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Foundations of Marketing -- BSAD 231
An Overview of the Twenty
"Thinking and Acting Like a Marketer" Modules
This Foundations of Marketing course 'textbook' contains 20 modules and about 135 pages.
These 20 modules introduce: the process of marketing management and planning; the process of
being analytical; the tools of marketing numeracy … the ability to "crunch the numbers"; and,
the process of communicating effectively … particularly via case analyses, memos and reports.
The modules hang together as follows:
Module 1
Introducing Marketing
and the Marketer
Module 2
Marketing Planning
and Analysis
Module 3
Researching Your
Marketplace
Module 4
Conducting a Size Up
(Analysis  Challenges)
Module 5
Sizing Up
The
Organization
Module 6
Sizing Up
the
Marketplace
Module 7
Sizing Up
the
Broader
Environment
Module 8
Portfolio
Analysis
Module 9
Crafting Marketing Strategy
(Challenges  Thrusts)
Module 10
Selecting
Target Markets
And Market
Positioning
Module 11
Developing the
Product:Service
Strategy
Module 12
Developing
Pricing
Strategy
Module 13
Developing
Place/Distribution
Strategy
Module 15
Product:Market
Growth Matrix
Module 16
Marketing &
the Internet
Module 18
On Being
Analytical Constructing
an Argument
Module 19
Keeping Score
Using Financial
Data
Module 14
Developing
Promotional
Strategy
Module 17
Marketing
Internationally
Module 20
Communicating
Your Ideas
Effectively
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The twenty modules introduce about 100 core concepts, 20 planning and communication
processes and 15 analytical and mathematical tools of marketing. These concepts, processes and
tools of marketing are generic. That is, they are as applicable to Highliner brand fish sticks as
they are to clothing, automobiles, filing cabinets, computers, vacation destinations, political
candidates, causes and issues.
Most first courses in marketing are heavy on concepts and theory. They employ principles of
marketing textbooks that tend to be long and seem to believe that “if 10 new concepts is good, 20
is better”. On the other hand, these textbooks tend to be loaded with contemporary examples,
well organized, well written and well illustrated so they have much to offer for introductory
courses taught in the traditional way.
This course is different. It emphasizes “how to” process learning over “what is” content
learning. It provides many opportunities to develop:
• Your analytical abilities These include finding and using evidence to draw conclusions -- to
construct an argument and persuade others of the soundness of your reasoning, and to make
tentative recommendations based on the accumulated evidence and conclusions.
• Your marketing numeracy This includes finding, “crunching” and using numbers and basic
mathematical tools to help make decisions, and
• Your communications skills These include writing memos and reports and making
presentations – as appropriate.
This course introduces terminology, concepts and theory only to the extent that a smart marketer
requires them. Note though: a solid grasp of these core concepts is critical to being an effective
marketer. Thus, we expect you to work as hard at building your conceptual knowledge as your
applied skills and abilities.
Figure 1 presents an overview of the complete Thinking and Acting Like a Marketer process. It
integrates the marketing management process with the process of ‘being analytical’. In effect,
Figure 1 depicts the BSAD 231 course. But, don’t throw it out when the course is over because
it depicts marketing reality as well. You’ll be able to use the framework in Figure 1 throughout
the rest of your studies here … any beyond.
Figure 2 on pages four and five identifies the core concepts, processes and analytical tools of
marketing employed in this course. For your convenience they have been grouped. Look them
over carefully. They are your keys to success. All concepts and tools are defined or otherwise
elaborated in the modules that follow so don't panic if the list appears a bit daunting.
The 20 modules in this short book are supplemented by the companion Cases and Exercises in
Marketing. Together they provide all the material necessary for you to be thinking – and acting
– like a marketer by the end of the course.
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4
Figure 2: Core Concepts, Processes and Analytical Tools of Marketing
Core Marketing Concepts:
Marketing
Exchange
Transaction
Product
Market
WIIFM
Customer oriented
Market driven
Marketing concept
Customer service
Customer satisfaction
Customer value
Relationship marketing
The marketing mix (the 4Ps)
Planning Concepts:
Marketing planning
Analysis
The marketplace
The broader environment
Challenges
Thrusts
A.C.T.
Problems
Opportunities
Marketing objectives
Marketing resources
Marketing strategy
Marketing tactics
End-user groups
Target markets
Competitive advantage
Portfolio analysis
Market positioning
Market penetration strategy
Market development strategy
New product development
strategy
Diversification strategy
Analytical Concepts:
Size-up
Situation analysis
SWOT analysis
Information
Evidence
Facts
Opinions
Calculations
Percentage comparisons
Weighted average
Frequency distribution
Percentage change
Percentage point change
Reasonable reasoning
If… then… reasoning
Sensitivity analysis
Conclusion
Recommendation
Implications of implementation
Marketing Research
Concepts:
Marketing information system
Marketing intelligence gathering
Internal records and results
Research objectives
Syndicated services
Secondary data
Syndicated research services
Single source research suppliers
Primary data
Observation research
Exploratory research
Conclusive research
Focus group research
Depth interview research
Case study research
Survey research
Controlled experiment research
Population
Sample
Representativeness
Generalizability
Database marketing
Datamining
Product Strategy Concepts:
Goods
Services
Rented-goods services
Owned-goods services
Non-goods (personal) services
Perishability, intangibility,
inseparability, variability
Not-for-profit organizations,
places, people, causes, issues
Product item, line, category, mix
The new product development
process
Product life cycle
Promotional Strategy
Concepts:
Advertising
Sales promotional activities
Public relations
Personal selling
Integrated marketing
communications (IMC)
Hierarchy of communication
effects
Pricing Strategy Concepts:
Retail selling price
Wholesale selling price
Manufacturer's selling price
Trade margins
Markup
Contribution
Break even point
Price discounts
Price allowances
Place Strategy Concepts:
Place strategy
Physical distribution strategy
Channel management strategy
Middlemen
Wholesaling middlemen
Distributor, broker, agent
Retailing middlemen
Dealer, reseller
Communication Concepts:
Consideration
Control
Coherence
Clarity
Conciseness
Correctness
Internet Marketing Concepts:
Intranet
e-tailer
online marketing
online merchant
delivery specialist
banner ads
button ads
~ Continued on next page ~
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The Ability to Undertake the
Processes of:
Marketing planning
Being customer oriented and
market driven
Identifying marketing
challenges
Setting marketing objectives
Conducting a size up or situation
analysis
Conducting a marketing
research project
Segmenting a market
Selecting one or more target
markets
Conducting a company analysis
Conducting a buyer analysis
Conducting a market analysis
Conducting a competitor
analysis
Conducting an environmental
analysis
Pricing a product
Using the Internet to market a
product
Writing a memo
Writing a report
Constructing tables and exhibits
Running effective group
meetings
Presenting your ideas in class
(as appropriate)
Making a formal presentation
(as appropriate)
The Ability to Employ these
Analytical Tools Correctly:
Using percentages to compare
numbers
Breaking aggregate results down
"per" and "by"
Calculating and using weighted
averages
Creating indexes (indices)
Calculating break even point
Calculating payout on new
product
Calculating and using markups
Conducting vertical analyses of
income statements
Conducting horizontal analyses
of data over time
Using sensitivity analysis
Using frequency distributions
Using "if…then…" reasoning
Visioning or visualizing a
marketplace
Calculating share of market
Distinguishing between
percentage and percentage
point chang
Foundations of Marketing -- BSAD 231
Module 1: Introducing Marketing and the Marketer
Module 1, Introducing Marketing and the Marketer, contains three sections. The first section
offers a managerial perspective on marketing and introduces several core concepts of marketing.
The second section provides a brief overview how marketers think and act. It introduces being
customer oriented and market driven, being an enthusiastic champion, being analytical and being
able to reason reasonably to extend a marketing analysis when important factual evidence is
lacking. Most of the BSAD 231 course is built around developing your knowledge and skills in
these areas. The third section presents a short quiz to help you determine if you possess the
characteristics of a successful marketer.
1.1 Marketing: Core Perspectives and Concepts
In these modules we regard marketing as a set of activities designed to:
• provide solutions to people’s consumption problems,
• satisfy their needs and wants, and
• deliver bundles of benefits.
Phrased another way, marketing is all about understanding and facilitating the exchange process
whereby products [tangible goods, intangible services, not-for-profit groups, other organizations,
people, places, causes, ideas] are acquired [consumed, used, attained, attended to, understood] by
markets [customers, consumers, buyers, resellers, clients, users, participants, members, fans, the
audience].
In other words, a product is anything that can be offered to a market for attention, acquisition,
use or consumption that might satisfy a need or want. A market is a person -- or an organization
-- with needs or wants to be satisfied and, in the context of commercial transactions, with money
to spend and a willingness to spend it. The act of exchange is referred to as a transaction. A
transaction is the tangible manifestation of the exchange process. As you can see, there are
many different types of products and many different types of markets. The scope of marketing is
far broader than toothpaste, beer and corn flakes … and, far broader than buying goods and
services for oneself or one’s family.
The relationships among marketing, the exchange process, products and markets look something
like:
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Marketing
↓
↓
↓
↓
↓
The Exchange Process
Market(s)
Product(s)
(Transactions)
Marketing may also be regarded from an academic perspective as an applied social science.
The marketing discipline – the formal study of marketing activities, the exchange process and
consumption – is about 100 years old. Thousands of researchers around the globe – both
academics and practitioners – devote their careers to understanding, describing, classifying,
explaining and predicting marketing activities and their impacts on consumption. The marketing
discipline supports dozens of respected academic journals and hundreds of professional and trade
magazines and web sites. This course does not take an academic, social science perspective on
marketing but it is important to realize such a perspective exists because the results of this ongoing “basic research” influences much “practical application”.
Taking the definition of a market a step further, we may classify these persons and organizations
into various end-user groups or segments of the overall market. Smart marketers always
determine whether or not an adequate market exists for their products within various, broadlydefined end-user groups. In fact, a smart marketer's most basic examination of market
segmentation usually starts with some analysis of sales, or potential sales, in each broadly
defined end-user market. Here is one common way marketers classify potential end-user groups:
• The consumer market, also referred to as the retail market or the household market … families
buying for their own consumption,
• The institutional market including hospitals, schools, restaurants, prisons, day care centers,
universities,
• The industrial market including harvesters of natural resources, processors and manufacturers,
• The commercial market including business services, retailers and wholesalers,
• The not-for-profit or non-governmental organizations (NGOs) market,
• The government market including federal, provincial and municipal departments and
agencies,
• The agricultural market … agribusiness markets, and
• The export market or, international market.
Often a marketer's first cut at segmenting the total market into one or more similar groups of
potential customers is taken by asking questions about the needs, wants, problems and relative
sizes of these eight end-user groups. Module 4 introduces several more specific bases for
segmenting markets into two or more meaningful groups.
In the early days of marketing the focus was on production and selling. The goal was profit
through volume. In the second half of the twentieth century, for many organizations, the focus
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has shifted from production and selling toward customers and the marketplace. The goal has
shifted to profit through customer satisfaction. Now it's customer patronage over production and
marketing over selling.
This approach or philosophy is called the marketing concept. Organizations that have adopted
the marketing concept see creating customers as more important than creating products and see
marketing as the central integrating business function. Everything the organization does requires
addressing the question, "How will this affect the customer and the satisfaction of her needs and
wants?"
Here are a baker's dozen factors controlled by the marketer that may affect customer
satisfaction:
•
•
•
•
•
•
•
Friendly employees
Knowledgeable employees
Helpful employees
Courteous employees
Billing accuracy
Billing clarity
Billing timeliness
•
•
•
•
•
•
Service quality
Overall good value
Quick service
Returns policies
Hours of operation
Ease of obtaining information
Are you able to identify another five factors?
As you can imagine, it is not easy to get everyone in the organization thinking and acting like
marketers and being customer oriented and market driven. At a marketing workshop for bankers
some years ago, one customer service representative (teller) commented,
"If I wasn't interrupted by customers all day long, I could get
my job done a lot better."
This is merely one example of the mindset that has yet to discover the wisdom of the marketing
concept. This mindset is not exclusive to front line employees. It is equally prevalent among
owners, presidents and top management. No doubt you have your own favourite examples of
such thoughtless, product-centered attitudes and behaviour.
Organizations that have embraced the marketing concept as a philosophy of doing business also
have led the way in implementing customer service programs, adding value to their products
and attempting to establish long-term relationships with their customers.
Some organizations have a passion for customer service. They aren't satisfied until the customer
is. They understand "word-of'-mouth" advertising and the importance of a positive reputation.
They do everything possible to avoid screw-ups. They invest heavily in employee training and
systems to ensure "the right products arrive at the right place at the right time". They dismiss
bullies who demonstrate insensitivity toward customers. As evidence of this trend, you have
probably seen hundreds of advertisements that stressed customer service as a means of
differentiating one company over another.
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Organizations with a passion for customer service are constantly on the lookout for ways to add
value to their products. They understand consumers assess the extent to which various
competing products will satisfy their particular set of needs, the cost of obtaining each product,
and thus the perceived value each offers relative to the others. Putting perceived value in pricing
terms: "The worth of a thing … is what it will bring". That is, the perceived value of a product
from the customer's point of view is at least as important -- if not moreso -- than its cost in
determining the product's price. Organizations that aggressively seek ways to add value to their
products stand the best chance of increasing relative perceived value.
Professional sports teams do not merely provide fans with a game to watch. They provide a total
three-hour recreational and entertainment experience. Athletic shoe retailers do not just sell
shoes. They provide education and instruction via well-informed customer service people and
long-term customer communications programs. They understand value … and they understand
that their only goal is to find and retain customers by satisfying their needs and wants.
Organizations that have adopted the marketing concept and are passionate about customer
service and seek to add value to their products, also are the leaders in building long-term
relationships with their customers. Relationship marketing also widely called customer
relationship marketing (CRM), means investing resources with the conscious intention of
developing long-term, trusting customer relations. Not all customers seek or want long-term
relationships with their suppliers, but many do. These customers like being kept abreast of
trends. They like receiving special treatment. They like the comfort and security of patronizing
a single supplier over a long period of time. Relationship marketing means a lot to these
customers.
Of course, relationship marketing means a lot to marketers as well. It's a lot less expensive -and therefore more profitable -- to retain a satisfied customer than it is to find a new one and, of
course, loyal, repeat customers accumulate a lot more purchases over time. Loyalty is a core
notion of marketing. Smart marketers understand the real goal is not merely to satisfy customers
but to satisfy them so well they remain loyal.
Implementing relationship marketing programs carries a risk. Technology has reduced the cost,
and increased the speed, of creating customer databases to the point where almost any business is
able to develop database marketing programs. It seems today almost every company, and every
brand, wants to establish long-term relationships with all their customers. Relationship
marketing overload is causing many consumers feel too targeted, too often and causing them to
reject all such offers. An emerging marketing challenge is getting close enough -- and staying
close enough -- to customers to satisfy their needs and create some type of long term relationship
without annoying the hell out of them.
1.2 Thinking and Acting Like a Marketer Overview
This section helps you understand a bit about how marketers think and what they are like. All
points made are re-introduced and elaborated in later modules. This section also identifies
several skills and abilities successful marketers possess … how they act. As you begin to
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understand how markers think and act, try to apply this thinking to the exercises and case
situations created for this course. When you have your marketing hat on, you should:
1.
2.
3.
4.
5.
be customer oriented and market driven,
be an enthusiastic champion,
be analytical,
be able to reason, and
be able to visualize your customers and marketplace
1. Be Customer Oriented and Market Driven
Marketers understand that their customers -- in various marketing situations also called:
• consumers
• users
• participants
• buyers
• fans
• guests or
• clients
• the audience
• members of the organization
do not want products and services, they want:
• solutions to their problems,
• satisfaction of their needs and wants, and
• bundles of benefits.
Smart marketers do not sell products. They offer solutions. They offer satisfactions. They offer
benefits. Smart marketers are much more concerned about delivering what their customers want
than they are about selling the goods and services they have to offer. Their focus is on what the
customer, wants, or gets, or feels, or looks like. Their focus is not "we" -- the company, the
marketer. Their focus is "you" -- the consumer, their customer.
In effect, smart marketers are tuned in to every customer's favourite radio station WIIFM (What's
In It For Me) because they know the interests of their customers come first. Effective marketers
know customers are interested in the idea behind the product. People do not want can openers.
They want open cans. People do not want garbage bags. They want bagged garbage. People do
not buy cosmetics. They buy hope.
2. Be an Enthusiastic Champion
If you aren't enthused about your product, service or new venture, who's going to be? Marketers by
nature are optimistic and enthusiastic. When others see problems, they see opportunities. When
others talk about survival, they talk about growth. When others dwell on yesterday, they are busy
creating tomorrow. Marketers are the champions of new ideas, new products, new services, new
projects. They love to create things. They try to be objective but often objectivity is difficult to
achieve because they have such an emotional stake in the vision, the dream, the concept. Thinking
like a marketer means being an enthusiastic — but hopefully realistic and objective — champion.
A test to determine if you possess the characteristics of a successful marketer follows in section
three of this module.
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3. Be Analytical
Smart marketers are analytical. Smart marketers think like detectives. Detectives:
• search for clues (He has a smoking gun in his hand.)
• to reach conclusions (He committed the murder.)
• to make decisions or recommendations (Arrest that man!).
In a similar manner, marketers are constantly on the lookout for:
• evidence (facts, opinions, calculations and reasoning) to try to figure out what happened, what
may happen, and what to do about it,
• so they may draw conclusions based upon the evidence and linked to marketing decision making,
• so they may then develop one or more recommendations to capitalize on an opportunity or
overcome a problem.
Being analytical is also referred to as being persuasive, constructing an argument or critical
thinking. It's what separates the pretenders from the real thing … effective marketers. Marketers
instinctively go beyond mere description of their marketplace. They begin to analyze that
marketplace. They instinctively think:
Information
(Raw data)

Evidence
(Clues)

Conclusions
(Thus, ...)

Recommendations
(Suggested Action ...)
They realize it is necessary to describe their situation accurately by collecting relevant information,
but smart marketers are then able to use that descriptive information; that is, to turn it into clues or
evidence and draw conclusions, to help decide what to do. Using information is the essence of
being analytical. Sometimes using information is referred to as answering the, "So what?"
question or, "How does this information help me market my product?" You'll have many
opportunities to develop your analytical skills in this course. Here is a brief example of using
information Follow it carefully.
Information, The Facts, Raw Data, Basic Description:
• A clothing store in the mall has annual sales of $350,000.
• The store is open 60 hours per week.
• The average customer spends $50 each time she/he buys something at the store.
• Across Canada average sales in clothing stores are $200 per hour and $40 per customer.
Selected Calculations Based on the Raw Data:
• The store is open about 3,120 hours per year (60 hrs./wk.  52 weeks)
• On average each hour the store sells about $112 worth of clothing ($350,000  3,120 hrs).
• On average each hour the store has 2.2 customers ($112/hr.  $50/customer).
• The average clothing store in Canada has 5 customers per hour ($200/hr.  $40/customer).
Tentative Conclusions from the Evidence (Facts and Calculations)
• The clothing store in the mall may have a problem (conclusion) as it serves a lot fewer customers
per hour (2.2 vs 5) and has a lot lower sales per hour ($112 vs $200) than the average store.
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• It does however have a slightly larger average sales ($50 vs $40).
Tentative Recommendations (Suggested Action … Thrusts):
• The analysis above hints at problems but there's too little information yet to suggest any specific
action.
• Certainly the store should try to find out why its results are so different than the average store.
You will get a chance to use this type of analytical thinking throughout the course … and
throughout life. Being analytical is a core skill of successful marketers.
4. Be Able to Reason
No matter how good you are at the detective work of finding and using facts and opinions and
making calculations to draw conclusions, there always will be gaps in your understanding about
customers, markets, competitors, the environment and so on. Marketing situations are seldom
'black and white'. There's plenty of room for logic, judgment and interpretation. The ability to
reason -- hopefully reasonably -- to close marketing information gaps is a critical skill of all smart
marketers.
In using their powers of reasoning, smart marketers tend to avoid subjective phrases such as "I
assume ..." or "I feel ..." or "I think ..." and replace such phrases with more objective, tentative,
cautious and appropriate phrases such as, "If this (is true), then that (is true)" or "I would reason (a
certain way) and, if this line of reasoning is accurate, then ...". Being able to employ "if…then…"
reasoning to assist in constructing an argument is the essence of reasoning reasonably.
5. Be Able to Visualize Your Customers and Marketplace
As input to their reasoning, marketers have an uncanny knack of being able to visualize their
marketplaces accurately. They are able to close their eyes and picture their marketplace in
operation. They are able to project themselves into the buying situation from the customer's
perspective and generalize (tentatively) the results. Marketers are able to construct accurate pictures
of reality from only a few details. Here are three examples of the kinds of thinking and visualizing
smart marketers engage in rather naturally. Why 'rather naturally'? Because they are tuned in to the
realities of their marketplaces, their competitors and their customers.
Visualizing The Residential Window Cleaning Market in Halifax
If someone said, "the residential window cleaning market in Halifax" to a marketer, she
would immediately begin visualizing different types of houses (old, new, one-storey, twostorey, three-storey), different types of customers (seniors, rich people, lazy people, fussy
people), different types of needs (clean outside surfaces only vs. inside too, remove and
clean screens, putty old windows and so on) and different types of competition (do-ityourself, hire the neighbour's kid, do nothing, hire a commercial cleaner). Soon she
would picture herself on the front porch of someone's house finding out about their needs
and explaining how she could satisfy them. Her eyes would be closed. But, her mind
would be wide open and actively working to "see" her marketplace accurately and in detail.
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Visualizing the Buyer of Lawn and Garden Sprays
Here is a second example of reasoning reasonably and visualizing to build an argument
(analysis). A manufacturer of a full line of high quality horticultural sprays and dusts
(insecticides and fertilizers for outdoor plants) has asked you to help understand the market.
You have no factual (hard) evidence in front of you but you reason that most people who
purchase such products probably would be homeowners (reasonable) who value having
nice lawns, rose bushes or whatever (reasonable). They probably like to get compliments
on their lovely property (reasonable) and get pleasure from admiring the property themselves
(reasonable). Because of the importance of a nice yard, such people probably will tend to
consult friends or specialty outdoor products dealers to make sure all of their landscaping
purchases, including sprays and dusts, are wise ones (reasonable).
If this line of reasoning is accurate, then the market probably is not overly price sensitive
and there is probably brand loyalty to products which work. Such reasoning has important
implications for developing a successful marketing strategy. In this case a reasonable
strategy would appear to be to create and promote a strong brand name and brand image
and avoid using price discounts to win customers.
Visualizing the Market for a New Mini Golf Course
Here is a third example. No one knows how many rounds of golf will be played next
summer on a proposed new mini golf course but reasonable estimates are needed. This
situation is encountered frequently in marketing. The rigorous, often expensive, answer
is to do a lot of marketing research. And, perhaps in time you will. But if the answer is
required immediately, you need to resort to reasonable reasoning such as: If one out of
every one hundred teenagers in the city (70,000 teens  1% = 700) and if one out of every
one hundred families in the city (300,000 families  1% = 3,000 families  3 people per
family = 9,000) each played one round of mini golf on the new course, then the local teen
plus family market would be about 9,700 rounds per season. You could employ similar
reasoning for the tourist market or other markets such as senior citizens to arrive at additional
rough estimates of market response.
Is it reasonable to think that 1 in every 100 teens and families would come once? In the
absence of factual evidence, you have to rely on judgment and the reasonableness of this
reasoning. Otherwise, you'd never have any estimate and that would be a lot worse.
[Of course, time permitting, as noted you'd want to commit some marketing (research)
resources to finding out what percentage of the population played mini golf last summer,
where, how often and with whom.]
As you can see, it is not easy thinking like -- and acting like -- a marketer. It takes practice and
experience. And even then, even marketers slide back into product-centered thinking and being
descriptive instead of being analytical. You'll be a more successful marketer if you put yourself in
your customer's shoes and attempt to understand accurately and in detail what is going on out there
in your marketplace.
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1.3 The Characteristics of Successful Marketers
Do you possess the characteristics of a successful marketer? This little less-than-purelyscientific quiz may provide the answer. Score each characteristic:
5 = Definitely me,
4 = Somewhat me,
3 = A little bit like me,
2 = Not much like me, or
1 = Definitely not me.
•
•
•
•
I am an enthusiastic person … a cheerleader in the highest sense of the word.
I am optimistic. I tend to see opportunities, not problems.
I am entrepreneurial. I tend to exhibit enterprising behaviour.
I am a (calculated) risk taker. I am not afraid of uncertainty or the unknown.
___
___
___
___
•
•
•
•
I am able to close my eyes and visualize how and why people purchase products.
I am empathetic … I am good at understanding other people's feelings.
I am a strong, confident person … not wishy-washy.
I am persuasive … I am able to convince others of the wisdom of my thinking.
___
___
___
___
•
•
•
•
I am good at bargaining and negotiating.
I am growth oriented … I focus more on tomorrow than on yesterday.
I am customer oriented.
I am analytical. I think methodically about evidence → conclusions →
recommendations.
___
___
___
• I am numerate. I love percentages. I instinctively break down aggregate results
or figures to make them more concrete and easier to understand .. revenue
per day, customers per month and so on
• I am logical … my reasoning tends to be seen by others as reasonable.
• I am tolerant of ambiguity … answers do not have to be black or white …
I am comfortable with a lot of gray.
• I day dream a lot … (bonus if in colour).
• Overall, I see myself, and others see me, as a true craftsperson … a bit of
a perfectionist who puts a lot of love into life's endeavours.
___
___
___
___
___
___
The maximum score is 85, the minimum is 17. I have not attempted to validate the scale, so the
most I can say about your score with any confidence is that it provides food for thought.
1.4 Course Focus
Now, we return to the identification of the 100 core concepts, 20 processes and 15 analytical
tools of marketing. Most first courses in marketing are heavy on concepts and theory. They
employ principles of marketing textbooks that tend to be long and seem to believe that “if 10
new concepts is good, 20 is better”. On the other hand, these textbooks tend to be loaded with
contemporary examples, well organized, well written and well illustrated so they have much to
offer for introductory courses taught in the traditional way.
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This course is different. It emphasizes “how to” process learning over “what is” content
learning. It provides many opportunities to develop:
• your analytical abilities (finding and using evidence to draw conclusions; that is, to construct
an argument and persuade others of the soundness of your reasoning),
• your marketing numeracy (finding, “crunching” and using numbers and analytical tools to
help make decisions), and
• your communications skills (writing memos and reports and making presentations – as
appropriate).
It introduces terminology, concepts and theory only to the extent that a smart marketer requires
them. Note though: a solid grasp of these core concepts is critical to being an effective marketer.
Thus, we expect you to work as hard at building your conceptual knowledge as your applied
skills and abilities. The process of managing the marketing function and of ‘being analytical’
were introduced on page 3. The core concepts, processes and analytical tools of marketing
employed in this course were identified on pages 4 and 5 of the Overview. Look pages 3, 4 and
5 over carefully. They are your keys to success. All are defined or otherwise elaborated in the
modules that follow.
1.5 Core Concepts, Processes and Tools
This module introduced about 20 concepts you should understand and be able to use.
• marketing
• exchange
• market
• transaction
• product
• visualizing
• WIIFM (What's in it for me)
• end-user groups
• customer oriented
• the marketing concept
• market driven
• customer satisfaction
• reasonable reasoning
• value added
• "if… then…" reasoning
• perceived value
• relationship marketing
As well, this module introduced these processes:
• the process of being customer oriented and market driven
• the process of "being analytical"
• the process of reasoning reasonably
• the process of visualizing or visioning
16
Foundations of Marketing -- BSAD 231
Module 2: Marketing Planning and Analysis
Module 2 introduces marketing planning and analysis. It contains five parts. The parts are interdependent. Each part answers a core marketing management question. The five questions
addressed are:
2,1
2.2
2.3
2.4
2.5
What is marketing planning?
What is analysis?
What is evidence?
What are marketing challenges?
What are marketing thrusts?
2.1 What is Marketing Planning?
Here's a folksy definition. Marketing planning is investing today's time examining yesterday's
information in order to affect tomorrow's results. Dwight Eisenhower, the former U.S. President
and five star general, was fond of noting, "Plans are nothing. Planning is everything." In other
words, from a marketing planning perspective, it is not just the details of the document produced. It
is also the planning process -- thinking, dialoguing, networking, analyzing, identifying challenges,
setting objectives, getting involved, reaching consensus) employed to generate the plan. Sometimes
the value of marketing planning is expressed:
If you don't know where you're going, how will you know how to get there,
or when you've arrived?
Marketing planning tends to be deskwork ... sometimes alone ... sometimes on the telephone or in
person ... often in small groups to generate consensus. On a rifle range, planning would be "ready ...
aim". Implementing the plan would be "fire". Marketing planning has a lot to do with trying to
understand how well the product -- broadly defined -- is doing in its marketplace(s), where it is
headed and where marketing management wants it to be. Only then may smart marketers decide
what changes -- strategies, resource acquisition, resource deployment -- are necessary to get there.
In the planning model below "we" means the product and the industry it is a part of, "results" means
outcomes and "resources" means money, people, information, equipment and facilities.
Where are we now?
Where are we headed?
Where do we want to be?
[Recent and current results
and resources]
[Projected results and resources]
[Desired results and resources]
When marketing management -- normally with considerable input from marketing research
professionals -- generates satisfactory answers to these questions, the focus then becomes:
What changes are required to close identified gaps?
[How may available resources be used more efficiently and/or
what additional resources are necessary]
17
Another vision of planning is the three step process:
A
C
Analysis
[Finding information.
Using information.
Conducting a size-up.
Doing a situation analysis.]
T
Challenges
Thrusts
[Identifying problems.
Identifying opportunities.
Establishing objectives.]
[Recommended
action plans.
Strategies.
Tactics.]
Or, from a marketing management perspective …
A.C.T. like a C.A.T.
and be ready to pounce
on any problem or opportunity (challenge)
that comes along.
This too is a bit folksy, maybe even a bit corny, but it's a pretty accurate summary, and it works. It's
the marketer's version of the old expression, "Look before you leap." It reminds us as marketers to
put analysis before action and evidence before conclusions. This is critical stuff.
2. 2 What is Analysis?
The essence of analysis as noted briefly in Module 1 is:
Evidence
Information in the form of
∙ Factual evidence
∙ Opinion evidence
∙ Calculations evidence
∙ Reasoning evidence
Conclusions
Inferences or supported assertions linked
to the information and the issues/decisions
being considered expressed as therefore..,
thus.., the evidence suggests..,
I conclude..
In other words, the essence of analysis or "being analytical" is using evidence to draw
conclusions which affect the development of marketing strategy positively. In a somewhat
expanded form the process of analysis looks like this:
Information → Evidence → Conclusions → Recommendations → Implications
(Raw Data)
(Clues)
(Inferences)
(Thrusts)
(What if …)
As noted in Module 1, smart marketers really do think like detectives. Like detectives, they
search for clues to draw conclusions which eventually lead to recommendations. Here's
another example.
18
Evidence -- The 500 or so fixed roof accommodation units in Baddeck and
area operate at about 90% capacity from July 1st to September 15th.
Conclusion -- There is not much room for growth among visitors seeking
this type of accommodation during this 12 week time frame.
Tentative recommendation -- To generate growth in tourism, Baddeck
should concentrate on increased visitation during the shoulder seasons and
the off season. [Alternatively, of course, Baddeck could: (1) promote its
campgrounds or (2) expand the supply of fixed roof accommodation units.]
Smart marketers are good analysts. They realize that merely describing a situation ("Once upon a
time there was a small county in eastern Nova Scotia …) is inadequate for decision-making
purposes. They are comfortable "being analytical". They are comfortable:
•
•
•
•
•
•
interpreting information,
calculating new evidence
using their powers of reasoning to extend the evidence base
explaining how various factors affect or may affect buyer behaviour,
predicting outcomes/results and
allocating scarce resources (making decisions)
all under conditions of great marketplace uncertainty and ever scarcer resources.
The information (raw data) noted above becomes evidence (clues) when marketers use it to
draw conclusions relevant to marketing decision making. A conclusion is an inference or a
supported assertion made from one or more bits of evidence. The evidence to support any
conclusion in the plan must be explicitly presented otherwise the manager or researcher is merely
making a series of unsupported assertions prefaced by dangerously weak phrases such as, "I
think… I feel… It seems to me ..." or worse, "I assume…".
Smart marketers have learned to replace "I assume…" reasoning with "If … then …" reasoning.
It is far safer, and just as effective, to state, "if such and such occurs then so and so follows" than
to assume away reality.
Here are eight better ways smart marketers draw conclusions and begin to construct an argument
for one course of action over others:
1.
2.
3.
4.
The evidence suggests …
Therefore …
Thus …
It seems …
5.
6.
7.
8.
We conclude …
A reasonable inference would be that …
If such and such is true, then so and so would follow
Or, we may simply state the conclusion.
Notice the future definite of the verb to be ("will") is never used in stating a conclusion. Always
use would -- or might or could or perhaps or possibly. You do not have a crystal ball. You
19
cannot see the future. So why pretend you can. Be a bit more humble. Humility does not
weaken an argument. Humility strengthens an argument.
To maximize the usefulness and value of the analysis, each conclusion should be linked both:
• backward to the evidence (facts, opinions, calculations and reasoning) and
• forward to its impact or effect on crafting, creating or adjusting marketing strategy.
Learning to make both of these linkages to construct powerful arguments is critical. Here is an
illustration.
Elvira's -- a fictitious dining room in a fictitious Antigonish motel -- experienced sales decreases
of 10 percent per year in each of 1997, 1998 and 1999 (factual evidence). Early in 2000 the
company asked its marketing assistant to check things out. She interviewed 10 people involved
in the hospitality industry (exploratory opinion evidence). They informed her other motel dining
rooms seemed to be doing all right and they were unsure why Elvira's seemed to be the only one
in decline. In her short memo to management, the assistant wrote:
• "It seems dining room market softness is specific to our company." [A tentative, but
important, conclusion linked backward to the opinion evidence.], and
• "It seems further exploratory consumer research is warranted to determine which element of
our marketing mix (product, price, place or promotion), if any, seems to be the problem." [An
extension of the tentative conclusion forward to a decision-relevant conclusion -- almost a
recommendation -- to conduct additional research.]
Linking a conclusion backward to the evidence that generated it is referred to as simply drawing
a conclusion. Linking a conclusion forward to the crafting or adjusting of strategy is referred to
as answering the, "So what?" question. That is, linking a conclusion forward permits smart
marketers to indicate how the conclusion affects, informs or has an impact on the proposed
strategy/plan -- the allocation of scarce marketing resources (money, talent, time).
The evidence → conclusions flow looks something like this:
Bits of Evidence:
Facts, Opinions,
Calculations,
Reasoning
A Relevant Conclusion, Inference or Assertion
Developed from -- and Supported by -The Bits of Evidence
A Decision-relevant Conclusion, Inference or Assertion
Linking the Bits of Evidence and Conclusions Drawn
From that Evidence to the Crafting of Marketing
Strategy
[Answering the critical, "So what?" question]
20
As elaborated in Module 4, a marketing size up or situation analysis contains three related
chunks of analysis. Marketing research is an important input to all aspects of a marketing size
up. Indeed, decisions made about conducting -- or not conducting -- marketing research projects
are a key "behind the scenes" element of marketing.
1. Normally, the first chunk of analysis is examining the organization itself and the products
being marketed. Sizing up "internal organizational reality" relies heavily on internal
secondary data (recent results, recent strategies, recent resources and so on).
2. Sizing up "the marketplace" relies heavily on primary data collection -- focus groups,
observation studies, surveys.
3. Sizing up "the broader environment" typically relies heavily on day-to-day marketing
intelligence gathering and on using syndicated secondary data services. Marketing research
does not have to be an expensive, time consuming activity. Well planned but folksy research
is better than no research at all.
The starting point for the marketing size up or situation analysis is information. Then, information
is used as evidence to support conclusions relevant to the marketing planning process and the
development of strategies, tactics, and programs. The notion of evidence is elaborated next.
2.3 What is Evidence?
The information marketers employ to create a marketing plan may be classified as facts,
opinions, calculations and reasoning. Figure 2.1 below reveals how the four types of evidence
are similar and how they are different. To smart marketers Figure 2.1 presents critical stuff.
Marketing planners need to know the nature and source of all information (evidence) in order to
draw appropriate -- tentative or definite -- conclusions.
Figure 2.1
Four Types of Marketing Information → Evidence
Source of
Information
Level of
Confidence
Higher Confidence
Lower Confidence
Obtained from others
Facts
Opinions
Generated by the
marketer/analyst (you)
Calculations
Reasoning
Figure 2.1 may be summarized:
• Facts and opinions come from others.
• Calculations and reasoning come from marketers/analysts (you)
• Facts and calculations warrant a high degree of confidence. They are true, close to the truth
or "givens".
21
• Opinions and reasoning warrant a lower degree of confidence. They suggest tentativeness
because the information cannot be immediately verified.
The distinctions among the four types of evidence are important. Smart marketers know the
types of evidence they are using before drawing any conclusions or making any inferences.
If the evidence is factual -- including calculations -- they may conclude with confidence that,
for instance, "Tourism in Industrial Cape Breton is growing." But, if the evidence is the opinion
of others or their reasoning -- however reasonable that reasoning may be -- the most they can
say with some tentativeness is, "Tourism in Industrial Cape Breton appears to be growing."
A word of warning: when writing a memo or report do not use the expression "my reasonable
reasoning." That would be quite self-serving. Simply say "my reasoning". It is up to the
recipient, not you, to judge how reasonable you have been.
The nature of marketing information and typical sources of facts, opinions, calculations and
reasonable reasoning are indicated below. The lists are important for both entrepreneurs and
existing marketers.
• Typical Sources of Marketing Facts
∙ Matters of context ("givens") such as time, place, history
∙ The organization itself (results, resources strategies)
∙ Internal secondary data … much of the information contained in data bases
∙ Much of marketplace reality (buyers, market characteristics, competitors,)
∙ Most external secondary data sources, and
∙ Observation studies
• Typical Sources of Opinion Evidence
∙ Most marketing research … surveys, focus groups
∙ Meetings, presentations, conferences, trade shows
∙ Assertions made in conversations and interviews
∙ Assertions made in print (articles, books, cases)
∙ Feedback from employees or customers
[Sometimes opinions are misrepresented as facts. Beware. Always consider the source and the
motive. See if an opinion may be verified or confirmed by examining or obtaining additional
information.]
• Typical Tools for Calculating New Evidence
∙ Using the four basic mathematical functions (add, subtract, multiply, divide) to
combine or compare two or more numerical facts,
∙ Using percentages to compare numbers,
∙ Using weighted averages,
∙ Breaking down aggregate results "per" and "by",
∙ Using frequency distributions of results (how many people did what things how often),
∙ Horizontal and vertical analysis of results, and
∙ Using break even, payout and markup.
22
• Using Your Own Reasoning as Evidence
∙ Having the ability to interpret facts, opinions and calculations and the confidence to
discuss the unknown,
∙ The art of persuading others by combining and extending bits of evidence …
constructing an argument … critical thinking,
∙ Using "if… then…" statements instead of "I assume…" to fill gaps in the analysis,
∙ Using sensitivity analysis … low, medium and high estimates of a number
∙ Visioning … "seeing" the marketplace,
∙ Avoiding "I assume…", unsupported assertions and "whim driven analyses", and
∙ Letting the analysis be driven by the evidence and reasoning stemming from the
evidence … "data driven analyses".
2.4 What Are Challenges?
Smart marketers obtain information -- and use it (evidence) -- to understand (analyze) the
marketplace and their place in it. As they draw conclusions from the size up or situation analysis
they begin to identify current, emerging and future challenges. Indeed, three common conclusions
flowing out of a size up are, "This appears to be an opportunity …" or "This appears to be a problem
…" or, more generally, "This appears to be a challenge…".
Challenges are the realities of: (1) the product and organization, (2) the marketplace(s) in which
they compete, and (3) the broader environment which require -- or may require -- some response in
order to:
• exceed objectives,
• meet objectives, or
• avoid failing to meet objectives.
There are two types of challenges. Positive challenges are called opportunities. Negative
challenges are called problems. Smart marketers want to capitalize on as many opportunities, and
overcome as many problems, as possible. Of course, given scarce (finite) resources -- money, time,
talent, available information, facilities and equipment -- rarely are marketers able to capitalize on all
opportunities and overcome all problems within the next planning period. That is why objectives
were invented.
Setting objectives is determining which opportunities to capitalize on and which problems to
overcome during the next planning period and then specifying the desired outcomes for each.
Smart marketers strive to develop objectives or desired outcomes that are:
•
•
•
•
•
•
•
concrete and specific (not vague and general)
quantified or measurable (numbers or percentages),
time bound (by such and such a date),
frequently targeted (a specific market segment is specified)
realistic/attainable ("doable"),
agreed upon, and
written down.
23
Well reasoned, clearly articulated marketing objectives -- desired marketing outcomes -- are crucial
to successful marketing. They provide the direction and guidance necessary to determine what
specific thrusts to employ and what specific resources will be necessary to implement each one.
There is a direct, specific, explicit link between marketing objectives and marketing thrusts and a
direct, specific explicit link between marketing thrusts and the resources necessary to implement
planned thrusts to achieve identified marketing objectives. This is critical stuff.
2.5 What Are Thrusts?
In the context of the marketing planning process, thrusts are what marketers plan to do to
achieve specific marketing objectives. Perhaps more accurately they should be referred to as
planned thrusts. Planned thrusts are variously referred to as recommendations, action steps,
programs, strategies and tactics. Whatever words are used, they are critical to success:
Thrusts — planned actions — linked to one or more specific marketing
objectives and supported by the size-up of product and organization reality,
marketplace reality and the forces of the broader environment beyond is
exactly what marketing planning and the process of crafting marketing
strategy are all about.
When a planned thrust -- a strategy developed to achieve one or more explicit marketing objectives
-- is implemented properly ("fire") it is a burst of directed resources and energy.
The day-to-day implementation of strategy is referred to as tactics. You may have heard the
expression, "Great strategy. Bad execution." It refers to the all-too-frequent situation in
marketing where the intent --the planned thrust, the strategy -- was correct but the many, many
details of implementation --execution -- were bungled badly. There's an important lesson here.
"Doing things right" requires at least as much marketing planning -- perhaps more -- than "doing
the right things."
Crafting a marketing strategy is covered in Module 8-11. Briefly, developing a marketing strategy
requires answering the journalist's six core questions:
• The who, when and where questions are answered by selecting one or more target markets
after conducting a detailed market segmentation analysis.
• The what and why questions are answered by selecting a meaningful sustainable competitive
advantage and articulating a market positioning statement.
• The how question is addressed by creating a marketing mix -- a recipe for success -- comprised
of the 4Ps (product, price, place, promotion).
As noted, the use of marketing research projects to fill information gaps is often an important
element of marketing strategy. In case you haven't guessed, the stuff in Module 2 is also absolutely
24
critical stuff to know and, more importantly, to be able to do. When marketers have their planning
hats on they try to:
A.C.T. (Analysis → Challenges → Thrusts) like a C.A.T. and be
ready to pounce on any problem or opportunity that comes along.
2.6 Core Concepts, Processes and Tools
This module has introduced about 20 concepts you should understand and be able to use:
•
•
•
•
•
•
•
•
•
•
•
planning
marketing resources
analysis
challenges
thrusts
evidence
conclusions
problems
opportunities
marketing objectives
the marketplace
•
•
•
•
•
•
•
•
•
•
•
the broader environment
size up
situation analysis
SWOT analysis
strategy
tactics
marketing strategy
target market
market positioning
marketing mix
the 4Ps (product, price, place, promotion)
As well, Module 2 has introduced these processes:
•
•
•
•
•
•
the process of marketing planning
the process of analysis (being analytical, doing a size up, doing a situation analysis)
the process of using evidence to construct an argument
the process of identifying marketing challenges
the process of setting marketing objectives
the process of identifying planned thrusts (a marketing strategy)
25
Foundations of Marketing -- BSAD 231
Module 3: Researching Your Marketplace
This module concerns researching your marketplace to generate the factual and opinion information
needed for your size up or situation analysis. The note concentrates on marketing research studies
as one important source of information. Marketing research studies are key tools in generating
information. When properly conducted, marketing research studies reduce the risk of making bad
decisions and increase the chance of making good decisions. This note helps you understand the
marketing research process. It won't make you a marketing research expert but it should make you
a bit more sensitive to the procedures necessary to obtain good information. First though, we take a
brief look at all four sources of marketing information.
3.1 Where Marketing Information Comes From
All organizations have systems, however informal, for obtaining, processing, analyzing and using
market-based information. Usually an organization's marketing information system includes:
1.
2.
3.
4.
Marketing intelligence gathering activities,
Internal records and results,
Secondary data sources including syndicated services, and
Marketing research projects.
Each of these information sources is elaborated below.
1. Marketing Intelligence Gathering Activities tend to be regular, every day, ear-to-the-ground
efforts to understand your marketplace and scan the broader environment beyond. Here are half a
dozen examples:
• reading relevant newspapers or business magazines,
• having lunch with one of your suppliers or middlemen,
• using the telephone to network (keep in touch) with key people in your industry,
• surfing the internet for any new, relevant information,
• talking informally to your customers, and
• attending a trade show … a gathering of manufacturers and middlemen within one industry.
2. Internal Records and Results provide many valuable insights for marketing decision-making.
Here are half a dozen examples:
• sales broken down by time period, sales area, product type or in other relevant ways,
• customer comments and suggestions,
• registration, credit card or charge account information,
• salesperson observations of competitive activity,
• the cost of goods sold and production schedules for each product, and
• the operating expenses associated with different activities, products or sales areas.
In the past decade or so firms have begun to capture customer, prospect and transaction information
to permit undertaking database marketing campaigns -- direct marketing (electronically, by mail or
by telephone) to selected customers or prospects.
26
3. Secondary Data Sources including Syndicated Services provide information obtained by
someone else for some other purpose -- that's why it is "secondary" -- but which you believe may
be relevant and helpful to your situation. Sometimes secondary data are free (reference material and
government documents from the library). Sometimes they require paying a small user fee (special
requests of Statistics Canada, industry-specific research reports conducted by the media).
Sometimes the supplier is in the business of collecting and disseminating ("syndicating") research
to its clients for substantial monthly fees. Examples include the A.C. Nielsen television ratings, the
Bureau of Broadcast Measurement diary panels on radio listenership and television viewership, and
retail store checkout UPC (universal product code) scanner research indicating which types of
buyers are purchasing which types of products. In fact, the marriage of scanner data and survey
data has created a new arm of the marketing research industry, single-source data services or
suppliers The Mini Appendix at the end of this module identifies several print-based and secondary
data sources.
4. Marketing Research Studies as the name suggests tend to be somewhat more formal,
organized, systematic, objective efforts to obtain and analyze information about your marketplace.
Marketing research studies tend to be requested, and conducted for or by, a specific organization.
Thus, they are "primary" or first hand sources of information. Again, here are half a dozen
examples:
• conducting a survey using the telephone, personal interviews or by mail,
• doing an observation study such as a traffic count or a store inventory count or recording
people's behaviour,
• conducting a focus group discussion in which six to ten consumers spend about two hours with a
moderator revealing their thoughts, feelings and behaviour about some service or product,
• doing detailed studies of only a few customers (structured interview research) or marketing
situations (case studies),
• conducting a controlled experiment in which one variable, say price, is changed and the effects
of these changes on other variables, say sales or image, are measured, and
• combining many of the above tools at an early stage in the decision-making process to spot
problems or emerging opportunities ... this is called exploratory marketing research. Its purpose
is to understand the marketing situation better, reduce the number of factors studied, develop
hypotheses about the relationships among variables and shape future, more conclusive research
studies.
Smart marketers obtain and analyze relevant information from a number of sources. Good
information helps them make good decisions and avoid costly mistakes. The next section provides
an overview of database marketing … the use of parts of the total information system to reach
selected customers.
3.2 Database Marketing [This section developed by Bobbi Hiltz]
People (customers) are a vital source of information and smart marketers know that every
contact with the customer is a learning opportunity, regardless of whether there is any
tangible contact with that customer. Think about it – if you had the capability to understand
27
exactly who your customers are, how much they spend with you, which of your locations they
frequent, when they shop, and what products they buy together, couldn’t you serve these
individuals better? Now, what if you could instantaneously collect and store all this information
each time a customer shops at your store by merely scanning a card? Many firms are now doing
this very thing to create vast internal records and use the information in their database marketing
efforts (direct marketing to selected customers).
You have already learned that people provide an abundance of information about the object of
interest (store, brand, location, service, person, product) by telling you, but actions sometimes
speak more loudly. Observing an individual’s purchase behavior provides an unbiased
source of marketing information. Rather than asking people about their behavior towards a
particular item of interest (store, brand, location, service, time to shop) a number of organizations
are finding it effective to study an individual’s actual behavior by electronically collecting and
storing point-of-sale information in internal databases.
This is not to say that talking with customers is not important, it is. Such conversations provide
insights not available through point-of-sale data collection (personal information, attitudes,
beliefs, feelings, perceptions) and are often the most practical information gathering techniques
for smaller organizations. In other words, electronic data collection is not the only answer, nor is
it always the best one. In fact, database marketing is only possible when electronically
collected data (scanned data, point-of-sale data) is paired with customer demographic
information (name, address, telephone number, email address, age, gender, occupation,
income level) collected via surveys. As Table 3.1 indicates, there are a number of pros and
cons associated with electronic data collection.
Table 3.1




Pros and Cons Associated with Electronic Data Collection
Pros
Cons
Information collected instantaneously
 Very costly to implement
Provides detailed purchase behavior
 Requires continual updating of linked
information
demographic information
Provides unbiased information
 Customers inundated with storespecific cards
Customer perception – not bothered by  Customer perception – lack of privacy
long surveys
Given this brief introduction to database marketing, there are two questions that you should be
asking yourself:
1. How do companies get this information?
2. What do companies do with this information?
28
1. Obtaining the Data
You probably own at least one “preferred customer “ type card like Shoppers Optimum, Air
Miles, or HBC Rewards (or at least know someone who does). Companies issue these cards to
their customers for two reasons:
• to collect information on their customers and track their actual buying patterns, and
• to reward customers for their loyalty with some sort of point/discount mechanism.
Do you remember getting your card? You had to register. This meant that, at a minimum,you
provided your personal contact information and you may have had to complete a survey
requesting other demographic information as well (gender, age, income, occupation). Then, you
were given a card. This card is equipped with an electronic id number that identifies you
personally. So now, every time you make a purchase with one of these cards a record of the
items you buy become stored in a database that is cross-referenced with the survey data you
supplied when you obtained your card. Companies win because they acquire all the data they
want and customers win because they receive some type of reward for using their card (points
and/or discounts). Figure 3.1 summarizes the process that occurs in order to collect this data.
Figure 3.1
Process of Obtaining Data
Customer
receives
reward (each
visit)
Complete
survey
including
demographic
info
(first visit)
Receive a
store card
(first
visit)
Present card
for scanning
(each visit)
Company
records
details of
transaction
& matches
with
demographic
information
(each visit)
2. Using the Data
The last section on obtaining data may sound a little frightening given all the data that companies
are collecting about your personal life and shopping patterns. However, organizations are
collecting the data to serve you better and create customers for life, so most reputable companies
only use the data internally (they don’t sell it).
29
• Smart marketers know that it is wasteful to invest the resources (time, money, information
technology) into such elaborate data collection procedures if that data is not converted into
information.
• Smart marketers analyze the data provided to segment their customers and create targeted
offers and information for selected groups (database marketing). (Database marketing is
sometimes referred to as “one-to-many” marketing because the company has isolated a large
group of customers with similar characteristics.)
• Even smarter marketers take this process one step further and create long lasting, cost effective
relationships with each of their customers by providing unique offers to each individual based
upon their past behavior and feedback obtained from database marketing (relationship
marketing). (Relationship marketing is known as “one-to-one” marketing because the company
has used feedback from each customer to create specific offers tailored to them.)
Here are the steps that smart marketers take in using the data, all of which are depicted in Figure
3.2.
Figure 3.2
Using the Data
Data
Information
Database Marketing
(“One-to-Many”)
Collecting and updating demographic,
and consumption profiles of customers
to target them effectively
Relationship
Marketing
(“One-to-One”)
Developing long-lasting, cost
effective relationships with
each customer for mutual
benefit
The data that was electronically collected is converted to information by a process referred to as
datamining. Analysts “mine” the vast store of data looking for patterns - relationships among
groups of customers or generalize customers based on groups of products purchased. As with all
marketing research, however, you need to make sure the information you are seeking is relevant.
With such vast amounts of interesting data on hand it becomes very important that you have well
defined objectives and know exactly how the information is to be used before you begin your
search.
As an example:
Consider a grocery store that wants to increase sales of its store brand orange juice (objective).
To do this, analysts can dig into (mine) the data and isolate different groups of customers that
30
may respond to store brand orange juice offers (convert data to information). Some potential
groups might be:
• breakfast customers - customers who purchase at least two of: bacon, eggs, hashbrowns, maple
syrup, or pancake mix
• current orange juice customers - customers who have purchased orange juice in the past (but
not the store brand)
• current store brand orange juice customers (may be given incentives like “buy 2, save $.50” to
increase overall store brand sales)
• non-orange juice customers – customers who do not buy orange juice, but who buy oranges
(indicating a like for the taste of oranges)
Once one or more groups are selected, incentives to purchase store brand orange juice are sent to
those customers via mail or email using the contact information provided by those customers
(database marketing). Analysts then determine which customers responded to the offer and
attempt to update incorrect addresses and use the information gained from this process in future
contact with the customer. This is relationship marketing or customer relationship
marketing (CRM) first introduced in Module 1.
3.3 Marketing Decisions  Research Objectives
Smart marketers avoid collecting interesting information and concentrate on collecting decisionrelevant information. The process of undertaking decision relevant research is outlined in Figure
3.3.
Figure 3.3
Linking Marketing Research to Marketing Decision-making
If I knew
(such and such)
Research Objectives:
to determine…
to estimate…
to measure…
The specific bits
of information
needed but not
available
(Linked)
That would
really help me decide
(so and so)
Acquiring and Deploying Resources
(Money, Talent, Facilities,
Equipment, Supplies, Time)
to Craft a Winning Strategy
Target Market Selection
Competitive Positioning
Product Strategy
Pricing Strategy
Place Strategy
Promotion Strategy
31
No one wants to construct an argument ("be analytical") with an evidence base of interesting but
useless information. Before smart marketers "do a survey" they ask:
•
•
•
•
•
•
What is the marketing problem, opportunity, challenge?
What are the marketing decision(s) which have to be made?
What information do we have now .. the current database?
What information do we need .. research objectives?
Who has the needed information .. sources?
How can we obtain it quickly and accurately .. methodology?
That's how you should think too:
?
What’s The Issue
(The Problem,
Opportunity, Challenge
Or Decision)
?
What Information
Do We Have
And Need
?
Who Has The
Information
And How May We
Best Obtain It
Always stop and ask yourself why a particular piece of information is needed and how it will be
used to help you make one or more marketing decisions better. When planning a marketing
research project your frame of mind should be:
If I knew such and such (the specific research objectives)
that would really help me decide so and so (some aspect of crafting a marketing strategy).
Or, conversely:
I could confidently decide so and so (some aspect of crafting a marketing strategy)
If only I knew such and such (the specific research objectives).
Thinking such as this helps you specify your research objectives. Research objectives are the
discrete, specific bits of information you need but do not have. Note: marketing objectives are the
desired outcomes of implementing marketing strategy such as share of market, new product
development, new market development, sales, profits and so on. Do not confuse marketing research
objectives (specific bits of needed information) with marketing objectives (desired outcomes).
3.4 Sources and Types of Information
Let's start with people. Frequently people are the source of needed information. People can provide
information on:
• awareness of a particular object (store, brand, location, service, person),
• their knowledge or familiarity with it,
32
• their image of it,
• their attitudes toward it (likes, dislikes, good, bad, right, wrong, overall preference for it ),
• their behaviour towards it (own it, use it, have several, been there many times, eat it with
applesauce or whatever),
• their intentions towards it (will buy, will go there, will vote for her or whatever), and
• their own personal characteristics or demographics (age, gender, number of kids, education,
occupation, languages spoken, religion, family income and so on).
Here are five examples of typical marketing research objectives. The survey is of residents in one
large town concerning the Seafood Fit For People restaurant. The survey is being done as input to
future advertising and special promotions decisions:
• to determine the level of awareness of the Seafood Fit For People restaurant.
• to determine the image of the Seafood Fit For People restaurant among those aware of it.
• to determine how many times in the previous three months each respondent has been to
(patronized) the Seafood Fit For People restaurant.
• to determine customers' attitudes toward the Seafood Fit For People restaurant ... likely this
objective would require many questions about the service, the food, the decor, and so on.
• to determine the characteristics of each respondent including age group, gender, family size,
occupation and where they live. ... likely these "demographics" would be used to identify and
quantify various market segments.
A more detailed and structured list of the types of information provided by respondents is provided
in Figure 3.4 on the next page.
People are not the only source of marketing research information. Sometimes the relevant
population is, say, all of the stores which sell jeans within 100 km of New Minas, Nova Scotia or
all of the harness racing tracks in Canada, or all of the cars passing a particular point along the Trans
Canada Highway, or all of the homerooms in a school or ... well, hopefully, you get the idea.
3.5 Selecting A Sample of People To Survey
Not all people are alike. This reality is important when you identify the specific people to survey in
a particular marketing research project. Some people live within the town limits, some have two or
more children at home, some have never owned a lawnmower, some have two lawnmowers, some
use your brand, and some people are not even consumers. They are retailers, government officials,
suppliers, mall managers and so on. Accurately defining the people you want to survey and
including screening questions to make sure you reach them are critical steps in obtaining relevant
information. In research terms you:
•
•
•
•
need to specify the population or universe (the people or objects you are interested in),
then, select a sample of those people or objects,
which is representative of them,
so you can generalize or project your results from the sample to the whole population.
33
Figure 3.4
Respondents Provide Information On …
Awareness
Unaided recall (no prompting)
Aided recall (some prompting)
Top-of-mind, share-of-mind recall
Knowledge/
Familiarity/
Beliefs
Facts and Opinions about an object
(a brand, company, person, place,
thing)
Image
Connotative meaning -- Semantic profile
Absolute image, or compared to a standard
Attitudes/
Affect/ Feelings
Like:Dislike -- Good:Bad
Rating and ranking
Importance
Of each attribute, feature, benefit
Expectations
The existence of key attributes and
anticipated performance on those attributes
Intentions
To behave in a certain way (buy
something, go somewhere, do something)
Behaviour/
Usage/
Ownership
Facts about possession and consumption
Facts about having done certain things
Performance
How well a product performed on key
attributes and delivered benefits/satisfactions
Demographics
Information about themselves and their
characteristics, family circumstances
Please re-read the previous sentence. It is a bit tricky but very important. When planning a
marketing research project you need to think:
What Is The
Relevant
Population
or Universe
?
How Should
I Select My
Sample
?
Is My Sample
Representative
Of The
Population
?
If Representative:
Generalize
The Results To
The Population
With Confidence
34
Here is a brief example. The Seafood Fit For People restaurant is interested in determining the
extent to which high school students patronize the restaurant. There's only one high school in the
town and it has 800 students. These 800 students are the population for this study. Is it necessary
to survey everyone? Certainly not. You can select a sample of students and if you are careful the
sample would represent (be very similar to) the population. One approach might be to obtain class
lists and survey, say, every eighth student on each list. This would give you a sample of 100
students which, because of the way you selected them, should be quite representative of all 800
students. Suppose 10% of these 100 students had been to the Seafood Fit For People restaurant an
average of two times each in the past month. You could then generalize these results and say with
some confidence that about 80 of the school's 800 students (10%) had patronized the restaurant a
total of about 160 times (2 visits each x 80 students) in the past month. Then, you could link this
information (evidence) to the restaurant's sales figures and possibly use the calculations to alter
advertising or special promotions.
The size of a sample depends primarily upon:
•
•
•
•
the manager's desired levels of accuracy and precision -- her desired confidence,
the amount of time available,
the available budget and, most important,
the importance of the information and decisions to be made.
You've probably seen and heard marketing research results presented on television or in the
newspaper as "accurate to within plus or minus 3 percentage points 19 times out of 20." Three
percentage points is the level of accuracy and 19 times out of 20 (95%) is the precision or level of
confidence. A probability sample of approximately 1,000 respondents is needed to generate an
accuracy level within 3 percentage points with 95% confidence.
Note: for large populations (roughly 10,000 and up) the size of the population does not affect the
size of the sample for given levels of accuracy and precision. Thus, a sample of 1,000
respondents properly selected from Nova Scotia or from Canada or from the United States would
each be accurate to within 3 percentage points 19 times out of 20 even though the three populations
are under 1,000,000, 30,000,000 and 280,000,000. The mathematics of this -- the Central Limit
Theorem -- is covered in every introductory statistics course.
3.6 Designing A Data Collection Form
Whether you are designing a questionnaire to survey restaurant patrons or an observation form to
record automobile traffic flows ask:
•
•
•
•
What marketing decisions will be made as a result of this study?
What are the specific research objectives of the study (the bits of information needed)?
What will the research design or methods of obtaining the information be?
How will the overall approach and the questionnaire be pre-tested to make sure they will work?
35
You always want a concrete, specific answer to the question, "What resource allocation decisions
will be made as a result of obtaining this new information?" Armed with answers to the
fundamental questions above, you are now able to consider more specific questions such as:
• What types of questions should I use? Your two basic choices are open-ended questions such
as "Why did you decide to vacation in Nova Scotia? or closed-ended questions such as, "How
important was access to sandy ocean beaches in your decision to vacation in Nova Scotia?".
Very important Ο Somewhat important Ο Not very important Ο Not at all important Ο
• What order or sequence will the questions be in?
• Will it be necessary to use screening questions to interview only certain people? For example
including the question, "Have you been to Nova Scotia before?" if you want to interview only firsttime visitors and screen out veteran travellers or vice versa.
• What will the specific wording of each question be? Here are a couple of tips.
∙ Use Yes:No type questions only for matters of fact such as, "Have you ever been to Nova
Scotia?"
∙ Use scales (Excellent ... Very Good ... Fair ... Poor ...) for opinions.
∙ Make the context absolutely clear. Do not ask "Do you go to the movies on Friday nights?"
rather ask, "On how many of the past eight Friday nights did you go to the movies? Specific is
always better than general.
• What instructions, layout and overall physical design will I use?
3.7 A Mini Appendix: Sources of Marketing Research Information
Here are several sources of marketing information. Never be shy about asking for assistance by
telephone or in person ...
1. The Canada-Nova Scotia Business Service Centre (1-800-668-1010). The main resource centre
is in the Cambridge Suites building on Grafton Street in Halifax.
2. Statistics Canada maintains toll free numbers (1-800-565-7192 and 1-800-263-1136) to help
guide you to the information you need. Recently StatsCan introduced a user pay policy so be
careful. They have a web site http://statcan.ca
3. The Statistics Branch of the provincial Department of Finance (902-424-5691) produces 5
Regional Profiles for Nova Scotia (Cape Breton, Northeastern, Halifax, Annapolis Valley and
Southwestern). These profiles provide considerable information on each county in Nova Scotia.
These profiles are also available from the Nova Scotia Government Bookstore on Granville
Street in Halifax (1-800-526-6575).
36
4. The Financial Post book Canadian Markets is available in most public and university libraries.
It contains detailed information on every market in Canada above 10,000 people. It also
contains detailed county and provincial information.
5. Three valuable occasional reports on family spending produced by StatsCan are:
• Family Expenditures in Canada (Cat. 62-5550).
• Family Food Expenditures in Canada (Cat. 62-5540).
• Home Repair and Renovation in Canada (Cat. 62-2010).
These reports help you estimate the size of many markets.
6. Normally a terrific information source is the Reference Librarian at any public or university
library. Reference librarians are there to help and are flattered when you ask.
7. The larger public libraries carry several trade magazines [magazines for particular industries].
Trade magazines can be the source of a lot of good background [secondary] information.
8. Municipal, provincial and federal government offices and agencies such as the Atlantic Canada
Opportunities Agency (ACOA) or your Regional Development Authority may be helpful.
9. Here are some other possibilities ... the Yellow Pages, the local Chamber of Commerce/Board
of Trade, Canada's banks — including the Business Development Bank.
3.8 Core Concepts, Processes and Tools
This note has introduced about 20 concepts you should understand and be able to use:
• marketing information system
• case study research
• marketing intelligence gathering activities
• experimental research
• internal records and results
• exploratory research
• secondary data
• conclusive research
• syndicated secondary data services
• research objective
• single source data suppliers
• population or universe
• marketing research
• sample
• primary data
• representativeness
• survey research
• generalizability
• observation research
• focus group research
• depth interview research
• database marketing
• datamining
As well, the note provided brief introductions to these processes:
•
•
•
•
•
the process of specifying research objectives and linking them clearly to marketing decisions
the process of conducting a marketing research study
the process of using samples to represent larger populations
the process of developing a data collection instrument.
the process of database marketing and datamining.
37
Foundations of Marketing -- BSAD 231
Module 4: Conducting a Size-up (Analysis → Challenges →)
Module 4 illustrates the elements of a marketing size up or situation analysis. Thus, it is an extension
of Module 2 on Marketing Planning and Analysis. In particular it elaborates the Analysis →
Challenges stage of the A-C-T process. It is also an introduction to Modules 5, 6 and 7 which show
how to conduct each of the three elements of a size up: the internal analysis, the marketplace analysis
and the analysis of the broader environment beyond.
4.1 An Overview of the Marketing Size Up
Figure 4.1 presents an overview of the marketing size up or situation analysis. Smart marketers do
not memorize the contents of Figure 4.1. They own them and use them to figure out ‘where are we
now, how did we get here and where are we going.’
Figure 4.1
An Overview of the Marketing Size Up or Situation Analysis
Sizing up the Organization
∙ Marketing resources (money, time, talent, equipment, facilities, information)
∙ Recent and current marketing results
∙ Recent and current marketing objectives
∙ Recent and current marketing strategies
∙ Recent and current resources, results, objectives and strategies of
all other departments in the organization
∙ The relative strengths and weaknesses of the organization
∙ The organization's "distinctive competencies", the things it does
better than others
Conducting a
Marketing
Size-up
Sizing up the Marketplace
∙ Analyzing buyer behaviour … buyer processes and purchase criteria
∙ Analyzing the market … its nature, structure, size, trends, factors
affecting demand
∙ Analyzing the competition … direct and indirect competition,
their resources, results, objectives, strategies, competencies
∙ Analyzing suppliers and middlemen … how these organizations
may affect your objectives and strategies
Sizing up the Broader Environment
∙ Identifying forces and trends in the "macro-environment" that
may affect your organization and its marketing strategy:
∙ Economic forces and trends (e.g. inflation)
∙ Government forces and trends (e.g. quotas, tariffs)
∙ Social/cultural forces and trends (e.g. dining out trend)
∙ Technological forces and trends (e.g. the www)
∙ Natural forces and trends (e.g. global warming)
∙ Demographic forces and trends (e.g. an aging population)
38
Sometimes a size up is referred to as an industry analysis. A thorough analysis (Evidence →
Conclusions) of your organization, its marketplace and the broader environment beyond provides the
base for identifying challenges and establishing marketing objectives. In Module 2 on marketing
planning and analysis we indicated a size up provides the input to address four key questions:
•
•
•
•
Where are we (the product, the organization, the industry) now?
Where are we (the product, the organization, the industry) going?
Where do we (the product, the organization) want to go? and
What changes (new or re-allocated resources) are required to close identified gaps?
4.2 Linking the Size Up to Marketing Challenges and Objectives
How your size ups lead to the identification of marketing challenges and the establishment of
marketing objectives is shown in Figure 4.2. Notice that marketing objectives flow directly from
challenges (problems and opportunities) and challenges flow directly from a thorough size up of the
organization, its marketplace and the broader environment beyond. It’s a logical, evidence-driven
process.
Figure 4.2
The Size Up → Marketing Challenges → Marketing Objectives
A Thorough Size-up or Analysis
(Evidence → Conclusions)
∙ The Organization ∙
∙ The Marketplace ∙
∙ The Broader Environment ∙
Negative Challenges:
Positive Challenges:
Problems
Opportunities
To be Overcome
To be Capitalized Upon
Marketing Objectives
(Desired Outcomes)
∙ Selected Problems ∙
∙ Selected Opportunities ∙
Notice also the absence of the phrase SWOT Analysis. This is deliberate. Although the phrase
SWOT Analysis is used widely, all too often students get the idea they can simply create four lists
(strengths, weaknesses, opportunities and threats) and that's it. Wrong. Creating lists is not analysis
and any tool suggesting it is analysis is dangerous. Explaining lists, drawing conclusions and linking
those conclusions to the crafting of strategy is analysis. Addressing the “So What?” question is
analysis. Making lists is not analysis.
39
Here’s a brief elaboration of the process illistrated in Figure 4.2. Modules 5, 6 and 7 are all
about doing a size-up and specifying the marketing challenges it reveals. The notions of
marketing challenges and marketing objectives were first introduced in Module 2, Marketing
Planning and Analysis. The points bear repeating so the size up gets used to the fullest.
We do not undertake a size-up merely as an academic exercise. We undertake a size-up to
determine what marketing problems (relative weaknesses of the organization; threats in the
marketplace or the broader environment) and what marketing opportunities (relative strengths
-- distinctive competencies -- of the organization; changes in the marketplace and trends or
forces in the broader environmental) exist, or are likely to exist.
Given a finite amount of resources, we probably cannot overcome every problem and capitalize
on every opportunity in the next planning cycle. Thus, we need to establish marketing
objectives. Marketing objectives specify which marketing opportunities and marketing
problems will be tackled and why. Marketing objectives specify the desired outcomes of each
opportunity or problem tackled. You’ll recall ‘good’ marketing objectives are:
• specific
• quantified
• time bound (by such and such a date)
• realistic, attainable, reasonable
• targeted (market specific)
• written down & agreed upon
4.3 Concepts, Processes and Tools
When you have completed Modules 5-8 on conducting a size up you should have working
knowledge of the following core concepts, processes and tools.
•
•
•
•
•
•
•
marketing size-up
marketing resources
buyer analysis
purchase processes
purchase criteria
marketing analysis
differentiation strategy
•
•
•
•
•
•
•
•
market segmentation
demographic segmentation
behavioural segmentation
competitor analysis
supplier and middleman analysis
macro-environmental analysis
concentration strategy
portfolio analysis
As well, these modules introduce many important marketing processes:
• conducting a size-up (analysis → challenges → )
• sizing up the organization
• sizing up the marketplace including conducting buyer, market, competitor and
supplier/middlemen analyses
• segmenting a market
• sizing up the broader environment
• using the results of a size-up to identify marketing challenges and specify marketing
objectives and
• undertaking a portfolio analysis to help identify opportunities.
40
Foundations of Marketing – BSAD 231
Module 5: Sizing up the Organization
Module 5 indicates how to conduct a size up of internal, organizational reality. Normally a size-up
progresses from the inside out. Marketers need an understanding of their own organizations to
determine which objectives and strategies are reasonable, or possible, and which are not. Then they
are ready to undertake marketplace and environmental analyses to determine the effects of
individuals, organizations and forces outside the organization.
Sizing up your organization means assessing its relative strengths and its relative weaknesses. Often
tentative conclusions are drawn about the organization using the three key words: opportunity,
problem or challenge. Remember though, to be helpful, conclusions must be linked to the crafting of
strategy, the making of decisions, or the acquisition and deployment of scarce resources. It's not
drawing conclusions merely for the sake of drawing conclusions. Doing an organizational size up is
a purposeful activity.
5.1 An Overview of Marketing Resources
Every organization is a bundle of finite, or scarce, resources. Here are five important resources to the
marketer. The goal is to draw conclusions about the ability to implement different marketing
strategies in light of these resources and, if needed, to identify any changes to the resource base
(additions, improvements). Measuring capacity is a key component of assessing marketing
resources. So is assessing the fit or lack of fit between each scarce resource and the organization’s
needs. The goal is not merely to catalogue or describe the resources.
1. People
Marketers need estimates of available and future human resources to plan, implement and monitor
marketing programs. Are "people resources" full time, part time or volunteers? Are the people
experienced and capable? Do they possess the skills and motivation to carry out assigned tasks?
Does the talent exist to implement approved strategies? Will they require close supervision or
training? Do they work well together now?
2. Time
An important marketing calculation is the amount of time available individually and collectively
among people involved in planning, carrying out and monitoring marketing plans. If the
organization works a 40 hour week, each full time marketing employee has about 2000 hours to
contribute to helping achieve specific goals and objectives. Smart marketers attempt to match
planned activities to available manpower. A second dimension of time is the length of time an
organization requires -- lead time -- to get ready to act. Organizations able to respond to change
quickly have a strategic advantage over those that are unable to do so.
3. Money
It would be nice, say, to add five new sales reps and expand overseas but where would the million or
so dollars come from to implement these plans? Smart marketers have one eye on the recent past
and present to determine how much money is available and one eye on the future to build the case for
investing in marketing activities now in order to generate significant returns later. Earlier we noted
41
that assessing the "doability" of implementing recommendations is part of the planning process. A
critical element of "doability" is assessment of the availability of funds.
4. Equipment and Facilities
Again, it would be nice to double production, say, to take advantage of an overseas opportunity but if
the firm's physical resources -- plant and equipment -- could not deliver such an increase, there would
be no point spending a lot of time on this alternative. Marketers require a good sense of the physical
capabilities -- estimates of capacity -- of the organization as well to assess the operational "doability"
of possible strategies.
5. Information
Information is also a scarce resource to be examined. Does the
organization have systems in
place to monitor sales, costs and profits? Does it know what is going on in the marketplace? Is it
monitoring trends in the broader environment that may affect the organization? Are systems in place
to get the right information in the hands of the right people at the right time? Can decision makers
access and manipulate information in the organization's database to increase response time?
5.2 Sizing Up Marketing Objectives, Strategies and Results
A thorough size-up of internal, organizational reality includes a detailed assessment of recent and
current marketing objectives, marketing strategies, the results these objectives and strategies
produced, and some interpretation why.
1. Marketing Objectives
Here is a list of typical questions asked … and answered … about recent and current marketing
objectives:
• Did the organization have any marketing objectives (stated desired outcomes)?
• Were the objectives implicit or explicit?
• Were they ‘good’ (specific, measurable, time bound, targeted, realistic, agreed upon, written down)
• Did the objectives ‘drive’ strategy? That is, could you see linkages between what were the desired
outcomes and how the organization went about realizing its desired outcomes?
• Were the objectives achieved?
2. Marketing Strategies
A thorough size up analyzes recent and current marketing strategies. Here are some questions asked
and answered about recent and current marketing strategies:
• What was the strategy? That is, who were the targeted market segments and what marketing mix
or mixes (the combination of product, price, place and promotion) were employed?
• What information approaches and sources were employed in generating and monitoring marketing
strategies?
• Did the various aspects of strategy seem to hand together and make sense?
• Did the strategy work?
3. Marketing Results
Smart marketers assess outcomes as well as inputs. They need to know if recent marketing
objectives were met and if marketing strategies worked. Here are some aspects of the assessment of
marketing results:
• What were the results and how do you know?
42
• Depending upon the situation, what were sales, margins, net profit, growth, share of market, the
launch of new products, entry into new markets, customer satisfaction, company image, employee
morale, marketplace momentum.
5.3 Sizing Up The Rest of the Organization
Even if marketing is the driving force behind the organization, all other functions and departments -accounting, finance, operations, human resource management, information management, research
and development -- contribute to its success. Marketing plans need to be developed in the context of
the relative strengths and weaknesses of the whole organization, not merely the strengths and
weaknesses of the marketing department. Key questions include:
• How large/small is the ogranization?
• What is the overall resource base upon which to implement marketing plans and strategies?
• What does the organization do particularly well -- its distinctive competencies -- that marketing
may take advantage of?
• What does it not do very well that marketing may avoid or attempt to improve?
Once you have a thorough understanding of internal, organizational reality and how the organization
will or might impact marketing strategy, you can turn to an analysis of marketplace reality. Module
6 indicates how to undertake buyer analyses, market analyses, competitor analyses, market
segmentation analyses and middlemen analyses. Typically, these are the five components of a
marketplace analysis or size up.
43
Foundations of Marketing – BSAD 231
Module 6: Sizing up the Marketplace
Module 6 contains five ‘chunks’ of the overall size-up. Collectively these five ‘chunks’ are
commonly referred to as the marketplace. An organization's marketplace are those individuals and
firms an organization encounters on a daily basis and which have the greatest impact on marketing
efforts. Module 6 examines the nature and process of buyer analyses, market analyses, market
segmentation, competitor analyses and supplier/middlemen analyses.
6.1 Conducting a Buyer Analysis
This section helps you understand what a buyer analysis is and how to conduct one. Doing a buyer
analysis draws heavily on the processes and skills you read about in earlier modules. Buyer
analyses are not restricted to the buyers of your product or service – your customers. The analyses
could just as easily be for buyers of competitors' products and services. Or, they could be for
prospective buyers of a totally new product or service.
The objective of a buyer analysis is to understand peoples':
• purchase processes – how they think, feel and behave (shop) with respect to a particular product
– their
• purchase criteria – what it is they want from that product ... the benefits they seek ... what's
important to them and their
• consumption behaviour – that is, how much they consume, when, how and with whom.
Conducting a buyer analysis requires visualizing and empathy. It may include making very
tentative generalizations from a sample of one (your own experiences) as in, ‘Been there. Done
that.’ You can learn a lot about buyer behaviour – purchase processes, purchase criteria and
consumption behaviour – by examining your own shopping and product usage and the shopping and
product usage of those you know.
Purchase processes are sometimes referred to as the six stages in the consumer's purchase decision:
Stimulus → Problem Awareness → Information Search →
Evaluation of Alternatives → Purchase → Post Purchase Behaviour
Of course, not all consumer purchases involve six stages. Some purchases are habitual and routine.
When a purchase situation is infrequent, important or new, however, it may well involve all of:
• Stimulus/Cue/Trigger -- What cue or stimulus triggered the purchase process? Was it a social
cue such as family conversation? Was it a commercial cue such as sign along the highway? Was
it a non-commercial cue such as a government report? Or, was it a physical cue such as hunger
or thirst? Marketers need to understand the situations and factors triggering needs.
44
• Problem Awareness -- What needs or wants have been stimulated? What is the state of inner
tension suggesting something is missing?
• Information Search -- How does the consumer find out about the various alternatives that may
"solve the problem"? What sources are contacted? Who or what influences the search for
information? Is the perceived risk of making a bad purchase decision great enough to motivate
an extended search? Smart marketers assess three types of perceived risk:
• perceived financial risk -- will it be worth the money?
• perceived social risk -- will it receive approval from friends and family?
• perceived performance risk -- will it work well and be hassle-free?
• Evaluation of Alternatives -- Marketers need to know the criteria consumers employ to
evaluate the various alternatives. What's important? Which attributes or features or services
matter? How much? How does the consumer combine all of this information into a decision?
• Purchase -- The purchase act is actually several decisions at once. The purchase act reveals
what was purchased (brand, style, features and so on), how many were purchased (1, 2 …),
where it was purchased (store, geographic location), and how it was paid for (cash, interact,
credit card, installment, lease/buy). Purchase details provide many facts marketers may use to
craft winning strategies.
• Post Purchase Behaviour -- How was the purchase used or consumed, by whom, in what
circumstances? Did performance match expectations? Was the consumer satisfied? Is repurchase likely? If appropriate, how was the product disposed of after use?
Purchase criteria call to mind every consumer's favourite radio station WIIFM … What's in it for
me. This should act as a reminder to think about benefits, solutions and satisfactions moreso
than attributes, features and products.
Here's a Rudyard Kipling poem which summarizes both the purchase processes and purchase
criteria dimensions of a buyer analysis almost perfectly. Of course, Kipling wasn't referring to a
buyer analysis in 1927 when he wrote:
I keep six honest serving men.
They taught me all I knew.
Their names are What and Why and When
And How and Where and Who.
Smart marketers want to understand as much as possible about how the marketplaces they operate
in work. The essence of buyer analysis is to understand how individuals, families or
organizations think, feel, behave, or intend to behave. Here are several typical questions asked:
Who?
Who purchases the product, who influences the purchase of the product, who pays for the product,
who consumes or uses the product, and who disposes of the product. In a family or an organization
these individuals are referred to as the decision-making unit or DMU.
45
What?
What problems they seek solutions to, what needs or wants they seek to satisfy, what bundles of
benefits they want, what product features or attributes matter most, what types and sources of
information are consulted.
When?
When do buyers search for and evaluate information to make informed choices, when do the actual
purchases occur, when is the product used or consumed, and when is the product discarded.
Where?
Where do buyers shop for the product, where do they purchase the product, and where do they use
or consume the product.
How?
How do they decide on a particular purchase at a particular time, how do they pay for the purchase,
and how do they use the product.
Why?
Why do they want the product, why do buyers' processes and purchase criteria differ, and why do
their choices differ.
As you know, to maximize the value of asking -- and answering -- questions such as these you must
follow up by asking -- and answering -- the "So what?" question -- how can this information or
reasoning be used to help develop marketing strategy.
As revealed in Module 2, Marketing Planning and Analysis, the information needed to conduct a
buyer analysis comes from:
1.
2.
3.
4.
5.
Marketing research projects,
Marketing intelligence gathering activities,
Internal records and results,
Secondary data and syndicated services, and
Reasoning, visualizing and disaggregating.
Armed with this wealth of information, you then put your detective's hat on and use this information
-- the facts, opinions, calculations and reasoning -- as evidence to draw conclusions (it seems ... the
evidence suggests ... therefore ... I conclude ...) about buyers' processes and criteria to support one or
more tentative recommendations or decisions (using your resources in a different way ... improving
a product ... changing your prices ... changing the types of stores where buyers may obtain the
product ... increasing the advertising ... or whatever ...).
Trying to understand buyers' processes and criteria and then using this understanding to craft
marketing strategy — to make decisions about how to use your scarce human and financial
resources — is by no means easy. It requires creativity, sensitivity and imagination. Often the
information you have to work with is not presented or available in the most useful groups,
categories or classifications. Often it is incomplete and anecdotal. Often there is not enough time or
money to obtain the information you need. These realities create huge challenges but they should
never stop you from doing the best you can with whatever information you have … plus, of course,
46
your ability to reason reasonably to develop an accurate picture of the buyers, customers or potential
customers in your marketplace.
If you carry the process of breaking down results or disaggregation to the extreme you would have
to analyze every buyer separately. Clearly, for most marketplaces, this is neither necessary nor
possible. On the other hand, if you carry out no disaggregation at all your buyer analysis and your
overall market analysis would be essentially the same. A useful balance between total
disaggregation and no disaggregation is:
In a buyer analysis, break down the available information into as many small
groups as the data permits or as your reasoning suggests make sense —
meaning you think can "do something different" for that small group from a
marketing point of view.
You have to decide what constitutes a relevant small group. Maybe it is all of the students in a high
school broken down by grade — 10 compared to 11 and 12 — or by gender and grade — girls in
grade 10 compared with boys in grade 12. Maybe it is all homeowners by age and location (under
30 living in the country compared with over 60 living in the city). This process is the essence of
market segmentation and is elaborated upon later. Every good buyer analysis includes some
assessment of the segments that make up — or could make up — the total market.
Conceptually, moving from buyer analysis to market segmentation analysis looks like this:
Market Segmentation Analysis
(Are there groups of buyers similar to each other but different than other buyers
we may attempt to target and satisfy?)
Buyer Analysis
(What are the purchase processes and criteria of individual buyers and groups of similar buyers?)
Once you have obtained and organized buyer information for several small groups you should
develop profiles, descriptions or prototypes of each group in terms of awareness, knowledge,
image, attitudes, usage, behaviour and intentions and then compare the groups. Comparison,
usually by calculating a lot of percentages, is a great way to understand the differences among small
groups of buyers. Drawing comparisons and creating prototypes permit you to see your
marketplace more clearly. Are the groups really different? Are the differences important in terms
of marketing to them? Then, you can draw conclusions and make recommendations (decisions)
with greater confidence.
Here's a brief example. Suppose you surveyed a sample of high school students and obtained the
following results on the ownership of jeans:
• the average student owns 7 pairs of jeans including both denim and cords and both shorts and
pants.
• the averages by grade are: grade 10 = 8, grade 11 = 7, grade 12 = 6.
• the averages by gender are: girls = 9, boys = 5
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• the group with the highest average is girls in grade 10 = 10 pair and the group with the lowest
average is boys in grade 12 = 3 pair.
To compare the groups you could let the overall average of 7 pair equal 100%. Then you could say
with confidence that girls are 129% of the average and boys are 71%, or, that girls in grade 10 are
143% of the average while boys in grade 12 are 43% of the average. In a report or presentation, you
might convert the percentages into an index. Comparisons such as these may help you select certain
segments to target and certain products to offer. Of course, you would also need to include
additional buyer process and buyer criteria information such as styles and brands owned and stores
shopped in.
Discovering how buyers' shop, why they behave as they do and what it is they really want are
critical to developing successful marketing strategies. Be sure you conduct detailed buyer analyses
as part of the size-up of your marketplace. And then be sure you try to group buyers and attempt
some generalizations about behaviour to make the results more useful.
6.2 Conducting a Market Analysis
This section describes and illustrates a market analysis. Note that a market analysis and a
marketplace analysis are not the same. A market analysis is the part of a marketplace analysis
that defines what the relevant market is, its size, structure and the factors affecting demand. A
marketplace analysis includes buyer, competitor and supplier/middlemen analyses as well as market
analysis. Note also that a market analysis and a buyer analysis are not the same. A market
analysis tends to take a broad, overall perspective. A buyer analysis tends to take a narrow,
individual perspective. Both market analyses and buyer analyses are essential inputs to market
segmentation.
Smart marketers try to learn as much as possible about their marketplaces. Market knowledge and
understanding increase the chances of serving and satisfying your customers, adding new
customers, responding to threats and taking advantage of emerging opportunities. Before a
marketer attempts a market analysis however, she/he must address the question:
What market(s) am I in?
Every market can — and should — be defined by:
1. The nature of the product or service,
2. The nature of the end user,
3. The geographic scope of sales.
Let's say you make food for animals. Is the relevant market all types of food for all types of
animals in all types of settings including in people's homes, on all farms, in zoos, in companies (like
guard dogs), in universities (like experimental labs), and in all countries of the world? Probably not.
Let's say the food you make is canned dog food you sell through grocery stores and specialty pet
stores in Atlantic Canada. Now we're getting somewhere:
1. The nature of the product is canned dog food,
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2. The nature of the end user (well, other than the dog) is the family or the household referred to
as the retail market or the consumer market, and
3. The geographic scope of sales is Atlantic Canada.
So, for you the relevant market is the retail canned dog food market in Atlantic Canada. This is the
reference point for any further market analysis you do. This is critical stuff. Of course, if you are
thinking of adding a canned cat food or selling directly to dog kennels or expanding into New
England the definition of relevant market would change.
Here are seven (7) important questions you should try to answer as part of your market analysis:
1. How large is the market?
Market size could be expressed in one or more of the following ways: dollars, kilograms, number of
dogs eating canned dog food, or number of households with one or more dogs eating canned dog
food. Smart marketers normally use all four measures and then compare their company's results to
total market size estimates to see how they are doing. This is referred to as calculating share of
market. In fact, they probably try to break these estimates down by province, by month, by type of
outlet and so on. [As you have probably realized, marketers love details. The more details they
have, the more relevant percentages they can calculate, and the more relevant comparisons they can
make to draw conclusions about their marketplace.]
2. What trends are there in the market?
You need to know if your market is growing or shrinking, by how much and where. Smart markers
obtain annual estimates -- 1995, 1996, 1997, 1998, 1999 -- of market size as noted above to increase
the number of relevant percentages and comparisons and thus increase their understanding of the
market.
3. What is the market potential?
If every dog in every home in Atlantic Canada ate only canned dog food — assuming such loyalty
would be healthy — what would total consumption be in terms of dollars, kilograms, number of
dogs and number of households? That is the type of question marketers attempt to answer about the
potential of a market. Rarely will one company or one brand capture 100% of the total market
potential for anything. There are simply too many different needs out there. Knowing total market
potential permits calculating your company's and all competitor's share of market potential.
Estimating market potential is also appropriate when entering a new market. For instance, if you
hope to open the first miniature golf course in your area, there is no existing market from which you
may estimate the share needed to break even or make a certain profit. You need to resort to an
estimate of market potential by finding out the size of the area in number of families, individuals
and tourists if appropriate and use these statistics to assess the likelihood of reaching certain volume
levels (numbers of rounds played in a season).
4. What types or forms of product make up the total market?
Estimates of total market potential frequently generate estimates of the sizes of different food types
such as canned, bagged, boxed, bulk, table scraps, liquids and so on. Such information allows you
to get a sense of the types of competition you have, what type of dog food is winning, what type is
losing, and what this may suggest for your company. Estimating sales of different product
49
forms is not always appropriate or necessary but when it is, such as for the many types of dog food,
it is a critical input to your market analysis.
5. What companies make up the total market?
Market potential estimates also frequently generate the names of competitors, the types of dog food
they make and the brands of dog food they make. Information such as this can be critical in crafting
strategy such as possible new brands, possible new packages, possible new advertising and so on.
Obtaining and analyzing information on dog food types and dog food companies is called market
structure analysis; that is, what parts or units or "chunks" make up the market. Of course,
analyzing all of the dog food companies also provides a general start at competitor analysis.
6. What market segments exist?
Smart marketers try to find out if there are two or more reasonably large groups of buyers of dog
food, or canned dog food, whose needs (problems, benefits sought) or buying processes (shopping
patterns) are different enough that it is worth analyzing them and possibly attempting to serve and
satisfy them with different marketing mixes. This is the essence of market segmentation. What
segments or groups of similar buyers exist? What are they buying? Are they satisfied? How is my
firm doing within each segment? Every good market analysis includes some assessment of the
segments that make up — or, could make up — the total market. Conceptually, moving from a
market analysis to a market segmentation analysis looks like this:
Market Analysis
(Is the market comprised of two or more end-user groups with
different needs or different purchase processes?)
Market Segmentation Analysis
(Are there groups of buyers similar to each other
but different than other buyers we may attempt to target and satisfy?)
7. What factors affect market demand?
A thorough market analysis asks what factors or variables seem to affect the demand for this
product or service? For example, the demand for dog food is derived from the demand for dogs and
the demand for dogs is derived in part from the number of single-detached houses, the overall
population, and trends in disposable income. To understand your market more fully, you need to
identify the factors, variables and conditions, which influence demand. Is demand seasonal? The
same very day? Cyclical? Dependent on the weather? Affected by exchange rates? Altered by
government policy?
6.3 Conducting a Competitor Analysis
Your first question should be, "What is a competitor?" Continuing the dog food illustration, if
you had said the competition is only other canned dog foods you would have excluded all other
types and forms of food. And, if you had said all manufactured dog food you would have missed
table scraps, anything killed and eaten by dogs (sorry about that) and possibly liquids which some
50
people might call food. Some competitors are direct — the same basic product, and the same
market — and some are indirect — different ways of fulfilling the same need or solving the same
problem. Sometimes "doing nothing" is your biggest competitor. A thorough analysis considers
both direct and indirect competitors.
Every market analysis includes at least a cursory look at the competition: who they are, what types
of dog food they make and what brands they make. As noted, the answers to these questions help
you describe and understand market structure. But, there is a lot more to analyzing the competition
than market structure.
Here are nine (9) typical questions you need to ask and answer to really begin to understand your
competition:
1. Which companies are winning and losing in terms of share of market, profit, or access to
important chain stores?
2. Which brands or products are winning and losing?
3. How important is this product/service to each competitor?
4. Will they retaliate if their sales are threatened?
5. Do they have the resources to respond to competition?
6. What resources such as money, talent, facilities, equipment do they have?
7. What marketing strategies (target markets, sustainable competitive advantages, marketing mixes)
are key competitors employing now?
8. What are their particular strengths? their vulnerabilities?
9. Are there any new entrants or competitors on the horizon?
6.4 Conducting a Market Segmentation Analysis
Buyer analyses, market analyses, competitor analyses and internal, organizational analyses are not
undertaken in isolation from one another. They are all ‘chunks’ of an organized, integrated size up.
One of the desired outcomes of a size up is a better sense of how the market is structured and what
market segments may exist that could be targeted successfully by existing or new products.
Graphically, the process is illustrated below.
Market Analyses
Internal Analyses
Market Segmentation
Competitor Analyses
Buyer Analyses
Smart marketers want to win (sales, share of market, growth) by satisfying peoples' needs and
wants, solving their consumption problems and delivering bundles of benefits better than the other
51
guys. That's why they spend so much time and money conducting buyer analyses, market analyses
and competitor analyses. That's also why they undertake so many marketing intelligence gathering
activities and sponsor so many marketing research projects. As noted earlier, marketers love details.
As you have come to realize, buyers differ. Smart marketers want to know how and why. This
reality is the logic behind market segmentation. Typically, detailed market segmentation analyses
require large samples of consumers and lots of cash. But even if you have neither a lot of
information nor a lot of money you can at least do some market segmentation analysis using
whatever information you have and, of course, your own reasonable reasoning about that
information. In fact, whenever you are conducting a buyer analysis, market analysis or
competitor analysis you also are -- or to some extent should be -- conducting a market
segmentation analysis. They are not independent activities even though we discuss them
sequentially. A buyer analysis is a market segmentation analysis from the bottom up. A market
analysis is a market segmentation analysis from the top down. Competitor analyses and internal
analyses come in from the sides so to speak.
If you can determine how the buyers who make up the total market for your product differ, you may
be able to segment the market, that is, to divide it into two (or more) segments or groups of
similar consumers and:
• attempt to satisfy both segments -- two targeted market segments or two target markets --each
with a different package of benefits or marketing mix. This is called a differentiation strategy. Or,
• attempt to satisfy one segment -- one targeted market segment or one targeted market -- with one
package of benefits or one marketing mix. This is called a concentration strategy.
The ability to describe markets accurately and in detail, and then explain why buyers behave as they
do is a characteristic of successful marketers. If you are able to describe your markets and explain
how they work, you are better able to predict the impact of any changes to your markets and thus
better able to control your own fate, and to a lesser extent, the marketplace itself.
Let's look first at the word market and then the word segmentation. A market is people, or
organizations, with needs to be satisfied, money to spend and the willingness to spend it. Here are
the eight (8) distinct end-user markets, first presented in Module 1, which may be potential markets
for your product:
1.
2.
3.
4.
5.
6.
7.
8.
the consumer or retail market (households, families);
the institutional market (hospitals, schools, prisons, day-care centres and so on);
the industrial market (manufacturers, processors, harvesters of natural resources)
the commercial market (retailers, wholesalers and business-to-business services)
the not-for-profit or non-governmental organizations (NGOs) market
the government market (municipal, provincial, and federal departments and agencies);
the agricultural (agri-business) market ; and
the export market (other countries … international markets).
Your first cut at market segmentation should be to inquire about the existence and satisfaction of
needs and wants, and the benefits sought in each of these eight potential end-user markets. Often
moving into a new end-user market is an effective way to increase sales. Your second cut should be
some specific segmentation within one or more of the eight end-user markets.
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Now let's look at the notion of segmentation. We'll use the consumer market because that's the one
you're most familiar with. Here are 25 or so ways the consumer market might be meaningfully
segmented. Of course, not all of these segmentation bases work in all situations. In marketing,
judgment is always required.
Demographic Segmentation Bases
• Family life cycle
• Age (age group)
• Education level
• Gender
• Occupation
• Size of household
• Religion
• Marital status
• Languages spoken
• Presence of children
• Race
• Nationality
• Geography (region, province, urban, rural, climate)
• Personal or family income
• Social class, life style
Behavioural Segmentation Bases
• Benefits sought (e.g., for toothpaste ... whiter teeth, no cavities, fresher breath; what different
needs exist)
• Usage level (light, medium, heavy)
• User status/patronage level (non-user, ex-user, potential user, regular user)
• Readiness level/intentions to purchase (unaware, aware, informed, interested)
• Current ownership (have none, one, two etc. plus types or brands owned)
• Loyalty status (brand loyal, store loyal, "deal" loyal, switcher)
Marketers often combine potential segmentation bases – demographic and behavioural – to
understand their markets better and spot opportunities. Here are a couple of simple examples to
give you the idea. A manufacturer of ice cream products wondered if segmenting the market by age
level and gender would reveal any new insights. Many tables of results looked like the following …
Age Levels
Gender
Females
Males
Under 10
10 to 19
19 to 29
30 to 39
40+
Of course, to make market segmentation analyses work best, you need a lot of good information
from your marketing information system. In the absence of a good database, you have to rely on
reasoning and visualizing … a common reality in the world of marketing.
Here’s a second example. A television network was interested in learning more about the various
segments (types of viewers) making up their audience and the audience of competitors. The
marketing manager suggested looking at the results of TV ratings and telephone surveys by
education level and benefits sought. Many tables of results looked like the fallowing …
Education Level
Benefits Sought
Education/learning
Sports/athletics
Comedy/laughs
Mystery
Less Than
High School
High
Some
School University
University
Completed
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Many market segmentation bases -- the ways you may segment the market meaningfully in order to
satisfy more people better -- are unique to a particular product:market situation. For example, hair
colour matters to manufacturers of tinting products and the number of children in a household
participating in minor hockey matters to summer hockey schools.
The key is to find one or more ways of classifying or grouping users or potential users which really
matter in terms of reaching them and satisfying their needs. The best market segmentation bases are
not always obvious. It takes vision and creativity to understand how a particular market works.
Module 6 concludes with a short section on sizing up middlemen – wholesalers and retailers.
6.5 Conducting a Supplier and Middleman Analysis
Organizations have marketing (trading) relationships with their suppliers and middlemen
(wholesalers and retailers). For instance, if a particular good, say fresh lobster, is in short supply
what can an organization do to ensure it obtains its fair share? Or, if aggressive new competitors are
attempting to steal a firm's middlemen, what can the firm do to ensure their middlemen stay with
them?
The answers lie in WIIFM. Smart marketers recognize that, in their roles as customer and supplier,
they have on-going marketing relationships with their suppliers and middlemen. In some ways
it's no different than the relationships they have with the final consumer. They need to understand
their suppliers and middlemen's needs, wants, problems, solutions and benefits.
Suppliers value customers who are loyal -- relationship marketing -- who cooperate to achieve
mutually beneficial goals, and who pay on time. Middlemen value suppliers who provide the right
goods at the right place at the right time and at a fair price; and, who cooperate to achieve mutually
beneficial goals.
There's no magic here. It's largely being sensitive to the needs and want of suppliers and
middlemen and behaving in a 'do unto others as you would have them do unto you' manner. Smart
marketers instinctively think about all trading relationships, not merely their relationships with end
users. Smart marketers are good at marketing themselves and their organizations to all stakeholders
in their marketplaces.
This completes our introduction to a marketplace analysis. The next short module introduces sizing
up of the broader environment beyond the day-to-day marketplace.
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Foundations of Marketing – BSAD 231
Module 7: Sizing up the Broader Environment
The third element of a size up is assessing the forces and trends beyond the control of the
organization and its day-to-day marketplace. Sizing up the environment is referred to as
conducting a macro-environmental analysis. It requires identifying the forces or trends that
affect -- or may affect -- the organization and its marketplace (industry) and then obtaining the
required information to be ready to act.
Typically, your marketing intelligence gathering activities -- reading the newspapers, attending
trade shows, networking with others in your industry -- generate most of the raw data to conduct
a size-up of the broader environment. Sometimes it is necessary to purchase syndicated
secondary information on forces and trends on a particular topic (e.g. a service providing
quarterly information on legislation from around the globe affecting fish stocks, quotas and
fishing rights). Sometimes it is necessary to conduct original research into a particular force or
trend in the environment (e.g. a large survey on household access to, use of and attitudes toward
the internet and electronic shopping).
Since each marketplace and industry is affected by a unique set of forces, it is difficult to
generalize. Here are six broad forces that affect most industries:
1. Economic Forces
Sometimes referred to as business conditions, economic forces include the rate of inflation,
growth in GNP, interest rates, exchange rates, increases or decreases in various economic
indicators such as housing starts and unemployment figures. Most economic forces are country
or region specific (e.g. the collapse of the Asian economy in the late 1990s).
2. Government or Political Forces
At the local, provincial, national and international levels, what regulations, laws and agreements
are in place or about to be put in place that may affect how, or where, a company does business?
Are governments friendly toward a particular industry or company? Can the firm do anything to
influence public policy?
3. Social/Cultural Forces
Many futurists, (Faith Popcorn and John Naisbitt come to mind) make their living monitoring
human behaviour searching for trends and hints of change and selling the results to clients eager
to see the future. Three noted by Popcorn are cocooning -- the tendency to spend more time at
home (the nest) because the outside is too tough and scary; down-aging -- the tendency to feel
and act younger than one's age; and save our society -- the tendency to want to make society
more socially responsible (environment, education, ethics).
Two noted by Naisbitt are institutional help → self help -- an increasing emphasis on self
reliance instead of institutional dependence; and, either/or → multiple options -- the demand for
variety instead of "one size fits all". What other social or cultural forces and trends do you see
emerging?
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4. Technological Forces
Many experts now say innovations in the telecommunications and computer industries -- the
marriage of voice, data and image -- will be as important to the way we do business as the
industrial revolution was 300 to 200 years ago. When you read about the exponential growth of
e-commerce it is difficult to argue with their predictions. In the past 20 years more firms have
recognized the long-term value of greater investment in basic research and development (R and
D) and more governments have enacted legislation to encourage such research. Organizations
need procedures to keep abreast of technological changes to assess their possible impact on
operations and to determine if adopting them would be worthwhile.
5. Natural Forces
Some industries, like casualty insurers, are dramatically affected by the weather. Tornadoes,
hurricanes, floods, electrical storms and ice storms all have a major impact on claims.
Dwindling fish stocks have had a major impact on thousands of Atlantic Canadians. Global
warming has had a major impact on many farm communities.
6. Demographic Forces
The population keeps aging and the 'baby boomers' of the late 40s, 50s and 60s have begun to
retire. A doubling in the number of senior citizens in a twenty year period has major
implications for many industries. In Canada, the number of school aged children keeps
declining. The market for teachers, school books and chalk has not been strong in recent years.
The decades long trend away from farms and rural areas to cities and suburban areas has forced
many small businesses to close. Despite massive educational, efforts the world's population
continues to grow at an alarming rate.
We cannot do much about forces and trends in the broader environment. But, we cannot
do anything about them if we fail to identify them, assess how they may affect us and make
adjustments as appropriate to take advantage of the opportunities they create or overcome
the problems they cause.
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Foundations of Marketing – BSAD 231
Module 8: Portfolio Analysis – Pulling the Size Up Together
Larger and medium firms -- typically those with many products, divisions and subsidiaries
operating in many different industries -- use portfolio analysis as a marketplace size-up tool.
One of the more popular portfolio analysis tools was developed by the Boston Consulting Group
(BCG). In fact it is commonly referred to as the BCG Matrix or the BCG Grid. The analysis
has four steps:
1. The analyst first divides the total organization into two or, most likely, more strategic
business units (SBUs). An SBU may be a separate company, a separate division, a product
line or a brand. The key is that each SBU has enough decision-making autonomy to be
regarded as a profit centre. It may draw on head office resources but its management team
operates with enough independence that it is, in effect, a separate (strategic) business unit.
2. Next the analyst measures each SBU's relative marketplace success or SBU performance.
Some have relatively high shares of market. Some have relatively low shares of market.
Some are about average. As you probably can sense, the analyst must have good market and
competitive information (evidence) to make these judgments.
3. The analyst also needs information on the relative growth rates of each industry each SBU
competes in. This information measures industry attractiveness. Some industries are
growing rapidly. Some are not growing at all or are in decline. Some are about average. In
North America mature industries grow at a rate of roughly 2 to 5 per cent per year reflecting
some combination of population growth, inflation and real per capita or per household
growth.
4. The analyst then determines where each SBU is in terms of relative performance and relative
industry attractiveness and uses these determinations to allocate the firm's scarce resources.
The BCG Matrix or Grid has four quadrants:
The Boston Consulting Group Portfolio Analysis Grid
Relative Industry
Attractiveness
Relative SBU Performance
High Market
Low Market
Share
Share
High Growth
Stars
Question
Marks
Low Growth
Cash
Cows
Dogs
SBUs classified as Stars typically require considerable marketing resources (time, talent, money)
to maintain or increase share. Question Marks require further analysis to determine whether to
57
intensify marketing efforts or leave the market and deploy resources elsewhere. Cash Cows
typically generate profits that may be employed first to maintain their market positions and then
to aid growing SBUs or to invest in new product development (research and development).
SBUs classified as Dogs invite either reduced marketing efforts or divestiture.
Portfolio analysis is simply a way to make sense of internal and external reality. It’s just an
organizing device. But, used wisely, it can distinguish among better strategies and poorer
strategies.
We now begin to consider Thrusts or Marketing Strategy.
Foundations of Marketing -- BSAD 231
Module 9: Crafting Marketing Strategy (Challenges → Thrusts)
Module 9 concerns the crafting of marketing strategy. Inclusion of the word 'crafting' in the title of
this module is deliberate. True craftspeople pour heart and soul into their work. They create works
of art with keen attention to detail, patience and love. Successful marketers are craftspeople as well.
They weave the needs of the marketplace together with the resources of their organizations to create
goods and services offering long-term value to their customers.
Module 9 is short. The goal is to present an overview of the elements of marketing strategy. Each
element is elaborated in Modules 10 to 14. Successful marketing strategies (Module 9) flow from,
and are consistent with, the marketing size-up, marketing challenges and marketing objectives
(Modules 4 to 8).
9.1 The Better Mousetrap
Years ago someone observed, "the world will beat a path to the door of the person who invents a
better mousetrap" and many people mistook this opinion as fact. But not smart marketers. Smart
marketers realized not everyone wanted a better mousetrap. They recognized the need to segment
the market and select only certain people to satisfy (target market), not the whole world. They
recognized the need to define how the mousetrap was 'better' (market positioning) -- its differential
advantage -- in terms the consumer could understand. Smart marketers also realized that, to be
successful, the better mousetrap (product) could not just sit in a factory hoping the good news
would spread. It would have to be in the right place, at the right time, in the right quantities (place),
at the right price (price), and be backed by adequate communication with potential consumers to
generate awareness, knowledge, positive attitudes and purchase intentions (promotion).
9.2 An Overview of The Elements of Marketing Strategy
Marketing strategies are marketing management’s response to its understanding of internal reality,
the marketplace and the broader environment beyond. An organization’s strategy is largely
controllable. It’s what marketing management decides to do in light of its interpretation of current
and emerging reality. It’s how scarce resources will be employed to achieve stated objectives.
To keep things simple, we think of marketing strategy as comprising the following related
components:
1. Selecting one or more target markets or market targets to reach and satisfy. Market
segmentation information is employed to assist in determining which segments are the best ones
to pursue.
2. Developing a positioning strategy that is meaningful to members of the target market and,
hopefully, different than the positioning statements of major competitors.
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3. Developing a marketing mix, or recipe for success, to implement the positioning strategy
comprised of four parts:
• A product-service strategy indicating what specific products and services will be offered to
the target market and how they will be different than competitive offerings.
• A pricing strategy indicating no only suggested prices to the consumer but also prices and
allowances to any wholesalers and retailers.
• A place strategy indicating how goods will be physically distributed to the ultimate consumer
through which types of middlemen (wholesalers and retailers).
• A promotion strategy indicating how the organization intends to employ mass media
advertising, personal selling, public relations and special sales promotional incentives (or deals)
to reach and influence consumers, middlemen and, possibly, other stakeholders.
4. Acquiring and analyzing marketing information to improve decision-making with respect to
any of the above components of the strategy. This could include conducting analyses of internal
records and results, conducting marketing research studies, undertaking secondary data searches,
purchasing of information from syndicated research houses or gathering market intelligence.
9.3 Core Concepts, Processes and Tools
Modules 10-13 introduce 30 or so concepts you should understand and be able to use:
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target market
market positioning
competitive advantage
product strategy
pricing strategy
place strategy
promotion strategy
goods vs services
rented-goods services
owned-goods services
non-goods services
perishability
intangibility
inseparability
variability
product item
product line
product category
product mix
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SKU (stockkeeping unit)
product mix breadth
product mix depth
product mix consistency
product life cycle
patronage motives
price discounts
special allowances
physical distribution strategy
channel management strategy
middlemen
wholesaling middlemen
retailing middlemen
advertising
personal selling
sales promotional activities
public relations
integrated marketing communications (IMC)
hierarchy of communication effects
As well, these modules introduced the following processes:
• selecting target markets
• market positioning for competitive advantage
• new product development
• considerations in pricing a product
• developing a promotional strategy
• developing growth strategies using the product:market matrix
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Foundations of Marketing – BSAD 231
Module 10: Selecting Target Markets and Market Positioning
This module elaborates the process of selecting one or more target markets and of developing a
positioning statement to meet the needs of the markets selected. Selecting target markets and
developing positioning statements are core elements of marketing strategy. Before they develop a
marketing mix (the 4 Ps), smart marketers know both whom they are attempting to reach and satisfy
and what ‘package of benefits’ or market position will appeal to them.
10.1 Selecting Target Markets
Marketers undertake buyer, market, competitor, organization, and segmentation analyses, for many
reasons but the key one is to permit them to identify, and select, the groups that make the most sense
given:
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their unique package of benefits
the packages of benefits of direct and indirect competitors
the size of various buyer groups (segments)
the needs of various buyer groups (segments)
their resources relative to the resources of competitors
the ability to select and then reach efficiently any particular buyer group (segment)
What they want out of market segmentation is the ability to identify one or more groups that are:
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big enough to consider
not as satisfied in some fashion as they want to be
relatively easy to identify and reach via available channels of distribution and advertising media.
These are your target markets, market targets or target market segments. Whatever you call
them, remember target markets are identified after you conduct a thorough size-up of the
marketplace, not before. Remember also that each target market is unique and requires its own
package of benefits or market positioning and marketing mix. Selecting target markets defines the
who, when and where of marketing strategy.
10.2 Market Positioning for Competitive Advantage
You are more likely to be successful if your package of benefits -- product, price, place, promotion - offers some advantage over the competition in a way that matters to a particular target market.
Does your toothpaste reduce cavities better than other brands? Is your accounting software package
fully compatible with the leading database software? Is your ice cream really richer or more
flavourful? Can your product be on any customer's doorstep in 24 hours? Do you offer unique
sizes? Is the image or personality of your store or product appealing to a large group of buyers?
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Questions such as these help you identify your competitive advantage and your market positioning.
Your market positioning defines the what and why of marketing strategy.
The market positioning for any good, service or store is how you wish to be seen in the eyes of
members of your target market relative to other competitive products, services or stores. Your
positioning statement thus combines buyer information (segmentation) and product information
(differentiation) to indicate how you are different from, and in some way better than, available
alternatives. Frequently market positioning statements are revealed in advertising slogans. A good
example is the "Conversation without Shouting" positioning slogan adopted by Chapters Lounge.
A company can successfully differentiate itself and enjoy market leadership through any of the
following three strategies:
• Operational excellence -- providing customers with reliable products or services at competitive
prices and easy availability.
• Customer intimacy -- knowing customers intimately and being able to respond quickly to their
specific and special needs.
• Product leadership -- offering customers innovative products and services that enhance utility
and outperform competitors' products.
Over the past 25 years or so, more and more firms have embraced the marketing concept and begun
acting in a customer oriented and market driven manner. As they have done so, more and more
market offerings (goods and services) are being differentiated in ways other than through strictly
their physical, tangible, product differences. You may differentiate your company, brand or market
offering along four basic dimensions:
Product Differences
Features
Performance
Style
Durability
Repairability
Design
Reliability
Services Differences
Delivery
Installation
Customer training
Consulting services
Repair
Personnel Differences
Competence
Courtesy
Credibility
Reliability
Responsiveness
Image Differences
Symbols, trademark, branding
Atmosphere/Ambience
Media advertising, association
Special event sponsorship
Of course, if you attempt to differentiate your company, brand or market offering from competitors
on any of these dimensions, be sure the dimensions are important, meaningful and matter to your
target market and be sure you can deliver on the promise of 'better' whatever.
Ideally any meaningful competitive advantage you have, and choose to promote, is sustainable over
a period of time. Obviously a sustainable competitive advantage is preferable to an easily copied
competitive advantage. The market positioning you select and the sustainable competitive
advantage you provide are presented and delivered to your target market via your marketing mix.
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Foundations of Marketing – BSAD 231
Module 11: Developing a Product:Service Strategy
This module and the three following it concern crafting a marketing mix for your product. The
marketing mix is your recipe for success and frequently is referred to as "The 4 Ps" [Product
strategy, Pricing strategy, Place strategy (location, distribution), and Promotion strategy]. The way
you mix the 4 Ps is what makes you different from, and hopefully better than, the other products in
your marketplace. It also defines the how of marketing strategy.
11.1 Defining, and Distinguishing Between, Products and Services
Buyers want to know What's In It For Me (WIIFM) when they are shopping. More than anything
other element of the marketing mix, product strategy defines the unique package of benefits you
offer. That's what buyers see, feel, touch, hear, smell, or taste.
Frequently products are identified as either goods (largely tangible) or services (largely intangible).
However, it is preferable to think of all products as existing on a continuum from totally tangible to
totally intangible. You will recall, in Module 1 we defined a product as anything that can be
offered to a market for attention, acquisition, use or consumption that may satisfy a need or want
Included are tangible goods, intangible services, not-for-profit groups, other organizations, people,
places, causes and ideas. In other words the concept of product is far broader than tangible goods.
To illustrate: services are products, universities are products, the Cayman Islands is a product,
Greenpeace is a product and "Don't kill whales" is a product.
Services deserve special mention because of their growing importance and the differences in
marketing them compared to goods. The first point to note is that not all services are intangible.
Many services include a tangible good as part of the market offering. Rented-goods services
involve the leasing of goods for a specified period of time, such as the rental of an automobile or
hotel room. Owned-goods services involve alterations to, or maintenance or repair of, goods
owned by consumers, such as alterations to clothing and auto repairs. Non-goods services involve
personal services such as hair care, consulting services, legal advice and tutoring. They do not
involve goods.
Four attributes generally distinguish services -- particularly non-goods personal services -- from
goods. These attributes affect marketing strategy.
Perishability
An empty theatre seat on a Tuesday evening or a slow month for a consultant can never be recaptured. They're gone forever. The perishability of personal services leads many marketers to
adopt differential pricing strategies to even out demand.
Intangibility
Perceived risk is greater when a consumer cannot easily judge quality. To overcome the risks of
intangibility, marketers use testimonial advertising featuring satisfied customers; focus on the
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qualifications and experience of the persons delivering the service; and, promote the company name
to build trust.
Inseparability
It is impossible to separate a lawyer from the legal services she provides or a hairdresser from the
hair care services he provides. This inseparability of provider and service leads marketers to
emphasize the experience, education, training and accomplishments of the service provider.
Variability
Service encounters are similar, but rarely identical, every time. Different
employees have different skill levels and different ways of dealing with customers. Machines break
down. Weather causes unavoidable delays in airlines arrival and departure times. To make the
service encounter as consistent as possible marketers provide extensive employee training and
require regular servicing and maintenance checks of any machinery.
As an organizing device, marketers think of their market offerings as product items, product lines,
product categories and their product mix. This helps identify and evaluate what they have -- and
do not have -- to offer to their customers and where their profits are coming from. A product item,
also referred to as a stockkeeping unit (SKU), is the most specific unit offered for sale. Thus, if
Starkist offers white and light tuna, each whole or flaked, and each in two different sizes, it offers
eight unique product items or SKUs. All eight items combined equals Starkist's canned tuna
product line. Canned salmon, shrimp and crab might be three other product lines Starkist offers.
Closely related product lines such as canned tuna, salmon, shrimp and crab likely would be referred
to by Starkist as its offerings in the canned seafood product category. Starkist's product mix
would be all product items, lines and categories it offers combined.
Marketers describe their product mix in terms of its breadth (width), depth and consistency. Again,
this helps identify and evaluate what they have -- and do not have -- to offer. Breadth (width)
refers to the number of product lines, from narrow to wide, a company offers. Depth refers to the
number of different product items, from shallow to deep, within each product line. Consistency
refers to the extent to which a firm's product lines and product categories, from consistent to less
consistent, share a common end use, end-user, channel of distribution, production method or
production facility.
11.2 New Product Development and the Product Life Cycle
Understanding and evaluating the product mix helps marketers identify the need for new product
development and how to manage the marketing effort as their market offerings move through the
product life cycle. New product development is crucial for most organizations because the everchanging marketplace -- new competitors, new needs -- forces firms to:
Generate Ideas
Ideas for new products may come from customers, channel members, competitors, the company's
research and development efforts, employees and the senior management team. The real trick is to
have a process in place to find, organize and analyze new product ideas.
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Screen Ideas
The key word here is "fit". How well does this new product idea fit with existing products, existing
markets, existing middlemen, existing production facilities, existing cash?
Concept Testing
Marketing research is used to see which concepts generate favourable attitudes and intentions to
purchase. Note: at this stage the actual product often does not yet exist.
Business Analysis
An idea that tests well from a concept perspective, must also test well from a business perspective.
Detailed estimates of costs and revenues are required.
Product Development
Prototypes are made and tested. If the product is edible, these tests are referred to as "taste tests".
The product is developed physically and from a marketing perspective … branding, packaging,
advertising, pricing, and overall launch strategy. The product development stage often requires
considerable market testing of various formulations and various aspects of the marketing mix to
check on consumer acceptance.
Test Marketing
Many firms launch new products in one or two markets (cities, smaller provinces) to see how they
perform before the product is launched officially.
Commercialization
If a product makes it out of a test market successfully, it is ready for commercialization. Most firms
lack the resources to launch a product across the county all at once. Thus, they launch the product
in one region and "roll it out" to the rest of the county over the following year or so.
One estimate is that it takes about 80 ideas to generate 1 commercialized new product. Clearly, new
product development is not for the faint of heart. New product development requires a lot of time
and a lot of company resources … but it’s a lot better than the alternative {no new product
development and, soon, no business at all.]
A newly commercialized product is at the introductory stage of its product life cycle. Searching
for available, appropriate middlemen and heavy consumer and trade promotion dominate the
introductory stage. If the product is successful it moves into the growth stage. Competitors arrive
on the scene. Some offer unique packages of benefits that cause a flurry of product differentiation
efforts and claims. Prices tend to remain stable. Volume forces costs down thus profits often peak.
As the growth stage ends, the product enters the maturity stage. There are few new customers to
win. Growth slows dramatically. Most customers have already tried one of the alternatives. Brand
or dealer loyalty makes it expensive to generate switching. Some competitors try to achieve market
leadership by offering better products (technical superiority), others opt for offering the lowest
price. Profits fall and many pretenders fall by the wayside. At some point in time -- this could be
decades or even centuries -- overall product category sales begin to fall and the product enters the
decline stage of the product life cycle. Each competitor has to decide whether to continue to
support products in decline or to abandon them in favour of supporting new ones. Marketers realize
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where every product is along the product life cycle and what to expect and do at each stage to
achieve agreed upon marketing objectives.
11.3 Product Differentiation
As discussed in Module 10, organization’s may differentiate their market offerings in many ways to
create unique and meaningful positioning statements. Attributes or features employed to develop
positioning statements are the same attributes and features employed to vreate fundamental product
differences … product differentiation. Here is a partial list of the items firms may employ to create
and define unique products and differentiate them from others:
Ingredients
Design
Shape
Features
Colours
Sizes
Favour
Sounds
Styling
Quality
Brand Name
Trademark
Packaging
Labelling
Image
Personnel
Servicing
Training
Installation
Delivery
Credit
Warranty
Guarantee
Even if your product is less tangible such as a game of mini golf or an entertainment event, you
have to think about the creation and presentation of a total package of want satisfying benefits -- a
product strategy. If your product is a place such as a store, restaurant, attraction, or accommodation,
you need to think about patronage attributes or motives, the factors such as parking, hours of
operation, layout, cleanliness, brightness, overall atmosphere (ambience), experienced, friendly
staff, selection/variety, availability that matter to consumers and may serve to differentiate your
place from other places.
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Foundations of Marketing – BSAD 231
Module 12: Developing the Pricing Strategy
Smart marketers know "the worth of a thing ... is what it will bring" meaning they ask what the
perceived value of a product is to their target market not just how much it costs to make or buy.
Their pricing strategies are customer and marketplace sensitive. Here are five considerations to
include in your pricing decisions. Conveniently all five start with – as Sesame Street would say –
the letter C:
Customers
An analysis of customers or buyers is one of the core activities in every size up. Price setting issues
to examine include affordability, the price of alternatives, benefits sought, and the perceived value
of the product.
Competition
Directly and indirectly how may buyers satisfy their needs? Who or what are your competitors and
how much do they charge for their packages of benefits? What competitive advantages do they
offer? What competitive advantages do you offer?
Channels
If you use wholesaler and retailers to distribute your product, you need to understand how much
they require (their "trade margins" or their markups) to provide their services and what those
services are. For example, a consumer might buy a really good sweater for $100 -- the retail
(selling) price -- which the store (the retailer) bought from a wholesaler for $60 -- the wholesale
(selling) price -- and the wholesaler bought from a manufacturer for $50 (the manufacturer
(selling) price -- and the manufacturer made for $25. As the manufacturer you need to understand
this markup and cost structure (chain) to craft your pricing strategy.
Middlemen also seek price discounts and special allowances as incentives to stock and support
your products. Two common price discounts are early pay discounts (e.g. 2% if paid within 10
days of being invoiced); and, volume discounts (e.g. an extra 1% discount if an order exceeds
$10,000 or "buy 10 cases, get 2 additional cases free", or an extra discount if annual purchases
exceed, say, $100,000). Most special allowances are to support advertising, displays and weekly
features. They are also referred to as merchandising allowances. Special allowances are one form
of trade promotion, sales promotional incentives for the dealer instead of the consumer.
Costs
The costs of making and marketing a product also enter into the pricing decision. What are the
start-up costs -- the initial investment to get the venture under way? What are the operating
expenses -- the costs which are relatively fixed for a period of time? What are the variable costs of
making the product -- the costs, like ingredients, which vary directly with the number of units made
or sometimes with the number of units sold (commissions, royalties). The selling price of a unit
(S.P.) minus the variable costs of producing or purchasing the product (V.C.) is referred to as unit
contribution.
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Company Considerations
Pricing decisions frequently require reference to internal factors other than costs such as the pricing
of other company products, company image, and product objectives (e.g., high share of market-low
price or high short-term profit-high price).
Related to pricing strategy, Module 19, Keeping Score: A Marketer's Use of Financial
Information introduces the concept and calculation of markup and break even.
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Foundations of Marketing – BSAD 231
Module 13: Developing Place or Distribution Strategy
Harvesters of natural resources, processors and manufacturers require distribution strategies to
move their goods through to industrial customers and final consumers. For these businesses, place
strategy includes:
Physical distribution strategy
Physical distribution strategy includes activities such as shipping and receiving, warehousing, the
use of trucks, trains, boats or planes, and materials handling. Physical distribution ("PD") also is
referred to as logistics and transportation and supply (T&S) and usually is managed by technical
specialists, not the marketing department.
Channel management strategy
Channel management strategy includes issues such as whether to use middlemen at all; if so, which
middlemen to use; how many to use; who performs which tasks; and, what legal relationships
(contracts or 'arms length') exist among channel members. Responsibility for channel management
usually resides within the marketing department.
Middlemen are the organizations and individuals who take ownership of goods, or actively
negotiate the ownership of goods, as they move from producer (harvester, processor) to ultimate
consumer. There are two types of middlemen. Wholesaling middlemen and retailing
middlemen. Wholesaling middlemen sell, or negotiate the sale of, goods for resale. They also are
commonly referred to as distributors, brokers and agents. Retailing middlemen sell goods to the
ultimate consumer for household consumption. They also are commonly referred to as dealers and
resellers. Thus, there is no such thing as "wholesale to you" no matter what some advertisements
might suggest. If you are purchasing something for household consumption, you are obtaining it at
retail. It is a retail transaction.
Here is a folksy definition of place strategy:
The Definition
The Translation
How can I get ............................
What locations, stores, middlemen, transportation,
warehouses, catalogues, the internet.
Whatever I've got ......................
My unique package of want satisfying benefits.
To whomever wants it...............
To my target market segments or designated markets.
So they're satisfied ....................
It's in the right place at the right time, and in the right
quantities.
And I don't go broke .................
The cost of providing widespread availability is not so
great that I lose money.
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Channels of distribution are interdependent systems of (usually) independent businesses. They
have a common goal of moving specific goods efficiently and effectively. They also have goals
specific to their own businesses. Textbooks often depict channels as:
Consumer
↑
Retailer
↑
Wholesaler
↑
Manufacturer
While this trade channel may be depicted accurately, such a rigid depiction fails to capture the
many hundreds, and often thousands, of relationships a channel contains. A manufacturer's sales
representatives may call on key wholesalers and retailers every few weeks. A wholesaler's sales
representatives may call on key retailers just as often. Over time, many buyers and sellers become
good friends.
Smart marketers recognize that a channel of distribution is also a channel of relationships. They are
able to understand the needs and wants of middlemen. They prefer cooperation over conflict. They
prefer dialogue and communication over silence and failure to follow up. They prefer training
middlemen about their products over hoping their middlemen will somehow be able to sell them.
Marketers frequently used to joke that the three most important factors in success were, location,
location, and location. This is probably still true in the tourism industry and maybe some retailing
but it is becoming far less so in many other businesses with the growth of:
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catalogue sales, direct response advertising and infomercials (direct marketing),
the use of the telephone (telemarketing),
the use of the fax machine, and
the use of the internet (electronic marketing, e-commerce).
Since the mid-1990s, the whole notion of channels of distribution has been changing rapidly …
and dramatically. Internet marketing, one of the main changes, is overviewed in Module 16.
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Foundations of Marketing – BSAD 231
Module 14: Developing the Promotional Strategy
Products may be created, priced and delivered but, as noted in the little vignette on the better mouse
trap, if they aren’t promoted, they may never be sold and never reach the people who need them.
Module 14 concerns ‘the 4th P’, Promotion.
14.1 An Overview of the Promotional Mix
Just as there is a four-part marketing mix (the 4 Ps), so too there is a four part promotional mix.
The four promotools available to communicate with consumers, middlemen and other stakeholders
are:
Advertising
Mass media advertising vehicles are either print-based or broadcast-based. Print-based media
include newspapers, magazines, catalogues, direct mail, outdoor signs, and the yellow pages.
Broadcast-based media include radio, television, cable, the internet, movie theatres, and compact
disks.
Personal Selling
Direct, face-to-face communication between a seller and a buyer still is the dominant promotool in
many marketing situations, particularly business-to-business marketing. Increasingly personal
selling is conducted over the telephone or electronically via e-mail.
Sales Promotional Activities
Sometimes incentives are added to the purchase situation to cause buyers to try a new or repositioned product, purchase one product over another, buy sooner, or buy more than they normally
would. Such incentives are referred to as sales promotions or special promotions or simply "deals".
Sales promotional activities may be directed at consumers (consumer promotions), middlemen
(trade promotions), and sales representatives (sales force promotions). Here are ten examples of
typical consumer promotions: coupons, in-store demonstrations, free samples, refunds, rebates,
reduced prices, bonus packs, in or on pack premiums (little gifts), contests and sweepstakes.
Public Relations
Smart marketers identify relevant publics such as employees, neighbours, the media, government
officials, the general public, and buyers and create programs to generate and maintain positive
relationships with them. The goal of public relations is not the immediate sale of a product. The
goal is to earn trust and confidence by being a good corporate citizen. Of course, trusted firms also
tend to be patronized firms so there is an indirect sales payoff of effective public relations.
Publicity, so-called "free news", is one common tool of public relations. Five others are open
houses/plant tours, newsletters for employees, donations, sponsorships of local teams, and investing
time and money in selected charities or causes.
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Customer oriented, market driven organizations employ these four promotools to create integrated
marketing communications (IMC) plans. Integrating advertising, sales promotional activities,
personal selling and public relations is a huge challenge because historically, in larger firms, each
promotool has been planned and implemented by different individuals. On the other hand, not
meeting the challenge of integration is to risk being fragmented, or worse, sending different
messages to the same target audience.
14.2 The Hierarchy of Communication Effects
One way to develop integrated marketing communications plans is to be mindful of the hierarchy
of communication effects:
Unawareness → Awareness → Knowledge → Beliefs → Image → Liking →
Preference → Intentions → Trial or Purchase → Re-purchase
Awareness, knowledge and beliefs comprise the cognitive level of the hierarchy -- Thinking.
Image, liking and preference comprise the affective level of the hierarchy -- Feeling. Intentions,
purchase and re-purchase comprise the behavioural level of the hierarchy -- Doing. Through
marketing research marketers are able to determine where consumers are in the hierarchy, use that
information to set communication objectives and then use the communication objectives to guide
communication strategy.
14.3 Six Core Promotion Planning Questions
Here are six core questions marketers need to ask and answer to develop an effective
promotional mix:
1. Is there a role for each of mass media advertising, personal selling, sales promotional incentives,
and public relations?
2. What are the objectives (awareness, knowledge, image, attitudes, trial, purchase, re-purchase or,
using another framework, what is it you want the recipient of the message to think? feel? do?) of
each promotool?
3. How much money should be allocated to each promotool or each campaign (what promotional
activities are really important)?
4. What should the message be and how should it be said (creative strategy)?
5. When (time of day, day of week, month of year) and where (which markets and which media)
should the promotools be used (media strategy)?
6. How, if at all, will the effectiveness of each tool be measured (monitoring performance and
results)?
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14.4 Planning and Creating Effective Advertising
Here's a short note written to the owners of small retail stores. Its intent is to give the retailer
greater confidence in his advertising planning and advertising execution. Although the context is
a retail store, most of the points raised are appropriate to many settings.
Be Market Focussed and Customer Driven
• Your customers do not buy goods and services. They buy solutions to consumption problems,
satisfaction of their needs and wants and bundles of benefits. They do not buy products,
attributes, features. They buy the idea behind the product, attribute, feature.
• Remember every customer's favourite radio station is WIIFM … What's In It For Me! when
they shop. So be sure to appeal to their self interest [How to… Three ways to… Announcing…
Now in Pictou County… The secret of… Attention men with (whatever)… Suddenly…].
• Every ad should focus not on "We have …" but on "You'll get … feel … be …".
• Objectives … determine if the ad is intended to generate or influence awareness, knowledge,
attitudes, feelings, patronage, intentions, repeat purchase, volume, timing, frequency. What is it
you want the ad to do?
• Visit your main competitors. Be like a sponge and soak up everything you can.
Invest Some Time Planning Your Marketing Effort
• Analyze your sales by year, month, week and day of the week. Break results down by product
line and by brand. Create and use lots of percentages to see how you are doing and have done.
Look for opportunities to advertise ahead of time.
• Know what a buck will buy in terms of the various media. Ask the media to provide cost
estimates and suggestions. Determine how much you would have to invest in advertising to have
adequate market coverage (number of ads or commercials per week or per month).
• Consider a wide variety of media: radio, cable TV, regular TV, the internet, fax, direct mail,
signage, billboards, newspapers, magazines, newsletters, brochures, handbills, flyers, letters and
so on.
• Get out a calendar and block out key merchandising dates (holidays, government cheque days,
large employer paydays special events). This is a great way to start advertising planning.
• Keep copies of past advertising in a file. It'll save you a lot of time next year.
• Spend some time with your bookkeeper or accountant to review -- and probably revise -- your
advertising related accounts. Be sure you do not include general travel, donations public
relations or special events. Create separate budgets for separate activities. An accurate, detailed
accounting system can be a good friend … and the incremental cost could be very small.
• Do not think of one ad or one commercial. Think of campaigns. The back to school
campaign. The father's day campaign. The Christmas campaign. Maybe the River John
campaign. Targeted dollars are smart dollars.
• Combine the information on media costs and possible campaigns to generate a very tentative
budget (what you think you'll need to achieve certain objectives).
• Scan trade and professional journals to get new ideas for advertising. When travelling cut out,
or make note of, ads/commercials that caught your eye.
• Talk to your suppliers about their co-op advertising programs. Some are very generous and
not too restrictive. Ask them what support material they can provide (ad mats, really nice clip
art, radio commercials with "donuts" for your specific message). Co-op advertising dollars can
double your ad budget.
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• Invest some of your ad budget in production (photographers, graphic artists, copy writers).
Creativity is a direct, explicit substitute for money.
• Find out why customers patronize your business other than to obtain goods and services. What
is important to them? What is it you do really well? Feature some of these things in your
advertisements [hours of operation? experienced sales people?]
Some Thoughts on Creating Ads
• Here are a few thoughts on print ads. Never put your store name in the headline … create a
headline that contains a benefit or selects specific readers ("Attention Moms") or arouses
curiosity (what's going on here). Always include a picture or illustration. Do not employ too
many different type faces or type sizes. Keep it simple. Focus on one key idea. Do not try to
cram in everything you can think of. Leave plenty of white space. If appropriate, create a
unique border. Unique borders attract attention. Always print your logo/signature
information (name, address, telephone number, slogan and so on) the same way.
Consistency
is a powerful communication tool.
• For radio, avoid the tendency merely to write a newspaper-type ad and ask a radio announcer
to read it. Boring! Capture and excite the listener's imagination with sound effects or dialogue.
Exploit the "theatre of the mind". Give listeners something to "see".
• Stick to one key idea. Repeat important details.
• Never be vague, general and abstract if you can be clear, specific and concrete. For instance:
Not… "We have lots of stuff to choose from and we offer the best value bar none." [Do you see
how useless that would be? You may as well save your money.]
• Consider testimonials to reduce perceived risk.
• Consider using dialogue the audience can relate to.
• Don't try to be funny if you're not.
• But create a friendly feeling … you're trying to win friends as well as customers.
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Foundations of Marketing – BSAD 231
Module 15: The Product:Market Matrix – Strategies for Growth
This Module introduces the Product:Market Matrix. It answers the strategically critical question,
“Manager, manager future minded, how does your company grow …?” In fact, it is sometimes
called the Strategies for Growth Matrix.
15.1 An Overview of the Product:Market Matrix
Businesses want to grow. They want greater sales, more customers, larger profits. A simple, but
powerful, way to classify a business's growth strategy options is the Product:Market Matrix.
This 2x2 matrix classifies growth options according to whether the focus is on current (existing)
or new products and current (existing) or new markets (customers). The matrix is illustrated in
Figure 15.1. You’ll find yourself returning to this simple but powerful matrix frequently to
identify and assess strategic alternatives.
Figure 15.1
The Product : Market Matrix -- Strategies for Growth
Product Focus
Current (Existing) Products
New Products
Market Focus
Current Markets
New Markets
Market Penetration
Strategies
New Product Development
Strategies
• invest to increase share of market
• get consumers to switch
• get consumers to use product in
different ways
• get consumers to use more of the
product
• make minor modifications to products
(relaunch or reposition)
• add product line extensions in related
product categories
• innovate - add truly new but related
products
Market Development
Strategies
Diversification
Strategies
• target new end user groups (e.g. if a
consumer product, look at industrial
or institutional or export markets)
• target new demographic markets (e.g.
if targeting women, think of men, if
targeting youth, think of seniors)
• target new geographic markets - new
cities, provinces, countries
• integrative growth (related growth)
∙ forward integration - buy out a
middleman
∙ backward integration - buy out a supplier
to ensure access to key materials
∙ horizontal integration - buy out a
competitor
• conglomerative growth (unrelated
growth) - invest in new industries
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15.2 Market Penetration Strategies
Normally when marketers ask the question, "How can we grow?" they look first to market
penetration strategies. The specific question is, "Can we get more sales, customers and profits
by concentrating on current products and current markets?" Here are three common market
penetration strategies:
1. Stimulate Primary Demand -- If your firm is among the market leaders and the industry or
product category is still in the growth phase of the product life cycle, you may benefit from
attempts to build primary demand, that is, demand for the product itself. Reynolds used this
strategy in the early days of aluminum foil when the major competitor was waxed paper.
2. Stimulate Selective Demand -- If your firm has a meaningful competitive advantage you
may benefit from attempts to stimulate selective demand, that is, demand for your brand (or
company) over direct competitors. The idea is that effective promotion or improved
distribution to reach targeted market segments will result in increased share of market as
some consumers switch to your brand or company and some consumers discover the product
category for the first time and select your brand or company.
3. Stimulate Variety or Frequency of Use -- Many firms attempt to grow by thinking up new
uses or new usage occasions for their products. Promoting recipe ideas is a common
approach used by the food and beverage industries. For instance, use cheese in soups, salads
and with hot vegetables or more generally, as the commercial reminded us, 'take it out of the
fridge more often'. Use soups in casseroles. Drink orange juice anytime not just at breakfast.
Don't use baking soda just for baking. Put one in your fridge and one in your freezer. Shake
it in your carpets or your kitty litter boxes to control odor.
Typically, market penetration strategies are implemented by improved promotion and
distribution and sometimes, if necessary, by adjusting price. Typically market penetration
strategies require no changes to the product itself (that would be new product development), the
target market (that would be market development) or the fundamental competitive advantage
(although ads may focus on new/different features or attributes of the brand or company).
Improved promotional strategies could mean investing more money, shifting the budget, creating
new more creative advertising, developing unique sales promotional incentives or improving the
performance of company sales representatives. Improved distribution could mean adding
wholesalers and retailers (more intensive distribution) in existing markets or working more
closely with existing middlemen to stock, support and merchandise your products more
effectively. Improved pricing could mean lowering (or raising) suggested retail prices, revisiting
wholesaler and retailer margins, or changing the nature, frequency and magnitude of volume
discounts and merchandising allowances.
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15.3 Market Development Strategies
If market penetration strategies appear to offer limited potential for growth, marketers look to
market development strategies. Market development strategies seek growth by concentrating on
current (existing) products but offering them to/in new markets. Three common market
development strategies are:
1. Target New End User Markets -- If it seems the current end user market has reached its
potential for growth smart marketers look to new end user markets. If your primary end user
market is the consumer (the retail market) ask yourself if there are opportunities in other end
user markets such as institutional markets or industrial markets or government markets or
export markets. Avoid myopic thinking that locks you into one end user market.
2. Target New Demographic Markets -- Johnson's Baby Shampoo, Powder and Lotion all
found great success targeting adults after decades of being marketed exclusively for babies.
After being launched as a deodorant soap for men, Irish Spring, found sales growth and
success in marketing it to women. Secret Deodorant did it the other way around. Targeting
new demographic markets means staying with the same end user market (e.g. the consumer
market) but within that market targeting a new segment. Any demographic or behavioural
segmentation variable could be used to identify new markets but basic demographics (age,
gender, race or ethnicity) seem to offer the most obvious possibilities.
3. Target New Geographic Markets -- Many small businesses grow by moving into new
towns or cities. Many larger businesses grow by moving into new provinces, regions or
countries. When Moosehead Beer had captured a significant share of the Atlantic Provinces
market management elected to launch it in New England. "The Moose is loose," became the
rally cry for millions of beer-drinking Americans. When Admiral Auto Glass, Bergengren
Credit Union and the Sunflower Natural Foods Store achieved success in Antigonish they
looked to neighboring communities to open new outlets. Going international is the subject of
Module 17.
Of course aggressive, well-funded firms do not have to wait until growth in existing markets has
slowed to implement market development strategies. Firms can engage in market development
strategies at any time.
15.4 New Product Development Strategies
A firm may elect to focus on serving the needs of existing markets better by creating new
products. Such efforts are called new product development strategies. Again, there are three
common strategies:
1. Making Minor Modifications to Existing Products -- Throughout the product life cycle a
brand may have several incarnations. The ingredients may change. The style may change.
The colours may change. The packaging may change. The sizes may change. All such
changes -- often called re-launching the product or re-positioning the product -- are, in effect,
77
minor product modifications. The goals are to remain fresh to consumers, middlemen and
the sales force; to reinforce product differentiation; and, to extract modest sales gains in
tough, competitive, mature markets.
2. Adding Product Line Extensions -- Sunlight laundry bar led to Sunlight Detergent and
Sunlight Liquid. Duncan Hines Cake Mixes led to Duncan Hines Cookie and Muffin Mixes.
Kraft Macaroni and Cheese Dinner led to Kraft Dinner with Spirals. Uncle Ben's Converter
Rice led to Uncle Ben's Seasoned Rice Dishes. In all of these instances a successful product
spawned one or more related products trading on the original name and marketplace success.
Sometimes a great way to grow a business is to add related products or services under the
umbrella of an existing successful brand.
3. Adding Innovative New [Related] Products -- Procter and Gamble had never made brooms
before launching the Swiffer in 1999 but this addition is considered 'new product
development' not 'diversification' because brooms are related to many Procter and Gamble
household cleaning products. When a firm adds innovative new products in existing product
categories or enters new, but related, product categories it engages in the most challenging of
new product development strategies. Another examples of this type of new product
development occurred when StFX launched its web-based and cd-based multi-media courses
in Aquatic Resources (still a post secondary education product).
15.5 Diversification Strategies
Normally the most challenging growth strategies involve both new markets and new products.
For this reason marketers usually look at other growth options first. There are two types of
diversification: related and unrelated. Related diversification is called integrative growth.
Unrelated diversification is called conglomeration. 'Related' in this context means related to the
kinds of product categories currently being marketed.
There are three types of integrative (related) growth. We'll use the example of Fitrite, a fictitious
Canadian shoe manufacturer to illustrate these options.
1. Forward Integration -- To guarantee access to markets a firm may elect to invest its
resources in acquiring, merging with or engaging in joint ventures with one or more of its
middlemen. Fitrite purchasing a small chain of shoe stores would be a good example of
forward integration. So would a flour mill buying out a bakery.
2. Backward Integration -- To guarantee a supply of needed raw materials or ingredients a
firm may elect to invest resources in the acquisition of one of its suppliers. Fitrite purchasing
a tannery to assure it a supply of quality leather would be a good example of backward
integration. So would Sobey's buying out several wholesalers or a pop bottling or printing
operation.
3. Horizontal Integration -- Sometimes growth may be best achieved by acquiring a
competitor. Since competitors are at the same level in the channel of distribution such a
78
move would be 'horizontal' integration. If Fitrite purchased another manufacturer with
complementary lines that would be horizontal integration.
Sometimes firms accumulate cash -- profits from Cash Cow SBUs or via share offerings -- and
go looking for expansion opportunities such as investing in totally new (but logical) industries.
Such growth is called unrelated diversification and begins the process of building a
conglomerate -- a group of companies simultaneously managed centrally (by a holding
company) and decentrally (semi-autonomously by operating management). If Fitrite became
very successful it may elect to diversify by investing in an upscale executive travel business or in
jewelry manufacturing. In either case there must be some business logic for such diversification.
79
Foundations of Marketing – BSAD 231
Module 16: Marketing and the Internet
This Module developed for the BSAD 231 course by Bobbi Hiltz
Module 16 explains how the Internet applies to the smart marketer. It begins with a look at the
various marketing uses of the Internet. The next section covers some of the criteria to keep in
mind when creating a web site. This is followed by a discussion of how each of the 4Ps are
affected by Internet business and finally, some suggestions for using the Internet to accomplish
the four marketing growth strategies are provided.
16.1 Using the Internet for Marketing Functions
When someone refers to the online marketplace, what do you think this means? Buying and
selling products over the Internet? If so, then you are partially correct. The Internet is used for
the exchange of goods (buying and selling products and services), but it is also used for much,
much more. Smart marketers recognize this fact and try to optimize the technology by using the
Internet to carry out a number of traditional (usual, conventional, established, accepted)
marketing activities. Smart marketers are also aware that the Internet is not a replacement for
these traditional marketing methods, but a supplement and complement the more recognized
practices. With this in mind, smart marketers use the web to:
1. create awareness for their product or service or company. You do not need to process
transactions on your site to have a web presence. Many companies or products or services
have web sites for the sole purpose of educating the customer about their offering. (The
expectation being that sales in traditional channels will result.)
2. brand (build brand image). The Internet provides another medium for traditional firms to
properly position their product, service or company in customers minds.
3. offer incentives in the form of e-coupons, printable coupons, discounts for ordering online,
contests and sweepstakes. These devices are used to create excitement and encorage
purchase behavior.
4. provide customer service. Most sites offer a Frequently Asked Question (FAQ) section and
others are equipped with return email systems where you email your question or comment
and a customer service representative will return a response. (hopefully a solution)
5. process transactions. Some sites allow customers to order their products online (paid for
with credit card information).
80
6. gather information. You know how important information is to a smart marketer. Well,
each of the four information gathering techniques can be employed online.
• Marketing intelligence gathering via online newspapers, newsflash services, and email
contact with suppliers and customers
• Primary marketing research activities can be conducted online and can be valuable, but
caution needs to be taken:
 Surveys and focus groups are easily conducted, but there is concern about
disguised identities (a 14 year old boy can say he is a 35 year old woman) and
statistical inaccuracies (not random)
 Observation (clickthrough) studies track the sites you visit, but are
controversial for privacy reasons.
• Secondary marketing research can also be accessed online (journals, government
databases, AC Nielsen data)
• Internal records and resources are usually made available to employees over secure
company intranet connections (an Internet network with controlled access, usually for
employees) and internal databases are generated from contact information supplied by
customers online.
7. generate leads on potential customers by asking visitors to leave personal information. Still
other sites generate leads by asking for your contact information in addition to that of friends
and relatives. These leads are then compiled in databases and used in direct marketing
efforts.
16.2 Criteria of a Great Web Site
The experience your potential customer has when visiting your web site can make or break a sale
(online or in traditional channels). Therefore, smart marketers know that web sites must be well
designed and function properly in order to create positive experiences. Some of the most
important criteria of a great site are that it:
• is user-friendly. The Internet is always gaining new users, most of whom are not technically
literate and sites must therefore be easy for them to use.
• has a memorable, simple URL (uniform resource locator, or web address). www.stfx.ca is
direct and easily remembered whereas you might have a little more trouble with
info.lib.uh.edu/wj/webjour.html.
• is consistent with company/product image portrayed using other media. Portraying a
consistent image helps with product positioning and branding.
• easily navigated. You cannot afford for potential customers to become lost and frustrated
with your site. It needs to be simple and easy to move around.
• downloads quickly. You will lose the interest and attention of possible customers if they have
to wait too long for unnecessary graphics to load.
• is well organized. If customers cannot easily get to where they want to be, you will lose them
and their potential business.
• is attractive. While unnecessary graphics are a no-no, the site still needs to be visually
appealing. Remember, you are trying to attract and keep the customer’s attention.
81
• enables secure transactions (if transactions are an offering). Customers that are not
convinced that their credit card information is safe with you will not purchase from you.
• values user privacy. Again, if customers do not feel secure at your site (if they suspect that
you will sell their personal information) you have lost a potential sale.
16.3 Managing the Marketing Mix Online
The marketing mix is your recipe for success in traditional business and the situation is no
different in the online marketplace. As you know, smart marketers effectively mix each of the
4Ps (Product, Place, Price and Promotion) to create a competitive advantage, so in order to do
this you must first understand how each element is affected by online business.
1. Product
The Internet has not only changed the way products are exchanged, by allowing customers the
opportunity to place product and service orders online, it has also altered the products that are
available.
• The Internet has created a market for a wide array of new products (computer equipment, web-
publishing software, email software, browsers, ISPs, MP3 players) and more new products are
expected to appear as the technology continues to develop.
• Traditional companies have diversified their offerings by creating on-line versions of their
products. (The New York Times is available in an online version at nytimes.com and tsn.com
provides sports information in an online format.)
• New companies have been created to market and distribute traditional products online.
(Amazon.com dealing in books and now music and Peapod.com sells groceries.)
2. Place
The supply chain, too, becomes a bit different for business conducted online. As you know from
studying the traditional marketing mix, the standard supply chain is viewed as:
Manufacturer
Wholesaler
Retailer
Customer
Now, consider what happens when you purchase a product online. To make it easy, let’s buy a
book. Depending on the product, you have the option of ordering directly from the
manufacturer (like McGraw-Hill) or from an online merchant (an online retailer or e-tailer,
like Amazon.com, who actually gets the product from a manufacturer). Next, you enter all of
your contact and credit card information on the site along with the product (book) you want and
your parcel magically arrives in a few days. Now, try to envision the rest of the supply chain in
this transaction.
• What happens after you place your order? Think about how you received the product.
Someone delivered it (a delivery specialist like FedEx, Purolator Courier, UPS or Canada Post).
The delivery specialist, then is the last step before you, the customer, in the supply chain.
• Are there any other players? Well, if you placed an international order there are. Before your
book reaches the delivery specialist there is another important middleman - a broker – who
82
ensures the product moves efficiently across international borders. Export brokers are often
employed by online merchants to handle their international sales.
Just as the traditional supply chain diagramed above is not always the case, neither is this version of
an online supply chain. However, the online supply chain shown below is a general representation
of the Internet process.
Online
Merchant
Manufacturer
Broker
Delivery
Specialist
Customer
3. Price
As with the traditional pricing strategy, the 5Cs (Customer, Competition, Channels, Costs,
Company Considerations) serve to affect the prices that are charged online. Let’s look at some
channel considerations as an example. Since online transactions often eliminate the traditional
middlemen (wholesalers and retailers), you can expect fewer markups and hence, lower prices on
the product, right? Not exactly. As we have just seen, online merchants, delivery specialists
(post office, UPS, FedEx) and brokers become the new intermediaries and most, if not all,
anticipated cost savings are lost. Paying these new middlemen, then, serves to increase the price.
Some of the other factors affecting online prices are listed in Figure 16.1
Figure 16.1
Factors Increasing and Decreasing Prices of Goods Sold Online

Are
driven
up
by






the customer paying for direct distribution
(Channel)
web site development (Cost)
higher marketing costs (Cost)
and in some cases, brokerage fees or tariff
for international deliveries (Channel/Cost)
auction sites (Channel)
quality image through price (Company
Considerations)
customer requirements – fast delivery,
after-sale service (Customer)
Prices in
Online
Transactions




Are
driven
down
by



international competition
automatic reordering systems
lower inventory and merchandising costs,
penetration strategies (items being priced
at a loss to gain acceptance)
auction sites
value image through price (Company
Considerations)
customer requirements – basic service
(Customer)
83
4. Promotion
The four traditional advertising elements are all used in online marketing as follows:
• Advertising is everywhere online. Banner and button ads are the most common. Banner ads
are rectangular, narrow bands that appear at the top, bottom or along the side of a web page and
button ads are, as the name implies, circular. To try to break through the clutter in Internet
advertising and make the ad more appealing, these ads can be animated and made interactive
(include games). Some companies are also purchasing key word ads from search engines that
allow for a more targeted audience. They buy a list of key words and if you use any of their
words in your search, you will have an ad for their product pop-up on your screen.
• Personal Selling is conducted via email where companies use their extensive databases of
contact information to solicit new business and more business.
• Sales Promotion occurs when customers are offered incentives via e-coupons (coupons issued
and used online), printable coupons to bring into the bricks-and-mortar store, contest and
sweepstakes entries for purchasing or discounts for ordering online.
• Public Relations are carried out mainly via email newsletters to current customers. The
sponsorship of various webcasts (for concerts, sporting events) is also a means of public relations
used by some e-marketers.
16.4 The Product:Market Matrix – Strategies for Growth Online
Now that we have looked at how each of the marketing mix elements are affected in online
business, it is important to examine how they can be applied to grow and enhance your business.
Remember the product : market matrix? Smart marketers can use the Internet to help
accomplish each of the 4 marketing objectives of i) market penetration, ii) market development
iii) product development and iv) diversification. (In most cases, these examples would be used
in conjunction with traditional marketing techniques.) A few examples of how smart marketers
might use the Internet to accomplish each are presented on the next page.
16.5 Core Concepts, Processes and Tools
This module introduced concepts that you should understand and be able to use:
Intranet
e-tailer
Broker
Banner ads
Online marketing
Online merchant
Delivery Specialist
Button ads
As well, the module introduced these processes:


maximizing marketing functions online
effective web site design
84


using the Internet to manage the 4Ps (Product, place, price, and promotion)
using Internet Marketing to accomplish the 4 growth objectives (market penetration, new
market development, new product development, diversification)
Figure 16.2
Using the Internet to Implement Growth Strategies
Market
Penetration
New Market
Development
If
Your
Objective
Is
then you can use the web to
then you can use the web to
then you can use the web to
New Product
Development
then you can use the web to
Diversification
Internet
 Email multiple purchase
incentives to current
customers (“buy 2, save $5”)
 Promote new uses of your
product on your site and in
email
 Access new geographical
markets
 Advertise (banner ads or
button ads) on sites
frequented by different
demographics
 Use key word ads to reach
new audiences
 Be the technology for your
new product/service (online
version of traditional product)
 Inform current customers of
new product (via email, enewsletters, web site)
 Obtain feedback from current
customers to modify current
offering
 Allow product developers to
via email
and
 communicate
Serve as one branch
of your
intranet
conglomerate (Time Warner
merged with AOL in 2001)
 Support forward integration
(engage in joint ventures with
online merchants to sell your
products)
85
Foundations of Marketing – BSAD 231
Module 17: Marketing Internationally
This Module developed for the BSAD 231 course by Denton Anthony. The Module will be
distributed during October.
86
Foundations of Marketing -- BSAD 231
Module 18: On Being Analytical - Constructing an Argument
This module elaborates the process of being analytical introduced briefly in Module 1,
Marketing and the Marketer and expanded upon in Module 2, Marketing Planning and
Analysis. The primary focus in Modules 1 and 2 was conceptual -- to define analysis and give
you an idea of the critical role analysis plays in the marketing planning process. Module 18 is a
skill builder. It focuses on how to be analytical; that is, how to conduct the many size-ups
outlined in Modules 4-7. Most of the material in Module 18 relates to The Riverside Motor
Inn, a short marketing case found on the next three pages.
18.1 Introducing Selected Tools of Analysis
Of course, "being analytical" requires a lot more than acquiring an intellectual understanding of
the notion of evidence and process of analysis. You need tools and you need practice. You have
already been introduced to two skills of analysis in Module 1, Marketing and the Marketer:
• the ability to visualize your marketplace with your eyes closed and your mind open,
• the ability to employ "if… then…" reasoning to extend your evidence base into areas where
limited hard evidence exists but where some evidence is needed.
Your ability to visualize and employ "if… then…" reasoning are re-introduced and elaborated in
this module. The module also introduces five new skills of analysis you may add to your
marketing tool box:
•
•
•
•
•
Using percentages to compare numbers,
Breaking down numbers to make them more concrete ("per" and "by"),
Using weighted averages,
Constructing frequency distribution,
Distinguishing between percentage and percentage point changes
18.2 The Riverside Motor Inn – Chapters Lounge
The Riverside Motor Inn case is presented as an October 1, 1997 memo from Ronald Veinot,
General Manager of The Riverside Motor Inn in Bridgewater Nova Scotia [a disguised name
and location but otherwise a real situation] to a new employee, Heidi Smith. Heidi has just been
hired as senior hostess/bartender for Chapters Lounge, one of the Inn's three profit centres. The
Inn's 34 guest rooms and its dining room are the others. Chapters Lounge has had a poor year
and Ronald has asked Heidi (the student analyst … you) to size up the situation -- a typical
marketing planning task -- and recommend actions to rejuvenate the lounge. The memo is filled
87
with factual information on recent results and strategies, comparisons with other lounges in the
area, an overview of the marketplace and several observations (opinions) from Ronald. Please
read The Riverside Motor Inn case before moving on.
Bridgewater, Nova Scotia
OFFICE OF THE GENERAL MANAGER
MEMORANDUM
October 1, 1997
TO:
Heidi Smith
Senior Lounge Hostess
FROM:
Ronald Veinot
General Manager
SUBJECT:
Chapters Lounge
Welcome to the staff of the Riverside Motor Inn. Your six years experience at The Little Brown
Jug lounge in Lunenburg, your infectious enthusiasm and your strong customer/service
orientation all suggest great promise for success. I am looking forward to working with you. By
the way, I just moved to Bridgewater myself so the whole operation is new to me as well.
As we discussed at your interview, in time I want you to regard Chapters Lounge as your own
business. For at least the first nine months however I’d like to work closely with you and review
and approve your plans. If everything goes well, independence, profit sharing and promotion to
manager could be just around the corner. To assist you in understanding Chapters’ situation, I
have assembled the following summary of operations, recent results and recent strategies. I hope
you don’t mind point form.

The Riverside Motor Inn was built in 1975 and has 34 rooms on two floors all within one
building. For the fiscal year ended November 30, 1996 occupancy totalled 7,800 room
nights at an average rate of $55.00. The Inn operates at capacity (almost) during July,
August and September. Our 50 seat diningroom, The Sou’Wester, is open daily from 7:00
a.m. to 2:00 p.m. and 5:00 to 9:00 p.m. Sales last year were $175,000 and will be about the
same this year. The Sou’Wester, you'll recall, is across the lobby from Chapters Lounge.
88

This summer the owners invested over $250,000 creating a new front entrance and lobby
area and dramatically renovating both Chapters and The Sou’Wester. Unfortunately, as I
think I mentioned, Chapters had to close for almost all of May and June to accommodate the
renovations.

Chapters Lounge contains 30 seats and is open Monday to Saturday from 4:00 p.m. to 12:30
a.m. During the past three fiscal years, sales have been $63,300 (1994), $75,700 (1995) and
$66,700 (1996). Cost of goods sold has been constant at 36% of sales and direct labour has
been constant at about $18,000.

Chapters Lounge offers a quiet, comfortable, relaxing alternative to “the bar scene”. The
seating is padded bar stools, armchairs, loveseats and a couch. The lounge’s seven square
tables are solid wood. The colour scheme is burgundy and forest green with pastel accent
colours dusty rose and pale green. This summer we began using the slogan, “Conversation
Without Shouting” to promote Chapters Lounge to guests of the Riverside Inn (signs in the
lobby and notices in guests’ rooms) and to residents of the community (three ads in the local
weekly paper). By virtue of its name, décor, size, rich colour scheme and overall ambience,
Chapters Lounge is unique in the area.

In fiscal 1996, sales from drinks were beer 69%, liquor 30% and wine 1%. Gross profit
margins (markups) were beer 60%, liquor 73% and wine 50%. Average retail prices were
beer $3.00, liquor (including cocktails) $3.75 and wine $3.25. Sales from drinks was 95% of
total revenue. The other 5% was packaged food items (peanuts, chips, etc.), prepared food
items (from our kitchen) and cigarettes. I expect these figures are much the same this year.

Happy Hour at Chapters now runs from 4:30-8:00 p.m. (it used to run from 5-7 p.m.). Beer
is $2.80 per bottle and liquor (excluding cocktails) is $3.25 per 1½ oz. shot. The three
largest bars/taverns in the area also have Happy Hours:
• Len’s Place – A country and western bar/lounge (seating for 125); 4:00-7:30
p.m., beer $2.75, liquor $2.75.
• Chevy’s – A rock ‘n’ roll (50s-60s) bar/lounge (seating for 200); 4:00-9:30 p.m.,
beer $2.75, liquor $2.75.
• Pirate’s Pub – Turn of the century pirate theme, German cuisine (seating for
400); 4:00-7:00 p.m., beer $2.75, liquor $2.75.
All have dance floors, “pub food” type meals, and feature live entertainment on a regular
basis.

Chapters’ revenue by month in calendar 1996 was:
Jan.
Feb.
Mar.
1st Qtr.
$ 5,055
5,133
5,146
$15,334
Apr.
May
Jun
2nd Qtr.
$ 6,345
6,486
7,405
$20,236
Jul.
Aug.
Sept.
3rd Qtr.
$ 6,071
4,843
5,273
$16,187
Oct.
Nov.
Dec.
4th Qtr.
$ 4,902
4,673
5,327
$14,902
89

Revenue in 1997 has been disappointing. During the seven months Chapters was open
everyday (January to April and July to September) revenue averaged $3,140 per month. I
think most of the decrease can be traced to the departure of “D.J.” a longtime bartender who
moved to Calgary in December, 1996 and to the hype surrounding the opening of Pirate’s
Pub in January, 1997.

Volume improved modestly in August ($3,708) and September ($4,350) but is still well
below the same months in 1996. Recently newspaper ads have urged the public to rediscover Chapters Lounge by featuring free hor d’oeuvres (value $3-5 per table), the new 210
minute happy hour and the new slogan. As well, we sent out about 200 flyers to local groups
suggesting they consider Chapters Lounge for group outings.

I must confess I haven’t had a chance to examine the lounge in any detail given the
renovations and the need to adapt to new systems and people. It seems to me though that
patrons will tend to be:
• Overnight guests at the Riverside Inn
• The 50 or so local groups which rented our meeting room (capacity 20).
• Residents who work in or near Bridgewater (about 4,000 people) who may
want to go out for a drink – usually in groups – after work.
• Couples, or groups of couples, who want a social drink or two prior to or after
some event in the community (banquet, concert, play, movie, sporting event).
Bridgewater seems to be a very active community. I estimate that at least
twice a week there’s something going on with audiences typically from 100400 but occasionally as large as 2,000 for major sporting events.
• Members of area organizations, clubs and groups (there must be 300-400 of
them) who want to go out for a drink after a meeting or special event.
• Anybody else who might want a quiet drink (a poorly defined group I admit).

Some additional numbers you may find helpful are:
• The population of Bridgewater is about 7,500 (2600 households); Lunenburg County
(including Bridgewater) about 48,000 (13,900 households); and, the Bridgewater
trading area about 60,000 (20,700 households).
• About 500,000 tourists pass by or through Bridgewater every May to October.
• Across Canada in 1996 average annual household spending on alcoholic beverages
served on licensed premises was:
Beer ..................................................
Liquor ..............................................
Wine and Cider ................................
Total ..........................................
Average Expenditure
Per Household
$118
38
35
$191
Percentage Reporting
Any Such Spending
36%
18
25
49%
Heidi, I believe we can rebuild volume with good strategies and good implementation. But, I’m
realistic. The ambience of Chapters Lounge, the availability of several acceptable alternatives
90
and the fact that a high percentage of social drinking is ‘party oriented’ suggests a ceiling on
revenue. During the next week or so could you please spend some time thinking about what we
might do to rebuild volume. I’d be willing to invest the full contribution (after labour) from
October 1997 to June 1998 if you think that would be necessary and appropriate. Do you think
we could hit $100,000 in the year 2000? I look forward to your size up of the situation, your
insights and your recommended objectives and plans.
18.3 Using Percentages to Compare Numbers
A core ability of every marketer is calculating relevant percentages. Relevant percentages permit
you to compare two or more bits of evidence and make the task of generating conclusions much
easier. Armed with several conclusions (inferences, supported assertions) about the situation,
you are better able to recommend possible actions (strategies, tactics, "thrusts").
At first you may wonder what the relevant percentage comparisons are. The answer is any
calculation which may help you understand the organization and its marketplace better (results
over time, market sizes, competitor successes and so on). Remember: you conduct size ups as
input to the creation of effective marketing strategies including the selection of target markets,
the identification of competitive advantage, the development of a positioning statement and the
development of a marketing mix (the 4Ps). Thus, any comparisons which would help you
understand the organization or its marketplace better would be relevant. Here are a couple of
examples using information from The Riverside Motor Inn.
• To determine how steep the sales climb must be to reach $100,000 in the year 2000, Ronald
Veinot wants to estimate sales for fiscal 1997 but October and November haven't happened
yet. Should that stop him? Certainly not.
• Ronald has 1996 and 1997 actuals for August and September. These facts allow him to
calculate estimated sales for October and November with some confidence. Here are the
percentage calculations:
∙ August 1997 sales were $3,708 and August 1996 sales were $4,843. The 1997 figure is
77% of 1996.
∙ Similarly, September 1997 sales were $4,350 and September 1996 sales were $5,273. The
1997 figure is 82% of 1996.
• These percentages (newly calculated factual evidence) suggest that, barring any significant
changes, sales for October and November 1997 also should be about 80% of 1996 sales
(reasonable reasoning).
• Actual sales for October and November 1996 were $4,902 and $4,673 respectively. Thus
(calculation and conclusion), reasonable estimates for 1997 are $3,922 and $3,738 -- each 80%
of 1996.
• Ronald now has an estimate of sales for the fiscal year ending November 30, 1997.
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December 1996 sales were $5,327 (given), January to September 1997 sales were $21,980
(given), October sales were estimated above to be $3,922 and November's $3,738. Adding
these figures generates estimated fiscal 1997 sales of $34,967.
• Of course, this is for a 10 month year since the lounge was closed all of May and June. Had
the lounge been open for 12 months, sales for fiscal 1997 would have been about $43,000.
• Ronald probably would use this estimate to calculate that 1997 sales will be about 64%
($43,000 ÷ $66,700) of 1996 sales. This calculation would give him a better sense of the
magnitude of the decrease and thus the magnitude of the rejuvenation effort needed to turn
things around.
• He might then tentatively estimate sales necessary to reach $100,000 in 2000 as 1998 ≈
$60,000, 1999 ≈ $80,000 and 2000 ≈ $100,000.
18.4 Breaking Down Numbers ‘Per’ and ‘By’ to make Results more Concrete
Percentages compare numbers using base 100. In marketing, many other bases are used to
compare numbers or break them down (disaggregate results) to make them more concrete, easier
to interpret and therefore easier to employ to craft strategy. Here are 10 common bases for
breaking down aggregate results:
• per capita, per household, per store, per square meter, or per sales territory, and
• by month, by day, by hour, by employee or by province.
Now, here are some examples from The Riverside Motor Inn. The examples employ
disaggregation of results and reasonable "if… then…" reasoning to extend the analysis as
needed:
• Ronald Veinot knows Chapters Lounge sales in 1996 were $66,700. But what does $66,700
mean? It's just a big number expressing aggregate sales for one year.
• Two relevant ways to break down these results are by time period and per seat. Those
calculations will help Ronald understand the reality behind the aggregate results … and then
permit him to use this new understanding to help craft strategy.
• Chapters Lounge is open 6 days a week, 8½ hours per day, 52 weeks of the year. This equals
a maximum of 2652 hours. But, a few days would be statutory holidays. If Chapters Lounge
was closed for 6 days at 8½ hours per day (a reasonable estimate), then the revised annual
hours would be about 2600. Note: it is important to use "about" when the evidence base
includes your reasoning.
• Thus, lounge sales per hour for the year would have been about $25.65 ($66,700 ÷ 2600 hrs).
This is about 8 drinks per hour. Revenue per seat per hour would have been about $.86
($25.65 ÷ 30 seats).
92
• A drink averages about $3.25 (new calculation, see below). If two drinks per hour is a
reasonable estimate of consumption when a seat is occupied, then Chapters Lounge may have
been running at about 13% capacity (roughly $.86/seat per hour actual ÷ $6.50/seat per hour
potential). Thus, Chapters Lounge has a lot of potential to grow. It was no where near
capacity in 1996. In fact, capacity is well above the tentative target of $100,000 in 2000.
• Such disaggregation of results also would permit Ronald to compare hour to hour, day to day
and week to week results over time to help spot relative opportunities and problems.
18.5 Using Weighted Averages
If 10 contractors submitted bids on a job, it would be easy to determine the average bid. You'd
add up the 10 bids and divide by 10. The arithmetic average is calculated easily because each
contractor has the same importance as each other contractor. In this instance each contractor is
equal to one tenth of all contractors (or, a contractor is a contractor, is a contractor). The
contractors' bids may have been different, but each contractor's weight or importance or worth to
the calculation of the arithmetic average is the same.
In many instances however the sub-groups which provide data for the calculation of averages do
not have the same weight or importance or value. In such instances weighted averages must be
calculated instead of simple arithmetic averages. Here is an example from The Riverside
Motor Inn, calculating the weighted average price of a drink as the example:
Drink Type
Beer
Liquor
Wine
Average Price
Per Drink
$3.00
x
3.75
x
3.25
x
Weight/Importance/
Worth (% of sales)
.69
.30
.01
1.00
=
=
=
Weighted Average
Selling Price
$2.070
1.125
0.033
$3.228
Notice the sum of the weights is, and must always be, 1.00. Notice also the simple arithmetic
average, $3.33 [($3.00+3.75+3.25) ÷ 3], is incorrect. The (weighted) average selling price is
$3.23 (rounded) because the three types of drinks sell at different rates.
18.6 Constructing Frequency Distributions
In 1996 Chapters Lounge served about 19,630 drinks (beer, wine and liquor sales of $63,365 -95% of total sales -- at an average price of $3.228 per drink). If the average drinking occasion
generated 2 drinks per person, then in 1996 Chapters Lounge served a total of about 9,800
"customer drinking occasions".
This could have been as many as 9,800 people each coming only once or it could have been the
same 33 people coming every day (sigh). Most likely it was a combination of a small number of
customers coming many times, a larger number of customers coming a few times and some
customers -- mostly tourists -- coming only once.
93
Frequency distributions -- typically as derived from surveys -- are able to tell us how many
customers engaged in certain behaviours to satisfy what needs how many times in a given period
of time. They are important to marketers because they identify the heavy, medium and light
users or patrons. Marketers can then profile each type of user and make informed judgments
about changes to marketing strategy.
At present Ronald and Heidi do not have customer frequency distribution information. But, they
could get it via periodic customer surveys. These surveys might help Ronald and Heidi identify,
say, the 50 or so customers who frequented Chapters Lounge at least 50 times in the past year.
These 50 customers might have constituted only 3% of all customers but accounted for 33% of
all "customer drinking occasions."
Ronald and Heidi could combine patronage data with demographic data and benefits sought data
for these 50 customers to maintain long-term relationships with them. Conversely, they could
identify the, say, 500 locals who frequented Chapters Lounge two or three times in the previous
year, try to understand their purchase processes and criteria and then develop ways to appeal to
them so they would frequent the lounge more often.
Even if you do not have frequency distribution information, you can still think about what the
distribution might look like and how you would go about obtaining this information.
18.7 Distinguishing Between Percentage and Percentage Point Changes
Smart marketers never get fooled by mistaking percentage and percentage point changes over
time or across sub-groups. This little note explains the difference.
The total market for any product is comprised of 100 share points or 100 percentage points.
These 100 share points (share of market points) are allocated to the companies or brands
making up the market according to their size or importance. The base is the whole market.
For example, in the Lunenburg County lounge, bar and tavern market Chapters Lounge is
believed to have, or own, 2 share points and all other lounges, bars and taverns the other 98 share
points. If Ronald and Heidi are successful in achieving sales of $100,000 by the year 2000,
Chapters Lounge would have, or own, about 3 share points and all other lounges, bars and
taverns the other 97 share points:
• It would be correct to say that Chapters Lounge gained 1 share point or 1 percentage point.
• It also would be correct to say Chapters Lounge achieved a 50 percent gain (assuming the
overall market remained fairly constant during this time period).
• It would be incorrect to say Chapters Lounge achieved a 1 percent gain … though the
temptation to do so by many is irresistible.
In this example, Chapters Lounge achieved both a 50 percent gain in sales (base = company
sales) and a 1 percentage point gain (base = the total market). It is true Chapters Lounge sales
94
increased from 2 percent to 3 percent of the market, but this is not a 1 percent gain. It is a 50
percent gain. And, it is a gain of 1 percentage point.
You can save yourself a lot of embarrassment if you understand the difference between
percentage and percentage point changes.
95
18.8 Visualizing Marketplaces
You have to be able to close your eyes and construct a fairly accurate, detailed picture of the
reality of your marketplace from only a few details. You have to be able to "see" Chapters
Lounge. You have to be able to "see" patrons from each market segment and reason how they
came to choose Chapters Lounge. You have to be able to "see" the patrons of the other
bars/lounges and understand their choice processes. And then you have to be able to answer the
tough, "So what?" question … how does such visualizing, or projecting, have an impact on the
crafting of strategy. In other words, you need the ability to "see" the marketplace and then "use"
this picture to help decide what to do (craft strategy).
The case provides no information on the reasons why people may seek a quiet lounge to have a
drink. You have to think like a customer and visualize their purchase processes and criteria. A
dozen possible reasons (developed simply by reasoning, visualizing and thinking like a
customer) are:
∙
∙
∙
∙
∙
∙
∙
∙
∙
∙
∙
∙
to celebrate a special occasion
to socialize .. just be with friends or relatives
to transact business .. have a meeting
to escape
to relieve tension and stress .. unwind
to enjoy conversation (without shouting)
to stay in love
to fall in love
to do something different (change, variety)
to entertain oneself (board games, computer games)
to learn about something (wine tasting, debate, skill development)
to be entertained (but quietly by background music or a soloist in the corner)
Can Chapters Lounge be all things to all people? Likely not. Can it provide some of the above
benefits (solutions to problems) better than anyone else? Likely yes. Of course, a lot more
analysis would be necessary to make judgments about exactly what Chapters Lounge would
offer on which evenings attempting to reach and satisfy which customer groups.
The point is, you do not have to have been to Chapters Lounge to help Heidi and Ronald. You
just have to close your eyes, open your mind, and begin to visualize the operation, its customers
and the Bridgewater licensed lounge/bar/tavern marketplace.
18.9 Using ‘If… then…’ Reasoning to Fill Information Gaps
You have to be willing to generate reasonable estimates -- or, a range of reasonable estimates -of the unknown and then use those estimates to help create marketing strategies. Such reasoning
is not the same as making "I assume" statements about reality (a bad approach). Such reasoning
is much more cautious and helpful. It says "if" reality is such and such "then" some additional
reality follows (a good approach). The key of course is to generate "ifs" and "thens" which are
both reasonable and linked to action.
96
Sensitivity analysis -- a specific type of "if… then…" reasoning -- deserves mention.
Frequently the unknown you are speculating about is quantifiable. Whenever the result you are
reasoning about is quantifiable, it is better to present a range of reasonable numbers than to
merely pick one number. This is particularly true if the unknown you are reasoning about is
important from a marketing perspective and the numbers you employ have a major impact on
some key result. Thus, sensitivity analysis is specifying a range of reasonable values for some
unknown.
In the section above we reasoned that an occupied seat would generate 2 drinks per hour. This
seems reasonable but it is not a fact substantiated by Chapters Lounge. If estimating the precise
number of "customer drinking occasions" would have mattered in illustrating frequency
distributions (and, it didn't seem to) we would have been wiser to present a reasonable range of
estimated drinks per hour such as:
Estimated Drinks Consumed
Per Hour at an Occupied Seat
1.50
1.75
2.00
2.25
2.50
Estimated Number of
Customer Drinking Occasions
13,100
11,200
9,800
8,700
7,900
Using "if… then…" reasoning provides new evidence and conclusions and adds value to your
analyses. Here is an example.
• Ronald Veinot says he thinks (opinion evidence) one group of Chapters Lounge patrons is
guests of The Riverside Motor Inn.
• Capacity of The Riverside Motor Inn is 12,400 room nights (34 rooms x 365 nights).
• Actual occupancy in fiscal 1996 was 7,800 room nights.
• Thus (new calculation and conclusion), the Inn operated at 63% capacity for 1996 (7,800
rooms rented ÷ 12,400 rooms available).
• Ronald Veinot says (an opinion, but probably a fact as well) the Inn was almost at capacity
during July, August and September.
• If 'almost at capacity' is 33 rooms per night (reasonable) then these three months accounted for
about 3,036 room nights (33 rooms x 92 nights).
• If so (another new calculation and conclusion), then the other nine months accounted for about
4,764 room nights (7,800 - 3,036). Thus, the average October to June occupancy was only 1718 rooms per night (4,764 room nights ÷ 273 nights) or about 50% occupancy.
97
• In other words (conclusion), on a typical night in July-September there were almost twice as
many guests at The Riverside Motor Inn as on a typical night from October-June.
• If guests of the Inn constituted a large percentage of Chapters Lounge customers, then there
should have been a noticeable increase in sales during the July-September period (reasonable).
• A check of fiscal 1996 results (fact) indicates no such increase took place. August and
September were below average and July was a few hundred dollars above average.
• It seems (tentative conclusion) guests of the Inn do not constitute a large percentage of
Chapters Lounge business. [Of course, another possibility is that the 'twice as many' summer
guests are only half as likely to purchase a drink at the lounge as non-summer guests. This
would have to be confirmed through research, starting likely with an examination of bar bills
charged to rooms.]
• Ronald Veinot would thank you for these insights as they hint at finding a way (strategy,
tactics, "thrusts") to increase overnight guests' propensity to frequent Chapters Lounge.
You might even continue the "reasonable reasoning" analysis to get a better feel for the
possible size of the overnight guest market segment. Trying to quantify market segments is
useful new information. Here is one analyst's effort.
• If the average visitor party contained 1.75 persons (using a range from 1.5 to 2.0 would have
been preferable … sensitivity analysis) then the Inn hosted 13,650 people in fiscal 1996
(7,800 room nights x 1.75 persons/room).
• If 3% of all guests (using a range from 1% to 9% would have been preferable … sensitivity
analysis) went to Chapters Lounge and each consumed 2 drinks (using a range from 1.0 to 2.5
drinks would have been preferable … sensitivity analysis), then collectively they would have
consumed 820 drinks (3% x 13,650 x 2 drinks each).
• In fiscal 1996, Chapters Lounge poured about 20,000 drinks (just over $63,000 in sales from
drinks and $3.23 weighted average sales per drink).
• Thus, it seems (a tentative conclusion) the overnight guest segment of Chapters Lounge
business is fairly small. In this analyst's view overnight guests might have accounted for about
4% of drinks served (820 drinks ÷ 20,000 drinks).
• Ron Veinot would thank this analyst as well because her insights add value. She has
tentatively confirmed his suspicion that Chapters Lounge overnight guest segment is not all
that large. He would probably see the potential of this segment…they are already in the
building and there are more than 1,000 of them in an average month. Then he'd make a
judgment about the means and resources necessary to penetrate (or not) this segment further.
Different analysts might have come up with different numbers but their conclusions likely would
have been similar. That is because they had a common fact base to work from and their
98
estimates of important unknowns, if reasonable, should have been similar (in this instance: 1.75
persons/room, a patronage level of 3% and average consumption of 2 alcoholic drinks per hour).
18.10 Constructing and Interpreting Exhibits
This section of Module 6 concerns constructing and interpreting exhibits that present your
evidence base. The module also introduces the construction of indices (the plural of index) to
assist your reader in comparing results among several groups.
Constructing Exhibits
• Consider your reader, the purpose of the report or memo and how the information in each
exhibit relates to one or more objectives or decisions. That should help you determine what
information to present in each column and row.
• Your reader is not as interested in how you calculated each number ("then I divided sales each
month by the number of …"). Your reader is more interested in the results themselves. So,
concentrate on results and relegate the calculation of results to the footnotes.
• Exhibits should be numbered.
• Exhibits should contain accurate, descriptive titles.
• Exhibits may contain accurate, descriptive sub-titles to clarify context (timeframe, source of
the data, location, scope).
• Each column and each row should contain an accurate, descriptive label. The whole exhibit
should have a unified rows x columns look.
• To compare two or more numbers, consider calculating and including percentages. Percentages
increase both your ability to interpret the results and their relevance to your readers.
• Similar rows and similar columns should be grouped. For instance, if two adjacent columns
are labelled "females" and "males" a common group label "gender of respondent" above them
should be created. Or, if several rows present estimates of the number of beer, wine and liquor
drinks sold, a common heading such as "Estimates of Beer, Wine and Liquor Sales in Units"
should be created.
• Use footnotes to help your reader. Footnotes may be created:
∙ to indicate how a particular result should be interpreted,
∙ to indicate how a particular calculation was made,
∙ to specify any constraints on, or limitations to, the interpretation of results,
∙ to indicate what assumptions ("givens") underlie the results or,
∙ to indicate the source(s) of the information.
[The above list is a good example of point form using parallel grammatical structure …
each point begins with the infinitive of an active verb.]
99
Interpreting Exhibits
• Look at the words in the title, column and row headings and footnotes before you look at the
numbers. The words provide the context, clarify what has been summarized, and sometimes
offer guidance on correct interpretation.
• Determine how the exhibit is constructed. Is it by year? By question? What are the relevant
sub-groups? What are the units of measurement (e.g. dollars, kilograms)? Does the exhibit
contain absolute numbers (dollars, kilograms), relative numbers (percentages), or both?
Frequently the number in the lower right hand corner of the exhibit is the key to understanding
all other results.
• Determine what summary measures are provided (averages, indices, totals). Normally
summary measures help guide the interpretation of the exhibit and permit comparison among
various sub-groups.
• Determine what explicit comparisons (usually percentages, sometimes indices) have been
made among sub-groups (months, regions, demographic groups, end users, products).
• Determine whether it is more important to make comparisons across rows or up and down
columns.
• Draft a sentence to express your interpretation of one of the key numbers -- or one of the key
columns or rows if that is more appropriate. Then see how this number might be compared
meaningfully to other numbers (sub-groups) in the exhibit. Always try to tell your reader
what the exhibit means, not merely what is says. Here is an example from Chapters
Lounge monthly sales results for 1996:
In 1996 sales were $66,659. Month to month sales fluctuations were modest.
They ranged from a low of $4,673 in November to a high of $7,405 in June. This
suggests the lounge may have had a fairly stable, though modest, base of loyal
customers. The second quarter (April to June) generated just over 30% of annual
sales. It was the lounge's strongest quarter. This may suggest growth potential in the
"end of year" get-together market.
• Think about the (marketing) decisions which need to be made and the decision maker. What
are the key bits of information each exhibit provides … the research objectives … and then try
to link the findings and your tentative conclusions both to management's objectives and any
pending marketing decisions. The best way to be relevant is to address a specific objective
and link your findings and conclusions directly to a pending decision.
• Interpreting exhibits presents a good opportunity to employ point form, as in the following
hypothetical exhibit:
The key findings in Exhibit 2 on patronage of lounges, bars and taverns in the
Lunenburg County area in general, and Chapters Lounge in particular, were:
100
1.
2.
- be sure to use parallel grammatical structure (all points
3.
starting with the same parts of speech and all sentences
4.
employing the same subject:verb structure) 5.
These findings seem to support to the following conclusions/inferences:
1.
2.
- [thus, therefore, the evidence suggests
3.
what the results mean] 4.
5.
Remember Goldilocks who felt everything had to be "just right"? Interpreting an exhibit is no
different. Readers do not want too much porridge … that might be boring and confusing.
Readers do not want too little porridge … that might be frustrating and force readers to have to
go the to exhibit itself to determine what was really found. Your porridge (interpretation) has to
be "just right". Unfortunately, there is no correct answer to the question, "How much should I
say about each exhibit?" The answer depends upon:
•
•
•
•
the purpose of your report or memo,
the audience for whom it is being written,
the amount of information in the exhibit, and
the importance of the information in the exhibit.
Indexing Results for Greater Clarity
A common, helpful presentation tool in marketing is the creation of an index to highlight the
differences among sub-groups. The sub-groups may be different time periods, different
provinces, different users of a product, different companies or whatever relevant sub-groups
exist.
When the sub-groups are different time periods an index usually is created by:
• establishing one time period as the base period or start point
• setting the base period equal to 100 (Note: not 100%. Indices use base 100. The
percent sign disappears.)
• determining the percentage differences between the base period and each of the time
periods
• expressing the percentage differences relative to base 100, the start point.
The Consumer Price Index (CPI) is probably the best known example of an index employing
time periods as the base. In The Riverside Motor Inn we have set 1994 ($63,300) equal to 100
(the base year) and then created an index:
1994 = 100 (Base year = $63,300)
1997 = 68
2000 = 158
101
1995 = 120
1996 = 105
1998 = 95
1999 = 126
When the sub-groups are different provinces, stores, end users, countries or whatever base is
used for grouping, an index is usually created by:
• calculating the average for all groups (summing their individual results and dividing by
the number of sub-groups in the sample,
• setting the average for all sub-groups equal to 100 … the base for all comparisons,
• determining what percentage each sub-group is compared to the overall average
(dividing the sub-group figure by the average for all sub-groups),
• expressing each percentage relative to base 100 … the overall average.
Here is an example of an index created to express the different levels of brand development
(market penetration) for Sunlight Liquid in each of the regions of Canada. Typically, only the
index and the Canada-wide average share of 14.5% would be revealed to increase clarity and
reduce confusion.
Region
Share of Market
(in litres)
Share of Market
Indexed
Canada
14.5%
100
Atlantic
Quebec
Ontario
Prairies
British Columbia
17.4
7.2
15.7
13.9
14.5
120
50
108
96
101
Indices can make a big difference when your report requires comparing several different groups.
They allow the reader to see differences more clearly than using absolute numbers alone.
102
18.11 Core Concepts, Processes and Tools
This module has introduced or re-introduced about a dozen concepts you should understand and
be able to use:
•
•
•
•
•
•
•
•
being analytical
evidence
factual evidence
opinion evidence
calculation based evidence
reasonable reasoning evidence
"if… then…" reasoning
sensitivity analysis
•
•
•
•
•
linking conclusions backwards and forwards
weighted average
frequency distribution
percentage cf percentage point change
index, indices
As well, the module introduced the following processes and analytical tools:
•
•
•
•
•
•
•
•
•
•
•
•
the process of being analytical
the process of drawing conclusions from evidence
the process of constructing an exhibit
the ability to use percentages to compare numbers
the ability to break down aggregate results "per" and "by" to make them more concrete
the ability to calculate and use weighted averages
the ability to construct and use frequency distributions
the ability to distinguish between and use percentage and percentage point chnages
the ability to employ "if… then…" reasoning
the ability to employ sensitivity analysis
the ability to interpret information contained in exhibits
the ability to construct indices to permit comparing numbers
103
Foundations of Marketing -- BSAD 231
Module 19: Keeping Score: A Marketer's Use of Financial Data
Module 19, Keeping Score: A Marketer's Use of Financial Data, contains introductory notes and
exercises on three important financial statements: the income statement, the balance sheet, the cash
flow statement. It also introduces the concept and calculation of markup and break even.
Understanding these concepts and their calculation are important building blocks in your marketing
education.
19.1 The Income Statement
The income statement reveals sales, expenses and profits (or losses) for a period of time, usually one
year. The time period may be the past (results) or the future (expectations, projections). Income
statements are prepared by accountants according to agreed upon rules (accounting principles) so
the statements have some uniformity and consistency.
Fortunately, we do not need to worry about the agreed upon accounting rules for this course. But,
we do need to consider uniformity and consistency. Uniformity and consistency make it possible to
compare income statements from two or more companies or two or more years. Calculating
percentages is the typical method of comparison. But first, let's see what an income statement looks
like:
The Creative Fish Cake Manufacturing Company Ltd.
Income Statement
For the year ended December 31, 1997
Sales ................................................................................
Cost of goods sold ..........................................................
$500,000
100,000
Gross profit .....................................................................
Operating expenses.........................................................
400,000
350,000
Net profit ........................................................................
50,000
Or , expressed in percentage terms:
Sales ................................................................................
Cost of goods manufactured...........................................
100%
20
Gross profit .....................................................................
Operating expenses.........................................................
80
70
Net profit .........................................................................
10%
In 1997 The Creative Fish Cake Manufacturing Company Ltd. of Amherst, Nova Scotia, sold
$500,000 worth of its unique fish cakes (shapes, ingredients, packages) to specialty stores and other
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customers throughout the Maritimes. To generate $500,000 in sales, the company spent $100,000
on ingredients, packaging and transportation. Expenses associated directly with making something
are referred to as the "cost of goods sold". The other expenses of running the business, in this
instance $350,000, are referred to as "operating expenses" and include wages, salaries, employee
benefits, utilities, office expenses, travel and accommodations, advertising, special promotions,
insurance. In 1997 the company had $400,000 gross profit after it covered the cost of ingredients,
packaging and transportation and $50,000 net profit after it paid its operating expenses.
Are these results, either in dollars or percentages, good? It is difficult to tell with only one statement
from one company. However, suppose the company's results for 1995 and 1996 were:
1995
$
1996
%
$
%
Net sales ....................................... $300,000
Cost of goods sold .......................
75,000
100%
25
$400,000
100,000
100%
25
Gross profit ..................................
Operating expenses ......................
225,000
225,000
75
75
300,000
292,000
75
73
Net profit .....................................
$
0%
$ 8,000
2%
-
Now we're getting somewhere. Relative to 1995 and 1996, the 1997 results are good. Sales were
up by $100,000. The cost of goods sold dropped from 25% to 20% of sales. Operating expenses
dropped to 70% of sales and net profit rose from 2% in 1996 to 10% in 1997. All of these
comparisons suggest the firm performed well.
Another measure of performance would be to compare these results to information on the specialty
fish cake market in the Maritimes or in Canada. We won't attempt these comparisons here but if we
had the data we could calculate percentages and use them to draw conclusions about how The
Creative Fish Cake Manufacturing Company is doing relative to the markets in which it competes.
Here is another example of an income statement – this time for a retailer instead of a manufacturer:
The Granola Health Food Store
Income Statement
For the year ended December 31, 1996
Net sales .........................................................................
Cost of goods sold ..........................................................
$350,000
250,000
Gross profit .....................................................................
Operating expenses ........................................................
100,000
85,000
Net profit on operations .................................................
15,000
100%
71
29
24
5%
Note that the health food store has only 29¢ (29%) of each dollar of sales remaining ("gross profit")
after it buys and pays for all of the products. This compares with 80¢ (80%) for the fish cake
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manufacturer. Different types of firms have different percentages because the types and size of their
expenses may differ markedly. You need to know the cost structure of a business as one important
element of planning.
When the business being analyzed is a service such as a health club or a mini golf operation,
“sales" is replaced by "revenue". As well, since nothing is being manufactured or purchased for
resale, there are no "cost of goods sold". All expenses are treated as "operating expenses."
Vertical and Horizontal Analyses of Results
The sales or revenue figure on the income statement is the base for calculating many operating
ratios. It is common practice to convert the dollar amounts on income statements into percentages
letting sales equal 100%. This is called the vertical analysis of an income statement.
Vertical analysis may be performed on the income statement for a single period or for several
different periods. When performed on a single income statement, vertical analysis permits
comparing company performance to industry averages and sometimes to specific competitors to
help spot differences that may indicate relative strengths and weaknesses. When performed on
several different income statements (usually consecutive years), vertical analysis permits identifying
trends in performance and helps diagnose possible problems.
When you perform a vertical analysis, remember to state any conclusions with a certain amount of
caution, humility and tentativeness. Seldom can you be certain about the meaning of the results you
are studying because seldom do you have all of the background information and thinking. For
instance, if the income statements you are analyzing and comparing reveal the following
"advertising as a percentage of sales" results for a given year:
* the company under study
* its major competitor
* the industry average
6.4%
2.3%
2.9%
resist the temptation to conclude, with confidence, that the advertising budget of the company under
study is far too high. Instead, conclude with a certain amount of tentativeness the advertising
budget “seems to be rather high”. You don't know for sure that it is high because many other
factors could explain the apparent differences; for instance, different definitions of what constitutes
advertising, different competitive situations, or different marketing strategies.
Vertical analysis is a useful diagnostic tool—particularly when data are available for comparison
from competitors, from the industry, or from the company itself from prior years. Remember
though, vertical analysis typically is only a "first cut" at understanding results. Use vertical analysis
often in your size-ups and analyses. But use it with due caution.
Another helpful diagnostic tool used by marketing managers is the horizontal analysis of financial
statements (or other results presented over time). Horizontal analysis requires financial statements
for at least two—and normally three or more—periods (usually consecutive years) and requires the
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identification of one period (usually the earliest year) as the base year or the starting point. Once the
starting point has been established, the percentage increase or decrease in each item of interest for
each consecutive period is calculated and the trend in percentages is studied for possible clues or
inferences about performance. Like vertical analysis, horizontal analysis typically is only a "first
cut" at understanding results. Note: horizontal analysis is appropriate whenever you have a time
series of results, whether they come from a financial statement or a marketing research report.
Here is an example of a partial horizontal analysis of net sales for a small business ...
Sales ($,000)
Change in Sales ($,000)
Percentage Change in Sales
1994
1995
1996
1997
$425
-
$445
+20
+ 5%
$480
+35
+ 8%
$595
+115
+24%
Notice that when calculating the percentage change in an income statement account, the absolute
dollar change is expressed as a percentage of the earlier year. For instance, from 1996 to 1997 the
absolute dollar gain of $115,000 is expressed as a percentage of the 1996 sales of $480,000 not the
1997 sales of $595,000. In the above example, the partial horizontal analysis reveals that sales are
increasing at an increasing rate (from 5% to 8% to 24%). Once the results are available from other
financial statement accounts, comparisons can be made and tentative conclusions reached about
performance.
Vertical and horizontal analyses are specific examples of the power of percentages as a tool for
comparing results over time. Direct comparisons of results using percentages (base 100) allows you
to draw many direct, appropriate conclusions with confidence.
The Relationship Between Cost of Goods Sold and Gross Profit
The relationship between the cost of goods sold and gross profit is of particular interest to
marketers, both in aggregate for the whole organization and disaggregated by product, by sales area,
by time period and/or by department. Marketers need to know where, and when, their profit is
being generated.
First, note that the sum of cost of goods sold expressed as a percent of sales and gross profit
expressed as a percent of sales equals 100%. On the income statement, an organization's net sales
is split between cost of goods sold (the more-or-less direct costs of making a product for
manufacturers or the direct costs of purchasing products for retailers and wholesalers) and the
amount left over (the gross profit) after allowing for the direct costs of making or buying goods.
Second, note that the income statement presents an aggregation of all transactions for a given period
of time, usually one year.
When you conduct a vertical analysis of two or more income statements and you observe a change - up or down -- in the percentage relationship between cost of goods sold and gross profit, one or
more of three underlying causes may have been at work:
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• Costs of producing or purchasing goods have gone up (or down) and the changes were not
passed on thus increasing (or decreasing) the cost of goods sold as a percentage of sales. Frequently
suppliers' invoices reflect changes in the per unit cost of items or ingredients. Sharp cost
accountants spot such changes and notify marketing immediately.
• The competitive marketplace forced some prices to be reduced (or allowed some to be raised)
thus decreasing (or increasing) the overall gross profit percentage. The extent and magnitude of
markdowns, inventory clearance sales and across the board decreases, or increases in selling prices
will affect the overall gross profit percentage. Smart marketers have a sales information system that
calculates gross profit percentages by item.
• The mix of products sold has shifted toward products with higher (or lower) gross profit
percentages thus altering the overall average gross profit up (or down). Again, smart marketers
have a sales information system that calculates both sales and gross profit by item.
In general, the smart marketer needs to monitor, and understand, the behaviour of costs and selling
prices to be able to interpret the changing percentage relationship between cost of goods sold and
gross profit.
19.2 Break Even Analysis and Markup
Nobody goes into business with the hope of just breaking even on operations. Everyone wants
some kind of return ("profit") on their investment of time and money and their willingness to
assume risk. However, determining the break even point is a useful business planning tool.
Calculating break even is also referred to as cost-volume-profit analysis, contribution analysis or
sensitivity analysis. Break even analysis is sometimes referred to as cost-volume-profit analysis
because these are three key elements, or variables, in the calculation. It is sometimes called
contribution analysis because break even requires determining how many contributions (selling
price per unit minus variable costs per unit) are necessary to cover, or pay for, the product's or
project's expected annualized operating costs (fixed costs). It is sometimes referred to as sensitivity
analysis because often the marketing manager changes one of the input variables to see what
difference the change makes on break even volume; that is, how sensitive break even is to changes
in the numbers used to calculate it.
The break even point occurs when sales (revenue) equals expenses or costs. Costs are either
variable or fixed. Variable costs tend to vary directly with the number of units made or sold.
Examples include ingredients and packaging, sometimes labour (piece rate work) and sometimes
sales commissions. Fixed costs tend to be relatively constant no matter how many units are made
or sold. Examples include rent, management salaries and advertising. Unit contribution is the
amount of money remaining after the variable costs of producing or purchasing one unit is
subtracted from the selling price of one unit. Total contribution is determined by multiplying unit
contribution times the number of units sold. For retailers and wholesalers (middlemen), unit
contribution is also referred to as markup or gross margin or gross profit.
Here is an example. A store sells tee shirts. The average selling price is $15 and the average
variable cost (cost price) is $9. Thus, every time the store sells a shirt it has $6 remaining after it
pays the manufacturer. This $6 is referred to as the "unit contribution". The word contribution
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is appropriate since the $6 "contributes" to cover fixed costs and, once the fixed costs are
covered, the $6 "contributes" to profit. Suppose the fixed costs of operating the store are
$100,000 per year. The question then becomes how many "contributions" of $6 are necessary to
cover all fixed costs. Here's the calculation:
Total Fixed Costs
Break even Point
(in units)
=
Selling price/
unit
or,
–
Variable costs/
unit
Total Fixed Costs
B.E.P.
=
Unit Contribution
$100,000
or,
B.E.P.
=
$15 – $9
or,
$100,000
B.E.P.
=
$6
or,
B.E.P.
= 16,667 units (tee shirts)
Thus, the store has to sell 16,667 tee shirts to reach break even. A sentence similar to, "The store
will reach break even when it sells 16,667 tee shirts" is common. Changing any of the fixed costs,
the average selling price per tee shirt or the average variable cost per tee shirt (sensitivity analysis)
would change the break even point. If the owner/manager desired a profit of, say, $25,000, this
would be added to the store's anticipated fixed costs of $100,000 to determine the number of tee
shirts (volume) necessary not only to break even but to make a profit of $25,000. In this instance
the volume would rise to 20,833 tee shirts. Frequently owners/managers contemplate making such
changes. Calculating break even is one tool available to help them make decisions on such changes.
Break even is a helpful start at determining the feasibility of launching a new venture or adding a
new product but it is not a particularly sophisticated tool. It assumes "a year is a year is a year". In
other words it assumes that fixed costs, selling prices per unit and variable costs per unit will be the
same each year until the break even point is reached. This is rarely the case. A somewhat more
powerful tool is payout analysis. Payout analysis allows year 2 to differ from year 1 and year 3 to
differ from year 2. In effect, payout analysis involves creating pro forma income statements for two
or more years using expected operating expenses (fixed costs), expected selling prices and revenues
and expected cost of goods sold (variable costs) on a year by year basis. The point at which
cumulative losses are eliminated -- typically expressed in numbers of months since the launch -- is
the point of payout. A sentence similar to, "The new product will reach payout in 18 months" is
common.
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For a retailer or a wholesaler, note that break even analysis parallels the income statement.
Continuing the example above...
Sales ($15  16,667 shirts)
Cost of Goods Sold ($9  16,667 shirts)
=
=
$250,000
150,000
Gross profit
Operating expenses (costs)
=
=
$100,000
100,000
Net profit on operations
=
$
0
("Break even")
So, at sales of $250,000, the store neither makes a profit nor incurs a loss. It just breaks even.
Another word for "unit contribution" is "markup". In the tee shirt example ...
The Selling Price (S.P.) is …………………. $15.00
The Cost Price (C.P.) is ……………………
9.00
The Markup (M) is ………………………. $ 6.00
A product’s markup may be expressed in dollar terms (“dollar markup”) or in percentage terms
(“percentage markup”). As well, a product’s markup may be expressed as a percentage of the
selling price ("markup on selling price") or as a percentage of the cost price ("markup on cost”). In
this instance ...
Markup
Selling Price
=
Markup
M
S.P.
M
=
Cost Price
=
$6
$15
= 40%
$6
=
C.P.
= 67%
$9
Normally the markups on individual products are expressed as a percentage of their selling prices.
The logic of this is to be consistent with vertical analysis of the income statement where sales =
100%. For example:
One Full Year
One Tee Shirt
Sales ............................................. $250,000
Cost of goods sold ....................... 150,000
100%
60
S.P. $15.00
C.P.
9.00
100%
60
Gross profit .................................... $100,000
40%
M
40%
$ 6.00
Whenever you see a percentage markup, be sure to determine whether it is based on the selling price
or the cost price. Know your base ... or face disgrace!
A common situation in marketing is calculating the selling price of a product when its cost price and
the desired markup on selling price (for the word "on", read: “markup expressed as a percentage of
the”) are known. Here is an example: the StFX Bookstore buys a weekly planner-calendar for $6.00
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and prices it to achieve a markup (expressed as a percentage of the ultimate selling price) of 40%.
What would a student have to pay for the weekly planner-calendar? The answer is $10.00. [Note:
if you thought it was $8.40 you incorrectly expressed the 40% markup as a percentage of the cost
price. Remember: markups normally are expressed as a percentage of the selling price.]
Here is one way the correct calculation may be made:
• Remember S.P. = C.P. + M (Selling Price = Cost Price + Markup)
• So if the desired markup (M) is 40% of the selling price (S.P.) – as it is – then the cost price
(C.P.) must be the remaining 60% of the selling price (S.P.)
or S.P. = C.P. + M
or 100% = 60% + 40%
• But, the cost price (C.P.) is $6.00
• And, the cost price (C.P.) is also 60% of the selling price (S.P.)
• Thus, 60% of S.P. = $6.00
or, (converting to a decimal) .6 S.P. = $6.00
then, dividing each side by .6 you end up with
S.P. = $6.00 ÷ .6
or S.P. = $10.00
This little calculation works every time you have to determine the selling price when you know only
the cost price and the desired markup. With practice it becomes quite routine.
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19.3 The Balance Sheet
The balance sheet reveals what a business owns (assets), what it owes (liabilities) and the difference
between the two (assets – liabilities = net worth or shareholders' equity) at a point in time.
The assets of a business are classified as current assets and capital assets. Current assets are "liquid"
meaning actual cash or assets expected to be converted into cash within one year. The two most
common non-cash current assets are accounts receivable (money owed to the business by its
customers) and inventory (finished product, partly finished product and raw materials or
components). Capital assets–sometimes called fixed assets or long-term assets–are not expected to
be converted into cash within one year. Common capital assets are land, buildings, vehicles, plant
equipment, office equipment, furniture and fixtures. Every business needs money (capital). A
business has two ways of obtaining capital. It can borrow money (debt) or it can obtain investment
money (equity). Debt capital usually has to be repaid with interest. Borrowing money incurs a
liability. Equity capital usually does not have to be repaid but investors expect to achieve a return
on their money. In incorporated businesses this return is achieved via (1) a distribution of some of
the business' profits to its investors (dividends) or, (2) increases in the value of the investment
owned so they may be sold for more than the investor paid for them. A typical balance sheet is
reproduced overleaf.
As with the income statement it is difficult to say a lot about this company from one balance sheet.
We'd need comparative data from prior years or from industry averages to put this information in
perspective. We can, however, make some observations. These are the types of observations a
smart marketer would make when first analyzing a firm's balance sheet.
1. The firm has about $1,000,000 in assets. Thus, in the world of manufacturing, it is a rather
small operation. A better comparison with respect to assets would be other fish cake manufacturing
companies.
2. Most of its assets are fixed and reasonably new. They are not fully depreciated. They likely still
have value. By acquiring capital (fixed) assets, this firm has invested in its future.
3. The business is financed by debt ($735,000) more so than equity ($340,000). Thus, its
debt:equity ratio is 68:32 or 68% of capital is debt and 32% is equity. This may also be expressed
as a debt to equity ratio of 2.16 to 1 ($735,000 ÷ $340,000). This means the firm needs to generate
a decent profit because the loan and mortgage -- including interest -- will have to be paid off bit by
bit each year. Marketers need to have a sense of the magnitude and timing of such corporate
financial obligations and to appreciate the pressures other company departments may face.
112
The Creative Fish Cake Manufacturing Company Ltd.
Balance Sheet
As at December 31, 1997
ASSETS
Current Assets:
Cash ............................................................................
Accounts receivable ...................................................
Inventory ....................................................................
$ 25,000
100,000
50,000
Total Current Assets ..................................................
Capital Assets:
Land............................................................................
Building...................................................................... 750,000
less accumulated depreciation ................................. (250,000)
Equipment .................................................................. 500,000
less accumulated depreciation ................................. (200,000)
$ 175,000
100,000
500,000
300,000
Total Capital Assets ...................................................
900,000
Total Assets......................................................................
$1,075,000
LIABILITIES AND OWNER'S EQUITY
Current Liabilities:
Accounts payable .......................................................
Wages payable ...........................................................
Taxes payable.............................................................
$100,000
25,000
10,000
Total current liabilities ...............................................
Long-term Liabilities:
Bank loan ...................................................................
Mortgage on building ................................................
$ 135,000
$100,000
500,000
Total long-term liabilities ..........................................
600,000
Total Liabilities ................................................................
$ 735,000
Owners' Equity:
Common stock ...........................................................
Retained earnings.......................................................
$200,000
140,000
Total Owners' Equity .................................................
340,000
Total Liabilities and Owners' Equity...............................
$1,075,000
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19.4 The Cash Flow Statement
The Cash Flow Statement or Cash Flow Forecast presents the amount and timing—usually
monthly— of cash receipts (money obtained from all sources) and cash disbursements (money paid
out). The difference between the two (cash receipts minus cash disbursements) is the cash a surplus
or cash deficit in a given month. If the business has a cash flow deficit in any month, additional
capital must be obtained. Normally this additional money is found by establishing a "line of credit"
with a financial institution. The cash flow forecast helps a business plan for seasonal, or monthly
fluctuations in receipts and disbursements.
The cash flow statement for each month is structured: estimated cash receipts from all sources
minus all estimated cash disbursements equals estimated net cash (monthly surplus or deficit).
Expected monthly cash surpluses or deficits are cumulative (added) to determine in which month or
months the cumulative deficit is the greatest and how large the deficit is. An accurate cash forecast
tells the manager when a line of credit will be needed and how large the request will be.
Normally disbursements are reasonably easy to estimate (by obtaining quotations from suppliers)
and anticipate (when money is to be paid). For instance, rent may have to be paid a month in
advance on the first day of each month. Or wages may have to be paid every second Friday. It is
fairly straight forward to take such estimates and anticipations and merely plug them into the
forecast worksheet.
Cash receipts present a much greater challenge. Both their magnitude (sales, revenue) and their
timing (how much each month) are difficult to determine. If a business has done its marketing
homework (buyer and market analyses and marketing research studies) it may have fairly good
estimates but there will always be some doubt. Sometimes industry statistics are published which
help new businesses estimate monthly cash receipts more accurately. Sometimes new businesses
have to rely heavily on reasonable reasoning and consensus building to develop these estimates.
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Foundations of Marketing -- BSAD 231
Module 8: Communicating Your Ideas Effectively
Module 8, Communicating Your Ideas Effectively, contains four short notes:
1.
2.
3.
4.
Some Tips on Doing a Marketing Case Analysis
A Memo on Crafting an Effective Memo
Crafting an Effective Business Report
Some Thoughts on Making a Presentation
Because each note concerns the process of constructing and presenting an argument (an
analysis), there is some overlap in content. The four notes provide an extensive set of "how to"
guidelines to accompany course assignments.
This module is all about process learning. It should be clear you cannot memorize your way to
greatness in marketing. You have to be an effective communicator. You have to know how to
be analytical, be persuasive and present your ideas in a clear, concise, compelling, correct
manner. Reading -- and using -- these notes will help.
1. Some Tips on Doing a Marketing Case Analysis
Usually a case is an accurate description of a real life situation a marketing manager faced at a
particular point in time. Based on this definition, note that "doing a case" means that you are
either actually making a marketing management decision or, recommending that certain
decisions be made. This manager/decision-maker/consultant perspective is very important. It is
a necessary ingredient for getting the most out of "doing a case" by yourself, in a study group, or in
class.
This note provides a variety of suggestions and guidelines to help you become a more effective and
efficient analyst. The note covers five aspects of case analysis:
1.
2.
3.
4.
5.
Understanding the process of analysis
Doing your own marketing case analysis
Dealing with the frustrations of case analysis
Working in groups
Getting the most out of a class discussion
1. Understanding the Process of Analysis
Cases which describe marketing situations are written as learning tools. The primary objective of
"doing cases" is the development of your analytical skills. Most cases also provide exposure to
one or more new concepts (terms) and some cases provide exposure to specific new analytical
tools (e.g., break-even analysis, or payout analysis). Since most cases also present data from real
115
situations, you end up learning something new about a specific company, industry, country, or city
as well. To repeat though, the primary learning objective of cases is to develop your skills of
analysis.
Briefly, the skills of analysis are:
1. learning to identify and define the primary issue,
2. learning to identify and define the important sub-issues, questions, topics or variables that will
have an impact on the resolution of the primary issue,
3. learning to identify, and marshall evidence to help resolve the issue,
4. learning to draw appropriate conclusions from the evidence presented,
5. learning to make appropriate recommendations from the evidence presented,
6. learning to identify the implications of accepting and implementing your action plan.
Primary issue - sub-issues - evidence - conclusions - recommendations - implications; these are the
essentials of the analytical, or problem-solving process. Virtually every marketing case we employ
presents the opportunity for you to practice using this basic model of analysis.
To illustrate the process, you might identify the primary issue in a case to be: should the
company launch the new product and, if so, using what marketing strategy? Key sub-issues in this
instance then would include: does the company have the resources to add the product? who would
buy it? could the product achieve break-even volume easily? are there any competitors? and so
on. Two key pieces of factual evidence (as contrasted with opinions, reasoning or guesses) could
be that there are 11.0 million people in Ontario and in 1999 per capita spending on the type of
product the company hopes to launch was 26 cents. You could then combine these two pieces of
evidence to generate (or calculate) important new evidence: the relevant Ontario market at 1999
prices was $2.86 million dollars (11.0 million people  26 cents per person). If you had also
calculated a reasonable break-even volume to be, say, $600,000 at 1999 prices and costs you could
conclude that you need a rather large 21 percent share of market ($600,000 ÷ $2,600,000) to break
even. You might then recommend against a launch as being too risky which in turn would have
implications for coming up with other ways for the company to grow.
And that, in highly simplified form, is analysis. Identifying the main issue and sub-issues. Finding
the right evidence. Creating new evidence. Drawing conclusions that flow from the evidence.
Making recommendations that are consistent with your conclusions. Considering what would
happen if your recommendations were adopted (or not adopted).
2. Doing Your Own Marketing Case Analysis
This section of the note provides guidance on what to do and how to do it when conducting your
own case analysis.
• Set Aside A Block of Time
Set a time limit of from 2 to 3 hours. Make up your mind that you are going to get the case done in
that 2 to 3 hour block of time.
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• Do A Quick Overview
Start by getting a feel for the company, the decision maker's position and the problem to be solved
(the decision to be made or the issue to be examined). Read the first and last paragraph of the case
first. Then, take a good look at the exhibits and the major headings in the case. You want to find
out what the particular case is about and get an overview of the situation. Like a journalist you
should seek to answer the questions who (is the decision-maker, are the key players); when (does
the situation occur, and have to be resolved by); where (does the situation occur); what (is the
product/service and the primary issue); and why (has the issue, or need for help, arisen). The
answer to the question how will spring from your analysis.
• Do A Thorough Reading
Do a thorough reading with a pen in hand and at least one sheet of paper nearby. As you read
make notes on the case or on the paper. (Having an idea of the decision to be made will allow you
to sift the information as you go along.) Use circles, boxes, arrows, stars, (anything!) to highlight
the important information. Make summary or evaluative notes in the margins. Do at least a few
simple calculations as you go along.
• Get Involved.... It's Your Company and Your Issue
Make no mistake about it: you are an active participant in resolving the issue. Once you have read
the case there is no "case" anymore. Just reality. Your company. Your problem. Your --- on the
line. Not they, but we. Not her (or him), but I. Get involved in the situation. Try to empathize.
Remember though that often you will have one big advantage—the opportunity to adopt the role of
a consultant hired by the company and thus, the opportunity to disagree with management's
impressions or plans. The important thing is to get involved in the situation. Take the whole thing
personally. Care.
• The Evidence (Facts and Opinions) Presented in the Case is Your Bread and Butter ...
Digest It
To produce a good analysis you absolutely must understand and distinguish among the facts and
opinions presented in the case. Here are three not-equally-recommended ways in which you can
approach this task.
• One approach is to assume that, having read the case, you understand all the facts and opinions,
their relationship to one another and their relationship to the primary issue. This is probably a
rather naive assumption which would generate half-right results and considerable "fuzziness"
should someone ask you to communicate your understanding of the situation.
• A second approach is to take a checklist of typical topics in marketing cases such as in Part 6 of
this note and fill in the important facts and opinions as given under the appropriate headings.
This is marginally better but rather mechanical. It fails to consider the issue at hand and the
relevance of the specific fact or opinion to the resolution of that issue.
• A third approach to understanding the facts and opinions of the case is to ask yourself what the
most important sub-issues (questions or topics) are that must be considered and then relate the
relevant facts and opinions from the case to each of these sub-issues. This is not easy and may
117
require you to resort to the checklist mentioned above—at least until you feel comfortable that
you know what is relevant and important. The advantage of this approach is that the
identification and marshalling of evidence starts by considering those sub-issues which will
directly affect the primary issue.
• If You Don't Know Where You're Going … How Will You Know When You're There?
The primary output of a case analysis is one or more specific action steps recommended to resolve
the primary issue. Thus, early in the analysis it is wise to write down and begin to think through
some of the different courses of action or alternatives that may be employed. Your frame of mind
should be: What is being done, what can (or could) be done, and what are the implications of
doing it? This thinking should lead you to begin to consider such topics as current strategy,
current resources, current goals and objectives, environmental constraints, risk, time (timing) and
the financial and human resources needed to implement the actions being considered.
A Few Words of Caution: Be careful not to get yourself totally locked into the following type of
analysis - "here are the three (or two or four) alternatives and the pros and cons of each." This is
naive and will almost guarantee that, in complex marketing situations which contain several
interdependent variables, you will produce an unrealistically simple analysis. As noted above, it is
almost always preferable to build your analysis around the key sub-issues than around possible
alternatives. Let the better alternatives fall out of your consideration of the issues, not vice-versa.
An exception to this suggestion would be when the alternatives are at a very high level of
aggregation such as a go:no go decision or an add product A or product B decision.
• Push Your Pencil Meaningfully
Usually numbers are included throughout marketing cases either standing alone or in tables or
exhibits. Seek out and be sure you understand the meaning and importance of the numbers
presented. Of all the facts (or alleged facts) presented in a case, numbers often are the closest to
incontestable. Thus, when used properly, numbers can form a very convincing base for accepting
one conclusion or one recommendation over another. Numbers in a case will probably turn out to
be your best friends. So don't panic or say nasty things if a case is filled with numbers. Marketing
reality is filled with numbers too.
One approach to using the numbers in a case is to seek out in an organized manner all of the
important absolute numbers (e.g., dollar sales, total market size, cost/unit, number of salesmen and
so on). Then, ask yourself what important numbers are missing. Can they be inferred from other
data? Are they available outside the case? Would it help to use sensitivity analysis: that is, to a
high, medium and low value for any of them and see what the implications would be on sales or
profits on some other dependent variable?
After working through some of the absolute numbers consider relative numbers; that is, one
number as it relates to another number or series of numbers. Now you are into trend data (sales
trends, cost trends, consumer awareness trends, etc.) and almost always you are also into
percentages. Percentages are wonderful for comparing numbers. Use lots of percentages,
provided of course they have relevance to the issue. Percentages allow you to draw conclusions
quite easily.
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When properly combined, numbers and percentages can tell a lot in a short space and they make
great tables. Managers like to learn a lot in a short space. So, for written memoranda and reports,
use tables to summarize key numerical data.
• So What? So What? So What?
A fact, opinion, number, or statement which tells you nothing about the primary issue is of little
use. The converse of this is of course equally true and the best way to find out about the relevance
of a point is to ask, "So what? What does this fact or opinion or number imply? What may I
tentatively conclude from it?" How might this inform strategy? How might this help in crafting
strategy?" The purpose of knowing the data and of digging into the numbers is to draw
conclusions about the particular topic. And the purpose of drawing conclusions is to get a bunch
of them which are consistent and thus lead to a supported recommendation. And, a supported
recommendation is precisely what you're after.
• Jump Outside the Case ... The Real World Exists
If you want an unrealistically simple analysis, base it solely on the data in the file provided (the
case). If you want greater breadth, depth and perspective, jump outside the case. The company
and its situation are real. Real people. Real products. Real customers. A real country. You have
a wealth of information and ideas to help the company. Often you can add factual data and offer
your opinions or hypotheses or hunches. Just make sure you support your reasoning as best you
can. Once you have expanded the analysis by bringing in your own real-world observations, again
ask yourself, "So what?" in order to make clear the relevance or implications of the new data.
• Dig, and Ye Shall Have a Whole
Secondary data sources also may provide a wealth of relevant information. If the case does not
provide certain needed data and you do not have it, don't stop digging, the library may well have
the answer. As always, make sure you indicate the relevance of the new data to the issue at hand.
• A Pot Pourri of Observations
Often when you have thoroughly analyzed a case there are some topics or issues which have come
to mind and bear consideration but which don't quite fit in or are not as complete as you would
like. Don't ignore these topics. Show the listener or reader that you've thought about them and
how they are or may be relevant. You are just being more creative and more complete.
Recommendations are Specific Action Steps
The goal of a case is to generate a series of recommendations that are supported by the evidence
and the conclusions derived from the evidence and which relate to the resolution of the main issue.
So, when making recommendations be sure they not only have been adequately considered in the
analysis but also that they are consistent with that analysis. Also, because recommendations are
specific action steps, it is wise to use action verbs (e.g., launch, drop, initiate) to express your
recommendations.
119
3. Dealing With The Frustrations of Case Analysis
When you develop your own case analyses you will probably experience the following three
frustrations:
Shortage of time: If you can honestly say to yourself that you "worked" on the case for 2-3 hours,
take heart in the law of diminishing returns. The case was assigned for study group and class
discussion, as well. See what you can pick up along the way. A good idea is to try to pinpoint
where you had problems or where there seem to be gaps in your analysis.
Lack of good information: Sorry, there is not much that can be done. Managers often have to
make decisions with much less information than you have in a case and they also have to put
considerable effort into getting the information which has already been gathered for you. Lack of
information can be handled by making reasonable assumptions, doing sensitivity analysis, or doing
some research.
Uncertainty about results: Again, this frustration is true to life. If there was a clear-cut "answer"
to a problem which would provide obvious results, there would be no need for management
decision-making. There is always risk, uncertainty, and ambiguity surrounding decisions.
Refining your decision-making skills will allow you to reduce the level of these three elements, but
not eliminate them entirely.
4. Working in Groups
Group study meetings should be no longer than 45 minutes per case. The objectives of a group
meeting should be to try out some of your ideas, to get help with some aspects of the analysis, and
to practice participating in decision making. Resist the temptation to focus on what management
actually decided or on what happened in last year's class.
5. Getting the Most out of Class Discussions
You should arrive at class with recommendations and a summary of your rationale for your
recommendations. The rationale should be multi-dimensional and touch on several qualitative and
quantitative factors related to the decision situation. No matter how uncertain you feel about your
preparation it is important that you go through the process of making recommendations and
rallying support for them.
There will be varying views presented in class—the more, the merrier. Listen to what others are
saying. Is there anything you can learn from them? Can you build on previous comments to build
the analysis, draw conclusions, etc.
If you feel nervous or shy about speaking, get started by making a minor point or by asking a
question. Try planning how you will participate in class.
120
Focus on the ideas, not the person presenting them, particularly when criticizing—and please,
criticize constructively. Practice speaking to each other, rather than to (or through) the
instructor.
As an overall strategy, look for the frameworks used in the analysis. Try to pull out the critical
factors. Be selective with note taking. Remind yourself that what you are learning is a process—
a decision-making process. This process goes beyond learning concepts and theory. It requires
learning through practice and experience (as in sports) and it takes some effort on your part. Take
the cases one at a time and build on your decision-making skills.
Learning to analyze a marketing case, discuss the analysis in small groups, present and
defend your analysis in class and sometimes write up the analysis as a memo or report build
important life skills. But, like the acquisition of any new skills, you cannot learn them by
watching others. You have to make the commitment to invest the time necessary to build
your analytical skills day by day.
2. A Memo on Crafting An Effective Memo
St. Francis Xavier University -- Business Administration Department
MEMORANDUM
September, 2001
To:
Foundations of Marketing Participants
From:
Your instructors
Subject:
Crafting Memos: Getting Results
This note presents guidelines on the format, purpose and structure of the memos you create for
this course. The guidelines are fairly general and should be suitable for the memos you prepare
for other courses or in business. By employing these guidelines you should be able to craft
memos that are compelling … and get results.
The Format of A Memo
The format employed above for the “greeting” portion of a memo is fairly standard:
•
•
•
•
•
•
The company name (You may create a name for your “firm”)
The word MEMORANDUM
The date
To:
From:
Subject: A clear, accurate descriptive title
121
If the memo is longer than, say, one page, consider using descriptive headings, at the left margin,
not centered, to help your reader understand how you organized it.
The Purpose of A Memo
The memo is a somewhat informal communication tool commonly employed in business. In
many firms the memo format is used only for communication within the organization. In some
firms the memo is used to communicate externally as well. A memo may be as short as a
sentence or two or as long as several pages, though typically it is not longer than a page or
perhaps two. If a memo exceeds a few pages it is often converted to report format. [Note: the
content of the two documents would be the same. Only the format would change…a title page
would replace the “greeting” portion of the memo.] Your memos in the BSAD 231 course will
be somewhat longer than average and will be employed to communicate externally – typically
with clients of your management consulting firm.
Memos serve many purposes:
• To inform or remind – such memos essentially provide information (e.g. the date, time and
place of a meeting).
• To describe or report – such memos tend to summarize, classify and categorize…what I did,
saw, heard, read, or discovered as the result of some action. If the actions included multiple
observations, the memo may compare and contrast results in addition to merely describing
them.
• To analyze, evaluate, assess, render an opinion, present a rationale, construct an
argument – such memos attempt to persuade. They present information (as in the descriptive
memo) but then they use that information as evidence to draw conclusions about the issues
under discussion.
• To recommend – often such memos are “action heavy” and “analysis light” in that
concentrate on what should be done more so than why.
they
The memos you create for BSAD 231 will tend to require a combination of description,
comparison and analysis. Be sure you understand the overall purpose and specific objectives of
each memo and communicate that understanding to your reader.
The Structure of A Memo
Each memo you create for this course will contain an introduction and a body. The body may
contain tables or figures to summarize detailed results or clarify ideas. If the memo is relatively
long and complex, it also may contain a summary to enhance clarity and exhibits to present
detailed information. Next, the five elements of a memo are described briefly.
122
1. The Introduction
Each memo should begin with an introductory paragraph or two to orient the reader. It is
unnecessary to use a heading such as “Introduction” as this is the first bit of text your reader will
encounter. Depending upon the length, purpose and scope of the memo, the introduction may
indicate all – but more likely only some – of the following:
• The reason the memo is being written…its overall purpose…or, its specific objectives.
• The value or importance to the reader (or others) of the issues discussed.
• The context … who, when, where, what…of the issue/memo.
• The scope of the memo…what was done (or not done) to generate information.
• The agenda, or sentence-like table of contents, for the memo.
• The key findings (results), conclusions or recommendations (action steps).
• The details of implementation (who has to do what, with whom, by when).
The introduction contains no analysis or argumentation. If the memo contains analysis, the
analysis would be presented in the body of the memo.
2. The Body
The body contains an organized description and analysis of each topic or issue. There is no
single best way to organize the body of a memo. Sometimes chronologically (first activity/event
to last) or reverse chronologically (last event/activity to first) is appropriate…sometimes from
most important to least important…and sometimes by activity undertaken. Each situation is
unique. One of the creative communication challenges you face in constructing an effective
memo is determining, and then communicating clearly, the arrangement of topics in the body.
Here are a few suggestions:
• Remember, you are not writing an essay or a term paper. You are conveying information to
assist in decision making. Everything you include should focus on addressing the request made
of you (i.e. helping to resolve a business challenge):
∙ Evidence – what facts, calculations, opinions and reasoning do you need or want to include?
∙ Conclusions – what tentative or definite conclusions are supported, or at least hinted at, by the
evidence and how do these conclusions link to the decisions at hand?
∙ Recommendations – what tentative recommendations are you prepared to make based on your
analysis (evidence and conclusions)?
∙ Implications – if your recommendations were adopted, what would be the implications of
implementing them (money, time, talent, results)?
• If you gathered information, describe what you did and, if necessary, how you did it [your
research (data collection) approach, research design or methodology].
123
• Organize and summarize your findings. To save space and enhance clarity, this is a great
place to employ point form. For example, “First, I spoke to the plant manager who indicated:
∙ Point 1 (opinion evidence 1)
∙ Point 2 (opinion evidence 2)
∙ etc.”
• If the purpose of the memo is to persuade, you also need to organize your conclusions…what
you think the findings tentatively (or definitely) mean, why you reason this way and how this
“analysis” is linked to the issue at hand. Again, this is a great place to employ point form. For
example, “In light of the plant manager’s observations, it would seem (thus, therefore, the
evidence suggests…):
∙ Conclusion 1 …
∙ Conclusion 2 …
∙ etc.”
• As the memo increases in length and complexity, use transition sentences to keep the reader
informed where the memo has been and where it is going. Such asides to the busy reader are a
courtesy and enhance understanding greatly.
3. Tables and Figures (optional)
Tables in the body of a memo typically summarize numerical results in a rows x columns
format. Here’s a ‘dummy table’ (a table without the numbers included):
Table 1
Knacky Marjorie’s Christmas Decorations
Pro Forma Income Statements
For the Calendar Years 2002-06
2002
2003
2004
2005
2006
Net sales
Cost of goods sold
Gross profit
Operating expenses
Net profit
Figures in the body tend to present information graphically (a pie or bar chart, a map, an
illustration, a graph, a picture). The important thing is that the information in the table or figure
be directly relevant to the business challenge at hand. If the information is interesting but not
essential it should be relegated to an appendix or not included at all.
Tables and figures in the body really help the busy reader grasp key details and are efficient
tools for communicating parts of your analysis.
124
4. The Summary (optional)
Long, complex memos may benefit from a short summary following the body. The summary
should present no new information or analysis. It should re-state the key findings, conclusions,
recommendations and/or implications often in point form. It also may suggest the need for
additional research or present ideas for future consideration or exploration.
5. The Exhibits (optional)
Long, complex memos also may benefit from the inclusion of exhibits. Here are a few
guidelines on preparing exhibits:
Referring to Exhibits in the Body …
• Exhibits should be referred to in the body of the memo in the order in which they appear at the
end of the memo.
• Use sentences to refer to exhibits (e.g. “Exhibit 1 presents library patronage information for
the past five years and reveals average annual growth of 5%.”).
• Do not use “(see Exhibit 1)”. This approach forces the reader to go the exhibit and figure it
out for herself. That’s not fair.
The Exhibits Themselves …
• The purpose of an exhibit – whether it is essentially numbers, words or graphics (pictures,
maps, charts, graphs) – is to support the memo. Your reader should be able to interpret each
exhibit fully without having to refer to the body for clarification. The cases used in BSAD
231 provide many examples of well-constructed exhibits.
• Exhibits should be numbered and contain an accurate descriptive title. A sub-title may be
created to clarify the context (timeframe, location, scope).
• Numerical exhibits should concentrate on the results of calculations, not on the process of
calculation and be presented as a matrix of well-labeled rows x columns.
• Footnotes should be employed to add clarity (how a particular result should be
interpreted…how a particular calculation was made…what the constraints are on the
interpretation of the information…what assumptions underlie the results…or, what sources the
information came from).
This note should help you craft well-structured and well-reasoned memos that get results. We
provide a self evaluation checklist for memos on the next page. It contains many of the
evaluative criteria employed by managers in assessing both communication and content.
For additional information on structuring a memo and creating exhibits see the course hand out
on Crafting an Effective Business Report. The two documents go hand-in-hand.
125
Foundations of Marketing – BSAD 231
Following Directions in Crafting A Memo
You are asked to use this evaluation form to assess the extent to which you follow directions in
preparing memos. Please complete the evaluation form and submit it to your instructor along
with the final copy of your memo. Scores between the maximum and the minimum are possible
for partially meeting some of the evaluative criteria. You will have to make some judgments
about your performance for these criteria.
Evaluative Criteria
1. I created a name for my consulting company
2. I included the word Memorandum at the top of page 1
3. I included the date
4. I sent the memo to the decision-maker not my instructor
5. I created an accurate, powerful, specific, descriptive title
-------- Scoring --------Max. Min.
My
[True] [False] Score
+2
–2
+2
–2
+2
–2
+3
–3
+5
–5
6. 'Page 1' did not appear on page 1
7. All pages other than the first were numbered
8. I created headings within the memo to aid clarity
9. I created specific, descriptive headings not mere labels
10. My memo stayed within the 900 word, 3-4 pages guide
+2
+2
+5
+5
+5
–2
–2
–5
–5
–5
11. I created an appropriate introductory paragraph to guide my reader
12. I consciously thought about creating 'topic sentences'
13. As appropriate, I included tables, figures and exhibits
14. I never used the decision-maker's name in the memo itself
15. I never inferred that the decision-maker is stupid
+5
+5
+5
+5
+5
–5
–5
–5
–5
–5
16. I avoided using the words 'assume' or 'assuming'
17. I avoided using the word 'very' as a modifier
18. I avoided using 'from/for/to you .. from/for/to me ..'
19. I consciously minimized use of the word 'that'
20. As appropriate, I correctly distinguished between 'then' and 'than'
+5
+3
+3
+3
+3
–5
–3
–3
–3
–3
21. I drew several relevant conclusions
22. The evidence supporting each conclusion was clearly presented
23. I used "if … then …" reasoning in my analysis
24. I made appropriate, tentative recommendations
25. All topics examined fit within the scope of the assignment
+5
+5
+5
+5
+5
–5
–5
–5
–5
–5
+100
–100
Total Score
Name _____________________________
____
126
3. Crafting An Effective Business Report
This note describes and explains several aspects of effective report writing. The note contains
three parts. Part one covers structural issues. Part two covers communication issues. Part three
covers report evaluative criteria. We believe passionately in every suggestion, guideline, and
rule in this note. We expect you to review and embrace them whenever you submit reports in
any business administration program course.
The Structure of A Report
The reports you create in the BBA Program are project-based, field-based or case-based.
Regardless of the base, each report you prepare will be analytical and at least somewhat actionoriented in nature. Your role will be either an assistant within an organization or, more typically,
a consultant to the organization and your task will be to present your analysis of the situation and
persuade the reader, usually your boss or your client, of the soundness of your recommendations
and reasoning. We think of reports as containing five parts: a title page, an introduction, a body,
a summary and exhibits.
1. The Title Page
The title page contains four elements: the title; the name and position of the recipient; the name
and position of the sender; and the date. An example is presented below. Notice that the title is
both descriptive and specific.
The Feasibility of Establishing
A Peat Moss Harvesting Operation
at
Sequinces Meadow, Guysborough County
Submitted to:
Mr. Fred Davis
The Atlantic Canada Opportunities Agency
Submitted by:
Neil Oxner –Spencer
Professor of Business Administration
St. Francis Xavier University
September, 2001
127
The page following the title page ...
•
•
•
•
re-states the title of the report, centered, at the top;
is not numbered;
contains a brief introduction to the report.
begins the body of the report (if the introduction leaves enough space to do so)
2. The Introduction
The introduction to your report has no separate heading. By definition it is the introduction since
it is the first bit of text your reader will encounter. The objective of the introduction is to orient
your reader and establish your agenda. It is process oriented (about the report) to a much
greater extent than it is content oriented (about the issue). The topics normally covered in the
introduction are:
• what the report is about...the nature of the issue and its context (recent history, current reality)
• why the report has been written...the importance of the issue...the purpose and value of the
report
• which topics or issues or factors or questions the report examines and, often, which ones it
doesn't...the scope, breadth, depth and coverage of the report and your agenda
• what you have discovered (findings, results), concluded and recommended--usually at a fairly
aggregate level and not at a highly detailed level and sometimes,
• selected details of implementation (who has to do what with whom by when).
3. The Body of the Report
The body of the report follows the introduction. It contains an organized examination (analysis)
of each relevant topic or sub-issue or factor or question. There is no "best way" to organize a
report. Each situation is unique. One of the creative challenges you face is determining,
justifying to yourself, and then communicating clearly to your reader, the arrangement of topics
in the body. The body of a report is the same as the body of a memo except reports are longer.
Introduce each topic with a descriptive heading. Avoid mere labels (e.g., The Market) as
headings. Attempt to create headings which are more descriptive (e.g., The Market for Canadian
Horticultural Peat Moss: Domestic and Export) or which state a conclusion (e.g., Demand
Strong for Canadian Peat: Domestic and Export). Descriptive headings and sentence
conclusion headings help to orient your reader and help you complete your agenda.
Be sure the content within each section of the body mirrors the heading. Don't lead the reader to
expect an analysis of the market when, in fact, most of the discussion is about the competition.
Determine the order in which you plan to present your points or argument or analysis. Be
conscious of the nature and purpose of each sentence:
• Is the sentence essentially evidence to support a conclusion?
• Is it essentially an explanation of your reasoning required to clarify some evidence?
• Is it essentially a conclusion?
128
•
•
•
•
Is it essentially an example to illustrate a point?
Is it essentially a transition sentence .. a helpful aside to the reader?
Is it essentially a tentative call for action or a recommendation?
Is it essentially the details of implementation or the implications of implementing your
recommendations?
You need to know the purpose and logical ordering of all sentences. If you don't your reader is
likely to wonder: What's the point? Where is this leading? If I'm confused, isn’t it possible the
writer is confused too?
Structure the analysis of each topic around your conclusions and the evidence supporting those
conclusions. Do not be timid about starting each section with a conclusion (the topic sentence if
you wish) then supporting and explaining the conclusion with evidence (facts, opinions,
calculations, reasoning) in succeeding sentences.
Practice using point form style to construct your arguments as in:
“Here is the evidence:
1 … a fact
2 … an opinion
3 … a new calculation
4 … your own reasoning
and here are the conclusions flowing from that evidence:
5 … it would seem
6 … the evidence suggests
7 … therefore … ”
Few communication skills are more highly valued than the ability to present an argument clearly
and succinctly.
Tables in the body of a report help the busy reader. Typically they summarize numerical
results in a rows x columns format. Quite often the summary numbers in a table come directly
from one or more exhibits at the end of the report. Here is a ‘dummy table’ (a table without the
numbers included):
Table 1
Knacky Marjorie’s Christmas Decorations
Pro Forma Income Statements
For the Calendar Years 2002-06
2002
Net sales
Cost of goods sold
Gross profit
Operating expenses
Net profit
2003
2004
2005
2006
129
Figures in the body tend to present information graphically (a pie or bar chart, a map, an
illustration, a graph, a picture). The important thing is that the information in the table or figure
be directly relevant to the business challenge at hand. If the information is interesting but not
essential it should be relegated to an appendix or not included at all.
Transition sentences act as bridges between topics and really help keep the reader focused on
your agenda--particularly in longer reports. Transition sentences are a courtesy to your reader.
In effect they act as asides to your busy reader (here is what we've just covered, here is where we
are going next). Use transition sentences as needed – you will have to determine the need – not
necessarily at the end of every section merely to impress the reader.
4. The Summary
The body of a report typically ends with a summary. The summary reviews the key conclusions
and the key recommendations made earlier in the body. Sometimes, if recommendations have
not been made previously, the summary becomes Recommendations and Implications. Again,
there is no clearly right answer. Sometimes reports can be written with recommendations
included (and supported) throughout. Sometimes a separate section is needed at the end to lay
out and comment on the recommendations.
5. The Exhibits
You include exhibits to support your analysis. Each exhibit should be numbered, contain a
descriptive title and, often, contain a clarifying sub-title. For example:
Exhibit 5
Windsor Miniature Golf
Pro Forma Operating Statements for Years 1 to 5
- At The Devonshire Mall Location Exhibits should be referred to in the body in the order in which they appear at the end of the
report. When referring to exhibits in the body, do not use "(see Exhibit 5)". Instead, use
sentences that summarize results: "Exhibit 5 presents pro forma operating statements for years
one to five and reveals cumulative profits of $75,000 on cumulative revenue of $150,000."
Your reader should be able to read the body without having to refer to the exhibits and
should be able to interpret each exhibit without having to refer to the body.
Usually an exhibit is essentially numbers, words or graphics (maps, illustrations, photoreproductions, graphs). Numerical exhibits seem to be the most difficult for students to organize:
•
•
•
•
Think of a numerical table as a matrix of rows and columns.
Identify each row and column with a heading.
As necessary, cite the source or sources of the information contained in an exhibit
Concentrate the exhibit on the results of calculations, not on the process of calculation. Use
footnotes to explain calculations which may not be understood easily.
• Use footnotes to explain your assumptions.
130
• Use footnotes (as necessary) to explain the numbers in the exhibit (e.g. "this should be
interpreted as 20% of the dollar value of peat moss exported from Canada in 1997 was
imported by Japan").
Here is an example of a reasonably well organized exhibit:
EXHIBIT 2
Pictou-Antigonish Regional Library
Usage of The Pictou-Antigonish Regional Library
By Antigonish Town and County Residents
- May-July, 2001 May
June
July
Total
Antigonish County Residents
Bookmobile
Antigonish Branch
Other Branches
Sub-total
271
372
2
645
150
403
6
559
87
381
2
470
508
1156
10
1674
Bookmobile
Antigonish Branch
Other Branches
Sub-total
10
505
6
521
5
507
5
517
3
508
8
519
18
1520
19
1557
Bookmobile
Antigonish Branch
Other Branches
Antigonish Totals
281
877
8
1166
155
910
11
1076
90
889
10
989
526
2676
29
3231
Bookmobile
All 7 Branches
Library Totals
569
5154
5723
505
4998
5503
176
4676
4852
1250
14828
16078
30%
44
10
49%
43
10
41%
43
10
Antigonish Town Residents
Antigonish Town & County Residents
All Library Borrowers
Antigonish County Residents ...
- As a %age of Bookmobile Borrowers
- As a %age of Antigonish Branch Borrowers
- As a %age of All Borrowers
48%
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Source: Pictou-Antigonish Regional Library records.
1. To be interpreted: there were 271 person-visits to the Bookmobile by Antigonish County residents
(excluding Town residents) during May of 2001.
Effective Communication
We are not experts on grammar and style but we are sensitive to, and can easily distinguish
between, effective and ineffective written communication. Here are six elements of style -- the
6Cs of communication -- we focus on.
1. Consideration
Showing consideration for the reader means understanding your relationship with the reader and
the nature of the assignment. If the reader is your boss or your client for goodness sake don't
call him/her stupid. This seems obvious but it is amazing how often – particularly in case-based
reports – we read observations such as:
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• The research conducted so far is totally inadequate.
• The sales projections are unrealistic.
• The company is away behind the times.
These observations may be true but the tone is all wrong. You have to be sensitive to your
reader. Here are three better approaches:
• It may be necessary to conduct additional research.
• We project sales of (whatever). You’ll note our projections are somewhat below your original
estimates. Our reasoning for lower projections is (whatever).
• All five competitors we studied have implemented computer-based customer relationship
management programs.
You have to create and maintain an appropriate tone. Normally folksy (“Hi guys …” or “next
week Bob you should …”) and slang (“you’ll lose your shirt” or “they got their clocks cleaned”)
are out. An objective, professional tone is in.
2. Control
Showing control means being organized. It means having a logical structure. It means knowing
the main topics to be covered, the sub-topics within each main topic, and the order in which the
topics will be presented. Lack of control signals confusion and a lack of organization. Some
aspects of control were dealt with in the section on the body of a report because demonstrating
control is both a structural issue and a communication issue.
3. Coherence
Coherence means flow. A coherent report is one in which the sentences within a topic are
organized logically. The reader can see the linkages between conclusions and evidence clearly
in a coherent report. Sometimes point form presentation aids coherence. If you use point form
be sure you also use parallel structure (i.e., use the same basic sentence structure for each point).
4. Conciseness
A concise report has no extra words, phrases, or sentences. Unnecessary words clutter up
reports and reduce their compellingness. Before you hand in a report edit it to eliminate padding,
empty phrases and sentences which contribute nothing to the argument. Here is one example:
Wordy:
One of the main things the company seemed to be doing was underpaying its sales
representatives.
Better:
The company seemed to underpay its sales representatives.
Or, if you're quite confident of the conclusion: The company's sales representatives were
underpaid.
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5. Clarity
A clear report is precise and simple. A clear report avoids jargon, slang and vague
generalizations. Clear reports are dominated by concrete specifics. Vague generalities are
minimal. Long, awkward sentences are replaced by two or three shorter sentences. In a clear
report the words chosen correctly convey the points you wish to make. Doubt and confusion
about your intent are minimal.
6. Correctness
A good report demonstrates correctness on a number of dimensions:
•
•
•
•
•
It is free of spelling errors.
It is free of typographical errors.
It is free of grammatical errors.
It is neat.
It conforms to assigned format and length guidelines
To produce reports which score high on correctness, proof read – or have a colleague proof read
– a draft version of the final document.
Report Evaluation Criteria
Reports are evaluated on content and communications dimensions. The three forms we use are
reproduced below. They should help you understand what we look for – and hope for – in your
reports. As you can appreciate it is not possible to separate all content and communication
issues. Often they interact. Thus, we normally provide one overall grade for each report and
make comments on both types of issues as part of the feedback.
Itemized below is an extended list of the criteria we employ to evaluate the content of casebased reports. Although the evaluative criteria listed are for case-based reports most are
applicable to project-based reports and field-based reports as well. Given some constraints on
our time, we could never make comments on all hand-ins on all of these criteria, but these are the
things we look for when judging the quality of report content.
1. Understanding the Overall Context of The Situation
• You understood and interpreted the situation correctly:
∙ The organization
∙ The product
∙ The decision-maker(s)
∙ The location
∙ The time
∙ The time frame
• In effect you were able to answer the journalist's who, when, where, what and why.
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2.
Understanding the Primary Issue
• You identified the primary issue correctly.
• You understood what had to be done, why (the context), and by whom.
• You understood your assignment.
3.
Identifying Relevant Sub-Issues
• You gave explicit recognition to the sub-issues that (will) affect the primary issue.
• The sub-issues you raised were linked clearly to the main issue and revealed why you
considered them.
• The sub-issues you raised were comprehensive, diverse, exhaustive--no major subissues were omitted.
4.
Analyzing the Sub-Issues
• Generating Evidence
∙ You went beyond the data (facts and opinions) presented.
∙ You calculated significant new evidence.
∙ You used your reasoning power to generate new evidence.
∙ The evidence base you generated was linked to the primary issue.
∙ The evidence base you generated was comprehensive.
∙ The evidence base you generated was creative, innovative.
• Using Evidence
∙ You drew conclusions (therefore, thus, the evidence indicates ...)
∙ Your conclusions were evidence based.
∙ Your conclusions were stated with the appropriate degree of confidence.
∙ Your conclusions were stated clearly.
∙ Your conclusions were linked to the primary issue.
∙ You employed "if ... then ..." reasoning to deal with uncertainty.
∙ Your assumptions (as necessary) were adequately explained.
5. Considering Alternatives
• Identifying Alternatives
∙ You identified alternatives.
∙ The alternatives you identified were thorough/comprehensive/exhaustive.
∙ The alternatives you identified were imaginative/creative.
∙ The alternatives were stated with sensitivity to the inter-action among
variables.
∙ The alternatives were linked to the primary issue.
∙ The alternatives were mutually exclusive (or if not, overlap was recognized.)
• Evaluating Alternatives
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∙ Where clear alternatives existed you attempted to generate evaluative criteria to
choose among them.
∙ The criteria you used were appropriate.
∙ The criteria you used were exhaustive.
∙ The criteria you used were imaginative, creative.
6. Developing an Action Plan/Specifying Recommendations
•
•
•
•
•
•
•
You made recommendations.
The recommendations flowed logically from your analysis.
Your recommendations addressed the primary issue.
Your recommendations were internally consistent.
Your recommendations were comprehensive.
Your recommendations were specific enough for the evidence base provided.
If you deemed that more research was necessary, your research proposal was in
sufficient detail and included a cost:benefit assessment.
7. Considering the Implications of Implementation
• You considered the implications of implementing your action plan (time, money, talent,
resources, "do-ability").
• Your implications were thorough/comprehensive.
• Your implications were appropriate/logical.
8. Overall: "The Bottom Line" is…
• Your report was compelling and would be helpful to its recipient.
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Criteria For Evaluating Effective Communication In A Business Report
CRITERIA
Consideration
-The tone reflects an understanding of the reader:writer
relationship, the purpose (importance) of the report,
the context of the report.
Control
-Well organized report, logical structure.
-Headings and sub-headings are employed and
appropriate.
Coherence
-Flow exists within each topic.
-Discussion of each issue is organized logically.
-The order of the sentences makes sense.
-The evidence  conclusions  recommendations
linkages are clear.
Conciseness
-Extra words, phrases, sentences eliminated.
-Style is "tight" not "wordy".
-As necessary tables and exhibits are used to enhance
conciseness.
Clarity
- Report avoids jargon, slang, and vague generalities.
- Concrete specifics dominate vague abstractions.
- Report is precise and simple.
- Word choice minimizes ambiguity, doubt and
confusion.
Correctness
- Minimal spelling errors and typos.
- Minimal grammatical errors.
- Neat in appearance.
- Correct title page.
- Correct introduction.
- Correct use of headings.
- Correct reference to and construction of exhibits.
COMMENTS
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4. Some Thoughts on Making a Presentation
This short section contains some thoughts on making a presentation. It was first prepared as a
handout for participants in the Case Competition. However, it should be helpful whenever you
are called upon to prepare and deliver a presentation.
Presentation Delivery
• Do not slavishly follow anyone's advice.
• There are no time-tested recipes for success but there are some guidelines to reflect upon.
• You are not giving a speech or doing a presentation. You are engaging your client. You need
to understand their goals, their frame of reference, their needs. Along the client's think -- feel -do continuum, what specific objectives (desired outcomes) do you want to accomplish in your
presentation.
• Your tone should be predominantly 'share with' not 'talk at'.
• Do not confuse raising your voice with persuasion.
• You want your client to follow, and agree with, your analysis and recommendations because
they are logical, reasonable, persuasive and evidence-based.
• You want to minimize 'we feel', 'we think', and 'we believe' and maximize 'the evidence
suggests' and 'our reasoning is as follows'. Objectivity is more persuasive than subjectivity.
• Overall the presentation should balance relational (high touch) and informational (high tech).
• Do not say you have done an 'in depth analysis' or engaged in 'reasonable reasoning' or
'thoroughly analyzed' anything. That would be incredibly self-serving.
• There is no need to rush. You control the pace. You control the agenda.
• Be enthusiastic but do not confuse speed with enthusiasm.
• Work really hard on the content of your analysis/assignment (Issues → Evidence →
Conclusions → Recommendations → Implications of Implementation). That is the best way to
overcome nervousness. You really do have something to say. The client is all ears. You are
compelling because you have done your homework and you know what you are talking about.
You can't be stumped. You really are helpful.
• Great power point slides cannot overcome a mediocre, whim-driven analysis.
• If a slide or overhead is worth creating, it is worth taking the audience through it. Never
display a visual without either providing time for the audience to interpret it or for you to take
them through it. Audiences hate to be confused by not knowing where to focus or not being able
to understand what is being presented.
• Remember, the audience was not there when you crafted your analysis and presentation. They
do not know where you're coming from. You have to lead them through the analysis carefully
and deliberately.
Presentation Structure
• Don't start by introducing your group. Start with a content-relevant visual or verbal grabber.
No, not a Jay Leno-type monologue or a funny comment. Rather a declarative statement or
series of facts or an authoritative quote or a powerful question or a scenerio ("picture this …") or
a brief anecdote. This is not an invitation to be cutesy or coy. This is an invitation to grab the
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listener's attention in a way that is immediately comprehensible and directly moving. The
reaction you seek is a gentle, "Wow, this team has it bang on. I'm interested in learning more."
• The old army adage, "Tell 'em what you're gonna tell 'em, then tell 'em, then tell 'em what you
told 'em," is good advice. It translates into (1) set the agenda, (2) present the topics or issues
indicated in the agenda and (3) provide a short summary of the key points raised.
• This is a business presentation. So, use the language of business verbally and in writing on
your power point slides or overheads. Here are several suggestions:
Objectives
Evidence
Results (findings)
Highlights
Insights
Conclusions (definite and tentative)
Recommendations (tentative)
Implications of implementation
Resources required
Responsibilities
• Transitions between topics and between speakers matter. They are critical in helping the
audience follow the flow. First of all, create transitions [here is where we have been (are) and
here is where we are going]. Never introduce the next presenter, "Now I'm going to call on ___
who will talk to you (tell you) about …". Create content relevant transitions, "Thus, the analysis
of the overall market supports the following 4 conclusions: __ __ __ __. Now __ will examine
how these 4 conclusions may affect your marketing strategy and the strategies of your 2 nearest
direct competitors." Specific. Concrete. Content-relevant. That's a good transition.
• Create a powerful close. Don't just tail off, "Well I guess that's just about it .. any questions?"
Link the close to your client's goals and needs. Link it to the objective (desired outcome) of the
presentation.
Enjoy yourself. Let your audience know you are enjoying yourself. Say so with a smile. Say so
with rapport. Connect. Go for it. You're up next!