Download hoofstuk 1 defining marketing for the 21e century

CHAPTER 1 DEFINING MARKETING FOR THE 21E CENTURY
New economy
The digital revolution has given consumers and companies new capabilities.
The Information Age has given consumers some new benefits:
1. substantial increase in buying power
2. greater variety of available goods
3. great amount of information about practically anything
4. greater ease in interacting and placing and receiving order
5. ability to compare notes on products and services
Companies benefits from the new economy:
1. new information and promotion channel with augmented geographical reach.
2. more available data about markets, consumers and competitors.
3. improved communication between employees and costumers.
4. ability to customize promotions
Whereas the Industrial Age was characterized by mass production and mass consumption,
high inventory levels, ubiquitous ads, and discounting. The Information age is leading to a
more accurate level of production, more targeted communications, and more relevant pricing.
Marketing deals with identifying and meeting human and social needs.
Marketing can pass trough 3 stages:
1. entrepreneurial marketing
2. formulated marketing
3. entrepreneurial marketing
Marketing people are involved in marketing 10 types of entities:
1. goods
6. places
2. services
7. properties
3. experiences
8. organizations
4. events
9. information
5. persons
10. ideas
Marketers are skilled in stimulating demand for these 10 types of entities. They can operate in
four major categories of markets:
1. consumer markets
2. business markets
3. global markets
4. non-profit and governmental markets
Marketing is a societal process by which individuals and groups obtain what they need and
want through creating, offering and exchanging products and services of value freely with
others.
Core marketing concepts
Target markets and segmentation.
Market segments can be identified by examining demographic, physiographic and
behavioural differences among buyers. The firm decides which segment presents the greatest
opportunity- which is the target market.
Market place, market space and metamarket.
Shopping can be done in the markets place (physical entity) market space (virtual entity).
Metamarket describes a cluster of complementary good and services that are closely related in
the minds of the consumers.
Needs, wants and demands.
Needs are basic human requirements( food, water etc.) which become wants when they are
directed to specific objects that might satisfy the need. Demands are wants for specific
products backed by an ability to pay.
Product offering and brand
A Product is any offering that can satisfy a need or want, while a brand is a specific offering
from a known source.
Value and satisfaction
Marketers can enhance the value of an offering to the customer by:
Raising benefits:
– Reducing costs.
– Raising benefits while lowering costs.
– Raising benefits by more than the increase in costs.
– Lowering benefits by less than the reduction in costs.
Exchange and transactions
Exchange involves obtaining a desired product from someone by offering something in
return. Five conditions must be satisfied for exchange to occur.
1. there are at least 2 parties
2. each party has something that might be of value to the other party
3. each party is capable of communication and delivery
4. each party is free to accept or reject the exchange offer
5. each party believes it is appropriate or desirable to deal with the other party
Transaction involves at least two things of value, agreed-upon conditions, a time of
agreement, and a place of agreement.
Relationship and networks
Relationship marketing aims to build long-term mutually satisfying relations with key
parties, which ultimately results in marketing network between the company and its
supporting stakeholders.
Marketing channels
- Communication channels
 Deliver messages to and receive messages from target buyers.
 Includes traditional media, non-verbal communication, and store atmospherics
- Distribution channels
 Display or deliver the physical products or services to the buyer / user.
- Service channels
 Carry out transactions with potential buyers by facilitating the transaction.
Supply chain
A supply chain stretches from raw materials to components to final products that are carried
to final buyers.
Each company captures only a certain percentage of the total value generated by the supply
chain.
Competition
Four levels of competition can be distinguished by the level of product substitutability:
– Brand competition
– Industry competition
– Form competition
– Generic competition
Marketing environment
 The following forces in the broad environment have a major impact on the task
environment:
– Demographics
– Economics
– Natural environment
– Technological environment
– Political-legal environment
– Social-cultural environment
Marketing program
The marketing program is developed to achieve the company’s objectives. Marketing mix
decisions include:
 Product: provides customer solution.
 Price: represents the customer’s cost.
 Place: customer convenience is key.
 Promotion: communicates with customer.
Several competing orientations exist:
– Production concept
– Product concept
– Selling concept
– Marketing concept
– Customer concept
– Societal marketing concept
Changes in the Marketplace
Globalization, technological advances, and deregulation have created many challenges:
– Customers
– Brand manufacturers
– Store-based retailers
Both companies and marketers have been forced to respond and adjust.
CHAPTER 2 Adapting Marketing to the New Economy
4 major drivers of the New Economy
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Digitalization and connectivity
– The Internet, intranets & extranets are key
Disintermediation and reintermediation
Customization and customerization
Industry convergence
Changes in Business Practices
Old Economy
– Product unit organization
– Profitable transactions
– Financial scorecard
– Stockholders
– Marketing does the marketing
New Economy
– Customer segment organization
– Lifetime value of customer
– Marketing scorecard
– Stakeholders
– Everyone does the marketing
Old Economy
– Build brands via advertising
– Customer acquisition
– No customer satisfaction measurement
– Overpromise, underdeliver
New Economy
– Build brands via performance
– Customer retention
– Measure customer satisfaction and retention rates
– Underdeliver, overpromise
How Marketing Practices are changing: E-business
Business practices are changing . . .
– E-business uses electronic means and platforms to conduct business.
– E-commerce web sites facilitate the online sale of products and services.
– E-purchasing from online suppliers.
– E-marketing efforts include those that inform, communicate, promote, and sell
products and services over the Internet.
CHAPTER 3 Building customer satisfaction, value and retention.
Customer Value
Customers seek to maximize value by
– estimating which offer (product/firm) delivers the most value (CPV)
– forming an expectation of value and acting upon it (purchase)
– evaluating their usage experience against the expectations
Satisfaction results when expectations are equaled or surpassed
Customer Perceived Value
Perception of delivered value is a function of:
– Total customer costs
– Total customer value
Firms at a disadvantage must:
– Reduce perceptions of costs or enhance perceptions of value
Customer Satisfaction
 To maximize satisfaction . . .
Don’t exaggerate the product / service’s capabilities in advertising or other communications
- Dissatisfaction will result
- FTC may become involved
Don’t set expectations too low
-Market size will be limited
High Performance Businesses
Stakeholders
- Identify several stakeholder groups for your University
- How might the needs of these groups conflict with each other?
Processes
- New product development
- Customer attraction and retention
- Order fulfillment
- Reengineering work flows
- Building cross functional teams
Resources
- Resources include labor, materials, machines, energy, and information
- Outsourcing vs. ownership: Own and nurture core competencies
Organization
- Organization refers to the organization’s policies, structures, and corporate culture
- Corporate culture: shared experiences, stories, beliefs, and norms within an
organization
DELIVER CUSTOMER VALUE AND SATISFACTION
Value chain
The value chain identifies nine strategically relevant activities that create value and cost in a
business.
The five core business processes are:
- Market Sensing
- Customer Acquisition
- Customer Relationship Management
- Fulfillment Management
- New Offering Realization
Customer Retention
 Reducing customer churn (defection) is highly desirable
– Define and measure retention rate
– Identify causes of attrition
– Estimate profit lost from customer defection (customer lifetime value)
– Estimate cost to reduce defection; take appropriate action
Losing profitable customers can hurt profits, so companies need to examine the percentage of
customers who defect. Winning back lost costumers is an important marketing activity since it
often costs less than attracting new costumers.
Customer relationship marketing
The key to retaining profitable customers is relationship marketing. The goal of relationship
marketing is to produce high customer equity. We distinguish three drivers of customer
equity:
- Brand Equity
- Relationship Equity
- Value Equity
There five levels of investment in customer relationship building:
1. basic marketing
2. reactive marketing
3. accountable marketing
4. proactive marketing
5. partnership marketing
CHAPTER 4 WINNING MARKETS THROUGH STRATEGIC PLANNING,
IMPLEMENTATION AND CONTROL
Nature of Strategic Planning
Strategic planning requires actions in three key areas:
1. managing a company’s business as an investment portfolio
2. Involves assessing each business’s strength by considering the market’s growth rate
and the company’s position and fit in that market.
3. Establishing a strategy for each business as a game plan for achieving long term
objectives.
Strategic planning takes place at the corporate, division, business unit and product levels
Marketing plans operate at strategic and tactical levels
The strategic marketing plan lays out the target markets and the value proposition that will be
offered based on an analysis of the best market opportunities. The tactical marketing plan
specifies the marketing tactics, including product features, promotion, merchandising, pricing,
channels and service.
Corporate and Division Strategic Planning
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Planning activities include:
– Defining the Corporate Mission
– Establishing Strategic Business Units (SBUs), and Assigning Resources to
SBUs
– Planning New Businesses, Downsizing Older Businesses
Mission statements define the company’s major competitive scopes:
- Industry scope
- Products and applications scope
- Competence scope
- Vertical scope
- Market-segment scope
- Geographical scope
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Strategic Business Units share three characteristics:
– Single business or collection of businesses which can be managed separately
– Has own set of competitors
– Has manager responsible for strategic planning and profits
SBUs are treated as investment portfolios. Resources are allocated by:
– The BCG Growth-Share Matrix
 Stars
 Cash Cows
 Question Marks
 Dogs
– The General Electric Market-Attractiveness Model zie pag. 63
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Planning New Businesses and Downsizing Old Businesses
– Involves taking advantage of one or more of the following:
- Intensive growth
- Integrative growth
- Diversification growth
- Harvesting or divesting old businesses
Planning Involves Eight Steps:
- Business Mission
- SWOT Analysis: Internal
- SWOT Analysis: External
- Goal Formulation
- Strategy Formulation
- Program Formulation
- Implementation
- Feedback and Control
SWOT Analysis
Opportunities and threats stemming from the external environment
- Monitoring key forces for trends
- For each trend, conduct an MOA - Marketing Opportunity Analysis
Internal strengths and weaknesses
- Brand awareness, image, and reputation
- Distribution, pricing, customer loyalty, product benefits
- Finance, R&D, manufacturing
Effective goals should be formulated so that they are:
– Arranged hierarchically from broader to more specific objectives
– Stated in quantitative terms
– Realistic
– Consistent with each other and the company mission
Strategy dictates the game plan for achieving goals. Porter’s generic strategies offer a
starting point for strategic thinking:
– Overall cost leadership
– Differentiation
– Focus
Program formulation and implementation involves:
– Developing supporting programs
– Estimating implementation costs
– Carefully managing the details so great strategy isn’t ruined by poor
implementation
Feedback and control is crucial
The Marketing Process
Two Views of the Value Delivery Process:
– Traditional physical process sequence
 Make the product . . . Sell the product
– Value creation and delivery sequence
 Choose the value . . . Provide the value . . . Communicate the value
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Steps in the Marketing Process:
– Analyzing market opportunities
– Developing marketing strategies
– Planning marketing programs
– Managing the marketing effort
Marketing Plan Contents
 Executive summary and TOC
 Current situation
 Opportunity and issue analysis
 Objectives
 Marketing strategy
 Action programs
 Financial projections
 Controls
CHAPTER 5 Understanding Markets, Market Demand, and the Marketing
Environment
 A Marketing Information System is defined as . . .
“people, equipment, and procedures that gather, sort, analyze, evaluate, and distribute
needed, timely, and accurate information to marketing decision makers.”
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Marketing Information Systems compile information from:
– Internal records systems
– Marketing intelligence systems
– Marketing research
– Marketing decision support analysis
Internal Records Systems
– Order-to-payment cycle is key
– Timely sales reports help to better manage inventory
– Customer, product, salesperson and other databases can be mined for fresh
insights
Marketing intelligence systems
is a set of procedures and sources used by managers to obtain everyday information about
developments in the marketing environment.
Improving the Quality of Marketing Intelligence System Data Requires:
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Training and motivating sales force to report developments
Motivating channel members to share important intelligence
Collecting competitive intelligence
Developing a customer advisory panel
Purchasing information from commercial data sources
Establishing a marketing information center within the company
Marketing research
Is the systematic design, collection, analysis and reporting of data and findings that are
relevant to a specific marketing situation facing the company.
The process:
– Defining the problem and research objectives
– Developing the research plan
– Collecting the information
– Analyzing the information
– Presenting the findings
– Making the decision
Developing the Research Plan Involves:
– Gathering secondary and primary data
– Selecting one or more research approaches for primary data collection
– Using the appropriate research instrument
– Developing a sampling plan
– Determining subject contact methods
Approaches for primary data collection include:
– Observational research
– Focus-group research
– Survey research
– Behavioral data
– Experimental research
Forecasting and Demand Measurement
Essential Aspects
The market
 Market
 Potential market
 Available market
 Target market (served market)
 Qualified available market
 Penetrated market
Measuring demand
 Market demand
– Market minimum
– Market forecast
– Market potential
– No expansible vs. expansible markets
– Primary vs. secondary demand
 Market forecast
 Market potential
Company demand and sales forecasts
 Company demand
 Company sales forecast
 Sales quota
 Sales budget
 Company sales potential
Current demand
 Total market potential
 Area market potential
– Market-buildup method
Future demand
 Many Forecasting Methods:
 Buyer intentions survey
 Composite of sales force opinions
 Expert opinion
 Past-sales analysis
 Market-test method
Chapter 6 Analyzing Consumer Markets and Buyer Behavior
How and Why Consumers Buy
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Buying behavior is influenced by:
– Cultural factors
– Social factors
– Personal factors
– Psychological factors
Cultural
– Exert broadest and deepest influence
– Culture
– Subculture
– Social classes
Social
 Reference groups
– Membership
-Primary vs. secondary
– Aspirational vs. dissociative
 Family
 Social roles and statuses
Personal
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Age
Stage in life cycle
Occupation
Economic circumstances
Lifestyle
Personality
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Self-concept
Psychological
– Motivation
– Perception
– Learning
– Beliefs
– Attitudes
Consumer Buying Decision Process
In addition to understanding how these factors influence consumers, marketers must identify
and understand:
– Who makes the buying decision
– The types of buying decisions
– The stages in the buying process
Buying roles
– Initiator
– Influencer
– Decider
– Buyer
– User
Buying behavior
– Complex buying behavior
– Dissonance-reducing buying behavior
– Habitual buying behavior
– Variety-seeking buying behavior
Buying decision process
– Problem recognition
– Information search
– Evaluation of alternatives
– Purchase decision
– Post purchase behavior
Postpurchase Behavior:
– Consumers’ expectations are compared to performance
– Postpurchase satisfaction influences future behavior
 Purchasing behavior
 Word-of-mouth communications
Marketers should attempt to influence and monitor post purchase behavior
– Post purchase communications reduce dissonance, returns, and order
cancellations
– Talk with customers to discover new uses for existing products
– Investigate methods of product disposal
Chapter 8 Dealing with the Competition
Competitive Markets
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Porter’s Five Forces that Determine Market Attractiveness:
– Threat of intense segment rivalry
– Threat of new entrants
– Threat of substitute products
– Threat of buyers’ growing bargaining power
– Threat of suppliers’ growing bargaining power
Failing to identify competitors can lead to extinction.
Internet businesses have led to disintermediation of middlemen
Competition can be identified using the industry or market approach
Industries Can Be Classified By:
 Number of sellers and degree of differentiation
 Cost structure
 Entry, mobility and exit barriers
 Degree of vertical integration
 Degree of globalization
Industry Structures:
Pure Monopoly
 Only one firm offers an undifferentiated product or service in an area
– Unregulated
– Regulated
 Example: Most utility companies
Pure Oligopoly
 A few firms produce essentially identical commodities and little differentiation exists
 Lower costs are the key to higher profits
 Example: oil
Differentiated Oligopoly
 A few firms produce partially differentiated items
 Differentiation is by key attributes
 Premium price may be charged
 Example: Luxury autos
Monopolistic Competition
 Many firms differentiate items in whole or part
 Appropriate market segmentation is key to success
 Example: beer, restaurants
Pure Competition
 Many competitors offer the same product
 Price is the same due to lack of differentiation
 Example: farmers selling milk, crops
A broader group of competitors will be identified using the market approach
Competitor maps plot buying steps in purchasing and using the product, as well as direct and
indirect competitors
Competitor Analysis
 Key characteristics of the competition must be identified:
– Strategies
– Objectives
– Strengths and Weaknesses
 Effect a firm’s competitive position in the target market
– Reaction Patterns
Competitive Positions in the Target Market
Dominant
This firm controls the competitors’ behavior and has many strategic options.
Strong
This firm can take independent action without endangering its long-term position and can
maintain its long-term position regardless of competitors’ actions.
Favorable
This firm has an exploitable strength and a better opportunity to improve its position.
Tenable
This firm’s performance is sufficient for it to remain in business, but it exists at the sufferance
of the dominant company and has less opportunity to improve its position.
Weak
This firm has unsatisfactory performance and an opportunity for improvement; it must change
or exit
Nonviable
This firm has unsatisfactory performance and no opportunity to improvement.
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Designing the system involves:
– Setting up the system
– Collecting the data
– Evaluating and analyzing the data
– Disseminating information and responding to queries
Value analysis helps firms to select competitors to attack and to avoid
– Customers identify and rate attributes important in the purchase decision for
the company and competition
Attacking strong, close, and bad competitors will be most beneficial
Designing Competitive Strategies
Major Strategies:
Market-Leader
 Expanding the total market:
o
Targeting Product to New Users
 Market-penetration strategy
 New-market strategy
 Geographical-expansion strategy
o Promoting New Uses of Product
o Encouraging Greater Product Use
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Defending market share:
 Position defense
This approach involves building superior brand power, making the brand
almost impregnable.
 Flank defense
The market leader should also erect outposts to protect a weak front or
possible serve as an invasion base for counterattack.
 Preemptive defense
A more aggressive maneuver is to attack before a rival starts its offense.
 Counteroffensive defense
When attacked, most leaders will counterattack. One effective counterattack
is to invade the attacker’s main market so it will have to defend its territory.
 Mobile defense
The leader stretches its domain over new territories that can serve as future
centers for defense and offense.
 Contraction defense
Large companies sometimes realizes that they can no longer defend all
territory. The best course of action then appears to be planned contraction(
strategic withdrawal) giving up weaker territories and reassigning resources
to stronger territories.
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Expanding market share
Before Attempting to Expand Market Share, Consider:
 Probability of invoking antitrust action
 Economic costs involved
 Likelihood that marketing mix decisions will increase profits
Market-Challenger
 First define the strategic goals and opponent(s)
 Choose general attack strategy
 Frontal attacks match competition
 Flank attacks serve unmet market needs or underserved areas
 Encirclement “blitzes” opponent
 Bypassing opponent and attacking easier markets is also an option
 Choose specific attack strategy
 Price-discount
 Lower-price goods
 Prestige goods
 Improved services
 Product proliferation
 Product innovation
 Distribution innovation
 Manufacturing cost reduction
 Intensive advertising promotion
Market-Follower
 Imitation may be more profitable than innovation
 Four broad strategies:
– Counterfeiter
– Cloner
– Imitator
– Adapter
Market-Nicher
 Niche specialties:
– End-user
– Vertical-level
– Customer-size
– Specific customer
– Geographic
– Product/product line
– Product feature
– Job-shop
– Quality-price
– Service
– Channel
Balancing Customer and Competitor Orientations
 Competitor-centered companies evaluate what competitors are doing, then formulate
competitive reactions
 Customer-centered companies focus on customer developments when formulating
strategy
Chapter 9 Identifying Market Segments and Selecting Target Markets
Target Marketing
 Target marketing requires marketers to take three major steps:
– Market segmentation: Identifying and profiling distinct groups of buyers who
differ in their needs and preferences.
– Market targeting: Selecting one or more market segments to enter.
– Market positioning: Establishing and communicating the key distinctive
benefit(s) of the company’s market offering to each target.
Using Market Segmentation
 Mass marketing is losing popularity
 Micromarketing can be undertaken at four levels:
– Segment marketing
– Niche marketing
– Local marketing
– Individual marketing
 Three patterns of preference segments are typically identified:
– Homogeneous preferences
– Diffused preferences
– Clustered preferences
Needs-based Segmentation Process
 Needs-based segmentation
 Segment identification
 Segment attractiveness
 Segment profitability
 Segment positioning
 Segment “acid test
Marketing-mix strategy
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Useful market segments share certain characteristics:
– Measurable
– Substantial
– Accessible
– Differentiable
– Actionable
Segmenting Consumer Markets
Bases for Segmentation:
 Geographic
 Nation or country
 State or region
 City or metro size
 Density
 Climate
 Demographic
 Age, race, gender
 Income, education
 Family size
 Family life cycle
 Occupation
 Religion, nationality
 Generation
 Social class
 Psychographic
 Lifestyle
 Activities
 Interests
 Opinions
 Personality
 Core values
 Behavioral
 Occasions
 Benefits
 User status
 Usage rate
 Loyalty status
 Buyer-readiness
 Attitude
Market Targeting Strategies
 Targeting multiple segments may result in cost economies
 Super segment targeting may be appropriate
 Blocked markets often require megamarketing countermeasures
 Be aware of ethical concerns
Chapter 10 Developing, Positioning, and Differentiating Products through
the Life Cycle
New Product Development
What is a “New” Product?
– New-to-the-world products
– New product lines
– Additions to existing product lines
– Improvements and revisions of existing products
– Repositioned products
– Cost reduction products
New Product Failure is Rampant:
– 95% of new U.S. consumer products
– 90% of new European consumer products
Reasons for failure include ignoring unfavorable market research, overestimating market size,
marketing mix decision errors, and stronger than anticipated competitive actions
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Successful new products:
– Offer a strong relative advantage
– Reflect better understanding of customer needs, and beat the competition to
market
– Exhibit higher performance-to-cost ratios and higher contribution margins
– Are launched with larger budgets
– Have stronger top management support
Managing New Products
New Product Development Process: Ideas to Commercialization
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Idea generation
Idea screening
Concept development
Concept testing
Marketing strategy development
Business analysis
Product development
Market testing
Commercialization
Consumer Adoption Process
Adopters of new products move through five stages:
– Awareness
– Interest
– Evaluation
– Trial
– Adoption
 People adopt new products at different rates
– Innovators
– Early adopters
– Early majority
– Late majority
– Laggards
 Five product characteristics influence the rate of adoption:
– Degree of relative advantage
– Degree of compatibility
– Degree of complexity
– Degree of divisibility (trialability)
– Degree of communicability
Stages of the Product Life Cycle
 Introduction
 Low sales
 High costs per customer
 Negative profits
 Innovator customers
 Few competitors
 Growth
 Rising sales
 Average costs
 Rising profits
 Early adopters customers
 Growing competition
 Maturity
 Peak sales
 Low costs
 High profits
 Middle majority customers
 Stable/declining competition
 Decline
 Declining sales
 Low costs
 Declining profits
 Laggard customers
 Declining competition
Objectives and Strategies for the Product Life Cycle
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Introduction
 Objective: to create awareness and trial
 Offer a basic product
 Price at cost-plus
 Selective distribution
 Awareness – dealers and early adopters
 Induce trial via heavy sales promotion
Growth
 Objective: maximize market share
 Offer service, product extensions, warranty
 Price to penetrate
 Intensive distribution
 Awareness and interest – mass market
 Reduce promotions due to heavy demand
Maturity
 Objective: maximize profit while defending market share
 Diversify brands/items
 Price to match or beat competition
 Intensive distribution
 Stress brand differences and benefits
 Increase promotions to encourage switching
Decline
 Objective: reduce costs and milk the brand
 Phase out weak models
 Cut price
 Selective distribution
 Reduce advertising to levels needed to retain hard-core loyalists
 Reduce promotions to minimal levels
Positioning and Differentiation
 Two views of positioning:
– Ries and Trout: products are positioned in the mind of prospect
– Treacy and Wiersema: positioning via value disciplines
 Product leader firm
 Operationally excellent firm
 Customer intimate firm
 Positioning statements:
– To (target group and need) our (brand) is (concept) that (point-of-difference)
 Example: To young, active soft-drink consumers who have little time
for sleep, Mountain Dew is the soft drink that gives you more energy
than any other brand because it has the highest level of caffeine.
Differentiated products feature meaningful and valuable differences that distinguish the
company’s offering from the competition.
Differences are stronger when they are important, distinctive, superior, preemptive,
affordable, and profitable
Product Differentiation Tools
 Form
 Features
 Performance
 Conformance
 Durability
 Reliability
 Repairability
 Style
 Design
Services Differentiation Tools
 Ordering ease
 Delivery
 Installation
 Customer training
 Customer consulting
 Maintenance and repair
 Miscellaneous
Personnel Differentiation Tools
 Competence
 Courtesy
 Credibility
 Reliability
 Responsiveness
 Communication
Channel Differentiation Tools
 Coverage
 Expertise
 Performance
Image Differentiation Tools
 Symbols
 Media
 Atmosphere
 Events
Chapter 11 Setting Product and Brand Strategy
The Product and Product Mix
Potential customers judge product offerings according to three elements:
– Product features and quality
– Services mix and quality
– Value-based prices
Marketers plan their market offering at five levels.
The customer value hierarchy:
– Core benefit
– Basic product
– Expected product
– Augmented product
– Potential product
Product Classifications
 Durability and tangibility
Nondurable
 Tangible
 Rapidly consumed
 Example: Milk
Durable
 Tangible
 Lasts a long time
 Example: Oven
Services
 Intangible
 Example: Tax preparation
 Consumer goods
Classified by shopping habits:
 Convenience goods
 Shopping goods
 Specialty goods
 Unsought goods
 Industrial goods
Materials and parts
 Farm products
 Natural products
 Component materials
 Component parts
Capital items
 Installations
 Equipment
Supplies and business services
 Maintenance and repair
 Advisory services
 Product mix dimensions:
 Width: number of product lines
 Length: total number of items in mix
 Depth: number of product variants
 Consistency: degree to which product lines are related
Product-Line Decisions
 Product-Line Analysis
 Product-Line Length
 Product-Line Modernization, Featuring, and Pruning
Brand Decisions
The AMA definition of a brand:
“A name, term, sign, symbol, or design, or a combination of these, intended to identify the
goods or services of one seller or group of sellers and to differentiate them from the
competition.”
Brands can convey six levels of meaning:
– Attributes
– Benefits
– Values
– Culture
– Personality
– User
Brand identity decisions include:
– Name
– Logo
– Colors
– Tagline
– Symbol
Consumer experiences create brand bonding, brand advertising does not.
Marketers should attempt to create or facilitate awareness, acceptability, preference, and
loyalty among consumers.
Valuable and powerful brands enjoy high levels of brand loyalty.
Five levels of customer attitudes toward brands:
– Will change brands, especially for price. No brand loyalty.
– Satisfied -- has no reason to change.
– Satisfied -- switching would incur costs.
– Values brand, sees it as a friend.
– Devoted to the brand.
Brand equity refers to the positive differential effect that a brand name has on customers.
Brand equity:
– is related to many factors.
– allows for reduced marketing costs.
– is a major contributor to customer equity.
Key Challenges
To brand or not
Advantages of branding:
 Facilitates order processing
 Trademark protection
 Aids in segmentation
 Enhances corporate image
 Branded goods are desired by retailers and distributors
Brand sponsor
Options include:
 Manufacturer (national) brand
 Distributor (reseller, store, house, private) brand
 Licensing the brand name
Brand name
Strong brand names:
– Suggest benefits
– Suggest product qualities
– Are easy to say, recognize, and remember
– Are distinctive
– Should not carry poor meanings in other languages
Brand strategy
Varies by type of brand
 Functional brands
 Image brands
 Experiential brands
Line extensions
Brand extensions
Multibrands
New brands
Co-branding
Brand auditing and repositioning
 A brand report card can be used to audit a brand’s strengths and weaknesses.
 Changes in preferences or the presence of a new competitor may indicate a need for
brand repositioning
Chapter 13 Designing Pricing Strategies and Programs
Names for prices:
 Rent
 Tuition
 Fare
 Monthly payment
 Fee
 Dues
 Interest
 Donation
Setting the Price
Select pricing objective
 Survival
 Maximize current profits
 Maximize market share
 Penetration strategy
 Market skimming
 Skimming strategy
 Product quality leaders
 Partial cost recovery
Determine demand
 Understand factors that affect price sensitivity
 Estimate demand curves
 Understand price elasticity of demand
o Elasticity
o Inelasticity
Conditions under Which Consumers are Less Price Sensitive:
 Product is more distinctive
 Buyers are less aware of substitutes
 Buyers cannot easily compare quality of substitutes
 The expenditure is a lower part of buyer’s total income
 The expenditure is small compared to the total cost
 Part of the cost is borne by another party
 The product is used with assets previously bought
 The product is assumed to have more quality, prestige, or
exclusiveness
 Buyers cannot store the product
Conditions under Which Demand is Less Elastic:
 There are few or no substitutes
 Buyers do not readily notice the higher price
 Buyers are slow to change their buying habits and search for lower
prices
 Buyers think higher prices are justified
Estimate costs
 Types of costs and levels of production must be considered
 Accumulated production leads to cost reduction via the experience curve
 Differentiated marketing offers create different cost levels
Key Pricing Terms:
 Fixed costs: do not vary directly with changes in level of production
 Variable costs: vary with production
 Total costs: sum of fixed and variable costs a given level of
production
 Average cost: cost per unit at a given level of production
Analyze competition
Firms must analyze the competition with respect to:
– Costs
– Prices
– Possible price reactions
Pricing decisions are also influenced by quality of offering relative to competition
Select pricing method
Price-setting begins with the three “C’s”
Select method:
– Markup pricing
– Target-return pricing
– Perceived-value pricing
– Value pricing
– Going-rate pricing
– Auction-type pricing
– Group pricing
Select final price
Requires consideration of additional factors:
– Psychological pricing
– Gain-and-risk-sharing pricing
– Influence of other marketing mix variables
– Company pricing policies
– Impact of price on other parties
Chapter 14 Designing and Managing Value Networks and Marketing Channels
Value Networks and Marketing Channel Systems
A Value Network is a system of partnerships and alliances used by a firm to source, augment,
and deliver its product or service offerings.
Intermediaries that help get the product from manufacturer to consumer or end users form the
Marketing Channel(s).
Work Performed by Channels
Producers establish marketing channels for a variety of reasons:
– Producers lack financial resources necessary for direct marketing
– Direct marketing is not feasible for many offerings
– Using channels frees money for investment in main business
– Intermediaries are more efficient
Channel members perform a number of key functions:
– Forward flow functions:
 Develop / disseminate communication
 Store and move the physical products
 Oversee transfer of ownership
– Backward flow functions:
 Place orders with manufacturers
 Facilitate payment of bills
Other key functions performed by channel members include those that flow both
ways:
– Forward and backward flow functions:
 Gather information
 Negotiate price and transfer of ownership
 Finance inventories
 Assume risk
Channel levels vary according to the number of intermediaries:
– Zero-level (direct marketing) channel
– One, two, and three-level channels
– Reverse flow channels
Service sector channels use agencies and locations to access population to be served
Channel-Design Decisions
 Push vs. pull strategy
 Analyzing consumers’ desired service output levels
o Lot size, waiting time, product variety, spatial convenience, service backup
 Establishing objectives / constraints
 Identifying and then evaluating major channel alternatives
Channel Factors:
Intermediary type
 Merchants
– Buy, take title, and resell merchandise
 Agents
– Find customers, negotiate, do not take title to merchandise
 Facilitators
– Aid in distribution, do not negotiate or take title to merchandise
Number of intermediaries
 Exclusive distribution
o Severely limited distribution
 Selective distribution
o Some intermediaries willing to carry good are selected
 Intensive distribution
o Offering is placed in as many outlets as possible.
Terms and responsibilities of intermediaries
 Price policies
o Price list and schedule of discounts
 Conditions of sale
o Payment terms and guarantees
 Territorial rights
o Define territory / terms
 Services to be performed by party
Channel-Design Decisions
Channel Alternative Evaluation Criteria:
– Economic criteria
 Sales and costs vs. added value
– Control criteria
– Adaptive criteria
After choosing a particular channel alternative, firms take several actions
Channel Development Process
 Select channel members
 Train channel members
 Motivate channel members
 Evaluate channel members
 Modify channel arrangements
 Channel systems are constantly evolving and developing
 Vertical Marketing Systems
o Corporate VMS
o Administered VMS
o Contractual VMS
 Horizontal Marketing Systems
 Multichannel Marketing Systems
Conflict, Cooperation, & Competition
 Types of conflict
 Vertical, horizontal, and multichannel
 Causes of conflict
 Major causes: Goal incompatibility; unclear roles and rights
 Other potential causes exist
 Managing channel conflict
Managing Channel Conflict





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Subordinate goal adoption
Exchange people between channel levels
Cooptation
Diplomacy
Mediation
Arbitration
Legal and Ethical Issues in Channel Relations
Two common distribution practices are legal as long as they don’t substantially
lessen competition:
 Exclusive dealing
 Tying agreements
Chapter 16 Designing and Managing Integrated Marketing Communications
Marketing Communications
Communications Platforms:
 Advertising
 Sales Promotion
 Public relations
 Direct
marketing
 Personal selling
Developing Effective Marketing Communications
Steps in Marketing Communications Program Development:
Identify target audience
– Includes assessing the audience’s perceptions of the company, product, and
competitors’ company/product image
Determine objectives of communication
 Cognitive, affective, and behavioral objectives may be set
Design the message
 AIDA model guides message design
Message Design
 Content
o Message content decisions involve the selection of appeal,
theme, idea, or USP
o Types of appeals
o Rational appeals
o Emotional appeals
o Moral appeals
 Structure
o One-sided vs. two-sided messages
o Order of argument presentation
 Format
 Message format decisions vary with the type of media, but may
include:
o Graphics, visuals
o Headline, copy or script
o Sound effects,
voice qualities
o Shape, scent,
texture of package
 Source
o Message source characteristics can influence attention and
recall
o Factors underlying perceptions of source credibility:
o Expertise
o Trustworthiness
o Likability
Select communication channels
– Personal communication channels
o Effectiveness derives from personalization and feedback
o Several methods of stimulating personal communication
channels exist
– Nonpersonal communication channels
o Influence derives from two-step flow-of-communication
process
Methods of Stimulating Personal Communication
 Devoting extra effort to influential individuals or companies
 Creating opinion leaders
 Working through influential community members
 Using influential people in testimonial advertising
 Developing advertising with high “conversation value”
 Use viral marketing
 Developing word-of-mouth referral channels
 Establishing an electronic forum
Establish the budget
– Affordability method
– Percentage-of-sales method
– Competitive-parity method
– Objective-and-task method
Select the marketing communications mix
 Types of promotional tools
 Advertising
 Sales promotion
 Public relations and publicity
 Direct marketing
 Personal selling
 Selection factors
 Consumer vs. business market
 Stage of buyer readiness
 Stage of product life cycle
 Market rank
Measure results
– Recognition, recall, attitudes, behavioral responses
Manage the IMC process
 Provides stronger message consistency and greater sales impact
 Improves firms’ ability to reach right customers at right time with right
message
Developing and Managing the Advertising Campaign
The Five Ms of Advertising:
Mission
Objectives can be classified by aim:
– Inform
– Persuade
– Remind
– Reinforce
Money
Factors considered when budget-setting:
– Stage of product life cycle
– Market share and consumer base
– Competition and clutter
– Advertising frequency
– Product substitutability
Message
 Factors considered when choosing the advertising message:
– Message generation
– Message evaluation and selection
– Message execution
– Social responsibility review
Media
 Developing media strategy involves:
– Deciding on reach, frequency, and impact
– Selecting media and vehicles
– Determining media timing
– Deciding on geographical media allocation
Major Media Types
 Newspapers
 Television
 Direct mail
 Radio
 Magazines
 Outdoor
 Yellow pages
 Newsletters
 Brochures
 Telephone
 Internet
 Deciding on Media Categories
 Target audience’s media habits, nature of the product and message, cost
 Media Timing Decisions
 Macroscheduling vs. microscheduling
 Continuity, concentration, flighting, and pulsing scheduling options
 Deciding on Geographical Allocation
Measurement
 Evaluating advertising effectiveness
– Communication-effect research
– Sales-effect research
Sales Promotion

Sales promotions are short-term incentives designed to stimulate purchase
among consumers or trade
 Purpose of sales promotion
– Attract new triers or brand switchers
– Reward loyal customers
– Increase repurchase rates
Steps in Sales Promotion Program Development:
 Establish objectives
 Select consumer-promotion tools
 Select trade-promotion tools
 Select business- and sales force promotion tools
 Develop the program
 Pretest the program
 Implement and evaluate the program
Major Consumer-Promotion Tools
 Samples
 Coupons
 Cash refunds (rebates)
 Premiums
 Prizes (contests, sweepstakes, games)
 Patronage awards
 Free trials
 Product warranties
 Tie-in promotions
 Cross-promotions
 Point-of-purchase displays and demonstrations
Public Relations
Public relations activities promote or protect the image of a firm or product
Public relations functions:
– Press relations
– Product publicity
– Corporate communications
– Lobbying
– Counseling
Marketing Public Relations (MPR)
 Plays an important role in
 New product launches
 Repositioning of mature brand
 Building interest in product category
 Influencing specific target groups
 Defending products with public problems
 Building the corporate image
Three Major MPR Decisions
Major Public Relations Tools
 Publications
 Events
 Sponsorships
 News
 Speeches
 Public-service activities
 Identity media
Chapter 17 Managing the Sales Force
Designing the Sales Force
Types of Sales Representatives:
 Deliverer
 Order taker
 Missionary
 Technician
 Demand creator
 Solution vendor
Steps in process:
 Objectives and strategy
Objectives
 Sales volume and profitability
 Customer satisfaction
Strategy
 Account manager
Type of sales force
 Direct (company) or contractual
Structure
 Types of sales force structures:
– Territorial
– Product
– Market
– Complex
 Key accounts
Sales force size
 Workload approach:
– Group customers by volume
– Establish call frequencies
– Calculate total yearly sales call workload
– Calculate average number of calls/year
– Calculate number of sales representatives
Compensation
 Four components of compensation:
– Fixed amount
– Variable amount
– Expense allowances
– Benefits
 Compensation plans
– Straight salary
– Straight commission
– Combination
Managing the Sales Force
Steps in Sales Force Management
 Recruitment and selection
 Training
 Supervising
 Motivating
 Evaluating
Recruiting begins with the development of selection criteria
 Customer desired traits
 Traits common to successful sales representatives
Selection criteria are publicized
Various selection procedures are used to evaluate candidates
Training topics include:
 Company background, products
 Customer characteristics
 Competitors’ products
 Sales presentation techniques
 Procedures and responsibilities
Training time needed and training method used vary with task complexity
Successful firms have procedures to aid in evaluating the sales force:
– Norms for customer calls
– Norms for prospect calls
– Using sales time efficiently
 Tools include configuration software, time-and-duty analysis, greater
emphasis on phone and Internet usage, greater reliance on inside sales
force
Motivating the Sales Force
– Most valued rewards
 Pay, promotion, personal growth, sense of accomplishment
– Least valued rewards
 Liking and respect, security, recognition
– Sales quotas as motivation tools
– Supplementary motivators
Evaluating the Sales Force
– Sources of information
 Sales or call reports, personal observation, customer letters and
complaints, customer surveys, other representatives
– Formal evaluation
 Performance comparisons
 Knowledge assessments
Personal Selling Principles
Major Aspects:
Sales professionalism
Sales-oriented approach
 Stresses high pressure techniques
Customer-oriented approach
 Stresses customer problem solving
Steps in industrial selling process
 Prospecting and qualifying
 Preapproach
 Approach
 Presentation and demonstration
 Overcoming objections
 Closing
 Follow-up and maintenance (servicing)
Negotiation
 Reps need skills for effective negotiation
 Negotiation is useful when certain factors characterize the sale
 Negotiation strategy
 Principled
 BATNA
Relationship marketing
 Building long-term suppler-customer relationships has grown in importance
 Companies are shifting focus away from transaction marketing to relationship
marketing