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Marketing notes

Marketing Notes

Chapter 1 - Marketing In a Changing World

What is marketing?

- Creating customer value and stratification are at the very heart of modern marketing thinking and practice.

Market Defined

- Markets always focus at satisfying customers needs

- Marketing: A social and managerial process by which individuals and groups obtain what they need and want through creating exchanging products and value with others.

- Needs: States of felt deprivation

- Wants: Are the form taken by human needs as they are shaped by culture and individual personality. Wants are described in terms of objects that will satisfy needs.

- Demands: Human wants that are backed by buying power

- Products: Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need it. It includes physical objects, services, persons, places, organizations, and ideas.

- "Marketing myopia" Sellers may suffer from "Marketing myopia" they are so taken with their products that they focus only on existing wants and lose sight f underlying customer needs. They forget that a physical product is only a tool to solve a consumer problem.

Value, Satisfaction, and quantity

- Customer Value: The difference between the values the customer gains from owning and using a product and the cost of obtaing the product.

- Customer Satisfaction: The extent to which a product’s perceived performance matches a buyer’s expectations.

- If the product’s performance falls short of the customer’s expectations, the buyer is dissatisfied. If the performance matches expectation, the buyer is satisfied. If performance excesses expeditions, the buyer is delighted. Outstanding marketing companies go out of their way to keep their customers satisfied.

- Total quantity management (TQM): Programs designed to constantly improve the quantity of products, services and marketing processes.

Exchange, Transactions, and Relationship

- Exchange: The act of obtaining a desired object from someone by offering something in return.

- Transaction: A trade between two parties that involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.

- Relationship Marketing: The process by creating, maintaining, and enhancing strong, value, -laden relationships with customers and other stakeholders.

- A market network consists of the company and all of its surrounding stakeholder: customers, employees, suppliers, distributions, retailers, advertising, agencies, and others with whom it has built mutually profitable business relationships.

Market

- Market: The set of all actual and potential buyers of a product or service.

- Figure 1-2 (13)

Marketing

- Marketing means managing markets to bring about exchanges for the purpose of satisfying human needs and wants.

Marketing Management

- Marketing Management: The analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives.

- De-marketing: Marketing to reduce demand temporarily or permantely-the aim is not to destroy demand, but only to reduce or shift it.

Building profitable customer relationship

- A company demand comes from two groups: 1. New customers and 2. Repeat customers.

- It costs five times as much to attract new customers as it does to keep an existing customers satisfied.

Marketing Management Philosophies

- There are five alternatives concepts under which organizations conduct their marketing activities: the product, selling, marketing, and societal marketing concept.

- Production Concept: The philosophy that consumers will favour products that are available and highly affordable and that management should therefore focus on improving production and distribution efficiency.

- Product Concept: The philosophy that consumers will favour producers that offer the most quality, performance, and innovative features.

- Selling Concepts: The idea that consumers will not buy enough of the organization’s products unless the organization undertakes a large-scale selling and promotion effort.

- Marketing Concept: The marketing management philosophy that holds the achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do.

The Internet

- Internet: A vast and burgeoning global web of computer networks with no central management or ownership.

Chapter 2- Strategic Planning the Marketing Process

Strategic Planning

- The annual plan is a short-run marketing plan that describes the current marketing situation, the company objectives, and the marketing strategy for the year, the action program, budgets, and controls.

- The long-run plan describes the major factors and forces affecting the organization during the next several years, it includes the long-term objectives, the major marketing strategies that will be used to attain them, and the resources required.

- Strategic Planning: The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

- At the corporate level, the company first defines its overall purpose and mission. This mission then is turned into detailed supporting objectivities that guide the whole company. Next, headquarters decides what portfolio of business and products is best for the company and how much support to give each one. In turn, each business and product unit must develop detailed marketing and other departmental plans that support the company wide plan.

Defining the company mission

- Mission Statement: A statement of the organizations purpose-what it wants to accomplish in the larger environment.

- Mission should be realistic, specific, fit the market environment, motivating

Designing the Business Portfolio

- Business Portfolio: The collection of business and products that comprise the company.

- The best business portfolio is the one that best fits the company’s strengths and weakness to opportunities in the environment. The company must (1) analyse the current business portfolio and decide which business should receive more, less, or no investment, and (2) develop growth strategies for adding new products or business to the portfolio.

Analysing the current business portfolio

- Portfolio Analysis: A tool by which management identifies and evaluates the various businesses that makes up the company.

- Strategic business Unit (SBU): A unit of the company that has a separate mission and objectives and that can be planned independently from other company business. An SBU can be a company division, a product line within a division, or sometimes a single product or brand.

- Management’s first step is to identify the key businesses making up the company. The next step in business portfolio analysis calls for management to assess the attractiveness of its various SBU’s and decide how much support each deserves.

The Boston Consulting Approach

- Growth-share matrix: A portfolio-planning method that evaluates a company’s strategic business units (SBU) in terms of their market growth rate and relative market share. SBUs are classified as stars, cash cows, question marks, or dogs.

- Four types of SBUs can be distinguished:

1. Star: High-growth, high share business or products that often require heavy investment to finance their rapid growth.

2. Cash Cow: Low-growth, high share business or products; established and successful units that generate cash that the company uses to pay its bills and support other business units that need investment.

3. Question Mark: Low-share business units in high-growth markets that require a lot of cash in order to hold their share or become stars.

4. Dogs: Low-growth, low share business and products that generate enough cash to maintain themselves but do not promise to be large sources of cash.

- Figure 2-2 (45) Growth Share matrix

The General Electric Approach

- It uses a matrix with two dimensions-one representing industry attractiveness (the vertical axis) and one representing company strength in the industry (the horizontal axis). The best businesses are those located in highly attractive industries where the company has high business strength.

Problems with Matrix Approaches

- They can be difficult, time consuming, and costly to implement. Management may find it difficult to define to define SBUs and measure market share and growth.

- These approaches focus on classifying current businesses but provide little advise for future planning.

Developing Growth Strategies

- Product/market expansion grid: A portfolio-planning tool for identify company growth opportunities through market penetration, market development, or diversification.

- Market Penetration: A strategy for company growth by increasing sales of current products to current market segments without changing the product in anyway.

- Market development: A strategy for company growth by identifying and developing new market segments for current company products.

- Product development: A strategy for company growth by offering modified or new products to current market segments.

- Diversification: A strategy for company growth by starting up or acquiring businesses outside the company’s current products and markets.

Marketing Role in Strategic Planning

- Marketing looks at consumer needs and the company’s ability to satisfy them; these same factors guide the company mission and objectives.

- Marketing plays a key role in the company’s strategic planning; Marketing provides a guiding philosophy-the marketing concept-which suggests company strategy should revolve around serving the needs of important consumer groups. Marketing provides input to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them. Within individual business units, marketing designs strategies

- For reaching the unit’s objective.

Conflict between Departments

- Operations focuses on suppliers and production; finance is concerned with stockholders and sound investments; marketing emphasizes consumers and products, pricing, promotion, and distribution.

The Marketing process

- Marketing Process: The process of (1) analysing marketing opportunities; (2) selecting targets market (3) developing the marketing mix and (4) managing the marketing effort.

- Market Segmentation: Dividing the market into distinct groups of buyers with different needs, characteristics, or behaviour who might require separate products or making mixes.

- Market Segment: A group of consumers who respond in a similar way to given set of marketing stimuli.

Market Targeting

- Market targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Marketing Position

- Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Marketing Strategies for Competitive Advantage

- The company must formally or informally monitor the completive environment to answer these and other important questions: Who are our competitors? What are their objectives and strategies? What are their strengths and weakness? And how will they react to different completive strategies we might use?

Developing the Marketing Mix

- Marketing Mix: The set of controllable tactical marketing tools-product, price, place and promotion-that the firm blends to produce the response it wants in the target market.

- Product means the ‘goods and services"

- Price is the amount of money customers have to pay to obtain the product.

- Place includes company activities that make the product available to target consumers.

- Promotion means activities that communicate the merits of the products and persuade target customers.

Managing the Marketing Effort

- Four management functions-analysis, planning, implementation and control.

- Marketing Analysis à The Company must analyse its markets and making environment to identify attractive opportunities and avoid environmental threats. It must analyses company strengths and weaknesses, as well as current and possible marketing actions, to determine which opportunities it can best pursue. Marketing analysis needs information and other input to each of the other marketing management functions.

- Marketing Planning à It involves deciding on marketing strategies that will help the company attain its overall strategic objectives. A detailed marketing plan is needed for each business, product or brand.

- Product or brand plan (Contents of Marketing Plan) p.58

- Product or brand plan includes: Executive summary that quickly overviews major assessment goals, and recommendation. The main section of the plan presents a detailed analysis of the current marketing situation, and of potential threats and opportunities. It next states major objectives for the brand and outlines the specific of a marketing strategy for achieving them.

- Marketing Strategy: The marketing logic by which the business unit hopes to achieve its marketing objectives. It consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels.

- In the marketing strategy level the planner explains how each strategy responds to threats, opportunities, and critical issues outlines earlier in the plan.

- Additional Sections of the marketing plan lay out action program for implementing the marketing strategy, along with the details of a supporting marketing budget.

- The last section à the controls that will be used to monitor progress and take corrective action.

Marketing Implementation

- Marketing Implementation: The process that turns marketing strategies and plans into marketing actions to accomplish strategic marketing objectives.

- Implementation involves day-to-day, month-to-month activities that effectively put the marketing plan to work.

Marketing Department Organization

- Marketing manager is responsible for developing long range and annual plans for the sales and profits in their market. This system’s main advantage is that the company is organized around the needs of specific customer segments,

Marketing Control

- Marketing Control: The process of measuring and evaluating the results of market strategies and plans, and taking corrective action to ensure that marketing objectifies are attained.

- Marketing first sets specific marketing goals. It then measures its performance in the market place and evaluates the causes of any difference between expected and actual performance. Finally management takes corrective action to close the gaps between its goals and its performance, this may require changing the action programs or even changing the goals.

- Operating Controls à Involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its annual plan. It also involves determining the profitability of different products, territories, market and channels.

- Strategic Controlà Involves considering whether the company’s basic strategies are well matched to its opportunities.

- The Marketing Audit: Is a comprehensive, systematic, independent, and periodic examination of a company’s environment, objectives, strategies, and activities to determine problem areas and opportunities and to recommend a plan of action to improve the company’s marketing performance.

- The Marketing Audit Questions (64)

The Marketing Environment

- The company must carefully analyse its environment so that t can avoid the threats and take advantage of its opportunities.

Chapter 3 – The Global Marketing Environment

- Marketing Environment: The factors and forces outside marketing’s direct control that affect marketing management’s ability to develop and maintain successful transactions with target customers.

- Marketers have two special aptitudes. They have discipline methods –marketing intelligence and marketing research-for collecting information about marketing environment. They also normally spend more time in the customer and competitor environment. By conducting systematic environmental scanning, marketers can revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace.

- Microenvironment: The forces close to the company that affects its ability to serve its customers-the company, suppliers, marketing channel firm, customer market, competitors, and publics.

- Microenvironment: The larger societal forces that affect the whole microenvironment –demographic, economic, natural, technological, political, and cultural forces.

Suppliers

- They provide the resources needed by the company to produce its goods and services. Marketing managers must be aware of supply availability –supply shortage or delays, labour strikes, and other events that can cost sales in the short run and damage customer satisfaction in the long run.

Marketing Intermediaries

- Marketing Intermediaries: Firms that help the company to promote, sell, and distribute its goods to final buyers, they include resellers, physical distribution firms, marketing services agencies, and financial intermediaries.

- Reseller à are distribution channel forms that help the company find customers or make sales to them.

- Physical Distribution Firmsà help the company to stock and move goods from their points or origin to their destination. Working with warehouse and transportation firms, a company must determine the best way to store and ship goods, balancing such factors as cost, delivery, speed and safety.

- Marketing Services agenciesà are marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right market.

- Financial Intermediaries à include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.

Customer

- The company needs to study its customer market closely.

- 5 Types of customer market:

1. Consumer Market: consist of individuals and households that buy goods and services for personal consumption.

2. Business Market: buy goods and services for further processing or for use in their production process

3. Reseller Market: buys goods and services and resells it to make a profit.

4. Government Market: are composed of government agencies that buy goods and services in order to produce public services or transfer the goods and services to others who need them.

5. International Market: Consists of buyers in other countries, including consumers, producers, resellers and governments.

Competitors

Publics

- Publics: Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectivities.

- Seven types of publics (see page 79 & 80):

1. Financial publics

2. Media publics

3. Government publics

4. Citizen-action publics

5. Local publics

6. General publics

7. Internal publics

The Company’s Microenvironment

Demographic Environment

- Demography: The study of human population in terms of size, density, location, age, sex, race, occupation, and other statistics.

Changing Age Structure of the Canadian Population

- Baby Boom: The major increase in the annual birth rate following WWII and lasting until the early 1960s. The "baby boomers," now moving into middle age, are a prime target for marketer.

The Changing family (87)

Geographic Shifts in population (87)

A better educated and more white-collar population (89)

Increasing Diversity (89)

Economics Environment

- Economic Environment: Factors that affect consumer buying power and spending patterns.

- Subsistence economies- they consume most of their own agricultural and industrial output.

- Industrial economies – which constitute rich markets for many different kinds of goods.

Chang in Income

- Marketers pay attention to income distribution as well as average income.

Changing Consumer Spending Patterns

- Engel’s Law: Difference noted over a century ago by Earnst Engel in how people shift their spending across food, housing, transportation, health care, and other goods and services categories as family income rises.

Natural Environment

- Natural Environment: Natural resources that are needed as inputs by marketers or that are affected by marketing activities.

Technological Environment

- Technological Environment: Forces that create new technological, creating new product and market opportunities.

Political Environment

- Political Environment: Consists of laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society.

Legislation Regulation Business

- Canada has many laws covering issues such as competition, fair trade practices, environment protection, product safety, truth in advertising packaging and labelling, price, and other important areas.

- North American Free Trade agreement (NAFTA) replaced the Free Trade Agreement (FTA) in August 1992. It governs free trade among Canada, United States, and Mexico. NAFTA is a historic document since it is the first trade agreement between two developed nation and a developing country.

- Business legislation has been enacted for various reasons. The first is to protect companies from each other. The second purpose of the government regulation is to protect consumers from unfair business practices. The third purpose of the government regulation is to protect the interests of society against unrestrained business behaviour.

Cultural Environment

- Cultural Environment: Institutions and other forces that affect society’s basic value, perception, preference, and behaviour.

- The following cultural characteristics can affect marketing decision-making:

Persistence of cultural Values

- Core beliefs and valuesà are passed by parents to children and are reinforced by schools, churches, business and government.

- Secondary Beliefs and value à are more open to change. Believing in marriage is a core belief; believing that people should get married early in life is a secondary belief.

Shifts in Secondary Cultural Values

- The major cultural values of a society are expressed in people’s views of themselves and others, as well as in their views of organizations, society, nature and the universe.

People’s Views of themselves

- People use products, brands, and services as a means of self-expression, and they buy products and service that match their views of themselves.

People’s View of others

- This suggests a bright future for the products and services that serve basic needs rather that those relaying on glitz and hype. It also suggests a greater demand for "social support" products and services that improve direct communication between people, such as health clubs and family vacations.

People’s View of Organizations

- They need to review their advertising communications to ensure that their messages are honest. They also need to review their various activities to make sure that they are perceived to be "good corporate citizens".

People’s View of society

- Patriots à nationalist, pro country

- Reformers à who want to change it

- Malcontent à who want to leave it

People’s View of Nature

People’s View of the universe

- People vary in their beliefs about the origin of the universe and their place in it.

- 1980’s people measured success in terms of career achievements, wealth, and worldly possessions.

- 1990’s success was measured with achievements such as a happy family life and service to one’s community replacing money as the measure if worth.

Responding to the Marketing environment

- Many companies view the marketing environment as an "uncontrollable" element to which they must adapt. They accept the market place and do not change it. They analyse the environmental forces and design strategies that will help the company avoids the threats and take advantage of the opportunities the environment.

- Environmental management perspective: A management perspective in which the firm takes aggressive actions to affect the publics and forces in its marketing environment rather than simply watching and reacting to it.

Chapter 4- Marketing Research and Information System

The Marketing Information System

- Marketing Information System (MIS): People, equipment, and procedure to gather, sort, analyse, evaluate, and distribute needed, timely, and accurate information to marketing decision-makers.

- First, it interact with these managers to assess information needs. Next, it develops needed information from internal company records, marketing intelligence activities, and marketing research. Information analysis processes the information to make it more useful. Finally the MIS distributes information to managers in the right form at the right time to help them make better marketing decision.

Assessing Information Needs

- Managers do not always need all the information they ask for, they may not ask for all they really need. The MIS cannot always supply all the information managers request.

Developing Information

Internal Data

- Internal database: Information gathered from sources within the company that can be evaluate marketing performance and to detect marketing problems and opportunities.

- Information in the database can come from many sources. The accounting department prepares financial statements and keeps detailed records of sales, costs, and cash flow. Manufacturing reports on production schedules, shipments, and inventories. The sales force reports on reseller reactions and competitor activities. The marketing department maintains a database of customer demographics, psychographics, and buying behaviour. The customer service department provides information on customer satisfaction or service problems.

Marketing Intelligence

- Marketing Intelligence: The systematic collection and analysis of publicity available information about competitors and development in the marketing department.

- Marketing Intelligence can be gathered from many source; can be collected from the company’s own personnel-executives, engineer and scientists, purchasing agents, and the sales force.

- For a fee companies can subscribe to online database or information search services.

Marketing Research

- Marketing Research: The systematic design, collection, analysis, and reporting of data and finding relevant to a specific marketing situation facing an organization.

Information Analysis

- Information gathered by the company’s marketing intelligence and marketing research systems often require more analysis, and sometimes managers may need help applying the information to their marketing problems and decisions. This may include advanced statistical analysis to learn more about both the relationships within a set of data and their statistical reliability.

Distribution Information

- The information gathered through marketing intelligence and marketing research must be distributed to the right marketing managers at the right time.

- With recent advances in computers, software, and telecommunication, most companies are decentralizing their marketing information systems. In many companies, marketing managers have direct access to the information network through personal computers and other means.

- Such systems offer exciting prospects. They allow the managers to get the information they need directly and quickly and to tailor it to their unique needs.

The Marketing Research Process

*Defining the problems and research objectives à Developing the research plan and collecting information à Implementing the research plan-collecting and analysing the data à Interpretation and reporting the findings

- Marketing managers and researcher must work closely to define the problem carefully and they must agree on the research objectives.

- Managers must know enough about marketing research to help in planning and interpreting research results. If they know little about marketing research they may obtain wrong information.

- Experience marketing researchers who understand the manager’s problem also should be involved at this stage. The researcher must be able to help the manager define the problem and suggest ways that research can help the manager make better decisions.

- Defining the problem and research objectives is often the hardest step in the research process.

- After the problem has been defined carefully, the manager and researcher must set research objectives. Can 1-3 types of objectives. Exploratory research, descriptive research and casual research.

- Exploratory Research: Marketing research to gather preliminary information that will help to better define problems and suggest hypotheses.

- Descriptive Research: Marketing research to better describe marketing problems, situations, or markets, such as the market potential for a product or the demographics and attitudes of customers.

- Casual Research: Marketing research to test hypothesis about cause-and effect relationship.

Developing the research plan

- Determining the information needed, developing a plan for gathering it efficiently, and presenting the plan to marketing management.

Gathering Secondary Information

- To meet the manager’s information needs, the researcher can gather secondary data, primary data, or both.

- Secondary data: Information that already exists somewhere, having been collected for another purpose before.

- Primary data: Information collected for the specific purpose at hand.

- Researchers usually start be gathering secondary data.

- Commercial data source à companies can buy reports from outside suppliers.

- Table 4-2 (page 125) Sources of Secondary data

- Online database and Internet data sources à Marketing research can conduct their own search of secondary data sources. A resent survey of marketing researchers found that 81 percent uses such online services for conducting research.

- Online database: A compilation of marketing information that can be accessed online.

Advantages and Disadvantages of Secondary Data

- Secondary data can usually be obtained more quickly and at a lower cost than primary data.

- A study to collect primary information might take weeks or months to complete and cost thousands of dollars. Secondary sources sometimes provide data that an individual company cannot collect on its own-information that either is not directly available or would be too expensive to collect.

- Secondary data can also present problems. The needed information may not exist-researcher can rarely obtain all the data they need for secondary sources.

- The researcher must evaluate secondary information carefully to ensure that it is relevant (fits research project needs), accurate (reliably collected and reported), current (up-to-date enough for current decisions), and impartial (objectively collected and reported)

Planning Primary Data Collection

- Primary data to assure that it will be relevant, accurate, current, and unbiased.

Research Approaches

- Observational research: The gathering of primary data by observing relevant people, actions, and situation.

- Observational research can be used to obtain information that people unwilling or unable to provide. Some things can not be observed such as feelings, attitudes, and motives, or private behaviour.

- Table 4-3 Planning Primary Data Collections (127)

- Checkout scanners in retail stores record consumer purchases in detail. Consumer products companies and retailers use scanner information to assess and improve product sales and store performances.

- Single Source data systems: Electronic monitoring systems that link consumers’ exposure to television advertising and promotion (measured using television meters) with what they buy in stores (measured using store checkout scanners)

- Survey Research: The gathering of primary data by asking people questions about their knowledge attitudes, preference, and buying behaviour.

- Sometimes people are unable to answer survey questions because they cannot remember or have never thought about what they do and why. Or people may be unwilling to respond to unknown interviewers or talk about things they consider private. Respondents might answer survey questions when they do not know the answer in order to appear smarter or more informed.

- Experimental research: The gathering of primary data by selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking differences in-group responses.

Contact Methods

- Information can be collected by mail, telephone, or personal interview.

- Table 4-4 Strengths and Weaknesses of three Contacts Methods (131)

- Personal Interviewing takes two forms- individual and group interviewing. Individual interviewing involves talking with people in their homes or offices, on the street, or in shopping malls. Such interviewing is flexible.

- Group Interviewing consists of 6-10 people gather for a few hours with a trained moderator to discuss a product, service or organization.

- Focus group interviewing: personal interviewing that consist of inviting six to 10 people to gather for a few hours with a trained interviewer to discuss a product, service, or organization. The interviewer "focuses" the group discussion on important issues. The comments are recorded through written notes.

- Focus group interviewing has become one of the major marketing research tools for gathering insight into consumer thoughts and feelings. However, focus group studies usually use small sample sizes to keep time and costs down, and it may be hard to generalize from the results.

- Computer Interviewing in which respondents sit down at a computer, read questions from a screen, and type their own answer into the computer.

Sampling Plans

- Marketing researchers usually draw conclusions about large groups of consumers by studying a small sample of the total consumer population. A sample is a segment of the population selected to represent the population as a whole.

- Designing the sample requires 3 decisions: 1. Who is to be surveyed (what the sampling unit)? 2. How many people should be surveyed (What’s the sample size)? 3. How should the people in the sample be chosen (what sampling procedure)?

- Using probability samples each population member has a known chance of being included in the sample and researchers can calculate confidence limits for sampling errors. But when probability sampling costs too much or takes too much time, marketing researchers often take non-probability samples, even though their sampling error cannot be measured.

Research Instruments

- In collecting primary data, marketing researchers have a choice of 2 main research instruments – the questionnaire and the mechanical devices.

- The questionnaire is by far the most common device. Questionnaires must be developed carefully and testes before they can used on a large scale. When developing a questionnaire the market researchers must first decide what to ask.

- Closed-end questions à include all possible answers, and subjects make choices among them.

- Opened-end questions à Questions allowing respondent to answer in their own words.

- Researcher should also use care in wording and ordering questions. They should use simple direct, unbiased wording.

- Table 4-7 Types of Questions (136)

Presenting the Research plan

- The proposal should cover the management problems addressed and the research objectives, the information to be obtained, the sources of secondary information or methods for collecting primary data, and the way the results will help management decision-making. It should also include, research cost, a written research plan, and they should all agree on why and how the research will be conducted.

Implementing the Research plan

- This involves collecting, processing, and analysing the information. Data collection can be carried out by the company’s marketing research staff or by outside firm. The data collection phase of the marketing research process is generally the most expensive and the most subject to error.

Interpreting and reporting the findings

- The research must now interpret the finding, draw conclusions, and report them to management. The researcher should not try to overwhelm managers with numbers and fancy statistical techniques. Rather, the researcher should present important finding that are useful in the major decisions faced by management. In many cases findings can be interpreted in different ways, and discussions between researchers and managers will help identify the best interpretations.

- Interpretations are an important phase of the marketing process. The best research is meaningless if the manager blindly accepts wrong interpretations from the research. Managers may have biased interpretations-they tend to accept research results that show what they expected and to reject those that they did not expect or hope for.

Other Marketing Research Considerations

Marketing research in small business and non-profit organizations

- Managers of small business and non-profit organization can obtain good marketing information simply by observing things around them.

- Managers can conduct informal survey using small convenience samples.

- Managers can also conduct their own sample experiments.

- Small organizations can obtain most of the secondary data available to large businesses. Many associations, local media, chambers of commerce, and government agencies provide special help to small organizations.

International Marketing research

- International marketing research can pose some unique challenges, For example they ma find it difficult simply to develop good samples.

- Difference in culture from country to country cause additional problems for international researchers. Languages is the most obvious culprit.

- Responses then must be translated back into the original language for analysis and interpretations. This adds to research costs and increase in the risk of error.

- Transplantation a questionnaire from one language to another is anything but easy. Many idioms, phrase, and statements mean different things in different cultures.

- Consumers in different countries also vary in their attitudes towards marketing research.

Chapter 5 – Consumer Markets and Consumer Buyer Behaviour

- Consumers buying behaviour: The buying behaviour of final consumers-individuals and households who buy goods and services for personal consumption.

- All of these final consumers combined comprise the consumer market.

- Consumer Market: All the individuals and households who buy or acquire goods and services for potential consumption.

Model of Consumer Behaviour

- The central questions for marketers are: How do consumers respond to various marketing efforts the company might use.

Characteristics affecting consumer behaviour

- Consumer purchases are influence strongly by cultural, social, personal, and psychological characterises.

Cultural Factors

- Culture: The set of basic values, perception, wants and behaviours learned by a member of a society from family and other important institutions.

- Culture is the most basic cause of a person’s wants and behaviour. Human behaviour is largely learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviours from the family and other important institutions.

- International marketers must understand the culture in each international market and adapt their marketing strategies accordingly.

SUBCULTURE

- Subculture: A group of people with shared value system based on common life experience and situations.

- Subculture includes nationalities, religions, racial groups, and geographic regions.

(1) Native Canadians

(2) Canada’s Ethnic Consumers

(3) Mature Consumers

(4) Internet Users

- Internet Users à Internet users are powerful and in control. The consumer s one who choose to access a web site and marketers must adjust to the idea that the Net is a means of two-way communication between a consumer and a vendor, not the one-way street that media advertising represents, IN other words, "They’re not just listening to what the corporation wants to sell them, they’re choosing the information that appeals to them.

SOCIAL CLASS

- Social classes are society’s relatively permanent and order division whose members share similar values, interest, and behaviours.

- Social Class: Relatively permanent and ordered division in a society whose members share similar values, interests, and behaviours.

- Social class is not determined by a single form, such as income, but measured as a combination of occupation, income, education, wealth and other variables.

- Table 5-2 Characterises of Seven Major North American Social Classes (page 162)

- People can move to a higher social class or drop into a lower one.

Social factors

GROUPS

- Groups: Two or more people whom interact to accomplish individual or mutual goals.

- Groups that have a direct influence and to which a person belongs are called à Membership groups

- Primary Groups à With whom there is regular but informal interaction – such as friends, family, neighbours, and co-workers.

- Secondary Groups à, which are more formal and that, has less regular interactions. These include organizations, such as religious groups, professional associations, and trade unions.

- Reference Groups à serve as a direct (face-to-face) or indirect points of comparison or reference informing a person’s attitudes or behaviour. People often are influence be reference groups to which they do not belong.

- Opinion Leaders: People within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert, influence on others.

- Opinion Leaders are found at all level of society, and one person may be an opinion leader in certain products areas and an opinion follower in others. Marketers try to identify opinion leaders for their products and direct marketing effort towards them.

FAMILY

- Family members can strongly influence buyer’s behaviours. The family is the most important consumer buying organization in society.

- In Canada and the United States, the wife is traditionally has been the main purchasing agent for the family, especially in the area of food, households, products, and clothing.

- In the case of expensive products and services, husbands and wives more often make joint decisions.

ROLES AND STATUS

- A person belongs to many groups-family, clubs, and organizations. The person’s position in each group can be defined in terms of both roles and status. A role consists of the activities that people are expected to perform according to the persons around them. Each role carries a status reflecting the general esteem given to it by the society.

Personal Factors

AGE AND LIFE CYCLE STAGE

- Taste in foods, clothes, furniture, and recreation are often age-related.

- Table 5-3 Life Cycle Stages (page 165)

OCCUPATION

- A person’s occupation affects the goods and services that he or she buys.

ECONOMIC SITUATION

- A person’s economic situation will affect product choice. Marketers of income sensitive goods watch trends in personal income, saving, and interest rates. If economic indicators point to a rescission, marketers can take steps to redesign, reposition, and reprice their products.

LIFESTYLE

- Lifestyle: A person’s pattern of living as expressed in his or her activities, interests, and opinion.

- Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves measuring consumers’ major AIO dimensions activities (work, hobbies, shopping, sports, social events), interests (food, fashions, family, recreation), and opinions (about themselves, social issues, business products). Lifestyles capture something more than the person’s social class or personality; it profiles a person’s whole pattern of acting and interacting in the world.

- Psychographics: The technique of measuring lifestyles and developing lifestyle classification; it involves measuring the major AIO dimension (activities, interest, opinions)

- VALS; Classifies people according to how they spend their time and money. It divides consumers into eight groups on two major dimensions.

- Self Orientation Group includes principle-oriented consumers à who buy based on their views on the world. Status Orientated buyers à who base their purchase on the actions and opinions of others. Action-oriented buyers à who are driven by their desire for activity, variety, and risk-taking. Consumers within each orientation are further classified into those with abundant resources and those with minimal resources.

PERSONALITY AND SELF CONCEPT

- Personality: A person’s distinguished psychological characteristics that led to relatively consistent and lasting response to his or her own environment.

Psychological Factors

- A person’s buying choices are further influenced by four major psychological factors: motivations, perception, learning, and beliefs and attitudes.

MOTIVATION

- Biological, arising from state of tension such as hunger, thirst, or discomfort.

- Psychological, arising from the need for recognition, esteem, or belonging. Most of these needs will not be strong enough to motivate the person to act at any given them.

- Motive: A need that is sufficiency pressing to drive the person to seek satisfaction of the need.

- Psychologists have developed theories of human motivation. Sigmund Freud and Abraham Maslow

- Freud’s theory of motivation: Freud assumes that people are largely unconscious about the real psychological forces shaping their behaviour.

- Abraham Maslow sought to explain why people are driven by particular needs at particular times. In order of importance, they are psychological needs, safety needs, social needs, esteem needs, and self-actualization needs. A person tries to satisfy the most important first. When that need is satisfied, it will stop being a motivator and the person will then try to satisfy the nest most important need.

PERCEPTION

- A motivated person is ready to act. How the person is influence by his or her perception of the situation.

- Perception: Is the process by which people select, organize and interpret information to form a meaningful picture of the world.

- People can form different perceptions of the same stimulus because of three perceptual processes: selective attention, selective distortion, and selective retention. Selective Attention à The tendency for people to screen out most of the information to which they are exposed- means that marketers must work especially hard to attract the consumer’s attention. Their message will be lost on most people who are not in the market for the product. Moreover, even people who are in the market may not notice the message unless it stands out from the surrounding sea of other ads. Selective distortion à describes the tendency of people to interpret information in a way that will support what they already believe. Selective distortion means that marketers must try to understand consumer’s perspectives and how these will affect interpretations of advertising and sales information. People will also forget what they learned they tend to retain information that supports their attitudes and beliefs. Because of Selective retention à advertisers try to frame messages in ways that are consistent with people’s existing beliefs. Example "Jen is likely to remember goods points made about the Harley and to forget good points made about competing motorcycles.

LEARNING

- Learning occurs through the interplay of drives, stimuli, cues, responses and reinforcement.

- Learning: Changes in an individual’s behaviour arising from experience.

- A drive is a strong internal stimulus that calls for action. Her drive becomes and motive when it is directed toward a particular stimulus object.

- A cue are minor stimuli that determine when, where, and how the person response.

BELIEFS AND ATTITUTEDS

- Beliefs: A descriptive thought that a person holds about something.

- This belief may be based on real knowledge, opinion, or faith and may or may not carry an emotional charge.

- Attitudes: A person’s consistently favourable or unfavourable evaluations, feeling, and tendencies towards an object or idea.

- Attitudes put people into a frame of mind of liking or disliking things, of moving towards or away from them. Attitudes are difficult to change. A person’s attitudes fit into a pattern, and to change one attitude may require difficult adjustments in many others. Thus, company should usually try to fit its products into an existing attitudes rather than attempt to change attitudes.

Consumer Buying Roles

- People might play any of several roles in buying decision:

- Initiator à The person who first suggests or thinks of the idea of buying a particular product or service.

- Influencer à A person whose views or advice influences the buying decision

- Decider à The person who ultimately makes a buying decision or any part of it- whether to buy, what to buy, how to buy, and where to buy

- Buyer à The person who makes the actual purchase.

- User à The person who consumes or uses a product or service.

Complex Buying Behaviour

- Complex Buying Behaviour: Consumers buying behaviour in situations characterized by high consumer involvement in a purchase and significant perceived difference among brands.

- Marketers need to differentiate their brand’s feature, perhaps by describing the brand’s benefits using print media with long copy. They must motivate store salespeople and the buyer’s acquaintances to influence the final brand choice.

Dissonance- Reducing Buying Behaviour

- Dissonance- reducing buying behaviour: Consumer buying behaviour in situations characterized by high involvement but few perceived differences among brands.

- Dissonance-reducing buying behaviour occurs when consumers are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands.

- After the purchase, consumers might experience post-purchase dissonance (after sales discomfort) when they notice certain disadvantages of the purchase carpet brand or hear favourable things about brands not purchased.

Habitual Buying Behaviour

- Habitual Buying Behaviour: Consumer buying behaviour in characterized by low consumer involvement and few significant perceived brand differences.

- Consumers have little involvement in this product category-they simply go to the store and reach for a brand. Example; salt. If they keep reaching for the same brand, it is out of habit rather than strong brand loyalty.

- Consumers do not form strong attitudes towards a brand; they select the brand because it is familiar.

Variety-Seeking Buying Behaviour

- Variety-seeking buying behaviour: Consumer buying behaviour in situations characterized by low consumer involvement but significant perceived brand differences. Brand switching occurs for the sake of variety rather than due to dissatisfaction.

The Buyer Decision Process

- The stages that buyer pass through to reach a buying decision. There are 5 stages

Need recognition à Information Search à Evaluation of alternatives à Purchase decision à Post-purchase behaviour

- Consumers often skip or reverse some of these stages.

Stage (1) Need Recognition

- Need Recognition: The first stage of the buyer decision process in which the consumer recognizes a problem or need.

- When the buyer recognizing a problem or need. The buyer actual senses a difference between his or her actual state and some desired stat. The need can be triggered by internal stimuli.

Stage (2) Information Search

- Information Search: The stage of the buyer decision process in which the consumer is aroused to search for more information; the consumer may simply have heightened attention or may go into active information search.

- An aroused customer may or may not search or more information. If the consumer’s drive is strong and a satisfying product is near at hand, the consumer is likely to buy it. If not, the consumer may store the need in memory or undertake an information search related to the need.

- Heightened attention à Consumer becomes more receptive to information about the product. Consumer pays attention to ads.

- Active information search à in which consumer looks for reading materials, surfs the net, phone friends, and gather information in other ways.

- Consumers can obtain information from any of these sources:

(-) Personal Sources: family, friends, neighbours, acquaintances

(-) Commercial sources: advertising, salespeople, dealers, packaging, and displays

(-) Public source: mass media, consumer-rating organizations

(-) Experiential sources: handling, examining, using the product.

Stage (3) Evaluation of alternatives

- Alternative evaluation: The stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set. Alternative evaluation-that is, how the consumer processes information to arrive at brand choice.

- Brand image: The set of beliefs that consumers hold about a particular brand.

- In some cases, the consumer use careful calculations and logical thinking. At other times, the same consumers do little or no evaluating; instead they buy on impulse and relay on intuition.

Stage (4) Purchase Decision

- Purchase decision: The stage of the buyer decision process in which the consumer actually buys the product.

- Consumer’s purchase decision will be to buy the most preferred brand, but two factors can come between the purchase intention and the purchase decision. 1. Attitudes of others à Jennifer’s friends ride Honda motorcycles, chances of her buying a Harley will be reduced. 2. Unexpected situation factors à The consumer may form a purchase intention based on factors such as expected income, expected price, and expected product benefits. However, unexpected events may change the purchase intention.

Stage (5) Post-purchase behaviour

- Post-purchase behaviour : The stage of the buyer decision process in which consumers take further action after purchase based on their satisfaction dissatisfaction.

- What determines whether the buyer is satisfied or dissatisfied with purchase? The answer lies in the relationship between the consumer’s expectation and the product perceived performance. If the product falls short of expectation, the consumer is satisfied; if it exceeds expectations, the consumer is delighted.

- Cognitive dissonance: Buyer discomfort caused by post-purchase conflict. (181) However every purchase involves compromise. Thus consumers feel at least some post-purchase dissonance for every purchase.

- Why is it important to satisfy the customer? Companies’ sales come from two places new customers and retained customers. It usually costs more to attract new customers than to retain current ones, and the best way to retain current customers is to keep them satisfied.

The buyer decision process for new products

- New Product: A good, service, or idea that a perceived by some potential customer as new.

- How consumers learn about products for the first time and make decisions on whether to adapt them.

- Adoption Process: The mental process through which an individual passes from first hearing about an innovation to final adoption.

Stages in the adoption process

- Awareness à The customer becomes aware of the new product, but lacks information about it.

- Interest à The customer seeks information about the new product.

- Evaluation à The customer considers whether trying the new product makes sense.

- Trial à The customer tries the new product on a small scale to improve his or her estimate of its value.

Individual differences in innovations

(The 5-adopter groups)à Innovators are venturesome they try new ideas at some risk. Early adopters are guided by respect-they are opinion leaders in their communities and adopt new ideas early but carefully. The early deliberate-although they rarely are leaders, they adopt new ideas before the average person. The late majority are sceptical-they adapt an innovation only after most people have tried it. Finally laggards are tradition bound-they re suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

Influence of product characteristics on rate of adoption

- Five characteristics are especially important in influencing an innovation’s rate of adoption

1. Relative advantage à the degree to which innovation appears superior to existing products.

2. Compatibility à The degree to which the innovation fits the value and experience of potential consumers.

3. Complexity à The degree to which the innovation is difficult to understand or use.

4. Divisibility à The degree to which the innovation may be tried on a limited basis.

5. Communicabilityà The degree to which the results of using the innovation can be observed or described to others.

Chapter 6 – Business Markets and Business Buyer Behaviour

- Business Markets: All the organizations that buy goods and services to use in the production of other products and services that are sold, rented, or supplied to others. It also includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.

- Business Buying Behaviour: The decision-making process by which business buyers establish the need for purchase products and services and identify, evaluate, and choose among alternative brands and suppliers.

Business Market

Characteristics of Business Markets

- Table 6-1 Characteristics of Business Market (200)

Market Structure and Demand

- The business market typically deals with far fewer but larger buyers than he consumer marketer does.

- Business markets are also more geographically concentrated.

- Derived demand: Business demand that ultimately comes from (derives from) the demand for consumer goods.

- Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes, especially in the short run.

- Business markets have more fluctuating demand. The demand for many business goods and services tend to change more-and more quickly then the demand for consumer goods and services does.

Nature of buying Unit

- Compared with consumer purchases, a business purchase usually involves more buyers and a more professional purchasing effort.

Types of Decision and Decision Process

A model of Business Buyer behaviour

Business Buyer Behaviour

Major types of Buying Situations

- Straight rebuy: A business buying situation in which the buyer routinely reorders something without any modification.

- They already did business and rebuying the same product.

- Modified rebuy: A business buying situation in which the buyer wants to modify product specification, price, terms, or suppliers.

- New Task: A business buying situation in which the buyer purchases a product or service for the first time.

- The greater the cost of risk, the larger the number of decision participants and the greater their efforts to collect information will be.

- The buyer makes the fewest decision in the straight rebuy and the most in the new task decision. In the new task situation, the buyer must decide on product specifications, suppliers, price limit, payment terms, order quantities, delivery times, and service suppliers.

- System buying: Buying a package solution to a problem and without all the separate decision involved.

- System selling is a two-step process. First the supplier sells a group of interlocking products. Second, the supplier sells system of production, inventory control, distribution, and other services to meet the buyer’s need for a smooth-running operation.

Participants in the Business Buying Process

- The decision-making unit of a buying organization is called à buying centre

- Buying centre: All the individuals and units that participate in the business buying decision process.

- Users: Members of all the organization who will use the product or service: users often initiate the buying proposal and help define product specification.

- Influencers: People in an organization’s buying centre who affect the buying decision, they often help define specifications and also provide information for evaluating alternatives.

- Buyers: People who make the actual purchase.

- Deciders: People in the organization’s buying centre who have formal or informal power to select or approve the final supplier.

- Gatekeepers: People in an organization’s buying centre who control the flow of information to others.

Major Influence on business Buyers

- Some marketers assume that the major influences are economic. They think buyers will favour the supplier who offers the lowest price, or the best product, or the most service.

Environmental Factors

- Business buyers are influenced heavily by factors in the current and expected economic environment, such as the level of primary demand, the economic outlook, and the cost of money. As economic uncertainty rises, business buyers cut back on new investments, and attempts to reduce their inventories.

- An increasingly important environmental factor is shortage in the key materials. Many companies now are more willing to buy and hold large inventories of scare materials to ensure adequate supply. Business buyers also are affected by technological, political, and competitive development in the environment. Culture and customs can strongly influence business buyer reactions to the marketer’s behaviour and strategies, especially in the international marketing environment.

Organizational Factors

- Upgrade purchasing à Today competitive pressure have led many companies to transform their old-fashioned "purchasing departments," with an emphasis on buying at the lowest cost, to "procurement departments," with a mission to seek the best value from fewer and better suppliers.

- Centralized purchasing à gives the company more purchasing influence, which can produce substantial saving. For the business market, this means dealing with fewer high-level. Instead of using regional sales force to sell to a large buyer’s separate plants, today seller may use, national account sales force.

- Businesses around the world has adopted several innovative manufacturing concepts, such as just-in-time production (JIT), value analysis, total quality management, and flexible manufacturing. Just-in-time means that production materials arrive at the customers factory exactly when needed for production, rather than being stored by the customer until used. It calls for close coordination between the production schedule of supplier and customer so that neither must carry much inventory.

The Business Buying process

1. Problem Recognition: The first stage of the business buying process in which someone in the company recognizes a problem or need that can e met by acquiring a good or service.

- The buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a better product or a lower price.

- Table 6-2 Major Stages of the business buying process in relation to major buying situations.

2. General Need Description: The stage in the business process in which the company describes the general characteristics and quantity of a needed item.

- For complex items the buyer may have to work with others-engineers, users, consultants-to define the item. The team may want to rank the importance of reliability, durability, price and other attributes desired in the item.

3. Product Specification: The stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item.

- Value analysis: An approach t cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.

4. Supplier Search: The stage of the business buying process in which the buyer tries to find the best vendor.

- The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. The newer the buying task, and the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers.

5. Proposal Solicitation: The stage of the business buying process in which the buyer invites qualified suppliers to submit proposals. In response some suppliers send catalogue, salesperson. However when the item is complex or expensive the buyer will usually require detailed written proposals or formal presentation from each potential supplier.

6. Supplier Selection: The stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers.

- The member of the buying centre now reviews the proposal and select supplier or suppliers.

- Another important factor includes repair and servicing capabilities, technical aid, and advice, geographic location, performance history and reputation.

- Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time.

7. Order-Routine Specifications: the stage in the business buying process in which the buyer writes the final order with the chosen supplier(s), listing the technical, quantity needed, expected time of delivery, return policies, and warranties.

8. Performance Review: The stage of the business buying process in which the buyer rates its satisfaction with suppliers, deciding whether to continue, modify, or drop them.

- The buyer reviews supplier’s performance. The buyer may contact users and ask them to rate their satisfaction.

Institutional and Government Markets

Institutional Markets

- Institution Markets: Schools, hospital, nursing homes, prisons, and other institutions that provide goods and services to people in their care.

Government Markets

- Government Markets: Government units-federal, provincial, and municipal- that purchase or rent goods and services for carrying out the main functions of government.

- The Department of public works and Government Services Canada helps to centralize the buying of commonly used items in the civilian section.

- Federal military buying is carried out by the Department of National Defence

- Government organizations typically require suppliers to submit bids, and normally they award the contract to the lowest bidder.

- Government Organizations tend to favour domestic suppliers over foreign suppliers.

- Because the Government spending decisions are subject to public review government organizations require considerable paperwork from suppliers, who often complain, about excessive paperwork, bureaucracy, regulations, decision-making delays, and frequent shifts in procurement personnel.

- Many companies that sell to the government have not been marketing-orientated for a number of reasons. Total government spending is determined by elected officials rather than by marketing effort to develop this market. Government buying has emphasized price, making suppliers invest their effort in technology to bring down costs. When the product’s characteristics are specified carefully, product differentiation is not a marketing factor. Nor do advertising or personal selling matter much in winning bids on an open bid basis.

Chapter 7 – Market Segmentation, Targeting, and Positioning for competitive advantage

Market

- Today most companies are moving away from mass marketing. Instead, they practice target marketing-identifying market segments, selecting one or more of them, and developing products and marketing mixes tailored to each.

- Market Segmentation: deciding a market up into distinct groups of buyers with different needs characterises, or behaviours who might require separate products or marketing mixes. The company identifies different ways to segment the market and develop profiles of the resulting market segments.

- Market targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to serve.

- Market positioning: Setting the competitive positioning for the product and creating a detailed marketing mix.

Market Segmentation

Levels of Market Cementation

Mass Market

- Mass marketing – mass production, mass distributing, and mass promoting the same product in the same way to all customers.

- The traditional argument for mass marketing is that it creates the largest potential market, which leads to the lowest cost, which in turn can translate into either lower prices or higher margins.

Segment Marketing

- Segment Market: Marketing that recognizes that buyers differ in their needs, perception, and buying behaviour.

- The company tries to isolate broad segments that comprise a market and adapts its offers to more closely match the needs of one or more segments.

Niche Marketing

- Niche Marketing: Marketing that focuses on subgroups within the large identifiable group in the market.

Micromarketing

- Micromarketing: The practice of tailoring products and marketing programs to suit the tastes of specific individuals or locations.

- Micromarketing include local marketing and individual marketing.

- Local Marketing: The practice of tailoring brands and promotions to the needs and wants of local customer groups.

- Draw backs of local marketing, it can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistical problems as companies try to meet the varied requirements of different regional and local markets. And brands overall image might be diluted if the product and message vary in different stores.

- Individual Marketing: The practice of tailoring products and marketing programs to the needs and preferences of individual customers.

Bases for Segmenting Consumer Markets

Geographic Segmentation

- Geographic segmentation: Dividing a market into different geographical units such as nations, provinces, regions, countries, cities or neighbourhoods.

Demographic Segmentation

- Demographic segmentation: Dividing the market into groups based on demographics variable such as sex, age, family size, family life cycle, income, occupation, education, religion, race, and nationality.

- Demographic factors are the most popular bases for segmenting customer groups. One reason is that customer needs, wants and usage rates often vary closely with demographic variables. Another s that demographic variables are easier to measure than most other types of variables.

- Table 7-1 Major Segmentation Variables for customer markets (231)

Age and life cycle

- Age and life cycle: Dividing the market into different age and life cycle groups.

- Customer needs and want change with age.

Gender

- Gender segmentation: Dividing a market into different groups based on sex.

Income

- Income Segmentation: Dividing a market into different income groups.

Psychographics Segmentation

- Psychographics segmentation: Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

Behaviour Segmentation

- Behaviour Segmentation: Dividing marketing into groups based on customer knowledge, attitudes, use, or response to a product.

- Occasion Segmentation: Dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use their purchase item.

Benefit Sought

- Benefit Segmentation: Dividing the market into groups according to the different benefits that customers seek from the product.

User Status

- Markets can be segmented into groups of non-user, ex-users, potential users, first-time users, and regular users of a product.

Usage rate

- Marketers also can be segmented into light, medium, and heavy user groups. Heavy users are often a small percentage of the market, but account for a high percentage of total buying.

Loyalty Status

- A market can be segmented by customer loyalty. Some customers are completely loyal-they buy one brand all the time. Others are somewhat loyal- they are loyal to 2 or 3 brands of a given product or favour one brand while sometimes buying others. Still other buyers show no loyalty to any brand. They either want something different each time they buy or they buy whatever is on sale.

Segmenting Business Markets

- Table 7-3 Major Segmentation Variables for Business Markets

- Within the chosen industry, a company can further segment by customer size or geographic location.

- Within a target industry and customer size, the company can segment by purchase approaches and criteria.

- Programmed buyers à they buy the products as a routine purchase, usually pay full price, and accept below-average service.

- Relationship buyers à these buyers regard packaging products as moderately important and are knowledgeable about competitors’ offering. They prefer to buy from a retailer as long as its price is reasonably competitive. They receive a small discount and a modest amount of service.

- Transaction buyers à these buyers view the product as very important to their operations. They are price and service sensitive. They receive about a 10 percent discount and above-average service. They are knowledgeable about competitors offering and are ready to switch for a better price, even if it means losing some service.

- Burgin buyers à these buyers view the product as very important and demand the deepest discount and the highest service. They know the alternatives suppliers, bargain hard, and are ready to switch at the slightest dissatisfaction.

Segmenting International Markets

- Operating in many countries present new challenges. The different countries of the world, even those that are close together, can vary dramatically in their economic, cultural, and political composition.

- Companies can segment international markets using one or a combination of several variables. They can segment by geographic location, grouping countries by regions such as Western Europe, the Pacific Rim, the Middle East, or Africa.

- World markets can be segmented on the basis of economic factors. For example, countries might be grouped by population income, level, or by their overall level of economic development.

- Countries can be segmented by political and legal factors such as the type and stability of government, receptivity firms, monetary regulations, and the amount of bureaucracy. Such factors can play a crucial role in a company’s choice of which countries to enter and how. Cultural factors also can be used, grouping markets according to common language, religions, values, and attitudes, customs, and behavioural patterns.

- Intermarket Segmentation: Forming segments of customers who have similar needs and buying behaviour even though they are located in different countries.

Requirements for Effective Segmentation

- Market segmentation must have the following characteristics:

v Measurability; the size, purchasing power, and profiles of the segments can be measured. Certain segmentation variables are difficult to measure. For example, there are four million left handed people in Canada –which is 15 of the population. Yet few products are targeted towards left-handed segment.

v Accessibility; The market segments can be effectively reached and served. Suppose a food company finds that heavy users of its brands are new Canadians. Unless there are media in the language spoken by these individuals, they will be difficult to reach.

v Substantiality; The market segment are large or profitable enough to serve. A Segment should be the largest possible homogenous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for persons who height is less than 4 feet.

v Actionability; Effective programs can be designed for attracting and serving the segments. For example, although one small airline identifies seven-market segment, its staff was to small to develop separate marketing programs for each segment.

Market Targeting

Evaluating Market segments

- In evaluating different market segments, a firm must look at 3 factors: segment size and growth segment structural attractiveness, and company objectives and resources.

Segment Size and Growth

- The company must first collect and analyse data on current segment sales, growth rates and expected profitability for various segments.

Segment Structural Attractiveness

- A segment is less attractive if it already contains many strong and aggressive competitors.

- A segment may be less attractive if it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services.

Company Objectives

- If a segment fits the company’s objectives, the company then must decide whether it possesses the skills and resources needed to succeed in that segment. If the company lacks strength needed to compete successfully in a segment and cannot readily obtain them, it should not enter the segment. Even if the company possesses the required strengths, it needs to employ skills and resources superior to those of the competition in order to really win in a market segment. The company should enter segments only where it can offer superior value and gain advantages over competitors.

Selecting Market Segments

- Target Market: A set of buyers sharing common needs or characteristics that the company decides to serve.

Undifferentiated Marketing

- Undifferentiated marketing: A market coverage strategy in which a firm decides to ignore market segment differences and purse the whole market with one offer.

- The company designs a product and a marketing program that appeal to the largest number of buyers.

- Difficulties arise in developing a product or brand that will satisfy all consumers. Firms using undifferentiated marketing typically develop an offer aimed at the largest segments in the market.

Differentiated Marketing

- Using a differentiated marketing strategy a firm decides to target several markets and designs separate offers for each. General Motors tries to produce cars for every "purse, purpose, and personality." Nike offers athletic shoes for a dozen or more different sports.

- Differentiated marketing typically creates more total sales than does undifferentiated marketing, and growing number of firms have adopted this strategy.

- Differentiated marketing: A market coverage strategy in which a firm decides to target several market segments and designs separate offers for each.

Concentrated Marketing

- Concentrated Marketing: A market-coverage strategy in which a firm goes after a large share of one or a few submarkets.

- Concentrated marketing provides an excellent way for a small new business to get a foothold against larger, more resourceful competitors.

- Concentrated marketing involves higher than normal risks. The particular market segment can turn sour. Or larger competitors may decide to enter the same agents.

Choosing a market coverage strategy

- When the firm’s resources are limited, concentrated marketing makes the most sense. The best strategy also depends on the degree of product variability. Undifferentiated marketing is more suited for uniform products such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration. The product’s stage in the life cycle also must be considered. When a firm introduces a new product, it is practical to launch only one version, and undifferentiated marketing or concentrated marketing makes the most sense.

- Another factor is market variability. If most buyers have the same tastes, buy the same amount, and react the same way to marketing efforts, undifferentiated marketing is appropriate. Competitors’ marketing strategies are important. When competitors use segmentation, undifferentiated marketing can be suicidal. When competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing.

Positioning for competitive advantage

- Product Position: The way the product is defined by consumers on important attributes-the place the product occupies in consumer’s minds relative to competing products.

- Tide is positioned as a powerful, all-purpose family detergent

Positioning Strategies

- Marketers can follow several positioning strategies. They can position their products on specific product promotes performance. Products attributes- Honda Civic advertises its low price; BMW promotes performance. Products can be positioned on the needs they fill or the benefits they offer-Crest reduces cavities; Aim tastes good. Or product can be positioned according to usage occasions-in the summer, Gatorade can be positioned as a beverage for replacing athletes’ body fluids; in the winter; it can be positioned as the drink to use when doctor recommends plenty of liquids.

- A product can also be positioned directly against a competitors. For example, in its ads, VISA compares itself directly with American Express.

Choosing and Implementing A positioning strategy

Identifying Possible Competitive Advantages

- The key to winning and keeping customers is to understand their needs and buying processes better than competitors do and to deliver more value. To the extent that a company can position itself as providing superior value to selected target market, either by offering lower prices than competitors do or by providing more benefits to justify higher prices, it gains competitive advantage.

- Competitive advantage: An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justifies higher prices.

Product Differentiation

- Differentiation of physical products takes place along a continuum. At one extreme there are highly standardized products that allow little variation, chicken, steel, aspirin. At the other end is paper towels, creating a demand for higher quantity products.

Service Differentiation

- Installation also can differentiate one company from another. Companies can further distinguish between themselves through their repair services. Providing customer training service. Other companies offer free or paid consulting services-data, information systems, and advising services that buyers need.

Personnel Differentiation

- Companies can gain string competitive advantage through hiring and training better people than their competitors do.

- Personnel differentiation requires that a company select its people carefully and train them well. This is especially important for companies such as consulting firms, which market knowledge-based services that hey tailor to their customers’ need.

Image Differentiation

- Even when competing offers look the same, buyers may perceive a difference based on company or brand image.

- Symbols can provide strong company or brand recognition and image differentiation. The chosen symbols must be communicated through advertising that conveys the company or brand personality. The ads attempts to establish a storyline a mood, a performance level-something distinctive about the company or brand.

Selecting the right competitive advantage

- Many marketers think that companies should promote one benefit to the target market. Ad man Rosser Reeves said that a company should develop a unique selling proposition for each brand and stick to it. Each brand should choose an attribute and tour itself as "number one" on that attribute. Buyers tend to remember "number one".

- Other marketers think that companies should position themselves on more than one differentiating factor. This may be necessary if two or more firms are claiming to be best on the same attribute.

- In general a company needs to avoid 3 major positioning errors.

1) Underpositioning à failing to ever really position the product at all. Some companies discover that buyers have only a vague idea of the company or that they do not really know anything special about it.

2) Overpositioning à giving buyers too narrow of a picture of the company. Thus, a consumer might think that Steuden glass company makes only fine art glass costing $4000 and up when in fact it makes affordable glass $60 and up.

3) Confused positioning à leaving buyers with a confused image of a company. Ex Burger King (251)

Which difference to promote

- A difference is worth establishing to the extent that it satisfies the following criteria:

q Important: the difference delivers a highly valued benefit to target buyers.

q Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.

q Superior: The difference is superior to other ways that customers might obtain the same benefit.

q Communicable: The difference is communicable and visible to buyers.

q Preemptive: Competitors cannot easily copy the difference.

q Affordable: Buyers can afford to pay for the difference.

q Profitable: The company can introduce the difference profitably.

Communicating and Delivering the Chosen Position

- Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers.

Chapter 8 – Product and Service Strategies

What is a Product?

- Product: A cluster of benefits that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, person, places, organizations, and ideas.

- Service: Any activity or benefit that the party can offer to another that is essentially intangible and does not result in the ownership of anything tangible.

The Product-Service Continuum

- Pure-tangible good, such as soap, toothpaste, or salt-no services accompany the product.

- Service dominated offerings à an intangible benefit created for the customer but no physical product is exchanged. Examples include a doctor’s exam, a university lecture, or financial service.

Levels of Product

- Core product: The problem solving services or core benefits that consumers are really buying when they obtain a product. Example: A women buying lipstick buys more than lip colour, "It the factory we make cosmetics, in the stores we sell home".

- Actual product: A product’s parts, quality, level, features, design, brand name, packaging, and other attributes that combine to deliver core products benefits.

- Augmented Product: Additional consumer services and benefits built around the core and actual product. Example: warranty on parts, free lessons on how to use the camcorder, quick repair service.

- Figure 8-1 Three levels of a product

Product Classification

Consumer Products

- Consumer Products: Products bought by final consumer for personal consumption.

- Consumer products include convenience products, shopping products, specialty products, and unsought products.

- Convenience Products: Consumer products and services that the customer usually buys frequently immediately, and with a minimum of comparison and buying effort.

- Convenience products can divide further into staples, impulse products, and emergency products. Staples are products that consumers buy on a regular basis, such as ketchup, toothpaste, and electric power. Impulse products are purchased with little planning or search effort. These products are normally widely available.

- Emergency products when their need is urgent-umbrellas during a rainstorm, travel insurance at an airport, or boots and shovels during the year’s first snowstorm.

- Shopping products: Consumer goods and services that the consumer, in the process of selection and purchase characteristically compares on such bases as stability, quality, price, and style.

- When buying shopping products and services, consumers spend much time and effort in gathering information and making comparison., examples include furniture, clothing, vacations, and restaurant.

- Table 8-1 Marketing consideration for consumer products

- Specialty products: Consumer products and service with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. A Rolls Royce, for example, is a specialty product because buyers are usually willing to travel great distances to buy one.

- Unsought Product: Consumer products and services that the consumer either does not know about or knows about but does not normally think of buying. Example; life insurance, encyclopaedias, and blood donations.

Industrial Products

- Industrial products: products and services bought by individual and organizations for further processing or for use in conducting a business.

- There are 3 groups of industrial products: materials and parts, capital items, and supplies and services.

- Material and Parts: Industrial products that enter the manufacturer’s product completely, including raw materials and manufactured materials and parts.

- Raw materials include farm products (wheat, cotton, livestock, fruit, vegetables) and natural products (fish, lumber, crude petroleum, iron ore)

- Capital Items: Industrial products that partly enter the finished products, including installation and accessory equipment.

- They include installations and accessory equipment. Installations consist of building (factories, offices) and fixed equipment (generators, drill presses, large computers and elevators)

- Accessory equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (fax machine, desks)

- Suppliers and services: Industrial products that do not enter the finished product at all.

- Supplies and services are industrial products that include operating supplies (lubricants, coal, computer paper, pencils) and repair and maintenance items (paper, nails, broom)

Organizations, Persons, Places, and Ideas

- Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behaviour of target consumers toward an organization both profit and non-profit organizations practise organization marketing.

- Person marketing consists of activities undertaken to create, maintain, or change attitudes or behaviour toward particular people.

- Place marketing involves activities undertaken to create, maintain, or change attitudes or behaviour towards particular places. Examples include business site marketing and tourism marketing.

- Ideas also can be marketed. In one sense, all marketing is the marketing of idea, whether it is the general idea of brushing your teeth or the specific idea that Crest provides the most effective decay prevention.

- Social Marketing: The creation and implementation of programs seeking to increase the acceptability of a social idea, cause, or practice within targeted groups.

Individual Product Decisions

- Figure 8-2 Individual product decisions (270)

- Developing a product or service involves defining the benefits that the product will offer. These benefits are communicated and delivered by product attributes such as quality, feature and design.

Product Quality

- Product Quality: the ability of a product to perform its functions; it includes the product’s overall durability, reliability, precision, ease of operation, repair, and other valued attributes.

- Product Quality has two dimensions-level and consistency. In developing a product, the marketer must first choose a quality level that will support the product’s position in the target market. Here, product quality means performance quality- the level at which a product performs its functions.

- Product design: The process of designing a product’s style and functions: creating a product that is attractive; easy, safe, and inexpensive to use and service; and simple and economical to produce and distribute.

Product Features

- Features are a completive tool for differentiating the company’s product form competitor’s products. Being the first producer to introduce a needed and valued new feature is one of the most effective ways to compete.

Product Design

- Design is a larger concept than style. Style simply describes the appearance of a product. Styles can be eye-catching or yawn inspiring. A sensational style may grab attention, but it does not necessarily make the products perform better. Unlike style, design, is more than skin deep-it goes to the very heart of a product. Good design contributes to a product’s usefulness as well as to its looks.

Branding

- Brand: A name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

- Consumers view a brand as an important part of a product, they give products and service a personality that consumers can relate to, and branding can add value to a product.

- Branding has become so strong that today hardly anything goes unbranded.

- Branding helps buyers in many ways. Brand name helps consumers identify products that might benefit them. Brands also tell the buyer something about product quality. Buyers who always buy the same brand know that they will get the same features, benefits, and quality each time they buy. Branding also gives seller several advantages. The seller’s brand name a trademark provide legal protection for unique product features that otherwise might be copied by competitors.

- A brand can deliver up to 4 levels of meaning:

Ø Attributes. A brand first brings to mind certain product attributes. Example Mercedes suggest attributes as "well engineered", and "durable". The company may use one or more of these attributes in its advertising for a car.

Ø Benefits. Customers do not buy attributes, they buy benefits. Therefore, attributes must be translated into functional and emotional benefits. For example, the attribute "durable" could translate into functional benefit.

Ø Values. A brand also says something about the buyers’ values. Thus Mercedes buyers value high performance, safety, and prestige. A brand marketer must identify the specific groups of car buyers whose values coincide with the delivered benefit package.

Ø Personality. A brand also projects a personality. Motivation researchers sometimes ask, "If this brand were a person, what kind of person would you be? The brand will attract people whose actual or desired self-image match the brand’s image.

Brand Equity

- Brand equity: The value of a brand, based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand association, and other assets such as patent, trademarks, and channel relationship.

- High brand equity provides a company with many competitive advantages; a powerful brand enjoys a high level of consumer brand awareness and loyalty.

Brand Name Selection

- Figure 8-3 Major branding decision

- Desirable qualities for a brand name include: (1) it should suggest something about the product’s benefits and qualities. (2) It should be easy to pronounced, recognize, and remember. Short names. (3) The brand name should be distinctive. (4) The name should translate easily into foreign language. (5) It should be capable of registration and legal protection. A brand name should be registered if it infringes on existing brand names. Also, brand names that are merely descriptive or suggestive may be unprotected.

Brand Sponsor

- The product may be launched as manufactures brand (or national brand), as when Kellogg and IBM sell their output under their own manufacture’s brand name. Or the manufacture may sell to resellers who give it a private brand (also called store brand and distributor brand). Although more manufactures create their own brands, other market licenses brand. Finally two companies can co-brand a product, such as when General Motors and Hershey Foods combined brands to create Reese’s Peanut Butter Puffs Cereal.

- Manufacture’s brand (national brand): A brand created and owned by the producer of the product or seller.

- Private Brand: A brand created and owned by a reseller of a product or service.

- Slotting Fee: Payments demanded by retailers before they will accept new products and find "slot" for them on the selves.

Licensing

- Some companies license names or symbols previously created by other manufactures, names of well-known celebrities, character from popular movies and books-for fee, any of these can provide an instant and proven brand name.

Co-branding

- Co-branding: The practice of using the established brand names of two different companies on the same product.

- For example, Pillsbury joined Nabisco to create Pillsbury Oreo Bars Baking Mix.

- In most co-branding situations, one company licenses another company’s well-known brand to use with its own.

- Co-branding offers may advantages. Because each brand dominates in different category, the combined brands create broader consumer appeal and greater brand equity. Co-branding also allows companies to enter new markets with minimal risk.

Brand Strategy

Line Extension

- Line extensions occur when a company introduces additional items in a given product category under the same brand name, such as new flavours, forms, colour, ingredients, or package size.

- Line Extension: Using a successful brand name to produce additional items in a given product category under the same brand name, such as a new flavour, forms, colour, added ingredients, or package size.

- A company might introduce line extensions to meet consumer’s desires for variety, to utilize excess manufacturing capacity or to match a competitor’s successful line extension. Some companies introduce line extension simply to command more shelf space for resellers.

Brand Extension

- Brand Extension: Using a successful brand name to launch a new or modified product in a new category.

- Fruit of a Loom launched a new line of socks, men’s fashion underwear, women’s underwear, and athletic apparel.

- A brand extension gives a new product instant recognition and faster acceptance. It also saves the high advertising costs usually required to build a new brand name. Ex. Life Saver Gum

Multibrands

- Multibranding: A strategy under which a seller develops two or more brands in the same product category.

- Multibranding also allows a company to lock up more resellers "shelf space." Or the company may want to protect its major brands by setting up flanker or fighter brands. Seiko uses different brands for its higher-priced watches and a different price for its lower-prices watches.

- A major drawback of multibranding is that each brand might obtain only a small market share, and none may be very profitable.

Packaging

- Packaging: The activities of designing and producing the container or wrapper for a product.

- Labelling is also part of packaging and consists of printed information appearing on or with the package.

- Packaging Concept: What the package should be or do for the product.

Labelling

- The label identifies the product or brand, such as the name Sunkist stamped on orange. The label might describe several things about the product-who makes it, where it was made, when it was made, its contents, how it is to be used, and how to use it safety.

Product-Support Services

- Product-support services: Services that augment actual products.

Product Line decisions

- Product Line: A group of products that are closely related because they function in a similar manner, are sold to the same consumer groups, are marketed through the same type s of outlets, or fall within the given price ranges.

- The line is too short if the manager can increase profits by adding an item. The line is too long if the manager can increase profits by dropping items.

- It can systematically increase the length of the product line in two ways: by strengthen its line and by filling its line.

Stretching Downwards

- Figure 8-5 Product Line stretching decision (284)

- A company may stretch downward to plug a market hole that otherwise would attract a new competitor, or to respond to a competitor’s attack on the upper end. Or it may add low-end products because it finds faster growth taking place in the low-end segments.

Stretching Upwards

- Companies at the lower end of the market may want to stretch their product lines upwards. They may be attracted by a faster growth rate or higher margins at the higher end, or they may simply want to position themselves as full-line manufacturers or add prestige to their current products.

Stretching both ways

Filling the Product Line

- An alternative to product line stretching is product line filling-adding more items within the present range of the line. Reasons for product line filling: reaching for extra profit, trying to satisfy dealers, trying to use excess capacity, trying to be the leading full-line company, and trying to lug holes to keep out competitors.

Product Mix Decisions

- Product Mix (or product assortments): The sell of all products lines and items that a particular seller offers for sale to buyers.

- The width of the products mix refers to the number of different product line the company carries.

- The length of the product mix refers to the number of different product line the company carries.

- Figure 8-2 Product Mix (286)

- The depth of the product mix refers to the number of versions offered of each product in the line. Thus, Crest comes in three sizes and 2 formulations (paste, and gel); Crest has a depth of 6.

Service Marketing

- The government offers service through courts, employment services, hospital, loan agencies, military and police...

- The private non-profit organizations offer service through museums, charities, churches, colleges, and foundations...

- Business organizations offer service through airlines, banks, hotels, insurance companies, and entertainment...

Nature and Characteristics of a Service

- A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

- A company must consider four special characteristics of a service when designing marking programs, intangibility, inseparability, variability, and perishability.

- Figure 8-6 Four service characteristics (290)

Intangibility

- Service Intangibility: A major characteristic of service-they cannot be seen, tastes, felt, heard, or smelled before they are bought. Example; cosmetic surgery.

- Service inseparability: A major characteristic of services- they are produced and consumed at the same time and cannot be separated from their providers, whether the providers are people or machines.

- Service Variability: A major characteristics of services-their quality may vary greatly, depending on who provides them and when, where, and how they are provided. For example, some hotel such as the best Western and the Marriot have reputations for providing better device then others. But within a given Marriot, one registration desk employee may be cheerful and efficient, whereas another standing just a few feet away may be unpleasant and slower.

- Service Perishability: A major characteristic of services-they cannot be stored for latter sale or use.

- Some dentists charge patients for missed appointments because the service value existed only at the point and disappeared when the patient did not show up.

Marketing Strategies for Service Firms

The Service-Profit Chain

- Healthy service profits and growth à superior service firm performance which result from...

- Satisfied and loyal customers à satisfied customers who remain loyal, repeat, purchase, and refer other customers, which result from...

- Greater service value à more effective and efficient customer value creation and service delivery, which result from...

- Satisfied and productive service employees à more satisfied, loyal, and hard working employees, which result from...

- Internal Service quality à superior employee selection and training, a quality work environment, and strong support for those dealing with customers.

- Internal marketing: Marketing by a service firm to train and effectively motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction.

- Interactive Marketing: Marketing by a service firm that recognizes that perceived service quality depends heavily on the quality of buyer-seller interaction.

Managing Service Quality

- One of the major ways a service firm can differentiate it is by delivering consistently higher quality than its competitors do.

- They assess the credibility of the service. Strong brand names and guarantees increase consumers’ perceptions of service credibility. They also want service providers to e empathetic and understand their needs and problems. Services must also be reliable. People expect that the service is delivered with consistent quality. People expect services to be responsive and to deal with them as individuals. People judge service quality using the tangible cues that surround service provision.

Managing Productivity

- The service providers can train current employees better, or they can hire new ones who will work harder or more skilful for the same pay. Or the service providers can increase the quality of their service by giving up some quality.

Chapter 9 – New Product Development and Life Cycle Strategies

New Product Development Strategy

- A firm can obtain products in 2 ways: Acquisition- buy buying a whole company, a patent, or a license to product someone else’s product. The other is through new-product development- in the company’s own research and development department.

- New product development: The development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts.

- Why do so many new products fail? The market size might have been overestimated. Actual product was not designed as well as it should have been. Or it was incorrectly positioned in the market, price to high or advertised poorly.

- Because so many new products fail, companies want to learn how to improve the success of their new product. One way is to identify successful new products and determine what they have in common. The number one success factor is unique superior product, one with high quality, new features, and higher value in use.

The New Product Development Process

1. Idea Generation

- Idea Generation: The systematic search for new product ideas.

- Many new product ideas come from internal sources.

- Good new-product ideas result from watching and listening to customers.

2. Idea Screening

- Idea Screening: Screening new product ideas in order to identify good ideas and drop poor ones as soon as possible.

- The purpose of screening is to identify good ideas and drop poor ones as soon as possible. Product-development costs rise greatly in later stages. The company wants to proceed only with the product ideas that will turn into profitable products.

- Committee asks questions such as: Is the product truly useful to consumers and society? Is it good for our particular company? Does it mesh well with the company’s objectives and strategies? Do we have the people, skills, and resources to make it succeed? Does it deliver more value to customers than competing products? Is it easy to advertise and distribute?

3. Concept Development and Testing

- Product Concepts: A detailed version of new-product idea stated in meaningful consumer terms.

- It is important to distinguish among a product idea, a product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.

Concept Development

- Concept development: Concept development involves expanding the new product idea into various alternatives forms.

- Concept testing: Testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

- Some concept test a word or picture description might be sufficient.

- After being exposed to the concept, consumers then may be asked to react to it by answering the questions in Table 9-2 (319)

- Many firms routinely test new product concepts with consumers before attempting to turn them into actual new products.

4. Marketing Strategy Development

- Marketing Strategy development: Designing an initial marketing strategy for a new product based on the product concept.

- They marketing strategy statement consist of 3 parts. The first part describes the target market; the planned product positioning: and the sales, market share, and profit goals for the first year. The second part outlines the product’s planned price, distribution, and marketing budget for the first year. The third part describes the planned long-run sales, profit goals, and marketing mix strategy.

5. Business Analysis

- Business Analysis: A review of the sales, costs, and new profit projections, for a new product to determine whether these factors satisfy the company’s objectives.

- Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. If they do, the product can move to the product-development stage. To estimate sales, the company should examine the sales history of similar products and should survey market opinion. It should estimate minimum and maximum sales to assess the range of risk.

6. Product Development

- Product Development: Developing the product concept into a physical product to assure that the product idea can be turned into a workable product.

7. Test marketing

- Test marketing: The stage of new-product development where the product and marketing program are tested in more realistic market settings.

- Test marketing gives the marketer experience with marketing the product before going to the expense of full introduction. It lets the company test the product and its marketing program-positioning strategy, advertising, distribution, pricing, branding, packaging, and budget level.

- 3 Types of Test marketing: (1) Standard Test Markets (2) Controlled Test Marketing (3) Simulated Test Marketing

Standard Test Markets

- The company finds a small number or representative test cities, conducts a full marketing campaign in these cities, and uses store audits, consumer and distributor survey, and other measures to gauge product performance.

- May be very costly, takes a long time, gives competitors a look at the company’s new product well before it is introduced nationally. Thus competitors may have time to develop defensive strategies, and may even beat the company’s product to the market.

Controlled Test Markets

- Research firm keeps controlled panels of the store that have agreed to carry new products for a fee. The company with the new product specifies the number of stores and geographical locations it wants. The research firm delivers the product to the participating stores and controls shelf locations, amount of self-space, display and point of-purchase promotions, and pricing according to specified plans. Sales results are tracked to determine the impact of these factors on demand.

- Controlled test markets take less time than standard test markets. Cost less.

- Disadvantage: Limited number of cities and panel consumers used by the research services may not be representative of their product’s markets or target consumers.

Simulated Test Markets

- The company shows ads and promotion for the new products. It gives a sample of a new product being tested in shopping centres. Gives customers a small amount of money and invites them to a laboratory store where they can keep the money or buy items. The researcher notes how many customers buy the new item. The research then ask consumers the reason for their purchase or non-purchase. Some weeks later, they interview the consumers by phone to determine product attitudes, usage, satisfaction, and purchase intentions.

- Cost much less, keep the new product out of competitor’s view. Disadvantage: does not consider simulated test markets to be accurate or reliable as larger, real-world tests.

Test Business Products

- Product use test à The business marketer selects a small group of potential customers who agree to use the new product for a limited time.

- Trade Shows à These shows draw large number of buyers who view new products in a few concentrated days. The manufacture sees how buyer react to various product features ad terms, and can assess buy interest and purchase intentions.

- Standard or controlled test markets à to measure the potential of their new products. They produce limited supply of the product and give it to the sales force in a limited number of geographical areas.

8. Commercialization

- Commercialization: Introducing a new product into the market.

- The company launching a new product must first decide on introduction timing.

- The company must decide where to launch the new product-in a single location, a region, the national market, or the international market.

Speeding up New-Product Development

- Sequential Product Development: A new product development approach in which one company department works individually to complete its stage of the process before passing the new product along to the nest departments and stage.

- This orderly, step-by step process can help bring control to complex and risky projects, but it can be dangerously slow. In fast-changing, highly competitive markets, such slow-but-sure product development can result in product failures, lost sales and profits, and crumbling market positions.

- Simultaneous (or team based) product development: An approach to developing new products in which various company departments work closely together, overlapping the steps in the product-development process to save time and increase effectiveness.

- The objective is not to create a product faster, but to create them better and faster.

Product Life Cycle

- Figure 9-2 (327)

- Product Life Cycle (PLC): The course of a product’s sales and profit over its lifetime. It involves five distinct stages: product development stage, Introduction, Growth, Maturity and Decline.

- 1. Product development begins when the company finds and develop a new-product idea. During product development, sales are zero and the company’s investments costs mount.

- 2. Introduction is a period of slow sales growth as the product is being introduced in the market. Profits are non-existent in this stage because of the heavy expense of the product introduction.

- 3. Growth is a period of rapid market acceptance and increasing profits.

- 4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profit level off or decline because of increased marketing outlays to defend the product against competition.

- 5. Decline is the period when sales fall off and profits drop.

- Figure 9-3 (328)

- Style: A basic and distinctive mode of expression. Example. Styles of Victoria, ranch, modern)

- Fashion: A currently accepted or popular style in a given field.

- Fads: Fashion that enters quickly is adopted with great zeal, peak early, and decline very fast.

Introduction Stage

- Introduction Stage: The product life cycle stage when the new product is first distributed and made available for purchase.

- Profits are negative or low because of the low sales and high distribution and promotion expenses. Mush money is needed to attract distributors and build their inventories. Promotion spending is relatively high to inform consumers of the new product and get them to try it.

Growth Stage

- Growth Stage: The product life cycle stage at which a product’s sales start climbing quickly.

- The early adapters will continue to buy and later buyers will start following their lead.

- Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets, and sales jump just to build reseller inventories. Prices remain where the are or fall only slightly.

- Profits increase during growth stage, as promotion costs are spread over a large volume and as unit-manufacturing costs.

Maturity Stage

- Maturity Stage: The stage in the product life cycle where sales growth slows or levels off.

- Overcapacity leads to greater competition. Competitors being marketing down prices, increase their advertising and sales promotion, and increasing their R&D budgets to find better versions of their product.

- In modifying the market, the company tries to increase the consumption of the current product.

- The company might also try modifying the product changing the product characteristics such as quality, features, and style to attract new users and to inspire more usage. It might improve the products quality and performance-its durability, reliability, speed, taste. Or it might add new features that expand the product’s usefulness, safety, or convenience.

- The company might decide to modify the marketing mix.

Decline Stage

- Decline Stage: The product life cycle stage at which a product’s sales decline.

- Many reasons include technological advances, shifts in consumer tastes, and increase in competition.

- The biggest cost may well lie in the future. Keeping weak products delays the search for replacements, creates a lopsided product mix, hurts current profits, and weekend the company’s foothold on the future.

- Management may decide to maintain its brand without change in the hope that competitors will leave the industry.

- Management may decide to harvest the product, which means reducing various costs (plants, equipment, maintenance R%D, advertising, sales force) and hoping that sales hold up.

- Figure 9-3 (333)

Chapter 20 – Marketing and Society

Marketing Impact on Individual Consumers

High Costs of Distribution

- A longstanding charge is that greedy intermediaries mark up prices beyond the value of their service.

- How do retailers answer to these charges? They argue the following: intermediaries do work that would otherwise have to be done by manufactures or consumers. Mark-ups reflect services that consumers themselves want-more convenience, larger stores and assortments, long store hours, return privileges. The cost of operating stores keep rising, forcing retailers to raise their prices. Retail competition is so intense that margins are actually quite low.

High Advertising and Promotion Costs

- Differentiated products-cosmetics, detergents, toiletries-include promotion and packaging costs that can amount to 40 percent or more of the manufacturer’s price to the retailer.

- Marketers answer these changes in many ways: Consumers want more benefits –they want to feel wealthy, beautiful, or special. Consumers usually can buy functional versions or products at lower prices but often are willing to pay more for products that also provide desired psychological benefits. Branding gives buyers’ confidence. A brand name implies a certain quality, and consumers are willing to pay for well-known brands even if they cost a little more. Heavy advertising is needed to inform millions of potential buyers of the merits of a brand. If consumers want to know what is available on the market, they must expect manufacturers to spend large sums on money on advertising. Heavy advertising and promotion may be necessary for a firm o match competitors’ efforts. The business would lose "share of mind" if it did not match competitive spending. Heavy sales promotion is needed to time to time because goods are produced ahead of demand in a mass-production economy.

Deceptive Practice

- Marketers are sometimes accused of deceptive practices that lead consumers to believe that they will get more value than they actually do.

- It falls into three groups: deceptive pricing, promotion, and packaging.

- Deceptive pricing à includes practices such as falsely advertising "factor" or "wholesale" prices or a large price reduction from a phoney high retail list price.

- Double-tagging, the practise of placing a sales ticket showing an original price an another ticket showing a sales price of a piece of clothing.

- Deceptive promotion includes practices such as overstating the product’s features or performance, luring the customer to the store for a barging that is out of stock, or running rigged contests.

- Deceptive packaging à includes exaggerating package contents through subtle design, not filling the package to the top, using misleading, labelling, or describing size in misleading terms.

High-Pressure Selling

- Salespeople are sometimes accused of high-pressure selling the persuades people to buy goods they has no intention of buying.

- Marketers know that buyers often can be talked into buying unwanted or unneeded things.

Shaddy or Unsafe Products

- Products lack quality they should have. One complaint is that many products are not made well or services did not perform well, also many products deliver little benefits. Another concern is product safety. Product safety has been a problem for several reasons, including manufacturer indifference, increase production complexity, poorly trained labour, and poor quality control.

Planned Obsolescence

- Causing their products to become obsolete before they actually should need replacement.

- Holding back attractive functional features, then introducing them later to make older models obsolete.

- Marketers respond that consumer’s life style changes; they get tired of the goods and want a new look in fashion or a new design in cars.

Poor Service to Disadvantages Consumers

- Accused of poorly serving disadvantaged consumers. Critics claim that the urban poor often have to stop in smaller stores that carry inferior goods and charge higher prices.

Marketing’s Impact on Society as a whole

Too Few Social Goods

- Business have been accused of overselling private goods at the expense of public goods. For example, an increase in automobiles ownership (private good) requires more highways, traffic controls, parking spaces, and police services (public goods). The overselling of private goods result in "social costs."

- A way must be found to restore a balance between private and public goods. One option is to make producers bear the full social costs of their operations.

Cultural Pollution

- Critics charge marketing system with creating cultural pollution and commercial noise.

Too Much Political Power

- Advertisers are accused of holding too much power over the mass media, limiting their freedom to report independently and objectively. Example (686)

Marketing’s Impact on Other Business

- Critics also charge that a company’s marketing practices can harm other companies and reduce competition. 3 problems are involved: acquisitions or competitors, marketing practices create barriers to entry, and unfair competitive marketing process.

- Large marketing companies can use patent and heavy promotion spending, and can tie up suppliers or dealers to keep out or drive out competitors.

- Some firms have in fact used unfair competitive marketing practices with the intention of hurting or destroying other firms. They may set their prices below costs, threaten to cut off business with suppliers, or discourage the buying of a competitor’s product.

Citizens and Public Actions to Regulate Marketing

Consumerism

- Consumerism: An organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers.

- The association has also outlined the following as fundamental consumer rights:

· The right of safety

· The right to be informed

· The right to choose

· The right to be heard

· The right to redress against damage

· The right to consumer education

Environmentalism

- Environmentalism: An organized movement of concerned citizens and government agencies to protect and improve people’s living environment.

- Environmentalists are not against marketing and consumption; they simply want people and organizations to operate with more care for the environment.

- Environmentalists want environmental costs included in both producer and consumer decision-making.

Business Actions toward socially responsible Marketing

Enlightened Marketing

- Enlightened Marketing: A marketing philosophy holding that a company’s marketing should support the best long-run performance of the marketing system: its five principle include consumer-oriented marketing, Innovative Marketing, value Marketing, sense-of-mission marketing and societal marketing.

- Consumer-Orientated Marketing: A principle of enlightened marketing that holds that a company should view and organize its marketing activities from the consumers’ point of view.

- Innovative Marketing: A principle of enlightened marketing that requires that a company seek real product and marketing improvements.

- Value Marketing: A principle of enlightened marketing that holds that a company should put most of its resources into value-building marketing investments.

- Sense-of-Mission Marketing: A principle of enlightened marketing that holds that a company should define its mission in broad social terms rather than narrow product terms.

Societal Marketing

- Societal marketing: A principle of enlightened marketing that holds that a company should make marketing decisions by considering consumers’ long-run interests, and society’s long-run interests.

- Deficient products: Products that have neither immediate appeal nor long-run benefits

- Pleasing Products: Products that give high immediate satisfactions but may hurt consumers in the long run.

- Salutary Products: Products that have low appeal but may benefit consumer in the long run.

- Desirable Products: Products that give both high immediate satisfaction and high long-run benefits.

Principle for Public Policy towards marketing

- The principle of consumer and producer freedom

- The principle of curbing potential harm.

- The principle of meeting basic needs

- The principle of economic efficiency

- The principle of innovation

- The principle of consumer education and information

- The principle of consumer protection.

Marketing Notes

Chapter 1 - Marketing In a Changing World

What is marketing?

- Creating customer value and stratification are at the very heart of modern marketing thinking and practice.

Market Defined

- Markets always focus at satisfying customers needs

- Marketing: A social and managerial process by which individuals and groups obtain what they need and want through creating exchanging products and value with others.

- Needs: States of felt deprivation

- Wants: Are the form taken by human needs as they are shaped by culture and individual personality. Wants are described in terms of objects that will satisfy needs.

- Demands: Human wants that are backed by buying power

- Products: Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need it. It includes physical objects, services, persons, places, organizations, and ideas.

- "Marketing myopia" Sellers may suffer from "Marketing myopia" they are so taken with their products that they focus only on existing wants and lose sight f underlying customer needs. They forget that a physical product is only a tool to solve a consumer problem.

Value, Satisfaction, and quantity

- Customer Value: The difference between the values the customer gains from owning and using a product and the cost of obtaing the product.

- Customer Satisfaction: The extent to which a product’s perceived performance matches a buyer’s expectations.

- If the product’s performance falls short of the customer’s expectations, the buyer is dissatisfied. If the performance matches expectation, the buyer is satisfied. If performance excesses expeditions, the buyer is delighted. Outstanding marketing companies go out of their way to keep their customers satisfied.

- Total quantity management (TQM): Programs designed to constantly improve the quantity of products, services and marketing processes.

Exchange, Transactions, and Relationship

- Exchange: The act of obtaining a desired object from someone by offering something in return.

- Transaction: A trade between two parties that involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.

- Relationship Marketing: The process by creating, maintaining, and enhancing strong, value, -laden relationships with customers and other stakeholders.

- A market network consists of the company and all of its surrounding stakeholder: customers, employees, suppliers, distributions, retailers, advertising, agencies, and others with whom it has built mutually profitable business relationships.

Market

- Market: The set of all actual and potential buyers of a product or service.

- Figure 1-2 (13)

Marketing

- Marketing means managing markets to bring about exchanges for the purpose of satisfying human needs and wants.

Marketing Management

- Marketing Management: The analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives.

- De-marketing: Marketing to reduce demand temporarily or permantely-the aim is not to destroy demand, but only to reduce or shift it.

Building profitable customer relationship

- A company demand comes from two groups: 1. New customers and 2. Repeat customers.

- It costs five times as much to attract new customers as it does to keep an existing customers satisfied.

Marketing Management Philosophies

- There are five alternatives concepts under which organizations conduct their marketing activities: the product, selling, marketing, and societal marketing concept.

- Production Concept: The philosophy that consumers will favour products that are available and highly affordable and that management should therefore focus on improving production and distribution efficiency.

- Product Concept: The philosophy that consumers will favour producers that offer the most quality, performance, and innovative features.

- Selling Concepts: The idea that consumers will not buy enough of the organization’s products unless the organization undertakes a large-scale selling and promotion effort.

- Marketing Concept: The marketing management philosophy that holds the achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do.

The Internet

- Internet: A vast and burgeoning global web of computer networks with no central management or ownership.

Chapter 2- Strategic Planning the Marketing Process

Strategic Planning

- The annual plan is a short-run marketing plan that describes the current marketing situation, the company objectives, and the marketing strategy for the year, the action program, budgets, and controls.

- The long-run plan describes the major factors and forces affecting the organization during the next several years, it includes the long-term objectives, the major marketing strategies that will be used to attain them, and the resources required.

- Strategic Planning: The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

- At the corporate level, the company first defines its overall purpose and mission. This mission then is turned into detailed supporting objectivities that guide the whole company. Next, headquarters decides what portfolio of business and products is best for the company and how much support to give each one. In turn, each business and product unit must develop detailed marketing and other departmental plans that support the company wide plan.

Defining the company mission

- Mission Statement: A statement of the organizations purpose-what it wants to accomplish in the larger environment.

- Mission should be realistic, specific, fit the market environment, motivating

Designing the Business Portfolio

- Business Portfolio: The collection of business and products that comprise the company.

- The best business portfolio is the one that best fits the company’s strengths and weakness to opportunities in the environment. The company must (1) analyse the current business portfolio and decide which business should receive more, less, or no investment, and (2) develop growth strategies for adding new products or business to the portfolio.

Analysing the current business portfolio

- Portfolio Analysis: A tool by which management identifies and evaluates the various businesses that makes up the company.

- Strategic business Unit (SBU): A unit of the company that has a separate mission and objectives and that can be planned independently from other company business. An SBU can be a company division, a product line within a division, or sometimes a single product or brand.

- Management’s first step is to identify the key businesses making up the company. The next step in business portfolio analysis calls for management to assess the attractiveness of its various SBU’s and decide how much support each deserves.

The Boston Consulting Approach

- Growth-share matrix: A portfolio-planning method that evaluates a company’s strategic business units (SBU) in terms of their market growth rate and relative market share. SBUs are classified as stars, cash cows, question marks, or dogs.

- Four types of SBUs can be distinguished:

1. Star: High-growth, high share business or products that often require heavy investment to finance their rapid growth.

2. Cash Cow: Low-growth, high share business or products; established and successful units that generate cash that the company uses to pay its bills and support other business units that need investment.

3. Question Mark: Low-share business units in high-growth markets that require a lot of cash in order to hold their share or become stars.

4. Dogs: Low-growth, low share business and products that generate enough cash to maintain themselves but do not promise to be large sources of cash.

- Figure 2-2 (45) Growth Share matrix

The General Electric Approach

- It uses a matrix with two dimensions-one representing industry attractiveness (the vertical axis) and one representing company strength in the industry (the horizontal axis). The best businesses are those located in highly attractive industries where the company has high business strength.

Problems with Matrix Approaches

- They can be difficult, time consuming, and costly to implement. Management may find it difficult to define to define SBUs and measure market share and growth.

- These approaches focus on classifying current businesses but provide little advise for future planning.

Developing Growth Strategies

- Product/market expansion grid: A portfolio-planning tool for identify company growth opportunities through market penetration, market development, or diversification.

- Market Penetration: A strategy for company growth by increasing sales of current products to current market segments without changing the product in anyway.

- Market development: A strategy for company growth by identifying and developing new market segments for current company products.

- Product development: A strategy for company growth by offering modified or new products to current market segments.

- Diversification: A strategy for company growth by starting up or acquiring businesses outside the company’s current products and markets.

Marketing Role in Strategic Planning

- Marketing looks at consumer needs and the company’s ability to satisfy them; these same factors guide the company mission and objectives.

- Marketing plays a key role in the company’s strategic planning; Marketing provides a guiding philosophy-the marketing concept-which suggests company strategy should revolve around serving the needs of important consumer groups. Marketing provides input to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them. Within individual business units, marketing designs strategies

- For reaching the unit’s objective.

Conflict between Departments

- Operations focuses on suppliers and production; finance is concerned with stockholders and sound investments; marketing emphasizes consumers and products, pricing, promotion, and distribution.

The Marketing process

- Marketing Process: The process of (1) analysing marketing opportunities; (2) selecting targets market (3) developing the marketing mix and (4) managing the marketing effort.

- Market Segmentation: Dividing the market into distinct groups of buyers with different needs, characteristics, or behaviour who might require separate products or making mixes.

- Market Segment: A group of consumers who respond in a similar way to given set of marketing stimuli.

Market Targeting

- Market targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Marketing Position

- Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

Marketing Strategies for Competitive Advantage

- The company must formally or informally monitor the completive environment to answer these and other important questions: Who are our competitors? What are their objectives and strategies? What are their strengths and weakness? And how will they react to different completive strategies we might use?

Developing the Marketing Mix

- Marketing Mix: The set of controllable tactical marketing tools-product, price, place and promotion-that the firm blends to produce the response it wants in the target market.

- Product means the ‘goods and services"

- Price is the amount of money customers have to pay to obtain the product.

- Place includes company activities that make the product available to target consumers.

- Promotion means activities that communicate the merits of the products and persuade target customers.

Managing the Marketing Effort

- Four management functions-analysis, planning, implementation and control.

- Marketing Analysis à The Company must analyse its markets and making environment to identify attractive opportunities and avoid environmental threats. It must analyses company strengths and weaknesses, as well as current and possible marketing actions, to determine which opportunities it can best pursue. Marketing analysis needs information and other input to each of the other marketing management functions.

- Marketing Planning à It involves deciding on marketing strategies that will help the company attain its overall strategic objectives. A detailed marketing plan is needed for each business, product or brand.

- Product or brand plan (Contents of Marketing Plan) p.58

- Product or brand plan includes: Executive summary that quickly overviews major assessment goals, and recommendation. The main section of the plan presents a detailed analysis of the current marketing situation, and of potential threats and opportunities. It next states major objectives for the brand and outlines the specific of a marketing strategy for achieving them.

- Marketing Strategy: The marketing logic by which the business unit hopes to achieve its marketing objectives. It consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels.

- In the marketing strategy level the planner explains how each strategy responds to threats, opportunities, and critical issues outlines earlier in the plan.

- Additional Sections of the marketing plan lay out action program for implementing the marketing strategy, along with the details of a supporting marketing budget.

- The last section à the controls that will be used to monitor progress and take corrective action.

Marketing Implementation

- Marketing Implementation: The process that turns marketing strategies and plans into marketing actions to accomplish strategic marketing objectives.

- Implementation involves day-to-day, month-to-month activities that effectively put the marketing plan to work.

Marketing Department Organization

- Marketing manager is responsible for developing long range and annual plans for the sales and profits in their market. This system’s main advantage is that the company is organized around the needs of specific customer segments,

Marketing Control

- Marketing Control: The process of measuring and evaluating the results of market strategies and plans, and taking corrective action to ensure that marketing objectifies are attained.

- Marketing first sets specific marketing goals. It then measures its performance in the market place and evaluates the causes of any difference between expected and actual performance. Finally management takes corrective action to close the gaps between its goals and its performance, this may require changing the action programs or even changing the goals.

- Operating Controls à Involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits, and other goals set out in its annual plan. It also involves determining the profitability of different products, territories, market and channels.

- Strategic Controlà Involves considering whether the company’s basic strategies are well matched to its opportunities.

- The Marketing Audit: Is a comprehensive, systematic, independent, and periodic examination of a company’s environment, objectives, strategies, and activities to determine problem areas and opportunities and to recommend a plan of action to improve the company’s marketing performance.

- The Marketing Audit Questions (64)

The Marketing Environment

- The company must carefully analyse its environment so that t can avoid the threats and take advantage of its opportunities.

Chapter 3 – The Global Marketing Environment

- Marketing Environment: The factors and forces outside marketing’s direct control that affect marketing management’s ability to develop and maintain successful transactions with target customers.

- Marketers have two special aptitudes. They have discipline methods –marketing intelligence and marketing research-for collecting information about marketing environment. They also normally spend more time in the customer and competitor environment. By conducting systematic environmental scanning, marketers can revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace.

- Microenvironment: The forces close to the company that affects its ability to serve its customers-the company, suppliers, marketing channel firm, customer market, competitors, and publics.

- Microenvironment: The larger societal forces that affect the whole microenvironment –demographic, economic, natural, technological, political, and cultural forces.

Suppliers

- They provide the resources needed by the company to produce its goods and services. Marketing managers must be aware of supply availability –supply shortage or delays, labour strikes, and other events that can cost sales in the short run and damage customer satisfaction in the long run.

Marketing Intermediaries

- Marketing Intermediaries: Firms that help the company to promote, sell, and distribute its goods to final buyers, they include resellers, physical distribution firms, marketing services agencies, and financial intermediaries.

- Reseller à are distribution channel forms that help the company find customers or make sales to them.

- Physical Distribution Firmsà help the company to stock and move goods from their points or origin to their destination. Working with warehouse and transportation firms, a company must determine the best way to store and ship goods, balancing such factors as cost, delivery, speed and safety.

- Marketing Services agenciesà are marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right market.

- Financial Intermediaries à include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.

Customer

- The company needs to study its customer market closely.

- 5 Types of customer market:

1. Consumer Market: consist of individuals and households that buy goods and services for personal consumption.

2. Business Market: buy goods and services for further processing or for use in their production process

3. Reseller Market: buys goods and services and resells it to make a profit.

4. Government Market: are composed of government agencies that buy goods and services in order to produce public services or transfer the goods and services to others who need them.

5. International Market: Consists of buyers in other countries, including consumers, producers, resellers and governments.

Competitors

Publics

- Publics: Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectivities.

- Seven types of publics (see page 79 & 80):

1. Financial publics

2. Media publics

3. Government publics

4. Citizen-action publics

5. Local publics

6. General publics

7. Internal publics

The Company’s Microenvironment

Demographic Environment

- Demography: The study of human population in terms of size, density, location, age, sex, race, occupation, and other statistics.

Changing Age Structure of the Canadian Population

- Baby Boom: The major increase in the annual birth rate following WWII and lasting until the early 1960s. The "baby boomers," now moving into middle age, are a prime target for marketer.

The Changing family (87)

Geographic Shifts in population (87)

A better educated and more white-collar population (89)

Increasing Diversity (89)

Economics Environment

- Economic Environment: Factors that affect consumer buying power and spending patterns.

- Subsistence economies- they consume most of their own agricultural and industrial output.

- Industrial economies – which constitute rich markets for many different kinds of goods.

Chang in Income

- Marketers pay attention to income distribution as well as average income.

Changing Consumer Spending Patterns

- Engel’s Law: Difference noted over a century ago by Earnst Engel in how people shift their spending across food, housing, transportation, health care, and other goods and services categories as family income rises.

Natural Environment

- Natural Environment: Natural resources that are needed as inputs by marketers or that are affected by marketing activities.

Technological Environment

- Technological Environment: Forces that create new technological, creating new product and market opportunities.

Political Environment

- Political Environment: Consists of laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society.

Legislation Regulation Business

- Canada has many laws covering issues such as competition, fair trade practices, environment protection, product safety, truth in advertising packaging and labelling, price, and other important areas.

- North American Free Trade agreement (NAFTA) replaced the Free Trade Agreement (FTA) in August 1992. It governs free trade among Canada, United States, and Mexico. NAFTA is a historic document since it is the first trade agreement between two developed nation and a developing country.

- Business legislation has been enacted for various reasons. The first is to protect companies from each other. The second purpose of the government regulation is to protect consumers from unfair business practices. The third purpose of the government regulation is to protect the interests of society against unrestrained business behaviour.

Cultural Environment

- Cultural Environment: Institutions and other forces that affect society’s basic value, perception, preference, and behaviour.

- The following cultural characteristics can affect marketing decision-making:

Persistence of cultural Values

- Core beliefs and valuesà are passed by parents to children and are reinforced by schools, churches, business and government.

- Secondary Beliefs and value à are more open to change. Believing in marriage is a core belief; believing that people should get married early in life is a secondary belief.

Shifts in Secondary Cultural Values

- The major cultural values of a society are expressed in people’s views of themselves and others, as well as in their views of organizations, society, nature and the universe.

People’s Views of themselves

- People use products, brands, and services as a means of self-expression, and they buy products and service that match their views of themselves.

People’s View of others

- This suggests a bright future for the products and services that serve basic needs rather that those relaying on glitz and hype. It also suggests a greater demand for "social support" products and services that improve direct communication between people, such as health clubs and family vacations.

People’s View of Organizations

- They need to review their advertising communications to ensure that their messages are honest. They also need to review their various activities to make sure that they are perceived to be "good corporate citizens".

People’s View of society

- Patriots à nationalist, pro country

- Reformers à who want to change it

- Malcontent à who want to leave it

People’s View of Nature

People’s View of the universe

- People vary in their beliefs about the origin of the universe and their place in it.

- 1980’s people measured success in terms of career achievements, wealth, and worldly possessions.

- 1990’s success was measured with achievements such as a happy family life and service to one’s community replacing money as the measure if worth.

Responding to the Marketing environment

- Many companies view the marketing environment as an "uncontrollable" element to which they must adapt. They accept the market place and do not change it. They analyse the environmental forces and design strategies that will help the company avoids the threats and take advantage of the opportunities the environment.

- Environmental management perspective: A management perspective in which the firm takes aggressive actions to affect the publics and forces in its marketing environment rather than simply watching and reacting to it.

Chapter 4- Marketing Research and Information System

The Marketing Information System

- Marketing Information System (MIS): People, equipment, and procedure to gather, sort, analyse, evaluate, and distribute needed, timely, and accurate information to marketing decision-makers.

- First, it interact with these managers to assess information needs. Next, it develops needed information from internal company records, marketing intelligence activities, and marketing research. Information analysis processes the information to make it more useful. Finally the MIS distributes information to managers in the right form at the right time to help them make better marketing decision.

Assessing Information Needs

- Managers do not always need all the information they ask for, they may not ask for all they really need. The MIS cannot always supply all the information managers request.

Developing Information

Internal Data

- Internal database: Information gathered from sources within the company that can be evaluate marketing performance and to detect marketing problems and opportunities.

- Information in the database can come from many sources. The accounting department prepares financial statements and keeps detailed records of sales, costs, and cash flow. Manufacturing reports on production schedules, shipments, and inventories. The sales force reports on reseller reactions and competitor activities. The marketing department maintains a database of customer demographics, psychographics, and buying behaviour. The customer service department provides information on customer satisfaction or service problems.

Marketing Intelligence

- Marketing Intelligence: The systematic collection and analysis of publicity available information about competitors and development in the marketing department.

- Marketing Intelligence can be gathered from many source; can be collected from the company’s own personnel-executives, engineer and scientists, purchasing agents, and the sales force.

- For a fee companies can subscribe to online database or information search services.

Marketing Research

- Marketing Research: The systematic design, collection, analysis, and reporting of data and finding relevant to a specific marketing situation facing an organization.

Information Analysis

- Information gathered by the company’s marketing intelligence and marketing research systems often require more analysis, and sometimes managers may need help applying the information to their marketing problems and decisions. This may include advanced statistical analysis to learn more about both the relationships within a set of data and their statistical reliability.

Distribution Information

- The information gathered through marketing intelligence and marketing research must be distributed to the right marketing managers at the right time.

- With recent advances in computers, software, and telecommunication, most companies are decentralizing their marketing information systems. In many companies, marketing managers have direct access to the information network through personal computers and other means.

- Such systems offer exciting prospects. They allow the managers to get the information they need directly and quickly and to tailor it to their unique needs.

The Marketing Research Process

*Defining the problems and research objectives à Developing the research plan and collecting information à Implementing the research plan-collecting and analysing the data à Interpretation and reporting the findings

- Marketing managers and researcher must work closely to define the problem carefully and they must agree on the research objectives.

- Managers must know enough about marketing research to help in planning and interpreting research results. If they know little about marketing research they may obtain wrong information.

- Experience marketing researchers who understand the manager’s problem also should be involved at this stage. The researcher must be able to help the manager define the problem and suggest ways that research can help the manager make better decisions.

- Defining the problem and research objectives is often the hardest step in the research process.

- After the problem has been defined carefully, the manager and researcher must set research objectives. Can 1-3 types of objectives. Exploratory research, descriptive research and casual research.

- Exploratory Research: Marketing research to gather preliminary information that will help to better define problems and suggest hypotheses.

- Descriptive Research: Marketing research to better describe marketing problems, situations, or markets, such as the market potential for a product or the demographics and attitudes of customers.

- Casual Research: Marketing research to test hypothesis about cause-and effect relationship.

Developing the research plan

- Determining the information needed, developing a plan for gathering it efficiently, and presenting the plan to marketing management.

Gathering Secondary Information

- To meet the manager’s information needs, the researcher can gather secondary data, primary data, or both.

- Secondary data: Information that already exists somewhere, having been collected for another purpose before.

- Primary data: Information collected for the specific purpose at hand.

- Researchers usually start be gathering secondary data.

- Commercial data source à companies can buy reports from outside suppliers.

- Table 4-2 (page 125) Sources of Secondary data

- Online database and Internet data sources à Marketing research can conduct their own search of secondary data sources. A resent survey of marketing researchers found that 81 percent uses such online services for conducting research.

- Online database: A compilation of marketing information that can be accessed online.

Advantages and Disadvantages of Secondary Data

- Secondary data can usually be obtained more quickly and at a lower cost than primary data.

- A study to collect primary information might take weeks or months to complete and cost thousands of dollars. Secondary sources sometimes provide data that an individual company cannot collect on its own-information that either is not directly available or would be too expensive to collect.

- Secondary data can also present problems. The needed information may not exist-researcher can rarely obtain all the data they need for secondary sources.

- The researcher must evaluate secondary information carefully to ensure that it is relevant (fits research project needs), accurate (reliably collected and reported), current (up-to-date enough for current decisions), and impartial (objectively collected and reported)

Planning Primary Data Collection

- Primary data to assure that it will be relevant, accurate, current, and unbiased.

Research Approaches

- Observational research: The gathering of primary data by observing relevant people, actions, and situation.

- Observational research can be used to obtain information that people unwilling or unable to provide. Some things can not be observed such as feelings, attitudes, and motives, or private behaviour.

- Table 4-3 Planning Primary Data Collections (127)

- Checkout scanners in retail stores record consumer purchases in detail. Consumer products companies and retailers use scanner information to assess and improve product sales and store performances.

- Single Source data systems: Electronic monitoring systems that link consumers’ exposure to television advertising and promotion (measured using television meters) with what they buy in stores (measured using store checkout scanners)

- Survey Research: The gathering of primary data by asking people questions about their knowledge attitudes, preference, and buying behaviour.

- Sometimes people are unable to answer survey questions because they cannot remember or have never thought about what they do and why. Or people may be unwilling to respond to unknown interviewers or talk about things they consider private. Respondents might answer survey questions when they do not know the answer in order to appear smarter or more informed.

- Experimental research: The gathering of primary data by selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking differences in-group responses.

Contact Methods

- Information can be collected by mail, telephone, or personal interview.

- Table 4-4 Strengths and Weaknesses of three Contacts Methods (131)

- Personal Interviewing takes two forms- individual and group interviewing. Individual interviewing involves talking with people in their homes or offices, on the street, or in shopping malls. Such interviewing is flexible.

- Group Interviewing consists of 6-10 people gather for a few hours with a trained moderator to discuss a product, service or organization.

- Focus group interviewing: personal interviewing that consist of inviting six to 10 people to gather for a few hours with a trained interviewer to discuss a product, service, or organization. The interviewer "focuses" the group discussion on important issues. The comments are recorded through written notes.

- Focus group interviewing has become one of the major marketing research tools for gathering insight into consumer thoughts and feelings. However, focus group studies usually use small sample sizes to keep time and costs down, and it may be hard to generalize from the results.

- Computer Interviewing in which respondents sit down at a computer, read questions from a screen, and type their own answer into the computer.

Sampling Plans

- Marketing researchers usually draw conclusions about large groups of consumers by studying a small sample of the total consumer population. A sample is a segment of the population selected to represent the population as a whole.

- Designing the sample requires 3 decisions: 1. Who is to be surveyed (what the sampling unit)? 2. How many people should be surveyed (What’s the sample size)? 3. How should the people in the sample be chosen (what sampling procedure)?

- Using probability samples each population member has a known chance of being included in the sample and researchers can calculate confidence limits for sampling errors. But when probability sampling costs too much or takes too much time, marketing researchers often take non-probability samples, even though their sampling error cannot be measured.

Research Instruments

- In collecting primary data, marketing researchers have a choice of 2 main research instruments – the questionnaire and the mechanical devices.

- The questionnaire is by far the most common device. Questionnaires must be developed carefully and testes before they can used on a large scale. When developing a questionnaire the market researchers must first decide what to ask.

- Closed-end questions à include all possible answers, and subjects make choices among them.

- Opened-end questions à Questions allowing respondent to answer in their own words.

- Researcher should also use care in wording and ordering questions. They should use simple direct, unbiased wording.

- Table 4-7 Types of Questions (136)

Presenting the Research plan

- The proposal should cover the management problems addressed and the research objectives, the information to be obtained, the sources of secondary information or methods for collecting primary data, and the way the results will help management decision-making. It should also include, research cost, a written research plan, and they should all agree on why and how the research will be conducted.

Implementing the Research plan

- This involves collecting, processing, and analysing the information. Data collection can be carried out by the company’s marketing research staff or by outside firm. The data collection phase of the marketing research process is generally the most expensive and the most subject to error.

Interpreting and reporting the findings

- The research must now interpret the finding, draw conclusions, and report them to management. The researcher should not try to overwhelm managers with numbers and fancy statistical techniques. Rather, the researcher should present important finding that are useful in the major decisions faced by management. In many cases findings can be interpreted in different ways, and discussions between researchers and managers will help identify the best interpretations.

- Interpretations are an important phase of the marketing process. The best research is meaningless if the manager blindly accepts wrong interpretations from the research. Managers may have biased interpretations-they tend to accept research results that show what they expected and to reject those that they did not expect or hope for.

Other Marketing Research Considerations

Marketing research in small business and non-profit organizations

- Managers of small business and non-profit organization can obtain good marketing information simply by observing things around them.

- Managers can conduct informal survey using small convenience samples.

- Managers can also conduct their own sample experiments.

- Small organizations can obtain most of the secondary data available to large businesses. Many associations, local media, chambers of commerce, and government agencies provide special help to small organizations.

International Marketing research

- International marketing research can pose some unique challenges, For example they ma find it difficult simply to develop good samples.

- Difference in culture from country to country cause additional problems for international researchers. Languages is the most obvious culprit.

- Responses then must be translated back into the original language for analysis and interpretations. This adds to research costs and increase in the risk of error.

- Transplantation a questionnaire from one language to another is anything but easy. Many idioms, phrase, and statements mean different things in different cultures.

- Consumers in different countries also vary in their attitudes towards marketing research.

Chapter 5 – Consumer Markets and Consumer Buyer Behaviour

- Consumers buying behaviour: The buying behaviour of final consumers-individuals and households who buy goods and services for personal consumption.

- All of these final consumers combined comprise the consumer market.

- Consumer Market: All the individuals and households who buy or acquire goods and services for potential consumption.

Model of Consumer Behaviour

- The central questions for marketers are: How do consumers respond to various marketing efforts the company might use.

Characteristics affecting consumer behaviour

- Consumer purchases are influence strongly by cultural, social, personal, and psychological characterises.

Cultural Factors

- Culture: The set of basic values, perception, wants and behaviours learned by a member of a society from family and other important institutions.

- Culture is the most basic cause of a person’s wants and behaviour. Human behaviour is largely learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviours from the family and other important institutions.

- International marketers must understand the culture in each international market and adapt their marketing strategies accordingly.

SUBCULTURE

- Subculture: A group of people with shared value system based on common life experience and situations.

- Subculture includes nationalities, religions, racial groups, and geographic regions.

(1) Native Canadians

(2) Canada’s Ethnic Consumers

(3) Mature Consumers

(4) Internet Users

- Internet Users à Internet users are powerful and in control. The consumer s one who choose to access a web site and marketers must adjust to the idea that the Net is a means of two-way communication between a consumer and a vendor, not the one-way street that media advertising represents, IN other words, "They’re not just listening to what the corporation wants to sell them, they’re choosing the information that appeals to them.

SOCIAL CLASS

- Social classes are society’s relatively permanent and order division whose members share similar values, interest, and behaviours.

- Social Class: Relatively permanent and ordered division in a society whose members share similar values, interests, and behaviours.

- Social class is not determined by a single form, such as income, but measured as a combination of occupation, income, education, wealth and other variables.

- Table 5-2 Characterises of Seven Major North American Social Classes (page 162)

- People can move to a higher social class or drop into a lower one.

Social factors

GROUPS

- Groups: Two or more people whom interact to accomplish individual or mutual goals.

- Groups that have a direct influence and to which a person belongs are called à Membership groups

- Primary Groups à With whom there is regular but informal interaction – such as friends, family, neighbours, and co-workers.

- Secondary Groups à, which are more formal and that, has less regular interactions. These include organizations, such as religious groups, professional associations, and trade unions.

- Reference Groups à serve as a direct (face-to-face) or indirect points of comparison or reference informing a person’s attitudes or behaviour. People often are influence be reference groups to which they do not belong.

- Opinion Leaders: People within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert, influence on others.

- Opinion Leaders are found at all level of society, and one person may be an opinion leader in certain products areas and an opinion follower in others. Marketers try to identify opinion leaders for their products and direct marketing effort towards them.

FAMILY

- Family members can strongly influence buyer’s behaviours. The family is the most important consumer buying organization in society.

- In Canada and the United States, the wife is traditionally has been the main purchasing agent for the family, especially in the area of food, households, products, and clothing.

- In the case of expensive products and services, husbands and wives more often make joint decisions.

ROLES AND STATUS

- A person belongs to many groups-family, clubs, and organizations. The person’s position in each group can be defined in terms of both roles and status. A role consists of the activities that people are expected to perform according to the persons around them. Each role carries a status reflecting the general esteem given to it by the society.

Personal Factors

AGE AND LIFE CYCLE STAGE

- Taste in foods, clothes, furniture, and recreation are often age-related.

- Table 5-3 Life Cycle Stages (page 165)

OCCUPATION

- A person’s occupation affects the goods and services that he or she buys.

ECONOMIC SITUATION

- A person’s economic situation will affect product choice. Marketers of income sensitive goods watch trends in personal income, saving, and interest rates. If economic indicators point to a rescission, marketers can take steps to redesign, reposition, and reprice their products.

LIFESTYLE

- Lifestyle: A person’s pattern of living as expressed in his or her activities, interests, and opinion.

- Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves measuring consumers’ major AIO dimensions activities (work, hobbies, shopping, sports, social events), interests (food, fashions, family, recreation), and opinions (about themselves, social issues, business products). Lifestyles capture something more than the person’s social class or personality; it profiles a person’s whole pattern of acting and interacting in the world.

- Psychographics: The technique of measuring lifestyles and developing lifestyle classification; it involves measuring the major AIO dimension (activities, interest, opinions)

- VALS; Classifies people according to how they spend their time and money. It divides consumers into eight groups on two major dimensions.

- Self Orientation Group includes principle-oriented consumers à who buy based on their views on the world. Status Orientated buyers à who base their purchase on the actions and opinions of others. Action-oriented buyers à who are driven by their desire for activity, variety, and risk-taking. Consumers within each orientation are further classified into those with abundant resources and those with minimal resources.

PERSONALITY AND SELF CONCEPT

- Personality: A person’s distinguished psychological characteristics that led to relatively consistent and lasting response to his or her own environment.

Psychological Factors

- A person’s buying choices are further influenced by four major psychological factors: motivations, perception, learning, and beliefs and attitudes.

MOTIVATION

- Biological, arising from state of tension such as hunger, thirst, or discomfort.

- Psychological, arising from the need for recognition, esteem, or belonging. Most of these needs will not be strong enough to motivate the person to act at any given them.

- Motive: A need that is sufficiency pressing to drive the person to seek satisfaction of the need.

- Psychologists have developed theories of human motivation. Sigmund Freud and Abraham Maslow

- Freud’s theory of motivation: Freud assumes that people are largely unconscious about the real psychological forces shaping their behaviour.

- Abraham Maslow sought to explain why people are driven by particular needs at particular times. In order of importance, they are psychological needs, safety needs, social needs, esteem needs, and self-actualization needs. A person tries to satisfy the most important first. When that need is satisfied, it will stop being a motivator and the person will then try to satisfy the nest most important need.

PERCEPTION

- A motivated person is ready to act. How the person is influence by his or her perception of the situation.

- Perception: Is the process by which people select, organize and interpret information to form a meaningful picture of the world.

- People can form different perceptions of the same stimulus because of three perceptual processes: selective attention, selective distortion, and selective retention. Selective Attention à The tendency for people to screen out most of the information to which they are exposed- means that marketers must work especially hard to attract the consumer’s attention. Their message will be lost on most people who are not in the market for the product. Moreover, even people who are in the market may not notice the message unless it stands out from the surrounding sea of other ads. Selective distortion à describes the tendency of people to interpret information in a way that will support what they already believe. Selective distortion means that marketers must try to understand consumer’s perspectives and how these will affect interpretations of advertising and sales information. People will also forget what they learned they tend to retain information that supports their attitudes and beliefs. Because of Selective retention à advertisers try to frame messages in ways that are consistent with people’s existing beliefs. Example "Jen is likely to remember goods points made about the Harley and to forget good points made about competing motorcycles.

LEARNING

- Learning occurs through the interplay of drives, stimuli, cues, responses and reinforcement.

- Learning: Changes in an individual’s behaviour arising from experience.

- A drive is a strong internal stimulus that calls for action. Her drive becomes and motive when it is directed toward a particular stimulus object.

- A cue are minor stimuli that determine when, where, and how the person response.

BELIEFS AND ATTITUTEDS

- Beliefs: A descriptive thought that a person holds about something.

- This belief may be based on real knowledge, opinion, or faith and may or may not carry an emotional charge.

- Attitudes: A person’s consistently favourable or unfavourable evaluations, feeling, and tendencies towards an object or idea.

- Attitudes put people into a frame of mind of liking or disliking things, of moving towards or away from them. Attitudes are difficult to change. A person’s attitudes fit into a pattern, and to change one attitude may require difficult adjustments in many others. Thus, company should usually try to fit its products into an existing attitudes rather than attempt to change attitudes.

Consumer Buying Roles

- People might play any of several roles in buying decision:

- Initiator à The person who first suggests or thinks of the idea of buying a particular product or service.

- Influencer à A person whose views or advice influences the buying decision

- Decider à The person who ultimately makes a buying decision or any part of it- whether to buy, what to buy, how to buy, and where to buy

- Buyer à The person who makes the actual purchase.

- User à The person who consumes or uses a product or service.

Complex Buying Behaviour

- Complex Buying Behaviour: Consumers buying behaviour in situations characterized by high consumer involvement in a purchase and significant perceived difference among brands.

- Marketers need to differentiate their brand’s feature, perhaps by describing the brand’s benefits using print media with long copy. They must motivate store salespeople and the buyer’s acquaintances to influence the final brand choice.

Dissonance- Reducing Buying Behaviour

- Dissonance- reducing buying behaviour: Consumer buying behaviour in situations characterized by high involvement but few perceived differences among brands.

- Dissonance-reducing buying behaviour occurs when consumers are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands.

- After the purchase, consumers might experience post-purchase dissonance (after sales discomfort) when they notice certain disadvantages of the purchase carpet brand or hear favourable things about brands not purchased.

Habitual Buying Behaviour

- Habitual Buying Behaviour: Consumer buying behaviour in characterized by low consumer involvement and few significant perceived brand differences.

- Consumers have little involvement in this product category-they simply go to the store and reach for a brand. Example; salt. If they keep reaching for the same brand, it is out of habit rather than strong brand loyalty.

- Consumers do not form strong attitudes towards a brand; they select the brand because it is familiar.

Variety-Seeking Buying Behaviour

- Variety-seeking buying behaviour: Consumer buying behaviour in situations characterized by low consumer involvement but significant perceived brand differences. Brand switching occurs for the sake of variety rather than due to dissatisfaction.

The Buyer Decision Process

- The stages that buyer pass through to reach a buying decision. There are 5 stages

Need recognition à Information Search à Evaluation of alternatives à Purchase decision à Post-purchase behaviour

- Consumers often skip or reverse some of these stages.

Stage (1) Need Recognition

- Need Recognition: The first stage of the buyer decision process in which the consumer recognizes a problem or need.

- When the buyer recognizing a problem or need. The buyer actual senses a difference between his or her actual state and some desired stat. The need can be triggered by internal stimuli.

Stage (2) Information Search

- Information Search: The stage of the buyer decision process in which the consumer is aroused to search for more information; the consumer may simply have heightened attention or may go into active information search.

- An aroused customer may or may not search or more information. If the consumer’s drive is strong and a satisfying product is near at hand, the consumer is likely to buy it. If not, the consumer may store the need in memory or undertake an information search related to the need.

- Heightened attention à Consumer becomes more receptive to information about the product. Consumer pays attention to ads.

- Active information search à in which consumer looks for reading materials, surfs the net, phone friends, and gather information in other ways.

- Consumers can obtain information from any of these sources:

(-) Personal Sources: family, friends, neighbours, acquaintances

(-) Commercial sources: advertising, salespeople, dealers, packaging, and displays

(-) Public source: mass media, consumer-rating organizations

(-) Experiential sources: handling, examining, using the product.

Stage (3) Evaluation of alternatives

- Alternative evaluation: The stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set. Alternative evaluation-that is, how the consumer processes information to arrive at brand choice.

- Brand image: The set of beliefs that consumers hold about a particular brand.

- In some cases, the consumer use careful calculations and logical thinking. At other times, the same consumers do little or no evaluating; instead they buy on impulse and relay on intuition.

Stage (4) Purchase Decision

- Purchase decision: The stage of the buyer decision process in which the consumer actually buys the product.

- Consumer’s purchase decision will be to buy the most preferred brand, but two factors can come between the purchase intention and the purchase decision. 1. Attitudes of others à Jennifer’s friends ride Honda motorcycles, chances of her buying a Harley will be reduced. 2. Unexpected situation factors à The consumer may form a purchase intention based on factors such as expected income, expected price, and expected product benefits. However, unexpected events may change the purchase intention.

Stage (5) Post-purchase behaviour

- Post-purchase behaviour : The stage of the buyer decision process in which consumers take further action after purchase based on their satisfaction dissatisfaction.

- What determines whether the buyer is satisfied or dissatisfied with purchase? The answer lies in the relationship between the consumer’s expectation and the product perceived performance. If the product falls short of expectation, the consumer is satisfied; if it exceeds expectations, the consumer is delighted.

- Cognitive dissonance: Buyer discomfort caused by post-purchase conflict. (181) However every purchase involves compromise. Thus consumers feel at least some post-purchase dissonance for every purchase.

- Why is it important to satisfy the customer? Companies’ sales come from two places new customers and retained customers. It usually costs more to attract new customers than to retain current ones, and the best way to retain current customers is to keep them satisfied.

The buyer decision process for new products

- New Product: A good, service, or idea that a perceived by some potential customer as new.

- How consumers learn about products for the first time and make decisions on whether to adapt them.

- Adoption Process: The mental process through which an individual passes from first hearing about an innovation to final adoption.

Stages in the adoption process

- Awareness à The customer becomes aware of the new product, but lacks information about it.

- Interest à The customer seeks information about the new product.

- Evaluation à The customer considers whether trying the new product makes sense.

- Trial à The customer tries the new product on a small scale to improve his or her estimate of its value.

Individual differences in innovations

(The 5-adopter groups)à Innovators are venturesome they try new ideas at some risk. Early adopters are guided by respect-they are opinion leaders in their communities and adopt new ideas early but carefully. The early deliberate-although they rarely are leaders, they adopt new ideas before the average person. The late majority are sceptical-they adapt an innovation only after most people have tried it. Finally laggards are tradition bound-they re suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

Influence of product characteristics on rate of adoption

- Five characteristics are especially important in influencing an innovation’s rate of adoption

1. Relative advantage à the degree to which innovation appears superior to existing products.

2. Compatibility à The degree to which the innovation fits the value and experience of potential consumers.

3. Complexity à The degree to which the innovation is difficult to understand or use.

4. Divisibility à The degree to which the innovation may be tried on a limited basis.

5. Communicabilityà The degree to which the results of using the innovation can be observed or described to others.

Chapter 6 – Business Markets and Business Buyer Behaviour

- Business Markets: All the organizations that buy goods and services to use in the production of other products and services that are sold, rented, or supplied to others. It also includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.

- Business Buying Behaviour: The decision-making process by which business buyers establish the need for purchase products and services and identify, evaluate, and choose among alternative brands and suppliers.

Business Market

Characteristics of Business Markets

- Table 6-1 Characteristics of Business Market (200)

Market Structure and Demand

- The business market typically deals with far fewer but larger buyers than he consumer marketer does.

- Business markets are also more geographically concentrated.

- Derived demand: Business demand that ultimately comes from (derives from) the demand for consumer goods.

- Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes, especially in the short run.

- Business markets have more fluctuating demand. The demand for many business goods and services tend to change more-and more quickly then the demand for consumer goods and services does.

Nature of buying Unit

- Compared with consumer purchases, a business purchase usually involves more buyers and a more professional purchasing effort.

Types of Decision and Decision Process

A model of Business Buyer behaviour

Business Buyer Behaviour

Major types of Buying Situations

- Straight rebuy: A business buying situation in which the buyer routinely reorders something without any modification.

- They already did business and rebuying the same product.

- Modified rebuy: A business buying situation in which the buyer wants to modify product specification, price, terms, or suppliers.

- New Task: A business buying situation in which the buyer purchases a product or service for the first time.

- The greater the cost of risk, the larger the number of decision participants and the greater their efforts to collect information will be.

- The buyer makes the fewest decision in the straight rebuy and the most in the new task decision. In the new task situation, the buyer must decide on product specifications, suppliers, price limit, payment terms, order quantities, delivery times, and service suppliers.

- System buying: Buying a package solution to a problem and without all the separate decision involved.

- System selling is a two-step process. First the supplier sells a group of interlocking products. Second, the supplier sells system of production, inventory control, distribution, and other services to meet the buyer’s need for a smooth-running operation.

Participants in the Business Buying Process

- The decision-making unit of a buying organization is called à buying centre

- Buying centre: All the individuals and units that participate in the business buying decision process.

- Users: Members of all the organization who will use the product or service: users often initiate the buying proposal and help define product specification.

- Influencers: People in an organization’s buying centre who affect the buying decision, they often help define specifications and also provide information for evaluating alternatives.

- Buyers: People who make the actual purchase.

- Deciders: People in the organization’s buying centre who have formal or informal power to select or approve the final supplier.

- Gatekeepers: People in an organization’s buying centre who control the flow of information to others.

Major Influence on business Buyers

- Some marketers assume that the major influences are economic. They think buyers will favour the supplier who offers the lowest price, or the best product, or the most service.

Environmental Factors

- Business buyers are influenced heavily by factors in the current and expected economic environment, such as the level of primary demand, the economic outlook, and the cost of money. As economic uncertainty rises, business buyers cut back on new investments, and attempts to reduce their inventories.

- An increasingly important environmental factor is shortage in the key materials. Many companies now are more willing to buy and hold large inventories of scare materials to ensure adequate supply. Business buyers also are affected by technological, political, and competitive development in the environment. Culture and customs can strongly influence business buyer reactions to the marketer’s behaviour and strategies, especially in the international marketing environment.

Organizational Factors

- Upgrade purchasing à Today competitive pressure have led many companies to transform their old-fashioned "purchasing departments," with an emphasis on buying at the lowest cost, to "procurement departments," with a mission to seek the best value from fewer and better suppliers.

- Centralized purchasing à gives the company more purchasing influence, which can produce substantial saving. For the business market, this means dealing with fewer high-level. Instead of using regional sales force to sell to a large buyer’s separate plants, today seller may use, national account sales force.

- Businesses around the world has adopted several innovative manufacturing concepts, such as just-in-time production (JIT), value analysis, total quality management, and flexible manufacturing. Just-in-time means that production materials arrive at the customers factory exactly when needed for production, rather than being stored by the customer until used. It calls for close coordination between the production schedule of supplier and customer so that neither must carry much inventory.

The Business Buying process

1. Problem Recognition: The first stage of the business buying process in which someone in the company recognizes a problem or need that can e met by acquiring a good or service.

- The buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a better product or a lower price.

- Table 6-2 Major Stages of the business buying process in relation to major buying situations.

2. General Need Description: The stage in the business process in which the company describes the general characteristics and quantity of a needed item.

- For complex items the buyer may have to work with others-engineers, users, consultants-to define the item. The team may want to rank the importance of reliability, durability, price and other attributes desired in the item.

3. Product Specification: The stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item.

- Value analysis: An approach t cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.

4. Supplier Search: The stage of the business buying process in which the buyer tries to find the best vendor.

- The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. The newer the buying task, and the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers.

5. Proposal Solicitation: The stage of the business buying process in which the buyer invites qualified suppliers to submit proposals. In response some suppliers send catalogue, salesperson. However when the item is complex or expensive the buyer will usually require detailed written proposals or formal presentation from each potential supplier.

6. Supplier Selection: The stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers.

- The member of the buying centre now reviews the proposal and select supplier or suppliers.

- Another important factor includes repair and servicing capabilities, technical aid, and advice, geographic location, performance history and reputation.

- Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time.

7. Order-Routine Specifications: the stage in the business buying process in which the buyer writes the final order with the chosen supplier(s), listing the technical, quantity needed, expected time of delivery, return policies, and warranties.

8. Performance Review: The stage of the business buying process in which the buyer rates its satisfaction with suppliers, deciding whether to continue, modify, or drop them.

- The buyer reviews supplier’s performance. The buyer may contact users and ask them to rate their satisfaction.

Institutional and Government Markets

Institutional Markets

- Institution Markets: Schools, hospital, nursing homes, prisons, and other institutions that provide goods and services to people in their care.

Government Markets

- Government Markets: Government units-federal, provincial, and municipal- that purchase or rent goods and services for carrying out the main functions of government.

- The Department of public works and Government Services Canada helps to centralize the buying of commonly used items in the civilian section.

- Federal military buying is carried out by the Department of National Defence

- Government organizations typically require suppliers to submit bids, and normally they award the contract to the lowest bidder.

- Government Organizations tend to favour domestic suppliers over foreign suppliers.

- Because the Government spending decisions are subject to public review government organizations require considerable paperwork from suppliers, who often complain, about excessive paperwork, bureaucracy, regulations, decision-making delays, and frequent shifts in procurement personnel.

- Many companies that sell to the government have not been marketing-orientated for a number of reasons. Total government spending is determined by elected officials rather than by marketing effort to develop this market. Government buying has emphasized price, making suppliers invest their effort in technology to bring down costs. When the product’s characteristics are specified carefully, product differentiation is not a marketing factor. Nor do advertising or personal selling matter much in winning bids on an open bid basis.

Chapter 7 – Market Segmentation, Targeting, and Positioning for competitive advantage

Market

- Today most companies are moving away from mass marketing. Instead, they practice target marketing-identifying market segments, selecting one or more of them, and developing products and marketing mixes tailored to each.

- Market Segmentation: deciding a market up into distinct groups of buyers with different needs characterises, or behaviours who might require separate products or marketing mixes. The company identifies different ways to segment the market and develop profiles of the resulting market segments.

- Market targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to serve.

- Market positioning: Setting the competitive positioning for the product and creating a detailed marketing mix.

Market Segmentation

Levels of Market Cementation

Mass Market

- Mass marketing – mass production, mass distributing, and mass promoting the same product in the same way to all customers.

- The traditional argument for mass marketing is that it creates the largest potential market, which leads to the lowest cost, which in turn can translate into either lower prices or higher margins.

Segment Marketing

- Segment Market: Marketing that recognizes that buyers differ in their needs, perception, and buying behaviour.

- The company tries to isolate broad segments that comprise a market and adapts its offers to more closely match the needs of one or more segments.

Niche Marketing

- Niche Marketing: Marketing that focuses on subgroups within the large identifiable group in the market.

Micromarketing

- Micromarketing: The practice of tailoring products and marketing programs to suit the tastes of specific individuals or locations.

- Micromarketing include local marketing and individual marketing.

- Local Marketing: The practice of tailoring brands and promotions to the needs and wants of local customer groups.

- Draw backs of local marketing, it can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistical problems as companies try to meet the varied requirements of different regional and local markets. And brands overall image might be diluted if the product and message vary in different stores.

- Individual Marketing: The practice of tailoring products and marketing programs to the needs and preferences of individual customers.

Bases for Segmenting Consumer Markets

Geographic Segmentation

- Geographic segmentation: Dividing a market into different geographical units such as nations, provinces, regions, countries, cities or neighbourhoods.

Demographic Segmentation

- Demographic segmentation: Dividing the market into groups based on demographics variable such as sex, age, family size, family life cycle, income, occupation, education, religion, race, and nationality.

- Demographic factors are the most popular bases for segmenting customer groups. One reason is that customer needs, wants and usage rates often vary closely with demographic variables. Another s that demographic variables are easier to measure than most other types of variables.

- Table 7-1 Major Segmentation Variables for customer markets (231)

Age and life cycle

- Age and life cycle: Dividing the market into different age and life cycle groups.

- Customer needs and want change with age.

Gender

- Gender segmentation: Dividing a market into different groups based on sex.

Income

- Income Segmentation: Dividing a market into different income groups.

Psychographics Segmentation

- Psychographics segmentation: Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

Behaviour Segmentation

- Behaviour Segmentation: Dividing marketing into groups based on customer knowledge, attitudes, use, or response to a product.

- Occasion Segmentation: Dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use their purchase item.

Benefit Sought

- Benefit Segmentation: Dividing the market into groups according to the different benefits that customers seek from the product.

User Status

- Markets can be segmented into groups of non-user, ex-users, potential users, first-time users, and regular users of a product.

Usage rate

- Marketers also can be segmented into light, medium, and heavy user groups. Heavy users are often a small percentage of the market, but account for a high percentage of total buying.

Loyalty Status

- A market can be segmented by customer loyalty. Some customers are completely loyal-they buy one brand all the time. Others are somewhat loyal- they are loyal to 2 or 3 brands of a given product or favour one brand while sometimes buying others. Still other buyers show no loyalty to any brand. They either want something different each time they buy or they buy whatever is on sale.

Segmenting Business Markets

- Table 7-3 Major Segmentation Variables for Business Markets

- Within the chosen industry, a company can further segment by customer size or geographic location.

- Within a target industry and customer size, the company can segment by purchase approaches and criteria.

- Programmed buyers à they buy the products as a routine purchase, usually pay full price, and accept below-average service.

- Relationship buyers à these buyers regard packaging products as moderately important and are knowledgeable about competitors’ offering. They prefer to buy from a retailer as long as its price is reasonably competitive. They receive a small discount and a modest amount of service.

- Transaction buyers à these buyers view the product as very important to their operations. They are price and service sensitive. They receive about a 10 percent discount and above-average service. They are knowledgeable about competitors offering and are ready to switch for a better price, even if it means losing some service.

- Burgin buyers à these buyers view the product as very important and demand the deepest discount and the highest service. They know the alternatives suppliers, bargain hard, and are ready to switch at the slightest dissatisfaction.

Segmenting International Markets

- Operating in many countries present new challenges. The different countries of the world, even those that are close together, can vary dramatically in their economic, cultural, and political composition.

- Companies can segment international markets using one or a combination of several variables. They can segment by geographic location, grouping countries by regions such as Western Europe, the Pacific Rim, the Middle East, or Africa.

- World markets can be segmented on the basis of economic factors. For example, countries might be grouped by population income, level, or by their overall level of economic development.

- Countries can be segmented by political and legal factors such as the type and stability of government, receptivity firms, monetary regulations, and the amount of bureaucracy. Such factors can play a crucial role in a company’s choice of which countries to enter and how. Cultural factors also can be used, grouping markets according to common language, religions, values, and attitudes, customs, and behavioural patterns.

- Intermarket Segmentation: Forming segments of customers who have similar needs and buying behaviour even though they are located in different countries.

Requirements for Effective Segmentation

- Market segmentation must have the following characteristics:

v Measurability; the size, purchasing power, and profiles of the segments can be measured. Certain segmentation variables are difficult to measure. For example, there are four million left handed people in Canada –which is 15 of the population. Yet few products are targeted towards left-handed segment.

v Accessibility; The market segments can be effectively reached and served. Suppose a food company finds that heavy users of its brands are new Canadians. Unless there are media in the language spoken by these individuals, they will be difficult to reach.

v Substantiality; The market segment are large or profitable enough to serve. A Segment should be the largest possible homogenous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for persons who height is less than 4 feet.

v Actionability; Effective programs can be designed for attracting and serving the segments. For example, although one small airline identifies seven-market segment, its staff was to small to develop separate marketing programs for each segment.

Market Targeting

Evaluating Market segments

- In evaluating different market segments, a firm must look at 3 factors: segment size and growth segment structural attractiveness, and company objectives and resources.

Segment Size and Growth

- The company must first collect and analyse data on current segment sales, growth rates and expected profitability for various segments.

Segment Structural Attractiveness

- A segment is less attractive if it already contains many strong and aggressive competitors.

- A segment may be less attractive if it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services.

Company Objectives

- If a segment fits the company’s objectives, the company then must decide whether it possesses the skills and resources needed to succeed in that segment. If the company lacks strength needed to compete successfully in a segment and cannot readily obtain them, it should not enter the segment. Even if the company possesses the required strengths, it needs to employ skills and resources superior to those of the competition in order to really win in a market segment. The company should enter segments only where it can offer superior value and gain advantages over competitors.

Selecting Market Segments

- Target Market: A set of buyers sharing common needs or characteristics that the company decides to serve.

Undifferentiated Marketing

- Undifferentiated marketing: A market coverage strategy in which a firm decides to ignore market segment differences and purse the whole market with one offer.

- The company designs a product and a marketing program that appeal to the largest number of buyers.

- Difficulties arise in developing a product or brand that will satisfy all consumers. Firms using undifferentiated marketing typically develop an offer aimed at the largest segments in the market.

Differentiated Marketing

- Using a differentiated marketing strategy a firm decides to target several markets and designs separate offers for each. General Motors tries to produce cars for every "purse, purpose, and personality." Nike offers athletic shoes for a dozen or more different sports.

- Differentiated marketing typically creates more total sales than does undifferentiated marketing, and growing number of firms have adopted this strategy.

- Differentiated marketing: A market coverage strategy in which a firm decides to target several market segments and designs separate offers for each.

Concentrated Marketing

- Concentrated Marketing: A market-coverage strategy in which a firm goes after a large share of one or a few submarkets.

- Concentrated marketing provides an excellent way for a small new business to get a foothold against larger, more resourceful competitors.

- Concentrated marketing involves higher than normal risks. The particular market segment can turn sour. Or larger competitors may decide to enter the same agents.

Choosing a market coverage strategy

- When the firm’s resources are limited, concentrated marketing makes the most sense. The best strategy also depends on the degree of product variability. Undifferentiated marketing is more suited for uniform products such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration. The product’s stage in the life cycle also must be considered. When a firm introduces a new product, it is practical to launch only one version, and undifferentiated marketing or concentrated marketing makes the most sense.

- Another factor is market variability. If most buyers have the same tastes, buy the same amount, and react the same way to marketing efforts, undifferentiated marketing is appropriate. Competitors’ marketing strategies are important. When competitors use segmentation, undifferentiated marketing can be suicidal. When competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing.

Positioning for competitive advantage

- Product Position: The way the product is defined by consumers on important attributes-the place the product occupies in consumer’s minds relative to competing products.

- Tide is positioned as a powerful, all-purpose family detergent

Positioning Strategies

- Marketers can follow several positioning strategies. They can position their products on specific product promotes performance. Products attributes- Honda Civic advertises its low price; BMW promotes performance. Products can be positioned on the needs they fill or the benefits they offer-Crest reduces cavities; Aim tastes good. Or product can be positioned according to usage occasions-in the summer, Gatorade can be positioned as a beverage for replacing athletes’ body fluids; in the winter; it can be positioned as the drink to use when doctor recommends plenty of liquids.

- A product can also be positioned directly against a competitors. For example, in its ads, VISA compares itself directly with American Express.

Choosing and Implementing A positioning strategy

Identifying Possible Competitive Advantages

- The key to winning and keeping customers is to understand their needs and buying processes better than competitors do and to deliver more value. To the extent that a company can position itself as providing superior value to selected target market, either by offering lower prices than competitors do or by providing more benefits to justify higher prices, it gains competitive advantage.

- Competitive advantage: An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justifies higher prices.

Product Differentiation

- Differentiation of physical products takes place along a continuum. At one extreme there are highly standardized products that allow little variation, chicken, steel, aspirin. At the other end is paper towels, creating a demand for higher quantity products.

Service Differentiation

- Installation also can differentiate one company from another. Companies can further distinguish between themselves through their repair services. Providing customer training service. Other companies offer free or paid consulting services-data, information systems, and advising services that buyers need.

Personnel Differentiation

- Companies can gain string competitive advantage through hiring and training better people than their competitors do.

- Personnel differentiation requires that a company select its people carefully and train them well. This is especially important for companies such as consulting firms, which market knowledge-based services that hey tailor to their customers’ need.

Image Differentiation

- Even when competing offers look the same, buyers may perceive a difference based on company or brand image.

- Symbols can provide strong company or brand recognition and image differentiation. The chosen symbols must be communicated through advertising that conveys the company or brand personality. The ads attempts to establish a storyline a mood, a performance level-something distinctive about the company or brand.

Selecting the right competitive advantage

- Many marketers think that companies should promote one benefit to the target market. Ad man Rosser Reeves said that a company should develop a unique selling proposition for each brand and stick to it. Each brand should choose an attribute and tour itself as "number one" on that attribute. Buyers tend to remember "number one".

- Other marketers think that companies should position themselves on more than one differentiating factor. This may be necessary if two or more firms are claiming to be best on the same attribute.

- In general a company needs to avoid 3 major positioning errors.

1) Underpositioning à failing to ever really position the product at all. Some companies discover that buyers have only a vague idea of the company or that they do not really know anything special about it.

2) Overpositioning à giving buyers too narrow of a picture of the company. Thus, a consumer might think that Steuden glass company makes only fine art glass costing $4000 and up when in fact it makes affordable glass $60 and up.

3) Confused positioning à leaving buyers with a confused image of a company. Ex Burger King (251)

Which difference to promote

- A difference is worth establishing to the extent that it satisfies the following criteria:

q Important: the difference delivers a highly valued benefit to target buyers.

q Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.

q Superior: The difference is superior to other ways that customers might obtain the same benefit.

q Communicable: The difference is communicable and visible to buyers.

q Preemptive: Competitors cannot easily copy the difference.

q Affordable: Buyers can afford to pay for the difference.

q Profitable: The company can introduce the difference profitably.

Communicating and Delivering the Chosen Position

- Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers.

Chapter 8 – Product and Service Strategies

What is a Product?

- Product: A cluster of benefits that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, person, places, organizations, and ideas.

- Service: Any activity or benefit that the party can offer to another that is essentially intangible and does not result in the ownership of anything tangible.

The Product-Service Continuum

- Pure-tangible good, such as soap, toothpaste, or salt-no services accompany the product.

- Service dominated offerings à an intangible benefit created for the customer but no physical product is exchanged. Examples include a doctor’s exam, a university lecture, or financial service.

Levels of Product

- Core product: The problem solving services or core benefits that consumers are really buying when they obtain a product. Example: A women buying lipstick buys more than lip colour, "It the factory we make cosmetics, in the stores we sell home".

- Actual product: A product’s parts, quality, level, features, design, brand name, packaging, and other attributes that combine to deliver core products benefits.

- Augmented Product: Additional consumer services and benefits built around the core and actual product. Example: warranty on parts, free lessons on how to use the camcorder, quick repair service.

- Figure 8-1 Three levels of a product

Product Classification

Consumer Products

- Consumer Products: Products bought by final consumer for personal consumption.

- Consumer products include convenience products, shopping products, specialty products, and unsought products.

- Convenience Products: Consumer products and services that the customer usually buys frequently immediately, and with a minimum of comparison and buying effort.

- Convenience products can divide further into staples, impulse products, and emergency products. Staples are products that consumers buy on a regular basis, such as ketchup, toothpaste, and electric power. Impulse products are purchased with little planning or search effort. These products are normally widely available.

- Emergency products when their need is urgent-umbrellas during a rainstorm, travel insurance at an airport, or boots and shovels during the year’s first snowstorm.

- Shopping products: Consumer goods and services that the consumer, in the process of selection and purchase characteristically compares on such bases as stability, quality, price, and style.

- When buying shopping products and services, consumers spend much time and effort in gathering information and making comparison., examples include furniture, clothing, vacations, and restaurant.

- Table 8-1 Marketing consideration for consumer products

- Specialty products: Consumer products and service with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort. A Rolls Royce, for example, is a specialty product because buyers are usually willing to travel great distances to buy one.

- Unsought Product: Consumer products and services that the consumer either does not know about or knows about but does not normally think of buying. Example; life insurance, encyclopaedias, and blood donations.

Industrial Products

- Industrial products: products and services bought by individual and organizations for further processing or for use in conducting a business.

- There are 3 groups of industrial products: materials and parts, capital items, and supplies and services.

- Material and Parts: Industrial products that enter the manufacturer’s product completely, including raw materials and manufactured materials and parts.

- Raw materials include farm products (wheat, cotton, livestock, fruit, vegetables) and natural products (fish, lumber, crude petroleum, iron ore)

- Capital Items: Industrial products that partly enter the finished products, including installation and accessory equipment.

- They include installations and accessory equipment. Installations consist of building (factories, offices) and fixed equipment (generators, drill presses, large computers and elevators)

- Accessory equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (fax machine, desks)

- Suppliers and services: Industrial products that do not enter the finished product at all.

- Supplies and services are industrial products that include operating supplies (lubricants, coal, computer paper, pencils) and repair and maintenance items (paper, nails, broom)

Organizations, Persons, Places, and Ideas

- Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behaviour of target consumers toward an organization both profit and non-profit organizations practise organization marketing.

- Person marketing consists of activities undertaken to create, maintain, or change attitudes or behaviour toward particular people.

- Place marketing involves activities undertaken to create, maintain, or change attitudes or behaviour towards particular places. Examples include business site marketing and tourism marketing.

- Ideas also can be marketed. In one sense, all marketing is the marketing of idea, whether it is the general idea of brushing your teeth or the specific idea that Crest provides the most effective decay prevention.

- Social Marketing: The creation and implementation of programs seeking to increase the acceptability of a social idea, cause, or practice within targeted groups.

Individual Product Decisions

- Figure 8-2 Individual product decisions (270)

- Developing a product or service involves defining the benefits that the product will offer. These benefits are communicated and delivered by product attributes such as quality, feature and design.

Product Quality

- Product Quality: the ability of a product to perform its functions; it includes the product’s overall durability, reliability, precision, ease of operation, repair, and other valued attributes.

- Product Quality has two dimensions-level and consistency. In developing a product, the marketer must first choose a quality level that will support the product’s position in the target market. Here, product quality means performance quality- the level at which a product performs its functions.

- Product design: The process of designing a product’s style and functions: creating a product that is attractive; easy, safe, and inexpensive to use and service; and simple and economical to produce and distribute.

Product Features

- Features are a completive tool for differentiating the company’s product form competitor’s products. Being the first producer to introduce a needed and valued new feature is one of the most effective ways to compete.

Product Design

- Design is a larger concept than style. Style simply describes the appearance of a product. Styles can be eye-catching or yawn inspiring. A sensational style may grab attention, but it does not necessarily make the products perform better. Unlike style, design, is more than skin deep-it goes to the very heart of a product. Good design contributes to a product’s usefulness as well as to its looks.

Branding

- Brand: A name, term, sign, symbol, or design, or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

- Consumers view a brand as an important part of a product, they give products and service a personality that consumers can relate to, and branding can add value to a product.

- Branding has become so strong that today hardly anything goes unbranded.

- Branding helps buyers in many ways. Brand name helps consumers identify products that might benefit them. Brands also tell the buyer something about product quality. Buyers who always buy the same brand know that they will get the same features, benefits, and quality each time they buy. Branding also gives seller several advantages. The seller’s brand name a trademark provide legal protection for unique product features that otherwise might be copied by competitors.

- A brand can deliver up to 4 levels of meaning:

Ø Attributes. A brand first brings to mind certain product attributes. Example Mercedes suggest attributes as "well engineered", and "durable". The company may use one or more of these attributes in its advertising for a car.

Ø Benefits. Customers do not buy attributes, they buy benefits. Therefore, attributes must be translated into functional and emotional benefits. For example, the attribute "durable" could translate into functional benefit.

Ø Values. A brand also says something about the buyers’ values. Thus Mercedes buyers value high performance, safety, and prestige. A brand marketer must identify the specific groups of car buyers whose values coincide with the delivered benefit package.

Ø Personality. A brand also projects a personality. Motivation researchers sometimes ask, "If this brand were a person, what kind of person would you be? The brand will attract people whose actual or desired self-image match the brand’s image.

Brand Equity

- Brand equity: The value of a brand, based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand association, and other assets such as patent, trademarks, and channel relationship.

- High brand equity provides a company with many competitive advantages; a powerful brand enjoys a high level of consumer brand awareness and loyalty.

Brand Name Selection

- Figure 8-3 Major branding decision

- Desirable qualities for a brand name include: (1) it should suggest something about the product’s benefits and qualities. (2) It should be easy to pronounced, recognize, and remember. Short names. (3) The brand name should be distinctive. (4) The name should translate easily into foreign language. (5) It should be capable of registration and legal protection. A brand name should be registered if it infringes on existing brand names. Also, brand names that are merely descriptive or suggestive may be unprotected.

Brand Sponsor

- The product may be launched as manufactures brand (or national brand), as when Kellogg and IBM sell their output under their own manufacture’s brand name. Or the manufacture may sell to resellers who give it a private brand (also called store brand and distributor brand). Although more manufactures create their own brands, other market licenses brand. Finally two companies can co-brand a product, such as when General Motors and Hershey Foods combined brands to create Reese’s Peanut Butter Puffs Cereal.

- Manufacture’s brand (national brand): A brand created and owned by the producer of the product or seller.

- Private Brand: A brand created and owned by a reseller of a product or service.

- Slotting Fee: Payments demanded by retailers before they will accept new products and find "slot" for them on the selves.

Licensing

- Some companies license names or symbols previously created by other manufactures, names of well-known celebrities, character from popular movies and books-for fee, any of these can provide an instant and proven brand name.

Co-branding

- Co-branding: The practice of using the established brand names of two different companies on the same product.

- For example, Pillsbury joined Nabisco to create Pillsbury Oreo Bars Baking Mix.

- In most co-branding situations, one company licenses another company’s well-known brand to use with its own.

- Co-branding offers may advantages. Because each brand dominates in different category, the combined brands create broader consumer appeal and greater brand equity. Co-branding also allows companies to enter new markets with minimal risk.

Brand Strategy

Line Extension

- Line extensions occur when a company introduces additional items in a given product category under the same brand name, such as new flavours, forms, colour, ingredients, or package size.

- Line Extension: Using a successful brand name to produce additional items in a given product category under the same brand name, such as a new flavour, forms, colour, added ingredients, or package size.

- A company might introduce line extensions to meet consumer’s desires for variety, to utilize excess manufacturing capacity or to match a competitor’s successful line extension. Some companies introduce line extension simply to command more shelf space for resellers.

Brand Extension

- Brand Extension: Using a successful brand name to launch a new or modified product in a new category.

- Fruit of a Loom launched a new line of socks, men’s fashion underwear, women’s underwear, and athletic apparel.

- A brand extension gives a new product instant recognition and faster acceptance. It also saves the high advertising costs usually required to build a new brand name. Ex. Life Saver Gum

Multibrands

- Multibranding: A strategy under which a seller develops two or more brands in the same product category.

- Multibranding also allows a company to lock up more resellers "shelf space." Or the company may want to protect its major brands by setting up flanker or fighter brands. Seiko uses different brands for its higher-priced watches and a different price for its lower-prices watches.

- A major drawback of multibranding is that each brand might obtain only a small market share, and none may be very profitable.

Packaging

- Packaging: The activities of designing and producing the container or wrapper for a product.

- Labelling is also part of packaging and consists of printed information appearing on or with the package.

- Packaging Concept: What the package should be or do for the product.

Labelling

- The label identifies the product or brand, such as the name Sunkist stamped on orange. The label might describe several things about the product-who makes it, where it was made, when it was made, its contents, how it is to be used, and how to use it safety.

Product-Support Services

- Product-support services: Services that augment actual products.

Product Line decisions

- Product Line: A group of products that are closely related because they function in a similar manner, are sold to the same consumer groups, are marketed through the same type s of outlets, or fall within the given price ranges.

- The line is too short if the manager can increase profits by adding an item. The line is too long if the manager can increase profits by dropping items.

- It can systematically increase the length of the product line in two ways: by strengthen its line and by filling its line.

Stretching Downwards

- Figure 8-5 Product Line stretching decision (284)

- A company may stretch downward to plug a market hole that otherwise would attract a new competitor, or to respond to a competitor’s attack on the upper end. Or it may add low-end products because it finds faster growth taking place in the low-end segments.

Stretching Upwards

- Companies at the lower end of the market may want to stretch their product lines upwards. They may be attracted by a faster growth rate or higher margins at the higher end, or they may simply want to position themselves as full-line manufacturers or add prestige to their current products.

Stretching both ways

Filling the Product Line

- An alternative to product line stretching is product line filling-adding more items within the present range of the line. Reasons for product line filling: reaching for extra profit, trying to satisfy dealers, trying to use excess capacity, trying to be the leading full-line company, and trying to lug holes to keep out competitors.

Product Mix Decisions

- Product Mix (or product assortments): The sell of all products lines and items that a particular seller offers for sale to buyers.

- The width of the products mix refers to the number of different product line the company carries.

- The length of the product mix refers to the number of different product line the company carries.

- Figure 8-2 Product Mix (286)

- The depth of the product mix refers to the number of versions offered of each product in the line. Thus, Crest comes in three sizes and 2 formulations (paste, and gel); Crest has a depth of 6.

Service Marketing

- The government offers service through courts, employment services, hospital, loan agencies, military and police...

- The private non-profit organizations offer service through museums, charities, churches, colleges, and foundations...

- Business organizations offer service through airlines, banks, hotels, insurance companies, and entertainment...

Nature and Characteristics of a Service

- A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

- A company must consider four special characteristics of a service when designing marking programs, intangibility, inseparability, variability, and perishability.

- Figure 8-6 Four service characteristics (290)

Intangibility

- Service Intangibility: A major characteristic of service-they cannot be seen, tastes, felt, heard, or smelled before they are bought. Example; cosmetic surgery.

- Service inseparability: A major characteristic of services- they are produced and consumed at the same time and cannot be separated from their providers, whether the providers are people or machines.

- Service Variability: A major characteristics of services-their quality may vary greatly, depending on who provides them and when, where, and how they are provided. For example, some hotel such as the best Western and the Marriot have reputations for providing better device then others. But within a given Marriot, one registration desk employee may be cheerful and efficient, whereas another standing just a few feet away may be unpleasant and slower.

- Service Perishability: A major characteristic of services-they cannot be stored for latter sale or use.

- Some dentists charge patients for missed appointments because the service value existed only at the point and disappeared when the patient did not show up.

Marketing Strategies for Service Firms

The Service-Profit Chain

- Healthy service profits and growth à superior service firm performance which result from...

- Satisfied and loyal customers à satisfied customers who remain loyal, repeat, purchase, and refer other customers, which result from...

- Greater service value à more effective and efficient customer value creation and service delivery, which result from...

- Satisfied and productive service employees à more satisfied, loyal, and hard working employees, which result from...

- Internal Service quality à superior employee selection and training, a quality work environment, and strong support for those dealing with customers.

- Internal marketing: Marketing by a service firm to train and effectively motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction.

- Interactive Marketing: Marketing by a service firm that recognizes that perceived service quality depends heavily on the quality of buyer-seller interaction.

Managing Service Quality

- One of the major ways a service firm can differentiate it is by delivering consistently higher quality than its competitors do.

- They assess the credibility of the service. Strong brand names and guarantees increase consumers’ perceptions of service credibility. They also want service providers to e empathetic and understand their needs and problems. Services must also be reliable. People expect that the service is delivered with consistent quality. People expect services to be responsive and to deal with them as individuals. People judge service quality using the tangible cues that surround service provision.

Managing Productivity

- The service providers can train current employees better, or they can hire new ones who will work harder or more skilful for the same pay. Or the service providers can increase the quality of their service by giving up some quality.

Chapter 9 – New Product Development and Life Cycle Strategies

New Product Development Strategy

- A firm can obtain products in 2 ways: Acquisition- buy buying a whole company, a patent, or a license to product someone else’s product. The other is through new-product development- in the company’s own research and development department.

- New product development: The development of original products, product improvements, product modifications, and new brands through the firm’s own R&D efforts.

- Why do so many new products fail? The market size might have been overestimated. Actual product was not designed as well as it should have been. Or it was incorrectly positioned in the market, price to high or advertised poorly.

- Because so many new products fail, companies want to learn how to improve the success of their new product. One way is to identify successful new products and determine what they have in common. The number one success factor is unique superior product, one with high quality, new features, and higher value in use.

The New Product Development Process

1. Idea Generation

- Idea Generation: The systematic search for new product ideas.

- Many new product ideas come from internal sources.

- Good new-product ideas result from watching and listening to customers.

2. Idea Screening

- Idea Screening: Screening new product ideas in order to identify good ideas and drop poor ones as soon as possible.

- The purpose of screening is to identify good ideas and drop poor ones as soon as possible. Product-development costs rise greatly in later stages. The company wants to proceed only with the product ideas that will turn into profitable products.

- Committee asks questions such as: Is the product truly useful to consumers and society? Is it good for our particular company? Does it mesh well with the company’s objectives and strategies? Do we have the people, skills, and resources to make it succeed? Does it deliver more value to customers than competing products? Is it easy to advertise and distribute?

3. Concept Development and Testing

- Product Concepts: A detailed version of new-product idea stated in meaningful consumer terms.

- It is important to distinguish among a product idea, a product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.

Concept Development

- Concept development: Concept development involves expanding the new product idea into various alternatives forms.

- Concept testing: Testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.

- Some concept test a word or picture description might be sufficient.

- After being exposed to the concept, consumers then may be asked to react to it by answering the questions in Table 9-2 (319)

- Many firms routinely test new product concepts with consumers before attempting to turn them into actual new products.

4. Marketing Strategy Development

- Marketing Strategy development: Designing an initial marketing strategy for a new product based on the product concept.

- They marketing strategy statement consist of 3 parts. The first part describes the target market; the planned product positioning: and the sales, market share, and profit goals for the first year. The second part outlines the product’s planned price, distribution, and marketing budget for the first year. The third part describes the planned long-run sales, profit goals, and marketing mix strategy.

5. Business Analysis

- Business Analysis: A review of the sales, costs, and new profit projections, for a new product to determine whether these factors satisfy the company’s objectives.

- Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. If they do, the product can move to the product-development stage. To estimate sales, the company should examine the sales history of similar products and should survey market opinion. It should estimate minimum and maximum sales to assess the range of risk.

6. Product Development

- Product Development: Developing the product concept into a physical product to assure that the product idea can be turned into a workable product.

7. Test marketing

- Test marketing: The stage of new-product development where the product and marketing program are tested in more realistic market settings.

- Test marketing gives the marketer experience with marketing the product before going to the expense of full introduction. It lets the company test the product and its marketing program-positioning strategy, advertising, distribution, pricing, branding, packaging, and budget level.

- 3 Types of Test marketing: (1) Standard Test Markets (2) Controlled Test Marketing (3) Simulated Test Marketing

Standard Test Markets

- The company finds a small number or representative test cities, conducts a full marketing campaign in these cities, and uses store audits, consumer and distributor survey, and other measures to gauge product performance.

- May be very costly, takes a long time, gives competitors a look at the company’s new product well before it is introduced nationally. Thus competitors may have time to develop defensive strategies, and may even beat the company’s product to the market.

Controlled Test Markets

- Research firm keeps controlled panels of the store that have agreed to carry new products for a fee. The company with the new product specifies the number of stores and geographical locations it wants. The research firm delivers the product to the participating stores and controls shelf locations, amount of self-space, display and point of-purchase promotions, and pricing according to specified plans. Sales results are tracked to determine the impact of these factors on demand.

- Controlled test markets take less time than standard test markets. Cost less.

- Disadvantage: Limited number of cities and panel consumers used by the research services may not be representative of their product’s markets or target consumers.

Simulated Test Markets

- The company shows ads and promotion for the new products. It gives a sample of a new product being tested in shopping centres. Gives customers a small amount of money and invites them to a laboratory store where they can keep the money or buy items. The researcher notes how many customers buy the new item. The research then ask consumers the reason for their purchase or non-purchase. Some weeks later, they interview the consumers by phone to determine product attitudes, usage, satisfaction, and purchase intentions.

- Cost much less, keep the new product out of competitor’s view. Disadvantage: does not consider simulated test markets to be accurate or reliable as larger, real-world tests.

Test Business Products

- Product use test à The business marketer selects a small group of potential customers who agree to use the new product for a limited time.

- Trade Shows à These shows draw large number of buyers who view new products in a few concentrated days. The manufacture sees how buyer react to various product features ad terms, and can assess buy interest and purchase intentions.

- Standard or controlled test markets à to measure the potential of their new products. They produce limited supply of the product and give it to the sales force in a limited number of geographical areas.

8. Commercialization

- Commercialization: Introducing a new product into the market.

- The company launching a new product must first decide on introduction timing.

- The company must decide where to launch the new product-in a single location, a region, the national market, or the international market.

Speeding up New-Product Development

- Sequential Product Development: A new product development approach in which one company department works individually to complete its stage of the process before passing the new product along to the nest departments and stage.

- This orderly, step-by step process can help bring control to complex and risky projects, but it can be dangerously slow. In fast-changing, highly competitive markets, such slow-but-sure product development can result in product failures, lost sales and profits, and crumbling market positions.

- Simultaneous (or team based) product development: An approach to developing new products in which various company departments work closely together, overlapping the steps in the product-development process to save time and increase effectiveness.

- The objective is not to create a product faster, but to create them better and faster.

Product Life Cycle

- Figure 9-2 (327)

- Product Life Cycle (PLC): The course of a product’s sales and profit over its lifetime. It involves five distinct stages: product development stage, Introduction, Growth, Maturity and Decline.

- 1. Product development begins when the company finds and develop a new-product idea. During product development, sales are zero and the company’s investments costs mount.

- 2. Introduction is a period of slow sales growth as the product is being introduced in the market. Profits are non-existent in this stage because of the heavy expense of the product introduction.

- 3. Growth is a period of rapid market acceptance and increasing profits.

- 4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profit level off or decline because of increased marketing outlays to defend the product against competition.

- 5. Decline is the period when sales fall off and profits drop.

- Figure 9-3 (328)

- Style: A basic and distinctive mode of expression. Example. Styles of Victoria, ranch, modern)

- Fashion: A currently accepted or popular style in a given field.

- Fads: Fashion that enters quickly is adopted with great zeal, peak early, and decline very fast.

Introduction Stage

- Introduction Stage: The product life cycle stage when the new product is first distributed and made available for purchase.

- Profits are negative or low because of the low sales and high distribution and promotion expenses. Mush money is needed to attract distributors and build their inventories. Promotion spending is relatively high to inform consumers of the new product and get them to try it.

Growth Stage

- Growth Stage: The product life cycle stage at which a product’s sales start climbing quickly.

- The early adapters will continue to buy and later buyers will start following their lead.

- Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets, and sales jump just to build reseller inventories. Prices remain where the are or fall only slightly.

- Profits increase during growth stage, as promotion costs are spread over a large volume and as unit-manufacturing costs.

Maturity Stage

- Maturity Stage: The stage in the product life cycle where sales growth slows or levels off.

- Overcapacity leads to greater competition. Competitors being marketing down prices, increase their advertising and sales promotion, and increasing their R&D budgets to find better versions of their product.

- In modifying the market, the company tries to increase the consumption of the current product.

- The company might also try modifying the product changing the product characteristics such as quality, features, and style to attract new users and to inspire more usage. It might improve the products quality and performance-its durability, reliability, speed, taste. Or it might add new features that expand the product’s usefulness, safety, or convenience.

- The company might decide to modify the marketing mix.

Decline Stage

- Decline Stage: The product life cycle stage at which a product’s sales decline.

- Many reasons include technological advances, shifts in consumer tastes, and increase in competition.

- The biggest cost may well lie in the future. Keeping weak products delays the search for replacements, creates a lopsided product mix, hurts current profits, and weekend the company’s foothold on the future.

- Management may decide to maintain its brand without change in the hope that competitors will leave the industry.

- Management may decide to harvest the product, which means reducing various costs (plants, equipment, maintenance R%D, advertising, sales force) and hoping that sales hold up.

- Figure 9-3 (333)

Chapter 20 – Marketing and Society

Marketing Impact on Individual Consumers

High Costs of Distribution

- A longstanding charge is that greedy intermediaries mark up prices beyond the value of their service.

- How do retailers answer to these charges? They argue the following: intermediaries do work that would otherwise have to be done by manufactures or consumers. Mark-ups reflect services that consumers themselves want-more convenience, larger stores and assortments, long store hours, return privileges. The cost of operating stores keep rising, forcing retailers to raise their prices. Retail competition is so intense that margins are actually quite low.

High Advertising and Promotion Costs

- Differentiated products-cosmetics, detergents, toiletries-include promotion and packaging costs that can amount to 40 percent or more of the manufacturer’s price to the retailer.

- Marketers answer these changes in many ways: Consumers want more benefits –they want to feel wealthy, beautiful, or special. Consumers usually can buy functional versions or products at lower prices but often are willing to pay more for products that also provide desired psychological benefits. Branding gives buyers’ confidence. A brand name implies a certain quality, and consumers are willing to pay for well-known brands even if they cost a little more. Heavy advertising is needed to inform millions of potential buyers of the merits of a brand. If consumers want to know what is available on the market, they must expect manufacturers to spend large sums on money on advertising. Heavy advertising and promotion may be necessary for a firm o match competitors’ efforts. The business would lose "share of mind" if it did not match competitive spending. Heavy sales promotion is needed to time to time because goods are produced ahead of demand in a mass-production economy.

Deceptive Practice

- Marketers are sometimes accused of deceptive practices that lead consumers to believe that they will get more value than they actually do.

- It falls into three groups: deceptive pricing, promotion, and packaging.

- Deceptive pricing à includes practices such as falsely advertising "factor" or "wholesale" prices or a large price reduction from a phoney high retail list price.

- Double-tagging, the practise of placing a sales ticket showing an original price an another ticket showing a sales price of a piece of clothing.

- Deceptive promotion includes practices such as overstating the product’s features or performance, luring the customer to the store for a barging that is out of stock, or running rigged contests.

- Deceptive packaging à includes exaggerating package contents through subtle design, not filling the package to the top, using misleading, labelling, or describing size in misleading terms.

High-Pressure Selling

- Salespeople are sometimes accused of high-pressure selling the persuades people to buy goods they has no intention of buying.

- Marketers know that buyers often can be talked into buying unwanted or unneeded things.

Shaddy or Unsafe Products

- Products lack quality they should have. One complaint is that many products are not made well or services did not perform well, also many products deliver little benefits. Another concern is product safety. Product safety has been a problem for several reasons, including manufacturer indifference, increase production complexity, poorly trained labour, and poor quality control.

Planned Obsolescence

- Causing their products to become obsolete before they actually should need replacement.

- Holding back attractive functional features, then introducing them later to make older models obsolete.

- Marketers respond that consumer’s life style changes; they get tired of the goods and want a new look in fashion or a new design in cars.

Poor Service to Disadvantages Consumers

- Accused of poorly serving disadvantaged consumers. Critics claim that the urban poor often have to stop in smaller stores that carry inferior goods and charge higher prices.

Marketing’s Impact on Society as a whole

Too Few Social Goods

- Business have been accused of overselling private goods at the expense of public goods. For example, an increase in automobiles ownership (private good) requires more highways, traffic controls, parking spaces, and police services (public goods). The overselling of private goods result in "social costs."

- A way must be found to restore a balance between private and public goods. One option is to make producers bear the full social costs of their operations.

Cultural Pollution

- Critics charge marketing system with creating cultural pollution and commercial noise.

Too Much Political Power

- Advertisers are accused of holding too much power over the mass media, limiting their freedom to report independently and objectively. Example (686)

Marketing’s Impact on Other Business

- Critics also charge that a company’s marketing practices can harm other companies and reduce competition. 3 problems are involved: acquisitions or competitors, marketing practices create barriers to entry, and unfair competitive marketing process.

- Large marketing companies can use patent and heavy promotion spending, and can tie up suppliers or dealers to keep out or drive out competitors.

- Some firms have in fact used unfair competitive marketing practices with the intention of hurting or destroying other firms. They may set their prices below costs, threaten to cut off business with suppliers, or discourage the buying of a competitor’s product.

Citizens and Public Actions to Regulate Marketing

Consumerism

- Consumerism: An organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers.

- The association has also outlined the following as fundamental consumer rights:

· The right of safety

· The right to be informed

· The right to choose

· The right to be heard

· The right to redress against damage

· The right to consumer education

Environmentalism

- Environmentalism: An organized movement of concerned citizens and government agencies to protect and improve people’s living environment.

- Environmentalists are not against marketing and consumption; they simply want people and organizations to operate with more care for the environment.

- Environmentalists want environmental costs included in both producer and consumer decision-making.

Business Actions toward socially responsible Marketing

Enlightened Marketing

- Enlightened Marketing: A marketing philosophy holding that a company’s marketing should support the best long-run performance of the marketing system: its five principle include consumer-oriented marketing, Innovative Marketing, value Marketing, sense-of-mission marketing and societal marketing.

- Consumer-Orientated Marketing: A principle of enlightened marketing that holds that a company should view and organize its marketing activities from the consumers’ point of view.

- Innovative Marketing: A principle of enlightened marketing that requires that a company seek real product and marketing improvements.

- Value Marketing: A principle of enlightened marketing that holds that a company should put most of its resources into value-building marketing investments.

- Sense-of-Mission Marketing: A principle of enlightened marketing that holds that a company should define its mission in broad social terms rather than narrow product terms.

Societal Marketing

- Societal marketing: A principle of enlightened marketing that holds that a company should make marketing decisions by considering consumers’ long-run interests, and society’s long-run interests.

- Deficient products: Products that have neither immediate appeal nor long-run benefits

- Pleasing Products: Products that give high immediate satisfactions but may hurt consumers in the long run.

- Salutary Products: Products that have low appeal but may benefit consumer in the long run.

- Desirable Products: Products that give both high immediate satisfaction and high long-run benefits.

Principle for Public Policy towards marketing

- The principle of consumer and producer freedom

- The principle of curbing potential harm.

- The principle of meeting basic needs

- The principle of economic efficiency

- The principle of innovation

- The principle of consumer education and information

- The principle of consumer protection.

Source: Essay UK - http://www.essay.uk.com/coursework/marketing-notes.php



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