Download Understanding Marketing and the Marketing Process

Chapter 1 - Understanding Marketing and the Marketing Process
Marketing Activities
What is Marketing?
Marketing is a social and managerial process whereby individuals and groups obtain what they need and
want through creating and exchanging products and value with others.
Core Marketing Concepts
Needs – states of felt deprivation
Wants – human needs shaped by culture and individual personality
Demands – Human wants backed by buying power
Product - any good, service, or idea that satisfies a need or want and can be offered in an exchange
Good - a tangible object - can be seen and touched when used
Service - an intangible product - involves human or mechanical effort
Idea - a philosophy, concept, or image
Customer Value – the difference between the values the customer gains from owning and using a
product and the costs of obtaining it.
Customer Satisfaction – the extent to which a product’s perceived performance matches a buyer’s
expectations
Quality – Freedom from defects
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 of creating, maintaining and enhancing strong value-laden
relationships with customers and other stakeholders.
Who Purchases Products and Services?
Market – Buyers who share a particular need or want that can be satisfied through exchange or
relationships
Modern Marketing System (Fig. 1-3)
Marketing Management Philosophies
Societal Marketing Concept
Societal
Marketing
Concept
•
Marketing Challenges in the New “Connected” Millennium
Technologies for Connecting
The Internet
The Internet has been hailed as the technology behind a new model for doing business.
•
New applications include:
– Internet – connecting with customers,
– Intranets – connecting with others in the company, and
– Extranets – connecting with strategic partners, suppliers, and dealers.
•
Purchasing will be over $1.4 trillion in 2003.
•
400,000 companies are now using the Internet to do business.
•
Connections With Customers
Most marketers are targeting fewer, potentially more profitable customers.
•
Asking:
– What value does the customer bring to the organization?
– Are they worth pursuing?
•
Focus has shifted to:
– keeping current customers, and
– building lasting relationships based on superior satisfaction and value.
•
Direct Connections With Customers
Many companies use technologies to let them connect more directly with their customers.
– Products available via telephone, mail-order catalogs, kiosks and e-commerce.
– Some firms sell only via direct channels (i.e. Dell Computer, www.Amazon.com), others use a
combination.
•
Direct marketing is redefining the buyer’s role in connecting with sellers.
– Buyers are active participants in shaping the marketing offer and process; some buyers design their
own products online such as at www.LandsEnd.com.
Chapter 2 - Strategic Planning and the Marketing Process
Formal Planning
Many companies operate without formal plans, yet these plans can provide many benefits such as:
-
Strategic Planning - is the Process of Developing and Maintaining a Strategic Fit Between the Organization’s
Goals and Capabilities and Its Changing Marketing Opportunities.
and Capabilities and Its Changing Marketing Opportunities.
Steps in Strategic Planning(Fig. 2.1)
The Mission Statement - a formal statement that describes what management wants the organization to be and the
guidelines for getting there.
Components of a Good Mission Statement
Examples of a Mission Statement
Organizational Objectives
Organizational Strategies
Designing the Business Portfolio
The business portfolio is the collection of businesses and products that make up the company.
 The company must:
 analyze its current business portfolio or Strategic Business Units (SBU’s)
 decide which SBU’s should receive more, less, or no investment
 develop growth strategies for adding new products or businesses to the portfolio
Analyzing Current SBU’s: Boston Consulting Group (BCG) Approach
High
High
Low
Low
Analyzing Current SBU’s: GE’s Strategic Business-Planning Grid
Strong
Average
Weak
High
Medium
Low
Problems With Matrix Approaches
Developing Growth Strategies in the Age of Connectedness
Existing Products
Existing
Markets
New
Markets
New Products
The Marketing Process (Fig. 2.5)
Connecting With Customers
 Market Segmentation: determining distinct groups of buyers (segments) with different needs,
characteristics, or behavior.
 Market Targeting: evaluating each segment’s attractiveness and selecting one or more segments to enter.
 Market Positioning: arranging for a product to occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
The 4 P’s & 4C’s of the Marketing Mix
4 P’s
 Product
 Price
 Place
 Promotion
4 C’s




Customer Solution
Customer Cost
Convenience
Communication
Managing the Marketing Effort (Fig 2.7)
Marketing Analysis of Company’s Situation
Marketing
Implementation
Marketing
Planning
Control
Measure
Develop Strategic
Plans
Results
Carry Out
The
Plans
Develop
Marketing
Plans
Contents of a Marketing Plan (Table 2.2)
Executive Summary
Current Marketing Situation
Threats and Opportunity Analysis
Objectives and Issues
Marketing Strategy
Action Programs
Budgets
Controls
Evaluate
Results
Take Corrective
Action
Chapter 3 - The Marketing Environment
Marketing Environment- consists of the actors and forces outside marketing that affect marketing
management’s ability to develop and maintain successful relationships with its target customers.
Includes:
Microenvironment –
Macroenvironment Company’s Internal Environment - functional areas inside a company that have an impact on the
marketing department’s plans.
Figure 3.1
Suppliers - provide the resources needed to produce goods and services and are an important link in the
“value delivery system”.
Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.
i.e. resellers.
Customers - five types of markets that purchase a company’s goods and services.
Figure 3.2
Competitors - those who serve a target market with similar products and services against whom a
company must gain strategic advantage.
Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.
Figure 3.3
Major Forces in the Company’s Macroenvironment
Demographic - studies populations in terms of size, density, location, age, gender, race, occupation and
other statistics.
Economic - factors that affect consumer purchasing power and spending patterns.
Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.
Key U.S. Demographic Trends
 Changing Age Structure

Changing American Family

Geographic Shifts

Better-Educated & More White-Collar

Increasing Diversity
Age Distribution of the U.S. Population
 Baby Boomer Generation

Generation X

Echo Boomer Generation (generation Y)
Economic Development
Changes in Income: Value Marketing
Changing Consumer Spending Patterns
Key Economic
Concerns for
Marketers
Factors Affecting the Natural Environment




The Company’s Macroenvironment
Technological - forces that create new technologies, creating new product and market opportunities.
Political - laws, agencies and pressure groups that influence and limit organizations and individuals in a
given society.
Cultural - institutions and other forces that affect a society’s basic values, perceptions, preferences, and
behaviors.
Technological Environment




Political Environment - Includes Laws, Government Agencies, Etc. that Influence & Limit
Organizations/ Individuals in a Given Society



Cultural Environment – cultural values of a society






Responding to the Marketing Environment
Advertorials
Chapter 4 - Marketing Research and Marketing Information
New Coke
The Importance of Information
Companies need information about their:
-
-
The Explosion of Marketing Information
What is a Marketing Information System (MIS)?
A MIS consists of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute needed,
timely, and accurate information to marketing decision makers.
The MIS helps managers to:
 Assess Information Needs,
 Develop Needed Information,
 Distribute Information.
Assessing Information Needs
The Value/Cost Trade-off
Functions of a MIS: Developing Information
Internal Data –
Marketing Intelligence -
Marketing Research -
Sources of Information (Data)
 Internal sources of information:

External sources of information (Marketing Intelligence):
Functions of a MIS: Distributing Information
Marketing Research
The systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an
organization.
Marketing Research Process
Step 1. Defining the Problem & Research Objectives Common Research Methods
Marketing Research Methods
Exploratory research – Gathers preliminary information that will help define the problem and suggest
hypotheses.
Descriptive Research - Describes things as market potential for a product or the demographics and consumers’
attitudes.
Causal research - Test hypotheses about cause- and-effect relationships.
Step 2. Develop the Research Plan
Research plan development follows these steps:
Determining Specific Information Needs
Gathering Secondary information
Internal : inside the company’s database
External : Sources outside the Firm
Planning Primary Data Collection
Develop the Research Plan Gathering Secondary Information
Secondary Data: information that has been previously collected for some other purpose
 Advantages
 Disadvantages
Develop the Research Plan - Planning Primary Data Collection
Primary Data: data that must be collected from original sources for the specific purpose at hand
Observation
-
The gathering of primary data by observing relevant people, actions and situations (Exploratory)
Survey Research
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The gathering of primary data by asking people questions about their knowledge, attitudes, preferences, and
buying behavior (Descriptive)
Experimental Research
-
Using groups of people to determine cause-and-effect relationships (Causal)
Primary Data
 Advantages
 Disadvantages
Planning Primary Data Collection
Develop the Research Plan Planning Primary Data Collection - Table 4.3
Online as a Research Contact Method
Planning Primary Data Collection
Sampling Decisions
1
2
3
4
Sampling Units
 Sampling Unit a single element or group of elements subject to selection in the sample
Simple Random Sampling a sampling procedure that assures each element in the population of an equal chance of
being included in the sample
Stratified Sampling a probability sampling procedure in which simple random subsamples are drawn from
within each stratum that are more or less equal on some characteristic
Cluster Sampling an economically efficient sampling technique in which the population is divided into
mutually exclusive groups (such as neighborhood blocks), and the researcher draws a random sample of the
groups to interview
Convenience Sampling the sampling procedure of obtaining those people or units that are most conveniently
available.
Judgment (purposive) Sampling a nonprobability sampling technique in which an experienced researcher
selects the sample based on personal judgment about some appropriate characteristic of the sample member.
Develop the Research Plan - Planning Primary Data Collection
Research Instruments
Presenting the Research Plan
 Summarize the plan in a written proposal and cover:
Marketing Research Process - Step 3. Implementing the Research Plan
Collecting the Data Processing the Data Analyzing the Data -
Marketing Research Process - Step 4. Interpreting & Reporting Findings
Researcher Should Present Important Findings that are Useful in the Major Decisions Faced by Management.
Step 1
Step 2
Step 3
Online Report Delivery
Other Marketing Research - Considerations
Ethics In Marketing Research
Common examples of unethical research practices:
1. Deception
2. Invasion of privacy
3. Reporting faulty conclusions
4. Disguising sales efforts as marketing research
Chapter 5 – Consumer Markets and Buyer Behavior
Harley Davidson
Consumer Buying Behavior
• Consumer Buying Behavior refers to the buying behavior of final consumers -individuals & households who buy
goods and services for personal consumption.
Model of Buyer Behavior (Fig. 5.1)
Marketing & Other Stimuli
Marketing
Buyer’s Black Box
Buyer Responses
Other
Factors Influencing CB (Fig. 5.2)
Factors Affecting CB: Culture
Culture – the set of basic values, perceptions, wants, and behaviors learned by a member of society from family
and other important institutions
Factors Affecting CB: Culture
Major cultural shifts over the last 25 years:
Subcultural Influences
Subculture - Group of people with shared value systems based on common life experiences.
Social Class Influence
•
Social Class – relatively permanent and ordered divisions in a society whose members share similar values,
interests, and behaviors.
Factors Affecting Consumer Behavior: Social
Factors Affecting CB: Personal
Personal Influences
Age and Life
Cycle Stage
Occupation
Economic
Situation
Personality and
Self-concept
Lifestyle Identification
Influences
Activities
Factors Affecting CB: Psychological
Interests
Opinions
Maslow’s Hierarchy of Needs (Fig. 5.4)
Buyer Decision Process (Fig. 5.6)
Step 1. Need Recognition
Desired State -
Actual State -
Step 2. Information Search
Types of Information Search
Internal - the acquisition of information that is available in memory
External - the quest for information, relevant to the product, brand, or shopping behavior, not found in memory
Prepurchase Search - Information seeking to make a better purchase decision
Ongoing Search - Information search activities that are independent of needs or a purchase decision
Sources of Information
1.
2.
3.
4.
Step 3. Evaluation of Alternatives
Steps Between Evaluation of Alternatives and Purchase Decision
Step 4. Purchase Decision
•
Actual Purchase
•
Postpone Purchase
Purchase Decision
Step 5. Postpurchase Behavior
Stages in the Adoption Process
Awareness: Consumer is aware of product, but lacks information.
Interest: Consumer seeks Information about new product.
Evaluation: Consumer considers trying new product.
Trial : Consumer tries new product on a small scale
Adoption: Consumer decides to make regular use of product
Adopter Categories (Fig. 5.7)
Early Majority
Innovators
% of Adopters
Adopter Categories (Fig. 5.7)
Late Majority
Early
Adopters
34%
34%
Laggards
16%
2.5% 13.5%
Early
Time of Adoption
Late
Chapter 6 – Business Markets and Business Buyer Behavior
What is a Business Market?
A business market comprises all the organizations that buy goods and services for use in the production of other
products and services that are sold, rented, or supplied to others.
Characteristics of Business Markets
Marketing Structure and Demand
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Types of Decisions and the Decision Process
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
Model of Business Buyer Behavior (Fig. 6.1)
The Environment
The Buying Organization
Buyer Responses
Marketing Stimuli:
The buying center
Buying decision process
(Interpersonal & individual
influences)
(Organizational Influences)
Product or service choice
Supplier Choice
Order Quantities
Delivery terms and times
Service terms Payment
•Product
•Price
•Place
•Promotion
Other Stimuli:
•Economic
•Technological
•Political
•Cultural
•Competitive
Business vs. Consumer Behavior
Major Types of Buying Situations

New Task Buying

Modified Rebuy

Straight Rebuy
Participants in the Business Buying Process
Major Influences on Business
Buyer Behavior (Fig. 6.2)
The Business Buying Process
Environmental
Economic
developments
Supply
Conditions
Technological
change
Political and regulatory
developments
Organizational
Objectives
Policies
Procedures
Stage 1. Problem Recognition
Interpersonal
Authority
Status
Organizational
Structure
Empathy
Systems
Persuasiveness
Stage 2. General Need Description
Individual
Age
Education
Job Position
Personality
Risk Attitudes
Buyers
Competitive
Developments
Culture and customs
Business Buying on the Internet
 Business buyers may purchase electronically by:

Connecting to customers to:
Stage 3. Product Specification
Stage 4. Supplier Search
Stage 5. Proposal Solicitation
Stage 6. Supplier Selection
Stage 7. Order-Routine Specification
Stage 8. Performance Review
Chapter 7 –Market Segmentation, Targeting, and Positioning for
Competitive Advantage
Steps in Market Segmentation, Targeting, and Positioning (Fig. 7.1)
Market Segmentation
1. Identify bases for segmenting the market
2. Develop segment profiles
Market Targeting
3. Develop measure of segment attractiveness
4. Select target segments
Market Positioning
5. Develop positioning for target segments
6. Develop a marketing mix for each segment
Step 1. Market Segmentation - Levels of Market Segmentation
Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can
be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs.
Mass Marketing –
Segment Marketing –
Niche Marketing – focusing on subsegments or niches with distinctive traits
Micromarketing – tailoring to the needs of individuals and locations
local -
individual -
Geographic Segmentation
World Region or Country
City or Metro Size
Density or Climate
Demographic Segmentation
Dividing the market into groups based on variables such as:
Age
Family size or life
Occupation
Gender
cycle
Education
Income
Religion
Race
Generation
Nationality
Psychographic Segmentation
Divides Buyers Into Different Groups Based on:
Behavioral Segmentation
Dividing the market into groups based on variables such as:
Occasions
Usage rate
Benefits
Loyalty status
User status
Readiness stage
Attitude toward product
How could you segment the following markets?
Segmentation Profile - Good segmentation analysis develops profile of consumer group which considers all
relevant segmentation variables.
Requirements for Effective Segmentation
_______________ - Size, purchasing power, profiles of segments can be measured.
_______________ - Segments can be effectively reached and served.
_______________ - Segments are large or profitable enough to serve.
_______________ - Segments must respond differently to different marketing mix elements & programs.
_______________ - Effective programs can be designed to attract and serve the segments.
Step 2. Market Targeting - Evaluating Market Segments
Segment Size and Growth - Analyze current sales, growth rates and expected profitability for various
segments.
Segment Structural Attractiveness - Consider effects of: competitors, availability of substitute products and,
the power of buyers & suppliers.
Company Objectives and Resources - Company skills & resources needed to succeed in that segment(s).
Look for Competitive Advantages.
Market Coverage Strategies
Choosing a Market-Coverage Strategy
Company Resources
Product Variability
Product’s Stage in the Life Cycle
Market Variability
Competitor’s Marketing Strategies
80 - 20 Rule
Positioning
Perceptual vs. Physical
Product’s Position - the way the product is defined by consumers on important attributes - the place the product
occupies in consumers’ minds relative to competing products.
Marketers must:
Identifying Possible Competitive Advantages
Key to winning and keeping customers is to understand their needs and buying processes better than competitors
do and deliver more value.
Competitive advantage is an advantage over competitors gained by offering consumers greater value, either
through lower prices or by providing more benefits, that justify competitive advantage,
Product Differentiation -
Services Differentiation –
Image Differentiation –
Personnel Differentiation –
Chapter 8 – Product and Services Strategy
What is a Product?
A Product is anything that can be offered to a market for attention, acquisition, use, or consumption
and that might satisfy a want or need.
Includes:
What is a Service?
A Service is a form of product that consist of activities, benefits, or satisfactions offered for sale that
are essentially intangible and do not result in the ownership of anything.
Examples include:
Nature and Characteristic of a Service
Intangibility - Can’t be seen, tasted, felt, heard, or smelled before purchase.
Inseparability - Can’t be separated from service providers.
Variability - Quality depends on who provides them and when, where and how.
Perishability - Can’t be stored for later sale or use.
Products, Services, & Experiences: The Product/Service Continuum
Levels of Product
Product Classifications Consumer Products
Industrial Products
Materials & Parts
Capital Items
Supplies & Services
Individual Product Decisions (Fig. 8.2)
Product Attributes
Developing a Product or Service Involves Defining the Benefits that it Will Offer Such as:
______________________ - Ability of a Product to Perform Its Functions; Includes Level & Consistency
______________________ - Help to Differentiate the Product from Those of the Competition
______________________ - Process of Designing a Product’s Style & Function
Branding
Brand – a name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a
product or service
Why Brand?
Brand Equity - the set of assets (or liabilities) linked to the brand that add (or subtract) value
The Billion Dollar Brands
Advantages of Branding
Brand Equity
Major Branding Decisions (Fig. 8.3)
Brand Name Selection
Brand Sponsor
Brand Strategy
Branding Strategies
Packaging
Activity of designing and producing the container or wrapper for a product.
Packaging is used to:




Packing now has promotional value and marketers should:
 Establish a packaging concept,
 Develop specific elements of the package,
 Tie together elements to support the positioning and marketing strategy.


Labeling
Printed information appearing on or with the package.
Performs several functions:



Product Mix Decisions
Product Mix - all the product lines & items offered
Width - number of different product lines
Length - total number of items in product lines
Depth - number of versions of each product
Chapter 9 – New Product Development (NPD) and Product Life Cycle
(PLC) Strategies
New products
 Last year food products alone accounted for more than 10,000 of the year’s 25,261 total new-product
launches, according to Marketing Intelligence Service. That’s 486 product launches a week, or 69 per
day.
 Interesting, considering the launch of a new shampoo can range in cost from $20 to $50 million dollars.
When is a New Product Really New?
- never been introduced before (i.e. inventions); functionally new
- firm enters into new product category or offers a modification of an old one
- how much consumer learning is involved to use product
- generally, a product is “new” for only six months
New Product Strategy Development
 Involves defining the role of new products in achieving the firm’s overall objectives.



Cross functional teams seem to produce best results in searching for new product and/or market
opportunities.
Causes of New Product Failures
One study estimated that as many as 80% of new consumer packaged products failed.
Only about 40% of new consumer products are around 5 years after introduction.
Why Do Products Fail?
 Rush to market


Product design problems


Product may have been pushed despite poor marketing research findings

Costs of product development


Consumer “need” was a fad, or short-lived

Timing

Major Stages in New Product Development (Fig 9.1)
Idea Generation
Idea Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization
Strategies for Obtaining New Product Ideas
–
–
–
New Product Development Process
Step 1. Idea Generation
… the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:
–
–
–
–
Step 2. Idea Screening
•
•
•
Many companies have systems for rating and screening ideas which estimate:
•
•
•
•
•
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
Step 3. Concept Development
1. Develop New Product Ideas into Alternative Detailed Product Concepts
2. Concept Testing - Test the New Product Concepts with Groups of Target Customers
3. Choose the One That Has the Strongest Appeal to Target Customers
Step 4. Marketing Strategy
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes First-Year:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Step 5. Business Analysis
Business Analysis - Review of Product Sales, Costs, and Profits Projections to See if they Meet Company
Objectives
Step 6. Product Development
Step 7. Test Marketing
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic
Market Settings.
________________________ - Full marketing campaign in a small number of representative cities.
________________________ - A few stores that have agreed to carry new products for a fee.
________________________ - Test in a simulated shopping environment to a sample of consumers.
Step 8. Commercialization
Commercialization is the Introduction of the New Product into the Marketplace.
Where?
When?
Sequential
Speeding Up New Product Development
Simultaneous
Product Development Costs
Consumer vs. Industrial
Product Life Cycle
Product Life Cycle (Fig. 9.2)
Sales and
Profits ($)
Sales
Profits
Time
Product
Development
Introduction
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and Profits Over the Product’s Life From Inception
to Demise
Problems Using the PLC
The PLC Concept Can Help in Developing Good Marketing Strategies for Different Stages of the Product Life Cycle, However
Some Problems Can Arise:



Characteristic
Sales
Costs
Profits
Marketing
Objectives
Product
Price
Distribution
Advertising
Introduction
Growth
Maturity
Decline
Chapter 10 – Pricing Products: Pricing Considerations & Approaches
Which is Price??
Price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.
Factors Affecting Price Decisions ( Fig. 10.1)
External Factors
Internal Factors
•
•
•
•
•
•
•
Marketing Objectives
Marketing Mix Strategy
Costs
Organizational considerations
Nature of the market and demand
Competition
Other environmental factors
•
•
•
Economy
Resellers
Government
Internal Factors Affecting Pricing Decisions: Marketing Objectives
- Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business.
- Choose the Price that Produces the Maximum Current Profit, Etc.
- Low as Possible Prices to Become the Market Share Leader.
- High Prices to Cover Higher Performance Quality and R & D.
 Other specific objectives include:
 Nonprofit and public organization may have other pricing objectives such as:
University aims for _____________________
Hospital may aim for _____________________
Theater may price to _____________________
Internal Factors Affecting Pricing Decisions: Marketing Mix
Customers Seek Products that Give Them the Best Value in Terms of Benefits Received for the Price Paid.
Types of Cost Factors that Affect Pricing Decisions
Fixed Costs (Overhead) –
Variable Costs Total Costs Different Levels of Production – costs vary with different levels of production and production capability - (in)
efficiency impacts the eventual cost.
Function of Production Experience - As a firm gains experience in production, it learns how to do it better.
The experience curve (or the learning curve) indicates that average cost drops with accumulated production
experience.
External Factors Affecting Pricing Decisions
-
Market and Demand Factors Affecting Pricing Decisions
- Many Buyers and Sellers Who Have Little Effect on the Price
- Many Buyers and Sellers Who Trade Over a Range of Prices
- Few Sellers Who Are Sensitive to Each Other’s Pricing/ Marketing Strategies
- Single Seller
Demand Curves and Price Elasticity of Demand
A Demand Curve is a Curve that Shows the Number of Units the Market Will Buy in a Given Time Period at
Different Prices that Might be Charged.
=
-----------------------------------
Price / Demand Relationship
Major Considerations in Setting Price (Fig. 10.5)
Price Ceiling -
Price Floor Cost Considerations
Types of Mark-Up Pricing
o Cost-plus pricing - a pricing method in which the producer (seller) determines its costs and then adds a
specified profit amount or percentage to the selling price.
o Break-even Analysis & Target Profit Pricing – setting price to break even on the costs of making and
marketing a product: or setting price to make a target profit
Cost-Based Pricing
Cost-Plus Pricing is an Approach That Adds a Standard Markup to the Cost of the Product.
Breakeven Analysis
Target Return Pricing
Cost-Based Versus Value-Based Pricing (Fig. 10.7)
Competition-Based Pricing
Setting prices based on the prices that competitors charge for similar products
______________________________ - Company Sets Prices Based on What Competitors Are Charging.
_________________________ - Company Sets Prices Based on What They Think Competitors Will Charge.
Chapter 11 – Pricing Products: Pricing Strategies
Dynamic Pricing Strategies
New Product Pricing Strategies
Market Skimming - Setting a High Price for a New Product to “Skim” Maximum Revenues from the Target Market.
-Use Under These Conditions:
 Product’s Quality and Image Must Support Its Higher Price.
 Costs Can’t be so High that They Cancel the Advantage of Charging More.
 Competitors Shouldn’t be Able to Enter Market Easily and Undercut the High Price.
Examples:
Market Penetration - Setting a Low Price for a New Product in Order to “Penetrate” the Market Quickly and Deeply.
-Use Under These Conditions:
 Market Must be Highly Price-Sensitive so a Low Price Produces More Market Growth.
 Production/ Distribution Costs Must Fall as Sales Volume Increases.
 Must Keep Out Competition & Maintain Its Low Price Position or Benefits May Only be Temporary.
Examples:
Product Mix-Pricing Strategies:
Product Line Pricing
Involves setting price steps between various products in a product line based on:
--Optional-Product Pricing - Pricing optional or accessory products sold with the main product.
Captive-Product Pricing - Pricing products that must be used with the main product.
By-Product Pricing - Pricing low-value by-products to get rid of them and make the main product’s price more competitive.
Product-Bundling - combining several products and offering the bundle at a reduced price.
Discount and Allowance Pricing
Adjusting Basic Price to Reward Customers for Certain Responses
Cash Discount Quantity Discount Functional Discount Seasonal Discount Trade-in Allowance Promotional Allowance –
Segmented Pricing
Selling Products at Different Prices Even Though There is No Difference in Cost
Customer – Segment Product Form Location Pricing Time Pricing -
Psychological Pricing
 Considers the psychology of prices and not simply the economics.
 Customers use price less when they can judge quality of a product.
 Price becomes an important quality signal when customers can’t judge quality; price is used to say something about a
product.
Psychological Pricing Methods
 Prestige Pricing - setting prices artificially high to evoke an image of prestige or quality
 Odd-Even Pricing - Ending prices with a certain number to influence customers
 Customary Pricing - setting prices on the basis of tradition.
 Price Lining - setting a limited number of prices for selected lines of merchandise.
Promotional Pricing
Temporarily Pricing Products Below List Price to Increase Short-Term Sales Through:
Other Price Adjustment Strategies
- Adjusting Prices to Account for the Geographical Location of Customers.
- Adjusting Prices for International Markets.
Initiating Price Changes
Price Cuts –
Price Increases –
Assessing/Responding to Competitor’s Price Changes (see Fig. 11.1)
Public Policy Issues in Pricing
--Pricing Across Channel Levels
_________________________ - Ensure sellers offer the same price/terms to a given level of trade
_________________________ - Manufacturer can’t require dealers to charge a specified retail price for its product
_________________________ - Occurs when a seller states prices or prices savings not available to consumers
Chapter 12 – Distribution Channels and Logistics Management
Issues Concerning Distribution Channels
What is the Nature Of Distribution Channels?
How do Channel Firms Interact and Organize to do the Work of the Channel?
What Problems do Companies Face in Designing and Managing Their Channels?
What Role Does Physical Distribution Play in Attracting and Satisfying Customers?
What is a Distribution Channel?
 A set of interdependent organizations (intermediaries) involved in the process of making a product or
service available for use or consumption by the consumer or business user.
 Marketing Channel decisions are among the most important decisions that management faces and will
directly affect every other marketing decision.
Why are Marketing Intermediaries Used?
•
•
•
The use of intermediaries results from their greater efficiency in making goods available to target markets.
Offer the firm more than it can achieve on it’s own through the intermediaries:
Purpose:
CD example
How a Marketing Intermediary Reduces the Number of Channel Transactions
Distribution Channel Functions
These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively to
Provide Satisfactory Assortments of Goods and Services to Target Customers.
Number of Channel Levels (Fig. 12.2)
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its
Ownership Closer to the Final Buyer.
Dual Distribution
Channel Behavior & Conflict
•
The channel will be most effective when:


•
all members cooperate to attain overall channel goals and satisfy the target market.
When this doesn’t happen, conflict occurs:
 ___________________ occurs among firms at the same level of the channel, i.e retailer to retailer.

___________________ occurs between different levels of the same channel, i.e. wholesaler to retailer.
•
Conventional Marketing Channel Vs. a Vertical Marketing System (Fig. 12.3)
Types of Vertical Marketing Systems
Corporate Systems
 Involves single ownership of two or more levels of a channel
 Vertical integration - one channel member acquires control of one or more other members, usually by
purchasing them.

Total vertical integration - one organization controls all marketing channel functions.

- Manufacturer purchases distributor or retailer

- Wholesaler or retailer purchases channel members above them.
Contractual Systems
 Involve independent production and distribution companies entering into formal contracts to perform designated
marketing functions.
Administered Systems
 Characterized by a higher degree of interorganizational planning and management usually resulting from the
existence of a strong channel leader.
Innovations in Marketing Systems
Horizontal Marketing System
Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity.
Hybrid Marketing System
A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments.
Changing Channel Organization
A Major Trend is Toward Disintermediation Which Means that Product and Service Producers are Bypassing
Intermediaries and Going Directly to Final Buyers or That New Types of Channel Intermediaries are Emerging to
Displace Traditional Ones.
Impact of the Internet
Channel Design Decisions
Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
Identifying Major Alternatives
Evaluating the Major Alternatives
Designing International Distribution Channels
Channel Management Decisions
Selecting Channel Members
Motivating Channel Members
Evaluating Channel Members
Chapter 13 – Retailing and Wholesaling
Top Retailers
1.
6.
2.
7.
3.
8.
4.
9.
5.
10.
What is Retailing?
Retailing - Includes all the activities Involved in Selling Goods or Services Directly to Final Consumers for Their
Personal, Non-business Use.
Retailing can be done in stores (_________________) or out of a store (_______________________) such as:

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


Classification of Retailing
- Self-Service, Limited-Service and Full-Service Retailer
- Length and Breadth of the Product Assortment
- Pricing Structure that is used by the Retailer
- Independent, Corporate, or Contractual Ownership Organization
Classification of Retailing: Amount of Service
Self-Service Retailer -
Limited-Service Retailers -
Full-Service Retailers -
Classification of Retailing:Product Line (Tab. 13.1)
Specialty Stores -
Department Stores -
Supermarkets -
Convenience Stores -
Classification of Retailing:Product Line (Tab. 13.1)
Superstores -
Discount Stores -
Off-Price Retailers -
Warehouse Clubs -
Classification of Retailing: Relative Prices
Higher Prices and Offer Higher-Quality Goods and Superior Customer Service
Regular Prices and Offer Normal-Quality Goods and Average Customer Service
Low Prices and Offer Lower-Quality Goods and Little Customer Service
Classification of Retailing: Retail Organization
Merchandising Conglomerates -
Corporate Chain -
Voluntary Chain -
Retailer Cooperatives -
Franchise Organizations -
Retailer Marketing Decisions (Fig. 13.1)
Retailer Strategy
•
•
Target Market
Retail Store Positioning
Retailer Marketing Mix
•Product and service assortment
•Prices
•Promotion
•Place (location)
Product Assortment and Services Decisions
Product Assortment
---Services Mix – Key tool of non-price competition for setting one store apart from another
Store’s Atmosphere
--Retailer’s Price, Promotion, & Place Decisions
Prices Decisions
Promotion Decisions
The Future of Retailing
New Retail Forms and Shortening Retail Lifecycle
Growth of Non-store Retailing
Increasing Intertype Competition
Rise of the Megaretailer
Growing Importance of Retail Technology
Global Expansion of Major Retailers
Retail Stores as “communities” or “hangouts”
Place Decisions
ELECTRONIC COMMERCE
DEFINITION - Exchange of information, goods, service, and payments by electronic means.
History of E-Commerce
 E-commerce actually began in the 1970s when larger corporations started creating private networks to share
information with business partners and suppliers. This process is called Electronic Data Interchange (EDI).
 Prodigy was running text ads and selling flowers in the early '80s. The first documented Online sale in
1994 was what?
E-Commerce Today
Some major product categories have paved the way:
 travel services ($5.95 B in 1999 sales),
 computer hardware and software ($5.8 B),
 books ($1.7 B),



gifts and flowers ($730 M),
music ($540 M), and
apparel and footwear ($460 M),
E-Commerce Services Today
 In 1999, the online market size for business services was estimated at $22 billion.
 Primary service categories include
o financial ($7.3 billion, 1999),
o corporate travel ($5 billion), and
o professional ($4.4 billion),
o telecommunications ($1.5 billion).
o administrative support ($3.9 billion),
 By 2003, Forrester Research predicts that online services will represent nearly 8 percent of the overall
sector hardly a drop in the bucket.
Future of E-Commerce
 eMarketer, an Internet technology (IT) research and reporting firm, estimates that the dollar figure for ecommerce will rise from approximately

In Europe, consumers' internet purchases will jump from:

Online business-to-business e-commerce is projected to speed past $1 trillion in annual revenue by 2003
Future Trends to Watch in E-Commerce
 Women take control. Women make or influence 80 percent of household sales in the United States,
according to WomanTrend, despite the fact that they make up 51 percent of the population.

The untapped get tapped. Two highly touted markets $509 million health and beauty, and $513 million
grocery still lag behind expectations.

More "click and mortar." Traditional retailers Circuit City, Crate and Barrel, Sears, Toys R Us, Wal-Mart,
and Federated Department Stores missed the boat in 1995 and 1996, but rest assured they "get it" now, and
are attempting re-entry, this time around with more money and smarts. Watch out.
Still a Long Way To Go
 Andersen Consulting and Forrester Research both show shopping cart abandonment rates of 25%.
 E-commerce still accounts for less than 1% of total retail sales
 Pure plays are struggling to maintain cash flow and are either:
Security Issues are Important
What is Wholesaling?
 All the activities involved in selling goods and services to those buying for resale or business use.
 Wholesaler - those firms engaged primarily in wholesaling activity.
 Wholesalers buy mostly from producers and sell mostly to:
---Why are Wholesalers Used?
Wholesalers are Often Better at Performing One or More of the Following Channel Functions:
Types of Wholesalers
- independently owned business that takes title to the merchandise it handles.
- they don’t take title to the goods, and they perform only a few functions.
- wholesaling by sellers or buyers themselves rather than through independent wholesalers.
Retailer Marketing Decisions (Fig. 13.1)
Wholesaler Strategy
•
•
Target Market
Service Positioning
Wholesaler Marketing Mix
•
•
•
•
Trends in Wholesaling
Consolidation within the industry is reducing # of wholesalers
Distinction between large retailers and wholesalers blurs
Wholesalers will continue to increase the services provided
Wholesalers are beginning to go global
Product and service assortment
Prices
Promotion
Place (location)
Chapter 14 – Integrated Marketing Communications Strategy
Marketing Communication Mix or Promotion Mix
Advertising
Personal Selling
Sales Promotion
Public Relations
Direct Marketing
The Changing Communications Environment
Two Factors are Changing the Face of Today’s Marketing Communications:
The Need for Integrated Marketing Communications
•
With Integrated Marketing Communications (IMC), the Company Carefully Integrates and Coordinates Its
Many Communications Channels to Deliver a Clear, Consistent, and Compelling Message About the
Organization and Its Product or Service.
Elements in the Communication Process (Fig. 14.2)
Key Factors in Good Communication
Sellers need to know what audiences they wish to reach and response desired.
Sellers must be good at encoding messages that target audience can decode.
Sellers must send messages through media that reach target audiences
Sellers must develop feedback channels to assess audience’s response to messages.
Steps in Developing Effective Communication
Step 1. Identifying the Target Audience
Step 2. Determining the Communication Objectives Buyer Readiness Stages
Step 3. Designing a Message
A
I
D
A
Message Content 


Message Structure 

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Message Format 

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Step 4. Choosing Media
Personal Communication Channels
Non-personal Communication Channels
Step 5. Selecting the Message Source
Step 6. Collecting Feedback
Setting the Total Promotion Budget
One of the Hardest Marketing Decisions Facing a Company is How Much to Spend on Promotion.
- Based on What the Company Can Afford
- Based on a Certain Percentage of Current or Forecasted Sales
- Based on Determining Objectives & Tasks, Then Estimating Costs
- Based on the Competitor’s Promotion Budget
Setting the Promotion Mix
Advertising
Personal Selling
Sales Promotion
Public Relations
Direct Marketing
Product Placement
•
•
•
Product Placement is the use or display of a product or service in an entertainment program.
The placement involves a payment to the entertainment vehicle, but does not involve payment for “airtime”
Famous examples include:



Promotion Mix Strategies
- Strategy that Calls for Spending A Lot on Advertising and Consumer Promotion to Build Up (Pull)
Consumer Demand.
- Strategy that Calls for Using the Salesforce and Trade Promotion to Push the Product Through the
Channels.
Strategy Selected Depends on:
---
examples:
Socially Responsible Marketing Communication
 Advertising and Sales Promotion
 Personal Selling
Chapter 15 – Advertising, Promotions, and Publicity
Advertising History
U.S. advertisers spend in excess of $212 billion each year;
Worldwide spending exceeds $414 billion.
Advertising is used by:




What is Advertising?
Advertising is Any Paid Form of Non-personal Presentation and Promotion of Ideas, Goods, or Services by an
Identified Sponsor.
Setting Advertising Objectives
Advertising Objective - specific communication task accomplished with a specific target audience during a specific
period of time
_____________________ - inform consumers or build primary demand
_____________________ - build selective demand
_____________________ - compares one brand to another
_____________________ - keeps consumers thinking about a product
Setting the Promotion Budget
After determining its advertising objectives, the marketer must set the advertising budget for each product and
market. (From Chapter 14)
_____________________ - based on what the company can afford
_____________________ - based on a certain percentage of current or forecasted sales
_____________________ - based on determining objectives & tasks, then estimating costs
_____________________ - based on the competitor’s promotion budget
Setting the Advertising Budget
Factors to be considered when setting the advertising budget:




Developing Advertising Strategy
Advertising Strategy Consists of Two Major Elements and Companies are realizing the Benefits of Planning These
Two Elements Jointly.


Developing Advertising Strategy: Creating Ad Messages
Plan a Message Strategy
Develop a Message
Creative Concept “Big Idea”
Advertising Appeals
----
Developing Advertising Strategy: Message Execution
Turning the “Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest.
Typical message execution styles:
Testimonial Evidence
Slice of Life
Scientific Evidence
Lifestyle
Technical Expertise
Fantasy
Personality Symbol
Mood or Image
Musical
Advertising Strategy: Selecting Advertising Media
Step 1. Decide on Reach, Frequency, and Impact
Step 2. Choosing Among Major Media Types
Step 3. Selecting Specific Media Vehicles
Step 4. Deciding on Media Timing
Major Media Types
Newspapers
Television
Direct mail
Radio
Magazines
Outdoor
Internet
Evaluating Advertising
Communication Effects -
Sales Effects -
International Advertising Decisions
Adaptation of global advertising
Advertising media differ considerably in availability & cost
Regulation in advertising practices
Comparison ads not acceptable in all countries
Programs must be matched to local cultures and customs
What is Sales Promotion ?
Sales promotion is a mass communication technique that offers short-term incentives to encourage purchase or
sales of a product or service.
Rapid Growth of Sales Promotion
Sales promotion can take the form of . . .
----Rapid growth in the industry has been achieved because:
 Product managers are facing more pressure to increase their current sales,
 Companies face more competition,
 Advertising efficiency has declined,
 Consumers have become more deal oriented.
Sales Promotion Objectives
Increase short-term sales or help build long-term market share.
Get retailers to:



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Major Consumer Sales Promotion Tools
Samples
Coupons
Cash Refunds
Price Packs
Major Consumer Sales Promotion Tools – (con’t)
Premium
Advertising Specialties
Patronage Rewards
Point-of-Purchase
Contests
Sweepstakes
Game
Major Trade Sales Promotion Tools
Trade Promotion Objectives

Persuade Retailers or Wholesalers to Carry a Brand

Give a Brand Shelf Space

Promote a Brand in Advertising

Push a Brand to Consumers
Trade-Promotion Tools

Discounts

Allowances
Major Business Sales Promotion Tools
Business-Promotion Tools
Business-Promotion Objectives

Conventions

Generate Business Leads

Trade Shows

Stimulate Purchases

Sales Contests

Reward Customers

Motivate Salespeople
Developing the Sales Promotion Program

Decide on the Size of the Incentive

Set Conditions for Participation

Determine How to Promote and Distribute the Promotion Program

Determine the Length of the Program

Evaluate the Program
What is Public Relations?
Public relations involves building good relations with the company’s various publics by obtaining favorable
publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.
Major Public Relations Functions
Public Relations Departments May Perform Any of All of the Following Functions:
Press Relations or Agentry -
Product Publicity -
Public Affairs-
Lobbying -
Investor Relations -
Development -
Major Public Relations Tools
News
Speeches
Special Events
Written Materials
Audio/Visual Materials
Corporate Identity Materials
Public Service Activities
Web Site
Major Public Relations Decisions

Setting Public Relations Objectives

Choosing the Public Relations Messages and Vehicles

Implementing the Public Relations Plan

Evaluating Public Relations Results
Chapter 16 – Personal Selling and Sales Management


Nature of Personal Selling
Most salespeople are well-educated, well-trained professionals who work to build and maintain long-term
relationships with customers.
The term salesperson covers a wide spectrum of positions from:



What is Personal Selling?
Involves two-way, personal communication between salespeople and individual customers. Communication can be:
The Role of the Sales Force
Personal selling is effective because salespeople can:
 probe customers to learn more about their problems,
 adjust the marketing offer to fit the special needs of each customer,
 negotiate terms of sale, and
 build long-term personal relationships with key decision makers.
The Role of the Sales Force
Sales Force
Serves as a Critical Link
Between a Company and its Customers Since They:
Major Steps in Sales Force Management (Fig. 16.1)
Designing Sales Force Strategy and Structure
- exclusive territory to sell the company’s full product line
- sales force sells only a portion of the company’s products or lines
- sales force sells only to certain customers or industries
Some Traits of Good Salespeople
Recommendations for Recruiting Salespeople
Current Salespeople, Employment Agencies, Classified Ads, College Students, Internet
Training Salespeople
The Average Sales Training Program lasts for Four Months and Has the Following Goals:

Help salespeople know & identify with the company

Learn about the products

Learn about competitors’ and customers’ characteristics

Learn how to make effective presentations

Understand field procedures and responsibilities
Compensating Salespeople
To Attract Salespeople, a Company Must Have an Attractive Plan Made Up of Several Elements
Directing Salespeople
•
•
Supervising Salespeople
Motivating Salespeople
• Organizational Climate
• Sales Quotas
• Positive Incentives
•



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Annual Call Plan
Time-and-Duty Analysis
Sales Force Automation



Evaluating Salespeople
 Management gets information about its salespeople in several ways:


 Formal evaluation of performance can be done qualitatively or quantitatively.
 Evaluation methods of performance include:


Chapter 17 – Direct and Online Marketing: The New Marketing Model
Mass Marketing and Direct Marketing
Mass Marketing
Direct Marketing
What is Direct Marketing?
Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an
immediate response and cultivate lasting customer relationships.
Forms of Direct Marketing
Face-to-Face Selling
Direct Response TV
Telemarketing
Kiosk Marketing
Direct Mail
Online Marketing
Catalog
Benefits and Growth of Direct Marketing
Buyers Benefits
Sellers Benefits

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Customer Databases

Customer Databases are an Organized Collection of Comprehensive Data About Individual Customers or
Prospects Including:
----Database Marketing
is the process of building, maintaining, and using customer databases and other databases for the purposes of
contacting and transacting with customers.
How companies use their databases:
Online Marketing

Online Marketing is conducted through interactive online computer systems, which link consumers with
sellers electronically.
Who is the Online Customer?
 They tend to be younger, more affluent, better educated, and more male than the general population; female
usage almost equals males.
 Other characteristic of net users:
Promise and Challenge of Online Marketing
Limited Consumer Exposure and Buying
Skewed User Demographics and Psychographics
Chaos and Clutter
Security
Ethical Concerns
Public Policy and Ethical Issues in Direct Marketing
Irritation to Consumers
Unfairness, Deception, or Fraud
Invasion of Privacy
Chapter 19 – The Global Marketplace
Global Marketing into the 21st Century
To compete, many U.S. companies are continuously improving their products, expanding into foreign markets, and
becoming global firms.
Global firms face several major problems:




Political-Legal Environment
At Least Four Political-Legal Factors Should be Considered in Deciding Whether to do Business in a Given
Country:




Sellers must examine the following before planning a marketing program within a given country:



Deciding How to Enter the Market (Fig. 19.2)

o
o

o
o
o
o

o
o
Deciding on the Global Marketing Program
Adapted Marketing Mix -
Standardized Marketing Mix -
Examples:
International Pricing
Companies face many problems in setting their international prices.
Possibilities in setting prices include:



International prices tend to be higher than domestic prices because of ______________________
Companies may become guilty of _______________ – when a foreign subsidiary charges less than its costs or less
than in its home market.
Problems in International Markets
International Problems can arise and cause VERY large international as well as domestic problems
Chapter 20 – Marketing and Society
Ben & Jerry’s
Marketing’s Impact on Individual Consumers
Criticisms Leveled at the Marketing Function by Consumers and Others:


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

Marketing’s Impact on Society as a Whole




Marketing’s Impact on Other Businesses
All Can Harm Other Companies & Reduce Competition



What company has been charged with these violations?
Consumerism
Consumerism is an Organized Movement of Citizens and Government Agencies to Improve the Rights and Power
of Buyers in Relation to Sellers.
Basic Consumer Rights




Marketing Ethics
Companies Need to Develop Corporate Marketing Ethics Policies – Broad Guidelines That Everyone in the
Organization Must Follow and Should Address:

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

Principles That Should Guide Companies and Marketing Managers On Issues of Ethics and Social Responsibility: