MARKETING 201 -Prof. Aaron Gazley- FALL 2020
CHAPTER 1
MARKETING: CREATING CUSTOMER VALUE & ENGAGEMENT
#What is marketing?
It is the process by which companies create value for customers and aim to build strong
relationships with them in order to capture value in return.
#Understanding the marketplace and customer needs
(a) Needs: necessities
(b) Wants: needs that are shaped by culture and individual personality.
(c) Demands: human wants that are backed by buying power. This means that they are
services/products that consumers want and are able to afford/buy.
- Market offerings: a combination of products, services, information, or experience that
are offered in a market to satisfy a need or want.
- Market myopia: is a flaw that is demonstrated when the market loses sight of the
underlying consumer needs behind a want, and instead only focus on the existing wants
as is. This is a flaw because the companies could have been able to maximize profits and
increase efficiency/productivity if they understood the underlying reasons behind a
customer’s want. (Maybe they could meet their wants in a better way or innovative
way.)
- Exchange relationships: (exchange is the act of obtaining a desired object by offering
something in return) Marketing actions try to create, maintain, and grow these
relationships.
- What is a market? It is a set of actual and potential buyers.
- When do consumers market? When they search for products, interact with companies
to obtain information, and when they make purchases.
- Each market is affected by major environmental forces: demographic, economic,
natural, technological, political, and cultural/societal.
suppliers
company or
competitors
marketing
intermediaries
final
consumers
*final consumers will go back either to the company itself or its competitors.
#Designing a customer value-driven marketing strategy
- Marketing management: the art/science of choosing certain target markets and building
profitable relationships with them. (this is accomplished through the target market and
a value proposition)
What customers will we serve?
How can we best serve these customers? (set of benefits/values a company
promises to deliver to satisfy customer needs)
Production
concept
Product
concept
Selling
concept
Marketing
concept
Societal
Markinting
concept
*The first three start with the firm trying to gain customers by convincing them why they need
the product. They are more focused on selling existing products. (they profit through sales
volumes)
*The marketing concept starts with the customer and what they want. (profits through
customer satisfaction)
*The societal marketing concept is similar to the marketing concept but is more concerned with
benefiting the society and environment.
-
-
Marketing mix: the marketing mix is comprised of four tools named the 4ps:
(a) Product
(b) Price
(c) Promotion
(d) Place
The integrated marketing program is a comprehensive plan that communicates and
delivers the intended value.
#Managing customer relationships and capturing customer value
- Customer relationship management is the overall process of building and maintaining
profitable customer relationships by delivering:
(a) Customer perceived value
Benefits > Costs
(b) Customer Satisfaction
The extent to which the buyer’s expectations are met.
Partner relationship management working closely with partners in other company
departments and outside the company to bring greater value to customers.
- Customer lifetime value is the value of tall the purchases that a customer makes in his
lifetime.
- Share of customer is the portion of the customer’s purchasing that a company gets in its
product categories.
- Customer equity is the total combined customer lifetime values of all of the company’s
customers.
#The changing marketing landscape
- Digital and social media marketing involves using digital marketing tools such as web
sites, social media, mobile ads and apps, online videos, e-mail, and blogs that engage
consumers anywhere, at any time, via their digital devices.
- Some new landscapes: Not-for-profit marketing growth, Rapid globalization, Sustainable
marketing
CHAPTER 2
PARTNERING TO BUILD CUSTOMER ENGAGEMENT, VALUE, AND RELATIONSHIPS
#Company-wide strategic planning
- What is strategic planning? the process of developing and maintaining a strategic fit between
the organization’s goals/capabilities, and its changing marketing opportunities.
- Steps of strategic planning:
(a)Defining the mission (mission statement: the organization’s purpose; what it wants to
accomplish in the larger environment.)
(b) Setting objectives and goals
(c) Designing business portfolio (is the collection of businesses and products that make
up the company.) There is something called the Portfolio analysis, it is a major activity in
strategic planning whereby management evaluates the products and businesses that make up
the company.
The best business portfolio is the one that best fits the company’s strengths and weaknesses to
opportunities in the environment.
Business portfolio planning involves two steps. First, the company must analyze its current
business portfolio and determine which businesses should receive more, less, or no investment.
Second, it must shape the future portfolio by developing strategies for growth and downsizing.
(d) Planning marketing and other functional strategies
* Stars are high-growth, high-share businesses or products requiring heavy investment to
finance rapid growth. They will eventually turn into cash cows.
* Cash cows are low-growth, high-share businesses or products that are established and
successful SBUs requiring less investment to maintain market share.
* Question marks are low-share business units in high-growth markets requiring a lot of cash to
hold their share.
* Dogs are low-growth, low-share businesses and products that may generate enough cash to
maintain themselves but do not promise to be large sources of cash.
- There are issues with the BCG matrix:
(1) Difficulty in defining SBUs and measuring market share/growth.
(2) Its time consuming
(3) Its expensive
(4) Focuses only on the current businesses (no future planning)
*Market penetration involves making more sales to current customers without changing its
original product such as by adding new stores in current market areas to make it easier for
customers to visit.
*Market development involves identifying and developing new markets for its current
products. For instance, managers could review new demographic markets. Perhaps new
groups—such as seniors—could be encouraged. Managers could consider new geographic
markets in U.S. markets and in non-U.S. markets, especially Asia.
*Product development involves offering modified or new products to current markets such as
by moving into new product categories.
*Diversification involves starting up or buying businesses beyond its current products and
markets. For example, the company could acquire a company that operates in different market
segments with a different product mix.
#Marketing strategy and the marketing mix
*Circle 1 Customer
*Circle 2 marketing strategy—the marketing logic by which the company hopes to create this
customer value and achieve these profitable relationships. The company decides which
customers it will serve (segmentation and targeting) and how (differentiation and positioning).
*Circle 3 the company designs an integrated marketing mix made up of factors under its
control—product, price, place, and promotion (the four Ps).
*Circle 4 marketing analysis, planning, implementation, and control.
*Circle 5 Through these activities, the company watches and adapts to the actors and forces in
the marketing environment.
KEY WORDS:
-Marketing strategy is the marketing logic by which the company hopes to create customer
value and achieve profitable customer relationships.
-Market segmentation is the division of a market into distinct groups of buyers who have
different needs, characteristics, or behaviors and who might require separate products or
marketing mixes.
-Market segment is a group of consumers who respond in a similar way to a given set of
marketing efforts.
-Market targeting is the process of evaluating each market segment’s
attractiveness and selecting one or more segments to enter.
- Market positioning is the arranging for a product to occupy a clear, distinctive, and desirable
place relative to competing products in the minds of target consumers.
-Differentiation begins the positioning process.
#Managing the marketing effort
*Product—Customer solution
Price—Customer cost
Place—Convenience
Promotion—Communication
*The company first develops company-wide strategic plans and then translates them into
marketing and other plans for each division, product, and brand.
*Through implementation, the company turns the plans into actions. (addresses, who, where,
when, and how. Implementation is extremely important)
*Control consists of measuring and evaluating the results of marketing activities and taking
corrective action where needed.
*Finally, marketing analysis provides information and evaluations needed for all the other
marketing activities.
-SWOT analysis:
(S) strengths (internal)
(W) weaknesses (internal)
(O) opportunities (external)
(T) threats (external)
-Parts of a marketing plan:
1) Executive summary
2) Marketing situation
3) Threats/opportunities
4) Objective and issues
5) Marketing strategy
6) Action programs
7) Budgets
8) Controls
-Return on Marketing Investment (Marketing ROI): Measurement of the profits generated by
investments in marketing activities.
ROI=net return from investment/costs of investment
CHAPTER 3
ANALYZING THE MARKETING ENVIRONMENT
#A company’s marketing environment
The marketing environment includes actors and outside forces that affect the marketing
managements ability to build and maintain target customer relationships.
- Why is it important to understand the marketing environment?
Because marketers must adapt their strategies in order to meet new marketplace
challenges and opportunities. + track environmental trends. (companies must always
adapt to the changing environment)
Marketing
environment
MICRO
-
MACRO
MICRO
Consists factors that affect the company ability to serve its customers:
(1) The company
marketers must work with other departments to create customer
value and relationships. For example, the top management, finance,
accounting, operations, purchasing etc..
(2) Suppliers
Provide the resources to produce goods/services. The company must
treat them as partners to provide customer value.
Suppliers are really important because they can affect costs/prices
which in turn affects sales volume and customer satisfaction.
(3) Marketing Intermediaries
Firms that help the company promote, sell, and distribute to final
buyers.
(4) Competitors
Firms must gain a strategic advantage by making their offerings stand
out to their customers instead of their competitors.
The firm must provide greater customer satisfaction and value than
its competitors.
(5) Publics
Any group that has an impact on the companys ability to reach its
objectives. (media, government, financial, citizen-action etc…)
(6) Customers
Any type of market: consumer, business, reseller, government, and
international. (the most important force)
The 6 forces mentioned above makeup the companys value delivery network.
Marketing success depends on them.
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MACRO
Consists of larger societal forces that affect the microenvironment.
(1) Demographic (this is important because it involves people and people
makeup the markets)
This force includes gender, race, size, density, location, occupation,
and age. An example is Netflix ”just for kids” segment or their app
that was made to meet the tech savvy generation requirement.
*Demographic trends include changing family structures,
educational characteristic, and population diversity.
*Generational marketing takes into consideration lifestyle
instead of age. (such as gen z , millennials, etc…)
(2) Economic
Monitors the changes in consumer spending by focusing on value
marketing (which involves offering greater value to financially
cautious buyers at the right combo of quality/service and price.)
(3) Natural
Includes the physical environment and the natural resources that are
needed or affected by marketing activities.
Natural includes the whole sustainability/ green movement. An
example is timberland trying to make their products less harmful for
the environment.
(4) Technological
This is the most dramatic force, because its massively changing the
marketplace.
(5) Political
The political environment is made up of laws, government agencies,
and groups that protect companies and customers as well as the
society as a whole.
(6) Cultural
(forces that affect values, behaviors, and perceptions)
This could be more related to doing good in the society. Such as
giving one pair of glasses for every purchase. (charity)
Marketers are interested in this environment because it strongly
affects how people consume.
#Responding to the marketing environment (as a company)
(a) Uncontrollable
React and adapt to forces in the environment.
(b) Proactive (preferred when possible)
Take aggressive actions to affect forces in the environment.
(c) Reactive
Watch and react to forces in the environment.
CHAPTER 4
MANAGING MARKETING INFORMATION TO GAIN CUSTOMER INSIGHTS
#Marketing information and customer insights
What are customer insights?
- They are fresh marketing information that lead to a better understanding of customer
sand the marketplace. These insights become the basis for creating customer value,
engagement, and relationships.
- Why is this important? Because it links the company and customer through information.
And allows for better decision making.
- In order to achieve value and deep relationships, marketers must first deeply
understand what customers want and need.
- To gain good customer insights, marketers must manage marketing information from a
wide range of sources.
*big data: the overwhelming overload of information volumes due to todays
technology.
MIS – Managing Marketing Information
- people and procedures dedicated to assessing information needs, developing the
needed information, and helping decision makers to use the information to generate
and validate actionable customer and market insights.
*First, MIS interacts with information users to assess information needs.
*Second, MIS interacts with the marketing environment to develop needed information.
*Finally, MIS helps users to analyze and use the information in order to develop customer
insights, make marketing decisions, manage customer relationships.
#Developing market information
Marketers obtain info from:
(a) Internal data
(b) Marketing intelligence
(c) Marketing research
(a) Internal data (internal secondary data)
- Internal databases: collections of consumer/market information obtained from within
the company network. (sales figures,past research, internal reports)
- What information is included?
 information on customer characteristics
 sales transactions
 website visits
 customer satisfaction and service records
 records of sales, costs, and cash flows
 reports on production, shipments, and inventories
 reports on reseller reactions and competitor activities
 point-of-sale transaction data
-
Why is this information important? Because it provides powerful customer insights and
strong competitive advantage.
Advantages: accessed more quickly and cheaply than other information sources.
Disadvantages: the data is often collected for other purposes, so it may be incomplete
or in the wrong form. Keeping the database current also requires special effort,
equipment, and techniques.
(b) Competitive marketing intelligence (external secondary data)
- The systematic collection and analysis of publicly available information about
customers, competitors, and developments in the marketing environment. (media,
consultants, government, trade publications)
- The goal is to improve decision making and provide early warning of opportunities and
threats.
- Marketing intelligence techniques:
 observing consumers firsthand
 quizzing the company’s own employees
 benchmarking competitors’ products
 researching the Internet
 monitoring Internet buzz
- This strategy is used on competitors as well in order to track their moves/strategies/new
product launches, potential competitive strengths/ weaknesses. Competitor intelligence
can be collected from:
 people inside the company
 suppliers, resellers, and key customers
 monitoring competitors’ websites
 Internet searches of specific competitor names, events, or trends
 tracking consumer conversations about competing brands and the
company’s own brands
 thousands of online databases
- Disadvantage: some of the techniques raise ethical issues.
Gathering secondary data (internal and intelligence):
- Advantages:
 Lower cost
 Faster access
 Gives access to information that cpouldnt have been collected in any oyther way.
-
Disadvantages:
 Relevant
 Not accurate
 It is only current data
 Its impartial (not all data can be obtained in this way) Ex: information on how
customer would react to an unreleased product.
(c) Marketing research (primary research)
- Systematic design, collection, analysis, and reporting of data relevant to a SPECIFIC
SITUATION facing an organization.
- Marketing research enables marketers to:
 gain insights into customer motivations, purchase behavior, and
satisfaction
 assess market potential and market share
 measure the effectiveness of pricing, product, distribution, and
promotion activities
- Companies hire other people to get the info or even buy marketing research to aid in
their decision making.
*These are the steps of conducting a market research. Managers and researchers must work
together (for reasons mentioned in diagram), in order to achieve maximum efficiency.
*The first step is the hardest and most important.
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-
There are three types of marketing research:
(1) Exploratory (focus groups, interviews)
Gather information that will help define the problem and suggest hypotheses.
(2) Descriptive (who, when, how, why)
Describes marketing problems, situations, or markets. (such as market potential for
a product, demographics, and attitudes of customers)
(3) Casual (price/demand, environment/purchase rate)
Tests hypothesis about cause-and-effect relationships.
Developing the research plan (the research plan outlines sources of existing data and
spells out specific research approaches, contact methods, sampling plans, and
instruments to gather data)
The research plan is a written proposal.
Management problemsresearch objectivesinformation neededhow the results
will help the management decisions budget (research costs)
Planning primary data collection:
Research approaches
•
•
•
•
Contact methods
Qualitative Research (Exploratory) uses interviews focus
groups and observation to gain in-depth understanding.
Disadvantages: expensive, difficult to generalize, consumers
are not always open/honest.
Survey research (Descriptive) Quantitative, involves
gathering primary data by asking people questions about
their knowledge, attitudes, preferences, and buying
behavior. Some disadvantages of this approach is that some
people may answer incorrectly or not answer at all.
Experimental research (Causal) Quantitative, involves
gathering primary data by selecting matched groups of
subjects, giving them different treatments, controlling
related factors, and checking for differences in group
responses.
Observational research involves gathering primary data by
observing relevant people, actions, and situations
The most common is questionnaires/surveys (in person, by phone,
online)
- Flexible
- Useful in exploratory research
Researchers should consider whether using close-ended (easier to
interpret) or open-ended (more opinion based) question would be
more beneficial
Sampling plan
Research instruments
- Questionnaire (most common)
- Mechanical instruments: (examples in slides)
(1) people meters
(2) checkout scanners
(3) neuro-marketing
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Implementing the research plan
 Collecting the information
 Processing the information
 Analyzing the information
Interpreting and reporting findings
 Interpret findings
 Draw conclusions
 Report to management
CHAPTER 5
CONSUMER MARKETS AND BUYER BEHAVIOR
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Consumer decision process (5 steps + examples of each step)
Characteristics affecting that process (cultural, social, personal, psychological + examples of each)
Types of decision behavior (involvement v differences between brands)
#Consumer markets and buyer behavior
What is a consumer buyer behavior?
It is the buying behavior of final consumers-individuals and households that buy final goods/services for
personal consumption
What makes up consumer markets?
All the individuals and households that purchase for personal consumption.
#Characteristics affecting consumer behavior
There are four main characteristics that affect consumer behavior:
1) Cultural
- set of basic values, perceptions, wants, and behaviors learned by a
member of society from family and other important institutions.
-Marketers need to understand the role played by the buyer’s
culture, subculture, and social class. Because cultural factors exert a
deep influence on consumer behavior.
-Marketers are always focused in finding cultural shifts in order to
spot new demands. An example of this is the shift to health, fitness,
and organic lifestyle….
2)Social
a) groups and social networks
- membership groups (direct influence which a person belongs too)
-aspirational groups (a person wishes to belong to these groups)
-reference groups (groups that form a comparison of reference in
forming consumer behavior)
Reference groups expose a person to new behaviors and lifestyles,
influence the person’s attitudes and self-concept, and create
pressures to conform that may affect the person’s product and
brand choices.
Additionally, social media has an effect as well:
-Word-of-mouth influence can have a powerful impact on consumer
buying behavior. The personal words and recommendations of
trusted friends, associates, and other consumers tend to be more
credible than those coming from commercial sources, such as
advertisements or salespeople.
-Marketers of brands subjected to strong group influence must
figure out how to reach opinion leaders—people within a reference
group who, because of special skills, knowledge, personality, or
other characteristics, exert social influence on others. Some experts
call this group the influentials or leading adopters. When these
influentials talk, consumers listen.
-Buzz marketing involves enlisting or even creating opinion leaders
to serve as “brand ambassadors” who spread the word about a
company’s products. Many companies are now turning everyday
customers into brand evangelists
b) family (most important consumer-buying organization in society)
c) roles and status (is defined by a persons position in a group)
role  A role consists of the activities people are expected to
perform according to the people around them. Each role carries a
status reflecting the general esteem given to it by society.
status Consider the various roles a working mother plays. In her
company, she may play the role of a brand manager; in her family,
she plays the role of wife and mother; at her favorite sporting
events, she plays the role of avid fan. As a brand manager, she will
buy the kind of clothing that reflects her role and status in her
company. At the game, she may wear clothing supporting her
favorite team.
(refer to notes in slides)
3)Personal
-Age and life cycle stage
-Occupation
A company may specialize in making goods that are suitable for a
certain occupational group.
-Economic status
A person’s economic situation will affect his or her store and
product choices.
Companies may redesign and reprice to fit the current economic
situation.
For example, upscale discounter Target has put more emphasis on
the “Pay less” side of its “Expect more. Pay less.” positioning
promise.
-Lifestyle
A person’s pattern of living based on their psychographics.
-Personality
The unique psychological characteristics that distinguish a person or
group.
Note: Psychographics  measure a consumer’s AIOs (activities,
interests, opinions) to capture information about a person’s pattern
of acting and interacting in the environment.
4) Psychological
- Motive
Motivation research is qualitative research designed to
understand the hidden/subconscious motivations of a consumer.
(examples in slides)
-Learning
The change in consumer behavior because of experience.
#Developing marketing information
-Because of selective attention, distortion, and retention, marketers
must work hard to get their messages through.
Selective attention is the tendency for people to screen out most of
the information to which they are exposed.
Selective distortion is the tendency for people to interpret
information in a way that will support what they already believe.
Selective retention is the tendency to remember good points made
about a brand
-Beliefs and attitudes
Belief  is a descriptive thought that a person has about something
based on:
• knowledge
*According to Abraham Maslow: A person tries to satisfy
the most important need first. When that need is satisfied,
it will stop being a motivator, and the person will then try
to satisfy the next most important need.
• opinion
• faith
Attitude  describes a person’s relatively consistent evaluations,
feelings, and tendencies toward an object or idea.
Why do marketers care about beliefs? Marketers are interested in
the beliefs that people formulate about specific products and
services because these beliefs make up product and brand images
that affect buying behavior. If some of the beliefs are wrong and
prevent purchase, the marketer will want to launch a campaign to
correct them.
#Types of buying decision behavior
Complex buying behavior  when they are highly involved in a purchase and perceive significant differences
among brands. Consumers may be highly involved when the product is expensive, risky, purchased infrequently,
and highly self-expressive.
Dissonance-reducing buying behavior  occurs when consumers are highly involved with an expensive,
infrequent, or risky purchase but see little difference among brands.
Habitual buying behavior  occurs under conditions of low-consumer involvement and little significant brand
difference.
Variety-seeking buying behavior in situations characterized by low consumer involvement but significant
perceived brand differences. In such cases, consumers often do a lot of brand switching.
#The buyer decision process
1) Need recognition
This is the first step in the process in which the consumer recognizes a problem/need triggered by
external or internal stimuli.
This is the stage where the marketer should research consumers to find out what kinds of needs
or problems arise, what brought them about, and how they led the consumer to this particular product.
2) Information search
This is the stage in which the consumer is motivated to search for more information. For example,
once you’ve decided you need a new car, at the least, you will probably pay more attention to car
ads, cars owned by friends, and car conversations. Or you may actively search the Web, talk with
friends, and gather information in other ways.
Sources of information include:
a) Personal sources
b) Commercial sources
c) Public sources
d) Experiential sources
Take into consideration that:
Traditionally, consumers have received the most information about a product from commercial
sources—those controlled by the marketer. The most effective sources, however, tend to be personal.
Commercial sources normally inform the buyer, but personal sources legitimize or evaluate products for
the buyer.
3) Evaluation of alternatives
The stage in the buyer decision process in which the consumer uses the information gathered to
evaluate other alternative brands.
Once consumers arrive at a set of final brand choices, marketers need to know how consumers
process information to choose among alternative brands.
How consumers go about evaluating purchase alternatives depends on the individual consumer
and the specific buying situation. The evaluation may involve careful calculations and logical thinking or
little or no evaluating, buying on impulse, and relying on intuition.
4) Purchase decision
Purchase decision is the buyer’s decision about which brand to
purchase.
The purchase intention may not be the purchase decision (this means that preferences and even
purchase intentions do not always result in an actual purchase.) due to:
Attitudes of others // Unexpected situational factors
5) Post purchase behavior
The stage in which consumers take decisions after purchase based on their satisfaction or
dissatisfaction.
What determines whether the buyer is satisfied or dissatisfied with a purchase? The answer lies in
the relationship between the consumer’s expectations and the product’s perceived performance.
Cognitive dissonance is buyer discomfort caused by postpurchase conflict:
Almost all major purchases, however, result in cognitive dissonance, or discomfort caused by
postpurchase conflict.
After the purchase, consumers are satisfied with the benefits of the chosen brand and are glad to avoid
the drawbacks of the brands not bought.
So consumers feel uneasy about acquiring the drawbacks of the chosen brand and about losing the
benefits of the brands not purchased. Thus, consumers feel at least some postpurchase dissonance for
every purchase and marketers should work to alleviate the discomfort by reinforcing the benefits of
the chosen brand. Because this benefits them and makes the customer come back.
#The buyer decision process for new products
A new product is a good/service/idea that is perceived by consumers newly. Even though the product may
have been around for a while, a marketers interest is in how consumers learn about products and
whether they make the decision to adopt them or not.
This leads to the adoption process: which is the mental process that an
individual goes through from first learning about an innovation to final regular use.
Stages:
AWARNESSINTERESTEVALUATIONTRIALADOPTION
• Awareness: The consumer becomes aware of the new product but lacks information about it.
• Interest: The consumer seeks information about the new product.
• Evaluation: The consumer considers whether trying the new product makes sense.
• Trial: The consumer tries the new product on a small scale to improve his or her estimate of its value.
• Adoption: The consumer decides to make full and regular use of the new product.
Marketers must help consumers move through this process, why?
For example, if consumers are not buying a new product because they do not perceive a need for it, marketing
might launch advertising messages that trigger the need and show how the product solves customers’ problems.
If customers know about the product but are not buying because they hold unfavorable attitudes toward it,
marketers must find ways to change either the product or consumer perceptions.
The five adopter groups shown in the slide have differing values.
• Innovators are venturesome—they try new ideas at some risk.
• Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas
early but carefully.
• The early mainstream is deliberate—although they rarely are leaders, they adopt new ideas before the
average person.
• The late mainstream is skeptical—they adopt an innovation only after a majority of people have tried it.
• Lagging adopters are tradition bound—they are suspicious of changes and adopt the innovation only
when it has become something of a tradition itself.
This adopter classification suggests that an innovating firm should research the characteristics of innovators and
early adopters in their product categories and direct initial marketing efforts toward them.
CHAPTER 7
CUSTOMER VALUE-DRIVEN MARKETING STRATEGY:
CREATING VALUE FOR TARGET CUSTOMERS
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It is very difficult to serve everything for everyone. Therefore, company’s must focus on a certain group
and focus their resources to meet their needs.
# Customer-driven marketing strategy
Creating value for targeted customers can be divided into two parts:
1) Selecting customers to serve
SEGMENTATION (dividing the market into smaller segments)
TARGETING (select the segment to enter)
2) Decide on a value proposal
DIFFERENTIATION (differentiate your product to create superior customer value)
POSITIONING (position the product in the minds of target customers)
#Market segmentation - Buyers in any market differ in their wants, resources, locations, buying
attitudes, and buying practices. Through market segmentation, companies divide large, heterogeneous markets
into smaller segments that can be reached more efficiently and effectively with products and services that match
their unique needs
There are four parts of segmentation:
1) Geographic (related to location; divides the market based on nations, regions, states, counties, cities,
or even neighborhoods)  an example of this could be mcdonalds and how they change their menu
based on the country they are in.
2) Demographic (such as age and gender; divided the market based on age, life-cycle stage, gender,
income, occupation, education, religion, ethnicity, and generation)
- Age and life-cycle stage segmentation divides a market into different age and life-cycle
groups.
Example: For example, Amazon targeted a younger tablet market for using the Kindle Fire
tablet, introducing FreeTime Unlimited, a multimedia subscription service targeted toward
3- to 8-year-olds. Marketers must be careful to guard against stereotypes when using age
and life-cycle segmentation.
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Gender segmentation divides a market into different segments based on gender.
Example: used in clothing, cosmetics, toiletries, and magazines. For example, P&G was
among the first to use gender segmentation with Secret, a brand specially formulated for a
woman’s chemistry, and packaged and advertised to reinforce the female image. More
recently, the men’s personal care industry has exploded, and many cosmetics brands that
previously catered mostly to women—like L’Oréal and Nivea—now successfully market
men’s lines.
Income segmentation divides a market into different income segments.
Example: Many companies target affluent consumers with luxury goods and convenience
services. Other marketers use high-touch marketing programs to court the well-to-do.
Not all companies that use income segmentation target the affluent. For example, many
retailers—such as the Dollar General, Family Dollar, and Dollar Tree store chains—
successfully target low- and middle-income groups. The core market for such stores is
represented by families with incomes under $30,000. (automobiles, clothing, cosmetics,
financial services, and travel)
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3) Psychographic (depends on the way customers think; divides a market into different segments based
on social class, lifestyle, or personality characteristics)
Example: Dunkin’ Donuts successfully targets the “Dunkin’ tribe”—not the Starbucks coffee snob but
the average Joe. Dunkin’ Donuts isn’t like Starbucks—it doesn’t want to be.”
Note that people who have the same demographic group can have very different psychographic
characteristics.
4) Behavioral (such as culture; divides a market into segments based on consumer knowledge, attitudes,
uses of a product, or responses to a product)
What are you buying for? Occasions, benefits sought, usage rate, loyalty status.
- Occasions: this refers to when consumers actually decide to buy a product. For example,
Campbell’s advertises its soups more heavily in the cold winter months, and Home Depot
runs special springtime promotions for lawn and gardens products. Other marketers
prepare special offers and ads for holiday occasions or nontraditional occasions.
- Benefits sought: this refers to finding the major benefits people look for in a product.
Markets can be segmented by user status:
nonusers, ex-users, potential users, first-time users, and regular users of a product.
Marketers want to reinforce and retain regular users, attract targeted nonusers, and
reinvigorate relationships with ex-users.
- Usage rate: light, medium, and heavy product users. Heavy users are often a small
percentage of the market but account for a high percentage of total consumption. For
instance, a recent study showed that heavy seafood consumers in the United States are a
small but hungry bunch. Less than 5 percent of all shoppers buy nearly 64 percent of
unbreaded seafood consumed in the United States.
- Loyalty status: Some consumers are completely loyal—they buy one brand all the time and
can’t wait to tell others about it. Other consumers are somewhat loyal—they are loyal to
two or three brands of a given product or favor one brand while sometimes buying others.
Still other buyers show no loyalty to any brand—they either want something different each
time they buy, or they buy whatever’s on sale. A company can learn a lot by analyzing
loyalty patterns in its market, starting with its own loyal customers.
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Requirements for effective segmentation: (these have an influence on what your target will be)
(a) Measurable (The size, purchasing power, and profiles of the segments can be measured)
(b) Accessible (being able to reach your audience; The market segments can be effectively reached and
served) For example, if you are an online company you need shipping.
(c) Substantial (target segment has to be wide-enough, it shouldn’t be too narrow/restrictive; The
market segments are large or profitable enough to serve)
(d) Differentiable (segments have to be different; The segments are conceptually distinguishable and
respond differently to different marketing mix elements and programs)
(e) Actionable (you must have the resources/expertise to produce and meet market needs; Effective
programs can be designed for attracting and serving the segments)
#Market targeting – is choosing a target market that is composed of a set of buyers who share common
needs or characteristics that the company decides to serve (which and how many segment to target?)
Four main marketing strategies:
1) Undifferentiated (mass marketing); this means that the whole market is targeted with one offer, it
focuses on common needs.
Examples of this is Amazon and department stores. As well as, companies that make salt and basic
products. They can be consumed by everyone.
2) Differentiated (segmented marketing); target several different market segments and designs
separate offers for each.
Targets several different market segments and designs separate offers for each. For example, a
company could produce a cheaper version of a product for a lower income society. OR a company
could advertise something for young people and then something more appealing to the elderly.
This strategy is more expensive because the company markets more and changes their product.
However, it achieves a stronger market position because it has more market share.
3) Concentrated (niche marketing); targets a large share of smaller markets.
Targets a large share of a smaller market. For example, a company that focuses on private jet
transport.
- An advantage of this strategy is that you can price higher because there is no competition, loyal
customers, and you own the market. (It is highly profitable)
- A disadvantage is that if something goes wrong in your segment, you lose everything. Or if a
competitor comes in with more resources, you will lose market share.
4) Micromarketing (local or individual marketing)
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What does selecting a market segment depend on?
(a) Company resources
When the firm’s resources are limited, concentrated marketing makes the most sense.
Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel.
(b) Product variability
When a firm introduces a new product, it may be practical to launch one version only, as
undifferentiated marketing or concentrated marketing may make the most sense.
(c) Product life-cycle stage
Differentiated marketing often makes more sense.
(d) Market variability
Undifferentiated marketing is appropriate where there is little market variability - most buyers have
the same tastes, buy the same amounts, and react the same way to marketing efforts.
(e) Competitors marketing strategy
When competitors use undifferentiated marketing, a firm can gain an advantage by using
differentiated or concentrated marketing, focusing on the needs of buyers in specific segments.
# Differentiation and positioning
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Product position is the way the product is defined by consumers  A product’s position is the complex
set of perceptions, impressions, and feelings that consumers have for the product compared with
competing products.
The company must decide on a value proposition—how it will create differentiated value for targeted
segments and what positions it wants to occupy in those segments. The place the product occupies in
consumers’ minds relative to competing products is the position. Products are made in factories, but
brands happen in the minds of consumers.
Example: Dreft is positioned as the gentle detergent for baby clothes; at IHOP, you “Come hungry. Leave
happy.”; at Olive Garden, “When You’re Here, You’re Family.” In the automobile market, the Nissan Versa
and Honda Fit are positioned on economy, Mercedes and Cadillac on luxury, and Porsche and BMW on
performance.
Marketers put competitors on a positioning map in order to understand their perceptions.
A positioning map shows consumer perceptions of marketers’ brands versus competing products on
important buying dimensions.
*Size of circle  indicates the brand’s relative market share.
*Position of circle  price and orientation (luxury versus performance
Steps of choosing a differentiation and positioning strategy:
1) Identifying a set of possible competitive advantages to build a position (a brand’s positioning must serve the
needs and preferences of well-defined target markets.). Example: starbucks and dunkin donuts
2) Choosing the right competitive advantages (offering consumers greater value, either through lower prices or by
providing more benefits that justify higher prices.)
3) Selecting an overall positioning strategy
4) Communicating and delivering the chosen position to the market
Value proposition: a full mix of benefits upon which a brand is positioned.
(possible value proposition positions)
***More for more: This positioning involves providing the most upscale product or service and charging a higher
price to cover the higher costs. Although more for more can be profitable, this strategy can also be vulnerable. It
often invites imitators who claim the same quality but at a lower price.
***More for the same: Companies can attack a competitor’s more for more positioning by introducing a brand
offering comparable quality at a lower price. For example, Toyota introduced its Lexus line with a more for the
same value proposition versus Mercedes and BMW.
***The same for less: Offering the same for less can be a powerful value proposition—everyone likes a good deal.
Discount stores such as Walmart and “category killers” such as Best Buy, PetSmart, David’s Bridal, and DSW Shoes
use this positioning.
***Less for much less: A market almost always exists for products that offer less and therefore cost less. Few
people need, want, or can afford “the very best” in everything they buy. In many cases, consumers will gladly
settle for less than optimal performance or give up some of the bells and whistles in exchange for a lower price.
For example, Family Dollar and Dollar General stores offer more affordable goods at very low prices.
***More for less: Of course, the winning value proposition would be to offer more for less. Many companies claim
to do this. And, in the short run, some companies can actually achieve such lofty positions. For example, when it
first opened for business, Home Depot had arguably the best product selection, the best service, and the lowest
prices compared to local hardware stores and other home improvement chains. Offering more usually costs more,
making it difficult to deliver on the “for less” promise in the long run.
***All said, each brand must adopt a positioning strategy designed to serve the needs and wants of its target
markets. More for more will draw one target market, less for much less will draw another, and so on. Thus, in any
market, there is usually room for many different companies, each successfully occupying different positions. The
important thing is that each company must develop its own winning positioning strategy, one that makes the
company special to its target consumers.
Positioning statement summarizes company or brand positioning using this form: To (target segment and need)
our (brand) is (concept) that (point of difference)
Example:
Evernote: “To busy multitaskers who need help remembering things, Evernote is a digital content management
application that makes it easy to capture and remember moments and ideas from your everyday life using your
computer, phone, tablet, and the Web.”
CHAPTER 8
PRODUCTS, SERVICES, AND BRANDS: BUILDING CUSTOMER VALUE
#What is a product?
Product  tangible/ physical; anything that can be offered in a market for attention,
acquisition, use, or consumption that satisfies a want or need.
Service  experience; a product that consists of activities, benefits, or satisfactions that are
intangible and do not result in ownership of anything.
Brand  you become loyal to the brand
*Core customer value  what is the customer really buying?
*Actual product  develop product and service features, a design, a quality level, a brand
name, and packaging
*Augmented products are services that are associated with the product (not the product itself),
this means additional consumer benefits and services (such as after sale services)
There are four types of products: (table in slides)
1) Convenience products
-products bought frequently
-not much thought goes into it (such as groceries.)
- low price
-widespread distribution
-mass promotion
Examples: toothpaste, magazines, laundry detergent
2) Shopping
-not widely available
-more thought about (you compare price, quality,style)
-bought every while
-higher price
-selective distribution
Examples: TVs, furniture, clothing
3) Specialty
-luxury type good (such as luxury car)
-not bought often and expensive.
-exclusive distribution
-carefully targeted promotion
Examples: Rolex, luxury items
4) Unsought
-any product that you buy because you have to, not because you are interested (such as
life insurance)
#PRODUCT AND SERVUCE DECISIONS
In order to create customer value:
(a) Communicate and deliver benefits by product and service attributes.
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Quality
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Features
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Style and design
The benefits that the product/service offers.
(b) Brand is the name, term, sign, or design or a combination of these, that identifies the maker or seller of a
product or service.
(c) Packaging involves designing and producing the container or wrapper for a product.
(d) Labels identify the product or brand, describe attributes, and provide promotion.
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(e) Product support services augment actual products.
Customer service: Customer service is another element of product strategy. A company’s offer usually
includes some product support services, which can be a minor part or a major part of the total offering.
Support services are an important part of the customer’s overall brand experience. Keeping customers
happy after the sale is the key to building lasting relationships.
EXAMPLE: Many companies now use a sophisticated mix of phone, e-mail, online, social media, mobile,
and interactive voice and data technologies to provide support services that were not possible before. For
example, Lowe’s has equipped employees with 42,000 iPhones filled with custom apps and add-on
hardware, letting them perform service tasks such as checking inventory at nearby stores, looking up
specific customer purchase histories, sharing how-to videos, and checking competitor prices—all without
leaving the customer’s side.
Product line decisions:
What is a product line? a group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall
within given price ranges.
Product line decision involves product line length:
The line is too short if the manager can increase profits by adding items
The line is too long if the manager can increase profits by dropping items.
Managers need to analyze their product lines periodically to assess each item’s sales and profits and
understand how each item contributes to the line’s overall performance.
A company can expand its product line in two ways:
(a) Line stretching :
occurs when a company lengthens its product line beyond its current range − downward, upward, or both
ways.
Companies located at the upper end of the market can stretch their lines downward. A company may
stretch downward to plug a market hole that otherwise would attract a new competitor or respond to a
competitor’s attack on the upper end. Or it may add low-end products because it finds faster growth
taking place in the low-end segments.
Companies can also stretch their product lines upward. Sometimes, companies stretch upward to add
prestige to their current products. Or they may be attracted by a faster growth rate or higher margins at
the higher end.
(b) Line filling:
adding more items within the present range of the line for earning extra profits, satisfying dealers,
using excess capacity, being the leading full-line company, and plugging holes to keep out
competitors. The company should ensure that new items are noticeably different from existing ones.
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Product mix : consists of all the product lines and items that a particular seller offers for sale.
(a) Product mix width is the number of different product lines the company carries.
(b) Product mix length is the total number of items the company carries within its product lines.
(c) Product mix depth is the number of versions offered of each product in the line.
(d) Consistency is how closely the various product lines are in end use, production requirements, or
distribution channels.
#SERVICES MARKETING
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Four service characteristics
*Intangibility  services cannot be touched, seen, felt, heard, or smelled before they are purchased.
*Inseparability  refers to the fact that services cannot be separated from their providers.
* Variability  refers to the fact that service quality depends on who provides the services as well as when,
where, and how the services are provided.
*Perishability  services cannot be stored for later sale or use.
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Three types of services marketing
Marketing strategies for service firms:
Managing service quality enables a service firm to differentiate itself by delivering consistently higher
quality than its competitors provide.
Managing service productivity refers to the cost side of marketing strategies for service firms.
• Employee hiring and training
• Service quantity and quality
All business are bound to mess up at some point. What matters is how they recover. (check slide 15 for
example)
#BRAND STRATEGY: BUILDING STRONG BRANDS
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Brand equity is the differential effect that knowing the brand name has on customer response to the
product or its marketing.
A powerful brand has high brand equity. It’s a measure of the brand’s ability to capture consumer
preference and loyalty. A brand has positive brand equity when consumers react more favorably to it than
to generic or unbranded products.
Ad agency Young & Rubicam’s BrandAsset Valuator measures brand strength along four consumer
perception dimensions: differentiation, relevance, knowledge, and esteem. Brands with strong brand
equity rate high on all four dimensions.
High brand equity provides a company with many competitive advantages:
• high level of consumer brand awareness and loyalty
• more leverage in bargaining with resellers
• easier launch of line and brand extensions
• defense against fierce price competition
Brand value is the total financial value of a brand.
BRAND STRATEGY DECISIONS INVOLVE:
Brand Positioning
Marketers can position brands at any of three levels.
• Attributes (lowest level)
At the lowest level, they can position the brand on product attributes. For example, P&G’s
Pampers’ early marketing focused on attributes such as fluid absorption, fit, and
disposability. Attributes are the least desirable level for brand positioning because
competitors can easily copy attributes. Customers are not interested in what the attributes
are—they are interested in what the attributes will do for them.
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Benefits
A brand can be better positioned by associating its name with a desirable benefit. Thus,
Pampers can go beyond technical product attributes and talk about the resulting
containment and skin-health benefits from dryness.
•
Beliefs and values (strongest position)
The strongest brands are positioned on strong beliefs and values, engaging customers on a
deep, emotional level. For example ,Pampers is positioned as a “love, sleep, and play brand
where we grow together” that’s concerned about happy babies, parent-child relationships,
and total baby care.
Brand Name Selection
1. Suggests benefits and qualities It should suggest something about the product’s benefits and
qualities: Beautyrest, Lean Cuisine, Snapchat, Pinterest.
2. Easy to pronounce, recognize, and remember  iPad, Tide, Jelly Belly, Twitter, JetBlue.
3. Distinctive  Panera, Swiffer, Zappos, Nest.
4. Extendable  Amazon.com began as an online bookseller but chose a name that would allow
expansion into other categories.
5. Translatable for the global economy The name should translate easily into foreign languages.
Before changing its name to Exxon, Standard Oil of New Jersey rejected the name Enco, which it
learned meant a stalled engine when pronounced in Japanese.
6. Capable of registration and legal protection  A brand name cannot be registered if it infringes
on existing brand names.
A company has four choices when it comes to brand development (see Figure 8.6). It
can introduce line extensions, brand extensions, multibrands, or new brands.
Line extensions occur when a company extends existing brand names to new forms,
colors, sizes, ingredients, or flavors of an existing product category. For example, over
the years, KFC has extended its “finger lickin’ good” chicken lineup well beyond original
recipe and now offers grilled chicken, boneless fried chicken, chicken tenders, hot
wings, and chicken bites. A line extension works best when it takes sales away from
competing brands, not when it “cannibalizes” the company’s other items.
Brand extension extends a current brand name to new or modified products in a new
category. For example, Starbucks has extended its retail coffee shops by adding
packaged supermarket coffees, a chain of teahouses (Teavana Fine Teas + Tea Bar), and
even a single-serve home coffee, espresso, and latte machine—the Verismo. And P&G
has leveraged the strength of its Mr. Clean household cleaner brand to launch several
new lines: cleaning pads (Magic Eraser), bathroom cleaning tools (Magic Reach), and
home auto cleaning kits (Mr. Clean AutoDry).
Multibrands: Companies often market many different brands in a given product
category. For example, in the United States, PepsiCo markets at least eight brands of
soft drinks (Pepsi, Sierra Mist, Mountain Dew, Manzanita Sol, Mirinda, IZZE, Tropicana
Twister, and Mug root beer), three brands of sports and energy drinks (Gatorade, AMP
Energy, and Starbucks Refreshers), four brands of bottled teas and coffees (Lipton, SoBe,
Starbucks, and Tazo), three brands of bottled waters (Aquafina, H2OH!, and SoBe), and
nine brands of fruit drinks (Tropicana, Dole, IZZE, Lipton, Looza, Ocean Spray, and
others). Each brand includes a long list of sub-brands.
Disadvantage As with multibranding, offering too many new brands can result in a
company spreading its resources too thin. And in some industries, such as consumer
packaged goods, consumers and retailers have become concerned that there are
already too many brands, with too few differences between them.
New brands: A company might believe that the power of its existing brand name is
waning, so a new brand name is needed. Or it may create a new brand name when it
enters a new product category for which none of its current brand names are
appropriate. For example, Toyota created the separate Lexus brand aimed at luxury car
consumers and the Scion brand, targeted toward Millennial consumers.
CHAPTER 10&11
PRICING: UNDERSTANDING AND CAPTURING CUSTOMER VALUE
CHAPOTER 10-PRICING: UNDERSTANDING AND CAPTURING CUSTOMER VALUE
#What is price?
Amount of money charged for a product/service. OR sum of all the values that customers
exchange for the benefits of having a product/value.
- Price is one of the most important elements that determines a firm’s market share and
profitability.
- Price is the only element in the marketing mix that produces revenue; all other elements
represent costs.
- Price is also one of the most flexible marketing mix elements; prices can be changed
quickly.
#Major pricing strategies
*the company must set a price between the price floor (lowest price because otherwise you will have a cost) and
the price ceiling (highest price you can det because otherwise customers wont buy)
There are 3 major pricing strategies:
1) Customer value-based pricing (customer driven- uses the buyers’ perceptions of value rather than the
seller’s cost.)
-Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary
price discounts.
-High-low pricing involves charging higher prices on an everyday basis but running frequent promotions
to lower prices temporarily on selected items.
-Good-value pricing is offering just the right combination of
quality and good service at a fair price.  ALDI keeps costs low so that it can offer customers
“impressively high quality at impossibly low prices” every day.
2) Cost-based pricing (product driven and sets a price that covers costs plus a target profit): sets prices based
on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk.
3) Competition-based pricing: is setting prices based on competitors’ strategies, costs, prices, and market
offerings.
#Other Considerations Affecting Price Decisions
Economic conditions
Reseller’s response to price
Government
Social concerns

decisions because they affect consumer spending, consumer perceptions of the product’s price and value,
and the company’s costs of producing and selling a product.
•
The company should set prices that give resellers a fair profit, encourage their support, and help them to
sell the product effectively.
The government is another important external influence on pricing decisions.
Social concerns may need to be taken into account. In setting prices, a company’s short-term sales,
market share, and profit goals may need to be tempered by broader societal considerations.
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CHAPTER 11 -Pricing Strategies: Additional Considerations
market-skimming pricing
An example of this is Apple, they skim the market
to get the highest revenue from all consumers.
When Apple first introduced the iPhone,
its initial price was as high as $599 per
phone. The phones were purchased only
by customers who really wanted the
sleek new gadget and could afford to pay
a high price for it. Six months later, Apple
dropped the price to $399 for an 8-GB
model and $499 for the 16-GB model to
attract new buyers. Within a year, it
dropped prices again to $199 and $299,
respectively, and you can now get a basic
8-GB model for free with a wireless
phone contract. In this way, Apple has
skimmed the maximum amount of
revenue from the various segments of
the market.
Conditions of price skimming:
 First, the product’s quality and image must
support its higher price, and enough buyers must
want the product at that price.
 Second, the costs of producing a smaller
volume cannot be so high that they cancel the
advantage of charging more.
 Finally, competitors should not be able to enter
the market easily and undercut the high price.
market-penetration pricing.
Involves setting a low price for a new product in
order to attract a large number of buyers and a
large market share.
Samsung has used low initial prices to
make quick and deep inroads into
emerging mobile device markets such as
Africa and India.
The high sales volume results in falling
costs, allowing companies to cut their
prices even further.
#PRICE ADJUSTMENT STRATEGIES (7)
Promotional pricing is characterized by temporarily pricing products below the list price, and sometimes even
below cost, to increase short-run sales. Examples include:
• special-event pricing
• limited-time offers
• cash rebates
• low-interest financing, extended warranties, or free maintenance
note that: promotional pricing may have a negative effect of price wars and damage to brand equity.
#PRICE CHANGES
Initiating Price Changes
Price cuts occur due to:
• Excess capacity
• Increased market share (in the face
of strong price competition or a
weakened economy, firms will; cut
prices to increase market share)
•
Responding to Pricing Changes
Effective Action Responses
• Reduce price to match competition
• Maintain price but raise the
perceived value through
communications
• Improve quality and increase price
• Launch a lower-price “fighting”
brand
Price increases occur due to:
• Cost inflation
• Increased demand
• Lack of supply
Wherever possible, the company should consider
ways to meet higher costs or demand without raising
prices, such as by:
Competitor Reactions to Pricing Changes
•
using more cost-effective ways to produce or
distribute its products.
• “unbundling” its market offering and price
elements separately.
shrinking the product or substituting less-expensive
ingredients.
CHAPTER 9
DEVELOPING NEW PRODUCTS AND MANAGING THE PRODUCT LIFE CYCLE
#New product development process
1) Idea generation: this refers to the systemic search for new product ideas
Sources can be either:
(a) Internal (employees, managers)  this means it’s the company’s own formal R&D, and
entrepreneurial programs.
An example of this is:
Google’s Innovation Time-Off program and 3M’s Dream Days encourage employees to spend a portion of
their working time on their own projects, resulting in many other successful products.
Tech companies such as Facebook and Twitter sponsor periodic “hackathons,” in which employees take a
day or a week away from their day-to-day work to develop new ideas.
LinkedIn, the 250-million-member professional social media network, holds monthly “hackdays” and
encourages employees to work on whatever they want that will benefit the company.
(b) External (focus groups)  refers to outside sources such as customers, competitors, distributors,
suppliers, and outside design firms.
Distributors are close to the market and can pass along information about consumer problems and new
product possibilities.
Suppliers can tell the company about new concepts, techniques, and materials that can be used to
develop new products. Walmart invites its thousands of would-be suppliers to submit product ideas and
supporting videos through its “Get on the Shelf” program and then invites its customers to vote for the
products they’d most like to see on shelves.
Competitors are another important source. Companies watch competitors’ ads to get clues about their
new products. They buy competing new products, take them apart to see how they work, analyze their
sales, and decide whether they should bring out a new product of their own. Other idea sources include
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trade magazines, shows, web sites, and seminars; government agencies; advertising agencies; marketing
research firms; university and commercial laboratories; and inventors.
Customers. The company can analyze customer questions and complaints to find new products that
better solve consumer problems. Or it can invite customers to share suggestions and ideas. For example,
the LEGO CUUSOO web site invites users to submit ideas for “the LEGO set of their dreams” and to vote
for other users’ ideas. Ideas supported by 10,000 votes are reviewed internally with a chance of being put
into production.
------------------------------------------------------------------------------------------------------------------TQM  (total quality management), is an approach where all of the company’s employees are involved
in constantly improving the quality of products, services, and business processes.
Product quality is a major positioning tool. It is defined in terms of creating customer value and
satisfaction.
Product quality has 2 dimensions:
(a) Quality level  this means performance quality (the product ability to perform its functions)
(b) Quality conformance  this means freedom from defects and consistency in delivering a targeted
level of performance.
2) Idea screening:
The process of narrowing down the good ideas and dropping the poor ideas. This is dangerous because you could
be dumping GOOD ideas. (you can avoid this by being fully informed; and conducting research)
Why do companies want to reduce ideas? Because product development costs rise greatly in later stages,
so the company wants to pursue only those product ideas that will turn into profitable products.
Many companies require executives to “write-up” new product ideas. The write up includes the product
or the service, the proposed customer value proposition, the target market, and the competition. It makes
some rough estimates of market size, product price, development time and costs, manufacturing costs,
and rate of return.
Based on the write up, the company should be able to answer YES to all the RWW questions.
R-W-W: Is it Real?- Can we Win?- Is it Worth doing?
3)
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Concept development and testing: the idea must then be developed into a product concept
Product idea: an idea for a possible product that the company can offer in the market
Product concept: is a detailed version of the idea stated in meaningful consumer terms
Product image is the way consumers perceive an actual or potential product
Concept testing: refers to testing new product concepts with a sample of target consumers
After being exposed to the concept, consumers then may be asked to react to it by answering questions.
The answers to such questions will help the company decide which concept has the strongest appeal and
the consumer’s intention to buy.
4) Business analysis
This is a very detailed financial review of the sales, costs, and profits for a new product. This is done in
order to find out whether these factors satisfy the companys objectives.
If the business analysis satisfies the company’s objectives, the product can move to the product
development stage.
In order for the company to get these estimate amounts, the company can look at the sales history of
similar products and conduct market surveys. Then, the company can estimate min and max sales to
assess the range of risk. After this, management can predict costs and profits, then decide if the product is
financially attractive.
5) Product development
 this is the stage in which the product concept is developed into a physical product to ensure that the
product idea can be turned into a workable market offering.
During this stage, after the product passes the business test, R&D/engineers develop the product concept
into a physical product ---------- this calls for a huge jump in investment
6) Test marketing (gives information about whether to launch or not)
 is the stage of new product development in which the product and its proposed marketing program
are tested in realistic market settings.
Test marketing allow the company to test the product and its entire marketing program (targeting and
positioning strategy, advertising, distribution, pricing, branding and packaging, and budget levels)
7) Commercialization
 this is the act of actually introducing a new product into the market
If the company decides to launch the new product, it must decide on 3 things:
(a) When to launch? (timing)  they must makes sure that the time they choose to launch wont cause
the new product to eat into the sales of the other products of the company. Additionally, they may
also delay the launch if the product can be further improved or if the economy is down. Moreover,
the company might launch SOONER, in order to get ahead of competitors.
(b) Where to launch?  in a single location, a region, the national market, or the international market
For example, Microsoft launched its Windows 8 operating system with a massive $1 billion global
marketing campaign spanning 42 countries.
(c) Planned market rollout?
#Managing new product development
New product development has to be customer centered. To be successful in the development, the company must
understand what customers need and value.
Most successful new products are ones that are:
(a) Differentiated
(b) solve major customer problems
(c) offer a compelling customer value proposition.
In addition, customer involvement has a positive effect on the new product development process and product
success.
Thus, today’s innovative companies get out of the research lab and connect with customers in search of
fresh ways to meet customer needs. Customer-centered new product development begins and ends with
understanding customers and involving them in the process.
#Product life-cycle strategies
The product cycle includes 5 stages:
1) Product development  begins when the company finds and develops the new product idea, it has zero
sales and increasing investment costs
2) Introduction  nonexistent profits due to heavy expenses of product introduction and it has slow sales
In this stage profits are negative or low because of the low sales and high distribution and promotion
expenses. Firms focus their selling on those buyers who are the most-ready to buy.
3)
-
-
Growth if the product satisfies the market it will enter the growth stage
period of rapid market acceptance and increasing profits
Sales increase
New competitors enter the market
Consumer education
Companys lower prices to attract new customers
The firm uses several strategies to sustain rapid market growth as long as possible:
• Improving product quality
• Adding new product features and models
• Entering new market segments and new distribution channels
• Shifting some advertising from awareness to building product conviction and purchase
• Lowering prices at the right time to attract more buyers
In the growth stage, the firm faces a trade-off between high market share and high current profit. By
spending a lot of money on product improvement, promotion, and distribution, the company can capture
a dominant position. In doing so, however, it gives up maximum current profit, which it hopes to make up
in the next stage.
4) Maturity  low sales growth and profits level off or decline because of increased marketing outlays to
defend the product against competition.
The maturity stage normally lasts longer than the previous stages, and it poses strong challenges to
marketing management. Most products are in the maturity stage of the life cycle, and therefore most of
marketing management deals with the mature product.
The slowdown in sales growth results in many producers with many products to sell. In turn, this
overcapacity leads to greater competition and a drop in profit. Some of the weaker competitors start
dropping out, and the industry eventually contains only well-established competitors.
Although many products in the mature stage appear to remain unchanged for long periods, most
successful ones are actually evolving to meet changing consumer needs. Product managers should do
more than simply ride along with or defend their mature products—a good offense is the best defense.
Modification strategies include:
a) Modify the market  the company tries to increase consumption by finding new users and new
market segments for its brands.
b) Modify the product  involves changing characteristics such as quality, features, style, or
packaging to attract new users and inspire more usage. The company can improve the product’s
styling and attractiveness or improve the product’s quality and performance—durability, reliability,
speed, and taste.
c) Modify the marketing mix  involves improving sales by changing one or more marketing mix
elements. The company can offer new or improved services to buyers. It can cut prices to attract
new users and competitors’ customers. It can launch a better advertising campaign or use
aggressive sales promotions—trade deals, cents-off, premiums, and contests. In addition to pricing
and promotion, the company can also move into new marketing channels to help serve new users.
5) Decline  sales fall off and profits drop (Sales decline for many reasons, including technological advances,
shifts in consumer tastes, and increased competition.)
-
Maintain the product
Harvest the product
Drop the product
ˆ^summary of PLC stages
Not all products follow all five stages of the PLC. Some products are introduced and die quickly; others stay in the
mature stage for a long, long time. Some enter the decline stage and are then cycled back into the growth stage
through strong promotion or repositioning. It seems that a well-managed brand could live forever. Examples of
well-known brands that have been around for at least 100 years include Coca-Cola, Gillette, Budweiser, American
Express, TABASCO sauce, and Life Savers Mints.
The PLC can describe one of three things:
1) Product class  longest life cycles; the sales of many product classes stay in the mature stage for a long
time.
2) Product form  tend to have the standard PLC shape: Product forms such as “dial telephones,” “VHS
tapes,” and “film cameras” passed through a regular history of introduction, rapid growth, maturity, and
decline
3) Product brand  A specific brand’s life cycle can change quickly because of changing competitive attacks
and responses. For example, although laundry soaps (product class) and powdered detergents (product
form) have enjoyed fairly long-life cycles, the life cycles of specific brands have tended to be much
shorter.
CHAPTER 12
MARKETING CHANNELS: DELIVERING CUSTOMER VALUE
#Supply chains and value delivery networks
Producing a product or service and making it available to buyers requires building relationships not only with customers but
also with key suppliers and resellers in the company’s supply chain.
This supply chain consists of:
(a) Upstream partners  firms that supply raw materials, components, parts, information, finances, and expertise needed to
create a product or service.
(b) Downstream partners  include the marketing channels or distribution channels that look toward the customer, this
includes retailers and wholesalers.
Value delivery network: composed of the company, suppliers, distributors, and, ultimately, customers who partner with each
other to improve the performance of the entire system.
Marketing channel (distribution channel): is a set of interdependent organizations that help make a product or service
available for use or consumption by the consumer or business user.
#The nature and importance of marketing channels
Marketing channels are beneficial in the sense that it reduces the amount of work that must be done by the producer and
consumer by acting as the middleman. SO, all manufacturers contact one distributer which then contacts all customers INSTEAD
OF each manufacturer having to contact each individual customer.
Number of channel levels:
Channel level: a layer of intermediaries that performs some work in bringing the product and its ownership closer to the
final buyers.
There are 2 marketing channels:
Direct marketing channel  no intermediary levels involved.
Indirect marketing channel  contains one or more intermediary levels.
Both of these channels can be consumer based OR business based:
**note that the more channels there are, the less control the company has and the more complex it becomes.
#Channel behavior and organization
Channel conflict refers to disagreement among channel members over goals, roles, and rewards. It could be either horizontal
conflict or vertical conflict.
Horizontal  conflict among firms that are at the same level of the channel
Vertical  occurs between different levels of the same channel
There are 2 types of marketing systems:
1) Vertical marketing system
 conventional distribution systems: consist of one or more independent producers, wholesalers, and retailers, each separate
business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole.
(have lacked leadership and power, often resulting in damaging conflict and poor performance)
2) Horizontal marketing system
 is a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.
This is useful because when the companies work together and combine their resources, they will achieve more than they
would have alone. (Companies might join forces with competitors or noncompetitors. They might work with each other on a
temporary or permanent basis, or they may create a separate company)
Companies may also use a Multichannel distribution system. (this means that they do both direct and indirect selling)
There are advantages and disadvantages to a multichannel distribution system:
ADV: Multichannel distribution systems offer many advantages to companies facing large and complex markets. With
each new channel, the company expands its sales and market coverage and gains opportunities to tailor its products and services
to the specific needs of diverse customer segments.
DIS: multichannel systems are harder to control, and they can generate conflict as more channels compete for customers
and sales.
Changing channel organization: disintermediation  this means cutting out of marketing channel intermediaries by producers
or the displacement of traditional resellers by new intermediaries (internet)
#Channel design decisions
Analyzing
consumer
needs
Setting
channel
objectives
Identifying
channel
alternatives
Evaluating
channel
alternatives
(a) Analyzing consumer needs:
Find out what target consumers want from the channel
Identify market segments (different segments could want different levels of service)
Determine the best channels to use
Minimize the cost of meeting customer service requirements (providing higher levels of service results in higher costs for
the channel and higher prices for consumers. The success of modern discount retailing shows that consumers will often accept
lower service levels in exchange for lower prices.)
(b) Setting channel objectives:
Determine the targeted levels of customer service
To determine targeted levels of customer service, companies must answer the following questions: Do consumers want to buy
from nearby locations or are they willing to travel to more distant and centralized locations? Would customers rather buy in
person, by phone, or online? Do they value breadth of assortment or do they prefer specialization? Do consumers want many
add-on services (delivery, installation, repairs), or will they obtain these services elsewhere?
Balance consumer needs against costs and preferred prices
(c) Identifying channel alternatives:
Number of marketing intermediaries:
The company has to decide how many channel members to use at each level. There are 3 strategies available:
1)
Intensive distribution  this strategy stocks their products in as many outlets as possible (this
strategy is usually used by producers of convenience products and common raw materials)
2)
Exclusive distribution  producer gives only a limited number of dealers the exclusive right to
distribute its products in their territories. Exclusive distribution is often found in the distribution of luxury brands.
3)
Selective distribution (lies between intensive and exclusive) the use of more than one but fewer
than all of the intermediaries who are willing to carry a company’s products. Most consumer electronics, furniture,
and home appliance brands are distributed in this manner.
Responsibilities of channel members:
A producer and the intermediaries must agree on:
1) Price policies
2) Conditions of sale
3) Territory rights
4) Specific services
In addition, the producer should establish a list price and a fair set of discounts for the intermediaries. It must define each
channel member’s territory, and it should be careful about where it places new resellers.
Mutual services and duties need to be spelled out carefully, especially in franchise and exclusive distribution channels.
(d) Evaluating channel alternatives:
Economic criteria  a company uses this criteria to compare the likely sales, costs, and profitability of different channel
alternatives.
Control issues  Using intermediaries usually means giving them some control over the marketing of the product, and
some intermediaries take more control than others. Other things being equal, the company prefers to keep as much control as
possible.
Adaptability criteria  Channels often involve long-term commitments, yet the company wants to keep the channel
flexible so that it can adapt to environmental changes. Thus, to be considered, a channel involving long-term commitments
should be greatly superior on economic and control grounds.
#Channel management decision
Once the company has reviewed its channel alternatives and determined the best channel design, it must implement and
manage the chosen channel. Marketing channel management calls for selecting, managing, and motivating individual channel
members and evaluating their performance over time.
Selecting channel
members
Managing
channel members
Motivating
channel members
Evaluating
channel members
(a) Selecting Channel Members
Producers vary in their ability to attract qualified marketing intermediaries. Some producers have no trouble signing up
channel members and others have to work hard to line up enough qualified intermediaries.
For example, when Timex first tried to sell its inexpensive watches through regular jewelry stores, most jewelry stores refused
to carry them. The company then managed to get its watches into mass-merchandise outlets.
Even established brands may have difficulty gaining and keeping their desired distribution, especially when dealing with
powerful resellers. For example, you won’t find P&G’s Pampers diapers in a Costco store. After P&G declined to manufacture
Costco’s Kirkland store brand diapers a few years ago, Costco gave Pampers the boot.
When selecting intermediaries, the company should determine what characteristics distinguish the better ones. It will want to
evaluate each channel member’s years in business, other lines carried, location, growth and profit record, cooperativeness, and
reputation.
(b) Managing and Motivating Channel Members
Once selected, channel members must be continuously managed and motivated to do their best. The company must sell not
only through the intermediaries but also to and with them. In managing channel members, companies practice partner
relationship management (PRM) and supply chain management (SCM) to develop long term relationships.
(c) Evaluating Channel Members
The company must regularly check channel member performance against standards such as sales quotas, average inventory
levels, customer delivery time, treatment of damaged and lost goods, cooperation in company promotion and training programs,
and services to the customer. The company should recognize and reward intermediaries who are performing well, assist those
performing poorly or, as a last resort, replace them.
Finally, companies need to be sensitive to the needs of their channel partners. Those who treat their partners poorly risk not
only losing their support but also causing some legal problems. The next section describes various rights and duties pertaining to
companies and other channel members.
#Marketing logistics and SCM
Nature and importance of marketing logistics:
Marketing logistics  (physical distribution) involves planning, implementing, and controlling the physical flow of goods,
services, and related information from points of origin to points of consumption to meet consumer requirements at a profit.
Companies must decide on the best way to store, handle, and move their products and services so that they are available to
customers in the right assortments, at the right time, and in the right place.
In a nutshell, marketing logistics is basically getting the right product to the right customer in the right place and time.
Supply chain management 
Marketing logistics involve both outbound logistics (moving products from the factory to resellers and ultimately to customers)
AND inbound logistics (moving products and materials from suppliers to the factory) and reverse logistics (reusing, recycling,
refurbishing, or disposing of broken, unwanted, or excess products returned by consumers or resellers).
Major logistics functions 
Warehousing
Inventory
management
Transportation
Logistics
information
management
What is the importance of logistics?
•
Competitive advantage by giving customers better service at lower prices.
•
Cost savings to the company and its customers.
•
Product variety requires improved logistics.
•
Information technology has created opportunities for distribution efficiency.
(a) Warehousing  Production and consumption cycles rarely match, so most companies must store their goods while they
wait to be sold. A company must decide on how many and what types of warehouses it needs and where they will be located.
The company might use either storage warehouses or distribution centers. Storage warehouses store goods for moderate to long
periods. In contrast, distribution centers are designed to move goods rather than just store them.
(b) Inventory management  Inventory management also affects customer satisfaction. Managers must balance the costs
of carrying larger inventories against resulting sales and profits. Many companies have greatly reduced their inventories and
related costs through just-in-time logistics systems which result in substantial savings in inventory-carrying and inventoryhandling costs. Companies using RFID know, at any time, exactly where a product is located physically within the supply chain.
“Smart shelves” not only tell them when it’s time to reorder but also place the order automatically with suppliers.
(c) Transportation  The choice of transportation carriers affects the pricing of products, delivery performance, and the
condition of goods when they arrive—all of which will affect customer satisfaction. In shipping goods to its warehouses, dealers,
and customers, the company can choose among five main transportation modes: truck, rail, water, pipeline, and air, along with
an alternative mode for digital products—the Internet. Multimodal transportation involves combining two or more modes of
transportation.
(d) Logistics information management  Companies manage their supply chains through information. Channel partners
often link up to share information and make better joint logistics decisions. From a logistics perspective, flows of information,
such as customer transactions, billing, shipment and inventory levels, and even customer data, are closely linked to channel
performance. Companies need simple, accessible, fast, and accurate processes for capturing, processing, and sharing channel
information
CHAPTER 14
ENGAGING CONSUMERS AND COMMUNICATING CUSTOMER VALUE:
INTEGRATED MARKETING COMMUNICATION STRATEGY
#The promotional mix (also called marketing communications mix)
-
What is it? consists of the specific blend of promotion tools that the company uses to engage consumers,
persuasively communicate customer value, and build customer relationships.
This tools include:
1) Advertising:
It is any form of paid non personal presentation and promotion for a good, idea, or service by and
identified sponsor. Advertising can be in the form of broadcasts, print, online, mobile, outdoor, and
other forms.
2) Sales promotion:
It is a short-term incentive to encourage the purchase or sale of a product or service. It includes
things like: discounts, coupons, displays, demonstrations…
3) Personal selling:
It is the personal interaction by the firm’s sales force for the purpose of engaging customers, making
sales, and building customer relationships.
4) Public relations:
It is the building of good relations with the company’s various publics by obtaining favorable publicity,
building up a good corporate image, and handling or heading off unfavorable rumors, stories, and
events.
5) Direct and digital marketing:
It is engaging directly with carefully targeted individual consumers and customer communities to
both obtain an immediate response and build lasting customer relationships.
#Integrated marketing communications
- The changing society has led to changing the factors that are used by the marketing communications:
1) Consumers are changing: consumers have changed in the sense that they are now better informed
because they no longer depend on marketer-supplied information. Rather, they get their info through
internet, social media, and other technologies on their own.
2) Marketing strategies are changing: this is because mass marketing is no longer effective, SO  marketers
are more focused on building marketing programs that are designed to build closer customer
relationships.
3) Advances in technology: the digital age has changed marketing in the sense that consumer can now be
reached in new ways such as emails, blogs, websites, social media and online communities.
-What is content marketing?
creating, inspiring, and sharing brand messages and conversations with and among consumers across a
fluid mix of paid, owned, earned, and shared channels.
-What is IMC?
IMC involves carefully integrating and coordinating the company’s many communications channels to
deliver a clear, consistent, and compelling message about the organization and its products.
-Why do we need IMC (integrated marketing communications)?
Because without it, consumers become confused about what the brand image is:
In the consumer’s mind, brand content from different sources—whether it’s a Super Bowl ad, in-store
display, mobile app, or a friend’s social media post—all become part of a single message about the brand
or company. Conflicting content from these different sources can result in confused company images,
brand positions, and customer relationships.
All too often, companies fail to integrate their various communication channels. The result is a
hodgepodge of brand content to consumers. The new world of online, mobile, and social media marketing
presents tremendous opportunities but also big challenges.
Marketers benefit from increased access to their customers and fresh insights into their preferences.
However, marketers must manage the complexity, fragmentation choices available so it comes together in
an organized way.
Integrated marketing communications calls for recognizing all touch points where the customer may
encounter content about the company and its brands.
Each contact with the brand will deliver a message—whether good, bad, or indifferent.
The company’s goal should be to deliver a consistent and positive message at each contact.
 Integrated marketing communications ties together all of the company’s messages and images.
Its television and print ads have the same brand message as its e-mail and personal selling
communications, and its PR materials are consistent with web site, online, social media, and mobile
marketing content.
The sender is the party sending the message to another party.
Encoding is the process of putting thought into symbolic form.
The message is the set of symbols the sender transmits.
Media refer to the communications channels through which the message moves from sender to receiver.
Decoding is the process by which the receiver assigns meaning to the symbols.
The receiver is the party receiving the message sent by another party.
A response is the reaction of the receiver after being exposed to the message.
Feedback is the part of the receiver’s response communicated back to the sender.
Noise is the unplanned static or distortion during the communication process which results in the receiver
getting a different message than the one the sender sent.
#Steps in developing effective marketing communication
Identify the target audience
Determine the communication
objectives
Design the message
Choose the media to send the
message
Select message source and
collect feedback
1) Identify the target audience
A marketing communicator starts with a clear target audience in mind. The target audience will
heavily affect the communicator’s decisions on: - what, how, when, where and who?
This part of the process is where marketers answer certain questions to target their audience:
What will be said? How it will be said? When it will be said? Where it will be said? And who will say it?
The target audience could be in one of 6 buyer-readiness stages (these are the stages that consumers
go through in the process of making a purchase):
Consider a Microsoft surface tablet as an example:
**The consumer wouldn’t know anything about it initially, so the marketers first step will be to build
awareness and knowledge.
**After the consumer becomes aware of the product, the marketer must now find out how the
customer feels about it? liking (feeling favorable about the Surface), preference (preferring the
Surface to competing tablets), and conviction (believing that the Surface is the best tablet for them
 A combination of promotion tools are used to create +ve feelings and conviction.
** some members of the target market might be convinced about the product but not quite get
around to making the purchase. To help reluctant consumers over such hurdles, Microsoft might offer
buyers special promotional prices and upgrades, and support the product with comments and
reviews from customers at its Web and social media sites and elsewhere.
2) Determine communication objectives:
3) Design the message:
Ideally, the message should follow the AIDA model framework (this model suggests desirable
qualities of a good message):
AIDA Model
• Get Attention
• Hold Interest
• Arouse Desire
• Obtain Action
The message content can appeal to the consumers in 3 ways:
1) Rational appeal  relates to the audience’s self-interest…. Examples are messages showing a
product’s quality, economy, value, or performance.
2) Emotional appeal  this appeal stirs up -ve or +ve emotions to motivate a purchase… it ranges
from love, joy, and humor to fear and guilt. Advocates of emotional messages claim that they
attract more attention and create more belief in the sponsor and the brand.
3) Moral appeal  is directed to an audience’s sense of what is right and proper (often used to urge
people to support social causes, such as a cleaner environment or aid to the disadvantaged)
When putting together a message, marketers must consider what to say and how to say it:
WHAT TO SAY:
Message Content  The marketer has to figure out an appeal or theme that will produce the desired
response. There are three types of appeals: rational, emotional, and moral.
HOW TO SAY IT:
Message Structure  Marketers must also decide how to handle three message structure issues. The
first is whether to draw a conclusion or leave it to the audience. Research suggests that, in many
cases, rather than drawing a conclusion, the advertiser is better off asking questions and letting
buyers come to their own conclusions.
Message Format  The marketing communicator also needs a strong format for the message. In a
print ad, the communicator has to decide on the headline, copy, illustration, and colors. To attract
attention, advertisers can use novelty and contrast; eye-catching pictures and headlines; distinctive
formats; message size and position; and color, shape, and movement. For example, consider the
striking Benjamin Moore paint ad shown in the slide
4) Choose the media to send the message:
This can be done in 3 ways:
-
-
-
-
Personal communication  its effective because they allow personal addressing and feedback
(a) Some personal communication channels are controlled directly by the company. For example,
company salespeople contact business buyers.
(b) But other personal communications about the product may reach buyers through channels not
directly controlled by the company. These channels might include independent experts—
consumer advocates, bloggers, and others—making statements to buyers. Or they might be
neighbors, friends, family members, associates, or other consumers talking to target buyers, in
person or via social media or other interactive media. This last channel, word-of-mouth
influence, has considerable effect in many product areas.
Opinion leaders are people whose opinions are sought by others. Company can achieve this by
supplying influencers with the product on attractive terms or by educating them so that they can inform
others.
Buzz marketing  involves cultivating opinion leaders and getting them to spread information about a
product or service to others in their communities.
An example of buzz marketing is Ford’s successful and long running Fiesta Movement campaign which
hands out Fiestas to selected consumers, turning them into “Fiesta Agents.” These brand ambassadors
then create buzz by sharing their experiences via blogs, tweets, Facebook updates, YouTube videos, and
other social media interactions.
Nonpersonal communication  channels are media that carry messages without personal contact or
feedback, including:
(a) Major media: include print media (newspapers, magazines, direct mail), broadcast media
(television, radio), display media (billboards, signs, posters), and online media (e-mail and
company web sites).
(b) Atmospheres: are designed environments that create or reinforce the buyer’s leanings toward
buying a product. Thus, lawyers’ offices and banks are designed to communicate confidence and
other qualities that might be valued by clients.
(c) Events: are staged occurrences that communicate messages to target audiences. For example,
public relations departments arrange grand openings, shows and exhibits, public tours, and other
events.
Nonpersonal communication affects buyers directly. In addition, using mass media often affects buyers
indirectly by causing more personal communication. For example, communications might first flow from
television, magazines, and other mass media to opinion leaders and then from these opinion leaders to
others.
Interestingly, marketers often use nonpersonal communication channels to replace or stimulate
personal communications by embedding consumer endorsements or word-of-mouth testimonials in
their ads and other promotions.
5) Select message source and collect feedback
-
-
-
-
SELECTING THE MESSAGE
The messages impact depends on how the target audience views the communicator
Messages delivered by highly credible sources are more persuasive. Thus, many food companies promote
to doctors, dentists, and other health-care providers to motivate these professionals to recommend
specific food products to their patients. And marketers hire celebrity endorsers—well-known athletes,
actors, musicians, and even cartoon characters—to deliver their messages.
A host of NBA superstars lend their images to brands such as Nike, McDonald’s, and Coca-Cola. Taylor
Swift endorses Diet Coke, Keds, and CoverGirl, and Beyoncé endorses Pepsi and L’Oréal, among other
brands.
COLLECTING FEEDBACK
involves the communicator understanding the effect on the target audience by measuring behavior
resulting from the content
After sending the message, the communicator must research its effect on the target audience. This
involves asking target audience members whether they remember the message, how many times they
saw it, what points they recall, how they felt about the message, and their past and present attitudes
toward the product and company.
The communicator would also like to measure behavior resulting from the message—how many people
bought the product, talked to others about it, or visited the store.
Feedback on marketing communications may suggest changes in the promotion program or in the
product offer itself.
#Shaping the overall promotional mix
The concept of integrated marketing communications suggests that the company must blend the promotion tools
carefully into a coordinated promotion mix.
How does a company determine what mix of promotion tools to use? Companies within the same industry differ
greatly in the design of their promotion mixes.
For example, cosmetics maker Mary Kay spends most of its promotion funds on personal selling and direct
marketing, whereas competitor CoverGirl spends heavily on consumer advertising.
Factors that influence the marketer’s choice of promotion tools:
Sales promotion includes coupons, contests, cents-off deals, and premiums that attract consumer
attention and offer strong incentives to purchase.
Public relations is a very believable form of promotion that includes news stories, features, sponsorships,
and events.
Direct and digital marketing is an immediate, customized, and interactive promotional tool that includes
direct mail, catalogs, telephone marketing, online, mobile, and social media.
Advertising can reach masses of geographically dispersed buyers at a low cost per exposure, and it
enables the seller to repeat a message many times.
Personal selling is the most effective method at certain stages of the buying process, particularly in
building buyers’ preferences, convictions, actions, and developing customer relationships.
Personal selling also allows all kinds of customer relationships to spring up, ranging from matter-of-fact
selling relationships to personal friendships.
These unique qualities come at a cost, however. Personal selling is the company’s most expensive
promotion tool, costing companies on average $600 or more per sales call, depending on the industry.
U.S. firms spend up to three times as much on personal selling as they do on advertising.
Marketers can choose from two basic promotion mix strategies:
 A push strategy involves “pushing” the product through marketing channels to final consumers. The producer
directs its marketing activities (primarily personal selling and trade promotion)toward channel members to induce
them to carry the product and promote it to final consumers.
 Using a pull strategy, the producer directs its marketing activities (primarily advertising and consumer
promotion) toward final consumers to induce them to buy the product. If the pull strategy is effective, consumers
will then demand the brand from retailers, who will in turn demand it from the producer. Thus, under a pull
strategy, consumer demand “pulls” the product through the channels.
CHAPTER 15
ADVERTISING AND PUBLIC RELATIONS
Companies have to do more than just create customer value. They must also communicate this value to their
target customers. They may do so by using two marketing communication tools:
1) Advertising
2) Public relations
#What is advertising?
-
Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services.
Although advertising is commonly done by business firms, it is also used by not-for-profit organizations,
professionals, and social agencies to promote their causes to target publics.
Advertising is a good way to engage, inform, and persuade, whether the purpose is to sell Coca-Cola
worldwide, help smokers kick the habit, or educate people in developing nations on how to lead healthier
lives.
#Setting advertising objectives
a)
Informative advertising  used when introducing a new product category to build primary demand.
EXAMPLE: Early producers of HDTVs first had to inform consumers of the image quality and size benefits
of the new product.
b) Persuasive advertising  important objective with increased competition to build selective demand.
EXAMPLE: Once HDTVs became established; Samsung began trying to persuade consumers that its brand
offered the best quality for their money.
c)
Comparative advertising (or attack advertising)  when a company compares its brand with other
companies
Example: used in almost every product category, ranging from sports drinks and fast food to car rentals,
credit cards, wireless phone services, and even retail pricing.
d) Reminder advertising  used with mature products to help maintain customer relationships and keep
customers thinking about the product.
EXAMPLE: Expensive Coca-Cola television ads primarily build and maintain the Coca-Cola brand
relationship rather than inform consumers or persuade them to buy it in the short run.
What is the goal of advertising? To move customers along the buying process which can be done in a direct way or
in an indirect way.
Direct  Some advertising is designed to move people to immediate action. For example, a direct-response
television ad by Weight Watchers urges consumers to pick up the phone and sign up right away, and a Best Buy
newspaper insert for a weekend sale encourages immediate store visits.
Indirect  Nike television ad in which well-known athletes work through extreme challenges in their Nike gear
never directly asks for a sale. Instead, the goal is to somehow change the way the customers think or feel about
the brand.
#Developing the advertising strategy
This is the strategy that the company uses to achieve its advertising objectives. It consists of two major elements:
1) Creating advertising messages
Marketers must consider advertising clutter  there is a surplus in adds being delivered to consumers
from all kinds of platforms and this makes the advertising environment hostile and hard to be
distinguished amongst.
Message and content strategy  the first step in making an effective advertising strategy is to plan your
message (what you are communicating to your customers) This message usually identifies consumer
benefits & follows from companys broader positioning and customer value creation strategies.
What is the purpose of this planning?
The purpose of advertising is to get consumers to engage with or react to the product or company in a
certain way. People will engage and react only if they believe they will benefit from doing so. Thus,
developing an effective message strategy begins with identifying customer benefits that can be used as
advertising appeals. Ideally, the message strategy will follow directly from the company’s broader
positioning and customer value-creation strategies.
2) Selecting advertising media
In the past, people believed that the message was more important than the media planning. However,
media costs, more-focused target marketing strategies, and the blizzard of new online, mobile, and social
media have promoted the importance of the media-planning function. The decision about which media to
use for an ad campaign is now sometimes more critical than the creative elements of the campaign.
#Evaluating advertising effectiveness and return on advertising investment
The return on advertising investment is the net return on advertising investment divided by the costs of the
advertising.
#What is public relations (PR) ?
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Public relations involves building good relations with the company’s various publics by obtaining favorable
publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories,
and events.
PR may perform the following functions:
o Press relations or press agency  involves the creation and placing of newsworthy information to
attract attention to a person, product, or service.
o
Product publicity  involves publicizing specific products.
o
Public affairs  involves building and maintaining national or local community relations.
o
Lobbying  involves building and maintaining relations with legislators and government officials
to influence legislation and regulation
o
Investor relations  involves maintaining relationships with shareholders and others in the
financial community.
o
Development  involves maintaining public relations with donors or members of nonprofit
organizations to gain financial or volunteer support.
What is the role of the PR and what impact do they have?
Public relations has an advantage over advertising because it can impact public awareness at a lower cost.
Why is this?
Take a look at this scenario  When using public relations, the company does not pay for the space or
time in the media. Rather, it pays for a staff to develop and circulate information and manage events. If
the company develops an interesting story or event, it could be picked up by several different media and
have the same effect as advertising that would cost millions of dollars.
CHAPTER 17
DIGITAL, ONLINE, SOCIAL MEDIA, AND MOBILE MARKETING
#Direct and digital marketing
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What is it? It involves engaging directly with carefully targeted individual consumers and customer
communities to both obtain an immediate response and build lasting customer relationships.
Why do companies use direct marketing? to tailor their offers and content to the needs and interests of
narrowly defined segments or individual buyers. In this way, they build customer engagement, brand
community, and sales.
EXAMPLE: GEICO interacts directly with customers—by telephone, through its Web site or phone app, or
on its Facebook, Twitter, and YouTube pages—to build individual brand relationships, give insurance
quotes, sell policies, or service customer accounts.
Direct and digital marketing are rapidly growing. They have become the fastest growing for of marketing.
Moreover, direct marketing is becoming more internet based, and digital marketing is claiming a huge
share of marketing spending and sales.
What are the benefits of direct and digital marketing – sellers?
o Tool to build customer relationships
EXAMPLE: ,
(1) last Fourth of July, home improvement retailer Lowe’s issued a stop motion “Happy 4th of
July” Vine video showing tools exploding into fireworks, a nice supplement to its ongoing
Vine series of do-it-yourself videos.
(2) General Electric celebrated last year’s National Inventors’ Day by asking its Twitter followers
for offbeat invention ideas, then created illustrations of the best ones, such as a “handholding robot.”
Especially in today’s digital environment, direct marketing provides opportunities for real-time
marketing that links brands to important moments and trending events in customers’ lives (see
Real Marketing 17.1). It is a powerful tool for moving customers through the buying process and
for building customer engagement, community, and personalized relationships.
o Low-cost, efficient, fast alternative to reach markets
o Flexible
o Access to buyers not reachable through other channels
#Marketing, the internet, and the digital age
What is digital and social media marketing? It is using digital marketing tools such as websites, social
media, mobile apps and ads, online video, email, and blogs that engage consumers anywhere, anytime via
their digital devices.
#Social media and mobile marketing
(A) SOCIAL MEDIA
What are the advantages of social media marketing?
o Its targeted and personal
o Interactive
o Immediate and timely
o Real-time marketing
o Cost effective
o Engagement and social sharing capabilities
Most brands chose to use already existing platforms because this is the easiest way. Thus, most brands
have set up shop on a host of social media sites with links to each brand’s Facebook, Google+, Twitter,
YouTube, Flickr, Instagram, or other social media pages.
Although there a lot of advantages, there is one disadvantage:
Because consumers have so much control over social media content, even the seemingly most harmless
social media campaign can backfire. “The hundreds of thousands, or millions, of people out there are
going to take your idea, and they’re going to try to find what’s weak or stupid in it.”
(B) MOBILE MARKETING
How is mobile marketing done? It delivers messages, promotions, and other content to on-the-go
consumers through mobile phones, smartphones, tablets, and other mobile devices.
What are its advantages? engages customers anywhere, anytime during the buying and relationship
building processes. The widespread adoption of mobile devices and the surge in mobile Web traffic have
made mobile marketing a must for most brands.
#Traditional direct marketing forms
Direct-mail marketing involves an offer, announcement, reminder, or other item to a person at a particular
address.
• Personalized
• Easy-to-measure results
• Costs more than mass media
• Provides better results than mass media
Direct mail is well suited to direct, one-to-one communication. It permits high target-market selectivity,
can be personalized, is flexible, and allows the easy measurement of results.
Although direct mail costs more per thousand people reached than mass media such as television or
magazines, the people it reaches are much better prospects.
Direct mail has proved successful in promoting all kinds of products, from books, insurance, travel, gift
items, gourmet foods, clothing, and other consumer goods to industrial products of all kinds. Charities
also use direct mail heavily to raise billions of dollars each year.
CHAPTER 20
SUSTAINABLE MARKETING: SOCIAL RESPONSIBILITY AND ETHICS
#What is sustainable marketing?
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Its socially and environmentally responsible marketing that meets the present needs of consumers and
businesses while also preserving or enhancing the ability of future generations to meet their needs.
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What is the difference between marketing concept and sustainable marketing?
The marketing concept recognizes that organizations thrive from day to day by determining the current needs and
wants of target customers and fulfilling those needs and wants more effectively and efficiently than competitors
do.
Figure 20.1 illustrates the following:
• The societal marketing concept considers the future welfare of consumers.
• The strategic planning concept considers future company needs.
• The sustainable marketing concept considers both.
Sustainable marketing calls for socially and environmentally responsible actions that meet both the
immediate and future needs of customers and the company.
Truly sustainable marketing requires a smooth-functioning marketing system in which consumers,
companies, public policy makers, and others work together to ensure socially and environmentally
responsible marketing actions. Unfortunately, however, the marketing system doesn’t always work
smoothly.
The following sections examine several sustainability questions:
• What are the most frequent social criticisms of marketing?
• What steps have private citizens taken to curb marketing ills?
• What steps have legislators and government agencies taken to promote sustainable
marketing?
• What steps have enlightened companies taken to carry out socially responsible and
ethical marketing that creates sustainable value for both individual customers and
society as a whole?
#Consumer actions to promote sustainable marketing
1) Consumerism is the organized movement of citizens and government agencies to improve the rights and
power of buyers in relation to sellers.
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Traditional sellers’ rights include the following:
o The right to introduce any product in any size and style, provided it is not hazardous to
personal health or safety, or, if it is, to include proper warnings and controls
o The right to charge any price for the product, provided no discrimination exists among
similar kinds of buyers
o The right to spend any amount to promote the product, provided it is not defined as
unfair competition
o The right to use any product message, provided it is not misleading or dishonest in
content or execution
o The right to use buying incentive programs, provided they are not unfair or misleading
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Traditional buyers’ rights include:
o The right not to buy a product that is offered for sale
o The right to expect the product to be safe
o The right to expect the product to perform as claimed
------------------ Comparing these rights, many believe that the balance of power lies on the seller’s side. Critics
feel that the buyer has too little information, education, and protection to make wise decisions when facing
sophisticated sellers.
2) Environmentalism is an organized movement of concerned citizens, businesses, and government agencies
to protect and improve people’s living environment.
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Environmental sustainability involves earning profits while helping to save the planet.
Environmentalists believe that the marketing goal should not be to maximize consumption, consumer
choice, or consumer satisfaction but rather to maximize life quality. Life quality means not only the
quantity and quality of consumer goods and services but also the quality of the environment, now and for
future generations.
Companies are now adopting policies of environmental sustainability and are taking action not because
someone is forcing them to or to reap short-run profits but because it’s the right thing to do—because it’s
for their customers, the company’s well-being, and the planet’s environmental future.
#Marketing ethics and the sustainable company
(a) MARKETING ETHICS
Good ethics are a cornerstone of sustainable marketing. In the long run, unethical marketing harms
customers and society as a whole. Further, it eventually damages a company’s reputation and
effectiveness, jeopardizing its very survival. Thus, the sustainable marketing goals of long-term consumer
and business welfare can be achieved only through ethical marketing conduct.
Conscientious marketers face many moral dilemmas. The best thing to do is often unclear. Because not all
managers have fine moral sensitivity  companies need to develop corporate marketing ethics policies.
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What are corporate marketing ethics policies?
They are broad guidelines that everyone in the organization must follow that cover distributor relations,
advertising standards, customer service, pricing, product development, and general ethical standards.
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Who should guide companies and marketing managers on issues and social responsibility?
There are two options:
1) Free market and the legal system should decide such issues:
Under this system, the company and its managers are not responsible for moral judgements.
In other words, companies can in good conscience do whatever the market and legal systems allow.
2) Individual companies and managers:
This system suggest that a company should have a social conscience. SO  companies and managers
should apply high standards of ethics and morality when making corporate decisions, regardless of
“what the system allows”
(b) THE SUSTAINABLE COMPANY
At the foundation of marketing is the belief that companies that fulfill the needs and wants of customers
will thrive.
Companies that fail to meet customer needs, or that intentionally or unintentionally harm customers,
others in society, or future generations will decline.
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What is a sustainable company considered to be?
(a) It is a company that goes beyond caring for the needs of today’s customers and has concern for
tomorrow’s customers and the broader world.
(b) Sustainable companies are those that create value for customers through socially, environmentally,
and ethically responsible actions.
(c) Companies that can build profitable customer relationships by creating value for customers in order
to capture value from customers in return—now and in the future.
#Social enterprises
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What are they? social enterprises comprise a subgroup of the broader cast of social enterprises, which
includes a wide range of organizations that market goods and services but are also driven by their central
mission toward some social or environmental benefit, or what is often labelled as a double bottom line”
They can be identified as:
o Community Interest Company.
o Member-controlled organizations such as co-operatives.
o Business with a social and/or environmental mission written into its strategic misson.