions through which a company can differentiate its market offering to gain a strong competitive advantage: Service Differentiation – Service differentiators: ordering ease, delivery, installation, customer training, customer consulting, maintenance and repair, and miscellaneous services (e.g. product warranty/maintenance contract). Product Differentiation – Products can be differentiated in many ways: Form, Features, Conformance quality (degree to which all the produced units are identical and meet the promised specifications), Performance quality, Reliability, Durability, Reparability, Style, Design. Channel Differentiation – Refers differentiating in ways of design of distribution channels’ coverage, expertise, and performance. Personnel Differentiation – Gaining a competitive advantage through better-trained people; whose characteristics are: competence, reliability, courtesy, responsiveness, credibility, and communication. Image Differentiation Image – the way the public perceives the company or its products. Identity – comprises the way that a company aims to identify or position itself or its product. Image and identity can be differentiated through using symbols, colours, slogans, generate image through their physical plant space, special attributes, engaging in events and sponsorships, and using multiple image-building techniques. Product Life-Cycle Marketing Strategies Because the product, market, and competitors change over time, firm’s positioning and differentiation strategy should change as well. Stages of the Product life cycle: introduction, growth, maturity, decline > bell shaped. Other products, those without bell shaped PLC, exhibit alternative patterns: growth-slump-maturity pattern – e.g. Kitchen knives, purchased a lot until reaching a petrified level, later sustained by late adopters. Cycle-Recycle pattern – e.g. drugs temporarily promoted that remain on the market. Style – a basic and distinctive mode of expression appearing in a field of human endeavour. Scalloped Patter – e.g. Velcro Fads – temporary fashions, that come on strong, then decline quickly. Fashion – a currently accepted or popular style in a given field. Introduction Stage
Pioneer advantage (Golder and Tellis): inventor (first in developing the patents), product pioneer (being first to develop the product), market pioneer (selling first in new product category). Growth Stage Tendencies: prices: remain unchanged or slightly fall, sales rise faster than promotional expenditures, profits increase, costs fall faster than price declines.
- lower prices, attract next layer of price sensitive buyers. - enter new market segments - add new models and flanker products - improve product quality and add new product features and improved styling. - increase distribution coverage, enter new distribution channels - shifts from product awareness advertising to product-preference adv. Maturity Stage
- or market leaders: low cost, high volume Market modification – and attempt to expand the market for its mature brand using: Volume = Number of Brand Users X Usage rate per user To expand number of brand users:
Product modification – Attempting to stimulate sales by modifying the product’s characteristics through feature improvement, style improvement (e.g. new car models), or quality improvement. Marketing-mix modification – Attempting to stimulate sales by modifying other marketing mix elements: distribution, prices, sales promotion, advertising, personal selling, services. Decline Stage A firms’ task is to identify the truly weak products; to develop a strategy for each one; and finally to phase out weak products in a way that minimizes the hardship to company profits, employees, and customers. Harvesting – calls for gradually decreasing a product or business’s costs while trying to maintain its sales. This is done by cutting R&D costs and plant and equipment investment, and reducing product quality, sales force size, marginal services, and advertising expenditures. Divesting – deciding to stop producing a product. Possibilities include selling the product, liquidating slowly or quickly. Market Evolution In order to have a more market-oriented picture, one should follow the evolution of the market to focus also on what is happening to the overall market. When making decisions, strategies considered include single-niche strategy, multiple-niche strategy, or a mass-market strategy. i. Emergence
ii. Growth
iii. Maturity
iv. Decline –Demand for the product begins to decrease. Four ways of dealing with attribute anticipation and discovering: Attribute Competition
Competitive Forces Porter’s 5 Competitive Forces: (1) threat of intense segment competition, (2) threat of new entrants, (3) threat of substitute products, (4) threat of buyers’ growing bargaining power, (5) threat of supplier’s growing bargaining power. Identifying Competitors A company is more likely to be hurt by an emerging competitor than a current competitor. E.g. Barnes & Noble amazon.com Competition can be seen from different perspectives: a. Industries – Competitors are characterized by similarities in: (1) Degree of differentiation and number of sellers . (leads to: pure monopoly, oligopoly, monopolistic competition, pure competition) (2) Mobility, entry, and exit barriers (high capital requirements, economies of scale, patents, creditors, government restrictions, high vertical integration…). (3) Cost Structure. (4) Degree of Vertical Integration. (5) Degree of Globalization - local vs. global industries. b. Market – Competitors are firms that satisfy the same customer need. This view specifies both an indirect and a direct view on competitors, and therefore has a broader range. Analyzing Competitors It is not enough to only identify competitors, companies must also understand their: Strategies: by identifying their strategic group (determined by levels of quality and vertical integration, firms following same strategy in a given target market). Objectives: these could be to increase market share, maximize profits, cash flow, service leadership, or technological leadership. Expansion plans are also important to monitor. Strengths and Weaknesses Competitive positions: favorable, tenable, dominant, strong, weak, or nonviable. Monitor share of market, share of mind (most recognizable), and share of heart (preferred company) variables of competitor companies. The goal is to make stead gains in mind share and heart share for gains in market share and profitability. Reaction Patterns: these may depend on the industry. Designing the Competitive Intelligence System
The information gathered through the competitive intelligence system allows for the creation of better strategies. In order to identify a company’s strengths and weaknesses relative to competitors, companies engage in Customer Value Analysis
They should also recognize the importance of competing in all different classes of competitors for their strategy: Strong vs. weak, close vs. distant, good vs. bad. Designing Competitive Strategies Market-leader strategies – Firms with largest market share. They must: 1. Expand the Total Market The dominant company will get the most gains and benefits through: finding new users, promoting new uses, convincing people to use more per use. Searching for new users: Market-penetration strategy; (those who might but not (yet) use the product), new-market segment strategy, (those who have never used it); geographical-expansion strategy, (those who live elsewhere). 2. Defend Market Share Through continuous innovation (– low costs, developing new product and customer services, distribution effectiveness.), increases in competitive strength and value to customer, defensive strategies which include:
3. Expand Market Share
Runner-up firms can use market follower or market challenger (attacking) strategies: Market-challenger strategies, firms must:
2. Choose a general attack strategy: a. Frontal attack – Match/ Copy opponent’s product, advertising, price, and distribution. b. Flank attack – find gaps and fill them; Strategic Dimensions: geographic (entering cities where opponent is weak), and/or segmental (serve uncovered market needs) c. Encirclement attack – Quickly try to conquer a part of enemy’s territory d. Bypass attack – Ignore leader’s market position. Develop brands in related markets, attack undeveloped or undefended territories, leapfrog current technology. e. Guerilla attack – By launching small, intermittent hit-and-run attacks to destabilize and harass the leader. These attacks include price cuts, intense promotional blitzes, and occasional legal actions. 3. Develop more specific strategies and combine – lower priced goods, price discounts, product proliferation (larger product variety for more choice), offering prestige goods, product innovation, improved services, distribution innovation, manufacturing cost reduction, intensive advertising promotion. Market-follower strategies Each follower tries to deliver distinctive advantages to its target market--location, services, financing. Four broad follower strategies:
Market-niches strategies
Balancing Customer and Competitor Orientations A balance between being competitor-centred and customer-centred is important. “Competitor centred companies”:
“Customer-centred companies”:
Product levels: The Customer-Value Hierarchy
Marketers classify products into two groups according to durability and tangibility
In the consumer-goods category, products are convenience goods, shopping goods, specialty goods, or unsought goods. In the industrial-goods category, products fall into one or three categories: materials and parts, supplies and business services, and capital items. A company can lengthening its products via line stretching in order to change the product component of its marketing mix. This can be done down-market, up-market, or both or by line filling, by modernizing its products, by featuring certain products, and by pruning its products to eliminate the least profitable. Brands are not rarely sold together with other brands. Ingredient brands and co-brands can add value, assuming they have equity and are perceived as fitting appropriately. The packaging can be quite important. Well designed packages can create promotional value for producers and convenience value for customers. They can act as five-second commercials. Global Market Offering Competing Globally Global industry – an industry in which the strategic positions of competing firms in major national or geographic markets are fundamentally influenced by overall global positions. Global firm – an organization that operates in more than one country and captures R&D, logistical, marketing, production, and financial advantages in its costs and reputation that are unavailable to purely domestic competitors. Advantages of going abroad – include lower prices, better products (ability to counterattack competitors), seizure of profit opportunities available abroad, increase of customer base, less dependency on single markets, international services for customers abroad. Threats when going abroad – Difficulty of understanding foreign customers and foreign culture or know how, underestimating foreign regulations, incurring unexpected costs, unstable foreign country. Questions a firm has to face when going abroad: How many markets should we enter? How fast should they expand? Entering fewer markets is appropriate if: product and communication adaptation costs are high, population and income size and growth are high in the initial countries chosen, market entry and market control costs are high, and dominant foreign firms can establish high barriers to entry. Expansion is regional, considering the intensification of regional economic integration shown by free trade zones or economic communities. European Community – reduced barriers to allow free flow of products, finances, services, and labor among member countries. Disadvantages of the EC are threats for foreign companies since EU companies grow bigger and more competitive, low internal barriers create thicker outside walls for businesses outside the EC. NAFTA – Free trade zone among the Canada, Mexico, and the United States. MERCOSUL – Free trade between Brazil, Argentina, Paraguay, and Uruguay. APEC – anticipated pan-pacific free trade area under the support of the APEC, Asian Pacific Economic Cooperation forum. Examples of determinants involved when choosing a market – psychic proximity, entry activeness, barriers, possession of competitive advantage, low market risk. Ways of entering the market: Direct and Indirect export: Exporting often helps companies better understand the place and use it as a market for testing for possible future building of a product overseas. Indirect exporting – When companies work through independent intermediaries. Advantages: It involves less risk, and less investment. Domestic-based export merchants – buy products and sell them abroad. Domestic-based export agents – seek and negotiate with foreign purchases and are paid a commission. (e.g. trading companies) Cooperative organizations – Do exporting activities on behalf of multiple producers and are partly under their administrative control. Export-management companies – agrees to manage a firms export activities for a fee. Direct Exporting – can be done through: overseas sales branch or subsidiary, domestic-based export department or division, traveling export sales representatives, or foreign-based distributors or agents. Licensing – Licensing a foreign organization to use a manufacturing patent, process, trademark, trade secret, or other item of value for a fee or royalty. Disadvantages – There is less control on the part of the licensor, and there is a risk of creating a new competitor. Ways of licensing – contract manufacturing; management contracts; franchising. Joint ventures – When foreign investors join with local investors to create a joint venture company in which they share control and ownership. Disadvantages – Disagreements between the partners, and the difficulty for the multinational organization to carry out specific marketing and manufacturing policies worldwide. Direct investment –Direct ownership of foreign-based assembly or manufacturing facilities. Advantages – Cost economies through cheaper labor or raw materials, foreign-government investment incentives, and freight savings, opportunity to better adapt products to local environment, opportunity to strengthen company image, retention of control over investments, and the company can assure itself to the market locally. Disadvantage – Risks, e.g. devalued currency, expropriation. Ways of adapting to the local market: a. Standardized marketing: lowest costs and assumes all markets are similar b. Adapted marketing mix: marketing mix elements are adjusted to each target market. Adapting to the local market involves adjusting the product, promotion, price, and place. Adaptation Strategies of product and promotion when entering the local market: Straight extension – introducing the product without any changes to the new market. Product adaptation – introducing the product with changes (adapting it) but no promotion changes. Communication adaptation – introducing the product without changing it but do make changes in promotion, e.g. adapting slogans, changing commercial themes, or making pools of ads and distributing according to city. Dual adaptation – changing both the promotion and the product. Product invention – Creating something new. Forward invention – create a new product to meet the need in another country. Adaptation problems in pricing when selling in foreign countries: Price escalation – Added costs (such as transportation, importer margin, tariffs, etc) makes the regular price in the home country escalate to a higher price when sold abroad. Choices when setting prices:
Transfer Price – The price the firm charges another unit internal to the company. It is a problem if the firm charges too high a price to the subsidiary. Dumping – When a firm charges either less than its costs or less than it charges in its home market, in order to enter or win a market. (e.g. when charging a too low price to its subsidiary) Gray Market – When the same product sells at different prices geographically. Dealing with Distribution Channels – Place, when selling abroad: The problem: Distribution channels with many levels (e.g selling first to general wholesaler, who sells to a product wholesaler, who sells to product-specialty wholesales, who sells to..etc.), causes the price for the end consumer to increase greatly. Also, the size and character of retail units abroad (e.g. small shops in India), can add major price differences between abroad and home. Whole-channel view of distributing products to final buyers – a view that firms need to take in order to have a proper picture of the distribution process. Managing International Marketing Activities: Depending on the level of international involvement, this can be done through the following: Export department Generally occurs in early stage when company still exports and when international sales have just started to expand. International Division Generally occurs when company has moved into joint ventures or direct investment, since export departments will then be insufficient. Global Organization
1. Global strategy, treats the world as one single market 2. Multinational strategy, treats the world as a portfolio of national opportunities. 3. Local strategy, standardizes certain core elements and localizes other elements. Product and Branding Marketing Mix – the set of marketing tools the organization uses to pursue its marketing objectives in the target market. The most important element in the marketing mix is the product. The Product: A product – isanything that can be offered to a market to meet a consumers’ want or need. (Includes services, experiences, physical goods, events, properties, persons, places, organizations, information, and ideas.) Product Levels – Are the levels of the product through which the marketer needs to think when planning its market offering. There are 5 product levels:
Product Hierarchy – The products position relative to other products. There are seven levels of the product hierarchy:
Product System – e.g. Mobile now comes with camera, games, radio, etc. It is a group of related but diverse items all functioning in one compatible manner. Product Classifications - There are many different ways of classifying products; By durability and tangibility, as non-durable goods, durable goods, and services. Customer-Goods Classification:
The Product Mix: A product mix –the set of all the products and items offered by a particular seller. Dimensions of the Product Mix:
Product Line Decisions Product lines – make up the product mix, and must be periodically evaluated for growth potential and profitability. Product items – items that make up the product lines. Product-line analysis – Involves studying the profit and sales contributions of items to the product lines, as well as their ways of positioning against competitors items. The latter is done using a product map which shows which competitors’ items are competing against the company’s items and identifies market segments. The product line analysis can help managers make various decisions on product line domain (line filling), length, modernization, featuring, and pruning (trimming) of the line: Product-line length – Product-line managers have to decide on the length of the product line (the number of items). If profits can be increased by dropping items the product line may be too long. The line may be too short if profits can be increased by adding items. Company objectives and how long the product line exists influence product-line length. Ways of lengthening a product line: Line Stretching – lengthening a product line beyond its current range through:
Line Filling
Product-line modernization – Modernizing the product line by giving it a new look and timing of the installation of the new look. Product-line featuring – Featuring specific items in promoting the line. Product-line pruning (trimming) – Detecting and removing weaker items from the line. Brand Decisions Branding – A major issue in product strategy. A brand – is a name, sign, term, design, symbol, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from the products of competing firms. Levels of meaning a product brand (symbol) can convey: benefits, attributes, values, personality, culture, user. Researching the position of the brand in the mind of consumers can be done through: brand personification (with kinds of persons or animals), word association questions, and laddering up to find deeper motives of consumers. Building brand identity – can be done through brand bonding, which happens when customers experience the company as delivering on its’ promised benefit.
To build brands in the new economy – means to:
Brand equity – refers to the degree of brand-name recognition, strong mental and emotional associations, perceived brand quality, and other assets such as patents, trademarks, and channel relationships. Brand equity involves Brand awareness, Brand acceptability, and Brand preference. Aaker’s five levels of customer attitude:
High brand equity (an important asset) yields the following competitive advantages:
Branding challenges: The activity of branding poses several challenges/confrontations to marketers. Among the challenges are:
Brand-name decision – strategies for manufacturers who do brand their products in picking brand names include: individual name strategy (General Mills Bisquik), blanket family name strategy (Heinz and GE), separate family names for all products (Sears Kenmore and Kraftsman), and company trade name combined with individual product names (Kellogg Rice Krispies). Brand building tools – Tools that attract attention to the firm’s brands: Sponsorships, public relations and press releases, clubs and consumer communities, trade shows, factory visits, public facilities, event marketing,high value for the money, social cause marketing, founder’s or a celebrity personality, and mobile phone marketing. Brand-strategy decision – depends on whether the brand is functional brand (satisfies a functional need, e.g. to shave), image brand (difficult to differentiate between brands e.g. Mont Blanc pens), or experiential brand (consumer involvement e.g. Disneyland). Developing brands can be done through:
Brand asset management – involves many areas beyond advertising and public relations, e.g. training and encouraging distributors and dealers to serve customers well, training employees to be customer-centered. Brand auditing and repositioning – organizations need to periodically audit their brand’s strengths and weaknesses, through using, for example, a brand report card, which may cause a company to discover it should reposition the brand. Packaging and Labeling Packaging – includes the activities of designing and producing the container of a product. Factors that have contributed to packaging’s growing use as a marketing tool are:
Labeling: This may be an elaborately designed graphic that is part of the package or a simple tag attached to the product. Functions performed by labeling:
Services Types of service industries:
A service – is any performance or act that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Manufacturers and distributors can differentiate themselves using a service strategy. Categories of service mix:
Generalizations: Services can be generalized as being either equipment based or people based, meet either a personal need or a business need,requiring either client’s presence or not, and differ in their objectives and ownership. Four major characteristics of services: Intangibility:
Inseparability:
Variability:
Perishability: The perishability of services is no problem when demand is steady. Several strategies for producing a better match between demand and supply in a service business: Demand: Differential pricing:Shift some demand from peak to off-peak periods. E.g. low early-evening movie prices. Nonpeak demand: E.g. McDonald’s opened a breakfast service. Complementary services: Developed during peak time to provide waiting customers with alternatives. E.g. automatic teller machines in banks. Reservation systems: Created to manage the demand. Supply: Part-time employees: Can be hired as extra staff during peak demand. Peak-time efficiency routines: Employees perform only the most essential tasks during peak periods. E.g. paramedics assist physicians during busy periods. Increased consumer participation: Self-service. E.g. consumers bag their own groceries. Shared services: E.g. several hospitals can share medical-equipment purchases. Facilities for future expansion:E.g. For later development, an amusement park buys surrounding land. Marketing Strategies for Service Firms P’s Marketing Approaches: There are also three additional ones to the traditional 4Ps:
Service marketing requires internal, external, and interactive marketing:
Describes the work to train and motivate employees to serve customers well.
Describes the normal work to price, prepare, distribute and promote the service to customers.
Describes the employees’ skill in serving the client. The customer judges service not only by its technical quality but also by its functional quality. For some services, customers are unable to judge the technical quality even after they have received the service. Goods provided can have the following qualities:
The level of difficulty of evaluation increases when the good has more experience and credence qualities. Consequences:
The managers of service companies face three tasks: Increasing competitive differentiation, service quality, and productivity. A. Managing differentiation: The offering:
Delivery:
Image:
B. Managing service quality: Delivering a service that is consistently of higher quality than competitors and exceeding customers’ expectations. The following five gaps can cause unsuccessful delivery:
Five determinants of service quality:
Service companies that are excellently managed share the following common practices: Strategic concept (clear sense of the need of their target customers, developed a distinctive strategy for satisfying these needs), High standards, Top-management commitment, monitoring systems (e.g. using comparison-shopping, self-service technologies, ghost shopping, customer surveys, suggestion and complaint forms, etc), satisfy customer complaints, and satisfy not only the customers but also employees. C. Managing productivity: Seven approaches to improving service productivity:
Managing Product Support Services Product support service is becoming a major battleground for competitive advantage. Specific worries of customers:
Life-cycle cost – A calculation the buyer makes: The cost of purchasing a product plus the discounted cost of repair and maintenance less the discounted salvage value. Offering and charging for product support services: E.g. providing a standard offering plus a basic level of services, anything additional costs more. Or offering service contracts allowing customers to choose their desired service level. Post sale (post purchase) service strategy: A strategy that is created in order to satisfy customers after they have already purchased the good. These services include repair, customer service departments, and maintenance services. Major trends in customer service:
Price Strategies and Programs Price: the amount of money customers have to pay in order to obtain a product or service. Attributes of Price: The marketing-mix element that produces revenue Price is the easiest marketing-mix element to adjust, and communicates to the consumer the firm’s intended value positioning of its brand or product. Setting the Price The first time a firm has to set a price is when it develops a new product, when it introduces its existing product into a new distribution channel or geographic area, and when it enters bids on new contract work. The following factors and steps have to be considered in setting a pricing policy: Pricing objectives, costs, demand, competitor’s costs, prices, and offers, pricing method, final price determination: 1. Pricing Objectives:
The following conditions favour setting a low price to maximize market share (market-penetration pricing):
2. Determining Demand:
Price Elasticity of Demand – Responsiveness of demand to price changes. Price elasticity of demand = % Change in quantity demanded : % Change in price Conditions for a less elastic demand are: buyers are slow to change their buying habits, few or no substitutes, buyers do not readily notice the higher price, buyers think the higher prices are justified. There is a distinction between the magnitude and direction of the contemplated price change, and whether elasticity is long term or short term (long term price elasticity indicates that the seller will not know the total effect of a price change until a certain amount of time passes). 3. Estimating Costs: A firm’s costs set the floor to the price that an organization can charge for its products. An organization usually charges a price that covers its’ cost of producing, distributing, and selling the product, including a fair return for its risk and effort. Factors that affect a corporation’s product cost are:
The marketer should always analyze the prices, costs and offers of competitors. Learning Curve – Also known as the experience curve: shows a decline in the average cost with accumulated production experience. Activity Based Cost accounting (ABC) – an accounting method used to estimate the real profitability of dealing with different retailers, tagging back both overhead and variable costs to each customer. Target Costing – A Japanese method of accounting, in which they use market research to establish a new product’s desired price, functions, target cost (from price –desired profit margin), bringing the final cost projections into the target cost range. 4. Analyzing Competitors prices, costs, and offers Analyzing competitors’ prices, costs, and offers enables firms to decide whether it can change more, less, or the same as the competitor. 5. Selecting a Pricing Method Mark-up pricing - This method requires a standard mark-up to be added to a product’s cost in order to determine the price of the product.
Target-return pricing – The company decides on the price that would yield its target return on investment. (ROI). Disadvantage: This method of pricing tends to ignore considerations like price elasticity, and competitors prices. Perceived-value pricing – Basing your product prices on the perceived value of your customers. Reaffirming value and constant innovation of new values is important to firms. It is crucial to deliver more value than the competitors and demonstrate this to prospective buyers. The value of its offering can be determined in ways like value of analogous products, managerial judgments within the company, analysis of historical data, surveys, focus groups, experimentation, and conjoint analysis. Value pricing – this method entails firms to gain loyal customers by having fairly low price for a high-quality offering (Walmart, IKEA). This low price in however accompanied by restructuring the firm’s operations to become a low cost producer without sacrificing the quality, and decrease prices significantly to attract a large number of customers that are value-conscious .
Going-rate pricing - Basing prices on competitors’ prices. Auction-type pricing - There are 3 major type so of auctions:
Group pricing - Consumers and business join groups to buy at a lower price. Web-sites support this method (Groupon). 6. Selecting the Final Price The above explained pricing methods are often followed by considerations of other factors. These as shown below: Psychological pricing: Manipulating the price to account for people’s psychological traits. (e.g. odd numbers (99$ instead of 100$) gives a certain psychological difference; or since many customers use price as an indicator of quality, raising the prices a bit would increase perceived value .) Risk and Gain Sharing pricing: Prices should also take into account a the perceived level of risk customers have in accepting a proposal. Other marketing-mix elements also have an influence on price: The final price must take into account the the quality of the brand and advertising relative to competition. Company pricing policies: Price must be consistent with the pricing policies of the firm. Management must also consider the reactions of other channel participants to product price. Price Adaptation Strategies Firms develop a pricing structure which reflects variations in geographical demand and costs, purchase timing, market-segment requirements, service contracts, delivery frequency, order levels, guarantees, and other factors. 1. Geographical pricing: Involves variations in pricing of a firm’s products to different customers in different geographical areas (locations and countries). Countertrade, which accounts for 15 to 25 percent of world trade, takes the following forms:
2. Price Discounts and Allowances: Cash discounts, functional discounts, quantity discounts, allowances, seasonal discounts. 3. Promotional pricing: Loss-leader pricing, Cash rebates, Special-event pricing, Low-interest financing, Warranties and service contract, Longer payment terms, Psychological discounting. If these strategies work, competitors copy them and soon they lose their effectiveness. If they don’t work, money has been wasted on a useless strategy. In other words, it can often be a zero-sum game. These strategies can only bring a short-term competitive advantage. 4. Discriminatory pricing: Occurs when a firm sells a good (product or service) at two or more prices that do not reflect a proportional difference in costs. Image pricing, Customer-segment pricing, Location pricing, Product-form pricing, Time pricing. 5. Product-mix Pricing Situations:
Initiating and Responding to Price Changes Initiating price cuts: Circumstances that might lead an organization to cut its’ prices are declining market share, excess plant capacity, and drive to dominate the market through lower costs. Initiating price increases: A successful price increase can raise profits considerably. Major circumstances that can provoke price increases include – cost inflation, anticipatory pricing (expecting further inflation or government actions), and over-demand. Reactions to Price Changes:
Responding to Competitors’ Price Changes: Brand leaders can respond to price changes in several ways: Maintain price, reduce price, increase price and improve quality, maintain price and add value, launch a low-price fighter line. Value Networks and Marketing Channels Value Network System – a system of alliances and partnerships used by an organization to source, augment, and deliver its service or product offerings. Marketing-Channel System –Intermediaries enhance the process of getting the product from the manufacturer to the end user. Examples of hybrid channels:
Channel Integration Characteristics:
Reasons for establishing marketing channels:
Functions of channels:
The important question is who should perform the various channel functions. Channel levels vary according to the amount of intermediaries, making a channel longer the more intermediaries involved:
Service sector channels use locations and agencies in order to access the population to be served. Decisions in Designing a Channel Structure:
(Lot size, product variety, waiting time, service backup, spatial convenience)
(Objectives, e.g. minimize shipping distance, vary per product e.g. bulky products as opposed to perishable ones)
Types of Intermediaries:
Number of Intermediaries:
Determine Terms and Responsibilities of Channel Members through:
Channel Management Decisions The channel development process – consists of selecting, motivating, training, and periodically evaluating the members of the channel. The final part consists of periodically modifying channel arrangements. Cooperation between intermediaries can be a major problem. In particular, to motivate channel members, the company should provide market research programs, training programs, and other capability-building programs to improve the intermediaries’ performance. Producers can use reward, coercive, expert, legitimate, or referent power to enkindle cooperation. Distribution programming the most advanced supply-distributor arrangement in which a planned, professionally managed, vertical marketing system that meets the needs of both manufacturer and distributors is built. Channel Dynamics – Marketing Systems Conventional marketing channel – comprises an independent producer, wholesaler(s), and retailer(s). This increase individual profit maximization, there is little control over members. The following are marketing systems that show growth trends:
The new competition in the retailing industry is no longer between independent business units but between whole systems of centrally programmed networks (corporate, administered, and contractual). These networks compete against one another to achieve the best cost economies and customer response. Horizontal Marketing Systems – A channel development in which two or more unrelated firms put together resources or programs to exploit an emerging marketing opportunity. Multichannel Marketing Systems Multichannel marketing – occurs when a single organization uses two or more marketing channels to reach one or more customer segments. Advantages: lower channel cost, increased market coverage, and more customized selling. Conflicts in Channels
Actual conflict may cause parties to resort to diplomacy, mediation and arbitration. Legal and Ethical Issues in Channel Relations Exclusive dealing and tying agreements are two common distribution practices that are legal as long as they don’t substantially lessen competition. Retailing, Wholesaling, and Market Logistics Retail: retail-store types pass through the retail life-cycle. The wheel-of-retailing describes how new store types emerge. The levels of service offered by retailers: self-service, self-selection, limited service, and full service Non-store retailing - has been growing faster than store retailing. Categories:
Types of retail organizations: voluntary chain, corporate chain store, consumer cooperative, retailer cooperative, merchandising conglomerate, franchise organization. Retailers marketing decisions include: defining target market, prices, product assortment and placement, promotion, services mix and store atmosphere, place (general business district, regional shopping centre, community shopping centre, shopping strip, or location within a larger store or operation) Trends in Retailing: new retail forms, growth of giant retailers, intertype competition (different types of stores competing for the same customers), growth in investment in technology, selling experiences, global expansion, competition between store-based and non-store-based retailing. Wholesaling Wholesaling excludes manufacturers and retailers, and include all the activities involved in selling goods or services to those who buy for resale or business use. Wholesalers versus. retailers:
Wholesalers handle many functions more efficiently than do manufacturers, e.g. selling and promoting, transportation, bulk breaking, and financing. Major wholesaler types: merchant wholesalers, full-service wholesalers, limited-service wholesalers, agents, brokers, manufacturers’ and retailers’ branches and offices, miscellaneous wholesalers Wholesalers marketing decisions include: defining target market, price decision, product assortment and services, promotion decision, and place decision (automated warehouses). Trends in Wholesaling: trends towards vertical integration, fierce resistance to price increases. Wholesalers have adapted to retailer and manufacturer strength by:
Market Logistics Interrelated Aspects Associated with Market Logistics:
Market Logistics Objectives:
M = T + FW + VW + S, where: M = total market-logistics cost of proposed system; T = total freight cost of proposed system; FW = total fixed warehouse cost of proposed system; VW = total variable warehouse cost of proposed system S = total cost of lost sales due to average delivery delay Market Logistics Decisions:
Shortening of the Order-to-payment cycle – the elapsed time between an order’s receipt, deliver, and payment. Preparing a criterion for the Perfect Order.
Decide on number of inventory stocking locations. Storage warehouses – storing for moderate to long periods of time. Distribution warehouses – moving goods out as soon as possible. Automated warehouses – has advanced materials handling systems under the control of a central computer.
Determine reorder point, relevant cost comparison, and optimal order quantity
Containerization, and decide on private vs. contract carriers Market Logistics Lessons: A senior V.P. is needed as the single contact point for all logistical elements and must maintain close control Software and systems are essential for competitively superior logistics performance. Integrated Marketing Communications The Communications Process: the decisions made about communicating are aimed at finding out what to say, how to say it, to whom, and how often. Marketing Communication Mix – communication can be done through 5 major modes (or platforms): advertising, public relations, sales, promotion, direct marketing. Elements in the Communication Process: receiver, sender, encoding, decoding, response, feedback, and noise. Reasons why the message doesn’t always reach the intended target:
Steps for developing Effective Communications: 1. Identify your target audience: Includes assessing the public’s perceptions of the product, company, and competitors’ company/product image 2. Determine the objectives of your communication: Objectives: Cognitive, affective, and behavioural 3. Design the message:
4. Select a channel of communication: You can choose either Personal (advocate, social channels) or Non personal (media, atmosphere, events) communication channels. Personal: Methods for stimulating personal communication: developing word-of-mouth referral channels, creating opinion leaders, and devoting extra effort to influential individuals or organizations. 5. Establish the budget:
5. Decide on the marketing communications mix: is about the allocation of a promotion budget over promotional tools (means) with the following characteristics:
Selection factors of the mix depend on consumer readiness to make a purchase,the type of product market, and the company’s market rank as well as the stage in the product life cycle. Consumer vs. business market – consumer marketers spend on promotion, personal selling, sales advertising, and public relations while business marketers spend on sales promotion, personal selling, advertising, and public relations. 7. Measure results: communication results do not only rely on expenses and outputs, but more on the recognition and recall scores, persuasion changes, and behavioural responses. IMC, Integrated Marketing Communications – a concept of marketing communications planning that evaluates strategic roles of a variety of communications disciplines, recognizes the added value of a comprehensive plan, and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of discrete message. It is vital to managing and coordinating the entire communications process. Managing Advertising Advertising – any paid form of not personal presentation and promotion of goods, ideas, or services by an identified sponsor. Communication companies – the broader term under which advertising agencies are redefining themselves, since they are assisting in overall communication effectiveness. The 5 M’s of Advertising: These are the 5 decisions required in developing an advertising program: Money, Mission, Media, Message, and Measurement. Steps in Developing an advertising program: 1. Setting advertising objectives (mission) – Objectives can be classified by aim: To persuade, inform, reinforce, remind . 2. Deciding on the advertising budget (money) – Which factors to consider when budget-setting:
3. Choosing the advertising message (message) – Which factors to consider when choosing the advertising message:
The relationship between frequency, reach, and impact is shown in total number of exposures (R x F), and weighted number of exposures (R x F x I) Selecting media types (television, newspapers, Radio, direct mail, Magazines, yellow pages, outdoor, brochures, newsletters, telephone) and vehicles.
Models which are developed on timing can be focused on macro scheduling (like the time lag model), involving scheduling the advertising in relation to the business cycle and season, or micro scheduling based, calling for allocating advertising expenditures within a short period to obtain maximum impact. The most effective pattern, however, depends on the objectives of the communication in relation to the nature of the target customers, product, distribution channels, and other marketing factors. Carryover: the rate at which the effect of an advertising expenditure wears out with the passage of time. Habitual behaviour: indicates how many brand holdovers occur independent of the level of advertising. Concentration, continuity, pulsing, and flight, and different timing strategies:
Areas of Dominant Influence ADI’s – areas in which companies pursue “spot buys” for certain markets or in regional editions of magazines, or contiguous areas defined by media, cultural and economic forces. 4. Measuring Effectiveness (measurement):
Sales Promotion Sales Promotion: are short-term incentives designed to stimulate purchase among consumers or trade. Purpose of sales promotion:
Steps in sales promotion program development: Establish objectives, select consumer-promotion tools, select trade-promotion tools, select business- and sales force promotion tools, develop the program. Pre-test the program, and finally implement and evaluate the program. Examples of major consumer promotion tools – Coupons, samples, cash refunds (rebates), prizes (contests, sweepstakes, games), premiums, free trials, patronage awards, tie-in promotions, product warranties, point-of-purchase displays, cross-promotions and demonstrations Major trade promotion tools – Price-off, free goods, allowance, sales contests, trade shows and conventions, and specialty advertising. Public Relations Public relationsactivities protect or promote the image of a firm or product Functions of public relations:
Marketing Public Relations (MPR)plays an important role in:
Major MPR decisions:
Measures of MPR effectiveness:
Major Tools in Marketing PR: events, publication, news, sponsorships, public-service activities, speeches, identity media. Direct Marketing Direct Marketing – the use of consumer-direct (CD) channels to reach and deliver services and goods to customers without using a marketing middlemen. Major Direct Marketing Tools:
Stages of Direct Marketing:
Steps in Developing a Direct-Mail Campaign:
Catalogue Marketing: companies send full-line merchandise catalogues, business catalogues, and specialty consumer catalogues, usually in print form but also sometimes as CDs, videos, or online. Telemarketing: involves the use of the telephone and call centres to attract prospects, sell to existing customers, and provide service by answering questions and taking orders. Types of Telemarketing: telecoverage (calling customers), telesales (taking order), teleprospecting (generating new leads), and customer service and technical support. Direct Response TV Marketing: using the television to promote direct sales with at-home shopping channels, direct-response advertising, and videotext and interactive TV. Kiosk marketing: a small building or structure that might house a selling or information unit like newsstands and free-standing carts. E-marketing: an electronic channel for direct marketing. Designing the Sales Force Sales Representative: an agent who is in charge of negotiating and, if required, concluding purchase, lease, service, or sale contracts as an independent profession and in a permanent way in the name and for the count of industrialists, tradesman, manufacturers or other sales representatives. Types of sales representatives: Order taker, Deliverer, Technician, Missionary, Solution vendor, or Demand creator,. Steps in Designing the Sales Force:
Firms should define specific objectives and strategies they want their sales force to achieve. Generally, salespeople target, prospect, sell, communicate information, gather information, provide services, and allocate scare products to certain customers. Type of sales force: Direct (company) sales force are the employees working exclusively for the firm, or contractual who are paid a commission based on sales.
Structures can only be determined after the strategies have been formulated. Most common sales force structures are: Product, focusing on sales force expertise on its products; territorial, assigning representatives exclusive territories; market, specializing sales forces along customer or industry lines; and complex, combining several structures to account for the large variety of products, customers, and geographical areas.
Workload approach to put together a sales-force size which is done by grouping customers by volume, establishing frequencies of calls, calculating total yearly sales call workload, calculating average number of calls per year, and finally calculating number of sales representatives.
Four components of compensation:
Managing the Sales Force Steps in Sale-force Management 1. Recruitment and selection - begins with the development of the selection criteria:
2. Training:
3. Supervising:
4. Motivating the Sales Force:
5. Evaluating:
Personal Selling Principles Three major aspects of selling: Negotiation, Professionalism, and Relationship Marketing. Sales training approaches for Sales Professionalism- Approaches in ways for training salespeople to get them to become active order getters:
Sales Professionalism – The Seven Step Selling Process:
Negotiation Negotiation Strategy: a commitment to an overall approach that has a good chance of achieving the negotiator’s objectives. The salespeople need skills for effective negotiation. Negotiation is useful when certain factors characterize the sale Relationship marketing: the focus is on developing mutually beneficial and long-term relationships between two parties. Building long-term supplier-customer relationships has grown in importance. Firms are shifting focus away from transaction marketing to relationship marketing. Total Marketing Effort Trends in Company Organization: business firms are responding to environment changes through outsourcing, re-engineering, supplier partnering, benchmarking, merging, customer partnering, flattening (of number of organizational levels), globalizing, empowering, and focusing. Marketing departments have evolved through 6 stages: first there was the simple sales department, then a sales department with ancillary marketing functions arose, followed by the separate marketing department, than the modern marketing department/effective marketing company, and finally the process- and outcome-based company. Ways of organizing the marketing department:
Answer: 1. No corporate marketing, 2. Moderate corporate marketing, 3. or strong corporate marketing.
Marketing relations with other departments – Often clash of interests. The marketing department should drive the company to “think customer” and work together to satisfy customer expectations and needs. Tasks of the marketing vice president: 1. To coordinate marketing with finance, operations, and other company functions to serve the customer; 2. To coordinate the company’s internal marketing activities. Company Departments and their Conflicts with the Marketing Department: R&D: there is a conflict in cultural differences. R&D and Markeeting should share responsibility for successful market oriented innovation. Engineering and Purchasing: tend to disagree on the number of items per product lines desired, and level of quality. Finance: clash lies in risk-taking levels and investment perceptions as expenses (finance) as opposed to investments (marketing). Manufacturing and Operations: complain about inaccurate forecasts and unrealistic capacity, quality, delay, and customer demands for service from the Marketing Department. Accounting and Credit: conflict on timing of credit standings and sales reports. Building a companywide marketing orientation towards being market-and-customer driven requires a change in job and department definitions, incentives, responsibilities, and relationships. In addition, a capacity for strategic innovation through increased creativity needs to be built through approaches like e.g. listing observable trends, hiring new creative marketers, setting up rewards and prizes for new ideas. Marketing Implementation Marketing implementation: the process that turns marketing plans into action. Marketing Implementation assigns and ensures that such assignments are executed in a manner that ensrues the plan’s stated objectives are accomplished. Implementation addresses who, where, when, and how. Four sets of skills for implementing marketing program (according to Thomas Bonoma): Diagnostic skills, implementation skills, identification of company level, and evaluation skills. Implementation can be done through automating repetitive processes, software packages (that help companies better manage their marketing processes, assets, and resources exist like MRM, marketing resource management), desktop marketing (in which whatever information and decision structures can be found), and reducing waste in practices like meetings and approvals. Evaluation and Control Four types of marketing control needed by firms: 1. Annual Plan Control: to examine whether the results as planned are being achieved in sales, profits, and other goals established in its annual plan.
Sales variance analysis: measures the relative contribution of the different factors to a gap in sales performance. Micro sales analysis: looks at specific products, territories, and so forth, previous referred to as the factors that contributed to the gap in sales performance, that failed to produce expected results.
Ways of measuring market share:  Served market share: a firms’ sales expressed as a percentage of the total sales to the firms’ served market. Served market: all the customers who are able and willing to buy its product. Relative market share: market share in relation to largest competitor.
Return on assets: the product of the profit margin ratio and the asset turnover ratio. Return on marketing investment: new marketing contribution divided by marketing expenditures. How to improve performance:
2. Profitability Control: to examine where the company is losing and making money.
3. Efficiency Control: evaluate and improve the sending efficiency and impact of marketing expenditures. Focuses on creating new ways to increase the efficiency of the advertising, sales force, distribution, and sales promotion. 4. Strategic Control – entails a periodic reassessment of the organization and its strategic approach to the marketplace, using the tools of the marketing effectiveness review and the marketing audit. Firms should also undertake marketing excellence reviews and ethical/social responsibility views. Tools:
Components of a Marketing audit - environment - macro, strategy, task, systems, productivity, organization, and function audits. What type of research brings together a small group of carefully selected people to discuss various topics Marketers are interested in?A focus group is a market research method that brings together 6-10 people in a room to provide feedback regarding a product, service, concept, or marketing campaign. A trained moderator leads a 30-90-minute discussion within the group that is designed to gather helpful information.
What provides diagnostic information about how and why we observe certain effects in the marketplace and what they mean to marketers?provide diagnostic information about how and why we observe certain effects in the marketplace, and what that means to marketers. the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.
Which of the following is considered to be the last step in the marketing research process?The final step in the market research process is to present your survey research findings and draw conclusions.
Which of the following type of marketing research tends to be the most expensive?Feasibility studies are a more expensive type of market research.
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Which of the following is used to assess peoples knowledge, beliefs, preferences, and satisfaction
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